I missed this on Wednesday but it’s worth sharing.

http://krugman.blogs.nytimes.com/…

What is the appropriate role of government?

Traditionally, the division between conservatives and liberals has been over the role and size of the welfare state: liberals think that the government should play a large role in sanding off the market economy’s rough edges, conservatives believe that time and chance happen to us all, and that’s that.

But both sides, I thought, agreed that the government should provide public goods — goods that are nonrival (they benefit everyone) and nonexcludable (there’s no way to restrict the benefits to people who pay.) The classic examples are things like lighthouses and national defense, but there are many others. For example, knowing when a volcano is likely to erupt can save many lives; but there’s no private incentive to spend money on monitoring, since even people who didn’t contribute to maintaining the monitoring system can still benefit from the warning. So that’s the sort of activity that should be undertaken by government.

So what did Bobby Jindal choose to ridicule in this response to Obama last night? Volcano monitoring, of course.

And leaving aside the chutzpah of casting the failure of his own party’s governance as proof that government can’t work, does he really think that the response to natural disasters like Katrina is best undertaken by uncoordinated private action? Hey, why bother having an army? Let’s just rely on self-defense by armed citizens.

The intellectual incoherence is stunning. Basically, the political philosophy of the GOP right now seems to consist of snickering at stuff that they think sounds funny. The party of ideas has become the party of Beavis and Butthead.

The intellectual incoherence is stunning. Especially that coming from Krugman. There is no incentive to monitor a volcano because there are free riders? That argument applies infinitely. There is no way to have an interaction with others without effecting them in some way. The free rider problem is the way of the world. There is nothing one can do about it. If you can’t peacefully convince people to pony up a few dollars to monitor the local natural disaster in waiting… it’s obviously not that bad a problem. If the residents learn otherwise… they won’t be living there very much longer. Knowing when a hurricane is coming is great for the Gulf coast settlements… too bad since it’s done at the threat of violence and then combined with other risk reductions not directly felt by the inhabitants you have for generations people living in locations they wouldn’t have otherwise.

Did Krugman ever bother to investigate Katrina? How many private firms went to help and were turned away by the government bureaucrats? How they arrived faster than FEMA? Uncoordinated private action is exactly what was needed. Those closest involved know better than some DC bigwig as to what is necessary. The arrogance of Krugman’s statements would be stunning if it wasn’t for the volumes of statist, know it all opinions on how helpless their fellow man is I’ve read. Why not rely on armed citizens? Does this man forget US history? Has this man ever read a history book? The things he advocate have been shown to be self destructive. Whether it be his Keynesian economic beliefs or his etatist beliefs in the power and role of government.

He makes no argument. No logically consistent statement. No means to prove his examples. What is says is mearly assumed true. Rather obvious to the average sophisticated NYT reader. Order comes from above. Man is helpless without the god State’s protection and guidance.  Spontaneous order is a novel but false idea. Or at least inefficient. Man couldn’t possibly know what is best for him. I am the only one with the knowledge to show them the way. For the betterment of himself and everyone else.

http://globaleconomicanalysis.blogspot.com/…

Dear Mr. President, I read your New Era $3.6 Trillion Budget Proposal. I also listened to your speech Tuesday night. You made a great campaign speech. However, the campaign is over. You won. And the reason you won is you offered hope as well as a promise of change.

With all due respect Mr. President, Tim Geithner and Ben Bernanke are offering the same policies as President Bush and Secretary Paulson. Those policies are to bail out banks regardless of cost to taxpayers. Mr. President, it’s hard enough to overlook Geithner’s tax indiscretions. Mr. President, it is harder still. if not impossible, to ignore the fact that neither Geithner nor Bernanke saw this coming. Yet amazingly they are both cock sure of the solution. Even more amazing is the fact that solution changes every day.

Read More…

Grabbed from Mish’s Global Economic Trend Analysis blog:

Things are looking pretty bleak. There is bad news in housing, the stock market, commercial real estate, jobs, and wages . Unfortunately, no matter how bad things are, someone always comes along to propose a “solution” that is guaranteed to make the situation much worse. Please consider the following ideas.

Punish savers and make them spend money: Near-zero interest rates and even a tax on bank deposits are necessary to force those with cash to use it productively

Assuming interest rates are reduced to about 1 per cent today, it will make little difference to savers if they fall all the way to zero. To all intents and purposes, income from bank accounts will be reduced to nil.

The next logical step, although it may be politically controversial, would be to do the opposite of what the Tories suggest. Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets – or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump.

The Case for Bigger Government

Thirty years ago, Americans were told that government was part of the problem, not the solution. We bet on the magic of the marketplace, but the magic proved illusory. Every major part of the economy – health care, energy, transportation, food and finance – is deeply troubled. Now we are ready to invite government back in to help solve our problems, if the price is right and the strategies are convincing. By spending more through government and treating government as a partner rather than an enemy of the private sector, we can potentially save vast sums in the long run through a more efficient health-care system, safer climate, more competitive economy and more secure country.

A big difference between the U.S. and the rest of the rich world is that for the past 30 years or so, Americans consistently rejected “government solutions” to the problems of health, poverty, education and the environment.

What Hath Big Government Wrought?

• It was big government that brought us Fannie Mae and Freddie Mac.
• It was big government that sponsored the war in Vietnam and the war in Iraq.
• It was big government that gave us nightmare problems we face with Medicaid and Medicare.
• It was big government that gave us overlapping hundred billion dollar systems in the Army, Navy, and Air Force.
• It is big government that sponsored 10’s of thousands of pork barrel projects and bridges to nowhere.
• It is big government that gave us the Davis Bacon Act and the insanity pf prevailing wages.
• It was big government sponsorship of the rating agencies that created the “AAA” rated securities that went to zero.
• It was big government that took us off the gold standard and illegally confiscated citizen’s money.
• It was big government that allowed fractional reserve lending and theft by inflation this is the root cause of a shrinking middle class today.
• It was big government that created the Fed, and it was the Greenspan Fed that blew serial bubble after bubble culminating in the housing crash we are in today.

Big government either created or made worse every problem we have today. Yet Time Magazine and free lunch proponents like Krugman propose an even bigger government is necessary to fix the enormous problems of an already too big government.

I’d like to add that the idea that “Americans consistently rejected “government solutions” to the problems of health, poverty, education and the environment” is completely fallacious and ridiculous. Medicare, medicaid, the war on poverty, from little or no federal involvement to No Child Left Behind, huge federal college subsidies, the increase of scope and power of the EPA, etc. Just because Americans didn’t jump on board as quickly as other socialist / fascist States doesn’t mean such ideas were rejected.

Fed Defies Transparency Aim in Refusal to Identify Bank Loans

Nov. 10 (Bloomberg) — The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

“The collateral is not being adequately disclosed, and that’s a big problem,” said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. “n a liquid market, this wouldn’t matter, but we’re not. The market is very nervous and very thin.”

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The full article includes more Fed lies, Barney Frank hot air, and some info on the AIG bailout.

From Marketwatch:

The U.S. is on track to post a record budget deficit in 2009, the White House is expected to announce Monday, according to reports.

The federal deficit will jump to almost $490 billion in the next fiscal year, U.S. media said, citing White House officials. Meanwhile, this year’s deficit will swell to more than $410 billion, a White House budget update to be released Monday afternoon will show.

The White House is scheduled to release its mid-session budget review at 1:45 p.m. EDT.

The continuing economic slowdown and bills for military operations in Iraq and Afghanistan are behind the record deficit.

The U.S.’s biggest budget deficit to date was $413 billion, according to figures cited by USA Today. President Bush inherited a budget surplus of $128 billion when he entered office in 2001.

An adviser to Republican presidential contender John McCain told the Washington Post that the new surge of red ink won’t have implications going forward since it’s tied to cyclical developments like the slowing economy and economic stimulus checks.