That ’30s Feeling

nytimes.com/2010/06/18/opinion/18krugman.html?ref=opinion

Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s.

Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.

But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.

I'm not sure if you've noticed or not, but the problem with "temporary stimulus" actions by the government have a rather bad habit of becoming permanent and entrenched. Google "national debt clock." As of when I type this EVERY taxpayer in America owes $118,700 as his even share of the national debt.

And you propose that we keep digging deeper? Great idea. :mad:

And yes, I HAVE been saying this loudly for FOUR presidents now.

[quote="jjdrury81, post:1, topic:202405"]
nytimes.com/2010/06/18/opinion/18krugman.html?ref=opinion

Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s.

Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.

But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.

[/quote]

The underlying assumption of the above is that governmental action is what creates most jobs. It isn't so. Right now there are plenty of solvent businesses that will not hire, won't borrow, won't invest in new plant and equipment. And why? Because "cap and trade" which promises higher energy costs is still on the Democrat table, taxes are absolutely going to go up on small business people, nobody really knows what business healthcare costs are going to be other than more expensive, interest rates are absolutely going to go up.

The very best thing this administation could do for the economy right now is say "We're going to extend the Bush tax cuts to at least 2012, we're not going to do any more stimulus, we're not going to bail anybody out, we're putting the health insurance bill on hold until 2017, we're abandoning cap and trade, we're not going to impose anything that will cause energy costs to go up. And by the way, we're going to allow drilling anywhere at all so long as relief wells are put into every deep under water well from the start, and we're going to put new refineries and nuclear plants on a fast track for approval. One way or another, we're going to bring energy costs down."

[quote="Ridgerunner, post:3, topic:202405"]

The very best thing this administation could do for the economy right now is say "We're going to extend the Bush tax cuts to at least 2012, we're not going to do any more stimulus, we're not going to bail anybody out, we're putting the health insurance bill on hold until 2017, we're abandoning cap and trade, we're not going to impose anything that will cause energy costs to go up.

[/quote]

That would be an absolute disaster for the economy. We would go into a full blown depression.

Here is another point of view:

preview.bloomberg.com/news/2010-06-18/greenspan-says-u-s-nearing-limits-on-borrowing-capacity-restraint-needed.html

Of course the Bush tax cuts should be made permanent and spending needs to be cut. But the current president doesn’t make decisions based on common sense but rather on socialist ideology. Maybe the next president will have more common sense?

Ishii

And indefinately spending more than we make won't? LOL!

As a guy who works directly for the president and owner of a small business, I can confirm much of what Ridgerunner says. Nearly every medium size business owner my boss knows is trying to hold off on investment and hiring until he has a better idea of what insurance costs are going to be, how his taxes are going to change and where energy costs are going to go (big effect on construction costs!). And It's not that they're greedy, they are worried about making payroll.

[quote="jjdrury81, post:4, topic:202405"]
That would be an absolute disaster for the economy. We would go into a full blown depression.

[/quote]

And you base that statement on what?

I know it may be difficult to make public policy decisions without any emotional reaction. If anyone deserves help, it is the unemployed. But looking at the greater picture, our defecit is 1% less of our GDP than Greeces.

In one word, its unsustainable

[quote="scipio337, post:7, topic:202405"]
And you base that statement on what?

[/quote]

History.

How do you think this recession came about?

There is no way this administration is going to do anything that would really help the economy anyway, so it’s pretty much an academic subject for now.

I don’t think even this administration and congress can push the economy into a full blown depression, precisely because business people are saving themselves by paying down debt and battening down the hatches for the disasterous policies this government has adopted and promises to adopt. Most businesses that were going to go under have already done so. Essentially what the remainder are doing is improving their capital ratios. Even in the 1930s the well-prepared businesses had a hard time of it, but didn’t go under. Unemployment varied, and topped out at about 25%. But even at the worst, then, the employment rate was 75%. Those who retained employment and most definitely those who were well capitalized, lived reasonably well; many fared better than they did before the Depression. Those on the bottom end of things, of course, lived very badly, and did for a long time.

No, what this administration and congress are presenting to the American people is a higher unemployment rate as far as the eye can see, little in the way of investment and hiring, and very little in the way of business borrowing; a sort of Depression scenario but at a less drastic level. What they’re probably doing, and they ought to recognize it, is establishing a very low economic “baseline” from which, with better policies, the next Repub administration can claim an astounding recovery. It’s really dumb to be doing what they’re doing, unless the objective is to expand an “underclass” of government-dependent people to the degree that it will create a permanent voting majority for them. Alinsky school stuff. One is at least somewhat inclined to doubt they’ll get it done.

A lot of things, but tax cuts weren’t one of them. Tax receipts were good, well after the tax cuts.

[quote="jjdrury81, post:8, topic:202405"]
History.

How do you think this recession came about?

[/quote]

Government. Democrats for the most part. People who spent more than they made.

In fairness, republicans have been at least as much to blame for irresponsible spending as Democrats. The Reagan years of Democratic Congress were marked by "I'll approve yours if you approve mine" spending on both sides. The Clinton years of Republican Congress, on the other hand were more marked by "Forget you, I'm not approving anything YOU like." Those were good years for America! Under Bush and so far under Obama, it has been back to spendamania.

Plenty of blame to go around, if you ask me.

Government spending is not a bad thing so long as the government has the revenue to pay for it. The Clinton years constituted an economic golden age and thanks to the Omnibus Budget Reconciliation Act of 1993 the deficit began a dramatic decline and, for the first time in this country’s history, the deficit was transformed into a surplus. This was not achieved through tax cuts and was unanimously opposed by the Republicans. Despite what certain Republicans claim; they are not responsible for the surplus. Clinton left behind a $236.2 billion budget surplus which Bush and his Republican Congress sent into immediate decline his first year in office through tax cuts and increases in spending.

[quote="EmperorNapoleon, post:13, topic:202405"]
Government spending is not a bad thing so long as the government has the revenue to pay for it. Clinton left behind a $236.2 billion budget surplus which Bush and his Republican Congress sent into immediate decline his first year in office through tax cuts and increases in spending. The Clinton years constituted an economic golden age and thanks to the Omnibus Budget Reconciliation Act of 1993, for the first time in this country's history, the deficit was transformed into a surplus. This was not achieved through tax cuts.

[/quote]

The mandatory "Its Bushes Fault" response is noted.

[quote="estesbob, post:14, topic:202405"]
The mandatory "Its Bushes Fault" response is noted.

[/quote]

Are you denying that Bush and the Republican Congress turned a $236.2 billion budget surplus into a $157.8 billion deficit within just two years?

[quote="EmperorNapoleon, post:15, topic:202405"]
Are you denying that Bush and the Republican Congress turned a $232.2 billion budget surplus into a $157.8 billion deficit within just two years?

[/quote]

What has Obama and the Democrat Congress done to the deficit in 18 months?

[quote="estesbob, post:16, topic:202405"]
What has Obama and the Democrat Congress done to the deficit in 18 months?

[/quote]

The deficit has, of course, increased because the Democrats are behaving like Republicans.

LOL! Now that’s funny!

Obam quadrupled the deficit in 18 months. The Republicans are spendthrifts in comparison.

Incorrect. The budget deficit currently stands at $2.3 trillion. Obama cannot be held responsible for the majority of the increase because the budget for fiscal year 2009 was decided and approved under the Bush Administration. What he can be held responsible for is the $951 billion increase in the deficit accrued so far in fiscal year 2010. To say that the deficit even doubled under Obama’s watch would probably be an overstatement.

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