An Odd Comment From Geithner
Treasury Secretary Timothy Geithner has urged Congress to raise the federal debt limit, currently chafing the administration at a measly $12.1 trillion. But as Robert Wenzel noted, Geithner’s reasoning is odd:
“It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations,” Mr. Geithner said in a letter to lawmakers.
When somebody owes you money, do you feel reassured when they say, “It’s fine, I’ll pay you back. I just got a new credit card.” ?
Krugman the Scientist Explains the Elderly Rioters
From his latest NYT column:
But while the organizers are as crass as they come, I haven’t seen any evidence that the people disrupting those town halls are Florida-style rent-a-mobs. For the most part, the protesters appear to be genuinely angry. The question is, what are they angry about?
There was a telling incident at a town hall held by Representative Gene Green, D-Tex. An activist turned to his fellow attendees and asked if they “oppose any form of socialized or government-run health care.” Nearly all did. Then Representative Green asked how many of those present were on Medicare. Almost half raised their hands.
Now, people who don’t know that Medicare is a government program probably aren’t reacting to what President Obama is actually proposing. They may believe some of the disinformation opponents of health care reform are spreading, like the claim that the Obama plan will lead to euthanasia for the elderly. (That particular claim is coming straight from House Republican leaders.) But they’re probably reacting less to what Mr. Obama is doing, or even to what they’ve heard about what he’s doing, than to who he is.
That is, the driving force behind the town hall mobs is probably the same cultural and racial anxiety that’s behind the “birther” movement, which denies Mr. Obama’s citizenship. Senator Dick Durbin has suggested that the birthers and the health care protesters are one and the same; we don’t know how many of the protesters are birthers, but it wouldn’t be surprising if it’s a substantial fraction.
If you’re curious as to Krugman’s evidence for this, he actually resorted to an a priori deduction (he must have been reading Mises). I think Krugman’s argument goes like this:
(1) The people say they are afraid of government taking over health care.
(2) The government already has taken over health care, and that’s nothing to be scared about. Therefore the rioting seniors don’t really mean it when they say (1).
(3) The only other explanation is that they’re racists.
Go ahead and read Krugman’s column if you think I’m being unfair.
My Radio Interview in the Bahamas
Here it is [.mp3]. I went in to the studio to do the “Jeffrey Show.” This aired live on June 19, 2009, during rush hour traffic in the Bahamas (Nassau).
This was definitely something different, but the TV show I did was really a new experience. (I don’t have the DVD yet, but it’s coming.)
I got my confidence with the Bahamians when I realized that my accent alone made me interesting. The unorthodox, yet strangely compelling, economic analysis was just gravy.
Glenn Beck Brigades Are Loose!
This is so ridiculous. Paul Krugman has a post called “Rioting Against Health Care Reform.” I only watched the first 2:30 of this, but it hardly looks like a riot. If Krugman actually listened to Glenn Beck, he’d know that Beck’s fans like to quote the Federalist papers. I’m not saying Glenn Beck’s growing popularity is A-OK, I’m just saying the people in this video–I’m assuming this is the same town meeting that I heard people calling Beck about–are mad because union people were allowed into a back entrance to fill up the hall before the angry mob could storm the gates. Those people had a right to be furious.
(Again, I only watched to 2:30. If something awful happens afterward, then point it out and I’ll retract my criticism of Krugman.)
UPDATE: Just look at this sentence from Krugman: “By all accounts, many if not most of the rioters were elderly.”
He has to be kidding, right? I mean, go read the whole post, and you’ll see that no, it’s a serious Krugman statement.
But what I mean is, no one can possibly write the sentence quoted above, and actually take himself seriously.
Krugman has been kidding all along. He might not say it in those words, but he knows.
The Coming Marijuana Legalization
The more I think about it, the more certain I become that there will be significant liberalization of the marijuana market within the next three years. I expect that at least half of the states will allow small purchases of marijuana, perhaps under an open ended “medicinal use” clause.
The power elites in D.C. are clever, but they’re not as clever as they think they are. And that’s not a good group of people to get handed the keys to the nukes, the IRS, and the Fed. They are going to hit a brick wall within the next two years and the elites will be genuinely surprised by just how hard the wall is. They think they have several backup plans, but they don’t really understand how society works and so their mental simulations are wrong.
In particular, I think they are underestimating the importance of reputation in financial markets. These people understand thuggery and intimidation. That’s not how you have your way in the bond market. Maybe it is for a while; but you can’t take on the whole world if they start attacking the dollar.
And oh my gosh can you imagine how much Putin is hoping the dollar crashes? This is like the time in high school when the meat-head gang slipped up and went to the wrong barbecue. They didn’t realize it was a get-together of 15 guys who were huge and who hated them with a passion. And they were just waiting, biding their time, until the meat-heads showed a vulnerability… (Yes I’m referring to actual events from my high school years, and yes Uncle Sam would be the big meat-head in the analogy.)
So what does all this mean? It means they will face the dilemma that Jeff Hummel describes: Within three years (my timing, not Hummel’s), they will have to either default on Treasury obligations or simply let the Fed print all our troubles away.
But they will have a third option, as someone will surely point out: They could legalize pot and tax the heck out of it! Not only would it bring in tax revenue, but it would also let the states turn out millions of nonviolent inmates. So they’d bring in more money and have to spend less on prisons.
How much money are we talking? Well, in 2007 the U.S. states in total collected $5.8 billion in revenues from liquor stores. Now note, I’m pretty sure that figure just refers to the actual earnings from state-run stores; that number doesn’t count sales and special sin taxes levied on alcohol sales in general. (The alcohol and beverage tax receipts in 2006 were $5.4 billion.)
Now who knows how much revenue pot legalization would bring in. But I’m guessing that it will be at least $15 billion annually, especially if you include the jump in sales tax and income tax revenues.
Because the elites who run the show will be caught with their pants down, I think they will almost certainly turn to marijuana legalization. They might save it to deploy near the 2012 election, just to make sure Obama gets enough votes that they can plausibly declare him the winner. There are going to be some seriously angry people then, so getting a bunch of them stoned might be an added bonus.
California Government Won’t Accept Its Own IOUs
This is pretty funny (HT2LRC):
SAN FRANCISCO (CN) – Small businesses that received $682 million in IOUs from the state say California expects them to pay taxes on the worthless scraps of paper, but refuses to accept its own IOUs to pay debts or taxes. The vendors’ federal class action claims the state is trying to balance its budget on their backs.
Lead plaintiff Nancy Baird filled her contract with California to provide embroidered polo shirts to a youth camp run by the National Guard, but never was paid the $27,000 she was owed. She says California “paid” her with an IOU that two banks refused to accept – yet she had to pay California sales tax on the so-called “sale” of the uniforms.
Incidentally, I’ve been writing a few op eds lately about the California budget crisis. Their deficit is bigger than most countries’ GDPs. Here is my best impression of Bill Kristol.
Last point: For those of you who like to consider data before forming a political conclusion, I refer you to Table 7 [.pdf] in the latest ALEC/Laffer state rankings. Before I began reading this research, I figured tax cuts were great but mostly on principle. But after reading this stuff for a few months, I began to be puzzled as to why any states have bad tax policies. My only conclusion was the (Hans Hoppian) observation that a governor at most gets to play with the state’s finances for eight years. But if a governor served a life term, then–whatever horrifying things might ensue–at least the 50 states wouldn’t have such ludicrous tax codes.
Mark Thoma Continues to Spread Myths About the Great Depression
Greg Ransom sent me this very interesting NYT piece on BB&T’s John Allison and Ayn Rand. Check out this absurd remark from Mark Thoma:
Mark A. Thoma, an economist at the University of Oregon, says the financial crisis would have been worse if the government hadn’t rapidly intervened.
“I completely disagree with the idea that letting the markets heal themselves is the best idea,” he says. “We tried that in the ’30s, and it didn’t work out so well.”
At the very very very most, you could argue that “we” tried letting markets heal themselves until March 4, 1933. But at that point, FDR was in charge, and right away he seized everyone’s gold at gunpoint. And then there was that whole New Deal thing.
So for a good 65% of the 1930s, we clearly had massive intervention; the most in U.S. history, before or since. And for the first portion, we still had much much much more government (and Fed) tinkering than we had ever had up to that point in U.S. history.
I actually think it would be far more accurate to say we didn’t let markets heal themselves in the 1930s, and that’s why we had the worst depression in world history.
We’ll Get Through This Depression, Really
As with most of my writing, my previous blog post on this topic did not receive the attention it deserved.
I don’t think I specified clearly enough why we are all fantastically rich, were it not for dumb government policies.
Just take organ markets. If the government made trade in body organs as regulated as, say, trade in perishable food, that would overnight add about $90 trillion in wealth to the U.s. population, at current market prices. OK, so prices for hearts and kidneys would come way down with the liberalization, so let’s call it $5 trillion to be super conservative.
I have no idea if they’re accurate, but I’ve seen estimates that the market price for a good kidney right now is $160,000. Now imagine you sold the rights to all of your body organs to some third party group. (You adjust your will so that after your death, you bequeath any salvageable body parts to the group.) How much would they pay you upfront for that right? It would depend on the characteristics of each person, of course, but I bet it’s worth at least $300,000 for a healthy 30-year-old.
So if I did the math right (and it’s tough with so many zeroes), then $300,000 per person times 300 million people in the U.S. is an increase in marketable wealth of…$90 trillion. Like I acknowledged above, presumably the price of a kidney comes way down once ten million people opt to sell their spare ones off, so the $90 trillion is way too high. But my point is to get you to see how rich we are, were it not for dumb laws.
Even if you chose to retain your kidney, you would still be wealthier. You would now have that $160,000 (or whatever) as an emergency backstop. And if the idea of signing away your body parts freaks you out–you don’t want the third party group cutting deals with ambulance paramedics!–then you can just leave your body to your own heirs. (You’d be like that tree in the Shel Silverstein book.) Knowing that Billy would get the farm and your heart, kidneys, eyeballs, and so on, you could safely contribute less to your 401k etc. Freeing up more present income would make you richer right away, even if you retained full rights over your body parts while alive.
Last point, more ominous: It’s possible that the State could transform this into a monstrous new development, just like other types of “deregulation” often blow up. For example, if I owe a lot to the IRS or my mortgage lender, I don’t want the executives telling me they were seizing a kidney. So with a predatory State looking on, the leftists are quite rightly concerned about commercializing the human body (even more so than our culture has already done).
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