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.
In this podcast, Bruce, Michael and Dale discuss the G-20 Summit, Pres. Obama’s foreign policy, and the Geithner Plan.
The direct link to the podcast can be found here.
The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.
After decades in development hell, Ayn Rand’s capitalism-minded “Atlas Shrugged” is taking new steps toward the big screen — with one of the film world’s most prominent money men potentially at its center.
Ryan Kavanaugh’s Relativity Media is circling the Baldwin Entertainment project and could come aboard to finance with Lionsgate, which got involved several years ago.
Rand’s popular but polarizing book — it’s derided by many literary critics but has a huge public following — tells the story of Dagny Taggart, a railroad executive trying to keep her corporation competitive in the face of what she perceives as a lack of innovation and individual responsibility.
A number of stars have expressed serious interest in playing the lead role of Taggart. Angelina Jolie previously had been reported as a candidate to play the strong female character, but the list is growing and now includes Charlize Theron, Julia Roberts and Anne Hathaway.
This isn’t the first time there has been talk of making Atlas Shrugged into a motion picture, as the article notes. In fact, Rand was working on a screenplay when she died in 1982. Needless to say, the project has a history of not getting off the ground.
Atlas Shrugged, published in 1957, is a work of fiction, however, it contains key concepts of Rand’s personal philosophy, Objectivism, which teaches rational self-interest, personal sovereignty and free-market capitalism. Many also consider it to be somewhat prophetic, especially during this current economic downturn.
The producers of society, represented by Dagny Taggart, Hank Rearden, Francisco d’Anconia and John Galt, are derided by antagonists in the book and government action, supported by “looters” and “moochers,” begin leading its citizens down the path of socialism. Sound familiar?
In Capitalism: The Unknown Ideal, Rand called business, “America’s persecuted minority.” Though, as Rand once pointed out, businessmen are often enemies of capitalism because they seek government favor, much like companies seeking bailouts today.
With the rise of the group mentality and class warfare, the producers in our world today are castigated and blamed for the current economic downfall. Rand once said, “One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.” That is exactly what we are seeing in today societal and political rhetoric, just look at recent comments by President Barack Obama for affirmation of the misguided and cancerous populism consuming America. That the market has failed and it must be regulated to the point of expanding government power to take over businesses.
Keep your fingers crossed that a film adaption of Atlas Shrugged gets done. with a message as powerful as the novel. Rand’s message needs to be heard.
Al Gore may have ‘invented’ it, but the Congress may give Obama control of it. The report is from Mother Jones:
Should President Obama have the power to shut down domestic Internet traffic during a state of emergency?
Senators John Rockefeller (D-W. Va.) and Olympia Snowe (R-Maine) think so. On Wednesday they introduced a bill to establish the Office of the National Cybersecurity Advisor—an arm of the executive branch that would have vast power to monitor and control Internet traffic to protect against threats to critical cyber infrastructure. That broad power is rattling some civil libertarians.
The Cybersecurity Act of 2009 (PDF) gives the president the ability to “declare a cybersecurity emergency” and shut down or limit Internet traffic in any “critical” information network “in the interest of national security.” The bill does not define a critical information network or a cybersecurity emergency. That definition would be left to the president.
The bill does not only add to the power of the president. It also grants the Secretary of Commerce “access to all relevant data concerning [critical] networks without regard to any provision of law, regulation, rule, or policy restricting such access.” This means he or she can monitor or access any data on private or public networks without regard to privacy laws.
So you have an unelected Secretary of Commerce able to access all of the data on the private or public networks without regard to privacy laws – yeah, no possibility of abuse there, huh?
The bill could undermine the Electronic Communications Privacy Act (ECPA), says CDT senior counsel Greg Nojeim. That law, enacted in the mid ’80s, requires law enforcement seek a warrant before tapping in to data transmissions between computers.
“It’s an incredibly broad authority,” Nojeim says, pointing out that existing privacy laws “could fall to this authority.”
It will be interesting to see if we hear the same sort of outcry from the left pertaining to warrants as we heard about FISA if this passes.
“We must protect our critical infrastructure at all costs—from our water to our electricity, to banking, traffic lights and electronic health records—the list goes on,” Rockefeller said in a statement. Snowe echoed her colleague, saying, “if we fail to take swift action, we, regrettably, risk a cyber-Katrina.”
And apparently the possibility of a “cyber-Katrina” means that any Constitutional right you may have to privacy can be waived.
The New York Times engaged in union busting:
The New York Times Company has threatened to close The Boston Globe unless labor unions agree to concessions like pay cuts and the cessation of pension contributions, according to a person briefed on the talks.
What a strange and different world we find ourselves in today. Of course I guess that’s really no different than Rosie O’Donnell railing against guns while her armed body guards stood next to her.
Some relatively good news and some bad news. The good news has to do with “cap-and-tax” as the WSJ article cited refers to “cap-and-trade”:
Tennessee Republican Lamar Alexander called it “the biggest vote of the year” so far, and he’s right. This means Majority Leader Harry Reid can’t jam cap and tax through as part of this year’s budget resolution with a bare majority of 50 Senators. More broadly, it’s a signal that California and East Coast Democrats won’t be able to sock it to coal and manufacturing-heavy Midwestern states without a fight. Senators voting in favor of the 60-vote rule included liberals from Wisconsin, Michigan and West Virginia. Now look for Team Obama to attempt to impose cap and tax the non-democratic way, via regulation that hits business and local governments with such heavy costs that they beg Congress for a less-harmful version.
I say relatively good news because the author is right – if the Obama administration can’t get it through Congress, there’s little doubt they’ll look for an administrative way to impose cap-and-trade through the executive branch. One route may be through the EPA.
Of course, there is always the distinct possibility that one of the Democratic Senators who is presently against limiting the filibuster will be pressured into changing his mind. And then there are always the RINOs.
But the possibliity remains that the cap-and-trade economy killer may be defeated in Congress, or at least delayed for a while. If passed, you could rest assured we’d not be seeing an economic recovery anytime soon.
However, cap-and-trade isn’t the only problem on the horizon. The health care push will be coming up soon as well, now that Congress has passed the Obama budget blueprint with no Republican support.
The most important remaining fight this year is over health care. Democrats seem intent on trying to plow that monumental change through with only 50 votes, even as they negotiate to bring along some Republicans. We hope these Republicans understand that a new health-care “public option” — a form of Medicare for all Americans — guarantees that the 17% of GDP represented by the health-care industry will be entirely government-run within a few years. This is precisely Mr. Obama’s long-term goal, though he doesn’t want to say it publicly.
It is a back-door means of claiming the reforms are “market” oriented while setting up the system to be quietly shifted to government control. And this at a time when more and more doctors are leaving the Medicare system because of low payment.
In the case of health care, the use of “reconciliation” appears to be a possiblity. That means, as an exception to the rule which now requires 60 votes for cloture on all measures of law, the Senate could require a mere majority (51 votes) to pass this monstrosity and see the government devour another 17% of GDP.
The game plan is fairly evident. Grace-Marie Turner, president of the Galen Institute, said in an interview:
“We really have a pretty good idea of the outline of the plan they are going to be proposing,” she said. They’ll want to “require everyone to have health insurance and require all employers to pay.”
Since some companies and individuals may not be able to afford that, the taxpayers will be told they are making up the difference, she warned.
The real danger, she suggested, is that with a government-run program, private insurance soon will start disappearing.
“If you expand access to government programs, more and more will drop private coverage,” she said. “A lot of this is going to be, I fear, replacing the private coverage with taxpayer supported coverage.”
That will just raise the costs even higher, and be the first step to what she expects eventually will be “a monopoly player.”
Routed through the government bureaucracy, the same inefficiencies that every government run health care service will emerge. And as with any system in which unlimited demand meets finite supply, some sort of rationing will take place. Since government will be the monopoly player, as Turner calls it, that rationing won’t be by price, as it now works, but instead by denial of service:
Already, she said, $1.1 billion is being allocated for “comparative effectiveness studies.”
That will be “what treatments are good and bad, what’s going to be available to us or not. That’s the first step toward rationing,” she said.
That $600 billion dollar “downpayment”, as Obama calls it, will eventually morph into a deficit of trillions. Why? Because the promise is low-cost universal health care. And there is no such animal that is worth a tinker’s dam.