Thursday, December 13, 2012

On Greed and Ignorance, i.e., Fiscal Cliffs

Ah, the "fiscal cliff."

It looms, portentously.

What is anybody doing about it?

Nothing -- see next Q and A.

When will we go over it?

We've already gone over it. Now the only thing to discuss is which rock(s) we will dash ourselves upon first.

How did we get to this point?

The short answer: Politicians are politicians -- what else did you expect them to be?

What do you mean by that?

I mean that we have abandoned this country's founding principles, and left our future to the politicians.

And just what is it about politicians that is bad for our future?

They always choose the short-term benefit over the long term. They choose whatever they judge will maximize their chances for re-election.

But why is the short-term outlook necessarily bad for us in the long run?

Think of rats on an eighteenth-century wooden ship at sea. In an effort to reach the grain in its hold, they have gnawed holes everywhere, including in the hull, and water is leaking in. But they have found their way to the grain. For the short term, they will not be hungry; but in the longer term, they will drown along with everyone else on board the ship.  The eighteenth-century rats are the equivalent to today's politicians.

And how do the politicians manage to get away with this?

Easy. They pass idiotic legislation to maximize their chances for re-election (think "earmarks," "subsidies," and "bailouts"). The fiscal effects of these laws then create a "debt limit crisis", as we approach the maximum amount we are allowed to borrow under the law, since we do not have enough revenues to finance the total level of their spending. Then they run about and scream: "Crisis! Fiscal cliff!" -- as though it were not all their fault in the first place. And then they vote to spend more money which the country does not have, and to raise the debt ceiling so it can borrow more, and life goes on as before.

But why does this scheme work? Why do not sensible people, who know that there is a limit to what one can borrow to spend, not bring the process to a halt?

Ah, now you are on to something.  The reason is what I call "the Curmudgeon's Corollary to the 'Tragedy of the Commons.'"

And what is the "Tragedy of the Commons"?

Check out this link for a simple explanation.

OK, I begin to see what you are talking about here. But what, specifically, is "the Curmudgeon's Corollary"?

It's really just an adaptation of a principle which has been known since Aristotle, and even earlier. The ancient Greek philosophers observed that democracies decay once they discover the power to distribute to all their citizens the wealth of the successful ones. The Curmudgeon's Corollary is more adapted to current times. It says: "The great majority of citizens will behave like rats on a sinking ship: they will see to their own gain and benefit first, even if it means that eventually everyone drowns."

But why can't people act differently? Why do they have to be greedy at others' expense?

You are seeing the results of what Christians call "man's fall from grace." Ordinary people simply cannot do otherwise, because everyone is fallen.

And does everyone bear responsibility?

Yes -- Republicans and Democrats; rich and poor; liberal and conservative. In the final analysis, they all act against their own long-term interests in order to benefit what they see as the short term.

But why, then, are the Democrats so popular just now, and the Republicans so unpopular, as we approach the "fiscal cliff" on December 31?  Aren't the Republicans more to blame for their unwillingness to compromise?

You mean: compromise on whether the ship sinks faster or slower? The reason is simple: Democrats are pursuing the shortest-term strategy of all: "Tax the rich, and our troubles will be over, because we will have even more money to spend. Those nasty Republicans just want to cut all your benefits, and let the rich keep their money."

And why is that exactly the "shortest-term strategy of all", rather than letting the rich stay rich?

Because you could confiscate, at a rate of 100%, all the wealth today in America, and keep the government operating on its current level of spending for only about nine months. And then what would you do, for more revenue? The Democrats have no plan for that; they say only: "Let's tax the rich more today, and worry about tomorrow later." That is a grasshopper philosophy, exactly as in Aesop's fable about "The Ant and the Grasshopper."

Are the Democrats, then, just appealing to class prejudice and envy?

You could be charitable, and put it that way. But what they are actually doing is far, far worse than that. 

And what is that?

They are making everyone think that Government alone will take care of them, and provide all the solutions. All they have to do is vote in favor of taxing the rich more than they are already taxed, and "Government" (i.e., the Democrats) will magically take care of the rest. The latest polls show that the vast majority of Americans are in favor of raising taxes on the wealthiest among us, while they are also against cutting any benefits that might affect them personally. Does that tell you anything?

Actually, yes, it does. It tells me that we have already gone over this "fiscal cliff."



  1. I am 80, and I have seen this coming for 50 yrs. For several yrs I have been asking my "progressive" (socialists, to me) friends & relatives "But what about your children & grandchildren...can't you see what this will mean for them?"
    They never have an answer, BUT THEY DO NOT CHANGE THEIR MINDS. Some of them live very conservative & responsible lives, otherwise.

  2. I will have other questions probably later, but one quick question first:

    The power of the federal government is, and always will be, MONEY. If a state doesn't want to do something the federal government wants it to do, they cut their highway funds, etc. If conservatives cannot muster enough voters nationwide (the same way unions, minority groups, etc.) to the polls to elect a realistic group of politicians to stop/cut spending, etc., then not only will we go over the "fiscal cliff" (if we haven't already, as you said), but we will see the complete collapse of the federal government. With another 4 years of Obama, I'm not sure how we can avoid it.

    (Amazing to think that Obama, with the help of low-information voters and his leftist thugs, will have accomplished what two World Wars, a Civil War, a Cold War, and a Great Depression could not...but that's another topic.)

    My question is this: When will we know for certain that the federal government has collapsed? Sure, long before it does, we'll have seniors being declined Medicare reimbursements, federal workers will be removed from their offices when they default on their leases, etc.

    While it is true that oftentimes the snows begin to fall before the leaves, and we are seeing signs of desperation already. But when will we know that the federal era is over?

    I can see in my minds-eye right now a large press conference at Jefferson's home led by Rick Perry, Bobby Jindal, Bob McDonald and other governors from red states issuing a statement saying that they will no longer force the residents of their states to pay federal income taxes (by then at astronomical rates) or any other federal tax, and that from now on, state revenues will stay in the states.

    Is this the moment when we know that the federal government as we have known it is no more?

    By then, the IRS won't exist anymore because the federal government will have failed to pay their employees. Obama would have no other choice but to send the army (it will be amazing how pro-military he will be by then!), but would the commanders do it since the forced collection of tax revenues is outside their usual charter.

  3. The trouble is that these people do not understand basic economics. They were not taught it in school.

    David Katzakian

  4. I've Got Mine

    "I've got mine!" say the old folks:
    My social security, my medicare.
    I paid for them for forty plus years;
    They damn well owe it to me.

    (The are the last generation
    To received unrestricted largesse
    From the government, financed
    By their children and grandchildren.)

    "I've got mine!" say the unemployed.
    It's not my fault I can't find a job.
    The benefits are keeping me alive;
    They damn well owe it to me.

    "I've got mine!" say the disabled.
    I worked hard all those years;
    My bad back is their fault.
    They damn well owe it to me.

    "I've got mine!" say the single moms.
    I can't work and tend my babies.
    That bastard left me nothing.
    They damn well owe it to me.

    "I've got mine!" say the food stamp recipients.
    It's not my fault that prices are sky high.
    I have to feed my family somehow.
    They damn well owe it to me.

    And while we're at it,
    What happened to "freedom from want?"
    Why do we have to pay for medical care?
    Why isn't college tuition free?

    Don't tell us about the national debt.
    Don't tell us about the budget deficit.
    That's someone else's problem.
    I'm only concerned about my finances.

    So tax the rich, like the fellow said.
    That's everybody who has more than me.
    They should have to get along
    With a whole lot less, like me.

  5. TRR, there are two ways all this folly can end: one is with a massive deflation (all businesses failing; everyone thrown out of work; no one has any money to spend on anything), or massive inflation (the dollar becomes worth less than the paper it is printed on). Or it may be that we will have the first followed shortly afterwards by the second. Right now, the Fed is pumping money into the system like crazy, which ordinarily would be inflationary. But no one is spending their money as they did in the past, because of the uncertain future -- the velocity of money has been falling, just as it did in the years of the Great Depression -- and that is deflationary.

    Thus far the forces have been more or less countering each other: money disappears (businesses fail and go bankrupt; mortgages and other loans are not repaid) about as fast as the Fed is creating it.

    But sooner or later, one factor has to get the upper hand, and possibly whether or not taxes go up and government spending actually drops will have a good deal of influence on which force eventually dominates. A number of tax increases are already certain -- chiefly the ones associated with the insanity of Obamacare. And government spending will massively increase under Obamacare, despite any mandated cuts that will take place if no agreement is reached.

    So with taxes going up (deflationary) and spending going up (inflationary), the forces will battle it out for a while longer. But eventually, the government will run out of other people's money, and will have to make do on what the Fed can print for it. Look for the value of the dollar to plummet when that point is reached. The resulting inflation will bankrupt most all remaining creditors, and take the country back to a barter economy. And guess what? Unlike individual families, the federal government can't survive by barter, so it will become irrelevant.

    The one thing that is not in the cards is a soft landing.

  6. And the very LAST government expendure to be cut will be the President's & Congress's salarys and benifiets. The last ones on the "government't tits" as Sen Alan Sinpson puts it.