Among the many strange contradictions in the body of pseudo-thinking called "economics" is this:
Let's imagine that 1/3 of what the govermint spends on was instantly privatized. Govermint spending would fall by 1/3, tax collections probably wouldn't change all that much (or maybe go up), the "deficit" would collapse.
Problem solved? It's just cultural accounting. Nothing at the cultural level has really changed. It's like using your nickname rather than your real name. Have you changed? There's no real change in flows of goods and services in the economy.
So what's the difference in before vs. after?
Is there even a difference? Well, one potentially key difference is private actors can fail and go bankrupt. Entrepreneurs can arise and take their place. You don't do that with govt bureaucracies. The Mises Freaks and Libertarians have that right. So yes, there's a discipline imposed that govt lacks.
But wait!!
What about bailouts? Doesn't the govt always bail out failed huge private sector actors? Well, it seems so, after the "revolution" in central banking and political economy dating possibly back to Alan Greenspan. One bailout after the other. Occupy Wall Street got that right.
You can put economic activity into the private sector and it's still "govermint". It walks, talks and quacks like goverment bureacracy. Maybe it is.
So what's all this yada yada about from the Mises Freaks and Libertarians? It seems more complicated than their Boolean Logic. Boolean Logic works in computer circuitry but not in the pseudo-thinking realm of economics. It's all political economy, all the way down.
Exactly, not only that when government services are privatized their costs can go higher (recalling a recent article about a government worker whose job was cut to trim bureaucracy and now the government pays him twice what he earned by being a consultant.
yeah, remember the movie Office Space with a very young Jennifer Aniston? The company fired the dude and then hired him back on the spot as a high priced consultant doing same thing. It was a comedy! But it was true. ahhahaha
correction: actually, tax collections may go down alot if the taxes that funded those privatized services were re-directed to private corporate invoices. I was too broad-brush there, it may depend alot on how the accounting is done. But it's still a reasonable thought experiment as to what the hell the govt-private sector continuum really is at a conceptual level.
Great post – but I still think you and others (non- Magas) sympathetic to Trump and his plans are delusional. How can you think the cut in government spending will be successful given the likely tax cuts that will be given to the uber rich and top 20 percent of the economy who are part of Trump’s donor base? Also, I don’t see any plans to drastically reduce miliary spending – and cut the huge waste of money that goes into this area. (WAIT! I do see where the money will be saved: by no longer spending the money protecting Taiwan from China’s intended take-over).
Lastly, the only honest way to reign in spending would be to have tax increases – but you know as well as I do that that will never happen. Taxing the uber wealthy is just such a ‘tired’, left wing idea of those who hate America. Right?
I agree, most people think that America got to where it is because of low government. In fact america's best moments and innovations were during the periods of high government involvement in funding innovation and spurring research. Semiconductor manufacturing, battery tech, solar tech, fission, fusion, radars, CDMA, FDMA/TDM, Sat Phone tech in starlink, rockets, Ethernet, Unix, Chip Design SW, Browsers, Cancer research, Immune research, Sequencing. Tax receipts as a proportion of GDP were also very high during those times. SInce Reagan, the govt maintained spending on research but did by adding onto the deficit and reducing taxes, all the GOP stories of trickle down did not materialize and in fact the only thing that happened is that the top 1-5% accumulated more, they outsourced more because they could accumulate faster. Americans started to focus on easier ways to make money - finance, government, entertainment, sports - instead of innovation. Look at wealth distribution over the last 100 years and tell me that it is not true. Look at tax rates over the last 100 years and tell me that it is not true. Look at the debt increase over the last 50 years and tell me when this upward momentum started.
It's going to be an "interesting" year financially. After 25+ years of "kicking the can down the road" we ran out of road. It's probably possible to "cut" $200 - $300 billion out of the "discretionary" federal budget over the next several years. However, those saving will be offset by increases in interest expense, "defense" spending and SS, Medicare and Medicaid program increases (due primarily to the still-aging population). Unless the American people are truly ready for a radical restructuring of the federal budget Von Mises' "Crack-Up Boom" is upon us. Govern yourself and you investments accordingly.
I like the spending cuts idea, but privatization, no. That only leads to higher costs for the end consumers, loss of jobs and erosion of our sovereignty by selling our national resources to international corporations. We need to put Americans back to work and instill a more realistic work ethic (merit based) that was prevalent 40-70 years back.
Canada does not have a military that could actually defend itself from an invasion - they would rely on the USA of protect them (unless we are the one taking them over). Hard to compare apples to apples.
However - 5 Years ago our budget was $4.4 Trillion. Now it is over $7Trillion.
The big difference between then and now is our interest expense on the debt (higher rates) and SS and Medicare have got more expensive due to inflation (self inflicted by raising M2 by 40%).
Now that we have a group willing to go through the budget with a fine tooth comb to cut any waste (Drag shows in Columbia). They have not even got the to the $900 Billion military budget yet. You have to think there has to be 20-30% of waste (not negotiating with vendors and other efficiencies). Then do Medicare and Medicaid. Then you could streamline the tax code and cut a large percentage of the IRS. Get rid of the Dept of Ed and Energy - just billions wasted.
We should be able to get back under $5Trillion. I think we should be able to get back to $4T or less if we really get serious about our spending and run the country like a business is ran.
With all the crying from Warren, Schumar, AOC about Musk exposing waste - you have to think that they are getting some kickbacks (Chuck had did you develop an $80MM net worth???). If that ever comes to be true they should be charged with Treason.
The government borrows from the Fed ( a sort of quasi governmental agency) and they charge interest to the government for money the government allocates?
It's like I charge myself interest for getting a paycheck?
I don't see it--its too late for spending cuts to work. With inflation driving bond interest rates higher any gains will be swiftly absorbed by paying interest on the existing debt (not to mention necessary inflationary increases in SS and Medicare). We don't necessarily need less government we need better government. Pure Libertarianism is an ideal, some utopian pipe dream, but it's strengths should be drawn on---sensible government instead of throwing the baby out with the bathwater.
..."But as the Wall Street Journal discusses today, other Republicans are nervous nellies, who need more convincing that cuts are both good economics and good politics".....
Among the many strange contradictions in the body of pseudo-thinking called "economics" is this:
Let's imagine that 1/3 of what the govermint spends on was instantly privatized. Govermint spending would fall by 1/3, tax collections probably wouldn't change all that much (or maybe go up), the "deficit" would collapse.
Problem solved? It's just cultural accounting. Nothing at the cultural level has really changed. It's like using your nickname rather than your real name. Have you changed? There's no real change in flows of goods and services in the economy.
So what's the difference in before vs. after?
Is there even a difference? Well, one potentially key difference is private actors can fail and go bankrupt. Entrepreneurs can arise and take their place. You don't do that with govt bureaucracies. The Mises Freaks and Libertarians have that right. So yes, there's a discipline imposed that govt lacks.
But wait!!
What about bailouts? Doesn't the govt always bail out failed huge private sector actors? Well, it seems so, after the "revolution" in central banking and political economy dating possibly back to Alan Greenspan. One bailout after the other. Occupy Wall Street got that right.
You can put economic activity into the private sector and it's still "govermint". It walks, talks and quacks like goverment bureacracy. Maybe it is.
So what's all this yada yada about from the Mises Freaks and Libertarians? It seems more complicated than their Boolean Logic. Boolean Logic works in computer circuitry but not in the pseudo-thinking realm of economics. It's all political economy, all the way down.
Libertarian don't support government bailouts.
Agreed. They don't. They are philosophically consistent there, no doubt.
Exactly, not only that when government services are privatized their costs can go higher (recalling a recent article about a government worker whose job was cut to trim bureaucracy and now the government pays him twice what he earned by being a consultant.
yeah, remember the movie Office Space with a very young Jennifer Aniston? The company fired the dude and then hired him back on the spot as a high priced consultant doing same thing. It was a comedy! But it was true. ahhahaha
That actually happened to me, implement SOX.
Reduce FTEs, hire more expensive consultants, justified by not paying 'benefits'. Shell game.
End of quarter (and more importantly, end of year) window dressing for disclosure purposes. Lipstick on a pig.
It's a tiny part of the overall 'it's just business' model of deceit.
correction: actually, tax collections may go down alot if the taxes that funded those privatized services were re-directed to private corporate invoices. I was too broad-brush there, it may depend alot on how the accounting is done. But it's still a reasonable thought experiment as to what the hell the govt-private sector continuum really is at a conceptual level.
Superb. Thank you.
Great post – but I still think you and others (non- Magas) sympathetic to Trump and his plans are delusional. How can you think the cut in government spending will be successful given the likely tax cuts that will be given to the uber rich and top 20 percent of the economy who are part of Trump’s donor base? Also, I don’t see any plans to drastically reduce miliary spending – and cut the huge waste of money that goes into this area. (WAIT! I do see where the money will be saved: by no longer spending the money protecting Taiwan from China’s intended take-over).
Lastly, the only honest way to reign in spending would be to have tax increases – but you know as well as I do that that will never happen. Taxing the uber wealthy is just such a ‘tired’, left wing idea of those who hate America. Right?
I agree, most people think that America got to where it is because of low government. In fact america's best moments and innovations were during the periods of high government involvement in funding innovation and spurring research. Semiconductor manufacturing, battery tech, solar tech, fission, fusion, radars, CDMA, FDMA/TDM, Sat Phone tech in starlink, rockets, Ethernet, Unix, Chip Design SW, Browsers, Cancer research, Immune research, Sequencing. Tax receipts as a proportion of GDP were also very high during those times. SInce Reagan, the govt maintained spending on research but did by adding onto the deficit and reducing taxes, all the GOP stories of trickle down did not materialize and in fact the only thing that happened is that the top 1-5% accumulated more, they outsourced more because they could accumulate faster. Americans started to focus on easier ways to make money - finance, government, entertainment, sports - instead of innovation. Look at wealth distribution over the last 100 years and tell me that it is not true. Look at tax rates over the last 100 years and tell me that it is not true. Look at the debt increase over the last 50 years and tell me when this upward momentum started.
It's going to be an "interesting" year financially. After 25+ years of "kicking the can down the road" we ran out of road. It's probably possible to "cut" $200 - $300 billion out of the "discretionary" federal budget over the next several years. However, those saving will be offset by increases in interest expense, "defense" spending and SS, Medicare and Medicaid program increases (due primarily to the still-aging population). Unless the American people are truly ready for a radical restructuring of the federal budget Von Mises' "Crack-Up Boom" is upon us. Govern yourself and you investments accordingly.
I like the spending cuts idea, but privatization, no. That only leads to higher costs for the end consumers, loss of jobs and erosion of our sovereignty by selling our national resources to international corporations. We need to put Americans back to work and instill a more realistic work ethic (merit based) that was prevalent 40-70 years back.
Canada does not have a military that could actually defend itself from an invasion - they would rely on the USA of protect them (unless we are the one taking them over). Hard to compare apples to apples.
However - 5 Years ago our budget was $4.4 Trillion. Now it is over $7Trillion.
The big difference between then and now is our interest expense on the debt (higher rates) and SS and Medicare have got more expensive due to inflation (self inflicted by raising M2 by 40%).
Now that we have a group willing to go through the budget with a fine tooth comb to cut any waste (Drag shows in Columbia). They have not even got the to the $900 Billion military budget yet. You have to think there has to be 20-30% of waste (not negotiating with vendors and other efficiencies). Then do Medicare and Medicaid. Then you could streamline the tax code and cut a large percentage of the IRS. Get rid of the Dept of Ed and Energy - just billions wasted.
We should be able to get back under $5Trillion. I think we should be able to get back to $4T or less if we really get serious about our spending and run the country like a business is ran.
With all the crying from Warren, Schumar, AOC about Musk exposing waste - you have to think that they are getting some kickbacks (Chuck had did you develop an $80MM net worth???). If that ever comes to be true they should be charged with Treason.
I'm not as sophisticated as most of your readers.
The government borrows from the Fed ( a sort of quasi governmental agency) and they charge interest to the government for money the government allocates?
It's like I charge myself interest for getting a paycheck?
If true, it's sounds quite bizarre.
I don't see it--its too late for spending cuts to work. With inflation driving bond interest rates higher any gains will be swiftly absorbed by paying interest on the existing debt (not to mention necessary inflationary increases in SS and Medicare). We don't necessarily need less government we need better government. Pure Libertarianism is an ideal, some utopian pipe dream, but it's strengths should be drawn on---sensible government instead of throwing the baby out with the bathwater.
..."But as the Wall Street Journal discusses today, other Republicans are nervous nellies, who need more convincing that cuts are both good economics and good politics".....
And doing nothing does NOT concern them? stupid!