Austerity? What Austerity?

The Paul Krugmans of the world keep telling us that the global slowdown is due to "austerity," meaning government spending cuts and tax increases.

Only one problem, writes Brian Westbury in The Wall Street Journal.  In Europe governments are spending more of GDP than they did at the height of the Crash of 2008.

Euro area government spending was 49.8% in 2013 versus 46.7% in 2006... France spent 57.1% of GDP in 2013 versus 56.7% in 2009, at the peak of the crisis.

Then there's quantitative easing.

The Fed's monetary base (currency in circulation and reserve balances) has grown 28.8% per year since QE started... But M2 [the actual money that you and I use], the measure Milton Friedman told us to watch, has grown just 6.7% this year. 

Then there's Janet Yellen, Chairwoman of the Federal Reserve Board. In 2008, as president of the San Francisco Fed, she argued that

As Japan found during its quantitative easing program, increasing the size of the monetary base above levels needed to provide ample liquidity to the banking system had no discernible economic effects. 

So why would the doughty Janet be following this policy that she rejected in 2008? The truth is, according to Reinhart and Rogoff in This Time is Different, it takes about ten years to recover from a full scale financial meltdown like the Crash of 2008.  All the froth about "austerity" and quantitative easing misses the point. After a big crash we are all poorer than we were and we all need to get to work to repair the damage to our fortunes.

In my view the purpose of quantitative easing and zero interest rates are to keep the federal government's interest rate expense down. If you go to usfederalbudget.us's interest page you will see that if you bump interest rates up to 5% then the federal government has to pay nearly $1 trillion a year in net interest instead of the $250 billion right now. That would add $750 billion to the annual deficit, and would require the government to start implementing spending cuts.

Look. The whole point of Keynesianism is that the modern welfare-state government keeps getting itself in a jam. Its supporters naturally demand a continuance of their accustomed handouts, as regime supporters have done since the dawn of time, and the government obliges. It must oblige until the Mongols sweep into Northern China from the Asian steppe, because no ruling class can survive the rebellion of its supporters. Keynesianism was developed to provide an intellectual shine to this bankrupt policy.

In just this one thing we see the bankruptcy of the welfare-state paradigm. It must chain the whole economy to the needs of its supporters. In the case of the Obama Democrats this means wholesale financial repression on the mom-and-pop savers in order to keep the entitlements and the crony capitalist handouts going.

The one thing the Obama Democrats cannot countenance is reform, to reverse the "ratchet" of increased government spending on their supporters.

This cannot end well.

Should GOP Worry About Gender Gap?

Everybody wants the GOP to worry about the gender gap, the fact that more women vote for Democrats than Republicans.

So, the worriers say, the GOP should "reach out" to women with women-friendly policies.

The same applies to the Hispanic vote and the black vote.

National Review's Ramesh Ponnuru takes a look at the problem. Democrats, he writes look at the gender gap and "conclude that they need to hit “women’s issues” hard both to raise their percentage of female votes and to boost female turnout."

Republicans, he adds, look at the gender gap and "conclude that they have a problem with women that they desperately need to address."

But couldn't the oppose be true? Shouldn't Democrats conclude they have a desperate problem with men and Republicans that they need to hit "men's issues" hard?

The simple fact, Ponnuru writes, is that since about 1980 women have trended Democratic because

Polling has for many years consistently found that women are more supportive than men of social-welfare spending, economic regulation, and gun control, and less supportive of military action.

The point is that the Republican Party is the party for people, men and women, that believe in less social-welfare spending, less economic regulation, less gun control and more concern for the enemy without (Commies and Islamists) than the enemy within (racists, sexists, homophobes).

Thus, it makes complete sense that single women vote Democratic and married women vote Republican.  Because when you get right down to it, all women need a protector, women's liberation and feminism be damned. That protector is either a man or a government. Period.

The point is that a Republican can still win in 2016, gender gap or not. All that need happen is that more men and women switch their vote and vote Republican.

As I understand it there are two basic strategies for winning elections. You can run on issues that appeal to your base and split the opposition. Or you can ignore the bases and appeal to the independents in the middle.

In 2012, it is said, the Democrats went for the base and the Republicans went for the independents. The Democrats riled up their base with class warfare (Romney as uncaring rich guy) and gender warfare (GOP war on women). They backed it up with Catalist, their Big Data turnout machine. Republicans assumed the base would turn out and tried to appeal to independents. You know how that turned out.

Apart from Catalist, the Democratic strategy also put the GOP in the uncomfortable position of responding to the question of "when did you stop beating your wife?"

So what should the GOP do? Look, politics is division. You want to unify and enthuse your supporters -- with "base" issues -- and you want to divide and demoralize the opposition -- with "wedge" issues. Then, as a second tier priority, you worry about independents.

So much for tactics. Now let's think about strategy.

I think the GOP should start making a small-government pitch on the basis that big government is dangerous and risky. It should push back on the idea that big government creates security and safety. Just look at the last ten years. The big government mortgage policy nearly crashed the world economy. Millions of people can't find jobs and they are increasing the deficit by relying on government benefits. Government dependency makes people unable to adapt to life challenges. And all the focus on domestic issues means that government takes its eye of the ball on foreign policy. Isn't that the first job of government? Keeping Us Safe?

Put it this way. Every entitlement recipient believes that they deserve their benefit. But what about all the others? Why not spread the idea that increaseing the roll of social-welfare recipients means that the government may run out of money and leave the really deserving current recipients in the lurch? It's all very well to expand Medicaid. But what about the folks already on Medicaid that need it for their health care? Every time you add a new program you are putting the existing beneficiaries at risk.

Social welfare makes people dependent. That's risky. Economic regulation favors existing interests and squeezes people without an in to the rich and the powerful. That's unjust. Guns are the woman's equalizer in a dangerous world. The military is there to Keep Us Safe.

It's the truth. Government riles people up to believe in its promises, but in the end it leaves people hungry, sick, and dying by the side of the road. Hey, think about Mao and his Long March of 6,000 miles from southeast China all the way to the west and then the north. Mao, they say, didn't actually march. He was carried in a litter. How many of the original soldiers that started out on the Long March in October 1934 from the red base actually made it a year and 6,000 miles later to the northern border close to the Soviet Union?

Ultimately what makes the world go round is work and family and skills and the determination to find a way to be useful to other humans. People that sit back and rely on a powerful patron get shafted.

Guess what side the GOP is on?

Why I Say "Politics is Division"

I keep saying this: Politics is division, and government is force. And really, it's true.

If you are mad about something, you form a political movement, and that political movement is almost bound to be based on the idea that society is holding you down. We need health care, education, climate research, but the eevil insurance companies, dead white males, oil companies are holding back the future. So we must join together against these enemies, and create a government program to defeat the enemies and force society to spend more money on us: for our health care, our education, our planet.

Isn't that the way it always works?

Last weekend, I read a piece by John Hawkins, who's always writing articles like "five reasons why liberalism stinks." But this time he has a list that knocks it out of the ballpark -- because it makes my point.

Liberalism is an ideology of tribalism and hatred. It works incessantly to undermine anything that truly brings America together -- like Christianity, the culture and love of country -- so it can try to rebind people together as liberal drones. Relatively minor differences of opinion between liberals and those who disagree with them are habitually elevated to encourage hatred.

For example, there’s no logical, rational reason that…

• If you oppose illegal immigration, you must hate Hispanics.
• If you oppose Affirmative Action, you must hate blacks.
• If you oppose free birth control, you must hate women.
• If you’re concerned about radical Islam, you must hate all Muslims.
• If you oppose gay marriage, you must hate gays.

Yet, liberalism promotes those lies incessantly to keep people at each other’s throats. 

 The point is that if you want to raise a political issue then you must get people all riled up about it. Otherwise nobody will pay attention, and nothing will change.

Now, my point is that politics and government is the way that humans protect themselves against predators. Period. Everything else is mission creep and leads to injustice.

So if you want to assemble people into a political group it stands to reason that you must convince them that they are under threat.

Thus racism, sexism, classism, homophobia. Workers! The bosses are out to get you!  Women! The Republicans are running a "war on women!" Blacks! The white "system" is out to get your "gentle giants!" And so on.

Liberals understand that this is an outrage, because they are really sensitive when someone tries to do the division thing on them. Liberals really object when someone accuses them of being "unpatriotic."

Our liberal friends from time to time like to accuse the government of whipping up nationalistic fervor and turning the minds of young men when they recruit them for the armed forces.

So national leaders rile up the citizens when they want to fight a foreign war, and they accuse their opponents of being "unpatriotic." That's just the same as liberals calling their opponents "haters." It's about riling up your supporters into a tribal frenzy so you can win the next war or election.

But I'd go a little further, if you don't mind too much.

I think that all politics, all government, involves recruiting people into a political army, riling them up with rage and martial spirit, and then marching them off to war.

But, as liberals so cogently argued after World War I, what's the point of it all, especially for the front-line soldier that gets chewed up and spat out by the military or political machine? The fact is that the individual soldier is cannon fodder for the politicians and the generals. If he dies, most probably from hunger and sickness, too bad. The movement or the nation must prevail!

Which is to say that in all wars the individual foot-soldier gets screwed, whether we are talking about the trenches in WWI, the strikes against capital, the various social justice wars that liberals are for ever ginning up on behalf of women, minorities, gays, working stiffs.

That is why conservatives want to dial back the politics and limit government. We don't think that Americans should be at perpetual war with each other. We believe that the more government you have the more conflict you have, and the closer you will get to real civil war.

That, of course, is the argument that Rene Girard makes in Violence and the Sacred. It is all too easy for arguments and feuds within society to dial up to all-out violence. And once it starts, how do you stop it? (Read the book to find out.)

Liberals just know that they are on the side of the angels, and that the "activism" they practice is all in the cause of peace and justice.

But politics is division. The whole point of "activism" may be to mobilize a group of activists to fight for peace and justice. But the historians tell us that once you have started a war you find yourself riding the whirlwind. The war never ends up where you thought it would. In 1914 the German and Austrian emperors had no idea that four years later they would be out of a job and their empires broken up.

So it is with all the tawdry liberal "wars" on racism, sexism, bigotry and homophobia. There is no telling where it will all end up.

All we know is that it will all end up really different from what the liberal activists confidently predicted.

Cause and Effect is All in the MInd

David Hume's Big Idea in his Treatise on Human Nature is to convince us that our reliance on Cause and Effect is all in the mind. It's not a relation built on reason, but from the force or "vivacity" of an idea prompted by a succession of perceptions.

Before Hume, the "causal maxim" reads thus: Whatever exists must have a cause or ground for its existence.

In 1.3.14.35 Hume presents this maxim as follows. A cause is

an object precedent and contiguous to another, and where all the objects resembling the former are plac'd in a like relation of priority and contiguity to those objects, that resemble the latter[.]

And so it goes backwards from cause to cause, turtles all the way down. That's no good, says Hume, because you can't prove it. There is no "metaphysical necessity" that causes go on forever. In fact, we might note, there's a creation problem in there somewhere. Is there a First Cause, or do causes go on forever?

All we can say, says Hume, is that the mind prompts us to believe in cause and effect. A cause is

An object precedent and contiguous to another, and so united with it in the imagination, that the idea of one determines the mind to form the idea of the other, and the impression of the one to form a more lively idea of the other[.]

So it's the imagination and, following a lively idea, the mind that make the connection between cause and effect.

We can understand better what is going on if we think of the problems that Google's self-driving car must solve. Google Car is an entity programmed by humans to navigate without human intervention in the world. It uses cameras to provide it with a constant supply of images of the world "out there," and it must resolve the successive images into something useful.  What is useful is to call patterns that seem to persist from frame to frame "objects" and keep track of them, assuming that these "objects" are entities out in the world that Google Car needs to understand and deal with. For instance, Google Car might interpret a certain seemingly persistent image as a "traffic cone" and another as a "flagman." It makes sense to classify these persistent images as objects. Google Car needs to respond in one way to a supposed "traffic cone" and in another way to a supposed "flagman."

All Hume is saying is that we must restate the causal maxim into something like this: "Whatever perception the imagination decides is an object the imagination also deems it to have a cause or ground for its existence."

Explain what Hume is doing in 1.3.14.35 and then restate the causal maxim making use of Hume's understanding of necessity.

Mann's Social Power Meets Novak's Three Sectors

I was over to Half Price Books yesterday and stumbled across a two volume set by Michael Mann on Social Power.

No, not that Michael Mann. This is a sociology prof. at UCLA. And his magnum opus is The Sources of Social Power, Vol 1, Vol. 2, Vol. 3, Vol. 4.

The big idea is to analyze human history through the lens of four competing power factors: ideology, economic, military, political. As in IEMP.

This, of course, is almost exactly the analytical framework of Michael Novak in The Spirit of Democratic Capitalism. Novak divides the social world into three sectors: political, economic, and moral/cultural. The difference between the two is that Mann wants to divide the political sector into two, because he sees that the military can be, and often is, a separate power sector from the political.

Also, Mann clearly operates from a lefty perspective, and Michael Novak is a former lefty. Mann's books start from the "beginning" and analyze the interplay of the four power factors throughout history. Novak's book is an apology for a greater separation of powers between the various power sectors.

So what does it all add up to? Well, I don't know yet, because I haven't read Mann. But here's a gloss by an adept of Mann, G. William Domhoff, a UC Santa Cruz prof. who runs a website called "Who Rules America?" about how "the wealthy few... defeating all of their rivals (e.g., organized labor, liberals, environmentalists) over the course of the past 35 years."

I know. If only. Because if you are like me you think that organized labor, liberals, environmentalists, and social justice warriors have eaten the corporate rich for lunch. The only way to escape the humiliation visited on the Koch Brothers is to kiss the liberal ring like Warren Buffett and Tom Steyer and contribute to Democratic coffers. Then you too can become a successful crony capitalist.

Here's an example of Domhoff's approach in "The Four Networks Theory of Power: A Theoretical Home for Power Structure Research".

As for the many wars in which the United States has been involved since 1949, they were decided upon by elected officials and by corporate leaders appointed to important positions in the state and defense departments, not by military leaders itching for a fight. The 2003 invasion of Iraq is a perfect example. It was the product of assertive nationalists like Vice President Richard Cheney and Secretary of Defense Donald Rumsfeld, both former corporate CEOs, and the neoconservative ideologues they brought with them to government from right-wing think tanks.

The only problem with this is that Dick Cheney and Don Rumsfeld were and are politicians. Their sojourns as corporate CEOs were merely pauses in their political careers to make a little money. Their value to the corporations they headed was their political clout -- for corporations that needed clout. Cheney served Halliburton, a global oil-services company, and Rumsfeld served G.D. Searle, a drug company.

It was possible to think of corporations as a new and frightening phenomenon in the mid 1900s. But by 1910 they had been definitely tamed. No corporate bigwig could survive and prosper without kissing the ring of the political sector.

The history of the last 100 years makes that clear. The political sector keeps putting on demonstrations of power, just to be on the safe side: first the Standard Oil breakup, then the humbling of auto and steel with collective bargaining laws, then the IBM anti-trust suit, then the Microsoft anti-trust suit.

Today's headline corporations like Google and Apple know exactly what side their bread is buttered, and they keep themselves properly aligned with today's political and ideological ruling class, the educated ruling class of well-born liberals.

Still, it's going to be interesting delving into Michael Mann's books. His work will provide a different perspective from the excellent Michael Novak.

Economic Policy After Obama

It's said that the American people are ready for a different economic policy after the six years of sub-par growth under Obama. That is nice.

Problem is that the American people don't have a clue about what economic policy creates prosperity. Exhibit "A" is minimum wage. The American people are for it.

Problem is that the science is pretty well settled on this, except among a few labor economists. Minimum wage creates unemployment, particularly among uneducated, inexperienced young single males.

But the American people think that, absent robust growth, the way to get a bigger check from their employer is by force. By the government holding a gun to the head of their employer.

Hey, no surprise there. Most Americans earn their living as employees or as government beneficiaries. They do not really live in the market economy. They live in an administered world, the world of the corporate bureaucracy, the government bureaucracy and the client of the powerful patron.

Trouble is that the feudal system got its marching orders centuries ago. It is not subordination but exchange that makes the world go round. It is individuals responsibly trying to serve their fellow humans in market exchange that undergirds our prosperity.

I like to say that the moment that this truth got established beyond a shadow of a doubt was in 1921 when the German General von Seeckt decreed that the German army now needed individual soldiers who were "self-reliant, self-confident, dedicated, and joyful in taking responsibility."

Here's an article listing the five things wrong with the economy. They are:

1. Poorly enforced trade agreements.
   
2. Misguided energy policies.
   
3. Burdensome government regulations and taxes.
   
4. Corruption and monopolies.
   
5. Disincentives to work, poorly run universities and immigration.

Fixing these five problems will go a long way to fixing the slow-growth economy After Obama.

The thing is, all these things are Holy Writ to Obama and the liberals. Energy? We gotta fight global warming! Regulation and taxes? You want unsafe working conditions! Corruption and monopolies? What about those Koch Brothers! Disincentives to work? You got no compassion for the poor and the marginalized!

My point is that we can have a Republican president and Congress that pass legislation to make a start on fixing this, but that won't even make a start on educating the American people to the real source of their prosperity.

The cunning of lefty "community organizer" politics is that you can always angry up people into a froth of rage and hate. Everyone has a complaint against society, from Warren Buffett down to the family of the dead teenager in Ferguson, Missouri.

But the point of the society of responsible individualism is that we agree not to resort to politics to settle our differences. Instead we accept the verdict of the market. Which is short for accepting the verdict of our fellows. Which means that there are no excuses.

The great tragedy of our time is that the very people that advertise their dedication to Peace and Justice are the very people that insist on a political solution to every problem.

But politics is division; government is force. The more politics you have, the less Peace and the less Justice. That's why, in the hyper-political Obama administration division has increased and inequality has risen. Politics sets "us" against "them" and government mostly sides with the powerful and the status quo.

Still, there is only one thing to do, and that is to make a start.

David Hume: In Media Res

I finally got to attend my class at the University of Washington on The Philosophy of Hume on Monday. Right in the middle of the whole question of Cause and Effect.

In media res. Just like an mythical epic, which always starts in the middle.

Cause and Effect. That's the Big Idea in Hume. You think there is such a thing as Cause and Effect, that when you see your friend throw a stone into the lake that there will be a splash. You are just assuming that because it happened last time it will happen this time. But you don't know that there will be a splash.  You just assume it, based on previous experience.

As Hume writes in A Treatise of Human Nature:

An object may be contiguous and prior to another without being consider'd as its cause. (1.3.2.11)

But that means nothing unless there is a NECESSARY CONNECTION. And Hume goes on to argue by reason that you can never prove a necessary connection.

The prof. in the class points out that there's a little problem here. If it's legitimate to argue about external "cause and effect" by the internal "cause and effect" of rational argument why isn't the same true of observation? What is the proper extent of the rule of reason?

Hume thinks he can confirm his doctrine by reference to animals. He does this to discredit the idea that we humans make a rational act when we declare that a certain Cause has a following Effect. The point is, he argues in 1.1.16, is that animals do the same thing we do with cause and effect, but they do it by instinct rather than self-conscious reasoning.

From the tone of voice the dog infers his master's anger, and foresees his own punishment. From a certain sensation affecting his smell, he judges his game not to be far distant from him.(1.3.16.6)

Hume is arguing what for the operation of what would be called a century later the "unconscious." We and the animals unconsciously link events together and experience it as cause and effect.

Beasts certainly never perceive any real connection between objects. 'Tis therefore by experience they infer one from another. They can never by any arguments from a general conclusion, that those object, of which they have no experience, resemble those of which they have. 'Tis therefore by means of custom alone, that experience operates upon them.(1.3.16.8)

 But when we make a rational decision to infer one event from another, using the "conscious" mind, do we have any additional warrant for that decision? Or are we just dressing up our experience with the name of reason?

Will anyone believe Hume, he wonders? At the beginning of 1.3.10 On the influence of belief he channels the 20th century Thomas Kuhn, he of "normal science" and the "paradigm shift." Writes Hume:

[A]ll systems... are apt to be rejected at first as new and unusual. This will perhaps be the fate of what I have here advanc'd concerning belief, and our reasonings from cause to effects... I expect not to make many proselytes to my opinion.

Yeah, well. I'm sorry Dave, I'm afraid I can't believe that. If nothing else, Dave, you woke dear old Immanuel Kant out of his dogmatic slumber.  And the consequences of that, at least, are immeasurable as the cause and effect of stone-throwing.