Short-Term Palliatives And The 5 Terrible Tendencies Of Government

Tyler Durden's picture


Excerpted from Seth Klarman's Baupost 2012 Letter to investors,

Absent an immediate crisis - and sometimes in the face of one - governments will often struggle to meet great challenges. Michael Boskin, former chairman of George H. W. Bush’s Council of Economic Advisors, recently described five tendencies of governments that should sound familiar. They include:

(1) Waiting until forced to act, often too late and with great harm;

(2) Systematically ignoring long-run costs to provide short-term benefits;

(3) Trying unsuccessfully to circumvent the laws of economics;

(4) Ignoring the laws of arithmetic, selectively counting some effects while excluding others; and

(5) Enacting programs or spending money in a crisis or boom where especially large unintended consequences become apparent only when the economy returns to normal.

This is a truly damning indictment of government arrogance, ineptitude, and overreach in the economy and beyond.

The short-term palliatives we are currently pursuing go against everything a long-term oriented society should aspire to achieve. Today’s policies encourage spending over saving, reward the profligate over the prudent, and support the failing at the expense of the successful. The antidote now being dispensed puts us squarely in uncharted territory in which the risks are outside the range of historical experience. There is no obvious exit and no path to normalcy.

Growing entitlements are popular with voters and with those whom they elect, for obvious reasons: because the bill never seems to come due. But come due it will. According to the law of economics named after the late economist and author Herbert Stein, if something cannot go on forever, it will stop. The result, which we are beginning to see already, is an acrimonious debate that divides rather than unites. Instead of efforts to expand the national pie through large investments in scientific and medical research and repair or replacement of our crumbling infrastructure, for example, we waste our breath bickering over the fairness of how we will share a flat-to-shrinking one.

Our spending is completely out of control, and, as of now, it seems as if the situation will have to become calamitous before we act. Let’s hope that it won’t then be too late.

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Thu, 01/31/2013 - 15:21 | 3203455 Chupacabra-322
Chupacabra-322's picture

@ Dr. Dick Head,



Thu, 01/31/2013 - 19:49 | 3204407 falak pema
falak pema's picture

why don't you begin at the beginning : One man one vote elects government. The people who then sit and decide in name of people who voted them in. Its called democracy and its called republic.

If that doesn't work then the people relect better ones...etc. Etc. If that doesn't work then its the end of demo and rep...its called dictatorship, oligarchy of fascism or whatever. There is NO reason that a republic in this day and age goes back there; to dictatorship...No reason, if the people want it to stay as republic...Take back the government of the people, people! 

Don't JUNK the republic and democracy! The collective boobs ARE the people...wake up!

If the US feels the people do not have the right, or the ability,  to elect its leaders then its over; you are back to the age of feudalism.

Thu, 01/31/2013 - 15:06 | 3203391 Cognitive Dissonance
Cognitive Dissonance's picture

" seems as if the situation will have to become calamitous before we act."

Don't look now, but we are already there. The actions of the Fed and the politicians are just an attempt to cover up this fact.

Thu, 01/31/2013 - 15:06 | 3203400 Cortez
Cortez's picture

(6) It's 6am on a Sunday morning and our economy can't find anymore cocaine. 

What's next?

Thu, 01/31/2013 - 15:19 | 3203444 Dr. Richard Head
Dr. Richard Head's picture

Blow jobs in exchange for more cocaine?

Thu, 01/31/2013 - 16:47 | 3203835 Cortez
Cortez's picture

The economy already gave out several "blow jobs" in exchange for cocaine.  The bubbles over the past decade were the "blow jobs."  Since 2009, Bernanke is basically mainlining cocaine right into the economy's "vein" using QE.

What's next? 

Thu, 01/31/2013 - 15:16 | 3203438 Racer
Racer's picture

"former chairman of George H. W. Bush’s Council of Economic Advisors"

Why the hell didn't he DO something when he had the chance instead of empty words now!

Thu, 01/31/2013 - 15:49 | 3203572 falak pema
falak pema's picture

here is one tendancy in local government that seems to be working  : Governor Moonbean shines! 

It seems to be working and it ain't libertarian policy :

S&P California Bond Rating Upgrade - Business Insider

Fri, 02/01/2013 - 00:05 | 3203615 Stuck on Zero
Stuck on Zero's picture

Why this arbitrary number of five?  ZHers can increase that to 50 by lunch.


Thu, 01/31/2013 - 16:00 | 3203620 earleflorida
earleflorida's picture

to late... war is already knocking in/down humanities backdoor!

Thu, 01/31/2013 - 16:56 | 3203876 Totentänzerlied
Totentänzerlied's picture

(1) Waiting until forced to act, often too late and with great harm"

This is totally fantastical delusional bullshit. The author obviously thinks his audience is comprised of morons.

The state acts to further its own interests: self-preservation and growth.

The author's implicit minor premise is that the government, concerning its citizens' welfare, is "well-meaning but inept".

No. The government, as the chief instrument of state power, may find that its best interests happen to involve things which benefit, or may seem to benefit, the citizenry. That is the only connection.

E.G.: Setting up a social safety net to prevent revolutions and implement social programs intended to modify, ultimately, the society itself.

Thu, 01/31/2013 - 18:20 | 3204170 madcows
madcows's picture

1. Corruption

2. Graft.

3. Egotism.

4.  Arrogance.

5.  Power-hungry

Thu, 01/31/2013 - 20:30 | 3204544 are we there yet
are we there yet's picture

All governments grow until some outside force stops them or they over consume their tax base. Alll governements grow in size, power, and corruption, until they can't.

Thu, 01/31/2013 - 20:35 | 3204562 SKY85hawk
SKY85hawk's picture

Colin Lokey gave zero-hedge credit for the 'Components of GDP by quarter - revised'  in

Adding up the 6 componets does total -.17%, I think that is wrong.  Anyone that remembers high school algebra KNOWS you can’t add individual percentages and get a valid %-change. 
One must add up the multiple components for Last-month and This-month and then calculate %-change on the Total. 
Do you have the underlying numbers that the gummint used? 
The real GDP change might be very interesting!

Fri, 02/01/2013 - 12:13 | 3206401 JeffB
JeffB's picture

And those with the resources and the inclination can rather easily take advantage of those tendencies to bring about societal changes they desire, such as perhaps a New World Order.


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