Clearly Some People DO Believe that State and Society are Identical

by Don Boudreaux on May 25, 2011

in Budget Issues, Myths and Fallacies, Other People's Money

Here’s a letter to USA Today:

Sally Kohn advises Americans to stop worrying about Uncle Sam’s gargantuan debt (“Don’t believe the hype about U.S. debt,” May 25).  But her explanation for why this debt is benign – namely, that successful private businesses often have high debt-to-income ratios – is deeply flawed.

First, while private firms do regularly borrow to finance productivity-enhancing investments, the same isn’t true for government borrowing.  Owners of private firms must repay their debts with their own money.  Private business owners, therefore, have much stronger incentives to borrow and invest wisely than do politicians who repay whatever debts they incur by taxing other people.

Second, Ms. Kohn writes that “The United States generates approximately $14.5 trillion in GDP each year and carries, currently, $14.3 trillion in debt.  That represents a debt-to-income ratio of roughly 1-to-1.”  Wrong.  U.S. GDP is emphatically not Uncle Sam’s income.

U.S. GDP is income earned by, and belonging to, Americans.  To get his income, Uncle Sam annually taxes away some of this privately earned income.  Uncle Sam’s income is this annual tax revenue – now about $2.2 2.4 trillion – and only this tax revenue.

Even if, contrary to fact, Uncle Sam were powerful enough to confiscate all $14.5 trillion of Americans’ incomes, it’s as illegitimate for Ms. Kohn to count Americans’ entire incomes as income belonging to Uncle Sam as it would be for me to count my neighbors’ entire incomes as income belonging to me simply because I might be powerful enough to confiscate those incomes in full.

Sincerely,
Donald J. Boudreaux

I didn’t have room to fit the following question into the letter: If every cent of U.S. GDP is Uncle Sam’s income, what does that fact imply about the solvency of state and local governments throughout America?  (There are tons of other such questions to be asked about this absurd proposition of Ms. Kohn.)

(Thanks to Mark Steckbeck for helping to update my information on Uncle Sam’s current annual revenues.)

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Methinks1776 May 25, 2011 at 11:00 am

*loud applause*

W.E. Heasley May 25, 2011 at 11:08 am

“Sally Kohn advises Americans to stop worrying about Uncle Sam’s gargantuan debt (“Don’t believe the hype about U.S. debt,” May 25). But her explanation for why this debt is benign – namely, that successful private businesses often have high debt-to-income ratios – is deeply flawed.”

NOTE: Sally Kohn is a community organizer and political commentator. She is the founder and chief education officer of the Movement Vision Lab.

Obtaining one’s economics degree from the back of a match pack cover seems to be a common thread among “community organizers“.

Once the match pack cover economic degree is obtained ($0.44 stamp and a one week turn around time) the overriding match pack economics spending theory appears:

“I’m working as hard as I can to get my life and my cash to run out at the same time. If I can just die after lunch Tuesday, everything will be perfect“.
-Doug Sanders, professional golfer

Mark T May 25, 2011 at 11:17 am

1) Her definition of “debt” only includes debt for borrowed money, or “funded” debt. It does not include the value of unfunded promises which she would likely not abrogate.

2) GDP is not the right measurement of ability to pay – it includes a sizable portion of government spending which cannot be taxed to repay debt, it can only be reduced, which she likely would not support.

The only way to evaluate the government’s debt paying ability is to first correctly value all the things government is proposing to pay out – entitlements, reasonably certain spending and debt service – and then to measure it against the discounted value of private sector revenue. It’s a disappointing result.

Herman May 26, 2011 at 12:58 am

(2) – ha! Great point. You mean the .gov cannot pay a man to build a highway, and then take it all back from him in taxes?

Dan May 26, 2011 at 2:59 am

Herman Cain…… Libertarianism is not gon to happen anytime zoom, nor should be ready to embrace it……. So……. Out with Obama and in with someone else…… I’ll take herman …..

nailheadtom May 25, 2011 at 11:20 am

“Consider the aftermath of the Great Depression, when the U.S. invested in the federal highway system that not only created jobs in the short term but also literally paved the way for all kinds of business growth and entrepreneurship across America.”
————————————-
Just as no one can accurately predict the future, no one can describe the alternative histories that would have occurred had events taken a different course. We have no way of knowing how today’s US economy and society would look had there been no federal highway system. It’s entirely possible that some other approach to transportation based on free market principles would have been more cost-effective and efficient than the current one. Why should anyone assume that the status quo was the optimal outcome?

roystgnr May 25, 2011 at 11:38 am

Why should anyone assume that the status quo was the optimal outcome?

No, no, no – we’re assuming that government spending was the optimal outcome, and we’ve noticed that government spending had a massive effect on transportation in the US, so we therefore conclude that transportation in the US is optimal.

If we’d been looking at things from a different perspective, it would be clearer that we don’t assume the status quo to be optimal. Suppose we noticed that people are buying polluting cars to drive on all these nice highways, and they’re saying they don’t want government spending on trains. Then, because government spending is optimal, we’d therefore conclude that the transportation status quo in the US is not optimal.

Just don’t try to talk to us about how government spending created the status quo and how government spending is going to fix the status quo at the same time and we’ll be fine. This also applies to power generation, water use, health care, education, agriculture, and broadcast media, by the way.

Economiser May 25, 2011 at 12:04 pm

Clearly, the amount of government spending was insufficient.

Methinks1776 May 25, 2011 at 12:11 pm

I assure you that if I drive on the highway in the wrong direction while drunk and blindfolded, there is some probability that I will make it to my destination without wrecking the car. I may even get there ahead of schedule. If that happens, I will pat myself on the back and marvel at my maverick genius.

However, my good fortune in that one instance does not change the fact that the expected outcome of this activity is a colossal wreck in which I’m likely to die and take out several other people as well.

I don’t need to know what society might have looked like or what other ideas might have been implemented if government hadn’t crowded them out. I have no doubt that some government spending may have even benefited us more than private alternatives in some instances.

All I know is that the expectancy for government spending, like my adventures in drunk driving, is negative – and that’s all I need to know about it to understand that government spending is waste.

The Reticulator May 25, 2011 at 12:40 pm

Ah, they’re still hiding behind the apron strings of the Interstate Highway System and the G.I. bill. Some things never change. (Ooh. I almost forgot to add teflon from the space program. That came about from government spending, too.)

As I understand it, the logic goes something like this: The U.S. used its tax and spend power to create the Interstate Highway System and the G.I. bill. Everyone likes the result of those programs; therefore, we should become a totalitarian police state in which the government controls everything.

Randy May 25, 2011 at 3:34 pm

Like

vidyohs May 26, 2011 at 11:52 am

Except that while hiding behind the Interstate system, Sally does the typical looney left misrepresentation thing.

The “fabulous interstate highway system” was not and is not a depression era thing at all.

It began under President Ike in the 1950s.

notalawyer May 25, 2011 at 1:55 pm

Tom, I think you bring up a great question. However answering it becomes difficult. You could point to many other countries that grew rapidly following infrastructure build-up, (Germany, Japan, China etc) vs. other countries that did not. Merely raising the question that this system isn’t optimal without any evidence, theory or suggestion of a possible alternative is not very productive.

I think the best argument is to posit that systems that allow individuals to interact and trade (via communications with phone systems and now the internet and transport of goods i.e. railroads, roads, air travel etc) increase private commerce’s efficiency. Evidence in our own country, to roman road building, to British naval shipping can all bolster this argument. We can observe that in nearly all of these respects a state actor was utilized as the foundation for the system upon which private enterprise flourished. There is much to suggest that private actors can’t successfully bring about these large systems in a more efficient way.

The reason is that the system requires the assent, input, contribution of all effected by it and its value lies only in a complete system. To take a rough example: If a private individual seeks to build such a system and it would travel through the land (of equal size etc) of 10 individual people. He would have to gain the assent of each individual for an easement or purchase outright. Each individual has an incentive to rent-seek because he knows the system is useless without his agreement. So, even if 9 of 10 people agree you don’t end up with a 9/10th useful road but a useless road and each person doesn’t seek his 1/10th contribution in compensation but a much higher amount. This is why eminent domain in these actions is allowed provided just compensation. We recognize that the existence of a system is a public good, but that private actors attempts to create them are met with perverse economic incentives. To alleviate them we utilize a governmental actor.

Some aspects and systems of civilized living require standardization to be useful. Methinks said he/she could drive blindfolded down the wrong side of the highway. While she is technically free to choose to do that, we create laws to punish it because we recognize we’re better off if we all conform to a system which aides our ability to exercise our freedom in other ways. No one rallies against being able to drive on the opposite side, or go at a red light and stop on a green. But you do feel the effects when you can’t get to a potential employer, or buy from a more efficient seller.

Note, this doesn’t mean the way their implemented can’t be improved. Wasteful government spending persists precisely because the individual impact is marginally small compared to the herculean effort necessary to change it.

nailheadtom May 25, 2011 at 2:27 pm

You’re assuming that the country would have basically the same transportation configuration regardless of how it came to be developed and financed. That’s not necessarily so. Of course a different kind of infrastructure would have produced different economic features. It’s impossible to say if the citizenry would be more or less satisfied because what is, is.

notalawyer May 26, 2011 at 10:52 am

I’m not assuming the country would have the same configuration. I’m simply saying there hasn’t been a notable example this development without state action. So far, no successful society of note has found it useful to employ this infrastructure without state involvement. So you may posit the theoretical possibility some other configuration could exist that might make people happier, and I would love to know if such a configuration exists, but in the interim we have to figure out how we’ll build things that’ll help facilitate private enterprise.

nailheadtom May 26, 2011 at 11:20 am

“I think the best argument is to posit that systems that allow individuals to interact and trade (via communications with phone systems and now the internet and transport of goods i.e. railroads, roads, air travel etc) increase private commerce’s efficiency. Evidence in our own country, to roman road building, to British naval shipping can all bolster this argument. We can observe that in nearly all of these respects a state actor was utilized as the foundation for the system upon which private enterprise flourished.”
————————————–
State actor? Maybe the Roman example is a good one, since their roads were built by conscripts and slaves or, in the case of Napoleon’s France, by the corve’e. The British navy didn’t invent ships and their colonies in North America became major factors in international shipping DESPITE the efforts of the imperial British government. The success of United Parcel Service is directly contingent on the inefficiencies of the US Postal Service. One could go on and on.

Methinks1776 May 25, 2011 at 9:02 pm

I think the best argument is to posit that systems that allow individuals to interact and trade…increase private commerce’s efficiency

Which is precisely why we have every reason to believe that private actors will provide these systems. They are in demand.

its value lies only in a complete system

Hogwash. The road from my neighbourhood to the downtown area in my town is valuable whether or not we have a beltway around the city and whether or not interstate highways exist on the other side of the country. If a road from New York City to Los Angeles was that in demand it would have been built. Roman central planning doesn’t disprove that. Next time you’re out and about, note the number of roads around you that pre-dated city planning where you live. There are a lot.

He would have to gain the assent of each individual for an easement or purchase outright. Each individual has an incentive to rent-seek…

You mean the bastard land owner will hold out for the best possible offer? The horror! We can’t allow that. I like your alternative much better – employ the state to violate his property rights in the name of the greater good because you aren’t imaginative enough to figure out a less obnoxious way to build a road.

So, even if 9 of 10 people agree you don’t end up with a 9/10th useful road but a useless road.

You really imagine that if that happened (and I can think of a few reasons why it wouldn’t), roads just won’t get built without government robbing people? You don’t seem to understand that this example doesn’t even begin to come close to the difficult obstacles entrepreneurs face every daily to bring to market a mind-boggling number of goods and services every day. They figure it out – and all without the use of guns.

Methinks said he/she could drive blindfolded down the wrong side of the highway. While she is technically free to choose to do that,….

You completely and totally missed the point of my comment. What I was trying to say is that doing stupid things is not a good idea.

Gil May 26, 2011 at 2:15 am

Or better what right has the government to tell a private landowner that he has to provide an easement to stop landlocking people on either side of his property? After all, a private street system means the private owners have the right to forbid non-members from using their streets. So you being surround by someone who has bought all the land around you? Go get a helicoptor. Heck if we had private landowning we would all have flying cars (i.e. small helicopters) long ago.

notalawyer May 26, 2011 at 11:12 am

Gil~ while everyone loves the concept of their property being a unassailable castle, the truth is far from it. The land you own both enjoys and provides certain rights of easement, passage, and access to certain neighbors and other entities in relation to where it sits. Your property wouldn’t even be usable if the government and utilities it designates didn’t have easement rights to install and maintain the sewer pipes and electrical lines connect it to the grid. Even if you wanted to grant them access for your own private benefit, the government must be able to coerce your neighbor, through which the services pass, to provide them to you. Property ownership is a bundle of rights that exist in relation to your neighbors and society not as some ideal island devoid of relation to its surroundings.

notalawyer May 26, 2011 at 11:04 am

The road from your neighborhood to your downtown only exists because the lots on which the homes in your neighborhood were marked by surveyors and provided all the easements and spaces necessary for road between them. The land on which is resides was either first reserved by the state to allow it to be built or acquired from private property owners.

Yes, when attempting to create a public work, perverse incentives are created for private property owners to hold their property hostage far above its normal value notwithstanding the project.

Entrepreneurs solve a myriad of problems to bring goods and services every day. They are more efficient when comprehensive road, trade, and communications systems exist. In lawless Rwanda or Mozambique, entrepreneurs try to bring goods to market their also. They contend with horrible roads, fight off bandits, and pay off corrupt warlords and the result is a very inefficient poor system. All of society suffers for lack of this basic trade facilitating infrastructure.

I wasn’t trying to suggest you advocated driving on the wrong side. I’m just saying that even those who might oppose government action still regularly acquiesce to driving on the “right” side and stopping at red lights not because it is inherently right but because conforming to a standard makes life for everyone better.

Methinks1776 May 26, 2011 at 11:19 am

You have an incredible gift for missing the point.

vikingvista May 28, 2011 at 2:07 pm

If someone wants to build a road through your property, than your property naturally increases in value. It doesn’t have the same value as before, because now demand for it has increased.

The free market has solutions to these issues, such as secret bidding and contingency plans. Violence and property rights violations are not necessary. They are just ways for some people to forcefully expropriate value from others.

vikingvista May 28, 2011 at 2:03 pm

Good Thor, but I love this post.

Russ Nelson May 25, 2011 at 11:36 am

This is as dumb as saying “We owe it to ourselves.” which of course this time around we don’t.

BonnieBlueFlag May 25, 2011 at 11:46 am

So cute watching some left-wing activist try and use financial terms like a real economist. One day she woke up and realized federal debt and GDP were roughly equal – eureka! All the federal government has to do is tax 100% of everything. Surely that will not affect incentives.

Who knew U.S. GDP all belonged to the federal government? They are so generous for letting us keep so much of what’s rightfully theirs!

Economiser May 25, 2011 at 12:09 pm

Wait until Sally realizes that GDP is just a measure of annual output, and instead of taxing that she can tax accumulated wealth. I’m sure the US federal debt is only a fraction of accumulated private wealth. Voila! Problem solved.

Krishnan May 26, 2011 at 7:47 am

Far easier than all that – Sally will recommend that we print money – and as much money as we need – so, problem solved – After all, money is what the GOVERNMENT says it is … so, no problem.

Economiser May 26, 2011 at 3:12 pm

Of course! Money is just paper. Add a zero to every Federal Reserve Note floating around and we’re good to go.

vikingvista May 28, 2011 at 2:14 pm

That won’t have the desired effect, since it instantly increases everyone’s dollar holding by the same percent. Other than confusion, it really has no effect at all.

To get the desired effect, inflation must be heterogeneous. The party to benefit, must be near (in terms of a chain of trades) the counterfeiting source. Inflation only “works”, when it succeeds in transfering resources from the victims to the beneficiaries, by means of the costless increase of only the beneficiaries’ purchasing power.

whotrustedus May 25, 2011 at 12:04 pm

And trying to compare private borrowing for new investments with public borrowing to pay for current obligations. The flaws in this piece are astounding….

Krishnan May 26, 2011 at 7:50 am

Not at all – What is scary is that there are people IN GOVERNMENT who believe in such trash – and the current White House is full of absolute idiots who have NO IDEA how the economy works and what “wealth” is – they are perhaps running around telling everyone – “No problem – we can create whatever we need – WE ARE THE GOVERNMENT – so people will do as they are told”

Economiser May 25, 2011 at 12:13 pm

I feel dumber for having read that whole op-ed. Don, in the future, please put warnings before such links.

Thank you,
Economiser

Ken May 25, 2011 at 12:33 pm

Was it one of the most insanely idiotic things you’ve ever heard? During the rambling incoherence was there anything close to what could be considered a rational thought? Did she mention a dog and a little boy, or “society”, lost in the woods?

Don Boudreaux May 25, 2011 at 12:35 pm

Touche. I truly is an especially astonishing piece of nonsense.

odinbearded May 25, 2011 at 2:52 pm

Will Government Spending Cuts Now Mean More Growth Now?

I see your community organizer and raise you a former Forbes writer.

Sam Grove May 25, 2011 at 5:27 pm

Remember, cutting spending takes money out of the economy.

One seems to be a dumb as the other.

This may not be Keynesian, but this is what Keynesianism has produced.

vikingvista May 26, 2011 at 2:00 am

When did economists decide that spending money was no longer a means to an end, but an end in itself?

lamp3 May 26, 2011 at 8:03 pm

Is the reason that is a false statement due to unspent money’s diversion into investment?

Darin Johnson May 25, 2011 at 12:19 pm

Thank goodness somebody finally made the point that the government is not the country – let alone the individuals in the country. When I hear “we’ve” been overspending, or “we’ve” run up a huge debt, it makes me want to… jump in my Beamer and drive up to my place in Beverly Hills.

Richard Stands May 26, 2011 at 2:06 am

I have a working theory that one can simply count the number of first person plurals used in any piece and determine the author’s position on a collective-to-libertarian spectrum with astounding accuracy.

Brian May 25, 2011 at 1:29 pm

Wouldn’t the analysis be more accurate if she included all the debt of all Americans?

NL May 25, 2011 at 2:06 pm

This. She’s counting government debt versus cumulative private income. She should be comparing government debt to government income, or private debt to private income. It ignores the fact that state debt and private debt also have to be covered by the same pool of private wealth, and that the massive federal deficit is still expanding the size of the federal debt.

TheMichaelOnline May 25, 2011 at 2:47 pm

Yeah, U.S. GDP is not Uncle Sam’s income. But, IMHO, the same goes for tax revenue. Some or entirely, it is illegitimate.

ej May 25, 2011 at 2:59 pm

you might want to add too that most business debt is borrowed for the purpose of aquiring investment goods, so that there is a return on the borrowing. Most government debt is taken in order to fund consumption through transfer payments of military spending. It would be a closer parallel to say it is like borrowing 500% of your income on a credit card or a HELOC.

Ken May 25, 2011 at 6:34 pm

“Most government debt is taken in order to fund consumption through transfer payments of military spending.”

I’m wondering how with a pretty constant 5% of GDP military spending government debt funds “military spending”, but not medicaid, medicare, and social security.

ej May 25, 2011 at 11:03 pm

“Most government debt is taken in order to fund consumption through transfer payments of military spending.”

This should have been AND military spending. With transfer payments being the entitlements.

Seth May 25, 2011 at 5:31 pm

If she wishes to consider GDP as the income component, she should use total debt, public and private as the debt component.

Though, I agree, that government revenue is the better income component here.

Don Boudreaux May 25, 2011 at 5:55 pm

Great point!

muirgeo May 25, 2011 at 6:34 pm

Yeah she is right. The debts not the problem. The debt is a symptom of the problem. The debt is mostly a result of the Bush Tax cuts and the economic collapse from following the neoliberal economic soothsayers policies recommendations. Unemployment, low wages and the trade imbalance ARE the problems. Fix those and the debt will go away. I promise.

Ken May 25, 2011 at 6:47 pm

muirgeo,

I can only laugh at you. Spending is the problem, not taxation. The debt is a symptom of out of control politicians who spend other people’s money with reckless abandon.

Government receipts have been a pretty constant 19% (with some variation) of GDP regardless of tax rates (including the dreaded Bush tax cuts).

The driver behind the debt is federal government spending deficits. As a percentage of GDP, federal government spending increased under Bush in the first few years, then levelled off to essentially permanent spending deficits. An enormous spike occurred in 2009, with US government spending as a percentage of GDP going higher than ever before, with the exception of WWII. The spike occurred due to Bush’s reckless TARP and the Obama-Pelosi-Reid triumvirate mad spending spree.

Why do you want to ignore this (something I’ve posted to you at least twice, this being at least the third time):

2007:
Fed Gov:
Revenue: $2.57T
Spent: $2.73T
GDP: $14.1T

2010:
Fed Gov:
Revenue: $2.38T
Spent: $3.55T +30%
GDP: $13.37T -5%

US government spending increased like crazy while the US economy shrank.

Are you too stupid to remember these numbers? I’m surprised you remember to breath.

Regards,
Ken

muirgeo May 25, 2011 at 9:38 pm

Lets devise a wager . YOU ARE WRONG.

If spending is cut and taxes are not raised the economy will do worse not better.

Ken May 25, 2011 at 10:47 pm

muirgeo,

“Lets devise a wager . YOU ARE WRONG.”

Look at how brain dead you are. The statement “YOU ARE WRONG.” is decidedly NOT devising a wager. Try again, idiot, and this time use a dictionary before you try unsuccessfully to use a word.

“If spending is cut and taxes are not raised the economy will do worse not better.”

Of course. Look at that stone cold assertion. It must be right. There’s not logical argument or evidence presented. Just a nice muirgeo assertion. Well guess what, dipshit, taxes were increased and spending was increased immediately after Obama was elected and the economy tanked even worse than the Keynesians said it would have been had they done nothing. Either their models don’t reflect reality and they’re just guessing, or taxing and spending doesn’t help an economy. Either way it’s pretty elegant proof that Keynesianism is wrong.

Try to think and back up your arguments with facts.

Later, asshole,
Ken

brotio May 25, 2011 at 10:53 pm

Aww, Ken!

I was really hoping you’d sign that post:

Regards, asshole,
Ken

:D

Ken May 25, 2011 at 11:53 pm

I actually had it like that to begin with. Not sure why I changed it. :-(

muirgeo May 26, 2011 at 2:42 am
Krishnan May 26, 2011 at 7:58 am

“Doctor, I have a headache that does not go away”
“Oh? Tell me about it”
“I keep beating my head against the wall”
“Stop beating your head against the wall”

There are some who cannot be reasoned with. Like some who believe (and demand) that Israel go back to the 1967 borders and commit suicide.

Jeff Neal May 25, 2011 at 10:00 pm

In that vein…

It is silly for some (not you) to behave as if they believe that we have two different governments – one that spends and one that taxes. The same Congress that appropriates money also levies taxes, true?

Now, we have votes/elections to keep them from taxing (much) more than we want to be taxed – 18-20% of GDP over several decades. Problem? The ‘voters’ who would need to show up at the next election to control spending are not yet born – the voters who will have to work some day in the future to pay for consumption that is happening now.

Giving the government the power to borrow against earnings of non-voting, not-yet-born citizens is the mistake we’re making today. I have two sons, 13 and a 16 years old. I’m hiring a lawyer for them and suing the US Congress and Treasury for theft – for taxation without representation.

Any of you want to join the suit?

Ken May 25, 2011 at 10:51 pm

Jeff,

You seem to think this is a voter problem, but are overlooking the byzantine rules incumbent politicians put in place all but outlawing politicians rising to power outside the control of the two parties.

Also, you can’t sue congressmen for their recklessness. They immunize themselves against that very thing.

Regards,
Ken

vidyohs May 25, 2011 at 11:17 pm

Jeff, go ahead and sue a criminal organization, see how far that gets you.

Besides there is this: U.S. Constitution, Art 1, Sec 5, para 2, 1st phrase.

It is necessary for congress to function with legal congressional insider trading and also to borrow on your grandkids earnings. Totally constitutional…….why in order to proceed unhindered from petty lawsuits from peons like you and I, that little piece of the constitution also makes it possible for them to deny you permission to sue them. Howdcha like them apples, citizen?

People say don’t get between a politician and a camera…….I say don’t get between a politician and your money.

Gil May 26, 2011 at 4:31 am

Gee, traditionally people would inherit their relatives’ debts presumably on the basis that if you are entitled to a dead relatives’s assets when they die then you should also get stuck with their liabilities.

On the other hand, I’m sure most of the world’s children wish they were born to American parents – doubly so for girls.

muirgeo May 26, 2011 at 2:48 am

When The U.S. Paid Off The Entire National Debt (And Why It Didn’t Last)

http://www.npr.org/blogs/money/2011/04/15/135423586/when-the-u-s-paid-off-the-entire-national-debt-and-why-it-didnt-last

On Jan. 8, 1835, all the big political names in Washington gathered to celebrate what President Andrew Jackson had just accomplished. A senator rose to make the big announcement: “Gentlemen … the national debt … is PAID.”

That was the one time in U.S. history when the country was debt free. It lasted exactly one year.

By 1837, the country would be in panic and headed into a massive depression.

crossofcrimson May 26, 2011 at 8:54 am

So your argument against paying down the debt is that it would lead to state-insulated banking monopolies? Fantastic.

brotio May 25, 2011 at 7:58 pm

Yasafi,

Median personal income for those 18 or older in the US is $25,000. The federal government makes an average of about $11,000 from everyone 18 and over in the United States, and you’re saying that’s not enough?

Sam Grove May 25, 2011 at 10:47 pm

What a superficial comprehension of economics you exhibit.

Treating symptoms won’t cure the disease.

muirgeo May 25, 2011 at 6:39 pm

James K Galbraith is an economist who makes sense.

http://www.bloomberg.com/video/62193196/

Brian May 25, 2011 at 7:50 pm

You realize that James Galbraith is advocating Keynesian economics?
The entire focus of this blog is a theory contrary to Keynesian economics.

muirgeo May 25, 2011 at 9:39 pm

Yes and the evcidnece suggest the entire focus of this blog is wrong… way wrong.

Methinks1776 May 25, 2011 at 9:44 pm

I see the problem now. Whenever we ask you for evidence, you’ve been providing “evcidnece”. This is not a term we humanoids are familiar with, I think. Can you explain?

brotio May 25, 2011 at 10:31 pm

We must be on the right track when a pediatrician who claims two-year-olds are altruists, and that individualism wherever it surfaces is inherently self-destructive says we’re “wrong… way wrong“.

Sam Grove May 25, 2011 at 10:50 pm

Benito is reborn.

Mesa Econoguy May 25, 2011 at 11:08 pm

“James K Galbraith is an economist who makes sense.”

Incorrect.

Sam Grove May 26, 2011 at 12:53 am

That says a lot about you AND Galbraith.

Russell Nelson May 26, 2011 at 12:55 am

I realize that responding to muirgeo is like shooting fish in a barrel, but think about the fish feel. Now think about how muirgeo feels. Now think about the fish, and realize that they are thinking, feeling beings. Shoot muirgeo instead.

River May 25, 2011 at 6:47 pm

Like most community organizers, implicit in her thought is the assumption that all production belongs not to the producers but to the “community”. It should be available for their taking if the organizer sees a need in her view of the world.

J Cuttance May 25, 2011 at 7:33 pm

Quite right. Anyone using the word ‘community’ stimulates my gag reflex, then I think, “how is this person on the take from the public purse?’

muirgeo May 25, 2011 at 9:41 pm

You are on the take too. We all are. The economy is a funcion of both public and private enterprises. You can’t have one with out the other. You guys need to come to terms with this and discuss real world limits on the balance betweent hese two.

Las Vegas is a thriving city. Where would it be without the depressionera Hoover Dam?

SheetWise May 25, 2011 at 10:02 pm

“You are on the take too. We all are. The economy is a funcion of both public and private enterprises. You can’t have one with out the other.”

Now there’s a bet I’ll take.

Ken May 25, 2011 at 10:54 pm

“Las Vegas is a thriving city.”

Las Vegas unemployment: 14.9%
Housing values: -64% in some areas

Now I see why you support Keynesianism – you think one of the cities hardest hit by the recession and the housing bubble is “thriving”.

Truly, you have dizzying intellect, the same as Vizzini.

Later,
Ken

Dan May 26, 2011 at 2:57 am

Las Vegas would be in L.A.

So?

Think of all of the geckos and scorpions we could have saved had we not built those greenhouse gas producing structures and their gluttons of wastes from unused portions of the buffet.

Damn you Hoover Dam and your desert destroying ways.

crossofcrimson May 26, 2011 at 8:55 am

“You can’t have one with out the other. ”

That’s probably the most patently false statement I’ve heard – even measured against all your previous statements.

muirgeo May 25, 2011 at 8:15 pm

Galbraith: The danger posed by the deficit ‘is zero’

http://voices.washingtonpost.com/ezra-klein/2010/05/galbraith_the_danger_posed_by.html

cmprostreet May 25, 2011 at 9:44 pm

The last paragraph of that link was one of the most economically illiterate things I have ever read in my life (either that or it was deliberately deceptive).

And I agree with him that the deficit is no problem. Where we differ is /why/ we believe that.

He says we need deficits, since otherwise we’d be wasting private sector resources. Outside his realm of mathematically contradictory fantasy, all government spending is a use of resources which otherwise would have been used by the private sector.

ALL government spending takes resources from the private sector, regardless of whether the government takes the taxes now or next year. Galbaraith believes that as long as the spending is financed by the deficit, it doesn’t use any private sector resources and instead grows the economy by the exact amount of the spending.

So, muirgeo, I must ask: If you agree with Galbraith, the “economist who makes sense,” why tax anyone at all? Why can’t we just fund everything with deficits indefinitely?

Why don’t we buy an iPad for everyone, and have the government borrow the funds to do it? It would take nothing from the private sector, and it would add Billions to GDP! Furthermore, imagine the economic utopia that would result if said iPads were mandated to be produced in the US using raw materials and labor from the US! We’d finally have enough money for everyone that we could start genetically engineering unicorns to complete our fantasy world!

Peter McIlhon May 25, 2011 at 10:43 pm

I’ve been known to play my fair share of fantasy based video games, and none of them compare to a world THAT ridiculous.

Also, LOL.

Mesa Econoguy May 25, 2011 at 11:09 pm

Like.

W.E. Heasley May 25, 2011 at 11:45 pm

Cmprostreet:

Do you mean to tell us James K. Galbraith, son of John Kenneth Galbraith (the two clones of Paul Samuelson) could somehow, someway be off the mark? Holy Phillips Curve !!

Methinks1776 May 26, 2011 at 12:11 am

Really, Heasley? And I’M the one accused of saying the worst things about Paul Samuelson around here?

W.E. Heasley May 26, 2011 at 8:01 am

Methinks1776:

Yes, really! The NRO Krugman Truth Squad should have been around for Samuelson.

Russell Nelson May 26, 2011 at 12:57 am

You were just trying to use logic and reason to convince muirgeo of something. You failed. Is that her fault or yours? Surely you could have predicted that muirgeo would be too stupid to understand your argument, so why did you even bother making it?

Ken May 26, 2011 at 3:22 pm

That the same Ezra Klein that said no one could understand what was in the Constitution because it’s over a hundred years old? That Ezra Klein?

vidyohs May 25, 2011 at 11:00 pm

“The United States generates approximately $14.5 trillion in GDP each year and carries, currently, $14.3 trillion in debt. That represents a debt-to-income ratio of roughly 1-to-1.”

One does not need to go any farther than that into Sally Kohn’s piece to know she has no clue as to what she is talking about, just typical looney left drivel; or, she knows but is exercising the typical looney left disingenuous drivel.

WhiskeyJim May 26, 2011 at 12:05 am

The American debt obligation is closer to $100 trillion than $14 trillion. How does one get a job publishing such crap, and who approves the articles?

Methinks1776 May 26, 2011 at 12:14 am

Totally. Those off-balance sheet liabilities will get you every time and they are routinely ignored.

Herman May 26, 2011 at 1:16 am

Yeah, but you can’t compare 20 years of future obligations to a single year of tax receipts. Or GDP for that matter.

Richard Stands May 26, 2011 at 2:10 am

“The United States generates approximately $14.5 trillion in GDP each year and carries, currently, $14.3 trillion in debt. That represents a debt-to-income ratio of roughly 1-to-1.”

This is the same sort of perspective that calls tax reductions “tax subsidies”.

Ken May 27, 2011 at 11:11 am

Or “revenue losses to the government.”

danny May 26, 2011 at 7:42 am

Even if all the GDP was the governments and leaving aside the difference between GDP and revenue in this bad analogy, since when is Debt/Revenue a number that anyone looks at?

I think she is hoping to fool people (or more likely just has no idea what she is talking about) into confusing debt/revenue (a non-number) with debt/equity. Since our federal government is essentially insolvent, the debt/equity number would be undefined.

Brian May 26, 2011 at 10:44 am

I don’t know if she’s trying to fool people or not but I’ve heard this argument before.
Earlier this year, California Governor Jerry Brown said something very similar on how to solve the California budget crisis. I cannot find the exact quote but Governor Brown pointed out how large the California economy is and how it can take a tax increase.

ettubloge May 26, 2011 at 8:18 am

Excellent highways and infrastructure is great to have, like education. But neither necessarily produces value. Look at Japan—shiny and smart with an economy pushing 3 decades of nil growth.

What creates jobs? Capital. It is money saved and invested by people motivated by profit. The keynesian approach ignores that.

muirgeo May 26, 2011 at 10:40 am

“The keynesian approach ignores that.”

Wrong… no it doesn’t.

SheetWise May 27, 2011 at 1:20 am

You’re right. It acknowledges it and abhors it.

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