Classmate blog commentary: 'I love Gooooooooooold'

In his blog post "I love Goooooooooooold," Brian Glover discusses a law passed in Utah concerning the use of gold and silver as legal currency. The post lays out details of the new law according to an ABC News article cited in the blog, however the explanation in the blog covers the federal use of the gold standard, not the new Utah law. It states that the Federal Reserve would be required to redeem dollars for a fixed amount of gold, and that the printing of money would have to be weighed against the value of gold, which would be true if the federal government adopted the gold standard, but not under the provisions of the Utah state law. The law does recognize gold and silver coins as legal tender, but they can only be used at their face value. According to the Wall Street Journal, a $50 dollar coin has a market value of $1,400, so the law really has no practical impact in that capacity. The law serves three primary functions: 1) it is a symbolic gesture against the Fed and their money-printing practices; 2) it legally classifies gold and silver as currency so that transactions involving gold and silver are no longer subject to Utah capital gains taxes; 3) it requires state officials to look into the use of an alternative system of legal tender. Articles outlining these functions can be found here and here.

As for the blog post itself, I found the writing style to be very engaging and witty, and a pleasure to read. The use of anecdote was good, and effective in illustrating the public's lack of familiarity with the issue. The author's position and conclusions were clear and assertive, and in line with the information provided.

Having said all that, I respectfully and strongly disagree with the notion that a return to the gold standard would be a good thing. On the contrary, it would be absolutely disastrous.

Proponents of the gold standard claim that the Fed's over-printing of cash is causing rampant inflation. This assertion is false. We are in the midst of a recession, so consumers do not have enough money at their disposal to create demand and drive up prices. As of March, the core inflation rate was a meager 1.2%, a very low figure by historical standards. The headline inflation rate was normal, at 2.7%, even after the impact of rising food and oil prices. Any arguments based on the problem of inflation are simply not rooted in reality.

The value placed on gold as a resource is a relic of civilizations dating back thousands of years. Gold has little intrinsic value; we cannot eat gold, our cars aren't fueled by gold, and our homes are not made of gold or heated by it. Why should the value of all goods be based on such an arbitrarily important commodity? Furthermore, the gold standard was a major cause of the Great Depression. It forced the government to raise interest rates (a definite no-no during a recession) in order to prevent widespread trading in of dollars for gold, which would have caused U.S. gold reserves to run out. With the current trade deficit, foreign countries are amassing dollars. If they were able to redeem them for gold, and did so, the U.S.'s gold supply would be depleted, and the value of our gold-backed currency would plummet. The gold standard also limited the government's ability to use monetary policy to combat the Great Depression, until 1933, when the federal government started printing money without gold-backing and, not coincidentally, the nation began to recover from the depression. If we return to the gold standard, our ability as a nation to respond to economic crises will be severely disabled.

Much ado about not much: rhetoric dwarfs budget cuts in magnitude

In the midterm elections of 2010, Republican candidates showed substantial gains in congress; six seats in the Senate and sixty-four in the House. Their elective success was due largely to the unpopularity of the Obama-endorsed stimulus package and bailouts of the financial and automotive industries, totalling north of $1.5 trillion, in addition to widespread discontent over unemployment levels. The influx of new Representatives, many having little or no Congressional experience, adopted fiscal austerity as their priority-issue. As the new Congress commenced in January, a hostile battle of political rhetoric unfolded as both sides obstinately resisted compromise over the yet-unapproved fedral budget. After capturing media attention and dominating political discourse for months, the issue was finally settled on Thursday, as Congress and President Obama approved over $38 billion in spending cuts, applied retroactively to 2010 spending levels that were still in place until now, in addition to the 2011 budget going forward for the remainder of the fiscal year.

The truth is that the fiscal significance of these cuts has been massively overblown. The federal budget for fiscal year 2010 totaled $3.55 trillion; the deficit alone was $1.17 trillion. While $38 billion seems like a big number, it accounts for only about 1.1% and 3.2% of the budget and deficit respectively. Republicans got a tangible result they can boast of to their supporters, but the process produced heavy doses of partisan enmity and has hardly any offsetting effect on the monolithic deficit incurred since the '90s.

Many politicians, notably Obama and House Appropriations Committee Chairman Harold Rogers (R-KY), are heralding the spending cuts as the biggest in U.S. history, and that sentiment is being echoed pervasively by pundits and news sources. These self-adulating claims are incredibly misleading, if not outright false. In 1946, after the spending regimen of World War II, federal spending plummeted from $92.7 billion to $55.2 billion, an overall decrease of 40%. The $37.5 billion difference is equivalent to $425 billion today after adjusting for inflation.

Not surprisingly, the Department of Defense's budget increased by $5 billion to a FY 2011 total of $513 billion, with an additional $158 billion appropriated to fund the wars in Afghanistan and Iraq, as well as the Global War on Terror. These funds comprise about 18.5% of the overall budget and do not include debts accumulated from previous years of waging war. $7.5 billion of the cuts approved on Thursday are to DOD military construction funding. Other notable cuts include:

-$1.8 billion to Department of Interior Clean and Drinking Water funds
-$2.15 billion to Department of Health and Human Services programs for HIV/AIDS, hepatitis, STD, and tuberculosis prevention
-$6.9 billion to Department of Transportation Highway Funds
-$4.3 billion to DOT High Speed Rail funds
-$3.36 billion to the Department of Housing and Urban Development

More details provided by Rep. Rogers on the spending cuts can be found here.

After all the partisan hullabaloo and the much-hyped threat of a government shutdown, the fiscal impact of the budget cuts isn't nearly proportional to their impact on political perception.

Classmate blog commentary: 'The Costs of Outsourcing'

Jessica Cosper's blog post entitled "The Costs of Outsourcing" had a good ratio of information to opinion. While Cosper's stance on the issue is established in the second paragraph, the bulk of the article presents information and reserves the persuasive part for the conclusion. After the information is introduced and taken into account, an opinion is given. As a result, much of the article read more like a news story and less like an editorial, but that is not necessarily a disadvantage. I personally like the fact that the article was not littered with appeals to the reader. Persuasive appeals can often be heavy-handed, and too much or too emotional of an appeal can sometimes be more polarizing than persuasive.

As for the actual content, I found it to be informative. The issue of confidentiality and security risks is one that does not seem to be among the conventional talking points regarding outsourcing, but one that bears importance as US companies share their customers' private information with third-party agencies in nations that may not have the same standards and regulations regarding privacy and consumer protection. The article does a good job of covering some of the different outcomes of outsourcing, and mentions China, India, and Brazil as top destinations for outsourced jobs, but a few more facts or statistics could have provided readers with better reference points regarding the argument. For instance, as I read some questions occured to me, like, "Besides IT, what are some of the jobs that are most commonly outsourced?", and "What are some of the estimated costs and jobs losses associated with outsourcing?"

Overall, the author seemed well informed on the subject. Whatever the article may have lacked in depth of information, it made up for in comprehensiveness. The opinion expressed was sound, and its tempered delivery kept the tone of the article from coming off as overly subjective.