With less than two weeks until President Obama’s August 2nd deadline for raising the debt ceiling, there seems to be no coalescence around a single solution. If anything, the scope of ideas being discussed seems to grow wider not narrower.
There is the $4 trillion grand bargain offered by President Obama. This deal was rejected by Speaker John Boehner but now supposedly is back in on the table in talks between the two. The Obama administration is also willing to consider a few days short term extension to make this particular deal possible.
Then there is the Gang of Six proposal that was thrown into the mix at the last minute. There is nowhere near enough time to get it written and passed by August 2nd even if it could get the support of the House. It would need, at minimum, a temporary extension for the Senate and House to work out the details, but Senate Majority Leader Harry Reid opposes giving it this short term extension.
Also, you have the powerful Senate Budget Committee chairman Kent Conrad with his own plan that is in direct opposition to the positions taking by Obama and Reid. He is now pushing for a six month extension to give the Gang of Six’s proposal a chance.
Still, the Plan B appears to be the McConnell-Reid plan, which would give Obama the power to raise the debt ceiling. This plan may or may not also contain $1.5 trillion in cuts and a new fast-tracked bipartisan deficit reduction commission.
While at one point it appeared to be gaining support, this option is looking less likely with each passing day. You now have a large group of House conservatives aggressively whipping against the plan. Which means that to pass the McConnell-Reid plan, a huge number of House Democrats must support it. Pelosi wants the McConnell backup plan to be a mostly “clean” debt ceiling increase with few cuts to win over House Democrats. Of course every move to make it cleaner will probably cost more votes from the conservative Republican side. Threading that needle may be impossible.
Alternatively, some House Republicans might be willing to accept the $1.5 trillion cuts Reid and McConnell are putting forward but only for an equal sized $1.5 trillion increase in the debt limit. Since that increase isn’t large enough, this would mean another debt ceiling vote just a few months before the 2012 election. That would probably make it unacceptable to the White House.
Also, while not being discussed publicly, I strongly suspect Republican Eric Cantor has a “call Obama’s bluff” bill in his back pocket. This would be something like a last-minute, two month increase not tied to any promise of a bigger deal. It would would either prove Obama’s veto threat was hollow or give the House Republicans a way to shift the blame for the default onto Obama.
Normally I consider myself pretty good at seeing through the political theater in Washington and figuring out what the maneuvering is really about. This time though, I’m really at a loss. What is going on appears to be less like a traditional PR political dance and more like a legislative mosh pit.
I have no idea how this is going to end, but the possibility of Obama using the 14th amendment solution or minting a $1 trillion dollar coin is looking more likely.






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I would watch the yields on Treasuries and the costs of insuring against a default on them. The NYT article today says the market is getting nervous and are taking precautions against a possible stalemate that results in missing the Aug 2 deadline. If there is still stalemate by Monday, look for thes indices to start signaling panic on Wall Street, and then we will see what effect that has on the crazies, if any.
It may take a huge shock to move this.
What a monumental and completely unnecessary cluster-fuck and circle-jerk.
I am not sure if this has been said, but raising the debt ceiling, increases the money supply, thus devaluing the dollar, which in turn makes food etc more expensive. So not only will people be forced to sacrifice through cuts, and have less money, but that money will be able to buy fewer things.
You might want to have a little cash at home incase they have a bank holiday to prevent a run on the banks. Yes, this will hurt Main Street once again.
It’s going to end the same way the argument over the Bush Tax cuts ended in 2010…
There will be a “deal” that gives the R’s everything they want, with the possibility of some shit the D’s want in the future, and it will be so close to the deadline that they’ll have to pass it cause they can’t hold the entire American economy hostage, doncha know.
There will be no 14th amendment. Or coin. Or default.
Not true.
Yes and we have already seen price increases across the board on food and fuel and that was from crazy bens q2 and just wait until q3. How sad.
Yes it is.
That’s my guess as well. But I also give about a 5% chance that the Congress is so completely broken that they simply can’t cut a deal, even with their Wall Street masters breathing down their necks.
There is a simple answer to the deficit hawks…transfer more wealth consolidating control over the work force. Less assets less options. The new world order has hit mainstream. Hiring cutback squeeze the work force into lower wages and benefit reduction. This is extortion and BO formed the catfood commission ala Peterson to do the dirty work, I would call it implementing fascism step by step. Junior started with all the legal dances to restrict our rights. Now taking away our assests wraps us into powerless subjects of the rich and powerful. The freedoms that were dearly won have been stripped.
I would have expected the market to be moving by now. Why is it so strong today? The market has moved on a lot less news. If Bernake just mentions the wrong word the markets jump. It doesn’t make any sense to me, unless wall street has gotten assurances from the white house that they won’t default.
I’m wrong a lot though. Hoping this time as well.
I hope they don’t come to an agreement.
And he does use the 14th amendment, or a coin, or whatever.
Who knows though, if Congress doesn’t agree on anything maybe when he unilaterally uses the 14th amendment he’ll unilaterally cut SS, Medicare, and Medicaid too. I gotta admit, that would be fun to see just because I’d so love to read the Bots response to that. That would require some mental gymnastics the likes of which I’ve never seen.
Please explain how raising the debt ceiling would increase the money supply. And show your work.
Modern Monetary Theory makes it clear that the debt limit is a scam. De-funding regulatory including financial oversight has given the capital investment community freedom to bilk investors and others alike. Wonder how CAL PERS made a 20% profit this year?
why don’t you explain how it would not
Jon Walker and Scarecrow -
forgive the related O/T
just now reading of the released GAO Audit (as mandated by Dodd-Frank) showing $16 T-R-I-L-L-I-O-N in bailout cash to domestic and foreign Banks
I am ten lifetimes beyond apoplectic
link
nice optics Obama 2012
HuffPost
what happens the Day After Social Security, Medicare, and Medicade are cut?
Does Obama celebrate?
Do Dems in the House and Senate take pictures with OBAMA celebrating this historic event.
Yes! this is going to be historic, Obama the 1st black Dem president just killed the party of FDR, LBJ, JFK,
What and Who do Dems fight for in 2012? the poor, seniors, who?
Do seniors just laugh this event off? and say we support OBAMA?
Do progressives just smile and walk away, and say Obama had to kill the New Deal?
Where Does Obama campaign in 2012? does he only campaign at military bases?
FDR, JFK, and LBJ, must be rolling over in their graves, knowing a Black president destroyed their Party.
MLK must be crying, at the fact that Black President killed the American Dream.”
Yes the Day After will be interesting
Oh, and lest anyone forget, BACK IN DECEMBER it was said here, MANY TIMES, that he should get the debt limit raised then too, since he was giving them the Bush Tax cuts extended. So we wouldn’t be back here. Again.
His response??? He “took the Republicans at their word” that the debt limit would be raised.
Ok bots, here’s a question: Is he just really that stupid (to take the R’s word for anything) or did he in fact want this added “crisis” to make changes to our “entitlements”????
Which one is it?
I’m not so sure that’s a bad strategy. “We gave the President a bill in time, he vetoed it and put the country into default because he insisted on raising your taxes.”
x2
$16 TRILLION???
Hey folks, we’ve gotta gut Social Security, Medicaid, and Medicare, cause, you know, we just don’t have the money.
Never mind the $4 Trillion in Bush Tax cuts. Or the SIXTEEN TRILLION we gave out to banksters.
What assholes.
Please also show how a default will keep the price of food down.
I had to look at the figure twice myself – and don’t forget, all these mf’ers needed to do was fill out a page and half application for Paulson
this is absolutely the most angry I have ever been – can’t NOT write what I think should be done – let’s just say I’m questioning Dickens portrayal of Madame DeFarge as villain – where are my f***ing knitting needles ?!?!
You are absolutely right. This is one of the most confusing and difficult to read processes in years. There really is no telling how this is going to end.
Yeah, that’s a big figure. Bigger than the GDP of our entire economy.
Wish I would’ve filled out one of those page and a half applications…
I agree with ya on the maddening. This one is truly galling.
$16 TRILLION dollars.
Jeebus, and they made a big show and circus over the, what, $800 Billion that they passed “in emergency” in 08??? Are you shitting me??? $16 TRILLION!?!?!?!?!
Screw the pitchforks, this is, ahm, I’ll stop there….
I agree with you. If you can name one thing that is going better (that is not a law passed, but actual result), I’d be interested.
Meaning, he really is that dumb.
Afghan
Jobs
Libya
Israel/Palestine
econ growth
Pakistan
Brilliant argument!
I don’t seem to recall this happening the 14 (?) times it was raised under Bush nor the 17 times it was raised under Reagan…..
GOP Sharks are in the water
they know OBAMA is a 1 termer
another one join the race today
Buddy Roemer
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102×4930020
this is getting silly
I thought Obama was un-beatable? Not
CBS is reporting that Dem congressional aide states that Obama has rejected the $1.5 trillion cut that did not touch Medicare and Social Security, and is demanding the GOP agree to a $3 trillion net cut with no immediate tax increases but with tax cuts – tax increases get just a promise to watch the Bush tax cuts expire, maybe.
Dem congressional aide – man – White House leaking is so professional.
Well, so far I’ve been wrong about Mr. Obama at least three times. I figured before the campaign that he was far more conservative than was assumed, simply based on his Senate record. His Presidency has shown me so far that either he is as much a neophyte as the GOP painted him (possible, but unlikely), that he is a master of eleventy-leven-dimensional Star Trek Chess (*snork*), that he’s even more conservative than I ever dreamed (also possible, but I’m not yet convinced), or that he’s made as much a blind ideological fetish of ‘bipartisan compromise’ as the present GOP has of ‘FDR and LBJ must die, die, die!’ We’re totally forked no matter what, though. Tough talk repeatedly followed by (if not preceded by) capitulation is no way to go through a Presidency, son.
We’re all passengers on a ship driven by officers who have decided that the North Atlantic in winter is one place that icebergs are never found. It’s small comfort to know that in the event of disaster, they’ll have plenty of room on the few lifeboats available. Never forget, though: one effective way to lower the unemployment rate is to reduce the population; Soylent green – two birds with one stone!
Normally the person that makes a positive claim is the one who should first state their reasoning.
no it is not – just what text in econ are you reading that says a debt limit increase has that affect – Ricardo rejected the concept that others put his name to.
Screw the Grand Bargain. Since when is giving the GOP 90% of what they demand a bargain? Better to have a short term default and its consequences than give away the New Deal to hostage takers who will only come back for even more next time. This is a Neville Chamberlain moment for Democrats when what’s needed is Winston Churchill.
And increases in bank reserves that do not result in new loans cause inflation by doing what?
All of this has to be stretched out so that there will be an absolute minimum period of time to pass the final deal with no amendments or discussion. The President, Boehner, Reid, Cantor and the rest know exactly what is going to happen, how and when. We will spend the remaining days chasing the red herrings they are dragging all over the path, so that nobody will have the time to really look carefully at the final product and generate any opposition or alternative.
They could do it today, but they have to make it back up against a big dramatic crisis deadline, just like the TARP that had to be done by FRIDAY or the world economy would collapse.
You know the econ books that says when you get an increased balance limit on your credit card you are that much richer.
Dear Ms
money supply has a definition that has no debt limit term in the calculation. I initially thought you were just young – now I assume you are 14 and indeed an over seas kid that is bored.
LOL – :-)
You should answer your own question there.
What DO banksters do with all that money when no one is begging for loans???
The answer is how it can be inflationary.
Oh come on Jon. That one’s easy. It will end dreadfully, horribly, agonisingly for all the serfs, and be absolutely spiffing for anyone of a net worth >$5M – with most of the benefit accruing to the wealthier ones amongst that cohort.
the wheels are coming off of this WH administration
the DEM base will love to hear that OBAMA seeks to kill the new deal.
Cenk WH insiders were right OBAMA hates progressives and FDR
link below
http://www.youtube.com/watch?v=H3EVoF-LUdU&feature=relmfu
It will definitely require a new tube of K-Y.
The problem with this situation is Obama have already surrender to the republican demands. The Republicans leaderships changes day by day.Now they want him to tap dance in the house of Representatives to Minnie the Moocher as precondition of there deal.”John Of Orange” wants him to cardie for him on their next round of golf. This has got the rest of the Democrats thinking they have been drugged themselves.
“Normally I consider myself pretty good at seeing through the political theater in Washington and figuring out what the maneuvering is really about. This time though, I’m really at a loss. What is going on appears to be less like a traditional PR political dance and more like a legislative mosh pit.”
That was the impression I got this morning as well, from hardworking Jane’s tour of various congressional offices. I am still wondering (prepared to get completely shot down on this as the market certainly isn’t seeming to reflect it) whether there’s some ultimate elephant in the room requiring the Grand Bargain wiping out benefits in order to keep fuelling money unendingly for all the wars. If our Almighty C in C can no longer drone drop, surely his hidden base (which is not us) will drop HIM like a hot potato.
This isn’t any different from Shock and Awe, just puts a different slant on the ability of this country to wage innumerable wars interminably.
As I said before, I can only hope. We do go after the imbalance of taxation vs. social programs, but that elephant, ridden by our own Hannibal in Chief, is still trampling around on the furniture, leaving large piles of something. And that something is starting to smell very bad indeed.
Wow, now that is really serious.
by econ text i assume you are referring to all the BS economic theories that forget to mention the entire monetary system is based on fraud and is just one big ponzi scheme. Insult me if you want, I don’t care, just shows how spineless you are. Years ago long before FDL, i would post on other blogs how the repub vs dems was just an illusion, and I got attacked in similar ways. Well as the curtain has been peeled away more and more people are waking up to that fact. Are you also with Benron when he says QE has not caused dollar devaluation and has had little impact on inflation?
“I have no idea how this is going to end, but the possibility of Obama using the 14th amendment solution or minting a $1 trillion dollar coin is looking more likely.”; one can only hope-and,as Camus said, such is a neurosis- that such comes to pass.
The only reason we don’t have a deal already is Obama hasn’t figured out how he can hide behind it.
If by ‘fraud’ you mean the fiat system of currency as contrasted to the ‘gold standard’ please state so.
If not, please cite the sources upon which you make such statements.
Revenue is constantly coming and going out of the Treasury. It’s amazing though that all the people so incredibly concerned about the deficit now. Where were you when Bush was passing tax cuts and starting wars?
The worst time to worry about fiscal discipline is during a downturn. Macroeconomics is not nearly as easy as microeconomics and a government economy is not like a household budget.
Just because you read something in a textbook does not mean it is true. You really need to learn to think for yourself instead of merely regurgitating that with which you have been indoctrinated. You are correct that raising the debt ceiling by itself will not cause inflation. However, MSWINKLE is correct in his larger point that dollar devaluation will. A debt default would over the short term probably cause devaluation, although this is not certain. I have read many analysts who fear default would cause a deflationary collapse, which is also what they said about TARP not being passed. They “fear” this result, along with the top 1% of the population, because the paper assets they hold would be reduced in value. The great majority of the population would benefit from such a deflationary collapse. It would level the playing field. Regardless, failure of the government to get its’ financial house in order will cause continued currency devaluation and inevitably lead to inflation.
Sadly, the way our government has acted historically that may not be so far off.
It isn’t like they didn’t make short work of the surplus that all of us have paid into in Social Security.
It is so sad to see smart men and women of both parties wringing their hands over a make believe deficit crisis while unemployment dances around 16%. This, not the debt, not al Queda is what will bring down the Republic.
I’m more interested in the ponzi scheme commentary.
Heck even gold value fluctuates as far as I’m aware.
Any system that requires ever increasing debt and/or money creation to sustain itself is by definition a Ponzi scheme. Throw in the accounting changes (repeal of mark to market) to prop up the banks and the stock market and you have a fraudulent system. I am amazed at all of the so called “progressives” who defend this crap.
I think the only negotiating Obama is trying to do is to force the Republicans to vote on a token increase in taxes. It really doesn’t matter how small it is, or how irrelevant. Changing the depreciation schedule for private jets. Wow, that will fix a $1 trillion plus deficit. But it lets Democrats run attack ads. It helps teabaggers primary otherwise electable Republicans.
This all makes perfect sense if Obama views the “new Democratic party” as spanning the ideological range from Bill Clinton on the extreme left (ahem) to Reagan/Obama on the right. Force the Republican party to consist of nothing but teabaggers. Cut the left loose, take their votes but never do a thing for them. 35% moderate Republicans and Blue Dog Democrats plus 15% lesser-evilers gives you the power.
Some dollar devaluation may be a good thing bc we need to increase our exports at a time of 16% unemployment. Trust me, inflation will not result with 16% unemployment either. I should say that increased food prices and commodities are the result of shortages.
I’d like to hear how deflation will benefit the average working man,since I’d always heard that is what happened in the great depression and that was not good.
I can’t speak for MSWINKLE but I was saying the same things when that scumbag Bush was President. At some point this shit has to end. The government of Zimbabwe tried the Keynesian method. How’s that working out for them.
Yeah, I hope that’s the outcome too. Use the 14th, IMO it’s actually what the 14th says, though I understand not all see it that way.
Guessing there would be some constitutional “crisis” if he did though. I mean I can see the House voting to sue the President, then ????
What do you think the fallout would be though if they did do the coin thing??? To me that one sounds like the overall best solution, from what limited I know about it, but wondering what you think the political fallout from that would be??? Basically the same as it would be if he were to invoke the 14th amendment???
The government is crazy they are trying to tell us that they borrowed money from themselves and they are going to refuse to pay themselves back.
Mark to market aside, a growing economy generally results in more debt as business needs to fund expansion. That’s not a ponzi scheme for most people.
This isn’t rocket science. If you don’t think dollar devaluation has an affect on food and energy prices check out a chart of the dollar versus any commodity since Ben’s announcement of QE2 last August. Hell, look at a chart of today’s movements in the dollar index and oil. There is a direct correlation. Supply is not the issue. In fact, oil supplies are at historically high levels for this time of year. Much higher levels than last year yet the price is 30% higher. I support much of the progressive agenda but it really annoys me when economist crackpots with politically motivated awards (i.e. Krugman) deny the affect of actions they advocate.
I am with you and it is about time people start waking up to the fact that way the system supports itself is a ponzi scheme.
Every currency system requires valuation and thusly the creation of currency. The only way you don’t have the creation of currency is to barter. Are you suggesting we need to go back to a barter system entirely?
If the debt is accompanied by increased productivity and increased “real” (not “nominal”) production you are correct. Therein lies the problem. In real terms this economy is not growing. I support protecting the social safety net but it should be financed by those at the upper income levels who have been the primary beneficiaries of the Federal Reserve/Federal Government bailouts.
For all thoughs that are confusing money supply with debt. See if this makes sense. You have one dollar on the balance sheet but purchase a receivable with an IOU. Therefore you have not increased the money supply.
Inflation of other goods and services, other than food and energy, are 2 to 3%, not worrisome. Food prices are up world wide due to increased population, developing economies demanding more, and shortages due to various evironmental issues like floods and drought. Another year like last year could result in severe shortages in some places, o yeah, like in Somalia. Oil is a monopoly. Whatever the underlying supply, nations with oil (remember OPIC) set the prices. On top of this developing nations (like China and India) are using more of it for cars and industrial capacity. I do agree this is not rocket science.
Keynes didn’t advocate tax cuts.
Let’s not blame the fact that Bush started a war that he didn’t pay for and then cut revenue on Keynes.
Exactly so it makes sense for the government to expend money and therefore increase our GDP output by putting more people to work.
Of course currency has to be created but its creation should be related to increased production of goods and services. If they are related there would be no inflation. In fact, deflation is the natural result of increased productivity. Look at the cost of computers, HD tvs, etc. versus a few years ago. I don’t hear anyone complaining about a deflationary collapse in these items.
Well not ALL of themselves, I’m sure they’ll continue to get paychecks and perks while they tell the rest of us they can’t afford to pay back the money they stol-er borrowed from social security.
inflation is up 2 to 3% if you go with the rigged method for calculating it. same rigged methods to calculate unemployment and if passed SS
Exactly. He also did not advocate continually increasing deficits.
There is generally no other reason for business to borrow than to use it in the business, ie investment. GDP is growing, albeit not fast enough to absorb the unemployed. Hell, even the stock market is up. I would let the upper classes fund SS but alas, I doubt they will do it.
What I can’t wrap my brain around about Obama in particular and politicians in general is this: How can he, or any politician, look at his beautiful, innocent children at night and know that what he is doing politically will completely fuck over millions of families with their own beautiful children? And all so needlessly.
Denial, rationalization, compartmentalization, lack of conscience, whatever. I’m glad I can’t understand it because then I’d be as venal, penurious, duplicitous, and just plain fucked up as them.
Obviously supply has an affect but it is not the only factor. Why is it so difficult to admit this ? The investment strategies of the Wall Street banks and hedge funds is all predicated on what they think the dollar is going to do.
I don’t see how you would be able to do that when you have large baskets of goods. I mean the demand for large screen tvs could be down while the demand for things like food or fuel increase.
I don’t know about Zimbabwee but most “experiments” in deficit spending don’t do enough of it. They tend to be too little and lifted too soon. Oh yeah, we did that here a year or so ago. A stimulus package about half as much as they needed – - and they were warned. And now? Nothing.
I think you just did answer it. To put it bluntly he does not give two fucks about other people’s children
Also threatening politicians with not voting for them is not as powerful as you think. Worse case scenario they lose there seat and go to a big payoff job for all their hardwork
Didn’t say it was. A few things like a flood, a drought and storms could put your plans for a great crop in a cocked hat.
In “nominal” terms GDP is growing. In real, dollar value terms it is not.
you came up with this idea all by yourself?
Obama is going to cut the left loose? more like the left is going to cut OBAMA loose
Reagan Republicans and Blue Dogs are going to vote for the Black guy? WOW
Racism is DEAD in the USA!!!
what about the baby boomers? yes the people OBAMA just shitted on with his grand bargain to cut Social Security, Medicare, and Medicade?
Obama is going to screw the largest voting block in the USA, and win what?
Are all the Dems on board for screwing the Baby Boomers?
are all Dems on board for killing the new deal?
FDR, JFK, and LBJ, real democratic presidents are going to be replace by presidents like OBAMA who bend over to the GOP all the time?
Obama is going to get laughed out of DC, or run out of DC, that how this story will end.
when is OBAMA going to fix the Economy?
who was smarter? FDR or REAGAN? FDR
Who is a Democratic Legend FDR or REAGAN? FDR
WHo is the worse Democratic President ever? Yes OBAMA
You bring up an important point- the resource market
That being said I remember reading in econ 101 about convergence theory and thinking we were screwed. Particularly since the under 18 set is always the first to have to sacrifice when budget cuts occur-after all they don’t vote.
false.
I agree that threatening with no vote isn’t as powerful as it may have once been, since they do indeed just go on to collect their riches.
But I’ve gotta believe that when they do bother to run for re-election, they’re doing so because they want to win.
So, I’m still going to advocate that NO DEMOCRAT reward Obama with their votes in 2012, because he not only hasn’t earned them, he’s earned our right to vote against him. Just as we would any other right wing Republican.
That last part is what really enrages me. Look at Judd Gregg. He spent his entire Senate career working for the corporate fat asses. Now he’s being rewarded with a huge pay package at Goldman Sachs. That’s where Geithner’s going to end up.
That is true and also for all the congress critters that vote with him.
Most economists agree on balancing a budget. It’s the stuff that gets us to balance that they can’t agree upon.
I feel fairly confident saying Keynes would have opposed cutting government spending during a downturn.
Cutting taxes certainly hasn’t gotten us a healthier economy.
I will agree with you there. The whole entire system makes me sick.
Not just the dollar
Wall Street has global investments. Heads they win, tails we lose.
In the big scheme of things the big players in Wall Street have all their bets covered.
The dollar index has declined by roughly 15% since June of last year. Has GDP increase 15% during that time period ? When you factor in deficit spending (i.e. stealing from future consumption) it is actually negative.
Yes – Reserves can be inflationary if the money ever moves into commerce – but as a number on a ledger it is as powerful as the spreadsheet number numbers on your last household budget calculation.
I’m not sure all economists want to balance the budget. It depends. If the economy needs it then we need deficits or surpluses. We now have a situation of high unemployment and money net going to support imports. That is a recipe for continued deficits. And the net import problem could last for years so that deficits will have to continue for years. Norway has a situation where they have net large exports and so they have budget surpluses as does the private economy. Oh How I wish we had oil to sell.
yes -
BTW – faith in value of something is not fraud
And Ponsi has a definition that the monetary system does not meet.
Then it should have been 30%
I understand it. They are sociopaths. I just can’t figure out how we get rid of them.
I mean I know the answer is to get money out of politics but how do you do that when the parasites are in office?
The only way I can see is to vote them in and vote them out. Still that won’t get the changes we need completely in place so that our pols are invested in the same system we are.
I never said I was opposed to increase government spending. I just believe it should be paid for. When the Bush tax cuts were passed, I supported them. It meant more money in my pocket. However, I’ve come to realize the immorality of it. The idea that these tax cuts improved the economy is bullshit just as the contention NAFTA would create American jobs. Yet, in Obama’s recent speeches one of the primary actions he has advocated to improve the economy is more free trade agreements. He’s been completely bought and paid for. It explains why Warren Buffett and his cronies supported Obama in 2008.
When that faith is perpetuated by a propoganda machine it is.
If we believe our MMT friends the answer is that money is not inflationary unless it stresses capacity, ie unemployment. But in todays situation there is lots of unemployed capacity and no one is going to borrow unless they have some reason to do so and that will not affect capacity use. One of the problems we have is there is not yet enough borrowing, which I think has something to do with housing.
Well my personal opinion is that we should have continued to run surpluses and paid out when we start new programs back when the economy was good. We also should have raised taxes to pay for the war. We should have put social security surpluses in a lock box. The list of things our *ahem* leaders(and I use the term loosely) fail us on routinely is fairly long.
That being said, now is not the time to worry about the deficit. Our goal should be creating demand and thereby creating jobs. Since the private sector is sitting on cash, it seems fairly obvious the government ought to be stepping up to the plate.
Not to mention that the bailouts saved Buffet’s ass. good to know that the taxpayer bailed out the so called Oracle of Omaha
Of course a dollar devaluation will cause inflation – imported goods rise in price. And that is what puts us on edge about MMT.
A deflationary collapse caused the disaster in the mid west and west in the 1890′s as the debts became more valuable to the banks as the land became less valuable and money earned from food production dropped.
I did not address the implied – thank you (no scarcasm) for taking care of that problem.
I think they’ve withdrawn K-Y from sale in serf-shops, so it’s also going to really, really sting…
Your comment reminds me of something I heard a WS analyst say a few years ago. He said housing was not in a bubble because people were willing to pay the prices. In affect, there is no such thing as a bubble.
Zimbabwe had 20 years of steady 5% annual GDP growth through 2002, and returned to normal growth in 2009.
Your point?
NAFTA has been a boon for Wall Street. They love them some cheap labor and loose regulation. Nevermind the long term consequences, long as there is short term benefits to be made.
It’s not immoral. Taxes should be used to regulate the economy. Tax cuts by themselves on the wealthy do not increase economic activity significantly.
To all out there: We may have disagreements on certain economic policies but I do believe we are primarily in agreement on the main point. Ergo, the system is corrupt and operated for the benefit of the polically connected wealthy.
Ciao
So your position right now would be to raise taxes on the well off?
Your last sentence agrees with what I said.
Except that overall inflation (ex food and energy) is still pretty low.
“Any system that requires ever increasing debt and/or money creation to sustain itself is by definition a Ponzi scheme.”
Well no, Ponsi had no income, and mathematically his method could not last past the first few “investors”. If you can sustain yourself you are not a Ponsi scheme.
Yes and I would not have said that three years ago. My eyes have been opened.
What was their cost of living increase during this period.
“There is a direct correlation” is the error of a first year student.
Correlation is not causation. There may be cause and effect, but I would like to see it explained and as yet have not seen that explanation.
Yes, but there is another point here I didn’t want to get into. That is a little controversial. I have a notion that the tax cuts created a deficit without which we would have had a recession sooner, although in that case maybe we would have avoided the great recession. Not sure though.
Well here we agree – I knew it would happen! :-)
The 5% is after the adjustment for inflation (actually there is a 10 year period that was at 4.6% after inflation growth).
Sure, the market makes it ok.
I agree. If the tax cuts had not taken place and Greenspan had not kept interest rates obscenely low for so long we would have had a milder recession and avoided the big one. Both of those actions were can-kicking operations.
I hope that is correct – but post Greenspans 1999 adjustments I trust no US CPI number – and I nitpicked the pre 1999 numbers in the past – but pre 1999 I could feel they were close except for the Reagan years overestimating quality improvements such that the Reagan years growth was thus overstated (again a Greenspan gift).
So, all is well except this fucked up debt “negotiation’, which would be merely silly were people’s lives not at stake. Gotta go,
I agree
Those interest rates and lack of regs were certainly major problems.
I think we agree on more than you realize.
“We should have put social security surpluses in a lock box.”
Gore’s “lockbox” was a lousy way of saying not growing the national debt so that there was “room” for the selling of debt to private investors whenever the Trust fund bonds were cashed in to pay benefits – the idea being to avoid tax changes.
The GOP correctly noted that investing the SS surplus would still be into gov bonds post the “lockbox”.
Thank you for answering. :)
Tough question – different CPI’s produce different levels of growth
Under the official version of CPI that is used for the GDP calculation, GDP grows after inflation, but there are many ways to calculate the CPI, and many of those show no growth after Clinton.
Unfortunately it also means that for some of us our “retirement” money was invested in war and other things rather than simply drawing interest. Now the intention is to tell us that we need to retire later and have our benefits cut because they won’t have the money when the bonds are due otherwise.
well obviously the system can not sustain itself that is why we are here needing to create more debt to keep it going