Obama's Deficit Lies

[BeAChooser]

When Barack Obama took office, the projected deficit for FY2009 was 1.3 trillion dollars. That was based on continuation of the previous administration's policies.

You again show a dishonesty by not stating all the facts. The deficit was under 500 billion at the end of FY2008 (i.e., up till October 2008). That's not debatable. So only the LAST 2-3 MONTHS of Bush's policies resulted in the 1.3 trillion dollar figure that Obama and you cite as being "inherited" from Bush. But remember, almost all democrats, including Obama, voted FOR the $800+ billion in post-FY2008 spending that drove the deficit up to that point. So it's rather dishonest to just blame Bush for that deficit as Obama and you have tried to do.

But more important, Obama clearly stated in his un-state of the union speech that the reason this economic crisis occurred in the first place is deficit spending. Since the crisis existed in pre-October, it cannot, therefore, be due to the spending that Bush (AND DEMOCRATS) added after FY2008. So again, it is clear that if Obama wants to halve the deficit in order to help solve this economic problem (and that is what Obama has indicated is his reason for halving the deficit) then he (and YOU) should really be insisting that the deficit be brought down below what it was in October 2008. Because if Obama is right that irresponsible deficits before that caused our economic woes, then unless he does that he will only be perpetuate the problem. That logic is inescapable, MM.

I can't see how it makes sense to say that Barack Obama was responsible for legislation that was passed before he became President

He campaigned for it. In October 2008 he said “I’ll be flying back to Washington today to cast my vote to safeguard the American economy." He called for swift approval of the bailout bill. He said "To the Democrats and Republicans who have opposed this plan, I say – step up to the plate and do what’s right for the country, because the time to act is now.” And he did vote for it. I don't see how he can not share part of the responsibility for it's passage, MM. Nor do I see how you cannot see the illogic of his position when he claims the crisis was caused by deficit spending and then proceeds to heap ten years of deficits that far exceed those in the decade before he took office (except for that last year). I think you aren't as fiscally conservative as you seem to want folks to think.

 

[Meadmaker]

You again show a dishonesty ...

Thank you for sharing.

 

[BeAChooser]

to assert that it was government intervention that caused the recession to become a depression is unsupported.

First of all, we are not now in a depression. But I think there is evidence to support the assertion that government interference has made this recession far worse then it had to have been. Before the government intervened last year on such a massive scale, the recession was nowhere near as severe as the one in 1981-82, which was the largest on record, and which we recovered from just fine and without promising to spend trillions of dollars to bailout and stimulate the economy. Numerous economists warned that government interference of the type implemented would only deepen and lengthen the recession. I call what has happened since proof that they were right. And by way, did you notice what the markets did today, down 300? Now they are wondering if the Dow will be closing below 6000 or even 5000 in a few weeks, all because the folks in Washington are not listening to what the free market thinks of this socialist boondoggle Obama and democrats have planned for America.

When are you going to wake up to the fact that FDR's attempt to spend America out of a depression didn't work? After 7 years of trying, FDR's own Treasury Secretary admitted it was a failed approach. I see no reason to think Obama's efforts won't end with failure too. They will do exactly what I warned of in the OP and we'll have people like you to thank for it.

So government borrowing is not driving out private borrowing.

Well that's not what the OMB concluded is going to happen as a result of the stimulus package ... not to mention the other TRILLIONS in welfare that Obama has now said he's going to spend. I'll trust the OMB over your economic expertise.

 

[gdnp]

But more important, Obama clearly stated in his un-state of the union speech that the reason this economic crisis occurred in the first place is deficit spending.

Really? Deficit spending was the sole cause of the crisis? Obama said that? How did I miss it?

One more time: Keynesian theory states you should run surpluses when the economy is growing and deficits when it is shrinking. Over the last decade, was the economy growing, BAC? I think it was. Does that make deficits good or bad. Take your time.

Now let us look at the economy today. It is shrinking at a rapid rate. Let's see what a real economist says about it, Nouriel Roubini in his blog today:

With economic activity contracting in Q1 at the same rate as in Q4 a nasty U-shaped recession could turn into a more severe L-shaped near-depression (or stag-deflation) as I argued for a while (most recently in my Sunday New York Times op-ed). The scale and speed of syncronized global economic contraction is really unprecedented (at least since the Great Depression) with a free fall of GDP, income, consumption, industrial production, employment, exports, imports, residential investment and, more ominously, capex spending around the world. And now many emerging market economies – as argued here for a while- are on the verge of a fully fledged financial crisis starting with Emerging Europe.

Thus, given the collapse of five out of six components of aggregate demand (consumption, residential investment, capex spending of the corporate sector, business inventories and exports) the stimulus from government spending will be puny this year.

And even with the $2 trillion of government support most of these financial institutions are insolvent as delinquencies rates and charge-off rates are now rising at a rate – given the macro outlook – that expected credit losses for US financial firms will peak at $3.6 trillion ($1.8 trillion for US banks and broker dealers that had a capital of only $ 1.4 trillion in Q3 of 2008). So, in simple words, the US financial system is effectively insolvent.
This is indeed the worst financial crisis and economic crisis since the Great Depression and, unless policy makers all over the world start waking up rather than being asleep at the weel and start to implement Powell-style overwhelming policy force we may end-up with a multi-year near depression or stag-deflation as we have not seen since the Great Depression.

Hmmm....That doesn't sound so good. Doesn't sound like an ordinary recession to me. Sounds like something a bit more severe. And 5 of the 6 components of aggregate demand have, in Roubini's words, collapsed. Who can step in to ameliorate, at least, this fall in aggregate demand? What does Keynesian economic theory say the government should do in a recession? Wait for divine intervention? The Invisible hand? The Choosers? Maybe the Raelians? Who has the money to recapitalize the insolvent banks, BAC?

Oh, that's right. Keynesian theory states that governments should run deficits in times of recession. Especially in times of severe recession. So I guess that would suggest that even though it was bad to run large deficits during times of economic expansion, than when we are in the most severe recession since the great depression, deficit spending is actually good.

 

[BeAChooser]

What about WWII, BAC? would you have advocated during WWII that the federal government balance the budget, or was deficit spending there justified due to the severity of the crisis?

ROTFLOL! For you to compare the crisis and needs of WW2 with what Obama claims are our crisis and needs now just shows how utterly out of touch with reality you are, gdnp.

Is it perhaps the case that there could be a financial crisis so severe that a similar level of deficit spending was necessary to end it?

We didn't spend the trillions in WW2 on welfare ... either individual or corporate, like we are and will be doing now under Obama. WW2 spending wasn't an effort to artificially create 3 million jobs that really didn't have a need. And we invested much of WW2 spending in infrastructure, technology and industry that actually did have long term capital and productivity benefits to the country. That's something that very little of 10-20 trillion dollars that Obama will be STEALING from productive Americans and giving to non-productive ones over the next 10 years will do.

 

[gdnp]

ROTFLOL! For you to compare the crisis and needs of WW2 with what Obama claims are our crisis and needs now just shows how utterly out of touch with reality you are, gdnp.

Well, once again, this is what a professor of Economics at the Sloan School has to say:

This is indeed the worst financial crisis and economic crisis since the Great Depression and, unless policy makers all over the world start waking up rather than being asleep at the weel (sic) and start to implement Powell-style overwhelming policy force we may end-up with a multi-year near depression or stag-deflation as we have not seen since the Great Depression.

Get that, BAC? Roubini is criticizing the government for being too timid in attacking the financial crisis. He wants shock and awe.

I guess if I am out of touch with reality, at least I am in good company.

 

[BeAChooser]

joobz, do you remember what you wrote back in September of 2008 ...

I do not believe that the exact opposite will be better (pure socialism). BUt there is an inbetween that needs to be met

Tell us joobz ... is Obama's plan to STEAL 10 to 20 TRILLION dollars from the wealth creators over the next 10 years and give it to the more non-productive elements of society the "inbetween" you had in mind for us?

And back in September you were big on responsibility ... blaming loan agents for "convincing people of being able to afford loans that no one in thier (sic) right mind would approve." What is different about Obama and his shyster cronies convincing America to buy TRILLIONS in welfare services by doubling (or worse) the National Debt? The market, which is probably our best indicator of what a "right mind" thinks, apparently doesn't approve. You said "This is predatory". Well Obama's plans are predatory too.

Back in September, while campaigning for Obama, you also applauded Obama when he said "As President, I will make it impossible for Congressmen or lobbyists to slip pork-barrel projects or corporate welfare into laws when no one is looking because when I am president, meetings where laws are written will be more open to the public. No more secrecy. When there is a bill that ends up on my desk as President, you will have five days to look online and find out what’s in it before I sign it." I can't help but notice that the stimulus bill violated all those promises ... yet you didn't seem to mind.

 

[Meadmaker]

Powell-style overwhelming policy force

???? Colin Powell? What does this guy actually recommend. Overwhelming what with what?

 

[BeAChooser]

BAC, be honest with yourself ... snip ... It's really that simple.

I'm certain that everyone will notice that the difference between what you wrote and what I wrote, is that what I wrote was based on verifiable facts.

 

[BeAChooser]

No.

No what?

Can't you be a little more specific?

Are you trying to challenge my statement that 10 to 20 trillion will be stolen from the creators of wealth in this country over the next 10 years as a result of Obama's plans? Where do you think that money will come from, if not from them? Or do you claim it's not being stolen ... that it's all being willingly given?

Are you trying to challenge the assertion that much of that money will then be transferred to people who were not the creators of that wealth? Well then, prove that the recipients actually earned that money.

Do you doubt that the overhead imposed by having the government as the middleman isn't at least 30%? Really? Where have you been?

 

[BeAChooser]

Nope just the same original question i.e. What are his socialist policies?

ROTFLOL! Tell you what, Darat. Why don't you ask Upchurch. He started a thread titled "Bush's socialist plan" back in September 2008 (http://www.internationalskeptics.com/forums/showthread.php?t=123062&highlight=upchurch ) so maybe he can identify what constitute socialist policies for you.

 

[gdnp]

???? Colin Powell? What does this guy actually recommend. Overwhelming what with what?

I assume he was referring to the Powell Doctrine:

Powell expanded upon the Doctrine, asserting that when a nation is engaging in war, every resource and tool should be used to achieve decisive force against the enemy, minimizing US casualties and ending the conflict quickly by forcing the weaker force to capitulate.

Essentially, Roubini has been stating that we need to nationalize the banks, clean them of their toxic assets, and then privatize them as quickly as possible. We also need a massive fiscal stimulus to get the economy moving, money spent NOW, not in 2010, and spent by the government, not given as tax cuts that will mostly be saved. The longer we wait, the longer and deeper the recession/depression. Better to take the unpleasant medicine now and get it over with.

 

[gdnp]

I'm certain that everyone will notice that the difference between what you wrote and what I wrote, is that what I wrote was based on verifiable facts.

Yes, as evidenced by all those other posters who agree with you

 

[BeAChooser]

It's only fair that BAC doesn't actually read what I say.

Back in that September thread I just linked Darat to, you stated the conviction that liberals don't want to spend money like drunken sailors. In light of Obama's proposals, do you still agree?

 

[BeAChooser]

The real world is so much more rich and subtle than yours.

I notice you don't want to debate my assertions that 10 to 20 trillion will be stolen from producers over the next 10 years, or that much of it will be given to non-producers, or that government will skim a large fraction of it off during the transfer.

In the real world, there are people who are honest, honorable, and intelligent. They are not deluded, nor have they been brainwashed by propoganda, nor have they been bought off by special interests. Some of these people chat on bulletin boards, and some hold elected office.

ROTFLOL! Yes, there are honest, honorable and intelligent people in the real world, MM. People who aren't deluded, brainwashed or bought off by special interests. But by and large, the majority of those people are not dependent on the government for jobs or benefits. It is the people who do have jobs or benefits paid for by the government (i.e., the taxpayer) who tend to be deluded, brainwashed and bought off. They make up a large fraction of Obama's constituents and will be the major recipients of his socialist largess over the next 10 years. What sweet irony.

 

[BeAChooser]

Thank you for sharing.

What's the problem, MM? Have facts and logic abandoned you?

 

[Meadmaker]

How would you suggest we stimulate the economy? What actions could be taken?

I've been thinking about this and, for the life of me, I can't come up with anything good. (Good thing I don't do policy. Hopefully, economists actually know something, although I have my doubts. In science, you do experiments and see the results. You can't do that with economics, at least not easily or with unambiguous results.)

The conventional wisdom (these days) is to take unemployed people and put them to work on government projects. Example, I just read that a road near my house will be resurfaced with stimulus money. Then, the theory goes, those people resurfacing my road will have money, but not only that, when they spend it, the people at the restaurants, department stores, and internet service providers will have money, providing jobs with a "multiplier effect".

I'm very dubious about this theory. The problem is that the money to pay those people has to come from somewhere. When Keynes created his theories, people, spooked by losses in bank failures, were literally keeping money in mattesses. There was no demand because people were hoarding money. By a combination of taxation and borrowing, he got money out of those hands (or so the theory went) and into the hands of workers/consumers. Excellent.

Is that the case today? Where is the unused money hiding in our economy? I suspect that the money the government is borrowing is coming from money that would otherwise be available for spending, lending, and investment.

No one puts money in a mattress today. However, what's the closest thing? An extremely safe place where it sits, unused, not funding business activity? Sounds like a T-Bill to me. Money is flocking into them. I'm worried that by borrowing so much mone, i.e. selling so many T-Bills, we are creating a giant virtual mattress. The stimulus bill gets some of that money into private hands, by funding projects, but not all of it, and we can only hope that what they pay for is worth having. Is it funding "bridges to nowhere?" If so, it would be better used to pay off debt.

 

[gdnp]

I notice you don't want to debate my assertions that 10 to 20 trillion will be stolen from producers over the next 10 years, or that much of it will be given to non-producers, or that government will skim a large fraction of it off during the transfer.

I notice you don't want to debate my assertion that the Federal government is the only institution with deep enough pockets to recapitalize the insolvent banking system.

Do you know what percentage of all US deposits are controlled by the twenty largest banks, BAC? Take a guess. You said that we should just let the banks fail and allow the free market to sort it out. You said that hundreds of banks failed during the Savings and Loan crisis. What percentage of the US banking industry was that?

The world has changed a bit since then. We've gone through 30 years of lax regulation. We've let the Choosers merge their institutions into oligopolies that are too big to fail. Where are the Choosers who are going to rescue the system now, BAC? Citigroup theoretically controls well over a trillion dollars in assets. What's their market capitalization, BAC? I'll tell you. It's down to around 10 billion dollars. That makes their stock worth less than Heineken. Have a beer.

So here's the answer, BAC. The twenty largest banks account for 90% of the US banking industry. 90%. In aggregate they are insolvent: their liabilities exceed their assets. Plenty of smaller banks are not that much better off.

There are several ways to recapitalize the banks. Someone with deep pockets could buy them. Sounds like a sucker bet in the current economy, though. I guess the Choosers didn't get to be Choosers by being suckers. Or the government could pour money into them in exchange for equity. They've been trying that. Or they could buy the toxic assets at more than market value and hope that they appreciate. This only works, however, if the government overpays. Which is not all that much different than giving the banks and their shareholders free money to bail out their bad decisions. It would also help to stimulate the economy so that fewer loans fall into default. That's the source of the losses, BAC. Mortgages people can no longer afford.

Or the government could nationalize the banks, wipe out the current stockholders, fire the incompetent management, strip out the toxic assets, and then split these megabanks up into institutions that that are not too large to fail.

Or, I suppose we could do it your way. Sit back and watch as the banking system implodes, while bartering with your neighbor for food.

 

[Upchurch]

ROTFLOL! Tell you what, Darat. Why don't you ask Upchurch. He started a thread titled "Bush's socialist plan" back in September 2008 (http://www.internationalskeptics.com/forums/showthread.php?t=123062&highlight=upchurch ) so maybe he can identify what constitute socialist policies for you.

Back in that September thread I just linked Darat to, you stated the conviction that liberals don't want to spend money like drunken sailors. In light of Obama's proposals, do you still agree?

psst, BAC. Go read post number 19 of that thread and tell me what it says on both of these subjects. I wouldn't want you to be, you know, stuck on stupid.

 

[BeAChooser]

Deficit spending was the sole cause of the crisis? Obama said that? How did I miss it?

I don't think I claimed Obama said it was the "sole" cause but Obama certainly indicated it was a major reason. Why else would he have mentioned over and over in that speech that we needed to "bring our deficit down"?

And that's not the only speech Obama has made indicating deficits were a cause of the economic crisis. Here, try this from February 23rd ...

http://news.yahoo.com/s/nm/20090223/pl_nm/us_obama

WASHINGTON (Reuters) – President Barack Obama pledged on Monday to cut the ballooning U.S. budget deficit by half in the next four years and said the country would face another economic crisis if it did not address its debt problems soon.

... snip ...

"If we confront this crisis without also confronting the deficits that helped cause it, we risk sinking into another crisis down the road," Obama told participants at the opening of a White House summit on "fiscal responsibility."

There you go. Obama warning that if we don't address the debt problem we will face another economic crisis. But tell us, gndp, how can ANYONE claim that doubling the National Debt in 10 years "address"es the problem?

Obama warns that if we don't "confront" "the deficits that helped cause" the crisis, we "risk sinking into another crisis down the road". But the only deficits that could have helped cause the crisis are the ones that happened before the crisis became evident, and the crisis became evident before October of 2008 ... before the end of FY2008. So the deficits before that must be what helped cause it and ALL those deficits were UNDER $500 billion a year ... in fact, most were well under that during the last 8 years. So tell us, gdnp, how is a budget that projects deficits for the next 10 years that are ALL going to be significantly more than the $500 billion a year budgets that helped cause the crisis "confronting" anything? Looks to me like both he AND YOU are simply avoiding (no ... compounding) the problem.

Tell us, gdnp? Are you OK with the next administration (say in 8 years because I'm almost certain you're hoping that Obama gets two terms) being able to claim that "we inherited from Obama nearly 10 TRILLION dollars in additional National Debt and a deficit that's now running over 600 billion a year and climbing? What will be your suggested solution to that problem? More taxes (for more government receipts ... even though that isn't really what happens)? More social spending to *stimulate* the economy (even though the previous 8 years will have demonstrated that doesn't work)? I bet that's just what you'll do.

Allow me to quote from several other liberal news sources to demonstrate their (and Obama's dishonesty) ... and test yours:

http://www.time.com/time/magazine/article/0,9171,1880648,00.html

After the Stimulus, Can Obama Tame the Deficit?

... snip ...

Thursday, Feb. 19, 2009

... snip ...

But assuming the economy has begun to turn around, the two-year spending splurge would be followed by a steady return to fiscal sanity

Tell us, gdnp, do you agree the OMB projections for the next ten years show a steady return to fiscal sanity given that it projects deficits at the end of each fiscal year that are significantly greater every single year than at the end of ANY fiscal year of Bush's 8 year administration? If you do, you must have redefined "sanity".

Let's see what a real economist says about it, Nouriel Roubini in his blog today:

ROTFLOL! Don't forget to mention that back in September of 2008, Nouriel Roubini was VERY much against the bank bailout that you clearly favor (http://www.rgemonitor.com/roubini-m...shareholders_and_unsecured_creditors_of_banks ). In fact, he said the plan was inefficient, ran counter to the best models of how to deal with this sort of problem, and does not punish current shareholders or management. He used words like "rip-off", "pathetic" and "disgrace". He said "Thus the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification." What was that you've been asking me about recapitalization, gndp?

The fallacy of your and Robini's analysis of the stimulus is that he, like you, can't see that if the government STEALS money from successful, productive people, then those private citizens and businesses will have that much less money to spend or invest. It's a zero sum game and why government involvement will have a minimal or even deleterious effect on GDP growth. Furthermore, if the government then gives a large portion of that money to less productive people (while siphoning off some large fraction to *oversee* the effort), that can only hurt GDP growth.

And by the way, there were lots of REAL economists who opposed the stimulus. In fact, over a 100 petitioned the Senate not to pass the stimulus.

Hmmm....That doesn't sound so good. Doesn't sound like an ordinary recession to me. Sounds like something a bit more severe.

Why do you keep pushing the strawman that I don't think the economic situation is bad NOW. Of course I do. What I don't think is that it was as bad as claimed back in 2008 when we started throwing hundreds of billions of dollars at a problem we really didn't (and clearly still don't) understand. At a time when the recession was no worse than in one in 1981-82 (which was the biggest one up to that time). That action ... and the uncertainty that government introduced in the system at that time ... are what have lengthened and strengthened the recession into what it has NOW become. That same uncertainty is what has now driven the markets below 6000 ... heading for 5000.