One of the central points of IER’s critique of “green jobs” studies is that these studies would assume that jobs could be “created” without destroying other jobs. And it’s not just an issue of taxes or borrowing, but even of workers quitting their current jobs and going into the subsidized sector. To illustrate, suppose the government goes ahead and subsidizes solar panel manufacturers, and they end up hiring 20,000 more people. Unless every single one of those new hires had previously been unemployed, it would be overstating to say that the subsidy “created 20,000 jobs.”
Ah, but these are subtleties. It’s almost conceding too much to argue with the PhDs from the Center for American Progress on the above point, when the people actually writing the legislation say things like this:
Incidentally, what shocks me with the clip is not that Pelosi obviously botched whatever her factoid was–presumably her staff told her to go with 500 thousand and Pelosi isn’t good with numbers.
No, what really shocks me is that the CNN reporter just plays that, and then moves on to the “Republican response,” without saying, “Of course, there aren’t even that many Americans, so Speaker Pelosi’s figure doesn’t make any sense. We contacted her staff, and they clarified blah blah blah.”
Nope, it’s the media’s job just to blindly report whatever our fearless leaders say, with no analysis at all, even if it’s demonstrably false. That’s not an issue of “attacking Pelosi,” or “opposing stimulus,” it’s an issue of knowing that you can’t have more Americans lose their jobs in a month than there are Americans.
In doing research for the book, I had an epiphany. And what is embarrassing is that this obvious truth has been sitting around for more than a century, but it was buried by Milton Friedman and others: During a financial panic, central banks should raise rates. An excerpt from my Mises Daily:
If the owner of a trucking company experiences a huge rush for his services, he might decide to postpone essential maintenance on his fleet, to take advantage of the unprecedented demand. But during this period he will be charging record shipping prices to make it worth his while to deviate from the normal, “safe” way of running his business. He will only be willing to bear the extra risk (either to the safety of his drivers or just the long-term operation of the trucks) if he is being compensated for it.
The same is true for the banks. Just as every other business during a recession wants to bolster its cash reserves, so too with the business that rents out cash reserves. If there’s a hurricane, the stores selling flashlights and generators should raise the prices on those essential items, to make sure they are rationed correctly. The same is true for liquidity — the moment after the community realizes they are in desperate need of it.
We conducted this interview (mp3) last Wednesday. It was a full hour, with (I believe) only one commercial break at the bottom of the hour, so lots of ground covered here. Also, their show wasn’t the standard right-wing shock jock stuff, so it was a different type of interview. The official topic was my book on capitalism, but we actually didn’t spend much time tied directly to it.
Rather than publish another essay, though there have been some fine ones lately, about just what really happened during America’s last episode of so-called socialism, we’ve opted to go to the visual record. As Marshall Auerback noted, in the process of modernizing the rural South and upgrading the infrastructure of America’s largest cities, President Roosevelt’s New Deal left behind a durable, physical and very visible legacy of schools and hospitals — even aircraft carriers. (We’ll leave discussion of Social Security and unemployment insurance for another time.) The following slide show gives a small sampling of the bricks-and-mortar achievements of red, white and blue “socialism.”
Oh my apologies! It’s a TIME article from 1933, not today. Obama will wait at least 6 months, easy, before he pulls something like this (HT2 Tim Swanson):
On March 9 Congress passed the Emergency Banking Act which empowered the President to call all gold into the Treasury, with heavy penalties for those who disobeyed his orders. At that time $1,400,000,000 in gold was in circulation, most of it hoarded. In the next 30 days more than one-third of this was turned in to the Treasury.
On April 5 President Roosevelt issued an executive order requiring holders of gold to turn it into the Treasury in exchange for paper currency under penalty of ten years imprisonment and $10,000 fine. Department of Justice agents began visiting known hoarders who, to date, have surrendered $38,901,009 in gold. During the same period unknown hoarders have given up more than $300,000,000. Attorney General Cummings issued threat of prosecution against recalcitrants who still held $560,201,000.
On Aug. 28 President Roosevelt issued another order requiring every possessor of gold to register his holdings with the Treasury before Sept. 18. Those who failed to do so were also to be punished by ten years imprisonment, $10,000 fine.
Somebody should really write a book on this stuff…
Well employers cut 598,000 jobs in January, “the deepest cut in payrolls in 34 years” though that is misleading because the population is bigger now. I need to start thinking of where Wenzel is buying me dinner.
On the other hand, I am beginning to worry about my price inflation forecast. Now that CNBC is running front-page stories on how the US could have 200% inflation, I’m thinking we will probably get deflation.
We all know that the market system is an amazing decentralized social planning and allocation mechanism if externalities are small, if returns to scale are in general diminishing, if we are happy with the distribution of wealth and the concommitant distribution of economic power it gives rise to, and if Say’s Law holds–if supply does indeed create its own demand, and we don’t have to worry about large-scale unemployment and deep depressions.
Hazlitt doesn’t recognize any of these ifs. And that is what makes his book very dangerous indeed to a beginner in economics, because the ifs are, all of them, important qualifications and caveats….
I find it astonishing that [Hazlitt] doesn’t recognize any of these ifs. I find it especially astonishing that he doesn’t recognize the last of them. The 1930s were the era of the Great Depression–the time when Say’s Law was most irrelevant. Hazlitt lived through them. Yet the Great Depression years seem to have had no impact on Hazlitt whatsoever.
Hmm that’s interesting. You know what I find astonishing, Professor DeLong? That you don’t acknowledge that Hazlitt wrote a several hundred page, almost line by line critique of the General Theory. So, did you not realize that, or just think it wasn’t worth mentioning to your readers?
Also, at the end DeLong accuses Hazlitt of misrepresenting Keynes with the “in the long run we’re all dead” line. DeLong gives the original context, and…I don’t get it. Keynes is saying the short-run commands the attention of policymakers, because in the long-run we’re all dead. So where’s the misrepresentation? That’s exactly what Hazlitt said was an awful perspective, to tell policymakers to focus just on the crisis and ignore the long-run consequences of the interventions.
For those newcomers who never read Hazlitt, I strongly recommend his slender volume. It is truly the single best introduction to economics ever written–superior even to the Politically Incorrect Guide to Capitalism. Here it is free (pdf).
A Free Advice reader wrote and told me he was planning on downsizing by selling his current house, moving into an apartment, and then buying a smaller house once he found a good bargain. He wanted to know if there were any snags with this plan, given my economic outlook. Here is what I said:
I definitely agree that downsizing your basic monthly expenses is a
great thing to do, and so in that respect getting into (first) a lower
rental payment and then (second) a lower mortgage payment, is a great idea.
I think it’s also true that buying and selling a house might be more difficult as time goes on, because of all the interventions in the bank sector. Just to give you an example, if the government forces banks to take a haircut (what a cute term) on their mortgages for people who make less than blah-blah per year, well heck if I’m a bank I don’t think I’m going to want to give out mortgages to poor people in the future. The government might just come in a knock off 20% of the principal again.
So because of that stuff, it’s true that if you are going to sell at some point, you might want to hurry up and get out of Dodge while the rules are still being obeyed.
My only concern is that there could be serious price inflation over the next few years. In that scenario, you wouldn’t want the major inflation to hit while you were in between houses with your money sitting in bank CDs or something.
I don’t mean to patronize you but let me just make sure you get what I’m saying: Using big scary numbers, let’s say that over the next 3 years, all prices and wages roughly double. In that case, you actually would do well to have a big fat mortgage on a nice house, because your monthly mortgage payments (assuming you have a fixed-rate mortgage) are going to stay the same, while your income will rise. It’s not so much that you welcome the inflation, but it is a big hedge for you to have a secured, fixed-rate loan denominated in dollars, if the dollar tanks.
Now if you were able to sell your current house, and then buy the smaller house, before any of the poop hits the fan, you would be fine, because you’d have that cushion with your second mortgage. But if the major inflation hit while you were in between houses–and you had your equity from your first house tied up in things that didn’t respond well to the rising prices, like bonds–then you could really take a hit.
So what is the result of all this hand-wringing? I would mention the possibility of renting out your current house while you live in an apartment. So long as you can rent it for more than you have to pay in rent in your apartment, you are still reducing your monthly expenses, even if you can’t rent it out for enough to cover the mortgage payment. This way, if serious inflation hits while you are still in your apartment, you will still have a big mortgage that becomes relatively lighter when the dollar takes a beating.
It’s a huge decision, obviously, and it would be bad if you got stuck with your first house and couldn’t find a buyer when you wanted to buy your second one. If you can sell it now and are happy with the price you get, maybe that’s the overall wisest thing.
But if you list it and find that only vultures are making you low-ball offers, you should seriously consider hanging on to it and renting it out while you move into the apartment.