Free Markets, Free People
Bob Shrum, perhaps best known for his masterful performance in shepherding John Kerry’s presidential race to…uh…it’s…conclusion, now sounds off about economic myths.
One of the most stubborn [myths] is what [John] Kennedy denounced at Yale—the notion that deficits are always evil and the balanced budget an inherent public good. This myth is now constantly exploited by do-nothing opponents of Obama’s recovery plan. On Sunday, George Stephanopoulos read a viewer’s complaint to Treasury Secretary Tim Geithner: “How do you justify printing money out of thin air?” Isn’t the inevitable consequence “hyperinflation?” Geithner calmly rebuked the cliché by pointing to the Federal Reserve’s capacity to counter inflation by raising interest rates once the economy is back on track.
Well, he’s cartainly right about that. The Fed can always just raise interest rates. It’s what Paul Volcker did as Fed Chairman in the late 70s and early 80s. If by “back on track” he means that we can have an unemployment rate of 12%, as we did in 1982, and a Fed Funds rate of 14%, then, I guess he’d be right. It certainly got rid of inflation.
After all, cutting spending now would accelerate, not reverse, the downturn, and trigger a spiral of declining federal revenues that could leave budget balancing out of reach no matter how deeply we cut.
And raising short-term interest rates by the Fed at some point in the future would…not?
This is elementary economics.
I certainly wouldn’t contradict that.
In reality, Roosevelt increased spending overall by 40 percent from 1933 to 1934, and the deficit by nearly a third. In the first five years of the New Deal, the gross domestic product rose more than 40 percent. The New Deal faltered not when FDR disdained conservative advice on deficits, but only when he briefly followed it. After Roosevelt drastically cut the deficit in his 1937 budget, the economy promptly tanked. When FDR reversed course, the economy turned around.
In reality, Roosevelt also increased tax rate; the top tax rate climbing from 63% to 79%. No doubt his conservative critics encouraged that, too. In other words, Roosevelt both decreased spending and increased taxes. In addition, there were new Social Security taxes in 1936 and 1937. And a new corporate tax on undistributed earnings went into effect in 1937, too. If only we had some way to know what effect tax increases have on economic growth!
Oh, and the Fed doubled reserve requirements on banks from 1936 to 1937.
I wonder–pure speculation of course–if significant tax increases and contractions in the money supply might have, in some mysterious way, contributed to the economic downturn of 1937-1938.
Sadly, we may never know.
In 1933, FDR blew up a London economic summit that sought to set fixed currency exchange rates, a virtual return to the gold standard that would have hobbled his economic strategy.
In other words, FDR was a unilateralist cowboy who intentionally flaunted international consensus for his own political ends, and, incidentally, reversed course a year later.
There was a lot more stuff going on in 1933-1940 than simply government spending. Not that you’d know it from reading Mr. Shrum’s amusing little article.
That’s sort of the gist of my latest Examiner column. I point out that education isn’t a one-size-fits-all proposition and experimentation is a good thing.
Another day, another breathless “Antarctica is melting” report:
An ice bridge linking a shelf of ice the size of Jamaica to two islands in Antarctica has snapped.
Scientists say the collapse could mean the Wilkins Ice Shelf is on the brink of breaking away, and provides further evidence of rapid change in the region.
Sited on the western side of the Antarctic Peninsula, the Wilkins shelf has been retreating since the 1990s.
The BBC report seems to consciously avoid blaming it on global warming, but does imply the change is recent (and leaves it to you to decide what that means):
“The fact that it’s retreating and now has lost connection with one of its islands is really a strong indication that the warming on the Antarctic is having an effect on yet another ice shelf.”
Since this is a floating ice shelf, its breakaway will have zero effect on sea levels.
The NYT, of course, is not so careful with its coverage:
An ice bridge holding a vast Antarctic ice shelf in place has shattered and may herald a wider collapse caused by global warming, a scientist said Saturday.
While citing both articles, Think Progress naturally choses the more dire pronouncement as its lede.
Of course we’ve been through this before. You may remember the discussion when it first came up almost a year ago to the day, we did some research and discovered, low and behold, that the area where the Wilkins Ice Sheet is located also happens to be the location of some active undersea volcanoes.
Notice the ice shelf is on the western side of the peninsula and south of its tip. Now, look at this:
Well I’ll be – an active volcano very near the shelf which also vents further up the peninsula. I wonder – could that cause a bit of warming in the area?
Last year, the Ice Cap provided a little sanity to the discussion. Then it was an MSNBC report. It is essentially no different than thes reports. In fact it is more of what they don’t say than what they do say the make the news reports suspect. Here’s what Ice Cap said last year:
The [MSNBC] account may be misinterpreted by some as the ice cap or a significant (vast) portion is collapsing. In reality it and all the former shelves that collapsed are small and most near the Antarctic peninsula which sticks well out from Antarctica into the currents and winds of the South Atlantic and lies in a tectonically active region with surface and subsurface active volcanic activity. The vast continent has actually cooled since 1979.
The full Wilkins 6,000 square mile ice shelf is just 0.39% of the current ice sheet (just 0.1% of the extent last September). Only a small portion of it between 1/10th-1/20th of Wilkins has separated so far, like an icicle falling off a snow and ice covered house. And this winter is coming on quickly. In fact the ice is returning so fast, it is running an amazing 60% ahead (4.0 vs 2.5 million square km extent) of last year when it set a new record. The ice extent is already approaching the second highest level for extent since the measurements began by satellite in 1979 and just a few days into the Southern Hemisphere winter and 6 months ahead of the peak. Wilkins like all the others that temporarily broke up will refreeze soon. We are very likely going to exceed last year’s record. Yet the world is left with the false impression Antarctica’s ice sheet is also starting to disappear.
In other words, it is tiny portion of Antarctica which is located in a part of the continent which is most exposed to South Pacific currents and also has “surface and subsurface volcanic activity” to add to any warming. Graphically it looks like this:
So, other than it finally looks like Wilkins may split away, the situation isn’t any more dire than it was last year at this time and seems, instead, to be the work of natural forces that certainly would have a warming effect without the assistance of any sort of “global warming”.
North Korea, ignoring the world as usual, launched it’s long-range missile:
North Korea fired a long-range rocket on Sunday, provoking international outrage and prompting the U.N. Security Council to call an emergency meeting.
The world as usual hopped up and down and told North Korea how angry it is:
“North Korea has ignored its international obligations, rejected unequivocal calls for restraint and further isolated itself from the community of nations,” President Obama said in Prague, urging Pyongyang to honor the U.N. resolutions and to refrain from further “provocative” actions.
It’s “obligations” obviously, pertain to obeying a unanimous UN Security Council resolution barring North Korea from firing ballistic missiles resolution passed in 2006. Of course North Korea never agreed to or had any say in the resolution. Just as obviously then, they feel no compunction whatsoever to abide by it.
And now, with the UN Security Council emergency meeting looming, what can we expect?
The 15-nation Security Council was due to hold an emergency closed-door meeting from 3 p.m. EDT but China and Russia have made clear they will use their veto power to block any resolution imposing new sanctions on Pyongyang .
For some reason, all of this reminded me of this from Team America: World Police -
Kim Jong Il: Hans Brix? Oh no! Oh, herro. Great to see you again, Hans!
Hans Blix: Mr. Il, I was supposed to be allowed to inspect your palace today, but your guards won’t let me enter certain areas.
Kim Jong Il: Hans, Hans, Hans! We’ve been frew this a dozen times. I don’t have any weapons of mass destwuction, OK Hans?
Hans Blix: Then let me look around, so I can ease the UN’s collective mind. I’m sorry, but the UN must be firm with you. Let me in, or else.
Kim Jong Il: Or else what?
Hans Blix: Or else we will be very angry with you… and we will write you a letter, telling you how angry we are.