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05/11/2008

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Eddie Allen

Mr. Becker, Is it true that you signed a petition that endorses John McCain's economic plan???? This is being reported on Tyler Cowan's website. See www.marginalrevolution.com/marginalrevolution/2008/05/economists-who.html#comments

The letter you are reported to have signed is patent campaign propaganda. Did you know what the letter would say? I am shocked that you would endorse McCain's patently misleading economic plan. His plan not just extends the Bush tax cuts but adds more to the same. And to say that the tax cuts could be paid for by a reduction in discretionary spending means you have not done your research on the government budget. Discretionary spending has actually decreased as a % of GDP under Bush; the increase in spending is primarily military. And to listen to McCain's foreign policy means that more military spending is likely under him than a Democrat.

The real new taxes imposed by the current government are the resources going to a non-productive war; the debate over tax rates is just political economy over which generation pays the burden. It seems that the Republican agenda is that this generation should not have to pay for their own defense. Does anybody read Barro anymore?

For an Obama response see http://econ4obama.blogspot.com/2008/05/mccains-economist-supporters-vs-facts.html

Jack

Eddie....... shush now, don't you know it's in bad taste to mention the emperor having no clothes?

Of course it's carved in stone that in addition to all else the boomer generation should have significant tax breaks in their highest earning years, leave the SS fund meant for boomer retirement full of hot checks and pass another $10 Trillion in D E B T on to their kids and those yet to be born.

............ ah yes the old "we'll cut the budget" to get out of deficit spending". Oh? show me the cuts. Like default on interest payments? Chop a couple hundred billion out of the military? We can't even manage to close bases that are so useless and wasteful that even the Pentagon favors closing them.

hekim group

The real new taxes imposed by the current government are the resources going to a non-productive war; the debate over tax rates is just political economy over which generation pays the burden. It seems that the Republican agenda is that this generation should not have to pay for their own defense. Does anybody read Barro anymore?

David Heigham

Gentlemen,

Debate on which is the least worst of presidential candidates' current economic programs belongs elsewhere.

Coming back to the issue, I fully agree with Professor Becker that in the long run the elastisities are high enough for supply and demand to adjust. I just wish someone would work out how long the lags are likely to be.

The reason why I think it is important to predict these lags reasonably well is that we need to fit the introduction of carbon taxes/cap and auction into the process of the market adjusting. Right now, the inabity/unwillingness of the major oil producers to expand supply is giving us some very sharp if very rough-hewn incentives to improve our (and China's and India's, etc.) plans for conserving energy and introducing renewables; but we have to plan for policies which can do the job properly over the decades to come. Getting those policies put in place will be much easier politically if we mange to introduce them in a context of generally falling energy prices

Jack

David, in an election year I'd think a vigorous debate of candidate's economic plans might be one of the most productive things we could do.

Remember when Bush's only justification for his tax cuts was that he "felt" no one should pay over a third in taxes? Well, it was a nice thought, I guess, but surely it deserved greater, or at least some, debate, and policies other than those that led to setting the post WWII record for expanding the size and cost of the federal government even before the bills began to roll in for the "war" (occupation?)

I got a chuckle out of your "lags" paragraph as the last sentence reminded me of a bumper sticker in my home state of Alaska that read "Oh Lord just give us one more pipeline and I promise not to pss it away this time.

Having lived through the last "crisis" (which spurred the building of the AK pipeline) the hoped for, falling prices, were taken by all hands as "crisis over -- return to wasting" and we promptly built the fleet of gas hogs that fill our roads today, with the biggest pigs getting the lucrative "over 6000 GVW" tax subsidy along with the "Mcmansions" that are a large part of the mortgage crisis.

A bit more seriously, with four of five new car sales being compacts or smaller it looks as though people are reacting. But what is anyone, rich or poor, to do with an existing gas hog or over-sized inefficient home? For example I could sell my 20 mpg rigs and get something with better mileage, but I drive much less than the average, so at considerable cost that would never be recouped, I'd take the efficient rig and sell mine to someone who probably drives much more than I do.

Same with our poorly constructed homes too. As most built in the last 20 years they didn't even have the inexpensive Low E windows (an upgrade rejected or ignored by most buyers of $25 per window) a retro fit would be $300 per window or more. With an installed base of 100 million homes and, say, 300 million vehicles, significant changes in demand are going to take a long time.

Presidential platform? Despite being left with empty cupboards, I'd propose a program of strong incentives to retro-fit homes with more efficient HVAC, added insulation, Low E argon filled windows, and reflective coatings (for all those black tar coated flat roofs). As nearly all of the materials are still mfg here and would be installed by those likely to be victims of the housing down-turn and recession, I suspect the overall costs would be less than it would seem at first glance.

Secondly, there is a huge deposit of gas that has been re-injected into the Prudhoe Bay wells and that should have been brought to market a decade or more ago. As President I'd find out why the oil cos are delaying this project and get it moving one way or another. Here's why: It's now about a $50 billion project (up from $25 just eight years ago) that would provide a LOT of good paying jobs in N. America. And these jobs need not be subsidized as they will be more than paid for by the delivery of natural gas to the upper midwest through the 52" pipeline that would supply ten percent of our current NG consumption for many many years.

One more? Well it's for CA's only. Years ago they dreamed up "Prop 13" which essentially froze your property tax as long as you owned your home. When sold the tax is then based on the sale price, so a huge disparity exists; two homes side by side might differ by $5,000 or more. Obviously this makes folks far more home-centric than they should be so young folk are driving 30 miles to "affordable housing" while an older guy might be driving 30 miles the other way to golf. About the only time it makes sense for long time occupants to sell is if they are leaving the state. And we build freeways to facilitate the silliness.

Solution? Phase out this ridiculous tax scheme and in the interim allow some portability of the favorable tax rate "earned?" by the long term occupants.

Eddie

Sorry to get off the topic but Becker's post was completely non-controversial. As Milton said, "the cure for high prices is high prices." The real interesting question is how long does it take for the LR elasticities to kick in. One of Friedman's more embarrassing moments was dismissing the the 70's oil price rises as "temporary". For those in the oil markets, in policy, in real life trying to decide whether to pay for more insulation in their house, the horizon between SR and LR elasticities is not academic.

But back to politics. I would hope that Mr. Becker would use this forum to explain his partisan position in favor of the Republican standard bearer.

Mr. Becker has unofficially assumed the mantle of Milton Friedman. Unfortunately I think he may be unintentionallly copying the biggest mistake that Friedman ever made. Milton Friedman's greatest stain on his career was his support of the economic policies of the Nixon administration. Those policies were atrocious (Do you recall that Friedman actually tried to explain away Nixon's price controls? Friedman defending price controls!)

Republican economic policies IN PRACTICE have been atrocious and diametrically opposed to what a libertarian small government platform would be. (Republican rhetoric is fine their actions are terrible.) The Bush administration is the biggest taxer in a generation (if you measure taxes properly - by the resources going to the government sector, +2.6% of GDP under Bush not including interest payments). Regulators have been quite active in interfering in markets. Not a surprise since the regulatory apparatus has been completely captured by industry under Bush and they have used it like theory predicts - to reduce competition when possible. On farm subsidies, ethanol, trade, and a host of other issues, the Republicans have implemented policies completely variance to their laissez faire rhetoric. See "Impostor" by Bruce Bartlett.

Frankly I see little difference in the McCain economic platform from the Bush policies.

The book "Saving Capitalism from the Capitalists" by Raghuran Rajan of the GSB describes exactly what has happened under this administration. American oligarchs and big industry have used the Republican party and the electoral process to enact policies in their interests. And these policies are as much at variance, if not more, to free markets as any labor oriented economic platform. And frankly I think it could be easily argued (and Krugman has done this in his recent book) that this platform allocated benefits to a much smaller group of people than a "liberal" economic platform would.

Additionally, this Republican administration has overseen the largest increase in government intervention into people's lives in a generation. The Federal government with "No Child Left Behind" now controls much of local public education, a field where the Federal government was not active before Bush. In science policy, Bush has seen the government interfere in to promote religious principles. And in civil liberties, does anything really have to be said?

So Mr. Becker, please do not make the same mistake as Milton Friedman in your approach to this oil crisis as in your approach to politics. At the very least, do not lend your sterling reputation to propaganda stunts by the Republicans which will embarrass you in the long run.

Peter Daniels

So, when are will the two of you join Twitter? http://www.twitter.com

Peter Daniels

So, when will the two of you join Twitter? http://www.twitter.com

neilehat

Bubbles and bubbles and still more bubbles. Such are the glories of Deregulation. Does any one remember Reagan and how "Deregulation" was sold to each and every one of us as the way to lower costs and expand the economy? What they forgot to tell us (the use of selective truth perhaps) was that according to most economists, deregulation could result in lower prices or was just as likely to create higher prices. Not too mention, the possibility of increased appearances of the "Bubble phenomenon" in the financial markets. Also, they "forgot" to tell the public about the possible creation of unstable markets. Sound familiar?

As for energy cost, this can be chalked up to deregulation of crude sales. Back in the days when there only three players involved; the Producer, the Transporter, and the Refiner the market was reasonably stable and prices were low. Now we have a true commodity traded on an "open market" (courtesy of the Wall Street Gang) at the mercy of market forces. Those forces are:

1. Increased demand (China/India)
2. Supply constraints (the inability to get at known oil reserves)
3. Central Bank or Federal Reserve Policy (flooding the markets with cheap loan rates and money)
4. Foreign Exchange rates (falling curency value due to cheap loan rates)
5. Speculation (tremendous amounts of borrowed money being used to buy and sell)

Like paying $4.00 a gallon? Wait, it's only going to get worse. Bubbles and Bubbles and still more bubbles. Deregulation/Non-regulation isn't it grand?

jason voorhees

What about the depreciation of the dollar? No role at all?

Jack

Jason & All, This is probably a difficult question to answer, but given that few changes have taken place in the US, Cdn and Euro economies, why do you suppose that a fifty percent disparity evolved between the Euro and the US in a few short years?

neilehat

Jason, In regards to depreciation, that's covered under Foreign exchange rates. Currency values are now established in an "open market" of Exchange Value. Unlike the days when currency value bas based on a "Gold Standard" which afforded the Dollar value stability, but those days are long gone. Courtesy of Nixon and his "Council of economic advisors" that took the Dollar of the gold stndard in response to trying to solve the "Stagflation" phenomenon.

neilehat

Seo, to gain a greater insight into the inner workings of the "Oil Industry", try Ida Tarbell's seminal work, "The History of the Standard Oil Company". But remember, while reading, she had an axe to grind.

Jack

Neil: My guess is that your #5 is ultimately responsible for perhaps half of the $120 as there just has not been the fundamental changes or the "shortages" of the 70's to cause such a rapid run-up. Some speculators are surely emboldened by the destabilization of the M/E and the threat of relations deteriorating with Iran leading to the closure of Strait of Hormoz.

But the bubble would seem another run or bubble as you say with the enormous amount of capital with no place to go chasing fat returns that breed more capital to chase fat returns.

Since you remember Nixon having taken us off the gold standard (or Ha! should I say putting us on the real gold standard where our dollars are freely convertible to bullion) and triggering the inflation that led to the run up in oil prices that led to more inflation, you'll recall the Hunt Bros scheme to corner the silver market in the same manner, buy silver, borrow dollars against it and buy more silver. The flaw was that silver is not consumed and eventually the market turned on them with no one to sell to in a zero sum game.

The oil bubble is a bit slicker (whoops!) as oil is not held but consumed so the speculators are fleecing the consumers as they go with each day being a new game with a fresh batch of oil, the speculators having fresh cash from yesterday's sales and a new batch of consumers to fleece. If the speculator is wise enough to bank some of his gleanings, stash in the side game of gold, or keep moving his stop losses up with "the market" his only risk is losing on a few rounds when the game nears its end. Great game compared to holding 5% bonds in a declining currency!

Think what an even greater game it is for the sovereign funds that are filled by oil in the first place and used to run up oil prices and fattened by both the speculative gains as well as the oil sale itself.

Apparently the total capital of the world has doubled in a short time (a decade? anyone recall) with viable investments not coming close to keeping pace and what could be better than a game of capital fleecing working folk to create more capital?

At least Congress passed a veto proof bill that ends the filling of the national reserve storage that is 95% full anyway. Sick stuff using taxpayer's own money to pay $120/bbl, unless "we" are expecting to see the Strait closed down.

eep

A number of economists such as James Hamilton @ Econbrowser have been floating the hypothesis that the recent run up in oil price is a direct consequence of the very loose monetary policy of the Federal Reserve. The lower interest rate suppresses yield on U.S treasury note well below inflation level. Since the U.S dollar is the currency unit for all commodity prices, the weakness in U.S dollar directly contributes to higher price of such commodities in U.S dollars.

So perhaps this phenomeon has more to do with Bernanke& Co. than OPEC or rising demand from China.

eep

A number of economists such as James Hamilton @ Econbrowser have been floating the hypothesis that the recent run up in oil price is a direct consequence of the very loose monetary policy of the Federal Reserve. The lower interest rate suppresses yield on U.S treasury note well below inflation level. Since the U.S dollar is the currency unit for all commodity prices, the weakness in U.S dollar directly contributes to higher price of such commodities in U.S dollars.

So perhaps this phenomenon has more to do with Bernanke& Co. than OPEC or rising demand from China.

asdasd

this which I will say is only a representation of the truth that is within children, and somewhere within us all. and the truth is beyond these words, and the falsified meaning they have in the world
don't take this as being taught, everybody is taught wrong, that's the definition of being taught
I think of children as from conception, the true good, the true humanity. when we are conceived, we have light, that shines so bright, it can only diminish. children hold within all the truth, good, love and beauty in this world, before it is taken away. children need to be their own future
loving the environment more than children is what truly eradicates it, as compared to children, the environment is shit
loving animals more than children is what truly obliterates them, as compared to children, animals are shit
loving possessions more than children is also what's destroying true humanity, as compared to children, possessions are shit
today an adult looks at a baby and is concentrated on how their teeth are growing, yet looks at some animal, or a tree, and is filled with awe. this is wrong priority. the only adoration they have for children is how they're growing into that same thwarted reality, succumbing to evil. I just saw a short documentary where some village was being shown. First was a short frame of three children standing motionless 20 feet away, followed by three in-face close-ups on three adults. yet this thing that adults became because of loss of their true humanity, is falsely being blamed on immaturity, instead of the other way around. children are the only truly human beings. everything negative that adults say or think about children, is the opposite of truth, and the truth about adults. adults will shun and ignore children while admiring this evil which they have become
adults live in this fake, adult world of theirs, blind to the true horror that the human race is in, which they are making worse while glorifying this evil, finding awe solely in nature which they are destroying and shaming, horror that is infinitely more horrible than anything they can imagine, because they no longer know what true beauty is
so children who are "misbehaving", (and the real kind, the kind you see in the real world, not the falsified media), like attacking solely the things which have become our biggest enemies: computers, television sets, speakers, ripping apart paper, wallets, our collections etc. and looking at things like an exercise bike with joy, as exercise is healthy, they know exactly which things are good and bad for us, not the other way around
they will throw things out of the carriage or crib, desperate to be let out and followed; take off clothes showing how we need to get rid of the bonds put on us, climb furniture to show us we are truly human beings above this fake world, which adults value more, they will tell a different age or name than their own, to show us it's not what makes us, and insistently speak of animals and possessions as shit or likewise, which compared to where our real priorities lie, that adults have abandoned, those things are, and thus abandoned everything else making it turn to shit they will desperately try to make adults rid themselves of the guilt, because that evil did not come from being one's true self, but from being made not to be, and believe they wouldn't normally be capable of any of this evil, and instead of tremendous good
so children who are still children, and they are so since conception, are the only ones who care for the human race and thus the planet
children have the healthy, true relationship with one another, and between females, males and two-spirits, they truly love each other, due to inability of a child to love oneself. they have extremely negative reaction to mirrors and pictures of themselves, instantly looking away and pushing it away. they will hail one youngest child by holding them up and spinning them around (or spinning a child in a carriage, for instance) counter-clockwise, which brings the hailed and the hailers great joy, thus showing the true nature of humans, our own conception as this "supreme" and as the only way to retain true humanity. it's the adults' exersion of control, teaching and constant moving them around which leads to disruption of this relationship and ability to create their own, true and good language and culture, later being replaced with fake
they are put in constant bondage, constant cage, being deprived of their touch with nature and other children, they are being held like trophies, beaten, shouted at, taught tricks, humiliated, and generally treated with total lack of respect and sensitivity, and being used as pawns by the media
so look at the smallest of children and see, what true humanity is
lend yourself completely to the smallest of children, they are being the truth that is inherent
predecessory blame is the only kind of blame there can exist, without it there would be no blame, loss of belief in that is loss of belief in inherent true good. lack of predecessory blame leads to wrongfully passing it on to children, the true good, instead of rightfully passing the blame back to adults, thus those which are not truly human. it's this tremendous fear and hate that adults have about themselves that they're putting on children. they no longer believe in humans as inherently capable of endless creativity and will adopt the falsities of talent and experience, as they have lost true creativity themselves
lend yourself completely to them, follow them absolutely, give them freedom to be with nature and other children, freedom belongs to them
don't teach them, don't exert supremacy like tapping them on the head, don't bondage them, don't talk to them, but listen
it's the only way that we all can heal, the environment can heal, and children can create infinitely more beautiful worlds based on true humanity, without shaming the environment and animals, and partake in endless creativity, love and beauty
can you envision a world with millions of different cultures and languages, cultures not based on lies, constantly being created anew, coming from true humanity? and a true, healthy relationship between males, females, and two-spirits? where everyone is extremely healthy, everybody is there's no loss of memory and thus our true humanity, and very little disease?


so the problem is maturism, false belief that we are becoming human by maturing, or being taught so by adults, due to loss of belief in inherent true humanity, and inherent good, thus it's a belief in false humanity as a humanity. thus any pretense can be created by anyone on what that maturity is, but it always means the opposite of being truly human, and the definition getting further and further away. they are completely taking away children's rightful freedom to take control of our culture, which is the only way to rid it of true evil. the effect of maturism is creation of a false goal for one great unity with everyone the same, which not only depraves us of our true humanity, but only leads to destruction as new ideas are being created on what that is. which is exactly what is happening with the world. from villages to towns, from towns to cities, from countries to unions, exerting control, constant policing. everything which is in disruption of creating this "one great unity" is seen as wrong, even though it's only our reaction to this evil. it also creates false belief that everything that happened in the past which was in the goal of this "great unity" can't be wrong. we are further becoming less and less truly human with things like loss of belief in abortion as murder and showing more and more extreme negativism against children, they are becoming a worse and worse stereotype stereotype, it is more and more in every film, documentary, newspaper and news broadcast, and outside. but only a child is the true individual, capable of creating new language, culture, and with complete understanding and love for other humans. today all the things are blamed on children, instead of this adult thing which isn't human, further exerting control of adults over children and strengthening the grip of this evil against true humanity, because they are no longer themselves being led by true humanity
a person once came to me, he seemed desperate to affirm the superiority of the adult and was insisting I call him sir, after I adamantly refused, defeated, he went and committed suicide. so in reality, these people are very fragile. their constant exertion of control and superiority is their only way that keeps them from seeing themselves as this great failure and maybe ending it all
adults have this extremely negative view on children, that they have been taught, which is in fact, the truth about themselves, and will constantly try to brainwash their child into believing they're the ones who are evil
everything today seen as conservatism is what kept us from coming into greater and greater evil. instead of trying to understand this affect of the adult which caused all the shit and rectifying it, it went the other way, creating a falser and falser humanity
that's the reason behind all "mental illness", fight to retain true humanity, and the only real mental illness is the adult
long, long ago, when my old grandfather, before he died, no longer having any memory at all, looked at me and he truly smiled, for the first time since I first met him. nobody saw him do this before. it's because he rerecognized true humanity


here is an example of the evils of maturism, as is our world, maturist propaganda is all around us:

"what we must fight for is to safeguard the existence and the reproduction of our race ... so that our people may mature for the fulfillment of the mission allotted it by the creator of the universe. ... peoples that bastardize themselves, or let themselves be bastardized, sin against the will of eternal providence."
-adolf hitler


maturism is the true evil behind all evil, this evil that is today's world and evil of the past. only our own true voice, one we were conceived with, the one with truth, is true humanity, that is in connection with our conception, and is capable of true, endless, creativity. immaturity is the only true humanity

so put this everywhere you can, translate it, write it on walls, shout it, vandalize. we need to break down the walls of this false reality which isn't ourselves, spit on this world, it's all shit everything around us is shit compared to our number one priority, children, the true humanity, otherwise everything turns to shit
stop this wrong of the adult, wrong of believing in thoughts and theories instead of the inherent truth which is in children
every child is conceived with complete love and understanding for other human beings, and ability to create new language and culture
more than that, a child is conceived with love of true humanity itself, with no love of false humanity which leads to this love of "great self", mostly due to unnaturality of humans being so connected together, instead of truly or at least partly flourishing apart

jhonbay

Right now, the inabity/unwillingness of the major oil producers to expand supply is giving us some very sharp if very rough-hewn incentives to improve our (and China's and India's, etc.) plans for conserving energy and introducing renewables; but we have to plan for policies which can do the job properly over the decades to come.

Saint Darwin Assissi's cat

Professor Becker, thanks for a GRAND post ... the best part of your blog is the stimulation of thought and the opportunity to read very fine writing. I thought of Judge Posner yesterday coming through 2 security checks at the Reno, Nevada airport, randomly triggered by Southwest Airlines...the randomness of the TAS security pat downs would seem to be a 'highest and best use' of security resources.

Anonymous

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Anonymous

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Anonymous

FYnJOB

Anonymous

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Anonymous

Hello everyone. What's the earth With all its art, verse, music, worth - Compared with love, found, gained, and kept?
I am from United and bad know English, tell me right I wrote the following sentence: "Com, a private company that provides support for modifying the commercial loan business or commercial."

Thank you very much 8-). Bjorn.

Anonymous

I want to say - thank you for this!

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