Obama hails economy's 3.2% growth rate

[antagon]

i think, ollie, that the government's contribution to the collapse of the economy began in earnest in 2002-2003 with the resolve to fund the wars with bonds, 5 years before the collapse. some are eager to tie clinton, even carter administration policies to the crisis. while some links are more tenuous than others, a number of strong links lead back to the beginning of the last expansion, or earlier. what has happened in the last three years to lead on to such a large contraction in isolation of the years before that?

you couldn't have actually thought your position through.

 

[SFC Ollie]

Fact is we can go back 50 years and find out that the Republican have only held both houses during 6 congresses, while the Democrats held 17 of them. so in 50 years (roughly) who has really been in charge of this financial mess?

You see we can all point the finger in many different ways. I prefer to point it at today and I see nothing but spending money that we don't have to fix problems that we had 40 years ago. And I see todays problems waiting to become politically expedient.

 

[antagon]

i wont describe the last 50 or 100 years as a mess, economically. what more than the greatest economy in the history of economics do you want?

spending is just such an issue which affords us some regrets about the past, and where some lessons can be taken from our history. the misfortune is that we took a spending posture right over the crest of the last expansion, which is ill-advised. alas, that is indeed in the past, but perhaps you're getting your wish with the need to ignore past deficits in an effort to patch up deflation by way of enormous expenditures today. was that what you had in mind with focusing on the moment?

 

[SFC Ollie]

i wont describe the last 50 or 100 years as a mess, economically. what more than the greatest economy in the history of economics do you want?

spending is just such an issue which affords us some regrets about the past, and where some lessons can be taken from our history. the misfortune is that we took a spending posture right over the crest of the last expansion, which is ill-advised. alas, that is indeed in the past, but perhaps you're getting your wish with the need to ignore past deficits in an effort to patch up deflation by way of enormous expenditures today. was that what you had in mind with focusing on the moment?

To put it simply, we are spending way too much. And have been for at least a decade, if not 2. It is time to reign in the wild spending and get the deficit under control. I don't care who is or was in office. My vote goes to the people who will stop the insanity. If they show up to the party.

 

[antagon]

i say pulling the brakes at this juncture will be catastrophic. have you considered that?

 

[SFC Ollie]

i say pulling the brakes at this juncture will be catastrophic. have you considered that?

I am not an economist, I don't know what it would do. But I do know that the only way out of debt is to pay off that debt. Pay more on the debt than what you are adding to it. It is how we pay our bills at home. If we charge or borrow a given amount we pay it off before we add any more. Basic econ 101 I thought.

 

[antagon]

i'm not an economist, either. i think that the government is one of the answers to your question about weak demand causing weak labor, which in turn causes weak demand, which in turn...

that is a deflationary cycle. i wrote a bit about what i did, but the bigger picture is that folks will drop prices as they compete, and the value of goods and services will be less likely to sustain or warrant the workers, facilities, assets and debts that some businesses have, and they could go belly up, or further contribute to the slackening demand cycle by cutting back.

unlike a household budget, the government can cause inflation by spending a lot. that's the opposite of deflation, and literally negates that cycle.

when the government dumped all that cash into sure-to-spend UI recipients hands, did it not mitigate the effect you had questioned as to what businesses will have to do when unemployed customers cant afford goods and services?

there is the issue of the debt. what role do you think it is playing right now? certainly not inflationary. i think that issue will wait until people are making the money to bear spending cuts, restructuring, taxes and inflation to resolve it. that work is best done when the economy is whizzing, and doesnt need a crutch, i say.

 

[boedicca]

The inflationary "fix" for the massive amount of debt we currently have and the future prospects for more is a pretty damaging one.

Just sayin'.

 

[antagon]

there's no way to inflate away all of our debt, or cut back all of our debt or tax all of our debt. that's why i'd mentioned we'd likely do all three, boe, plus restructuring obligations like SS. we wont ever eliminate the debt, ever, but we'll have to address its obesity over the next decade.

as to inflating our way through the recovery, i think it is the way to go until natural inflation takes hold, internationally. the last thing we want to do in emerge with a super-dollar from this crisis, although i'd say that bridge may have already been crossed. nevertheless we've strengthened against other currencies over the last 2 years... another testimony to the strength of the deflation at hand.

 

[FA_Q2]

there's a major difference in deficit spending in a recovery effort and growing the debt in the middle of an expansion. that's one contrast between the Obama and the bush at the moment, and incidental to the state of the economy and the limited options available to the government, today.

Personally I do not believe this. Bad debt is bad debt. It is akin to you attempting to keep your standard of living the same after you lost your job. That is dumb and modern economics be damned, it is still dumb on the national level. It really boils down to common sense and the lack of it in our government.

do you print your own currency? i think that the federal government's perspective on the situation, starting with blaring differences like that, make analogies to an unemployed joe-the-plumber moot. business owners and asset investors who are able to affect more, but not wholly similar perspective to the government's, see contractions as investment phases.

your 'modern economics be damned' also damns classical economics and is in itself dumb on a national level. be smart: the government is not akin to an unemployed bloke.

Granted, there are significant differences there but the basic principal still stands. At times when the government loses cash flow it goes into hyper spending mode. I see no way for that to help the economy now and believe that it only slows down a recovery as the future becomes questionable. At some point this debt has to be paid and it is growing so fast that it may be impossible to address no matter how good the economy gets. Based on your last statement:

there's no way to inflate away all of our debt, or cut back all of our debt or tax all of our debt. that's why i'd mentioned we'd likely do all three, boe, plus restructuring obligations like SS. we wont ever eliminate the debt, ever, but we'll have to address its obesity over the next decade.

as to inflating our way through the recovery, i think it is the way to go until natural inflation takes hold, internationally. the last thing we want to do in emerge with a super-dollar from this crisis, although i'd say that bridge may have already been crossed. nevertheless we've strengthened against other currencies over the last 2 years... another testimony to the strength of the deflation at hand.

Correct me if I am wrong, but I do not believe that government spending effects inflation, it is government printing that does so. Granted, that does cause spending but what we are doing right now is not printing trillions out to meet what we are spending (and I DON NOT advocate that) but we are borrowing trillions to continue spending. This is a full circle thing, at some point we will sink the ship.

I will give you that contracting the government in times of financial crisis may not be a good answer as that would just add to the jobless problem and there are good ways for the government to spend money in a recession. The problem I have is that I do not believe our current spending policy is in a good form for a recession and it is causing more long term problems than short term problems it is solving.

To me, most of this policy looks like an attempt to mitigate the pain we feel today at the price of tomorrow and that is not a good idea.

 

[FA_Q2]

i think, ollie, that the government's contribution to the collapse of the economy began in earnest in 2002-2003 with the resolve to fund the wars with bonds, 5 years before the collapse. some are eager to tie clinton, even carter administration policies to the crisis. while some links are more tenuous than others, a number of strong links lead back to the beginning of the last expansion, or earlier. what has happened in the last three years to lead on to such a large contraction in isolation of the years before that?

you couldn't have actually thought your position through.

It is easy to tie in the Clinton admin into this crisis as the groundwork was laid in that administration. Carter is a little more of a stretch - the concepts were laid there but not implemented in a way that was disastrous until Clinton. They most certainly do have a connection to the current problems. Bushes claim to fame in this was, as you mentioned, cutting taxes and then spending more and that brings the other side into this. As you r brought up Wagner's law earlier, I believe that this has a direct connection with where we are today. People want to own homes and politicians make that happen, people want less taxes and politicians let that happen, people want anything and politicians make it happen for your vote. Then the system inevitably has to readjust and pay for what you are giving out.

I do find it interesting that you point out Bush's spending role in this current economy and then defend Obama's spending in the next breath. If Bush's overspending was a factor in creating this mess than Obama's spending will make it that much worse.

 

[antagon]

i think, ollie, that the government's contribution to the collapse of the economy began in earnest in 2002-2003 with the resolve to fund the wars with bonds, 5 years before the collapse. some are eager to tie clinton, even carter administration policies to the crisis. while some links are more tenuous than others, a number of strong links lead back to the beginning of the last expansion, or earlier. what has happened in the last three years to lead on to such a large contraction in isolation of the years before that?

you couldn't have actually thought your position through.

It is easy to tie in the Clinton admin into this crisis as the groundwork was laid in that administration. Carter is a little more of a stretch - the concepts were laid there but not implemented in a way that was disastrous until Clinton. They most certainly do have a connection to the current problems. Bushes claim to fame in this was, as you mentioned, cutting taxes and then spending more and that brings the other side into this. As you r brought up Wagner's law earlier, I believe that this has a direct connection with where we are today. People want to own homes and politicians make that happen, people want less taxes and politicians let that happen, people want anything and politicians make it happen for your vote. Then the system inevitably has to readjust and pay for what you are giving out.

I do find it interesting that you point out Bush's spending role in this current economy and then defend Obama's spending in the next breath. If Bush's overspending was a factor in creating this mess than Obama's spending will make it that much worse.

this goes full circle to my criticism of timing in the government's economic input/output. i am of the belief that structural and more topical conservatism should be addressed as the expansion of the economy is at it optimum rate. economists have the wherewithal to calculate that sort of shit specifically, but more holistically, when employment and growth are healthy, that the government could try to roll back stimulus policies and address the debt. It will benefit from increased revenues at this stage, despite not having applied any increase in tax.

at present, and why i advocate spending now, we are in a contraction, and the government's posture should be different than the expansion policy, IMHO. it is not a partisan preference, although i feel obama is acting under the same understanding that i have.

for that reason, spending like the dickens in the peak of an expansion is detrimental. i recall popping the tire on my bmx when i was a kid, because i was over-zealously chasing that firm feel in the tire. that does not mean that we shouldn't fill the tires when the economy is flat.

 

[antagon]

Personally I do not believe this. Bad debt is bad debt.

do you print your own currency?

Granted, there are significant differences there but the basic principal still stands. At times when the government loses cash flow it goes into hyper spending mode. I see no way for that to help the economy now and believe that it only slows down a recovery as the future becomes questionable. At some point this debt has to be paid and it is growing so fast that it may be impossible to address no matter how good the economy gets. Based on your last statement:

there's no way to inflate away all of our debt, or cut back all of our debt or tax all of our debt. that's why i'd mentioned we'd likely do all three, boe, plus restructuring obligations like SS. we wont ever eliminate the debt, ever, but we'll have to address its obesity over the next decade.

as to inflating our way through the recovery, i think it is the way to go until natural inflation takes hold, internationally. the last thing we want to do in emerge with a super-dollar from this crisis, although i'd say that bridge may have already been crossed. nevertheless we've strengthened against other currencies over the last 2 years... another testimony to the strength of the deflation at hand.

Correct me if I am wrong, but I do not believe that government spending effects inflation, it is government printing that does so. Granted, that does cause spending but what we are doing right now is not printing trillions out to meet what we are spending (and I DON NOT advocate that) but we are borrowing trillions to continue spending. This is a full circle thing, at some point we will sink the ship.

I will give you that contracting the government in times of financial crisis may not be a good answer as that would just add to the jobless problem and there are good ways for the government to spend money in a recession.

as to your analogy, i disagree about the basic conceptual similarity. there are too many differences.

i am in a position to have to spend more when less money is coming in, in a way which more closely mimics deficit spending. this is typical, i think of any attempts at shrewd business practices. there's some imperfections to this analogy: i am investing in my own revenue where the government is investing in our revenue. i use the government's currency, the government uses its own, and has a range of considerations related to that which change the application of this analogy.

but.. ill put it through it's paces anyhow: when i take 3k in one week 2.5k the next, and am on pace to do the same, it panic a bit. if i could pocket all that cash, i'd of course be happy, but considering the expense in operating my life, the business, and paying three guys to help, these figures are in the black or red. rather than tightening my belt and putting my income, my business and my employees at risk, i turn to increased spending and effort to change my economic lot. it works every time; profits might not be the same, but it keeps me and my dudes going to see better economic conditions.

this is different from persons on fixed incomes or who have no way to convert money into more money, like businesspeople can. if you make a grand a week and your expenses change, or your hours get cut back, you do the tightening of the belt thing, which i could understand. if you don't function in that paradigm, like the government most certainly does not, tightening the belt is suicidal in some ways.

spending is inflationary by extension of the printing or the borrowing it requires. rates are only future measures of inflation, and they appreciate under heavy borrowing. squeezing them back down is directly inflationary.

The problem I have is that I do not believe our current spending policy is in a good form for a recession and it is causing more long term problems than short term problems it is solving

these are real concerns. what do you have in mind?

To me, most of this policy looks like an attempt to mitigate the pain we feel today at the price of tomorrow and that is not a good idea

i would characterize this similarly. some of the spending is pain relief, but some of it, i would say, addresses the problems causing the pain. i have a broken leg with screws sticking out of the cast. i could speak on pain, but aren't anti-inflammatories both relievers of pain and affectors to healing and circulation? i feel spending to stem deflation is like this. more granularly, the UI insurance extensions, though at great cost, put money in the hands of rent and mortgage payers and the businesses they consume from, directly counter-balancing the deflationary effects of low demand.

again, my thoughts on timing in macroeconomics indicate that paying those prices tomorrow is more prudent than paying them today.

my solution to the wagners creeping is to remove the politics from the budgets that congress has their hands on, instead laying them out with respect to inflation, deflation, debt, surplus, and deficit, alone. how the congress spends it, is up to them and the constituents they're beholden to.

 

[FA_Q2]

do you print your own currency?

Granted, there are significant differences there but the basic principal still stands. At times when the government loses cash flow it goes into hyper spending mode. I see no way for that to help the economy now and believe that it only slows down a recovery as the future becomes questionable. At some point this debt has to be paid and it is growing so fast that it may be impossible to address no matter how good the economy gets. Based on your last statement:

Correct me if I am wrong, but I do not believe that government spending effects inflation, it is government printing that does so. Granted, that does cause spending but what we are doing right now is not printing trillions out to meet what we are spending (and I DON NOT advocate that) but we are borrowing trillions to continue spending. This is a full circle thing, at some point we will sink the ship.

I will give you that contracting the government in times of financial crisis may not be a good answer as that would just add to the jobless problem and there are good ways for the government to spend money in a recession.

as to your analogy, i disagree about the basic conceptual similarity. there are too many differences.

i am in a position to have to spend more when less money is coming in, in a way which more closely mimics deficit spending. this is typical, i think of any attempts at shrewd business practices. there's some imperfections to this analogy: i am investing in my own revenue where the government is investing in our revenue. i use the government's currency, the government uses its own, and has a range of considerations related to that which change the application of this analogy.

but.. ill put it through it's paces anyhow: when i take 3k in one week 2.5k the next, and am on pace to do the same, it panic a bit. if i could pocket all that cash, i'd of course be happy, but considering the expense in operating my life, the business, and paying three guys to help, these figures are in the black or red. rather than tightening my belt and putting my income, my business and my employees at risk, i turn to increased spending and effort to change my economic lot. it works every time; profits might not be the same, but it keeps me and my dudes going to see better economic conditions.

this is different from persons on fixed incomes or who have no way to convert money into more money, like businesspeople can. if you make a grand a week and your expenses change, or your hours get cut back, you do the tightening of the belt thing, which i could understand. if you don't function in that paradigm, like the government most certainly does not, tightening the belt is suicidal in some ways.

spending is inflationary by extension of the printing or the borrowing it requires. rates are only future measures of inflation, and they appreciate under heavy borrowing. squeezing them back down is directly inflationary.

I do see your point but think equally bad of the analogy of the government creating wealth and your company creating wealth. You increase spending to create more wealth and bash through rough times but the government does not create more wealth. Sure, they print money but that in itself does not create wealth and there are very few things the government spends money on that creates wealth. Using a business owner is actually a counter to the major spending we are going through now. What the government is doing is taking that money from you, reducing your ability to create real wealth and get out if the recession and spending it in places that do not create wealth at all.

The problem I have is that I do not believe our current spending policy is in a good form for a recession and it is causing more long term problems than short term problems it is solving

these are real concerns. what do you have in mind?

I believe the deficit should be reigned in to more manageable spending limits and the bailout of private industries stopped. I see your point that government must spend at the downturn but our government is not simply spending, they are almost DOUBLING discretionary spending. That kind of debt is insane. If the deficit spending were closer to 1/8 to 1/4 of what it is today I would be far more accepting. Also, bailing out private industry is another of those massive spending fiasco's that bothers me and I believe that is destroying the basics of our economy that is based on the rise AND fall of companies.

To me, most of this policy looks like an attempt to mitigate the pain we feel today at the price of tomorrow and that is not a good idea

i would characterize this similarly. some of the spending is pain relief, but some of it, i would say, addresses the problems causing the pain. i have a broken leg with screws sticking out of the cast. i could speak on pain, but aren't anti-inflammatories both relievers of pain and affectors to healing and circulation? i feel spending to stem deflation is like this. more granularly, the UI insurance extensions, though at great cost, put money in the hands of rent and mortgage payers and the businesses they consume from, directly counter-balancing the deflationary effects of low demand.

again, my thoughts on timing in macroeconomics indicate that paying those prices tomorrow is more prudent than paying them today.

I believe that the economy has a set value. That value changes constantly but is nonetheless a value. Our economy in all its faucets from the stock market to consumer spending has no idea what that value actually is but IS driven by the perceived value. That perceived value may fluctuate over and under the actual value at the many whims of the people driving the economy forward. At some point we get over exited and get where the perceived value gets so out of touch with the actual value that reality steps in and forces us to realign our perceptions with reality. That is where I see recessions. Reality coming and knocking on our greedy little doors. When the government attempts to soften the blow with spending it is brining the economy even further down as it, as a whole, has absolutely no ability to spend that money wisely and removing it from our hands where it would do more good is a bad idea. The economy still has to realign with reality, no matter what the government spends and that is why I do not believe in spending our way out of this. There is the need to insure that perception does not fall to far below the actual value and that is where much of what you are talking about in deflation and inflation terms fits in but the overspending here is far to much.

my solution to the wagners creeping is to remove the politics from the budgets that congress has their hands on, instead laying them out with respect to inflation, deflation, debt, surplus, and deficit, alone. how the congress spends it, is up to them and the constituents they're beholden to.

A very good idea, to bad congress would never go for that. It would remove far to much power for them.

 

[antagon]

there's no real perfection among analogies. i emphasize that like a business, but rather unlike employed individuals or fixed income 'earners', the government can associate investment with its objectives, rather than just time alone.

as to your point about the government being unable to affect the creation of wealth: public consumption can certainly allow contractors to realize profits. public jobs can allow employees to convert their time to wealth. luckily, man, all money is green.

the propensities of the economy to create wealth are facilitated by the government's issuance in the first place. barter will not suffice.

with respect to tax policy, our tax code is designed to specifically target monies not participating in the economy, and government spending specifically puts those dollars back into the part of the economy where wealth is created. there is a sweet-spot in the economy, where the most valuable economic activity with respect to wealth creation -- commerce -- is most pervasive. tax and spend redirects money into this area, and more wealth is created by that virtue. the US is a consumer economy, by far. some ideas are more fitting with industrial/agrarian economies.

this libertarian-derived mythology regarding the government's inability to create wealth or facilitate that creation does not consider this sweet spot. where its progenitor may have seen the microeconomic bases to his macroeconomic thesis in pre-war europe, i say the tenets of this aspect of it fall like ducks to a 10-guage when put through their paces in modern america:

where its argued that taxation and expenditure by government is wasteful and precludes the creation of wealth, i say that the expenditure of government, waste (like paying too much for facilities and supplies) included, is more effectively targeted at the part of the economy where wealth is created than it would have been had the tax not been collected at all.

exploring that..

where it is argued that taxation of businesses which have monies earmarked for stimulative investments curtails these productive pursuits, i say, in america, if you make said investments, the expenses are deductible. shoulda, woulda, coulda made them within the fiscal year. i say this mechanism motivates investment among businesses and charitability among individuals more than an entire absence of any taxes, whatsoever, would affect.

where it is argued that private citizens with expendable income and savings more effectively stimulate the economy with their spending, i argue that the government makes specific consideration to parts of the economy which are hurting, like the housing and rental markets in cities with 15%+ unemployement as many cities right now are experiencing, and spends in ways no private citizen will: like paying unemployment for 99 weeks to those who can substantiate they are making a jobsearch effort. who the f is the private citizen angel who has the wherewithal or intention to do that? rents get paid. mortgages get paid. goods continue to flow, albeit slower, and producers and service providers can hang on to their employs as a result. :wealth creation.

then there's the dead horse ive been beating about timing and the converse character of expansions and contractions. part of that indicates the government being one of the only to put out in desperate times, while at the height of the economic cycle, private citizens and businesses are spending drunk. the government will spend. it is crucial that it not spend drunk with the rest of us near the summit. it is crucial that is supplant the scarcity of expenditure in the trough, when everyone else seems to do the belt-tightening act.

time is not on my side. i'll get to your contention that the spending is too much, and the spare the rod, spoil the child in the recession some time later.

 

[antagon]

that was a great summary of the economic cycle, FA_Q2. when recession knocks at the door, lessons are indeed dealt out in the ensuing smack-down. from the government's perspective, there are two lessons which come to mind where they have learned that spoiling the child has merits which outweigh the discipline of companies and consumers and the wariness of risk taking imparted by other lessons taught by the recession.

i take each of the great depression and the lost decade (japan) as examples where the government let the recession beat-down the economy so badly, it was crippled and rolled around in a wheelchair with a colostomy bag attached for years thereafter. no critical injuries is the goal. these injuries are analogous to stagflation: where there is something wrong with the economy which is keeping it from growing, even functioning. monetary stagflation in both instances precipitated deflation. credit stagflation, particularly in japan continues to be an issue for their economy, since the government allowed, i believe, all but 4 banks to fail when they went into recession. in both instances, these recessions converted to depression on the basis of specific inaction on the part of government with respect to inflationary expenditure or easing.

lessons are being learned, man, despite the spending. 150 or so banks have bellied, 5 million people lost their jobs, some to companies which have gone under, never to hire again. the reality is that it takes 6 months to make all that happen, but it takes years to get a company realizing its potential, reestablish oneself in a less depressed city, or to retrain and gain experience in a new field. if the only recourse to recession for most rather than some people is going though these drawn out processes, you have a depression.

how much spending? i'd argue not 1/4 or an 1/8 of the status quo, for starters. i feel that the state of the economy does not just need a coat of fresh paint and an oil change. instead, it's more like the tranny needs a rebuild. the government cant entirely bridge the gap in demand, but it takes considerably more than we are putting out right now to approach that. i'm looking on to see if the quantities, conclusions and mechanisms the government and the fed are employing will be sufficient, not that they'll be too much, for that reason.

there haven't been massive structural commitments in the stimulus, but stimulus expenditure. once its spent, its spent. the outlook on the debt is more crucially on the commitments that the government has made, and a need to overfund new commitments as well as structurally alter those we have.