Defenses of Trade Deficits That Could Mask Danger
This EconLog post from Scott Sumner, and the accompanying post from Don Boudreaux, provide much useful pushback against typical worries about trade deficits. However, Sumner in particular makes some strong claims that are misleading, and the two posts together could understandably make critics think that free traders are naive and distracting people from a genuine danger.
To be sure, I am not doubting the case for free trade. Rather, I’m saying that when Scott and Don write posts with such confidence (bordering on smugness), if they actually overstep, then it really makes it hard to convince critics who start out suspicious.
The easiest way for me to illustrate is through a simplistic fable. Because I’m still sick of apples from the Great Debt Debate, I’ll use bananas.
Originally all of the real estate in the USA is owned by Americans. The only output good is bananas. There are 100 units of land, and each produces one banana per period. Real GDP is 100 bananas. In the beginning, Americans consume all the bananas. GDP = C + I + G + Nx = 100 + 0 + 0 + 0. There is no trade deficit (or surplus). Let’s denote this original situation as Period 0.
Then at some point a US firm wants to fertilize some of the land to make it more productive, but it can’t raise any domestic capital because American savings is zero. So Chinese savers lend the US firm the money. Specifically they lend the market equivalent of 20 bananas worth of fertilizer.
So we now have the following:
Period 1: GDP=100; C=100, I=20, G=0, Nx=-20.
Specifically, the Americans still eat all 100 bananas that are grown domestically, and the Chinese send over 20 units of fertilizer (measured in bananas’ of market value). GDP is still 100 bananas, while domestic investment is now 20 bananas and we have a trade deficit of 20 bananas. Because there were no earnings on foreign investments either way, the current account deficit is also 20 bananas, while the capital account surplus is 20 bananas. Americans imported more goods (fertilizer) than they exported, while foreigners invested more in American assets than vice versa.
Now the interest rate on this debt is 5 percent. Further assume that the increase in physical yield is 5 percent. (I’m assuming the relative prices of bananas, land, and fertilizer all stay the same, just to keep it simple.) Just to isolate the effect of the original bout of Chinese saving/investment, suppose there is no new investment. Then we have:
Period 2: GDP=101; C=100, I=0, G=0, Nx=1.
Specifically, the application of 20 units’ worth of fertilizer in Period 1 has caused a permanent increase in real output from the land, to the tune of 1 extra banana per period. Americans still consume the 100 bananas they always had, while 1 banana is exported to the Chinese who consume it as interest on their debt. The US has a trade surplus of 1 banana, but a current account deficit/surplus of 0 (and of course a capital account surplus/deficit of 0).
Now, however, suppose that the Chinese keep rolling over their interest earnings on the US debt. That is, instead of consuming their interest income, instead they acquire more US assets. Yet for whatever reason, the Americans do not match this influx of additional Chinese savings with increased domestic investment, but rather with increased domestic consumption.
The simplest way to think of it is to start by studying the numbers in Period 2. When that 1 banana in interest income flows to China, they redirect it to lend to an American who eats it today. Now how does that American convince the Chinese owner to do that? He can either issue debt (i.e. a promise to pay bananas over the course of the future), or he can sell some of his land.
Let’s assume he sells the land, which is capitalized at 5 percent. That is, to receive 1 banana today, an American sells the Chinese person 1/20th of a unit of land.
At some point the Chinese own half of the real estate in the US. They again reinvest all of their earnings rather than consume any bananas. Let’s look at the numbers for that period:
Period n: GDP=101; C=101, I=0, G=0, Nx=0.
All 101 bananas physically produced on US soil are eaten by Americans. But what the GDP figures don’t show is that only 50 of the bananas were produced on land owned by Americans. The other 51 were grown on land owned by the Chinese. Yet rather than eat them, the Chinese sold these bananas to Americans, in exchange for about 2.5 units of US soil. Thus, an the end of period n, the Chinese now own about 52.5 units of US soil, while Americans only own about 47.5 units.
[UPDATE: In this period, the current account deficit is 51 bananas and the capital account surplus is 51 bananas. The Chinese earn 51 bananas’ worth more of real income from US assets than Americans earn from their Chinese assets–which are $0 in this exercise–and this is matched by the Chinese acquiring on net 51 bananas’ worth of additional US assets this period. But note that there is no trade deficit in this period. The fact that Americans are “living beyond their means” is reflected in the net sale of assets [financial claims on future US banana output] to the Chinese, not in the physical importation of goods made in China.)
In the long run, the Chinese eventually acquire ownership of just about the entire real estate in the US. Because the Americans now have no assets to sell, the Chinese revert to consuming the annual yield of their assets. The long run numbers look like this:
Period LR: GDP=101; C=0, I=0, G=0, Nx=101.
The US trade surplus is 101 bananas, while the current account deficit/surplus is 0, and the capital account surplus/deficit is 0. No American eats anything. All US output is shipped to Chinese for their consumption.
Now here’s what’s really interesting. At every single point along the way, free market economists were blogging that there was nothing to worry about, and that the critics were simply racists who hated the Chinese. For example, one economist pointed out that the Americans couldn’t possibly be living beyond their means, because in no period did C ever exceed GDP.
Another economist pointed to the example of Period 1, when the trade deficit fueled an increase in domestic investment, paving the way for permanently higher GDP. This was obviously benign, and a reflection of the superior investment opportunities in the US vis-a-vis China.
These free market economists were particularly amused when the critics engaged in silly rhetoric by claiming that “Americans were selling their birthright for a mess of pottage,” etc. The free market economists argued that selling US real estate was the same thing as shipping a banana plant overseas, and yet the former was counted as an import while the latter was counted as an export. For some arbitrary reason, the people at the BEA thought selling real estate was somehow different from exporting bananas. What mercantilist idiots!
P.S. It should go without saying that I am not saying a tariff or other government restriction on trade would help things. I’m just trying to get you guys to see why people like Vox Day think libertarian economists are fools.
P.P.S. Don Boudreaux was being much more careful than Scott Sumner was. Don was arguing that trade deficits might not be a problem, etc. But after you’ve digested my fable above, go re-read Scott’s post. He is way too sweeping in some of his statements. And look at how he dismisses the quite serious objection by Phil in the comments, like it’s a real chore to have to answer somebody who gives a counterexample to his sweeping (and unqualified) statements in the original post.
P.P.P.S. I am particularly sensitive to this because I did a very similar thing with Peter Schiff back before the financial crisis. (In this piece I was pretty careful, but not so much in this piece, forcing me to write a mea culpa.) I’m not saying I’m better than Scott or Don, I’m saying I’m wiser since I got burned before. In particular, neither Scott nor Don even mentions the fact that the Chinese hold $1.2 trillion worth of Treasuries. What reason do we have to think that this has gone hand in hand with wise domestic investments that boost US output?
Yeah, owned by Native Americans, until that business with the beads of course. Supposedly Vox Day heard about this from some old walnut face guy sitting on a mountain, might have been his ancestor or something.
I think it’s fair to point out that there’s something missing from your story when told from a libertarian perspective. You don’t have “Americans” you have 100 individual people who happen to be American and also each owns 1 unit of land and produces and consumes 1 banana. Twenty of those individual Americans signed a contract with someone in China at 5% interest and took the fertilizer to each improve their unit of land. The economy is not built out of aggregates.
This is important because it is the individual American making the choice to invest or not invest, and it is the individual American making the decision to sell land and consume capital. Once one particular American’s capital is gone they will find they personally produce nothing and therefore cannot consume any more. The disaster won’t happen suddenly as you have described, it will happen little bit at a time. Purist libertarians would say that the individual made the choice so the individual is responsible for the outcome… too bad!
HOWEVER… if this scenario happened in Australia, the individual who sold her capital for consumption would not find herself starving, she would instead come under the wing of the welfare state and all of those individuals who did NOT sell to the Chinese would be forced to transfer some of their income over to her. This in turn creates an incentive for more individuals to sell up their capital seeing as they no longer get 100% of the produce, and each one that sells must then cause taxes to increase which means the incentive to sell gets even bigger. This isn’t really an open borders problem, it’s a welfare state problem but those open borders make it worse. The society has a problem either way but with the open borders it rapidly accelerates into a bigger problem. Without the open borders they might figure themselves out. Your story as told above presumes that “Americans” operate as a gestalt entity that redistributes produce within itself, which is kind of similar to saying there is a welfare state in operation.
I guess what I’m saying here is that if I know that an individual who consumes capital will come to me afterwards and force me to keep their consumption stream going (at my own expense) then I’m kind of stuck in a position where I need to force them NOT to consume that capital. We end up with a kind of collective ownership (I know, I know, can’t exist, blah blah).
Tel wrote:
This is important because it is the individual American making the choice to invest or not invest, and it is the individual American making the decision to sell land and consume capital. Once one particular American’s capital is gone they will find they personally produce nothing and therefore cannot consume any more. The disaster won’t happen suddenly as you have described, it will happen little bit at a time.
Good point, Tel. So we would only need to start worrying if we noticed that growing segments of American society were finding it really hard to earn an income, and ended up relying on handouts? In that kind of sci fi scenario, the critics would be right?
“So we would only need to start worrying if we noticed that growing segments of American society were finding it really hard to earn an income, and ended up relying on handouts?”
lol…. Says a man comically oblivious to the disaster of free trade by absolute advantage that has already devastated America, along with open borders.
Stop plagiarizing Trump, LK.
LK now you have violated not just the laws of economics, but of comedy. Look again at my comment. I’m being sarcastic, saying that Tel has just described exactly what is happening right now in the USA.
(Now, it’s not because of free trade policies, to be sure, but because of other policies that you recommend.)
Of course part of the explanation for the current economic malaise is free trade by absolute advantage. You lost your debate to Vox Day by a landslide.
The truth hurts, Bob.
Free trade by ANY form of “advantage” is not a disaster. What is a disaster is your hatred and ignorance masquerading as economics. You have never shown, and never will show, how introducing violence and coercion against innocent people, makes them worse off. That is the implication of calling free trade a disaster.
You’ve never been able to show how the foundation of Rothbard’s natural rights ethics is anything but horsecrap:
http://socialdemocracy21stcentury.blogspot.com/2014/06/rothbards-argument-for-natural-rights.html
We do not need recourse to ANY setof rights or ethics to know you made a factually incorrect statement about the supposed increase in living standards that come from introducing violence against individual’s persons and property. It is all descriptive.
I also don’t click on links to spam sites.
It is also notable that American libertarianism is collapsing into the Alt Right, because your fellow libertarians are more and more realising the economic flaws of libertarianism.
More and more, protectionist conservatives and the Alt Right are going to be a great intellectual challenge for you, and not just left-wing Keynesians or liberals.
Were you in the drama club as a kid?
LK and his hero Trump have proven time and again that the problems of the USA and the world are not caused by funny money emissions, “private debt” loans created by regime banks out of nothing, wars funded and facilitated by funny money emissions and the resulting artificial and unsustainable price, investment and capital structure. Plus the evisceration of property rights vis-a-vis the third world. (All of which, by the way, are examples of failed libertarianism in action!) LK directly engages these topics hourly. Go check for yourself.
Tell us the definition of a “market clearing price”, Bob I-don’t-care-about-market-clearing Roddis.
lol… even though America was one of the most protectionist nations in the Western world down to the 1940s.
Finally. LK has now admitted that laissez faire did not exist and therefore could not have failed so as to justify Keynesian analysis.
It’s like Hillary blaming the Russians for the email hacks – – which authenticates them.
“It is also notable that American libertarianism is collapsing into the Alt Right, because your fellow libertarians are more and more realising the economic flaws of libertarianism.”
There were several people who referred to themselves as libertarians that I used to argue with a lot in a Libertarian group on Facebook. One of them supported destroying Mecca. Another referred to himself as a “white nationalist” – he wrote a blog post about me once. This was all before Trump. Hoppe/Rockwell always supported closed borders, and Hoppe wanted the country to be run by people who acted as if they owned it, an extreme authoritarian concept. Alex Jones was always an extreme joke, and never an actual libertarian. Molyneux was supporting police brutality and other junk long before his fall to the alt-right.
The truth is, libertarianism always had these people. They were never libertarians, they never supported open borders, they just felt as if the libertarian movement was a good opportunity to spread their junk and make some money.
But things are changing now. The authoritarians, who I have always had to deal with and I’ve been trying to push out of the movement for years, are starting to not refer to themselves as libertarians anymore. And this is doing wonders for libertarianism.
Gary Johnson, who used to be a closed borders advocate, has completely flipped his position to something much closer to open borders. He’s polling over 5 times as high as he got last time.
But most importantly, who’s leading? Not a right wing xenophobe like you. Trump is about 6 points behind. The leader is Hillary Clinton, cited by the Rothbard decades ago. While Trump yells about being scared of Muslims and Mexicans, Hillary Clinton says things like “My dream is a hemispheric common market, with open trade and open borders”. That’s right, LK. Someone who has privately supported open borders and free trade is about to win the White House. You have lost, the alt right is dead, Milo is banned from Twitter, and the Libertarian Party and an open-borders supporter are about to make history.
If libertarianism is collapsing, please, let it collapse again!
I am certain that these former “libertarians” were meticulous in their understanding of the NAP, Cantillon effects, price distortions, economic miscalculation the permissible application of ethnic discrimination and the advantages of strict contractual bylaws in their analysis of the failures of actual libertarianism.
Bob Roddis vs. The World
“I don’t feel I have to wipe everybody out, Tom. Just my enemies.”
I’m very surprised to learn that Gary Johnson is a better libertarian than Hoppe/Rockwell. Tell me more.
Clinton hack John Oliver does a good job taking down Gary Johnson on his show last week.
https://www.youtube.com/watch?v=k3O01EfM5fU
“Bake the Cake” means that if you do not bake the cake, you will be sued by the government or a person with whom you have no contractual or other relationship. If you lose, the police will come and seize your property to pay the “victim”. Sounds Rothbardian to me.
Andrew – Hoppe says that the government should run the country as if they own it (“The best one may hope for, even if it goes against the “nature” of a democracy and thus is not very likely to happen, is that the democratic rulers act as if they were the personal owners of the country and as if they had to decide who to include and who to exclude from their own personal property (into their very own houses).”). He’s no more an anarchist than Marx. Wanting an imaginary anarchist world is cool, but it isn’t actually going to happen anytime soon, so what you support in the meantime is what matters. Marx wants a super powerful state in the meantime (and then the state will wither away). Hoppe wants a system of government ownership of people in the meantime, a system even more authoritarian than the old feudal system, where there areno limits on the power of our benevolent rulers.
Gary Johnson has made a lot of mistakes and supports a lot of statist policies. But he doesn’t think that the best system we can hope for is a system of literal slavery. He wants to reduce government power in the meantime.
Bob Roddis – I agree that the people I named weren’t ever real libertarians, but I think your standard is way too strict. It would imply that people like Lysander Spooner and the vast majority of libertarians aren’t actually libertarians, if I’m understanding you correctly.
There’s a fair argument for Johnson not being a libertarian, but I don’t think the standard should be nearly that strict.
American libertarianism is not collapsing into anything. It is a theory which serves as a set of norms of action, and the only way to collapse it is by other ideas.
Protectionism is not going to be any greater challenge to libertarianism, since libertarianism has already refuted it ages ago. What you fail to grasp is that old, refuted ideas often come back in slightly different forms that superficially appear to be fresh new ideas, when in reality they are not. For example Keynesianism is just the old refuted doctrine of mercantilism in a slightly different form.
“Protectionism is not going to be any greater challenge to libertarianism,”
lol… even though America was one of the most protectionist nations in the Western world down to the 1940s.
Yeah, you libertarians had no “challenge” from protectionism.
Idiot.
LK, where did MF say that protectionism was never a challenge for libertarians? He said libertarians refuted it ages ago, implying that it once was a challenge. He said that it won’t be a greater challenge after this Trump thing than before, which is probably true, since Trump is a joke that the large majority of people dislike (especially young people) and when he almost certainly loses his awful ideas are going to appear even more ridiculous.
And why the hostility?
You say “even though” as if your long is proved by mere reference to a time in history.
Protectionism during the 1940s decreased living standards from what they otherwise would have been.
Libertarianism had zero challenge from protectionism. Protectionism started and has always been a myth that has been refuted.
Introducing violence and coercion against innocent people does not make living standards higher. Free trade and peaceful cooperation does.
Reece,
Why the hostility? LK is intellectually and emotionally stunted. He probably was not breastfed as a baby.
LK:
“the disaster of free trade”
One cannot be “oblivious” to what does not exist.
“along with open borders.”
That is a statist creation.
A free market has “closed borders” right down to the individual land owner, for it is the property owners who decide who to deal with at such close proximity.
Such a hypothetical scenario would indeed worry me.
If by some remote chance similar things were happening in BOTH America and Europe at the same time, I’d be even more worried.
Bob: I haven’t read Scott and Don’s posts.
What you say here seems right to me. But we don’t need international trade or borrowing to make this point.
If an individual consumes more than his income (GNP not GDP) eventually his wealth goes to zero. The GNP vs GDP distinction is important.
Hey Nick,
Thanks. You’re right, but I’m trying to get people to understand what GDP is. I think it will be harder if I then try to teach an entirely new concept.
(To be clear, Scott and Don know what GDP is. I’m talking about the average reader.)
Wait a minute. Are you telling me that selling my house for an extra banana a year was a bad idea?
Whoa I hope you got at least 20 bananas for it. The land alone is worth 20.
No, but I did get a green banana. Once that thing turns yellow, I’m planning on flipping it for a nice condo on the beach.
The banana producers in your example run down their wealth to increase consumption in the short run. Sometimes (such as if they will die when they have sold all the land and have no interest in leaving a legacy) this is rational behavior.
Even if it not obviously rational and the banana farmers will end up landless and starving its not easy to see what could be done to stop them from a free market perspective
Can you be more specific about what you thought was wrong with Sumner’s post ?
If I run down my wealth then (in money terms) it makes no difference if I do this by selling my car rather than part of my farm. If I freely swap part of my farm (that has been in my family for generations) for my neighbors car then I am actually better off despite having “sold part of my birthright”. If I use the car to earn a higher income than I did from farming then I am not only better off but also will increase my wealth if my level of savings stays the same,. Looking at these things from the perspective of international trade doesn’t seem to change anything.
Transformer wrote:
Can you be more specific about what you thought was wrong with Sumner’s post ?
I really don’t understand why it’s so hard for people to understand how arguments work.
Sumner is arguing that the critics are wrong to warn that a day of reckoning is coming, because (a) GDP > C and (b) selling US real estate is the same thing as exporting a mobile home. So I come up with a counterexample to show exactly what the critics are warning about, that satisfies all of the “safety conditions” Sumner listed.
“I really don’t understand why it’s so hard for people to understand how arguments work.”
Really ?
Scott’s post starts by stating what its point is “The US has been running large current account deficits for many decades. Commenters often suggest that this means we are becoming a debtor nation, living beyond our means. This is not true.”.
He then gives a good analysis to explain why he thinks its not true, including the claim that as US wealth is increasing though time it is not actually living beyond its means.
You post is about a fictional America that IS living beyond its means and ends up landless. I suspect Scott would agree that this fictional scenario is theoretically possible – its just not what the data is telling is actually happening to the real US today.
So Its still not clear to me what your beef with his post actually is.
Sumner says ” GDP in the US is much larger than US consumption. ” and concludes that this means that the US is getting wealthier – I think I agree that your example shows that this may NOT be true.
However I’m not sure that is very relevant to his overall argument – which is that the US actually is getting wealthier.
I think Nick Rowe nails it – Scott should have said “GNP in the US is much larger than US consumption.” and he is home free.
I agree Transformer that if Scott had said something different from what he actually wrote, then maybe he would have had a valid argument.
As it stands, if we assume “we are growing wealthier over time” means “US real GDP is increasing” (which I think is what he means in context), then literally every single argument he put forth in that post is either a non sequitur or is wrong.
Here is an example of a false statement:
Scott: “The international accounts balance out perfectly, once you include trade in goods, services, and assets. The overall balance of payments deficit is precisely zero, if measured properly. Some countries, such as China, are relatively good at exporting goods. They run a positive trade balance. The US is relatively good at international investment—we run a persistent trade deficit, financed by our profits on overseas investments.”
No, that is not true. Here Scott is making it look like our trade deficit is simply due to superior earnings on foreign investments. But that would mean the US is running a current account surplus or balance, which is not true.
To simplify this a bit for my benefit:
If an individual (or a country) is consuming more than their income then their wealth must be falling.
If a individual (or a country) has increasing wealth then they must be consuming less than they earn.
A search on google indicates that US wealth (assets – debts) is increasing.
So even if the US is buying foreign goods by taking out loans with foreigners why would this be a problem if these loans were backed by additional assets accumulated by the US during the same time.
Isn’t that (perhaps with some minor terminological errors) what Sumner is saying ?
Transformer wrote: “However I’m not sure that is very relevant to his overall argument – which is that the US actually is getting wealthier.”
This has to be my last post for a while.
Scott listed several specific things. Anything specific is either a non sequitur or wrong, or is unclear because it is an assertion.
So you’re right, if we take the “over time we are becoming wealthier and wealthier” and strip it away from the GDP comment–even though it looks like he is linking them–then that statement, if we take it to be true, refutes the claim that we are living beyond our means.
However, he doesn’t tell us how he knows that we are becoming wealthier and wealthier. What if, for example, US households’ net worth is rising largely because of the gains in equity markets since 2009? If somebody like me thinks the artificially low interest rates of the Fed have fueled a massive bubble in stocks that is unsustainable…
I’m not merely being pedantic. As you well know, I think a major economic crisis is in the works. So when my libertarian allies are mocking people who are warning about a coming day of reckoning–and using some arguments that are invalid while doing so–I am doing my part to help shield the case for free trade from what I perceive to be incaution.
Yes, this strikes me as a better and more Austrian counterargument.
I would not rule out the possibility that weirdness in the financial system, plus Chinese trade policy, has distorted asset values making it hard for people, to meaningful gauge their wealth – and that this could end badly.
Let me put it this way Transformer:
Sumner did NOT say, “Hey, it’s entirely possible that Americans are foolishly consuming their capital, living on borrowed time, living beyond their means. But if people want to be foolish and shortsighted, they have a right to do that.”
That is not at all what Sumner wrote. He was quite confidently saying the critics were wrong, and his two chief arguments were irrelevant, as my post illustrates.
For an analogy, it’s like Sumner saying, “The number X can’t possibly be prime, because we know that 2X is even.” If I write a post, “Suppose X is 3? Note that 6 is even and 3 is prime,” you don’t resurrect Sumner by saying, “Yeah but X might be 4, which is what I think he was saying.”
>For an analogy, it’s like Sumner saying, “The number X can’t possibly be prime, because we know that 2X is even.” If I write a post, “Suppose X is 3? Note that 6 is even and 3 is prime,” you don’t resurrect Sumner by saying, “Yeah but X might be 4, which is what I think he was saying.”
… that’s actually what most internet debates look like to me, with people frequently talking past each other and trying to “salvage” arguments by fundamentally changing them. :-p
In https://mises.org/library/falling-dollar-after-all from 2007, you say:
“Well, I must now report that after wading hip-deep into the numbers for a consulting project, I have acquired “more information” and now agree with the alarmists this time around: I now believe that at present, the US current account deficit is indeed unsustainable, and I expect the dollar to fall (perhaps sharply) against other major currencies over the next few years.”
Did you take any bets out on that ?
Good, Transformer, I was wondering if someone would pounce on that. I made what I think is the same mistake Schiff made, that the crisis was so bad that people rushed to the safety of Treasuries.
But, you are right to bring that up.
The answer seems so trivially simple, I have to assume I am missing something obvious, but for the life of me I cannot identify it. I hope somebody takes a few minutes to show me the logic flaw, as this has always struck me as much ado about nothing.
Bob’s example is not wrong, per se, but it describes a completely static economy without any new wealth creation. By definition, any closed system with net outflows runs its stocks down to zero eventually, whatever its constituent parts. So the example is not particularly helpful, I would argue.
Bob’s example does not allow for the Chinese to purchase NEW assets. For example, what if through learning-by-doing, or technological breakthroughs, or methodological improvements, or any other host of productivity enhancing activities that fewer resources are required over time to produce the banana total in the example? What if those resources are then deployed into other, different, yet valuable tasks (pick your activity) through the form of startups, or through a single conglomerate? What if those startups sell shares, and their value grows at a rate so that 20% of its growth in value is sold each year to foreign entities to match the negative balance of trade? In other words, what if we modeled an actual, growing economy with increasing wealth over time, for which some of that wealth is exchanged to foreigners for goods and services? Is this not sustainable in perpetuity?
Using Bob’s example, suppose the fertilizer doesn’t generate a 5% return, but rather a 25% return (I’m using these numbers for a reason – see below). Then, when the Chinese reinvest their interest (i.e. the value of their net imports), they are purchasing a fraction of newly-created wealth, not the underlying land, or any other original asset base.
A well-functioning economy produces goods, services AND assets, i.e. increased wealth or net worth. By definition, a negative current account balance is the opposite of a positive capital account balance. But capital is NOT static, so there is no need to profligately “sell one’s birthright” for current consumption. By my very rough math, total public corporate wealth held by Americans is increasing at roughly $2.5-3.0 trillion each year, while the current account deficit is $500 billion per year. The latter seems huge, but said differently, Americans are “choosing” to liquidate less than 20% of the ADDITIONAL wealth generated each year in exchange for net imports of that amount. Why does that activity necessarily imply something negative or nefarious?
DMS wrote:
By definition, any closed system with net outflows runs its stocks down to zero eventually, whatever its constituent parts. So the example is not particularly helpful, I would argue.
The example *is* particularly helpful, if someone has just argued that (a) GDP>C means we aren’t living beyond our means and (b) selling real estate is equivalent to exporting products.
Its not a closed system if it has net outflows, is it ?
Bob Murphy is very good here explaining the good, along with the bad, in the Trump/Navarro “White Paper”.
http://contrakrugman.com/ep-55-krugman-trump-and-trade/
Slightly separate issue, but I would argue that Hillary Clinton’s interest in open borders is based neither on any principle, nor based on a love of people. It is purely a way to import likely Democrat voters.
Probably some of her corporate donors also like the idea, because they see it as a way to keep wages down and break the unions. If you aren’t basing your thinking on maximum cynicism, you just won’t be able to understand the political process.
What’s more, Clinton’s policy involves cranking up the welfare state while also maintaining an open borders posture. Milton Friedman already explained why this cannot possibly be a success.
Personally I think Trump has much better support than the polls make out, mainly indicated by massive turnout to hear Trump speak while Hillary has largely given up on any speeches and before she gave it up she was pulling less than a thousand people, sometimes just a handful. This makes me think those newspaper polls are unrealistic. What’s more we already know that most of the media want to stop Trump at all costs. This election is going to be very dirty, and if you haven’t watched the Project Veritas videos then go and take a look just to get some idea of how dirty.
I mean, she probably doesn’t support open borders at all. She has a history of supporting some closed border policies and the open borders quote is about a long term future, not the present. But it’s a fun quote anyway.
I don’t think it matters why she supports it though. Open borders would be an amazing leap in the living standards for tens of millions of people and a huge increase in freedom. That’s to be respected regardless of whether she is doing it out of personal interest, just like I admire businesses when they produce a great product.
Milton Friedman was referring to immigration that came with high welfare benefits. He was in favor of increased illegal immigration. But Milton Friedman was wrong anyway. I’ve seen no evidence that immigrants would significantly increase debt per capita (as in, they might end up taking more from the government than they pay in taxes, but not any more than the typical citizen of similar age). And the position on blocking them would also imply sending babies out who are more likely to take welfare, which is silly.
The polls have been remarkably close for presidential elections. I’m not sure what you’re referring to for the speeches. I was at a Clinton speech at Ohio State and there were at least 10,000 people there (18,000 according to the media and that seemed about right to me – but if you don’t trust the media, I am certain that there were not less than 10,000 people there). And number of people at rallies isn’t remotely scientific – if it was, we would be under President Paul, and Sanders would be the next president.
The media has loved Trump. They’re the reason he got the nomination in the first place. He’s amazing for views. They have some political opinions, and disagree with Trump generally, but not nearly enough to not give him the free airtime. This election really showed a couple things: Media “bias” is almost completely irrelevant and the campaign finance laws were never remotely necessary to allow candidates without many special interests to win. The media is going to report what pleases their customers regardless of bias.
I saw the main video, it was the most boring thing of the election. Trump called for violence against protesters. Some irrelevant DNC people thought it would be a good idea to antagonize Trump people so that the Trump people would attack them. The bigger story is that Trump has lowered the standards so much that all opponents need to do is wear a Planned Parenthood t-shirt to expect to be assaulted. The people yelling about Bill Clinton being a rapist at the Clinton rally I mentioned before, meanwhile, were not remotely afraid of being attacked.
I disagree, this is not a question for a possible long term future. The US Southern border has been wide open for decades. Estimated 6 million people are working illegally in the USA and the businesses are hiring them illegally, and they send significant amounts of money back to Mexico.
Well the border has been open for a long time and since 2000 the US economy has been performing poorly, no “amazing leap” happening yet. No doubt some individuals have benefited.
There was an estimated $25 Billion per year going to Mexico in 2010, I would guess more now, so yes some individuals have benefited. Has the USA improved in living standards though? I would argue that many Americans are significantly worse off, sitting out of work and the white, male, working class suicide rate is steadily increasing. There’s a reason many middle classed people are pissed off. Don’t talk about some magical long term future… take a look at what’s happening right now!
http://cis.org/north/remittances-iadb
In 1994 California had a referendum known as “California Proposition 187” which would have prevented illegal immigrants from collecting benefits paid for by the other citizens. An overwhelming majority in a majority of counties voted YES but it was struck down after the fact, with the reason that apparently states don’t have the authority to decide who gets their welfare (astounding but there you go).
Democratic Governor Gray Davis later decided to formalize this overruling of the will of the people. This all happened several decades ago.
So to get back to your point, yes we are talking about immigration with welfare benefits. Strongly enshrined benefits. If you search around there are a number of estimates of how much welfare the illegal immigrants benefit from, but it’s non trivial. This amounts to taking property away from citizens and handing it to non-citizens, and at an increasing rate.
This is a load of cobblers, Trump supporters have been beaten for nothing more than wearing a MAGA hat. The Democrat supporters were stalking people, hitting from behind, intimidating people coming to or leaving a Trump rally. They were also going out of their way to be as disruptive as possible. In the video he explains the Democrats were deliberately hiring people who were not mentally all there for this purpose and they were very much in constant contact with the higher ups in the party.
Check out that rally in Costa Mesa where the people were waving Mexican flags, they were behaving like thugs. Smashing police cars, blocking traffic, beating up anyone they didn’t like. Why does Trump get the blame when his supporters are beaten up? Do you also blame women for getting raped?
That’s not even getting started with Black Lives Matter who are another bunch of thugs, but their strategy is a bit different, instigating riots, and bringing in professional hooligans from out of town to smash things. They mostly hurt African-American communities, but the violence is similar.
“I disagree, this is not a question for a possible long term future.”
I didn’t say that it was. I support open borders immediately. I said that Clinton was referring to the long term (her “dream”). She supports securing the border in the meantime.
“The US Southern border has been wide open for decades.”
That’s factually wrong, Tel. There is plenty of research suggesting massive numbers of people would come to the US if they could. Thousands of people have died at the border. The illegal immigrant population has hardly moved for over a decade (it has actually dropped slightly, especially when looking per capita http://www.pewresearch.org/fact-tank/2016/09/20/5-facts-about-illegal-immigration-in-the-u-s/) This is just a ridiculous right wing myth.
“Well the border has been open for a long time and since 2000 the US economy has been performing poorly, no “amazing leap” happening yet. No doubt some individuals have benefited.”
Like I said before, this is just wrong. The border has not been open. And I was referring to the people who come here being helped, which there is plenty of evidence suggesting they are being helped massively. The benefits to existing US citizens are small, the benefits to people who want to move here are very large. I’m a libertarian, so I care just as much about people in Mexico as the people in the US.
“Has the USA improved in living standards though? I would argue that many Americans are significantly worse off, sitting out of work and the white, male, working class suicide rate is steadily increasing.”
Ironically, this argument can be flipped around using the real illegal immigrant numbers. Living standards increased a ton when illegal immigration was increasing a lot. Ever since the drop off, not so much. Suicide rates are increasing? Must be the slow down in illegal immigration!
This is a really bad correlation argument. Suicide rates have nothing to do with illegal immigration, you’re just grabbing at straws. And I have no idea why you brought up white men, since the suicide rate for white women has been increasing twice as fast as for white men recently. Immigration has almost always been shown to have slight benefits for the native population in actual studies.
“So to get back to your point, yes we are talking about immigration with welfare benefits. Strongly enshrined benefits. If you search around there are a number of estimates of how much welfare the illegal immigrants benefit from, but it’s non trivial.”
Illegal immigrants pay a ton in taxes, much of which they don’t get back. Look at social security in particular, where they’ve been adding about 13 billion a year recently while getting about 1 billion back.
“This amounts to taking property away from citizens and handing it to non-citizens, and at an increasing rate.”
You being in this country amounts to taking property away from undocumented people and handing it to you, at an increasing rate. Perhaps you shouldn’t be allowed in the country. Oh, wait, I’m actually fine with you being in the country, because I’m actually a libertarian.
If an organization steals money from everyone and uses threats of violence or actual violence against everyone, and then gives everyone some amount of money, you can’t just signal out a single group that is hurt more than you for *maybe* getting more money. That’s awful logic, and extremely authoritarian if you support policies restricting movement based on it.
“In the video he explains the Democrats were deliberately hiring people who were not mentally all there for this purpose and they were very much in constant contact with the higher ups in the party.”
Quote exactly what they said then, because I didn’t hear that at all.
Nobody is denying some violence against Trump supporters. It isn’t a deliberate policy of Clinton or major groups supporting her to attack Trump people. It is a major policy of Trump to call for attacking protesters.
“Why does Trump get the blame when his supporters are beaten up?”
He doesn’t. He gets the blame when he specifically calls for attacks on protesters. Both sides have used violence, I think Trump supporters do it more often, you might think otherwise. There is no research either way, so we can’t say for sure. We can see what Clinton and Trump say on the issue.
“Do you also blame women for getting raped?”
This is disgusting. How in the world can you think asking this is okay? I didn’t even blame Trump for violence against Trump supporters (quote me if you think I did), and here you are making a disgusting analogy to rape.
“That’s not even getting started with Black Lives Matter who are another bunch of thugs”
Every BLM supporter I have met has been much more libertarian than you. Not surprising, since you aren’t a libertarian.
You appear unfortunately unable to even follow your own choice of charts. The Pew data shows a significant rise from 1990 to 2008 (i.e. 17 years rising) and then small dip and leveling out after 2008 (i.e. 7 years of slight reduction). Well that looks like mostly rising to me, resulting in a large nett rise in illegal immigrants. This shows no evidence of effective border security, but it does show evidence that the economic crash of 2008 was sufficiently discouraging that the incentive to enter the USA was reduced.
Mind you, there’s heaps of problems with those Pew figures, mostly they are subtracting two large numbers (total foreign born from known legal immigrants) to get a small but highly inaccurate number (the residual). There’s also problems with using census data (plenty of people just don’t answer honestly) and of course it is difficult to measure illegal activity at the best of times.
More recent remittance data shows total remittances leaving the USA are picking up at about 5% PA so the dip has been turning around again, but that’s just in the past few years. Anyhow, the general trend is clearly up. Apparently Mexican illegal immigration is less popular now but has been filled in from other countries of origin.
So here’s some charts of suicide data:
http://www.pbs.org/newshour/rundown/chart-americas-rising-suicide-problem/
Over 1999 to 2010 we see rising suicides for BOTH men and women. There might be some small difference in the amount of rise between the two sexes, but anyway vastly more men commit suicide so they are the population that is most effected. This is exactly the period during which the illegal immigrant population was growing and also year 2000 was the year where the US employment participation stated it’s long and steady collapse. The correlation is clearly positive, I can’t possibly imagine how you manage to get something else out of that.
Here’s the key quote from the above article:
You originally made a prediction about quality of life: “Open borders would be an amazing leap in the living standards for tens of millions of people and a huge increase in freedom.”
Well at least 10 million ALREADY HAVE crossed the border, and presumably they did it because they think they are better off, but at the same time the US economy as a whole has nose dived since 2000. It might be great for some, but it’s come at the expense of others. People are citizens of a nation because they believe that nation will protect them and protect their property and their rights. This is not future tense, it’s happened already. The results are in, so no need to speculate about how great it’s all gonna be.
The primary purpose of the US government is to serve the citizens. It’s been failing to do this. The fact that someone in China is better off now than they were under Mao is quite nice, but not the main aim of the US government.
You also claim there’s no wealth transfer. Well several estimates on that are saying the complete opposite:
There’s a Center for Immigration Studies report (Jason Richwine May 2016) which concludes:
There’s another study by Federation for American Immigration Reform (2013, Jack martin & Eric Ruark) which concludes:
There’s another study from Heritage (2013, Robert Rector and Jason Richwine) which has these figures:
There’s another study specifically looking at Texas (high illegal immigration state) from the Lone Star Foundation (2006, by James A. Bernsen) which attempts to estimate a bunch of factors including medical, education, cost of police and changes in crime rates, plus a displacement effect when native born people are out of work. The conclusion gives these figures (only Texas) :
The report goes on to point out that these costs would be even worse if not for the Welfare Reform Act of 1996. It also complains that while governments are busy collecting statistics on every other aspect of life, many statistics relating to the effects of illegal immigration are not available (we can argue about how difficult it would be to collect this data, the author seems to believe they go to very little effort).
So there’s very solid evidence of a government sponsored wealth transfer in operation here. Your argument that governments are involved in other wealth transfers at the same time seems somewhat irrelevant, you have to fix what you can fix. I’m not opposed to reduction of tax and reduction of government spending, but that can’t happen while large numbers of people with low education come along and put their hand out for assistance. Nor can it happen while you have a political party buying more votes in return for greater transfers out of the public purse. These things combined only serve to further undermine private property rights, as well as undermining the public good which is national defense and secure borders.
“You appear unfortunately unable to even follow your own choice of charts. The Pew data shows a significant rise from 1990 to 2008 (i.e. 17 years rising) and then small dip and leveling out after 2008 (i.e. 7 years of slight reduction).”
See, that’s the problem with not quoting people. You can make up whatever you want. I said it had “hardly moved for over a decade”. I clearly didn’t mean that it didn’t have ups and downs in over a decade, I meant that it hardly moved.
“This shows no evidence of effective border security”
A large number don’t come through the border. And a much larger number are discouraged by the border, as every single serious person knows. You said open borders, which was laughably wrong.
“Over 1999 to 2010 we see rising suicides for BOTH men and women. There might be some small difference in the amount of rise between the two sexes, but anyway vastly more men commit suicide so they are the population that is most effected. This is exactly the period during which the illegal immigrant population was growing and also year 2000 was the year where the US employment participation stated it’s long and steady collapse. The correlation is clearly positive, I can’t possibly imagine how you manage to get something else out of that.”
Hahahaha, this has got to be the dumbest theory I have ever seen. The suicide rate in 2014 is much higher than the suicide rate in 2007 or 2008, just before the dip happened. So illegal immigrants dropping has increased the suicide rate or something. http://www.nytimes.com/2016/04/22/health/us-suicide-rate-surges-to-a-30-year-high.html
There is no correlation. You found something increasing for a few decades, realized that this meant you could correlate it with your theory that illegal immigration has been increasing steadily, and then imply this to magically mean that there is a connection. Want to know something that’s more correlated? More illegal immigrants = drop in crime
“Well at least 10 million ALREADY HAVE crossed the border, and presumably they did it because they think they are better off, but at the same time the US economy as a whole has nose dived since 2000.”
GDP per capita (2000): 36,449.93 USD
GDP per capita (2013): 53,041.98 USD
You were saying?
The US has a lot of problems. But living standards are clearly increasing and GDP is increasing a lot.
“You also claim there’s no wealth transfer. Well several estimates on that are saying the complete opposite”
There are also several that say otherwise. It depends on how you measure (do you correct for things like number of children? do you use individual data or household?), and whether you include legal immigrants. It also always ignores corporate subsidies, which are a major problem. It also depends if you’re a hack conservative group like FAIR or CIS. I wonder if the studies you posted are from conservative groups with an agenda or an actual study?
Oh.
CIS “study”:
– Used households instead of individuals. If there were 100 people named Reece in the United States and they all lived in my house, and we each used the average amount of welfare, they would say that Reeces use 100 times the welfare on average. Which is idiotic. Immigrants tend to have larger households. It also means that native born children, for example, are counted.
– Being a hack group, they try to hide the biggest problem. Unless if you are anti-child, you likely recognize that children grow up and end up paying taxes and the like. Immigrants tend to have more children. So what happens when you correct for children? For one, two, and three or more children, immigrants use less welfare, and for no children, they use more.
See this Cato article for more of the problems on this awful hack study: http://www.cato.org/blog/cis-exaggerates-cost-immigrant-welfare-use
FAIR is such a joke that I hardly even feel comfortable addressing it. It is the most ridiculous immigration research place in existence. Their $113 billion number was so bad that it was literally declared false by fact checkers like politifact. They don’t include taxes at all in that number (and although they mention taxes in the report, they drastically underestimate it – social security payments alone are almost as high as their tax estimate). They estimated the number of undocumented immigrants higher than any other respected place. They’ve been caught including private hospitals in their estimated costs. They obviously don’t correct for children. It’s a hack website that uses fraudulent numbers, and everyone involved in this subject for more than a day and not ideologically blinded is aware of that.
Heritage is at least a real place, finally. They also include children, including native born children. They greatly underestimate the taxes, because undocumented immigrants often pay into things like social security but can’t take it out. That brings in over $10 billion a year. It also doesn’t compare to natives.
I started reading the Texas one, but like I said, FAIR is junk, and they immediately used some awful logic in order to use FAIR’s ridiculous estimate on the number of undocumented immigrants (the “extrapolated” Pew’s national number to Texas, which they claim came out to the high end of FAIR’s number, so they said they would be conservative and use the low end of FAIR’s number – this makes zero sense, because Pew’s national number is millions lower than FAIR’s national numbers. The extrapolation was almost certainly wrong, and then they used FAIR’s number.) They continually cite FAIR throughout the study, which no real study would do, since FAIR is a hack group.
Here’s a good way to reduce government spending: Stop making immigrants subsidize you.
You bring up data from Pew which can hardly be neutral, and then you just arbitrarily ignore multiple sources that you don’t like for your own personal reasons. Sure, if you want to just throw away anything that doesn’t fit your world view, what you have left will support you. That’s not really any sort of analysis though is it?
Here’s your quote regarding correlation:
That’s your actual quote right there, and the data you provided (from Pew) goes back to 1990 and shows predominately increase. The data I provided (from PBS citing CDC) goes back to 1999). You are not entitled to just snip off a little piece of the data to make it do what you want (that’s called “cherry picking”), and anyway I quoted you right there and you don’t even mention anything precise. You claim of “the suicide rate for white women has been increasing twice as fast as for white men recently” is backed by nothing and doesn’t match the charts I provided. Your qualifier “recently” could mean the last 3 years, or 3 weeks, or 3 days for all I know.
You look at those suicide charts they are showing a steady overall rise. Give or take a few small wobbles. If you can’t see that then just forget about it.
Rising illegal immigration, and rising suicides, and the correlation is positive. I accept this does not prove causality but it’s ridiculous to attempt to claim negative correlation based on the available data (which was the data you cited in the first place).
Wait, you are calculating the future tax that might be paid by children who grow up to become adults, and then projecting that back to the present day?
Cato are very supporting of open borders, so they “control” the statistics to get the answer they want. They “control” for poverty, which is meaningless because the whole cost of bringing in a bunch of third world people into a first world nation is you are increasing the amount of poverty in the nation and bringing in families who have many children. Then they pretend the cost is actually not a cost but that doesn’t solve the problem of who should pay. The wealth transfer is actual dollars, not statistical control dollars.
Cato also regularly take an argument that is primarily against illegal immigration (i.e. building a wall obviously has no influence on legal immigration) and then they pivot to start talking about legal immigration pretending these are equivalent topics. There’s a huge difference between bringing in highly educated skilled labour and just having a border where poorly educated people wander across.
That’s the thing with these Social Security contributions: legal migrants get a real Social Security number assigned to them, while illegal migrants either work cash under the table without a Social Security number or find ways to obtain a number illegally. This makes the contributions untraceable.
Clearly when you have a first world nation bringing in people out of third world conditions there will be a cost imposed on the taxpayer. It’s ridiculous that such an effort is made to hide this.
It comes down to a property rights question, whether people in wealthy first world nations have an obligation to share their wealth with others. I would argue no there is no obligation, although anyone who wants to voluntarily share is welcome to do so, but they cannot choose to infringe the property of others.
Again, you pull out stuff and back it by nothing. There’s plenty of data showing you got that wrong also, and yeah I have a real source.
http://www.breitbart.com/big-journalism/2015/08/08/illegal-alien-crime-accounts-for-over-30-of-murders-in-some-states/
Sure, you will tell me all these people are “alt-right” so you don’t like their data so you can ignore it. Well the data comes from the Government Accountability Office and from various state government justice departments. The data may not be prefect but let’s see if you can back up your claims with anything tangible. And yeah, I included your actual quote there so back up that actual claim, exactly as you said it.
“That’s your actual quote right there, and the data you provided (from Pew) goes back to 1990 and shows predominately increase. The data I provided (from PBS citing CDC) goes back to 1999). You are not entitled to just snip off a little piece of the data to make it do what you want (that’s called “cherry picking”), and anyway I quoted you right there and you don’t even mention anything precise.”
You’re accusing me of cherry picking when I specifically mentioned that this argument method was stupid. Of course I didn’t mention anything precise, I was making fun of your bad argument. The suicide rate doesn’t work for your argument because it’s a continual increase, including during times of dropping immigration. The suicide argument on my side doesn’t work for the same reason, except flipped. I wasn’t seriously saying that suicide is connected to immigration, I was laughing at your ridiculous view.
“You claim of “the suicide rate for white women has been increasing twice as fast as for white men recently” is backed by nothing and doesn’t match the charts I provided. Your qualifier “recently” could mean the last 3 years, or 3 weeks, or 3 days for all I know.”
I meant recently. For something like this, that probably means a few years at the least. In this case, over a decade applies. http://www.cnn.com/2016/04/22/health/suicide-rates-rise/
“However, there was a 45% increase in the suicide rate in women between 1999 and 2014, whereas the increase among men during that period was 16%.”
Don’t blame your inability to read charts on me, please.
“Rising illegal immigration, and rising suicides, and the correlation is positive.”
They were both steadily rising early on. The immigration dropped off, and suicide rates kept rising. You cherry picked the earlier period, so I jokingly pointed out that I could take recent numbers and claim the opposite.
“Wait, you are calculating the future tax that might be paid by children who grow up to become adults, and then projecting that back to the present day?”
Hahaha, how in the world did you get that from my statement? No, I’m saying counting children here is stupid, because they’re going to be long time citizens here, just like children of natives. Why does it matter who a child’s parents are?
“Cato are very supporting of open borders, so they “control” the statistics to get the answer they want”
I never cited a Cato study. I cited a Cato article pointing out how stupid your biased link from CIS was. Funny how you didn’t bother to reply to my criticisms of your studies, and instead decided to attack studies I never linked.
“illegal migrants either work cash under the table without a Social Security number or find ways to obtain a number illegally”
The Social Security Administration brings in billions every year from people who cannot take the money out. Even Heritage estimates 7 billion a year. Everyone except FAIR knows this, the argument is on whether it’s between like 5 billion gained at the lowest to like 15 billion at the highest.
“It comes down to a property rights question, whether people in wealthy first world nations have an obligation to share their wealth with others. I would argue no there is no obligation, although anyone who wants to voluntarily share is welcome to do so, but they cannot choose to infringe the property of others.”
The question comes down to property rights. Should undocumented immigrants be forced to subsidize Tel? I would argue no, therefore Tel should be deported until the government stops subsidizing him. /s
“Again, you pull out stuff and back it by nothing. There’s plenty of data showing you got that wrong also, and yeah I have a real source.
http://www.breitbart….”
Hahahahahah, Breitbart is not a source.
“Tancredo said that between 2008 and 2014, over one-third of the murder convictions in Arizona, California, Florida, New York and Texas were committed by illegal immigrants. The man who presented the data Tancredo cites said Tancredo “quoted the whole thing incorrectly.”
Tancredo used the wrong time period. He thought the baseline number was homicide convictions when it was actually all homicides. Most important of all, he took the presentation he relied on at face value and ignored the hard numbers available from the Texas Department of Public Safety.
And while Tancredo might not have known it, the researcher whose work he used himself has questions about the underlying data he used. We have hard data from Texas that refutes the big and estimated numbers Tancredo used. Undocumented immigrants do commit murder, but perhaps only one-fifth as often as Tancredo said.”
http://www.politifact.com/punditfact/statements/2015/aug/17/tom-tancredo/tancredo-muffs-illegal-immigrant-murder-stats/
Your article was found to be false, hahahaha.
There isn’t any strong evidence on immigrants and crime, especially undocumented immigrants and crime. The research over all suggests that immigrants over all are probably less likely to commit crimes. Regardless, it isn’t much of a difference either way.
In the case of any demographic shift or major macroeconomic changes it’s pointless to look at short term data. At very least a few decades. I’m sure I mentioned above that year 2000 was approximately the turning point for the US economy, but no one is claiming something happened overnight. Just that employment participation was trending up until that point and has trended down since 2000.
The children cost money and that money comes from working adults. We are counting up total costs so this is a real cost. To make a meaningful total you should include all the things that are costing money.
Yes, in future those children will grow up but no that future earning cannot be used to pay for services right now.
Let’s suppose I have two kids and I earn money, and I think Tom Woods has more than that (five or something) and he also earns money and for argument sake suppose we have a mutual gay friend (call him Milo) who doesn’t have kids and this gay guy also earns money. To begin with, just assume there is no wealth transfer (government stays out of it), and to keep it very simple presume all three of the working people here earn exactly the same income.
So I spend my spare money on looking after my kids (housing, food, clothing, education, entertainment) and that’ splits two ways. Tom spends his money on the same and splits it five ways, Milo just spends all his money on going out, getting haircuts, personal trainer and stuff.
Clearly some kids end up getting more spent on them than others (and some adults get better haircuts than others) so it does matter who a child’s parents are. If a family with a low income chooses to have six kids you can reasonably expect those children are going to meet up with a bit of hardship as they grow up. No fault of the child… the parents made the decision, but anyway it happens. Other families choose to put more money (and parenting time) into fewer children and that’s an alternative strategy, likely to have some advantages in terms of the future earning potential of those children. Not saying which strategy is best, that’s a personal decision, but there is a difference.
Milo will retire without any kids (for the sake of argument, presume we know he will) and maybe he wants someone to look after him, but then he had more money to put into savings so he can just hire some help when he gets older.
So, now into this picture we bring wealth transfer. Government says that for the benefit of the country Milo must pay extra to help Tom Wood’s children and make it “fair”. Milo gets taxed more, can’t spend money on the haircuts that he wanted, and pays for services to benefit kids that he isn’t the parent of. So now you have wealth transfer happening.
You want to turn around and say “counting children here is stupid” so therefore even though right now Milo is having his wealth taken away from him we are supposed to not count that?!? How does that work?
Your rhetorical question, “Why does it matter who a child’s parents are?” is attempting to demand that family is irrelevant and all children should just be seen as homogeneous. This is not my idea of libertarian, seems to me like justifying state-imposed equality.
If you’re actually interested in looking into FAIR’s numbers (which are what two of your sources are based on), I would read this study:https://cei.org/sites/default/files/Alex%20Nowrasteh%20-%20WebMemo%20-%20A%20FAIR%20Criticism.pdf
It notes things like:
“FAIR’s difficulty counting is not limited to its most recent study. Its 2005 report, “The Costs of Illegal Immigration to Texans,” assumes there are 225,000 undocumented immigrant children in Texan schools,25 a number extrapolated from the Urban Institute’s 1994 estimate of 93,907.26 One of the authors of the Urban Institute study, Dr. Jeffrey Passel, estimates that the real number of undocumented immigrant children in Texas in 2005 is approximately 140,000.27 FAIR’s estimates were 61 percent higher than that of one of the most respected demographers in the field—on whose estimates FAIR supposedly relied. In its recent report, FAIR compounds this error by adding inflated numbers onto previously inflated numbers. Its 2010 report estimates that there are 468,436 children of unauthorized immigrant parents in Texas, yet it never addresses the disputed and controversial numbers in its 2005 report.” (Note this is a Texas number, which your other study relied on)
They talk about the weird child thing that all these anti-immigration “studies” do too: “Applying its study’s reasoning to studying the children of
American citizens, one could conclude that it never pays to have children because the fiscal costs
will always outweigh the benefits. That is prima facie absurd.”
FAIR is really, really bad. They inflate the costs by massive amounts (over 60 percent before they inflated the numbers even more in the example earlier) and completely ignore the benefits in their estimates. I recommend not using them as a source if you want to be taken seriously in real immigration arguments.
The quote can be found with minimal effort, people are reporting it all over the place on blogs and stuff.
http://catholiccitizens.org/news/68419/undercover-video-democrats-caused-violence-trump-rallies/
What do you think he means by “mentally ill people that we pay to do shit”, hmmm? He must mean offering them odd jobs like lawn mowing or cleaning the car. That would be it, no doubt.
What do you think “do some crazy stuff” might mean? Hmmm, probably he asks them to do a crazy dance or something.
See if you can find any mainstream media reporting on this though. They love Trump so much that they want to ensure the public remains ignorant about Dems starting violence at Trump events (because that’s exactly what Trump would want). You know it makes sense.
As for you other claim:
Yes it is deliberate policy. The guy in the videos is Robert Creamer who is fully onboard with what’s going on there. He is calling the shots, but also he is married to Democrat congresswoman Jan Schakowsky so it is impossible to believe there’s no higher up connection there.
The same guy is on record as making 340 visits to the White House during the Obama term in office and 40 of those visits were to talk with President Obama himself.
Then there’s also Creamer’s biography claiming he has been a “political organizer and strategist for over four decades”.
Zerohedge pulled up a leaked DNC email from Creamer to Luis Miranda who in turn forwarded this email to various other DNC people requesting they take action on it. The subject was “Reminder — Trump Rapid Response / Bracketing Call — Today – Tues – May17 – 1PM Eastern”
Inside the email was the comment: “Including updates on plans for Trump appearance at NRA Convention Friday… and New Jersey on Thursday.”
So yeah, the higher ups knew all about it and were in direct contact with the guy.
Feel like apologizing for your victim blaming now?
Your quote of me: “In the video he explains the Democrats were deliberately hiring people who were not mentally all there for this purpose and they were very much in constant contact with the higher ups in the party.”
You: “The quote can be found with minimal effort, people are reporting it all over the place on blogs and stuff.”
Awwww, Tel, you finally quoted me. Good job. Still, I wonder what purpose I was talking about…
“The Democrat supporters were stalking people, hitting from behind, intimidating people coming to or leaving a Trump rally. They were also going out of their way to be as disruptive as possible.”
Oh, I see, I wanted a quote about Democrats hiring mentally ill people to hit people. I don’t care about them hiring people to protest, give a quote of them hiring people to commit violence, the entire point of this conversation here, or admit you made it up.
“See if you can find any mainstream media reporting on this though.”
The mainstream media generally doesn’t care about people paying mentally ill people to protest, because they aren’t ableist like you. Still, this exact quote was in Time magazine.
“Yes it is deliberate policy. The guy in the videos is Robert Creamer who is fully onboard with what’s going on there. He is calling the shots, but also he is married to Democrat congresswoman Jan Schakowsky so it is impossible to believe there’s no higher up connection there.”
Lol, I don’t care if a congresswoman knew about paid protesters. The Trump campaign gives money to groups that protest, that isn’t much different. I care if they were paying people to attack people, like I said in the quote you literally posted a response to. Show me where they called for violence, Tel. Stop with the dodging, that’s all I want to see.
“Feel like apologizing for your victim blaming now?”
You’re a jerk. Quote me on where I blamed any victim of violence for that violence, or go away.
Here’s your actual quote.
OK, I posted evidence, both the hidden video admissions and also the leaked emails… there IS a deliberate policy of inciting violence.
Trump’s supposed “major policy” is not about random attacks on protestors, he was talking about using force to remove people from private property who were being deliberately disruptive and who were interfering with the rights of Trump supporters to peacefully gather and exercise their free speech.
Trump never said people are not welcome to protest somewhere else, or some other time, he just wouldn’t accept his own rallys being disrupted.
The NAP does not protect people who enter someone else’s private gathering and disrupt the event. This is clearly a violation of private property if the NAP did not allow the defense of private property then no such property could exist.
https://www.washingtonpost.com/news/morning-mix/wp/2016/06/03/ugly-bloody-scenes-in-san-jose-as-protesters-attack-trump-supporters-outside-rally/
There’s a video where a Trump supporter is walking on an ordinary street, actually walking away from the people who had violently taken his sign away and he gets hit in the head from behind.
There’s plenty of other videos, but I can’t link to them all. These anti-Trump protestors even started fights among themselves. When they have nothing else to do they start beating on each other.
You go find me any Trump supporters who go and start trouble at any Democrat rally. Show me any Trump supporters coming up and smacking someone who is just walking AWAY down an ordinary street.
In the mean time you have been called out on your victim blaming.
You are trying to create a false equivalence. There is plenty of evidence out there, don’t pretend we can’t say either way. Trump’s calls were for people to assert their right to assemble on private property without interference. Show me where Trump supporters were bashing the police, because there’s examples of anti-Trump protesters starting fights with police as well.
In every case you will find it’s the Democrat groups who actively seek out trouble at Trump rallys and you never see Trump supporters going anywhere near a Democrat rally. That’s because Trump supporters respect property rights and respect other people’s freedom to assemble and communicate. Show me just one Democrat speech that was shut down due to threats of violence like what happened to Trump in Chicago. I’ll bet you can’t find one.
That’s why there’s no false equivalence.
Tel, come on. This is honestly getting annoying. I said a policy of “attack[ing] Trump people”. You continually respond with what I knew before this entire conversation took place, that there is likely a deliberate policy by major Clinton supporters to antagonize Trump supporters (for example, with Mexican flags).
“Trump’s supposed “major policy” is not about random attacks on protestors, he was talking about using force to remove people from private property”
No he wasn’t. He said that he would like to punch someone in the face who was peacefully being removed. He promised to pay legal fees for supporters who used violence, until he lied about it. That’s not okay. If your system of ethics allow for that, they’re really bad.
“You are trying to create a false equivalence. There is plenty of evidence out there, don’t pretend we can’t say either way.”
There’s no research either way. There are just numerous cases on both sides, like Trump supporters pepper spraying protesters: http://gawker.com/photographs-show-trump-supporters-pepper-spraying-prote-1780399845, https://www.washingtonpost.com/news/morning-mix/wp/2016/03/10/trump-protester-sucker-punched-at-north-carolina-rally-videos-show/
Like I said, I think Trump supporters are more likely to use violence, but who knows? Perhaps a researcher could look at all the cases or someone could do a long social experiment type thing, but the fact is that there is a ton of violence from both sides.
“In every case you will find it’s the Democrat groups who actively seek out trouble at Trump rallys and you never see Trump supporters going anywhere near a Democrat rally.”
Tel, this is honestly why I can’t take you seriously. You only look at your own sources. I was at a Clinton rally very recently, with Donald Trump supporters there, yelling that Bill Clinton is a rapist and other stuff. They were yelling at people and being very antagonizing. I can’t take you seriously when you deny basic reality. This is the second time you said something on this subject where my own experience proved you wrong (last time it was on the number of people who go to her speeches – it was about 18,000 at that one).
“Show me just one Democrat speech that was shut down due to threats of violence like what happened to Trump in Chicago”
Trump crying and cancelling a speech is evidence of nothing. Clinton could do the same thing when Trump supporters say stuff like “Hillary needs to be taken out”. But she doesn’t, because she’s not behind in the polls, so she doesn’t need to push a ridiculous story. You’re literally using Trump as a source now, which is hilarious. People actually at the speech saw Trump supporters, as usual, being the more violent ones http://www.salon.com/2016/10/21/donald-trumps-history-of-violence-the-truth-about-the-chicago-rally-and-trumps-conspiratorial-child-brain/
“In the mean time you have been called out on your victim blaming.”
I’ve said this multiple times now, but this is a really rude thing to say when you have zero evidence of it.
Look, in the McGraw case it was clearly wrong to punch the guy who was already being held by police. However, the protester cannot be considered peaceful because he had already entered private property and deliberately gone looking to cause disruption. The police were dealing with it and that’s their job, and it’s wrong to escalate violence, but I’m just pointing out that the protester had already violated the NAP so the real question is how best to deal with someone who clearly does not respect others.
Anway McGraw got charged so this helped discourage repeats of this kind of thing, and no similar incidents occurred as far as I know.
I think there was an incident where a black Trump supporter was offended by an agitator who turned up in a KKK hood, that’s pretty clearly a type of deliberate incitement. I’m not overly sympathetic I must admit. Probably the black guy lost his temper, could have handled better it with less escalation but really someone who deliberately goes out to start trouble in a KKK hood cannot be regarded as just some peaceful guy minding his own business.
Historically the KKK were mostly Democrats and they were known to attack Republicans just for being Republican, and attack anyone who supported equal rights for African-Americans. So there’s an intentional implied threat just lurking below the surface there.
In the pepper spray case it’s kind of unclear who started it, if we trust the journalist then it sounds like Trump supporters went looking for trouble. Many journalists have been caught coordinating their reports with the Democrats though, even to the point of allowing preview of articles and being willing to make sympathetic adjustments. I would like to hear something first hand from both sides.
Anyway, none of this compares with hitting people who are actually walking away. There are quite a lot of these type of videos out there. Maybe it’s not scientific to your level of scrutiny but that’s the evidence available at the moment. Trump supporters are getting beaten even when they don’t start anything and when they are trying to leave the scene.
Nor does this even start to get into the documented fact that Democrats have been running an orchestrated campaign of disruption and using phrases like “crazy stuff” for the agent provocateurs that they are PAYING to cause trouble.
Besides that, it’s still wrong regardless of whether other people are doing other bad stuff. At least people like McGraw got busted for what they did, there will be a trial and some law and order there. This doesn’t make an excuse for other deliberate and well organized provocation. That’s like saying, “Hey, you were a member of this political group so you deserved it, regardless of your individual behaviour.” I know that’s not literally what you said, but that’s the effect of it.
I would have thought that all violations of the NAP should be condemned, but especially organized groups who are using violence for political gain.
Here’s your quote (since you always insist):
Sounds a lot like making excuses for people paid to systematically violate the NAP and blaming it all on Trump. Wrong is still wrong, even when Trump is not himself a saint.
I searched for comparisons between Trump and Clinton rallies, here’s one.
http://www.nbcnews.com/politics/2016-election/tale-two-rallies-how-trump-clinton-campaign-n503911
It’s not clear how many of these protesters are even Trump supporters, but anyway they clearly don’t cause much trouble.
That’s what most reports are saying, crowd size is not large. OK, maybe there was a large crowd, but the reports are mostly saying small crowds. Obviously I can’t check all of them.
Maybe you see things the reporters don’t see, maybe journalists are biased, I’m going with what information I have available. This is not the only report, multiple sources are similar.
There’s three key phrases that I quoted:
“… people that we pay to do shit”
and
“… guys to do some crazy stuff”
and
“… union guys, a lot of union guys, they’ll do whatever you want. They’re rock ’n roll.”
Now in the context of situations where people have repeatedly violated NAP by pushing themselves into other people’s private venues and disrupting, and also with videos of Trump supporters getting hit from behind while walking away and completely unprovoked… there’s a clear link to violence.
I’m not going to get into arguments about how the English language operates but if you seriously claim that this is all about some peaceful protesters just quietly keeping to themselves holding up a sign or something then I put it that you are being deliberately dishonest or else you have no clue whatsoever.
Like I said already, there’s no discussion if you just persistently declare black is white and your subjective reality is impervious to new information. If that’s where you are coming from then it would be polite to simply announce that we can stop wasting time over this.
Bernie had a lot of supporters, what this says about young people and the lure of socialism in the US is a bit worrying; but ignoring that and concentrating on the question of votes, there’s a number of points here:
* Hillary’s main advantage over Bernie was super-delegates. These people magically get more votes than normal people and this allows the party machinery to assert a significant influence regardless of popular support. There won’t be any “super delegates” in the real election.
* The DNC was proven to be working on the side of Hillary against Sanders (known colloquially as cheating) there was an Observer article that pulled up some of the leaked DNC emails.
http://observer.com/2016/07/wikileaks-proves-primary-was-rigged-dnc-undermined-democracy/
* Debbie Wasserman Schultz quit the DNC after various emails revealed her less than neutral stance, but then Debbie was immediately hired by the Clinton campaign. Quote from Hillary:
So there you go, break the rules, get hired by Hillary. No problem!
* There’s a commentary by Ted Rall at Rassmusen Reports with the following (regarding the Democrat primary) :
* In New York many Democrat voters in the primaries were turned away because their registration mysteriously got changed or purged. There’s a Counterpunch article (2016, Doug Johnson Hatlem) about this strange event and there’s now a lawsuit in progress (which won’t have any effect this election):
* In Arizona there was an article from the Horn News with the following:
* In California the pro-Hillary camp cheated again by giving instructions to the poll workers so that registered independents (a group leaning towards Bernie) would be given provisional ballots. There was investigation by Greg Palast and I’m quoting from that:
“Hillary’s main advantage over Bernie was super-delegates. These people magically get more votes than normal people and this allows the party machinery to assert a significant influence regardless of popular support. There won’t be any “super delegates” in the real election.”
The super delegates ended up making no difference, as always.
“In New York many Democrat voters in the primaries were turned away because their registration mysteriously got changed or purged. There’s a Counterpunch article (2016, Doug Johnson Hatlem) about this strange event and there’s now a lawsuit in progress (which won’t have any effect this election):”
This is the first thing you mentioned that was actually interesting, since the others were just accusations of cheating and complaining about DWS having an opinion on who should win. And your source is Counterpunch. Lol.
This is exactly the problem with you. You see something that is bad, and you immediately conclude that the bad thing is because of something you dislike, regardless of your lack of evidence. In this case, it takes 10 seconds to find out that it disproportionately hit likely Clinton voters, since latinos were much more likely to have the problem.
“Horn News”
Lol, you managed to find a place worse than FAIR. Good job!
Headline: “Hillary cheating scandal erupts in Arizona”. There complaint is over some people saying that they were really Democrats. They did an investigation, and apparently found nothing. Because these people almost certainly forgot. You do know people sometimes forget things? Why in the world would Clinton flip like 50 voters? What’s the point?
“There was investigation by Greg Palast…”
Woah, Greg Palast quoting some guy from a change . org petition? No way! Hold on, interesting report from Reece:
“The moon landing was fake. Evil! Here’s a change petition with an interesting claim: ‘The Earth is flat.’ Wow! The moon landing was fake and the Earth is flat.”
Multiple claims here are wrong. Bernie almost certainly won significantly more coin tosses in Iowa than Clinton. One or two irrelevant ones are correct as far as I can see (like the license plate).
Still, this is a pretty good quote from that: “The true results of the election is estimated to be 69% to 31% in favor of Sanders.”
Lol. And the moon landing was fake, right?
“The true results of the election is estimated to be 69% to 31% in favor of Sanders.”
Still better than FAIR estimates.
Sure, if you want to just throw away all information that doesn’t suit you … what’s the point of discussion then?
Then you start tossing random crap like moon landings which are obviously utterly unrelated to the topic. The logical conclusion is that you know you have no argument, so you throw this in as a substitute. Look, a distraction! Over there, go!!
Tel, things like “The true results of the election is estimated to be 69% to 31% in favor of Sanders.” are so ridiculous that they don’t merit serious attention. They are as silly as moon landing conspiracies, yes. You can’t use a random blogger citing a change . org petition as a source, that’s silly. Clinton won because she had much more support among Democrats.
I took some of your other stories seriously, like in New York. But they didn’t help your conclusion, since they likely hit Clinton voters harder than Sanders voters.
Millions of people voted. There are going to be some problems. That doesn’t mean there is a massive conspiracy.
You want something ridiculous? How about this one.
Very easy to look it up, here’s the link to Wikipedia with a pie chart:
https://en.wikipedia.org/wiki/File:2016_Democratic_Party_presidential_primaries_delegates.svg
You can see that the super delegates were 571 to 45 in favour of Clinton. Had they been the other way around 571 to 45 in favour of Sanders then the outcome would also have been the other way around. You claim “no difference” and yes I exactly quoted you on that, but in truth those super delegates were in a position to completely determine the outcome of the primary.
At least I’m going and checking stuff, because you don’t even do that much.
It is completely obvious in context that I meant no difference to the outcome, not no difference in the exact numbers. I don’t see how you could possibly read my statement like that unless if you are a frequent Breitbart reader (I’m suspecting you knew that I didn’t mean that super delegates have been split 50-50 every election, because that would be ridiculous). If there were no super delegates, Clinton would have been far ahead in delegates.
Super delegates have never flipped the result to the candidate who lost in regular delegates. Which is clearly what I meant.
Bob,
I’ve not read all of the comments, so forgive me if what I say below is repetitive.
I agree with you that it’s possible that a trade (or current-account) can be a symptom of poor economic policies, or of myopic actions, in the domestic economy. But (1) contrary to nearly all public commentary – some of it by economists, such as Peter Morici – a trade deficit is not necessarily or even typically symptomatic of such domestic problems; (2) also contrary to nearly all public commentary – some of it by economists, such as Peter Morici – a trade deficit is never a CAUSE of such problems; and (3) contrary to nearly all public commentary – some of it by economists, such as Peter Morici – a trade deficit very often is both a symptom of good domestic economic decision-making (at least relative to that done in other countries) AND strengthens the domestic economy.
More fundamentally, the problem you point out is a problem of excessive consumption driven by unwise borrowing. That can be a genuine problem, of course, and it’s one that (as you note) is made more likely by government fiscal policies. It’s also a problem a symptom of which often is a rising domestic trade deficit. But this problem is independent of international trade and, indeed, can be real and growing even if the trade deficit is falling.
Contrary to nearly all public commentary – some of it by economists, such as Peter Morici – there is nothing about international trade, or about the accounting artifacts that today accompany it. that uniquely causes economic problems. I know that you understand and accept this point. My goal in my writings (I cannot speak for Scott Sumner) is to do all that I can to slay the myth that there’s something economically unique about trade that spans across political borders.
Yep, thanks Don. I hope my tone was not too flippant. The only thing in your post that concerned me, was that you seemed to endorse Scott’s claim that there is no important difference between exporting a mobile home versus selling a house in LA. That was what my post was designed to show (along with the GDP>C thing), that you could end up with Americans being tenants on land owned by foreigners, and surely *that* is the kind of thing the critics are talking about.
To be sure, as libertarians we can’t do anything except disagree (if that) if people want to sell their property and become tenants, but it seemed you guys were saying selling your real estate in the US is economically equivalent to assembling a product and shipping it overseas. I was trying to show why it does make sense to treat them as assets vs. goods, even though the LA house case is more borderline (since you’re selling a produced house, not just the land on which it sits).
Bob,
I did – and do – indeed like Scott’s point about selling mobile homes vs. selling land-based homes. My chief reason for liking this example of Scott’s is that it nicely highlights the artifactual nature of balance-of-payments concepts. There’s no reason in principle why a foreigner’s purchase of residential real estate in America could not be, or should not be, recorded on the current account rather than on the capital account. Were purchases and sales of residential real estate by foreigners recored on the current account (rather than on the capital account), nothing whatsoever about the real economy would change, but the U.S. trade (or current-account) deficit would be lower – as is would be lower if, given the current accounting conventions, foreigners instead bought lots more mobile homes (rather than residential land-based homes) in the U.S.
Another point that is relevant to point out here is that sales by Americans of real estate to foreigners does not, contrary to common supposition, necessarily diminish Americans’ ownership of capital. Much depends upon what happens post-sale to the price of the exchanged real estate as well as upon what the selling Americans do with the funds they receive from these real-estate sales.
Thanks Don. If you have time to continue, I have follow-up questions then:
1) Do you think exporting a TV set and selling a bond should be treated in the same way?
2) If I sell my labor services all year for $100,000, or if I sell my house for $100,000, do you think those are both equivalent forms of income?
And if I work for myself as a builder for a year and then sell the house I built for $1
And if I work for myself as a builder for a year and then sell the house I built for $100,000 I have both added to my wealth then changed it from one from to another.
last 2 comments were posted accidentally – please delete (or ignore).
Bob
(1) I don’t think that exporting a TV set and selling a bond should be treated in the same way.
(2) Obviously, those are two non-equivalent sources of income.
But the reality to which your questions point don’t fully capture the residential-housing example. While TVs can be (and sometimes are) capital equipment – and while the value of a bond might tank after I sell it – it’s pretty clear that in most cases when Jones exchanges things that normally hold or increase value for consumption goods, Jones makes his financial net worth lower than otherwise. But why suppose that residential real estate is more like a capital asset than a consumption good? IF it is more like a consumption good – admittedly, a quite durable one – then the sale to non-Americans by Americans of condos in Manhattan can be productively thought of as equivalent to the sale to non-Americans by Americans of mobile homes.
A deeper point is that the size of the capital stock isn’t fixed. If I sell a bond and then use the proceeds as seed money to start a new business that turns out to be profitable, the capital stock increased. It’s true that I could alternatively have funded my start-up by keeping the bond and instead selling my living-room furniture, my car, and by eating only gruel for the next ten years. I would be financially richer had I pursued the latter course.
The bottom line, for me, is that even when a trade deficit is a symptom of inadequate ‘national’ savings, (1) the problem is the inadequate savings, not the trade deficit; and (2) there is no particular reason to lump all Americans into one group and then say “Their collective savings is rising or falling.” If our fellow Americans become so profligate that the result shows up as an increase in the U.S. trade deficit, but if you and I continue to save wisely, what difference does it make to us if the factory across town and the R&D done by the company in Seattle are financed by savings that come from citizens of Spain or Korea rather than from citizens of Florida or Kansas?
Don,
I think when foreigners buy a house in LA, they’re getting the underlying land too, right? That’s why I think it’s more appropriate to think of a Chinese person buying a house in LA as buying a bond, versus buying a TV set that was assembled that year.
I have no problem with your other points. Again, I endorsed everything in your post (not in Scott’s though) except the part where it seemed you were saying Americans selling a house in LA is the same thing as exporting TVs.
Fantastic blogging. I learned something new today.
Thanks Maurizio, but what did you learn specifically? I’m just curious.
Many things… that there’s a difference between selling real estate to foreigners and selling them goods. Also the “no american eats anything” ending , I didn’t see it coming. I’d say you clearly explained the danger of increasing investment without decreasing consumption (I guess).
But also the specific steps were not obvious to me. I like when you explain the actual mechanisms step by step, as in the sushi economy.
🙂
“I was trying to show why it does make sense to treat them as assets vs. goods”
What is the distinction you are making between assets and goods ? Are you saying that land has some sort of special status when it is traded that makes it different from other goods ?
Transformer,
Your son comes home with a fancy new suit. You say, “Whoa, how much was that?” He says, “$1,000.” You ask how he could afford it. Imagine two possible answers:
(a) “I used my labor to produce a product they paid $1,000 for.”
(b) “I sold my car.”
You see no difference?
Ok, so that’s just back to Nick Rowe’s point about running your wealth down if you spend more than your income.
That would be equally true if I sold either land or mobile homes and used the revenue for consumption in excess of my income if they are both my assets.
My take on
1) Do you think exporting a TV set and selling a bond should be treated in the same way?
2) If I sell my labor services all year for $100,000, or if I sell my house for $100,000, do you think those are both equivalent forms of income?
Exporting a TV set, selling a bond, and selling a house are all converting wealth from one form to another.
Selling labor is adding to one’s wealth (at the expense of giving up leisure).
If you use the proceeds of the sale for consumption then in all but the last case you end up with less wealth as a result.
OK Transformer, you are making true statements, but it seems–like Sumner–you reject the notion of “income” as serving any purpose. But it’s not just the bean counters at the BEA, but also the entire profession of accounting, that thinks “income” is a useful concept. You disagree?
I would define income as something like “the stream of revenue coming from an asset” (labor would be income from an individuals “human capital”) and distinguish it from the “revenue from from the sale of an asset”..
Then in a given period individuals get a stream of income from their stock of assets (including human capital). They may spend it all on consumption, or they can save some of it. If they save some of it they increase their wealth (stock of assets) and future income stream.
If they consume more than their income they must be dis-saving – reducing their stock of assets either by selling them or taking out loans against them. This reduces their future income.
In addition, at any point in time individuals can change the form of their assets from one form to another via trading them.
I’m not an accountant so I’m sure there are holes in the above,. I can see for example that the same sale (of a house for example) could be considered revenue from an asset sale if it was me selling my house, but as income from assets if it was a house builder selling a house they had just completed. So there may be some grey areas.
However if you take a snapshot of trades taking place at a point in time – none of the above matter. Essentially they all amount to individuals swapping goods for money or money for goods. They are all (at least before the event) beneficial to both parties. Whether the trade is local or international its hard to see how its not all good. (Unless you bring in stuff about mercantilism, ABCT making people fell richer than they really are and making bad trades, third-parties losing out etc).
If I sell assets for a living, I am earning zero income?
Only if you’re not very good at it 🙂 Otherwise you might earn some brokerage fee income or some capital gains.
Transformer, you ought to be more precise and not so flippant.
If I buy semi-finished assets, and work to produce finished assets, and earn revenues in doing so, then according to your definition of “income”, am I or am I not earning an income?
You wrote that your definition of income does not include selling assets. I am proposing the above example to test your understanding of what it is you are claiming.
OK. sorry..
So I think you mean something like a tailor who buys cloth and produces suits ?
The cloth is a raw material in the production process.
I think this is a particular category of capital goods, whose flow of income happens to get used up all at once at the moment it is consumed in a production process (unlike the machine that stitches the cloth where the flow of income gets used up potentially over many years).
The finished goods – the suits – then embodies the flow of services of the various capital goods involved (human capital, machines and raw material). When these finished goods are sold this generates income , including the income on the semi-finished goods (the cloth).
When you export a TV set, there’s a kind of presumption that this set was built locally and there’s facility to build plenty more of them as required. In other words, the TV set is an embodiment of both the labour that went into it, plus the technical know-how in terms of design, tools required, factory setup, etc.
Admittedly, we may be living post apocalypse, where the factories have been destroyed and the technical knowledge lost, and we recently stumbled onto the last warehouse of TV sets. This is possible, and it’s a valid topic for study, but it just isn’t the scenario that first comes to mind.