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Archive for December 6th, 2010

I just had the interesting experience of getting called by a well-known polling company while sitting in the Tampa Airport.

The good news is that they’re allegedly going to send me $5 for participating via cell phone (yes, I’m a cheap bastard, so that was all it took to convince me to give up 10 minutes of my time – especially since there are not many exciting things to do while waiting for a delayed flight).

The bad news is that polling companies ask poorly designed questions.

I was asked, for instance, what I wanted as the main goal of fiscal policy. My choices were, a) reducing taxes, b) reducing the deficit, or c) maintaining government services. I told the pollster that the right answer is, d) reducing government spending. After all, the evidence is very clear that excessive government slows growth by diverting resources from the productive sector of the economy. Sadly, the poll only allowed the three options. So I said “reducing taxes” since that was my only choice that couldn’t be misinterpreted.

Another question was whether the retirement of the baby boom generation would create problems for health care. So I told the pollster that also made no sense. The retirement of the boomers would create big problems for Medicare and Medicaid, but that’s not the same as big problems for health care. So I refused to answer that question. In retrospect, I probably should have answered “yes” since government intervention has screwed up the entire health care system, even the parts that ostensibly are private.

To be fair, most of the questions were straightforward. Shockingly, I said that I disapproved of Obama’s performance. You’ll also be stunned to learn that I said I was a strong supporter of the Tea Party movement. And I was insulted to be asked whether I was male or female after a 10-minute conversation.

Last but not least, I avoided the temptation to mis-identify myself as a Pacific Islander. That should only be done when dealing with government.

One final note. This actually was my second experience with pollsters. The first time happened when I was walking by a pay phone in a shopping mall in Indianapolis about 15 years ago. The phone rang, nobody was around, so I figured I would answer and tell the person they had a wrong number. Much to my surprise, it was a polling company, which proceeded to ask me questions about a local congressional race. Even though I obviously couldn’t vote in that area, I went ahead and told them I was firmly against Congresswoman Carson.

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In his latest Bloomberg column, Kevin Hassett of the American Enterprise Institute notes that research from places such as Harvard and the International Monetary Fund confirms that spending restraint is the way to successfully reduce red ink – and it’s also the way to improve economic performance.

The antidote to fiscal crisis is fiscal consolidation… Such consolidations have relied on varying degrees of tax increases and spending reductions. Some have successfully reduced debt, some haven’t. The data tell a clear story: What works is cutting government spending. A series of influential papers by Harvard University economist Alberto Alesina and various co-authors found decisive evidence that successful consolidations rely almost exclusively on spending reductions, while unsuccessful consolidations seek to close 50 percent or more of the gap with tax increases. A recent study by the International Monetary Fund supports the principle that cuts, particularly to entitlement programs, are key. …Cuts to pension and health entitlements had the most beneficial effect on economic growth. Tax increases fail to achieve sustained debt reduction for two likely reasons. First, they increase the risk that an economy will experience a double-dip recession. Second, they illustrate that the offending government is unwilling to take a tough stand against soaring entitlements. A welfare state that can’t shrink in a recession will possibly never shrink, which means that today’s high taxes provide an ominous foreshadow of even higher rates to come.

The entire column is worth reading. Kevin is not as firmly against tax increases as I would like, but he is always thorough and the information in his column definitely supports the notion that spending is the problem and therefore any fiscal consolidation should be based on restraining the size of government.

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Fed Chairman Ben Bernanke is at it again, giving an interview that combines all of the worst features of Keynesian economics. I have an excerpt below from a New York Times report, which features an amazing amount of mistakes in a very short amount of space. Here are three that demand correction.

1. The economy needs less government intervention, not more “government help.” Bernanke doesn’t understand that job creation and entrepreneurship are hurting because politicians are doing too much, yet he wants more interference from Washington.

2. The economy needs less government spending, not Keynesian nonsense about big deficits to boost consumer spending. Bernanke seems to think so-called stimulus schemes for more wasteful spending help the economy, even though those policies failed for Hoover, Roosevelt, Bush, and Obama.

3. The economy needs a strong and stable dollar, not inflationary quantitative easing. Bernanke wants us to believe that low interest rates are the key to growth, but apparently oblivious to the fact that interest rates are very low now (and have been very low in Japan during that country’s 20-year stagnation. Memo to Ben: People don’t invest when they expect to lose money, regardless of interest rates.

Here’s the excerpt about Helicopter Ben’s thinking:

Federal Reserve Chairman Ben Bernanke is stepping up his defense of the Fed’s $600 billion Treasury bond-purchase plan, saying the economy is still struggling to become “self-sustaining” without government help. In a taped interview with CBS’ “60 Minutes” that aired Sunday night, Bernanke also argued that Congress shouldn’t cut spending or boost taxes given how fragile the economy remains. The Fed chairman said he thinks another recession is unlikely. But he warned that the economy could suffer a slowdown if persistently high unemployment dampens consumer spending. The interview is part of a broad counteroffensive Bernanke has been waging against critics of the bond purchase plan the Fed announced Nov. 3. The purchases are intended to lower long-term interest rates, lift stock prices and encourage more spending to boost the economy.

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