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I'd like to think we'll see more of this kind of anger between now and the November elections.
UPDATE: The video that accompanied this post has been removed by its creator apparently. I'm leaving the post so that the comments remain.
Wednesday, January 6, 2010
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23 comments:
Scott,
At this point, what do you think of the possibility of the Dems simply initiating a massive escalation in military conflicts around the world simply to distract the public from the consequences of misguided policies?
Most of our College Grads can't find jobs and are idle.
Our Cities, Counties, and States are broke.
http://globaleconomicanalysis.blogspot.com/2010/01/governor-paterson-new-york-runs-like.html
Our Pension System is insolvent.
Health Care is a mess and now hospitals are running low on funds forcing layoffs and cutbacks.
Recent Actual unemployment claims are coming in much higher than adjusted numbers.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/volcker/DOL%20SA%20Jan.jpg
Foreclosures and Bankruptcies continue to escalte.
Strip Center vacancies are now the highest ever.
Bloomberg reports Silicon Valley commercial space, the heart of growth and innovation in America, is swimming in a "bloodbath" of vacancies.
http://www.businessweek.com/news/2010-01-05/silicon-valley-bloodbath-leaves-buildings-empty-update2-.html
And finally, this from Trim Tabs today:
NEW YORK (MarketWatch) -- The unusual circumstances that led the U.S. market to rally powerfully in 2009 might be explained by secret government moves to buy stocks, according to Charles Biderman, the founder and chief executive of TrimTabs, a research firm that tracks liquidity flows in the market.
"We cannot identify the source of the new money that pushed stock prices up so far so fast," Biderman said in a statement Tuesday.
The source of approximately $600 billion net new cash necessary to lift the market's overall capitalization by $6 trillion last year could not be identified by TrimTabs, Biderman said. The money, he said, didn't come from traditional players such as companies, retail investors, foreign investors, hedge funds or pension funds.
"We know that the U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market, and the banks and brokers. Why not support the stock market as well?"
The Federal Reserve or the Treasury, Biderman said, could have easily manipulated the stock market by purchasing $60 to $70 billion worth of futures of the S&P 500 Index (INDEX:SPX) on a monthly basis.
AND CONDITIONS ARE AT THIS LEVEL AND THE FED IS RUNNING A MASSIVE DEFICIT AND FUTURE OBLIGATIONS ARE GROWING AS TAX RECEIPTS ARE EVAPORATING.
How long do you think America can simply be the biggest welfare state in the world before a change of course must be undertaken?
WOW.
There is anger out there. Even some of my liberal friends are expressing concern and displeasure about what is happening and what they bought into.
The far left will never move off their peg, but I sense a shift to the middle (and beyond) for many.
Looking forward to November. Ten more months for the anger to increase.
I hope the "anger" is translated in cutting outlays, not just cutting taxes.
The Tea Party is easy street. I want to cut my taxes, you want your taxes cut. Yeah, we are all friends.
The childish side of this is that it ignores outlays. Deficits!!!!
I contend we have to bring down deficits.
That means outlay cuts.
This is the tough part. I do not hear real proposals from anybody on that.
Worse, the right-wing is hopelessly embedded into certain groups that need continual and increased federal spending--witness rural America, which would just about disappear without federal subsidies.
That part of the federal budget that is financed by income taxes (not payroll taxes) is, in many ways, an R-Party budget.
Defense, Homeland Security and civilian defense, VA, Ag. Department and debt consume more than 60 percent of federal outlays financed by income taxes.
Those programs are either required (debt payments) or are sacrosanct in R-Party circles.
That is why I prefer to look to Third Party candidates, and I fear that even an R-Party sweep will not bring balanced budgets.
Actually, recent history suggests as much. We had R-Party domination of House, Senate, and Executive Branch 2000-2006 and they just ran huge deficits the whole time.
The D-Party is no better. Maybe worse.
I guess my hope by posting this is that responsible R-Party elements will start to say more than "cut taxes" and will add "cut outlays to balance the budget. And here are the cuts."
"Starve the beast" is fun to say, but actually leads to "feed the deficit."
Karl Rove has a good article in today's WSJ, in which he discusses exactly this. He points out that 66% of federal spending is consumed by entitlement spending, and he correctly notes that this is the only place where serious cuts to spending can occur.
The notion in Political-Economy of the “political anger factor” is at work. As unemployment approaches 10% the political anger factor rises. When unemployment reaches 10% the political anger factor then rises at an exponential rate. Persistent high unemployment removes incumbents from office.
You would think all of these political representatives (intellectuals/elitists) would understand such a well known theory. Go figure.
Rove is exactly right in his WSJ piece. However, the Progressives (Socialists) have built a welfare state over the last 80 years and as warned by many including Friedman, its difficult to reverse the welfare state.
W.E.:
What makes you think our representatives don't realize that the jobs situation is very big politically?
The problem is getting agreement on how to respond to high unemployment. R's tend to explain to us that we need to rip the bandage off all at once and have ourselves a faster/deeper recession. Ouch! D's tend to want to wet the bandage and pull it off a tiny bit at a time (while expanding gov't). In purely political terms, the D approach usually helps congresspeople get reelected: thus even the R's will hold press conferences bragging about bringing home the stimulus spending. They just forget to mention it was obtained through earmarks on the stimulus bill.
Angry mobs aren't likely to consistently demand *lower* spending on goodies that ease their pain. Yes people love getting mad at Congress, libruls, commie-nazi-socialist whatchamacallits. But in the voting booth it's back to "hands off MY medicare!"
Scott,
I am a bit surprised you would post something as inflammatory as this without providing a source. Do you know who put this out there?
While I am a liberal and agree that things seem to be wildly out of control, alot of the issues referenced in this video can be attributed to Republicans as much as Democrats.
The problem with alot of what is happening in Washington right now, in my opinion, is that neither the Dems or Reps are bringing forth ideas and solutions that address what is in the best interest of Americans in general. There is no consensus on what the issues that need to be addressed are. War? Terrorism? Economy? Health care? Education? Environment?
Lastly, I have a hard time listening to people complain about taxes in one breath and look for the government to provide basic core functions in another. Who is going to pay for: War? Terrorism? Economy? Health care? Education? Environment? - if there is no tax revenue?
How low will we have to sink before Republican and Democrat politicians realize that the answer will lie somewhere between the two and start working together?
As always, I enjoy your economic analysis.
Dan
Dan: the URL source of the video comes at the end:
http://www.youtube.com/watch?v=HiyqvuTxaEs
I think Republicans and Democrats have all done a miserable job over the years. Spending is out of control, especially entitlements. No party can stake out the high ground on this issue. Amazingly, the Democrats have done even worse than the Republicans this past year.
I'm a big fan of the Tea Party movement, since it transcends both major parties. It is a call for less government, less spending, and lower taxes. It's a return to our Libertarian roots as a nation.
I decided to feature the video mainly because it taps into the anger and frustration that has been building for years but which has come to a head thanks to the Democrats' mad dash to the left. The Democrats now own this mess, even though the Republicans have contributed hugely to it.
all the "socialist and liberal" bailouts and TARP were due to Paulson and Bush passed in 2008, BEFORE the election (exception of GM but that was festering for years). Bernanke was Bush's appointee and worked in his WH. It's unbelievable that Obama continues to get blamed for what the Bush administration did. like today with Geithner and AIG, Obama was not negotiating the CDS prices at par but he's getting blamed for it. the deficit would be the same no matter who was president because it reflects what was already in the budget before Obama took office.
i'm not saying they are doing a great job but sheesh at least get your facts straight.
Dan:
I agree with your comment. I wonder how many of us are out there: folks reading Scott for his cogent economic analysis, but scratching their heads a bit about his politics ;)
I find lots of smart, well-to-do R-leaning folks intriguing because they seem to feel completely disassociated from the government. Yet for liberal leaning folks, the perception is that R types ARE the government (in their stockholder, board-member, lobbyist-paying, campaign donor roles).
Both parties obviously have their big money influencers: people sitting behind gates in big houses in the hills calling the police to get stray homeless people out of their neighborhoods, yet thinking that THE MAN is some other guy. I sometimes think a root problem with our system these days is that the rich and powerful have "gone Galt". They have 'checked out' and left the rest of us to squabble over the ruins.
I guess that amounts to a criticism of Scott's affinity for the Tea Party movement. Quoting Rove's editorial about the reality of entitlements spending seems reasonably rational. Playing outraged innocent bystander by posting over-the-top Wagnerian Gotterdamerung videos from YouTube seems a little deluded.
Still, better to have these issues 'on the table' so we can TRY to talk rationally about them. That in itself is a healthy form of engagement with the public business of our country.
Yes, Obama inherited a huge mess from Bush. But he didn't have to spend $787 billion on a ridiculous "stimulus" package that has virtually nothing stimulative in it. And he didn't have to increase discretionary spending by 8% in the last half of fiscal '09, and he didn't have to increase it another 12% for fiscal '10. And if he manages to get his healthcare bill passed and implemented, the increase in nondiscretionary spending is likely to be truly off the charts. Government spending as a % of GDP averaged about 20% in the 40 years leading up to 1998, but it is set to average at least 25% under Obama. This is a very big change for the worse.
Rove is right about cutting outlays, but entitlement outlays (Social Security and Medicare) are financed by payroll taxes. You won't get an income tax cut by cutting SS and Medicare (and I think they should be cut, both benefit levels, by raising retirement age).
If you want to cut income taxes, you can whack some "liberal" programs, and I encourage that. But 60 percent of federal spending financed by income taxes goes to Defense, VA, Agriculture, Homeland Security, and debt.
And even some of the remaining programs--Commerce, Interior -- are popular among Repubs.
We have met the enemy and he is us!
The R Party will never balance the budget, I think that became obvious 2000-2006. I wish I could say something nice, but the record is just not there.
Where is the R=Party groundswell for free markets in agriculture?
Ron Paul comes to mind as an alternative. Actually, almost any Third Party seems better at this point.
Benjamin: there may appear to be a link between income taxes and medicare and social security, but the link is a fiction, just as is the "lock box." All federal revenues get dumped in a pot and spent as needed on whatever. Congress can raise or lower medicare and social security entitlements without regard to income taxes.
Scott-
Maybe we are talking past each other.
Right, if we want income tax cuts, we have to whack outlays financed by income taxes. If you want payroll tax cuts, then let's whack those programs financed by payroll taxes.
I favor a 15 percent across the board whack for starters.
My usual point is that both wings regard certain programs as sacrosanct in the abstract, and even in the practical.
Unfortunately for those of us who support free markets, the "free market" R-Party is deeply in bed with non-free market players, such as agriculture.
That is why Rove never calls for the obvious, which is asking the Ag. Department to submit a five-year sunset plan, in which ii disappears (including the food stamps program).
Indeed, often US agriculture, nearly wholly a creature of the federal subsidies, socialism and rigged markets, is cited for its wonderful abundance! By so-called right-wingers!
I can't mention Defense, as it gets people too angry.
Suffice it to say, if you like federal control of our ag. and defense industries, then you are going to love federal control of health care.
Open up your wallets and weep.
STS and Vincent:
Can solve your quandary. Merely go buy the book Free to Choose by Milton Friedman. Its $9.75 on Amazon. When you are done reading the book, get back to me.
W.E.:
Bless you for citing Milton Friedman as your intellectual guiding light. But there's a big gap between his insights and the sort of political conclusions many folks here tend to draw.
Here's a nice passage from our friend Milton (you might need to scroll down a bit):
"I believe our present predicament exists because we have gradually developed governmental institutions in which the people effectively have no voice."
This is very much the case. But advocating a government which surrenders pre-emptively to entrenched private interests -- a major effect of the Reagan revolution -- is self-defeating.
Where are the Republican trust busters? All the R senators are employed by various monopolists, whether agribusiness or insurance etc.
I guess my point is just that some of the Keynes-bashers reading here should try a little self-examination. Yeah a lot of dumb things have been done in Keynes name. Sure, too many Dems are simple-mindedly statist. But you're not gonna influence them. That would be my job, so to speak. But you MIGHT be able to influence right-leaning folks to look at what some of their political heroes are up to.
There. I've said my piece. I'll shut up and listen to Mr. Grannis talk economics again for a while ;)
STS:
Not bashing Keynes. Keynes is to be studied. However, Keynes is to be discounted as proven by Friedman.
In the 1970’s Keynesians, neo-Keynesians, and new-Keynesians suddenly couldn’t explain the Phillips Curve. Then the theories behind Keynes began unraveling at an increasing rate. Yet Samuelson and his followers kept pushing Keynesian Theories head long into the Stag-Flation of the mid to late 1970’s. Enter The Chicago School of Economics and Milton Friedman.
In the mid 1970’s a few University Economics Departments were questioning Keynes via Friedman. That’s me STS, attended one of those universities that went Friedman early on. Better yet STS, we had many professors on loan from Germany who were early on Austrian School of Economics.
STS, your comments are more Political-Economy. That’s fine. However, sticking strictly with economics, and looking at the allocation of scarce resources to competing ends as well as finding the cheapest, simplest solution to a perceived problem…..I’ll stick with Friedman. Thirty one years into private sector business, Friedman hasn’t failed me yet.
Think of it this way STS, stick with Grannis Economics and you’ll be fine. Go the Krugman and DeLong route and you’ll end up very unhappy.
STS, look into economist Steven D. Levitt at The University of Chicago Booth School of Business as well as John B. Taylor at Stanford. You might also consider Thomas Sowell and Walter E. Williams. Regarding your Political-Economy, take a look at Sowell’s book Intellectuals and Society.
W.E.
Thanks for the reading list. I'm not familiar with Walter Williams and will give him a look. The others I have already appraised at a somewhat lower value than you apparently assign them. But then, there is no trading unless valuations differ :)
As an investor I know most theoretically-minded economists are poor sources of market forecasts (not that there's a long list of good ones, mind you!) DeLong for instance is a valuable historian and able mathematical economist, but his occasional market timing attempts have been rather lame. Scott is a very useful source of fact-based arguments about the likely course of events. I use them consciously as a balance against other sources which exhibit different cognitive biases.
Holy cow. This excellent video has been removed.
I have no idea how or why this was removed! I sure didn't remove it.
Although not mentioned, I believe the video you may have posted is titled 'America Rising'. If it is it is back on Youtube.com under a different link: it is now http://www.youtube.com/watch?v=662R2awSwPQ
I actually sent this to Gordon a few days ago with this comment:
"The following applies to all politicians especially the present Administration and Congress."
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