Tea Party Wins

[a_majoor]

A read of the Chinese superthread should point out enough evidence that Chinese statistics are....questionable. Builting entire cities that stand empty in the middle of nowhere or continuing to funnel money into whatever the ruling elites desire may allow a command economy to "grow", but is this realy "growth" or just manipulation of statistics? The Obama Administration has been trying trying something similar (Summer of Recovery, anyone?), but since there are a myriad of more data points that can be tracked and reported (and more outlets to report them), this sort of manipulation was laid bare and the more correct numbers (unemployment, economic growth, amount of economic decline) have become available. Look upthread if you need a reminder of the true numbers.

As for California "supporting" other states in the Union, that has to be the funniest thing I have read in a long time. In the US Economy thread there are charts showing where people and jobs are going, so unless you metric is the net outflow of people from "Blue" states as being support, your argument is not supported at all...

As as a reprise of what is actually working and what isn't (and what sort of policies provide very fast results), see here

 

[Redeye]

As for California "supporting" other states in the Union, that has to be the funniest thing I have read in a long time. In the US Economy thread there are charts showing where people and jobs are going, so unless you metric is the net outflow of people from "Blue" states as being support, your argument is not supported at all...

I'm not sure what's funny.  It's true.  California pays more into the federal pot than they take out - and that money tends to flow into red states - rather like Canada's "equalization" scheme, though not an actual explicit, formulaic program.  That's reality.

http://taxprof.typepad.com/taxprof_blog/2004/09/red_states_feed.html

http://www.opposingviews.com/i/politics/why-do-red-states-want-limited-gov-spending-then-take-more

Great infographic here: http://www.visualeconomics.com/wp-content/uploads/2009/11/tax.jpg

http://reason.com/archives/2011/07/14/the-redblue-paradox

http://mediamatters.org/blog/201011160026

And so on, and so on.  So, when if you want to discuss reality, I'm all ears.  If you want to discuss your right wing fantasies, I'm pretty much done.

 

[Haletown]

Interesting discussion  . . sounds so much like Canada and hearing Quebec always clam they pay more in than get out.

In the case of the USA it matters not a whit as long as the Federal Government ( Dig Barry, dig!) and the majority of States are spending far more than they have receipts for.

American has a massive SPENDING problem and even this latest Tea Party inspired deal just slightly slows down the deficit rate from Totally Out of Control (Peace be Upon Barry) to Crazy Out of Control.

The reality hasn't hit home yet  . . .  too many Americans and American politicians believe they are entitled to their publicly funded lip lock on the taxpayer's teat and like the 13th piglet on a twelve teated sow, are fighting each other for their freebies.

They past a debt ceiling increase deal to avoid losing their AAA credit rating and now will lose their AAA credit rating because they are demonstrating their inability to deal with their real problem.

Too Much Spending.


Maybe they should just all learn to speak Greek or  Italian or American with an Irish accent.

 

[Nemo888]

A read of the Chinese superthread should point out enough evidence that Chinese statistics are....questionable. Builting entire cities that stand empty in the middle of nowhere or continuing to funnel money into whatever the ruling elites desire may allow a command economy to "grow", but is this realy "growth" or just manipulation of statistics? The Obama Administration has been trying trying something similar (Summer of Recovery, anyone?), but since there are a myriad of more data points that can be tracked and reported (and more outlets to report them), this sort of manipulation was laid bare and the more correct numbers (unemployment, economic growth, amount of economic decline) have become available. Look upthread if you need a reminder of the true numbers.

If you need to pretend China is doing poorly economically as a refutation Keynesian regulation good luck with that. Laissez faire is dead and buried. That is what creates these crazed boom bust cycles.(I'm assuming manic boom bust cycles are not to your liking of course.) Personally I'd rather something a bit more stable that has some vision for the next generation. Capitalism and free markets only work properly within the moral framework of a civil society. Civil society by its very definition is regulations on human behavior. The tea parties new love affair with Anarchocapitalism/Laissez faire is not for me. Not that it is real anarcho apitalism, more like crony capitalism using the call for laissez faire to deregulate very select areas of the economy while protecting their monopolies in others. 

Look at any failed state to see real Anarchocapitalism in action.

 

[Haletown]

Look at any failed state to see real Anarchocapitalism in action.

Like the Soviet Union
Like Poland
Like East Germany
Like Lithuania, Estonia, Latvia
Like Venezuela
Like Cuba
. . . .

 

[Redeye]

Like the Soviet Union
Like Poland
Like East Germany
Like Lithuania, Estonia, Latvia
Like Venezuela
Like Cuba
. . . .

Yeah, actually - cronyism at their finest points, in many cases.  Replace "the state" with "select corporate interests" and you have something similar.  Not, by any means, the same - but just as bad.  The rich will keep getting richer, and the rest... well, they'll just keep watching that American dream slip away.

 

[Brad Sallows]

>You mean California, whose federal tax revenues subsidize numerous red states?

California is a big state and is not an autarky.  It subsidizes parts of the rest of the country so that its cities don't devolve into howling gangs of savages.  This smacks of the same empty criticism as "urban areas subsidize rural areas".  Next time you drive a road in redneck country, count the trucks which are moving things - food, for example - towards more cosmopolitan areas.  Some of the money spent outside the cities - or a particular state, or province - is for the benefit of that city - or state, or province.

Still, it's beside the point.  California chooses its own taxation and spending within its own sphere of responsibility.

 

[Brad Sallows]

>Civil society by its very definition is regulations on human behavior.

Civil society by definition is one in which respect is mutually accorded voluntarily.  If regulations and enforcement are required, the society is assuredly not civil and must be kept that way forcibly - hence the regulations and enforcement.

 

[Brad Sallows]

>I'm not sure how laying off government employees and the US government spending less on procurements is likely to help the situation particularly

The answer lies in "productivity".  Simply put, productivity (aka "wealth") increases when more outputs are produced with less time and other inputs.  To the extent government "overpays" for anything  - wages, materials, things which don't need doing - productivity falls (wealth is removed).  Governments just happen to be destroying a lot of wealth at the moment, and discouraging people from taking risks to create wealth.  The longer this persists, the worse things will get - until some external event forces governments to let go.

 

[cupper]

If Keyensian spending is so effective, why was US economic performance not enhanced by the 2006 spending blowout orchestrated by the Democrat Senate and House? Why did this vast spike in spending not prevent the 2008 economic meltdown? (We already know that the 2008 Stimulus package had a negligable or even negative effect on the US economy).

First off, if you are going to challenge the economic theory, you should at least getthe spelling right. Keynesian Economic Theories.

As for the 2008 financial meltdown, the system was doomed to fail, regardless of what ever economic theory you subscribe to.

The biggest cause of the meltdown was a complete lack of regulatory oversight, combined with questionable financial investments, and a wild west mentality within the investment community. The huge losses in the mortgage backed securities markets, along with the credit default swap scams pulled trillions of dollars out of the global economy. As a result, consumers lost confidence in their own futures, as homes were foreclosed, jobs eliminated, industries slowed or shut down.

The problem was so extensive that you could have thrown the equivalent of the national debt at the problem and it would have not resulted in any different outcome.

 

[cupper]

If continued cuts to Federal spending is the path that the GOP and the extremist Tea Part elements chose to walk, the mine field will reveal itself in due course.

The cuts will result in higher unemployment as federal workers and contract employees are laid off. Cuts to state budgets due to loss of federal funds will result in contraction of the stae workforce. And so on down to the local level.

As federal state and municipal employees start cutting back on their own spending, the private sector will feel a reduction in revenues, and thus may consider contracting their own workforces.

What we have is the proverbial self-licking ice cream.

I believe todays market closings have shown that Wall Street has no confidence in any economic improvement in near or medium term.

 

[muskrat89]

First off, if you are going to challenge the economic theory, you should at least getthe spelling right. Keynesian Economic Theories.

You've been posting decent debate. Don't derail it by nitpicking spelling errors. By the way, what is a "getthe"? See how that works?

Army.ca Staff

 

[GR66]

If continued cuts to Federal spending is the path that the GOP and the extremist Tea Part elements chose to walk, the mine field will reveal itself in due course.

The cuts will result in higher unemployment as federal workers and contract employees are laid off. Cuts to state budgets due to loss of federal funds will result in contraction of the stae workforce. And so on down to the local level.

As federal state and municipal employees start cutting back on their own spending, the private sector will feel a reduction in revenues, and thus may consider contracting their own workforces.

What we have is the proverbial self-licking ice cream.

I believe todays market closings have shown that Wall Street has no confidence in any economic improvement in near or medium term.

We (the collective industrial West) have taken quite a while to dig ourselves into the economic hole we're currently in.  The Tea Party is correct that we need LESS government.  Government in very general terms should be restricted to providing the infrastructure and regulatory framework to support a healthy and growing private sector.  Public sectors in the West have grown far beyond that and do need to be reigned in.  The wages of civil servants are paid from the profits of the private sector (through taxes) and when they become too large a portion of the GDP become a major drag on the economy as a whole. 

The problem with the Tea Party is not in this general concept, but rather the idea that just hacking away at public services will solve the problem.  As Cupper pointed out simply slashing public sector jobs (and withdrawing services) will hurt the economy in the short- and even medium term.  A more reasoned and long-term approach needs to be taken to reverse the trend in recent decades toward a big-government nanny state.    We need to ask the fundamental questions of what services our various levels of government SHOULD be providing and what can be devolved (back) to the private sector.  Then we need to develop transition plans to move toward that long-term goal of a smaller, more efficient public sector.

The biggest hurdle is our political system.  It doesn't typically reward those that take the long view on issues but rather rewards those that seize the spotlight available in the moment.  The solutions really aren't rocket science and when you talk about these issues at a fundamental level ("you can't spend more than you make", etc.) it's not hard to make people understand what we are facing.  Unfortunately we're simply lacking in political leaders with the vision and charisma to take the electorate by the hand and start us down the right road.

 

[Redeye]

Still, it's beside the point.  California chooses its own taxation and spending within its own sphere of responsibility.

Actually, no.  It doesn't choose federal tax rates, nor federal spending.  California's state fiscal mess is largely a product of its own laws and voter initiatives that have handcuffed its ability to raise revenue substantially.  So when conservatives talk about it being a fiscal basketcase, I laugh, because Prop 13, one of the major roots of its problems (though by no means the only one), was a conservative ballot initiative.  They're reaping, in essence, what they sowed.

 

[Redeye]

First off, if you are going to challenge the economic theory, you should at least getthe spelling right. Keynesian Economic Theories.

Not only that, no one has ever actually practiced what Keynes really advocated - they're cool with the deficit spending concept but they don't really get around to the paying off the debt incurred and saving during good times well.  The stimulus shot was sort of the first half (and, some argue, wasn't enough to have an impact) but there hasn't been much of a plan for the second part.  In the mess that is US fiscal policy there's no easy way to do it either.

As for the 2008 financial meltdown, the system was doomed to fail, regardless of what ever economic theory you subscribe to.

The biggest cause of the meltdown was a complete lack of regulatory oversight, combined with questionable financial investments, and a wild west mentality within the investment community. The huge losses in the mortgage backed securities markets, along with the credit default swap scams pulled trillions of dollars out of the global economy. As a result, consumers lost confidence in their own futures, as homes were foreclosed, jobs eliminated, industries slowed or shut down.

Yep.  And both sides of the aisle were to blame.  Both created policies that set the conditions for the mess to happen.  Blaming one side or another is pointless.  What made it worse was basically "positive feedback loops" that made things worse and worse regardless, particularly in the housing market.  People walked away from homes they could in fact afford the mortgage payments on because non-recourse loans shielded their other assets, and there's economically speaking no rational reason to continue paying a $300,000 mortgage on a house devalued to to $200,000.  That fueled the wreck particularly in the US southwest.

The problem was so extensive that you could have thrown the equivalent of the national debt at the problem and it would have not resulted in any different outcome.

Probably not, to be honest - it was that bad.

As to your other post, I generally share the sentiment that the idea of smaller, more efficient government is good - but the problem I see with the Tea Party is that they're largely economic illiterates who do not have any particularly strong understanding of the impacts of their ideas - and not just in economic terms.  The idea of scrapping agencies like the EPA strikes me as rather ridiculous.

Among many of the pundits and so on I'm watching, it's interesting to see how they're interpreting the last few days' events.  It seems like the Tea Party is the "winner", but a lot of them are thinking it'll be a Pyrrhic victory - I suspect they've blown their political capital, and a lot of the folks who didn't bother to vote in the midterm elections will be back out in 2012.  It's interesting watching both the GOP and the Democratic Party tearing themselves apart by factions, the impacts will be quite interesting to watch.

 

[a_majoor]

As for the 2008 financial meltdown, the system was doomed to fail, regardless of what ever economic theory you subscribe to.

Unless you are suggesting the ancient Greek view of how the universe works is in effect, nothing is "doomed" or "ordained". The economic system was stressed by perverse incentives enacted into law and regulatory practice (some of which date as far back as the Carter Administration) and overstressed by the rapid ramping up of spending and "free money" starting in 2006.

The biggest cause of the meltdown was a complete lack of regulatory oversight, combined with questionable financial investments, and a wild west mentality within the investment community. The huge losses in the mortgage backed securities markets, along with the credit default swap scams pulled trillions of dollars out of the global economy. As a result, consumers lost confidence in their own futures, as homes were foreclosed, jobs eliminated, industries slowed or shut down.

As Rep Barney Frank put it; "I'm prepared to throw the dice" WRT not regulating Fannie Mae and Freddy Mac. Regulatory failure is indeed a huge cause of the problam, but where do these regulations come from in the first place? The croney capitalists and their partners in government set the stage, providing favours and access to taxpayer wealth. This offers perverse incentives to the markets, which respond accordingly. Really this is the same issue (on a much larger scale) that plagued Britain in the 1700's during the South Sea Bubble, with similar results. The economic meltdown in Japan and decades long stagnation since the 1990's is also illustrative. The same conditions are growing in China (See the July 25 2011 edition of Maclean's; the particular article isn't online yet but China currently has outstanding loans worth @125% of its GDP, and over $500 billion in government spending cannot be accounted for....), what China has is a "bubble" economy, and the deflating of that bubble is bound to be messy.

The problem was so extensive that you could have thrown the equivalent of the national debt at the problem and it would have not resulted in any different outcome.

The Administration's prediction was quite clear: No "Stimulus" spending and American unemployment would rise to 8%.
The result is stark as well; Stimulus spending was applied and most economic indicators fell, economic growth was 1.6%, while official unemployment grew to over 9%.

Perhaps you need to look at different economic periods and see what alternative solutions were tried and their results (the real solutions, not what popular history would have you believe). Start with the John F Kennedy tax cuts for an illustration of what is actually possible by a Democrat Administration....

 

[Haletown]

If continued cuts borrowing to support Federal spending is the path that the GOP Democrats and the extremist Tea Part AFL/CIO elements chose to walk, the mine field will reveal itself in due course.

The cuts will result in higher unemployment  lowered government interest payments to China as federal workers and contract employees are laid off.  and a balance budget at the State and Local Level. Cuts to state budgets due to loss of federal funds will result in contraction of the stae workforce. And so on down to the local level.

As federal state and municipal governments  [/s]employees start cutting back on their own spending,[/s]  stop borrowing and driving the economy into a hole, the private sector will feel a reduction in revenues, confident that  taxation and borrowing are under control and thus may consider contracting investing in their own workforces.

What we have is the proverbial self-licking ice cream. proof you can't borrow your way to prosperity, or as a wise man said, when you are in a very deep hole and want to get out, the first thing you have to do is stop digging the hole deeper.

I believe todays market closings have shown that Wall Street has no confidence in any economic improvement in near or medium term. in the Obama regime and their continued use of failed spread the wealth socialist economic policies.

 

[Redeye]

I agree with your editing of this post.

Except, of course, for all of it.

 

[Haletown]

I agree with your editing of this post.

Except, of course, for all of it.

As is your right.

But a question . . .  what level of borrowing to fund what level of deficit spending would make you feel worried about the policy being currently followed by the Obama administration?

OK with the current $1.65 trillion or would you go higher, lower?

 

[Redeye]

As is your right.

But a question . . .  what level of borrowing to fund what level of deficit spending would make you feel worried about the policy being currently followed by the Obama administration?

OK with the current $1.65 trillion or would you go higher, lower?

Ideally, I'd like to see the deficit cut - and dramatically so.  There are likely many places where efficiencies can be found.  But it's unrealistic to expect it to happen overnight.  Ending the wars in Iraq and Afghanistan will help, and probably a substantial downsizing of the US military through natural attrition and getting rid of some bases will also help, but that takes a lot of political will.  A national conversation about "entitlement programs" will probably have to happen as well, but there's also little constructive happening there.

As far as the "policy currently being followed by the Obama Administration", I don't really see anything especially different other than major insurance reform which in the long run should help save money.

The other side of the coin is the revenue side.  A large majority of Americans agree with increasing taxes on the wealthiest Americans, so getting rid of Bush's tax cuts as soon as possible is going to need to happen, and other options must be explored - ideally in the form of consumption taxes - a national sales tax being the most unpalatable but probably best way to do things.