Government kills private investment?

I'm still working my way through Mauldin and Tepper's Endgame, but I still wanted to talk about a couple of parts of it that I've already gotten through.

The first thing I wanted to mention is that they talk about how bigger government crowds out industry. I don't know whether that's true or not, but their argument is certainly unconvincing. Their figure 3.5 (p 59) does nothing to convince me, for a couple of reasons. One is that I've seen a graph of the US economy, over an even longer period, showing annual GDP growth versus top end marginal tax rate. I don't know about causation, but they certainly correlate well (that is, higher taxes seem to go hand in hand with higher GDP growth), and that graph (I'll try to find it again) was since WWII, so it covered a much longer period than Mauldin and Tepper's.

Another problem with that is that French medicine is socialized (more or less, I did read somewhere that that is not quite, technically, correct), and run by the government. That means that they have better controls on costs, so there is less GDP growth there, and that's a good thing for their economy.

A final issue I take with it is that it implies that GDP is the be-all and end-all of economic analysis. If you allow corporations to run rampant, the water, food, and air will all end up poisoned, and the cost of added healthcare will more than offset the higher GDP growth. And that's ignoring what happens to infrastructure when nobody will care for it (actually, it's kind of odd to miss this, as they do talk about how bad the US' infrastructure is a little bit later in the book). It also ignores things like worker safety (how much worse would the Upper Big Branch mining disaster have been if Massey Energy hadn't had to consider government safety regulations?

Moving on, I mentioned that they talked about infrastructure a bit later. It seems quite weird to me that communications infrastructure was ignored (yes, not the fault of the authors, I realize); you know, the phone system and internet. I think they're a very important part of any discussion of infrastructure.

Anyway, the reason I bring htis up is they talk about raising gas taxes by 2-3 cents a gallon each month until we stop needing to import oil. And all the funds raised would be invested in infrastructure. I have mixed feelings about this.

First, I wonder if the amount is too low. The good of that is that it isn't a huge shock with a large jump at once. The bad is that we know that it will need to be raised by (at least) a couple of dollars, so that will take a long time to get there. But maybe that time will make it more politically feasible.

Second, I do like using that money to invest in infrastructure. One important part of that infrastructure would have to be public transportation. Because, otherwise, you're just forcing people out of their cars without giving them an alternative, and that would never work.

Well, that's about all I have to say about the book for now; I just wanted to get it down before I forgot what I wanted to say. I'm sure I'll talk more about the book later.

Back to the beginning...

I previously mentioned reading Michael Lewis. Well, I just got his latest book, and found it rather disappointing. It was all good material, but just about all of it duplicate Vanity Fair articles that he wrote recently.

Actually, now that I was looking at Vanity Fair's site again to find links to those articles, I'm even more disappointed, because even more of it came out of Vanity Fair than I thought (I'd only seen the first two of those before reading the book).

It affects the prose, a little bit, because, for instance, the Ireland section mentions something about Greece without making it a reference back. And the book ends without a real conclusion; it just kind of drops off a cliff.

As I said, it's still good material, so I'm not totally down on it, but it could have been a bit more, I think. And I would have liked if it had gotten into more details of the trouble, with more details about where we go from here. I'm not sure exactly what I mean by that last statement, but, for instance, at the end of The Big Short, I really felt like I had a good handle on what happened with the mortgage crisis. I don't feel like I have that, now.

I'm very tempted to get John Mauldin's Endgame, which reviews indicate might give that level of understanding.

The takeaway, though, is certainly that much of the world is in very bad shape; perhaps even worse than indicated by watching the news. Excessive debt has caused a lot of problems, and will continue to do so for quite a while.