Seamanship Quotation

“In political activity, then, men sail a boundless and bottomless sea; there is neither harbour for shelter nor floor for anchorage, neither starting-place nor appointed destination.”
— from Michael Oakeshott's
Political Education” (1951)

Friday, July 22, 2011

Not all economic advice from Canada is boring

Executive director of a Toronto think tank and market economist Lawrence Solomon has come to the aid of Michele Bachmann’s singular vision of jerking the US government back to balance by selling assets and gutting big government. Other think tanks don’t take her too seriously so he fleshed out her plan. For awhile, he sounds quite Canadian: 

“What could be more sensible? Most agree that the debt not only threatens America's Triple A credit rating but the country's economy and its preeminence in the world. . . . Bachmann's straightforward approach would quash these threats and spare Americans from becoming ever-more vulnerable to the vicissitudes of the financial markets. And it would be achievable merely by restoring a smaller federal government.

Bachmann’s approach requires finding $1.4 trillion to pay the interest on the national debt and to avoid any new borrowing over the next fiscal year.

A half to two-thirds, Solomon assures us, can be found in scrapping a range of government departments that apparently were created to meet America’s growing pains in the 20th century but are unnecessary today; for instance, federal programming in education, energy innovation, urban and inter-urban transit.

The rest of the money would be found by selling large chunks of the $3.5 trillion of federal assets. He nominates the Tennessee Valley Authority, Amtrak, and the postal service and assures us there are plenty others to do the job. Apparently, selling mineral rights alone would provide enough to balance the budget.

His delicate northern pen avoids selling Yosemite National Park to either Disneyworld or the burgeoning Chinese entertainment industry. And he concludes by offering Bachmann a “friendly” amendment: agree to extend the debt ceiling for a year, the time it would take to execute the cuts and the asset sales.

All in all, Solomon makes a very bad idea appear quite feasible.

If the President, Congress, and those who use government as well as argue about its size just got out of the way, Solomon and a task force of investment bankers could find the $1.4 trillion in the government’s books. If one morning, Washington woke up inspired by one vision—with an accompanying action plan—for a “smaller” federal government, the task would be easy.

Economists may deserve to live as well as investment bankers but, before they team up to transform the biggest, busiest government in the world, they owe it to their profession to address the bizarre economics of Bachmann’s idea.

The capital markets want Washington to agree on a plan to get back to balance of over this decade but they are not alarmed about lending the federal government up to another $1.4 trillion. That borrowed money would be supporting tens of thousands of public and private American incomes and could be used to repair decrepit infrastructure and stimulate competitive investment.

What is the logic of taking that $1.4 trillion out of a weak economy when you’re credit is excellent? How is America’s productivity enhanced by inviting American investors to use up hundreds of billions in cash and credit buying non-tradable public assets?  

Medical science long ago gave up on bleeding as a medical cure. Economics’ standing as a social science also stands on keeping up with the evidence and not being seduced by panicky ideas that make it difficult to think.  

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