Third Party & Independents Archives

May 18, 2005

GOP Strategy - Bankrupt The US

In a move by Republicans in the House of Representatives revealed yesterday, their Medicare strategy is going to be applied to Social Security. Their strategy has but one goal and outcome, to end the program. Medicare/Medicaid already had a dismal finacial future last year when the Republicans made the program exorbidently more expensive not only with the addition of the Rx drug benefit, but, also by putting in language that prevented the Government from competitive bidding for the cost of benefts and prescriptions.

The net result is that Medicare is financially an even greater burden on our national debt today than before, and will belly up even sooner than before as national debt climbs and historic tax increases loom as the only way to deal with the debt. Republicans know Americans would overwhelmingly oppose them if they offered legislation to end Medicare/Medicaid. So, they have taken a different route. Make the program so expensive that voters will one day want to end the program to prevent huge tax increases from taking place or Government default on its debt obligations.

As the Associate Press's Glen Johnson reports:

House Republicans are moving to super-size President Bush's Social Security overhaul with measures aimed at breaking Democrats' united front against it - such as bolstering private pension plans and improving non-retiree benefits for widows, children and the disabled.
In the convoluted logic of Republicans, the way to end Social Security is not by voting on it, but, by bankrupting it, all the while protesting that they are trying to save it. But, when was any program in financial trouble ever saved by increasing its costs? Never! Yet, that is precisely what the Republicans are going to do.

It is a double whammy. The GOP both intends to increase the benefits for non-retired beneficiaries as well as remove revenues coming into Soc. Sec. and redirecting them to private savings accounts. In a few years, Republicans will take the stand that Social Security is what is causing the federal deficit of then 10 trillion dollars to force dramatic tax increases. They will then offer the voters a choice; dramatically increase their taxes or get rid of the Social Security program altogether which could even mean further tax cuts in the future.

This is all part of a grand plan by Republicans to hasten the day the US reaches the brink of bankruptcy. The Transportation Bill this week, in which Pres. Bush called for 256 billion for roads and bridges repairs and maintenance, ballooned under the Republican Congress' pork layering which increased the size of the bill to about 290 billion despite Bush's idle threat of a veto. And a great deal of that pork added on to the bill, is not going to go for roads and bridges, but for all manner of other local and regional pork projects from gazebos to new historical site preservations to sports projects. When one steps back and takes a look at the big picture, one sees Bush and Congress coming to office in 2000 with about 5.5 Trillion in national debt. Today, that amount is more than 7 and 3/4 Trillion and rising. (9/11 and Iraq/Afghanistan account for less than 1 trillion).

The House report of the nation for 2004 indicates 1.3 Trillion will be added to the national debt based on current program projections by 2014. That of course does not include the additions to the national debt for our continued activities in Iraq and Afghanistan nor the minimum initial 2 Trillion dollars which private savings accounts will add to the national debt. Put all these together, and the big picture paints a national debt of well over 11 Trillion dollars in the early part of the next decade. Even conservative think tanks agree that debt level is not sustainable and will lead to hugely negative effects upon our economy. They also agree that growing the economy cannot begin to address that level of national debt. Much higher taxes or dramatic spending cuts will be needed to reduce an 11 Trillion dollar national debt back to a manageable 6 to 7 Trillion dollar level.

Our current national debt of 7.75 Trillion is costing the average worker over $2000 a year in federal taxes just on the interest payments for that debt. That is $2000 of your tax bill for which you receive nothing, not a single pot hole in the road fixed, not one extra dollar for education, not one extra dollar to save Social Security, nothing, nada! That portion of your federal taxes does however enrich Treasury bond investors, 40% of whom are wealthy foreigners in Saudi Arabia, China, India, and Japan. So, in reality, about $800 of the average tax payer's federal taxes each year goes for nothing other than to make rich foreigners richer.

This borrow and spend strategy of the Republicans will have one of two dramatic outcomes. if no other serious hits on our economy occur in the next 10 years, the result will be Congress killing the single biggest expenses of the federal government, Social Security and Medicare/Medicaid to bring the debt under control. Or, with a 10+ Trillion dollar debt load, our economy is hit hard by another natural disaster such as a Yellowstone volcano or Tsunami hitting the West Coast or another devastating terrorist attack, which will literally force the United States to default for the first time in its history on its debt obligations. Under either scenario, somewhere between 50 and 150 million Americans will be forced into poverty.

This is the GOP poker hand. They are willing to bet such enormous negative consequences in the pursuit of their ideological belief that Americans helping Americans through the tax system is an evil we cannot afford. Their winning hand is a royal flush that pits American tax payers against themselves in the hopes of ending social spending in America. Follow the steps. How else can the party of fiscal conservativism's behavior in doubling our national debt under their leadership make any sense. It is not an accident.

It is not without plan and design. There is a goal behind doubling our national debt and risking US insolvency. And only one makes sense in light of ultra-conservative values which vehemently oppose American tax dollars helping Americans. The irony is these same leaders don't think twice about sending 100's of billions of tax dollars to Indonesia or Iraq to help Iraqis or Indonesians. But then that is easily explained by their Bankrupt America agenda too, isn't it?

Posted by David R. Remer at May 18, 2005 08:53 AM
Comments
Comment #55290

I don’t think it’s strategy, more like stupidity. We have a liberal president and an even more liberal congress. None of them, from either party, are willing to make or even suggest any actual cuts. Why? Because it will loose them votes.
I’m sure someone will bring up Clinton’s balanced budget. That’s a joke. When you have two trillion of income and almost eight trillion of debt, a budget requires cutting, not balancing.
This is not a one-party issue, David. There is no “Grand Plan” to bankrupt America. If there is, the Democrats are in on it too. I think they’re simply buying votes. Which is just as bad.
They are fiscally liberal on both sides. Until someone suggests some massive budget cuts and the elimination of government programs, no one in congress from either party should be referring to themselves as conservative.

Posted by: TheTraveler at May 18, 2005 10:09 AM
Comment #55293

So this prompts the question: Given that the politicians are wrecking the country for short-term personal gains, how would anyone be able to prevent this from happening?

We discuss the fact that the fleecing of the country is occurring and has been since the 50’s. What ideas do you propose to eliminate the conflict of interest between a politician trying to get elected and a country trying to prosper and be socially responsible at the same time?

My hypothesis is this: If you take money out of the equation for getting reelected legislation will better reflect the needs of the country and the most greedy and selfish of the politicians will have to move on if their intention is soley to line their pockets.

But I don’t no how to test it. What if following bills and resolutions were as interesting to people as sports seem to be? What if the country cried foul on a political party for inserting a rider that wasn’t related to the parent bill?

Do we just need a few tools? A video game using real-time data from thomas.loc.gov? A collaborative software app that lets people generate bills to propose to congress?

Or is it already too late?

Posted by: Kris Bravo at May 18, 2005 10:44 AM
Comment #55294

the Traveler, I agree with you that some Democrats have fallen prey to the bait offered by the Republicans to coax some Dem’s to give them bi-partisan cover. And you are right, it is constituency votes that causes Dem’s to fall for the ploy. But, it is not Democrats who are trying to brink bankruptcy in order to shed social spending programs, that is purely a Republican strategy.

Posted by: David R. Remer at May 18, 2005 10:47 AM
Comment #55295

Kris Bravo, there is certainly nothing afoot in our society to block our government’s march to bankruptcy. In fact, history points to either a deep recession or spiralling tax increases as the prerequisite for voters to really care. So, given current circumstances, we will have to go to the brink before making any substantial changes in our course, and then pray we haven’t passed the point of no return. I frankly give us about 3 chances out of 10 for averting an economic calamity that causes massive American suffering and loss. Pray I am wrong.

Posted by: David R. Remer at May 18, 2005 10:52 AM
Comment #55301

David,

You are not wrong and given the current political and social climate I would give us 2 chances out of 10 for averting an economic calamity. Clearly half of the electorate has lost its way. While Kansas and other backwards states fight to have Intelligent Design taught to our children the Chinese are kicking out economic butts, draining America jobs all the while making us feel giddy about paying lower prices for good we don need, sowing the seeds for our down downfall.

And what will happen when, not if, but when all American companies divest themselves one-by-one of their pension plans (is GM next), and that huge burden is place upon the backs of the American taxpayer? Is this really a time to fiddle with Social Security? I shutter to think of what will happen when Medicare finally does go under. Will we see the resurgence of deceases in America’s inner cities we thought long vanquished? Tuberculosis is already making a comeback in some American cities because of lack of adequate health care, but of course we lack the visionaries to recognize the warning signs.

We are falling fast and the picture we paint as we decay is not pretty. Christian nation my arse!

Posted by: V. Edward Martin at May 18, 2005 11:22 AM
Comment #55303

David,

So you’re saying that the Republicans are trying to bankrupt the country to force the government to stop spending money? Then why not just cut spending now? They are going to lose political power either way. In fact, they would probably lose more power by bankrupting the country than by simply cutting spending now. That’s why I think they’re just vote whoring with no regard for the future at all.

Posted by: TheTraveler at May 18, 2005 11:29 AM
Comment #55305

The simple fact is that cutting programs loses votes, and raising taxes loses votes. Running debt doesn’t lose nearly as many votes, and so it the plan of choice for both sides of the isle.

The GOP is much more organized than the Democrats, so they might actually have an agenda. But, for the most part, I don’t think it’s so much a conspiracy as it is the natural consequences of our voting habits.

Posted by: Rob Cottrell at May 18, 2005 11:40 AM
Comment #55316

Rob, I would agree with you except for one simple fact. PayGo. Many of the Democrats have been fighting since the early 1990’s for pay as you go. Some have opposed it. But, without notable exception, Republicans have opposed Pay as you Go.

As you know, Pay as you Go is what brought deficits under control between the Republican Congress and Clinton’s veto pen. It required that any new spending of any kind be paid for with current revenues and not added to the deficit and national debt. It was an effective strategy to avoid the crisis Republicans are now creating. They talk responsibility, but, they don’t act responsibly - they simply say “charge it to the next generation”. With Clinton gone, pay as you go also went.

These facts and others convince me that the GOP does have a strategy to bring the country to the brink of bankruptcy in order to proclaim it was social spending that did it. No other explanation makes sense of Republicans choosing to increase entitlements while chanting the horrors of social spending. Simple vote getting would be better accomplished by acting in accordance with their conservative rhetoric. No, in my mind, they have a “final solution” for social programs in America and it will result in a “final solution” for America’s poor and elderly as well.

Posted by: David R. Remer at May 18, 2005 12:22 PM
Comment #55319

I don’t think you can bankrupt a country that isn’t on something like the gold standard.

The numbers are all just make believe.

Posted by: Trevor at May 18, 2005 12:30 PM
Comment #55322

Trevor, ask some S. American countries if defaulting on their loans isn’t a form of national bankruptcy?

Posted by: David R. Remer at May 18, 2005 12:37 PM
Comment #55324

The Traveller said: “They are going to lose political power either way. In fact, they would probably lose more power by bankrupting the country than by simply cutting spending now.”

Yes, but, they will all be far wealthier if they go the bankrupt route. You have to watch their deregulation and tax cuts for the corporations and wealthy to see how that works to their advantage. Not surprisingly, as you say, they get some Democrats to climb right on that bandwagon everytime.

Posted by: David R. Remer at May 18, 2005 12:40 PM
Comment #55337

David, Your on to us! Republican leaders are meeting as we speak in their secret lair called the Neo-Con Cave and plotting the demise of United States…

Come on! Reality check! This is conspiracy theory at it’s finest and were it not for a serious subject would actually be laughable!

I’m fairly confident that there is no one in Washington that has a plan to force “between 50 and 150 million Americans into poverty” just so that they can get rid of Social Security and Medicare.

The heart of the problem is that just about every person in public office (regardless of their party) at the national level is looking to do one thing and one thing only… Get re-elected. And as Rob said “cutting programs loses votes, and raising taxes loses votes. Running debt doesn’t lose nearly as many votes…”

None of the politicians have the Kahones to tackle the real problems because it might actually mean they could lose the next election. I’m begining to think OSI is on the right track…

Look, cutting spending or raising taxes are the only 2 ways that we can truly start cutting into the national debt. My personal opinion on this is that cutting government spending is the best answer although I’m begining to think that we may need to do both to get rid if it entirly.

Posted by: Brad at May 18, 2005 01:07 PM
Comment #55343

Yes, but, they will all be far wealthier if they go the bankrupt route. You have to watch their deregulation and tax cuts for the corporations and wealthy to see how that works to their advantage.

I’m still not following you. If the economy crashes, won’t the corporations crash with it? Businesses tend to go bankrupt too, when there is no money to be made.

Posted by: TheTraveler at May 18, 2005 01:49 PM
Comment #55357

Brad whether it is by design to end social programs which many Conservatives are proud to wear as an issue, or whether it is putting reelection before America’s needs, matters little in the long run. The outcome will be the same. Brinkmanship with defaults and suffering by 50 to 150 million Americans.

The GOP control the play, that makes them responsible either way. Time for Republican supporters to start putting the screws to their representatives if they mean even one ounce of compassion in their Compassionate Conservative rhetoric.

And you have not argued why the Pay as you Go concept of Democrats is not at the heart of the Republican agenda these days in light of our eroding fiscal condition.

Posted by: David R. Remer at May 18, 2005 02:24 PM
Comment #55358

The Traveller, look to the globalization of investments. Just in the last couple weeks we have seen outflows of American investments into foreign markets. Corporations too are expanding operations overseas like Wal-Mart into China, where US default will not affect their long term profitability.

7.5 Million American citizens already have permanent residences overseas. Watch that number explode when US default on loans or withdrawal of foreign investors occurs. In the end, the large corporations long term profitability lies overseas, and the wealthy can live anywhere in the world with as much security as they have here. So, I wouldn’t look for self-interest by the big corporations or the wealthiest in America to be the check and balance against an unsustainable natioanl debt.

Posted by: David R. Remer at May 18, 2005 02:29 PM
Comment #55368

David,

Maybe I just haven’t had enough coffee today, but nothing of what you’re saying is making any sense to me.

You say the Republicans want to increase government spending in effort to cut it by bankrupting the country, which will crash the economy and lose them control of the government in the process. Why would they want to do this?

It hurts the Republicans, because they would loose control of the government.
It hurts the corporations, who would lose American sales and investment.
It hurts the average American, as you have pointed out.
It hurts the foreign governments who won’t be seeing the money they lent us, and by extension it hurts their citizens.
It hurts the nations we will have to stop sending aid to.

The list goes on and on. And the only thing the republicans gain is government cuts that they could put in place now if they really wanted to?

If you want to bash republicans for spending too much I’m with you all the way. I just don’t understand what the republicans would hope to gain from a conspiracy like this.

Posted by: TheTraveler at May 18, 2005 03:12 PM
Comment #55371

TheTraveler,

“The list goes on and on. And the only thing the republicans gain is government cuts that they could put in place now if they really wanted to?”

Do you honestly think the Republicans could end Social Security and Medicare now? I don’t. Even if they tried, it would take far longer than 2 or 3 years to do it, and they’d be booted out of office for even attempting it.

History has shown that the American people are only willing to make major changes if they absolutely have to. As long as Social Security at least partially works, we’ll keep it. The only way to get the American people to agree with scrapping it is to break it beyond fixing.

Posted by: Rob Cottrell at May 18, 2005 03:20 PM
Comment #55379

David,

Time for Republican supporters to start putting the screws to their representatives if they mean even one ounce of compassion in their Compassionate Conservative rhetoric

I agree… However, my point was that Liberal voters need to do the same. My argument is that this is not a one sided, one party issue. You and I can (and probably would) argue for quite some time with no resolution on how to fix the problem going forward (i.e. which programs to cut, what taxes to increase, etc…) It is my contention however that until the people in the government are reigned in by the people of this country the problem will continue to grow.

And you have not argued why the Pay as you Go concept of Democrats is not at the heart of the Republican agenda these days in light of our eroding fiscal condition

I agree that Pay as you go is a wonderful concept. It is how everyone should live in fact… However it is unrealistic to think that it will always work all the time. There are times in everyones life where something happens that requires more money than you have at that time. So goes the US…. Pay as you go worked great in the Clinton years because the economy was up (even overinflated some would say), 911 had not happened yet, the war on terror was barely a blip on the radar screen, no tsunami had hit, Florida had not been hit by several hurricanes in a row, etc. etc… The idea is that it works well when there are no gotchas that spring up. And there have been MANY gotchas during this presidents terms.

Pay as you go is a good way to maintain during the “slow news” times like the clinton years but in the long run more agressive steps are needed to solve the debt problem.

Understand that I am not saying that the president and the current congress is doing a great job at making cuts and controlling spending. I am just stating that I believe that there are reasons for the inflated debt and it will take work to get it down again.

Which brings us again to how to reduce the debt (i.e. increase taxes and reducing government spending)… As I stated earlier, you and I would argue over and never agree on these issues because our belief system of what the government should and should not be responsible for is too different.

My contention is that unless ALL of us (both parties) wake up and realize that unless we make all of the “representatives” from the president on down more accountable then the problem will continue to escalate regardless of who is in control.

Posted by: Brad at May 18, 2005 04:04 PM
Comment #55388

Brad, the fact remains, Republicans need not a single Democratic vote to pass legislation. They have the power with or without the Democrats. Why are they not using it to put the country’s future on a stable economic footing?

I know to some, my article at first glance reads like a conspiracy theory. But, anyone who follows the article step by step with the question in mind, Why would Republicans continue to more than double the 5.5 Trillion national debt they inherited?, why make Medicare more expensive than it has to be?, why inflate the Transportation Bill 39 Billion over what is needed?, etc. etc., the conclusion that this is an act of will becomes almost inescapeable.

Posted by: David R. Remer at May 18, 2005 04:27 PM
Comment #55389

The Traveller, Rob Cottrel’s answer is just about exactly how I would have replied.

Posted by: David R. Remer at May 18, 2005 04:28 PM
Comment #55398

I think it is a strategy.
They believe they’re biting the bullet now,
and realize it will be very expensive, but
they want out of the entitlements business.
The selling point is retiree ownership.
But, of course, politicians forget this strategy
upon each new election, and they pander and
promise some new entitlements, and the problem
gets worse and worse. Now it has momentum (a lot of it).

And, when tax payers are paying 85 cents of
interest on every tax dollar, benefits are
being cut, and taxes are being raised, and
finally, without a shadow of a doubt, realize
they’ve been scammed, and decide to do something
about it, it will be too late. They will look
all about for someone to blame, but they only
need to look in the mirror to see who that is.

Posted by: One-Simple-Idea.com for Transparency and Accountability at May 18, 2005 04:56 PM
Comment #55410

David:

You really need to include the time value of money in your calculations. As you and I have been over before the nominal rate of growth in the economy is 6% which means the economy doubles every 12 years. That means that if federal debt doubles every 12 years as a percentage of national income we are in the same place. Your figures assume NO growth in the economy.

In addition the $2000 figure on taxes is bogus. You should present that figure on a % basis. The rich pay most of the taxes in our economy. Sometimes the poor pay no federal income taxes at all. What is true is that a percentage of our taxes go to cover debt.

Can you comment sometime on some positive things happening in the economy?

Oil prices are declining, interest rates have dropped on the 10 year note by a half a percent in the last three or four months. Commodity prices are going down. You must see SOMETHING positive!!

Craig

Posted by: Craig Holmes at May 18, 2005 06:36 PM
Comment #55415

Craig, it is hard to debate with someone who thinks they have the facts when they don’t. Inflation is holding constant approximately at the same rate of growth. You want to focus on the core rate which is of interest to the Fed, but the overall rate is of interest to consumers and consumption and it is keeping pace with GDP growth.

I responded in the Red column that the short run economic picture is stable and looking decent. But we don’t live just for today in America. Americans are working and looking to the future for their prosperity and good times, and that longer term picture as I have outlined, is looking pretty dark.

The $2000 amount is not bogus. I stated as the House of Republicans did that that was an average figure per taxpayer. Got a beef with that figure, take it up with your Republican representatives who wrote it.

As for the economy doubling, well. If one ignores the one and a half decades of trade deficit deepening, the transitioning of American companies to overseas markets, the fact that the national debt grew 45% from 2001 to 2005, that deficits are getting bigger, not smaller, that taxes are going to have to go up dramatically in just a couple years or quality of life go down seriously for 100 million Americans for a host of reasons including pension plan bailouts, retirement bubble, and spiralling health care costs, then yes, your purist model of economics would be highly predictive. However, when real life and models paint different pictures, it usually wise to pay attention to reality rather than the models. Unless of course, you are trying to impress folks with one’s liberal academia education :-)

Posted by: David R. Remer at May 18, 2005 07:14 PM
Comment #55416

Craig, Oil prices are declining? Get real! Opec has set a whole new range of 40 to 50 dollars a barrel. That is a 25 to 30% increase over just a few years ago, and it is going to be sustained. Therefore, oil prices are not declining, they have increased dramatically and are not going to drop below OPEC’s $40 floor except for brief periods of quota violations or reserve adjustments. This increase is setting a new benchmark for the cost of living and doing business in the US that we are all going to have to accept due to our committment to fossil fuel dependence.

Posted by: David R. Remer at May 18, 2005 07:21 PM
Comment #55438

Absent any iron-clad evidence, I prefer to think them stupid more than sinister, especially given their track record. I say let them have their way, even if it’s planned. Obviously, actual lives aren’t as important as abstract principles. If you can afford boot straps, you should be able to pull yourself up by them. If you can’t and you starve, it’s your own damn fault. God made man to serve the economy. Those who don’t are egregious sinners and deserve their torment.

Posted by: Joseph Briggs at May 18, 2005 10:52 PM
Comment #55443

David:

Do you see anything positive in the American economy?

Craig, Oil prices are declining? Get real! Opec has set a whole new range of 40 to 50 dollars a barrel.

Oil prices have declined nearly $10 in recent weeks.

As for the economy doubling, well. If one ignores the one and a half decades of trade deficit deepening, the transitioning of American companies to overseas markets,

You changed deficits. In your article you are talking about the federal deficit, then answering me you changed to the trade deficit.

Actually, numbers are going exactly the opposite of what you are arguing on several fronts. These are 1. Commodity prices are currently declining not rising. 2. Long term interest rates are declining not rising. (10 year treasury down from 4.6% at our recent debate to 4.1 % now.).

Bill Gross how manages one of the largest Bond funds in the world predicts the 10 year treasury could go as low as 3% today. He says inflation is not an issue.

You accuse me of not having the facts, but on your side you are hyper focused on debt and have no concept of equity. The equity of our economy has never been higher. (the amount of the check in your hand after you sell and pay off your debt).

There has been so much talk about foreigners not buying our treasuries and yet those interest rates keep falling.

You were predicting at one time that the “measured” language in the Fed’s language would be gone. Now speculation is that the Fed nearing the end of their rate hikes.

The core rate of inflation is the measure to watch as the other prices fluctuate too much. Now oil is declining and we will probably see the reverse trend as in the last year.

Craig

Posted by: Craig Holmes at May 18, 2005 11:35 PM
Comment #55468

Craig, spoken like a true conservative. Oil goes from 26$ a barrel to $58 a barrel and then drops back to $47 a barrel and you call that a drop in oil prices. Absurd, Craig. The Price has risen from the upper 20’s per barrel and is now hovering in the up 40’s per barrel.

How can anyone believe in your assessment when you try to spin real data this way?

Posted by: David R. Remer at May 19, 2005 08:27 AM
Comment #55470

Craig, here is some real data from our DOE:

Refiner Acquistion Costs average per year:

Domestic Imported Composite

2003 29.82 27.71 28.53
2004 38.65 36.00 36.97
2005 43.89 40.15 41.46 (1)

(1) Through Feb, 2005

Sorry, but your assertion that oil prices are falling is an assertion based on the last couple weeks. OPEC ministers have stated in recent months that $40 to $50 per barrel is their new target range. So, your argument has no merit whatsoever when discussing the larger picture.

Posted by: David R. Remer at May 19, 2005 08:53 AM
Comment #55471

Well said, Joseph… it is all about values. Conservatives have them for sure, and you outlined a subset of them quite accurately.

Posted by: David R. Remer at May 19, 2005 08:56 AM
Comment #55531

I didn’t have time to read and post much yesterday, so I finally had the chance to read this article and all the follow-ups. Great work David.
Rob, you made several excellent points.
Joseph, you characterized the hard-hearted attitude of the neocons perfectly.

Posted by: Adrienne at May 19, 2005 02:17 PM
Comment #55544

The Economist (British not American) ran a balanced editorial on America. It praised the U.S. as one of the best economies in the world, but gave a few suggestions on how to do better.

My favorite part was the last paragraph: “The way to support enterprise—American enterprise, the best in the world—is to be as unEuropean as possible. Mr President, look at France. Notice their economic policies. See how they subsidise this and protect that. Do we have to spell it out?”

America has its share of problems, but somewhat less than most other countries and I don’t share the pessimism expressed here.

Those who keep on predicting downturns will eventually be right. When they are right, they can boast of it. But their boast will need be tempered. In the last fifty years, a person who was optimistic (and invested as such) would have done very well. A person who bet on pessimism has bupkis. Even after downturns, you are always better off betting on America, but you are almost always out of style among the prognosticators.

Posted by: Jack at May 19, 2005 03:32 PM
Comment #55565

Jack, your general optimism reminds me of the Democratic Party back in 1992. They too were generally optimistic and ignored the signposts of what was coming — Now look at them.

Optimism is justified when one is attending the maintenance issues the keep the good in the present safe for tomorrow. That is not the case with our fiscal policy - we are doing almost exactly the opposite of what maintenance would require. Instead of raising taxes AND reducing spending, we are cutting taxes and raising spending 5 years in row now. Instead of investing in our global competitiveness with much more Gov’t assisted R&D and beefing up our educational systems, we are investing in elective war and nation building at the expense of education and border security here at home. Instead of investing in our future growing and aging consumers who will dominate the potential consumer profile, we are seeking policies that will erode their consumer capacity by undermining Soc. Sec. and utterly failing to address the double digit inflation in health care costs.

The signposts are there. But, like the Democrats, the Republicans just don’t have what it takes to heed and deal with them.

Posted by: David R. Remer at May 19, 2005 05:33 PM
Comment #55566

David:

Here are the prices I watch:

http://www.bloomberg.com/markets/commodities/energyprices.html

They peaked at near $57.00/barrel and have fallen about $10.00/barrel since. You are looking at historical monthly data, I am looking at it on a daily basis. Basically you are looking at data that is three months old. They have yet to post for March.

I also remember you asserting (as well as many others) how the dollar was in free fall. It seems that many on the left have stopped discussing that since the dollars rebound.

We are in an environment of contained inflation, low interest rates, improving employment, record home sales, and low taxes. Corporate earnings are at near altime highs when measured as a percentage of GDP. Corporate America has over $1.5 Trillion sitting in money market funds for a rainy day. Americans per capita have never been wealthier.

There must come a point when the left admits there is at least one thing going on that is good in the economy. How about record minorities owning their own homes??

There will always be problems on the horizon. But we are certainly not the only ones to know about them. Certainly no new light has been shown here. As they approach we will overcome them.

Craig

Posted by: Craig Holmes at May 19, 2005 06:00 PM
Comment #55572

Craig, economics can never be discussed intelligently using one month’s or two’s data. Economic data is full of blips for a myriad of reasons and variables. Economics is a study in trends over time. Stock investing is where you want to watch the short blips which can sting like hell.

The discussion here is about where we are headed economically over the next 6 to 20 years. Not over the next few weeks or months. I have already conceded that in the short term, fundamentals look good, I even made some decent money in stocks myself this last week. But, that says nothing about our ability to deal with looming pension crisis, aging baby boomers, trade deficit trend, downward pressure on wages and the coming large reduction in total compensation packages offered by employers as they divest themselves more and more of responsibility for health care and retirement packages for their workers. Not to mention the ever increasing service costs on our debt which sap our economy by virtue of 40 cents of every dollar leaving our shores to foreign investors much of which may never be recycled back through our economy.

Posted by: David R. Remer at May 19, 2005 06:27 PM
Comment #55793

I just saw where Grenspan says that China decoupling the yuan won’t help the trade imbalance. How did I get the impression it would?

David, excellent post. The Republicans have been trying to get the “starve the beast” plan. What it boils down to is this: For the Republican leadership, tax cuts for the already wealthy are more important than Social Security, MediCare, and public schools.

I just heard a really good Truman quote, “If you want to live like a Republican, you’d better vote Democrat.”

Posted by: American Pundit at May 21, 2005 09:40 AM
Comment #55801

AP, yeah, I read that yesterday too, about Greenspan’s admonition. He is a Republican, and they don’t come any better educated and experienced when it comes to the economy. So, why don’t the Congress and Whitehouse listen to the man?

Greenspan has warned the greatest danger America faces is our reckless fiscal policy.

He has warned that globalization must be embraced and joined and managed with an eye toward our own competitive interest and education and schools are a cornerstone of that competitive advantage.

Though he has come out for private savings accounts, he has never said they should replace the Social Security system that I have heard.

He has warned that another large costly event like 9/11 will find our economy ill-equipped to rise to the challenge and should we fail to rise to it, the foreign investment community will send their dollars elsewhere overseas at a time when we need them most.

But, deafness seems to be a common malady in D.C. these days. Presumeably a result of all political screaming and infighting.

Posted by: David R. Remer at May 21, 2005 10:04 AM
Comment #55884

David,

I would have to say that Greenspan’s greatest fault, if he has one, is that he fails at recognizing the human element. He knows his economics, no doubt about it, but he just doesn’t understand that sometimes the smart thing to do is not so obvious to everyone.

His warnings and messages are all so cryptic that they must be decoded by people learned at the art of Greenspan-ology. There is no way the average American would be able to connect with Greenspan on a meaningful level of understanding, which is exactly why much of his wisdom is wasted on the public.

If you’re looking to open any eyes, or free any minds, I would suggest finding a different champion than Greenspan.

Posted by: Zeek at May 22, 2005 12:13 AM
Comment #55917

Zeek, that is one of the most astute constructive criticisms I have received in a very long time. Thank you. You are of course, absolutely right.

Greenspan speaks to power, not to the people. He is a Republican serving Republican reins of power while at the same time trying to move them away from their potentially dangerous ideas and actions in the Whitehouse and Congress.

If he openly criticizes them, he will no longer serve in the position he holds. Yet, what he has to say, is of extreme importance for all person’s who live in this nation he so loves. Hence, Greenspeak, which as you say, is cryptic to the general public.

Posted by: David R. Remer at May 22, 2005 09:43 AM
Comment #55924

I don’t know… When Greenspan tells Congress, “You should not be borrowing for your tax cuts.” I don’t think it gets any clearer than that.

Posted by: American Pundit at May 22, 2005 10:01 AM
Comment #55990

AP, is that a direct quote, or paraphrase. I don’t recall him being that direct on the tax cuts.

Posted by: David R. Remer at May 22, 2005 06:52 PM
Comment #56272

It was a direct quote originally from the NYT. I just googled and found it here, too.

Posted by: American Pundit at May 24, 2005 09:12 AM
Comment #56327

AP, the quote is: “distances himself more from Bush administration and Congressional Republicans on issue of reducing federal deficit; urges lawmakers to reinstate rules that expired in 2002 that required Congress to pay for both tax cuts and new spending programs by either spending cuts or tax increases in other areas.”

Which leaves the Republican Congress with wiggle room to defend even more reductions in taxes while cutting spending in other areas. NOTE the word, “or” in the quote.

I try to listen to everyone of Greenspan’s testimonies before Congress, I have yet to hear him pin his own party down to raising taxes.

Posted by: David R. Remer at May 24, 2005 01:13 PM
Comment #56434

No, David. “You should not be borrowing for your tax cuts,” is an actual Greenspan quote. You sound like you’re quoting the reporter.

Here’s some context from the NYT report,

In contrast to previous testimony, when Greenspan strongly urged Congress to resort to tax increases only as a last resort to reduce the deficit, he placed more emphasis yesterday on the need to address the long-term fiscal imbalances as quickly as possible.

“You should not be borrowing for your tax cuts,” he said.

But a leading House Republican bluntly told the Fed chairman that there was no willingness among Republicans to reinstate the old budget rules.

“You cannot manufacture a consensus for statutory controls when the consensus for budget discipline is not strong enough,” said Rep. Jim Nussle, R-Iowa, chairman of the House Budget Committee. “I do not believe, unfortunately, there is a broad enough consensus necessary to enact budget controls into law.”

Posted by: American Pundit at May 25, 2005 07:00 AM
Comment #56511

AP, thank you for the direct quote. I missed it somewhere along the line. It elevates my mood immensely that Greenspan is finally departing his politically “safe” position which he has held as cover for the Bush administration and Congress for far too long.

I could see him couch his admonitions in politically safe wording for years and I found it very frustrating. On the other hand, now that he is leaving that safe position, will he be labelled and ignored from now on by those he admonishes?

Posted by: David R. Remer at May 25, 2005 02:32 PM
Comment #56664

Yup.

Posted by: American Pundit at May 26, 2005 05:03 AM
Comment #56782

I think it is ludicrous to blame any particular party for the medicare crisis we are facing. One could make the argument that both parties are to blame however even this I would disagree with. The fault for the current medicare crisis rests solely on the shoulders of ourselves. For years the Amercian people knew the system was destined for bankruptsy, yet we sat back and did nothing about it. Instead we continued to cast one uninformed vote after another. Now it is too late to do anything to save the system. If you want to blame someone for this don’t blame our government. Blame the people who tolerated our government…..us!

Posted by: extagen no at May 26, 2005 05:42 PM
Comment #57721

extragen no, actually, a lot of responsibility lies at the feet of Gingrich and his crowd back in 1992 when Pres. Clinton announce universal health care would be on his agenda.

Rather than allow reformation of America’s health care system destined even then to become unaffordable for 1/6 or more of our population, the Republicans demonized the announcement as socialist and lifted not a finger to work or counter offer a plan with Clinton on reforming health care.

1992 was the time to get ahead of the health care crisis we are now mired in. Now we are behind the curve with few if any options to make health care affordable to the people, the economy and posterity.

Posted by: David R. Remer at June 1, 2005 05:32 PM
Comment #57903

I don’t like to admit it, but Hillary may have been right.

Posted by: d.a.n at June 2, 2005 08:11 PM