Thursday, December 27, 2007

So I took Ezra Klein's advice.....

.... and read the transcript of Ron Paul's appearance on "Meet the Press". Here is a nugget:

MR. RUSSERT: Under President Paul, if North Korea invaded South Korea, would we respond?

REP. PAUL: I don't--why should we unless the Congress declared war? I mean, why are we there? Could--South Korea, they're begging and pleading to unify their country, and we get in their way. They want to build bridges and go back and forth. Vietnam, we left under the worst of circumstances. The country is unified. They have become Westernized. We trade with them. Their president comes here. And Korea, we stayed there and look at the mess. I mean, the problem still exists, and it's drained trillion dollars over these last, you know, 50 years. So stop--we can't afford it anymore. We're going bankrupt. All empires end because the countries go bankrupt, and the, and the currency crashes. That's what happening. And we need to come out of this sensibly rather than waiting for a financial crisis.

Hmmmm. Are the people of South Vietnam really better off for our leaving than the people of South Korea are for our staying? I mean you can say it's wrong to be involved at all. You can take a position of non-intervention as a given, but Paul is making a cost benefit argument here and saying that the benefits are negative.

Well let's consult our friend the Penn World Tables. In 2003 (the last year with data for all three entities), we find the following figures for per capita income. Vietnam: $2560, South Korea: $17,595, North Korea: $1428 (these numbers are adjusted for deviations from PPP and the variable I use is called RGDPL). So South Korea is 7 times richer than Vietnam and we have the natural experiment of what happened to North Korea. I think you can argue that if we'd left Korea the same way we left Vietnam (during the war), Korea today would look like Vietnam at best. Conversely, if we'd stayed in Vietnam, South Vietnam today quite likely would look like South Korea.

Now you can say, we've been in South Korea long enough, time for them to stand on their own two feet (and with a more than 10x greater wealth than the North, clearly they should). Or you could say despite the amazing success of our policy with South Korea it wasn't worth the cost. But you can't really say what Paul is saying. It doesn't make sense.

Also, I don't think you can say "we can't afford it" and "we're going bankrupt". It's just not true. It's just not even close to true.

I think Ron Paul should stick to "these are my principles, my ideology," and not try some whacked out instrumental arguments for his positions.


Shawn said...

...first time I've read a numbers-based economics blurb that made sense. Thanks for the input.

Nathanael D Snow said...

I think a better answer is why should we give a damn? Why is it our problem? The second and third worlds always have and always will quibble among one another, and until they adopt principled liberty we can't expect anything from them except the unexpected.
They are not our trouble. We should stay out of all foreign disputes and only use military force defensively. Bring all the boys home and let them be productive in industry. This is the principled response, which Paul ought to have given, and ought to have left the C-BA alone.
But, where does Mungowitz stand on using Principles vs. C-BA's? I was under the impression he was a consequentialist. Is there a resolving of the two?

Nathanael Snow

Dirty Davey said...

Conversely, if we'd stayed in Vietnam, South Vietnam today quite likely would look like South Korea.

Shouldn't this more accurately begin: "If we had achieved a stalemate along a defensible line and stayed in Vietnam..."?

After all, we left in large part because we didn't have the ability to keep South Vietnam intact without active fighting.

Anonymous said...

Come on DUDE, you think the country is not bankrupt? WTF? Consider opening your eyes, mon ami. No, no, better yet, keep them closed and hire someone from South Korea to read the following to you. It's a speech David Walker, Comptroller General of the USA, gave to the National Press Club on December 17th, 2007:


This morning, the Treasury Department released the 2007 Financial Report of the United States Government. Candidly, if the federal government were a private corporation and the same report came out this morning, our stock would be dropping and there would be talk about whether the company's management and directors needed a major shake-up....

From a short-term perspective, it's true that our federal deficits have declined for three straight years and declining deficits are better than rising deficits. However, we are still running large deficits on an operating basis [i.e., excluding the Social Security surplus]....

Our current deficit and debt levels are not unduly troubling as a percentage of our national economy. However, these deficit levels and related debt burdens are set to escalate dramatically in the near future due to the retirement of the "baby boomers" and rising health care costs. The fact is, absent meaningful reforms, America faces escalating deficit levels and debt burdens that could swamp our ship of state!....

The federal government's total liabilities and unfunded commitments for future benefits payments promised under the current Social Security and Medicare programs are now estimated at $53 trillion, in current dollar terms, up from about $20 trillion in 2000. This translates into a defacto mortgage of about $455,000 for every American household and there's no house to back this mortgage! In other words, our government has made a whole lot of promises that, in the long run, it cannot possibly keep without huge tax increases.

The Medicare program alone represents about $34 trillion of our current $53 trillion fiscal gap. If there is one thing in particular that could bankrupt America, it's runaway health care costs. And don't forget, the first "baby boomers" will begin to draw their early retirement benefits under Social Security in a couple of weeks! And, just three years later, they will be eligible for Medicare. When "baby boomers" begin to retire in big numbers, it will bring a tsunami of spending that, unlike most tsunamis, will never recede.

The prescription drug benefit alone represents about $8 trillion of Medicare's $34 trillion gap. Incredibly, this number was not disclosed or discussed until after the Congress had voted on the bill and the President had signed it into law. Generations of Americans will be paying the price—with compound interest—for this new entitlement benefit. In many ways, the 2003 Medicare prescription drug episode arguably represents government "truth" and "transparency" at its worst. Unfortunately, based on adding the prescription drug benefit and other spending and tax actions, the federal government seems to be ignoring the first rule of holes in connection with its fiscal affairs. Namely, when you're in a hole, stop digging!


So clearly we are not bankrupt as you proclaim! Clearly we are in a position to trot our aircraft carriers around the world. Clearly it is our divine right to tell people how to live, becuase isn't it so clear to you that we know best how everyone else might live? We do!

Sure, we shoulda stayed in Vietnam and won more battles and had more boys (BOYS, DUDE) die in order to smother the communists who eventually ended up giving up on their own stupid accord. Shit, why stop there. Why did we ever hand control of East Germany over to the communists? And why have we ignored China for all these years?

You know what? I think you like to think you can enforce your morality on other people, that you know best. But I don't see you singing up to go to Iraq. I don't see you volunteering to fight in the Israeli army. I don't see you writing extra checks to the government that you don't have to write to help support the cause of global liberation. Sure, in theory it's a nice idea: let's help everyone! But do this first: go tell your wife that your son needs to go to Vietnam to fight a stupid war that has no meaning other than providing those waging it a crutch for their power, see how your wife likes that. Then go talk to guys who fought over there and see what they think about your idea to spread American Consumerism to the rest of the planet. If the planet chooses the American way, god bless them. But it sure as hell isn't going to be going over there to ram it down their throats as you suggest we might do.

Good day.

Shawn said...

...didn't realize they handed out free crack for christmas. Glad you got some, dude.

Angus said...

Dear Mr. Anonymous Ranter: If you actually read what I wrote, I did not endorse military intervention. I criticized Ron Paul for making bizarre statements about the benefits of intervention. I clearly say that it's totally fine to say "anti-intervention is a bedrock principle" and leave it at that.

As for out country being bankrupt, that is just plain silly.

Anonymous said...

In business, taking on debt is a good thing, as it presumes you're investing in projects with a higher return than the cost of capital. Otherwise, you "can't afford it".

How does this play out with government? It seems (I could be wrong) as though the government invests primarily in negative return projects and finances them through inflation. As long as firms increase output and hold down inflation by implementing new technologies, the government can possibly maintain liquidity.

I would be interested to hear more from Angus on how we're not going bankrupt, because I tend to share Anon Ranter's perspective that the babyboomers are taking us into bankruptcy.

Angus said...

US GDP for 2006 is 13 trillion plus. Total accumulated government debt for 2006 is around 9 trillion plus. This is not an historic high (in terms of percentage of GDP) for the US.

If the country was bankrupt, why would people still be loaning us money?

Projecting "unfunded liabilities" out into the future to create a big number is just (in my opinion) a liberal scare tactic to try and justify tax increases. Social security benefits will have to be adjusted. The current form of health care (fee for service, employer insurance with govt. tax breaks for same) will have to be adjusted. Probably won't happen cleanly or efficiently, but it's nuts to assume that those future numbers are inevitable or even likely.

baby boomers are selfish pigs for sure, but America will survive them, no problem.

I am a big fan of letting economic growth and plentiful legal immigration help us survive our governmental excesses.

Dirty Davey said...

Projecting "unfunded liabilities" out into the future to create a big number is just (in my opinion) a liberal scare tactic to try and justify tax increases.

Or, rather, a conservative scare tactic to justify benefit cuts.

Angus said...

LOL, sure, either way could play I guess. The point is we are not "there" and we are unlikely to ever get "there".

mp said...

Angus, should any consideration be made for the fact that Vietnam hasn't been a capitalist economy for very long?

In other words, how does the rate of growth compare between the countries, as opposed to just the current per capita income?

Angus said...

DG: I think that depends. For Paul's argument, I don't think it matters. He's saying we left 'Nam (in 1975) and they are cool and we stayed in Korea and it's a mess. That just isn't right.

Vietnam has been growing rapidly, no doubt. From 1989 to 2003 their per capita income according to the PWT almost doubled from 1380 to 2560, which is over a 5% annual average growth rate (pretty darn good for per capita growth rates).

Will they catch up to South Korea with their present institutions? I don't think so.

mp said...

Thanks Angus.

I wonder if Paul was getting to something and just expressed it wrong. He's said before that he doesn't want to spread reforms around the world by force. So I think you could argue that in Paul's head those first 10 or so years before 'Nam went capitalist don't matter, and that what's important is that they did it eventually and have been growing since.

On the other hand, maybe he was just wrong. ;-)

Anonymous said...

The fact that the US is in S. Korea begs the question: How does the presence of US troops and their money impact the growth of Korea as opposed to Vietnam?