The budget battles

[luke warm]

The weird thing about current financial policy is how rare it is to see examples of leaders even acknowledging this logic, much less making a serious effort to strike a balance between the immediate, real problem of recovery and the long term, real problems of debt and inflation.

ideology trumps problem solving, even at the state level... it's just easier to see the more local it is

[awm]

I wonder if the increasing trend towards automation is taking its toll. There are more and more jobs which computers (or robots) can do instead of people, or can assist a person in to allow dramatic increases in productivity. We are reaching the point where a factory doesn't need to hire thousands of workers, and a law firm doesn't need to hire dozens of paralegals. This will inevitably decrease the supply of jobs.

 

Of course, in terms of overall "wealth" all of these things are advantageous. We can produce more and better goods with less human effort. The problem is that the idea that every adult who wants a job should be able to get one has changed, and it may not be changing back. The people who own the companies benefitting from this massive increase in productivity are making crazy money, but a rising percentage of the population is getting left behind. It seems like we will have to make a choice soon (or maybe we are making it now). The options would seem to be: (1) Eliminate laws protecting workers' pay and benefits, such that humans can "work cheaper" with a much lower standard of living to compete in price with the machines (2) Move towards a more socialist society where we tax the people at the top who have benefitted in order to provide a modest standard of living to everyone.

 

It seems like our political parties in the US are pushing towards different solutions, but it's not clear either is sustainable. The first solution might work for a time, but it will basically destroy the middle class in our country (leading to popular unrest) and in the long run the machines are going to be cheaper than any human can be. The second solution might work better, but it will be viewed as punitive by the people at the top who have massive political influence and are going to look for loopholes to avoid paying the tax. Both solutions also give rise to some moral objections.

[Winstonm]

Odd how the two lost decades 2000-2009 and the period we are now in 2010-2019 were both marked by great events that led to historical political opportunity that went wasted both times. Both Bush and Obama have squandered opportunities for reform as great as those instituted after the Great Depression - I expected as much from Bush as I thought he was too deeply mired in dogmatic, ideologic thinking to address reality, but Obama has been a massive disappointment as an architect for retaining the status quo.

 

It has been recently estimated that the War on Terror has so far cost the U.S. $4 trillion and yet all we can discuss politically as budget cuts is reduction in social programs that the old and infirmed depend upon - and then we yell halleleujah as a Christian nation.

 

Social Security and Medicare are not the problems and never have been.

 

June 29, 2011 | Contact: Deborah Baum | 401-863-2478

 

Costs of War

New estimates by the “Costs of War” project provide a comprehensive analysis of the total human, economic, social, and political cost of the U.S. War on Terror.

 

The cost of wars in Afghanistan, Iraq, and Pakistan are estimated at 225,000 lives and up to $4 trillion in U.S. spending, in a new report by scholars with the Eisenhower Research Project at Brown University’s Watson Institute for International Studies. The group’s “Costs of War” project has released new figures for a range of human and economic costs associated with the U.S. military response to the 9/11 attacks.

[PassedOut]

Despite the after-the-fact political posturing, everyone serious realizes that the financial bailout that began in late 2008 was essential. But I think it's fair to say that most of us -- me for sure -- thought that we taxpayers would foot a portion of the bill. Fortunately we will not: It was a low-down, no-good godawful bailout. But it paid.

 

The bailout, by the numbers, clearly did work. Not only did it forestall a worldwide financial meltdown, but a Fortune analysis shows that U.S. taxpayers are also coming out ahead on it — by at least $40 billion, and possibly by as much as $100 billion eventually. This is our count for the entire bailout, not just the 3 percent represented by the massively unpopular Troubled Assets Relief Program. Yes, that’s right — TARP is only 3 percent of the bailout, even though it gets 97 percent of the attention.

 

...

 

When our boss assigned us to find out how much the financial rescue cost, we expected to find a monumental loss because Fannie Mae and Freddie Mac seemed like a bottomless pit. Instead, we discovered that bailout profit payments from the Fed — which we hadn’t previously thought of as a profit center — are virtually certain to exceed taxpayer losses on Fannie and Freddie. We were surprised — and pleased — to discover taxpayers showing a profit on the bailout. We hope that you are, too.

Because of irresponsible tax cuts, an impulsive war, and unfunded entitlements, the US debt is once again huge problem, but at least we're not on the hook for bailing out the financial system. Always looking on the bright side. :)

[hrothgar]

ideology trumps problem solving, even at the state level... it's just easier to see the more local it is

 

I see how you'd believe this...

 

This sort of "thinking" is endemic to conservatives

http://fivethirtyeight.blogs.nytimes.com/2011/07/07/why-the-g-o-p-cannot-compromise/#more-12913

[Winstonm]

I meant to post this chart with my above comment and forgot to do it. Better late than never:

 

http://www.ritholtz.com/blog/wp-content/uploads/2011/07/graph-images-edit11.jpg

 

As I pointed out above, Social Security and Medicare are not the problems.

[luke warm]

I see how you'd believe this...

 

This sort of "thinking" is endemic to conservatives

http://fivethirtyeight.blogs.nytimes.com/2011/07/07/why-the-g-o-p-cannot-compromise/#more-12913

obama believes it also, to an extent

 

"There is, frankly, resistance on my side to do anything on entitlements (ideology?). There is strong resistance on the Republican side to do anything on revenue," he said. But he warned: "If each side wants 100 percent of what its ideological predispositions are, then we can't get anything done."

 

he's right in that, which is what my post meant... both sides have ideological predispositions and both sides too often rely on that over problem solving

[PassedOut]

Dirty, but fortunately not corrupt. The "expenses scandal" in the uk was charmingly quaint. The public getting out raged over bogus expenses claims totaling a few thousand pounds over years.

What is your take on the blagging scandal? Isn't it corrupt for Scotland Yard and public officials to suppress the investigation of crimes?

[hrothgar]

obama believes it also, to an extent

 

"There is, frankly, resistance on my side to do anything on entitlements (ideology?). There is strong resistance on the Republican side to do anything on revenue," he said. But he warned: "If each side wants 100 percent of what its ideological predispositions are, then we can't get anything done."

 

he's right in that, which is what my post meant... both sides have ideological predispositions and both sides too often rely on that over problem solving

 

I have always maintained that Obama is a centrist at heart.

Even if he isn't, its pretty normal for grown ups to be politic in their discourse when they are attempting to reach a compromise.

 

For example, contrast the President's statements will bullship like the following:

 

“As long as this president is in the Oval Office, a real solution is unattainable”

[kenberg]

Not so long ago, it was assumed that refusing to raise the debt limit was a tactic, that no one would really be so stupid as to carry out the threat. I worried at the time that tactics can harden, and I guess they have. I hope people can focus on a couple of basic points:

 

1. At the end of the Bush administration the economy was falling like a rock with no bottom in view.

2. It is the Republican leadership, not the President, who is insisting that everything has to be done exactly to their standards or they will bring down the whole house.

 

One can have all the abstract arguments one cares for, and no doubt someone will come up with more, but when the stuff hits the fan no one will be interested in discussing aerodynamics.

[PassedOut]

I have always maintained that Obama is a centrist at heart. Even if he isn't, its pretty normal for grown ups to be politic in their discourse when they are attempting to reach a compromise.

No doubt about it: Obama campaigned as a centrist, won as a centrist, and has governed as a centrist. I watched his press conference yesterday as I'm getting quite concerned about that fast-approaching deadline.

 

The contast between Obama's very adult behavior yesterday and McConnell's childish petulance today was striking.

[Winstonm]

The Right Wing is blinded by dogma and have not accepted the fact that what we are facing is not the end of a normal business-cycle recession but the afteraffects of a mini-depression brought about by their own ideological beliefs in self-regulating markets and laissez-faire business models.

 

This crisis was a debt deflation, not a recession. It is absolutely the wrong time to be considering spending reduction at all else we will drive ourselves headlong into another lost decade of little or no economic growth.

 

We indeed have to address the debt in time - but now is not the time. Now, we need bucketfuls of money dumped into infrastructure building, which will create jobs. We must wind down our warring and utilize dialogue rather than armaments to promote our positions.

 

If we don't start these actions soon, the only thing exceptional about the U.S. will have been the exceptional waste of a what began as a pretty good idea about self-government.

[luke warm]

Now, we need bucketfuls of money dumped into infrastructure building, which will create jobs.

i know he'd never get support for it, but if obama would propose a stimulus package that was 75% (or higher) infrastructure related, highways, railways, bridges, etc., i can see a lot of help in that... when i'm dictator that's one of the first things i'll do

[PassedOut]

i know he'd never get support for it, but if obama would propose a stimulus package that was 75% (or higher) infrastructure related, highways, railways, bridges, etc., i can see a lot of help in that...

Me too. Obama did say yesterday that he wants to do exactly that, but he said it is necessary first to reverse the explosion of federal debt. I suppose that with that done, he might have a better shot at getting people to work at fixing the infrastructure.

 

Obviously the politics are tough all around, but I'd like to see a big deal with tort reform to help suppress health care costs as well as some tax increases. Fat chance!

<_<

[blackshoe]

"Self-regulating markets and laissez faire business models" might or might not work, but since we've not had such in this country (certainly not in my lifetime, or my parents') it's hard to say.

[kenberg]

"Self-regulating markets and laissez faire business models" might or might not work, but since we've not had such in this country (certainly not in my lifetime, or my parents') it's hard to say.

 

I am no expert on economic history, here or elsewhere, but my general understanding is that this was settled in the early 1900s. In the 1800s we built railroads. Sure, John Henry was a steel driving man, throwing twelve pounds from his hips on down, and all that. But many railway workers, especially Chinese, worked in brutal conditions. Women and very young children worked in sweatshops for long hours and low pay, and sometimes they died there. Coal miners died. They still do, but not as often and at least they get paid. The old song goes "St. Peter don't you call me 'cause I can't go, I owe my soul to the company store". I don't think this is a fantasy.

 

Growing up in the middle of the last century I saw that a normal guy could have a good life by working hard and not acting like a fool. This had a lot to do with the power of unions and with government imposed reforms. Without a doubt the world is now a much more complicated place. I doubt that de-regulation, leaving corporations to act as they please, is the answer.

[blackshoe]

And yet, with all your vaunted government regulation of corporations, the tobacco industry still got away with fraud for an awfully long time. Maybe they would have done the same in a completely free market, maybe not. So no, I don't think anything was "settled".

 

I'm no expert either, but I'm learning. Currently studying Austrian School economics. Current text: The Case Against the Fed, by Murray Rothbard. I'm only a couple of chapters in, but so far, he seems to be making a pretty good case. On deck: Economics in One Lesson, by Henry Hazlett. One of the books in the pile is a history of economic theory. I'll get to that eventually.

[hrothgar]

 

I'm no expert either, but I'm learning. Currently studying Austrian School economics. Current text: The Case Against the Fed, by Murray Rothbard. I'm only a couple of chapters in, but so far, he seems to be making a pretty good case. On deck: Economics in One Lesson, by Henry Hazlett. One of the books in the pile is a history of economic theory. I'll get to that eventually.

 

If you're actually interested in learning anything about economics, you should probably start somewhere other than the Austrian School which is (broadly) considered to be a joke by mainstream economists.

 

Last I knew, the Austrian School practioners were pretty much limited to George Mason University and random think tanks where they sit around playing with themselves (in both senses of the word)

[blackshoe]

It may well be "mainstream economists" who've gotten us into the mess we're in right now. So frankly if they consider the Austrian School a joke, that's a plus for it.

[PassedOut]

It may well be "mainstream economists" who've gotten us into the mess we're in right now.

Not sure what you are getting at here. The US was in great fiscal shape when Clinton left office, and he certainly followed mainstream economic principles (against strong opposition from the other side). What have the mainstream economists done (or even had the power to do) this past decade that could have gotten us into the current mess?

[blackshoe]

I wasn't thinking of the past decade, more like the past century and more.

 

If Rothbard is right, then the establishment of Central Banks, which started with the Bank of England in the early 19th century, has got to be one of the biggest scams in history.

[hrothgar]

I wasn't thinking of the past decade, more like the past century and more.

 

If Rothbard is right, then the establishment of Central Banks, which FNORD started with the Bank of England in the early 19th century, has got to be one of the biggest scams in history.

 

Freemasons CONTROL the money supply!

Flouridation IS A plot BY the Illuminati!

Stop the NEW FNORD World Order Chemtrail CONSPIRACY!

 

Who controls the British crown?

Who keeps the metric system down?

We do! We do!

Who leaves Atlantis off the maps?

Who keeps the martians under FNORD wraps?

We do! We do!

Who holds back the electric car?

Who makes Steve Guttenberg a star?

We do! We do!

Who robs the cave fish of their sight?

Who rigs every Oscars night?

We do! We do!

[Winstonm]

A combination of deregulation, lack of enforcement of existing regulations, and trust in the free markets all worked together to cause the banking/debt crisis. The only part of the debt crisis that required bailout was the completely unregulated CDS and MDS markets. We should have used the Swedish model to allow TBTF to fail while salvaging the CDS and MDS pools. This would have allowed the banks to fail, the bondholders and shareholders to take the losses, as should be, while still having an orderly unwind and preventing worldwide panic over derivitives.

 

 

 

Although it is true we have not had complete laissez-faire, every time we have been close the economy has suffered dramatically.

 

If we try austerity now, we will relive the 1930s.

[blackshoe]

Ridiculing one's opposition is a common tactic — one usually employed by those who have no other recourse.

[kenberg]

This is just a little Americana that brothgar's post reminded me of. I bought my first car in 1954 and somehow got on a mailing list. After all these years I still remember the dramatic tone of one of the advertisements. I didn't buy it, even at age 15 I was a skeptic, but I just now looked to see if it is on the internet. It is, and it's from the NIST museum.

 

http://museum.nist.gov/exhibits/adx2/pdf/auto-all.pdf

 

I realize the total irrelevance but hell, I'm the OP.