Paranoia, Democrats, and the Speculators

Now that a Democrat is in the White House, I find it interesting that near-record gasoline prices somehow have nothing to do with Barack Obama. When gas prices four years ago went up under the Bush White House, Democrats quickly claimed that it was Bush's fault.

Not surprisingly, Paul Krugman continues the partisan line that anyone who thinks that Obama's policies have anything to do with the pain at the pump is being paranoid. This is quite rich, especially given that Democrats en masse are claiming that it all is the work of those dastardly speculators.

And even though Krugman the economist should know that blaming speculators is like blaming wind for a tornado, we see that he keeps silent, which makes me wonder if he really believes this nonsense -- or if he is being cynically quiet. Either way, it seems that he is endorsing paranoia, or at least paranoia that is partisan in nature. (Gee, what happens when oil prices fall? Does that mean that speculators are taking a day off?)

Of course, what is a Krugman column that does not make excuses for Obama? During the campaign, Obama said that policies he wanted to put into place would cause energy policies to "skyrocket." Krugman says that the term was "unfortunate," although I doubt he would be so gracious to a Republican or to someone like Ron Paul.

Then there is the matter of Obama's energy secretary, Steven Chu. This is the same Steven Chu who before taking office declared:

“Somehow we have to figure out how to boost the price of gasoline to the levels in Europe”

Chu conveniently claims he does not believe that now, although I doubt he is telling the truth. Like so many other Progressives, Chu believes that Americans should be forced into a lifestyle that people like Chu, Krugman, and Obama have no plans of adopting for themselves.

Then there is the small issue of the dollar and the fact that oil prices worldwide are denominated in that currency. The Ben Bernanke Fed is showering the world with dollars (although Krugman believes not enough dollars), so we should not be surprised that when the Fed deliberately engages in inflationary policies, that energy prices -- and other commodity prices, for that matter -- are going to go up.

Not surprisingly, Krugman calls all of this "paranoid." When people take Obama and his administration at their word that they want to force Americans out of fossil fuels (which Obama has vilified), and then the results create real economic pain, then suddenly we are supposed to believe that whatever Obama and his minions have said is irrelevant.

Once again, we see Paul Krugman abandoning economics for partisan rhetoric. No, we should not be surprised. Remember his claim that because Grover Norquist had once said that we should reduce government to a size where it can be "drowned in a bathtub," therefore all Republicans are wanting to do the same? Yes, the Bush administration was trying to reduce government. And I have a bridge in Brooklyn to sell to Krugman.

The Times and Taxes

[Update]: It seems that Alan Greenspan is channeling the Chartalists! I'll let Greenspan's words speak for themselves:

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.

"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.

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]

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.