Optimism

New York Times columnist David Brooks is playing contrarian, and expressing a high degree of optimism about America's future. To a great extent, I agree with his point of view. But not completely.

Brooks alludes to "a fiscal crisis" but doesn't discuss it in any detail. As I see it, if the U.S. is going to have any sort of bright future, we will first need to deal with the issue of Social Security and Medicare solvency. The choices are either some combination of benefit cuts and/or tax increases, or default on the unfunded obligations.

Immigration and its demographic effects, as described by Brooks, will ameliorate the solvency problem to some degree. But I don't think it will come anywhere near restoring the balance between workers and retirees that allowed Social Security to appear to work over its first few decades.

I see no basis for optimism about this country's future if that issue is not adequately addressed. Ideally, we should wean future generations off of the Social Security and Medicare Ponzi schemes as soon as possible.

I also take issue with the concept of national competitiveness, which underlies much of Brooks's argument. He notes that, on average, American workers are 10 times as productive as their Chinese counterparts. Is that a good thing? Brooks seems to take it for granted that the answer is "yes". But I disagree.

The more productive that Chinese workers become, the better off Americans are, on the whole. Of course, if Chinese workers get more efficient in making widgets, they might put American widget makers out of business. But an American is as likely to be a customer to the Chinese manufacturer as a competitor. A customer will benefit from greater efficiency on the part of a manufacturer, because that will decrease prices.

The U.S. gets some benefits from having the world's largest economy. It's the main factor making us the predominant military power in the world. We haven't always used that power wisely, and it's a bit of a mixed blessing when we're called upon to be the world's policeman, but, on balance, I'd rather be in our position than not. Also, we can borrow dollars from international creditors, and therefore we're shielded from the foreign exchange risk that can bedevil other debtor countries.

But we're nowhere near losing either of those advantages, regardless of how much China's economy grows in future years. So we have every reason to celebrate improvements in other countries' productivity, which will create better markets for our exports, and hold down the prices of our imports.

My view is that the concept of national competitiveness is based on the fallacy of composition. An individual business benefits from being more efficient than its competitors. But that doesn't mean that a country benefits from inefficiencies in other countries.

I hope you're right, Larry

I agree with what Larry Kudlow writes in this blog post about freedom of contract.

But I don't know that he necessarily has a basis for being so bold as to say "Republicans have clearly become the party of the private sector."

Many of us hope that that is the case. But it's one of the big unanswered questions going into the 2010 and 2012 elections. The Republicans' record, when they controlled the political branches of the federal government from 2003 to 2006, is not encouraging in that regard.

The 2003 Medicare expansion wasn't Obamacare, but it was a giant step in the wrong direction, right at the time we should have been preparing for the demographic time bomb that will soon hit the FDR and LBJ Ponzi schemes. We need to, at the very least reduce, and ideally phase out, Medicare and Social Security in their current form.

George Will provides a good summary of that situation, in case by some chance you might need a reminder.

I'd like to see this question asked of Republican candidates at every opportunity: will you indeed be the party of the private sector when you're back in power?

Krugmancare

What better way to kick off this new blog than by arguing against this New York Times op-ed piece by Paul Krugman?

Krugman cherry-picks a handful of extreme statements, and asserts that they discredit the entire Republican position in opposition to Obamacare. Are the congressional Republicans really the extremists Krugman makes them out to be?

He defines Republican extremism on health-care issues in terms of Ronald Reagan's opposition to Medicare. But Reagan has been proven right on that issue, as he has on so many others.

Medicare is not financially sustainable in the near and long term. Like its friend Social Security, Medicare is a ponzi scheme, and the kitty will soon run out as lower birth rates and higher life expectancy continue to destroy the programs' rationale.

That viewpoint is sensible. And if you want to call it extreme, so be it.

It will be interesting to see whether Krugman's enthusiasm for majority rule in the Senate still holds up when the Democrats next find themselves in the minority in that body. Each of the two most recent presidents has spoken favorably about "up or down votes" in the Senate, but only when his party had a Senate majority.

That point of view runs counter to George Washington's view of the Senate as the place where "we pour legislation into the senatorial saucer to cool it." And, if I forget that, the next time the Republicans are in the majority (2011? 2013?), please remind me.