Saturday, December 27, 2008

Economic nonsense

When he finally takes office, look for a big old bailout from Barry:

At least as designed, the Obama plan, like a calibrated drug regimen, aims to deliver both short- and long-term relief.

The short-term help would flow partly from tax cuts of $1,000 for couples and $500 for individuals,costing about $140 billion over 2009-2010. The Obama team, said two congressional Democratic aides familiar with the discussions, will likely deliver those tax cuts by reducing the tax withheld from paychecks.

This would put more money in paychecks, unlike the lump-sum rebates issued earlier this year. Many people used those to pay down debt, rather than spending them as the administration had hoped.

In addition, states would get up to $200 billion over two years for Medicaid health coverage for the poor and to narrow state budget gaps, which are forcing layoffs and cuts in services. The aides spoke on the condition of anonymity to candidly discuss the evolving plan.

Throwing money at the problem to solve it. That'll work.

It's frustrating to see that the "do something" crowd is given the benefit of the doubt, no matter how silly their plan. The correct response by the government during an economic crisis is to do nothing, or perhaps cut taxes and reduce spending. This is precisely the thing government is least likely to do.

When the bailouts and the stimulus checks fail to stimulate the economy, the powers that be will be excused on the grounds that they couldn't sit idly by while the economy was in crisis. And they will be forgiven, even though government action causes and exacerbates the very crisis they were ostensibly attempting to eradicate.

You won't read this in the article, of course. Our supposedly skeptical journalists are either too ignorant of economics or just too wrapped up in their belief that the government will save the day to doubt the efficacy of stimulus and bailouts. This is to be expected. But the article contains a line so preposterous that we must be amazed that no eyebrows were raised when such an incredulity was printed:

For each $1 invested in infrastructure spending, about $1.60 in economic activity would be generated, according to estimates by some economists.

If I told you that I knew a way for you to make sixty percent returns on your investment, you would wonder whether I was smoking crack or if I had merely stumbled upon a Ponzi scheme. With the help of some funny math, the stock market promises returns of ten percent, but anything approaching sixty percent is unheard of. And yet, there it is, smack dab in the middle of the article, without the accompaniment of a hysterical laugh, even a parenthetical one.

If infrastructure spending really made such stupendous returns, we would be wise to invest all of our spending in infrastructure, economic crisis or no. Why, if we simply devoted all of our money to infrastructure, we could grow the GDP by sixty percent.

The reality is these numbers are completely inaccurate. Every dollar invested in infrastructure must come from somewhere. These dollars are taken from the private sector; ignoring the inefficiencies of government bureaucracies, the net result is, at best, a replacement of private sector employees with those who work for the government. And this overly optimistic view depends on the infrastructure being invested productively, and not, say, on bridges to nowhere.

Since the government is far less efficient than the private sector, increasing government spending in the midst of a recession is a profoundly stupid thing to do. Only a return to normalcy in the private sector will end the recession; every attempt to squeeze it only puts off the day on which normalcy shall return.

It'd be nice if journalists expressed some familiarity with this theory. In the meantime, I'll settle for skepticism toward obviously exaggerations.

Sunday, December 21, 2008

Onward empire

The president-elect is looking to surge in Afghanistan:

The top U.S. military officer said Saturday that the Pentagon could double the number of American forces in Afghanistan by next summer to 60,000 - the largest estimate of potential reinforcements ever publicly suggested.

There's a really good article in this week's American Conservative that discusses the three far more important policy changes, commonly attributed to the surge, that have seemingly caused a reversal of fortunes in Iraq in the last year or so. It's worth a read, but it's important to remember that even if policy and tactical changes in Iraq momentarily reduced American causalities, we are nowhere near the goal of making Iraqi into a democratic republic.

In other news, the president-elect is backpedaling on his promise to bring our troops home from Iraq:

A new military plan for troop withdrawals from Iraq that was described in broad terms this week to President-elect Barack Obama falls short of the 16-month timetable Mr. Obama outlined during his election campaign, United States military officials said Wednesday.

Well, at least they won't be there for one hundred years.

Obama sure seems hellbent on backstabbing his supporters. Especially impressing is the speed and forthrightness with which it is taking place. He's not even in office yet and we're seeing a complete capitulation on the foreign policy front.

This isn't surprising; if you have a memory that is capable of retaining information of more than the past president, you'll recall that the democrats--Carter excepted--have traditionally been hawkish. And although Obama was against the war in Iraq, he's never expressed a commitment to avoid aggressive war. Iraq was the wrong war, but not necessarily for moral reasons; another war--say in Pakistan--might be a good one.

It will be very interesting to see if there is a significant backlash from the antiwar left against Obama when it becomes apparent that the wars aren't going to end. I'm not holding my breath, but I'll still be paying some attention.

Worth mentioning, too, is that because we're in the midst of a rather large recession, it may become difficult for Obama to justify the costs of empire. So argues Pat Buchanan; and though I'm hopeful that he is correct, I fear that the war lobby will be powerful enough to keep most of the empire in tact.

Wednesday, December 03, 2008

State of the state

High and Dry sends me a link to an amusing piece from Reason:

We are in fact living at the cusp of what should be called the Libertarian Moment, the dawning not of some fabled, clich├ęd, and loosey-goosey Age of Aquarius but a time of increasingly hyper-individualized, hyper-expanded choice over every aspect of our lives, from 401(k)s to hot and cold running coffee drinks, from life-saving pharmaceuticals to online dating services. This is now a world where it’s more possible than ever to live your life on your own terms; it’s an early rough draft version of the libertarian philosopher Robert Nozick’s glimmering “utopia of utopias.” Due to exponential advances in technology, broad-based increases in wealth, the ongoing networking of the world via trade and culture, and the decline of both state and private institutions of repression, never before has it been easier for more individuals to chart their own course and steer their lives by the stars as they see the sky. If you don’t believe it, ask your gay friends, or simply look who’s running for the White House in 2008.

I'm reading--and quite enjoying--Nozick, butI can't seem to figure out how his "minimal state" even vaguely resembles the leviathan in Washington. Granted that the proliferation of technology in a somewhat capitalist society confronts the individual with a variety of choices, libertarianism is primarily concerned with the relationship between an individual and the State, which is likely to violate the individual's rights. The State remains strong. Too strong.

Singling out the gays and Obama is curious, too. Gay marriage isn't a fundamental right since it has been summoned from the abyss by the State; increased cultural acceptance of homosexuality, on the other hand, may be a liberation, but it is difficult to attribute this to Governmental forces. Likewise with Obama. Blacks haven't been disqualified from running for political office for sometime now; it is, instead and yet again, cultural change--coupled with a very pathetic Republican candidate--that has elevated a black man to the highest office in the land.

More importantly, "living life on your own terms" is still rather difficult to do. If you work hard to become moderately successful, the government will take upwards of a third of your income to give it to someone "less fortunate". Moreover, even these will have to pay; for under our economic system, which is difficult to opt out of, one is forced to use fiat currency. Inflated regularly by the Federal Reserve, this funny money exacts a tax, in the form of decreased purchasing power, upon everyone who uses it.

Since the authors are speaking of a "rough draft" of Nozick, I think it's unfair to suggest they believe we are living in some sort of libertarian paradise. But they do think that such an idea is not only plausible, it is likely--and in the short term. Perhaps this is so, though I severely doubt it. The essential point here is that we have a very long way to go yet.

I take umbrage, too, with their thoughts about what libertarianism means, and the victories we have, apparently, won:

The Libertarian Moment is based on a few hard-won insights that have grown into a fragile but enduring consensus in the ever-expanding free world. First is the notion that, all things being equal, markets are the best way to organize an economy and unleash the means of production (and its increasingly difficult-to-distinguish adjunct, consumption). Second is that at least vaguely representative democracy, and the political freedom it almost always strengthens, is the least worst form of government (a fact that even recalcitrant, anti-modern regimes in Islamabad, Tehran, and Berkeley grudgingly acknowledge in at least symbolic displays of pluralism). Both points seem almost banal now, but were under constant attack during the days of the Soviet Union, and are still subject to wobbly confidence any time capitalist dictatorships like China seem to grow ascendant in a time of domestic economic woe. Though every dip in the Dow makes the professional amnesiacs of cable TV and the finance pages turn in the direction of Mao, there is no going back to the Great Leap Forward.

The first point is solid, though I offer a caveat and a criticism. Even if Central Planning were superior to capitalism in regards to the organization of the markets--of course, we know that they are not--capitalism is still to be preferred because it respects property rights in ways State planning cannot. My only criticism is that I don't think people necessarily accept the superior efficiency produced by a free market, to say nothing of its greater respect for property rights. If people believed the market was superior, there would be no clamoring for bailouts. No entity is large enough or secure enough to prevent anything else from failing forever; history is replete with the rotten carcasses of nation states and empires who were once thought too big to fail. A few corporations may collapse during this present recession, but only the attempt to save the whole mess will destroy the present State--which is almost a shame.

The second point is less valid. The centrality of the libertarian's argument is that the State must be small so that man may be free. Voting doesn't even enter into this except insofar as it may be argued that a representative republic will best secure the blessings of liberty. I find this notion to be exceedingly dubious. One of the great flaws of the present system is that, since the people believe themselves to be responsible for their leaders, they will continue to work through the ballot box to effect change. This is a waste of time and energy as both parties are antithetical to the principles of liberty and limited government for which the libertarian stands.

In addition, the authors ought to ask themselves: if libertarianism is growing in popularity, shouldn't we see liberties being returned to the people as more and more libertarian minded folks attain representation in Government? If not, either libertarianism is still largely a fringe movement--I think it is--or democracy is not necessarily the best way to ensure that the State respects individuals' rights.

Also, while I sincerely hope there is no going back to the Great Leap Forward, as long as the recent economic crisis can be blamed on the failures of capitalism, socialism will attract a fair number of adherents. After all, it simply has not been implemented correctly--at least not yet. Should a totalitarian regime arise again--and I see nothing to suggest that this is a fundamental impossibility--another Great Leap Forward is quite plausible, and far more likely than a development of authentic socialism, whatever that is.

The writers go on to discuss the role played by the Internet in the coming libertarian revolt:

The ne plus ultra change agent as we lurch through the finish line of yet another electoral contest between our 19th century political parties is the revolutionary, break-it-down-and-build-it-back-up power of the Internet, and all the glorious creative destruction it enables at the expense of lumbering gatekeepers and to the benefit of empowered individuals. No single entity in the history of mankind has been so implicitly and explicitly libertarian: a tax-free distributed network and alternative universe where individuals, usually without effective interference from government, can reshape their identities, transcend limitations of family, geography, and culture. It’s a place where freaks and geeks and regular folks can pool their intelligence and compete (even win!) against entities thousands of times their size.

The generation raised on the Internet has essentially been raised libertarian, even if they’ve never even heard of the word. Native netizens now entering college exhibit a kind of broad-based tolerance toward every manner of ethnic, religious, and sexual-orientation grouping in a way that would have seemed like science fiction just a generation ago. The products and activities they enjoy and co-opt most, from filesharing to flying discount airlines to facebooking, are excrescences of the free-market ideas of deregulation and decontrol. Generations X, Y, and those even younger swim in markets—that is, in choices among competing alternatives—the way those of us who grew up in the ’70s frolicked on Slip ’n Slides.

This is probably the most intriguing part of the article. The Internet is conducive to libertarian thought; witness Ron Paul's presence, far outweighing his actual support in polls not conducted on the information superhighway. But it is also open to Government control. Take Facebook, which I begrudgingly use. The social networking tool is useful to those who log-on to message friends; but it also provides, well, anyone, with a cornucopia of information about a person: who he hangs out with, and where; what he looks like and what he likes. Most concerning is that all of this information is provided by the participants themselves without any poking or prodding by Orwellian forces.

It would be hypocritical of anyone who spends as much time using it as I do to bash the Internet. It has its flaws, certainly, but it provides many benefits; in any event an analysis of the pros and cons of the Internet is best dealt with elsewhere. The salient point is that it is still too early to say that the Internet won't be controlled by the State. It is also worth mentioning that, while it allows for open discussion of issues and ideas not mentioned by traditional media outlets, all of this seems to mean little in the long run. After all, look at the recent Statist in the White House.

Liberty is too popular an idea for libertarianism to ever fade entirely. But it does no good to pretend that it is more popular than it actually is. True, from certain vantage points, things are looking up a bit. Yet we still live in a country with a massive Government and an Empire almost as large. There are still minds aplenty who remained unconvinced that "government is best which governs least." There is also the political battle, and that hardly even begun.