The Big Lie on Deficit Reductions

So you woke up last Friday to the news that President Obama and the Congressional leaders had agreed to pursue the “most aggressive plan” for deficit reduction – a $4 Trillion whopper. Then you’re thinking, Well Mr. Obama and his Democrat colleagues increased the federal deficit by $4 Trillion in just two years, they damn well ought to reduce it by $4 Trillion. You’re starting to feel good about the economy and even about the President – possible even about the Congress.

But then you read the Wall Street Journal and learn that they really aren’t going to reduce the deficit at all. That’s right. This big talk about deficit reduction is really about slowing the growth of the deficit – not an actual reduction.

And then you learn that they aren’t talking about a $4 Trillion reduction over the next two years – the same amount of time that it took the Democrats to increase it by $4 Trillion – in fact, they are talking about $4 Trillion over 10 years. TEN YEARS. That’s $400 Billion a year. The total federal budget for fiscal year 2011 was $4.83 Trillion with a forecasted deficit of $1.27 Trillion for the year. A $400 Billion reduction would not even bring it close to the $2.9 Trillion budget in 2009 – the year before the massive and pointless spending by Mr. Obama and his Democrat colleagues.

But then you find out that we aren’t even really talking about a $400 Billion decrease for the next fiscal year. Rather, you discover that the $4 Trillion is backend loaded. That’s right, the vast majority of the reduction in spending occurs in the very last years of the ten-year plan.

When I was an executive at U S WEST (since absorbed, first by Qwest and then by CenturyLink) market units were created to address the growing competition in the telecommunications market. The new heads of the market units had varying skills and experience but they all had something in common – the five-year planning cycle. And they all responded to the five-year planning cycle with the same hockey stick projections. That means that in the first three years virtually no progress was made, in year four a break even was achieved and in the fifth year business took off like a rocket.

The problem was that in twenty years at U S WEST I never once saw a five-year cycle come to conclusion. At some point in the five-year cycle a change was made – new leaders, realignments of market segments, and on and on. The point is that everyone knew that there would never be final accountability because the plan would be abandoned before the end of the planning cycle.

The same is true with the President and the Congress. Increasing the planning cycle from five to ten years ensures that no sitting president will be held accountable because the life of a plan exceeds a president’s term – even with re-election. Increasing the planning cycle to ten years allows the participants to talk about larger numbers – make the problem and the solution more dramatic. And making the planning cycle ten years allows the participants to push the benefits (or the damage) out even further. But most of all it ensures that there will never be any accountability because of intervening changes and elections.

This isn’t rocket science. You don’t need economists, accountants and actuarials to understand that you cannot cure a deficit problem by continuing to spend more than you receive in taxes. You also cannot cure the problem by continuing to push the problem out in front of you indefinitely. Only a room full of professional politicians can claim victory by proposing a solution that will never reach fruition. It is that phenomena that defines the cause of the problem that this country now faces.

Fred Barnes in the Friday edition of the Wall Street Journal hit the nail on the head:

“Simple lessons from the presidencies of Franklin Roosevelt and Ronald Reagan point to what’s likely to be the only successful approach to containing government spending in the Barack Obama era.

“In FDR’s time, a surge in spending by Washington was the cornerstone of New Deal effort to lift the country out of the Depression. But unemployment never dropped below 14% in the 1930s and rose to 19% by the end of the decade. ‘Now, gentlemen, we have tried spending,’ Henry Morgenthau, FDR’s Treasury secretary, confessed to House leaders in 1939. ‘We are spending more than we have ever spent before and it does not work.’”

And it doesn’t work any better in the 21st Century. Government simply cannot spend its way out of a recession – particularly as severe of a recession as this one. Keynesian economic theory doesn’t work. It hasn’t ever worked – not here, not anywhere. And liberals routinely excuse its failures by claiming that we just didn’t spend enough. Even if we spent it all, it still wouldn’t be enough because it doesn’t work.

The solution simply lies not in raising the debt ceiling but rather in lowering the amount we spend. Here again are some things that can be done now to reduce the spending and for which we will recognize immediate benefit – not ten years down the road:

  1. Congress should refuse to raise the debt ceiling and, instead, adopt a resolution giving first priority to the payment of interest on the existing debt.
  2. Congress should amend Medicaid and the Emergency Medical Treatment and Active Labor (EMTALA) to exclude those illegally in the country.
  3. Congress should amend all remaining welfare programs to exclude those illegally in the country.
  4. Congress should remove subsidies to agricultural operations, oil and gas production, alternative energy production, and the myriad of other subsidies designed to pick the winners and losers in a competitive marketplace.
  5. Congress should immediately repeal Obamacare and all of the mandates and taxes attendant to it.
  6. Congress should raise the Social Security eligibility age by one year for those under 55, two years for those under 50, three years for those under 45, and four years for those under forty. Even at that point, the eligibility age will not have kept pace with the advancement in mortality rates in this country.
  7. Congress should restrict current and future payments under Social Security to amounts that reflect earnings on actual employer/employee contributions at a rate comparable to the S&P 500 over the same time and amortized over the life expectancy of the recipient at the time of eligibility.
  8. Congress should remove troops immediately from Iraq and Afghanistan – no more nation building – and limit active military engagements to incidents where the United States’safety and security are threatened and only until that threat is neutralized. While we can provide encouragement and supplies (military and civilian) for those who seek independence and democracy, we cannot fight their wars of independence.
  9. Congress should eliminate the Department of Energy and its entire budget given that it has failed completely in its purpose – to provide energy independence for the country.
  10. Congress should eliminate the Education Department and provide block grants to the states based on advancement under national testing programs. It too has failed in its mission given the continuing decline in educational achievement by our students vs. those in other advanced societies.
  11. Congress should review and reduce financial participation in the United Nations and its various programs. The same can be said of the International Monetary Fund (IMF), the World Bank, and NATO. Our financial commitment should not exceed our proportional control.

Fundamental change is required to return to a healthy economy with robust job growth. Solutions that will not take effect for a decade are pointless.

Act now or hand in your resignations.

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Posted by at 05:00 | Posted in Economy, President Obama, Social Security, Taxes | 30 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Founding Fathers

    Mr. Huss,

    Where were you when Bush was doubling the national debt?

    Where were you when Reagan was TRIPLING the national debt?

    Oh, I forgot, it’s okay if you’re a Republican.

    • Rupert in Springfield

      I love how liberals can never ever admit they are wrong. I mean look at this logic – its ok for Obama to overspend, even though its wrong and he ran specifically against overspending by Bush. But somehow its OK for Obama to overspend because Bush overspent and by FF’s logic now its Obama’s turn.

      Why can’t you just be intellectually honest and admit – Obama is overspending. Why do you guys always have to try and change the subject?

      On this one it’s especially ham handed because on on thing regarding Bush – the record is very clear. Bush was quite loudly and famously hung out to dry by any conservative you can name for his rampant overspending, Larry Huss included, and on this blog. But that was probably before you started trolling here.

      I think this inablility for liberals to ever admit a mistake comes from the arrogance of the philosophy. Liberalism is based upon one central ethos -the state is better able to run peoples lives than the people themselves. Once one has professed a belief in modern liberalism – one has adopted such an arrogant posture that to admit a mistake would be fatal.

      Conservatism is the polar opposite in this regard. Conservatives have little faith in the state to run anything, much less peoples lives. Therefore, since the state is ineffective at best, incompetent at worst, conservatives have no trouble admitting when leadership has made a mistake. This is the case regardless of the type of leadership, be it liberal, Obama, moderate, Bush, or conservative, Reagan.

      So no FF – It’s  not OK for Obama to overspend just because Bush overspent. You can’t rail about the previous guys overspending, win an election based on it, and then repeat the exact same mistakes that got you in office and expect to get a pass. Sorry guy – life doesn’t work that way.

      • LC

        Whenever you challenge a liberal on any of their policies, the response is always the same: “But Bush….!!!”

        After a while, it starts to lose it’s effectiveness.

        As far as the point in the article about pulling out of Afghanistan, this argument ignores the cost of defeat. The vacumn that would be created due to the lack of necessary domestic security forces would once again create a breeding-ground for terrorists and would lead to the re-establishment of a Taliban-controlled state. Not to mention human-rights abuse against women and children would naturally follow with an Islamaic terrorist group running the country. But if things like  honor killings, child marriages, and the use of women as currency doesn’t bother you, then I suppose pulling out early wouldn’t be an issue.  

      • valley person

        Admit they are wrong about what? Larry’s claims are factually incorrect. FY 2009, Obamas first year governing, was Bush’s final budget, which was about $1.4 trillion in deficit. So that shaves Obama’s number down to $2.4 trillion. The new Republican House has done nothing  other than pass a fantasy budget that, while eliminating Medicare from the face of the earth, still does not being the federal budget into balance for something like 40 years.

        Here are the rough numbers that matter:
        1) We are currently taxing only 60 cents for every dollar we are spending.(Federal tax rates and collections are at their lowest level as a share of GDP since around 1950).
        3) About 40% of the total budget (counting SSI) is for old age security, disability,  and health care. Old people vote, so you can’t cut much there or you get voted out, as the tea party will soon find out.
        4) About 22% is Defense, counting veterans, which doubled under Republicans and which they refuse to cut.
        5) Something like 18% is interest on the accumulated debt, 90% of which was accumulated under Republican administrations

        So go ahead and try to balance that budget without raising anyone’s taxes. And do it tomorrow. And you will be ushered back into the private sector very quickly.

        Show me where Obama is overspending. On what? What is he spending too much on? SSI and Medicare and Medicaid and food stamps and unemployment? Those are programs with automatic spending based on eligibility.  Congress passed these programs. Republicans had 12 years of control in Congress and 8 in the White House preceding Obama. WHy didn’t they cut these when they had the chance?

        Who invaded Iraq? Obama? Who botched the Afghan war and lost Osama? Obama? Who passed Medicare Part D? Obama?

        “Conservatism” is an oxymoron. It is self contradictory, as evidenced by the past 3 decades of so called conservative governance that create the debt you guys are now screaming about.

        • LC

          I actually agree with you about raising taxes, and I think they should be raised heavily on the middle class and poor.

          You are right that as a whole, Americans are paying out $0.60 per for every dollar the government spends on them. Pretty good deal, right?

          Well, if you force the middle class and poor to pay for ALL of the government services they are receiving, they quickly become much more interested in how that money is being spent.

          Additionally, a Cato Policy report has shown (based on figures from 1981 – 2000)  that when taxes are increased, federal spending decreases. So, it looks like the best way to cut federal spending, is to increase the tax rate for the lower and middle incomes.

          Let’s end the free ride and force people to pay for the services they want NOW without letting them shift the burden to future generations.  

          • valley person

            About 40 or 50% of the federal budget is essentially transfer payments from some to others. SSI and Medicare and Medicaid are transfer payments. So how can you possibly tax those receiving the transfers to pay for them? That makes zero sense.

            The Cato study is probably revealing a corelation, not a causation.

        • Rupert in Springfield

          >Admit they are wrong about what

          Wrong about Obama’s level of spending. People feel that he is spending too much. That’s the perception, and if you are unaware of that, now you know. You can try the “it’s all Bush’s fault” all you want, it isn’t working. What would work is for Obama to do what Clinton did, give up the wild spending and go with fiscal responsibility pro growth policies. That would be successful. If you want to keep it up with trying to blame Bush, you will probably get no where.

          • valley person

            Oh ok…its that perception thing again. Not reality. You don’t think Obama is spending too much, but “people” think that. You must think his spending is about right then.

            Yes Rupert, “people” probably think Obama is spending “too much.” And “people” also think that their SSI check, their Medicare coverage, Veterans services, defense spending, their national parks, and their food inspections, are all pretty important to continue paying for. Its the horns of the dilemna we ride upon. People want services and don’t like to be billed for them. This is breaking news.

            Did I even mention Bush? No. I didn’t mention Bush. So why do you claim I said it was his fault? Your reading comprehension is a continuing mystery.

            Clinton raised taxes on the upper end. Obama has been trying to go the Clinton route. Republicans won’t let him. No tax increases. You must have read about this inflexible position somewhere. You are always telling us how up on the news you are. 

            And I note, you did not bother to offer any means to balance the budget in a politically possible way given the facts of the matter.  Reality calls once again, and Rupert from Springfield does not answer the phone.

          • Rupert in Springfield

            >Oh ok…its that perception thing again. Not reality. You don’t think
            Obama is spending too much, but “people” think that. You must think his
            spending is about right then.

            What on earth implies I think his spending is ok? Im telling you the mood out there is spending is out of control. If you don’t understand that you are in dreamland baby.

            >Did I even mention Bush? No. I didn’t mention Bush. So why do you claim I
            said it was his fault? Your reading comprehension is a continuing
            mystery.

            Read what I was originally replying to and figure it out.

            >Clinton raised taxes on the upper end. Obama has been trying to go the Clinton route.

            Oh good Lord do we have to go through this again? Clinton got trounced in 94 with the crazy taxes and spending. He sent up 10 years of projections in 94 with 300B or more deficits each. After those were rejected Clinton got to fiscal sanity and became a popular president. Please, for the last time, I shouldn’t have to go over the history of this with you every single post.

            >And I note, you did not bother to offer any means to balance the budget
            in a politically possible way given the facts of the matter.

            And note, I am not claiming to be president, therefore I don’t have to.

          • valley person

            The mood out where? Springfield? Is the mood in Springfield that people think their SSI checks, or those to their grandmas, are too high? Is that what you are saying? Is the mood there that wounded veterans should be tossed out in the street? Is it that they want the FDA to stop regulating prescription drugs? Exactly what “spending” do you and your moody people think should be cut?  And by how much?

            “Read what I was originally replying to and figure it out. ”

            Yes, well your reply was to me, and I said nothing about Bush, so I’m unable to  figure out what you actually meant when you said I said something I didn’t say.  I could call for mind reading intervention, but would have to send someone from Eugene.

            “Oh good Lord do we have to go through this again?”

            Yes, unfortunately we do. Again and again and again. Clinton raised taxes on upper income Americans. Republicans voted against this and predicted economic catastrophe. Instead, the economy grew nicely, spending was restrained somewhat (nobody started any stupid wars or passed any new unfunded programs) and the budget magically came into balance. Obama is trying to do the same exact thing, only this time the Republicans are able to prevent him. 

            And without mentioning any names of any past presidents, after Clinton left office the same Republican Congress cut the taxes Clinton had raised (and then some,) started a stupid war, and passed an unfunded program. As if by magic deficits reappeared. I doubt there is any connection here….I’m just saying. 

            “I shouldn’t have to go over the history of this with you every single post.”

            History Rupert, is what actually happened. What you present as history is what you remember happening. I have noticed that the two are rarely in alignment, and from time to time I point this out to you. You then get all huffy. Try real history and we can both stop this game ok? Its not good for either of us.

            “And note, I am not claiming to be president, therefore I don’t have to.”

            Lucky for both of us then. But since you have no clue about how to mend a broken budget, doesn’t that give you any pause at all to stop criticizing those who actually have to craft a solution to an actual problem? Or is empty complaining your version of a respectable way of life?

        • Rupert in Springfield

          >Admit they are wrong about what

          Wrong about Obama’s level of spending. People feel that he is spending too much. That’s the perception, and if you are unaware of that, now you know. You can try the “it’s all Bush’s fault” all you want, it isn’t working. What would work is for Obama to do what Clinton did, give up the wild spending and go with fiscal responsibility pro growth policies. That would be successful. If you want to keep it up with trying to blame Bush, you will probably get no where.

      • Founding Fathers

         Rupert,

        The problem is, the right only complains when it’s a Democrat in the White House.

        They REVERE Ronald Reagan, but he’s the KING of deficit spending.

        Did you complain when Bush was overspending in order to enrich his and Cheney’s cronies? Did you complain when he started two wars that weren’t paid for? Did you complain when he cut taxes for only the most wealthy?

        There’s a difference between spending in order to deal with an economic crisis, a crisis created by his predecessor, and spending in order to enrich one’s friends.

        Get. A. Clue.

        • Rupert in Springfield

          >The problem is, the right only complains when it’s a Democrat in the White House.

          Wrong, the right constantly complained about Bush spending. Rush as well as WF Buckley railed about it throughout his presidency. Those are the two most notable conservatives during the time, and they were quite vocal in their opposition to Bush’s overspending.

          On this blog plenty of people denigrated Bush for his spending during his presidency. I did, as well as Larry Huss.

          Even if you don’t believe any of that ever happened, here and now I will tell you, Bush was wrong to spend as much as he did. Got it now? I am perfectly willing to admit Bush way over spent. Did so then, did so now. Thats a far cry from you who can never admit when your guy is wrong. Obama has overspent and only the die hards are still defending him on the spending.

          Again – You need to get over this belief of yours that if you are unaware of something it didn’t happen.

          >Get. A. Clue.

          Believe me, I’ve got a clue. If you think the public is behind Obama spending more and more, you are the one who is vastly out of touch.

          • Founding Fathers

            Rupert, did they complain about the tax cuts and the two wars? Not so much.

      • ardbeg

        Let me apologize up front what what I’m about to say.  I only visit this site occasionally because the conversation usually deteriorates to little more than name calling and finger pointing like “your side is all at fault” for whatever the topic of the day is.  So for this I apologize:  YOUR ALL…….. A BUNCH……… OF……..(wait for it)………….. FOOLS!. You are missing the point because you are too busy blaming the other side.  Which is exactly what they (the GOP and the Dems) want.  Why you ask?  Because if you hate the other side enough, you will vote for us and keep us in power.  Gentlemen (I’m trying to bring civility back to my post, my momentary out bust is over) the problem is both the Dems and the GOP.  THEY BOTH HAVE INCREASED THE SIZE AND COST OF GOVERNMENT!  I don’t have a problem with a central government, I think we need one and it serves some very useful and needed purposes.  And I don’t mind paying a REASONABLE amount in taxes to support it.  I know, I know, some of you just had an aneurysm.  Any of you that are older than about ………12 will understand this is the same stupid conversation that has been going on for years.  Was Bush a terrible president?  Sure he was.  Anyone who wants to argue that he wasn’t had a bowl of stupid for breakfast!  Was Clinton any better?  Well the economy did better but I don’t give ole’ Bill to much credit for that.  BOTH of them increased the size and cost of government and the bill is coming due and guess what……we can’t afford it!  Your fighting the wrong battle when you look to the “other side” to place blame.

  • Rupert in Springfield

    I think the best comment I have heard about the Obama spending, especially the stimulus, was on Kudlows radio show last Saturday.

    “If all this spending was going to work, it would have worked” – In other words, if the spending worked, we would see some results and wouldn’t have to make up lame excuses. The spending was supposed to drop unemployment, and instead it rose. That ain’t working. When you spend $1T, if you have to use a divining rod to determine effects, it’s pretty safe to say the money was wasted.

    As for the excuse  – “well, it did work, because the economy would be in full depression had we not done the spending” – that doesn’t make a lot of sense.

    It’s like claiming “yes, the WMD’s aren’t in Iraq, which is what we claimed at the outset, but had we not invaded, Saddam would have made them”

    • HBgyuy

      So you’re saying the stimulus bill didn’t work. Yet 40% of the stimulus bill was actually tax cuts. So is there any other logical conclusion other than tax cuts don’t stimulate the  economy in any perceptible way?

      If you claim that the tax cuts weren’t BIG enough to have an effect, doesn’t that open the door to the claim that the stimulus spending wasn’t enough to make a dent either, and the Krugman argument that we need even bigger spending?

      • Rupert in Springfield

        Yep, and some of those tax cuts were ill advised. I’ve never claimed all tax cuts are all great things. I abhor using the tax code to modify behavior. The $5,000 first time home buyer credit would be an example of this.

        >doesn’t that open the door to the claim that the stimulus spending wasn’t enough to make a dent either

        Sure, I wouldn’t argue that. Everyone told Obama that from the outset. I wrote about it right here on this blog when the stimulus was passed. Unlike Krugman, I wasn’t a Johnny come lately to this argument. The point is, whatever the reason, the money shouldn’t have been spent when it was to small to do anything. If a rocket blows up on the launch pad, the fault is yours because you didn’t build it properly. The fault is not those who warned you you didn’t have the funds to do so.

        The problem with government spending to stimulate the economy is two fold. First of all, government can never really spend enough to do much because of the size of the spending government is capable of compaired with the size of the economy overall combined with the fact that often that spending is zeroed out by the need to increase taxes to fund it. Second government spending is the least efficient way to get money into the economy. Obamas stimulus was heavily back weighted, with 25% occurring in year one, the balance in year two. This was an exact repeat of the Japan policy, which also was judged a failure, of the 1990’s. I made that exact argument here. If government is going to spend in order to stimulate the economy, it is essential to get the money out fast. not slow. Obama took the slow approach and found out guess what? There were no shovel ready jobs. It was a huge financial mistake and one he was warned about by every single leading economist, including those who supported him, Robert Reich being an example. He didn’t listen, now he is paying the price.

        • valley person

          Unlike Krugman you were not a Johnny come lately? Unlike Krugman you are delusional.

          Government can’t spend enough to do much? It “does” about 30% of the economy every day. Government spending sustains the economy in ways you don’t even notice. All those SSI checks cashed by your granny buy private sector goods and services. Cut or remove those checks, send her to begging on street corners, and private sector businesses will close. Increase her checks and they will do better. There are economic formulas for this, government spending plus multipliers = X number of jobs. Its imperfect, but useful for estimating.

          Direct government spending is WAY more efficient at getting money into the economy than any other action they can take, including (especially) tax cuts, because part or much of a tax cut is stashed, not spent. Government “spending,” by definition is 100% spent. Its new money baby, especially if printed or borrowed.

          Expert economic analysis of the stimulus shows that each dollar spent on construction projects or direct assistance to low income people had an economic multiplier of 2.0.  That is quite significant, and resulted in a new job for every $100K spent. What was less effective was spending on local and state governments, which essentially just backstopped their layoffs.

          https://www.freakonomics.com/2011/06/27/stimulus-analysis-state-block-grants-created-no-new-jobs/

          Obama did not take a “slow” approach. The shoveled as much money out as fast as they could responsibly. His approach was too timid, not too slow. As Krugman, that Johny come lately who won a Nobel, wrote at the time on multiple occasions.

    • valley person

      I guess you and Kudlow know more than the CBO then. Unemployment rose before the stimulus went into effect. It dropped only after stimulus funding kicked into gear.  It worked. It just was not enough to fully offset the drop in private sector spending. Obama was warned by Krugman, Galbraith, Baker, and other liberal economists that he was aiming too low. They turned out to be right. But assuming that there was no upward impact from stimulus spending is counter factual to what the CBO and every reputable economic analyst has said.

      What does not seem be “working” is election of the Tea Party in 2010. Since that time the economy has stagnated. What do you and your friend Kudlow have to say about that?

      • Rupert in Springfield

        >I guess you and Kudlow know more than the CBO then.

        Wrong again, the CBO as well as Obama’s council of economic advisers both put the stimulus effect at marginal at best. Sorry Charlie, $278,000 per job is not success. And thats what Obamas own hand picked people put the cost per job at. And thats even buying into this “jobs saved” nonsense. An economic metric unheard of before the backpedaling on Obamas stimulus began.

        You are right about one thing though, every single economist at the time, not just liberal ones, warned Obama on two things, the amount of spending was too low to do much, and was too back loaded towards 2010 to have much of an effect. As I said, I even said so right here on this blog. You, however, defended it at the time. You were proven wrong in the end.  

        • valley person

          Marginal? 2.5 million jobs was marginal? A fully recovered stock market marginal? Whatever dude.

          $278000 per job? I just sent you a real work analysis. It was more like half that amount. Math is just not your strong suit.

          “every single economist at the time, not just liberal ones, warned Obama on two things…”

          No Rupert, every single economist did not say that at all. A whole bunch of “conservative economists” signed a letter that McConnell and Boner waved around that said the stimulus would do absolutely nothing except increase the debt, which they had magically rediscovered as an issue after their 8 year kegger ended, and they used that as justification for 100% voting against the stimulus. Not a single Republican,economist or otherwise argued for spending MORE to get their support. 

          Some economists argued that the amount Obama got, which was less than he asked for by the way, was enough to do the job. Every single economist only agrees on the fact that every single economist never agrees on anything. Like you and me.

  • 3H

    What I would like to see is some numbers attached to the recommendations.  How much money is going to be saved?  How much more needs to be done and where are those savings going to come from? 

    Don’t get me wrong, I like some of them.  I would just like to know how much Walter feels we are going to reduce expenditures by.

  • Bob Clark

    I think Keynesian economics did work to stop the run on banks in fall of 2008, but I tend to agree Keynesian economics really doesn’t work in growing an economy afterwards.  Mostly because all you really do in upping federal expenditure is to shift growth to the immediate period from the next period.  So for example the 2009 to 2010 first time home buyer credit and the cash for clunkers.  All that these programs did was to postpone the inevitable correction.  Keynesian economics probably doesn’t work especially currently when investors begin to question the solvency of the government and the store of value of the currency.  What we have now is inflation of commodity prices caused by stepped up printing of monies and deficit government spending.  The inflation in commodity prices is putting a lid on private sector domestice economic growth.

    What we actually need is to continue stepped up printing of money, slow federal government spending so as to let inflation reduce the effective debt obligations of the government and private sector debts, and to deregulate things like environmental restrictions on fossil fuels.  Obama even now acknowledges the need to lower gasoline prices.  But unfortunately, he can’t afford to lose his leftist environmental friends and flim flam cronnies like GE who want to continue making bank on “green” subsidies.  So we continue to hamstring ourselves by continuing the expensive shackles of “climate change.”

    I agree with moving out of Afganistan but not on Iraq.  We need to be a counter force to Iran, and Iraq gives us a potential base for counterforce.  (I have to say we are still suffering for this mis step as this was the real world role of Sadam Huessin, and George W bungled it because of 911 anxieties).  We also should pull out of Germany, and redeploy to the eastern pacific to buttress the other counterforce point, that being China.

    There.  What’s for dinner?

    • valley person

      Bob, the home buyer credit was not very effective Keyensian spending because the banks failed to get with the program to write down mortgages. So the effort sputtered. Cash for clunkers was quite effective, but the program was too short in duration to have a lasting impact. Nevertheless, the fact that car companies have recovered is in part due to cash for clunkers.

      Postponing the “correction is exactly what Keynes proposed, in large part because “corrections” can take a long while to find the bottom, leaving a lot of unnecessary human suffering in their wake and creating a much deeper hole to have to ultimately dig out of. Instead of having to recreate 10 million jobs, it could be 20 or 30 million by the time the market fully liquidates.  It took the entire decade of the 30s to recover from the 75% of wealth the market lost.

      “Printing money” is just a metaphor. Most money is electronic data, not physical currency. You can’t simply create it. You have to get it into accounts where it will start circulating. Near zero interest rates are supposed to accomplish that but have not because businesses are not spending their capital and consumers are tapped out. The three main effective ways government can get more electronic money circulating is direct spending on projects (infrastructure), hiring people directly or indirectly to perform services (teaching, police, fire, parks management, ecological restoration) and increasing the amount of money sent to granny, the unemployed, and the poor (through the earned income tax credit.) Since all of this money goes directly into circulation it is stimulative.

      Opening more areas in America or off shore to drilling will not lower gasoline prices today or tomorrow or ever. Oil is a global commodity, and only the Saudis have enough recoverable oil to manipulate prices. We are a drop in the bucket no matter what we do.

  • 3H

    “…rose to 19% by the end of the decade.”

    In 1938 it rose to 19% – after the Government tried to slash spending.  Think about the significance of that. 

    As for Morgenthau – he never was a  Keynesian and was not comfortable with deficit spending.  His comments are not surprising.

  • 3H

    “…rose to 19% by the end of the decade.”

    In 1938 it rose to 19% – after the Government tried to slash spending.  Think about the significance of that. 

    As for Morgenthau – he never was a  Keynesian and was not comfortable with deficit spending.  His comments are not surprising.

  • HoboJoe

    Of course they lie, they are Dems.

    • valley dude

      And Republicans always tell the truth. 

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