Government shutdowns are not “small government.” Nor are they “fiscal policy.”

Every once and a while a leftist will taunt libertarians by pointing to someplace like Somalia as a “libertarian paradise.”  I do understand that there are many forms of libertarianism, including anarchy, but I think it’s fair to say that most libertarians prefer their governments small, not nonexistent. More like Hong Kong than Somalia.

But I also believe this is partly the fault of libertarians, who approach the issue from the wrong direction. They regard government with an almost visceral hatred, rather than asking what sort of things government can do best.

I believe that the Federal government should not be doing most of the things that it currently does.  I’d prefer a much smaller government.  But I also believe the government shutdown is a sort of “real shock,” which makes the economy less efficient in the short run.  Thus shutting down the National Parks is not small government.  Privatizing the National Parks would be small government. Having the government heavily involved in the paperwork necessary to get home loan mortgages and then suddenly shutting down those functions so that it’s really hard to get mortgages is not a move toward smaller government. Removing the government entirely from the mortgage issuing process would represent smaller government.

In my view the Fed successfully offset the strong move towards fiscal austerity in 2013. That austerity includes the various tax increases at the beginning of the year and the sequester which began in the spring. However, I would not expect them to be able to fully offset a real shock like a government shutdown, although they are clearly trying to do so by delaying the taper. Indeed they’ve cited fiscal uncertainties as one justification for the delay.

Morgan Warstler sent me an interesting forecast of economic growth by the Bank of America:

BofA Merrill Lynch has lowered its Q3 and Q4 U.S. GDP forecasts on the expectation that the government shutdown will extend another week, resulting in decreased government spending and attendant “significant spillovers into the private sector.”

The bank is adopting its 1.7%-annualized tracking estimate of of Q3 GDP growth as its official forecast, which would mark a slowdown from Q2’s 2.5% annualized pace of growth. It also lowered its Q4 growth estimate to 2.0% from 2.5%.

I found it interesting that before the shutdown BofA was forecasting 1.95% growth for 2013 (Q4 over Q4). That’s identical to the growth rate in 2012 (Q4 over Q4).  So monetary offset seemed on course. Their new forecast implies 1.825% RGDP growth for 2013, suggesting monetary offset will fall a bit short.

At the September meeting the Fed forecast 2.0% to 2.3% RGDP growth, and all year I’ve been saying the Fed’s too optimistic.  Indeed I’ve been saying that for 5 years.  And every year I’ve been right and the Fed’s been wrong.  I’m not trying to puff myself up like some sort of Nostradamus; beating the Fed at forecasting is like stealing candy from a baby, all you need to do is look at the financial markets.

Almost all economists now accept Robert Lucas’s claim that for a policy to be effective it must be systematic.  If fiscal policy really were helpful, then changes in fiscal policy would be predictable.  Unfortunately the Fed will tend to offset predictable changes in policy.  It’s the unexpected fiscal shocks that are most likely to have real effects.  This shutdown is double trouble—it’s unexpected like the sequester, and its productivity reducing (unlike the sequester.)

Earlier in the year I forecast Q2 growth would come in lower than Q1 growth, due to the unexpected sequester.  I got that one wrong, although keep in mind that quarterly changes in RGDP involve measurement error—the employment numbers were significantly stronger in Q1 than Q2.

In any case, don’t think of the government shutdown as “small government” and don’t think of it as “fiscal policy.”  It’s more like a tsunami or hurricane—a real shock.  And just as the Japanese tsunami affected output far more strongly than employment, I’d expect the same from the government shutdown.

PS.  It’s hard to assess blame until you see the endgame (what does the GOP “get.”)  But my hunch is that we’ll look back on this as being the GOP’s fault.


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68 Responses to “Government shutdowns are not “small government.” Nor are they “fiscal policy.””

  1. Gravatar of Morgan Warstler Morgan Warstler
    7. October 2013 at 05:19

    This is political genius, it’s serious GOP chess:

    “So what should we do? I think somebody like Steve Scalise, who chairs the Republican Study Committee, needs to propose a short-term debt limit for a few weeks and attach to it the Full Faith and Credit Act that ensures the Treasury Department prioritizes interest payments in the event the debt limit is ever not increased. This would buy us some time to finish the fight to defund Obamacare and set us up well to fight the next long-term debt limit increase to the death by removing some of the President’s scare tactics. How do Republican Leaders not adopt and push such a proposal? How does Obama not accept it without looking completely unreasonable?”

    http://www.redstate.com/2013/10/07/obamacare-or-the-debt-ceiling/

    ——

    Scott, just one more question:

    Given a serious shock like shutdown or default, which monetary policy would most alleviate it?

    A. The status quo Fed
    B. NGDPLT

  2. Gravatar of Wonks Anonymous Wonks Anonymous
    7. October 2013 at 06:30

    Somalia actually improved under anarchy:
    http://austrianeconomists.typepad.com/weblog/2006/02/better_off_stat.html
    Expecting Somalia to transform into Hong Kong would be ridiculous, you have to compare it to how things were when it had a government.

  3. Gravatar of ssumner ssumner
    7. October 2013 at 06:46

    Morgan I’m still skeptical of the GOP position. They seem to be in too weak of a position to win this. I hope I’m wrong.

    NGDPLT would do better, but not perfect.

    Wonks, Interesting, but I seem to recall the section that broke off (Somaliland?) does have a government. Is that right? If so, how is Somaliland doing relative to the rest of Somalia? I had thought they were doing better.

  4. Gravatar of Greg Ransom Greg Ransom
    7. October 2013 at 07:06

    Thanks for speaking for all ‘libertarians’ …. “They regard all government with almost visceral hatred.”

    OK, that’s bullshit.

    Why talk bullshit.

    How does it contribute to any conversation.

    Or is this more of your self-announced policy of trolling for hits?

  5. Gravatar of Steve Steve
    7. October 2013 at 08:16

    Some have suggested Boehner wants to hit the debt ceiling before doing a clean CR, so he can combine the two and only have ONE vote across party lines. Just a theory, probably wrong.

    PS
    When gov’t orders shutdown of private concessions in National Forests, that’s Obama Spite, not GOP shutdown.

  6. Gravatar of Luis Pedro Coelho Luis Pedro Coelho
    7. October 2013 at 08:21

    The European version is whenever public servants strike, there are a bunch of liberals saying “see, you small government people, without government, people cannot even get to work [because there is no public transit]”.

  7. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    7. October 2013 at 08:24

    Mark Steyn, does his usual number on politicians;

    http://www.nationalreview.com/node/360429/print

    ‘So the Parks Service dispatched their own vast army to the World War II Memorial to ring it with barricades and yellow “Police Line “” Do Not Cross” tape strung out like the world’s longest “We Support Our Troops” ribbon. For good measure, they issued a warning that anybody crossing the yellow line would be liable to arrest “” or presumably, in extreme circumstances, the same multi-bullet ventilation that that mentally ill woman from Connecticut wound up getting from the coppers.’

  8. Gravatar of Steve Steve
    7. October 2013 at 09:08

    Patrick Sullivan,

    I like this quote better: “a visiting party of veterans pushed through the [Barrycades] and went to honor their fallen comrades, mordantly noting for reporters that, after all, when they’d shown up on the beach at Normandy it too had not been officially open.”

  9. Gravatar of Brian Donohue Brian Donohue
    7. October 2013 at 09:25

    As a taxpayer, the debt ceiling is the ONLY arrow in my quiver right now. Rolling over on this is bad policy.

    But defunding Obamacare is, I think, bad, sore-loserish politics.

    Take aim at EVERYTHING ELSE. Get something meaningful in exchange for the next trillion.

    This is a strategic situation- hand-wringing over a short-term 0.1% GDP effect misses the point.

  10. Gravatar of LK Beland LK Beland
    7. October 2013 at 09:53

    Brian Donohue,

    Debt-to-gdp is on a downward path, at least for the next few years. Low interest on the debt will plausibly cause this decrease to be even greater than projected. Taxes are up, spending (as a % of GDP) is expected to decrease.

    What more do you want, exactly? The US is set to be fiscally responsible for the foreseeable future. Are you proposing to put the credit of the US at risk for some other reason, such as supply-side policies? That doesn’t seem to me like a reasonable thing to do. Especially since the opposition is in a state of power solely thanks to gerrymandering.

  11. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 10:14

    Scott, You are saying the GOP ends could justify the GOP means. I remember you once said that Democracy was the best system. Theses two positions are not compatible.

  12. Gravatar of Brian Donohue Brian Donohue
    7. October 2013 at 10:14

    LK Beland,

    The ‘foreseeable future’? Just because economists can’t predict GDP out two years without a lot of fuzz doesn’t mean that you can’t take increasing debt service costs and the baby boomer demographic entitlement tsunami to the bank.

    Debt service cost has been amazingly steady for two decades now ($300-$450 billion per year), despite a tripling of the debt, because rates have trended down the whole time. Until the past year…

    And the boomer wave is coming. We’ve known about this forever. Check out any CBO forecast that goes out to 2020 or so.

    Not a good combination. It’s just around the corner (5-7 years?), apparently beyond your field of vision, but frighteningly clear to me.

  13. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 10:17

    The people that are for the shut down and default, are blaming the people that are against it for it.

    Blame is easy to assess.

  14. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 10:34

    “libertarian” Hong Kong has universal health care provided by publicly run hospitals. That does not fit my definition of what a Libertarian system looks like.

  15. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    7. October 2013 at 10:35

    There is the little matter of the Constitution;

    ‘All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.’

    It doesn’t say anything about the House having to agree to those proposals from the Senate.

  16. Gravatar of Vivian Darkbloomt Vivian Darkbloomt
    7. October 2013 at 10:35

    “Debt-to-gdp is on a downward path, at least for the next few years….The US is set to be fiscally responsible for the foreseeable future.”

    You may want to reconsider the odd juxtaposition of those two thoughts regarding “the next few years” and “the foreseeable future”.

    If you read the following CBO document in its entirety, I think you would come to a different conclusion.

    http://www.cbo.gov/sites/default/files/cbofiles/attachments/44521-LTBO2013.pdf

    Per that document, the debt-to-GDP ratio is expected to decline modestly over the next five years to 68 percent in 2018. After that, the situation deteriorates rapidly and severely. Is that the “foreseeable future” you refer to? And, keep in mind that these projections are based on *current law*. Unlike recent prior projections, which assumed massive tax increases on the middle class which were certain never to happen, “current law” projections now underestimate the future fiscal problem. Using an alternative and more realistic scenario, the CBO paints a more dire fiscal future. And, importantly, these projections don’t take into account the negative effects of the increasing debt burden on economic growth.

    The future is never completely “foreseeable”. However, to the extent that it can be approximated, the CBO has clearly concluded the current path is “unsustainable”. They may be wrong in the magnitude, either on the upside or the downside, but that is no comfort.

    What do *you* want, exactly, when the path one is on is unsustainable? For the United States to wait until the problem gets urgent enough that the markets force them to act? Is that “fiscally responsible”?

    As regards gerrymandering, both parties have that in their arsenal and both use it. Here, there appears to be a rough balance of abuse. But, as regards ObamaCare, opinion polls show that the majority of the public opposes it. Is that due to gerrymandering?

  17. Gravatar of benjamin cole benjamin cole
    7. October 2013 at 10:47

    The GOP fervor for small government was curiously muted 2000 to 2008…

  18. Gravatar of Saturos Saturos
    7. October 2013 at 11:02

    But you’re not a big fan of Obamacare either, are you Scott, so what do you think of the Republican strategy? (IS THERE a Republican strategy?)

  19. Gravatar of Benny Lava Benny Lava
    7. October 2013 at 11:05

    Correction: Somalia actually improved under a theocracy.

    http://en.m.wikipedia.org/wiki/Al-Shabaab_(militant_group)

    Not surprised to see libertarians shill for an authoritarian regime

  20. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 11:14

    “As regards gerrymandering, both parties have that in their arsenal and both use it. Here, there appears to be a rough balance of abuse. ”

    No, The dems would have to win the total popular vote by 6% in order to gain control of “the People’s House”. That is not a rough balance.

  21. Gravatar of LK Beland LK Beland
    7. October 2013 at 11:16

    The CBO long-term projections depend highly on the path of federal borrowing costs vs path of NGDP. I certainly do not have a good model for that.

    For the next mandate (4 years or so), the US will be one of the more fiscally responsible jurisdictions worldwide. That’s not a bad position to be in.

    From what I understand, Brian Donohue and Vivian Darkbloomt, you’re asking for people to receive less from Medicare and Social Security in 2025 in exchange for a functioning government in 2013. Not a very good thing to do, in my mind.

  22. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 11:32

    Greg Ransom,
    Scott is right. Most libertarians are reflexively anti-government. When they admit that government can work it is always as an exception to their rule.

    Similarly most people who call themselves libertarians are reflexively rabidly anti-government when it comes to rent seeking by the poor. While rent seeking by the elite is ignored or paid lip service. The typical Tea partier is an example.

    Even true Libertarians, who are famously anti- big military spending, don’t go after the MIC with a 10th of the energy they go after rent seeking by the poor.

  23. Gravatar of Brian Donohue Brian Donohue
    7. October 2013 at 11:37

    LK,

    Your obscurantism, and the general inability to forecast GDP with any accuracy whatsoever, will not help you here.

    The specific items I mentioned (debt service costs, entitlement tsunami), can be estimated with much more precision.

    And that’s all you need to know. The choice is between making some grown-up choices now and living in a world of permanent sequester and no money for any nice things ever starting in about 7 years.

    I’m not even a huge fan of the welfare state, but I feel like I’m the only guy thinking hard about how to save it.

  24. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 11:51

    Our budget problems could be solved by cuts to the Military alone.
    Many Libertarians (true libertarians IMO ) have as much distain for our insane level military spending as I do.

    Yet, when it comes to controlling the debt by cuts, their focus is all about not making the poor lazy…while for practical purposes ignoring the elite’s approach of manufacturer fear to keep government money flowing to their useless/ harmful protection rackets.

    Why is it more important to reduce food stamps than to cut military spending ? Why is one on the back burner, while the other gets all the attention?

    Inevitably someone will protest…We Libertarians want both cut…we want it all cut.
    Sure we all want lots of things…but we fight for what we REALLY care about.

  25. Gravatar of jknarr jknarr
    7. October 2013 at 11:53

    The view is different when you’re in the gun turret of the tank:

    Play: Libertarian or Obama!

    “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies.”

    “Over the past 5 years, our federal debt has increased by $3.5 trillion to $8.6 trillion.That is “trillion” with a “T.” That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the President’s budget will increase the debt by almost another $3.5 trillion.”

    “Numbers that large are sometimes hard to understand. Some people may wonder why they matter. Here is why: This year, the Federal Government will spend $220 billion on interest. That is more money to pay interest on our national debt than we’ll spend on Medicaid and the State Children’s Health Insurance Program. That is more money to pay interest on our debt this year than we will spend on education, homeland security, transportation, and veterans benefits combined. It is more money in one year than we are likely to spend to rebuild the devastated gulf coast in a way that honors the best of America.”

    “And the cost of our debt is one of the fastest growing expenses in the Federal budget. This rising debt is a hidden domestic enemy, robbing our cities and States of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on.”

    “Every dollar we pay in interest is a dollar that is not going to investment in America’s priorities.”

    Why can’t we all just get along? 🙁

  26. Gravatar of Steve Steve
    7. October 2013 at 12:12

    jknarr,

    Those all sound like Senator Obama. Are any actually libertarian?

  27. Gravatar of jknarr jknarr
    7. October 2013 at 12:41

    Steve, let’s leave red-blue labels out of it. There’s a just lot of concern over debt levels out there:

    http://www.youtube.com/watch?v=1kuTG19Cu_Q

  28. Gravatar of TallDave TallDave
    7. October 2013 at 12:50

    83% of the government is not shut down. And the government is actually spending more money to close parks than it does keeping them open. The mind boggles.

    The Presidential golf course remains open, of course.

    In the MSM, any major problem involving the GOP can only be the GOP’s fault. That’s why Obama is doing this — he knows the more coverage it gets, the more people will hear from the MSM that it’s all the GOP’s fault. It’s his last-gasp effort to win the House in 2014 so he can pass something even worse than Obamacare before his failed Presidency peters out completely.

  29. Gravatar of Philippe Philippe
    7. October 2013 at 13:06

    Scott,

    Hong Kong seems like a slightly odd example of a more libertarian system, given that the government there owns all of the land and 50% of the population lives in public housing.

  30. Gravatar of ChargerCarl ChargerCarl
    7. October 2013 at 13:49

    TallDave, this is the GOP’s fault. How could anyone deny that?

  31. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 14:06

    ChargerCarl,

    The repubs are like the parent who regrets it when his child “makes” him beat her.

  32. Gravatar of Negation of Ideology Negation of Ideology
    7. October 2013 at 14:14

    “But I also believe this is partly the fault of libertarians, who approach the issue from the wrong direction. They regard government with an almost visceral hatred, rather than asking what sort of things government can do best.”

    Excellent point. Some small government advocates even describe themselves as “anti-government” a term I dislike. I think we should describe ourselves as extremely pro-government. If a friend was deep in debt I would advise them to reduce spending, not because I’m anti-friend, but because I’m pro-friend. It’s the same with government. I want a strong, effective, low cost government with little or preferably no debt.

    The way to get there, in my opinion, is for the government to do less things, and do core functions as efficiently as possible.

  33. Gravatar of Negation of Ideology Negation of Ideology
    7. October 2013 at 14:21

    Bill and Charger –

    The Republicans are the good guys in these budget battles. They extracted huge spending cuts during each showdown, and passed the sequester, which was a resounding success – saving money without any damage to the economy, because of the monetary offset.

    However, I don’t agree with bringing Obamacare into this. I prefer using numbers. Pick a dollar figure of spending cuts, and be very flexible on what programs are actually cut. Extract some more budget cuts every year when the budget comes up.

  34. Gravatar of jknarr jknarr
    7. October 2013 at 14:27

    Trust is the issue, not love/like/dislike/hate.

    Libertarian philosophy is rooted in mistrust in government power. It fits nicely alongside the founders well-earned dislike of centralized power – so much distrust that they split powers up so that the government could not do biiiig thiiiings. i.e. this is a feature, not a bug.

    Others trust a centralized government with wide ranging powers that stretch deep into personal lives. Hope over experience, I guess.

  35. Gravatar of Larry Larry
    7. October 2013 at 14:50

    I read (FWIW) that of the 17 government shutdowns since the 1970s, exactly 1 involved shutting national monuments. Guess which one?

    Many government websites have also been offlined. Guess which one stayed open (until they shut it to “fix” it): ACA. Checked it this AM and found the same “too busy” screen as last week. Given that “success” I would have thought it politically prudent to leave it down until the shutdown ended. Less embarrassing.

  36. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 14:57

    Negation of Ideology,
    says…”The Republicans are the good guys in these budget battles.”

    Even if one agrees with you on the ends…(I don’t. Being fiscally responsible and having a large welfare state are not mutually exclusive. ) How does that justify this means ?

    If you say the means are justified then you are legitimizing the use of this nihilistic tactic for the dems too.

    We all know one of the big reasons that Italy tends to underperform compared to the UK, France and Germany is that their political system is chronically unable to reach consensus.

    The Repubs are turning us into Italy. They are not the “good guys”.

  37. Gravatar of ChargerCarl ChargerCarl
    7. October 2013 at 15:18

    Negation, why should the dems be forced to give up unilateral concessions in order to re-open the government/avoid default?

  38. Gravatar of ssumner ssumner
    7. October 2013 at 15:37

    Greg, Given that I’m a libertarian, I must hate myself!

    Bill, You said;

    “Scott, You are saying the GOP ends could justify the GOP means. I remember you once said that Democracy was the best system. Theses two positions are not compatible.”

    This statement is really absurd, for three reasons:

    1. The GOP was elected democratically.
    2. They are working within the law.
    3. I don’t support the GOP tactic.

    So basically you get everything 100% wrong; about me, about the GOP, and about democracy.

    You said

    “libertarian” Hong Kong has universal health care provided by publicly run hospitals. That does not fit my definition of what a Libertarian system looks like.”

    This is even more absurd than your previous comment. No one ever claimed that Hong Kong is a perfect libertarian paradise. The claim was that they had the most free market economy on earth. Do you disagree? BTW, HK is certainly more libertarian on healthcare than America, where the government is much more involved, and spends a higher share of GDP.

    Saturos. Yes, I opposed Obamacare. But I’m equally opposed to the sort of health care regime the GOP likes. And as far as I can see they have no strategy, so that’s what I think of their strategy.

    Bill, You said:

    “Greg Ransom,
    Scott is right.”

    I take back all the bad things I said about you. I should have said you are a genius. And you are compared to Benny Lava.

    Philippe, I’ve been over this many times. Every country in the world has MASSIVE intervention in the economy. Hong Kong rates as the most free market country in every single ranking of economic freedom that I have ever seen. Which one do you think is freer? And then describe all the forms of intervention in that freer country. When I point out that Singapore rates number two, people tell me about all the intervention in Singapore. You can’t win.

  39. Gravatar of Morgan Warstler Morgan Warstler
    7. October 2013 at 15:44

    Bill Ellis,

    In your Guns or Butter lies a horrible conceit….

    Being NOT GUNS and NOT BUTTER means you never get a real trade.

    Liberals, like yourself never say

    “Hey SMB owning upper middle class bosses of Main Street, if you vote you cut the military, we’ll let you have 100% of the saving back to you and you alone!”

    You never even say

    “Hey SMB owning upper middle class bosses of Main Street, if you vote to slam the Wall Street oligarchs, we’ll let you have 100% of the savings back to you and you alone!”

    Is it bc you are pro-military and pro-Wall Street?

    NO.

    You are either anti my tribe, God’s chosen people, the SMB owning upper middle class bosses of Main Street.

    OR

    You are lying about the above, and all efforts of yours to get less guns, are JUST TO get more butter.

    You don’t care AT ALL about less military or less Wall Street.

    Stop scamming, and act like the weaker C power you are in a three man game and offer A the spoils from B, and then reverse your loyalty and play again.

    But IF I gotta choose between GUNS which sends the money back to guys at least who PAID the taxes, that’s better than MORE BUTTER to those who didn’t.

    Stop banging you head against the wall and at least get less military and less wall street.

    Take your half loaf.

  40. Gravatar of Philippe Philippe
    7. October 2013 at 15:53

    Scott,

    I don’t have a problem with your desire for a more libertarian system (given that you seem like a reasonable person!). Personally I’m not sure what the best system might be… However, I don’t think that Hong Kong really qualifies as libertarian in any way given that the government OWNS ALL THE LAND! And 50% – FIFTY PERCENT!! of the population lives in public housing!!

  41. Gravatar of ssumner ssumner
    7. October 2013 at 16:04

    Philippe, One more time—there are no libertarian countries in the entire world. HK comes closest in economic policy.

  42. Gravatar of Philippe Philippe
    7. October 2013 at 16:27

    sorry I got a bit carried away with the caps there.

  43. Gravatar of Philippe Philippe
    7. October 2013 at 16:31

    It’s just that “the government owns all the land” sounds a bit… socialist, really. How would the Tea Party react if you said, “we’re going to cut taxes and regulations, but from now on the government will own the land under your house…?”

  44. Gravatar of Steve Steve
    7. October 2013 at 16:44

    Obama’s Spitefulness has no bounds:
    http://www.argusleader.com/article/20131005/NEWS/310050021/Mount-Rushmore-blockage-stirs-anger-in-South-Dakota

    “state officials didn’t expect Congress’ budget stalemate to shut down a view of Mount Rushmore.”

    I’ve been there. It’s a highway pullout. It’s outside the park. Why not send the National Guard out to shut down the interstate highway system?

  45. Gravatar of Geoff Geoff
    7. October 2013 at 18:16

    “But I also believe this is partly the fault of libertarians, who approach the issue from the wrong direction. They regard government with an almost visceral hatred, rather than asking what sort of things government can do best.”

    That’s actually the correct direction. The wrong direction is asking “How can we initiate violence to benefit some at the expense of others?”, or, using Sumner’s parlance, “What sorts of things can government do best?”

    Rothbard has a good essay on this topic:

    https://mises.org/daily/5342

  46. Gravatar of Philippe Philippe
    7. October 2013 at 18:24

    Geoff,

    did you use road in the recent past?

  47. Gravatar of Philippe Philippe
    7. October 2013 at 18:59

    *s

  48. Gravatar of Geoff Geoff
    7. October 2013 at 19:04

    Phillipe:

    Have victims of kidnapping or theft ever accepted anything of value given by the perpetrators?

    And does doing so justify the initial aggression?

    Or is it the case with you that should anyone accept anything ever from anyone, it is ipso facto proof of mutually consensual interaction?

    Let me guess, you would say to a victim of rape that because she kept her baby, it proves she agreed to the rape. After all, she is “using” her womb and pregnancy ability, so that must mean the initial act from the rapist was a tit for tat sale like you do when you go to the store, huh?

    Here’s a suggestion: If you can’t stand individuals who dare point out unjust violence in our society, one where competitive road production is all but eliminated by the coercive activity of state monopolists, try to take a step back and realize that attacking your mommy and daddy government is NOT the same thing as attacking your actual mommy and daddy.

  49. Gravatar of Geoff Geoff
    7. October 2013 at 19:20

    Debts are bad only if others run it up.

    http://i.imgur.com/J63KYr4.jpg

  50. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 19:22

    Scott says…

    1. The GOP was elected democratically. Not in dispute. But Democratically elected officials can act in undemocratic ways and often do.

    2. They are working within the law. Once again..not in dispute. But even working within the laws democracy can be and often is subverted. I don’t see how subverting our system into one where a minority gets what it wants through economic blackmail or by actually inflicting harm can be called democratic.

    3. I don’t support the GOP tactic. Then why do you find it hard to assess blame ?

  51. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 19:48

    Geoff,
    You have to believe that the elite can be stopped from turning the government into their tool to believe what you do.

    Civilization IS the application of corrosive force.

    We have never in History had a system where the elite did not rig the system. Never. But we have had lots and lots of systems where the government was small and there was ONLY elite rent seeking. (A king is a pretty small government.)

    If Conservatives want to prove that government without rent seeking is possible…Then take away the rent seeking of the elite first and then get back to us. Taking away the rent seeking of the common man proves nothing. Historically it has been easy and always INCREASES elite’s rent seeking. (Because who is gonna stop them? The invisible hand ? The elite have been ignoring the invisible hand forever. )

    If you can’t take a way the institutionalized privilege of the elite, then it is immoral to ask the common citizen to give up his privileges, the ability to protect them, and to the ability to seek new privileges.

    In the end, rent seeking is a market. It is a market for privilege that effects your chances in all the other markets. You can’t make it go away anymore than you can make the market for drugs go away. If people want something and others have more of it than they need…An exchange WILL happen.

    How can Libertarians deny this ? Their own beliefs tell them it is true.

  52. Gravatar of Philippe Philippe
    7. October 2013 at 19:50

    “unjust violence”

    so let me get this straight. Every day, you move through public land and you benefit from public services, but you don’t want to pay because you think that in some alternate universe those things could potentially be provided by some other entity instead.

    The fact, is, I’m not particularly interested in your imagination, and nor is anyone else, really. Few people care that you think that paying a tax is the same as getting physically raped. That’s your own personal psychological problem, and not an issue for normal people who don’t suffer from your weird mental problems.

  53. Gravatar of Bill Ellis Bill Ellis
    7. October 2013 at 20:14

    Morgan,
    After weeding out your irrelevant accusatory ranting, I think we agree that small business owners should get a better deal.

    I have long advocated that Dems fight to give them significant and special treatment vs large corporations.

    I think the first party that pays more than lip service to them will gain a significant political weapon in their arsenal… And I am dumfounded that it never happens. I keep thinking I must be missing something…

    For almost 30 years my dems drove me nuts because they let the repubs be the party of tax cuts. I realized that there was no reason the dems couldn’t be the party of tax cuts for the middle class just by matching the repubs on it, plus a bit– while still fighting tax cuts for the wealthy. I always felt that I must be missing something back then too. Turns out I was just early to it.

  54. Gravatar of Geoff Geoff
    7. October 2013 at 20:29

    Philippe:

    So let me get this straight. Every day, a victim of aggression moves their body, and benefits from the aggressor’s food and shelter, but the victim doesn’t want to pay because he or she has the audacity to think that in some alternate universe those things could potentially be provided by some other entity instead of the aggressor.

    The fact, is, I’m not particularly interested in your imagination, and nor is anyone else, really. Few people care that you think that paying a tax is the same as paying someone else in a voluntary transaction. That’s your own personal psychological problem, and not an issue for normal people who don’t suffer from your weird mental problems.

  55. Gravatar of Geoff Geoff
    7. October 2013 at 20:42

    Bill Ellis:

    “You have to believe that the elite can be stopped from turning the government into their tool to believe what you do.”

    No, I do not have to believe that at all. I only have to believe that enough people learn of the inherent violence of statism such that no individual or group of individuals can convincingly lay claim to being a territorial monopolist in the area of protection of person and property.

    I don’t have to believe that given the existence of a state, that “the elite” will have a moral conscience not to use state power.

    “Civilization IS the application of corrosive force.”

    No, civilization is the defense against corrosive force. If corrosive force was taken to its logical conclusion, and was universalized, there would be no civilization, only a perpetual war of all against all.

    “We have never in History had a system where the elite did not rig the system. Never.”

    We have never ever ever had a country without slavery…until we did.

    History does not chain us Bill. It doesn’t matter if one million years of human history passes without any empirical example of democracy or theocracy or anarchy or any other social structure in practise. Humans have the ability to learn, adapt, choose and alter the course of history.

    Every social system that was not in existence since the dawn of man were systems that “falsified” all of history prior.

    If we were living in the year 1000 AD, and the world was full of monarchical dictatorships, then according to your logic, anyone who claimed that democracy were possible would allegedly be wrong, since history up until that point did not have worldwide democracy (with the exception of ancient Greece for a few years, which is like anarchist exceptions to the rule, or any other exception).

    “But we have had lots and lots of systems where the government was small and there was ONLY elite rent seeking. (A king is a pretty small government.)”

    Starting with a small government is like starting with a small cancer and hoping it doesn’t metasticize.

    “If Conservatives want to prove that government without rent seeking is possible…Then take away the rent seeking of the elite first and then get back to us.”

    Or take away the agent of rent giving.

    “Taking away the rent seeking of the common man proves nothing.”

    It would prove that rent seeking is not a law of nature.

    “Historically it has been easy and always INCREASES elite’s rent seeking.”

    Because of people who think like you do, who believe humans are chained to their violent statist past forever.

    “(Because who is gonna stop them? The invisible hand ? The elite have been ignoring the invisible hand forever. )”

    Moral convictions stops unjust activity. It is how monarchy was stopped in favor of open government, i.e. democracy.

    The elite only gain power when people think like you do, and GIVE it to them because they have this fantastical belief that “the elite” is a historically inevitable coercive institution.

    “If you can’t take a way the institutionalized privilege of the elite, then it is immoral to ask the common citizen to give up his privileges, the ability to protect them, and to the ability to seek new privileges.”

    You’re only trying to justify in your own mind your desire for violence against innocent people. You believe “If the common man, namely me, doesn’t do it, then “the elite” will do it against me.”

    You’re thinking like a tribalistic warrior, not a rationalist or a philosopher. You aren’t helping humanity. You’re taking personal advantage of others instead of teaching them.

    “In the end, rent seeking is a market. It is a market for privilege that effects your chances in all the other markets. You can’t make it go away anymore than you can make the market for drugs go away. If people want something and others have more of it than they need…An exchange WILL happen.”

    Rent seeking is not a market. Rent seeking is antithetical to markets. Markets are grounded on respect for private property rights. Rent seeking is grounded on a violation of them.

    “How can Libertarians deny this ? Their own beliefs tell them it is true.”

    It’s false. You’re not correct. You want to believe violence in the form of states is inevitable. You lack moral and intellectual courage.

  56. Gravatar of Philippe Philippe
    7. October 2013 at 20:53

    Geoff,

    you seem to be living a strange fantasy life, in which you imagine that you are being repeatedly physically raped by strong muscular aggressors over whom you have no control. You appear to be fantasising about this on a regular basis, and even going so far as to describe these strange and rather sexual imaginings in public forums.

    Given that I don’t suffer from your bizarre mental condition, and as such can give you an more-or-less objective opinion, I would suggest that you seek the help of a certified professional psychologist, who might be able to make sense of these strange psycho-sexual dominant-submissive fantasies you seem to be obsessed with.

    I’m sure my advice will fall on deaf ears – it usually does with people who have mental problems. Nonetheless, I hope you eventually get enough clarity to seek out the professional help you so evidently require.

  57. Gravatar of Andrew Andrew
    8. October 2013 at 04:58

    Philippe

    Your confusion begins and ends with your assumption that lands or services can be “public”.

  58. Gravatar of ssumner ssumner
    8. October 2013 at 05:22

    Philippe, Almost no one in HK lives in America-style “houses.” Do you think the residents of Manhattan care who owns the land under their skyscraper, as long as they own the condo itself? HK is more like Manhattan than Kansas.

    Bill, It’s possible (admittedly unlikely) that the shutdown will lead to a smaller government. In that case the benefit would probably outweigh the cost. And the result would be completely “democratic.”

    I currently oppose the tactic, as I think that outcome is very unlikely. But if it did occur, the GOP would not be “to blame.”

  59. Gravatar of Floccina Floccina
    8. October 2013 at 06:45

    IMHO the debt ceiling battle is just grand standing. The opposition to PPACA should focus on repealing the employer mandate, getting rid the mandate that it cover some inexpensive stuff like birth control and change it to allow higher deductibles. The rest it seems reasonable. Instead they are going after the whole thing using the only slightly related debt ceiling. The Republicans must think one of 2 things:

    1. Once enacted people will love PPACA and so will vote democrat for a long time and so the must stop it now.

    2. The debt will in the next 10 years become a major problem and the voters will remember the fight over the debt ceiling and elect Republicans.

    To really deal with the budget you need to either raise taxes or cut one or more of the big 3, SS, medicare, defense and republicans are afraid to cut SS and medicare and are too committed to high defense spending to cut there.

    Politics is all about fooling the voters.

  60. Gravatar of John Papola John Papola
    8. October 2013 at 06:51

    Questions:

    1. Who’s saying that the so-called “government shutdown” is either “small government” or “fiscal policy”? Would love to see who this post is aimed at addressing, because those position seem bizarre.

    2. What is Bank of America’s track record on growth projections? Over the past, say, 3 years, have they generally nailed it within .1% of accuracy? If not, why should anyone care if they make a .1% adjustment to their forecasts? Are we really to consider that evidence of note that the partial “shutdown” for a week (or two) somehow produces a massive real shock to our productive capacity?

    3. Reduced production of government goods and services may impact measured GDP, but so what? Isn’t most of government production of goods and services not only wasteful but very difficult to actually measure in terms of real economic value? We measure private goods and services by their market price, their voluntary, mutually-gained exchange value. Government production isn’t. It’s measured by the cost of production with no mechanism for benefit or economic value because there’s no voluntary exchange. Perhaps we should separate “G” out and put a big asterisks next to it. Focus on C+I+Nx as the real proximate measure of whether the economy is healthy.

  61. Gravatar of Floccina Floccina
    8. October 2013 at 07:04

    Bill Ellis wrote:
    Why is it more important to reduce food stamps than to cut military spending?

    One plausible reason is that food stamps hurt the truly poor more that defense spending because food stamps reduce support of freer immigration.

    One plausible reason is that they really believe that high defense spending is necessary.

    Another plausible reason to not discus it much is that few knowledgeable people disagree with cutting defense and it is simple to do just cut the appropriations. That makes discussing it very uninteresting.

    Never the less I think defense spending could easily be cut in half without endangering the world.

  62. Gravatar of Government shutdowns aren't "small government", they're full-on financial shocks | ACom archives Government shutdowns aren't "small government", they're full-on financial shocks | ACom archives
    8. October 2013 at 07:30

    […] MoneyIllusion.com – Tagged: Wonks View on Counterparties.com […]

  63. Gravatar of Lorenzo from Oz Lorenzo from Oz
    8. October 2013 at 12:14

    The GOP does seem to want Hilary to be the next Prez.

  64. Gravatar of Edward Edward
    8. October 2013 at 16:54

    “It’s hard to assess blame until you see the endgame (what does the GOP “get.”) But my hunch is that we’ll look back on this as being the GOP’s fault.”

    God I HOPE SO!

    Have you noticed Scott, that the Tea party has morphed into a a large group of “Geoffs aka Major Freedoms?

    God, Im glad Im a pragmatic libertarian. My feeling is this, if were going to have big government, (at least for the time being) lets have big government that at least puts up a credible pretense about caring about the poor and middle class

  65. Gravatar of ssumner ssumner
    8. October 2013 at 18:14

    John.

    1. See my comment section. And see your third question.

    2. I completely agree. That’s not why I cited their forecast. Rather I wanted to show that prior to the shutdown we are almost perfectly on track for monetary offset. If the shutdown has no effect on GDP that’s fine with me.

    3. Your comment in 3 is an example of the ideas I was pushing back against in point one. I gather you don’t agree. I favor smaller government, but the shutdown is a horrible way to do it. If it were helping the economy I’d guess stocks would be rising instead of falling.

    Lorenzo, Yup.

  66. Gravatar of Why Has the GOP Shutdown the Government? Redux | Last Men and OverMen Why Has the GOP Shutdown the Government? Redux | Last Men and OverMen
    18. February 2017 at 09:13

    […] you get everything 100% wrong; about me, about the GOP, and about democracy.     https://www.themoneyillusion.com/?p=24043     Sumner’s wrong of course-the GOP only won the House because of […]

  67. Gravatar of Scott Sumner on the GOP's Cunning Plan | Last Men and OverMen Scott Sumner on the GOP's Cunning Plan | Last Men and OverMen
    17. March 2017 at 05:47

    […]    “I’m sick of you seizing every data point as somehow once and for all ‘disproving Keynesianism’ or proving that austerity works, that it stimulates, a la Rogoff and Alesina.”      “Are you intentionally lying, or just clueless as to what I am arguing?”    https://www.themoneyillusion.com/?p=24017&cpage=1#comment-282797    Actually, the answer is: neither. Sumner is an advocate of fiscal austerity. I don’t come to this conclusion out of ignorance but actually knowledge-of his agenda chiefly.     Let’s take it from a different angle. Here he said something else in the comments section with which I actually agree: that the GOP strategy isn’t going to work.     ” I agree that the debt ceiling brinksmanship is ineffective (unless Obama is stupider than he looks.) As far as the government shutdown, I’m dubious it will work. It seems to me that Obama has the upper hand, and little reason to negotiate. His only chance of passing the legislation he supports is if he takes the House in 2014. That’s really tough to do in the 6th year of a Presidency. His only hope for doing so is if the GOP shuts down the government for a very long period of time.”      So I agree with Sumner here-he’s dead right: GOP brinksmanship isn’t going to work anymore than it did in 1995 or 2011. However, in another comment in answer to Morgan Warstler, he said a mouthful:      “Morgan I’m still skeptical of the GOP position. They seem to be in too weak of a position to win this. I hope I’m wrong.”       So he supports the GOP brinksmanship but fears it won’t work.        “https://www.themoneyillusion.com/?p=24043 […]

  68. Gravatar of The GOP Tax, or Why the Fiscal Multiplier is Far From Zero | Last Men and OverMen The GOP Tax, or Why the Fiscal Multiplier is Far From Zero | Last Men and OverMen
    15. April 2017 at 02:25

    […] admits that the Fed can’t fully offset a government shutdown.      https://www.themoneyillusion.com/?p=24043    For him, a govt shutdown is a kind of real shock. I wonder what a govt shutdown […]

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