Ron Paul: Stimulus Packages Will Turn Recession Into A Depression

[Arrian]

Drake,

Ok, I took that a little too far. You're ok with extending unemployment benefits and some limited infrastructure spending. I imagine there would be a massive difference in scale, however, between your plan and a Keynesian fiscal stimulus.

And yes, DD, it's entirely possible that I've got a case of confirmation bias. It's rather common. I *do* in fact expect our right-leaning posters to be generally anti-stimulus. I think that expectation is rather well grounded, in spite of your protestations. It is, after all, massive spending by the government financed by debt. Hell, truth be told I don't much like it myself, but I've come to believe it's better than the alternative.

Until next time...

-Arrian

[Agathon]

I agree that in the vast scheme of things, it's not a big deal. However, punishing people who behaved well with their money while rewarding those who were reckless and speculative, is decidedly unjust.

It's called capitalism.

[Victor Galis]

I refuse to be responsible for the interpretations you come to when you read words that aren't there.

How Cheneyesque.

[DinoDoc]

Hell, truth be told I don't much like it myself, but I've come to believe it's better than the alternative.

The informal fallacy of false dilemma (also called false dichotomy, the either-or fallacy) involves a situation in which only two alternatives are considered, when in fact there are other options.

http://en.wikipedia.org/wiki/False_dilemma

There are in fact more options than doing nothing or passing this bill.

[Felch]

It's called capitalism.

Words of this kind are often used in a consciously dishonest way. That is, the person who uses them has his own private definition, but allows his hearer to think he means something quite different. Statements like Marshal Pétain was a true patriot, The Soviet press is the freest in the world, The Catholic Church is opposed to persecution, are almost always made with intent to deceive.

Victor mentioned this very phenomenon. Sometimes words mean fundamentally different things to different people. I do not believe that inflation as a matter of policy is a capitalist idea. It sounds more like government interference. But you equate capitalism with almost all the economic problems of the world, so problems are easily summed up as "Capitalism." Debating the matter is pointless, because when I talk about capitalism, I'm assuming that there are structures in place to protect all parties equally (ideal capitalism), while you assume that there are structures in place to protect the more corrupt party (cynical capitalism). But the reality is somewhere between.

Or I could just be reading waaaay too much into this.

[Naked Gents Rut]

I imagine there would be a massive difference in scale, however, between your plan and a Keynesian fiscal stimulus.

There's no "right" scale or procedure for a Keynesian fiscal stimulus. Several prominent Keynesian economists have argued for something closer to my plan than that of Congress. Even Keynes himself seemed to sour on the idea of stimulus via massive government spending in the years after his General Theory was published. Greg Mankiw had a interesting post the other day about the older Keynes' views...

http://gregmankiw.blogspot.com/2009/02/mature-keynesian-perspective-ii.html

[Victor Galis]

The informal fallacy of false dilemma (also called false dichotomy, the either-or fallacy) involves a situation in which only two alternatives are considered, when in fact there are other options.

http://en.wikipedia.org/wiki/False_dilemma

There are in fact more options than doing nothing or passing this bill.

Yes and no. If Congress can't come up with a better option, those are the two choices.

[Agathon]

Victor mentioned this very phenomenon. Sometimes words mean fundamentally different things to different people. I do not believe that inflation as a matter of policy is a capitalist idea. It sounds more like government interference.

The government has to interfere in order to create the legal structure of the market. But the temptation for people to mess with the rules to favour themselves is too great.

Plato understood this 2400 years ago, which is why he sought to separate commerce and government, and prevent the rulers from ever owning more than a toga and a toothbrush.

But you equate capitalism with almost all the economic problems of the world, so problems are easily summed up as "Capitalism." Debating the matter is pointless, because when I talk about capitalism, I'm assuming that there are structures in place to protect all parties equally (ideal capitalism), while you assume that there are structures in place to protect the more corrupt party (cynical capitalism). But the reality is somewhere between.

This is a slightly different tack. I wouldn't say it was "capitalism", but "capital". Capital is just another of those immaterial forces that affect society, like religion. It comes into being by the creation of a certain social system, but once created has its own logic. I don't mean that Capital is literally an invisible force, but it's just a handy way of thinking about it.

Grotesquely generalized, Capital seeks profit to the exclusion of everything, including its own long term health. Take pollution. In order to increase profits, a firm might want to pollute to lower the price of its own goods and externalize their cost of manufacture. So the government does the right thing and internalizes the costs to the firm by imposing pollution controls. But it doesn't stop there, because capital has an incentive to subvert the pollution controls. The most effective way of doing this is to gang up with the rest of those affected by the controls and start to pressure the government to relax them. It's as inevitable as water running downhill. If the public object, then capital simply pays people to mount a public relations campaign denouncing regulation. If you see one of those bull**** astroturf ads on TV, that's capital talking to you. When Fox News takes an absurd editorial line, that's often capital talking as well.

On a larger scale, fraud destroys capitalism. But capital has no scruples about fraud if it is profitable. Hence the pressure for deregulation and the wonderful results we now have. When you try to regulate capital by imposing rules against fraud, it fights back, even if the rules are in its own long term interest (remember how the car companies had Nader followed for insisting on safety, even though the car companies were killing their own future customers).

So I don't assume that there are necessarily structures in place to protect the more corrupt party, but that there is continual and often successful pressure from capital on the rulesetters to free up capital. No one ever really "wins", but capital has been winning for about 20-30 years now in western countries after taking a beating post war.

[Agathon]

Oh, and I forgot to mention the long standing PR campaign of capital to persuade us all that we behave just like it, and that its behaviour is natural and not the result of convention. How much money do certain think tanks and others get to promote this idea?

[RGBVideo]

Doing nothing is better than passing a debt-based pork bill, in the same way how doing nothing would've been better than passing the Smoot-Hawley tariff act, which transformed an ordinary economic downturn caused by stock market bubble into the decade-long Great Depression it turned out to be.

The underlying cause of this recession is debt-based growth during an upturn, which has been the Bush policy during the past 8 years, apparently because "deficits don't matter". And you're cheering for US congress for solving this with yet more debt-based spending? Brilliant.

[Agathon]

Doing nothing is better than passing a debt-based pork bill, in the same way how doing nothing would've been better than passing the Smoot-Hawley tariff act, which transformed an ordinary economic downturn caused by stock market bubble into the decade-long Great Depression it turned out to be.

Not the Smoot-Hawley tariff conspiracy again. This is a crank theory. The US wasn't importing enough or exporting enough for it to make a huge difference to the economy. The economic decline started before the tariff anyway.

A similar tariff had been enacted about a decade earlier to no ill effect. It just doesn't add up to being able to cause anything like what happened in the depression.

[Arrian]

Um, I thought the problem with Smoot-Hawley was that it kicked off reciprocal actions by furriners (aka a trade war) that worsened the depression worldwide.

-Arrian

[Agathon]

Um, I thought the problem with Smoot-Hawley was that it kicked off reciprocal actions by furriners (aka a trade war) that worsened the depression worldwide.

-Arrian

It wasn't that big a deal. It would have been forgotten except that right wingers have a pathological need to blame the Depression on the gub'mint, and Smoot-Hawley is literally the best thing they can find.

So if you should travel the internet and happen on a discussion about the Depression, you will likely see a post like this:

The depression was all the democrazis falt!!! Librulz manged to convince everone of the lie that it was the market, but it was the communist government and FDr the communist, the communist Smoot-Hawley Smoot-HawleySmoot-HawleySmoot-Hawley tarrif was 2 blame. von mIses ron apul ron pual ron paul111ONEONE

[obligatory World Nut Daily link]

Not an exaggeration.

[Imran Siddiqui]

If right wingers want to blame it on the government, the reaction of Federal Reserve would have been enough. However, the Smoot-Hawley tariff tended to do things like, oh, imposing an effective tax rate of 60% on over 3,200 products... which most likely didn't help anything.

[Agathon]

If right wingers want to blame it on the government, the reaction of Federal Reserve would have been enough. However, the Smoot-Hawley tariff tended to do things like, oh, imposing an effective tax rate of 60% on over 3,200 products... which most likely didn't help anything.

No one said it helped. The problem is that the effect of the tariff was too small to bear the weight of responsibility for the depression that some people would like it to bear. It had about as much effect as a mouse trying to pleasure an elephant.

And there's the fact that a similar tariff was imposed a decade previously to no great ill effect, and that the slide started before the tariff, and so on.

It's certainly possible that the government was to blame for the depression. The Smoot-Hawley tariff was not.