My unoffical bet with Cafe Hayek

Cafe Hayek, Hayek's Gift



That’s cute but I think mis-informative.
Spending is growing and growing? What is the biggest new program any how? How much is it costing a year? Can you name it? We have laid off about 750,000 federal and state workers. Most of the increased spending is in the automatic stabilizers not new programs. There are NO new big programs that spending is going into.

Yes we have an aging and unemployed population. Does Hayek recommend that we cut payments to Medicare and Medicaid recipients? Should we cut back social security payments and unemployment payments? That will stimulate the billionaires with piles of cash to start investing? It will help how?

The fact is our current deficit of about $1.3 trillions consist roughly of :
$350 automatic stabilizers
$500 billion of lost revenues from the recession
$100 on defense
$350 Bush tax cuts

This IS Hayek’s austerity program. And as Krugman points out fanatical elements around the world are rearing their ugly heads.

The wealthy will have themselves to blame when they realize the cost of a civil society that protected their wealth is a good price to pay compared to the cost paid as society breaks down and their hated government is no longer their to protect their fortunes. This is all so un-necessary.

At this point as we watch our civilization crumble we should be aware its not for shortages of fuel or food or other material or even war or even natural disaster…. but for sheer unmitigated catastrophic greed. This is all so unnecessary. If I were to pick people to blame I’d blame Rush Limbaugh and Milton Friedman most. But if I was looking for institutional failures… the profession of economics has failed modern civilization more than any profession. It’s failed more than our legal system and even more than our political system. Wow …worse than lawyers and politicians…that’s bad.

It will be a long process coming through this but civilization may look much different in 10 -20 years. Hopefully for the better and not some god awful post apocalyptical society or some global dictatorship. It’s a scary time indeed.

Anyway, other then that..nice video.

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Gordon Richens December 13, 2011 at 10:04 am
Not to worry. You won’t realize it for what it is.

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John Papola December 13, 2011 at 10:09 am
Muirgeo, is total government spending in 2011 higher than in 2010 and was 2010 higher than 2009? That’s called “growing and growing and growing”. There is no “austerity”. Cuts in the rate of projected future spending growth are, um, still growth.

It is, frankly, a LUDICROUS abuse of language to call ANY of this “austerity”. Even if spending was cut by 15%, that’s still not “austerity” by any historical or global notion of the word. Our grandparents generation saw ACTUAL “austerity” during the depression and war.

It’s offensive to those living true lives of austerity that so many in the richest countries on earth living better than the richest people of only a generation ago are decrying slower growth of gifts and goodies as “austerity”. Give me a break.

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Daniel Kuehn December 13, 2011 at 10:24 am
It seems to me growth should be looked at relative to trend, otherwise you can get into some trouble.

A midget grows as he gets older, but to infer from that that his growth is excessive or even normal is quite misleading.

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Chucklehead December 13, 2011 at 11:40 am
It seems to me that the trend should be looked at whether it is sustainable or not, otherwise you can get into some trouble.

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Seth December 13, 2011 at 11:57 am
How are human growth and government spending growth analogous?

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g-dub December 13, 2011 at 1:28 pm
dk>
A midget grows as he gets older,…
I don’t think you are allowed to say “midget.”

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Paul Brinkley December 13, 2011 at 4:02 pm
You’re only saying that because you don’t consider him a microeconomist.

muirgeo December 13, 2011 at 11:51 am
“It is, frankly, a LUDICROUS abuse of language to call ANY of this “austerity”.”

Yes, it’s never enough right. But from a Keynesian peerspective it sure isn’t stimulus. And I do believe we spent less in 2010 but more again in 2011.

And WHAT? Austerity during the Depression? What year? Did it work?

http://static.seekingalpha.com/uploads/2009/7/23/393768-124834411462255-Gerard-Jackson.png

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Jon Murphy December 13, 2011 at 12:25 pm
I think you misunderstood John’s statement. He wasn’t talking about government cutting spending. He was talking about real austerity: people having to do with very little when their incomes fell. Governments can print money at will to help pay off debts (inflate away debts, in other words). Real people cannot do that. Our grandparents had to cut back. That’s austerity.

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muirgeo December 13, 2011 at 11:52 am
John,

A simple question. What is the most expensive new program since Obama took office and how much did we spend on it in 2011?

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Russ Roberts December 13, 2011 at 12:41 pm
Your question is irrelevant. The Keynesian dogma does not require new programs, just more spending. There is no austerity. Federal spending has increased dramatically since the recession began in 2007. The fact that the increase in expenditures wasn’t spent on new programs is irrelevant.

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muirgeo December 13, 2011 at 1:35 pm
Russ,

You’re the expert but I think your claims grossly distort Keynes ideas. We’ve cut government jobs by 750,000. If we had hired that many I’d bet we’d be much further along tough I hesitate to say towards recovery as the structural problems are too big to allow a normal recovery.

Here’s a non-monetary bet though. I bet that you will NOT see a significant recovery from this situation without a dramatic policy change. Any pushes further in the direction of cutting spending and government jobs will make thing worse.

The bet specifically:
When we are finally out of this the proportion of government workers will be UP not down.

Also, our exports will increase compared to imports, median wages will have risen, government receipts will be closer to 19 or 20 percent of GDP, homeowner debt will somehow be cleared (by policy) and income inequality will be decreased.

Any pushes in the opposite direction will make things worse.
This will take some time like the climate change debate but I bet I am right.

The only outlier is a complete societal meltdown and/or some massive wars or revolutions. I think that’s where we are at… and all for ideology over pragmatism.

Mesa Econoguy December 13, 2011 at 3:06 pm
http://www.bloomberg.com/news/2011-07-15/is-government-spending-historically-high-echoes.html

indianajim December 13, 2011 at 10:35 am
Muirge0,

“…the profession of economics has failed modern civilization more than any profession. ”

There are two glaring problems with your post: 1) Over aggregation (some economists have failed others have succeeded); and 2) Misidentification (Friedman, aside from the withholding tax blunder, was a great champion of individual and economic freedom).

The economists who have done the most harm, IMO, were/are the proponents of vulgar Keynesianisms. It is indeed the Beast that Won’t Die:

http://mises.org/media/6160/Keynesian-Economics-The-Beast-That-Wont-Die

BTW, I must confess to having utter an ad hominem (dummkopf!) when I read your post. I’m only human after all; I have to admit I enjoyed it. And now I really feel great because: “Confession is good for the soul.”

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Mesa Econoguy December 13, 2011 at 3:07 pm
http://www.zerohedge.com/news/guest-post-keynesian-solutions-after-total-failure-try-try-again

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