ARR! "dramatic action" ahoy :P
January 11, 2009 9:41 AM Subscribe
President Obama's plan for American Recovery and Reinvestment [pdf] might be thought of as TARP round two [1,2] -- instead of hiding the bodies, this one's preparing the ground for a big tent or the economic equivalent of war. There are critics and detractors (cramdown nation ;) left and right, natch, but also conservative supporters and progressive defenders to save or create three four million jobs; hooray!
...then there's the question of how to pay for it all [entitlements, ORLY?] -- of course it pays for itself thru the (one) wonders of self-financing! like a key difference in my mind between the current situation and depression-era US or 'lost decade' Japan is reliance on external creditors to finance deficits; the dog isn't barking yet, so to speak...
[personally i'm eagerly awaiting the obama corps and a (borked, esp if jerked) military/civil space elevator :]
...then there's the question of how to pay for it all [entitlements, ORLY?] -- of course it pays for itself thru the (one) wonders of self-financing! like a key difference in my mind between the current situation and depression-era US or 'lost decade' Japan is reliance on external creditors to finance deficits; the dog isn't barking yet, so to speak...
[personally i'm eagerly awaiting the obama corps and a (borked, esp if jerked) military/civil space elevator :]
I call it the GWOE -- Global War on the Economy.
I'm a committed Keynesian, so wahey. Bring on the Supertrains, Wonderwoman Airplanes, Ubiquitous Tesla-esque wireless AC transmission towers, Miracle Batteries, Free Health Diagnostic stations, Super Schools, etc etc.
Too much of today's $3T++ Federal budget is going towards consumption -- military make-work ($800B/yr) and a hodge-podge and largely unresponsive Medicare system ($600B).
This decade has shovelled about half a trillion dollars of borrowed money into an unproductive hole in the ground in the mideast (thanks, Ralph!) and now wonders why the economy is going to pot.
As for the "external creditors" problem, there really isn't one. Wage inflation is our friend, the true rising tide that lifts all boats (but savers, but screw them since 'saver' is a synonym for 'rentier' these days).
The 1970s were better than the 1930s. . .
posted by troy at 10:13 AM on January 11, 2009 [4 favorites]
I'm a committed Keynesian, so wahey. Bring on the Supertrains, Wonderwoman Airplanes, Ubiquitous Tesla-esque wireless AC transmission towers, Miracle Batteries, Free Health Diagnostic stations, Super Schools, etc etc.
Too much of today's $3T++ Federal budget is going towards consumption -- military make-work ($800B/yr) and a hodge-podge and largely unresponsive Medicare system ($600B).
This decade has shovelled about half a trillion dollars of borrowed money into an unproductive hole in the ground in the mideast (thanks, Ralph!) and now wonders why the economy is going to pot.
As for the "external creditors" problem, there really isn't one. Wage inflation is our friend, the true rising tide that lifts all boats (but savers, but screw them since 'saver' is a synonym for 'rentier' these days).
The 1970s were better than the 1930s. . .
posted by troy at 10:13 AM on January 11, 2009 [4 favorites]
Just reading this stuff makes me more and more angry.
Let's be realistic here - the money was all stolen from us by the rich. For years and years they acquired more risk in exchange for money, which they kept. When they finally had to pay for the risk, WHOOPS, it turned out the last twenty years of brokerage company profits were completely fraudulent.
Are they going to have to pay it back? No. They're simply going to print more money to make up for it, which will make the hyperrich simply very rich, and make your average guy with some savings like me worth almost nothing.
If I stole a $1000 ring, I'd go to jail for years for grand larceny. The bailout is like the rich taking $5,000 to $10,000 from each and every American. But no one's going to jail except Mr. Ponzi - who would still be doing it if he hadn't had a moment of weakness.
posted by lupus_yonderboy at 10:19 AM on January 11, 2009 [3 favorites]
Let's be realistic here - the money was all stolen from us by the rich. For years and years they acquired more risk in exchange for money, which they kept. When they finally had to pay for the risk, WHOOPS, it turned out the last twenty years of brokerage company profits were completely fraudulent.
Are they going to have to pay it back? No. They're simply going to print more money to make up for it, which will make the hyperrich simply very rich, and make your average guy with some savings like me worth almost nothing.
If I stole a $1000 ring, I'd go to jail for years for grand larceny. The bailout is like the rich taking $5,000 to $10,000 from each and every American. But no one's going to jail except Mr. Ponzi - who would still be doing it if he hadn't had a moment of weakness.
posted by lupus_yonderboy at 10:19 AM on January 11, 2009 [3 favorites]
Krugman this morning (on his NYTimes blog)
"Still picking over the Romer/Bernstein official evaluation of the Obama economic plan. Again, kudos to the team for producing such a clear, honest assessment. But the more I look at the report, the more I wonder why anyone in the Obama team thinks the plan is adequate."
posted by Auden at 10:20 AM on January 11, 2009
"Still picking over the Romer/Bernstein official evaluation of the Obama economic plan. Again, kudos to the team for producing such a clear, honest assessment. But the more I look at the report, the more I wonder why anyone in the Obama team thinks the plan is adequate."
posted by Auden at 10:20 AM on January 11, 2009
Meanwhile, the headline for this Huffpo hosted AP story says everything you need to know about the the official line of the soon-to-be-opposition party:
Republicans Suddenly Deficit Hawks As Obama Enters Office
posted by George_Spiggott at 10:22 AM on January 11, 2009 [1 favorite]
Republicans Suddenly Deficit Hawks As Obama Enters Office
posted by George_Spiggott at 10:22 AM on January 11, 2009 [1 favorite]
But the more I look at the report, the more I wonder why anyone in the Obama team thinks the plan is adequate.
Nate Silver has a theory on why Obama's economic team put the plan together the way they did: Obama's Price Is Right Negotiation Strategy?
posted by synaesthetichaze at 10:38 AM on January 11, 2009 [2 favorites]
Nate Silver has a theory on why Obama's economic team put the plan together the way they did: Obama's Price Is Right Negotiation Strategy?
posted by synaesthetichaze at 10:38 AM on January 11, 2009 [2 favorites]
The bailout is like the rich taking $5,000 to $10,000 from each and every American
Since the wealthy pay the bulk of the taxes in this country -- the middle-class portion's annual tax burden pretty much matches the value-add they get from gov't (while the 'lucky-ducky' poor are getting what amounts to varying degrees of free rides) -- the various bailouts are taking money from all tax-paying wealth-owners and redistributing it into the system. It is true that this money will end up in the pockets of those with the biggest maws latched onto the system -- Wall Street, real estate investors, the health industry, the military-industrial complex -- which unfortunately are not hotbeds of wealth creation but function more like rentiers in the US economy.
Invest accordingly, LOL.
posted by troy at 10:50 AM on January 11, 2009
Since the wealthy pay the bulk of the taxes in this country -- the middle-class portion's annual tax burden pretty much matches the value-add they get from gov't (while the 'lucky-ducky' poor are getting what amounts to varying degrees of free rides) -- the various bailouts are taking money from all tax-paying wealth-owners and redistributing it into the system. It is true that this money will end up in the pockets of those with the biggest maws latched onto the system -- Wall Street, real estate investors, the health industry, the military-industrial complex -- which unfortunately are not hotbeds of wealth creation but function more like rentiers in the US economy.
Invest accordingly, LOL.
posted by troy at 10:50 AM on January 11, 2009
Uh, I kind of wanted to bask in ignorant hope for a while longer. Specifics defeat that goal.
posted by BrotherCaine at 10:51 AM on January 11, 2009 [4 favorites]
posted by BrotherCaine at 10:51 AM on January 11, 2009 [4 favorites]
Christina Romer talks about the Stimulus Plan on Youtube
posted by delmoi at 10:56 AM on January 11, 2009 [1 favorite]
posted by delmoi at 10:56 AM on January 11, 2009 [1 favorite]
Oh, I was looking for this chart which shows that the economic stimulus proposed isn't actually enough. So if they know that, why are they proposing such a low number? They can't be stupid enough to think getting lots of republican votes is going to provide them any coverage, after all, bush got plenty of democratic votes on the Iraq war, and that didn't help his poll numbers.
So I'm assuming either they'll get the numbers up, or they'll add more stimulus later, perhaps as a regular budget proposal. The thing about regular budgets is that they can't be filibustered.
posted by delmoi at 11:11 AM on January 11, 2009
So I'm assuming either they'll get the numbers up, or they'll add more stimulus later, perhaps as a regular budget proposal. The thing about regular budgets is that they can't be filibustered.
posted by delmoi at 11:11 AM on January 11, 2009
Sax Romer on Youtube.
That's about all I can add to this. Also, crossed-fingers.
posted by wemayfreeze at 11:12 AM on January 11, 2009
That's about all I can add to this. Also, crossed-fingers.
posted by wemayfreeze at 11:12 AM on January 11, 2009
I'm pretty sure he's low-balling the size of the needed stimulus (and making sure to hedge his statements to temper expectations that the initial scope of the plan will be enough to do the trick) to make the proposal more politically palatable. If the stimulus proposal as finally adopted offers mechanisms for reevaluating the efficacy of the program and expanding its scope as needed, it's a good bet those mechanisms will be used. So hold off on judging too quickly.
They can't be stupid enough to think getting lots of republican votes is going to provide them any coverage, after all, bush got plenty of democratic votes on the Iraq war, and that didn't help his poll numbers.
It's not about getting the poll numbers. It's about being able to work with others in congress who ultimately have to provide the votes. Even a lot of Democrats aren't willing to support a stimulus package that's too expansive or that's perceived as non-market friendly, because our whole political culture now tilts so lopsidedly rightward.
There's a huge gap between what works as policy and what works as politics, and the biggest challenge of any elected official whether they understand the real policy needs or not is finding a workable way to get the policy-making muscle they need. Bush lucked out. After 9-11, virtually everyone including the public, the judiciary, congress and the press gave him the benefit of the doubt as he and Cheney arbitrarily expanded their policy-making power.
It's ironic really: Bush got a free ride for at least five years during which even many self-identified liberals argued passionately for moderation in attacking his policies, as he steamrolled over every other branch of government and countless historical precedents. Obama hasn't even assumed office yet and he's catching all hell for proposals that aren't even under consideration in congress yet, and members of his own party like Feinstein are already pulling immature little power play stunts.
If the stimulus package is structured properly, the new administration will have all the muscle it needs to modify the program and expand its scope as the economic reality changes. That's what counts.
posted by saulgoodman at 11:17 AM on January 11, 2009 [1 favorite]
They can't be stupid enough to think getting lots of republican votes is going to provide them any coverage, after all, bush got plenty of democratic votes on the Iraq war, and that didn't help his poll numbers.
It's not about getting the poll numbers. It's about being able to work with others in congress who ultimately have to provide the votes. Even a lot of Democrats aren't willing to support a stimulus package that's too expansive or that's perceived as non-market friendly, because our whole political culture now tilts so lopsidedly rightward.
There's a huge gap between what works as policy and what works as politics, and the biggest challenge of any elected official whether they understand the real policy needs or not is finding a workable way to get the policy-making muscle they need. Bush lucked out. After 9-11, virtually everyone including the public, the judiciary, congress and the press gave him the benefit of the doubt as he and Cheney arbitrarily expanded their policy-making power.
It's ironic really: Bush got a free ride for at least five years during which even many self-identified liberals argued passionately for moderation in attacking his policies, as he steamrolled over every other branch of government and countless historical precedents. Obama hasn't even assumed office yet and he's catching all hell for proposals that aren't even under consideration in congress yet, and members of his own party like Feinstein are already pulling immature little power play stunts.
If the stimulus package is structured properly, the new administration will have all the muscle it needs to modify the program and expand its scope as the economic reality changes. That's what counts.
posted by saulgoodman at 11:17 AM on January 11, 2009 [1 favorite]
I give the supposed honeymoon exactly one month, if that. After that, the ideologues will find their voices, aided by the 24-hour need to feed shouting-head tv, and everything descends into partisanship on a level that makes anything that's gone before look like a Lutheran Singles mixer. Any possible solutions will be frozen and the recession will start to look more and more like a depression in many areas.
No. I am not an optimist.
posted by Thorzdad at 11:30 AM on January 11, 2009 [4 favorites]
No. I am not an optimist.
posted by Thorzdad at 11:30 AM on January 11, 2009 [4 favorites]
The common interpretation of the New Deal–and you’re hearing it bandied about a lot these days–is that the New Deal didn’t resolve the depression, the war did.
I disagree with this misleading claim from toward the end of the "economic equivalent of war" link. This IMO is a common revisionist interpretation, one that's become increasingly prevalent in the years since the Reagan era. But even as recently as when I studied the Great Depression era in middle school and early high school, the accepted interpretation was that the New Deal pulled us out of the Depression and WWII led us to unprecedented new levels of prosperity. That's not an insignificant difference of interpretation.
In any case, war obviously isn't such an effective wealth and prosperity generator anymore. We've had at least two wars going for nearly a decade now, and despite all that "economic stimulus," here we are today.
posted by saulgoodman at 11:34 AM on January 11, 2009 [1 favorite]
I disagree with this misleading claim from toward the end of the "economic equivalent of war" link. This IMO is a common revisionist interpretation, one that's become increasingly prevalent in the years since the Reagan era. But even as recently as when I studied the Great Depression era in middle school and early high school, the accepted interpretation was that the New Deal pulled us out of the Depression and WWII led us to unprecedented new levels of prosperity. That's not an insignificant difference of interpretation.
In any case, war obviously isn't such an effective wealth and prosperity generator anymore. We've had at least two wars going for nearly a decade now, and despite all that "economic stimulus," here we are today.
posted by saulgoodman at 11:34 AM on January 11, 2009 [1 favorite]
I don't know dude those Lutherans can get fired up.
posted by synaesthetichaze at 11:35 AM on January 11, 2009
posted by synaesthetichaze at 11:35 AM on January 11, 2009
Oh shit, I just realized my joke only works for Methodists.
posted by synaesthetichaze at 11:36 AM on January 11, 2009
posted by synaesthetichaze at 11:36 AM on January 11, 2009
demoi: I think that the analysis of the impact of that chart on congress is right. I'm sure that a quiet request has gone out to create a plot of $Spent_on_stim vs %Unemployed_Q3_2010. In the "place yourself in a congressthing's shoes" game my first thought was "how much to get to 6%? 6.5%?"
posted by a robot made out of meat at 11:38 AM on January 11, 2009
posted by a robot made out of meat at 11:38 AM on January 11, 2009
if we willingly participate in a capitalist system, is it ok to complain that wealthy people behave as they have for thousands of years and profit off of the poor? we're all trying to reach middle ground sure. but its kind of obvious that when the elite rich can abuse power to maintain their lifestyle, they will. hopefully obama will make it a little harder for these bastards to do so.
posted by johnferg99 at 12:11 PM on January 11, 2009
posted by johnferg99 at 12:11 PM on January 11, 2009
the middle-class portion's annual tax burden pretty much matches the value-add they get from gov't (while the 'lucky-ducky' poor are getting what amounts to varying degrees of free rides)
You're missing the trillions of dollars stolen from the government and put into the pockets of the rich in your calculation there, young man.
Just looking at the military industrial complex alone, you're forced to include that at least 20% and perhaps at much as a third of that spending is directly stolen by collusion between current and former Pentagon members.
What about the trillions for the bailout? None of that goes to the poor or middle classes.
What about the billions spent every year hunting down and emprisoning poor black guys selling marijuana? That money isn't going into my pocket either.
To put it another way, as a middle class person in a Social Democracy, you pay slightly more taxes, but get vastly greater services from the government - and as an additional bonus, these governments are also consistently risk averse (because they actually see government as a good thing, not something to be destroyed) so you have the advantage that your banks are probably doing a lot better than ours, too.
Until you've lived in a place where there's a safety net, where you can just walk into a government office and say, "I'm broke, help me" or a doctor's office and say, "I'm sick, help me", you really don't understand how close to the edge Americans live. I have friends who haven't been able to get a decent full-time job in years - and these are well-educated people with decent resumés who live in tiny apartments way out in Queens, in constant fear of getting sick. doing part-time jobs or selling handicrafts or cleaning houses. Their fear buttons are constantly being pressed, I have provided a safety net for quite a few of them but...
And yet in most social democracies, there doesn't seem to be any more waste of assistance money than here. Certainly, the wastage is done a hundred dollars at a time, not a trillion dollars at a time.
posted by lupus_yonderboy at 12:36 PM on January 11, 2009 [4 favorites]
You're missing the trillions of dollars stolen from the government and put into the pockets of the rich in your calculation there, young man.
Just looking at the military industrial complex alone, you're forced to include that at least 20% and perhaps at much as a third of that spending is directly stolen by collusion between current and former Pentagon members.
What about the trillions for the bailout? None of that goes to the poor or middle classes.
What about the billions spent every year hunting down and emprisoning poor black guys selling marijuana? That money isn't going into my pocket either.
To put it another way, as a middle class person in a Social Democracy, you pay slightly more taxes, but get vastly greater services from the government - and as an additional bonus, these governments are also consistently risk averse (because they actually see government as a good thing, not something to be destroyed) so you have the advantage that your banks are probably doing a lot better than ours, too.
Until you've lived in a place where there's a safety net, where you can just walk into a government office and say, "I'm broke, help me" or a doctor's office and say, "I'm sick, help me", you really don't understand how close to the edge Americans live. I have friends who haven't been able to get a decent full-time job in years - and these are well-educated people with decent resumés who live in tiny apartments way out in Queens, in constant fear of getting sick. doing part-time jobs or selling handicrafts or cleaning houses. Their fear buttons are constantly being pressed, I have provided a safety net for quite a few of them but...
And yet in most social democracies, there doesn't seem to be any more waste of assistance money than here. Certainly, the wastage is done a hundred dollars at a time, not a trillion dollars at a time.
posted by lupus_yonderboy at 12:36 PM on January 11, 2009 [4 favorites]
if we willingly participate in a capitalist system
I'm sorry, I wasn't aware I had any choice?
posted by lupus_yonderboy at 12:37 PM on January 11, 2009 [2 favorites]
I'm sorry, I wasn't aware I had any choice?
posted by lupus_yonderboy at 12:37 PM on January 11, 2009 [2 favorites]
Let's dump another trillion dollars of debt on the economy and see what happens. Like throwing gasoline on a fire and expecting to put it out. What country would be willing to fund this kind of debt given the state of the US and its incompetent economic management?
posted by diode at 1:12 PM on January 11, 2009
posted by diode at 1:12 PM on January 11, 2009
Joseph Stiglitz: Drink-driving on the US's road to recovery. The Federal Reserve is swerving all over the place: we need solutions to underlying problems, not a series of overreactions
posted by homunculus at 1:32 PM on January 11, 2009 [2 favorites]
posted by homunculus at 1:32 PM on January 11, 2009 [2 favorites]
I think these huge stimulus packages are being viewed along the lines of: if we don't act quickly, the cost will be waaaay higher. Yes, going (more) into debt sucks. But if the alternative is worse than that, then you'd be foolish not to run up the tab. Like, if you're on the verge of starvation, maybe four hours left to live, and the only way you can get some food is to charge it to Mastercard, do you forgo eating and die simply because it's the fiscally responsible thing to do? Not really a hard choice, at least for me.
posted by jamstigator at 1:54 PM on January 11, 2009
posted by jamstigator at 1:54 PM on January 11, 2009
The national debt is now 10.6 trillion, with the CBO predicting this year's deficit to add another trillion +, and this is before Obama's 0.75-1.2 trillion plan. This will put the debt at the same approximate level as GDP and about 5-6 times yearly revenue. A household analogy would be a household income of $25,000 and credit card debt of $130,000. And the business you work for only clears $130,000 a year. Obama's solution? Put another 10 grand on the credit card and give it to your boss in the hopes that you'll get a big enough raise to solve your problems.
posted by 445supermag at 2:01 PM on January 11, 2009 [1 favorite]
posted by 445supermag at 2:01 PM on January 11, 2009 [1 favorite]
There are so many details do this economy thing that I don't understand. All I can think is "More jobs? Hooray!"
posted by debbie_ann at 2:06 PM on January 11, 2009
posted by debbie_ann at 2:06 PM on January 11, 2009
Like, if you're on the verge of starvation, maybe four hours left to live,
I cannot tell you how sick I am of this sort of reasoning. We have to throw habeas corpus to the winds because we only have minutes till the terrorist kill us. We have to give away trillions to rich people because otherwise we'll starve tonight!
Fixing things like an economy takes a long time. The idea of destroying the government as a desirable goal started with Ronald Reagan - it took them 30 years to actually pull it off - it'll take us decades to fix it, if at all.
All of our problems have happened because the people who were paid enormous sums of money to protect us were completely oblivious to logic and long-term reasoning. More blind, massive panic is just going to make things worse.
In particular, giving trillions of dollars to the exact same, word-for-word, identical people who lost the money in the first place has to be the worst thing you can do!
posted by lupus_yonderboy at 2:07 PM on January 11, 2009 [1 favorite]
I cannot tell you how sick I am of this sort of reasoning. We have to throw habeas corpus to the winds because we only have minutes till the terrorist kill us. We have to give away trillions to rich people because otherwise we'll starve tonight!
Fixing things like an economy takes a long time. The idea of destroying the government as a desirable goal started with Ronald Reagan - it took them 30 years to actually pull it off - it'll take us decades to fix it, if at all.
All of our problems have happened because the people who were paid enormous sums of money to protect us were completely oblivious to logic and long-term reasoning. More blind, massive panic is just going to make things worse.
In particular, giving trillions of dollars to the exact same, word-for-word, identical people who lost the money in the first place has to be the worst thing you can do!
posted by lupus_yonderboy at 2:07 PM on January 11, 2009 [1 favorite]
I think we're going to fail this badly. There are too many Chicago-school fanatics still in power. We have an incredibly majority incompetent leadership in the Senate, and a merely somewhat incompetent leadership in the House.
We have a full court press going to "prove" that FDR caused the Great Depressions. We have a plan that allows companies that lost tons of money -- like the banks that causes this nightmare -- to write those losses off, so they're getting a tax cut.
We refuse to do anything painful. We'll bail out the banks, the auto companies -- hell, they're talking about bailing out those being foreclosed. What they're telling you is that responsibility is for suckers -- if you kept your debt in check and paid off your house, well, that was stupid!!!
So. We won't touch defense spending, we won't raise taxes, we won't fix healthcare, we'll give a bunch of money away badly, and then we'll crash and burn.
All because we want to be "bipartisan."
posted by eriko at 2:46 PM on January 11, 2009 [1 favorite]
We have a full court press going to "prove" that FDR caused the Great Depressions. We have a plan that allows companies that lost tons of money -- like the banks that causes this nightmare -- to write those losses off, so they're getting a tax cut.
We refuse to do anything painful. We'll bail out the banks, the auto companies -- hell, they're talking about bailing out those being foreclosed. What they're telling you is that responsibility is for suckers -- if you kept your debt in check and paid off your house, well, that was stupid!!!
So. We won't touch defense spending, we won't raise taxes, we won't fix healthcare, we'll give a bunch of money away badly, and then we'll crash and burn.
All because we want to be "bipartisan."
posted by eriko at 2:46 PM on January 11, 2009 [1 favorite]
How are we defining victory?
(And are house prices going to go down? I'd really like to buy a house.)
posted by IndigoJones at 2:56 PM on January 11, 2009
(And are house prices going to go down? I'd really like to buy a house.)
posted by IndigoJones at 2:56 PM on January 11, 2009
I love threads like these up in this hizzy. But even more than I love this thread, I love Christine Romer. It's like having the kindest, gentlest Keebler Elf explain policy to me.
I feel better already.
posted by Lipstick Thespian at 3:30 PM on January 11, 2009
I feel better already.
posted by Lipstick Thespian at 3:30 PM on January 11, 2009
(while the 'lucky-ducky' poor are getting what amounts to varying degrees of free rides)
Curse you Lucky Ducky!
posted by benzenedream at 3:33 PM on January 11, 2009
Curse you Lucky Ducky!
posted by benzenedream at 3:33 PM on January 11, 2009
I'm going to go with the consensus among the economists who could see this coming that we need to do as much as possible, and the worst thing would be to do too little. Admittedly, nobody really knows what "too little" means. The debt doesn't matter at this moment (it will later, though). Providing liquidity and velocity is what's needed. Obama's on the right path, but I'm a little concerned that he's being too cautious. The employment numbers don't look so much like the US Depression but the post-WWII era, but it's much more widespread.
posted by krinklyfig at 4:07 PM on January 11, 2009
posted by krinklyfig at 4:07 PM on January 11, 2009
Yeah, I think he's lowballing it so that when it becomes a christmas tree of pork, it winds up as big as he wants it to be. (ew! but no way around the size thing).
posted by Maias at 4:55 PM on January 11, 2009
posted by Maias at 4:55 PM on January 11, 2009
GD2.
posted by wallstreet1929 at 6:31 PM on January 11, 2009
posted by wallstreet1929 at 6:31 PM on January 11, 2009
The national debt is now 10.6 trillion, with the CBO predicting this year's deficit to add another trillion +, and this is before Obama's 0.75-1.2 trillion plan. This will put the debt at the same approximate level as GDP and about 5-6 times yearly revenue. A household analogy would be a household income of $25,000 and credit card debt of $130,000. And the business you work for only clears $130,000 a year. Obama's solution? Put another 10 grand on the credit card and give it to your boss in the hopes that you'll get a big enough raise to solve your problems.
Except for the part where you can borrow money at 3% APR and are immortal. Imagine if two families each making $25k. If one family can borrow money at 3%, and the other at 12%. The first could borrow $130k and the interest would only be about $4k a year. On the other hand, the other family could only borrow about $33k.
It's the cost of the payments, not the actual debt that determines what is and isn't feasible. If the second family tried to borrow $130k, their payments would be $15k a year. Almost half their income. That's probably untenable. But that kind of debt load isn't a problem for a government or other institution.
posted by delmoi at 6:39 PM on January 11, 2009 [4 favorites]
Except for the part where you can borrow money at 3% APR and are immortal. Imagine if two families each making $25k. If one family can borrow money at 3%, and the other at 12%. The first could borrow $130k and the interest would only be about $4k a year. On the other hand, the other family could only borrow about $33k.
It's the cost of the payments, not the actual debt that determines what is and isn't feasible. If the second family tried to borrow $130k, their payments would be $15k a year. Almost half their income. That's probably untenable. But that kind of debt load isn't a problem for a government or other institution.
posted by delmoi at 6:39 PM on January 11, 2009 [4 favorites]
What delmoi said. And the US debt, while troublesome, isn't even close to the top 20 when viewed in terms of GDP to debt ratio. (Although as you can see here, we've only got most of Europe (including France, Germany and Italy), Japan, large portions of the Middle East, and Canada ahead of us, so I guess we can't afford to get too cocky.
posted by saulgoodman at 6:56 PM on January 11, 2009 [1 favorite]
posted by saulgoodman at 6:56 PM on January 11, 2009 [1 favorite]
In particular, giving trillions of dollars to the exact same, word-for-word, identical people who lost the money in the first place has to be the worst thing you can do!
Respectfully, lupus_yonderboy, what makes you think the Obama stimulus plan is going to do that? It's stated intent is to:
posted by saulgoodman at 7:00 PM on January 11, 2009
Respectfully, lupus_yonderboy, what makes you think the Obama stimulus plan is going to do that? It's stated intent is to:
"...save or create 3 million jobs by doubling the production of alternative energy; weatherizing 75% of federal buildings and two million American homes; computerizing America’s medical records; updating thousands of schools, community colleges, and public universities; expanding broadband; and investing in science, research, and technology."Please point me to the parts about giving even more free money to big healthy banks so they can buy up smaller struggling ones.
posted by saulgoodman at 7:00 PM on January 11, 2009
It's the cost of the payments, not the actual debt that determines what is and isn't feasible.
Which is PRECISELY how mortgage brokers sold subprime and option-ARM mortgages to home buyers to induce them to buy a bigger home than they could actually afford. "Hey, don't worry! In 3 years when the payment resets, the house will be worth more than what you paid for it, so you can sell it and make money!"
What scares me is THAT is precisely what many are saying is the solution to our economic problems. "China and Japan will buy our debt and keep our interest rate low! But in a few years, even if they stop, our economy will have recovered, so it's okay! Run massive deficits to restart the economy!"
The problem is: we have no guarantee whatsoever that our economy will recover in a couple of years. The scary thing is: because most of the job growth in the last decade in this country has come from retail, construction, and finance, there's a pretty good chance that our economy won't recover anytime soon.
Don't get me wrong; I think that government stimulus is the answer. But my fear is that it might be answering the wrong question (which is, how to get out of this funk using short-term, presumptuous strategies).
posted by SeizeTheDay at 7:16 PM on January 11, 2009
Which is PRECISELY how mortgage brokers sold subprime and option-ARM mortgages to home buyers to induce them to buy a bigger home than they could actually afford. "Hey, don't worry! In 3 years when the payment resets, the house will be worth more than what you paid for it, so you can sell it and make money!"
What scares me is THAT is precisely what many are saying is the solution to our economic problems. "China and Japan will buy our debt and keep our interest rate low! But in a few years, even if they stop, our economy will have recovered, so it's okay! Run massive deficits to restart the economy!"
The problem is: we have no guarantee whatsoever that our economy will recover in a couple of years. The scary thing is: because most of the job growth in the last decade in this country has come from retail, construction, and finance, there's a pretty good chance that our economy won't recover anytime soon.
Don't get me wrong; I think that government stimulus is the answer. But my fear is that it might be answering the wrong question (which is, how to get out of this funk using short-term, presumptuous strategies).
posted by SeizeTheDay at 7:16 PM on January 11, 2009
SeizeTheDay: Well, I think the idea is to use the short-term stimulus to make investments in exactly the kind of infrastructure development projects that could make a sustainable long-term economic recovery possible. Just because the plan has a short-term upshot doesn't mean it can't also have long-term benefits--in fact, it has to have both. The trick will be to invest in projects that will build up America's economic base again. That's the point of a stimulus plan that invests in things like alternative energy technology (the point being to establish America's leadership in that industry), education, healthcare, etc., that will help to make America more competitive in the future.
posted by saulgoodman at 7:30 PM on January 11, 2009
posted by saulgoodman at 7:30 PM on January 11, 2009
Please point me to the parts about giving even more free money to big healthy banks so they can buy up smaller struggling ones.
That's not what I said.
Someone: "We had to do a bailout in a hurry because the sky would fall."
Me: "We should have taken the time to work it out. In particular, simply handing a trillion bucks to the people who did it was definitely the wrong solution."
I'm sure Obama's stimulus plan will be better worked out - how could it be worse? But we're starting out with a trillion simply pissed away before we start.
There is no question in my mind that most of the Wall Street bonus money that was given out, not just in 2008 but for the last decade, was fraudulently attained - and I mean that in the literal, criminal fraud basis. None of these companies was actually solvent; no one was doing the due diligence; people were simply acquiring risk and doing nothing to evaluate and hedge it.
I'm not arguing against a stimulus plan - but who's going to pay for it, when we're starting with a trillion vanished? Mister Mambo isn't going to roll back those tax cuts on the rich, we're expanding the war in Afghanistan, we won't see the war in Iraq cut down any time soon.
Any just settlement of this would start with a claw-back of all the trillions stolen from the stockholders and taxpayers by corrupt management.
posted by lupus_yonderboy at 7:52 PM on January 11, 2009
That's not what I said.
Someone: "We had to do a bailout in a hurry because the sky would fall."
Me: "We should have taken the time to work it out. In particular, simply handing a trillion bucks to the people who did it was definitely the wrong solution."
I'm sure Obama's stimulus plan will be better worked out - how could it be worse? But we're starting out with a trillion simply pissed away before we start.
There is no question in my mind that most of the Wall Street bonus money that was given out, not just in 2008 but for the last decade, was fraudulently attained - and I mean that in the literal, criminal fraud basis. None of these companies was actually solvent; no one was doing the due diligence; people were simply acquiring risk and doing nothing to evaluate and hedge it.
I'm not arguing against a stimulus plan - but who's going to pay for it, when we're starting with a trillion vanished? Mister Mambo isn't going to roll back those tax cuts on the rich, we're expanding the war in Afghanistan, we won't see the war in Iraq cut down any time soon.
Any just settlement of this would start with a claw-back of all the trillions stolen from the stockholders and taxpayers by corrupt management.
posted by lupus_yonderboy at 7:52 PM on January 11, 2009
saul, if these programs were so fantastic, they'd have been implemented (or at least discussed) by now. I've read the Obama report. It says 3-4 million jobs saved or created, not simply created. And we lost 2.6 million jobs in ONE year, 2008.
And if you think about Wall Street jobs (which pay $100-1000K) and are now being dropped in droves, they serve as an anti-stimulus. Take away one Wall Street job, and 2, 3, 4, 5 normal jobs go with it (because person "x" making $100K spends 95-99% of income, thus putting $95K back into the economy). Take a look at NY Governor Paterson's State of the State and you'll see/hear the fear in him.
Meanwhile Krugman alludes to Goldman Sachs' report claiming that shovel-ready stimulus is in the "10s of billions". Not even close to being good enough to stimulate anything. I'll tell you why it's like that: most states until now were on the brink of bankruptcy; this crisis is only pushing them over the edge. Look at California, Pennsylvania, Michigan, North Carolina (off the top of my head).
Obama never had an energy plan. He claimed that "windfall profits taxes" would save us. Obama never had an economic plan. He's filling his cabinet with ex-Clinton junkies who led us to many of these problems, including Summers (whose opinion was critical in the lack of regulation of derivatives), and ex-Secretary of Treasury Rubin (who just disgracefully stepped down from Citi's Board) who was critical in creating a tax break that helped stoke the size of the housing bubble. And now Obama is pushing MORE tax breaks and credits (which only help people get rid of debt, and won't help keep people employed or educated).
Obama needs long-term education, energy, and infrastructure programs which simply don't exist right now, will take years to implement, and won't prevent a deepening recession. I'd actually make the argument right now that being very, very careful about deficit spending will artificially keep mortgage rates down (due to low inflation and lack of dollar devaluation), which will stabilize the middle class. But that's just another theory which hasn't been tested.
posted by SeizeTheDay at 8:07 PM on January 11, 2009 [1 favorite]
And if you think about Wall Street jobs (which pay $100-1000K) and are now being dropped in droves, they serve as an anti-stimulus. Take away one Wall Street job, and 2, 3, 4, 5 normal jobs go with it (because person "x" making $100K spends 95-99% of income, thus putting $95K back into the economy). Take a look at NY Governor Paterson's State of the State and you'll see/hear the fear in him.
Meanwhile Krugman alludes to Goldman Sachs' report claiming that shovel-ready stimulus is in the "10s of billions". Not even close to being good enough to stimulate anything. I'll tell you why it's like that: most states until now were on the brink of bankruptcy; this crisis is only pushing them over the edge. Look at California, Pennsylvania, Michigan, North Carolina (off the top of my head).
Obama never had an energy plan. He claimed that "windfall profits taxes" would save us. Obama never had an economic plan. He's filling his cabinet with ex-Clinton junkies who led us to many of these problems, including Summers (whose opinion was critical in the lack of regulation of derivatives), and ex-Secretary of Treasury Rubin (who just disgracefully stepped down from Citi's Board) who was critical in creating a tax break that helped stoke the size of the housing bubble. And now Obama is pushing MORE tax breaks and credits (which only help people get rid of debt, and won't help keep people employed or educated).
Obama needs long-term education, energy, and infrastructure programs which simply don't exist right now, will take years to implement, and won't prevent a deepening recession. I'd actually make the argument right now that being very, very careful about deficit spending will artificially keep mortgage rates down (due to low inflation and lack of dollar devaluation), which will stabilize the middle class. But that's just another theory which hasn't been tested.
posted by SeizeTheDay at 8:07 PM on January 11, 2009 [1 favorite]
Yeah, the Obama plan seems like political pandering that doesn't seem to do anything except attempt to please everyone, but in doing so pisses everyone off. It's like the theater of Bush's two tax rebates. A symbolic measure that really doesn't do squat. I was pretty excited about Obama, but now I'm much less so. Basically I think we're fucked no matter what, but I was hoping that with Obama we'd at least get kissed first.
posted by Eekacat at 8:23 PM on January 11, 2009
posted by Eekacat at 8:23 PM on January 11, 2009
The common interpretation of the New Deal–and you’re hearing it bandied about a lot these days–is that the New Deal didn’t resolve the depression, the war did.For anyone who is interested, David Sirota has two articles rebutting the current Republican talking points that FDR's New Deal made the Great Deperession worse. As usual, the Republicans making this claim either fail to cite supporting data, or cite misleading or fabricated data (such as counting people employed by the government as "unemployed" to "prove" "unemployment" became "worse" under the New Deal).
An excerpt from the first article.
For a start, New Deal intervention saved the banks. During Hoover's presidency, around 20 percent of American banks failed [...]Okay, so what about the exception, the recession of 37-38?
[FDR and Congress] established the Federal Deposit Insurance Corporation, which, as economists Milton Friedman and Anna Jacobson Schwartz wrote, was "the structural change most conducive to monetary stability since ... the Civil War." After the creation of the FDIC, bank failures almost entirely disappeared. [...]
The most important thing to know about Roosevelt's economics is that, despite claims to the contrary, the economy recovered during the New Deal. During Roosevelt's first two terms, the U.S. economy grew at average annual growth rates of 9 percent to 10 percent, with the exception of the recession year of 1937-1938...
Excepting 1937-1938, unemployment fell each year of Roosevelt's first two terms[...]
This basic fact is clear -- unless you quote only the unemployment rate for the recession year 1938 and count government employees hired under the New Deal as unemployed, which conservative commenters have taken to doing.
Well, as Paul Krugman recently explained 1937-1938 was the period Roosevelt dialed back the New Deal in the name of conservative demands that he stop spending:
By 1937 things were a lot better than they were in 1933. Then [FDR] was persuaded to balance the budget or try to and he raised taxes and cut spending and the economy went back down again and then it took an enormous public works program known as World War II to bring the economy out of the depression.The second piece mostly just runs down historical changes in unemployment numbers for comparison purposes, to try and help put things into historical perspective.
If you'll forgive me for rounding numbers because of the hour (corrections welcome) the gist of which is that the New Deal and WW2 each saw a roughly a 900 basis point change in unemployment each, for a combined improvement in the unemployment numbers of about 2200 basis points. For comparison, the "big" economic turnaround under Reagan was about 210 basis points (about1/10th as much as FDR's total).
FDR's New Deal went from the 1932 Unemployment Rate: 23.6% (12.8 million total unemployed) to the 1940 Unemployment Rate: 14.6% (8.1 million total unemployed)
FDR's WWII turnaround went from a 1941 Unemployment Rate: 9.9% (5.5 million total unemployed) to a 1944 Unemployment Rate: 1.2% (670,000 total unemployed)
In total, FDR took the country from 23.6% unemployment to 1.2%.
posted by Davenhill at 1:09 AM on January 12, 2009 [2 favorites]
lupus_yonderboy: I'm sorry if I misunderstood your comment and took your remarks out of context. I think we're basically in agreement.
Obama needs long-term education, energy, and infrastructure programs which simply don't exist right now, will take years to implement, and won't prevent a deepening recession.
SeizetheDay: That's what the proposal ostensibly aims to do. But if you think such measures are doomed to fail before they're even tried, then why do you say they're what we need, and why does the failure have anything to do with Obama's proposal?
Let me put it another way. Aren't you basically saying this: What we really need is "X," but "X" is impractical because it will take too long and won't work anyway, so Obama is going about things the wrong way by proposing "X"? If our economy collapses, it collapses totally; there'll be no minimizing the damage by being thrifty now. Being thrifty now will only prolong and deepen the collapse.
As for the matter of tax cuts, credits, etc., my understanding is that those measures will be aimed at small businesses and individual middle-class households, and let's face it, if Obama doesn't work some kind of middle class tax cuts into the package, Republican opponents will probably successfully spin the plan as more "tax and spend" fiscal policy from those nasty Big Government Dems.
posted by saulgoodman at 7:38 AM on January 12, 2009
Obama needs long-term education, energy, and infrastructure programs which simply don't exist right now, will take years to implement, and won't prevent a deepening recession.
SeizetheDay: That's what the proposal ostensibly aims to do. But if you think such measures are doomed to fail before they're even tried, then why do you say they're what we need, and why does the failure have anything to do with Obama's proposal?
Let me put it another way. Aren't you basically saying this: What we really need is "X," but "X" is impractical because it will take too long and won't work anyway, so Obama is going about things the wrong way by proposing "X"? If our economy collapses, it collapses totally; there'll be no minimizing the damage by being thrifty now. Being thrifty now will only prolong and deepen the collapse.
As for the matter of tax cuts, credits, etc., my understanding is that those measures will be aimed at small businesses and individual middle-class households, and let's face it, if Obama doesn't work some kind of middle class tax cuts into the package, Republican opponents will probably successfully spin the plan as more "tax and spend" fiscal policy from those nasty Big Government Dems.
posted by saulgoodman at 7:38 AM on January 12, 2009
saulgoodman writes "As for the matter of tax cuts, credits, etc., my understanding is that those measures will be aimed at small businesses and individual middle-class households, and let's face it, if Obama doesn't work some kind of middle class tax cuts into the package, Republican opponents will probably successfully spin the plan as more 'tax and spend' fiscal policy from those nasty Big Government Dems."
As much as the Republican Party has become the one-solution group for economic issues ("lower taxes!"), this actually does some good in a recession. Even Krugman advocates cutting or at least not raising taxes right now. Balancing the budget is what we do when we stop bleeding jobs and start seeing growth. Japan is considering forgiving some of our debt. I bet we'll see more of that sort of thing involving other nations' debt in years to come.
posted by krinklyfig at 5:43 PM on January 12, 2009 [1 favorite]
As much as the Republican Party has become the one-solution group for economic issues ("lower taxes!"), this actually does some good in a recession. Even Krugman advocates cutting or at least not raising taxes right now. Balancing the budget is what we do when we stop bleeding jobs and start seeing growth. Japan is considering forgiving some of our debt. I bet we'll see more of that sort of thing involving other nations' debt in years to come.
posted by krinklyfig at 5:43 PM on January 12, 2009 [1 favorite]
Oh, and btw, the government wants inflation so it can lower its own cost to pay back its debt. But not too much, obviously ... we probably won't see it until we start seeing growth again, unless we get stagflation. The money that's gone from the system is still far more than what we've put back into it.
posted by krinklyfig at 5:45 PM on January 12, 2009
posted by krinklyfig at 5:45 PM on January 12, 2009
for those still following along :P
posted by kliuless at 7:07 AM on January 13, 2009
- more video and discussion
- more on TARP accountability (esp since the rest of it is requested)
- more on entitlement reform as the bridge to credibility
- nate silver takes down greg mankiw on the romers' tax study (update)
- brad setser on deficit absorption
- and lemme just reemphasize steve randy waldman's post on tariffs, subsidies and investment and really all his posts on interfluidity; he is a genuine Original Thinker, the kind of which (i think) we need to solve "the significant problems we face today" as einstein sez...
posted by kliuless at 7:07 AM on January 13, 2009
Economy Made Few Gains in Bush Years: Eight-Year Period Is Weakest in Decades
posted by homunculus at 10:07 AM on January 13, 2009
posted by homunculus at 10:07 AM on January 13, 2009
also, as if on cue, china woos US...
peter orszag on entitlements and budget sustainability
lawrence summers on TARP oversight (esp since 'Push to Buy Toxic Debt Gets New Life')
oh and bernanke on 'credit easing' vs. 'quantitative easing'; i listened thru the Q&A and the only other interesting thing really (besides his admission that markets work well only under certain conditions; it's nice to know now that he wants to put those conditions back in place ;) was that 25 years ago he and (BoE governor) mervyn king were assistant professors sharing an office at MIT!
posted by kliuless at 11:56 AM on January 13, 2009
peter orszag on entitlements and budget sustainability
lawrence summers on TARP oversight (esp since 'Push to Buy Toxic Debt Gets New Life')
oh and bernanke on 'credit easing' vs. 'quantitative easing'; i listened thru the Q&A and the only other interesting thing really (besides his admission that markets work well only under certain conditions; it's nice to know now that he wants to put those conditions back in place ;) was that 25 years ago he and (BoE governor) mervyn king were assistant professors sharing an office at MIT!
posted by kliuless at 11:56 AM on January 13, 2009
Four Reasons to Oppose the Bush-Obama Request for the Rest of the $700 Billion Bailout
posted by homunculus at 11:39 PM on January 14, 2009
posted by homunculus at 11:39 PM on January 14, 2009
« Older Redefining the term "makeup artist" | PLEASE UNSUBSCRIBE ME FROM THIS LIST!!!!!!!! Newer »
This thread has been archived and is closed to new comments
WTF is wrong with this guy?! Hasn't he ever heard of "keeping expectations low"? What are they going to do if things get out of hand and he can't create these jobs?!
:-(
Why is he doing this? I really wanted to like this guy. Why can't he meet us halfway?
"In your plan, 'A Better Britain For Us', you claimed that you would build 88,000 million, billion houses a year in the Greater London area alone. In fact, you've built only three in the last fifteen years. Are you a bit disappointed with this result?"
posted by lupus_yonderboy at 10:06 AM on January 11, 2009 [2 favorites]