The Obama Watch
The Coming Crash of 2011
There will be naturally occurring economic growth this year — but then Obama’s neo-socialist, recovery delaying policies kick in for good and we better hope the rest is just his history.
Americans no longer remember the concept of the “business cycle.” For centuries, market economies have periodically turned down, and then turned back up. The recovery from such downturns is natural for a market economy. Every morning, at least some of the unemployed get up and look for work. Businessmen wake up and spend the day trying to restore their businesses to prosperity. As a result, market economies naturally come back to recovery. This is why the average recession in the U.S. since World War II has been only 10 months, with the longest, until now, being 16 months.
Bad economic policies can throw economies into downturns, and delay recoveries. Keynesian economics and rising effective tax rates produced four worsening inflation/recession cycles in and around the 1970s: 1969-1970, 1973-1974, 1979-1980, and 1982.
But Reaganomics was so successful that it all but abolished the business cycle for a generation. The economy took off at the end of 1982 on a 25-year economic boom interrupted by only two, short, shallow recessions in 1990-1991 and 2001. That is why today we no longer recognize the natural workings of the business cycle.
The current recession was officially scored by the National Bureau of Economic Research (NBER) as starting in December, 2007. It was caused by excessively loose Federal Reserve monetary policy from 2001 to 2006, and the liberal policies creating the subprime mortgage market, resulting in the catastrophic housing bubble.
As previously explained in this column, from the beginning the government tried to address the downturn with long ago failed, counterproductive, Keynesian economics, rather than Reagan’s shockingly successful supply-side economics. First there was the Bush/Pelosi stimulus bill of February, 2008, since forgotten because it had no positive effects.
A year later, President Obama and Congressional Democrats came back with the almost $1 trillion stimulus bill, promising that it would stop unemployment from climbing above 8%. These bills both involved Keynesian economics because they tried to stimulate the economy through higher government deficits and spending. Even the “tax cuts” in those stimulus bills involved tax credits and rebates that effectively are the same as just more government spending, sending out government checks, rather than the tax rate reductions that were the focus of Reaganomics and supply-side theory, which fundamentally change economic incentives. The slow and weak recovery from the recession, which has lasted almost two years (a postwar record), shows yet again the failure of Keynesian economics, continuing a long, unbroken record of failure stretching back to the 1930s.
But the Obama Administration came into office knowing that the economy would ultimately recover as the business cycle turned up naturally, and planned to reap the political credit, enabling still greater leaps of neo-socialism. Internally, they are surprised and miffed that it has taken so long, not understanding that their own, blindly anti-market policies only delayed recovery.
The Plague of Left-Wing Propaganda
A plague of left-wing propagandists from such pustules as the George Soros-funded Center for American Progress are already feverishly at work attempting to obscure these economic realities. On a recent broadcast of the Larry Kudlow Show on CNBC, Art Laffer politely sat through an infantile lecture from Michael Linden, Associate Director for Tax and Budget Policy for the Center, claiming that Laffer had been “long discredited” in his argument that cuts in capital gains tax rates produce higher revenues.
But the truth is that over the past 40 years, every time capital gains tax rates have been cut, revenues have increased, and every time capital gains tax rates have been increased, revenues have declined.
In 1968, a 25% capital gains tax rate generated real capital gains tax revenues of $40.6 billion calculated in 2000 dollars. The capital gains tax rate was then raised 4 times in the next 7 years to 35%. By 1975, at the higher rate, capital gains revenues totaled $19.6 billion in constant 2000 dollars, less than half as much.
In 1978, the capital gains tax rate of 35% yielded $29.9 billion in 2000 dollars. The rate was then cut 3 times to 20% over the next 4 years. By 1986, the new rate, 43% lower than the 1978 rate, raised $92.9 billion in 2000 dollars, about three times as much.
The capital gains rate was raised by 40% the next year, to 28%. Capital gains revenues fell to $56.2 billion that year, and declined all the way to $34.6 billion by 1991.
In 1997, Congress cut the capital gains tax rate from 28% back down to 20%. Despite this almost 30% cut in the rate, capital gains revenues rose from $62 billion in 1996 to $109 billion in 1999. Revenues over the period 1997 to 2000 increased by 84% over the projections before the tax cut.
Finally, Congress cut the capital gains rate from 20% to 15% in 2003. Capital gains revenues doubled from 2003 to 2005, despite this 25% cut in the rate. Revenues increased by $133 billion during the years 2003 to 2006 as compared to pre-tax cut projections.
About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.
Letter to the Editor View all comments (118) | Leave a comment
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Bill Hussein O'Stalin| 2.10.10 @ 6:35AM
It's hard to discuss or read economics without interjecting personal beliefs along with the facts. Here's what I believe is about to occur or perhaps not occur. I don't think the FED will do much more then discuss raising rates. The business class is still either imploding or pondering the next moves of the Plutocracy inside the beltway. Just the threats presented by lame brained plans of nationalized health care and cap-tax-trade, have slowed the momentum of the business class. The government has taken on a role over the last 40 years of permanent arbiter of all issues, no matter how germane. It's all been done of course to help the people but in actuality it's grown the government. The growth of government has not lead to efficiency but has lead to massive blunders and even greater inefficiency. You predict a bad 2011. I predict it will start to unravel this September and by 2011 the unraveling will be on a roll which will lead to panic in many sectors. A bigger worry is if the FED and the Treasury try to debase the currency through some type of collusion. All government largess leads to entropy.
Wilderness Lurker| 2.10.10 @ 11:52AM
I agree in large part to your comments. The risk is there that the administration and the Fed will let the dollar get weaker so as to export the deficit to the offshore types like China who are now threatening to use dollar reserves as a weapon. This means inflation aka a hidden tax on all of those
Doug | 2.10.10 @ 4:52PM
Hyper inflation is coming to your town ! I am glad I have a safe haven in another so called "3rd World Country" where everything is much cheaper.
www.info37.info
Hotrodroy| 8.12.10 @ 10:50AM
Bill, I know I am responding way late, but, better late than never, I guess. I really like what you said about the government has become the permanent arbiter. Our whole problem in this great country is the Federal Government! I just have to say that it is obvious that our government has its focus on the world, not the United States. We all have to remember that one world government is the ultimate goal in all this. It is the only way that "peace and security" in the world will ever be obtained in the mind of our governmental insitution. It is Biblical! God knows it won't work, but try to tell that to the so called smart guys in our world.
Thomas Jefferson, Ronald Reagan and JFK all talked about the Federal Government as being the problem, not the solution. Income taxes and banks issuing money are the biggest problems we face and they go hand in hand.
Income taxes gone= increased business to a level that would be unbelievable. Most of our revenue comes from excise taxes. If income tax was abolished, revenue would sky rocket and businesses would spring up everywhere!
We started on a bad path under FDR and it is killing us,because the Government can't run anything right. Social Security could be great, but it should have been done under each persons own name and account and after some years we would have so much money it would be wonderful. And, allow that money to build from generation to generation! Our government doesn't want that to happen! They want control!
jan| 2.10.10 @ 7:33AM
I just could not wade through this article.
THE FACTS ARE SIMPLE:
No small business person has trust in this administration. They will not hire. They will not increase inventory over bare bones need. They will not borrow. ONCE TRUST IS DESTROYED IT IS IMPOSSIBLE TO GET IT BACK. Not until this president is out of office will we rebound. Any new president would be better for business than this one
grant1863| 2.10.10 @ 10:16AM
"any new president" , that's what was said in the last election. watch what you wish for.
GUI| 2.10.10 @ 10:28AM
Jan, I could not agree with you more. The day after Obama beat Clinton in the Super Tuesday presidential primary I began converting every one of my assets to gold because I could see the writing on the wall. I saw that we were going to have an enemy of the free market in the White House and the only way to have even a slim chance of surviving him would be to hunker down and ride out the storm. Apparently I am not alone.
If, God willing, we are fortunate enough to survive this disaster Obama will be the last enemy of the Constitution to ever see the inside of the White House.
Pingback| 2.10.10 @ 7:39AM
The Coming Crash of 2011 : USACTION NEWS links to this page. Here’s an excerpt:
Melvin| 2.10.10 @ 7:56AM
People, Mr. Bill is right, bad juju is heading our way. This Ponzi scheme that we have been living under since after WWII will unravel and unravel quickly.
Those who have the ability will desert this sinking ship like rats to cheese, but the problem with that is, the rest of the world will also be going through the same economic convulsion as well. Money will basically become worthless.
I have read of multiple sources that what Bill eluded to is going to happen in the very near future.
Chaos and hysteria will remain surpreme, and to quell the unrest, Obama's council of the round table will come down with an iron fist in more ways than one.
Of course society will rebuild, but the question is, to whose blueprint?
Becky| 2.10.10 @ 8:16AM
I agree with jan. This administration is running on theory, not experience. We are the guinea pigs, they are certain of their own economic security.
Economics is a complex system and the average American only understands his paycheck, not what all the deductions are for. The average worker doesn't even realize what his cost are to his employer for things like unemployment and workman's comp are not listed on his paycheck stub.
I got a call from an employee once saying her husband got health insurance from his job, and to quit taking out the Med deduction. She was in her 40's and didn't have a clue what it was for.
I wish Laura Bush had emphasized eliminating economic and numeric illiteracy instead of promoting literature.
Bob| 2.10.10 @ 8:25AM
Again, Ferrara shows a total lack of understanding of economics and proves he is just another political hack.
Reaganomics was not extremely successful as one of Reagan's own top economists has said:
http://www.econlib.org/library.....omics.html
And as I've said many times, tax cuts are not stimulative. Just look at inflation adjusted GDP over time:
http://www.data360.org/dsg.asp.....oup_Id=230
By the way, there is also no evidence that Keynesian spending has any real effect on GDP as well.
And your statement regarding capital gains cuts and federal revenues in constant dollars is just not true when you look at ALL of the data. I will post a link to the federal revenues chart following this post so people can see for themselves that you don't understand economics.
The business cycle has not been repressed, it has been enhanced by the financial manipulation of Wall Street. True cycles have been overshadowed by bubbles -- the dotcom bubble in the late 90's and the housing bubble a few years ago. The housing bubble was not caused by subprime mortgages as you've said, because the rise in housing values associated with non-subprime mortgages were actually greater than subprime homes. And it was securitization and the resultant reformation of this process into derivatives and swaps that caused the latest recession.
So, Ferrara, why don't you stick to the legal issues you were trained for rather than stepping into economics which you obviously know little about.
Bob| 2.10.10 @ 8:26AM
Here is the chart of federal revenues:
http://www.heritage.org/resear.....-1965.aspx
Howard| 2.10.10 @ 8:36AM
So, what is your point? Are you saying the 1980's were not an economic success? Frankly, as a CPA I would believe low tax rates combined with minimal deductions would be more efficient than the current system. But that would take the political class out of the tax favoritism game. And I still am of an old fashioned sense that people should keep more of what they make. I don't believe the Constitution states that all wealth belongs to the government, unless otherwise allowed to the citizens.
Bob| 2.10.10 @ 8:44AM
Remember that there was high inflation in the early 80's. Once you correct for inflation (you do agree that inflation is not real growth), there was no greater growth in the 80's than any other period. The problem with tax cutting is that it raises the debt. As a CPA, you should understand that. Here's a chart of the national debt as a percentage of GDP:
http://zfacts.com/p/318.html
I am a firm believer in making government smaller and reducing government spending. But if you are a CPA, you should actually take a look at the federal budget to see that the problem is entitlements, not non-military discretionary spending. That's why I support Paul Ryan's plan on cutting entitlement spending. Yes, people will say that more Grandma's will die -- and they will, but that's OK with me. We can't give everything to everyone since health care is a privilege, not a right.
More importantly, if you are really a fiscal conservative, you should value balancing the budget more than cutting taxes. If our politicians are not going to cut spending, it is immoral for us not to pay for it and put that burden on our children.
carnot| 2.10.10 @ 12:18PM
so Bob....as someone who has contributed to social security, medicare, etc., his entire life...and now that I am approaching mid-50s......why should I buy into something that offers no return at all on an investment the terrorist powers of the government were used to enforce?
want to see real domestic violence? just abrogate the contract the government forced on me and others our entire working lives.
Cody| 4.30.10 @ 7:26PM
Hi carnot i am a strong believer in Social security.Social security can be easily fixed by cutting 70% of the military budget,making laws that administrations cant borrow money on social security,maybe raise the pay role taxes by 2%,make the employer & employee split the 2% increase,problem solved.
Cody| 4.30.10 @ 7:54PM
Carnot another i forgot add about fixing Social Security,stop the flow illegals coming in the United States,their costing the tax payers billions of dollars each year,do not give illegals food stamps,Social Security or medical help,make strict laws that if employees hire illegals they should pay a heavy fine and face up to 5 years in prison.Another thing to do is if illegals are on a guest work program make them pay taxes like everyone else does.That is all i can think of right now.Let me know if that sounds like a good plan to fix Social Security.
carnot| 2.10.10 @ 12:27PM
yawn...same argument reich made on the WSJ OpEd pages a couple days ago...though his piece was more qualified about where the deficit spending should occur in the cycle. I refer you to the many letters to the editor in todays edition that call into question the entire reich ideology...excuse me......keynesianism.
Klaus| 8.9.10 @ 9:22PM
Tax cuts increase the revenue base, tax increases are regressive and shrink the revenue base. What is your connection to the Obama administration?
Greg| 2.11.10 @ 4:35PM
Bob: Interestingly, the chart you link to from heritage.org (http://www.heritage.org/research/features/budgetChartbook/Federal-government-revenues-have-more-than-tripled-since-1965.aspx) shows just the opposite of the point you are trying to make. In fact, the headline of the article states that the revenues increased because tax rates were cut. Read the article linked to at the bottom of this chart to find that Ferrara is exactly correct. http://www.heritage.org/Resear......cfm#_ftn4
LQQKY| 2.10.10 @ 8:44AM
WOW Bob. I really pity you -- it must really be difficult to get up in the morning, knowing that you are the smartest? person in the world, surrounded by retards, and then get dumped on by us, who usually make more sense than thee. Perhaps you should replace the messiah in the white house -- you seem to have the same (whoops higher) level of intelligence (read same dumb ideas), so it couldn't hurt. BTW, "retarded" was an accepted medical diagnostic term until PC got in the way.
MikeD| 2.10.10 @ 8:26AM
You're unfortunately correct. Additionally, nobody really has a clue what is going to happen. We're all venturing in uncharted territoty. Some possible scenarios include:
1. The dollar remains the 'go to currency'; not because of any intrinsic strength, but because the rest of the world will be in worse shape and the dollar will be seen as the 'safe haven'.
2. Continuing the same scenario; the dollar remains viable until the people holding it realize that there's nothing backing it up and the collapse is even worse. Chaos then reigns and law and order in the U.S. is at the point of a gun.
3. The rest of the world is such a mess that the dollar is psychologically 'propped up' and remains the currency of choice for the forseeable future.
4. Obama continues to make really bad decisions; our economy completely tanks, and the U.S. is no longer a factor in the world economy. At that point, all bets are off and the U.S. is no longer a safe place to live.
Of course, all the currencies in the world, with the possible exception of the Swiss Franc, are 'fiat' currency, not backed by anything except the perception of strength represented by the government that has printed it. Some other countries, like Australia, may present the hope of a stronger currency because their budget is sorta balanced and their economy is natural resource and commodity based. But, nobody knows because the whole system is based purely on perception; if people THINK a currency is stable, it will be. If people don't; it will collapse. We may be heading for a 'barter system'.
Into this mess we should also figure the artificial elements like the moronic 'Cap and Trade' laws under consideration in various countries, like the U.S. and Australia. This would upset the applecart and at least temporarily disrupt international trade because of the unknown costs of fuel.
This whole thing makes my head hurt. My feeling is, after realizing ALL I DON'T KNOW, is to diversify into a few currencise I have some confidence in, go to a 'backwater' country, of which there are several with solid economies, infrastructures, and even decent health care systems, and 'lay low' until the dust clears.
Obama and his buddies are such ideologues that it is not possible to reason with them. Unfortunately for those of us who'd love to see justice done, history will have to take care of obama and his fellow co-conspirators.
Jim O'Brien| 2.10.10 @ 8:29AM
Solution: 1) Abolish the federal income tax and replace it with the Fair Tax (www.fairtax.org); 2) Congress repeals everything not authorized by the Constitution; and 3) pass a balanced budget amendment.
Bob| 2.10.10 @ 8:37AM
Jim, the concept of the fair tax is good, but in this internet age, the purchase of black market goods would then become a huge problem. We would need less IRS but we would need an organization just as large to continually find black marketeers.
I would prefer a flat tax and then eliminate all other taxes just like the fair tax. No more excise, death tax, capital gains, etc. Rather than giving the lower income people "stipends", you'd just start the flat tax at some reasonable level like 20K. That said, I think a consumption tax to replace business income taxes makes a lot of sense and would be far easier to manage and regulate.
Alex| 2.10.10 @ 9:21AM
Ever, for a second, wonder why there would be such a thing as a black market?
Your thinking disgusts me. Statist, elitist and controlling. No matter what, you want to tax the hell out of whomever you can, as much as you can, just short of bullets flying. As if economic policy is some chess game with you protecting your king at all cost. Devising ever more complex and unreasonable forces of law to trap the industrious. You assume the government is entitled to the fruits of MY labor. FAIL
Jim O'Brien| 2.10.10 @ 1:30PM
Illegal immigrants, tourists, and assorted criminal elements currently evade the federal income tax. But with the Fair Tax (www.fairtax.org) virtually everyone who wants to buy goods and services will be paying the national sales tax. Housing, clothing, cars, airline tickets, sporting events, food, medicine, professional service fees, etc. There would be no sales tax on used goods, just new. But the tax would apply to all services. There would be no payroll withholding tax, no Social Security tax, no death tax, no capital gains tax, no tax on dividends or interest, no need to spend $300 billion just on compliance with the existing system, and no IRS. Read about it at www.fairtax.org
The Observer| 2.10.10 @ 8:38AM
Fortune 100 companies are already well advanced in shipping their jobs overseas. O's big business partners (executives in the major financial houses, tech firms (HP, IBM, etc.) have publicly documented where their investment, focus and energies are focused - and it isn't in the US and North America.
Matt| 2.10.10 @ 9:06AM
Also check out Walton's Wall and how the Stimulus Bill Creates Jobs… In China.
http://waltonswall.com/2010/02.....eates-jobs…-in-china/
Tim| 2.10.10 @ 9:21AM
Massive inflation. It is coming.
Paul Nelson| 2.10.10 @ 7:01PM
Coming? Everything I buy is alraedy 20% more expensive than it was 2 years ago.
DR_X| 2.10.10 @ 9:51AM
If you have a credit card pay it off and if you have savings spend it! the 1970's are back.
My son wants to earn a Ph.D but to do so he will need to borrow $16,000 per year for three years. I'm telling him to wait because there is a good chance he will get to year two and have to take out a student loan with a rate of 25% or more!
Everyone needs to pull back on spending with the large tax hikes and hype-inflation that is on the way.
Welcome back Jimmy Carter...I just hope there is a Regean waiting on the other side.
Ken (Old Texican)| 2.10.10 @ 9:53AM
If we get to work and elect a solid conservative congress, we can duck that crash.
All we business people need is a "solid business climate" legislated into being.
Oil/gas drilling and production would put millions to work literally overnight.
The working capital "sitting on the sidelines" is trillions of dollars...with Capitalists all over the world hoping to put it back to work.
Millions of others could be put to work in construction. Over night.
I remind each of you that in what? 1939? our factories began cranking up to build war materiel. By 1941 ship building added to the boom.
We just need to declare "war" on stupid and lazy.
Pingback| 2.10.10 @ 9:57AM
Dinocrat » Blog Archive » Cause and effect links to this page. Here’s an excerpt:
Bill Hussein O'Stalin| 2.10.10 @ 10:08AM
In fact, it's been proven time and again that Keynesian spending always leads to disasters and that's not good for GDP or anything else. Read this article. If you could spend your way out of a disaster the government could simply print and give everyone a million dollars. Obviously only a lunatic would support that.
http://mises.org/daily/4089
Most economists, including the White House chief economist Christina Romer, hailed the Q4 GDP data as "the most positive news to date on the economy."
But economic growth presented in terms of GDP just describes monetary expenditure. GDP is designed along the line of Keynesian thinking, which holds that spending equates with income — hence more spending leads to a higher national income and in turn to higher economic growth. On this logic, a tighter monetary stance by the Fed leads to slower economic growth while increases in monetary pumping produce higher economic growth. (In the GDP framework, money expansion leads to an increase in overall income in the economy, and hence to a higher rate of growth of GDP).
In reality the exact opposite actually takes place — printing more money weakens wealth generators' ability to grow the economy whilst a decline in the money supply's rate of growth strengthens their ability to grow the economy.
Bob| 2.10.10 @ 10:41AM
Didn't you learn any critical thinking in school? Here's what the article said:
"The bounce in the growth momentum of both real and nominal GDP is due to the Fed's massive money expansion. "
The numbers don't support this erroneous conclusion. In point of fact, the number show inventory replenishment as the greatest factor in 4th quarter growth. Does monetary policy effect the GDP -- certainly as it allows financial institutions to make more money on the spread thereby making loans less risky.
As I've said many times, the data shows that neither Keynesian spending nor supply side thinking has any dramatic effect on GDP. That's why things like the stimulus bill are mostly waste and tax cuts lead primarily to debt increases. The engine of growth is private enterprise -- which thrives on innovation and growing demand. You don't invest in a new plant of there is nothing more to produce.
Of course, it is far more complicated than that, but the lack of economic knowledge of people like you in our country really damages our future.
Bill Hussein O'Stalin| 2.10.10 @ 10:45AM
Apparently you're the one without the ability to read and understand, because in fact, that's exactly what it states, that the GDP's underlayment is due to massive federal spending, which will end badly. If that's your desire go for it. You can't be that stupid to believe you can spend your way out of this. After reading your comment I can only deduce that people like you doom our future, too stupid to understand what you read, while suffering from Megalomania.
Melvin| 2.10.10 @ 2:10PM
In relation to what you have posted, is this what Conservatives, Libertarians, and Independents have been preaching all along.
I guess we can sum this up in one phrase, "If we have checks, therefore we have money albeit borrowed money."
Government doesn't produce anything to make a profit, it only produces debt. That is why your
argument of, "Neither Keynesian spending nor supply side thinking."
I am not a financial wizard, but in order for the government's scheme to work wouldn't the GDP have to go through the roof to cover the debt plus the interest and the growth at the same time? If so, the government's scheme is completely unachievable.
Curtis Rasmussen| 2.10.10 @ 2:41PM
If the government takes a dollar from the people, then the amount given back to the populace through programs such as the 'stimulus' is less than one after the bureaucratic overhead. The government cannot create wealth, only transfer it from one group to another with a net loss.
We'd all be better off if they never took the funds in the first place as citizens will always be more than capable of deciding how to spend the fruits of their labor. The only thing preventing you from seeing this is your greedy, self-centered arrogant big government leftist drone liberal speak. How would you personally benefit from massive taxation? Have a vested interest?
Bill Hussein O'Stalin| 2.10.10 @ 10:49AM
Here's another quote from the article which totally discredits Keynesian principles. If you believe it, then Ferrara's article stands on its own merits and Bob continues to piss into a windstorm blowing in his direction. That's his critical thinking.
http://mises.org/daily/4089
If the supply of real savings is dwindling, the government's attempt to boost the rate of growth of GDP by raising expenditures is also going to fail. After all, government activities also require real savings. If the government persists with its aggressive stance, it will only make things much worse: it will deprive funding from wealth-generating activities.
Increasing government outlays while the pool of real savings is declining could severely damage the process of real-wealth formation. Those commentators who subscribe to the view that an increase in government spending can fix things hold that something can be created out of nothing.
There is no such thing as a stimulus policy that can grow the economy. Neither the Fed nor the government can grow the economy. All that stimulatory policies can do is redistribute real savings from wealth-productive to nonproductive activities. These policies encourage consumption that is not supported by useful production.
The latest data show that in Q4 the government outlays to GDP ratio stood at 0.25. Note that the ratio is on an explosive path. Also, the government deficit as a percentage of GDP increased further in December. The 12-month moving average of this percentage stood at 10.3% against 10.1% in November and 4.7% in December 2008
Bob| 2.10.10 @ 4:13PM
The only problem is that the data doesn't back up this theory. Of course the government deficit as a percentage of GDP increased because government revenues are depressed. It would be nice if you understood the fundamentals rather than repeating quotes.
Bill Hussein O'Stalin| 2.10.10 @ 5:55PM
The data doesn't back up the theory? I'm afraid it does. Apparently fundamental fundamentals are beyond your fundamentally deficient grasp.
Huh?| 2.15.10 @ 12:29AM
Bob...you're just friggin' stupid. You are much like a 13-year-old arguing with her parents. You know just enough to make noise and spout nonsense. You are way over your head here, go back to moveon.org or wherever you came from. You are just plain stupid.
fbom| 2.10.10 @ 11:04AM
This debate only points to one thing - confusion and uncertainty. When that happens, people go into a bunker mentality – I am going to watch out for my family first.
We are changing our ‘family economy’ as follows:
1. NO, repeat – NO new spending. Don’t buy new – repair that car, postpone remodeling the kitchen.
2. Cut back on savings.
3. Some bank say they are strong – but it ain’t over yet.
4. Use the increased ‘disposable’ income to pay off all unsecured debt that does not have a locked in interest rate – such as the home loan. This includes our kids student loans.
5. Just like is happening now on the East Coast, make sure you have wood for the fireplace and gas for the snow blower and wait for the coming economic blizzard to pass.
njre| 2.10.10 @ 11:51AM
That is why we need to remove the usurper! We simply cannot afford to leave him there leading his criminals to destroy our nation!
If only the Tea Party movement rally people to remove the usurper! But it is sad to see that the only thing that the Tea Party has ever successfully stopped was the Obama eligibility issue. I find it interesting that the Tea Party leaders and Fox News puppets like Breitbart are silencing talk about the one issue that could force Obama to resign or be removed.
Why protest his every move but not the 'mover'? Currently the usurper is the cancer that is killing us. Leaving the cancer there to metastasize is beyond comprehension! He is building the structures to transform America so fast there is no going back if we don't stop him soon!
If we all unite to expose Obama we can remove him before it is too late!
Check out OBOGO petition:
http://www.scribd.com/doc/24591408/OBOGO-Petition
or
http://www.resistnet.com/forum.....emergency-
Drew | 2.10.10 @ 12:57PM
Reading this article I am reminded of the Texas Sharpshooter. The guy who empties his six gun into the side of a barn, then walks up it, and circles a group of bulletholes with white paint, "proving" the accuracy of his aim.
Mr. Ferrara conveniently forgets to mention a couple of very salient points: it was during the Reagan administration that the US changed from being a net creditor nation to a net debtor, and that our balance of trade began its inexorable slide into negative territory. He also manages to forget that other legacy of Reagan's policies - the S&L crisis, brought on by a combination of reckless deregulation and "free market" policies. That boondoggle only cost us a (relative bargain) of $160 billion or so to clean up.
The other problem with this article is the existence of a very real "counter factual" in the Bush administration. Despite relentless tax cutting by the second Bush administration, the US economy failed to grow in terms of either net private employment OR personal income for the entire GW Bush Presidency.
For Ferrara to argue that the GDP growth that is going to occur in 2010 is because of the sunsetting of Bush-era tax cuts is absurd. He is asking us believe that those would-be John Galts sat on their creative and fiscal assets for a decade or more, only to set them free when threatened with an increase in the top tax rate from 36% to 39%. Please.
Ken (Old Texican)| 2.10.10 @ 1:22PM
Drew,
You are either hopelessly ignorant, or an abject belly crawling liar.
Your "facts" are simply lies.
Drew| 2.10.10 @ 1:31PM
Which of my facts are lies?
Are you arguing that 750 Savings and Loans didn't go belly up, thanks to a policy of deregulation that permitted them to invest in shaky commercial real estate loans?
Or are you arguing (contrary to just about every statistic and real world experience) that neither the number of jobs or personal incomes increased at all during GW Bush's administration?
Just curious.
Oldefarte| 2.10.10 @ 1:52PM
Drew Dummie, the number of employees may not have increased due to private businesses' having to resort to oursourcing their employment overseas to India, China,etc; all due to excessive labor union wage scales that forced same in thsi country. The personal incomes of the intelligent Americans certainly did increase under Bush, through stock/bond,etc investments in corporation whose profits increased substantially [from tax reductions]. Your alluded to incomes of the dummie, high school grads dependent upon union-factory employment and exhorbetant salaries from same, did not increase due to this outsoursing of factory-type jobs [and their salaries]. Due to computers/technology, only the EDUCATED survive, so this outsourcing is only these factory workers' faults for not previously persuing their educational needs further, not Bush's fault!!!!!
Drew| 2.10.10 @ 2:03PM
So, you are arguing that it was the elite that benefited most from Bush's policies?
Strange, then that those elite, educated people should be significantly more likely to be Obama supporters. Like the fact that Obama outpolled McCain 54%- 36% among college graduates.
Just keep repeating that tired old Conservative meme: Yeah, a bunch of dummies voted for Obama because he promised to pay their cable bill. We'll see how that works out for you next time.
Bob| 2.10.10 @ 4:16PM
Drew, you are correct.... But then again, you are using data and analysis rather than the seat of your pants to come to your conclusions. Ken wants us to think he is a high level muckety-muck, but he has the economics knowledge of a pre-schooler. We also know that he doesn't know how to read a bottom line.
Bill Hussein O'Stalin| 2.10.10 @ 6:08PM
By bringing up the concept of debtor nation, Drew in fact proves Mr. Ferrara's main point. America is a debtor nation thanks to government spending and government borrowing, which has as it's foundation Keynesian principles of government spending. In fact the U.S. Congress has acknowledged that Keynesian principles don't work by implementing a Paygo plan. As phony as it is, the Paygo acknowledges that the government just can't keep spending money without consequence.
Oldefarte| 2.10.10 @ 1:39PM
Ah, more Drew Bullexcrement! If the Reagan years initiated this country becoming a debtor nation, it is because his [governmental] tax decreases were not matched by substantial expense reductions. Congressional Democrats as always resist the reduction/elimination of unneeded/wasteful governmental programs/expenses; and the decrease in governmental receipts [from tax reductions] without corresponding governmental expense reductions results in the federal debt/defecits being increased [whereupon the government needs to borrow more money, and pay higher interest rates for, to run their operations. If Democrats had allowed governmental expense reductions of unneeded programs, the nations' debt would not have increased under Reagan [whose attempts to decrease expenses were thwarted by Democrats in congress]. Also, 'free markets' fiscal policies have nothing to do with Reagan or any other president; it is a economic philosophy that is condusive toward increase business production/profits. Business greed caused the S&L crisis, not Reagan's policies. Greedy business sharlitans will be present during either Republican or Democrat administions. Both private/public [non repressing] regulation and oversight is the solution to this business greed/corruption, not the philosophy of 'free markets'. Also, the private employment/personal income increases during Bush's years will/are considered monumental in comparison to the dire/bleek, pedistrian economic/financial misery/pain that is not/will be experienced under Obama and his socialists-Democrats [the monetary pain suffered by American incomes/salaries under the CHOSEN ONE will be eventually felt by future generations to come]. As usual, Drew, you're nothing but a scripted mouth piece for the current administration!!!!!!
Bob| 2.10.10 @ 4:20PM
Oldefarte, did you learn these lies on Fox News? BOTH Democrats and Republicans resist budget cuts because their primary job is to get reelected. You get reelected by bringing pork to your district. Government spending grows just as fast under Republican administrations and Congress as it does for Democrats. Here is a chart of federal spending:
http://www.heritage.org/resear.....rship.aspx
And this comes from a CONSERVATIVE think tank. Reagan failed with his economic policies Just as Bush and Obama are doing. When you understand how to analyze real data, let us know.
Oldefarte| 2.10.10 @ 1:13PM
Let me simplify this situation: Increased taxes takes money away from businesses that they need to buy/purchase additional plant, equipment, and labor. Increased governmental defecits/debt causes increased governmental borrowings, which takes away from provate/non-governmental businesses available bank credit sources that is needed for them to buy/purchase that additional plant, equipment and labor. Government uses the money it raises through tax increases to pay for increased governmental provided welfare, and for additional governmental [useless] labor. Result, public/governmental welfare employment increase, and private/non-governmental employment decrease, when the government raises taxes!!!!!
fbom| 2.10.10 @ 1:28PM
Hey Oldefarte , from one to another - when I did my undergraduate work your summary was called ECON101. I guess the people now running our economy skipped that class and took Progressive 101. :)
Grzmlyk| 2.10.10 @ 3:12PM
Oldefarte, why on EARTH are you introducing common sense into the argument?
That's Kryptonite for our "economist" friends and Obama apologists.
:-)
Bob| 2.10.10 @ 4:33PM
And decreased taxes causes a huge rise in governmental debt increasing interest payments. In point of fact, companies invest in plant and equipment for longer term reasons, i.e., they have a new product or service. It may take a year or two to build a line so you wouldn't do that with a short term tax cut. If you had a killer new product, it wouldn't make any difference what the tax rates were. Just ask Apple.
But I agree with you on entitlement spending. The cause is NOT increased federal revenues, if it were, then Medicare would be paid for. The problem is that politicians, both Democrat and Republican, get reelected by giving their constituents more. Since the most important group of voters are seniors, you don't want to cut their benefits. You just have your logic reversed.
As I've continually said, we spend too much on Medicare, Medicaid and Social Security and we need to cut them back. That will mean that more Grandmas will die, but that's OK. Health care is a privilege, not a right.
carnot| 2.10.10 @ 9:59PM
you are a slippery one...I notice your pattern is to speak truths...but only half truths.
companies do invest in plant and equipment for longer term reasons (including obsolescence) which you missed. but they do this based on expected demand/projected ROI (i..e., the discounted ROI must exceed the opportunity cost)
carnot| 2.10.10 @ 10:04PM
expressed more colloquially: except for freddie/fanny, no company invests if it expects to lose money...and that entails demand/price and cost calculations (fixed & variable)....as well as opportunity cost (better investments elsewhere)
Nick| 2.10.10 @ 1:29PM
3/5 Bob,
"[...] that neither Keynesian spending nor supply side thinking has any [DRAMATIC] effect on GDP." (emphasis mine)
Couching our words now? I thought supply side policies have NO effect on GDP?
What happened? Did you find a chart that contradicts your continued assertion?
Bob| 2.10.10 @ 4:25PM
1/5 Nick -- No couching here.... I grouped both philosophies. If you want further explanation, governmental spending does stimulate GDP, but not enough to pay for that spending, i.e., there is no multiplier effect. There is absolutely no macroeconomic evidence that supply side policies positively effect GDP. The justification of supply side policies are almost always based in microeconomics for that very reason. It is akin to looking out your front door and announcing the world is flat because that is how it looks to you.
Nick| 2.10.10 @ 8:01PM
3/5 Bob,
That's a lot of words to NOT answer the question.
Either supply side policies have NO effect, or they have no DRAMATIC effect.
Were you wrong then, or are you wrong now?
Or just inaccurate?
Ken (Old Texican)| 2.10.10 @ 5:38PM
Bottom line Bob.
Heh. I will play for a minute. Did you look me up on the internet yet?
Are you frightened to do so?
Look, turd, I have just let my words and opinions here speak for themselves.
I had hoped you might look me up and demonstrate a little respect.
Obviously that is totally beyond you.
I will play with you now and then just for the sake of the new guests here, and the many lurkers.
Bottom line................you are a zero, because you are a liar and the truth is not in you.
Bill| 2.10.10 @ 10:09PM
Bob and all,
There is a distinct difference between tax cuts and tax rate reductions. Something you may have missed, Bob. Taxed rates were reduced over three years in the early 80's but during the decade gov't tax revenues doubled. The % of income taxes paid by the wealthy also increased since they worked longer due to the decrease in tax rates. Its the same talk of the left now crowing about the Bush tax "cuts" for the rich. Nevermind the fact that by reducing the lowest rate to 10% nearly 10 million people saw their fed. income tax liablility disappear. Furthermore, the % of income taxes paid by the well-off increased as well during this decade. Don't try to be so slick. These were tax rate cuts. Hell, because of these tax rate reductions in capital gains and income the deficit had declined in 2006 to $176 billion I believe. In case you forgot, people respond well to positive incentives.
As far as the savings and loan crisis, this was primarily caused IMO by the change in passive loss regs in the 1986 tax reform bill and the drastic cut in the oil price which severly crippled the oil industry in Texas, Louisiana. Thats where the majority of bank closings began. This regulation canard is a tired and lazy excuse. Regulators are human just like bankers and businessmen. They do make mistakes and are not infallible. Just look at the Madoff fiasco. Its because of the success of the "Reagan
Revolution" that the concept of the business cycle described by Mr. Ferrara has been forgotten. Economic growth leads to speculation, hysteria, and the popping of the bubble. Now its time to clean up the mess. Unfortunately, because of gov't meddling, we haven't been allowed to clean it up yet and we are where where we are trying to delay the pain and insuring bigger problems in the immediate future.
carnot| 2.11.10 @ 9:42AM
nice post. as you are really implying - the stats very often mask the details.
Curtis Rasmussen| 2.10.10 @ 7:18PM
By definition, a liar knows the truth but prefers something less than genuine. Bob's brain tied truth to a kidney stone and pushed it overboard. He couldn't piss it out if he tried.
Pingback| 2.11.10 @ 3:14AM
The American Spectator : The Coming Crash of 2011 | Stock Capitalist links to this page. Here’s an excerpt:
Ryan| 2.11.10 @ 8:15AM
Hey Bob,
Is debt created by spending too much or not bringing enough in? What happens first?
Pingback| 2.11.10 @ 9:58AM
3 Simple Tips For Uncovering Crash Diets That Work | Diet Health Wisdom links to this page. Here’s an excerpt:
dareisay| 2.11.10 @ 10:34AM
I think the States should take back the power they were intended to have.....allow them to set conditions to bring in factories and jobs and go for our own resources.....tell the Federal gov. to take a hike.....then go "right to work" State!
Jacob Morgan| 2.11.10 @ 1:15PM
Regarding when the business cycle became unacceptable, it was in 1992 when the media hounded Bush Sr out of office over a barely noticable recesion.
Since then a recession near an election year has meant a shift in political power--no wonder the goverenment will do anything to push out a recesion, even if it builds into a bad one.
The only way out of this is to do thre things:
1. Rationalize environmental law, institute tort reform, reduce the cost (taxes) to hire people and to build businesses.
2. Drill for oil and build reactors.
3. Have more babies.
Pingback| 2.11.10 @ 1:30PM
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Obama 2012 in Jeopardy | Chicago Daily Observer links to this page. Here’s an excerpt:
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Climate Change The Coming Crisis links to this page. Here’s an excerpt:
Pingback| 2.11.10 @ 10:16PM
Live in the U.S. but can’t afford precious metals? Consider stocking up on dehy – Re links to this page. Here’s an excerpt:
Bilwick| 2.12.10 @ 10:40AM
Wait a minute! Hold the phone! Stop the presses! Are you saying . . . statist economic policies wreak havoc with economies?! I'm shocked! Someone call the White House and inform Il Dufe immediately? Why didn't the media point this out? I always got the impression statist econonomic policies have worked well in Europe and Asia during the past 100 years. You don't mean--*gasp*--the Left actually misledus, do you?
Bilwick| 2.12.10 @ 10:42AM
I'm sorry--I'm stil stunned. So taking wealth away from the people who earned it and giving it to politicians and bureaucrats to spend as they please DOESN'T produce prosperity? Next you'll tell me there's no Easter Bunny.
randyinrocklin| 2.12.10 @ 11:51AM
To a lot of people, they have no concept of what a trillion dollar is. It is ONE MILLION, MILLIONs. So a million is like a dollar in the context of a million dollars. Tell me if you had a million dollars right now from the government would that get you set for life if you invested wisely?
That's the problem with how the ignorant public percieves what a trillion dollars really amounts to. There is an unfunded liability of close to a HUNDRED TRILLION that we will be faced when the boomers start collecting SS and Medicare. Thats a HUNDRED MILLION! Its mind boggling, what you see in Greece, and the EU, you aint seen nothing yet! Beware Mr. Ferrara is coreect! Great post!
Pingback| 2.12.10 @ 12:03PM
Keynesian Ideology and the Coming Crash « The War on Socialism links to this page. Here’s an excerpt:
Reasonsjester | 2.12.10 @ 8:18PM
Reagan did not interrupt the business cycle because tax rates do not drive the business cycle.
If one looks at the Fed interest rates and the money supply (which one can chart against the stock market), then one has a steady increase in the money supply after inflation was brought under control in the early 1980s.
Then there was a big crash in 1987, and a Greenspan expansion of the money supply. This smoothed things over until the money supply really shot up in the 1990s, fueling overspeculation in the already hot tech market.
When the dot-com crash came at the end of the Clinton second term, Greenspan really started throwing dollars in the sieve instead of allowing for market correction. Since 2000, one can see the effect of dollar devaluation by comparing the dollar against gold or most other commodities.
In any event, this unwillingness to allow for market correction in the aftermath of the dot-com crash fueled the ABC cycle, specifically the housing market, which was already a house of cards due to the mortgage insurance scheming of Fannie/Freddie and the bank lending bullying undertaken by the likes of ACORN.
Reagan should not be given credit for interrupting the business cycle, though his cutting of taxes and getting inflation under control warrant respect.
Pingback| 2.13.10 @ 3:46AM
Principles for Total Prosperity In Business And Beyond links to this page. Here’s an excerpt:
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Patrick Kennedy won’t seek reelection | WeCharts.com links to this page. Here’s an excerpt:
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The Coming Crash of 2011 #fb links to this page. Here’s an excerpt:
Anti Cripes| 2.14.10 @ 2:01AM
Hey Pete, we already crashed. It was called 2008. Buy yourself a brain with what ever chump change these clowns are tossing to you.
Long Ben| 2.14.10 @ 3:49AM
The Keynesian model is a cartload of cobblers. Said cobblers should be roughly chopped and parboiled in a huge vat of Lysol , then sun dessicated , ground to dust , and then exposed to the winds of reason. In addition the name of John Maynard Keynes should be blotted out and remembered no more.
Pingback| 2.14.10 @ 7:54AM
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Gene| 2.15.10 @ 4:15PM
Preaching to the choir has long passed its usefulness. Preaching to the numbnuts is a waste of time.
We arrive at two questions: what do we do personally?; what should we try politically?
I suppose most people reading this have been securing themselves, preparing to vanish, and so on. The word to the wise was given a long time ago. Government is never ahead of those who watch what is going on.
So, the remaining question is what to do for others, especially those deep into struggle. You can prod neighbors, friends, and family to prepare, but most are embattled inside the machine and there is a precious small window of time to escape. So, I recommend we work on this. Be boring and push.
As for the big picture, it is probably too late to do anything for now. We have an election coming, but the only way the conductors will apply the brakes is if they are all new.
I almost don't care about parties - throw out all the rascals, unless they prove themselves as on the side of common sense and the constitution in 100 wordsor less. Who needs a McCain?
Forget parties; look at philosophy and clear thought. The media plays the Bloods vs. Crypts show all the time. Stop playing.
Spread the word about our ponzi economics, sure, and vote, but just reading an article, like this one, and keeping moron vs. moron scores goes nowhere.
Act.
It doesn't matter if Mr. Obama is a financial cypher, move on to protecting yourself.
Protect yourselves and others who will listen.
skip| 4.13.10 @ 5:48AM
I'd hang out with Bob. He sounds like he actually has read about and thought about the complexities of the issue. No one can predict anything with 100% accuracy. Not even Bob! But I suspect that he could give us a lesson in how not to believe everything we read. I am disheartened by Republicans and Democrats. I am disheartened by Americans. We will start to fix things once we've all spent our first day in a soup-kitchen-line. See y'all there!
Pingback| 4.16.10 @ 9:41PM
Some investing food for thought from Paul – emailed 4/14/10 « iGaps links to this page. Here’s an excerpt:
Pingback| 4.17.10 @ 11:27AM
March 13th e-mail « iGaps links to this page. Here’s an excerpt:
nick kelly | 12.16.10 @ 4:14PM
Why is it so few Americans are unable to grasp the burden of 'defense' spending equal to the rest of the world combined? Most economists agree that the first post WWII bout of inflation, painfully squelched by Volcker, was the result of paying for the war in Vietnam. Iraq alone has already cost more than Nam. Maybe we need a world policeman, but not a rogue cop.
Puma x Alexander McQueen | 8.12.11 @ 11:20PM
is good
optimist | 1.18.12 @ 2:12AM
Looks like you were all wrong... Whats that unemployment went down again?!?!