Flying Pigs
My friend and former business manager John Mauldin have become an economist. I hate to see this.
He is a good analyst. He is a good commentator on business trends. His site is a veritable clearing house of insights of famous market analysts. But now he has wandered astray. He has become an economist.
His most recent newsletter begins with these insights:
In this business we spend a lot of time thinking about problems. What if we could wave a magic wand and make them all go away? Maybe we can.The wand isn’t made from wood. You don’t need Latin phrases or a special incantation learned at Hogwarts to make it work, either. It’s a simple six letter word: growth.
This assumes an articulate coalition of politicians who speak in the name of determined, well-informed constituents, who can “weigh” — a favorite term of non-Austrian economists — objective costs against objective benefits. These voters have somehow come up with index numbers of benefits and costs which can guide politicians in establishing bilateral exchanges of government wealth-extraction programs. “You give up your program of theft by the ballot box, and I’ll give up mine.”
But, it turns out, there are tens of thousands of these programs, with each represented by at least one federal agency. There has yet to be discovered a political way to trade off any set of benefits (funding) to these agencies, which are 100% losses from their point of view. These agencies represent entrenched political constituencies, especially constituencies of multi-billion dollar benefit-seekers in the business community. Think “PAC.”
It is not possible to get bilateral exchanges of reduced costs. There are too many beneficiaries who know their interests. Change one federal budget, and this change will have negative secondary effects throughout the economy. Or, as economists also affirm, “you can’t change just one thing.”
The beneficiaries see their opportunities, and they take them. This is the specialization of knowledge. Those vast numbers of uninterested and uninformed people who pay for the specialized benefits to specific groups do not organize to call a halt to specialized programs. The benefits of political looting are concentrated. The costs are diversified and essentially invisible. A theory of information costs, when coupled with a theory of political mobilization costs, reaches this conclusion: the cost-cutting pigs cannot fly.
Then how can the system be reformed? By bankruptcy, which is the pathway of political looting. The unfunded liabilities of the U.S. government discounted to the present, is over $210 trillion.
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