Practice Good Theory

In the middle of the "fiscal cliff" stand-off, there are stories about a  "milk cliff" . If Congress does not act, milk prices might rise substantially -- potentially doubling. Price support programs  have been around for decades. Herbert Hoover desperately tried to keep prices from falling, and was fairly successful at doing so (prolonging the great depression). The intellectual root comes from monetarist economists who want the government to ensure the stability of prices, in order to fight deflation. [Today, some of these are cheering Japan's new Prime Minister Abe who says he wants prices to rise at least by 2% per year.] Roosevelt doubled down on the madness. In 1933,  millions of pigs were slaughtered . They were not handed out to the hungry poor struggling to get by. Instead, they were buried in mass graves. Posterity will not believe this. The Dairy Product Price Support Program makes the government buy milk. The current program dates from 1949.

In this 2-minute video, CNBC's, Maria Caruso Cabrera demonstrates the abysmal quality of mainstream business reporting: First, Cabrera implies that Democrats are wrong in a wanting to raise tax-rates on the rich. Then, with no sense of irony, she suggests means testing for Medicare. She ought to know that means testing is as much a progressive tax as the Dems push to raise the marginal rates. The GOP want to tax the rich just as the Dems do...they just want to pretend they don't. Payroll tax are taxes:  Today's social-security system is very progressive. Richer folk are paid out more than the poor; but,  proportionally the rich are paid out far less. We have  Alan Greenspan to thank for this . Medicare is even worse. The rich pay in far more and get nothing extra -- not even a better walking-stick -- in return. The  Simpson-Bowles  plan would shore up social security. In part, it would do so by raising payroll taxes on the rich, but only paying them a t

Some tidbits of news from around the world: Protests in India:  As these photos from CNN show , last week New Delhi looked like Tahir square, as thousands of middle-class youth protested against traditional police attitudes toward rape. This followed an exceptionally brutal rape of a middle-class girl in India's capital. Police responded with batons and water-cannons, and one cop died. It appears that this will be  watershed incident, which will bring some real change to public (and police) attitudes toward rape. Britain's Royal Mail has started to explore privatization . Margaret Thatcher sold state-owned industries except for the railways and the post office. Her successor privatized British Rail  in 1993 (inspired by Sweden). The U.S.Post Office and Amtrak have no plans to privatize, though the former is selling some of its pricey real-estate . The 1997  Kyoto Protocol is losing steam. In 2011, Canada withdrew . Now, in the latest round, Russia and a

( Updated: Dec 2012 ) Lots of numbers:  Trying to get a clear picture of U.S. government debt can be frustrating. The government owes: 60% of GDP : bonds owed to private entities , both foreign and domestic 100% of GDP : if we add bonds owed to the government-itself (e.g. Social Security "trust fund", Federal Reserve) 400%+ : if all Fed promises to social security and medicare recipients are met (they won't be) [Note: the GAO claims that adding another 2% (of payroll) to the current 13% payroll tax would keep social security funded for more than 70 years!] A snapshot: The U.S. government (officially) owes about US $16 trillion to the public, plus to the Fed, plus to the "trust funds".  The GDP of the U.S. is approximately $16 trillion. (Both these were about $15 Tr. last year.) To put this in perspective:  adding up the assets of everyone in the U.S. and subtracting liabilities, we get a "net worth" that adds up to about $ 64 trillion ($5

" The fiscal cliff ", is a poor name, that obscures through metaphor. Call it what it is:  a little deficit reduction . All the cries to "not go over the cliff" are cries to not reduce the deficit. CNBC, usually middle-of-road is running a campaign called "Rise Above", asking law-makers not to reduce the deficit (i.e. not to go over the cliff)! Taxes will rise if:  the "Bush tax cuts" and "AMT exception" expire,  the Payroll tax goes back, up to its normal rate Some government spending will falls if: unemployment benefits go back down to their normal rate "sequestration" agreed to when extending the debt-ceiling kicks in Too much too soon: Keynesians never want to reduce deficits, but they couch their appeal saying: "don't cut right now ", "don't cut too much " or "don't cut too abruptly ". Yes, tightening will cause some short-term pain, but it'll be worse later.