A Slight Correction That May Be of Interest
I’ve been saying that America has never defaulted on its debts. But some new facts have been brought to my attention that force me to modify that to “America has never deliberately defaulted on its debts.” So, it’s okay, right? We’ve survived, haven’t we? We can default with impunity, correct?
The year I was born, we accidentally screwed up the system. The quote in the article goes like this:
Investors in T-bills maturing April 26, 1979 were told that the U.S. Treasury could not make its payments on maturing securities to individual investors. The Treasury was also late in redeeming T-bills which become due on May 3 and May 10, 1979. The Treasury blamed this delay on an unprecedented volume of participation by small investors, on failure of Congress to act in a timely fashion on the debt ceiling legislation in April, and on an unanticipated failure of word processing equipment used to prepare check schedules.
What was the result?
Zivney and Marcus examined what happened to T-bill interest rates as a result of this small, temporary default. They find a surprisingly large effect. As best they can tell, T-bill interest rates increased about 60 basis points after the first default and remained elevated for at least several months thereafter.
Indeed, using more sophisticated means, including comparing T-bill rates to interest on commercial paper, the authors conclude that default led to a persistent increase in T-bill rates and, therefore, higher borrowing costs for the federal government.
And this was just a small default, for a very, very narrow segment of America's debtholders. But read that last part: "a persistent increase in T-Bill rates and, therefore, higher borrowing costs for the federal government."
America cannot cold turkey on its debt addiction. It would be the equivalent, raising taxes or cutting spending that fast, of a 10% drop in GDP.
We're still recovering from a 4.1% drop.
But then we're faced with the prospect of a deliberate default. If an accidental default, since forgotten, can have that negative of an effect on America's ability to borrow, and more importantly, to pay back cheaply, then an intentional one, where investors believe that the government effectively intended to default, will be that much worse.
I'm preparing another entry right now, and it's got an article about how much the average American consumer is struggling under their debts. Right now, the Federal government pays billions to cover the interest payments and maturing bonds that it issued over the last few years.
The last thing we need is for the servicing of that debt to get more expensive, because both family budgets and the Federal budget can only sustain the cost of handling their debts because its cheap. But if we intentionally default, or even get close to it, if we show the political will to fail to pay our debts, America will will face higher costs all around on borrowing.
Our last big economic disaster happened because our big banks not only stopped making loans, but stopped issuing the kind of commercial paper that allowed businesses to meet payroll. Businesses that played by the rules were suddenly forced into economic turmoil, suddenly forced, in a train-wreck sequence of events, to lay off workers and even close up shop. We still haven't recovered from that failure.
If what this one accidental default indicates is true, even a short default will raise interest rates that have been held at rock bottom. As some conservatives around here know, one thing you don't do in a situation like ours is suddenly tighten up the money supply. Doing that catches banks up short, and forces them to charge higher interest rates to customers. In a time where people need to be spending more money to generate economic growth, to put people back to work, the raising of interest rates would cut that recovery short, even if it was very slight.
The ratings agencies are warning us that we don't even have to fail to pay to do damage. We just have to look like it.
The brinksmanship the Republicans are engaging in is unsound economic policy. Any serious approach to default will result in interest rate increases that this country can ill afford, and actual default will be disastrous.
The unfortunate tendency on the Right, when told something is stupid or foolish, is to rationalize it away. I would point to the response to the Economic crisis in 2008 to warn them away from that. They were told letting Lehman Brothers crater would be a disaster. They let it go to show that they weren't going to interfere with market forces. Unfortunately, because they had let companies interfere with market forces, what followed on that was not Lehman Brother's orderly demise, but the collapse of Wall Street's ability to function.
Faced with that, Republicans were still afraid that voters might think that the party had gone socialist on them. So, to dispel that idea, they, altogether, opposed the prototype version of TARP when it was first run through Congress, successfully torpedoing it.
The result was a massive panic on Wall Street.
The Republicans don't need to be posturing for the voters, they need to be looking out for their best interests, even when that doesn't make them popular. Defaulting on America's debt will only make resolving that debt all the more difficult, as interest payments on what we've borrowed goes up, and as the costs of doing business in America skyrocket, taking tax revenues and employment with them.
Republicans will have plenty of opportunity to rangle over the budget when the next budget comes along. They'll have the ability to hold programs hostage, rather than America's economy in general. Republicans might think they can get away with blaming the Democrats over this, but really, after a screw-up of this magnitude, I don't imagine anybody will get away clean, least of all the Republicans who had to insist, right after having made a spending deal, that there be another round of budget negotiations.
I mean, just stop folks. Just stop. You've done enough damage already being contrarians, not listening to anybody else's advice. Stop taking unconscionable risks with this country's future, and start living up to your responsibilities.
Here's an idea of the costs that could be involved:
Because interest rates on bonds determine how much it costs the US government to secure more debt, even seemingly slight changes can affect the long term deficit on a large scale. A 1% rise in interest rates, or 100 basis points, would grow the deficit by over $400 billion over the next five years and $1.2 trillion from 2012-2021, according to the CBO. Given that the agency's baseline assumes a number of tax cuts that Congress typically extends will expire, it's likely that more debt would be affected and push the number even higher.
It's not enough to want a policy to reduce the deficit, it actually has to reduce it. Defaulting on America's debt will not reduced the deficit, will not make it go away.
It'll just make a giant mess of the economy.
Posted by Stephen Daugherty at June 9, 2011 2:11 PM
I am glad to read that SD now understands how serious this is as I and others have been telling the dem/libs for months now.
And, the only solution that SD can imagine is increasing the debt limit. Perhaps in a month or two he will be posting comments that reducing spending is also a way to solve the debt crisis. I am sure if that happens, it will be claimed as an original thought by him as well.
We have two scenarios to consider.
1) Increase the debt limit and go another $2 trillion in debt by the end of 2012…
2) Reduce spending enough that the debt limit does not have to be increased and then begin looking for ways to reduce our debt.
Is there any doubt that number 2 would be viewed by our financial markets, employers and countries around the world as the preferred method to solve this crisis? Would anyone disagree that number 2 would most please our largest foreign lender…China.
Royal Flush wrote: Is there any doubt that number 2 would be viewed by our financial markets, employers and countries around the world as the preferred method to solve this crisis? Would anyone disagree that number 2 would most please our largest foreign lender…China.
The problem is that Washington’s already *WAY* overfilled with Number 2, in every conceivable manner.
Exactly what part of “10% drop in GDP” were you unclear on?
Do you have any real plan as to how to deal with a one third cut in every department, or is this something you hope to deal with in the final weeks as sovereign default hangs over our heads?
You might as well send Rand Paul to Narnia to find a way to avoid default, because that’s the kind of fantasy-land logic you’re operating off of.
Or put in more objective terms, your party already passed the legislation that makes raising the debt ceiling necessary. You’ve already ordered the dinner, now your suggestion as to how to save money is skip out on the check.
That would damage the average Americans reputation to do, now you want America as a whole to engage in such a trust-destroying way.
Are you saying that congress is made up of a bunch of brown eyed politicians? I agree.
SD wrote; “America cannot cold turkey on its debt addiction. It would be the equivalent, raising taxes or cutting spending that fast, of a 10% drop in GDP.”
He asks me what part of this was unclear to me. OK, it’s unclear to me what source produced this 10% prediction?
What is clear to me is that even SD recognizes our “debt addiction”. He claims we can’t go cold turkey. I believe that is the only way we can do it. What evidence can he present that our congress and prez can gradually ween themselves from this addiction? What evidence can he present that the American people, so accustomed to pork and entitlements, would voluntarily take themselves off the government teat?
We don’t need any more incremental creep in our national debt, but rather, a sudden and dramatic effort to reign it in.
A “game of chicken” requires that BOTH drivers refuse to turn off the path. If they collide, it is because BOTH failed to made a necessary adjustment.
Stephen, this is your refrain. You (sometimes) correctly identify a problem or an impasse and then blame Republicans for not giving in to the Democrats. When Democrats were the minority, you claimed that they should stick to their positions. When Democrats were in the majority, you said Republicans should give in because the people had voted for Democrats. Now when they are in the minority again (at least in the House) you are back to the first position.
If we come perilously close to default, it will be because Republicans failed to compromise on cuts AND because Democrats failed to compromise on cuts. Both sides are holding on to their respective steering wheels and applying the gas. Most Americans (according to a recent poll) feel that raising the limit w/o getting some fiscal discipline will just result in more spending and more limit raising. If the Democrats want to follow the will and wisdom of the people, perhaps they should turn from their error and compromise on cutting this – the largest deficit in human history.
Gary St. Lawrence-
The people who think China would like the #2 option forget that a cold turkey on the debt would instantly require us to do with out over one trillion dollars worth of either taxes or spending. Such a sudden drop in economic activity would create a Depression right off the bat (4.1% recession put us in our current shape, for comparison, and this would be about 2 and half times worse)
So, I don’t think they’d like it. What they’d like is some stability from us. What the Republicans are creating is uncertainty in the markets.
It’s nothing short of the biggest organization and employer in America cutting it’s two or three trillion dollar output by a third, and then laying off all the people it would take in order to make that happen. You would throw a monkey wrench into positively every economic calculation out there.
Or, you can directly take, in a matter of months, a trillion dollars out of the economy that wasn’t being taken out before, to do essentially the same work that was effectively being done at deferred cost.
It’s like the old saying: it’s not the fall that kills you, it’s the sudden stop. In this case, it’s not so much that a trillion and a half dollars goes bye-bye, but that it happens so suddenly and violently that the economy trainwrecks as a result. If several hundred thousand people are thrown out of worker all at once, or if Americans suddenly have a trillion dollars taken out of cash-strapped pocket books, it’s going to interfere with just about every kind of business we have going on.
Is it worth dealing such a mighty blow to government, if you knock the entire country on its ass to achieve that? And really, are people going to thank you at the end of the day? Are they really going to say, “here’s the turning point where American kicked the debt habit, or are they going to say, “this is where they finally dispensed with driving the country into the ditch and just decided to run it off a cliff.”
Your sudden dramatic effort would be like running a car into a brick wall. Sure, it stops the car. But you’re not driving it anywhere else in the near future.
What do you think it will take, a dictatorship? You folks had near absolute control over the budget, and you deliberately followed a budget that debt financed more, and taxed less. What America needs is to do things the right way, in the right order.
Let me ask you one pertinent question: if this was a Democratically run House of Representatives, would we be seeing any of this crap?
No. It is only by virtue of the power the Republicans hold that they are capable at this point of holding the nation’s economic fortunes hostage to their political demands. Nobody else was even interested in this kind of stupidity.
If we were in charge, the budget would have been passed in January, and the debt limit raised long before our country reached the critical threshold.
You’re asking the Democrats to commit political suicided to prevent you from committing economic homicide on this country. The Republicans should give in now, because I’m pretty certain that Americans did not elect your people so they could be a plague on this country’s financial stability.
Hell, you ran on the idea that your party was the sane alternative to Democrats who were creating uncertainty, making waves. You ran on improving the economic situation.
But all you’ve done so far is put things in doubt and put things in danger. There’s not much out there you’ve done that’s actually promoted growth.
It’s time to stop playing the game, and start living up to your responsibilities, or you will find America once again eager to be done with the Republican party. Quit pushing our nation’s luck, and quit pushing your own.
Professor Daugherty, lay out the plan and be specific. So far all you have said is the Republicans are gloom and doom. So start a list of specific items that in your opinion needs to be done. Rhetoric does not qualify anything here.
I don’t need a complex plan. My idea is simple: don’t **** with the debt limit. If you want to reduced the debt, get people employed again, get the economy growing at a quick rate, and then, and only then bring in your austerity.
The point is not to sabotage your economy trying to resolve the deficit. It defeats the purpose because revenues are economically dependent.
The Republicans didn’t pick the proper part of the problem to tackle first, they picked the most politically expedient part, the part the Obama administration didn’t have the flexibility to dodge on.
Unfortunately, they’ve picked it at time when most economists outside the conservative ivory tower think the economy’s too fragile in its recovery to take the strain.
The economy supports the revenues, and the ability to increase them by properly raising taxes. Revenues are what pay for things when you don’t want to pay for them through debt financing. If you want to resolve the deficits, you have to repair the economy enough to pay for them through taxes, and so that spending cuts don’t have a disproportionate effect. Right now, there isn’t the private investment capability there to replace the bucks the government’s cutting off.
With a systemic issue like this, good intentions and noble quests are not enough. You have to create a situation where your successes aren’t working against each other, where your attempts to drastically reduced debt don’t stall the economy, making long term deficit spending an unpleasant, persistent reality, rather than getting rid of it. Sometimes, we are not fortunate enough to have a situation that pleasantly cooperates with our ideologies.
SD writes; “With a systemic issue like this, good intentions and noble quests are not enough.”
Really? How about all the money being spent on subsidizing green energy? Good intentions and noble quests in this case are OK? How about attempts to create a carbon tax taking billions from the economy. That’s OK?
When glorious leader O’bama declares that electricity prices must “necessarily skyrocket”…that’s OK?
When Energy Sec Stephen Chu declares…”Somehow we have to figure out how to boost the price of gasoline to the levels in Europe (around $8/gal) that’s OK?
In his fiscal 2012 budget, the O’bama requested more than $60 billion in direct tax and fee increases on American energy production over the next ten years. That’s OK?
In the June 8, 2011 issue of USnews “Washington Whispers”, author Paul Bedard writes; “Two new EPA pollution regulations will slam the coal industry so hard that hundreds of thousands of jobs will be lost, and electric rates will skyrocket 11 percent to over 23 percent, according to a new study based on government data.” That’s OK?
SD and his dem/lib leaders warn about damage to the economy and lost jobs if we reduce spending rather than increasing the national debt. And SD has the gall to describe such action as merely “good intentions and noble causes” but unworkable and “not enough”. Yet, just the few things I mention above will cost the economy just as much in lost GDP and jobs and that’s just fine with them.
Once again, SD is the leading cheerleader for more debt and economy destroying regulation and policy rather than reigning in our run-a-way spending.
Some would have us believe that inflation is under control in the US. Following are just a few commodities used by most Americans every day with the percentage in price increase in just the past year.
43% Crude oil
One can seldom, if ever, get a dem or lib to admit that printing excess money or borrowing money to pay for spending causes inflation. Yet, here’s the inflation percentage of just a few commodities over just the past year. Could some dem/lib please explain what they believe is the cause of this inflation to me?
Found this article in Yahoo News. http://ca.news.yahoo.com/china-ratings-house-says-us-defaulting-report-054309883.html
China ratings house says US defaulting: report
“A Chinese ratings house has accused the United States of defaulting on its massive debt, state media said Friday, a day after Beijing urged Washington to put its fiscal house in order.
Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies — eroding the wealth of creditors including China, Guan said.
China is by far the top holder of US debt and has in the past raised worries that the massive US stimulus effort launched to revive the economy would lead to mushrooming debt that erodes the value of the dollar and its Treasury holdings.
Beijing cut its holdings of US Treasury securities for the fifth month in a row to $1.145 trillion in March, down $9.2 billion from February and 2.6 percent less than October’s peak of $1.175 trillion, US data showed last month.
Foreign ministry spokesman Hong Lei on Thursday urged the United States to adopt “effective measures to improve its fiscal situation”.”
“China is by far the top holder of US debt and has in the past raised worries that the massive US stimulus effort launched to revive the economy would lead to mushrooming debt that erodes the value of the dollar and its Treasury holdings.”
Interesting since China deficit funded a much larger stimulus package as a percent of GDP for its own economy.
China is worried about a weakening dollar because it reduces their competitive trading advantage.
Rich wrote; “Interesting since China deficit funded a much larger stimulus package as a percent of GDP for its own economy.”
China doesn’t have a national debt almost equal to one year’s GDP.
You last sentence is true and, they are worried about payment of what we owe them.
Quoting from your own article:
Dagong has made a name for itself by hitting out at its three Western rivals, saying they caused the financial crisis by failing to properly disclose risk.
The Chinese agency, which is trying to build an international profile, has given the United States and several other nations lower marks than they received from the the big three.
Sometimes it’s worth considering the source. It’s also worth considering that when we had problems, China had problems, too, given the size of our economy. Your suggestion that we run the Budget into a brick wall is still reckless, and still wrong.
You’re too credulous. We haven’t missed a payment for quite some time, so talk of default is very premature, especially since the person talking seems to equate it with America not having the economic policy he likes.
On the subject of price increases, the main reason those items are excluded from core inflation studies is that their price is volatile, and not necessarily related to growth in the economy, or money supply. Other goods can be more reliably indexed.
As for your whole environmental regulation problem?
There’s a word you need to learn: externalizing.
See, pollution isn’t necessarily cheap. It causes healthcare costs to go up. It can adversely affect necessities like food and water, and those cost something to restore, if restoration is possible. And really, how much did it cost, will it cost to deal with the economic consequences of the Gulf Oil Spill?
Unsurprisingly, you only take the view of the externalizing business, in terms of what the pollution costs.
In the case of carbon emissions, there’s nowhere to hide from the effects. Just about everybody’s weather, everybody’s interests are vulnerable to changes in the weather.
That includes those food prices of yours, which you so adorably displayed while arguing about inflation.
Well, inflation isn’t the only thing that affects food prices. So does supply, and its lack. Trouble in the Russian wheat crop is part of the cause of recent spikes in food prices, and the recent spike in food prices is part of what caused all these revolutions in the Arab world.
Water is certainly affected by climate, too. Where it rains, where it doesn’t, the glaciers that help feed the great rivers of the world.
When such supplies become harder to come by, or their sources change, well then you get expensive water projects that try to resolve the issue.
It’s only cheaper to do things your way, if you ignore what the change in climate is going to require. And it only gets worse, the more carbon we chuck into the atmosphere.
Ah, but some businesses today have to make their record profits. Anything else would be socialism, right?
Your tendency to argue by vilification is in good evidence here. Your picture of our intentions should be obvious to anybody as a melodramatic parody. Can you really argue that you have the science to prove that carbon emissions are not a problem, or do have nothing else to bring to the table but quibbles already answered a thousand times in the literature?
The Republicans and the energy companies play on people’s sense of necessary sacrifice and uncertainty to turn them against doing something about this problem. But it won’t do them much good. They’ll be the ones who see August temperatures in June, who see the weather go all out of kilter with what they’ve known for generations.
And our children will pay for the expenses made necessary by the changes in our climate.
Now is the time to do something about it, when we still have the oil to cushion energy shocks. The stitch in time saves nine.
SD writes; “You’re too credulous.”
LOL…did you see any comment by me other than where I found the article? NO, of course not. So, please explain your remark…if you can.
The real story in the article is that China has cut its US Treasury securities purchases for five months in a row. While SD piddles around with honking the Chinese rating house, and trying to find something derogatory to write about me, he misses the meat of the story and how that may affect our future borrowing ability from China.
SD writes; “On the subject of price increases, the main reason those items are excluded from core inflation studies is that their price is volatile…”
Notice how he sidesteps my question which was, why are these commodity prices rising so fast. Instead, his so-called answer is unrelated to my post except for a brief mention of a diminished Russian wheat crop. It makes no difference if they don’t form the governments bullshit inflation figure…real people buy these things nearly every day. And, when the next election comes around, folks will be voting their pocketbook not some imaginary crap from the administration that there is little inflation.
Then, wandering off into MMGW SD once again wants to argue the science. I’ve been there, got the T-shirt and coffee cup. I would like the Irishman to make a new carbon tax part of his stump speech. And, I would like him to tell Americans that there is no need to worry about inflation of products they use every day. He could tell them it’s just their imagination, a clever trick by Republicans, a horrible consequence of the Bush administration, or to simply buy less of these commodities until he fixes everything.
Finally, SD let’s go with the big guns. He predicts the weather. I wonder, does he have stock in Algores carbon scam?
“Let me ask you one pertinent question: if this was a Democratically run House of Representatives, would we be seeing any of this crap?”
That is a silly question. Of course, if Democrats controlled the place, they would happily spend money and increase the deficit.
Stephen – I really think you have severe political myopia. I understand that you support Democrats. Almost half of American voters agree with you and it is a legitimate position. But it is not the only true position. Your question reveals the myopia. You just cannot accept that the other side has legitimate concerns. Like President Obama, your idea of compromise is to allow the other side to join yours.
When you are in serious trouble or in debt, there is never a “good” time to work to get out of it. But if we wait until we feel good about reducing the debt, we will never do it.
Read between the lines.
What strikes me here is that Beijing is saying “Jump!”, and you’re asking how high. For a person eager to see a socialist bias in the mainstream media, you’re quick to take seriously a newly minted agency whose stated purpose is to provide an antidote to our domestic rating agencies.
Oh, did I mention that your article states that the reduction in securities held is something like thirty billion dollars? That out of 1.175 Trillion. Now it’s at 1.145 trillion. Watch out, they’re heading for the door!
Look at treasury bond yields. When those start going up, that’s the time to become concerned.
And regardless of all these red herrings you’ve delivered to me in a barrel, ripe for the shooting, it still remains a bad idea for a nation to suddenly halt 1.5 trillion dollars or more of economic activity all at once, an effective cut of ten percent.
An effective cut of 4.1 percent put us in this position, with a bigger deficit and a higher debt level. We aren’t going to get out of it by mangling the economy.
The government’s contribution to the economy is not a small matter, and all the economic activity relating to it doesn’t just magically become unnecessary or come to a clean end.
Your solution to an inflationary problem not even truly manifested in Core indexes is to cause a deflationary collapse greater than the one just knocked us on our ass.
I suppose you’ll want to punish American businesses and consumers further by then trying to squeeze even more revenue or savings on spending from the folks who remain employed and the businesses that remains solvent. Sigh.
Just remember what happened to the GOP the last two times it failed to prevent a massive panic in the American economy.
Our future borrowing ability from China won’t mean ****, if we don’t have the economic strength to pay back what we borrow. In fact, I’d think this voluntary economic seppuku would itself be a black mark on our nation’s economic prestige. Republicans these days seem more intent on destroying capitalism than even the most radical socialist out there.
Notice how he sidesteps my question which was, why are these commodity prices rising so fast.
I’m saying core inflation, that is, the prices that people are asking for consumer goods, isn’t going much of anywhere. If we had really monetary inflation, that’d be heading up.
Our main issues here relate to an energy policy that a Republican Congress and a Republican President made law. Your people deregulated the trading energy-related commodities, and required the addition of ethanol into today’s gasoline.
Tell me: are your people really going out of their way to end either error? No? They’re fighting the end of that? Well then, your policies aren’t a real alternative, then, are they?
The real problem here is that you try to hide the effects that your people have had on this economy in the past, so you can make Obama pay for them, so you can call him names and make him unpopular.
But in the meantime, you have no real answer to the problem you yourself created.
That is a silly question. Of course, if Democrats controlled the place, they would happily spend money and increase the deficit.
Translation from your loaded language: No.
You want to talk about political myopia, let’s talk about trying to solve a fiscal problem in the middle of a deep economic downturn. Your people picked the wrong time, the time we would need to run higher deficits to fund recovery, to fund unemployment and aid for those who are in the hole financially.
Hell, you picked the worst time in recent history!
And now, your side is trying to shoehorn your Medicare changes, which are deeply unpopular, into negotiations to raise the debt limit.
You’re not trying to cooperate. Your party is trying to force the country to do things its way by making the alternatives too horrible to consider.
There is a good time to work out our fiscal problems, and that’s when we’re not going to send ourselves into a counterproductive, fiscally driven recession or depression in the process of attempting- attempting- to resolve the deficit.
“When you are in serious trouble or in debt, there is never a “good” time to work to get out of it. But if we wait until we feel good about reducing the debt, we will never do it.”
Your correct. However, the debt problem that really needs to be worked out is in the private sector. The recent increase in public debt is due primarily to covering creditor losses and demand reduction resulting from the housing bubble collapse. That collapse wiped out trillions of dollars in equity but left the debt. The housing market continues to decline. Until that debt issue is resolved there will not be a sustainable recovery. Focusing on public debt misses the real issue.
As I explained, it would not be a problem if Democrats controlled the House, but it would also not be a problem if Republicans controlled the presidency and the Senate. Both sides feel theirs is right. This is evidently beyond your ability to appreciate.
I could use your line w/o change - “You’re not trying to cooperate. Your party is trying to force the country to do things its way by making the alternatives too horrible to consider.”
Never in human history has any government run up such a debt. We did the massive stimulus. It did not work. All that happened is it cost a lot.
So Democrats want to spend more.
You are right re the housing, but is the alternative to have government permanently digger in deeper and deeper? It is likely that the Obama folks have already taken the step that will help the housing market catch up. Inflation will take care of this.
“One can seldom, if ever, get a dem or lib to admit that printing excess money or borrowing money to pay for spending causes inflation.”
ya….i brought that one up on c&js thread about obamas failed policies, but got no response. the left likes to talk about the eveil oil co.s, and claim the rise in prices is due to speculators, and a conspiracy on the part of producers, but fails to see the overall trend. ie as the dollar falls comodities rise. guess the evil farmers, coffee growers, and precious metal producers are part of the cabal. go figure.
“There is a good time to work out our fiscal problems, and that’s when we’re not going to send ourselves into a counterproductive, fiscally driven recession or depression in the process of attempting- attempting- to resolve the deficit.”
you mean after the republicans give in, and give up the best card they have in forcing the democrats to make deep cuts. left on thier own democrats will never make cuts that will piss off thier entitlement voter block, so i’de say that now is actually the best time to force the issue. let’s face it we’re already in a fiscally driven recession, and it is the result of the democrats policies. the gov’t can’t spend us out of the situation we’re in. the only thing that will do that is healthy growth in the private sector, and the market needs to decide where that growth will occur. the gov’t borrowing money to subsidize who they think the winners should be based on thier political ideologies, will not work.
dbs, thanks for the research and links.
SD writes; “Look at treasury bond yields. When those start going up, that’s the time to become concerned.”
When investors get skittish about the economy they seek refuge in safe harbors such as US Treasury bonds. Many investors who were trading in oil sold their positions and parked the money in bonds. Certain government bond yields are use to set interest rates and are not necessarily a signal for calculating inflation.
SD may not feel the affect of inflation on our most common commidites in his pocketbook, but I…and millions of other Americans certainly do.
i don’t have nearly the knowlege you do about investment strategies. what i do know is that as my debt rises it takes an icreasingly larger amount of my monthly income just to cover my interest. this means i have less to spend on the other nessesities. i have to reduce my general expenses in relation to my debt load. as my debt rises so does the likelyhood that i will default. it also usually means lenders will start to raise my interest rates in proportion to the added risk. continuing to seek increases in my credit limits will only make it more likely that i will default at some point. i can either make the tough choices, and work to get it under control, or i can go to my boss and demand more money so i can continue my reckless ways.
this is IMO where our gov’t is headed. i don’t see how we can keep raising our debt limit without making large increases in interest rates. without the incentive of larger returns to offset the increasing risk, eventually no one will be willing to loan us money. now is the best time to break the cycle. it also may be our last opportunity.
dbs, I believe you have a very good understand of how debt and credit works.
dbs and RF
While reading the above notes a thought came to me. Maybe SD is a alias for Tim Geithner. lol
LOL…Tom…you’re so baaaad!
If the rise in commodity prices reflects US policy, it is that of the Federal Reserve Board, a private-government hybrid agency (our Central Bank). It controls monetary policy, not the executive branch. The Chairman of the Fed is a conservative Republican, Ben Bernanke, originally appointed by GW Bush and re-appointed by Obama. The quantitative easing program of the Fed is a monetary policy of the Fed not a fiscal policy of the Obama administration or Congress.
The Federal Reserve Board is the primary agency responsible for management of inflation/deflation in the economy. Blaming the Obama administration for inflationary actions of the Fed is misplaced. The Fed is an independent agency.
The fact of the matter is that the Fed has been fighting deflation or less than optimal inflation since the 2008 collapse. The reduction to near zero interest rates and the quantitative easing program are intended to stimulate borrowing in the private sector and to induce investment in more risky markets other than treasury bonds. The whole point of these monetary policies is stimulate new borrowing and increase the money supply in the general economy.
“The reduction to near zero interest rates and the quantitative easing program are intended to stimulate borrowing in the private sector and to induce investment in more risky markets other than treasury bonds.”
I wonder why we need to do this? Could it be because everyone is afraid to invest because of the present administration’s policies?
Ben is a conservative?
The funnies come out in the Sunday paper.
Anybody that has any ranking whatsoever in the Fed is not a political conservative, period. No exceptions, period.
That is akin to the head of the CFR being a JBS member.
Liberals come up with some of the most preposterous things. And saying Big Ben is a conservative is right in the middle of those things.
The whole point of these monetary policies is stimulate new borrowing and increase the money supply in the general economy.
Posted by: Rich at June 11, 2011 04:04 PM
Rich, please communicate with some of the folks here who don’t believe quantitative easing increased the money supply. Are you suggesting that more money, chasing the same amount of goods, doesn’t lead to inflation. If the 50% to 60% increase in the cost of the five commodities I mentioned, used nearly every day by every American, isn’t inflation, what name should we apply?
The quantitative easing programs have not put new printed money into the private sector in the sense that there is additional financial assets (money) in the system. The Fed essentially swapped federal reserve notes for existing treasury bonds of roughly equal value. The government is then obligated to pay the interest and principal on the bonds to the Fed. The prior private sector holder of the bonds gets the cash equivalent for the bonds in their reserve account at the Fed. You had a 10 million dollar bond and now you have 10 million in federal reserve notes. It is basically a conversion of a highly liquid asset (bond) into an even more liquid asset (cash). The purpose is to move private investment out of safe treasuries into more risky investments, i.e., commodities, stocks, housing, etc. It will result in more money flooding into those assets. But, it is not really new money. It is money diverted from bonds.
The entire exercise is to inflate asset values. This, in theory, induces a wealth effect. If you are wealthier in assets, you are more likely to have the confidence to borrow and invest in alternative job producing ventures. The borrowing creates new credit money and increases the money supply in the general economy. For example, if housing assets could be inflated, that would be a huge boost to our economy. An additional factor is that it increases the reserve accounts of banks that theoretically would be available to support lending.
Much of the criticism of the recent quantitative easing program is not that it flooded the market with newly money, but rather that it resulted in an inflation of commodities and stocks that were not related to basic fundamentals. In other words, the Fed simply created a bubble in the commodity and stock markets without much positive effect in the main economy. Indeed, it may have inflated basic staples without increasing the ability of most Americans to pay for the inflated values. Good for speculators in the short term, at least, bad for the general public if the desired wealth effect doesn’t trickle down into the main economy.
There is a big difference between the first quantitative easing programs of the Fed and the recent ones. During the crisis of 2008-2009, the Fed brought onto its balance sheet enormous amounts of mortgage backed assets from the banks in exchange for cash. It made a market for the plummeting mortgage assets and provided liquidity for the banks at modeled long term prices (mark to model rather than mark to market).
The Fed did quite well with the first quantitative easing programs turning a profit on the mortgage assets when it unwound its balance sheet by selling the assets back into the private sector. The program was instrumental in saving the banks from bankruptcy. The jury is still out on the recent quantitative easing programs.
“Rich, please communicate with some of the folks here who don’t believe quantitative easing increased the money supply.”
If the program really did increase the money supply in the main economy, it would be a great success. However, it appears to have only created inflation in the commodities and stock markets thus far. Increasing the money supply was the goal of the Fed. It is the cornerstone of monetary policy in fighting deflation and recessions. It is the alternative to Keynesian fiscal stimulus. Both seek to increase the amount of money in the system. Monetarists, however, believe that the private sector is better suited to allocate additional resources than the government. In other words, the government is an inefficient stimulus engine.
Your party’s threatened to force the country into default. I don’t think we’ve threatened anything on that scale, and by the numbers alone, we never obstructed the Senate as badly as you. You can’t use the tu quoque defense well at all, if your sides gone further in its extremes than ours ever has. Worse than that, justified it.
You’re thinking in terms of the wrong system. What’s happening is that other grains are being used in lieu of the food corn that is not being used, in order to make different products, and livestock that is dependent on that cornfeed (the pigs traded in porkbellies, for example) are getting more expensive to feed. The Oil on the market’s being traded on a market your people deregulated, and which investment banks are using as their speculative wasteland of choice.
I wonder why we need to do this? Could it be because everyone is afraid to invest because of the present administration’s policies?
You’ve fallen for a magic trick here, unfortunately.
They’ve pulled the old “regulations = economic friction” notion out of the hat.
But tell me something here: the biggest financial institutions leveraged themselves up to their eyeballs in toxic derivatives which then turned out to have low to completely uncertain real world value. This made their balance sheets uncertain, and lead them to cut a lot of their lending short, and keep it cut short even to this day.
The Conservatives on this site have cherry-picked the few parts of our economy where prices are going up. Housing prices remain in a downward trajectory in many places, credit remains more difficult to acquire, and other indicators show that the economy really isn’t picking up steam.
What’s really happening is, policies have not be changed. Successful political manuevering from the right has maintained policies that are detrimental to the proper, supply-and-demand oriented price of oil, and which employ farmland to grow ethanol and not food.
We could change things, but conservatives refuse to compromise. They insist on letting private players continue to distort market, rather than admitting that those distortions do not reflect the activity of a healthy economy.
Is it just me, or do you guys tend to pat each other on the back way too much? Seriously, fellows, just because you have your mutual appreciation society, doesn’t mean you’ve convinced everybody else.
Let’s remember how the deficit and debt were reduced in the 1990s: we raised taxes, and an economic boom raised employment, job creation, and revenues. We became more efficient, and the Clinton Administration took enforcing Wall Street rules more seriously.
Let’s remember how they were not: Neither Bush nor Reagan succeeded in lowering deficit numbers. They let those who relied on leverage get out of control, and then we had to bail out those who screwed things up.
The truth is, Republican policies on the economy, on deficits and debt are more aspirational than real. This is the way they want it to work, rather than the way it actually does. Republicans claimed ten years ago that their tax cuts were going to bring economic growth. Even without the economic collapse, we didn’t replicate the growth of the nineties. They claimed the debt was going to go down. The national debt was between five and six trillion dollars when Clinton left office. You do the math. They claimed revenues from explosive economic growth would undo the shortfalls on revenues caused by tax cuts.
Nothing of what they claimed came to pass.
If we want to step back from the passionate idolatry of political dogma that Republicans use to push people’s buttons, we have to admit that the Republican’s fiscal policies are not the answer.
Of course, the Republicans don’t want to admit this.
As for regulations? I was born in 1979, so my lifetime tracks with the progress and lack of same that came from deregulation. Even when I called myself a Republican, I often found myself thinking that the experiments with Deregulation, whatever party started them, weren’t working out. Savings + Loans, junk bonds, derivatives, housing securities, home equity loans, energy deregulation… the list goes on. Where we counted on people to police their own behavior, they failed much of the time, because much of the time, they were looking out for themselves.
What I think has happened is that the GOP has traded it’s moderation and it flexibility for the ability to march policy through lockstep, to exercise power to its greatest extent. In the process, though, the party’s sort of created a strained situation, where it no longer has the flexibility to respond properly to people beyond the party. It only gets worse as they double down on their policies, and use any excuse to push radical changes across the country that cost people in real terms, and alarm them.
I have the feeling the Republicans are going to have to truly crash to humble themselves enough to admit that the old conservative movement is dead, and that the party needs to reorganize itself according to a different set of principles, more consistent with the country this nation has become, than the one we once were, decades ago.
I just hope that when they do hit their low point, it’s not in such a way that we all end up seeing our country suffer for it. Country should come first. I’d rather there be some point at which the Republicans just reach some tipping point, and just back down. America does not need to suffer for one party’s unwillingness to admit that it’s policies didn’t work when given the best possible chance to succeed.
Your party has threaten to push the country into default, since they will not agree to needed cuts in the face of the largest spending in human history.
Democrats have refused to compromise with the majority in the House and have threatened to tie up any bills in the Senate, which they control by a slim margin.
The old liberal idea of spending your way out of problems is dead. It didn’t work in the 1970s and indeed created stagflation, which we might be seeing again.
One definition of insanity is repeatedly doing the same things and expecting different results.
The Democratic big-government ideas have indeed crashed. Actually, they crashed in the 1970s, but Obama has tried to revive them. Despite record spending, we went well above the 8% unemployment promised by the Obama folks and it has stayed high. Their “plan” is to do more of the same. That would be merely useless, if it wasn’t so expensive and using borrowed money.
“What’s happening is that other grains are being used in lieu of the food corn that is not being used, in order to make different products, and livestock that is dependent on that cornfeed (the pigs traded in porkbellies, for example) are getting more expensive to feed.”
i guess they’re feeding them coffee, and gold then too. thanks for clearing that up.
Do you understand how stupid of a negotiation tactic this is?
Let me put it this way: If we say no to any Medicare cuts, and your side says, then, that there’s no deal, what then?
Do you deliberately let this country go into sovereign default, just to show you will make good on the threat, Democrats having not conceded to it?
No, if you’ve got any brains, hell, if you have any love of this country, then you pass a debt limit increase, because not doing so at the end of the day means this nation sees its government, and in particular, the Republican Party, deliberately make our economic situation worse. And in response to what, not implementing the hugely unpopular Ryan plan?
There’s no way your party wins free of deliberately undermining the full faith and credit of this country! It only seals the deal on a decades worth of fiscal mismanagement, and history will record that your party acted foolish in away that I would be most people in the far future would have a difficult time understanding.
I mean, really, these people deliberately squandered on of the best, most reliable credit ratings in the world, so they could teach their nation a lesson about fiscal responsibility? Quick lesson here: deliberately undermining your credit does not help fiscal matters!
Can’t you guys quit with the lessons? Hasn’t the economy learned enough lessons already? Isn’t it time the Republican party started making it easier, not harder for this country’s economic to recover?
Coffee doesn’t ship itself. And Gold? I seem to recall Republicans telling people to buy up gold in response to inflation. But you know something, there’s another reason why we don’t measure inflation from these products:
Because your friends on Wall Street speculated on such products, causing major price swings. What broke the step of those rising gas prices?
Well, we set higher margin requirements on trading silver commodities. That sent the price of silver down, and a whole bunch of other commodidities got traded down as well.
There’s not much sense to letting speculative commodities be the basis of core inflation. The point is to get more reliable, more dependable information on where the economy’s going, not chase around numbers that get bubbled and deflated all the time.
rise in comodity prices can be affected by a lot of things. when the trend is upward for extended periods of time, and at the same time the value of our currency is trending down, one would have to be foolish to believe that inflation in price has nothing to do with the devaluation of our currency.
you can deny inflation if you choose, but those of us who are consumers see it in everything we buy. i buy groceries every week stephen, and i can tell you without reservation prices are going up every week. it is directly related to obamas fiscal policy, like it or not.
BTW, raising the margin only serves to keep smaller players out of the market. people buy and sell because of conditions affecting the market. it is those signals that are responsible for the movement in price. the same thing happens in the stock market. when things look bad for a company people tend to sell off which causes the price to drop. i don’t hear you bitching about that.
your president is an utter failure, and i will be dancing in the street when he is kicked out of the white house next year. then maybe we can get this country back on track.
“Despite record spending, we went well above the 8% unemployment promised by the Obama folks and it has stayed high. Their “plan” is to do more of the same. That would be merely useless, if it wasn’t so expensive and using borrowed money.”
If you are correct that Keynesian fiscal stimulus has failed to significantly revive the economy, then so has the preferred conservative, monetarist approach.
Since the 70’s the free market, monetarist policies of Friedman, Greenspan, Bernanke have been thought to be the more powerful tool of economic management. However, the Fed monetarist policies in this deep recession have had little success in increasing the money supply and aggregate demand. It has lowered interest rates to virtually zero. It has tried quantitative easing with much criticism. Despite those actions, the money supply and aggregate demand remains depressed with borrowing and lending activity stagnant. The best efforts of the Fed to make available cheap money, to create abundant high powered reserves has not resulted in a significant increase in borrowing and lending.
Critics of the Obama fiscal stimulus program seem blind to the fact that there has been two tracts combating this deep recession. Both are coming up short. There is an issue that is not being addressed by both approaches. In my opinion, it is that household and consumer debt has reached its limits. In a consumer economy supported by debt, that is a dangerous development. Fiscal stimulus can supply some support for the debt burdened society on a temporary basis. However, the successful monetary policies of the past won’t work if your balance sheet is underwater. Nobody is going to take on more debt.
The government bailouts of 2008-2009 were directed at creditors and their agents. Virtually nothing was done to relieve the debtors. Mortgage foreclosures continue and equity value continues to decline. We propped up the banks but left the debtors twisting in the wind. Those debtors are the consumer base of our economy. It is not rocket science to understand the reasons for the tepid recovery. Ignoring the demand side of the equation has been penny wise but pound foolish.
“…without reservation prices are going up every week. it is directly related to obamas fiscal policy, like it or not.”
No it is not related to Obama’s fiscal policies. It is related to the monetary policies of the Federal Reserve, an agency independent of the executive branch. There is a direct correlation between commodity price inflation and volatility with the quantitative easing programs of the Fed. It is not fiscal policy that is causing commodity price inflation. Indeed, the fiscal stimulus was being withdrawn from the economy at time of the commodity price inflation. How would less federal stimulus cause price inflation?
It IS a stupid negotiating tactic. We agree. But the tactic is on BOTH sides. And it sometimes works.
Your idea seems to be this. Democrats are right. Republicans won’t see this and make concessions, therefore they are bad. This is myopic & partisan, as I have pointed out.
Your subsidiary point seems to be that we have always raised the debt before, why not do it always in the future. Well, that does not mean we should happily spend and spend. Beyond that, we are in uncharted debt territory. Never before in the history of the world has any government spent as much as we are now or run up a debt of such massive proportions. Maybe the world is not ready for that.
My belief is that BOTH sides will make some compromises to avoid the crash. We obviously need to cut the budget and we obviously need to avoid default. Smart people on both sides will see that and - grudgingly - do the needful things. When that happens, you can claim that Democrats were the reasonable people and I will again point out that both sides made compromises.
Re Obama’s stimulus - It didn’t seem to do much of anything, except move economic activity to an earlier period. We are now paying the price in a slower recovery.
The Obama stimulus didn’t work, but it was not free. Our debt went up in ways never before seen in the broad sweep of human history. If “stimulus” was cost free, I would do it. But we have to borrow that money.
The Keynesian system collapsed in the 1960s. It is not completely wrong, but it didn’t work as planned. What was wrong was the idea that government could fine-tune the economy. Unfortunately, we have downturns, which we can mitigate but not avoid. The downturns create changes that make possible recovery.
For example, home prices went too high. We all talk about the bubble that developed from 1997-2005, but many of us do not take the lesson. If prices bubbled, they need to go down. Government “keeping people in their homes” doesn’t address the problem AND it helps prevent the problem from being addressed. Some people will need to sell and almost all of us (myself included) will lose money. Nothing can be done to prevent that. When dishonest or cognitively challenged politicians claim otherwise, they are not only useless, but are actually pernicious.
“The Keynesian system collapsed in the 1960s. It is not completely wrong, but it didn’t work as planned. What was wrong was the idea that government could fine-tune the economy.”
That was the criticism. So, the free market economists turned to monetary policy with money supply as the core factor. During inflation, choke off the money supply by raising interest rates, etc. In times of recession and deflation, increase the money supply by lowering interest rates, increasing bank reserves to encourage lending, etc. Letting the free market allocate the increase in the money supply during recessions would be better than government fiscal stimulus. The concept is that the free markets are a more efficient mechanism than government in allocating the additional resources.
But it appears that monetary policy is pushing on a string in this deep recession. You claim that fiscal policy is a failure. So, what is your solution? Complaining about fiscal policy and deficits doesn’t contribute to the solution.
Indeed, neither fiscal nor monetary policy is pulling us out of the recession fast enough for us to feel comfortable.
My point is that perhaps it cannot be done. Maybe we just need time. Maybe we need to allow prices to fall, even if it is painful.
It seems like Obama’s policies have been like a guy lighting matches under a thermometer on a cold day.
The New Deal policies may have increased the duration of the Great Depression by using government power to try to prop up wages and prices and creating rules and procedures that made it difficult for people to adapt. The problem is that it seems to make sense to intervene to “help” people in distress, and who doesn’t want to accept that help.
I learned this on a personal level with my son, who always seemed to need a lot of help and attention from me. I worried when I went to Iraq for a year, that it would be really hard for him. Instead of collapsing, he thrived and became much more what he - and we for him - aspired to be. I had to conclude that much of my intense help and attention had actually slowed his progress. A more distant relationship was better.
Government is not THE problem, but it is also not the solution. Government can help create conditions for prosperity, but it cannot create prosperity. That is the job of the people. Sometimes government needs to step back and let them do that, even when the people are clamoring for help in these “toughest of all times”.
If inflation is high, why don’t we see it elsewhere, outside the commodities market?
Could it be that the problems in the commodity market have more to do with how we govern derivatives contracts? But no, that’s not the position, it has to be monetary inflation, even though it’s not showing up elsewhere in durable goods.
I buy groceries, too. What I don’t buy is that gas and food prices reflect objective supply and demand nowadays.
As for raising the margins?
This is why I don’t listen to you concerning commodities, because you don’t have a basic understanding of what’s going on.
You know what buying on margin is? You buy the securities or bond, or stock on credit, with the notion that you’re going to pay it back when you make your money. It’s the same sort of leveraging that got this economy in trouble in the first place. You say I deny inflation. I don’t. I say, you’re in denial about speculative excesses.
You’re in denial about how far this system actually strays from your idealized vision of the free market. You’re failing to realize that without regulatory constraints, folks will complicate and **** up the market in an effort to pad their own bottom line, and competition will often force even those of conscience to play along.
As for my President being a failure? As for you getting the country back on track? Mister, there isn’t much your people have done to make things better. You think you’re the ones to make things better, but then, you think jobs cuts magically create job growth, and tax cuts magically create revenue increases. I think people should look at the Right Wing’s policies with appropriate skepticism and demand for evidence.
Is this how it’s going to be? During the Healthcare reform debate, you told us that we were wrong to push a plan on American, that by your determination was against their will.
Now, you’re backing the Republican party as it attempts to do that very thing.
The stimulus worked. The CBO confirmed it. It just wasn’t enough. It was designed for a 3.6 rather than 6.1% drop. All other things being equal, the stimulus as well, the good that it would do in the first economy would have been greater than the second.
But it did some good. It got in the way of the momentum of the recession, giving the banks and the American people back enough demand to start pushing growth in the other direction. As for moving economic activity, you’ll have to point out to me where we’ve suddenly seen a rise in any of the sort of costs associated with borrowing more money.
Are all the Treasury Bonds that financed it suddenly coming due? I didn’t hear about that. Interest rates remain low. Inflation is weak, and commodities, especially these days with the energy trading shenanigans going on, aren’t really indicating a cost either. There aren’t higher taxes to explain the failure to invest- they remain low as ever. And Regulation?
Look, a lack of regulation allowed a great deal of false wealth generation to occur, so is it really a cost to prevent this, or are just seeing the economy for how it’s truly working, rather than being deluded by leveraged derivatives that mask another future plunge in America’s wealth?
Where is this displacement you’re talking about? It is one thing to make vague claims, it’s quite another to prove them. The Republican’s rhetoric may produce a good story, but it doesn’t square with any evidence that might indicate that it’s the real story.
But the other side of this, and what you’re not acknowledging is the fact that the consequences of the failure of the markets in 2008, are producing what could be termed a reverse bubble, an unjustifiable slackness in the American economy. People aren’t getting loans who could in fact pay them back. Americans aren’t getting jobs that this nation’s productivity could support. And America’s productivity remains well below what it can sustain.
You’re working off the premise that this should be the new normal, but this is far from a normal state of affairs for our economy.
If this becomes a long-term state of affairs in this country, it will do America’s fortunes a bitter injury. We don’t need to sit around in an economic funk, much less try and implement austerity on that weak economy at this point.
Finally, regarding the compromise, here’s the thing: I predict one of four things will happen:
1) The nation will come close to, or go into a short period of defaults which will shock the system enough to cause damage to the economy, which will panic the Republicans and everybody else into passing a debt ceiling. It will also, probably, be a black mark on everybody’s record, but the Republicans in particular.
2) The Republicans will go down to the wire, but warnings from Wall Street will prompt them to quickly push a nominal compromise through. This will be a black mark on their records with the Tea Party.
3) The Republicans will go down to the wire, but warnings from Wall Street will prompt them to quickly formulate a proposals, which the Tea Party Republicans will balk at, forcing a vote where Democrats have to fill in the missing legislators, repeating the political fiasco of March.
4) The Democrats will accept the Medicare compromise, and commit political suicide in doing so. But will Republicans do much better? Primaries will likely replace many Democrats who voted for the deal, and the American public will rise up against the Republicans.
So everybody gets screwed.
I think the Democrats know what the polls say. The Republicans don’t seem to care, or only care about local polls.
But really, you’re facing a significant problem here. Your threat, if carried out, inflicts economic ruin on the country. What is this, we had to destroy America’s economy to save it? That’ll never fly. This would be an unconscionable act of economic sabotage. Democrats wouldn’t do this on their own. It would never happen. We don’t pass things like this because we love to spend and run up deficits, we pass them because the alternative is highly irresponsible! If you really wanted more cuts, you should have shutdown the government, rather than accept the deal you got. But you accepted that deal, and by doing that, accepted the spending that got us to this current debt ceiling. And this debt ceiling is all about paying for what your people agreed to earlier in the year!
So you tell me, why are we in this hostage situation, and what good does it do the stability of the country, much less its economy, for this to become a seasonal threat? You’re so greedy for leverage to carry out your agenda, that you seem to have missed where you passed the moral event horizon, or at the very least, the point where you could actually carry out the threat in your ultimatum, without bringing eternal condemnation down on your heads!
Back away from this. For once, as a party, back down from a bad idea, rather than rationalize it. The Bush Administration warped the priorities of the Republican party, and this brinksmanship shows just how badly. When your folks took this kind of chance in 2008, it triggered the panic that depth-charged our economy. Is that the mistake you want to make all over again?
“This is why I don’t listen to you concerning commodities, because you don’t have a basic understanding of what’s going on.”
i took a course on comodities trading back in the 90s. it covered contracts, and options, but continue to tell me what i don’t know.
“You know what buying on margin is? You buy the securities or bond, or stock on credit, with the notion that you’re going to pay it back when you make your money.’”
it’s also the amount of money needed to be maintained in a margin account in order to hold your position on a futures contract. that is after all what we were talking about right?
“It’s the same sort of leveraging that got this economy in trouble in the first place.”
without that leveraging the average person could never get involved in futures trading, and is why it came about in the first place. @100 dollars a barrel, most people don’t have the money it would take to control one contract, or $100,000. are you going to argue only the wealthy should be able to participate?
“If inflation is high, why don’t we see it elsewhere, outside the commodities market?”
HUH ? comodities are present in most everything we use on a daily basis. do you drink coffee, orange juice? do have electronics in your house which contain gold, aluminum, copper? do you drive a car? what’s it made of stephen? evrything we have or use is affected by comodity prices. to say they are some how different, or unrelated is asinine.
“Mister, there isn’t much your people have done to make things better.”
mister, your people have F*#@ked up the entire country the same way they did california. they’ve only made a bad situation much worse. your people would be wise to run a primary, or face the fact they will probably lose the senate, and the whitehouse next year.
Public opinion polls indicate that Americans consider debt the bigger problem and most do not believe the stimulus worked.
Going farther into debt is what Americans dislike. Once again it is the Democrats who are going against the will of the people.
Re the stimulus - the CBO works with the numbers given. The Obama folks made lots of assumptions and put them into the numbers.
In any case, how much MORE. Obama has already spend more than anybody else in world history. Eventually, size matters. Our debt is astronomical. How much more do you think we can borrow?
Re lack of regulation - it was not LACK it was wrong. Guys like Barney Frank insisted on pushing bad loans.
Re “So everybody gets screwed.” you are pretty much right. We have gone into more debt than anybody ever in the history of the world. We have to dig out. Nobody wants to pay. Democrats are telling people that somehow they don’t have to. It is like telling people that water will flow up hill.
In the end, both sides will need to compromise. I agree. Republicans will have to allow more debt and Democrats will get to add more debt than Republicans want.
I can quote you about the debt Democrats want to add - Back away from this. For once, as a party, back down from a bad idea, rather than rationalize it.
What I would argue is that if you can’t afford to lose that much money, you shouldn’t be playing that game.
Unfortunately, Plenty are playing that game, and world oil producers know it.
Indeed, the cable noted, “As the oil futures markets play an increasingly large role in setting world oil prices, (Mufti) remarked his team was now obtaining better insights into prospective oil prices from banks than from those working in the real oil sector, such as refiners.”
Another document, from Sept. 2, 2009, offers an eerily accurate prediction of today’s high prices, made by Sadad al Husseini, Aramco’s former executive vice president.
“In his view, the bearish energy analysts arguing that the oil price shocks of last summer are not likely to be repeated anytime soon are making inaccurate assumptions,” the cable said, warning that the former Aramco executive saw political uncertainty and a perception of tight supplies as fuel for speculators.
The cable said that “al Husseini predicted that another oil price shock would likely hit sometime in the next year or two.”
Right on time, don’t you think?
A McClatchy investigation earlier this month showed the extent to which financial institutions now influence the price of oil. Until recently, end users of oil — such as airlines, refineries and other consumer of fuel — accounted for about 70 percent of oil trading as they tried to hedge against price fluctuations.
Today, however, speculators who’ll never take possession of a barrel of oil account for that 70 percent of oil futures trading, and the volume of speculative trading has grown fivefold.
What was once a hedge against price fluctuations is now responsible for the biggest price fluctuations. So, if you have to transport any goods, including groceries, you’re paying more, essentially, so somebody on Wall Street can take home more money. For what? For essentially acting as a middleman, a robber-baron.
Commodities should be used as a hedge against dramatic shifts in prices, but without proper regulation, they’re very often used as means to make money from a rigged bet.
As for the differences between finished products and commodities?
Well, here’s the thing: a commodity might increase in cost, but will people pay more for the car?
Also, is this system necessarily anymore market-bound? Are they really following inflation, or are they charging what they think the market can bear?
mister, your people have F*#@ked up the entire country the same way they did california.
What screwed up California is that it’s a state that taxes like Bush, but spends like the Europeans.
That, and the fact that the place was one of the big centers of real estate speculation. YOu know how that went.
They’re failings reflect nothing so much as the failings of the rest of the country, where people seek low taxes, but not the spending appropriate to that. And really, if that was a Democratic problem, it was most certainly a Republican problem, too.
As for your predictions? I wouldn’t overestimate people’s patience with the Republicans at this point. They advertized themselves as the antidote to the Democrat’s supposed radicalism, but they turned out to be more profoundly radical than they accused us of being.
Economic numbers are more important than poll numbers, especially with your party flooding the airwaves with its pessimism on the question. “Stimulus failed, stimulus failed, stimulus failed”
Except it didn’t. The object numbers show a strong recovery, that’s only now beginning to taper off. Numbers also show that the slashing of State and local budgets created a huge drag on the economy. (which you’re now trying to replicate on a federal level, you clever folks, you!)
This the problem with organizing your politics around not what works, but what sounds good.
You might want to quit with the fainting couch hysterics while you’re ahead. I’m not one of these idiots out there who gets influenced by that kind of thing. I’m seeing the numbers and factors out there that contradict your account. I mean, Barney Frank? I debunked that crap years ago!
I was blogging about the Derivatives market in the wake of the collapse, about where the toxic assets really came from, and what market forces enabled all that a long time ago. You can’t sell me on the idea that Fannie and Freddie were responsible, not when I know that their market share wasn’t exploding, and theirs weren’t the riskiest loans, or even the predominant ones issued as the bubble grew.
This is political horse****, rhetoric designed to mislead people, to get them to think that it was a failure of liberalism, even though you folks were defending that very system as your right up until its collapse.
You’re just helping the people who made the mistakes, committed the frauds, and helped destroy the economy get away with it.
As for the amount we’re spending right now? Tax cuts, Two Wars on credit, Medicare Drug Benefit and Medicare advantage. Obama’s spending relative to that is mostly temporary, and otherwise minimal by comparison.
Oh, and we’re also in the midst of a financial downturn, which always reduces revenues.
Meanwhile, we have your party fighting to prevent any changes to policy that might actually prevent further trouble, or constrain speculators who are driving up gas prices.
I can quote you about the debt Democrats want to add - Back away from this. For once, as a party, back down from a bad idea, rather than rationalize it.
You’re either trying to force a default, or tear down a very popular program a majority of Americans want kept intact, benefits-wise by using the threat of an economic collapse.
We’re trying to prevent both. I have nothing to back away from. My policies are the ones people want, really want.
We’re not looking to overload the debt. But we’re not going to punish a weakened economy, and afflict the finances of the poor and middle class to do it, while those on Wall Street, whose asses we saved from ruin, continue to engage in predatory speculation.
It is debt. You are correct. However, it is not the public debt that is the main problem. It is the private sector debt. In 2008, private sector debt exceeded 350% of GDP! That was the highest level since just prior to the Great Depression. The equity supporting that debt collapsed but the debt remained putting the economy on a deflationary trajectory only arrested by the intervention of the government. Hence, the public debt explosion. It was the result of absorbing the losses in the private sector.
You say, the hell with intervention, let the prices fall. Were you really willing then and are you really willing today to let that scenario play out?
You say that the New Deal did not solve the depression. That is not quite correct. After significant New Deal intervention, GDP climbed dramatically starting in 1933, only arrested by cuts in spending and tightening of the money supply by the Fed in 1937. What is true is that despite GDP returning to pre-depression levels and exceeding those levels, private sector unemployment remained high. The productivity-demand gap was never truly closed. It was only through massive spending in WWII that the economy and unemployment was finally resolved.
An interesting fact that many fail to appreciate about the massive WWII spending is that it was as much a forced private sector savings program as it was a government spending program. The spending and government supported war construction and manufacturing jobs went into non-consumer goods that were destroyed. Nobody could buy anything. There was rationing. Prices of essential goods were controlled. Everbody was employed but couldn’t do much with their wages except save it or invest it in war bonds. That factor is under appreciated. The result was that the American consumer repaired their balance sheets. In fact, they had surplus funds to spend when the war ended and consumer production resumed. They could now close the productivity gap with sufficient funds and equity to purchase the productive capacity and to acquire new debt to grow the economy.
“What I would argue is that if you can’t afford to lose that much money, you shouldn’t be playing that game.”
it would seem you are the one that knows little about futures trading. do you know what a margin call is?
“Well, here’s the thing: a commodity might increase in cost, but will people pay more for the car?”
people don’t have to buy cars, but they do have to buy food and other staples. the increase in the price of the comodities that are part of those staples is passed on.
“What screwed up California is that it’s a state that taxes like Bush, but spends like the Europeans.”
WRONG! what screwed up california was spending more than they take in, and then borrowing to spend even more. sorry as a 46 year resident i know why cali is screwed up. the democrats f#@*ked it up, and continue to do so. that turd needs to be winked off into the pacific ocean.
“That, and the fact that the place was one of the big centers of real estate speculation. YOu know how that went.”
trust me, it was in financial trouble long before that.
“As for your predictions? I wouldn’t overestimate people’s patience with the Republicans at this point.”
sonny boy, obamas’ toast. the best thing they could do is force him into a primary.
I wonder what platform the dems will run on in the next election.
Will O’bama be on the stump calling for more “change”. Is that a winning slogan for the dems in these times? Since the dems controlled both houses for two years and one chamber and the WH for two years, is it likely the voters will ask…why haven’t you already made the changes you believe are necessary? I expect dear leader will answer, because the nasty Reps wouldn’t cooperate. AH, yes…for two years you controlled everything in Washington and gave us another huge entitlement program in o’bama care rather than focus on the economy and jobs.
And of course, the dem platform will highlight all their foreign affairs victory’s such as killing OSB. How about the wars they are still running, and, in my opinion, losing. How about all the missed opportunities in the Middle East? How about allowing NATO to become nothing less than useless.
Well, the dems can say, we have accomplished a great thing in the military…gays can serve openly. That should get the gay vote which they always get anyhow.
How about the black vote. Most thinking black folks know that they are worse off today than four years ago. I expect the dems to lose 10% to 15% of that formerly reliable voting block.
How about the elderly. They have not had a raise in SS for two years and find that the cost for the basic necessities of life for them have risen dramatically. In this case, I expect the dems to blame Bush. Ya…that will work well.
I could go on but it’s time to eat.
OH, Wait…one more comment. California is no longer a basket case. They had to sell the basket. Now, they’re just a case.
“How about the wars they are still running, and, in my opinion, losing.”
how about the other two “dear leader” has started in lybia and yemen. oh wait….i didn’t say that. never mind.
“The object numbers show a strong recovery, that’s only now beginning to taper off.”
Are you serious about that? Unemployment that never dipped below even that 8% Obama promised, anemic growth rates that, as you say, is already beginning to taper off, you think this is strong? Do you laugh while you are writing those things about the strong recovery?
“You’re either trying to force a default, or tear down a very popular program a majority of Americans want kept intact, benefits-wise by using the threat of an economic collapse.”
It is a popular program. We all want to get more stuff and we all would like the sweet deal current recipients get. But the money is running out. You are talking like a true liberal. There are things you want to give away w/o anybody paying for them. It is a world of make believe.
You say the economy has recovered. Most Americans disagree with you and the high unemployment and low growth rates are not consistent with good times.
Obama inherited a bad situation, which he made worse.
I understand that it is both public and private debt. You have to let prices adjust. In 2005, many young families were unable to afford to buy houses. The prices were too high. If you continue to protect those people who already own houses, you will ensure that they never can buy. The prices are too high. Government can help and try to engineer a softer landing, but it cannot create sustainable demand where none exists.
Re the New Deal – economies recover. From 1929-33 the economy was going through the downturn. It would be natural to have some kind of recovery. You need also recall that Hoover did NOT do nothing. He was also highly interventionist.
Re World War II – there was a lot more happening than mere government spending. The government directly employed and trained millions of young men. Nearly half a million were permanently removed from the labor force. Worldwide, we had destruction on an unprecedented level. The rebuilding kept people busy for decades. We don’t have that today.
Another important factor was regimentation. Many progressives welcomed war as a way to regiment society. It works. But at a great cost.
You allude to that fact yourself, when you mention the forced savings.
The war absorbed millions of men and actually created a labor shortage. Almost half a million were killed. It is not an example of successful government employment stimulation.
We might also add that Obama is spending more than we did during World War II even in inflation adjusted dollars and he is closing in on debt as a % of GDP.
Preliminary reports on GDP come out a month after. They’re a guide to what is going on, but they can be different from what actually occured, because not all reports are in. Second reports come in sixty days after, and generally are more accurate. Final Reports, naturally, give the authoritative conclusion.
Obama couldn’t wait another thirty days to start work on it. His people had to design it in light of what they knew at the time.
That, though, was not the only design consideration.
Obama had to pass the stimulus package through a Senate where your people were guaranteeing a filibuster, if it wasn’t all tax cuts. We managed to get three votes on that from your party, to get it past the filibuster.
This, by the way, explains why I have grave doubts as to your story that the filibustering was a response to the Democrats taking policy too far. I think you’ll find that some kind of stimulus package was wanted by the American people at the time.
The contents of the Stimulus package included tax cuts as part of it, rather than being completely spending measures, which studies showed were much, much more effective than tax cuts. But thanks to your filibuster, we not only had to get Republican support, but also, the support of all the conservative Democrats. So, it was made smaller. Political considerations, because of the interference of the Republicans, compromised the attention of the majority to the needs of the people that elected them.
Funny thing, really. To make sure Obama failed, Republicans had to attack programs and initiatives which were aimed at relieving the problems of the average person. Republicans then had to shift all of the focus in Washington from jobs to the deficit.
True, the deficit was bad, but that was because we just got hit by the worst economic crisis in decades. Now Hoover tried to resolve our fiscal problems in the midst of the Great Depression, and not only did he fail, but probably helped make the Depression worse. Even FDR, when he tried to resolve the situation, failed to balance the budget by attempting austerity in the late thirties.
It’s robbing Peter to pay Paul. It’s political posturing in the place of honest wisdom. Why are we cutting aid to the population just when they need it? Why are we putting off the end of what is really a fiscally ruinous economic downturn, rather than getting this country back on its feet?
I know, you’ll push that immature bull**** that I just want to spend recklessly, just thrown money left and right. That’s your way of avoiding the debate, and avoiding any shift of the policy away from Arthur Laffer, and back towards Keynesian economics.
I want what most rational Americans want: a recovery. I don’t want wasteful, inefficient use of the taxpayer’s dollar. I don’t want to bankrupt my own country! Hell, that’s why it puzzles me that Republicans would even risk it by pushing a default.
Why are you doing that? Why are you taking the chance? Why are you insisting on policy the American people don’t want, will not support? If you have to put the nation under such duress to pass your policies, then you’ve lost politically already. The Republican Party of ten years ago had a balanced budget. They didn’t need to slam this country’s fortunes into a brick wall, or threaten to, in order to seek out change.
That party also had some sense of its limits.
Since then, the GOPs become less and less able to reward good judgment and punish bad, to suppress the fringe, and maintain a connection to the American mainstream.
The Republican Party cannot make its fiscal legacy vanish by running the nation’s finances into a brick wall. Find some face-saving way to get get out of this, and start working with Democrats on a practical, long term program for restoring the economy, and returning the budget back to balance.
“We might also add that Obama is spending more than we did during World War II even in inflation adjusted dollars and he is closing in on debt as a % of GDP.”
Please, C&J, the spending and budget deficits were initiated during the Bush administration and are primarily the product of the deep recession. I thought that we cleared that up in another thread. He inherited the last Bush budget (2009) which was the largest deficit budget since WWII.
Now, Obama is responsible for not dramatically cutting those expenditures in the last and current budget years. But that action would have been be counter to the advice of the Federal Reserve Board which advised continued government expenditures in the immediate term due to the economy’s continued need for support.
We have evidence of the results of those countries that taken the austerity route. It has not been very successful. Ireland is a good example since it began austerity very early in the crisis. It just replaced its leadership due to worsening economic conditions and rising unemployment in the country. England has begun to experience negative GDP growth since it initiated its austerity and tax increase policies.
Yeah, the Republicans try to portray it as the tightening our belt, the idea being we’re keeping more of our money, rather than spending it. Except, any spending cuts at this point don’t yield us back any more cash, but do deprive people of critical financial help, and of critical healthcare. People already in debt go further into it, or cease to be viable parts of the workforce.
Not to mention, the failure to invest in our nation’s future, in schools, in infrastructure (internet or otherwise), in getting this country to be a country that exports more, and uses energy that is better and cleaner, and ours to begin with.
For years, we’ve essentially subsidized China’s economic rise at our own expense, and that of the rest of the world. It was great shareholder value for some of the big corporations out there, but it created a massive trade deficit and both a shrinking presence in manufacturing, and a growing brain-drain overall.
Republicans want to go the austerity route. Well, they had better look at the real world results, rather than take up their own marketing as the theoretical outcome. Greece hasn’t recovered, and neither has Ireland. Austerity, they need to understand, is a luxury good in these economic times. It’s what you buy when you can both fulfill a country’s needs, and have something left over to deal with the fiscal problem.
And as long as we’re competing to be second place to China, if that, none of that will matter.
I know this is rather unfair of me to say, but it reflects my feelings. It almost seems like every action the Republicans take is calculated to lay down America’s leadership on just about every level. No more international cooperation, with America at the front. No more competing to make sure America has the best jobs and the best wages. We fought two wars, one pointless, one carried out in a pointless holding pattern for years, rather than concluded. We took the army that had become the envy of the world, that had recovered from Vietnam, and ran it through the wood chipper all over again, just so we could vindicate the stupidest policies of that war. We’ve taken a media that once informed people and kept them apprised of what was really going on, and because it told some uncomfortable truths about the GOP, led a decades long attack on the objectivity and ethics of the press, creating a whole industry of people who flatter the Republican party, but end up misinforming, manipulating, and misleading their viewers and listeners, and worse yet, isolating them from a more reasonable consensus.
And now, it seems the Republicans want to finish the job of ruining us fiscally and financially. Perhaps they think that as long as they win, America will muddle through to triumph and victory.
Only trouble is, their political victories, so far, starting the war in Iraq, keeping Wall Street free of bothersome regulations, even after their worst screw-up in decades, keeping tax rates low, but succeeding in enacting wastefully designed, unfunded Medicare additions, have all come at the expense of the good fortunes of the American people. With more victories from the GOP, why would America need defeats?
America doesn’t need another crisis precipitated by Republican stubbornness.
The problem with conservatives about the deficits is that they fail to acknowledge the issues causing the deficit.
They construct a fantasy world in which the deficit is simply government gone wild with their money. Not a problem, simply cut government largess and re-distribution schemes and everything will be fine. Except, that if the deficits were the result of deep economic problems in the general economy, their analysis may be a prescription for disaster. Its as though the 2008 collapse never occurred. Its as though everything is great in the private sector. Never for a moment giving any thought to the concept that without continued government support, the economy might plunge into a double dip recession. A recent CNN Money article, citing Federal Reserve data, points out that American household balance sheets remain depressed by $7.7 trillion from pre-recession levels. http://money.cnn.com/2011/06/09/news/economy/household_wealth/index.htm
The Ryan budget is a good example of this fantasy economics. It reduces the deficit by “fixing” Medicare. Except that it doesn’t “fix” Medicare unless you think that massive cuts in health care are a “fix.” Sure, it fixes the deficit but doesn’t address the reasons for the need for a fix in the first place (skyrocketing health care inflation).
SD writes; “Austerity, they need to understand, is a luxury good in these economic times. It’s what you buy when you can both fulfill a country’s needs, and have something left over to deal with the fiscal problem.”
That statement really sums up the liberal political philosophy. Living within our means is a luxury? For liberals, there is never a point in which they will say we have “fulfilled the country’s needs.” Interest group liberalism will always find needs to fill. Consequently, there will never be something left to deal with the fiscal problems associated with filling those “needs”. Their mental disordered minds don’t see this as chasing their own tail.
Liberals search out “needs” (which they define as rights), demand government fill those needs, spend taxpayer money, borrow money, or print money to fill those needs. Then, the pen of SD says…some day, we will run out of needs to fill and then, and only then, can we deal with the fiscal problems created by this jaundiced viewpoint.
Conservatives recognize the difference between constitutional rights, and liberal perceived needs. Rights carry no price tag, other than that required to enforce them. Needs are like a blank, signed check. Just fill in the amount as you identify the need and either find someone to pay today in higher taxes or delay payment to some unfortunate future generation.
Living within our means is a luxury?
Let me explain this to you. When you’re in real financial trouble, the priority, of course, is to keep your family fed, to keep a roof over your heads of some kind, to keep the utilities going as far as that is possible.
Is that the time, then, to deal with all kinds of other debts? If you can afford the payments, of course you try, but you deal with your needs first.
America must deal with its needs first. It can’t cease to function as a country to pay its debts off faster, and reduce its deficit. It certainly shouldn’t cut its own throat economically, since that would just defeat the purpose of trying to square things.
Debt is scary, but it can be managed. This nation started its existence indebted, and rather than ram our country into a brick wall, the Framers made arrangements for how to pay it off in good time.
Having this conversation is difficult if you think of me and other Liberals as cartoon characters, as those comic book villains who just do evil because being wicked is such great fun.
The reality is, we have an economic problem that constitutes a major part of the fiscal problem. If we just sit around on our asses, the fiscal problem will continue for years to come, and we’ll have no respite from the economic problems.
You obscure that by pretending that we Democrats are just going to go throwing money around, announcing made up rights and all that hooey. The reality is, though, as long as growth is weak, as long as private enterprise isn’t capable of stepping in and filling in where Government steps away, your austerity not only won’t get anywhere, it will weaken the economy, which really is the stronges reason for our massive deficit.
That is, besides your party’s old policies.
You picked the wrong time to try and prove what bold and callous skinflints the GOP has. Americans need help. They want good paying jobs again. And the last thing they need is some moralizing fools going out there and sinking America’s credit.
Damage America’s credit, and our borrowing, and our nation’s credit system become more expensive, and our economy grinds to a halt. Only this time, the government can’t save anybody, because it can’t afford to borrow. So, we wallow in the consequences for years to come.
American needs its functioning economy more than you need your vindicated ideology. Why don’t you put your country’s good fortunes first?
“You picked the wrong time to try and prove what bold and callous skinflints the GOP has. Americans need help. They want good paying jobs again. And the last thing they need is some moralizing fools going out there and sinking America’s credit.
Damage America’s credit, and our borrowing, and our nation’s credit system become more expensive, and our economy grinds to a halt. Only this time, the government can’t save anybody, because it can’t afford to borrow. So, we wallow in the consequences for years to come.”
Why are you so one sided in your writing. Politicians of both ilk have abused the credit of US. Don’t be a fool and try to say the Republicans are at fault all by themselves. Both parties have for decades done the same thing. The main thing the Democratic Party is today is the portrayal of their party symbol.
Republicans should not try to duck responsibility for their part by pointing to liberals. The deficit exploded under two Republican Presidents, and exploded precisely when each vastly increased military spending and vastly decreased taxes. Each tried a variety of cheap-**** little cuts to offset, but neither came close. Each claimed great economic success, but one was the beneficiary of reduced anti-inflation measures by the federal reserve, and the other the beneficiary of an economic bubble on Wall Street that wiped out more than a decade of economic gains.
Each claimed that their tax policies and spending cut policies created jobs, but Reagan’s economic policies did nothing to stop unemployment from hitting 10.8% at its worse, and staying over 10% for eleven months. His one saving grace was that his recession lasted a shorter time than Obamas, and had an easy resolution: the lowering of interest rates.
Well, interest rates now, thanks to Alan Greenspan and Bush’s policy, were at zero, and the major banks are still crippled by the toxic assets on their balance sheets, and the uncertainties of a market where productivity remains slack below sustainable levels.
Republicans want a natural end to a thoroughly unnatural downturn that occured thanks to a thoroughly unnatural market operation.
America doesn’t need to walk this recession’s consequences off. It needs medicine. It needs treatment. We can start living within our means when we have enouch economic power to afford the strains of austerity.
SD writes; “You obscure that by pretending that we Democrats are just going to go throwing money around, announcing made up rights and all that hooey.”
“hooey”? Please tell us all just what spending our government does to protect “rights” versus “needs”. And, while you are at it, please defend government “needs” spending in the context of our constitution.
I’m not going to chase you around the merry-go-round on your political beliefs.
I believe Constitutional rights are fundamental. I just have a differing interpretation of what they mean. I believe those rights give us the space to make up our own minds and discover the truth for ourselves. This allows us to avoid the fate of some Democracies, where well-meaning and not so well-meaning folks use government’s power to force their opinion and their policies on everybody else, and thereby removing the advantage of adaptivity from our society.
If you’ll notice, though, the Bill of Rights itself says “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”
As for needs? Well regardless of what our rights are, the people of this nation need an economy that works, that remains robust and stable. They need a justice system that justifies the name. They need their interests seen to, and disputes resolved among themselves reasonably.
As of right now, they need the economic crisis to come to an end. The economy is going to be the worst of all drags on any attempt to balance the budget. It will keep people on assistance who could otherwise work and make money. It will idle workers, keep them from paying into the system. It will encourage people to retire early, or go on disability, putting their load on the system earlier. It will prevent the government from gaining more revenue at the same rates, or from raising rates if that’s what’s needed to balance the budget.
About thirty to forty percent of the deficit is purely attributable to the economic downturn, and many of the big spending items you criticize were a response to it.
The sooner we do this, the more deficit spending we save, and the cheaper it is to bring this country back on the track of an appropriate level of productivity.
If you want to remain in these economic doldrums indefinitely, and try to impose your austerity on an economy that trembles at small cuts and tax increases, be my guest. But really, we’re not getting anywhere until the economy functions like it should, and people are back to work, back supporting themselves.
Sounds like a response I would hear from an expert teleprompter reader.
You have ducked the issue. Should I be surprised. Of course not. You are good at that. You continue to want nothing but what the dimorcrats are proposing and that is spend more or do nothing. That is pure and simple idiocy. Why don’t you practice that same procedure in in your finances? It does not work and that is the reason why we have the problem we have today. All you want to say is blame the Republicans and pen some words that are so rhetorical I have to almost have to wipe the vomit off my screen. I really don’t care what your political beliefs are. There are enough differences to go around for everybody. But don’t play this crappy game of we are the only ones who know and do the right thing. That is sick. Politicians are going to continue to agree to do the thing they do best and that is grow the power and spend our money. Until the American people get off their duffs and demand in loud and clear voices that they are going to stop or we the people will kick you out. The trillions of dollars that have been spent is a mockery of sound judgement. A very huge amount of that money went to prop up nothing but the power and ego of sitting congressmen. The list is long and covers both sides of the aisle. You write as if it only covered Republicans. Your nuts if that is what you really believe. Otherwise your penmanship is nothing but rhetorical trash.
When you have a coherent argument that doesn’t depend on insulting me and demeaning my politics, then you can lecture me about rhetorical trash.
Otherwise, what am I to respond to? The millionth invocation of the dreaded Teleprompter? However much you might wish it, Obama is not Bush.
What I want is simple: my nation strong enough to get back on its feet, and the debt reduced by a long-term plan that takes account of the economy’s involvement in fiscal matters. I don’t want another panicked set of forced cuts, made in disregard to their effect of the economy. I actually cited a Goldman Sach’s report on how the state local government’s problems were causing a fiscal drag on the economy.
Republicans are disregarding the notion that doing the same things would cause additional fiscal drag, but again, the folks in the financial sector are predicting pretty much the same effect, only on a larger scale, with one or two points knocked off of growth. Those are points we can’t afford.
But don’t play this crappy game of we are the only ones who know and do the right thing. That is sick.
It’s not sick, it’s exercising my rights as an American. Everybody’s entitled to their opinion, to express their views on what’s best. What’s your problem with that?
The issue here is whether you can support your opinion on something other than your contempt for mine, and its expression.
SD writes; “As for needs? Well regardless of what our rights are, the people of this nation need an economy that works, that remains robust and stable. They need a justice system that justifies the name. They need their interests seen to, and disputes resolved among themselves reasonably.”
Allow me to interpret your statement…”As for needs? Well regardless of what our rights are, the people of this nation need (name the liberal interest here)…”
The word “regardless” means…without regard. Considering that, your comment reads, without regard to our constitutional rights, peoples needs, as defined by you, or government, must be met.
SD, do you really believe this? Do you really believe that perceived “needs” exceed guaranteed “rights”? Can you honestly tell us that our rights are guaranteed only to the the extent that they don’t conflict with, or deny, someones needs? Do my guaranteed rights end when you have a need? Where in the hell did you learn this concept of our guaranteed constitutional rights? Is this what liberalism represents?
“Republicans should not try to duck responsibility for their part by pointing to liberals.”
do see the irony in your statement. maybe you should start with the man in the mirror.
“When you have a coherent argument that doesn’t depend on insulting me and demeaning my politics, then you can lecture me about rhetorical trash.”
“Otherwise, what am I to respond to? The millionth invocation of the dreaded Teleprompter?”
i think you may have struck nerve there tom. LOL!!!
Obama panicked and spent too much. He was able to do that because lots of people also panicked. This is what happened when passions rule.
It didn’t work. All it did was pile up debt. Now you want to pile up even more.
Liberals used to like to quote Einstein saying that the definition of insanity was doing the same thing over and expecting different results.
The economy crashed. Obama applied the wrong remedy. You want to keep telling me that the economy crashed. You are right about that, but the Obama response was wrong.
We cleared up 2009. Yes, in FY 2009 we had the priorities of the Bush budget and the Democratically controlled congress. That fiscal year ended in at the end of September in 2009. It is now almost the forth quarter of 2011. The spending continued and Obama would like to spend even more. If Obama’s plan had worked, we would not be having this discussion. Unemployment never would have reached even 8%, as Obama said, and we would be enjoying Reagan style growth.
The good life that Obama promised is not what we are living today.
They blamed Ronald Reagan for the situation in 1981 and they blamed GW Bush for the slowdown of 2001. Ronald Reagan joked that they called it “Reaganonics” in 1981-2, but by 1983 they had stopped. Why? And why are opponents now wanting to give Obama “credit” for what he has done.
Your parsing indicates that you think the meaning in question would not be self-evident.
I think most people recognized that I was segueing the argument from the discussion of rights to the discussion of needs, and very real needs at that.
I wasn’t saying we should satisfy the needs of the people at the expense of their rights. In fact, in many cases, the fulfillment of their rights and of their needs are one and the same thing. People need the due process of law, but it is also their right, no?
When I use the contents of an argument against somebody, I usually go out of my way to preserve what they originally say, so that my refutation can’t be claimed to be what yours is: a twisting of the meaning of that person’s words.
I like to show that where the other side’s made a bad argument, the flaws are glaring enough as to not need such lawyerly parsing and reinterpretation.
Why? Because interest rates had gone down, and freed up money in the economy. Reagan was also carrying out a Keynesian stimulus by deficit spending on military procurement at high levels. Also, he calmed the investors by raising taxes to prevent an out of control deficit.
Reagans image is at odd with Reagan’s reality. More later.
Whatever Reagan did, it worked better than whatever Obama did. Re interest rates - were they EVER lower under Reagan than they are today under Obama. If that is what it took, Obama would have succeeded. The sames goes for spending. Obama has spend a lot more. If that is what it took, Obama would not have failed. But he did.
Obama promised that things would get much better. He even promised that the seas would stop rising. He collected all his praise up front, which was smart since he got his praise before we knew for sure he didn’t deserve it.
Re Reagan - I voted for Reagan twice. I remember what it was like. Maybe those who only heard about him are the ones who don’t understand him.
“The economy crashed. Obama applied the wrong remedy. You want to keep telling me that the economy crashed. You are right about that, but the Obama response was wrong.”
What exactly is your diagnosis of the problems with the economy and the preferred solution? You have stated in past posts that fiscal stimulus has been ineffective and have agreed that monetary policy of the Fed has been ineffective. The only thing that you agree with was the Bush TARP salvation of Wall Street. So what have they done wrong? What should they be doing?
You also appear to believe that all liberals are in complete agreement with the economic policies of Obama. That is not true. I, for one, feel that the actions of both the Bush and Obama administrations as well as the Fed have been unbalanced in favor of Wall Street at the expense of Main Street. In my opinion, that is a great mistake. The core problem is middle class debt and the resulting drag on the consumer economy. As I posted earlier, the American economy has still not recovered almost $8 trillion dollars of equity lost in the 2008 crash. Most of those losses are concentrated in the middle class (housing equity). Our economy will not grow until that problem is resolved. We saved the balance sheets of the investor class but let the balance sheets of the engine of the economy, the consumer, flounder.
Reagan had a shallower recession to pull his country out of, with an easily resolveable cause: high interests rates. Reagan could free up capital, and eventually did. Obama’s looking at corporations that are overloaded with capital, banks flush with money, but nobody lends because the businesses don’t make money, and nobody makes money because the average American can no longer afford to be the customer, the homebuyer, the vacation-taker or whatever else.
Meanwhile, Obama’s having to deal with the near failure of the main financial institutions. He’s having to find other ways to stimulate the economy, despite a Republican Congressional delegation that won’t let him do anything else but apply supply side tax cutting theory.
I lived through Reagans years in office. I remember a time of great patriotism, but also a time where my family repeatedly took the brunt of booms and busts, and the consequences of a serious healthcare crisis of our own.
I also remember the instability of the markets, and that colors my view of Wall Street. In my lifetime, they’ve had repeated opportunities to police themselves sucessfully, and failed. So, I don’t trust them. I think people will cheat if you give them the legal leeway, and cheating distorts the markets.
Reagan offered a dream, a new way to do things. But time has put his vision to the test repeatedly, and found it wanting.
Bush gave the theory the best ten years it ever had to prove itself, and it failed. America’s economy only got more unstable.
“I lived through Reagans years in office. I remember a time of great patriotism, but also a time where my family repeatedly took the brunt of booms and busts, and the consequences of a serious healthcare crisis of our own.”
you were @ 10 years old when he left office. your memories of reagan are those of a young child. your memories of reagan are no more accurate than mine of kennedy, or johnson. i sure remember waiting in line for gas during the carter years tthough.
I can remember Halabja from when it happened. I was aware enough of events to know that junk bonds were part of the 1987 crash. My memories of what happened to my family during that time, though, are what’s important. We’re the part of the middle class that has taken the brunt of all these shifts in risk and fortune.
I would like to say that it was all a wonderful time, but it just seems like as time has worn on, the fortunes of people like us have become increasingly strained, and that’s no way to run a country.
As for teleprompters, My annoyance is that I’ve seen the guy work off teleprompter, and though his delivery isn’t as fluent, he demonstrates intelligence way beyond our former Commander in Chief.
It’s a nice racket the Republicans have. First they do their absolute best to get in the way of anything Obama and the Democrats do, then they hold them accountable for having failed to do so much. Democrats were willing to work with Bush and negotiate with him for the good of the country. We won simply based on the extremity of his failures.
But the Republicans aren’t willing to change anything, despite the obvious failure of their policies, and they’re not willing to let Democrats develop a policy of their own. See, this is where we get into trouble with the post hoc propter hoc argument that blames Obama for everything that came after his inauguration. Obama’s responsible for some things, but Republicans have done their best to clog up Congress for most of the Democrat’s agenda, and not let any kind of reform come through unscathed, undiluted. They won’t let the policies that helped cause the Gulf Blowout be revised. No, instead, they back the oil companies in their rush to get back to business as usual. Same with the economic crisis. No regulation of derivatives, just back to business as usual.
The question is, can we afford another failure of the markets, or failure of industrial and environmental safety on that level?
We should be learning from the mistakes of the Bush Administration, not repeating them. But Republicans in Congress won’t let anything else but that happen, and I fear for my country’s fortunes as a result.
We cannot continue on just blindly rushing back to business as usual when these big systemic failures occur. America cannot afford to make these kinds of mistakes indefinitely, and still remain a great power.
Re Reagan - I voted for Reagan twice. I remember what it was like. Maybe those who only heard about him are the ones who don’t understand him.
Posted by: C&J at June 13, 2011 09:05 PM
My first presidential vote was for Jack Kennedy. I also voted for Reagan…twice. Beyond dealing with the economic trouble and malaise that was afflicting our nation, Reagan gave us confidence in ourselves. He exuded confidence in domestic and foreign affairs. And, it wasn’t some false bravado born of privilege, academic honor, or heroic status. His confidence came from knowing well the American people. He drew his strength from spending years talking with all kinds of Americans.
Ronald Reagan was an honorable man, a moral man, a man filled up with good character. Friends and foes alike understood that what he said came from his heart and mind. Ronald Reagan understood our democratic republic and from where we drew our tremendous strength and vitality.
I slept well at night when he was in charge and drew confidence and courage from this great man…Ronald Reagan.
“I can remember Halabja from when it happened. I was aware enough of events to know that junk bonds were part of the 1987 crash.”
and i can remember vietnam, and seeing the nightly news footage, but 1969 i was 7, and to say i really had a complexed understanding of what was going on would be a complete exageration. at 8 stephen i doubt very seriously you had grasp as to what was happening, other than what you heard the adults in your life talking about, or what you saw on TV. the truth is that our childhood memories are very seldom an accurate reflection of times and events. they are based more on emotion, than critical thinking based on the facts.
“We’re the part of the middle class that has taken the brunt of all these shifts in risk and fortune.”
so were we, and i don’t see things that way.
“I would like to say that it was all a wonderful time, but it just seems like as time has worn on, the fortunes of people like us have become increasingly strained, and that’s no way to run a country.”
your life is what you make of it. to blame others for your circumstances is wrong. in life there are NO equal opportunities, or outcomes. only the opportunity to apply yourself so as to be the best YOU can be. when i was small my father sold cars. he had no college education. as i grew he was seldom around. he worked six days a week, and was always out of town on business. he worked hard, and took risks, and by the age of 53 was a multi-millionaire. he spent the best years of his life working to make his dreams a reality, and when he was knocked down, he got back up without bitching pointing fingers, or making excuses, and got back to work. he died of cancer at the age of 64, and never bitched about how unfair it was he worked so hard, and had little time to enjoy it. he spent his life making every day count.
you’re 32 years old stephen. you can go out and do what it takes to make your dreams reality, or you can continue bitching, and blaming others for how unfair you feel life is. the choice is yours. what will you choose? to continue on your path, and force your brand of social justice through force of gov’t to punish those eveil rich people, or focus on what you want your life to be and make a pact to succeed come hell or high water.
“but Republicans have done their best to clog up Congress for most of the Democrat’s agenda, and not let any kind of reform come through unscathed, undiluted.”
oh c’mon, when have democrats ever not tried to dilute or amend republican bills to make more to thier liking?
Reagan’s myth seems more powerful in the Republican’s mind than his reality. They emphasize his confrontation of the Soviets, but forget his diplomacy. They emphasize the success of his tax cuts, and forget that it took almost three years after his tax cut, an eleven month period where unemployment was over 10.0% included, before his economy broke even on jobs.
He said he would reduce the debt, but it skyrocketed under him. Investors weren’t spurred by Reagan’s deficit spending, but scared by it, and the message they sent was enough to get him to pass several major tax hikes, which most Republicans conveniently forget.
Ah, but you have your warm and fuzzy myth to wrap around you, don’t you?
at 8 stephen i doubt very seriously you had grasp as to what was happening, other than what you heard the adults in your life talking about, or what you saw on TV.
I didn’t have a sophisticated adult’s understanding of it, but I certainly knew more than my peers about it. I could probably name the different countries on the globe, and had a decent understanding of what was happening with the Soviet bloc for a kid of my age. When I heard kids couldn’t do things like locate Mexico on a map, I remember thinking “what are you talking about? It’s right there!”
And really, nobody has to teach you about what happens when your dad loses his job, or when he has a heart attack, and only gets minimal care after that.
As for my grasp of financial events, I probably didn’t understand it all, but at the very least I wasn’t utterly ignorant of what was going on. I mean, you should be impressed that I have first hand memory of reports of the 1987 stock market crash. How many kids knew about that at my age, at that time?
I remember being a regular watcher of the news, both the NewsHour (which I remember from the time that it was the MacNeil-Lehrer NewsHour, of the Nightly Business Report. I remember hearing news reports of Chernobyl, and later seeing a National Geographic magazine about its entombment.
I certainly read a lot of National Geographics, which my brother got from my Grandfather. I learned about ancient cultures, about foreign cultures, natural wonders, and scientific curiosities of all types.
So, I think you might be underestimating how well I understood things at that point. At the very least, I had the groundwork for understanding much of the rest of what I would learn about through the rest of my life.
As far as difficulties in life go?
What I learned is that it was always going to be a combination of external circumstances and internal will to succeed. Even though we can’t force people to do their best, we can certainly prevent and withhold burdens that unnecessarily hinder their success.
I’m working hard right now to make my dreams a reality, but I have to do so from a position that complicates my ability to move on from where I am right now. I came very close to becoming another victim of the economic downturn.
I want us to get our heads out of our butts about this economy. It’s not natural. It’s not healing well on its own.
As for Republicans and their hindrance? Four Fifths of the Democratic agenda was simply stonewalled, prevented from getting an up or down vote, and the rest often had to be reformulated so that every Democrat, and sometimes even a few Republicans, would be willing to vote for it. I really doubt that’s what Americans had in mind when they voted in 2008.
There’s changes and amendments, and then there’s flat out obstruction, and the Republican’s records as a minority, that is their record-breaking obstruction, are plain about which one they did.
If Republicans don’t let Democrats change the policies, and the Republican’s policies are a big part of what voters have to react to, then are voters really objecting to what the Democrats offer, or what Republicans are keeping instead?
“Even though we can’t force people to do their best, we can certainly prevent and withhold burdens that unnecessarily hinder their success.”
how so? i’m not sure what you mean by this.
“I came very close to becoming another victim of the economic downturn.”
i was early on. it hasn’t stopped me from moving on. i went from 16 years of self employment to punching a timeclock, and making a whole less than i used to. to add insult to injury my jobs revolves around the auto industry in central ohio, and my hours have been cut in half because a shortage of parts. i could have taken a voluntary lay off and been a whole lot better off. ie, sit on my ass and collect more on unemployment, but i didn’t. my work ethic and belief that it’s wrong to shift my burden to others even though it would be easier, would be irresponsible and selfish. there are to many who refuse act simply because it is easier, and more financially beneficial not to. it’s one thing to not be able to get a job period. it’s whole different one when you won’t take one because it’s doing something that pays a lot less, or you feel is beneath your dignity. if you were an engineer and have to clean toilets for a while then that’s what you have to do. more peolpe have to take responsibility for thier own well being, and stop pushing the burden off on others because they feel entitled.
SD writes; “Ah, but you have your warm and fuzzy myth to wrap around you, don’t you?”
Good Grief man, why in the world would you call my memories of Reagan myth? One can not live in or through a myth. SD can only comment on the liberal view today, and his childish memories, of this historic presidency. For SD, it appears he can only measure success in dollars. It is rare to read a comment by him that doesn’t involve government spending being the impetus for action. He is measuring o’bama in the same fashion. When o’bama and the dems spend, they are heralded as great leaders. He has no other barometer to measure success.
I talked about the ability of Reagan to inspire confidence in ourselves, individually, and in America the nation which was desperately necessary after the Carter administration. No one, not even you as an adult now, or a child then, can deny with any believability, that Reagan lifted this country to new levels of confidence and achievement.
I should add this to my comment above. Being born in 1940, I have no direct memory of FDR. My parents and the adults of my youth did have memories of FDR and they were most impressed by his attitude, his ability to lift their spirits and to give them courage to sacrifice, endure and succeed through very, very tough times. It wasn’t FDR’s programs that were remembered so fondly, but instead, his ability, as a great leader, to make the folks what to follow, with confidence, what he proposed.
In many ways, JFK had much the same ability. He could inspire folks to do their best, and in doing so, create better lives for themselves and the nation.
I place Ronald Reagan in this same category of great leaders…not because of their politics, but because they could lead and inspire.
o’bama is not qualified to be in the same room as these great men if the qualification for being in that room is leadership.
SD and his dem/lib friends have a robot instead of a leader. o’bama inspires no one to aspire to anything beyond getting something for nothing. Who, besides those being paid to do so, would lay down their life for o’bama?
Millions of Americans would have taken a bullet intended for FDR, JFK, or Ronald Reagan to ensure their survival.
I think that the economy has to go through the rough patch. Governments, firms and people worldwide overspent and created a bubble. It has to adjust.
The Fed did the right thing by pouring in liquidity. This probably prevented the 1929 style crash, which itself was exacerbated by the Fed not putting enough money into the system. The government could (and did) the needed task of defending the financial system.
Obama’s stimulus was just wrong. Obama himself has no understanding of business or economics. He had some smart advisers, but they evidently put hope over experience. Maybe more cynically, they played politics, believing that the economy would improve and they could get credit. They lost that bet.
Now emperor Obama has no clothes and everybody can see his shortcomings. By 2012 the country will be ready for some competence and President Romney will supply it.
You still haven’t answered the question as to what you think is the problem with the economy and what should be done about it.
reagan was a great man. in 2004 i was working for the LA county flood control district in simi valley. it was the day reagans funeral procession was scheduled. my dumptruck was loaded and i headed towards the freeway. as i approached the overpass there were fire trucks with banners saluting RR and people lined up to see it pass. i passed over the bridge turned left on the the on ramp, and stopped. i was lucky enough to catch glimpse of his funeral procession as it passed by. it’s day i will always remeber.
here is one of his memorable quotes.
“A recession is when your neighbor loses his job. A depression is when you lose yours. And recovery is when Jimmy Carter loses his.”
here’s my version
A recession is when your neighbor loses his job. A depression is when you lose yours. And recovery is when Barack Obama loses his.
Seriously, there is a need for both sides to move this discussion beyond Romney is smarter that Obama or vice versa.
Thus far, Mit Romney has said very little about what he would actually do now to stimulate the economy. He has spent his time criticizing Obama in very general terms and frequently inaccurately. But, we have his 2008 campaign proposals, his book and his prior statements. Surprisingly, there is not a huge difference between them. Target relief for the middle class and create small business incentives, e.g., capital purchase credit. http://nationaljournal.com/economy/romney-vs-romney-the-economic-critique-20110602?page=1
The problem with the economy was over spending and over borrowing.
The solution is to allow things to come back into balance, where supply meet demand. Prices of houses, for example, need to drop back down.
What should government do? Protect the integrity of the financial system and supply liquidity. Build infrastructure and manage competently. Otherwise, just let it go. Nothing Obama has done beyond the initial propping up of the financial system, which was more Bush than Obama, did any lasting good. In fact, the Obama stimulus is what is making this recovery so slow.
Government does not have the tools to create prosperity. All it can do is help create conditions where the people can create prosperity. It does not have the capacity to fight recessions.
Obama’s idea of shovel ready projects sounded good. Unfortunately, the government permitting process made shovel ready impossible, as Obama himself admitted. Maybe government could make the bureaucracy and regulations less onerous.
The worst unemployment ever got under Carter was 7.8% In Reagan’s first term, Unemployment was worse than that from October of 1981 to March of 1984. Reagan had snappy rhetoric, but it was empty rhetoric. He took a 2.7% recession and made it’s effect on the job market worse than what hit us with the 4.1% recession Obama had dumped in his lap.
Anybody who thinks Obama’s approach was less successful than Reagans should just take that fact into account.
On the subject of taking jobs, if youv’e got tens of thousands of dollars in student loans, you can’t afford to take that job without destroying your credit. Besides, if you’re out of the game for long enough, all that expensive education becomes worthless.
We can’t afford to let the economy recover on its own.
The government must get behind pro-growth policies. Not tax cuts, not deregulation- that’s what killed growth and sent us screaming into a recession. No, what we need is to rebuild our nation’s ability to build real things, and stop giving people incentives to be middlemen and con artists. We have to stop fooling ourselves that our nation can lead the economies of the world if it makes nothing and sells nothing of its own
Reagan wasn’t a bad President. He at least had some of the common sense that his spiritual successor lacked. But his methods for stimulating the economy mostly failed, and he ended up contradicting much of that in later policy. He raised taxes more times than he lowered them.
As for my childish memories? I loved Reagan as a child! It’s through the lens of adulthood that I began to see the flaws in his presidency.
As for my measurements? I measure things in all kinds of ways. I mean, even if his great effect was to play the confidence fairy, we ought to have seen such effects early on, when he had so much confidence to morning-in-America into our heads. Instead, we see a steep collapse in the GDP and a steep, long-lasting rise in unemployment. Note my numbers above if you need evidence.
The President isn’t there to be a cheerleader, he’s there to make decisions. His most needed leadership is in policy. Yes, sometimes people need inspiration, but if that inspiration is to have any long lasting effect, it must have more on its side than people looking over a scenic vista with a serene look on their faces.
Reagan gave soaring rhetoric, but what is rhetoric gave, his policies took away.
SD and his dem/lib friends have a robot instead of a leader. o’bama inspires no one to aspire to anything beyond getting something for nothing. Who, besides those being paid to do so, would lay down their life for o’bama?
More empty rhetoric. Obama doesn’t just talk about jobs, he creates and saves them through direct action, and has proved better at it than Bush ever was. Ah, but Obama must be a failure for your side to win, because your side doesn’t have the competence to leverage things the other way.
I’m sorry, the economy did improve. Your side’s just been working furiously to make sure he couldn’t do more of the same.
Japan had a similar crisis, with others who decided a recession was the time to be fiscaly prudent. Rather than actually resolve their problem, they lost an entire decade to it.
We don’t need more of the Republicans trying to force their failed solutions on us.
I got two phrases for you on Texas: Highways, and shovel-ready.
“BTW - 37% of all the jobs created since Obama took office were created in Texas. Maybe whatever Texas is doing is smarter than whatever Obama is doing.”
The answer is not so much what they are doing recently but rather what they did in the past.
Texas is doing well because it didn’t have a huge housing bubble to begin with. Texas avoided the bubble and crash because it had sensible regulations governing mortgage lending. After it was hit hard by the last major real estate bubble in the 80s, it became a nanny state imposing consumer protection and lending standards that protected both parties in the long run. http://blogs.wsj.com/developments/2010/04/06/did-consumer-protection-laws-prevent-texas-housing-bubble/
Ironic, isn’t it? Government regulation preventing a crash and protecting the consumer and the economy. Texas has fared well not because it took a laissez-faire approach to mortgage financing but because it took just the opposite approach.
There are other issues, of course. Texas is the gateway for trade with Mexico under NAFTA. It has a huge immigrant population providing a large and cheap labor force. But, the avoidance of the housing bubble through strong regulation was the key factor in avoiding the worst of the Great Recession.
Whatever Texas did/does maybe we should extend those policies to the rest of the U.S.
It doesn’t seem like Obama wants to use Texas as the model. As the article says “Texas has no state income tax. Its regulatory conditions are contained and flexible. It is fiscally responsible and government is small. Its right-to-work law doesn’t impose unions on businesses or employees.” They also have enacted tort reform. Let’s hope such things spread, but they don’t seem very Obama-like.
Texas and Florida are comparable on the issues of state income tax (none), Homestead provisions (debtor shelters), right to work laws, tort reform, conservative governance, etc. However, Florida is a basket case due to the housing bubble collapse. Texas, on the other hand is not. What’s the difference? Strong consumer regulatory and mortgage lending protections. Perhaps a simple accident of history. Texas having experienced an economic debacle from the 80s real estate collapse made adjustments in mortgage lending regulations. Others did not and paid the price this time. By the way, Texas was a strong Democratic state when the regulations were passed.
Contrary to your assertion that Texas doesn’t seem very Obama like, when it comes to mortgage lending regulation, it actually seems highly progressive. It’s limitation of mortgage and equity loans to not more than 80% of value and prohibitions on using equity loans for payment of other debts stopped the worse mortgage predatory practices of the 2000s in their tracks and limited the practice of using home equity as a piggy bank for consumer funding. It is the type of consumer protections that progressives were crying for in the 2000s and which have been consistently opposed by free market conservatives even today.
Of course, before you go lavishing the praise on my home state, you should remember that, despite having a Republican Governor and Republican legislature for almost all of the last decade, it’s got a massive budget shortfall that’s comparable to California, and is right now slashing its public services and education system to ribbons trying to make up for it.
While it avoided the worst of the real estate bubble, and its energy sector connections helped keep it going during much of the great recession, it’s system of taxation is still based on property taxes, and those evaluations have gone down in recent times.
So, before you go praising the Texas model, take another look, and acknowledge what’s not working out so well.
SD spins his fairy-tale by writing…”Reagan had snappy rhetoric, but it was empty rhetoric. He took a 2.7% recession and made it’s effect on the job market worse than what hit us with the 4.1% recession Obama had dumped in his lap.”
Reagan combined four economic policies that resulted in the most successful economic experiment in world history. The Reagan recovery started in official records in November 1982, and lasted 92 months without a recession until July 1990, when the tax increases of the 1990 budget deal killed it. This set a new record for the longest peacetime expansion ever, the previous high in peacetime being 58 months.
Those four economic policies were:
1) Cut tax rates.
2) Spending reductions.
3) Anti-inflation monetary policy.
When President Reagan entered office in 1981, he faced actually much worse economic problems than President Obama faced in 2009. Three worsening recessions starting in 1969 were about to culminate in the worst of all in 1981-1982, with unemployment soaring into double digits at a peak of 10.8%. At the same time America suffered roaring double-digit inflation, with the CPI registering at 11.3% in 1979 and 13.5% in 1980 (25% in two years). The Washington establishment at the time argued that this inflation was now endemic to the American economy, and could not be stopped, at least not without a calamitous economic collapse.
All of the above was accompanied by double-digit interest rates, with the prime rate peaking at 21.5% in 1980. The poverty rate started increasing in 1978, eventually climbing by an astounding 33%, from 11.4% to 15.2%. A fall in real median family income that began in 1978 snowballed to a decline of almost 10% by 1982. In addition, from 1968 to 1982, the Dow Jones industrial average lost 70% of its real value, reflecting an overall collapse of stocks.
During this seven-year recovery under Reagan, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, the third-largest in the world at the time, to the U.S. economy. In 1984 alone real economic growth boomed by 6.8%, the highest in 50 years. Nearly 20 million new jobs were created during the recovery, increasing U.S. civilian employment by almost 20%. Unemployment fell to 5.3% by 1989
Real per-capita disposable income increased by 18% from 1982 to 1989, meaning the American standard of living increased by almost 20% in just seven years. The poverty rate declined every year from 1984 to 1989, dropping by one-sixth from its peak. The stock market more than tripled in value from 1980 to 1990, a larger increase than in any previous decade.
The twenty-five year boom, from 1982 thru 2007 was the greatest period of wealth creation in the history of the planet. In 1980, the net worth–assets minus liabilities–of all U.S. households and business … was $25 trillion in today’s dollars. By 2007, … net worth was just shy of $57 trillion. Adjusting for inflation, more wealth was created in America in the twenty-five year boom than in the previous two hundred years.
In contrast, the o’bama insists upon doing the exact opposite of the Reagan policies that were so successful. o’bama calls for increasing income taxes, capital gains taxes, death taxes and medicare payroll taxes.
Instead of reducing spending, o’bama’s first act was a nearly $1 trillion stimulus bill. In his first two years in office he has already increased federal spending by 28%, and his 2012 budget proposes to increase federal spending by another 57% by 2021.”
His monetary policy is just the opposite as well. Instead of restraining the money supply to match money demand for a stable dollar, slaying an historic inflation, we have QE1 and QE2 and a steadily collapsing dollar, arguably creating a historic reflation.
And instead of deregulation we have across-the-board re-regulation, from health care to finance to energy, and elsewhere. While Reagan used to say that his energy policy was to “unleash the private sector,” Obama’s energy policy can be described as precisely to leash the private sector in service to Obama’s central planning “green energy” dictates.
o’bama is fond of saying that this recession is the worst economy since the Great Depression. What he should recognize is that this is the worst recovery since the Great Depression.
The greatest time of economic growth coincides with the greatest amount of debt accumulated by a peoples in history.
Reagan $1,692 trillion
Bush 1 $1,587 trillion
Clinton $1,540 trillion
Bush 2 $4,887 trillion
Obama $1,573 trillion projected first term.
The consumer debt accumulated during that period dwarfs the national debt by an extremely large amount.
Conclusion, the lions share of the wealth created went to the wealthy, with the bankers leading the pack.
Nice legend. Too bad fact lets it down.
Let’s take tax policy first. Reagan cut taxes, sure enough, lowering the top rate over his time from 70% down to 28%.
Then he ended up raising taxes several time, cancelling out much of his tax cuts.
The first bill to do this was enacted in 1982, the second in 1984, and according to one of the article’s source, “constituted the biggest tax increase ever enacted during peacetime”.
Sorry to burst your bubble. Clinton then raised taxes again, and instead of the economy immolating itself from that, it went on to add 23 million jobs, even while Clinton reduced the budget deficit. Economic growth under him was considerable, too.
As for spending cuts? Reagan grew government more than Clinton did. He just grew it in a place you have a blind spot for: Defense. The numbers still add up the same, and so do the deficits.
I just have to wonder how it is we get sixteen combined years of Republican deficits, and that’s alright, but you hand off a record deficit to Obama, then criticize him for employing emergency spending measures in the face of the worst economic crises we’ve had since the Greatest Generation. Your party has delusions of grandeur on fiscal matters that are not born out by your actual numbers.
As for that anti-inflation monetary policy? He basically continued Carter and Paul Volcker’s policy, so whatever’s so special about it escapes me. It was more the end of those high interest rates, and the rebound that caused that raised fortunes for America. Kind of cute and clever of you to measure standards of living from the bottom of that recession, where 10.8 percent unemployment reigned, and the GDP was 2.7% lower than when we started out.
But let’s not stop there. You need to be honest with our readers on what the fiscal and inflationary results of Reagan’s fiscal policy were, and how that contributed to the 1990’s recession. You don’t get something for nothing. You don’t triple the national debt and post record deficits, then not see an increase in inflation under most circumstances.
As for Deregulation? Reagan doesn’t take the credit or the blame alone, but the S&L crisis and the 1987 crisis were reflective of a wild west mentality that valued speculation, both in real estate and on Wall Street, that never really stopped putting our nation’s economy at risk since then.
I mean, you get all kinds of myths pushing deregulation from the right, but a critical examination reveals different realities. Rates go up, not down when utilities are deregulated. Gas prices when up, not down when we deregulated commodity markets that dealt with energy. Left to a market where all kinds of chicanery was possible, home prices did not reach an equilibrium that represented their true market value, nor have they still.
Many people assume that mergers make companies stronger, but in reality, the reason Wall Street pushed so many mergers was that corporate bonds would have their credit rating reduced to junk status, due to the debt it took to buy their competitors or their new subsidiary.
Of course, the other issue was that being bigger both made the markets less robust, the company’s more bureaucratic, and the prices they charged for their products and/or services higher.
But of course, you can’t say that, and get the regulatory changes needed to be able to engage in all that BS.
As for the energy sector? Look at those gas prices. Those were being charged in the Bush Administration, and for much the same reason: speculators now constitute the owners of seven out of ten contracts for energy commodities. They’re making their money playing with the prices, distorting the market from what supply and demand would naturally set the price at.
Derivatives are a tool that can, when regulated properly, smooth out the chaos in the curves, moderating the shifts in prices. But when not moderated, they can create huge swings in price that entirely miss the proper value.
Overall, what we have here is a difference between the promised results of Republican and conservative fiscal and financial policies, and their delivered results.
We’ve tried our best to make Reagan’s vision work. It hasn’t.
What Reagan said he would do and what he actually did are not necessarily the same. It is hard to argue with a myth. http://mises.org/daily/1544
We’ve tried our best to make Reagan’s vision work. It hasn’t.
Posted by: Stephen Daugherty at June 15, 2011
All the contorted statistics, all the implausible deniability, all the anger, hatred and outright lies about Reagan will not change one fact that I posted.
This is not the worst recession since the Great Depression, but is, the weakest recovery since then. And, if it continues, which is likely, the o’bama and more dem/lib congress-persons are history.
Re Texas - nothing is perfect. I think the inability to recognize this and make reasonable distinctions is one of the liberal pathologies. You guys are good at criticizing and imagining perfection. You never get there. The country never gets there. It cannot.
This would be okay, except that it makes you guys advocate all sorts of dumb policies that expand government and end up costing us money and liberty.
Maybe you know the term “luddite”. It describes those benighted folks that dislike innovation since they think it will cost jobs. They really do not understand how things work and call productivity gains “job killers”. Such people are common in backward countries and they are a big reason such countries stay backward.
Luddites have raged against technology for centuries, always claiming that it cost jobs. They are right in that it costs low skilled jobs, but it created lots of other, usually better ones.
The Obama/Luddite position is that there is only so much and that we have to make sure we spread it around. They do not understand science or innovation. That is why it is silly.
Obamacare did not address costs. That was the BIG part of the problem and he simply ignored it or avoided the real choices.
Luddite? Please! Obama was hardly advocating such a position. He wasn’t knocking productivity advances or technological development. He was simply pointing out that a consequence of technological progress in a particular area is a reduction for the need for human labor with a resulting loss of jobs in that area. That will require a process of re-training for those workers. In general, he was explicitly advocating employment and educational programs aimed at preparing US workers for tomorrows jobs.
If anything, Obama’s statement was the antithesis of a Luddite position. It recognizes that technological advances are a part of our economic development. It recognizes that job training and preparation for those technological advances are necessary if the US workforce is to remain competitive and workers are to find future employment in a changing technological world.
The only way you could interpret Obama’s statement on ATMs and bank tellers as a Luddite position is to not read the entire statement and make an unjustified assumption that Obama thinks that technological advances are bad for our society because it reduces jobs. Alternatively, perhaps Obama can actually walk and chew gum at the same time. Perhaps he can actually recognize that something can be good for the overall society but bad for a smaller segment of society that is negatively effected, such as with job losses. Perhaps he can recognize that it would be advisable to change our job training to accommodate a rapidly changing technological environment in order to minimize the negative long term unemployment resulting from such advances. Perhaps, he was talking about preparing America’s work force for the future.
ATMs have been around for forty years. Did Obama just notice them?
ATMs aren’t bad for any segment of society. It is silly to have a job that doesn’t need to be done and/or nobody wants to pay for.
Why ATMs? What difference. He could have used the steam shovel to describe the phenomena. He could have used robots on the auto assembly line. His point was simple. Technology displaces human labor. The labor force must adjust with new skills to accommodate the displacement and to provide a labor market with the necessary skills for capital to take advantage of technological advances.
You might legitimately criticize Obama’s promotion of government programs for training and re-training of labor. For targeting certain skill development, etc. However, that is an entirely different than saying he was taking a Luddite, anti-technology approach. In my opinion, he was only advocating an approach taken by countries such as Germany that have heavily invested in labor skill development and adjustment.
His point was dumb, childish. Does he think that he is the first person to figure this out? Does he think that technology has jumped so much in the last two years that it completely swamped his so-called job creation? Does he wish to return to the bad old days?
The man is not thinking in 21st Century terms.
Talk about childish. To ignore the issue and attempt to characterize Obama as a Luddite is truly childish. Advances in technology have had an accelerating impact on jobs, not only in the US but worldwide. The increasing length and depth of jobless recoveries in recent recessions should be of concern for anybody truly interested in our economy. It is not only unemployment that is of concern but the fact that productivity is outstripping demand world wide. It was a major factor in the chronic unemployment of the Great Depression despite recovering GDP and is present in today’s deep recession.
So should we slow productivity in order to protect the old jobs? I understand Obama’s point, but it is silly. What scares me is that some people think it is not silly.
I used to work in a union shop. We purposely were less productive in order to preserve jobs. This seems like a workable idea in the 1970s, but it contributed to the destruction of jobs and the collapse of whole industries.
The President should not revisit these old ideas.
Re luddite - the fear that productivity is outstripping demand and “destroying jobs” is the essence of ludditism. This fear is centuries old. When do you stop the progress? Ned Ludd attacked simple textile machines. Would life be better with 18th Century technologies? There would be lots more unskilled jobs available.
BTW - I like to do things online, instead of waiting in long lines. I don’t care if it “cost jobs”. The efficiency allows us all to do more important things and in creates better jobs.
Lets get something straight. Nobody is advocating slowing down technological advances to save old jobs.
However, it would be equally silly to ignore the problems created by technological productivity advances. It is not just the elimination of jobs but the the fact that almost all the savings from productivity advances have been realized by capital with almost none going to labor. That has contributed to stagnation in middle class wages and an accelerating wealth gap. Ultimately, it is penny wise and pound foolish. In a consumer oriented economy, starving the consumer base is not going to work in the long run. In my mind, Henry Ford had it right. Good wages support the demand necessary to consume the increased output afforded by productivity advances. Capital and labor have a yoked relationship.
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