The Public Has Spoken – Sort Of

Once you understand public choice theory, watching politics unfold becomes less of a frustration and more a source of amusement.

I just heard President Obama lay out his near term agenda. He was elected by a decent majority and will fight for the issues for which he campaigned. The people have spoken, and the people want a Democratic agenda implemented.

But the House of Representatives was also just elected. It is firmly Republican. The people have spoken, and the people want a Republican agenda implemented.

Same voters. Two conflicting agendas.

Some pundits say that voters want compromise. I don’t understand how you compromise between raising taxes and lowering taxes, for example.

I can only conclude that what voters actually favor is gridlock. This restrains both Democrats and Republicans and preserves the status quo. The last several presidents, when given a compliant Congress, have moved the country in unhappy directions. Gridlock forces politicians to take a “timeout” and allows only actions which are broadly acceptable to voters.

voting day in a small town (Photo credit: Muffet)

Don’t expect a lot to happen in a gridlocked political system – the public has spoken and inaction seems to be our preference as a nation.

Dealing with Information Overload

The Web is a wonderful thing, but it’s hard to keep up. Every day it dishes up more essays, quips, useful videos, lectures, and books than you can read in a lifetime. And that’s just the serious stuff. And that enormous outpouring is dwarfed by the stuff meant primarily to entertain. Plus there’s another huge explosion of stuff that’s difficult to classify – wanderings of demented minds and the like. Is there a good strategy for dealing with it all?

You could, of course, just ignore it all or at least ignore the serious stuff. That might be the best strategy, but I find it unsatisfying.

I have some rules for my reading.

If the output involves name calling, I ignore it completely. If someone has a serious point to argue, they won’t engage in name calling.

Ignore anything that purports to tell you what other people think, such as “conservatives think…” or “Democrats think…”.  This kind of argument is itself empty of thinking, relying on mind reading instead.

Ignore guilt by association. If Obama’s secretary once got a speeding ticket, that has no bearing on Obama. If Romney had college buddies who went rogue, that has no bearing on Romney.

There are other filters – in fact, there’s a whole branch of knowledge devoted to identifying false arguments. But these three are a start. If you can have enough discipline to stick to these rule, a day’s Web output may only take half a lifetime to absorb

Image via Wikipedia

!

Market Regulation

Conventional wisdom has it that the excesses of free markets and lack of regulation caused the financial crisis. Isn’t it odd that, in financial circles, the least regulated entities were the least damaged while the most regulated were the most damaged? Hmmm. This should make anyone suspicious of the conventional wisdom. Thomas DiLorenzo challenges the conventional wisdom and tosses in an interesting history lesson on the side. Government suppression and regulation of free markets has a long history in this country. As you might expect, the winners from these exercises are friends of politicians while the losers are average Joes and Janes. Politicians have a strong incentive to tell a different story, which they do. The reality is that you lose and they win. President Obama is just the latest to honor this grand tradition.

Obamanomics

Under Reaganomics, government was the problem. It can still be a problem. But a central tenet of Obamanomics is that there are even bigger problems out there which cannot be solved without government. By building the economy from the bottom up, enhancing public investment, and instituting reasonable regulation, Obamanomics marks a reversal of the economic philosophy that has dominated America since 1981.

via Robert Reich Says Barack Obama’s Obamanomics Isn’t About Big Government – WSJ.com.

Reich articulates the theory behind Obamanomics very well. He doesn’t, however, address the big question: will the attempts to solve “bigger problems” result in even worse problems? History is not encouraging.

Obamanomics Revisited

If leadership is defined as recognizing a crisis, addressing its challenges, and setting new directions while remaining true to one’s values, then Barack Obama is already demonstrating his strengths as a leader. He has inherited an economic crisis worse than any the nation has experienced since the Great Depression. Within fewer than 50 days in office he has signed a historic stimulus package to bolster demand and create 3.5 million jobs. Governors, business leaders and economists from both the left and the right have applauded the stimulus. Friday’s distressing employment numbers indicate that much more may be needed.

via Opinion: In Defense of Obamanomics – WSJ.com.

The banking crisis and the economy have preoccupied most everyone , including many of the economics bloggers. There has been surprisingly little commentary on Obama’s budget proposal. The article quoted above is written by a proponent of the Obama budget. It outlines the priorities and the rationale. It also responds to some of the critics, mainly Republican politicians.

This article is an analysis. It identifies several problems in the thinking behind the Obama proposal.

My opinion? Everything is a trade-off. Beside the general trade-offs inherent in taxation, there are specific trade-offs involved in each of President Obama’s budgetary initiatives. I don’t think I’ve identified the most important trade-offs (yet), so it’s simply too early to have an opinion. I’m all for people pointing out the benefits, costs, and risks, but I do get tired of the one-sided advocacy.

Obama’s Social Welfare State

Mr. Obama’s $3.6 trillion budget blueprint, by his own admission, redefines the role of government in our economy and society. The budget more than doubles the national debt held by the public, adding more to the debt than all previous presidents — from George Washington to George W. Bush — combined. It reduces defense spending to a level not sustained since the dangerous days before World War II, while increasing nondefense spending (relative to GDP) to the highest level in U.S. history. And it would raise taxes to historically high levels (again, relative to GDP). And all of this before addressing the impending explosion in Social Security and Medicare costs.

To be fair, specific parts of the president’s budget are admirable and deserve support: increased means-testing in agriculture and medical payments; permanent indexing of the alternative minimum tax and other tax reductions; recognizing the need for further financial rescue and likely losses thereon; and bringing spending into the budget that was previously in supplemental appropriations, such as funding for the wars in Iraq and Afghanistan.

The specific problems, however, far outweigh the positives.

via Michael Boskin Says Barack Obama Is Moving Us Toward a European-Style Social Welfare State and Long-Run Economic Stagnation – WSJ.com.

What could I possibly add? The clear intent is to move us in the direction of a European social welfare state. What’s wrong with that? The problem is that the social welfare economies are stagnant. One might argue that they would not work at all were it not for the presence of one global source of innovation and entrepreneurship. That would be us. If we leave the game, what holds up the house of cards?

Of course, proposals are not deeds and many of the worst ideas in Obama’s budget could be undone by a future administration – but only after people experience the results. I guess we only learn the hard way.

Save The Home “Owners”

Well, they don’t actually own their homes – they have little or no equity. They would be more correctly described as people living in houses they can’t afford, paying below market rents. It’s a great deal if you can get it. Now that the jig is up, President Obama and others want to extend the deal using taxpayer dollars. That’s great for the lucky few, but a bad blow for everyone else. Why would a politician do such a foolish thing? A blog comment has the answer:

It’s actually very simple to understand. Consider People who have shown restraint, control and forethought in how much house they may afford and when best to purchase it. These individuals and families are not very likely to vote for someone just because the politician stayed out their lives and they were allowed to do so.They would regard the political as just doing what is right, commonsense and nothing special.

People who were unable, unwilling or just inpatient and bought a house beyond their means are very likely to vote for whoever ‘saves’ them.

via “I Don’t Care”, David Henderson | EconLog | Library of Economics and Liberty.

I hope that prudent people, people with common sense, recognize how they’re being harmed and who is responsible.

First, Do No Harm

My blog entries concern whatever interests me, with my interest usually being piqued by something I’ve read. But I read more than I can possibly comment on, so I perform a kind of mental triage. I blog about the most interesting stuff and put my “overflow” into my Shared Google Reader container . These are usually short items and I will sometimes add a quick note. It’s easy for readers to spin through these entries, reading only what they want. This still leaves a “middle ground” of articles of interest for which I haven’t the time or inclination to write about but that are too long to place in the Shared Reader. Here’s today’s serving:

The Stimulus Tragedy – Obama bets that we can spend our way to prosperity – WSJ Editorial

A dollar doled out in jobless benefits may well be spent by the worker who receives it. That $1 of spending will count as economic activity and add to GDP.

But that same dollar can’t be conjured out of thin air. The government has to take that dollar away from someone else — either in higher taxes, or by issuing new debt in the form of a bond. The person who is taxed or buys the bond will have $1 less to spend. If the beneficiary of that $1 spends it on something less productive than the taxed American or the lender would have, then the net impact on growth will be negative.

Instead of stimulus, do nothing – seriously – Christian Science Monitor

The US government has shown repeatedly that as an economic manager it is not to be trusted. What we need most are authorities wise enough to follow the dictum, “First, do no harm.” The stimulus package will do enormous harm. The huge debt burden it entails, by itself, ought to condemn the measure. America is already drowning in debt. But the measure will also wreak harm in countless other directions by effectively reallocating resources on a grand scale according to political priorities, rather than according to individual preferences and economic rationality. As our history shows, the economy can recover strongly on its own, if only the politicians will stay out of the way.

How Government Created the Financial Crisis – John B. Taylor in WSJ

Many are calling for a 9/11-type commission to investigate the financial crisis. Any such investigation should not rule out government itself as a major culprit. My research shows that government actions and interventions — not any inherent failure or instability of the private economy — caused, prolonged and dramatically worsened the crisis.

Pragmatic Incoherence

The blogosphere is full of people pointing out that our three contenders for the Presidency have incoherent energy policies. While it certainly seems that way, we must remember that all three have pretty good track records of getting elected. They must understand something I don’t, and it concerns getting elected. Face it: a lot of voters don’t care about policy at all and a lot of others care about only a thin sliver. Senators McCain and Clinton must calculate that there are at least some voters who will be enthusiastic about a “gas tax holiday”. No one is going to vote for Senator Obama on the basis of his position – it’s just not that big of an issue in the larger scheme of things. But his position does get air time. I imagine that all three are taking stands and raising points on a most pragmatic basis – getting elected. If the more thoughtful among us find it incoherent, we should recognize it for what it is: pragmatic incoherence.

Blissful Ignorance

The economics of our situation with gasoline is pretty straight forward. Anyone who managed to pass high school economics should pretty much understand it. Our Presidential contenders seem to find that too high a standard. Senator McCain has offered a really dopey suggestion; Senator Obama has even worse ideas; Senator Clinton has descended to new depths of economic nonsense. But I doubt that they’re too far out of step from their colleagues in the Senate. When it comes to economic issues, many of our politicians are blissfully ignorant but nevertheless prepared to fix what they don’t understand. We’d all better pray for gridlock.