The Age of Ideological Uncertainty


Will writes from Washington, D.C. (well, Arlington, Virginia). You can reach him at willblogcorrespondence at gmail dot com.

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50 Responses

  1. mike farmer says:

    Most critics of the stimulus have said the stimulus will have an effect — if 787 billion dolars doesn’t have an effect, then THAT would be incredible — it’s just short-term and not enough to make a difference long term. It’s the type of stimulus that’s the problem, don’t you think? Or do I have to be a prize winning economist from Harvard to make such a claim? Surely as a libertarian you would agree Miron in National Review today, that a real stimulus entails doing away with corporate taxes.Report

    • Jaybird in reply to mike farmer says:

      How in the world would Congress be able to wet its beak with a stimulus like that?Report

    • Alex Knapp in reply to mike farmer says:

      Eliminating corporate taxes only enriches large companies at the expense of small, entrepeneurial businesses, which are typically unincorporated or organized as partnerships. Additionally, how would you propose that the revenue shortfall be accounted for in the federal budget?Report

      • Jaybird in reply to Alex Knapp says:

        Just claim that there would be multipliers that will show up around the time the next guy is slated to sit in the chair. Make the chart be a hockey stick.

        If growth is anemic, point out how the chart you supplied months ago accurately predicted that. If growth actually is better, explain how your plan is exceeding expectations.Report

      • mike farmer in reply to Alex Knapp says:

        “Additionally, how would you propose that the revenue shortfall be accounted for in the federal budget?”

        Wait, wait, okay…it just came to me — cut spending!

        Plus, creating wealth doesn’t take anything from anyone else, it bakes a whole new pie — and, yes, I want businesses to make lots and lots of money — if they do, we’re all better off — more jobs, more consuming going on, more revenues for the government to waste.Report

        • North in reply to mike farmer says:

          Mike, are you a supply sider?Report

        • Wait, wait…I have another idea, too — let’s cut small business taxes!Report

        • Alex Knapp in reply to mike farmer says:

          Okay. Corporate taxes account for 12.5% of total Federal Revenues. Please describe, in detail, how you would cut at least 12.5% of the federal budget.Report

          • Kyle in reply to Alex Knapp says:

            HAH! When’s the last time revenues determined the size of the budget?

            Also, corporate taxation is itself something of a misnomer as the corporations themselves don’t really pay the taxes but raise prices to offset, so really it’s more like a clumsy and regressive second sales tax.

            But they get passed and supported because most people assume that when you tax something it gets taxed. In their defence, it’s not an illogical assumption, just inaccurate one.

            Personally, I don’t care, keep the corporate income tax, don’t keep the corporate income tax, it doesn’t really have that much of an effect. It doesn’t cost the corporations more than compliance costs, which can be substantial but rarely as a percentage of operating costs. It doesn’t discourage entrepreneurship as much as onerous regulation alongside labor and health insurance costs. Clearly, people are willing to purchase items at current prices so it strikes me as exceptionally likely that corporations would just become more profitable, rather than reduce prices to the same kinds of margins they have currently.

            Eliminating the corporate income tax is kind of like the tort reform of commerce, it’d probably be a good thing but in context isn’t that big a deal.Report

    • Alex Knapp in reply to mike farmer says:

      Most of the $787 billion “spent” was in the form of tax cuts.Report

  2. Scott says:

    Yes, the stimulus had an effect. It seems to have had the same effect and throwing gas on a small fire in that the fire flares up briefly and then goes back to being a small fire. The Obama admin should be mocked for touting false results whether they are in the form of false zip codes or congressional districts. Sorry, but is seems that robbing Peter to pay Paul is a good name for it as the stimulus just adds to the deficit.Report

    • Klein in reply to Scott says:

      Jaybird, perhaps your sarcastic response is part of the culture that produced this blog post (my apologies if it’s in good faith)? The point of these editorials and countless blog posts that repeat ad infinitum the talking points of their respective political slants is to win. Not to argue or convince. Win. Wit d’escalier. You couldn’t really come up with a good zinger to that douche liberal journalist at the Georgetown party so you know what Ima gonna blog about how much an idiot Palin is; network news starts chirping about a John McCain gaffe so an editorial is needed to run somewhere explaining why that gaffe shows what an incorrigible elitist Obama really is.

      Projection; wit d’escalier; win, baby, win.Report

      • Jaybird in reply to Klein says:

        For the record, I did come up with a good zinger at the Georgetown party. It involved the journalist’s mother, her size, and how she was orbited by other, smaller, fat mommas.

        If you want me to write an essay explaining churn/velocity, discuss the difference between “legal tender” and “wealth”, and talk about the ability of Central Planning to create tiger-repellent necklaces with brochures that discuss what (the) children look like after a tiger attack… well, I could do that. I just feel that such would be preaching to the choir, those who disagree with my fundamental assumptions wouldn’t be moved, and the discussion wouldn’t progress. (Indeed, many might point out that, once again, I repeat myself.)

        Would you like me to write such an essay? One is building in my head as we speak!Report

        • Klein in reply to Jaybird says:

          And delivered without one drop of moisture slipping from your chilled cocktail of Three Olives Vodka and scorn.

          Write that essay. I sincerely hope the churn/velocity chapter deals explicitly with water polo:

          • Jaybird in reply to Klein says:

            Three Olives? That has to be the most unappetizing name for a vodka ever. Seriously.” Ipecac Vodka” sounds more appealing.

            I’m a wino, myself. The essay is coming right up.Report

          • Jaybird in reply to Klein says:

            The fundamental assumption I have is that human beings are resilient and that the end of the world is not, in fact, just around the corner.

            On my wall at work is a little sign that says:
            According to Isaac Asimov’s Book of Facts (1979), an Assyrian clay tablet dating to approximately 2800 BC was unearthed bearing the words “Our earth is degenerate in these latter days. There are signs that the world is speedily coming to an end. Bribery and corruption are common.”

            People have been worried about the end of the world for a long, long time. We’re still here. In any case, those are my two foundational assumptions. From there, let’s move on to economics:

            The stimulus was not needed, did not help, and actually actively harmed things by kicking them down the road rather than addressing them. They’re just going to fester a bit more and we’ll have to deal with them then… only the problem will be worse and we’ll have less energy to deal with it.

            Why is that?

            Well, because the government printed up that money and dumped it into the economy. They didn’t do something as straightforward as “sending everybody with a registered SSN a check”, either. They poured a bunch of it into “special interests”… that is to say, people who donated the most (or bundled the most) found themselves at the front of the line. Folks like, oh, the CEO of GM. The CEO of Chrysler.

            Which resulted in such things as “Cash 4 Clunkers”. What did Cash 4 Clunkers do? Well, in theory, it gave a reason for someone driving an inefficient car to trade it into their local car dealer for a good, efficient, new car and would then take these inefficient cars off the road for good. Everyone wins, right? Well, part of the problem was that the list of “clunkers” did not include such things as “that 1977 Datsun truck that belches black smoke” but *DID* include such things as “the 2001 Hummer”. The efficient cars included such things as “other, newer, SUVs”. Additionally, the bonus only applied to people buying *NEW* cars. It didn’t apply to the guy who wanted to trade in his 1977 Datsun for a 1999 Civic. It applied to the parents getting rid of their 1999 SUV for a 2008 SUV (which was, co-incidentally, the biggest tradeoff made by Cash 4 Clunkers… the old SUV for a new one). What happened in practice is that the middle class (most of the folks who could afford a new car in 2008/2009 were middle class… the ones who weren’t were upper class) got a one-time incentive to buy a new car. Their old car? Their clunker? Got destroyed. Not traded to the folks for whom a “clunker” would be a step up in gas mileage, not given to dealers to sell to folks with a 1977 Datsun to use as trade, destroyed. Melted glass poured into the engine. The 1977 Datsun trucks are still on the road and middle-class folks have somewhat better SUVs than the ones they were going to buy next year. (Oh, I forgot to mention that part… this didn’t really inspire any purchases that weren’t going to happen anyway. People said “That thing we were planning on doing next year? Let’s do it now instead (and, perhaps, put off that thing that we were planning on doing now until next year).”

            It created churn, this stimulus of Congress… but it didn’t really create velocity. (Velocity, you may remember, was what happened in the 90’s. There was a lot of new tech that suddenly became affordable at the same time, there was a lot of existential angst regarding the Soviet Threat that many people with money in their pockets no longer had crushing on their shoulders, and a lot of things suddenly felt possible. Everybody needed a cell phone. Everybody needed a computer once it was possible to buy one for less than a grand (remember Gateway’s $999 computer? good times). Everybody needed internet access. Everybody needed tech support. Jobs were being created left and right and they were more or less brand-spanking-new jobs that no one had ever done before. Webmaster? Who had heard of a webmaster under Reagan? The guys at Marvel Comics, maybe. You suddenly needed tens of thousands of people familiar with Dos, Unix, Linux, Windows, and computing in general and you needed them Romeo-Foxtrot-November. The old way of saying “we need someone with 10 years of Linux experience” and waiting for people to roll in didn’t work because Linus Freaking Torvalds Himself only created the Linux Kernel half a decade prior) and so companies were hiring people fresh out of school who knew how to type and were familiar with Windows 3.0 and saying “okay, we’ll train you” and these kids, not being stupid, found out after about a year that there were other companies out there that were willing to pay twice as much for people with one year of unix experience and they got up and left and then came back a year after that with now two years of experience under their belt making four times what they made when they were being trained. These kids all spent this money they had on stuff like stuff and restaurant food and the stuff salespeople and waitresses went out and bought computers and cellphones and Windows 95 and needed tech support and so on and so forth and a virtuous cycle was created and everybody was trading money as fast as they could. Anyway, that’s velocity… to be compared to the churn created by getting people to all buy cars at the same time,)

            Where was I? Oh yes. This created churn… but, immediately following, nothing happened. Car purchases dried up. It turned out that most of the “upgrades” were people trading in 15-16 MPG cars for 19-20 MPG cars. The number of 1977 Datsuns stayed on the road and the cars that, presumably, would have been better than the 1977 Datsuns were destroyed.

            This merely an example of what the government does when it intends to “stimulate”. Instead of creating velocity, it creates churn. The cars that were bought were not inspired, but shifted forward a few months and the stuff that people were going to buy instead of the car went unbought. Cash 4 Clunkers cost the country millions. Interestingly, these “millions” do not add up. If you took the $3500-$4500 that everybody got when they traded in their cars and added them up, you’d find that you don’t get the number poured into program. The *REAL* cost of C4C is a *LOT* higher for a program from which few benefited which resulted in mostly middle-class folks upgrading their vehicles 4-5 MPG.

            Which brings us to wealth vs. money. What the government did was pump money into the economy. What it then did was take cars and destroyed them.

            The cars qualify as wealth. It’s a useful thing, you can get around in it, you can move stuff around in it, you can loan it to a friend, you can use it to provide you with work and add value to your and another’s life. You can make yourself a trade with the right vehicle, even.

            Well, the federal government poured money into the economy, created churn, and then destroyed wealth.

            The fundament question comes: How representative of central planning is Cash 4 Clunkers? Surely everything the stimulus did isn’t like that, right?

            I don’t know. The bailouts were sold to the American People as something without which the world markets would melt down. The EOTWAWKI (“there are signs”, people said). The money, of course, was paid to corporations from the government to prevent the tigers from taking over. We received wonderful descriptions of what (The) children would look like after being mauled by tigers. Glossy pictures. The bailout went through and (The) children did not get mauled by tigers. Whew!

            Which brings us back to here:

            The corporations and the government are colluding to redistribute (and devalue) money, destroy wealth, create churn instead of velocity, and, essentially, screw things up. The question of whether they are intending this or whether it’s an unintended consequence that follows, seriously, the absolute *BEST* of intentions is not a question that interests me, particularly.

            Hell, even the question of whether there is some theoretical bailout or stimulus that actually would create velocity (and multipliers!) and get everything back on track is not one that particularly interests me… because I see it as a given that the corporations and the government will collude to instead devalue the currency, destroy wealth, and sell tiger-repellent necklaces by force of law because only wicked people would want (The) children mauled by Tigers… and they will get people to believe that *ONLY* the government could possibly create a necklace capable of protecting (The) children.

            Meanwhile, currency is devalued, wealth is destroyed, and the lack of tigers is given as evidence of how well the necklaces have worked so far.

            I propose that we get out of the way of the people like what happened for much of the 90’s. New technology will create wealth (and velocity, and multipliers). I trust the parents to keep their children safe more than I trust those necklaces.

            Even if there aren’t any tigers around.


            • 62across in reply to Jaybird says:

              Jaybird –

              I found your essay very compelling, so I hope I’m not coming to this thread too late in its life to get a response to this question: as the government and the corporations are in collusion to screw things up, who is the “we” in this sentence – “I propose that we get out of the way of the people like what happened for much of the 90’s.” Is there a plan out there to get BOTH the government and the corporations “out of the way?”Report

              • Jaybird in reply to 62across says:

                I wish I knew.

                I can’t help but wonder if corporations might not behave a bit better if they knew, for example, that the government didn’t have the power to bail them out if they got in over their heads.

                Imagine what corporations might act like for the next 40 years or so if the gummint didn’t bail out Morgan Stanley and instead allowed competitors to buy up the shatters for pennies on the dollar.

                I reckon they’d all learn a very valuable lesson when it comes to risk aversion, trusting those guys who rate this pile of crap AAA and that pile of crap AAa, and so on.Report

              • Dave in reply to Jaybird says:

                allowed competitors to buy up the shatters for pennies on the dollar.

                Which competitors?

                I think you’re forgetting that at the time this was going on, there was so much uncertainty over what assets any institutions were holding that even pennies on the dollar would not have been enough to get anyone to trade on anything. We had a classic lemons problem and the result was a no-trade situation. Financial institutions weren’t lending to each other because no one knew who was going to be the next shoe to fall and given the problems with Lehman, Merrill, AIG and the run on money markets fund which was threatening to seize up the commercial paper markets, the idea that any capital source would have stepped in to acquire assets of any firm carrying toxic assets without explicit government guarantees was not going to happen. The market completely fell apart.Report

              • Jaybird in reply to Dave says:

                Calling the assets “toxic” was a brilliant piece of marketing.

                The assets were not, and were never, worthless. They merely were not worth what was paid for them.

                It’s like someone complaining that their stock wasn’t worth $50 anymore. The even bigger sucker happened to be someone with lobbyists rather than someone without… and so the assets (which, unlike, actually had value remaining) were called “toxic” and claims were made that the same things that were trading hands between even bigger suckers fast and furious two years prior were now shown to be worth, yes, pennies on the dollar.

                I have no doubt that when the price of the “toxic assets” went down to something approximately accurately reflecting their worth, they would have been bought. If they were allowed, due to uncertainty, to get much lower than that, there would have been dozens (and, if lower than *THAT*, hundreds) of buyers squabbling to pick them up.

                As for “which competitors”, why not the smaller ones who hadn’t poisoned themselves sick with “toxicity”?

                That strikes me as much less harmful in the long run than making the government (and, by extension, the people) the even bigger sucker (and, indeed, there ain’t no bigger).Report

              • 62across in reply to Jaybird says:

                Yeah, I tend not to expect better behavior from the corporations without some powerful leverage. The risky financial instruments were dreamed up without prior knowledge of a government bailout. Do you think the gang from Lehman Brothers learned any valuable lessons? Massive amounts of jail time for the fraud that was the whole credit default swap scheme, however, might be a learning opportunity.Report

      • Koz in reply to Klein says:

        I’ve written one or two of these “Rob Peter Pay Paul” blogposts so for the record let me say that my political motive is (foolhardy or not) substantially postpartisan and post-electoral.

        By now it’s pretty clear for me at least that the GOP is going to recover and going to be representing the dominant narrative in American political culture for the next couple of years or so. And as that happens it’s important for liberals and Democrats (and dissident conservatives) to know that the rob Peter to pay Paul welfare state mentality is wrong and destructive. From what we’ve seen so far this year, we know that minorities actually have substantial operational power. When the liberals are in the minority, it’s very important that they don’t have a scorched-earth mentality.

        But to the extent that such a thing can be done, it’s important to advance this argument in a nonpolemic way. One problem with the vampire-esque survival of the health care bill is that its taking all the oxygen out of our discourse and by the time that’s resolved we’ll be in full gear campaign mode and have lost the chance to really talk turkey with each other across the political divide.Report

        • greginak in reply to Koz says:

          so are you saying its important D’s don’t go all scorched earth, by ohhh i don’t know, holding every vote in the senate to a super-majority to get passed. Because if that is what you are saying , then that kind of tactic would indeed be bad for the country and result in an unworkable government.Report

          • Koz in reply to greginak says:

            No. The Republican obstructive tactics against the health care bill represent the best interest of America (and the will of the people too). The D’s obstruction (when we get there and I fear we will) are just the expression of bitterness at holding 60 votes in the Senate and a 40 seat majority in the House and still not being able to get their legislative agenda through Congress.

            They look the same, but the reality is they are very, very different.Report

    • Alex Knapp in reply to Scott says:

      The vast majority of stimulus “spending” was in the form of tax cuts. Are you opposed to tax cuts?Report

      • Dave in reply to Alex Knapp says:

        I’m not at all opposed to tax cuts but I certainly will question the stimulative effect that the most ardent and crude supply siders believe they have.

        Do you have a link to support your claim? I know that tax cuts constitute a significant percentage of what constitutes the program but I do not recall tax cuts being a majority let alone the “vast majority”. I could be wrong though.Report

  3. Kyle says:

    Will, I’m with you until the Shelby Steele comment. Steele, while being unreliably interesting, is not an economic specialist but what does that mean for his criticisms or questions about policy? Are they less trustworthy, probably? Are they less valid, I’m less sure.

    If I were to only trust the opinions macroeconomic experts on macroeconomic policy wouldn’t that cut out of both the process and my own understanding of the issue an unbelievably large number of people who don’t qualify as macroeconomic experts but are in fact expected to approve of the expert consensus, support it, and be affected by it?

    The questions that Steele raises – though I disagree they demonstrate some sort of economic inability on the part of the President – are certainly valid questions and the kind that I would expect non-experts to ask.

    So do we take them seriously and bridge the gap of understanding? Or do we dismiss them because the speaker, lacking a degree and career in education, doesn’t know what they’re talking about.

    I don’t think that’s what you’re doing here but your comment, I think, touches on this point/question that I’m raising. What does not being an expert mean in reference to one’s concerns about public policy?Report

    • Will in reply to Kyle says:

      Kyle –

      As a blogger, I’m kind of obligated to defend non-experts weighing in on complicated issues. My criticisms are aimed at the unyielding, self-righteous certitude of comments like Steele’s, not the authors’ credentials.Report

  4. Sam M says:

    Does the AEI quote really counter what the Examiner said? Seems like one is talking about GDP, the other is talking about jobs. The administration said the stimulus package would create or save millions of jobs. Someone went out and tested that thesis and found it wanting.Report

    • Koz in reply to Sam M says:

      Good point. The idea of the “stimulus package equals GDP growth” argument is that the GDP statistics are artificially inflated by the stimulus package and overstate the real economic activity of the country that quarter. It’s closer to the opposite of saying the stimulus package worked.

      I think that argument has some merit but we shouldn’t be reading too much into one quarter’s growth numbers anyway. Higher is definitely better, but we get a much better signal to noise ratio looking at several quarters, and the trends therein.Report

  5. E.D. Kain says:

    Nice post, Will. I hear you loud and clear.Report

  6. Koz says:

    “In the wake of an incredibly disorienting collapse that defies just about every facile ideological diagnosis, I don’t find absolute certainty all that attractive anymore. Call me a squish or a bad team player or someone who’s unwilling to take sides when the chips are down, but the Great Recession of ‘09 has shaken my faith in dogmatic economic analysis of just about any stripe.”

    Really? I took it the other way. In the long run, robbing Peter to pay Paul doesn’t work. Eventually the bill comes due. I think that’s a lot more clear now than it was prerecession.

    From there, we can conclude that prosperity and limited government in America require the successful integration of Republican Party, the mainstream conservative intelligentsia, and Greater Red State America. That last part tends to make people uncomfortable (of many different ideological stripes), but for me at least that’s the way it is nonetheless.Report

  7. mike farmer says:

    It also needs to be noted that “absolute certainty” regarding ideology is a strawman argument. Of course, no ideology is absolute, but it’s not necessary that an ideology be absolute, only more right than competing ideologies — there is room for improvement in the affairs of humans, and always will be, but just because there are no absolutes, to say that judgement and choice among competing ideologies are useless or dangerous is just as wrong as insisting on absolutism. If by ideology, you are reducing the meaning to someone, for instance, who believes that current progressive policies enacted by an enlightened group of government experts will solve our problems, then, yes, I agree. But if by ideology, it’s meant — The body of ideas reflecting the social needs and aspirations of an individual, group, class, or culture — then these sets of ideas can compete for acceptance and a reasonable person can choose the set of ideas which make the most sense, with the understanding that nothing is absolute, and new information and facts call for adjustments in the set of ideas.Report