The Loch Ness Austerity

Eli,

I keep reading about austerity, but like the Loch Ness monster I just can't find it.

Here's a graph of federal spending since 2005. The source is the Monthly Treasury Statement put out by the Treasury Department.

I see the big increase in Federal Government spending from 2005 to 2009, and flat-lining since. When economists talk about a multiplier of government spending they are referring to a multiplier on government consumption and investment expenditures, which total about $1.4 trillion for the federal government and $3 trillion for state, local and federal government combined. The shape of the charts are not too dissimilar to the one above.

So austerity means government isn't growing? Really?

Like most discussions on the economy this one suffers from the "all else equal" fallacy. All else equal, if government spending changes, such and such will happen. All else equal, a change in the minimum wage results in x, y and z. All else equal, a change in interest rates causes the following...

All else is never equal. For instance, since the beginning of this year, the S&P 500, a broad measure of the US stock market is up 15%. The total market value of the S&P 500 is about $14 trillion, and the increase has been about $180 billion. Other asset classes have also had strong gains, including housing.  It seems that would be an offset to the LochNessAusterity. And what if the market is up BECAUSE of austerity?

The arguments for and against "austerity" are proxies on you view of government effectiveness. The recent news from the IRS, DoJ and CIA are not supportive of the efficacy of wise men in the government directing a $16 trillion economy.

Bill

The Please Mother May I State

Eli, 

Walter Russell Mead's article on NYC and Washington DC using arbitrary rules to prevent new service providers from competing is another illustration of how the capricious nanny state stifles job growth and limits consumer choice. 

Bill 

http://blogs.the-american-interest.com/wrm/2013/05/22/blue-cities-declare-war-on-popular-services/

Permit Me.

Eli,

I've been interacting with companies large and small for over 20 years now, but the first time I ever heard a company say, "We won't even consider putting a major plant in the US" came about six months ago. When asked why, the response was the permit process is arbitrary. Not that the permit process was long, or arduous, or complex or difficult. It was arbitrary.

I don't blame this on Obama, or the Democrats. This is a bipartisan failing. We scratch our heads and wonder why is this recovery slower than the previous recovery; and why was that recovery slower than the recovery it followed and why was that recovery slower than previous recoveries? In fact, why are the three slowest recoveries post WWII the last three? What has changed, or is changing?

Is it possible it has become too difficult for businesses to expand and ideas to turn into businesses? Is it possible the vast regulatory state has become too arbitrary?

Is the lesson of the IRS one of squelching speech AND an example of an arbitrary regulatory state squelching economic activity?

Bill

Richard Epstein and John Cochrane have thoughts along this line.

400 PPM

Eli,

There's been some todo about 400 ppm (carbon dioxide in the atmosphere) recently. Made the front page of the NY Times. All the Green bloggers wailed and rent their garments. Even made it into the remarks from the President of my daughter's college at her graduation ceremony.

According to the Times:

The best available evidence suggests the amount of the gas in the air has not been this high for at least three million years, before humans evolved, and scientists believe the rise portends large changes in the climate and the level of the sea.

What I find curious about these jeremiads is they (willfully?) ignore the progress that has been made in carbon emissions in the US since 2007. You can't get this from the Times or the Green blogs, but carbon emissions in the US is down, since 2007 by 12%. Lots of reasons. More natural gas, more wind, less consumption. But it's just odd to me the climate crisis mongers never seem to recognize this.

The graph uses data from EIA's April 2013 Energy Monthly. Table 12.1 if you care. It shows carbon emissions in the US from 2001 through 2012 and you can see the impact a recession has, but oddly, emissions have continued to decline even though the economy is in the 4th or 5th year of recovery.

In fact, the entire history of the world is one of moving to fuels that are less carbon intensive. Dung, wood, coal, oil, natural gas are successively less carbon intensive. So why wouldn't a reasonable person applaud the extensive deposits of natural gas in the US, and the substitution it encourages for oil and coal. I think it's partly a zealotry that ignores the benefits of fossil fuels, like keeping us warm in the winter, cool in the summer, providing light at night and mobility to all, you know the small stuff of life, and partly an arrogance that believes the hoi polloi exist for the elites to manage.

Maybe it's also a (willful?) ignorance of science as well. I know I know. The Democrats are the big believers in science. They wrap themselves in SCIENCE as much as a priest wraps himself in the sign of the cross. And the result is remarks like Barbara Boxer's that attribute tornadoes to climate change, despite no consensus on that subject.

Greens ask themselves often why America ignores their warnings. We must be in thrall to Fox News, Big Oil and the Koch Brothers. The simpler answer is we like being warm in the winter and cool in the summer. We like lights at night. We like driving around. And when someone constantly screams the world is ending, and it doesn't we kind of start ignoring them. They become that kid in the grocery store screaming and crying because he isn't getting his way. We ignore that kid. He's a pest.

Bill

Are Congressmen Really Stupid, or Do They Just Play it that way on TV

Eli,

Lots of (faux) outrage in the Senate today as Apple CEO Tim Cook explains to Senators that yes, if you create a law that allows a corporation to lower its tax liability, rational companies will take advantage of that law.

So today we get the spectacle of the World's Greatest Deliberative Body (and I say that with the maximum amount of scorn and sarcasm) discovering that, shockers, laws have consequences; companies have a moral duty to maximize profits, and most companies don't regard taxes as "contributions." Thanks Senators McCain and Levin, for your example of bipartisan idiocy.

Bill.

Ps I too avoid taxes by, gasp, itemizing deductions and taking full advantage of the mortgage interest deduction, deduction for property taxes paid and deducted my charitable donations. Given Senator McCain thinks of taxes as "contributions," maybe I should deduct my federal contributions as well.

The IRS Spin

Eli,

In my opinion, the behavior of the IRS is putrid and indefensible. Why anyone tries, like Steve Rattner and the Editorial Board of the NY Times is inexplicable.

First of all, this was not, as Rattner claims, "low-level staffers." The Cincinnati office is responsible for reviewing applications for exemption status. This is not some rogue, low-level, staffers. This supression of certain political opinion was organized by the office in charge of granting exemptions.

This was not, as Rattner claims, a Keystone-cops comedy of errors. This was an enduring, persistent, organized deliberate attempt to stop certain speech. The office deliberately attempted to prevent certain groups from speaking with a campaign of intimidation, threats, delays and leaks. Donor lists were leaked to the media, including Pro Publica, as part of this campaign.

This campaign is not justified because Rattner and the NY Times does not agree with the Supreme Court's decision on Citizens United. It is the law.

Bill

In response to Government over-reach, Obama promises more government over-reach.

Eli,

This is from Politico.

>Aware that few substantive bills can receive the bipartisan support needed to pass Congress in the current political climate, White House officials are also turning their attention to narrower policies Mr. Obama can carry out on his own

So the response to the IRS trying to restrict speech and influence elections, the DoJ's attempt to muzzle the press and the attack on a CIA installation in Benghazi, is to try to do more things outside of oversight and participation by the co-equal branch of government.

Curious.