Wednesday, February 25, 2009

Obama Begins the Process of Fixing Gov't Accounting

At the cost of looking like he is increasing the deficit by an additional $70 million dollars, President Obama has banned certain accounting tricks, started by the Carter Administration but brought to an art form during the last Bush presidency. In particular, the AMT is going to see an overhaul, bringing its account in line with its reality.

This is a great step forward in fixing our overall economic crisis: properly recognizing our debts.
http://www.nytimes.com/2009/02/20/us/politics/20budget.html?_r=2&partner=rss&emc=rss

Tuesday, February 24, 2009

Congressional Budget Office sees Overall Growth due to Stimulus

From the Feb 11 Congressional Budget Office, an independent group the oversees gov't actions and proposals:

"Taking all of the short- and long-run effects into account, CBO estimates that the
legislation implies an increase in GDP relative to the agency’s baseline forecast of
between 1.4 percent and 3.8 percent by the fourth quarter of 2009, between 1.1 percent and 3.3 percent by the fourth quarter of 2010, between 0.4 percent and 1.3 percent by the fourth quarter of 2011, and declining amounts in later years (see Table 1). Beyond 2014, the legislation is estimated to reduce GDP by between zero and 0.2 percent....

Correspondingly, the legislation would increase employment by 0.8 million to 2.3
million by the fourth quarter of 2009, by 1.2 million to 3.6 million by the fourth quarter of 2010, by 0.6 million to 1.9 million by the fourth quarter of 2011, and by declining numbers in later years. The effect on employment is never estimated to be negative, despite lower GDP in later years, because CBO expects that the U.S. labor market will be at nearly full employment in the long run. The reduction in GDP is therefore estimated to be reflected in lower wages rather than lower employment, as workers will be less productive because the capital stock is smaller."
http://www.cbo.gov/ftpdocs/99xx/doc9987/Gregg_Year-by-Year_Stimulus.pdf

The last sentence of each paragraph is critical, and is what is being taken out of context all over the place. In both cases, the CBO is saying that in the long-term, the effects of the stimulus will taper off to eventually be effectively unnoticeable; that in the long-run, the economy will recover from this downturn on its own.

Assuming that we are not actually facing the leading edge of a complete failure of western society right now, that should be a given.

The GDP numbers do suggest that in the mid-term, we may actually see a 0.0 to 0.2 percent decrease in annual GDP (which, according to other sources, would even out by 2019), but they are *not* saying that the stimulus will "cause a reduction in our economy" as a whole, despite what some senators and journalists are currently claiming.

In the end, the report suggests that in exchange for a combined 2.9 - 8.4% GDP increase over the baseline forecast for the next 3 years along with increased employment in the millions, we may see a <1% decrease in total GDP spread over the years between 2014 and 2019.

Attendence to Religious Service, not deviotion to faith, predicts suicide bombing

Adding more evidence to the idea that regular organized religious attendance - at a church, synagogue, mosque or temple - is as much about social unity than anything else, a three-pronged study shows a strong correlation between suicide bombing and attendance to religious services; no correlation found between suicide bombing and religious devotion, as measured by daily (personal) prayer.

http://scienceblogs.com/notrocketscience/2009/02/attendance_at_religious_services_but_not_religious_devotion.php

Friday, February 6, 2009

The Mother of all Bailouts?

Start with this post sent to me via the Populist America newsletter:
http://www.populistamerica.com/the_mother_of_all_bailouts

My response to the author can be found in the comments; I've reproduced it here. His questions are in bold, my responses are in normal font.
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As mentioned above, if not having enough dollars is the problem, why not have the government give each person a million bucks? Would that fix everything?

No, because by simply increasing the number of dollars, you decrease the inherent value of each individual dollar. The dollar is not wealth, it is a tool for moving wealth. *Work* creates new wealth.

If increasing spending fixes an economy, how about if we all stand in a long line, and everyone hand $20 to the person next to them? How about $1,000? Would that fix everything? (Or, if gifts aren’t good enough, everyone could buy his neighbor’s shoes for $1,000. Wouldn’t all that “spending” save the day?)

This is a misleading question. The economy *is* spending, by definition; but more importantly, it is spending on new effort that creates. By simply trading money for no work, we gain nothing – again, the dollar is a tool for trading, not wealth itself. If we all give each other $20, we waste everyone’s time. If we all make *new* shoes, and *then* pass around $20 in exchange for them, we have an economy.

If it helps the economy to redistribute wealth, how about if the government takes away all existing wealth and divides it up equally, 300,000,000 ways? Would that fix everything?

Also a misleading question. Redistributing wealth is not inherently beneficial to a society, especially when that redistribution is not in line with individual effort. However, reducing the overall income gap *is* beneficial to society. The more top-heavy a society gets, with the upper-upper class holding more and more of the money, the more unstable it gets.

A healthy middle class is a healthy and stable nation, a large economy, and an improved quality of life for the nation as a whole. A weak or non-existent middle class results in a smaller economy, a lowered quality of life for the nation as a whole, and subsequently results in an unstable nation.

Effectively, what it comes down to is this: Money in circulation for trade of goods and services is a stabilizing force for society. Money held out of circulation is a destabilizing force, as is is not doing any work other than to foment jealousy.

If the problem is lack of jobs, how about if the government gives a job to anyone who wants one, paying them $50 an hour to carry empty boxes around in circles? Would that fix everything?

Again, this is misleading; suggesting that the only solutions being put forward are communist. Money is not wealth. If we want to pay people to do work, there is lots of *actual* work that needs to be done. There is no reason to start paying for box-carrying when we have infrastructure, medicine, farming, research, etc that needs doing.

If a lack of credit is the problem, how about if the government gives everyone a new, federal credit card with a $1,000,000 line of credit? Would that fix everything?

No. We have too much debt in general; and we’re going to have a rough time over the next few months as we reduce the debt in circulation to come closer to a safe ratio to the actual money in existence. I’m not much of a fan of 1:11 lending; 1:33 lending was insane, and we’re paying the price for it.

If “corporate greed” is the problem, how about if government outlaws making profits, forcing companies to sell things at prices that would just make them break even? Would that fix everything?

This is a specious argument; there is a vast gap between “lax regulation” and “outlaw all business”. Smart regulation is a necessary part of any market; or do you think that monopoly laws should be eliminated? What about workplace safety regulations? Food quality control?