Er, respectfully, wtf are you talking about?
http://en.wikipedia.org/wiki/Golden_parachute
Ah, I thought that was intended in a metaphorical sense. My mistake. Nonetheless, my point still stands. In the long run, crooked execs who run their companies into the ground are not going to be rehired if they have a bad record of doing so, and over time the crooks with connections will be weeded out. Unfortunately there isn't much to be done in the short run besides jailing people who took stolen bailout money (something I wouldn't object to), but that's life.
And now you are making a false dichotomy; it isn't "we let everything go to shit, then we either fix it or we don't." The whole point of regulation is to not let everything go to shit to begin with.
Except regulation doesn't do a damn thing to prevent problems, it just creates larger problems in its own right. Again, once you have a single large regulator in charge of things, the first thing companies buy and sell is privilege from the regulator.
Two things here. First of all, 500 billion in QE is nothing. To demonstrate that point, let me point out to you that in the past 4 years, the fed has done a total of 2 TRILLION dollars of QE to buy up the morgage-backed securities. Inflation throughout this period of time was not only lower than than decade average, but was actually deflationary for a relatively extended period of time (most of '09).
http://en.wikipedia.org/wiki/Quantitative_easing#Amounts
Flawed argument. 2 Trillion in QE has had no effect because it failed so hard that the banks aren't even willing to lend out their money. In turn, because the banks are playing it safe, the money isn't making rounds in the economy and inflation isn't taking hold. Of the countries that have tried variations of Quantitative Easing before, the US is currently taking the route that Japan took (failure to even allow for inflation), whereas it could potentially take the route Germany took instead (Hyperinflation). It has, however, had a variety of unintended side effects that are going to cause problems later.
It is notable, though, that other countries are beginning to slowly dump US treasuries while prices of select goods (food, gold, etc) have been going up rather alarmingly. Were China, the Eurozone countries, etc not stuck in their own holes right now they'd very likely consider dropping their treasuries outright, which would precipitate a panic that might motivate those banks to let their money loose.
Secondly, while it has helped avert disaster, 500 billion is also probably not enough for a full economic recovery at this point so long as the systemic problems in the financial sector aren't remedied.
Well now there's an unfounded assumption.
Ignoring that, you do realize that you appear to be replying to my reply to this:
Get another 500 billion dollars from an economic recovery due to platinum coin type QU
right? I wasn't arguing that 500 billion in QE would be an unfounded disaster at this point, it was arguing that QE is not going to produce 500 billion in "recovery revenue" (unless it buys debt directly of course, which it won't).
As for social security, it is sustainable if and only if it is reformed to its original intent. That intent being to provide for those who live long enough above expected life expectancy as to make saving dry up (as living to 110 will eat through your savings if you expected and saved to live until 76). Essentially reduce it to something to prevent elderly destitution. The reason it is unsustainable is because it is given out at an age which most people are expected to live to, and as such everyone is able to get it for, on average, a full decade. Trying to provide enough funds during a 40-55 year working time to live comfortably for 10+ years is what is killing the system.
Increasing the age at which payouts occur, or decreasing the payouts, would indeed make the system solvent, but that simply moves the goalposts and turns it into a moral issue. I'd say the moral arguments specifically against raising the age or decreasing the payouts are obvious, so I'll focus on something else
That intent being to provide for those who live long enough above expected life expectancy as to make saving dry up (as living to 110 will eat through your savings if you expected and saved to live until 76).
That's all well and good if you assume Social Security is a net benefit to someone as it stands right now. However, lets look at a basic scenario:
A person born in 1988 making $30,000/year can expect to receive $1,539/month in the year 2058. The Social Security Administration says that he is expected to live until the ripe old age of 87. So that's another 17 years after retiring at the age of 70. The annuity present value of $1,539/month for 17 years at an annual rate of 5% is $212,938.88. In order to hit that target, he would have to set aside $1,132.50/year in a 5% security. This amount is only 3.775% of his $30,000 annual income.
Social Security and Medicare taxes are 15.3% of his income. If he invested that 15.3% of his income instead, he would be investing $4,590. Supposing that this annual contribution was invested each year for the next 48 years and the principal was collecting 5% interest, instead of the Social Security value of $212,938.88, he would have $863,036.55! That's a little more than four times the return that Social Security is "promising."
Or, to drive the nail home, he is paying $4,590 a year and is getting a future value of only $212,938.88. If he simply took that money and buried it in the dirt, he would have, after 48 years, $220,320! The bottom line is that, for today's 21-year-old, Social Security is a negative return.
(source: http://mises.org/daily/4595)Social Security is, for the younger generations at least, daylight robbery. You get marginally more for your dollar's worth at the end of it, but looking at the way the dollar's value is going your purchasing power will be significantly less for the same amount of money. Being able to opt out of the system is the only reasonable solution, and frankly it doesn't deserve to exist if it can't justify its own existence as a profitable entity.
The reason why I'm saying that full employment would restore revenues rather then leading to ongoing stagnation is because I used the words "full employment". You can take issue with the assertion that full employment is possible (by throwing out all of mainstream economic theory as it existed between 1946 and 2007).
In the context you're using "full employment" as (specifically, in the voodoo Keynesian sense), then yes I would say that it isn't possible. To call that "all mainstream economic theory from 1946 to 2007" is rather overstating things. More like "all mainstream economic theory from 1946-1974", whereupon the paradox of stagflation arose, Keynesian economists ran around like headless chickens, the US economy very nearly flew straight off a cliff, and a variety of other schools (Monetarists, Supply siders, etc) became the "mainstream economic theory". Keynesianism (in the US, at least) then made a comeback right around the time of the recession.
What I was really arguing with, though, was that assumption that revenue increases would suddenly equal 500 billion without any evidence or proof. That isn't an argument, that's a disguised variation of
Step 2. ?? ?? ?? ??
in the Underpants Gnome business model. "The economy will recover greatly and then tax revenues will go way up!" is not a valid argument, nor does it constitute a "deficit reduction plan".
However it's simple arithmetic that if you remove the decline in tax revenues associated with the recession and the increases in spending on things like unemployment insurance and SNAP benefits that it would help government revenues enormously. The only optimism is in believing that US monetary and fiscal policy could be as successful as it has been in places like Sweden and China if we were as aggressive as in places like Sweden and China.
Not 500 billion worth. Again, Japan was "aggressive" and it has nothing to show for it except a debt of over 200% of its GDP. I'll get to Sweden and China later if you want, but believe me, they have problems of their own.
You also assume that the end of the Bush tax cuts, specifically the payroll tax cuts (which incentivize hiring on the part of employers), won't have any negative effects.
The recession didn't destroy our economic capacity. It's not like a nuclear war. People are unemployed not dead. If the economy go back to it's normal capacity then... it would be back to it's normal capacity.
Yes indeed, but for the economy to get back to its normal capacity, it has to restructure along more efficient paths of production. If money is simply handed out to zombie companies, it creates a Potemkin Village of an economy that only offers the illusion of recovery.
That's not to say that you couldn't maybe save more money by reforming military spending or agricultural subsidies or by taking food out of the mouths of starving children. Those are all quite possible. I'm just saying that your basic "things that are already legislated and would happen if congress never passed another law" package includes:
Well now that's not a false dichotomy or anything. But if you want, I can make a bigger list of things that could be cut. In fact, let's take things farther. Departments that could be slashed:
Agriculture Grows no crops.
$19 billion
Commerce Makes and sells nothing
$6 billion
Education Educates no one
$34 billion
Energy Jimmy Carter’s idea—need I say more?
$17 billion
HHS Dump the FDA, our most lethal agency. Whatever
else HHS does, it’s bad.
$54 billion
HUD Nukes. You already have DoD for this sort of thing.
$37 billion
Interior An independent nation larger than France.
$9 billion
Labor Engages in no actual labor.
$12 billion
Transportation A mess of pork barrel spending. (Keep the Coast Guard)
$48 billion
Corps of Engineers Causes floods.
$4 billion
FEMA Extremely poor handling of floods/disasters (caused by the Corps of Engineers)
$3 billion
EPA Terrible track record when it comes to environmental protection, could be put into an amalgamated department relating to land use.
$7 billion
Foreign Aid Retirement fund for corrupt dictators.
$11 billion
NASA Challenger.
$14 billion
SBA They only waste a billion dollars each year, but they waste it magnificently.
$1 billion
There you go, a bit over $275 billion cut, and all from smaller sources of spending. Already I've generated a gigantic surplus, and keep in mind my budget plan (if you could call it that) generates a surplus long before you even slash these departments.
1) Afghanistan and Iraq withdraw.
2) Expiration of the Bush tax cuts
and if the Fed and Treasury did their job properly then in a few years we'd have:
3) Return to full employment
This point needs repeating.
Step 1: Let the tax cuts expire
Step 2: Withdraw from specific foreign wars
Step 3: More Quantitative Easing
Step 4: ?? ?? ?? ?? ?? ?? ??
Step 5: BUDGET SURPLUS
In '29 the economy melts down at a stunning rate. Hoover sticks to laissez faire and for his troubles he watches the economy to continue to collapse for another three years. This is the fastest economic collapse in US history and it all took place before FDR was even in office to start the new deal.
I know this isn't aimed at me, but this is an incredible myth. Hoover did not believe in Laissez-Faire in the slightest, he engaged in massive government intervention to get the US out of depression. Many of FDR's "New Deal" programs were simply refurbished Hooverite programs, and he actually campaigned AGAINST Hoover's government programs while trying to get elected.
Furthermore, in 1920, Hoover advocated government spending to get the US out of recession and was completely ignored. Instead, Warren Harding drastically cut taxes (far more than what Bush cut, by the way), drastically cut spending, and sat back. Meanwhile, the Federal Reserve did nothing and waited as well. The recession lasted from 1920-21, featured a very deep economic collapse, and then led into the growth and recovery of the 1920s. Of course, Keynesians like to ignore the 1920 recession because it distinctly goes against their view of how economic collapses should occur.
The new deal started in summer of '33 when FDR was elected along with a massive new deal majority (80% of congress supported him) and pushes through massive new regulations, spending and taxes in the first 100 days. Far from extending the depression, it lead to double digit economic recovery. The unemployment rate drops from 35% to 15% in just six years. This is the fastest economic recovery in US history and it took place as regulations and taxes increased enormously.
Far from extending the depression, it lead to double digit economic recovery.
In GDP. You would find that government spending as a proportion of the economy rose rather drastically at the same time, so it's somewhat misleading.
The unemployment rate drops from 35% to 15% in just six years.
First of all, that isn't quite true. It was extremely sporadic, to say it dropped just like that is incredibly misleading. Second, despite this, a LOT of those jobs were make-work jobs that contributed nothing to the economy and EVEN THEN unemployment didn't return to levels of the 1920s for quite some time.
Meanwhile, the Forgotten Depression of 1920-21 featured a massive bounce back that more than made up for lost time, AND it was accomplished through deregulation, tax cuts, and an inactive central bank. Even previous panics (such as the so-called "Long Depression" of 1871) featured far more growth and less unemployment than the Great Depression. Comparing the Great Depression to such economic problems pretty clearly shows which method works better
In '37 congress is getting nervous about the size of the government so they cut down on new deal spending greatly and pursue deflationary monetary policies. This leads to a double dip recession in '38.
In '37 various labor disputes came to the fore. It's worth noting that one of the few things FDR did right was not trying as hard as Hoover did to keep wages high, which is a huge reason as to why unemployment was so high. If you look at wages throughout the Great Depression, you'll find that wages were unrealistically high for a lot of it because Hoover was against wage cuts to allow for reallocation of resources and rehiring. I can get into more detail with this one if you want.
In '39 congress realizes the error of their ways, and restarts the new deal jobs programs. From this point onward armament programs start to ramp up as well until by '43 we are in full war production mode. These years break the record for fastest growth ever in our history that had previously been set in '32-'36. By '43 unemployment is at levels that would be unsustainably low if the government weren't actively rationing everything and conscripting labor.
'39 is something I can deal with later, but it seems you think WW2 was a great creator of prosperity, which is a rather odd thing to think.
WW2 created jobs, yes. Most of those jobs either involved joining the military or working in a factory producing war materials. There was rationing of basic consumer goods and labour was very heavily controlled (I recall the army being sent into Detroit to stop striking workers on different occasions). The fare of the common man during WW2 was, if anything, worse than during the Depression, since at least during the depression his wages weren't controlled and his choice of consumer goods wasn't restricted. The one good thing about WW2 was that it also resulted in the end of many of FDR's programs once it was over due to general public dissatisfaction with government control of the economy during the war. 1945 then featured a brief recession and then growth as a result of savings accumulated during the war alongside the end of the New Deal.
So in a nutshell in the depression we see that Laissez-faire lead to economic collapse both times it was tried and government intervention was accompanied by record setting economic expansion both times it was returned to. Basically you couldn't come up with a worse period of history to argue against laissez faire in. This is literally the worst laissez faire has ever done.
Again, 1920-21 (Laissez Faire solutions) vs 1929-41 (Interventionist solutions) demonstrates pretty clearly that Laissez Faire is the far more successful option. Unfortunately, the side effect of successful ends to recessions is that they aren't considered noteworthy if they don't hit hard/end quickly.
To further explain, what SalmonGod is saying is that even though the company replants trees, just replanting does not renew the nutrients in the ground which the trees need to absorb to be able to grow, leading to a slow defertilisation of the land, leading to less and less trees being able to grow there, leading to worse and worse business for the logging company. In short, it's a chop-and-burn philosophy, if not as extreme as actual chop-and-burning.
Depends on the regulations and controls in a given country.
In the US, what happens (correct me if I'm wrong) at a lot of the time is that the Federal Government leases/lends out land for companies to "farm". These companies don't own the land and cut as much as they can while they have the chance, leading to clear cutting. In some places there are outright tree farms, but various environmental standards make the feasibility of operating the same parcel of land for a long period of time low.
In "socialist" Sweden, however, tree farms are far more common, operate under far less regulations, and are far more successful in terms of ecological sustainability. Since the Swedish companies operating tree farms know that they'll probably be running them for a long time, they're quite careful to not cut too many and ruin the nutrients of the soil. Furthermore, (I think, anyway; I'm not a professional logger) they grow different trees so that they have a constant supply yet only cut as many as they need, leaving a relatively steady amount of different kinds of trees to keep the soil in good condition.
I may be wrong of course, but I'd say that the Swedish method works far more, and in this case it also happens to be the market method of solving such problems (hence why categorizing countries by the broad measures of "Socialist" or "Capitalist" isn't always a good idea).
