Political update for August, 2011

Debt

So, the debt crisis . . . NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO!

I don't know if I've ever been so sick of a political story in my life as I am of this. Maybe I just forget, but, I'm really sick of this and I think everyone else is too. And that's recognizing (as it seems the whole world does other than those who put it together) that nothing has really been fixed, and the can has simply been kicked down the road.

I was all for a compromise of sorts to get it done, but, not a compromise like this. I hate to go all Clara Peller on you, but, Where's the beef?

I don't want to go all Gary Coleman on you, but, Whatchyu talkin' 'bout, Willis?

I don't want to go all Maggie Wheeler on you, but, Oh . . . My . . . God.

Let's just go over this a little bit and I'll move on. The first thing that irks me is the way it is now set up. They increased the debt ceiling by billions right away. I do not have a problem with that. But, then they reverse the process of the House (which has to be re-elected every two years) starting all funding bills, and give that power to the president to raise the ceiling another 500 billion. Can they stop him? Sure, but only by a 2/3 vote. That means, if all the Republicans vote against it - possible, you still need 48 Democrats to agree with them. In the Senate, it's a Democratic majority. Seriously, how likely is that to happen? Near impossible? The way it is supposed to work is that congress decides with a majority, and then after the senate agrees, the president gets to decide if he wants to veto or not. Why would we reverse that?

The cuts. $900 billion over ten years. Okay, that sounds like a start. But, wait a minute. The debt is going to increase 900 billion this year and we are going to reduce 900 billion over ten? What happened to the crisis where we have to reduce or we are going to default? What happened to reducing trillions? What happened?

Now, to be fair, there are going to be some cuts in the next two years. 63 billion. So, we are 14 trillion in the red, which, is, by the way fourteen thousand billions (pretending the real number isn't over four times that size) and we are going to reduce by 63 billion in the next two years. 14000 bill in debt. 63 billion in cuts. Oh. So, that's about .0045%.

Oh.

But, wait. we get a committee of 12 people - have Republicans and half Democrats, to make up their mind as to further cuts.  Let's give this one some thought. Why do we have committees with odd numbers? Oh, so someone can win, right?  But, should the special committee deadlock or should Congress reject the committee's recommendations, then automatic across the board spending cuts of at least $1.2 trillion would go into effect. I like that part. It's not enough, but it is a step in the right direction. Ironically, I am one of the few people I know who urges across the board cuts. There is very little support for it in congress (Connie Mack's one percent reduction plan balances the budget in about 8 years and is one of the best plans out there - maybe - this is hard for me to say - even better than my own, which would have been more draconian). But, what I want and thought couldn't happen might happen just might if the committee of 12 acts true to form and can't agree on anything. I guess there could be one or two on each side who might think about voting for the enemy - but imagine the political results. This is why we need independents flooding congress. Good luck to me on that.

Last big item in the plan. The House and Senate vote on a Balanced Budget Amendment. I doubt even I would vote for that, but you need two thirds of both houses to propose it and then three quarters of the states ratify. Good luck to them on that. Of course, there could be a first ever new constitutional convention called by two thirds of the states. But, what does it matter? We all know that congress will merely come up with ways to take things off budget (like - let the fed do it) or declare that the its an emergency, or put us in a constant state of war.

Of course, if there is no strong balanced budget amendment with teeth, they'll just slowly (or quickly) ramp um the spending once they reduce it.

Am I totally convinced that this is all going to go bad? No. I really don't believe in the end of our little experiment. But I also don't believe we will "fix" it until we have to and when it is almost too late. Sort of like the way we all do term reports. It's just American.

That rap video you have to see

I saw it. It's pretty good. You can find it at http://www.youtube.com/watch?v=d0nERTFo-Sk and then the sequel at http://www.youtube.com/watch?v=GTQnarzmTOc. I haven't seen the second one, but it's probably good too.

I'm talking about the rap videos which pit John Maynard Keynes against Friedrich August von Hayek. Most relatively educated people know who Keynes was and remarkably, Hayek is making a comeback. They were economic adversaries, but not personal enemies. In fact, they were sort of friends, although Keynes died over thirty years before Hayek. And when I say friends, I mean the kind of friends who could think be completely critical of their friend's most cherished ideas. Of course, in the most important ways, Keynes cleaned Hayek's clock. All government's today that I know of are Keynesian to one degree or another. By that I mean they believe in the government increasing spending in tough times in the hopes of stimulating the economy. On the other hands, many people have come to appreciate Hayek's ideas in the past forty years, but more so since the 80s (thanks to some degree to Ronald Reagan).

With our economy in the dumps, the argument between Keynes and Hayek has been revived to enough of a degree that they have two highly watched rap videos.

I am much more interested in Hayek (who was also a social philosopher) than Keyenes, although I try to avoid the tendency to look at political science or philosophy in a mutually exclusively way. So, I always leave a little room for absolutely. But, in the long run, I believe Hayek was much more right than Keynes, even though when I read him, I often find myself disagreeing or thinking of exceptions to his very lightly exampled ideas. I've talked about Hayek other times and I'd rather let someone else do the work. I'm going to extract a little from a 1992 Reason Magazine article (http://reason.com/archives/1992/07/01/the-road-from-serfdom) based on a 1977 interview of Hayek, mostly some stuff that resonates with the arguments of the day:

Reason: Of your bestselling The Road to Serfdom, John Maynard Keynes wrote: "In my opinion it is a grand book.... Morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement." Why would Keynes say this about a volume that was deeply critical of the Keynesian viewpoint?

Hayek: Because he believed that he was fundamentally still a classical English liberal [DHE - by this, he essentially mean a libertarian] and wasn't quite aware of how far he had moved away from it. His basic ideas were still those of individual freedom. He did not think systematically enough to see the conflicts. He was, in a sense, corrupted by political necessity. His famous phrase about, "in the long run we're all dead," is a verv good illustration of being constrained by what is now politicallv possible. He stopped thinking about what, in the long run, is desirable. For that reason, I think it will turn out that he will not be a maker of long-run opinion, and his ideas were of a fashion which, fortunately, is now passing away.

Reason: Did Keynes turn around in his later years, as has frequently been rumored?

Hayek: Nothing as drastic as that. He was fluctuating all the time. He was in a sort of middle line and he was always concerned with expediency for the moment. In the last conversation I had with him (about three weeks before his death in 1945), I asked him if he wasn't getting alarmed about what some of his pupils were doing with his ideas. And he said," Oh, they're just fools. These ideas were frightfully important in the 1930s, but if these ideas ever become dangerous, you can trust me—I'm going to turn public opinion around like this." And he would have done it! I'm sure that in the post-war period Keynes would have become one of the great fighters against inflation.

* * *

Reason: The United States has cut inflation from 12 percent to 4.8 percent, Britain from 30 percent to 13 percent—both without Depression-type setbacks. Doesn't this offer hope that economic adjustments can be made without massive unemployment?

Hayek: I don't know why you suggest this. It has been accomplished, very much, through extensive unemployment. I think it is certainly true that ending an inflation need not lead to that long-lasting period of unemployment like the 1930s, because then the monetary policy was not only wrong during the boom but equally wrong during the Depression. First, they prolonged the boom and caused a worse depression, and then they allowed a deflation to go on and prolonged the Depression. After a period of inflation like the past 25 years, we can't get out of it without substantial unemployment.

Reason: How does inflation cause unemployment?

Hayek: By drawing people into jobs which exist only because the relative demand for the particular things is temporarily increased, and these employments must disappear as soon as the increase in the quantity of money ceases.

Reason: Yet, if the United States, for example, went through a period of temporarily high unemployment—say we have double the current rate of unemployment for one to two years—wouldn't all the automatic income-maintenance programs, such as unemployment insurance, welfare, etc., run up such an enormous bill as to bankrupt the federal government, which already runs a deficit of $50 billion or $60 billion in a so-called recovery period?

Hayek: Yes, they probably would. There would be an enormous political struggle on the question of whether social security benefits ought to be adapted to inflation or cut down. I don't think that you can effect a permanent cure without a substantial alteration of the social security system.

* * *

Reason: Well, then, why isn't there any such thing as social justice?

Hayek: Because justice refers to rules of individual conduct. And no rules of the conduct of individuals can have the effect that the good things of life are distributed in a particular manner. No state of affairs as such is just or unjust; it is only when we assume that somebody is responsible for having brought it about.

Now, we do complain that God has been unjust when one family has suffered many deaths and another family has all of its children grow up safely. But we know we can't take that seriously. We don't mean that anybody has been unjust.

In the same sense, a spontaneously working market, where prices act as guides to action, cannot take account of what people in any sense need or deserve, because it creates a distribution which nobody has designed, and something which has not been designed, a mere state of affairs as such, cannot be just or unjust. And the idea that things ought to be designed in a "just" manner means, in effect, that we must abandon the market and turn to a planned economy in which somebody decides how much each ought to have, and that means, of course, that we can only have it at the price of the complete abolition of personal liberty.

* * *

Reason: Are you optimistic about the future of freedom?

Hayek: Yes. A qualified optimism. I think there is an intellectual reversion on the way, and there is a good chance it may come in time before the movement in the opposite direction becomes irreversible. I am more optimistic than I was 20 years ago, when nearly all the leaders of opinion wanted to move in the socialist direction. This has particularly changed in the younger generation. So, if the change comes in time, there still is hope.

He has hope. Me too. I have my reasons, but it will have to wait a little.

Great little stories

Every once in a while some story takes off that just makes you shake you head about our nanny state (some elements of which I admit I enjoy). One of the best of the year came out a few weeks ago about he poor fellow who owned his own helicopter. He had his own company and was the own employee.

Of course, he had to follow FAA regs, and one of them required him to test himself for drug use. But, not just test himself. They had to be surprise tests. And, he has to take a course for this. And, he also has to take another one to learn about the ways his employer might surprise him with a test. And . . . they are going to audit his procedures. Come on, this is a joke, right? It has to be. Or, are you getting visions of Bugs Bunny giving himself a surprise drug test?

Perry in or Perry out

That's the big story these days in the Republican world. People are so bored with those actually running, that they are hoping this pistol carrying, prayer rally giving Texas governor will jump in and make things happen. Of course, I remember when he ran for governor a few years ago and, you know what, he really wasn't all that exciting. But, for a little while, it beats stories about whether Sarah Palin is getting in or not.

I've stayed out of guessing whether he's in or out so far. I've been pretty good so far on my picks, but I just don't know with him. But, since I have a gun to my head, the answer is yes. The reason its yes is because he's looked at the polls and sees that Mitt Romney, the Dick Clark of Republican politicians, is running everyone off the field, and, he's thinking he can out charm him any day of the week.

He's not in the debate this week which will be watched by the entire FoxNews team and about 7 other people who just can't stay away. But, if they only let me ask the questions:

"Representative Bachmann. Why do always say you were a United States tax attorney and not an IRS lawyer?"

"Mr. Cain, you have been clear in your warnings that Muslims are trying to force Shariah law into American. Which do you believe will be the first Shariah law to be held constitutional by the Supreme Court - stoning adulters or the cutting off the hands of thieves?

"Governor Pawlenty, why do you think you remind me so much of Mike Dukakis?"

"Governor Huntsman - seriously?"

"Speaker Gingrich, according to RealClearPolitics poll averages, the president gets a higher percentage of votes against you than people like Jon Huntsman, Hermain Cain and actually everyone except Sarah Palin. When does it just get too embarrassing? Or, should we ask your wife?"

"Governor Romney, Rush Limbaugh has already said you are done - it can't be you. Please tell us what you you think of that, without proving to us you are afraid to criticize him?"

Yeah, that's going to happen.