Mark Steyn, US Federal Debt & Conventional Wisdom

[Michael Hardner]

If the US federal government can overcome this fear - even by borrowing - then it would be a good thing. Once Americans get back to work, trust one another, the debt will easily be repaid. But if Americans stay in this funk, then the cost will be great and it may last for years.

This is a good discussion. I especially agree with Auguste's point about fear. Economics is based on human perceptions, and the idea that raising taxes will shut down the economy is one of the key perceptions here.

The US needs to stop deficit spending, and to tax what they need to pay for the government. If that means a tax hike, then somebody is going to have to point this out sooner or later.

Instead, the richest country in the world chooses to let its infrastructure crumble, to cut it's small amount of social spending and to point fingers everywhere. Americans need to solve their problems.

I don't get it. But then again, I'm Canadian.

[bush_cheney2004]

Bush Jnr put $700 billion of borrowed money in with TARP in 2008 as did Obama in 2009 with his $750 billion stimulus package. IMV, America could use another dose.

90% of TARP funding has been paid back....the US government could actually make some money on the bailout, depending on how things go with GM and Chrysler. Vote is still out on the stimulus package's effectiveness.

[bush_cheney2004]

The US needs to stop deficit spending, and to tax what they need to pay for the government. If that means a tax hike, then somebody is going to have to point this out sooner or later.

The US will not stop deficit spending, as it is too powerful a tool. Canada also has a deficit.

Instead, the richest country in the world chooses to let its infrastructure crumble, to cut it's small amount of social spending and to point fingers everywhere. Americans need to solve their problems.

America's social spending is huge...not small.

I don't get it. But then again, I'm Canadian.

Agreed...you don't get it....but your economy is very dependent on it.

[Michael Hardner]

The US will not stop deficit spending, as it is too powerful a tool. Canada also has a deficit.

It's ok to have a deficit in a recession. We still had a surplus going into it, though.

America's social spending is huge...not small.

I'm surprised to see that. Is it true ? It's my impression that we spend more per capita on such things. At least it seems that have a much softer systems - but my impressions also come from Canadian conservatives who complain about that.

Agreed...you don't get it....but your economy is very dependent on it.

Dependent, and also influenced by trends in politics and government for good or bad - yes.

[bush_cheney2004]

It's ok to have a deficit in a recession. We still had a surplus going into it, though.

You can't compare Canada's economy or government spending to the US...California's economy is bigger than all of Canada's, but Canadian federal spending is much larger.

I'm surprised to see that. Is it true ? It's my impression that we spend more per capita on such things. At least it seems that have a much softer systems - but my impressions also come from Canadian conservatives who complain about that.

Canada actually saves money by taking advantage of excess capacity in the USA for all sorts of things, from health care to slaughtering beef.

Dependent, and also influenced by trends in politics and government for good or bad - yes.

If it chooses to be. I can't relate...of course.

[Michael Hardner]

Canada actually saves money by taking advantage of excess capacity in the USA for all sorts of things, from health care to slaughtering beef.

That seems like a weak explanation. Not that I have one either though.

[bush_cheney2004]

That seems like a weak explanation. Not that I have one either though.

It not an explanation...just a statement that reports the suffocating integration to the US economy. Look at the thread(s) on buying CF-18 replacements...the entire discussion is framed around American metrics and choices. Mark Steyn makes a handsome living as just another "vicarious American".

[Pliny]

It starts with the money. For dominant powers, it always does – from the Roman Empire to the British Empire.

Ahhh....Mark Steyn. One of my favourite writers.

[August1991]

Ahhh....Mark Steyn. One of my favourite writers.

I once would have agreed with you but not now. Mark Steyn has gone the route of The Economist. He has sold out.

It starts with the money. For dominant powers, it always does – from the Roman Empire to the British Empire.

It starts with the money? What a hackneyed phrase, that comes from Watergate - not the Roman or British Empire.

As far as I know, conventional wisdom does not use money to explain the collapse of the Roman Empire or the British Empire.

----

I like Steyn for many things. I met him once in a grocery store in Montreal with his kids. He's an ordinary person, a little uptight maybe.

In general, I agree with many of his basic arguments. I too believe that individual liberty is a precious gift, always to be defended. I also think that the State in general in western countries is too large, too intrusive.

But Steyn's forays into demography and now macro-economics are testing his abilities. Since at least Malthus, demography is the deathbed of social/political prognosticators. (In Quebec, demography is understandably an intellectual industry, but largely without product.)

So when Steyn started to talk of federal government debt, or out-sourcing - I reckoned that he's gone "The Economist" circa 1995. He's become an echo chamber. He's telling customers what they want to hear.

Edited October 29, 2010 by August1991

[maple_leafs182]

It's ok to have a deficit in a recession. We still had a surplus going into it, though.

No, no it isn't.

You have to much faith in Keynesian economics. Keynesian economics is what lead to the problem in the first place, it won't solve the problem.

Did you see my post ? Foreign investors, including the US, own large percentages of Chinese assets. Their fate is now intertwined with that of the west. They don't own us, we own each other.

America's economy and China's economy are intertwined, I am not denying that. If America falls, China will feel it. China relies heavily on Americans to by the cheap crap they make. That being said, China is looking to other countries to trade with because they see how terrible the U.S. economy is doing.

China won't continue to buy American bonds when the U.S. dollar continues to lose value, that would be a terrible investment. Eventually China along with other countries will stop buying American bonds, when that happens, America will turn to the Federal Reserve to buy bonds. If that happens, the dollar will inflate risking hyper inflation killing the U.S. dollar along with their economy.

You have to look at what China has been spending their money on. They have been building trains, improving their infrastructure while America has been spending its money on wars. China is in a lot better shape then America.

[August1991]

No, no it isn't.

You have to much faith in Keynesian economics. Keynesian economics is what lead to the problem in the first place, it won't solve the problem.

Maple Leaf, you ask the right questions.

It is not faith. It is a question of understanding a model of the "universe". We now believe in the Galilean model of the solar system - with subsequent refinements. The Keynesian model is similar.

----

In the 1930s, US unemployment was 30%. At present, it is 10%. Americans should thank Bush Jnr and Obama that it is only 10% now rather than 30%.

How did Bush Jnr and Obama manage this? They both used Keynes' insights of the world and approved government borrowing.

Edited October 29, 2010 by August1991

[Michael Hardner]

America's economy and China's economy are intertwined, I am not denying that. If America falls, China will feel it. China relies heavily on Americans to by the cheap crap they make.

Depending on what you mean by "falls", China would also lose the giant investment in their industry - leaving massive unemployment.

[GostHacked]

Unlike the Japanese in the 1980s and 1990s, the Chinese tend to own federal paper and not privately issued US paper.

So they are buying into the US government and not the private sector. Correct?

[maple_leafs182]

In the 1930s, US unemployment was 30%. At present, it is 10%. Americans should thank Bush Jnr and Obama that it is only 10% now rather than 30%.

How did Bush Jnr and Obama manage this? They both used Keynes' insights of the world and approved government borrowing.

They count unemployment differently now. Some say real unemployment numbers are somewhere between 15%-20%.

The surface of the U.S. economy may be shining right now but the inside rots.

Bernake is inflating the dollar in order to help the economy and as a result the dow is rising because it is measured in dollars. What people aren't looking at is how inflating the dollar is hurting the savers. Prices will rise, the cost of living will rise and because of that unemployment will rise.

Not too mention that the stimulus isn't the real economy, once it disappears many of the jobs associated with it will disappear as well. The stimulus is more of a bubble to the economy then a fix.

[August1991]

They count unemployment differently now. Some say real unemployment numbers are somewhere between 15%-20%.

The surface of the U.S. economy may be shining right now but the inside rots.

Bernake is inflating the dollar in order to help the economy and as a result the dow is rising because it is measured in dollars.

They may count unemployment differently now, but whatever the measure, there is a difference between 30% and 10%.

IOW, this recent severe financial panic meant fewer people lost their jobs.

MapleLeaf, you mention Bernanke. I noted Bush Jnr and Obama above for thanks. We should also thank Bernanke. But these three owe a great debt to Keynes - just as they must thank Adam Smith and Milton Friedman.

We truly live in a better world. But in this regard, Mark Steyn is oblivious. He is pre-Keynes, and even sometimes pre-Smith.

Edited October 31, 2010 by August1991

[maple_leafs182]

They may count unemployment differently now, but whatever the measure, there is a difference between 30% and 10%.

IOW, this recent severe financial panic meant fewer people lost their jobs.

MapleLeaf, you mention Bernanke. I noted Bush Jnr and Obama above for thanks. We should also thank Bernanke. But these three owe a great debt to Keynes - just as they must thank Adam Smith and Milton Friedman.

We truly live in a better world. But in this regard, Mark Steyn is oblivious. He is pre-Keynes, and even sometimes pre-Smith.

You're wrong, Keynesian economics will lead to the collapse of the U.S. dollar.

[bloodyminded]

Steyn is such a blowhard. Now on the subject of economics, he complains about Globalization (which was brought to us by ostensibly forward-thinking conservatives in the 1980s) and shows that he is some kind of isolationist. He dismisses services, equating them to what Michelle Obama does.

What a cranky mess he is.

Steyn is not a deep thinker. He's an angry polemicist, no different from, say, Ann Coulter (and embraces the same love of nasty invective), but with better skills of articulation.

At best--the very best--he is utterly incurious and banal.

Edited October 31, 2010 by bloodyminded

[August1991]

Steyn is not a deep thinker. He's an angry polemicist, no different from, say, Ann Coulter (and embraces the same love of nasty invective), but with better skills of articulation.

At best--the very best--he is utterly incurious and banal.

Steyn on his bad days is a polemicist but but he is curious and certainly not banal.

Deep thinker? IMHO, Steyn thinks better or more deeply than, say, Noam Chomsky.

You're wrong, Keynesian economics will lead to the collapse of the U.S. dollar.

I don't think anyone is following Keynes in these questions. But they are certainly using economic theory - based on the likes of Smith, Keynes, Friedman, Cournot - to name a few.

Good thing too. Two years after this panic, we are starting to get back to normal.

"Collapse of the US dollar"? People in the midst of a panic say such things, and people who communicate through their teeth to aliens. ML, which are you?

Edited November 2, 2010 by August1991

[August1991]

Thread drift ahead.

So they are buying into the US government and not the private sector. Correct?

GH, I missed this.

Japanese savers bought all manner of American financial paper. The Chinese government (on behalf of its savers) prefers US government financial paper.

Does this matter? I don't really think so. Americans respect private property.

What intrigues me instead is why the Chinese are now saving in America. I reckon the Chinese bureaucrats/politicians are stupid mercantilists. They like American dollars.

IOW, China could have even faster growth rates if not for this mercantilism. That is, the Chinese should be saving at home and buying their own financial paper - rather than collecting US dollars.

Edited November 2, 2010 by August1991

[bloodyminded]

Steyn on his bad days is a polemicist but but he is curious and certainly not banal.

Deep thinker? IMHO, Steyn thinks better or more deeply than, say, Noam Chomsky.

Clearly, I disagree. I think it a preposterous claim.