"Gross Output:" Does It Matter?

Today, Friday April 25, 2014, the federal government's Bureau of Economic Analysis produced its first report on "Gross Output" as part of its report on GDP by industry. It is a computation of the economy's output similar to Gross Domestic Product, except that it includes as output all the intermediary stages in the production of the domestic product.  You can find the data here.

Does it matter?  Economist Mark Skousen argues that it does.  In the Wall Street Journal he writes:

Why pay attention to gross output? For starters, research I published in 1990 shows it does a better job of measuring total economic activity. GDP is a useful measure of a country's standard of living and economic growth. But its focus on final output omits intermediate production and as a result creates much mischief in our understanding of how the economy works.

And, Mark writes, it corrects "the misguided Keynesian notion that consumer and government spending drive the economy rather than saving, business investment, technology and entrepreneurship."

OK, Good.  But what difference does it make to, e.g., usgovernmentspending.com?  I pulled up the first numbers from the BEA to take a look.  Right now, there are only numbers going back to 2005.  I hope that this will change.  Here's what you get.

Gross Output vs. Gross Domestic Product

Year	Gross Output $ billion	GDP $ billion	GO/GDP
2005	23517.2	13095.4	1.80
2006	24891.8	13857.9	1.80
2007	26157.2	14480.3	1.81
2008	26825.8	14720.3	1.82
2009	24655.2	14417.9	1.71
2010	26097.3	14958.3	1.74
2011	27526.9	15533.8	1.77
2012	28693.5	16244.6	1.77
2013	29667.2	16797.5	1.77

OK. That's nice. You can see that Gross Output was tooling along at 1.8 times GDP until the Great Recession, and then it retreated back to 1.71 in 2009.  By 2013 still hasn't recovered to its pre-recession relation.

So what does it look if you run a chart of federal spending over at usgovernmentspending.com?

Here's federal spending as a percent of GDP.

And here's federal spending as a percent of Gross Output.

What does it tell us?  Not much.  Maybe the Great Recession looks a little deeper with the GO numbers than the GDP numbers, but who cares?

What we really need is for the BEA to extend the data series back to 1930, like their GDP series.  You would think that  today's economy has more intermediary production than the economy of 1930.  But we can't be sure unless we get to take a look.

From "Because Exploitation" to "Because Inequality"

As I've studied Marxism over the last few years, I have found myself cudgeling my brains to figure out what the point was.

Eventually, I beat the answer out of my brain.  Marx admits that the bourgeoisie had conjured miracles of economic growth out of the ground.  But it was all going to end in tears.  Because exploitation.  The capitalists would secure a larger and larger share of the economic pie, and the proletariat would be driven to penury.  Because the capitalists would secure all the value added by labor, leaving merely a subsistence existence for the rest, including the middle class.

The point is that without the exploitation, the Marxians don't have an argument for revolution, for the seizure of political and economic power by the educated youth in the name of the working class.  So there must be exploitation, "naked, shameless, direct, brutal".

Today liberals are insisting we have a big argument about inequality.  And they are all over the moon over the new version of Capital.  It is called Capital in the Twenty-first Century by Thomas Piketty.  He argues that the income from capital is about 4-5 percent per year while the growth in the economy is only about 1.5 percent per year.  Thus wealth will concentrate in the wealthiest families without end.  As Scott Winship writes:

In other words, Piketty is suggesting that we may have entered a period in which concentrated wealth will produce a sort of inequality death spiral. With economic growth sluggish, and the returns to wealth high, owners of “capital”—land, housing, buildings, businesses, and other income-producing property—will receive a rising share of income as they re-invest their returns. 

So he is making exactly the same argument as Marx.  Marx argued for an exploitation death spiral and a progressive "immiseration" of the workers.  Therefore we should stop the rich cold with a revolution.

Piketty argues for an inequality death spiral and a progressive increase in the wealth of the 1%.  Therefore we should stop the rich cold with a global wealth tax.

There is a rather obvious conclusion to be drawn from both these theses.  Without exploitation and immiseration there was nothing for the Marxists to complain about.  Just shut up and let the railroaders make more railroads, the shipbuilders make more steamships, the Carnegies make more steel, the Rockefellers make more oil, and let the market take care of it.  Because, as it turned out, the workers eventually got to wield not spades and shovels, but powered backhoes and dragline excavators.

Without inequality and concentration of wealth there is nothing for liberals to complain about.  Just shut up and let the Googles and Facebooks and Apples get on with it.  Oh and don't forget Qualcomm.  They are the guys that developed spread-spectrum CDMA.  That's the technology that allows cellphones to work.  Back in the 1990s the settled scientists said CDMA violated the laws of physics.

Oh, and before we follow liberals into the inequality black hole maybe we should remember Nassim Nicholas Taleb and his Black Swan. On his idea, capitalists make their tidy 5 percent for years and years.  Until a Black Swan event completely wipes them out.

Or there is Stein's Law.  If something cannot go on forever, it will stop.

But one thing will go on forever.  Liberals will always need a "because" to justify their political power.

Military Socialist? Of Course It Is

Jonah Goldberg is not sure if Jacob Siegel is kidding when he applauds that the "U.S. Military is a Socialist Paradise" -- and sniggers that conservatives ought to be all confused about the institution we support being a poster boy for the "other" way of doing things, from subsidized childcare to universal health care.

But really, how little liberals know about conservatives and what we think!

Yes, of course the military is a socialist paradise.  That's because the military is all about force.  It forces its members to toe the party line, and it is the government's weapon for defending the country by force against foreign enemies.

Not to put too fine a point on it, the military is a single-purpose organization. Its job is to make war. All the members of the military are supposed to be focused upon the single purpose of preparing to make war on behalf of the United States government.

Such a single-purpose organization cannot have people going off doing things on their own account.  That is why it has to provide everything for them.  Even then, the military suffers from its Sgt. Bilkos trading on military supplies on their own account.  That's why Sgt. Bilko was so funny in the 1950s.  Everyone had run into a guy like Bilko in their time in the service.

But the military is not a poster boy for socialism.  It shows why the socialist idea cannot work outside a single-purpose organization.  The military is an engine for war.  Very good: that is what it is supposed to be.  But the trouble is that every other government program ends up being the Moral Equivalent of War.

Back in the day John Wayne starred as a civilian contractor militarized into one of The Fighting Seabees during World War II.  The Seabees built all those Pacific island airfields.  A major subplot in the movie was the difficulty of getting tough hard-nosed John Wayne to do things "the Navy Way" according to the bureaucratic book.

That's the way government does everything.  It sets up one single way to do things, usually for the convenience of the bureaucrats, and certainly to try to control the Sgt. Bilkos.  But it is ruinously expensive and ruinously unjust.

What about education?  Well, the problem is that millions of parents have millions of different ideas about how to educate a child.  But when the government does it we are all forced to send our children to government schools and our children get educated the One Way.  Originally it was the One Horace Mann Way; now it is the One Liberal Way.  So government education is irradiated with liberal initiatives like anti-racism, diversity, and positive self-esteem.  Conservatives can go pound sand.

What about health care?  There are about 170 million women in the United States and therefore about 170 million ideas on health care needs.  But Obamacare is all about reducing those ideas down to a single program.  There will be certain procedures that will be free, and certain procedures that will not be available.  And a bureaucratic committee, the Independent Payment Advisory Board, will rule over all.

The point about capitalism is that modern society is so complicated that the ukase of the local political boss and the formation of society into a single socialist collective under his control just cannot work.  What we find is that the market system, in its prices, wages, buying and selling, working and consuming, has spontaneously developed to coordinate the interaction of millions of acts and decisions of millions of individuals in the economy.

That's because a society does not have a single purpose.  It has millions of individual purposes that are facilitated and coordinated by the voluntary cooperation of millions of individuals.  Each person has her particular wants and needs that she wants to get from society.  But each person has his individual skills and abilities that he can contribute to society.

How do we coordinate needs and abilities?

It is in the nexus between needs and abilities that society happens.  In his Critique of the Gotha Program Marx confidently proclaimed:

In a higher phase of communist society, after the enslaving subordination of the individual to the division of labor, and therewith also the antithesis between mental and physical labor, has vanished; after labor has become not only a means of life but life's prime want; after the productive forces have also increased with the all-around development of the individual, and all the springs of co-operative wealth flow more abundantly -- only then then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs!

Well, yeah!  So true, Chuck old chap.  But every individual and every society is trying to do that, to convert abilities into the satisfaction of needs.  The question is what works.

The truth is that capitalism works out how to realize the Marxian slogan every day.  The whole point of Adam Smith's invisible hand is to helpfully direct each individual everyday in the best way to match ability and need.

In the military it is the commander-in-chief and under socialism it is the Forward Thinker in the educated ruling class that gets to decide what is a "need" and what is an "ability" and how the two are to be combined.

And the universal result has been death and destruction.  The military does that very well.

A new mega-church opens in China

In the United States the coming thing is “marriage equality” and multiple genders. In China the coming thing is Christianity, like the new mega-church that just opened in Liushi, Zhejiang province, featured in the London Telegraph. China is on course for 247 million Christians by 2030.

To your average educated American this seems astonishing, because after all Christianity is so pre-Enlightenment. As Charles Murray puts it: “Smart people don't believe that stuff any more.” That's probably the way the Chinese ruling class feels too. But what can we, with open minds, understand about Chinese Christianity?

We can start with the comments of a Chinese Christian captured by David Aikman in Jesus in Beijing.

 At first, we thought [the power of the West] was because you had more powerful guns than we had. Then we thought it was because you had the best political system. Next we focused on your economic system. But in the past twenty years, we have realized that the heart of your culture is your religion: Christianity.

So what is it about Christianity that the Chinese find so powerful? Leaving aside the question of whether God or Jesus actually exist, there is plenty. First, there is the idea of the individual believer responsible for her individual life to God. Individualism permits the breakout from tribalism and the expansion of trust beyond the boundary of blood. Then there is the end of actual blood sacrifice when things go wrong; Jesus made the sacrifice so we don't have to. You may think that's a minor thing, but it makes a difference when Christianized villagers stop sacrificing animals during hard times. Finally there is the particular appeal to women. Jesus loves you. If men are fighters and women are lovers, Christianity is the lovingest religion in the world with its perfect relationship of love: you love God and God loves you right back.

In Latin America the US-born Pentecostal movement seems to be really effective in helping women wean their husbands away from the male macho culture and towards work and supporting their families. David Martin in On Secularization.

Within Pentecostalism the injurious hierarchies of the wider world are abrogated and replaced by a single hierarchy of faith, grace, and the empowerments of the spirit... where groups gather on rafts to take them through the turbulence of the great journey from extensive rural networks to the mega-city and the nuclear family...

That's probably what's going on in China, too. Of course, nobody really knows how many Christians there are. The mega-church in Liushi is a state-approved Protestant church, but many millions of Chinese worship in so-called “house churches” outside the state-approved system.

The most intriguing thing about Chinese Christians is their notion that Christianity is fated to move westward across the world, and it is the destiny of Chinese Christians to complete the global circum-conversion and return Christianity to Jerusalem.

I'm not sure if they have checked in with the mullahs on that.

Of course, all that has nothing to do with secularized, educated Americans like us. Unless you'd like to read more of what Charles Murray has to say in his Curmudgeon's Guide for Getting Ahead about religion to thoroughly secularized college graduates like you and me.

When Stupid LIberals Become Evil

I wonder if it’s time to update Charles Krauthammer’s catchphrase about liberals and conservatives. Conservatives think liberals are stupid; liberals think conservatives are evil, says Dr. K.

Because if you are stupid enough to believe that your political opponents are “evil”, then you are stupid enough to wander into the paths of evil. Like right now.

If you are stupid enough to think that the practice of politics is exhausted by the politics of the community organizer, and that the only thing you need to do is to rally your troops with racist, sexist, classist catchphrases, then you really don’t deserve to govern in America.

I have my own catchphrases, and one of them is that “politics is division.”

There is, or at least I hope there is, a warning in that catchphrase. If you want to have a society in which people are doing something more than fighting each other over loot and plunder then you’ll have to make your politics extend to something a little bigger than mere division of the nation into “us” -- the good, the evolved, the educated -- and “them.”

And we know that liberals know this because they keep blathering on about the “other.” Except that if you are a sophisticated liberal that knows your German philosophy you will talk on a slightly higher plane about “ego” and “alter” of course.

When liberals reduce their politics, as the president seems to be doing this season, to efforts to rile up the race base, with speeches at the convention of the racist National Action Network, or rile up the feminist base with lawyers’ protection bills like the Paycheck Fairness Act that makes employers guilty unless they can prove themselves innocent, or with class appeals like the president’s minimum wage policy, when liberals do that then conservatives have every reason to wonder if liberals are something worse than stupid.

Because you are basically saying that there is no compromise with the other side. They must be destroyed.

How are you going to be able to work with people across the aisle after such a season of naked race, sex, and class baiting?

Now we have the IRS scandal, which seems to be escalating beyond mere efforts to embarrass conservatives trying to organize for political action into efforts to trick conservatives into criminal acts.

In the opinion of J. Christian Adams these efforts of the liberals stem from the thinking and the doing of their left-wing activist base. He goes into a lot of detail showing how these groups have persuaded themselves that right-wing speech is illegitimate and should be censored.  They even have University of California at Irvine Law Professor Rick Hasen with a blog to bring all the speech regulators together.

We all make a joke about this, and chuckle about the inanities of “political correctness.” But think about this. Liberals, the ones that lecture us about the “other,” seem not to understand the danger to themselves of censoring the “other’” speech.

What do I mean by this? I mean this: Does it not occur to liberals that when you censor other peoples’ speech it makes them really angry? Does it not occur to liberals that one of the reasons we have the First Amendment is to provide people with a safety valve? They may not get what they want from the political process but at least they have the right to peaceably assemble and present their grievances. If people present their ideas and then get defeated in a fair election, they they are likely to go home and feel that they have at least had a chance to make their case.

The only way this regulation of other peoples' speech works in the long term is if you are prepared to go Full Monty totalitarian and put your opponents in the gulag.  I presume that liberals are not planning to do that.  Not yet.

So why don’t liberals have the common courtesy of letting their opponents organize politically without harassment?  How come that they are stupid enough to harass their opponents enough to make them really angry?

Well we know how all this comes about. It comes about because politics for liberals is a kind of religion. It is not just a practical thing about repressing violent foreign powers and violent domestic criminals. Politics is also about right and wrong, good and evil. It is also about saving society from injustice.

It is very easy, when your politics is to you religious, to make the next logical step, and try to suppress the Evil One. Nobody needs to ask Satan how he feels about things; you just stick it to him.

This is why I think that liberals are in for the worst times they can imagine. Ordinary, decent people are going to be shocked and indignant as they slowly get the picture on the corruptions and the repressions of the Obama administration -- let alone angry that they can’t keep their doctor and can’t keep their health plan.

Of all people, liberals should know this. They were beside themselves during the Bush administration, absolutely outraged by Christian conservatives in positions of government power. Can they not therefore see that conservatives might be absolutely outraged by what they experience as liberal abuse of power?

Answer: no they can’t. They can’t see it. It’s comical, in a way, because liberals have built a huge edifice of developmental psychology to account for the fact that most people can’t see other peoples’ point of view, starting with people that cannot even experience the possibility of other points of view. Only at the upper reaches of developmental psychological systems are there people that can put themselves in the place of the “other” and can understand the fact of other people, other ideas, other world views as perfectly natural and physical. Yet the liberal psychologists are about the worst when it comes to political intolerance.

And because liberals live in a bubble and have a way of forbidding anyone from uttering a discouraging word, they won’t know what’s hit them until it’s hit them.

Stop Complicating Home Finance

The US Senate is presently putting together what reads like Obamacare for Mortgages, a fiendishly complicated bill that will privatize, yet super-regulate home mortgages -- with a ton of special subsidy programs to queer the whole thing into a nightmare.  At least that's what the Wall Street Journal reports.



So the political elite hasn't learned from the Great Crash of 2008.  And no wonder.  Democrats have been indefatigable in blaming greedy bankers for the problem, rather than face the truth, that the deliberate federal policy to subsidize home mortgages forced bankers to extend loans to people that couldn't afford them.  If you read The New York Times and listen to NPR you wouldn't have a clue about what really went down.



It gets worse.  Here's a report on some focus groups of Option-ARM mortgage borrowers conducted for now-defunct Washington Mutual back in 2003.  The borrowers really had no clue what they had signed up for, with low payments and negative amortization for now followed by huge increased payments later on.  They knew they had a great deal -- for now -- but really weren't thinking too hard about what came later.



Yes.  WaMu was staggeringly negligent in pushing out mortgages to people that didn't have a clue what they were getting into.  But WaMu was just dutifully implementing national policy, pushed  by liberals for a generation.  It started with liberal activists complaining about "red-lining" in the 1970s.  Red-lining referred to the reluctance banks showed in loaning money on inner-city homes.  And why not?  Decaying inner city neighborhoods are not the place to loan money on demand deposits. It's simple prudence.  So we had to make sure that a certain share of mortgages went to "sub-prime" borrowers.



Because liberals are smart and compassionate.



And when the whole thing blew up, liberals blamed the greedy bankers.



Yes, of course the bankers were greedy.  Anyone that works close to government is greedy, because there's a lot of free stuff going on if you are smart enough and pushy enough to get in line for the handouts.



Given the financial ignorance of most people, the government's role should be to regulate the financial system to make it as simple as possible.  But that would make it harder to buy peoples' votes and hand out free stuff.



Given the financial ignorance of most people, we should reform the home mortgage business to remove the subsidies, to disabuse people of the notion that their homes are an "investment."



Given the financial ignorance of most people, we should get the government out of mortgage finance.



But the realities of legislating means that any reform of Fannie and Freddie will have to buy off the powerful special interests, in finance, in real estate, and in the liberal activist community.



Which means that the cure will probably be worse than the disease.



The real cruelty of the Liberal Century is the idea that government can be smart and intelligent -- if run by intelligent, large-minded people with the help of rational experts.



No it can't.  That's what we know now after a century.  Governing makes you dumb.  Governing makes you stupid.  Government makes you cruel.  You can take the largest-minded person in the world, but if you put them in charge of a government or a government program, they will turn out stupid.



This is not rocket science.  Government is force; politics is division.  When you put government in charge of something it will turn it into a bureaucratic monstrosity, pushing people around.  And the politicians will be figuring out how to divide people and how to buy votes with the money sloshing around in the government program.



Suppose the program turns out to be a complete mess?  How do you unwind the mess of bureaucratic rules; how do you persuade people to give up their nice little subsidies?



Exactly.  You can't.  Short of Armageddon, people are going to demand to keep their goodies.



They will keep on demanding their goodies until the invading soldiers are going house to house raping the women, and the question is no longer subsidies and handouts, but getting food to stave off starvation.



Meanwhile the mortgage mess remains a mortgage mess.  Thanks a lot, liberals.

Liberalism will end as a joke

You can't be serious.  That is perhaps what conservatives feel as each new Obama era folly hits the headlines.



This week we saw Democrats in the House claiming that the Republican pursuit of Lois Lerner was McCarthyism.



We heard of the Dallas office of the IRS brimming with pro-Obama election fever.



We saw liberal students and faculty getting Ayaan Hirsi Ali, the Somali-born woman who has risen from tribalism to an icon of freedom, uninvited as Commencement speaker at Brandeis.



We saw the Obama administration ginning up their female base with yet another equal pay act.



We saw dear old baseball legend Hank Aaron linking Obama critics to the KKK.



Yeah, I know.  Marx told us that history repeats itself, the first time as tragedy, the second time as farce.



But I wonder if there is a deeper truth there.  Beyond the idea that a movement begins as a cause, then becomes a business, and finally becomes a racket, I suggest that the final phase of any human endeavor is to become the butt of jokes.



And why is that?  It is because any human institution eventually gets inherited by fools, and fools are too stupid to realize they are running the place into the ground.  And so their clumsy pretense at wisdom and cunning becomes the butt of jokes.



And one day it all goes up in smoke.



Yeah, I know.  We Obama haters are desperate for a divination from the heavens that indicates that our prayers for a life after Obama will be answered.



But somehow, I have a feeling that the next 30 months leading up to the 2014 midterm and the 2016 presidential election will see a meltdown seldom seen before in US politics.