US Political Scene A right of center view of American politics

7Feb/092

Mitt Offers His Sage Advice

Once again, Mitt Romney, a successful businessman and former governor of Massachusetts, offers his insightful advice about how to best stimulate the economy. His theory toward economic policies is much more Smithian than Keynesian. His tagline is Stimulate the Economy, Not the Government.

Quoting the CNN article: "In the final analysis, we know that only the private sector -- entrepreneurs and businesses large and small -- can create the millions of jobs our country needs. The invisible hand of the market always moves faster and better than the heavy hand of government" (emphasis added).

Lastly, in a letter to supporters he stated, "This is a time of hardship and uncertainty for millions of Americans. Unfortunately, the new President and the Democratic Congressional majority seem more concerned with stimulating the government than stimulating the economy."

We need to stimulate the economy by freeing up more money from the clutches of our inefficient government. Our government needs to gain inspiration from Smith and Friedman (as far as arguing for smaller government), not Eva Perón's welfare program or her husband Juan's economic policies that led to the downfall of the Argentinian economy (please read the comments to this post for more about Argentinian economics).

27Jan/092

Keynesian Economics is Not the Answer

John Maynard Keynes was a British economist who is most famous proposing what is commonly called today deficit spending. That's only a portion of his theory but it captures the gist of it. He particularly thought government deficit spending was necessary in times of economic turmoil in order to stabilize the economy. His ideas were first put into practice in a significant way during the Great Depression - although some people argue that FDR didn't do enough to stimulate the economy (i.e., he should have pushed for more spending). There is some merit to this idea. The Great Depression really did not end until WWII and all the government money being spent on building war machines, training and supporting soldiers, etc. On the surface it looks like massive government spending was what fixed the economy. That may be.

However, it also started an era (that has not ended since - there were short periods of time when Keynesian economics was not popular with governments but many of the underlying principles were never rejected) of big government and governmental intrusion into the "normal" workings of capitalism and the free market. As the markets thrived, people spent more money, acquiring more possessions. Governments and businesses followed suit. The U.S. enjoyed relative prosperity between the years of 1945 and 2000 (I could even argue it to 2007). There were some rough stretches in the late 70s and in the 80s but generally the economy was quite good. The Korean and Vietnam conflicts did not significantly interrupt the economy. Neither has any war since (although the latest Iraq War certainly did not help the budget).

The problem with Keynesian economics is that no one reverses the intervention. Governments spend more to stimulate the economy then never (or very rarely) cut back. The other problem is that individuals also deficit spend in the acquisition of more goods. Wants become needs and the deleterious cycle of borrowing and spending then borrowing to repay spending takes on a life of its own. In short, both governments and citizens overspend, which is an unsustainable path. I believe much of our current economic crisis stems from such wasteful deficit spending on an individual and governmental level. I think that Keynesian economic policies were one of the instigators of the current economic turmoil. It just took many years for it to develop again.

That's why I don't believe that having the government jump in to stimulate the economy is the right path, especially now that the most conservative estimate of the cost of the economic stimulus is $1.2 trillion (other estimates put the cost at around $2 trillion)! Sure, it will help the economy in the short term. It will probably even help the economy for much of our lifetimes. However, I think it "fixes" the economy at the expense of our children's security. At some point the government cannot jump in and fix the economy any more because it is the economy. Just as communism was shown to be economically unsustainable, Keynesian economics is also unsustainable (unless it is applied topically then removed when the crisis is over, to use a bit of medical terminology; even then I don't think it is the best approach). Keynesian economics is not socialism but it does have socialist inspiration. I'm not using an association fallacy (i.e., guilt by association) to equate Keynesian economics with communism or socialism (i.e., Keynesian economics = communism = bad; this is not true) - that's not my point. I'm merely pointing out that at least the communist variation of socialism was shown to be unsustainable. Governments that strictly follow Keynesian economics could end up in an unsustainable state (as I said before, there would be no more room in which to maneuver).

Now, I don't think a completely hands-off approach is necessarily the best way to help the economy but we should start with less intervention, less government, and less deficit spending. If we as people and if the government all lived within our means, that would be a major step towards fixing the economic problems of our nation and of our world.

8Jan/090

“Let Detroit Go Bankrupt” – NYTimes.com

Op-Ed Contributor - Let Detroit Go Bankrupt - NYTimes.com.

This article by Mitt Romney was published back in mid November. He provides his perspective on the "Big 3" bailout. As a very successful businessman, his opinion is worth something.

I'll post a few good quotes from the article.

"Detroit needs a turnaround, not a check."

"Retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers. That extra burden is estimated to be more than $2,000 per car."

"Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th."

"Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation."

"Starving research and development is like eating the seed corn."

"I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today."

5Jan/094

The King is Dead! Long Live the King!

Obama, in a keen maneuver showing how he is bringing change to Washington, proposed a radical new plan to help the economy. I'll quote from a CNN headline: "Obama begins push for tax cuts, more spending."

It seems he learned something from Pres. Bush and Congress after all. I like this bold new fiscal plan. Let's bring in less money while spending more money because that will magically fix the nation's financial problems. I understand that on a theoretical macro economic scale, it's not a terrible plan because the goal is to stimulate the economy by freeing up liquid assets. This in turn grows the economy, bringing in more tax revenues. At this point government spending will be reduced and Poof! the economy is good again.

However, the government never seems to get to the reduced spending part. Cutting taxes and increasing spending is a very difficult way to stimulate the economy - it requires much financial acumen as well as the willingness and ability to stop the plan as soon as possible. It's a good plan in the short-term but is not sustainable. On top of that, it's amoral at best.

The best way to increase financial stability and to make the economy stronger in the long-term is for the government to reduce taxes and reduce spending. They don't even have to reduce taxes at first, but they have to learn to live within their means.

The only change so far in Washington is that change the government is "borrowing" from taxpayers and the extra change the government mints to help "fund" its spending habits. I know my critique is simplistic but Obama's "stimulus plan" basically boils down to "tax less, spend more."

28Nov/081

The Beast in the Shadow

I have very mixed feelings about Black Friday. On one hand I am a huge fan of finding good deals on things. When I can purchase items for significantly less than their actual retail value, I always have a feeling of satisfaction. While I like to buy frivolous things sometimes, I also enjoy finding deals on everyday items - toothpaste, toilet paper, diapers, and so forth. I'm also a believer in many of the tenets of capitalism and consumerism, although I certainly don't canonize those beliefs. I save money but I also believe that money is most useful when it is spent. Spending money directly on services or goods benefits both buyer and seller. On a macro level, money has to be spent to grow an economy. The old mantra of business - you have to spend money to make money - is true (generally and within the realm of legitimate business operations; there are those who illegally {or even legally} prey on others and unethically profit with little or no effort on their part).

I enjoy finding deals on Black Friday. I also don't mind doing my part to help businesses become profitable and to stimulate the economy in my own little way; after all, businesses employ people and provide goods and services. All savings without any spending does not help the broader economy. Saving money for retirement, unexpected expenses, expected expenses, and so forth is necessary but saving all your money and spending only the bare minimum might not be in the best interest of the broader economy. That is, unless you do not make enough money to afford any of your wants beyond your basic needs. The problem is that so many of us have our needs and wants mixed up.

Then there is the other part of me that dislikes the barely suppressed or outright greed that is rampant on Black Friday. Black Friday is the paragon of consumerism, it is when many people openly and gaudily worship at the altars of Mammon by selling their messes of pottage for trinkets and trivialities. Occasionally in the pursuit of such idle pleasures and worldly possessions, a streak of egocentrism with apathy and violence towards the Other is revealed. How abhorrent that some people are so callous that their desire to consume results in the extinguishment of a human life! Yet, all is not gloomy. I witnessed kindness while shopping this morning - people sharing a deal or helping others. Even those who were not Other-focused were patient and civil. The extremes just capture our attention. While violence that is performed by the hands (or feet) of the worshipers of Mammon is relatively rare, it reveals a dark and vicious beast lurking in the shadows of consumerism.

Another disconcerting aspect of Black Friday and the holiday season in general is the commercialization of it. Everything is about spending money and buying the fanciest toys for children, friends, family, and loved ones. Many people go into significant debt during this time of the year. According to one article, "One survey suggests that while 30% of Americans pay off Christmas debt within three months of Christmas, another 25% carry it for over a year" (Source). 25% are paying off Christmas debt until the following Christmas! And some people wonder why the U.S. government has a spending problem. How can we expect fiscal responsibility from Congress when we are not a fiscally-sound people? This whole holiday season from Thanksgiving to New Year's Day has become one big spending spree. Much of the original meanings of those holidays has been lost to the constant stream of consumerism (the recent mortgage crisis is also evidence of this).

With all the focus on consuming, it's no wonder our country also faces an obesity epidemic. The two - irresponsible spending and eating - go hand in hand. We are a country of extremes and impulsivity. The shadow beast of consumerism is greed. It has claws of irresponsibility and fangs of self-centeredness. It preys upon all who stand in its way; in the end, the beast eventually turns on its owner and consumes him. We need to have moderation and responsibility of our personal habits if we hope to tame or slay this beast. We also have to gain control over our personal lives and habits if we expect to have a more fiscally-responsible government.

Image by hradcanska.

24Sep/082

McCain Temporarily Suspends Campaign!

Sen. John McCain, in a move that shows integrity, announced that he would suspend his campaign until a deal was reached concerning the proposed bailout of Wall Street. Some Democrats, typically, are criticizing him for this move saying that it is much more important that a debate between McCain and Obama take place. That's more important than a senator doing his job?! Obama's response was: "It is going to be part of the president's job to deal with more than one thing at once. It's more important than ever to present ourselves to the American people." In other words, "Look, I can deal with lots of things at once like a President has to." The problem is that he isn't dealing with a lot of things at once - he's campaigning but not doing his job as Senator. Of course, Obama historically has mainly just worked with his party on issues so maybe he really isn't needed in Washington for a bipartisan effort. McCain has worked with those not of his party a number of times over the years and is known for "crossing the aisle" if needed. I applaud McCain's move - it shows that he is committed to his job, even if it costs him the Presidency (of course, he might have done some informal polling to see how this act would be viewed but that still doesn't mean he isn't doing the right thing for the right reason).

20Sep/080

A Plea for a Return of Fiscal Responsibility

I've written a number of posts focusing mainly on Republicans and conservative ideals and haven't written much recently about Democrats or liberal ideals. While I've never downplayed my conservative beliefs, when I started this blog (back when it was hosted by Blogger) it was intended to be a fairly balanced look at U.S. politics. I've drifted away from that some because I felt the need to share my conservative voice with others, even if few read my blog. I'm an open critic of the Bush administration's fiscal policies. I know Pres. Bush inherited an economy in a recession that was quickly struck by the horror of 9-11. The economy faltered but then grew stronger; it was strong for a few years and recently turned downwards. I do not believe we are in a recession and I agree with John McCain that the fundamentals of the economy (e.g., businesses, innovation, hard work, etc.) are still strong.

We are passing through some hard times (I'm not trying to minimize any individual suffering but we are in a nation with hundreds of millions of people) but so far it has not been anything serious. Gas prices are high but I believe that high gas prices are a blessing - they lead to the development of alternative potentially cheaper and more environmentally-friendly technologies. The stock market has been volatile but stock markets always are. My mutual fund hasn't been performing well over the past year but this particular fund is a long-term investment (it did quite well the previous year) and stock markets always go up over time given enough time.

I don't believe that U.S. presidents have that much influence on the economy - they certainly have some but in reality it's pretty limited. Congress probably has a little more influence on the economy but still pretty limited. However, I'm still pretty disgusted by all the deficit spending our nation is doing (again, you can't put all the blame on Pres. Bush; after all, Congress has to actually set all the spending, the President just approves it; further, there are fewer tax revenues when the economy isn't as strong, which also affects the deficit). What happened to good old fiscal conservatism? Where are the politicians who believe we shouldn't spend more than we earn, except in emergencies? Many states run just fine and have budget surpluses. Granted, states receive a lot of money from the federal government but the problem is out-of-control spending in general. We are a consumerist society. We have to have the latest and greatest now! Our government seems to think that we have to try and fund as much as we can, after all, each of us is entitled to handouts from the government.

The recent economic woes have little to do with the government; they stem largely from from our entitlement society. People expect a lot from the government (we should all expect a lot of the government, just not from); many expect too much. We also feel entitled to our individual rights over individual and social responsibility. This leads to excessive consumption by society as a whole, which is also reflected in governmental spending. If we can't control our spending, how can we expect our government to control its spending? I'm not completely opposed to "big government"; our world is very complex today, much more complex than when the country was founded. The government has to be more involved than it was in the past. However, if our spending is higher than our income, we must curtail our spending. I'm aware that many economists feel that keeping a deficit is necessary for healthy economic growth and that balanced budgets hold us back from growth potential; however, we've been increasing our federal deficit and national debt for so long that we have to get it under control. I'm not an advocate of raising taxes, especially when the government wastes so much money. You never solve a problem like our government has by throwing more money at it. This means that the only way to eliminate our deficit and national debt is to seriously reduce our spending. It's painful - no one likes having their money taken away. It's not an easy job because people would complain and lobby against the spending cuts. Most people who want the government to reduce spending don't want the government to take away their money.

The easiest way to start is to eliminate redundancies and close loopholes. Simplifying and streamlining the tax codes and process would immediately produce sizable benefits. We should eliminate many of the farm subsidies, for example. Right now the government is like a massive, largely mismanaged company. Departments need to be modernized and streamlined. Consultants need to be pulled in to help with the process. The government needs to be treated more like a corporation (I'm not saying it should be a corporation, it just needs to be managed more like one). We need to elect officials who have the guts to tackle the economic problems of the government.

18Apr/080

Obama and Clinton – All For Raising Taxes

From an excellent Wall Street Journal article: "But Mr. Obama has also said he's open to raising – indeed, nearly doubling to 28% – the current top capital gains tax rate of 15%, which would in fact be a tax hike on some 100 million Americans who own stock, including millions of people who fit Mr. Obama's definition of middle class." Both Clinton and Obama are in favor of raising taxes on capital gains, which affects, as the article said, the millions of people who own stock. I own stock and I'm a grad student on a grad student income. Capital gains taxes have rightfully been decreasing over the years. Many want them to be eliminated. I'm not qualified to provide commentary on that but don't let Obama or Clinton fool you with pledges of not raising taxes. Our government and governmental spending may be breaking down but you can't fix the deficit or the national debt by throwing more money at the government, you have to reign in spending and reduce waste; and there is a lot of waste. Why would anyone want to give the government more money when the government can't even work well with what it has. It's time for a paradigm shift in our country; we need to change our philosophy about governmental spending. Both Democrats and Republicans are at fault. I'm not necessarily arguing against big government; it might be unavoidable in our world but a large government does not have to be inefficient. Inefficiency is more likely in larger governments but it is not inevitable. There is no need to raise taxes, we just need to fix what we have and go from there.

4Feb/080

Mitt Romney: The Man for the Economic Crisis in America

I normally take a very positive view of the economy; I'm optimistic about the future. However, there are a number of disturbing signs that point to the serious faults in our economy. One problem is the fiscal irresponsibility of many Americans. I do not blame the banking industry completely, although the relative ease at which credit is obtained is problematic. The fault lies with us as consumers. We live in a disposable society, one where cell phones are replaced almost yearly, food containers are largely disposable, food is fast, and people always desire more. The impulsive and uninhibited spending is correlated with impulsive and uninhibited eating our country seems to suffer from. How can people control their spending if they cannot control their eating? Granted, some people have biological or psychological issues that lead to impulsive eating and spending, but that is relatively rare compared to the overwhelming problem our country has with obesity. The fiscal irresponsibility in our country is manifest in the recent sub-prime lending fiasco that is still shaking up the economy (it is one of the major contributers to the flailing stock markets). The fiscal irresponsibility in our country also is manifest in the high bankruptcy rates. I am generalizing of course. There are people who have financial difficulties without any irresponsibility but they are often a minority of cases.

How can we expect our politicians to run the government in a fiscally-sound manner if we can't run our own homes that way? I'm not implying that we all need to roll in riches but there is a definite problem with too many people living outside their means, which problem is reflected by the federal government. The question now with our tenuously-perched economy is who is the best presidential candidate to help strengthen the economy?

While there are fiscally conservative Democrats and fiscally liberal Republicans as well as fiscally-responsible and irresponsible Democrats and Republicans, the Republican Party has traditionally been the party of good fiscal conservatism and responsibility. The distinction between Republicans and Democrats has become blurred recently with many Republicans becoming fiscally liberal and supporters of "big government" (which actually is a "return to their roots" per se. The early Republicans grew out of the old Federalists, in part, who were for a strong central government compared to the old Democratic Party of Jefferson, which was in favor of states' rights and small federal government. This is, however, a discussion for another time). Of note though is that just because someone favors "big government" does not mean that they are fiscally-irresponsible.