Every family, every company, every nation must decide how much to spend today and how much to save/invest for the future. The decisions they make reflect their internal discount rate, which is the rate (expressed as an annual percent) that they discount future benefits and costs.
In the case of the recent debt deal, Democrats want to spend more now and not worry about future costs, indicating they have high discount rates and value present consumption much more highly than the future. Republicans want to save now, which they hope would have the effect of leading private investors to invest that savings effectively. This suggests they have a lower discount rate and value the future more highly.
On the other hand, considering the climate change issue, liberals tend to want to reduce current consumption in order to protect the distant future, which suggests a low discount rate. Fiscal conservatives see the future as highly uncertain and prefer to increase current wealth, which sounds like they have a higher discount rate. (A true application of the “precautionary principle,” conservatives argue, would be to invest in things that have immediate returns, such as reducing malaria and other major diseases, with the expectation that society will be wealthier and better able to deal with climate change if and when it actually happens.)
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Is this a paradox? Not really. The real conflict is over alternative views of the public vs. private sectors. Liberals think that public sector spending is automatically a good thing; anything that gets filtered through the democratic process must be desirable. Fiscal conservatives think that public spending is highly inefficient, while private spending is more productive and more likely to lead to a future that is better off.
The New York Times‘ Nate Silver, for example, takes it as a given that more government spending will contribute to the nation’s gross national product. My view is that may be partly true in the short run, but not the long run. It isn’t even completely true in the short run, as more government spending is likely to crowd out some private spending. But it certainly isn’t true in the long run as more deficit spending today will only further cripple the nation in the future.
How did we become such a polarized society that roughly half the voters in the nation love government and hate private “capitalism,” while the other half hates government and loves private entrepreneurship? How did we so quickly forget the lesson of the soviet collapse in 1990? This will no doubt be fodder for many books in the future. Let’s just hope they are books published by and for readers in a thriving American economy.
How did we become such a polarized society that roughly half the voters in the nation love government and hate private “capitalism,
Why wonder? We have a person of this very mindset right here. Calling the professional planner who dropped out of school and didn’t get his master’s degree, Dan. Dan, please explain your lib mentality without using phrases such as “hand-waving”, “hand-flapping”, “conflation”, “misrepresentation through mis-dosage”, or the like.
As regards the Democratic position, it’s not quite accurate to say they have a high discount rate when part of their position is that there should be higher taxes now to pay for things as we go.
I would note, though, that if you’re going to borrow money at all, it is undeniably best to do so when your costs of borrowing are low. Rarely have we had such low costs of borrowing as over the past year or so.
“How did we become such a polarized society…”
We’ve always been this polarized, we were just more segregated and cordial to one another in the past. There is the Sean Hannity/Keith Olberman factor as well. The internet has played a huge role. Now people can say the most ruthlessly rude things to one another with relative anonymity, something that was not possible before “comment” space on the web.
I also think your post today gives too much credit to our congresspeople. You speak of “fiscal conservatives” and “liberals” as if there are more than a handful of each in congress. Most self-proclaimed fiscal conservatives are merely No-tax and spend republicans (according to their voting record). Most self-proclaimed liberals have done everything they can too keep power in the hands of the monied interests that back their campaigns, usually at the expense of the people they claim to represent. Fact is these people are, by and large, political power brokers backed by monied interest and religious zealots. Their plan is to keep winning the game, at all costs, no matter the means or ends (for everybody else).
We are polarized because the biggest assholes on each side of the debate are seemingly the only ones with a voice (see: Rush Limbaugh and John Stewart- at least he admits he’s an asshole). In regards to the deficit, I think the average voter thinks we can close tax loopholes, have tax reform, spend in more efficient ways, and cut a whole lot more spending, regardless of their ideological stance. Somehow our political system has made it impossible for this sentiment to be reflected by our representatives.
Randal, I am on both sides of these issues. On the one hand, I assert that stimulating the (weak) economy by building things that our citizens will use (such as highways, freight railroads, water and sewer lines and repairs and upgrades of same) is a good idea (yes, I read Paul Krugman). Certainly there are legitimate needs for these things.
On the other hand, I don’t think we should be spending public dolars to building choo-choo trains to carry passengers that will simply increase spending in the near and long-term, given the labor-intensive nature of transit.
Regarding global warming, there are things that we could do with relative ease to reduce the growth in CO2 emissions, or maybe even cut them back that do not involve social engineering. The biggest of these is not mass transit, but nuclear energy. But (curiously) the very same groups that promote transit and Smart Growth and the rest of it to reduce global climate change are usually vigorously opposed to the construction of new nuclear-powered electric generating stations.
But I question what the use of any reduction of CO2 emissions is when some of the large economies of the world, notably Red China and India, are not planning on doing anything to reduce the growth of their CO2 emitting industries, much less reduce the absolute quantities of CO2 that they release.
The Antiplanner wrote:
Is this a paradox? Not really. The real conflict is over alternative views of the public vs. private sectors. Liberals think that public sector spending is automatically a good thing; anything that gets filtered through the democratic process must be desirable. Fiscal conservatives think that public spending is highly inefficient, while private spending is more productive and more likely to lead to a future that is better off.
Randal, I must respectfully remind you of the (hugely expensive) prescription drug benefit that was passed for Medicare members when both houses of Congress had Republic Party majorities (who tend to describe themselves as “fiscal conservatives” and many of which who are still in Washington have just spent a month of time harrumphing over the federal budget deficit and debt) and the White House was occupied by a self-described “compassionate conservative.”
This massive increase in federal spending was not in any way approved with any source of revenue (as in tax increase or offsetting cut in spending) to pay for it.
C.P.
Nukes are an interesting issue. What about the waste concerns? As a friend in CO (a member of the Lakota Sioux) told me in regards to nuclear power, “I’m just not sure there are enough Indian reservations to store all of that toxic waste.” With the tsunami in Japan and the Yucca Mountain ordeal, I am sympathetic to those who oppose nuclear power despite the obvious benefits when it comes to CO2 emissions. What’s your take on these concerns?
C. P. Zilliacus says: “This massive increase in federal spending was not in any way approved with any source of revenue…”
The only thing worse than a tax and spend democrat is a no-tax and spend republican.
Randall:
The disputes aren’t government vs. capitalism, but over who has to pay for government and who the government spends the money on and provides loans to.
No politicians are promoting wholesale closure of things like the Dept. of Education or the Dept. of Agriculture like they should if they really believed we face economic doom from deficit spending.
Its polarized because people love conflict and the feeling of being on a team that has a chance to “win”, even when its really just tweedledee and tweedledum fighting, and neither side is even close to representing the stated interests and desires of their electorate that one can find in polls, leading to the majority of Americans checking out of the process and being for “none of the above”.
Sen. Rand Paul said, “If you ask the American people if we should borrow money from China to give it to another foreign country, they look at you like you have three eyes.” Around 75% of Americans want us to end ALL foreign aid. Nearly 90% of Americans do not want to see Social Security and Medicare cuts even considered, and yet the politicians keep trying to bring it into the discussion. You get similar lopsided results for raising taxes on high earners and corporations. While Americans do not have a true grasp of the relative amounts spent on certain things in Washington, its notable that their next targets after foreign aid are farm subsidies, arts subsidies, and defense spending, especially on the wars in Afghanistan and Iraq.
The real conflict is ordinary Americans both left and right vs. Washington business-as-usual.
As a former Republican I stopped using the words “conservative”, “liberal”, “Republican” and “Democrat” after Reagan took office as a Republican and Conservative, the proceeded to cut taxes and increased spending on the military justifying this as the military had been neglected so long while the deficit exploded. In other words, no more borrow and spend unless it is the things I really want, and let future generations pay for it. When the Republicans took congress and the white house in 2000 I was staggered as they immediately took a balanced budget; started deficit spending with no intention whatsoever of paying down the deficit; then invaded Iraq (was I the only former Republican who said the data did not justify the invasion?) at huge expense; re-elected a Vice President who had publicly said that deficits don’t matter and had no intention of running for President; passed a Medicare drug benefit with no funding that was guaranteed to bankrupt Medicare sooner and now is taken as a “right” by seniors; moved lobbyists into congress and the white house making it clear that all spending on borrowed money was to be approved as president George W. Bush had a strict policy of not vetoing anything, including spending; gutted the SEC so that it could not protect those of us who are small investors; and was finally able to pass on $1 trillion to the banking industry in 2008 as a results of lax regulation. Through it all I was amazed to watch “Republicans” and “conservatives” support congress and the president as they borrowed and spend the future of this country.
It should be clear to anyone who has any knowledge of the numbers that if we are ever to get out of the deficit both parties were happy to run up in the last 10 years we need to make big cuts in spending, and increases revenue, as Reagan did six times, preferably through eliminating tax loopholes that may restrict efficient use of capital. The Republicans could have got a 4 trillion dollar cut in spending two weeks ago with “revenue enhancements” (Reagan’s term)of about one trillion dollars for a net reduction in government spending of 3 trillion dollars. Instead they are now settling for cuts of about two trillion dollars, and I would argue therefore not really concerned about the problem of government spending and the future of the deficit.
So exactly what is the discount rate attached to words like “Republican, Democrat, conservative and liberal”? These words mean nothing, it is what a party or group is actually doing by passing into law that matters.
From a former Republican disgusted with the party.
“In regards to the deficit, I think the average voter thinks we can close tax loopholes, have tax reform, spend in more efficient ways, and cut a whole lot more spending, regardless of their ideological stance.” – bennett
I think that’s true, but any effect instituting those reforms (and those reforms alone) might have would be marginal because the average voter also doesn’t want to cut entitlement spending or defense, doesn’t want to borrow, and doesn’t want to raise taxes to cover the difference. If only “magic” were a legitimate governing alternative.
How did we become such a polarized society that roughly half the voters in the nation love government and hate private “capitalism,†while the other half hates government and loves private entrepreneurship?
When the Goldwater defeat motivated conservatives to fund their own think-tanks in the 1960s to spread their ideas. Only later did cheap knock-offs start spreading mencacious, binary talking points that oversimplified and hasty generalized half-truths. The quality of think-tank output has sadly declined since the ’90s, especially so after Rove.
DS
Eventually, however, someone’s ox is going to be gored. It’s inevitable. Future voters will demand that Congress cut entitlements, most likely (which are the biggest budget items anyway).
“Future voters will demand that Congress cut entitlements” – metrosucks
The people will demand that government stop taking money from future generations to hand it to the current generation of voters? Has that happened, anywhere, ever?
It certainly won’t happen any time soon. Democrats and Republicans alike have won elections solely by pointing out that the other side was threatening entitlements.
Perhaps, but bear in mind that Social Security, Medicare, and Medicaid have not yet become the monsters they will be in 10 years.
On the other hand, considering the climate change issue, liberals tend to want to reduce current consumption in order to protect the distant future
On climate change, the liberals want to reduce consumption permanently. At the least, that’s what their capital-destroying policies would accomplish.
The people will demand that government stop taking money from future generations to hand it to the current generation of voters? Has that happened, anywhere, ever?
It happened in the US in the 1950s, when the federal government decided it needed to repay the money it borrowed to finance its participation in WW II. Of course, this was before the introduction of Medicare/Medicaid.
I doubt the U.S. is any more polarized than it has been in the past and will be in the future.
In fact, the political parties aren’t that far apart. This was only five years ago…
http://www.youtube.com/watch?v=ELkbDdPeL7I
bennett wrote:
Nukes are an interesting issue. What about the waste concerns? As a friend in CO (a member of the Lakota Sioux) told me in regards to nuclear power, “I’m just not sure there are enough Indian reservations to store all of that toxic waste.â€
The above point is correct. But Sweden (with a hint of ethnic pride, as my late Mother was Swedish and I speak the language) is doing the disposal (as in interment) of “hot” waste (e.g. spent reactor fuel) the right way (and only the Swedish Green and Left (f/k/a Communist) Parties are unhappy, which provides instant validation that it is the right way). See the Web site of SKB, Swedish Nuclear Fuel and Waste Management Company here, in English, for details.
With the tsunami in Japan and the Yucca Mountain ordeal, I am sympathetic to those who oppose nuclear power despite the obvious benefits when it comes to CO2 emissions. What’s your take on these concerns?
Regarding the tsunami damage to the nuclear generating stations in Japan, I believe that was the fault of TEPCO (the owner) and of Japanese regulators, who should have anticipated the damage that a large tsunami could inflict. But I don’t think that the damage in Japan, even though it was severe and is going to be expensive to clean-up, should deter us from building more and larger nuclear power plants, though we can and should learn from what went wrong there.
Many aspects of large projects in the U.S., be they electric generating stations (regardless of fuel type), electric transmission lines, highways and highway improvements, refuse incinerators and landfills, and yes, places to dispose of nuclear waste, are bedeviled by U.S. federal and state laws that allow a disproportionate amount of influence to persons and groups opposed to something (or, in many cases, opposed to everything that might be in or near their backyard). There are people and public agencies and private consultants that know how to navigate the (expensive and risky) process and paperwork requirements associated with getting to a final environmental impact statement (FEIS), and record of decision (ROD) but even when millions of dollars are spent to get to that ROD, someone opposed to the project (or all such projects) can usually find one or more pro-bono lawyers to file suit in the appropriate federal court (or courts). There’s no reason that we cannot inter hot nuclear waste, or reprocess it into fuel for reuse (and I know that federal law and policy currently forbids reprocessing, which is nuts).
Speaking of Sweden and nuclear power, there’s this story from the other day (in English):
Swede held for building nuclear reactor in his kitchen
Some quotes from the article:
The man began his experiment some six months ago and has reportedly been open about his plans to construct a nuclear reactor in his apartment in the small Swedish coastal town, maintaining a blog of his nuclear adventure.
The man, who explained that his interest in nuclear physics was awakened as a teenager, ordered some radioactive material from overseas and acquired more by taking apart a domestic fire alarm.
Despite the man’s frank and full disclosure of his experiment, his activities only came to the attention of the authorities a couple of weeks ago when he contacted the Swedish Radiation Authority (StrÃ¥lsäkerhetsmyndigheten) to inquire if it was legal to construct a nuclear reactor at home.
Re: Nuke power. Why still use 40 year old nuke power tech? Technology should be able to solve the nuke power problem; maybe the Toshiba 4S will.
I agree that it is puzzling why the nuclear plants in Japan were not ready for large Tsunamis.
What really amazed me was how such a large earthquake caused so few injuries and deaths. Well done engineers! The tsunami did many times more damage, and while amazingly small, the casualties could have been far less if people understood what a large earthquake means.
But I am not a good critic of earthquake disasters. I live atop a major earthquake fault, yet I am not sure if a tsunami could threaten my house or if I could be safe. I doubt I could figure it out in a 5 minute earth shake.
Frank wrote:
Why still use 40 year old nuke power tech?
Because as a nation we have discouraged the construction of new (and more-modern) nuclear electric generating stations.
Technology should be able to solve the nuke power problem; maybe the Toshiba 4S will.
I think you are correct, though I am not so sure I want sodium cooling anything – in its pure state, sodium is pretty nasty stuff.
Apologies for going off-topic for the zillionth time here, but I was wondering if any train experts/aficionados here can tell me the name of the train in the top image? Because I found that one in an old train calendar at an expo 2 years ago. But the bottom photo was a picture I took while visiting the National Railroad Museum in Green Bay, WI the past week:
http://goo.gl/ZiAHz
Welled Iced, the top image doesn’t look like a photograph, it looks a painted propaganda poster.
Well propaganda & marketing are the same thing.