[kenberg]

 mike777, on 2010-November-19, 21:26, said:

To be fair, Congress votes on spending...Iknow we forget that.

People outside the usa may think Bush or any president governs by fiat.

Ah yes, I remember it well. GWB was just happily tending to the Rose Garden when, whaddaya know, this bill arrived by the morning mail proposing a tax cut. "What the gosh darn heck is this, Dick?" "Oh, it's just one of those fool Congress things. Just sign it and keep them happy".

I know it's a sin, but like many Americans I cannot say with confidence who was Speaker of the House when the tax cut was passed. I know who was president.

The tax cut went in, GWB was president, the debt went up, way up. So far, I think I am on solid ground. I heartily approve of looking at subtleties, both in examining the tax cut and, among many things, examining the stimulus. But the debt did go up under the cuts, and, contrary to prediction, unemployment did get up and stay up above 8% after the stimulus. Subtleties will receive a fair hearing after plain facts are clearly acknowledged.

[Zelandakh]

 hrothgar, on 2010-November-19, 18:43, said:

I do agree that the Brits are following a very different policy.
It will be interesting to see how their austerity measures impact the economy.

Not really. Britain has devalued its currency by about 25% by exactly the same method as America (QE) in order to stay competitive. The problem (one of) for countries such as Ireland is that they cannot devalue the currency in the same way because they are part of the Euro-zone. It has been noted that in general, after the initial stimulus packages put out by most Wsetern governments that there is a deep difference of opinion between America and Europe for the follow-up measures with America looking to promote growth through further stimulus and Europe looking more at deficit reduction. The only reason why Britain looks to be on a different course to Germany is the level of debt. Germany can afford to cut less due to its more cautious fiscal position at the time of the crisis and more resilient economy. If you look at other European countries with high debt - Greece, Ireland, Portugal, etc - then they are running austerity measures at least as severe as the UK.

[PassedOut]

 kenberg, on 2010-November-20, 05:44, said:

...contrary to prediction, unemployment did get up and stay up above 8% after the stimulus. Subtleties will receive a fair hearing after plain facts are clearly acknowledged.

I think it's a plain fact that the effects of the stimulus were seriously oversold by Obama (Paul Krugman gave strong warnings about that at the time). That overselling was a bad mistake, and the vague mutterings later to the effect that, "Things were so much worse than we thought," only added to Obama's political problems.

Maybe it's my business orientation, but I would like to see the president stand up with charts (I'd prefer monthly, but quarterly would be acceptable) to explain the administration's goals, the plans to achieve those goals, and how things have tracked since the last presentation. If things go off track, explain what went wrong and what corrections are being made.

Perhaps an approach like this would be too boring for most folks to sit through, but I would watch and so would many in the dreaded "elite" class. Perhaps Obama's advisors caution him against looking "too professorial," but I've seen him do a very good job of explaining his policies when he actually gets around to it. Obama's no schmoozer like Bill Clinton, and he shouldn't try to be. But he should make good use of his ability to be professorial, rather than shrink from it.

[hrothgar]

 mike777, on 2010-November-19, 20:29, said:

"am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible. The reason I am is because I believe the big problem is not taxes, the big problem is spending. The question is, "How do you hold down government spending?" Government spending now amounts to close to 40% of national income not counting indirect spending through regulation and the like. If you include that, you get up to roughly half. The real danger we face is that number will creep up and up and up. The only effective way I think to hold it down, is to hold down the amount of income the government has. The way to do that is to cut taxes.
Interview by John Hawkins (16 September 2003)
There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income."

http://en.wikiquote....Milton_Friedman

I have some nice Mozart recordings on my iPod...
This doesn't make me a world class composer.

In much the same manner, dredging out the same tired Friedman quotes doesn't make you any kind of expert on fiscal policy.

I know its stupid to even ask, however, how do you propose to pay to extend the Bush tax cuts?

1. Do you actually believe that said tax cuts are self funding?
2. If not, please show me $700 billion dollars in spending cuts that you support

[hrothgar]

 kenberg, on 2010-November-19, 20:13, said:

My main disagreement with quantitative easing, other than its silly name, is that it promulgates the idea that our elected officials can all act like a bunch of idiots since the Fed is Superman and will come to our rescue.

There are much better ways to deal will a depressed economy that quantitative easing.
Deficit spending is a vastly preferable solution.

Regretfully, its impossible to get a stimulus package past congress.
There are any perfect solutions available and quantitative easing is better than sitting around and slitting our own throats.

[Zelandakh]

One of the main points of QE is to devalue the currency when interest rates are so low that they cannot be used as a tool for that purpose. That is why it is ironic to the rest of the world to hear America complaining about foreign countries devaluing at a time when America is printing an extra $600000. A stimulus package would not achieve this.

[kenberg]

 PassedOut, on 2010-November-20, 10:13, said:

I think it's a plain fact that the effects of the stimulus were seriously oversold by Obama (Paul Krugman gave strong warnings about that at the time). That overselling was a bad mistake, and the vague mutterings later to the effect that, "Things were so much worse than we thought," only added to Obama's political problems.

Maybe it's my business orientation, but I would like to see the president stand up with charts (I'd prefer monthly, but quarterly would be acceptable) to explain the administration's goals, the plans to achieve those goals, and how things have tracked since the last presentation. If things go off track, explain what went wrong and what corrections are being made.

Perhaps an approach like this would be too boring for most folks to sit through, but I would watch and so would many in the dreaded "elite" class. Perhaps Obama's advisors caution him against looking "too professorial," but I've seen him do a very good job of explaining his policies when he actually gets around to it. Obama's no schmoozer like Bill Clinton, and he shouldn't try to be. But he should make good use of his ability to be professorial, rather than shrink from it.

I think that all the charts in the world are not going to do the trick unless he is prepared, and we are prepared, to face hard facts.

QE2: It's not a free trip on an ocean liner. Maybe it will "work", whatever that might mean. Maybe, when it doesn't cure everything, maybe just maybe Bernanke has another rabbit in another hat. And then maybe another. But eventually we run out of rabbits.

Tax cuts: The original argument, that they made sense because of the huge surplus, seems like we must have been on acid. Let's, perhaps, accept that with our massive unemployment problem (the figures are tricky for well-known reasons, but "massive" seems about right) this is not the time for all tax rates to revert to the level of ten years ago. Perhaps that is so. This definitely does not mean that we can all go on spending what we do not have forever. Moreover, we will all (including us with even modest resources) need to accept some responsibility here. The rich, well-connected and grabby need to be told to ante up, but the rest of us cannot expect to totally escape responsibility.

Personal debt: I think this is a huge problem. As I have noted before, credit card debt apparently has been decreasing quite a bit in the last couple of years. It's (mostly) good news/(but some) bad news. The good news is that quite a few people seem to actually have caught on to the fact that large personal debt is a serious enemy. The bad part is that this spend now pay later approach was responsible for selling a lot of stuff, and now that economic boost will decrease as personal financial sanity sets in.

Cutting government spending: Republican or Democrat, I'll believe it when I see it.

[PassedOut]

The NYT compared the two plans -- and demanded leadership -- in this piece: Now, for Some Leadership.

Quote

Unfortunately, in dealing with the most difficult problem — the inexorable rise in spending on Medicare and Medicaid — the two plans would result in unacceptable reductions in benefits for people of modest means or stiff (for them) payment increases.

The best long-term solution is to make the delivery of medical care much more efficient. That is a major goal of the new reform law, which is starting an array of pilot projects in Medicare and Medicaid. Congress needs to accelerate this effort, not look for ways — as Republicans are — to repeal or obstruct the new law.

These calls for obstructing healthcare reform are in total conflict with restoring fiscal responsibility. Obama has to stand his ground on this.

Quote

Meanwhile Congress is moving in exactly the wrong direction. Republicans are bent on letting unemployment benefits expire, lessening the chances that the economy will be ready for deficit cutting by 2012. And those supposedly deficit-minded Republicans are pushing to extend all of the Bush-era tax cuts. That would add $4 trillion to the debt over the next 10 years, the same amount the commission has proposed to cut.

The Democrats are doing only slightly better. They want to extend the middle-class tax cuts permanently — which would add $3.2 trillion to the debt over 10 years. They do not seem inclined to fight the Republicans very hard. If lawmakers — of both parties — were serious about the deficit, they would let the Bush tax cuts for the rich expire, extend the tax cuts for the middle class for a year or so, and reform the tax system in the meantime.

This makes perfect sense — so it's not surprising that our politicians in both parties find it difficult to support. The bleating from the free lunch crowd would be just so-o-o hard to bear.

Quote

There is no way to reduce the deficit without strong leadership from President Obama and honest cooperation from the Republicans. The ideas are out there. Now we are waiting for the politicians.

Yep. Hope springs eternal...

[Winstonm]

"The good news is that quite a few people seem to actually have caught on to the fact that large personal debt is a serious enemy.
maybe just maybe Bernanke has another rabbit in another hat"

Ken,

I don't see the fix - Bernanke is fighting the levelheadedness of reduced debt-fueled consumption by trying to increase debt-fueled consumption. Perhaps this is a systemic problem.

Wages must rise or prices must fall if healthy consumption is to be resumed - lowering interest rates won't help when there is reluctance to borrow except for the insolvent.

This was not the garden variety recession. This was a collapse of peak debt. In my opinion, the best the Fed can accomplish with monetary policy is to create another bubble - but even then it will take years to overcome the deleveraging that is still ongoing.

[kenberg]

Winston! Wait! You are quoting one sentence from one paragraph, another from another, and they don't fit well in their new arrangement.

The first sentence you quote, "The good news is that quite a few people seem to actually have caught on to the fact that large personal debt is a serious enemy.", refers to personal debt. Too many people, both from statistics and from personal experience, have been far to casual about running up credit card and other debt. I understand that cc debt is sharply falling and I consider it good news that people are coming to appreciate the dangers of living on substantial amounts of borrowed money. There are many variants of personal debt and I think that it, besides the personal tragedy, impacts our economic problems. I earlier cited a newspaper article about a man in trouble with a mortgage on a house he bought thirty years ago. Of course the trouble is not a result of his original mortgage which should be in its final months. Everyone was screwing around, the banks with weird mortgages, the homeowners by using their equity to finance a way of life not justified by their income. Chickens are now coming home to roost, alongside the rabbits spoken of earlier. Also, some crow is in need of eating. My oldest granddaughter has announced that she is a Vegan and no doubt she would not approve of all this animalism.

The second sentence, "maybe just maybe Bernanke has another rabbit in another hat", relates to the Fed. I don't know how QE2 will play out. Generally I am skeptical about fixing something with no pain. But Bernanke, we could say, has credentials that I lack. Perhaps it will do something, perhaps even something good. I am prepared to wait and see. But my point here was that even if it helps, it surely must be seen as a last or close to last, ditch effort from the Fed. Find the wisest man/woman on Earth, put him/her in charge of the Fed, there will still be no way to resolve our problems simply through his/her actions. Our elected representatives are supposed to earn their pay now.

Anyway, I am off to the Shenandoah for a couple of days, you all will have to figure things out without me. I will think kind thoughts of all of you.

[Winstonm]

Hi, Ken,

Have a nice time.

I know I quoted from two spots but I thought you made good points both times and I saw a correlation that perhaps you did not see - the fact that the Fed's reaction is always the same, to lower interest rates in an attempt to spur borrowing - all kinds of borrowing, yet artificially low interest rates and excessive borrowing is how we engineered a real estate bubble in the first place.

Seems a Catch-22.

Regardless, Happy Thanksgiving

[kenberg]

I'm back. A couple of thoughts.


When we were last at the Shenandoah in June or so, they were working on the roads and the overlooks. They still are. Signs saying "Your recovery dollars at work". This makes fine sense to me. It needed doing soon, maybe next year or the year after, but soon. So with unemployment high, they are paying guys to do work that needs doing and timing it to help them and help the economy. How bad an idea can this be? Interestingly enough, much of the original construction was done in the thirties by the CCC.

Moving on, in the Post this morning there was an interesting article about the stress on community colleges. They are flooded with people seeking skills for new careers. See
http://www.washingto...0112605035.html


A couple of points from the story:

Quote

In one small anatomy lab, there's a craps dealer training to become an anesthetist, a cocktail waitress who wants to be a dental hygienist, and a former stripper seeking to become a nurse.

This is a bit like fixing the roads. If a craps dealer, a cocktail waitress and a stripper convert to an anesthetist, a dental hygienist and a nurse this has its merits. But the money, including some substantial stimulus money, is running out to support this training.


Before we let ourselves get in a tizzy about all of this wasted stimulus money we might look at some specifics.


PS I thought that you shoot craps and deal blackjack. Am I behind the times?

[PassedOut]

We had quite a number of those signs in the Upper Peninsula of Michigan and the roads and bridges here are the better for it, as are the folks who worked on those projects. Teachers and police officers were kept on who would not have been otherwise and (in my opinion) communities are the better for that too. My eldest son took advantage of the first home tax credit, and I know several people here who made use of the cash for clunkers program. The Obama tax cuts have put more spending money in folks' pockets, and I'm sure that our businesses got some of that money.

So I wouldn't say that the stimulus money was wasted. But the stimulus did not reduce unemployment as much as was promised, so you'd have to classify it as a failure in that sense.

[y66]

I love that excerpt from the community college story Ken posted. Will find the paper and read the rest of that story.

p.s. Hard to believe anybody in their right mind would oppose increasing funding for community colleges.

[PassedOut]

Paul Krugman has endorsed Ken Berg's idea that the democrats should just let the Bush tax cuts die now, rather than making any kind of a deal with the republican free lunch crowd: Let’s Not Make a Deal.

Quote

Democrats have tried to push a compromise: let tax cuts for the wealthy expire, but extend tax cuts for the middle class. Republicans, however, are having none of it. They have been filibustering Democratic attempts to separate tax cuts that mainly benefit a tiny group of wealthy Americans from those that mainly help the middle class. It’s all or nothing, they say: all the Bush tax cuts must be extended. What should Democrats do?

The answer is that they should just say no. If G.O.P. intransigence means that taxes rise at the end of this month, so be it.

It's clear that the Bush tax cuts have been an abysimal failure--leaving a huge debt without producing economic growth. My only reservations about pulling the plug on those disastrous tax cuts now stem from the negative effects of doing so during the present time of high unemployment. However, Krugman makes a strong case that those negative effects pale in comparison with the negative effects of keeping in place the foolish Bush tax cuts:

Quote

But while raising taxes when unemployment is high is a bad thing, there are worse things. And a cold, hard look at the consequences of giving in to the G.O.P. now suggests that saying no, and letting the Bush tax cuts expire on schedule, is the lesser of two evils.

...

A few months ago, the Congressional Budget Office released a report on the impact of various tax options. A two-year extension of the Bush tax cuts, it estimated, would lower the unemployment rate next year by between 0.1 and 0.3 percentage points compared with what it would be if the tax cuts were allowed to expire; the effect would be about twice as large in 2012. Those are significant numbers, but not huge — certainly not enough to justify the apocalyptic rhetoric one often hears about what will happen if the tax cuts are allowed to end on schedule.

David Stockman, Reagan's budget director, is in complete agreement with Paul Krugman and Ken Berg on killing the Bush tax cuts right now to restore fiscal responsibility. And I'd love to see Obama and the democrats stand up for common sense and future taxpayers by putting a halt to the foolish Bush tax cuts once and for all. (Not holding my breath though.)

[luke warm]

well there's been time for the dems to do something about it... maybe you're wrong, maybe the reps aren't the only 'free lunch crowd' in d.c.

[hrothgar]

 luke warm, on 2010-December-06, 09:52, said:

well there's been time for the dems to do something about it... maybe you're wrong, maybe the reps aren't the only 'free lunch crowd' in d.c.

Maybe abuse of the Senate rules have blocked any possibility for the democrats to pass legislation?

FWIW, here' a pretty good discussion regarding "free lunch" over the last decade or so

http://motherjones.c...-business-cycle

[kenberg]

 PassedOut, on 2010-December-06, 09:15, said:

David Stockman, Reagan's budget director, is in complete agreement with Paul Krugman and Ken Berg on killing the Bush tax cuts right now to restore fiscal responsibility. And I'd love to see Obama and the democrats stand up for common sense and future taxpayers by putting a halt to the foolish Bush tax cuts once and for all. (Not holding my breath though.)

And you know, these guys did not even acknowledge me!

I am more and more in favor of the following:

Long term, the cuts should expire. Simple argument: Before the cuts, the budget was balanced. Now it isn't. Of course I know that this is simplistic, but Palinites are not in a good position to criticize simplistic reasoning.


As to cutting government spending and cutting taxes, perhaps. But so far we have succeeded in cutting taxes, while cutting spending has been all talk and no action. So,restore the taxes to previous levels. If we reduce spending, and if this leads to deficit reduction, then, after the spending has been reduced and the deficit has been reduced, I will be happy to hear of tax cuts.

Short term: We need to put people back to work. This is done by hiring them. Since industry isn't, government should. We are not, I hope, going to let them starve so putting them to work on worthwhile projects seems to make sense. Better than paying them when they are not working. Perhaps the overall economic effect is less than hoped/predicted, but every guy you hire is one more guy feeding his family with wages from a job.

I await my Nobel prize.

[PassedOut]

 kenberg, on 2010-December-06, 12:34, said:

And you know, these guys did not even acknowledge me!

It's a jungle out there!

 kenberg, on 2010-December-06, 12:34, said:

As to cutting government spending and cutting taxes, perhaps. But so far we have succeeded in cutting taxes, while cutting spending has been all talk and no action. So,restore the taxes to previous levels. If we reduce spending, and if this leads to deficit reduction, then, after the spending has been reduced and the deficit has been reduced, I will be happy to hear of tax cuts.

Short term: We need to put people back to work. This is done by hiring them. Since industry isn't, government should. We are not, I hope, going to let them starve so putting them to work on worthwhile projects seems to make sense. Better than paying them when they are not working. Perhaps the overall economic effect is less than hoped/predicted, but every guy you hire is one more guy feeding his family with wages from a job.

I await my Nobel prize.

You'd have my vote, if I had one.

[y66]

 kenberg, on 2010-December-06, 12:34, said:

... I am more and more in favor of the following:

Long term, the cuts should expire. Simple argument: Before the cuts, the budget was balanced. Now it isn't. Of course I know that this is simplistic, but Palinites are not in a good position to criticize simplistic reasoning.

... I await my Nobel prize.

If you decide to make some calls and get enough votes to let the tax cuts expire, I will contact Nobel Shore and pay his fee to play in the event of your choice.