Representative Dennis Richardson: Dangerous debt

Oregon: Digging With A Shovel Named “Debt”
By State Representative Dennis Richardson

In a recent newsletter, I explained two bills that will increase Oregon’s long-term debt by $177 Million to fund a few months of short-term jobs repairing state buildings. Today, the Oregon House passed two bills (S.B. 338 and S. B. 5562), authorizing $177 Million of long-term debt. It was a lively debate on the floor of the Oregon House of Representative. By today’s House vote and the Senate’s vote last week, it is clear to me the majority of our state leaders have yet to learn, you cannot dig yourself out of a financial hole with a shovel named Debt. Oregon is certainly not alone in its strategy to borrow and spend its way back to prosperity. The financial crisis in which our State and Nation are mired was succinctly described by a recent blogger who stated:

“All of the proposed bail out schemes to date share the same flaw; they are all geared to returning the existing system to health. It is the existing financial/economic system that is the root of the current crisis. It is built on the discredited premise of endless growth and a childish faith that critical finite resources will always be abundant. A primary goal of the bail outs is to revive the debt machine. Why are we not hearing the truth that we have to live within our means? If you can’t afford it, don’t buy it. Save your money. Make do with less. Instead of constantly buying new stuff, make things last. Repair them. Eat less trash. Walk instead of drive. Etc., etc. Let’s build the future on a new model – sustainability!”

In short, Debt is not the solution to our State and Nation’s financial crisis–Debt is the cause. What is Oregon’s current indebtedness? Before today’s $177 Million increase, Oregon already carries a $9.7 Billion debt burden. The biennial cost for debt service on Oregon’s current Net Tax-Supported debt is more than $1.1 Billion. Of that $1.1 Billion, $535 Million will be paid from the General Fund. That is $535 Million that must be paid first”¦off the top. It is $535 Million that cannot be used to educate or provide health care for our children. It is $535 Million that cannot be used to protect our citizens, and it cannot be used to provide care and food for our most needy seniors. It is ½ Billion dollars from the next budget, siphoned off to pay for debts incurred by legislators of the past, and this Oregon’s debt will not be paid off until 2038.

In recent decades, we, as a society, have forgotten sound economic principles of thrift. We have lost our financial anchors regarding debt and interest. These sound economic principles were discussed in the August 2007 newsletter entitled “Oregon’s Revenues, Fees & Debt: Cycles for Boom & Bust.” I reviewed then the ill-advised debt decisions made by the 2007 Legislature, when Oregon’s revenue forecast was bright and rosy. I mentioned lessons learned the hard way on the temptations of easy credit and the enslaving power of incurring unnecessary debt.

Oregon’s legislative leaders see the State’s great borrowing potential and find it difficult to resist the temptation to use it. Oregon’s State Debt Policy Advisory Commission stated in its January 2009 Report, that Oregon has a “maximum [long-term debt] target ratio of 5% of General Fund revenue.” The State’s problem is the same problem causing so much suffering for Oregon and American families: Troubles begin when “availability” of credit is confused with “advisability” of incurring debt.

The warning for Oregon Legislators is that long-term debt too often is seen as a way to satisfy the immediate desire for additional revenue. By incurring additional debt, Oregon loses for decades the money consumed by debt payments. In short, long-term debt results in draining funds away from crucial services and programs for 20 to 30 years.

Time-tested principles of thrift have been ignored or forgotten by our political leaders. They are not alone. Many Oregon households are sinking in a sea of debt. Nationally, Americans have been spending more than they earned””folks have based their lifestyle on the ability to borrow, not on the ability to earn or produce wealth.

In conclusion, the Oregon House passed two bills today–Senate Bill 5562 authorizes $177,000,000 of additional debt, and Senate Bill 338 authorizes spending it on state building maintenance projects. Many of the approved projects have short-term benefits, yet all are financed with long-term debt. I believe incurring this high level of additional debt is well-intended, but ill-advised. We should not be incurring further debt when Oregon’s present decline in tax revenues is so drastic that nearly a $1 Billion revenue short-fall must be addressed within the next four months. The loss of $1 Billion in revenues is a financial catastrophe of historic proportion. Dealing with such an enormous short-fall will require all available financial resources. It saddens me to watch Oregon sink deeper and deeper into debt, while committing tens of millions of taxpayers’ dollars in addition debt service payments for the next 15 to 20 years. Oregon truly is in a financial and economic pit, and it makes little sense to continue digging with a shovel named Debt.
Sincerely,

Dennis Richardson
State Representative

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  • Anonymous

    The only way to get out of a hole is to stop digging. and we dig and we dig and we dig. Whatever happened to learn from experience? Course I guess you have to look at it first. Our state government is competing to see who can wear the biggest blinders.

  • sagano

    Just trying to keep up with the feds

  • Reper

    I thought there was a constitutional cap on how much Oregon could borrow at one time.

  • Steve Plunk

    I have to give thanks to Rep. Richardson for once again being the voice of common sense. The irrational behavior in Salem grows daily and without people to hold it back it would grow faster and faster.

    Thanks.

  • dean

    What Rep. Richardson does not know about economics apears to be a lot. Cutting back on spending at a time when we are teetering on a severe deflationary cycle makes perfect sense for individuals and businesses, but makes no sense for government. Nationally we have a 1 trillion dollar private spending slack that is already resulting in massive layoffs and wage cuts. This sets up a cycle that will feed on itself, and if we are not smart about this we will end up with a repeat of the 1930s.

    The government can spend our way out of this, and yes we will have to pay the tab later on. But better to do that from a larger economy than a smaller one.

    • davidg

      If huge deficit spending is the way to get out of this, please explain why the huge deficits Bush ran up didn’t prevent the problem.

  • Scott Jorgensen

    I’m pretty sure that Rep. Richardson, as a member of the budget-writing Ways and Means Committee, knows a hell of a lot about this than Dean, who regularly demonstrates how little he knows about anything at all.

    Long-term debt for short-term gain? I sure hope Dean’s wife holds the credit cards and wears the pants in his family…

    • dean

      Apparently he doesn’t know what he should know. Being a member of a committee does not make one an economist. Maybe he should consult a few. Long term debt to help head off a long term depression…not short term gain.

      Davidg….Bush’s deficits were mostly accumulated during a time of economic growth, not contraction. Bush, his father, and Ronald Reagan all ran deficits counter-cyclical to when economists say they should have. Clinton was the only of our last 3 presidents who built his budgets mostly in synch with what the economy was doing. He raised taxes at the front end of a recovery and balanced the budget, leading to a long, sustained period of high growth. Bush basically squandered his opportunity, like he squanded pretty much everything else that was handed to him, and doubled the national debt when it could have been paid substantially down.

      Temporary…and I stress temporary, huge deficit spending is probably the only arrow in the quiver left to head off a serious bout of deflation. Tax cuts are useless because people will use them to pay down debt, and businesses lack customers so they won’t invest in new production until the market rebuilds. Interest rates are effectively at zero percent. We are out of options. Republicans, by opposing the only rationale way out of this, are ignoring history and risking our future.

  • Rupert in Springfield

    Well, it would appear Representative Richardson is in very good company regarding the worthiness the concept of spending our way out of this.

    Who else agrees with him?

    Well, the stock market for one, seems like it pretty much tanked one the first go round of this idiocy under Bush.

    Wonder why people don’t have much faith in this nonsense? Well,, could be little things like the revelation yesterday that the Treasury had overpaid by some $70B for assets it had bought under TARP yesterday. Hardly confidence inspiring.

    Hmmmm, who else?

    Of that’s right, the Congressional Budget Office. They just ranked this bill a looser long run.

    In a letter sent to Sens Chuck Grassely and Judd Gregg:

    “In contrast to its positive near-term macroeconomic effects, the Senate legislation would reduce output slightly in the long run, CBO estimates, as would other similar proposals. The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth in the form of government bonds rather than in a form that can be used to finance private investment, the increased government debt would tend to “crowd out” private investment—thus reducing the stock of private capital and the long-term potential output of the economy.”

    http://www.usnews.com/blogs/capital-commerce/2009/2/4/cbo-obama-stimulus-plan-weakens-economy-over-long-run.html?s_cid=rss:capital-commerce:cbo-obama-stimulus-plan-weakens-economy-over-long-run

    Ok, well, so that pretty much dispenses with the Richardson doesn’t know much about economics canard.

    • dean

      Yes…brilliant. debt is bad and has to be repaid. Grassley should put himself up for the Nobel.

      Reality check…what private investment is going to be crowded out? Investment in auto manufacturing? No. They are all cutting back and need no investment. Steel? Housing? Beanie Babies? No. All are on downward trends. As is high tech. As is….well everything. Hence the stock market continues to go down. and will do so for a long time unless big gobmint prints some money and gets it out there.

      It is real good timing that Republicans have rediscovered the desirability of fiscal prudence just in time to help push us into a depression. Fabulous.

      • davidg

        You haven’t answered the question I posed to you at 5.1. If deficits stimulate, why didn’t the Bush deficits stimulate? You observe correctly that Bush ran deficits at a time of growth. That observation doesn’t answer the question: if deficits stimulate, why did the Bush deficits not stimulate?

        • davidg

          Even I think I need to correct my phrasing on this question. I like the way I phrased the first time: please explain why the huge deficits Bush ran up didn’t prevent the problem.

          Put another way: if deficits stimulate, how could the huge Bush deficits lead to a downturn?

          • dean

            David…the Bush deficits probably DID stimulate the economy for a while. As did the low interest rates that led to the over-stimulation of the housing market that eventually led to the crash. The Bush deficits did not prevent the crash because they were never designed to do so. those deficits funded 2 wars and reconstruction of 2 nations far from here.

            If we have 8% unemployment and rising, hundreds of thousands laid off every month, factories closing, and so forth, the only 2 options are to wait it out or try and spend ourselves out. Hoover tried to wait it out and that did not go well. Obama did not get elected to sit on his arse and wait it out.

      • Rupert in Springfield

        >Hence the stock market continues to go down. and will do so for a long time unless big gobmint prints some money and gets it out there.

        Yeah, I didnt think you would have much to counter the fact that after you just got done saying someone doesnt know anything about economics, you find out the CBO agrees with him.

        Look Dean, yammer all you want, the fact of the matter is

        The CBO says your wrong.

        The Stock market acts like you’re wrong.

        And the American people think your prescription, the stimulus, is wrong.

        And if that weren’t enough there seems to be legions of economists in full page ads by the CATO institute who are willing to put their names on betting the stimulus is wrong.

        So you go right on with this sort of nonsense, it would seem few agree with you.

        Bottom line – You seem to be the last person on the planet who thinks spending $300,000 per job created ( using fearless leaders high numbers ) makes sense.

        Oh, and hey, you know what? I was just wondering something. You were saying the Republicans better move to a center left position. And you know, you just said a while back Republicans faced oblivion if they didn’t support this silliness. Well, seems like that have been against it and the public has moved right along with them.

        So how’s all that working out for you?

        Do you think maybe its time to start thinking?

        Maybe just blindly going along with whatever your party does isn’t the best strategy?

        • dean

          If the $300K per job were true that would be one thing, but it isn’t.
          as for public opinion:

          02/04 CBS News Poll: 51% in favor of passing the stimulus bill, 39% opposed.

          USA gallup: 52% in favor, 38% opposed.

          Fox: 45% say stimulus will help, 18% say hurt.

          Diago: support: 54-66%, oppose 27-34%.

          I could go on. Read for yourself.
          http://www.pollingreport.com/budget.htm

          I don’t think I ever suggested republicans move to “center-left.” That political space is already occupied territory. Center-right is freed up space. But I have come to agree with you. I think Republicans should stay as far to the right as is humanly possible. Eventually the people will get it.

          • Rupert in Springfield

            The $300K figure is untrue?

            Why? because Dean say’s so?

            Ouch…… this is going to hurt Dean, that’s all I can say. Prepare for a whoopin!

            From the White House web site:

            “On January 8th, 2009 — less than two weeks before taking office — President Obama spoke on the need for urgent action on his American Recovery and Reinvestment Plan to save or create over 3 million jobs while investing in priorities like health care, energy, and education that will jumpstart economic growth. ”

            http://www.whitehouse.gov/agenda/economy/

            That’s the stimulus plan he is talking about.

            That too old for you?

            Fine, lets go to Feb 3rd. Again from the White House web site discussing Larry Summers trying to sell this dog on a state by state basis.

            WASHINGTON, D.C. – During a briefing with National Economic Council Director Larry Summers, the White House today released state-by-state data detailing the jobs impact of the American Recovery and Reinvestment Plan. Summers discussed President Barack Obama’s plan to create jobs, stimulate the economy, and foster long-term economic growth.

            “We need to immediately jumpstart job creation and President Obama’s American Recovery and Reinvestment Plan will help those who have suffered the most during this economic crisis. Our economy is in the midst of an unprecedented crisis and we need to act now,” Summers said today.

            Obama’s plan will create 3-4 million jobs over the next two years. See below for state-by-state data detailing the employment impact of the recovery plan.

            http://www.whitehouse.gov/the_press_office/state_by_state_employment_impact/

            National economic Director Larry Summers

            So, Divide one trillion ( yes that’s the bills cost, no Dean, don’t come back at me with some $750B figure, you add the interest and the other crap they will add to this, you have $1T) by three million jobs and you come up with over $300K per job created.

            Wow Dean – that’s what they call a body slam in the wrestling world

            You know what else its called?

            Hang the leash on the Donkey – You have touting this plan as a great move by Obama. You have been running around saying others don’t know about economics.

            You know what we find out? You don’t even know how many jobs the plan was intended to create.

            That’s a pretty key element of why someone would support it, but you didn’t even know that basic fact. So then on what basis was your support for the plan given?

            Simple – It was a plan put out by Democrats, and that for you is good enough.

            So Dean, in the future, could you please not pretend any more that you follow good ideas, not ideology. You have just been caught red handed supporting something not because you knew even the most basic thing about it, but because of the party that supported it.

            Napoleon is always right Dean.

  • davidg

    Dean, your response at 7.1.1.1.1 is still inadequate. You claim that the Bush deficits didn’t stimulate the economy because they were spent on wars. Just a few weeks ago you told us that World War II deficit spending got us out of the Depression. Now you tell us that the war deficit spending doesn’t work, but somehow local projects will. The Bush deficits, though huge and harmful, hardly contain anywhere near the amount of war spending as occurred in WWII. Most of his budget is still domestic spending.

    It seems like you have to change your theory every time you look at it. You have castigated people here for allegedly being ideologues against the bailouts. You might want to be a little more careful with that term as you seem to be as ideologically committed to bailouts as those who oppose them.

    As for your comment that the only two choices are to do nothing or sit on your arse, remember that it is possible to make matters worse if you do something stupid. In that case, doing nothing would be better. Obama, like Bush, is now thundering that it is urgent to adopt his bailout version, yet he warns that it will probably be years before there is any effect. New Deal legislation was adopted in the early thirties. The Depression didn’t end until the late forties. That is hardly a recommendation for government action to combat a downturn.

    • dean

      For Rupert…you are simply taking the ridiculous math of the House Republicans and swallowing it whole without giving it a 2nd thought.

      First…the Obama latest estimate was 4 million jobs, not the 2-3 million used by Republicans. 2nd, the spending and job creation is for 2 years, not one. 3rd…the stimulus…being a stimulus after all, is predicted to boost the GDP growth by 1.5% over what the cost of is because of a multiplier effect. That has a $150 billion a year plus on taxes and spending, or $300 billion over 2 years, or effectively reducing the “cost” of the stiumulus to $500 billion.

      Thus the correct math is about a $500 billion cost over 2 years that creates 8 million job years. (Yes, you could argue for raising the cost by including interest, but you would also have to factor in reduced growth and what the cost of that is).

      Do the math and you get an actual cost of $65K per job. And for that we actually get bridges fixed, roads patched, schools rebuilt, government buildings made more energy efficient, and so forth. We don’t just drop bombs on the Middle East.

      This analysis by the way, is from the Center for economic Policy Research, economist Dean Baker. It is supported by Nobel prize winner Paul Krugman. It is not my personal analysis.

      So yes…you and Representative Richardson and the entire Republican party seem to have lost touch with economic reality (as you have with climate reality) and have instead decided to manipulate numbers to serve your ideology and fear of demonstrated success of government spending.

      No Rupert…I have not been caught “red handed” at anything. You have been caught swallowing bad math because that is what you wanted to believe.

      Davidg…I wrote: “David…the Bush deficits probably DID stimulate the economy for a while…”

      Spending on war is stimulative. According to Keynes, dropping money out of airplanes during times of depression would be stimulative.

      WW2 began after a 12 year period of an economy that was way under producing its potential. The ramped up demand for steel, vehicles, planes, ships, food, and so forth quickly absorbed the slack, and then some. Roosevelt had to impose wage and price controls and rationing to keep all this stimulus from becoming inflationary.

      Bush cut top marginal tax rates, then ramped up spending to fight 2 wars, plus he and the Republican Congress increased domestic discretionary spending and the Fed kept interest rates very low. I think all this was stimulative. The record shows we ended up with severe price inflation in housing, and later in energy, and food, but not in the economy as a whole. Wages for example stayed flat or even declined. But fact is, we have little to show for what was borrowed and spent. We did not invest in America.

      I’m not an economist nor an economic historian. I don’t know for example, how we managed a fairly smooth transition from a war economy to a peacetime economy after WW2 yet avoided a crash or high sustained infaltion.

      I know the debt that was run up was like nothing we had ever had before, and I know that a long period of sustained economic growth (at a time of our highest every private union rates and highest ever marginal tax rates) all happened together. The steam ran out in the 70s, and in my (and Rober Reich’s opinion) never came back. We have been treading water for the most part for 30 years. We have had growth, but middle class incomes have been stagnant all that time. The rich have gottern richer, and our civic infrastructure has declined.

      I’m not “ideologically” committed to bailouts. I’m only interested in what works and what the downside risk of not bailing out is. I’d be much happier with a balanced budget, full employment, rising middle class incomes, and low inflation. I don’t much care how we would get there, whether by taxing the hell out of the rich or by cutting capital gains taxes to the bone. If either one works…I say go for it.

      Yes…it is a risk to do something as it is a risk to do nothing. I agree. I’m saying Obama was not elected to do nothing. McCain might have addressed this problem through tax and spending cuts, but he lost.

      New Deal legislation revived the banking industry, put many unemployed people to work (including my father and his father,) kept people fed and housed, started social security, got a lot of great infrastructure built that we still make use of (Columbia River dams, Timberline Lodge, Highways, Parkways, trails, etc…) and it held the nation together through a tough period. Roosevelt was re-elected 3 times. Yes, the economy stayed below its potential, but when Roosevelt came into office it had shrunk by something like 75%. It grew all through the 30s except for a short downturn in 37-38 when he made the mistake of cutting spending and balancing the budget too soon.

      Obama is being straight with us. It is going to take years to dig out of this hole. He can’t predict the future. he can only have it modeled and go with the best odds.

      I bleieve the opposition is largely idiological, not practical.
      When Republicans say we should cut taxes instead of spend on government projects, they are choosing a path that most economists say is the wrong one because at this time people will not spend their tax cuts (and I know this is the case for myself). I believe they fear success. They have tried for 28 years now to convince the American people that government can’t do anything right except fight wars, so if a stimulus works and we get a lot of good stuff built, and we get a comprehensive health insurance system in place, that kills the core theory that underpins a whole movement based on what i think is a false belief.

    • John in Oregon

      Dean I would like to discuss your comment that > *”They [Republicans] have tried for 28 years now to convince the American people that government can’t do anything right except fight wars, so if a stimulus works and we get a lot of good stuff built, and we get a comprehensive health insurance system in place, that kills the core theory that underpins a whole movement”*

      I agree this is your belief. My view is the stimulus has little potential to improve the economy. My fear, it can do great harm.

      Which of us is ultimately correct turns on your phrase > “so *if* a stimulus [the Senate bill] works and we get a lot of good stuff built.”

      The actual capitol construction in the spending stimulus is small, around 4%. Lets take one example as a small glimpse into the future.

      $88,600,000 new construction for the Milwaukee Public Schools. The Milwaukee Journal Sentinel reports the Milwaukee Public Schools have shrinking enrollment, 15 vacant schools and, quite logically, no plans for new construction.

      Dean, I would like to debate your comment > *”I bleieve (sic) the opposition [Republican] is largely idiological, (sic) not practical. When Republicans say we should cut taxes instead of spend on government projects, they are choosing a path that most economists say is the wrong one because at this time people will not spend their tax cuts (and I know this is the case for myself). I believe they fear success.”*

      Your comments covered quiet a wide range so lets focus each point at a time.

      > *most economists say is the wrong*

      Economics is not done by consensus. No two economists agree on everything although both may conclude that Keynesian spending does not work.

      Also old ideas like Keynesian spending die hard, slowly being relegated to narrower and narrower applications. That’s what you have been saying in your posts above, adding conditions and caveats. Spending stimulus will work in this one special short tern circumstance for example.

      Dean you observe that Republican tax cuts are wrong because *”at this time people will not spend their tax cuts (and I know this is the case for myself).”*

      Here you and I agree on the outcome but not what caused that outcome.

      My view is simple, Keynesian spending does not work. From what you said your view is that people will not spend their tax cuts.

      Lets evaluate in light of two recent examples, the Bush tax rebate of 2001 and then again in the spring of 2008.

      In both cases rebate checks went out. In neither case did it work which supports both you and I.

      Now you say that’s because it wasn’t spent. lets consider the possibilities:

      *O* If the money is buried in the back yard it disappears from the economy. Very few would do this.

      *O* If the rebate is spent it buys goods and the money renters the economy.

      *O* If the rebate is used to pay down debt the money goes to creditors and renters the economy.

      *O* If the rebate is saved the bank will lend the money which renters the economy.

      Other than the back yard in all cases the money remains in the economy. Unless you can identify another mechanism the only conclusion remaining is my contention that Keynesian spending does not work. Tax rebate checks are Keynesian spending, the only detail is whether the Government spend it directly or by rebate checks.

      Dean you noted > *Republicans say we should cut taxes instead of spend on government projects,*

      Very true, although I would point out the specifics are Republicans advocate cutting the marginal tax rate and more specifically the marginal tax rate on investment and business.

      Lets check how well that works. Probably the best examples are the JFK and Ronald Reagan marginal tax cuts. However lets use a more recent example the marginal tax cuts of 2002 and 2003. Marginal tax cuts worked as you observed above when you commented that *Bush’s deficits were mostly accumulated during a time of economic growth..*

      Its worth discussing the deficits, partly due to the Clinton gift of a decimated military but mostly due to congress (both Republican and Democrat) spending pork such as the Farm Bill, the Perception benefits for upper income and more.

      That’s the same spending problem Reagan had with a Democratic congress and the LBJ war on poverty spending.

      Many comments here have been attributed to “economists”. Sorta like “they say”, but rather than a nebulas they, consider a specific economist. Nouriel Roubini, professor of economics at New York University.

      He alone predicted the predicted the present economic situation and what is happening in specific detail. His recent Forbes article *Is America Going The Way Of Japan?*

      Roubini rejects the spending stimulus that failed Japan. But the money quote (pun intended) is this:

      “Time is of the essence, and the clock is working against U.S. and global policymakers. The time to stop dithering has long passed; _the time to implement a program of forceful, coherent, credible, globally coordinated monetary, fiscal, *financial clean-up and debt-resolution policies* is now.”_

      Sounds a lot like what Representative Richardson said above doesn’t it?

      (No I don’t count Paul Krugman as predicting anything. He simply began preaching economic doom on Janurary 20, 2001. He is just a bad news bear.)

      I see discussion here about the popularity of the Spending stimulus bill. For example the CBS News Poll showing 51% in favor down from 63% in favor. However that isnt all that is in that poll which additionally shows;

      *O* What is the best way to end recession?
      — More government spending 22%
      — Tax cuts for business 59%

      *O* Will the [spending stimulus] bill shorten the recession?
      — Yes, significantly 21%
      — Yes, a little 18%
      — No 45%

      *O* Should the government own and control the banks?
      — Yes 14%
      — No 76%
      — Don’t know 10%

      *Very Interesting*

  • Anonymous

    dean says:

    “I bleieve [sic] the opposition is largely idiological,[sic] not practical”

    Shocking that’s not.

    Given dean’s extraordinary left wing ideological self his take on anything Republican or conservative is entirely a contrived straw man image best crafted to have his contrasting left wing look preferable by comparison.

    Gee, who better to explain, or more accurately interpret, conservative Republican thoughts, motives and objectives then yet another left wing crackpot.
    Oregon is stuffed with lefty deans out there splaining Rs to everyone. Here we have to be subjected to deans intrusion on nearly every major discussion.

    Forever counseling us on how to be better Republicans.

  • John in Oregon

    To put a point on something Representative Richardson said, “All of the proposed bail out schemes to date share the same flaw; they are all geared to returning the existing system to health. It is the existing financial/economic system that is the root of the current crisis”… A primary goal of the bail outs is to revive the debt machine.

    Simply put, the days of easy credit to marginal borrowers promoted to meet laudable social goals are over, never to return for at least a time. This is true for three immutable reasons;

    *O* Short of Administration intervention, Regulators are simply not going to allow new lending to marginal and over extended borrowers.

    *O* Short of nationalization, banks and lenders will restrict new lending to only credit worthy borrowers.

    *O* In the presence of the interventions to promote easy borrowing mentioned above Private and Industrial capitol will flee the market like the plague.

    As an engineer geek I become frustrated that today much durable equipment is no longer field repairable. Durable equipment costing $1,000, $5,000, $10,000 or more must be returned to the factory for repair. And at the factory they no longer repair to the component level. At best the repair is done at the sub-assembly level. Somewhat like replacing the rear end and wheels of a car when the left rear tire goes flat. I have a Black and Decker power drill that my father purchased in 1943 for his work at Douglas Aircraft. I have used it for 20 years. I replaced the power cord and installed new brushes, it functions just fine today.

    That said I find I disagree with some small phrases used in the article. “childish faith that critical finite resources will always be abundant”… “a new model – sustainability!”

    Sometimes what seems obvious is simply not the case. Such as my discomfort with disappearing field repair. When the cost to recycle an old product and manufacture a replacement device falls below the cost of creating and supporting a repair process, then repair no longer makes any sense.

    The ever looming exhaustion of critical resources is another example. Doctor Julian Simon researched the facts. He looked at them and accepted what they said. There is no such thing as the exhaustion of critical resources. In the debate between Simon, Paul Ehrlich, (The Population Bomb), and John Holdren it was Simon who prevailed.

    More recently Bjørn Lomborg revisited the subject expecting to prove Simon wrong. Lomborg, a tenured professor of mathematics and an honest statistician looked at the facts. The facts proved Simon correct. For publishing his research Lomborg was charged in Danish Court with the modern day equivalent of scientific heresy.

    Part of the Danish Inquisition’s case against Lomborg was written by John Holdren. The Danish court however held in favor of the facts supporting Lomborg who retained his position as a tenured professor of mathematics in Denmark.

    I use the word “sustainability” very carefully as the word has become an environmental and political slogan. Implying that we must settle for less. At the heart of this implied thinking is the belief that wealth is limited. One becomes more wealthy at the expense of another becoming more poor.

    In free markets where individual entrepreneurs are at liberty to build business, free market enterprise creates new wealth. Government, cartels, and command economies are the antithesis of new wealth creation. Government accumulates and distributes existing wealth.

    In the interests of coherency I had considered forgoing the above discussion of resources and wealth creation. Nevertheless seting free the free market engine of wealth creation is a path to extricate our selves from the present situation.

    One cost free solution open to Oregon is to streamline increasingly cumbersome regulation.

  • Rupert in Springfield

    Dean, if nothing else, you do take the cake for wacko math.

    >For Rupert…you are simply taking the ridiculous math of the House Republicans and swallowing it whole without giving it a 2nd thought

    No I’m not, I’m simply taking quotes from the White House web site and dividing the numbers out. Take the number of jobs projected by the total cost, divide, you get the cost per job.

    You might not like that, or may have missed it because you are doing Dean Weasel number 1 ( feigned inability to read ) but thems the facts.

    >First…the Obama latest estimate was 4 million jobs, not the 2-3 million used by Republicans.

    Obama used 3mil in Jan, then bumped it to four, quoted in the same white house citations I gave.

    Again Dean Weasel number one does not get you around this simply fact. Sorry you cant read, but trying to use that to correct me points to mistakes on your part, not mine.

    >2nd, the spending and job creation is for 2 years, not one.

    Ok, so now you want to divide the total cost by the number of jobs AND the number of years? What sort of insanity is this? How is the number of years relevant?

    Second, even if we accept your premise, on what basis do you get to divide by the number of years? That concept makes the assumption all jobs are created at once, right at the start, something that is impossible given the plans delayed implimentation.

    In order to divide by years, you have to assume all jobs are created right at the outset and last the duration. This is not the case. Even if it were, we are talking about jobs, not “job years”. You really didnt think this one through at all did you?

    >3rd…the stimulus…being a stimulus after all, is predicted to boost the GDP growth by 1.5% over what the cost of is because of a multiplier effect.

    Well, this would have some validity if Democratic projections of cost were ever true. Lets not forget the fiasco you guys had with Medicare running at ten times its projections for 1990.

    You are expecting us to accept projections for growth at face value and also that costs will not also grow beyond projections? Please, Im over 21.

    >Thus the correct math is about a $500 billion cost over 2 years that creates 8 million job years.

    What’s a job year?

    Is that like dog years?

    Where did the White House use the term job years?

    What the hell is a job year?

    What are you on?

    >Do the math and you get an actual cost of $65K per job.

    No, do the math and you get right around the $300B per job figure I cited. Its called simple division. My kids can do it in the car, and they are both under 10.

    The simple fact is, the cost of the plan divided by the number of jobs Obama expects to create with it, gives you the cost per job.

    >No Rupert…I have not been caught “red handed” at anything. You have been caught swallowing bad math because that is what you wanted to believe.

    Sure you have. I’m using White house numbers, which obviously you were unaware of until you brought them up. You are trying to do ridiculous things by now talking in terms of “job years” which is laughable on the face of it.

    You sure aren’t arguing this point very well.

    Coming up with all the clumsy math contortions just because Obama is a Democrat proves my point all the more.

    You just got caught red handed defending something only because Obama is a Democrat, since you didn’t even know the numbers of what you were defending. You were all gung ho stimulus, when you had no concept of the projected cost per job.

    “Job Years”….. what a joke. Nice try at a the old switcheroo, but we are talking about jobs here. Not “job years”.

    • dean

      How is the number of years relevant? You are kidding right? You take a proposed 2 year spending bill and divide it up by an estimated number of “jobs,” and you don’t think it matters whether those jobs will last 1, 2 or 20 years?

      The number of years is relavant Rupert, because people tend to get paid based on hours, and there are more hours worked in 2 years than in one. If we were paying teachers $100K for 2 years work, that is twice the productivity of paying them the same amount for 1 years work. Same goes for bridge builders and pothole fillers. Let me ask you this. If for the same amount of money, $800 billion, we got 4 million jobs for 10 years…you think that is the same cost and benefit as 4 million jobs over 1 year?

      Yes…your math is simple division. Very simple. So simple it reaches a distorted conclusion, handy for political theatre but not for economics. It is revealing that you thought to add in future interest paid on borrowing, but left out all the other peky details, like projected GDP growth…like the number of years the jobs are to last, like the costs in unemployment insurance, food stamps and other help unemployed people would get form the government for doing nothing, and so forth.

      But I give up. You win. A zillion dollars a job, Whatever. I tried. I should get credit for that.

    • John in Oregon

      Hey Guys

      There is an easy solution here. As my 8th grade math teacher said, show your work.

      So to start. Obema used several different numbers, 2 million, later 3 million, later still 4 million. With deference to Dean, lets use 4 million.

      Today Shumer said he thought $840 billion out of conference, or $1.3 Trillion with interest.

      So here we go…….

      Premise 1, Jobs will in fact be created.
      Premise 2, The number of Jobs = 4 million.
      Premise 3, The bill will cost $1.3 Trillion.

      Therefore

      Cost to create a job is $1,300,000,000,000 / 4,000,000 = $325,000 per job

      Dean it’s a stretch to assume the jobs last 10 years, 2 years maybe.

      Also, $325 K is cost to create, not the pay.

      • dean

        John…you apparently had the same 8th grade math teacher as Rupert. The money is allocated over a 2 year period, and the jobs would be for that period, so the annual cost per job is no more than half of your conclusion. Also, your numbers also fail to factor in the predicted higher GDP that goes along with the spending, which is as legitimate as paying interest. And bear in mind the entire spending bill is not even aimed at job creation. Some of it is aimed at paying unemployment, paying for food stamps and so forth for those who will not be employed by these public projects nor the rapidly shrinking private sector. So why allocate a portion of the funding to the cost of jobs if it is not even designed to create any jobs?

        Anyway…its all but a done deal. Your side lost the election and does not have the votes to kill this (fortunately). We all get to sit back and see what happens next. If the downslide is halted and recovery begins in a year or 2, your side can trot out your old white guys from Congress and claim it would have happened anyway, and my side can have our rainbow (including a few old white guys like me) step up and will claim the stimulus spending worked as planned.

        If things continue to go south, then your side can get re-elected in 4 or 8 years and have a new go at it, and mine can carp from the sidelines. It’s all great fun either way no?

    • John in Oregon

      Dean SHOW YOUR WORK!

      • dean

        It’s not my work. It’s the work of the Center for Economic Policy Research. I referenced it above.

        Logically John, why would you or anyone calculate the “cost per job” without factoring in the number of years those jobs last? I mean…how long a job lasts does matter. And logically, why would you not factor in GDP growth with or without the stimulus? GDP growth matters. The whole basis for Keynes theory is that government deficit spending can and should fill the gap between the productive capacity of a society and its lower output during downturns. You may not accept the theory, but that is the basis for the components of the math in question.

        Let me try this from a different angle. If part of the stimulus funding pays workers to build a bridge…do we care if that bridge lasts 1 year or 100? I would think we would prefer a longer lasting bridge, and would think we got more for our money.

  • John in Oregon

    Ohhh I see.

    You can’t show your work because you are just repeating the talking points.

  • John in Oregon

    Dean you said > *your side can trot out your old white guys… my side can have our rainbow*

    Well lets consider;
    Bush first Secretary of State
    Bush National Security Advisor
    Bush second Secretary of State

    There is more on the list. BUT I TAKE YOUR MEANING.

    *Conservative thought, Libertarian thought, and Republican thought are racist.*

    • dean

      John…you read way more into my remark than I intended. But if you look at the vote demographics of the last election, and the clear trend lines…well the results if not the intent are pretty clear.

      On the accusation that I am “repeating talking points.” No…I was merely summarizing the findings of economic analysis done by those I cited. Thus I’m not claiming it as “my work” because I respect the work of those who actually did it.

      And I noticed you did not try and answer my question. Would you calculate the construction cost/benefit of a bridge differently if it were built to last 1 or 100 years? If you answer yes, then you would calculate “jobs/cost benefits” differently if the jobs in question lasted 1 year or 2.

  • John in Oregon

    Dean I understand you didn’t realize what you said. That in its self is troubling. But then, in your explanation, you invoke demographics to effectively say again the same. *Conservative thought, Libertarian thought, and Republican thought is racist.*

    Of course I didn’t answer your “summary” which has no factual substance that would be just silly.

    The cost of “creating a job” is the cost divided by the number of jobs. The service life of the capital good produced (what little there is in this bill) is irrelevant.

    The goal of course is to increase permanent jobs while the “stimulus jobs” last only for the duration of the Government funding. There is a name for the “stimulus jobs”. Back during the great depression they called it being on relief.

    • dean

      But John…the goal is not to create permanent jobs with the stimulus. The goal is to bridge a recession and prevent a slide into a depression. Presumably after the 2 year mega deficit spending is over, the housing and financial fiasco will have played itself out and the private sector economy will be back on its feet. The new capital built or old capital repaired will be there to provide service to us in the decades beyond…but not the jobs…and we would not want them to still be there would we?

      Therefore…the appropriate math remains to divide either the annual spending ($400 billion) by 4 million jobs ($100K per job) or divide 2 years of spending ($800 billion) by 2 years worth of 4 million jobs, which still comes out to $100K per. Then factor in the other stuff (GDP, interest on debt, etc.) and get what you get. No need to fudge.

      My invoking of demographics is simply to point out the facts on the ground. One party’s membership is more racially diverse than the other by an order of magnitude. I assume people are intelligent enough to join a party with and vote for those who best represent their interests. Nothing more.

      If the perception amongst minorities (as is apparent) is that conservative, libertarian, and Republican thought is of no advantage, and may be downright hostile, then so be it. Whether that amounts to racism or not I won’t judge. So it’s not what I said. it’s what you think I meant by what I said. I can’t control that.

    • John in Oregon

      > *the appropriate math remains to divide either the annual spending ($400 billion) by 4 million jobs ($100K per job) or divide 2 years of spending ($800 billion) by 2 years worth of 4 million jobs*

      I understand your logic, thing is its just silly. Assuming 4 million jobs in year 1 and another 4 million in year 2 for a total of 8 million. If Obama had meant 8 million he would have said 8 million.

      > *the goal is not to create permanent jobs…*

      That’s an astonishing admission that the 4 million jobs are just temporary welfare jobs.

      > *My invoking of demographics is simply to point out*

      Stop digging.

      In the toss up states Obama prevailed in a virtual tie in nearly all. What is remarkable is he did so by picking up one or a few small demographic groups. Even more remarkable is he did so with different groups in each state. That’s a mark of a well ran campaign. Mcain helped when he lost conservative support but on the margins Obama ran the much better campaign.

      You claim a mandate to do as you wish. Lets consider how the first 21 days went.

      *O* The administration stoked and kindled a world trade war. The Senate ignited the first engagement of the trade war yesterday.
      *Unions demand Buy Canadian policy*
      Globe and Mail

      *O* In an interview on Saudi TV the administration made what was viewed as a capitulation to Iran by the Arab Middle East.

      (Both of the above were missteps during the primary which compounds the mistakes.)

      *O* The administration created a showdown with Gates and Petraeus on Iraq withdrawal.

      (With Iraq off the political radar and the popularity of Petraeus I don’t understand why this was necessary.)

      *O* The administration is preparing wage control through legislation which would set compensation for all financial institutions and might be extended to include all U.S. companies.

      *O* Offering General Zinni the position of ambassador to Iraq. After Zinni accepted they gave the position to someone else and never informed Zinni.

      *O* Talking down the economy as a catastrophe when previous administrations spoke of “nothing to fear”.
      With the one exception of the Carter malaise speech.

      *O* Employing the “I won” political strategy, angering the House Republicans and waking the Blue Dogs.

      *O* Holding a secret midnight meeting to put together the House/Senate conference report on the “stimulus” package. *Only Democratic conference committee members were permitted to attend.*

      The change in the polls are even more interesting.

      *O* Rasmussen now has the generic congressional ballot a very tight 42% Democrat to 38% Republican

      *O* 62% Want Stimulus Plan to Have More Tax Cuts, Less Spending, while just 14% would more government spending and fewer tax cuts

      *O* Forty-eight percent (48%) of voters believe that increased spending is generally bad for the economy. On the other hand, 57% say tax cuts are generally good for the economy.

      *O* Two-thirds of the nation’s voters (69%) lack confidence that Congress knows what it is doing when it comes to addressing the country’s current economic problems. Just 29% are even somewhat confident in the legislators.

    • John in Oregon

      Not to forget that the stimulus plus the announcement by treasury secretary Geithner of another $1 to $2 trillion has driven the Dow through the $8,000 floor.

      • dean

        John…the Dow closed up 51 points today after news that the House and Senate reached agreement on the stimulus. And Caterpillar announced it would recall 22,000 laid off workers once the legislation is signed into law. Just like that..Obama gets a down payment on the promised jobs.

        One day does not a recovery make…but we are now into the experiment for good or ill.

      • John in Oregon

        Dean you avoid the point.

        For the last 12 weeks the market has been up and down by 250 to 500 points depending on the latest Government news. With this kind of chaotic stock market investors don’t buy until the market hits bottom.

        Over the last 6 weeks the market slowly established a new bottom at $8,000 an important step to bringing stability to the market.

        The legacy media’s take on the plunge in the market on the 10th was it followed Treasury Secretary Geithner’s announcement to spend even more money. In this case I happen to agree, everyone knew the Democrats were going to ram through the spending bill.

        So when you say “the Dow closed up 51 points today [now yesterday] after news that the House and Senate reached agreement on the stimulus” that is BS. Up or down 51 points in this market is the same as NO CHANGE, and besides everyone knew the Democrats were going to ram through the spending bill.

        The only point that matters is this. *Tuesday the market broke through the $8,000 bottom. It is now reckoned the next likely bottom is $6,700 to $7,000.* It is now Thursday and the DOW is below $8,000. Bad. Very bad.

        Your example of Caterpillar is irrelevant. Caterpillar is an administration advisor. Caterpillar is a political entrepreneur.

        A political entrepreneur is a businessman who seeks to gain profit through subsidies, protectionism, government contracts, or other such favorable arrangements with government through political influence.

        Just like Google is a political entrepreneur seeking “white space” and the CTO. I will let you look those up.

        Did you see the latest Rasmussen poll taken after the spending bill passed?

        1> When it comes to the nation’s economic issues;
        67% of U.S. voters have more confidence in their own judgment than they do in the average member of Congress.
        19% trust members of Congress more.
        14% aren’t sure.

        2> Who would do a better job addressing the nation’s problems?
        44% A group of people selected at random from the phone book. (Up from just 33% last October.)
        37% Congress.
        20% Undecided.

  • John in Oregon

    *FLASH UPDATE*

    Jim Owens, the CEO of Caterpillar, Inc., asked today if the stimulus package would be able to stop the 22,000 layoffs or not, Owens said,

    *”I think realistically no. The truth is we’re going to have more layoffs before we start hiring again”*

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