Domestic Policy

Deficits don’t matter

Erik Kain 16 Comments

At least, deficits don’t matter when unemployment is teetering on the brink of 10%, and when government debt is actually cheaper than cash.

fredgraph

The chart is from Karl Smith, who writes:

Suppose the government had two choices. It could either pay for infrastructure improvements as it went along out of tax revenue or it could borrow money build the infrastructure now and then repay the money with tax revenues.

Ordinarily the question would be, does the advantage of building quickly outweigh the cost of the interest.

However, right now the interest cost is negative. The government saves money by borrowing now rather than waiting and paying cash. Let me say again because I have noticed that this goes against so much intuition that its hard for many people to wrap around when I first say it.

The government will wind up paying more if it decides to pay cash for a project than it will if it decides to borrow. This is irrespective of the return on the project itself or the advantages of avoiding delays or anything like that. It is simply that the cost of borrowing is negative.

As Alex Knapp notes the deficit really is a long-term problem. It just isn’t a problem right now and focusing on it is a cynical political ploy that is helping nobody but the cynical politicians exploiting it. The markets are spooked, the credit rating agencies are grumbling, and people remain very much unemployed.

Why are we even talking about the debt ceiling?

Erik Kain 4 Comments

Setting aside the fact that all this debt-ceiling brinksmanship is probably starting to spook markets and could have an enormously bad, possibly catastrophic effect on the economy should negotiations collapse entirely, the very focus on deficits during the worst recession in decades seems to just badly miss the point.

Yes, the national debt is a problem. No, we can’t keep going like this forever. And yet, if we don’t return to normal growth rates simply cutting spending (or raising taxes) to close up the deficit will do us little good and could in fact do us a great deal of harm.

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Gary Johnson comes out against Family Leader Pledge

Erik Kain 30 Comments

Just another reason to support Gary Johnson in 2012:

July 9, 2011, Las Vegas, Nevada – Presidential candidate and former New Mexico Governor Gary Johnson charged today in a formal statement through his campaign that the Family Leader “pledge” Republican candidates for President are being asked to sign is “offensive to the principles of liberty and freedom on which this country was founded”.  Governor Johnson also plans to further state his position against the Family Leader pledge this afternoon in Las Vegas, NV at a speech he will deliver at the Conservative Leadership Conference.

Johnson went on to state that “the so-called ‘Marriage Vow” pledge that FAMILY LEADER is asking Republican candidates for President to sign attacks minority segments of our population and attempts to prevent and eliminate personal freedom.   This type of rhetoric is what gives Republicans a bad name.

“Government should not be involved in the bedrooms of consenting adults. I have always been a strong advocate of liberty and freedom from unnecessary government intervention into our lives. The freedoms that our forefathers fought for in this country are sacred and must be preserved. The Republican Party cannot be sidetracked into discussing these morally judgmental issues — such a discussion is simply wrongheaded. We need to maintain our position as the party of efficient government management and the watchdogs of the “public’s pocket book”.

“This ‘pledge’ is nothing short of a promise to discriminate against everyone who makes a personal choice that doesn’t fit into a particular definition of ‘virtue’.

While the Family Leader pledge covers just about every other so-called virtue they can think of, the one that is conspicuously missing is tolerance. In one concise document, they manage to condemn gays, single parents, single individuals, divorcees, Muslims, gays in the military, unmarried couples, women who choose to have abortions, and everyone else who doesn’t fit in a Norman Rockwell painting.

The Republican Party cannot afford to have a Presidential candidate who condones intolerance, bigotry and the denial of liberty to the citizens of this country. If we nominate such a candidate, we will never capture the White House in 2012. If candidates who sign this pledge somehow think they are scoring some points with some core constituency of the Republican Party, they are doing so at the peril of writing off the vast majority of Americans who want no part of this ‘pledge’ and its offensive language.

Quote of the day

Erik Kain 30 Comments

“Slavery had a disastrous impact on African-American families, yet sadly a child born into slavery in 1860 was more likely to be raised by his mother and father in a two-parent household than was an African-American baby born after the election of the USA’s first African-American President.” ~ from a pledge signed by Michele Bachmann

Ta-Nehisi Coates writes:

We could parse the facts here, or discuss the implicit racism in the notion that by sheer dint of skin color, Barack Obama is responsible for the fate of the black family. We could also interrogate the meaning of "two-parent household" when you, your parents and their home are all property.

We could also note that a slave born into the 1820s had a thirty percent chance of being parted from his parents, not by divorce, but by the auction block. Or we could have a hearty existential debate on the complex interplay of liberty, freedom and happiness in an era of original light.

But it seems to me that we should be compassionate and put this in a dialect which the white populists of America might, if haltingly, understand: Jazz was a lot better under Jim Crow, and before women could vote no one worried about Michelle Bachmann.

To hell with people writing pledges to ‘protect family’ and to hell with people who use slavery for political gain. And to hell with any stupid politician who has the gall to sign something like this. And to hell with pledges in general. There’s one damn pledge that each of our politicians takes and that’s a pledge of allegiance. We don’t need anti-tax pledges, racist pledges, or anti-gay pledges. We will know you by your deeds.

Keynes and Hayek revisited

Erik Kain 4 Comments

 

I’ve been thinking about this video lately, which is really quite excellent, and it struck me that the two economist-rappers are essentially not arguing at all – they’re simply talking past one another.

Keynes is talking specifically about what to do in an economic recession. Hayek is talking much more broadly about the economy itself. Keynes isn’t really arguing for central planning so much as he’s advocating an increase public spending to make up for the downturn in private spending. Hayek, on the other hand, is describing why central planners inevitably fail, and that government policies aimed at hitting full employment, for instance, might have unintended consequences.

These don’t strike me as exactly competing narratives so much as different narratives. Hayek doesn’t really answer the question about what he’d do to get out of the recession, he just moves back to the broader subject of the economy. And while I think the Hayekian take on the broader economy is correct, I’m left feeling short-changed on any ideas Hayek may have to actually spark recovery.

Further thoughts on DSK

Erik Kain 4 Comments

Maybe I’m not up-to-date enough on the whole DSK story, but I find myself increasingly uncomfortable with the new consensus that just because the ‘accuser’ (now it is accuser, rather than ‘victim’) is unreliable or a bad person that she could not have been raped. Or just because she turned tricks she could not have been raped (as though prostitutes are never raped!). We are conducting a trial of the woman in the court of public opinion that may result in no trial at all for the man who may have raped her. There is a lesson in this for rapists: so long as you rape those on the margins of society – immigrants and prostitutes and other people with shady backgrounds or connections – you will get away with it. Maybe he didn’t do it, maybe he did. I don’t know. I just don’t like the way that one set of assumptions have replaced another.

For-profits vs. non-profits

Erik Kain 7 Comments

Arnold Kling asks:

I am curious about the intuition that people have about non-profit work. The standard intuition is that going to work for a profitable company means that you are not serving people, only the profits of the company. On the other hand, working for a non-profit means serving the community. Do I have that right?

Of course, I think that profit-seeking enterprises serve the community, also. In fact, they do it in a way that is more sustainable and more accountable. It is more sustainable, in that the value of what they produce is greater than the cost of the resources (including labor) that they use. Otherwise, they would not make a profit. However, a non-profit can very well use more resources than the value of what it produces. A profit-seeking enterprise is more accountable, in that a profit-seeking business must satisfy consumers or else go out of business. Hence, it must provide something of value to its customers. On the other hand, if a non-profit fails to provide any benefit to its customers, it still might be able to obtain grants from the government or from donors.

Is my perspective valid? If so, why is the conventional intuition so pervasive?

I don’t think Kling is wrong when it comes to purely for-profit businesses. Where I start to see a conflict of interest with profit-making is when those profits rely entirely (or mostly) on government dollars. Take the for-profit college industry. One would imagine that the efficiencies of a for-profit firm would translate into a successful business model for educating students. But for-profit colleges rely almost exclusively on government money to be profitable. This doesn’t lead to the sort of innovation and efficiency one might see in the actual private sector. Rather, it leads to more and more creative ways to get prospective students to take out massive loans and then turn those loans into profits for the for-profit colleges, education be damned.

That’s where I start to become uncomfortable with the for-profits. The profit incentive isn’t bad until it morphs into corporate welfare. Then these firms become no better than government itself, and in many ways much worse with far less accountability.

Whether Kling is correct that non-profits have little accountability is something I’m not sure I can speak knowledgeably about. I do know that many non-profits have specific missions and that they are accountable to the people with the purse-strings. This creates similar incentives to the profit motive, though it’s not a perfect match.

Texans and TV cameras

Erik Kain 10 Comments

Over at Forbes I take a look at the reality-show-bread-and-circuses nature of crime sensationalism in the media and some of the ways that can be dangerous, both in our attitudes toward crime and in a very literal sense.

I also talk about Texas which is reviving its anti-TSA bill, but which falls quite short on other civil liberties issues such as the death penalty. Conor has more on the death penalty issue, and how it will come to the fore if Perry runs for president:

The farther he goes, the worse things will get for death penalty supporters, due to a part of his record that his critics are already highlighting: his shocking negligence in the case of Cameron Todd Willingham, a man put to death on his watch who was very likely innocent, and certainly wasn’t guilty beyond a reasonable doubt. Perry has presided over a couple hundred executions. Even one of them emerging as a national issue could change the whole political calculus around capital punishment. What if America’s governors were just as fearful of executing an innocent in an age of DNA as they are of granting clemency to someone who goes on to commit another crime?

Cigarettes don’t kill people, harmful carcinogens in cigarettes kill people

Erik Kain 4 Comments

Courtney Knapp has an interesting piece up on the new graphic images that will be added to cigarette packs in an effort to curb smoking.

CigAds

She writes:

These new labels will be required on all cigarette packs, cartons and ads no later than September 2012. So in the meantime, we have time for a thought experiment. Yesterday, Cheap Talk contributor and Northwestern University economics professor Jeffrey Ely posed an excellent question to me:

Suppose you had a choice between only two policies: A) grotesque pictures or B) increased per-pack taxes calculated to generate exactly the same reduction in demand. Which do you prefer?

This is a tough question. To me, as disturbing as the photos are, raising already regressive-taxes (assuming that current levels of taxes with discount rate already more than offset the costs to government of people smoking) is bad policy. Smokers may quit or not start, but without a larger revenue stream no new vested interests would be created. On the flip side, no revenue could possibly be earmarked for an agreeable cause.

What do you think, dear readers?

Which policy would you choose? Will the images deter nonsmokers?

Smokers, are the images likely to help you quit or will you acclimate to the images after a few packs? Would you pay more for a pack without the warnings?

I think it’s an interesting thought experiment: would consumers pay a higher price for non-labeled packs? I don’t know. As an ex-smoker, I suppose it’s more likely I’d pay for the cheaper pack and then put my cigarettes in a cigarette case. Maybe slap a picture of Camel Joe holding a bunny on it for good measure.

I think a better idea than simply raising taxes ad infinitum or shaming smokers with images of fetuses or whatever would be to legalize the sale of single-cigarettes at gas stations, bars and so forth. There is something really ridiculous about being forced to purchase cigarettes 20 at a time. It makes it much more difficult to quit. It also makes it easier to pick the habit back up if you have to buy a pack at a time.

As someone who has relapsed now and again, I know it would be much better if I could stave off a craving by purchasing a single smoke instead. I wouldn’t have that sense of obligation to clean my plate, as it were. I know a lot of people in similar circumstances.

Sometimes giving people more choices can be better than shaming them or taxing them.

A brief update

Erik Kain 8 Comments

So, I may be writing about education around these parts a good deal more in coming weeks. This is because I have decided to change my beat at Forbes to an issue that, I admit, sits nearer and dearer to my heart: the War on Drugs and the militarization of our police.

Education is something I do care about a great deal, but it’s not something I can blog about on a daily basis. No-knock raids and the policies surrounding the drug war, on the other hand, are not only extremely important but also something I can write about with more regularity, and with a clearer sense of what is right and what is wrong.