What If Obama Is Sincerely Wrong?
To those readers who want to nurse their hatred of politicians, I want to raise the possibility that Barack Obama actually believes his stimulus plan is a good idea. Don’t get me wrong, he knows full well all the political back deals and payoffs it contains. But I am entertaining the possibility that he actually thinks on net, it is better than doing nothing, or doing what Sean Hannity would recommend.
We have all heard the “Well whaddya think a stimulus is?” line, but the fuller context shows Obama’s charm. And when he says, “That’s not me talking, that’s the economists talking…” well darnit, he’s right!
If someone gets a PhD in economics and manages to write this, or wins the (pseudo) Nobel Prize and writes this, how can you fault Obama for believing his plan will work?
Does anybody know if Obama is right about the Republicans initially saying the mix of tax cuts and spending was a pleasant surprise, and then a week later going nuts about the ratio? I think he is right, but is that a fair charge on his part? Because the package went through an evolution. Did the original version have more tax cuts or less?
Another thing: My theory is that Obama tries to minimize his actual lying. So during the campaign, he would answer tough questions by saying, “I have always said…” so that he can RIGHT THERE be uttering a true statement, referring to the lie of his earlier self.
In the clip above, when he’s discussing earmarks, listen carefully to what he says:
“Then there’s the argument, ‘Well this is full of pet projects!’ When was the last time that we saw a bill of this magnitude move out with no earmarks in it? Not one.”
Then people start clapping, because of course Obama has led them to believe that this ~$800 billion monstrosity is earmark-free. But notice that he doesn’t actually say that.
Bob Higgs No Fan of the Government
Straight-shootin Bob Higgs learns us all a lesson about fiscal responsibility at LRC today. But before I give you Higgs’ funny conclusion, you need to know what he is responding to. At first I was going to just paraphrase, but folks, you really have to read this New York Times article describing the government’s latest plan:
The Treasury Department and the Federal Reserve plan to spend as much as $1 trillion to provide low-cost loans and guarantees to hedge funds and private equity firms that buy securities backed by consumer and business loans.
The Fed is expected to start the first phase of the program, which will provide $200 billion in loans to investors, in early March.
The program . . . does not try to change securitization practices that, many investors say, spread risks throughout the world and destroyed financial institutions. Policy makers acknowledge that for now, fixing credit ratings, reducing conflicts of interest and improving disclosure can wait.
Under the program, the Fed will lend to investors who acquire new securities backed by auto loans, credit card balances, student loans and small-business loans at rates ranging from roughly 1.5 percent to 3 percent.
Depending on the type of security they are borrowing against, investors will be able to borrow 84 percent to 95 percent of the face value of the bonds. Investors would not be liable for any losses beyond the 5 percent to 16 percent equity that they retain in the investment.
In the initial phase, the Treasury will provide $20 billion and the Fed will provide $180 billion. Treasury Secretary Timothy F. Geithner said last week that the Treasury could increase its commitment to $100 billion to allow the Fed to lend up to $1 trillion.
So in response to that, Higgs declares:
Well, there you have it. If you can imagine anything more idiotic in the present circumstances, your imagination is more powerful than mine.
I have this recurring nightmare in which Tim Geithner is lying in a dark corner of a saloon. His bosom buddy Ben Bernanke comes in, sees him lying there in a heap and rushes to his side. He finds his comrade breathing heavily and reeking of a warehouse worth of booze. He shouts for help: “Bartender, get over here quick. Bring this man a whiskey. And make it a double!”
Into such hands has fate delivered us. May God have mercy on our souls.
Go get em, Bob!
Toward an Understanding of the Old Testament God
I try to make a religiously themed post every Sunday, but my other work took over my weekend. (I shudder to think what that says about my priorities, I know.)
For today’s post I want to move toward an understanding–i.e., I am not claiming I actually have it yet–of how the God of the Old Testament could issue commands like these (Lv 20):
1 Then the LORD spoke to Moses, saying, 2 “Again, you shall say to the children of Israel: ‘Whoever of the children of Israel, or of the strangers who dwell in Israel, who gives any of his descendants to Molech, he shall surely be put to death. The people of the land shall stone him with stones. 3 I will set My face against that man, and will cut him off from his people, because he has given some of his descendants to Molech, to defile My sanctuary and profane My holy name. 4 And if the people of the land should in any way hide their eyes from the man, when he gives some of his descendants to Molech, and they do not kill him, 5 then I will set My face against that man and against his family; and I will cut him off from his people, and all who prostitute themselves with him to commit harlotry with Molech.
6 ‘And the person who turns to mediums and familiar spirits, to prostitute himself with them, I will set My face against that person and cut him off from his people. 7 Consecrate yourselves therefore, and be holy, for I am the LORD your God. 8 And you shall keep My statutes, and perform them: I am the LORD who sanctifies you.
9 ‘For everyone who curses his father or his mother shall surely be put to death. He has cursed his father or his mother. His blood shall be upon him.
10 ‘The man who commits adultery with another man’s wife, he who commits adultery with his neighbor’s wife, the adulterer and the adulteress, shall surely be put to death. 11 The man who lies with his father’s wife has uncovered his father’s nakedness; both of them shall surely be put to death. Their blood shall be upon them. 12 If a man lies with his daughter-in-law, both of them shall surely be put to death. They have committed perversion. Their blood shall be upon them. 13 If a man lies with a male as he lies with a woman, both of them have committed an abomination. They shall surely be put to death. Their blood shall be upon them. 14 If a man marries a woman and her mother, it is wickedness. They shall be burned with fire, both he and they, that there may be no wickedness among you. 15 If a man mates with an animal, he shall surely be put to death, and you shall kill the animal. 16 If a woman approaches any animal and mates with it, you shall kill the woman and the animal. They shall surely be put to death. Their blood is upon them.
17 ‘If a man takes his sister, his father’s daughter or his mother’s daughter, and sees her nakedness and she sees his nakedness, it is a wicked thing. And they shall be cut off in the sight of their people. He has uncovered his sister’s nakedness. He shall bear his guilt. 18 If a man lies with a woman during her sickness and uncovers her nakedness, he has exposed her flow, and she has uncovered the flow of her blood. Both of them shall be cut off from their people.
19 ‘You shall not uncover the nakedness of your mother’s sister nor of your father’s sister, for that would uncover his near of kin. They shall bear their guilt. 20 If a man lies with his uncle’s wife, he has uncovered his uncle’s nakedness. They shall bear their sin; they shall die childless. 21 If a man takes his brother’s wife, it is an unclean thing. He has uncovered his brother’s nakedness. They shall be childless.
22 ‘You shall therefore keep all My statutes and all My judgments, and perform them, that the land where I am bringing you to dwell may not vomit you out. 23 And you shall not walk in the statutes of the nation which I am casting out before you; for they commit all these things, and therefore I abhor them. 24 But I have said to you, “You shall inherit their land, and I will give it to you to possess, a land flowing with milk and honey.” I am the LORD your God, who has separated you from the peoples. 25 You shall therefore distinguish between clean animals and unclean, between unclean birds and clean, and you shall not make yourselves abominable by beast or by bird, or by any kind of living thing that creeps on the ground, which I have separated from you as unclean. 26 And you shall be holy to Me, for I the LORD am holy, and have separated you from the peoples, that you should be Mine.
27 ‘A man or a woman who is a medium, or who has familiar spirits, shall surely be put to death; they shall stone them with stones. Their blood shall be upon them.’”
Whatever else you want to say about the LORD, it’s clear that He means business.
No, seriously. I really think that’s part of what is going on in the above.
If you don’t have kids, you may not agree with or understand what I’m about to say. But the one person on Earth on whom I am the hardest, the person that I am the “meanest” to, is my 4-year-old son. Now some of it is due to my mistakes (in losing my temper or being impatient), but a lot of it is intentional. In other words, heck yes I want my son growing up being a least a little bit afraid of me. I was afraid of my parents, and it was a good thing.
Why? Because even though they overreacted at times to what were really minor trangressions (compared to all the crazy stuff my friends did), they were fair about it and their rules really were for my own good. So when I say I was afraid of my parents, I don’t mean because my dad might come home drunk and take out his belt. No, I mean if I did a halfhearted science project in 5th grade I would get yelled at. NOT because “you’re stupid,” mind you, but because, “Why didn’t you put in any effort into this? Did you see how much work the other kids did?”
So the same with my son, if he talks back to my mom (i.e. his grandma) and she thinks it’s hilarious, I am still going to (verbally, not literally) slap the back of his head and say, “Whatsa matta wich you?”
I think that is the way we need to understand the God of the Old Testament. The children of Israel behaved like children when it came to their relationship with their Father.
Now I know, some of you are going to say, “So why don’t you stone your 4-year-old when he talks back?” I am admitting that the intensity of the above passages surprises me. But I must reiterate that the one person I really let “have it” when he has screwed up is my son. He’s a little guy, so don’t misunderstand: I don’t mean I do anything that would concern Social Services. But that’s my point; I actually spend a lot of my day criticizing / correcting what this little 4-year-old does. In contrast, if somebody else’s 4-year-old came up and literally stabbed me, I truly don’t think my reaction would be to scold the kid. (I’m thinking the kid would have to be about 6 or 7 before I would really be insulted.)
So, when he has really screwed up–like if he asks me for apple juice and I say, “OK one minute” and then he doesn’t wait but instead tries to fill up his own sippy cup and drops the ENTIRE bottle of apple juice on the kitchen floor so the sticky liquid flows under the stove and refrigerator–he is not happy with my performance for the next 10 seconds. He knows I am seriously mad.
OK now back to the children of Israel: They grew up in a sick, twisted world. There was lots of crazy stuff going on back then. Picture it this way: Sure you can be cynical about things, but generally speaking society gets more civilized over time. E.g. it would be inconceivable for police departments to spray down unpopular minorities nowadays, thought it happened in the ’60s. (Of course, it is still acceptable for the BATF to burn unpopular minorities, but that’s another matter.)
Now, work your way backwards. Every generation, humans just keep getting more bigoted and vicious and…well, they are a bunch of animals by the time you go back thousands of years.
Now in that context, the LORD decides He is going to personally deal with this situation. The human race, without His direct intervention, was going to hell. Now when the children of Israel were very immature in their relationship with Him, He had to–you saw this coming, right?–put the fear of God into them. That was the first order of business.
Last point: Some people understandably ask, “How could God possibly order the Israelites to kill pagan babies?” Well, He is the author of the universe, truth, beauty, love, mathematics, nature, and limericks. You don’t think He is “allowed” to setup the universe in such a way that people get killed?
Suppose your wife says, “Guess what honey, John Grisham is coming to dinner next week. Jill knows him and he’s in town.” Would you say, “Are you nuts? Do you know he makes his characters murder other characters in his novels? You think I’m allowing that fiend into our house?”
"Pre-Privatization": You Have to Be Kidding Me
Have you heard the new term for bank nationalization? All the cool kids are calling it “pre-privatization.” Oooh, you’re so scared of bank nationalization, what a chicken. Is it because your mommy and daddy warned you about it? I bet they told you to stay away from dope and rock ‘n roll, too.
How the Government Dealt With Previous Recessions
This is a really neat idea by the New York Times. They got a few big guns to discuss the government’s moves during previous recessions. Unfortunately, the three economists all cling to the Keynesian/monetarist view that government spending and money printing boost the economy, with the only downside being rising prices. (Somebody else, who claims to be an Austrian business cycle theorist, holds the exact same view apparently without realizing that his analysis is identical to that of mainstream, NYT-approved gurus.)
Fleshing Out the Broken Window Fallacy
A colleague recently forwarded me an email he had received asking about the broken window fallacy. (If you have never heard this spelled out before, you absolutely must read Hazlitt’s discussion–it’s very short.)
Anyway, the correspondent was puzzled, because if the “flaw” in the broken window fallacy is that the baker would have spent money on, say, a suit, then isn’t that compensated when the glazier goes and buys something? In other words, isn’t Hazlitt just narrowly focusing on the loss in employment and income to the tailor (who would’ve sold a suit to the baker had the hooligan not broken the baker’s window)? Here is my answer:
The issue isn’t one of income or job creation. [Your correspondent] is right; there will be just as much employment and the level of sales will be the same in the aggregate.
The difference is that the community will be one item poorer. So yes, the window glazier can go buy a suit that the baker would originally have purchased, but by the same token the tailor would have bought something with the $$ that the baker would have spent on his suit, if the window had never been broken.
If you picture the two timelines diverging once the hooligan breaks the window, the point is that no matter how much production the spending stream entails, the community will always be materially poorer in the timeline that starts off with one fewer window. Only by assuming that people produce *more* after the kid breaks the window, can the community close the gap in wealth at the starting point.
And Bastiat/Hazlitt’s point is that there’s no reason to assume people would produce more after the window is broken. The baker’s spending doesn’t do it, because he would have spent that $$ on somebody else, and the glazier’s spending doesn’t do it, because the tailor’s spending would have done the same in the original timeline, etc.
DeLong and Krugman Surrounded by Friggin Idiots, #283
Ah, poor Brad DeLong. In a post entitled, “Against Stupidity the Gods Themselves Contend in Vain,” he echoes Paul Krugman’s exasperation with moronic Republicans. Here’s Krugman full post:
The most valuable lesson I learned from the year I spent in Washington (1982-1983, on the staff of the Council of Economic advisers — I was the senior intl economist, the senior domestic economist was a guy named Larry Summers. What ever happened to him?) was the extent to which senior government figures have absolutely no idea what they’re talking about.
So when I read something like this:
“Why should we reward Fannie Mae and Freddie Mac with $200 billion in taxpayer dollars without first reforming these housing entities that were at the heart of the economic meltdown?” House Minority Leader John A. Boehner (R-Ohio) said in a statement.
and people ask what on earth Boehner might mean when he talks about taxpayers “rewarding” institutions that are owned by taxpayers, I go for Occam’s Razor: Boehner doesn’t have some complicated notion in mind, he either doesn’t know that the government took over F&F months ago, or he just doesn’t get this “government-owned” concept. [Emphasis in original]
Huh, that is surprising. But of course, what’s even more surprising is that we taxpayers would shift our funds around in such a pointless fashion. I mean, I didn’t transfer $200 billion from my checking account to my wallet yesterday, so why would I do the same with my Fannie Mae property?
Oh, it’s because F&F are going to buy stuff with our money, or they’re going to guarantee the value of certain assets, using our money as the backstop. That’s why the government is authorizing money in the first place; that’s why they are picking $200 billion and not, say, $200 trillion–even though according to Krugman, the latter number would just be a meaningless accounting trick.
Note that I am not necessarily defending the wisdom and intelligence of John Boehner; his statements are no doubt calculated for political effect.
But what I am saying is that Boehner’s statement is perfectly sensible. It is Krugman (and DeLong) who are falling for the crudest of fallacies when they think the taxpayers can’t possibly lose on agencies that they “own.”
Anyway, I’m a little bearish right now. I want to sell my shares of Fannie and Freddie. Does anyone have the correct broker contact info? I seem to have misplaced the laminated card that Henry Paulson mailed me back in September.
The Stock Market in 1929 Was Undervalued??
So argue McGrattan and Prescott in this 2003 Fed paper (pdf). Here’s the abstract:
Many stock market analysts think that in 1929, at the time of the crash, stocks were overvalued. Irving Fisher argued just before the crash that fundamentals were strong and the stock market was undervalued. In this paper, we use growth theory to estimate the fundamental value of corporate equity and compare it to actual stock valuations. Our estimate is based on values of productive corporate capital, both tangible and intangible, and tax rates on corporate income and distributions. The evidence strongly suggests that Fisher was right. Even at the 1929 peak, stocks were undervalued relative to the prediction of theory.
Hmm. I think if your model predicts that stocks were undervalued in 1929, then your model is wrong. Forget the fact that the Dow didn’t surpass its 1929 peak until the 1950s (according to Amity Schlaes)–after all, one could plausibly argue that the New Deal and World War II totally changed the underlying fundamentals that prevailed in 1929. Fine.
But still, how do our authors explain the huge rise in the stock market during the late 1920s? In other words, if stocks were undervalued at the 1929 peak, then they must have been ludicrously undervalued in 1927, since I don’t think there were any major changes in the “fundamentals” during the two years.
I haven’t read the paper so maybe they give an answer. They do address the issue of the crash itself–they follow Friedman and blame it on the Fed tightening. I think this theory that the tightwad Fed caused the crash may be Friedman’s worst contribution, surpassing his role in creating tax withholding.
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