Well, everyone else is talking about economics and the stuff going on with the now $838 billion stimulus bill, I figure after a few Twitter conversations I should weigh in a little. Because, as @matthewgood says: Everyone is a macroeconomics expert right now.

And he’s right. The past few weeks and even back before the first bailout was issued, everyone was espousing their ideas, waxing intellectual on the topics of how the government should spend money, where it should go, how big that number should be, etc. There are a few differing camps and they seem, often times, to be broken up between the more liberal and more conservative. That line between Democrat and Republican is always rough and each side claims to have proven results in their case.

As far as macroeconomics go, it’s pretty simple really. While in Washington state last month, I talked to my cousin Josh (who has a doctorate in political science and teaches at SUNY Buffalo) about this stuff a bit. We carried the conversation over to facebook via a few articles we’d read, and he explained that it doesn’t really matter where the money goes or how it’s spent, it just matters that it is. “It’s Keynesian economics 101,” he told me. Just by spending that money – wherever it may go – we’ll increase GDP and thus revive the economy.

I trust my cousin more than most people on these issues–mainly because he’s been into politics for as long as I’ve known him, and now has a doctorate in poli-sci–but, being me, have to question that line of thinking. Now, there may not be a question of whether spending that money will start some motion, the question lies in how effiicient that spending is going to be. Because large spending didn’t seem to help out during the Great Depression or with the New Deal, didn’t help during the Panic of 1893, and hasn’t helped more recently with stimulus checks and automotive bailouts.

The two differing sets of ideology are summarily this:

• Free Markets should exist outside of government meddling and be allowed to run their courses no matter what.
• Government should have a say in how Free Markets are run and step in at any time to fix things.

I am not opposed to government regulation, but I am opposed to bad, arbitrary government meddling. A lot of our problems now are due to 1.) The unethical behaviour of those with the most power (I lump in certain politicians), and 2.) Poor or inefficient regulation. I think regulation can be good, if it’s done intelligently. But so far, we don’t seem to have a good track record with knowing how to regulate markets effectively. This has gotten to the point where we now need to re-regulate our regulations in order to fix what’s been screwed up in the first place by regulatory legislation.

So, starting with the first problem I’ve pointed out above, those with financial power have abused the markets to better their positions. This is seen in the mortgage crisis, bad loans, automotive collapse, the stock markets, etc. In a capitalistic system of free markets, you would normally allow this collapse to take place in order to build a better system the next time around. That’s the phenomenon that will inevitably happen in a system left to its own devices.

Here in America though, we believe everything has to be constant (except, apparently when it comes to presidential campaign marketing – though that’s another topic for another time), so we meddle with those markets by instituting legislation. Sometimes it works, more often than not it just bogs down the system, making things more expensive. We push legislation into effect to stop global climate change – regardless of whether the science is *actually* valid, and regardless of whether it matters. We think we have to keep a static system, that any change is bad.

I contend that when industries or companies fail due to their misdeeds, newer, better, more innovative identities will take their places. That’s how the system is supposed to work. GM goes under because their cars aren’t selling. Their cars aren’t selling because the company hasn’t been smart enough to make the cars people want to buy. Whose fault is that? Who should take responsibility? If they disappear will not a newer, smarter, more appealing car manufacturer take their place?

Instead we take tax-payer money and put it back into an industry, that has been failing for a while, to keep it alive just a few more years. To give them another chance. That’s not responsibility, that’s stupidity. That’s gambling. Read the rest of this entry »

I’ve had this discussion with a few people, including my good friend Danny, and keep coming back to the point that spending more money has not yet helped in times of economic crisis. Bush shouldn’t have thrown money at the problem with his “economic stimulus plan”, no bailout has helped, and now our leaders are trying to pass a plan to spend, at the moment, $800 billion. That will surely rise to over $1 trillion after everyone get their say, their earmarks, their pork.

I still don’t understand why the President’s (any President) economic advisers are given more weight that Nobel Prize winners, active researchers, and other leading economists who have no party affiliation and no reason to spread doom and gloom.

More money hasn’t yet fixed the problem. Not now, not during the Great Depression, not during the Panic of 1893. We need smart, efficient spending, tax cuts, regulation reform/scaling back, and we need businesses who made poor decisions to be allowed to fail.

CATO took out this ad yesterday and I thought it was pretty interesting. Click the link to see the 200 signatures of economists who signed the petition.

Fiscal Reality Central.

“There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy.”

— PRESIDENT-ELECT BARACK OBAMA, JANUARY 9 , 2009

With all due respect Mr. President, that is not true.

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policy makers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

Remember:

Some cartoons for you.

“When you choose to serve — whether it’s your nation, your community or simply your neighborhood — you are connected to that fundamental American ideal that we want life, liberty and the pursuit of happiness not just for ourselves, but for all Americans. That’s why it’s called the American dream.” source

Barack Obama’s new (and fantastically designed, I might add) change.gov is messing with us. That, or his team is pretty confused about dreams vs. reality. Apparently, according to them, the guarantee to “life, liberty, and the pursuit of happiness” that was written into the Declaration of Independence is a dream. The American Dream.

But that isn’t the American Dream and never has been. Looking past the fact that they are turning a reality into their version of compulsory volunteerism, we have problems with history. “The American Dream” has always been about upward mobility.

“The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”

-James Truslow Adams, (Epic of America, 1931)

Adams happened to have coined that term, “The American Dream.” Now, instead of perpetuating the ability for any American to make whatever they want of themselves “regardless of the fortuitous circumstances of birth or position,” we will be brought to one level – or at least be brought closer to that one level.

Through taxation and redistribution of wealth to welfare programs and doing to college what we’ve done to the public school system, all men will not just be created equal, they will all be on the same level.

That’s not my real point though. My main point is that Obama’s team has a misunderstanding of these phrases they are throwing around. That, or they are hoping to continue rewriting the expectations and understanding of the American people, many of whom voted based on an image, a race, or the chance to “be a part of history.”

My favourite quote from this story is

“Well, I wouldn’t say it’s entirely realistic, but I’m not sure this president is going to start off listening to people who tell him what’s realistic or not.”

Fixing The Economy Is Job One For Obama : NPR.

The bad news for us is that your “supporters” already have their grimy hands out and they are awaiting their “daily bread” which will be systematically (read: illegally.) taken from those who used to work for themselves and their families, but who now unfortunately work for your collectivist liberal government.

source

He’s been voted in. And like I’ve said before, philosophically I am okay with that. We’ll see what happens. My taxes won’t be going up, but I feel bad for my parents who make enough on paper but in reality don’t; or for my in-laws who are in a similar situation. Their taxes will go up. The pay grade may be above middle-class but they certainly aren’t able to live that way. And I suppose once I start making more I won’t be able to support the charities and historic preservation societies we give to.

Upward mobility will probably lay stagnant as everyone has access to a 4-year college degree and the entry-level job market becomes even more oversaturated. Unemployment will increase or at the very least not decrease by much.

Our deficit will continue to increase and many promises will be cut out. Because this country turned the election into a popularity contest and the DNC managed to create a cult of personality around their candidate. That’s fine. It’s a little sad, but it’s okay.

I’ll be praying that things turn out alright, and we’ll always have a way out… I hope. The great thing about the internet is its record-keeping abilities. We can see in four years’ time just what has gone over, what has failed, and who was right. It’ll be a great learning experience at the very least.