if you ask Lyman Stone.
A country that was once typified by a sense that anyone could be or do anything is now hidebound by an increasingly heavy weight of rules and regulations. While this trend toward more regulation and greater constraints on regular life can be seen across all walks of life, this report focuses on five main areas:
• Increasing stringency of land use regulations such as zoning,
• Greater prevalence of restrictions on work such as occupational licensing,
• Unusually high incarceration rates given currently low crime rates,
• An education system that forces people to spend more years in school for a higher cost and less value, and
• Growing debt and other financial burdens among households and at all levels of government.
On the debt issue, Timothy Taylor writes,
Interest payments are already 9% of federal spending. Before just brushing past that number too quickly, it’s worth noting that net interest is 1.8% of GDP–call it about $360 billion that the government is spending because of past borrowing, and thus doesn’t have available for current spending, tax cuts, or deficit reduction. On the current path, interest spending will be 20% of all federal spending by 2049.
…This is a “current law” projection. It has become standard practice for the federal budget to play games by forecasting that certain spending programs will be cut and certain taxes will rise in the future. But when the actual date of such changes approaches, they are then pushed back a few more years. The CBO also constructs an “alternative fiscal scenario” which doesn’t assume that these spending cuts and tax increases scheduled for the future will actually happen. In that scenario, the rise in deficits, health care spending, interest payments, and debt is much larger.
Have a nice day.
We live in a democracy. Until the voting pubic gets concerned about the deficit, politicians (sometime called our elected leaders) will not. Ironic you made this post so soon after the death of Ross Perot, who with his infomercial TV ads full of charts deserves a lot of credit to focus the public on the issue, which allowed the country to at least delay the problem in the 90s.
Republic, if we can keep it.
Lol, happy 15th zombie-theory Birthday to The Butterfield Effect. Somebody send Stone a copy of Pearl’s Causality “The glass is tipped over, but how did the table get wet?”
Try to imagine someone getting away with, “We foolishly insist that more catalytic converters and smokestack scrubbers be installed than ever before, which is unusual given currently low air pollution levels.”
The analogy police would like a word with you.
I think we all know you don’t have this much respect for the government’s capacity to execute complex solutions competently, or that you believe such problems are ever as easy to solve as this.
Fox Butterfield call your office.
I would add to that list: legal immigration restriction.
The good news is that if you believe, as I do, that a) the first 4 in Stone’s list plus mine above are a significant drag on productivity and growth, and b) they are potentially solvable problems, then they imply at least a partial solution to the future budget problems.
Lyman Stone article reads like a young ideologue of Ayn Rand economics and is surprised to see all this. It comes close to Bryan Caplan weird belief the US working class are terrible but we need more of them.
1) If working class life is so great and hiring without licensing, why don’t young people are not flocking to these positions? Why aren’t businesses hiring non-college grads more?
(The jump in licensing also occurred at the same time as the decline of private unions of the 1970s and 1980s.)
2) Considering he comes Kentucky, that is the heart of the WWC issues they speak of the drug and alcohol deaths. Maybe he should focus on these failures here.
I still say all modern competitive economies become their own version of post-Japan 1990s sooner or later.
With some apologies for modification, “The working class is awful and let’s get more of them” is a great line of satire.
Actually, Caplan has little fear of biting bullets like this, so I wouldn’t be surprsied if he embraced it with an enthusiastic “Just so!”
I have several friends and acquaintances who employ mainly low-skill labor, and they all tend to hire recent immigrants, being of the consensus that, yeah, unfortunately, being raised in America totally ruins the native-born stock of low-skill workers in terms of their work ethic, character, and suitability for the only kinds of labor they can do. That and the rest of the things Caplan complains about means they are destined to join the underclass.
Meanwhile, imported labor tends to bring with it the additional amount of nurture-derived human capital that was generated by the social capital of their native cultures. Just like rich countries get to benefit from a brain-drain effect, in which we get not just the nature-derived human capital of smart people, but also capture (without compensation or reimbursement!) the nurture-derived human capital resulting from the considerable financial investment some countries put into creating new elites and professionals. Dubai doesn’t have to make doctors at all, because it can pay foreign doctors to come in, and free-ride off of other countries’ doctor-creation systems. Specialization and Trade, right?
Likewise, America doesn’t have to form the character or incentivize the stock of its population who would form a future working class, because we can free-ride off of the good-working-class-creating systems in other countries.
The trouble is, character formation is not something any country should ever outsource (or be tempted to outsource by an ability to outsource). It’s one of those critical sectors in which production should always be done domestically.
Of course, part of the trouble is a positive-feedback mechanism whereby importing a replacement working class lowers wages below the point that would have automatically helped to incentivize the native working class stock to be better workers. But think of all the consumer surplus! (And don’t mind the underclass-management costs behind the curtain).
Oh, also, the replacement working class will have kids, who will get ruined too. Don’t worry though, just keep rinsing and repeating.
Living in SoCal this has been our reality for decades in terms of recent immigrants and honestly all the Hispanic-American neighbors I have sound a lot like the WWC of the 1960s of working harder for kids. (My kids do go to a minority dominated HS by the way and my various Hi-Am have a wide variety of Immigration and US ancestry btw. We forget the California moved in the 19th century!)
1) In terms of building character, that is something for a local community and family. But if the local community crashes and church attendance falls? In terms of building character, who is the leader here?
2) The other big question I have is why isn’t private sector not building and training their workforce? This was something done most of the 20th century and started disappearing in the 1970s. (IMO the Boomers entering the workforce created too much labor supply in the 1970s but that is different post.) But this ‘worker’ shortage has been with us since ~2015 and yet I don’t see a change in firm’s behaviors.
At the core I do agree with conservative economist about more blue collar working but I don’t see how the economy is making their positions look better to young people. I know we can complain about culture, but show young people these are good careers.
Let’s face it: most low-skill jobs don’t require any training, and in truth, the private sector does do the training, because the skills are learned quickly on the job. No one learns how to pick produce in school. And no one has to.
The kind of training the private sector can’t do is teach someone how to be a trustworthy hard worker rather than unreliable, surly, and indolent.
You might as well ask why can’t the private sector make people taller. They weren’t there when the whole generation of kids was malnourished, have no power to affect childhood nutriotion, and by the time those kids reach adulthood, it’s too late, and so the sector has to live with the results and take them as they come.
Trouble is the private sector needs that missing height, and so a short generation is ruined and worthless. Meanwhile, there is an infinite reserve army of giants out there. What do you expect the private sector to do and lobby for?
Unfortuantely the giants, though big, aren’t big fans of the private sector, so this reaction is quite short-sighted, as it were. Then again, in the long run we’re all dead, right?
The other big question I have is why isn’t private sector not building and training their workforce?
If a company trains a worker, and at the end of the training period, he quits to work for someone else, there is nothing the company can do. And since the new company doesn’t have to pay training costs, it can offer more to entice the trained worker away.
Not a great incentive to build and train your workforce.
This is what has happened the last 40 – 50 years in the job market as more of the training and education is on the employee time and cost.
And guess what if the employee works to train and get an education to be a better employee, they are going want a license or college signal to future employers. So the licensing and college signaling makes sense for employees to earn more. (Not saying this is right but it is reasonable movement with US job markets. Honestly, I think most licensing for jobs has a lot less impact than conservative economist lead us to believe.)
I’m an entrepreneur who has hired over a hundred people in the last 12-15 months and in the growth IT sector we’re in (b2b SaaS) companies invest pretty significant amounts in training as do my competitors and peer companies.
It probably costs me nearly six figures to ramp up a new salesperson, for instance, and junior software engineers (0-5 years post-college) require lots of apprenticeship to become highly effective. No college degree exists for any of the jobs I hire for and I’m not sure there could or should be. We put a lot of thought into building tracks in hopes of reducing our need to hire experienced people from the outside as that is expensive and unreliable. Likewise high potential junior employees want learning and growth opportunities and lack thereof is one of the top two reasons people return calls from recruiters.
I do think the past few years have seen an increase in interest in workforce development due to the tightening labor market. While I think smart companies have done this for a long time, it’s moving towards being table stakes. The big question is whether that’s a durable trend driven by something like demographics (retiring boomers and not enough Gen Xers) or a transient result of white hot market.
I agree with this post, except perhaps the part about the federal debt.
And oddity we have discovered is that quantitative easing does not lead to inflation.
If you have any doubts, see Japan .
So, evidently, a central bank can buyback sovereign debt. Interest payments and ultimate principle payments are made back to the same government.
Theoretically, this should not happen. But history is what history is. If anything, Japan is tiptoeing along the edge of deflation.
Who is looking?
Says Stone:
“These trends can all be traced back to policy
choices made between the 1940s and 1990s. That is
to say, while they disproportionately afflict younger
generations such as millennials, they are problems
created by baby boomers and their parents. If the
United States is to have a 21st century as prosperous
as its 20th century, these damaging legacies of the
baby-boomer generation must be fixed.”
——-
Boomers be looking, millennials be looking, something be fixed. That means MMT meet up. We will be having the auction, a repricing of government debt. And it is tricky business, we have millennials doing more looking back and boomers doing less as events progress, inevitability comes to mind.
Our central bank system has hard bounds in the constitution, a permanent cost. That cost never gets expensed, it accumulates in government currency insurance. We see it in cost plus government contracts, COLAs, FDIC, ill quantized tax brackets, and mandates. The cost does does not go away, it defers payout to a finite future. These are the real monopoly costs on central banking due to hard constitutional bounds.
I saw the opening maw of hell,
With endless pains and sorrows there;
Which none but they that feel can tell—
Oh, I was plunging to despair.
-Herman Melville
The Lyman Stone piece was well worth the read. Thanks for the link and reminder to follow him more closely. He also wrote a piece at The Federalist entitled “To Make America Great Again, The Right Needs To Learn How To Run Bureaucracies” which optimistically argues: “Until the conservative movement makes a serious, long-term effort to train young people to manage the federal bureaucracy competently until it can be reduced, the swamp will keep winning. Conservative leaders will continue to be hamstrung by uncooperative agencies, tut-tutting middle management, quiet obstruction from the bureaucracy, and repeated defeats in the courts.” Moving conservatives into the bureaucracy is an interesting notion but definitely a very long term project at best. One would think that veterans preference would have brought talented and competent conservatives into the government but, in my experience at least, military experience, especially at the officer rank, is more corrupting and less edifying. The swamp transmogrifies even the clearest thinkers and most rational analysts. I am afraid the best we can hope for is to elect more outsiders hell-bent on draining the swamp by any means necessary. Trump can redeem himself by vetoing any borrowing cap increases and forcing real spending cuts.
This is a topic with which I have some intimate familiarity from first hand experience. I’d like Stone (and other Right-Gramscians like Vermeule) to be right about this, but they aren’t, in two important ways.
Now, of course, personnel is policy, and a bureaucracy filled with more right-leaning people would tend towards more right-leaning results. But the bigger problem by far is the courts. Worrying about the political composition of the bureaucracy is focusing on straining the gnats out of your pool when there is a giant, hungry, man-eating alligator swimming in it.
A mostly Democrat bureaucracy for any Republican administration is a stubborn mule but one that be tamed and harnessed with sufficient coaxing and prodding which doesn’t actually require all that much sophisticated savvy. There is no taming the hungry alligator. If it decides to make you a snack, you either shoot it in the head or at the very least you’re losing a limb. Trump has been riding the mule through the swamp trail well enough, but the gator keeps jumping out of the water and eating the mule’s legs.
Recently many journalists and commentators – including many on the right – have been pushing a fake-news meme that is completely without basis in reality (but what else is knew) which is that a main reason Trump is having trouble accomplishing his goals is because he and his administration lacks “political competence”. The non-progressives among them use this meme to bolster their big “told you so”, and prove they were right all along about the need to pick a GOP establishment figure … who would use all the extra competence to do things thing the base didn’t want them to. Do I get a mediocre buyer’s agent, or a great one, but he’s married to the seller? Some choice!
These claims rely on the assumption of truly magical levels of power resulting from ‘political competence’ which expands the zone of possible agreements to infinity. See, if Trump was only politically competent, he would made all the clever deals necessary to have persuaded the GOP establishment to do whatever he wanted on the very positions in which Trump distinguished himself from the rest of the party, positions to which they made it perfectly clear they could never be moved, even if dragged, kicking and screaming. Look, that’s just a facially nutty claim that shouldn’t see the light of day without strong evidence. And yet …
The other half of the ‘political competence’ claim is that Trump’s administration lacks ‘bureaucratic / legal competence’. That his administration is filled to the brim with hacks and cronies and recent graduate interns and clueless drones from the – get this – private sector (gasp!), who don’t know anything about how government processes (e.g., those required by the APA) work. If only the administration had clever, savvy, and sophisticated government-experts, and lots more of them, well then, again, because these are magic powers without limit, Trump could wield them like a dictator in possession of the One Ring to do anything his heart desires.
Again, that’s nuts! As ‘evidence’ for these claims, the journalists and commentators point to … judges – mostly progressive ones – knocking his initiatives down. Because, as we all know, progressive judges are just pushovers for Republican initiatives when they are conducted with bureaucratic savvy? When Obama couldn’t get something past the courts, it was obviously because of evil judges, never because Obama wasn’t savvy enough.
But for non-progressive commentators who have been complaining about a constant stream of judicial abuses for three or four generations now, to suddenly adopt a position that assumes that any judge’s reasons – even infamously biased progressive judges – for invalidating Trump’s initiatives are obviously perfectly valid and legitimate and wrong to question … well, it certainly takes some brass.
As it happens, while it could certainly use a lot more, the administration does in fact have sufficient numbers of sufficiently savvy and sufficiently loyal people to get its initiatives through a mostly Democrat bureaucracy just fine, and has done so many times. Take a look at all new rules and notices in the Federal Register over the past two years. The trouble is the lawfare. You can be the most savvy and sophisticated kung-fu master in the world, but if your opponent pulls a sawed-off shotgun out from under his robe, you better run.
Look, the courts are just out of control. The typical manner of performing jurisprudential analysis of scrutinizing whether some state action was permissible was to inquire whether or not the exercise of the authority was within the generally understood limits of the powers granted by the Constitution and legislation. If it was within the goal posts, you scored a goal. Case closed. Especially if you were trying to revive some older practice which had already been established to be a legitimate exercise of authority, then you could be almost certain you were on solid ground. That’s what a fair umpire or referee would do, and that’s what we used to call ‘rule of law’ (as opposed to ‘rule by judges’, which, you know, is something altogether different, though someone ought to tell those journalists and commentators.)
But a judge who doesn’t want to follow the law obviously won’t be a fan of the actual rule of law. So the judiciary simply fabricated novel ways of invalidating rules they didn’t like, and the political system let them get away with it. A good example is the rational basis test, which allows a judge to say, “Yeah, you may technically have the authority, and there are no other constitutional issues here, but now you also need a good reason to want to do what you’re doing, and guess what, I guess to decide whether your reason is good enough.”
But what if the reason had already been held good enough? No worries, we’ll just go one layer deeper and delve into the realm of mind-reading and inquire as to whether your reason was your real reason, or whether it was some pretext, and you are just pretending and saying what your lawyers coached you to say, and in truth you have other, secret reasons, which are bad, forbidden reasons. And, of course, once again, I get to be the judge of all that. After all, I’m a judge!
If someone doesn’t understand how fundamentally bogus and illegitimate all this is and how structurally fraught with potential for abuse and bias, such that it would be somehow surmountable by any Republican so long as he had enough political and legal ‘competence’, I have some prime swampland to sell you. It’s full of hungry, man-eating gators, but apparently you think they’re harmless.
As a final note, it’s worth considering how exactly is Trump supposed to get those savvy and sophisticated people in, even if he had them, when he can’t get the Senate to confirm anyone to the very positions that would responsible for steering the stagecoach? The sheer number of senior political-appointee positions in the government which are not officially filled is mind-blowing and under-reported, perhaps because no one wants to press the issue too hard, not knowing what would happen if things escalated.
The ‘advice and consent’ requirement turns out to be a really bad failure mode in the Constitution which results from a design which was frankly, kind of dumb and naive. Hamilton really embarrasses himself on this point in Federalist 75 and 76, which are probably the weakest and worse things he ever wrote, and I’m guessing he was playing the unmotivated lawyer for a clearly guilty client who was both terrible but too important to refuse (i.e., the class of people who were likely to become Senators).
The obvious failure condition (according to today’s rules anyway) is that 40 or more Senators, for whatever reason but most likely simple partisan acrimony and bad faith – simply refuse to provide any consent to confirm anyone or to ratify any treaty that the administration wants. What then? Well, there is the arguably-unconstitutional Federal Vacancies Reform Act (which might turn out to be possible to circumvent anyway via the temporary “First Assistant” tactic), but in general, we have a question of whether the President can more or less keep on running the Executive without the Senate confirming anybody.
So, either the provision is null and void (as with the case of war-like or treaty-like foreign policy which just goes on as if valid, whether the war is declared or the treaty ratified or not), or it’s valid, and most of what the government is doing is null and void, because it’s not being directed by people with Constitutionally valid authority – which is kind of a ‘nuclear option’ / ‘government shutdown’ level consequence, and no one wants to open up that Pandora’s Box.
Maybe one day this big issue will get fixed or settled, though it’s hard to see how. However, in the meantime, to the extent it still severely limits who any Republican President is able to place in the positions necessary to apply any savvy and sophisticated political competence to managing the bureaucracy, it just makes a giant joke of any claim that it’s mostly the lack of such leet DC skeelz that accounts for Trump’s inability to get everything he wants right away.
Spot on. You’ve persuaded me.
This is spot on. If you want a good, read the recent SCOTUS opinion on the Census question (Department of Commerce v. New York). It isn’t long: https://www.supremecourt.gov/opinions/18pdf/18-966_bq7c.pdf (pages 6-32 for the actual opinion).
Actually, I think Arnold Kling needs to wrestle, in a straighforward manner, with the QE and nationals debts issue.
Three major central banks (Japan, ECB and the Fed) have conducted QE without much, if any, inflationary impact. I think also the PBoC, but that case is muddy. The freshwater St Louis Fed issued a study that Fed QE would have had to been four times as large to have much of an impact on inflation. (See author Wen).
So governments, after QE, owe money to themselves.
So…what do sovereign debts mean?
One can no longer posit that monetizing debts leads to a H-bomb of inflation, It does not happen.
Shedding our theories and ideologies, what is the practical way forward to cutting down national debts? Does QE offer an escape hatch, however odious by orthodox analysis? I there such a thing a prudent use of QE to trim national debts?