An Economic Misunderstanding

The Congressional Budget Office said Wednesday that the two-year budget deal will increase our annual deficits significantly over the next ten years.  That puts a premium on Republicans regaining the majority in the House, retaining/expanding its majority in the Senate, and retaining the White House, with an emphasis on Conservative Republicans in that mix.  That’s for another post, though.

What…triggered…me was this bit at the end of the article CBO Director Phillip Swagel:

The nation’s fiscal outlook is challenging. To put it on a sustainable course, lawmakers will have to make significant changes to tax and spending policies—making revenues larger than they would be under current law, reducing spending below projected accounts, or adopting some combination of those approaches.

Close, but no cigar—not even an ersatz vaping cigar (do they make these?).  To get onto a sustainable course, the only change to tax policy is to continue reducing the rates: make the individual income tax rates permanent, then move onto a course to (permanent) low flat tax rate on all income, regardless of source. Add to that elimination corporate income taxes altogether; it’s corporations’ customers who pay the bulk of those taxes, anyway, in the form of higher prices.

Then cut spending to levels below the resulting revenues, with an emphasis on cutting non-defense spending.  It’s time the government stopped misspending us citizens’ money.  It’s also time the government stopped competing in the economy for products, services, and resources to produce those products and services.

With more money left in our hands, and with less competition from Government driving up our prices, the private economy will truly take off—increasing along the way revenues to the government from that greatly increased economic activity.

That increased economic activity and revenue to Government will have an additional mid-term salutary effect, if politicians are sensible and don’t lose their nerve.  The increased revenue could ease the pain of transitioning our Social Security and Medicare programs to privately done facilities, getting Government further out of our personal economic and health lives.

The increased economic activity also would redound to the States’ collected revenues—facilitating over the same mid-term a conversion of Federal Medicaid transfers to block grants to the States on an annual declining balance to zero schedule.

Campaign Spending vs Intake

Progressive-Democratic Party Presidential candidates are spending more money than they’re collecting through campaign donations.

Eleven of the Democratic presidential campaigns, including former Texas Congressman Beto O’Rourke, New Jersey Senator Cory Booker and former Colorado Governor John Hickenlooper spent more than they raised in the most recent three months.

How quickly the 24 Democratic contenders are burning through cash seven months ahead of the first primary caucuses and elections is as important as how much they are bringing in.

Of course, they have to in order to stay/get competitive in the race.

This is a microcosm of what we can expect from a Progressive-Democratic Party-dominated Congress and White House.

Because, of course there’s always a “reason” for the Federal government to spend more than its revenue collections.

Economic Misunderstanding

The broad Keynesian misunderstanding regarding government spending is continuing.

Spending by consumers and businesses are the most important drivers of economic growth, but in recent years, government outlays have played a bigger role in supporting the economy.
The level of the federal component of GDP in the first quarter of 2019 was $78 billion, or 0.4%, lower than what forecasters expected it would be following the February 2018 budget deal….
The government is spending much less on disaster relief than it did in fiscal 2017, and a partial shutdown temporarily stalled outlays in January. Those factors explain about one-third of the missing stimulus, Mr [Ernie, an Evercore ISI economist] Tedeschi said.

No, that lack explains nothing at all about any “missing stimulus” except in the narrowest, purely statistical sense of a correlation having been found between two factors.  Correlations don’t even prove a relationship, only seeming relationships: all, or nearly all, nickels have two sides—a head and a tails.  All, or nearly all, pennies have two sides—oddly enough, also a head and a tails.  That correlation shows nothing at all substantive about a relationship between nickels and pennies.

Beyond that bit of statistical trivium, it’s necessary to recall the real-world nature of government spending: every dollar that government spends must first be taken from someone else, and then carrying costs—middle man costs—must be deducted before passing it on. There is nothing at all stimulative about government spending, as even John Maynard Keynes understood: in his government-spending-as-stimulus theory, it was the sharp rise in government spending that he held to be stimulative, not its steady state.  And beyond that, his “stimulus” was a purely price-inflationary stimulus, his spike being intended to come inside the ability of production to answer that spike in demand.

Indeed, if only because of those government middleman costs, steady state government spending is a net drag on the economy.  An additional contribution to the drag is associated government borrowing, which competition for lendable dollars drives up the cost of money for private enterprises and private citizens.  A third drag is the simple existence of Government spending: this crowds out private enterprises and private citizens by consuming resources that those citizens and enterprises would otherwise have consumed—while driving up the costs in the private economy of the remaining resources.

The Cost of a Celebration

President Donald Trump held America’s Independence Day celebration with a Salute to America, centered at the Lincoln Memorial.

Together, we are part of one of the greatest stories ever told—the story of America.  Today, just as it did 243 years ago, the future of American Freedom rests on the shoulders of men and women willing to defend it.

Just to pick out a couple of things: The Wall Street Journal cited “Democrats” complaining about

the use of military hardware for a traditionally nonpartisan celebration.

Because defending our nation’s existence and celebrating those who do that defense isn’t nonpartisan.  Sure.

And this one:

The Pentagon has said it wouldn’t have cost estimates until next week at the earliest.

I have some estimates now—not on the costs of the military units’ performances, but on those costs unique to their participation in the Salute to America celebration.

The aircraft—and their pilots—used consisted of

B-2 stealth bomber
F-35 Joint Strike Fighter
F-22 Raptor
F/A-18 Hornet
Air Force One
Marine One

Their cost that’s unique to the celebration is a good approximation of zero.  Those sorties flown—every single one of them—count as nav currency sorties and formation-keeping currency sorties, and they are a direct substitute for sorties that otherwise would have to be flown as part of any pilot’s currency training.  Furthermore, the fuel and maintenance resulting from the sorties also are already accounted for in those required currency sorties.

M1 Abrams tanks
M2 Bradley Fighting Vehicles

Here, the costs will be somewhat incremental, but some—the transport part—will count for existing currency requirements, similarly to the aircraft costs.

The incremental costs just aren’t that great.

Tax and Spent Progressive-Democrats

In spades.  They’re in a race to bankrupt us.  Or, as The Wall Street Journal put it,

The Democratic presidential primary is turning into a bidding war.

Senator and Progressive-Democratic Party Presidential candidate Elizabeth Warren (D, MA) has broken out of the starting gate with an offer of forgiveness of $640 billion in student debt for our votes.

Senator and Progressive-Democratic Party Presidential candidate Bernie Sanders (I, VT), though, has caught her at the first turn: he’s offering $1.6 trillion (yes, that’s with a ‘t’) in canceled student debt plus tuition-free “public” colleges.

And both, and their fellow horse racers, are offering tens of trillions more dollars on their Green New Deal variants, health care for all variants, government jobs guarantee variants, social security for all variants, and on and on.

Free stuff for all, and all they want is our votes.  And the destruction of our economy and our wallets.