Why “Deficits” Don’t Always Matter:

12 November 2013

As “Fiscal Conservatives,” we take issue with how the “Conservative” side of American politics looks at deficit spending and debt. Here’s why:

Every year, our family takes in a certain amount of money as “income.” A portion of that income, we use to make “capital improvements” and “investments.”

A portion of funds employed for capital investments constitutes down-payments for new real estate properties, for which we take out mortgages.

____________________

If One Were to Look at selective parts of our family balance sheet, one might see:

Deficit Spending: We have added 80% of “spending” in relation to the 20% down-payment

Increasing Debt: We have added that 80% of “debt” to the balance sheet. This debt addition may be offset by total reduction of principal on all mortgages.

Over more than three decades of such “deficit spending,” our debt-to-equity ratio is less than 50%.

Any political “Conservative” might say that we are “spending” ourselves to ruin, and that we risk leaving a mountain of debt to our children and grandchildren.

Our children don’t mind.

Regards,
(($; -)}
Gozo!

[NOTE: The above post on “deficit spending” was prompted by our reading of Why The Most Important Budget Event Of The Year Has Had No Impact, which was posted earlier today by Stan Collender, at “StanCollender’s Capital Gains and Games.”

@GozoTweets

Unexamined Capitalism Will Not Serve Us Well

13 December 2012

In response to a comment on a Bloomberg View article, “Romney’s Bain Yielded Private Gains, Socialized Losses,” Online Gym writes:

“Gozo I sort of agree Capitalism remains the most-effective economic model....And yes our capitalist model is flawed. But it takes decades to get it correct....It’s almost like we need to slow down and review our growth and correct what needs to be corrected....”

____________________

This is exactly right: being that capitalism is a human “invention,” of course it has flaws. Perfection is always the pinnacle to which we aspire, not one on which it is given to us to stand.

Given that we exist in a universe cycle of perpetual motion, of perpetual ebb and flow—of perpetual energy and entropy (as described in Newton’s laws)—the Perfect is near-certain to exceed our grasp.

This cycle provides the only canvas available for our great works. Which means that, often, “we need to slow down and review our growth and correct what needs to be corrected.”
____________________

The way I see it, the Conservative mind-set is particularly averse to taking the wrong steps, in fear of making new mistakes. The hazards of “unintended consequences” seems to come quickly to the Conservative mind and lips.

That’s a good thing: the impulsive Progressives need someone to help slow them up. To keep them from rushing willy-nilly over the cliff.

But, then society as a whole needs the progressive risk-takers, such the Wright brothers, who take that cliff-leap and lead us eventually to flying around the world, seven miles up, at a thousand miles an hour.
____________________

The “slow down and review” process began in earnest with the election of Ronald Reagan as President.

Under his guidance, sure, our debt grew to frightening heights. But things also got brought back down to Earth.

America took a breath, a pause, following the heady epoch from the Great Depression to the declines of the Vietnam War and the Great Society.

But it’s now thirty-two years on. This Conservative pull-back has hampered us with ideology that, the more its elements fail, the more its adherents want to double down.
___________________

We need to take a clearer look at capitalism, and how it really works.

First of all, we ought to go read the book, to see how Adam Smith characterizes collaboration as the key element, rather than this thing about “competition” and “greed,” which are essentially side-effects.
___________________

I think it’s a crime that we don’t teach such essential things in our schools. I believe we waste a tremendous learning and growth opportunity in our educational system, by not recognizing the demographic changes of the last century.

American kids no longer grow up in single-earner homes, where they learn our culture’s habits and values there. Instead, our kids learn from television and the Internet and the streets. It’s no longer enough to teach them history and math/science.

We need to teach them how to manage their economic lives. And how to manage our political society as a whole.
___________________

My personal, big question is, “How do we get there from here, when the Right is so-blindingly focused on winning the tug-of-war between sides, that we have impasse at every turn?”

Unfortunately, I haven’t a clue. And so I keep coming around to places like this, getting up on my soapbox, and hoping that I can finally manage to spy something, from perched on the soapbox’s modest height.

Regards,
(($; -)}
Gozo!

@GozoTweets

____________________
Read the originating discussion at:

Romney’s Bain Yielded Private Gains, Socialized Losses

Energy Independence Is a Myth:

14 MARCH 2012

Because Oil Is a Commodity, its price reflects the world markets. Thus, high gas prices have little to do with how much oil we drill, drill, drill here at home.

If American companies drill more oil here at home, does anyone really believe that they will sell their product here at home for a lower price?
____________________

The Greatest Limitation on our American “capitalist” system is that hardly any of us really know how capitalism really works. Adam Smith wrote the book: you probably haven’t read it.

“Free markets” means that we all seek the lowest costs (e.g., Chinese labor) and we all sell to the highest bidder.

The only energy that cannot be exported to the highest bidder is the kind of alternative energy that the Greens dream of.
____________________

“Green” Energy is nowhere close to viable, as far as current technologies and costs are concerned.

But once established—whether as solar or wind power or some other form—its product won’t be exportable to the highest bidder abroad.
____________________

When it Comes to New Technologies—such as the Intercontinental Railroad or the Internet or the NASA space program—government provides the powerful seeds that give private industry the opportunity to grow America forward.
____________________

To Lower Our Energy Costs, we need energy forms that can’t be exported. Anything else—such as “energy independence”—is a myth.

Regards,
(($; -)}
Gozo!

BP Does Not Deserve to Die....

.....Merely for Playing by the Rules of Misguided America’s “Free-Market Capitalism”

Not “Greed,” but America’s Deluded Misunderstanding of “free-market Capitalism” is the culprit in the Deepwater Horizon oil spill: in the rest of the developed world, oil companies are required to drill the auxiliary well with the primary one, before pumping begins. Thus, this disaster, if it occurred in the North Sea, could be shut down immediately.

But Our Ideological View of Capitalism says that the oil companies are the best stewards of their interests, and thus can be trusted to avoid these disasters.

The Flaw in That Argument is the “Hockey Helmet Conundrum”: If Shell and ConocoPhillips do not bear the cost of auxiliary wells—and the regulators do not require it—then BP can not bear the cost and remain competitive with the others.

Capitalism Is the Friend of our system of government and economics. But the misguided, misapplication of some of its tenets is the folly destroying our economy:

The Purpose of Regulation is not to inhibit or to punish individual competitors. It serves to level the competitive playing field, while protecting the assets of all.

And That (In the Nutshell) is the short answer on how the anti-capitalist illiteracy of the Left, and the ignorant-capitalist ideology of the Right, are bit by bit shipping the abundance of American capital overseas.

Regards,
(($;-)}
Gozo!

In Defense of Corporations

Citizens on the Political Left generally consider as suspect, two terms key to America’s economic greatness. Those terms, capitalism and corporation, have a mixed history in service to the “well-being” of the nation.

But as Any Student of Adam Smith knows, nothing inherent in capitalism or incorporation creates the kinds of excesses that we, the people, have wrestled with for at least the last 150 years.

It Is Not “Capitalism” That Is the Evil. It is the deadly sin of “greed” that is the culprit.

Some Few Large Corporations in America subscribe in practice to the more-socially oriented capitalist ideal. We keep our own personal list of American corporations which in practice exhibit the kind of business activities and stakeholder responsibility that would do Adam Smith proud.

Two Favorites, for the purposes of this discussion, are Warren Buffett’s Berkshire Hathaway and John Mackey’s Whole Foods:

BERKSHIRE HATHAWAY INC:
One can hardly read Warren Buffett’s annual letter to the shareholders without an appreciation for what authentic corporate stewardship means. The link below leads to 32 years of such letters. If capitalism and investment mean anything to you, you could hardly do better than to read some of these letters.

For what it’s worth, Mr. Buffett claims to vote Democratic, and believes that we, the people, through our shared government, should limit the legal ability of corporations to damage the overall society.

WHOLE FOODS, INC:
The annual shareholder letter by Whole Foods founder and current CEO John Mackey is less-direct than Mr. Buffet’s letter, perhaps. But these letters convey Mr. Mackey’s sense of a “mission” for the company, which mission goes beyond the mere issue of profit. Mr. Mackey clearly believes in using the structure of incorporation to spread his ideals of healthful living. Mr. Mackey also advocates the “stakeholder” concept, rather than the more-common “shareholder” concept that is honored more in the breach than in practice.

For what it’s worth, Mr. Mackey considers himself to be a Libertarian. He notoriously wrote a letter on health-care reform, which letter was published in The Wall Street Journal in an edited version. Mr. Mackey argued the Libertarian view that health-care is best provided through the structure of the employer. (While his perspective seems naive, given general, corporate practices in relation to employee welfare, his ideological integrity is substantiated by practices at Whole Foods.)

Corporate Links:

Warren Buffet’s Berkshire Hathaway shareholder letters, 1977—2009:

Whole Foods, Inc., annual reports:

John Mackey’s blog 

(In the case of Mr. Mackey’s communication, I appreciated his most-recent blog post, entitled, “Creating the High Trust Organization”)

Regards,
(($;-)}
Gozo!

When Did “Tax” Become Another Word for “Punishment”?

Our Current Distortion of Capitalism isolates management from the real ramifications faced by consumers/taxpayers on one side of the equation and shareholders/taxpayers on the other—one or both of whom will pay the “ax.” A defender of taxes on banks, as punishment, recently wrote, “Banks will pass those taxes onto consumers only if consumers let them. We have a free enterprise system enshrining competition. If Bank A raises fees, then we can go to Bank B.” That’s how capitalism should work, but clearly it doesn’t. Why not?

We Believe that “Tax” Equals “Punishment.” We believe that “Bank A” can be made to operate differently than “Bank B.” We believe (on the Left) that “greed” is inherent in capitalism or (on the Right) that “yes, but it’s a necessary component.”

Neither Side Knows What Adam Smith Had to Say About It. We need to learn the value of taxes. We need to learn the price that each line employee at the bottom pays so that each CEO makes the eight-digit salaries—and bonuses—at the top.

If We Continue to Think of Corporations as the Enemy, then we are sunk. But if we continue to think of corporations as equal to citizens under the law (absent the vote, but free of the risk of incarceration), we will continue to feel enslaved by these very entities that are required, by charter, to serve public need.

If We Continue to Think of Government—We, the People—as somehow doing other than what we send it to do, we will continue racing through the rapids with just one oar in the water. We reward elected officials for limiting the amount that they displease us. We continue to act is if our elected officials operate in a vacuum, like dictators or kings, when in truth, their job is to keep the voters as happy as possible, while keeping the ship of state afloat.

It’s Really All a Failure of Education.

We Don’t Know What We Have Here.

We Don’t Know How It Works.

And We Keep Turning to Expressive Communicators—politicians, pundits, commentators—who don’t really know enough more about it than we do.

Before Any of Us Really Do Anything Else, we ought to get out our Wealth of Nations and see if a better title might not be Well-Being of Nations. Adam Smith’s work is predicated on his first volume, A Theory of Moral Sentiments, which sets the foundation for the civic good that capitalism and corporations serve best.

Says Smith, We Humans Are Motivated to Do Good. Capitalism provides the best engine. But no engine runs itself, and it behooves all of us to read the operating manuals.


Regards,
(($;-)}
Gozo!