Debt’s The Way I See It

TLDR Version – Great book, definitely worth reading.  Despite essentially being a huge failure.

My take on Chapter 12 will follow, but since it’s the final chapter of the book, I’m starting with a book review.  See Chapter 12 is (ideally anyways) where all the various ideas and bits and pieces Graeber has been going through are brought together and placed into context with the real present-day world.  So, before I get to Chapter 12, I have to look at what comes before.

General impressions?  It’s quite readable.  Graeber has such an easy conversational style that despite the educational nature of the book, it’s still compelling.  A couple of times the mask slips (in this case, probably slips back on) and you realize that d00d is a university professor.  His love of the word “efflorescence” for example.  Efflorescence?  Doesn't that mean "to deflower"?  It's eff-something anyways.

One thing Graeber does very well throughout the book is to present and effectively support a bunch of ideas and concepts which are in direct opposition to conventional wisdom.  The famous example is The Myth of Barter, which is how I was first introduced to this book.  So when you read these bits, you suddenly feel smarter – as if you now have some secret bits of information not available to the general public.  A batch of little assisted epiphany moments. These moments themselves are worth the price of admission.

Which is good because otherwise the book is a failure.  You see, it’s not an almanac or reference document.  Those new ideas and concepts that Graeber gives us, they are as part of a bigger picture.  Graeber first gets us to address a bunch of misconceptions we have, about things that a lot of us have always taken for granted.  This part goes well.  Then he tries to get us to understand accept the resulting implications.  That’s asking too much of readers.  People are basically lazy.  Especially when dealing with overhauling their world-views.  Trust me, I am an expert on lazy.

Graeber claims that his actual goal is fostering dialog and getting people to consider options and alternatives for the future that were previously verboten.  He’s prompted dialog for certain, moar words have been written about Chapter 12 than are in it, but it’s all of teh flawed old mode of seeing the world and framed almost entirely in the “language of the market”.  And anyways, even if he doesn’t have the actual solutions, claiming that one is needed (and especially in teh detailed and persuasive way Graeber does this) is a partisan take on its own.  Anyways, I am personally quite sympathetic to the arguments he’s made, and I’m still sorting things out in my head.  I guess that makes me one of the people he’s successfully reached – but I’m not sure if I am moar BURN SHIT DOWN after reading Debt than I was before.

Okay, on to teh specifics.  The first half of the book is anthropology.  He argues, based on empirical observations of societies that little or no exposure to the rest of the world, that the Myth of Barter as the origins of money is false.  That money itself was always credit-based or “fiat money”.  That the actual origins lie in accounting systems developed by large central bureaucracies for accounting purposes.  That, a bunch of other stuff.  Anyways the main point (from my understanding of the book) is that Debt precedes Dollars.  That our understanding of money has to be updated to take into account that at its root, money is not about precious metals, but about obligations and promises.

Added to that is another concept – the idea of a “human economy” as he calls it.  A system of Debt that is based on different rules than traditional exchange or barter.  With the primary basis being that human beings have value and worth beyond quantification and that there are some things where Debt is incurred in a fashion that it can never be repaid – and that tokens are used to express the magnitude of this Debt, but in no way make up some sort of “recompense” for it.  Bridewealth and blood penalties are used to illustrate this concept.

He gets us to start thinking about the way people interact with one another in terms of rank or the presence/absence of hierarchy.  That exchange requires a sort of equality between parties and that this sometimes requires willfully ignoring obvious power disparities.  That inherent contradictions such as these are present in all these types of relations.

These ideas are then illustrated by wandering through five thousand years of history, which I will fast forward through.  The birth of coins marks the start of Empires and exploitative war.  Due to the need to provision armies.  Besides, chaos and violence is not particularly amenable to reputation based economies.  And coins enable pillaging.  He describes this as the military-coinage-slavery-complex.  Then comes a period after the collapse of the Great Empires where global institutions come into play.  These alleviate a lot of suffering and we return to a more credit based economy.  Then the Capitalist Empires develop and we’re back to gold and slavery.  And the finally, we get to Chapter 12 when Nixon unilaterally ends the Gold Standard.

Chapter 12 is not a stand-alone argument.  This is evident by the number of times he references concepts from earlier in the book.  It is evident in Chapter 8 when he explains what this is exactly what he intends to do over the next bunch of pages.  It is evident because it is Chapter 12 and not a separate book altogether.  Which is why it’s getting a separate post.

Halfway in Debt

An update for those of you who still occassionally look at this blog - I am reading the Graeber tome (speaking of being late to the party).  No time to blog*, and yet I can find time to wade through a pound and a half of anthropology, history and anarchist ranting.  Well, in teh words of someone who's already neatly summed up teh situation and then moved on to something after goatse, I blame Twitter.

I'm on Chapter 6 which is halfway to teh Controversial Chapter of Bombing and Doom.  Maybe it's confirmation bias, but things are looking pretty bad (at least from my perspective) for teh Graeber h8rs.  d00d may have been a complete ass and jerk - and it's not like Henry Farrell is dum or what (that guy's whipcrack sharp).  But unless Chapter 12 breaks out Fluoridation is an Ebil Conspiracy, it's looking bad for teh CT crowd.  Especially bad because despite teh ridiculously offensive "a Reply" that Graeber crapped out, I totally see where he was coming from.  Teh childish SAT/GRE insults are totally about turning teh "de-legitimization" argument around on its head to show how ridiculous it is.  And despite Gabriel Rossman's very helpful and productive responses in teh Thread of teh Unpleasantness, it is very hard to see how Graeber wasn't justified in lashing out***.  That is, unless you value convivial non-shrill pleasantries over substance in arguments.

Anyways, I should have moar to report when I finally get to Chapter Graeber's Full of Shit Despite all teh Nodding and Agreeing I've Been Doing for the Past Three Hundred Pages.  And depending on when Rathian Plate drops for a hammer user, it could be any day now.

* Everyone has their excuses.  Too busy with work, or fambly, or whatnot.  I gots nothing other than pure carp laziness.  Heck, I've only just cleared Rathian** and Monster Hunter Tri will have been out for two years on Friday.  I can't even keep current with dicking off!

** Barroth is a cheap bastard and can suck my hammer.  Fuck you Barroth.

*** Although in the context he was replying in, a more artful response would have been moar effective and knowing your audience is something that's considered a good thing in a writer.

Windows Vista*

*About teh post title - I was going to title this post Broken Windows Vista, but then realized that was redundant.

Before going forward, just want to shoutout the Graeber Invention of Money post again. His highlighting the fact that one of the foundational ideas about economics is totally bogus is pretty awesome. Also too, teh interview wherein we learn that teh symbol of teh Liberty Fund is an excellent example of how money, debt and credit pre-existed barter and was probably a result of government regulations and trial lawyer type compensation processes.

Also too, a disclaimer. This post is Part 2 – and if you had a problem with Part 1 then you should probably give this one a bye. This post is going to be speculation about the reasons and related bits associated with the mistakes I pointed out in the previous post.

One final bit of preamble.
TLDR version: FYIGM is actually a generous interpretation.

So anyways, there’s a bunch of different things you can read into the broken windows fallacy. Firstly, you’ll notice that there is a premium of sorts for wealth on hand as opposed to earned money. The owner of the broken window is worse off because they had to spend cash that they had – but the window repairman is not better off because he exchanged his labours for the replacement cost of the window. Now if you stipulate that the opportunity cost to the repairman is zero – IOW he doesn’t have to cancel other window replacement jobs or postpone window replacement training or skip that year’s window replacement trade show (GlazeCon 1849 – the cosplay is practically pornographic) – then the window repair is pure windfall profit for him. So what difference is there in the value between the window owner’s six francs or the window repairer’s six francs? Obv. none.

Not so obv. This misconception – that available cash is worth more than earned cash – has been carried through to this very day. For instance, the capital gains tax rate is lower than income tax rate. If you accept the conservative/libertarian never before observed Laffer curve concept that the higher the taxes the greater the disincentive to produce – the result is that it is somehow less harmful to directly “disincentivize” producers than it is to “disincentivize” investment. Apparently the ideas surrounding “supply-side” economics does not extend to the market for labour.

The other big problem I had with Bastiat was the labelling of things as useless. He doesn’t accept the idea that the window repairman’s exercising of his trade has value in and of itself. That since the net wealth of the village is unchanged, the window repairman’s efforts are cancelled out and somehow “useless.” It is as if he could not see the value of maintaining skill and expertise in local industries. The type of attitude that would denounce tariffs of all types and push for widespread free trade.

Actually, it’s worse than that. Because the things he rails against have as their intended purpose things which are clearly indicated. In the case of tariffs, it’s protecting local industry – in the case of “make work” programs it is keeping people employable and engaged in society – in the case of the assorted social programs that are always at risk of funding cuts it is the provision of those social services. Those things all have value, but Bastiat as well as modern day conservatives claim that they don’t. Usually based on this dollar value taxes-are-evil approach.

This ties into the glibertarian “why can’t we let charities do that” thing which I’ve railed against elsewhere. Perhaps another post.

Lastly but not leastly, the whole broken windows fallacy thing gives us a new and more complete definition of modern conservatism than Galbraith’s. Observe that in the broken window story, society is no worse off for having lost the window. Overall wealth is unchanged because an otherwise idle labourer has the opportunity to produce a replacement. But the window owner is definitely worse off. And this is the parable that Bastiat uses in order to advocate for policy decisions that affect all of society – including the window repair d00d. That’s conservatism in a wingnutshell – this idea benefits me personally therefore it should be the way it is for everyone.

This not only covers the greedy position conservatives have about government providing only the services they want and need and nothing else, all the while complaining about having to pay for any of it. It also applies to social conservatives and their insatiable need to prevent anyone else from having a good time. Their religion has forced them to suffer a joyless existence made bearable only by the future promise of eternal happiness and communion with the most powerful being in the universe. And if that’s good enough for them,,,

It’s not that conservatives lack empathy, it’s that their empathy only works backwards. It’s not that they can’t imagine themselves in position of someone less fortunate or successful – it’s that when they do so they project so much of their own experiences that they actually become offended. Because they achieved whatever level of success and comfort they have, everyone should be able to as well. That for conservatives, imagining what it is like to be in someone else’s shoes really means wondering why being insulted that people have the audacity to not do exactly as they do all the time.

And so the way they understand the world is through that lens. Their metaphors and analogies are all of the Me First variety. Tax cuts are good because they want to pay less in taxes (even if those tax cuts don’t target them but only benefit the uber-rich, because they may be uber-rich some day). Cutting social safety net programs is okay because they don’t use them. Something about your mother. Hence government budgets are like family budgets meaning the anti-Keynesian belt tightening austerity during recessions and crazy deficits during market booms. Hence “if you have nothing to hide,,,” since of course everything they do is by definition societally accepted if not revered. Hence all sorts of authoritarian abuses because there would never be a reason to racially profile them.

And finally I started Part 1 by mentioning that I was going to be very critical of Claude Frédéric Bastiat, but that we should bear in mind that his time was a very different one. While it was the Age of Enlightenment, enlightenment is a process whereby one starts of unenlightened. That his writings show the twisted thoughts of a selfish sociopath with no empathy for his fellow man, he was probably still pretty progressive for his time. However, the folks that buy into his century and a half old worldview - they don't have the same excuse.

You're Not Supposed To See Teh Window

This one's way way TL - and Confession Time: I'm already working on Part 2.

TLDR version: Shorter Bastiat

FYIGM

So, a bit of a while ago I got engaged in a bit of a flame war at Crooked Timber. About broken windows. It's gotten me thinking and reading and although I really don't have anything new to add to what I said at CT, I think it might make sense to put it all down in a single post. Well, at least it will make moar sense to me - which is what this blog is here for anyways.

First the beackground - the broken window fallacy. From Claude Frédéric Bastiat's essay That Which is Seen, and That Which is Not Seen. I'm going to be pretty harsh on pauvre Bastiat - so I want to caveat up front. Dude is from early 19th century France. Those were different times, Revolutionarily different. Please bear that in mind.

Here's the story: There's this shopkeeper, let's call her Alice. Alice's son, Alison, breaks one of the shop's windows. Alice hires a glazier, Bob, to repair the window. The price is six francs (for context, the franc at the time was a physical standard amount of gold. ~0.29 g. Meaning six francs is approximately a fifth of a troy ounce or about $350). Bob fixes the window, collects his three and a half benjamins and in rubs his hands in glee.

So, from an economics perspective, what's happened? Well, Bob did six francs of work that he otherwise would not have done. And that's it. The broken window is repaired and thus the community as a whole is no better or worse off. Six francs has been redistributed from Alice to Bob and Alison is probs in big trouble with his mom (whom I totally did).

But no. Here's where Bastiat comes in and says, oho - while the overall wealth of the community appears to be unchanged, you are not factoring in what is unseen. Which apparently is Alice's spending six francs on new shoes (ladies and their obsession with buying shoes - amirite!). Charlie, who is teh village cobbler, is now out the six francs that he would have been plus had Alice not had to shell out all them phat francs to Bob.

Which is, of course, bullshit. The way I phrased it in teh original dust-up was And Bob wears no shoes?

Money is money, francs are francs. Cold hard cash is teh most frungible of assets - even moar so than diamonds, or so my fence tells me. Does it matter if teh six francs are spent by Alice or spent by Bob? No, it does not (although this misconception is an interesting one to unpack as well - possibly in a later post). So Bastiat's poor unseen Charlie is getting his six francs after all, or maybe not Charlie since it's only teh chicks with teh thing about shoes. Let's say that Bob blows the cash on a used computer from some guy named Dave. Bastiat's "not seen" Charlie is exactly balanced out by Dave whom Bastiat doesn't seem to see.

There was a big discussion about hoarding. Various people maintained that teh broken window fallacy does not require Bob to be a hoarder. This is untrue. The conclusion of the Broken Windows section:

The reader must take care to remember that there are not two persons only, but three concerned in the little scene which I have submitted to his attention. One of them, James B.Alice, represents the consumer, reduced, by an act of destruction, to one enjoyment instead of two. Another under the title of the glazierBob, shows us the producer, whose trade is encouraged by the accident. The third is the shoemakerCharlie (or some other tradesman but def not that Dave guy), whose labour suffers proportionably by the same cause. It is this third person who is always kept in the shade, and who, personating that which is not seen, is a necessary element of the problem. It is he who shows us how absurd it is to think we see a profit in an act of destruction.

Clearly for the little parable to have any meaning, only money spent by Alice counts. Bastiat has raised teh unseen potential use by Alice of the cost of the window - but studiously ignores teh possibility of increased spending by Bob due to his coming into new money. Furthermore, the cash spent by Alice is cash that she had on hand - and in the story, Bob is otherwise unemployed. Which of the two is more likely to hoard cash? Later in that same essay, Bastiat waxes poetical on teh virtue of hoarding - so there's also that.

Anyways, teh whole point of teh parable apparently, is to show that Bastiat is a huge hypocrite. The parable is a very special form of special pleading where he invents an entire extra set of rules, which don't actually change the outcome unless they are selectively applied. It's like playing a baseball game and being told that reaching third base now also counts as a run. And then being told that this special rule only applies in the bottom half of the inning. Without tilting teh playing field entirely in his favour, teh best Bastiat actually manages to prove is that in a system with excess capacity/high unemployment - the useless destruction of things causes no net loss to society. Because there is available unused capacity to replace them.

But wait, what about that bit about redistribution? At the very least doesn't Bastiat have an argument from moral grounds about how even if you pay Paul, robbing Peter is still Dentistry? Well, yes and no. In the original story, teh window is broken by accident by Alison. Or maybe not accident but possibly as revenge for being given a girl's name. Or maybe while he was practicing in order to succesfully punch a shark in teh face. Whatever Alison's motives, there appears to be no lesson in morals available. Next Bastiat proposes that Bob hires a bunch of thugs to go break windows for teh sake of drumming up business. Well, that certainly seems immoral. So it appears that the issue of the moral rightness with respect to redistribution hinges upon context. Meaning that teh parable is a pretty weak one in terms of being some sort of archetype to base analogies on.

But base analogies Bastiat does. Many of them. He projects the lessons of this story, lessons which only follow if you are willfully ignorant of teh inherent contradictions, to a host of other things.

And each time the formulation of teh analogy goes - Alice is teh consumer or teh taxpayer or teh polity at large. Alice is kinda like Christine O'Donnell, she's you. Bob is any public spending be it a standing army, spending on the arts, trade restrictions and tariffs, just about everything. Charlie is everything good and proper. All that we want out of society. Everything that is right and just. Bastiat doesn't recognize Dave, probs because he's on vacation in Europa (not Europe, since that's where Bastiat iswas). And Alison and teh broken window? Everything Bastiat hates - taxes, regulations, prepared mustard instead of Dijon, teh foul mouthed Poet-Engineer from Canada that's schtupping his mom, teh noise that kids these days call music. Basically, any and everything he doesn't like.

So, you're Alice. Alison, who I suppose is no longer your son but rather some sort of OMG! SOSHULASM! inflicted upon you. You are at some sort of loss due to teh effects of SOSHULASM. Bastiat's true nemesis, whom he calls Monsieur Industriel (firstname Strawman) says to not worry since teh loss is totes balanced out because teh funds go to Bob who provides you with something in exchange. i.e. Despite being out your precious tax monies, here's a functioning civil society for your troubles. But Bastiat says - oho, that's all well and good, but what of poor Charlie! You kept Charlie out of teh picture! Therefore it is a net loss to society. Not just to Alice but to society as a whole.

It ain't. It never is in any of the comparisons he makes. Because all of the balances revolve around what Alice is out compared to what she would have had in an otherwise perfect world and none of them consider Bob at all. Not only that, he is saying that this analysis is the basis on which policy decisions which affect all of scoiety, Bob and vacationing Dave included. And since you're Alice - it's like some form of meta ur-pandering. So credit for that, Bastiat was already trying to buy your vote in teh earliest days of modern democracy.

Here's teh kicker. That's not teh worst error Bastiat makes. There is another "not seen" thing which Bastiat completely igmores. The breaking of the window itself. He calls it the useless destruction of things, but "useless" - as in without any value whatsoever - that's a hard bar to meet.

The lost window may have been previously faulty in some way. Somehow inapprorpiate for teh application. Knowledge which was not available when teh window was first installed means that teh new window has teh potential to be better than teh old one. Perhaps a window is a bad example of these things - but teh point was to set up a basis for analogies. There are all sorts of things that one wishes they could change after they were installed. Bastiat also offhandedly cites the example of a fire burning down Paris. Well that is a bit extreme and teh cultural loss is immeasurable, but on a smaller scale, a single house burning down provides teh opportunity to rebuild it, this time meeting standards for electical wiring. A moar recent example is teh LulzSec hacking of PSN. Destroyed Sony's entire security system (twice). Compromised tens of thousands of credit card numbers. Doesn't that count as "useless destruction"? Well no. Sony's "security" was godawfully bad. There is definite value - especially to Sony - in knowing that their security seriously needed beefing up. It would be like if Alice's window popped itself open while no one was looking and started throwing shit out into teh streets. Breaking teh window was a good thing. Breaking Sony's "security" was also a good thing. Because it was done for teh lulz and not to bone thousands of people whose only mistake was to think Sony would be able to keep their credit card info safe. People whom Sony had already put at risk for that very boning.

On an even moar obvious basis - technology doesn't stand still. Again, teh window ain't teh best example since window technology is already pretty mature - but say one of your buddies, for example Alison, finally manages to break your Nokia 5110 (probs with a sledgehammer). ALISON HAS DONE YOU A FAVOUR. You should be thanking her.

Bastiat is not only unconcerned with what happens to teh money after Alice spends it - he is concerned only with money. In the original story, Bob is an unemployed skilled worker. The longer he is unemployed, the rustier he gets and teh moar out of touch with current industry practices he is. The opportunity to exercise his trade has value to society in and of itself. And in teh current context of the long term unemployment epidemic in the US - it's not a small point (although I concede that it's not something that 19th century frenchmen should have been able to predict).

That's the real unseen that Bastiat glazes over. In the example of tariffs and what he calls "restrictions", Bastiat assigns a value of nurturing local homegrown industry at zero. According to Bastiat, there is apparently no value in having domestic sources of goods when they can be procured on teh global market. Kinda funny considering the state of international relations in Europe during his time. I mean, Prussia made such fine weaponry, why bother with a domestic arms industry when you can just purchase said items from your neighbour?

The usual bugaboo that is raised as teh broken window is make-work programs. Why implement make-work programs when you could just lower taxes and BOOM MAGIC FAIRY JOB CREATION? Not to be too asshole-ish about it, but it's right there in teh name. To Make Work. Making work isn't a by-product of Make Work programs. As I mentioned previously, long-term unemployment - not good for society. The whole idea is to keep teh long term unemployed from slipping into teh long term unemployable. But that's something Bastiat doesn't see. Because he got his job at 17 through nepotism and then inherited a fat ass estate at 25 making him fabulously wealthy and never needing to do sweet fuck all except complain about taxes for teh rest of his natural life.

Tax Cuts Cut Both Ways - UPDATED and now ridiculously long

That whole stupid fucking insane bullshit about tax cuts paying for themselves?  About how teh only way to save teh Economies is by cutting taxes on teh rich and teh corporations?  Well, I suppose if you're reading this you probably are well aware that it's bullshit and there's decades of proof of it, but have you ever wondered why it's wrnog?  I mean other than the fact that teh argument is always made by smug sociopathic selfish jerkasses or brainless dolts that think they are smug sociopathic selfish jerkasses.

Caveat - I'm just pulling stuff outta my ass here, it's not like I'm an economist - heck I don't even have an mba.

Here's the argument, by cutting taxes to teh uber wealthy - they'll have moar disposable income to spend which thus stimulates teh economy!  Tax cuts mean that rich folks have moar resources that they can then invest!  Increasing all sorts of good things for teh peons!  Yayyys!

Only, of course teh richer you are, teh higher your savings rate.  Meaning that cutting a dollar of taxes for teh wealthy has a smaller effect than giving a dollar to teh less wealthy.  That if you really wanted to stimulate teh economy and boost consumer spending, tax cuts benefitting mostly teh rich is teh worst way to do it.  Let's gloss over all of that, like a good glibertarian.

Teh tax cut thing is still bullshit.  If you wanted to "incentivize" spending by teh wealthy - you can do that with tax credits.  Up teh top tax rate and give tax refunds to Moneybags McHazALot when he actually uses his obscene wealth right when it would help teh economy teh most.  That way you can ding teh miserly Hoardy McSkinflints without hurting teh productive überGaltmenschen who only want to help teh markets realize their full potentials.  It's not a crazy idea - 401(k)'s are a tax refund based method to get people to put away some retirement moneys.  Typically into investments.  Although maybe 401(k)'s is a bad example given market performance over teh past few years.  Still - the basic idea is there, and anything that has gotten capital investment from a mutual fund has tax refunds to thank.

So anyone trying to sell you on tax cuts to boost investment or spending or whatnot, they are lying or stupid.  If you wanted to boost investment or spending or wev, you can just do that much moar efficiently than by cutting taxes.  Teh fairytale is purely a justification for tax cuts.

Anyways, if it's so easy - why don't they do it more?  Well other than the fucktards that run the system being total fucktards - they actually do do this a lot (heh "do do").  All those various deductions and exemptions are all programs which cut taxes for specific individuals for doing specific things, such as spending money on their home business or having babbies.

Okay, that's a lot of background - hopefully my point is a good one.

So, there are also these types of programs for corporations and businesses too.  The one I'm going to talk about is the one I have some experience with - the Renewable Energy Tax Credits.  There are two (actually three, but that's complicating things unnecessarily) programs - the Investment Tax Credit and the Production Tax Credit.  One covers 30% of the capital costs of installing a renewable energy facility and the other is worth around a third to a half the average wholesale price of electricity last year - for ten years.  These programs can easily turn a marginal project into one with quite decent returns.

BUT - and here's teh problem - teh incentives are tax refunds.  Meaning that to take advantage of these programs, you need to find investors who are taxable (called "tax equity investors").  And with a lot of big players paying little or no tax those investors are getting hard to find.   Although to be fair, these tax credit programs may be part of why those companies are paying so few taxes.

So here's the other edge of the tax cut - none of this stuff happens in a vacuum.  That currently there are big corporations that are sinking capital on a tax equity basis into wind farms and solar power projects.  And what happens when you cut their taxes?  They suddenly have less to gain from these investments.  IOW, that money that you're giving back to corporations so that they can invest in the economy?  They were going to invest that money in renewable energy anyways.  And now that you've cut their taxes - they aren't.  They're going to save it.

UPDATE: There's one of those genteel dust-ups brewing in teh left neo-liberal blogosphere.  Henry Farrell at Crooked Timber and Doug Henwood who I hadn't heard of earlier are taking teh piss out of BM Matt.  Generally, I'm okay with Matt (excepting that he passed on teh opportunity to spit in ME-gan's face when he had the chance.  In fact, he continues to do skip that opportunity regularly! ) but is he ever getting shat upon here, and justifiably too.  Why am I mentioning it as an Update to this post?  Just to point out that BM Matt is making very much teh same argument as teh tax-cut folks.  That his preferred sacred cow will start all these nebulous mechanisms which will automagically lead to his preferred outcomes because that's how it works since he is so smart and has such deep understanding of teh mechanisms and situation at all times.

Matt, when we're talking about near double digit unemployment for over a year and teh sum total of your argument amounts to repeating "At the margins" - you have lost.  You're going back to teh "marginal case" because that's what your argument is - a marginal case.  I mean srsly.  Ooooh, maybe a higher target inflation rate may have made moar rich persons spend some cash!  Right.  And maybe monkeys will fly out my ass, carrying giant bags with dollar signs on them.

One.  Teh margins are small.  That's why they are called margins.  I don't know why you folks don't understand that.  When you're trying to name teh single best thing we can do to spark job creation, a marginal change is teh wrnog answer.

Two.  Yeah, maybe the non-economist non-pundit non-wunderkid (without even an mba) has missed teh point about "at the margin".  No, I haven't.  You're trying to say that changing the marginal case is a fundamental change - that moving a threshold value captures teh entire population that was near the threshold.

Bullshit.  Where are all these people who would have spent like sailors if only the target inflation rate was one percent higher?  They don't exist.  No one thinks like that, not even technocratic dweebs like Yglesias.  Proof - when was the last time BM Matt thought to himself "I'm not going to splurge on anything until the Fed adjusts its target inflation numbers".  NEVAR.  His mom told me so.

One of his commenters put it very succintly:

This looks like:

1. Feds wants inflation.
2.
3. Inflation!

Three.  If you want people to spend money, why the hell don't you just encourage that.  What the fuck is it with technocratic neoliberals and their roundabout Rube Goldbergian schemes to get at their goals?  Changing the target inflation rate?  WTF?  You want corporations to expand operations?  Why the fuck don't you just target that?  New Hire Tax Credit - Gubmint pays x% (in tax credits) of salaries for everyone hired that had been unemployed for moar than y weeks.  It's not fucking rocket science.

Four.  So a jobs program won't just use idle resouces and therefore will cause inflation. BwaAAHAhhaHAHa.  WTF is teh complaint?  U wanted higher inflation anyways.  i.e.  Teh jobs program achieves what you wanted in teh furstest place!*

No srsly though - here he says that teh inflation means that teh Fed will tighten money supply and slow down teh economies again and poof - back to square one.  IOW, in teh long run you get zero benefit from a jobs program.

Begging teh question of teh All Powerful Monetary Policy Paradigm.  But, nevermind that part.

His problem is that there’s no way you could design a program of that kind that exclusively mobilizes idle resources.  Well sure, but you can design a jobs program to do the shit that you want to do.  Like employing people who have been out of work for a long time and are at risk of becoming unemployable.  Like repairing long neglected infrastructure.  And then, even in teh world of Magical Monetary Policy Trumps All, you are back to square one - only if you discount all teh shit that got done.

Shorter BM Matt:  Since you can't design a jobs program that exclusively uses idle resources, jobs programs must therefore exclusively use non-idle resources and therefore get you "nowhere".  Much simpler to increase the target inflation rate and hope that all teh marbles in teh margins line up and teh magic invisible hand gives us lower unemployment because shut up that's why.  So much moar direct and sensible.

*IOW according to Matt, at teh margins people are moar concerned with teh Feds target inflation rate than they are with actual inflation. Because if all he wanted was moar inflation to stimulate marginal entities to spend - then he'd be advocating for a jobs program, which he says causes inflation.

Three Things I Learned From Paul Ryan

Well, like everyone else who has commented on Teh Ryan Budget, I am going to start off with Teh Blockquote.

Well, first of all, I think we need to have a fact-based conversation about our budget. We need to get rid of all these accounting tricks, all these budget gimmicks and we`ve got to attack the drivers of our debt.

This from someone who presented his budget not with a CBO score, but with something from teh Heritage Foundation. If you remember Ryan's shadow budget (also titled Teh Path to Prosperity) from last year, he is already pretty well-practiced in giving CBO some ludicrous conditions for analysis but this time around - he didn't present the results of rigging teh game - he just pulled numbers outta his ass. So I guess he did get rid of gimmicks and accounting tricks, by simply ignoring accounting altogether and inventing numbers with no basis in reality whatsoever.

Is that a harsh description of Heritage's analysis? Well, general consensus is that teh Heritage analysis is full of shit - from "unicorn sighting" optimism to unemployment numbers that violate decades of central bank practice. You know, when even teh guys who did the analysis thinks something might be off, you know something might well be off.

Basically, the Ryan Budget isn't really a budget document, but rather a work of Objectivist slash fan-fiction. And while there is no useful information about economics or reality to be gleaned from it, it serves as a window into the Randian Super-Mind. The reaction from Heritage regarding 2.8% unemployment is quite interesting and brings us to our first insight.

"We adjusted the full employment unemployment variable," Beach told Weigel. "Nothing else changes as a result of that, but the employment number changes."

How much adjustment? 1.5% or roughly two and a quarter million jobs. Effect on tax revenues? 0. Effect on GDP and economic growth? 0. i.e. the "number of people working" in the Heritage model is incidental. It doesn't influence anything, it's just spit out afterwards - like an after-thought. IOW, in Objectivist Supply-Side magic unicorn land, EMPLOYMENT DOES NOT MATTER. They have literally said that whether or not there are two and a quarter million people at work or collecting unemployment, there is no effect on the economy. So when the Heritage Foundation makes unfounded claims about job losses, bear in mind that they don't give a shit. According to the Heritage Foundation, jobs have no effect on the economy.

Lesson 2 is about vouchers. In the magic world of conservatardism, Vouchers mean Freedom. In this case it's the Freedom to Die From Easily Treatable Medical Conditions, but that is a type of Freedom that you'll have to pry from the cold dead hands of Tea Party People - and by then it will be TOO LATE. Teh Ryan Medicare Plan is to replace teh EVIL gubmint Medicare with vouchers. You'll be able to use your vouchers to purchase the private health insurance of Your Own Choosing and not As Dictated By Some Bureaucrat - SOCIALISM! RATIONING! This totally follows standard supply-side reasoning - vouchers are bettar because it puts more power and choice in the hands of the consumer, plus private enterprise gets to do the job instead of brutally inefficient and immorally coercive Big Government.

So what's the Lesson? The vouchers are only for people under 55. Anyone 55 or older stays on the old system.

There are two possible explanations for this:

1. Paul Ryan hates old people and thinks they should be exluded and denied the Freedom to Choose their own health care coverage. Maybe because he thinks they are all senile idiots who would squander the Freedom he is offering. If so, this isn't age-induced senility, because the people who will have to deal with the magic vouchers will be old by the time they have to use them.

2. Medicare vouchers are not as good as the existing system. Government-run socialistic Medicare is better than vouchers for private-run insurance. IOW - health care, at least for seniors, is better managed by some huge central bureacracy. Now intelligent folk may already know that to be true, but this isn't a statement about what is and what is not. This is a statement about what Paul Ryan thinks, or at least what his budget says about the way he thinks.

There's the real framing on these Medicare reforms. Either teh GOP hates seniors, or not only are they cutting Medicare - but they also acknowledge that health care is better run by the government.

Thirdly, and finally for this analysis - it's the claim about whether or not Tax Cuts Pay For Themselves. Here's the Heritage Report. Appendix 3 presents the numbers. Remember that we are now playing in teh world of magic supply-side sparkleponies - the unadjusted 2.8% unemployment, plus 150 billion dollar per year average growth miracle world of Randian Super Awesome. Net difference with magic sparkleponies over ten years? $325 billion dollars. BUT, and I cannot lie - this is a big BUT, personal income tax is up $680 billion. That works out to thousand dollars per man, woman and child in the US. IOW, the tax cut shifts roughly One Trillion Dollars worth of tax burden from corporations to people.

Hertitage has people taking home an additional $935 billion dollars over ten years. Wait - that's before taxes. After-tax it's plus $255 billion. Still, that's net plus, so obviously the tax cuts are paying for themselves. Well, kinda. That's plus 255 on a base of 97,000 (averaged over 10 years) or a quarter of a percent. A quarter of a percent over ten years. IOW, no difference at all. BUT, corporate after-tax profits go up by $400 billion on $1,300 billion or a whopping 30.7%. Over one hundred times the benefit that households see. Even the most blood-thirsty and sadistic of pirates would have moral qualms about this level of looting.

So the answer is actually no. Even in the Heritage Foundation magical supply-side universe where a Galtian Perpetual Money Machine constantly pumps dollars into the economy without end, Tax Cuts Do Not Pay For Themselves. They Pay Their Corporate Overlords.

Note: CBO has scored the Ryan Budget (in this pdf), and it ain't pretty. Even after slashing trillions of dollars of spending, the ten-year effect on the deficit is marginal. And any gains after that are heavily influenced by the cancelling of Medicare. In this case it's not teh Tax Cuts, but rather the total gutting of Medicaid and CHIP that produce Big Fat Corporate Profits.