Brad DeLong's Semi-Daily Journal (2004)

Maybe Ben Stien- Bueller. . .Bueller. . .Bueller

I think the adjective in common usage is Randian (i.e. a follower of the cult of Ayn Rand, one of whose central economic beliefs was that currencies should be based on the gold standard and without central banks???)

The adjective in Robert A. Heinlein's _The Moon Is a Harsh Mistress_ is "Randite."

Grownup headlines from a GOP Grownup???

"Greenspan Backs Tax-Cut Extension
Thursday February 12, 5:58 PM EST
By Tim Ahmann
WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan on Thursday voiced support for extending President Bush's tax cut...."

This is the problem with Greenspan, he keeps giving cover to the tax cuts. Revenue is now less than 16% of GDP. You may understand what AG is saying, but this is how his lack of support for revenue plays in the press.

There's always the backup theory, that they're all grownups, but part of a crime family. or ideologues.

If a major figure in economics can be a Randite, isn't there a criticism of economics there?

dictionary.com says no such words as "transversality"?

Greenspan seems intent on flushing what little remains of his reputation as soon as possible. Like Powell. What is with these people? Whatever the cause, I hope it doesn't drift over the Potomac to where I live.

Brad - I predict a deafening silence in response to your challenge. Sorry.

No fair on Greenspan; IIRC, he broke with the Randroids at about the same time as Murray Rothbard and has drifted further away since. I certainly don't think you can call him a "disciple", because that implies someone like Leonard Peikoff, and I don't think he's even a believer.

It is possible to be a believer in Randism without being a loony (although not to eb a disciple, apparently). Christian Sciabarra has a revised, neo-Randian position that is actually one of the more convincing forms of libertarianism out there.

Bulent,

"Transversitude"?

-dlj.

"The adjective in Robert A. Heinlein's _The Moon Is a Harsh Mistress_ is "Randite."

Although Loonie works just as well. In both contexts.

A "Randian" is a "Randite" after a couple of drinks. You should leave the bar before that happens.

bulent:
"transversality"
this is kind of an impractical theoretical subject, so I a little about it, sort of. Check out:

http://www.worldbank.org/wbi/macroeconomics/management/contents_fiscal.htm

http://econweb.tamu.edu/auernheimer/HAND_12.simple.but.complete.III.pdf

Re Greenspan -the early articles I remember reading by him were all gold standard tracts, and now he head the Fed, so go figure. Maybe he's changed his mind, or maybe that ox is too close to home to gore now (or something).

Jim

I don't think that it is possible to be both an adult and a Randite. Chronologically, of course, it is possible for someone to be an adult while holding these views, but it is not possible for the sense of "adult" which Brad DeLong seems to intend.

Greenspan is simply a canny hypocrite, who prefers the exercise of power to a principled stand on behalf of his beliefs. So he will do what is necessary to keep power -- at the present moment, this means that he will support closing the budget deficit, since he couldn't survive a crash. But as soon as necessity permits, he will go back to promulgating the same policies that he so disastrously encouraged in the early part of the Bush administration.

Call on him for his self-interest, but don't call him an adult.

I watched the question & answer part of AG testimony.

It was actually a very even handed, fair discussion on both sides of the isle.

One, Greenspan really shot down the Reb attempts to use the household survey data to argue that Bush record better.

Two, he agreed that tax cuts maybe included in the --forgot the buzz word-- proposal that laws to increase spending must include where an offsetting spending cut will be made.

He stuck with cutting spending thesis, but was
clear that reducing the deficit was much more important than cutting spending.

Talked about how solving the SS problem was not all that hard if we did something now.

Peikoff "excommunicated" Greenspan for various heresies. Or maybe the better term is "denounced". Nonetheless, we should all recall that he was a Keynesian before he fell under Rand's sway.

I agree that Greenspans testimony has been distorted by the news. Driving to work today, I heard it summarized as "keep the tax cuts, cut SS and Medi-Care." Which would be outrageous, if that is what he actually said. Of course, as Prof D points out, there are meanings within meanings within meansings here. So maybe I missed the subtext, which in the wonk world might be more important than the text.

Re Brian's comment: I had no idea Greenspan had fixed ideas before he was a Rand disciple. From what I read, he got Randian very soon after he received is bachelors degree. Do you know of any early keynian articles by him?

If Greenspan supports making permanent the
awful tax cuts for his class, he has no
credibility. Exactly what cuts in spending
would he support; he of the 1983 SS "bail-out"?

Any significant cuts in Federal spending would have to tackle Defense, Medicare, and Social Security. There are no other large pots of money to cut.

It is important to ask how much revenue loss is due to "economic factors". The economy has expanded significantly since 2000, but revenues have dropped significantly. The argument has been that revenues will increase when the economy recovers. Is there a technical change causing permanent loss of revenue? If so, that needs to be addressed.

The SF Chronicle story on Greenspan's comments came down about the same as the radio broadcast referred to by jml, above. To my untutored mind, that means that he advocates permanent use of revenues from the Social Security payroll tax to finance a cut in the government's general revenue tax. I'd like to know if more educated individuals, who pay more attention to Mr Greenspan's testimony, think that this is an accurate summary of his remarks. If so, isn't that rather shocking, given that (1) the SS tax is intended for SS expenditures, (2) the SS tax is quite regressive compared to, say, income and capital gains taxes, and (3) there was no cut in SS taxes enacted as part of the Bush tax cut, therefore it doesn't make sense to finance the cut of general revenue taxes with a cut in Social Security payouts? I'd really like to know if that is indeed what he meant and also if it is as shocking a proposal as I think it is.

When Greenspan said, "Much of what we took for granted in our free market system and assumed to be human nature was not nature at all, but culture" in that famous speech he made it clear he had abandoned Randism. Give the man full credit for being willing to learn from experience, at least.

And, yes, he needs backup. What is *wrong* with our neo-conservatives? Has neo-conservatism become its own shadow, taken to the embrace and pursuit of power for its own sake?

PT:
I am always of two or three minds regarding Greenspan testimony. Let me count my minds here...
1. I do think the media have distorted his testimony regarding SS and Medicare. The kind of adjustments he was referring to were respectable policy options, even if you don't agree with him on the specifics. But they are reasonable starting points for adjustments. I don't have a problem with gradual increases in the age of retirement. He did emphasize the importance of keeping basic commitments to future retirees. (non-outage)
2. What the heck is he doing giving his opinion on fiscal policy and social welfare policy? That is not his job, so what business does he have giving his opinions on it (identified as such or otherwise). Now, if he could give a clear explanation of how that affects his job at the Fed, that would be OK, but when does he ever give a really clear explanation of anything? There are other people whose expertise on SS and Medicare are just as valuable as his. Do they get spout in front of Congress on monetary policy (outrage)
3. The Congressmen and press should realize point number two and give more weight to his testimony on monetary policy (naive non-outrage)
I am not a Greenspan fan, especially since a few years back he confused moving to a higher productivity path with the the chances that there could be a serious the stock market bubble. And after his confusing mix-and-match positions on the tax cut, given without much useful rationale.
But I am here more to learn some macro/finance stuff and preach anything, so I don't know if I could give a very clear explanation of my views. But that is my opinion.
But I did notice that the Bush adminisration did fess up that there actually would be a transition cost to their welfare reform schemes, to the tune of up to $4.5 B (incurred on a couple of adjacent generations even if PV of total commitments remains the same)

I suppose the term "objectivist" is considered to acquiesce too much to the premises of Rand's philosophy?

Or are objectivists and Randites two different things?

PT write, "To my untutored mind, that means that he advocates permanent use of revenues from the Social Security payroll tax to finance a cut in the government's general revenue tax."

That's what my untutored mind says also.

PDF with his remarks in full is at:
http://www.senate.gov/~banking/_files/greenspan.pdf

Oops, $4.7 trillion, not billion.

About that link to G's testimony: that's the *prepared* remarks. The more controversial stuff being discussed in this comments thread doesn't really seem to appear there. Of course, since we live in the information age, there's a transcript available at the Senate Banking Committee website...NOT!

jml wrote, "I do think the media have distorted his testimony regarding SS and Medicare. The kind of adjustments he was referring to were respectable policy options, even if you don't agree with him on the specifics."

Where's the evidence that the media have distorted G's testimony?

And while the adjustments are reasonable policy recommendations regarding the solvency of the trust funds in the long run, that doesn't address PT's point, which is that regressive payroll taxes should not be used to balance shortfalls in the general fund budget.

"What the heck is he doing giving his opinion on fiscal policy and social welfare policy? That is not his job, so what business does he have giving his opinions on it (identified as such or otherwise). ... The Congressmen and press should realize point number two and give more weight to his testimony on monetary policy "

As Krugman has pointed out on at least two occasions, the Fed can't have its cake and eat it, too: if the Fed is insulated from political pressure regarding monetary policy (except insofar as the Fed should follow the guidelines set out in its charter), then the Fed should keep quiet on issues like taxation and spending.

spencer wrote, "Two, he agreed that tax cuts maybe included in the --forgot the buzz word-- proposal that laws to increase spending must include where an offsetting spending cut will be made."

Buzz word *should* be the 1990 BEA and its amendments, which lapsed in about 2002.

However...Greenspan agreeing to PAYGO is meaningless unless he's willing to include future tax decreases that are already part of current law---which was the whole Bush scam to begin with (backloading tax cuts for the wealthy). (Of course, that can't be done in the PAYGO framework per se.) From the little I've seen of Greenspan's remarks (and as noted above, I can't find a transcript of the Q&A at the Banking Committee), and from what he's said in the past, I'm sceptical that Greenspan means anything except for *future* tax cut provisions. What that would mean about the sunset provisions, I'm not sure.

I've been looking for a transcript too. I based my remarks on lengthier excerpts in the newspaper stories, usually buried deep in the text. These give a different impression than the headlines I've seen and heard. On the way to work this morning I heard the news announcer say that Greenspan wanted to keep the tax cuts and cut SS and Medcare, period, end of story. That is different from the lengthier excerpts.
I would very much like to see his testimony on PAYGO. If his PAYGO is the US admin's version of PAYGO, then it is a complete fraud and I will post a post of outrage.

I'm trying to take an ultra-nuanced balanced view of Greenspan, which means I am probably sounding like him and it is impossible to figure out exactly what I mean. In a general sort of way, I am outraged by the way he insinuendos and wedge-hedges his own prejudices and opinions on matters that are not his direct concern into his testimony, kind of qualifies everything around so he can't be pinned down, and probably sending little signals of encouragement to legislators to do things he favors in areas that are none of his expertise or business. Did previous chairmen do the same thing? Was Volker the same way? That was before my time.

I dislike the term "objectivist", for much the same reasons I dislike the newspaper title "Pravda".

What a sneer-fest, more than half full of emptiness. OK, it's silly fun whether it's Radite, Randroid, Objectivist, or popsicle-stick-up-the-butt. (E, all of the above)

AG likes spending cuts to reduce the deficit, more than tax increases (me too); but he thinks the deficit is too big (I'm not so sure), so big that he'd rather increase taxes.

But that's fiscal policy -- if all he did was say yes, interest rates are low and can stay low while inflation is low -- great, thanks, bye now.

When are YOU going to grow up and favor some spending cuts? How big does the deficit have to get before you do?

I prefer tax cuts and increasing deficits until Dems start saying the deficit is a big enough problem to justify spending cuts. Oh, that's right, the Dems always, and only, want to punish, er, tax the rich.

[There's a non-causal relationship with Jew-hatred due to many folk believing that Jews are rich, so deserve to be taxed, or punished]

Re: Tom Grey

[There's a non-causal relationship with Jew-hatred due to many folk believing that Jews are rich, so deserve to be taxed, or punished]

This so specious as to be a waste of the bandwidth it took to upload it.

"I prefer tax cuts and increasing deficits until Dems start saying the deficit is a big enough problem to justify spending cuts. "

Uhhh, excuse me. Isn't it the reps who are doing all the spending? They control congress, the presidency and (apparently) the courts.

B

jml: re: transversality

Thank you for the links. I am beginning to suspect that a scientist for whom English was second language invented the word transversality (but then English could be second language to a native speaker of English if he or she was mathematician -- or a poet? -- the word seems to have its roots in differential calculus). Perhaps they could have said "transversal property", but they didn't.

The World Bank link you provide offers a practicial definition of transversality condition in the context of national debt:

"... the transversality condition that the present value of public debt in the indefinite future converges to zero; real debt must grow at a slower rate than the real interest rate..."

--------------

dlj: dictionary.com didn't like "transverstitude" either.

Tom Grey wrote, "I prefer tax cuts and increasing deficits until Dems start saying the deficit is a big enough problem to justify spending cuts. Oh, that's right, the Dems always, and only, want to punish, er, tax the rich."

OK, please specify what you want to cut spending on.

I vote to cut the military budget. What do you suggest?

Please don't talk about cutting SS or the payroll-tax funded part of Medicare. They're running *surpluses* right now, and they're financed by regressive taxes.

And please explain to me how making the rich pay their fair share is punishing them? The rich are always free to emigrate to places like Mogadishu which are free of the evils of government.

The "GROWN-UP" generates more juvenile headlines:

Greenspan says Congress should cut Social Security to keep tax cuts
By MARTIN CRUTSINGER
Associated Press
2/13/2004

WASHINGTON - Federal Reserve Chairman Alan Greenspan said Thursday that Congress should make President Bush's tax cuts permanent and cover the $1 trillion price by trimming future benefits in Social Security and other entitlement programs.

Greenspan was asked how he would come up with the decade-long cost of $1 trillion to pay for extending the 2001 and 2003 individual tax cuts. "I would argue strenuously that it should be taken out on the expenditure side," he answered.

Greenspan, chairman of a commission that recommended solutions to a Social Security funding crisis in 1983, said he has felt for a long time that the promised program benefits greatly outweighed the government's ability to pay for them.

He recommended two items for study in terms of trimming benefits: linking the retirement age to the population's longer life spans and tying annual cost of living benefits in Social Security to a less-generous inflation index than the Consumer Price Index.

SERIOIUSLY- No one who argues that revenues should be lower (extend Bush tax cuts) and spending can be cut is not grown-up or at least tuned to budget reality.

And this seems reasonable ("...linking the retirement age to the population's longer life spans and tying annual cost of living benefits in Social Security to a less-generous inflation index than the Consumer Price Index.")
But as adequate as GM's $13B recent
bond issue to meet their pension funding requirements.

OK, so not too many of us wept when the pilots were forced to roll back their contracted pensions. And some more ( actually quite a few more) will get upset when GM forces a similar roll back on its retirees.
But when the Gov rolls back on the SS pensions, the chorus will be deafening.
Suskind's book gives the impression that AG and O'Neill thought the SS was urgent then --and that was when the gov was recording a surplus.