Actual Keynesian Theory
1] Save and pay off past debt during boom times.
2] Borrow and spend during bust times.
What our national policy has been for decades:
1] Borrow and spend during boom times.
2] Borrow and spend more during bust times.
What we have done, and are doing, has nothing at all to do with Keynes. What we have done, and are doing, is profligate spending of OPM. Period.
Endlessly borrowing from the future is a de-investment in future economies. After decades of this carcass-carving policy, those endlessly de-invested in future economies are here, gasping at our feet. With more than a little irony, and certainly not harmlessly so, our government has delivered this nation from a period of generational worker surplus, with an extra 30 million working Boomers just today leaving the peak of their earnings and tax-paying years, with nothing but a broke-busted credit card to show for its management of 'the economy.'
SS 'solvent to 2037? Ha! That 2037 date is totally without meaning, and shouldn't re-assure anyone except a fool. The Boomer generation was surcharge taxed once, for its entire working life, to create those 'assets' in the SS Trust fund-- the ones that are supposedly not going to be consumed until 2037. But they are self-issued bonds-- IOUs from the government to itself! To redeem those 'assets' representing the once surcharge taxation of the Boomers, the Boomers kids would need to be taxed a second time, for the same 'asset.' The 2037 date is merely the hypothetical future date when the Boomer's kids will have finished being taxed a second time for the same government 'asset.' And as they date moves up, that only means that the Boomer kid's will need to be taxed at a higher rate to pay them off sooner!
Too few, but many, saw this clearly, even in the 70's. Moynihan, on the floor of the Senate in the 70's: "God help us when they realize what we've done to them." I voted for Clark over Reagan in 1980, precisely over this issue.
We are decades past being able to 'fix' SS. All that is left is the slow realization of exactly what the government did with fully 15% of the middle class's lifetime earnings, to pay the benefits of a generation whose middle class paid 6% of their earnings, who were taxed to pay the benefits of a generation who paid 2% of their earnings, who were taxed to pay the benfits of a gneration that paid 0% of their earnings...
As the sinking lifeboat slowly realizes this and panics, the 'solution' offered is ... acceleration of the burn the future policies that got us to this point.
Credit must be balanced by savings/investment, or else there is endemic deflation/value corruption in the economies. The sum of all private and public credit must be balanced by the sum of all private savings/investment, because there is no such thing as public savings/investment; profligate government at every level spends every dime it taxes, and then some at the federal level, with one minor exception: local school district capital accounts. That is it.
Who saves and invests? Those with excess current income. Who saves and invests the most? The rich.
What we are saying when our panicked lifeboat mentality clamors for yet more 'tax the rich and spend it NOW!' solutions is that we want them to save and invest less and let the rest of us spend it all immediately NOW! On top of our massive public future borrowing/debt, we want to accelerate the de-investment in future economies even more.
Said another way, screw our children, we want our free government cheese and band-aids.
We need to look at SS as what it was: a one time generational thank-you to the sacrifices made by the Greatest Generation, all of whose generational pain was front end loaded, and which created every economic opportunity which followed. But now it is time for our generation to accept its share of the generational pain; ours will be back end loaded, as one way or the other, those politically promised SS benefits are going to far less than as promised by vote buying politicians long dead. Our generation pain will be back end loaded, but accepting less than politically promised SS benefits is not nearly the same thing as leaving a leg or worse in Normandy or Iwo Jima, so buck up and accept our share of the generational pain.
We should not screw over our kids or our neighbors kids just to maintain the empty political promises of vote buying politicians long dead.
Friday, July 08, 2011
JFK's federal budget = $100B, at the height of the Cold War.
Adjust for CPI/inflation to 2011: x 7.5 = $750B
Adjust for population growth to 2011: barely x2 = $1500B
Compare to today's actual $3800B+. How to explain?
Medicare in 1966: $3B
Same CPI and Population adjustment: $45B
2011 Medicare budget: $466B. A factor of over 10X over adjusted 1966 amount.
And yet, we could eliminate 100% of defense(at $550B) and 100% of Medicare(at $466B), and still not be half-way between today's bloated $3800B and JFK's fully adjusted $1500B.
Explain that.
"% of GDP" is a sham. It is not the function of self-government to consume a given % of GDP. The measure of government efficiency is in inverse proportion to the % of GDP that it consumes.
When we built our home 20 years ago, we spent a certain % of our income on much needed plumbing. As our income has grown, we did not continue to spend a fixed % of our income on much needed plumbing, nor were we ruled by plumbers, just because we needed plumbing.
Self-government is much needed plumbing, and our elected officials are state plumbers. They are not tasked with consuming a fixed % of GDP, but ... we wish. Obama's 25% is a whopping 5% over historical averages in this nation. As Peggy Noonan wrote, "He made things worse."
Federal bloat has crushed our economies, even as they insist on referring to them as an it.
JFK's 60's economies provided the world's best ... everything. Economic opportunities, educational opportunities, infrastructure programs -- this was the height of building IKE's autobahn/Interstate system -- and even, Apollo Moon Programs.
So how to explain his adjusted $1500B federal budget against today's $3800B federal budget?
The difference has crushed our economies-- the engines that we claim 'must' fire to drive prosperity. These social engineers do not understand how they've killed risk, the desire to run uphill against the gradient, the desire to pull hard on pump handles. They are all about taking and giving, redistributing, shedding risk at the point of a gun aimed at the many for the some.
This nation's financial system used to be governed by 50 sets of independent state banking and lending laws. In court case after court case, and even USSC, those 50 sets of regulations standing in parallel in a distributed governance model were systematically and deliberately replaced with a single point of failure overbearing federal model. This exposed the inherent dangers of monopolistic influence(even in governance) when it failed simultaneously across the entire nation. Monopolies can't be bad only in the private sector, but good things in the public sector, and as we flirt with global totalitarian economic constructs, we should ponder that, no matter how compelling the resulting leverage is. The lesson of massive leverage, over and over and over again, is that it can massively leverage in two directions; good and bad.
There is a reason that suspension bridge cables are built the way they are. There is a reason that 'the Sears Tower' is really 9 towers standing in parallel, like a bundle.
The expression is, "United We Stand." Not, "United It Stands."
If we still had those 50 sets of independent state banking and lending regulations, this financial crisis would have never made it past P8 of the local paper, and "CountryWide" would have been named "StateWide." The failures of a single state running amok with a failed social experiment would have easily been absorbed by 49 still standing state economies, interlinked and yet not lockstepped via an over-bearing single point of failure federal model.
We are in love with the leverage promised by totalitarian solutions, and it blinds us to everything except our ambitions, well meaning or not. When those disparate ambitions converge and sprint the entire nation headlong into a single 'the' direction, heads roll.
The last person you want to be is the last investor into a bubble. And yet, that is exactly what our converged interests managed to do, aimed precisely at that segment of our nation least able to bear that title-- well meaning or not. But, who was there to say "No...stop!" in our nation? Not any POTUS of any party, anxious to tout 'the highest % of home ownership in history." Not any Congress, for the same reason. Not the "CountryWides," raking in milliosn doing God's work. Not HUD, or any construct of government. And certainly not the folks getting access to the warm body tear-off credit. A few academics here and there were waving the nation off, maybe Peter Schiff most effectively. But during the peak of the bubble, anyone who would have actually effectively argued to put a stop to this convergence of interests would have been painted as a 'red-lining' meanie who was trying to keep poor-people away from the 'wealth-building' party.
The failure was not our intentions. The failure was the massively monopolistic, single-point-of-failure nature, scale, and scope of all those converged interests. The failure was our collective stupidity at tolerating over-leveraged models of single-point-0f-failure governance loose in our nation.
The imbalance between weakened states and too-powerful federal models of governance is what failed us all, at once, in the universe's latest demonstration of the stupidity of single-point-of-failure models.
We have barely learned a thing; we are still drawn like moths to a flame to totalitarian global solutions, because we are mesmerized by the leverage. If only our great ideas could benefit from the massive leverage afforded by global totalitarian reach, then we could build 'a' better economy.
We should be building economies, plural. Massively parallel systems, not a single point of failure 'the' system.
But we aren't. Until the wheels fall of 'the' wagon.
(Credit: Ayn Rand, "We The Living" for the plumbing analogy.)
Adjust for CPI/inflation to 2011: x 7.5 = $750B
Adjust for population growth to 2011: barely x2 = $1500B
Compare to today's actual $3800B+. How to explain?
Medicare in 1966: $3B
Same CPI and Population adjustment: $45B
2011 Medicare budget: $466B. A factor of over 10X over adjusted 1966 amount.
And yet, we could eliminate 100% of defense(at $550B) and 100% of Medicare(at $466B), and still not be half-way between today's bloated $3800B and JFK's fully adjusted $1500B.
Explain that.
"% of GDP" is a sham. It is not the function of self-government to consume a given % of GDP. The measure of government efficiency is in inverse proportion to the % of GDP that it consumes.
When we built our home 20 years ago, we spent a certain % of our income on much needed plumbing. As our income has grown, we did not continue to spend a fixed % of our income on much needed plumbing, nor were we ruled by plumbers, just because we needed plumbing.
Self-government is much needed plumbing, and our elected officials are state plumbers. They are not tasked with consuming a fixed % of GDP, but ... we wish. Obama's 25% is a whopping 5% over historical averages in this nation. As Peggy Noonan wrote, "He made things worse."
Federal bloat has crushed our economies, even as they insist on referring to them as an it.
JFK's 60's economies provided the world's best ... everything. Economic opportunities, educational opportunities, infrastructure programs -- this was the height of building IKE's autobahn/Interstate system -- and even, Apollo Moon Programs.
So how to explain his adjusted $1500B federal budget against today's $3800B federal budget?
The difference has crushed our economies-- the engines that we claim 'must' fire to drive prosperity. These social engineers do not understand how they've killed risk, the desire to run uphill against the gradient, the desire to pull hard on pump handles. They are all about taking and giving, redistributing, shedding risk at the point of a gun aimed at the many for the some.
This nation's financial system used to be governed by 50 sets of independent state banking and lending laws. In court case after court case, and even USSC, those 50 sets of regulations standing in parallel in a distributed governance model were systematically and deliberately replaced with a single point of failure overbearing federal model. This exposed the inherent dangers of monopolistic influence(even in governance) when it failed simultaneously across the entire nation. Monopolies can't be bad only in the private sector, but good things in the public sector, and as we flirt with global totalitarian economic constructs, we should ponder that, no matter how compelling the resulting leverage is. The lesson of massive leverage, over and over and over again, is that it can massively leverage in two directions; good and bad.
There is a reason that suspension bridge cables are built the way they are. There is a reason that 'the Sears Tower' is really 9 towers standing in parallel, like a bundle.
The expression is, "United We Stand." Not, "United It Stands."
If we still had those 50 sets of independent state banking and lending regulations, this financial crisis would have never made it past P8 of the local paper, and "CountryWide" would have been named "StateWide." The failures of a single state running amok with a failed social experiment would have easily been absorbed by 49 still standing state economies, interlinked and yet not lockstepped via an over-bearing single point of failure federal model.
We are in love with the leverage promised by totalitarian solutions, and it blinds us to everything except our ambitions, well meaning or not. When those disparate ambitions converge and sprint the entire nation headlong into a single 'the' direction, heads roll.
The last person you want to be is the last investor into a bubble. And yet, that is exactly what our converged interests managed to do, aimed precisely at that segment of our nation least able to bear that title-- well meaning or not. But, who was there to say "No...stop!" in our nation? Not any POTUS of any party, anxious to tout 'the highest % of home ownership in history." Not any Congress, for the same reason. Not the "CountryWides," raking in milliosn doing God's work. Not HUD, or any construct of government. And certainly not the folks getting access to the warm body tear-off credit. A few academics here and there were waving the nation off, maybe Peter Schiff most effectively. But during the peak of the bubble, anyone who would have actually effectively argued to put a stop to this convergence of interests would have been painted as a 'red-lining' meanie who was trying to keep poor-people away from the 'wealth-building' party.
The failure was not our intentions. The failure was the massively monopolistic, single-point-of-failure nature, scale, and scope of all those converged interests. The failure was our collective stupidity at tolerating over-leveraged models of single-point-0f-failure governance loose in our nation.
The imbalance between weakened states and too-powerful federal models of governance is what failed us all, at once, in the universe's latest demonstration of the stupidity of single-point-of-failure models.
We have barely learned a thing; we are still drawn like moths to a flame to totalitarian global solutions, because we are mesmerized by the leverage. If only our great ideas could benefit from the massive leverage afforded by global totalitarian reach, then we could build 'a' better economy.
We should be building economies, plural. Massively parallel systems, not a single point of failure 'the' system.
But we aren't. Until the wheels fall of 'the' wagon.
(Credit: Ayn Rand, "We The Living" for the plumbing analogy.)
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