Simon Johnson on the apparent new deal in politics
Baseline Scenario links to Simon Johnson’s thoughts on current practice of politics. Well worth the time to read and comment.
Delusions Of Fiscal Grandeur
by Simon Johnson
If you honestly believe that investors will happily buy up any amount of US government debt (at low interest rates) for the indefinite future, then relax. The tax deal passed yesterday should make you happy.
But if you fear that the US will soon be tested by financial markets – just as the eurozone is being tested today – then please read my column,”Voodoo Economics Revisited“, which is now on the Project Syndicate website. There is a well-established tradition in the Republican Party of thinking that tax cuts cure all ills; many in the Democratic leadership have apparently now fallen into line. We need to think hard about what our fiscal crisis will look like – and who will end up being hurt the most.
Another link to the column: http://www.project-syndicate.org/commentary/johnson15/English
He is a lot more optomistic than I am. The only way we get our fiscal house in order is on the GOP’s terms–no more government run social security, no more unemployment insurance, no more epa, no more regulation of Wall Street, no health care reform, no more unions, no more wage and hour laws, no more poor people going to college etc. The recently passed tax legislation was game set match. If you are in the upper 2% you won, everyone else has lost.
@Terry “If you are in the upper 2% you won, everyone else has lost.”
Which has been effectively true now for 3 decades. The mystery is why the 98% which has been losing – repeatedly votes in favor of continuing to screw themselves. Yes, the oligarchs own the media via which the masses get their information, but still – WTF???
Democrats have done the responsible thing on the budget, if not often, at least more often than Republicans. What political reward have they had? Well, Bill Clinton finished his career with better public approval than most recent presidents, but he is not the party. The party has had a brief stint in the majority, and now seems headed back toward the wilderness. This is not because of “new ideas” from the GOP. It’s because of the same old ideas. Pander harder than the other guy, run up the deficit more than the other guy, and make sure the Supreme Court is packed with guys on your side.
“But if you fear that the US will soon be tested by financial markets”
The test is a ways down the road, and if the Euro tanks it will reinforce the dollar as reserve currency a bit longer, maybe near or far down the road.
First, the folks lending to the US are the ones who would: pay a lot of it in taxes/tariffs anyway so will keep lending.
Second, the folks lending are also the folks taking dividends from profits on the US G spending for war and corporate welfare, about 40% of expenditures.
Third, the same folks are making money hand over fist on the margins on entitlements, just because they are not filtered through the cabinet departments does not mean the activity generates no profits.
As long as the debt keeps the military and corporate welfare brand of keynesian stimulus going it is okay. Maybe inflation would be an issue. Not in view form here.
There is reason to be pessimistic rather from social unrest than from fictitious bond vigilantes who are rational and won’t end the voodoo economics scam.
It is always better to lend to Uncle Sam than to be taxed or to lose the discretionary margins.
However, social dispruption and scarce commodities may blow the lid.
i emailed that link out when mark thoma first linked to it, with this comment:
simon johnson’s the only soothsayer out there…
when this fiscal ponzi scheme collapses, a lot of little people will get hurt…
kharris
i hate to say a good word for the Republicans, but if the Democrats hadn’t sold out, the worst policies we have seen lately wouldn’t have happened.
As for why the R’s get elected, I think it has something to do with the arrogance and stupidity of government at the interface with the people. And I am a person who believes in taxes and regulations, but when you see how they are administered you can understand why someone would vote for a politician who promises to end them.
The “austerity debate”, as if bond vigilantes only look at revenues, needs to hit the 40% of US government expenditures that are not “entitlements.
In the Euro zone discretionary spending is less than 15% of outlays. That is why the argument never goes to what the Eurozone “socialists” broader budget looks like.
US government outlays are stingy in social safety net and profligate in corporate welfare and keynesian militarism (healthy, profitable war machine, also known as war profiteering through privatized arsenals).
Real men talk what the money is going for if they are rational about the money they lend.
It is voodoo, clipping copupons on profits paid by cahs you lent…………………….
The supposed bond vigilantes won’t stop the voodoo.
Liberals lose because they’re blind to the huge qualitative difference between spending and taxation. We all know there’s really no quantitative/economic difference– both involve a net flow of money in or out of government. But to real people, there’s a big difference between government handing out money to people vs. government letting people keep more of their earnings. So liberals roll out their utopian progressive schemes and expect them to be popular, because they’re incapable of understanding how real people think.
The entire system of taxation at the Federal level is all a stupid game, anyway. We should get rid of Federal taxes altogether, and have the government fund itself by borrowing and printing money. Then we could honestly decide how much we want our government to do and how big we want it to be by managing inflation (albeit at a much higher level). In addition to the fact that inflation is a tax on wealth, and therefore fairer, such a system would force politicians to honestly address things that matter rather than gaming taxes in one direction or other. We would also have a society that was much more free, by removing the pernicious ability to control people’s behavior through the tax code.
Liberty or death.
Credit is controlled in the world by 3 entities: the Peoples’ Republic of China, the US Federal Reserve and the European Central Bank. These run the money which lube the arcane social contract, and its politcal economy.
The US federal reserve works for the small number of “too big too fail” conglomerated interests of world creditirs on the US currency which regretaably is used as a reserve currency manipulated in Beijing. The ECB is resurging liebensraum.
Liberty, what is liberty? I assume you are in the US, Concord, Ma or Tidewater, Va?
I would not go into your Orwellian slogan of “difference between government handing out money to people vs. government letting people keep more of their earnings.”
Quaintly 1984.
But…………
40% of US G hand outs are more than half for war profiteering and most of the rest to subsidize economic activity, hand outs for the owners.
Debtors are slaves, hoarders of money hold other people slave (in debt). Why not? Put whole countries in the poor house, like Ireland, Greece and Latvia.
And borrowing to fund creates a nation of slaves to the bankers.
I don’t know which liberty you would prefer death to, but bankers whom you would borrow from to run the gumint are the death of liberty.
Credit is power! To the holder of the note, while the debtor is slave.
What kind of social contract is owned by bankers?
I suggest purge the banks, regulate credit and institute equality!
The only reason to borrow would be to set the “risk-free” rate for the bond market. At the Federal level, government should primarily print what it needs.
When you say:
I would not go into your Orwellian slogan of “difference between government handing out money to people vs. government letting people keep more of their earnings.”
Quaintly 1984.
You prove my point nicely. You are blind to that qualitative difference and cannot address it.
Borrowing by individuals is a choice for all but a few. Whining about “debt slavery” is just complaining about the hole you dug for yourself.