Monday, October 5, 2009

A Basic Economics Lesson...

Too many liberals today mistake liberalism for anti-capitalism and with the plethora of misguided, Left-wing goofballs from Michael Moore to Keith Olbermann to Janeane Garafolo, who can really blame them?

Recently I saw this pablum from a liberal poster, "...many of those in the US today who call themselves conservative aren't really conservative at all. They're reactionaries !!! They want to undue all of the social and economic progress the US has made in recent years and create a form of capitalism which denies help to those in need, and think that this will increase general prosperity.” (“superhorn” – a generic liberal)
Actually it was liberal social and primarily economic policies (called Keynesianism) that imploded the economy during Jimmy Carter's star-crossed Presidency, the real “worst U.S. economy since the Great Depression,” with STAGFLATION (double digit inflation, unemployment and interest rates), along with a record high Prime Lending rate (22%) and a record high Misery Index (23) to boot! In fact, President James Carter presided over four years of double digit Misery Indexes AND an average annual Misery Index of 16.2 - a post-WW II record!

ALL of the economic progress in the U.S. since the Keynesian implosion presided over by Carter was brought about through the Supply Side (market-oriented) policies brought about during the Reagan administration, lapsed shortly during Bush Sr.'s years (Bush Sr. was a Nixonian Keynesian and was only the 2nd post WW II U.S. President to preside over a full term of double digit Misery Indexes) then resurged again during the Gingrich years.

IF there were only some way to argue that the economy is NOT the "expanding and contracting pie" that Supply Siders claim it is and that it really IS a "fixed pie," ONLY THEN could we argue in favor of some degree of redistribution and more "economic equality," because if there were only a fixed amount of wealth one Donald Trump would consign 1,000 other people to poverty.

Of course we DON'T have a fixed economic pie, we DO HAVE a very fluid one. Donald Trump's and Mike Bloomberg's BILLIONS don't deny others access to wealth, nor consign so many others to LESS, in FACT they create many more opportunities for other well educated, technologically savvy people to take advantage of.

WHY are liberals so economically ignorant?

We have a host of systemic problems in this country, most of them cultural that are working themselves out economically. One of those problems is so many people lauding words like “equality” and “democracy” without ANY understanding of what those words mean.

America was founded on LIBERTARIAN principles by men who saw “freedom” as strictly defined as “INDIVIDUAL LIBERTY,” which is complete SELF-ownership with the full burden of personal responsibility that comes with it. They saw “freedom” primarily as “freedom from government restriction or intrusion,” which is why they devoted the first ten amendments to the Constitution (The Bill of Rights) to shackling the government by LIMITING its actions.

ALL of America’s Founders not only opposed but reviled anything like a pure democracy, where the “will of the majority ruled.” Ben Franklin famously said, “Democracy is like four wolves and a sheep deciding on what’s for dinner.”

As a result the Founders built in all sorts of mechanisms to thwart democracy at every turn, including a Legislature comprised of a Senate with 2 Senators from every state, so that small states would have the ability to thwart the excesses of larger, more populous states by amending and negating many of their Bills in the Senate, and like the election of Senators conducted by the Legislatures of the individual states and the Electoral College, which was designed to blunt the electing powers of the larger, more populous states.

Why did they do all this? For one thing, they all saw the excesses of democracy in the annals of Roman history and for another, they all recognized that as hard-working, successful, land-owners they were, in fact a minority in need of protection from the majority or “the rabble” as some called the people. Moreover, ONLY about 14% of Americans supported the American Revolution, mostly the merchant and investor class, which were comprised almost entirely of “landed gentry,” the common folks didn’t really want a fight with “mighty Britain,” or “Mother England,” but that 14% minority prevailed, because they were better organized, more dedicated in their purpose and more disciplined to achieve their objectives.

All of America’s Founders rightly feared the excesses of government and the dreaded “tyranny of the majority.”

The word “equality” was NOT anywhere extolled by America’s Founders. They all knew that “Free men are NEVER equal, because individuals are not equal in their abilities or temperaments, but slaves are always equal in their misery.” The oft used phrase “equality before the law” was no endorsement of ANY kind of “equality of men” other than that they should all be equally accountable...and equally SELF-owning.

Those principles are what America’s cherished freedoms and prosperity are due to.

America’s market-based economy is why our GDP is more than twice the combined GDPs of the 2nd and 3rd most productive nation’s GDPs and it’s why the more market-oriented we’ve been (like during the near two decade long Supply Period from 1981 to 2002) the more prosperous we’ve been.

That’s born out in the fact that the Keynesian period that stretched from 1964 to 1981 marked a terrible downward spiral economically for America and why the Gingrich years, when a Conservative Congress actually forced federal budget CUTS on a reluctant Executive Branch, not only delivered the LOWEST Misery Indexes in over 40 years (1998’s Misery Index was an incredible 6.1, it’s currently 10.6 and was as high as 23 during Carter’s tenure), but was what delivered the SURPLUSES present at the end of the Clinton tenure. It’s ironic that a President who fought so hard against those Federal Budget CUTS, benefitted so greatly from the surpluses those cuts created.

N.B. for those who still don’t seem to understand the difference between the DEFICIT and the National Debt; a “Budget SURPLUS” (like we had in 1998, 1999 and 2000, means that we merely took in more money than we spent, it sadly WASN’T used to pay down any of the ponderous U.S. National Debt. The National Debt at the end of the Clinton administration was a huge $5.3 TRILLION! As an analogy, the Deficit is what local weather (expenditures vs. revenues for each year) is to climate as our National Debt (the ever-mounting DEBT we add to with each year’s succeeding DEFICITS). Like weather and climate, they are related, but far from the SAME thing.

G W Bush, who was as Keynesian as his father, DID initially cut taxes and tax revenues skyrocketed and halved the DEFICIT in three years, despite a tremendously expensive two-front war AND more social spending (even adjusted for inflation) than even LBJ delivered, but his spending DID deliver deficits every year and he ended his tenure having upped the National Debt to a staggering $9.8 TRILLION! Still, as many note, about $3.4 TRILLION of that $4.5 TRILLION addition came over the last two years, when G W Bush was cooperating with the Pelosi-Reid Congress.

When the political tides turn, we are going to NEED someone like a Gingrich who’ll come in and undo most of the last decade (yes, including much of the Bush debacle – the prescription drug boondoggle, the NCLB spending, etc.)

That’s why an expanded public option is NOT all that bad a prospect to me.

The primary problems with America’s healthcare delivery are (1) the FAILING existing PUBLIC OPTION and (2) the exploding cost of giving away too much advanced care. An expanded public option would (1) insure everyone with basic, minimal care, while allowing those who can and want to avoid the coming rationing and restrictions to buy private sector supplemental health insurance, (2) take a ponderous weight from the back of U.S. industry and make them even more competitive in today’s global market, while making the U.S. workforce even more productive and appealing to foreign employers, and perhaps most importantly, (3) allow for COST REDUCTIONS by RATIONING and RESTRICTING ALL of the public options. It can be argued that Medicare, which we all pay into, should be LESS rationed and restricted than Medicaid and the new expanded public option for all and that can be argued down the road, on its own merits.

In my view, that kind of “targeted rationing” would be very good for U.S. business and would make President Obama good to his word, when he recently said, “ saying that no one else is going to carry your burdens for you any more.”

Rationing and restricting an expanded public option would target the least productive among us, which would be a rare program in America, one that would benefit the most productive immeasurably. In fact, it would be one of the more Supply Side programs we could enact, ultimately making individuals MORE responsible for their own health coverage via a strictly rationed expanded public option and much NEEDED supplemental insurance for any who want to avoid that rationing.

H/T to Hassan at Digital Publius ( for inspiring this discussion.

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