So all is coming right. Sales of existing homes in the final quarter of last year were 27.2% above the 2008 level. Home construction jumped 2.8% in January, to its highest level in six months. The mining, manufacturing and utilities sectors also grew at satisfactory rates as did retail sales.
So confident is the Federal Reserve in the recovery that it has raised a key interest rate.
Alas, every silver lining has a cloud ”” in the case of the American economy, several. For one thing, the fiscal deficit, which is fuelling some of the growth, is clearly unsustainable. Even under the rosy scenario posited by the president ”” economic growth at about twice the rate the non-partisan Congressional Budget Office is predicting ”” the deficit will still be unsustainably high, and rising, in 2020.
Congress knows this, the president knows this, and the opposition knows this. But the Democrats want to fill the gap by raising taxes, anathema to Republicans, who fear such a move would stifle growth by reducing entrepreneurs’ incentive to create new businesses and jobs. The Republicans want to cut spending, a move the Democrats say would stifle growth by prematurely withdrawing a prop from a fragile recovery.
[i]Republicans, who fear such a move would stifle growth by reducing entrepreneurs’ incentive to create new businesses and jobs … [/i]
This is not something we are “afraid” of: it is something repeatedly demonstrated in many nations across many generations.
I have a God-given right to my life, my liberty, and the fruits of my labors. If you take my life, that’s murder. If you take my liberty, that’s slavery. And if you take the fruits of my labor, that is theft.
Government produces absolutely nothing. It only re-shuffles and re-distributes .. and quite inefficiently at that. Government involvement is not the “prop” of a “fragile recovery” — government is a dead weight that hinders real economic growth and thus ensures any recovery will be at [i]best[/i] “fragile.”
The proof will be in the pudding come the next congressional election, and if our representatives and senators are beginning to feel edgy, good! They should!
Bart,
Are you an anarchist? I am not wild about government. I have some libertarian leanings. But I do recognize that we DO NEED a government. And taxes are the price of citizenship. The simple fact is that if eliminated all of the spending short of war expenses, protection of life and property, and servicing the existing debt, the budget would still be unbalanced.
Obviously we can not do that even if we wanted to. My personal feeling is that we need to take a meat cleaver to the budget, but after that we raise taxes to cover the rest. “DEBT” is a four letter word. No variation on “TAX” comes out that way.
Taxes are, indeed, the price of citizenship. Let those who have ears hear!
*4. Reasonable taxes for a Constitutional limited government are indeed, the price of citizenship. Not unreasonable taxes to support a monstrous and profligate government.
Of course I’m not an anarchist. The 30 year average federal revenue has been about 18% of GDP, oscillating slightly around that average.
Defence spending is currently about 4.5% of GDP, which is somewhat lower than it was under Carter, and half what it was in JFK’s presidency. Overall federal spending has nevertheless increased seven times faster than median income, and it has done so rather steadily since 1970, adjusted for inflation. Republican or Democrat Congress … it does not matter, with the exception of a few years in the late ’90s. State and local spending increases are even worse.
If, however, you combine interest on existing national debt (about $300 B per year) and national defence (about $700 B) you come up well over a Trillion short of present-day federal tax revenues, which are in the $2,300 Billion range. Ad-O, your numbers don’t add up.
We have a massive problem at all levels of government. There are certain things government [i]MUST[/i] do, because individuals are incapable. National defence and international relations come immediately to mind. There are plenty of other things governments [i]can[/i] do (but do not have to do), and to the extent they get deeply involved in those optional activities they tend to do a disappointing job in the areas we really need them to be active.
Looking very briefly at only my own professional area, do we really need to spend $203,000 every year to subsidise the Alabama Peanut Queen Festival? Do we need over 28,000 words of federal regulation merely for cabbage? Should we be paying small-scale organic farmers to erect little greenhouses? Should we be handing massive subsidies to Archer-Daniels-Midland for ethanol production?
We could reduce federal spending by half — all government spending for that matter — and after all the initial yowls of protest from affected interest groups we’d be substantially better off.
Hi Bart,
Although I have some libertarian sympathies, I’m not sure there is much biblical warrant for it. God given right to “my” liberties is not the way the Israelites would have phrased it, for all wealth is, in fact, God’s and not really ours to begin with. The Land – the community, or the nation – as it is God’s nation – has some claim upon us, and we are expected to share it. It’s in the commandments.
Second, there are limits to the claim “it’s my money.” Could parents, who are the main breadwinners of a family, legitimately claim that they need not feed their children? It happens, for example, when parents get divorced. It seems that many people would give the state some rights to coerce an unwilling parent to pay for the needs of the child. Are children dependent? Well, only until the age of 6 or 7. We can ask them to work in factories, as they do in other parts of the world. Our moral intuition about discouraging such labor is, perhaps, arbitrary and a good example of us insisting that the state involve itself where it shouldn’t.
We also tend to have a higher view of our own personal generosity. Psychological studies seem to indicate that we’re much more stingy and irrational about our money than we’d like to believe. We like to get something for nothing, and we prefer NOT to pay for our services. For example: we clearly do NOT want to pay for two wars.
Your claim about government being unable to do anything is interesting, but I’m not sure about what your criteria is. Redistributing wealth is one way of inhibiting monarchies from developing. Most wealth is, after all, inherited. Should we outsource our military? Blackstone is a LOT more expensive. Do you hold government to standards higher than businesses? Do businesses ever make mistakes?
Take Medicare. By and large it seems that people are statistically happier with medicare than other kinds of insurance. In fact, this is one reason Republicans give for not supporting health care. It is, however, government run. Is it perfect? No. ARe insurance businesses perfect?
Take Nuclear power in France. It runs quite well. Nuclear engineers are paid handsomely, and there is more of a culture that says that serving France is patriotic through doing so in its administration. In the US, a good American works mainly as a private businessman; they do not serve the country in its departments. My point is that good government happens when a culture rewards and incentivizes it. In many ways it’s the Pygmalion effect: if you expect the government to be bad, it will be. Thus, George Bush, who thought of the Government as bad, ran a horrible government. It’s a brilliant strategy: run it horribly and then tell people that government can’t do anything well.
What is true is that not everyone will be happy. Paris Hilton probably thinks she deserves every penny she inherited and resents the idea that she gets taxed. Businesses like Worldcom and Enron probably chafed at even the very lax regulations they had to endure, even while Enron screwed the people of California repeatedly. It’s Arrow’s Impossibility Theorem in action, but as Keynes remarked, when we have to choose between inconveniencing the Landlord and throwing the Tenant out on the street, we may decide to assist the tenant.
Last, in a world of sinners, plenty (not you) will hide behind the mantra, “it’s my money” blind to the many ways they are interdependent upon other people. As sinners, this is completely natural; we are usually quite unaware about the way others impact us, and the way we impact other people.
Like you, I’m ambivalent about the coercive arm of the state. I don’t like being coerced, and usually I don’t like being told what to do, even when I’m wrong. Nobody likes being called selfish; we often resent when we’re told to pony up. It even happens in churches.
I also think there is LOTS of government waste. But I would point, however, to the military as where the greatest percentage of it lies. And although there are plenty of anecdotes about other sorts of pork, most of what we spend money on are very popular programs.
That said, I’d love to end Corn and Soybean subsidies; and have ranchers farm on public land at market value. I’m less enthusiastic about privatizing Yellowstone and making it into Disney. Granted, that’s my conservative elitism speaking. Not a big fan of strip malls.
I think Bart summarizes the situation rather well. We in the west now live in a world of gross over regulation that only serves the interest of government control and those in government who like to control and at the same time ignore those areas (because they are hard) that are uniquely in the sphere of government responsibility. For example see:
http://article.nationalreview.com/425573/keeping-you-safe/mark-steyn
where they regulate running while carrying a frying pan, seal hot tubs because “Hotel management explained that the drains in all the resort’s hot tubs had recently been found not to comply with new safety regulations.” And ignore the fact that Iran is developing and will soon have nuclear weapons.
Thanks Bart — good work.
@7 — [i]Most wealth is, after all, inherited.[/i]
No, John, 85% of American millionaires began with absolutely nothing. Taxes on high incomes are simply a means by which the millionaires in Congress wish to maintain their personal status by taxing away the ability of others to get there.
If I have a really good year in my business, it doesn’t really get me much farther ahead because increased taxes take a horrible lot of it away. If I have a really bad year, I’m on the hook for it all.
I might possible be for increased taxes if they would be used to pay the current debt. But they won’t do that. They will look at the increased revenue and raise spending. The net result is that we stay in the same place or even loose ground.
Paul Krugman (a man with whom I rarely agree) has a very [url=http://www.nytimes.com/2010/02/22/opinion/22krugman.html?hp ]interesting post[/url] in today’s NY Times. He predictably roasts the GOP (Krugman is an old fashioned tax and spend liberal/Keynesian). But some of his points hit uncomfortably close to the truth.
The GOP has an appalling fiscal track record. They talk the talk but have never really shown any serious inclination towards the kinds of deep spending cuts they advocate at CPAC or during election years. The GOP basically had a lock on power for all but the last 2 years of G W Bush’s tenure in office. And they never once moved to engage in any meaningful fiscal restraint. They scream “starve the beast!” But they are unwilling to face the implications of what that means.
If you are going to starve the government of money then you have an obligation to lead and make the tough choices on spending cuts. They have never done it, and I have no reason to believe they are serious now.
Which is why I think we are in really deep trouble as a country. I’m not sure which party is worse. The one that is at least somewhat honest in telling us they believe in big government running our lives and taxing us to support it. Or the party that advocates at election time for small government all the while voting for massive tax cuts and increased spending.
The GOP and the Democrats strike me as just two sides of the same coin. Both want the government telling us how to live our lives and both support massive spending and military adventurism overseas. The only big difference is what aspects of our lives they want to regulate (Dems favor economics while the GOP favors sex and morals), and what they want to waste our money on (Dems favor unions and the nonproductive elements in society and the GOP favors millionaires and Wall Street Bankers).
I am sick of all of them. A plague on both their houses. Is their anyway we could get the British to take us back? Maybe if we ask really nicely and admit it was all a mistake.