A short note: A world with 9.7% unemployment, anemic economic growth, 10-year treasury yields that have barely blinked in the face of a massive expansion of the monetary base, and a Fed that seems to think its job is done is not a world the Strawman Blogger wants to live in.
But surely not even Fate herself could not be that cruel to your dedicated correspondent ...
What's that? Eh? Ah. I see.
Saturday, February 6, 2010
In Which Normal Service Will Be Resumed
The Strawman Blogger arrives very late to this party, but it does deserve a mention: GDP grew at 5.7% in the fourth quarter. And the result? Nothing much. It is an inventory bounce, full of sound a fury, signifying nothing.
Final demand was, I'm afraid, an awful 2.2%. At this rate, we'll have have reduced unemployment below 8% by 2013.
Final demand was, I'm afraid, an awful 2.2%. At this rate, we'll have have reduced unemployment below 8% by 2013.
In Which We Solve The American Debt Crisis For All Eternity – Part I
There must be some kinda way outta here,
Said the Joker to the Thief
There’s too much confusion here,
I can’t get no relief – Bob Dylan
Spending freezes. Monetary tightening. My credit card balance. Yes, the debt crisis is everywhere these days, to the point where your wandering correspondent can’t safely travel the blogosphere without tripping over threats to raise the Fed fund rate.
Originally, I had hoped to solve this problem in a single blog post. But it seems you’ve gotten yourself in quite the mess. Even my venerable intellect would be taxed to clean it up in a mere seven hundred words.
So instead we’ll take it easy: follow-through is important here. From time to time these posts will crop up, and I’ll explain the basics of our debt problem – its characteristics, its management, its cyclical and structural issues, until, much farther down the line, we’ll arrive at the obvious solution. All written in prose so clear and lucid that even a peasant like you can understand it.
But first, we’ll have to clear up this strange confusion between the debt and the deficit.
Debt and Deficit – Two Entirely Different Ways To Screw Yourself
Details, details. The debt is simple – it’s the measure of the outstanding liabilities of the U.S. government. Like all debt, its value rests on the expectation of timely payments from the borrower. It takes many forms: treasury bills, notes, and bonds, TIPS, and assorted other government securities. Indeed, it is the management and sale of these securities that forms an important part of our monetary policy.
The debt is also, in nominal terms, quite large.
The Deficit – Some Problems Find You
The deficit, on the other hand, is not a current obligation. Rather, it’s the difference between the money our government acquires and the money it spends. It is the rate at which we add money to the debt.
Now, those of you who have been poorly educated, are of weak constitution, or who cannot be ballsed to keep up with current events, will be troubled by this. “Tis Obama!” you cry. “And his terrible, socialist, no good health care policy. Or perhaps the bailouts.” Which brings us quite conveniently to our first important point:
Our First Important Point
Ponder, if you will, this graph:
Here, we find something very clearly demonstrated. That there a two ways to run a deficit – and, in evils, they are worlds apart.
Lesson The First – The Cyclical Deficit
The cyclical deficit. The hurricane in otherwise peaceful financial waters. Like a seasonal storm, it swoops down among our nation’s finances to wreak untold havoc. Like a seasonal storm, it passes quickly, leaving nary a trace behind.
In normal times, the government raises money through taxes, and spends it in the budget. During a recession, tax revenue falls, while our spending remains the same. A deficit ensues.
Falling revenue alone is enough to cause a deficit. But of course our government is not content with a merely passive role, so they engage in assorted types of expensive action designed to bring the economy back to health. And the deficit increases.
Once the economy is chugging nicely along again, the cyclical deficit all but disappears. Tax revenues go up, spending drops back to it’s original level, and cyclical factors – like the much maligned fiscal stimulus and the Troubled Asset Relief program – fade into tiny lines in the future horizon.
Lesson The Second – The Structural Deficit
The structural deficit is an altogether different animal, nasty and full of venom. A structural deficit is not a product of a recession. It is always there. It is simply a feature of the things we cannot afford, and the things we refuse to pay for.
The cyclical deficit ebbs and flow. The structural deficit does not. Like cancer, it just grows and grows. An increasing part of it is caused by health care costs, which will absorb 49% our GDP by 2082.
It’s also caused by programs that have no tax offset. Since raising taxes is so politically unpopular, we stopped doing it – between 2000 and 2008, we simply put everything on the credit card. The wars in Iraq and Afghanistan, the Bush tax cuts, the 2003 Medicare Part D Prescription Drug expansion – all of these were enacted without a single offsetting piece of revenue, in the midst of an already growing deficit.
Truly, people. How the current Republican party became a model of fiscal prudence is insulting in its audacity. They passed a massive, budget busting tax cut that primarily benefited the richest Americans, along with an expansion to Medicare that cost $1 trillion dollars, and did not bother to come up with a single dime.
In closing: What have we learned?
1) When we fix our debt problem, we cannot focus on cyclical factors. We must concentrate on the structural problems that threaten our solvency.
2) Using quick, back of the envelope calculations, the 10-year financial impact of both the Troubled Asset Relief Program and the fiscal stimulus have exactly this much impact: F@%&-all.
3) When passing the largest tax cut in American history, it’s best to find a way to pay for it, first.
Said the Joker to the Thief
There’s too much confusion here,
I can’t get no relief – Bob Dylan
Spending freezes. Monetary tightening. My credit card balance. Yes, the debt crisis is everywhere these days, to the point where your wandering correspondent can’t safely travel the blogosphere without tripping over threats to raise the Fed fund rate.
Originally, I had hoped to solve this problem in a single blog post. But it seems you’ve gotten yourself in quite the mess. Even my venerable intellect would be taxed to clean it up in a mere seven hundred words.
So instead we’ll take it easy: follow-through is important here. From time to time these posts will crop up, and I’ll explain the basics of our debt problem – its characteristics, its management, its cyclical and structural issues, until, much farther down the line, we’ll arrive at the obvious solution. All written in prose so clear and lucid that even a peasant like you can understand it.
But first, we’ll have to clear up this strange confusion between the debt and the deficit.
Debt and Deficit – Two Entirely Different Ways To Screw Yourself
Details, details. The debt is simple – it’s the measure of the outstanding liabilities of the U.S. government. Like all debt, its value rests on the expectation of timely payments from the borrower. It takes many forms: treasury bills, notes, and bonds, TIPS, and assorted other government securities. Indeed, it is the management and sale of these securities that forms an important part of our monetary policy.
The debt is also, in nominal terms, quite large.
The Deficit – Some Problems Find You
The deficit, on the other hand, is not a current obligation. Rather, it’s the difference between the money our government acquires and the money it spends. It is the rate at which we add money to the debt.
Now, those of you who have been poorly educated, are of weak constitution, or who cannot be ballsed to keep up with current events, will be troubled by this. “Tis Obama!” you cry. “And his terrible, socialist, no good health care policy. Or perhaps the bailouts.” Which brings us quite conveniently to our first important point:
Our First Important Point
Ponder, if you will, this graph:
Here, we find something very clearly demonstrated. That there a two ways to run a deficit – and, in evils, they are worlds apart.
Lesson The First – The Cyclical Deficit
The cyclical deficit. The hurricane in otherwise peaceful financial waters. Like a seasonal storm, it swoops down among our nation’s finances to wreak untold havoc. Like a seasonal storm, it passes quickly, leaving nary a trace behind.
In normal times, the government raises money through taxes, and spends it in the budget. During a recession, tax revenue falls, while our spending remains the same. A deficit ensues.
Falling revenue alone is enough to cause a deficit. But of course our government is not content with a merely passive role, so they engage in assorted types of expensive action designed to bring the economy back to health. And the deficit increases.
Once the economy is chugging nicely along again, the cyclical deficit all but disappears. Tax revenues go up, spending drops back to it’s original level, and cyclical factors – like the much maligned fiscal stimulus and the Troubled Asset Relief program – fade into tiny lines in the future horizon.
Lesson The Second – The Structural Deficit
The structural deficit is an altogether different animal, nasty and full of venom. A structural deficit is not a product of a recession. It is always there. It is simply a feature of the things we cannot afford, and the things we refuse to pay for.
The cyclical deficit ebbs and flow. The structural deficit does not. Like cancer, it just grows and grows. An increasing part of it is caused by health care costs, which will absorb 49% our GDP by 2082.
It’s also caused by programs that have no tax offset. Since raising taxes is so politically unpopular, we stopped doing it – between 2000 and 2008, we simply put everything on the credit card. The wars in Iraq and Afghanistan, the Bush tax cuts, the 2003 Medicare Part D Prescription Drug expansion – all of these were enacted without a single offsetting piece of revenue, in the midst of an already growing deficit.
Truly, people. How the current Republican party became a model of fiscal prudence is insulting in its audacity. They passed a massive, budget busting tax cut that primarily benefited the richest Americans, along with an expansion to Medicare that cost $1 trillion dollars, and did not bother to come up with a single dime.
In closing: What have we learned?
1) When we fix our debt problem, we cannot focus on cyclical factors. We must concentrate on the structural problems that threaten our solvency.
2) Using quick, back of the envelope calculations, the 10-year financial impact of both the Troubled Asset Relief Program and the fiscal stimulus have exactly this much impact: F@%&-all.
3) When passing the largest tax cut in American history, it’s best to find a way to pay for it, first.
Friday, February 5, 2010
Things I Ponder When Woken In The Middle Of The Night In A Cold Sweat Over Fears For America’s Deficit
Net savings from Senate Health Care proposal: $132 billion a year.
10-year cost of the unfunded, Republican Medicare Part D Act: $1 trillion.
10-year cost of the unfunded, Republican Medicare Part D Act: $1 trillion.
Clear Leadership We Can All Believe In
It was an old testament land he found himself in, a land
of barbarity and retribution. - Ian Rankin, Knots and Crosses
With all the grace of a drunken Labrador slamming into the closed glass door of a 7-Eleven, Mike Pence, the third-ranking leader in the House Minority, advances his alternative plan for health-reform:
“Well, look, you know, I was, uh, yeah, yeah, look, uh.”
Ahh. Bless.
Thursday, February 4, 2010
In Which We Consider The Awful, Terrible, No Good Socialist Health Care Proposal
No you can’t always get what you want
But if you try some time, you might find
You get what you need. -
The Rolling Stones
So several times in the past two weeks, when the topic of health care reform is broached, my conservative family and friends have offered some familiar personal advice:
“You, [Strawman Blogger], are just another socialist.”
Now, I take no offense. If there’s one thing your intrepid blogger enjoys, its being considerately labeled a no-good-red-commie-Mao-loving-Trotskyite. But unlike that time we were caught with the minister’s daughter, these allegations are without a shred of truth. So very shortly, and with damning finality, I shall clear my name.
But before I begin, we need to know what the bill is. And for that, we’ll need a shorter version of the bill in question. If only I had one lying around …
The Awful, Terrible, No Good Socialist Health Care Proposal: A Shorter Version
So this is how the bill works:
Each state sets up an exchange, where individuals who are uninsured (or uninsurable) are allowed to buy insurance from private companies, such as the ever-caring Blue Cross/Blue Shield. The individuals benefit from purchasing insurance at cheap group rates, and the insurers benefit from access to new customers.
In order to be listed on the exchanges, insurers have to meet some minimum qualifications. They have to qualify in price – their policies must be cheap enough. And they have to qualify in quality – they have to provide a basic level of health care service. In return, individuals are allowed to rate their level of satisfaction with their insurance, and these ratings must be made public by the insurers – the community rating system.
But what does the government do? In short, not much. The government provides subsidies to purchase insurance to the mostly poor (people earning up to about 300% the federal poverty line, or around $32,000 for an individual). They also help set up the exchanges.
But, as far as reform goes, that’s it. The government doesn’t employ any doctors, and they don’t tell you what policy to buy. And they don’t insure a single person.
If this all seems terribly conservative, well, it is. It’s so conservative that it’s basically identical to the proposals endorsed by Bob Dole and Tom Daschle. It’s so conservative that some basic elements, like a selling insurance across state lines, were suggested by McCain on the campaign trail. It’s vastly more conservative than the health-care plan advanced by Richard Nixon, and it’s conservative in part because over 160 amendments were accepted from Republicans in the Senate HELP committee.
A Brief, Irritated Aside
Oh. And the end-of-life counseling provision, the late and unlamented father of the death panel rumours? It was included in the GOP’s 2003 Medicare prescription drug bill.
And Back to Our Original Point
So I hope you can understand the uncomfortable position of your Strawman Blogger. Here I stand, accused of all types of nefarious socialism, for the crime of being slightly further to the right than Richard Nixon.
And we’ve sacrificed along the way. We’ve given up on the strong public option on a federal exchange, the federal exchange, the strong public option on a state exchange, the weak public option on a state exchange and, finally, the public option all together. We’ve given up stronger subsidies, on ending the employer-tax exclusion, on Medicare-for-all. We’ve given it all up in a hopeless effort to get a single Republican vote, and now have lost it all, all because a Massachusetts politician doesn’t see the value in shaking hands outside of Fenway Park.
And for this, you accuse me of being a socialist. For shame.
Back to the Future
So where does this leave us? It’s very simple.
Health care is broken. It’s broken enough that we spend 40% more than any other country, but rank 32nd in health outcomes. It’s broken enough that it will bankrupt the country by 2070. It is, in immortal words of Steven Pinkner, well and truly unsu-fucking-stainable.
Of course, if something cannot go on forever, it stops.
Solution #1 – Like Our Sex Life in High-School: We Do Nothing
This, ignorant louts that you are, is the option you’ve chosen. We continue merrily on our present course, while each year health care costs increase, and each year more and more people will be denied, or will be unable to afford, insurance. Eventually this will increase to the point where the system of private insurance will be, for all intents and purposes, broken.
Solution #2 – Like Our Sex Life in College: We Do Something, Anything, At All
There are options for fixing health insurance. Hell, we’re the only country who can’t do it right. We can squeeze insurers and providers with a public option. We can set up a risk-equalization pool. We can nationalize the whole bloody system. But these are all much, much more liberal than the proposal you’ve just rejected.
So this leaves me in a confused position – I am left defending a conservative health care proposal from the conservatives who invented it, when the status quo doesn’t work and all the other options are deeply, terribly more liberal.
Just what is your better idea?
Welcome To The SMB
- Oscar Wilde
There was once a time, back in the day before MySpace became overrun with drug dealers and people looking to sleep with other people they once knew in high school, I kept up a small unremarkable blog. And it was good.
Although I blogged it up for awhile, it lapsed with the passage of time. But lately the blogging urge has struck again. Surely, I think to myself, the world can still benefit from my always clever, often timely, and admittedly vast pool of personal wisdom?
Of course it bloody well can. It is, for example, full of people like you, and that does it very little credit. The world, I modestly accept, could use me.
So came about the Strawman Blogger. Here, we’ll find social commentary, with frequent diversions into the field of economics, and occasional forays into the merely curious.
But before we begin, it would help to have the House Rules.
The House Rules
1) A sense of humor is required.
2) Your comments will rarely be deleted. Your frequent and entertaining displays of childlike reasoning don’t concern me – they embarrass only yourself. However, we will delete any material deemed to be offensive to any gender, ethnic, religious, or other interest group, anything deemed off-subject, any material my girlfriend does not like, and, on rare occasions, any time I really, really feel like it.
3) We will try not to offend you.
4) These things do not amuse us: Manchester United, the EMH, Michael Bay, the Treasury View, Eugene Fama, the Wall Street Journal Editorial Board, Casey Mulligan (It’s because they don't want to work, Casey? Really? Really?), anything ever recorded by Nickelback, the actual band members who comprise Nickelback, prawns (Tiny legs. Can’t trust them.), James Patterson, and Kokanee beer. Liking anything above doesn’t disqualify you from participating in this blog. It will, however, raise grave doubts about your level of taste.
5) Actually, scratch (3.). We will try to offend you all the time. For example: “I privately admire the willpower of anorexics.”
6) From time to time, if comments are slow, we will resort to outright bribery. Participating in the blog can be lucrative as well as edifying.
And, finally:
7) In the beginning, there was Liverpool.
And that about covers it. Let’s get it started:
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