Today's Economy in Perspective

Even with all this humble pie, I haven't completely reformed. I'll probably still go on being a pain about redistribution, or "distribution," as the semantic purists would have it.

But my emphasis on it is not meant to exclude other matters, nor other approaches to this one, nor even to insist that everyone address it.

I do believe in the division of labor.

And, while I believe that redistribution is the paramount and ultimately only issue of political economy, I recognize the necessity of dealing with other matters as they arise.

And while I believe there is one best argument against redistribution, I would not exclude others.

I would simply ask that the most important issue and that the best approach to it not be excluded, and, that while not every economist must address it, at least some of them should, that that the whole thing should not be left to one little old fellow with hardly any voice in the world.

Lee Kelley,

It was wrong for me to have criticized you for your use of the term "inflation." For, as you said, you used it in the customary sense, and language, after all, is custom, not logic. So, while we need to keep in mind the illogicality of certain terms, we can't keep jumping on one another for their use.

The same thing about the term, "rationality." "Redistribution" is another, and, of course, "liberalism."

Martin Brock,

I agree with you, too.

Why not deflation of the money supply and lowering of prices?

Because consumer price "inflation" and "deflation" refer to prices in the standard definitions, not to any rise or fall in any price but to a rise or fall in prices generally. Measuring this rise or fall is relatively straightforward. On the other hand, "the money supply" is a much trickier thing to define at all, much less to measure, because money is credit, and extensions of credit occur in many different forms that aren't always so easily measured.

Lee Kelley,

To add a bit to what I had said about the same term for different things, to wit, inflation for both an increase in the money supply and an increase in prices.

While the two are apt to occur together, they don't necessarily do so. You could have an increase in the money supply without an increase in prices, if there was also an increase in production. So the non-inflation of prices masks the inflation of the money supply.

It is not not just the increase in prices that makes an increase in the money supply a bad thing. It is bad even without the increase in prices. For it still brings about misallocation and redistribution and a lower standard of living than would otherwise have been the case.

So, we ought to distinguish between changes in money supply and changes in price, by different terms for each, lest we allow the confusion of the two to mask what's really occuring.

By the way, are you going to follow through with our discussion below, at Rationality and Experience? You ought to, for I suspect some confusion there that could be dangerous.

Sam,

Sorry that I missed your other post. And glad to hear that you're on the right track, attacking the root of the problem as well as the branches, redistribution as well as its derivatives.

Gil,

It's always nice to hear from you.

Cheers,

I still say that the shortest distance between two points is a straight line, and that it's better to get straight to the point than beating around the bush.

If a democrat was in the White house all these 8 years the howling would be unbearable. Of course last time a democrat WAS in the White House and the economy was booming this guy was likely saying... ~ muirgeo

It has much more to do with the composition of the Congress...the more it stays out of the way, the better the economy does. It makes no difference what the Parties call themselves as long as they tend to stay out more than they care to "do something".

dg lesvic,

The path I described IS one of the ways in which people become poorer as a consequence of redistribution. I fear it will happen to the larger economy because it already has happened in several smaller areas of the economy such as healthcare.

Because there is a lack of downward pressure on certain types of medical care, the cost has increased to the point at which people who never had to worry before are starting to lose the certainty of medical care in those areas.

It is a net loss on every person in the long run that is caused by a lack of input to the market.

I make the point in this way because it's a more tangible example of net loss as a result of redistribution. It is a smaller side issue, but one that gives credence to the larger theory.

Yeah dgl quit using your 'masterstroke' so much or you risk going blind!

It looks like you're still trying to evade the issue of redistribution.

I don't know why you would say that as I made that point recently in another blog post.

I could as well suggest that you are evading the point of my thesis.

See, you have to find out what has motivated your target's support for an expansive state.

Many fear that criminals would run amok, or invasion from the south.

Lee Kelley,

If there is a difference between deflation of the money supply and "deflation" of prices, why use the same term for both.

Why not deflation of the money supply and lowering of prices?

Mezzaninny,

You wrote:

'dg lesvic - they are not evading, they simply believe in legalized theft just because it makes them feel better. Everyone is out to get their "pound of flesh".'

You missed my point. I wasn't trying to turn Sam Grove against redistribution, for he was already against it. I was trying to convince him of the necessity of facing the issue, and, as I would like to convince you, of the conclusion that it isn't just immmoral but doesn't pay.

I agree with the first part of Muirgeo's post. The partisanship in denying the depth (an initially the existence) of the downturn seems undeniable to me. That being stated, there I have seen absolutely no indication that Muirgeo can himself recognize any fallibility on the part of the Democrats.

Also, when Clinton left office the tech bubble was bursting and if not for subsequent reckless credit expansion, the jig would have been up right there.

dg lesvic - they are not evading, they simply believe in legalized theft just because it makes them feel better. Everyone is out to get their "pound of flesh".

Notice every time we have a recession we'll have Muirgeo tell us how rotten we are to point out that this is not the worst recession ever. Because sad faces of the freshly unemployed always win elections for Democrats!

It's late at night, and I haven't really gone too assiduously into what you were saying, but I think you need to keep in mind that inflation and deflation are increases or decreases in the money supply, not a rising or falling of prices; for, as I believe you noted, prices can fall even without a decrease in the money supply. - dg lesvic

I keep in mind that inflation and deflation are not changes in the money supply, but are changes in prices. Since almost everyone else uses the latter definition, it breeds miscommunication to insist upon the former. Besides, anything that can be said using one definition can be expressed using the other.

At the risk of duplicating a post I tried and failed to make about a half hour ago:

Sam Grove,

It looks like you're still trying to evade the issue of redistribution. The point you want to make is a good one, and should be made. But, so is the point I would make.

Why must it be just the one or the other, why not both?

At the risk of duplicating a post I tried and failed to make about a half hour ago:

Sam Grove,

It looks like you're still trying to evade the issue of redistribution. The point you want to make is a good one, and should be made. But, so is the point I would make.

Why must it be just the one or the other, why not both?

Don't forget about the relative wealth effect of a declining stock and housing market... people have seen a dramatic decrease in their retirement accounts and thus the real economy feels worse for them..

We just lost 1.5 million jobs in 3 months and this guys is like.... " ehh...it ain't so bad". I'm guessing it has more to do with his conservative writings of the past and the current ownership of the presidency. If a democrat was in the White house all these 8 years the howling would be unbearable. Of course last time a democrat WAS in the White House and the economy was booming this guy was likely saying.....eh...it ain't so good".

I think he missed his true professional calling... comedian..... he's very funny to me.

Thanks Brotio, got it.

I strongly suspect Sean just simply spent some time collecting muirduck and STrUmPiT rants and just transposed them into his robot.

LMAO!

Actually the "democraticunderground" provides all the material one needs for stupid rants should anyone want to see the birthing cesspool of muirduck and STrUmPiT.

Don Boudreaux says in his opening:

"Of course, it could become such a catastrophe if Uncle Sam continues his frenzied interventions."

The "it" being the state of the current US economy.

"catastrophe" might be the improper noun to use here.

Don, this is a question for you.

How can we measure the long term impact of government intervention this early in the game?

Lee Kelley,

It's late at night, and I haven't really gone too assiduously into what you were saying, but I think you need to keep in mind that inflation and deflation are increases or decreases in the money supply, not a rising or falling of prices; for, as I believe you noted, prices can fall even without a decrease in the money supply.

Cheers,

When you talk about one man paying for another man's medicine, you're talking about redistibution, taking from the rich to give to the poor. And the way to discredit it is not with what you fear but know will happen, that it will only make the poor themselves poorer.

dg lesvic

I offer another thesis:

The left/progressive/liberal support for the state is based on their belief that it protects us from economic power.

Muirgeo elucidates this perspective quite frequently.

They need to be convinced that the government does the opposite.

Mezzanine,

I also think the rich should be waterboarded at Guantanamo to teach them some humility. I think you could benefit from the same treatment.

Cheers - you talk about Trumpit's tax position as though it's a valid point. He wants 100% tax rate on "the rich". The guy is a fucking psychopath.

Thanks Trumpit,

I understand where you're coming from though I don't agree with your perspective on taxation.

But setting aside my personal feelings on the morality of taxation, the issue that I have is with what happens when we don't see the cost of what we consume. That's one of the reasons why healthcare costs (and as a result, insurance costs) as well as attainability has taken such a hit. At the end of the day, when someone else is paying for your drugs, it doesn't matter how much you use. But at the same time, it also doesn't matter how much is charged or wasted, because the person who decides what to use doesn't pay for it. From purely a functional perspective, I fear that if we don't all pay for the products we use, then it's going to spiral out of control to the point that it becomes unaffordable to everyone.

The U.S. Government will create inflation in the long run.

Going into debt is inflationary, whereas defaulting on or paying off debt is deflationary. In the long run each cancels out the other.

In a growing economy deflation ought to be the norm, since investments created using debt would increase future productivity beyond what is necessary to pay off the debt. In other words, while paying off a debt is deflationary, the additional production beyond that creates a net deflation.

It should be clear that inflation can only be achieved in the long run using credit markets by destroying wealth. That is, if increasing productivity creates a net deflation, then decreasing it through malinvestments (like government spending) creates a net inflation.

Assuming that the Federal Reserve only manipulates the availability of credit, then the only way that it can meet an inflation target in the long term is to reduce future prosperity. Am I wrong here?

Why is the Federal Reserve so afraid of deflation? So far as I can reckon, the Federal Reserve creates deflation every time it lowers interest rates. Any inflation created via credit expansion in the short term creates deflation in the long term, since defaulting on or paying off debts is deflationary. Any deflation being recorded right now is a consequence of inflating the credit bubble in the past.

Now they are trying to combat deflation with even more debt. But surely this is only going to create a stronger deflationary pressure in the future, right? Does ben Benranke and his board of governers think something different will happen next time? It seems to me that the they have only two escape routes; 1) let the deflation occur, or 2) debase the currency by printing dollars and "lending" to the treasury.

They have no other option in the long run. Is there anything wrong with my analysis here? It seems to me an inescapable consequence of current policy. Perhaps if economic growth suddenly increased dramatically, then the currency would not be debased. But considering the scale of malinvestment, much needed restructuring, and the U.S. Government's attempts to prevent it, such grand growth seems almost fanciful.

The whole business of monetary and fiscal policy strikes me as somewhere between sordid and absurd.

Vidyohs,

I'm not sure why that won't open for you. You can increase your carbon footprint (and really piss off Mierduck) by googling Autorantic Virtual Moonbat

That should get you to Gleeson's site. Make sure you also follow his link to the sidebar moonbat. Both are pretty funny.

Even without Obama and his henchmen aggravating the situation, I think worse is yet to come. Besides, does anyone really believe the BLS's unemployment figures? Since the early 80s they have discovered many ways to coax those figures into a more pleasing form. I am led to understand that if unemployment were measured today by the same standards which prevailed in the 30s, it would already be in the double digits. If anyone here has any information about this, I would be thankful to be corrected.

Trumpit - you are exactly like the Bolsheviks of 1917. They also took everything away from the wealthy by the point of a gun.

Notice how Trumpit redirects attention from the real stats to Rush Limbaugh as though that means anything. Notice the rottenness and viciousness.

Fellows,

If this is all about rich vs poor, don't forget that taking from the rich to give to the poor can only make the poor poorer.

So, lf you really want to make them richer, you've got to find some other way to do it, and I can't imagine what that would be other than an increase and improvement of the capital goods with which they work, and therefore an increase of the freedom and incentive for capitalists to provide them.

Trumpit,

"How do you know that 39% is a lot? Perhaps they ought to be paying 100% of the income taxes and get a tax increase to boot."

I agree, though from a different perspective. I would like to see government services provided on a fee for service basis to the greatest extent possible. You want something from government, you pay - 100%. The situation now is that the wealthy are getting the government services they want at subsidized rates, and the political elite are getting the services they want without paying a dime.

"How do you know what's enough and fair? The people should decide by voting"

In fact they decided twice to elect GW Bush president.

Trumpit 12:52 is balderdash. Trumpit 1:00 was right on the mark. Chapman's blog entry was a waste of keystrokes and I fear that the cold weather may be getting to Dr. Boudreaux. Notwithstanding that the unemployment rate has not yet peaked, there are the small matters of insolvent banks (the bailout of which will approach WW II in cost) and collapsing asset values. For all the talk of Japan's lost decade, much of the country has had a lost decade already. I was in school during the 1973-74 and 1980-82 recessions, but I don't recall that my parents had their housing equity wiped out.

Brotio,

Doan get nada on that URL. Can't even get the name Sean Gleeson to come up on the search function of Pakamas Media.

"The top 1% of income earners pay 39% of all income taxes, up from 37% when Bush took office."

Statistics are curious things and must be handled with care. How do you know that 39% is a lot? Perhaps they ought to be paying 100% of the income taxes and get a tax increase to boot. It depends on how much they are making and how much they already own. And what about the top 2%, 3%, etc.? Maybe they should all be paying a lot more. How do you know what's enough and fair? The people should decide by voting, but they don't really run the government, the rich and corporate America does. Most of their income doesn't require them to lift a finger, except for the middle finger for you and me. Under Bush, you can rest assured they had it real good. They got a big tax break in the midst of multiple wars at home and around the world. All the rest of us got was a collapsing economy at home and abroad. Soyonara, Adios, Arrividerci, Au Revoir, Scram, Out of Here, Bad Mr. Bush, and company.

Trumpit was just demonstrating how leftists create reality by assertion.

On the right we have a mirror image.

Cheers,

If you take Trumpit's comments as satirizing Mierduck's Socialist Evangelism, his pupose in posting makes perfect sense.

THIS is what Trumpit reminds me of:

http://sean.gleeson.us/2004/11/27/new_mini_moonbat_fits_in_your_sidebar

Sorry about the double post.

TrUmPiT,

Perhaps people around here would respect you more and not talk down if you explained where you are coming from and why you believe Michael Smith is lying. Michael gave a reasoned and sourced view of his perspective. When you attack him without reason or source when he has come armed with both, it is little more impressive than a child swinging at a soldier who is holding him out of reach.

Given that, to be honest, I don't understand what your purpose is in posting if it is not to present a perspective that anyone is going to give credence to.

Let me state right off the bat, Michael Smith, that I agree with 99.999 present of what you previously wrote. What I take issue with is this:

And now that we are at the end of Bush’s administration, all the Democrats, liberals and leftists want us to believe that because Bush has an “R” after his name, the last 8 years have been an orgy of “laissez-faire” “deregulation“, cutting of government services and spending, “tax cuts for the rich” and “tax cuts for big business”.

Let me state right off the bat, Michael Smith, that I agree with 99.999 present of what you previously wrote. What I take issue with is this:

And now that we are at the end of Bush’s administration, all the Democrats, liberals and leftists want us to believe that because Bush has an “R” after his name, the last 8 years have been an orgy of “laissez-faire” “deregulation“, cutting of government services and spending, “tax cuts for the rich” and “tax cuts for big business”.

But Michael Smith, it was all so well spent!!

Ok, joking aside ... I thought I saw somewhere that the Fed Budget went up 1.5 trillion for an almost 100% increase.

The other stats are equally frightening.

And yes, we're going to have to listen for a century to claims that Bush was a free market zealot. If only.

Most of what Michael Smith says is true. Anyway, he gives references, and it can be checked out. But, did Democrats also play a role in this or did Bush do it all by himself?

I seem to recall Barney Frank and Chris Dodd vehemently protesting when the Bush administration was warning about Freddie and Fannie back in 2006. I also recall that banks who refused to participate in sub-prime lending during the Clinton administration being threatened by Janet Reno that their mergers would not be approved, and that they would be sued or prosecuted for "red lining."

Wasn't it the Clinton Administration that modified the Community Reinvestment Act in 1995 to create more lending to people who were not qualified?

Bush was a big spender, no doubt about that. But it is also true that spending bills have to originate in the House of Representatives. Well, except when Democrats decree otherwise.

Steve Chapman puts things in historical perspective. That a laugh. He uses ONE statistic, an emploment number comparison, now and then, to predict our rosy economic future. More gall and inanity from the Right.

You really know how to lie with statistics, Michael Smith. I bet you listen to Rush Limbaugh, too. After 8 horrid years of Bush and Greenspan, you have a lot of gall.

Don, allow me to refine one point:

"(Of course, it could become such a catastrophe if Uncle Sam continues his frenzied interventions.)"

The frenzied interventions are only half the problem. The other half is the perception that more interventions are in the offing.

There was clamor for an injection of money to "unfreeze" the credit markets, followed by confusion over the lack of movement after the infusion. We didn't inject enough! Lather rinse repeat.

Fact is that neither borrowers nor lenders can make sound financial decisions when the baseline is in flux. Credit isn't moving because no one can say what the best deal will be. Do I jump at the 4.75 rate, or wait until Friday when it could drop a basis point?

It's like doing math, but replacing the operands with rubber bands. Is that a division sign, or a square root symbol? The math of finance won't make any sense until Uncle Sam not only stops intervening, but firmly COMMITS to stop. That will be the signal that we can start calculating again with confidence.

What's even worse than the exaggeration over the state of the economy is the perception of what has caused the problem.

Bush, the Federal Reserve and the Congress have spent the last 8 years following an aggressively liberal economic policy that makes anything attempted by Lyndon Johnson pale into insignificance.

For instance, the last 8 years has seen the following:

1) Massive increase in the welfare state through the establishment of a vast new entitlement program, the prescription drugs for seniors, as well as ongoing increases in spending for Medicaid and SCHIP. Health expenditures in the last 8 years have increased 85.6%, an increase of $327.1 billion.

2) Massive increase in Federal spending on Education, up 103.3%, an increase of $34.6 billion

3) Expansion of farm subsidies. Agriculture expenditures up 26.2%, an increase of $19.7 billion

4) Substantial increase in Federal spending on public housing and urban development. Housing and Urban development spending is up 69.8%, an increase of $21.5 billion.

5) Huge increase in spending on Transportation, which is up 65.1%, an increase of $27.1 billion.

6) Total Federal spending has increased 63.8%, an increase of $1.149 TRILLION per year.

Source: Federal Spending Pages 78 - 79

7) We’ve had a continuation of the “Affirmative action mortgage loan program” that was given teeth by the Clinton administration. Government-sponsored entities Freddie and Fannie have purchased trillions of dollars in questionable loans, while Democrats in Congress assured us there was no risk from these agencies.

8) Along with the spending increases, the income tax system has gotten even more “progressive”. Despite some tax rate cuts, the upper income earners are paying more of the tax burden than ever before.

* The top 1% of income earners pay 39% of all income taxes, up from 37% when Bush took office.

* The top 25% of all income earners now pay 86% of all income taxes, up from 84% when Bush took office.

* Individual income tax collections are up 21.4% and corporate tax collections are up 66.6% since Bush took office.

Source: Tax Collections Page 31

9) Along with the spending and tax increases, government regulations have increased enormously. The Code of Federal Regulations (CFR) -- the master set of books containing all the federal regulations -- occupies 25 feet of shelf space at the library of Congress and has over 73,000 pages. It's pages of regulations -- which are double-columned, double-sided, fine print -- would stretch 4.5 miles if laid end to end.

Over 51,000 new regulations have been added since 1995, when Republicans took control of Congress. The Bush administration has added over 30,000 of these. So much for "Republican deregulation.

Right now, some 50+ federal agencies, commissions, departments etc are working on finalizing over 3000 additional regulations.

Source: Competitive Enterprise Institute

These regulations are promulgated and pushed by regulators and bureaucrats from over 100 federal agencies and commissions, the most well-known of which include, besides the IRS, the FRB and FDIC, the EPA, FDA, SEC, CFTC, NLRB, FTC, FCC, FERC, FEMA, FAA, CAA, INS, OHSA, CPSC, NHTSA, EEOC, BATF, DEA, NIH, FNMA, FHA and the FLMA.

In addition to these economic regulatory agencies and their interference, we have a fiat money supply under the control of a central bank with virtually unlimited power to manipulate that currency as it sees fit. First Greenspan, and then Bernanke, piloted the Fed on a relentless course of expanding the money supply and credit.

And now that we are at the end of Bush’s administration, all the Democrats, liberals and leftists want us to believe that because Bush has an “R” after his name, the last 8 years have been an orgy of “laissez-faire” “deregulation“, cutting of government services and spending, “tax cuts for the rich” and “tax cuts for big business”.

And what do they think we need to solve our problems? More government spending and more regulation!

How many times does this have to fail before they will give up on it?