Stimulus fraud

This video is pretty good. The best point is made early, and it's why government stimulus spending never seems to work. The idea is to boost economic demand by giving people money to spend, thus stimulating business activity to end the slump.

One problem is that many people use the money to pay down existing debt, rather than spending it. When times are uncertain, people and businesses get conservative with their money. We saw that with those stimulus checks to individuals a while back, and we've seen it more recently with banks sitting on federal bail-out money rather than lending it out like they were expected to do.

But the more interesting point made in the video is that when the government gives so-called stimulus money to consumers, businesses, or public interest organizations, it does not come from some pile of cash sitting there idle. Government runs at a deficit, so it has no piles of cash. All the money it gives out has to be borrowed. But that borrowed money was also not sitting idle, it was invested in some productive use. When government borrows money, that money is removed from whatever private sector productive use it could otherwise be invested in.

Private sector resource allocation is nearly always much more efficient than government spending. No private lenders are lining up to invest money in GM, for example. So whatever increases in economic activity the infusion government stimulus money MAY produce is more than offset by the loss of other, more productive economic activity in the private sector. The net economic effect of government stimulus spending is therefore less than zero. (The short-run political payoffs, unfortunately, may be highly positive.)

When people speak of the bad effects of government borrowing on the capital markets, this is what they're talking about -- government borrowing that crowds out more efficient and productive users of those resources. The difference is like a hidden tax on the whole society. Even so, it can still be worth it if the government use involves something necessary and not well served by the private market. But by its own stated aims, the "stimulus" Pork-A-Palooza that the Obama Administration currently has on the table fails that test by a mile.

Byron

Progressivism

Walter Lippmann, The Good Society, 1937:

Nearly everywhere the mark of a progressive is that he relies at last upon the increased power of officials to improve the condition of men. Though the progressives prefer to move gradually and with consideration, by persuading majorities to consent, the only instrument of progress in which they have faith is the coercive agency of government. They can, it would seem, imagine no alternative, nor can they remember how much of what they cherish as progressive has come by emancipation from political dominion, by the limitation of power, by the release of personal energy from authority and collective coercion. For virtually all that now passes for progressivism in countries like England and the United States calls for the increasing ascendency of the state: always the cry is for more officials with more power over more and more of the activities of men.

The progressive response to this kind of critique is to point to instances and patterns of coercion in the private sphere, which have often required government action to remedy. Various civil rights and emancipation movements provide striking examples of people made more free by government. Even though such examples do not prove that government action was the only way that result could have been arrived at, the point has undeniable force, as far as it goes. What is false is the generalization that sees coercive domination as characteristic and typical of relations within society. In fact, any society like that would quickly disintegrate.

But if that false premise is accepted, then government surveillance and intervention must necessarily encompass every sort of human relationship. In Sweden, for example, corporal punishment of children by their parents is legally defined as criminal assault, including not only the mildest forms of physical reprimand, but also "mental abuse," such as ridicule. This law, which has wide public support, is described as the logical conclusion of an evolutionary process in which Swedish society has developed in an increasingly egalitarian and collective direction. Sweden is, after all, the the world model of progressivism. There, for all intents and purposes, the private sphere no longer exists; the Swedes have not been coerced, they have willingly given it up.

What to make of this? Swedish statistics show that by this government action many children have been freed from abuse and the threat of abuse, and that's certainly a very good thing. The bad things, I think, are two. First, taking this path means that the private sector has completely thrown in the towel and accepted the idea that only government can do anything effective. That seems excessively passive, a quick-and-dirty swap of private responsibility for the convenience of dumping the problem on government to handle. If responsibilities and rights are mutually dependent, this starts to look like a transition from being citizens to being subjects. Second, and this is just the flipside, as one after another formerly private sector function and responsibility is off-loaded to government, government becomes progressively more powerful. At some point, faith and trust in government must become effectively absolute, and history does not recommend that.

Byron

We Want Stimulation...

...and we want it now!

Looking at this Stimulus Bill, several things become apparent.

First, every page of this thing has been written by one rent-seeking special interest or another, a chance for every wish list to become reality. A lot of legislation is like that, of course, but this is a chance to see how it works right out in public. Count me as one proud taxpayer.

Second, you can forget about this being a one-shot deal. Many of the projects that will be funded to this or that "community" or "public interest" will not be the sorts of things you can shut down once they are running. Political reality will not allow it, period. You can write the various scenarios as well as I can, so enough said.

Third, there are the mechanics of how this mountain of money is going to be distributed. The premium is on getting the money out as fast as possible. (Jump start!) The only way to do that is to give officials like the HUD Secretary, and to officials well below him, an enormous amount of disbursement power, or disbursement power in effect. Running back up the chain for approvals and sign-offs would slow things to a crawl. The proposals will be too numerous to vet in any serious way in the time available, so recommendations may often have to be taken at face value. Mistakes will be made. Nature of the beast. We all did our best. Shoulder to the wheel. Yadda, yadda.

In reality, these officials are going to be, in effect, bag men with large bags of ready money to distribute at their discretion. They are being invited to waive this or that statutory restriction in order to get it spent ASAP. The feeding frenzy that this will create is not hard to imagine. Now ask yourself: Has any more perfect invitation (nay, inducement) to waste, fraud, and corruption ever been penned by the hand of man?

It seems perfectly appropriate that this mess should become law under the leadership of Nancy, Harry, and what's-his-name from the Chicago political machine.

Byron

Déjà Vu Vu Vu

A bail-out of the auto companies (and who knows what other failing industries), plus a so-called stimulus package consisting largely of public works infrastructure projects. It sounds pretty familiar, and it didn't work last time:

Wikipedia:

The NIRA [National Industrial Recovery Act, passed in 1933] was strongly supported by many leading businessmen, some of whom had helped draft the legislation. Gerard Swope, head of General Electric, was one of the first champions of this legislation—which legalized cartels and funded massive government spending on public works through the PWA [Public Works Administration]. This increased spending was designed to restore prosperity and benefit General Electric and all businesses.

Jerry Z. Muller, The Mind and the Market, Capitalism in Western Thought, Anchor Books, 2002:

"The National Recovery Administration [an offshoot of the NIRA], initiated in 1933, reflected a government policy of deliberate cartelization... Here was a policy at odds with the very concept of a competitive economy, which created winners and losers; instead the NRA attempted to keep all players in the game."

(p. 303.)


The plan now on the table seems to me wrong-headed in the extreme. If we are going to add $850 billion to the deficit, we should do it with $850 billion in tax cuts. That money, since it would stay in people's pockets and business accounts, would be available quickly, and it would get allocated to consumption and rational investment uses. That's where the multiplier effect is to be found, and the economic growth required to erase the deficit being created.

But no. Instead, the idea is to prop up failing enterprises with part of the money, thus defeating creative destruction and the dynamism of the market, and to misallocate the rest. Whatever stimulus effect there might be from infrastructure spending will be minimized because that money will of necessity trickle out over a period of years. The portion that will disappear down rat holes like GM or, in the case of public projects simply evaporate in set-up expenses, administrative overhead, and wasteful cost overruns, is something you don't even want to think about.

What taxpayers will get for their money is an enormous federal deficit with no prospect of an early pay-back, a fat portfolio of flat-line businesses requiring endless transfusions of money to limp along, and a large number of inefficient public works and other government projects that will feast on the public purse like vampires who cannot die. Successful, creative, competitive enterprises, for their portion, will reap the hobbling effects of higher capital costs due to massive government borrowing, which will hamper their ability to expand and compete internationally.

I keep searching for the pony in this steaming pile of horse pucky, but I can't find it.

Byron

Fixing the Economy

"Fixing the economy" is a notion so absurd that only a certain species of economist could possibly take it seriously. The root of this nonsense is the planner's pipedream of economic calculation, so we have an absurdity built upon an absurdity. The present meltdown is classic. People with a planning agenda, in this case an agenda of creating universal home ownership, manipulated things to insure that normal market discipline could not operate. As the resulting distortions accumulated, patches were plastered on here and there, pathetic little fingers were stuck into the multiplying holes in the dike. Now that it's all crashed in an inevitable cascade of failure, they are frantically trying to shore up the mess with actions that will almost certainly cause immense additional damage. What's required is a truly enormous quantity of sheer luck, and that ain't likely.

The single, shining truth here is that nobody has any hint of a clue about what they're doing, but political survival requires that they do something. When people are forced to operate in that kind of ambiguity, where it is impossible that they could actually understand what they are dealing with, they always seek the shelter of a false consensus. Certain opinions get some support, and those quickly become the port in the storm to which everyone flocks. Those ideas begin to be treated as if consensus about them somehow magically turns them into real facts about the world. They aren't. But this compounded ignorance now coalesces into bold policy prescriptions that will, with almost perfect certainty, make things worse either immediately or down the road. The Greeks knew that hubris always ends badly, and they were right. This article is a keeper.

Byron

Deepak Chopra

Or, as I prefer to refer to Public Broadcasting's favorite fundraiser, Choptank Sixpack. To be fair, and that is after all my mission, let's make that "favorite fundraiser other than the IRS." Chop-Chop is always in heavy rotation with the superannuated Peter, Paul, and Mary the Large, the toothy waltz-schmaltz guy from Vienna whose swaying, sing-along audience makes me wish I had a hammer, and one or another assemblage of ethereal, willowy Celti-Culti Enya knock-offs.

The Chopster has been described as a firehose of nonsense. But firehoses don't rake in mega-bucks from the gullible, who seem to be the same people who besides involuntarily supporting the Bill Moyers Network with their tax dollars also get a warm feeling from spending $300 for a CD and a tote bag that by chance (!) has just enough blank space for your "Free Tibet!" sticker. To be fair once again, that tote no doubt pays for itself when you walk it through Whole Foods, exchanging winks with other Carriers of the Bag. We are the world. And if the Chinese don't shape up and un-lasso Lhasa, we may just stop buying their menopause potions and prostate herbs over on Aisle Four.

See this link for Choppy's adventures with the the Journal of the American Medical Association, in which he displayed the ethics of the barker at a carnival geek show: http://www.aaskolnick.com/naswmav.htm The bits about flying yogis are especially entertaining, as the only thing that actually flew was his $194 million libel suit when it was tossed out.

Byron

P.S. Just as an aside, I have to say that when I happened to flip by the Choperino on a PBS Beg-a-Thon a few weeks ago his face seemed all purply and rubbery and bloated; the guy just didn't look at all healthy. But maybe he just ran into a bad quantum energy field that day.

Upon discovering the deception, JAMA requested from the authors a full account of their connections to TM organizations. The confusing statement they provided was published as a financial disclosure correction on August 14 and represents only what the authors admitted. While it appears to hold the record in terms of length for a financial disclosure correction in the journal, the account is still incomplete. Among other things, Chopra did not acknowledge that he collects hundreds of thousands of dollars from his seminars on Maharishi Ayur-Veda and by providing Maharishi Ayur-Veda treatments. (According to David Perlman's October 2 San Francisco Chronicle article, Chopra claims he gives 50% to 70% of his fees to the movement.) He also did not report that he had been the sole stock holder, president, treasurer, and clerk of Maharishi Ayur-Veda Products International, Inc (MAPI), the sole distributor of Maharishi Ayur-Veda products. Although he no longer holds these titles, Chopra still has the same office address and phone number as MAPI.