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Posted on 12/06/2022 8:06:09 PM PST by SeekAndFind
In the teeth of the Depression, Treasury secretary Andrew Mellon famously told President Herbert Hoover to “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate”—in other words, to resist bailing out any industry through state intervention. This was a tough sell even in those days, and of course Hoover succumbed to politics and took the opposite approach, greatly and needlessly damaging the US economy for decades to come.
Less often quoted are Mellon’s follow-up words to Hoover: Liquidation would “purge the rottenness out of the system,” so “people will work harder” and “live a more moral life.”
Mellon, having lived most of his life in an America without a central bank, understood economic recessions as necessary cures rather than ills to be avoided. But he also understood the human price that would be paid in the aftermath of a period of phony economic prosperity. Only hard work and personal sacrifice, person by person and town by town, could get America out of its economic mess. Fiscal and monetary policy would provide no free lunch, as millions of Americans learned the hard way in the 1930s.
Fast-forward to 2022, and it’s hard to imagine Janet Yellen calling for liquidation or telling Americans to improve their moral fiber. Nobody votes for austerity or personal responsibility, and any politician or bureaucrat or central banker who even suggests it is doomed today.
Yet this mythology of austerity persists, that a stingy federal Treasury and reticent central bank don’t intervene enough in economic crises. Consider this howler from Paul Krugman back in 2011, apparently delivered with a straight face: “One thing is clear: Mellon-style liquidationism is now the official doctrine of the G.O.P.” Keep in mind he wrote this several years into the most “extraordinary” monetary intervention in the history of the world—one which ultimately saw the US Fed purchase several trillions’ worth of Treasury debt from the “market”! Yet for Krugman, it is never enough.
As the bruising midterm elections recently demonstrated, America is a deeply unserious country. A serious political discussion at the federal level would center on existential structural problems of war and peace, debt and the dollar, and entitlements. But these issues can be addressed only by real austerity and real pain. So instead, we distract and divert ourselves worrying about whether Donald Trump should be allowed on Twitter. We argue over flu viruses, guns, transgenderism, climate, and abortion (none of which the federal government has the slightest jurisdiction over) rather than the material standard of living we will leave our grandchildren.
This is possible only because millions of Americans, maybe a majority, are simply economics deniers. They either don’t believe economic laws exist or think economics can be overcome by legislation, regulation, or central bank actions. And there are plenty of deniers among the ranks of professional economists! The profession does itself no favors when it cheerleads for politics, providing an intellectual veneer for interventionism. Human nature makes us want to believe untrue things, but economics should help disabuse Americans of political fantasies.
Let’s face it: the US is not a free-market economy because we don’t much believe in markets, despite our lip service. Most Americans, and virtually all political, media, academic, corporate, and banking elites, believe economic intervention (fiscal and monetary stimulus) form the basis of our economy—not production and saving.
So, what would a serious America do to correct our disastrous economic path? This may seem like an academic or rhetorical question, but it’s worth laying out the actual steps necessary to build a real economy rather than a fake one dependent on monetary or fiscal interventionism. As Dr. Mark Thornton recently explained, these steps may be conceptually simple even as they are wildly beyond political imagination today:
a wholesale adoption of laissez-faire economic doctrine by national politicians;
immediate deep tax and regulatory reductions;
immediate sharp reductions in government spending at every level (leaving federal spending well below federal revenue);
rigorous entitlement cuts, using some combination of means testing and raising age eligibility for both Social Security and Medicare;
rigorous defense spending cuts of at least 50 percent, combined with a radically reduced US military footprint overseas;
cessation of new debt issuance by the US Treasury;
cessation of active monetary “policy” by the Federal Reserve Bank, meaning no intervention with respect to the money supply, interest rates, or credit and debt markets (including US Treasurys);
a radical reduction in the Fed’s balance sheet by letting existing Treasurys mature and roll off;
an entirely hands-off approach allowing the US dollar to float freely relative to other currencies and commodities;
an express policy against bailouts or subsidies of any kind to any industry or company, regardless of the severity of an economic downturn;
allowing troubled industries or companies, no matter how big, to fail—through bankruptcy and asset sales; investor losses; and firing boards, management, and employees when restructuring is possible;
actively encouraging business and individuals to save (through market/floating interest rates);
elimination of any price ceilings or floors on prices, wages, and profits;
elimination of any unemployment subsidies to individuals, along with abolition of minimum wage laws; and finally,
the immediate sale of federal land and other assets to reduce debt service on the $31 trillion in Treasury obligations and to restore worldwide confidence in the US economy.
This, ladies and gentlemen, is what a real program of austerity looks like. That these actions are politically unfeasible—complete nonstarters—shows how politics dominates economics in America. The profession charged with explaining how no free lunch is possible instead mostly operates as a handmaiden to the state and its bosses. But politics won’t fix this, and we won’t vote our way out of trouble.
The best path forward is at the state and local levels, attempting to build regional economies with less fragility in the face of the warring, borrowing, spending, and devaluing mania of Uncle Sam.
Everything is just fine....
https://twitter.com/Blackrussiantv/status/1600276044992299008
Maybe, maybe not. You stated an ABSOLUTE, I shot it down with actual examples that any reasonable person cannot debunk.
But some respond in other ways when caught...
Caught at what? Lowering marginal tax rates results in increased federal revenue. FACT.
Our political system is so deeply corrupted that it makes banana republics look good. It appears that a watering of the tree of liberty is the only repair remaining.
"Let's start with the lawyers . . . " At least that's what Will said.
Well, we have never faced the horror of Keynesian Economics these multiple decades, so No, we never will until we stand before our graves.
We’re done. Stick a fork in us.
If only the GOP had the presidency and a filibuster-proof Congress, they would implement all that and save our country. Elections will save us.
/sarc
“a woke government with a printing press will fund their political cronies and 1000 social-engineering schemes.
Fix that, and everything else conservatives desire will fall into place.”
Oh, i think we spent well before we were woke. The real problem is that we are a socialist country, and by God, you better gimme, gimme, gimme.
This problem is not fixable by the kind of men we have today. Today government “service” is about looting the treasury of printed money.
No this problem will only fix itself when there is nothing of value that government can give our fellow socialists, and no amount of taxes can be paid to satisfy the government appetite.
We are most of the way there. The misery will be epic. The conflicts seemingly unending, but everybody who survives will understand that not only are they broke, but any program or institution they expected to help them is also broke.
Will we become a more moral society? I suspect we may, after a hopefully brief but intense descent into the immorality of anarchy, starvation, and deprivation.
From such trauma emerges a resilient sel-reliant people.
They will simply keep printing their way out of this, and the devalued dollars will continue to lead to a decrease in our standard of living. With each passing day, there are less and less “normal” Americans to resist this as they are replaced with Thirdworlders for whom this is still a step up (they have indoor plumbing, de facto “guaranteed basic income”, etc.).
I think it’s very telling that the U.S. embarked on this historic, seemingly transformational lunar program during a period in our history when the signs of cultural and moral dysfunction and disorder were becoming increasingly clear. It was not a coincidence.
What evidence do you have to support your claim that tax rates of 40% and 41% are on the RIGHT side of your Laffer curve?
The US is a shell of a nation.
Law enforcement is politicized and no longer protects the citizenry.
First Amendment - free speech suppressed, churches shut down by gov’t mandates, the press works with the FBI and federal gov’t
Second Amendment - under assault daily, constant erosion, only a matter of time
Fourth Amendment - no privacy in your online papers, home or travels. Gov’t tracks you and your bank account.
Fifth Amendment - US Citizens held without charges for nearly 3 years after Jan 6
Tenth Amendment - states rights eroded via dependency on federal dollars
Anyone who thinks this can be salvaged and restored is fooling themselves.
Culture is dead.
No great art, music or cinema has been created. All have been politicized.
No great medical breakthroughs or scientific advances. All depend on gov’t funding and have been politicized.
Breakdown of the family unit, the foundation of gov’t and culture.
Devaluing human life, including children and political opponents.
The entire nation is a hollow shell and in total free fall and you two are debating if 40% or 41% tax rates increase revenue.
Enjoy yourselves.
I don’t know about that. Things are pretty good in my neck of the woods.
We’re no longer a republic.
If we don’t fix that FIRST, we’ll never fix anything again.
I think I'll pass. The Federal Reserve has way too much power because we debased the currency by leaving the gold standard. This unconstitutionally gave the Fed complete control over the currency by setting interest rates. The politicians went along because the Fed allows them to spend like drunken sailors and they cream a percent of the bloated budget for themselves and their backers.
What we need is: a) a halt to all immigration; b) stiff tariffs on imported manufactured goods and re-capitalization of American manufacturing; c) massive anti-trust break-ups of the banks, airlines, cell phone companies, etc.; d) restoration of the division between banks and investment banks. Make the banks make money by investing in loans to businesses and not speculation on Wall Street; e) tie executive compensation to long-term company performance so they can't cash in by boosting profits temporarily by gutting a company's core competencies and walking away from a husk like GE and Boeing; f) give the US military the capability to deter any aggression by other great powers. Does anyone thing Russia would have attacked Ukraine if Trump had remained in office?
Above all, restore election integrity.
As someone called it, the agenda to Make America Great Again.
Short of a genuine revolution where most of the current political and business classes are lustrated, I seriously doubt any of this will happen.
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