Map of life expectancy at birth from Global Education Project.

Monday, March 09, 2009

Flying with your head in the seat of your pants

As you may recall, while the official results of the investigation won't be released for many months, it appears that commuter plane went down near Buffalo because the pilot, in reaction to a stall warning, pulled back on the yoke and pointed the nose up. I've never taken a flying lesson in my life, but even I know -- probably from reading WWII novels or something -- that a stall is when you don't have enough air speed to provide lift. Pointing the nose up in response to a stall just kills what air speed you have and down you go, splat. What you are supposed to do is to point the nose down, thereby taking advantage of the mysterious force of gravity to increase your air speed and restoring lift. I know that's what Chesley B. Sullenberger would have done.

So here's the Republican response to the economic stall: a federal spending freeze. They want to point the nose up, and send us into a tailspin right into the ground, because Milton Friedman told them to. Are they really such idiots? No, they're evil. They know perfectly well this would be insane, but they also know it isn't going to happen, so they can lie about it, and whip up the wingnuts into a frenzy.

Scum.

13 comments:

Peter said...

The Keynesian response during the Great Depression, which was to increase government spending massively, was actually the cause of the prolongation of economic recession. The Democrats are keen on repeating the folly of the 1930s government intervention, and in the words you described, are pulling the nose up in a stall.

The smartest thing the government can do now is to allow businesses to hire more employees and to increase capital investment spurring on genuine economic activity. Unfortunately, this is the exact opposite of what the federal government is doing.

The Republicans are proposing what rational, sensible individuals would do. If someone lost their job, and has $10,000 in credit card debt, would he decide to get a mortgage to purchase a new home? Of course not. If a state government does not have enough money to expand government, does it initiate a trillion dollar new liability? Of course not. Is the federal government any different than individuals or state governments? The federal government and you insultingly think otherwise.

Cervantes said...

Nope. Here's what a recession is: people aren't spending or investing. You can't "allow" businesses to hire more employees and increase capital investment -- they're "allowed" to do it right now, but they aren't. They aren't hiring or investing because people aren't spending, and people aren't spending because they have lost their wealth and their jobs.

Ergo, the spender of last resort, the government, has to step in and reverse the downward spiral. This is very basic stuff Peter.

Cervantes said...

And oh yeah, the federal government is completely different from state and local governments -- the federal government is the creator of all money.

kathy a. said...

peter, you are just wrong about spending during the depression.

and you have totally lost me with your reasoning for today. how is government standing in the way of businesses hiring more employees? seems to me that a great many employees have kept their jobs, despite the disaster, because their businesses were rescued -- and those businesses had better start working more effectively for consumers now. if you are referring to the increased marginal taxes on income over threshold amounts, i don't buy it. we're talking about small increases in marginal taxes for large incomes.

have you thought about the jobs that will be created, not to mention the common good, to come of the government contributing funding to things that are needed? if not, how bad do you think the roads should get? how many bridges should fall down in catastrophes? how many kids should die because they don't have medical care? how bad should it get before the richest should pitch in for the common good?

kathy a. said...

i don't even want to talk about my state government, which battled 3 months over passing an emergency budget that everyone knew had to be passed. it has cuts; it has compromises; and it has the horror of some tax increases -- the horror on my side is that the increases fall mostly on those who can't afford them at all.

we've got massive layoffs; we've got public employees with involuntary furlough days, losing 9% of their incomes. far as i know, the state controller still has holds on checks to contractors.

public entities aren't hiring because they are cut beyond the bone. private entities are not hiring, because of the credit crisis, and because customers have to cut back. private citizens are screwed all around -- no jobs, credit lines and credit cards being cut. how in the world do you think a spending freeze is going to fix this?

Peter said...

You are arguing for a Keynesian interpretation of current economic conditions. Keynesian economics is a liberal's wet dream: the more the federal government spends, the better the economy. Can you explain that if this is true, why the U.S. government does not spend itself into $100 trillion in debt, when the more it spends the more prosperous the country as you claim?

The greatest rebuttals to Keynesian economics are the results of the New Deal and the collapse of the Soviet Union. Let me address your specific points.

You can't "allow" businesses to hire more employees and increase capital investment -- they're "allowed" to do it right now, but they aren't. They aren't hiring or investing because people aren't spending, and people aren't spending because they have lost their wealth and their jobs.

They are not hiring because the marginal cost of each employee exceeds the marginal return of that employee, i.e. each new employee makes the company worse off. Many factors play into this, including high corporate taxes cutting into profit margins, high payroll taxes, macroeconomic conditions influenced by central government planning, asset bubbles leading to high underlying business costs, et cetera. Lowering taxes across the board alleviates this problem, something which Obama has sworn to do the opposite of.

Ergo, the spender of last resort, the government, has to step in and reverse the downward spiral. This is very basic stuff Peter.

Once again, this is a tenet of an incorrect macroeconomic theory brought by Keynes and rebutted by the result of the New Deal and the collapse of the Soviet Union: massive government spending caused profound economic anguish for years as a result of the New Deal, and the Soviet Union outspent itself leading to its demise, not economic prosperity as you would predict. Once again, can you explain why the government does not taken on $100 trillion in debt to make the U.S. the most prosperous country in the history of the world?

And oh yeah, the federal government is completely different from state and local governments -- the federal government is the creator of all money.

There was a point in our history when gold was the standard unit currency, not fiat money. When fiat money collapses followed by profound inflation, you will regret ever thinking that the federal government can magically create "money" out of thin air without any adverse consequences.

Peter said...

Kathy, you make several bizarre statements:

How bad should it get before the richest should pitch in for the common good?

Are you talking about the wealthy who already have half their income taken by the government?

have you thought about the jobs that will be created, not to mention the common good, to come of the government contributing funding to things that are needed?

Like funding abortion in Mexico?

if not, how bad do you think the roads should get?

The roads are already funded through state and federal government.

how many bridges should fall down in catastrophes?

Are you speaking from a philosophical perspective or from an engineering perspective?


how is government standing in the way of businesses hiring more employees? if you are referring to the increased marginal taxes on income over threshold amounts, i don't buy it. we're talking about small increases in marginal taxes for large incomes.

1. The U.S. has the highest corporate tax rate in the entire world at 39.3%. That is a significant deterrent against increased employment. Why start a company in the U.S. when you can basically go anywhere else and operate more cheaply?

2. Monetary and fiscal policy including artificially-low interest rates have caused a massive asset bubble in stocks, commodities, houses, employment, and trade. The bursting of all these bubbles is causing a world of hurt. Trying to reinflate the bubble will not benefit the U.S. in the long term.

3. The people getting taxed the most are the greatest source of employment: small-business. Taxing them will lead only to decreased employment.


how in the world do you think a spending freeze is going to fix this?

Are you saying that massive government spending is the solution to the problem of massive government spending from the past? That does not make any sense. The government is already $10 trillion in the hole in terms of debt, and this year's budget is already close to a $2 trillion deficit. Do you suggest adding another $100 trillion in debt?

Cervantes said...

1. The U.S. has the highest corporate tax rate in the entire world at 39.3%.

This is false. that is the nominal tax rate, but because of loopholes and gaming the system, the effective corporate tax rate in the U.S. is much lower than in the other developed countries. In fact, most large corporations pay almost no corporate taxes at all.

They are not hiring because the marginal cost of each employee exceeds the marginal return of that employee, i.e. each new employee makes the company worse off.

Well yes -- because the company can't sell its products. That's because we are in a recession. If companies could sell their products at a high enough price to hire more people, they would do so. What is your point?

macroeconomic conditions influenced by central government planning, asset bubbles leading to high underlying business costs, et cetera. Lowering taxes across the board alleviates this problem, something which Obama has sworn to do the opposite of.

Yet more nonsense. Yes, there was an asset bubble, but the problem is not that the bubble led to high underlying business costs (it didn't, particularly), but that it has collapsed. Why do you think it happened? Because Obama wants to restore marginal tax rates on the wealthy to something less than they were during the Reagan administration? It happened long before Obama took office.

Once again, this is a tenet of an incorrect macroeconomic theory brought by Keynes and rebutted by the result of the New Deal and the collapse of the Soviet Union: massive government spending caused profound economic anguish for years as a result of the New Deal, and the Soviet Union outspent itself leading to its demise, not economic prosperity as you would predict.

This is the most ridiculous thing I have ever read. You know absolutely nothing about economic history. When Roosevelt took office, the Depression was already three years old. The New Deal was followed by a restoration of economic growth that, unfortunately, stopped when Roosevelt's advisors talked him into ending the stimulus in 1936. And oh yeah -- massive government spending got us out of it, in WWII.

The collapse of the Soviet Union is completely irrelevant. Soviet Communism didn't collapse because of "overspending" by government. It was a completely different system. The reasons why the Soviet Union failed are complex, but the explanation is certainly not that the government ran a deficit -- in fact, it did not. It could not. The Soviet Union did not allow the importation of capital.

The deficit spending is temporary, because it is needed currently. There is no intention to sustain it long term.

As for taxes, the U.S. has the lowest marginal tax rates in the developed world -- but we do not have higher growth rates. In fact, empirically, it has been proved that there is no relationship between the long-term growth rates of developed economies and marginal tax rates. Do you think wealthy people will stop working and investing all of a sudden if their marginal tax rate goes from 30% to 34%? That's idiotic.

On the contrary, the government needs to raise revenues in order to invest in essential public goods that the market does not produce -- and yes, that includes roads and bridges, airports, educating kids, police, fire protection, basic scientific research, and on and on.

Learn something, and then come back.

Peter said...

Regarding your last statements:
If you want to increase government revenue, you should cut taxes.

Well yes -- because the company can't sell its products. That's because we are in a recession. If companies could sell their products at a high enough price to hire more people, they would do so. What is your point?

And the company can not sell its products because the price set is too high, but the company can not lower the price because of high underlying costs. If underlying costs were lower, such as lower corporate tax rates, the company could sell the product for a cheaper price and more products would be sold.

This is Economics 101.

This is false. that is the nominal tax rate, but because of loopholes and gaming the system, the effective corporate tax rate in the U.S. is much lower than in the other developed countries. In fact, most large corporations pay almost no corporate taxes at all.

No, it's true. The revenue from the corporate tax is not the highest because of loopholes, but the rate is the highest. You can guess what will happen when Obama follows through on his promise of closing those loopholes: mass exodus of U.S. companies.

Yet more nonsense. Yes, there was an asset bubble, but the problem is not that the bubble led to high underlying business costs (it didn't, particularly), but that it has collapsed. Why do you think it happened? Because Obama wants to restore marginal tax rates on the wealthy to something less than they were during the Reagan administration? It happened long before Obama took office.

Obama has specifically stated that he wants to give money to individuals who have a mortgage on a house that they can not pay so that housing prices do not fall further.

Obama is trying to prop up a bubble economy through his mortgage plan and bank rescue plans.



Bottom line: you can not spend yourself out of a recession. Raising taxes, no matter how you phrase it, will hurt the economy.

kathy a. said...

peter, i adhere to no particular school of economics. all i care about is what is happening on the ground, in my neighborhood and beyond.

if someone making $1mil is losing half of that to taxes -- and i doubt that many are -- well, is it so hard to live on $500,000/year after taxes? did their incomes in any way depend on the labor of others who are not so fortunately compensated? damn straight i think they ought to think about roads and health care before they select the next condo -- even though i hear that condos are moving at fire sale prices.

the "things that are needed" to which i referred include schools, roads, emergency services -- and health care, housing, food, and supportive services to help families stay alive and off the street. do i think all family planning and women's health services should be provided, even to poor people? yes, i do.

if you think that the major portion of this budget is going to fund abortions in mexico, i'd respectfully suggest you aren't paying attention.

kathy a. said...

p.s. -- it scares the pants off me, running up more debt. but there were federal budget surplusses before the last administration, and look what happened. we got into a couple of bottomless wars and another round of tax cuts benefitting the rich. we saw the fruits of deregulation blossom into madness. we would not collectively be in this mess, had prudence prevailed.

a great many people have tried to be reasonable and prudent in their own lives, and other people's decisions wound up blasting them.

there is a role for governmental regulation. there is an obvious need for all citizens to contribute fairly to making the country work. fairly is the operative term, for me.

kathy a. said...

pps -- cutting MY taxes is not going to help anyone, particularly. i don't make enough. i'm more worried about the state paying me for work i've done before my taxes are due. i'm more worried about my community keeping services.

and, as said, more worried about fairness.

Peter said...

if someone making $1mil is losing half of that to taxes -- and i doubt that many are -- well, is it so hard to live on $500,000/year after taxes? did their incomes in any way depend on the labor of others who are not so fortunately compensated?

What do you think they do with that money?

They invest it in their own companies to hire new employees, they expand their manufacturing capability, they invest in new technologies, they invest in other companies so that those companies can grow and invest and hire new employees and return a dividend.

It can even get so personal as those individuals hiring cooks, nannies, maids, assistants, mechanics, handymen, or plumbers to take care of things that they normally would have done themselves. What increased taxation does encourage is a decrease in productivity, for high-earners and business owners to do menial tasks themselves instead of hiring additional workers to help.

Investment is key to economic growth. Without investment and with primarily consumption (which is what Obama is proposing), the country will not grow, it will not prosper, and we as a country will be worse off because of it.

Finally, what system of economics you think the country operates is key to what you support and what you are against. Keynesian economics is a failed economic theory which politicians have adopted to justify their desire to spend the American people's money. Keynesian economics is wrong, demonstrably so. Please consider the Austrian school of economic theory (or anything other than that dreadful Keynesian theory).


it scares the pants off me, running up more debt. but there were federal budget surplusses before the last administration, and look what happened. we got into a couple of bottomless wars and another round of tax cuts benefitting the rich. we saw the fruits of deregulation blossom into madness. we would not collectively be in this mess, had prudence prevailed.

As a correction, the idea that there was a budget surplus before Bush is false for a number of reasons besides erroneous budget predictions which includes not counting an increase in the national debt during that late period to be a sign of budget deficit. Manipulation of numbers showed there to be a surplus which never turned out to be the case in reality.