Open thread August 8, 2011
I think given the seriousness of the political situation currently being played out, which in my thinking includes the current S and P opinion, has been discussed in comments in a remarkable fashion. Plenty of links and thoughtful commentary. And of course passions run high and are expressed. Well done and my thanks to the readers.
The economic questions are longer term in nature, and of course include much more than the federal government…believe it or not it also includes the predominate trade policies multi national companies implement in their business plans, and those other policies they express through their lobbyists to Congress and the President as solely in the national interest, and how the federal government will play a part. But that discussion is muted at the moment.
How the format here promotes several conversations at the same time is a priority, and keeping a lid on the propensity to offer political answers and retorts as economic answers is a difficult task when debating the political commentary. After all I think information as accurate and real as possible is the baseline, including enough baseline knowledge to sort some of it out on one’s own and not repeat slogans as much as possible, is important. Suggestions welcome on format if you have ideas. Historic times demand attention.
Get MG to post as a main poster like Rebecca or Linda. All three bring the data reguardless of if you like it or not.
Islam will change
For what it is worth my opinion of the debt downgrade is that it is warranted.
It is not a question of an ability of the US to service its debt.
Rather, it is a question of the willingness of the US to service its debt.
We have a major political party with a stated objective of bankrupting the US that regularly wins major election.
Given that S&P is correct to question the US willingness to repay its debt.
Ah well…he won’t. Besides, he might have to be as even tempered as Bruce Webb, which might prove difficult. 🙂
Actually it is well stated….the thing is, it is certainly a political statement and not ‘economic’ thought at the moment. Moody’s is negative watch. What is enough???
“We have a major political party with a stated objective of bankrupting the US that regularly wins major election.”
“Given that S&P is correct to question the US willingness to repay its debt.”
I’m not disagreeing with your main premise, that there is a reason to question and investigate the issue of sovereign debt in this country, but read your own last two sentences. You’ve jumped from pointing out a specific protagonist which is instigating a serious problem to questioning the entirety of the US regarding repayment of debt. That isn’t a fair assessment, it’s being self contradictory. Had S&P written on Op-Ed pointing out that the Congress is dysfunctional and that the extremist ideas of many members of the Congress is interferring with the proper function of the government they would be on more solid ground in making their argument regarding the quality of US debt.
Spencer said: “
Rather, it is a question of the willingness of the US to service its debt.
We have a major political party with a stated objective of bankrupting the US that regularly wins major election. ”
And I am willing to bet that Spencer’s definition of the party is different then many.
1) Which party was making the claims that we would/might default?
2) Which party claimed that SS checks could not be guaranteed?
3) Which party claimed the military might be able to be paid?
4) Which party wants to borrow even more to spend as a stimulus in a liquidity trap debt driven recession?
5) Which party fails to accept responsibility for dysfunctional/failed policies?
6) Which party has consistently blamed the previous administration or the other party for affects of their own policies?
7) Which party failed or refuses to address the entitlement problem?
There’s much much more to add to the list, but that’s a start.
S&P have been bold enough to speak the very obvious. We are heading towards bankruptcy. One just cannot substain borrowing 40 cents on the dollar, year after year. This is a dysfunctional family.
It might be simple when we are “single” i.e. right after the revolutionary war. Then we decided to get married. Now we have two people in the household deciding the family affairs. Now couple generations down the line. We have our grandparents to take care of, the kids, the cars, their education, and healthcare. Every family needs to prioritize what is essential and what are luxury items. Today the republicans and the democratic parties find themselve with skyrocking credit card debt, the mortgage payements overdue and the home line of equity have start to run out.
This is about growing pain and responsibility. Just in any family there are different opinions, needs, wants. It is time for all sides to decide what is important and what is not. Both parties have been partying on their grandparent generation wealth, and then borrowed to continue their luxury and lifestyle. Everyone will need to sacrifice and take responsibility. The party is over!
Seems kind of churlish to stop the party while it’s still getting cheaper though.
What is the difference between the fed and the ECB?
Both have arduously and at the expense of the working folks prevented liquidation of bad debt on bank balance sheets, aided and abetted by governments willing to resolve debt on the brow of the worker.
Aside from protecting the Euro for the Germans and French savers (wow, in 1914 and 1940 the Germans used panzer to take over France).
My answer to the difference between the fed and the ECB as to ratings: see cartoon from Barry Ritholtz at TBP.
Dad’s a fool. He needs more income and to exit the one person “racing club”.
Giving up the war wagon Lambhorgini’s is worth about $400B a year starting in ’12.
Dad cannot have his fancy race car, with no one to run against but goats if his kids and parents are starving.
“Which party wants to borrow even more to spend as a stimulus in a liquidity trap debt driven recession?”
The debt problem is not on local governments’ bacj, it is bad debt (A/MBS) in fed connected banks, the treasury and the federal reserve that needs liquidated.
You have it backward the liquidity trap is why money supply expanding is not gaining results, as well as the tax cuts.
With the 10 year at 2.35% it is good to borrow now.
To finance fiscal stimulus aside from the war wrecking side.
Still, cutting the war Lamborghini is needed to move resources to roads and infrastrcuture.
Explain why Grandma, the disabled and the poor need to suffer for the wall st banksters and the war profiteers?
Today’s deficit debate is very different. In years past the Dems would just trot out some affected dependent group and everyone would cave, lest they be thought of as uncompassionate.
But now, increasingly, people are starting to see through the spin, in large part because of the new communications: the internet, talk radio, and cable TV. When they hear “invest in education” they translate it to “bloated pensions,” and when they hear “rebuild our infrastructure” it becomes “Bridge to Nowhere.”
And previously the debt and deficit were abstract, intangible boogeymen, but now the S&P downgrade provides tangible adverse consequences to our profligacy.
The Tea Partiers, whom you love to deride, were right. Must be a bitter pill.
I am waiting for the CD rates to be 14%.
Maybe Volcker can come back and whip inflation now!
See my cartoon.
What if Keynesain counter-cycle stimulus only works from the bottom up?
Surely, noone really believes that ‘Austerity’ works???
Could it be that top-down stimulus only worsens an economy which is out of balance due to excess liqidity?
Of course, this would suggest that the contributions made by investors are not vastly more integral than those made by workers… this could undermine hundreds of year’s worth of promotional efforts! The question then becomes: how far are investors willing to go, in order to save their existing gains? The truth could have long-term implications.
But they are short-term thinkers….
Milton Keynes advocates “spending” in recession and “saving” in boom time. Either party actually followed through with his advice. (Europeans are in worse shape than we are)
The Austrian School may be right that you cannot predict human nature. It’s like gambling, once you win one hand than you always want another one, even you already sold your wife, kids, and finally your soul!
But… there was no “boom time”, only a time when assets were overvalued due to excess liquidity. A boom would have improved the circumstances of the general popualtion as opposed to that of only investors. What improvements did occur during the ‘boom’ were only due to debt increases. Keynes was advocating saving… not increased levels of debt.
There was no ‘boom’.
There is so much cutting to do on the pentagon.
The Euro zone is a mix in terms of better or worse than the US. One difference on the surface in spending priorities: the US spends multiples what the Euro zone spends in terms of fraction of GDP for war. Roughly 5 times Euro zone percent GDP for US wars and war profits.
So, Euro zone has deeper safety net, better roads and infrastructure and their health results are generally superior at lower cost for the middling quintiles of their population.
The US spending 20% of outlays for war, while the Brits who are in Pound Sterling spend about 6%.
If I recall correctly there is a lot of micro in the Austrian school, marginal analysis and concern for opportunity costs which means the Austrians and Germans do not take from infrastructure and employment investments to build Maginot lines in Afghanistan and Iraq or jet tankers to bring tank fuel to Sammarkand.
I would go Austrian if the advocates of austerity would really go Austrian.
Alas, all austerity is for is to sack SS and medicare for the war machine.
So much analysis all leading to a dead-end has left this site in a funk!
“tangible adverse consequences” I do not think that word adverse means what you think it means. borrowing is cheaper for us taxpayers today. I guess it’s adverse if you hold a shitload of bonds or derivitaves of treasuries.
If the tea partiers were right why are people leaving the party? In droves? I don’t want to jinx myself but maybe tomorrow’s WI recalls will be a better bellweather than the 2010 mid terms. Maybe.
The President needs a new press secretary. This kid is a joke.
Monday’s press briefing:
Q But why can’t you say, okay, there were — gridlock is a problem, but President Bush didn’t pay for two wars, didn’t pay for prescription drug benefit; Republicans bear responsibility. And you know what, we had a stimulus of nearly a trillion dollars; we’ve had other things we didn’t pay for.
MR. CARNEY: That is not —
Q Why can’t you say, “We have some of the responsibility”?
MR. CARNEY: We have the responsibility to take action and compromise, and we have shown our willingness to do just that and reach across the aisle, meet Republicans more than halfway, make politically tough choices like taking on the issue of the need to strengthen our entitlement programs and make changes in them as necessary.
Blah, blah, blah…
MR. CARNEY: Markets go up and markets go down. We do not and we cannot react precipitously in reaction to how the markets behave on a given day or week.
Obama, the stock market expert, is just moving federal funding around on the table.
Obama’s Monday press conference:
“Our [deficit] problems are eminently solvable. And we know what we have to do to solve them.”
“Last week, we reached an agreement that will make historic cuts to defense and domestic spending. But there’s not much further we can cut in either of those categories. What we need to do now is combine those spending cuts with two additional steps: tax reform that will ask those who can afford it to pay their fair share and modest adjustments to health care programs like Medicare.”
The “good news here is that by coming together to deal with the long-term debt challenge, we would have more room to implement key proposals that can get the economy to grow faster. Specifically, we should extend the payroll tax cut as soon as possible, so that workers have more money in their paychecks next year and businesses have more customers next year.”
“In fact, if Congress fails to extend the payroll tax cut and the unemployment insurance benefits that I’ve called for, it could mean 1 million fewer jobs and half a percent less growth. This is something we can do immediately, something we can do as soon as Congress gets back.”
“We should also help companies that want to repair our roads and bridges and airports, so that thousands of construction workers who’ve been without a job for the last few years can get a paycheck again. That will also help to spur economic growth.”
“Markets will rise and fall, but this is the United States of America.”
I can ask! And actually MG is pretty even tempered – he just doesn’t put up with the ad hominum from some of the lefties at AB when confronted with facts that don’t support the narrative. For example. President Obama is a Democrat.
Anyway to make th e page load faster? Its the slowest fo all the websites I visit regularly?
I have seen this claim multiple times. I understand the political implications, but the underlieing point is economic. The US current debt trajectory is unsustainable. That is an economic statement as reflected in the downgrade. Basically S&P is pointing out the emperor has no clothes…finally.
Islam will change
So much analysis all leading to a dead-end has left this site in a funk!
It is shell-shock.
Worth a look:
Four Ways Congress Can Upgrade Our Credit Rating: Peter Orszag
Aug 8, 2011 10:00 AM ET
The tribal wisdom of the Dakota Indians, passed on from generation to generation, says that, “When you discover that you are riding a dead horse, the best strategy is to dismount.”
However, in government, education, and in corporate America, more advanced strategies are often employed, such as:
1. Buying a stronger whip.
2. Changing riders.
3. Appointing a committee to study the horse.
4. Arranging to visit other countries to see how other cultures ride dead horses.
5. Lowering the standards so that dead horses can be included.
6. Reclassifying the dead horse as living-impaired.
7. Hiring outside contractors to ride the dead horse.
8. Harnessing several dead horses together to increase speed.
9. Providing additional funding and/or training to increase dead horse’s performance.
10. Doing a productivity study to see if lighter riders would improve the dead horse’s performance.
11. Declaring that as the dead horse does not have to be fed, it is less costly, carries lower overhead and therefore contributes substantially more to the bottom line of economy than do some other horses.
12. Rewriting the expected performance requirements for all horses.
And of course….
13. Promoting the dead horse to a supervisory position.
“If ever a time should come when vain and aspiring men shall possess the highest seats in government, our country will stand in need of its experienced patriots to prevent its ruin.” — Samuel Adams, 1776
Obama is definitely a dead horse.
Come on, Hillary. Resign from SecSTATE and run for the presidency.
Kind thanks. I prefer to hang out in the audience and enjoy that level of participation. Besides, Dan has a large stable of main posters. Hopefully, more will be added who have strong backgrounds in economics, industry, or government.
I believe that I am positioned where I need to be to help Dan improve his blog.
Well now we have something that we are in fairly close agreement about. We differ in that you point to Obama as the analogous steed. I would suggest that the entire herd has stumbled over the cliff. I don’t know whether H. Clinton would make a better Executive. I do know that if the leadership of the Congress doesn’t change she will end beating the dead horse far too often. The last effective congressional handler was LBJ and he let himself get caught up in wars of adventure.
What tribe of Dakota Native Anericans do you quote?
Horses escaped from Spanish explorers likely did not get to them until the mid 16th century.
I agree need achallenger, I am for Bernie Sanders.
Your welcome. You tend to bring facts and links to arguments instead of some of the crap that gets posted around here. I welcome your inputs!
As for Obama being a Democrat – you have had more than one (and its quite common on ‘progressive’ blog) person try to tell me Obama wasn’t a true Scotsma…ooops Democrat.
Islam will change
No Dem will run against Obama. Not a chance – the numbers don’t work at all. No Democrat can betray the first black President and expect to get any black votes. Either in the primary or the general election. Without them the challenger loses and breaks up the Democrat monoploy on the black vote. No corporation is going to give money to some white person to try to unseat the first black President via a primary challenge. All the optics are terrible for a Dem primary challenger. If you want to get Obama out, work to get a good R on the ticket.
The Dems are in a bad position. Can’t replace Obama and Obama is really likely to destroy the Dem brand (as cactus pointed out the other day). Obama has already destroyed the idea that the Dems are the party of fiscal soundness. Destroyed the idea that the Dems are the party of peace (which is laughable since Dem Presidents have led to more US combat deaths since 1900 by a wide margin). What else can he destroy?
And London is looking really fun – the death throes of the welfare state?
Islam will change
“And London is looking really fun – the death throes of the welfare state?”
London, England, the welfare state? And Santa Claus lives in the North Pole. And Stalin was a Communist rather than a totalitarian tyrant. And Rick Perry makes a lot of sense as an alternative to any Democrat, but is only slightly loonier than Michelle Bachmann.
“In years past the Dems” … “Bridge to Nowhere” You realize that the 2nd contradicts the first, right? The Gravina Island Bridge was a Republican pork barrel project through and through, and even Sarah Palin supported it (until she became a national figure). If you are going to list things that are related to both parties, why start your post out with an anti-Democrat rant? It just makes you seem partisan and unserious.
Well, well, well for all the fuss and $30M spent in WI, at 1050PM it looks like Dems may take at least 2 of the recall seats. They need to win 3 seats to take control of the WI senate. If republicans hold 4 or 5 of the 6 WI senate recall elections the Dems will be involved in an epic and cdostly defeat. Two dems will be under the gun in next week’s recall elections, with one of them.
At this writing the only republican to lose was Kapanke, who was involved in a marriage/sexual fidelity issue. Consequently his loss was expected.
Which candidate among the Republicans do you believe can cut it as president? I mean really cut it as a national leader. All I see is milk toast. Not an exceptional leader among them. And Perry certainly isn’t the answer. The guy is pure blowhard. I know people who know him and he’s not their pick. These are Dallas people.
Clinton could easily knock off Obama at this point. Obama might very well withdraw to avoid a defeat.
Clinton would pick up a large share of independent voters. And there’s no way that the majority of the black voters would support a Republican. They might not vote, but that’s about all.
Obama is very vulnerable to a primary defeat. Not as vulnerable, though, in the final election against whichever Republican wins the primary. He will be running a well financed campaign against a Republican pony that has to get up to speed quickly, both financially and with viable non-bullshit ideas.
Jack, I would say that buff is right. London and the UK in general have serious problems with the welfare state that the government created. The rioting in London is tied directly to beneficiaries of the welfare state and the ongoing battle to keep the funding flowing downstream to them. There is considerable writing on this matter.
What do you think is unfolding in London and now other cities in the UK? Where do you think those kids get their money?
It’s from an old joke.
You’re right. Both parties are guilty of wasting taxpayer money. However, for one of the parties, the Dems, it is their raison d’etre. And it is Obama who now calls for more spending on roads and bridges (at Davis-Bacon wage). So it is they that will bear the brunt of the scorn.
The difference being that there are important bridges to build and maintain, and that the country needs the jobs. It’s not the same thing as a bridge to nowhere at all. And by “their raison d’etre”, do you mean that the richest country in the world should maintain it’s infrastructure? Then I’ll agree with you.
Good articles on China’s healthcare system, including 1975’s ‘Barefoot Doctors’ and others into the present – apparently they’ve seen post-Mao deterioation which may be turning around.
From China Study Group –
sacrificing pharma for the common people
Final WI count this AM, republicans hold 17 Senate seats, Democrats hold 16. Republicans hold control of Senate with two democratic seats up for recall next week. One of the Dem seats is at risk.
Dems out spent repubs 2 to 1, and still couldn’t reverse the 2010 election results.
I agree about Perry – and I live in Texas. He’s been a decent Gov. but I don’t think he’s Presidential material – but then again he’s better qualified than Obama.
And really that goes to the heart of the matter. Obama is just plain incompetant. He’s making Carter look good. You ask which R would cut it? The question is which R would cut it better than Obama? That lets ‘milk toast’ easily jump the bar. You add a primary challenge or worse (for Dems) a left-wing Nadar type on the ballot (Bernie Sanders?) and even one of the crazy R’s could when like Clinton did in 1992.
Yes, I know Obama will have more money than a few countries to campaign on. He is also a outstanding campaigner and has the MSM backing him. But this isn’t 2008 when he had no track record (at all) and was a true blank slate. He HAS a record.
He can’t run on his sound fiscal running of the government. His own budget projections run unprecedented deficits as far as they go. Obama makes Bush look like a miser.
He can’t run as a antiwar candidate. (That would be hilarious) And how is the left going to take him on the campaign stump telling of his victories in Iraq, Libya, and Afghanistan. And don’t forget his cross-border raid into Pakistan to get OBL. How’s GITMO these days? On the other hand the anti-war left has basically taken a dive for the Dem President, my bet they will vote for Obama even though he’s continued every Bush initiative they were protesting when a ‘R’ was in office.
HE can’t run on his stewardship of the US economy. We are running 9+% unemployemnt and it will probably still be in the 9-10 range on election day. To quote a more successful President,”Its the economy stupid.” Remember the phrase ‘are you better off today than 4 years ago?’ That will come back with a vengence.
Even ObamaCare is floundering and the more details that come out, the worse it looks. Plus his Czars will become a running joke.
So will the ralleying cry of the Dems be ‘Four more years so we can pick supreme court justices!’ ???
I wish Hillary had won. I voted in the Dem primary for her and my wife caucused for her. First time either of us had ever done anything more than vote in the general. But in Texas the results were rigged. But Hillary is not going to primary Obama. No matter how bad it gets. Becuase tyhat would be the way one of th etruely crazy ‘R’s could get in office.
Even then I’m thinking Anyone would be better than another four years of Obama.
Islam will change
Yep, and all the news about the Walker’s reforms have been very positive when actually implemented at the school district levels. And its getting out.
Looks like Walker’s safe and the one of the Dems may lose. Plus the WI fight sucked all the oxygen out of the MSM and they missed other governors doing just about teh same. (Ohio).
Islam will change
We need an exceptional leader to tackle this mess. It’s not enough to just beat Obama.
Poor Obama is trying to use a plastic sword in a real world fight.
The situation is not looking good for the nation.
The MSNBC crowd looked a bit sick last night.
MG, MSNBC was the new group to which I eventually switched to get the latest info. At times they were confidentally arrogant and then accepting. I turned R Maddow off before she went too far.
Epic defeat, and as Buff point out took all the oxygen out of the MSM. Libs put all their eggs n the WI basket, and they lost. They were the ones suggesting WI would be the bell weather for 2012. Dunno, but if they are correct, its going to get ugly for them.
Better the unknown than the incompetant I do know. YMMV…
Islam will change
1. Santa does live at teh North Pole last time I checked…
2. Stalin was a communist as was Mao, the two greatest mass murderers in history.
3. Perry may not be the ‘Messiah’ that was Obama in ’08, but he looks a LOT better than Obama ’12.
4. Heck, even Bachman’s starting to look capable of jumping the Obama ’12 bar. Its very low.
You obviously haven’t been paying attention to what’s going on in London.
MG – thanks for the links!
Islam will chnage
As the S&P pointed out, we are running out of otehr people’s money. Some voters are starting to realize that. Looks like WI is leading the way…
Islam will change
MG said: “Clinton could easily knock off Obama at this point.” and Buff believes HC would also be better than Obama, but that is also based upon the perception that she would be significantly different than Obama. I do not!
They have the same educational and political, far left liberal backgrounds. She might be a better leader than Obama, but the evidence is very weak on that. We should still have had a similar Health Care bill if she had been elected, and that was the catalyst behind the tea Party’s focus. Her stimulus would have been similar to Obama’s. So then and now I am unconvinced she would be superior to a conservative. Any of them.
Even thought you guys feel the difference is in leadership, I, and many other conservatives feel the problem is the liberal policies.
What is needed is a change in direction for economic policy. Only a conservative can bring that. Another liberal will just adjust the existing failed policies. More of the same is NOT THE ECONOMIC ANSWER!
The Republican candidates are weak. None of them offer any greatness. This is a second tier group of candidates. It appears that the Republican Party doesn’t really want the presidency on this election cycle.
Hillary Clinton would have a stronger executive team if she is elected president. That’s as important as anything else right now. Obama’s team is lost.
The problem is that Obama is still likely to win the general election over any of the current Republican candidates. This weak leader may serve in office until 2017. The nation can’t survive that. This sitting president doesn’t have what it takes to lead the government or the nation out of the economic hole that exists.
I know that you hate the new healthcare law. My opinion is that the United States of America should have adopted universal healthcare basic coverage for all citizens decades ago as was once seriously considered. We should have ended the problem of basic healthcare coverage and moved on to bigger issues.
The new healthcare law, in light of the massive continuing campaign against it, is likely to put a drag on the U.S. economy as many businesses are expected to opt out and unload their employees’ healthcare coverage, forcing workers into the government controlled exchanges. By 2014, it appears that businesses are expected to hire fewer full time workers while increasing the number of part time workers, which is a legally supported scam to avoid payment of benefits. In essence, the new healthcare law was put in place at the wrong time in history. It is likely to cause a major economic hit at the wrong time. But that doesn’t mean that there has been any serious attempt to address overall healthcare costs to citizens and residents of the United States.
Now, as for the rest of the Republican chatter, the simple truth is that federal budget outlays increase during a major recession without any consideration of enacting stand alone government stimulus bills. This garbage that Obama created the much larger federal budget deficits is nonsense for the most part. Obama pushed for increases in Fedeal outlays by deparment and agency just as most sitting presidents would have done. McCain would have pushed for a stimulus bill as well. So, the Republicans are faking it. I’ve read all of their pro growth and job proposals. Not much there.
The deficits exist because multiple Congresses have put the United States on an unsustainable fiscal path and that process began long ago. Neither group of Congressional members has a realistic plan for reducing deficit expenditures without causing plenty of economic harm. The Republicans are hell bent on dumping much of the cost reduction load on poor individuals and families as well as elderly citizens. That’s bullshit. They need a better plan, one that includes changes in the U.S. tax code necessary to increase tax revenues.
Neither the Republicans nor the Democrats are yet ready to publicly tackle U.S. trade policy which is a huge driver of lost employment and industrial debasing. It appears that will come into play after the next major recession or economic crash.
The Republicans should adopt some of the recommendations in other deficit reductions plans including those proposed by Democrats. There are good ideas in the other plans. The Republicans do not have the magic answers for everything.
I am thankful to be an independent voter.
There has always been plenty of money to maintain the infrastructure. The problem is the most state governments were controled by Democrats who plundered the money on social agenda’s.
State’s control the infrastructure. The federal government has regulatory and military requirements in the maintance and building of infrsatructure, but are not the driving force in new construction.
Do a comparison of state infrastructure that have had long term Republican control vs. Democratic control as the conversation comes to end quickly.
I know alot of people in Wisconsin and have some family there. I figured they would not be foolish enough to let the Union and Marxist Machine hamper the progress that has been made there.
I think there are two recall elections for Democrats next week, and from what I hear. one of them is gonna get the axe as well.
At least there is a bit of good news in all the madness, and maybe this is a signal to what will happend in 2012. Let’s Hope!
That is all they got from a $31 million political war? That money is now…poof.
If they had captured three or four seats…maybe. But only two doesn’t make financial sense to me. And they may lose one next week. If that happens, what will be the gain?