Daily Archives: August 15, 2011
Paul Krugman was on CNN yesterday, as a guest on “Fareed Zakaria GPS”. I’m glad of it, because he provided us with this gem:
If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better–
I guess since the Nazis and Imperial Japan are no longer with us, an alien attack threat is all he’s got left. In one sense, he’s right. If aliens were coming to attack us, we’d do whatever we had to do, and damn the expense. Of course, the aliens, assuming they were really interested in killing us all off, would probably stop close to the asteroid belt and drop bolides on us until we said "uncle". Or were extinct. Which would solve our financial problems.
Here’s the thing about military spending. we consider a lot of military spending to be on durable goods. We count it that way as part of GDP. But these goods are NOT durable goods. They are consumables. We build them with the expectation that they will be quickly, and violently consumed in combat. And outside of combat, they generally have no useful role in society.
But let’s assume he’s right. We have a massive space armaments buildup, everyone goes back to work, and we borrow another $14 trillion to do it. Great. 18 months later, everybody is working in the armaments factories, thousands of "space fighters" and orbital x-ray lasers are buzzing around in near earth orbit, command bunkers are built deep in the earth’s crust…woo hoo! The economy is booming again.
Then we find the threat has been mistaken. There aren’t any aliens coming to attack us. Are we really better off? I mean, we’ve been better off for a couple of years, while we were preparing for the aliens, and everybody was working. But what happens now?
Now we have a huge stockpile of useless military equipment that we have to destroy, or borrow more money to maintain. Demand for plasma cannon and shield generators disappears. The armaments factories close down, and those jobs are gone forever. We have rung up a $30 trillion debt to purchase a massive amount of goods that have no constructive purpose, and generate no wealth. And what wealth we did have is now sunk into space weaponry we can’t use for…well…anything. What we can use, we have a glut of, and have to either destroy or surplus out.
So, where do all the jobs go now? How are we better off? All the alien-fighting military and civilian jobs evaporate, our national wealth has been sunk into useless alien-fighting equipment, and we’re now carrying a debt of 200% of GDP. It seems to me that we’re now worse off than we were before the alien scare.
This is Keynesianism taken to the furthest logical extreme: We’d be better off creating a massive buildup of useless and unusable military equipment, because it would stimulate the economy. The trouble is, how do we pay for it once we’ve done it?
Frankly, if the aliens do come, I’d prefer that we do nothing. If they can cross the vastness of interstellar space, their technology is so far ahead of ours that any attempt at defense would be futile. And, of course, I presume that any society so advanced would, if nothing else, deliver us from Prof. Krugman’s brand of irrational economics once and for all.
The article today in the New York Times where Warren Buffet laments that he just gets off so easily at tax times is one of those hinkey pieces that establishes two premises that are, in fact, nonsense.
Premise one is the rich are not paying their fair share. IRS statistics consistently tell us that it is the bottom 50% who aren’t paying any share and the so-called rich pay the lion’s share. Buffet at least tries to push it toward “super-rich”, whatever that means. However, it is just another version of the class warfare argument the left has been trying for years. Bill Clinton has stood up and said “why aren’t they taxing people like me more?” Barack Obama has done the same.
Here’s what Buffet is pitching:
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
Buffet first goes right to the class aspect of it in the most emotional manner possible. The implication, of course, is that the rich aren’t fighting … they don’t have too. Obviously then the “poor and middle class” must. They couldn’t do it for reasons other than they must, I guess.
And, of course, the other other narrative is that 15% is a “bargain” tax rate. He attempts to make the point that the super-rich don’t do much work to earn their money. Well here’s a clue for Mr. Buffet – the government doesn’t work at all for the 15% it takes.
Premise two is that if they’d just tax the rich more, all of our revenue problems would be over. The fact is that’s not even close and a money man like Buffet knows that. What it would do, though, is help dry up any revenue that is now being gotten from investments as the rich seek other ways to invest and protect their income. Again, this should be Econ 101 stuff for a guy like Buffet.
The government could tax the rich 100% next year and still have to borrow money. But we know, given human nature, that there’d be no 2nd year at 100% because those with that sort of money would have found ways to protect it by then. Meanwhile, the economy would be in reverse.
Finally, Buffet says:
I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.
Would someone who has Warren Buffet’s email please apprise him of the fact that a) he doesn’t speak for all the “rich” so he ought to confine his appeal to only himself and b) if he’s really serious about this, he doesn’t have to wait to have the government increase his taxes, he can voluntarily contribute any amount he wishes to the US Treasury to help pay down the debt or help their “fellow citizens” who are “truly suffering”.
Of course he do everyone a much greater favor if he’d take that money and instead invest in a business that’s got promise so they can expand and hire people. Dollar for dollar that would do everyone more good than appealing to government to raise tax rates on those who actually do have the option of what I described.
But, of course, that doesn’t fit the liberal narrative and the one thing those like Buffet and George Soros have reliably done for some time is push that narrative.
I‘ll be honest with you. I dunno if Rick Perry would be a good president or not. I don’t even know if he’s been a particularly good governor of Texas. But it’s becoming apparent he’s perceived as a pretty big threat to Barack Obama. The guy entered the race less than 48 hours ago, and we’re already being treated to things like this, this, and this, from the usual suspects on the left. It’s like the oppo research has already been done, and they were just waiting to go with it. As hard as that might be to believe.
In the next couple of weeks, we’re going to learn more about Rick Perry than we ever thought possible. Which kind of inclines me to think that anybody that has the Left jumping in to castigate them this quickly must have something going for him.
What’s especially interesting about this response is that we knew what Rick Perry’s college grades were before he even announced his candidacy, and 2.5 years into Obama’s presidency, we can merely state, with some degree of confidence, where he went to college.
At least we won’t have to worry about whether Rick Perry gets properly "vetted".
A federal judge has scrapped the Obama Administration’s rules for drilling. The new rule required oil and gas producers to do additional environmental studies for each new site (or if increased drilling was to be done at an existing site) even though such studies had been completed on the entire tract previously. Under the Bush-era ‘categorical exclusion’ rule, the existing studies and approval for the entire tract were sufficient and subsequent studies for new drilling on that tract were waived.
The Energy Policy Act of 2005 allows the BLM and Forest Service to invoke categorical exclusions and skip new environmental review for drilling permits under certain circumstances.
The circumstances include instances where companies plan to disturb relatively little ground and environmental review already has been done for that area. A categorical exclusion also can be invoked when additional drilling is planned at a well pad where drilling has occurred within the previous five years.
The Obama administration had issued new rules which revoked categorical exclusions (used extensively in the Western US until last year) and required new environmental studies for each new planned drilling or expansion of drilling, slowing the process to a crawl.
The plaintiff, Denver-based Western Energy Alliance, argued that the new rule had created delays that thereby added cost and materially hurt (and thereby created “recognizable injury”). The administration rejected the argument saying it was “speculative. However, the federal judge, U.S. District Judge Nancy Freudenthal , did not:
"Western Energy has demonstrated through its members recognizable injury," she said. "Those injuries are supported by the administrative record."
This, of course, is good news for the oil and gas industry, good news for job hungry Americans and, ironically, a ruling the “focused on jobs like a laser” administration is sure to appeal.