American Budget Cuts

Why does it have to be "where" and not "if"? Why do we suddenly have to balance the budget in the middle of a recession?Why not balance it in the middle of a roaring economy, one with high growth and low unemployment so that the inevitable job losses as a result of public sector spending can be absorbed by the commensurate increase in private sector spending?Doesn't that make a lot more sense? I don't understand the argument that a budget deficit we've been running continuously for 20 years is somehow now of such crucial importance that it outweighs the urgency of economic recovery. Can anyone explain?

I confess, your position on this issue came as a complete surprise given the strong correlation between evolution denial and political conservativism/voting for Republicans.

The most profitable reaction to competition is rent-seeking and regulatory capture, not "efficiency." Businesses lose money off of inefficiency, but generally people make quite a bit of money off of it. And, of course, taking profits is about as inefficient as it gets.Greed, as it turns out, is not consistent with free-market capitalism, contrary to popular perception. In a perfectly capitalistic and highly competitive market sector, the competition drives the price of a widget down to the marginal cost of producing a single widget, and nobody makes any profit.Greed isn't what makes capitalism work. Greed is what makes it not work. The experience of history is that public sector jobs can only be successfully transfered to the private sector when the profit incentives line up with the successful performance of the job. But in most public sector jobs the profit incentives actually run the other way - it's more profitable to deny health care than to provide it, it's more profitable to run selective schools than effective ones, it's more profitable to run failing prisons than safe and secure ones, it's more profitable to let houses burn than to put out fires, it's more profitable to engage in criminality than to oppose it, and so on.

Sure - have the "CEO" be paid a GS-14 salary instead of multi-million dollar salary plus bonuses.

Well, no. It should be the public sector who is in charge of the laws and in charge of breaking monopolies and preventing regulatory capture, not the private sector who is in charge of the laws which they then use to establish regulatory monopolies and rents, which is what we have in the United States.The private sector has a profit motive to gain control of legislature, not to increase competition and drive down prices. That's not a response to the dilemma I posted. No, it's complete and utter truth. For a health insurance company, premiums are income and health care expenditures are costs. Therefore, maximizing profit - which is income minus costs - means maximizing premiums and minimizing costs. That means increased premiums, establishing a client base consisting only of the healthiest, most affluent clients, and generally denying medical care or cancelling coverage where contractually permissible.It's the "adverse selection" problem - people generally need either no medical care, or need an expensive amount of it. Most people who make claims have not paid premiums in excess of their claims (otherwise they'd just have used a savings account.) Therefore the most profitable way to run a health insurance company is to collect premiums from people who never get sick. No, it's the most profitable, because the marginal costs of providing medical care - pharmaceuticals dispensed, bandages used, bedpans cleaned - are larger than the marginal costs of paying doctors to stand around and do nothing - coffee and magazines, basically - and then bill insurance companies or the government for it. Right. There is no market for effective schools; there's only a market for selective schools. That's why all of the measurable benefit in for-profit private secondary and primary schools is in the admission process; after students are admitted, the educational improvement at private schools is no different than at public schools. The only measurable "benefit" to a private school education is as a market signal that you were "good enough" to pass a more selective admissions filter. "Failing" in that prisoners are subject to abuse and neglect. Failing in that prisoners escape instead of not escaping. Failing in that prisoners are not rehabilitated. The profit basis in running a private prison is in informing the government that a certain number of beds are filled, not in actually having prisoners in those beds, or being fed, or living in a safe and clean environment. Since private prisons aren't actually paid for any of that, they have no reason to do so. Why not? The government runs the Post Office, and then there are at least three private-sector competitors that deliver less efficient, less effective service at about ten times the price. (Don't know how they stay in business, honestly. Probably huge government subsidies - another example of the private sector's profit motive working directly against efficiency.) They earned it, and I get to tell them how to spend it. Funny - my landlord keeps neglecting to ask me how to spend those huge rent checks I keep writing every month. That seems a lot less efficient, frankly.

What's your evidence that there's such a thing as "quality" of a CEO? Is there any evidence that Steve Ballmer is a "lower quality" of CEO - by an entire order of magnitude? - than W. James McNerney?Is there any evidence that EADS, the manufacturer of Airbus airplanes and Boeing's major European competitor, is a much worse-managed company? This chart seems to indicate otherwise:It's clear that enormous CEO salaries are nothing but an enormous inefficiency created by the private sector's profit motive. Perhaps if Boeing didn't need to pay wasteful enormous CEO salaries, they could direct that capital to improving aircraft reliability, something Airbus has clearly been able to do.

I didn't have a lot of time to Google and it's the best I was able to find in about 3 minutes. In fact it's the top result for "Airbus vs. Boeing reliability." That's simply as much FAA data as that person was able to get. I don't see how it's "misleading" in any way.Wikipedia says:

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Both aircraft manufacturers have good safety records on recently-manufactured aircraft. By convention, both companies tend to avoid safety comparisons when selling their aircraft to airlines. Most aircraft dominating the companies' aircraft sales, such as the Boeing 737-NG and Airbus A320 families (as well as both companies' wide-body offerings) have good safety records as well. Older model aircraft such as the Boeing 727, Boeing 737 Original, Boeing 747, Airbus A300 and Airbus A310, which were respectively first flown during the 1960s, 1970s, and 1980s, have had higher rates of fatal accidents.[34]

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The difference in annual, non-bonus compensation between Boeing's CEO and Airbus's CEO is more than 12 million dollars. That's approximately 1% of their total annual budget for the development of commercial airliners according to their 2007 annual report (which was the most recent I could Google.)Boeing recently filed suit against the EU for providing what they view as illegal and anti-competitive government subsidies to EADS. Perhaps if Boeing stopped overpaying for CEO services they would find themselves on a slightly more competitive footing. Again, if there's a case that the CEO of Boeing is an order of magnitude more effective than the CEO of EADS, it should be reflected in their products. Is it? I can find no evidence of that and much against.

The public sector's control over legislation, however, is both circumscribed by the Constitution and fundamentally legitimate. That's actually what they're there to do and because legislative self-dealing was envisioned by the Founding Fathers, they structured the government to minimize it. Yeah, I did. To repeat:

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Greed, as it turns out, is not consistent with free-market capitalism, contrary to popular perception. In a perfectly capitalistic and highly competitive market sector, the competition drives the price of a widget down to the marginal cost of producing a single widget, and nobody makes any profit.

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The profit motive creates inefficiency, it doesn't result in efficiency. That's because profits are inherently inefficient. The free-market notion is that the inefficiency of profits will somehow be overcome by the efficiency gains in other fields - by magic, I guess - but that's not what we empirically see in private industry. We see self-dealing, regulatory capture, rents, and other deadweight losses that stem from the fact that it's people, not businesses, who are motivated by profit. Right, so naturally, insurance companies try to find new ways to avoid putting themselves in contractual obligation to pay out. That can mean lifetime coverage caps, involuntary arbitration, overbroad interpretation of "pre-existing conditions", or outright rescission of contract the first time you attempt to make a claim. These abuses became so commonplace that Congress took action to regulate or even ban them. Maybe you heard something about that - it was "shoved down your throat" after a period of approximately a year and a half of continuous, nationwide debate. Well, people who have no choice but to buy - people who have to be covered as a function of their employment, or people who anticipate having medical needs in excess of their ability to save in advance for them. And, of course, you don't know that you're getting "no payout" insurance until it comes time for them to pay you. Obviously, the profit motive suggests that insurance companies will attempt to sell people insurance that pays them as little as possible, but convince them that the coverage is very generous. No, competition forces those companies to insure the least risky client pools as possible. Hence "adverse selection." There's no money to be made insuring people who actually need medicine. That's why we have Medicare. You do recognize that if premiums and payouts are balanced, nobody makes any money, right? Since profit equals premiums minus payouts. You can do basic math, right? How are they supposed to pay premiums that are higher than they can afford? Are you saying that poor people should die of untreated diseases? What about people who can't work because of their illness? They just deserve to die? I'm saying that the benefit of college is known not to be the instruction - there's no evidence of college being a fundamental "value-add" for students beyond the prestige of simply having been admitted. It's even more true of private secondary schools, where the difference in test scores between students at private schools and at public schools completely vanishes when you control for the fact that private schools can be selective but public schools have to take all comers.Private schools sell selection, not education. The value of a Harvard education is the ability to say that you got into Harvard. How so? What's better about it? The Post Office delivers on Saturday and picks up mail from your house. They can drop mail right into your mailbox; UPS frequently makes you pick it up at a service center. That's assuming they even have a business presence where you live. If you really want some UPS horror stories, you can just read here. Everybody knows the Post Office has way better service than any private company, and for less. In many rural locations it's the only option. I earned my paycheck, and they earned theirs. Don't you believe in paying your bills?

No, Phage. It's honestly not all that hard to meet people who are motivated by more than the love of money. You just have to leave the corrupting, distorted, sick, destructive world of corporate cronyism.Almost everybody makes decisions on the basis of more than mere love of money - they're getting married, starting families, reading books and learning, having fun with friends, getting politically active in their community donating their time and effort to various causes, etc.People who view every interaction through the lens of personal monetary profit are sociopaths, and for the most part they're blessedly rare. No. But the rich are getting richer as the poor get poorer. That's objectively happening, and we know it's not good for society. The answer is progressive taxation - higher marginal taxes for higher margins of wealth. A society where all the gains in GDP since 1970 are captured by the top 5% income earners is inherently not a healthy society; that's a society where the wealthy are stealing from the middle class and poor.

Right. That would be perfectly efficient. Thus, the profit motive is to avoid being in a perfectly competitive environment and thus avoiding efficiency by such means as regulatory capture, rent-seeking, and other forms of anti-competition. Yes, fraud. Until last year perfectly legal fraud. The profit motive is one that leads to fraud, because fraud is the best possible profit mechanism - all of the income of selling something with none of the fixed costs of actually making the sale. Fraud is certainly inefficient, but the profit motive ensures that profit-minded people will always be trying to defraud others.The profit motive causes inefficiency, not efficiency. You're proving my case for me. On the private market? "Being older than 65" and "serving in the military." Right, the issue is that people should receive the medical care they need without being limited by their ability to pay. Both conservatives and liberals agree on that. Of course, the pharmaceutical companies and medical professionals who deliver that care deserve to be paid to do so, so the question becomes how we get doctors paid when they treat people who can't afford to pay them.Clearly, that's not something the free market can deliver; that's the reason that more Americans are on public health coverage than private. The Post Office is faster, more reliable, and cares more than any of its private competitors, in my experience. I think you mean "advertising."

Economics fail. By definition aggregate spending equals aggregate income.

Well, obviously. But I would do that even if making money was my absolute lowest concern, because you stipulated that it was identical in any other way, so it would basically be free money. (Who wouldn't take free money?) The question is - would I take a job that paid as much but:1) the job was located somewhere I didn't want to live? (No, but someone who was primarily motivated by love of money would.)2) the job was doing something I didn't like to do? (No, but someone who was primarily motivated by love of money would.)3) the job would cause harm to me or my loved ones? (No, but someone who was primarily motivated by love of money would.)4) the job would cause harm to society in general? (No, but someone who was primarily motivated by love of money would.)Almost everybody rejects employment on these and other criteria, even where they stand to gain monetarily. Certainly having children is not a money-making proposition; quite the opposite. Getting married may or may not be but relatively few people make the decision on those grounds.The people who are genuinely motivated by nothing more than avarice are sociopaths, and thankfully they're quite rare. Sure, that's how I know it's true:"Leverage ratio" is the ratio of income to debt.This last graph is particularly damning evidence of a shift in policy that resulted in an enormous theft of GDP gains by the wealthiest 5%.Edited by Adminnemooseus, : Reduced 4th graphic width from "700" to "600".

Nope, I'm just demolishing that old and tired canard that "private corporations are oh-so-much more efficient." In fact, they have an inherent incentive not to be. What being government-run? Presumably it prevents fraud by making it harder to defraud the government. But if you want me to be more specific than that you have to tell me what you're talking about. Risk pools that no one can profitably insure. After all, if the premiums to cover the payouts are more than anyone in the pool can afford who is actually going to buy your insurance plans? You can't make money off of plans nobody will buy. Isn't that something you just said, in fact? Right. For instance, doctors who are saving people's lives instead of the financial lords and masters who are ruining people's lives.Do you really blanch at the notion that different people deserve different outcomes as a result of their different actions? Surely that's not something we have to argue about. You believe that some people deserve money more than others. I believe the exact same thing. We just have an argument about which people those actually are. I don't think the IRS has guns, actually. Or indeed has ever used violence to collect taxes. For the most part people voluntarily follow established tax law because they agree with the notion of funding the governments whose services they benefit from. I disagree. The people being paid are the doctors who provide medical care, and they're being paid for providing medical care. What's unfair about that? Who else should be paid for providing medical care if not medical providers? Right, but you've already agreed on how the "free market" can be fundamentally misled and perverted by the profit motive.

Really? Every American family is engaged in it. I think something that works for every single American family is probably fairly practical. As far as ethics go - I don't know, something strikes me as unethical about demanding that children not receive the benefits of their parent's income and expenditures unless they're making just as much money as their parents. Is there a lot of demand for the labor and skills of one-month old infants?Edited by crashfrog, : No reason given.

No, their real income decreased. ("Real income" is a function of share of GDP earned as wages or salary.) Their actual income increased relative to their income in 1979, but the tricky problem about being paid in 2011 is that you can't go back and spend it in 1979, you have to spend it in 2011.Every graph I posted proved that the rich are getting richer and the poor are getting poorer; you just didn't know how to read them.Edited by crashfrog, : No reason given.