Earlier this week I did a short Q&A about the latest in monetary policy: quantitative easing. This video goes into much more detail. And is pretty funny:
For an extended, non-animated explanation of QE, try a helpful article by monetary economist Leland Yeager: “The Fed’s Easy Money.”
If the Tea Party’s newly elected spokespeople really want to prove they are serious, they must dare to gore a familiar ox.
The best place to start? Pentagon budgets.
It’s not just me saying that. Just as Congress overspends domestically, it overspends militarily, primarily by what Cato Institute’s Downsizing the Federal Government website defines as “overreach”:
We would improve the nation’s security by adopting a more restrained and defensive strategy. We should cut the number of military personnel and reduce overseas deployments to save money and relieve burdens on military families.
But Cato’s a think tank. What say actual, elected Tea Party politicians?
Well, Sen. Tom Coburn recently wrote that “Taking defense spending off the table is indefensible.” Further, Senator Elect Rand Paul has called for a debate in the Senate and House over the war in Afghanistan. He started off by saying that Congress had proved lax in its duty to declare war, and then argued that the debate ten years ago on the Afghanistan intervention was not enough for the war’s continuation. He brought up a list of sensible concerns that require careful discussion.
Tea Party politicians should also see the political value of strategic disengagement from any number of worldwide hotspots. Or funding sinkholes, like Europe. Being the world’s policeman costs us dearly, in more ways than one. Were Republicans to rethink their traditional No Pentagon Budget Left Behind approach, Democrats might have less standing to oppose the domestic cuts that must be made.
This is Common Sense. I’m Paul Jacob.
John Tyner, a 31-year-old man hailing from Oceanside, California, not only declined San Diego International Airport’s kind offer of a full-body scan via privacy-invading machine, he also declined a full-body groping via privacy-invading human.
Unfortunately for TSA (who would like to make it unfortunate for Tyner as well) he happened to record his interactions with security personnel on a cell phone. Now TSA honchos are growling that they may well follow through with a threat to fine him $10,000 for not submitting to either procedure — inasmuch as it’s now a crime to care about one’s personal dignity.
The penalty has gone up, though, since TSA threatened Tyner at the airport. It’s now $11,000.
Five or ten dollars for refusing an obnoxious groping, I understand. Or a nickel. Better? A penny. But thousands of dollars?
I’m sure other aspiring passengers who initially cooperated with such intrusions also decided mid-procedure that things were getting too invasive for comfort and that retreat was the better part of valor. I doubt that TSA has sought to extract $10,000+ from each recalcitrant.
But it seems Tyner’s conduct is especially heinous. First, he balked at unreasonable search of his person; second, he blatantly exercised his First Amendment rights by shockingly sharing evidence and testimony about what happened.
If the TSA doesn’t do something, fast, more and more people might act as if their constitutional rights still apply.
Do they?
This is Common Sense. I’m Paul Jacob.
It’s one of those terms seemingly designed to conceal something ugly, dangerous, or unnerving; this example of contemporary policy jargon just looks like a euphemism. It’s “quantitative easing” (QE) and it’s Federal Reserve policy.
What does the “quantitative” part refer to?
The quantity of money in bank reserves.
Is this all about increasing that quantity?
Yes.
Isn’t that synonymous with inflation?
According to the old definition — where inflation is the increase in the supply of money — yes. But since economists became obsessed with the price level, and “correcting” the price level, today inflation usually designates a general rise in prices. Of course, more money will tend to raise prices. But because demand for money can offset supply moves, price levels are not affected on a simple input-output, one-to-one manner.
Is this what we call “printing money”?
Yes, but in the digital ledgers of banks, not in terms of paper dollars.
So this “easing” is just “easy money”?
Yes, but not “just.” Because the new money hits bank reserves, it eases banks’ pressure vis-a-vis risk. So banks can lend more.
Will banks, helped out by QE, actually follow through and make loans?
Big question. They didn’t, much, after the bailouts. Banks loan funds only when they can expect a return. Monetary manipulation doesn’t, presto chango, solve the problem of the future. If the future looks especially unstable, or uncertain, no loan.
Will this necessarily jump-start the economy?
No. Our elite experts’ desperation is showing.
This is Common Sense. I’m Paul Jacob.
Politicians like to talk about “unity” and “co-operation” and “getting things done.”
This would be all well and good if, when they manage to co-operate, they could restrain themselves from going whole hog and radically increasing government spending.
But the evidence is: They can’t.
Politicians in Washington are most co-operative and least “obstructionist” when the legislative and executive branches are united by party — that is, the majority’s in Congress is the same as the president’s. But look what happens when there’s united government under one party: Government growth.
A graph compiled by Mercatus Center research fellow Matthew Mitchell makes this easy to see:
Since Eisenhower, the federal government has grown every administration, every year. But the rate of growth is highest when government is united by party. It tends to grow less when there’s divided government. The rate of growth? 2.55 percent with divided government, and nearly double that — 4.67 percent — with united government.
If you look at the graph carefully, you can see there are anomalous developments and periods. And you can see that some famous (Reagan, Clinton-era) attempts at pruning spending hasn’t amounted to a reduction in total spending, yet. But still, the graph is a bit comforting, when you realize that we have divided government now, after a period of united government and massive spending increases.
This is Common Sense. I’m Paul Jacob.
With this last election, 87 percent of House incumbents who chose to run for re-election got re-elected.
That’s low by modern standards. In fact, it’s the lowest since 1970, which garnered 85 percent rates for incumbents.
But it’s high by older standards. Eric O’Keefe, of the Sam Adams Alliance, says that the re-election rate may be low today but remains higher “than every election of the 19th century.”
Something changed. Individual career politicians gained the upper hand.
On the brighter side, it’s worth noting that if you include “voluntary retirement” in current figures, the turnover rate was much higher. Forty-five open House seats saw 16 flips of party affiliation, all but one going from Democrat to Republican. This leads Doug Mataconis to figure the retention rate at 64 percent. (Still, in the 19th century, that same rate averaged to under 60 percent.)
Of course, many of our recent “voluntary retirees” may have seen the writing on the wall, preferring to bow out with more dignity than an electoral trouncing would allow.
Credit this to an exceptional frisson amongst the voting public, born of anger and disgust at the political class’s habitual over-spending and general foolishness.
It remains to be seen whether this acuity of citizen focus can alone spur continued turnover and real change. It seems unlikely, which is why I’ve long supported term limits.
But, whatever the source, real change is necessary. And the current turnover, welcome.
This is Common Sense. I’m Paul Jacob.
It’s pretty clear that the big issue this election was spending. Not high taxes, or the lowering of taxes. Not war. Not illegal immigration. Not regulation. Not abortion. Above all these issues has emerged one supreme: high spending, over-spending.
According to increasing numbers of Americans, it’s the level of spending by government that must decrease. We must balance budgets. Soon.
One could play sloganeer and say “It’s the spending, stupid”; or, twist that, to say “It’s the stupid spending.” But however you formulate the problem, what the new Republican House must do is find a way to cut spending.
And, as I argued last week, it’s the House that has the constitutional duty to decide money matters.
But talk by the Republican hierarchy, about returning to 2008 levels of spending, will hardly cut it.
Indeed, that idea, of just returning to 2008 spending levels, seems to be a subconscious repudiation of the best thing that Republicans said on Tuesday, that “we’ve been given a second chance.” But to go back to 2008 levels merely takes government back to “before Obama,” and reflects an attempt to let themselves off the hook for the Bush-era spending extravaganza.
There are reasons why I put so little hope in politicians as such, and more in the direct actions of citizens. Even the best politicians tend to lack real convictions.
If the GOP offers any hope, it depends entirely on continued pressure applied to them by the people.
This is Common Sense. I’m Paul Jacob.
In Europe, populist response to government policy looks a lot different than in America. The French are rioting in the streets . . . because President Nicolas Sarkozy proposed to raise the retirement age by a mere two years. But, as The Economist notes, America’s Tea Partiers “are the opposite: they exhale fiscal probity through every pore.” The French, on the other hand, “appear to believe that public money is printed in heaven and will rain down for ever like manna.”
This appraisal, “The good, the bad, and the tea parties,” recognizes that the Tea Party is not violent, doesn’t even litter much. In sum, the Tea Party is “[n]ot French, not fabricated and not as flaky as their detractors aver: these are the positives. Another one: in how many other countries would a powerful populist movement demand less of government, rather than endlessly and expensively more?”
Interestingly, The Economist pushes the practical point, arguing that if Tea Party “Republicans capture the House, they need to move past ideology into the realm of practical policy.”
This echoes what I argued this weekend on Townhall: “[I]f Republicans in Congress are serious about restoring fiscal sanity to Washington, they will hold all the cards necessary to do so. The Obama Administration simply cannot spend money the U.S. House refuses to raise or appropriate.”
This will lead to a game of chicken with the Obama administration, threats of a government shutdown.
So, who will blink first?
This is Common Sense. I’m Paul Jacob.
The essence of politics-as-usual is to promise the moon and bury any mention of costs.
This beggar-all promising has calcified into government policy. And we all get trapped in the web of promises that become law and then bureaucracy with “benefits” . . . as folks come to rely on those benefits. Damn the costs.
Example? Medicare.
It’s politically untouchable. Though deeply insolvent, politicians and partisan activists of both parties whip voters into a frenzy each time the program gets targeted for the slightest cost-constraining reform.
How out of control is it?
According to a report by David Naither, for The Center for Public Integrity, “Medicare is a significant part of the reason the national debt is soaring. . . .” Millions rely on it as a “safety net” that protects them “from bankrupting medical bills. But since it’s an open-ended program — with no upper limit — the nation has no similar protection to keep Medicare from bankrupting the country.”
Naither is not just fear-mongering. The trends are clear. The program itself raises medical costs, Naither notes, and, as the Baby Boomers retire, it will have “more seniors to cover.” No wonder the program now outpaces Social Security growth; it could very well bulge past Social Security within 25 years.
If the country survives the added burden, that is.
There are reasons we need to reform the structure of politics. For politics-as-usual is throwing us into a deep, downward spiral.
This is Common Sense. I’m Paul Jacob.
Early reports and predictions about political spending in this election cycle claim there’s a 30 percent increase over the last mid-term election. One figure hazards that this campaign will total out to around $3.7 billion. Spending on ads is said to be up 75 percent. Traditional spending via parties and party committees shows Democrats to have an edge over Republicans by about $20 million. Republicans are making up for it, we’re told, by newly re-legalized “outside” spending.
A CBS News report relates the conventional wisdom about this. Watchdog groups “say more ads and information can be good — but voters can’t judge their credibility when donors are secret.” One expert decries this, saying “We just cannot know and we’ll never know who is ponying up the money.”
I say, “so what?”
Information cannot be judged good or bad, nor facts or argument dismissed, depending on where the money comes from to distribute the information and argumentation. The classic fallacy of the argumentum ad hominem judges conclusions by the character of the speaker rather than the truth of the facts or the validity of arguments.
Its dominance in politics is a curse, not a blessing.
Demands for full transparency of citizen activism bolster the nasty politics of a logical fallacy. When we don’t know the economic provenance of an ad or a slogan or an argument, we’ll just have to decide the issue on its own merits.
Horrors!
This is Common Sense. I’m Paul Jacob.