Monthly Archives: July 2011

View 683 Friday July 15, 2011

Sowing the Wind

Debt Ceiling and More Government Services We Don’t Need

The President insisted on enormous deficit spending as a stimulus to restart the economy. It didn’t work. The shovel ready jobs were not ready, and much of the money was put to questionable uses, but one things that was predictable in advance happened as expected: the deficit went up and up. Now the President is saying that without a raise in the debt ceiling we are ruined. He will have to shut down much of the government, and of course he will start with the things that hurt most.

Of course the US can’t default: the cost would be enormous. The Deficit Dance continues, and so long as we have the current administration there’s not much to be done. The Republicans will have to make the best deal they can.

One deal they probably can’t make is an off switch. There ought to be a Commission of Thrift which has this power: it can select government programs that are not needed and turn them off. The Congress would have the right and power to turn them back on, but it would have to do that: without Congressional action the designated “services:” would be turned off, and those involved would either have to find new jobs or be laid off.

We’ve already shown a few here. The Federal Department of Agriculture inspectors whose job it is to see that stage magicians have a federal – not state, not local, but Federal – permit if they use pet rabbits in their stage act, and people who sell rabbits as pets – not as snake food, or to restaurants, or to slaughterhouses, but as pets – must have a Federal license. This law is a great candidate for repeal by the Commission of Thrift. Another is the Department of Education Inspector General’s SWAT team. If the DOE IG needs to have arrests made, let him get a US Marshal, or perhaps ask for cooperation from the local sheriff; no need to hire, train, and maintain armed agents in the Department of Education.

I am sure everyone here can list more such programs that we simply can do without.

Today’s Wall Street Journal has found a very good one. See “Cellulosic Ethanol and Unicorns”. The EPA has mandated that six million gallons of ethanol generated from cellulosic sources like wood chips and switchgrass must be added to the automobile fuels sold by US gasoline suppliers. There’s only one problem. There is no cellulosic ethanol. Zero cellulosic ethanol is for sale. The last authorized supplier of cellulosic ethanol has shut down, and there don’t seem to be any new ones making applications. Meanwhile there are government officials who are standing by to license new suppliers assuming any appear. Oil refiners who sell gasoline will have to buy six million cellulosic waivers. Someone must sell those waivers, and inspectors must see to it that the waivers are bought. I don’t know what the expenses will be for all this, but it must come to tens of millions of dollars. Everything does. The whole gasohol subsidy program would be a good candidate for repeal, but surely the requirement that oil refineries buy waivers for a requirement to use six million gallons of a product of which zero gallons are made for commercial use would be an obvious candidate for elimination?

Nothing of the sort will happen, of course. If government shuts down you may be sure that the government will lay off Park Rangers long before eliminating the EPA inspectors who make certain that oil companies buy six million waivers for the mandate to use a product no one makes.

And the dance goes on.

You will have noticed that the Democrats had two years with majorities in both Houses to raise taxes and reduce the deficit. They used those years to increase spending and grow the debt, meaning that the portion of the budget that must go to debt service grows, and there is less money to spend on anything else. The trouble with socialism and the command economy is that you run out of other people’s money. Most everyone outside Harvard understands that. Reality is demonstrating it to the rest of us: the enormous stimulus packages were supposed to bring us economic recovery. Recovery Summer came and went. Now we have the Debt Limit Crisis. The new game is to blame it all on the Republicans and the era of the Country Club Republicans after the implosion of Speaker Gingrich. There’s a lot of truth in that, of course. I have been saying that the Country Club Republicans sow the wind since the inauguration of George W. Bush (Bush I). The problem is that if the Country Club Republicans were doom, their Hope and Change replacements led by Pelosi were Doom, Death, and Despair.

If something cannot go on forever it will stop. The United States spirals rapidly toward the situation in Greece. The European Union meets again to bail out Greece. They will have a price. Perhaps the People’s Republic of China will help bail out the United States. We can guess some of their price will be Taiwan; but be assured that will not be all of it. We have sown the wind. We will reap the whirlwind. There is a way out, but the way will be hard and not pleasant: easier to foist it off for a while, and continue the Dance.

Yes We Can! Yes We Can!

We have errands that will take up most of the day. This evening they start shutting down the 405 Freeway and Los Angeles believes itself to be under attack for the weekend. It’s Carmageddon. I hope it’s like the Year 2000 Crisis rather than a big earthquake. Of course nothing stops us from having both, but hope springs eternal. Those interested in global warming may find find this bit on undiscovered underseas volcanoes worthwhile.

I may not have been as clear as I thought about the slide into a command economy. No, we are not there yet, but we are on dangerous ground. The Republican post Millennial Spending Spree coupled with needless wars – guns and butter – tipped us in the direction of a tax, deficit, spend, deficit, raise taxes death spiral. The Republicans were not trying to create a command economy. They thought we could afford guns and butter. They thought the economy was robust enough to survive all their new entitlements, which were supposed to make them popular and ensure that they would stay in command. The bubbles began bursting. The nation was horrified at the mounting deficits coupled with enormous tax breaks (which the Republicans had set up in part to ensure that there would be non-command investments). The nation threw the Country Club Republicans out. Turn the rascals out.

Unfortunately that did not bring in normalcy and the dismemberment of the spending cycles. Instead it brought in the Pelosi /Obama group. Whatever the sentiments and wishes of most Democrats, the leaders were not horrified at the move toward a command economy. That is the goal of a number of liberal Democrats. The US should be much more like Europe, with the government controlling a lot more of the economy and allocating the resources according to the needs and enjoyment of the populace. Greater good for the greatest number. That sort of thing. The problem is that in order to distribute wealth there has to be wealth to distribute. The ratchet continued. More spending. More deficit. The remedy to that is more taxes. More government control of the economy. A spiral to a command economy.

That is where we are now. We will not get out of it by cuts alone. There will have to be some tax increases: but those must be coupled with a sharp turn toward a road that leads to less government, less government control over the economy, and this in a time when debt service costs more and more, and so long as the deficit must be financed by borrowing, the proportion of government control continues. That is a spiral to a socialist state. There are those who like this. History has not been kind to such states – they are generally not stable. They are wonderful so long as they are rich, but eventually you run out of other people’s money and have to start taking money from everyone. 

And that is where we are. Yes, there will have to be tax increases; the deficit can’t be paid off by cuts along. But there must be cuts. There must be a turn toward the notion of controlling spending; of cutting out the “services” we can’t afford any more. I have listed some of them. There are thousands more. The whole notion that if we have some money it ought to be spent on entitlements has to be turned on its head.  The notion that if there is any surplus in the economy it is the right of government to take it and spend it on entitlements must be shed, or we will continue the death spiral.  And note that in all the Kabuki dancing here there has never been anywhere in the main debate a word about needless entitlements, entitlements that we can no longer afford, and very little about the concept of property. It is becoming more and more taken for granted that if there is money, the government has more right to say how it should be spent than the people who own the money; more and more taken for granted that “the rich” do not have a right to what they have, because they do not deserve it.

That is a command economy.

Mail 683 Thursday July 14, 2011 – 2

A Modest Proposal

Dear Jerry Pournelle:

In the following email I satirically take on the persona of a Chinese Communist Party apparatchnik, sending a message to you, satirically given the persona of a higher-up official. In it I propose an offer that the Chinese would be foolish not to make, and the Americans would be hard-pressed not to accept. And it has precedent in our own history.

Satirically yet sincerely,

Nathaniel Hellerstein

***

Dear Comrade Pournelle:

I write you to propose a way for us, the People’s Republic of China, to

reclaim Taiwan without firing a shot. Our army is strong and could

easily over-run the rebel province, were it not for the Americans. Also

it would be a shame to damage the property while repossessing it; and

the use of force could have a negative propaganda effect.

The key is to convince the Americans to go. Fortunately they are

trillions of dollars in debt to us, due to their foolish greed and our

foresight. The solution, then, is simple; we need merely _buy_ Taiwan.

This has historical precedent; consider the Louisiana Purchase.

The procedure would be simplicity itself. We would merely agree to

cancel part of the debt we hold over them, along with interest payments

owed to us; and in exchange the Americans withdraw all of their armed

forces from the area; and then, for political cover, hold a referendum

on the island, agreeing to the transfer of power. The election will, of

course, be fixed to ensure the correct outcome; the Americans are

skilled at such things.

Some of your comrades in the Party will object that the barbarous

Americans are too proud to betray an ally. They are indeed proud and

bellicose, but they are also corrupt, and they are economically

vulnerable. So much so that our trillions of dollars of holdings might

depreciate badly, soon; so I suggest that we bargain that debt away

while it’s still worth something.

Sincerely,

Comrade Hellerstein

= = = =  Surprise. it’s working. ===

 

Re: A Modest Proposal

Dear Comrade Pournelle:

Our plan is working perfectly. The Americans are aware of what’s

happening, but they can’t prove it, and they lack the political will to

resist. Right now they are too busy destroying their own credit rating.

I would like to brag that our agents were responsible for that triumph,

but it seems that the Americans are doing it to themselves. Amazing!

I am informed that there is another historical precedent for our plan

to purchase Taiwan; namely, the absorption of the Republic of Texas

into the United States, in exchange for assuming the Republic’s debt.

Buying instead of invading Taiwan will of course be an ideological

victory for capitalism. Perhaps the Americans will console themselves

with that.

Sincerely,

Comrade Hellerstein

Alpha, Omega

http://news.yahoo.com/blogs/upshot/two-photos-thirty-years-apart-move-192313669.html

Steven J. Dunn

"Economic miracles never happen with command economies"

The counter example to that is the USSR during the late 1920s & 30s. Stalin may have exaggerated his productivity figures but WW2 proved that the USSR’s economy really had grown from destitution to the world’s second. Much of the appeal of communism was based on this achievement (at one time it appealed to me on those grounds) while the rest of the world was in Depression and I believe it has to be explained It can partly be explained by the pure human cost paid but if the command economy was that moribund that would not have been sufficient.

My current explanation is that Trotsky became electricity commissar in 1925 and set in train a decade of 23% annual growth in electricity capacity and that, then, newish technology was the or a pivotal one and allowed the economy to grow at 10% at a time when introduction of command factors into the US economy had depressed it. However this may be an after the fact rationalisation (and iprojection onto Trotsky) and I would be interested in your thoughts.

Neil Craig

Actually, Lenin was forced to resort to his New Economic Policy much to the dismay of many devoted Marxists. Russia went from being the breadbasket of Europe to famine. Command economies can always produce some spectacular results in their areas of concentration. Intelligent masters understand that it is best not to bind the mouths of the kine who tread the grain.

"The Disappearing Recovery"

http://online.wsj.com/article/SB10001424052702304911104576443953024891120.html?mod=WSJ_Opinion_LEADTop

We can only hope America is paying attention.

Phil=

If something cannot go on forever, it will stop.

Armed guards at fast food restaurants

Dear Jerry:

The person who thinks that only China has armed guards at fast food restaurants needs to get out more. This is very common and depends, as do all such services, on the crime rate, threat level, and insurance premiums for not having such a guard. You will recall I used to sell these services. Private security officers, armed and unarmed, are used at thousands of such restaurants around the world. Here in L.A. some of them have died in the line of duty, shot by gang-bangers who didn’t like them challenging their dominance. Sometimes off-duty police officers are hired for this, but generally, they are too expensive, expect free food not just for themselves but for their fellow officers and disappear just when there is a real emergency because they get called back to duty to respond to it. The most dangerous account like this I ever sold myself was in Chicago, located at the juncture of five different gang turfs and going broke because the off-duty cops would only work it if there were two of them. We replaced them with one officer, a burned out Lieutenant from the Housing Projects force, who was a Black Muslim, and took no guff from anyone. He simply looked at anyone who acted up and they got real quiet, real fast. And that restaurant actually started making money for the first time in its history because people were no longer afraid to come there. And all our guy did was sit there and look hard at anyone who was acting out.

Sometimes the private sector can do it better.

Sincerely,

Francis Hamit

Shades of Dune

Jerry,

"The properties of shear-thickening fluids lead to the strange result, however, that while such a vest would defend against a sudden, aggressive knife attack, it wouldn’t guard against a slowly piercing one."

A Bomb-Proof Bag to Foil Terrorists

http://www.technologyreview.com/blog/helloworld/26959/?ref=rss

Reminiscent of the personal shields in Frank Herbert’s Dune.

Regards,

George

View 683 Thursday July 14, 2011

BASTILLE DAY

The Deficit Dance continues. The President petulantly demands his tax increases so that he can continue his Obama Stash gifts and convert more of the nation to the command economy which more and more appears to be a goal. The Republicans are told that he won’t accept a temporary measure nor will he accept cuts without tax increases nor, apparently, will he accept anything other than what he wants. “Don’t call my bluff,” he warns. That is not what most poker players would say, but the meaning is clear: he is, he says, willing to let the nation go into default if the Republicans do not “compromise” by becoming his tax collectors, and do what he could not do when there were Democratic Majorities in both Houses of Congress: raise enough taxes to reduce the deficit while allowing the government to grow larger and spend more.

Regarding the command economy:

The Command Economy

Dear Jerry,

Things are bad, but let me suggest that exaggeration is not a very good strategy. For example, when I google "command economy", I get links to definitions such as:

Noun: An economy in which production, investment, prices, and incomes are determined centrally by a government.

and this:

An economy where supply and price are regulated by the government rather than market forces. Government planners decide which goods and services are produced and how they are distributed. The former Soviet Union was an example of a command economy. Also called a centrally planned economy.

We just don’t have that – not even close. As to the semantics of "non-discretionary", I can see how the August 2011 – at least – social security payments might be meaningfully considered non-discretionary even by someone who advocates – as I do – not only the end of Social Security, but the whole federal "safety net".

By the way, where were McConnell and Boehner when Bush was running up three trillion dollars of costs in Iraq? (And yes, I know, that is liberal economist Joseph Stiglitz’s number, but I would not want to bet against it.) I would also like to see the whole mess fixed with only cuts, but those two turke… I mean, distinguished members of Congress, have zero credibility with me.

Gordon Sollars

I won’t attempt to answer the question about where were McConnell and Boehner during the Bush Administration. I opposed all the overseas adventures from the Bush I Gulf War on, and whatever slight influence I had on spending ended when Newt ceased to be Speaker; it’s not my job to be an apologist for what happened after The Millennium. I do note that it hardly matters who got us into this mess: the question is how we get out of it.

I will note that the two definitions of command economy appear to be precisely where we are headed: tax money by definition is allocated to spending where it would not have been spent if left to those who were taxed. Presumably they would have invested the money, if only by leaving it in a checking account, as one of my software genius geek friends did with everything he had until he married and his wife straightened things out. Even if merely left in a bank account the money was invested by the bankers, presumably in order to make a profit. The government appears mad on fixing wages – minimum wage, NLRB rulings that Boeing can’t move its plants, ObamaCare – and on setting prices for many items. Government certainly dictated the conditions of mortgages, Fannie Mae poured money into the housing market and made mortgage money available to many who otherwise would not have it, driving up prices and creating the boom that became a bubble. Government regulations dictate the minimum prices for many goods – only large companies can afford compliance.

Adam Smith warned that the greatest enemies of capitalism are capitalists who will use government to restrict competitors from entering the market. And the Iron Law dictates that government will expand its functions without limit if allowed to. More and more regulations are applied. Thousands of pages of regulations. That, I put it to you, is moving toward a full command economy. Government tells us what kinds of cars we can drive, even what kind of light bulbs we can buy. How is that not a command economy?

And yes: I have been in favor of some national investments, particularly in long term projects where there is little immediate return on investment. Someone must look out for our grandchildren. Someone should speak for the Grand Canyon. I am not a laissez faire capitalist. My views are far closer to those of Wilhelm Roepke (A Humane Economy) than of anyone else. I know where unrestricted economic freedom can lead. But that is a long way off: we are not facing a problem of too much economic freedom but of too little. It is time for an economic miracle. That means less command economy.

Freedom is not free. An economy is never fully free, and since there is usually a black market – blatt men in the old Soviet economy – an economy is seldom fully under central command. Lenin was forced to bring in the New Economic Policy – deliberately allowing some economic freedom from the Soviet planned economy – because the planned economy was not producing prosperity. And of course planned economies often do wonders in targeted industries. The Soviet Union became an industrialized society, and built a war machine. East Germany continued for years. They had to build a wall to keep its people from fleeing to West Germany, but there was an economy. It just wasn’t much of one.

Command economies do not produce prosperity. Free economies trend to prosperity, but free people will spend money in ways that offend and disgust others. Freedom is not free.

And Obama intends that the Deficit Dance will move us further toward a command economy, with government commanding more of the economy. That will result in less prosperity.

Don’t call my bluff, says the President.

Note: The Bastille was a royal fortress used as a prison for aristocrats held under royal warrants. The garrison was mostly elderly and included many partially disabled soldiers on pension. On Bastille Day 1789 there were seven prisoners in the Bastille, all aristocrats: four forgers, two madmen, and a young man sometimes described as a follower of de Sade who had challenged the finest swordsman in France to a duel, and had been locked up at his father’s request so he wouldn’t be skewered. The madmen were privileged to be confined in the Bastille where they were waited on and treated as eccentrics by the elderly military who comprised the staff. When the Bastille fell, the garrison was slaughtered to a man. The forgers were liberated and vanished. The madmen were sent to the snake pits. The young aristocrat joined the Revolution as Citizen Liberte or some such, and eventually went to the guillotine during one of the perturbations following the Revolution. The revolution eventually ended at the tomb of Napoleon, as I said in my photo tour of Paris. [When I wrote that I noted that Van Loon once said that those who want to understand Napoleon’s attraction should listen to a good artist rendering Heine’s poem Die Beiden Grenadiere as set to Schumann’s music. That was before You-Tube. Now it’s easy to hear a good performance.]

The Bastille, in short, was symbolic. Bastille Day is to France what the Fourth of July is to America, but the differences between the are profound. Over time, though, that is changing, as American exceptionalism succumbs to the ideology Rousseau. Liberty, Equality, Fraternity are all laudable goals, but they can be incompatible. Freedom is not free, free men are not equal, equal men are not free, and only in religion are all men brothers. But that is another story.

See also my comments on Bastille Day from a few years ago.

I wish France a Happy Bastille Day.

I was digging about in an Older View (which has some interesting stuff for that week) and encountered a lead that took me finally to

http://www.deepdyve.com/lp/nature-publishing-group-npg/
in-retrospect-lucifer-s-hammer-ObgK8EzzZb

which may be interesting. There was a lot in the View that week, too.