Skip to main content

US currency

Simon Johnson, former chief economist at the International Monetary Fund, has an important post on the NYTime's Economix blog, challenging the predominant austerity narrative.

The United States faces some serious medium-term fiscal issues, but by any standard measure it does not face an immediate fiscal crisis. Overly indebted countries typically have a hard time financing themselves when the world becomes riskier — yet turmoil in the Middle East is pushing down the interest rates on United States government debt. We are still seen as a safe haven.

Nonetheless, leading commentators and politicians repeat the line “we’re broke” and argue that there is no alternative to immediate spending cuts at the national and state level....

The most immediate problem is that our largest banks and closely related parts of the financial system blew themselves up in 2007-8. The ensuing recession and associated loss of tax revenue will end up increasing our government debt, as a percentage of gross domestic product, by around 40 percent. Very little of this debt increase was due to the fiscal stimulus; mostly it was caused by lower tax revenue, because of the slump in output and employment....

The only room for bipartisan consensus here seems to be what we got in December 2010 — a big tax cut. Cutting taxes is nice, but only if it is consistent with keeping the budget on a sustainable path.... the problem here is bipartisan — as it was with the tax cut last year. None of the leadership on either side is willing to talk openly about how our biggest banks caused great fiscal damage. No one is willing to explain why our health care costs continue to rise. And no top politicians currently champion real tax reform.

The Republicans have seized a moment. To them, this is not really about fiscal responsibility; this is about an opportunity to shrink the size of government.

Both sides of our political elite have contributed to the sense of fiscal crisis. And as we continue down this path — dangerous big banks, out-of-control health care spending, significant tax cuts, small changes in nonmilitary discretionary spending and irresponsible rhetoric on both sides — we are well on our way to a real crisis.

In other words, the political expediency of appealing to supposed moderates by being willing to compromise and finding "bipartisan" solutions might have been good for Wall Street and the wealthiest Americans. It's not been at all pretty for the millions who no longer have equity in their homes and downright disastrous for the one-fifth of Americans who are unemployed or underemployed.

The pressing fiscal crisis the nation faces is the job deficit, and slashing public spending is only going exacerbate that problem. "So be it," says Speaker Boehner. And so it will be unless President Obama and other Democratic leaders embrace reality and reject austerity.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  It has become accepted as fact (12+ / 0-)

    Cutting Taxes is good for the economy.  Government is the problem.  Those Reagan canards still infect us and will sink us.

    •  Has "investment" become a dirty word? (8+ / 0-)

      We need a way to get corporations to start investing some of that 2 Trillion in cash they are sitting upon in the USA.

      Wall Street used to be a means to funnel funds into new business opportunities.  No longer, now it is just casino games.

      The American Business Class has become very lazy.

      I'm thinking that the transaction tax might be a good way to get more funds.  Put it into real infrastructure projects.

      •  No one is interested in investment that takes (8+ / 0-)

        longer than 30 or 60 days to double in value. That's the casino culture referred to. Most Americans don't realize it, because no economist will say so, but there has been very little investment happening on Wall Street for a very long time.

        They've been packaging and repackaging fraudulent securities to drain money out of the system, so it can be invested in hedge funds. But hedge funds simply invest in index funds, which are like the corner bookie running numbers on the race at Santa Anita. The money never comes near any real productive economic activity.

        This is what we're paying bonuses of 100+ million dollars for.

        As or "shrinking government," it's a non-sensical term. One can shrink government services, and can restrict it from enforcing the law, but at that point we become Somalia, with the war lords (think Koch Brothers) controlling everything. Government doesn't shrink, it just becomes more and more ineffective at providing the framework for a civil society.

      •  They're addicted to the big score (2+ / 0-)
        Recommended by:
        brooklyngal, miningcityguy

        The old fashioned profit margins are not 'exciting' enough.

        And the only way to sustain these new 'exciting' opportunities is fraud and theft.

        Somebody has to pay for it, the money has to come from somewhere, there needs to be dupes and suckers for this game to keep going.

        Meanwhile Obama drones on about the same old false bullsh** while ignoring the 2,000 lb elephant in the room....
        because he needs that 2,000 lb elephant to fund his 2012 campaign.

        All this nonsense needs to stop NOW.
        They need to bleed the American middle class dry to keep this game going, and they WILL do just that
        and then they will pick the bones of the dead carcass.

      •  For the serious answer, Richard Koo (1+ / 0-)
        Recommended by:
        brooklyngal

        wrote up the economic pressures that define such behavior.

        The title is "The Holy Grail of Macroeconomics."

        -- He identified this problem as the Balance Sheet Recession. Debt overhang after a boom-and-bust cycle dominates corporate finance.

        -- Money is held, not invested.

        -- Even firms that have some cash are constrained because so many firms are under water to debt that normal investments are paralyzed.

        Bob Swern and I have posted several diaries here. Search on "Richard Koo" under Diaries after 01/01/2008 and they will pop up for you. For example:

        Economic Earthquakes, Dr Koo, Avoiding a 15 year Recession

    •  Simon Johnson nails it! (As usual.) (2+ / 0-)

      And many thanks to Joan for posting it here.

      The hungry judges soon the sentence sign, And wretches hang, that jurymen may dine.

      by magnetics on Sat Feb 26, 2011 at 07:50:21 PM PST

      [ Parent ]

  •  Austerity doesn't work ask Ireland... (8+ / 0-)

    time for evil rich people including evil rich corporations to pony up. Not going to happen since the founding fathers were tax cheats and we have more of the same now.

    John Kasich, R-OH-gov hates black people, women, children, and unions, I guess that covers almost everyone.

    by OHknighty on Sat Feb 26, 2011 at 06:21:00 PM PST

  •  Tax cut? (3+ / 0-)
    Recommended by:
    seabos84, Terra Mystica, jfromga

    Really? Where? I certainly haven't seen one. As a matter of fact, my withholding has INCREASED.

    I'm not rich, I don't make that much. My husband's military pension has ALSO had the withholding increased, and they even included a little newsletter explaining why.

    Our household income has DROPPED by about $100/mo, so don't tell me there's been a tax CUT.

  •  It is hard to justify Austerity when (5+ / 0-)

    there is no link between doing it, and the growth we need.

    Labor is the answer.

    We do not produce enough to compensate for our consumption.  That's the problem.

    So, it's possible to reduce consumption, and that means fucking us all out of any benefits we might have coming from our taxes

    , or

    it means laboring our way out of the debt.

    With so many people unemployed, we have a huge workforce potential, yet no political will to engage it.

    Why is this?

    It's not just Republicans.  It is big corporations and the very wealthy, who want to model their vision of a feudal society to the rest of the world.

    IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

    by potatohead on Sat Feb 26, 2011 at 06:34:23 PM PST

    •  Engage It At What? (4+ / 0-)

      Name me one job sector which creates new wealth and does not simply redistribute existing wealth where the U.S. can today employ any significant portion of America's unemployed.

      I don't think that you can. So instead we:

      a.) have an endless litany of 'job summits'

      b.) we put Jeff Immelt who along with Jack Welsh offshored everything that wasn't nailed down at GE in charge as some kind of 'job czar'

      c.) we put Diana Farrell who while at McKinsey Global Institute wrote Offshoring: Is it a Win Win Game? (complete with four footnotes) in as Deputy Director of the United States National Economic Council

      c.) we stump hard for even more so-called 'free trade' agreements

      (and on, and on, and on)

      And then we go on TV every week and lament as why we are so fucking perplexed as to the reasons the U.S. economy is circling the drain.

      I won't be coming home tonight, my generation will put it right - Genesis 9:3

      by superscalar on Sat Feb 26, 2011 at 06:56:22 PM PST

      [ Parent ]

      •  Well (1+ / 0-)
        Recommended by:
        flavor411

        Food production

        Infrastructure of all kinds, broadband, rail, bridges, new roads, etc...

        Capital Equipment (machinery)

        Parks and lands.

        Recycling and materials processing.

        All of those are good targets.  Not all the labor force can participate, but the part of it that can should.

        Then we need to seriously talk policy.

        Either we start to use tarrifs to marginalize the cost of overseas production to phase in domestic production

        ,or

        we raise the tax on the wealthy so that our permanent service economy supports a standard of living we can live with

        , or

        we significantly reduce our standard of living

        , or

        people will die.

        Gotta pick one, or a combination of those.  Can't just tread water hoping for a miracle.

        The nation doesn't produce what it needs to account for it's consumption.  We need to get to work.

        There are laborers, a lot of them, meaning the work is possible.  It's just politics from there, meaning we need our leadership to actually make some decisions, not keep coddling big corporations.

        IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

        by potatohead on Sat Feb 26, 2011 at 07:31:38 PM PST

        [ Parent ]

    •  it's not just the republicans (6+ / 0-)

      with damn few exceptions democrats are selling "the wealthy create jobs" bullshit instead of "labor creates wealth."
      the plutocrats have been very upfront in telling working people, "we don't need you, go away & die." it's astounding that people have gobbled it up instead of turning it back on them. does the world stop spinning if we fire donald trump? or a bunch of waltons or buffet or the kochs? do we really require these economic lords in order to exist?

      Whatever action a great man performs, common men follow. And whatever standards he sets by exemplary acts, all the world pursues. The Gita 3.21

      by rasbobbo on Sat Feb 26, 2011 at 07:19:49 PM PST

      [ Parent ]

    •  No, that's NOT the problem (0+ / 0-)
      We do not produce enough to compensate for our consumption.  That's the problem.

      The problem is that our consumption is way too low and therefore we have idle capacity in both workers and factories.  Until consumers start spending money again, businesses won't hire anyone.  That's the problem and it has been the problem for 2 years.

      •  That's supply sider thinking. (1+ / 0-)
        Recommended by:
        SherwoodB

        Coupla things:

        The majority of consumer goods are not made here, and we owe the people who did make them for us a lot of money.

        That's what a deficit is.

        And that supports we do not produce enough to account for our consumption.

        Without understanding that, we cannot realize why we don't have the production we do.

        Demand comes from wages.  When we sent the means of production overseas, transitioning to a service economy, demand dropped with wages, and at the same time, the cost of operating our society rose, because we were paying others to do what we could do ourselves.

        The key thing driving this mess is the trade policy.  When it's cheaper to have other nations produce for us, we do not value our labor properly, but they do.

        And in the end, at the macro scale, labor accounting comes down to this:

        Who is spending their time laboring for who?

        Time is wealth.  Wealthy people have lots of time they can do what they want with.  Poor people do not have as much time.

        The other nations laboring for us expect a return on that investment, and that's our deficit, because of this one pesky dynamic:

        What do they buy with our dollars?

        If we don't produce enough to back the dollars, they will buy us, and our means of production, and look at all the foreign ownership of our means of production!

        So, even if we increase production, and even if we do it as you say to stimulate consumption, the profit from that leaves the nation, does not end up in the treasury, leaving us poor.

        We will remain poor this way, because of the basic labor accounting that cannot be written away.  Because we let them buy us, they own that wealth, not us.

        The product of that is we buy goods, or even produce goods here, and the profits for a great quarter go overseas, where they get taxed and pay for their universal health care, while we squabble over scraps.

        We must abandon that supply side / free market ideology, and take a macro view of our national economics, and structure the trade agreements in ways that encourage domestic production, domestic consumption, and domestic exports in amounts that are greater than our imports.

        Or...  we need to fight a war and acquire significant new wealth...

        Or...  we suffer a much reduced standard of living, or Austerity, in a attempt to better balance things.

        Or, we let a lot of people die, which would reduce the cost of the society as a whole.

        That's reality man.

        IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

        by potatohead on Sun Feb 27, 2011 at 04:11:04 PM PST

        [ Parent ]

        •  You couldn't be more wrong about everything! (0+ / 0-)

          First, how you could possibly equate my demand focused analysis with supply side thinking is just ludicrous.  Obviously, there is way too much supply on the market now which is why inflation is so low.

          Demand comes from wages.

          No, demand come from consumers buying things.  They may buy on credit, they may sell stock and buy with that cash, they may realize capital gains and use that to buy.  Wages can also be saved, rather than spent, and that is a big problem right now too.

          What do foreigners do with our dollars?

          If we don't produce enough to back the dollars, they will buy us, and our means of production, and look at all the foreign ownership of our means of production!

          Wrong again.  Foreigners have been buying our Treasury bonds by the trillions of dollars.  That is why our interest rates are so low, which is another big plus for our economy.  They have also been buying our stuff:

          Overseas demand for American goods is helping support manufacturers. Exports rose 1.8 percent in December to the highest level since July 2008, according to Commerce Department data released Feb. 11. For all of last year, exports increased 17 percent, the biggest one-year gain since 1988.

          http://www.bloomberg.com/...

          Your "analysis" of our economic situation is just pathetic, but typical of the nonsense here on DKos.

          •  I think you need to reconsider some of your (0+ / 0-)

            commentary.

            There is a reason why "typical of DKos", and that is you have some basic misconceptions.

            Demand is only possible when people have access to dollars to spend.

            Notice how the banks tightened up the credit?  Notice how wages are flat and ordinary people are seeing much higher costs and risks in their lives?

            That all suppresses demand.

            Pay the people more, or lower their risks, or give them access to cheap credit, and they will spend, generating demand.

            Now, if that money is spent on things not made here, or on goods owned by a foreign corporations made here, most of the benefit of the demand being satisfied doesn't go to helping run the nation.

            It goes instead to fund some other nation, say Belgum, who owns Busch.  Now drink a Bud, and help pay for universal health care in Belgum, not here.

            Our exports do not bring in enough to run the nation.  It doesn't help that we have most large corporations paying little to no tax at all, and it doesn't help that our treasury is seeing low revenue numbers, through depressed wages, due to lots of jobs overseas.

            That's the balancing act we are failing.

            Our domestic production simply does not support our level of consumption.

            That is what a deficit is.

            Really, your whole argument is George Bush, "Support the US, go shopping!"

            Here's a little reality check for you:

            No, demand come from consumers buying things.  They may buy on credit, they may sell stock and buy with that cash, they may realize capital gains and use that to buy.  Wages can also be saved, rather than spent, and that is a big problem right now too.

            You wrote that.

            Most people right now are month to month.  There are no stocks to sell, no dividends to spend, and no savings to draw from, because they've been bled dry due to the massive wealth leaving the nation.

            That is what happens when you send so much production off shore.  

            We can't make a living here doing each others nails and laundry, and that's the problem.

            Pay them more, put production here, raise the income level, and demand will come up, and we will see the mutual benefit of that in terms of our domestic economy.

            Roll back the tax cuts, so that the safety nets are well funded and expanded to actually help people, and that will increase demand more still.

            I do give you two bonus points for trying to express supply side ideas as demand though!

            IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

            by potatohead on Mon Feb 28, 2011 at 12:13:18 PM PST

            [ Parent ]

            •  Wow (0+ / 0-)

              Your level of ignorance is just mind boggling.  You actually believe that buying a Honda made in Ohio is less beneficial than buying a Ford made in Canada that is sold here?

              Do you just make this stuff up by yourself?

              The problem is that Americans have stopped spending money like they did before the Collapse of 2008.  If we don't spend, unemployment goes up.  Why you can't grasp that basic concept, which Keynes established 75 years ago, is just beyond comprehension.

              •  Devaluing people doesn't make for (0+ / 0-)

                effective advocacy.

                My post is clear on my economic position, as is yours.  Now, I went through and answered it, while you more or less decided on some attempt to marginalize me.

                This appears typical, after a quick review of your comment history.

                One would think so many interactions would reduce the level of surprise you experience, given you've been here for a while.  But, that's understandable, in that maybe it just takes a while to recover from the differences.

                Take your time, by all means.

                Now, let's talk about just why Americans don't spend money like they used to.

                A large and growing percentage of them simply don't have it to spend!

                Have you considered that there may be a link between the collapse and the lack of spending today?  If not, you really should give that some consideration.

                The middle class really has taken it in the shorts income wise.  Has been going on for 30 years now, and the truth is, housing values were inflated, and that used to fund spending, despite wages or buying power per hour work not actually being adequate to support that spending.

                When the collapse happened, the "house as ATM" game was over, and it's still over!

                The average income is very low compared to what people need to meet their needs.  You can pick whatever chunk of the income curve you want, but it's safe to say $30K to 50K is considered "good income" by a lot of people right now, many of whom make considerably less than that.

                So then, let's take the $40K and look at why somebody isn't spending.

                $40K, maybe a kid or two, and a home and a car.

                After taxes, that's maybe $29K or so, depending on deductions, and let's just be generous and say it's $30.

                Divide that by 12, and you get about $2500 / month.  A very large number of my peers have income levels in this range right now, many down from nearly double that as their family wage jobs were outsourced for ones that pay considerably less.

                If both parents work, then maybe we can add another $1000 a month or so to that, for $3500.

                There are two kinds of spending.  Wants spending, and needs spending.  Generally speaking, demand for wants is dependent on what needs spending looks like.

                If that family owns a home, their mortage could run from say, $900 to $1700 or so, depending on a lot of factors, the primary ones being their overall home value, and whether or not they have done a lot of refinancing to pull equity out of the home.

                A renter where I live, can expect to pay $700 to $1200 for modest living, and deffo that amount for a small family.

                Food for a small family can run a few hundred dollars a week, so let's just call that $250 or so, and be very conservative about it.  That totals $1000, with two kids, your typical American family, that's not out of the norm, if they expect to eat reasonably healthy.

                So we are at $2200 now, out of $3500.  let's round down a bit to account for variance and just say $2000.  Fair?

                Utilities are on the rise, particularly in those regions where they are privately operated and poorly regulated.  Where I live, this is not true, and those amounts are small.  $300 a month or so, maybe $350.  Where I lived before, it was double that, so let's just say $400 and call it good.

                That's $2400 out of $3500.

                Many people drive to work, and that's easily $40 a week for gas, totaling $160.  Round up for trips to school, and if both parents drive, let's say $300.

                $2700 now, only 700 left for spending!!

                A modest family has a entertainment budget of a coupla hundred dollars per month, and potentially some subscription TV on top of that, so let's say $300.

                $400 left now.

                If they have kids, they need things, clothes, health care, school fees, and the many other little bits of cash needed throughout the month.  Honestly, that can consume the $400, depending on the time of year, but a family could choose to spend instead of taking care of their kids, so maybe they finance a HDTV, or something, and call it good.

                Your call there.

                Now, what's unaccounted for?

                401K contributions?  Health care premium contributions.  Car and home insurance?  Tools and materials needed for home repair or to perform labor?

                Where's the money at pal?

                Are they hoarding?  Are you fucking high?

                This is where half, or more of America is at right now.  

                The spending is not happening, because they don't have any money to spend, and that's a fact for a growing number of people.

                To these people, tax cuts don't do any good, because they don't have liquid dollars.  To these people, there is no pulling from savings, if they even have it, to take advantage of some good discount incentive.  Many of these people use their personal credit to account for those bad things that happen, which I did not account for here.

                Car repair?  Medical Supplies?  New Appliance?  

                We get demand by putting money in peoples pockets.  They then will decide to spend on their needs, and if those are met, their wants.

                We could work to raise wages, for example.  Bringing those up seriously impacts demand in a positive way.

                No amount of supply helps the person who doesn't have liquid dollars to buy it with.

                We could reduce their risks!  Universal health care is a big deal here, with many families paying anywhere from a few thousand to 10K or more per year for health care coverage, not to mention the supplies, deductable, etc...

                That would generate a TON of demand, which is why many of us progressives pulled for a medicare for all type program.  Huge stimulus right there.

                We could simply give them money, but that only works for a while.  Why?

                Once the buying is done, they are back month to month again, and because most of that money leaves the nation, the longer term effects of it are limited.

                So there you go.  I seriously doubt you are going to be well received, walking around like a clown saying, "go shopping to generate jobs", LOL!!

                IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

                by potatohead on Mon Feb 28, 2011 at 09:27:46 PM PST

                [ Parent ]

                •  Where's the money at pal? (0+ / 0-)
                  Are they hoarding?  Are you fucking high?  - Marginalize Much? -
                  The spending is not happening, because they don't have any money to spend, and that's a fact for a growing number of people.

                  Here's why you are wrong.

                  Back in 2009, as the Great Recession was hitting bottom, Congress enacted the "Cash-4-Clunkers" program that increased auto sales by nearly 50% overnight to an annual sales rate of 14 million.  Thereafter, auto sales gained momentum to the point that sales are nearly normal now.

                  How could that have happened if people "don't have any money to spend"?  Clearly, people did have money to spend and are still spending it creating tens of thousands of jobs for auto workers and making the companies they work for, both foreign and domestic, profitable again, some for the first time in many years.

                  Your "solution" -

                  a medicare for all type program.  Huge stimulus right there.
                  would not generate any jobs except in the healthcare sector which is already sucking up massive amounts of spending without producing better health outcomes for Americans.

                  As a real economist, Dean Baker, has said many times, if America spent the same amount as other major countries do on health care, we would have federal budget surpluses now instead of record deficits into infinity.  But you think it is "progressive" to waste billions of tax dollars giving Big Pharma and the hospital industry massive profits by ripping off Medicare and Medicaid.

                  Like I said, your ignorance is staggering.

                  •  Yeah, and I think you are acting like the ass (0+ / 0-)

                    There is a difference between finding ways to get the money that is out there moving, and doing things that contribute to that pool of money in a material way.

                    Cash for clunkers turned old cars into money, which lowered the bar for people to spend on new cars.

                    I don't dispute the potency of that, but it was only effective for those able to spend, or who had access to credit.

                    The family I just outlined, is very typical, and there are a ton of families right there, with the numbers growing every day.

                    Cash for clunkers didn't work for them.  What will work for them are things that free up liquid dollars, and that means either:

                    lowering their month to month costs and risks, like health care would for example

                    , or

                    increasing their wages, like public works programs, domestic production would do.

                    The kinds of things you advocate operate for those people who have credit, or enough income to make choices on spending.  That's actually not the growing norm, because we have a cheap labor policy here, and we continue to push cost and risk onto the middle class.

                    I'll bet a cookie you are fairly affluent, probably upper middle class professional or better, with peers who are the same.

                    I'm the same, for what it's worth, with a difference.  I got hit by the health care issue, with a sick person forcing the loss of all I had built up.  Now I am here, no real working credit, lots of bills, and basically month to month.

                    Frankly, I'm one of the lucky ones, because my income is actually considerably higher than what I wrote above.  However, the MAJORITY of my peers are pretty much where I detailed above.

                    You walk in to that group of people with this message, and they will laugh you out of the room.

                    I'm laughing at you, because I don't believe you actually understand where most people are at, nor do you understand how those numbers are growing right now.

                    The stock market looks good.  Corporate profit is at a all time high right now, but it doesn't trickle down like you say.

                    Never has.  Never will.

                    People are not hoarding money.  Well, let me correct that.

                    Affluent people are hoarding money, not spending as much as they could.  You are correct on that.

                    Most ordinary people simply don't have the money to spend, unless they have access to cheap credit, and even then it's difficult because they have costs and risks, and that line of credit needs to be liquid so they can deal with that.

                    And again, devaluing people doesn't make for good advocacy.

                    Your disdain for people who bother to tell you how it is spending wise is not all that attractive, and it sure as hell doesn't boost your credence.

                    It's actually the number one response I see from people who are presented with information that's difficult to rebut.

                    Now you tell me, step by step, how that family I just outlined, assuming a small $1K or so line of credit being available is going to go out and spend.  Tell me where the money will come from, and how they would structure their choices differently to boost the economy.

                    Will it be less for the kids?  Cancel the insurance policy that's "optional"?  Maybe they win the lottery?  

                    And what happens with that credit line full, and they need to fix their car, or the kid breaks a tooth?

                    Show your work.

                    IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

                    by potatohead on Tue Mar 01, 2011 at 08:45:37 AM PST

                    [ Parent ]

                    •  Here's your answer right here (0+ / 0-)

                      Get a job at GM, especially a salary job:

                      GM to pay more than $400 million in worker bonuses

                      DETROIT (AP) — Less than two years after entering bankruptcy, General Motors will extend millions of dollars in bonuses to most of its 48,000 hourly workers as a reward for the company's rapid turnaround after it was rescued by the government.

                      The payments, disclosed Monday in company documents, are similar to bonuses announced last week for white-collar employees. The bonuses to 76,000 American workers will probably total more than $400 million.

                      Most of GM's hourly workers will get a record payment of more than $4,000 — more than double the previous record in 1999, at the height of the boom in sport utility vehicles and pickup trucks. Nearly all 28,000 white-collar workers such as engineers and managers will get 4 to 16 percent of their base pay. A few — less than 1 percent — will get 50 percent or more.

                      Most GM salaried workers earn in excess of $100,000 per year. A bonus of 8 percent, the midpoint of the range, would give them roughly $8,000 each. That means GM would pay out roughly $224 million.


                      http://www.bloomberg.com/...

                      Beats the hell out of the minimum wage public works programs that you advocate:

                      Cash for clunkers didn't work for them.  What will work for them are things that free up liquid dollars, and that means either: lowering their month to month costs and risks, like health care would for example, or increasing their wages, like public works programs
                      •  Great!! (0+ / 0-)

                        Let's make a lot of stuff here, so we can get that money flowing.

                        Domestic production.  Said it a lot of times.

                        We need more of it, and I never advocated otherwise.

                        BTW:  That does fall under "raise their wages", which stimulates demand.

                        I in no way advocated we only do public works.  Seems to me, you just made my point nicely.

                        Thanks!

                        IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

                        by potatohead on Tue Mar 01, 2011 at 10:37:39 PM PST

                        [ Parent ]

                        •  This was your point (0+ / 0-)
                          Cash for clunkers didn't work for them.

                          C-4-C  worked for everyone by pumping up demand across the economy and stimulating consumption which is 70% of demand in America.  Most people are spending again and that is why over a million new jobs were created last year in the private sector.

                          Obama's health care reform did nothing to stimulate jobs or the economy.  That was the clear message from voters last November, but the Dems still don't get it.

                          •  no (0+ / 0-)

                            "the dems" are divided.

                            There are "the coin operated dems" and "the progressive dems".

                            The coin operated dems think like you do, and didn't actually pull anything back from the insurers, who still make a huge profit on doing nothing but handling money.  They don't actually add any value to the system'

                            The progressive dems wanted to put a public plan out there that would lower people's costs and risks, which would have made their dollars more liquid, creating demand, among other things.

                            Had we actually passed reform, instead of the illusion of reform, the story would be very different there.

                            Actually, had we passed most of the good legislation that came out of the house, the story would be very different, but coin operated Democrats see it the way you see it, and failed us, leading people to wonder just how the two parties are different, opening the door for the GOP.

                            Now, having opened that door, they are finding out that the GOP is still all about having it trickle down, and pushing costs and risks onto people, suppressing demand.

                            My core objection was the implication that people need to spend more to stimulate the economy, framed as people hoarding money.

                            If there is demand, then spending will occur.  If there isn't, then it won't, and all you have to do is look to the wealthy to see that in action right now.

                            IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

                            by potatohead on Wed Mar 02, 2011 at 07:27:45 AM PST

                            [ Parent ]

                          •  So, No Paradox of Thrift for You? (0+ / 0-)
                            My core objection was the implication that people need to spend more to stimulate the economy, framed as people hoarding money.

                            Prof. Krugman says you are wrong.  So do I.  This concept has been well established for many decades, so why don't you get it?

                            http://krugman.blogs.nytimes.com/...

                          •  Not for me, thanks. (0+ / 0-)
                            Wow interesting stuff. No matter which way you consider it they are interlinked. Which comes first a decrease in GDP or a decrease in investment? You can’t consider each individually. From a novice perspective, this seems like an increase in our personal savings is our enemy. I doubt you’re advocating this, but superficially it seems like George W.’s assertion during the 2001 recession that everyone go out to the mall, would seem apt right now?! Confusing.

                            That comment pretty much sums up my general exception to this line of commentary.

                            IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

                            by potatohead on Wed Mar 02, 2011 at 11:32:54 AM PST

                            [ Parent ]

                  •  By the way... (0+ / 0-)

                    "are you fucking high?" was in response to your diminutive comments directed my way.

                    It's not sufficient to claim another is ignorant.  You've got to demonstrate that, which you've failed to do.

                    Usually, I like to have a bit of fun with that, giving as good as I get.  More entertainment that way.

                    By all means, get as shitty about it as you want to.  I've the higher ground, and find it entertaining.

                    IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

                    by potatohead on Tue Mar 01, 2011 at 08:48:13 AM PST

                    [ Parent ]

                  •  Medicare for all isn't ripping off (0+ / 0-)

                    medicare and medicaid.

                    If we all could buy into that, at cost plus a few percent, the shared risk pool would be huge, saving us a lot of money, and the lower premiums would deffo free up dollars for spending.

                    Let those programs bargian and use the leverage from all those people, and it would shave a ton off the massive profits from big pharma.

                    That's what most other nations do, and it's a big factor in how much less they pay for their health care.

                    However, that's another discussion.  I wrote what I did under the assumption that smart policy would be used to get the margins OUT of those two industries, operating on larger volumes, and lower costs per person, but that's just me.

                    If you want, we can factor that difference of opinion out, and simply focus on either lowering the average persons cost and risk, or raising their income to generate demand.

                    After all, that is what is needed for very large numbers of Americans, whose income does not meet their basic needs.

                    IF THEY ARE GOING TO SCREW THE PEOPLE, MAKE THEM OWN IT. #opengeekorg

                    by potatohead on Tue Mar 01, 2011 at 08:52:11 AM PST

                    [ Parent ]

                    •  Yeah, like that could happen (0+ / 0-)
                      Let those programs bargian and use the leverage from all those people, and it would shave a ton off the massive profits from big pharma.

                      Here's some news you obviously missed: Obama promised Big Pharma that there would be no bargaining on prices to get its support for his health reform bill.

                      Do you live on Planet Earth?

  •  No economy or game is sustainable (2+ / 0-)
    Recommended by:
    Garrett, magnetics

    When one person has all the marbles.

    "My plan is this: to place before mankind the alternatives of sharing and death. No-one in truth could for mankind choose the latter, for that death would be shameful and bitter indeed, unlike your blackest fears. My friends, there is a way of Hope.
    There is a way into the Light. That simple way lies through Brotherhood and Love. Many times before have you heard this. Nevertheless, mankind yet awaits its fulfilment."
    - Messages from Maitreya the Christ

  •  Austerity Now (1+ / 0-)
    Recommended by:
    magnetics

    is asking for disaster.

     The Governors met today in Washington, and none of them are happy because they need federal dollars to maintain. They all know that.

    ~a little change goes a long way~

    by missliberties on Sat Feb 26, 2011 at 07:01:54 PM PST

  •  simon reading yves, krugman, bobswern? (1+ / 0-)
    Recommended by:
    potatohead

    hopefully the reality chorus will get louder than the clap louder chorus, BUT

    there sure is a lot of money to be made making excuses for the last few years and the last few decades of thieving...

    first rule - don't call it 'THIEVING"

    rmm.

    Yond Cassius has a lean and hungry look; He thinks too much: such men are dangerous

    by seabos84 on Sat Feb 26, 2011 at 07:04:08 PM PST

  •  Why quote the IMF Crooks (0+ / 0-)

    The IMF is part of the problem.

    These are the guys whose solution to every countries problem is to privatize water and utilities.

    No - the IMF is NOT on our side.

    The object of persecution is persecution. The object of torture is torture. The object of power is power. --George Orwell

    by jgkojak on Sat Feb 26, 2011 at 07:04:43 PM PST

  •  Finacial crisis = energy crisis (3+ / 0-)
    Recommended by:
    Sparhawk, potatohead, miningcityguy

    The energy we get from fossil fuels has created the bulk of our wealth and driven world population growth and increases in standards of living. Furthermore, almost all the debt in the world is leveraged against the the future creation of wealth obtained by extracting and burning more fossil fuels.

    As dependent on petroleum use as the US economy is, our financial health is very directly tied to the abundance of cheap oil.

    Good luck with that. But it's going to be a while before things really crash hard.

  •  That's always the case (1+ / 0-)
    Recommended by:
    flavor411

    President Obama (all Presidents really) will nearly always do the politically expedient thing and will kick the can down the road as much as humanly possible rather than make any kind of hard decision that will offend any constituency at all. It's more or less the Iron Law of Politics these days.

    No one will upset the apple cart until it collapses on its own.

    (-5.50,-6.67): Left Libertarian
    Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

    by Sparhawk on Sat Feb 26, 2011 at 09:58:06 PM PST

  •  we're not broke (2+ / 0-)
    Recommended by:
    denise b, Dauphin

    It always disturbs me when people say that because we are running a trillion dollar deficit, we must be broke.  And then to illustrate their point they try to tell you how many times to the moon and back a stack of bills adding up to a trillion dollars would make.  But that is asking us to imagine how many dollars any one of us would need to make up the shortfall.  Better to imagine it this way:  A trillion divided by more than three hundred million Americans is only about three thousand bucks apiece.  That's less than most of us owe on our credit cards.  We are far from broke.  

    •  Actually, we are loaded with money (0+ / 0-)

      Facts:

      1)  Interest rates on government debt, 10-year T-bonds (which are market driven), are half what they were during the Reagan administration.  So our credit is in great shape.

      2)  The debt service to GDP ratio is less than 2% while the ratios for Germany (2.5%), U.K. (2.6%) & Japan (2.9%) all exceed ours.  We can easily afford more debt.

      3)  We can print as much money as we want, any time we want because the U.S. Dollar is the reserve currency of the world.  So we can easily pay our obligations.

      OTOH, we could painlessly reduce our debt by selling oil from the Strategic Petroleum Reserve or gold from Fort Knox reserve.  We have no need for either of those stockpiles.

  •  Johnson had a great post over at... (1+ / 0-)
    Recommended by:
    denise b

    ...ProPublica, this past Tuesday: "Geithner’s Gamble."

    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

    by bobswern on Sat Feb 26, 2011 at 11:29:54 PM PST

  •  A+ subject choice. D on the diary. (0+ / 0-)

    Johnson makes three main points, all of which get missed by the diary.

    1. "Doom Loop" risk taking is still running free on Wall Street.

    Of the national-level politicians now pushing for spending cuts, almost none showed up to fight to contain the fiscal risks posed by our largest banks. The Brown-Kaufman amendment to Dodd-Frank — which would have placed a limit on the size and debt (relative to equity) — was supported by 33 senators, only a handful of whom were Republican.

    But then again, the Obama administration also fought hard against Brown-Kaufman. Treasury Secretary Timothy F. Geithner argues that the TARP bank bailouts will end up costing the taxpayer very little. He is forgetting the broader fiscal damage done by the collapse of the real economy and the loss of eight million jobs.

    That is what merits extended discussion. Cowardice makes for LOL moments in the Monty Python films, but it is out of place a Treasury.

    2. "...we need to control health care spending...."

    Of course. The only institutions that do control health care costs are TriCare and Veterans Health Administration. On a per procedure basis they function at between 1/3 to 1/2 greater efficiency than "insurance" paid for-profit or non-profit care systems.

    Socialized systems do not steal money by generating phony tickets -- the "referrals" -- that double America's costs for chronic care treatment.

    3. Tax system modernization.

    My take on it is different from Johnson and much closer to Bowles-Simpson:

    -- Eliminate loop holes.

    -- Lower the base rates as offset.

    Unfortunately, loop holes are obtained by bribing the politicians in hundreds of ways. Bribes flow. Loop holes remain.

    Bowles-Simpson takes this on full steam. Option # 2 of Bowles-Simpson has a first rate layout for getting it done.

    *****

    Read the original. Good stuff. Johnson is an economist, not some talking-head goof ball.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site