There Is No Debt Crisis

Fake Debt Crisis

The graph above is from Matt Yglesias. It is taken from information in a new book by Thomas Piketty, Capital in the Twenty-First Century. What it shows is something that Dean Baker talks about a lot: it is ridiculous to simply look at government debt. As he has pointed out a number of places, the federal government owns hundreds of trillions of dollars in land. If it wanted to pay off its debt, it could just sell a bit of it.

What the graph shows specifically is that since the country was founded, we have had more federal government assets than we have had debts. Even at the peak of our debt during World War II, we were producing more in assets. And that has continued all the way to today. As Yglesias writes:

The conventional way for debt scaremongers to measure the national debt is to compare gross public debt to GDP. But the normal way you measure the debt load of a business or a household is to ask for a net figure. Just because you have hundreds of thousands of dollars in mortgage debt doesn’t mean you’re a pauper. In fact it probably means you’re a rich person who owns an expensive house. It is of course possible to take out a large mortgage and then end up “underwater” because house prices decline, but it’s simply not the case that a large amount of gross debt is a sign of overextension. It’s typically a sign of prosperity and creditworthiness.

This is the graph we should all look at whenever the “problem” of public debt comes up. There is no debt crisis. There has never been a debt crisis. It is just a fear that conservatives use to force cuts on government programs for the poor and middle classes.

There is no debt crisis!

Herd Mentality on Shark Tank

Shark TankI just caught the very end of this week’s episode of Shark Tank. As you may have noticed in the past, I don’t care for the show. It provides a ridiculous view of how venture capital actually works. But more important, it mythologizes the rich and pushes the idea that the rich are entrepreneurs when usually they are anything but. The people presenting are entrepreneurs, but the people in the chairs are generally not, although some of them used to be.

The bit I saw tonight was a perfect encapsulation of the show. Some doctor was producing some kind of medical device that she wanted to market to the general public. She valued her company at $5 million. The most annoying of the “sharks,” Kevin O’Leary made an offer based upon his belief that the company was worth $3 million. After this, two other “sharks” made offers that went along with the $3 million valuation. The doctor stood firm on her valuation. At that point, one of the “sharks” that was not interested in investing told her that she was crazy not to go with O’Leary’s offer because clearly her company was only worth $3 million.

And how did this “shark” know that it was only worth $3 million? Because three of the sharks all believed it. Such is the nonsense of the “sharks.” They all see themselves as equals in one way: as rich people, they all feel that the entrepreneurs who are looking for venture capital should treat them as the gods they seem themselves as. How dare this doctor question the combined wisdom of the sharks!

There are two issues here. First, the doctor understands her company and the market far better than the “sharks”—none of whom is an expert in her field. And in the discussion, she argued that the company was worth more because in that field, most products fail long before they reach the point she had with her company. Effectively, she made the same argument that I make about the entrepreneurial process: the hardest part is the idea and making it work. From that point, it is just a matter of effective management. She’s asking for venture capital, not an angel investment.

The second issue is critical to why I despise the show. When O’Leary came up with his $3 million valuation, it wasn’t based on anything. He had no reason for thinking that. If she had valued it at $7 million, he probably would have “determined” that it was worth $5 million. And when the doctor pushed back on it, the only response she got was cant about investment risk, as though investors should get a huge return on their investments without taking risk. What’s more, there are two reasons why the other “sharks” jumped on the $3 million valuation. First, it’s just herd mentality.[1] Second, it was in their best interest in terms of negotiation. By grabbing it, they put themselves in a position to get a better deal on their investment. No one was going to say, “I think Kevin is totally wrong; your company should be valued at $7; I’ll give you the money you want, but I’ll take a smaller percentage of your company!”

When I see the show, I almost always hope that the entrepreneur will walk away. It usually is a bad deal. What’s more, I can see a lot of interesting ideas being turned into quick profits rather than solid going concerns. In this case, there was a happy ending: the doctor respectfully declined the offers. And the “sharks” were amazed that anyone would question their inerrancy. I think rather than “sharks” they should be referred to as “catfish,” because they are bottom feeders who prey on the dreams and desperation of the best that humanity is.

[1] Actually, at one point, another of the “sharks,” Robert Herjavec, offered to add half as much to O’Leary’s offer. It seemed to be a way of splitting the difference. But O’Leary immediately jumped in and said something like, “I still want 20% because I think the company is only worth $3 million.” Herjavec backed him up on that, but that wasn’t what it sounded like he was proposing. So there was clear indication that their valuations did not agree and were little more than WAGs.

Three Nobels and a Funny Man

Paul KrugmanIt has been one year since Pope Benedict XVI resigned. I think that is hilarious. I don’t begrudge him, but if God really cared about who the pope is, why would he allow such a thing? Wouldn’t he just kill the old man and have things work the right way? As with most thing religious, it just doesn’t make sense. But there is no doubt that the new pope is a much better choice to head the Catholic Church. While I don’t think that Pope Francis is going to do anything radical, he has already started to reform a lot of the corruption that is in the church. And if Catholicism is to survive as a going concern, it must evolve. And I say that knowing, as many conservative Catholics seem not to, that the church has always evolved. Once upon a time, the Catholic Church did not believe that a fertilized egg had a soul. Now it does. Perhaps it will further evolve to the point of understanding that it doesn’t. Pope Francis could lead the Catholic Church forward; Pope Benedict could only have led it backwards.

Linus PaulingOn this day in 1901, the great scientist Linus Pauling was born. His work spanned a number of fields. He was, at base, a chemist. His first Nobel Prize was for his work on chemical bounds in complex chemical structures. According to Wikipedia, “His discovery of sickle cell anemia as a ‘molecular disease’ opened the way toward examining genetically acquired mutations at a molecular level.” This is why Francis Crick said he was the father of molecular biology. Later in his life, he became a peace activist. His work against nuclear weapons proliferation and testing won him a second Nobel Prize. He also had some controversial beliefs about the effectiveness of vitamins in combating cancer. But no one is right all the time. He was far greater than any man has a right to be.

Last year, the day went to the great actor Zero Mostel who was born in 1915. As I noted then, I especially like him because of the feud that he had with Mel Brooks (a well established asshole who isn’t capable of giving anyone credit for anything) during the shooting of The Producers. Here he is in the film:

Other birthdays: philosopher Michel de Montaigne (1533); illustrator John Tenniel (1820); philosopher Ernest Renan (1823); screenwriter Ben Hecht (1894); pilot Jadwiga Piłsudska (94); actor Charles Durning (1923); actor Stanley Baker (1928); actor Gavin MacLeod (83); musician Brian Jones (1942); actor Bernadette Peters (66); actor John Turturro (57); and writer Daniel “Lemony Snicket” Handler (44).

The day, however, belongs to Paul Krugman who is 61 today. He is, as anyone who reads this blog knows, a great economist. His academic research was on deflation in Japan in the 1990s. That was perfect background for what has been happening in the west for the last seven years. The most important thing that he’s been saying since the start of this economic downturn is that inflation is not a problem. Slowly, it seems that liberal politicians have figured this out. Conservatives, of course, continue to think that hyperinflation is just around the corner. What’s really going on with conservatives is their belief that even the smallest amount of pain suffered by the rich is unacceptable. The truth is that if we doubled the current rate of inflation in this country, it would be a great thing for the working class. And it would not be that bad on the owning class. But given that the owning class also owns the political class, that will never be allowed to happen.

It is interesting that on this, his 61st birthday, Krugman also announced that he is leaving Princeton University to move to the Graduate Center, City University of New York. He says it is because his interests are now more in public policy than straight economics. Also, his life is more focused on New York. It still seems like an odd move, but I suspect City University is paying a lot for Krugman. Regardless, I like the idea of Krugman focusing more on public policy. I’ve always found his economic lecture slides kind of boring. But his outlook on the political environment is always insightful.

Happy birthday Paul Krugman!

Obamacare Helps the Poor and Sick

We Heart ObamacarePaul Krugman wrote a very interesting article earlier this week, A General Theory of Obamacare Fiction. Basically, he tries to given general advice to tell if any particular Obamacare horror story is true. But I think his article is a bit muddled, so I thought I would go through it here and try to make it plain.

There are two groups of people who one might say are losers with Obamacare. The biggest category are the rich. In general, they won’t lose out because of anything to do with their insurance. Obamacare is largely funded by a tax on very high income earning people. And as I’ve noted before, this is why conservatives hate Obamacare. So let’s not ever lose sight of this most important issue regarding the Republican Party and Obamacare. The reason they hate it is that it taxes the rich, but they understand that they can’t say that. People won’t be sympathetic to that cause.

The second group of people who might be said to be losers are young men. If they currently have catastrophic coverage—like something with a $10,000 deductible—they will now be forced to get a more reasonable policy and it will almost certainly cost more. But these kinds of policies are not generally the kind of things that poor people get. For poor young people, losing $5,000 in one year due to a medical problem would likely be enough to force them into bankruptcy. And extremely high deductibles are mostly only useful for people who are worried about protecting their assets, not their health.

Regardless, even this second group is not going to fly as a source of hard luck stories designed to vilify Obamacare. For one thing, healthcare policies for young men are now and will continue to be rather cheap. So even doubling the cost of insurance from $100 per month to $200 doesn’t have much shock value. You can see the reason why the Republican Party is not going to this well for their outrage stories.

What this all means is very simple. Suppose someone comes to you with a story, “Person A is being screwed by Obamacare!” Unless Person A is a young man or a very wealthy person, the story is nonsense. And thus far, the only story that falls into that category is Cathy McMorris Rodgers’ claim during her State of the Union response about Bette in Spokane. In that case, Bette seems to be rich. She is at least rich enough that she wouldn’t use the state exchanges to save at least hundreds of dollars per month on her health insurance, simply because of her ideological rigidity.

Or you could just wait a day or two after any Obamacare horror story comes out to see what is actually going on. Because the stories always collapse after the smallest amount of journalistic digging. But as Krugman notes, it isn’t necessary to wait for the facts. We know how Obamacare works. It harms the rich and healthy a small amount in order to help the poor and unhealthy a lot. So a poor middle-aged woman dying of cancer will be helped by Obamacare. If someone says otherwise, they are lying.

Good and Bad From Terry Fator

Terry Fator: Live from Las VegasLast night, after watching The Painting, I searched Netflix for “Terry Pratchett,” probably because it was Richard Coyle’s birthday and he had starred in Going Postal. There were no Pratchett related films, but Netflix offered me, Terry Fator: Live from Las Vegas. If you don’t know him, Fator is a ventriloquist who won Amerca’s Got Talent. I knew him from the documentary Dumbstruck. And since watching it, Google offers me ads for his Las Vegas show all the time.

As usual, Netflix’s rating system was dead on. It’s “best guess” rating for me was 3 stars, while the average rating was 3.8 stars. At first, I thought this was odd. Fator is a ventriloquist, after all. I love ventriloquists and puppets. But reflecting on it a moment, I had to admit that I wasn’t that impressed with Fator. He is a passable ventriloquist and not much of a puppeteer. What he is, however, is an exceptional singer and impersonator. So it wasn’t too surprising that Netflix thought I would be lukewarm on it.

What I wasn’t prepared for was just how uncomfortable Fator is on stage. This isn’t unusual for a ventriloquist. But given that he doesn’t even try to do puppetry, much of the show is frustratingly static: man standing with puppet. The show actually gets substantially better when Fator does a song himself, even though he’s still far from relaxed.

A bigger problem for me is that the show is not well written. The bits are tired with very little wit—most of them are variations on old jokes. And it is painfully clear that they are just meant to kill time in between songs. I suppose that would be fine if I enjoyed the songs more. But most of the time, the songs just seem weird to me. Why is the guy singing while holding a puppet? But sometimes it does work, as in his final number, a duet of “What a Wonderful World” with his turtle doing a rather weak Kermit the Frog voice and Fator doing a passable Louis Armstrong. At least there is interaction in the routine.

Ultimately, Terry Fator provides an act rather similar to Jeff Dunham. There’s no doubt that Fator is distinctly better than Dunham. But both acts appeal to lowbrow tastes. Dunham is marginally more funny, but Fator has the musical numbers and is technically far better. And as a show in Las Vegas, that’s fine. On video, it just sits there (like Fator and his puppets) and is marginally interesting but hardly entertaining. I think this clip shows Fator at his best and worst:


I know it is a matter of taste, but I continue to come back to the far less popular Dan Horn. Horn is by far the best puppeteer I’ve ever seen working as a ventriloquist. He’s also one of the better ventriloquists and his material is strong. But ultimately, when I watch him, I think I’m watching two people up on stage. The weirdness I feel while watching Fator’s awkward performance simply isn’t there with Horn. That’s not to put down Fator. And I can see why Fator’s act fits in rather well in Las Vegas in a way that Horn’s would not. But the two performers show the vicissitudes of fame. Here is just a taste of Dan Horn: