What accepted wisdom says lifted the world out of the Great Depression. More widely I think it’s disputed how much effect it had and that a different approach would have been more efficient.
[quote=“BigJohn”]It was the Republicans who started bloating the debt to simultaneously cut taxes and boost spending, especially on the military.
Obama’s spending is obviously Keynesian in nature: Spend money you don’t have in order to create economic activity that will pay off later in terms of tax revenues. He is trying an old war-horse of center-left economics, the one that lifted the world out of the Great Depression.
Republicans prefer to do boost the economy with tax cuts, but I’m not sure that’s a good way to start an economy that is paralyzed in the way that this one is.
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Yep the Republicans focused on tax cuts and expanding our military. President Clinton traded guns for butter by shrinking the spending on our military and moving it into domestic non-military spending. President Bush traded the butter for guns and military excursions.
There’s already been a discussion started on whether or not FDR’s policies lifted the US out of the Great Depression. It definitely had nothing to do with the rest of the world. Most economists aren’t even sure how well FDR’s policies did but the politicians are damn sure that it worked/didn’t work!
Regarding Keynesian economics in the here and now, there has to be some increase in productive value at the end of the day for it to work. Simply paying one guy to dig a hole and the next to fill it in doesn’t produce any goods that can be traded. Yes it will lower unemployment, give people money but it won’t increase consumer spending because you haven’t done anything to fix the decrease in the supply of consumer goods. You need consumable goods to be produced for the economy to salvage itself. Keynesian economics can work at dropping the unemployment rate, but without anything for them to spend their money on, you haven’t actually fixed the economy.
There is also two other problems with applying Keynesian economics to the current crisis. The first is the interest rate issue. Interest rates are already extremely low. I don’t know how much lower they can get without getting into the negative interest range. You’ll start having to seriously worry about inflation soon. The second problem deals with savings. Keynes believed that savings was bad because it prevented investment and should be discouraged. There isn’t any saving to be discouraged because there aren’t any savings to be had in the US.
People can (and will) argue all they want about what might have been, but FDR’s policies worked.
Re: the current situation. Essentially, it’s a crisis of confidence. No one wants to borrow or lend. Pumping some money into the economy at least keeps the cash flowing and might even make some investments attractive, putting a little pull on the credit system. Also, if unemployment figures stabilize it might convince some investors that we have reached bottom and that it’s a good time to go bargain hunting.
The bottom line is: Does it help? If not, do you have a better idea? NOT: Can people debate it? The answer to that one is always yes.
I encountered the editorial writer on line a few days ago, confirming that my inkling was correct. While congratulating myself on my own expertise in text analysis, I am compelled to leave the rest of you in the dark until such a time as the writer may choose to come out of the closet. 
The fact that the bonuses were purposely stuck into the package by Dodd, who is now suffering the results of this info outing, is a quite interesting POI.
I have not seen the CP(China Post?) so I cannot address that item specifically. I will offer my opinion that 98% of the “editorial” offerings in all of the english lingo papers here are completely adequate for the market they serve.
[quote=“BigJohn”]People can (and will) argue all they want about what might have been, but FDR’s policies worked.
Re: the current situation. Essentially, it’s a crisis of confidence. No one wants to borrow or lend. Pumping some money into the economy at least keeps the cash flowing and might even make some investments attractive, putting a little pull on the credit system. Also, if unemployment figures stabilize it might convince some investors that we have reached bottom and that it’s a good time to go bargain hunting.
The bottom line is: Does it help? If not, do you have a better idea? NOT: Can people debate it? The answer to that one is always yes.[/quote]
The thing is economists are looking back and saying “hmm maybe FDR’s policies really didn’t work like we thought they did”. They have new theories and understandings in how the market works. They now know that the Smooth-Hawley Tariff Act was a horrible idea. They know that artificial price floors on consumer goods was worsened things. Buying up 8 million pigs and slaughtering them was bad too. Lots of FDR’s policies are now known to be bad in an economic sense. They were also found to be unconstitutional by the Supreme Court.
I agree with you in a sense that it’s a crisis of confidence. It is also the US having to radically change the consumption level we’ve been living at for the last twenty years. A lot of businesses have found their services turned into commodities thanks to the internet. They were operating with thin margins and expanding out to try and grab market share.
When that market share is based solely on credit spending you have a small, but manageable, problem. It can become a bigger problem when people are purchasing your goods on credit and living above their means in doing so. Your expansion is based off of a purchasing trend that can’t continue indefinitely because it isn’t sustainable.
The debate is as important as everything else in our system. You can say that plan A won’t work even if you aren’t sure if plan B will work. You don’t need to go along with plan A and not argue about it just because we have a crisis, or because the President isn’t George Bush. Plan B may not work either but it may cause less damage than Plan A would.
I’m saying the debate needs to be solution oriented, not just political talk. We don’t want to sit around debating while the economy goes to shit. It’s like how the captain of a ship must act with confidence even if he is personally unsure of his decision. A crisis in political confidence in how to respond to the crisis in economic confidence won’t help.
People who oppose the bail-out package need to provide an alternative, or else it simply isn’t helpful. BTW,with respect to a kick start effect, the productive capacity in the US economy is already there, it’s just laying idle. Pumping cash in might help get some of it moving again, by saving jobs and hence maintaining spending levels.
Also, if you say it wasn’t the New Deal and WWII that restarted the US economy after the GD, what was it?
[quote=“BigJohn”]I’m saying the debate needs to be solution oriented, not just political talk. We don’t want to sit around debating while the economy goes to shit. It’s like how the captain of a ship must act with confidence even if he is personally unsure of his decision. A crisis in political confidence in how to respond to the crisis in economic confidence won’t help.
People who oppose the bail-out package need to provide an alternative, or else it simply isn’t helpful. BTW,with respect to a kick start effect, the productive capacity in the US economy is already there, it’s just laying idle. Pumping cash in might help get some of it moving again, by saving jobs and hence maintaining spending levels.
Also, if you say it wasn’t the New Deal and WWII that restarted the US economy after the GD, what was it?[/quote]
A crisis in political confidence is what is inevitable when our political parties have different ideas on what to do. The Democrats plan had lots of spending and less on tax cuts. The Republican response has been that you need to cut taxes more and go with less spending. The argument largely is on what spending will help and what is wasted. The reason the market hasn’t responded, in my opinion, is not because the Democrats and Republicans are arguing. It’s because in the middle of the worst economic crisis that we’ve had in 60 years our Captain is focusing on fixing things unrelated to our economy. Those items are important, and deserve their time, but fixing health care won’t fix our economic system and neither will implementing a cap and trade system for carbon.
Yes something needs to be done about how our health care spending is spiraling out of control. Yes something needs to be done about global warming, getting the US off foreign oil and jump starting alternative energy. The thing is that our Captain has said that to fund his plan of expanded health care, he is going to tax the very rich. He said that to deal with foreign oil and jump start alternative energy, he is going to institute a carbon cap program, which is a kind of tax. He provided some details with the first plan and very few with how the tax structure will be implemented on the carbon cap program. When you raise taxes you slow down investment and the creation of new businesses. You create a dead weight loss because the government is inefficient at collecting taxes. The very rich have an easier ability than ever to choose where to invest, and raising taxes on them makes them less likely to invest here than somewhere else.
Spending levels can’t be maintained at what they were. Those spending levels involved people buying everything on credit with future money, and not today’s cash. Far too many Americans were carrying large balances on credit cards because they were spending more than they earned every year. It also involved a lot of people buying houses, refinancing and then using the difference to buy shiny things. The housing market tanked so they can’t do that anymore. They can’t pull their money out of their stock market portfolio because they did that in the lead up to the 1998 stock market bubble. Americans can’t go into their savings account because they haven’t been saving over the last twenty years. Basically jobs can’t be saved and we need to find a sustainable spending level, which I don’t think we have found yet.
Economists are becoming more sure that it wasn’t the New Deal. Everything that FDR did during the New Deal was to lower the productive level of workers while giving them a higher wage rate. This made it so that fewer people were employed by business and then the unemployment rates stayed high until the people were employed by the government. FDR also instituted a price floor on most items so that you couldn’t charge below a certain amount without going to jail. That hurt the consumer and changed the demand.
Economists aren’t as sure about WWII because there aren’t any numbers for consumer consumption during those years due to the wartime restrictions. Consumer goods are the primary way in which to judge the economy through the GNP and GDP. Building munitions and ships throughout the war was necessary until VE and VJ day. After that the biggest question was what would everyone do now that the majority of people weren’t necessarily going to build guns and ships anymore. The conversion of factories to make peacetime products is pretty amazing, but it wouldn’t have happened if Truman hadn’t relinquished the top down control on consumer goods. Starting in 1946 the economy took off as a result of that decision.
Ibksig:
I believe the US economy started to recover in the late 1930’s. There is doubt about the details, but please provide me with a reputable, unbiased source that says that FDR made things worse, or didn’t help. FDR came along, then there was the New Deal, then massive production - federally funded or controlled - for WWII, and the economy started picking up. I’m not saying that Truman didn’t help, but it was the factories that FDR helped build that he used. You can’t just say Truman gets all the credit.
So, are you saying that the stimulus package hasn’t helped prevent a global melt down? People say “it isn’t working” because we’re still fucked. If there hadn’t been one, more banks would have fallen, and it would be real doom and gloom as everybody would feel that there is no global consensus on how to keep the machine moving.
BTW, you still haven’t said what YOUR solution is. What do you recommend?
Oh, and I am not a lefty, at least in my own eyes. I believe there is a time and place for government to step back and let business do its thing, and a time and place for government to intervene. All these theories of efficiency in business can obscure the fact that businesses did not reliably provide health care to 40 million people in the world’s wealthiest nation. Who else you gonna tax, if not the very richest?
I agree that it’s awkward timing to pass this stuff, but it’s doubtless because Obama knows that if he doesn’t do it now, he’ll never get it done. It’s his gift to America’s helpless. It’s also a sign that he is confident in a recovery. I hope he’s right!
Tainan Cowboy: You are saying tax cuts will save the economy? And less government spending? Right now??
[quote=“BigJohn”] Lbksig:
I believe the US economy started to recover in the late 1930’s. There is doubt about the details, but please provide me with a reputable, unbiased source that says that FDR made things worse, or didn’t help. FDR came along, then there was the New Deal, then massive production - federally funded or controlled - for WWII, and the economy started picking up. I’m not saying that Truman didn’t help, but it was the factories that FDR helped build that he used. You can’t just say Truman gets all the credit.
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I provided reputable sources in this thread in on the Republicans voting down Tax cuts. Every economist has a bias, just as every person has a bias. An economist could be Keynesian, a Free market, of the Austrian school, etc. I can’t provide you with an unbiased source because no such thing exists. You’ll just have to decide how much weight to give each source yourself as you read it.
One of the problems is you are leaving out the bad things that FDR did. He locked prices higher on consumer goods, like food, than they would have otherwise been. Many couldn’t afford food as a result. He kept Hoover’s minimum wage requirement, which meant that companies couldn’t afford to hire more workers. Productivity decreased while wages stayed the same making everything more expensive. To show you what some of the damage was, I included quotes about the Agricultural Adjustment Act and the National Recovery Administration ended up doing.
If you want to try and argue that it was WWII that brought us out of the Depression, that’s an understandable argument. It’s clear that the New Deal didn’t do anything to increase production or help the economy. All the New Deal did was try and lower unemployment, expand government control over business and raise taxes. The problem with the WWII argument is that the productive capacity had been converted to make war supplies. War supplies weren’t as useful after the war so someone had to take the risk to try and provide more consumer goods. They couldn’t do that under the top down control system that FDR ran before and during the war. Truman got rid of the system, went back to a decentralized market and then the US economy expanded. I am saying that FDR didn’t help because FDR didn’t do anything to build factories during the New Deal. Had Truman not decentralized the economy the US never would have had the expansive growth of the middle class that came in the 50’s and 60’s.
The stimulus package or the bailouts of AIG and others? I don’t think the stimulus package has done anything yet to prevent a global meltdown. The bailouts, which are a separate act of the US Congress, kept the dominoes from falling. Below I copied the title of “American Recovery and Reinvestment Act of 2009”, otherwise known as the Stimulus bill. While I support expanding health care and education, those aren’t critical priorities right now. Stop the hemorrhaging before you worry about small cuts. Get the credit market unfucked and then sit back and wait for it to fix itself before the government causes another bubble in a different industry.
[quote=“Open Congress”]American Recovery and Reinvestment Act of 2009
A bill to create jobs, restore economic growth, and strengthen America’s middle class through measures that modernize the nation’s infrastructure, enhance America’s energy independence, expand educational opportunities, preserve and improve affordable health care, provide tax relief, and protect those in greatest need, and for other purposes. [/quote]
My solution is let the assholes who were living in homes that cost 10X their yearly income eat cake. Why should my tax dollars go to support someone who was greedy? I think that government intervention should be minimized as much as possible. I think people should be allowed to succeed or fail on their own merits. I don’t like the idea of the government choosing the winners or protecting the losers from failing. The unintended consequences is that further down the line people come to expect the government to protect them from losses when they take excessive risk. They expect the government to protect them from themselves.
Tell me why the very richest, for the sole purpose of being rich, should pay for the 40 million to have health care at no cost to them. Why should businesses have to provide health care to everyone? It’s supposed to be a perk or benefit to attract quality labor, not as something you are entitled to just because you’re an American. I have to wonder how many of those 40 million are 20 somethings who choose not to pay for health insurance because they think they won’t need it. How many are actually poor who truly can’t afford it vs. people who would rather spend the money for the premiums on something else like $200 basketball shoes.
[quote]I agree that it’s awkward timing to pass this stuff, but it’s doubtless because Obama knows that if he doesn’t do it now, he’ll never get it done. It’s his gift to America’s helpless. It’s also a sign that he is confident in a recovery. I hope he’s right!
[/quote]
Or like FDR, President Obama sees that he has a chance now to use the crisis to get his domestic agenda passed. He won’t get it passed once we recover because there will be too much opposition to his grandiose plans without concrete details. He may be confident in his plans, but I’m not confident in how he plans on financing things. When he passes a tax on the rich, that reduces the number of people in that category. Health care costs for the poor are never going to decrease as long as you don’t require obese people in the US to exercise as a requirement for getting health care. Health care costs will increase, based off supply and demand, and the pool of people to leech off of will decrease.
[quote]
Tainan Cowboy: You are saying tax cuts will save the economy? And less government spending? Right now??[/quote]
Knowing our Congress, they will never decrease the federal deficit if they don’t have to. They will always find something that needs to be federal funds in their district. Tax cuts will do more than unsustainable federal spending. We are just transferring unsustainable consumer spending to unsustainable federal spending right now.
Well, it’s a huge argument to get into, and one that I would rather do over a beer than online. So I’ll agree that we disagree.
My parting shot is just to say that I am a compassionate person and I like to think of people being kind to each other and helping each other out when necessary, and not leaving their brother or sister human to rot. Ohhhhhhh you may say that I’m a dreamer.
People on the far right (by Canadian standards) say that government helping business is good for the economy. I also say that government helping families and individuals is good for our humanity. (BTW, who gave those “assholes” mortgages? If the banks had said no then we wouldn’t be in this mess, now would we?
Oh, and thanks for being civil even though we obviously have very different views.
Bye for now!
[quote=“BigJohn”]Well, it’s a huge argument to get into, and one that I would rather do over a beer than online. So I’ll agree that we disagree.
My parting shot is just to say that I am a compassionate person and I like to think of people being kind to each other and helping each other out when necessary, and not leaving their brother or sister human to rot. Ohhhhhhh you may say that I’m a dreamer.
People on the far right (by Canadian standards) say that government helping business is good for the economy. I also say that government helping families and individuals is good for our humanity. (BTW, who gave those “assholes” mortgages? If the banks had said no then we wouldn’t be in this mess, now would we?
Oh, and thanks for being civil even though we obviously have very different views.
Bye for now![/quote]
It’s also a very good thing that we can disagree without resorting to name calling.
I don’t think it’s bad to be a dreamer, I just know that I’m not one. I would love to give the 40 million Americans who don’t have health insurance a free way in which to prevent small, treatable conditions from growing to the point that it requires an ER visit. The thing I worry about is how to pay for it. Providing it for free will drive up health care costs for everyone as people start going in for office visits, procedures, and everything else. As more people use the program the costs will continue to go up. If you start charging co-pays, there will be some people who can’t afford co-pays and they will be left out.
Health care is increasing yearly as new and better procedures come out, new drugs, etc etc. The health care plan that President Obama has put forward lacks details about what it will cover. What will be covered under the plan? Is it basic office visits for free or low cost or is it similar to a private insurance plan but without having to pay monthly premiums?
I also worry about the eventual coverage creep that will occur as vocal groups who are underrepresented now (minorities and the poor) want the government program to cover their condition. This goes mainly with how to pay for it. If the 40 million people will be covered by taxes on the ultra rich that may work for today but will it work for tomorrow? There is a set amount of money you’ll collect from the taxes but the amount you’ll be spending is going to continually increase. That means that the government will have to divert funds from another source to make up for the shortfall or continually increase the taxation on the rich to pay for it. That’s a big obligation to take on and there needs to be some actual discussion about how to pay for it.
The CEO’s at the banks got to keep their jobs. The lowly loan officers who made the loans have lost theirs. The homeowners are getting relief to try and allow them to refinance their mortgages at lower rates due to the fact that they didn’t read what an interest only loan or an ARM are. So the big guys stay in place, the middle ones got fired and the homeowners get to keep their houses. The government officials who pushed Freddie Mac and Fannie Mae to loan to high risk borrowers didn’t have to answer to the public did they?
EDIT:
I’ve deleted my rant, and will just say I really disagree with a ruthless or callous approach to government.
BigJohn: Life is a two-way street though. If rich people have an obligation to help the poor, where’s the obligation of the poor to behave responsibly? Where’s their obligation to stay in school, and not to engage in self-destructive (and expensive) activities such as (but not limited to) the over-consumption of tobacco, alcohol, bad foods (with little corresponding exercise), gambling, etc.? Why should the rich be expected to be disciplined when so many of the poor have virtually no self-discipline?
It’s not only the poor who lack discipline: One could argue that the current financial crisis was caused by a lack of discipline. Also, beyond discipline is the larger concept of responsibility. The rich often behave irresponsibly, as in resisting higher fuel efficiency standards for cars as the Big 3 have, going along with Big Tobacco, etc etc yadda yadda Micheal Moore stuff.
But how about health care? That’s a basic public service in most countries, but not for many in the US. Yes, people need to be responsible - across the board. And yes there are losers out there that made a mess of things. But I don’t like it when these arguments are used to deny basic services to citizens or hide the greed of the power elite.
I don’t think anyone, rich or poor, who makes a hash of things should be bailed out or let of the hook.
If they’re such basic services, then why shouldn’t people be expected to get their basic acts together and provide them for themselves? Plenty of poor people always have money for cigarettes, alcohol and bad food. Ironically, they’re the things that often get them in the mess in the first place. If I absolutely had to agree to universal health care, at the very least, I’d expect there to be heavy conditions placed upon it such as if you smoke, abuse alcohol or other drugs or are obese, you don’t get it. The trouble is that it would be almost impossible to really stop people from harming themselves. Even if the government monitored these things and/or gave them food stamps, etc., they’d still find a way to abuse themselves, which brings us right back to square one: that those who behave responsibly get punished by having to carry those who don’t because the only people governments can get to do the right thing are the very people who least need government to be telling them what the right thing is and how to do it. Everyone else does whatever the hell he likes and then expects someone else to foot the bill.
These are ‘middle class’ values. The true rich require neither self-discipline, nor inexpensive activities to maintain or improve their status.
Oh, the nouveau-rich are so insipid, dull and garish.
God give me tobacco, alcohol and more dancing.
How did a thread about democracy vs. republics end up about US fianical crisis?
Democracy is a form of government where the majority rules, usually through a voting procedure.
Republics are governments where individual reliquish their rights to govern to representatives, who are usually elected, or put into office by those who are elected.
The fundimental difference is how each form of government will treat those in the minority. In a pure democracy no consideration for the minority is needed. In a republic, the representative doesn’t need to be at the whim of the majority and weigh the needs those in the minority, it is entirely at the discretion of the representative.
The US crisis, I think it can be sum up in a statement by some economist. The system broken and was unable to handle the cash flooding the US system.
GuyInTaiwan: Your views are extremely harsh and show a lack of compassion or even a willingness to look at things on a case-by-case basis. Are you going to say to some guy with a treatable cancer but no health insurance, “You should have lived your life differently. Now, I’m not going to help you on principle.” ?
Charlie Phillips: Indeed, they are middle class values, because the middle class are the ones who get screwed.
Put the shoe on the other foot. While he’s out living it up in his youth, does he give a second thought to the guy squirrelling his money away or paying for stupid things like health insurance premiums? People who don’t take responsibility for their futures (yet expect those who act in a responsible manner to do so) have extremely harsh views and show a lack of compassion. They’re not some poor, downtrodden segment of society. They’re just as selfish and callous, if not more so. The difference is that they often cause a whole lot of social ills as well.
I’ve seen this exact course of events affect my parents both directly (through my mother’s white trash relatives who have let money slip through their fingers before coming and sponging off my parents) and indirectly (through my parents working their arses off in jobs or a small business, paying for private education of their children, private healthcare, etc., and still getting raped on taxes for yet more irresponsible people).
So, to answer your question, yes, I would tell him he should have lived his life differently.