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media and media people national politics & policies tax policy

Decreases & Increases & Krugman

Social Security was never designed for sustainability. The “Ponzi” element was there at the beginning: early recipients received HUGE benefits over their contributions, but as the population matured, that ratio of what working taxpayers put in compared to what they received in benefits decreased

Further, because there never was a “lock box” much less any investment of funds — it was always a transfer scheme — as the system matured it hit the point of financial default. Back in the 80s this was fixed by raising the taxes on working people.

And then the kicker: with the rate of reproduction in the U.S. falling like Sisyphus’s rolling stone, the ratio of taxpayers to subsidized retirees went in the wrong direction. The folks assigned to keep track of the system’s finances predict that a major insolvency moment occurs about a decade from now, a few years ahead of earlier predictions.

So what does Nobel-​winning economist Paul Krugman, of The New York Times opinion page, advise?

While we fret about the devastation that benefit cuts and tax hikes would cause, Reason’s Eric Boehm notes that Krugman doesn’t think the cuts are necessary. “First, Krugman says the CBO’s projections about future costs in Social Security and Medicare might be wrong. Second, he speculates that they might be wrong because life expectancy won’t continue to increase. Finally, if those first two things turn out to be at least partially true, then it’s possible that cost growth will be limited to only about 3 percent of gross domestic product (GDP) over the next three decades and we’ll just raise taxes to cover that.”

Hope over reason! And the progressive’s blithe acceptance of always-​increasing tax burdens.

Serious people should confront facts … and avoid Krugman.

This is Common Sense. I’m Paul Jacob.


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free trade & free markets too much government

Do More Than Baby Steps

Major disruptions such as pandemic policy in China and the Russian invasion of Ukraine obviously crimp trade and supply chains. But given such impacts, should governments here in the United States be making things better or making things worse?

Oil is one example of a good that would be more abundant and cheaper had the government left it alone — stopped blocking domestic production and the flow of oil from Canada.

Now parents are having trouble getting baby food.

A proximate cause of the shortage is the closure of a single major factory producing baby formula. But Kevin Ketels, a professor who studies the global supply chain, argues that restrictions on production had set things up so that a blow like this would be crippling.

For one thing, only a few companies, Abbott, Reckitt, and Nestlé, are allowed to participate in a government program to provide baby formula to low-​income families. This is not a minor program. The federal government provides substantial grants to the states to fund it.

More importantly, only a few manufacturing facilities are allowed to produce baby formula, and “startups don’t have the volume required to produce in these facilities.”

High tariffs on baby-​food imports have also reduced supply.

You would think, then, that the first thing to do would be to remove governmental barriers to production and imports.

And all, not just some.

So why isn’t that what we are hearing about now?

Well, politicians do not gain their power, prestige, and insider trading advantages by leaving well enough alone. Admitting that their stock in trade — regulation and tariffs and the like — is the cause of this problem might suggest to distracted minds that it is the cause of most, if not all, our problems.

This is Common Sense. I’m Paul Jacob.


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deficits and debt free trade & free markets national politics & policies too much government

Inflation Evasion…Depression

Going into the lockdowns and bailouts, a consensus of politicians and their court wizards, the economists, had belittled the specter of inflation.

Nowadays, when folks use the term “inflation,” they really mean upward movement on the consumer price index (CPI). Some economists, who have a sense of history,* reserve the word not for price level increases, but for increases in the supply of money. And the two concepts are tightly linked. 

But a whole lot of people seek to blame CPI rate increases on anything but monetary policy, as Veronique de Rugy notes in an article at The American Spectator.

“Theories for why we shouldn’t worry abounded,” de Rugy writes. “It was caused by a base-​effect price increase, supply-​chain restraints, a drought in Taiwan — everything but the Fed’s expansionary policies and Congress’ overspending, in part because some of these experts had cheered for these actions all along.”

And then inflation came back.

Big time.

While expressing some humility and an unwillingness to make predictions, de Rugy insists that “the amount of money printed, borrowed, and spent during the last few years led to a one-​time price level rise, and we may have a way to go until we are done.” 

She also insists that the Pollyanna phrase “transitory inflation” is no comfort: “inflation was always going to be transitory. Even the inflation of the 1970s ended in the ’80s. What mattered is whether transitory inflation meant a few weeks, months, or years.”

And, I cautiously add, how de-​stabilizing it is. Consumers rightly worry about rising prices, but inflation doesn’t hit all sectors the same. Credit expansion leads to imbalances that are hard to correct. 

And the correction is “depression.”

This is Common Sense. I’m Paul Jacob.


* Including the history of their own discipline. Readers of Austrian economists such asF.A. Hayek get a better sense of past debates than from other economists.

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deficits and debt

Sitting on the Volcano

“Wait, it gets worse.”

Over halfway through Eric Boehm’s Reason discussion of our government debt situation, he gets to a crucial point: “The federal government’s debt is particularly susceptible to rising interest rates … because so little of it is locked into long-​term interest rates. If you have a 30-​year fixed-​rate mortgage on your house, rising interest rates won’t bother you much. But the federal government overwhelmingly relies on short-​term debt, with an average maturity time of just 69 months.” 

So the standard approach to inflation, with the Federal Reserve raising interest rates, would hit the federal budget like an exploding volcano. 

When talking trillions, it’s hard to keep a sense of proportion. Boehm puts it this way: “A one percentage point increase in interest rates translates into a $30 trillion increase in interest costs.” 

Debt service is one of the reasons why the sages at the founding of America were, if not united in opposition to federal debt, overwhelmingly leery of it. But that leeriness did not stop federal borrowing. Only for one brief moment did the United States’ government not hold debt.

Borrowing was one thing when gold or silver fettered our finances to some limits. But paper and digital money have divorced us from a sense of reality.

We pretend that debt’s reality can be perpetually postponed, but we always “pay” — in lost prosperity; in inequality; in economic dislocation; in political unrest. But when the volcano erupts, then we really pay. 

As we awake to our indebtedness, let’s recognize that our political culture has allowed it to get so far out of hand. Fundamental political reform is imperative.

This is Common Sense. I’m Paul Jacob.


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Accountability folly national politics & policies political economy

Whip Producers Now

The Biden administration is siccing agencies like the Federal Trade Commission, Department of Agriculture, and the Federal Maritime Commission onto the producers of stuff who have recently dared to raise prices.

Stuff like gas. Higher prices at the pump must be an oil-​company conspiracy.

It has nothing to do with (and don’t even think it!) governmental actions that impede production, including shutting down the Keystone oil pipeline on Biden’s first day in office or calling a halt to new oil leases on public lands. Etcetera.

Nothing to do with mammoth expansion of the supply of money and credit to facilitate trillion-​dollar government spending sprees.

In case you hadn’t noticed, meat costs more, too. So obviously that must be the fault of malicious meatpackers. Rest assured that beef price inflation is utterly unrelated to pandemic-​policy-​induced labor shortages and delays.

Or to any recent increase in efficiency-​impairing trucking regulations.

Same with sundry supply-​chain problems, like the ships and crates piling up at ports. Greater consumer demand, new pandemic-​induced screening protocols, union rules that prevent ports from operating 24/​7 or improving automation — all irrelevant.

Must be. That’s the script from 1600 Pennsylvania Avenue, anyway.

But if companies can hike prices at will, ignoring whether regulations ease or obstruct production, why doesn’t the meat industry, for example, charge a thousand dollars per pound of flesh?

Well, we know why. 

Demand for a pound of ground beef would slide to zero, or close to it.

If only the government people knew! 

Or would stop pretending they don’t know. 

A consistent recognition of the laws of economics would sure make a great gift — in any season. Instead of bullying and making things worse, government could get out of the way.

This is Common Sense. I’m Paul Jacob.


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media and media people responsibility

Science Isn’t Morality

“Scientist” — what an abused term! When a journalist needs an authority to write about some nutty, wildly improbable affront to common sense, a “scientist” will do.

Case in point, turn to Newsweek:

“Tanning salons are more likely to be located in U.S. neighborhoods with higher numbers of same-​sex male couples,” writes Kashmira Gander, “according to scientists who fear the industry could be targeting the demographic.”

Well, since gay men — for a variety of reasons surely no one will dispute, and which we need not trouble ourselves with — are more likely to use such services than straight men, one might expect marketers to “target” a likely clientele.

But why the “fear”?

Well, don’t panic, but “[t]anning beds are dangerous. They double your risk of skin cancer. Over time, they also cause wrinkles, skin aging, uneven skin texture and dark spots, so even from a cosmetic standpoint, no one should be using them.”

Well, that latter is not a scientific finding. It is up to consumers to decide what acceptable levels of risk they will take to make themselves appealing for the opposite sex, or — in this case — the same sex.

If scientists made fewer moral and political pronouncements, sticking to statements that they can defend with facts and findings, not only would Newsweek and other magazines be easier to bear (I cannot guarantee more subscribers and newsstand sales, alas), but science itself might gain a bit more credibility.

As it is, it is teetering.

Or so somestudies have shown.”

As for me, I’m not gay, but I am married … and a former redhead. Tanning salons don’t profitably pitch their services to me.

Not because of science, but …

Common Sense. Which this is. I’m Paul Jacob.


tanning bed, science

Original image by Alexis O’Toole

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