A Very Good Question about Our National Debt
On Friday, I published a blog post on the national debt with key points that can be summarized as: (1) the idea that we will have anything like currently anticipated entitlement payouts plus currently anticipated tax rates is a fantasy, (2) this gap is enormous, and represents the “mother of all bubbles,” (3) our debt situation means that we need to address it quite soon or face a funding crisis, and therefore (4) the correct primary metric for evaluating anybody’s plan to do this is what practical measures it puts in place now and how much additional time this creates for us prior to this crisis, rather than theoretical and unenforceable promises about the distant future.
Very smart TAS commenter “cw,” who almost always disagrees with me in a highly productive way, asks what I think is an excellent question:
So here is a technical question for Jim or whoever else can answer it: how much would taxes need to be raised to maintain our current entitlement regime?
The total present value of payments expected under Social Security and Medicare beyond what is expected to be collected under current tax laws is about $100 trillion.
One way to put that amount of money in context is to note that it is about twice the amount of all the net private assets that exist in America today.
To answer cw’s question directly, the best back-of-envelope estimate is that meeting this unfunded portion of the commitments implied by our current rules governing just Social Security and Medicare would require roughly an immediate 80% increase in federal income taxes, sustained forever.
That is one end of a spectrum. The other is to cut out $100 trillion of present value of anticipated entitlement spending.
I was at a dinner last year with about 15 well-known Washington think tankers, academics, journalists, bloggers and budget experts, entirely focused on the question of where on this spectrum we will end up. What was so striking to me is that as we went around the table, the majority of these people asserted confidently what would be politically feasible or infeasible positions. Many of these equally confident-sounding assertions were contradictory, and not shockingly, tended to line up roughly with each speaker’s political inclinations.
It would be simple for me as an economic conservative to dismiss the idea of a tax increase equal to an 80% increase in income taxes as politically unrealistic, but I’m not so sure about that. In the event of a crisis, I could easily imagine “emergency” income taxes on the “most fortunate among us” plus some increases in middle class tax rates, plus the introduction of a VAT, that got to something like that.
If you had asked me at a New Year’s Eve party in 2006 what I thought the odds were of the U.S. government taking a controlling interest the largest bank, the largest car company and the largest insurance company in America, I would probably have laughed at you. Yet within 36 months, this is exactly what had happened.
My friends who are more liberal than I probably should not make the analogous mistake of imaging that benefit reductions that seem absurd politically right now might come to seem not so absurd, and surprisingly quickly.
If you think about it, any real solution to the federal deficit problem is currently politically impossible, yet we know mathematically that, barring a productivity miracle, the situation cannot persist indefinitely. Therefore, we know that some change that currently seems politically impossible is all-but-certain to happen sooner or later. I have no idea what change will become politically feasible in the future, but then again, I don’t think anybody else does either, because it is not written in the stars – it will depend on some combination of events and political leadership.
(Cross-posted at The Corner)
“If you think about it, any real solution to the federal deficit problem is currently politically impossible”
Why? Is the current situation THAT much worse than what was faced in the early 90s? What is the source of that political impossibility? Are Democrats irrationally opposed to any and all efforts to control or reduce federal spending? That doesn’t seem to be the case. Are Republicans irrationally opposed to any and all efforts to increase revenue? That seems slightly more on target.
And let’s just suppose for a second that the irrational GOP resistence to tax increase carries the day and we unmake the 20th century, reverting the U.S. federal government back to what it was pre-FDR or even before that. How closely have you looked at what our society was like back then, how it functioned and what sort of lives people lived? What do you think will be the result of applying late 19th century economic structures to a 21st century civilivation that’s over 3 times bigger and radically more diverse? Do you really think a utopia will be the result or do you wonder what the population will do in response to such a circumstance imposed on it from above?
Mike
— MBunge · Apr 18, 08:27 PM · #
Mike:
I just mean politically impossible as in “is not currently happening.” There is no change to laws moving through a legislative process that would remotely bring federal entitlement program inflows and outflows into balance.
I think that we need to think about structuring the welfare system (in the broad sense of pensions, health care, education, etc.) for the 21st century, which would look different than either the New Deal / Great Society model we currently have, or than what preceded this. I’ve actually made some proposals for how to do this, which, plus 75 cents, will get you a copy of the Washington Post.
Jim
— Jim Manzi · Apr 18, 08:54 PM · #
What disturbs me about this whole debate is the long-term projections. The Ryan plan, for instance, goes out to 2080. That’s 69 years from now. Sixty-nine years ago was 1942. You would be hard-pressed to find a congressman from that era who had anything accurate or useful to say about the FY 2011 budget. You’d be hard pressed to find anything useful from a congressman in 1982, or 1992 for that matter.
Most of the scary graphs used to sell extreme austerity are extrapolations from much shorter periods and consequently tend to fly up into the stratosphere in an ominous line. A straight-line road to hell, if you will.
It’s worth entertaining the notion that the serious and brave thing to do is be a bit more skeptical of claims of the doomsayers and the austerity mavens. What do we know now?
- Rushing has its drawbacks: The last time we made major changes to the way government deals with the citizenry, we also took a lot of ideas off the shelf from people who needed a crisis to get what they couldn’t sell to the public otherwise. We got the USA PATRIOT Act.
- There are no monsters under the bed: The threat of so-called “bond vigilantes” is a non-falsifiable tall tale. The bond market tells us how confident it is in our debt by the interest we have to charge to sell our bonds. Right now, that interest is very low for both long and short term debt.
- This isn’t Greece: The fast-moving sovereign debt crises that we fear most (versus a gradual increase in borrowing costs) all took place in countries that 1) gave up control of their monetary policy; and 2) had the implicit backing of larger countries within the Eurozone. The folks who borrow our debt don’t have the same incentives.
- We’re not all that indebted: Our debt to GDP ratio is #36 in the world, on the low side compared most other industrialized nations. See http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt
The Ryan plan proposes we decrease our ratio to 10%, which would put us in the bottom dozen, above only some petrostates, microstates, copper-rich Chile and Estonia. Seems like massive overkill and an ideological agenda to me rather than an adjustment to live within our means. It’s not a moral failing for governments to run defecits or to have outstanding debt.
- Present Value: Just because you can’t wrap your head around a big number doesn’t make it scary. The $100T figure Manzi uses comes from all future unfunded projected liabilities of SS, Medicare and Medicaid. The Bartlett article Manzi links to says it’s over 75 years, which makes it a little less imposing. If you’re going to project over that long, the compounded effects of front-loaded economic growth take on outsized importance. So do we cut like the UK and depress economic growth in the near-term in fear of a far-off boogeyman? That creates a self-fullfilling prophecy of decreased long-term revenue projections that require even steeper cuts.
Sure, we may be need to make some changes in the future. No program stays unchanged over the course of decades. To think that your budget numbers will go off into the stratosphere unless we get tough right now is ahistorical and unwise.
— rj · Apr 18, 09:27 PM · #
rj:
In the prior post, I spent a lot of time on skepticism about the tail of these projections.
The key point is number 3, which (as I went into some detail on in the prior post) means we are going to be in a pretty dangerous debt position within about 15 years, which I think is within the rational planning horizon.
— Jim Manzi · Apr 18, 09:36 PM · #
Jim:
Most of your boogeyman numbers refer to the solvency of the entitlement program over very long time periods. You did throw some cold water on them in the last post, but they’re back with a vengeance here.
I see that your 15 year projection in the previous post shows that our debt-to-GDP ratio will increase to 100% by then (assuming the Bush tax cuts stay intact for all brackets, I assume). That number is some sort of tripwire because… it’s “uncharted territory.” Hate to break it to you, but it’s all uncharted territory. Dismantling the safety net is uncharted territory. For that matter, Obamacare is uncharted territory. The future is scary, but it’s not so scary that we need to buy whatever boogeyman-repellant the ideologues have been selling during rain or shine for decades. Especially not just because we’re spooked by a round number.
Austerity budgeting in a bad economy, on the other hand, is being tried in the UK right now with crummy results. Lost growth now will make that nation poorer for decades and will require even more austerity budgeting.
— rj · Apr 18, 09:52 PM · #
Let’s assume these projections are correct, and one solution is “an 80% increase in income taxes.” I assume this means federal income taxes. Assume a family with two kids, with AGI of $50k (or $75k, or $100k). What dollar figure does this represent? What percentage increase does this represent in total tax burden?
— Chris · Apr 18, 10:12 PM · #
Chris:
Roughly speaking, take your federal income tax bill from this year, and multiply it by 1.8. Repeat for every taxpayer in America.
— Jim Manzi · Apr 18, 10:46 PM · #
Jim, I understand what an 80% increase of income tax means. My real question was about the percentage of the total tax burden. Why express this number as a percentage of a particular tax? That just seems to obscure things.
— Chris · Apr 19, 12:14 AM · #
To truly tackle the debt problem, America would have to engage in the same thing the UK is currently doing. Austerity here and now. That’s politically impossible and economically suicide. In short, if entitlements really are the problem that they are supposed to be then we cut entitlements NOW. Not a few decades from now.
The reality is tackling the problem as a “debt” problem by itself is irrational simply due to the long time projections we are dealing with. I think the analogy above referring to a congressman in 1942 is perfect. What you CAN do is look at things on the whole that influence the debt. If you can set things in place that deal with healthcare costs, then you ensure that future congress’s will be able to better deal with the deficit. And no, pretending a future congress is going to voucherize medicare is not setting things in place that deal with healthcare costs.
— Console · Apr 19, 01:50 AM · #
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— Debt Relief · Apr 19, 11:27 AM · #
An 80 percent increase in taxes would mean government would breath a sigh of relief and leverage the revenue to go further in debt, which would mean we’d need another 80 percent increase, which would mean we’d increase spending even further, and so on. The economy will crumble to dust whether we raise taxes or not. However, the balance of power between people and the government will change at higher tax rates, even if the economy will not improve.
— The Reticulator · Apr 19, 11:45 AM · #
Chris, IMHO, income tax is a helpful proxy, because: (1) it’s concentrated on the middle class and rich, and we don’t want to raise taxes on the poor; and (2) people know about how much they pay now. You’re right that you could raise the money through a national sales or VAT tax, but it’s harder to visualize. So start bt visualizing an additional 80% of the current income tax load, then move it around as you please.
— J Mann · Apr 19, 01:15 PM · #
I did a little googling to try to answer my own question. According to Wikipedia, 2010 Federal revenue was 2.16 trillion: 42% personal income tax, 40% FICA, 9% corporate taxes, and 9% other. So 80% of federal income tax is about $730 billion dollars per year. A little more googling tells me that the Bush tax cuts cost about $250 billion per year (based on a number I found for the cost of the two-year extension), so we can apparently solve a third of this just by eliminating those. I can’t quite find the cost of the income limit on social security taxes, but reading between the lines of some articles makes me think it’s about $150 billion per year. (That seems like a lot, anyone know for sure?) So right there, that’s over half of the shortfall. Seems like a good start, especially for a problem that may never appear.
J Mann: But income tax comes with a certain distribution among the population, so expressing the problem in those terms inherits whatever distortions are present in the current income tax code. Also, I suspect that most readers (but maybe not most readers of this blog!) conflate “income tax” with “total tax”, because income tax is the most noticeable federal tax most people pay.
— Chris · Apr 19, 01:35 PM · #
The important point, made I believe by Peter on the last post, is that the long-term Medicare problem is a subset of the overall US problem is astronomical health care costs. The CBO: “[t]he bulk of that projected increase in health care spending reflects higher costs per beneficiary rather than an increase in the number of beneficiaries associated with an aging population”
And we know that this is a US-only problem. See: http://seekingalpha.com/article/146992-comparing-u-s-healthcare-spending-with-other-oecd-countries “In 2007, the total spending for health care accounted for 16% of the country’s GDP, the highest share among the OECD and almost double the OECD average; On a per capita basis also the U.S. spent the highest with a total of $7,290 which is two-and-half times the OECD average.”
There were a number of proposed responses to that problem in the ACA (See Jon Cohn’s “The Affordable Care Act Did Happen” at TNR last week).
And that is a major part of why Paul Ryan’s plan is so deeply, unflinchingly, militantly unserious. We have a long-term policy problem of anomalous, too high health care costs. Ryan’s proposal is, in ten years, Medicare and Medicaid start paying less money. Ta-da! Problem solved!
Well, OK, from a government budget standpoint, sure. But then we have all these people standing around unable to pay their medical bills. It’s an abdication of responsibility, not a serious proposal. In fact, it’ll never happen, because no Congress will ever tell everyone to back off and die. Or in CBO-speak, “It is unclear whether and how future lawmakers would address the pressures resulting from the long-term scenarios or the proposal analyzed here.”
Anyway, we can get the deficit mostly under control by reverting to most surplus-era tax levels (and recall that the 1990s was a very good economy), and refraining from occupying foreign countries. See: http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=809205qv#
There can be no serious discussion of the problem of long-term deficits without a discussion of the US-only problem of skyrocketing health care costs. Ryan’s plan is, therefore, not part of a serious discussion. It shies away from the policy problem, retreating into the false, partisan, baldface lie that the Heritage Foundation/RomneyCare based ACA was a “government takeover of health care.” Even though the CBO says the ACA will reduce the deficit, Ryan proposes to repeal it, because he is writing a lengthy compendium of falsified talking points, not a budget plan.
— reflectionephemeral · Apr 19, 03:28 PM · #
@Reticulator:
Starve the beast theory? Still? 1983 called and they want their bad ideas back.
— rj · Apr 19, 03:48 PM · #
I can see why the governing class is having a temper tantrum over Ryan’s plan. It’s like watching an adolescent whose parents are laid off and are cutting his allowance. “You can’t be serious!” he screams. “My friends in Europe have big allowances! How is cutting me off going to help? You’re reneging on your promises!”
As far as the kid getting a job and helping to grow the family income, well this particular spoiled brat has a lot of growing up to do. But since money doesn’t grow on trees, it’ll happen.
— The Reticulator · Apr 19, 04:06 PM · #
rj, please get the fuck off of Reticulator’s lawn!
— concerned neighbor · Apr 19, 04:59 PM · #
You must be watching Alternate Earth C-SPAN again. Here on Earth Prime, the “governing class” has had nothing but a raging boner for Ryan’s plan, just as they always do for anything that gives them an excuse for hippie-punching, aka “being SERIOUS!”
— Ch3t · Apr 19, 06:07 PM · #
Chris, that’s fair enough. Following Jim’s links, he’s using a Bruce Bartlett estimation that to meet current commitments without cutting benefits would require an increase in revenues of 8.1% of GDP.
If you use the 2010 GDP (14.66 trillion) and the 2010 US population of 309 million, that’s a little less than $4,000 per year per person (man woman and child), increasing at the rate of GDP increase over time, assuming no deadweight loss. (I.e. that the tax increase does not lower the amount of the activity that we tax).
That’s not perfect either — obviously, we aren’t going to be taxing a working class family of 5 an additional $20K per year, so we can assume that the taxes will be concentrated on the middle class and wealthy. Assuming that, multiplying existing income taxes is a good first order guess.
— J Mann · Apr 19, 06:35 PM · #
You must be watching Alternate Earth C-SPAN again.
I’ve heard of C-SPAN, but don’t think I’ve seen it on any of the planets I’ve visited. I used to say the same about FOX news, but unfortunately I’ve seen bits of it a couple of times. Even more unfortunately, I’ve seen CNN.
What gets me is that hospitals ban smoking, but still think it’s OK to inflict television on us. Not that I don’t watch any television at all. There is the NCAA tournament once a year, and I’ve watched Vladimir Putin in the news on RTR Planeta on the internet. In fact, I’ve watched more of him than of George W Bush and Barak Obama combined. What those three say all makes about the same amount of sense, as far as I can tell. (And my knowledge of Russian is still quite limited.)
My apologies if I’ve already posted this schtick on this forum. It’s all true, though.
— The Reticulator · Apr 20, 12:24 AM · #
My wife is living with another man in another state. Small children and pets give me a wide berth. I’ve stopped opening my mail, but I can’t bring myself to throw it away. It’s all true.
— The Reticulator · Apr 20, 03:27 AM · #
No, no, only part of that is true. The part about small children giving me a wide berth is true, especially when it comes to those leftwingers who are now reliving their Terrible Twos in reaction to Ryan’s proposal.
— The Reticulator · Apr 20, 07:23 PM · #
All societies have always had to give folks like you a wide berth in order to make any positive progress.
Mike
— MBunge · Apr 20, 07:52 PM · #
Chris, according to the trustees, eliminating the income cap on SS contributions would generate revenues of 0.6% of GDP (about 2% of reported earned income). Curiously, that number also represents the long-term projected shortfall, so it would also make SS solvent beyond the imaginable future.
— Steve Roth · Apr 20, 08:10 PM · #
I would favor eliminating the income cap on SS contributions so long as other taxes would be cut to pay for this increase. This move would also eliminate the fiction that SS is an insurance program — thereby removing one roadblock to partial privatization — and would also make our tax system more progressive. This latter part would probably be true no matter which taxes would be cut to pay for it.
— The Reticulator · Apr 21, 12:31 AM · #
Jim Manzi,
I don’t know if I always disagree with you or not. I don’t usually comment on things I agree with becasue what is the point. I am usually interested in what you write about and appreciate your scientific approach. Even if I do disagree with you a lot I appreciate your work. And thanks for trying to answer my question. I wonder if the tax question could be de-extrapolated to a shorter time line?
The whole exercise shows how little we have really thought about this problem as of yet. We are still wading through a sea of hysteria and propoganda. That is why I hope we take things fairly slow. It would be nice if the public actually had time to understand the problem, was presented with actually facts and realistic options, before some kind of monstrosity gets rammed through congress.
And I think that reflectionephemeral’s point that the root of our long term debt probems is what our health care system costs is very important. You look at other countries with equal or better care and they spend 1/3 to 1/2 as much. And the majority of future medcare costs come from the continually growing cost of health care, not from added recipients. So reforming our health care system seems like areally profitable direction to follow. As the kids say, a “no brainer.” And yet reform of our healthcare system is completely off the table for one half of the political spectrum because it will scuff our sacred free-market system and impinge on our freedom (to pay out the ass for health care). That’s one big reason why I think the republican party just totally sucks.
— cw · Apr 22, 04:06 AM · #
Four thoughts that come to me, in no particular order:
1) Projections of government obligations that sum to at least six times current GDP do not really concern money in the sense we understand it, they concern fundamental matters of the way we do things. In this case, the demographic structure of society at present, with the “big generation” just hitting retirement, has probably made the 20th century model of retirement, out with a gold watch at 65 or whenever, difficult if not impossible to sustain. The means by which your country delivers social security don’t really affect this: large numbers of retirees will bid up the prices for services used in retirement at the same time as the economy necessary to provide retirement funds loses their experience and labour. At some time soon, you (and we, and most of the so-called “Western world”) will need a new retirement and work model.
2) I can understand calls to abolish social security/social insurance. But it seems to me that attempts to “privatize” social security involves a potentially dangerous semantic error. I see no particularly reason to to turn social security into a tax-free or tax-deferred investment vehicle, since you already have the IRA, Roth IRA, 401(k), and perhaps one or two other tax-deferred investment plans, it hardly makes sense to create another one.
3) Projecting a hundred trillion shortfall and eighty percent tax increases creates a subtle impression that if the government simply cancels medicare and social security, the money would go into some productive or pleasurable spending: investments or ipads. In fact. medical care for the elderly will require significant resources. You as a nation can allocate those costs in very different ways: you can charge the elderly in the form of dire poverty, indignity, and shortened lives; you can saddle millions of average Americans with double burdens as caregivers and parents, or you can attempt to share the burdens with something approaching equality, but they will at some level exist.
4) You don’t have a free market in medicine. You didn’t have one before the affordable care act, and you won’t have one if you repeal it. You have a medical profession, in other words, the last of the medieval craft guilds with the muscle of a 21st century state behind it. Now, maybe you can’t deliver medical services any other way. However, please do not indulge the silly illusion that the way your medical system now works has anything to do with the free market. It doesn’t.
— John Spragge · Apr 23, 11:45 AM · #
“I see no particularly reason to to turn social security into a tax-free or tax-deferred investment vehicle”
This is actually the easiest thing to understand. As the baby boomers retire, they’re naturally going to be moving their retirement funds (to the extent they have any) into lower risk financial instruments. No 68 year old wants to risk a 8 or 10% loss that it might take several years to recover from. That means Wall Street is looking at a sustained era where money is going to be diverted or removed from the stock market, no matter how much they try and rig the game to benefit investment over savings. The primary motivation for Social Security privatization is that Wall Street needs those SS dollars to replace what they’re going to lose in the next 20 to 40 years.
Mike
— MBunge · Apr 23, 07:00 PM · #
Mike, that makes a lot of sense. But I still have to ask; why not just abolish Social Security, or more realistically give the program a sunset date ten years or so out, and then tell the post-boom generation they have to invest (privately) if they want to eat after 65, and direct them into one of the existing tax deferred investment vehicles. That should produce quite a nice flow of investment funds.
When politicians propose to “privatize” social security, I have to wonder if they mean to turn it into a program where individual savers take the risks, or a program where private interests (investors, or some Freddie-Mac type super mutual fund managers) make the choices and the public bears all or some of the risk. If they mean the former, they mean to turn social security into an investment tax deferral program. Since you already several of these, why not just abolish or drastically curtail social security? If they mean some hybrid program where the private sector makes the choices and the public assumes the risks, well, haven’t the past thirty years taught us all quite enough about the moral hazard of having the public guarantee investors against risk? Four years ago when I wrote about these risks, I would have used the word “recklessness”; today, with the experience of the last four years, I would add the word “larceny”.
— John Spragge · Apr 24, 02:44 AM · #
When politicians propose to “privatize” social security, I have to wonder if they mean to turn it into a program where individual savers take the risks, or a program where private interests (investors, or some Freddie-Mac type super mutual fund managers) make the choices and the public bears all or some of the risk.
No, no, neither of these. Haven’t you heard? By privatizing, they mean throw grandma out in the street with just enough money to buy cat food to eat, if she hoards it carefully.
BTW, I don’t think we want yet another program of private profit and public risk.
— The Reticulator · Apr 24, 10:17 PM · #
Regarding an 80 percent tax hike, or any tax hike, don’t forget that in order to make such a thing politically palatable, you have to overpromise the benefits. If you don’t lie about it, the voters will never buy it. If you bypass the voters, European style, you probably have to overpromise and overpay all the other beneficiaries to get them to go along with it. In other words, the only way you’re going to get an 80 percent tax increase is to spend money to get the country deeper in debt. Even if you came up with a tax proposal to pay off the national debt, you’d have to overpromise the benefits, which means that in order to reduce the debt you’d have to take on more debt.
— The Reticulator · Apr 25, 05:28 AM · #
Please do not confuse the psychology and tactics of politics with the principles of policy. It makes sense to start with the facts: has a large population cohort in the United States and indeed most of the “Western world” started to reach the traditional retirement age? If so, can we expect costs associated with that process, whoever pays the costs in question? Assuming, as I think most of us do, that the largest population cohort has indeed reached 65, and that process does objectively entail costs, then the question arises: how best do we (or in this case you) deal with those costs? Who should pay? Who can pay? What principles should govern our decisions? And once we have addressed those questions, we will have a much better sense of what we can achieve, and more important, we will have established a solid basis for a just and equitable decision.
— John Spragge · Apr 25, 07:27 AM · #
we will have a much better sense of what we can achieve, and more important, we will have established a solid basis for a just and equitable decision.
Tell you what, Mr. Spragge. It can be your job in life to make grandiose calculations for the ordering of our society. It will be my job to poke historical fun at those pretensions. Is it a deal? My job will be similar to that of the slave who was ordered to continually whisper “memento mori” in Caesar’s ear, except that I don’t have to whisper.
— The Reticulator · Apr 25, 12:22 PM · #
@Reticulator: I knew I’d seen you before somewhere. Whispering in Hayek’s ear that he didn’t need to go through all these silly arguments about what makes free markets a good idea: just make up t-shirts saying commies are stupid, throw rocks at them. How silly, irrelevant and conceited to try to actually think policies through starting with facts and principles!
— John Spragge · Apr 25, 06:08 PM · #
Whispering in Hayek’s ear that he didn’t need to go through all these silly arguments about what makes free markets a good idea:
Only in the minds of liberals do we still need to go through all these silly arguments. The rest of us can see Communism and socialism in the dustbin of history. (The Communists and socialists are still around, unfortunately.)
Show me the successful economies that are not based on free markets, are not subsidized by the US Military and have a major impact on the world market.
How silly, irrelevant and conceited to try to actually think policies through starting with facts and principles!
What is conceited and arrogant is to believe that anyone is capable of managing something as far-reaching as the American economy. It is precisely because of the arrogance of the anointed that we are so far in debt today.
It’s readily apparent in your thinking spragge: you really seem to think that some smart folks can get us out of this mess. In your defense it’s probably true for Canada. Canada only has hockey and oil. Just turn Canada over to the General Manager of the Vancouver Canucks. He should be able to turn your economy around. But not the US.
— jd · Apr 25, 06:53 PM · #
Hayek was wrong about everything.
http://gregmankiw.blogspot.com/2006/11/sachs-on-hayek-and-easterly.html
[I]n 1976, in the Preface to the Reprint Edition, Hayek made perfectly clear that he believed that the same outcome would occur through the welfare state. Noting that “socialism has come to mean chiefly the extensive redistribution of incomes through taxation and the institutions of the welfare state,” Hayek wrote that “In the latter kind of socialism the effects I discuss in this book are brought about more slowly, indirectly, and imperfectly. I believe that the ultimate outcome tends to be very much the same . . .” …
Thirty years on, we can see the results of Hayek’s prediction. Despite government revenues above 50% of GNP in the Nordic countries supporting an extensive social welfare state, those countries are vibrant democracies with open, competitive, and high-income economies and low rates of poverty. That is precisely the point of my Scientific American piece and a longer scholarly paper that Prof. Easterly wrongly attacks. He actually makes my point for me by pointing out that the Heritage Foundation/Wall Street Journal Index of Economic Freedom ranks Finland, Sweden and Denmark as “free economies,” with Denmark ranked ahead of the United States, despite the fact of their extremely high rates of taxation and social welfare spending. Similarly, the Global Competitiveness Index of the World Economic Forum puts these three countries at ranks two, three and four in global competitiveness, ahead of the United States at rank six.
— reflectionephemeral · Apr 25, 07:15 PM · #
reflectionephermal,
Hayek was wrong about that very famous prediction(at least on any timescale that seems sensible). But he wasn’t wrong about everything. IMO, he was right about an enormous amount.
Jim
— Jim Manzi · Apr 25, 08:19 PM · #
Thanks for your polite response, Mr. Manzi. You’re quite right, I was being quite hyperbolic, in response to the comment above mine.
— reflectionephemeral · Apr 25, 08:42 PM · #
“It is precisely because of the arrogance of the anointed that we are so far in debt today.”
This is entirely true, except the person who wrote it has absolutely no idea who “the anointed” really are.
Mike
— MBunge · Apr 26, 01:24 AM · #
@reflectionephemeral: I would like to point out that the writer of the post you answered completely misunderstood my point; whatever I think of Hayek, right or wrong, he took a principled approach to the questions he addressed. So did most of the free market conservatives of the sixties and seventies: while they obviously differed widely in ability, education, and understanding, they at least understood the need to make a principled argument, They may or may not have fully understood the world or predicted society and technology, but they did understand the need to ask whether they considered something wise, just, or right before they asked whether they could sell it. That made them, in fact, the exact opposite of silly; it made their criticisms formidable, in a way that a great deal of conservative rhetoric today, particularly from professional or “movement” conservative, does not come close to. When I used the word “silly in relation to Hayek, I did so sarcastically.
Mike, while I agree with what you say, I consider the deeper principle here worth defending. The real effect of an idea, the lasting influence of any idea, depends on the justice and wisdom of that idea. We can sell political platforms based on momentary excitement, but as a great Republican put it, you can fool some of the people all the time, and all the people some of the time, but you cannot fool all of the people all of the time. This has nothing to do with conservatism or liberalism; it applies right across the political spectrum. Principles matter. Justice matters. Wisdom, facts, reality: these all matter. This has nothing to do with central planning in any sense; in fact, quite the opposite. It has to do with submitting every political belief, from central planning by a revolutionary vanguard to complete belief in unfettered markets, to absolute anarchism, to two tests: the test of reality, the question of what results we and other have achieved with a given policy, and what do we need to do for the future, and the test of values, of ethical principles. Submitting our ideas to these tests before asking if we can sell them displays the exact opposite of arrogance.
— John Spragge · Apr 26, 05:13 AM · #
Forever and ever. Amen. Always preaching. But I can’t argue with one point of your sermon (except that I missed the point of your previous post.)
But who are you trying to kid? You’re a central planner, aren’t you Spragge? And like most central planners, you can’t admit it. And like most central planners, you think you’re smarter than the rest of us. It might even be true. But you’re not smart enough; certainly not smart enough to direct outcomes of something like the US economy. Maybe smart enough to direct Finland, Sweden, Denmark, and Canada. But what are they actually competitive in? Lutefisk and hockey. I don’t think it’s really all that meaningful to compare Sweden, Denmark and Finland to the US. It might be helpful to advance an argument, or to look at them as case studies. But if they quit doing what they’re doing, nobody will notice. They’ll just go on being “vibrant” and “open” democracies. “Open” to what I’m not sure, because no one is clamoring to immigrate there.
Hey, M. (that’s Mike) Bunge. Suppose you enlighten us as to who the anointed “really are.” Do you realize how ironic it is that someone like you tells me that I’m not in on the secret knowledge?
— jd · Apr 26, 12:08 PM · #
“Hey, M. (that’s Mike) Bunge. Suppose you enlighten us as to who the anointed “really are.” Do you realize how ironic it is that someone like you tells me that I’m not in on the secret knowledge?”
It’s not secret knowledge, moron. It’s being able to observe reality without projecting your emotional and psychological hang ups onto everything. Such as pretending that any serious person anywhere in our political system is proposing anything that even remotely resembles “central planning”. Trying to discuss things with folks like you is like trying to debate the existence of The Great Pumpkin with Linus.
Just to give you a hint, though, which of the following do you think would be more deserving of being mocked as “the annointed”?
1. A dark-skinned kid with a funny name from a broken home who grew up to defeat the most powerful political operation of his adulthood to win the Democratic presidential nomination.
2. A white kid from a wealthy family who was a drunk-off-his-ass screw up until the age of 40, yet still went on to practically have the Republican presidential nomination handed to him on a silver platter.
Mike
— MBunge · Apr 26, 03:58 PM · #
In response to a wholly irrelevant question about my political view: if you want to know what I think, consider me a Christian who believes what Jesus says in the Sermon on the Mount. For that matter, I also agree with the Magnificat.
But my overall political opinions have nothing to do with a predicted US budgetary shortfall of $100 trillion. Nor do they have any real relevance to the factual questions: what proportion of that sum represents actual costs you cannot avoid using any remotely acceptable means, what proportion of those costs can you avoid by changing the way you do things, for example by changing the way you structure work and retirement? Then you have the ethical question of whether or how you should share to proportion of the costs you cannot avoid.
— John Spragge · Apr 26, 07:16 PM · #
It’s not secret knowledge, moron.
The new civility, from the left, as usual.
— jd · Apr 26, 08:11 PM · #
“The new civility, from the left, as usual.”
More wussy whining, from the right, as usual.
Mike
— MBunge · Apr 27, 02:51 PM · #