November 18, 2024

What Happens After Major Cuts In Government Spending? The Latest From Argentina

November 18, 2024/ Francis Menton

If you believe the messaging of the Trump transition, big cuts in U.S. government spending are coming. Announced cabinet appointments include several who are opponents of the mission of the agencies they will soon be heading. A new Department of Government Efficiency is to be created, headed by Elon Musk and Vivek Ramaswamy, with instructions to take an ax to wasteful programs.
But, assuming that some big cuts actually get implemented, you know what inevitably comes next: Because all government spending is (foolishly) counted as a 100% addition to GDP, the cuts first get recorded as a decline in GDP. Economists on the left (e.g., Krugman) then immediately scream that the cuts have failed, the country has gone into recession, and the people are suffering.
In recent U.S. experience, the Republicans have never had the political fortitude to stay the course.
But let’s look at the latest news from Argentina.

September 18, 2024

The Economic Record Of Socialism -- China

September 18, 2024/ Francis Menton

China has proudly proclaimed itself to be a Communist country ever since Mao Zedong came to power in the late 1940s. I understand the term “Communism” in the context of a country like China to mean a socialist (state-directed and controlled) economic system with the additional element of political repression allowing no dissent from official orthodoxy.
China’s economic history is a bit more complex than just 75 years of tightly-controlled socialism. Its economy languished (including the usual mass deaths and starvation) for the first 40 or so years of Communist rule.
Next, under party leader Deng Xiaoping and successors from the mid-1980s for about 30+ years, China allowed a substantial private economy to emerge and flourish. During those years it experienced rapid economic growth, and in that very short period of time its economy became the second largest in the world after the U.S. (however, more like 70th place if ranked by per capita GDP).
Then in 2013, current strongman Xi Jinping came to power. In the most recent decade under Xi’s rule, the political repression has been greatly ramped up, the central planners have reasserted their pre-eminence, and the private economy has been gradually strangled.
So how is China faring under its most recent regimen of tightly-controlled socialism, central planning, and state-directed investment?

January 05, 2023

January 05, 2023/ Francis Menton

Here’s a question where I’ll bet you think the answer ought to be completely obvious: Should the purpose of government “anti-poverty” programs be to help the beneficiaries rise from poverty and become successful and independent, or alternatively should the purpose of such programs be to entice the recipients of aid into a life of permanent dependency upon government handouts?
From the earliest days of the anti-poverty programs back in the 1960s, the programs were sold to the public as being a temporary boost by which the poor could be helped to escape from poverty and achieve self-sufficiency. And yet, about six decades in, the rate of poverty never seems to go down, and the number of program beneficiaries grows inexorably. Did something change along the way?
The answer is yes.

August 30, 2022

August 30, 2022/ Jane Menton

President Biden’s plan to forgive $10K in student loans quickly became the biggest news of the last few weeks. Indeed, in what should be a sea of ugly news for Biden (Mar-a-Lago, anyone?), he’s clearly hoping debt forgiveness is his golden ticket.
Conservative and libertarian pundits have already covered many of the important reasons why the President “forgiving” or “canceling” debt is a terrible, not to mention unconstitutional, idea.
Meanwhile, I decided to have a little fun (or make myself a little enraged) by looking up the Buzzfeed twitter roundup on the subject to see what the youths are saying

August 09, 2022

August 09, 2022/ Francis Menton

On Sunday (August 7) the Senate passed the 700+ page bill with the Orwellian name of the “Inflation Reduction Act.” The bill has essentially nothing to do with supposedly reducing inflation, and is really just a conventional tax-and-spend extravaganza, with hundreds of billions of dollars of completely counterproductive taxing on the one hand, and even larger amounts of equally counterproductive and wasteful spending on the other hand.
The bill is still not final, since it differs substantially from a version previously passed by the House. So it may be a while before there is an enacted statute. But now that the main hurdle of Senate passage has been cleared, there probably will be a statute within days, in all likelihood identical to what the Senate has passed.
This is one of the very worst bills ever to clear a house of Congress, although to be fair the (equally misnamed) Build Back Better bill passed by the House toward the end of last year was much larger and would have been even worse.
But from information coming to me, it appears that the very most destructive provision of the proposed bill got scrapped at the very last minute, just prior to Senate passage. That was a provision that would have attempted to substantially undo the Supreme Court’s June 30 decision in West Virginia v. EPA.
Although the bill is not final, and I cannot find definitive information at the time of this writing, it appears likely that we have dodged a huge bullet, at least for the moment.

March 03, 2022

March 03, 2022/ Francis Menton

I can’t watch much of a State of the Union Address by any Democratic President, let alone Biden. It’s just too painful. But as a service to readers, I did watch a small portion, and then I skimmed through the transcript when it was released by the White House.
Mostly, this exercise is useful be sure one understands the governing philosophy that informs our President and at least the Democrats in Congress. And this speech does inform us of that.
Really, there’s nothing complicated about it. The federal government has infinite amounts of free money to hand out to solve every conceivable problem of the people. There are no costs, no downsides, no tradeoffs — or at least none worth mentioning. Name the issue, and the feds will create a “program” and pass out the money.