Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

[WildspitzE]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

All that I am saying is that either you want less money in the public sector, or you want a more effective government.

Define effective, because I don't see the absolute corollary b/w money and effectiveness. So, if we give them infinite amounts of money they will be infinitely effective?

I agree, let's go to the tax rates of yesteryear... say pre-1913? Things "worked" then too.

[ASH]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

As a new member here at iTulip, please be patient if I appear to overlook the obvious; I'm trying hard to get my arms wrapped around this macroeconomics.

Although I agree with much of what Pat Buchanan wrote in that article, his claim that free trade has damaged the country (a charge that Peter Schiff also makes) just doesn't make sense to me. Doesn't the fact that a product is produced cheaper elsewhere result in a savings to the American consumer and, in the big picuture, thereby raise everyone's standard of living? As long as we are trading value for value, why does anyone get harmed?

Thanks,

Steph

Hi Steph. This is a semi-ideological point as well as an economic issue.

I think some of the disagreement over free trade stems from conflicting objectives. Free trade tends to optimize cost efficiency for production of goods, and in that sense, it may optimize total global wealth. Optimizing the size of the pie is an efficiency issue, but what distribution of the pie is optimal is a matter of ideological opinion. In general, free trade promotes equilibration of first world wages with third world wages, and in the developed world increases the value of capital (i.e. company ownership) relative to that of labor. The problem is that we are starting from a vast difference in standard of living between the first and third world economies -- and a vast difference in labor costs -- so the process of equilibration is very painful in the developed world. Costs may go down for manufactured products in the first world -- and living standards may rise in the third world -- but equilibration of labor costs through free trade involves a large drop in standard of living for the first world and a small rise in the standard of living in the third world, due to the numbers of workers involved. Whether or not this is a good thing depends a lot upon one's personal beliefs.

There are many other issues in addition to the question of cost efficiency versus local standards of living. Another point of concern is trade imbalance (what happens when you can't trade value for value, because you don't export value equal to your import needs). This is a particular concern because as others have pointed out 'free' trade isn't actually free -- especially when governments step in to manipulate exchange rates, and act to prevent trade imbalances from correcting themselves. I haven't the time today to write down more thoughts, but I thought I'd interject to point out that you need a job at the same salary you had before in order to enjoy lower prices.

[Starving Steve]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

There are several reasons why 'free trade' is a misnomer:

1) China's trade with the US is far from free. China has (and continues) to subsidize its exports in many ways including:

a) import barriers for US and other outside companies to sell inside China
b) a national currency (RMB) which is significantly lower in value than it 'ought' to be
c) considerably different regulatory and environmental considerations
d) outright subsidies on land, on energy costs, etc etc

2) The cost of a product is not the only factor. The economic benefit from the product's life cycle also matters: the income earned in the circle from commodities to parts to product to wholesale to retail.

While in the short term having a cheaper widget is great, is it a net benefit when in the long term overall incomes fall? We can't all make a living waiting tables, cutting hair, and walking dogs.

3) The actuality of the 'free trade' experience has not demonstrated any of the benefits of theoretical free trade. Has the US - which has given up a significant part its domestic manufacturing - shown a significant increase in standard of living? The average - as weighed up by the outsize profits by the top 0.5% - is higher, but the middle and working classes have clearly gone nowhere in 10 years as Buchanan has noted.

In fact outside of the few resource rich nations - outsourcing of too much manufacturing has not worked well anywhere.

Through free-trade policies, my dollars buy more because goods are produced at the cheapest possible location. That means I have extra dollars to spend, and that means I can buy other goods and create other jobs in the economy such as shipping jobs, manufacturing jobs, retailing jobs, etc.

As I said, we learned this hard lesson about what inflation does to the economy thru the miserable period of stagflation, 1963-1980. Why do we now have to even debate this matter?

Tell the idiots in the Fed and at Princeton and at Stanford the damage that inflation does to the economy, even so-called modest inflation.

As for why our standard of living is going down the toilet, the answer is that inflation has sucked the very life out of our economy. There is almost nothing left to buy that is affordable except for foreign-made goods such as Japanese cars.

And why have homes and land and energy gone up? The answer is two-fold: 1.) Interest rates have been held tooooooooooooooooooooo damn low for too damn long by the Federal Reserve Bank in Washington; and 2.) Government has been trying to restrict land-supply and water-supply and kill energy planning for cities in order to protect the so-called, "environment" and to control so-called, "urban sprawl".

[Serge_Tomiko]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

As a new member here at iTulip, please be patient if I appear to overlook the obvious; I'm trying hard to get my arms wrapped around this macroeconomics.

Although I agree with much of what Pat Buchanan wrote in that article, his claim that free trade has damaged the country (a charge that Peter Schiff also makes) just doesn't make sense to me. Doesn't the fact that a product is produced cheaper elsewhere result in a savings to the American consumer and, in the big picuture, thereby raise everyone's standard of living? As long as we are trading value for value, why does anyone get harmed?

Thanks,

Steph

The "standard" of which you speak is materialism. That dominant theory of the 20th century is now thoroughly discredited. It is time to adapt to this fact.

When Jeremy Bentham first postulated his utilitarian fantasies, he likely could never image the world that he would help create. Today, there are more animalistic starving people alive right now than the combined total of all human beings who had ever lived prior to his birth.

If you honestly believe we as a people can continue to thrive so that we can continue this mad attempt at improving living standards, you have yet to reflect adequately upon the nature of human existence.

The very first people who set up the first human civilization did not do so their progeny would be burdened with this impossible task. Further, no one will ever bother fighting to preserve a system of society where that is the stated goal.

Does economics serve culture or does culture serve economics?

[Rantly McTirade]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

[quote=Starving Steve;142258] So, even if you have lost your job to a lower-cost producer, you benefit by having your dollars buy more goods.


If you have no job......WHAT DOLLARS, econogenius?:mad:
Theoretical drivel worthy of Bernanke or an equivalent paper-credentialed
poindexter, wholly ignorant of reality.

And, as Mr. Tomiko indirectly noted previously, your 'point 7' listed above-otherwise known as patriotism- has, most unfortunately,been actively opposed by the US's government and centralized culture for decades, rather than embraced as it should be.It is exactly what should occur,as it's in the interests of the nation as a whole and the vast majority of citizens, and would in fact be a prerequisite for your #4 and #5 to have any chance of happening.

[flintlock]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

As usual, Ash summed it up pretty well, it really is as much an ideological as economical issue. I'll add my thoughts from the view of selfish American vs as a citizen of the world.

Buchanan in his article states

Once the most self-sufficient republic in history, which produced 96 percent of all it consumed, the U.S.A. is almost as dependent on foreign nations today for manufactured goods, and the loans to pay for them, as we were in the early years of the republic.

The fact that the US was so self-sufficient at one time is a point often lost in these type discussions. Food, natural resources, technological resources, human resources, we had it all to a degree few nations in history ever have. Part of this was a result of hard work, correct economic philosophy, and careful planning. The other part just fate that left the US sitting on a broad array of natural resources.

So what exactly the US really "needed" from globalism I still have not figured out. Frankly, besides the "Materialism" Serge mentions, I can't see quite what we have gained from it all, because to supposedly "own" lots of material things, yet "owe" many times their value doesn't strike me as a higher standard of living. Perhaps we should call it a "temporary higher standard of living" or some other phrase.

Its a complex issue. There is no pat answer. Some benefit, some lose. Generally speaking, I think we will look back in 10 years and see that most lost, a few gained a lot. As a nation, we aren't as wealthy as we think we are. Most of us at least. When all those dollars we thought we had squirreled away in that 401k become worthless and the tax man comes banging on our door to collect for the drunken spending binge of others, we will find out the real truth to the phrase, "No such thing as a free lunch".

Trade is good. But what we have now is not free trade. Medved said it better than I can.

The notion of the free markets emerged when everything was much smaller, trade happened between similarly developed western countries and gov’t was not involved in manipulating the financial system.

There is more to a standard of living than low prices. "Low prices on what" should be the question. Wants vs Needs. American citizens NEED jobs. They NEED food. Housing. Health care. Not much else is a real need. The rest is a "want". They WANT a 50" Plasma TV, luxury items, cheap gadgets, 250 HP "economy" cars.

The US has sold out its long term prosperity for a quick sugar high of excess. Now we will have to pay the piper. Only now many of us will lack the jobs to pay him.

I'm not against trade. The US has always had a strong trade with the world since its beginning. Its when we started to sell the seed corn that we started down the wrong road.

[fiver]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

Free trade? How much of U.S. mfg has moves abroad to evade taxes? A lot, I suspect.

[hayekvindicated]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

Buchanan cannot get himself to admit that the country is in irreversible decline.

One major disagreement: Buchanan has a fixation with free trade. But there are other countries also that have low tariff barriers (lower than the US) and their economies have not experienced such declines. Singapore, for example, has the lowest tariffs on earth but runs trade surpluses and has a savings rate of 55 percent. Hong Kong has operated as a free port and has a savings rate of 33 percent.

Germany has operated in an EU where wages in almost every country are lower than Germany and yet German manufacturing is strongest in Europe.

Another fact to remember is that even if the US economy was not so mismanaged, America's strength relative to the rest of the world would have still declined - simply a function of other countries that were wretchedly poor fast coming up the ranks. I can speak with some confidence on this subject - I grew up in India when its economy was a joke and we had the "licence/quota raj", Soviet economics and the ideas of Nehru dominating the landscape. Forget about car ownership, owning a scooter was a big deal. The change has been so rapid that I, for one, having seen the old India cannot fathom that the new India is essentially the same country separated by one generation. The world is changing very rapidly.

[hayekvindicated]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

I fear focus on tax rates is counterproductive.

An examination of federal spending as a percentage of GDP show that tax rates are irrelevant:

http://www.usgovernmentspending.com/...olor=c&local=s

[ATTACH]2687[/ATTACH]

Though nominal tax rates may have appeared higher in the 60s, the reality is that federal spending has been increasing at a very substantial rate.

This spending increase is accompanied not only via increased income from income taxes, but via income from entitlement taxes - and the entitlement tax withholdings have been going up mercilessly in the past decade.

Bingo. In the 1950s, the state as a percentage of the economy was TINY compared to today.

[Starving Steve]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

Thanks for posting this, clue1.

Ole Pat has always made sense, and he's far from a "whacko" in his faith - except to those who worship at the altar of Secular Humanism and despise Orthodox and Catholic Christianity. (I've met Pat and spoken with him; even his political opponents seem to like him.)

But to be fair Pat has said some foolish things in his lifetime; the good part is that he does learn and he has become more pluralstic, while standing fast for basic Paleoconservative principles.

I do NOT like Pat Buchanan, nor any of his paleo-conservative bunch. These are the xenophobic bunch in the Republican Party, especially the Christian-right. They, along with the neo-cons, have destroyed the Republican Party in America.

Whatever happened to liberalism, or even just moderate conservatism, in the Republican Party? Whatever happened to the liberalism and tolerance in the tradition of Governor, Nelson Rockefeller (R) or President, Dwight David Eisenhower (R)? That moderation appears to be gone now.

[steph_m_chick]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

Thanks for the discussion on free trade. It appears it isn't the free trade that is the issue, but rather the absence of a free market (government intervention) that perverts the concept of free trade (via taxes, wage laws, fiat currencies, etc.). Apparently, given the mess our economic system finds itself in, it's anybody's guess what kind of trade policy makes sense, because the results are very difficult, if not impossible to predict.

Sure makes studying economics difficult!

Thanks for the input,

Steph

[Starving Steve]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

If you have no job, how about working at a lower wage--- provided that the lower wage buys more than before? What is wrong with de-flation?

Or if you have no job, how about taking your savings and investing it into oil and gas trusts that pay a high rate of return? (That's what I did.)

Or if you have no job, how about substitute teaching even though you have a clear teaching credential. (That's what I did.)

Or if you have no job, how about investing your savings in your house? (I did that.)

Or how about renting your house out and drawing income from your house? (I did that, too.)

Or how about creating your own job running your own business, your way? (I did that, too.)

But if you want to drink and smoke and drive a Hummer, if you want to take holidays and buy electronic gadgets, drink lattes, and if you want to live off of the savings of others by maxing-out your credit cards and borrowing off of your home, then I have no sympathy for you whatsoever.

There was a class of people in America, many of them dot-commers, and many of them scam artists and Ponzi-schemers. They prospered under the Republicans, especially under George Bush Jr. Now this whole bunch is facing a reckoning, and I am glad..... Let them starve.:rolleyes:

There is another bunch in America that has never saved for the future, as if they would remain healthy forever. This bunch would go to hospital emergency rooms and not pay one-cent. They would leech off of the healthcare system or off of county welfare programmes. Now their day of reckoning has arrived too, because they will have to pay for their own private for-profit health insurance. (And these very same leeches were some of the idiots who showed-up at tea-party protests in recent weeks against the public-option to be able to buy into Medicare at age 55. )

The people in America are now getting what they deserve. I love it.

[dcarrigg]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

I fear focus on tax rates is counterproductive.

An examination of federal spending as a percentage of GDP show that tax rates are irrelevant:

C1ue, I am afraid you are wrong on this one.

Any growth in spending has been in entitlement programs and interest. Other areas of discretionary government spending have shrunk as a percentage of GDP -- and significantly since the 60's.

Here is a chart of Federal Outlays as a % of GDP by type from the CBO from '62-'01 that contradicts the chart you linked to.



It's a good 125 year report from the CBO that is short and that shows the alarming rate of entitlement spending increases well. You can find the full report here:

http://www.cbo.gov/http://www.cbo.go...521/352101.gif

The point being that defense and non-defense discretionary funding have indeed fallen significantly since that time.

In fact, a chart projecting this is below:



The further point is that tax-rates (whether the income, social security, or medicare) are NOT static. How long until the SS tax does not stop at $102k and you're paying ~6.8% all the way up the income ladder? How long until it applies to capital gains? How long until income taxes go higher worldwide to pay worldwide government debt? How long until all bonuses/capital gains are taxed as income?

It's already happening at the state level.

These are the right questions in my opinion when thinking about how the public sector bails itself out of the banking disaster, not "Will the country decline irreversibly?"

Respectfully Submitted:

-D

[dcarrigg]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

Bingo. In the 1950s, the state as a percentage of the economy was TINY compared to today.

Hayek, I do not believe this to be true. All government expenditures (including entitlement programs, which are taxed separately and not what I was on about originally) made up 15.6% of GDP in 1950. 18.8% in 1962. & 18.4% in 2001

Picture 2.png

[dcarrigg]

Re: Pat Buchanan: A Decade of Self Delusion (We Did It To Ourselves)

There are several reasons why 'free trade' is a misnomer:

1) China's trade with the US is far from free. China has (and continues) to subsidize its exports in many ways including:

a) import barriers for US and other outside companies to sell inside China
b) a national currency (RMB) which is significantly lower in value than it 'ought' to be
c) considerably different regulatory and environmental considerations
d) outright subsidies on land, on energy costs, etc etc

2) The cost of a product is not the only factor. The economic benefit from the product's life cycle also matters: the income earned in the circle from commodities to parts to product to wholesale to retail.

While in the short term having a cheaper widget is great, is it a net benefit when in the long term overall incomes fall? We can't all make a living waiting tables, cutting hair, and walking dogs.

3) The actuality of the 'free trade' experience has not demonstrated any of the benefits of theoretical free trade. Has the US - which has given up a significant part its domestic manufacturing - shown a significant increase in standard of living? The average - as weighed up by the outsize profits by the top 0.5% - is higher, but the middle and working classes have clearly gone nowhere in 10 years as Buchanan has noted.

In fact outside of the few resource rich nations - outsourcing of too much manufacturing has not worked well anywhere.

C1ue, I am glad to see I can come back to agreeing with you again. It is the state I prefer

Very well put.