About This Blog

Ludwig von Mises (1881-1973) was the greatest economist of my time. His greatest works can be accessed here at no charge.

Mises believed that property, freedom and peace are and should be the hallmarks of a satisfying and prosperous society. I agree. Mises proved beyond a shadow of a doubt that the prospect for general and individual prosperity is maximized, indeed, is only possible, if the principle of private property reigns supreme. What's yours is yours. What's mine is mine. When the line between yours and mine is smudged, the door to conflict opens. Without freedom (individual liberty of action) the principle of private property is neutered and the free market, which is the child of property and freedom and the mother of prosperity and satisfaction, cannot exist. Peace is the goal of a prosperous and satisfying society of free individuals, not peace which is purchased by submission to the enemies of property and freedom, but peace which results from the unyielding defense of these principles against all who challenge them.

In this blog I measure American society against the metrics of property, freedom and peace.

Friday, April 6, 2012

More Cutesy Fluff From Ezra Klein

[EDITOR'S NOTE: An earlier version of this post appeared briefly in this space. That post was in bad taste and I apologize for it. I have a dark and irreverent sense of humor along with a hair-trigger political temper. Combined, they can sometimes result in an embarrassing post. Again, I apologize to my many billions of readers. The post below gets the point across without the shame. SB] 

Ezra Klein's piece in Bloomberg, entitled "Don’t Worry About Deficit That Will Heal Itself," is political and economic nonsense. It's illiterate, illogical, irrelevant and deceitful. I cannot even summarize the point of Klein's printed mush because he doesn't have one, unless maybe it's this:
Nevertheless, I’m confident that we will, one way or another, muddle through. Because when it comes to the deficit, Congress really has two choices: Do something to solve it, or do nothing and let that solve it.
Doing nothing will solve the deficit? How is Congress going to stop short of the "fiscal cliff" Ben Bernanke says the country is approaching in 2012 by doing nothing? Isn't muddling through doing something?

Klein says that Congress has muddled through in the past and will muddle through in the future:
In part for that reason, we don’t balance the budget for 70 years at a time. Indeed, we usually don’t even balance it for 10 years at a time. Instead, we muddle through, striking deals that are smaller than wonks like, but sufficient to keep us out of the woods. That’s what we did in the 1990s, which featured deficit-reduction bills in 1991, 1993, 1995 and 1997. We’ll probably follow a similar path in the decade to come.
So, apparently in the past muddling through meant doing something, i.e., "striking deals...which featured deficit-reduction bills...," but today muddling through means doing nothing. What is Klein smoking?
Maybe Klein thinks doing nothing now will "solve" the deficit because Congress has already done something. Klein writes:
Federal Reserve Chairman Ben S. Bernanke calls the end of 2012 “a fiscal cliff.” The Bush tax cuts are set to expire. The $1.2 trillion spending sequester, enforcing cuts in the defense and domestic budgets, is set to go off. Various stimulus measures -- including the payroll tax cut -- are scheduled to end. “Taken together,” writes the Committee for a Responsible Federal Budget, “these policies would reduce ten-year deficits by over $6.8 trillion relative to realistic current policy projections -- enough to put the debt on a sharp downward path."
OK. The something Congress did reduces ten year deficits by $6.8 trillion and puts "the debt on a sharp downward path." Terrific, but a lie by omission. Here is the full quote from the Committee for a Responsible Federal Budget:
At the end of 2012, we face what Federal Reserve Chairman Ben Bernanke calls a “fiscal cliff.” Taken together, these policies would reduce ten-year deficits by over $6.8 trillion relative to realistic current policy projections – enough to put the debt on a sharp downward path but in an extremely disruptive and unwise manner.
Notice the phrase I bolded but Klein erased? [Isn't it customary to use an ellipsis when omitting part of a quote unless the part omitted is obvious or irrelevant? Does that phrase seem obvious or irrelevant to you? Maybe Klein couldn't fit that phrase into his 1000 word piece.]

Here is how the Committee for a Responsible Federal Budget concludes its report:
At the end of the year, Congress and the President will face what appears to be a daunting choice: either allow the country to go off of a recessionary “fiscal cliff” all at once, or else doom the country to large deficits that will permanently slow economic growth and increase the likelihood of a fiscal crisis.

Allowing the country to hit the fiscal cliff at year’s end would be a dangerous mistake, but adding $7.5trillion to our debt by extending the expiring policies and repealing the sequester, without putting the budget on a more sustainable path, would be a travesty.

But the end of the year provides the opportunity for a third option – one which avoids many (though not necessarily all) of the abrupt changes at year’s end and replaces them with a gradual and thoughtful plan to stabilize and then reduce the debt. As Chairman Bernanke has argued, Congress should “figure out ways to achieve the same long-run fiscal improvement [as the fiscal cliff] without having it all happen at one date.” A comprehensive deficit reduction plan can offer a win-win by giving the economy space to recover in the short-term while enacting long-term reforms to strengthen the economy and put the country’s finances in order. Policymakers should avoid the fiscal cliff and take this course instead.
Whoa! Am I crazy, or does this say that doing nothing wouldn't solve anything and, in fact, would be a "dangerous mistake?" Doing nothing would propel the country over Bernanke's "recessionary 'fiscal cliff' all at once."

In fact, the report's conclusion strongly recommends doing something, the "third option," which involves Congress coming up with "a gradual and thoughtful plan to stabilize and then reduce the debt."

Maybe this is what Klein means by Congress doing nothing. I doubt it. Klein writes:
Of course, you can muddle wisely or muddle stupidly. I worry we’ll choose the latter. Evidence is already mounting: The sequester is a stupid way to cut spending. Letting the Bush tax cuts expire all at once is a stupid way to raise taxes. And repeatedly forcing the country to the brink of default is a stupid way to manage our budget. 
There he goes again with that muddling through nonsense! At first Klein is comfortable that Congress will "one way or another" muddle through. Now he warns us that "one way" of muddling through is wise and another way of muddling through is stupid!

Maybe Klein is stupid. Maybe the deficit won't heal itself. Maybe we should worry about it!

And what is that little, overlooked phrase that Klein did have room to publish? I'm talking about the phrase: "a stupid way to raise taxes."

As it turns out, doing nothing really means doing something...to you, something Klein is, apparently, very comfortable with, and something President Obama promised would never happen: raising your taxes. Remember? Obama was only going to raise taxes on the "rich!"

Yeah? Well both Klein and Obama are jerking you around. Here's another tidbit from the Report of the Committee for a Responsible Federal Budget that Klein failed to include in his love letter to himself:
Additionally, on the tax side, the fiscal cliff would lead to abrupt increases in taxes for nearly every person without making strategic choices about how to best improve the tax code.
Here's another:
Congress generally “patches” the Alternative Minimum Tax (AMT) every year to help it keep pace with inflation. As a result, just over four million tax returns currently pay the AMT. If a new patch is not enacted retroactively for 2012, that number will increase to above 30 million for that year and would exceed 40 million by the end of the decade.
If you don't know what the AMT is, you better find out. It's a very, onerous tax meant to penalize "the rich." The problem is in a few years Bernanke's inflation will make us all "rich" on paper. In reality, we'll be poor saps paying a rich man's tax!

These new taxes, along with all the other somethings Congress did and didn't do in 2011, comprise the "fiscal cliff" we'll tumble over if Congress does nothing between now and then. That tumble will plunge us into another deep recession or worse. But Klein is confident. Forget the cliff, he says. Worry about something that really matters:
The same can’t be said for issues such as infrastructure and loose nukes and climate change and preparing for pandemic flu. On those questions, congressional inaction isn’t enough to make the problem disappear. So those are the issues I worry about.
Wait! If Congress did something to solve these all-important, earth-shaking, progressive-talking-point issues, wouldn't that require Congress to spend a bunch of new [stimulus?] money? Wouldn't this bunch of new "doing something" muck up the "something" that Congress has already done, like the $6.8 trillion in deficit reduction over 10 years? Wouldn't that mean Congress would have to muddle through again and...?

You know what? I don't give a damn about what Klein says or thinks or smokes. Rather than writing he'd be better off doing nothing. Logic never muddles through his gibberish.

His is the kind of cute nonsense that the stuffed shirts in Washington salivate over. No wonder the country is speeding toward a "fiscal cliff" with it's foot on the accelerator.

My advice? Fasten your seat belt and start worrying.

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