As the economy spirals toward collapse and the government toward bankruptcy, the necessity of spending cuts and downsizing of government should be obvious. However, the recent debt ceiling debacle indicates that the political class is not interested in saving the economy:
… an implicit decision was made to kill the host. There were no spending cuts. There was hardly a slowdown in the planned rate of spending.
The late Dr. Jacob “Jack” Kevorkian, often referred to as “Dr. Death,” was described by Wikipedia as
The term Kevorkian economics is used to describe the current economic strategy pursued by the political class. Like Kevorkian, the strategy involves managing death – the death of the US economy (and likely other economies).
The parallel between Dr. Kevorkian and the political class is not perfect, however. Kevorkian engineered quick, painless deaths for patients. All patients requested his assistance. Regardless of your moral judgment, Kevorkian did not coerce anyone. He provided service per their requests.
The political class differs from Kevorkian in that they have parasitically preyed on citizens from the inception of government. Now they have refused to pursue remedies to save the economy. Instead the economy has been committed to hospice, unbeknownst to citizens. This strategy is pursued solely for the interests of the political class as explained here.
“Extend and pretend” is a commonly-used term to explain what is meant by Kevorkian economics. The phrase implies that no attempt is being made to cure the problems. Instead, the political class extends the life of an economy placed in hospice while pretending to the public that conditions are normal and improving.
Dying: The Economical Way to Go
In 1975, Richard B. McKenzie and Gordon Tullock wrote a book entitled The New World of Economics. Tullock is one of the founders of the Public Choice School of Economics. The book expanded economics to non-market aspects of life, much like the recent Freakonomics. It was in the spirit of Gary Becker’s pioneering work of explaining non-market behavior with economic principles. Becker won a Nobel Prize for his contributions.
A short chapter in the book was entitled “Dying: The Most Economical Way to Go.” According to the authors, the way to maximize the utility of living is to have all your bodily systems fail simultaneously. If, for example, you died of a heart attack with healthy lungs and liver, it indicated that you could not have maximized the pleasures of life. Presumably, you under-consumed cigarettes, booze and other unhealthy pleasurables.
Their colorful and somewhat tongue-in-cheek treatment of dying demonstrated utility maximization. It illustrated the utility maximization principle. Maximization is achieved when the marginal value (or utility) of all products/resources are equalized.
The economist’s advice is that a person should so employ his human and nonhuman resources that the world ends for him not with a whimper but with a bang.
In other words, the optimal solution is to expire precisely at the time that all resources are exhausted.
Politicians, generally ignorant and dismissive of economics, seemingly grasp the dying concept, at least with respect to the death of a country. Their behavior has been consistent with it during the latest crisis and arguably for decades. Their actions steer us to an eventual economic ending “not with a whimper but with a bang.”
Assuming that politicians understand the principle of economic maximization may seem far-fetched because it implies intelligence and understanding usually considered beyond the political mind. Yet political behavior conforms nicely to the maximization conditions set forth by McKenzie and Tullock as discussed below.
For those who find it implausible to accept that the political class is following such a strategy, let’s rephrase the economic maximization strategy into more crass political parasite terms: “the longer we can keep the host alive, the more we can plunder.” That is more consistent with the average citizen’s view of political behavior.
Regardless of how political motivation is expressed, the actions to achieve it are the same. The economic principle merely defines the conditions under which the goal is achieved and maximized.
The dying analogy can be extended to the economy by assuming that economic sub-systems are akin to human organs. Comments on some of these follow:
- The banking system is insolvent and near collapse.
- Government debt is approaching its maximum; at least as far as arms-length buyers are concerned.
- The social welfare system is unsustainable with record numbers of people on food stamps and extended unemployment benefits.
- Government revenues shrink due to actual and potential diktats from Washington. The uncertainty these create is not conducive to private initiative.
- The Social Security Fund is now cash-flow negative. Unless provisions are changed, it is unsustainable in the longer-term.
- Medicare is broke and bankrupting the country. ObamaCare will dramatically worsen this black hole. Massive changes in these programs are necessary.
- Fannie Mae and Freddie Mac are insolvent and require continuing bailouts from taxpayers. The FHA is not far behind.
- The Student Loan Program will be the next big bailout. Students are graduating with unprecedented levels of debt and unable to find employment.
- Government-run organizations like Amtrak and the Postal Service lose money consistently. They cannot be effectively managed in a political environment.
- “Green Energy” jobs are a myth and a new potential bubble. Subsidizing these jobs or “investments” is merely another political boondoggle and misallocation of resources. Ethanol subsidies are a prime example of this green uneconomic engineering.
Every one of these sub-systems is under the control of government. Even the shelter of monopoly, afforded the postal service and Amtrac, is not enough to enable government ineptness from resulting in bankruptcy.
Every one of these subsystems is on the verge of collapse. This condition is exactly what the economic maximization principle for dying efficiently calls for.
Not all sub-systems are of critical importance. The failure or cessation of “green jobs” would be trivial (other than from a political posturing standpoint). The failure of Amtrak or the Post Office would be akin to a skin rash. The failure of any one of the other sub-systems, however, would likely be fatal for the economy.
An economic collapse would also be fatal for the parasite class. That is why politicians manage the demise so carefully. Ultimately it will be impossible to avoid collapse.
Every sub-system is on the verge of collapse. Some reached this condition as a result of blatant incompetence. Others because they were originally set up to be, or quickly became, Ponzi schemes – nothing more than scams intended to purchase current votes to be paid for by future voters. We are the generation when the music stops. We will suffer the consequences of past and current political nonsense.
Bernie Madoff and Enron executives must wonder why they are in jail. Compared to government they appear highly ethical and moral, and certainly more competent.
Conditions in Europe are at least as bad as the US. Problems there could trigger the downfall of our banking system and economy.
Decades of short-run political fixes have finally caught up with us. The process was summarized by Urs Paul Engeler:
By following today’s apologists of the British economist John Maynard Keynes (1883-1946), the so-called ‘welfare’ states pumped too much money (which they didn’t have) into consumption: into pensions for all (Europe), exorbitant armament (US), endangered industries (both), and finally bailouts for ailing mortgage banks (also both). This intervention was celebrated by Keynes’ disciples as the ‘return of politics’. In reality the hopelessly over-indebted states only exacerbated the crisis.
We are on the precipice of economic and societal collapse which the political class has chosen to accept so as to maximize their time in, and spoils from, office.
Despite their criticism of economics, politicians practice the concept of self-interest better than economists or anyone else. Unfortunately politicians are not encumbered with constraints like a Hippocratic Oath, ethics or principles.
Elites don’t need constraints. That is why we face this threat to the very foundations of civilization itself.
This article was originally published by Monty Pelerin today on American Thinker