Here’s hoping now that all the asshats enjoy their new prelude to depression, and near civil war it’ll take to rub the liberalism from their eyes.

Now, can we institute an IQ test at conception?

the broader point of the Bethesda water main break is that there’s a lot of aging public infrastructure that is in need of replacement and/or upgrading.

starfleet_dude on December 23, 2008 at 2:55 PM

The break in Maryland is due to overpaying executives and funding a deluxe HQ building at the expense of maintenance. PG and Montgomery County have been Democratic for a long time.

In Fairfax, the water system is in better shape, but the current Democratic county government had to spend extra this year to repair failed HVAC at the “Taj Mahal” Government Center because, and I quote ” we invested in people by deferred maintenance.”
I can think on only one Democratic governance body that gets even close to a fair value for the taxpayer’s dollars.

You should realize that the spending buck stops at the front door of the White House. It was Bush who promoted unrealistic tax cuts for the wealthy…

As for Obama, we know that deficit spending is the only way to prevent a repeat of the 1930’s collapse that almost wiped Western democracies off the face of the earth.
bayam on December 24, 2008 at 1:15 PM

You should realize that tax cuts for the wealthy produers ARE deficit expenditures meant to sustain the economy. And as a reminder, the “robust economy of the Clinton years” ended in an equally serious tech bubble burst that destroyed Trillions of dollars in capital. After that and 9-11, stimulus was required to replace lost capital.

The question this thread centers on is which deficit spending provides the most stimulus: government spending or tax cuts going towards private investment? National debt grows either way. However, a rise in taxes collected from the fruits of private investment can erase the deficit. In fact, that’s the ONLY thing that will erase the deficit.

Without a deflationry depression, government expendatures will rack up huge debt that the stimulated economic activity may not pay for in extra revenue. Just imagine that, through a combination of stimulus packages and bailouts, we manage to keep businesses open and people shopping but at no taxable profit. How do you pay the deficit off? This seems to be where we’re headed.

However, deficit spending for public projects had at bargain prices due to substantial deflation will not help the economy either. Deflation would be catastrophic. We have so much debt to service that deflation guarantees ever-larger portion of the federal budget go to debt service, wiping out any gains from cheap labor and material. And we’d lose the ability to sell our debt overseas unless their deflation is worse.

The Fed is trying to deflate our debt away but the money is ot getting into the hands of consumers because we’re saving cash and we don’t want to, or can’t, borrow. Money, when available, gets hoarded or goes toward debt service and therefore is not contributing to inflation.

Deflation looks to be in the cards unless people somehow get more money to spend without having to go any more into debt.

That depends, actually. A lot of socialists go into economics.

Count to 10 on December 23, 2008 at 12:57 PM

Absolutely correct and it makes perfect sense that the cohort of economists would lean in the socialist direction. After all, free market economists don’t really have much to do aside from pound the table about philosophy. As an economist, the application of free market theory amounts to doing nothing. :) However, socialist theories, or interventionist economics, makes a lot of work for economists who must monitor, calculate and project. It all still boils down to a proof that the capitalism is the best of the imperfect systems available to us, because people (including economists) will always act to serve their own self interest.

God Gave Us the Water, but Who Pays for the Pipes?

… A water utility consultant told me of a nun who came to a public hearing on a proposed rate increase and testified that because God gave us the water, the people should not have to pay for it. This might be called the sacramental view of infrastructure financing.

The consultant responded, “Sister, God did give us the water; but who is going to pay for the pipes, the pumps and the water treatment works?”

The good sister’s view is consistent with the finding of pollster Frank Luntz that 54% of Americans believe clean water is a right, not a privilege.

This occurrence illustrates the challenges of financing water infrastructure in the U.S. The estimates of an investment gap over the next 15 years range from hundreds of billions of dollars to more than a trillion.

ANother of the lies that you like to push.

Ed, you’re too funny. Keynes laid the groundwork for most modern day economic theory,

bayam on December 23, 2008 at 6:58 PM

How can something that has been completely discredited and isn’t taught by any reputable economist, be the foundation of all economic thought.

And your claim that Keynes was ignored during the depression is utterly laughable. The politicians of the day followed his recommendations to the letter, to the economies ruin.

Count to 10, the broader point of the Bethesda water main break is that there’s a lot of aging public infrastructure that is in need of replacement and/or upgrading.

starfleet_dude on December 23, 2008 at 2:55 PM

I find it interesting that on one hand you claim that only govt knows the right amount of investing in infrastructure, yet you complain that govt has been underinvesting in infrastructure.

Er, Bush and ALL OF CONGRESS, which passed each budget and still whined about never getting all the spending it wanted.

Do you hear Obama saying “No mas!” when it comes to deficit spending? I sure don’t

You should realize that the spending buck stops at the front door of the White House. It was Bush who promoted unrealistic tax cuts for the wealthy and massive spending programs- not the Congress. If tax rates had been left at levels in place during Clinton’s tenure (a time of robust growth of both the tech and Fortune 500 economy), and new entitlement spending avoided, our debt would have remained unchanged.

As for Obama, we know that deficit spending is the only way to prevent a repeat of the 1930′s collapse that almost wiped Western democracies off the face of the earth. The government has to step in and replace all the money that’s vanished from the system with massive cash and credit injections to prevent a meltdown. And prop up the economy through infrastructure spending that helps mitigate the effects of lost jobs. No one really knows the right formula for doing this, but we know that the brave ‘protectors of capitalism and fiscal discipline’ of the 1930′s were following a disastrous course.

The problem is that we never saved for a rainy day to use a simple phrase because people like Cheney who said that “deficits don’t matter” thought that financial meltdowns were a thing of the past. In reality, black swan financial events will probably occur every 50 to 100 years, due to a confluence of risks that go unrecognized until it’s too late. Policy-makers can’t assume otherwise when amassing debt.

starfleet_dude on December 24, 2008 at 12:27 PM

Not to let that go unanswered: ridiculous.
Marry Christmas.

Keynes offers us the best way to think about the financial crisis
by Martin Wolf, Financial Times

Keynes’s genius – a very English one – was to insist we should approach an economic system not as a morality play but as a technical challenge.

Thinking of ways to right the economy trumps thinking of excuses not to every time.

Stossel!

First, government isn’t inherently wasteful

With a tiny handful of exceptions throughout the centuries, large governments have always been wasteful. Bureaucracies are inefficient by their very nature – to say nothing of when they’re composed of corrupt dunderheads.

Is this a typo?

Yes. It was a typo. Thanks for catching it.

No ‘new way of thinking’ is required, unless it’s new to those who have never studied capitalist economics. Mises, Rand, et al knew decades ago what ideas were required to protect freedom and create prosperity.

I agree with you that you and I don’t need a new way of thinking, but my guess is that you won’t disagree if I suggest that most Americans don’t think or behave as they need to in order for a capitalist economy to thrive.

My point, which I made in a far-too rambling way, was that capitalism needs to be repackaged and explained to a generation that has been raised thinking that the New Deal saved our capitalist system and who have never read Rand, Freidman or Hayek, much less heard of them.
Efforts to rescue capitalism that are sent down from an ivory tower will fail. America will be renewed when they begin to comprehend that it is no longer in their best interest to think of themself as an employee, but as a one-person business that adds value to another business or businesses. That is what I meant, as another commenter picked up on later.

But there’s no doubt that future economists will point to the $9 trill debt built up by Bush as one of the most hazardous fault lines in the current economic environment.

bayam on December 23, 2008 at 7:08 PM

Er, Bush and ALL OF CONGRESS, which passed each budget and still whined about never getting all the spending it wanted.

Do you hear Obama saying “No mas!” when it comes to deficit spending? I sure don’t.

I’m not sure I follow your thinking on the problem with the weak dollar though. Since Treasuries are denominated in dollars and paid back in dollars wouldn’t a weak dollar increase exports, boost economic activity and allow us to pay back the debt more easily? Foreign investors would hate it because the currency effect on top of low Treasuries rates would make for a bad return.

dedalus on December 23, 2008 at 6:56 PM

If the dollar gets too weak, dollar-denominated assets will get dumped by foreigners. Why hold treasuries at even 3% return in US dollars if the dollar is losing, say, 5% annually? Right now, short-term treasuries at near-zero interest are a way to park capital away from risk, seemingly giving us endless and free access to money. But now the dollar is weakening, and we HOPE we can sell new treasuries at equally low rates when those mature because obviously we can’t pay them off.

If treasuries are dumped by foreign investors, who hold several Trillion in our debt, new debt issuance will have to promise ever-higher returns to investors that comfortably exceed dollar deflation – or not have any buyers. If government can’t both keep paying higher interest and cut spending to actual income, we’ll have no choice but default. Just like the homeowners who bought homes they couldn’t afford at teaser rates who got ruined when those rates adjusted through the roof and couldn’t refinance. I think that our government has been accruing debt recently at the teaser rates!

So, I’m thinking an inability to take on new debt or to roll over old debt is coming and will do far worse for our economy than any increase in exports will help, even if the rest of the world can absorb enough exports to make a difference to begin with. The rest of the world is having it’s own problems, so who knows how much it could buy? We have the choice to suffer right along with them, or for “pushing-the-string” Fed action to trash the dollar independent and on top of the global economic downturn. If we lose the dollar as a fiat currency due to defaulting on any part of the national debt, we couldn’t even afford to import oil and other raw materials needed to produce exports to take advantage of the weak buck; imports which will be cash-only deals in someone else’s currency, BTW.

Of course, I could be as wrong as anyone else has been.

We never stopped deficit spending, no matter how good the economy got. The problem with Keynesian economic thought today is that if deflation comes and the dollar slips in value, say, 50%, then our $50 Trillion debt will be as if $100 Trillion. No amount of public works projects will help the ballance sheet. So, its still better for the government to inflate its way out of debt. But that can’t be accomplished if money sits in banks, untapped and out of circulation. Or, if monetary policy pushes too hard, we get Weimar Republic hyperinflation that kills the dollar altogether and ends our ability to import oil.

You’re right- in some ways this situation is much more precarious due to our stupid behavior. If our national debt were around $5 trillion- where Clinton left the country when the annual budget was producing a sizable surplus- opening up the floodgates to pour money into the economy would be a no-brainer. That is, with $5 tril in national debt, you could easily justify massive tax cuts or spending on infrastructure (done by private co’s mind you, not socialism).

However, Bush decided that ‘deficits dont matter’ and chose to amass this incredibly huge amount of debt even when our economy was expanding. Tax cuts for the wealthy were too important compared to balancing the budget in a world that Cheney that was immune from a massive financial crisis. So you’re right, we do have to worry about hyperinflation or the other side of the coin- massive deflation- emerging and absolutely destroying the nation’s collective wealth. Our lack of practical experience in dealing with depression-like conditions means that exerting any real control over the outcome of our current policies might in fact be quite slim. But there’s no doubt that future economists will point to the $9 trill debt built up by Bush as one of the most hazardous fault lines in the current economic environment.

On today’s Ed Morrissey Show, we’ll talk with my favorite economist, King Banaian, the chair of economics at St. Cloud State University, about Keynesianism and its potential to drag the American economy back into stagnancy.

Ed, you’re too funny. Keynes laid the groundwork for most modern day economic theory, including our understanding of how factory closings have a snowball effect across the rest of the economy. Generally speaking, no one understand or listened to Keynes during the years of the worldwide Depression in the 1930′s. Keynes could have been part of the solution, but he wasn’t part of the problem- unless you interview a far right leaning professor from an unknown university. For some reason, I suspect that you’ll do just that. Why quote or interview a leading economist from Stanford, MIT, or Wall Street when there’s McCloud?

The problem with Keynesian economic thought today is that if deflation comes and the dollar slips in value, say, 50%, then our $50 Trillion debt will be as if $100 Trillion. No amount of public works projects will help the ballance sheet. So, its still better for the government to inflate its way out of debt. But that can’t be accomplished if money sits in banks, untapped and out of circulation. Or, if monetary policy pushes too hard, we get Weimar Republic hyperinflation that kills the dollar altogether and ends our ability to import oil.

shuzilla on December 23, 2008 at 5:16 PM

Agree with the grim possible scenarios. I have some inverse treasuries as a bet that the massive government borrowing will cause rates to rise again at some point.

Betting against the dollar seems like a good idea, though it has depreciated significantly in the past 2 weeks.

I’m not sure I follow your thinking on the problem with the weak dollar though. Since Treasuries are denominated in dollars and paid back in dollars wouldn’t a weak dollar increase exports, boost economic activity and allow us to pay back the debt more easily? Foreign investors would hate it because the currency effect on top of low Treasuries rates would make for a bad return.