Yes You Can
As I tried to get into at length in the prior post, once you get past all the mumbo jumbo, it seems to me that there is one thing we can know with confidence about deficit spending on stimulus: it will, in part, transfer wealth from future generations to our own. Of course, if you’re reading this, and you’re, say, 24 years old, then that should read as “transfer wealth from you to a bunch of Baby Boomers”.
This makes the incredible support of this age cohort for Obama seem pretty ironic, at least on this issue. You know all those rallies you went to, and how excited you were on election night? It turns out that the most important result of that, so far at least, is that you get work much, much harder over the next 40 years so that the overweight guy in the khaki pants down the hall from you at work who does nothing of much observable value doesn’t have to move to a smaller house or trade in his car.
What’s this we stuff Kimosabe? – Yes you can!
This stuff is cultural theory of evolution in action, Kimosabe.
Give us a bit of credit. We can see the future just fine.
Its a stark choice.
Gigabytes of pain and the destruction of whole swaths of America, or we learn to Fight with Tools.
We are idealistic, ‘member?
Besides you aren’t offering any viable alternatives, and you and your homie GW clusterfucked this all up in the first place.
Why should we trust you?
— matoko_chan · Feb 10, 09:04 PM · #
Eh. Late 20s here, but from the research available a generation spending its 20s in a Japanese style no-growth decade is going to destroy our human capital and earnings potential in a profound and lifelong way; it strikes me as a fair gamble to try and jump the economy earlier. Like all gambles, there is risk, but it strikes me as NPV positive.
And now that I think of it, like a modern-day parable, I like the idea of a generation of hipsters reaching out to the suffering overweight khakis-wearing boomer middle-manager left beaten and robbed on the side of the road by Financialized Capitalism. Hipsters, give the inn-keeper two silver coins to watch over him! These actions, as opposed to the Young Liars EP, is how we will be judged.
— Rortybomb · Feb 10, 09:14 PM · #
Rorty’s right.
Besides, Riddick, your argument will persuade no one and you know it.
When did the dude-you’re-sooo-stupid argument ever work on anything?
/ghetto snap@Manzi
— matoko_chan · Feb 10, 09:26 PM · #
You need an argument. We don’t “know” that the stimulus package will transfer wealth from future generations. Yes, there will be an added liability, but if it works, there will also be more to pay it with.
— Pithlord · Feb 10, 09:46 PM · #
Jim: Even assuming you are correct, if we spend right we will be buying useful, durable stuff — buildings, bridges, health care databases — captured under the dull name “infrastructure” that we will pass on to future generations for their use.
— David A · Feb 10, 09:47 PM · #
Pithlord / David A:
I should have made this clearer, but the other post that I link to goes into the trade-off, and what we’re getting for the money. This is why I said “in part”.
— Jim Manzi · Feb 10, 09:58 PM · #
Speaking as a member of said younger generation, I think we’ll live.
— Ned · Feb 10, 09:59 PM · #
Early 30’s, and not only would I like to echo what others have said on this thread, but what makes Dr. Manzi’s argument especially bogus is that this kind of wealth transfer has already been happening for most of my life. Under both Reagan and W, we’ve had huge deficit ramp-ups, to a point where we’re now paying something like 17% of our taxes on nothing but debt-service payments, all so that Republicans could pursue their tax cut jihads.
When I think of how much better the economy would look if we could do something more productive with that money, and how little so-called economic conservatives have done to stand in the way of this far more prolific and harmful borrowing… gah!
So yeah, spare me concern for people in their 20’s, please.
— Chris · Feb 10, 10:24 PM · #
Jim,
It’s not so much transferring my future income to the middle manager down the hall as it is transferring my future income to some Wharton MBA trader in New York who doesn’t want to have to take his kids out of boarding school.
— Aaron Street · Feb 10, 10:27 PM · #
We youngn’s paid attention in history class to what happened from 1929-1945. Jim, I hope you’re not buying into the desperate history-rewriting of the 30’s going on on the Republican side in the last three weeks.
And you post assumes away anything like a systemic crisis. Do you recognize that systemic crises exist?
— Steve C · Feb 10, 10:27 PM · #
motoko_chan, Chris, et al:
I don’t think I’ve defended (in this post, or elsewhere) the fiscal rectitude of GWB or the current Republican Party.
Why would GWB wasting a lot of dough have a huge impact on your desire to pile up more debt (i.e., larger future tax obligations)?
— Jim Manzi · Feb 10, 10:34 PM · #
Steve C:
How does my post “assume away a systemic crisis”? As per the prior post to which it links, I think there is very little evidence that the proposed stimulus will actually increase output, drive higher employment over anything but a very short timeframe, and in Rortybomb’s conceptual point create “positive NPV”. If you have this evidence, it would be great to see it.
— Jim Manzi · Feb 10, 10:39 PM · #
Jim, the point wasn’t so much that you’ve defended W’s tax policy (although certainly many right-wing economics pudits have tried to minimize its importance) but that you certainly haven’t attacked W’s tax policies the same way you’re now critiquing the stimulus package.
That said, as someone under 40 who knows the stimulus having a strong positive result isn’t a sure thing, I’m still far more comfortable with this borrowing, which is specifically adding to the national debt for a specific economic goal, as opposed to the general “we can’t raise taxes on the rich, because that’ll hurt economic growth, but who cares about adding to the debt” rationale of the Reagan epoch.
— Chris · Feb 10, 10:51 PM · #
“tax cut jihads”
This rolls off the tongue nicely!
No love of paying taxes here, but loath buying things I can’t afford either. My current theory is the founders never imagined, not even in their wildest dreams, that their fledgling country would ever have a AAA rating.
— Tony Comstock · Feb 11, 12:26 AM · #
Now do you see why the conservative movement has lost a whole generation of youth?
You rode this horse right into the ground, and now you’re callin’ us out for foo’s for voting for someone that is at least proposing some action to ameliorate the crisis?
Good luck with that.
— matoko_chan · Feb 11, 12:37 AM · #
Is it really possible to redistribute wealth from posterity to the present? If you think in terms of the real economy, that doesn’t make sense (unless you actually have negative real investment, but I’m assuming that’s pretty rare outside places like Zimbabwe).
— Pithlord · Feb 11, 02:05 AM · #
One of the nice things about TAS has been the fact that the comments sections have never (much) degenerated into the kind of snickering, flippant, and unpleasant schoolyard taunting that populates too many blogs. It would be a shame if that changed.
— Bryan · Feb 11, 03:32 AM · #
One thing we can say with confidence is that if the stimulus program doesn’t work, the children born between 1990 and 1994 will be life-long Republicans. If it does work, in contrast, those children probably won’t complain much about paying higher taxes.
— y81 · Feb 11, 03:49 AM · #
If the stimulus (and the bank thingy) does work, then Obama (who will be pres then becasue the stimulus worked) will be faced with the monsterous deficit. Plus he will still be a democrat. THose two facts will give him political leeway to cut the increase in social payments that bug you, and more. If the stimulus doesn’t work there will probably be an even larger deficit by the time the economy settles (sending the military in to occupy Detroit and all that costs money) and then republicans will cut all those social programs (and taxes which will be counter productive but that is another story).
In the end, no matter what happens, the deficit will be so large that pressure to cut social programs will be enormous. There will have to be massive resturcturing of medicare at the very least, and maybe SS too, won’t there? I mean, that already had to happen before this financial crisis. That’s got to be the silver lining for conservatives.
I think this crisis is like when your kid gets sick and you spend and sell everything you have to cure her and then when she’s better, the family’s broke, living in the car, and sending videos to Extreme Makeover Home Edition.
— cw · Feb 11, 04:59 AM · #
Great idea to save the economy:
matoko_chan stops writing “cultural evolution” in every comment section of every website…seriously, i’m going to throw something.
— D-Rock · Feb 11, 05:00 AM · #
Sorry, Bryan.
In the immortal words of Vince Vaughan: “I’m the a$$hole.” I will now shut up.
— D-Rock · Feb 11, 05:03 AM · #
So I clock in just under 40 too and I don’t get the comments.
Yeah, I’m no Reagan fan — and no W. fan! And there’s been a lot of deficit spending and it would be nice to rell back the clock on it. But I don’t remotely understand what people are trying to say in this thread: two wrongs still don’t make a right. Plus Reagan, W., and so on — well, you can excuse the deficit spending a little better because there was no massive unprecedented credit crisis. Right now the threat that the US might actually default is real, not a long-term hypothetical. Look at Iceland to see how that looks. Look at very real threats that a lot of southern European governments may default (and notice that markets are beginning to bet some will). Real, serious economists are fretting about “Reykjavik-on-Thames.” How sure are you that America can dodge that bullet?
And that is the answer to a lot of the objections in the thread. Yeah, lots of us are liberals and vote for expansions of the social safety net and more responsive government. But what we’re flirting with here is a possibility that puts all that at risk. cw points that out, and it’s worse than that. If the US government can’t borrow cheap (or hyperinflates), then the progressive agenda is dead for a generation: it’s not easy being broke. That’s not beanbag. This, we voted against you guys, shtick is dumb: I didn’t vote Obama for Obama, I voted Obama for liberalism (and, side note, what I’m getting so far is defenses of secret privileges, preventing the Brits from talking about torture, waffling on detainees, a continuation of chaos on banking, nods to protectionism, what sounds like an escalation in Afghanistan … OK, I’m actually very happy about the FOIA order though.)
So, yeah, Mr. Manzi’s dead-on. We aren’t necessarily fools for supporting this turkey, but we are sure as hell fools for supporting it without, as far as I can tell, much acknowledgement of the incredible potential downside.
— Sanjay · Feb 11, 03:09 PM · #
I also talk quite a bit about the tyranny of the bellcurve of IQ.
A big problem here is how does the conservative leadership regain the trust of the youth demographic.
Unlike the religious-right middle-IQ republican base still buying the GOP snake-oil, it is perfectly obvious to us that conservative leadership caused this clusterfuck.
Frankly, that profoundly delegitimizes republican leadership for us.
The fed interest rate was GW’s stimulus. When money got tight, the “fiscal cons” (lolllolol) slashed the fed prime, right up to the bitter end when there was nothing to left cut.
1/2 percent.
But there is hope…..I do think the socons are finally going to wise up about how they have been exploited and scammed by their leadership on “life” issues all these years.
As they are IQ challenged enough not to realize that you are all they have got, I fully expect they will eventually turn on you with fury.
— matoko_chan · Feb 11, 03:15 PM · #
Jeez Sanjay, don’t you think Summers and Geithner have modelled the negatives and done cost/benefit and risk analysis?
And is it really a good idea for Geithner to surface those negatives for the yokels on FOXnews to soundbite when restoring confidence in the economy is a current imperative goal?
— matoko_chan · Feb 11, 03:23 PM · #
I mean srsly….Geithners appearance was a pep talk, not an economics lecture.
And as the market demonstrated, it wasn’r nearly peppy enough.
And then Manzi calls us foo’s.
Oh Dr. Manzi, forgive us for bein’ so dumb!
We will all totally vote Palin in 2012.
tax cut jihaadis FTW!
— matoko_chan · Feb 11, 03:37 PM · #
Sanjay-
The current national debt is something like 10 trillion dollars; Obama’s stimulus package is roughly 1 trillion. (That doesn’t count the bank bailout funds, but for good or ill, we don’t seem to be arguing that here.) While default is a possibility, it seems unlikely to me that we will default because we could handle 10 trillion in debt, but not 11 trillion.
Rather, if we do default, it’ll be because the entire economic climate has changed, and a very high US debt – whether it’s 10 or 11 trillion – simply isn’t sustainable any longer. That being the case, I’d say doing our damnedest to get the economic climate back to where it used to be is far more important than the marginal danger of adding another trillion to the debt.
So it isn’t a question of two wrongs making a right, Sanjay, it’s a question of the government using credit the way it was meant to be used – as a temporary, emergency option in times of need – rather than as a regular part of our yearly budget to let us “afford” tax cuts that we otherwise couldn’t.
And as for the antipathy to Dr. Manzi, it’s likely because I see this as a pattern with him – as with global warming, he’ll put his considerable intelligence to work highlighting the downside of proposed liberal remedies to serious problems, but completely gloss over the problems that could arise from inaction.
— Chris · Feb 11, 05:28 PM · #
Chris, that’s not quite the right analysis. Interest rates on borrowing reflect the perception that we’ll default. I would argue that showing a commitment to fiscal caution right now can do a lot to defuse that perception. In fact, that’s basically the calculation Ireland’s making.
— Sanjay · Feb 11, 06:16 PM · #
Sorry, Chris, more germane: that mischaracterizes Manzi’s point. He argues — correctly I think — that much of what looks to be stimulus spending is likely to be ongoing or at least to continue to be in demand. That is exactly not “the government using credit the way it was meant to be used — as a temporary, emergency option.” So it’s not $1 trillion: its ongoing budget strain that keeps needing to be refinanced. Whereas say the Iraq war is a sunk cost.
— Sanjay · Feb 11, 06:22 PM · #
Is there any evidence that would falsify the conclusion that the stimulus package is a wealth transfer from the future? What future condition would it take for people, including the author, to admit this post is incorrect?
My two thoughts on the stimulus:
1. Infrastructure investments can be very useful. Taking a subject near and dear to my heart, California water, the investment of several billion in water infrastructure, from cross-Delta pipelines to local reclaimed water systems, should result in increased productive use of water, an improved environment and a tremendous reduction in uncertainty.
2. One thing the American economy needs is time. time to sort through the bad debt, impose the haircuts, take the banks and non-bank financial institutions through receivership or the equivalent. Paying one guy to dig a hole and another guy to fill it in the interim prevents them from starving and supporting nationalistic and protectionist policies that appear to benefit them in the short run.
— Francis · Feb 11, 07:55 PM · #
Sanjay-
You’re right that interest rates on borrowing reflect the perception that we’ll default. However, since current rates are infinitesimal, and the vast majority of investors, both foreign and domestic, seem to view US bonds as the best possible investment right now, worrying about driving up those interest rates with more borrowing seems a secondary concern, at best. The financial problem we seem to be facing at the moment is a liquidity trap, and while we can go back and forth on this for a while, it’s not insane to suggest that large-scale government spending can ameliorate the situation, and put us in a better long-term economic position.
Moreover, I do actually think Manzi’s earlier post is mistaken, and that much of the spending in the stimulus is a one-shot deal. One-time payments to states to cover budget shortfalls, money to build specific schools, bridges, water projects, set up electronic medical records – these are fixed projects with a definite termination point, and from my perspective, they do have a definite stimulative function.
Meanwhile, I can only read Manzi’s point as making sense if he thinks Obama and his successors will be looking for packages of this magnitude every year, and that we will presumably be running a budget deficit of nearly a trillion dollars every year, even in good years, as opposed to the ~200-300 billion deficit we’ve been running, on average, under Reagan and company. In contrast, I’ll point out that not only do I think it’d be politically very unlikely to get a package like this through Congress again in years to come, but that Manzi’s reasoning on this seems pretty partisan. We know, from experience, that Republicans can’t be trusted to balance the budget, but the evidence that Democratic presidents can’t balance the budget is lacking, to say the least. And, as I said before, Manzi has very little credibility to be wailing “Won’t someone please think of the children!” (especially in the snarky way he does in the post up-top) when he – and a bunch of his economically conservative buddies over at The Corner – turned a blind eye to the exact same thing over the past few decades of Republican rule.
As for the Iraq war being a sunk cost, let’s revisit that issue again when we’re spending less than $100 billion a year there… whenever that turns out to be.
— Chris · Feb 11, 09:25 PM · #
You know, Riddick…..Chris has the 411 on you.
You an I already talked…..we basically agree that Palin would be a fish-gutter and a PTA mom right now if she looked like Janet Reno. But you can’t say it because you are an intellectual whore in service to the mad shamans at the Corner.
w/e
My generation’s hypocrisy detectors are strong…..no youth vote for you until you own the clusterfuck your party made of the world we are inheriting.
— matoko_chan · Feb 12, 03:21 AM · #
> How does my post “assume away a systemic crisis”? As per the prior post to which it links, I think there is very little evidence that the proposed stimulus will actually increase output, drive higher employment over anything but a very short timeframe, and in Rortybomb’s conceptual point create “positive NPV”. If you have this evidence, it would be great to see it.
For starters:
http://images2.dailykos.com/images/user/363/Depression_GDP_output_1.gif
But this feels weirdly like I’m being roped into some never-ending faith-based debate about whether carbon really is increasing in the atmosphere or where I have to prove that Bush wasn’t behind 9/11.
Jim, what’s your version of the story about unemployment and output from 1929-1945?
— Steve C · Feb 12, 05:34 AM · #
Steve C:
Re: http://images2.dailykos.com/images/user/363/Depression_GDP_output_1.gif
You’re kidding, right?
— Jim Manzi · Feb 12, 03:12 PM · #
Bush wasn’t behind 911.
But he definitely was the hand on the throttle for the econopalypse.
— matoko_chan · Feb 12, 03:15 PM · #
Jim,
Please tell us the 1929-1945 story. What went wrong, why did things get better, that kind of thing.
-Steve
— Steve C · Feb 12, 11:06 PM · #