gdp's Comments

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Fri, 9 Jan 2009 19:45:45 +0000

"The USDA should represent all interests in agriculture and stop its tendency to see itself as a policy advocate for employers." This really needs to be a commandment for every branch and department of government. Businesses certainly have louder voices than us consumers, do policymakers not recognize that?

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Mon, 15 Dec 2008 10:21:31 +0000

As a citizen concerned with our scientific future, I second Lee_Love's message and encourage that not only NASA's budget be increased, but scientific funding in general be increased.

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Mon, 15 Dec 2008 06:27:54 +0000

While most of what you are saying is true, it also oversimplifies the situation we are currently facing as a country. Thanks to the credit crunch, innocent people who were paying their bills also lost their house. Neighbors of these people are finding their property values drop. Credit is tight right now, which is certainly not a good thing, and we've had a headless chicken sort of attitude toward the problem, where we should act before we think lest it be too late. We've got plenty of collateral damage from this mess. People aren't going to stand idly by and let this happen to them at no fault of their own. What we need to do now is make sure that in consideration of all the facts, what should we do? If we do nothing and let the economy self-correct on its own, what's to prevent this from happening again? And is doing nothing really fair to those people who paid their bills on time? EDIT: BTW, fortunately, your prediction of a depression is likely incorrect. Hooray!

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Mon, 15 Dec 2008 06:14:21 +0000

What's more important than vengeance is that we make sure this never happens again. It's great if we bring justice to the criminals responsible, but it means very little if we don't learn from our mistakes. Focusing on vengeance is a bad idea if it distracts us from the problem.

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Mon, 15 Dec 2008 05:56:15 +0000

I didn't want to leave this conversation, Mahji_Khan, but I wanted to check the numbers first before responding. First off, the U.S doesn't practice unregulated free trade right now. Disappointing it is for me to say, we have a long way to go before we can claim any serious U.S economic data on free trade and it's effects. Secondly, I can't claim that free trade is perfect, in theory or in practice. Not everyone benefits from free trade. The same, however, can be said of protectionism, that not everyone benefits from it either. In making economic decisions, both us as individuals and this administration need to be asking: "Who benefits from this, and who suffers, and does this maximize the difference between the benefits and the costs?" Now, I must first correct your first point. The dollar certainly has been getting weaker over time. I remember hearing on the news the day when the Canadian dollar was worth more than the USD. What we have not seen is the subsequent decrease in imports, rather, our imports continue to increase. Americans, it seems, perhaps don't care about the rising costs of foreign products (imports are inelastic), or perhaps there are other factors. Things such as the rising price of oil and other essentials which we cannot live without. The causes for our rising imports are complex. Perhaps there is a quick fix for this problem, but I doubt it. Regarding borrowing, any government which borrows too much threatens to collapse in on itself. Other countries have learned this the hard way. I hope that the U.S government learns this lesson soon, and reserves the use of the deficit as a temporary measure, rather than the apparently permanent style our federal government has adopted. It is sad, because when it is used in the temporary manner that economists prescribe, it can have wonderful economic effects, such as pulling us out of a recession (or depression, see the Great Depression). As far as how much a government can borrow, theoretically its bound by the same rules as us, in that it can only borrow as much as it can reasonably promise to pay back. Seeing as how the government has a potentially endless income stream, mainly us and our children, and it has a perfect record when it comes to paying its bills, it might be a while before the federal government hits its limit, regardless of GDP and whatnot. On the speed of the economies, this is assuming that we only have exclusively exports or imports. Our children may have expensive cars, but they will at the same time have fairly inexpensive televisions, or coffee, or energy perhaps. Besides, I think that this is a little bit of an exaggeration. Also, isn't the alternative to just always have expensive cars? How does that help our children? I don't have the expertise or the numbers to comment on your last point, unfortunately. I will have to look that up sometime. I will say that it is distressing to see foreign profits coming from our pockets, but there is no economic reason I can think of as to why this is a bad thing. Also, Toyota produces cars domestically in the U.S. They pay taxes and provide jobs to Americans. I agree with your last comment completely, and I'll add this: If we aren't trying our hardest, and other countries are, why should we expect to come out ahead?

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Sat, 13 Dec 2008 21:51:10 +0000

Mahji_Khan has already expressed a good response to this, so I'll borrow his words. "Mainly, if we are to say that the average American can not do the math on a housing bubble, or a stock bubble, or an oil bubble, or any other bubble that is coming, then are we not saying that average American's can not be responsible for these types of assets?" Your story constantly deflects the blame to people who are "utterly incapable". If we don't understand the system we use, why should we expect it to work anyway? Why shouldn't we hold responsible the people who are a willing part of our failure?

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Sat, 13 Dec 2008 21:43:40 +0000

Yeah, it's very likely that you and I are saying the same thing, just with different names. Sometimes, I wish it weren't so novel a concept to examine our options objectively and choose the best one. Sometimes it boggles my mind to see people make decisions based on "it feels good and we have no choice" and not "because its the best choice". Until we overcome this hurdle, we've already lost at solving our own problems.

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Sat, 13 Dec 2008 21:22:13 +0000

These are very good points, and I certainly cannot account for the cost of every externality of every system. Obviously, those must be judged on a case-by-case basis. However, your example, taxes, is already taken into account in the model. Yes, foreign manufacturers don't have to pay income taxes, but it is not correct to just make the case that the only reason cars are cheaper is because they do not pay income tax. There are _many_ other factors involved in the cost of production, such as transportation costs, raw materials costs, labor costs, etc. You cannot fairly make that assumption. However, for the sake of argument, lets assume that this is the sole difference between domestic and foreign producers. Transportation costs are the same, labor costs are the same, the only difference is the foreign producer does not pay income taxes to their gov't. Thus, it is accurate to say that, in the short term, our government will receive less money now through tax revenue. Now, there is no sound economic reason why the government cannot borrow money now as long as in the long run it pays it back. If the government waits a couple of years, will it be able to pay off its deficit without raising taxes? (Holding other things equal, of course) The answer is, of course, certainly. As we import more and more cars, our dollar will weaken. At a certain point, the price of imports will become greater than it costs to make it here ourselves. Great! Domestic production returns, tax dollars flow back in. Even better, our weakened dollar means that exporting American products becomes a good idea. The U.S will certainly be collecting tax dollars on those, and barring some freakish economic disaster, we will be able to easily recoup the tax dollars lost from the imports we collected in the past. In the long run, the government does not lose tax revenue. The same, on some level, also applies to other benefits. Saving $2000 per car means that we have a lot of extra cash which can be put to health care, education, retirement, etc.. -- As to the velocity of money, I am not sure why the FED cannot counteract this with monetary policy. I will be reading up on my monetary policy literature tonight I guess.

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Sat, 13 Dec 2008 20:18:21 +0000

This sounded strange to me at first, but apparently GM did create the first hydrogen car in 1966. http://www.hydrogencarsnow.com/gm-electrovan.htm Of course, the first commercially-available hydrogen car was/is produced by Honda.

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Sat, 13 Dec 2008 19:44:55 +0000

Anomar, you are correct in stating that this is not the fault of the average person, but at the same time, this mess would not have occurred if these people had been better informed by reading the fine print, asking a couple of questions, doing the math, etc... Businesses shouldn't have been making those loans, but at the same time, people shouldn't have been taking them either! What we have seen is a ripple effect, as the problem grows far beyond people who made bad decisions and begins to affect others, such as the value of your home. The true devastation of allowing people to make stupid loans, _and_ allowing people to take them.

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Sat, 13 Dec 2008 19:24:14 +0000

The externalities of free trade should certainly be taken into account, but they should be taken into account fully, including the externalities that other countries incur. For example, our heavy importation of Chinese products makes is reliant on them, and puts is in a bind if we ever wanted to, say, defend against Chinese imperialism or engage in aggressive imperialism against China. On the other hand, though, it also puts the exact same noose around China which pretty much limits it in a similar fashion. If you want to see the Chinese market nosedive (and don't care about our economy), petition congress to ban all Chinese imports. And of course, remember to weigh the costs with the benefits of free trade. As for the second point, I must simply disagree. The hardest question in economics is not 'what do we want', as that's a fairly easy question to answer: We want it all. Its the driving principle behind all economic theory: scarcity, we want everything, but there isn't enough everything to go around for everyone, so we ration it off using our system of currency. The real million dollar question we should be asking is "How do we get what we want, cheaply?", and this question isn't too hard to answer if one does exactly what you recommend, by doing the benefit calculations, comparing them to costs, and looking at the alternatives, as well as making all of the above public, so that everyone who wants to can check and verify the results.

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Sat, 13 Dec 2008 18:58:27 +0000

This attitude towards protectionism is sadly quite common, and these arguments are not necessarily wrong. From a mathematical standpoint, though, it over emphasizes the disadvantages and under emphasizes the benefits. On the flip side, who suffers from protectionism? Everyone does, with the most impact on the lowest-income Americans who are most affected by the price of commodities such as these. For this example, you cite cars. Everyone needs a car. If a foreign company were to come in to the market, offer the same quality car for $2000 less, why, the American consumer would be overjoyed. That's $2000 that could be spent on _other industries_, like electronics and food, or $2000 that can be invested into our future, or more likely, $2000 less that we don't have to purchase on credit, thus helping certain borderline people who couldn't normally pay their bills now the ability to purchase a car. Suddenly, it looks more attractive for some people to buy a new car and sell their old car. More used cars on the market translates into cheaper used cars, which means that the lower-income Americans don't have to tighten their belt so hard anymore. Hooray, less expensive products! Now, I mentioned math earlier. Who benefits from protectionism? American Auto workers. Who suffers? American consumers, especially the poorer ones. You do the math, and consumers suffer every time, in practically every single industry. If you let the consumer choose which product to get, they'll choose free trade every single time.

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Sat, 13 Dec 2008 18:28:11 +0000

It's disappointing to hear that about free markets, Mahji_Khan, especially since one way or another, its going to do its best to force people to forefit what they can't afford. I don't think that anyone (excepting a small minority, of course) wants to return to the snake oil and mystery ingredients. Government has a role now more than ever in making sure that everyone plays fair and doesn't tell bold-faced lies in order to squeeze a couple extra dollars. Yes, government should be watching out for us and leveling the playing field so that the more trusting of us don't end up dead because of lead content in toothpaste. What we also really need right now though is for some accountability. Government should step in and clamp down on the instigators of this mess, and at the same time help those who are unfairly suffering from this mess. That will go a long way towards both restoring consumer confidence and properly greasing our economic cycle.

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Sat, 13 Dec 2008 09:02:00 +0000

I wholeheartedly agree with this entire statement, and will go so far as to say that any solution which does not allow this (the correction of prices and wages) to happen is doomed to cause more problems than it solves. There is no quick fix that will make this problem go away for good, a recession is the medicine for this economic irregularity. Now, that said, there is plenty we can do to make this less painful for the rest of us. Help people who have lost their job both weather this process and get back on their feet. Stabilize consumer confidence by both giving individuals more disposable income and by government itself contributing by spending (just make sure to pay back your loans before the next recession, congress!), and by studying this mess in great detail and enacting regulations which would hopefully discourage this from happening again. Ultimately though, when we abuse the free market, it'll bite back. The sooner we let it bite us, the sooner we can move on.

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Sat, 13 Dec 2008 08:33:07 +0000

It's a good start, but the plan makes some assumptions which are not necessarily true. It assumes that the holders of the mortgages will in turn start lending to other people. As far as we have seen, bailing out the credit industry has not resulted in a return of credit. It also assumes that, if these holders were to overcome their shyness, that they would make _responsible_ loans, which is certainly not going to happen if the government guarantees $500,000 up front to them. We're right back to square one once that happens. If we assume, though, that it frees up credit, props up the housing market, and somehow we have responsible lending practiced, it still does not: -) Save and create jobs. Not during a recession. -) Increase tax revenues significantly. (That 1.5% is technically revenue, but it doesn't even compensate for inflation of the loans) -) Not increase the deficit. Where is that $500,000 per person coming from? Yeah, it'll get paid back, but it is not fair to claim that this means the money comes out of nowhere. And at the interest rate cited, it'll be lent out at an economic loss, so it is technically increasing the deficit even after it's paid. -) Reverse the economic decline. We're taking $500,000 per person out of overall consumption to fund this.

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Sat, 13 Dec 2008 07:53:33 +0000

How right you are! When the people who are in charge of making decisions don't get to feel the pain of their actions, they face skewed incentives in which it is more profitable to them to hurt the company they control. If a CEO is given the choice to reap massive profits (and thus, massive bonuses) now in exchange for bankrupting the company in 10 years (subprime?), why wouldn't they? This problem isn't restricted to the private sector either. Pork-barrel spending stems from the fact that projects that wouldn't normally be feasible due to their cost become very feasible when 49 other states pitch in an equal share, whether they want to or not. A congressman gets all of the reward for bringin' in the bacon, and only pays 1/50th the cost.

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Sat, 13 Dec 2008 07:37:10 +0000

The problem is obvious, but the solution is not. Why is health insurance grossly profitable, and will nationalizing the problem fix it? There is a fundamental failing in the system somewhere that is gumming up the works, and it is not likely having the government take over will solve the problem. We need to reorder the system so that hospitals and doctors can work efficiently, and that we as consumers do have a voice of our own in the system. If we try expanding coverage to others before we solve this problem, the market will certainly react negatively, and the end result most assuredly will not be better health overall.

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Sat, 13 Dec 2008 06:03:18 +0000

Regressive concerns the percentage of your wealth that is taxed. Money that is saved is not taxed. The rich can afford to save more money than the poor. Thus, the rich simply pay a smaller percentage of their wealth than do the poor. If I make 20k a year and spend 20k a year, 100% of my income is taxed. If I make 200k a year and spend 100k a year, 50% of my income is taxed. Yes, you get more tax dollars from the rich, but you are putting more pressure on the poor.

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Sat, 13 Dec 2008 01:03:53 +0000

Banks which don't lend money are losing money. Won't the banks that are hoarding cash eventually fail on their own, open to be replaced by braver entrepreneurs? In other words, shouldn't the credit markets self-correct themselves?

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Sat, 13 Dec 2008 00:57:01 +0000

The destruction of the American auto industry would very likely end any American development into green technologies. However, the impact on worldwide green technology development would likely not be significantly negative, and could possibly be a net increase. Reallocating those businesses to more responsible hands would hopefully result in a more efficient industry, which, given the current consumer trend toward green products and government regulations, would result in an industry more capable of developing "greener" technologies faster and cheaper. Of course, they wouldn't be "American" owned innovations, if that's what you're worried about. As far as the manufacturing potential of the U.S is concerned, those plants aren't going to sprout legs and swim to China, they'll likely still be used domestically, or converted for use in another domestic product. If China wants to buy everything up, employ American workers to produce Chinese cars, then sell them to us, I don't see a problem with that as long as they engage in fair business (which will be easy to force since they'd be manufacturing in the U.S). Workers keep their jobs, we pay less for our cars.