Friday, June 24, 2011

Just Let the Tax Cuts Expire

According to the CBO that's about all it would take to fix our deficit problem. If only Congress would just do nothing. Details here.

Instead on the right they want to follow the policy of Latin America, Haiti, and Africa. Slashing government expenditures and regulation will attract business and lead us to recovery. Here Congresswoman Renee Elmers pushes these policies in questions to Tim Geithner.

33 comments:

Chad said...

Of course, the Left's solution is steal more from the providers - so sad.

Jon if you and your group promise to stop stealing money from the providers forever more we would listen, but the fact is the Left is a black hole and would suck at the nipple until the nipple fell off so no.

In fact, I am absolutely proud to announce that my family made sure to pay the absolute minimum amount in taxes last year -'instead of having $35,000 stolen from my wife and I for our hard work, blood, sweat and tears of labor we paid half that amount and I only wish it would have been less than what we did pay! We earned that money, we put the effort forward to keep that money and if we choose to give to a charity or buy a boat that is our right.

Jon - let me ask you a fair question, when you buy a $100 of food do you make sure that 30%, 40% or 50% of that food goes to the poor before you and your family eats? When you get your paycheck is your conviction so strong that you make sure you that you only take what is needed to survive and voluntarily give the rest to the gov't? I may be a money hungry jerk who actually believes in keeping the max of what you earn ,but at least I am not a hypocrite. Live your words and then they will hold weight - otherwise your just another Progressive that believes in the cause, but is not willing to bleed for it.

Ooooh and by the way Jon, we used a good portion of the saved money and put it toward OUR CHARITY - directly affecting a cause we believe in. When you write a 5 digit check to a cause you believe in then we'll talk otherwise stop trying to steal from the producers.

HispanicPundit said...

In either case the middle class loses. Remember, the CBO didn't say just the part of the Bush tax cuts that go to the rich: it said the FULL bush tax cuts. And a large portion of those, go to the middle class.

So the middle class has a choice: less taxes, or more government programs. I choose less taxes(ie, cut spending). Others may vary. But it's not like one is middle class wins, other is it loses. It's basically asking: which is worse.

Jon said...

I don't understand this point you keep making, Chad. Are you saying you take your tax deductions? So do I. Do you think I would suggest you shouldn't do that? I don't.

You are obviously doing very well financially. A 5 digit check to charity is not in the cards for me. That doesn't mean though that the policies you suggest are really going to help future generations.

There's a difference between feel good policies and do good policies. Suppose I gave more to charity. Would that solve our deficit problem? It's a real problem. It's unsustainable. People on the right, like yourself, seem to think it's the most important thing in the world. Well, there's an easy fix. Let the Bush Tax Cuts expire. That's true whether or not I'm a miser.

Well, you don't want to pay. You think I'm a hypocrite. But if I am so are you. You know why you are successful? A lot of it is due to your own hard work. But a lot of it is due to the fact that the government "stole" from the "producers" and invested. It protected infant industries so they could be successful, and you could swim in that economic world. It industrialized by assessing high tariffs, collecting taxes from "producers" and using that money to develop key industrial technologies. It shielded industries from competition so they could be the best, and you could grow up in such a prosperous society. One that afforded you a pretty good education, awesome health care, and generally a good life.

You and I prosper (maybe you more than me) because our government took from the producers and created conditions that allow us to live well. The difference between you and me is I'm willing to continue to give so that future generations can have the sort of life I have. A life that wouldn't be what it was without the sacrifices of those willing to give up a portion of their hard earned income so I could have a better life.

My question to you is, why don't you acknowledge the gifts that have been given to you via taxation and government expense? And given that you reap those rewards why are you unwilling to offer the same to future generations? Giving to your favorite charity is fine. But if history is a guide, government involvement is quite important for alleviating poverty and for economic development. To swamp our ship of state merely because you want to keep more is to create a very miserable world. A world like what exists in Latin America, Africa, Haiti, and the rest of the third world. Maybe you'd be one of the few super wealthy. OK. For me I'd rather see a world where everyone is better off though, not just me and my family.

Jon said...

HP, the top 1% were the group that saw their tax rates reduce the most. See here. The NY Times summarizes the CBO report as follows: "Put another way: rich families were the undisputed winners from President Bush’s tax cuts, but people in the bottom half of the earnings scale were not paying much in taxes anyway."

Still, the middle would pay a little more if the tax cuts expired. I'd be happy if nobody had to pay any taxes at all. But then, would that solve the deficit problem? These millionaires say yea, taxing them more isn't what they want. But they say do it anyway. It makes for a better society.

HispanicPundit said...

Sure, the upper 1% saw more in terms of raw absolute numbers, but not in terms of percentages.

But that's not really my point: there is not that many people at the 1% level (which is why they are 1%!). So even if you were to take all of the Bush tax cuts from them, it wouldn't mean all that much to the deficit. The real money is in the middle class. While they may each individually get less in absolute numbers, they are far far more numerous. SO on the whole, that's where the real deficit reduction would come from.

But then were back to the European vs USA debate, but smaller version: would you rather get taxed more and get more benefits, or taxed less and get less benefits? I prefer the latter. But dont act like the former is any way truly better off. It's an empirical question, at least.

HispanicPundit said...

Oh and, regarding your reply to Chad, I know you believe in industrial policy and its benefits, and it's 'success' is a "no brainer" to you (and it really has to be, else your paradigm crumbles) but don't act like its a settled topic.

It's still highly debatable to those who study this stuff (economics) and if anything, they still tend to be against it.

Which means Chad - if he were to only concentrate on objective science - could sleep perfectly well at night completely rejecting your heterodox view of the world. ;-)

Jon said...

HP, did you fail to read the link I provided again? Tsk, Tsk. Let me quote from the NY Times article:

Tax cuts were much deeper, and affected far more money, for families in the highest income categories. Households in the top 1 percent of earnings, which had an average income of $1.25 million, saw their effective individual tax rates drop to 19.6 percent in 2004 from 24.2 percent in 2000. The rate cut was twice as deep as for middle-income families, and it translated to an average tax cut of almost $58,000.

This is not talking about raw numbers. It's talking about rates. The biggest rate reductions went to the top 1%.

But as far as your main point, I agree. The middle pays more. Not something I like. Like I said ideally nobody has to pay anything. But we need to talk about solutions to the problem. Higher taxes, like what we saw in the Clinton years, are not something I want to be subjected to. I get a child credit through the Bush tax cuts and that's nice. But our deficits are quite large. And those tax rates, while higher, aren't ridiculously high.

Is it really debatable that American investment in R&D (via taxation) has been key to our prosperity? Is it really debatable that the US experienced huge economic growth in the high tariff years while British imposed free trade throughout the rest of the world and their subjects languished? Is it really debatable that taxes fund higher education, and that funding made it easier for lots of people, including me, to get an education without graduating with a mountain of crushing student loan debt, and a college degree is really important for increasing your earnings?

These were all the means which made me prosperous. I acknowledge that. I am grateful to my American ancestors. While giving myself some credit for my success I don't pretend I did it all by myself. Not only does Chad not acknowledge that his present success is dependent on those ancestors, he refuses to bequeath the same benefits to future generations. Not going to take his money. He earned it. He's a producer.

He earned it with a lot of help. I admit that. Do you? I know you are in a technical field, like me. Where would you be without all that government intervention? Are you going to, like Chad, pretend that it's all you? Chad pretends he's an island. He's not. He's where he is because of community.

Andy said...

Against my better judgement I will leave a post. By saying "according to the CBO" does not hold much weight. By law they are required to calculate the numbers given to them including expected growth rates. A 1% change up or down would make a huge difference. They also calculate based on static numbers. They assume nobody will change their behavior with a different tax code. That has never been true. People will always change their behavior to keep more of their own money.

Proof is that the lower capital gains tax increased activity and more revenue was brought in.

Spending at almost 25% GDP can always outpace tax revenue. It does not matter what the tax rate is.

The second point is that even though it is counter-intuitive, just giving people money (transfer payments) does not make people better off. This is a philosophical perspective, but unless money is earned it is not respected and sometimes does more harm than good. Lottery winners are a good example.

Talk to people who are on unemployment (I was for five months in 2005). I did not feel good about it and was not allowed to take a minimum wage job for fear of losing $375/wk.

Chad said...

The problem with your argument Jon is that I am preparing my family and community far better than you are by my actions. Both directly and indirectly my beliefs mold young men and women to compete and to be winners. My success then creates opportunities for those similar minded individuals who plan to earn and produce - we don't make excuse and we don't have room for parasites, but we are the first people on scene to pick up and help a fellow producer that falls on hard times. We give hand ups and not hand outs - the community I live in is thriving, growing and building because we are producers and we have a far better understanding of community than you ever will. When you come to the table where we are sharing a meal, each person has brought a dish to pass and believe it or not we invite some of need as well to give them a glimpse at what they can earn and achieve.

You have a bubble of truths that really are lies you live in, but here is the difference between you and I - when a friend and neighbor fell on hard times his mortgage was paid, his electricity was on and food was on his table courtesy of me and other producers - when they got back on their feet our hand up was repaid in full - that is community, not your false idea of being a their on behalf of a fake good.

Jon said...

You blew it Andy. Now you'll end up having to deal with me.

True enough the CBO estimates are just that. Estimates. But it's regarded as among the best we have and you have to make judgments based on the best evidence you have.

Why do you think the reductions in capital gains taxes generated more revenue? Could be, I'm just curious for a source. Here's a source that lists tax receipts by year. Note that Bush passed his first tax cut measure in June 2001. Tax receipts immediately fell off through 2004 and started climbing again in 2005. Note that receipts in the Clinton years increased every year.

We could talk about the welfare state and changes needed, but that's not really my point here.

Jon said...

Chad, I think the difference between you and me is that my claims are informed with evidence. Your claims are just that. Claims.

When I read what you say I always get the assertion. "My methods produce better outcomes." Instinctively I'm immediately looking for the follow up. This claimn is based on what evidence? Well, the evidence doesn't come.

This "no room for parasites" methodology is a lot better you say. Makes a better world. How do we know this? These beliefs mold men and women to compete and be winners. OK. How do we know this works? Sure, it may make sense to you. But sometimes things that make sense or sound plausible turn out to be wrong. So the key in my world is to put forward some sort of a test. Where is your test?

My evidence may not support my conclusion. I've been wrong before. I say we can look to history and see the parasites and see those that have done it on their own for the last 30 years. The parasites are you, me, Americans, Japanese, South Koreans, the British, the Germans. The independent ones are in Latin America, Haiti, and Africa. Not reliant on the government. Maybe I'm misinterpreting the data. That's possible. But claims based on evidence can at least be evaluated.

I can sit here and espouse a lot of left wing talking points. Bush caused the recession with tax cuts. Gun control reduces crime. Only the rich benefited from the Bush and Reagan tax cuts. What do you think of those claims? You dismiss them immediately. Why? They come without evidence. If this is what you do when controversial left wing talking points are offered, how do you expect me to react to your talking points?

I live in a bubble of lies. I would be very interested to see some evidence. It's the kind of charge that is really irresponsible if offered without evidence. But I get none.

Here's what I think. And this is just speculation. I stand by my earlier point that I think you just have little exposure to the other side. Being a smart person you are reacting to it like an allergic reaction. That's why there's all this personal stuff. You give more to charity than I do. You feed people, help them with their mortgage payments, write 5 digit checks. But does this have to be personal? We are talking about ideas. We are talking about what is best for the world. Let me commend you for your charity. It's more than I do. Of course I can't exactly do it at that level. I do give. Maybe not enough. But why are you making it personal? I think it's because you don't know how else to react. Ann Coulter and Rush Limbaugh don't address left wing points in a fair way, so you are hearing them for the first time and don't know what to say. What you need to learn to do is react by addressing my claims as they stand. Instead of just saying "My method molds people into thinking in a winning way and this produces better outcomes" tell me why you think your method is effective.

We both want a healthier, happier, more just society. My belief is that if you don't consider evidence for why your methods are more effective you will probably be lead astray. You will offer poor methods.

HispanicPundit said...

Jon,

I tried to comment last night...wrote a nice long one, then your stupid blogspot had a hickup. Lost it ALL! Grrr...when are you switching to wordpress? Think about your commentors here man!

So the short version: first, lets make it clear what we are disagreeing on. We are NOT disagreeing that "helping the next generation" is good. We are disagreeing about HOW best to do that. Should we do it via government transfer, or via private charity? That is the fundamental disagreement. Read Chad's response again, he didn't argue to selfishly hold onto the money - he specifically said he donated a GOOD CHUNK to charity.

This is really (one of) the fundamental differences between the left and the right. The left will portray the right as selfish bastards who don't want to give anything. This is lazy thinking though. It helps them mentally, so they don't have to deal with the real arguments - but doesn't match reality. If you read the right carefully, they in fact DO argue for giving - just through private charities, as opposed to government. The right views charity as private entity and believes - strongly, I would argue - that that is where real efficient change comes from. The left views charity via government and believes - strongly, I would argue - that that is where real efficient change comes from.

This helps explain why, for example, conservatives tend to be significantly more charitable than liberals (see here). It's not that liberals don't believe in giving, it's that they believe they have given via their taxes - so why give more?

So when addressing our disagreement, it's that subtle disagreement that needs to be addressed.

Second, we both agree that the middle class should get more. The question is in what FORM should that "more" come from. You believe the middle-class should get more government benefits. I believe the middle-class should get to keep more of their money. In other words, it's the form of the more that matters to our disagreement, not the MORE itself.

So again, when addressing our disagreement, it's that subtle disagreement that needs to be addressed.

So if you believe, through reading linguists, journalists, movie directors, or the bible, the Koran, or whatever subjective reading material you happen to believe in, that the government spends its money wisely, and is for the benefit of the next generation vis-a-vis private charity, then by all means - send more money to the government. It's an option. Have at it. But I don't believe it (and alot of my views are based on objective sources - economists), so I don't.

Reading your response to a poster, you wrote this: "True enough the CBO estimates are just that. Estimates. But it's regarded as among the best we have and you have to make judgments based on the best evidence you have."

For the record, I happen to believe you here. But I am curious, why do YOU base your trust on the CBO? In other words, if Andy comes back with the writings of a great historian, linguist, journalist, or movie director, and those writings contradict the CBO, why shouldn't he believe them over what the CBO says?

Jon said...

Switch to Wordpress? What about my millions of fans? And the history?

Anyway, we are in agreement on your first point. Chad commendably gives to charity. We all want what's best for the world.

But there is an element of selfishness. I am a producer. Those Mexicans are parasites. Nonsense. Chad is a parasite and a half and so am I. He is not better than those Mexicans. He is not smarter than those Mexicans. He has been given gifts that those Mexicans have not been given, so he stands there and thinks that means he's entitled.

Again with the linguist talk. I know it's kind of in fun, but let me say this. This particular linguist is widely regarded as the most important public intellectual alive. He happens to be the most frequently cited living human. This is a guy that has literally changed the field in linguistics and computer science. When the world's most important public intellectual talks maybe you should listen. You like credentials, right? I'll stack up his credentials against anyone from your side.

Not that I don't have economists on my side.

And if the world's leading public intellectual tells me to question the CBO report and offers reasons I'd consider them.

Speaking of economists, that's another I wanted to ask you. Do you know of a good book that might be a good response to the Chang book I recommended to you? I'm looking at this Jagdish Bhagwati book "In Defense of Globalization". Reading the reviews though I'm afraid I might agree with him a lot. Globalization is great for China he says. I agree. He says it needs to be managed, not laissez-faire. That's me. Tax the skilled workers. Sounds good. I thought I'd seen he was like the king an arch neo-liberal type, but maybe not.

Paul said...

Can someone explain how one can equivocate, logically, that in a representative form of government that increasing tax rates equates to stealing from producers? Does this also imply that the money stolen is given to non-producers?

HispanicPundit said...

Jon,

You write, "This particular linguist is widely regarded as the most important public intellectual alive....He happens to be the most frequently cited living human. You like credentials, right? I'll stack up his credentials against anyone from your side."

Actually, were talking about two different things here. I don't blindly like credentials - I like credentials that objectively say something. If were talking about the evolution of language, or the innate ability to speak, or the nuances of the romance languages, then yes, I have to deal with Chomsky. He is a giant in that field. But really, his credentials mean absolutely nothing outside of that field. I love Milton Friedman, I think he was one of the smartest economists around, but I think what he would write regarding linguistics would be very low level, probably make fundamental mistakes in concepts and understanding.

In other words, I only look at experts and credentials in relation to their fields. When Chomsky delves into economics, he is bound to make fundamental mistakes. Economics is not easy. It takes a certain framework and understanding to even understand it well. People even have an intuition that goes against economics and what brings prosperity (see here). It takes economic training to hone in those instincts. Chomsky hasn't done that.

So yes, people quote him. But who are those people? Movie stars, media personalities and pundits - it's certainly not economists. They generally completely dismiss him.

Regarding book recommendations? Do you mean of the extreme right-wing type? I can't think of any(but I'm mainstream economics on free-trade, not absolutist). I think Jagdish Bhagwati is a good source. Here is economist Tyler Cowen (center-right) answering that question, along with many suggestions from his readers.

Also, here are two rebuttals (Cowen then the link to DeLong) to the China and Industrial Policy claim you continue to make. Notice that DeLong (center-left) rebuts the argument in favor of industrial policy with an argument you have as of yet refused to answer, specifically his Argentina argument at the end.

Oh yeah, and you skipped over my very important question:"But I am curious, why do YOU base your trust on the CBO? In other words, if Andy comes back with the writings of a great historian, linguist, journalist, or movie director, and those writings contradict the CBO, why shouldn't he believe them over what the CBO says?"

I really want to know.

Chad said...

Hold on a second my friend, when I am speaking of a parasite it is never and will never be toward a race of people. I have family members who are parasites so I would appreciate it greatly if when you toss a zinger at me make sure your not crossing that line.

What gifts was I given at birth again that somehow gave me a leg up exactly? Are you attempting to argue that my race gave me a leg up or that I was born in America - is that what I should apologize for? What exactly is your argument there - I am unsure of what your trying to relay because my live was not one of privilege and I received no special treatments during my up bringing. Are you saying that I should fall on my knees and thank my lucky stars that I got to go to Ida High School? Is that why I am a parasite in your eyes? How about EARNING a scholarship to go to college via sports - should I feel privileged because I worked harder to earn that? What about taking a job with a company for ZERO salary to prove that I was better than what they had - should I feel privileged for that? You obsession with what the government did to provide me with certain things is hog wash - every citizen in this country had the same chances as I did - I just happen to work harder for what I have today so your attempt at making me feel as if somehow I am reliant on government is wrong - they made the rules and I played them and when they change the rules we will play those too, but I am not a parasite.

Look HP is right on the money here, I care about the next generation a lot, but we have a real different view on how to secure that future. You think you can save the world, I think that is absolutely impossible so I choose to try and help the tiny space I take up in this community. I am smarter than the government of the US when it comes to money - especially my money and when I donate my time and or my money to a charity or cause that affects people I see everyday. The all knowing government can not and will never be able to help a single person, but I can. The government is the most inefficient and wasteful business in the world and I do nt want to give them a single dime extra for their ideological causes. It is similar to one of my previous posts - why do you take the maximum deductions if you feel so strongly in your cause? Why are you not volunteering to give more if you believe that the gov't is good stewards of your money? That is where Progressives lose me every time - when I ask them how much they give extra to the gov't none of them say they do then I say what causes/donations/volunteer work do you do - none. Okay then when you go to the grocery store and see a single mom buying milk on food stamps did you offer to pay - nope. Okay then did you seek out and cloth anyone on the street - nope. Well I am a son of a bitch Capitlist evil Right'y, but I have done all of those things many times so what does that say? If I can keep more of my money I could help more people, but it is taken because they know better than I, but that is false. That is the point here - we are not saying you can't take my money because we are pigs - we are saying you can and shouldn't take more because gov't sucks with money and the reposibilities of taking care of people fall back on the community we live in.

Paul said...

HP -

The following question is off topic -

What are your thoughts on the Chamber of Commerce?

Paul said...

HP - one other question

You asked Jon the following
"But I am curious, why do YOU base your trust on the CBO? In other words, if Andy comes back with the writings of a great historian, linguist, journalist, or movie director, and those writings contradict the CBO, why shouldn't he believe them over what the CBO says?"

Do you trust the CBO, if so why? If not, why not and who do you trust?

Jon said...

When the world's premier public intellectual offers thoroughly researched thoughts on topics for which he does not hold a formal degree, to me it's worth listening. Now when you just say we're dealing with a linguist normally that implies someone that is completely out of his league when it comes to the field of economics. Normally that's true. But this is not a normal situation. This is not a normal linguist. This particular linguist is expert in a variety of fields outside linguistics, including foreign policy. He shames such people as Richard Perle and WF Buckley with regards to his breadth of knowledge and expertise. He's published books on economics. What you're trying to imply is that I'm doing the equivalent of getting engineering advice from an interior decorator. Not the case.

On the other hand getting economics advice from an English Lit major that is not the world's premier public intellectual, that would be a different story. :)

There's a difference between "refusing" to answer a question and just moving on from a blog entry. Sometimes I just don't see the point and don't feel like making the effort required to try and figure it out. In the case of DeLong's few sentences about Argentina, he's referring to some sort of government intervention in Argentina that didn't work out that must have been related to protecting certain industries. That's very little information so I don't know how to comment on it. Except to say that it is not my position that every government intervention in the economy is a good idea.

What's interesting about DeLong though is how he admits Deng Xiaoping's leadership was shrewd and important for China's economic development. Sure, he emphasizes that his policies were related more politics than economics. But political stability is key for economic development. It's not really an either or. The mass unemployment that would have resulted, and subsequent unrest, would have undermined China's growth according to DeLong. Shrewd governmental management of globalization is required for success. Just a blanket opening of borders to free trade would cause havoc. That's pretty much my view as well, and it is not neoliberalism.

But I did already answer your question on the CBO. I said "And if the world's leading public intellectual tells me to question the CBO report and offers reasons I'd consider them."

Thanks for the links. Are you aware of something that's more thorough, like a book? One of Chang's major poitns is this. Free trade is harmful to a country if that country wants to develop new industries and it presently doesn't have the ability. Those countries that moved from poverty to prosperity did it with government management of trade and government investment in growth industries. The one book at your link doesn't seem to address this sort of thing but is more a history of trade.

Jon said...

Sorry Chad, I don't mean to suggest you are racist. It's just that you complain about illegal immigrants a lot and I take you to be saying they are parasites. Well we all know who the illegal immigrants are.

I've never said you should apologize for the gifts you have been given. What I have said is that you should acknowledge those gifts and be grateful for them. Being born in America is an advantage. The reason is because all Americans have been given great gifts by prior American generations. Among these gifts are tax dollars which funded R&D which lead to the creation of computers and the internet, both key items in our lives today.

Yeah, you should fall on your knees and thank God that you went to Ida. I was just speaking with an Indian friend yesterday. This is what his schooling amounted to, through high school. His teachers took a crappy textbook, say a geology book, and they'd say that everyone in class would read a paragraph. They'd go around the room and each take a turn reading. No discussion. No nothing. That was it. He finished high school and looks back considering it all a boring waste of his time, and it makes him angry.

How about your sports scholarship. Should you feel lucky? You better believe it. You know, schools don't just appear like magic. They have to be paid for. Same with sports programs. You do know where that money came from, right? Taxes. You mentioned that your Dad was overpaid because of the union. You can say he's overpaid if you like, but what you are conceding is that your Dad made enough money thanks to the union that he didn't have to send you into the fields after school to pick beans to keep food on the table. Well, that's not a gift my father-in-law enjoyed. He's Mexican and there was no union to protect his father. So when he got home from school he wasn't going to work on his passing routes. He was picking tomatoes. The fact that he was even allowed to go to football practice was a stretch.

So yeah, you should feel lucky. But this is not to say you should apologize. This is also not to say that you don't deserve praise. I know you worked very hard on and off the field. Same with your job at zero pay. You are deserving of credit for that.

But the conditions that prevailed that allowed you to take advantage of these opportunities were made possible by gifts from others. Did you pay rent? Did you pay for your food? Or was the free market involved? Because in a free market world you don't have time for football practice or baseball practice. Where's your scholarship under those conditions?

How can you say every citizen had the same chances you did? My father-in-law did not nor do many other poverty stricken children. It's a bit bizarre to me that you are so insular and unable to see how the contributions of others made your achievments possible.

Why don't I just give more in taxes? Because there is a difference between feel good action and do good action. I'm looking for real solutions to problems. Like the deficit. If I send more does this change anything? No.

I feel the same way about boycotts. A single individual boycotts a product and the corporation won't notice. What does this accomplish?

Chad, do you not recognize that people that make less money than you are not able to buy groceries for others to the extent you do? Do you really expect a family living at the median income to make the same gifts to charity that you do? Don't you think expectations are a bit different based on earnings? The Koch brothers gave away millions of dollars to the Hall of Human Origins at the Smithsonian could be built. Since I didn't do the same I guess I should not have a say in governmental policy. Is that how you see the world?

HispanicPundit said...

Jon,

Okay, Chomsky is a linguist who decides to opine heavily on economic and foreign policy issues. I get your point. But how does that give him any validity on those topics? Has he published any papers in peer reviewed articles? Has he written any books where the economic community takes him seriously? I don't think so. Which is again, why even liberal economists pretty much just blow him off. He is still an untrained economists delving into economics. There are alot of those out there. It's really no different, IMHO, than an interior designer talking about electrical engineering - now they may still turn out to be right, but my money is always on the experts (I am an admitted elitist).

Regarding Argentina and industrial policy, you write: "Sometimes I just don't see the point and don't feel like making the effort required to try and figure it out.... it is not my position that every government intervention in the economy is a good idea."

Let's clarify some things here. I don't think economists have argued - and I know I certainly haven't argued - that every government intervention in the economy is a bad idea, either. What is the difference between us (and by all means, correct me if I am wrong here), is that you think industrial policy is more likely to work in a developed country than not, and more importantly, that it would result in a better standard of living than an alternate path of not implementing industrial policy.

Yes?

The standard economics position AFAIK is two critiques to this view. First, there are two types of developing countries. The first type is the one with a somewhat dedicated to development (as opposed to dictatorship and gross corruption) and functioning government. This is the kind of government the United States developed under. So did most of the Asian countries. This is the situation with China now. The argument against industrial policy here is that with this type of government, you wouldn't need industrial policy anyway(and, in alot of ways, Hong Kong proves that!). The country would likely develop without it just fine because of the functioning government. And eliminating industrial policy comes with the added benefit that the country will be able to specialize in whatever it does best - at true competition levels, thereby removing an element of waste.

The second type is the one with a lousy and corrupt government. Think about many countries in Africa. Where the leaders primarily care about enriching themselves and maintaining power. In these situations, industrial policy would likely just favor sectors with special political connections. Companies that give the most political support, for example. So then industrial policy just works as another form of corruption. It would likely lead to a stronger corrupt government and a further impediment to growth.

But we all agree that if it's done right it CAN lead to improvements. The question is when is it likely to be done right (probably not in second scenario above) and even when done right (first scenario), would it be better than the alternative? It's THESE questions economists try to tackle.

Lastly, the argument against industrial policy is its predictive power: in situation one or two above, what would likely happen if you implemented industrial policy vs if you didn't. For example,i f you implement it 10 times and it fails 6 and is successful 4, then the predictive consensus would be that it's not advisable.

So when you make the argument that industrial policy is advisable, you can't just look at its successes. You HAVE TO look at its failures (this is another one of Chomsky's flaws). It's the full picture and it's predictive power that matters here. As far as policy recommendation goes.

HispanicPundit said...

So you can't just dismiss Brad DeLong's point (and the mere fact that you know so little bit about it, speaks volumes to how seriously you - or Chomsky, for that matter - have truly investigated this issue fairly) about everybody and their mom thinking industrial policy would help Argentina, when in fact it harmed them. This is VITAL to your overall opinion on industrial policy (unless of course, you really don't care about the topic of industrial policy - but then why write about it soo much?).

Now we get to a fundamental difference between us. You write, But I did already answer your question on the CBO. I said "And if the world's leading public intellectual tells me to question the CBO report and offers reasons I'd consider them."

Well this depends. I'm certainly not arguing that the CBO is gold. For one, it has limitations. Is the 10 years window sufficient? What about another variable that the CBO didn't address? What about the issue from a moral perspective? What about a secondary issue that they didn't focus on? Etc. But within its charter, I do think its near gold. And I would put it above most economists - and certainly all linguists, smart or otherwise.

But let's go deeper than this: do you think that two laymen, untrained in a science, can accurately come to conclusions that are near universally opposed to by the scientific consensus? I say no. You (probably?) say yes.

This is where me and you fundamentally differ. For example, I don't know very much about evolution. So if a creationist were to engage with me on that topic, he may very well make strong arguments. Arguments that I may not be able to answer. But, IMHO, I don't think I would really need to address his points. As long as I know for certain that evolution and not creationism is the standard scientific consensus within the Biologist and scientific communities, I can say with a pretty high accuracy that that creationist is wrong. I know this with HIGH certainty. I can simply dismiss the creationist and his points. I shouldn't waste my time studying the issues. Why? Because neither I, nor the creationist has enough training in the topic to truly make an informed conclusion. Debates like that are for the experts at the very top level - NOT between two laymen.

I follow this view religiously. You will never see me speaking against evolution, for example. Whether or not you can make better creationist arguments than I can make evolutionary arguments, I am going to believe you are wrong. You will never see me speaking against global warming, for example. Whether or not you can make better anti-global warming arguments than I can make pro-global warming arguments, I am going to believe you are wrong (and I know many conservatives who do indeed make strong arguments on why they deny global warming - no matter, I dismiss them all. Environmental scientists are against them, and therefore in all likelihood - and certainly far better likelihood then I could come to on my own - is that the consensus scientists are right.) Same with math, physics, and other areas.

And I apply this same consensus view to economics. So when I hear economics say that it's near universal that healthcare coverage comes out of wages, or that large raises in the minimum wage cannot be overcome by productivity gains, I listen. Now, I may entertain opposing viewpoints, but I do so more for courtesy, not for anything of substance.In the end, my money is always on the experts.

Jon said...

Let me address your later point first regarding experts. In this discussion it's not so much that I'm preferring linguists to economic experts. The issue is I don't claim to have a handle on the opinion of experts. Of course I'm reading economists too, not just linguists. And I'm regularly reading critics of those economists. So I'm soaking up as much as I can. But it's not a criticism of you when I say that I do not accept your assertion that such and such a view is consensus.

I also don't think you understand my views well enough to recognize that I'm not even disagreeing with what you call the consensus. Take this claim that health care comes out of wages. I didn't say otherwise. I said that if Wal-Mart increased health care expenditures they wouldn't have to necessarily cut wages. That's a fact. They could increase the price of goods for instance. You took this in a very odd direction, calling me a bunch of names because for bookkeeping purposes you say health care is classified by economists as wages and only idiots don't know that. Just a strange reaction that doesn't address my point. You ultimately agreed with me. Sure, wages don't drop if health care goes up. In fact that's unlikely. What matters is the rate of increase in wages slows. OK, so you agree with me that increasing health care expenses doesn't necessarily require a reduction in wages. If you agree with me why are you calling me an ignorant student unaware of what economists think?

Or this "large increase in the minimum wage" thing. Do you seriously think I have a major beef with what you call the consensus view on this? Krugman doesn't define "large" there. Presumably he means large relative to the overall cost of doing business. When did I say anything different? I honestly think you read what I write not in an effort to understand, but with an eye towards putting in my mouth positions that you can label as ignorant.

So for instance you talk abou thow I "dismiss" Brad DeLong and this speaks volumes about me and Chomsky. Where did I dismiss Brad DeLong? I agree with Brad DeLong. And what does Chomsky have to do with it? You don't know what he thinks about this.

Jon said...

Brad DeLong says that if Deng Xiaoping had permitted free trade he would have really had problems. He would have had large scale unemployment and unrest. That's my view. I talked about how Xiaoping was shrewd in managing development according to DeLong and I think he's right.

Why does this become "You dismiss DeLong and this speaks volumes about you. Also Chomsky." So much of our discussion is about me trying to get you to treat what I say in a charitable and fair way.

Now, let me go back to your earlier point about what you call the standard economics position critique of my view (though my view is not characterized entirely accurately by you). Countries that develop do so because they are dedicated to development and not corrupt. Hence China developed as did some of the Asians, the US, etc. Could be the standard view but according to Chang it's totally wrong on the facts. South Korea, the US, and I believe he talks about Taiwan were TOTALLY corrupt. And had huge economic growth. He talks about Indonesia and Suharto. Totally corrupt. Stole billions of dollars. But the economic performance wasn't bad. Not necessarily amazing like South Korea, but decent. You have to look at it case by case. Some types of corruption, while nefarious, are actually not bad for an economy. What if a bribe gets you around pointless regulations? So this critique is wrong on the facts according to Chang.

Of course I do look to what has been successful and what has failed. This you claim is another of Chomsky's flaws as if you are aware of how he argues. His method is all about assessing what has worked and what hasn't.

But if you are just going to say that any time the state acts in an economy then a failure is a strike against my view then once again I'd ask you to treat my view fairly instead of concocting caricatures. It's just not my position that every industrial policy action is for the best.

But it is your position that free trade is for the best, right? Blocking imports is harmful. Imposing high tariffs is bad, right?

HispanicPundit said...

Paul,

Just saw your questions now. Regarding the first, I think the Chamber of Commerce is largely a worthless organization. Economy would do just fine without it (except for its lobbying efforts - they can serve as a counterweight so some nefarious organizations).

Regarding the CBO question, I answered that in my response to Jon.

Now, back to my loong response to Jon....

HispanicPundit said...

Jon,

You write, I said that if Wal-Mart increased health care expenditures they wouldn't have to necessarily cut wages. That's a fact.

Maybe our difference was a semantics one. I am open to that. But I invite anybody to read our exchange and decide for themselves if what you said implied exactly that - especially given the context of our discussion.

Regarding the minimum wage increase coming out of increased productivity, again, I invite readers to read our exchange. Start with the link above and read how Jon argues that increased healthcare coverage, or vacations, or minimum wage increases, could be offset from productivity gains, then read this Paul Krugman post and see how he directly rebuts this (also, notice how I agree with everything Krugman writes in that article - but Jon is forced to disagree with certain parts of it. This tells you that Jon is to the left of even very liberal economists).

I am not saying I am certain that I read you right. I am a product of our public school system and was forced into an ESL program as a kid. So god knows I can make mistakes reading other peoples posts. But I do think you made those arguments, or atleast a reasonable person could read you saying as such. But again - I'm just glad that you now take the economic consensus seriously. I consider that progress.

Regarding Brad DeLong on Industrial policy, you write: So for instance you talk abou thow I "dismiss" Brad DeLong and this speaks volumes about me and Chomsky. Where did I dismiss Brad DeLong? I agree with Brad DeLong. And what does Chomsky have to do with it? You don't know what he thinks about this.

This is what you wrote about Brad DeLong's post in question (just a few comments up):There's a difference between "refusing" to answer a question and just moving on from a blog entry. Sometimes I just don't see the point and don't feel like making the effort required to try and figure it out. In the case of DeLong's few sentences about Argentina, he's referring to some sort of government intervention in Argentina that didn't work out that must have been related to protecting certain industries. That's very little information so I don't know how to comment on it. Except to say that it is not my position that every government intervention in the economy is a good idea.

That to me, is by definition, dismissing what Brad DeLong said. Especially if you add in the fact that when I first presented this response to you, you completely ignored it. Now maybe I am using the wrong term here? But clearly, you didn't find his rebuttal interesting enough to research it. Yet it's a direct rebuttal to an argument you continuously make (both, that China relies on Industrial policy AND that industrial policy as a general rule is desirable) and it's made by a serious economist. Should I have said ignored? Avoided to address? Found it inconvenient to look into? It seems to me like were splitting hairs here (the Chomsky remark is made by extension - you get a lot of your information from Chomsky, and since you know little about this Argentina rebuttal, this tells me that Chomsky writes little about this).

HispanicPundit said...

Here is another impression I have of you: that you are a horrible reader. :-) Seriously man. Even when we first met, and you were still a Christian, remember we made that bet about something we both had read? You had remembered it one way, and I a different way - and I turned out to be right? Same thing over and over again. For example, take what you read from the famous Paul Krugman article on the living wage. Then compare that to the actual article written by Krugman. And the summary I gave afterwards. I invite the readers to compare these posts and see who had the more accurate reading.

So when you summarize DeLong's post, I have an instinctive reaction to go back and read it. You probably missed his main point (and coincidentally, your misreads always tend to bend the conclusions towards what you would like to believe - btw). And sure enough, you did.

This is what you wrote about the DeLong post in an earlier comment (scroll up) : What's interesting about DeLong though is how he admits Deng Xiaoping's leadership was shrewd and important for China's economic development. Sure, he emphasizes that his policies were related more politics than economics. But political stability is key for economic development. It's not really an either or. The mass unemployment that would have resulted, and subsequent unrest, would have undermined China's growth according to DeLong. Shrewd governmental management of globalization is required for success. Just a blanket opening of borders to free trade would cause havoc. That's pretty much my view as well, and it is not neoliberalism (emphasis added).

This is what you wrote above: Brad DeLong says that if Deng Xiaoping had permitted free trade he would have really had problems. He would have had large scale unemployment and unrest. That's my view. I talked about how Xiaoping was shrewd in managing development according to DeLong and I think he's right.

HispanicPundit said...

Now if I am reading you correctly (and please, correct me if I am wrong), you read DeLong to be saying that Xiaoping's industrial policy bent on net helped China economically vis-a-vis a situation without these industrial policy like moves. You read DeLong to be saying that had Xiaoping avoided these political moves, China would have suffered economically - or atleast prospered less than our current situation, where he did make these political moves. Granted, you concede that the rational was political, but argue that even the political results also - in addition to the industrial policy like moves - helped China economically. Is this an accurate portrayal of what you see DeLong to be arguing?

But I am curious Jon - doesn't it strike you as odd that if this is what DeLong is arguing - which would really be an endorsement of industrial policy, atleast China style - that he is doing so in the context of rebutting the pro-industrial policy view? But alas, even this doesn't cause you to re-read the post more carefully - instead you read his post in a favorable light.

Here is my interpretation of what DeLong wrote: DeLong is arguing that Xiaoping's moves were political in nature and helped China's government maintain power at the expense of economic growth. He is arguing that China's resulting increase in unemployment would have destabilized China's politic power via unemployment and resulting anger. And so Xiaoping - being part of China's political power center - had to find a way around that. But he did so (and here is the important point) at the expense of economic growth.

I'm guessing that what confused you is DeLong's argument that completely free-trade would have resulted in large scale unemployment. But DeLong is making the unemployment argument in relation to political instability, not economic growth. Economists don't necessarily see large scale unemployment as economically undesirable. It all depends on the duration and whether it results in better jobs and a higher standard of living. For example, I am sure that the plow caused a lot of unemployment at the time. But few economists would argue that that was a bad thing etc.

To put it more succinctly, DeLong is arguing that had Xiaoping fully let in international trade, China would have grown FASTER - though it would have harmed them politically. He is specifically rebutting the claim that their industrial policy like nature helped them economically. They were political moves - not economic moves. You seem to be arguing - and believe DeLong is in your favor here - that had Xiaoping fully let in international trade, China would have grown SLOWER.

Fundamental misreading of what DeLong is arguing (I invite those reading this to read the DeLong post in question for themselves - it can be found here - then read Jon's characterization of it and mine and see for themselves who made the more accurate characterization).

HispanicPundit said...

Lastly, keep in mind that I am not here quoting right-wing economists. We haven't even gotten to them. Just to show how far Jon veers off the economic consensus, I have so far only used liberal economists. Paul Krugman. Brad DeLong, these are all economists that atleast share Jon's political inclinations in one form or another. So their not some evil people who want to see a right-wing utopia. Yet even they disagree with him on his Chomsky claims. Surprised? Not me - remember, he gets his claims from a linguist, not economists.

You write, "Could be the standard view but according to Chang it's totally wrong on the facts. South Korea, the US, and I believe he talks about Taiwan were TOTALLY corrupt. And had huge economic growth."

I am not arguing that they were saints - I am arguing that they met some fundamental level of economic concern. Or to use Brad DeLong's terminology, "a government that was both competent and (relatively) benevolent--in the sense of wanting to see the economy grow rapidly if that could be accomplished without endangering its hold on power".

Now if Chang argues against even this, I would say he is wrong (btw, notice here that Jon has to reach out to heterodox economists to make his point...which is progress, considering he also quotes Marxists 'economists' ) . :-)

You also write, Of course I do look to what has been successful and what has failed. This you claim is another of Chomsky's flaws as if you are aware of how he argues. His method is all about assessing what has worked and what hasn't.

You say you do, but then you had no idea what DeLong is arguing about in his Argentina response. In fact, you even dismissed - whoops, I mean ignored it. And then defended your decision to ignore it. How is that looking "to what has been successful and what has failed"?

And yes, I believe that free trade creates a net plus for an economy (though not necessarily a pareto improvement) and tarriffs the opposite.

Jon said...

I think you're kind of being ridiculous, HP, on this Krugman thing. Krugman writes things every day that I agree with you and disagree with. What you did is you found an article introduced as "surprising" in that it come from Krugman where you agree with 6 of 6 points that he makes and I agree with 5 of 6 points that he makes, and somehow this makes me some kind of extremist. It's very easy for me to paint you as extremist by the same methodology, but it's all pointless in my view.

I take "dismiss" to be "reject" in this context. When you write thousands of words on a blog page and eventually the discussion ends and a point is not addressed, that's basically a normal ocurrence that doesn't at all imply that I've concluded that DeLong is wrong. I'm just moving on. We have to at some point. I wasn't rejecting DeLong. I was moving on.

You say I'm a horrible reader. I think you're a horrible reader.

http://bigwhiteogre.blogspot.com/2011/06/fiscally-responsible.html

The confusion regarding DeLong I think is yours, not mine. Read what I wrote. Am I saying I agree with DeLong on everything? No. The issue is the fundamental disagreement we share. Your position is that blocking imports is harmful, high tariffs are bad, etc. Notice that I explicitly asked you to clarify this disagreement because it is fundamental to the discussion and on this fundamental point DeLong and I agree. As I read DeLong he's saying sure, he'd rather not have high tariffs and infant industry protection economically. But politically it was required. If he could have permitted purely free trade and still avoided revolution and social unrest than China would have been better off. But is that possible? DeLong seems to be saying no. What would opening markets have lead to? Riots and revolution. Are riots and revolution good for an economy? I'm assuming he'd say no.

Jon said...

Here's where DeLong and I would part company. And honestly I wrote this in my prior post, but then deleted it because I thought I was getting too lengthy and boring. I wish I had kept it because you would see that I'm not saying I agree with DeLong on everything. DeLong would say that if China could have weathered the storm, took the tough medicine that is the free market, and yet managed to prevent riots, they would have struggled with unemployment temporarily but in the end would be in a better position today. And he points to certain regions that earlier adopted more free trade and are today ahead of their counterparts. I disagree. I say protection of infant industries is key to the kind of economic development China has enjoyed (and continues to enjoy).

But instead I decided to emphasize where DeLong and I would stand against you. Preventing riots and revolution is kind of important. Civil war is not fertile ground for economic growth. How to prevent it? Shrewd political maneuvering which involved.....wait for it.....blocking the importation of superior products which would have lead to massive unemployment. State management of the economy. A violation of the position you explicitly stated in your last post. DeLong and I disagree on which policies have which effects, but we agree on state intervention in the economy.

By the way I have no problem quoting a Marxist. You think applying a label is proof that whatever a person says should be discounted. I don't agree.

And I also absolutely disagree with your treatment of economic opinion as if it was the same as a scientific consensus. Global warming, evolution. These are things that can be proved with scientific methodologies. Economic claims cannot. So they can't be known in the same way and can become more prone to herd mentality, biases, incentives of purveyors.

HispanicPundit said...

Jon, You write, Krugman writes things every day that I agree with you and disagree with. What you did is you found an article introduced as "surprising" in that it come from Krugman where you agree with 6 of 6 points that he makes and I agree with 5 of 6 points that he makes, and somehow this makes me some kind of extremist.

It does make you an extremist when you consider the source: Paul Krugman, being one of the most liberal economists around. It goes along with what I was arguing in this thread - which I highly recommend - namely, that lefties tend to be so far out of the mainstream that if you put a conservative and leftist in the room with an economist, any mainstream economist even of the liberal persuasion, the conservative will have more in common with the liberal economist than the leftist one. This goes against your whole perception that the right doesn't investigate things. Atleast knowledgeable right-wingers tend to be more in line with economics than leftists.

It's alot easier to get worked up and morally self-righteous when you are freed from the reality and constraints of economics and its rules. Thomas Sowell calls it the Constrained vs Unconstrained vision. It's been my experience - and you really are no exception, though I admit better than most of your compatriots - that leftists tend to have the unconstrained vision. The right, more constrained.

You write, When you write thousands of words on a blog page and eventually the discussion ends and a point is not addressed, that's basically a normal ocurrence that doesn't at all imply that I've concluded that DeLong is wrong. I'm just moving on. We have to at some point. I wasn't rejecting DeLong. I was moving on.

But the context where I brought it up was not one with "thousands of words on a blog page", in fact, it was where I was short and to the point, see here.

In fact, in that comment section, you were the more verbose and the very person that brought up industrial policy in the first place. The topic of my blog post had nothing to do with industrial policy - you chimed in with a long comment, first brought up industrial policy and I replied with DeLong's post and you ignored his Argentina claim. Even after I prodded you again to look into it.

Now don't get me wrong, I have no problem with leaving topics as is. I do it all the time. What I find odd is that you brought the topic up first, and when I responded you ignored it, then later claimed that "I do look to what has been successful and what has failed." But you don't. Sometimes you just plain ignore it.

HispanicPundit said...

You write, As I read DeLong he's saying sure, he'd rather not have high tariffs and infant industry protection economically. But politically it was required. If he could have permitted purely free trade and still avoided revolution and social unrest than China would have been better off. But is that possible? DeLong seems to be saying no. What would opening markets have lead to? Riots and revolution. Are riots and revolution good for an economy? I'm assuming he'd say no.

Now your toning down your claims with regard to DeLong. Good. This is progress. But even here, you are putting too much into what DeLong is saying. I dont think DeLong would argue that possible revolution and social unrest in China would be bad economically. It certainly would be bad from Xiaoping's perspective - after all, he is part of the power center of China, and it is precisely this that DeLong is arguing. But would it be bad from an average Chinese citizens perspective? I don't necessarily think so, and I can't really tell how DeLong would fall on that.

Remember, China is a dictatorship. Very corrupt. Very inefficient. Really bad human rights record. Maybe some possible revolution or social unrest would be a good thing. Think about Egypt - is the downfall of Mubarak a bad thing from the Egyptian citizen perspective? It certainly is in the short term, but not necessarily in the long term. In the long term it may be an economic gain! Same with China.

You also conclude with, DeLong and I disagree on which policies have which effects, but we agree on state intervention in the economy.

See you can't say stuff like this. DeLong DOES NOT agree with state intervention in the economy, as far as industrial policy goes. He is arguing that state intervention harmed China economically, though it helped maintain power for China's government.

You write, And I also absolutely disagree with your treatment of economic opinion as if it was the same as a scientific consensus. Global warming, evolution. These are things that can be proved with scientific methodologies. Economic claims cannot. So they can't be known in the same way and can become more prone to herd mentality, biases, incentives of purveyors.

Environmental science, and even biology though I would say to a lesser degree, suffers from the exact same shortcomings as economics does. What I find interesting though, is the arguments you make regarding economics are the same the right-wingers make with regard to global warming and environmental scientists. Both, I would argue, suffer from selectivity bias: you find it easier to believe this because its the economics that clashes with your already preconceived notions. Same as the right-winger finding it easier to believe this with regard to environmental science, because it clashes with their already preconceived notions.

Not I, I take experts for what they are - experts. And I take their consensus and widely held views seriously. They have spent their lives studying this and it would be foolish of me to try and reinvent the wheel. So I a priori dismiss creationists, global warming deniers, and Marxists 'economists' - they are outside of the mainstream for a reason. And I do so objectively - not selectively picking the majors that I like and rejecting the ones I dont.