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RE: We all made this bed. Now we have to lie in it!

"Do you mean like in Washington, D.C.? ;)"

Man, if you think Washington is corrupt, you should visit Egypt! If you make reservations and show up at the hotel, you'll discover that you don't have a room. You have to take a tour or hire a local facilitator to grease palms just to get a hotel room.

It's sad, really, these countries are suffocated under a blanket of corruption, official and otherwise. It has a lot to do I think with the difficulty they're having with modernization. I don't think they see baksheesh the same way we do, as bribery: essentially, every transaction is still personal to them. They lack the generalized work ethic that says you should just do your job, and it makes hard for them to move to a more sophisticated economic model.

"Except that now they don't really have a government, and as things continue to take shape, it looks like the Camp David accords (remember Jimmy Carter?) are going to be thrown in the dumpster. More billions flushed down a rat hole."

I think the world should have imposed a settlement on the Israelis and Palestinians long ago. Everyone knows what it has to look like. But as things now stand, they're just going to destroy one another -- and the ill will and resentment that the conflict causes in the Islamic world is I think a major contributor to world terrorism, which threatens us.

"My point isn't the percentage of the budget that goes to foreign aid, it's that we shouldn't do it at all. As the lefty liberals are so fond of saying (with regard to the space program, etc.), we could use that money to help people in America to get out of poverty or have better food or schools, or whatever. Don't get me wrong, those problems will never go away, I'm just saying that, when I get up in the morning, I don't see how my life is measurably better because we gave Dan Noriega or Hosni Mubarack a few billion dollars, but I AM entirely aware that I've got taxes to pay in a couple weeks, and I'd rather keep that $20 instead of giving it to guys like that. But if you're happy with the concept, I'll send you my address, and you can send me $20. :)"

Well, I don't agree with them about the space program, either. :-) I'm not fond of what the national GOP has become in recent years, it has little to do with the aspects of conservatism that appeal to me, but in this, I think they have it all over the Democrats. Yes, helping people is important, but so is the human future. Besides, the cost of the space program is trivial. We each spend far more on entertainment than we do in taxes to fund the space program. Wouldn't a mission to Mars be more interesting than another teevee show?

As to foreign aid, well, I do want to help people who are hungry and poor, though much of the money and food aid that's supposed to do that just gets stolen. I think a prosperous third world is in our interest, because it's the failed states that threaten us -- countries like Iran and Somalia, which is fertile ground for Al Qaeda. Just look at China -- not our bestest friend in the world, but they sure aren't a threat like they were in the days of Mao, because their prosperity depends on the prosperity of their victims er trading partners. And I continue to think that in many cases we can buy more security with a bit of aid to dictators than the same money would buy us if we spent it on our military, though there's certainly a cost attached to that, including the not-entirely-unjustified perception that because we aid the dictators economically, we're supporting their repression.

" 'We're still far and away the world's richest country'.

"Hmm, I don't think so, as much as we'd like to believe we are. Check out Singapore."

I was referring to total GDP:

1 United States 14,637,661
2 China 5,767,346
3 Japan 5,567,898
4 Germany 3,397,562
5 France 2,673,853

In the case of GDP per capita,

1 Qatar 102,891
2 Luxembourg 84,829
3 Singapore 59,936
4 Norway 53,376
5 Brunei 49,517
— Hong Kong 49,342
6 United Arab Emirates 48,597
7 United States 48,147

I've noticed over the years that the countries that have a higher per capita GDP than ours are changing players, that is, they'll have higher GDP's than the US for a few years, then drop down on the list. For example, Ireland was near the top of the list before their economic catastrophe. Conversely, the US maintains its position near the top year after year. Right now, Singapore, Hong Kong, etc. seem to be benefiting from economic growth in mainland China, and the fact that the region isn't in recession. Our idiotic globalization policies mean that our economic stimulus packages have been doing a great job -- for China.

"I'm not sure what you mean. Are you saying we should have listened to the liberal-leaning economists, or the conservative-leaning economists? In either case, Obama's position seems to be that since Bush ran up the debt and drove the car toward the cliff, now Obama's got to run it up even more and drive even faster in order to fix the problem. ;)"

From my perspective, economics is supposed to be a science, and science doesn't care one way or another about politics and ideology. Either a theory works, or it doesn't. So the economists who interest me are those who have a good understanding of economic theory, and I don't care whether their personal ideology is liberal or conservative, any more than I care whether an engineer is, as long as the product he designs does what it should.

That to me means, among other things, accepting Keynesian economics, which I find so logically compelling as to seem self-evident, and which is backed up by overwhelming historical evidence.

The economy doesn't work like your checkbook. But since most people don't know anything about macroeconomics, they think it does -- and that makes it easy for whichever party is out of power to demagogue the other party's deficit. Both have done it. In actuality, federal deficits are neither intrinsically good or bad -- that depends on economic circumstances.

Bush turned a surplus into a deficit by cutting taxes when economists said that that was irresponsible and economically counterproductive. Obama, too, ignored the advice of the best economists, and we're now paying the price in the form of a slower recovery. But that advice was very different -- we needed a $2 trillion stimulus, rather than the $1 trillion stimulus that we got. (Geithner is now known to have mislead Obama, by intentionally changing the figures in the memorandum that a government economist prepared for Obama because he didn't believe $2 trillion was a politically realizable figure. But still, its Obama's responsibility to choose his people and vet what they say, and word is that like Bush he listens more closely to his political than economic advisors. Whereas Clinton is known to have listened to his economists, and reaped the benefits of doing so.)

Now, we're in a recession, and from a macroeconomic perspective, the situation is different -- we should be running deficits, though we shouldn't be doing so by cutting taxes, since research shows that people bank tax cuts rather than spending them, meaning that tax cuts offer little bang for the buck when it comes to fighting recessions by increasing demand. Rather, what we need is direct federal spending, which does increase demand. It doesn't much matter on what: it could be war, or social programs, or roads. Liberals always say we're hurting the economy by spending it on the military, conservatives by spending it on domestic programs. But neither of those assertions is true. The idea is to have the government print money, borrow it from itself, then spend it on *anything;* this puts people back to work, then they spend their wages, and the recovery becomes self-sustaining. And rather than costing us much, it makes us richer. People just don't get that, though, really, the concept isn't difficult: money is just paper or bits, whereas empty factories and unemployed workers make no goods.

Once a recession ends, the government has to dial back as demand increases to avoid inflation, a step that can be difficult (look at Roosevelt's premature budget balancing of 1937, the economic contraction during the demobilization after WW II, or the recession that cost George H. W. Bush office after he raised taxes to reduce the deficits he inherited from Ronald Reagan's decidedly Keynesian big-government policies).

Some interesting figures:

PERCENT CHANGE IN GDP (IN INFLATION ADJUSTED DOLLARS)

1. D FDR ('40-'44) 74.69
2. D FDR ('32-'36) 34.63
3. D LBJ ('64-'68) 21.81
4. D TRUMAN ('48-'52) 21.00
5. D JFK ('60-'64) 19.86
6. D FDR ('36-'40) 19.33
7. D CLINTON ('96-'00) 17.87
8. R REAGAN ('84-'88) 15.98
9. D CARTER ('76-'80) 13.67
10. D CLINTON ('92-'96) 13.53
11. R IKE ('52-'56) 13.45
12. R REAGAN ('80-'84) 12.63
13. R NIXON ('68-'72) 12.38
14. R IKE ('56-'60) 10.91
15. R FORD ('72-'76) 10.62
16. R BUSH SR ('88-'92) 8.81
17. R BUSH JR ('00-'04) 8.75
18. R BUSH JR ('04-'08) 2.00*
19. D TRUMAN ('44-'48) -9.04
20. R HOOVER ('29-'32) -25.60

Original figures are at http://www.bea.gov/national/xls/gdplev.xls
*Based on an estimate of economic performance in fourth quarter '08

What stands out I think is that the times of growth coincide with periods of higher government spending, whether on war or peacetime programs like the New Deal and Great Society.

When demand exceeds productive capacity, you start to have inflation, as in WW II (when we enjoyed the fastest economic growth in our history, but had to implement wage and price controls), or the "guns and butter" period of the Great Society and Vietnam Wars.

Conversely, cutbacks tend to lead to or worsen economic contractions, although they're frequently precipitated by cyclical economic instabilities caused by burst bubbles -- 1929, the Internet stock bubble, the subprime mortage bubble, or the more usual bull/bear cycle of Wall Street). It's all pretty much as Keynes predicted, except for stagflation, which occurs when the price of an essential commodity like oil rises -- that required a modification to the original Keynesian theory, which didn't envisage inflation and recession occurring at the same time.


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  • RE: We all made this bed. Now we have to lie in it! - josh358 09:37:16 03/30/12 (0)

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