Saturday, December 11, 2010

Why Borrowing Money is NOT the Same as 'Free"

Kindred, you ignorant slut. Of course, I mean that in a loving way, because Mr. Winecoff has given me a chance to explain an objection that many people may have had.

I wrote this piece. Then I tried to explain, using this "joke" that wasn't funny.

Then Kindred had this (updated) response.

Okay.

Consider three offers to sell a car.

A. You can buy this car for $10,000
B. You can buy this car for a 60% discount, or $4,000
C. You can buy this car for $4,000 down, and finance $6,000

My claim was that the Republican tax cuts pretended to offer us deal B (big free discount), but in fact offered us deal C (borrow part of price). Deal B is WAY better than Deal C, but it was fake. If someone offered you B, but your contract said C, that would be fraud.

Kindred's objection was that many people prefer Deal C (borrow part of price) to Deal A (pay full price). Um...yes. That's why it is, as he rightly notes, very common. But his objection is a non sequitur. (He's a smart guy, and knew this, I'm pretty sure.)

I never said A was better than C. I said it is a lie to offer B, and then get C.

And Kindred, one other thing: when you cite Wimpy on time preference, you really should cite Chapter 10 of my ANALYZING POLICY book. That is the primary source on Wimpy, I'm pretty sure. Check p. 323...

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On the surgery: I can see a whole bunch of bubbles, and the giant red/blue disk of detached retina is getting less opaque, though not smaller. I type this looking straight down over my laptop. Can't use regular computer, or do much of anything else. We'll know by Monday if the surgery is going to work....

8 comments:

eightnine2718281828mu5 said...

To spend is to tax, so the only way to cut taxes is to cut spending.

But you're not likely to hear that from Fox or Rush.

Richard Stands said...

"To spend is to tax, so the only way to cut taxes is to cut spending."

I agree.

That's why I'd leave taxes at the same rate they've been for nearly a decade. Decrease the spending; leave tax rates the same.

It's the spending.

Richard Stands said...

I'd prefer option D: buy a $1000 car and don't finance anything.

Since all decisions at this car lot are made unilaterally by the car salesman (who you get to vote out every few years, at least), allowing him to force you to buy an expensive car is less desirable than allowing him to force you to buy a cheaper one.

It depends on your view of the legitimate function of this "car". For me, it's secure transportation (defense of rights) and nothing more. For others it's seating for 50 million welfare recipients, placards bearing the name of the salesman (Murtha) for posterity, and hyper-active driver restraint systems (Obamacare).

I'll pass on the gold plated $10,000 Trebant, no matter how it's financed.


(And best of luck with the ocular convalescence. Perspicacity like yours is much appreciated.)

eightnine2718281828mu5 said...

The population is aging, which consumes more government services, so if you want gov't spending to stay flat DoD will have to be cut to pay for SS, etc.

Richard Stands said...

Personally, I'd happily agree to large DoD cuts and a retasking of military to actual defense rather than foreign adventures and world policing.

But rather than keeping spending flat, I'd advocate decreasing it. This would mean Medicare, Medicaid, Welfare and other entitlements should be put on a long road towards drastic reductions or complete extinction. Social Security and Unemployment should also be put on this road. The road might be quite long for each of these in order to help people wean off of current expectations and dependencies, but absent such a commitment, the current conditions cannot last.

eightnine2718281828mu5 said...

---
entitlements should be put on a long road towards drastic reductions or complete extinction.
---


Communism built a system based on assumptions that flew in the face of observed human behavior and that didn't turn out so well.

Assuming that the existence of perfectly rational actors will allow us to eliminate SS is about as useful as assuming that an enlightened proletariat will lead us to a utopian withering away of private property.

Richard Stands said...

Sadly, I have to agree there. There is no incentive for any politician to begin traveling on any such road.

Of course, that doesn't stop me from advocating it.

Elizabeth J. Neal said...

For others it's seating for 50 million welfare fast cash loans recipients, placards bearing the name of the salesman (Murtha) for posterity, and hyper-active driver restraint systems (Obamacare).