Re: interesting article on Obama...


"Alvin E. Toda" <aet@xxxxxxxx> wrote in message
news:Pine.BSI.4.64.0801070018560.15086@xxxxxxxxxxxxxxxxxxxx
On Sun, 6 Jan 2008, John Galt wrote:


"Islander" <nospam@xxxxxxxxxxx> wrote in message
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Rumpelstiltskin wrote:
On Sun, 06 Jan 2008 13:26:49 -0800, Islander <nospam@xxxxxxxxxxx>
wrote:

<snip>

But, I'm not dismissing the possibility that possible influence from
any
quarter might be dirty tricks. I want names! Who are his advisers?


Friedman is not a fiscal conservative, though, as far as I know.
Aren't his views partly responsible for the nine-trillion dollar debt
we have now?

No.

I might be wrong about that, but he's no friend
of "the common man", anyway. He's more of a laissez-faire guy,
as far as I know.

Friedman holds that goverment's role in the markets is to guarantee a
level and fair playing field for all participants. Regulations which work
to that end would possibly be approved of by him.

There are also a couple of key exceptions which he cites to the above
rule. The first is "neighborhood effects", wherein the potential damage
to a community by unfettered business action is so great that the
goverment must intervene. He cites the Love Canal incident as an example
of this, so it is not a stretch to say that Friedman would be in
concurrence with some environmental regulation. The second is in the area
of standards -- he recognizes that the free market takes its own sweet
time to figure out what standards it wishes to adhere to, and if that
process impedes progress, the governemt has as a role in setting those
standards. He sites the goverment establishing the guage of the railroads
in the 1860's as an example. (That said, I doubt he'd be much in favor of
the goverment's current attempt to set a standard in alternative fuels by
throwing money at corn farmers.)



Friedman is considered to be the dean of fiscal conservatives, but that
is only because fiscal conservatism was corrupted by the far right. His
particular claim to fame was his belief that economic growth was
improved by increasing the supply of money. Not surprising then, that
as Reagan's economic adviser, he allowed the debt to increase so
dramatically. There are those today who still argue that the debt is
not a problem.

Friedman's actual views on this were a bit more nuanced. You may find
this interview interesting. Keep in mind it was done in 2000. I've tossed
in a few commnents of my own for those who have the stamina.

http://www.hoover.org/multimedia/uk/3391401.html

Excerpts: Peter Robinson: Question number one: keeping the economy
growing. Let me open, if I may, with a tale of two administrations. The
economy expands during the administration of Ronald Reagan and during the
administration of Bill Clinton. But of course they represent two quite
different approaches. Reagan cuts marginal income tax rates quite
dramatically. Top rate goes from about 70 percent to under 40 percent.
That largely because he increases defense spending. He piles up massive--

Milton Friedman: That's not the reason.

Peter Robinson: No? Okay, correct me.

Milton Friedman: The reason you had massive deficits was because they
were more successful at reducing inflation than they had anticipated.
Inflation is very productive of taxes. Because at that time there was no
indexing of tax brackets, and inflation pushed people up into higher and
higher brackets.

Peter Robinson: So they give a larger percentage of their real income to
the government?

Milton Friedman: Right. Now, after 1980, '81, when inflation came down
much more sharply than anybody had predicted. If you look at the
predictions at that time, they thought it would take ten or more years to
wring inflation out of the economy. It took more like three or four
years. And as a result, the actual tax receipts during those periods were
very much lower than the estimated tax receipts, based on the higher
inflation assumption. And that's the main reason we've got a deficit.

Peter Robinson: But we did get a deficit.;

Milton Friedman: Because actual spending, the increase in spending on the
military, was offset by reductions in spending in the rest of the budget.
Not entirely.

Peter Robinson: Not entirely.

Milton Friedman: Not entirely. But very largely.

Peter Robinson: Okay. I'm rejiggering my question as we go here, but I'll
keep going. So we had Reagan cutting taxes, but with a deficit that piles
up; but nevertheless the economy grows. Then we have Clinton who raises
taxes early in his administration, and indeed his tax increases are on
top of tax increases enacted by President Bush, but Clinton, we actually
have, whether you give credit to President Clinton or Republicans in
Congress, we actually have relatively moderate growth in federal
spending; so that as a proportion of GDP, the federal government actually
shrinks; we end up in the last couple of years in the Clinton
administration with a surplus. Who's a better model for the president?

Milton Friedman: The better model is Reagan, cutting taxes. The reason
you have a surplus today, in my opinion, the credit for that has to be
given overwhelmingly to gridlock.

Peter Robinson: To gridlock?

Milton Friedman: If you had had a Democratic House and Senate, as well as
a Democratic president, you would not have a surplus today in my opinion.
They would have spent it. Similarly if you had had a Republican president
as well as a Republican House and Senate, I doubt that there would have
been a surplus today. Because they would either have spent it or had tax
reductions.

[JG] Here's my key point having to do with political parties -- it's not
enough to look at each four to eight year package, says Friedman, and
determine which POTUS -- or which party -- is more fiscally
responsible/has the better economic package. It's more complicated than
that. Friedman notes that when you have goverment which is not divided,
(and outside an inflationary anomaly as you saw during the late 70's and
early 80's) you see deficits increase the fastest.

Peter Robinson: So when President Clinton steps forward to take his bows,
you don't applaud at all?

Milton Friedman: Well, I applaud. He provided gridlock.

Peter Robinson: Okay, you applaud but for a different reason than the one
he supposes.

Milton Friedman: The winning thing that really contributed to our
successful economy over recent years is that the government has stayed
out pretty much, with the White House and the Congress and the Senate
haven't done much.

Peter Robinson: In this upcoming election, you'd hope for the White House
and Congress to be captured by different parties? You vote for gridlock?
Or what would you tell the next president about keeping the economy
growing?

Milton Friedman: First of all, I don't think the president has a great
deal to do with keeping the economy going.

[JG] I posted this notion, either here or elsewhere, a few weeks ago and
got scorched. I remain of the opinion that we give the POTUS way too much
credit in creating or breaking economies.

Peter Robinson: All right.

Milton Friedman: I think presidents have a great deal to do with keeping
the economy from growing. They can follow follow-throughs which will
cause contractions. But I think the economy is largely independent of the
government, and what keeps it going is its own internal development.
However, you can short-circuit that internal development. If you impose
very high taxes, and eliminate the incentive to innovate, to improve, to
take risks, and do things, you'll kill the economy. And that's what's
happened over and over again in other countries around the world.

Peter Robinson: I have to remind you at this point of a story that I
heard from James Buckley who served in the United States Senate. He was
elected in 1972. He flew down to Washington to meet President Nixon. AS
the door to the Oval Office, Nixon was concluding a meeting with John
Ehrlichman, his domestic policy adviser. And as James Buckley walked into
the Oval Office, the first words he heard Richard Nixon utter were: I
don't care what Milton Friedman says, he's not running for reelection. So
the point is, if you're suggesting that the next president say in his
inaugural address, my fellow Americans, I promise not to get in the way
of the economy, you're promising something that a politician finds
unsatisfying. Is there any positive?

Milton Friedman: Yes. Cut taxes.

Peter Robinson: Cut taxes? Okay.

What does Milton suggest we do with the federal budget surplus? We have
money piling up in the federal coffers.

Milton Friedman: And you think you have choices?

Peter Robinson: Well, we could spend it on new programs.

Milton Friedman: Don't you think if--let me ask you a question. Suppose
you don't cut taxes. Do you think the surplus will last?

Peter Robinson: In other words you're asking a political question?

Milton Friedman: Absolutely.

Peter Robinson: And Congress resists the temptation to spend it?

Milton Friedman: Exactly. Exactly.

Peter Robinson: My opinion is no.

Milton Friedman: Right. Mine too. I think they cannot resist.

Peter Robinson: So this notion of paying down the debt is a nice idea,
but it'll never happen.

Milton Friedman: It'll never happen. Moreover, I'd go further than that.
Suppose you succeed--what may happen, what may really happen, is that
because of the gridlock for two or three years you do pay down the debt.
What do you suppose will happen to those saved interest payments?

Peter Robinson: Socrates, I think I see where you're going with this.

Milton Friedman: And I want to ask you another question that ties in with
that. I believe, and you believe, that that saved interest payments would
be spent on another government project. Would that government project do
more or less harm than the payment on the current debt?

Peter Robinson: That's a good question--isn't it?

Milton Friedman: Yes, it is.

Peter Robinson: That's not obvious is it?

Milton Friedman: No, I think the answer is obvious. The marginal projects
that the government would undertake would certainly do more harm. See,
one of the least harmful of government expenditure projects if the
payment of interest on debt. That's a transfer of money from taxpayers to
taxpayers.

[JG] EARMARKS!

<snip>



The Reagan tax cuts were intended to be consistent with this economic
policy, labeled as "trickle down" but by the time the politics finished
with it, it was a grab-bag of favors to political supporters.

Exactly as Dr. Friedman predicted.....

JG

I recall Friedman saying to Charlie Rose that he is a big R Republican and
a small l liberarian. I take this to mean that he distrusts all govt.

I would concur.

The Reagan "trickle down" funds actually went to Reagan political
supporters. Because of this he also distrusts Democratic spending. But
there is a great difference in spending presently between Democrat and
Republicn and the Republican policy creates economic problems for the
lower economic classes.

We're in debt. There's no such thing as "good additional spending" unless
you take the position that deficits don't matter. (Cheney's view.)

I would believe that the economist Paul Krugman makes more sense than
Friedman in this area.

The economist Krugman has called Freidman America's greatest economist. So,
I'm not sure if you're talking about the economist Krugman, or the partisan
Krugman. These are two completely different people, as has been noted by
quite a few observers at this point, and because the views of the latter
differ so much from the papers of the former, I have a difficult time taking
Krugman seriously about anything.


My reasoning is that Friedman is correct that fair competition is good for
low prices and good service, but our economic system is inherently unfair.

Actually, it's perfectly fair. The most efficient get nearly all the
profits, the least efficient starve. It's up to the goverment to balance the
two entities, not the economic system.

Friedman's theory is good for controlling inflation, but he just doesn't
get the political realities of any large economic system such as ours
where politics does influence the direction of the economy.

I disagree.

Krugman's idea is that a large middle class is essential for the economic
well-being.

Friedman would agree.

Our economy functions best that way as it has from Roosevelt and the New
Deal up to Reagan at the start of the decline of the middle class.

The decline of the middle class has more to do with education and technology
than goverment policy.

JG


.

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