I Coulda Had a Payroll Tax Cut

November 18th, 2009 at 7:48 am by David Frum | 152 Comments |

The U.S. needed a fiscal stimulus in 2009, but not the fiscal stimulus we got. Much of the Obama stimulus consisted of blowing dust off the mouldering wish lists of Democratic appropriators and cramming them through Congress as just the medicine ordered by the emergency. Now the administration has reached the absurd result of trying to count one-by-one the jobs supposedly created by its ramshackle plan. Embarrassingly, many of the jobs are located in congressional districts that don’t exist.

There was a better way. A fast-acting, direct-to-consumers, no bureaucracy created alternative – a payroll tax holiday.

Michael Boskin again reminds us of the case in favor in today’s WSJ:

The payroll tax cut would have reduced firms’ costs by roughly the same amount as from the entire decline in employment. It would have cost less than half as much as the stimulus bill, gotten far more income into paychecks quickly and, most importantly, greatly reduced incentives for firms to lay off workers. In fact, it would have created incentives to hire.

And it’s still not too late!

It would be far better to junk part of the remaining stimulus in favor of a one-year partial payroll tax cut. Also accelerate spending that needs to be done eventually, such as replenishing depleted military equipment used up in Iraq and Afghanistan and adding a desperately needed two Army brigades.

Then this good advice for the longer term:

By far the best response to these headwinds is to curtail the huge current and contemplated future government control of the economy with a clear, predictable exit strategy—before the programs become permanently entrenched, develop powerful dependent constituencies, and greatly increase the risk of rising interest rates, inflation and taxation. Doing so would more rapidly improve the outlook for permanent private-sector employment, investment and growth than any conceivable second stimulus. It would also allocate capital and labor to their highest value in providing goods and services that people actually want and need, not what government bureaucrats want them to have.

The jobs agenda must begin with a Hippocratic oath: First do no harm to employment. That means jettisoning or at least delaying job-killing energy and health-care legislation with their mandates, taxes and costs that especially hammer small businesses.

Also wind down, as soon as possible, the emergency measures which healthy businesses, households and investors fear will become permanent competitive impediments. Start with the Troubled Asset Relief Program, which the Treasury uses as a permanent revolving fund even fornonfinancial bailouts.

Financial regulation should focus on disclosure, transparency, effective clearing, capital adequacy, and new bankruptcy procedures. We also need a Plan B, modeled on the Resolution Trust Corporation cleanup of the savings and loans, in the event the losses on toxic assets are too large for time, profitability and economic recovery to manage. And the Fed must forestall future inflation by withdrawing its immense liquidity injections as soon and predictably as feasible (its initial steps are commendable).

Finally, if possible, we should complement these pro-employment policies with long-run fiscal reform: control entitlement cost growth, e.g. with price rather than wage indexing of Social Security, and real tax reform with the widest possible tax bases and lowest possible rates. America’s corporate tax rate, the second highest among advanced economies, is especially damaging.

I’d add only one point more: don’t forget healthcare. The problem of crushing cost increases will not go away, even if the Democratic health plan does.

152 responses so far

1 teabag // Nov 18, 2009 at 8:25 am

You got a Tax cut 30% of the stimulus was a tax cut , and you as an extremely rich person are still enjoying the huge tax break for the top 2% that is still in place. So stop whining.
2 Mfairbanks // Nov 18, 2009 at 9:17 am

How about we get rid of the real thieves: The Federal Reserve.
3 sinz54 // Nov 18, 2009 at 9:31 am

Liberals have attacked the payroll tax cut because they said the money would either be saved or “spent in a lot of little ways.” As if that were a bad thing.

They virtually admitted that what they really wanted was a stimulus package that advanced their social goals. It had to support alternative energy (even though right now alternative energy can’t make it in a free market without massive government subsidy). It had to keep thousands of state bureaucrats from losing their jobs.

So that’s why liberals didn’t want any kind of tax holiday for working families–not income tax, not payroll tax. They didn’t want those working families to decide for themselves how to spend that money.
4 MI-GOPer // Nov 18, 2009 at 10:14 am

I can tell you sinz54, that if the Stimulus Spending Spree of Obama, the SSS Obama, hadn’t sailed and instead it had been payroll tax reductions or even 6-8-10-18 months of temporary abatement on some payroll taxes, the recovery would be real –not just a fictional creation of political hacks and stockbrokers trying to sell the “Recovery is Here” concept to investors unwilling to buy.

In Michigan, the pro-Democrat, liberal Detroit Free Press did a study of the 1800+ SSS Obama projects cited by Biden as proof of the positive effects of the SSS Obama sailing into Michigan.

Guess what?

Average job created cost $2.7m.

Nearly 3/4trs of the projects created one or zero jobs. 75% of the projects created 1 or no jobs.

One case to demonstrate it: a Gt Lks dredging company got two SSS Obama projects funded… both harbor improvements. Total cost: $4.3m… jobs created? Two. Two new jobs. Two.

http://www.freep.com/apps/pbcs.dll/article?AID=/20091115/NEWS15/311150005/1318/Where-are-the-jobs-from-federal-stimulus-money&&template=fullarticle

As more is learned about the fake numbers, about the fake expenditures, about the fake jobs created or even the manufactured numbers about the far more fanciful “jobs saved” claims… the more the Tea Party Movment will flush Obama and the Congressional Democrats out of office.

There’s a smell of rotting fish and fear in the air… and it’s coming from Democrats and their trolls like TeaBag, automaticBS, old skool and the other trolls. Pure, raw fear. Palin brings it out. Good policy alternatives like a payroll tax holiday bring it out. Their decline in the polls bring it out. Fumbled opportunties like the SSS Obama bring it out.

I’m still remembering all the democrat underground trolls here talking about how the GOP was dead in the water; no chance of any recovery. Time to start a 3rd Party… oh yeah, that’s working for them.
5 balconesfault // Nov 18, 2009 at 10:15 am

Boskin in 2003:

Michael Boskin: all the evidence we have is that temporary tax cuts are not very stimulative. The evidence is that maybe 20%, 25% of it will be spent.

Peter Robinson: Just help me understand that in laymen’s terms, people sock the money into a bank account instead of going out and buying refrigerators?

Michael Boskin: We all got $300 or $600 rebates in 2001 and the evidence was that about 20% of it got spent. People socked it away or paid down debt or did something else with it, it’s not like the money disappeared, but it didn’t go directly in the short-term to stimulate the economy. The second major problem with it is that it gets into some very awkward situations with respect to social security and its financing. Now maybe those could be finessed somehow, but the payroll tax is how we finance current and future social security obligations.

Maybe we could have a Boskin-Boskin debate.
6 Churl // Nov 18, 2009 at 10:35 am

balconesfault, a theory of what taxpayers do with the money the government lets them to keep:

“See, when the Government spends money, it creates jobs; whereas when the money is left in the hands of Taxpayers, God only knows what they do with it. Bake it into pies, probably. Anything to avoid creating jobs.”
~Dave Barry
7 Reason60 // Nov 18, 2009 at 10:48 am

Even if we all went and spent every penny of that $600, what good would it have done outside of a flash in the pan for one month?
I am a deficit hawk, and want a balanced budget; but if there is one thing that is worth going into debt over, it is avoiding a depression.

Someone could turn the argument around- if $600 tax cut is an effective stimulus, wouldn’t an additional $600 of borrowed money spent by the government stimulate even more?

A tax cut that is not balanced by an equal spending cut is just borrowed money; and borrowing money to send a check to every taxpayer is no different than borrowing money to build a bridge or train line or something else.

This argument is avoiding our real deficit problem- military spending; 2/3 of our discretionary budget is military spending. As long as we keep spending a Trillion dollars per year on military, we will never have a balanced budget- or a sustainable economy.

Never in the history of the world, has any nation fought wars of this magnitude for this long, and had a prosperous economy.

Ever.
8 balconesfault // Nov 18, 2009 at 10:49 am

churl – lol

The problem is that money only is used to create jobs if there is a perception that the jobs will return more money or utility than, say, baking it into pies.

So at the top, if people think that buying gold is the best investment … they’ll buy gold. If people think that buying real estate is the best investment … they’ll buy real estate. Stock in Chinese minerals companies, or in oil futures … they buy those. Where did all the money come from to drive the derivatives market in the last decade? Try the billions in top end tax cuts.

Below the top, where day to day concerns dominate, if people think that saving money for retirement or college funds are more important than immediately spending any tax windfall – they’ll save. If they think that their prime spending need is a 52″ LCD TV to replace the old 32″ one, a good chunk of the money will immediately be used to inflate our trade deficit.

So there is a solid chance that a large tax cut goes right down a million holes, never to produce many more jobs than for real estate brokers and Best Buy salesmen moving investment land and Chinese goods.
9 MI-GOPer // Nov 18, 2009 at 10:59 am

wow, the echo chamber is in full tilt and the King of the Con (BlankHead) is back on his throne… “So there is a solid chance that a large tax cut goes right down a million holes, never to produce many more jobs than for real estate brokers and Best Buy salesmen moving investment land and Chinese good.”

Given that the Stimulus Spending Spree of Obama has netted so few jobs that the Obama Kamp has had to start claiming “jobs saved” instead of jobs created, I’d think that might be a con that fakes out a few people on first blush.

But when the numbers start coming in and 1-2 jobs are created for $2.7m and more or nearly 75% of all SSS Obama expenditures barely create a single new job… Americans are going to stop drinking your Kool Aid BlankHead and start taking their frustration out in the voting booth… that’s if ACORN doesn’t keep negating each real vote with a creative vote for the Democrats.

Remember, it would have been President McCain and Veep Sarah Palin if just 443k votes had materialized for the real Patriotic Team instead of the Dithering Duo.

Now, back to the Democrat Troll Echo Chamber we’ve all come to love on this conservative site dedicated to rebuilding the GOP.
10 Churl // Nov 18, 2009 at 11:18 am

balconesfault sayeth, “Below the top, where day to day concerns dominate, if people think that saving money for retirement or college funds are more important than immediately spending any tax windfall – they’ll save.”

And what then becomes of the money that people save? Does it just sit in a vault like Scrooge McDuck’s, or does something else happen to it? Let us know where you think it goes and what it does when it arrives there.
11 LFC // Nov 18, 2009 at 11:21 am

Tax cuts in a recession are ineffective stimulus. An enormous percentage goes to debt reduction and saving, not spending. I just read (don’t have the source handy) that there was something like a 5% reduction in credit card debt in the U.S. in August. That’s a ton of money coming from the tax cuts and less spending, and it’s not stimulative.

While debt reduction is good for the long-term balance sheets of Americans and our overall economic health, it’s not stimulative in the short-term which was the goal. Excess spending is 100% stimulative.

Now if Obama supports continued big increases in spending when the economy turns (like Reagan kept increasing spending for his entire 8 years), then there will be something to complain about. But tax cuts (the Republican end all / be all to EVERY economic situation) are an ineffective tool right now.
12 LFC // Nov 18, 2009 at 11:22 am

Churl asked… And what then becomes of the money that people save?

It goes to prop up sloppy bank balance sheets, and doesn’t get loaned out to stimulate the economy … just what we’re seeing now.
13 balconesfault // Nov 18, 2009 at 11:37 am

churl: Does it just sit in a vault like Scrooge McDuck’s, or does something else happen to it? Let us know where you think it goes and what it does when it arrives there.

I am certainly in favor of saving … but it does not provide immediate economic stimulus. As a long-term path to health of the economy, it should certainly be encouraged – but I don’t think that a tax rebate or holiday or whatever is the right tool to encourage savings.
14 MI-GOPer // Nov 18, 2009 at 11:39 am

Actually, LFC, of the SSS Obama TARP ship, according to the Federal Reserve, about 67% of the US Govt payments went to US banking institutions who then paid off foreign banking syndicates with those hard-earned, quickly borrowed US funds.

Biggest net reciepent? Deutsche Bank. $33.5b in funds from 7 TARP-assisted US banks.

http://www.federalreserve.gov/newsevents/testimony/kohn20090113a.htm

By the way, when Washington was bailing out the US automakers, guess who wanted and got a cut? Daimler and BMW. Nice touch… it’s good to know the Obama Administration is taking care of non-US manufacturing giants, too.

http://www.dw-world.de/dw/article/0,,3866992,00.html
15 sinz54 // Nov 18, 2009 at 11:58 am

balconesfault:

all the evidence we have is that temporary tax cuts are not very stimulative. The evidence is that maybe 20%, 25% of it will be spent.

What percentage of Obama’s stimulus package was spent in 2009? I heard it was about one-eighth.

Obama and Pelosi have admitted that the stimulus package was back-loaded. Most of the stimulus will kick in in 2010 (just in time for the November congressional elections), and even in future years when presumably the economy will have recovered but the need for the Dems to dole out pork will be permanent.
16 sinz54 // Nov 18, 2009 at 12:01 pm

lfc:

I just read (don’t have the source handy) that there was something like a 5% reduction in credit card debt in the U.S. in August. That’s a ton of money coming from the tax cuts and less spending, and it’s not stimulative.

ANY reduction in consumer debt helps keep consumers out of bankruptcy–and that’s stimulative.

When a consumer has to declare bankruptcy, their ability to purchase anything on credit is severely restricted for 10 years at least.

Obama is trying to have it both ways here. First he justifies the health care plan as necessary for the health of the economy, pointing to how many Americans declare bankruptcy due to staggering health care costs. And now, he and you claim that reducing debt (thus preventing widespread bankruptcies) isn’t stimulative.
17 balconesfault // Nov 18, 2009 at 12:03 pm

sinz: first, you’re not quoting me – you’re quoting Boskin from a 2003 discussion. I just like to make sure attribution is proper.

second, you’re right that the money was not largely spent in 2009. The conservative in me appreciates this, since it makes it less likely the government will waste the money – and more likely that there’s a well documented well justified path for looking at who gets money and why.

The businessman in me realizes that companies have held off to some extent on job cuts because keeping quality staff is critical to being able to chase those projects. Without that money looming, even if in 2010, a lot more jobs would likely have been lost.
18 MI-GOPer // Nov 18, 2009 at 12:09 pm

BlankHead writes: “… The conservative in me appreciates this…”

Wow, is that the same conservative who’s been a longtime commenter at HuffPo? For five years? Yeah, that’s the conservative in you? You meant to say far Left democrat activist in you, right? You wouldn’t deliberately try to mislead readers here?? Honest as the driven snow, that BlankHead.

http://www.huffingtonpost.com/users/profile/Balconesfault?action=profile
19 LFC // Nov 18, 2009 at 12:24 pm

MI-GOPer said… Actually, LFC, of the SSS Obama TARP ship, according to the Federal Reserve, about 67% of the US Govt payments went to US banking institutions who then paid off foreign banking syndicates with those hard-earned, quickly borrowed US funds.

I’m sorry. I thought George W. Bush passed TARP with a bipartisan vote from Congress. Must be my mistake.
20 LFC // Nov 18, 2009 at 12:31 pm

sinz54 said… ANY reduction in consumer debt helps keep consumers out of bankruptcy–and that’s stimulative.

Some percentage of people will avoid bankruptcy, which helps further deterioration, but that’s not the same as stimulus. Money spent on goods and services is direct stimulus.
21 Churl // Nov 18, 2009 at 1:03 pm

LFC, “It goes to prop up sloppy bank balance sheets, and doesn’t get loaned out to stimulate the economy … just what we’re seeing now.”

And if it is propping up a bank balance sheet, it still has to be somewhere. Where is it? What is it doing?
22 Independent // Nov 18, 2009 at 1:18 pm

“I’m sorry. I thought George W. Bush passed TARP with a bipartisan vote from Congress. Must be my mistake.” -LFC @ 19

It’s ok, LFC. I’m guessing from your other comments, you’re use to being dead wrong. Remember that was the Democrat Party leadership in Congress who told the Bush Administration that they’d vote for the TARP package EXCEPT THAT 60% had to be held back and spent by the upcoming Obama Administration… and the Democrat leadership in the House and Senate made sure that Bush Secy of Treasury Paulson spent the 1st 1/2 of TARP on items that all three groups could agree on –and nothing else.

It’s why Geo Bush, I think wisely said this past week, “I believe in the power of the free enterprise system, which made the decision I faced last fall one of the most difficult of my presidency. I went against my free market instincts and approved a temporary government intervention to unfreeze credit and prevent a global financial catastrophe”.

Want to try to spin that a different way now? What was that about the TARP, LFC?
23 balconesfault // Nov 18, 2009 at 1:26 pm

And if it is propping up a bank balance sheet, it still has to be somewhere. Where is it? What is it doing?

Well, left to their own devices – a lot of them are just holding cash.

http://online.wsj.com/article/SB125712303877521763.html?mod=WSJ_hps_LEFTWhatsNews

Stung by the financial crisis, companies are holding more cash — and a greater percentage of assets in cash — than at any time in the past 40 years.

Again – jobs aren’t created because companies have money. Jobs are created when companies believe that those jobs will produce revenues and profits. If companies think the money will produce better returns if invested in something that isn’t directly correlated to job growth in America, they will do that, because they have a fiduciary responsibility to stockholders that trumps any responsibility to the health of the American economy.
24 ottovbvs // Nov 18, 2009 at 1:43 pm

…….As is well known, handing out tax cuts in the depth of a recession is one of the least effective methods of boosting aggregate demand and ultimately job creation because the recipients of those tax cuts are deeply fearful of losing their own jobs and therefore use the additional income to either pay down debt or increase their savings. This is economics 101 and you’d think this completely logical bit of reasoning would be obvious to all but it’s not to Republicans who faced with the reality that giving tax cuts to people without jobs wasn’t likely to be very effective, desperately scratched around to find some alternative to the stimulus program which they virtually unanimously opposed and came up with this other form of tax cut which suffers from the same disadvantages of all tax cuts in a recession………the problem in the early party of this year, when it was acute, and still in fact is the need to put more demand into the economy and a tax cut alone was going to be totally ineffective in boosting demand………..Republicans as Bruce Barlett keeps explaining are married to a series of economic policy prescriptions that are going to be completely ineffective in the current situation…….Now Mr Boskin was the chairman of Bush’s council of economic advisors during much a presidency that was largely responsible for creating a near collapse of the banking system and the most serious recession since the big one……. he’s one of the people primarily responsible for creating this mess so his credibility is zero…….obviously David is still heavily invested in supply side baloney…..he should read Bartlett’s book
25 balconesfault // Nov 18, 2009 at 1:49 pm

otto: This is economics 101 and you’d think this completely logical bit of reasoning would be obvious to all but it’s not to Republicans

I’ve yet to find any economic condition that Republicans don’t claim tax cuts will improve. It is a first principle.
26 ottovbvs // Nov 18, 2009 at 1:55 pm

balconesfault // Nov 18, 2009 at 1:26 pm

” Again – jobs aren’t created because companies have money. Jobs are created when companies believe that those jobs will produce revenues and profits.”

……..I think you said somewhere that you are an accountant so you are obviously financially literate unlike many others here……….the problem as you indirectly say is one of demand……companies don’t invest or take on workers unless demand for their product is increasing (which is why the notion that a payroll tax cut would encourage companies to hire workers in a period of collapsing demand is ludicrous)…….the problem at the moment from what my sources tell me is that capital is available from lenders but businesses are not borrowing unless they have to…..much like the rest of us….paradoxically this is likely to have generally beneficial results for labor as companies put off investment decisions involving more productive plant and hire more workers who are a much more elastic factor of production
27 ottovbvs // Nov 18, 2009 at 1:58 pm

25 balconesfault // Nov 18, 2009 at 1:49 pm

“otto: This is economics 101 and you’d think this completely logical bit of reasoning would be obvious to all but it’s not to Republicans

I’ve yet to find any economic condition that Republicans don’t claim tax cuts will improve. It is a first principle.”

……..That’s there problem as Bartlett keeps repeating…….they are married to a set of economic mantras that not only wouldn’t work in current circumstances and would actually make things worse……hence they have to come up with baloney like Boskin’s which have more holes than swiss cheese
28 Independent // Nov 18, 2009 at 2:15 pm

“As is well known, handing out tax cuts in the depth of a recession is one of the least effective methods of boosting aggregate demand and ultimately job creation because the recipients of those tax cuts are deeply fearful of losing their own jobs and therefore use the additional income to either pay down debt or increase their savings.” -ottovbs

lol. well, let’s see… history says you’re wrong, ottovbs. the carter recession was ended when mr reagan stood his ground and forced the democrats in congress to pass tax cuts. bush 41 pushed the recession deeper when he agreed with greedy democrats in congress an passed the biggest tax hike in history -up to that point… i’m sure obama will be breaking that record, soon. maybe repeatedly.

recession and tax cuts. boom time

recession and tax hikes. further recession.

truth isn’t a very close friend of your’s, is he ottovbs?
29 ottovbvs // Nov 18, 2009 at 2:17 pm

MI-GOPer // Nov 18, 2009 at 10:59 am

“Actually, LFC, of the SSS Obama TARP ship, according to the Federal Reserve, about 67% of the US Govt payments went to US banking institutions who then paid off foreign banking syndicates with those hard-earned, quickly borrowed US funds.”

……..Leaving aside that TARP was actually passed by the Bush admin, I’d have thought as a practising lawyer in MI you’d understand sometthing about derivatives like CDS’s and how they work……it’s always useful to get the benefit of your considerable legal and financial expertise
30 Independent // Nov 18, 2009 at 2:19 pm

speaking of truth… balconesfault got it between the eyes from mi-gop with this sinker:

“Wow, is that the same conservative who’s been a longtime commenter at HuffPo? For five years? Yeah, that’s the conservative in you? You meant to say far Left democrat activist in you, right? You wouldn’t deliberately try to mislead readers here?? Honest as the driven snow, that BlankHead”

the truth is a real taskmaster around here when transparency and accountability trump spin and distortions.

maybe that’s why the democrats and obama don’t want to honor their pledge to post bills 72 hours before a vote? don’t want us looking into how they’re spending the stimulus? don’t want us asking GM which pot of money will they be draining to “pay” back the govt while asking for more money?

crooks and liars are in power… they aren’t in west texas or wyoming.
31 Independent // Nov 18, 2009 at 2:22 pm

“Leaving aside that TARP was actually passed by the Bush admin” — ottovbs

that lie has already been dealt with and dispatched, otto. you really do need to get in a few class hours in “reading for comprehension”.
32 ottovbvs // Nov 18, 2009 at 2:22 pm

28 Independent // Nov 18, 2009 at 2:15 pm

“lol. well, let’s see… history says you’re wrong, ottovbs”

…..the top marginal rate of tax in 1980 was around 90%…..it’s currently around 35%……this as Mr Bartlett points out makes rather a large difference…….knowledge of economics or economic history isn’t a very close friend of your’s is he independant?……go spend 20 bucks buy Bartlett’s book and he will explain it all to you……alternatively Frum has provided links to several of his opinion pieces in Forbes where he goes over the same ground
33 ottovbvs // Nov 18, 2009 at 2:24 pm

31 Independent // Nov 18, 2009 at 2:22 pm

“that lie has already been dealt with and dispatched, otto”

…….The TARP bill wasn’t passed by the Bush admin?
34 ottovbvs // Nov 18, 2009 at 2:29 pm

31 Independent // Nov 18, 2009 at 2:22 pm

“that lie has already been dealt with and dispatched, otto”

“On October 3, 2008, the Emergency Economic Stabilization Act became law with the signing of Public Law 110-343, which included the act.[155] Below is a list of key items and how the legislation deals with them.”

……..Just so I’m clear Bush wasn’t president and Paulson the author of the bill wasn’t treasury sec?….ok I understand
35 ottovbvs // Nov 18, 2009 at 2:31 pm

Independent // Nov 18, 2009 at 2:19 pm

“the truth is a real taskmaster around here when transparency and accountability trump spin and distortions.”

……..you were saying?…….unfortunately I don’t think you’d recognize truth if it bit you in the bum
36 Independent // Nov 18, 2009 at 2:37 pm

you really do need to learn to read for comprehension, ottobs. your lies and half-truths were dealt with at comment 22.

now, what was that nonsense of your’s about taxes and recessions not working? history knocked your yellow teeth out with that one, eh? what’s the “bs” on your name stand for?
37 balconesfault // Nov 18, 2009 at 2:40 pm

speaking of truth… balconesfault got it between the eyes from mi-gop with this sinker:

“Wow, is that the same conservative who’s been a longtime commenter at HuffPo? For five years? Yeah, that’s the conservative in you?

LOL. What kind of criticism is that? The allegation is that you cannot read Huffington Post (or Daily Kos, or Balloon-Juice, etc) and have any conservative principles?

By the same token, Independent, you could be the next target if someone disagrees with you, arguing that anyone who voted for Obama could never have any conservative principles.

A specious argument, at best. If that’s the best GOPer can come up with, it’s no surprise he resorts to silly name calling as the lynchpin for most of his rebuttals.
38 ottovbvs // Nov 18, 2009 at 2:46 pm

Independent // Nov 18, 2009 at 2:37 pm

…….When cornered with the facts revert to ad hom attacks…..standard operating practice for cornered conservatives……..and you can’t even get your tarp numbers right……..by the time Obama took office over 450 million of the 700 million had been spent on amongst other things AIG and the auto industry bailouts……..the problem with lying in such a well worn area as this is that the facts are so easily ascertainable…….it’s a pity you don’t take the trouble to look them up, but then you aren’t awfully interested in facts are you
39 balconesfault // Nov 18, 2009 at 2:49 pm

Independent carter recession was ended when mr reagan stood his ground and forced the democrats in congress to pass tax cuts.

How do you define recession? Do you have your own meaning?

Per the National Bureau of Economic Research, there were two recessionary periods around the time you’re talking about.

Jan–July 1980 – which ended well before Reagan took office

July 1981 – Nov 1982 – This started a month before Reagan signed the Economic Recovery Tax Act of 1981 in August 1981 … and ended shortly after passage of the Tax Equity and Fiscal Responsibility Act of 1982 (September 3, 1982) that rescinded portions of the 1981 tax cuts.

We also had during that time period, in January 2003, more than a doubling of the federal gasoline tax.

So I guess your argument rests on the idea that a Carter recession that started 6 months after Reagan took office ended 15 months after Reagan’s tax cuts took effect as a direct result of those cuts?
40 balconesfault // Nov 18, 2009 at 2:52 pm

Oops – scratch the date on the gasoline tax increase. That happened in 1993, after the recession ended (but well before the unemployment rate started to come down).
41 Churl // Nov 18, 2009 at 2:59 pm

balconesfault says, regarding bank deposits, “Well, left to their own devices – a lot of them are just holding cash.”

So does that mean that they are keeping bundles of banknotes in a vault somewhere?
42 ottovbvs // Nov 18, 2009 at 3:03 pm

Independent // Nov 18, 2009 at 2:37 pm

………Since I can clearly see that you are an intelligent, objective and economically literate poster I’m making it easy for you and provide a link to Bruce Bartlett’s comments that put his new book in perspective:

http://capitalgainsandgames.com/blog/bruce-bartlett/1168/supply-side-economics-rip
43 balconesfault // Nov 18, 2009 at 3:06 pm

So does that mean that they are keeping bundles of banknotes in a vault somewhere?

I assume you can follow the link to the WSJ story as well as I can? You tell me what that means.

It does mean they’re not out hiring people with those dollars.
44 ottovbvs // Nov 18, 2009 at 3:09 pm

Churl // Nov 18, 2009 at 2:59 pm

” So does that mean that they are keeping bundles of banknotes in a vault somewhere?”

………Er no………Obviously any bank needs relative large amounts of cash to fund ongoing operations but the vast majority of their reserves are in the form of treasury bonds, derivatives, short term loans to bank and other financial institutions, and their balances at the Fed in the form of either financial instruments of one sort and another and notional cash which while it technically adds to the money supply is largely a fiction because they are funds that have been notionally loaned to the banks by the Fed against various paper assets they have used as collateral (much of it the famous iffy paper).
45 sinz54 // Nov 18, 2009 at 4:14 pm

balconesfault:

it makes it less likely the government will waste the money – and more likely that there’s a well documented well justified path for looking at who gets money and why….companies have held off to some extent on job cuts because keeping quality staff is critical to being able to chase those projects.

There’s a “well justified path” all right.

The purpose is to pump money into the economy in the middle of 2010 so the Dems can run on that in the congressional elections.

As for who gets money and why, that’s already crystal clear. If you supported Obama in the 2008 election (the teachers’ unions, the auto unions, AFSCME), you’ll get money. Otherwise, not so much.

The fact that your fellow liberals are now all crying out for a brand new “Green Jobs Conservation Corps” (cf. DailyKOS, Robert Reich, Krugman, etc.) proves that the original touted purpose of creating zillions of green jobs from the stimulus package has so far failed.

And as for businesses holding onto workers: That was NOT the original purpose of the stimulus package. We were told it was going to create hundreds of thousands of new jobs, including lots of “green” jobs. Remember THIS famous chart from Joe Biden? (With the real results annotated in red)

http://i36.tinypic.com/1075l4x.jpg

Unemployment rate is going to be about 3 percentage points higher than Biden thought–even with the stimulus package.

Now here’s a comparison of our current recession with past recessions:

http://i46.tinypic.com/314w3a0.jpg

With a stimulus package that you freely admit was back-loaded, how long would you estimate the unemployment rate will remain above 10%? The way I read this chart, that will be the case at least through 2010 and even maybe beyond.

You seem like a reasonable fellow. I hope when you look at this chart, you will admit that backloading the stimulus package was economically disastrous and politically risky. Your fellow liberals are now admitting it.
46 MI-GOPer // Nov 18, 2009 at 4:20 pm

balcone spins and hopes no one checks: “The allegation is that you cannot read Huffington Post (or Daily Kos, or Balloon-Juice, etc) and have any conservative principles?”

Sweetheart, nice try. The allegation isn’t that you cannot READ HuffPo, it’s that you’re a regular, registered commenter at the site with a fan base of adoring fellow-HuffPo readers who have “hearted” you as one of balcones’ “fans”.

“Love the spin; hate the spinner” –is that it? Christianity has something like that about sins and sinners… oh wait, sorry you’re one of our anti-Christian bigots at the Frum Forum; forgot, balcones. So sorry.
47 Churl // Nov 18, 2009 at 4:27 pm

balconesfault, “It does mean they’re not out hiring people with those dollars.”

They certainly aren’t hiring people with those stimulus dollars, either, wherever THAT money went.

All one can say is that bank deposits (however they are invested) do shore up bank balance sheets with real cash thereby making bankers less scared to lend.

One should remember that, given the huge uncertainties in health care legislation, taxation, cap and trade laws along with the general economic worries, people are not so interested in borrowing, either.
48 MI-GOPer // Nov 18, 2009 at 4:28 pm

automaticBS complains about Independent “When cornered with the facts revert to ad hom attacks…”

Well, kettle… for you to write that about anyone here is quite a temptation for God to send a thunderbolt or two in your direction for sheer cheekiness and intellectual dishonesty. Next time you’re outside, automaticBS, stay close to tall objects… you can’t risk a walk in the open.

I thought Independent did a great job of explaining why the TARP package was mostly a Democrat plan, directed by Democrat Congressional leaders, with a huge chunk of it left for the incoming Obama Administration (yep, they’re Democrats too) to spend.

Tell me again why, after a few months, Geo Bush disowned the package and said it was one of the toughest decisions he made as prez and he regrets it???

Or are you and BlankHead on autopilot when it comes to spitting out the far Left talking points, automaticBS?
49 ottovbvs // Nov 18, 2009 at 4:30 pm

MI-GOPer // Nov 18, 2009 at 4:20 pm

“Sweetheart, nice try. The allegation isn’t that you cannot READ HuffPo, it’s that you’re a regular, registered commenter at the site with a fan base of adoring fellow-HuffPo readers who have “hearted” you as one of balcones’ “fans”.’

………when cornered with the facts revert to the ad hom attacks…..it’s all you know how to do……surprising since you’re an attorney in MI…….where this guy visits or blogs is irrelevant what matters is the accuracy of his opinions on the subject under discussion and on these he’s entirely correct
50 balconesfault // Nov 18, 2009 at 4:32 pm

sinz: The purpose is to pump money into the economy in the middle of 2010 so the Dems can run on that in the congressional elections.

Do you believe that it would have been possible for government to have spent all the stimulus funds effectively in 2009?

The fact that your fellow liberals are now all crying out for a brand new “Green Jobs Conservation Corps”

Most of those same parties were also calling for the same thing, as well as a doubling of stimulus spending, back in February. They are using the delay in reversal of the jobless growth as an opportunity to press the same argument they were making then.

I will agree that backloading the stimulus package was politically risky. I won’t agree that it was economically disasterous.

We are clearly following Odysseus course between Scylla and Charybis – the rocks of depression that can destroy an economy, the whirlpool of hyperinflation that could suck it down.

My problem, I guess, is that I have become so jaded about the financial institutions in America – their loyalty, their goals – that I don’t think Government can just pump money out there without the traders siphoning a significant portion off before it can create any jobs … and worse yet, using that to leverage even bigger risks into the future.

If Government is going to be borrowing from future generations to prevent an economic collapse today, I want them to tell me exactly where that money is going. And that can’t be done with tax cuts. And you may disagree, but I don’t think it could have been done had they accelerated the spending and tried to go through 700 billion in 2009, either. It would have just pulled us closer, faster to the whirlpool, ironically without making us safer from the rocks.

But the moneymen would have been happy.
51 ottovbvs // Nov 18, 2009 at 4:33 pm

MI-GOPer // Nov 18, 2009 at 4:28 pm

automaticBS complains about Independent “When cornered with the facts revert to ad hom attacks…”

“Well, kettle… for you to write that about anyone here is quite a temptation for God to send a thunderbolt or two in your direction for sheer cheekiness and intellectual dishonesty. Next time you’re outside, automaticBS, stay close to tall objects… you can’t risk a walk in the open.”

…….There you go again……you never actually contribute anything of substance…..or discuss the point……just pour out the rather juvenile bile…….for a lawyer in MI you’re startling lacking in debating skills
52 balconesfault // Nov 18, 2009 at 4:34 pm

The allegation isn’t that you cannot READ HuffPo, it’s that you’re a regular, registered commenter at the site with a fan base of adoring fellow-HuffPo readers who have “hearted” you as one of balcones’ “fans”.

I’m a regular, registered commenter? That’s news to me! Do I get royalty checks for that? Arianna’s a millionaire, she can send a few bucks towards my beer fund.
53 MI-GOPer // Nov 18, 2009 at 4:35 pm

BlankHead makes the case for why tax cuts, not tax hikes, are the needed tonic in a recessionary period… “July 1981 – Nov 1982 – This started a month before Reagan signed the Economic Recovery Tax Act of 1981 in August 1981 … and ended shortly after passage of the Tax Equity and Fiscal Responsibility Act of 1982 (September 3, 1982) that rescinded portions of the 1981 tax cuts.”

BTW, BlankHead, the ‘82 TEFRA expanded tax cuts and massively reduced tax rates… it did modify the real estate depreciation schedule and that may be how you think it was a tax hike. But then, it also launched the nation’s most successful housing tax credit program in 50 yrs of federal activity in housing policy… the Low Income Housing Tax Credit program –thank you Mr Reagan.

This year, LIHTC will expend about $17.4B in foregone tax revenues for housing… and the last depreciation table for real estate provided about $388m in tax benefits to housing. Not even in the same ballpark, are you BlankHead?

You just gotta know by now that someone is going to check your BS. And remember the question (thanks for that observation, independent).
54 MI-GOPer // Nov 18, 2009 at 4:39 pm

Oh, and yes, it was the Carter recession –because Carter’s foreign policy directly contributed to the world’s economic collapse that brought about the recession.

To wit, BlankHead: “Economist Walter Heller, chairman of the Council of Economic Advisers in the 1960s, said that “I call it a Reagan-Volcker-Carter recession.”"

http://www.time.com/time/magazine/article/0,9171,922689-2,00.html

Ouch, when you’re wrong, you step into it deeply, ol’ pal.
55 ottovbvs // Nov 18, 2009 at 4:40 pm

Churl // Nov 18, 2009 at 4:27 pm

balconesfault, “It does mean they’re not out hiring people with those dollars.”

“They certainly aren’t hiring people with those stimulus dollars, either, wherever THAT money went.”

……….actually they most certainly are…..within my state at least two major construction projects that had been mothballed have been restarted with stimulus funds and more are going to be rolled out over the next few months according to a neighbor of mine whose in the construction business……and just as important in the short term the transfer payment to states prevented even worse govt layoff than we’ve seen…….basically you’re just not telling the truth about this just mouthing the usual bumper stickers
56 balconesfault // Nov 18, 2009 at 4:40 pm

One should remember that, given the huge uncertainties in health care legislation, taxation, cap and trade laws along with the general economic worries, people are not so interested in borrowing, either.

I am not a healthcare expert, so I don’t know if uncertainties in healthcare legislation is keeping the medical industry from investing in people and technology.

I don’t see where the uncertainties in taxes are.

As for cap-and-trade, right now there are investment dollars poised to jump into a myriad of technologies aimed at reducing carbon emissions, from renewable energy to combustion process modifications to carbon capture and sequestration. You’re right – they are sidelined until legislation passes, because they need the bill to drive the economics. It’s almost always cheaper to pollute than to not pollute, so companies almost never stop polluting until there is economic (or punitive) incentive to do stop.

And yes, general economic worries contribute. Which is the reason why companies are stockpiling cash. They don’t want to start big new investments and have the economy turn south in a bad way, and they don’t want to make big purchases if the same things might be cheaper in 6 months, unless there is an immediate profit motive in making the purchase today.
57 MI-GOPer // Nov 18, 2009 at 4:42 pm

BlankHead tries to pull a JonStewart: “I’m a regular, registered commenter? That’s news to me! Do I get royalty checks for that? Arianna’s a millionaire, she can send a few bucks towards my beer fund.”

All you got to do is follow the links, idiot. HuffPo and balconesfault. Since 2005 a registered commenter at HuffPo with even a fan base who hearted his webpage there.

Idiot dissemble, BlankHead. Morons keep digging the hole deeper.
58 MI-GOPer // Nov 18, 2009 at 4:44 pm

automaticBS, not at all… we were speaking exactly on topic about your propensity to lie here and call others out for the traits you exhibit routinely.

You might think there’s some defense in appearing dumb, because you try that trick often here.
59 ottovbvs // Nov 18, 2009 at 4:48 pm

“MI-GOPer // Nov 18, 2009 at 4:39 pm

“Oh, and yes, it was the Carter recession’

……….It was the Carter recession to the extent that he appointed Volcker to the Fed and he set about squeezing the inflation out of the economy that had been building ever since the sixties and added to by firstly Nixon’s fiscal policies and then the spike in oil prices. It had next to nothing to do with Carter’s foreign policies…….I realize this is all complicated but understanding it shouldn’t present any problems to someone with your legal and financial background
60 balconesfault // Nov 18, 2009 at 4:48 pm

HuffPo and balconesfault. Since 2005 a registered commenter at HuffPo with even a fan base who hearted his webpage there.

What I get for reading your stupidity. Another wild goose chase, as counterfactual as your constant repeat of the canard that 443K votes could have changed the outcome of the 2008 election. I note you never responded to my lengthy rebuttal of that, but I guess that would actually take facts rather than vitriol. If you are an attorney, you remind me of the old attorney joke
If you have the law on your side, hammer the law
If you have the facts on your side, hammer the facts
If you have neither, hammer the table

Anyway, I went and looked at my profile there.

Stats Board
Comments
Total Comments Made: 59
Comments to News: 25
Comments to Blog: 34
Fans
Total Fans of Balconesfault : 0
Total Members Balconesfault is a Fan of: 1

I have no idea what constitutes reality for you, MI-Goper, but it really doesn’t match up with what most people would call reality.
61 WillyP // Nov 18, 2009 at 4:49 pm

Being economically literate, reading this posting by the waffling and perpetually confused Mr. Frum, and then the childish comments from smarter-than-thou pontificaters is like playing “Spot that Fallacy!”

Look, anyone without a degree in economics and with common sense will tell you this – if you want to effectively address (government induced) depression, what you do is quite simple:

1) Cut spending in the most politically expedient manner
2) Cut taxes
3) Reduce regulations in the most depressed sectors. In this case: auto manufacturing, insurance (including health insurance), health care, and securities (i.e., kill Sarbanes-Oxley), and ENERGY
4) Reduce regulations in the ubiquitous labor market
5) Reduce (or better, eliminate) protectionist tariffs and other measures (that are non-essential to national defense)

This concoction of policy would spike the Dow 2 grand alone. The rest is details.

In the case we’re experiencing RIGHT NOW, as a result of the imbecilic policies already enacted, we also need to tighten interest rates, like was done under Reagan’s Fed.
62 WillyP // Nov 18, 2009 at 4:51 pm

…I have a penchant for pressing submit one second too early.

I meant, we need to RAISE interest rates, like was done under Reagan’s Fed, in order to TIGHTEN the money supply. Else, plainly put, we’re going to create rampant inflation, 70s style or worse.
63 ottovbvs // Nov 18, 2009 at 4:52 pm

58 MI-GOPer // Nov 18, 2009 at 4:44 pm

:automaticBS, not at all… we were speaking exactly on topic about your propensity to lie here and call others out for the traits you exhibit routinely.”

……….your bile and unpleasantness is a real tonic to my laughter buds……..but thanks for another helping of the ad homs that you believe pass for substance…….what are you a laid off clerk of some kind?
64 balconesfault // Nov 18, 2009 at 4:55 pm

WillyP: I meant, we need to RAISE interest rates, like was done under Reagan’s Fed

I actually agree with Willy on one thing. IMO, the interest rates being kept so low, for so long, has seriously damaged our economy. The money-men being able to get their hands on so much cash at such low rates in the last decade just encouraged all their worst instincts, as bad as giving an inveterate gambler an unlimited credit line while they go into a casino. Being able to get money at almost no cost made all that leveraging all that much more attractive to them, and we are all paying the price.
65 ottovbvs // Nov 18, 2009 at 4:55 pm

62 WillyP // Nov 18, 2009 at 4:51 pm

“I meant, we need to RAISE interest rates, like was done under Reagan’s Fed, in order to TIGHTEN the money supply. Else, plainly put, we’re going to create rampant inflation, 70s style or worse.’

…….Volker was rasing interest rates long before Reagan became president…..he was appointed chairman by Carter in 1978 I believe…..and subsequently let go by Reagan btw……and there isn’t the slightest sign of rampant inflation……wholesale and retail prices are essentially flat
66 ottovbvs // Nov 18, 2009 at 4:58 pm

balconesfault // Nov 18, 2009 at 4:55 pm

” I actually agree with Willy on one thing. IMO, the interest rates being kept so low, for so long, has seriously damaged our economy. ”

………that may be true to some considerable extent historically but it’s hardly an argument for raising rates now when the need is to encourage companies and individuals to borrow……that would be insanity when there is no danger of inflation
67 ottovbvs // Nov 18, 2009 at 5:02 pm

WillyP // Nov 18, 2009 at 4:49 pm

“Look, anyone without a degree in economics and with common sense will tell you this – if you want to effectively address (government induced) depression, what you do is quite simple:

1) Cut spending in the most politically expedient manner”

……..you’re obviously a modest guy but this is your claim to economic literacy?……..Hoover tried this I believe with mixed results
68 WillyP // Nov 18, 2009 at 5:11 pm

Volker resigned after the Fed board rejected his then-latest diktat, if I recall correctly. It was a bit of a coup d’état, and I believe he was very offended (it was theretofore unprecedented in Fed history). I’m recalling what I read in Woodward’s Maestro many years ago.

ottovbvs agrees with me? I must be wrong. The idea of a centrally managed currency is inherently bad. And when you can create money and/or credit out of thin air (fractional reserve banking and central banking do this), you’re asking for a boom/bust cycle that follows a predictable pattern: capital consumption, fueling malinvestment and surreptitious “over”consumption, following by bankruptcy and necessary liquidations once the monetary spigot is turned off. But expounding the details around that process is a bigger can of worms that I care to open presently.
69 MR FACE // Nov 18, 2009 at 5:26 pm

Mi-Goper,

I have been reading this site for a couple weeks now, and really enjoy it. I’m not a big poster, but like all the back-and-forth. Lots of different points of views, which is good. Reading your comments, I find it hard to believe that you really are a Christian. Your posts are always filled with name calling and negativity, always attacking everyone who doesn’t agree with you 100%. Your online persona sure doesn’t come off as Christian to me.

Is this how Jesus would post online?
70 ottovbvs // Nov 18, 2009 at 5:34 pm

…….From the 1981 Time article supporting my contention that it was Volckers tight money policies that were the main source of the recession……they were entirely appropriate btw in the context of inflation in the teens

“Only the harshest political partisans are pinning principal responsibility for these pains and risks on Reagan. Most economists view the recession as primarily the result of the tight-money policy adopted by Paul Volcker, chairman of the Federal Reserve Board, before Reagan took office—though they note Reagan has supported that policy. Some also see the slump as a delayed effect of the vacillating economic strategy of Reagan’s predecessor. “I call it a Reagan-Volcker-Carter recession,” says Economist Walter Heller, chairman of the Council of Economic Advisers in the 1960s.”

68 WillyP // Nov 18, 2009 at 5:11 pm
“Volker resigned after the Fed board rejected his then-latest diktat, if I recall correctly.”

………I thought he left because Reagan chose not to reappoint him and instead gave the job to Greenspan

“ottovbvs agrees with me? I must be wrong. The idea of a centrally managed currency is inherently bad.”

……..what am I supposed to be agreeing with?…..that you’re very modest?

………your notions about central banks and currency seem rather wrongheaded to put it mildly…….boom bust cycles have been with us forever and have little do with central banks per se……..the bust cycle in the late 19th century lasted for around 25 years and there weren’t any central banks in existence in a modern sense …….since the second world war central banks have been largely instrumental in keeping their duration short, typically 6-24 months …….instead of going off on some new tangent about the evils of central banking how about responding to my critique of your suggestion that cutting govt spending in a recession is in fact a demonstration of complete economic illiteracy
71 WillyP // Nov 18, 2009 at 5:36 pm

otto, modesty is irrelevant in this case. I am being intellectually honest, in a way that I truly believe would alleviate the pain of economic depression the most expediently.

But since you bring up modesty… unlike so many others here, I am not the one proposing a thousand pet schemes on how to spend other people’s money – which is what fiscally”stimulative” government’s do implicitly.
72 WillyP // Nov 18, 2009 at 5:49 pm

otto, you say (boringly and predictably): “instead of going off on some new tangent about the evils of central banking how about responding to my critique of your suggestion that cutting govt spending in a recession is in fact a demonstration of complete economic illiteracy”

Why? Because clearly I am not talking to someone with a coherent conception of economics. The onus is on you to explain how increasing government spending during a recession will cure it faster. Remember, whatever a government spends necessary comes out of private spending. Keep to this rule, and you may begin your explanation whenever you feel equipped.

My prognostication – you’re unconsciously an unreconstructed quasi-Keynesian, who will provide some ad hoc theory, cherry picked from your favorite sources, with vague historical references and obscure pieces of propaganda you’ve collected throughout the years in an attempt to justify your obvious lack of understanding.

The comment about you agreeing with me was misaddressed – it was meant for balcones. As for Hoover, he ran up the biggest spending tab in history up until that point. Oh the good that did, huh?
73 WillyP // Nov 18, 2009 at 5:53 pm

please excuse my many typos.
74 ottovbvs // Nov 18, 2009 at 6:01 pm

WillyP // Nov 18, 2009 at 5:36 pm

“I am being intellectually honest,”

……really?…….the NYT announces Reagan not renewing Volcker’s contract…..nothing to do with diktats

“VOLCKER OUT AFTER 8 YEARS AS FEDERAL RESERVE CHIEF; REAGAN CHOOSES GREENSPAN
By ROBERT D. HERSHEY Jr., Special to the New York Times
Published: Wednesday, June 3, 1987

President Reagan brought to a close today Paul A. Volcker’s stewardship as one of the most powerful economic policymakers in the nation’s history, nominating Alan Greenspan to succeed him as chairman of the Federal Reserve Board.”

“I am not the one proposing a thousand pet schemes on how to spend other people’s money – which is what fiscally”stimulative” government’s do implicitly.”

……..I’ve got news for you…….govt has been proposing a thousand pet schemes to spend other people money since at least the early 18th century France if not sooner…….what about all those castles Edward 1 built with other people’s money…..grow up…..this is 2009……..you linked central banks to boom/bust as if these conditions only existed as a consequence of their actions which was completely dishonest…….although they have at times contributed to them as Greenspan undoubtedly did with his easy monetary policies in the early 2000’s they have also generally ameliorated their effects…….no modern society would sustain a 25 year recession without violent revolution so you should be careful what you wish for
75 WillyP // Nov 18, 2009 at 6:07 pm

What is this 25 year recession you’re always referring to? And since when did the United States not have 2 central banks in the 19th century?

There is no point, really, in debating economics when all you do is reference history. You need to learn sound theory, and then be able to relate that theory to history. If and when you ever get around to learning economics, you will be far more interesting in a discussion of this nature.

And just because Reagan hired Greenspan does not mean that Volker did not decide he wanted to resign. If I’m wrong on this, I blame either my bad memory or Bob Woodward. Possibly both.
76 balconesfault // Nov 18, 2009 at 6:11 pm

When we discuss the economy, I think that it’s critical that we discuss America’s desire to maintain an empire.

The reason that elected officials from both sides of the aisle are willing to embrace a managed economy, attempting to control the downsides on any recessions, is because public support for our global military presence would dry up almost immediately if people saw unemployment rates spike into the 25% plus range while we were keeping our bases open around the world and funding huge weapons programs, it would mean instant changeover in the political leadership.

You want empire? You gotta pay for it, or make the empire pay for itself like the Brits did for a long time, using the Opium trade from India to China to finance their military operations.
77 ottovbvs // Nov 18, 2009 at 6:13 pm

WillyP // Nov 18, 2009 at 5:49 pm

“otto, you say (boringly and predictably): “instead of going off on some new tangent about the evils of central banking how about responding to my critique of your suggestion that cutting govt spending in a recession is in fact a demonstration of complete economic illiteracy”

Why? Because clearly I am not talking to someone with a coherent conception of economics. The onus is on you to explain how increasing government spending during a recession will cure it faster.”

……….still avoiding a response…….actually the onus is on you to provide one since YOU proposed a series of policy prescriptions that in your words:

“Look, anyone without a degree in economics and with common sense will tell you this – if you want to effectively address (government induced) depression, what you do is quite simple:”

…….I pointed out that that the last person to try this was Herbert Hoover and a lot of other govt’s in the early thirties and it was a major contributor to the greatest depression of modern times…..so why don’t you bring your modesty and commonsense to bear by explaining to us how reducing demand during a recession is helpful in both bringing the recession to an end and avoiding a deflationary spiral. Since you’re “economically literate” and I have “no conception of economics” this shouldn’t present much of a challenge ……surely?
78 LFC // Nov 18, 2009 at 6:16 pm

Independent (a.k.a. Republican Apologist) said… lol. well, let’s see… history says you’re wrong, ottovbs. the carter recession was ended when mr reagan stood his ground and forced the democrats in congress to pass tax cuts.

This from the guy who said I was wrong that TARP was passed under Bush with bipartisan support.

Actually, Volker’s moves at the Fed and Mr. Reagan’s spending spree (which lasted 8 years, not just during the recessionary period) might have had just a bit to do with it. But I guess life is simpler in your little “the GOP is perfect” world.
79 ottovbvs // Nov 18, 2009 at 6:24 pm

balconesfault // Nov 18, 2009 at 6:11 pm

“What is this 25 year recession you’re always referring to? And since when did the United States not have 2 central banks in the 19th century?

There is no point, really, in debating economics when all you do is reference history.”

………Britain has had a central bank since the reign of William III…….it was hardly a central bank in the modern sense………none were really until the period 1912-1933 hence my qualification……and since the basic set of economic theories that underpin most economic management today were formulated about 70 years ago history is rather relevant…….and you’re ignorance of that late 19th century recession hardly attests to your economic literacy

“And just because Reagan hired Greenspan does not mean that Volker did not decide he wanted to resign. If I’m wrong on this, I blame either my bad memory or Bob Woodward. Possibly both.”

…………of course the blame couldn’t be solely yours because that might suggest you were intellectually dishonest, or lying about the circumstances of Volckers departure from the Fed , or both
80 ottovbvs // Nov 18, 2009 at 6:30 pm

78 LFC // Nov 18, 2009 at 6:16 pm

“This from the guy who said I was wrong that TARP was passed under Bush with bipartisan support.”

……..I think you have comprehension or amnesia problems buddy……I said Tarp was passed under the Bush admin ……. as in:

“……..Leaving aside that TARP was actually passed by the Bush admin,”
81 ottovbvs // Nov 18, 2009 at 6:33 pm

78 LFC // Nov 18, 2009 at 6:16 pm

…..it seems I have comprehension problem on this one you were referring to Independant not me in denying when TARP was passed….sorry
82 ottovbvs // Nov 18, 2009 at 6:38 pm

……..something strange is happening…….I’m copying one poster’s comment and it’s bringing up another posters name……the comments in 79 originated with:

WillyP // Nov 18, 2009 at 6:07 pm
83 ottovbvs // Nov 18, 2009 at 7:13 pm

……Hubris?

WillyP // Nov 18, 2009 at 4:49 pm

“Being economically literate, reading this posting by the waffling and perpetually confused Mr. Frum, and then the childish comments from smarter-than-thou pontificaters is like playing “Spot that Fallacy!”

WillyP // Nov 18, 2009 at 6:07 pm

“What is this 25 year recession you’re always referring to?”

……….You may find this useful in improving your economic literacy:

http://en.wikipedia.org/wiki/Long_Depression
84 Churl // Nov 18, 2009 at 8:14 pm

Also sprach ottovbvs, ……….actually they most certainly are…..within my state at least two major construction projects that had been mothballed have been restarted with stimulus funds and more are going to be rolled out over the next few months according to a neighbor of mine whose in the construction business……and just as important in the short term the transfer payment to states prevented even worse govt layoff than we’ve seen…….basically you’re just not telling the truth about this just mouthing the usual bumper stickers”

Well, bumper stickers or not, it would be nice to get a count of real jobs created (and long term jobs differentiated from short term ones). Anecdotes from somebody’s neighbor are nice, but it would be nicer if Joe Biden’s Web Site of Stimulus Truth and Transparency didn’t reference so many imaginary congressional districts or nonsensical claims of job savings.

If the figures for job creation got the same sort of outside review that the tax authorities give to a neighborhood pizza parlor, I would be more likely to believe you.
85 WillyP // Nov 18, 2009 at 10:19 pm

otto, yes, usually when a huge, industrialized, and globalized country demolishes itself in civil war, depression follows. does this surprise you? apparently so. and then what happened, according to your wiki article? protectionism. and the depression continued, just like what happened after the protectionism after the stock market crash of 1929. hoover, YES HOOVER, jumped right into the fray – forcing up wages, spending unprecedented amounts and increasing taxes to keep the budget balances, enacting the Smoot-Hawley tariff act. meanwhile, the fed kept on inflating. the depression was caused by unprecedented government interventionism.

“so why don’t you bring your modesty and commonsense to bear by explaining to us how reducing demand during a recession is helpful in both bringing the recession to an end and avoiding a deflationary spiral.”

because you clearly are not willing to learn. if you spent more than a minute thinking about the terms you throw around, i might consider you educable. i will gladly explain, to be best of my ability, whatever you wish, but first i’d like you to explain to me, in good faith, what the words “deflationary spiral” mean to you, how the phenomenon emerges in the real world, what events set it in motion, and the best way to prevent it. as for the “modern” central bank, please explain how the Fed differs in principle from the earlier banks.

being literate economically would require, you know, understanding the laws of economics and the history of the discipline, and not solely history as it relates to the economy of the united states in the 19th century.

i’m about 99.999% sure you have no concrete understanding of money, its function, its history, or how it is at the center of the business cycle. i very much doubt you’re familiar with the classic debates in economic history – use value “vs.” exchange value, labor theory of value, “intrinsic value,” the “neutrality of money,” fiscal stimulus vs. monetary stimulus vs. laissez-faire, originary interest rates (i.e., market interest) vs. centrally set interest rates, the practicability of socialism, etc.

continuing, i wonder if you’ve ever heard of many economic laws past the foundational supply and demand; for example, say’s law, marginal utility, the law of unknown consequences, the law of diminishing returns, Gresham’s law, the affect of time preference on value…

as for economic methodology, i would just sound obnoxiously condescending if i started asking you about your philosophical assumptions as pertaining to economic truth – i.e., rationalism vs. positivism. i wouldn’t expect anyone casually commenting on a blog to be familiar with the debates surrounding economic methodology. most people trust the practitioners of the discipline to converge on best practices. since our academic institutions have adopted the positivism allegedly offered by mathematical applications, we blindly accept them as reliable. mathematics, regrettably, has little to do with economics. quantitative figures (expressed in currency figures) enter the discipline because decisions are established marginally – for example, the more offered as a bid from the buyer, the likelier the ask of the seller will be met ($2 we understand to mean “more” than one dollar, $3 more than $2, etc.) in short, economic logic is not mathematical logic, and the two are not interchangeable. if this sounds obtuse, then i’d ask you to reflect on the positivism (”proved” through mathematical methods) applied by central banks and commercial entities, and the spectacular failure of all of these models to predict the current crisis.

i’d wager you probably couldn’t name more than perhaps 2 or 3 foundational shifts in economic thought, much less the economists, much less the books that these ideas were transmitted through. besides adam smith, david ricardo, john stuart mill, karl marx, john maynard keynes, and milton friedman, i very much doubt you could name a very influential economist (and i feel that list was likely too generous).

i admit i may be wrong about your knowledge base. perhaps you’re extremely well read, and well versed economically. but you see, i consider this a field with right and wrong answers, not like so much of politics which on some level comes down to preference for almost everyone. if i were a physician, i wouldn’t waste my time debating a lawyer about practicing medicine unless he had done his homework and was at least talking some sense.

the onus, therefore, is on you.
86 MI-GOPer // Nov 18, 2009 at 10:23 pm

Mr Face @ 69 injects: “I find it hard to believe that you really are a Christian. Your posts are always filled with name calling and negativity, always attacking everyone who doesn’t agree with you 100%. Your online persona sure doesn’t come off as Christian to me.”

Mr Face, like we say in Michigan, let’s cut the chase and get to the hauling the dogs off the bear, ok? I seriously doubt that you’ve been a reader here who hasn’t commented and is now suddenly compelled to comment just because you find such an supposedly unChristian theme in my comments –only mine, not automaticBS, not TeaBagged, not OldSkrewled, not BlankHead.

I think you’re one of those guys with just a new label. Hey, that beats Sarah Palin for candor, right?

I’d suggest you try being honest here –it’s eluded automaticBS and TeaBagged and OldSkrewled. Try being honest and maybe others will take your “contribution” at it’s face-value. Frankly, to have your comment arise in this thread at number 69 is kind of ironic… because I think your “contribution” here is just one of those other trolls engaged in giving themselves some public head –it’s really that obvious and the motivation is transparent in the extreme.

Put down the DNC Chair’s PlayBook for FireEaters… exorcise the lingering spirit of Terry McAuliffe… and stop playing cheap theatrical games with those of us interested in a serious discussion about the issues affecting conservatives –and not about the annoyance of some trolling Democrat.
87 MI-GOPer // Nov 18, 2009 at 10:42 pm

BlankHead reverses his earlier denial and now admits he is, indeed, a regular commenter with a HuffPo profile at a hardcore, liberal, anti-GOP, anti-conservative site best known for it’s radical, San Francisco value ladened articles.

I get it, BlankHead. First you contend you’re a conservative and try to project that lie as a credible defense to your usual nonsense. I say you aren’t a conservative and you’ve been posting comments at HuffPo for years and years.

You say you didn’t even know HuffPo existed and call me a liar. Then you admitted that, well, maybe you have read it once or twice. I say you have a profile there and have been commenting since 2005. You say I’m a liar. I give you the citation. You say I don’t know what I’m talking about.

Then you reprint the facts of your HuffPo profile here and say I’m still the liar?? Wow, that’s a great act you’ve got going… is this the OJ Simpson murder defense you’ve crafted for yourself, part deux?

The real silliness, BlankHead, is that you’re a dyed-in-the-wool liberal. You’re clearly a democrat activist and far Left defender on a conservative, GOP site working to rebuild the Party. That, BlankHead, makes you a troll. As much a troll as if I went over to MichaelMoore’s site or the democrat underground and flamed, incited, irritated and annoyed them.

Newsflash: you don’t belong here. You belong there. To be here and post as often as you do indicates you’ve got a serious problem with being serious. You’re here to annoy, BlankHead. Like rbottoms. Like TeaBagged. Like automaticBS. Like OldSkrewl. Annoy and distract from the important work of this site to design a new path for the conservative movement in America.

You and the other trolls remind me of guys we’ve all met in college… polisci majors who are intent on just arguing for the sake of argument… for the rush of a gotchya point that somehow makes you feel superior to others or more secure in the monopoly you think you have on truth.

At the end of the day, you’re just an annoyance. Not constructive. Not helpful. Not serious about the real problems facing America. Just a petty debater looking to argue the contrarian position, no matter if that effort turns you into some pretzel of ridiculousness.

I’m guessing you might be our newest Mr Face? The line of attack in using the Christian angle was interesting and since automaticBS is an atheist, he isn’t smart enough to take that tack. Come out, come out Mr Face… hey, no need to deny it. None of us would believe you at this point, BlankHead.

What was that line about having voted for Reagan once but now you’re a solid Democrat? Ummmm, yeah; right.
88 MI-GOPer // Nov 18, 2009 at 10:54 pm

C Hurl @ 84 remarks: “Anecdotes from somebody’s neighbor are nice, but it would be nicer if Joe Biden’s Web Site of Stimulus Truth and Transparency didn’t reference so many imaginary congressional districts or nonsensical claims of job savings.” Interested in what’s really happening with all the Stimulus Spending Spree money? Where are those jobs?

Already done, C Hurl. The liberal, pro-Obama, pro-Democrat Detroit Free Press reporters looked into Michigan’s 1800+ Stimulus Spending Spree “awards” and found that nearly 75% of them didn’t create a single new job or did just that, create 1 new job. Moreover, when you divide the jobs “created” by the monetary value of the “awards”, the figure of $2.7m per job created leaps off the page and into reality for all.

http://www.freep.com/apps/pbcs.dll/article?AID=/20091115/NEWS15/311150005/1318/Where-are-the-jobs-from-federal-stimulus-money&&template=fullarticle

It’s gotta hurt the Democrats when their Banner Headline Premier Jobs Program turns out to be more mismanagement and failure.

Maybe that’s why Obama’s polling on favorable support is crashing and under 47% now? Maybe that’s why there are far more VOTERS who dislike him and disapprove of him than like him. Buyers’ remorse is in full swing and not too soon for 2010.

How many seconds til we all hear from the trolls that they always expected to lose seats in 2010… the president’s party always loses seats… you know, the Virginia Governor loss excuse. Yeah, that comes from the trolls who were gleefully announcing the GOP was dead on arrival and Sarah Palin is their new leader in chief… LOL.
89 hormelmeatco // Nov 18, 2009 at 11:21 pm

“And since when did the United States not have 2 central banks in the 19th century?”

Most of the 19th century’s economic crises happened long after the First and Second Banks of the United States were dissolved.
90 hormelmeatco // Nov 18, 2009 at 11:28 pm

WillyP,

You might think central banking is evil, but I’d rather trust a PhD economist and professor who’s studied the Great Depression to run the world’s largest economy than a populist.
91 MI-GOPer // Nov 18, 2009 at 11:28 pm

AutomaticBS at #81 gets a tad confused and dazed: “…..it seems I have comprehension problem on this one you were referring to Independant not me in denying when TARP was passed….sorry.”

Not at all, automaticBS. We find you to have a regular problem with comprehension. It’s perfectly predictable with you.
92 WillyP // Nov 18, 2009 at 11:54 pm

hormelmeatco,
I trust my own ability to comprehend logical arguments. Do you trust yours?
93 balconesfault // Nov 19, 2009 at 12:34 am

You say you didn’t even know HuffPo existed and call me a liar.

If you are claiming that I said I didn’t know HuffPo existed … then you most certainly are a liar, sir.
94 jruss89 // Nov 19, 2009 at 2:32 am

I’d like to speak to a few points that WillyP. For the record, though, I must contend that those who are relying entirely on “common sense” (although at times will be right), should not be quite so sure of their primacy over all others. Call me elitist, or perhaps instead call me a conservative in the Burkean-Tocquevillian strain.

WillyP Post #61
I agree with cutting taxes, as that is a boost to C (and thus Y), as well as point #5. As Dr. Smith had so brilliantly recognized over two hundred years ago, trade liberalization is the way to economic growth. But unfortunately, my agreement with you ends here.

He suggested cutting the budget by as much as politically possible. While the Hoover horse has already been beaten to death, should you wish to decrease GDP, by all means, go ahead. (Recall Y [GDP] = C [consumption] + I [investment] + G [government spending] + CA [current account balance]). I suppose you’re worried about G crowding out the market, but with barely anyone in it these days, it’s not such a concern.

In Post #62 you (with the support of balconesfault), suggested hiking the interest rates on account of a fear of inflation. Given that we have only witnessed economic growth for the first time in several quarter, strangling such growth is likely ill advised. Also, if you wish to destroy our exporting sectors, then go ahead and raise interest rates (a rise in these rates will increase demand for US currency, since American deposits will offer a greater return, (for the econ people out there, interest parity condition: R = R* + (Ee-E)/E — the increase in R is mirrored by a decrease in E–Eexpected does not rise because this is a temporary policy) thus bidding up the price, and therefore causing an appreciation in the currency, which is bad for exporters). I know that there is the worry of causing inflation, but given that GDP growth has just recently been positive, this is truly a moot point for the moment.

And tightening the money supply? Again, if your wish is to hurt our exports, allez-y! Otherwise, decreasing MS raises R, which then lowers E, which then hurts our current account since we would export less and import more, further hurting our GDP. Given that we are FAR below the natural level of employment (because let’s be serious, 10% unemployment is not our natural level), we are not in a particular threat for inflation. Then perhaps you would raise the issue of stagflation. Given that not much is known about that phenomenon (a quick look at a Phillips curve shows why it makes no sense–but it happens!), I don’t think that we can expect it to occur out of normal economic procedures. It is more likely to come as a result of a major supply shock (for example, if oil were to overnight shoot up say 50%, the price of everything would rise, while many businesses would simultaneously decide to shut down since heating, transportation, etc. is just too expensive). Since we cannot supply shock, and there is nothing to suggest that a supply shock is in the near future (then again, it is a -shock- so it is not predicted by nature!), stagflation is truly not a valid concern. In fact, if anything, an arbitrary rise in the inflation rate would simultaneously cause things to become more expensive (think of all outstanding loans, and new ones that would be taken out) while causing businesses to shut down given their already precarious positions. So I guess come to think of it, YOU would like to cause a minor form of stagflation… (I’m kidding)

In all, contractionary economics is NOT the thing to do in the current economy, and a balanced budget for the sake of a balanced budget is also passe. Do feel free to challenge some assertions though, I welcome the debate!
95 MI-GOPer // Nov 19, 2009 at 9:17 am

BlankHead reverses his earlier denial and now admits he is, indeed, a regular commenter with a HuffPo profile at a hardcore, liberal, anti-GOP, anti-conservative site best known for it’s radical, San Francisco value ladened articles.

I get it, BlankHead. First you contend you’re a conservative and try to project that lie as a credible defense to your usual nonsense. I say you aren’t a conservative and you’ve been posting comments at HuffPo for years and years.

You say you didn’t even know HuffPo existed and call me a liar. Then you admitted that, well, maybe you have read it once or twice. I say you have a profile there and have been commenting since 2005. You say I’m a liar. I give you the citation. You say I don’t know what I’m talking about.

Then you reprint the facts of your HuffPo profile here and say I’m still the liar?? Wow, that’s a great act you’ve got going… is this the OJ Simpson murder defense you’ve crafted for yourself, part deux?

The real silliness, BlankHead, is that you’re a dyed-in-the-wool liberal. You’re clearly a democrat activist and far Left defender on a conservative, GOP site working to rebuild the Party. That, BlankHead, makes you a troll. As much a troll as if I went over to MichaelMoore’s site or the democrat underground and flamed, incited, irritated and annoyed them

What part of this picture don’t you get, BlankHead? You were caught fair & square in a set of lies and dissembling… citations and proof provided… then you call everyone else a liar?

Wow, you aren’t just a troll. You’re a troll with a fact-challenged, reality-warped perspective to boot.
96 balconesfault // Nov 19, 2009 at 9:25 am

jruss: In Post #62 you (with the support of balconesfault), suggested hiking the interest rates on account of a fear of inflation. Given that we have only witnessed economic growth for the first time in several quarter, strangling such growth is likely ill advised.

Actually, I agree with you about raising the interest rates right now, in the short term. But I do think that when the economic ship starts to right itself, and we have solid job growth, it would be good for the middle class to reward their savings with some actual interest accrual and create some disincentive for financial firms engaging in superspeculative paper trading using borrowed money.

fact, if anything, an arbitrary rise in the inflation rate would simultaneously cause things to become more expensive (think of all outstanding loans, and new ones that would be taken out) while causing businesses to shut down given their already precarious positions.

I’m not sure where the arbitrary rise in the inflation rate comes in here?

Aren’t you kind of having it both ways here, though? You’re contending that rising
97 balconesfault // Nov 19, 2009 at 9:26 am

You say you didn’t even know HuffPo existed and call me a liar.

Once again – if you are claiming that I said I didn’t know HuffPo existed – you are a liar.
98 ottovbvs // Nov 19, 2009 at 9:41 am

WillyP // Nov 18, 2009 at 10:19 pm

“otto, yes, usually when a huge, industrialized, and globalized country demolishes itself in civil war, depression follows.”

………Another demo of your economic literacy?……..the civil war in itself was actually enormously economically and technologically stimulative …..the causes of the long depression from the collapse of Jay Cooke in 1873 (really a series of numerous busts/booms) had entirely different causes which judging by the little rodomontade about Hoover I don’t think you begin to understand.

……..As for the rest instead of answering a question with a question and telling me how uneducable I am and what I don’t know why don’t you just explain how cutting govt spending in a recession and thereby reducing aggregate demand assists the process of economic recovery and prevents a deflationary spiral (the definition of which is economics 101). Simple question which you don’t seem to be able to answer. And btw I was reading the General Theory and J. S. Mill at Cambridge over 40 years ago.
99 ottovbvs // Nov 19, 2009 at 9:52 am

jruss89 // Nov 19, 2009 at 2:32 am

“WillyP Post #61
I agree with cutting taxes, as that is a boost to C (and thus Y),”

……..But is it the most efficient stimulative……..that’s the point

“must contend that those who are relying entirely on “common sense” (although at times will be right), ”

……..well let’s call it intuitive reasoning then that tells us that in the midst of a recession and all the personal fears it evokes that if you give people tax cuts they are most likely to use them to pay down debt or boost savings, and not spend them
100 ottovbvs // Nov 19, 2009 at 10:03 am

Churl // Nov 18, 2009 at 8:14 pm

“Anecdotes from somebody’s neighbor are nice,”

…….Hardly anecdotal since the two mothballed schemes that have been resucitated with stimulus monies are $100 million plus projects that are going to create hundreds of new jobs in state and lots of others downstream…….if you could only get away from your bumper sticker pizza parlor mentality
101 ottovbvs // Nov 19, 2009 at 10:10 am

MI-GOPer // Nov 18, 2009 at 10:23 pm

………Another expression of simple christian faith and rational reasoning from our lawyer friend in MI
102 WillyP // Nov 19, 2009 at 10:31 am

otto, it all makes sense now:
“And btw I was reading the General Theory and J. S. Mill at Cambridge over 40 years ago.”

You are a doctrinaire Keynesian! What else needs to be said?!
103 MI-GOPer // Nov 19, 2009 at 10:31 am

BlankHead reverses his earlier denial and now admits he is, indeed, a regular commenter with a HuffPo profile at a hardcore, liberal, anti-GOP, anti-conservative site best known for it’s radical, San Francisco value ladened articles.

I get it, BlankHead. First you contend you’re a conservative and try to project that lie as a credible defense to your usual nonsense. I say you aren’t a conservative and you’ve been posting comments at HuffPo for years and years.

You say you didn’t even know HuffPo existed and call me a liar. Then you admitted that, well, maybe you have read it once or twice. I say you have a profile there and have been commenting since 2005. You say I’m a liar. I give you the citation. You say I don’t know what I’m talking about.

Then you reprint the facts of your HuffPo profile here and say I’m still the liar?? Wow, that’s a great act you’ve got going… is this the OJ Simpson murder defense you’ve crafted for yourself, part deux?

The real silliness, BlankHead, is that you’re a dyed-in-the-wool liberal. You’re clearly a democrat activist and far Left defender on a conservative, GOP site working to rebuild the Party. That, BlankHead, makes you a troll. As much a troll as if I went over to MichaelMoore’s site or the democrat underground and flamed, incited, irritated and annoyed them

What part of this picture don’t you get, BlankHead? You were caught fair & square in a set of lies and dissembling… citations and proof provided… then you call everyone else a liar?

Wow, you aren’t just a troll. You’re a troll with a fact-challenged, reality-warped perspective to boot.
104 MI-GOPer // Nov 19, 2009 at 10:34 am

automaticBS whines: “Another expression of simple christian faith and rational reasoning from our lawyer friend in MI”.

First off, BS-boi, you’re an atheist.. when did anything Christian matter to you –let alone, anything of faith? Most people capitalize the C on Christian, btw.

Second, you forgot to log in as “My Face” before posting… you need to keep all those alternate characters and labels straight, pal. Your cyber slip is… well, showing.
105 WillyP // Nov 19, 2009 at 10:36 am

jruss89 – i may write more later, but as for your mathematical equations that are shown in their full glory in an attempt to invalidate my economic logic, please see post #85.
106 MI-GOPer // Nov 19, 2009 at 10:38 am

automaticBS declares: “if you could only get away from your bumper sticker pizza parlor mentality”

For you to charge anyone else of using a bumper sticker mentality is the ultimate irony and hypocrisy, BS-boi. You literally define “bumper sticker mentality” on the Left.

You can do better, BS-boi. Try starting out just sticking to the topic and not flaming another commenter, ok? It’d be a small constructive step from you for once.
107 MR FACE // Nov 19, 2009 at 10:53 am

MI-Gopher – Why do you have so much hate in your heart? You are the definition of a wingnut.
God teaches love, not hate. You should try it out sometimes. It will make you feel better, instead of being so ignorant,childish, and hatefull all the time. Love, not hate. Remember, love not hate.
That is what Jesus taught. Love.
108 balconesfault // Nov 19, 2009 at 10:56 am

Mi-GOPer You say you didn’t even know HuffPo existed and call me a liar.

Once again – if you are claiming that I said I didn’t know HuffPo existed – you are a liar.

I can keep pointing this out as many times as you’d like to keep repeating the lie.

Next time, just for some variety, can you do the math and show us how McCain could be President now with only 443K more votes?

It is difficult to discuss with someone who is willing to so shamefacedly lie after having facts pointed out to him. This is what Dick Cheney has done to the Republican Party.
109 ottovbvs // Nov 19, 2009 at 11:22 am

WillyP // Nov 19, 2009 at 10:31 am

otto, it all makes sense now:
“And btw I was reading the General Theory and J. S. Mill at Cambridge over 40 years ago.”

“You are a doctrinaire Keynesian! What else needs to be said?!”

…….I also read Schumpeter, Veblen and Hayek……and unless you’d noticed when the chips are down we’re all Keynesians now…… even Republican presidents and treasury secretaries……see what Bartlett has to say on the subject of exactly what Keynes was and wasn’t…….and I’m still waiting for an answer to my ever so simple question……judging by the immaturity of your responses I’m betting you haven’t got to that chapter of your economic textbook yet so get back to me when you do
110 ottovbvs // Nov 19, 2009 at 11:28 am

MR FACE // Nov 19, 2009 at 10:53 am

“MI-Gopher – Why do you have so much hate in your heart?”

…….old mi goper sure is one angry man isn’t he……..every so often on liberal blogs they pick up totally insane rantings from conservative blogs for laughs…..I presume mi-goper is having to tone it down for FF but he’s still fairly funny
111 ottovbvs // Nov 19, 2009 at 11:35 am

MI-GOPer // Nov 19, 2009 at 10:34 am

“First off, BS-boi, you’re an atheist.. when did anything Christian matter to you –let alone, anything of faith?”

…….what I think about religion is irrelevant…..however since YOU claim to be a christian one would have thought you’d abide by it’s teachings
112 jruss89 // Nov 19, 2009 at 11:43 am

@ balconesfault #96 definitely interest rates will rise to their natural level once this is recession is past. The only reason I said “arbitrary interest rate hikes” is that I had assumed that your intention was to raise R in the short run, a policy for which I could see no purpose besides whim. I would like to speak to you other point, but unfortunately it remains unfinished!

@ WillyP #85 and #105
If you feel like challenging some of the basic tenants of international monetary economics, go ahead. But DO IT don’t just suggest that I don’t know squat. If you want some credibility, instead of being seen as someone who throws out a sophist’s amount of economic theory plus a few names, challenge or support the reasoning for -something- instead of trying to say that we know nothing. For example, you could start with speaking to the J-Curve, the Dornbusch Overshoot Model, the asymmetry of a reserve currency fixed exchange rate, or something like that, rather than trying to invalidate all economic reasoning on this forum by throwing around words like “positivism” and “rationalism” and saying that it would be condescending to start a debate about it. I admit, I don’t know anything, so I probably would learn something from such a debate, so why not start one? Is intellectual enlightenment not the purpose of the forum?
113 balconesfault // Nov 19, 2009 at 11:54 am

definitely interest rates will rise to their natural level once this is recession is past.

Ah – but do you believe that interest rates were at a “natural level” through most of the last decade? I think no – that interest rates would have naturally risen had the Fed not been willing to lend out money at such low rates much of the time.

As for my second point … I didn’t notice I’d left the sentence fragment. I started to write more, then stopped myself because I wasn’t sure I understood what you were saying. Once again, my question has to do with you suddenly shifting to talk about an arbitrary rise in the inflation rate – I’m not sure where it comes from in this discussion.
114 ottovbvs // Nov 19, 2009 at 12:06 pm

jruss89 // Nov 19, 2009 at 11:43 am

……willy p is 11 I fear

……and do interests rates have a “natural” level…….not really……they have a desired or optimum level perhaps but natural?…..furthermore that optimum level varies wildly from country to country given it’s particular circumstances……..how could they be anything else when essentially they are a form of economic governor
115 jruss89 // Nov 19, 2009 at 12:11 pm

balconesfault

Actually achieving the “natural interest rate” more of a fiction, than it is the direction in which normal market forces push the interest rate through time. We will be pushed towards that rate the closer we get to full employment (not 100% employment, just our natural level). As you say, with certain Fed policies, such as what we witnessed under Greenspan in the last decade, the interest rate was kept unnaturally low. And that was certainly an enabling factor to our latest asset bubble. I agree with you here. What we need is for the Fed to better emulate market circumstances instead of trying to artificially drive up GDP, since real GDP is only changed by changes in the factors of production, and all artificial means to drive up production, such as interest rates, money supply, etc. will only lead to price level increases–in the long run of course.

As for the “arbitrary interest rate hike”, it was in response to what was said in WillyP #62, and with your agreement in #64. Not knowing that you had intended it to mean an interest rate hike in the long-term -after- the recession, I could not understand why on earth one would wish to raise interest rates at a time like this. Thus, I deemed it “arbitrary”. And so that’s why I then went on to speak to what such an “arbitrary” increase in R would do in the short run.
116 WillyP // Nov 19, 2009 at 12:11 pm

Alright, well excuse me for not being down with the chips. For the record, I’d take Mises over Bruce Bartlett any day. I read that ridiculous article by him already, and it further convinced me that we have a crisis in academia when it comes to economics. You’re free to choose your heroes, though. Cambridge chose Keynes.

The question, I believe, was about a deflationary spiral. I asked you to provide me with your understanding of a deflationary spiral, so I could determine what exactly I’d need to address in answering your sophomoric query. Since you never deigned to reply to my (very fair) request, I will provide you with my understanding of the economic phenomenon we refer to as a “deflationary spiral,” however misleading I believe it to be.

A deflationary spiral occurs during depressions. As businesses go under and people lose their jobs, they naturally look to curb spending and therefore increase their cash balances. The money goes into savings – or, as is said, it is “hoarded.” Therefore, it is not spent on “consumption.” This non-spending causes more business to go under, leading to more unemployment, leading to more “hoarding,” and hence your spiral. It is so-called deflationary because price go down as a result of money being taken out of circulation and deposited into savings. This cycle is called the “paradox of thrift.”

Of course, it’s sheer nonsense. It even misses the traditional definitions of inflation and deflation completely, which are political in nature anyhow. To “fix” this deflationary trap, wages have to fall, as all prices should during a recession. It’s our idiotic Keynesian pumping that causes inflationary recessions (which, strictly speaking, is also erroneously termed). Employment will pick up as prices readjust and industry begins producing things that people value again, i.e., not a HUGE housing boom that only served to suck resources away from more urgent productive needs. See Austrian Business Cycle Theory.

All we’re accomplishing now is papering over serious structural problem in the economy. Facts and figures might start to look good, but at the end of the day we’re all poorer because of this massive intervention. And we’re playing with fire, likely causing the events that will lead to the first major currency crisis in the newly “globalized” world. Why is gold hitting all time highs? Where will it stop?

Honestly, after throwing around the word hubris so liberally, you exhibit the characteristic in an exemplary manner. You do not bother to engage in debate. You refer to your Cambridge education and throw around names. It’s typical of a lazy intellect, who lacks the capacity for independent and creative thought. Keynes never successfully refuted Hayek, and Hayek made mincemeat of Keynes on more than one occasion. Your deference to Keynes and Cambridge is sycophantic, and apparently matches well with your ability to look at the world around you and not notice that every sign is pointing towards extended depression, despite following your master’s advice to the hilt.

I went to Harvard! I went to Yale! I went to Princeton! I went to Cambridge! Sorry, but this does automatically not make you smart in my book. We’ve had plenty of tragically hubristic academics that have lead the world down the path of ruin.
117 WillyP // Nov 19, 2009 at 12:18 pm

jruss, here:
http://nyyrc.com/2009/10/16/the-why-of-undulating-gdps/

As for-
“Is intellectual enlightenment not the purpose of the forum?”
uh, it’s Frum’s site… hackery and condescension are more in style.
118 WillyP // Nov 19, 2009 at 12:28 pm

jruss:
another reason i loathe to get into all this in a more civil and sophisticated manner, is because i’ve already tried that, right here, with another student of economics.

http://www.frumforum.com/ron-pauls-fatuous-anti-fed-book

read the extended discussions between me and yoctobarryc. as you can see, people become ideological, and reaching them after years of indoctrination and standardized testing is nearly impossible.
119 balconesfault // Nov 19, 2009 at 12:31 pm

jruss: As for the “arbitrary interest rate hike”

ok – here’s I guess where I have the cognitive dislink. Are you equating an arbitrary interest rate hike with an arbitrary rise in the inflation rate? I am sure I didn’t understand fully what you wrote in your first explanation on the causality of the arbitrary rise in the inflation rate.
120 MI-GOPer // Nov 19, 2009 at 12:38 pm

Ahh Mr Face is back and it’s almost as if on cue by one of our Frum Forum DailyKos trolls… who never, ever post there… like AutomaticBS or BlankHead. Oh wait, it was HuffPo they never post at. I forgot. Nawh, we don’t have trolls making up fake characters and posting here, do we?

BlankHead, the MSU professor who worked out the “McCain Wins by 443k Votes” scenario was referenced in another thread. Exercise that brain and find it for yourself… remember, you went on for some length trying to discount it and then, ultimately when repeated failures forced you silent, you tried to out-do the analysis by claiming your own, slightly suspect analysis claiming that Gore really won, Kerry really won and Dukakis would have won if the GOP hadn’t supressed the votes. Blah, blah, blah. It was a beaute. (PS for AutomaticBS> that’s the correct spelling for beaute, btw)

It was a pure flight of fancy and intellectual dishonest. I’m not surprised you’d like to forget it.
121 ottovbvs // Nov 19, 2009 at 12:48 pm

WillyP // Nov 19, 2009 at 12:11 pm

“The question, I believe, was about a deflationary spiral”

…..Er no……I know what a deflationary spiral is and I never asked you to define one…..just to tell me how cutting govt spending in a recession avoids one and assists general economic recovery as you originally claimed in 61…… you apparently believe there’s no such thing as a deflationary spiral which is fine by me but most economists including the present and former chairmen of the Fed wouldn’t agree with you but then they went to Harvard and Princeton so their ignorance can be explained!

……the rest is pompous flummery in which you make all kinds of assertions about a subject of which you clearly know little mixed in with a the usual ad homs….I particulary like the pivot from first saying I’d never read any economic works to excoriating me for actually doing so at a university…….you are 11 alas…..well maybe 18 with a mental age of 11……believe me you’re going to have to much better than this if you ever want to get a decent job
122 ottovbvs // Nov 19, 2009 at 12:55 pm

WillyP // Nov 19, 2009 at 12:28 pm

” as you can see, people become ideological, and reaching them after years of indoctrination and standardized testing is nearly impossible.”

……..????????????
123 WillyP // Nov 19, 2009 at 12:57 pm

otto,
then consider yourself shown up by an 18 year old with an 11 year old’s intellect! and i have a decent job, thank you for the well meaning advice though!
-willyp
124 balconesfault // Nov 19, 2009 at 1:05 pm

the MSU professor who worked out the “McCain Wins by 443k Votes” scenario was referenced in another thread

I didn’t see that – I only saw your reference to it as a claim by Karl Rove.

If it is that clear, you can make your case. Otherwise, you can quit making the claim. Appeals to some MSU professor are kind of pathetic – this isn’t complex. It’s a matter of simple algebra.
125 ottovbvs // Nov 19, 2009 at 1:17 pm

WillyP // Nov 19, 2009 at 12:57 pm

otto,
then consider yourself shown up by an 18 year old with an 11 year old’s intellect!

……….Only to those unaquainted with sophistry of which you are a particularly tedious practitioner…… however, glad to hear you have gainful employment although I doubt it has anything to do with the practical application of economic science
126 hormelmeatco // Nov 19, 2009 at 1:24 pm

@WillyP:

Crises in the 1800s happened decades after the central banks were dissolved. Your trust is misplaced.
127 hormelmeatco // Nov 19, 2009 at 1:27 pm

WillyP, who am I kidding? “logical” for you is just shorthand for “things I agree with.”
128 jruss89 // Nov 19, 2009 at 1:48 pm

@WillyP #116

“It even misses the traditional definitions of inflation and deflation completely, which are political in nature anyhow.” Then what are the traditional definitions of inflation and deflation? Are they not a general increase and decrease in the price level, respectively? And how are they political? I can understand the reasoning to say that a “natural level of unemployment” can be a political tool, but I’m not sure what you’re getting at. You talk about how wages ought to readjust downward in response to market forces, but what about sticky wages? (That is, the principle that wages are more ineleastic in the short-run than classical economists had hoped because wages are negotiated months or even years in advance, and it takes time for them to expire and readjust downwards. The same goes for commodities contracts, goods purchases, etc.) Considering this, how is it that we can expect prices to magically decline in the manner you desire? As I alluded to above, if you wish to challenge the notion of sticky prices, then while you’re at it, challenge the empirical evidence of the Dornbusch Overshoot Model and J-Curves.

“Honestly, after throwing around the word hubris so liberally, you exhibit the characteristic in an exemplary manner. You do not bother to engage in debate. You refer to your Cambridge education and throw around names. It’s typical of a lazy intellect…” Are you referring to me in this? Because aspects of this are applicable to what I said, and who I am (though you have my college wrong). Speaking to Hayek though, though Keynes perhaps did not prove him wrong, time did in some regard. His state of serfdom never did come to pass.
129 WillyP // Nov 19, 2009 at 1:49 pm

the practical application of the economic science partly lies in creating wealth, which i do adequately enough for my purposes.

no, nothing to do with “sophistry.” i am largely in agreement with all classical economists and sociologists, and firmly against the socialists dating back to saint-simone.

you’re just annoyed because you can’t explain how increasing government spending can lead to prosperity, when i insist you maintain that all government spending is alternatively private spending. it’s like filling up a bucket with it’s own water, which is moronic enough. except its also destructive: you’re unarguably substituting the preferences of bureaucrats for those of the people – hayek’s exposition of the “knowledge” problem of socialism. maybe you should refresh the 40 year gap in your learnings. well then inflate, you say, and you do not remove the money from the people’s hands – there is no crowding out when you inflate! of course, this is more bunk, as money too is subject to marginal utility. have you ever read any bastiat?

you’ll never answer me because 1) you can’t 2) you’ve already shown your unwillingness (and inability) by attempting to slight my accurate critique by insinuating that i am 11, now 18 years old. if i were as childish as you claim, i’d suggest your age has taken an irreversible toll on your neural synapses, and senility is just around the corner. oops!

i understand, i understand… you can’t be bothered stooping down to my non-esteemed level. that’s fine. if i wanted more opinions like yours, i’d open up any dryly recited news article, and eyeball the propagandist cant telling me the wonders of bernanke & co., the “bold” actions of our magnificent president, and of their academic forebears whose intellects have built a economic magisterium (the Fed) that successfully creates bread from stone.
130 jruss89 // Nov 19, 2009 at 2:20 pm

WillyP, to whom was #129 directed? Since ottovbvs have spoken to similar points, I don’t know whether I should respond to it, or leave it for him, since in my mind, I feel as though I have spoken adequately in my posts. If you have issue, please respond to a particular point, (or to a particular person) so I know to what I should respond.

Speaking to the knowledge problem of socialism. Certainly I am against a command economy, but can you honestly believe that the “people” will do the right thing in all situations, and are better at solving national problems than the “elite/cultured/Platonic Philosopher equivalents” (whomever they be, whether aristocrats in Burke’s time, or economists today) whether monetary or not? If so, then I suppose that you can remain with your liberal texts, and I shall return to Burke, Tocqueville, Strauss, Rodrigo y Gasset, and so forth, and leave it up to different strains of conservatism.
131 WillyP // Nov 19, 2009 at 2:26 pm

jruss89, i’ll answer you respectfully because you’re not so condescending.

First, I would recommend losing all the jargon. It leads to unclear thinking, which leads to wrongheadedness. I’ll be honest with you – I have no idea what the “Dornbusch Overshoot Model” model is, nor am I going to bother looking it up. Let’s just focus on the idea of a “sticky” price, which implies “inelasticity.”

I’m going to handle this in a holistic manner, part of the essential whole of good (that is to say, True) economic theory. To answer this question, then, we must first ask what would cause such huge, systemic fluctuations in prices, what we refer to as the business cycle. As posted earlier, see here:

http://nyyrc.com/2009/10/16/the-why-of-undulating-gdps/

(Now is a good time to clear up what was originally meant by inflation and deflation, and why I echoed Mises in saying its a political concept. With commodity money – as in, not a fiat money regime – there is no such thing as money falling out of the system. Unless the – say – gold is literally lost, the money supply remains stable, as new money will be added when the price of extraction is less than the market price of gold. And here we preserve Say’s law: that gold will increase in supply when there is an adequate amount of compensatory goods to justify the new extraction. As you can imagine, the world supply of gold is VERY stable. Therefore, increases or decreases in the general price level are very, very mild. In fact, the general tendency under a gold standard was toward falling prices. Violent swings in the general price level of goods comes only when the money supply is expanded under false pretenses – that is, through two primary mechanisms. 1) the “printing press” of a central bank, and 2) checkbook money creation of fractional reserve banking – the legal monopoly given to registered banking institutions to loan out in multiples what they receive in deposit. It is legalized counterfeiting. Because the legal (i.e., state enforced) monopoly of the central bank and the state sanctioned and protected privilege of banks to counterfeit are both products not of human economic activity but instead political law, they are ontologically political terms. In their original meaning, they referred to increases and decreases in the MONEY SUPPLY, not the general price level.)

Prices are mere agreements. They are enforced by contract, sure, but contracts have limits and can have built in mechanisms for renegotiation. Prices need to be renegotiated, and will likely fall, given the disappearance of the former paper wealth. Given what we’ve already done to prop up the banking sector, however, we should be RAISING rates (i.e., sucking in money from the private sector and out of circulation) to prevent what will be, I assure you, rampant inflation of at least the 70s variety.

Pumping money into a bad economic superstructure (that is, one that is not serving our needs well – what we mean when we say “depression” or “recession”) will only encourage the persistence and expansion of the non-productive industries. There’s no way to short circuit a recession. Capital is not homogeneous like money. Building new industries, expanding existing industries, and shifting channels of good production is costly, and so there is quite literally no way to stop it. Monetary pumping and deficit spending will only make things worse.

The comment about hubris was not directed at you. Hayek was a long term thinker and a student of history. He got the name for the book based on what happened when the Roman Empire collapsed after financial ruin, leaving in place taxes that tied people to their land, or “serfdom.” This was with us for the Middle Ages, and a product ultimately of out of control spending and inflationism by Rome. I don’t think we’re looking at identical conditions to the Middle Ages, obviously, but when you’re taxed on your every move and transaction (getting close, aren’t we?), you do end up with a sort of modern form of the ancient societal condition.
132 WillyP // Nov 19, 2009 at 2:32 pm

jruss, Tocqueville was a classical liberal.

Do I trust the economists, who, as you accurately say, are in charge today? Umm, are you kidding me? They’re leading us down a path to currency collapse.
133 jruss89 // Nov 19, 2009 at 2:46 pm

WillyP, I need to run off to a precept right now, so I cannot comment in full for a couple hours, but I will gladly bring down the jargon–I merely employed it to determine your background in economics. Since you portended to be much more highly versed in the field than the others, I wished to see you support it, that’s all. Though I will be bringing back the J-Curve later as an empirical example to show the stickiness of prices, but I will most certainly explain it this time!
134 ottovbvs // Nov 19, 2009 at 2:56 pm

WillyP // Nov 19, 2009 at 1:49 pm

“you’re just annoyed because you can’t explain how increasing government spending can lead to prosperity,”

………..Er……I actually made no such claim(although in the context of a recession I believe it to be true)……I merely asked you to justify your claim that cutting govt spending in a recession and thereby further reducing aggregate demand was a means of bringing a speedier end to a recession……despite endless paras of largely unintelligible sophistry you have yet to provide an answer……..however we do know that you are unaware of the long recession of the late Victorian era; don’t know when the world’s first central bank was established; don’t believe there is any such thing as a deflationary spiral; consider Hayek’s prediction of universal serfdom for social democratic economies proven; believe the reading of economic texts at a university at which Keynes taught to be educationally damaging; are oblivious of the fact that Keynesianism is essentially the basis of almost the entire system of world economic management today; and accuse others of condescension when you could give Lady Catherine de Burgh a run for her money…….but apart from that you’re entirely credible as an economic commentator
135 WillyP // Nov 19, 2009 at 2:57 pm

jruss, clearly since I claim to be at variance with nearly the entirety of modern practitioners, I do not claim to study modern economic journals and jargon. i’ve read mostly hazlitt, friedman, menger, mises, rothbard, parts of say and turgot, schumpeter, and a smattering of others. of course, weekly i probably read dozens of news reports in which modern practitioners have their say. the most recent book i’ve read is Animal Spirits by akerloff and schiller (spelling?). it was monumentally painful and pure Keynes.
136 ottovbvs // Nov 19, 2009 at 3:02 pm

131 WillyP // Nov 19, 2009 at 2:26 pm

“There’s no way to short circuit a recession.”

……..Actually central banks and Treasuries around the world have been short circuiting them and avoiding turning them into full blown recessions at regular intervals since the war by the practice of Keynesian economic remedies in the main
137 WillyP // Nov 19, 2009 at 3:13 pm

ugh, know when you’re beaten, man. or better yet, let me give in:

i’m wrong. i believe in Lord Keynes. ottovbvs has shown me the way through his explanations. i admit the error of my ways, and forever now will blame the stupid laymen who populate the world for all fiat money crises. my unintelligible ramblings, austrian in nature, were mere sophistry. ottovbvs, as part of his kind nature, will forever have them stricken from the record to spare me further embarrassment and for the betterment of mankind. truly, i have been reborn.

otto, can you please explain to me HOW they short circuit them?
138 ottovbvs // Nov 19, 2009 at 3:57 pm

WillyP // Nov 19, 2009 at 3:13 pm

“i’m wrong. i believe in Lord Keynes. ottovbvs has shown me the way through his explanations.”

…….I’ve presented very few “explanations” just pointed out a few realities that you may not like but that doesn’t make them any less real…… I have however, been seeking one and still don’t have it……quite honestly getting into arcane discussions about economics with someone who not only doesn’t believe that govt’s can contribute to deflationary spirals but doesn’t even believe they exist at all would be like talking Russian to an Italian.

“otto, can you please explain to me HOW they short circuit them?”

………they write books about this but in single sentence: loose monetary policy and a mix of fiscally stimulative policies, usually increased govt spending or tax cuts, to prop up aggregate demand until normal patterns are re-established……that’s why recessions since the war have typically had durations of 6-18months rather than years as in thirties and earlier……this may all be conventional wisdom but then conventional wisdom is usually not far wrong.
139 WillyP // Nov 19, 2009 at 6:31 pm

a few loosely connected thoughts, leaving economics and entering politics at the end

Basically, I contend that those measures will not work. I also contend that empiricism in economics is erroneous methodology. Economic theory is qualitative, not quantitative, and therefore whatever statistics are collected, if they’re even accurate, do nothing to contribute to the the discovery as what I would call natural law. We can observe certain phenomena in data, collected through statistics, but that does alone contribute to the understanding of the science. Just as physicists observe and then formulate, so must economists. It cannot be done the same way in physics and economics, however, because the human is not precisely predictable, and under no circumstances can his actions and decisions “quantified” in any real sense of the word. If you think of money like bargaining chips in poker, and then imagine quantifying poker into an exact science, you’ll see how silly the empiricism actually is.

In my opinion, the best economic theorizing comes out of the Austrian school, which emphatically denies the validity of Keynesian prescriptions. I think you’ll find the best policy comes from knowing the best theory. Therefore, I conclude that the laws and decrees being passed down from above wrong, damaging, immoral, and at this point approaching reckless. We’ve consumed and destroy a huge amount of capital savings, are facing severe deficit figures; presently we are placing such inflationary pressures that even in the midst of a severe contraction, which theoretically should be a time of deflation, there is still mild inflation according to several measures.

Right now must be a time of thrift, not extravagance. To the certain extent, the market is going to override any policy, and I think most people aren’t living like they were back in 2006. And yet, there has been no concession by the government to cut spending, so the private sector – the sector that produces goods people need besides those under the Constitution, which long ago the Founders of this nation decided must be done by a central Government – can beef up its activities. Instead, we get additional tax seizure, increased spending, extremely reckless deficit spending during a time of war and recession (in other words, two period where non-essential services must be CUT), and most significantly, the expansion of government into all sectors of the economy.

It’s like the idea of true scarcity never entered your head when thinking about the problem we’re facing. Like those who insist we must start EXPORTING more goods when clearly we’re hurting for more goods internally. We don’t need mathematical models to tell us that when we feel poorer, we need more real production, and we should do things that encourage the behavior rather than punish it.

Economic dangers aren’t just about dollars and sense. At some point they lead to political revolution of one sort or another. A desperate population, like a desperate person, is not best geared to make good decisions about self-government. Are we going to look like the USSR? No, but we could very well end up like the Europeans – with a decline in birthrates and a huge Islamic immigration upon them. Please – no accusations of racism. I’m frankly not interested in racial distinctions, but I do like the traditional American system of government and would prefer it exported to the rest of the world – Live Free or Die!
140 ottovbvs // Nov 19, 2009 at 7:09 pm

WillyP // Nov 19, 2009 at 6:31 pm

“In my opinion, the best economic theorizing comes out of the Austrian school……..
It cannot be done the same way in physics and economics, however, because the human is not precisely predictable, and under no circumstances can his actions and decisions “quantified” in any real sense of the word.”

…..Er…. isn’t one of the central tenets of the ur Austrian Chicago school of economic thought that when it comes to economic decision making the individual is entirely rational

……I’ll leave the rest of your comments to speak for themselves as they provide an interesting window into an unusual mind…..umhhh…..empiricism has no place in economic policy making?…..most interesting
141 hormelmeatco // Nov 19, 2009 at 7:21 pm

No empiricism in economics makes perfect sense, Otto. That’s how he can sidestep the issue of crises happening in the 19th century without a central bank as a convenient scapegoat of a cause.
142 ottovbvs // Nov 19, 2009 at 7:42 pm

hormelmeatco // Nov 19, 2009 at 7:21 pm
” No empiricism in economics makes perfect sense,”

…….you mean it only makes perfect sense as a rhetorical device in the context of his reasoning system….. not the real world……..although most of the industrialized world had central banks by the time of WW 1 it wasn’t really until the war and it economically disruptive aftermath (which basically they didn’t fully understand) that they became important in monetary management…..and within 11 years they were overwhelmed by the greatest depression in modern history which did indeed cause real political revolutions…….one of the purposes of Keynesianism is the prevention of the revolutions that nihilists like this twit so desire
143 jruss89 // Nov 19, 2009 at 8:04 pm

@WillyP, Speaking to empiricism in economics. Although one cannot predict what any given market participant is going to do using this system, one can predict, more or less, what a certain quantity of market participants are going to do. The easiest analogy is flipping a coin 100 times; although you cannot predict which flip will render heads or tails, but one can predict that at the end of the trial, one will have 50 heads and 50 tails. Since I assume that analogies such as these are unable to convince you, I would suggest going to a variety of college campuses, visiting their econ departments, and discussing the validity of empiricism and how they actually -can- predict economic behavior with some accuracy. I’m not saying it’s perfect–nothing is, even physics–but it’s still pretty good.

“Being economically literate” #61 and “clearly since I claim to be at variance with nearly the entirety of modern practitioners, I do not claim to study modern economic journals and jargon.” #135

Given what you said, plus your name dropping (Say’s Law, etc.) I naturally assumed that you were versed in economic theory, and that you had studied it. Would a man conversing in French not be assumed to know the language?

“Economic theory is qualitative, not quantitative, and therefore whatever statistics are collected, if they’re even accurate, do nothing to contribute to the the discovery as what I would call natural law.”

Natural law? In economics? As I would recall, in a state of nature, there are no “markets” as such. In fact, it takes entering into a society to form a market–by definition–thus thus negating the opportunity to observe man in nature and thus Natural Law from man itself. And last I checked, the other sources of Natural Law, God and animals (the world around us) don’t trade.

You speak about government spending as though it must be met by an immediate tax increase, which is just not true. It is easy enough for the US government to spend more (sell foreign reserves, sell gold reserves, borrow internationally) without levying more taxes–we have this flexibility because of our fiat money. -Eventually- we ought to pay it back, but that is an issue to deal with when our economy is in the upswing. (Again, I address the worries of crowding out above)

“It’s like the idea of true scarcity never entered your head when thinking about the problem we’re facing. Like those who insist we must start EXPORTING more goods when clearly we’re hurting for more goods internally. We don’t need mathematical models to tell us that when we feel poorer, we need more real production, and we should do things that encourage the behavior rather than punish it.”

Since you are so fond of the classical economists (Ricardo in particular), you should already recognize the silliness of that argument. What would be more productive, transforming silicon valley into a car manufacturing center (or some other good we need) and be terrible at it, or continue to export our software (which is very good, and fetches good prices) and trade the money you earn for cheaper goods elsewhere? What of Comparative Advantage?

“Economic dangers aren’t just about dollars and sense. At some point they lead to political revolution of one sort or another.”

So you’re a Marxist now as well?

“Right now must be a time of thrift”

And for individuals and families, it is. With just how uncertain things are these days, one ought to be financially prudent. However, this is where the government, in some way or another, must come in lest we intend for the recession to last for years or decades as in centuries past.

And in closing, “I think you’ll find the best policy comes from knowing the best theory.” – Right back at ya
144 WillyP // Nov 20, 2009 at 10:01 am

jruss and otto,

The events of the future will prove me right. We will have a very slow recovery, and it may indeed rival the Great Depression in terms of longevity. Of that I’m relatively confident. Our only saving grace here is the 22nd Amendment to the Constitution.

I am defending the classical liberal position on political economy, and yet I am derided not only for my aberrance from the modern mainstream, but nearly treated as a pariah who has presumptuously developed his own fatuous system and pushes it on people like would any other charlatan. The lack of respect that legitimate criticism is treated with by forum members speaks to their arrogance and ignorance.

Political revolutions do come about from poor economic conditions. Recognizing this blatant fact of history (in modern American history, 1932 and 1980 come to mind) does not make me a Marxist eschatologist, waiting for salvation day upon the dawning of the proletariat uprising. Not all political revolutions are bloody coups. Above all, your dismissal of this strong correlation speaks loudly about your lack of historical perspective, and your disavowal of economists as anything but number crunching technocrats.

In the past, economists have written extensive treatises to explain their theories and illuminate them through recorded historical phenomena. Nowadays, “economists” attack you with a barrage of charts, numbers, formulae, and statistics they claim to be portentous, yet balk when asked to explain why these models failed to predict the 2007 collapse. The older tradition almost always championed liberty; the modern tradition, central planning. But I digress.

Mentioning Say’s law is not name dropping, it’s reference… name dropping would be something like “Last night I saw Steve Forbes speak, and his prescription for the ailing economy was largely in line with what I outlined in post #61.” That, in fact, happens to be true. In otto’s schema, Mr. Forbes’ preference for a strong and stable dollar serve to qualify his mind as “unusual.”

“Natural law? In economics?” Yes, that’s the idea. Universal laws that remain valid for all time space, just like all other “laws” we develop from our pursuit of knowledge. Not a hodgepodge of empirically derived, at best arbitrary deficit spending policies. You would do well to read Bastiat, and then turn to Mises. Bastiat will cure you of your knee-jerk protectionism, central planning tendencies, and – yes – hubris in believing that a bureaucrat can short circuit recovery. Mises’ work on the philosophical underpinnings of the economic science and epistemological problems inherent in empiricism and positivism may allow you to drop the yoke of erroneous methodology. Somehow, I feel I am asking too much.

Speaking of empiricism, let’s see: the biggest government “bailout” of the economy since Hoover/FDR has taken place in the last year, and in that year unemployment has risen to double digit and the job losses keep mounting without any abatement. Gold has climbed to all time highs on inflationary fears. There is mild inflation during a time when there should be deflation, to use these vulgar terms. The commercial real estate market is on the precipice, and come February could very well be in the same position as was the subprime market. How’s that Keynesianism working out?
145 WillyP // Nov 20, 2009 at 11:02 am

Err, the 2008 collapse. My mistake.

Recent: http://mises.org/daily/3870
146 balconesfault // Nov 20, 2009 at 11:37 am

How’s that Keynesianism working out?

Quite well, given the very legitimate fears 14 months ago that we were about to see a complete economic meltdown.

As Krugman and Reich and others argued last February, twice as much stimulus was probably warranted – but Obama decided to hold back in order to lessen the risk of rapid currency devaluation. As you say, we shall see who was right.

Although almost everyone is sure that the anti-stimulus crowd is wrong.
147 WillyP // Nov 20, 2009 at 1:08 pm

“Quite well, given the very legitimate fears 14 months ago that we were about to see a complete economic meltdown.”

As someone who generally likes sticking to reality when making statements, I implore you to explain how papering over bankruptcy could prevent what you call a “meltdown.” What harm would have come with a restructuring? Lehman is no more; Bear is no more; the world continues to turn.

Almost everyone would not include anyone on this list:
http://www.cato.org/special/stimulus09/cato_stimulus.pdf

We shall see, we shall see…
148 ottovbvs // Nov 20, 2009 at 6:14 pm

WillyP // Nov 20, 2009 at 10:01 am

jruss and otto,

“The events of the future will prove me right…… and it may indeed rival the Great Depression in terms of longevity. Of that I’m relatively confident. ”

…….You forget one of Maynard Keynes most memorable aphorisms “In the long run we’re all dead.”

…….Unemployment is going to hit 25% and the economy is going to continue contracting for about 14 successive quarters?……..not very likely….in fact it’s already started growing again……I know in your nihilist heart that this is what you want to happen but you’re going to disappointed a bit like those religious guys carrying signs saying the end is nigh.

““Last night I saw Steve Forbes speak, and his prescription for the ailing economy was largely in line with what I outlined in post #61.”

……..Mr Forbes would be better employed tending to his own garden…..he owns a business that’s on its knees and he personally has allowed to atrophy……..he should also read his own columnist Bruce Bartlett who actually is an economist not just pretending to be one.
149 WillyP // Nov 20, 2009 at 6:51 pm

if you are going to start quoting your hero keynes, i would recommend taking another one of his aphorisms to heart:

“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

i don’t understand when i became a nihillist? in fact, i believe such a cynical statement as “in the long run we’re all dead,” would, especially when used to promote dangerous policy with insouciance, require nihilist, if not sociopathetic, tendencies.
150 ottovbvs // Nov 21, 2009 at 10:14 am

WillyP // Nov 20, 2009 at 6:51 pm

…….more sophistic blather…..it’s a poor substitute for backing up absurd claims like your earlier one which you’ve never answered and this most recent one that the current recession will rival the great depression in longevity which is just as ludicrous

……and when it comes to debauching the currency much of the debauching was done by Republicans…..in 1998 in Bill Clinton’s golden days I was staying in a rather grand hotel in Salzburg and could buy Euros for around 81 cents……they now cost around $1.50……and just in case you want to claim this is all the current admin’s creation they were costing about $1.55 in the spring of 2008!
151 WillyP // Nov 22, 2009 at 8:41 pm

otto, you’re incurable.

The events of the next 4-5 years will unfortunately prove me correct, I’m pretty sure.

See here:
http://mises.org/story/3488
and here (as linked above):
http://mises.org/daily/3870

If you find no reason to question your Keynesianism after reading those two articles, one of them written by an eminent economist, then what can I say?
152 What’s To Be Done? « noot // Jan 9, 2010 at 12:06 am

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