PL,Come now, he (Obama) certainly throws money (debt) around like a progressive, considering his second stimulus package is presently in makeup and about to make its way onto the stage. I hope and pray it works but it won’t and then there’ll be a third and then … a reckoning – which should have been allowed in the first, second, and third place.
"Our current President is the closest thing to a true conservative we've got."In that he's spending like a drunken sailor who's stolen the captain's credit cards, yes, he's very much like the recent Republican Congresses. That certainly doesn't make him a "Conservative". As to the other points, that just makes certain segments of his base dupes, because, of course, he campaigned on doing just those things that he isn't doing now that he's in office. Now, on corruption; ask yourself why he's firing Inspector Generals overseeing government spending, and seeking to change oversight of the remaining IGs from dual Congressional/Executive to a purely Executive. And remember, this is a Chicago pol we're talking about. Sorry to say this Stephanie, but I think you and a lot of other people who put your hopes for better leadership in the wrong basket. OTOH, we'll all get another chance in four years, and Obama has the same time period to get his act together, and who knows? maybe the Republicans will take back Congress in '10 and we'll have this nice thing called checks-and-balances restored.
George and Mark--I'm currently spending like a drunken sailor on credit that I haven't got the resources to repay. I spent the money on having a baby, paying rent and buying groceries. It was not possible to put these things on hold until the economy turned around.Perhaps the 'conservative' thing to do would have been to politely die in the middle of the street of starvation, exposure and a ruptured uterus, but I don't currently subscribe to that form of conservatism, and neither does Obama. Fortunately, the majority of the voting public agrees with us. Perhaps Obama's base thinks they've been duped; that just means they weren't paying any closer attention than you appear to have been. Obama has been doing EXACTLY what he promised; increasing transparency in government, appointing competent people to do the jobs they're hired to do, opening up some civilized international dialogue and tackling the collapsed economy and the broken healthcare system. I was a diehard Obama supporter during the campaign, and so far I have had no cause to regret this. I am baffled by the people who complain that 'the stimulus isn't working.' Do they think that the wreckage produced by nearly a decade of basing our economy on denial, off-track betting, arrogance and manipulation can be fixed in three months, six months or a year? I'm amazed that things are stumbling along as well as they are. We've been sucking up a lion's share of the world's resources in exchange for smoke and mirrors for far too long, and I would be surprised if some major cultural upheavals weren't necessary before we see the end of this. Meanwhile, crumbling infrastructure needs fixing, energy needs innovating, kids need educating and people need jobs. If putting it on the credit card is the only way it's going to get done, so be it. And Mark, I'd take your remonstrances a lot more seriously if you'd said anything--anything at all--about the billions and billions and billions spent in Iraq, where the contract negotiated with Halliburton--you know, Cheney's company--provided for 'unlimited expenses plus profit', which, in practical terms, means that when a Humvee gets a flat tire they just torch it and order a new one, sticking the taxpayers with the tab. Watch 'Iraq for Sale.' I dare you.
Plus, I think it's rather strange that when discussing such meaningless and twisted labels as 'progressive' and 'conservative,' all you talk about is money. NOBODY has been handling money wisely in this country--well, ever. I don't understand why you think that one alleged and theoretical political philosophy or other has a lockhead on stupid financial tricks, or that a person's money-handling skills has anything to do with their politics.When you think 'progressive,' think 'civil liberties,' like gay marriage, decriminalization of drugs, green energy, organic food, restrictions on pollution, ending torture and indefinite detention without charge, suspicion of corporatism, encouragement of community and cooperation, and universal healthcare. When you think 'conservative,' think slow, considered change, respect for tradition, and respect for existing systems. The two aren't necessarily mutually exclusive.
Oh, to be clear, they torch the whole Humvee, not just the tire. Also they pay $45 for a Coke. A locally produced Coke with Arabic writing on the can, not imported Coke from Houston.
PL,Inserting your exceptional circumstances into the equation is a bit unfair. Inflicting guilt is no way to win an argument - fairly that is - unless you're a Yiddish momma.That the stimulus is not working because of the breadth and depth of the economic implosion suggests that incurring yet more debt (third stimulus, Obama's second) to cure the debt debacle is... (I'm at a loss for an apt descriptive, so...) stupid, and most definitely not conservative. And that's all I was saying.
I'm not sure why you think PL's circumstances are exceptional. There are many people who have or had small businesses (such as a massage practice) or a combination of self-employment and part-time outside employment (like being an artist and working occasionally as a temp in other people's businesses) whose sources of income have slowed or completely stopped.PL also had a baby recently, which adds significantly to the negative cash flow, but many people do have babies, even in harsh economic times. It's one of those things that most humans do at least once, usually more than once. Sometimes people have things all set up (jobs in place, presumed financial security) before having a baby, and by the time the baby comes they have been laid off. Stuff happens. PL is far from the only one in such a situation.
George--what I'm saying is that there's a major difference between a financial institution going into debt to finance its off-track betting winnings in order to distribute these winnings to the top .01% of earners in the world, and a government going into debt to prevent its infrastructure from crumbling, its poorest citizens from starving, its most vulnerable citizens from dying and/or going bankrupt for lack of basic healthcare, and its educational system from sliding farther into non-competitive territory. Thus, I think that the stimulus is 'working' if it begins to mitigate some of the most egregious inequalities and misprioritizations in our culture. Expecting it to rocket our economy back to the place it was before Denial ceased to be an endemic coping strategy is unreasonable.And I'm not 'inflicting guilt,' I am illustrating the general situation by using my personal situation as an example. This is not merely a question of a negative balance on a spreadsheet. This is a question of getting actual people through an actual life-or-death crisis, right now, and setting systems in place which will prevent such crises in the future.
Oriane and PL,My comment about exceptional circumstances was precisely about a new family and going into debt to provide and care for it. Debt, in such a case, is an imperative. The guilt I alluded to was in no way meant to accuse you (PL) of eliciting that guilt only that your circumstances naturally evoke a sense of guilt in someone who is saying “enough with the stimuli spending, enough with the debt”.For everyone’s sake, I hope you are correct that the stimuli “mitigate some of the most egregious inequalities and misprioritizations in our culture”. It’s just that I don’t see that happening – based on historical evidence of spending and debt in severe economic downturns but most especially based on the fact that those who fostered easy debt and the unmitigated economic disaster are now saying they can make things right with more easy debt – it’s the same culprits with the same snake oil panacea.
Anti-stimulus, anti-deficit spending people all seem to fall prey to the same fallacy. And Steph, you aren't helping by comparing the situation to your personal finances. The simple fact is that governments are not households, and the same rules of finance just do not apply, any more than you can play with your rubber ducky in the bath to gain insight into the Space Shuttle.Deficit spending is absolutely required during an economic contraction. Because what we call an economic contraction is, in fact, a reduction in the available money supply. And the only way to counter that is to increase the money supply, which is done these days by deficit spending.This is basic Keynesian economics, which is essentially accepted by everyone except Milton Friedman acolytes, all of whom, one would hope, have been adequately proven to be idiots by the current state to which they've driven the world economy.
No, last time I looked, they were all still insisting that Friedmanism didn't work because it was never tried, just like Krugman is insisting that the stimulus isn't big enough. Identity economics: forcing the world to conform to your preferred theories. At least I'm honest about my personal stakes in the matter.
Mr. Rywalt,Whenever anything becomes essentially accepted by everyone is about the time to look elsewhere - and there is another School of economics - the Austrian School. Also, deficit spending is historically a disaster, see the Great Depression where deficit spending extended the economic depression for over a decade, until a war came to save the day - hardly a cure, unless you're deeply into irony. By contrast, a greater economic downturn, deeper and wider than the one that precipitated the Great Depression occurred a decade earlier. The government sat on its hands and eighteen months later the economy was once again growing. Sometimes, most of the times, it's just better to take the medicine.
With all due respect, George, study your history better. The Depression was prolonged because FDR was pressured to balance the budget. The consequences were disastrous. FDR finally broke that hold and began spending in earnest before the U.S. entered the war; and World War II itself caused the worst deficit spending America -- possibly the world -- had ever seen. As a percentage of GDP -- which is the only way the deficit matters -- the debt at the end of the war dwarfs the modern debt.
Actually, the libertarian economists were proven entirely correct by the crisis. Two quasi-governmental agencies had become the presumed guarantors of half of the nation's mortgage market, and interest rates were kept artificially low by a central entity (actually, one guy). This excessively encouraged investment in housing, mortgage-backed securities, and exotic financial products such as synthetic collateralized debt obligations that consisted mainly of repackaged mortgage debt. The quants who first figured out that there was a problem calculated that there was so much leverage in the market that housing didn't even have to correct downwards to take out the whole shebang, it merely had to stop growing. And it did. You did read this, didn't you?Libertarians would have abolished Fannie and Freddie (Ron Paul was trying to do so in 2003) and left interest rates up to the market. With the understanding that the government would do nothing to guarantee bad loans, lenders would have been more cautious about making them, and securities and derivatives based on mortgage debt would have appeared as they were: insane. The government should have allowed the banks to fail and reimbursed the bank's customers directly, at which point they would put their money into boring, local banks that would forevermore regard things like CDOs as if they were nuclear waste. The government could then have ruled that failed banks were to return any titles in their possession to homeowners indebted to them. That would have taken care of foreclosures at least somewhat. Instead we have the bailouts. The libertarians predicted that increasing the money supply would devalue the dollar and cause gold to go up; I bought gold at $742 and it's now trading at $913. I'm not a partisan; I just want to do what works.
The people who like to blame quasi-governmental agencies for the collapse of the housing bubble somehow fail to consider the creation of the bubble, which was made possible by the suspension (or lack of application) of government policies in place since the last Great Depression precisely to prevent such a thing. The trouble in this case was not too much government, but not enough.Now, we can argue that the reason there wasn't enough government in this case (and many others) is a basic problem with government in general. And that may be so. That doesn't mean, to my mind, that the solution is as little government as possible, since that's the problem, too.Read Matt Taibbi on Goldman Sachs to see how a Wall Street company will find any place it can to play the game. They don't need anyone artificially holding down interest rates -- do interest rates have some natural source of which I'm unaware? I thought they were all artificial -- or government guarantees to fuck with the system.
Incidentally, the fact that people panic and run to gold in difficult financial times -- despite the fact that advanced mining techniques have increased the world gold supply to unprecedented levels -- is not evidence of "what works". In fact it's taking advantage of the same market machinations and inequalities for the same personal gain; playing a game of paper pushing instead of creating real wealth. The only reason these games have resulted in the fortunes they have is due to the diligent and difficult work of scientists and engineers creating true wealth for humanity. All of the paper wealth continues to be supported by technological improvements, with the cream skimmed off by worthless do-nothing middlemen.
Mr Rywalt,I will definitely hone up my historical understanding. Until then, notwithstanding my being neither historian nor economist, here is the way it went down, so to speak. From Murray Rothbard’s America’s Great Depression:“Federal expenditures rose from $4.2 billion in 1930 [up from $4.0 billion in 1929] to $5.5 billion in 1931–excluding government enterprises it rose from $3.1 billion to $4.4 billion, an enormous 42 per cent increase! …From a modest surplus in 1930, the Federal government thus ran up a huge $2.2 billion deficit in 1931. And so President Hoover, often considered to be a staunch exponent of laissez-faire, had amassed by far the largest peacetime deficit yet known in American history. In one year, the fiscal burden of the Federal government had increased from 5.1 per cent to 7.8 per cent…”That’s a 42% increase in Federal expenditures in one year; the fiscal burden, a 50% increase. The Federal gevernment went from a surplus to over a $2 billion deficit (this at a time when a billion was a real billion). That’s deficit spending of colossal proportions. Your defense of the sainted FDR is admirable but unnecessary – it was a villainous Republican (needless to say, an unconservative Republican) who caused the mayhem. My point stands - deficit spending is a disastrous remedy and, until proven otherwise, remains so.Since you brought up FDR, I’m not going to let him off the hook. FDR’s administration failed to provide an environment that would end the Hoover inspired disaster anytime soon through: large tax increases, make work programs, interventionist programs, and an ongoing hostility to the business community (separating himself from his patrician bloodline and putting himself four square for the proles and down and outers… or the majority of the voters (for the cynically minded).
There is a natural source for interest rates: the lender's tolerance for risk. If you ask me for a dollar to buy a candy bar, I'll do it interest-free with no repayment plan. If you ask me for $100,000 to buy a house, we're going to set up a contract that stipulates a repayment schedule and consequences for defaulting. If I have a brain, I'm going to look at your credit score and make you prove income before I agree to anything. If a government-sponsored enterprise is making loans based on a centrally planned prime rate and everyone else has to compete with them, with the implicit guarantee that the Fed will bail me out if it all goes to hell, then my tolerance for risk goes through the ceiling. This is bad."As little government as possible" doesn't mean "no government." Fraud should be illegal. But here: there were plenty of regulations in place that, say, required insurance companies (which included some of these banks) to have real funds on hand to match potential claims. This is what prompted traders to invent the credit default swap, which is basically a bastard, mutant insurance policy with investment dollars but no reserves. That didn't turn out so well. Economists call this a "perverse externality." You could criminalize credit default swaps, but I tend to think that traders will just invent more exotica. Ultimately you're better off allowing the consequences of bad trades fall to the institutions making them. The nice thing about consequences is that they enforce themselves.There's a long, ugly history of corporatism in this country that makes a chicken-or-egg problem out of many determinations of who's really at fault, private enterprise or government, when the economy sours. But corporatism itself is ultimately the fault of government. This is where the idea of limited government comes in: that we should restrict government's role to that of ensuring freedom and individual rights, not economic prosperity. Few self-described conservatives really want that.
"George--what I'm saying is that there's a major difference between a financial institution going into debt to finance its off-track betting winnings in order to distribute these winnings to the top .01% of earners in the world, and a government going into debt to prevent its infrastructure from crumbling, its poorest citizens from starving, its most vulnerable citizens from dying and/or going bankrupt for lack of basic healthcare, and its educational system from sliding farther into non-competitive territory."I have no idea what you're talking about when you say "distributing the winnings to the top .01%" so I can't argue that point. The only other point that I might grant you is a legitimate is the healthcare point; however, I believe that any system that taxes for and pays for a "free" option while allowing a "private" option will inevitably lead to something that in fact mirrors our educational mess; those who can't afford the private option will get poor service, while those who can afford it will get service proportional to their means. This is not an egalitarian model, in my humble opinion. (At least with education, people can vote with their feet. I plan to be Elsewhere when my kids have to hit the public school system, because I think they deserve better than they'll get in Crown Heights. If you want to tell me how I can make Crown Heights public schools as good as, say, Austin's, I'd love to hear it. With a national health care plan though, I won't even have to move to Canada to get level of service that stinks all over.) Everything else I call BS. Of course the stimulus isn't working; most of it isn't scheduled to be spent this year, when it might actually do some Keynesian good. (That's like expecting the frog to jump five minutes before you poke it. Not. Rocket. Science.) Also, I'd like to know what the statistics were for starvation in America under the evil Republicans. And as to infrastructure, can you point me to a list of high-impact projects coming up that will make this nation more economically competitive/productive or significantly safer? I'll help; here's a good link that I'm going to bookmark:http://www.stimuluswatch.org/My favorite item on the current list is this one: Raul Alvarez Disc Golf Course: This project will develop a 36-hole disc golf course that will be environmentally and financially sustainable. (Oddly enough, it's in Austin, that Black Hole of Calcutta of the Western Hemisphere.)My point isn't that governments shouldn't spend money; my point is when bills too-big-to-read and including numbers-too-big-to-be-believed get tossed onto a Commander-in-Chief's desk who has conspicuously broken a campaign promise to enforce a "waiting period" for the public to review the contents before signing then I believe that it is very sane to be wary of what's going on.
I have no idea what you're talking about when you say "distributing the winnings to the top .01%Er, huge bonuses to the investment bankers and traders that got us into this mess? Hello?I'd like to know what the statistics were for starvation in America under the evil Republicans.Aren't I the unlucky one; the most recent statistics at NYPIRG are from 2000. I guess the evil Republicans didn't bother to keep up with them. That stimulus watch site is great! I note that under the 'most critical' tab there are things like bridge and road repair, construction of veterans nursing home, flood control and green building. There is also a lot that sounds like crap. Isn't it great that more and more of this stuff is online, so that the obsessive activists can make themselves useful?In fact, I find it hugely encouraging that authority is finding it more and more difficult to get away with Dirty Tricks. Obama isn't causing any change, as much as he's a symptom of it. Be as wary as you like; you've got a useful channel to express your concerns, and an even chance that those concerns will be listened to.
Franklin, your discussion of "natural" interest rates reminds me of one of the problems I have with libertarians. They tend to, as you have here, put together a lovely, seemingly logical model of human behavior, a nice little system that fits together like clockwork, and then assume if we set everyone free the clockwork mechanism would tick along and everything would work, not necessarily really well, but the best it possibly could.I recognize this as a problem because it's something I do myself a lot. I've trying, for the past couple of years, to stop. Because the trouble is, these clockwork models are simply inaccurate. They rely on personal ideas of how humans operate while ignoring centuries of empirical data.I don't believe in Economics as a science -- not even a dismal one -- but it is very good when it approaches human behavior as a collection of individual decisions. It's not a predictive science, but a descriptive taxonomy; a list of how people do things, and how they behave given certain situations.The controls setting "artificial" interest rates were invented because your "natural" method was used for a long time and found wanting. The 19th century suffered through a series of booms and busts, continuing right into the early 20th century, until 1929, when the people of the Western democracies finally said, "We've had enough of this. There's got to be a better way." Thus was the central bank born. Economies were stabilized by Bretton Woods for nearly forty years, until the system started to break down in the late 1960s. Even then, the boom-bust cycle didn't reach pre-Depression levels until the S&L collapse in the late 1980s.The return of the boom-bust cycle -- what Paul Krugman calls "Depression economics" -- came about when regulations and regulatory agencies were dismantled by the Friedmanites in the Reagan administration, carried forward by Bush I, Clinton, and Bush II.Claiming that regulation is the problem and we need to return to limited government is like saying that since your car broke down and left you stranded on the highway, you're going to go back to riding a horse. The fact is, the system in which things like interest rates are entangled is a human-built system, not a natural feature, like a volcano. Because it's built by humans, it can and will be modified over time, like any tool, to best achieve its ends. We may argue about those ends, but what shouldn't be argued is that the tool should be left alone. Flint knappers are fine tools, but technology has moved on.
Briefly, the Fed was legislated into existence in 1913 and self-evidently did not stabilize the economy. Too, Bretton Woods made the US Dollar the reserve currency of choice around the major markets. Economists at the time picked it because it used a gold standard, another favorite libertarian idea. BW become unpopular because it wasn't allowing the money supply to increase fast enough for the bankers, and was messing up LBJ's plans to get the Vietnam War on without raising taxes. Fun times!The funny thing about saying that these simple models don't work is that the complex ones don't work. 2008 Q3 and Q4 was a giant case of OMG The Complex Model Isn't Working.Gotta run.
I don't see some failures as indicating that the whole idea of controlling interest rates is a bad one. Again, that's like saying your car broke down catastrophically once, so you should go back to riding a horse.The argument has never been between a free market (or even a minimally-regulated one) and a regulated market. Because the free market doesn't exist. This simple model of interest rates only obtains for loan sharks. The argument is over which regulations and what they should look like. Or, to extend my metaphor: It's not about horses versus cars, as you seem to think; it's about what kinds of cars and what features they should have.The end of 2008 was actually a brilliant demonstration of the free market in action. Financial types, working around regulations, overseen by lax regulatory agencies, encouraged by the very people who should have been reining them in, wreaked havoc on the economic world. It's an argument for better and more oversight, not less. Not even more, necessarily: Like some advocates of gun ownership, I think we don't necessarily need more laws, we just need to enforce the ones we have.Libertarians love to point to government agencies which have been bought and paid for by private concerns as the main failure of government. As P.J. O'Rourke once wrote, when legislation controls what's bought and sold, the first things bought and sold are legislators. Which is a good point to a degree, and which viscerally connects with the libertarian mindset.I prefer to think of this as less a failure of government and more a failure of design. I believe it's possible to design government such that these kinds of problems can be minimized.Of course there's only so much that can be done, and of course history is going to continue to be a dialectic as groups attempt to pull things in their preferred ideological direction against the counterpull of other groups. We're not going to solve that problem any time soon. But one thing is certain: The solution is not to throw up your hands, say it's hopeless, and expect those simple clockwork models to keep things moving along. Their failure is what got us where we are today: The obvious drawbacks of riding horses everywhere are why we have cars. Doesn't mean cars are perfect.
As you know, I don't like debating a caricature.
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