Former Federal Reserve Chairman Alan Greenspan on Sunday ruled out the chance of a US default following S&P's decision to downgrade America's credit rating.Gee, hoodathunkitt! The Zimbabwe-Weimar "solution." Of course, the very act of printing money to repay debts is a form of default, so I think that Greenspan's belief that the USA can print worthless paper and get away with it speaks pretty much for itself. [End Update]
"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default" said Greenspan on NBC's Meet the Press
"What I think the S&P thing did was to hit a nerve that there's something basically bad going on, and it's hit the self-esteem of the United States, the psyche" said Greenspan.
One of the reoccurring themes from the Keynesians is that government spending and taxation do not have an opportunity cost. While it is true that Keynesians at times will say not to raise taxes during a recession/depression, nonetheless the Keynesian "Balanced-Budget Multiplier" holds that government spending is preferable to private investment/spending, so the more the government takes in taxes, the better off the economy will be.
(Obviously, this presents us with an interesting question: Why doesn't government confiscate ALL of our earnings and spend them, thus creating endless prosperity? If government spending has a larger "multiplier effect" than private spending, then why hold back?)
So, we now hear from the New York Times about the "truth about taxes." This is one of those editorials that pretty much exposes the mentality of the "elite" of this country, thinking that is utterly condescending and demonstrates absolutely no ability of people at the "Newspaper of Record" to comprehend the current economic crisis.
This is par for the course at the Grey Lady. During the New York City fiscal crisis of 1975, the NYT in both its news and editorial sections utterly failed to comprehend what was happening. (For all of its crusading against "financial fraud" and the like, the NYT had NOTHING to say about the illegal and criminally-fraudulent practices of the city to sell capital bonds in order to pay for previously-issued bonds. Thus, the NYT endorsed criminal fraud when it was being committed by its political friends.)
Investment? Tax away the returns. Declares the NYT:
At the same time, super-low tax rates for investment income should be ended. Capital gains are taxed at a top rate of 15 percent, compared with a top rate for wages and salary of 35 percent. Proponents argue that the lower rate is an incentive to invest, but research shows that it also encourages gaming of the system. Tax breaks that have outlived their purpose must be ended, starting with subsidies for the oil industry, which is making billions in profits.Let's deconstruct that one. Once again, the NYT is claiming that profits are bad for the economy (as opposed to losses in "alternative energy" that must be made up via subsidies.)
Yet, the ONLY way we will have an economic recovery, versus the constant financial bubbles that the Fed has been creating, is for firms to be able to be profitable in at least a semi-free market. In this country, the traditional energy industries of oil, natural gas, and coal can be profitable, yet these are the very targets of the NYT crowd, which is utterly delusional in its belief that we can create energy "alternatives" that will come close to our needs and subsidize our way to prosperity. That is not just wrong; it is sheer delusion.
Let's take on another whopper from the editorial:
To avoid across-the-board cuts, Congress must enact at least another $1.2 trillion in deficit reduction measures over the 10 years. For all of the talk of “big government,” there is no way to cut that much in discretionary programs without crippling basic functions. Lawmakers could eliminate the Federal Bureau of Investigation, Pell Grants, the Centers for Disease Control and Prevention, the National Institutes of Health and Head Start and still not cut $110 billion annually.Now, no one has called for elimination of those agencies, although it might not be bad to take a hard look at them. Perhaps we might start with the TSA, an agency that was enthusiastically endorsed by the NYT, and has proven not only to be incompetent, but also abuse to travelers. (Notice that the NYT never does deal with that abuse, as the people there -- like most Progressives, including Krugman -- believe that just the very creation of a government agency is "progress." If there is abuse and fraud within the favored organization, then the "solution" is "more training."
Anyway, the editorial itself provides a window into the thinking of modern Progressives, who believe that any expansion of the state into our lives is a good thing. The massive tax increases that the NYT demands, in the view of Progressives, would have ONLY positive effects. But, then, these are people who actually believe that we can destroy our existing energy industries, replace them with corn-based ethanol and windmills, and subsidize and tax our way to prosperity.
This isn't economics; it is foolishness.