Philip Greenspun’s Weblog

Let’s look at what the U.S. government has been proposing to do in response to the collapse of 2008…

• extend unemployment benefits and other payments to people who don’t work
• expand government spending as a percentage of GDP
• increase taxes, starting with folks who have higher incomes
• offer universal government-paid health care
• make it easier for workers to unionize

Will this work?  Let’s consider the Western European countries.  They all have lavish unemployment benefits, high government spending, higher taxes on high earners, taxpayer-funded universal health care, and powerful trade unions.  They long ago achieved everything that our current president and Congress are trying to achieve.  How are the Europeans doing?  The S&P 500 is down 48.76% from a year ago; the FTSE Eurofirst 300 is down 49.11% (source).  Our unemployment rate is 8.1%; France and its overseas departments have an unemployment rate of 8.2% (source).  France is supposedly the healthiest of the European economies.

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I was talking to one of my pilot friends yesterday.  He was the CEO of a public company for 20 years and now serves on the Boards of several big firms.  I asked him whether he thought there was any prospect of an economic recovery.  “I think we’re more likely to see a Politburo down in Washington and all of those guys wearing fur hats.”

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This evening’s New York Times was worrisome.  An inset box showed that the S&P 500 had fallen 4.25 percent for the day, wiping out roughly a year of investment returns.  A few months ago this would have been the top story.  Today, however, it did not even make the front page.  There were no articles talking about the collapse of the stock market unless you clicked into the “business” section.  Investors in the U.S. economy being destroyed isn’t news anymore.

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I thought it would be nice to take a moment to thank God and our government for spending nearly $2 trillion of our tax dollars on TARP, auto industry rescue, and stimulus.  Imagine if our politicians had not acted decisively.  We might have seen the following:

• stock market down 50 percent
• businesses terrified and firing 500,000 workers per month
• insolvent banks
• domestic car makers near bankruptcy and begging for loans

Whew!

[One could, of course, argue that without the expansion of Big Government, the stock market would have fallen 98 percent and one guy in Saudi Arabia plus the Chinese government could have scooped up 100 percent ownership of America’s 5000 publicly traded companies, but that doesn’t seem entirely plausible as most of these companies are still profitable.]

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A friend works at a wind energy company.  I asked him if he was getting his share of the money from our new planned economy.  His response:  “We are stimulated!   There is some good stuff in there for renewable.  We may need to open a DC office just to chase the $$.”

As long as we think that we can grow GDP by having an ever-larger proportion of our best citizens working as full-time lobbyists, it would seem that the stimulus bill is working as advertised.

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Barack Obama proposes to dig the Federal government out of its deficit hole with higher taxes on the 2 percent of Americans with the highest income.  Today’s Wall Street Journal carries an analysis of what would happen if the government could confiscate 100 percent of those folks’ earnings.  The depressing conclusion is that it wouldn’t be enough money.

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I’m enjoying Soon I Will be Invincible as a book on CD right now. The character and voice of Dr. Impossible, a victim of Sociopathic Hypercognitive Disorder, are very entertaining.  The audiobook is marred by a parallel narrative from the perspective of a boring female hero, but you could probably skip over all of the hero sections and still follow the story.

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Just finished read Ahead of the Curve: Two Years at Harvard Business School.  Philip Delves Broughton was a British journalist who dragged his wife and young child away from Paris in hopes of changing his career.  He was successful in spending $175,000 and graduating with the Class of 2006, but the HBS degree does not make him irresistible to consulting firms and investment banks.  Broughton achieves an excellent balance between summarizing the material taught and the social experience.  Highly recommended to anyone considering business school (a potential $174,983 savings by reading the book instead of attending) or anyone wondering why our economy is where it is.

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Worth a trip to the library.. the February 23, 2009 New Yorker magazine.

There is a story by Evan Ratliff entitled “Shoot!” about Jerry Barber, a guy who has developed a variety of recoilless automatic shotguns and rifles (videos).  Because these powerful weapons don’t have much recoil they can be mounted on lightweight ground robots and radio-controlled helicopters.  The U.S. Army doesn’t like them because they aren’t expensive enough and weren’t conceived by them.

“The Background Hum” is about Ian McEwan, author of Enduring Love, among other great novels.  My favorite part is when McEwan’s son is assigned the book for a school paper.  He asks his dad about the meaning of the novel, makes that the subject of his paper, and receives a D for his work.  The teacher says that he didn’t understand the book and that Joe, the main character was “too male” in his thinking.

There is also a story by Italo Calvino, the only one of these that I could find online.

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Prior to the U.S. economy collapsing, there were news reports that women were shunning men without college degrees (example).  They didn’t want to bother marrying a man who might become a financial burden and preferred to raise children by themselves rather than settle for a soon-to-be-unemployed blue collar worker.  I wonder if the Depression will accelerate this trend.  For a single mom, it will be tougher to earn a sufficient wage to pay for child care and living expenses.  The blue collar guys are being destroyed.  Rich guys are becoming comparatively much richer.  A Wall Street executive might only get 80 percent of his former bonus from the TARP funds, but with the rest of the nation destitute, he stands even taller than before.  A university dermatologist earning $4.4M per year looked good before industry failed, but he looks great now.  A guy who can spend a record-setting $41 million on a Matisse while the rest of the world queues up for bread is going to look like a god.

If a woman’s primary concern is the ability of a mate to support her children, wouldn’t she be better off as the junior wife of that dermatologist than as the only wife of a soon-to-be-laid-off autoworker?  Especially since government aid flows only to select industries, the current Depression seems likely to greatly exacerbate income inequality in the U.S., pushing wages of 30-50 percent of guys below what is necessary to support a family.  The remaining men, employed in the favored sectors of government, health care, banking, and government contracting, will consequently become far more sought-after.  Could we soon see de facto if not de jure polygamy?

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