Saturday, January 31, 2009


I totally screwed up my site.  I was playing with alternative templates and downloading the old template didn’t actually back it up the way that I assumed it did.

Now I have to remember all the widgets and links and other crap I had on the site. 

How frustrating.

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If I had to Stimulate This is How I Would Do It

Businesses and consumers are scared to spend because they are uncertain about the future, or so the theory goes.  If someone would just inject a little cash into the system then it would all start moving again.  They key is to get the spending going soon on projects that are “ready to go” and will make good use of idle resources right?

There seems to be a belief that there are a few people (namely ‘the government’) that can figure figure out what resources are idle and knows what projects are just sitting on a shelf ready to implement.  That is clearly incorrect if you look at any of the boondoggles that are part of the current stimulus bill.  It is primary composed of increased departmental budgets and infrastructure projects that will take years (and year) to complete.

If I had to come up with a stimulus bill – let’s leave aside whether or not its necessary – I would attempt to use the private sector  to funnel the money.

There are problems with just giving business a bunch of cash – they use it for things like bonuses, airplanes and 0% interest, putting their competitors that don’t get cash at a disadvantage.  And, call me a fool, I am uncomfortable letting tax dollars go towards picking winners.

Assuming that most companies are like mine, there have been millions and billions of dollars in capital projects that have been postponed because no one knows how bad the economy is going to get or how long the downturn will last.  So there are projects that businesses will think will make them better off that they aren’t pursuing because they are simply trying to conserve cash.

Now you don’t want to just give them money and trust that they will use it in a productive way – but the government could match any capital spend that a business decides to undertake.  There are a lot of productivity projects ready to go, we cut capital in half and there are probably twice that many projects that were proposed.  (unlike government, the private sector actually has to make choices). 

So it’s clear that the money could be spent quickly.  Because the funding is only a match there is some likelihood that the spending would actually be productive (though not guaranteed).  And this type of spending is more likely to re-absorb the unemployed resources, or at the very least stop the bleeding.  It is certainly better than assuming that everyone that has been laid off could become a construction worker overnight.

So that is my plan – what do you think?

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Thursday, January 29, 2009

Clearly Delusional

And no, I'm not talking about Blagojevich's ramblings about Gandhi, MLK & Mandella.

In an editorial in the NYT asking what's missing from the bailout package, Galbraith writes:

– Increase Social Security benefits, say by 30 percent, and a lower the eligibility age of Medicare to (say) 55 years of age. This would offset the deep drop in equity wealth of the elderly population, while favoring the poor. Expanding Medicare eligibility would permit more workers to retire, freeing firms from carrying health care costs for older workers.
Social Security and especially Medicare are under deep water and will require cutting benefits or substantially raising taxes (probably both) in the next decade. Galbriath's solutions is... to make the problem drastically worse!

Who gave this guy a microphone and how do we take it back?

Monday, January 26, 2009

Questions on Keynes

I just listened to Russ Roberts podcast on Keynesian economics – especially in relationship to the current economic situation.

Before I get to my question I would like to commend Roberts on his ability to be gracious to his guests.  I find myself nearly jumping out of my seat wanting to challenge his guests on one thing or another.  Roberts lets his guests have their say, he will challenge them – gently – on some of their points, but for the most part makes every attempt to make sure that their points are understood or understandable by his listeners.  If you do not regularly listen to EconTalk then you are really missing out on one of the most educational hours that you could possibly had.  I can’t recommend it enough.

Now on to Keynes.

So, if I understand the Keynesian perspective correctly, recessions are caused by a lack of demand.  In order to correct the lack of demand the Keynesian remedy is to have government replace that demand by spending lots and lots (and lots and lots and lots) of money, thus replacing the lost consumer demand with government demand.

So take the current stimulus as an example.  Consumers are spending as much as they used to which has led to a recession.  The Obama economic team wants to ‘fix’ this by having the government spend close to a trillion dollars, thus replacing the nascent consumer demand, thereby stimulating the economy.

Now, if the stimulus was implemented in a best case scenario with all of the money spent in 2009 on projects that are ‘necessary’ – what happens in 2010?  Doesn’t this new lack of demand put us exactly where we started?  How is this a long term fix.  It seems to me that Keynesian stimulus can be nothing but short term in effect.

Am I missing something?

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Tuesday, January 13, 2009

Some Pretty Good News

I hope they spend a lot of time on this.  In fact, Congress should make this their top priority and devote every effort into uncovering the truth.

The incoming Obama administration should launch a criminal investigation of Bush administration officials to see whether they broke the law in the name of national security, a House Democratic report said Tuesday.

The more time they spend on useless political grandstanding the less real harm they will be able to do.

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Monday, January 12, 2009

Foundations of Science

A scientific theory can be disproved by a single counterexample, but it can never be proved true because that would mean it couldn’t be refuted; and – it’s faith, not science.

Quick!  Which so called science seeks, above all else, to make sure that no one attempts to disprove it?

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