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View Diary: Book Review: Kevin Phillips' "Bad Money" (143 comments)

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  •  Governments where? (5+ / 0-)

    According to the CIA World FactBook on line the public debt of the developed world stacks up next to ours like this:

    Debt as a percentage of GDP

    USA     36.7%
    France  66.6%
    Germany 65.3%
    Britain 43.3%
    Japan  194.4%

    I would really like it if Democrats could get off of this "Balance the budget and pay down the debt" bullshit. In the April 1996 edition of The American Journal of Economics and Sociology Frederick C. Thayer wrote an essay contending that for 6 previous periods of budget balancing and debt pay down the immediate results had been 6 recessions or depressions. He listed them:

    1. 1817-21: in five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.
    1. 1823-36: in 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.
    1. 1852-57: in six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857.
    1. 1867-73: in seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.
    1. 1880-93: in 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.
    1. 1920-30: in 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.

    Robert Rubin insisted that the Clinton administration balance the budget and pay down the debt from 1991 to 2000. The recession that followed may still be in progress and is close to becoming a depression. The mechanism is pure Keynesianism. Sequestering money depresses economic activity. Cutting taxes means rich people sequester money, paying down the debt means the government sequesters money. If you want a healthy economy, get the money out on the street.  

    "If I pay a man enough money to buy my car, he'll buy my car." Henry Ford

    by johnmorris on Sun May 25, 2008 at 07:31:18 AM PDT

    [ Parent ]

    •  private debt ... (5+ / 0-)

      Your argument is about public debt, and perhaps with further analysis and deeper thinking, we might be able to draw useful and interesting conclusions about debt payment policies.

      However, I've been reading Both American Theocracy and Bad Money, and Kevin Phillips' real argument is much more focused on private debt rather than public debt.

      A part of his thesis holds that the financialization of the U.S. economy, and consequent excess private debt masked from view by "advanced financial instruments" is leaving this economy vulnerable.

      So, while it's OK do debate public debt (and keeping money in circulation rather than sequestering it), that's not the discussion that Kevin Phillips, Warren Buffet and other minds greater than mine are having.

      On a topic related to public and tax-funded money management: I am curious whether anyone else has noticed that funneling money or resources into "the poor" keeps that money in circulation in those communities?

      I hypothesize that money flows through the pjockets and wallets of "the poor" exceptionally quickly, circulating back into the community practically instantly. This money hits grocery stores, landlords, the community in general without hardly slowing down as it flows through the hands of "the poor".

      Money funneled into the accounts of "the rich" does become sequestered. When it does move, it moves much further away from the local community toward much more sophisticated, but much more remote communities of interest.

      The result (I hypothesize) is that money that is "misspent" on the poor is much healthier for local communities than money "properly directed" to the rich.

      I believe your theory of sequestration would be able to inform this discussion. Thoughts?

      •  to summarize (0+ / 0-)

        Trickle down only works for the people at the tip of the pyramid. The mythos that the people at the tip of the pyramid will magically transform what we give them into a rain of plenty falling on the rest of us is called neoliberalism this generation. While a rain happens afterwards, it's yellowish and smelly. I know of NO historic exceptions to this.

        Trickle up as practiced in the New Deal and the post-WW2 programs that built infrastructure, housing, and sent people to college built the biggest national economy the world has ever seen even with (or because of) a 91% marginal tax rate.

        Looking for intelligent energy policy alternatives? Try here.

        by alizard on Sun May 25, 2008 at 10:52:29 PM PDT

        [ Parent ]

    •  The Debt is Overhyped (3+ / 0-)
      Recommended by:
      alizard, pigpaste, Paul Ferguson

      That for presenting some excellent facts regarding the debt.  The debt is extremely overblown and is nothing but a rhetorical bait and switch.  The focus on the debt is to convince the public to suppress social spending.

      The real problem is the spending priorities which favor military spending and tax cuts for the rich.  In other words favor the transference of wealth to the already wealthy.  In other words -- neoliberalism.

      These policies got started under Jimmy Carter with the cutting of the Capital Gains taxes and deregulation.  They got extended under Reagan and continued under Clinton via trade "agreements" that favored the investor class.

      In addition in 1969, the Johnson Administration put Social Security "on budget" to paper over military spending.  Social Security does not add on thin dime to the deficit or the debt.  And Social Security is not in crisis.

      The Clinton Administration under Robert Reich made that false claim by understanding growth numbers that made it appear that Social Security was going bankrupt.

      What is dragging the United States down is military spending that subtracts more that it provides.  Military spending is extremely wasteful and is extremely harmful to the environment.  Notice that "Mr. Environmentalist", Al Gore, has never advocated cutting the miltiary budget and during the Clinton years military spending increased in real terms.

      What is needed is a tremendous restructuring of spending priorities.  The War in Iraq has exposed the wastefulness of military spending which consumes more that half the the true budget.  Military spending provide no mulitiplier effect for economic stimulus.

      Redirecting military spending toward health and infrastructure will improved the standard of living for most American and also promote a much more peaceful and cooperative world.

      However the ruling class has no real desire to give up the power.  They desires is for global domination at the expense of domestic needs.  What people have to come to grips with is that the U.S. is a plutocracy and that it will be an immense struggle to change the U.S. into a true democracy.

      This requires education and real facts and people becoming more engaged and finding better source than the mainstream media who job it is to keep people ignorant.

      •  Overhyped? Maybe. Good? No. (0+ / 0-)

        What percentage of your taxes go to interest on the debt?

        I'll deal with this issue another day, but suffice it to say that if you have a choice between borrowing and lending, lending is better.

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