Tuesday, June 19, 2012

Libertarian Lala Land (Q and A)

Had a spare half hour at the end of the day and made the mistake of drinking a cup of regular. So read at your own risk (although I think the point I make at the end is one worth considering).

This would be Q (your consumer/investor who suffers from multiple personality disorder) and A (your ever-consistent advisor). In case you haven't figured it out, A would be my pseudonym.

Q: I've been reading your stuff lately, and you're really starting to tick me off! You've been living in some Libertarian Lala Land and you're egregiously misleading your readers!

A: Libertarian Lala Land (lol), really? How's that?

Q: Really! Allow me to list 3 things:

1. You've criticized the health care mandate. While the fact of the matter is we'll never get anywhere unless everyone contributes. And I don't think it's fair that the rest of us pick up the tab for people who choose not to insure themselves.

2. You're suggesting we shouldn't tax the rich to help balance the budget. The fact is we need to raise revenue and they can afford it. And you suggesting they'll cut jobs is nothing more than rhetorical talking-point hogwash! Raising their taxes will not reduce demand for the stuff they sell. They'll therefore have to keep their people working to meet that demand. They'll cut back on their personal spending long before they cut workers.

3. You keep saying countries should act like companies and households. Cutting spending when times are tough. While that may make sense for a business or a family, you cut government spending during a downturn and you kill the economy. Just ask Paul Krugman.

A: Okay, I understand your arguments. Let's do this one at a time. 1: Regarding the mandate: We'll simply have to agree to disagree with regard to the freedom argument. That is my belief that, in America, one should have the freedom to not act in his own best interest, as long as he isn't directly harming others. And I know you'll say that he is harming others because others will pay for his irresponsibility. But, for one, the extent to which a given individual's healthcare needs will cost others in the future is entirely unquantifiable. And two, he is not forcing anyone to pick up his tab, government is. And when government (the taxpayer) helps out, those who otherwise would, won't.

As for the presumed savings to others by forcing his compliance; have you ever considered the guaranteed hit to the economy by forcing all the uninsureds to become insured? I mean what about the losses taken by all the places they used to spend that money?

Q: Yes, we will disagree on your freedom argument. As for the hit to the economy, you're kidding, right? You totally ignore the much larger hit to the economy when the others pick up his potentially huge future hospital bills. You didn't consider that, now did you?

A: Well, I did, but I didn't want to insult your intelligence by stating the obvious. But since you don't see the obvious, I guess I'll go ahead: You see the concept of insurance is to collect premiums from a large group of individuals, which will be used to pay the medical expenses for the ones who incur them. Some will incur a whole lot less than the total of their premiums, some a whole lot more. Insurance companies price their policies so as to insure (bigtime) that they'll net a profit when it's all said and done. Meaning it's a virtual guarantee that the current hit to the economy coming from all that capital diverted to premiums will be greater than the hit when the medical bills come due.

Q: Alright, I'll give you that one. I guess I didn't think that far into it.

A: You're still not thinking that far into it. There's even a rebuttal to what I just offered. You could have said that while the newly insured will have spent less in other places, the insurance companies will be in receipt of those monies. And therefore the insurance company employees, execs and shareholders will reallocate it back into the economy. To which I would have said: yes, but that's yet another example of government (in this case indirectly) taking from the (broader) private sector and redistributing where it sees fit. A provenly inefficient method of allocating resources.

Q: Like I said, I didn't think that far into it.

A: Very true. Now let's talk about #2, taxing the rich. For one, you could tax the rich at 100% and not nearly take care of our country's problems. And I could argue that raising taxes at this point will not raise revenue, but, in that the operative word on that topic would be 'argue', I'll leave that one for another day. As for directly costing jobs: guesswhat? I agree. Being an employer myself, there's no question I'd take the hit before I'd ever compromise the quality we deliver our customers. Besides, I have great staff and I would go to great lengths to keep from losing them (I'd need them when business picks back up, and they've been great to me). But we have to ask, what would an employer cutting his personal expenses look like? A cancelled vacation or two perhaps? Giving up the housekeeper? Mothballing the private jet? Freezing the country club membership? (in case you're wondering, I have no jet (I fly coach), and I don't play enough golf to justify a cc membership)

And should we feel sorry for the over-fed felines who, through higher taxes, will share our sacrifice by giving up a few luxuries? I certainly won't. But I do have a soft spot for the maid at the vacation resort, the personal housekeeper, the pilot and the caddy, who will all lose their jobs while fat cat cuts back. So I guess we are talking about job losses, now aren't we?

Q: Not sure I completely buy that. But I don't have a comeback at the moment.

A: No problem. But be sure to come back when you have that comeback. As for #3: countries cutting spending during a downturn: I'm very aware of Mr. Krugman's, whose NY Times column is titled The Conscience of a Liberal (not the most objective bloke I might add), thoughts on the subject. But here's one thing (oh there's much more I could offer on #3)you continue to miss. The money the government spends comes from tax revenue. To ramp up spending means to, now or later (or both), ramp up tax rates. And ramping up tax rates means taking from the economy in areas where free people spend their money and injecting it where government sees fit. Which gets us back to the inefficient allocation of resources conversation.

Q: But what about the Fed? It doesn't tax, it prints. Monetary stimulus programs (quantitative easing and the like) don't require any increase in taxes.

A: So you're suggesting that the private sector doesn't ultimately pay for the Fed's money printing? You need to get familiar with the concept of devaluation. That's what happens to the value of a currency when its supply grows faster than the supply of goods and services produced within the economy. Prices will ultimately expand to absorb the excess liquidity. The other term for that is inflation. Which means your dollars will buy less stuff. No different than having fewer dollars due to a tax increase. The worst case scenario is where you have taxes and inflation rising at the very same time.

Q: Okay. I can't argue any of your points at this point. But just because I don't have an argument doesn't mean you're right. A lot of people disagree with everything you just said.

A: I know. And just for the record there are very few (especially here) original ideas. I mean this isn't anything I've dreamed up on my own. In fact, I do check myself all the time. I'm even a regular reader of your Mr. Krugman and many of the other very intelligent folks who could no doubt debate me under the table when it comes to the economics of my positions. But there is one area where I believe I would win every single time, regardless of the credentials of my opponent - that is in exposing the sacrifice of personal freedoms inherent in the policies promoted by every economist, pundit and politician who advocates for growing the size of government.

Q: I may have to give you that one.

A: You don't have to give me anything. That is not until the government forces you to.

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