Random Takes

I have had too many posts titled “Odds and Ends #.” These are shorter.

The Last War But One

One lesson of the first world war was that it is usually an expensive mistake to try to break through a solidly fortified line. The Ukrainian counterattack in the first year of the Ukraine war, initially successful, ground to an expensive halt against the Surovikin Line, the system of fortifications that Sergey Surovikin had constructed behind the Russian front line. The Ukraine war turns out to be WWI with drones, something Surovikin realized a little sooner than the Ukrainians.

It is commonly said that generals go into each war prepared to win the previous one. Someone, I think Orwell, objected that it was worse than that, that England entered the second world war fully prepared to win the Boer war.

Sometimes being prepared to win the last war but one is the right call.

The Fiscal Peril of Positive Feedback

I have just been reading a piece on the perils of the fiscal cliff, the mounting US deficit combined with the prospect of Social Security running out of funds in the next decade.

The CBO is projecting deficits of around 6% of GDP each year for the next decade …

Those same CBO projections have the public debt soaring to 120% of GDP by 2036, compared to about 100% now. …

Debt service costs are on track to soar to more than $2 trillion a year in 2036 — a historically high 4.6% of the economy.

One point the author did not make and should have is that the cliff edge is crumbly. The interest paid on the debt has three parts: the real interest rate, the anticipated inflation rate, the risk premium. The higher the debt becomes, the greater the probability of open default or inflation as covert default. An increase in the perceived probability of either raises the interest rate on the debt, increasing the deficit.

Suppose lenders believe the chance of default is 5% each year. That adds a 5% risk premium to the interest on the debt, about two trillion dollars added to a current interest cost of almost one trillion. Federal revenue is about five trillion, current expenditure about seven trillion. As more and more has to be borrowed to fund federal expenditure the perceived probability of default increases.

Positive feedback.

Positive feedback with some lag, since the debt does not all have to be refinanced each year; currently the average maturity is a little less than six years. It is likely to shorten if worries about future default make lenders reluctant to buy longer term bonds.

Elastic Budgets: A Balanced Budget Amendment With Teeth

The idea first occurred to me reading about budget disputes in San Jose, where I live. States and Cities, unlike the federal government, are in theory required to run a balanced budget, with the result that people proposing an increase in one expenditure combine it with a decrease in something else. My proposal is to delink the two.

The city council passes a budget whose items, assigned to different departments, add up to a billion dollars. The city estimates revenues of 800 million. Each department gets 80% of its budget appropriation. If, over the course of the year, revenue turns out to be more or less than projected, the fraction is adjusted accordingly. This makes it explicit that a dollar more spent on one thing means a dollar less spent on something else while leaving different claimants to push their claims without having to specify what else should be cut.

There are obviously practical complications, since some expenditures, such as many salaries and pensions, are set by contract; that is why the reduction is by department and not by individual item of expenditure. I do not know if it is workable, whether it would make the politics around budgeting work better worse; I have never been involved in running a city. I like it as a simple and elegant alternative to how things are done now.

But what I really want it for is the federal government.

As I pointed out above, the federal finances are in serious trouble, with a crisis likely in the next decade or two. Proposing a significant increase in taxes or a reduction in one of the major expenditures, Social Security, Medicare, Health or National Defense, is political suicide. I propose instead a balanced budget amendment along the lines I have just sketched.

It isn’t that we don’t want to (insert worthy goal). It’s just that the money isn’t there.

Why Is Sex Different?

Selling services is legal — unless they are sexual services.

Eating in public, playing tennis in public, fighting in public, all legal. Making love in public not.

Movies of beautiful people doing things is legal, watching such movies legal and respectable, unless what they are doing is sex.

Details vary across time and space — prostitution is legal in some places now, has been in the past. But I think the basic pattern of sex treated differently, being more restricted legally and/or socially than other activities, is almost universal. Why?

The first obvious guess is that the answer has something to do with the fact that evolution has designed us for reproductive success and sex is how we reproduce, but I don’t think I can get much further than that. The second is that it has something to do with the fact that intercourse produces pregnancy, which has more serious consequences than most other things that people do, but the pattern seems to have survived the introduction of reliable contraception.

Is that only cultural lag?

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