I don’t know much about Osama bin Laden. But I’ll tell what I think of him. Unlike most people, I don’t think he was a crazy and evil man. I think he was an entitled rich boy. This allowed him to be just like rich guys all over the world: absolutely certain that whatever stupid thought entered his brain must be right. Most rich people follow the likes of Ayn Rand and Milton Friedman who tell them that they deserve their wealth—that it is a sign of just how morally superior they are to all the prols they walk on.
But bin Laden was different: he took his marching orders from the Quran. It seems that like most believers of the Abrahamic religious, his reading of the book was simplistic and based mostly (Just like other rich people!) on his existing prejudices that he wanted to justify. If you look at his career, such as it is, he wasn’t that successful. He just spent a lot of time hanging around, most of the al-Qaeda leadership had abandoned him, and his greatest “success” was a fluke that certainly worked better than even he could have expected.
I imagine him sitting around his compound during those last years. He watched his pornography. He wrote about the coming Islamic revolution. Maybe he watched the newest Bollywood films. He was a man of leisure—just like all the men of his class. Anyway, he would be celebrating his birthday today if it weren’t for the fact that he is dead.
Luckily, Edie Brickell is 46 today. So I get to listen to the the Top 10 hit, “What I Am”:
The International Monetary Fund (IMF) has just put out a paper on austerity. It argues that in the medium term, austerity is self-defeating. This is because austerity causes the economy to shrink by a greater percentage than the debt shrinks.
When deficit scolds talk about the national debt, they almost always do it in raw numbers. This is because “$14 trillion” sounds a lot more scary than “Our debt is equal to about our yearly productivity.” But the proper way to look at government debt is relative to GDP or even more so Potential GDP. Traditionally, the way to get debt paid off is to outgrow it. This is how we got rid of most of our debt from World War II. (At least we did until that great debt cutter Ronald Reagan got into office.)
Given this fact, when looking at debt, we have to look at two variables: the size of the debt and the size of the economy. Those who would have us cut and tax our way out of debt introduce the concept of “confidence.” This is the idea that businesses will see that the government is “serious” about debt, think the economy will soon by roaring, and so start investing in capital equipment and hiring people. This is a ridiculous idea that shows a shocking level of ignorance about how businesses actually work. As we have seen again and again, when the government cuts its spending, businesses correctly determine that the bad economic times will continue. This is exactly why business groups were against the Sequester.
There is, of course, a time when cutting government spending will help the economy: during a boom. When the economy is humming along, government debt can make it more expensive for businesses to borrow money. This is because the government has to borrow a fair amount of the available funds to service its debt. But that is most definitely not the case right now. In a depressed economy, there is too much money looking for too few opportunities to be used. Now is exactly the time for the government to be running large deficits.
Paul Krugman created a simple model of the effect of austerity on the government’s debt to GDP ratio. He calls the country Osbornia, after the austerity true believing Prime Minister of the UK. He assumes an economy very much like our own and shows that after 5 years of gradual austerity, the debt problem is worse than doing nothing for 6 years. Of course, the problem isn’t one round of austerity. The problem is that austerity is piled on top of itself. We’ve seen this in the 2011 deficit deal, then the Fiscal Cliff deal, and now the Sequester deal.
All of this shows what we already know: all of this austerity (which isn’t nearly so bad as what they are dealing with in Europe) is slowing our economic recovery. What we need is to put people to work and grow the economy. Even the conservatives claim to understand this. The problem is that they seem to think that the way to grow the economy is to destroy the government and allow the “magic” of the market to work. The problem is that everything we know about economics shows that this isn’t the case.