When even Liberals wake up

Here is a financial report on USA, Inc., presented as a slide show, as developed by financial analysts.

Most of us Bookworm Room aficionados know that the economic state of health of our country is not good and getting worse. It is critical, actually. Unfortunately, there are many still wedded to Keynesian mythologies of the Hoover and FDR era who insist on bleeding the patient with leeches when major surgeries are warranted.

Where I see hope is that this devastating report, authored by Morgan Stanley analyst and Silicon Valley venture capitalist Mary Meeker, was supported by famous Liberal Democrat heavyweights such as Laura Tyson, Al Gore and Peter Orzag. Small rays of sunshine are beginning to enlighten the clinicians’ gloom. One can quibble with details (that General Motors has turned the corner, for example), but the core facts presented are solid and irrefutable. Scroll toward the end and visualize how this is not just the United States but the entire western world as we know it that is affected.

To solve a problem, one must first define the problem. Read it, skim it (just the graphs are explanatory enough) bookmark it, and use it to educate as many  people as you can. Because the real battles will begin when all of us must decide between surrendering our entitlements to the scalpel and turning off artificial life support altogether.

Our era is ending and we are seeing the first birth pangs of the new. Birth is a painful, bloody process.

H/T Richard Fernandez and Ace of Spades HQ.

***Update***

Some people have had trouble with the link above, so here is another link to the article.

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  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Link to the pdf doesn’t work. (Https is hypertext transfer protocol secure.)

    What’s the title of the article?

  • Randall Woodman

    That link didn’t work so well.  Is this the same report?
    http://www.fms.treas.gov/frsummary/frsummary2010.pdf
     
     

  • Danny Lemieux

    Thanks for the heads-up.
     
    Don’t know what is wrong. I’ve tried it and it works well for me. It is a .pdf file.
     
    I’ve updated the post with another link to the article.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Danny Lemieux: Don’t know what is wrong. I’ve tried it and it works well for me.

    If it’s a https file, it usually means you have to log in to access the document.
     
    Danny Lemieux: Unfortunately, there are many still wedded to Keynesian mythologies of the Hoover and FDR era who insist on bleeding the patient with leeches when major surgeries are warranted.

    Interesting metaphor. Neo-keynesian theory still holds a lot of sway among economists, while many other theories have taken a broad hit due to the financial meltdown.

    “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.” — Alan Greenspan, noted monetarist.

    But just so we’re clear, does Keynesian theory say that government spending always increases economic output? 
     
    Danny Lemieux: Where I see hope is that this devastating report, authored by Morgan Stanley analyst and Silicon Valley venture capitalist Mary Meeker, was supported by famous Liberal Democrat heavyweights such as Laura Tyson, Al Gore and Peter Orzag. Small rays of sunshine are beginning to enlighten the clinicians’ gloom. 

    Are we even reading the same document? It seems like a well-written and researched article. It doesn’t seem to have anything to do with Al Gore. Not sure your point. 
     

  • http://ymarsakar.wordpress.com Ymarsakar

    Danny, it’s https. Which means there’s a security authentication attached to it. Perhaps it works for you because you have access to the website but the general anon public isn’t.

  • http://photoncourier.blogspot.com David Foster

    The document in chart format is here.
    I’ve only had time to flip though a little of it and read some comments, but it sounds like Meeker actually believes that more money spent on K-12 education would improve results.
     
     

  • http://ymarsakar.wordpress.com Ymarsakar

    LibsProgs never wake up, Danny. They have to suicide and kill their identity before they “change their minds”. Which is to say, so long as they have a supply of their fix, the drugs will let them handle the pain through self delusion.
     
    The truth of economic prosperity is not tied to what economists say or what theory they believe paramount. Economic prosperity is based upon the truth of people’s living standards and personal cash reserves. An economist class can paint roses and make gold toilet seats, but the reality can easily be that the downtrodden majority are living on bread and water.
     

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    From the study,

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    From the study,
    * History suggests the long-term consequences of inaction could be severe
    * USA Inc. has many assets, but it must start addressing its spending/debt challenges now.

    That is an important point. The longer it takes the U.S. to address the problem, the more it will cost. However, Americans have many assets that can be brought to bear on the problem, including a highly educated and productive workforce.  
     
    More from the study,
    * Options for increasing revenue by focusing on driving long-term GDP growth and changing tax
    policies
    * USA Inc. should examine ways to invest in growth that provides a high return (ROI) via new investment in
    technology, education, and infrastructure and could stimulate productivity gains and employment growth.
    * Reducing tax subsidies (like exemptions on mortgage interest payments or healthcare benefits) and
    changing the tax system in other ways could increase USA Inc.’s revenue without raising income taxes to
    punitive – and self-defeating – levels. Such tax policy changes could help re-balance USA’s economy
    between consumption and savings and re-orient business lines towards investment-led growth, though
    there are potential risks and drawbacks.
     
    If you look at the numbers, it is Medicare/Medicaid that represent the bulk of the long term problem. Some increases in revenues are undoubtedly needed, including long term gains in productivity from prudent investments in technology, education and infrastructure, but “bending the curve” on medical costs is essential to any long term solution. 
     

  • http://ymarsakar.wordpress.com Ymarsakar

    Over educated work force and under trained.

  • Danny Lemieux

    So, Zach, is it government investment in these areas that produces results in your view, or freeing the private sector to make those investments?
     
    Note that the authors argue that a historically high-rate of GDP growth would be required. Not sure that this is realistic.
     
    The Al Gore credit is at the very beginning of the report.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Danny Lemieux: is it government investment in these areas that produces results in your view, or freeing the private sector to make those investments?

    Business will usually only invest over timelines that can reasonably produce a profit. Many technological advances are beyond that timeline. The benefits of education are also only felt over generational time scales. The benefits of infrastruture are society-wide, which is why most roads are built by governments. 
     
    Danny Lemieux: Note that the authors argue that a historically high-rate of GDP growth would be required.

    (You may want to provide quotes. It’s a rather long report.) They seem to suggest that investments in high ROI growth are an important part of the solution, though it can’t be the full solution. Again, medical insurance is by far the largest component of the long term fiscal problem, so bending that curve would seem to be paramount.

    USA Inc. should examine ways to invest in growth that provides a high return (ROI) via new investment in technology, education, and infrastructure and could stimulate productivity gains and employment growth.

    Over the long run, there will be increasing competition from other countries. This could lead to job dislocation and unemployment. It’s important to maximize utilization of all resources, including labor. That means increasing productivity and creating new kinds of jobs as the technology evolves.
     

  • jj

    Liberals wake up?  haven’t seen that.

  • suek

    How do you get both an increase in productivity _and_  and increased employment?

  • kali

    Zach:
    “Business will usually only invest over timelines that can reasonably produce a profit. Many technological advances are beyond that timeline”
     
    Your basic thesis seems to be that business as a class is too short-sighted to generate the economic growth we need. Am I reading that accurately? If so, then two points: first, business is always forward-looking, it’s where the profit is. What shortens the planning horizon is that every two years, the government changes the rules, and the cycle seems to be shortening even more. No one can plan when the costs of running a business vary from year to year depending on regulations, or when markets are cut off, re-opened, and cut off. Fear, uncertainty, and doubt make a lousy setting for investment. Everyone pulls in then, from the micro to the macro level.
     
    Second, buried in this critique of business is the assumption that government can make better economic choices than entrepreneurs can. Even if we elect angels, the interest of government is government. When it comes down to a choice, any politician will chose the best political outcome, not the best economic. And since we don’t have any angels in Congress, the choice will be whatever benefits the most useful interest groups.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    suek: How do you get both an increase in productivity _and_  and increased employment?

    There are several solutions, but for developed countries, it will center on technology and education driving economic growth. 
     
    kali
    : Your basic thesis seems to be that business as a class is too short-sighted to generate the economic growth we need. 

    Business generate economic growth because it can react to local conditions quickly. This ability also tends to make businesses myopic, as we saw with the financial meltdown. 

    “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.” — Alan Greenspan, noted monetarist. 
     
    kali
    : If so, then two points: first, business is always forward-looking, it’s where the profit is. 

    Corporations have to generate profits to stay in business, so they necessarily have limited time horizons. Some technological investments are beyond the capability of any competitive enterprise. On the other hand, businesses can take a new technology and implement it in the marketplace much more efficiently than government. That’s why all successful developed nations are mixed economies, with government investing over long time horizons, and businesses bringing new technologies to markets over short time horizons.  
     
    kali: Second, buried in this critique of business is the assumption that government can make better economic choices than entrepreneurs can.

    Governments have a broader scope than any business. There was no profit in going to the Moon, yet it profited the U.S. greatly. The interstate system was a government-led effort, not a system of toll-roads built for profit. In democracies, grand projects can represent the aspirations of a people. Today, the U.S. is the center of technological achievement, with much of that research funded by the government.   
      

  • Charles Martel

    It would be interesting to see listed, as examples, three current government-sponsored research projects, beyond the ken of shorter-sighted corporations, that are expected bring great economic benefits in the future.

    I cannot think of one so would appreciate the help.

  • Danny Lemieux

    CharlesM…wind power, people power and unicorn power, in increasingly likely order of positive outcomes.

  • Danny Lemieux

    Seriously, I think the next two big technological waves are going to come from nanotechnology and superconductor technology. However, this will come from private industry, not government.

  • Charles Martel

    Thanks, Danny. I’d add electric cars to the list. How’s that government-owned Volt coming along?

  • suek

    “Increased Productivity” = more output per employee.  That means that fewer employees are needed.  So…what do we do with the employees that are _not_ needed?

  • Danny Lemieux

    Suek, they are unclear on the concepts. That’s OK…we detect progress.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    suek: “Increased Productivity” = more output per employee.  That means that fewer employees are needed.  So…what do we do with the employees that are _not_ needed?

    The same thing you do with all those former agricultural workers who are no longer needed. Create new goods and services. That’s the technology part.
     
    Danny Lemieux: … superconductor technology …

    We can use that as an example. Superconductivity was discovered in 1911 by a university research scientist, Kamerlingh Onnes, at the University of Leiden. Later research determined some of the key properties of superconductors, such as the Meissner effect. This research culminated in a complete theory in 1957. Only in 1962 was the first commercial superconductor developed, by Westinghouse. Even today, government is a primary purchaser of advanced superconductors, such as for the Large Hadron Collider, another important scientific project that is too vast and on too long a time line for industry. 
     

  • SADIE

    So…what do we do with the employees that are _not_ needed?
     
     
    Soylent Green ;)

  • Charles Martel

    So…what do we do with the employees that are _not_ needed?

    Give them government jobs creating the technologies and infrastructures of the future, silly.

  • Danny Lemieux

    So…what do we do with the employees that are _not_ needed?

    Well, they could go to community college and learn new technical skills, but that’s hard.

    Alternatively, they could go to school and learn hobbies or absolutely useless things like ethnic or gender studies, sociology, music, art, poetry writing, video making, acting, psychology, warm-fuzziology, environmental “science”, political science, only to discover that there really isn’t much of a market for such learnings (so, so unfair!), whereupon they can go and start not-for-profits and petition the government (i.e. taxpayer) or Mommy and Daddy (did I just repeat myself?) to subsidize them so that they can “repair the world” and feel good about themselves.

    Or, they can try reading tarot cards for a living, which is probably much more useful and less destructive to society.

  • http://photoncourier.blogspot.com David Foster

    “Innovation” does not always imply “technology” in the sense the latter term is typically used today. One of the most important innovations of the last 50 years is the Toyota Production System (“lean”)…it does not involve any magical new machines or materials, just better ways of organizing the human work of manufacturing. And Toyota was much more successful with this approach than was Roger Smith of GM with his robot-focused approach.
    Looking back a little further, supermarkets and department stores were also basically process innovations rather than technology innovations per se. Container freight, that vast enabler of globalization, was a combination of technology and process innovation.
    Also, “technological innovation” is not a synonym for “R&D.” Xerox accomplished great R&D feats at Xerox PARC, but the commercialization of these ideas (and the profits therefrom)  went to others.

  • Mike Devx

    Zachriel:  Some increases in revenues are undoubtedly needed, including long term gains in productivity from prudent investments in technology, education and infrastructure

    Ah, we see Zachriel promoting the benefits of government force via “prudent investments”.  As “they” have made clear in other followup posts, this is what Zachriel is speaking of: government control and government “investment”.  Right in line with Obama, who never spends taxpayer money, but only “invests”.

    I have *never* yet seen Zachriel take a position I would consider conservative.  Yet Zachriel appears to speak for conservatives.  If you look at “their” blog, at least, which has no recent entries.  In all of Zach’s commentary on these threads in Book’s domain, Zach hasn’t, to my knowledge, claimed to speak for conservatives.  Any more.

  • Danny Lemieux

    We now know, thanks to a recent Congressional Office Report, that Obama’s $821 billion stimulus plan (which is more than the entire cost of the Iraq war) is an abject failure and that each job supposedly saved or created by the government cost $228,055.
     
    Now, we could drill down into the data and question just how the CBO measured “jobs saved or created” or how much of that $228,055 actually ended up in the pockets of each “job” holder, but that would be anathema. We simply cannot be allowed to question the dogma that issues from the Temple of Orthodoxy, say some. We must accept it at face value.
     
    Hence, we shall have to resign ourselves only to conclude that the Obama stimulus was an abject economic failure and a waste of colossal proportions for which we and our children will be paying with years of additional servitude to their government.
     
    I shall now simply give you a link to the CBO report with no analysis, as no analysis is needed. The Temple has spoken.
     
    http://www.cbo.gov/ftpdocs/120xx/doc12074/02-23-ARRA.pdf

  • http://ymarsakar.wordpress.com Ymarsakar

    Danny, that temple also requires dues in the form of tithes. And they aren’t voluntary.

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Danny Lemieux: We now know, thanks to a recent Congressional Office Report, that Obama’s $821 billion stimulus plan (which is more than the entire cost of the Iraq war) is an abject failure and that each job supposedly saved or created by the government cost $228,055.

    Much of the stimulus is in ongoing tax cuts or hasn’t yet been spent. The effect on jobs is not just in a single year, but spread over a number of years. Full-time equivalent jobs (in millions) is estimated as follows:

      2009, 0.7-1.3
      2010, 1.9-4.8
      2011, 1.2-3.7
      2012, 0.2-0.7

    Taking the cost of $821 billion, and dividing it by the midpoint of each range, that’s 7¼ million job-years, or about $56000 per job-year. For the families directly affected, this was crucial support, and prevented them having to depend on unemployment, and the problems of reentering the job market after a long absence. Many gained valuable work experience, which will help them in the future. (A Google-search reveals how the right-wing echosphere continues to repeat the $228,055 number.)
     
    Danny Lemieux: Hence, we shall have to resign ourselves only to conclude that the Obama stimulus was an abject economic failure and a waste of colossal proportions for which we and our children will be paying with years of additional servitude to their government. 

    Because we know what a great economy Bush Administration policies left behind. In any case, most economists understand that the economy was in free-fall, so a stimulus provided an important bulwark against collapse. And many of the jobs built things of value. The U.S. is still enjoying the parks and roads built by the CCC in the 1930’s. 
     
    Danny Lemieux: I shall now simply give you a link to the CBO report with no analysis, as no analysis is needed.

    Thanks for the link. That’s where the numbers above came from. 
     

  • http://zachriel.blogspot.com/2005/07/liberal-v-conservative.html Zachriel

    Zachriel: or about $56000 per job-year.

    Oops. That should be $112000 per job-year, or about half the number usually quoted.