Quotation of the Day…

by Don Boudreaux on December 10, 2011

in Budget Issues, Country Problems, Debt and Deficits, Other People's Money, Politics, Reality Is Not Optional

… is from page 296 of Dwight Lee’s 1987 essay “Deficits, Political Myopia and the Asymmetric Dynamics of Taxing and Spending”; this essay is chapter 16 in James M. Buchanan, Charles K. Rowley, & Robert D. Tollison, eds., Deficits:

Because of the absence of privately owned and transferable claims against the collective value created, or destroyed, by political decisions, citizens will be less sensitive to reductions the long-run wealth of the general political community than to temporary, but individually realized, benefits.  For this reason politicians can pursue with impunity a policy analogous to that of excessive corporate borrowing to finance current benefits.

See, e.g., Greece circa 2011.

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{ 60 comments }

Greg G December 10, 2011 at 8:02 am

As Reagan “proved.”

Greg Webb December 10, 2011 at 8:12 am

Swing and a miss! As Obama proved.

Greg G December 10, 2011 at 8:17 am

Both Reagan and Obama are in that tradition of not worrying much about deficits. Obama is often criticized by those on the left for speaking about Reagan with too much respect.

Greg Webb December 10, 2011 at 8:49 am

That is, of course, disingenuous. Reagan, if he had had a supermajority in Congress like Obama did, would have balanced the budget after reducing the size of the bloated welfare state more than sufficiently to pay for increased military spending to bankrupt the Soviet Empire. He choose, because of political realities, to run the deficit to increase military spending and speed up the breakup of the Soviet Union. The deficit was caused by libtard Demcorats like Tip O’Neil, blocking Reagan’s desire to dismantle the welfare state as much as he wanted.

Obama, on the other hand, had a supermajority in the Congress during his first two terms. He choose, unwisely but willingly, to spend excessively to bail out political cronies at Goldman Sachs, Government Motors, Solyndra, etc and to vastly increase the welfare state.

Obama willingly chose to massively increase the size of deficits to reward political cronies. Reagan unwillingly chose to run deficits because of political realities and need to defeat the Soviet Empire. The two are just not the same.

Greg G December 10, 2011 at 9:00 am

If only he had had veto power.

Greg Webb December 10, 2011 at 9:04 am

You mean if only he had the line-item veto power.

Greg G December 10, 2011 at 10:57 am

Reagan’s famous “There you go again” line was in response to Carter’s accusing him of wanting to cut Medicare.

He laughed that off helping to cement the idea in the public mind that Medicare was an untouchable entitlement. The more you talk about this, the more you look like a garden variety Republican G.W.

Greg Webb December 10, 2011 at 11:14 am

From Wikipedia: “‘There you go again’ was a phrase spoken during the 1980 United States presidential election debate by Republican presidential candidate Governor Ronald Reagan to his Democratic opponent, incumbent President Jimmy Carter. Reagan would use the line in a few debates over the years, always in a condescending way intended to disarm his opponent.

‘There you go again’ emerged as a single defining phrase of the 1980 presidential election. The phrase has endured in the political lexicon in news headlines, as a way to quickly refer to various presidential candidates’ bringing certain issues up repeatedly during debates, or to Reagan himself.”

Swing and another miss, Greg G. Reagan used the phrase against Carter’s misleading comments about Reagan’s voting record on Medicare. He also used it in other debates about other issues including a famous one with Walter Mondull where Reagan also quipped that he would not use Mondull’s youth and inexperience against him.

The more you talk about this, and keep changing the issue, you reveal yourself as a disingenuous libtard Democrat.

Greg G December 10, 2011 at 11:20 am

There is nothing at all in that Wikipedia quote that contradicts anything I said.

Greg Webb December 10, 2011 at 11:55 am

Your comment that Reagan used his quip to “cement the idea in the public mind that Medicare was an untouchable entitlement” is disingenuous because, as noted in Wikipedia, Reagan used the quip to disarm opponents, including Carter, when they kept bringing up a single issue.

Carter should have talked about his record as President instead trying to scare old people by focusing on a disingenuous claim about Reagan’s voting record on Medicare. But, Carter, like you, had to be disingenuous and prevaricate because the facts, especially Carter’s own record as President, were against him.

Daniel Kuehn December 10, 2011 at 8:18 am

This is an excellent point about sensitivity to public vs. private wealth. It’s an old point, but I like it because it makes the point in a different way. Of course, if you accept this you have to accept the corollary that citizens are not sensitive to the accumulation of “long run wealth of the general political community than to temporary, but individually realized benefits” either.

The solution to the second problem in the paragraph – the prospect of deficits – is institutions. Constitutional restraint. An approach to public finance that is founded in sound economics that recognizes the limits of debt financing.

Methinks1776 December 10, 2011 at 8:39 am

Now, if only we could get them to stop ignoring the constitution entirely or adopting an approach that isn’t completely focused on brokering rents and getting re-elected (to say nothing of bribe collection)…..

Daniel Kuehn December 10, 2011 at 8:42 am

For all the very real problems, I think we do the job pretty well here. I certainly can’t think of a whole lot of other places I’d rather be. Don’t make the perfect the enemy of the good, and don’t mistake respect for the Constitution that doesn’t kowtow to your very unusual reading of it as “ignoring the Constitution”.

Methinks1776 December 10, 2011 at 8:46 am

You can’t think of too many other places because you haven’t experienced a lot of other places. It’s not my reading that’s unusual, dear, it’s congress’s.

Greg G December 10, 2011 at 8:57 am

Which other places are you recommending Methinks?

Greg Webb December 10, 2011 at 9:01 am

“It’s not my reading that’s unusual, dear, it’s congress’s.”

Yep. Many Congress critters, including Nancy Pelosi, have said that the Constitution does not restrict Congress from doing what it wants despite the clear meaning of Article I Section 8. Congress has passed laws that were clearly unconstitutional at the time they were adopted. Those acts were illegal uses of power, which is happening more and more frequently since the progressive movement began.

Daniel Kuehn December 10, 2011 at 9:05 am

Yes, which other places do you recommend, Methinks? Instead of fulfilling everyone’s expectation of you as someone who informs people of their own opinions, can you offer an alternative? They’re out there – I’m not an exceptionalist. But I think we do it pretty well here.

Greg G December 10, 2011 at 9:10 am

So the “usual” reading of the Constitution here means the Greg Webb/Methinks reading, not the Supreme Court reading that has been in place our whole lives.

Have patience. I am still learning how to speak libertarian.

Greg Webb December 10, 2011 at 9:16 am

Swing and another miss. Article I Section 8 means what it says. It’s not mystical scripture requiring that it be read and properly interpreted by only nine high priests.

Greg Webb December 10, 2011 at 9:27 am

“But I think we do it pretty well here.”

I have not seen as much of the world as I want to. But, what I have experienced has taught me that I prefer the United States to all others. It has also taught me that centralizing more power in the hands of politicians is bad for the vast majority of people and good for only corrupt politicians and their political cronies. That is one of the reasons I oppose the US following the “example” of the rest of the world.

Methinks1776 December 10, 2011 at 9:34 am

You know everyone’s expectations, do you, Danny? What an omniscient little boy drenched in irony you are, sweetie.

Greg G December 10, 2011 at 9:34 am

OK I think I’m getting the jargon now.

oppression = choosing to live in the most free and prosperous country in human history.

Josh S December 10, 2011 at 9:54 am

Sorry, Methinks, Kuehn is right. The only reading of the Constitution that matters is the Court’s. The Court is part of the government. Unsurprisingly, the Court tends to interpret the Constitution in a way most amenable to the interests of government. Note, for example, Stevens’ guiding hermeneutic is “the government’s interests,” going so far as to say the First Amendment can be abrogated when it is in the government’s interest to do so.

The Constitution has no power of its own. People have power. They use the Constitution to legitimize that power, much like kings used their noble lineage to legitimize their power.

Methinks1776 December 10, 2011 at 9:56 am

As a matter of fact, my pea-brained little friend, once you choose to live in the United States, it’s not so simple to rid yourself of its power over you. You cannot, for example, just simply renounce your citizenship and move on. The United States forces you to pay an exit tax on worldwide assets, often refuses visas for re-entry for visits, and it’s up to the government whether you will be allowed to renounce at all (a process that can take a decade or more, depending on the circumstances). Until the HEART Act was passed a few years ago (2007, I think), the United States taxed the income of former citizens for 10 years after renunciation. Hotel California – you can check out any time you like, but you can never leave.

U.S. and North Korea are the only two countries that tax citizens based on citizenship instead of residency. So, a U.S. citizen living and working in France, using none of the government provided services in the United States, is forced to pay taxes in both France and the United States. Worse, because the IRS has forced foreign banks into the role of tax enforcers (that is, the banks are made responsible for the actions of their American citizen and greencard holder customers), foreign banks will not open bank accounts for Americans. Tres convenient for ex-pats working abroad.

Oh, and Obama, the guy who screeched loudest about suspension of Habeas Corpus, yet kept a list of enemies of his glorious Obamacare which he encouraged the population to add to, would now like to imprison any U.S. citizen indefinitely on his word alone that they are a terrorist.

The U.S. was an excellent country. Unique in the world. It’s done better than “pretty well”. It’s unlikely to do well in the future.

Methinks1776 December 10, 2011 at 10:08 am

Well then, Josh S, I think you’re agreeing with me, not Kuehn. It’s Danny who thinks that constitutional constraint is a solution. I wish it were, but I don’t think it is. If the court interprets a constitution meant to constrain government power in the interest of government, such interpretations will always lead to an erosion of the constraints the constitution is meant to impose on government, right?

Greg Webb December 10, 2011 at 10:36 am

Excellent comments, Methinks1776! The right to travel is one of the fundamental rights that was intended to be guaranteed under the Constitution. It is sad to know that this fundamental right is now being infringed upon as corrupt politicians continue their illegal power grab.

Greg Webb December 10, 2011 at 10:44 am

Josh S, you are right, of course. A Constitution has power only if the people believe it is important and demand that politicians comply with it. Once the people lose respect for the Constitution, then corrupt politicians merely have to sway a plurality to get their way on each issue. That leads to the terror of the mob as individual rights and liberties are violated at the will of the mob. And, that leads to despotism as people demand protection. I don’t think that the US is close to this yet, but that is the direction the country is going.

Greg Webb December 10, 2011 at 1:08 pm

“oppression = choosing to live in the most free and prosperous country in human history.”

“disingenuousness” = misrepresenting another’s comments in a vain attempt to win an argument.

You do this a lot, Greg G. Methinks1776 was merely making the valid point that the federal government is centralizing power and infringing on individual liberties to a much greater degree than it has in the past, which is making it like pretty much everywhere else.

muirgeo December 10, 2011 at 4:05 pm

Greg G,

They would like to move to Libertopia. Its a magical place where, like in the end of times like scenario, all the useful people, of which there aren’t many, suddenly up and leave establishing this new utopia. And best of all the rest of useless humanity, something like 99%, is left behind crapping on each other and totally unable to care for themselves…eventually murdering and starving themselves to extinction.
The main difference between their scenario and the Christian scenario is that in libertopia there are no Chritstians… just misanthropic atheist… but it all works out wonderful.

Greg G December 10, 2011 at 4:12 pm

muirgeo

You should leave religion out of it. Jesus may have said some inconvenient things about helping the poor but he didn’t say anything about government needing to do it. The few libertarians I know do step up when it’s time for charitable giving.

g-dub December 10, 2011 at 6:50 pm

gg> So the “usual” reading of the Constitution here means the Greg Webb/Methinks reading, not the Supreme Court reading that has been in place our whole lives.

Sure, there is none so sweet an attachment to the idea of self-government as the one where citizens take the word of the black-robed gods as holy gospel.

Josh S December 10, 2011 at 7:26 pm

Jesus also said you shouldn’t look lustfully at another man’s wife. Clearly, what he meant is that the government should establish a Department of Fidelity to monitor every man’s eyes to make sure they are trained firmly on his spouse at all times, and to mete out punishment when appropriate.

Dan J December 10, 2011 at 8:20 pm

Indeed, Congress will infringe on written limitations or find a way around written law that explicitly states what a govts job is to do.
Example A: commerce clause mentioning in Constitution. GOVT has abused this phrasing to encompass controls over men, even exerting forced participation in commerce.
Example B: welfare statements in Constiution. GOVT has abused the original intent and meaning to create stealing from Peter to give to Paul, a.k.a a nanny state.

vikingvista December 10, 2011 at 1:17 pm

DK: your very unusual reading of it as “ignoring the Constitution”

I have to agree with you. The usual reading of the Constitution has become one of reading it between the lines–while ignoring the lines. Methinks’ plain reading of it with Framer’s intent has indeed become unusual.

g-dub December 10, 2011 at 6:54 pm

hah! Except, these days congress critters don’t even pretend to read it, or care in the least bit what it says.

IIRC — and I may not — Madison, when talking about parchment barriers asked “is there no virtue among us?” I think I could give him a pretty definite answer.

vikingvista December 10, 2011 at 7:51 pm

Indeed. The widespread errors in the Constitution would be less of a problem in more virtuous hands. But then, it is those errors that attract and reward the non-virtuous, so the end was inevitable.

Dan J December 10, 2011 at 8:28 pm

Some in Congress do not care a whiff about Constututionality of legislations passed, nor do they see the Constitution as anything but an obstacle in their path to do whatever they want.
Sept of 2009, judge Andrew Napolitano interviewed James Clyburn of SC.
During debate of Obamacare the Judge was questioning the legality of a healthcare bill…..
The Judge then pops the question: “Where in the Constitution is the federal government charged with maintaining people’s health?”

Clyburn’s answer: “There’s nothing in the Constitution that says the federal government has anything to do with most of the stuff we do.”

The Judge charges back a bit later: “You took an oath to uphold the Constitution. You can’t go outside the Constitution because you think it is a good thing to do without violating that oath!”
Clyburn replies: “How about show me where in the Constitution it prohibits the federal government from doing this?”

The Judge then, of course, cites the 10th Amendment. Listen to the entire audio below to hear Clyburn’s sad and predictable follow-up.

Dan J December 10, 2011 at 8:30 pm

The radio clip can be found at : http://libertymaven.com/2009/09/08/judge-napolitano-pops-the-health-care-constitutionality-question/7163/

I used to have it on my computer. I saved that days radio show for my own evidence.

Greg G December 10, 2011 at 10:15 am

Methinks

The explanation of U.S. exit taxes was genuinely interesting and educational. I understand why you are pissed off about them.

But you didn’t address the original question of which other countries you think are better places to live today?

Methinks1776 December 10, 2011 at 10:29 am

There will never be a country in your lifetime as good, in terms of the personal freedom and limited government, as the United States used to be. The United States may very well become worse than other available options. I don’t give people advice about which country will suit them best for the same reason I don’t give investment advice. But, if smoking pot while chewing gum is important to your daily well-being, I wouldn’t recommend a move to Singapore.

Greg Webb December 10, 2011 at 10:48 am

Agreed. But only move to Singapore if you are willing to continue to pay US taxes for 10 years.

Methinks1776 December 10, 2011 at 10:57 am

You are no longer required to pay taxes for 10 years. You are now required to pay an exit tax. I don’t think the U.S. government had very much success in tracking down former citizens to extract taxes from them, so it just takes it out of your hide up front now. We had to pay an exit tax to leave the USSR as well. No other country requires it.

Before you can leave Hotel California, however, you must first obtain citizenship in another country. Unless you’re wealthy, this is not so easy. Merely moving your person to another location on the planet will not free you from the grip of the U.S. government.

Josh S December 10, 2011 at 7:31 pm

The exit tax should tell you all you need to know about power–governments exercise power because they can. I’m sure every government in the world would love to tax its citizens living abroad, but only the USA is big enough to bully them into it. It’s easy to not ever do business with Sweden or Mexico again…not so much the USA.

Methinks1776 December 10, 2011 at 9:26 pm

I’m sure every government in the world would love to tax its citizens living abroad, but only the USA is big enough to bully them into it.

EXACTLY. The sheer wealth of the U.S. government (all courtesy of the innovative free human beings living on this patch of soil) allows it to use its ever-increasing power against its own citizenry. It’s one reason that I think the United States government can more easily slide toward a totalitarian model than toward a Western European socialist model. What worries me is that it’s clearly willing to entertain previously unimaginable restrictions and powers.

We are sexually molested at airports. Our communications can be tapped by government (there was a time when we worried about only about Soviet censors spying when communicating with relatives in Russia). Now, the president will likely be able to imprison any one of us indefinitely on his word alone. I’m sure that will never be used against political adversaries, right? The effect is to chill speech and if speech is chilled, “the people” lose all ability to exert any control (however tenuous it may be) over their own government. Without making it explicitly illegal, it will be illegal to say anything against the regime.

There are definitely benefits to living as a citizen of a smaller, weaker government. As an immigrant to the United States – particularly a Soviet immigrant – I’m sickened and saddened by what’s happening here.

Gil December 10, 2011 at 9:53 pm

Do tell us Methinks1776 when you’re comment from Chile or Sinagpore. Just as an idiot deserves to get burnt if they continue to drive a dangerously-built car so too a Libertarian can’t complain when the country they’ve been complained is turning into a Fascist for years state has locked them up in a concentration camp when emigration was option for a while.

Greg G December 11, 2011 at 7:58 am

Methinks1776 December 10, 2011 at 10:29 am
“There will never be a country in your lifetime as good, in terms of the personal freedom and limited government, as the United States used to be.”

Even so, our hosts often remind us that most are living with a higher standard of living than they were 20, 30, 40 years earlier. It’s probably time for another one of those regular posts to put this all in perspective.

Methinks1776 December 11, 2011 at 9:50 am

Greg, everyone on earth has a higher standard of living than they did 30 years ago. As usual, try as you might, you haven’t the faculties to grasp the point.

Greg Webb December 11, 2011 at 2:50 pm

Methinks1776, that is a possibility that I have not considered. I just thought Greg G was being his typically disingenuous self. But, on second thought, it is stupid to avoid economic reality to argue in favor of big-government.

Greg G December 11, 2011 at 3:07 pm

Methinks1776 December 11, 2011 at 9:50 am
“Greg, everyone on earth has a higher standard of living than they did 30 years ago.”

Activate the pretense of knowledge alarm system!

Greg Webb December 11, 2011 at 3:23 pm

There you go again, Greg G. Being stupid is no way to go through life.

vidyohs December 10, 2011 at 8:43 am

“This is an excellent point about sensitivity to public vs. private wealth.”

Now there is a subtle disingenuous little line. “The wealthy public” is a label that is a lazy way of saying “a lot of wealthy individuals”.

How does a public gain wealth? I have never heard of a public taking a job, I have never heard of a public offering a job, I have never heard of a public investing earnings, I have never seen a public do a damn thing.

All the things I can see to be done to create wealth are done by either individual free men or legally recognized individual persons. The wealth created can then be considered private.

Personally, I do not see wealth stolen in the form of taxation from the private individual or person as public wealth. That stolen wealth may be held by what we lamely call a public entity in this circumstance t is not held by “the public”, but it is held by individuals who supposedly act for that vague concept of public. Furthermore, that wealth is typically not spent in the best interest of “the public” but spent instead in the best interests of the re-election of the one who spends.

Josh S December 10, 2011 at 9:51 am

No, that’s not the solution because that’s not how the incentives work. Politicians have no incentive to take an approach to public finance based in sound economics rather than the comedy-Keynesianism* of big deficits in good times and TERRIFYING deficits in bad times. They have every incentive to grab as many goodies for their constituents and cronies as they can.

*Because it’s like a bad parody of Keynes’ views

George Selgin December 10, 2011 at 9:26 am

Hmmm. Dwight’s argument here is awfully similar to the usual rationale supplied for taxing people to provide for public goods that will otherwise be under-supplied. The twist is that he suggests that governments themselves will borrow too much (and, though he resists this implication of his argument) tax too little, while sacrificing genuine public goods investment for the sake of short-term largesse. The question then becomes an empirical one: is the inadequate provision for public wealth actually worse than under laissez faire, or just not so much better than standard public finance treatments suppose?

George Selgin December 10, 2011 at 9:28 am

For “than” in my last sentence please read “as.”

muirgeo December 10, 2011 at 10:10 am

As Steve Keen points out privately held debt has been far more a problem than government debt. So the quotation is not consistent with reality. Wall Street took 1 trillion dollars of debt and leveraged it to over $100 trillion.

http://cdn.debtdeflation.com/blogs/wp-content/uploads/2009/09/bear/image002.gif

Greg Webb December 10, 2011 at 10:54 am

The European countries are have to face the consequences of their government’s over spending. That is public sector debt. The US government, though low interest rate monetary policies and subsidies to the real estate industry, encouraged excessive private sector debt as well as borrowed an excessive amount itself.

Ken December 10, 2011 at 6:19 pm

I’d say it was a right scholarly summation, but let’s face it: it’s too concise to be scholarly. Even the abstract would be at least three times as long as what you wrote. :)

Well done.

Greg Webb December 11, 2011 at 2:52 pm

Thanks, Ken! You can’t make it too long otherwise muirgeo won’t understand it. In a way, he helps me to write more clearly and concisely in the hope that he will finally understand that big-government is the problem, not the solution.

Ken December 10, 2011 at 5:45 pm

Because of the absence of privately owned and transferable claims against the collective value created, or destroyed, by political decisions, citizens will be less sensitive to reductions the long-run wealth of the general political community than to temporary, but individually realized, benefits.

The McLawsuit is a perfect example of this. I read a peer-reviewed, published article arguing obesity lawsuits against McDonald’s should be allowed to go forward (and I can’t even remember the argument advanced, that’s how compelling it was — I think it might still be lying around my home office somewhere). My thinking was, “Where do McDonald’s franchisees and shareholders go for redress after the firm spends millions of dollars in the process while the courts establish what anyone with a moral sense knew all along: that the claims are codswallop?”

Harold Cockerill December 11, 2011 at 8:23 am

Fortunately private companies can’t just print money to cover their excessive borrowing. Unfortunately government can and has been and probably will a lot more. Yes your SS check will show up. Good luck buying anything with it.

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