Independent Scotland

[Florestan]

That is true.

Pure democracy is unattainable on a large scale, and unsustainable on a small scale. 

That is true.

Now that you agreed with me and I agreed with you, what next?   

[Todd]

For instance, it is simply inconceivable that the Norwegian government be on the verge of bankruptcy and temporarily shut down all non-essential institutions because the King and the Storting are engaged in a bitter war over the nation's budget.

To be clear, the US Federal Government was not on the verge of bankruptcy.  As a monetarily sovereign nation, the only way the US will default is if a political decision is made to default, but that is not the same as bankruptcy. 

[Florestan]

To be clear, the US Federal Government was not on the verge of bankruptcy.  As a monetarily sovereign nation, the only way the US will default is if a political decision is made to default, but that is not the same as bankruptcy.

Then please enlighten me (this time seriously intended): why all the fuss about "The US government going bankrupt" that made headlines and breaking news several weeks ago?

[Todd]

Then please enlighten me (this time seriously intended): why all the fuss about "The US government going bankrupt" that made headlines and breaking news several weeks ago?

The headlines in the US were mostly about default, not bankruptcy.  To the extent they were about bankruptcy, that would be because the reporters and editors did not understand what was happening.  And even had the debt ceiling not been lifted, the US would have been able to service the debt for at least 60-90 days, and probably longer, though the Obama Administration, including the Prez himself, preferred to use scare tactics in public discourse.  For me the biggest takeaway from the whole episode was further evidence that the American Left is just as dishonest, and possibly more so, than their adversaries. 

As a case in point, some bona fide Big Brains of the Left (eg, Paul Krugman), stated that immediate default was a very real possibility, that Republican dismissal of this notion was incorrect, and that default really meant more than not paying debt obligations, but also included a cessation in outlays on anything the government typically plumps for.  These are all just silly arguments.  The last item is prima facie silly, but on the first two, the silliness was exposed on a most enjoyable Charlie Rose show (Charlie Rose is an interviewer for American Public Television as well as one of the big three networks), where former Obama Administration wonks Peter Orzsag and Austan Goolsbee debated with former Reagan wonk Martin Feldstein about the "crisis."  Orzsag and Goolsbee – capable and intelligent men both – toed the Democratic line, while Mr Feldstein, himself intelligent and capable (he teaches at Harvard, so one would think his credentials among Lefties should be secure), pointedly asked Mr Orzsag, based on his experience in government, if it would be possible to prioritize payments so that debt holders were paid first.  After some verbal fidgeting, Mr Orzsag begrudgingly admitted it would be possible.  Since he worked for Barry O, it's hard to see how one could argue that things have changed since he left.

Something I have yet to see raised, though it very well may have been, is that the Lefties' arguments actually undermine their own philosophical position.  Underlying the worldview of the American Left are the notions that government is good, that the people who run government are good, and that the people who run government are capable.  But here I heard and read, repeatedly, about how default was a real possibility.  This required all three of those notions to be false.  This required readers and listeners to believe that the Treasury of the United States of America, in continual professional operation since it was established by Alexander Hamilton, did not and does not have people who plan for emergencies and contingency situations and cannot pay creditors using a payment waterfall.  This is very clearly false.  Of course the Treasury is filled with people, lots of them, who know how to do their jobs.  Of course debt holders would be paid first.  The US is both contractually obligated to debt holders and constitutionally obligated to pay debt holders via the 14th Amendment. 

Now, the stronger argument the American Left fielded – that truly hitting the debt ceiling and not paying everyone would cause a recession – is true and should have been hammered home.  But scare tactics are easier, and for a lazy (non-) leader like Obama, understandable. 

In the event that the US ever defaults on a large scale – the US has defaulted before, including in 1979, but they have not been on a large scale – then there would be serious consequences, including near chaos in pricing financial assets the world over and a freezing of money markets.  If that happens, the political leaders responsible should be driven from power, with pitchforks if need be. 

[Florestan]

scare tactics are easier, and for a lazy (non-) leader like Obama, understandable.

Hey, wait a minute! Obama was democratically elected, right? So you have what the majority of the American people wanted and you should personally submit to the majority --- that's how democracy works and you being a staunch democrat cannot complain. 

In the event that the US ever defaults on a large scale – the US has defaulted before, including in 1979, but they have not been on a large scale – then there would be serious consequences, including near chaos in pricing financial assets the world over and a freezing of money markets.  If that happens, the political leaders responsible should be driven from power, with pitchforks if need be.

They'll be driven from power and retire peacefully in their homes and businesses, enjoying their life happily everafter, while the harm they did will outlive them. In pretty much the same situation king Louis the 16th lost his head. Long live the Republic! 

[Sammy]

Hey, wait a minute! Obama was democratically elected, right? So you have what the majority of the American people wanted and you should personally submit to the majority --- that's how democracy works and you being a staunch democrat cannot complain. 

That's not how our democracy works.  The only "given" is that Obama was elected President by the majority of Americans who voted.  He has all the power and constraints placed on him by the Constitution, Federal law and precedent. 

[Florestan]

That's not how our democracy works.  The only "given" is that Obama was elected President by the majority of Americans who voted.  He has all the power and constraints placed on him by the Constitution, Federal law and precedent.

Fine! Then he either is bound by those constraints, and therefore lame and inoffensive, or he oversteps them and pursue his goals in open disregard to them, and then what use are those other than as a mere paperwork?

[Sammy]

Fine! Then he either is bound by those constraints, and therefore lame and inoffensive, or he oversteps them and pursue his goals in open disregard to them, and then what use are those other than as a mere paperwork?

If a President disregards his constraints, he opens himself up for a potential impeachment.  With impeachment on the horizon for disregarding his constraints, Nixon resigned.

[milk]

"...that government is good, that the people who run government are good, and that the people who run government are capable..."

I'm curious if you would then say that underpinning the American right is the belief that corporations are good, that the people who run corporations are good, and that the people who run corporations are capable?

[Todd]

I'm curious if you would then say that the underpinning the American right is the belief that corporations are good, that the people who run corporations are good, and that the people who run corporations are capable?

I should think so (using "a" rather than "the" before "underpinning"), and I would think most on the American Left would agree. 

[milk]

I should think so (using "a" rather than "the" before "underpinning"), and I would think most on the American Left would agree.

But many on the left and right, I suppose, would disagree with their respective descriptions. I suppose it also depends on what you're covering by the terms left and right. I can't imagine lefties in the 60s agreeing with this. Of course, if Johnson was a lefty, then yes. 

[Todd]

I suppose it also depends on what you're covering by the terms left and right.

By Lefties, I mean most Democrats, and other less consequential left wing parties.  Perhaps hippie-dippie lefties in the 60s would have disagreed, or perhaps more stringent actual Marxists/Socialists or whatever would have disagreed and still do disagree, and perhaps Elizabeth Warren would disagree now, but of course part of the disagreement, Marxists and their ilk aside, stems from the Lefties' incomplete and (possibly) uninformed understanding of what a corporation is.  I would guess that most people - left and right, to be fair - probably envision Fortune 500 companies when the word corporation is used.  The overwhelming majority of corporations are small businesses though, and only hardcore collectivists don't sing the praises of small businesses.  Corporations are what keep the country going.  In 2008, per the Census Bureau, about 60 million people worked for corporations with less than 500 employees (granted, that is getting big, but not Fortune 500 big), and of that, 40 million people worked for corporations with less than 100 employees, and 20 million worked for companies with less than 20 employees.  (This is out of about 120 million employed by all corporations.)  Only an idiot would argue that "corporations" are bad, or that the people who run them are bad or incapable.

[milk]

By Lefties, I mean most Democrats, and other less consequential left wing parties.  Perhaps hippie-dippie lefties in the 60s would have disagreed, or perhaps more stringent actual Marxists/Socialists or whatever would have disagreed and still do disagree, and perhaps Elizabeth Warren would disagree now, but of course part of the disagreement, Marxists and their ilk aside, stems from the Lefties' incomplete and (possibly) uninformed understanding of what a corporation is.  I would guess that most people - left and right, to be fair - probably envision Fortune 500 companies when the word corporation is used.  The overwhelming majority of corporations are small businesses though, and only hardcore collectivists don't sing the praises of small businesses.  Corporations are what keep the country going.  In 2008, per the Census Bureau, about 60 million people worked for corporations with less than 500 employees (granted, that is getting big, but not Fortune 500 big), and of that, 40 million people worked for corporations with less than 100 employees, and 20 million worked for companies with less than 20 employees.  (This is out of about 120 million employed by all corporations.)  Only an idiot would argue that "corporations" are bad, or that the people who run them are bad or incapable.

Right, "bad" doesn't cover it. It's a bit too abstract. Most people want, and benefit from, stuff like medicare and EPA regulations and expect them to be administered by people at least as capable as those running banks. As far as the left and right, though I'm on the left, I don't think it's either or. I wouldn't argue for splitting the difference, but we do need each other. I've lived in Japan long enough to see that a country governed by one party for fifty years and, generally, "consensus," is a menace and a democracy in name only.   

[Todd]

I don't think it's either or...I've lived in Japan long enough to see that a country governed by one-party for fifty years and, generally, "consensus" is a menace and a democracy in name only.

I completely agree.  To a large extent, that is why I think divided government is the best possible situation for the US, except, perhaps, in time of true national emergency.  We need at least two parties that offer competing ideas.  We can go the multiple party route, but under the US system I don't really see a huge benefit there; both parties encompass a pretty broad array of outlooks, and Congress would be even slower and more cumbersome (not that that would be bad, necessarily) with three or four or five parties with a lot of members.  But if that happens, that's fine, too.  I completely understand the Right's desire to see a smaller government - hell, I share it - but reducing the government's role is complex and of course a lot of people on the Right really want cuts to other people's programs.  Perhaps I'm unusual in that I know what cuts - and reductions in tax expenditures, in particular - will mean for me, and I accept that.  But I also cannot help but see as assuredly as a lot of rhetoric used by the American Left is hypocritical and outright dishonest, the Right has allowed itself to be coopted, to an extent, by morons pursuing moronic ideas.  The Right must change its game, but not, I hasten to add, to necessarily be more like the vaunted Republican Party of the 60s or 70s or 80s, or whatever Lefty approved Golden Age one selects.

[milk]

I completely agree.  To a large extent, that is why I think divided government is the best possible situation for the US, except, perhaps, in time of true national emergency.  We need at least two parties that offer competing ideas.  We can go the multiple party route, but under the US system I don't really see a huge benefit there; both parties encompass a pretty broad array of outlooks, and Congress would be even slower and more cumbersome (not that that would be bad, necessarily) with three or four or five parties with a lot of members.  But if that happens, that's fine, too.  I completely understand the Right's desire to see a smaller government - hell, I share it - but reducing the government's role is complex and of course a lot of people on the Right really want cuts to other people's programs.  Perhaps I'm unusual in that I know what cuts - and reductions in tax expenditures, in particular - will mean for me, and I accept that.  But I also cannot help but see as assuredly as a lot of rhetoric used by the American Left is hypocritical and outright dishonest, the Right has allowed itself to be coopted, to an extent, by morons pursuing moronic ideas.  The Right must change its game, but not, I hasten to add, to necessarily be more like the vaunted Republican Party of the 60s or 70s or 80s, or whatever Lefty approved Golden Age one selects.

It's interesting for me to compare terms and ideas across international lines. The Japanese "right," now back in power after a brief hiatus, has done everything it can not to cut the government and has convinced people to raise the sales tax. Of course, the debt is well over 200% of GDP in Japan. But those who argued to cut the government first were unceremoniously shunted from political life (They tried to put Ozawa, associated with the "left," in jail - quite unusual for Japan. Osaka's Hashimoto, the closest thing to a Tea Partier here, went from rising star to humiliated loser in the span of one year). Japan is already a pretty darn expensive place and the sales tax includes food and medicine. I know nothing about monetary policy and not much more about economics in general, so someone can correct me if I'm wrong, but Abenomics looks not so different from Obamanomics in that they both advocated printing more money. To me, it seems that boosting the economy by manipulating currency aids a kind of holding pattern in that it allows business as usual to continue, along with Abe's astounding popularity, with no real thought to the future or need for difficult changes. Anyway, that's the "right" in Japan. Perhaps Japan's biggest problem is it's inability (with no improvement on the horizon) to produce more workers, either through sex, women's participation in the work force, or immigration. There's one strength of the U.S.: new people = new vitality.       

[Todd]

I know nothing about monetary policy and not much more about economics in general, so someone can correct me if I'm wrong, but Abenomics looks not so different from Obamanomics in that they both advocated printing more money. To me, it seems that boosting the economy by manipulating currency aids a kind of holding pattern in that it allows business as usual to continue, along with Abe's astounding popularity, with no real thought to the future or need for difficult changes.

Abenomics combines easy monetary policy with a larger relative fiscal stimulus than used in the US, but in essence it is the same.  While policy makers in all countries pursuing loose monetary policy insist that they are not pursing depreciation as a means to expand exports, inflate financial asset prices (fostering a sort of trickle down effect), and not so secretly generate more inflation, that is in fact what they are doing.  I'm hoping, but not completely hopeful, that it doesn't get worse, with attendant worsening of economic nationalism. 

I doubt Abenomics will have the hoped for results.  Japan has had low nominal, and even negative real, interest rates on and off for years, and with so much debt already, increasing it more and more will end up causing major pain at some point.  Not this year, not next, but eventually.  When rates do rise, and not even by a lot, the debt service burden will be horrendous.  All large economies need to perform some structural changes, and I'd prefer to see them start sooner rather than later, so as to phase them in and lessen the impact.

[milk]

Abenomics combines easy monetary policy with a larger relative fiscal stimulus than used in the US, but in essence it is the same.  While policy makers in all countries pursuing loose monetary policy insist that they are not pursing depreciation as a means to expand exports, inflate financial asset prices (fostering a sort of trickle down effect), and not so secretly generate more inflation, that is in fact what they are doing.  I'm hoping, but not completely hopeful, that it doesn't get worse, with attendant worsening of economic nationalism. 

I doubt Abenomics will have the hoped for results.  Japan has had low nominal, and even negative real, interest rates on and off for years, and with so much debt already, increasing it more and more will end up causing major pain at some point.  Not this year, not next, but eventually.  When rates do rise, and not even by a lot, the debt service burden will be horrendous.  All large economies need to perform some structural changes, and I'd prefer to see them start sooner rather than later, so as to phase them in and lessen the impact.

Nice succinct explanation. Hmmm...it seems to me that politicians, and more so Japanese politicians, are pretty bad at long-term thinking. With such a steep decline in the number of workers and increase in the number of elderly relying on extremely expensive benefits, is there any way to avoid disaster? I suppose that's a trillion dollar question.

[Todd]

is there any way to avoid disaster?

Yes.  Steeply progressive retirement benefits, an increased retirement age, a large increase in the number of immigrant workers (which will prove difficult in Japan), and increasing reliance on high value added automated production all will play a role.  Japan offers a glimpse into the future for a lot of developed countries, though some specifics are obviously different.  Also worth noting is that zero or low GDP growth in a country with a shrinking population yields a higher GDP per capita.  Things are hardly rosy, but they could be worse.

[milk]

Yes.  Steeply progressive retirement benefits, an increased retirement age, a large increase in the number of immigrant workers (which will prove difficult in Japan), and increasing reliance on high value added automated production all will play a role.  Japan offers a glimpse into the future for a lot of developed countries, though some specifics are obviously different.  Also worth noting is that zero or low GDP growth in a country with a shrinking population yields a higher GDP per capita.  Things are hardly rosy, but they could be worse.

Yes, most Japanese that I talk to are convinced that Japan can never accept new people. Of course, this is a result of being severely brainwashed into the illusion of innate different-ness. Anyway, sorry I got you off topic. Actually I was following along the democracy vs. monarchy debate with interest. Japan has it's imperial family as well. And they are gods, not just anointed by god. However, like a lot of other things here, it appears to be an elaborate exercise in sadism/masochism.