Thursday, December 30, 2010

(You Should Be) Obsessed With The Deficit

Once a week--sometimes twice a week if I'm feeling frisky--I stop by the Sajak Pavillion and pay a visit to my allergy doctor for a scheduled dose of magic serum that will hopefully increase my tolerance to grass pollens and cats before 2012.  Each visit involves a shot in both arms, followed by a 20 minute waiting period, after which I present my arms for inspection much like a dog presents itself after rolling over in the hopes of earning a treat.  Since there isn't any cell phone reception, the situation requires some reading (only of magazines--don't worry!).  Having exhausted the office's supply of Automotive Weekly magazines, and determining which version of the Porsche 911 I would like (this one), I found myself in some uncharted territory via a November issue of Time magazine.  Enter Joe Klein.

Time, apparently, wanted 2 columnists to write about the same topic, which was the economy.  I think the idea might have been to have 2 opposing viewpoints, which didn't come close to happening.  Anyway, I couldn't let this article go by without comment.

In his article, Klein spends the first however many paragraphs dismissing the sincerity of the most recent promises to reduce the deficit, then announces what he considers to be the "larger problem", which is that people are "spending so much time and effort bloviating about long-term deficits and so little trying to untangle the immediate economic mess that we're in".

"In the long run we are all dead", the famous Keynes quote, does well to describe the problem that Klein ignores.  Politicians focusing on short term problems to gain next-term election have gotten us where we are! What the shit, Joe??!!

In the interest of time (I have to take my little cousins to a place called 'Pump It Up' soon), let's skip down to the last paragraph of the article, so Joe and I can have a nice chat.

Again, I'm not opposed to long-term deficit reduction, so long as it's equitable. 

Remember, this is not the 'larger problem'.  Jobs are fickle--they will come back, as long as government policies don't prohibit them.  If we spend another 3 stimuluses to gain an extra 50,000 jobs, the deficit is even more of a problem.  K?

But I do wonder why these righteous burghers are leading the charge on this particular issue and are so obviously AWOL on a more pressing problem: finding a way to encourage productive investment that creates jobs while discouraging the financial speculation that creates bailouts. 

[looking up the word 'burgher'...right...ok...apparently it means a complacent member of the middle class.]

OK!  So the logic here is that encouraging productive investment is what we need, and the secondary logic is that financial speculation creates bailouts.

Rich people invest money productively. They buy stuff then hire people to run the stuff they buy. This creates jobs, which is our short-term concern in this little exercise. Rich people get more money through lower taxes, which can only be accomplished by lowering deficits.

Also, financial speculation does not cause bailouts.  Politicians' pens cause bailouts.  On a more analytical level, pressure placed on financial institutions by government agency directives leads to irresponsible financial behavior.  Speculation, which by the way is way too vague of a term to possibly have meaning in Mr. Klein's argument, is good because (1) it conveys pricing information to the market, (2) it provides liquidity to markets, (3) it decreases the likelihood of non-competitive pricing by suppliers, (4) it encourages the sustainable level of consumption, and (5) it reduces risks borne by manufacturers by allowing them to pre-sell at a fixed price.

If that last paragraph didn't seem relevant, don't worry; the topic of speculation wasn't relevant in Joe's original article either.

For starters, there needs to be a stiff sin tax on speculation. 

A sin tax! Could Joe be any more anti-free market? Also, how would you determine what "speculation" is? 73

 "Attention, any investment that has a risk of losing more than 10% is sinful and will cost you a tax of $500,000."

At the very least, the resplendent Olympians should work to put their squalid McMansion in order


 — by launching a public-service campaign against excessive executive compensation and devoting their considerable energies to encouraging our smartest young people to go into careers that produce jobs, not deals — before they're allowed to lecture former assembly-line workers about the sacrifices they have to make in order to balance the budget.

[Economic & Business Theory: Explode].  

The Joe Klein Business Interview:

[Joe Klein]: Are you a smart young person?

[College Graduate]: I'm pretty smart--maybe not the smartest.

[JK]: Ok well if you're not the smartest, you can go into a career where they only focus on deals.

[CG]: Huh? Umm, ok, so like...every career?

[JK]: No! The best careers are for the smartest people...the careers that produce jobs.

[CG]: Like I said, I'm not the smartest, but I'm pretty sure that when you make a deal, you need to hire more people to fulfill whatever promises you made in the deal, and that creates jobs.  Am I wrong?

[JK]: I knew it--you are a financial speculator!

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