What Krugman (who is a multi-millionaire and really doesn’t have to worry about what things cost) does not tell people is that Swedes pay much more for goods than do Americans, yet Swedish incomes are not as high, and their real incomes are substantially lower than ours.

The argument from Krugman was that Sweden was a thriving country despite high taxes and a welfare state. Anderson noted the use of the word ‘despite’ and wondered if the wording was intentional, i.e. does Krugman believe that high taxes and a generous welfare state are impediments to growth and prosperity, or does he believe the growth and prosperity are due to the high taxes and generous welfare state?

In the comments section, I quoted from a tweet that I had posted in response to Hans Rosling (a Swede), who asked:

Sweden collects 50% of GDP in tax & has 5% growth, US collects 25% & has 1% growth. Is tax good for growth or who explains the paradox?

My response:

Sweden has roughly same population as North Carolina. Let’s try 50% state tax for NC and 0% federal taxes and see how they do!

The rest of my comment on Anderson’s site read:

The point is that a society like Sweden is much more directly comparable to one of the states in the United States rather than the entire nation. I think that’s why Milton Friedman always caveated his statements on freedom as such: “I do not know any exception to the proposition that if you compare like with like, the freer the system, the better off the ordinary poor people have been.”

The comparing of “like with like” would suggest that comparing the Sweden with the United States is unfair. If Swedes were also burdened with the majority of their taxes being paid directly to the European Union versus the government of Sweden, their tax system and economy would probably look quite different.

Now that the bill looks like it has passed the House and will presumably be signed by the President tomorrow, it’s safe to engage in a little Monday morning quarterbacking.

On the whole I agree with Charles Krauthammer, who wrote:

The distinctive visions of the two parties — social-democratic vs. limited-government — have underlain every debate on every issue since Barack Obama’s inauguration… The debt ceiling is but the latest focus of this fundamental divide.

The sausage-making may be unsightly, but the problem is not that Washington is broken, that ridiculous ubiquitous cliche. The problem is that these two visions are in competition, and the definitive popular verdict has not yet been rendered.

I hasten to point out that the “definitive popular verdict” will likely never arrive and we will surely always have people with opinions all across the political spectrum. This is, as they say, a feature, not a bug.

Regarding the terms of the debate, one thing that interests me the most is just what was considered “normal”, and what was at least originally considered a fringe viewpoint. On the one extreme, you had the President and much of the Washington political commentariat arguing for a clean increase in the debt ceiling with no limitations. This viewpoint roughly equates to “the government should be allowed to spend whatever it needs to spend regardless of how much revenue is being brought in.” On the other extreme, you have folks who are arguing for reducing spending, a viewpoint which might equate to “the government should spend roughly the same amount that it receives in revenue.” Despite the characterization that people in the limited government camp were heartless extremists bent on ripping apart the social safety net, very few people were arguing for anything as radical as a return to 1920 spending levels. Most were simply arguing that we should endeavor to spend only about as much as we bring in, not more.

In a normal household or business, the view that outlays or expenses should be roughly equivalent to income or revenue would be the only logical position to take. But when it comes to government, we are told it’s a special case and any spending by the government has a special effect, regardless of the cost to current or future taxpayers. It looks like that view is getting less and less traction, which in my mind is a positive development.

As with many topics related to economics, I first learned about Bitcoin through the EconTalk podcast, specifically the episode where Russ Roberts talks to Gavin Andresen, one of the principals of the Bitcoin open source project. The Economist also has a good overview of Bitcoin.

The idea of having the digital equivalent of cash is not new, but Bitcoin does have some interesting approaches which may prove to be more resilient than previous implementations of “electronic cash”. (See this page from the Internet Archive on an introduction to ecash from Digicash, a now defunct company that was a pioneer of electronic currency.)

My interest in Bitcoin was further piqued by a blog post from The Atlantic by Courtney Knapp, who was operating as a guest blogger for Megan McArdle, one of my favorite bloggers on economics (and other topics). The article refers to a “crash” on one of the most popular online exchanges that allows people to trade Bitcoins for US dollars. It will be interesting to see if these incidents erodes people’s trust in the Bitcoin concept, or if it matters much since very few people know much about Bitcoin yet.

A few more links:

• Ars Technica on the hacking of Mt. Gox
• DailyTech on the “Digital Black Friday”, with some good background info.
• Bitcoin forum on the theft of 25000 BTC. (Depending on the exchange rate, this could have been worth approximately $500,000.) Good info and insight from the Bitcoin community on the need for encryption, vigilance in backing up and protecting your Bitcoin “wallet”, etc.

On the occasion of the president’s recent speech on the way forward in Afghanistan, it seems fitting to address: are we at “war” in Afghanistan? Are we also at war in Iraq? And finally, what about Libya?

Let’s first take Iraq. According to Barack Obama on August 31, 2010, we ended the combat mission in Iraq. So, at least according to the current administration, the “war” is over. Of course there were at least 50,000 troops still stationed in Iraq when the war was over, but since we still have troops in Germany, Japan, and other countries with whom we are not at war, we will assume for the moment it is true that the Iraq war really has ended.

What about Afghanistan? Well, in the president’s speech on Afghanistan, he said “This is the beginning — but not the end –- of our effort to wind down this war.” Part of his strategy for Afghanistan last year was a “surge” modeled after the Iraq surge to attempt to bring things under control. Although we are now supposed to begin drawing down the number of troops in Afghanistan, it appears that we are still officially at war, but with whom we are at war is not quite as clear.

Finally, in Libya, according to Bob Gates, we are not “at war with Libya”. He characterizes it as a “kinetic military action”, as does Ben Rhodes, the Deputy National Security Advisor for Strategic Communications, according to this press briefing conducted aboard Air Force One. The implication seems to be that if we don’t send in ground troops, it doesn’t really count as a war. Now the administration is also saying that our actions in Libya don’t even amount to “hostilities” (see this response from the President to the Speaker of the House on the War Powers Resolution).

It is getting late so I will not editorialize too much on the above except to say that it doesn’t take much of a partisan to believe that playing word games when we are bombing other countries and trying to make an end-run around laws like the War Powers Resolution is dangerous territory.

Gene Healy of the Cato Institute has a good article on the Libya situation.

I have been on Twitter (@Duane1024) a lot more in the past year, which explains some of the break from blogging. However, Twitter is definitely not good for anything substantive unless you are linking to a full blog post on another site. I will probably try to go back and re-read some of my previous links from Twitter to see if there are good articles I want to write up more thoughts about here on the blog.

In the meantime, welcome back to Strange Frontier.

• Nothing to Envy: Ordinary Lives in North Korea by Barbara Demick. An extremely moving book. Wonderfully written in the style of a good novel. But the sad stories of the main characters are unfortunately true. It’s easy to make fun of Kim Jong Il and the unbelievably backwards government over which he presides. And it’s easy to use phrases like “living hell” when describing North Korea, but this book does a good job of putting that in human terms. Highly recommended.
• The Rational Optimist by Matt Ridley. Another excellent book. Makes a powerful case for optimism, explaining that the reason humankind has progressed so much more than other animals is our exchange of ideas and innovation that results from the division of labor and specialization. Borrows many ideas from economics and overall is a very informative and enjoyable read. Also highly recommended.
• Last Call: The Rise and Fall of Prohibition by Daniel Okrent. A fascinating look at the Prohibition movement. Very informative in detailing how the Prohibition amendment came to pass. Has some interesting insights with regard to special interest politics that are relevant in today’s world, and also ought to offer some lessons to today’s politicians as we fight an endless “drug war”. Recommended for anyone with an interest in history. BTW, I first learned about the book from the EconTalk interviewwith the author.
• On the Brink: Inside the Race to Stop the Collapse of the Global Financial System by Hank Paulson, former US Treasury Secretary. I need to post a full review of this book because I have too many thoughts to capture in this post. Interesting insider’s look at the events surrounding the so-called financial crisis of 2008.
• Options: The Secret Life of Steve Jobs by Fake Steve Jobs, aka Dan Lyons. I don’t know if Fake Steve’s sense of humor appeals to everyone, but I find him not only hilarious, but also quite insightful about the technology industry.

The first from Barack Obama’s appearance on CNBC on September 20, 2010:

My entire focus right now is to make sure that the private sector is thriving, is growing, is investing. As I said, that’s why we haven’t increased taxes on corporations. We are not proposing dividends to go up — taxation on dividends to go up above 20 percent. I think we’ve been very responsible stewards.

The second from George W. Bush’s remarks to the press on September 13, 2001:

You know, through the tears of sadness I see an opportunity. Make no mistake about it, this nation is sad. But we’re also tough and resolute. And now is an opportunity to do generations a favor, by coming together and whipping terrorism; hunting it down, finding it and holding them accountable. The nation must understand, this is now the focus of my administration. We will very much engage in domestic policy, of course. I look forward to working with Congress on a variety of issues.

But now that war has been declared on us, we will lead the world to victory, to victory.

The end of this terrible recession into which the free market plunged us is all thanks to the federal government, of course. In particular, we owe the Obama administration our gratitude for its stimulus program. But we should also tip our hats—hats we can presumably now afford to buy— toward the Bush administration for its TARP bailouts, without which the banking system would have completely collapsed, credit would have dried up and we would have all starved to death.

This post reminded me that I needed to write my own blog entry on the central issue that I believe could unite people from both ends of the political spectrum. That idea is that it is not the intention behind a particular policy or government program that matters; what truly matters is the overall effectiveness of the policy. More to come on that in a future post.

Sorry for the lack of updates. Will try to resume regular posting soon.

So I enjoy soccer (James Taranto of the Wall Street Journal jokingly calls it “metric football”), and my comment that it is un-American isn’t meant to offend. However, I just look at a result like today’s match between England the U.S. and wonder what a “draw” is. I found out that it means there was actually a tie. To me, this is distinctly un-American and totally contrary to the notion of sport and competition. When in a competition, one team must lose and the other must win. One team must be destroyed, and the other lifted up to greater glory in hopes of destroying more teams as they progress through the tournament. This is also another reason why I have never been able to fully embrace hockey, which also allows tie games.

As a corollary, it is easy to demonstrate why baseball, though it can be infinitely more boring than soccer at times, is such a quintessential American sport. The longest professional baseball game in history took place in 1981 and lasted for 33 innings until a victor finally emerged. Very inspiring stuff.

• The BP oil spill. First, Obama is not responsible for it. I don’t want him to get angry or outraged, and I certainly don’t need him to kick someone’s ass. When will the public and the media learn that there are limits to government power, no matter what your political leanings are? Secondly, I think it’s certainly in BP’s interests to clean up the spill as quickly as possible. Threatening them with fines or making them pay for all the people who are out of work because of the government’s temporary ban on deepwater drilling (!) makes pretty much zero sense unless your goal is political demagoguery, and not actually finding ways to fix the problem.
• The Democrats are in trouble for the fall election. Though I typically vote Republican, this news doesn’t fill me with great pleasure like it does for the strongest partisans. I would like to point out, however, how wrong all the journalists and columnists were who said 2008 portended a new era for the Democratic party and the possible beginnings of irrelevance for the Republican party. Once again, hubris strikes and is going to take down a fair number of politicians with it. Please let at least a few of the Republicans (or Democrats) who win their elections this fall enter office with some humility about what they are actually able to accomplish.
• The health care issue is still not dead. It will be interesting to see how the constitutional challenges to ObamaCare play out, but it’s interesting to note how many polls still show a large portion of the electorate disapproving of the recently passed bill (though not a majority in some of the recent polls).
• The financial regulatory reform bill is a disaster in the making. If only this headline were really referring to me instead of some unknown representative from Kansas.

More to come later. Namaste.