Democrats & Liberals Archives

Borrowing to Correct Excessive Borrowing?

The current recession is the result of too much or too risk-averse or too foolish borrowing. This is the general opinion of economists. Then these same economists say that the solution is to bail out the huge financial institutions that caused our economic difficulties in the first place. We should do this so they may increase borrowing. Ridiculous.

There is a borrowing mania in the United States. If you want anything and you haven't got the money to pay for it just borrow, and bingo - you've got it. This is not the way it used to be in the first half of the 20th century - except for buying homes. After all you would never be able to live in a home if you needed to wait until you saved the amount of money needed to buy it. But even then, you needed to put down 20% in cash. Today you can buy a house with no down payment. And you can buy anything you desire with credit cards that charge usurious rates of interest.

Our government encourages it: you get a tax deduction if you borrow to buy a home. Repeal of the laws forbidding usury did not help either.

We have become addicted to credit. Once we get hooked by the shiny baubles we can obtain with credit, we want more and more of it. The more we want the more it costs until we must devote all our energies to paying the money back What promised to be so enjoyable becomes a life-destroying habit.

The banks used easy credit to rope in the unsuspecting individual who wanted to buy a home. If he could borrow the money he could have the home of his dreams. The bank or mortgage broker told him that though he has no savings and is not earning enough to take care of the monthly payments, he qualified for a loan. The financial people told indivudals clearly that the interest rate was low; then mumbled that the interest rate may rise in the future.

These home owners did nothing wrong. They were seduced by the easy credit offered them. Now they suffer while those who seduced them get free money from the government.

The banks were not satisfied merely to make loans. They combined them into complex securities that they sold. Supposedly this reduced the risk. So they made loans that nobody in their right mind would do. Why worry? These securities are wonderful protection.

The stock market boomed. Investors borrowed money to invest in "sure things." What did the SEC do? Nothing. With so much prosperity why bother?

Now that this whole house of cards has collapsed, the Treasury Secretary, together with our brilliant lawmakers, have come up with a bailout plan: "inject" money into the financial plundering organizations so they may increase lending. Did they give it to small financial companies that did not swindle the people? Of course, not. They gave it to the greatest swindlers, who happen to be "too big to fail."

"Too big to fail" in their their predatory lending practices!

We don't need to make borrowing easy. This is what brought us to the fix we're in. We need to make borrowing harder, to discourage it. Instead of focusing our help on huge financial institutions we must focus our efforts on those who are truly suffering: homeowners who are losing their homes and workers who are losing their jobs.

We need a stimulus package that helps workers build their economic fortunes, so they may buy or keep their homes and so they may have the confidence to buy cars and other gadgets. Michael Lewis and David Einhorn express it well:

Instead of buying dodgy assets and guaranteeing deals that should never have been made in the first place, we should use our money to A) repair the social safety net, now badly rent in ways that cause perfectly rational people to be terrified; and B) transform the bailout of the banks into a rescue of homeowners.

This is President-elect Obama's view: Leave the rich swindler alone. Help the little guy who has been wronged. Have a stimulus package that provides work, and helps entrepreneurs - especially in the green energy field - who will produce jobs.

Sure, the stimulus is a form of borrowing. But nobody encourages it as a prudent mode of living. We must do it now because we need to manufacture jobs. Once the economy improves we must reduce borrowing and we must reduce the deficit.

Posted by Paul Siegel at January 5, 2009 7:26 PM
Comment #273181
Paul Siegel wrote: Sure, the stimulus is a form of borrowing. But nobody encourages it as a prudent mode of living. We must do it now because we need to manufacture jobs. Once the economy improves we must reduce borrowing and we must reduce the deficit.
More debt and deficit spending might have worked at one time, but not now, because:
  • (01) the federal and nation-wide debt weren’t already near (or already) untenable.
  • Most Americans are already very deep in debt ($54-to-$67 Trillion nation-wide);
  • Nation-wide Debt has increased from 100% of GDP in 1956 to 483% of GDP in 2008.
    • _______ Nation-Wide Debt ________
    • $67.5T |——————————————D (Debt=$67 T)
    • $65.0T |—————————————-D-
    • $62.5T |—————————————-D-
    • $60.0T |—————————————-D-
    • $57.5T |—————————————D—
    • $55.0T |—————————————D—
    • $52.5T |—————————————D—
    • $50.0T |—————————————D—
    • $47.5T |—————————————D—
    • $45.0T |————————————-D—-
    • $42.5T |————————————-D—-
    • $40.0T |————————————-D—-
    • $37.5T |————————————D——
    • $35.0T |———————————-D——-
    • $32.5T |———————————-D——-
    • $30.0T |———————————D———
    • $27.5T |——————————-D———-
    • $25.0T |——————————D————
    • $22.5T |—————————-D————-
    • $20.0T |—————————D—————
    • $17.5T |————————-D—————-
    • $15.0T |————————D—————G-
    • $12.5T |———————D—————G—G(GDP=$13.8 T)
    • $10.0T |—————-D—————G———
    • $07.5T |———-D————G——————
    • $05.0T |-D———G——————————
    • $02.5T |-G—————————————-
    • $00.0T +(1956)———-(1982)———-(2008)YEAR
    Amortize that debt at only 4.0% interest, and guess how many centuries it would take to merely pay down half of that debt?
  • Increasing DEBT decreases Income, Employment, Exports, Tax Revenues, Investments, Consumption, and Wages, which can all result in wide-spread foreclosures, liquidation, bankruptcies, and pressure to create more new money, which can lead to hyperinflation. And all are amplified by CORRUPTION.
  • The massive foreclosures (10,000 per month in AUG-2008), bankruptcies, and liquidation has already begun. Already, more and more of the U.S. is becoming foreign owned (i.e. over $20 Trillion as of year 2007).
    • ____ Foreign Owned Assets in the U.S. ____
    • $24T |———————————————
    • $22T |——————————————-o
    • $20T |——————————————o-
    • $18T |—————————————-o—
    • $16T |—————————————o—-
    • $14T |————————————-o——
    • $12T |————————————o——-
    • $10T |———————————o———-
    • $08T |——————————o————-
    • $06T |————————o——————-
    • $04T |————-o——————————
    • $02T |o——————————————-
    • $00T |(1987)————(1997)————(2007) YEAR
  • The U.S. Dollar has been deterioating for decades.
  • We’ve already had 52 consecutive years of incessant inflation, federal deficit spending, and growing nation-wide debt (that has almost quintupled GDP), and it’s catching up with us.
  • More debt , borrowing , money-printing , and rampant spending will almost certainly guarantee hyperinflation, which will make things MUCH worse.
  • There are $11 Trillion of foreign-owned U.S. financial assets, including $3.04 Trillion of foreign-owned U.S. Treasury Securities.
  • Millions of Americans are already liquidating (i.e. foreclosures, filing for bankruptcy, selling assets; see graph above of foreign owned assets).
  • Average savings in the U.S. have already been negative for 3 years;
  • The ratio of nation-wide debt of $54-to-$67 Trillion -to- GDP has quadrupled since year 1956);
  • The federal government has already been deficit spending for 52 consecutive years;
  • The federal government and Federal Reserve have maintained positive inflation for 52 consecutive years;
  • Since we don’t manufacture as much as we did several decades ago, foreigners holding $11+ Trillion in U.S. Dollars will start buying anything we still manufacture, or own which can be liquidated, including (both new and used) cars, trucks, dozers, cranes, ships, planes, farm equipment, land, farms, corporations, houses, auctioned foreclosures, buildings, troubled banks, jewelry, gold, silver, steel, furniture, food, art, wineries, restaraunts, high-tech electronics, hotels, resorts, weapons, tools, hospitals and healthcare services, technology (one of the worst things we’ve been doing for decades), breweries (such as Anheuser-Busch that was bought by Belgian InBev), oil and fossil fuel refineries, coal, shipping ports, oil companies, essentially, anything that has value and can be liquidated (fueled by massive nation-wide debt, and millions of foreclosures, unemployment, and bankruptcies per year).
  • The increased spending of U.S. Dollars will create inflation, which can easily lead to hyperinflation, as hoarded foreign-owned U.S. dollars come rushing back. Since the U.S. doesn’t have the manufacturing base it had several decades ago, the money will not be able to create enough new jobs quickly enough for the middle and lower income classes, and will instead result in liquidation of assets (see list above), due to the pressure of so much current nation-wide debt.
  • The U.S. is a 70% consumer driven economy, and the wealthiest 20% of all Americans make up most of that spending. The wealthiest 1% of all Americans owns over 40% of all wealth in the U.S. 80% of Americans now own only 17% (or less) of all wealth in the U.S. The wealthy in the U.S. and world-wide are also sitting on the sidelines with a lot of cash due to stock-market volatility, and as inflation increases (world-wide), people will try spend that cash on whatever they can, before the currency erodes more in value. The massive liquidation, fueled by inflation, will result in the wealthy buying up assets anywhere they can (see list above) at fire-sale prices, in order protect their wealth (i.e. dumping all currencies experiencing significant inflation, and replacing it with something that will still have some value).
  • Even if the Federal Reserve tries to restrict the rapid growth of the Money Supply (i.e. inflation), it won’t help because the Federal Reserve will be trying to battle BOTH inflation and a recession simultaneously. The federal government and Federal Reserve can’t BOTH simultaneously create massive amounts of new money to fight a recession, and also restrict Money Supply to limit inflation.
  • Globalism: when and where wages and taxes increase, transnational corporations simply move somewhere else, which is facilitated by unfair trade-deals that pit workers in both nations against each other, while the wealthy owners of the corporations reap the temporary profits before moving on to the next place where labor is cheaper; always insuring a source of cheap labor;
  • Unlike the Great Depression, we are entering a recession with much larger debt and liabilities (both federal and non-federal); a deteriorated manufacturing base; more foreign owned U.S. dollars; more debt owed to foreign nations; a huge trade deficit; triple the population; a more urban population; huge entitlements liabilities with a 77 Million baby boomer bubble; and these 18+ economic conditions have never been worse ever, and/or since the Great Depression.
Nations with fiat currencies all over the world are in trouble due to decades of excessive inflation due to excessive creation of new money out of thin air, resulting in huge debt-bubbles.

That is, unless several things are done exactly right and simultaneously.
And one of those things is NOT growing the debt-bubble any larger.
Eventually, the debt must be unwound, before it bursts.
New money can not substitute for real productivity, and can eventually render the money worthless.
Several nations have already tried it, and it resulted in hyperinflation (i.e. in the last 150 years):

  • Madagascar 2004 - 2005 (1/5th of starting value),

  • Zimbabwe 2003 - present (6 quadrillionth of the starting value and continuing to fall),

  • Romania 1998 - 2005 (1/50,000th of starting value),

  • Former Soviet Union 1993 – 2002 (1/14th of starting value),

  • Angola 1991 - 1995 (1 Billionth of starting value),

  • Belarus 1994 - 2002 (1/1,000 of starting value),

  • Georgia 1993 - 1994 (1 Millionth of starting value),

  • Ukraine 1993 - 1995 (1/100,000th of starting value),

  • Bosnia-Herzegovina 1992 – 1993 (1/100,000th of starting value),

  • Krajina 1992 - 1993 (1 Millionth of starting value) reincorporated into Croatia in year 1998,

  • Republika Srpska - Bosnia 1992 - 1993 (1 Millionth of starting value),

  • Turkey 1991 - 1999 , double-digit inflation 2005 - 2007(1 Millionth of starting value),

  • Poland 1990 – 1994 (1/10,000th of starting value),

  • Yugoslavia 1989 - 1994 (1/1x10^27 of starting value),

  • Zaire 1989 - 1996 (1/30 Billionths of starting value),

  • Nicaragua 1987 - 1990 (1/5 Billionth of starting value),

  • Mexico 1987 to 1993 (about 1/3 of starting value),

  • Peru 1984 - 1990 (1 Billionth of starting value),

  • Bolivia 1984 - 1986 (1/1,000 of starting value);

  • Israel 1976 – 1986 (1/16th of starting value),

  • Argentina 1975 – 1983 (1/1,000th of starting value),

  • Chile 1971 - 1973 (1/12th of starting value),

  • Brazil 1960 – 1994 (1 trillionth of starting value), Chile 1971 – 1973 (1/3rd of starting value),

  • China 1947 – 1955 (1/10,000th of starting value),

  • Taiwan 1947 - 1949 (1/40,000th of starting value),

  • Greece 1943 – 1953 (1/50 trillionth of starting value),

  • Hungary 1945 – 1946 (100 quintillionth of the starting value),

  • Japan 1934 – 1951 (1/362nd of starting value),

  • Hungary 1922 – 1923 (1/4 of starting value),

  • Austria 1921 – 1923 (about 1/4 of starting value),

  • Free City of Danzig 1922 - 1923 (1/10 Millionth of starting value),

  • Weimar Republic of Germany 1920 – 1923 (1/466 billionth of starting value),

  • U.S.A. (Confederate States of America) 1861 – 1865 (1/90th of starting value, and then, by the end of the Civil War, the Confederate Dollar depreciated to zero).

  • It also happened in the ancient Roman Empire, when the silver and gold coinage of that day was progressively debased with base metals, in order to fund wars, giveaways to the Plebeians, and various other adventures.
Other nations have already tried to borrow and money-print their way to prosperity, and it not only failed miserably, but made things much worse, by debauching the currency, which will destroy savings, pensions, entitlements, and wages. It will turn a bad recession into another Great Depression with double or triple or 4+ digit inflation rates.

There is a limit to the amout of debt a nation can carry, and nation-wide debt of $54-to-$67 Trillion is 390%-to-493% of GDP (i.e. GDP=$13.86 Trillion in 2007).
Trillions of dollars have been created recently (out of thin air) for banks, corporations, and Wall Street
In the last few months, $3.2 Trillion has been spent or lent from $8.5 Trillion allocated to banks, corporations, and Wall Street:,0,5292528.graphic

However, for some reason, the U.S. seems to believe that it is immune to hyperinflation.
A 1950 Dollar is now worth only about 10 cents.

  • Inflation: Consumer Price Index (CPI=100 for year 1967)

  • 700 |———————————-X (=665: JAN-2008)

  • 650 |———————————X

  • 600 |———————————X

  • 550 |———————————X

  • 500 |——————————-X

  • 450 |——————————-X

  • 400 |——————————-X

  • 350 |——————————X

  • 300 |—————————-X

  • 250 |—————————-X

  • 200 |—————————X

  • 150 |—————————X

  • 100 |————————X

  • 050 |XXXXXXXXX

  • 000 +(1800)—————(2008)YEAR

By the way, inflation, GDP, national debt, and the money supply are not being reported accurately:
Inflation is actually higher.
GDP is actually lower.
The money supply is unknown at the moment, with trillions being thrown all about.
And the National Debt does not include the $12.8 Trillion borrowed from Social Security (which has NO surpluses; only I.O.U.s that are most likely worthless).

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at January 5, 2009 11:31 PM
Comment #273184

Not confusing macroeconomics with microeconomics is an important distinction.
Hyperinflation is not a problem in a deflationary, shrinking economy. Let’s not repeat the thirties. Those of us who study history should learn something about the period.

Government spending in a shrinking economy is not a bad thing. It is not akin to balancing your personal checking account. I wonder if we should not have aided Britian, or began building our munitions prior to WWII? I mean we could ill afford to spend the money, right? It enslaved the children of that generation didn’t it? Understanding the problems with that kind of logic is at the root of understanding that investment to restore economic health is not irresponsible. Understanding that money simply represents real value and is not a real value in and of its self is a concept I found hard to understand in college economics. It took a few economic cycles for me to get that concept.

I suppose we could return to a barter economy, or an imaginary standard such as gold, but I doubt any one would enjoy the results. Study Jackson’s stupidity to understand that. He was a popular president, until he destroyed the economy.

That said, irresponsible spending, which to some degree is unavoidable at the large levels needed, IS something to be avoided. Investment in infrastructure makes sense. Transparency in the economic system is equally important.

In a perfect world we would have zero inflation, a constantly moderate GDP growth, steady population demographics, the business cycle would be in perfect control, the Fed would have a crystal ball so that just the right monetary policy occurs at just the right time. A million psuedo economists with perfect hindsight, now tell us they had the perfect plan. It’s such an obvious and easy thing, why has no one thought of it before? Reality is a bit messier, than idealism.

If there is one lesson here that should be learned here, the belief in capitalism as something independent from governmental trade, monetary, social and military domestic and foreign policy is the lie of all lies. robust capitalism only exists in the presence of strong fair and moral policies of a nation or economic group, be they governed by a monarch or democratically elected representatives.

Posted by: gergle at January 6, 2009 7:59 AM
Comment #273192

gergle said: “Government spending in a shrinking economy is not a bad thing.”

Unless it bankrupts the nation’s credit capacity in time of need, which many nations have evidenced, such as Brazil forced to the IMF to save themselves from themselves and the gratuitous mismanagement of borrowing.

You are right that borrowing and spending to increase and shore up economic activity during a recession is ordinarily called for.

What you aren’t considering is whether a nation which has wastefully added trillions to its debt BEFORE the recession is in a sound position to raise that debt ceiling by trillions more, apparently.

I will argue as a large number of economists will that 12 trillion national debt will not kill America’s economy. But, it will seriously impair and close many of America’s opportunities and choices going forward. There is a limit to how much debt America can support, and while no one knows precisely what that amount is, it is a certainty that we are approaching that limit at a vastly faster rate of speed than at any other time in our history, except during the 1930’s and 1940’s.

The difference between then and now, is that our economy had vast untapped human, natural and innovative resources ahead of us after the Great Depression and WWII. That is not nearly the case today. With global competition for America’s marketable products and services today, growing the economy and tax revenues to halt deficit spending and draw down the debt is going to be considerably more costly to American workers going forward than it was to workers in the 1950’s and 1960’s.

d.a.n is right to throw up the flags of caution regarding this incredible piling on of debt. Though there are overlooked compensatory trends underway. A lot of debt is going to be paid off sooner as a result of low interest rates both today and going forward for quite some time.

No one in power believes this level of debt is healthy and can be maintained without negative consequences. Obama is committed to insuring that spending going forward has dual purpose fulfillment both present and future, and thus, will be eliminating, if he is successful, much of the wasteful and inefficient spending that had become the hallmark of the last several administrations and many, many Congress’.

Inflation will be byproduct of all this borrowing and printing of money. There is no escaping that. Whether it results in crippling hyperinflation or just painful high inflation for decades to come remains to be seen, but, here too, there are a few positive signs becoming apparent such as a majority of other nations taking similar central bank and treasury measures, which checks the potential of other nation’s taking advantage of our own attempts to fight inflation after the economy has begun to recover. Also, labor capital is becoming relatively cheaper in the wake of a global recession. That is a major check on inflation. And lastly, American business’ are likely to see themselves relieved of the health care cost burden in coming years, allowing our business’ to more effectively compete with other nations for exportable products and services.

So, I am not ready to say the sky is falling. But, I am prepared to say there are growing cracks in that sky that if not repaired in a timely fashion, could allow the debt ceiling to come crashing in on the U.S. over the next couple of decades. There are many unknown events in the future which could give rise to yet more need for massive borrowing and spending, and that may coincide with a global investment environment that believes it can get better and less risky returns elsewhere - effectively forcing the U.S. into a bankrupt scenario, in which major portions of our government and private sectors are forced to shut down.

These are uncharted and potentially perilous economic scenarios we are entering and going to have to deal with. Rather scary to think that the outcome rests in the hands of voters ultimately. But, many times before the U.S. has faced self-destruction and the American people have averted such disaster or dissolution. It would be prudent however for voters not to count on history as salvation for our future. That would be a gratuitous error in logic and contrary to historical evidence as to how it was we circumvented national failure and dissolution in the past.

Posted by: David R. Remer at January 6, 2009 11:43 AM
Comment #273197
David R. Remer wrote: Inflation will be byproduct of all this borrowing and printing of money. There is no escaping that. Whether it results in crippling hyperinflation or just painful high inflation for decades to come remains to be seen, …
Thanks. Yes. That is the BIG question.

How much debt , spending , borrowing , and creation of new money can we withstand without triggering hyperinflation (or inflation that does more harm than good)?
Once hyperinflation starts, it will be unstoppable, until it runs its devastating course.
The risky part is the $11+ Trillion of foreign-owned U.S. dollars and U.S. Treasury securities which could all start getting spent (especially if foreigners see the U.S. Dollar continue to fall):

  • __ Foreign Owned U.S. Dollars and U.S. Treasury Securities __

  • $12T |———————————————

  • $11T |——————————————oo

  • $10T |—————————————-o—

  • $09T |————————————-o——

  • $08T |———————————-o———

  • $07T |———————————o———-

  • $06T |——————————o————-

  • $05T |—————————o—————-

  • $04T |———————-o———————

  • $03T |——————o————————-

  • $02T |———-o———————————

  • $01T |o——————————————-

  • $00T |(1985)————(1995)————(2005) YEAR

Inflation and devaluation of the U.S. Dollar has already resulted in a sell-off of $20 Trillion of U.S. assets (now foreign owned).
That is, the liquidation has already begun, and the debt may already be untenable?
  • ____ Foreign Owned Assets in the U.S. ____

  • $24T |———————————————

  • $22T |——————————————-o

  • $20T |——————————————o-

  • $18T |—————————————-o—

  • $16T |—————————————o—-

  • $14T |————————————-o——

  • $12T |————————————o——-

  • $10T |———————————o———-

  • $08T |——————————o————-

  • $06T |————————o——————-

  • $04T |————-o——————————

  • $02T |o——————————————-

  • $00T |(1987)————(1997)————(2007) YEAR

gergle wrote: Hyperinflation is not a problem in a deflationary, shrinking economy.

We don’t have deflation today.

Even if the government’s fudged (understated) value of inflation for DEC-2008 is the same as NOV-2008, the average inflation for 2008 is 3.40%:
JAN-2008: 4.28%
FEB-2008: 4.03%
MAR-2008: 3.98%
APR-2008: 3.94%
MAY-2008: 4.18%
JUN-2008: 5.02%
JUL-2008: 5.60%
AUG-2008: 5.37%
SEP-2008: 4.94%
OCT-2008: 3.66%
NOV-2008: 1.07%
DEC-2008: 1.07% ?
AVERAGE-2008: 3.40%

  • ____INFLATION RATE_____
  • 4.00%|———————-
  • 3.75%|———————-
  • 3.50%|——————xxx (3.4% average for year 2008)
  • 3.25%|————xxx-x—
  • 3.00%|————x-xxx—
  • 2.75%|——xxx-x———
  • 2.50%|——x-xxx———
  • 2.25%|—xxx—————
  • 2.00%|—x——————
  • 1.70%|—x——————
  • 1.50%|xxx——————
  • 1.25%|———————-
  • 1.00%|———————-
  • 0.75%|———————-
  • 0.50%|———————-
  • 0.25%|———————-
  • 0.00%|__________________YEAR
  • _____ 2_2_2_2_2_2_2
  • _____ 0_0_0_0_0_0_0
  • _____ 0_0_0_0_0_0_0
  • _____ 2_3_4_5_6_7_8

Year _ Inflation Rate
2002 __ 1.59%
2003 __ 2.27%
2004 __ 2.68%
2005 __ 3.39%
2006 __ 3.24%
2007 __ 2.85%
2008 __ 3.40% (estimated)

Inflation, GDP, unemployment, and debt are all being misreported (for several obvious reasons).
First of all, Social Security increases are linked to inflation, so obviously, inflation is under-reported.
Even with the fudged numbers, inflation is still positive, and has been for 52 consecutive years.
Only some items are experiencing significant deflation, such as the glut of houses and oil and gasoline.

The reality is that core inflation excludes food and energy items, and the inflation calculations have been fudged twice in 1983 and 1998 so that CPI items falling in price are weighted more heavily than items rising in price, resulting in a lower inflation number.
Another recent dishonest trick was to fudge the CPI weighting for used cars prices and car rentals, in a way to reduce the inflation numbers.
Another trick was the fudging of the CPI weighting for housing unit rentals, and new homes, in a way to reduce the inflation numbers.
As a result of all this clever fudging, core CPI is essentially inflation excluding all of the stuff that increased in price.
Another farce is the claims of deflation.
How can there be deflation when we have had positive inflation for 52 consecutive years (even by the government’s own fudged CPI numbers)?
These threats of deflation are used to pave the way for more inflation.
The Federal Reserve designed that myth to distract from the real problem, which is inflation, which the Federal Reserve can’t effectively control today, because consumers are already too close to the edge of their capacity to afford the debt they already have.
Thus, you could say that core inflation measurements, and other government reported economic statistics are essentially rotten to the core.

And I won’t even bother to go into the way GDP numbers are distorted.
If GDP numbers are inflated (e.g. $13.86 Trillion for 2007), then nation-wide debt ($54-to-$67 Trillion) is actually more than 390%-to-483% of GDP!
And how lucky we are to have Helicopter Ben who thinks like Alan Greenspan.
Bernanke said we could drop cash from a helicopter to illustrate how easily the economy could be fixed by creating massive amounts of new money.
The danger about all of this misinformation about inflation is that by the time inflation is recognized as a problem, hyperinflation will already be upon us, and it will be too late to counter act. Especially when 95% of all U.S. money in existence is debt.

gergle wrote: Government spending in a shrinking economy is not a bad thing.
Unless the debt is already untenable.

Amortize $54-to-$67 Trillion of nation-wide debt and $23 Trillion of federal debt, and see how many centuries it would take to merely reduce the Principal by 50%.
Do we want to unwind the debt with more responsible spending, reforms, and elimination of abuses, or hyperinflation and more of the same?
Take your pick. Which do you think will be worse over the next few years?
Other nations have tried to money-print and spend their way to prosperity, and it did not work, did it?

What makes so many Americans think we are immune to hyperinflation?
Especially with 52 consecutive years of incessant inflation, and a 1950 Dollar that is now only worth 10 cents (or less)?
M3 Money Supply increased from $135 Billion in 1950 to $10.15 Trillion in year 2005 (when the govenment stopped reporting it), a increase of 7520% !
Did the U.S. become 7520% wealthier?
Even with double the population today (305 Million) than in 1950, did the U.S. become 3760% wealthier? No.

gergle wrote: That said, irresponsible spending, which to some degree is unavoidable at the large levels [of spending] needed, IS something to be avoided.
Why are large levels of additional spending needed?

Why not cut unnecessary spending and waste to fund more productive spending, research, energy independence, rebuilding infrastructure?
There is a LOT of waste in the federal government.

It makes no sense, except for one thing: The federal government and Federal Reserve can print all the money they want.

Try playing the game of Monopoly where one person (the bank) can print all the money they want, and see what happens.
Before long, the bank owns everything, while everyone else is broke, deep in debt, jobless, homeless, and hungry.
This is a large part of the reason for the growing global wealth disparity since year 1976 (along with regressive taxation, corrupt government, and other abuses).
Inflation slowly but gradually extracts wealth from the many and funnels it to the wealthy.
Is borrowing and creating massive amounts of new money out of thin air (tens of trillions) fiscally responsible when the nation-wide debt is already 483% of GDP? (up from 100% of GDP in year 1956; i.e quintupled).

How much debt and inflation is too much? When a U.S. Dollar is worth a hundredth, millionth, billionth, trillionth, quadrillionth, or 1/(1^500) of its original value?
Almost everyone agrees that inflation will eventually result from all of this rampant creation of new money, debt, and spending.
Also, inflation today is actually worse than what is being reported.
Even with lower gasoline prices and home prices, overall inflation for 2008 is still positive and higher than several previous years.
Also, inflation, GDP, unemployment, and debt are all being misreported.

When inflation does start ramping up sharply, what makes anyone believe the Federal Reserve will be able to limit inflation?
Especially if the federal and nation-wide debt grew much larger too?
Especially if inflation triggers a run on the U.S. Dollar by over $11 Trillion foreign-owned U.S. dollars and U.S. Treasury Securities?
How can the Federal Reserve remove money from the Money Supply if it exists as more debt, and more of all wealth has been shifted to a small percentage of Americans?

It appears that (with plans to spend trillions more) the opposite of what needs to happen will happen:

  • (01) stop these abuses now.

  • (02) Fix the dishonest, usurious, predatory, steep leveraging of debt-to-reserves (i.e. 9-to-1 fractional lending) by the Ponzi-sheme monetary system; banks are loan-sharking, with ridiculous 35%-to-64% (or higher) interest rates, and other predetory lending practices; 64%! ! ! banks are preying on the young, poor, minorities, and financially naive;

  • (03) Cut all the massive bloat and waste in the federal government now:

  • (04) Get out of Iraq;

  • (05) And perhaps reduce or eliminate involvement in Afghanistan too and get more help from other nations; the terrorists are now in norther Pakistan;

  • (06) Create jobs to rebuild the nation’s infrastructure;

  • (07) Create jobs to research, develop, and implement better and renewable energy resources;

  • (08) Stop throwing money, subsidies, tax breaks, and welfare at failing banks, financial corporations, the wealthy, and Wall Street; stop rewarding failure;

  • (09) Increase and enforce more transparency and accountability;

  • (10) Uphold the Constitution; reduce lawlessness; enforce existing laws; stop illegal immigration and $70-to-$327 Billion in annual net losses due to illegal immigration;

  • (11) Stop plundering Social Security surpluses; $12.8 Trillion has been borrowed and spent, leaving Social Security pay-as-you-go, with 77 Million baby-boomers approaching;

  • (12) Eliminate regressive taxation:

  • (13) Create a non-profit national health insurance system (get rid of the millions of unnecessary middlemen); build non-profit hospitals and clinics;

  • (14) End the U.S. has a presence in 134 nations around the world, and that costs a lot. Is all of that necessary? No. Significantly reduce that.

  • (15) Congress just gave itself its 10th raise in 12 years (they’re actually automitic). Is that necessary? No. What arrogance!

  • (16) Politicians are FOR-SALE, and they’ve sold-out most Americans, but the majority of voters continue to repeatedly reward the same incumbent politicians with 86.9% re-election rates. Stop rewarding corruption!

  • (17) … More Solutions …

David R. Remer wrote: So, I am not ready to say the sky is falling. But, I am prepared to say there are growing cracks in that sky that if not repaired in a timely fashion, could allow the debt ceiling to come crashing in on the U.S. over the next couple of decades.
Yes, again, the BIG question is: How big can the debt-bubble grow, before it becomes untenable?

But equally (if not more) alarming than the federal debt, is the $54-to-$67 Trillion of total nation-wide debt (390%-to-483% of year 2007’s $13.86 Trillion GDP), exacerbated by: a 70% consumer-driven economy; tens of trillions of foreign owned money and debt; huge trade deficits; a deteriorated manufacturing base; negative savings since 2005; 10,00 foreclosures per day; $12.8 Trillion borrowed from Social Security; energy vulnerabilities; a continued confidence in highly leveraged fiat money; usurious and predatory banks growing more usurious and predatory; growing wealth disparity; wars; and the cost of a military precense in 132 nations; falling real median incomes; growing federal government bloat and waste; Congress is still FOR-SALE; globalism; etc., etc., etc.

And then, the debt may already be untenable, since the total federal debt is actually more than $10.7 Trillion, if the $12.8 Trillion borrowed from Social Security is included?
That $12.8 Trillion borrowed from the pay-as-you-go Social Security is becoming critical with 77 Million baby boomers approaching, and will become more critical in the approaching decades.

In my opinion, we will have hyperinflation if federal deficit spending continues; if massive waste, bloat, and unnecessary spending is not also eliminated to fund more productive spending; if the already severely bloated federal governemnt simply grows larger and more costly; and major abuses (e.g. regressive taxation; unfair-trade; usurious and predatory banking practices; etc.: hammering most Americans are not stopped as soon as possible. We need much smarter spending first, instead of more spending.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at January 6, 2009 1:06 PM
Comment #273209

Let me ask a question. Does anyone ever read these long lists of numbers and figures? I normally just scroll down and I was wondering if anyone else did the same thing.

Posted by: Oldguy at January 6, 2009 4:11 PM
Comment #273217


I have the same problem wading through a bunch of bible quotations…don’t you?

Posted by: Marysdude at January 6, 2009 7:13 PM
Comment #273224


Try some bible quotes and I will let you know!

Posted by: Oldguy at January 6, 2009 10:15 PM
Comment #273230


I am skeptical of Obama’s words that we will see Trillion dollar deficits for “years to come”. Count me in as believing it’s over if that is the case. I am hearing things like Obama wants to add 600,000 jobs government jobs. I believe he said 3 million with 80% being in the private sector.

I’m out a here in those figures.

I think we should balance high deficits now with future cuts. We should look at cutting retiree benefits by delaying retirement for boomers. That way we would not be adding a burden onto our children. Or at least an additional burden. this is all too cotton candy. this is not your usual borrow money to get out of a jam. Adding 600,000 goverment workers is remaking America into Europe.

I think there are about 1.8 million government workers now. I would need a huge explaination as to why we are increasing the workforce by a third.

If this is the case, I’m heading for the woods!!!

Posted by: Craig Holmes at January 7, 2009 12:06 AM
Comment #273231

d.a.n said: “Why not cut unnecessary spending and waste to fund more productive spending, research, energy independence, rebuilding infrastructure?”

That is the Obama plan.

“There is a LOT of waste in the federal government.”

Largely created to appease special interest groups of very small number at great cumulative expense to all federal tax payers. This is precisely one of those issues I speak of when referring to Obama going to war with those within his own Party in the Congress. Congressional politicians will demand their lobbyist special interest minority group’s, funding their reelection campaigns, pork projects be included in the federal budget. Obama, if he is true to his campaign, will have to fight this source of federal budgetary waste and inefficient spending, by members of both parties.

Posted by: David R. Remer at January 7, 2009 1:19 AM
Comment #273235

Craig, I apparently missed the speech in which Obama said we face trillion dollar deficits for years. Do you have a link?

I have only heard Obama reference large deficits for the next 2 years with the anticipation that a recovering economy would permit a pronounced reduction in deficit spending thereafter and addressing the national debt eventually.

I am with you. If trillion dollar deficits are in the cards for many years to come, there will be no escaping the weight of those accumulated deficits combined with the entitlement future deficits from caving in on the American economy.

Craig: “I think we should balance high deficits now with future cuts. We should look at cutting retiree benefits by delaying retirement for boomers.”

I am confident that is on the way, and included in Obama’s references to shared sacrifice by all. But, there is a right way and wrong way to do this. The wrong way is to simply legislate it. The right way is to create a market place that will employ 67 year old American with middle class wages, WHILE legislating extensions on the eligibility retirement age for federal benefits. I think that is on Obama’s agenda too, and cannot be accomplished in Jan. of 2009.

Craig: “Adding 600,000 goverment workers is remaking America into Europe.”

I don’t agree. Whether adding government workers is a net positive or negative depends entirely on how much services are provided to the economy and people by those added workers that cannot be provided at comparable cost by the private sector. Please provide a link to this reference to adding 600,000 government workers, because that is news to me as well. I am familiar with Obama’s intent to create 3 million new jobs in the private sector by funding infrastructure development. Is that what you are referring to?

Or, are you referring to the single payer universal health insurance program? Far as I know, there are no details on whether that insurance program would be managed by the private or public sector employees. You know something I don’t?

Posted by: David R. Remer at January 7, 2009 2:36 AM
Comment #273238

Yes he did say that. By now its in all the news. Good.He’s honest. After bushco’s damage it will be a rough row to hoe but we still need to do it. Its like medicine to a sick person. Its vital. The projects,mostly infrastructure, being proposed will be overdue or worth the investment. The projects will be shown on the internet for all of us to judge in an unprecedented show of transparency.THERE WILL BE NO EARMARKS!!!
Your concerns about out of control spending have merit under usual circumstances. Not now or for at least the next two years. The danger here is not doing enough. If the economy is overstimulated the result is inflation. This is amenable to quick correction by raising interest rates. Atempts to suddenly balance the budget in 1937 deepened and lenghtened the depression. We must not make the same mistake. When the economy starts showing growth at sustainable levels again I will be with you.


Worth mentioning is the long term ill effects of the concerted effort to keep wages depressed. If people earn enough they do not need to borrow or have as much touble paying off debt. This was on purpose and yet another legacy of the Bush regime.
As for bailouts, I recall a Michael Moore interview wherein he opposed the first atempt by the big 3 to get help. What got him was in one financial restucturing plan they proposed laying off 20,000 more American workers. Don’t these guys get it at all?

Posted by: bills at January 7, 2009 7:30 AM
Comment #273242

Craig, and bills, context is everything.

What Obama said is that we may be facing trillion dollar deficits for years to come. He did NOT say we should expect a trillion a year deficits for many years to come. He did not define the word years, which could mean 2, or 10.

Obama’s context is this: we can’t deal with eliminating deficits and reducing debt UNTIL the economy is on a healthier and growing employment track. Therefore, the his first priority will be to get the economy growing again and people in jobs again, and that requires deficit spending now, even as he works to insure that spending is made vastly more targeted and efficient and less wasteful. Howard Dean and Rep. Clyburn this morning have both said that Democrats cannot abandon PayGO in the name of saving the economy. Other Democrats like Maxine Waters don’t agree. There is a battle to be fought over spending.

Who wins that battle and by how much will in large part determine whether trillion dollar deficits are incurred for 2 years or 10. Obama, as bills said, is keeping his promise to the American people to be honest and forthright in the information he and his administration puts out. Obama does not control the Congress. The Congress controls spending, deficit and otherwise.

Obama intends to do his utmost to insure deficits are as short lived as possible, but, ultimately that responsibility lies with the Congress. You know, all those corrupt representatives Americans reelected who got us here in the first place.

Posted by: David R. Remer at January 7, 2009 8:47 AM
Comment #273244

DR,Craige and I hope DAN

Things are not normal economically. Those of both parties that attempt to weaken the stimulus plan or apply normally prudent standards to it are not doing a service to the country.

pls read:

Posted by: bills at January 7, 2009 9:04 AM
Comment #273247

bills, Krugman is incorrect in some of his understanding. First, the Congressional leaders told Obama that could put a bill on his desk to sign the day of his inauguration. Obama said, “NO”. He said he wanted this bill to go through the normal legislative process insuring Republicans have their input and amendment potential as part of the process.

Krugman insists in his article that Obama wants it big and fast. That is NOT how Obama has treated the stimulus package request. Krugman is a smart guy, but, he plays fast and loose with his writing at times failing to do his homework to support HIS opinions.

Posted by: David R. Remer at January 7, 2009 10:32 AM
Comment #273248


We disagree, due to one fundamental reason. The debt is TOO BIG!

Too much debt can easily trigger another economic terror:

  • Hyperinflation

I think the total federal and nation-wide debt is already very near (if not already) untenable, and growing it any larger is risking hyperinflation, due to tremendous pressures to not default on current debt and liabilities. The U.S. Dollar has been falling for many years, and a continuation of this inflation could trigger a run on the incessant weakening U.S. Dollar. That’s not only my opinion, but the opinion of other economists who accurately predicted this entire mess many years in advance (which in my opinion, doesn’t require much skill or clairvoyance).

If the debt is near (if not already) untenable, growing it any larger is like a huge debt-balloon searching for thorn in a huge field of thorny roses.

If the U.S. continues to grow the federal debt beyond already nightmarish proportions, there will most likely be a run on the U.S. Dollar, and hyperinflation will be unavoidable when foreigners start spending and dumping over $11 Trillion of foreign-owned U.S. Dollars (including $3.04 Trillion of foreign-owned in U.S. Treasury Securities).

We need an end to major abuses and much SMARTER spending of the federal government’s $2.5 Trillion in federal tax revenues; not more borrowing, money-printing, debt, and rampant irresponsible spending.

bills, Regarding the article you link to, Paul Krugman writes:

  • Paul Krugman wrote: Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy — well, you can see where this is going.

There is NO deflation. That is a myth used to pave the way for more massive creation of new money out of thin air.
Don’t worry about deflation, the Federal Reserve and Helicopter Ben won’t let deflation occur, and deflation ain’t likely with 52 consecutive years of positive inflation.
Even if we had 1% deflation, so what?
Some deflation once in a while is OK if it offsets inflation.

History doesn’t repeat itself exactly.
As Mark Twain said:

  • “History doesn’t repeat itself - at best it sometimes rhymes” — Mark Twain quotes (American Humorist, Writer and Lecturer. 1835-1910)

While history is important, and while there are many lessons to learn from history, this is not identical to the Great Depression.
The U.S. did not enter the Great Depression with the massive level of federal and non-federal debt we have today.
The U.S. was more rural in the Great Depression.
The U.S. did not have globalism to the degree of today and it had not deindustrialized and gutted the U.S. of jobs as it has today.
the U.S. did not have the degree of global competition that we have today.
The U.S. economy was not 70% consumer-driven in the Great Depression.
The U.S. did not have the financial liabilities in the Great Depression that it does today.

Today, total federal is much larger (as a percentage of GDP). Including the $12.8 Trillion borrowed from Social Security, total federal debt as a percentage of GDP has never been larger.

Today, total nation-wide debt is many times larger than it was in the Great Depression, and the total nation-wide debt has never been larger ever in magnitude and as a percentage of GDP, which is now 5 times larger today than in the Great Depression.

David R. Remer wrote:
  • d.a.n said: “Why not cut unnecessary spending and waste to fund more productive spending, research, energy independence, rebuilding infrastructure?”
  • That is the Obama plan.
    You may be right about Obama’s plan.

    But a corrupt, FOR-SALE, and incompetent Congress is very unlikely to allow spending cuts, unless Obama can somehow convince enough Americans to side with him.
    Obama is a good speaker and communicator, but it doesn’t seem likely that Congress or the majority of Americans will embrace cuts in unnecessary spending and waste.
    If the severely bloated federal government is merely grown ever larger and more wasteful, it will most likely be the last straw.
    More wasteful spending will not reduce the debt, which is already at very dangerous levels.
    Also, federal debt is not the only issue, with nation-wide debt of $54-to-$67 Trillion (up from 100% of GDP in 1956 to 390%-to-483% of GDP today).

    bills , Have you ever amortized the federal, non-federal, and total nation-wide debt to see how many centuries it would take to merely reduce the Principal debt by 30%?
    How much debt is too much debt?
    There seems to be a lot of people that seem to think debt and deficits don’t matter.
    Those people are all about to learn a V E R Y painful lesson.

    At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

    Posted by: d.a.n at January 7, 2009 10:51 AM
    Comment #273250

    Paul said “These home owners did nothing wrong. They were seduced….”

    Try that line on your wife
    “Honey, I did nothing wrong. I was suduced!”

    The fact is people did something wrong.

    The john did something wrong, the prostitute did something wrong and the rest of us have to pay because now they both have herpes.

    Posted by: 037 at January 7, 2009 11:14 AM
    Comment #273251


    I could swallow what you are saying if Obama was not advocating adding 600,000 new governemt workers.

    Posted by: Craig Holmes at January 7, 2009 11:21 AM
    Comment #273252

    Craig, please provide a reference to this 600,000 new government jobs. Context and details are crucial to making any determination as to whether such additions are warranted or not.

    Posted by: David R. Remer at January 7, 2009 11:23 AM
    Comment #273255

    d.a.n, you may be surprised. This morning both Howard Dean and Rep. Clayton said separately that the Democrats in Congress simply must insure PayGo is applied to these economic stimulus and rescue packages. They are talking about working in mechanisms in which stimulus or bailout deficit spending is recovered through a variety of measures, loans made with penalty and interest, investments that will dollar for dollar reduce future outlays for infrastructure, and rescue dollars attached to stock ownership in corporations to be rescued.

    Some Republicans are rallying behind these proposals of Obama’s like Rep. Clayton of N. Carolina. The Blue Dog Democrats are sure to climb on board with this, and Pelosi said in the last 24 hours that it is incumbent upon the House to operate from a centrist position in which accommodation for bi-partisan input and passage of legislation can be the norm.

    The only 2 persons I am detecting as opposed to this PayGo approach to economic stabilization deficit spending are Sen. Harry Reid (D) and Rep. Cochran (R). I think there is a consensus building to follow Obama’s lead on this, as the price of obstructionism becomes that of the Congress person’s if such measures fail, whereas, following Obama’s lead puts the responsibility on Obama’s shoulders.

    I think it is possible we may see America’s first largely lean of pork budget to come out of Congress in many, many decades.

    Posted by: David R. Remer at January 7, 2009 11:34 AM
    Comment #273257

    d.a.n, just read some important words from Sen. Reid in an interview recently: “If Obama steps over the bounds, I will tell him. … I do not work for Barack Obama. I work with him,”

    What precisely that means in terms of his following Obama’s and other’s lead on PayGo is not indicated. However, Reid appears as committed as Pelosi to insure bipartisan input and votes on legislation, which means he must be willing, if his words are credible, to allow fiscal restraint and prudence in budgeting going forward, which both Blue Dogs and Republicans will make their bi-partisan centerpiece.

    Cloture can work on Republicans, but, not on Republicans backed by Blue Dog Democrats. Reid sees the writing on the wall and, as I see it, is acknowledging that a bi-partisan approach is essential to winning that filibuster proof Senate in 2010, without which, Reid’s power is diminished.

    Posted by: David R. Remer at January 7, 2009 12:00 PM
    Comment #273258
    bills wrote: Your concerns about out of control spending have merit under usual circumstances.
    Deficit spending (as in the Great Depression) may have worked then.

    But not today, when the federal and total nation-wide debt is near (if not already) untenable.
    If the debt is already untenable, the pressures and tremendous to create more money out of thin air, borrow, and spend.
    Those pressures can easily lead to hyerinflation, which has been a hard lesson already learned by many other nations in the past 150 years, who watched the currencies become worthless in a very short period of time. Once hyperinflation occurs, it will be too late.

    bills wrote: Not now or for at least the next two years. The danger here is not doing enough.
    The danger is growing the debt-bubble, instead of finding ways to unwind it.
    bills wrote: If the economy is overstimulated the result is inflation. This is amenable to quick correction by raising interest rates.
    You may want to rethink that.

    What good will raising interest rates do, when most Americans are already on the edge, already deep in debt, and unable to carry more debt, and unable to spend enough to keep a 70%-consumer-driven-economy from decline?

    bills wrote: Atempts to suddenly balance the budget in 1937 deepened and lenghtened the depression. We must not make the same mistake. When the economy starts showing growth at sustainable levels again I will be with you.
    The budget was not balanced in 1937. The National Debt grew for a decade from 1931 to 1941 (but it was still much smaller as a percentage of GDP):
    • YEAR _______ National Debt _____ Increase per year
    • 6/30/1941 ; $48,961,443,535. ; $5,993,912,498
    • 6/29/1940 ; $42,967,531,037. ; $2,527,998,627
    • 6/30/1939 ; $40,439,532,411. ; $3,274,792,096
    • 6/30/1938 ; $37,164,740,315. ; $740,126,583
    • 6/30/1937 ; $36,424,613,732. ; $2,646,070,239
    • 6/30/1936 ; $33,778,543,493. ; $5,077,650,869
    • 6/29/1935 ; $28,700,892,624. ; $1,647,751,210
    • 6/30/1934 ; $27,053,141,414. ; $4,514,468,854
    • 6/30/1933 ; $22,538,672,560. ; $3,051,670,116
    • 6/30/1932 ; $19,487,002,444. ; $2,685,720,952
    • 6/30/1931 ; $16,801,281,491. ; $615,971,660 (3.7% increase)
    • 6/30/1930 ; $16,185,309,831. ; -$745,778,653 (4.6% decrease)
    • 6/29/1929 ; $16,931,088,484. ; -$673,204,717 (4.0% decrease)
    • 6/30/1928 ; $17,604,293,201. ; -$907,613,730
    • 6/30/1927 ; $18,511,906,931. ; -$1,131,309,383
    • 6/30/1926 ; $19,643,216,315. ; -$872,977,573
    • 6/30/1925 ; $20,516,193,887. ; -$734,619,102
    • 6/30/1924 ; $21,250,812,989. ; -$1,098,894,375
    • 6/30/1923 ; $22,349,707,365. ; -$613,674,343
    • 6/30/1922 ; $22,963,381,708. ; -$1,014,068,844
    • 6/30/1921 ; $23,977,450,552. ; -$1,975,005,854
    • 7/01/1920 ; $25,952,456,406. ; -$1,438,513,707
    Also, GDP was flat or rising during the Great Depression (
    • ________ $NATIONAL DEBT ____ GDP (NOMINAL) _____ $NATIONAL DEBT __ GDP _____________ $NATIONAL DEBT __ GDP
    • DATE ___ (NOMINAL) _____________________________ in 1950 dollars _ in 1950 dollars__ in 2005 dollars _ in 2005 dollars ___ %GDP
    • 06/30/1941 $48,961,443,536 _ $126,700,000,000 _ $83,217,146,963 _ $215,345,213,678 _ $645,083,758,817 _ $1,669,315,819,548 __ 39%
    • 06/29/1940 $42,967,531,038 _ $101,400,000,000 _ $73,759,910,608 _ $174,067,598,371 _ $571,773,031,421 _ $1,349,339,466,007 __ 42%
    • 06/29/1935 $28,700,892,625 __ $73,300,000,000 _ $51,112,403,447 _ $130,537,374,628 _ $396,213,791,764 _ $1,011,901,313,183 __ 39%
    • 06/30/1930 $16,185,309,831 __ $91,200,000,000 _ $22,559,556,882 _ $127,117,219,818 _ $174,877,465,547 ___ $985,388,912,786 __ 18%
    • 06/30/1925 $20,516,193,888 __ $90,600,000,000 _ $28,664,062,456 _ $126,581,181,321 _ $222,198,451,006 ___ $981,233,642,612 __ 23%
    • 07/01/1920 $25,952,456,406 __ $88,400,000,000 _ $35,837,237,566 _ $122,069,824,575 _ $277,803,562,825 ___ $946,262,448,893 __ 29%

    Also, the federal debt (excluding the $12.8 Trillion borrowed from Social Security) is 77% of GDP.
    Total federal debt was only 18%-to-39% in the Great Depression.
    Even during WWII, the total federal debt was 116% of GDP.
    Today, including the $12.8 Trillion borrowed from Social Security, the total federal debt is 166% of GDP.

    The debt-bubble today (both federal and non-federal is MANY times larger) than ever before.
    Total nation-wide debt in 1956 was only 100% of GDP.
    Today, nation-wide debt is 390%-to-483% of GDP.

    Also, something very unusual has since late 2006 or early 2007, which has never occurred since 1900 (if ever).
    GDP has fallen sharply since late 2006 (regardless of whether it is measured in any previous inflation adjusted U.S. Dollar, such as in 1950 or 2005 dollars:

    • __________________ GDP (in 2005 Dollars) ___________

    • $14.5T |——————————————————————

    • $14.0T |————————————————————-x—

    • $13.5T |————————————————————x-x-

    • $13.0T |————————————————————x-x-

    • $12.5T |————————————————————x-x-

    • $12.0T |———————————————————-x——

    • $11.5T |———————————————————-x——

    • $11.0T |———————————————————-x——

    • $10.5T |———————————————————-x——

    • $10.0T |———————————————————-x——

    • $09.5T |———————————————————x——-

    • $09.0T |———————————————————x——-

    • $08.5T |——————————————————-x———

    • $08.0T |—————————————————-x————

    • $07.5T |————————————————-x—————

    • $07.0T |———————————————-x——————

    • $06.5T |——————————————-x———————

    • $06.0T |——————————————x———————-

    • $05.5T |—————————————-x————————

    • $05.0T |—————————————x————————-

    • $04.5T |————————————-x—————————

    • $04.0T |————————————x—————————-

    • $03.5T |———————————-x——————————

    • $03.0T |———————————x——————————-

    • $02.5T |————————-xxxxx———————————

    • $02.0T |————————x—————————————-

    • $01.5T |———————-x——————————————

    • $01.0T |———-xxxxxxxx——————————————-

    • $00.5T |xxxxxxx——————————————————-

    • $00.0T |——————————————————————

    • _______1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2

    • _______9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0

    • _______0 0 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 0 0 1

    • _______0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0

    • _________________ GDP (in 1950 Dollars) ___________
    • $1.7T |——————————————————————
    • $1.6T |—————————————————————x-
    • $1.5T |————————————————————-x-x
    • $1.4T |————————————————————x—-
    • $1.3T |———————————————————-x——
    • $1.2T |——————————————————-x———
    • $1.1T |——————————————————x———-
    • $1.0T |—————————————————-x————
    • $0.9T |————————————————-x—————
    • $0.8T |———————————————-x——————
    • $0.7T |——————————————-x———————
    • $0.6T |—————————————-x————————
    • $0.5T |————————————-x—————————
    • $0.4T |———————————x——————————-
    • $0.3T |————————xxxxxx———————————
    • $0.2T |———————-x——————————————
    • $0.1T |xxxxxxxxxxxxxx———————————————
    • $0.0T |——————————————————————
    • _______1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2
    • _______9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0
    • _______0 0 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 0 0 1
    • _______0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0

    Yet, the government was trying to tell us we weren’t in a recession, and then in late 2008 they told us a recession started in late 2007 (although it was more likely year 2007).
    The problem with lying about economic statistics is that they are eventually found out later.
    Inconsistences such as those above raise questions about the validity of inflation, GDP, unemployment, and debt statistics reported by the federal government and the Federal Reserve.

    I’m not sure it is true, but that 600,000 jobs thing was reported on CNN and on many blogs (e.g.

    David R. Remer wrote: I think it is possible we may see America’s first largely lean of pork budget to come out of Congress in many, many decades.
    I hope so. However, I’m still worried about growing debt and size of government, and the statements about years of trillion dollar deficits. What are the real odds that we’ll see cuts in unnecessary and wasteful spending? The level of wasteful spending is possibly many hundreds of billions. We’re down to the wire. It appears unlikely thus far that actions sufficient to avert an economic disaster are likely. If they don’t cut the waste too, and continue to grow the size of government and debt, it’s most likely over, because we need smart spending and less debt more than more spending and debt.

    At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

    Posted by: d.a.n at January 7, 2009 12:08 PM
    Comment #273265

    CORRECTION: Yet, the government was trying to tell us we weren’t in a recession, and then in late 2008 they told us a recession started in late 2007 (although it was more likely year [early] 2007).

    Posted by: d.a.n at January 7, 2009 12:48 PM
    Comment #273267

    d.a.n said: “If they don’t cut the waste too, and continue to grow the size of government and debt, it’s most likely over, because we need smart spending and less debt more than more spending and debt. “

    Well, I have to disagree because this quote appears to me to be unsubstantiated speculation. As I have said before, no one knows what the debt carrying capacity of the American government and private sector are, because America has never defaulted before. All one can safely and logically state for fact is that we are moving very fast toward whatever that unknown debt carrying limit is. And that is, as you say, very much a cause for concern and action in mitigating.

    And as I said in my comments above, there is evidence that a number of our elected officials now get this and willing to commit to mitigating that rush to discover what debt limit will bring our nation’s economy crashing down. Time will tell if that number is sufficient to actually avoid an economic catastrophe or not.

    Posted by: David R. Remer at January 7, 2009 1:00 PM
    Comment #273271


    Just for kicks, and these are rough figures,

    America has been over 100% of gdp and was able to recover fine.

    Britain at the end of WEII was over 200% and was forced to withdraw it’s foreign commitments.

    Germany after WWI was over 300% of gdp and collpsed with hyper inflation.

    What I wish would happen is that we would shift to GAAP budgeting for now. Under these rules we can borrow a trillion here or there and still “balance” the budget by cutting future spending. If this truly is a national crisis (and it is) we can ask people to work a year or two longer to pay our way. We can use accounting rules to do this in a fiscally sound way.

    In terms of avoiding catastrophe as you mention above, some of it is confidence. I would have more “confidence” if I could trace the logic. Current logic seems to be we will stimulate as long as necessary to get the economy going.


    I would be interested in your thoughts on the following:

    The nine worst years in the stock market are (not necessarily in order)


    Looking foward from those years, I don’t see on average great economies. 2002 seems to be ok, but the market dropped from a huge over priced market. If you take out “big war” like the civil war in WWII, the numbers seem to look bad going foward.

    My point is that I am wondering if we are in for a period of very slow growth if growth at all.

    Posted by: Criag Holmes at January 7, 2009 1:42 PM
    Comment #273272


    I am expecting to hear going forward of a reduction in the number of people applying for Social Security as those of retirement age decide to pospone.

    This is the “market” adjusting to new realities. This could have a large impact if the trend continues.

    Posted by: Craig Holmes at January 7, 2009 1:47 PM
    Comment #273277


    In a recession, while the jobless rate grows, I’m not sure how this so-called market adjustment will impact. Older folks will hang on, if they can, but many won’t have a choice…and, younger folks, who need a job, will maybe have to wait? Kinda like chasing your tail around a bush, if you catch it you’re the one who’s hurt, and if you don’t catch it, you just wear out…

    Posted by: Marysdude at January 7, 2009 3:06 PM
    Comment #273279


    Age asside, any economy can only support a certain percentage of retires at a certain standard of living with a certain national savings rate, tax rate and gdp growth rate.

    Economics has no soul and doesn’t care, and the numbers will balance.

    Right now, the number of retirees that can be supported by the US just dropped dramatically.

    The implications to me are that the young will have a harder time getting work, Social Security will be delayed, and retirees with lots of debt will go back to work.

    As a society eventually we might just rewrite what is considered “normal” retirement age. Most likely it will be closer to 70 than it is today. I don’t think that is a bad thing unless we make it so, since we still live much longer than previous generations.

    Posted by: Craig Holmes at January 7, 2009 3:17 PM
    Comment #273285

    Craig Holmes,
    I agree. Sustainability, much less growth will be difficult due to a myriad of reasons, until some of a LOT of debt has a chance to unwind. I don’t think more huge debt and deficit spending is a good idea, and may cause enough inflation go cause a run on the dollar.

    Posted by: d.a.n at January 7, 2009 5:08 PM
    Comment #273287


    I just went back and looked at GDP numbers in the five years following the 9 worst years in the stock market. One five year period was very high (1937-1942) 57.5% and two were negative (1907-1912 -.2% and 1930-1935 -3.01%/

    If you through out the one high year and the two negative years, the average return was 3.12. If you keep all all of them, the average real gdp growth was 2.87%.

    This gives me some hope. It tells me that the outliers are to have the economy grow about 10% a year (not likely) or contract about 3% over all in the next 5 years, with the more likely outcome a bit below the mean growth. It also means that based only on the stock market, the world is not yet coming to an end.

    Posted by: Craig Holmes at January 7, 2009 6:09 PM
    Comment #273288

    Remer writes; “I think it is possible we may see America’s first largely lean of pork budget to come out of Congress in many, many decades.”

    I am teaching my “pig” to fly in that eventuality.

    Seriously though, how would many members of congress expect to get reelected if they don’t bring home the promised pork? In the past it has seemed to me that many elections have been won by making promises of bringing back the pork to the home state.

    I can’t rule out the possibility of the majority in congress acting in the best interests of the whole country…and such an event would truly be inspiring and confidence building.

    We shall see if Mr. Obama truly has “steel” in his spine as Mr. Biden indicates he possesses.

    Posted by: Jim M at January 7, 2009 7:11 PM
    Comment #273289

    “This is the “market” adjusting to new realities. This could have a large impact if the trend continues.”

    Craig our longevity appears to be in decline much like everything else.{1FE4B90E-4DDA-438F-92D1-D3B1FE0468C3}&siteid=yhoofront

    It seems the repubs just think of everything when it comes to OASDI ;)

    Posted by: j2t2 at January 7, 2009 7:30 PM
    Comment #273294

    Well, we’re about to find out if the debt-bubble can grow by a few more trillion. I hope I’m wrong, but the debt appears untenable now, and likely to cause inflation which can easily lead to hyperinflation, due to a myriad of factors.

    It should be noted that all of this new money does not exist, and not all of it can be borrowed. Thus, much of it will be created out of thin air. The inflation from that alone could trigger the dumping of $11 Trillion of foreign owned U.S. dollars and U.S. Treasury Securities.

    Posted by: d.a.n at January 7, 2009 8:52 PM
    Comment #273296

    Every time I hear talk about postponing the retirement age I cringe. That may be all well and good for beancounters and pencil pushers. How about construction workers,farm workers,miners, oil roughnecks,underwater welders,loggers etc. At 62 a couple more years staring at a computer is one thing. Going back underground in a mine is a death sentence. You want to rig shoreing a hundred feet in the air on a bridge job at 67? There are a whole lot of Americans with these jobs,thank God. They create real wealth as opposed to investment bankers,for example. They have also been paying a good deal of their hard earned money into their retirement plans,including SS. They,we, deserve to retire in dignity and not spend the years between when we can no longer physically continue our trade and some arbitrary retirement age determined by overwieght bean counters ,in poverty.

    Posted by: bills at January 7, 2009 9:04 PM
    Comment #273299

    bills, the key to extending the eligibility retirement age successfully is by taking into account fitness for employment and creating a societal support environment for retraining workers to new positions which they are fit and capable of holding until the later retirement age.

    Disability will have to remain available to those whose physical or mental conditions don’t permit continued employment. But, those criteria need to be more stringently written and adequate review and assessment processes put in place.

    In other words, there is a lot of CHANGE that has to take place to make this work adequately and justly. Which is why Obama was elected.

    Posted by: David R. Remer at January 7, 2009 9:36 PM
    Comment #273300

    Jim M asked: “Seriously though, how would many members of congress expect to get reelected if they don’t bring home the promised pork?”

    That is a very good question for which there is an answer. If rules and legislation is introduced that restricts special interest spending insertions into larger bills which fail to meet national objectives, all elected officials and their contenders will be operating on a level playing field and thereby equally protected against onslaughts by the crying special interest pork promoters.

    It is not a perfect answer. But, it would prove to be adequate to significantly lower wasteful special interest spending which does not meet the national objective standard.

    There are two kinds of representatives in Congress on this issue. Those who view themselves as primarily stewards of the agendas of special interest in their districts, and those who view themeselves as stewards of BOTH the national interests of America and their special interest groups in their states.

    If, and its a big IF, there proves to be a filibuster proof majority of the latter type of representatives in Congress, such regulations and legislation can become a reality and a giant leap toward more responsible government can be realized.

    We shall have to wait and see how many of each kind of representative we now have in the Congress. I suspect however, the dual stewards are in far greater number in Congress at this time due to the perilous economic challenges facing the nation as a whole, that we may be all pleasantly surprised that so many have found a way to sell to their voters the notion that without national economic health, there will be no prosperity for special interest groups either going forward.

    Obama can only use the veto and the Bully Pulpit to foster such an effort. The heavy lifting has to come from the Congress, and, as Obama has pointed out many times, the American people making known their demands for more fiscal sanity upon their representatives.

    Posted by: David R. Remer at January 7, 2009 9:48 PM
    Comment #273301

    Craig, that is a rational use of statistical data. But, caution is advised in the assumption that the post recession period economic circumstances of today are essentially the same as those following preceding recessions.

    I share your optimism and am seeing a small set of encouraging data coming forth already. But, I also share Bernanke’s view that we are in uncharted waters for which there are no historical precedents in a few substantial areas such as population and work force sizes and their relationship to entitlement spending, and global competition both fair and unfair impacting our export capacity.

    I remain hopeful. But, with a healthy compliment of d.a.n’s skepticism as to whether fate will treat us kindly in this great hour of need of some honest good luck in treading these unknown waters. One rogue wave at the wrong time, and we can still all drown in our sea of past recklessness and irresponsibility toward our nation’s economic future.

    Posted by: David R. Remer at January 7, 2009 9:57 PM
    Comment #273302


    You bring up a very good point. There is an inequity in Social Security that can be taken away and help our country fiscally. The more affluent a person is the longer they live. Because of that fact, for every dollar the affluent put into SS, they get more in return than the rest because they live longer.

    One way to save money would be to “bracket” Social security based on longevity tables to equalize it so that everyone gets the same benefit per dollar. In the end, the affluent’s SS would be watered down a bit.

    I am in that category, and I think it would be fine.

    Posted by: Craig Holmes at January 7, 2009 10:02 PM
    Comment #273309

    So after thirty years as a journeyman carpenter you are proposing retraining me so I can be a greeter at Wallmart? Some better job? You got any that will pay the $32 plus benefits an hour I was making when I retired?I am talking about jobs that take a good deal of trainning and experience to perform. These are also jobs of great dignity. From most of the people in my circumstance your proposal will get a resounding,”Up yours ,pal”. It ain’t gonna happen. And just what are we supposed to do. Will there be any savings to create make work jobs? I doubt it. Do you realy think you can turn a 65 yo crane operator into a school teacher?
    There is also another societal benefit to early retirement. It makes room for younger people to move into the workforce. If unemployment is a problem then retiring older workers is part of the solution.

    A better way to address the inequity and help stabilize SS would be to raise or remove the SS cap and possibly include executive bonuses and stock options in the tax basis.
    I will assume you are refering to American statistics. We can expect a change as the inevitable universal healthcare becomes a reality and everyone gains access to preventive care.
    I have noticed an amusing difference in cultures. In America the rich are often thin,with personal trainers and the latest diet etc.Often the poor,for reasons of diet are fat. I am living in the Philippines now.FYI a good place for retirement. Here the rich are fat and the poor thin.Seems a more traditional circumstance.

    Posted by: bills at January 8, 2009 6:20 AM
    Comment #273322

    The vast majority of Americans will have no stomach for increasing retirement age or reducing benefits in Social Security and why should they? Promises were made and should be kept.

    And, the Ponzi scheme can only continue if more money enters the coffers than leaves in benefits. If we can’t politically reduce benefits or increase retirement age the only solution remaining is to bring more money into the account.

    As I see it, there are only two ways to bring more money into the account and that is by increasing the number of workers contributing to it, or to increase the amount of SS tax being paid. Most of us would agree that the average working person is already paying what they can reasonably afford.

    While I am almost always against tax increases, I see no other way to rescue this God-awful system…and we must. One possibility is to devise a formula which would determine each retirees ability to provide some or all of their retirement income needs from their own assets and income and reduce their SS benefits accordingly.

    Since many on this site have no objection to increasing the death penalty tax, which effectively takes assets from the wealthy upon death, my proposal would just hasten this process.

    The wealthy pay a higher rate of taxes on earned income so one could make the case that it is also reasonable for them to receive lower benefits from SS. The difference however is that while there is no cap on the income taxes the wealthy pay, there is a finite limit on the amount of SS benefit reduction. When ones SS benefits are reduced to zero, there is no further penalty for being wealthy.

    Just some silly thoughts from a conservative who is willing to make some concessions to save SS upon which many absolutely rely.

    Posted by: Jim M at January 8, 2009 12:17 PM
    Comment #273324

    Current $67 Trillion Nation-Wide Debt at only 4.0% interest.

    Current National Debt (excluding $12.8 Trillion borrowed from Social Security) at only 4.5% interest.

    Recent spending: $3.2 Trillion of $8.5 Trillion.

    And $1 Trillion deficits are planned for a few more years?

    Seems like lunacy to me.

    At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

    Posted by: d.a.n at January 8, 2009 12:28 PM
    Comment #273330

    If that doesn’t cause hyperinflation , then I suggest we print up another $10 ro $20 Trillion.

    Posted by: d.a.n at January 8, 2009 1:41 PM
    Comment #273333

    While it is nearly impossible to be perfect, and targeting zero inflation and zero deflation is highly unlikely, predicting hyperinflation in a shrinking economy is a bit absurd to me. That there will be overshoot and a tendency for governments to prefer some inflation as a trade off for low unemployment is likely.

    If there is no growth in GNP, you will never pay off a deficit. This is where Macroeconomics kicks in. It may be nonsensical to some, that deficit spending and increasing money supply actually makes it more likely that you can reduce a deficit than by not doing so, but it is a reality long ago proved by Keynes.

    Posted by: gergle at January 8, 2009 3:29 PM
    Comment #273335

    We don’t have deflation.

    We have inflation, and we have had inflation for 52 consecutive years.

    • ____INFLATION RATE_____
    • 4.00%|———————-
    • 3.75%|———————-
    • 3.50%|——————xxx (3.4% average for year 2008)
    • 3.25%|————xxx-x—
    • 3.00%|————x-xxx—
    • 2.75%|——xxx-x———
    • 2.50%|——x-xxx———
    • 2.25%|—xxx—————
    • 2.00%|—x——————
    • 1.70%|—x——————
    • 1.50%|xxx——————
    • 1.25%|———————-
    • 1.00%|———————-
    • 0.75%|———————-
    • 0.50%|———————-
    • 0.25%|———————-
    • 0.00%|__________________YEAR
    • _____ 2_2_2_2_2_2_2
    • _____ 0_0_0_0_0_0_0
    • _____ 0_0_0_0_0_0_0
    • _____ 2_3_4_5_6_7_8

    Year _ Inflation Rate
    2002 __ 1.59%
    2003 __ 2.27%
    2004 __ 2.68%
    2005 __ 3.39%
    2006 __ 3.24%
    2007 __ 2.85%
    2008 __ 3.40% (estimated for year 2008)

    And those are the fudged inflation numbers.
    Inflation is actually worse.
    Probably 2 or 3 times higher.

    So you don’t understand how creating trillions of dollars out of thin air causes inflation?

    You are right about GDP.
    GDP is falling, and has since JAN-2007 (see graph above).

    When hyperinflation kicks in, it will be too late.

    Posted by: d.a.n at January 8, 2009 3:44 PM
    Comment #273337

    That’s why the U.S. Dollar has been falling sharply for a decade.

    What do you think will happen when that continued inflation motivates foreigners to start spending and dumping the $11 Trillion of U.S. Dollars and U.S. Treasury Securities. They will be buying up everything they can, which will fuel more inflation. Excessive money supply will create inflation. We don’t have control of those foreign owned U.S. dollars.

    Inflation has been decreasing in the last few months, which is good.
    However, decreasing inflation with so many trillions being thrown about is a sign of something very too.
    Usually, hyperinflation is preceded by deflation and volatility.
    The most dangerous time for hyperinflation is during decreasing inflation or deflation.
    Hyperinflation is also fueled by massive irresponsible government spending which produces little (if anything).
    Hyperinflation rarely (if ever) happens during an economic expansion.
    Hyperinflation is dangerous because it usually follows a failing economy that is trying to be propped up with massive infusions of fiat money.

    The bottom line is that the debt-bubble is huge.
    Trying to stop the debt-bubble from bursting, by growing it bigger won’t work.
    When huge amounts of debt and borrowing fails, the psychological impact will also fuel hyperinflation.

    Also, we are not like Japan.
    The Japanese Yen is not the world’s reserve currency.
    The rest of the world wasn’t holding tens of trillions of Yen.

    I’ve been suspicious for a long time that new fiat money would begin to be created in massive amounts out of thin air.
    Now it’s happening even on a grander scale than I ever expected.

    At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

    Posted by: d.a.n at January 8, 2009 4:09 PM
    Comment #273340

    Jim M, yes, SS can remain as is with adjustments.

    I think we will see more than just minor adjustments however. At some point, some bright person in government is going to suggest converting the system into an insurance plan against poverty, everyone pays premiums but only those retiring with insufficient lower middle class living funds will receive benefits. That is how the system was originally thought up before being altered severely in the Congress.

    I am not saying this will pass, but, it is possible, and would be the MOST appropriate approach.

    Fixing SS however is a piece of cake compared to Medicare/Medicaid.

    Posted by: David R. Remer at January 8, 2009 4:44 PM
    Comment #273341

    bills said: “So after thirty years as a journeyman carpenter you are proposing retraining me so I can be a greeter at Wallmart?”

    If you are fit to continue carpentering, do so. If not, and you aren’t yet at the new retirement age, you may choose, retire on your own resources after being let go from your carpenter job, OR, receive assistance retraining for some jobs that are available in the marketplace at the time. The choice would be yours.

    “Some better job? You got any that will pay the $32 plus benefits an hour I was making when I retired?”

    Entirely up to you reject assistance if you wish. If a clerk job is beneath you, live poorer and retire early. Not a problem.

    Posted by: David R. Remer at January 8, 2009 4:48 PM
    Comment #273345

    Social Security would be OK if they stopped stealing from it.

    Posted by: d.a.n at January 8, 2009 6:09 PM
    Comment #273349


    They’d also have to pay it back for previous thefts…in this economy, it would be VERY difficult.

    Posted by: Marysdude at January 8, 2009 7:11 PM
    Comment #273351

    bills, just a complete aside here, but I’m curious about where you might be in the Phillipines….which island. I was there about 4 years ago, in Cebu, for about a year one week… ;) While many things there made me appreciate what we have and some criticize here, the people really seem to like “us” and are very curious to hear all we can tell them about our world.

    Posted by: janedoe at January 8, 2009 8:06 PM
    Comment #273352


    Raising the maximum contribution only changes the formula so that the wealthier get a higher payout. It’s a money in money out system.

    In order to help the system you would still need to change the formulas so that the money goes to the poor, or to system solvancy. In the end it’s the same thing. More money for the same benefit, or same money for less benefit. Since the affluent do not rely on the system nearly as much as the poor, I believe my way is superior. Cut the benefits first.

    Posted by: Craig Holmes at January 8, 2009 8:26 PM
    Comment #273357

    The underlying fallacy to your proposal is that it assumes there will be unfilled jobs in the time frame we are dealing with. That is becomming a deceasingly likely posibilty. The alternative is government creation of jobs. If the latter,then what is the point. That will not save money.


    SS should never be means tested. It is NOT welfare. It is a generational compact of profound significance.


    We settled on Luzon, in a city called Baguio. Its 5000 ft. up so the climate is relatively temperate for the tropics. San Miquel is 14 cents a bottle. We have catastrophic health insurance for about $80 a YEAR! I suspect the retirement option of expatriation will become a widely used . Hmmm….so old people become America’s chief export. As you know, people here are friendly and many speak English. If you ever get here go to the Red Lion and ask for me.

    Posted by: bills at January 8, 2009 9:44 PM
    Comment #273360

    Thanks bills……and I did see that an American of even minimal financial status could be quite comfortable over there. Do you see that our current situation is an issue there at all? Looks like about 47 pesos to our dollar, and the peso is “surging”.
    Do you speak Tagalog at all? The people I know speak more Cebuano, which of course is just another dialect, but in some instances is very different. All in all they’re quite loving people, very meek and subdued, as if still trying to recover from years of abuse by both the Chinese and Spanish. One man that I know was one of Marcos’ personal security team, recruited from the regular military, and a local sport celebrity (basketball “star”)…which is funny since they’re so short… ;) …but they usually just play half court…
    Thanks again…kind of fun to find some commonality.

    Posted by: janedoe at January 9, 2009 1:05 AM
    Comment #273361

    “Meek and subdued”? The current welterwieght champion of the world and national hero is a philipino. I don’t know his last name. He is usually just refered to as Manny. So fast you can barely see his hands move. While Cortez was conquering the Aztecs with a hand full of men,Magellan,attempting the same thing, was killed by a chieftan named Lapu Lapu with a stick!. It took the Spanish a very long time to gain control and some regions were never realy conquered by the Spanish,Americans or even the Japanese. There is a colonial deference however. The PI is still largely a US colony of sorts and light skinned people are given an automatic respect,wether we deserve it or not.
    We moved here for several reasons. One of them was that I saw this economic disaster comming and am well aware that the building trades is always the first to take a hit.That and I am getting arthritus. We are living pretty comfortably on my union pension. I know a lot of non-union carpenters. They do not get squat and are having a rough time of it now with not much hope for the future..I just turned 59 so have not reached SS age yet. I hope to start collecting at 62,if DR doesn’t manage to screw it up. Us boomers are still a dominent voting bloc and will be up until 2040 or so. That is exactly the period SS expects to face a need for benefit reductions or increasing revenues, that is if the feds do not default on the bonds they are holding. The US has never defaulted on bonds before and there is no reason to expect them to.
    My wife speaks Tagalog and Ilocano. We have family here. I have picked up a bit of Tagalog but it hard to teach an old dog. There are about 200 different languages spoken in the PI.Languages,not dialects,mind you.I suspect it comes from there being 7000 islands and much of the country is mountainious jungle. Thats one reason they have been conquered so many times.
    Just last year Philippino veterans of ww2That fought with Americans under the US flag , were granted full US benefits. Finally after all these years. Of course there is only about 40 of them left.We havent always treated the PI right all the time.
    The global economic meltdown is having some effect but the PI went through a big bank shakeout in the 90’s and learned to strictly regulate them. Surprise,surprise, It works. The banks here have sustained little damage from the AIG and Lehman mess. The worst effects are expected to be less remittance coming in from overseas workers. We will see how that plays out. Exorts will also decline but ,sadly, the biggest export from the PI are people.OFWs,overseas forign workers.

    Posted by: bills at January 9, 2009 5:06 AM
    Comment #273362


    Nice to know SOME nations are smart enough to regulate banking/finance…wish we’d learned…

    Posted by: Marysdude at January 9, 2009 5:50 AM
    Comment #273368

    d.a.n, there will be nothing to steal from, no surplus, in just a few years. So, that problem takes care of itself.

    Which leaves the IOU’s to be paid as benefits going forward for the borrowing of previous surplus’s. If the economy is stable and or growing, that will help increase federal revenues, to honor those IOU’s. Just one of myriad reasons to get the economy stabilized and unemployment numbers going down again.

    Posted by: David R. Remer at January 9, 2009 11:39 AM
    Comment #273369

    bills said: “The underlying fallacy to your proposal is that it assumes there will be unfilled jobs in the time frame we are dealing with. That is becomming a deceasingly likely posibilty. The alternative is government creation of jobs. If the latter,then what is the point. That will not save money.”

    What time frame are YOU talking about?

    Posted by: David R. Remer at January 9, 2009 11:42 AM
    Comment #273375
    David R. Remer wrote: d.a.n, there will be nothing to steal from, no surplus, in just a few years.
    That’s right. There really are no surpluses.
    David R. Remer wrote: So, that problem takes care of itself.
    However, the point was that the surplus of Social Security tax revenues have been and are still being completely spent, and replaced with I.O.U.s. If they would stop stealing those surpluses, Social Security might be OK by 2040. However, that’s ONLY if inflation is controlled. If incessant inflation continues, cash in Social Security reserves would simply be eroded and nearly (if not totally) worthless by 2040.
    David R. Remer wrote: Which leaves the IOU’s to be paid as benefits going forward for the borrowing of previous surplus’s.
    Most (if not all) of those I.O.U.s are unlikely to ever be repaid.
    David R. Remer wrote: If the economy is stable and or growing, that will help increase federal revenues, to honor those IOU’s.
    That’s a big “If” with 52 consecutive years of deficit spending and spending Social Security surpluses.

    The economy is still shrinking at the moment (despite infusion of trillions to the banks and Wall Street), and some of that is needed and nessesary, because some of it is part of an unsustainable bubble.
    Also, why do we need growth?
    Why can’t we target sustainability, instead of bubble after bubble?
    Incessant inflation fuels these bubbles.
    These bubbles don’t come about by mere accident.
    These bubbles are a man-made; not some misunderstood phenomenon.
    These bubbles are one of many abuses that must be stopped, because each bubble succeeds in growing the wealth disparity gap ever larger (since 1976).
    The wealth disparity gap has been growing worse since year 1976 (never worse since the Great Depression).

    • WEALTH OWNED by Wealthiest 1% of U.S. Population:

    • 045% |—o——————-

    • 040% |oo-o—————oo 40%

    • 035% |——o—oo——o—

    • 030% |——-oo—o—o—-

    • 025% |—————o-o—-

    • 020% |—————-o——

    • 000% |—————+————YEAR

    • _____ 1 1 1 1 1 1 1 1 2 2

    • _____ 9 9 9 9 9 9 9 9 0 0

    • _____ 2 3 4 5 6 7 8 9 0 0

    • _____ 0 0 5 0 5 0 5 0 0 9
    The next bubble may be the last straw, with so much nation-wide debt.

    David R. Remer wrote: Just one of myriad reasons to get the economy stabilized and unemployment numbers going down again.
    True. But there is a great divide in opinion on the solution to acheive stability (not another bubble).

    There are 3 major camps:

    • GROUP #1: Continue massive deficit spending as soon as possible.

    • GROUP #2: Reduce (and eventually eliminate) deficit spending, eventually start reducing the debt and the service on that debt, eliminate all unnecessary spending, and shift savings from spending cuts to more productive and responsible spending (the 2007 federal revenues were $2.5 Trillion, but a huge part of that is already designated for Social Security, Medicare, other social services, defense, Congress’ obscene salaries and their recent 10th raise in 12 years, etc., etc., etc.).

    • GROUP #3: Same as GROUP # 2 above, plus ending these abuses now. These abuses are at the root of most of our problems, and nothing will get better without addressing those abuses. If those abuses are not addressed, we will most likely only see another inflation-fueled bubble which will fail miserably and worse than previous bubbles.
    The BIG questio is: How much debt is too much debt?

    Can the federal debt grow another 2 or 3+ Trillion, with $11+ Trillion in foreign owned U.S. money that will come rushing back if inflation increases?
    Especially when foreigners finally discover that inflation rates are worse than what is reported, which is a lie that is revealed by several foreign currencies?
    Especially when foreigners finally discover that even if their loans are returned, they will be severely debached by incessant inflation?
    If one believes the current $23 Trillion of federal debt and the total $67 Trillion nation-wide debt is untenable, then is it possible to grow the debt-bubble bigger?
    Even if the government can create a few million jobs, it is miniscule to the 13 million unemployed, and even for those finding work, it will be at a small fraction of what they previously made and/or need to merely break even. Regardless, it took years to ramp up to millions of foreclosures and bankruptcies per year and it will take years to ramp down (especially with over half a million job losses per month). A lot of debt is going to default.

    • _______________ FORECLOSURES____________________

    • 325K |————————————————————————

    • 300K |—————————————————————-x—— (10,000 per day AUG-2008)

    • 275K |————————————————————-xx-xx—

    • 250K |———————————————-x———-xx——-xx

    • 225K |———————————————x-xx-xxxx————-

    • 200K |———————————————x—-x——————-

    • 175K |——————————————xxx————————-

    • 150K |————————————xxxx——————————

    • 125K |——————-x———-xxx————————————

    • 100K |——————x-xxxxxxx—————————————-

    • 075K |xxxxxxxxxxxx——————————————————

    • 050K |————————————————————————

    • ______(2 0 0 5)___(2 0 0 6)_____(2 0 0 7)____(2 0 0 8)___(YEAR)

    At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

    Posted by: d.a.n at January 9, 2009 1:20 PM
    Comment #273380

    d.a.n, one thing is for sure. The debt can grow more if the economy is growing, and the debt can cave in on us sooner if the economy continues to contract.

    How much debt is too much, is indeed the question. Let’s hope we never have to find out what the answer to that question is. Because the answer rests in federal government default on its debt and decades of recovery, if recovery means a stable and healthy economy providing the basics for quality life for all. By that definition of course, we still haven’t recovered from the Civil War depression or the Great Depression.

    Changing the way we do things is imperative. One of the most hopeful changes I have heard of in decades is Obama’s proposal to insure federal spending serve two purposes at the same time or get vetoed. Specifically, both short term and long term objectives for SAME dollar spent.

    Every dollar spent on short term economic stimulus which also eliminates future spending on infrastructure, gets twice the return on every dollar spent. That is the kind of change America must seek a whole lot more of.

    Posted by: David R. Remer at January 9, 2009 1:54 PM
    Comment #273382


    Means testing. that is what you are for in wanting to raise taxes on the wealthy to make the system solvant.

    What I am for is equity. Our current system in not equitable because the poor pay more per dollar of benefit because of shorter longevity. By banding SS based on current longevity tables tied to income levels, and by leaving lower income earners alone, we can save a bunch of money and make the system more solvant.

    Posted by: Craig Holmes at January 9, 2009 2:02 PM
    Comment #273384


    The problem with your reasoning is that no Congress or President can bind future spending. Spending money now on infrastucture to save money in the future is well intended but meaningless.

    I offer a “bridge to nowhere” as an example. Spending money now on future infratracture needs has no provable bearning on saving money in the future. None.

    What is far more likely to save dollars in the future is to attack entitlements. Change the social contract with boomers who are 55 and younger and we can pay for this thing. We raised the retirement age back in Reagan’s administration, and no one has moved it since. We have a much better track record with that type of long term cut. Also it’s a much bigger target.

    Posted by: Craig Holmes at January 9, 2009 2:07 PM
    Comment #273386
    David R. Remer wrote: d.a.n, one thing is for sure. The debt can grow more if the economy is growing, and the debt can cave in on us sooner if the economy continues to contract.
    True, if it is REALLY growing, and not another bubble fueled by losses in the middle-class caused by more incessant inflation and these abuses. Also, our manufacturing base has steadily deteriorateed for decades, which won’t turn around anytime soon, the government can create enough jobs to employ 13+ Million unemployed, and we can’t all wash each others’ laundry.

    I still think the best way out of this mess, which won’t be painless, is to:

    • [01] go through the federal budget line-by-line, and eliminate all unnecessary and wasteful spending immediately;

    • [02] shift the money from those cuts (a portion of the federal government’s $2.5 Trillion in annual revenues) to reseach, develop, and implement solutions to make the U.S. energy independent;

    • [03] stop these 10 abuses now, or any recovery plan will most likely fail;

    I’m still not a fan of trillions of more dollars of deficit spending, borrowing, and money-printing, because after 52 consecutive years of deficit spending, it is quite likely that Congress will never stop until the economy is completely destroyed by this massive and growing debt-bubble. We are getting closer to that every day, if we haven’t already passed that point, and merely don’t yet realize it. That is possible, since no one knows how big the debt-bubble can grow. Especially when it would take a century (at only 4.5% interest) to merely pay down half of the current total federal debt, and centuries (at only 4.0% interest) to merely pay down half of the nation-wide debt. And that is only IF we had the extraordinary discipline to do so for many decades. That’s not very likely. That’s because those with power don’t feel the pain-and-misery of most Americans, and most Americans continue to repeatedly reward Congress with 85%-to-90% re-election rates. This last election was probably the last chance to send a loud-and-clear message to Congress. Having missed that opportunity, it seems unrealistic to believe Congress is going to turn over a new leaf. It’s simply not believable. Americans have not yet felt enough pain and misery to motivate them to pressure Congress sufficiently. Until that happens, Congress will continue to be FOR-SALE, irresponsible, incomptent, and/or corrupt. Americans will now have to wait until 2010 and 2012. However, that will be too late to mitigate a lot of pain and misery already in the pipeline. I hope I’m wrong, but I’d bet a large sum that I’m not.

    The federal government and the Federal Reserve are going to try to use massive spending with the hope that it doesn’t trigger hyperinflation, but I think it is going to get away from them, because the amount of money required to put a dent in $67 Trillion of nation-wide debt will most certainly cause inflation. If we had a manufacturing base, we could sell products. Unfortunately, since we don’t, all we can do (for the most part) is liquidate.

    At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

    Posted by: d.a.n at January 9, 2009 2:55 PM
    Comment #273387

    Craig, sorry, but your response is pure knuckle headed.

    Maintenance on a bride today in need of it, is vastly cheaper than rebuilding an entirely new one after the old one collapses, where the old one could have serviced another 40 years IF it received the required maintenance. Same for roads, tunnels, rails, electrical and other energy resource infrastructure, and more.

    Posted by: David R. Remer at January 9, 2009 2:55 PM
    Comment #273388

    Attacking entitlements is what Republicans did. See where that got them?

    What we need to do is reform SS putting it on a self-sustaining track, and reform our enormously wasteful health care system which would resolve significant portions of the medicare/medicaid shortfalls.

    We need to work on our entitlement programs to make them cost effective. They do, after all, represent human dignity and absence of poverty and suffering by 100’s of millions of our senior citizens and poor in coming decades. And we will all be either poor or senior in our lives if we are fortunate enough to not have our lives cut short.

    Posted by: David R. Remer at January 9, 2009 3:00 PM
    Comment #273393


    You missed my point. You said above to Dan that it is smart thinking to borrow to pay for infrastructure now to avoid paying later. I am saying in response that Obama has no control over budget issues 4 or 8 years or more into the future. Future presidents or Congresses will spend as they need to.

    As for Entitlements and my comment on Reagan era moving back the SS age, where was the negative fallout?
    And if it was a bad thing to move back SS age in Reagan’s day are you for reversing that decision now?

    It was a good decision then, and it would be a good decison now.
    It would help our country fiscally to roll back SS age for workers under 55. It would be good for our country fiscally to remove the inequity of payments that the affluent enjoy because of their longer longevity.

    Posted by: Craig Holmes at January 9, 2009 4:41 PM
    Comment #273394


    Where do you think I am attacking entitlements?

    What we need to do is reform SS putting it on a self-sustaining track, and reform our enormously wasteful health care system which would resolve significant portions of the medicare/medicaid shortfalls.

    We need to work on our entitlement programs to make them cost effective. They do, after all, represent human dignity and absence of poverty and suffering by 100’s of millions of our senior citizens and poor in coming decades. And we will all be either poor or senior in our lives if we are fortunate enough to not have our lives cut short.

    I agree with every word of this.

    I would add (and believe you would agree) that we need to do so in such a way that our grand children and great grandchildren have a chance of the American dream, and are not doomed to paying off enourmous debt.

    Someone needs to stand up for future generations. I am concerned about the people you mention and also those to follow. At what point to re relook at the age of SS? When longevity reaches 100? Under the current system longevity increases are payed for by the young. It is unjust for the current adult generation to take the benefit of longer life and hand the bill to the young. It is also not unfair to ask the current adult population say under age 55 to work a bit longer as they still will have more retirement years than their parents did.

    Longevity goes up about a year a decade. Retirement age or SS payments should go up over time as well to pay for all of it.

    The problem with tax increases totally taking care of the issue is that tax increases slow down the growth rate of the economy, thus slowing the rate of growth of tax revenue.

    It has been over 20 years since the age of recieving SS benefits was looked at, and it’s time to look at it again. As I recall, the end result in the 80’s was a mixture of tax increases and benefit cuts. Sounds good to me.

    Posted by: Craig Holmes at January 9, 2009 4:56 PM
    Comment #273397

    Here is a good link for all you on the left that think everything is Bush’s fault.

    Robert Rubin!!! Clinton’s Treasury secretary from the administration that did everything right ecomically.

    Posted by: Craig Holmes at January 9, 2009 5:02 PM
    Comment #273407

    The odds of the United States going into a depression in 2009 has doubled from roughly 20% in November to 40% since the election according to

    Posted by: Craig Holmes at January 9, 2009 10:30 PM
    Comment #273417

    A Great Depression may be avoided, but it will take extraordinary discipline, which I don’t think exists in a Congress in which 86.9% were just rewarded with re-election, and just gave themselves their 10th raise in 12 years, while U.S. Troops go without armor, adequate medical care, promised benefits, and have to do 2, 3, 4+ tours in Iraq and/or Afghanistan.

    And voters are culpable too, for repeatedly rewarding Congress with 85%-to-90% re-election rates, and then wondering what the hell happened.

    At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

    Posted by: d.a.n at January 10, 2009 11:14 AM
    Comment #273423

    As far as I am concerned, this whole senario was planned. It’s called waging war by economic means. Those who are waging this war are not in jeopardy financially and could care less about painful side effects as long as the targets are harmed significantly.

    Posted by: jlw at January 10, 2009 1:44 PM
    Comment #273426

    Craig, But that increase in odds has NOTHING to do with the Election, but, with the economic data worsening. Your wording leaves open an implication otherwise.

    Posted by: David R. Remer at January 10, 2009 2:11 PM
    Comment #273427

    Craig, I quote you, in using the words ‘attack entitlements’.

    “What is far more likely to save dollars in the future is to attack entitlements.”

    Posted by: David R. Remer at January 10, 2009 2:14 PM
    Comment #273428

    Craig said: “I would add (and believe you would agree) that we need to do so in such a way that our grand children and great grandchildren have a chance of the American dream, and are not doomed to paying off enourmous debt.”

    But, where we disagree apparently, is in grasping the fact that holding the line on deficit spending to 0 in 2009, WILL cripple future generation’s economic circumstances. 2009 is NOT 1941, with vast untapped resources to tap economically and virtually no competitors in the international marketplace.

    We are in a circumstance, thanks to Republicans and the Democrats that went along with them, in which future generations are GOING to pay, one way or another, for our previous folly and mismanagement. There is NO WAY around that now. The only solution going forward is to mitigate the losses to the present and the future by balancing the shared sacrifice between present and future.

    Killing the economy today, pays no benefits to future generations and cripples their opportunities as well. Which is exactly what would happen if we chose to incur zero deficit spending in 2009 and going forward.

    Preventing default on federal debt and keeping Americans employed as best as possible is job number 1, and that will require deficit spending, because all that money that trickled up from tax payers to the private sector is NOT now going to trickle down to create jobs during a recession. That trickle down bubble has burst, permanently.

    Posted by: David R. Remer at January 10, 2009 2:23 PM
    Comment #273430

    David, I still hope for the best, but it’s looking more dismal every day, when the intentions of the next administration is to continue growing the debt and creating money from thin air.

    Posted by: d.a.n at January 10, 2009 6:27 PM
    Comment #273432


    Above you were stating agreement with a line of thought from Obama that spending money now on infratructure now that we need in the future is fine because it saves future dollars.

    My point is that this is hogwash. Spending money now is spending money now. We need to spend it to stimulate the economy period. Obama cannot speak for future presidents and future members of Congress.

    Future Congressmen will have their bridges to nowhere whatever Obama things today.

    Where we have had some success that I can point to is in Entitlements. Specifically Reagan’s proposal to move back retirement age. That “cut” still stands.

    As Americans we must not only be concerned about saving the economy now, but passing on an economy worth being a part of for our chilren. We can do both.

    As Americans live longer it is only reasonable that a portion of this longevity bonus be applied to working years. We can borrow these trillions of dollars and pay for them by increasing the number of years before one can apply to SS/Medicare.

    The position that we cannot touch retirement age is unsupportable. Some day, when longevity reaches 100 do we look at it? At some point there is a logical time when we have to face the fact that it is unfair or unjust to ask our children to support us for longer period’s of time that we worked!!

    There is no health reason why many workers cannot continue to be producting past 65. Disability among seniors is droppoing rapidly. Most boomers are planning on continuing to work anyway.

    By borrowing what we need now, and paying for it by looking at future spending for those 55 and younger, we can restore our economy and pass on an America that is fair to our children.

    Right now there is little confidence that Obama can pull this thing out. Investors are betting on increasing risk of the economy getting worse.

    Posted by: Craig Holmes at January 10, 2009 7:50 PM
    Comment #273436

    Craig H.
    The actuarile tables will change when we achieve universal healthcare. Being wealthy does not for some magical reason provide more longevity.
    There was a genuine bi-partisan board formed under Reagan. Raiseing the retirement age was one of their solutions. So was collecting additional contributions from participants. We ahve been paying these additional amounts for most of our working careers. The additional amounts paid are enough to cover our benefits unless we are ripped-off. Politically the is a non-starter and any politician or party that proposes that will cease to exist as a political force.
    Means testing is defined on income being a determinent in whether or not benefits are provided or at what level. One of the growing and expensive “entitlement” programs of the federal government is military retirement. Should we means test that or pay more to those vets likely to drop dead sooner?Perhaps,as DR suggest, we should keep them from retireing so soon and keep them on active duty longer.

    Posted by: bills at January 10, 2009 10:25 PM
    Comment #273438

    No one seems to know what will happen if we increase the deficit. Can more debt solve a debt problem? No one knows if government intervention by building infrastructure will boost our economy. It is appears unlikely since the commerce doesn’t exist to make use of it.
    I worked for a company that had to compete with others by using debt. When there was a downturn in the market he used more debt to stay afloat. He then borrowed from one job to sustain another. Some perceived it as a Ponsey scheme and called him a rip off artist but it was simply the last stage in a debt cycle that should have been dealt with instead of being swept under the rug. Could buying more equipment have saved him?
    You always come to a point when money has to be applied to a debt or all business stops. Increasing debt means you are losing money and setting yourself up to lose more. The government is no different. You cannot wait for peak times to do the responsible thing. Low times just make irresponsibility evident because you are forced to face bad practices.
    I just hope we stop the cycle even if it requires sacrifice. The last stage in a losing proposition is covering debt by deceptive means and we have already been seeing this in Social Security borrowing.
    Doesn’t the word govern mean to set limits?

    Posted by: Kruser at January 10, 2009 11:05 PM
    Comment #273439


    Thanks for your thoughts. There are some silver linings. Savings rates are going up, and workers are delaying retirment or moving out of retirement and back into the workforce.

    I hope I never see universal health coverage with all of it’s problems. Moving longevity of the wealthy down is not an answer. I understand the need to take care of the wealthy. However if you force, and mandate the wealthy to move into a rationing system they will simply move to another location. It’s a freedom issue.

    Wealth redistribution has just been reversed dramaitcally. It is the wealthy that own most of the assets that have fallen. Wealth redistibution reversed in the 1930s.

    The wealthy have far less to tax now to pay for the universal healthcare you are considering. Many of the ideals of the left just lost much of their funding sourse. Increasing taxes to pay for the ideals of the left right now would only mean greater job losses. Obama said as much this week when he admited much of his agenda will need to be poseponed.

    Posted by: Craig Holmes at January 10, 2009 11:40 PM
    Comment #273440


    There is logic to spending on infrastructure. It’s just not the one I heard above. (We are simply moving up expenditures we would need to make in the future, and so it’s not a real cost, because we save money later).

    The reason to spend on infrastructure and defense is because it’s a way to buy American. With a tax cut given to middle class and below, they spend the money with a large portion going to imports. Infrastructure is American. Also it can if done right provide a return. (Interstate Highway system comes to mind). So it’s money spent that we can get some return on.

    The problem with Infrastructure is that it takes time. Some projects take years. so if we spend the money or allowcate the money some of it might get spent in three or four years, after the crisis has passed.

    I just read an article in Barrons by some pretty top people. The economy looks REAL bad. This looks like the real deal. This blame Bush thing is stupid and wont pass the test of history. not to pat the guy on the back ecnomically, it’s just both parties did this. The Clinton administration was every bit as much to blame as the Bush administration.

    In addition, the markets have no more confidence in Obama than it does in Bush. The S&P 500 was at 1000 on election day and is under 900 now. The odds of depression have doubled since november.

    It’s a complicated bipartisan mess we are in that will take a long time to sort out.

    Posted by: Craig Holmes at January 10, 2009 11:48 PM
    Comment #273443

    Craig said: “I just read an article in Barrons by some pretty top people. The economy looks REAL bad. This looks like the real deal. This blame Bush thing is stupid and wont pass the test of history.”

    That is the dumbest comment I have read in a very long time. Here’s why.

    If in 2008 we experienced an economic crisis with a current debt of 7 trillion, instead of 11 trillion, the future would not appear so dim at all, and the prospect of deficit spending to recover from this recession while maintaining optimism about bringing down the debt after the economy is back on its feet, would be a no brainer.

    It is precisely because Bush and the Republicans maintained a big government spending deficits trillions more that the cost of 9/11, Katrina, and Afghanistan, while increasingly pushing small government tax policy, that Bush, (including minority Democrats to be sure), doubled the national debt in 8 years. This crisis of debt can be laid directly at the feet of Bush and the Republican control of government who controlled the budgets and veto for the last 8 years.

    And you know, I ain’t buying what we hear everywhere from politicians these days on both sides of the aisle, “Fixing blame does not solve our problems going forward”. That is pure B.S. Fixing blame is precisely how one nails down causes and identifies the actions, policies and behaviors that must be prevented in the future if we are not to repeat the errors of the past.

    We DO need to fix the blame, and we must do so in a cold, objective, and non-partisan fashion in order to insure we DON’T repeat the S&L debacle, the Chrysler bailout the first time and this time, and the wall street boom bust cycles which are caused by lack of oversight and defiance of transparent accountability, as with the rating agencies.

    Posted by: David R. Remer at January 11, 2009 12:19 AM
    Comment #273444

    Kruser, yes, we do know we can come out of this recession, but, there is no assurance we will be able to come out of any future ones. The reason is this. The U.S. is still the best magnet for foreign investments presently with 11 trillion national debt.

    However, after salvaging this economy from recession and ending with a 14 to 16 trillion national debt in the doing, it is not at all assured that our government would ever again be able to borrow its way out of a recession in the future. America has one last reprieve to get its economy going again and make strong enough to pay down the national debt to a level that will still invite investors from India, Japan, and China in the future.

    To the extent that we restructure our economy so that more dollars recirculate back into our own economy instead of being exported to foreign economies, our future economic future can brighten. That can be accomplished, by increasing our savings rates steadily, investing in American quality education, and innovating more self-sufficiency in energy, food, waste management and recycling (we now pay other nations to take our waste, and we export our recyclables to be used as raw resources for manufacturing overseas - unnecessary and costly) for starters.

    Posted by: David R. Remer at January 11, 2009 12:29 AM
    Comment #273445

    Craig, Obama can speak to the next 4 to 8 years, which had bloody well better be sufficient to get the job done.

    And in fact, the infrastructure development he is talking about is easily accomplishable in 8 years, with the lion’s share contracted for in the next 4 years.

    We aren’t talking about bridges to Andromeda here centuries out. We are talking about mending our roads, bridges, and tunnels, 4 years max. Expanding broadband everywhere, 4-6 years. Developing alternative energy strategies to oil, easily put in place for the most part in 8 years to the extent that it would be foolish of the next president to not finish the little that is left to complete the goal of energy self-sufficiency.

    Posted by: David R. Remer at January 11, 2009 12:35 AM
    Comment #273447

    “Movimg the longevity of the wealthy downwards is not an answer” Pehaps not but unless we take steps to dramatically lessen the growing devide between the haves and have nots it will become the solution. The French revolution comes to mind. Americans are not immune from such actions. We are actually a pretty rowdy bunch,born to revolution.We either do it in a civilized ,controlled manner with a steep graduation in income taxes and inheritance ,property taxes etc. like FDR did in the 30s or,sooner or later by violent upheaval. Look at history.
    Universal healthcare will create a savings of dollars. We spend nearly twice as much on healthcare as other industrial countries with poor comparitive results. I saw one study,wish I’d kept it, that concludes that the average Frenchman recieves better healthcare than even wealthy Americans. It won’t cost more. In the long run it will cost far less. I know rich people just hate having to wait for their turn so hopfully they will help us create a system where delays are minimal.

    Another caution when judgeing the proposed infrastructure improvments is not to judge them as a business might. The value of a bridge may not amortize for 40,50,or even a hundred years. The value of BUILDING THE BRIDGE will be almost immediate. It will put people to work at decent pay, doing something worth while. There is a large multiplying effect with such projects. A lot more Americans than those directly employed in its construction get work. The bridge itself is a bonus.There are also lots of project ready to go,a backlog as it were of needed retrofits and expansions. Thats what happens when great powers spend all their money on wars.

    Posted by: bills at January 11, 2009 4:32 AM
    Comment #273449

    If you look at past infrastructure projects, they were production links. East to west, automotive factories to markets, commuters to businesses. Just making infrastructure to give immediate jobs will only prolong the payoff of our debt if it doesn’t increase efficiency to produce something. Most states have a large budget for repairs and such. The void in our economy for projects don’t exist to the extent it is being portrayed. The void isn’t a factor in our market downturn.
    Michigan went through huge infrastructure spending under a democrat governor but it was mostly wasted since businesses and residents are leaving. Detroit is like a ghost town.

    Posted by: Kruser at January 11, 2009 10:00 AM
    Comment #273450

    It is interesting you would bring health care into the debate. The French have lower health care simply because they pay close attention to their health. Americans in general are self indulgent and fat. A Reuters Jan 9 article says just that. The “system” has little to do with it.

    There is a parallel here with our debt crisis. At one point things have to be streamlined and we have to do without for a while to get back to healthy practices. Have you watched those shows where they cut away the fat and skin from obese people? Who fed that guy and why don’t he quit eating? Democrats/republicans; Bush/congress; enabler/consumer. Where do you put the blame?

    Posted by: Kruser at January 11, 2009 10:35 AM
    Comment #273451


    I am for something that I would never expect to get passed on health care. I am for changing our taxcode so that we “prepay” our burden to society by the way we eat. It’s not a “sin” tax as in tobacco and alchohol. Rather we have actuaries actually look at the present value of the cost of eating that big mac and pay the tax accordingly. It we were forced to pay the tax on each can of sugar soda, the market would then adjust accordingly.

    With our technology, I think we could create a sort of VAT (Value added tax) on food that would pay for our extra cost of medical care due to our bad habits.

    I don’t like legislation that takes things away from us by force. However since most Americans will be on Medicare someday, I see no problem in requiring “prepaying” the cost of our bad habits through taxation.

    It would be great if this plan didn’t work because people changed their habits and stopped consuming so much bad food.

    This is a real concern to me because I am deeply concerned not by the trillions we are now borrowing, but because we are borrowing it right as boomer are about to hit medicare in a few years. The oldest boomers turn 63 this year.

    I agree on the need for stimulus now. I hope we are also able to creatively drive down the future costs of government so that our chldren will have a chance at the America dream as well.

    If we take care of boomers retirement simply by raising taxes, then we will slow the economy in the future.

    I like the above way of raising taxes because it has hope of changing people’s eating habits and cutting the cost of medicine in the future. It’s a creative way of paying for these large deficits by reducing future costs to treat diabetes, heart disease etc.

    The more basic principle to me however is that we pay for these current needed large deficits by creativly cutting future costs. The big huge cost is healthcare for boomers as they age. That is the place where the serious money is contained.

    Only by cutting future costs can we ensure that our grand chldren will have the kind of good life that we have enjoyed.

    Borrow all we need now to avoid a total meltdown, pay for it by cutting costs in the future by changing entitlements. Delay retirement for a year or so in SS, and change how we collect revenue for medicare to something like a VAT are my two feable ideas so far.

    Simply raising taxes is not an answer as far as I am concerned.

    I do believe, if I can’t win the argument that we need to delay retirement than payroll taxes need to go up. The simple logic is that we are paying for more and more years of retirement as longevity increases. Obviously there are only three things we can do, save more, earn a higher return on investments, or delay retirment. maybe we should consider all three.

    Posted by: Craig Holmes at January 11, 2009 12:38 PM
    Comment #273452


    I don’t mind fixing blame. I can go on a long list for many years. Economists that I read go right to the Fed with it’s near zero interest rate policy after 9/11 that practically forced investment houses and banks to leverage.

    I don’t need to blame Bush because you do such a good job of it. I will simply say amen.

    I then will go on and say the Clinton administration under the direction of Robert Rubin is equally responsible. Rubin’s reputation is going down in flames.

    Then there are the house democrats that pushed for low income loans. It goes on and on and on and on.

    For instance, I am for something like the Glass Steagall act being reinacted. Those controls are obviously necessary. That is just a beginning.

    Posted by: Craig Holmes at January 11, 2009 12:50 PM
    Comment #273456

    Craig, sorry, but, there is nothing wrong with pushing for income loans. Low income loans have many benefits to society. How those loans are made and to whom, and on what terms is what must be investigated, and where things went wrong.

    A low income borrower, purchasing a low cost home, amortized for a period and interest rate that is in keeping with the borrower’s low income ability to pay, is absolutely acceptable and good practice.

    Your generalization is unacceptable logically and actuarily. There is no harm in seeking low income loans for low income borrowers seeking low cost housing.

    It was not the GLB Act signed by Clinton that caused the growth of financial institutions to the size of being too large to fail. It was the Congress and Clinton’s and Bush’s failure to follow it up with additional safeguards to close the potential for mergers and acquisitions and cross lines of business growth in creating financial behemoths too large to permit to fail.

    But, this raises another issue. Being stupid is NOT against the law. Fabricating bookeeping wealth and waltzing off with other people’s money as payment for that bookkeeping wealth created, leaving the tax payers and government holding the bag, that is fraud and theft, and that is illegal.

    I agree with you. We need to discover all the contributing parties and identify them, and what they did to contribute to this assault on our nation’s economic future and survival, and tax payers. But, as a nation of law, we can only punish and demand restitution from those who violated our laws, our GAAP standards and rules backed by force of law, and extract restitution from the guilty to the extent possible.

    Your attempt to throw the stupid into the same pot as the legally culpable is precisely what the guilty’s parties’ defense attorneys would do. Are you defending those legally responsible intentionally or, are not?

    Posted by: David R. Remer at January 11, 2009 5:31 PM
    Comment #273457

    Kruser said: “Detroit is like a ghost town.”

    You obviously haven’t a clue what you are talking about, Kruser. Detroit is far from being a ghost town. Detroit is a major and impoverished urban city, with a vast middle class population in its metropolitan communities dependent upon the auto industry directly or indirectly in its metropolitan area, and extending all the way up through Flint and Saginaw, and over to Grand Rapids.

    A lot of new business has been drawn to Michigan over the last decade or so due to favorable government incentives to relocating businesses. But, nothing approaching the employer size of the Big 3 auto industries, and these new businesses have chosen to locate in areas other than the S.E. corner of the Lower Peninsula, like Grand Rapids, Lansing, and Houghton areas.

    Yes, there has some migration of population from Detroit since its heyday in the 1960’s. I am one of those who saw no future in Michigan and left in 1972 after working for Ford Motor co as a crank handler and furnace operator. But, the emigration was not isolated from continual immigration over those decades.

    For the state 1960 through 1990:

    Wayne County in which Detroit is located:
    2,666,297 1960
    2,670,368 …
    2,337,843 …
    2,111,687 1990

    As you can see by these numbers, the Detroit area’s population has diminished from 2,666,297 to 2,111,687 over 40 years. That hardly constitutes the turning of Detroit into a ‘ghost town’. BTW, the vast majority of Wayne Counties residents reside in Detroit, and Hamtramack, and island city within Detroit.

    I was born and raised in Detroit, and my family still lives there. One of my sisters and her husband reside in Dearborn. Another in Westland, and another Redford. It is the furthest thing from a ghost town. It is full of millions of people threatened by the possible demise of the American auto industry and this horrible economic recession and credit and capital crisis.

    Posted by: David R. Remer at January 11, 2009 5:43 PM
    Comment #273458

    Kruser said: “It is interesting you would bring health care into the debate. The French have lower health care simply because they pay close attention to their health. Americans in general are self indulgent and fat. A Reuters Jan 9 article says just that. The “system” has little to do with it.”

    Your comment demonstrates a lack of understanding of the complexity of the issue. Stress, among many other factors, causes eating habit changes and weight gain. Americans are significantly more stressed out than the French, when comparing lifestyle factors. They work less than 40 hours per week as a nation; in other words, they work in order to live. Far too many Americans live in order to work.

    The stress differential between each nation’s cultural life is to a significant extent measurable and demonstrable, and contributes to the weight and eating habits differential between the French and Americans. The French drink wine regularly in modest amounts with meals, from as early as childhood. Millions upon millions of Americans either drink not at all (receiving no stress reliving benefit of a glass of wine), or in copious quantities lethal to brain and liver tissues.

    Try looking up the incidence rate per capita of sclerosis of the liver between Americans and French. Or, between the English and French for that matter. There are two major causes of this disease, alcohol abuse and hepatitis. The French have significantly lower incidences of each.

    There are a host of factors that contribute to weight gain, but, comparative per capita health condition between cultures requires a rigorous statistical approach to discuss differences in any meaningful way. Americans visit health care practitioners far more often than the French on average. That would appear to indicate Americans focus on their health more than the French, in direct contradiction to your lay assessment. But, as you can see, appearances can be deceiving and wrong.

    The fact that the French are healthier is not due to their focus on health being greater than ours. It is a result of myriad cultural differences in everything from dietary choices and psychological stress to length of work week to genetics. The mere fact that every French person doesn’t worry each day whether they have access to health care and whether it will bankrupt them, as is the case for 47 million Americans is another cultural factor that plays a role in the French being generally healthier.

    Posted by: David R. Remer at January 11, 2009 6:03 PM
    Comment #273462


    I agree with you on low income loans. What happened was a lowering of standards for loans.

    It will be nice to reenact standards that have proven over time to work.

    I also have some sympathy for your argument about who was asleep at the switch. Where has the SEC been?

    One of the issues I see time and time again is that there is a tendency, (admitedly this is a generalization but bare with me), to add new laws when the old ones were not enforced. We have many laws already, and I want to know where the oversight has been?

    Posted by: Craig Holmes at January 11, 2009 8:26 PM
    Comment #273463

    We all have the same motive but differing ways to arrive there. Solving out of control debt with more debt makes as much sense as pouring food down an obese person especially if it is at the expense of a healthy person. Should we distribute consequences of bad behavior to those who are doing things right? This is what needs to be avoided in any plan. Who determines the difference between personal irresponsibility, neglect or just plain bad luck? That is why government intervention needs to be limited.
    According to an AP story on Dec 20th 2008, Detroit has an unemployment rate of 21%, and half the population has left since 1967 when it was at its peak of 1.8m. The average home price is at 18k.
    We do have something in common. I was born in Detroit General and lived in Ferndale. My family moved north just before the riots in 67.I recently relocated to another state from MI, (housing business). Everyone I know there is struggling.
    My mother received an FHA loan and bought a nice home when we were on welfare. Responsible poor people have had that avenue for years. The programs you speak of were formed not to help the poor but to enrich cronies and score sympathy vote points by capitalizing on irresponsible people. They were also formed to stimulate the economy as is the guise of most wasteful government programs.
    Don’t get me wrong. I am a big fan of irresponsible people, they can be allot of fun. You just cannot expect them to behave responsibly. Throwing loans and houses at them doesn’t change the behavior. They are personally at fault for embracing the behavior but the ones who capitalize on it are also scoundrels. Kind of like a drug user vs a dealer.

    Posted by: Kruser at January 11, 2009 8:35 PM
    Comment #273465

    Are you kidding? The French drink like fish , smoke like chimneys,and eat like there was no tommorrow. Their healthcare system is nearly the entire reason their longevity is increasing while ours is declining. Our system has failed. We have an infant mortality rate higher than Cuba’s. We are on a par with Latvia. Are you proud of that?Without addressing healthcare we can never address entitlement programs or compete economically. The time has passed when fear mongering and failed rightwing ideaology can be allowed to prevent universal healthcare from becomming a reality.

    Posted by: bills at January 11, 2009 9:05 PM
    Comment #273469

    You know, just to be blunt, we either reform entitlements or America ends. Current forcast for the Debt of our country is to go to 400% of GDP in 50 years. That is higher than the amount of debt Germany had after WWI. (340% of GDP.

    Britain came out of WW2 with a debt of 280% of GDP.
    So we either cut spending or are no longer a world power, or worse!! (thinking of the crisis of 340% debt to gdp bringing in Hitler).

    Posted by: Craig Holmes at January 11, 2009 11:49 PM
    Comment #273470

    The French students I sponsored wouldn’t eat fried foods or much meat. Maybe they were the exception.
    Statistics can be easily skewed. When time is taken to observe variables that are overlooked due to agenda based studies, experience and logic win. Sorry I don’t have time to give more info. I have in the past. Government money doesn’t exist to fund expansion to our already inefficient government funded universal care. (Medicaid).
    I have two sisters who are nurses and the care given here is exceptional. One is in a neo natal unit and the other is emergency.
    Anti capitalists frequently characterize existing professionals, corporations and systems as incompetent thus the need for government take over. There are bad cases out there as in any system but they are the exception. Installing unexperienced bureaucrats (cronies)as managers is the reason for our existing economic and health care problems. Set limits and penalties for bad behavior, yes. That is the essence of governing. Manage and fund through politicians? Not a good idea.

    Posted by: Kruser at January 12, 2009 12:55 AM
    Comment #273476

    According to the latest projections from the Congressional Budget Office, Social Security can pay all benefits through the year 2049 with no changes whatsoever. Even after that date, it would always be able to pay beneficiaries a far higher benefit than what current retirees receive.

    Social Security Update (PDF)

    Posted by: womanmarine at January 12, 2009 11:58 AM
    Comment #273484

    Thank you, womanmarine, us old folks find that reassuring, but if that is true, why was selling Social Security to the stock market such a cause d’etat of the Cheney/Bush administration? What a shocker! To find out that our president actually DID try to shanghai Social Security…who’d a thunk it?

    Another negative on his ‘legacy’?

    Posted by: Marysdude at January 12, 2009 1:49 PM
    Comment #273498

    Kruser said: “Anti capitalists frequently characterize existing professionals, corporations and systems as incompetent thus the need for government take over.”

    That is pure B.S. Critics of pure capitalism argue that it professionals, corporations, and systems operating on pure capitalism fail to make accessible and affordable their goods and services to everyone. If we are talking Bentley and Rolls Royce vehicles, this is not a problem for society. If you are talking health care in the event of illness or injury, it becomes an enormous problem for society, especially one which elects representatives democratically with suffrage for those who couldn’t afford health care under a pure capitalist system.

    Consider that our mixed social/capitalist health care system ALREADY leaves 47 million Americans without health insurance, and consider how that number would have to triple, quadruple, or more, without government underwriting of health care accessibility.

    Posted by: David R. Remer at January 12, 2009 4:30 PM
    Comment #273505

    bills, care to cite some official empirical research to support your statements about the French? Your statement about the French reads like an early 19th century plantation owner’s assessment of Black field laborers.

    There is a grain of truth to all prejudicial and bigoted statements which is what gives them currency. The French people probably do consume more wine per capita than Americans, but at the rate of 2 to 3 glasses per day for most with meals, this is hardly “drinking like fish” as you put it.

    I don’t know about smoking. They may smoke more per capita than Americans, maybe not. I would have to see hard comparative data on that. I wouldn’t be surprised if they did smoke more, since, smoking brings pleasure to those addicted to nicotine, and the French are known for being less inhibited about pleasure seeking than Americans, though America’s illegal drug and sex industries would seem to indicate even this reputation for French pleasure seeking sits more on the bias side of assessment than empirical.

    Posted by: David R. Remer at January 12, 2009 5:12 PM
    Comment #273510


    I will take a stab at that SS question.

    First of all no one has ever talked about messing with social security of current recipients since the Clinton administration when they began to tax a portion of it. (I think it was 1993).

    So if someone is retired or near retirement no one exept democrats have suggested doing anything with it.

    What Bush was suggesting was that peope with several years to go would be allowed different investments besides the SS trust fund because they earn a higher yield. It was one way to make sure that our grand children inherite a country not so overwelmed with debt.

    There are five choices on Entitlements. We can increase taxes, lower the costs (reform or ration medical expenses), invest the contributions going into the SS trust fund into a higher yielding investment, delay retirement, or pass the bill on to the next generation like we are doing now.

    I understand that SS trust fund is ok until 2040 something. That is great in theory. IF the country is bankrupt how are thay going to redeem the trust fund?

    Posted by: Craig Holmes at January 12, 2009 6:25 PM
    Comment #273522

    “What Bush was suggesting was that peope with several years to go would be allowed different investments besides the SS trust fund because they earn a higher yield. It was one way to make sure that our grand children inherite a country not so overwelmed with debt.”

    Not necessarily so Craig, The 401k ‘s we thought would help us save for retirement has proven to be less than successful over the middle term. To many bubbles bursting in the financial world to ensure any real wealth in a 401k seems to be the problem. Had we put more of our retirement eggs into the wall street basket we would only be worse off than we are now. I watched my IRA lose 30% in ‘01 and then 20+% in ‘08. The only reason I didn’t lose more this time around was because I put half of it into a money market fund prior to the collapse. Unfortunately I did wait until mid ‘08 to do so and lost a quarter of it. Had GWB and his wall street cronies had their way perhaps part of my OASDI funds would have went down the drain with the 401k during this current bubble.
    I will allow you GWB may have thought he had good intentions but to think Wall Street had good intentions stretches the imagination. Wall Street’s actions since ‘04 has proven this IMHO.

    Posted by: j2t2 at January 13, 2009 12:24 AM
    Comment #273524

    >That is great in theory. IF the country is bankrupt how are thay going to redeem the trust fund?
    Posted by: Craig Holmes at January 12, 2009 06:25 PM


    I’ve got news for you…if the country is bankrupt, the dollar is no good, hence, SS is not spendable. If there was a trust fund fund it would be useless.

    My point is, we keep hearing, especially from Republicans, how the SS system is broke and needs to be fixed. Their plan to ‘fix’ it is to turn it into a bucking bull so that some can retire with a little padding and some cannot. Riding the stock market, when you can’t count to two with both hands doesn’t seem like a viable alternative, but not being able to count should not, of itself, become a sentence to starvation.

    Now we find that even broken or bent out of shape, because of each president since Johnson’s abuse (laying it at Clinton’s door was not correct, because Johnson started the whole thing, by merging the trust fund into the general budget, and each president since has taken his shot, not just Clinton), it is still alive and kicking…fixing it will be the easy part…keeping stupidity out of the picture will be the hard part.

    Posted by: Marysdude at January 13, 2009 6:29 AM
    Comment #273552

    Craig, you forgot option 6. Convert it into a true poverty insurance program, and eliminate it as an entitlement altogether for all newer workers in the work force. It becomes self correcting.

    Posted by: David R. Remer at January 13, 2009 8:27 PM
    Comment #273556

    Can someone please tell me why we refer to Social Security as an ‘entitlement’?

    Posted by: Marysdude at January 13, 2009 10:48 PM
    Comment #273560

    Marysdude, because it is. There is a social contract between government and employees and employers, in which the government mandates extraction of funds from employer’s and employee’s to which all workers who paid into the SS are ‘ENTITLED’ to proscribed benefits upon their retirement age set by the government. Hence the word, entitlement.

    If SS were an insurance plan, no one would be entitled to any benefit UNLESS, upon retirement, their income was insufficient to meet basic dignified living cost levels. That was the original intent of the plan that came out of FDR’s administration, but, the Congress and some of their special interest lobbyists would not accept an insurance plan: the wealthier insisted on a paid entitlement for being forced to pay into the system.

    Posted by: David R. Remer at January 14, 2009 4:57 AM
    Comment #273561


    Up until 2006 there was still a question on this subject. Unless there has been a finding that I’m unaware of, the question is still just a question:

    Originally, President Roosevelt called for “social insurance.” He envisioned a plan through which workers would contribute and provide for their own future economic security. He specifically disdained the idea of reliance upon welfare. The original SSA embraced the idea of Social Security being an insurance program under which a group of individuals were insured against identifiable risks: disability and old age. Workers paid for their own insurance. The concept pools the risk of disability or loss of income due to old age among a large number of individuals and pays out to those who live long enough to reap the benefit. If Social Security is thought of as an insurance program, then only those who had paid into the system should receive benefits. In addition, the benefit should be payable only to the insured individual and not to the insured’s spouse or family. If the benefit can be paid to a spouse or family, then an individual without a spouse or family should be able to identify a “beneficiary.” Finally, there should also be a direct correlation between the amount paid in and the benefit received, without a benefit cap or the taxation of benefits for wealthier recipients.

    On the other hand, should Social Security be considered a tax, with benefits paid based upon social entitlement? If so, then the benefit received would not correlate to the amount paid. Most kinds of taxes (income, property, sales) are paid without the expectation on the part of the payor of receiving commiserate benefits. Currently, Social Security benefits are calculated based upon the income earned by an individual, up to a capped benefit amount (the formula uses a smaller percentage as income increases). Under the current system, the AICPA has identified a redistribution of income from 1) single participants to married participants, 2) high-income participants to low-income participants, and 3) two-earner couples to one-earner couples. These net redistributions must be taken into consideration in evaluating the Social Security system. Any proposed changes must weigh whether Social Security is an “insurance program” or a “tax” for the redistribution of income. One current proposal, the use of a “means test” to determine who should receive Social Security benefits, would solidify the program as a tax intended to redistribute income.

    Quoted from:

    Posted by: Marysdude at January 14, 2009 6:26 AM
    Comment #273562

    Marysdude, I see nothing in your quote to contradict the history of the SS program as I explained it.

    It was conceived as an insurance plan. It ended up, thanks to modifications by Congress, being an entitlement plan. And quite appropriately called that, I might add.

    It makes no sense for retirees with $2500 per month or more net income before SS benefits, receiving SS benefits, IF, SS is reformed to become a retiree poverty insurance program. In addition, the insurance approach, allows for paying only partial benefits in order to offset deficiencies in private savings income to insure against poverty. It saves the purpose of the program while also saving the taxpayers from significant amounts of the deficits currently facing them. More is saved if the retirement eligibility age is bumped up to 68 for men and 70 for women, or something like that.

    But, SS is not the major entitlement challenge going forward. Medicare/Medicaid are. It appears however, that politicians think there is no point tackling Medicare if reforming SS can’t be accomplished. There is logic to that line of thinking, to be sure. So, I look forward to Obama and Congress reforming SS very quickly, as in the next 12 months.

    Posted by: David R. Remer at January 14, 2009 8:18 AM
    Comment #273563


    I guess it all boils down to what your definition of ‘is’ is…

    My wife and I both contributed to Social Security over the years. Our various bosses, as part of our pay packages contributed like amounts…we did this on the assumption that at a given age, we could draw retirement on the strength of those contributions. That has not changed.

    There have been several changes and adjustments that have affected the program over the years, but the basic concept has not changed…I think of it more like a 401K or an IRA, only run by and mandated by the government.

    Posted by: Marysdude at January 14, 2009 9:11 AM
    Comment #273565

    Marysdude, it boils down to whose history you read on the origins of the SS program. There are several versions.

    I take the one that makes the most sense in the context of the time in which the idea was conceived, the Great Depression. That was a time when the elderly were suffering horribly, when savings were small to begin with and much of them wiped out by banking failures. Unemployment skyrocketed through no fault of workers. Hence, the version of history I read indicated that the idea for SS that originated within the FDR admin. was for an insurance plan against poverty upon reaching retirement age. Only when the Congress and their lobbyists got hold of it, did it become fashioned into an entitlement, or, as your version has it, an insurance against living beyond the government’s expectations for average mortality. But, if you think about it, your version has the program set up as insurance against longevity. That would not have made a lot of sense as an insurance program as insurance is designed to insure against misfortune, not fortune. If one lives longer one could save more and work more.

    At any rate, once passed, it was indeed an entitlement program for those who paid in. Given the assumed appreciation and inflation of money in a perpetually growing economy, and the already historical rate of growth of the population in the 1930’s, it was not hard to foresee that the day would come when outlays would exceed revenues for the program.

    As passed, the SS program was dumb from an actuarial and social program design point of view. Of course, hindsight contributes to the certainty of that view, where it was obviously not viewed that way by many in the Congress of the 1930’s.

    You may want to reference the Townsend Movement, The Bigelow Plan (a true insurance plan), and the history of the social insurance movement. In the U.S. a number of the State’s programs of social insurance were contributory while others were not.

    The concept of the European social insurance, the precursor to our own, however is written about as follows from the official SSA site:

    Although the definition of social insurance can vary considerably in its particulars, its basic features are:
    — the insurance principle under which a group of persons are “insured” in some way against a defined risk,
    — and a social element which usually means that the program is shaped in part by broader social objectives, rather than being shaped solely by the self-interest of the individual participants.

    Social insurance coverage can be provided for a number of different types of insured conditions, from disability and death to old-age or unemployment.

    Taken together with the fact that Edwin Witte who chaired the commission that developed FDR’s proposal for SS was both an economist and leader of the social insurance movement in the U.S., it seems more likely that Witte recognized the potential downfalls of an entitlement program or, savings program, and chose instead to propose an insurance program which insured against poverty in old age.

    The Congressional bills and their alterations to achieve passage did not mirror the Administration’s initial proposal. We know this because the admin’s proposal included health insurance, disability insurance and survivors’ benefits, and these were absent upon passage by the Congress. Therefore, I lean toward the history of that says WItte and his group leaned toward a true insurance against poverty in their design, and Congress and their lobbyists morphed the proposal into an entitlement which would guarantee paid benefits to all white male workers, rich and poor alike, who paid into the system.

    Posted by: David R. Remer at January 14, 2009 9:59 AM
    Comment #273580

    Okay…whatever you say…but, FDR referred to it as ‘insurance’. No mas!

    Posted by: Marysdude at January 14, 2009 1:18 PM
    Comment #273664


    I understand that SS is in “ok” shape until 2040 something and then we can “just” cut benefits by 12% or something of the sort. So if we cut benefits now for those retiring in the distant future so they could plan the system would be totally sustainable.

    The problem as you say is that the country is bankrupt. Well the country isn’t bankrupt but it is on a schedule to be bankrupt. So the parts all work together. It doesn’t matter how well a program looks in terms of being fiscally solid if the whole thing collapses SS is gone too.

    By the “whole thing”, we do have to be concerned about haivng a large enough economy to defend ourselves which means simply raising taxes to cover “the lot” is dangerous, unless you completely trust the Chinese.

    We need to look at an over all limit on spending at a % of GDP. 20% looks good to me, as it has worked since the end of WWII. It is hard to argue iwth success.

    But I can tell you very few on the left want to keep spending at 20%. Many look to Europe as a model of what a real social net can do for an economy. Europe is so weak militarily. Think of how the world would be right now without the US navy patroling the shipping lanes. Imagine what would happen to trade. If we decide to increase spending permanently above 20% of GDP, and take it from defense as Europe has done, we will become as weak as Europe. Who will fill in the vacuum of power?

    We have some very very serious issue. We appear to be forced to choose between our promises to boomers and our children. I personally choose our chldren. Keep America strong,level with future retirees, make the tough decisions and leave a strong America to the next generation.


    Posted by: Craig Holmes at January 15, 2009 10:50 PM
    Comment #273673


    The problem with maintaining our military at the expense of social programs is we become too arrogant. We have this huge military, and support this huge military industrial complex, and what we get for that are follies. In order to show the world who’s boss we push ourselves into places like Korea, lie ourselves into places like Viet Nam and Iraq, fumble our way into places like Panama and Grenada and Iraq 1 and Kosovo. Some of those were for the right reason, some were not and some were without honor at all. But, no matter the reason, if we had not been the world’s policeman, they would have each reached a viable conclusion without our interference.

    You mention our Navy patrolling sea lanes…what sea lanes? Who’s paying for the patrols? How many pirates has our Navy caught or killed? Who asked for those patrols? What are they protecting? If they are protecting oil transports…that is another reason for us to spend more of our finite resources on renewables and alternative energies. Research and development for those might be cheaper than providing Navy patrols…

    Posted by: Marysdude at January 16, 2009 8:41 AM
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