Balkinization  

Monday, August 08, 2011

Deficits and Defense Spending

Bernard E. Harcourt

Following up on my post on the S& P downgrade, some interesting comments about defense spending, and Frank Pasquale’s powerful remarks on austerity, Lori Williams over at Tableau Software produced two marvelous graphs that visualize my earlier thoughts on deficits and defense spending.

The first graph represents the presidential contributions to the national debt. The data match those of the New York Times, but are pulled from Treasury Direct. The red and the blue should be self-explanatory! If you scroll over the bars, the data show. If you are having problems with your browser, you can see the graph here. (It never ceases to amaze me how the Republican Party can claim to be the party of fiscal restraint).





The second graph concerns defense spending. The data are from SIPRI’s 2011 yearbook and focus on the top 10 military spenders. If you are having problems with your browser, you can see the graph here. It’s an interactive chart, so you can use the drop-down menu at the top left to switch between measures and hover over a bar to see all the defense spending data for a country:



Together, the graphs tell a compelling story. Thanks Lori!

Comments:

Given that we are not just borrowing to spend, but also borrowing to make the interest payments on the debt, shouldn't the contribution from each administration logically continue growing after that administration ends, to account for all we had to borrow to finance their addition to the principle?
 

Your graphs conclusively prove that there was never any need to raise the debt ceiling.
 

Not to discount the military boondoggle, but healthcare is the number one driver of the debt.
 

Assigning the debt to particular Presidents ignores the Constitution that grants spending decisions to the U.S. Congress. A more thorough chart would assign colors based on Presidential party affiliation shared with color for Congressional party dominance of that particular period.
 

Eric, you can find such a chart here.
 

Is mls being serious? Does he accept the graphs? If so, does he truly believe there was no need to raise the debt ceiling?

Regarding Brett's take on assigning interest to each administration's contribution to debt, shouldn't that concept apply to the future costs of caring for the Afghan/Iraq wounded American servicemen along the lines of Joseph Stiglitz's calculations?
 

Shag- the answer to your questions are no, no and no.
 

But, but, but, only a terrorist-loving--fascist--hippie-commie would suggest cutting military spending instead of US infrastructure (roads, schools, hospitals). And don't get me started on that taxes thingy!
 

mls brings to mind a popular song of my younger days::

"Your lips tell me no, no,/
But there's yes, yes in your eyes."

but not in a romantic context, rather political. So perhaps a "Point of Order" is appropriate.
 

mls,
you've replaced moralizing/slippery legal rhetoric with economic incompetence.

Republicans never seem willing to admit: To spend is to tax. With inflation and population growth, non military discretionary spending was largely flat from 01-11. Tax cuts, war, healthcare, recession and resulting increases in social services are the problems. You don't really care about the debt; you just want to have someone else to blame. Democrats, Socialism, Stalin, Scandinavia, are all the same to you. The republicans have all the moral authority of pedophile priests.

None of this is a defense of Obama for caving. His performance has been pathetic. Sad to say, I'm not surprised by that either.
 

I guess there are lies, damned lies and NYT charts. As to the ridiculous NYT chart:

1) Despite the fact that Obama borrowed roughly $4 trillion during his portion of FY 2009 to 2011, the NYT only says he borrowed 2.4 and then attributes much of this to the recession.

2) In a particularly egregious lie, the NYT attributes the FY 2009 (10/08 to 09/09) to George W. Bush although he was out of office for months before the Obama and the Dem Congress enacted the FY 2009 budget which increased discretionary spending by 20%, enacted the stimulus and enacted the S-CHIP entitlement.

3) Moreover, the NYT dishonestly charges Bush with the FY2009 TARP money Obama spent on nationalizing GM/Chrysler and quasi nationalizing Freddie and Fannie while crediting Obama for repayments of Bush loans to the banks and automakers.

Correcting the NYT lies does not excuse Bush for his profligate spending but only goes to show that Obama is substantially worse. The last Bush FY 2007 budge had a half trillion deficit. Obama's FY 2011 continuing resolution has a $1.8 trillion deficit.
 

Bart:

Every analysis I have seen shows that had Bush been in office in 2009, his deficit would have been over 1 trillion, because the economic downturn caused tax revenues to fall.

You can certainly criticize the stimulus and the auto bailout as Obama spending, but most of the deficit was baked into the cake due to Bush's tax cuts AND spending and the economic conditions when Obama came in.
 

Every intellectually honest person admits that Bush is responsible for the FY2009 deficit, although that may not include everyone in this thread. The stimulus and other spending initiated by the Obama administration amounts to only 4% of the government's FY2009 spending.

Here is an informative explanation from Cato. It's interesting to contrast Cato's methodical work with the tripe served up by faux spending hawks who really only care about bashing Democrats.
 

Steve M said...

Every intellectually honest person admits that Bush is responsible for the FY2009 deficit...

Really?

When precisely did George W. Bush propose or sign the FY 2009 budget enacted in April 2009 with only Dem votes and with Obama's signature?

George W. Bush's proposed FY 2009 budget offered back in 2008 proposed a half trillion less in spending than did the actual Dem FY 2009 budget bill and obviously did not include the "stimulus" or S-CHIP entitlement.

George W. Bush did sign one significant budget bill during FY 2009 - the TARP. The TARP was a slush find that appropriated, but did not require spending about 750 billion to purchase bad subprime mortgages from banks for resale. It was never used for that purpose.

Bush used TARP to make loans to banks in October 2008 and then to GM/Chrysler in December 2008. Nearly all of these loans have been repaid, usually with fanfare by the Obama Administration.

Obama spent (not loaned) much of the rest of the TARP to buy GM, Chrysler and to repeatedly bail out the now government run Fannie and Freddie. Obama has only recovered a tiny portion of this money when the government sold some of its stock in GM at a massive loss so GM could pretend it was not run by the Administration.

I generally admire and use Cato's research, but the Mitchell study was just plain wrong for the reasons I noted. Indeed, Mitchell may be the only Cato member to be repeatedly cited by the left.
 

Dilan said...

Every analysis I have seen shows that had Bush been in office in 2009, his deficit would have been over 1 trillion, because the economic downturn caused tax revenues to fall.

Because Congress and the President may at any time revisit and cut spending in the budget to match falling revenues just like the states, a recession is never an excuse for a deficit.

Next, tax revenues did not drop anywhere close to a trillion dollars in FY 2009. Half of the FY 2009 deficit was directly attributable to increased spending in the completely Dem and Obama FY 2009 budget, "stimulus" and S-CHIP entitlement.
 

Our yodeler's Blogger profile includes that his:

" ... new book 'Never Let A Crisis Go To Waste - Barack Obama and the Evolution of American Socialism' is scheduled to be released during the Fall of 2011."

Our yodeler started this work of "Friction," based upon his comments at this Blog, immediately upon Obama's inauguration on 1/20/09. So as Obama was about to start with his duties, our yodeler started off with his conclusion before any evidence to support it. Our yodeler is not very clever. He has been an Obama stalker since the git-go. As to the assurance of publication (by himself) this fall, keep in mind my earlier reference on another thread at this Blog to the "September Song."

With respect to our yodeler's "Evolution" of socialism claim in the title, it isn't clear if he will try to demonstrate that Obama introduced socialism on 1/20/09 or whether Obama picked up on past American socialism and advanced it. In either case, how prescient was our yodeler to know on 1/20/09 that this was Obama's course.

And he prattles on, despite being unable to remove the scum from his GOP sewer wallowing during the Bush/Cheney 8 years.
 

Shag:

If you would like to discuss my book and its contentions, take it to my Facebook page.

If you can come up with some actual evidence for this thread's proposition that Dubya is somehow responsible for Obama and the Dem's FY 2009 spending bills, I would love to see it.
 

Because Congress and the President may at any time revisit and cut spending in the budget to match falling revenues just like the states, a recession is never an excuse for a deficit.

Next, tax revenues did not drop anywhere close to a trillion dollars in FY 2009. Half of the FY 2009 deficit was directly attributable to increased spending in the completely Dem and Obama FY 2009 budget, "stimulus" and S-CHIP entitlement.


Bart:

FY2008 budget deficit was $438 billion. Tax receipts dropped $419 billion in 2009. So the amount of the budget deficit baked into the cake was $857 billion, before we take into account whatever stimulus measures BUSH would have approved, plus TARP, however you want to count it.

Again, I'm not saying you can't criticize Obama's spending, but the narrative of many tea party types of "OMG we suddenly have this trillion dollar deficit!" rewrites history.
 

BD: Because Congress and the President may at any time revisit and cut spending in the budget to match falling revenues just like the states, a recession is never an excuse for a deficit.

Next, tax revenues did not drop anywhere close to a trillion dollars in FY 2009. Half of the FY 2009 deficit was directly attributable to increased spending in the completely Dem and Obama FY 2009 budget, "stimulus" and S-CHIP entitlement.

Dilan: FY2008 budget deficit was $438 billion. Tax receipts dropped $419 billion in 2009. So the amount of the budget deficit baked into the cake was $857 billion...


You pretty much made my point. Nothing was baked into the cake that Obama and the Dems could not have removed in February 2009. Rather, they threw in another box of spending cake mix.
 

Fiscal restraint in the Repulic Party is a virtue conveniently rediscovered when the other party is in power.

It's the amazing discovery that for years Fred has been spending all the family's money on guns, and the approach we took with him at the time was to help him find a lower paying job, and now it turns out the family has a food problem but that must be someone else's fault.

It's a mass delusion that cutting taxes, borrowing trillions to wage two wars, somehow just happened, and is somehow not related to the country's bank account now. It goes well with other delusions, e.g. TARP was created by the new guy.

It's having your own set of facts.
 

Our yodeler once again displays his Tea Party bake sale credentials:

"Nothing was baked into the cake that Obama and the Dems could not have removed in February 2009. Rather, they threw in another box of spending cake mix."

More accurately, "half-baked." Our yodeler lacks credibility on just about anything he says based upon his past history. The air must be thin at his mountain top.
 

jpk said...

Fiscal restraint in the Repulic Party is a virtue conveniently rediscovered when the other party is in power.

And even then it is mostly lip service. This is why the Tea Party is attempting to take over the GOP and why the primary incentive for the GOP establishment to act is a fear of being primaried.
 

And even then it is mostly lip service. This is why the Tea Party is attempting to take over the GOP and why the primary incentive for the GOP establishment to act is a fear of being primaried.
# posted by Bart DePalma : 4:21 PM


Blankshot, why didn't the teabaggers try to take over the GOP when it was driving up the debt? In fact, you fully supported the GOP increase in debt.
 

This comment has been removed by the author.
 

You pretty much made my point. Nothing was baked into the cake that Obama and the Dems could not have removed in February 2009. Rather, they threw in another box of spending cake mix.

This is silly. In 2001, Bush, with the support of Republicans and conservatives, argued we had to cut taxes to stimulate the economy, which had been in recession. Nobody on the right argued for austerity.

In a recession, there's going to be a shortfall of tax revenues. And then you pile stimulus-- which can be tax cuts or spending increases-- on top of that. The result is that you will run a bigger deficit.

What you seem to be saying is "well, in theory you could slash spending even more to reduce the deficit". Sure. You know what you could also do? Raise taxes to reduce the deficit.

You COULD do either thing. But actually doing it would be completely stupid, because it would be contractionary.

What you are endorsing is that the government respond to recessions with austerity. As I said, I actually think you are being dishonest-- that in 2001 you supported Bush's tax cuts along with everyone else on the right and endorsed the argument that they were a form of stimulus. And that in 2009 if Obama had proposed raising taxes to reduce the deficit you would have claimed that raising taxes in a recession would harm the economy even further.

But in the oft chance that you really think that contractionary fiscal policy during a recession is a good idea, let me just make it very clear-- that is crazy. And further, Bush and the Republicans would not have done it either-- they would have run a big deficit, just like they did in 2001 and just like Obama did in 2009.
 

Bartbuster, Dilan, et al.,

Look, Bush did a bunch of stuff, spent a bunch of money, ran up a big deficit, etc. But, that doesn't matter in the Depalmaverse, because Bush a) was a Republican and Republican deficits don't matter, and b) was busy torturing brown people, which renders all other concerns moot.

Now, you might wonder why Obama's continuing efforts to torture brown people don't have the same effect. Well, here's another ineffable rule of the Depalmaverse, "Democrats can't torture brown people." What appears like Obama policies regarding the torture of brown people are actually the effects of Bush reaching into the future to torture brown people. Thus, we're left only with the fact that deficits have increased under Obama and, of course, in the Depalmaverse, Democratic deficits do matter.

So, having made that clear for you, I will no provide you with something I like to call the Depalmificator. It's a handy phrase that you can cut and paste into your word processor, change to 48-point font, print out, and, everytime you see the name "Bart DePalma" pop up, place over his comment so as not to otherwise interrupt the natural flow of your reading.

Ready? Here you go:

!!!!!!!!OBAMA! SOCIALISM! TYRANNY! DEBT! TRILLIONS! REPUBLICANS! FREEDOM! EAGLE! JESUS! BLAARRRGGGHHHH!!!!!!!!!!!!!!!!

Cheers!
Everett
who long ago gave up posting here
 

Dilan:

This is silly. In 2001, Bush, with the support of Republicans and conservatives, argued we had to cut taxes to stimulate the economy, which had been in recession. Nobody on the right argued for austerity.

Before she became an Obama administration hack, Christine Romer's academic research in recessions indicated that tax reductions historically created economic growth while borrowing and spending did not.

As for "austerity"...

In 2001, the Feds were spending about 19% of GDP, the deficit was small and sovereign insolvency was not even a remote problem.

Today, the Feds were spending about 25% of GDP, we are suffering the largest deficit in American history absent a world war and sovereign insolvency will (not may) occur in less than a decade at current rates.

Thus, there was no need to cut government spending in 2001, while there is a desperate and immediate need now.

In a recession, there's going to be a shortfall of tax revenues. And then you pile stimulus-- which can be tax cuts or spending increases-- on top of that. The result is that you will run a bigger deficit.

Taking money from the private economy through taxation or borrowing, removing government transaction costs and then spending it on things the government likes and the consumers do not demand reduces GDP growth.

Only certain types of tax cuts are stimulative or more correctly remove disincentives to create wealth.

Simply giving away money in the form of "rebates" to people who often do not pays taxes does nothing because the money is being taxed or borrowed from another part of the economy to pay for it. See Bush 01 and Obama 09-11.

Reducing income tax rates, especially progressively punitive rates, reduces a government imposed disincentive to creating wealth and has increased GDP growth every time it has been tried. See Coolidge 20s, Kennedy/Johnson 64, Reagan 81 and 86, Bush 03.

You know what you could also do? Raise taxes to reduce the deficit.

True. Both Hoover and FDR tried this with predictable results.

You COULD do either thing. But actually doing it would be completely stupid, because it would be contractionary.

Because there is nothing stimulative about government taxing or borrowing and spending, there is nothing contractionary about declining to do so. See Eisenhower cutting spending to keep the budget balanced in the 1954 recession and Maggie Thatcher doing much the same thing in 1979 through the early 80s.
 

Such a wonderful thing to have opinions.

And yet there are such things as facts.

It is a fact the vast majority of the debt was run up under Republic administrations. And with hundreds of Republic votes in Congress.

It is a fact that the vast majority of Republic voices bemoaning the debt today were not heard when it was being run up. (You might think they discovered the situation one day while weeding the cabbage patch.)

And it is a fact that certain characterizeable voices today get the facts consistently wrong, usually in ways convenient to their opinions, e.g. "Obama created TARP" and so on and so forth.

It is not an accident that astounding percentages of Americans have critical facts completely wrong. E.g. in 2007, 33% of all Americans believed Saddam Hussein was personally involved in the 9/11 attacks (source: NYT/CBSNews poll). Gosh, I wonder how they got that idea?
 

I'm only too glad to heap abuse on either Bush, when it's deserved. But...

Aw, heck, I'll leave it at that.
 

jpk: It is not an accident that astounding percentages of Americans have critical facts completely wrong.

Thanks to Rupert Murdoch, Fox News, Rush Limbaugh and the rest of our robust Ignorance Industry. And you know, Bart is doing his part.

Bart: Reducing income tax rates, especially progressively punitive rates, reduces a government imposed disincentive to creating wealth and has increased GDP growth every time it has been tried.

Marvelous, Bart! And yet--strangely it seems--the greatest growth our nation has ever known took place under high tax regimes.

Dilan wrote of Bart's economic analysis: "This is crazy."

I just hope this doesn't come as a surprise.
 

I just finished reading Paul Krugman's Blog at the NYTimes 8/10/11 post "Dismal Thoughts," an apt title of what Krugman describes.

I generally don't deal in "what ifs," but with the GOP sewer pushing for a balanced budget amendment, I wonder what if the Constitution had a balanced budget limitation on the federal government from the beginning, what would America look like today? Maybe Brett, if he has found batteries for his abacus, can calculate this for us based on family B-B-Q economics.
 

I thought at first this was from the "Onion" but it's at TPMMuckraker, 8/9/11, by Jillian Rayfield, "To Infini-Tea And Beyond: 'Tea Party In Space' Aims To Stop NASA's 'Socialism.'" Take at peek at:

http://tpmmuckraker.talkingpointsmemo.com/2011/08/to_infini-tea_and_beyond_tea_party_in_space_aims_t.php?ref=fpb

This is an offshoot of the Florida Tea Party, having been "launched" by Alfred L. Gasser in June. Perhaps there is a tie-in with our yodeler's spaced out work of "Friction" on Obama's socialism. It's a real gasser.
 

Shag:

I wonder what if the Constitution had a balanced budget limitation on the federal government from the beginning, what would America look like today?

We would probably be spending between 15% and 19% of GDP on the federal government because the middle class would not volunteer to pay for more.

We would be getting far more bang for our tax bucks because we would not be paying substantial interest except after major wars.

We would be fighting far fewer expensive small wars unless they could muster the supermajority support or in most BBA a declaration of war to pay for.

Entitlements would be far more limited and their benefits adjusted with the budget.

Far more intelligent people would be working in the private sector creating goods and services consumers want instead of crippling the economy working in the regulatory bureaucracy.

In short, our present government might look more like 1920s America and less like Peronist Argentina.
 

In short, our present government might look more like 1920s America and less like Peronist Argentina.
# posted by Bart DePalma : 9:01 AM


Blankshot, 1920s America ended with the worst economic collapse in our nation's history. Does any rational thought go into your posts?
 

Here is an idea: maybe all the liberals who comment here should just capitulate to Bart's economic world view. Let's admit that it is far better for society to organize itself around principles of selfishness, unsharing and indifference to the well-being of our fellow citizens.

If Bart feels like he's won the economic argument I can't help but thinking his next crusade here will be lecturing us on Christian values.
 

bb:

The Great Depression was triggered by a series of tax increases starting with the Smoot Hawley tariffs which caused a trade war and then Hoover's "millionaire's tax" to balance the budget and pay for public works.

Given these policies, I am surprised Hoover is not a patron saint of the left in this country.

mattski:

Do you have to be a Christian to share a love for freedom? What a depressing thought.
 

The Great Depression was triggered by a series of tax increases starting with the Smoot Hawley tariffs which caused a trade war and then Hoover's "millionaire's tax" to balance the budget and pay for public works.

Blankshot, your revisionist version of the cause of the Great Depression is complete lunacy.
 

bb:

What precisely did they teach you in your government school about the Great Depression? The Smoot Hawley tariffs are pretty much standard textbook stuff. It was a subject of my AP history exam way back in the day. You have to actually do some research to learn about the harmful effects of the Hoover "millionaire's tax," though.
 

Blankshot, by the time the tariffs were in place the depression had already started. They may have made it worse, but they certainly were not a cause.
 

BB:

Prior to Smoot Hawley and the other Hoover tax increases, we experienced a market panic of similar intensity to the 1920 recession. If the government had simply left it alone, the economy would have fairly quickly rebounded as the US did after the 1920 recession and as most of Europe did after what was only a recession for them in the early 30s. Because the US government layered on taxes, regulations and backed union strikes, our recession turned into a Depression which lasted well over a decade.
 

Speaking of government driven recessions, the markets are currently down another 400 points in fear of sovereign insolvencies in Europe and our regulation hobbled economy here in the US.
 

This comment has been removed by the author.
 

Prior to Smoot Hawley and the other Hoover tax increases, we experienced a market panic of similar intensity to the 1920 recession.

Blankshot, if the 1929 crash was similar to 1920 the response in 1929 would have been similar. The reason the response was not similar is because the 29 crash was clearly a lot worse. That's simple common sense.
 

Despite the "fact" that our yodeler destroyed the legal competition in his rural community, he apparently has all the time away from his practice for his comments at this Blog and operating his own blog and Facebook and whatever. I wonder if he keeps time sheets. Maybe his clients should wonder as well.

But his history about the Great Depression is askew. Here's a link to "Timelines of the Great Depression":

http://www.hyperhistory.com/online_n2/connections_n2/great_depression.html

It should be noted that the crash started October 24, 1929, followed by Black Tuesday on October 29, 1929. Hoover did not get sworn in until March of 1929. The recession preceding the Great Depression began two months before the crash. What are the Hoover tax increases our yodeler refers to?

Hoover had three years to do something to address the crash before losing to FDR. Our yodeler suggests that if nothing were done, the economy would have quickly rebounded. This is ultimate revisionism that should put our yodeler in the loony bin:

"If the government had simply left it alone, the economy would have fairly quickly rebounded as the US did after the 1920 recession and as most of Europe did after what was only a recession for them in the early 30s. Because the US government layered on taxes, regulations and backed union strikes, our recession turned into a Depression which lasted well over a decade."

Consider that Hoover inherited 8 years of Harding and Coolidge, Republicans I might add. Check the "Timelines" for what happened during those 8 years. Contrast this with what Bush/Cheney after their 8 years of GOP sewer handed Obama prior to the latter's inauguration on 1/20/09.

As to our yodeler's response to my query on how America would look today with a balanced budget provision in the Constitution from the git-go, he points to the 1920s. But take a look at the "Timelines" on the 1920s. Worse yet, he offers nothing about prior to the 1920s, let's say going back to pre-Louisiana Purchase days and following up with the events that occurred expanding America to the Pacific and the subsidized technology that expanded the economy. But the Roaring Twenties were not that great for that many Americans.

It is amazing the number of orifices our yodeler extrudes his crap from.

And notice his salivating with the market drop today. But I guess he feels comfortable living with the demographics in his rural community.
 

BD: Prior to Smoot Hawley and the other Hoover tax increases, we experienced a market panic of similar intensity to the 1920 recession.

bb: if the 1929 crash was similar to 1920 the response in 1929 would have been similar. The reason the response was not similar is because the 29 crash was clearly a lot worse. That's simple common sense.


That is ridiculous. The government response to a recession is driven by the administration in power at the time.

The 1920 recession was almost identical to the 1929 recession. Indeed, 1920 was severe enough that many called it a depression. http://en.wikipedia.org/wiki/Depression_of_1920–21

Harding's hands off free market response to the 1920 recession stands in as sharp contrast with Hoover's government interventions after 1929 in approach and results as Reagan's tax and regulatory reform response to the 1980-82 double dip recession contrasts with Obama's interventions after 2008.

Elections have consequences and sometimes those consequences are long term economic collapse and stagnation.
 

This comment has been removed by the author.
 

That is ridiculous. The government response to a recession is driven by the administration in power at the time.

# posted by Bart DePalma : 12:19 PM


Yes, and said administration would be aware, assuming it isn't filled with clueless nutcases like you, that the country recovered from the 1920 crash with no government intervention. If the situations were similar it would only make sense to do the same in 1929.

The fact that the 1929 administration decided that it had to do something should make it clear that the situations were NOT similar. Again, this is common sense.

Elections have consequences and sometimes those consequences are long term economic collapse and stagnation.

Indeed, it's going to take some time to recover from the Bush/Cheney Disaster.
 

Oh, of course. Generations.

When you run up five trillion dollars in debt, your grandchildren will still be paying it off.

Shrub's legacy will long be remembered, indeed.
 

Bart:

Christina Roemer does believe that tax cuts are stimulative. She also believes that spending is stimulative. You don't get to quote only the half of the economic theory that you like and ignore the rest.

As for spending as a percentage of GDP, you know why it is so high? Because GDP is DOWN. Reduce the denominator of a fraction and a ratio increases. That is a meaningless statistic in recessions.

Further, lots of successful European social democracies spend far more than we do. This idea that you can't have prosperity while spending more than a fifth of the economy on government is completely disproven by reality.

The spending to GDP ratio is a completely meaningless and unimportant statistic. We should spend what we need to in order to get the government we want, and set tax rates high enough to pay for it. Made up statistics that no economist care about may sound good at tea party rallies, but they have no place in this discussion
 

Dilan said...

Christina Roemer does believe that tax cuts are stimulative. She also believes that spending is stimulative. You don't get to quote only the half of the economic theory that you like and ignore the rest.

Romer's academic research prior to becoming an administration hack was far different in its findings:

http://www.nytimes.com/2009/01/09/opinion/
09brooks.html?adxnnl=1&adxnnlx=1312995343-
//GtAh64QHP77p7mLLmoWQ

As for spending as a percentage of GDP, you know why it is so high? Because GDP is DOWN. Reduce the denominator of a fraction and a ratio increases. That is a meaningless statistic in recessions.

That is true in isolation. However, my comparison was between the feds spending 19% of a far lower GDP in 2001 and spending 25% of a higher GDP now.

Further, lots of successful European social democracies spend far more than we do.

The handful of Euro socialist countries which have remotely the same GDP growth and employment as pre-2007 America also have low business taxes and comparatively low regulation compared with the US. Most of the EU has been stagnant for over a generation.

The spending to GDP ratio is a completely meaningless and unimportant statistic. We should spend what we need to in order to get the government we want, and set tax rates high enough to pay for it.

That worked so well for the socialists and communists. Something the party of government needs to learn is that killing the milk cows only brings in less milk.
 

That worked so well for the socialists and communists.
# posted by Bart DePalma : 1:05 PM


AKA, the people who keep loaning us money.
 

Do you have to be a Christian to share a love for freedom?

Not that I know of. I certainly implied no such thing.

But to be obsessed with "freedom" at the expense of other human values betrays a grave imbalance in one's character... if you ask me. Not to mention, Bart, the ambiguities (deep ambiguities) inherent in the idea of "freedom."

If you can't see that freedom is a murky and provisional idea then you probably shouldn't be polluting the discourse.
 

By the way, the euphemism "defense spending" is often an inaccurate term, and even more so for the budgets in question here; "military spending" is better.

E.g. invading a country that was no threat to us, overturning its government, and occupying it, did not defend our Nation from anything. So to say the trillion bucks we put into that was for defense is simply inaccurate. Military spending, sure; that's accurate.

It turns out Shrub didn't have the money for this, nor the decency to charge the citizens that he sold the war to. Instead he sent the bill to the next generation, and the generation after that: he borrowed the money. Our grandchildren may reasonably complain about taxation without representation. They'll have a compelling argument that they never voted for this, nor did it make them safer.
 

Our yodeler's statement:

"Elections have consequences and sometimes those consequences are long term economic collapse and stagnation."

describes well the Supreme Court (5-4) "election" of Bush/Cheney in December of 2000, what our yodeler now describes as a GOP sewer. He ought to know as he was wallowing in it for 8 years.
 

That worked so well for the socialists and communists.

Bart:

There is a difference between these three things:

a. A command economy (communism).

b. Government ownership of the major means of production (socialism).

c. Politicians and the public deciding how much government they want and then raising the taxes necessary to pay for it (fiscal responsibility).

In any event, as you can see from the label I attached to (c), I think it's very important to make clear that this argument is NOT about being fiscally responsible. I am perfectly willing to criticize Obama for fiscal irresponsibility. I don't think he's been THAT irresponsible, given the situation he is in, but as a general matter, it's perfectly fine to say that he's spent a lot without paying for it.

But the tea party critique that you make is different. This critique says that it really doesn't matter whether you pay for your spending or not. What matters is that (a) taxes stay low and (b) spending stays under some arbitrary spending-to-GDP ratio. And that's completely idiotic.

If people want government spending, taxes need to go up to pay for it, because the alternative is big deficits. Sorry, but that's the reality. If you can convince your fellow Americans to want less government spending, that would be one thing, but as it turns out, Americans like Medicare, Social Security, Medicaid, and national defense, and those things are most of the budget. So you got to pay for them. Your choice is taxes or deficits.

Further, as I said, the spending-to-GDP ratio is going to jump around because GDP jumps around. The only way to keep it constant would be to cut spending in recessions and raise it in good times. And that, again, is crazy. The term economists use for it is "pro-cyclical", which isn't a compliment. Instead, what they mean is that it feeds the business cycle. You get deeper recessions from the spending cuts in bad times, and more inflation from the spending increases in good times.

Why do you like boom-and-bust so much? Or do you just not know anything about macroeconomics?

Finally, on Roemer-- that Brooks column does not say that she used to believe that tax cuts were good and spending cuts were bad (which is what you said upthread). It said she used to believe that ALL stimulus is bad.

Again, you can ding her for changing her mind, but you can't claim that the 1994 Roemer was right about spending but the 2011 Roemer was right about taxes.
 

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Dilan:

What communism, socialism and your contention have in common is the government decides what it wants and you pay the cost regardless of whether it destroys the economy. Instead, government should be cost benefit driven.

I have complete faith in the American voters to make a wise cost benefit analysis of how much they want to spend for government services if everyone has to pay for the services and all bills offering services come with price tags that are made public. No shifting taxes to other people and no game playing with the cost of bills like the Obamacare scam.
 

I have complete faith in the American voters to make a wise a cost benefit analysis of how much they want to spend for government services if everyone has to pay for the services and all bills offering services come with price tags that are made public. No shifting taxes to other people and no game playing with the cost of bills like the Obamacare scam.
# posted by Bart DePalma : 4:08 PM


Good thing for you that everything Dems want to do is a "scam", isn't it?
 

bb:

The GOP plays the cost hiding scam game as well. For example, both the GOP and the Dem claimed some $2.4 trillion in cuts in the debt limit legislation. In reality, these "cuts" are only reductions of the increase in baseline spending the government awards itself every year.

The first cost-benefit reform should be to compel government to follow the business practice of zero baseline budgeting where spending conforms to income and not the other way around.
 

No shifting taxes to other people and no game playing with the cost of bills
# posted by Bart DePalma : 4:13 PM


Why weren't your standards this high for the Iraq Disaster scam?
 

"The GOP plays the cost hiding scam game as well."

Not to mention the Bush administration never even pretended to pay for anything it spent, once the projected surpluses evaporated anyway.
 

Bart, Medicare and Social Security and Medicaid are not some government diktat. They are enormously popular.

I think you are really overstating my position. I am not advocating any particular level of government spending. I am saying the public has a right to decide what it wants to do, but has a responsibility to pay for it if it decides it wants government programs.

The reason deficits happen is because you get politicians of both parties who offer the public unpaid-for government.

Now would you please explain how that position is socialistic or communist?
 

Our yodeler continues to try to separate himself from the Bush/Cheney GOP sewer he wallowed in for 8 years, now with this:

"The GOP plays the cost hiding scam game as well."

Alas, it would a crow bar to make this separation (as with the punchline of a joke I won't repeat). Our yodeler's affiliation remains on record at this Blog and elsewhere on the Internet. Why, we haven't had as yet a mea culpa from our yodeler for his uptight support of Bush/Cheney for those 8 years he swam in the GOP sewer. Confession may be good for the soul but that's only if you have a soul.
 

Dilan:

My position and your restated position appear to be nearly the same. If I misread your original point, I apologize. It appears we have reached some common ground.
 

Shag:

In the 2000 GOP primary, I supported Steve Forbes over Bush 43.

I voted for Bush 43 during the 2000 general election because he somewhat better matched my libertarian conservative philosophy than Al Gore. In retrospect, given Gore's complete leap off the deep end of AGW quackery after he left public office, I do not regret that vote at all.

I reluctantly voted for Bush 43 in the 2004 general election because I was adamantly opposed to Kerry's plan to surrender in Iraq after my brother had risked his life there. If we were at peace and there was a moderate like Bill Clinton running, I would have voted libertarian in 2004 as I had in 1992.

As you well know from my prior posts, the only Bush domestic policies I supported were the tax reforms and the ban on partial birth abortion infanticide. I supported Bush's foreign policy, which was by far the subject of most of our debates at this blawg.

In 20/20 retrospect, I probably should have supported more troops than Rumsfeld wanted in Iraq. I regret none of my other positions.

My opposition to Bush 43 overspending is entirely consistent with my opposition to Obama overspending. This is in stark contrast to yourself and many others here who attacked Bush domestic and foreign policies, but are silent about or actually support the same or worse Obama domestic and foreign policies.

Eye, mote, log...
 

My position and your restated position appear to be nearly the same. If I misread your original point, I apologize. It appears we have reached some common ground.

I suspect where we agree is that whatever government the people want has to be paid for. You can't just pass a boatload of government programs and then not raise whatever taxes are needed to pay for them. Both parties have done this and it leads to big deficits which then have to be fixed with austerity measures later.

I suspect where we disagree is that you think it would be healthy to declare some arbitrary spending-to-GDP ratio that we should never go over (or at least, perhaps, never go over except in emergencies-- I don't know, you haven't said this, but I assume you aren't advocating that FDR couldn't go above it during WW2, right?).

I don't think that's healthy for two reasons. First, I think the spending-to-GDP ratio naturally fluctuates as GDP fluctuates, and this would mean you would have to cut spending during bad times and then raise it during good times, and actually I think good macroeconomics suggests that the opposite is the case and actually doing this would make the business cycle more harsh, with deeper busts and more inflationary booms.

Second, I think that it's simply much more important for people to figure out what government programs they really want. In this sense, it's fine to have some sort of guideline in terms of GDP ratio, I guess, but Medicare doesn't automatically become a bad program just because it costs a lot due to health care technology and baby boomer retirements. Or, to use an example that might appeal to conservatives, if you think the Iraq War is a good idea it doesn't suddenly become not a good idea because it ends up costing more than X percent of GDP.

The important principle, to me, is that if particular government programs are beneficial they are worth paying for, and if they are not beneficial they are not. At different times in our history, that may turn out to be different percentages of GDP. For instance, with respect to exploding Medicare costs, we could make all sorts of decisions about whether and how to reduce spending in the program. But if we decide that we can't abide by significant spending cuts, then we need to pay for the Medicare program we desire.

I don't think tea party talk about percentage of GDP gets us to that place because I actually think it conceals the actual issue, which is that the trade-off is between imposing some restraint on these programs and higher taxes. Ideally, I'd try to figure out a way to actually present that trade-off to the American people.
 

My opposition to Bush 43 overspending is entirely consistent with my opposition to Obama overspending.
# posted by Bart DePalma : 6:04 PM


What a load of crap. There wasn't a peep of protest out of you as we pissed away billions every month in Iraq.
 

Our yodeler's hysterical histories are far from:

"In 20/20 retrospect, ...."

particularly regarding the Great Depression, what led up to it and the subsequent events. His hindsight is myopic.

And I know too well our yodeler's out and out lies:

"As you well know from my prior posts, .... "

The archives are there. His distance from George W. Bush that he now claims are not demonstrated in the archives during Bush/Cheney's 8 years of GOP sewer.
Our yodeler's " ... opposition to Bush 43 overspending ... " came about only AFTER Bush/Cheney left their disgraceful 2008 Great Recession behind for Obama.

And what were the Bush/Cheney "tax reforms" our yodeler supported, as if tax cuts that squander the surplus Clinton/Gore left for Bush/Cheney constituted tax reform? (We now know of our yodeler's tax expertise.)

And our yodeler's opposition to Kerry because our yodeler's brother had risked his life? That's a sound basis for a foreign policy? If so, on our yodeler's theory America should stay in Iraq and Afghanistan forever. That's personal, not policy. But for our yodeler to claim he reluctantly voted for Bush in 2004 is an out and out lie based upon his comments at this Blog. Our yodeler was so uptight with Bush/Cheney for their 8 years, there wasn't a crow bar big enough to separate them.
 

Dilan:

I suspect where we disagree is that you think it would be healthy to declare some arbitrary spending-to-GDP ratio that we should never go over (or at least, perhaps, never go over except in emergencies-- I don't know, you haven't said this, but I assume you aren't advocating that FDR couldn't go above it during WW2, right?).

You suspect correctly. Given the almost complete inability of western democracies to control the cost of their welfare states and the movement toward sovereign insolvency across the US and Europe, I would support a very strict constitutional fiscal straight jacket.

Federal spending should be limited to 20% of GDP and borrowing prohibited except for military spending after a declaration of war or for any reason upon a 3/5 vote of both houses of Congress.

The highest income tax rate should be no more than twice the lowest and no deductions should be allowed so everyone is paying a relatively proportional share of the tax burden and the government is not distorting the tax code to benefit favored constituencies. Because folks cannot vote themselves benefits to be paid by someone else, you remove an enormous impetus to government growth.

Finally, no citizen is entitled to benefits and benefits are limited to what Congress appropriates.

Such amendments if written clearly should return sanity to fiscal governance.
 

In Mr. DePalma's defense, I'd like to point out that he was adamantly opposed to the stimulus spending effort prior to the 2008 election.

That doesn't make him right or excuse any other transgressions, but he did make his opposition to those spending bills known. Of course, so did the mainstream GOP in Congress at the time, so it shouldn't be too surprising.
 

The opposition of our yodeler and mainstream GOP in Congress to the 2008 stimulus was purely aimed at the 2008 elections and not based on sound economic reasons. Such a stimulus was perceived as an admission of the failures of Bush/Cheney by our yodeler and his ilk, an administration that our yodeler was uptight with for its two terms, an administration that our yodeler now, reborn as a Tea Partier, seeks to separate himself from. No, our yodeler and his ilk do not admit mistakes. The concern of our yodeler was that 2008 would be a bad election year for the GOP and without a stimulus a deeper mess could be passed on to Obama.

I have said before that I don't like to deal with "what ifs," but what if the steps taken by Bush/Cheney after its 2008 Great Recession had not been taken? Would the economy have gone into a free fall? Based upon our yodeler's hysterical history on the Great Depression, its causes, etc, he can be expected to say it was no biggee and in quick order the economy would have been resolved if left alone. But it seems fairly clear that both the steps taken in late 2008 by Bush/Cheney and those taken by Obama in early 2009 prevented the 2008 Bush/Cheney Great Recession from becoming the Second Coming of the Great Depression.

No, our yodeler and his ilk did not care about economic failure and desired instead a deeper political hole for Obama. For our yodeler, it was better to sink the ship of state. And our yodeler quickly followed up with his stalking of "Obama the socialist."
 

Shag:

I have said before that I don't like to deal with "what ifs," but what if the steps taken by Bush/Cheney after its 2008 Great Recession had not been taken? Would the economy have gone into a free fall?

Like the Obama borrowing and spending, the Bush "stimulus" actions made no difference to the economy.

The Economic Stimulus Act of 2008 enacted in the beginning of that year did not slow the descent into recession any more then the Obama "stimulus" helped the recovery.

The TARP meant to buy failing subprime loans was never used for that purpose. Rather, Bush and Obama used it as a slush fund.

In October 2008, some weeks after Paulson and Bernanke predicted the banking system would collapse, these two saved face by forcing the banks to take TARP loans nearly all of them did not want or need.

Rather than letting GM and Chrysler go through bankruptcy as did the post-9/11 airlines or simply guarantee a bridge loan through reorganization as Carter did for Chrysler in 79, Bush made no strings loans and Obama nationalized the automakers using TARP.

Obama then used TARP to subsidize the now quasi nationalized Fannie and Freddie.

NONE of this "stimulated" the economy.

The one government intervention that was both necessary and worked was the Fed lending the banks money to get them through the liquidity crisis in the fall of 2008. After a short period, the banks started obtaining their own private lines of credit and the crisis had passed. Unfortunately, the Fed kept this up far longer than needed and has effectively doubled the money supply.
 

Our yodeler seems to have a fondness for the banks:

"After a short period, the banks started obtaining their own private lines of credit and the crisis had passed. "

Just how, prey [sic] tell, did the banks work that out? Did the banks then make money by lending again? Or did bank earnings result by some other means?

I wonder if our yodeler is relying upon economics experts for his anal-ysis or coming up with this crap straight from his ....
 

BD: "After a short period, the banks started obtaining their own private lines of credit and the crisis had passed. "

Shag: Just how, prey [sic] tell, did the banks work that out? Did the banks then make money by lending again? Or did bank earnings result by some other means?


Seriously, do some reading outside of law reviews.

Most US banks were basically sound. The liquidity problem was caused by a lack of transparency in the asset based securities (ABS) many banks held.

ABS were traditionally AAA rated securities that bundled low risk home mortgages and credit card debt to give banks and funds a safe place to park part of their portfolios. However, during the Clinton and Bush 43 administrations, Freddie, Fannie and various home mortgage lenders started adding subprime home mortgages into these ABS bundles.

To their enormous discredit, the credit rating agencies continued to rate these now toxic assets as AAA. Not much research has been done on this yet, but I suspect that the credit rating agencies either drank the koolaid being handed out by the Fed and HUD that subprime home mortgages were safe or simply turned a blind eye.

Because the ABS do not detail what loans are bundled into the instrument, the banks holding ABS did not realize they were riddled with failing subprime mortgages until the summer of 2008 and also could not tell what the ABS were worth. Did the ABS have 5% or 100% failing mortgages?

Now Banks use ABS as collateral to take daily loans for operating cash. When the lenders discovered the ABS were riddled with failing mortgages and could not determine the ABS worth, they considered the ABS to be worthless and refused to make the daily operating loans. The is when the banking system almost came to a screeching halt.

The Fed started making emergency loans to the banks to provide them operating cash and the banks sought out and usually obtained lines of credit from other banks using other collateral.

By the time Treasury got around to setting up TARP, the crisis had largely passed. The banks refused to sell their ABS to Treasury for pennies on the dollar as Treasury bragged to the public that they would make the taxpayers billions of dollars reselling the instruments. When they could not buy the toxic assets as promised and the banking system had not collapsed as predicted, Treasury and the Fed saved face by calling all the major bank CEOs to Treasury, putting loan agreements in front of them and demanding that they sign or the bank regulators would force them to take the loans. This was reported in the NYT and Paulson's notes were produced in a largely unreported FOIA request.

This is your government at work. In case you think this thuggery was limited to the Bushies, it continued through out the Obama Administration. I document much of it in my book.

I do not have much sympathy for the banks who actively participated in the subprime home mortgage market, but I do not blame the holders of the ABS for being snookered.
 

Our yodeler has to work on his ABS a tad more as he is revealing his softness. What are the real values of these ABS compared to book? Perhaps our yodeler missed Columbia Law Prof. Coffee on the Daily Show yesterday describing the roles of the financial bankers who compensated the S & P's and other agencies for their AAA ratings. Even AIG is in the process of suing Bank of America for its Merrill and Countryside acquisitions for the latter two's involvements in leading to the 2008 Bush/Cheney Great Recession.

Notice there is no comment by our yodeler on how the banks made their earnings after liquidity relief from the Bush/Cheney Administration.

As to our yodeler's promise to document the "thuggery" in his upchucking book, that will be worth the paper it won't be printed on.

By the Bybee [expletives deleted], banks have a broad definition that includes investment banking operations.

Further with regard to my response to a mild defense of our yodeler, I should have described the situation referenced as comparable to that of a rat deserting a sinking ship what with the 2008 Bush/Cheney Great Recession.
 

Shag from Brookline said...

Perhaps our yodeler missed Columbia Law Prof. Coffee on the Daily Show yesterday describing the roles of the financial bankers who compensated the S & P's and other agencies for their AAA ratings.

The Daily Show is where you look for your information on the subprime home mortgage market and ABS including those mortgages? That explains a great deal.

In any case, the financial industry does indeed pay for the credit rating companies' product so they can judge the investments they make. What did you think the business model was?

Even AIG is in the process of suing Bank of America for its Merrill and Countryside acquisitions for the latter two's involvements in leading to the 2008 Bush/Cheney Great Recession.

I actually feel for BoA. Treasury begged BoA to buy Merrill and especially Countrywide to avoid more Lehman-like failures and the result has been a black hole of legal liabilities for the acquiring bank.

BTW, the Clinton Administration and the Dems running Fannie and Freddie very publicly praised and feted Countrywide for its great work creating the subprime home mortgages for "underserved communities" and used Countrywide to meet the Clinton HUD quotas imposed on Fannie and Freddie to buy up "CRA compliant" junk mortgages. This was almost exclusively a Dem scam.

Go read Gretchen Morgenson's scathing indictment Reckless Endangerment.
 

"Go read Gretchen Morgenson's scathing indictment "

We did this before. You ignored it then. You'll ignore it now. You going to repeat Wallison's lies again too?
 

Columbia Law Prof. Coffee knows a tad more about the financial mess than does our yodeler and whether Coffee is on the Daily Show or on political talk shows or interviews he reveals a more accurate background than our yodeler. What's amazing is that our yodeler seems to like the business model, which then permits the investment banker to market, not basically to invest in, a shady financial product to the actual investors who rely upon the credit ratings. The investment bankers would have difficulty selling many of these products without the co-opting/cooperation of the ratings agencies. If the investment bankers are not happy with a proposed rating, then no pay to the agency. Our yodeler thinks this is okay even though the product being marketed is shady.

But what is really obvious to those who read our yodeler's comments, the Daily Show does more research than our yodeler's anal-ysis.
 

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DG:

If you want to discuss one of my statements, cut and paste it to your post rather than linking to an entire thread.
 

Shag:

John Stewart brought Coffee in to attack S&P for downgrading the Obama Administration's credit rating. Stewart got his contextless comment from Coffee about how the banks pay the S&P and the other agencies to perform ratings so he could play the innuendo.

If you have any evidence at all that S&P, Moody or Fitch are trading ratings for payola, you are free to offer it.

If you have a better business model for the rating agencies than simply selling their product to interested customers, you are of course welcome to offer it.

Instead, you also prefer to play the innuendo.
 

Our yodeler has praised Gretchen Morgenson's book to the extent it benefits his cherry-picking comments. But he might try reading her columns, the major ones on Sundays in the NYTimes, attacking the "business model" concerning the ratings agencies that our yodeler seems to find no problem with; she has been devastating.

And Dodd-Frank calls for addressing this matter noted by our yodeler:

"If you have any evidence at all that S&P, Moody or Fitch are trading ratings for payola, you are free to offer it."

Yet the GOP in Congress fights funding Dodd-Frank such that the well recognized causes of the 2008 Bush/Cheney Great Recession delay being addressed. Follow the money, i.e. campaign contributions.

Further with respect to the ratings agencies business model, the rating agencies are NOT paid by governments for ratings of their bonds. Is this too much innuendo [in the end it's the dough] for our yodeler to handle?
 

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Shag:

Dodd Frank should be repealed in its entirety and replaced with a ten page bill addressing the three primary problems that caused the subprime home mortgage crisis:

1) Forbid the government or its GSEs from guaranteeing or subsidizing in any way subprime and Alt-A home mortgages.

2) Make transparent all ABS instruments so buyers can obtain a list of the home mortgages and credit accounts bundled within.

3) Restructure or preferably liquidate Freddie and Fannie.

That is all that needed to be done. Instead, the Dems made an enormous power grab to have the bureaucracy set the terms of every commercial loan transaction in the country.

Never let a crisis go to waste.
 

Our yodeler's simplification of the causes of the 2008 Bush/Cheney Great Recession demon-strates his simpletonian anal-ysis once again. Perhaps our yodeler could provide a history of his home ownership in his mountain venue and any mortgage financings that benefitted him personally that he might wish to eliminate from a national policy that has indeed assisted many in becoming homeowners. (I am aware that public records are available in this regard.)

Regarding transparency, perhaps if our yodeler has the time from his busy law practice he might favor us with his version. But imagine a potential buyer wading through this suggestion:

"2) Make transparent all ABS instruments so buyers can obtain a list of the home mortgages and credit accounts bundled within."

and determining the risks involved. All this would do is revive "Caveat Emptor," the good old days of the regulationless 1920s that our yodeler seems to favor. Why not require that rating agencies be on the hook for questionable ratings by means of regulating the rating agencies?
 

Shag:

1) Are you actually defending government guarantee and subsidy of subprime home mortgages (loans made to the non-creditworthy) and Alt-A home mortgages (no money down)? The the Clinton Administration and its bureaucracy had not started these guarantees and subsidies and the Bush 43 administration continued them, there never would have been a Great Recession. Banks almost never made these high risk loans before the government agreed to assume the risk.

2) Are you actually opposing making ABS transparent? Dude, caveat emptor applies to all investments that are not fraudulently sold. The government's only legitimate goal here should be to make the investment transparent so the investor knows what she is buying and not to tell the investor what they may or may not buy.
 

I took Sales, Bills and Notes, etc, courses in law school well before the UCC so I actually read cases where caveat emptor was applied. The UCC recognized in many ways that caveat emptor was burdensome and buyers needed protection. Now, our yodeler might claim this was pre-Obama socialism. And steps to protect a buyer were extended to real estate as well as broad consumer protection laws with treble damages. All socialistic, presumably, to our yodeler.

National housing policy contributed many positives to America's growing economy post WWII, including the GI Bill and FHA. Here's another "what if": what would America have looked like post-WWII without this housing policy? Yes, as time went on, perhaps the housing policy became looser, too loose. But putting ALL the blame on Fannie and Freddie for the 2008 Bush/Cheney Great Recession is historically and economically incorrect. As has been noted by others at this Blog, Fannie and Freddie were late in the game on subprimes, trying to catch up with the greedy private sector. Yes, the national housing policy has to be tightened. It would be preferable if a govt. guarantee policy could be eliminated but there are serious questions regarding the private sector's lending practices.

Note that our yodeler avoids responding to providing a history of his home ownership and mortgage financing that might just reveal he benefitted personally with the socialistic national housing policy.

Regarding banks making risky loans, many of such loans did not involve Fannie and Freddie and the banks lessened their risks by selling mortgages by means of bundling so that investment bankers, with the cooperation of ratings agencies, could palm off by securitization such risky loans. Dodd-Frank would require that banks keep some skin in the game so that banks would bear risks as well. But the GOP in Congress will not fund Dodd-Frank, as the banks wish to have very little or no risk.

Regarding our yodeler's suggested transparency, it seems clear to me that our yodeler has had no experience in the preparation of prospectuses for the sale of securities or any idea how tedious it would be for a potential investor to review the details of the mortgages/loans being securitized, as opposed to relying upon a "responsible" rating by a "responsible" rating agency. Our yodeler demon-strates how RETRO he is with his desire to replicate the Roaring Twenties sans regulation.
 

Shag:

National housing policy contributed many positives to America's growing economy post WWII, including the GI Bill and FHA.

Prior to 1993, almost all government home mortgage guarantees and subsidies were limited to the creditworthy and did not extend to subprime borrowers or Alt-A loans.

But putting ALL the blame on Fannie and Freddie for the 2008 Bush/Cheney Great Recession is historically and economically incorrect. As has been noted by others at this Blog, Fannie and Freddie were late in the game on subprimes, trying to catch up with the greedy private sector.

And for the nth time, this claim is flat out wrong. The main villain in Morgenson's book is the Dem hustler who ran Fannie until replaced replaced by Clintonistas Raines and Gorelick. The Boston Fed President Syron who instructed the banks to make subprime loans ended up running Freddie into the subprime ground making millions along the way.

Regarding banks making risky loans, many of such loans did not involve Fannie and Freddie and the banks lessened their risks by selling mortgages by means of bundling so that investment bankers, with the cooperation of ratings agencies, could palm off by securitization such risky loans. Dodd-Frank would require that banks keep some skin in the game so that banks would bear risks as well.

That is because Dodd and Frank, two of the other chief perps in the subprime scandal want to continue subprime lending and force the banks to take a portion of the risk. My suggestion would eliminate the subprime market altogether.

Regarding our yodeler's suggested transparency, it seems clear to me that our yodeler has had no experience in the preparation of prospectuses for the sale of securities or any idea how tedious it would be for a potential investor to review the details of the mortgages/loans being securitized, as opposed to relying upon a "responsible" rating by a "responsible" rating agency.

We are talking about instruments purchased by sophisticated financial firms who get paid to review tedious prospectuses. If the makers of ABS cannot or will not make them transparent, then they can get out of the business. Even this libertarian will support laws preventing ABS makers from defrauding investors with hidden worthless assets.
 

For the nth+ time, our yodeler is cuckoo in placing all or most of the blame on Fannie and Freddie. Our yodeler cherry-picks Morgenson's book and ignores her many, many columns on the ratings agencies.

In response my transparency challenge, our yodeler says:

"We are talking about instruments purchased by sophisticated financial firms who get paid to review tedious prospectuses."

The investment bankers that do the bundling for securitization are the ones that get the cooperative ratings from the agencies they pay so that the prospectuses used by the investment bankers to sell to investors can convince the latter fairly readily of the safety of their investment in such securities. The investment bankers need the AAA ratings for marketing purposes for the investors to rely upon rather than the investors making sophisticated judgments from a lengthy and complex prospectus that the investment banker puts together. Such investors have no contractual arrangement with the rating agency.


By the Bybee [expletives deleted], our yodeler continues to avoid this:

"Note that our yodeler avoids responding to providing a history of his home ownership and mortgage financing that might just reveal he benefitted personally with the socialistic national housing policy."
 

The opposition of our yodeler and mainstream GOP in Congress to the 2008 stimulus was purely aimed at the 2008 elections and not based on sound economic reasons.

Of course! Similarly, their understanding of the debt limit dinner theater and the mortgage crisis is limited to partisan misrepresentation rather than economic brilliance. Not that their opposition does much better.
 

Shag: The opposition of our yodeler and mainstream GOP in Congress to the 2008 stimulus was purely aimed at the 2008 elections and not based on sound economic reasons.

You conveniently ignore my and the GOP House minority's opposition to the TARP slush fund pushed by Bush 43 and the Dems.

PMS: Of course! Similarly, their understanding of the debt limit dinner theater and the mortgage crisis is limited to partisan misrepresentation rather than economic brilliance. Not that their opposition does much better.

Please. It was Obama and the Dems who repeatedly lied and continue to lie that declining to raise the national credit card limit would result in default, cutting SS or cutting Medicare. Declining to drive one's country into insolvency is not economic brilliance, but basic economic sanity.
 

Our yodeler continues his duck and cover to:

********

By the Bybee [expletives deleted], our yodeler continues to avoid this:

"Note that our yodeler avoids responding to providing a history of his home ownership and mortgage financing that might just reveal he benefitted personally with the socialistic national housing policy."

********

I wonder what a public record review will disclose. Recall the hypocrisy of Tea Party rally signs: "Keep your government hands off my Medicare."

And our yodeler seems to think there is a "lock box" for Social Security funds.
 

Not fully off topic, take a peek at Charles Rappleye's 8/12/11 LATimes op-ed "Founding Fathers and federal debt: Government borrowing was one of the prime reasons the framers of the Constitution met in 1787."
 

As an aftermath to the 2008 Bush/Cheney Great Recession, go to TomDispatch and read Barbara Ehrenreich's 8/9/11 post "NIckel and Dimed (2011 Version): On Turning Poverty into an American Crime." It doesn't paint a pretty picture and perhaps would be ignored by libertarians. Her book was published in good times - before Bush/Cheney messed things up. So what was bad for the poor back then has worsened with many dropping from the middle class to the poor, currently 27% of the population. Safety nets? The Tea Party wants what's left of the safety nets to be eliminated.

Regarding crime, Ehrenreich references a French official of years ago who said the law against sleeping under bridges applies not only to the poor but to the rich.
 

Shag:

The left destroys the working and middle class with its subprime home mortgage fiasco and then makes things even worse by crippling the economy with a tidal wave of regulations, then it arrogantly hectors those who still have jobs to pay more taxes for "safety nets" for the victims of left policies.

And you wonder why trust in the government is almost nonexistent and there is a Tea Party movement in near open rebellion against that government.

I initially had my doubts about Sandy's project to rework the Constitution. Now, after three conservative wave elections in 80, 94 and 10 resulting in very little long term substantive change, I am coming around to the POV that fundamental constitutional change will be required to stop the progressive and now socialist projects and restore a modicum of limited government. If the government no longer listens to the people, it is time to change the government.
 

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If the government no longer listens to the people, it is time to change the government.

Bart, you and your Tea Party ilk are not synonymous with "the people."

Rather, you're a shrinking minority of under-informed cranks. You personally owe Jack Balkin & Sandy Levinson a debt of gratitude for all the free therapy they offer by allowing you to post here.

Your presence here makes sense when viewed as self-medication, but almost none at all when viewed as an attempt to persuade.
 

Our yodeler recently suggested that I should spend less time reading law review articles and read the crapola he links to. But I keep on and I recommend a recent draft article by Rebecca E. Zietlow: "Popular Originalism? The Tea Party Movement and Constitutional Theory," available at SSRN via:

http://ssrn.com/abstract=1905824

She refers to the Northwestern Law Review Colloquy and the papers by Jared Goldstein, Ilya Somin, Randy Barnett and own own Sandy Levinson, all readily available for downloading by Googling:

Northwestern Law Review Colloquy

I have read Richard Albert's introduction [he lead the panel's discussion and the audio is available] and Goldstein's paper and hope I'll finish the rest over the weekend. [I amy be delayed because I'll be preparing Elk burgers tomorrow and Gazpacho and Sweet Corn] There is quite a bit of information on the Tea Party. The title of the Colloquy's program is:

"The Tea Party Movement and Popular Constitutionalism"

So that's the next assignment for those who do not follow our yodeler's advice. Enjoy.
 

BD: If the government no longer listens to the people, it is time to change the government.

mattski said... Bart, you and your Tea Party ilk are not synonymous with "the people."


Did I write Tea Party?

The center-right electoral majority in this country are the people for policy making purposes in a democratic republic.

We in the Tea Party are a more libertarian conservative plurality within that majority.

However, the supermajority of the electorate who justifiably believe that their government does not listen to them is far larger than either the center-right majority or the Tea Party rebellion.

I very strongly suggest that you read Scott Rasmussen and Doug Shoen's book Mad as Hell summarizing a couple years of polling they did dividing up respondents into a pro government "political class" and a populist "mainstream" depending upon how they answered three questions concerning populist (not left or right) views on government. About 7% fell into the "political class," a bit over a majority fell into the populist "mainstream" with the rest somewhere in between.

The polling showed an grand canyon size divide between the views of the "political class" and the populist "mainstream," with the "mainstream" joined by large percentages of those who fell in between telling the pollsters that their government did not listen to them, did not care what they thought, did not have their best interests in mind, and was acting without the consent of the governed.

mattski, these are revolutionary sentiments shared by supermajorities of Americans.
 

Our yodeler defines delusional with this:

" ... these are revolutionary sentiments shared by supermajorities of Americans."

Yes, there's trouble in River City according to our yodeler hiding behind his mountain top curtain rural community like the Wiz. Do I hear shades of Father Coughlin, too? Or Robert Welch of the John Birch Society? Or is he Roy Cohn whispering in the ear of Senator Joe McCarthy?

Supermajorities? Yes, delusional is the "Word." (Sorry Stephen.)
 

mattski, these are revolutionary sentiments shared by supermajorities of Americans.

Bart, one of the big problems you have is your penchant for appropriating people who find your views abhorrent. It's easy to observe that our government is dysfunctional. That's obvious. And as a liberal I am frankly disgusted with Obama. But my frustration has very little to do with yours.

I, and millions of other disaffected Americans, find your vision perfectly repulsive and unmoored from reality.

Why don't you go back to your own blog--with it's crush of populist traffic!--and stay there?
 

Something our yodeler stated in another thread at this Blog:

"Much of my competition in our rural county has gone out of business during the Obama Great Recession and my firm has become rather busy. '

needs a further response. First, he redescribes the Bush/Cheney Great Recession as Obama's. Second, he demonstrates that he professionally has benefitted from it. Third, he seems to take glee in much of his competition going out of business in his rural community. Of course, despite his busyness with his law practice, he finds time to be a writer - soon to be self published (aka literary masturbation) - comment extensively at this Blog and at his own blog and on Facebook. But his histrionics history, his lack of foresight and even blind hindsight at this Blog suggest that he is making this all up. But his chutzpah with his legal competition disappearing is going overboard professionally. If our yodeler is to be judged professionally by his performance at this Blog, then he is at most king of a legal anthill (aka a NOAGN*).

*NIT ON A GNAT'S NUT

By the Bybee [expletives deleted], there remains only Sandy Levinson's paper on the Colloquy referenced in an earlier comment for me to read. So far, the papers are quite informative, except for Randy Barnett's paper, where it is all about Randy Barnett, who outdoes in spades Tom Friedman's use of the first person singular. Barnett is in no sense objective in his paper.
 

I just finished reading Sandy Levinson's paper on the Tea Party Colloquy. I have even greater respect for Sandy than I had before, and that was quite a bit. His paper is basically a response to Randy Barnett, quite detailed and quite polite. (The only problem I have with Sandy is he is too polite. But we need at least one grown up to keep things civil. And Sandy has a sense of humor, displayed well in his paper.) His paper is a short 10 pages; the other papers are also short. I urge all to read these papers. (Note: I have yet to locate the paper of the panelist Nathaniel Persily. Have I missed it?)
 

In contrast to Sandy's civility, take a peek at the vile, bilious article by Elizabeth Price Foley titled "Sovereignty, Rebalanced: The Tea Party & Constitutional Amendments" available via SSRN at:

http://ssrn.com/abstract=1904656

that focuses on calling a constitutional convention pursuant to Article V. I don't know if Sandy has returned from his trip or is aware of this article, but perhaps he has some comments, especially since she is critical of Sandy's comments on Randy Barnett at the Tea Party Colloquy with this:

"Moreover, his [Sandy's] use of the perjorative adjective 'parochial' to describe small states reveals a common liberal bias against rural America, which liberals fault for clinging to tightly to guns, Bibles, and the Constitution. It is much better, under this elitist view, to let densely populated, 'sophisticated' urban areas dominate the legal system."

It's as if Randy sent Ms Price on a rehabilitation mission regarding Sandy's response to Randy's proposed Tea Party "Repeal Amendment."

While Sandy is rightfully concerned with an imperfect Constitution, a convention might end up blowing it up. Ms Price does not rule out revolution such as that which followed the Declaration of Independence.

But Ms Price's rural/urban diatribe brings to mind the popular song following WW I:

"How 'Ya Gonna Keep 'Em Down On The Farm,
After They've seen Paree?"

unless it's the tax subsidies.

Speaking of Paree, if Ms Price were to get her way with amending the Constitution, America mind end up looking more like Europe.
 

Ms Price's reference to "guns" brings to mind Adam Winkler's recent The Atlantic article "The Secret History of Guns" which includes a history of the NRA and how it has changed its views over the years. A link to SSRN is available at the Originalism Blog.
 

Shag:

Thanks for the references.
 

The closing paragraph of my 8:00 AM comment contains a typo: "mind" should be "might," rewording the paragraph as follows:

"Speaking of Paree, if Ms Price were to get her way with amending the Constitution, America might end up looking more like Europe."
 

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