Mike Kueber's Blog

October 24, 2013

ObamaCare – temporary glitch or systemic failure

Filed under: Economics,Issues,Medical,Politics — Mike Kueber @ 1:41 pm
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There has been much talk the past few days about the problems associated with the federal government’s ObamaCare exchanges.  This publicity suggests that public radio’s David Martin Davies was correct last week when he suggested that the TEA Party was shooting itself in the foot with its shut-down of the federal government.  According to Davis, the shut-down was distracting the public from ObamaCare’s embarrassing crash.  Now, with the shut-down over, there is no bigger story in America than the ObamaCare exchanges.

The initial debate seemed to have conservatives arguing in a knee-jerk fashion that the implementation failure was only an example of all that was wrong with ObamaCare, while the liberals countered that the problems with on-line implementation had nothing to do with the substance of the law.  Eventually, though, the debate has gravitated toward the real issue, which was the title of a pro-con op-ed piece in today’s SAEN:

On the side of temporary glitch is NY Times columnist Paul Krugman.  On the side of systemic failure is Washington Post columnist Michael Gerson.  Both Krugman’s and Gerson’s columns tend toward picking straw man arguments and then debunking them.  Near the end of Gerson’s column, however, he makes a broader point that resonates with me.  He refers to Friedrich Hayek’s point about a fundamental flaw of central planning, which is the inability to consider all of the relevant information.  By contrast, the free market has the marvelous ability to do just that.

And that is why ObamaCare needs to go away.

December 16, 2012

The death of the GOP?

Filed under: Economics,Issues,Politics — Mike Kueber @ 1:28 am
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Several days ago, the New York Times’ Pulitzer-prize winning gadfly Maureen Dowd penned a column titled, “The Lost Civilization,” in which she predicted the death of the Republican Party.  She concluded the column as follows:  

  • But history will no doubt record that withering Republicans were finally wiped from the earth in 2016 when the relentless (and rested) Conquistadora Hillary marched in, General Bill on a horse behind her, and finished them off.”

Surprisingly, the Times’ famously liberal readers disagreed with Dowd.  Scores of readers wrote to her and scoffed at the thought that one of our nation’s great parties was emasculated.   

The New York Times’ Nobel-prize winning columnist Paul Krugman was apparently not listening to those readers because yesterday he wrote a similar column titled, “The GOP’s existential crisis.”  This time, instead of questioning Krugman’s ability to prognosticate, the Times’ liberal readers by the thousands have been forwarding the column around the world because nothing seems to make them feel better than to read about the demise of the GOP. 

Krugman is probably the most doctrinally pure spokesperson for liberal economics, and that is why this column is resonating with millions of liberals.  The column begins by declaring, “We are not having a debt crisis,” and then goes on to explain:

  • It’s important to make this point, because I keep seeing articles about the ‘fiscal cliff’ that do, in fact, describe it — often in the headline — as a debt crisis. But it isn’t. The U.S. government is having no trouble borrowing to cover its deficit. In fact, its borrowing costs are near historic lows. And even the confrontation over the debt ceiling that looms a few months from now if we do somehow manage to avoid going over the fiscal cliff isn’t really about debt.”

The only person who would give Krugman any credibility after reading that statement must have jettisoned their common sense and drunk the Kool-Aid.  The remaining part of the column, however, clearly articulates what this ongoing war of ideas is about:

  • No, what we’re having is a political crisis, born of the fact that one of our two great political parties has reached the end of a 30-year road. The modern Republican Party’s grand, radical agenda lies in ruins — but the party doesn’t know how to deal with that failure, and it retains enough power to do immense damage as it strikes out in frustration.

According to Krugman, the “radical” Republican agenda “is nothing less than the elimination of the welfare state — that is, the whole legacy of the New Deal and the Great Society.”  What is so radical about that?  

Krugman argues that a frontal attack by Republicans on the welfare state was not possible because, although Americans oppose big government in the abstract, they strongly support Social Security, Medicare, and even Medicaid. So instead, Republicans tried to indirect attacks:

  1. “Starve the beast,” the idea of using tax cuts to reduce government revenue, then using the resulting lack of funds to force cuts in popular social programs.
  2. Exploit other sources of strength — white resentment, working-class dislike of social change, tough talk on national security — to build overwhelming political dominance, at which point the dismantling of the welfare state could proceed freely.  

Neither indirect attack worked – starving the beast led only to exploding deficits and the Republican base has demographically shrunk, plus Obama killed bin Laden.  And to add insult to injury, “Republicans now have to watch as Mr. Obama implements the biggest expansion of social insurance since the creation of Medicare;” – i.e., ObamaCare.

Krugman concludes his column more pessimistically than Dowd because he sees the GOP as in its dying days, but still with enough life to do serious damage:

  • So Republicans have suffered more than an election defeat, they’ve seen the collapse of a decades-long project. And with their grandiose goals now out of reach, they literally have no idea what they want — hence their inability to make specific demands.  “It’s a dangerous situation. The G.O.P. is lost and rudderless, bitter and angry, but it still controls the House and, therefore, retains the ability to do a lot of harm, as it lashes out in the death throes of the conservative dream.  Our best hope is that business interests will use their influence to limit the damage. But the odds are that the next few years will be very, very ugly.”

The hubris by Dowd and Krugman in thinking the GOP is outdated is incredible.  Either they are totally out-of-touch while ensconced in their Manhattan edifice, or they are merely entertaining their liberal audience, a la El Rushbo.  And they can only dream that America continues down the road to becoming a full-fledged welfare state.

I wonder how they would answer a question posed by liberal Fareed Zakaria this week in Time magazine:

  • The left must ask itself why it is tethered to a philosophy that insists that government’s overwhelming responsibility is for pensions and health care even when, as an inevitable consequence, this starves other vital functions of the state….  Above education?  Above scientific innovation?  Above investments in infrastructure and energy?  Above poverty alleviation?”

January 5, 2012

We are all Keynesians

Filed under: Economics,Issues,Politics — Mike Kueber @ 7:05 pm
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I recently blogged that NY Times columnist Paul Krugman was letting his political ideology get in the way of his (mis)understanding why Americans feel so passionate about attacking our burgeoning debt.   In a subsequent column titled, “Keynes was right,” I think Krugman, a Nobel-winning economist, has returned to his area of competency. 

For those not familiar with the Keynesian economic philosophy, Krugman provides an accurate summary:

  • “The boom, not the slump, is the right time for austerity at the Treasury.” So declared John Maynard Keynes in 1937, even as F.D.R. was about to prove him right by trying to balance the budget too soon, sending the United States economy — which had been steadily recovering up to that point — into a severe recession. Slashing government spending in a depressed economy depresses the economy further; austerity should wait until a strong recovery is well under way.

I was taught this economic philosophy in college as something that was undeniably true.  In fact, based on some statements by Milton Friedman and Richard Nixon, it was common for politicians and economists in the 70s to acknowledge that in the famous saying, “We are all Keynesians now.”

The essence of Krugman’s column is that conservatives in Washington have failed to act in accordance with sound Keynesian principles.  First, the initial stimulus was too small (and misdirected), and secondly, imposing austerity at this early stage of recovery will be counter-productive.

I remain a firm adherent to Keynesian economic principles, and thus endorsed the stimulus.  (I also believe it is voodoo economics to think that you lower taxes to increase revenue.)  It is above my pay grade to have an opinion regarding whether the size of the stimulus was too modest.  I also agree that now is not the time for draconian austerity.  The best course of action, which I think was reflected in the Simpson-Bowles plan, is to stimulate the economy by making the politically-difficult, long-term structural changes that show America has taken control of its fiscal future without being excessively austere in the short-term.

 

 

January 2, 2012

Kueber challenges Krugman on economics

Filed under: Economics — Mike Kueber @ 3:44 pm
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NY Times columnist Paul Krugman has won a Nobel Prize in economics, so it might seem cheeky to challenge him on economics, but his column in today’s edition of the Times contained two fundamental points that I whole-heartedly (no pun) disagree with.   According to Krugman:

  • For while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem’s size.  Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.  This is, however, a really bad analogy in at least two ways.
  1. First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.
  2. Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.

Krugman is wrong on the first point because families have to pay back their debt.  Did Krugman not notice that a major cause of the 2008 financial meltdown was the practice of families to use their homes as an ATM machine by continually refinancing their mortgage?  Although most right-thinking (pun) people will eventually pay off their mortgages, there is nothing inherently wrong with taking money out of an appreciating asset.  In fact, my deceased dad applied this practice to our family farm, which he bought in the early 60s with an $80,000 mortgage and transferred to us kids in the early 90s with a $160,000 mortgage.  So, Krugman, you are wrong – i.e., my dad never had to pay back his debt.  Like a responsible government, however, he did manage the debt.  Fiscal conservatives are simply arguing that America’s goal, like my dad’s, should be to pay off the mortgage or the farm; not to keep it at manageable levels.

Krugman’s second point is that the American government owes its debt to Americans mostly.  So what?  Are we supposed to feel better that our tax money is going to rich Americans who are financing monstrous debt from irresponsible spending years earlier?  Even Krugman admits that “you don’t have to be a right-wing ideologue to concede that taxes impose some cost on the economy, if nothing else by causing a diversion of resources away from productive activities into tax avoidance and evasion.”  Government spending on debt maintenance is spending that could be better used on core government responsibilities, like national security and promoting opportunity.

Krugman’s column is titled, “No one understands debt.”  I think (a) Krugman’s political ideology is causing him to misunderstand debt and (b) fiscally conservative Americans know more about debt than he gives us credit for.