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If It Worked, There Might Be A Point.

It hasn’t, so there isn’t. I know the Conservatives continue to want to make this work, but the desire to make such approaches were does not equal the ability. If it did, Greece and Ireland would be on their way to recovery, instead of facing double digit unemployment for the long term.

I don't think many Republicans appreciate the pickle we're in. I don't think many want to. Trouble with this is that they build their self-ascribed reputation for fiscal success on Reagan, failing to remember that he both increased taxes and actually raised spending, especially deficit spending. Debt increased precipitously. It's like Republicans are running on a treadmill of fiscal insanity, with their solution, every time, being to repeat the mistake that got them in this mess in the first place.

It makes political sense to blame the Democrats for this, but only because they've spent decades ingraining the idea in people's heads, to the point that many people actually believe the insane idea that Democrats actually want to bankrupt the country.

Fact is, we took a real bad hit in 2008, worse even than the 1937 recession, which, by the way, occured after FDR attempted austerity.

It isn't that paying down your debts is a bad thing, any more than, say, respecting the sanctity of life is a bad thing. But there are times respecting the sanctity of life isn't a good thing (like when you're fighting as a soldier), and times when austerity is a terrible idea.

You must keep in mind what austerity is: a policy by the government which diverts money from doing other things in the economy, towards resolving our debts. Whether it's added taxation that drains money from an economy, or reduced spending, which take current revenues and diverts them more towards paying off debt, you are deliberately decreasing other economic activities in order to pay down debt.

When it works, it's usually during a strong economy, and revenues- well, let's not be coy- taxes are involved as well. In a strong economy, private industry can make up the difference in jobs and investment. In a weak one, though, we don't have that buffer. We're cutting muscle, maybe even bone.

The question should be, if we're reducing growth in the economy, do we have the excess growth to spare? Are we killing growth for the sake of the confidence of those who are going to look at our weak economy and disparage it anyways?

The stimulus worked, but it didn't correspond to the Republican's notion of what worked, so it had to be declared a failure. And they didn't even wait half a year to start.

If Republicans had already decided it wasn't going to work, if they didn't even wait for the effects to begin in earnest, then what point is there to respecting their point of view here? Results don't figure into it. That's whether we're talking about the failure of a decades worth of tax stimulus, mainly aimed at the upper class, to create jobs, the failure of the Reagan and Bush tax cuts to create economic booms, much less booms in revenue, or the success of the stimulus in creating growth, raising or maintaining employment and breaking the back of the recession.

Getting back to Reagan, we have to recall that with a 2.7% drop in GDP, Reagan's unemployment peaked at 10.8%, with almost a full year of 10.0%+ unemployment. That's right, his policies made things even worse for the average American than Obama's policies ever let them get, and this descent from around 7.7% unemployment to 10.8% happened entirely within the Reagan Administration (It didn't get a running start before, like the situation Obama faced.)

With a 4.1% drop in GDP, the Great Recession caused worse economic damage, crippling the banks and sucking wealth out of the economy in a way that was not as easily reversible as the Interest rates that Reagan had Volcker keep high. Where Volcker, and subsequently Greenspan could ease more money back into the system, get people taking out mortgages and buying financed products again, Obama's faced... well, he's faced with a society overloaded with debt that can't borrow buy, or pay back as well as it could. The pent-up demand that should fuel an economic recovery isn't there.

The states all face that as well. Now the Republicans claim that their cuts will stimulate the economy, but, if you look at the results, they've done the opposite. Should this be surprising?

No. Reduce taxes, and the arithmetic alone predicts the result of a drop in revenue. The results of one tax cut after another have not been the promised rise in revenues, but the expected drop in revenues. It happened with Reagan, who then had to respond with tax hikes the next year, some of the largest in American history. Even that couldn't restore the balance. And Bush? Well, of course, we went into deficit the year after his tax cut, and not that thin stuff, but the industrial sized deficits.

Republicans increased military spending and ran wars on credit. The theory probably is that this helped us in Reagan's day, but regardless, the effect on our budget and our debt's been stark to say the least.

The Republican cry has been "We're broke, we're broke, we're broke!"

But confront them with how that happened, the destruction of the walls that kept the banks that did investments separate from those that did home loans, the derivatives market they helped keep unaccountable and out of control, and they'll start blaming Obama and the socialists instead. Why? Because they don't want those results to matter. But matter they do. We cannot solve the problem in our economy without preventing the next wave of false wealth, because what goes up that way will come down just as hard as it did this last time.

Good intentions, which undoubtedly many conservatives have, are not enough. I'm pretty much convinced most Republicans really do want fiscal balance and whatever else. But their minds are stuck on certain ideas, and they're not letting the results of their past experiments hold them back.

They're not letting the failure of those ideas to pass real-world muster get in the way of continuing to push those ideas on the rest of us.

Right now, we're facing the possibility of a credit endangering default on our debt. It's funny that those who wouldn't hesitate to tell us when China is getting nervous about our budget deficit don't hesitate to risk or even deliberately push a default that would likely end up given China a real soaking, both from what money we don't pay them and the failure of our economy for the consequences.

It bears repeating that no good can come out of a default, or even a serious approach to one. Republicans would respond to that by saying it would be Obama's fault for not being flexible.

Except, there wouldn't be a debt crisis at this point, any head-butting between the nation's ability to to borrow with it's inability to pay if it weren't for the Republican's political resistance.

Right now, folks are still buying American debt, because they believe in this country's ability to pay them back. Whether having to pay them back will be good for the economy later is open for debate. What's not open for debate is that America can still borrow if it wants to, and because of that, saying we're bankrupt is silly. We're not bankrupt until we're unable to pay, and though not all modes of raising debt levels lead to a positive outcome, our financial and fiscal armageddon is far from imminent.

None of this problem with the debt ceiling is being forced upon us by outside events. This is entirely the result of an ideological calculation on the part of the Republicans.

I hope people are looking at this, looking at the possible consequences, and are understanding why it was far too soon to bring Republicans back to power. The irony is going to be that whatever cuts they achieve probably will be a political disaster too, as well as economic. The UK tried their hand at similar austerity, as did Ireland, as has Greece. The basic result in all cases were economies sent into recession, with unemployment higher and debt problems still considerable. That, and they managed to tick most of the country off. There isn't a real success story here to tell us that austerity is an effective position to take in situations like these.

That bears repeating. Nice ideas abound, and so do the outcomes we imagine from people doing things our way. It's only, though, when such theories are tested against reality that we see their true worth. The theory that tax cuts for high earners create stronger economies and more robust job generation certainly has it's intuitive sense, but that doesn't prevent events from discrediting it. The Bush and Reagan Tax cuts were both followed by weak job growth. If we rethink things, re-examine the evidence, we can see the flaw in their sentiments: rich people keep money rather than spend it when they get more. As investors, throughout the last thirty years, they've favored keeping more money, time and again, rather than creating more jobs here.

When the standard way to improve the profits of a company is to hire consultants and lay people off, how is it that we come to the conclusion that taking fewer dollars in taxes from the rich is going to somehow spur them to behave altruistically?

The Republicans claim that their policies are more fiscally sound, but the basic objective fact is that their preferred course of action, which they got, created a larger deficit than the Democrats planned on. And this wasn't an accident. They didn't trip, slip, and fail to offset their tax cuts. They were presented with the numbers. They had common sense to tell them that tax cuts don't make back reveneues, and higher spending on wars and benefits back home would spread that new deficit even further.

But what they also have is a system dedicated to promoting a theory of economics, or at the very least, and excuse for social engineering under the guys of an economic theory. They've taken the notion of starving the beast to heart, only to find that the beast feeds just fine despite the drop in revenues. But the dogma is the dogma, and few are willing to depart from it within the GOP, or provide the party with an alternate approach. There's nothing worse than a party out of good ideas, but not out of the ambition and partisanship it takes to force those bad policies down everybody else's throats.

There's nothing real that keeps folks on the right from acknowledging the problems, and adapting appropriately. This is a problem that mainly turns around the fact that in the service of making the GOP a dominating force, they turned what was once a robust, self-correcting discourse within the party, and made into a brittle, one-sided centralized system that isn't even tolerant of alternate kinds of conservatism. It's like they took out the brake pedal for the party, and just installed another accelerator. Some folks consider a party without any inhibition in it ideal, but the reality is, we don't have the imagination and the limitless knowledge necessary to pretend we're perfect, and pull off the illusions safely or successfully. Every party's got to have the capacity for a reality check, if it wants to survive as a viable political force.

We've had multiple reality checks on budget matters. Those who sacrifice the wellbeing of the average person in the middle of a recession don't encourage economic recovery, but it's opposite, for what else is the state of the economy, but a composite, emergent picture of how a population, a society is faring? When economic growth is built on the disadvantage of the average person, it might make a few people more money in the short term, but the problems the rest of us experience, the unemployment, the poverty, the loss of confidence and consumer activity overwhelm the value the advantages that the rich gain.

What will move this economy is employment, movement in capital from a thriving customer to investors, who then have reason to invest in starting new businesses and expanding existing ones. A growing economy cannnot simply be a game just a few can play and win at the top, a game played with secretive, exotic, unaccountable financial instruments. It's got to be a system that supports the needs of the people in general, a system that human beings can operate without constant critical failures sending it into collapse.

It's all too common to address the idea of such a system as a naive dream, but in my opinion, the current system we have is nothing but a cynical nightmare, of equally unrealistic character. You don't have to be panglossian about things to be oblivious. My sensibility is that I don't push for such ideals out of the sense that things can't or won't get screwed up, but rather from the sense and necessity of getting things right, and avoiding the consequences of getting things wrong. To get things right, to do what's best for ourselves and the country is a struggle, but a struggle we have to engage in, if the good of the country means anything to us.

We choose what we struggle against, what we contend against. There is plenty enough to contend with in this world, than contend with our own unadmitted errors.

Posted by Stephen Daugherty at June 30, 2011 3:08 PM
Comments
Comment #325149

Stephen, as usual, you comments are nothing more than liberal talking points. But I will try to deal with only one point and the reason I do this is because you seem to have a problem dealing with multiple comments:

“The stimulus worked, but it didn’t correspond to the Republican’s notion of what worked, so it had to be declared a failure. And they didn’t even wait half a year to start.”

Your link at: http://tpmdc.talkingpointsmemo.com/2011/06/top-economist-even-brief-default-will-cause-new-recession-and-blow-recovery-out-of-the-water.php?ref=fpb is meant to prove the stimulus worked, but there is not one word in your link stating the stimulus ever worked. This is not the first time you have tried to spread this WH created lie. But the fact is, Alan Greenspan, said the Feds massive stimulus had little impact on the economy. Before you begin your attack on Greenspan, you might want to read his bio, education, and career. He served under Reagan, both Bushes, and of course Bill Clinton; whom you have claimed many times to be the messiah of the economy. So what part did Greenspan play in the Clinton economy? In 1977, Greenspan predicted a bursting housing bubble in his PhD dissertation. Ironic, isn’t it? But anyway, here are Greenspans comments:

“The Federal Reserve’s massive stimulus program had little impact on the U.S. economy besides weakening the dollar and helping U.S. exports, Federal Reserve Governor Alan Greenspan told CNBC Thursday.

In a blunt critique of his successor, Fed Chairman Ben Bernanke, Greenspan said the $2 trillion in quantative easing over the past two years had done little to loosen credit and boost the economy.”

http://www.cnbc.com/id/43598606

The question is, who do we believe; a blog writer with a liberal arts degree from Baylor; or a PhD economist with 20 years experience as the head of the Federal Reserve?

Posted by: Conservativethinker at June 30, 2011 7:04 PM
Comment #325150

Greenspan. Oh yeah. The guy who screwed it up so bad.

Posted by: phx8 at June 30, 2011 7:15 PM
Comment #325151

Greenspan! The guy who thought flooding the economy with cheap money was a great idea? The guy who admitted before Congress that he was wrong about the ability of de-regulated financial markets to assess risk, manage risk and self regulate?

By the way, his criticism of QE2 and QE3 is not an isolated criticism. It certainly directed money formerly in Treasuries to the stock and commodity markets, resulting in selected asset price inflation, but has had little impact on stimulating borrowing and increased credit (debt) in the main economy. The general measures of money supply remain depressed. Americans are de-leveraging from debt, saving and not taking on new debt. Debt is money in our monetary system. Retiring debt or defaults reduces the money supply. The Fed’s efforts to increase bank reserves to stimulate borrowing and credit have been only marginally successful. We remain locked in a balance sheet recession. In the term of economists, the Fed has been pushing on a string to get banks to lend and people to borrow. That is why Bernanke has been clear that the federal government should maintain fiscal stimulus while addressing the long term deficit. In other words spend in the short term to keep the economy alive and plan for reductions in the future as the main economy is able to sustain its own momentum.


Posted by: Rich at June 30, 2011 7:49 PM
Comment #325152

CT,

Stephen was talking about the Obama stimulus program not the Federal Reserves’ monetary actions. Your criticism is misplaced if you thought that Greenspan was talking about the Obama administration’s stimulus package. The Federal Reserve is an independent private-government hybrid. It doesn’t answer to the Obama administration. It doesn’t conduct fiscal policy. It is our central bank. The current chairman is a conservative Republican and a disciple of Milton Friedman, a follower and admirer of Ayn Rand.

Posted by: Rich at June 30, 2011 8:34 PM
Comment #325155

Conservativethinker-
Oh dear. I guess the argument is all over. I mean, how can I maintain credibility, using arguments similar to other Democrat’s arguments. I mean, look at me, I’m a contributing editor for the Democratic Party/ Liberal column of this blog. How would I ever live such left-wing partisanship down?

Seriously, fellow, the only people who care whether a talking point is liberal, are the people who already agree with you. And the fact that I may, from time to time, borrow my fellow Democrat’s debating points, doesn’t change one very important distinction that you ought to be making, and which I make quite a bit in my critique of your party’s talking points: a talking point that reflects the truth remains true no matter how opposed your adversary in the debate is to you. Rather than asking, “do liberals argue this point?”, you should ask, “Is this point correct?”

When I referred to the stimulus, I am referring to the stuff that came under the Recovery act, or ARRA. I am not referring to the Fed’s emergency actions in Fall of 2008, as C&J are known to misleadingly argue. Nor am I referring to Ben Bernanke’s Quantitative easing, which reflect his attempts to stimulate the economy in the absence of a second stimulus. So why you go off on that tangent beats me.

But on the subject of Greenspan himself, it was his policies that had interest rates so low in the first place, and that played both a role in letting the mortgage markets get overheated, and in leaving the throttle so wide open on the money supply that the Fed couldn’t inject more capital into the markets by dropping the interest rates. He might be critical of the Quantitative easing, but his policies didn’t turn out any better for the economy.

Posted by: Stephen Daugherty at June 30, 2011 10:26 PM
Comment #325181


The recession is proof of the effectiveness of finacialization, both in regards to the market and worker/consumers.

It gave us to big to fail and two separate economies, the domestic economy and the multinational corporate economy.

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Comment #330902

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