Meltdown

[Coopmv]

Given that the existing stimulus and bailouts are going to put the gross public debt / GDP ratio over 90% (where recent empirical studies find strong evidence of sustained impairment of economic growth) more debt-funded pork-barrel spending is hardly the solution.  Although that is the predictable reaction of Keynesians to the abject failure of Obama's program, but we are already at the point where the solvency of the government is suspect (indeed if you take into account unfunded SS & Medicare liabilities, the US is bankrupt).

And I seriously doubt politicians have any real knowledge either on the causes of the financial crisis or the fixes (particularly because ultimately the politicians are the problem)

Because 98% (or perhaps even higher percentage) of the politicians are career politicians who have never worked in the private sectors.  As such, they have no clue as to what works and what does not work.  How many jobs has the US lost since China was admitted into the WTO?  That trade imbalance should have been issue # 1 for the politicians to address.  So far there have been only GATT's - the general agreement to talk and talk (but do nothing) ...   

[drogulus]

Because 98% (or perhaps even higher percentage) of the politicians are career politicians who have never worked in the private sectors.  As such, they have no clue as to what works and what does not work.  How many jobs has the US lost since China was admitted into the WTO?  That trade imbalance should have been issue # 1 for the politicians to address.  So far there have been only GATT's - the general agreement to talk and talk (but do nothing) ...   

     That doesn't show what you think. It shows that politicians are not willing to do something that's hard, with a low chance of a near-term payoff. They know they have to improve the schools, and put downward pressure on nondiscretionary spending because discretionary spending is where public investment is done.* You need a spending freeze on the entitlements and military, tax increases at the top, tax cuts at the bottom, and a reduction of middle class perks like home interest deductions (which are a bad idea anyway). All the cute tricks to convince people they aren't getting poorer should be done away with.

     Then maybe we'll get some movement towards improving education. And entitlement spending restraint will make it easier to boost R & D. The history of this country is that government spending leads private investment, from the Erie Canal to the Homestead Act to communications satellites and the Internet. Private spending doesn't build things in a banana republic. If you don't want to live on a big plantation, stop listening to the plantation pols. There's a reason they don't want to build anything. It would make what they have worth less. How can you be really, really rich unless everyone else is really poor? That's the mentality.

     _{* Eisenhower was sneaky and got the highways built as a defense measure. He was smarter than he appeared.}

[bwv 1080]

     government spending leads private investment, from the Erie Canal to the Homestead Act to communications satellites and the Internet. Private spending doesn't build things in a banana republic. If you don't want to live on a big plantation, stop listening to the plantation pols. There's a reason they don't want to build anything. It would make what they have worth less. How can you be really, really rich unless everyone else is really poor? That's the mentality.

     _{* Eisenhower was sneaky and got the highways built as a defense measure. He was smarter than he appeared.}

So you trust congress to decide what areas the US should invest in, like corn ethanol perhaps?  How do you propose to get around the Public Choice issues?  You give a handful of examples of basic infrastructure or some serendipitous outcomes where a couple of programs wound up having later, unforeseen commercial applications.  That actually is a pretty small list if you think about it, compared to the contributions of the private sector

[drogulus]

So you trust congress to decide what areas the US should invest in, like corn ethanol perhaps?  How do you propose to get around the Public Choice issues?  You give a handful of examples of basic infrastructure or some serendipitous outcomes where a couple of programs wound up having later, unforeseen commercial applications.  That actually is a pretty small list if you think about it, compared to the contributions of the private sector

    I'm sorry, did you say contributions from the private sector? I don't know what that is. Generally the private sector will invest depending on what conditions allow, and by far the most important factors are the level of infrastructure and the availability of an educated workforce. As the plantationists convince more and more people that infrastructure improvements and public R & D investment is "pork barrel spending" the private sector will go elsewhere or it will content itself with fighting for a piece of a shrinking pie. But build things? No, it won't do that. That's not how the railroads were built, for example. Or airports and the airline industry. Or the auto industry. All of them were built on subsidies. The government decided that there should be winners, and we won. Now the plantationists tell us that deciding to win is "picking winners", a very bad thing. Apparently they have no problem with deciding to lose, which is somehow fairer.

[bwv 1080]

    I'm sorry, did you say contributions from the private sector? I don't know what that is. Generally the private sector will invest depending on what conditions allow, and by far the most important factors are the level of infrastructure and the availability of an educated workforce. As the plantationists convince more and more people that infrastructure improvements and public R & D investment is "pork barrel spending" the private sector will go elsewhere or it will content itself with fighting for a piece of a shrinking pie. But build things? No, it won't do that. That's not how the railroads were built, for example. Or airports and the airline industry. Or the auto industry. All of them were built on subsidies. The government decided that there should be winners, and we won. Now the plantationists tell us that deciding to win is "picking winners", a very bad thing. Apparently they have no problem with deciding to lose, which is somehow fairer.

Not sure where you came up with this term "Plantationists", but the railroads & auto industry were built by private capital.   We live in a developed country, so we have an infrastructure.  Aside from replacing some that is old & failing, there's not that much left to do.  There is some role for public spending on basic R&D, but that is a long term investment, beside most of the basic R&D in the US is done by private non-profits and State Universities, not the Federal government.  Furthermore, the gov funding on R&D is successful because it is dispersed into small amounts so that there is no payoff to interest groups fight to get a piece of it.

So what exactly are these obvious candidates for public investment that the private sector cannot compete?

Still have not addressed the public choice issues, how do we avoid getting programs like Corn Ethanol?  Do you really think our politicians make decisions based upon a disinterested consideration of what is in the public good

[Coopmv]

     That doesn't show what you think. It shows that politicians are not willing to do something that's hard, with a low chance of a near-term payoff. They know they have to improve the schools, and put downward pressure on nondiscretionary spending because discretionary spending is where public investment is done.* You need a spending freeze on the entitlements and military, tax increases at the top, tax cuts at the bottom, and a reduction of middle class perks like home interest deductions (which are a bad idea anyway). All the cute tricks to convince people they aren't getting poorer should be done away with.

     Then maybe we'll get some movement towards improving education. And entitlement spending restraint will make it easier to boost R & D. The history of this country is that government spending leads private investment, from the Erie Canal to the Homestead Act to communications satellites and the Internet. Private spending doesn't build things in a banana republic. If you don't want to live on a big plantation, stop listening to the plantation pols. There's a reason they don't want to build anything. It would make what they have worth less. How can you be really, really rich unless everyone else is really poor? That's the mentality.

     _{* Eisenhower was sneaky and got the highways built as a defense measure. He was smarter than he appeared.}

While all the points you have raised so far are true, you seem to totally ignore the trade imbalance issue.  In my opinion, the loss of all those manufacturing jobs have had a severe impact on the middle class and also a bad multiplier effect on the overall US economy (i.e. when middle class cannot spend, many other jobs are impacted).  American companies have been shipping many manufacturing jobs overseas and the trend is still continuing under this administration.  How are new job creations going to help when we continue to lose existing jobs.  All those talks of green jobs have been just talks.  Without a resurgent middle class, there is no hope any of the issues that have been discussed so far can be addressed.  A stronger middle class will bring in the additional tax revenues.  The wealthiest 5% should pay higher taxes, but they alone cannot close that massive federal deficits.

[Coopmv]

So you trust congress to decide what areas the US should invest in, like corn ethanol perhaps?  How do you propose to get around the Public Choice issues?  You give a handful of examples of basic infrastructure or some serendipitous outcomes where a couple of programs wound up having later, unforeseen commercial applications.  That actually is a pretty small list if you think about it, compared to the contributions of the private sector

That corn ethanol is a major pork IMO and has been used to round up votes from the farm-belt.  It helped to drive up food prices since the farm animals consume corn-based feed.  They need to find other sources such as algae or anything else that can produce ethanol without jacking up food prices. 

[bwv 1080]

That corn ethanol is a major pork IMO and has been used to round up votes from the farm-belt.  It helped to drive up food prices since the farm animals consume corn-based feed.  They need to find other sources such as algae or anything else that can produce ethanol without jacking up food prices.

Right, the point is government economic policies are co-opted by special interests.  Environmental regulation, anti-trust action, tariffs protect uncompetitive businesses with good lobbyists, not the public good (which does not exist in most cases anyway)

http://en.wikipedia.org/wiki/Public_choice_theory

[drogulus]

Not sure where you came up with this term "Plantationists", but the railroads & auto industry were built by private capital.   We live in a developed country, so we have an infrastructure. 

     No, we don't live in a developed country. There are no such countries. We decided to develop it. We had natural advantages, to be sure, but deciding to develop them meant that Hamilton had to win an argument against Jefferson in favor of an industrial policy. We gave huge subsidies to the railroads to link up the country, huge subsidies to oil companies and rubber interests to build the auto industry, as well as creating an interstate highway system. Yes, private money was invested, but where it's invested matters. Where does private money invest in a country with no roads, bridges, or electricity? When will private industry create a miracle in countries where most of the people are illiterate? Will they build schools for everyone? When will this happen? Never is when it will happen. In a banana republic it's subversive to educate the peons.

[bwv 1080]

While all the points you have raised so far are true, you seem to totally ignore the trade imbalance issue.  In my opinion, the loss of all those manufacturing jobs have had a severe impact on the middle class and also a bad multiplier effect on the overall US economy (i.e. when middle class cannot spend, many other jobs are impacted).  American companies have been shipping many manufacturing jobs overseas and the trend is still continuing under this administration.  How are new job creations going to help when we continue to lose existing jobs.  All those talks of green jobs have been just talks.  Without a resurgent middle class, there is no hope any of the issues that have been discussed so far can be addressed.  A stronger middle class will bring in the additional tax revenues.  The wealthiest 5% should pay higher taxes, but they alone cannot close that massive federal deficits.

100 years ago something like 90% of the population was employed in agriculture, now it is under 2%, where did all those agricultural jobs go?  Why aren't we poorer because of it?

Before China, there was Japan, Taiwan and Hong Kong.  The US lost its competitive advantage in manufacturing during the 1970s.  It is not coming back, you can't just slap on a bunch of tariffs and hope that textile mills and television factories start sprouting up.  You have a situation now where the wage differential between a US worker and an equally qualified Asian is 10-1 or more, you simply cannot compete on that and no government policy can fix it.   The jobs created and lost this decade were overwhelmingly in construction and finance and are not coming back to any degree.  The point is nobody knows how to fix this problem.  There are no real public policy solutions other than to create an environment that supports entrepreneurship and exports.  protectionist policies will destroy the only real potential source of wealth creation that I can see, which is providing goods and services to the growing economies of China, India, Brazil etc.  The US still has competitive advantages in medical and information technology and if you look at the S&P 500, over 50% of the revenues are from outside the US with the majority of that growth coming from the developing world. 

[drogulus]

Right, the point is government economic policies are co-opted by special interests.  Environmental regulation, anti-trust action, tariffs protect uncompetitive businesses with good lobbyists, not the public good (which does not exist in most cases anyway)

http://en.wikipedia.org/wiki/Public_choice_theory

     To some extent, that's true. You have to do it anyway. Ethanol from corn is just the kind of inconsequential blip that allows the plantationists to say that government policies can't get it right. Meanwhile the subsidies for oil exploration continue, and perhaps they should as a bridge from the old to the new, but let's keep things in perspective, shall we? Doing nothing in a crisis is hardly better than mistakes made while doing the right thing.

[bwv 1080]

     No, we don't live in a developed country. There are no such countries. We decided to develop it. We had natural advantages, to be sure, but deciding to develop them meant that Hamilton had to win an argument against Jefferson in favor of an industrial policy. We gave huge subsidies to the railroads to link up the country, huge subsidies to oil companies and rubber interests to build the auto industry, as well as creating an interstate highway system. Yes, private money was invested, but where it's invested matters. Where does private money invest in a country with no roads, bridges, or electricity? When will private industry create a miracle in countries where most of the people are illiterate? Will they build schools for everyone? When will this happen? Never is when it will happen. In a banana republic it's subversive to educate the peons.

So then answer my earlier question, what are the obvious candidates for public investment that the private sector cannot compete?

No one is arguing against roads or public education, you seem to keep wanting to throw up strawmen here

[Coopmv]

Yes, private money was invested, but where it's invested matters. Where does private money invest in a country with no roads, bridges, or electricity? When will private industry create a miracle in countries where most of the people are illiterate? Will they build schools for everyone? When will this happen? Never is when it will happen. In a banana republic it's subversive to educate the peons.

While I have always favored small government, I am personally very much against for-profits educational institutions.  The for-profits schools just want to please their investors and care little for their customers - the paying students. 

[Coopmv]

So then answer my earlier question, what are the obvious candidates for public investment that the private sector cannot compete?

No one is arguing against roads or public education, you seem to keep wanting to throw up strawmen here

What about those private contractors the Pentagon has hired to run various services in Iraq and Afghanistan other than doing the actual fighting?  I have been reading all kinds of horror stories about those private contractors ...

[bwv 1080]

While I have always favored small government, I am personally very much against for-profits educational institutions.  The for-profits schools just want to please their investors and care little for their customers - the paying students.

Its worse than that, they are taking advantage of the government student loan program to provide overpriced, worthless degrees to people who then default at a rate of about 66%.

People forget there is a third option - private non-profits  - in this gov vs private industry debate. 

[bwv 1080]

What about those private contractors the Pentagon has hired to run various services in Iraq and Afghanistan other than doing the actual fighting?  I have been reading all kinds of horror stories about those private contractors ...

Yes, the Military / National Defense establishment is the worst example of this

[Coopmv]

Its worse than that, they are taking advantage of the government student loan program to provide overpriced, worthless degrees to people who then default at a rate of about 66%.

People forget there is a third option - private non-profits  - in this gov vs private industry debate.

It is time to shut down these for-profits schools since they do not serve any national interests.

[drogulus]

While I have always favored small government, I am personally very much against for-profits educational institutions.  The for-profits schools just want to please their investors and care little for their customers - the paying students. 

     The point is you have to step back and see the whole picture. How did the wealthy countries get that way when all of them are quasi-socialistic and have been that way for a century? Why isn't there one country, just one, that actually fulfills the conservative fantasy of free enterprise giving birth to itself owing nothing to nobody?

     I have never and will never favor a size for government. That's a misdirection. It's the capability of government that matters. It needs to be big enough to do what it should do, which is provide for the improvements called for by changing conditions.

[drogulus]

Yes, the Military / National Defense establishment is the worst example of this

    That's what comes from shrinking the army while spending insane amounts of money on heavy weapons to keep those Soviet tanks from rolling across West Germany.

[bwv 1080]

     The point is you have to step back and see the whole picture. How did the wealthy countries get that way when all of them are quasi-socialistic and have been that way for a century? Why isn't there one country, just one, that actually fulfills the conservative fantasy of free enterprise giving birth to itself owing nothing to nobody?

Perhaps because your characterization of classical liberalism is a strawman?