By James Kwak
Helene Cooper of the New York Times wrote a “news analysis” story saying that the challenge for President Obama is this:
“Is he willing to try to administer the disagreeable medicine that could help the economy mend over the long term, even if that means damaging his chances for re-election?”
The problem, she goes on to say in the next paragraph, is that the economy is in bad shape:
“The Federal Reserve’s finding on Tuesday that there is little prospect for rapid economic growth over the next two years was the latest in a summer of bad economic news.”
Now ordinarily I wouldn’t pick on the Times for something like this: it is just a newspaper, after all. But this case is a good example of right-wing talking points leaking into the mainstream media and then becoming part of the conventional wisdom, which is something that should be cut off as soon as possible.
This framing has a certain kind of narrative resonance: Is the young, “untested” leader of the free world willing to sacrifice himself for the good of the country? Is he, like Harry Potter, willing to face death to save the world from Lord Voldemort?
The problem is, it’s completely backwards. The “disagreeable medicine” Cooper suggests is budget cuts, including cuts in entitlement programs like Social Security. But that has nothing to do with the problem she presents at the beginning: slow economic growth. Anyone who is reading this blog already knows that budget cuts are contractionary in the short term. The “medicine” the economy needs now is more government spending, not less, and there’s nothing disagreeable with putting more people to work and building more stuff that people want.*
There is a somewhat valid debate about whether deficit-cutting is good in the medium and long term. There have been papers purporting to show that deficit-cutting can lead to higher economic growth, but those have confused deficit-cutting in a boom and deficit-cutting in a slump. (See Mike Konczal for a summary of that debate.) In other words, it could be a good idea to cut the deficit when the economy is strong (because then it could lower interest rates for the private sector), but not when it is weak (and certainly not when interest rates are already extremely low). A recent paper by economists at the IMF reaffirms that when you restrict your sample to episodes of deficit-cutting that are not confounded by concurrent economic conditions that the deficit-cutting is responding to, you find that deficit-cutting lowers economic growth.
So why is Helene Cooper ready to dispatch Frodo Baggins off to Mordor to toss the One Ring into Mt. Doom, when really all he needs to do is head back to the Shire and throw a huge party, putting unemployed caterers, bakers, and entertainers back to work? I think it’s because if right-wing politicians and commentators keep repeating that the deficit is hurting the economy (“job-killing deficits,” of course), then otherwise reasonable people start to believe it. See for example this priceless passage from the House Budget Resolution:
“Government at all levels is mired in debt. Mismanagement and overspending have left the nation on the brink of bankruptcy. Only recently, millions of American families saw their dreams destroyed in a financial disaster caused by misguided policies, perverse incentives, and irresponsible leadership. This crisis squandered the nation’s savings and crippled its economy.”
If you didn’t know better, reading that would make you think that the financial crisis and recession were caused by government debt.
So now we’re at the point where ordinary people are starting to believe this nonsense. And that means we need to stamp it out whenever possible.
* Arguably, tax cuts would work, too. I think that government spending is highly preferable for two reasons. First, spending is easy to undo after it is no longer necessary (or even before—see ARRA for Exhibit A), while tax cuts seem to be forever. Second, spending has a higher multiplier.
The Baseline Scenario 
Again (and again) we are faced with people who say Social Security is an “entitlement”.
By any definition of the word its is NOT an entitlement; you are not “entitled” to Social Security when you turn 65. You only receive benefits if you have contributed, and what you receive depends on how much you contributed.
This all too common error skews the discussion. SS is a retirement program and does not contibute to the deficit.
JFK is such a dump that both Moscow airports are now better looking. At the same time the USG can borrow a practically infinite amount of money at no cost for infrastructure projects.
It takes a really powerful narrative to stop Americans from trying to make their country better. Thank goodness Cantor and Boehner have found such a narrative. And that Obama agrees with it.
Apparently Mr. Wheaton does not understand that “contributing” is what “entitles” you to benefits. It is not a retirement program, it is an insurance program. People always forget that a tremendous amount of Social Security’s budget is spent of disability and survivor benefits. In other words, you pay into a compulsory insurance program and and are entitled to benefits when you can no longer work, either due to old age or disability. But, you know
I’m not sure how this thread turned into a discussion of Social Security rather than a commentary on media, but since it has I will chime in.
Social Security would probably be more efficient (“better” in some sense) if it worked more like insurance — in other words, you get it if you need it, not just by dint of having contributed. I think the number of people who would deliberately under-save in order to qualify for a meager benefit is probably small.
SS opponents seem to prefer income insurance provided by the private sector, or self-insurance (i.e. personal saving) to a government program. I find it hard to imagine a private income insurance that could beat a government insurance program, due to smaller risk pools and larger overhead (shareholders to please, you know) — basically the same arguments as for single-payer health insurance, but without the provider-side concerns (income insurance just sends people cash). It seems like this type of discussion should have been conducted in 1933, and perhaps it was. I assume that the reasons we ended up with a less efficient entitlement rather than insurance are political (parties who wanted NO program attacked the highly efficient insurance-like proposals as “rewarding the wasteful”, and proponents of some program were forced to go with the less efficient but more popular entitlement).
One reason austerity is so popular is that Obama has endorsed it. He talks about the need for govt to tighten its belt, just like families, when govt needs to stimulate to counteract family belt tightening, he talks about confidence when the main problem is lack of demand, etc., etc.
When no one is pushing back against the argument that debt will kill us all, it’s not surprising where the national conversation is going. We’re trying to fix a problem that may arise in the future while ignoring a more urgent current problem.
Yet another episode of crying Fire, Fire in Noah’s flood.
oh puhleeze – after decades of following the rule book – put a dummy in the seat – all of a sudden everyone wants the dummy to drive?
@ James,
Poor darling, no you won’t be able to save Obama from himself. After all, you can barely save yourself from yourself as it is.
Kindly reduce the partisan din.
Social Security is a social insurance program. You only receive if if you or your spouse made contributions and you meet certain conditions. One condition is living long enough to collect. Lots of people pay into the program will never collect a thing (just like you (or rather your beneficiaries) don’t collect your term life insurance if you don’t die while the policy is in effect. Also people are constantly being fooled by the life expectancy argument, another toxic conservative meme that that is constantly repeated by people who know better (Ben-Moshe, the current CEO of AIG and long time insurance executive knows better and he was repeating the variation “that there were 16 workers for every beneficiary when the program was created in 1937, now it one to 4 and life expectancy is 77” on CNBC last Friday. First, most of the stretching out of life expectancy is the result reduced infant and childhood mortality (let’s get Government out the way so we will have the freedom to catch polio, diptheria, measles, etc. once again). So in fact the national wealth was increased by having many more healthy productive workers enter the work force. The life expectancy for those who reach 65 is not much more now than it was in 1937. Finally, life expectancy means half the people reach that age and half do not. The obituaries are filled with people who have died in their forties, fifties, and sixties who have paid into social security and will never receive a dime. Likewise, illegal immigrants, many state and Goverment employees who because most of their income was exempt from social security tax will not be able to get the full, if any, benefit from their employment time subject to the social security tax.
@ engineer27 –
I believe that Social Security was not made a true insurance type system instead of a flow-through system is in part because the government would rapidly sequester most of the investible capital in the economy, choking off growth.
Do a little dance, …..
“So rather than fight for a bold jobs plan, the White House has apparently decided it’s politically wiser to continue fighting about the deficit. The idea is to keep the public focused on the deficit drama – to convince them their current economic woes have something to do with it, decry Washington’s paralysis over fixing it, and then claim victory over whatever outcome emerges from the process recently negotiated to fix it. They hope all this will distract the public’s attention from the President’s failure to do anything about continuing high unemployment and economic anemia.”
http://robertreich.org/post/8704286098
Actually, there were zero beneficiaries (retirees) for every worker when the program was created in 1937. The first retiree was Ida May Fuller of Vermont who received her first check January 31, 1940.
More importantly, no effin kidding. Any retirement program is going to have a lower ratio of payouts at the beginning than when it matures. It takes some time to get to a (reltively) steady-state where some people are being added and others are being dropped (i.e., they die). Initially you have a lot of people paying, but not many who are eligible to collect. The original Social Security planning took this into account, as well as the increase in life expectancy, which they in fact overestimated.
On the other hand they did not take into account the Baby Boom bulge or all the changes in Social Security benefits, but changes in SS taxes under Reagan addressed a large part of the resulting strain on SS finances.
Anyone who suggest that SS problems stem from changes in life expectancy or cite the worker to beneiciary ratio, however well intentioned, probably does not understand the issues.
You know, you could run the tax argument backwards and argue that if you really wanted to cut the deficit currently, the best way, the way that does the least damage to the economy, is increasing taxes on the wealthy, because those have such small multipliers.
In her article, Cooper relies on the wisdom of Charlie Black, formerly an adviser to McCain. She seems to be in line with most other journalists. They think the reliable guides to the state of the economy and economic policy are business economists, right wing traders, and Republican pundits.
I keep getting email from my high school buddy and now proud Tea Party patriot arguing that there is a much larger multiplier for tax cuts. Any pointers to real evidence, asked to those who have thought about this?
thx
Well where i’m from, we just use commen sense. You can’t chop a forest down with a herring.
Fact is you can show Americans where the truth is, but you can’t make them follow it. I see a big problem in that wise people like Delong, Krugman, Stiglitz and others explain things but few pay attention, least of all in Washington. It would seem that Washington has become allergic to the truth and enamored of lies. And what can you do about that? If you know, please inform.
‘The “medicine” the economy needs now is more government spending, not less’
She was talking about medicine for the long-run, though, right?
@Owen Owens: Could a forest be chopped down with a European Swallow wielding a coconut, then?
In all seriousness, the simple problem with the economy is that money is accumulating with the wealthy, and if the poor don’t get some soon the penalties, fees, and foreclosures will doom them to a lifetime of indebtedness. Without forgiving debts that can’t be paid (haircuts for all), without rewriting upside-down mortgages, and without injecting money were it will be spent instead of saved, the economy will continue to spiral downwards for all but the most well-off.
Ahh yes, the search for the grrail. It just might hold some keys as for an economic fix. dead men tell no tails, and they also don’t collect any debts owed them.
James Kwak blasted this one out of the ballpark, imo.
Disagreeable medicine?
Tax WALL STREET speculative transactions with a sales tax, remove the wage base limitation on FICA, increase the income tax rates on corps and individuals in high income brackets, start jailing people for insidious financial criminal fraud, aggressively move to closing down no income taxation for companies making multi-billions in net profits, ban naked short selling, reinstate Glass-Steagall, and the other things so many on this board have long-advocated.
Workers in USA are getting bent over and jammed. The poorer we find ourselves, the richer someone else gets, the very essence of the predatory capitalist system people are now rioting over.
Sometimes I wonder if the economic situation as reported by the media shows a disconnect between how external forces, such as government, are responsible for our situation and the day to day economics we experience and participate. In many ways we, the people of the United States, are the government. We elect our politicians. We, as a people, indirectly or directly reward and punish how the government spends money. For example, when the Bush tax cuts were passed, how many Americans chomped at the bit to return the refund? Granted there are individual politicians and behaviours that have contributed greatly to the situation. But, at this point it does not matter where we point fingers. We are in a global economy and need to solve this situation together.
As far as taxing the wealthy goes, at what point do we decide what constitutes as wealthy. Yes there is a wealth gap. But as I drink my latte in a coffee shop or have a Sunday off to spend with my family, does this also not constitute as wealth? Some people do not have these options and are struggling to find something to eat or a place to live. Perhaps there are some people who need two or three jobs to live. Don’t I appear more wealthy than them. Then again, there are folks who have 2 houses and 3 vehicles. They may take trips frequently. Maybe they are more wealthy than me. It does not change the economic situation or realities that we as a people, need to work together to find a way to make better use of our resources, regardless of wealth. We need to contribute to each other and the society as a whole.
Roads don’t get built and maintained by magic. When we visit the doctor or get prescriptions, our trust in medicine is not mystical. When we get food from the grocery that we afford and are safe to eat, the food does not suddenly appear on the grocery shelves. When we walk around safely, without fear of being shot, there are no fairies flying around assuring this. When we go to elementary school and get an education, there are no supernatural powers that deposit teachers and materials in the classroom. These behaviours are interconnected with economics and government. They are community actions.
When we look at government spending or cutting we need to look at how it connects with us as communities, states, and country; not just individuals. We are all interconnected. One person’s economic situation is tied to another. I think, until we look a government spending and cutting from a group perspective and as a group solution, it could be harder to dig ourselves from this one.
When a person skims off an innapropriately large income for himself, more money than a person could possibly spend, the excess money is kept out of our economy. It would surely help if someone on the left would repeatedly refer to ‘job-killing income inequality’.
@ Michelle, beautiful post, I must say. With all due respect, try conveying that to the right wingers who are pushing austerity like there is NO tomorrow.
Perhaps now is a good time for President Obama to ask for a little sacrifice from the “tea party patriots.” On the approaching tenth anniversary of September 11th, I’m reminded of those killed in the attack, over 4,500 soldiers killed since that date (not to mention the countless maimed, wounded and permanently scarred), and the trillions of dollars spent on the wars that continue to this date. Not once do I remember the President – or any other politician – asking me to contribute anything of significance to the effort. If the tea party is convinced that the current deficit is now a crisis, and if it admits that the wars have at least contributed significantly to that deficit – is it not then our patriotic duty to contribute to the payment of that debt through increased taxes?
I don’t understand why everybody here is so exercised about our present condition. The recent budget deal did nothing to harm entitlements, Obamacare may not have created a single payer system ab initio, but it has set in place the mechanisms to achieve that, and when the new gang of twelve becomes deadlocked, the supposedly mandated “cuts” will fall equally on defense on one hand and everything else on the other. And as a whole bunch of former OMB directors just pointed out, congress will have little problem getting around those “mandates” anyway.
Sounds like a great deal to me.
@the sky is not falling
I don’t think that the gang of twelve are going to be “deadlocked”….LOOK at what we’ve been dragged into in the past decade!
I think it would be safer to write up a risk management plan based on the MOST damage they could do, then add in a multiplying factor of 10 for the most morally unthinkable decision, and you’ll have a TRUE picture of their *secret* plan….
it’s very bad juju what they can do – they are consistently iniquitous – look at their records….
James, nobody reads house budget resolutions. Are you done with law school yet? Congressional “findings” (of fact or otherwise) rarely if ever relate even remotely to observable facts, much less the truth. So please don’t republish that nonsense, even to say it’s nonsense. You’ll just perpetuate it.
But note Paul Krugman’s recent blog entry, “Dismal Thoughts” that quotes Robert Reich as stating essentially that he is told by insiders that the Obama and his people don’t want to do the right thing (stimulus), but have instead chosen too do the wrong thing (cut spending) because they think that co-opting this Republican issue will be the better bet for getting him reelected. Knowingly screw the country to get reelected! If true, and sadly, I don’t find it hard to believe, how’s that for vile, cynical politics?
The last thing this country needs is more wasteful spending by government. Obama has already wasted billions $$ on so called jobs and shovel ready programs that failed to materialize. The suggestion of further tax cuts is insane too. This country needs to abolish the tax breaks that corporations; big oil, banks and special interests receive. We need to repeal the Bush era tax cuts and make the wealthy start paying their fair share instead of sacking the middle class. Lastly, we need to get out of Afghanistan and Iraq and stop the taking of young Americans’ lives and wasting trillions $$ on those unjust wars. The savings gained from the aforementioned proposals should be used to offset/ subsidize the cost of higher education for young Americans. The way the situation is now; young people are often sacked with tens of thousands $$ in student loan debt upon leaving college and the greedy banks just love sucking up the interest. These kids haven’t a chance at life because they’re already sacked with enormous debt when compared with their income. Many will not be able to get a good paying job when they leave college at a time when corporations are sitting on record profits but not hiring. And watch them use their record profits to pay their CEOs millions $$ in compensation for doing such a great job. Our government spends forty cents of every dollar on interest payment on the nation’s debt, and that figure is rising. We need to have a balanced budget instead of paying banks and overseas countries like China the interest. The banks take but they don’t give back and one day soon China will be eating our lunch, not because they stole it from us but because we gave it away.
Social Security was originally intended for retirees and widows and dependent children.Now you have every lousy dirtbag collecting SSI. It is easy just go to your Doctor complain of mood swings and bango!!!you are bi polar and you get a big fat check every month. Let’s go back to the pre-Kennedy era when these givaways were minimal. Obama gets blamed for everything but just think about my last sentence
Jamie, I have not read Harry Potter but I do know for a fact that the book called ’13 bankers’ is pretty close to fiction.
Here is why: The book is filled with fiction embedded within facts, like your post from 2 days back: “A friend who knows these things better than says that falling Treasury prices, by forcing investment banks and other borrowers in the repo market to put up more collateral, could force some institutions to deleverage.”
So now we’re at the point where you are making ordinary people believe your nonsense. The repo market has among the worst stresses in the past year….and that is because banks are stronger, BEFORE any regulation has been implemented.
The market takes care of bad apples. NOT the government.
you are entitled to your opinion. You are NOT entiteld to LIES boy.
Now boy, here is something you will surely enjoy reading. This is the most informed piece of work written in the past 4 years:
http://www.philadelphiafed.org/research-and-data/publications/working-papers/2011/
A. To call Social Security an “insurance” program makes no sense to me. Insurance companies collect “premiums,” not contributions. Insurance companies are required to hold assets in reserve. Insurance companies pay people like Mr. Kwak (MIT mathematician) beaucoup bucks—enough to qualify for a tax break for the rich— to forecast the future. Even the neophyte actuary would have seen the baby boomers ambling down the street.
B. Has anyone at MIT ever done an analysis of the programs instituted by other countries to combat similar economic circumstances or provide retirement benefits? I would be interested in learning which approaches worked best. Which combination of spending cuts, tax cuts, gov’t spending, etc. boosted lagging economies? Does the data exist? With regard to retirement benefits Chile comes to mind, as well as Galveston, TX, which opted out of Social Security before it became mandatory.
I see the peanut galary is attempting to sell differential equasions to a commen math crowd. Nothing like trying to dumb down a class so you can show off your economics talents and be the big man on campus. You will eventually get lost within your own facts and have to juggle stats until your head hurts, but soon as you feel better, feel free to return to and continue contributing your amazing information. There are all of about 3 people who actually understand your endless rambling of economic terms. You should really start a movement of your own with all that education. I mean i only made through the 6th grade myself, it was the 100 million passed down to me and my sis that keeps me goin.
@god’s work
Thanks for the link. Wish I could insert the roll eyes happy face right here…
11-26: A Quantitative Analysis of the US Housing and Mortgage Markets and the Foreclosure Crisis, by Satyajit Chatterjee and Burcu Eyigungorc
God needs to PREACH why Las Vegas, NV has 87% of it’s housing stock *underwater* ala “abstracts”….? Huh, who knew?
Too bad *economists* aren’t scientists, but then again, with banksters telling everyone else in the world what data to collect and not collect, scientists are finding themselves exponentially producing *retractions*:
http://retractionwatch.wordpress.com/
The only thing that “could lower interest rates for the private sector” is for lenders to think borrowers are less risky.
@Lil’D: see http://voices.washingtonpost.com/ezra-klein/2010/06/research_desk_whats_a_dollar_o.html for some analysis.
Here is the most important piece of real research written on the knee jerk reaction to the financial crisis:
Click to access wp11-27.pdf
Eagerly waiting for Admati to withdraw her “research” on Bank Capital!
I do roll my eyes every single time Johnson refers to Admati’s theatrics.
@ Desi Girl
“The market takes care of bad apples. NOT the government”
If only that were true – bad apples get cow’s drunk, and it seems there are more than enough in Wall Street barn’s that need milking?
BAC sells half-a-billion dollars worth of rotting loans to GSE’s, “Fannie Mae” while Fannie gets a $5.1bn line of credit.
Larry Fink from BlackRock Inc. now has ~$3.7tn under management (could have taken CEO job at BAC)
Larry Fink and Lew Ranieri create & implement MBS’s and their evovling offshoots CDS’s.
JPMC = rumors of liquidity risk for said WAMU & Bear Stearns, and gobbles both up – coincidence?
WellsFargo & Citigroup fight tooth and nail for liquidity-trapped rumored Wachovia with Uncle Sam giving the prize to WF!
BAC gets Merrill (MLIM now BLK) Lynch with government free money,… and pays premium to boot?
ML is all Cash-Cow” BAC has left, and now has it’s lunch being eaten by BLK Inc.!
Rumor that BAC has a liquidity crises – same doomsday scenario happened with BS’s,ML, Wachovia, WAMU, and CountryWide in which the peoples’ government offered cover?
Morgan Stanley is on, or in survival mode, and BAC is dead in the water (JMHO)
Ref: “Larry Finks $12Trillion Shadow”, and “The King of Wall Street: Larry Fink”
http://www.vanityfair.com/business/features/2010/04/fink-201004
http://www.senseoncents.com/2009/06/the-king-of-wall-street-larry-fink/
Thankyou James and Simon
James:
Please explain the magical mechanism by which tax cuts would “work” to solve anything other than right-wing paranoia. Remember that your answer should also be an explanation of why the Bush tax cuts have not generated any jobs.
Here’s an example of why giving multinational corporations money is not an answer to anything other than executive greed: The tax repatriation discussion. Who’s the biggest corporate sponsor? Cisco. What’s Cisco currently doing? FIRING PEOPLE. They will not commit to hiring one FTE after the bill is passed, but they will not stop using this lie as the main justification for pushing Congress.
I am not convinced that another stimulus is the answer to restart the economy, even if there are many smart economists recommending it. There are other smart economists who don’t think it is a good idea. Who am I to believe? If we do another stimulus, how much to spend, where to spend it? I think that this process is too political, too managed by special interests. And I definitely disagree that spending can be turned off when the economy is humming along. By that time there will be too many interested parties wanting to keep the spigot open. It is hard to raise taxes, it is also very hard to cut spending.
@ Desi Girl – Doing Gods Work (Part 2/2)
“Eagerly waiting for Amati to withdraw her “research” on Bank Capital!”
We all remember Lehman Brother’s? The ~$450bn bankruptcy that was swift, and deliberate. Guess what? Barclays plc buys (acquires?) up the North American trading desk platform for a whopping ~$1.75hbn ,… the crown-jewel (the best half?), and let’s JPMC eat their “RACER’s! It was a battle of titans, and Robert Diamond floored Jamie Dimon! Just watching the NYSE floor traders in Barclays’ “Blue” uniforms hustling about, is a stark reminder of where our countries going?
What’s even more ironic is that EL Rothschild LLC purchased /acquires the other half of Lehman for ~$10bn, and now we have a private bank that provides – Commercial Banking/ Private Equity/ Private Banking (shadow banking wins again?), with Nomuro Holdings acquiring a small portion of the Asian-Pacific trade, for ~$100ml. Note: All this took place in the month of Sept/2008 and at a total buyout cost of ~$11.875bn, or better said no more than 3% of Lehman Brothers original worth,… WOW!
Ref: http://en.wikipedia.org/wiki/Lehman_Brothers
Now,… my point of contention is quite simple – follow the money:
Barclays plc buys Lehman (NA) Trading Desk Platform (9/17-18/09)
Barclays plc sells it “Barclays Global Investors Unit, plc” (BGI plc)___ {(8/6/09)(iShares&ETF Platform)} to BlackRock Inc. (BLK Inc.)
El Rothschild LLC buys Lehman Bank for $10bn (PS. owns controlling interest in McGraw-Hill, but good luck researching,… already redacted from web?)
Finally, rumor has it that Larry Fink has a built-up/ pent-up animosity (hatred?) for Goldman Sachs and vice-a-versus,… so how does Fink, or Blankfein go about combating oneself adversaries? Who would be a great target/ candidate to level the playing field for complete dominance? Let’s start with Morgan Stanley,… shall we! (JMHO)
So what we have in the near future will be a Bank Capital (liquidity risk?) Run! Real or Rumored the word is out,…
“Deficits don’t matter.” – Dick Cheney, VP of the United States
Taking your babies to Shelburne Farm on a glorious autumn day, and enjoying apple picking, and tasty baked treats and fresh cider afterwards……$65.
“The market takes care of bad apples. NOT the government.” PRICELESS.
@ Earle, game-winning, bottom of the NINTH, Grand Slam! :)
Can we just cut to the shooting war please? The suspense is killing me.
Just to be clear I’m referring to the American Civil War 2.0
James Kwak-
Interesting take on the article. I did read the article but took a different impression from it completely.
Would Obama damage his re-election chances more by moving to address the deficit or coming out decisively against the very Wall Street backers that supported his campaign the last time around?
I’d love your take on that. It seemed to me that the reason for Obama’s infuriating lack of force with things like TBTF is that he owes his success to the very same people who have the most to lose from real financial reform.
Right wing politicians aren’t the only ones saying it. Unless by ‘right wing’ you meant to include Barack Obama, which wouldn’t be unreasonable.
I would beg to differ. The problem with the economy is business , gov’t and individuals are over-leveraged.
We should force big banks like BAC to restructure and bond holders to take a hit,consumers that have too much debt need to go through bankruptcy or have some of their homes foreclosed and gov’t needs to restructure inefficient operations like the post office. Seems to me we can take the pain up front and resume growth or continue on our present path and experience Japan for the next ten years.
Just look at Bank America, they’re attempting to earn their way toward higher capital and live with a constrained balance sheet while a bankruptcy/receivership would solve it via forced debt conversion of bond holders. Both may work in the long term, but with the former, the bank can’t lend.
Well, certainly both Harry Potter and Obama’s promises are both fictional.
Which reminds me of another famous author’s work: People are out of work ergo we should cut more jobs.
Pure Orwell.
@John Haskell
“It takes a really powerful narrative to stop Americans from trying to make their country better. Thank goodness Cantor and Boehner have found such a narrative. And that Obama agrees with it.”
I wish you were right, but this middle-aged veteran of watching politics sees otherwise. It’s the same narrative over and over:
– Decide policy that benefits rentier class.
– Make up “facts” around it.
– Repeat “facts” endlessly until 2 + 2 = 5.
– If by some miracle public doesn’t buy, ignore public (that’s “strong” leadership!).
– Rinse and repeat.
Ah, democracy at work.
@Carl – since when is criminal “economic” Nihilism *democracy*?
From the book “Reckless Endangerment” – “The American People realize they’ve been robbed. They’re just not sure by whom.”
Since we are in the fantasy thread that mixes Potter on the Potty with “My Precious”, can we get Romney to connect the metaphysical *religious* dots for us to explain how a corporation became a person in the minds of the Supreme Court Justices?
We could all use a come to Jesus moment about right and wrong…or no?
What’s improved since Sept-Oct 2008 forward, in terms of toxic “assets” creating massive insolvencies for the TBTF’s? Profits have returned with all the free digital-“money” provided by the “FED”, and execs have seen some happy looks with the enormous paydays, but their organizations are still cancerous lesions oozing pus and goo.
Meredith Witney referred this week to one of these “institutions” as a ZOMBIE BANK, which is news to a lot of readers here, but certainly takes gumption saying it on national tv. The prevaricating CEO denied his was a ZOMBIE BANK……roaring laughter.
The simple truth is this: the mess created by these swindling criminals is absolutely and irrevocably insoluble, in a way that isn’t calculated to steal the remaining wealth that hasn’t heretofore been stolen.
Tony Foresta is correct in his diagnosis. This swill-system really isn’t worth a damn.
I would pay more attention to the Left if its devotees chose to recognize the value of polluting, dangerous industry; if there were some admission that many (most?) government jobs actually have neutral to negative economic value; that self-reliance is in general a good thing. On these points this blog seems a vast desert.
@swerv21
Much of our immediate problem can be understood on the basis that Obama has been bought-and-paid-for all along. (The best Republican President since Teddy Roosevelt!) There has not been such an incompetent Dept. of Justice since Nixon’s time — hardly ANY prosecutions of the massive Wall St frauds. The Treasury bends over backwards to avoid even hurting Wall St feelings. The SEC is a bitter joke. Obama and his admin. have done literally NOTHING for the middle class, or to protect the US from another financial crisis.
Some day historians will look back at the incredible co-opting of this administration, and the Wall of Shame will feature Geithner (Treasury), Holder (DoJ), Schapiro (SEC), Gensler (CFTC). Historians will wonder at the maginalizing of Paul Volcker, Sheila Bair (FDIC), Elizabeth Warren, etc.
Look carefully at Obama’s fund-raising. He’s owned by the same guys who own the GOP.
@woop, “The simple truth is this: the mess created by these swindling criminals is absolutely and irrevocably insoluble, in a way that isn’t calculated to steal the remaining wealth that hasn’t heretofore been stolen.
Tony Foresta is correct in his diagnosis. This swill-system really isn’t worth a damn.”
This is how I diagnosed the same problem, “No one gave the INSANE permission to turn earth into a deeper circle of hell than it already was…by taking away our RIGHTS – RIGHTS we gave each other a LONG time ago in WESTERN CIVILIZATION – the RIGHT to make our lives LESS MISERABLE through honest work.
1. This is a WESTERN CIVILIZATION moment, that’s a FACT. And when you take a really LONG view of the timeline – it has epochs where it gets it really wrong. What do all those epochs where everything goes dark in a hurry have in common? Delusions. One monkey brain “ism” after another. And what do ALL those “isms” have in common? The attack on the SIMPLE human right to make our lives LESS MISERABLE through honest labor. ALL DELUSIONAL Western Civilization’s short lived, massive damage inflicting “isms” are rooted in the desire for UNEARNED WEALTH – they are THEFT masked as holier-than-thou pseudo intellectual *crap*.
2. This *FIAT* $$$, fractional reserve banking scheme is worse that being “worth a damn” – it IS a *damn*. It is constructed to function as a “transfer of wealth”. It’s INIQUITY. It allows the scum, not the cream, to rise to the top because for all the algorithms and rube cube shenanigans – at it’s core all those machinations still do this and ONLY this: More misery for others = More money for ME ME ME.
3. Operationally, we are in a LAWLESS state – which means we are at war with each other because the Ponzi scheme *economy* sets that up *operationally* in DAILY LIFE. Only during a war is there a suspension of civil law because power is being sought to overturn long awarded RIGHTS – hence the existence of our current Orc mercenaries as established by the Patriot Act. Also not the first time in one of Western Civilization’s periodically DELUSIONAL epochs has *legislation* BY THE CRIMINALS been used to cover up their ongoing ORGY of crimes against humanity.
So before anyone goes off half-cocked to paintball the scum bag sociopathic geeks, make it CLEAR what we are fighting FOR – we are fighting FOR the RIGHT to make our lives LESS MISERABLE through honest work.
Which means, if *god*’s special brigade of know it alls and holier than thous are about to dismantle a factory or fire a whole bunch of people to move the jobs to a newly discovered dark planet somewhere where dogs can cook dinner :-)
THAT is where you take the paint balls.
I think we can safely paintball the same talking heads that have been dumbing us down with MADE UP NEWS on TV (how people are still willing to PAY to be insulted by paying for TV, I don’t know)…
Dylan Ratigan has disappeared – probably needs to go into WitSec and Patriot Act goons are in charge of his *social* websites, so if you sent an “atta boy” email, twit, or whatever – you’re on the LIST now, Baby!
Let me be the first to welcome you to the LIST :-) 100% consistent certainty – they’re going to take it all – their Orc hooligans are everywhere….especially among your *neighbors* and *friends*…..
Think RUSSIA after they killed the Czar and the immediate RISE of the nasty smelly babushka busybodies as their social engineers…ick, right?
Select a LEADER, broadcast ONLY THIS MESSAGE – “We are fighting to restore our RIGHTS – our RIGHT to make our lives and this land LESS MISERABLE through honest work”.
That statement blows all the current “isms” right out of the water….ALL of them – right, left, up down, bassackward – wha’ever…
Okay – let’s go paintball “Money as the Ultimate Grifter’s Good”
:-)
Tax cuts will work, as long as they are aimed at the low end. That is where the financial stress is and that is where people are not spending. Extention of the payroll tax cut is a very good idea, expanding it, either by making the individual side bigger, or cutting the employer side would help (a tax is the difference between what one person spends and the other recives in a transaction, calling part of the tax as being on employees and the other part as on employers is just book keeping with no economic substance).
Focus first on bringing down UE. If we bring down UE, the deficit will follow. More people working, more people with income, more income tax collected. Fewer people in desperate poverty do to no income from employment, less spending on things like UE insurance and food stamps. The same is not true in reverse. Focus on cutting spending or raising taxes, particularly taxes that fall on those just scraping by with little or no disposable income will slow the economy, throw more people out of work, less income, therefore less income tax collection and more spending on things like food stamps.
The arrogant presumption is that “real wealth” is profit driven not wage earned so much so that Peter G. Peterson Foundation can chase an “IOUSA” agenda based upon “giving back” the money that the working class has claim to, because the country is being “drained” of its wealth for the financial sector paradigm.
The arrogance is all the more brazen in that P.G.P. and his crony stealth club of unscrupulous vulture-member capitalists have made their massive fortunes on the scrap heap of public trust and inside information which includes to evolution of the revolving door methodology of socio-economic “placement” in rank and file financial status seeking and rewarding among the “specialists” of “entitlement” at the top (AKA: elites! …pardon me while I vomit…). In the “elite” clubs wealth is “natural law” and the abomination is that you lowly creatures do not deserve to share in the spoils. You are dirt…give back your security to “the man” and the “bonus” boys will piss down on you with a golden blessing if you just stand in line !!!
WEREN’T we originally talking about mis-management and infrastructural rebuilding?
If you have not noticed, we are knocked off issue at every turn. If you have not noticed they control the media and the dialogue…defining the issues with “specialists” and “authorities” along the paved way. Just follow the yellow brick road…right to Wall Street and the Emerald City. Except that we all end up in Wisconsin and the term “sacrifice” gets a great deal of mileage from people who don’t bleed!
If you have not seen this article by Dean Baker, it is worth a reading. What is also essential to realize is that the “big boys” have us all talking about bailouts over give backs…instead of what are they doing with “OUR” country and the public systemic of monetary adjustments that allows us a pursuit of happiness? AKA: GET BENT…Give us back OUR money and strart paying a fair share of the taxes!
Primary focus: WHERE IS THE INVESTMENT CAPITAL INTO THE INFRASTRUCTURE AND THE POLITICAL POLICES TO DEMAND, COMMAND AND GUIDE THESE TO FULL EMPLOYMENT AND MEANINGFUL ECONOMIC PRODUCTIVITY.
http://rwer.wordpress.com/2011/08/17/the-sp-downgrade-market-plunge-myth/
The S&P downgrade market plunge myth
August 17, 2011
Excerpt from Dean Baker
“They are now setting the stage to have the Congressional “super-committee” produce a deal that will mean large cuts in both programs. The backdrop for these cuts is that the country is in crisis and that we have no choice. A central part of this story is that the stock market crashed last week in response to the Standard and Poor’s downgrade of U.S. government debt. The Wall Street crew and their allies in the media and Congress will tell the country that if we don’t have the cuts in Social Security and Medicare demanded by S&P then we run the risk of further downgrades. This raises the prospect of further market panics and the complete wreckage of the economy.”
@ Annie, darn, that last post…..just moved me to tears….thanks for being such a COOL human person, I love you.