Economics

The Battle Has Been Joined

Well, I’ve finally found a (sort of) explanation for Tom Daschle’s rants. Tony Andragna has been defending his nonsensical assertion that the Bush tax cuts have exacerbated the recession over at Quasipundit. He says:

Neither Tommy D’ nor myself argues that the tax cut per se deepened the recession, but the lack of confidence in this administration’s fiscal policy, especially as regards the return to deficit spending, definitely could have had some impact.

Well, I don’t think that’s what Tommy D’ is arguing, though I suppose it’s possible that you’re channeling him. In fact, I haven’t heard Tommy D’ make an argument at all–just issue fatuous nonsense. But if that’s what you’re arguing, then you don’t really have a case, unless you’re saying that in order to instill “confidence,” we have to cater to the economically ignorant.

Deficit spending doesn’t cause recessions. And concern about deficit spending doesn’t cause recessions, unless the public has been propagandized by the likes of Tommy D’ to believe that they do (i.e., “talking down the economy”). Would it sound a little too cynical if I point out that it’s not in the Democrats’ political interest to see an economic recovery prior to November?

This argument is pointed up by what actually happened in the instance that Bill cites – the Depression wasn’t the effect of a single event, but a chain reaction flowing from lack of confidence in the government’s ability to deal with the problem.

No, the Depression was caused by too-tight money after the crash, and then compounded by the Smoot-Hawley tariff bill, which, with its retaliatory companion bills overseas, signicantly reduced trade and made the situation global.

If Hoover had done something – anything – instead of nothing, the the Depression may well have been avoided.

He didn’t do “nothing.” He did things to make it worse. Like encouraging and signing Smoot-Hawley. He even did things that modern-day liberals would have him do, like creating the RFC.

Sure, “deficit spending” is one of the tools that a government ought have the ability to use in fighting downturns – nobody argues to the contrary. Daschle’s complaint over handling of the downturn is that the GOP “made a huge tax cut their number one priority — ahead of everything else — and discarded the framework of fiscal responsibility”(italics mine).

Those two things (tax cuts and fiscal responsibility) are not in any way inconsistent, if you believe that cutting tax rates grows the economy (which leads to tax revenue increases, even as rates are reduced). Apparently, you don’t believe that, despite all the historical evidence for it.

IOW, there is an argument that the GOP made our long-term situation less secure with their use of fiscal policy in trying to fix a short term problem, and this insecurity might have had an adverse impact on the recovery.

I find it amusing that Democrats are now concerned about “fiscal responsibility.” They never used to care, as long as they could get all the revenue they needed for their programs.

More to the point, the projected deficits are less a of function of spending than they are of a failure to collect enough revenue to cover all of the things that the government – yes, even under Mr. Bush’s plan – wants to do (some of us argue that sans the recession Mr. Bush’s numbers still never got there). That might seem an inane distinction, but the point is that spending is the cure to downturns, not tax cuts.

No, the point is that recessions are solved by spending and investment. Tax cuts accomplish both (since the money that the people don’t have to pay in taxes will be either spent or invested). Government spending can accomplish both, but it’s usually much less effective at either than letting individuals make the choices.

Uncategorized

Be Careful What You Wish For

Senator Lieberman is about to start up his Enron investigation. The conventional wisdom in the press is that this will uncover all kinds of skullduggery linking the Bush Administration to the failed company as a result of campaign donations and close ties of the principals to the Administration members, including W.

But the Democrats will have to be very careful when they turn over that particular rock–you never know what will crawl out. According to Accuracy In Media:

…it was the Clinton administration that did favors for Enron, and received large donations in return. Time magazine reported in 1997 that Clinton chief of staff Mac McLarty reached out to Enron Chairman Ken Lay, at President Clinton?s urging, and for nine months closely monitored a $3 billion dollar power-plant project in India. Four days before it was announced that Enron won the contract, it gave over $100,000 to the Democratic Party. Robert Rubin had worked closely with Enron when he was with Goldman Sachs. He recused himself from dealing with Enron matters during his first year in the White House as Clinton?s economic adviser, but not when he became Treasury secretary in 1994. According to the Houston Chronicle, Enron got permission to build a pipeline from Mozambique to South Africa after National Security Adviser Anthony Lake threatened to withhold aid to Mozambique if it didn?t approve the project….

Also, from the Center For Public Integrity:

Kenneth Lay, chairman and chief executive officer of the Enron Corporation, accompanied Secretary of Commerce Ronald Brown on the trade mission to India in January, 1995.

In India, Enron signed a contract for a 2,000 megawatt power plant in Dahbol worth an estimated $400 million. Enron also won a contract to build a $920 million power plant on the West coast of India and a $1.1 billion contract for offshore gas and oil production.

Rodney L. Gray, chairman and chief executive officer of Enron International accompanied Brown on the trade mission to Russia in March and April of 1994.

In Russia, Enron signed a deal to develop a market for Russia gas in Europe.

During the 1991-92 election cycle, Enron gave $28,525 to the Democratic party while Brown served as the chairman of the Democratic National Committee. Enron gave $42,000 to the Democratic party in the 1993-94 cycle.

Sounds like “Enronomics” might turn out to be a double-edged sword…

Uncategorized

US, Banana Republic

Reader Robert Martin has some further thoughts on the airline security fiasco.

They’re all worth a read, but I particularly agree with his final comment.

In all, the visible presence of heavily armed troops in airports is only a public relations gesture that makes no genuine contribution to security. It serves only to fool those who will be fooled by such things. In the meantime, we get to look like a banana republic that is anticipating, undergoing, or recovering from, a coup.

Uncategorized

Afghan (And Space) Tourism

According to the Telegraph, Afghanistan is getting ready for tourists again. It may be that this is the first industry to recover in that beleaguered country, and it will be a significant one, since now many who had previously barely heard of the place will be interested in seeing it.

I find this personally interesting because I think that it says something profound about the nature of the modern economy that could have an impact on our future space activities.

There is a long-standing debate in the space policy community as to whether space tourism (assuming that it occurs at all on a large-scale–that it will occur on a small scale now has an existence proof in the person of Dennis Tito) will be a cause or a consequence of space development.

Most “traditional” space analysts believe that if space tourism occurs, it will happen after technology has sufficiently advanced to make space travel affordable. They make the historical analogy that tourism has never before led the development of a frontier, and it won’t do so for space either.

I (and some others, such as Dr. Patrick Collins, an economist at the Japanese Space Agency and Tom Rogers at the Space Transportation Association) argue that absent a large market like tourism, the costs of space access will never be reduced, because it is not fundamentally a technology problem–it is a problem of lack of economies of scale.

Furthermore, historical analogies on this particular subject have little relevance because the nature of the economy has changed. In the past, tourism was not a major part of the economy. Now, depending on how you do the bookkeeping, it is perhaps the second largest industry in the world, after energy.

In this formulation, developing a robust market for public space travel will create the infrastructure, both for earth-orbit transportation, and on orbit, that will enable many of the other things that space enthusiasts propose (e.g., solar power satellites, space manufacturing, lunar science bases, space settlements, etc.).

One other related item.

NASA Watch provides a link to a story in the Hunstville Times about the closure of the Space Camp in California, due to declining attendance, and increasing debt load of the Space Camp Foundation…

The story describes the bare fact that attendance is down, but doesn’t discuss any possible reasons for it.

Is this a bad sign for space tourism (I don’t think so myself, but I’m interested in other points of view)?

After all, one of the indicators that many use to show support for public space travel is the large existing terrestrial space tourism market, as represented by visits to the National Air and Space Museum, and various space museums and attractions, etc., in Florida.

This article indicates that the Florida space tourism activities are down. How about attendance at NASM? How much of it is due to 911, and how much to declining general interest in space among the public?

I’ve never been a big Space Camp fan myself, and still think that there may be a market for a space tourist-themed resort that is less NASA/science/Shuttle focused.

But for those who believe, as I do, that space tourism is the best hope for a viable and self-sustaining free-enterprise space industry, these represent both encouraging (Afghan) and troubling (Space Camp) trends. Not enough data to make a judgement either way here, but after the ripples in the pond from the 911 boulder die down, it will be worthwhile to take another look at the prospects for the global tourism industry, and reassess the implications for space development.

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