Question for you fiscal conservatives

Been reading the various political posts and a lot of people seem to be voting republican because they're "fiscal conservatives" and not saying much more. To those of you who claim this I was wondering what you think of:

1) fiscal stimulus (I.e. Infrastructure spending) at the zero lower bound in light of the failure of quantitative easing to really move the needle on inflation expectations and the fact that we can borrow mad cheap at the moment and will need to pay for it eventually anyways.

2) moving to the gold standard (pretty sure Ted Cruz was advocating that at some point).

3) Paul Ryan's "balanced" budgets with their massive tax cuts alongside spending cuts that only pay for themselves because of magic asterisks beyond most reasonable estimates for the growth effects due to the tax cuts.

4) relatively small hits to growth in exchange for social benefits (e.g. Getting rid of the cap on social security taxes to fully fund and maybe expand the program), do you think their immoral or do you just not believe economists when they tell you the trade off is small.

5) Rawls v nozick and if nozick how you respond to calls for reparations for slavery in that context (I'd be surprised if your average monkey knew anything about this one, but I'd be really interested in a fiscal conservative's view on moral question when examined in the abstract).

Comments (45)

Jun 28, 2016

I don't have time to fully respond at the moment, but keep in mind that Republicans != fiscal conservatives (or the equivalent outside the US).

Jun 30, 2016

I would consider myself a libertarian with a heart and I agree with fiscal conservatism for some background but here are my thoughts

1) I do think that borrowing now in the short term, given rates, would be a good idea. But the libertarian argument advocates for the privatization of infrastructure revitalization

https://libertarianmoney.wordpress.com/2013/07/12/...
2) The case for the gold standard is really the case against inflation - it cant be printed so it makes it harder for a government to increase the money supply. While this is the case, it doesn't really matter what backs the currency, what matters is that the currency supply cant be increased. A good example would be Bitcoins - peer to peer, decentralized, and the currency cant be reproduced. Even though it isn't backed by a commodity, they hold their worth because the market sees an inherent value in a token exchange system that is decentralized and impossible to inflate.

3) Preposterous and wont pass the Senate.

4) Privatize social security - instead of paying to the government you could self fund your own private account. Yes the transition to such a system would be painful for those nearing retirement but can be alleviated through the sale of government assets ie USPS

https://www.ssa.gov/policy/docs/ssb/v59n3/v59n3p45...
5) I've thought of reparations before and I personally do not think they are feasible (how much? who pays?)

However I did look at how Ta-Nehisi Coates call for reparations and Nozicks' views on what is consider legitimate obtainment of property and they seem to coincide so ideologically there is a case for reparations in the liberation view.

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Jun 30, 2016

Your #4 is something I am blown away that most people don't agree with.

SS was never meant to be a retirement account. It was to be used as (gasp) security if in your old age you didn't have enough saved or the economy collapsed like the Great Depression during retirement.

I want my money to put into an investment account where I can determine my own risk/returns. Every percentage more counts when compounding returns.

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Jun 30, 2016

"This argument is based on a straightforward calculation. If workers invested 12.4 percent of their earnings in a private retirement account yielding a moderate rate of return (say, 3 percent a year after adjusting for inflation), most would collect larger pensions than they can expect under the present Social Security system."

http://www.brookings.edu/research/papers/1997/03/s...
And that is with a 3% return...

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Jun 30, 2016

"SS was never meant to be a retirement account. It was to be used as (gasp) security if in your old age you didn't have enough saved or the economy collapsed like the Great Depression during retirement."

See this seems to me like an argument against privatizing social security since individual risk preferences lead to higher returns with higher volatility/ maximum drawdowns (I.e you're looking at the wrong metric when you just look at returns what you should really be looking at as something more like a sharpe ratio).

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Jun 30, 2016

1) I think the argument against this is that if it was private we'd have the same problem we do now with people not wanting to make the investment because the zero lower bound means that the risk free rate is actually higher than what the market is calling for. The point of government spending is that the government can step in and spend when nobody else wants to in order to increase aggregate demand and bust us out of deflationary cycles.

Jun 30, 2016

I prefer helicopter money (as W did) to quantitative easing

Jun 30, 2016

Could you explain your preference?

I'm curious on why giving someone money vs making their liquid assets more valuable is more effective

Jun 30, 2016

In my opinion, it's not exactly fair to give the roughly 50% of the US population who own equities a financial stimulus. It's an example of the govt picking winners and losers, which I am opposed to in general. Also, I feel giving people cash is a faster/more direct way to stimulate the economy, since studies have shown people rarely save that new cash.

Jun 30, 2016
  1. for it. the spending I want to see cut is medicare, medicaid, SS, military, and tax breaks
  2. don't see the point
  3. haven't read them but balanced budgets are a myth. by the time that gets through the senate, there will be so much pork in it the purpose will have been lost
  4. keep it the same for people 50 and older, wean people 35-49 off of it, and privatize completely for the rest.
  5. stupid idea, and I'd likely be a recipient of reparations (though my dad's side would be a payer, so I'd probably just end up even). don't blame the current generation for the evils of the past. it's important to remember atrocities so that they never happen again, but if your family hasn't improved from nearly 200 years ago, something's wrong with you, not the system.
Jun 30, 2016

1) on healthcare I think the main issue is the cost whether it's the government paying it through our taxes or private insurance companies (we pay a lot more then the rest of the developed world for similar outcomes). Tell me if I'm wrong but I'm pretty sure Medicare is better at controlling costs than private insurance (they have more market power to determine prices) and spends less on administrative fees (intuitively it makes some sense that the free market might have socially undesirable outcomes on healthcare since if you're dying you'll pay anything to live).

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Jun 30, 2016

talking about 2 different things here. what I want is less gov't assistance in general. I'm fine with my tax dollars going towards infrastructure, education, necessary defense, public works, science grants, all that stuff, but I am not a fan of paying other people's health insurance premiums.

am I going to do anything about it? fuck no, I'm going to focus on making enough money so I don't care how much they tax me, but if it was possible, I think it'd be nice. in my view, you need either 100% government sponsored like some European countries or 100% privatized.

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Jun 30, 2016

Republican fiscal conservatism math never works because they never count military spending, among other reasons.

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Best Response
Jun 30, 2016

I consider myself fiscally conservative but do not tow the complete line of many libertarians/conservatives and hope I can provide some nuanced perspective:

1) I am not wholly opposed, like many, to fiscal stimulus. I think that, all else equal, it is better done through tax cuts (to segments of the populations with higher marginal propensities to consume) than spending 80-90% of the time. The thing I probably have the most issues with is that the true Keynesian doctrine is that you crank up spending in times of recession and then crank it back down and run surpluses in times of growth. That has not been the case in the US, outside of the surplus of the late-Clinton era. We need structural reforms to our policies that allow us to get on this proper counter-cyclical track.
2) I have mainly ever seen this advocated by libertarians who lack a formal economics background. There are pretty easy-to-follow arguments against "standards" in undergraduate monetary economics textbooks, including this one: https://www.amazon.com/Modeling-Monetary-Economies.... I won't endeavor to reproduce them here.
3) I'm generally a fan of Paul Ryan, who I see as one of the most intellectually honest politicians in Washington (not a super-high bar to jump, of course), but I'm not familiar with the latest iteration of policy proposals. I generally think we need to be bringing the corporate tax rate down to be in line with the rest of the developed world. I don't think upper-margin tax cats cause explosive growth (at least at the level they're at now) like many on the right do. I think tackling spending is a more pressing issue in this day and age.
4) The government needs to engage in smart campaigns (a la those that would be covered in "Nudge" by Thaler and Sunstein) with regards to retirement planning. Especially given that Medicare is unsustainable, Social Security needs to be means-tested, retirement age raised, and coupled with education about consumer-focused planning.
5) This one is tricky. You could argue that current Affirmative Action and diversity policies amount to an attempt at reparations for an assortment of injustices, slavery included. Arguing that case means you are agreeing that the legacy of slavery is what has historically held back black communities (a different can of worms). Cash reparations' main problems are several: Philosophical - as others have said, should we punish/reward current populations for their ancestors sins/suffering? Logistics - how do you determine blackness; if you are of African descent and your ancestors were not slaves, do you get reparations; etc. Culture/identity wars escalation: Poking the beast of identity politics even further in this climate is probably not prudent.

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Jul 5, 2016

+1 for Thaler reference, great book

Jul 6, 2016

Thought-provoking even if one disagrees with it

Jun 30, 2016

For any interested folks here, I highly recommend this paper by UChicago economist John Cochrane on freer health care markets. It's long and can be fairly dense, but it's fascinating.
http://faculty.chicagobooth.edu/john.cochrane/rese...

Jun 30, 2016

Mostly skimmed it so sorry if I'm missing something obvious, but it seems like he's arguing something like "healthcare is inefficient relative to other markets because it's more regulated". This seems wrong empirically because more regulated European markets have lower costs and again it seems intuitively reasonable that the free market would have very high healthcare costs because people will pay whatever if it's their life on the line.

Jun 30, 2016

That's not all he's arguing; I would recommend reading it more thoroughly. It's true European health care costs less. The question is, "Compared to what?" We're comparing it to the US, which is the system he's arguing against. So, really you have to compare European health care systems to the type of system he's advocating, not the status quo.

Jun 30, 2016

The reason for our higher than European health costs are complicated.

For the most part, both Medicare, Medicaid, and the current hospital model is set up for rent-seeking and price gauging on the part of the both the Hospital and the Insurance companies:

Ignore the title, it's meant to be partisan.

Here's an article from a more left leaning site: http://thinkprogress.org/health/2013/07/10/2281401...

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Jun 30, 2016

quick q - is moving to the gold standard actually possible? i hear the idea tossed around, most recently by Greenspan, but i don't see how it could actually be implemented

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Jun 30, 2016
  1. There is absolutely no empirical or theoretical support for expansionary fiscal stimulus via spending. It has never worked and no fiscal multiplier has ever been observed. More recently, it didn't work during the financial crisis (Obama said that without them, unemployment would rise to 8%. Passed them and it rose to >11%); it didn't work for Japan, and it didn't work during the great depression. The support for fiscal stimulus spending is always the unobservable, unverifiable counterfactual. And why would it be stimulative? Why would taking from Jimmy to pay Tommy lead to positive net gain? At the very best, it's a wash.
  2. There are pros and cons to the gold standard. The main pro is the price-specie flow mechanism, i.e., the internal controls that prevent run-away inflation and continuous capital flight (which are not in place in our current international monetary system). There are cons as well, most notably that the supply isn't elastic to account for fluctuations in velocity.
  3. Tax cuts, on the other hand, have proven to be stimulative. Recently, corporate tax cuts in the UK had a major, observable affect on GDP growth rates, and the Clinton/Bush tax cuts (one on capital gains and the other on income) actually increased tax revenue (as a result of elevated growth figures). Historically, Regan/JFK/Mellon tax cuts have all led to sharper GDP growth and higher tax revenue. Conversely, we have seen that tax hikes not only suppress economic output, but also decrease tax revenue (France is a clear example). Business and individuals flee from overly oppressive tax rates.
  4. Define 'small hits to growth?' I can support that, but that's my own, entirely arbitrary and subject value preference.
  5. Couldn't give a shit less about political philosophy and hypothetical scenario where I posit the life I would prefer before birth. I leave that useless shit to the unemployed.
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Jun 30, 2016

from a libertarian point of view:
1) fiscal stimulus is unnecessary. Easy money tends to mislead the allocation of resources and generates false "market winners" when government gets involved. That's the main point of Hayek's work about economic intervention. Due to the lobby industry, bureaucrats can be easily captured and those "fiscal stimulus policies" are simply tax payers' money going to corporations' pocket and not letting the market attain equilibrium. Although my real concern related to fiscal conservatives, and therefore fiscal surplus, is whether it will be achieved by spending reductions or revenue increases. If the former takes place, spending decreases in transfers and government wages are preferable than in public investment. Any economist familiar with neoclassical's empiric findings will feel the same way I suppose. I recommend Robert Barro's work.

2) tricky question. I definitely don't have an answer for this. However, I feel that fiat money is not the long term bet we should place.

For the remain questions, I believe that Uncle Drew's post is spot on.

Jun 30, 2016

1) what do you mean by market equilibrium? If you mean something like full employment with minimal but non-negative inflation then that's where the question of the zero lower bound and the fact that we're in a liquidity trap kicks in since the fact that rates can't really go below zero means the market can't actually meet that equilibrium though I think the fact that you think the gold standard might be a good idea might also mean you don't believe in the fed actively managing interest rate in good times either. Not sure where you get that stuff about the multipliers because I'm pretty sure the empirical research says they are/were pretty large in the most recent episode https://www.imf.org/external/pubs/ft/wp/2013/wp130...

Jun 30, 2016

Gah wrong person on the multipliers response, but I think the argument is still the one I want to make.

Jun 30, 2016

Republicans aren't really fiscal conservatives. They aren't really even conservatives in any facet anymore. Some are, but true conservatism is (mostly) with the Libertarian party as of the moment, which is where my vote will go this fall.

  1. I actually support infrastructure spending. But for the sake of improving infrastructure specifically, doing it to create temporary jobs just does that... creates temporary work.
  2. No.
  3. No clue about his specifically. Balanced budgets really don't happen in practice, but we should be cutting outrageous military contracts that hemorrhage money, should be reevaluating tax breaks, and looking at areas that don't give a good benefit/cost ratio. There's a lot of fluff the US spends money on because no one wants to be the guy who cut X number of government jobs.
  4. Social security shouldn't be capped IMO. Its cap hides a regressive tax system. We can argue all day on if "the rich" should be taxed much more than Average Joe and I'll see the light on both points, but people making more getting taxed less on their payroll is burdensome.
  5. Socially, many minority families suffer from the long term effects of their ancestors' heritage and slavery. Their family started at the bottom and thus struggled to get ahead compared to others. But reparations don't solve the issue. We can't just hand cash to anyone who came from a struggling family, regardless of race. There are plenty of things we can do to reach out to those who need help, but handing them cash based on the color of their skin isn't one of them. That's backwards.
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Jun 30, 2016

"I'm socially liberal but fiscally conservative"

TRANSLATION:

"The problems are bad but their causes... their causes are very good."

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Jun 30, 2016

If you are fiscally conservative, you should vote for Hillary. If you like working on Wall Street, you should also vote for Hillary. http://crfb.org/papers/promises-and-price-tags-fis...
1) There are different levels of "fiscal stimulus" and it seems consistent with logic and literature that the benefits quickly diminish. Yes, some infrastructure investment could increase productivity and boost the economy (what if people living in Atlanta didn't spend 2 hours a day in traffic?), but this is on a case-by-case basis and can probably not be simply scaled up to apply to an entire country large scale.

2) This is such a bad idea. Go back to college and take a basic monetary economics course if you disagree.

3) It's a very Republican tax plan. It's also stupid and regressive. It would never get passed. Yes, lower corporate tax rate, but by also lowering tax rates on high earners and eliminating capital gains tax and paying for it by cutting welfare, healthcare, and other programs, he is hurting poor people.

4) Depends on your individual values. The bipartisan CBO seems to think that privatizing Social Security is a great idea. Not sure if this will ever happen due to the power of the AARP. As far as healthcare goes, I think that, at our current level of wealth, access to healthcare should be a human right, not a privilege. I'll pay higher taxes for expansive health care systems. It's not all about money guys

5) Racial economic inequality totally still exists in America and it is probably directly due to years of exploitation that didn't begin to truly end until the 1960s. I'm not sure cash reparations are the answer, but I would be fine with some solution which guarantees economic benefits

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Jun 30, 2016

You don't know the first thing about the gold standard. You probably can't even replicate the argument made by those that support it. Your appeal to 'college economics' is laughable as well.

Jul 1, 2016

Yes, I studied economics in college. I studied economics in graduate school as well. In the words of the University of Chicago's Anil Kashyap, "Love of the G.S. [gold standard] implies macroeconomic illiteracy."

Feel free to defend your point. I'm genuinely curious about the economic (not philosophical or ideological) benefits of the gold standard.

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Jun 30, 2016

1) I support infrastructure spending and am currently enjoying the low interest rates
2) Good in theory, potentially in practice. Though I wouldn't actively support it until I research it more.
3) Capitol Hill is too messed up to pass anything that would be considered "good" from a bipartisan perspective when it comes to a budget
4) I think your retirement should be self funded. I don't like this idea of me paying into the fund to help someone retire tomorrow and having to wait until I have grand kids for someone to start actively contributing to my retirement.
5) Anyone who supports this is just playing the SJW archetype. The implications of this are asinine. Honestly, where would the line be drawn? There have been disadvantaged groups of all kinds. Which of them don't qualify for reparations after going down this path?

Jul 1, 2016

Social security essentially is a country wide centralized pension plan/annuitization that invests entirely in treasuries. Because it is risk free it is a good safety net that people essentially would in many cases want to have and would find a harder time finding in the private market. As long as there isn't political interference and its fully controlled by actuaries, one giant plan is superior to multiple ones. However at the same time the program shouldn't be expanded as far as contribution increases for greater income as that money is "dead money" insofar it is only invested in treasuries and not the business sector.

For healthcare, the same could theoretically be true. However medical costs are out of control and are not being constrained by payer discipline. So there is very little credibility at this point that single payer would be wise. I think the answer is for the goverment to be extremely aggressive in pushing Medicare costs down to prove that they can do it first.

Goverment is a cluster fuck so I'm very doubtful about this happening.

Jul 1, 2016
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Jul 5, 2016