Silly Ned
Governments aren't businesses. They're governments.
By Dan McLaughlin Posted in Liberals — Comments (41) / Email this page » / Leave a comment »
The Wall Street Journal humors Ned Lamont with some prime op-ed space to make his case to business-minded voters, with unintentionally hilarious results. Here's his #1 "lesson" he draws from his experience in business:
[E]ntrepreneurs are frugal beasts, because the bottom line means everything. In Connecticut, voters are convinced that Washington has utterly lost touch with fiscal reality. We talked about irresponsible budget policies that have driven the annual federal deficit above $300 billion and the debt ceiling to $9 trillion. Meanwhile, the government is spending $250 million a day on an unprovoked war in Iraq while starving needed social investment at home. I am a fiscal conservative and our people want their government to be sparing and sensible with their tax dollars.
Let's say you owned a bank, and you noticed that the bank's security guards were costing money, and weren't bringing any revenue into the bank. Would you fire them on the theory that "the bottom line means everything"? Maybe Ned Lamont would. But to the rest of us, the bank's security guards are there to protect the parts of the bank that make the money. This is one reason why the obsession with equating deficits to private businesses or households is so silly - there are reasons, yes, why it is preferable not to run deficits, but the idea that government should be run with an eye to its own bottom line is not one of them. The purpose of government is to protect the rest of society, enabling private citizens to make money and do all the other good things of life. Once you treat government like an enterprise with value and profit motives unto itself, you head down a very dark path.
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Silly Ned 41 Comments (0 topical, 41 editorial, 0 hidden) Post a comment »
bank manager. The entire reason that you hire security guards is in order to protect the bottom line. The fact that they "protect the parts of the bank that make money" indicates that it is, in fact, in the best interest of the bottom line to have security guards. If a bank manager determined that there was a better or more efficient way of protecting the money (fewer security guards, but more security cameras, for example), then he would be a fool not to do so. No bank keeps around security guards just because it likes having lots of security guards.
There is plenty to criticize Ned for without jumping on him for advocating fiscal responsibility. I thought that was one of the defining virtues of conservatism, and rightly so, because government deficits hurt the economy, and therefore the country in both the short run (by crowding out investment) and long term (by requiring higher taxes in the future to pay off the interest accumulated).
My point is, the relevant bottom line is the whole bank, not just the guards. Government is just the guards.
"No compromise with the main purpose, no peace till victory, no pact with unrepentant wrong." - Winston Churchill
.. government deficits hurt the economy, and therefore the country in both the short run (by crowding out investment)
If it were true, I'd expect that high deficits would go along with high interest rates. That is not happening.
I'd like to see some evidence of a crowd out effect going on. It seems to me that for much of the Reagan and G. H. W. Bush years, interest rates and deficits went in opposite directions.
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"In this day and age, you're not going to get a fair shake in the media" -- Lance Armstrong
My guess is that the effect is small and easily swamped by other factors. Which is yet another reason why deficits are bad all other things being equal but less bad than at least some of the alternatives.
"No compromise with the main purpose, no peace till victory, no pact with unrepentant wrong." - Winston Churchill
is a product of government investment in consumer goods. It can happen when the government sets prices and becomes a monopsony (kind of like a monopoly, except a monopsony is the only buyer for a good, instead of the only seller) for some market, or even if it just starts spending so much money in a market it may as well be the only buyer. Crowding out is not caused by deficit spending per se; it depends on what the government is using the deficit spending to buy. Much of our deficit right now is going to war and national security related spending, which aren't really consumer goods since I can't walk in off the street and purchase a tank or an aircraft carrier, no matter how rich I may be. This same dynamic happened during the Reagan years. That's why we're not seeing a short-term crowding out effect. On the other hand, large deficits can theoretically have a long-term impact on inflation, and they are certainly tied to changes in the value of the dollar, but long-term means 20 years or more, not 5 as some critics of Bush would have the public think.
So I hope the original poster doesn't spend too much time hunting for your evidence, Neil. He might be surfing Google for a long time!
crowding out can be manifest in several ways. The most direct of which is via interest rate increases, but such increases can be limited by simply printing more money (leading to inflation), by a depreciation of the nations currency (leading to higher prices for consumers), or a couple of others that I don't remember off the top of my head. I do distinctly remember my Econ prof adamently stating that government deficits always end up hurting private investment somewhere, whether it's through less available investment due to high interest rates or a lower value of the capital invested due to inflation or a weak dollar.
I specifically said that crowding out can be manifest not only in the form of higher interest rates, but also in the form or weak currency or inflation. During the past five years interest rates have been higher, but admittedly modest, as has inflation. The dollar, however, has been steadily declining during the current cycle of government deficits. I'm not an economist, and I haven't claimed to be, but I would place much of the blame for the declining dollar on the federal deficit. A decline in the dollar, of course, makes domestic capital investment less attractive, both to domestic and foreign investment and therein lies a crowding out effect.
It'll have whatever effect you need it to have at the time.
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"In this day and age, you're not going to get a fair shake in the media" -- Lance Armstrong
I had the misfortune of reading two of your comments. Both of which were counterfactual and nonsensical.
hurt the private sector on a conservative blog. Of course there are times when it is worth the blow to the stock market to run a deficit for a bit. I'm not trying to say that this is or isn't one of those times. What I am saying is that it is basic economics that a federal deficit hurts an economy. It's simple supply and demand. Conservatives have been saying this for years, and they've been right. It's a sad state of affairs when a Democrat is harping on federal deficits and "conservatives" have gone Keynesian.
Also, it's a sad state of affairs when a featured contributor on one of the most read conservative blogs on the internet would rather drop one-liners and insults than actually interact with an issue. Man, Redstate must set the bar pretty low.
that's what happens when you get famous, you start dissing all the little people who made you great.
But if you want interaction you need to drop totally unsupportable statements about what conservatives believe (See Reagan, deficit, economic boom) and economics in general ("basic economics that a federal deficit hurts an economy", see War, World, II, effect on economy).
but I was under the impression that traditional conservativism eschewed deficits and wanted to offset tax cuts with cuts in federal spending. In fact, I've heard many conservatives (including myself, a conservative, although an admittedly moderate one) who considered Reagan's failure to reign in spending to curb the deficit his greatest shortcoming. I realize that conservatism has changed over the past decade and a half with the rise of neoconservatism, but I was unaware that conservatism had come to embrace Keynesian deficit spending. In regard to WWII, as with most wars, inflation spiked, as one would expect with a federal deficit financed by printing more money. In that case, the inflation put money back in the hands of a lot of people who had been without it for quite a while, thereby stimulating the economy from the demand-side, a situation that I hope we agree would be undesirable today (at least Greenspan and Bernake think so).
I guess what I'm wondering is: if deficits don't matter anymore, what is the point of attempting to cut federal spending, or is that why Republicans have been so horrible at it over the past few years?
there was such a thing as "conservative economics."
I don't see how a government can have a surplus unless it overtaxes, it isn't like the government can work two jobs or do overtime, so I'm not really afraid of deficits that run <= about 3% of GDP.
supply-side, low government spending as a percentage of GDP, a hawkish stance on inflation, etc. as opposed to "liberal" demand-side, increased government spending, lax inflation policy (although the latter has nearly gone the way of the dodo), etc.
I'm glad to see our difference is more one of degree than of opinion. God forbid that conservatives advocate for federal deficits! I agree with you about the 3% rule, but I'd like to see us run a small surplus for a few years to pay down the federal debt a bit first.
how do you pay down the federal debt when Social Security creates debt at the rate of billions and billions of dollars each year. Have you read this, by another featured contributor Bob Hahn?
it seems to give China too many cards for my taste. Time will tell, I suppose. Social Security is indeed a mess. The way I'd prefer to go about it would be to tie retirement age to life expectancy. But then again, I'm under 30 and both my wife and I are maxing out our Roth IRA's every year, so I imagine that flavors my opinion a bit.
Who here said deficits are a stimulus? There's a long way between being a Keynesian and cheering on deficit spending, and being of the belief that a modest deficit is, in the words of Douglas Adams, mostly harmless.
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"In this day and age, you're not going to get a fair shake in the media" -- Lance Armstrong
Again: deficits are bad. But the usual debate is deficits vs. tax hikes. What needs to be shown by the tax hiking faction is that deficits are worse than tax hikes, and that's a serious uphill battle.
Now, if there was someone out there making a case for closing deficits by cutting spending, we could talk.
"No compromise with the main purpose, no peace till victory, no pact with unrepentant wrong." - Winston Churchill
This assumes that there is some fixed pool of investment money out there and that when the government "takes" more of it there is less left for other investment.
In reality there are different pools. The people who are willing to lend to Uncle Sam are not neccessarily interested in lending to Auntie Jill's startup catering business, and vice versa.
It was back in the 60s and having participated in the economy over the last 40 years, it turned out my Prof was an idiot. In reading your comments down thread, we must have had the same prof, only I got a C and you got an A.
Envisioning when all that is Left is the Right.
On the entrepreneurial side he makes some sense at a high level. Put aside the fact that this is all 1) designed to appeal to moderates, 2) there's no way that his base approves of any of his conservative views, he does seem to be saying things that don't annoy me.
Your analogy about the guards is a classic example of cost management. Security guards are like IT infrastructure investments: they don't add to the bottom line but are cost avoidance plays. What is the cost of the guard compared to the probability of a bank robbery loss? That's the biz case there. Same with an IT infrastructure investment. And by working in a mega for-profit company that you've heard of, I can tell you that selling the infrastructure is very, very difficult for the rationale you lay out. The situation essentially needs to be the equivalent of a bedsheet tied under a car's undercarriage to hold the exhaust system together. And even then it's uphill and unpleasant.
The "profit motive" aspect of government is a good idea in general. This is in alignment with the bill proposed by a Republican that would force every government agency to re-request funding in order to continue to exist. This is an excellent proposal. We're not looking for P&L here, simply a revalidation of the "business case" for the operation. If your value proposition is solid, you should have nothing to worry about. If your value prop is questionable, then you absolutely should be up on the Hill re-justifying yourself. This would make government much more nimble in responding to the needs of the consumer.
What you should be taking Ned to task over is his ridiculous treatment of how to solve our terrorism problem. This couldn't be more sophomoric of an approach, if you can call it that:
But here's how we'll get stronger by changing course. We must work closely with our allies and treat the rest of the world with respect.
How will working any closer to our allies defeat the enemy? How will treating the world with more respect win the war? Is he nuts? Those are indirect measures, not direct ones. His plan for the War on Terror/IslamicFascists is completely absent. Unacceptable. To explain in entrepreneurial terms, it would be like Ned telling us that he will secure investor funding by being nice to the people that talk to investors. Yeah that will do it. No worries about biz case or value prop or feasibility. Just be nice, not to the investors, but to their friends.
I have no quarrel with requiring government agencies & programs to justify themselves. But again, the inquiry should be benefit to society, not benefit to government.
"No compromise with the main purpose, no peace till victory, no pact with unrepentant wrong." - Winston Churchill
Isn't it the Democrats who are always calling for government to move into more and more sectors of our economy on the grounds that government will come tot he problem differently from how bottom-line-watching business people do? Aren't they the ones that said free markets inevitable create Enrons?
So here we have one of the few areas where an overwhelming majority of Republicans are totally, strongly, utterly in favor of government action, and now he wants government to act like a business?
Quick, someone get his stand on school choice.
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"In this day and age, you're not going to get a fair shake in the media" -- Lance Armstrong
Lamont was in the cable business, so he may be a bit shaky on the concept of competition.
"No compromise with the main purpose, no peace till victory, no pact with unrepentant wrong." - Winston Churchill
that's going to leave a mark :-) But true, the cable TV business is as far from a competitive enterprise as the local power company and with far, farm far less justification.
John
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Why would God invent a thing like whiskey? To keep the Irish from ruling the world of course.
...perhaps he could do a cost-benefit analysis on "social investment"? I'd like to see that ROI, 'kay Nedster?
I am an entrepreneur. I have for many years looked at the bottom line as the sole indicator of success.
However, in the last 3-4 years I have been pulled by my personal choices to become more involved within the community. To provide a better experience for the population as opposed to a narrow group of shareholders. Knowing that the public sector was a different beast altogether I chose to earn an MPA degree. The differences in private to public administration are enormous and only vaguely similar in operational application. Hence, the fallacy that government can be run like a business.
I recall a statement made in an association publication:
Government is an activity unlike business because the department or division that is failing can not be spun off or closed, it must be improved
And that is the crux of the differentiation between the two. And from what I have experienced so far in public service, the leader (elected official) is quite a small component in the process of governance. Sure, the politician may set some direction, but it is the career civil servant who is the implementer and hence, the power to make a real difference in the publics’ experience resides there, not with the elected official.
The government is the "guards" of the bank. The bank is all the free-enterprise activity conducted, represented as the gross national product. Ideally the federal government would be just that; a service-provider controlling currency, keeping the peace, ensuring the free exercise of the markets and providing domestic tranquility. They are there to ensure no disruption of market conditions so the "bank", the capitalistic free-enterprise engine, can do what it does; make citizens wealthy.
The current government deficits are at an acceptable percentage of the gross national product. Remember when Reagan ran up "catastrophic" deficits during his tenure that would never be overcome? When he started the Dow Jones average was 890. Today, 25 years later, the Dow is at 11,000 and the country has never been wealthier. Today Americans in the bottom quartile of income enjoy a standard of living better than the average western European.
The deficits are chump-change and the government is just the tail of the dog. Of course it is the Socialist Democrats that always want the tail to wag the dog. Lamont is a joke; his analogy is ridiculous.
For the message of the cross is foolishness to those who are perishing, but to us who are being saved it is the power of God. St. Paul
The bank also wouldn't pay the have the guards take over the convenience store across town because they thought that they were going to be putting in an ATM that was going to take away from their business.
And then keeping them there working overtime for shift after shift after shift.
So, obviously there are plenty of problems with my analogy, but I was just pointing out that you are taking it for granted that what happened in Iraq is keeping us safer, and thus is worth the expense. I take the opinion that in hindsight, that is not an obvious conclusion.
The point is debatable, so it kind of knocks the wind out of your argument. I am not alone in this opinion, so I don't think it is too unreasonable: http://www.pollingreport.com/iraq.htm :
"As a result of the United States' military action against Iraq, do you think the threat of terrorism against the United States has increased, decreased, or stayed about the same?"Increased 48% Decreased 9% Same 42% Unsure 1%
I don't want to be disruptive, but don't want to pretend to be something I am not. Hopefully I don't go too far. I think being able to have a reasonable debate is good for both sides. No?
Groupthink is dangerous. I need both sides, but my opinions tend to push me one direction. I will leave it up to your imagination to guess where!
If you want to engage in 'both sides' debate, go to Swords Crossed instead. Red State isn't the site you are looking for.
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"In this day and age, you're not going to get a fair shake in the media" -- Lance Armstrong
But your comment didn't address the issue at hand. I would like to believe that we here are better then the completely closed minded wackos on kos or DD et. al.
that you believe this poll to be dispositive of something.
I'd always thought polls measured opinions not facts so using a poll to attempt to refute an assertion which isn't based on polling isn't very helpful
You've returned! Goodbye!
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Even those who learn from history are surrounded by those doomed to repeat it.
I haven't seen you in 38 years!
"I'm just beginning...The pen's in my hand...Ending unplanned"
Translation: Government needs to give more money to workers who are members of unions, in particular those who are in public sector unions. This money is quickly recycled back into the Democratic party coffers.
Perhaps we could dispense with the middle-men and simply give the Democratic party a few billion dollars per year direct from the federal treasury. At least that way we could finally get good schools.