Republicans & Conservatives: Archives

Quite right, Jack. The world still exists also. But, it will not always be the case. Wal-Mart just announced China is its fastest growing market and is investing heavily in increasing store units there. What this means to the chain that imports from China to its US stores is that in China, it has no importing to do lowering its overhead for operations in China.

That is the future. American companies finding profits and growth in China, India, Malaysia, and later on, Eastern European and some Middle Eastern countries if they manage the present and near future relations there appropriately. Americans will always be able to fall back upon its caste system of servants and served domestically as manufacturing diminishes, and innovation continue to shift overseas.

You recall that when Lord Keynes was asked what would happen in the long run, he famously said that in the long run we are all dead.

This is not as facile a statement as it appears. We have to plan for the short and medium term. In the long run, many things happen that we cannot predict. I think of the long run as about 50 years. Step back to 1955. Would anyone have come close to predicting the world today? Any policy to manage the economy would have caused us to stifle innovations in computing, biotechnologies and a myriad of other things we now take for granted.

We have the best planning mechanism in place today: the free market. When I talk about this, I don’t mean unfettered capitalism, but business with reasonable government regulation. Nothing that have ever been tried or proposed has ever worked better. Our reliance on this system is the reason the U.S. tops the competitive lists year after year.

Each year, someone predicts our imminent fall from grace. Someday they will be right, but not today.

Heh. Nice ranking. I bet the Europeans don’t think being number one in this catagory is a good thing. :)

Any policy to manage the economy would have caused us to stifle innovations

So why are Republicans so quick to slap quotas and tariffs on Chinese textiles, steel, and Canadian lumber, and so quick to subsidize major industries like airlines, oil, S&Ls, and automotive?

AP

I oppose most quotas and subsidies. Both parties do it because of political considerations. We can’t rely on the good will of politicians to protect us from politicians. That is why I generally oppose government interference in the economy.

If you don’t give them the power, they can’t exercise it. Sometimes that means tolerating some bad conditions because the government solution will be worse.

My experience is that while both parties sin against the free market, the Dems are quicker to look for governmental solutions. Republicans may do the bad things, but at least they suffer from some cognitive dissonance. On the liberal end of the Democratic spectrum, government management of the economy is considered a good thing, although they have learned not to use those words.

For example, I generally read the books that Robert Reich writes (alliteration). He is a smart guy and I usually agree with everything he says in the first half of the book (when he is describing the problem). I generally disagree with everything in the second half of the book, where he is proposing solutions.

There is a greater advantage to lessening imports by expanding stores in China and the other area mentioned above and that is the decrease in time needed for import and the plethora of related activities that must be built into the marking and merchandising calendars delivers “fresh” merchandise to the shelf more often. The increase in turns on inventory offers a multitude of profit opportunities. Capacity for storage of raw materials and finished product reserve stock increases dramatically. Increased volume of production and distribution of product tends to invite deeper excursions into automatic equipment utilization resulting in decreased labor cost and (generally) increased quality.
It would take paragraphs to fully detail the advantages to offshore manufacturing and retailing for the Wal-Marts of the world.

Ah, Steve, I don’t think you got it. There is hardly anthing in Chinese Wal-Marts made in America. Hence, there are no profit opportunities for Americans save investors when American retailers move overseas, especially in China. I doubt, we even get to tax Wal-Mart on their Chinese profits, made, distributed and sold in China.

David,
You are correct. My error is that for some reason I was thinking that we would be importing goods from China for Wal-Mart stores here in US and by not doing so would create the opportunities I described in my post. Of course the goods retailed in China would be made in China. We will still import China goods for US retail so the present marketing/merchandising calendars remain for US stores.

What was I thinking? That we would import the goods and then turn around and export it back to China. I have gone to my room as punishment.

David:

The point of this thread is that there are at least some positives in this economy. You must admit to at least SOME positives don’t you??

Craig

Craig, for the next 6 to 12 months, overall, things should not be too bad. But the pressures are building. I see on the news today that as I predicted a long time ago on WB, foreign investors are pulling back. That is going to spell interest rate hikes at an accelerated rate if it continues. And there is no reason to think it won’t continue in light of growing deficits and debt. Did you see the pork in that highway bill?

400 earmarked pork additions having nothing to do with highways, just Congresspersons tacking on to the bill federal tax dollar spending for local and regional products like Gazebos. Initial request, 256 billion. Now after your and my Congress persons are done with it, it is closer to 290 billion. There is no way that deficit is going to be cut in half in 3 years. You watch, Bush still won’t be able to find his veto pen despite his threat.

Are you aware that Congress gets 10% of our federal expenses - 3 billion, 30 million in 2004, to do their job? And what do they do with their time, spend our money trying to stiff each other over what rules to play by in Congress, as if, after hundreds of years, our system is broke.

Craig, note this from the 2004 House Annual Report of the Federal Government:

Interest expense on the $7.4 trillion national debt totaled 12 percent of federal spending in 2004. Historically low interest rates have significantly lessened the impact of the rapid growth in federal borrowing. As a result, debt service in 2004 was less than in 1995, even though the national debt in 2004 was 50 percent larger than in 1995.

Should interest rates rise, the federal government’s interest expense would increase substantially. This, in turn, would further increase the deficit. Had the average interest rate during fiscal 2004 been two points higher, debt service would have risen to $469 billion. This is approximately the combined total for military and homeland security expenses in 2004.

David:

Do you see anything positive happening in the economy??

Craig

Jack,

“If you don’t give them the power, they can’t exercise it. Sometimes that means tolerating some bad conditions because the government solution will be worse.”

That is just a fancy way of saying you give up because the government is too corrupt to objectively solve the problem. You need to give the government power of the country and its people, but power over itself must accompany that.

I think the good news is that the bad news isn’t.

All my life I have been hearing predictions that doom for the U.S. was right around the corner. There is a whole industry devoted to this. When I was in HS, I read “the Population Bomb†that predicted mass famines in the U.S. in the 1980s. I missed them. “The Limits of Growth†predicted shortages of everything at about the same time. Actually raw materials are cheaper today than when the book was written. We had books about the Japanese taking over the world, the U.S. economy collapsing for various reasons.

This is nothing new. There are a couple of things that are true.

1. The U.S. economy will shrink RELATIVE to the world economy. This is not a sign of U.S. failure, but rather finally success of others.
2. The U.S. economy will remain the world’s largest and most productive for at least twenty years (and probably more)
3. There will be several economic booms and downturns before we all retire. If I could time them I would be rich.
4. Social Security will run out before we do.

Besides number four, there is nothing we can really do anything about except adapt to the changes.

And despite all the gnashing of teeth, the U.S. remains the world’s most competitive economy. And it is the only big economy in the top group, which otherwise contains boutique countries with smaller problems.

Yes. I have given up on big government. That is the whole basis of conservative ideology. Government should be small because it is not scalable. It should be decentralized whenever possible. And the private sector should be allowed to flourish.

When government gets into too many things, it screws up. And it is a constant struggle to keep it from getting too big, since everyone, when they get in a position of power, wants to use it “for good.” BTW, we can never win that struggle. Eternal vigilance is the price of liberty.

He is a smart guy and I usually agree with everything he says in the first half of the book (when he is describing the problem). I generally disagree with everything in the second half of the book, where he is proposing solutions.

Jack,

It’s too bad you disagree with Reich so often. The truth is, the Democrats are simply better for the U.S. economy than Republicans. As Slate looked at the numbers back in 2002, it found, “Since 1900, Democratic presidents have produced a 12.3 percent annual total return on the S&P 500, but Republicans only an 8 percent return. In 2000, the Stock Trader’s Almanac, which slices and dices Wall Street performance figures like baseball stats, came up with nearly the same numbers (13.4 percent versus 8.1 percent) by measuring Dow price appreciation. (Most of the 20th century’s bear markets, incidentally, have been Republican bear markets: the Crash of ‘29, the early ’70s oil shock, the ‘87 correction, and the current stall occurred under GOP presidents.)”

My own theory about this is that Democrats are simply more practical about running the economy. They aren’t ideologues like so many Republicans and so they’re freer to use free markets systems where they work best and the occassional government incentive or investment when it works best. They’re also more likely to spend on things like infrastucture and education, both of which are good investments in growth. And they’re more likely to create tax programs that help people at the lower classes, who are quite likely to spend the extra money they earn rather rather than socking it away or putting it into overseas investments. In short, if you really want to see the economy grow, vote Democrat. If you want to remain a happy but poorer ideologue who sits around the club complaining about how the Democrats just don’t know squat about business or economics, vote Republican.

Reed

Lag times.

The market began to go down most recently in 2000 March. It started to go up in 1991 March. The bull market nearly coincided with Clinton, but it started before he came into office and ended before he left. The most recent bull market is a big part of the stats.

Presidents of either party have little to do with the swings of the market in the short term and not that much in the long term. The bull market of the 1990s (that started under Bush I and ended under Clinton) was made possible by the downsizing and shake outs of the late 1980s.

The late 1990s was a bubble. The dot.coms had little underlying value.

I think Clinton did a good job of managing the economy, such as a president can between 1994 and 1998. The first two years, he was a little wild to the left and the last two he was preoccupied.

Bad economic managers were Johnson, Nixon (after 1972) and Carter.

Stock stats are not like baseball stats, just like betting on the stock market is not like betting on a sporting event.

Re Reich – he had less to do with Clinton’s management of the economy, since he was in the labor dept. I really respect Robert Rubin and have also read his book. It seems to make sense throughout.

Jack,

Yeah, that Bush bull market is really something.

You’re right, of course, that Mr. Rubin had more to do with economic realities than Reich. But it does help to have a president who actually cares about the little details, like deficits and proper investments and a solid understanding of economic balances. I think that in the end history will judge Mr. Bush to be quite a poor economic manager, especially in terms of job creation and the stagnation (or erosion) of wages, even in an era of high productivity. Lag time, indeed.

Yes. I have given up on big government. That is the whole basis of conservative ideology.

Then here’s a shocker, Jack. The Republican Party is no longer the party of conservatives.

President Clinton rolled back the federal government to 1950’s era size and growth. “The era of big government is over,” he declared. Of course no one could have predicted that the Republican Party leadership would completely reject that fundamental conservative ideology.

Under President Bush and the Republican Congress, the government has expanded by a full third over what it was under President Clinton. John Kerry voted against a funding bill for troops in Iraq because Republicans couldn’t figure out a way to pay for it except to borrow the money from future generations.

There is no longer any mention of fiscal controls in the Republican Party platform because the Republican Party no longer believes in it,

“You cannot manufacture a consensus for statutory controls when the consensus for budget discipline is not strong enough,” said Representative Jim Nussle, Republican of Iowa and chairman of the House Budget Committee. “I do not believe, unfortunately, there is a broad enough consensus necessary to enact budget controls into law.”

It’s not your father’s GOP. By the same token, the Democratic Party is now the party of conservative fiscal policy. Democrats recently introduced legislation (S.19) to reinstitute fiscal restraint mechanisms,

This legislation would restore the Senate pay-as-you-go rule to require that mandatory spending and tax legislation be fully paid for, or be subject to a 60-vote point of order.

…The bill would also reinstate sequestration (across-the-board spending cuts) to enforce pay-go and discretionary spending limits. Legislation that exceeds fiscal year 2005 discretionary spending caps, as well as mandatory spending and tax legislation that would increase the deficit, would trigger sequesters.

…The bill prevents procedural gimmicks from being used to increase the deficit. The bill allows the Senate’s fast-track “reconciliation†procedures, which cut off debate after only 20 hours, to be used only for deficit reduction. Legislation that would increase the deficit could still be considered in the Senate, but could not be expedited.

Democrats are now the party of fiscal restraint.

I know some of you over here think it must be a trick. Fine. Call the bluff. Tell your Republican senators to support Senate Bill S.19.

The Dems are the party of restraint because they are not in power. They are currently performing a useful service but I despair of finding anyone who will restrain the size of government because power corrupts.

I read the Dem platform from last time. There are calls to increase workers rights, raise wages, protect the environment etc. These are all great goals. But read between the lines and it is not hard to see that the bigger government would be the instrument.

So you think Dems are bluffing with the fiscal control legislation? Call the bluff. Tell your senator to support S.19.

Craig, if you consider borrowing from the future to shore up the present economy a positive, then yes. But, let’s face facts here, the tax cuts are just tomorrow’s tax increases since we borrowed the money to pay for the tax cuts. The tax cuts stimulated the economy today, while threatening the economy tomorrow. In the short run, the economic fundamentals look good, even great in some respects.

But, move just 8 years out on the horizon and economically speaking there are nothing but convergent slams on the economy. Pension crisis, trade deficit trends, deficit spending, enormous national debt and interest payments on it as interest rates continue to rise, and of course the largest segment of American consumers being comprised of the retired whose ability to consume will be increasingly threatened by inflationary health care costs and the threatened demise of Soc. Sec. and Medicare/Medicaid assistance which Republicans are growing the costs of instead of reining them in.

Fisrt Quarter IRS revenue figures released about two or three weeks ago show a gigantic influx of revenue they did not and cannot predict because of a robust economy, they went on to say that it nearly wiped out this years shortfall in revenue.

The only reasons dems want fiscal responsibility is that those dollar are not for there programs. There motives are as usual suspect. They have had there own abuses as well.