Monday, June 20, 2011

Tom Coburn Update

I was driving home from work this afternoon and my phone rang. Thinking it might be the company I was hoping would make it out to fix our AC (they didn't :( ) I picked up while still driving.


"Is this Steven?"

"Yes, it is."

"Steven, Tom Coburn."

Yes it was. I pulled over as quickly as I could and we had a 20 minute discussion about macroeconomics. I am incredibly impressed that this United State senator took the time to call a constituent for a discussion. Wow! Seriously, that is just phenomenal. It's how it should be, but we all now how busy everyone is and how many people our Senators represent.

Despite being caught off guard, I feel I was decently cogent. He spent most of his time discussing the need for confidence in our economy and worrying about inflation. Of course I brought up many points concerning the need for more spending in our economy. He agreed, but he thinks that the more than two trillion dollars currently sitting in the coffers of corporations will be spent when they have more confidence in the stability of the dollar and our nation's debt to GDP ratio. (He didn't say this exactly, but this is the gist of it. I sincerely hope I am representing his position correctly). Of course, I asked him why a company would invest in more workers and products when the economy is weak and sales are down, despite whatever our deficit happens to be. "Why would a company hire workers they don't need?" was my main question. He said that companies could be selling more right now, but they just aren't willing to take the risk on more investment right now.

Of course I disagree. If customers are demanding a company's products, companies will respond by making more products.

We also disagreed on how more government spending would affect the economy. He maintained that more government dollars being introduced into the economy right now would only increase the number of dollars and not the number of real products and services. While I am very, very pleased that he is focusing on real goods and services and not just the dollars which represent them, I am mystified as to how this would work. If unemployment is at 9%, surely no one is thinking that our nation is anywhere close to full productivity. More spending creates more sales which creates more jobs. And we have people ready for those jobs, ready to create more goods and services.

So I am not sure why he thinks more government spending right now would result in inflation and not greater productivity. And of course we would all love for companies to just start spending out of the blue, but once again, the poor economy makes people hunker down and save, which of course keeps the economy poor! Only the federal government has the ability to spend counter-cyclically, when confidence is down, which can create more spending and more jobs and then more confidence. Confidence is the symptom of a good economy, which can then turn into a cause.

Of course, I know how this may sound to some, but I do not feel that I am a proponent of "big government." I don't think the government should overly involve itself in people's private lives, from who they marry to what plant they smoke to how they spend their money. I just think the government should do its job, acting as a source of fuel for the engine of the private economy. And no one doubts that the government is source of our currency (the "fuel"), which is required for spending. The government should step up its spending when the private sector needs that spending to maintain and grow its ability to produce. And, of course, all public spending ends up as money in the pockets of private individuals.

Mr. Coburn asked me to read some Hayek and I asked him to browse through Warren Mosler's online publication "The Seven Deadly Innocent Frauds of Economic Policy", which can be found here. Then he asked me to write him another letter after our reading, and he promised me another call.

So cool!


  1. That is amazing, Steven. Your activism is very inspiring. I would probably have a heart attack if any of my representatives I have written to ever replied, let alone called.

    You are on the right course.. the world is awash in cash, but in the pockets of the wrong people.

  2. That is quite incredible. I agree with Burk - your activism is wonderfully inspiring. Keep up the good work!

  3. I appreciate the words - I have never considered anything I do "activism" . Especially compared to the work of so many who really have their boots on the ground, but I hope every little bit helps. Certainly Burk and Kelly are huge activists if I am in any way.

    And I hoped that Mr. Coburn might respond to my critiques, because he is an avid reader and a studier of issues.

    Burk, I may need some insights into Hayek (I will read him directly instead of just about him), and I need to study measures of inflation. Mr. Coburn is convinced that inflation is currently running at 5%, and that we have changed the relevant measures of it over the years.

  4. Hi, Steven-

    As you read, I found Hayek relatively thoughtful. But remember that he was arguing against Stalinism.. not a terribly controversial position. He was trying to prevent postwar Britain from going down the road to a "planned economy". Hayek also had no intrinsic problem with public goods, unlike many of our contemporary libertarians. Roads, infrastructure, research, etc... that was fine with him, so after the ideology is packed away, our considerations come down to what properly constitues a public good. It would be interesting to ask what he would think about the case of China today- very successful as a mixed economy, and trending free-er, which was Hayek's core concern. As far as the technical debate between Hayek and Keynes, it was no contest- Keyenes won on the big issues of macroeconomics.

    Keynes fell out of favor during the inflation of the 70's. And those on the right are busy finding inflation under any bed they can right now again, in order to discredit any thought of stimulus. But as you have observed, there is so much slack capacity that it will not be a problem any time soon. The recent blip came from fuel prices, which arise from totally different sources (geological shortage) than the monetary phenomenon that Coburn is trying to find under the covers. Also, one's attitude on inflation has a class aspect to it, since those living from inherited wealth are more damaged by inflation than are those in debt.

    Best wishes..

  5. This is amazing. I think it is a testament both to the articulate arguments in your letters to Coburn and to the civility and openness of your tone. Your letters not only challenged Coburn thoughtfully but did so with respect--indicating a sincere interest in critical dialogue.

  6. Burk,

    Thanks for the insights into Hayek - I will keep them in mind as I peruse "The Road To Serfdom" (and Keyne's "The Theory of Employment, Interest and Money" for balance).

    These books will take a while to read, so I intend to go ahead and write Mr. Coburn again in the next couple of weeks. I will distill the ideas down to 3 or 4 direct questions. Then I hope to ask him to find specific flaws in the points I put forward. I am hoping this type of correspondence might take the exchange of ideas to a new level.


    Thanks, man! You are truly an active proponent of careful, honest and charitable discourse. I appreciate the influence.

  7. Hi, Steven.. Sorry to go on, but one question to ask is whether your senator really cares about unemployment.

    All the CEOs on Obama's council for jobs or whatever... they have zero interest in fixing unemployment. The more unemployment, the more power they have over their employees, the more selective they can be in hiring, and the less they have to pay. Likewise for the Republicans, as far as their business go, but also as far as their political interests go. The more unemployment, the worse Obama looks, and the better chances they have in the next election.

    The only reason to care about unemployment is direct compassion for the unemployed, and perhaps a very long-term view of what is best for the country. Whether either party shares such sentiments is at this point somewhat questionable.

  8. Burk,

    I think it is a fair question. Republicans in general have not been deficit hawks at all until recently and they are still unwilling to raise taxes on the wealthy.

    James Galbraith has a good section on how high employment creates greater inequality in his book Predator State. He brings up many of the issues you list.

    I intend to ask Mr. Coburn a question along these lines, but I will be clear that I am not questioning his integrity, rather it's an acknowledgment of our collective human nature.