Nearly all of what appears on this blog is my own writing but I was impressed with this piece in the Wall Street Journal.It well explains why President-elect Obama's decision to further bloat the size of the government is so likely to devastate America.
Wednesday, January 14, 2009
On Why Big Government Will Fail
Nearly all of what appears on this blog is my own writing but I was impressed with this piece in the Wall Street Journal.It well explains why President-elect Obama's decision to further bloat the size of the government is so likely to devastate America.
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5 comments:
It's more of an embarrassing mash note to a bad novel (the stilted prose quoted at the end of the review is, however, priceless) than an actual explanation; it's a list of things the author does not like, rather than an argument as to why they are intrinsically bad.
The novel's most powerful exponent, Greenspan, has gone on the record and admitted that he was misled by his ideology into refusing to regulate derivatives, thereby allowing a fiscal house of cards to be built in the air (to mix a metaphor.)
For counterpoint, there is an article just out which argues that raising taxes is good for the economy, using Roosevelt, Truman, Eisenhower, Kennedy/Johnson as key examples.
the nub of the argument is this:
"Government spends money on things that the private sector does not spend money on: physical infrastructure, social infrastructure, market infrastructure, and defense. These are the things that create a world in which doing business is possible."
http://www.alternet.org/democracy/119048/why_you_should_be_screaming_for_higher_taxes/
Greenspan had moved far away from his Ayn Rand days by the time he was appointed Fed Chairman. He became much more pragmatic about money policy and put principles aside many times. I doubt that he ever was a libertarian or a proponent of the Austrian school of economics, no matter what he says.
The whole thing about this "fiscal crisis" is poorly understood, especially by left leaning people who blame this on too little regulation. The fact is, the banking and monetary system hasn't resembled anything close to a free market enterprise in a hundred years.
Most of the fears and predictions in the article have been addressed in a number of your blog posts and I agree with much of it. I think such destructive policies could turn America into an impoverished country. On the other hand, I think that Rand's personal experiences and her novel are a bit extreme. When I think about Soviet Russia and post-Soviet Russia and the Putin-Medvedev duo, I wonder about a couple of things:
1. Could the reasons for the Soviet Union's failure to compete with the West have to do with the general backwardness of Russian society?
2. Could the reasons for Stalinism lie deep within Russian political culture?
Authoritarianism aside, can eight years of Obama's reforms really turn the country into an impoverished socialist state? Will some of Rand's nightmares become reality in 21st century America? I want to say no, but maybe I'm being too opimistic! As you said a few months back, "It's going to be an interesting 8 years." I believe you said 8 years. You're right -- hope for the best, prepare for the worst...
Um, the derivatives markets and especially credit default swaps were, in fact, unregulated.
Notable left luminaries such as Warren "smash the state" Buffett were warning about the derivatives' lack of regulation some time ago.
Regulation in and of itself is not the point; the regulations require reporting, and from reporting comes information.
Without information, no one can make informed judgements; all they can do is place bets. When a dollar wagered can wind up being leveraged through derivatives out to ~100 fold and no one has information to understand that that's the degree of leveraging in play, you get spectacular unwinds such as the ones we see now.
Sad, really, that our host - so willing to get into such detail and length on atmospheric physics - has so little to say at that level of detail about economics, which I'd have thought would be much closer to his metier given his training in the social sciences.
My non-response was partly because I'm busy and partly because the two negative commenters were
a: ad hominem ("an embarrassing mash note to a bad novel") and grossly overextending the implications of Greenspan's and Buffett's statements.
and b: overextending the implication of what Buffett and Greenspan said.
No one's arguing that regulating derivatives as we do other investments is a bad idea. Light regulation is not a bad thing. (As readers of this blog know, I'm not a pure Libertarian; I lean Libertarian.)
But Obama, the liberal congress, and liberal media are calling for a massive redistribution of GDP from the private to the public sector AND increasing the GDP by massively increasing the deficit into trillions.
The commenters' posts do not address my concern that this represents an unprecedentedly enormous risk, one that would make Nobelist Milton Friedman, Adam Smith, and the entire Austrian school of economists turn over in their graves, and may make the majority of living U.S. economists worry themselves into an early death--few leading economists (other than those Obama selected for his team) are fans of his plan.
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