Daily Archives: 28 August 2012

Extremes

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Democratic Presidential Candidate Barack Obama gave an interview to the AP in which he described Republican Presidential Candidate Mitt Romney’s positions as “extreme.”  Yet both Obama’s descriptions and his countervailing positions demonstrate pretty conclusively which of the two is extreme.

Obama had this non sequitur in his remarks about what he has “learned about [Romney] this campaign:

What we’ve also seen is Gov. Romney has not been willing to, I think, own up to some of the responsibilities that are required if you’re president of the United States. So there’s been obviously a lot of discussion about his unwillingness to release his tax returns.

Apparently honoring the law (here, concerning the required releasability of personal tax returns) is “not willing to own up to some of the responsibilities that are required if you’re president of the United States.”  But ignoring the law (vis., DOMA) is such a responsibility.  Ignoring the will of the Congress and implementing carbon cap-and-trade by Executive fiat is such a responsibility.  Ignoring the will of the Congress (the failed DREAM ACT) and implementing immigration parameters by Executive fiat is such a responsibility.  Refusing to enforce our borders while attacking states that do attempt to enforce them, using laws that ape Federal law, is such a responsibility.

Obama made this argument about Romney being short on facts in his campaign.

[T]he most prominent argument that he’s been making for why voters should vote for him is this notion that Obama took the work requirement out of welfare, and he’ll put it back.

Never mind that the explicit requirement for actual work has been withdrawn, and the states’ “flexibility” includes the option to not require work or work training.

And without a trace of irony, Obama had this to say:

Well, I think that if you don’t have a good argument for how you’re going to make things better, then you stay focused on how you can discredit the incumbent.

After accusing Romney of being responsible for the cancer death of a woman (he did say in a separate interview that he didn’t really believe that, but in that same interview, he refused to repudiate the ad that made the accusation, or to call out the SuperPAC (run by his ex-Deputy Press Secretary) for having run it).  And after accusing Romney of being a felon over Romney’s position at Bain while rescuing the Olympics—stemming from Obama’s own “misunderstanding” of SEC filings.

On those extreme positions themselves, Obama had this:

[Romney] has signed up for positions, extreme positions that are very consistent with positions that a number of House Republicans have taken.

Obama then listed the Republicans’ $5 trillion tax cut proposal, the elimination of tax credits for wind energy, and an amorphous objection to the Republicans’ Medicare proposals as those “extreme” positions.

If I understand Obama aright, then, it’s extreme to cut taxes, especially in a recession: it’s extreme to leave more of private citizens’ money in the hands of the original private citizens instead of those of whom Obama favors.

It’s extreme, in a time of enormous government spending and debt buildup, to cut spending—especially to fringe energy sources like wind power.  Obama proudly pointed out that he’s doubled the output of wind-generated electricity with his tax credits.  Let’s see: total electricity generated in the US in 2008 was nearly 3.5 Terawatts.  Wind-generated electricity in 2011 was nearly 47 Megawatts.  Obama has pushed wind energy from nearly nothing to twice nearly nothing.  And that doubling came, as he so proudly said, only with the aid of government subsidy.  Wind-generated electricity is fringe not because it’s an idiotic idea, but because it cannot compete in the free market on its own; it needs a constant propping up.

Finally, it’s extreme to take steps to reform Medicare so as to preserve it for tomorrow’s seniors, while leaving it alone for today’s seniors and near-seniors (who have no chance of adjusting to any changes).

But what are Obama’s plans?  He’s carefully nebulous about those, but we can look to his record and see his plans.

Obama intends to ratchet up the taxes on Americans of whom he disapproves.  He intends to ratchet up his spendinginvesting in his favored companies and in his favored unions.  He already has taken the (not at all extreme, he says) measure of removing $700 billion from the present form of Medicare in putting it into his Obamacare to pay for that.

Who’s extreme?

Government Spending

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Much of this originated as a comment to a Gay Patriot post.  I strongly recommend the post and then the accumulating commentary.

It’s important to note at the outset that government has no money of its own.  It only can act as intermediary in the (forced) process of transferring money from one group of private citizens to another.

Now a few remarks on government spending.  First, much of the money taken from private individuals and/or their businesses (which are just agencies of private individuals) to pay for government spending is lost to friction, including outright waste (I won’t get into losses to graft.  Could the graft be identified, it’d be rooted out.  Right?).  The waste includes money spent on government middlemen, money spent on government contractors hired to oversee the transfers and transferees, time and money spent schmoozing with lobbyists (both the good ones who are only identifying constituent needs—Congressmen generally fit this bill, for instance—and the bad ones, who are sure to take a taste of their own as the money flows, or to provide some vig in return for future consideration), and so on.

Second, money taken from private individuals to pay for government spending—whether through current taxes, current borrowing (future taxes), or printing money (future inflation)—is money that is not spent in the private sector, or husbanded against future spending in the private sector.  Thus, the multiplier effect of government spending, such as it is, is cancelled, if not exceeded, by the known, and fairly large, multiplier effect of private spending that is lost.  In many sequences of private spending, for instance, that multiplier effect runs out to 1.7x.  The best Keynesian estimate for the government spending multiplier is 1.5x.

Third, those husbanded funds generally are deposited in financial institutions as savings, and these deposits then are loaned to borrowers: these deposits are the primary source of loanable funds.  Taxes, then, reduce the amount of private money available for saving and so reduce the amount of lending that can occur.  This effect isn’t enough to cause a credit crunch like the one coming out of the Panic of 2008, but it hasn’t helped.  Further, that future inflation from printing to support excessive public borrowing devalues the funds that are saved.

There’s more.  As government debt grows, more private funds become husbanded, not against future spending goals in the private sector, but against those future taxes.  And even more borrowing is encouraged by that inflation (in the period before the recession that is the inevitable result of that high inflation)—in both the private and government sectors—since the repayment will be with inflation-devalued dollars.  Then that inevitable recession hits, and payback becomes, as they say, a bitch.

In sum, government spending isn’t zero-sum, it’s negative sum.

Update: clarified the second point.