Cliffs, Ceilings, Bombs, and Explosions…

Cliffs, Ceilings, Bombs, and Explosions…

…When Metaphors Go BAD

Cliffs, Ceilings, Bombs, and Explosions: When Metaphors Go BAD.

Jim LukeLCC EconomicsJanuary 30, 2013

Blog: econproph.comInfo: jimluke.comCourses: econproph.netDownload: http://wp.me/pR94N-gj (or search at jimluke.com)

Twitter: @econproph

Twitter: James Luke

DISCLAIMERS & Legal Fine Print

While many phrases have been tortured, no actual words have been destroyed. Yet.IANAWP – don’t quote me on metaphors vs. similes vs. analogies vs. other stuff.

Metaphors and stories help us think about things – like the economy.

Metaphors can limit thinking too.

Let’s Look At Some Examples

What Have You Heard?

metaphor trouble

Economy Going Off The Fiscal Cliff

But Why? Debt and Spending? NO. This is double BAD.

BAD: Fiscal Cliff was about debt and deficits hurting the economy.

Reality: Fiscal Cliff was automatic spending cuts & tax increases.

Spending cuts & tax rises SLOW the economy

BAD: The “Debt Ceiling” has to do with spending.

Reality: Budget mandates spending, taxes, and borrowing. Debt ceiling is a silly law.

Reality:The debt “ceiling” is a charade and kabuki theater.

Reality: Not raising the debt ceiling would be catastrophic for U.S., the world, and you.

BAD: Govt debt is a “bomb”, just like private debt is a “crushing burden”.

Reality: One of these is not like the other.

Credit Cards (private debt)

US Government Bonds

US Federal Reserve Notes

Reality:U.S. Cannot “Go Broke” orGo Bankrupt

Reality:U.S. is not like Greece, or Ireland, or Spain, or Argentina.It is like Japan, UK, Canada, Australia, etc. – sovereign in money.

Reality:Default can only happen by choice.

Non-convertible (floating) rates Debt in own currency.

BAD:Govt budget should be balanced just like your household budget.

Reality:

Government is NOT like a household.

Reality:Deficits are NOT bad, but surpluses are.

Surpluses are followed by recessions. Necessary if private sector wishes to save. Supply of safe financial assets.

BAD:Cutting spending can balance budget.

Reality:“Austerity” slows an economy and worsens deficits.

Taxes are % of GDPAutomatic stabilizer effectUK & Ireland proving it (again)

Reality:Deficit will shrink as employment returns. Growth heals.

BAD: We can balance the budget by cutting “waste”.

check out the zero’s in *illions.

Reality:The U.S. government is an insurance company with an army.

Big Social Security (self-funded) Defense (unfunded) Medicare (part funded)

Medium – income transfers Interest Medicaid & Income Security

Insignificant Everything else

BAD:Spending has exploded under Obama.

Reality:Recovery and Obama budgets have cut spending.

Ignorance

Politics

Ideology

Hide the real agenda

Good sources for facts.

Econproph.com Tax.com CalculatedRiskBlog.com NakedCapitalism.com AngryBear.com

Presimetrics.com

Krugman.blogs.nytimes.com“FRED” at research.stlouisfed.org

Others…?

Sources & Images• http://www.nakedcapitalism.com/2013/01/philip-pllkington-purging-economics-of-religion-a-rebuttal-to-robert-nelsons-defence-of-the-

great-chain-of-being.html/graph3• http://radio.foxnews.com/wp-content/uploads/2013/01/1-6-debt-ceiling.jpg• http://www.sleuthsayers.org/2011/11/metaphor-hunting.html• https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid

=72fwfKqKE32n7M&tbnid=0ZoZLXH6UyTraM:&ved=0CAIQjBw&url=http%3A%2F%2Fimages.businessweek.com%2Fcms%2F2012-12-20%2F0803_cliff_630x420.jpg&ei=6u0GUa-9AsX6qwGE6YGoDg&bvm=bv.41524429,d.aWc&psig=AFQjCNEsodTvHsJ674IwCKvPtv3MjmjE0g&ust=1359494550883237

• http://netrightdaily.com/2012/12/fiscal-cliff/• http://www.wlwt.com/image/view/-/17343332/medRes/2/-/maxh/460/maxw/620/-/41bw25/-/Fiscal-cliff-notes-jpg.jpg• http://upload.wikimedia.org/wikipedia/en/f/f5/US_$50_1993_Federal_Reserve_Note_Obverse.jpg• http://img.wpdigital.net/rf/image_606w/2010-2019/WashingtonPost/2012/12/10/Editorial-Opinion/Graphics/toles12112012.jpg• https://encrypted-tbn1.gstatic.com/images?q=tbn:ANd9GcTYtn5eycKKLe51EwkeoIyoDby2F7sSfNL08QSEzq_6glpYveeX• https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcTnLcEfK3HDFlutcFOr2T4Th3VlJBcRSUtr8hkbY67vtFlWgeoY1Q• https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcRrEvhRfftkWFxwJK2SvKGRAi4ILVBFSeou8paXonv_CZuxLqVN• https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcSIvgD10FL5tzHs7pnOzt1QKUWIhefomNwMlqmSa8pDulgOYsn8pQ• https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcQYKURNQI3vm_hZYXxDRgZ8T3RVKKXzS2tRL3oY5o5YIRc0cv7CtQ