Re: interesting article on Obama...


"Alvin E. Toda" <aet@xxxxxxxx> wrote in message
news:Pine.BSI.4.64.0801071042270.26958@xxxxxxxxxxxxxxxxxxxx
On Mon, 7 Jan 2008, John Galt wrote:

"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
news:UKSdnQeW9JwoFxzanZ2dnUVZ_vmlnZ2d@xxxxxxxxxxxxxxxxx

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 would believe that the economist Paul Krugman makes more sense than
Friedman in this area [of trickle down economics].

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.

That's the point. Friedman in his mistrust of all govt wants to eliminate
govt from affecting the economy.

You make it sound like an emotion, which it's not. Remember, a huge part of
Friedman's opus, which contributed to his Nobel, was proving that it was the
goverment and the Fed was responsible for turning a nasty market correction
into a full scale worldwide Depression.

Krugman recognizes that the govt is very much part of the problem as well
as the solution.

Not many datapoints showing that government is part of the solution. No
problem finding those where it's part of the problem.

He may not have the best political ideas, but his political ideas explain
the economics. Friedman is both good in his ideas on inflation by monetary
control, but wrong on his ideas of political influence. Krugman recognizes
that. Krugman might do well as an advisor to the new president.

Didn't think of that, but right -- he does, of late, read like a person
applying for a a job. Not a likely hire, though -- he's made himself a
lightning rod, and bringing him into an adminstration would insure that the
GOP would be uncooperative. (Which, from my standpoint, is all good,
wherever the gridlock comes from.)


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

I think that Krugman has show that Republican economic policies and
political strategies are responsible for the decline in so far as they
affect education, technology, etc. We shouldn't confuse the effect for the
cause. It's the reason Krugman has been one of the earliest critics of the
Bush administration.

I think that's his opinion, but has fallen far from "showing" anything, from
an economist's standpoint, from what I've read.

At any rate, he's diametrically opposed, if that's really what he believes,
from Obama's economic advisors. who believe that education and technology
are the issues.

JG


.

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  • Re: interesting article on Obama...
    ... Friedman is considered to be the dean of fiscal conservatives, but that is only because fiscal conservatism was corrupted by the far right. ... Excerpts: Peter Robinson: Question number one: keeping the economy growing. ... The economy expands during the administration of Ronald Reagan and during the administration of Bill Clinton. ... Milton Friedman: The reason you had massive deficits was because they were more successful at reducing inflation than they had anticipated. ...
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