Paul M. Jones

As we know, most of the stimulus spending does not take place until next year and beyond, so the short-run gains are puny. On the other hand, the big increase in the projected deficit creates the expectation of higher interest rates, which raises interest rates now. These higher interest rates serve to weaken the economy.

According to this standard analysis, the stimulus is going to hurt GDP now, when we could use the most help. Much of the spending will kick in a year or more from now, with multiplier effects following afterward, when the economy will need little, if any, stimulus.

This is the flaw with using spending rather than tax cuts as a stimulus. The lags are longer when you use spending.

Of course, if the real goal is to promote government at the expense of civil society and to create a one-party state in which business success is based on political favoritism, then the stimulus is working exactly as intended.

via The Anti-Stimulus, Arnold Kling | EconLog | Library of Economics and Liberty.

What requires government action - what requires "collective choice" - is protectionism. Free trade exists naturally. Free trade is simply the absence of trade restrictions - the absence of officious interference with those engaged in consensual capitalist acts.

via Dear Baltimore Sun: Perils of Protectionism.

Highly educated people with high-status jobs - investment bankers, professors, lawyers - often believe that they could do anything their less-educated brethren can, if only they put their minds to it, because cognitive ability is the only ability that counts. The truth is that some would not have the physical and cognitive ability to do skilled blue-collar work, and that others could do it only if they invested 20 years of their life in learning a trade. “Shop Class as Soulcraft” makes this quite vivid by explaining in detail what is actually involved in rebuilding a Volkswagen engine: grinding down the gasket joining the intake ports to the cylinder heads, with a file, tracing the custom-fit gasket with an X-Acto knife, removing metal on the manifolds with a pneumatic die grinder so the passageways will mate perfectly. Small signs of galling and discoloration mean excessive heat buildup, caused by a previous owner’s failure to lubricate; the slight bulging of a valve stem points to a root cause of wear that a novice mechanic would completely fail to perceive.

via Cafe Hayek: Hayek (and Fukuyama) on the Use of Knowledge in Society.

Great article from McArdle about budget deficits and who's-to-blame. (For the record, I had little love for Bush's economic policies.)

http://meganmcardle.theatlantic.com/archives/2009/06/the_deficit_blame_game.php

Various excerpts follow, but you should read the whole thing.

Iraq is now at $120 billion a year, and scheduled to decline. It seems churlish to blame Bush for Medicare Part D, given that the Democrats' main complaint was that it wasn't expensive enough, but let's go ahead and blame him anyway: $35 billion a year. The tax cuts sunset in 2010; after that, Obama has to affirmatively act to extend them. The structural deficit projected in 2010 was a little over $100 billion.

But what about all the debt [Bush] racked up? Net public debt rose less than 4% of GDP during Bush's presidency. Net interest (aka Cash Interest We Pay Bondholders) went from $223 billion in 2000 to $244 billion in 2008; adjusted for inflation, and as a percentage of GDP, it actually fell. If we are entitled to expect Bush to close the budget deficit with those kinds of numbers, then we ought to be able to expect it from Barack Obama. Bush's deficits are not holding him back.

But this is what we have been told to expect:

How is a $118 billion structural deficit, $35 billion in Medicare Part D, and a theoretical end to the Iraq presence forcing Barack Obama to spend nearly $1 trillion in 2018? How is it forcing him to spend roughly $650 trillion more than he takes in in 2012?

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The problem with the budget deficit is not any particular program, or even any particular tax cuts. It is not that George Bush or Obama is a bad person who does bad things. The problem with the budget deficit is that, unlike the deficits George Bush ran, the deficits projected under Obama (and beyond) are actually large enough to potentially precipitate a fiscal crisis. If our interest rates suddenly spiked up, perhaps because lenders were worried about the size of our budget deficits, we'd find ourselves in the kind of nasty fiscal jam that regularly plagues third-world countries. The difference is, no one has enough money to bail us out.

Obama is the one who will have to prevent this. Yet instead of plans, we're getting fairy numbers from the OMB. That's worrying, and it's sure not George W. Bush's fault.

So many laws have eroded our Second Amendment gun rights that, as P.J. O'Rourke notes, if Massachusetts had the same gun laws in 1775 that it has now, we would all be Canadians.

Even political campaign speech is constricted. The Obama administration argued at the U.S. Supreme Court that the McCain-Feingold Act can ban books about ongoing election campaigns. Yet Justice Hugo Black warned that:

"The freedoms of speech, press, petition, and assembly guaranteed by the First Amendment must be accorded to the ideas we hate, or sooner or later they will be denied to the ideas we cherish."

Almost half of all U.S. income is taxed today which means we have lost about half our economic freedom. With record government spending and soaring debt, we are set to lose a lot more. And to think the Boston Tea Party was waged over a three-cent-a-pound tax on tea. Government regulations on business cost us well over $1 trillion a year in higher consumer prices, and there are exactly 26,911 government words policing the sale of a head of cabbage.

In recent years, obsessive-compulsive environmental regulations halted a Massachusetts town from using fireworks on Independence Day since an 'endangered' bird's nest was found near it. News flash: on July 4 we celebrate independence from a tyrannical government. Yet George III never taxed, regulated, or policed us remotely as much as Washington, D.C. does today. U.S. House Speaker Nancy Pelosi says "Every aspect of our lives must be subjected to an inventory".

Everywhere rules and paperwork mushroom as nit-picking bureaucrats grow in numbers and power. As a buddy bemoaned, the increasingly shrill message of the establishment is “Sit down - and shut up". No wonder so many Americans feel frustrated and impotent.

Why has our liberty eroded so badly?

via America: closing her door to freedom | Samizdata.net.

Letterman is empty; he’s inert; he stands for nothing except disdain for people foolish enough to stand for anything - aside from rote obesciance to all the things Decent People stand for, of course, all those shopworn assumptions passed around in the bubble.

This posture was fresh in ’80; it even had energy. But it paralyzes the heart after a while. You end up an SOB who shows up at the end of the night to reassure that nothing matters. I think he may have invented the posture of Nerd Cool, an aspect so familiar to anyone who reads message boards - the skill at deflating enthusiasm, puncturing passion with a hatpin lobbed from a safe distance. The instinctive unease with the wet messy energy of actual people.

Yes, reading too much into it. Really, it’s just a rote slam: If your mother is a loathed politician, and your older sister gets pregnant, famous old men can make jokes about you being knocked up by rich baseball players, and there’s nothing you can do. That’s the culture: a flat, dead-eyed, square-headed old man who’ll go back to the writers and ask for more Palin-daughter knocked-up jokes, because that one went over well. Other children he won’t touch, but not because he’s decent. It’s because he’s a coward.

Oh, one more thing: it’s okay for David to say that because someone said something else about someone, and since I didn’t write about that, I’m a hypocrite. Just so we’re clear.

via » Blog Archive » Wednesday, June 10.

YouTube - The Obama Stimulus: Predictions vs. Reality.

As the New York Times delicately reports, Mr. Obama's jobs claims are "based on macroeconomic estimates, not an actual counting of jobs." Nice work if you can get away with it.

And get away with it he has. However dubious it may be as an economic measure, as a political formula "save or create" allows the president to invoke numbers that convey an illusion of precision. Harvard economist and former Bush economic adviser Greg Mankiw calls it a "non-measurable metric." And on his blog, he acknowledges the political attraction.

"The expression 'create or save,' which has been used regularly by the President and his economic team, is an act of political genius," writes Mr. Mankiw. "You can measure how many jobs are created between two points in time. But there is no way to measure how many jobs are saved. Even if things get much, much worse, the President can say that there would have been 4 million fewer jobs without the stimulus."

Mr. Obama's comments yesterday are a perfect illustration of just such a claim. In the months since Congress approved the stimulus, our economy has lost nearly 1.6 million jobs and unemployment has hit 9.4%. Invoke the magic words, however, and -- presto! -- you have the president claiming he has "saved or created" 150,000 jobs. It all makes for a much nicer spin, and helps you forget this is the same team that only a few months ago promised us that passing the stimulus would prevent unemployment from rising over 8%.

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It's true that almost any government spending will create some jobs and save others. But as Milton Friedman once pointed out, that doesn't tell you much: The government, after all, can create jobs by hiring people to dig holes and fill them in.

If the "saved or created" formula looks brilliant, it's only because Mr. Obama and his team are not being called on their claims. And don't expect much to change. So long as the news continues to repeat the administration's line that the stimulus has already "saved or created" 150,000 jobs over a time period when the U.S. economy suffered an overall job loss 10 times that number, the White House would be insane to give up a formula that allows them to spin job losses into jobs saved.

via McGurn: The Media Fall for Phony 'Jobs' Claims - WSJ.com.

Like the auto companies today, the railroads of the late nineteenth century received huge subsidies, often in the form of free land adjoining new track. Like GM and Chrysler, most of those subsidized railroads went belly up – not despite the government subsidies, but partly because of them.

That sounds bizarre, but it isn’t. Allegedly friendly governments offer their business patrons a killing embrace – do this or that, and we’ll give you more money or land or trade protection than you could possibly ask. The subsidies are so generous, responsible corporate managers will do pretty much anything to get them. Over time, the corporations acquire more and more skill at pleasing the relevant government officials – and lose the ability to please their customers.

via GM and the Railroads--Stuntz (Less than the Least).

This would have severe effects on the more than 100 million Americans who have private health insurance today:

* The government would mandate not only that you must buy health insurance, but what health insurance counts as “qualifying.”

* Health insurance premiums would rise as a result of the law, meaning lower wages.

* A government-appointed board would determine what items and services are “essential benefits” that your qualifying plan must cover.

* You would find a tremendous new disincentive to switch jobs, because your new health insurance may be subject to the new rules and would therefore be significantly more expensive.

* Those who keep themselves healthy would be subsidizing premiums for those with risky or unhealthy behaviors.

* Far more than half of all Americans would be eligible for subsidies, but we have not yet been told who would pay the bill.

* The Secretaries of Treasury and HHS would have unlimited discretion to impose new taxes on individuals and employers who do not comply with the new mandates.

* The Secretary of HHS could mandate that you provide him or her with “any such other information as [he/she] may prescribe.”

via KeithHennessey.com » Understanding the Kennedy health care bill.