Archive for the 'Public Finance' Category
Posted by Carl from Chicago on 15th October 2015 (All posts by Carl from Chicago)
Dan and I go back and forth on the relatively arcane topic of municipal debt. As we all know, the state of Illinois is awash in debt. The situation is so bad that:
1. The State of Illinois is operating without a budget
2. The city of Chicago is proposing a massive property tax increase
3. Cook County just raised our sales tax (one of the highest rates in the country, already) and is proposing additional fees
4. Chicago Public Schools face a major deficit and without some sort of massive state tax relief is likely going to face significant layoffs and a likely teachers strike
5. Note that we are one of the few states and cities to be in such dire straits that we issue TAXABLE debt instead of MUNICIPAL debt which is generally exempt from Federal taxes and some state taxes. This is due to the fact that you generally cannot issue muni bonds to pay off operating expenses (like payroll and legal settlements)
The long term most indebted players have been Detroit, Puerto Rico, and the State of Illinois / City of Chicago. We saw how the Detroit bankruptcy occurred, with bondholders generally taking it on the chin and unsecured pension holders in fact emerging in a relatively better situation.
Now Puerto Rico is up to bat. They have massive, unpayable debts of many varieties (some secured by full faith and credit, some secured with revenues, some bank loans, etc…) and their governor basically said so out loud. All of this is inevitable as their island’s best talent has fled to the mainland USA and the remaining population is more and more reliant on government aid to survive. They also have failed to modernize their power infrastructure and / or build new industries outside of tourism which erodes their ability to compete against the mainland USA that in turn has much higher productivity.
The real issue – long term – is whether or not the Federal government will back up the states. This is essentially the “long game” of the State of Illinois and the city of Chicago – waiting to see whether or not the Federal government is really going to stand by and let us go bankrupt or not. If the government is ultimately going to pick up our debts, it is “business as usual”, and the corruption, back-scratching, and non-competitive behavior can just continue indefinitely, with taxpayers across the nation picking up the debris rather than forcing the citizens of Illinois to clean up our act.
Today Puerto Rico and the treasury announced that they are working to backstop the Puerto Rican debt with some sort of Federal umbrella per this article.
Puerto Rico and U.S. officials are discussing the issuance of a “superbond” administered by the U.S. Treasury Department that would help restructure the commonwealth’s $72 billion of debt, people familiar with the plan said.
And what a great name! A “superbond” means that all the US citizens will pick up the “super” obligations of our corrupt, crony-laden, inefficient city and state. That’s super!
This is the path out for Illinois and the city of Chicago. Play brinksmanship with Federal government and receive a backstop. Puerto Rico leads the way!
Cross posted at LITGM
Posted in Big Government, Chicagoania, Economics & Finance, Politics, Public Finance, Taxes | 15 Comments »
Posted by Jonathan on 26th August 2015 (All posts by Jonathan)
Here’s an interesting article on CNBC’s website: Katrina anniversary: Will New Orleans levees hold next time?
The 100-year threshold is also a statistical guess based on data on past storms and assessments of whether they’ll occur in the future. That means the models change every time a new hurricane strikes. The numbers being used as guidelines for construction are changing as time passes.
The standard also does not mean—can’t possibly mean—that a 100-year storm will occur only once per century. It means that such a storm has a 1 percent chance of happening in any given year. So for example, it’s technically possible for several 100-year floods to occur in just a few years, although it’s highly unlikely.
One way to look at it is that the engineers need to estimate how high a wall New Orleans needs to protect itself against a reasonably unlikely flood — say, a 1-in-1000-year event. This is the line of discussion pursued in the CNBC article.
Another way to look at it is to observe that the odds of another Katrina, or worse, within a specified period are highly uncertain. In this case a radical course of action might be called for. You do something like: take the best estimate for the wall height needed to protect against a 1000-year flood and then double it. Building such a levee would probably be extremely expensive but at least the costs would be out in the open. Or you might decide that it’s not the best idea to have a coastal city that’s below sea level, and so you would discourage people from moving back to New Orleans, rather than encourage them by subsidizing a new and stronger system of walls.
In this kind of situation the political incentives are usually going to encourage public decisionmakers to ignore radical solutions with high obvious costs, in favor of the minimum acceptable incremental solution with hidden costs: probably subsidies to rebuild the levees to, or perhaps a bit beyond, the standard needed to protect the city in the event of another Katrina. And it’s unlikely that any local pol is going to advise residents to move out and depopulate his constituency. Thus, eventually, a worst case will probably happen again.
Posted in Deep Thoughts, Economics & Finance, Environment, Human Behavior, Markets and Trading, New Orleans Tragedy, Predictions, Public Finance, Statistics, Systems Analysis, Tradeoffs | 14 Comments »
Posted by Michael Kennedy on 5th July 2015 (All posts by Michael Kennedy)
I’ve been planning trip to Greece for months. Back in January, I decided to wait until the Greek monetary crisis was closer to resolution. Finally in May, I made reservations for September. I even posted my plans here.
Well, today it may be all going glimmering. The Greeks have apparently voted NO to the EU deal.
Greece has overwhelmingly rejected Europe’s latest bailout package, plunging the country’s future in the Eurozone into jeopardy.
With most of the votes counted in a referendum that will shape the future of the continent, the ‘No’ campaign has a staggering 61 per cent of the vote – 22 points ahead.
German Chancellor Angela Merkel and French President Francois Hollande called for an EU crisis summit to find a ‘solution’ for Greece, with leaders set to meet in Brussels on Tuesday.
Thousands of anti-austerity voters took to the streets in celebration as the leader of the pro-EU ‘Yes’ campaign resigned, with an official announcement of the final result imminent.
But German politicians warned of ‘disaster’ as they accused Greek Prime Minister Alexis Tsipras of ‘tearing down bridges’ between Greece and Europe.
Now what ?
Read the rest of this entry »
Posted in Big Government, Current Events, Europe, Leftism, Public Finance | 32 Comments »
Posted by Jonathan on 27th June 2015 (All posts by Jonathan)
The Supreme Court and Federal Reserve are corrupt in the same way. Both institutions defer excessively to legislative and regulatory agendas instead of sticking to their respective mandates.
(Re: Judicial Restraint.)
Posted in Current Events, Deep Thoughts, Law, Organizational Analysis, Political Philosophy, Politics, Public Finance, Tea Party | 6 Comments »
Posted by Kevin Villani on 17th October 2014 (All posts by Kevin Villani)
This year marks a century since the outbreak of WW I and coincidently the initiation of US Federal Reserve System operations. Prior to these events, politics were democratizing, economic growth was booming, economies were liberalizing and global trade and finance were growing, all at a pace not seen again for almost another century. Recognizing that achieving these mutual benefits required an externally imposed political discipline, all of the countries participating in this happy situation voluntarily followed a set of rules governing domestic and international trade and finance for automatic and continuous adjustment to changing economic reality, then provided by the gold standard.
It was during this enlightened period that philosopher George Santayana wrote: “those who cannot remember the past are condemned to repeat it.” Hedge fund manager and Brookings Director Liaquat Ahamed set out to remind us why countries failed to recapture this economic dynamism after the Great War with the publication of the Pulitzer Prize winning Lords of Finance: The Bankers Who Broke the World in 2009. This book took on greater significance when in 2010 Federal Reserve Board Chairman Ben Bernanke recommended only this historical account in response to the Financial Crisis Inquiry Commission’s request for a book reference explaining the 2008 financial crisis. What history had this most recent financial crisis already repeated and what was Chairman Bernanke determined to avoid repeating in the aftermath?
Read the rest of this entry »
Posted in Book Notes, Current Events, Economics & Finance, History, Public Finance, Systems Analysis | 6 Comments »
Posted by Carl from Chicago on 14th July 2014 (All posts by Carl from Chicago)
A few years ago I went to Norway and had a great time. In this post I described how expensive everything was in Norway due to their highly valued currency (tied to oil riches) combined with the relentless decline of the US dollar (tied to ZIRP and other dubious economic moves). In the simplest terms, a fast food meal or a beer in Norway cost over $20 USD which is complete madness.
Business Insider discussed the Scandinavian economic experiment, where high taxes are applied to goods and services in order to fund a vast social safety net. From the article:
In Norway, a burger and fries at a fast food joint will set you back $23. A six-pack of warm grocery-store beer is nearly $30.
These hefty price tags are due, in part, to high wages for low-skilled service jobs. But high taxes play a role too.
Most products have a 25 percent value-added tax, which means that $5.50 of the cost of that burger goes to fund Norway’s generous social programs.
As a visitor, you get little for the added price. But, as a resident, your daily spending helps to fund an expansive package of benefits, including health care, child care, high-quality education, pensions, and unemployment insurance.
Some are now proposing this high-cost method, with large taxes embedded in everyday prices, as a solution to the inequity in incomes and wealth that is discussed widely in politics and economics today.
From the perspective of someone who is highly interested in economics and tax policy, my two rules of thumb are:
1) that the tax policy raise the money that it intends to raise
2) that the tax policy not significantly distort economic activity
Any society that implements high taxes such as Norway needs a comprehensive surveillance model in order to collect these taxes. It is difficult to avoid taxes that are broadly assessed on fast food, for instance, because each corporate location will set up cash registers and controls to remit these taxes onto the state. The same types of processes can be installed in liquor stores, formal bars and nightclubs, grocery stores, and restaurants.
In a less-homogeneous society such as the USA, we already have major problems with tax evasion on cigarettes and likely liquor, and these are in responses to our sales taxes. The problems would be compounded if we placed value added taxes on all goods at a higher level and on services such as restaurants, hair care, etc… Smuggling would become rampant and informal or barter methodologies would increase in size and scope. These sorts of costs would have to be applied across the USA or some areas would become uncompetitive and see an out-migration of economic activity, starting with incremental additions (no one has opened a new manufacturing plant in Illinois in years, for instance) and eventually leading to the lock, stock and barrel out migration of existing industries (such as the exodus of car manufacturing out of the Midwest and California to the American South).
Read the rest of this entry »
Posted in Big Government, Economics & Finance, Public Finance, Taxes | 33 Comments »
Posted by Lexington Green on 9th July 2014 (All posts by Lexington Green)
Todd applies his family structure analytic model to explain why the Euro is doomed to fail. He notes that the French and the Germans, for example, have little in common. He expressly says that the French individualism is much closer to the Anglo-American individualistic culture, distinct from the German authoritarian style. He says that the French elite caused the problem and they cannot admit their mistake or the entire foundation of the French political structure would collapse.
The European idea of a union of free and equal states has been destroyed by the Euro, and it is now an economic hierarchy, with the Germans at the top. Further, democracy itself is incompatible with the Euro.
Todd notes that the very low birth rates in Europe have a positive benefit: There will be no open or violent conflict to resolve the current political conflicts. Rather, contentious issues are kicked up to the “European level” — which means nothing whatsoever will happen.
He sympathizes with the British position. Britain is dependent on a dying content, Europe. “It is committing suicide under German leadership.” But Britain is part of a much larger Anglo-American world, which in ten years, on current trends, will have more people than all of Europe.
Of course, America 3.0 is based in large part on a “Toddean” understanding of American culture, and this talk is consistent with our understanding.
A fascinating talk.
H/t Brian Micklethwait
Posted in America 3.0, Anglosphere, Economics & Finance, Europe, France, Public Finance, Video | 3 Comments »
Posted by Jonathan on 19th June 2014 (All posts by Jonathan)
After Janet Yellen’s latest press conference Chicagoboyz plunge heavily in canned kipper snacks and other hard assets.
Posted in Photos, Public Finance, That's NOT Funny | 6 Comments »
Posted by TM Lutas on 9th June 2014 (All posts by TM Lutas)
Thomas Piketty has written a monster of a book, Capital in the Twenty-First Century. I find myself in strange agreement with Brad DeLong, that the collective conservative response is weak. I had a patch of time that left me twiddling my thumbs waiting for some pretty long database operations to finish over the past four days. So I went and decided to fisk the book. I just finished the introduction. It took four posts, Part I, Part II, Part III, Part IV and overran the spare time I had available from a database import and indexing task by about 12 hours.
Now I know why the criticism is so weak. Piketty is a target rich environment and doing a line by line analysis is simply exhausting. But it’s the only way to be sure.
Posted in Book Notes, Business, Economics & Finance, Public Finance, Society, Taxes, USA | 18 Comments »
Posted by Jonathan on 27th April 2014 (All posts by Jonathan)
Via J. Scott Shipman and Grurray on Twitter:
Real-life performance data shows that the most important and high-impact technologies are not the gold-plated, over-engineered wonder weapons that turn majors into colonels, colonels into generals, and young Jedi apprentices into Sith Lords. Instead, data suggest the real winners are humble, simple, low-cost products made by small, rapid innovation teams — the type of projects that don’t attract much attention from the press or from the brass because all they do is get the mission done without any fuss.
Read the whole thing.
Posted in Management, Military Affairs, Public Finance, Systems Analysis | 34 Comments »
Posted by Kevin Villani on 26th April 2014 (All posts by Kevin Villani)
The political movement Occupy Wall Street has shaped the tax and spending proposals of the Obama administration’s budget and political debate on the premise that our capitalist economic system is rigged to favor the top-earning “one percenters.” But income inequality can result either from capitalism or politics, each for better or worse.
Historically, political elites focused on enriching themselves at the expense of the general public: In 1773 patriots threw the tea into Boston Harbor of the East India Tea Company, granted a “royal charter” in 1600. The U.S. system was founded not just on the principles of democracy but on limited government complementing private market capitalism that encouraged individuals to “pursue happiness” — accumulate wealth — on merit rather than political connections. Support for the less fortunate was provided by family members, religious and other charitable organizations.
Believing (wrongly) that class envy against the new economic elites — innovative entrepreneurs — would cause revolution, Karl Marx offered the socialist alternative “from each according to his ability, to each according to his need” with politics supplanting merit. Despite totalitarian methods universally employed by governments seriously pursuing the socialist model leading to the murder of tens of millions, one historian recently concluded that communism reduced workers “to shiftless, work-shy alcoholics.”
Read the rest of this entry »
Posted in Big Government, Crony Capitalism, Economics & Finance, History, Political Philosophy, Public Finance, Taxes | 15 Comments »
Posted by Jonathan on 9th December 2013 (All posts by Jonathan)
New from Kevin Villani: Occupy Pennsylvania Avenue: How Politicians Caused the Financial Crisis and Why their Reforms Failed, and the Kindle version: Occupy Pennsylvania Avenue
(Kevin has shared on this blog a couple of prior works on the same subject. You can find those essays, and reader comments in response, here.)
Posted in Big Government, Book Notes, Economics & Finance, Public Finance, Urban Issues | Comments Off on “Occupy Pennsylvania Avenue”
Posted by Jonathan on 19th August 2013 (All posts by Jonathan)
House Republicans have to learn and proclaim the basics of money and taxes because balancing the budget could be a disaster for the economy as even more money is pulled out of the productive economy to pay for their past sins. The best example of how to get out of debt remains what England did after Waterloo and the massive debt of the Napoleonic War. Parliament dumped the income tax immediately, returned to sound money in 1821 and went to free trade later. The economy exploded and led to a century of prosperity like none seen before. They didn’t pay off their wartime debts, a huge sum for the time, they froze it and paid interest. As time went by, that once inconceivable mountain of debt shrank to insignificance in the shadow of the world’s most powerful economy.
He gets it. Economic growth is the solution to most of our problems. Growth requires investment capital. The less investment capital that gets diverted from the private sector into unproductive govt spending and misguided debt paydowns, the more growth there will be.
Read the whole thing.
Posted in America 3.0, Economics & Finance, Public Finance | 20 Comments »
Posted by TM Lutas on 9th July 2013 (All posts by TM Lutas)
During the process of putting together Citizen Intelligence, I sometimes run into some things that are quite simple, but are worth remarking on. I’ve decided to put them up here as an irregular series.
Out of the ~89,000 governments in the United States, ~55,000 of them bond, or borrow money, about 61% of the total. That means 34,000 do not. Which of your governments live within their means and spend all their tax money on providing services and which of them have an invisible drain installed siphoning off unnecessary interest payments to Wall Street? How many of them could, with minimal inconvenience, add a few more percent in services or cut a few percent off their tax bills simply by not bonding or reducing their bonding to large capital items instead of borrowing for operations?
Note: Updated to make it clear that this is not about the classic large capital expenditure items that most would agree are legitimate projects for bond financing but rather borrowing that could be foregone and where, in some jurisdictions, they manage their cash flow well enough to do without the borrowing.
Posted in Big Government, Economics & Finance, Public Finance | 3 Comments »
Posted by Lexington Green on 14th May 2013 (All posts by Lexington Green)
IRS Intimidation Forced Founder to Shut Down Tea Party Group.
Progressive Group: IRS Gave US Conservative Groups’ Confidential Documents.
IG report: ‘Inappropriate Criteria’ Stalled IRS Approvals of Conservative Groups.
During the 2012 election cycle the Internal Revenue Service did not act as an objective, nonpartisan arm of government subject to the rule of law.
Instead the Internal Revenue service acted as an arm of the Democrat Party, engaged in harassment, intimidation and opposition research for partisan political purposes.
The result of the most recent Presidential election, in the key state of Ohio, was impacted, possibly decisively, by this intentional, partisan, coordinated, unlawful activity.
Yet this entity, the Internal Revenue Service, will imprison you if you disobey it.
There are “voices that incessantly warn of government as nothing more than some separate, sinister entity … that tyranny is always lurking just around the corner.”
Heed the voices.
Posted in Anti-Americanism, Big Government, Crime and Punishment, Politics, Public Finance, Tea Party, USA | 6 Comments »
Posted by Jonathan on 10th May 2013 (All posts by Jonathan)
This is very good:
There are opportunities, but they require a deep understanding of risk and security. A livelihood with day-to-day low-level insecurity and volatility is actually far more stable and secure than the cartel-state one that claims to be guaranteed.
The burdens of Fed manipulation and the cartel-state rentier arrangements will come home to roost between 2015-2017. Those who are willing to seek livelihoods in the non-cartel economy will likely have more security and satisfaction than those who believed that joining a rentier arrangement was a secure career.
There is a price to joining a parasitic rentier arrangement, a loss of integrity, agency and independence. Complicity in an unsustainable neofeudal society has a cost.
Read the whole thing.
(Via Lex and ZeroHedge.)
Posted in America 3.0, Big Government, Economics & Finance, Education, Political Philosophy, Predictions, Public Finance, Society, USA | 9 Comments »
Posted by Jonathan on 30th March 2013 (All posts by Jonathan)
Riffing on David Foster.
It’s like how Keynes’s theory about liquidity traps is used to rationalize all kinds of govt spending programs, perhaps far beyond what Keynes himself would have advocated.
1 Great man has a theory about a, b and c.
2 Great man’s acolytes turn the theory into a dogma, religion and, eventually, industry.
3 Politically savvy third parties with agendas use the theory to justify x, y and z.
Posted in Human Behavior, Political Philosophy, Politics, Public Finance | 4 Comments »
Posted by Michael Kennedy on 2nd March 2013 (All posts by Michael Kennedy)
UPDATE: Here is one solution.
This week Europe blew up. The media haven’t caught up yet, because they are what they are. But the markets are catching up fast.
This is a huge event for the United States, because our political elite is bound and determined to turn us into Europe. Hasn’t the EU found the answer to war and peace and prosperity forever?
Our Democrats believe it. Europe is their model. Every batty new idea they have is copied from the glorious European Union. Twenty years ago they still celebrated the Soviet Union, until that house of cards crumbled. Now they have shifted their fantasy paradise to Europe.
Over there, fifty years of increasingly centralized control have made it impossible for voters to be heard. The political parties are stuck in GroupThink. Only the fascist “protest” parties agitate for reform. The ruling class doesn’t listen. They don’t have to — they don’t have to run for election.
So European voters fled to the fascists to express their rage and despair. Imagine one out of four US voters going for Lincoln Rockwell, and you get the idea.
Read the rest, as they say.
Belmont Club has an unusually good post for yesterday. I could say that more than once a week, if truth be known. This one is quite to the point on Sequester Day.
The NHS, which its creators boasted would be the ‘envy of the world’, has been found to have been responsible for up to 40,000 preventable deaths under the helm of Sir David Nicholson, a former member of the Communist Party of Britain. “He was no ordinary revolutionary. He was on the hardline, so-called ‘Tankie’ wing of the party which backed the Kremlin using military action to crush dissident uprisings” — before he acquired a taste for young wives, first class travel and honors.
The NHS is dealing with the shortage of funds by pruning its tree of life, so to speak. He also does not tolerate anyone telling the truth about it.
it emerged he spent 15 million pounds in taxpayer money to gag and prosecute whistleblowers — often doctors and administrators who could not stomach his policies.
The public money spent on stopping NHS staff from speaking out is almost equivalent to the salaries of around 750 nurses.
It has recently been noted that NHS staff no longer recommend their own hospital for family members. Also one quarter report being harassed or bullied at work.
The other half of the equation involves the youth.
The European Youth will remain outside the Death Pathways for some time yet. But they will spend the time waiting for their turn at affordable, caring and passionate medicine in poverty and hopelessness. With the exception of Germany youth unemployment in Europe is over 20%. “A full 62% of young Greeks are out of work, 55% of young Spaniards don’t have jobs, and 38.7% of young Italians aren’t employed.”
Unemployment exceeds even our own Obama economy for failure. Read the rest of this entry »
Posted in Big Government, Britain, Civil Society, Coolidge, Economics & Finance, Elections, Europe, Health Care, Leftism, Libertarianism, Obama, Political Philosophy, Public Finance, Tea Party | 11 Comments »
Posted by Michael Kennedy on 8th February 2013 (All posts by Michael Kennedy)
UPDATE: An an article at Belmont Club describes interest in alternative money creation as a way of anticipating inflation. It also goes further into a discussion of general competence.
The idea that Virginia should consider issuing its own money was dismissed as just another quixotic quest by one of the most conservative members of the state legislature when Marshall introduced it three years ago. But it has since gained traction not only in Virginia, but also in states across the country as Americans have grown increasingly suspicious of the institutions entrusted with safeguarding the economy.
What has changed is faith in the federal government, not just in Virginia but in a growing number of places. The lack of faith in the competence of government — and the soundness of the dollar — has been growing leading some states to create contingency plans in case the currency goes bust.
Once again, I apologize for my pessimism but this is what I see. First, there is this article, which quotes a well known financier.
There may be a natural evolution to our fractionally reserved credit system that characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a “big freeze” trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence. And too, the advancing entropy in the physical universe may in fact portend a similar decline of “energy” and “heat” within the credit markets. If so, then the legitimate response of creditors, debtors and investors inextricably intertwined within it, should logically be to ask about the economic and investment implications of its ongoing transition.
Certainly “growth” seems to be fundamental to our economic health. That, of course, presumes a growing population but it also would be affected by a stagnant population with a growing age disparity. The obvious example of the latter is Japan.
The creation of credit in our modern day fractional reserve banking system began with a deposit and the profitable expansion of that deposit via leverage. Banks and other lenders don’t always keep 100% of their deposits in the “vault” at any one time – in fact they keep very little – thus the term “fractional reserves.” That first deposit then, and the explosion outward of 10x and more of levered lending, is modern day finance’s equivalent of the big bang. When it began is actually harder to determine than the birth of the physical universe but it certainly accelerated with the invention of central banking – the U.S. in 1913 – and with it the increased confidence that these newly licensed lenders of last resort would provide support to financial and real economies. Banking and central banks were and remain essential elements of a productive global economy.
The effect of asset bubbles on such a system is worrisome as the history of Japan and the recent history of the US have shown. The Panic of 1907 was largely responsible for the creation of the Federal Reserve. That financial crisis is thought, by the authors of a recent book, to have been a consequence of the 1906 earthquake in San Francisco, which destroyed a large amount of real assets and the insurance costs that were associated. The immediate cause was financial speculation but the real losses had added to the fragility of the system.
Read the rest of this entry »
Posted in Big Government, Civil Liberties, Conservatism, Economics & Finance, Elections, Libertarianism, Political Philosophy, Politics, Predictions, Public Finance | 23 Comments »
Posted by Michael Kennedy on 1st January 2013 (All posts by Michael Kennedy)
I wish I were more enthusiastic but I still wish everyone a good year. The “fiscal cliff” talks have ended about as I expected. The Republicans have pretty much rolled over. The House has yet to vote and I wonder how that will go. If they all grew a spine (or some other anatomical parts) they would vote “present” and let the Democrats pass the bill by themselves. Drudge has a link to the Breitbart story.
According to the Congressional Budget Office, the last-minute fiscal cliff deal reached by congressional leaders and President Barack Obama cuts only $15 billion in spending while increasing tax revenues by $620 billion—a 41:1 ratio of tax increases to spending cuts.
When Presidents Ronald Reagan and George H.W. Bush increased taxes in return for spending cuts—cuts that never ultimately came—they did so at ratios of 1:3 and 1:2.
“In 1982, President Reagan was promised $3 in spending cuts for every $1 in tax hikes,” Americans for Tax Reform says of those two incidents. “The tax hikes went through, but the spending cuts did not materialize. President Reagan later said that signing onto this deal was the biggest mistake of his presidency.
“In 1990, President George H.W. Bush agreed to $2 in spending cuts for every $1 in tax hikes. The tax hikes went through, and we are still paying them today. Not a single penny of the promised spending cuts actually happened.”
This will be another such fake compromise. However, The Gods of the Copybook Headings are coming.
In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: “If you don’t work you die.”
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew,
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four —
And the Gods of the Copybook Headings limped up to explain it once more.
It’s too long to post all of it and, for those who are unsure of the source of the title, copybooks were supplied for all school children in England, when it was still England. The copy books had traditional aphorisms on each page that children were expected to learn.
Another expression that relates to the books was someone “blotted his copybook.” This meant making an error that was difficult to correct.
The “copybook headings” to which the title refers were proverbs or maxims, extolling virtues such as honesty or fair dealing that were printed at the top of the pages of 19th-century British students’ special notebook pages, called copybooks. The school-children had to write them by hand repeatedly down the page.
The work has been described as “beautifully captur[ing] the thinking of Schumpeter and Keynes.” David Gilmour says that while topics of the work are the “usual subjects”, the commentary “sound better in verse” while Alice Ramos says that they are “far removed from Horace’s elegant succinctness” but do “make the same point with some force.”
I don’t think I would agree that Keynes is an example of the copybook headings’ wisdom although his recommendations have been wildly distorted by politicians.
We are coming to a period when math will be far more determinant than wishful thinking in terms of our lives.
As it will be in the future, it was at the birth of Man —
There are only four things certain since Social Progress began —
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire —
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins
As surely as Water will wet us, as surely as Fire will burn
The Gods of the Copybook Headings with terror and slaughter return!
Hopefully, not this year. Happy New Year.
Posted in Anglosphere, Civil Society, Economics & Finance, Education, Human Behavior, Leftism, Morality and Philosphy, Poetry, Public Finance | 5 Comments »
Posted by Michael Kennedy on 23rd December 2012 (All posts by Michael Kennedy)
I’ve tried to think about anything but the coming economic calamity but this column from the Daily Telegraph is too perceptive to ignore. Of course, the liars include most of the US media, press and TV. We have to get our news from the British media about American politics. The US media has become an arm of the Democratic party.
Must we assume now that no party that speaks the truth about the economic future has a chance of winning power in a national election? With the results of presidential contests in the United States and France as evidence, this would seem to be the only possible conclusion. Any political leader prepared to deceive the electorate into believing that government spending, and the vast system of services that it provides, can go on as before – or that they will be able to resume as soon as this momentary emergency is over – was propelled into office virtually by acclamation.
So universal has this rule turned out to be that parties and leaders who know better – whose economic literacy is beyond question – are now afraid even to hint at the fact which must eventually be faced. The promises that governments are making to their electorates are not just misleading: they are unforgivably dishonest.
I have not believed that Romney’s problem was one of poor communication or salesmanship. Certainly, the turnout numbers show that Obama’s organization made the most of a very intrusive data mining system. The possibility that the system of the campaign will become part of the political party’s permanent infrastructure is worrisome. I don’t want to be an alarmist but one feature of totalitarian governments, after the French Revolution, was the intrusion into daily life.
Of course, once in power all governments must deal with reality – even if they have been elected on a systematic lie. As one ex-minister famously put it when he was released from the burden of office: “There’s no money left.” So that challenge must be met. How do you propose to go on providing the entitlements that you have sworn never to end, without any money? The victorious political parties of the Left have a ready answer to that one. They will raise taxes on the “rich”. In France and the United States, this is the formula that is being presented not only as an economic solution but also as a just social settlement, since the “rich” are inherently wicked and must have acquired their wealth by confiscating it from the poor.
I see no sign of any recognition of reality yet by Obama or his government. The “fiscal cliff” negotiations, if they can be called that, have been a farce. The Republicans have allowed themselves to be maneuvered into secret negotiations which have been demagogued and which have set them up for blame for what is coming. They would have been far better advised to insist on open negotiations, on C-SPAN if necessary.
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Posted in Big Government, Britain, Economics & Finance, Elections, Europe, France, Leftism, Obama, Politics, Public Finance | 30 Comments »
Posted by Jonathan on 28th May 2012 (All posts by Jonathan)
Chicagoboyz community member Robert Schwartz emails:
I read an article today that really set me to thinking. Here are the title and a brief clip:
“Is It Time for D.C. to Grow Up?: Growth Prompts a Rethinking of Law That Limits Washington Building Heights” by Eliot Brown in The Wall Street Journal on May 26, 2012 at page A3:
This dwindling supply of space in central Washington comes amid growth in the office sector over the years and a population that is back on the rise after decades of decline. Washington’s population has grown 8% since 2000 to more than 600,000, adding an estimated 46,000 residents, as young people in particular have flocked to live there.
The article discusses proposed changes to the DC zoning ordinances so that more office space and high-rise condos could be added to the area north of the Mall and between the White House and the Capitol.
I devoted a few seconds of rumination to the architectural issue, before it hit me. What the article says is that all of the country’s wealth and power are being concentrated in the Imperial Capital. The real problem is not building heights, it is the concentration of political power. I think we need a meme or slogan to carry us through to November, and through the subsequent campaign to re-establish constitutional government in the United States. So here is my suggestion:
Vote Republican — Send the Recession to Washington
Your thoughts are welcome. So are bumper sticker designs.
Posted in Big Government, Politics, Public Finance | 7 Comments »
Posted by Jonathan on 2nd May 2012 (All posts by Jonathan)
So what next? The best first step is to free up labor markets world wide. Specifically, we need policies that take aim at the unbearable political forces that seek to tighten the regulatory noose on voluntary labor markets.
Unfortunately, the dominant attitude of macroeconomists is to assume that nothing that takes place within the labor market (of which Krugman never speaks) is large enough to influence the large macro trends to which they attribute today’s high employment rates.
The blunt truth is exactly the opposite. The calcification of labor markets is the primary impediment to economic recovery. The direct effects of government regulation of labor can matter far more than the indirect effects of macroeconomic policy, whether Keynesian or austerity-based. Neither austerity nor lavish public expenditures will improve the overall situation, which is why the massive increase in American public debt has not nudged unemployment rates down. The only workable solution has to stress job creation, not by misdirected subsidies, but by dismantling the government obstacles to market exchange.
Posted in Big Government, Business, Economics & Finance, Obama, Public Finance, Quotations | 14 Comments »
Posted by Michael Kennedy on 14th March 2012 (All posts by Michael Kennedy)
Ann Althouse has a good post today. I can’t get through her Captcha system so I thought I would post a few comments here. This NY Times op-ed piece is the source for her observations. It is behind the Times’ idiotic payment wall so go to her blog for the link.
TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
That certainly states the issue clearly. What does he complain about ?
I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.
But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.
I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.
What specifically is the problem ?
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Posted in Big Government, Biography, Book Notes, Business, Conservatism, Economics & Finance, Management, Markets and Trading, Politics, Public Finance | 19 Comments »
Posted by onparkstreet on 4th January 2012 (All posts by onparkstreet)
Commenter Lynn Wheeler writes at zenpundit:
“….Boyd would comment in the 80s that the approach was having significant downside on American corporations as former WW2 officers climbed the corporate ladder, creating similar massive, rigid, top-down command&control infrastructures (along with little agility to adapt to changing conditions, US auto industry being one such poster child).”
Wheeler’s comment reminded me of the following post that I had meant to blog earlier:
One occasion in particular in the late 1970s brought this home to me. McNamara had come to one of our staff meetings in the Western Africa Region of the World Bank, where I was a young manager, and he had said he would be ready to answer any questions.
I felt fairly secure as an up-and-coming division chief and a risk-taking kind of guy. So I decided to ask McNamara the question that was on everyone’s lips in the corridors at the time, namely, whether he perceived any tension between his hard-driving policy of pushing out an ever-increasing volume of development loans and improving the quality of the projects that were being financed by the loans. In effect, was there a tension between quantity and quality?
When the time came for questions, I spoke first at the meeting and posed the question.
His reply to me was chilling.
He said that people who asked that kind of question didn’t understand our obligation to do both—we had to do more loans and we had to have higher quality—there was no tension. People who didn’t see that didn’t belong in the World Bank.
– Steve Denning
This too from a speech by Robert McNamara, “Security in the Contemporary World”:
The rub comes in this: We do not always grasp the meaning of the word “security” in this context. In a modernizing society, security means development.
Security is not military hardware, though it may include it. Security is not military force, though it may involve it. Security is not traditional military activity, though it may encompass it. Security is development. Without development, there can be no security. A developing nation that does not in fact develop simply cannot remain “secure.” It cannot remain secure for the intractable reason that its own citizenry cannot shed its human nature.
If security implies anything, it implies a minimal measure of order and stability. Without internal development of at least a minimal degree, order and stability are simply not possible. They are not possible because human nature cannot be frustrated beyond intrinsic limits. It reacts because it must.
Development means economic, social, and political progress. It means a reasonable standard of living, and the word “reasonable” in this context requires continual redefinition. What is “reasonable” in an earlier stage of development will become “unreasonable” in a later stage.
As development progresses, security progresses. And when the people of a nation have organized their own human and natural resources to provide themselves with what they need and expect out of life and have learned to compromise peacefully among competing demands in the larger national interest then their resistance to disorder and violence will be enormously increased.
Think about this in terms of the “armed nation building” of the past decade or so and in terms of successive Clinton, Bush, and Obama administration policies. Really not that much difference if you look at it in terms of securing stability through development – armed or otherwise. Not a novel observation in any way, but bears in mind repeating as the 2012 Presidential campaign continues its “running in place” trajectory….
Update:“Running in place” and “trajectory” don’t really go together, do they? Oh well. You all know what I mean….
Posted in Academia, Afghanistan/Pakistan, Business, Civil Society, Economics & Finance, History, Human Behavior, International Affairs, Middle East, Military Affairs, National Security, Public Finance, Society, Speeches, Terrorism, United Nations, War and Peace | 24 Comments »