
Growth and Government - sama
http://samaltman.posthaven.com/growth-and-government
======
swombat
Many good points, though I'd take exception to this line:

 _incidentally, it should be a big red flag for growth when the brightest
young people start going into finance, since they aren’t actually creating any
more wealth, just redistributing it_

A modern finance system does more than "redistribute wealth" - or rather,
perhaps better phrased, redistributing wealth is fundamentally important to
growth and wealth generation. Wealth isn't generated in a vacuum - it's a
product of capital and work. The capital can be in all sorts of form, and a
modern finance system does its best to keep that capital liquid and keep it in
the place where it gets the best return.

Having a faulty banking system would be a bit like having a faulty memory
allocation system in a computer program. It may not be the most directly
related to performance/growth, but if memory is poorly allocated (e.g. a
method that should use just one memory allocation call has to use 10 billion
calls), performance will suffer.

Of all fields, technology, with its VC, capital-fuelled madness, should have a
pretty clear understanding of the importance of capital allocation.

That said, overall the article is very sensible, or seems so to me. I'd only
add that this is not just a US problem, it's a world problem. The whole world
is connected together now, and any worthwhile solution cannot be purely US-
centric.

We must figure out ways to make growth happen on a global scale, for all
countries taking part in "the game".

~~~
sama
Capital allocation is critical, no question. I think venture capital is a
great thing, but I think it's very different than HFT.

~~~
nawitus
HFT makes markets more liquid and efficient. I think people oppose HFT because
it prevents small investors from competing with algorithms and bigger players.
However, the function of market shouldn't be job creation, it should be used
to determine true market prices.

If all traders are replaced by HFT algorithms, that would be fantastic news.
Opposition to that is ludditism.

~~~
swombat
In theory you're right, but in practice, it breaks the mechanisms which ensure
that investors actually want to participate in the market.

The function of the market is not job creation, however one of its functions
is to incentivise investors to invest rather than store their money under the
mattress. HFT hurts that incentive, that's why it's functionally bad.

The purpose of the market is to get all that capital out of the mattresses and
into the economy, not to be liquid or efficient. Those are secondary
objectives. To get investors' money, it needs first of all to be perceived as
fair.

~~~
nawitus
Investors can invest in funds which utilize HFT.

------
dbul
_A shocking data point about how things are going is that the median real net
worth for households headed by someone under 25 dropped 68% from 1984 to 2009,
to $3,662._

I remember hearing this on NPR a couple days ago. It's actually 35.[1]

To all who write blog posts: please cite your stats.

[1] [http://www.pewsocialtrends.org/2011/11/07/the-rising-age-
gap...](http://www.pewsocialtrends.org/2011/11/07/the-rising-age-gap-in-
economic-well-being/)

~~~
gjm11
Net worth can be negative and quite often is. Quoting percentage changes for
values close to zero isn't very meaningful -- a change from $12k to $5k net
worth probably has about the same impact as a change from $8k to $1k, but one
is a "58% decrease" and one is an "87.5% decrease".

If there's something shocking about this statistic, it's how small the figure
is, not the fact that it's dropped by 68%.

------
argumentum
_Quality of life should improve for everyone; the bigger issue will likely be
that people are very sensitive to relative fairness._

It seems like such a blasphemous thing to say, that there is nothing wrong
with the top 1% of people owning 99% of stuff. But it's true, as long as their
ownership has not come at the expense of others. Why is that so hard for most
people to grasp?

99.999999% of sports TV coverage and endorsement income goes to the top
0.000001% of athletes, but its hard to argue that the world isn't a better
place for it.

~~~
john_b
The thing that causes political instability is not that the 1% derive their
gains at the expense of the 99%, but the _perception_ that they do.

In sports, it's pretty easy to demonstrate which athletes are superior. Nobody
even argues about it except when it's a close call and "home team" loyalty
comes into play.

But for some reason, perhaps a legacy of the Puritan ethos that hard work will
produce deserved prosperity, Americans have always felt like their net worth
is a measure of their worth as individuals. So when the relative purchasing
power of the 99% decreases in relation to that of the 1% (as it has over the
past few decades), people tend to feel that the game is stacked against them
in a very personal way. If, the thinking goes, they have still been working
hard all this time, why are they suddenly valued less? Surely someone must be
conspiring to steal the fruits of their labor and allocate it to the 1%.

It's the kind of thinking that revolutions are born out of, which is a scary
thought.

~~~
abstractbill
_Surely someone must be conspiring to steal the fruits of their labor and
allocate it to the 1%_

That's not necessary at all, and I think everybody knows it. The thing I think
people often perceive as unfair is that there's a level of wealth beyond which
you don't have to _do_ anything at all, and you will continue to gain wealth -
often at a rate that's much faster than people who do work very hard. I can
see that feeling unfair. I tend to think in more pragmatic terms personally -
I don't care too much if it's fair or unfair, I care more about whether it
_works_ (and on that, I'm undecided).

~~~
argumentum
Beyond that level of wealth, you can also lose incredible fortunes very
quickly. That's probably more common than gaining without doing anything at
all, don't you think?

~~~
abstractbill
I honestly don't know. My gut feeling would be no - the rich people I know
personally tend to be very conservative with the bulk of their wealth, and at
least one of them does just pay someone else to grow it for him. I'd love to
see more data though!

~~~
argumentum
Who is that someone? That would be quite valuable information ;)

------
dsugarman
>Robots are going to replace human workers in lots of factories; jobs that do
require human labor are going to continue to move to the lowest-cost place.
But that’s ok, and these sorts of jobs are not what will generate economic
growth for us anyway.

This is all very true, but automation doesn't remove jobs just at factories.
We will continuously figure out how to automate more and more jobs. Capitalizm
should dictate that these jobs would fall into a ranking where the highest
paid, easiest to automate jobs should be replaced first, that might mean
traditionally very "safe" jobs like Accounting (see: InDinero). What happens
to those who are unskilled an can not assume jobs that really promote growth?

I think it is very important that the government can react to these changes
quickly, and while entitlement programs may not be investing in growth, it
prevents a very large class of US citizens from being very very unhappy
resulting in a very harmful situation for all of us. I do think in the end,
you are right, if we can hit growth, everyone will benefit. The consequences
lead to an extremely complicated problem and every idea I have to solve the
problem is pretty porous.

------
kunle
> We should understand that as a consequence of technology and an economy of
> ideas, the gap between the rich and the poor will likely increase from its
> already high-seeming levels.

The gap doesn't just "seem" high, it "is" high. The core reason this is a
problem is that higher gaps in income in a society are correlated (not
necessarily causal, but they frequently appear) with social instability.

As voters, we currently want more America than we've proven willing to pay
for. This means one of 2 things must happen.

1\. We pay more for the America we have

2\. We get less America than we want

"less" in this case could mean really obvious things like less services or
benefits of certain types. It could also mean less of
intangibles/unquantifiables such as social stability, or opportunity etc,
which are hard to value until they're not there (I've spent much of my life in
seriously unstable places in the world, and I can attest that little else
works when you dont have the basics). Most likely, we'll have to pay a little
more, accept a little less, and as OP suggests, buy slightly different things
with what we're paying. If we don't make those decisions, gravity will make
them for us.

~~~
crusso
I would argue that plenty of "less" is "more". \- less inefficiency \- less
duplicate programs \- less intrusion upon personal liberties (drug war, EPA)
\- less government power ~= more personal sovereignty.

~~~
kunle
Your argument makes sense insofar as we as a society need to litigate/revisit
what our positions are on these things, but, as is typically the case, the
answers aren't all that clear. All the things you mention are things that
reasonable people can disagree on.

~~~
crusso
My point was that your choices presented an often-heard false dichotomy.
Fundamentally, I think it's a mistake to equate "America" with the "Federal
Government" or even "Government".

~~~
kunle
Ah - I misunderstood your point, but to some extent, you misunderstood mine. I
don't equate "America" with the "Federal Government". I equate the taxes we
pay, with a benefit in public goods that must be administered by someone
(hopefully someone we choose). That might be the federal government, it might
be state and local authorities, some private folks, charities, businesses or
some combination (status quo = some combination). For the sake of this
discussion, I'm indifferent as to who administers it, but we can agree that
public goods cost something - everything from intangibles (social stability)
to really tangible things (like roads).

That being said - yes we could be more efficient. I'm doubtful that $1TN in
deficits annually are attributable to waste though - are we really overpaying
for services to the tune of $1TN? Possible, but doubtful.

~~~
crusso
_I equate the taxes we pay, with a benefit in public goods_

Ah, but there's the sad sad assumption that causes us to put the noose around
our own necks. Often times, the emotions and ignorance of voters are
manipulated so that the money paid isn't going to "the children" or
"healthcare savings", or "defense"... it's going to empower and enrich those
in the government. We're actually paying for our own suffering.

 _I'm indifferent as to who administers it_

I'm not. I'm a firm believer that local tends to be more accountable. As with
software development, you don't spread authority and concerns all over your
object model.

------
bjhoops1
"it should be a big red flag for growth when the brightest young people start
going into finance, since they aren’t actually creating any more wealth, just
redistributing it"

God I could not agree more. I absolutely hate the fact that the most lucrative
jobs in our country go to those who move money around, not those who create
anything of real, tangible value.

------
dakinsloss
The post is overall good but it misses one huge question and seems to
implicitly assume something that is incorrect.

I agree growth is good, but shouldn't we then ask what causes growth or halts
it? The post does not explore this, but Sam seems to assume that growth is
caused by government investment in infrastructure, science and technology.
This is false. What are real concrete examples of this abstract idea 'economic
growth'. Many of the best examples are actually due to individuals
acknowledged in the post such as Peter Thiel and Paul graham. Growth comes
from individuals like these choosing to invest in entrepreneurs (at various
stages) based on their judgment. Those investors who judge right enough
accumulate more capital to reinvest and continue encouraging growth as long as
their judgment about what should grow is good enough.

Sam seems to suggest that growth is achieved through government investment. I
disagree. Every dollar the government spends comes from a Peter, a Paul or an
Elon. Who is going to do a better job investing and causing growth? Elon or a
government bureaucrat. Elon is one of those rare entrepreneurs who has plowed
into areas of deep regulation such as space travel and transportation. Imagine
if the government wasn't financing roads with money taken from those
accumulating capital, then how much easier would it be for Elon to disrupt
transportation and grow that industry through innovation? How many more
entrepreneurs would be willing to work in that industry?

Each of the most broken and stagnant industries are most touched by
government: education, healthcare, defense, finance, transport, and energy.
Growth has happened in software/tech because government is far away meaning it
is easier to work on problems free of intervention and more people are willing
to. Growth has stagnated in these other areas because government has
disincentivized entry (and often teamed with established inneffectivr big cos)
by getting involved, regulating, giving away for free, and generally making it
difficult to impossible for entrepreneurs to enter and thus undesirable.

So what has caused growth? Individual investors and entrepreneurs exercising
good judgment. What has slowed it? Government regulation as government has
grown its tendrils into more and more areas. What should we do to promote
growth? Shrink government leaving investors their money to invest and opening
more industries for potential private investment that won't have to face
burdensome regulation or competition against public entities that don't try to
profit.

~~~
sama
I actually say that government is bad at picking individual companies to
invest in. I do think infrastructure investments by the government are
important; go try to do business in a country where the roads are terrible and
the trains don't run on time. If we had an efficient system for the private
markets to do this, it might be better, but we don't right now.

~~~
dakinsloss
Thanks Sam for the clarification. I think the likelihood of one developing is
much greater with less government involvement (because now there is less
incentive to start a competing infrastructure business since your competitor
can lose money and not die). If government were not providing roads, we would
have tolls (likely in aggregate costing us less than what we spend through
bureaucracy) and a lot more people thinking creatively how to build
infrastructure. It's such a 'schlep' problem (thanks pg) only bc you have to
beat a competitor that can't die and can arbitrarily decree that you are not
allowed to do certain things.

------
johnrob
Scary thought: the U.S. is actually going to have to compete going forward.
We've leveraged our natural resources for a long time, but we just can't get
much more growth out of them.

------
maceo
The general points on growth are well-put but the 'anti-science' examples are
very poorly chosen. The anti-science population isn't the group of people who
want to see GMO labels and drone restrictions, it's the group of people who
don't believe in evolution. These groups are distinct, and I think it's very
clear that the former isn't the one pushing budget cuts in alternative energy
and technology. There are plenty of valid reasons to oppose GMOs in food and
the chemical companies who aggressively defend their controversial patents.

"Technology magnifies differences in innate ability."

It also magnifies your inherited financial circumstances. The industry directs
much attention to its gender gap, but there is an equally embarrassing lack of
engineers from lower class & lower middle class backgrounds and this never
gets enough attention.

~~~
sama
Good point, I could have chosen better anti-science examples--just picked two
recent issues that I think are hurting innovation.

I think the tech industry magnifies your inherited financial circumstances
less than most other industries.

------
nhashem
_We have, in startup parlance, a high burn, and most of it can’t be considered
‘investment’ but is instead ‘expense’. Spending money on things like
infrastructure improvement or new technology that are likely to generate more
money in the future helps growth; spending money on the so-called entitlement
programs, and parts of the military, does not. Of course medical care and
defense are important, and we have to have them—this is a tough balancing act.
In some cases, the competitive nature of the private sector may provide a
better path. Sooner or later, we are going to have an ugly conversation about
our national budget—we can delay it for a long time but not forever. The
government, when it needs to spend money at all, should aim to invest._

If you have a high burn, you either have insufficient revenue or excessive
costs. I have gotten _so frustrated_ the past four years at the demagoguery of
the national debt as a result of excessive costs.

These are the data points I want to point to every time someone suggests our
national debt is "unsustainable":

\- In 2000, the federal government collected tax receipts of 20% of GDP[0].
From 2009-2012, these tax receipts were around 15% of GDP. This is due to, as
you'd imagine, the huge private sector deleveraging that happened in 2008 and
the fact that, politically, any suggestion at raising taxes gets you called a
Kenyan Muslim Communist. Yet we didn't seem to have a problem with growth when
taxes collected were much higher than they were now, as a percentage of the
economy.

\- 2/3 of our federal budget is spent on Social Security, Medicare/Medicaid,
and defense. Any issues with Social Security being considered unsustainable is
that only $113,000 of payroll is eligible for taxation. It would seem to me
that if you made all payroll eligible for taxation, you would only be
impacting those well into the upper-middle class, and would ensure solvency
for at least 75 years. Legislation to do so was recently proposed by some
Democrats in the Senate[1].

\- We spend a lot on Medicare because we spend a lot on healthcare. We spend a
lot on healthcare because we are the only first-world country in the world
that doesn't put a ceiling on how much health care providers (hospitals and
drug companies) can charge, even for basic services. Yet those that have good
insurance are completely price-unconscious. We essentially have the worst of
both worlds -- not enough free market forces for health providers to price
competitively, and yet not enough price controls either. If you have a free 30
minutes, I highly recommend anyone read Steven Brill's recent writeup in TIME
magazine[2].

\- _It is a complete fallacy_ that we're living longer, so therefore we have
to jack up the age of eligibility of programs like Social Security and
Medicare. Most gains in expected life expectancy over the past several decades
are due to reducing infant mortality -- in other words, the only change is
that we have less people that died before they could even pay anything into
SS. Furthermore, most life expectancy gains are concentrated on the wealthy --
those that don't even need Medicare. The life expectancy for working-class
Americans is actually _shrinking._ [3]. I'm not really sure why we need to cut
government benefits for janitors because lawyers are living longer. Paul
Krugman is constantly trying to explain this on his blog[4].

\- If you want GDP growth after a recession caused by massive private sector
deleveraging, Keynesian government budgets are exactly what you want. Beyond
stimulating spending when everyone is clinging on to whatever money they have
because they're living paycheck to paycheck, with US treasury interest rates
under 2% for years, this is the perfect time for our government to run
deficits at cheap interest rates.

The OP says "Borrowing money to get ninety growth cents on the dollar does not
count, although that may work for a while." But in current conditions mean
we'd be getting _much more_ than ninety growth cents on each deficit dollar.
Conversely, cutting each deficit dollar results in _much less_ growth than one
dollar. This is known as the "fiscal multiplier," and there is a lot of
research showing that in depressed economic conditions, the multiplier is much
higher than 1.0. The utter economic clusterfuck in Europe is because too many
people in controlling the Euro felt the way the OP does, so you have countries
like Greece and Spain cutting their budgets to eliminate deficits, yet
resulting in such a harsh economic contraction that their budgets end up with
even _bigger deficits._ [5].

\- We obviously have a shitload of waste in the federal government. You can't
have a $3 trillion budget and not have some dumb stuff in there. But for the
purposes of any macro fiscal impact in terms of GDP or unemployment, it's
literally _irrelevant._ After Social Security and Medicare/Medicaid, you're
left with $1.3T in the budget, over half of which is military spending[6].
Yeah, we have too many military bases and we probably have some useless
bureaucrats in the Department of Transportation. But for the most part this
spending is on core government programs that are helpful and that people like,
which is why the only specifics Mitt Romney could give on what programs he
would actually cut was Big Bird. I'm sure you could cut $100 billion with
nobody really caring, and we should obviously strive to have the least
wasteful government possible, but are a few wasteful programs the reason why
democracy is going to unravel?

\- In the early 1990s, it was legitimate to argue the federal deficit was
crowding out private sector growth. Deficit spending required the Federal
Reserve to keep borrowing rates high to fend of inflation, which meant it was
more expensive to borrow money for any sort of investment. As George H. W.
Bush and Bill Clinton passed tax increases in 1990 and 1993 to balance the
budget, the Federal Reserve was able to lower interest rates in lockstep, thus
preventing any fiscal contraction. In other words, counterbalancing public
spending with looser monetary policy can be a good receipt for stimulating
growth[7].

However, the Federal Reserve rates have been at zero for _years_ now, because
the recession of 2008 pales in comparison to 1991. If you make money as cheap
as possible the private sector continues to say "meh, I think I'll just hoard
profits" and you don't have any inflation even with absurdly cheap money, then
there are no more bullets in the monetary policy gun left, but bless Ben
Bernanke for still trying (QE, Operation Twist, etc).

Yeah, yeah, "OMG HYPERINFLATION WEIMAR ZIMBABWE!" The same people have been
yelling this for years. Wake me up when the Bureau of Labor statistics reports
a CPI inflation over 3%[8].

\- 2% growth isn't great, but it's not going to cause democracy to unravel. It
may cause democracy to unravel when 99% of the wealth generated by that modest
growth is concentrated in 1% of the population, however[9].

In conclusion: in principle, there's nothing really too controversial about
what the OP is saying. We should absolutely be talking about the ways to grow
the US economic pie so that our political process doesn't keep grinding to
stalemates over who gets what of the pie we already have.

Our government isn't perfect. It could do a lot to improve a lot of things to
encourage growth, and many of them aren't even fiscal in nature (e.g. patent
reform). But if you're just going to point to the national budget, echo
popular political talk-show points about "$16 TRILLION IN DEBT OUR GRANDKIDS
WILL HAVE TO PAY" and "WE'RE ON THE ROAD TO GREECE" then I'd argue you're
_completely_ missing the forest for the trees.

[0]
[http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...](http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200)

[1] [http://vtdigger.org/2013/03/07/sanders-reid-defazio-
introduc...](http://vtdigger.org/2013/03/07/sanders-reid-defazio-introduce-
legislation-to-strengthen-social-security/)

[2] [http://healthland.time.com/2013/02/20/bitter-pill-why-
medica...](http://healthland.time.com/2013/02/20/bitter-pill-why-medical-
bills-are-killing-us/print/)

[3] [http://www.nytimes.com/2012/09/21/us/life-expectancy-for-
les...](http://www.nytimes.com/2012/09/21/us/life-expectancy-for-less-
educated-whites-in-us-is-shrinking.html)

[4] [http://krugman.blogs.nytimes.com/2013/03/05/the-life-
expecta...](http://krugman.blogs.nytimes.com/2013/03/05/the-life-expectancy-
zombie/)

[5] <http://www.imf.org/external/pubs/ft/wp/2013/wp1301.pdf>

[6]
[http://www.cbo.gov/sites/default/files/cbofiles/attachments/...](http://www.cbo.gov/sites/default/files/cbofiles/attachments/BS_Discretionary_print.pdf)

[7][http://www.washingtonpost.com/blogs/wonkblog/wp/2012/08/06/w...](http://www.washingtonpost.com/blogs/wonkblog/wp/2012/08/06/what-
we-can-learn-from-clintons-1993-tax-hike/)

[8]
[http://data.bls.gov/timeseries/CUSR0000SA0?output_view=pct_1...](http://data.bls.gov/timeseries/CUSR0000SA0?output_view=pct_1mth)

[9] [http://money.cnn.com/2012/12/03/news/economy/record-
corporat...](http://money.cnn.com/2012/12/03/news/economy/record-corporate-
profits/index.html)

~~~
crusso
_demagoguery of the national debt as a result of excessive costs_

If you look at government revenues as a percentage of GDP (your first link)
over the last century, they've actually stayed within a fairly narrow window
between 15%-20%. With the expiration of the "Bush Tax Cuts", they're up to
average levels.

If you look at expenditures, historically they've hovered in the same range.
Recently, they've climbed to over 24% of GDP.

How can you look at historical revenue AND expenditure levels and call the
unsustainability of spending "demagoguery"?

We have a spending problem.

~~~
jbooth
"We have a spending problem" is a dumbed down, politicized way of putting it.

We have an entitlement problem, caused by a population bump, healthcare cost
inflation and increasing lifespans.

~~~
crusso
When the argument is "taxation vs spending" and the spending side is 33% off
historical norms while taxation is within 5% of historical norms... calling
something a "spending problem" would seem to be objective.

Listing _some_ of the details for why that spending problem exists doesn't
make it any less or more politicized. It's just adding details.

~~~
jbooth
It's absolutely politicized. The obligations driving our spending were on the
ledger 15, 30 years ago, everyone knew it. But now we hear about 'overspending
during the obama administration' as if it was his decision to have people get
old and collect their benefits. Or as if he didn't try to attack healthcare
costs first thing out of the gate.

Calling it an entitlement problem highlights the problem. Calling it a
'spending problem' obscures it. Do whatever you want.

~~~
crusso
_Or as if he didn't try to attack healthcare costs first thing out of the
gate._

Because he didn't? Instead of attacking the root causes of health care costs,
he implemented yet another Big Government entitlement program that was in
keeping with his socialist ideology.

There were lots of good ideas on reducing healthcare costs. Obamacare includes
almost none: [http://togetrichisglorious.blogspot.com/2011/04/levitt-on-
he...](http://togetrichisglorious.blogspot.com/2011/04/levitt-on-health-
care.html)

It's truly ironic that there you are saying that we all knew about the
spending obligations 30 years ago regarding SS and Medicare - yet you call yet
another government spending obligation that will certainly spiral our of
control an effort to reduce healthcare costs.

------
jellicle
> We should understand that as a consequence of technology and an economy of
> ideas, the gap between the rich and the poor will likely increase from its
> already high-seeming levels. There is good and bad to this, but we should be
> careful not to legislate against it, which will hurt growth.

Oh, it was going so well, and then, BOOM!, the whole essay explodes into
flames and plummets to the ground in a ball of fire and greasy black smoke.

Hey! Who's going to buy your startup product? Hint: it is NOT people who are
working 25 hours per week at Walmart for $8/hour. Government action to put
more money in those people's pockets and take it away from these people...

[http://online.wsj.com/article/SB1000142412788732466240457833...](http://online.wsj.com/article/SB10001424127887324662404578334330162556670.html)

...is purely beneficial for ANYONE who wants to do ANY sort of business with
or in the United States. You can't charge $19.95/month to the whole population
of North America (or whatever your made-up business plan shows) _if they don't
have $19.95/month to give you_.

~~~
sama
I think you misunderstood my point.

I am a big believe that the middle class, not the super-rich, are the job
creators for this exact reason. And I'm not saying we should take money from
them.

All I'm saying is that everyone can get richer together, but the way that
works in our current system is that there will be a big disparity between the
rich and the middle class.

------
FD3SA
Interestingly enough, it appears that the wheels of capitalism (free markets)
have run out of the lubrication (purchasing power) that allows them to
function.

Wealth inequality is at record highs [1], and is being further fueled as a
result of productivity gains from technology. Thus, corporate profitability is
no longer coupled to wage growth, and "trickle-down" economics no longer
applies.

This is a brave new world indeed, and I'm not sure more startups in the web
sector will help. However, applying the lean productivity philosophy of
startups to government while simultaneously laying out a new plan for
revitalizing the purchasing power of the public, through redistribution
mechanisms such as Negative Income Tax or otherwise, may be steps in the right
direction.

1\. <http://news.ycombinator.com/item?id=5345267>

~~~
argumentum
Negative income tax is a good idea _only if it replaces_ all the other forms
of redistribution. Otherwise you are just adding another middleman bureaucrat
who moves wealth around rather than creates it. It's main benefit is that it
_could_ cut out a lot of the bloat in government, while keeping a floor for
the least fortunate amongst us.

~~~
kaonashi
For a sovereign currency issuer, taxation and spending are not operationally
connected. Taxation serves to regulate inflation and unemployment. Too much
taxation, you get high unemployment and idle output capacity, too little, you
get inflation.

In a situation with a general lack of aggregate demand and high unemployment,
adding a minimum income would work similarly to a tax decrease on the extreme
low end of the income scale.

I'm not sure what the windging about middleman bureaucrats is about. Look at
something like Social Security, it's direct payouts to beneficiaries, so the
decision making is left to the beneficiaries as to what to buy. No central
planning, just let demand and markets do their work.

~~~
argumentum
Even without central planning, social security requires administration,
auditing etc. The Social Security Administration alone has 57,000 employees.

~~~
kaonashi
The point was that they're not planning or interfering with production and
consumption, merely passing along financing.

~~~
argumentum
But they exist, and take a salary and benefits, do they not?

~~~
kaonashi
Yes, there is going to be some overhead in administering most anything, I'm
not sure I see the point you are trying to make.

~~~
argumentum
That's exactly the point. Since there is always going to be overhead to
administer anything, does it not make sense to have _less things_ to be
administered?

~~~
kaonashi
If you're making an efficiency argument, then it really depends on the
details. You could conceivably have 10 programs that are horribly mismanaged,
and 100 that are well-run.

~~~
argumentum
The more programs you have, the more you have to manage the managing of
programs, making it _less likely_ that any one program will be well-managed.

~~~
kaonashi
Sometimes the virtues of consolidating purposes are outdone by the virtues of
redundancy. A single program is a single point of failure.

------
jpadkins
I don't understand why we can't all be happy with euro social-democratic
levels of spending done at the state level, with minimal federal spending for
military, justice dept, and programs that 80+% of the population agree with
(~10% GDP). You don't hear Scandinavians petitioning for a Euro wide
healthcare system (the equivalent scope and scale of Obamacare). This way
progressive/liberal states can still be happy with their programs, while
conservative states can keep their taxes low. This is the philosophy of 50
experiments on what is good government policy.

I just don't understand why Americans feel like we can impose our values on
everyone else. We live in a free country, and people are free to immigrate to
a government that aligns with their values. We don't _need_ to solve this at
the federal level.

------
bjhoops1
"Technology magnifies differences in innate ability"

I hope you are not confusing _innate_ ability with _realized_ ability. I am
sure you are a talented, skilled individual, but if you were born in a
horribly disadvantaged situation I doubt you would have amounted to as much. I
am a fairly successful, and rather bright person myself, but I do delude
myself into thinking that my own success are solely the result of "innate
ability" magnified by technology. A more complete and accurate statement would
have been that "Technology magnifies differences in realized ability."

This type of thinking is dangerous because in a perceived Meritocracy, the
poor deserve to be poor and the rich rich.

~~~
sama
Luck trumps everything else, by a huge margin. Choosing your parents well is
the best decision you can make.

For equal-luck people, I stand by the above point.

------
speeder
The first half of the article is good, the second half totally miss the point.

You CANNOT fix what is happening in the western world now (not only US, but
even Brazil that is not a developed company is facing the same issues) by
fixing the economy.

The economic problems we have, are a symptom of something else, that is the
degradation of our culture.

You cannot have infinite economic growth like the author advocates, when you
population is dwindling, also, the growth that matters is not really GDP, more
money does not always translate to better living conditions and power.

Many people say that Malthus was wrong, because now we have a world full of
fat people and the "green revolution" that saved us from starving, yet, he was
not wrong...

Yes, we have a world full of fat people, we can produce total calories, mostly
in the form of carbs, in amounts that are much more than we need, but several
other nutrients are lacking, and we are running out of the material that
allowed the "green revolution" in first place (for example, natural
fertilisers are not enough, and we are mostly mining it, and it already
peaked, we WILL run out of fertilisers, at least the one that we can mine on
land, and the only option that will remain is figure how to retrieve from
seabed the stuff we threw and discharged there).

More technology and better ran economy is not the solution. Yes, it can be
part of the solution, but it is not what really matters. What really matters,
is the rebuilding of a behaviour that is less greedy and selfish, we need to
recover the urge that people felt to help others, specially their family, the
urge to seek happiness of other people, not your own at the expense of others.

Yes, we are in a zero-sum world, but because we put ourselves there.

The changes that rippled on the world in the last century, happened because we
could change, prosperity allowed them, and not the opposite, it was not our
culture changes that allowed prosperity. The cultures that reach the growth
that the author wants, are the ones that understand that they must work for
future generations, not for themselves.

We need more sex (with less partners), seriously.

~~~
speeder
My post got a couple of upvotes...

Then it went back down to 1 point.

Since you cannot undo upvotes, I guess people are also downvoting me.

Can someone refute my arguments, instead of just downvoting? When you agree,
it is easy to just upvote, you agree, thus there are not much else to discuss.

But I urge people to write when they disagree, how can we discuss things, if
you just do some drive-by downvoting? I made a very big text, I want to know
what you are disagreeing with! I want to see your counter-arguments, so I can
argue back! It is this way that I can learn more maybe, or teach.

~~~
john_b
I didn't downvote, but your premise is incorrect. You can have increasing
economic growth with a dwindling population. Russia and Romania have
experienced this for over a decade. You may discount Russia as a post-Cold War
bounce, but there are other examples of economies with negative or stagnant
population growth that also experience economic growth.

You claim that our economic malaise is primarily due to cultural problems, but
you don't cite any data to support this. I doubt anyone collects statistics on
the percent of people who "help others", but there are statistics that
contradict your assertion that American culture is declining, e.g. the
dramatic decrease in violent crime over the past two decades.

You also ignore the possible causal relationship between a degrading culture
(if it is indeed occurring) and national economic problems. Perhaps people
would be less likely to help others if they feel less financially secure?

Too much sex with too many partners and a declining stock of fertilizer, as
causal factors of economic malaise, is a tenuous connection at best.

If I had to guess, I'd say that most people didn't find enough relevant,
substantial claims in your comment to bother replying to.

~~~
swombat
I downvoted. The explanation above is a pretty good rendering of why (though I
didn't think about it that long).

------
ashwinaj
America needs a societal change. You cannot have a celebrity obsessed, self-
serving, lazy, first-world problems obsessed, narcissistic society and believe
that all the problems can be solved. I'm obviously making a rash
generalization but have a look beyond your zip code. It sounds harsh but it is
what I've seen as an outsider for the past ~8 years.

~~~
RougeFemme
I agree, but the question is how that societal change will come about. Through
individual or group efforts? Via religion, self-study, social engineering. . .

~~~
ashwinaj
That's a $16.7 trillion dollar (and ever growing) question.... I don't know,
it certainly should be a collective effort, but looking at Congress I don't
have much hope.

------
BenoitEssiambre
I don't think the type of growth advocated in the article, relying mostly on
innovation and technology, is the type that the government can influence
effectively. Outside of keeping the population educated and maybe reducing the
sting of patents and regulatory capture, it is mostly up to the private
sector.

------
tunesmith
I think it's an interesting belief - that democracy doesn't scale/work when
there is no growth.

But if you combine it with the belief that we can't have growth forever - see
"Limits To Growth", Donella Meadows, etc - then it leads to the question of:
what kind of government form should we have if both beliefs are true?

------
p3r1
Just a question, how can growth be sustainable and good in a resource-limited
world?

I mean, fore sure that everyone is better where we have a lot of lemons to
give, but the lemon tree is limited to a number of lemons per year, if the
demand increases, how we can producte more lemon if we only have this tree?

~~~
jpadkins
the limiting resource on our information economy is smart people's time. We
don't suffer from a lack of raw materials. The only natural resource I can
think that may be limiting economic growth is energy, and that is largely
going to be solved with smart people's time.

~~~
p3r1
Ok, so with optimizing the process of taking lemons from the tree with
technology we can care less of the tree (resources).

But, at the end, the tree is the same, so we can stay X years more using more
productive ways to consume this resources, but at the end we life in a limited
world.

So isn't logical to thing that a neverending grow is impossible?

I think we have two ways, or stop growing, so we become a world sustainable or
we find somehow to produce infinite resources.

~~~
jpadkins
no, soon we will find ways to travel to the next lemon tree (again limiting
factor is smart people's time). We will experience a renaissance like we did
when the New World was discovered and explored.

------
abstractbill
The GDP growth rate chart is interesting; The overall trend line does point
gradually downwards, but the big spikes in _both_ directions seem to have
flattened out a lot, rather than just the positive ones going away. I wonder
what would cause that.

------
joelrunyon
First blog I've seen on posthaven. Is it literally the exact same as posterous
w/ the monthly fee?

Trying to figure if I should just import it to a WP blog or if posthaven is
worth it (and will still be around down the road)

~~~
sama
Posthaven is outstanding!

~~~
crusso
I really like the blog article. You tried to cover a lot of ground, and I
think you did a good job being objective. The analysis on growth of GDP was
something I haven't seen presented in quite that way.

It got me thinking. Thanks!

------
geoka9
Why is there no date for the post? When I read "last Friday", I immediately
scrolled up to check when it was written, but there's none.

------
johnrob
typo: "It was their number one priority; the put it up on their desks, on
their refrigerator, and on the mirror in their bathroom"

------
CleanedStar
The US has a military base in Djibouti. It has a military base in Cuba - which
the Cuban government has been asking the US to get out of for over half a
century. The US has military bases in Germany. It is now openly bankrolling
anti-government forces in Syria. The US has 10 aircraft carriers in service
and is spending a massive amount of money to build a new class of
supercarriers. No other country has more than 1 aircraft carrier other than
Italy which has 2 - and it is unlikely the US will go to war with Italy any
time soon.

None of this of course is on the chopping block. I've paid into Social
Security my entire life. It's one of the few things my massive federal taxes
are going to give to me in this life. Of course, this one "entitlement" (it's
apparently an entitlement to at some point pull out some of the thousands I
pushed into Social Security) is the only thing really on the chopping block in
any form.

There was an economist who wrote a book about a century and a half ago how the
economic system would eventually lead to slow growth, with ever larger
recessions, depressions and economic crises, with ever higher unemployment
etc. The economist was Karl Marx, and the book he explained this in is
Capital. It seems the higher unemployment goes, the worse the economic crises
get, the less any kind of left prognosis seems to come around, the
establishment view from Paul Krugman to the Cato Institute is full steam
ahead. Thus for any other kind of answer one must look outside the
establishment view.

~~~
kunle
>I've paid into Social Security my entire life. It's one of the few things my
massive federal taxes are going to give to me in this life. Of course, this
one "entitlement" (it's apparently an entitlement to at some point pull out
some of the thousands I pushed into Social Security) is the only thing really
on the chopping block in any form.

The bases around the world were how the US bought global security, upon which
our economic growth for several decades was premised. Without (what looks
like) a sprawling military with bases everywhere, we would have less
safe/reliable sea lanes, which means higher prices of inputs and lower value
for exports, and we would also have much of the advanced world spending ever
more of its money on defense goods (it's called a nuclear umbrella for a
reason).

Social Security is one of the few things your massive federal taxes are going
to give to you in this life THAT ARE OBVIOUS. The other stuff is just as
important, though way less obvious.

~~~
RougeFemme
The bases in Germany were certainly "necessary" after WWII, but 70 years
later, do we still need so many and do they need to have so many personnel?
Especially with all the "force multiplying" technology that's been developed
since WWII.

~~~
kunle
We definitely need to revisit how much of this is "necessary" today. I will
say this though, for the populace in Japan/South Korea/Eastern European
countries, the necessity of the nuclear umbrella is not theoretical vis a vis
China (in Asia Pacific) and Russia (in Eurasia, particularly after the events
in Georgia a few years ago)

