Squaring the Culture

"...and I will make justice the plumb line, and righteousness the level;
then hail will sweep away the refuge of lies,
and the waters will overflow the secret place."
Isaiah 28:17

05/26/2010 (7:33 pm)

CBO Publishes Fiction Regarding the Stimulus

The Congressional Budget Office issued its quarterly report regarding the effect of the American Recovery and Reinvestment Act (ARRA), claiming that the ARRA spending has increased real (inflation-adjusted) GDP somewhere between 1.7% and 4.2%. Leftie blogs are reporting this as proof that the stimulus worked, including gloating from Washington Monthly’s Steve Benen:

There’s a word to describe a recovery effort like this: success.

Facing the greatest economic crisis in generations, the nation had two choices early last year: the Democratic stimulus or the Republicans’ proposed five-year spending freeze. We’re all very fortunate the latter was in the minority.

Even worse was Prairie Weather:

I don’t think even the toxic right can wiggle around those results.

These guys are beclowning themselves. The CBO report is an exercise in question-begging. All it does is run the actual spending numbers through a model that presupposes that Keynsian government-spending multipliers are correct, producing a range of results by changing the multipliers. In other words, they’re using a model to project what the spending did, not actually measuring economic output. Since the projections of what the stimulus would accomplish used exactly the same models, all they’re doing is reciting their theories and patting themselves on the back. Bruce Reidl of the Heritage Foundation explains, and Stephen Spruiell boldly predicts that each quarter’s CBO report will simply repeat the fiction.

In case you’re not familiar with Keynsian multipliers, allow me to explain briefly:

Keynsians argue that when individuals have money to spend, they save some of it, but when the government has money to spend, they spend all of it. They argue that by taking the money as taxes and spending it as government spending, more money reaches the economy — the difference being what the taxpayers would have saved. That’s how they claim that taking money out of the economy through taxation then re-inserting it through government spending actually stimulates the economy.

This is nonsense, in my humble opinion, because dollars saved do not disappear from the economy, they get cycled into capital formation. Capital formation results in expansion, and expansion occurs by way of spending. For instance, Widget Manufacturing builds a new plant by buying materials from suppliers, paying construction workers, etc. So saved dollars circulate just as readily as spent dollars, only they cycle through the banking system first.

I accepted the Keynesian multiplier when I first studied economics, because that’s what college freshmen do when their professors feed them an equation, but I’m not buying it now, especially with all the real-world examples of failed Keynesianism to work from. Those reading this who feel compelled to complain that I’m a nobody criticizing the uncontested brilliance of Nobel prize-winners should reread my post addressing that very point back in February 2009, when the Cato Institute took out a full-page ad in the New York Times listing the names of all the professional economists who simply don’t believe that the Kenysian multiplier has any relevance to the real world.

It is not clear that stimulus spending has done anything other than benefit Democratic party donors and bloat an already unmanageable deficit. It is abundantly clear that Democrats want very badly to claim that it has helped things. Those who use the CBO report to prove it, though, prove either that they have no idea what they’re talking about or that they have no scruples.

02/22/2010 (11:21 pm)

Watch Your 401(k)

BusinessWeek reports that the Treasury and Labor departments are asking for public comment on “the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams.”

Sound innocent? Newt Gingrich and Peter Ferrara over at Investor’s Business Daily explain at some length what it means: it means the Obama administration is taking a look at turning your 401(k) account into the government’s piggy bank.

Here’s how it would work: the government would first require that your bank or investment house offer that you receive the proceeds from your 401(k) as an annuity. Later, they would mandate it; they would probably be nice and offer you three different repayment plans to fit your particular needs. The annuity would exist in the form of Treasury notes. Meanwhile, behind the scenes, they would take all the funds in your account and spend them on federal budget items, leaving you with a promise by the government to pay you back. Just the way they did with the Social Security and Medicare trust funds.

From the viewpoint of the Obama administration, this is a logical step. They’re running massive annual deficits, and the 401(k) pool represents probably more than a trillion dollars in available revenue to finance the deficits. They’ve already done exactly the same thing with Social Security, and they imagine that Treasury bills are the safest, most secure investment on the planet, so in their minds it’s not really stealing. In the odd rigidity of the liberal mind, there is no possibility that “the full faith and credit” of the government could ever become anything other than the absolute guarantee that it has been all their lives; they have no notion that their actions can, and will, produce genuine insolvency.

But insolvency will come, as night follows day. As the world’s investors see the irresponsibility of the government’s actions, they will abandon the T-bill, and then the Fed will have to crank up the presses to buy American debt with inflated dollars — and then pay the investors back with those inflated dollars. A retirement nest egg that should have sufficed for a comfortably middle-class old age will barely ensure survival, and God help the retiree whose nest egg was only just enough.

Either that, or massive new taxes will have to be drafted, which will break the back of the economy. They will never think of the only solution that would have a chance of working, to privatize as much of the massive entitlement programs as possible. Reducing their own power is against their nature.

The authors added:

Argentina provided a precedent in 2008, taking over that country’s private retirement accounts for forced investment in government bonds to cover spiraling deficits. Ambrose Evans-Pritchard editorialized at the time in Britain’s Daily Telegraph that this may be “a foretaste of what may happen across the world as governments discover .. . that the bond markets are unwilling to plug the (deficit) gap. . .. My fear is that governments in the U.S., Britain and Europe will display similar reflexes.”

This is just the latest chapter in what is developing into a war by the left on America’s seniors. All that class-war rhetoric about “the rich” ends up targeting seniors, who tend to have accumulated the most in savings and investment on average because they have been around the longest.

The attorneys at PowerLine think the Obama administration will not be able to get away with this. They point out that a large percentage of the nation’s lawyers have million-dollar retirement accounts, and will scream bloody murder if the government attempts to force them to finance the deficit. It is not clear that the Obamanites will willingly abandon their own base in this fashion; the Obama machine runs on money.

That’s plausible, but hardly reassuring. The mere threat that the government might take this step, an idea that’s been quietly floating on the air for a few months, is already slowing the rate of investment in retirement accounts. PowerLine’s Hinderaker notes:

Earlier today I learned that a relative on Wall Street has stopped accumulating funds in his retirement accounts precisely because he thinks they may be confiscated by the Obama administration. Instead, he is acquiring untraceable, tangible assets–gold and silver–that the government won’t be able to steal without a physical search of his property.

If major investors deflect their retirement savings into hard assets, like gold or collectibles, that will take those savings out of circulation, making expansion capital that much rarer and extending the recession that much further.

Socialism has failed the world in every imaginable way. No nation can afford what is planned for it by those who imagine themselves the rightful engineers of the perfect society.

12/28/2009 (12:45 pm)

Trickle-Down Obama (Updated Twice)

Non-partisan analysis of recipients from the Obama administration’s first round of stimulus spending indicates that the President and the Democrats in Congress appear to favor a partisan form of trickle-down economics. It seems that 38% of the stimulus spending went to the wealthiest districts, most notably wealthy districts represented by Democrats.

The same analysis could find no correlation between stimulus spending and unemployment. There was no apparent targeting of areas hit hardest by the economic downturn.

RichMoreTextBoxThe analysis, a working paper entitled “Stimulus Facts” published by the Mercatus Center at George Mason University, was prepared by senior research fellows Veronique De Rugy and Jerry Brito. The Mercatus Center is a think tank researching economic policy issues.

The study took districts reporting having received stimulus funds and broke them into Metropolitan Statistical Area (MSA) by zip code, then grouped them into quintiles by the median income of each MSA as reported by the Census Bureau. It was determined that districts within the highest-income MSA’s received 38.16% of the stimulus funds reported in the 4th quarter of 2009, or roughly $55 billion. Only about $2 billion, or 1.43%, went to districts in the lowest quintile. Considering all the stimulus money allocated, about $114 billion, or 78%, went to districts with above-average median incomes, whereas only about $32 billion, or 22%, went to districts with below-average median incomes.

The working paper also analyzed stimulus spending by political indicators, including which of the presidential candidates the district voted for in 2008, the party affiliation of the Congressperson representing the district, the Congressperson’s tenure in office, whether the Congressperson chaired a major committee, and whether the Congressperson sat on the Appropriations Committee. Of these, only one variable showed a significant effect on the distribution of stimulus dollars: districts represented by Democrats received 1.8 times as many dollars as districts represented by Republicans, on 1.6 times as many individual awards of funds. It didn’t matter who the district voted for for president, nor did it matter what committee the district’s representative sat on. Only party affiliation mattered. Predictably, Democrats received almost twice as much money.

Non-political variables considered by the researchers included unemployment levels, average income, and affiliation with the construction industry. Of these, the only variable that indicated a group that received disproportionate funds was income; the highest-income areas received by far the most funds. Democrats in Congress touted their focus specifically on the construction industry during the debates in Congress, but apparently did not direct funds disproportionately to areas hosting construction companies.

One more thing — more than half of the stimulus dollars went to governmental entities rather than private ones, according to the Washington Examiner’s article discussing the findings.

DemMoreTextBoxSo, the stimulus money was taken by a Democratic Congress and sent to the richest districts represented by Democrats. So much for the myth that Democrats care about the poor, eh? This distribution is far more uneven than as uneven as any spending by any free-market Republican could ever be. In fact, it appears that the primary criterion determining which district would receive stimulus funds was that district’s ability to supply contributions to the nearest Congressman — and most emphatically the nearest Democratic Congressman.

This illustrates the core fallacy of the liberal mindset. Their arguments always begin and end by identifying an inequality produced by free markets. They supply no argument or evidence whatsoever regarding what a government-run solution will produce instead. The entire argument consists solely of the existence of the inequality. It is a fact that government-run solutions invariably produce worse inequalities, but inequalities along partisan lines, favoring the wealthy friends of those who are handing out favors.

Leftists think — or want you to think — that self-interested systems will be replaced by systems run by the wholly Good and Righteous, meaning themselves. What occurs in reality is very different from what they imagine in their fantasies. Leftists hold a completely political view of man (or sometimes an economic, gender-centric, or race-centric view of man), and consequently seldom focus on reforming the weaknesses in their own character, except as they relate to politics (economics, gender, race, or what have you). They are thus at the mercy of their own foibles when they come to power, and behave abominably. Everybody suffers due to policies based on incorrect principles — except those closest to the power centers, who apportion wealth and protection to themselves and their friends. Welcome to the nest-feathering autocracy of the Left.

Remember this statistic the next time any leftist sneers about “trickle-down economics” from Republican policies. When given absolute power, leftists give far more to the wealthy than do conservatives. Only, they don’t do it thinking that it will actually help the economy; they do it thinking they’ll help their friends.

A caveat about the survey: for the analysis the researchers used data retrieved from Recovery.gov, the Obama administration’s site reporting the effects of stimulus spending. The numbers on Recovery.gov are self-reported by recipients. It is possible that there were reporting biases in the data; that is, it is possible that a greater number of Democratic recipients of stimulus funds reported their grants than did Republicans. It is also possible that wealthier districts reported more faithfully than did less wealthy districts. I saw no indication that the researchers assessed this possibility, and can offer only conjecture regarding the possible impact on the data. My gut tells me that correcting for reporting bias could affect the Democrat/Republican statistic a little, but would not change the statistic about the wealth of the districts receiving funds. But that’s just a guess. YMMV.

UPDATE 12/29: Another caveat about the data, this one pretty big. I noticed that in the table from the working paper that contains the primary statistic reported in this piece, namely the one claiming that 96.4% of the stimulus money went to districts in the top quintile of median incomes, that the percentages in the top and bottom quintiles total to 100%. That would mean there were no districts in the 2nd, 3rd, or 4th quintiles. This does not sound correct, so I’m trying to contact the authors. In the meantime, please consider that 96.4% figure suspect. I’ll give you the facts as soon as I’ve verified them. Thanks.

UPDATE 12/30: I contacted the researchers, who acknowledged that there was an error in the white paper at the place I noticed. They are adjusting their figures, and send me appropriate adjustments. I’ll note here that the original report claimed that 96.39% of stimulus funds went to the top quintile, when in actuality it was 38.16%. They also reported originally that 3.61% of stimulus funds went to the bottom quintile, when it was actually 1.43%. I have changed the numbers in the article proper, but not the analysis — I think the disparity between what was received by the districts in the top and bottom quintiles speaks for itself. Whatever Democrats said about trickle-down economics, what they have produced with their back-scratching corruptocracy is worse.

10/01/2009 (11:12 am)

Obama Compels Carbon Caps While Science Applies the Brakes (Updated)

Taking action based on Justice Anthony Kennedy’s misconception that carbon dioxide is a pollutant subject to regulation under the 1973 Clean Air Act, the EPA announced plans yesterday to implement regulation of carbon emissions for large emitters, signaling the Obama administration’s intentions to cap carbon whether Congress acts or not. The plans create a requirement that carbon-generating sources that emit more than 25,000 tons of CO² per year must “demonstrate the use of best available control technologies and energy efficiency measures” to minimize greenhouse gas emissions. Small businesses are exempt, for now.

The Obama administration is apparently making it clear to Congress that it expects action immediately. The House version of the carbon caps bill, if passed, would restrict the EPA from regulating carbon (the Senate version does not,) but until that bill is passed the President has authority under the Clean Air Act to establish regulation of any pollutant that it deems a danger to the general public. Apparently the EPA has ruled that CO² is a danger.

In the meanwhile, the forward progress of science seems to be falsifying the EPA’s finding.

About a month ago, Prof. Mojib Latif of Germany’s Leibniz Institute, climate-modeler extraordinaire and lead author for the Intergovernmental Panel on Climate Change (IPCC) conceded that the earth has not warmed for the past 10 years, and that we seem to be entering a cooling period that may last another 10 to 20 years (but he’s not sure.)

The global warming theory has been based all along on the idea that the Atlantic and Pacific Oceans would absorb much of the greenhouse warming caused by a rise in man-made carbon dioxide, then they would let off that heat and warm the atmosphere and the land.

But as Latif pointed out, the Atlantic, and particularly the North Atlantic, has been cooling instead. And it looks set to continue a cooling phase for 10 to 20 more years.

“How much?” he wondered before the assembled delegates. “The jury is still out.”

But it is increasingly clear that global warming is on hiatus for the time being. And that is not what the UN, the alarmist scientists or environmentalists predicted. For the past dozen years, since the Kyoto accords were signed in 1997, it has been beaten into our heads with the force and repetition of the rowing drum on a slave galley that the Earth is warming and will continue to warm rapidly through this century until we reach deadly temperatures around 2100.

While they deny it now, the facts to the contrary are staring them in the face: None of the alarmist drummers ever predicted anything like a 30-year pause in their apocalyptic scenario.

And in an even more stunning reversal of fortune for defenders of the thesis that humans are catastrophically warming the planet, the scientists who produced the data set that has been used to defend the “hockey stick” graph of global temperatures were found to have cherry-picked their data, deliberately selecting a small number of particular tree rings that would create a significant up-tick on the temperature graph.

Public release of the Yamal tree ring data on which Keith Briffa’s hockey-stick-like chart of global temperatures was based, allowed statistician Steve McIntyre to attempt to replicate Briffa’s results; what he found was a divergence from the previous graph that was so dramatic that it practically indicts the previous scientists without words. Briffa had been refusing to release the data sets since 2003, but was recently required by standards of The Royal Society (British scientific association) to make them public. Jennifer Marohasy of the Australian Institute of Public Affairs posted a challenge calling for the authors of the original research to explain the difference or resign. Meanwhile, additional scientists are performing the same replication using the same data and verifying that McIntyre’s results are accurate.


There remains very little evidence of any sort that human-generated CO² is causing any significant impact whatsoever… but that only makes Progressive politicians push harder for carbon restrictions. These restrictions, far from “saving the planet,” will most likely wrap the US economy in chains and prevent economic growth for decades, until alternative technology is actually ready for use. These politicians need to be thrown out on their ears, and all carbon restrictions need to be rolled back; a new Congress could mandate that carbon dioxide is not a pollutant and is not subject to EPA meddling.

Anthony Watts just posted Dr. Keith Briffa’s rebuttal to Dr. McIntyre’s analysis of his tree ring data, along with comments. You can read it here.

07/03/2009 (7:44 am)

Checkin' on the Kids: How's That Stimulus Going?

I’ve been quiet about economics for a while, because it’s just a gloomy topic these days, but the Democrats in Congress, the White House, and the Fed have been busily stimulating this and that for 9 months or so, so let’s check on them. How’s it going, kids?


One data point is not enough to indicate a change in direction, but the job loss curve might be beginning to top out. Of course, then there’s this from Karl Rove, showing how many jobs we’ve lost relative to President Obama’s predictions:


So we know that the stimulus package is not doing for jobs what it was advertised to do. This is not news.

Meanwhile, there’s no end in sight to the downturn. Headlines this morning suggested a gloomy prognosis and more losses for everybody:

Not only are consumers still losing jobs and income at prodigious rates, but also their net worth has dropped 21 percent since the end of 2007 because of big drops in the value of their largest assets — homes and stock portfolios.

…while this article explains in terms that I deem mostly accurate why what we’re seeing is only the beginning of a long, slow decline into stagnation, with inflation to boot:

An economic train wreck is coming. Its cause is simple and straightforward: the breathtakingly bad monetary and fiscal policy during the past six to nine months – in other words, too much money and too much federal spending.

Simply put, spending gazillions that we don’t have on programs that benefit Democratic campaign donors does not improve the economy, it kills it. The levels of government spending under Obama-Pelosi rival the largest spending of WWII when expressed as a percentage of national output, and they’re still cooking up new spending plans. Meanwhile — and this is where the stagflation article I linked to, above, is wrong — interest rates of T-bills are creeping up, not because investors are wary of possible inflation, but because nobody wants to buy our debt.

And the debt is going to get worse. Whatever Obama cooks up regarding health care will cost more than we could have afforded even before the stimulus wave. Obama still has not launched his “I’ll pay for everybody’s college education” program, but that’s coming sooner or later, as will more “I’ll care for your every need” legislation. Cap-and-trade will raise taxes, but the economy will shrink under its weight, and the net will be lower tax revenue. So we’ll have to borrow more at ever-higher rates, crowding out investment capital…


I don’t believe Nancy Pelosi knows any better; she genuinely thinks all this spending is good for the economy, and is probably thinking “Wow, this must have been worse than we thought. We’re going to have to spend even more.” I do think President Obama knows what he’s doing, though, and the economic hardship he’s deliberately creating will give him more opportunities to seize things, especially the liberties of free citizens.

Had enough?

Allahpundit waves towards a hokey ad from House Minority Leader John Boehner that’s a small start on a campaign that could, on a long shot, give the House back to the Republicans in 2010. There’s got to be more and better where this came from. And then, if we somehow got the House back, we could conceivably start ratcheting back some of the destructive nonsense; but even if we did that, the reversal would be slow. It’s Great Depression II on the way, folks.

Take it away, John Boehner.

06/25/2009 (6:32 pm)

"NO" to Cap-and-Trade

Congress will be voting tomorrow on H.R. 2454, the Waxman-Markey Cap-and-Trade scheme. This is a permanent energy tax that will, in fact, cripple the US economy, extending the current downturn into the foreseeable future. Proponents are touting a Congressional Budget Office estimate that says the cost will be minimal, but the Heritage Foundation explains why their estimates grossly underestimate the costs and completely ignore the depressing impact that an energy tax will have on the economy.

American Solutions has a petition that we should all sign, expressing our general opposition to any cap-and-trade system or energy tax.

Two factors that I’ve discussed frequently on this blog come into play:

(1) The alternatives to fossil fuels are not ready for prime time. The evidence of this is that nobody will touch them without enormous subsidies, which means they do not believe they can make a profit at current energy prices. By this we know that a tax sufficient to force producers to build alternative-technology electrical generating capacity will necessarily drive our electricity rates through the roof; they will not work unless fossil-fuel-generated electricity costs more than alternative-generated electricity — which we already know costs so much that producers won’t touch it without huge subsidies. Worse, even with artificially high fossil-fuel prices and ridiculous subsidies, fossil fuels will continue to provide most of our energy for at least the next 35 years, and more likely longer. If you want to read what I’ve written about energy alternatives and their readiness for use, click the topic “Energy” under the Topical Index on my sidebar, or click here.

(2) Switching away from fossil fuels will accomplish exactly nothing. Not only is it the case that the best estimates of the reductions in CO² by America implementing cap-and-trade are not sufficient to stop any significant warming; it is the case that current science has pretty much demolished any defense of the notion that humans are causing the climate to heat enough to cause any damage. There remains not a shred of observable evidence suggesting that humans are heating the planet more than a few fractions of a degree, and the returns from NASA’s Aqua satellite demonstrate beyond reasonable doubt that the earth responds to increases in CO² by generating more cloud cover, cooling the earth to counteract greenhouse warming. Not only that, but theorists studying the effect of solar flares on cloud formation predict 25 years of cooling, and the earth has not experienced any warming in the last 11 years. If you want to read what I’ve written about climate change, click the topic “Climate Science” under the Topical Index on my sidebar, or click here.

Thus, Waxman-Markey engages bad economics in an attempt to calm fears caused by obsolete science.

Please sign the petition, then call your Congressman and tell him to vote “No” on H.R. 2454.

Aren’t you glad the Democrats control Congress?

06/10/2009 (8:42 am)

Stimulus Fiction From the White House

Chris Muir’s cartoon today links to a fine video presentation from what appears to be an ordinary math geek who likes to create visualizations with pennies. The site is called Political Math, and I’d never heard of it before today.

Here’s his visualization of the job losses since passing the stimulus bill, compared to what was predicted by the Obama administration. One and a half minutes.

I wrote a little about this a month ago, but he’s captured a bit more data.

What’s clear here is that the government’s projections of what would happen both with and without the bill were so far wrong as to be meaningless. Given that, any claim regarding how many jobs the bill “saved” are completely meaningless as well — not to mention that economists don’t even pretend they can measure how many jobs a policy “saved” in the first place.

In other words, anything the President says about what the Stimulus bill has accomplished, apart from spending nearly a trillion dollars to reward his political supporters, is pure fantasy.

He’s vowing to accelerate his spending, on the premise that it’s working. If he were simply saying “Let’s stay the course,” I might believe that he really thinks stimulus is working even though he has no data to support the notion. Him saying “It’s working, let’s accelerate,” in the absence of meaningful data, makes me think he really does intend to wreck the US economy. The alternative explanation, that his grasp of economics is that of a college sophomore and he does not really understand what the statistics mean, is looking less plausible; he might be that naive, but I doubt it.

05/14/2009 (9:53 am)

Piling On Social Security

Hot Air’s article covering the Tuesday’s announcement that Social Security will be going negative sooner mentioned something they posted a month ago, saying that the SS revenue surplus may be gone already. That somewhat dramatic and possibly disputable claim masks a more sobering discussion regarding how small the surplus really is, even if it’s still there. The attached video runs about 5 minutes and contains sobering statistics:

The part of the discussion that I want to highlight occurs near the end, where the representative of SS reassures the public that a $2.5 trillion trust fund exists to cover their claims until 2040. As I pointed out yesterday, that “trust fund” exists only on paper; it exists in the form of Treasury bonds.

If you or I invested our money in T-bills, we’d consider that safe, because the government historically has been good about paying its debts. T-bills are issued by the government; they’re how the government acquires our national debt. If I buy a T-bill, the $25,000 or so I’d spend (the lowest denomination of T-bills, if I’m not mistaken) would be sent to Congress, who would use it to finance the military, various government programs, welfare, or whatever. When I cash out my T-bill, it would be paid back to me out of general tax receipts.

The SS trust fund is no different. Americans have paid $2.5 trillion into Social Security over the years, and SS, in turn, loaned that money to Congress — which immediately spent it. The only asset backing that $2.5 trillion IOU is future tax revenue.

This means that when SS starts paying out of its trust fund, it will have to finance those payments out of Congress’ general revenues. The trust fund will cash out some T-bills that they won’t repurchase with other funds; the money to cash out the T-bill will have to be appropriated by Congress as part of the annual budget.

So, when that clueless woman in the video says “The trust fund will cover us until 2040,” what she’s actually saying (without really understanding, I suspect) is that she’s got a claim that gives SS first dibs on what the government raises by taxing your income. If she’s right about SS getting financed, what it means is that the government will have $2.5 trillion less to spend on other things. More likely, though, SS is going to have to stand in line for its funds just like every other federal funding mandate when the government runs out of money.

The effects will cascade. As the government’s ability to repay its debts becomes less, borrowing money for deficits will become more and more difficult (not to mention expensive). The economy will sour, tax revenues will drop dramatically, and that will create even more pressure on government to borrow — which will make our bond rating even lower, and borrowing that much harder and more expensive, pushing the economy down further, and so forth. It won’t surprise me much if a lot of American Boomers end their self-centered existences literally starving.

The other thing worth noting is, we should recall what the Democrats said about Social Security back when President Bush was attempting to reform it. Bush was about 20 years too late, actually, the reforms should have occurred back in the 1980s, but at least he made the attempt. Democrats replied, “It’s all in your head.”

“Today’s report confirms that the so-called Social Security crisis exists in only one place — the minds of Republicans,” said Senate Democratic Leader Harry Reid of Nevada. “In reality, the program is on solid ground for decades to come.”

Keep it in mind the next time Democrats tell you not to worry about some looming problem Republicans mention.

05/08/2009 (3:40 pm)

How Well Stimulus is Working So Far (Updated)

The following graph, except for the two triangles, was produced by the Obama administration, and published in a document entitled “The Job Impact of the American Recovery and Reinvestment Plan,” released January 10, 2009 (here it is.) It represents what the Obama administrated predicted for the economy if nothing was done, and what it predicted for the economy if the $787 billion stimulus bill was passed.


The two triangles are the actual figures for unemployment for March and April, in the wake of the passage of the stimulus bill. While the curves on the graph are only projections, and it’s at least theoretically possible that the actual unemployment figures would have been far worse than the projections, the actual unemployment figures are running suspiciously close to what was predicted if nothing was done — and we’re just two months into the projections.

Moreover, the Labor Department, when it published it’s March unemployment statistics, made this prediction:

Many analysts don’t expect the housing slide to show signs of stabilizing until the second half of this year. They said layoffs may be at their high point, but that the jobless rate, already at a 25-year high, will keep rising until the middle of 2010.

The jobless rate will keep rising until the middle of 2010 — again, suspiciously similar to the curve that predicted what would happen if nothing was done.

In other words, the most likely explanation at this moment is that the stimulus bill, all $787 billion in government expansion and unheard-of deficit levels that we had to pass so quickly that our elected representatives were not even permitted to read the bill, is doing nothing.

Credit goes to a blog called Innocent Bystanders. The original post is here, and the follow-up with April’s figures is here.

UPDATE 5/14: Ed Morrissey points out something I did not notice: the graph demonstrates that with or without the stimulus, the government thought unemployment would return to about 5% by 2014, and would fall to a few fractions of a percent by 2012. In other words, that nearly $1 trillion in borrowing and spending was proposed entirely to avoid a two-and-a-half-year bubble in unemployment. Even if it had worked, it probably was not worth nearly as much as it cost.

05/07/2009 (4:06 pm)

If It Can't Go On Forever…

I’ll thank the Richman, Richman, and Richman team at American Thinker for my new favorite economic dictum: economist Herb Stein once said, “If it cant’ go on forever, it won’t.”

It’s a bit of avuncular wisdom that seems obvious, but we miss it all the time. We look at something that’s just all out of whack — like, for example, Social Security, promising more money to each succeeding generation, just like a Ponzi scheme — and we say, “That can’t go on forever,” but then we forget about it. Everybody does the same thing. And then, when it finally crashes, everybody points the finger at everybody else and says, “Why didn’t anybody predict this?” The fact is, everybody DID predict it; it’s just, when it goes along for so long without blowing up, we forget that everybody knows it’s going to blow up sooner or later.

So, there are things in the economy that simply can’t go on forever. Social Security. Medicare. Ungodly levels of federal spending. And now, a huge trade deficit along with unbelievably high federal deficits. It can’t go on forever… and it won’t. Sooner or later, it’s going to come crashing down.

A blog called HazZzMat drew attention to the American Thinker article that produced the following chart. Click on the image for a larger image:


They describe a possible future as the US struggles to pay the increasing burden of foreign debt (the government, businesses, and private individuals) in which the government starts printing money rapidly in order to devalue the currency, and pay off the debt in devalued dollars — hyperinflation, accompanied by currency collapse. HazZzMat suggests this is deliberate. I don’t know if this is true, and I’ve speculated about this possibility before, but it hardly matters at this point; if it can’t go on forever, it won’t.

This, by the way, and not “energy independence,” is the reason the US should be drilling its own oil. We don’t really need energy independence, any more than we need, say, automobile independence, or steel independence, or shirt independence. We live in a global economy; it’s interdependent, and that’s not a bad thing. What we need, rather, is something to offset the $700 billion in trade deficit caused annually by our oil imports. Every drop of oil that we bring out of American ground helps this, and adds to our wealth at the same time. It doesn’t matter if this makes us energy independent or not.

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