More Crazy Talk from UNM Faculty

It seems like UNM has more economically-ignorant people affiliated with it than most universities. Take Nick Estes and his recent column in the Albuquerque Journal, please. The level of economic ignorance from this former UNM lawyer and current staffer at the far left-wing Voices for Children is truly appalling.

He starts with a truthful statement about World War II and the US government running up massive deficits. It’s true. Fighting the combined forces of Hitler and the Empire of Japan cost a lot of money. The thing is that after the War, our leaders enacted massive spending cuts and the economy grew faster than ever before. Estes and his ilk would have a fit if spending dropped by 2/3rds as it did after WWII, but it did.

Then Estes goes into the farcical “we owe it to ourselves” routine. Debt is debt whether it is owed to a family member or to someone in a far-off foreign country. If that debt burden becomes too much a default is possible and those are still painful. If your cousin doesn’t pay you for the care he “bought” from you and then he crashes it and can’t pay you, you are still out the money. This is just a dumb argument from Estes.

Then Estes claims that trade imbalances, not government deficits are the real problem. REALLY. On what planet does this guy live? Nations that have major “current account balance deficits” include the USA, Canada, Australia, and England. Nigeria, Venezuela, Libya, and Iran all have major surpluses. I’ll leave it up to Estes to pick the countries he’d rather live in. Of course, these “deficits” partially represent foreign investment in firms located in those nations.

In other words, governments going into debt is bad, but so-called “trade deficits” are irrelevant as economist Walter Williams rightly points out.

The good news is that Nick Estes’ title indicates he was a lawyer and not involved in teaching economics. The bad news is that there is a clear pattern of economic ignorance from current and former faculty at UNM.

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17 Replies to “More Crazy Talk from UNM Faculty”

  1. Clearly, this model of ignorance is rooted deep in the minds of those who think money grows on trees, that government is good and produces returns on ‘investment’ while wealth is being redistributed, that capitalism is bad because it is somehow inherently greedy and that the constitution can be changed by the whim of those who seem to be momentarily in charge.

    NM has been dominated by this mindset for a very long time.

    I guess forever being in last place doesn’t bother them. I guess they believe their work is far from over… the wealthy need to give more, government needs to be bigger, unions have no moral obligation to the greater population, debt is ok as long as borrowing and printing money remains possible, and we will one day all sit around a campfire holding hands and singing kumbayah… celebrating their socialist agenda.

    NOT!

    Vic Bruno, Treasurer
    Board of Directors
    Rio Grande Foundation

  2. You failed to mention tax rates – which were high resulting in paying off WWII debt. During WWII the top marginal rate was 94% but fell to 91% in 1946 where it remained until 1964 when the top rate was lowered to 77% followed by a 70% rate in 1965. That rate remained until 1982 when the top rate fell to 50%. The top marginal rate is now 35%. And our national debt is growing. Seems to me the the top marginal rate is way too low. At least under Clinton America was able to drastically slow deficit spending because the 1993 tax increase (along with the tech boom) brought inflows and outflows in balance. W Bush’s tax cut did what for America – added $ 5 trillion to the national debt.

  3. Mark R writes the following, which I fear is ‘accepted wisdom’ at least by those who know zero about economics. He wrote, “Bush’s tax cut did what for America – added $5 trillion to the national debt.” That is just plain silly.
    Taxes – increased or decreased – produce revenue. Spending more than you take in is how you incur debt. Mark R seems to assume that spending is fixed and therefore, when revenue from taxes go down, debt increases.
    Sorry. Other way around. It is spending that is in our control. I for one want to see less of my money going to the Federal bureaucracy, not more.
    Did you know that almost 40% of ALL, repeat all, healthcare spending produces no health CARE? It goes to the bureaucracy. Obama’s health care ‘reform’ massively increases the money going to Washington but not to patients. Bottom line: The reason Greece, England, Ireland, Spain, and Italy are in deep financial trouble is not their tax rates but their over-spending. There is an obvious lesson that we are ignoring at our peril. Well, actually at our children’s peril.
    As Reagan and others have said, “Starve the beast!” Reduce spending especially when it is our own government bureaucracy feeding off of us.

    1. First off you wrong on all counts. Paul had addressed spending cuts following WWII which were drastic, yes. I was addressing another aspect – that the top marginal tax rate was purposely high so that America could pay off its WWII debt. There is a relationship between high tax rates and tax revenue. Between spending cuts and high tax rates WWII debt was greatly reduced.

      I agree, spending is too high and the primary problem. While the Dems champion social security, Medicare, and Medicaid, the Repubs champion high defense spending. All need to be dealt with. Likewise, America must decide what our taxes should fund and set the tax rate appropriately. The most recent history has shown the tax rates enacted in 1993 paid the bills the country generated so thats a good starting point. Would I make changes, yes, but then you ask 100 people and you will get 100 differing answers.

      Plain silly? – its fact, under W $5 trillion was added to the national debt. You can’t spin that. You also can’t spin the fact that we saw the national debt go from $982 billion to $2.7 trillion under Reagan. So much for “starve the beast”.

  4. Both Republicans and Democrats are responsible for deficit spending. Revenue is not the problem. Spending is. Repubs and Demos have turned progressive, hate the free market and intend to make us a totalitarian nation. We are as Hayek said, are on the ‘Road to Serfdom’.

  5. Deane Waldman writes “Did you know that almost 40% of ALL, repeat all, healthcare spending produces no health CARE? It goes to the bureaucracy” –but neglects to mention that this is the “free market” privately funded health care bureaucracy we all enjoy today (assuming we are fortunately enough to have coverage). Some of this 40% goes to profits, some goes to executive bonuses for finding ways to rescind people’s policies once they get sick, and some of it undoubtedly goes to fund candidates and pay Washington lobbyists to keep the status quo. In New Mexico, administrative costs for Medicaid are just 3%.

    1. Seriously Sharon, you call our health care system a ““free market” privately funded health care bureaucracy.” I don’t expect the folks at Voices to know what “free markets” are, but when the government is picking up 50% of the bill, that is hardly “free market.” Other aspects of government manipulation and control include (just to name a few of the big ones):

      the “original sin” of US health care, the third-party payment system (done because employers, but not individuals, pay for health care w/ pre-tax money;
      the bureaucratic and deadly Food and Drug Administration;
      the absurd legal system;
      licensing laws that drive up costs and reduce supply of providers;
      state monopolies on insurance regulation (this drives up the number of mandates and reduces the number of insurance providers in a given state);

      I could go on, but this is a response to a blog posting, not a college dissertation. We don’t have a “free market” in health care or anything resembling one.

  6. Mr. Gessing: The text of your critique of my op-ed clearly reflects that I was not a UNM faculty member, and did not claim to have been one. Why did the title of your piece say that this was “more crazy talk from UNM faculty”? Was this mere sloppiness or a deliberate misstatement? –Nick Estes

    1. Okay, you are former UNM faculty and yes, your title in the original article indicated this. My posting also made it clear that you were a “former UNM lawyer” within the first paragraph. I’m not trying to mislead anyone.

      1. Did you mean to say that “Okay, you are NOT former UNM faculty”? I’ll give you the benefit of the doubt on this one; was this really just a typo?

          1. Until the end of last year I was an on-call attorney in the University Counsel’s office, working a couple hours a month, if that. No, I was never “on the faculty” although about 10 years ago, I team taught an evening course in administrative law in Public Administration for five years. But your headline was obviously intended to tar the faculty with your negative assessment of my views by suggesting I was a faculty member, even though your text showed you knew I wasn’t. That wasn’t right.

            On the merits, you are wrong in suggesting my arguments about “owing it to ourselves” and the potential trouble of our balance of trade deficits are some far-out left-wing “crazy talk.” Both points are largely accepted in mainstream economics. You are free to disagree with them, but neither one can fairly be called crazy, in the sense of being out of the bounds of reasonable discourse. On the first point, I don’t know whether you agree or disagree with Ben Bernanke, but he certainly is a mainstream academic economist. His Macroeconomics text (2001), page 581, says:

            “People often express concern that the trillions of dollars of Federal government debt will impose a crushing financial burden on their children and grandchildren, who will someday be taxed to pay off these debts. * * * This conventional argument ignores the fact that most U.S. government bonds are owned by U.S. citizens [no longer true, which is why I also discussed our trade deficit]. Therefore, although our descendants someday may face heavy taxes to pay the interest and principal of the government debt, these same taxpayers also will inherit the outstanding government bonds and thus will be the recipients of most of those interest and principal payments. To a substantial degree, we owe the government debt to ourselves, so the debt isn’t a burden in the same sense that it would be if it were owed entirely to outsiders.”

            [Let me add that this will become true again if we get our trade deficits under control some day.]

            Likewise virtually all economists would share some degree of concern about the dangers of our growing negative Net International Investment Position. I have no problem with the excerpt you quoted from Prof. Williams; he just supports my assessment that our debt to foreigners is nowhere near crisis proportions–some countries are obviously always going to have positive balances and some negative. But I’m sure he’d agree that continuing a significant negative balance of trade year after year will hurt any country’s economy and could eventually lead to a crisis.

            Actually, I’m surprised that you’d disagree with me about whether our trade imbalance will eventually become a problem. If you think about it some more, maybe you’ll come to agree with my position, as just stated above.

          2. I concede the point that you are not and were not “faculty.” My mistake. Nonetheless, there have been several other members (current and former) of the UNM faculty that have expressed similar, economically-ignorant opinions.

          3. Regarding the merits of your points outlined in your comment, I am not sure if Ben Bernanke’s economic wisdom is your best support given his current mismanagement of the Federal Reserve. Here’s one discussion of the myriad problems with government indebtedness.

            On trade deficits, their main potential “harm” is as an indicator that the economy running the deficits is inherently inefficient and not competitive, but there are numerous better economic indicators (GDP, per capita income to name a few) that are far superior.

  7. Paul, Paul, Paul! Why do you think I put “free market” in quotes?

    BTW, you forgot all the federal funding that goes into R&D of new meds — which then enrich big Pharma.

    1. Fair enough, that subtlety was lost on me. I agree with you, no taxpayer money for big Pharma either! Bush’s Medicare Prescription Drug Bill was a huge error.

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