What recovery? (updated 12jun12)

George Rebane

[This is the submitted form of my regular Union column that was published on 9 June 2012.  Remarkably, The Union published its print and online versions without the inclusion of the figure.]

How’s that recovery working out for you?  It’s seems like we’re watching molasses flow uphill, and we know that is not going to last.  There is no indication that anyone has a plan that would let us catch up with our historical growth curve, and the mavens in Washington and Sacramento are applying every trick they know to destroy the incentives for businesses to create jobs and the unemployed to find work.

All the numbers that drizzle out of the various government bureaus and agencies are confusing and so much hooey.  Harvard economist Robert Barro advises us to keep it simple by just gluing our eyeball to the gross domestic product (GDP) – if that’s not going up at a good pace, nothing else matters.  To give you an idea of a good pace, GDP went up at an average of 3.1% a year since recovering from the post-war recession in 1948.  And to put a bow on it, in the 1982-89 years GDP growth spurted up to average 4.3% a year.

In this so-called recovery we have averaged 2.4% annually since 2009, and that rate has been slowing.  Last quarter it dropped to 1.8%, and the per capita rate has dropped about $1,000 since 2009.  The reason all this is doubly troubling is that historically recession recoveries have enjoyed GDP rates significantly above the 3.1% average when supportive economic policies have been followed.  The bigger the recession, the stronger has been the recovery.  Not this time.

  Most folks don’t pay much mind to GDP; it’s just another number they hear on TV that’s supposed be something like a speedometer, or fuel gauge, or gas pedal, or some other thing to do with America’s economy.  But as things keep going downhill - and make no mistake, we are now going downhill – all of us who vote should know a little something about what GDP is and what goes into its make-up.  The nearby figure helps us understand GDP’s important inputs and outputs – it’s really a simple arithmetic problem that sums a few fairly straightforward parts as shown.

The main thing to focus on is government spending (G) because that is the spigot all politicians like to get their hands on and claim to turn to your benefit.  However the government’s money comes only from taxing everything it can, and then borrowing what it can’t tax, and then printing what it can’t borrow.  All three sources are opportunities for mischief that puts sand in the gears of commerce, made up of consumer spending (C), business investments (I), and exports (X), these are the only wealth generators that make it all happen.

A quick look at the figure tells us why government spending should be kept to an absolute minimum required to keep us safe, commerce humming, and consumer incomes high.  And that is because all of government’s sources of cash, including borrowing, subtract from what contributes to a sustainable high quality of life.  A proper recovery that would return us to our historical growth rate should now be above 4% instead of the sickly and shrinking 2.4% that we are experiencing.

A byproduct of low growth is that America can’t absorb each year’s arrival of 4.3M new workers into the workforce.  And no one yet has a plan to handle this growing population of un(der)employed.  The most ballyhooed approach is to keep raising taxes on those who create jobs so we can continue the transfer payments (entitlements, welfare, unemployment, …) and attempt to tread water until the next election.

In California we have brought this policy to perfection, and are now reaping its full benefits.  (Did you hear that Stockton’s new city hall is being foreclosed by Wells Fargo, and it’s just as well since the city is flat broke and doesn’t have the funds to move.  In Nevada County we have $119M of unfunded liabilities coming due on some unknown schedule, and no plan to handle it.)

So to summarize, keep your eyes on GDP growth and filter out all the bamboozle about unemployment numbers, green jobs, and climate change while we tax and regulate ourselves back to prosperity.  Without strong GDP growth none of the other numbers will get back to levels that let us feel we are out of the woods.  Look again at the figure and see where that growth will come from.  In the meantime, gird your loins because ever since this so-called Great Recession started we have been in Depression2.  And it has a way to run, both deeper and longer. 

George Rebane is an entrepreneur and a retired systems scientist in Nevada County who regularly expands these and other themes on KVMR and Rebane’s Ruminations (www.georgerebane.com).

[12jun12 update]  Mathew Mitchell of the Mercatus Center observes that government spending has grown more than 13-fold in the last 60 years, while private goods and services have grown about five-fold.  The figure below says it all.

State and local governments depend on the private sector for their survival. Yet, more more than half a century, these governments have continuously outpaced the growth of the private sector on which they depend. After 60 years, the private economy is 5 times its 1950 size while state and local governments are spending almost 13 times as much as they did in 1950. This divergence is unsustainable.

Comments

[Russ Steele]

Here is some insight from the President of the United States that does not understand George's simple graphic.

"The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government. Often times cuts initiated by, you know, Governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in."

"And so, you know, if Republicans want to be helpful, if they really want to move forward and put people back to work, what they should be thinking about is how do we help state and local governments and how do we help the construction industry?"

“The private sector is doing fine” talk about cluelessness. He thinks that state and local government budgets are a source of economic growth. The more government spending the better! I am sure he was thinking of California as an example of how excessive government spending can spurred our economic recovery.

When is fact we are not recovering and are going deeper and deeper in to government created depression, with deficit of $75 Billon. Brown says the “deficit” is $16 billion. But, he left out a few items in his calculations. The state owes:
• $33 billion stolen from Trust Funds—like the Recycling Fund [ Used by CARB to create and implement AB-32. Cap and Trade was to pay it back.]
• $14 billion “borrowed” from the Feds so CA can continue to send out unemployment checks.
• $10 billion owed government schools from Prop. 98 money CA have not paid.
• $2.5 billion for science classes the State mandated and never paid for.

The deficit of the State of California, were it honest, is now $75 billion—and that does not include about $500 billion of unfunded pension liabilities.

If you understand George graphic, there is no way to tax and spend our way out of a Depression. And, Obama is about to demonstrate it once again.

[Douglas Keachie]

Don't kid yourselves, even with no taxes and no regulations, American businesses cannot compete with wages measured in dollars per day, instead of per hour, that are available in workers abroad. Get used to it. Until you can downsize the expectations of American workers to live at 3rd world standards of living, you ain't going no where. The one percent sucker punched the American public on mortgages, healthcare, and credit cards, and is now on the hunt for public pensions, and the salaries of firemen, teachers and law enforcement. Once those are totally drained, then what? Let the Chinese take over the responsibility for the bankruptcy of the USA?

[Russ Steele]

On Tuesday, the CBO released the 2012 version of its Long-Term Federal Budget Outlook.

How bad is the outlook? According to Page 38 in the full report:

 “Debt would reach 250 percent of GDP (gross domestic product) by 2035 under the assumptions leading to these estimates.

CBO’s model cannot reliably estimate output after debt reaches that amount, in the agency’s judgment.”

Wow, it is so bad the CBO pencil pushers and spreadsheet jockies could not esitmate the worst case scenario?

This report is text dense governnment blather but it has some interesting graphics. Click HERE for a copy.

[Account Deleted]

The only entity that lied and forced the American public into a scam was the govt. No private business ever has or could force you into something that wasn't a good idea. I have challenged Doug and other lefties that post here to provide me with an example of a business that could legally force a citizen to buy something they didn't want and all I hear are crickets. Maybe Doug can explain why there are still millions of the 99% that have managed their money responsibly and aren't in desperate straits? The American public, as a whole, have personally and at various levels of govt decided to have it all now and put it on the credit card. We had a great time "punishing" evil businesses that simply shrugged and passed the costs along to us, the consumers. We felt all victorious as we over-regulated the producers and now find that the cost of houses and cars and such have gone way up, even as advances in tech could have lowered them. The rest of us have watched in sadness as the country now collectively goes down the drain. When things go bad, the sheeple always find some minority to blame - the Jews, the foreigners, the banks - whatever. We did it to ourselves, folks. And we have to dig out with something no one likes to talk about - hard work. And yes, you have to compete against others that will work harder and for less than we will. We Americans did that for 200 years and we prospered. Why shouldn't the rest of the world not want to emulate that?

[billy T]

Looking at Dr. Rebane's graph above, one cannot but see the similarities to the flow chart of a porcelain throne. If government spending brought us more Apples and less Solyndras, we all might be taking a second hard look at Keynesian Economics. If Keynesian Economics really worked, then the Soviet Union would still be the Evil Empire and Greece would be a superpower. Mr. Keachie points out the complexities of our post racial economy and its global impact which should not be discounted. I have taken a hard second look at Keynesian policy lately and agree with some of the theory. In slow times Keynesian doctrine says raise no taxes on nobody, instead lower taxes on everybody. People say JFK and Reagen and Clinton all raised taxes, but a closer look reveals that immediately after the aforementioned Presidents lowered taxes, the economy took off. They raised taxes after a spurt of growth caused by a strong recovery fueled by lower taxes. On the spending side, Keynesian theories have government spending like a drunken sailor during economic contractions. I wish government would spend like a drunken sailor on the private sector instead of the public sector. Yesterday President Obama repeated his call for spending now on bridges and roads and school buildings. I could not help but remember that clip of the President chuckling about finding out there are no shovel ready projects. During the early Reagen years I was starting a business renting vehicles to small film production companies.. I bought my first new vehicle (a cargo van)and Reagen raised the accelerated depreciation to 33% of equipment purchases for the first year. With that temporary tax write off I bought a couple more and...Just an example of "spending" on the private sector versus spending to do research of how shrimp behave on a treadmill. Businesses do not know how much they should set aside for taxes out of their capital expenditures budgets. How much will Health Care cost, especially employers that use a lot of seasonal or part time workers. Employers know regulations are part of doing business, but why does it have to be an increasing overt hostile attitude from regulators instead of just plain ole regulation? The current administration of course would say that the private sector is doing fine and bemoan the fact that states and local municipalities have tighten their budgets. The White House has surrounded itself with Ivy League professors and Keynesian disciples as it spends countless hours giving ear to the rich and famous Hollywood types. Us ignorant blue bloods clinging to our guns and Bibles just don't get it. If history is any guide, the clock says we are due for another recession next year. Just like Britain is frolicking in right now.

[Douglas Keachie]

That's hard work at third world wages, and you can forget about healthcare, you're too poor for any. How long do you think those who survived by being frugal will be able to keep it up, with the other half of the Titanic USA underwater already? We bought a house and land at well below our means, because we were concerned clear back in the 1990's.

[Douglas Keachie]

In a country where some idiot in jail for a deadly DUI turns around and sues the estate of his victims for pain and suffering, trust me, be are scammed all the time. By definition, "legitimate" businesses don't scam. If they do, then they fall outside the category. Nice try at whitewashing reality.

[THEMIKEYMCD]

Keynesian economics is the main culprit. It ignores the laws of economics and human nature while it fleeces all in order to serve the elite. Keynesian economics is a tool of evil.

[THEMIKEYMCD]

I need a new bull$hit meter after hearing Obama's press conference... pass the Keynesian kool-aid...the man has zero understanding of the laws of economics, zero.
Obama- "The truth of the matter is that...the private sector is doing fine. Where we're seeing weaknesses in our economy have to do with state and local government."

[Douglas Keachie]

Guess what, the Conservatives are creating jobs. Turns out they are willing to invest in the business of promotoing Mitt Romney. A win for printers and banner makers......in Hong Kong, or even more patriotic, in Taiwan.

[George Rebane]

DougK 1106am - You are indeed the consummate and irredeemable class warrior. I would dearly like to see any of your prescriptions work somewhere on this planet where people like you can gather, take counsel among themselves, and then sally forth into their private world of economics to discover what works and what doesn't. What I, and those like me, don't want to do is become guinea pigs in another one of your failed collective experiments. How can we wish you 'vaya con Dios'?

[Douglas Keachie]

"How can we wish you 'vaya con Dios'?" you could start by admitting that electing Romney and reducing taxes and regulations to zero will not jump start anything, and will most likely result in the rich getting richer, etc. Talking about failed experiments, how's reducing unions across the country working for you? The rich may temporarily get richer, but ultimately, the entire country is weakened, because rich or poor, a man can eat only so many meals a day, and the maximum number of McMansions, assuming one is built and lived in each day, is only 36,500, if Mr Rich Man is the one in ten thousand who lives to age 100.

[Douglas Keachie]

Speaking of calls, I think I heard someone in the Alps yodeling again about the final resting place of all the Richies in the world. Do you like to ski? No surprise to me that Giger, the artist, lived in Switzerland.

https://giger.com/gigerframeset.php

[George Rebane]

DougK 1150am - Have no idea how those claims address my point at all. From our vantage, we have only seen the well-to-do and/or the free take the risk in ventures that create jobs to hire the less-well-to-do and create the wealth to care for the poor. The poor have never been in a position to do anything but wait for someone one to hire or feed them, or revolt. And when by diktat government becomes the only solace of the poor, then the 'rich' will become the inevitable pariahs and leave or be lynched. Abject and wholesale misery follows.

[Douglas Keachie]

Hard to tell if those in the former Soviet Union or better or worse off than they used to be. Or for that matter, on the planet as a whole, unless you take some simplistic measure, like, "how many people are alive to day, regardless of condition of happiness or misery?"

If the rich were as smart and powerful as they think they are, there would be no Syria's, now would there? I'm hoping the rich in this country will snap out of it, and actually start to work on the issues, instead of platituding all day, about lower taxes and no regulations or unions. Being among those bunker-caded in Montana is going to be no fun, especially if you start worrying about your human Doberman-Pincers turning on you. Liitle late for Assad to say he's sorry, it's not too late for the rich of the USA to wise up and live up to their own advance billings.

Too smart for his own and his country's good:

Bashar Hafez al-Assad (Arabic: بشار حافظ الأسد‎, Baššār al-ʾAsad, ‎‎‎Arabic pronunciation: [bæʃˈʃɑːɾɪlˈʔæsæd])‎; born 11 September 1965) is the current President of Syria and Regional Secretary of the Syrian-led branch of the Arab Socialist Ba'ath Party. His father Hafez al-Assad ruled Syria for 29 years until his death in 2000.

Al-Assad graduated from the medical school of the University of Damascus in 1988, and started to work as a doctor in the army. Four years later, he attended postgraduate studies at the Western Eye Hospital, in London, specializing in ophthalmology. In 1994, Al-Assad entered the military academy and in 1998, Al-Assad took charge of the Syrian occupation of Lebanon. In December 2000, Assad married Asma Assad, née Akhras. Al-Assad was elected as President of Syria in 2000 and 2007, unopposed each time.[2][3] During the Syrian uprising, activists and protesters have called for President al-Assad's resignation

[Russ Steele]

Douglas what does your 12:49 have to do with the US GDP? It is getting harder and hard to force myself to read your comments, as they are becoming a waste of mental bandwidth. It is just easier to skip them and read what others have to say. Of course it helps if you stick to the subject of the original post.

[billy T]

From our GDP to Syria? Boy, Mr. Keachie, you really have your hair on fire this fine day. Arab Spring has not resulted in Arab democracy. Syria has booted out our ambassadors, which is fine with me. Libya is rioting outside our Embassy, which is also fine with me. Egypt used to be a good place for risk takers before the OWS/Ahab Spring stuff.. For our system of capitalism to work, there must be a level of morality adhered to. That is why true capitalism will never work in Russia as their system is chalk full of corruption. Want to get your feathers plucked or have the rules changed in mid-stream? Invest in dictatorships or whatever label they call themselves. Even Italy is increasingly alarmed as the Mob has stretched their control of the south up into the northern regions of the formerly free enterprise zones of the country. Not good. Those lusting for power are taking advantage of the global slowdown. Wonder what the GDP of the sacred UN is? Wonder what is the GDP of southern Europe? They say the Mediterranean climate is similar to Southern California. Coincidence? I remember once debating the impending passage of the health care bill on a blog which barred me for life. The posters all echoed the rhetoric of the current tzars (czars?) of our Executive Branch. GDP will be over 4% and pay for it all. Probably 6%, a given. In fact, it will reduce the budget by billions and balance the budget. When I pointed out if that was true, then why don't we insure every man, woman, child and beast in the Western Hemisphere and be instantly rolling in unfathomable surpluses? Yes, I have been kicked out of better blogs than that. Guess some people just hate it then things don't go the way they planned. I still hold on to the rather quaint notion that you cannot tax and borrow your way to prosperity. The more taxes I pay and the more times I swipe the plastic...well, it just did not seem to elevate me to the ranks of the 1%ers. It may be too late for old dummies like me. College dropout and former rebel without a cause then becoming a rebel without a job. Wasted too much of my life in la-la land. Dr. Rebane has pointed the way via specific skills needed to have a decent standard of living for the next generation. Their future is not my future, duh. Each generation has to make its own way. Having a Masters in Post-Modern Literature is okay if that is your "bag." Groovy man. I am proud to have 2 nieces that were home schooled and graduated from Berkley in 2 years. They saw the handwriting on the wall and went into science and physics respectively. Both hated chemistry. Found out one is working somewhere on a thing called a Super-Collider (think it has to do with atoms or lasers or something). The other is working at Cornell (wherever that is) writing research papers on bees. I do like honey. They were such cute little babies. Think their personal GDP will be better than mine.

[George Rebane]

DougK 1249pm - "Hard to tell if those in the former Soviet Union or better or worse off than they used to be." I do believe that it's only hard for western socialists. Russians have no problem answering that question in favor of the fall of the USSR, no matter how much they are still suffering under the corruption of the current oligarchy.

It appears from all your postings here on RR, that you are a firm believer of the progressive mantra that all economies are basically zero sum games when they are bathed in liberty.

[Gregory]

George, enjoying the "debate"?

I think the thought process of the fellow in question is more tribal than that. It's just a zero sum game, and that the middle class was created by government hiring taking money from business, which cheated to get it in the first place. Hence rolling back excessive public spending becomes a war on the middle class.

[Account Deleted]

Please, let's not just blame Doug. Nobel Prize winning Paul Krugman thinks we need to spend 400 billion right now to shore up states and municipalities that have spent well beyond their means. The money will not go to all of them, only the stupid and wasteful. Where do we get 400 billion? Why - Helicopter Ben takes out a sheet of paper and pastes a picture of Daffy Duck in the middle and uses crayons of diverse colors to write "400 Freakin' Billion" on it and sends it to a bank. Repeat as necessary. Crazy? Krugman is convinced this will work because it's never worked before, but maybe this time it will. I'm trying to think of what I can do with the assets I have that the govt can't (or will have a hard time) seizing or making worthless through fiat law. To all who yell "buy gold" I would remind you of what happened in the 30's. Land might be good on a small scale, but if you have too much, you'll be targeted as "rich" and be taxed to death while forbidden to do anything of value with the land. Any one who can't figure out if the citizens of the former USSR are better off now or not is probably state of the art for the American left.

[Ryan Mount]

Scott.

Krugman is on record as wanting to raise the debt up to at *least* 130% of GDP. He's mentioned Japan's 200% of debt/GDP more than once. (that really worked for them...not) That's in the $4 trillion dollar ball park. Dumping a measly 400 billion into the economy would have little effect.

Krugman's criticisms of Obama all along is that he's squandered the chance to inject money into the economy. By any measure, Left or Right, Obama's has proven to be, at a minimum, the most mediocre President in recent history. Not bad or destructive, but for a lack of better words, kinda lazy and ineffectual.

Now my fiscal conservative friends often breath a sigh of relief with the thought of a restrained Obama (as per Krugman), but I often wonder what the we would have looked liked if Obama indeed inject, I dunno 8 (12?) trillion or so into the economy by running the dollar printing presses at full speed. Spare us the conservative rhetoric about bridges to nowhere...I'm on your side with this one.

But what we have right now, IMO, is the worst of both worlds. Anemic spending and anemic cost costing and a Federal Reserve that's holding this economic, non-inflationary house of cards together with insanely low interest rates. It's quite possible that Obama has made things much worse by a lack of real action in either direction. Actually, it is much worse.

The Keynesian really believe they can soften the downturns with the financial three-ring circus we see today. (I've read the debates on the Great Depression, so I'm abreast of the hawkish criticism of FDR there) But we're 4 years into it and it's getting worse probably for the reasons I mentioned above. Whether we agree with the Keynesians or not, we'll never know because Obama totally blew his chance to test it.

[billy T]

I have always believed that mundane things like the economy with charts and graphs simply to do capture Obama's imagination. More of the philosopher type. My eyes glaze over on certain topics so I can relate. Clinton poured over budgets with passion and submitted 8 budgets knowing their ins and outs. Clinton also had the political genius to move the Democrat party to the middle. Today I popped a couple pain killers (recovery from knee surgery) and ended up watching Uncle Ben on C-Span. Talk about eyes glazing over. I developed a new respect for Uncle Ben. He talked about an exit strategy from monetary easing. Timing is critical and he even said there is not a lot of technical history to serve as a road map when pursing the monetary policy road. (my paraphrase). He really is saying get your fiscal act together you politicians. Monetary policy can carry us only so far and only for so long. Fiscal policy must be dealt with soon. Seemed to me he was saying I can't cover your arses much longer and he is running out of options. An exit strategy (monetary policy) must be discussed now before some nasty side effects boil up. All these endless discussions about The Great Divide really boil down to fiscal policy. Taxes, spending, entitlements, governments' role, breaks for businesses, the interpretation of The Constitution etc. Isn't Euroland hanging on the Tree of Woe because of fiscal policy? Isn't the current buzz phrase "kicking the can down the road" about fiscal policy? The good news is fiscal policy is something we can do something about. That bad news is we don't do anything about it. At least former president Bill Clinton gave me a ray of hope. He said (with a wink and a nod and that charming twinkle in his eye)that he thought we had to deal with the financial cliff before November's 2012 election. He said he thunk wrong and we can wait January 2013. Great news. Our Thelma and Louise date with the financial cliff just go pushed back 2 months. I feel so much better.

[George Rebane]

RyanM 657pm - Au contraire, FDR tested Keynes to the hilt. His SecTreas Henry Morgenthau's 1939 testimony to Congress put a bow on it when he said that they had thrown all the money available and then some at the national economy - "We're spending more than ever, and it doesn't work." The economy was still on its ass, and unemployment was back where it was when FDR took office. Morgenthau was asking for ideas, any ideas. In response FDR gave us the Pacific War. Next case please.

[Account Deleted]

Obama has done every destruction thing I can think of to the economy. From the Cash for Clunkers to shutting down the off shore oil drilling, he and his socialist, big-govt minions have wreaked havoc on the ability of the private sector to lift the economy out of it's slump. His fixation with CO2 as it applies to others, not himself of course has and is driving our energy costs through the roof. He's not the only one, but he wields the most power and has brought our country to it's knees. The govt can not borrow and print and spend it's way out of a economic slump. It doesn't make any sense and it has never worked anywhere it was tried. Krugman likes to point to the huge deficit spending of WWII as "proof" it can work, but if that was true, why didn't the deficit spending during the 30's work? It "worked" AFTER WWII because we spent the money destroying most of the worlds industrial capacity and emerged with ours roaring full steam. If Krugman would like to try that again, he'll have a few problems. Of course we have insanely low interest rates. If they were to be allowed to float up to a free market rate, our interest costs would blow wide open. Even if they were to go up just a few points, we'd be in deep trouble for cash flow right away. And since they can't be allowed to rise, we will have a permanently skewed playing field for the private sector into perpetuity. Keynesian policies were about the govt building up a surplus to then be released back into the economy when things were slow. Our fiscal policy for decades has been to just spend totally beyond our means and now it's descended into total insanity.

[Ryan Mount]

Yep. I mentioned in my comment about the the modern conservative revisionists and FDR. And I've read Amity Shlaes book The Forgotten Man: A New History of the Great Depression:

http://www.amazon.com/gp/product/0066211700

It's a fascinating read. Here is this debate in the form of George Will vs. Paul Krugman:

http://bit.ly/LNtgB8

Krugman = Demand
Will = Supply

Krugman doesn't offer a solution for FDR's mess, but he does imply it. And I keep bringing up Krugman because I think he's being treated unfairly here, and people are confusing his snarky public persona with his bonafide credentials. Krugman has acknowledged on more that one occasion, for example, the contributions of Milton Friedman.

Anyhow, Morgenthau was a fiscal Hawk to some extent. And in my opinion FDR was clutching at straws by the late 30s as his "Big Fix" was stalling. According to Krugman, the stall happened for the same reasons its stalling today: a lack of spending (note: Krugman means investment, not consumption). But FDR got his wish eventually, but in a more Reaganesque form: World War II. So we will never know who was right.

But more to my point, unless there's a true crisis, Americans do not act. And as long as we're walking around in a comfy, iPod-induced halos of distortion and have virtually unlimited Taco Bell's Dorito Tacos (which are oddly delicious I might add), we have no crisis. FDR "got lucky" the day the Japanese bombed the snot out of us, which in retrospect, didn't work out so great for them. Don't f$%^ with Americans when we're backed into a corner.

At least FDR conducted the war properly with taxes and rationing. What did 99% Americans have to "give up" for Iraq and Afghanistan? iPods? Dorito Tacos?

[Account Deleted]

Ryan, I'm afraid we part company with your insistence that the govt can spend it's way to private sector health. It didn't work for ten years in the 30's. We DO know. It has never worked and there is no reason to believe it will. I really love your description of Krugman. Since his credentials are swell, he must be correct. That "snarky" persona is his series of eds in the NYTs and his personal appearances. He has no idea of what he's going on about. He believes that money is what comes out of a printing press and has no correlation to anything of real value. Want more money? Just make it come out of thin air! Money is only a medium of exchange that makes it easier to barter goods and services. Those goods and services must be judged by free individuals to have value. We should only increase the amount of money to follow the increase of real goods and services. Govt "services" have value only to a certain extent. I value a Constitutional justice system that protects me from harm and guards the sanctity of contracts. I value a govt service that protects our borders and keeps our enemies at bay. A govt that is obsessed with CO2 emissions not only has no value, but impedes our ability to compete on the world market and lowers my lifestyle. When the govt tries to push the market with made up money that has no real basis for value, there is only a limited stimulation of buying in the market, but production will not increase that much because the producers know the demand is artificial and must end up being paid for out of their gross earnings. There will be no net profit from this sort of arrangement.

[George Rebane]

RyanM 805am - Krugman with his hubris amplifies the over-extended ignorance of his profession. Economists have always worked in the functional relationships of the economic parameters they attempt to measure. The signal indicator is that time never appeared in their equations. Yet from these 'time-less' descriptions of the economy, they gave public prognostications of what would happened over time to their time-less parameters.

Control theory is uniquely equipped to identify their malady cum ignorance. Economists, Krugman withstanding, never developed transfer functions that relate inputs over time to outputs over time given certain exigencies. They were either ignorant of system identification methods or rightfully feared that it would expose the manifest shortcomings of their profession. An economy is an extremely complex, dynamic, non-linear system.

Nature 'controls' such systems in a distributed manner with distributed measurement and data repositories. Nowhere in nature can we find a location of a central controller executing a transfer function and sending out control signals to whatever system we study.

Yet the Keynesian ilk believe that they know enough about the stimulus/response mappings (i.e. transfer function) of an economy to support reasonable diktats of central control. In this they are proven wrong time after time. Success lies only with those who minimize central control and allow distributed mechanisms to reestablish themselves. One of the systems where this was practiced extensively is still called America.

Given this, on these pages Krugman is dealt with most kindly.

[THEMIKEYMCD]

WWII saving the US economy is among the top 5 myths of all time (perpetuated by the Dept of Education's idolatry of FDR). I sincerely believe Krugman to be an enemy of America.

[Ryan Mount]

Mikey(did you unfriend me on Facebook?! [taps fingers and grumbles like Marge Simpson])-

WWII didn't save the economy; it kept people from revolting. That's my point. If you revolted during WWII, you would have been put in jail or simply shot. War has an interesting (unfortunate?) way of resetting people's expectations. At a minimum, the war effort kept everyone poor, hungry and busy, just how elites like their surfs. And the good news, if we want to call it that, is we won the war by literally incinerating our competition. Recovery we can believe in.

This is why I frequently make the facetious suggestion to Progressives that we should just invade China and India. And then we can keep them as colonial pets.

Scott-

I am not in favor per se of spending as an antidote for a Depression. I don't think the government, nor people, have the discipline and frankly the courage to do it properly. I think it might work if we were to move quickly, with large amounts of liquidity, followed by strict austerity once the patient stabilizes.

But governments don't work that way, which is why the Keynesians work well in the college laboratory with their slide rules, and not in real practice. And what we end up with is this large and unwieldy government for decades to come. For the real deal, I think Friedman is the man to look to, not Krugman.

George-

I distinctly remember some aggressive language (not from you) with regards to Krugman. Not that I'm trying to defend him, but I just think it's more important to have a moderate tone especially with people you disagree with. Mom always said to be more polite with people you argue with. I don't have much more to say about that.

[billy T]

Mr. Obermuller, Cash for Clunkers did not work out very well for me. I took the contentious ex wife down to the flatlands and they would not take her or give me a dime. Luckily CA is more generous than the Feds. A house painter friend of mine recently had his paint van throw a rod. The thing was not worth fixing and barely ran for years. The State gave him a grand for it as he was wondering how much he would have to pay the wrecker to haul it off! The wrecker has a green job and my friend got a wad of greenies for something of no value. Only in the Golden State.

[THEMIKEYMCD]

Ryan, good thoughts. Thanks for clarifying.

re: FB- I closed my Facebook account. Regulations in my business regarding 'social networks' were just too burdensome/overwhelming.

[Account Deleted]

re: Ryan at 11:03 - "I think it might work if we were to move quickly, with large amounts of liquidity, followed by strict austerity once the patient stabilizes."
So everyone gets 500K of funny money and then we have a dictator run things?
Not trying to be funny here, but that's what it sounds like. How much and who gets it and why? Govt control is a joke. They can't even control themselves. It was the govt that brought us this mess, what new forms of life will suddenly inhabit the seats of power that will know better than the average producer how to allot resources? The average person that has produced and saved and kept their head above water obviously knows best. Why aren't we the ones that are heeded? Oh - that's right, we don't have a Nobel prize like Krugman and Arafat.

[Russ Steele]

The net worth of the American family has fallen to its lowest level in two decades, according to government data released Monday, driven by a more than 40 percent drop in their stakes in their homes.

The Federal Reserve’s detailed survey of consumer finances showed families’ median wealth plunged from $126,400 in 2007 to $77,300 in 2010 — a 39 percent decline. That put them on par with median wealth in 1992.

========
Let Obama run on that platform!

[Account Deleted]

By the way, Ryan - WWII did not keep everyone poor and hungry. Busy? Yes, absolutely.
You might want to go over the actual industrial history during the war years. There was a massive hiring of folks who wouldn't otherwise have been allowed into the work force and at skilled positions to boot. The ship yards and factories on the west coast saw a huge migration of blacks from all over the country that otherwise had no employment. The workforce was suddenly stripped of millions of healthy male workers and the factories and other large projects needed labor. Because of the war-time restrictions on wages, the workers for Henry Kaiser got free health care. The poorest of Americans were quite happy about the working conditions during the war and had more disposable income than ever.

[Ryan Mount]

Scott-

I'm saying it would probably never work other than as an academic activity. In a political/societal vacuum, probably. And, according to Krugman, it's (massive spending) never really been tried in the scope her's referring to. It's really a non-starter along with the discipline issue I mentioned above. If we do manage to get a spender in the White House, like Bush and Obama, they're likely to blow it. Bush did it with 2 unfunded wars, bailouts and handouts and Obama decided to top that and add in all kinds of strange projects for his campaign donors.

It turns out, much to the shagrin of the this country's Right, that Obama appears to be a horrible Socialist.

>Why aren't we the ones that are heeded?

I realize this is a rhetorical question, so allow me to elaborate. It's because people who live more austere lifestyles know to keep their heads down and not make unnecessary trouble, else the cretinous mobs will come and take their things. I made that mistake in college while reading Hegel [for Greg]. I once invited a homeless guy to crash at my house. The next night there were suddenly 4 people crashing my place and they ate all my food. Eventually I had to call the police who lectured me on my good intentions. Of course, I was the bad guy for kicking them out, not them for thrashing my house.

So I agree with you, the government brought us this mess under the guise of trying to help us. Test outputs, not intentions as Milton Friedman always advised.

[Ryan Mount]

> There was a massive hiring of folks who wouldn't otherwise have been allowed into the work force and at skilled positions to boot.

Well, that would be government spending in my book. So it appears that the only Keynesian policies that work are those during times of war.

But I'm with Mikey, I do not believe WWII brought us out of the Depression; the fact that we eliminated our competition and were able to seize the bounty of resources at the precise time Globalization was starting to kick (1950s) in was the real cure. Not to mention the mountains of debt other countries owed us post WWII. Britain comes to mind. Also business cycles play a role. For the Keynesians, the cycles are driven by worker wage distribution relative to business profits. For the Austrians, it's about excessive credit and fractional wealth typically enabled by central banks. It seems we have both now. Yikes.

The hungry and poor thing was an overstatement to prove a point that during war times, it's best to go with the flow. It's hard to have social uprisings when you're busy fighting tyranny. So I beg your pardon for the overstatement. My George Orwell is showing.

[George Rebane]

Re WW2's impact on the economy - after four war years of massive deficit spending and full employment, for the reasons pointed out above we emerged into a deep recession as hordes of returning GIs hit the job markets while FDR's depression policies were still in place. It was Truman's rescinding those policies and the sufficient recovery of trashed economies that ended that recession (or, if you will, the post-war continuation of Depression1). Without those overseas markets and massive regulatory recall, the economic story would have been very different.

Today neither of these winds are at our back, but are instead a gale into which we must slog with at least one hand tied behind our back.

But I still hear some of you declare that Obama is trying to achieve effects different from what we are witnessing. Let me again make my own stand clear - Obama is achieving EXACTLY what is in his plan for America. That explanation is demanded by Occam while we await one that is simpler and more revealing.

[Ryan Mount]

I guess I would like to put a finer point on your observation that Obama (and his Administration) "is achieving EXACTLY what is in his plan for America."

In my opinion if it is as you say, in my judgement he's doing a horrible job at this achievement. He's not very good at it. So unlike partisans, I think he's a bad President because he's very bad at playing the part, and not due to some nefarious agenda. I understand why Conservatives don't like him because of his spending without aim and a variety of other reasons. And admit it though, those on the Right did agree with him a on few things, notably the things he carried forward from President Bush like our foreign policy and keeping Guantanamo Bay open.

What I don't understand is why Progressives/Modern Liberals don't like him either. They herd neatly towards him. Because, to quote Van Morrison, "he ain't give you none." When the dust clears, what did Nevada County end up with? A couple of paved roads and a new fire station in Rough and Ready. Every time I drive under the Dorsey overpass I shake my head. But heck, we've got 4 uncompleted lanes to nowhere down at La Barr Meadows Road. BTW, I do like the unnecessary wood paneling on the sound walls and the 100 foot street lights.

I guess it's something. Liberals were hoping for a Leftish version of Reagan. Obama was to be the guy who said he was going to do something, and then went ahead and did it. But that Obama never really materialized, again, because he kinda sucks.

[Gregory]

I think left-liberals in the USA continue to wish for their ideal president to be replicated in the West Wing. Of course, I speak of Jed Bartlet, who looked and sounded remarkably like Martin Sheen. Just like Clinton but reliably to the left and no bimbo eruptions or lying, unless, of course, it was best for the country.

If only Bartlet had kept his Estevez identity, he could have been the first Hispanic president.

[billy T]

What recovery is the question. Seems we don't fall into full blown depression or full blown recovery. Every time I see a sign of one or the other, another part of the economy goes up or down, making a classic technical call muddled. Manufacturing, consumer spending, jobs, new home sales, whatever. Even labeling this slow/declining growth coupled with declining wages as "stagflation" is hard in the classic sense since the Fed has kept interest rates artificially low and inflation numbers are skewered. Of course most figures coming out of the Administration are compared to last month requiring a longer view over a year or two to identify trends. But I am about to say something I never ever thought I would utter in my lifetime, not even under my breathe. I am starting to believe that a US President is indeed hell bent on destroying our system of government as we have always known it and planned to change it into some kind of ideologist social world government. I say this with much sorrow. I thought Glen Beck was crazy and turned him off a long time ago when he was making the argument of "fundamentally transforming America". Did find it odd that Obama would have a green czar that believed that 911 was a fraud and sympathetic to the hijackers. To rebuild American in the Van Jones/Bill Ayers/Marxist model there must be a revolution in the streets and a massive transfer of power to a single branch of government or a global authority. The Constitution was written with the purpose to diffuse power. I can understand that most voters did not care that Candidate Obama and Senator Bidden were ranked the number one and third most liberal lawmakers in the Senate. I can understand the Apology Tour to Cairo immediately after taking office. In fact it clears things up for me. One one the first things Obama did as President was snub the British envoy, leaving them waiting downstairs on purpose and dissing them with both words and body language. After all, Obama's grandfather was arrested and treated roughly by the Colonialists (British). He was just getting his revenge for Grandpa and he heard about the evil Colonialists many times from his parents. I can understand a different view. Guess that is why he removed the bust of Churchill from the White House and sent it back to the English. He could have put it in the basement or some closet, but he was sending a message. Same with Israel. Guess he thought we would be better served with new allies. BTW, on day one of Reagen's Presidency, Reagen revoked the Soviet's parking spaces in the State Department garage. Reagen was sending a message as well. Maybe it is a good thing that Obama inherited a economy falling like a bag of rocks. If he came into office during good times, his agenda might have gone forward unnoticed, his attacks on the wealthy and capitalism gained wider support, his turning over the keys of the Treasury to the UN Green Squad might have worked. I am not saying Obama hates America. No evidence. Being sympathetic and tolerate of OWS (perhaps cheering them) is not evidence in the least nor Anti-American. The examples above actually defend President Obama. I am saying is I believe he abhors what America stands for and what America currently is not. Just my opinion.

[billy T]

Mr Mount, you articulated my point and thoughts for me. The liberals don't cling/like Obama exactly because he is not the average liberal. Nay, he is more of a citizen of the world kind of guy, which goes beyond having red shirts and blue shirts marching in different positions in the same 4th of July parade. Think he missed the Apple Pie part on his journey to The Oval Office.

[George Rebane]

RyanM 324pm - "In my opinion if it is as you say, in my judgement he's doing a horrible job at this achievement." Am confused by this statement.

If it is as I say, then he's doing a marvelous job, period. Perhaps I didn't make my self clear as to what I believe Obama's agenda is; he has alluded to it so many times both as candidate and as President. There is little that is "nefarious" about it. His core constituency understands perfectly, and you can see their disappointments when he isn't pushing the pedal to the metal in his rush to make the US a needy and compliant member of the world community, one that will join with peers in seeking a new world order that will unabashedly implement his promised international redistributions in the context of Agenda21.

You see him as inexperienced and bumbling, and to an extent so do I. After all he rose quickly from the ranks of an ideologically mature community organizer with little else to recommend him. But for the job before him, the assembled cadres around him, and the ability to generate legions of upturned, tear-faced useful idiots to boost him, little else is needed and what he has is sufficient. The world's socialist leaders have now hailed him for four years, and properly welcomed him as one of their own.

His job is to deliver America on a platter, and that main course, garnished by the US taxpayer, is being prepared by his minions (again, useful idiots) in the passing of every day.

[Ryan Mount]

Sorry George. My point is indeed jumbled.

My point is if he is a Socialist or whatever, he's a very bad/ineffective one. As we say in the kitchen, a dull knife is the most dangerous tool. So perhaps an ineffective Socialist is the government equivalent of a dull knife. I dunno, I don't see him as a Socialist. I see him as bumbling. But that's why they make Chocolate and Vanilla ice cream. We probably both agree that he's not good for the country.

Elites seem to love him as does his march-in-step minions. I think Elites loves him, notably Wall Street types because he seems to be all about them and then puts them in his Administration. I've heard that the Media loves him too, but I'm not keen on that. His minions presumably love him because he talks real pretty about equality and stuff and he's a "Constitutional Law Professor."

Greg is right. People want the President they see on TV. They want the novelized president, not the real one. On a related note, I'm trying to decide which would be worse: a Sheen in the White House or a Baldwin.

I've been following E.J. Dionne. You'll hear his commentary on NPR vis-à-vis David Brooks. His message to the Left is come out loud and proud in favor of your big government. Be like the Right and stick to your guns. But they don't. So why don't they just come out and say, "hey, I like my 4 trillion dollar government and I want more"? What's holding them back? What could it be?

[billy T]

People did not vote for Obama the person. They voted for Obama the ideal, depending what one read between the lines. The image. He was packaged and slapped on tee shirts like the hottest new fad . He could speak in generalities and repeat slogans such as "Yes we can" and "Hope and Change" like there was no tomorrow. Any criticism brought the immediate charge of racism. Anyone who did not vote for Obama was someone who could not stomach a Black Man in the White House. He was Oprah's hand picked guy. People swooned and fainted at just the sight of him and even Chris Matthews got tingles up his leg as the second coming of JKF on steroids finally arrived. Now, 3 years later, we have Obama the Man, warts and all. And one big national hangover. Now we actually listen to his words and wonder what happened to the Anointed One, the Nobel Peace Prize Winner, the one who could attract 200,000 worshipers in the streets of Berlin as a mere candidate and have standing room only outside of the packed Bronco Stadium. When Obama the candidate spoke, people read into his words everything they longed to hear, everything pointed to the Savior of this messed up world. In the few times since when he is without his 6 tel-prompters (as his recent hastily called press conference last weekend), we hear his words clearly before and after we are told what he really meant. And the explanation of what he meant is more confusing than what he meant when he actually said it. Sad, sad story. The fall from grace is happening as quick as his ascension to the 3rd heavens. All we are left with is "He is not Bush" or "He is not Romney".

[Account Deleted]

Ryan - I give you full credit for understanding that was a rhetorical question, but the answer you gave was absurd. The correct answer is multi-part. Numero Uno is that folks like Obama would have a hard time finding a job flipping burgers. Yes, really. Please put aside racism or envy or any of that nonsense. The guy can't even read from a teleprompter. Twice he claimed to have sons instead of daughters during a speech. He has done a fabulous job of lying about what he intended to do during office. So he's a great scam artist. Swell. Anyone paying attention when he was running knew exactly what he was and what he would do in office. But what is he capable of doing in real life private business producing something of honest value? I haven't seen anything yet. Nothing. Another reason that producers aren't listened to is that a lot of other folks would be out of the good life pronto and having to work for a living. And they don't like that. Being on the dole is way more fun. I had to work and sacrifice and save and scrimp and I see no reason why any body else shouldn't do the same before they come crawling to the bread line. That's probably the biggest reason fellow producers aren't listened to - we're no fun. Until the work is done, that is. Then it's party time, but on our own dime.

[Ryan Mount]

Scott-

You're probably more on point in your assessment, however I stand by my assertion that people making (and paying taxes) a living don't have the time to march in the streets demanding...I have no idea what they want...more thingies. Again, we should just invade more countries(China, India, Brazil et al) so we can have a single breadwinners, two cars and, I dunno, more iPhones. It's good to be the King as Mel Brooks noted.

I've grown tired of the 1% rhetoric. As I've said elsewhere, there is no one, not even the butt-poor in this country that can hold a candle to the poor in Mumbai. I've grown tired of arguing with the entitlement crowd even though I try and tease-out some sense from their rage. I'm sympathetic, but my patience is running out.

[Account Deleted]

Ryan - I don't have the time to march in the streets for the most part, nor do I see the need. It's not a matter of wanting more "thingies" it's a matter of the govt taking most or all of our "thingies" and giving them to those that will not produce because of their attitude. We have elections and the non producers out vote the producers as the non producers have heard the siren call of "democracy". That is - who ever wins get to take from those who lose. The founders knew and warned about this, but that's life. I'm sorry to hear you're tired of hearing the 1% rhetoric - whatever the hell that is. Would that be Jimmie Carter or Donald Trump? George Soros or the Koch brothers? I remember the first time decades ago I heard stupid BS talk like that when some black leftist say I was talking like a white man. I asked him if he meant Richard Nixon or Frank Zappa. He of course had no answer, but it shut him up. I operate in the real world of actions, consequences and reality. Things work or they don't. I don't have any fixed ideology based on who says what or what party they belong to or how much money they have or don't have.
And we don't have to invade countries to have single bread winners - just get the leeches off of our back. More iphones? You're kidding. Most of the conservatives I know don't have any. But I see every "poor" entitlement class zero has one.

[George Rebane]

"We have elections and the non producers out vote the producers as the non producers have heard the siren call of "democracy"."

http://rebaneruminations.typepad.com/rebanes_ruminations/2008/07/how-elections-r.html

[Ryan Mount]

Scott-

I was being facetious about invading other countries for the purposes of making life easier for the 99%ers. And I was mentioning that the 99/1%er thing is a bogus construction and subject to criticism. Perspective is important here, and most Americans have none in my experience. We behave like spoiled teenagers relative to the rest of the globe.

George-

> "We have elections and the non producers out vote the producers as the non producers have heard the siren call of "democracy"."

de Tocqueville warned us years ago about this ago. His Democracy in America was required reading back in College. What are kids reading now? Maya Angelou? Democracy in America should be read by High School Seniors.

[Account Deleted]

OK Ryan - sorry I misread the 1% and 99% comment. You are tired of hearing others comments. I am too. Classifying folks into groups only works to a certain extent and it gets tricky or just wrong to work the group think backwards. Just because you might get classified into a group (veteran, biker, stock clerk, etc) doesn't mean that you think and act just like most others in that group.
Franklin also had a great quote about that: "When the people find that they can vote themselves money, that will herald the end of the republic."
Boy, did they ever - world wide.

[Ryan Mount]

NP Scott. It's hard to develop context in the blogs comments. It was my fault for not being more clear.

de Tocqueville liked groups of people (our right to assemble), but he was very wary of them leveraging their power to influence policy. I think that is a very sober observation. Specifically, as you mention, they're ability to vote themselves free cheese.

Me? I suppose I belong to some demographic somewhere in some marketeer's spreadsheet, but generally speaking I like to exercise that Groucho Marx line: I don’t care to belong to any club that will have me as a member.

[Douglas Keachie]

"Just because you might get classified into a group (veteran, biker, stock clerk, etc) doesn't mean that you think and act just like most others in that group. "

The obvious exception, being, LIBERALS!!!!

Right?

[Humaun Kabir]

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[Brad Croul]

San Jose makes top 5 list of best performing cities,

http://finance.yahoo.com/blogs/daily-ticker/best-performing-cities-2012-milken-institute-141336671.html

Unlike other "best places" lists, Milken's report is not a quality of life survey. It does not focus on weather, number of golf courses or healthcare facilities, but rather on job and wage growth and the propensity for technological innovation.