Thursday, August 4, 2011

Marshall Dillon – Doing the Wrong thing for the Right Reason


Some of us older folks grew up watching a television show named Gunsmoke. Marshall Dillon was always the good guy. Inevitably there were always at least two bad guys getting into an argument in Miss Kitty’s bar, the Longhorn Saloon. She and the Marshall seemed to have a thing for each other. Anyway when the dusty bad guys would drink a little too much firewater at the Long Branch Saloon they inevitably got into highly intellectual discussions and heated debates. On many shows the first cowboy accused the second of having an ugly horse. Can you imagine such a provocation! This led to both cowboys going into the street, drawing their six guns, with the result that one of them ended up being dragged away by Chester, Mr. Dillon’s sidekick. This was where we Boomers first learned about doing the wrong thing for the right reason. No good man could let the reputation of his horse be soiled. So the right thing was to protect the reputation of your steed. But please, killing someone to protect your horse seems a little extreme. I don’t know if this kind of thing really happened out West in those days, but if it did, it seems pretty hard to defend on the surface of it.

Don’t get me wrong. I am not against extreme actions and even killing has its place. Getting Hitler and/or Bin Laden are examples of doing the right things for the right reasons. But I am against wrong things even if they are for the right reasons.

So let’s get to it. Many democrats often say they stick up for the poor and the middle class.  That’s almost a way to identify or define democrats. They never let a good party or a drink go by without mentioning all the good things they want to do for the poor. I think it is a good thing that democrats play this role. It is the right thing for the right reason.

Republicans often stick up for entrepreneurs and investors – big or small. They worry about the free enterprise system and they defend the Constitution. You won’t be in a golf foursome of republicans and not hear how they defended the capitalist system. I think this a good thing that republicans play that role.

So let’s begin this little story by admitting that our government representatives have good goals. I doubt that you would ever hear many democrats say that he or she wanted to ruin the capitalist system. And I don’t think republicans want to hurt or punish the poor. Both sides have admirable goals.

While there are often political and economic tradeoffs as the democrats and republicans duke it out for their chosen constituencies year after year, the result of all this politicking is an economy that generally grows and provides jobs and is one in which some groups get more entitlements than others and some people pay higher taxes than the rest. These results kind of ebb and flow: During one time period the pendulum may swing toward more benefits for the poor and middle class and typically that phase will be followed by a time when the opposite occurs.

The trouble comes when we have years like this year in which these politicians simply do the wrong thing even though they are, as usual, doing these things for the right reasons.  Take the republicans first. In trying to protect the economy they want to see major cuts in government spending. They believe that taxes should not be part of the solution for a large debt because they believe future government will figure out ways to spend all that tax revenue and more and soon we will be back with debt growing. I see nothing wrong with that position. But in a time when republicans are a minority of the government they cannot enforce their will. The usual thing when you are a minority is to forge a compromise where you try to get most of what you want. Trying to do more than that can be very harmful. In addition, while the long-run health of the economy requires a significant cut in spending, doing so too much too soon could jeopardize the speed and strength of the current economic recovery. They were doing the wrong thing when they held the debt ceiling hostage.

You Rs are now wanting Marshall Dillon to shoot me down on Main Street. So let me now turn to the D’s. In trying to protect old people, college students, poor people, union people, and people who do not own their own jets, they are doing the right thing. Those people have seen their incomes and wealth fall both in absolute and relative terms. These people are struggling and it is good that the Ds point this out and represent their interests. 

But even some of the wackiest Ds have to appreciate that the poor, the elderly, students, and others regular folks would do a bunch better if the entrepreneurs and investors were a lot more optimistic about the future. Aiming their ammo at higher taxes for the latter does little to help the people they really want to help. And a lack of sincere and specific attention to limiting government spending does not help solve longer-term issues. Sticking their heels into the mud on entitlements and holding tightly to higher taxes on the rich seems the wrong approach. While the Ds hold the majority of the government now, their own tenacious approach just hardens the rigidity of the Rs. The Rs cannot win but they can surely make sure that we all lose.

Why is it so hard for all of these government representatives to see what history shows us? The rich and the poor are not mortal enemies. If anything they are co-conspirators and jointly derive benefits when the right things are done for the right reasons. It is true that in any given time period, they do not share equally in the benefits, but I am guessing that they do better when they work together than when they treat each other like the cowboys did in Dodge City. When the economy is doing well most of this stuff happens:
                
                Employment and incomes rise across all income classes
                
                Poverty in both absolute and relative terms declines
                
               Government spending on entitlements automatically decrease as fewer people are unemployed and people move out of poverty
               
                Government revenues increase as people and companies earn more incomes and pay more taxes

None of these things are happening now and won’t be happening in the near future so long as both parties do the wrong things for the right reasons. A deal has been made and so far the economic consequences suggest that doing the wrong things for the right reasons is not fooling anyone. As we move to the next stages of debt and deficit resolution we can only hope that all sides come to understand that a divide and conquer approach will do nothing but impoverish us all. 

16 comments:

  1. You do better when you teach people how to fish and feed themselves and just help the exceptions. When the economy flourishes on a real sustainable basis then governments revenue will increase even with a less complicated and more fair taxes.
    So we come back to what is good for the US in the short term and long term? A government that stays out of the way of the development of private sector business without ruining the very land we live in. A government that provides the tools and leadership that will underwrite an environment for sustainable economic growth. If this is done then all of the other issues will have a chance for solutions.

    Key words...leadership and critical thinking/action. We elected them but leadership is not there. Maybe 2012. Unfortunately, voters for the most part do not understand the issues let alone the solutions. They are interested in now and after listening to all of the stretching and spinning of the truth, their vision is quite distorted.

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  2. I had intended to remain silent, but you know what they say about good intentions.

    James makes great points! What he fails to realize, or maybe he just didn't say it in terms simple enough for me, is that we have no electable leadership talent. What we have is a bunch of power-hungry, progressive-socialists who just want to be in the ruling class. Ayn Rand described them as "takers," I believe, in "Atlas Shrugged." In ancient Europe they would be called the "aristocrats." To paraphrase a quote from 1849, "Thar's gold in them thar halls of guvmint!"

    We, the "underclass," have been led to believe that we are "entitled" to all of that good stuff that Washington doles out to us in dribs and drabs. Why are we entitled? What did most of us do except be fortunate enough to be born here? Why are we entitled to a college education funded by the taxpayer? Some of could barely make it through high school. Maybe we should have just gone to work. Too many of us failed to take advantage of the opportunities available and just waited for The Eagle to crap on us, again. Why, there's about 51% of us who earn an income but don't have to pay any taxes so why not just let the other 49% who are wealthy ($250K+ annual income as defined by the feds)pay all of the bills?

    I'm particularly fond of a quote attributed to Andrew Fraser Tytler, Scottish-born historian, lawyer, and writer. It says: "A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship. The average age of the world's greatest civilizations from the beginning of history has been about 200 years. During those 200 years, these nations always progressed through the following sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to complacency;From complacency to apathy; From apathy to dependence; From dependence back into bondage." I believe the quote tells the whole story especially the first 4 or 5 full sentences.

    Where are we right now in our constitutional republic-wrapped-around-democratic-principles form of governemnt? As the eternal pessimist, I'd say we're somewhere between apathy-to-dependence and dependence-to-bondage. After all, the major portion of our debt is entitlements, Social Security, Medicare, and Medicaid being the primary ones. Heaven knows, we've allowed "the ruling aristocrats" to create many more to ensure our votes.

    So here we are. "Heck Miss Kitty! Them guvmint men done shot all the horses in town so we kain't work no more, but they's over to th' Long Branch buyin' everbody free beer! 'At ain't too bad, ya thank? I'm votin' fer the guy who shot Trigger! He sed he'd buy 3 or 4 rounds fer each of us."

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  3. James didn't anyone ever tell you "build a fire for a man and he is warm for the night, set a man on fire and he is warm for the rest of his life".

    On a more serious note I would point out to Larry not everyone buys into his claim that "In addition, while the long-run health of the economy requires a significant cut in spending". None of the current plans contain any cuts in spending; instead they simply reduce the amount govt spending will grow. How do you define "significant cut"?

    Currently there is what is called the one penny plan. Simply stated one penny is cut out of every dollar the govt spends, across the board. This one percent cut in spending if done for between five and six years would completely eliminate the debt, not the deficit, the debt.

    By my definition a one percent cut is not a "significant cut", but YMMV.

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  4. Effective leadership is able to clarify and simplify the problems and solutions. It can teach all of us how the game is played and how to win with hard work and consistent practice. Leaders who are professional politicians and who never have had to make a payroll should not be allowed to run for office..? Good leaders enjoin others to take responsibility for themselves in all aspects of their lives including their own health. If suddenly we were taxed on our body mass index how soon would the cost of healthcare plummet? Yet the opposite is the case. We all pay for those who pay no taxes and receive healthcare free from the emergency room. The hard evidence is clear about the future of healthcare and yet Congress and the President dance around the subject and are still kicking the can down the road.

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  5. Mr. Davidson. It boils down to the great philosophical chasm betwixt the Ds and Rs. Ds want bigger govomit and dependency thereon and the Rs want less of both. Ds will dig their heels down on the accelerator driving the economy faster into the ditch and OB won’t give the keys back to W. Fine. They will be self-righteously right and demand more govomit stimmolose, higher taxes, et al until the economy gasps its last breath. And the media will blame it all on the Rs.

    Your comment: “The usual thing when you are a minority is to forge a compromise where you try to get most of what you want. Trying to do more than that can be very harmful. In addition, while the long-run health of the economy requires a significant cut in spending, doing so too much too soon could jeopardize the speed and strength of the current economic recovery. They were doing the wrong thing when they held the debt ceiling hostage.” I whole heartedly disagree.

    Your comment: “A deal has been made and so far the economic consequences suggest that doing the wrong things for the right reasons is not fooling anyone.” I whole heartedly agree.

    The Rs compromised . . . freed the debt ceiling from “hostageness” and look what we’re getting . . . . a 400+ drop in the market because the compromise only disguised future spending increases, punted the can farther down the road, and put an extra layer of lipstick on that pig. Yer right . . . nobody’s fooled. The debate/Congressional relations come post September 30, 2011 will be bloodier than the past 30 days.

    “Both sides have admirable goals.” Sure, but the means by which to attain them matter significantly. Get the Ds and govomit out of the economy.

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  6. Here are some words from a good friend in the medical devices business....The problem can be solved much more easily and without ratifying a balanced budget Constitutional amendment. Three obvious changes:

    1. Simplify the tax code. Way too many loopholes and the complexity alone supports a gigantic and necessary industry of tax lawyers and tax accountants. The money spent on these consultations could be applied to much higher purposes. Warren Buffet recently lamented that his secretary pays more taxes than he does. She’s not rich. He freely admits this is a big problem. Grover Norquist is incorrect that a modest rate increase on the very wealthy would reduce American investment and prosperity. Indeed, he’s a moron. Modifying the inheritance tax is sensible, eliminating it is not.
    2. Stop adding pork to substantive legislation. The healthcare bill had numerous riders for schools and highways. That’s nuts. Healthcare overhaul is not important enough to stand on its own? Others are just like it. Reagan pleaded for the line item veto and we should give it to him, posthumously.
    3. Clean out the junk in the trunk. In today’s paper, the public library is listed as consuming more than 10% of the Monroe County budget. Who uses a public library these days in the age of Google, Amazon and Kindle e-readers? This is not about nostalgia for a proud tradition, it’s about utility and public preference. Public libraries are a microcosm of a gazillion examples of wasted tax money. What exactly does the Department of Commerce actually do that we cannot live without? I agree with the principle of farm subsidies but water intensive rice production in arid states like California? Give me a break. Deranged subsidies and useless bureaus are an embarrassment to capitalism and democracy.

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  7. Thanks to all of you guys for your comments. You are making this a very interesting blog! Since I am out of town I can't respond to all your points ones at a time but I will be watching what else goes on here in the coming days and try to respond as necessary. I think most of us pretty much agree on most items here. We all want a smaller government. I was trying to focus on one idea in this posting -- that each side is partly responsible for giving us a lousy compromise. I do agree with Ragebot's point that there are no real cuts here. And like him I think that real cuts are necessary. I do think the right overplayed their hand with respect to taxes and helped bring us to the brink. And as Rage points out --- it still didn't get them any real cuts. Inasmuch I like to agree with Alfred N that both parties share the guilt and blame for giving us crap. Of course, that was the point of my posting though Al explained it in a different fashion. Anyway, you guys make this fun. I am somewhat optimistic that the market's reaction may educate some of the these fools in government. But you never know. I heard Bernanke was thinking about another round of stimulus. Do they never learn? Keep at it. Larry

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  8. This increase-taxes-the-rich-must-pay-their-share mantra that the left seems to repeat like a warped 33 1/2 LP (who remembers those?)absolutely will not work! It ain't the answer no way, no how! No matter how high you push the rates, about the max revenue that comes in is around 18% of GDP. The system as it is just can't get anymore. The secret is to unleash the economy. Get rid of the bulk of the stupid governmental regulations which are intended only to give jobs to government employees. We have to grow the GDP through the private sector, a job government has never been able to do. As the GDP grows that 18% looks a lot bigger as far as revenue goes.

    I also agree with somebody here that we have to scrap the current tax code. We need a flat tax or a fair tax or something other than what we have. Won't happen in my lifetime because as written it is intended to punish achievement and to be used as a redistribution tool.

    By the way, the big "KERPLUNK" we all heard today was my pension as it smashed into the bottom of the barrel.

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  9. Hi Larry,

    The R's might be the minority partner in government. But they are more united in their purpose, motivated to take action according to their beliefs and most importantly, they have majority control of the House of Representatives. And that is a result of the most recent federal election cycle.

    So while the R's cannot govern from the House, they can (and have) reset the terms of how the D's can govern from the WH and the Senate. They would have been unable to do that if they only had majority control of the Senate (the D's still could leverage the filibuster as the Senate minority).

    I have considerably more respect now for Boehner and Cantor now than I did back in April after they got rolled by the WH over the Continuing Resolution fiasco. I mean that rodeo ended up with only $19B in real savings over the last half of FY2011. The government spends about $10B a day!!! And borrows $4B a day to do it. That is just insane!

    There is much, much more to be done to get the leviathian under control. The debt ceiling deal will only reduce the accumulated deficit by less than 5 or 6 trillion dollars over the next 10 years. So our total debt will still continue to climb. And with another recession knocking at the door, we stand a fair chance of seeing total debt levels well north of 100% of GDP in the near term. If growth continues to stay below 2%, the Obama tax increase will have to pushed back even further to the future because even D's know that raising taxes in a recessive or stalled economy is not a pro-growth policy position.

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  10. Uh, Lar! Would you like to rephrase that last comment?

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  11. I was referring to your Kerplunk point above.I will stick with it even though Newton might not agree.

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  12. Sorry! My mind was in the gutter........again.

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  13. Down 400 points, and HE's got to open his unintelligent mouth! The Dow drops another 200! Geitner and Obama deserve each other!

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  14. Dear Al,

    After a downgrade our President basically said the downgrade was unfair, that we are not going to change our major entitlement programs much or at all, we are going to tax the rich more, and we will spend more. He has now declared himself Lame Duck.

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