USA Politics

As someone who worked at an auto plant that was closed, I can tell you that what Ryan said was a blatent lie. The decision to close that plant was probably made as early as 2007 just as the economic shit was about to hit the fan. Being that he was a senator from Wisconsin he could have done a hell of a lot more to save it than Obama could, yet he didn't lift a finger. On the other hand Obama should've never said it would be there for a hundred years. I worked at a Chrysler plant and the company poured $275 million dollars into it for a new building and much needed upgrades ( some of our mills and lathes dated back to the 1930's) When the new building was completed, Wolfgang Bernard who at the time was the number 2 man at Daimler-Chrysler visited the facility. I actually spoke to him and told him how I had just bought a house. He congratulated me and said that this facility would be there for at least the next 50 years. Two months later we were sold and seven months after that I was out of a job. While I supported the auto buy outs, they were way to late to save mine and the other 1500 some people that worked there.
 
My mistake. Still doesn't change the fact that he had the power,access,and ability as a state congressman to help the workers more than Obama who was just a candidate running for office and yet he did nothing, But now he wnats to put the blame on the plant closing at Obama's feet.
 
There have been a few stories on this, the corrected CNN fact checking basically says the plant announced it would reduce staff and possibly close during Bush, Obama gave his 100 yers speech, the plant stayed open until 2009 and then closed. It looks like Ryan made an attempt to save it, as did the states Senators, but no luck.

I think the point of the whole thing was an Obama promise not kept, which he was stupid to make to begin with
 
The GM/Chrysler bailout worked. It was just that...I feel like Ryan could have represented a lot of what he said better, factually. And I will feel the same when Obama and Biden and co. lie about their end, because I'm sure it'll happen.
 
The problem with bailouts, from an economic standpoint, is that they don't work in the long run. The nature of the free market is that businesses that know what they're doing succeed, and those who don't fail. When you bail out the losers, no matter what your intentions are, what you're really doing is keeping bad businessmen in business. And they won't learn from their mistakes, so they'll fail again.

Anyway, yes, Paul Ryan was at the very least distorting the facts and at the most telling a blatant lie. Yes, Obama said that the plant would last a hundred years, but it closed before his policies were implemented, which was the qualifying portion of that statement. It was that it would last a hundred years if his policies were implemented. Not that I believe it would have, but that's what he said.
 
Bailouts have a history of going both ways, I think. The GM/Chrysler bailout was needed because GM and Chrysler had been very, very poorly run, but are essential industries. What I liked was that the government structured it in such a way that they got out of the ownership gig as soon as possible. As as result, both companies are decently healthy today - and have changed the way they make automobiles. That's a successful bailout, because the government recouped their costs.
 
It may seem like a successful bailout, and it certainly worked to a benefit in the short run, but in the long run, the poorly managed companies are remaining in business. The idea that they are essential industries is the same argument used to bail out banks that are "too big to fail." By keeping these businesses that make poor decisions afloat, they are still able to cause more harm in the future.

Bailouts can go both ways in the short run. They can fail to revive the company or revive it through loans that the government never recovers, or they can be successful at reviving the company without loss to the government. The problem is, the free market works not only because someone with a good idea, hard work, and intellect can be successful and improve the world, but it also works because companies that grow lazy, or make poor/reckless decisions fail. When you prevent the losers from actually failing, you are a) guaranteeing them a chance to cause more harm in the long term and b) keeping the market crowded with failures leaving less room for new companies that are smarter and more ambitious.

Many of the economic tricks that are used by governments today, such as bailouts and quantitative easing, have been shown by economists of the Austrian school such as Ludwig von Mises and Friedrich A. Hayek to be successful in the short run but cause damage to the economy in the long run. Notice, however, that the people in the financial sector support all these tricks. It is not surprising that they, particularly the large financial businesses like Goldman Sachs, are the primary beneficiaries of these activities.
 
Sorry, I checked out when you said Austrian school of economics.

Edit: To be perfectly clear, I am not an economist, unless you count a basic course in university. What I can do, however, is follow what accepted economist theory is. The Austrian School is not accepted economist theory, and, to put it succinctly, I agree with Paul Krugman that the Austrian School exists to prove a pre-established notion (that the "free hand of the market" is the ideal way for economy to work), rather than evaluating the complexities of the economy and using the scientific method to determine what it means.
 
The Austrian school is a valid economic school that is too often ignored in favor of Keynesianism, which history has shown not to work. Take, for example, the United States' crashes of 1920 and 1929. In 1920, the US government cut it's budget, as Austrian economists recommend, and the young Federal Reserve did the opposite of what Keynesian economics recommends. Despite the fact that the crash was as bad as the one that would happen 9 years later, that economic downturn ended in 1921. In 1929, on the other hand, the government increased spending on bailouts and public works projects (not just under Roosevelt, these programs began under Hoover), and the Federal Reserve acted as Keynes recommended. It took World War II to end the resulting depression. By killing millions of people, and employing most of the country either in the army or making weapons. So it was not exactly an optimal situation.

Edit to respond to edit: I'm sorry, but if Paul Krugman is as deep as you've looked in economics, you need to look deeper, whether it be on the Keynesian side or [preferably] on the Austrian side. Krugman is not consistent and not above average as economist. He excels mostly at being very stuck-up. One search for "Paul Krugman refuted" and I found this gem about how Krugman laughed at the idea of even considering a particular aspect of Austrian theory, and a few years later, accepted it.

Historical examples, such as the crashes of 1920 vs. 1929, and every bubble that has occurred since (Austrian economists accurately predicted the housing bubble long before anyone else did, this is because of the Austrian theory of the business cycle, or the "hangover theory"), show that Austrian economics at the very least is worthy of consideration and indicate that it is the economic theory with the most real-world evidence supporting it.

Whether or not a theory is the "accepted theory" should not be your only marker in considering its validity. When Copernicus asserted that the Earth orbited the Sun, this was not the "accepted theory."

In economics, almost everyone has a bias, because they have something to gain from the acceptance of a particular economic theory. Keynesian theory benefits mostly the financial institutions that are paid by the government. It also benefits employees of the Federal Reserve, since it keeps them in business. Austrian theory benefits mostly people who would like to get what they earn and keep what they earn, and people who save money (because the use of QE and other methods of producing inflation harm those who save by devaluing a currency).

Do not accept a theory only because a majority does, accept a theory only after looking at its actual validity and the biases of those promoting it. Keynesianism may be the majority accepted theory, but it is not necessarily correct, and history shows it.

Disclaimer: I am not an economist. However, I have taken interest in economics ever since reading what Austrian economists have to say about the basic fallacies of Keynesian theory, and am learning economics. I know enough to provide a few examples, but if I have made an error, do not necessarily hold this against Austrian theorists, as I do not claim to be one.
 
I don't think history shows Keynesian theory is incorrect. And one thing I do know well is history.
 
Since you know history, you should be aware of the 1920 crash that I described earlier, and should be able to point out how the distinctions between it and the 1929 crash are not strong circumstantial evidence in support of Austrian theory and against Keynesian theory.
 
Alright, so here's the thing about the 1920 recession: most historians and economists don't point to it as being important. As a result, the only way to find out about it without dedicated research is to sift through pro-Austrian writings. Luckily, I have already done this research, so I can tell you what I found.

1. The average unemployment rate in the USA doubled to about 8.5-9%. Accurate numbers were not kept at the time, and there's a school of estimates. Every single Austrian resource I found quoted the absolute worst extreme, rather than an average - this always makes me shake my head, because it is a clear sign of trying to prove a point.

2. The causes of the recession were entirely different. The 1920 recession was a post-war readjustment, similar to what occurred in the USA in 1990-1992 at the end of the Cold War.

3. Harding signed many tariffs into play, and his Commerce Secretary (a gentleman you might have heard of, named Herbert Hoover), co-ordinated state, federal, and local governments which provided direct unemployment reliefs.

What happened in 1929 was that Hoover used his 1920 experience and took it to a new level, a much further level, and crashed the economy. Hoover wasn't Keynesian, either. He isolated the US economy without government spending and jacked up taxes.

Edit: I should note that Krugman's ability to change his positions when he is wrong, even if he ridiculed an idea previously, is a strength - not a weakness. Admitting the Austrians are right on one, several, or even many planks is not the same as agreeing they are correct, either. That is a very...solid point of view. Krugman, however, applies the scientific method, which the Austrians do not.
 
Regarding the bailout, the better longer term solution (IMO) would have been to allow both companies to go into bankruptcy. They got a good infusion of cash from the government that let them get over this downturn. The concern on my part is that they really needed to restructure the companies, renegotiate their labor contracts, etc. They still have massive labor costs compared to other automakers which will cripple them in the next downturn. I think you can look at just about every US airline (Southwest being the big exception) to see how bankruptcy helped them and still allow them to operate in decent shape despite a poor economy and high fuel costs.

You can see American Airlines, despite being in bankruptcy taken advantage of it to consolidate their fleet and buy tons of new 737s and Airbus' to modernize the fleet and reduce their current and future fuel costs (not to mention get gid of those horrible MD-80s).

GM/Chrysler has done a bit of this type of thing with the infusion they got, but could have done much more.
 
I was under the impression that GM had done a lot of consolidation. Chrysler got bought by Fiat, so I just assume they do everything smaller now.
 
LooseCannon said:
Alright, so here's the thing about the 1920 recession: most historians and economists don't point to it as being important. As a result, the only way to find out about it without dedicated research is to sift through pro-Austrian writings. Luckily, I have already done this research, so I can tell you what I found.
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Or through the dozens of anti-Austrian writings that sprung up in opposition. Either one.

1. The average unemployment rate in the USA doubled to about 8.5-9%. Accurate numbers were not kept at the time, and there's a school of estimates. Every single Austrian resource I found quoted the absolute worst extreme, rather than an average - this always makes me shake my head, because it is a clear sign of trying to prove a point.
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I agree that they should not quote only the worst extreme, but this does not refute their arguments.

2. The causes of the recession were entirely different. The 1920 recession was a post-war readjustment, similar to what occurred in the USA in 1990-1992 at the end of the Cold War.
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Readjustment may have had a part to play in the 1920 depression, but inflation was a primary cause. One of the main points made in Austrian theory is the idea of the boom and bust cycle. The government and the central bank inflate the currency, which causes a temporary economic boom, but it ultimately results in a bust due to the fact that the boom was manufactured artificially (i.e., with wealth that did not actually exist, it was produced out of thin air by the central bank, which weakened the purchasing power of the currency). Take a look at this chart which shows the American monetary base from 1918 to 1934. This shows periods of inflation before the two major economic downturns of that time period, the ones in 1920 and 1929. However, the monetary base decreases in the middle of the 1920 depression, but continues to increase throughout the 1929 depression. This seems to suggest a correlation between depression and inflation.

Figure1.png

I should point out right now that the economic base increases going into and through the 1929 depression. Inflation seems a possible or even probable cause for the depression, as part of an unsustainable boom, the likes of wish have contributed to most recessions since, including the 2007 financial crisis, which was, once again, predicted well in advance by Austrian economists.

What happened in 1929 was that Hoover used his 1920 experience and took it to a new level, a much further level, and crashed the economy. Hoover wasn't Keynesian, either. He isolated the US economy without government spending and jacked up taxes.
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Herbert Hoover essentially started what became the New Deal, by spending money on public works projects and to help struggling businesses. He was not the laissez-faire defender that modern spin claims he was. It appears to be in vogue to equate Hoover with capitalism in order to demonize it, but he was not a capitalist, he was an advocate of government spending and economic interventionist. This is clear. Roosevelt expanded upon many of his policies to create the New Deal. And the depression continued until the war.

Edit: I should note that Krugman's ability to change his positions when he is wrong, even if he ridiculed an idea previously, is a strength - not a weakness. Admitting the Austrians are right on one, several, or even many planks is not the same as agreeing they are correct, either. That is a very...solid point of view. Krugman, however, applies the scientific method, which the Austrians do not.
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The problem is that economics is not a natural science. It is a social science, which means that human behavior must be taken into account. Many people neglect the fact that the economy is not something that is controlled, but something that consists of the action of human beings. Therefore, the scientific method is not directly applicable to economics. Theories must be derived from logic and from data. As far as I know, Austrian economics derives economic theories from both logic and data. This is, of course, beside the point. I have read more Paul Krugman than my sins probably deserve, and he doesn't spend a lot of time talking about economics. He spends a lot of time talking about his political opinions, while being rude in a way he believes to be witty. He spends quite a bit of time in his so-called "economics column" talking about things that are very far outside his area of expertise. From what I've seen, he is a pragmatist who rejects morality in favor of what he declares to be "fairness." I have very little respect for him. He seems to be writing not about economic fact, but about his vision of the way the world should be. I would love to comb Krugman's writings for logical fallacies, of which I am sure there are many, but for the fact that his attitude and unwillingness to conduct debate without name-calling and rudeness (the Ludwig von Mises Institute challenged him to a debate a few years ago, he declined). In general, I find Krugman to be unworthy of my time. I would not mind talking about other Keynesian economists (there are many), but not Krugman.

Once again, I am not an economist. I am a student of Austrian economics, but I do not have a very deep knowledge of it yet (however, I support laissez-faire not for economic but for ethical reasons).
 
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