Dec 182017

One of the criticisms of the currently proposed GOP Tax Cut bill is that it will reduce tax revenue and so increase the national debt. As a friend put it recently, “I’m against this bill because it will place an unfair burden on my grandchildren.”

(Let’s put side the observation that, if anyone was really worried about the national debt they should have said something nine years –and 10 trillion dollars in debt– ago.)

But the fact is that debt arising from tax cuts is very different from debt arising from government spending. And a close observation shows that the proposed tax bill will not increase the burden on future generations.

Tax Cuts and Debt: It’s a Wash

While the actual increase in debt resulting from the tax bill a matter of debate, let’s for the sake of argument use the often-bandied figure of a $1.5 trillion increase in debt. While this certainly seems like a substantial number, keep in mind that the $1.5 trillion will not just disappear – it will remain in the pockets of US taxpayers, who will be paying lower taxes, and will increase their wealth accordingly. So any increase in the national debt will, by definition, be offset by an equal increase in private wealth created by the tax cuts themselves.

To get back to my friend’s argument, the taxpayer will not be burdening his grandchildren, because the $1.5 trillion government debt burden will be offset by $1.5 trillion in increased private savings and wealth. It’s a wash.

But Debt from Government Deficits is Different

So while any deficit from the tax cut will be offset by tax savings to citizens, the deficits arising from excess government spending are very different. The Obama era saw a huge increase in government spending that added an incremental $10 trillion in government debt. That $10 trillion in debt truly is a burden to future generations, as there is no offsetting wealth granted to the taxpayers.

Who is the best fiduciary?

Now to be fair one might argue that deficit spending can provide a benefit – after all, government spending is not necessarily 100% wasteful. That $10 trillion might have gone into infrastructure, or defense, or other needed allocations that could benefit future generations. However it’s also very possible that much of this was wasted, spent on needless regulations, or salary increases for government workers who turn around and plow it back into blowing up the Washington DC housing bubble.

But the $10 trillion is definitely a burden to future taxpayers, and there is no offsetting increase in personal wealth accruing to citizens. So the only benefit is the residual value of that $10 trillion in government spending – if you can figure out where it went.

So perhaps the real question should be: Who is the best fiduciary for that $1.5 trillion? The Federal Government? Or your own bank account? I’ll leave you to decide…

 Posted by at 1:49 pm
Mar 162016

Jeffrey Goldberg was on Charlie Rose talking about his exhaustive interview with Obama for the Atlantic regarding the “Obama Doctrine”, Obama’s foreign policy legacy. Goldberg started by staring that Obama has had a recent “string of successes” and citing the Iran deal, the Paris Climate Change pact, the opening of Cuba and TPP as his notable accomplishments. He seemed unaware that others are citing these same deals as failures.

The discussion was typically Charlie Rose wonkish stuff, going into arcane detail and name-dropping in various corners of the world, mostly the Middle East. Goldberg was deeply convinced that Obama is a very smart guy with a real command of the details.

However, Foreign Policy has two aspects: (1) Expertise and (2) Presence. Expertise is the ability to grasp the facts and implications of a given situation, and to use those facts to come to a logical conclusion of action. The problem with this approach is that people do not always act logically, nor do they respond properly to reasoned arguments.

Presence is the ability of a foreign policy actor, and particularly a powerful one like a US President, to act in such a way that generates a desired result. Depending on the situation, a POTUS could be conciliatory, aggressive, logical, friendly, or unpredictable. In fact, acting in an unpredictable manner (such as Putin does) can be a very effective strategy to achieve one’s goals. The main objective in using Presence is that the other party respects you – he may not like you, or even think you’re stupid, but if he respects or fears your power enough he will defer to your position.

If Obama thinks he’s the master of Expertise, Trump has grabbed the mantle of Presence. Trump doesn’t sweat the details or care to engage in policy discussions, he’s all swagger and gamesmanship. Want a better deal from Iran? Send me in, I’ll take care of it!

So how are they alike? Each is, in his own way, surprisingly immature. Obama desperately wants to be seen as a smart guy. And not just smart, but smarter than everyone else, on whatever side of the table. Goldberg states that Obama thinks he knows better then other world leaders what is good for their own countries. He uses Clinton and Kerry for their “transactional abilities” and not for their expertise. He even famously ticked off Britain by criticizing PM Cameron’s actions on Libya, which is an extraordinary thing for a sitting US President to do.

Obama’s need to appear intelligent is immature, and a sign of weakness. He puts his desire to appear smart before the priorities of his country. Similarly, Trump wants to be the king of Presence. That desire has made him continually overreach himself, overstepping boundaries and alienating large swaths of the population. It may be a good thing to have people fear you, but not if you’re running for President and need their votes.

So would an Obama / Trump team be an ideal combination of Policy and Presence? And how would they do on foreign policy? Probably very badly, they are both just too immature – more interested in making themselves look good than creating an effective policy.

Jun 082014

Here’s an attempt at a non-partisan examination of the US debt problem. Do younger voters really understand just how big a burden is being placed on them by government obligations? I’m not completely happy with the comic – the dialogue and timing are a bit clunky – but it gets the point across.

You are welcome to post this wherever you like, but please add a link back to this site.  You can download the comic in PDF form here.

 Posted by at 6:04 pm
Nov 022012

I’ve been looking at the San Francisco real estate market listings – an activity guaranteed to bring on depression – and came across this: “Fabulous convenient and prime Location (SP) near San Francis Wood (SP). Specious and nature (SP) light.”

First, it’s amazing that a $1MM+ listing could include 4 typos in the first dozen words. But the choice of the word “specious” is a lovely Freudian slip:

Specious: 1. apparently good or right though lacking real merit; superficially pleasing or plausible 2. pleasing to the eye but deceptive. 3. Obsolete.

A glimmer of truthiness in real estate listings?

 Posted by at 10:23 am