Economic Prediction for the Obama years

Submitted by Ironman on Tue, 01/06/2009 - 07:07

barack Obama; deficits; recession; interest rates; stimulus

"Blackhedd" at RedState has an interesting take on the future with the Obama stimulus package

His theory is that while the program may have the temporary political benefit of propping up short term demand and limiting the blizzard of pink slips, it fails to address the public's loss of consumer confidence, their battered balance sheets which must be rebuilt, and of course, crowds out other more productive investment uses of money.

Thinking ahead to '11 and '12, let us presume this program fails to live up to expectations and the Blackhedd's essential thesis---that nothing will stop an adjustment in home prices and nothing will allow a recovery to occur without it.

At that point, the federal government will be out of economic ammunition. They simply won't be able to find enough shovels even if they find the money. Which is going to be problematic since it's unlikely foreigners will lend us money at below historic rates forever. With all the new added debt, when borrowing costs rise, that will greatly increase the deficit then.

Not to mention that it will be impossible to move the inventory of unsold cars and unsold homes when interest rates rise. Once the Democrats understood this. But now the new conventional wisdom is "the free market failed". And the solution is of course, to tie on some ankle weights to it.

The Fed won;t be able to push down interest rates because of years of excess borrowing and if continually escalating budget deficits aren;t causing the economic engine to turn over on it's own, are you going to double down on bigger deficits? As I said, they'll be out of bullets (as both monetary and fiscal policy will be fully expended) and have to let the business cycle run it's course then. Or blame the rich and go the whole hog income redistribution route so that 51% of the voters got enough largesse to vote them in again.

Look for a brief period of enthusiasm over Obama, then some grudging understanding the economic problem is not going away, and then, perhaps right on the cusp of the midterms, but certaintly before his re-elect, a realization that the nation's problems are not getting solved with Obama's red ink.

Indeed, we could see some "positive growth" in '10 only to be followed by this treat in '11

http://www.investopedia.com/terms/d/doublediprecession.asp

Ruffini is dead on. We will want to have no part of this in future years.

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You say "the government will

Submitted by In between on Tue, 01/06/2009 - 09:14.

You say "the government will be out of economic ammunition."

That is the case today.

You have had some 8 years of tax cuts and we are back into a recession. The tax cuts have been spent, it has been overplayed, and they are ineffective as the deficits and debt keep going higher depriving the private sector. Add to that, that middle class jobs are going overseas. That cities and states are going broke.

The other stimulus is that the federal reserve has reduced interest rates to their lowest levels ever. They can do no more. They are printing money. You will have inflation in 3 years and another recession to deal with that.

So the last resort is the government and they will have to borrow and spend. There is no other choice. But what you need is to recognize globalization.

And to deal with this you need infrastructural spending (limited), energy independence, mandatory vocational training, embryonic stem cell research, and research and development of whatever is needed to make us number 1 with government and private sector collaborations.

So far we are doing nothing. The last 8 years have seen our jobs go overseas, our money to Iraq, the neglect of the infrastructure and just borrowing for tax cuts. Makes no sense.

stop it! the federal reserve sets TARGET

Submitted by RisingTide on Tue, 01/06/2009 - 10:59.

interest rates. real ones are set by the market and have been at zero for quite some time now.

please read some actual economics trackers (i rec calculated risk)

http://www.fxstreet.com/funda

Submitted by In between on Tue, 01/06/2009 - 14:25.

http://www.fxstreet.com/fundamental/analysis-reports/weekly-credit-strat...

The fed (Beranke) lowered interest rates to their lowest levels ever. This to help stimulate the economy.

Markets can control it also. And some day it will reflect the deficits, the debt, the low dollar, and later inflation.

The fed can do no more than this. This is their last stimulus. Add to that 8 years of tax cuts and now we are back into a recession. The tax cut game is ineffective.

So the last resort is the government for a stimulus. And that should be in the form of infrastructural spending, energy independence, mandatory vocational training, embryonic stem cell research, and research and development in whatever is needed to create jobs and economic growth.

well, there's a whole lot of blindness herein

Submitted by Ironman on Tue, 01/06/2009 - 19:28.

Without the Obama "stimulus" package we are on track---thanks in part to the sundry bailout schemes from 2008---to run a trillion dollar 2009 budget deficit

This is a pre-existing level of fiscal stimulus unprecendented in American history. (unless one wishes to count the mid 1940's).and it is already alarming foreign financiers.

Do you think they are going to continue to buy 30 year treasuries yielding 3% or so? I don't. Only someone convinced a) no other safe investment would yield more and b) American inflation will be de minimus over mutliple decades would deem this a wise strategy. And when long rates go up, there goes consumer big ticket and real estate sales. Which was why the last Democratic president was a deficit hawk.

Perhaps tinkering with the debt bomb is a fun idea for you guys, but until someone credibly explains why another trillion dollars in fiscal stimulus is going to work any better than the first trillion, I think I'll pass, thank you very much.

Jezz, I remember the good old days, when a $1.6 trillion dollar tax cut spread over a decade was a "risky scheme" $160 Billion/year is going to be a rounding error the way Obama, Pelosi and Reid want to spend our money.

I don't like deficits either.

Submitted by In between on Tue, 01/06/2009 - 20:57.

I don't like deficits either. But at least there may be some that are better than others.

For instance, Bush has created a 500 billion dollar yearly deficit, and has added 4 trillion dollars to the debt. Now, where did that money go to and what benefit did we get out of it as we sit in a recession.

For one thing the Bush deficits were from the tax cuts creating a false economy. How else did he stimulate the economy. Anything we do will be deficit spending as we have no savings in this country. So what Bush did is borrow from other countries (deficits and debt) to stimulate the economy, at the same time we are losing middle class jobs as factories close and are going overseas and our money is going to Iraq.

Now this makes no sense. Does it to you? That we send our jobs overseas, you lose the middle class, cities and states are losing money, and social programs need to be funded. At the same time we have to fund a war, which was on a lie that will cost at least a trillion dollars, and then Bush in return borrows more money to keep our economy going.

I don't get this. Maybe someone can explain how this works.

When Obama inherits Bush's problems, he will inherit Bush's deficits and debt, add to that the bailouts, and add to that his stimulus. It will definitely be over a trillion dollar deficit and it looks like for years to come.

But let me go back to Bush. What has he ever done to look into the future for our future growth. The tax cuts are for the here and now, our jobs go overseas, cities and states are broke, we have an infrastructure to take care of and we are falling behind in so many areas.

But the one big factor to deal with is globalization.

What has Bush done for us to be competitive on globalization? Other countries have made mandatory education in English to compete. China is doing it and in Hungary since I was recently there, I found out they must know english to go to college.

Bush talks of free trade and the factories close and he does nothing about it. All he says is that this is good policy. Well, the people in the Midwest would say otherwise.

To cut this short, here is my answer. Do we have to cut spending? Yes. However just to deal with the Bush deficits and debt will take 20 years. We also have 50 trillion dollars of unfunded social programs. We are also behind in our infrastructure by hundreds of billions of dollars, we are in a war taking 10 billion dollars a month. All of these things we have to deal with.

Besides cutting spending that will take decades, we need to fix the infrastructure (limited), have energy independence, mandatory vocational training as our factory jobs leave the country, embryonic stem cell research as Singapore is further ahead of us in this area, and all research and development to create economic growth and jobs.

Like one area is to produce a battery that will go 100+ miles on a charge. This would help our auto industry and make it competitive and also create jobs. We have to look 20 years out and invest in that future. We can make a different fuel for the airlines. That will save them money and not dependent on oil. We need a new air traffic control system and that helps the airlines with more direct routes and saves money on fuel. We need energy independence to get away from OPEC. All of these are good for America and create jobs. There has to be some cooperation with the government and private industry to work together on a Manhattan project.

But we have to keep in mind that we have globalization, that we need the best educated people to compete in the world.

So tax cuts alone, and free trade, wars that take away our capital, and laissez-faire in which we have seen has destroyed this country. It takes time. We should have been doing many things 10 or 20 years ago. We had a cold war peace dividend and we blew it. We through our future away with deficits and debt, with war, and useless ideology, and here we sit in a recession with no way out but deficit spending.

Also we have had tax cuts for 8 years and we are sitting back into a recession, people are losing middle class jobs, cities and states going broke. So I see nothing that the tax cuts have done. And what jobs can be done here that can't be done in China?

The fed has lowered interest rates to their lowest level in history. This may work in time, but also may create inflation in 3 years and wreck the dollar.

So the last resort is the government, with what I have said above. I see no other way out of this recession/depression.

riddle me this?

Submitted by Ironman on Tue, 01/06/2009 - 21:25.

How long will we be able to subsidize your "middle class jobs" (since you don;t seem to think the US private sector can create any anymore) with borrowed money from the surplus earnings of Chinese peasants lent to us by Chinese plutocrats?

At some point we are not going to be able to in a de facto sense exploit peasants in Beijing to pay higher salaries to bureaucrats in Bethesda.

By the way, on all your wonderful necessary technological innovation required to keep America competitive,. could you identify the federal bureaucrat two decades ago who directed federal research money be sent to Steve Jobs and Bill Gates?

What makes you think our federal money launderers will do a better job now?

All I can say is that we

Submitted by In between on Tue, 01/06/2009 - 22:37.

All I can say is that we have to deal with globalization. We have had a Manhattan project before when we needed it. We have the space program. We have the NIH, FDA, and CDC. We have the interstate system to move goods. We have an air traffic control system. We have an infrastructure to take care of. I am sure you take care of your house. And we have to do the same.

Other countries know if you want to compete in the world then you need an educated workforce. The president talks of free trade and does nothing with the loss of factory jobs and the cities and states that are going broke. But yet Bush will spend our money in Iraq. While we need to be there (by mistake) we cannot forget that we have a country to run.

We have to be energy independent. We should get away from OPEC. This is a national and security concern. It can make us more competitive if we can develop a batter that will go 100+ miles on a charge. If we do nothing then the Chinese will.

I have a book from a nearby NASA facility and it is 158 pages of spinoffs in technology. That is in Health and medicine, transportation, public safety, consumer health, home, and recreation, environmental and agricultural resources, computer technology, and in industrial productivity.

We gain from research and development.

But my question to you, if free trade is so good. And that we lose middle class jobs, the factories closing, and the cities and states going broke. What kind of standard of living should we have? What is your answer to the whole Midwest which is manufacturing. Why not get rid of farming or wall street or doctors. I mean it is ridiculous when you have a president that will not manage the economy. We have to deal with globalization. Any company can make a product, but more than likely it will go to China. So again, what jobs can we make that will stay here.

I am all for the private economy, but government works in this also with research and development. The NIH works with many universities on medical technology. We do this all the time. We just haven't done enough.

A group of doctors were on C-span and they complained that the amount of research dollars have remained stagnant.

The only way I know we can raise our standard of living is to help our private industry, along with the best education, research and development. It all has to work together. I don't know where we got away from the idea that government cannot be involved. They can at least supply the research dollars. We need to stay one step ahead of other countries. These are research dollars that most corporations are not willing to spend. Like in preliminary science.

and you trust a community organizer from Chicago to pick this?

Submitted by Ironman on Tue, 01/06/2009 - 22:55.

Like he's gonna do better than Silicon Valley VC firms picking promising technologies?

My brother works in space technology. The fewer politicians that screw with NASA, the better.

At the end of the day you can;t tax the crap out of the middle class thinking this will create jobs for the middle class (or conversely, deprive them of money via higher interest rates or a depreciated currency) . Government is an incredibly leaky bucket.

People have to pay real money to get real services. Subsidized happy talk can't repeal that fact.

There is going to be pain. But the only gain will be from the skills and talents of entrepeneurs, not politicians with cash looking for things to throw money at.

http://www.hudson.org/index.c

Submitted by In between on Tue, 01/06/2009 - 23:54.

http://www.hudson.org/index.cfm?fuseaction=publication_details&id=5656

Here is an economist that agrees on me on education and training the workforce. The fact remains, that we won't have the factories as we had before. You can no longer graduate from high school and expect to know nothing and work in a factory.

On science, Martin Feldstein was just on the Charlie Rose show a few minutes ago. And he said it would not cost a lot of money for the NIH, but they need more funding for research.

I never said that politicians should interfere with anyone. I am just suggesting our priorities.

We have globalization. The jobs are going overseas, we need to replace those jobs with something. Cities and states that rely on factories are going broke. So what is the answer?What in the private sector that will create millions of jobs? And what product can you make when China can make the same product at a cheaper price?

And I never said tax. We will deficit spend. Bush did it and threw the money away. The tax cuts after 8 years are used up. Does us no good, when we sit in a recession with our jobs going overseas. Bush has spent on war. Well this deficit does no good.

Again, we need more science, research and development to create the jobs of the future. There is no greatness in the country. We have to strive for something as a nation.

Many nations subsidize technology. Singapore is moving way ahead in embryonic stem cell research since Bush did not want it. We have lost years of science and we have lost scientists. We need to be energy independent, and the list goes on. But as our jobs go to China, we better find a way to employ millions of people. And at the moment we are doing a bad job of it.

In the meantime China has the advantage with 5%+ growth, and we sit with 0% growth. They will do things that we can only dream of.

Watching further on the Charlie Rose show, two experts said there needs to be a better cooperation between the private and public sector.

See, Bush does not believe in science. He has no curiosity. And the only way to drive the country in the future besides the private economy is for the government to fund science. Future jobs depend on it.

According to you maybe we should give the internet back to the government. Maybe you don't want to fund science, but it makes our life better.

Let's go to the videotape, shall we...

Submitted by Ironman on Wed, 01/07/2009 - 07:00.

Instead of talk show factoids, let's look at hard evidence.

http://www.cbo.gov/ftpdocs/82xx/doc8221/06-18-Research.pdf

I know it's easy to say "Bush didn;t want to fund science" and use that as the explanation for the American economy. (Think the CRA and Fannie Mae had anything to do with what happened? hmmm)

But the CBO says nyet to that theory.

The chart shows as a percentage of GNP federal R&D spending increased from the late 1990's to the 2000's There was a slight contraction in business sector R&D in the late 1990's coincidental with the deflation of the tech bubble. Overall national R & D spending as a percentage of GNP was well above its nadir in the Carter years, but just slightly below where it was in the Kennedy years ( I suspect that since much of that spending was on how to vaporise Soviets it really is not replicable in this era).

Perhaps as a nation we would do well to return to Kennedy era science spending. The net increase to get there is less than 0.3% GNP, though. Compared to Obama's 3% plus GNP stimulus package , that's a rounding error.

I love learning new things. Especially when it debunks old myths

for fuck's sake, I work in that industry!!!

Submitted by RisingTide on Wed, 01/07/2009 - 10:24.

both sides, upwards and downwards, NIH, NSF, DARPA even, they've all seen cuts. DRAMATIC cuts. PLEASE stop imagining that you know what you're talking about.

SHIT man, even your own fucking chart proves my point.

Basic Science is DEAD as a Doornail.

(unlike op, i wont' blame this all on bush. some of it is the result of congressional pissing matches with the president. not most of it though).

for fuck's sake, I work in that industry!!!

Submitted by RisingTide on Wed, 01/07/2009 - 10:24.

both sides, upwards and downwards, NIH, NSF, DARPA even, they've all seen cuts. DRAMATIC cuts. PLEASE stop imagining that you know what you're talking about.

SHIT man, even your own fucking chart proves my point.

Basic Science is DEAD as a Doornail.

(unlike op, i wont' blame this all on bush. some of it is the result of congressional pissing matches with the president. not most of it though).

Save it for CBO

Submitted by Ironman on Wed, 01/07/2009 - 20:46.

Hey, I quoted their charts. And in 2007 they were definitely NOT a right wing GOP news source.

The chart shows that the golden age of research occurred under Cold Warriors Jack Kennedy and again under Ronald Reagan. The weak link was Jimmy Carter. Again, why would CBO circa 2007 spin it that way if it weren't true.

oh, they ain't spinning.

Submitted by RisingTide on Thu, 01/08/2009 - 10:11.

I realized after I wrote that-- we're talking about two different things. (you were talking about overall research, whereas I really would rather focus on the government sponsored stuff, as I believe that gives more long term gains.)

I'd by all means love to see research go back up to peak, or even higher.

Hell, if we could spare a few billion to toss at some gov't paid researchers (for just one year, mind), I think that would be a great investment in infrastructure. We'd see folks buying equipment that will last for ten, if not twenty years. Which in turn would spur growth in the scientific equipment fields, and possibly more efficient/productive ways of producing some things.

Well, I have heard no call

Submitted by In between on Wed, 01/07/2009 - 21:12.

Well, I have heard no call from the president that we should have an energy council and an energy plan.

He has vetoed embryonic stem cell research two times.

There were scientists that went before congress and testified that they were muzzled and their reports were doctored.

A group of doctors on C-span had complained that their research dollars have remained stagnant.

We are up against globalization. The country that discovers new technologies will be the winner and will create jobs. The losing country or business sector will fail.

We are losing manufacturing to China and other countries, and we will need to find new ways to replace those jobs.

I think you are going to see a lot more science under Obama. I am not that much of a science nut. I am just a perfectionist, an independent who sees our fight with globalization and the need to manage our country. And it means creating wealth and jobs.

OK, I'll buy getting total R&D back to the GNP% under JFK

Submitted by Ironman on Wed, 01/07/2009 - 21:36.

There's about $100B/over two years. Now explain the rest of the trillion dollars proposed.

I suspect we are going to find out a lot more "community organizers" get hired under the Obama "stimulus program" than scientists and researchers. As I noted, my brother wishes his stuff was self-financing and they could tell the pols to butt out; since the only thing they understand is PAC checks.

Barack Obama is a politician. He is going to fund politics.

That I don't know. I haven't

Submitted by In between on Wed, 01/07/2009 - 22:55.

That I don't know. I haven't seen the rundown of that. Personally, I would not want the tax cut and that is 200 or 300 billion dollars. You have infrastructural spending and I don't know the costs. As we all know when you do this is that you will have cost overruns, favoritism, and the like.

At this point the private economy cannot do much. Your having bailouts and the fed has done all it can do.

So on the short term there is not much that can be done. People fear losing jobs. And as long as that fear is there, the private economy cannot budge. And that is the psychological benefit if the government can do something. How much, I don't know. We want the private economy to pick up. I can only say that we need enough money for research and development in a lot of areas to compete with globalization and we are far behind in that. And science takes many years. So there is not much on the short term except infrastructural spending.

I have seen failed ideologies and it just comes down to management. It is always the case. CEO's manage, managers manage, coaches manage. But when it comes to the president with republicans it is just ideology of tax cuts. So to me it may be tax cuts, but also cut spending, look for problematic areas and address the issues. And look 20 years down the road and try to prepare for it.

One thing is for sure, Bush was an inactive president and did not know what was going on around him. Obama will be an activist president. Two opposites. We have seen one fail. And maybe the next one will also fail. We shall see.

that's for sure.

Submitted by RisingTide on Thu, 01/08/2009 - 10:13.

but they'll get hired as social workers for unemployment benefits depts -- and would you really want a scientist there??

If you organize a letterwriting campaign to improve science spending using this stimulus, i'll pimp it on dailykos.

http://www.hudson.org/index.c

Submitted by In between on Tue, 01/06/2009 - 23:56.

http://www.hudson.org/index.cfm?fuseaction=publication_details&id=5656

On science, Martin Feldstein was just on the Charlie Rose show a few minutes ago. And he said it would not cost a lot of money for the NIH, but they need more funding for research.

I never said that politicians should interfere with anyone. I am just suggesting our priorities.

Again, we need more science, research and development to create the jobs of the future. There is no greatness in the country. We have to strive for something as a nation.

In the meantime China has the advantage with 5%+ growth, and we sit with 0% growth. They will do things that we can only dream of.

Watching further on the Charlie Rose show, two experts said there needs to be a better cooperation between the private and public sector.

According to you maybe we should give the internet back to the government. Maybe you don't want to fund science, but it makes our life better.

http://www.hudson.org/index.c

Submitted by In between on Tue, 01/06/2009 - 23:57.

http://www.hudson.org/index.cfm?fuseaction=publication_details&id=5656

On science, Martin Feldstein was just on the Charlie Rose show a few minutes ago. And he said it would not cost a lot of money for the NIH, but they need more funding for research.

I never said that politicians should interfere with anyone. I am just suggesting our priorities.

Again, we need more science, research and development to create the jobs of the future. There is no greatness in the country. We have to strive for something as a nation.

In the meantime China has the advantage with 5%+ growth, and we sit with 0% growth. They will do things that we can only dream of.

Watching further on the Charlie Rose show, two experts said there needs to be a better cooperation between the private and public sector.

According to you maybe we should give the internet back to the government. Maybe you don't want to fund science, but it makes our life better.

Sorry for the three posts, it

Submitted by In between on Wed, 01/07/2009 - 00:01.

Sorry for the three posts, it was hanging up.

well, you seem to dwell in repetition

Submitted by Ironman on Wed, 01/07/2009 - 06:41.

Most of which are various tired riffs off these memes

a) George W. Bush was a dummy who hated scientists

b)Every part of our infrastructure is falling apart

c) The private sector can't do anything technologically advanced anymore so we need bureaucrats to run everything with taxpayer money.

I'm not going to go into a detailed debunking of the truth or relevance of all this and I doubt it matters to those who worship at the altar of Al Gore and Paul Krugman. On the infrastructure data point, most of the evidence seems to be the bridge in MN that collapsed due to a 1967 design flaw and Tom Friedman thinking JFK airport in NY is a dump compared to the nice new Hong Kong airport. Even granted that infrastructure has been overlooked and could stand some reinvestment , are you proposing the more useful remedy of looser environmental regulation to cut the time and expense of construction? I didn't think so. (See note: worship of Gore). Oops. this might prevent the creation of new "green jobs" where tax money to spent to hire people to stop building stuff.

Barack Obama is President because of voters too young to have remembered the last Democratic president who tried to create economic nirvana with government programs. . I recall Carter tried to enforce "austerity" once his stimulus programs in the 1970's backfired.

Carter's tax reductions and increased spending for the creation of jobs did lower the rate of unemployment from 7.4% when he took office to 5.9% now. But he was months late in recognizing inflation (9% during 1978) as the nation's most critical economic problem. His anti-inflation program (wage-price guidelines and a reduced budget deficit) has not yet taken hold, and experts believe results will not be visible for months. Carter's new austerity drive may also contribute to a recession, though the Administration's experts predict only a slowdown.

For the young, or young at heart, I guess there is a very educational parable about creating new government programs to address economic problems and what inevitably happens to liberals after they get them underway.

I am for anything for

Submitted by In between on Wed, 01/07/2009 - 08:09.

I am for anything for America and the world. Infrastructure and science? Think internet. It came from the department of defense. We put a man on the moon. It was government cooperation that has benefited business. How many jobs does the internet provide around the world? How much in commerce? So this is the example of what government can do.

Right now the private sector is doing nothing. And even when you get economic growth, it will be very slow. What I do know for example, that there are parts of this country that is losing manufacturing jobs. I have not heard of anything new that will employ millions of people. While I think we should work to clean air or any other environmental better situation, I am for progress first. And if you talk of regulation and denial, then you don't have to look no further than George W. Bush muzzling scientists and their reports. So we have seen government intervention by Bush. And I am independent and I don't care about Gore.I expect progress in this country, be it in the private sector or from government. I want a better life for all people. Obviously, the last 8 years have not done that.

Now to go back to Carter. But let us go back to LBJ.

LBJ wanted to expand the Vietnam war and he wanted his Great Society programs. This is called "guns and butter."He could not raise taxes, since JFK lowered them. So he went to the federal reserve and had money printed up and that caused inflation. Inflation is a lagging indicator, it takes around 3 years to show up. And today we are doing the same as the fed just lowered interest rates to stimulate the economy.

Nixon saw inflation and with that unemployment and interest rates went higher. Nixon used "wage and price controls", which were hard to control and ineffective. Inflation roars on.

Ford used "WIN buttons" to fight inflation and that was ineffective and unemployment and interest rates went higher.

Carter had no idea what to do. He was in over his head. But in his last year, he did get Paul Volcker in as head of the fed. And it was Paul Volcker under Reagan that raised interest rates to 21.5% on the prime. That made a big recession and unemployment was well over 10%. But this is what broke the back of inflation. And since then inflation, interest rates, have come down for over 20 years.

Reagan cut taxes but he also created deficits, and Bush 41 raised taxes to get the deficits down. I am just saying this as we see the same situation today. So I don't think the trickle down theory works.

At the end of Clinton's term, along with Gingrich you had a yearly surplus. Were things perfect? No. There have been complaints that the military was cut back to achieve that goal. And Clinton raised taxes. I would call it a mediocre presidency. Nothing great.

Bush 43 wants his "guns and butter." First, he wanted massive tax cuts. And I don't know what the exact numbers, but I suppose some 800 billion dollars in tax cuts so far. Now this money has to come from somewhere as we don't have a savings, so this money was borrowed from other countries to stimulate our country. At the end of 2002, Bush and the neocons pushed for the war in Iraq. They did not predict a quagmire, although there were plenty of people, including his father who knew. Bush said he answered to "to a higher authority." So again as we had the quagmire, we borrowed more money to finance the war. And as you see today Bush is leaving a 500 billion dollar yearly deficit and has added 4 trillion dollars to the debt. We have never seen this kind of spending before. Eventually, all these deficits and debt slows the economy, not unlike higher taxes. As you may dislike taxes, the deficits are future taxes. There is another problem today and that is globalization. We see China and India with 1 billion people each and they want our jobs. So the factories are closing up, cities and states are going broke and there is not catalyst to do anything. There is no greatness as we still depend on OPEC, as globalization takes hold, as we have 0% growth, as we are still in war.

So I view the last 8 years of nothing more than our jobs going overseas, our money going to Iraq, the neglect of our country, and the run up of deficits and debt. The tax cuts are for the here and now and nothing has been done for our future. We ourselves and our country are in a quagmire. As we end the Bush years, we are sitting in a recession, with deficits and debt, with unemployment going higher, with the latest financial crisis, and with the bailouts. We are in a situation that is a near depression.

I don't know what will get us out of this recession. I do know that we have had 8 years of tax cuts and we are back into a recession. I do know that the fed has lowered interest rates to their historic lows (and may create inflation). I do know that we are losing middle class jobs. I do know that we are not competitive with our wages, healthcare, and pension to third world countries. I do know that we have an older population that will require more government spending. I do know that cities and states are going broke. I do know that we have not kept up with our infrastructure of hundreds of billions of dollars. And I do know we have bailouts.

So what are we doing? We send our middle class jobs overseas, we send our money to Iraq, we neglect the infrastructure, and to keep the economy going we keep borrowing more and more. Granted, deficit spending is all we can do now, but when we have a president that says free trade is good and looks at nothing else, then I think somebody has a screw loose. I have not seen anything positive over the years. I have watch Bush all these years and the problems just keep piling up. I have mentioned laissez-faire and someone criticized me in saying that. Well, if I eliminate that word, then I would say we have the most delusional and do nothing president of all time.

Going back to the "guns and butter" issue. It took 20 years to fix the inflation problem. It took high interest rates and high unemployment to do that.

The 500 billion dollar deficit and the added 4 trillion dollars to the debt will take 20 years to fix. Just try cutting 100 billion dollars out of a budget. And add what we need to do for the economy in our infrastructure and we are back to more spending. Add to that the bailouts and we can see that we will never really fix the spending problem. And that is on the cutting side. What will we do about jobs and getting revenue in as we fight globalization? And the bottom line to fix a lot of these problems is that you are going to have to need jobs. Jobs that will pay the needed taxes to the cities, the states, and the federal government. If we do not train, do research and development, then all you are going to have is more people on welfare. In any case, the economy will run slow for many years. It will not have enough growth to bring in the revenue, and in future years with 1% or 2% growth, the third world countries will grow at 5% or higher and we will lose our standard of living.

So if we can create the next internet (it might be energy independence and/or a battery that will go 100+ miles) it will need the cooperation of the government and with that the private sector can thrive with all kinds of spinoffs.

umm... okay. that blackout in the ENTIRE east coast

Submitted by RisingTide on Wed, 01/07/2009 - 10:33.

because of a fucking science experiment JUST DIDN"T happen. sure.

And just what is your fucking problem with enzymes and catalysts?

Guess you never wanted to care for a baby boy, neh? (due to the high levels of estrogen in our water, there is a statistical decrease in the number of baby boys being born).

A few points

Submitted by Ironman on Wed, 01/07/2009 - 20:41.

1, I have a son. Thank you. By the way, when did estrogen become a political issue?

2. I've lived through three major blackouts. Can I blame LBJ for the '65 one; or Carter for the '77 one? As for the last blackout, it was blamed on poor tree trimming in Ohio . An utlity was lazy about using chain saws and that justifies a trillion dollars of new debt?

3. I have no quarrel with enzymes. Now hyperdebt, alarmist "science", and language saltier than a George Carlin record, not too keen on .

did you ever read the papers on global cooling?

Submitted by RisingTide on Thu, 01/08/2009 - 10:30.

they read "if the pollution smoke quadruples in the next X years, we could see global cooling" -- some dipshit editor at Time decided to be alarmist -- there was a very active debate going on in the science community, though the consensus was coallescing around global warming being more probable. The argument was exacerbated by not having enough measurements from the Southern Hemisphere, which wasn't showing cooling -- exactly as models would predict.

Estrogen becomes a political issue all the time. You've heard about the Christians who hate birth control? Well, you probably haven't heard about Environmental Oncology, and the amount of estrogen pollution that you drink every day (errm, this is probably more of a problem if you aren't getting water from wells).

I wish you and your son well!

You seem to think that I'm blaming Bush for this blackout -- hardly. If i must, I'll blame all the presidents since Carter for failing to do needed maintenance (this of course works in a linear fashion, reagan getting less blame since repairs had been done recently). And sure, you can blame Carter for the blackout-- so long as you also credit him for fixing the damn problem.

Conjure Bag's Global Depression Clock is at 12:59:54. I'd say that warrants concern and determined action.

Besides, why shouldn't we invest in our infrastructure in lump sums when the economy needs it? It seems like a marginally better plan than investing over the long haul, as it may serve to smooth out natural bumps in our economy.

you mean the same silicon valley firms that are on the chopping

Submitted by RisingTide on Wed, 01/07/2009 - 10:18.

block right now?

The ones that have loans on the books that they can't repay when someone calls them on the loans?

they won't be doing any investing until they can move off the loan system.

which will cause deflation in the m3.

sometimes panic is justified.

The worst national security problem we've got right now is...

Submitted by RisingTide on Wed, 01/07/2009 - 10:14.

Global Warming.

Feh. And that's a quote from a General, too, not a crazy econut.

The worst national security problem we've got right now is...

Submitted by RisingTide on Wed, 01/07/2009 - 10:14.

Global Warming.

Feh. And that's a quote from a General, too, not a crazy econut.

try four. and that would be Eisenhower, I'd bet

Submitted by RisingTide on Wed, 01/07/2009 - 10:10.

he was a hell of a pro-science guy.

Transistors were one ducky of an invention, don't you think?

CONTINUING, the Japanese are going to give us a Marshall Plan so their economy doesn't tank like ours did. Or at least that's what 20% aso is proposing.

doubled

Submitted by RisingTide on Wed, 01/07/2009 - 10:39.

deleted

try four. and that would be Eisenhower, I'd bet

Submitted by RisingTide on Wed, 01/07/2009 - 10:11.

he was a hell of a pro-science guy.

Transistors were one ducky of an invention, don't you think?

CONTINUING, the Japanese are going to give us a Marshall Plan so their economy doesn't tank like ours did. Or at least that's what 20% aso is proposing.

most distressing is that no one knows what will fix this.

Submitted by RisingTide on Wed, 01/07/2009 - 10:04.

not Krugman, not Stiglitz, not Volkher. I just feel lucky that we have the smart chaps in charge right now.

most distressing is that no one knows what will fix this.

Submitted by RisingTide on Wed, 01/07/2009 - 10:04.

not Krugman, not Stiglitz, not Volkher. I just feel lucky that we have the smart chaps in charge right now.

Now, why shouldn't I be skeptical

Submitted by Ironman on Wed, 01/07/2009 - 20:51.

We're not sure if this is going to work, but lets drop a trillion or so dollars of money borrowed from foreigners on it anyway, and find out

Boy, I'm just brimming with enthusiasm about doing this. Aren't you!.

BTW, the "smart chaps" are Bernacke and Geithner, right? Guess they had a chance to learn from their mistakes

I trust Helicopter Ben Bernanke

Submitted by RisingTide on Thu, 01/08/2009 - 10:35.

(one of the best appointments Bush has ever made, though my investor friend's response to his appointment was "oh shit" -- the admin was clearly telegraphing the potential for an extreme recession/depression).

He's the foremost expert in the Great Depression -- and since the Friedmanian "lower the interest rate to zero" has already been tried for the past month or so, I'm all for Ben's suggestion to try the Keynesian stuff too.

The Fed reserve is scared, bigtime. They've got access to different numbers than you or I do, and they're expecting something pretty bad.

The smart chaps are the whole economic team, actually. Though I don't particularly like Summers, I'm glad to see he's involved because I like people arguing out what's best, rather than groupthinging their way to "success"

umm... i didn't say that they weren't sure this would work

Submitted by RisingTide on Thu, 01/08/2009 - 10:36.

I said that they didn't know -what- would work. so expect them to try a ton of different solutions, including tax cuts, incentives for new jobs, etc.

This is an emotional problem, not a numbers problem

Submitted by Ironman on Thu, 01/08/2009 - 21:39.

I'm a glass eyed suburban lawyer, and the last guy to buy into psychobabble. But maybe the numbers gurus who botched the derivatives business ought to put their spreadsheet away for a moment., and think about nonquantifiable human nature.

Fact One: We have a panic.

Now we can use lots of bandwidth explaining why it happened, who caused it , and how it ripplied. But the bottom line is once the public saw name Wall Street firms tanking and Helicopter Ben airdropping megabucks into the likes of AIG, consumer confidence went into the freezer.

Based on what I'm seeing, if the problem in September was systemic freeze-up; it's been resolved. The problem now is to get people willing to invest and buy again

Fact Two: To sell the stimulus solution, they are continuing the panic.

What is the rational public reaction to government officials claiming economic armageddon is on the way unless a trillion dollars is spent yesterday? Hello, it isn't that things are getting better and it's the time to hit the mall or buy a house. The rational response by private actors is to go the canned goods and firearms route; or at least the spend nothing/put everything in FDIC insured accounts strategy.

Counterintutively, less drastic but visible government action might be far more effective in breaking the crisis vortex we are in. Stressing a deliberate and well reasoned approach instead of a warp speed printing press would reasssure domestic consumers and foreign financiers.

On the other hand, if Stimulus I fails after exploding the deficit, they will be forced to ramp up the "apocalypse now" pitch again to throw another trillion at the problem. If the idea is to use the current crisis to foist socialism on the country, well, it's a strategy I suppose. It is not a high percentage way to restore a stable private sector economy , though. As I pointed out in the original post, this coul easily result in the infamous "double-dip recession"

Obama was praised for a calm, above-the-fray response to the market meltdown in September, while McCain's frenetic response got panned. This is one time I wish Obama would govern like he campaigned.

the panic is in wall street

Submitted by RisingTide on Mon, 01/12/2009 - 13:54.

treasures are still at 0% (http://www.calculatedriskblog.com/2009/01/credit-crisis-indicators-impro...). NOTHING that obama could say would take the sting out of the Fed Reserve panicking at the end of last year -- at least not for investors. Those are money markets worried about runs on their money -- or on breaking their buck.

And credit card companies are scaling back their credit, trying to get as much liquidity as possible.

Everyone is scared shitless, and they've got a real reason to be.

The FUN bet is whether China stays Communist.

Obama could be saying ducks and fishes, it doesn't change the fact that pigs are flying, and with almost all leading economists saying that this could be bad, as bad as the great depression, some say worse, some say a little better, well, we'll see.

but the public watches GE, so if you want to bitch about someone starting a panic, go bitch about General Electric.

I think that Obama is failing to toss enough money at the problem, honestly. But I'm glad to see that people will be able to find more money someplace, and more thigns to do with it.

We need to defuse the bomb that is

Submitted by RisingTide on Mon, 01/12/2009 - 13:57.

CDS. that is all. the mortgages are a big problem, but bailing out that wouldn't be very expensive. the problem is that America has consistently overspent for ages, and now is saying "hey, things look bad, and I guess I really don't need cable" and they're saying it a lot.

the real danger is a new age of austerity. Americans get to liking not having so much stuff.

Economic Prediction for the Obama years

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