Updated 26 June 2013
Archie Pegalowe is many things: an avatar at your service, a game to play and a whole lot of uninhabited islands. Through Archie you can make a game of ridding yourself of annoying persons in a way that perpetually punishes them for said annoyances.
Archie knows the way to an infinitely large archipelago of small desert islands, each with one palm tree, an abundance of sand crabs for food and company and a fresh water spring with which to wash them down. Eah island has a flag pole. All are in sight of the occasional passing ship, shiny and inviting.
Ships pass just close enough to see the flag. The flag is the Jolly Roger, flown upside down in the manner of the universal distress signal. It is often seen, but answered only by the occasional pirate in a manner common to pirates..
At your request Archie will populate an island with your choice of celebrities, two to an island. Once there your choices will never be seen or heard of again. Archie guarantees it. Every year I will evaluate the degree of delicious suitability of all choices and select the one best. Ties go to the first person to make his or her identical request known to Archie.
Delicious suitability is attained when 1) you are delighted to be rid of both; 2) both will be indescribably appalled at the prospect; and 3) thoughts of them living perpetually in a state of high intimacy is pleasurable to you and friends in whom you confide.
Anyone may play their own game of Archie Pegalowe. Perhaps a small circle of close friends may wish to limit it to their larger social set. College freshmen pledging a fraternity or sorority, may wish to consider the current membership now harassing them. Democrats may wish to target republicans (Newt Gingrich and Michele Bachman) or vice versa (Nancy Pelosie and Joe Biden). Qualified historians many even select from the dead of their favorite era: this may seem pointless to the rest of us. Betsy Ross and Benedict Arnold?
Should nobody care to play my game of celebrity pairing, I will call on Archie myself once a year, limiting my choices to famous Floridians. In 2011 I made a trial run and was happy with nominating Tim Tebow and Casey Anthony. By the close of 2012 poor Tim's celebrity was fading fast, however, so I thought to pair Casey with George Zimmerman. This year I'm look for the proper companion for Marko Rubio. So far nobody quite matches our Marko.
You don't have to pick one of each gender if you don't want to. Odd couples are okay (Barney Frank and Sarah Palin?). In fact there are very few rules: two homo sapiens per island, and don't just pick on Obama. Send your entries to me by commenting on any post in this blog including this one.
This post is dedicated to the late Charles Sheldon Bennett, who first came up with the concept a half century ago. Our friends never knew what hit them.
2013: There are not enough famous Floridians and so why limit myself? My choice this year is, (ta da!) Karl Rove and Ann Coulter.
Wednesday, January 23, 2013
Saturday, January 19, 2013
Debt and Deficits In Perspective
Updated May 23, 2013
The Debt
When an up and coming family like yours finds it can earn more by moving far away from its present home, the pleasant prospect of buying a better place to live presents itself. The question of how much can you afford depends mostly on how much each monthly house payment will be when compared to your newly enhanced monthly income. Congratulations!
It is taken for granted that you will sell the present home, pay off its mortgage, and put any remaining equity into the new place, which because it costs more will put you deeper in debt. Despite that, if you always pay on time your credit only gets better. In fact, if you bank the equity from the old place and rent until you could buy that dream house outright your credit score could drop for lack of current credit data in your records.
Something like that happened to my father. After living over 30 years in the same oil patch town in a little cottage paid for in the first ten years, always paying cash in Detroit for a new car every five years and never using credit cards or charge accounts, he asked his bank for a loan to buy some oil leases and was turned down. He had absolutely no credit history. The bank issued him some credit cards, to my mother's incredulous delight, and he soon had a history. (The less said about the oil leases the better.)
Our federal government has never had Dad's problem. Since the day when Alexander Hamilton, President Washington's Treasury secretary, assumed the revolutionary war debts of the thirteen states, there has been a national debt. Because, like your up and coming family, the nation has always paid its debts in full on time, our credit standing is without parallel in the world.
This is true even though we owe creditors at home and abroad over $16 trillion and a private credit rating agency,recently dropped us one notch from AAA to AAa (don't ask). Why? Because wealthy creditors prefer to trust us with their money over anybody else -- and at historically low interest rates. They just ignore the credit agency's tut tutting over recent financial food fights in Washington.
Don't Japan and China, the big creditors, know how horribly much we owe? Of course. What is it that they know that most Americans don't know? They know to ask the question, the debt is too big compared to what? Nations like people become insolvent when they stop paying their debts, even with borrowed money. We meet our payments, even if with borrowed money, and have done so for about 230 years.
The next question is how long can we keep on living on the world's borrowed dime? One way nations evaluate their financial standing with other nations is by comparing ratios of public debt (PD to Gross National Product (GNP). The ratio of the US PD to annual GDP (PD divided by GDP) is 73% at the end of 2012. Japan's in contrast is 250%, one of the highest in the world. We are in the middle of the pack of wealthy nations.
But isn't that ratio the highest in our history? No. In 1946 in the wake of our costly victory in World War II it was 113%. We cut debt in the booming aftermath of the war when a rapidly expanding GDP generated the tax money to do so. Of course tax rates were as high as 91% in the highest brackets back then, and virtually everybody paid something.
Annual Deficits
So how are we doing today? A look at the numbers from October 2009, when the first Obama administration budget was formed, to October 2013 reveals that our annual deficit is coming down rather steadily:
2009 -- $1,509 billion
2010 -- 1,360
2011 -- 1,324
2012 -- 1,100
2013 -- 885 (early estimate)
2013 -- 636 (later estimate)
The numbers quoted above are from an official US government web site. They show that we are on track to reduce annual deficits to less than half of the 2009 figure in the current fiscal year ending next October 1.
So, how is the GDP doing? It's expanding, not as rapidly as after the war, or as rapidly as we could if government were allowed -- and business could be enticed -- to invest more.
2009 -- $14,297 billion
2010 -- 14,044
2011 -- 14,582
2012 -- 15,094
It's on a slow but fairly steady rise. Indications for 2013 are for more of the same. These numbers are taken from the web site of the University of North Carolina's Kenan-Flagler Business School.
Perspectives
If the annual deficit is dropping and GDP is rising then we are on a track to bring growth in the national debt to zero. If at that point we can still borrow at a low rate of interest and unemployment is still high by historic standards it will be time to increase investments in infrastructure (roads, bridges, ports, tunnels, rail, airports, the electric grid, the Internet, air and land traffic control systems), education (especially remote learning) and basic research (environmental and demographic threats, energy alternatives, the human brain, the genetic code, robotics, life in space).
Will this send the debt up again? Yes, of course. But these are areas where we are lagging, not leading, the world. They are investments that in some cases should be made now if we are not to lag further behind. They are investments that will pay off in jobs, income and wealth. They are investments that entrepreneurs can turn into life enhancing products supporting jobs and more GDP growth.
The sum of these efforts will solve the curent deficit/debt problems, but only if we also reform entitlements. The easy one is social security pensions. The program will not be insolvent for years and with a modest bit of tweaking even that threat can be made to receed further. This is explored in my blog entry of 4/4/2012, "On Social Security Finances and Myth Making."
The hard and important one is medical care. ObamaCare is a brave, flawed start. But it only partly tackles the issue of insurance, and peeks ahead to the prolonged effort we will have to take to rein in the rampant ineffeciencies, and attendant costs, of a bloated, corrupt health care "system." For more on this subject see my blog entry of 9/21/2009, "Reforming Medical Care: A Task for a Generation."
Finally, we must also cure one other plague if our other efforts are to endure. The earth is finite. Therefore our boot prints cannot grow infinitely. Eventually there will be fewer of us or less of our "stuff." Growth in tangibles, even services, cannot go on forever. This year we have seen how our coastal cities can be washed away if trapped heat from the sun sends polar ice caps sliding into the sea, warming them and thus feeding greater energy into their storms. We have met the plague and it is us. We either come to terms with a sustainable state of nature or nature will reach a state in which our species cannot live.
The Debt
When an up and coming family like yours finds it can earn more by moving far away from its present home, the pleasant prospect of buying a better place to live presents itself. The question of how much can you afford depends mostly on how much each monthly house payment will be when compared to your newly enhanced monthly income. Congratulations!
It is taken for granted that you will sell the present home, pay off its mortgage, and put any remaining equity into the new place, which because it costs more will put you deeper in debt. Despite that, if you always pay on time your credit only gets better. In fact, if you bank the equity from the old place and rent until you could buy that dream house outright your credit score could drop for lack of current credit data in your records.
Something like that happened to my father. After living over 30 years in the same oil patch town in a little cottage paid for in the first ten years, always paying cash in Detroit for a new car every five years and never using credit cards or charge accounts, he asked his bank for a loan to buy some oil leases and was turned down. He had absolutely no credit history. The bank issued him some credit cards, to my mother's incredulous delight, and he soon had a history. (The less said about the oil leases the better.)
Our federal government has never had Dad's problem. Since the day when Alexander Hamilton, President Washington's Treasury secretary, assumed the revolutionary war debts of the thirteen states, there has been a national debt. Because, like your up and coming family, the nation has always paid its debts in full on time, our credit standing is without parallel in the world.
This is true even though we owe creditors at home and abroad over $16 trillion and a private credit rating agency,recently dropped us one notch from AAA to AAa (don't ask). Why? Because wealthy creditors prefer to trust us with their money over anybody else -- and at historically low interest rates. They just ignore the credit agency's tut tutting over recent financial food fights in Washington.
Don't Japan and China, the big creditors, know how horribly much we owe? Of course. What is it that they know that most Americans don't know? They know to ask the question, the debt is too big compared to what? Nations like people become insolvent when they stop paying their debts, even with borrowed money. We meet our payments, even if with borrowed money, and have done so for about 230 years.
The next question is how long can we keep on living on the world's borrowed dime? One way nations evaluate their financial standing with other nations is by comparing ratios of public debt (PD to Gross National Product (GNP). The ratio of the US PD to annual GDP (PD divided by GDP) is 73% at the end of 2012. Japan's in contrast is 250%, one of the highest in the world. We are in the middle of the pack of wealthy nations.
But isn't that ratio the highest in our history? No. In 1946 in the wake of our costly victory in World War II it was 113%. We cut debt in the booming aftermath of the war when a rapidly expanding GDP generated the tax money to do so. Of course tax rates were as high as 91% in the highest brackets back then, and virtually everybody paid something.
Annual Deficits
So how are we doing today? A look at the numbers from October 2009, when the first Obama administration budget was formed, to October 2013 reveals that our annual deficit is coming down rather steadily:
2009 -- $1,509 billion
2010 -- 1,360
2011 -- 1,324
2012 -- 1,100
2013 -- 885 (early estimate)
2013 -- 636 (later estimate)
The numbers quoted above are from an official US government web site. They show that we are on track to reduce annual deficits to less than half of the 2009 figure in the current fiscal year ending next October 1.
So, how is the GDP doing? It's expanding, not as rapidly as after the war, or as rapidly as we could if government were allowed -- and business could be enticed -- to invest more.
2009 -- $14,297 billion
2010 -- 14,044
2011 -- 14,582
2012 -- 15,094
It's on a slow but fairly steady rise. Indications for 2013 are for more of the same. These numbers are taken from the web site of the University of North Carolina's Kenan-Flagler Business School.
Perspectives
If the annual deficit is dropping and GDP is rising then we are on a track to bring growth in the national debt to zero. If at that point we can still borrow at a low rate of interest and unemployment is still high by historic standards it will be time to increase investments in infrastructure (roads, bridges, ports, tunnels, rail, airports, the electric grid, the Internet, air and land traffic control systems), education (especially remote learning) and basic research (environmental and demographic threats, energy alternatives, the human brain, the genetic code, robotics, life in space).
Will this send the debt up again? Yes, of course. But these are areas where we are lagging, not leading, the world. They are investments that in some cases should be made now if we are not to lag further behind. They are investments that will pay off in jobs, income and wealth. They are investments that entrepreneurs can turn into life enhancing products supporting jobs and more GDP growth.
The sum of these efforts will solve the curent deficit/debt problems, but only if we also reform entitlements. The easy one is social security pensions. The program will not be insolvent for years and with a modest bit of tweaking even that threat can be made to receed further. This is explored in my blog entry of 4/4/2012, "On Social Security Finances and Myth Making."
The hard and important one is medical care. ObamaCare is a brave, flawed start. But it only partly tackles the issue of insurance, and peeks ahead to the prolonged effort we will have to take to rein in the rampant ineffeciencies, and attendant costs, of a bloated, corrupt health care "system." For more on this subject see my blog entry of 9/21/2009, "Reforming Medical Care: A Task for a Generation."
Finally, we must also cure one other plague if our other efforts are to endure. The earth is finite. Therefore our boot prints cannot grow infinitely. Eventually there will be fewer of us or less of our "stuff." Growth in tangibles, even services, cannot go on forever. This year we have seen how our coastal cities can be washed away if trapped heat from the sun sends polar ice caps sliding into the sea, warming them and thus feeding greater energy into their storms. We have met the plague and it is us. We either come to terms with a sustainable state of nature or nature will reach a state in which our species cannot live.
Monday, January 14, 2013
On Compromise In Washington
Last major update on 11 February 2013. Last major correction 5 June 2013.
Compromise -- Art or Science
"Why," people wonder, "can't Congress work things out? Give and take? Horse trade? Split the difference? Just compromise and do something?!"
Well, I know why, if by "something" is meant comprehensive and enduring solutions to big problems. Problems such as as jobs and unemployment, debt and deficits, growth and sustainability, health care and aging, retirement and longevity, energy and global warming, poverty and strife.
The true believers at each end of American political opinion are righteously sure that they know how to solve these and other problems, while the rest of us who make up the muddle in the middle are confused and uncertain, knowing only that no one can predict the future and that past ideologies have, one by one, failed.
The old ways to compromise have been found wanting. Splitting the difference? A lazy way that works well enough when the stakes are small, there is no "right" number and it is past time to move on. Horse trading (I'll vote for this if you will vote for that)? It has been the sordid means to noble ends, as in the cases of Lincoln and slavery and LBJ and voting and other struggles for rights for marginalized Americans. But mostly it merely divides up the pork for local gain, serving a national purpose accidently if at all. Give and take? See horse trading.
That leaves working things out. Find win/win solutions. Play only non zero sum political games. But even then compromise is only an art, when it should be a formal science. Working things out begins well enough. Serious people without ideological blinders set aside narrow interests and pragmatically seek a way forward. Goals are set. All options go on the table. Sensible ones stay there. A "realistic" plan for meeting those goalsis drawn and reported to responsible officials. Then -- usually -- nothing happens absent a crisis, and then only the crisis is addressed. Examples: when we "fixed" social security a generation ago.
But, you say, our politicians are mostly lawyers, seldom scientists. Their focus is on winning office and debates, not on discovering. Who are they to rely on controlled experiments, predictive model building, double blind testing, assesment of results by preset criteria, and the other tools of the scientific method? Could they -- and we -- we ever accept the humbling ethos that every outcome is at best a partial failure from which to learn? That every theory is flawed? That other societies do some things better than we?
How do we get legislators that are comfortably steeped in the scientific method and ready to experiment? One it tempted to begin with Shakespeare's solution: "First, kill all the lawyers!"
In the midst of this righteous diatribe I have to make a humbling confession. For hundreds of years Sakespeare has been quoted out of context. According to Morris Dees, a lawyer and founder of the Southern Poverty Law Center, which is in the business of putting hate groups such as the Klan out of business, what the Bard really said was "If tyranny is to prevail, we must first kill all the lawyers." Even "The Oxford Dictionary of Quotations" gets it wrong by quoting the short version. 5 June 2013.
Not that the scientific method cures all. Scientists squabble fiercely. Some cling tenaciously to discredited theories for the sake of the careers and institutions built upon them, and in general prove conclusively only one thing: that they are human and prone to covet fame, riches and status as payoffs on a par with the advancement of knowledge. Sometimes it is necessary to wait until a generation or two have left the stage before the next act can begin.
But begin it does. Inexorably. Ceaselessly. Incrementally. And all the while, without meaning to, trashing cherished beliefs, knocking down religious, philosophical, stereotypical and moral fences with a steady barage of belief killing facts.
The Political Economy - A Case Study
Theories of political economy, however cherished, are no different. Capitalism, while the best system contrived to date, fluxes all too often from expansive heights to depressive depths, which economists are unable to either predict or anticipate. At one extreme inflated wealth is produced; at the other, it vanishes leaving only very real creditors stiffed by hords of debtors left jobless and homeless.
Capitalism also has other major deficiencies, for example a tendency to concentrate economic power, turn it into political influence and thereby endanger the equality of individuals before the law and the foundation of democratic government itself. Furrther, the ability of democratic governments to equip the capitalist engine with the appropriate governors is far from proven and lamentably limited. Money, credit and debt are the variables in the equation we have yet to formulate and prove that would give us the levers with which to macro-manage an exuberent capitalism rooted in a democratic society.
Instead of setting out to learn how to organize economic activity into an effective controlled producer of income and wealth that provides for all while rewarding creativity, productivity and leadership, we divide into rigid schools of economic theology and preach at the infidels of the other camp. Neither side has a monopoly on truth -- or stupidity.
We have had only one president, elected in the midst of our worst economic collapse, The Great Depression, who rejected the old remedy of inaction and boldly experimented. That Franklin Roosevelt was often wrong and only partially successful when right, is why the recent Great Recession did not cause more misery than was suffered in the 1930s.
Students of the Great Depression such as Ben Bernanke had learned from the frequent failures and slender successes of the remedies of Roosevelt's day. They had a better grasp of what to do and how to do it. They could not speed up today's recovery from an old fashioned financial panic, but they did halt the slide. Unemployment peaked at half what it was in the mid 1930's, and the belated boost of the stimulus program is fueling a slow recovery that now seems to picking up steam.
We have had other presidents who were not so helpful. Herbert Hoover started many of the prototype programs of the New Deal. That he was too little and too late, was demonstrated by Roosevelt's greatly expanded support for these and his own ideas that usually failed also. Only the spur of war put America back into business. War of course is the worst possible government program, but it does show that government action can fuel a boom.
The least helpful president was that amiable dunce, Ronald Reagan, who professed to admire Roosevelt while finding government not the solution but the problem. Of course government alone is neither. Capitalism is the essential fountain of freedom and prosperity -- if we can get to stop acting like dancing waters. Government, however inept it can be, has to be the regulator that contains the steam in its boiler and so gets useful work out of the engine without gruesome blowups. There basically is nobody else to do the job.
The best theory of how to set the economy on a smooth, sustainable path to growth is still that of John Maynard Keynes, if only we would test it. Counter cyclical activity that reduces government debt in boom times by taxing away the froth and increases it when a downturn begins by pumping deficit money into the economy, is what Keynes and his followers have consistently advocated, but we have never systematically tried.
More precisely we have tried only the pumping part. A few states have a rainy day fund, but it is used mainly to keep government running during down times while satisfying a legal requirement to annually balance the government's budget. Even the biggest states are helpless to shore up their economies when ill winds blow through the nation economic house.
Compromise -- Art or Science
"Why," people wonder, "can't Congress work things out? Give and take? Horse trade? Split the difference? Just compromise and do something?!"
Well, I know why, if by "something" is meant comprehensive and enduring solutions to big problems. Problems such as as jobs and unemployment, debt and deficits, growth and sustainability, health care and aging, retirement and longevity, energy and global warming, poverty and strife.
The true believers at each end of American political opinion are righteously sure that they know how to solve these and other problems, while the rest of us who make up the muddle in the middle are confused and uncertain, knowing only that no one can predict the future and that past ideologies have, one by one, failed.
The old ways to compromise have been found wanting. Splitting the difference? A lazy way that works well enough when the stakes are small, there is no "right" number and it is past time to move on. Horse trading (I'll vote for this if you will vote for that)? It has been the sordid means to noble ends, as in the cases of Lincoln and slavery and LBJ and voting and other struggles for rights for marginalized Americans. But mostly it merely divides up the pork for local gain, serving a national purpose accidently if at all. Give and take? See horse trading.
That leaves working things out. Find win/win solutions. Play only non zero sum political games. But even then compromise is only an art, when it should be a formal science. Working things out begins well enough. Serious people without ideological blinders set aside narrow interests and pragmatically seek a way forward. Goals are set. All options go on the table. Sensible ones stay there. A "realistic" plan for meeting those goalsis drawn and reported to responsible officials. Then -- usually -- nothing happens absent a crisis, and then only the crisis is addressed. Examples: when we "fixed" social security a generation ago.
But, you say, our politicians are mostly lawyers, seldom scientists. Their focus is on winning office and debates, not on discovering. Who are they to rely on controlled experiments, predictive model building, double blind testing, assesment of results by preset criteria, and the other tools of the scientific method? Could they -- and we -- we ever accept the humbling ethos that every outcome is at best a partial failure from which to learn? That every theory is flawed? That other societies do some things better than we?
How do we get legislators that are comfortably steeped in the scientific method and ready to experiment? One it tempted to begin with Shakespeare's solution: "First, kill all the lawyers!"
In the midst of this righteous diatribe I have to make a humbling confession. For hundreds of years Sakespeare has been quoted out of context. According to Morris Dees, a lawyer and founder of the Southern Poverty Law Center, which is in the business of putting hate groups such as the Klan out of business, what the Bard really said was "If tyranny is to prevail, we must first kill all the lawyers." Even "The Oxford Dictionary of Quotations" gets it wrong by quoting the short version. 5 June 2013.
Not that the scientific method cures all. Scientists squabble fiercely. Some cling tenaciously to discredited theories for the sake of the careers and institutions built upon them, and in general prove conclusively only one thing: that they are human and prone to covet fame, riches and status as payoffs on a par with the advancement of knowledge. Sometimes it is necessary to wait until a generation or two have left the stage before the next act can begin.
But begin it does. Inexorably. Ceaselessly. Incrementally. And all the while, without meaning to, trashing cherished beliefs, knocking down religious, philosophical, stereotypical and moral fences with a steady barage of belief killing facts.
The Political Economy - A Case Study
Theories of political economy, however cherished, are no different. Capitalism, while the best system contrived to date, fluxes all too often from expansive heights to depressive depths, which economists are unable to either predict or anticipate. At one extreme inflated wealth is produced; at the other, it vanishes leaving only very real creditors stiffed by hords of debtors left jobless and homeless.
Capitalism also has other major deficiencies, for example a tendency to concentrate economic power, turn it into political influence and thereby endanger the equality of individuals before the law and the foundation of democratic government itself. Furrther, the ability of democratic governments to equip the capitalist engine with the appropriate governors is far from proven and lamentably limited. Money, credit and debt are the variables in the equation we have yet to formulate and prove that would give us the levers with which to macro-manage an exuberent capitalism rooted in a democratic society.
Instead of setting out to learn how to organize economic activity into an effective controlled producer of income and wealth that provides for all while rewarding creativity, productivity and leadership, we divide into rigid schools of economic theology and preach at the infidels of the other camp. Neither side has a monopoly on truth -- or stupidity.
We have had only one president, elected in the midst of our worst economic collapse, The Great Depression, who rejected the old remedy of inaction and boldly experimented. That Franklin Roosevelt was often wrong and only partially successful when right, is why the recent Great Recession did not cause more misery than was suffered in the 1930s.
Students of the Great Depression such as Ben Bernanke had learned from the frequent failures and slender successes of the remedies of Roosevelt's day. They had a better grasp of what to do and how to do it. They could not speed up today's recovery from an old fashioned financial panic, but they did halt the slide. Unemployment peaked at half what it was in the mid 1930's, and the belated boost of the stimulus program is fueling a slow recovery that now seems to picking up steam.
We have had other presidents who were not so helpful. Herbert Hoover started many of the prototype programs of the New Deal. That he was too little and too late, was demonstrated by Roosevelt's greatly expanded support for these and his own ideas that usually failed also. Only the spur of war put America back into business. War of course is the worst possible government program, but it does show that government action can fuel a boom.
The least helpful president was that amiable dunce, Ronald Reagan, who professed to admire Roosevelt while finding government not the solution but the problem. Of course government alone is neither. Capitalism is the essential fountain of freedom and prosperity -- if we can get to stop acting like dancing waters. Government, however inept it can be, has to be the regulator that contains the steam in its boiler and so gets useful work out of the engine without gruesome blowups. There basically is nobody else to do the job.
The best theory of how to set the economy on a smooth, sustainable path to growth is still that of John Maynard Keynes, if only we would test it. Counter cyclical activity that reduces government debt in boom times by taxing away the froth and increases it when a downturn begins by pumping deficit money into the economy, is what Keynes and his followers have consistently advocated, but we have never systematically tried.
More precisely we have tried only the pumping part. A few states have a rainy day fund, but it is used mainly to keep government running during down times while satisfying a legal requirement to annually balance the government's budget. Even the biggest states are helpless to shore up their economies when ill winds blow through the nation economic house.
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