Intervention Helped Avert a 2nd Depression

It is interesting. I will look forward to reading the paper.

Of course we all know that mark Zandi completely missed the bubble.

I consider Tim Geithner's stress tests pure brilliance. Even though we all knew the stress tests were a farce, it created a valuable time-out and allowed people to rethink their views on the banks and the crisis. Of course we all know today the stess tests used optimistic scenarios. Fed programs to prop up asset values were arguably successful. Asset values have recovered(but at great cost to tax payer). We aren't able to have a do-over and see if forcing the bond holders of banks and auto companies to convert to equity holders in a re-org would have been a better long term solution.

My immediate reaction to the article is that the subsidies and injections in the banking system had a clear short term benefit. I'm not sure we're better off in the long term for having such concentration of risk. Also it helps to bear in mind, we loaded up the national debt, stole future demand and transferrred greate wealth from savers to banks via the zero fed funds rate, and made highly questionable investments. Does anyone belive a $40,000 chevy volt that requires a $7,500 tax credit (subsidy) is viable? And G.M. took their bail-out and bought a subprime auto-lender..

This paper will be a very interesting read, and I may change my opinion, but for now I think the conclusions are premature. We may well see that we are entering a double dip and that the second half of 2010 and the entire year of 2011 will be very disappointing.

I guess if you believe the working man gets burned the worst if you don't save the rich ones first the the bail out was a success....

"I guess if you believe the working man gets burned the worst if you don't save the rich ones first...."

Not something I believe in, which is why I believe in re-regulation of commercial banks. The fact is, the Depression showed that the worst thing to do during a downturn is to cut off the supply of money, and letting banks fail does just that: it causes significant counterparty risk and unleashes a chain reaction in much the same way that the failure of Penn Central led to the demise of Continental Illinois, which led to the demise of Seattle First National Bank, which could have led to the demise of the entire financial system, which in the end is based on trust: trust that you'll get your money back.

I have always been one to support a balanced budget, since as long as I can remember. However, just as during a downturn it's not a good idea to raise taxes, it's not a good idea to turn off the printing press or to slow the velocity of money. And it has been empirically proved that there is no purely monetary solution to deflation, as no monetary solution can increase velocity. Lowering taxes does not have the same effect as fiscal stimulus through direct spending, which is guaranteed - if properly done - to increase the velocity of money. Just ask LICC: he has admitted that government deficit spending in WWII is what eventually got us out of the Depression. Rearming was also what got Germany out of the Depression.

Talking about targeted tax credits just proves my point: corn ethanol uses more energy to produce than it actually produces; battery-driven cars are highly inefficient because they have to be charged using electricity, which is made first by burning coal, then by boiling water, then by running a steam turbine, then by distributing the electricity to the end destination, with power lost through leakage and resistance. Then you have to deal with the toxic products that batteries are made out of.

I'm much more a free marketeer than you think, Riversider. I just think that, in the present situation, your solutions won't work, because time and again they have been proven not to.

I don't necessarily disagree and a do-over is not in the cards.

But the policy is to let the banks "earn" their way out of their capital problems. Had we forced them to write-down assets more agressively, wipe out the common and preferred stock holders and forced debt conversion to equity the banks may have been in a better position to put money to work without sticking it to the tax payer and mom& pop saver.
Keynes never believed we should have deficits in good times, only in good times. so I'm not sure he would approve of what we did now.

I'll read the paper, I may find that I agree with a great deal of what the paper says.. or maybe not..

I will be impressed when Blinder, Zandi or John Taylor study empirical data and come to a conclusion that does not support their ideological biases. In the mean time, the greatest economic minds in the world cannot agree on whether the stimulus worked, whether we need more stimulus or austerity and the debate is raging daily in newspapers, magazines, conferences and talk shows. Which leads me to the question:

Do we really need to rehash their arguments in thread after thread on a real estate board with commentary and links from equally biased anonymous posters who I will bet are not the world's greatest economic minds?

Move on, ffs.

The Fed policy and bank bailouts saved us from another depression. The Obama stimulus- had little positive effect, but a lot of long-term negative effect.

steve, don't blame me because Keynesianism is a failed theory. Wow, Zandi studied empirical data based on his theory and concluded that his theory was correct. Shocking.

The sharp downturn in housing markets across the country, which undermined the solvency of major financial institutions and severely disrupted the functioning of financial markets, has led the United States into a recession that will probably be the longest and the deepest since World War II. The Congressional Budget Office (CBO) anticipates that the recession—which began about a year ago—will last well into 2009.

Under an assumption that current laws and policies regarding federal spending and taxation remain the same, CBO forecasts the following:

A marked contraction in the U.S. economy in calendar year 2009, with real (inflation-adjusted) gross domestic product (GDP) falling by 2.2 percent.
A slow recovery in 2010, with real GDP growing by only 1.5 percent.
An unemployment rate that will exceed 9 percent early in 2010.
A continued decline in inflation, both because energy prices have been falling and because inflation excluding energy and food prices—the core rate—tends to ease during and immediately after a recession; for 2009, CBO anticipates that inflation, as measured by the consumer price index for all urban consumers (CPI-U), will be only 0.1 percent.
A drop in the national average price of a home, as measured by the Federal Housing Finance Agency’s purchase-only index, of an additional 14 percent between the third quarter of 2008 and the second quarter of 2010; the imbalance between the supply of and demand for housing persists, as reflected in unusually high vacancy rates and a low volume of housing starts.
A decrease of more than 1 percent in real consumption in 2009, followed by moderate growth in 2010; the rise in unemployment, the loss of wealth, and tight consumer credit will continue to restrain consumption—although lower commodity prices will ease those effects somewhat.
A financial system that remains strained, although some credit markets have started to improve; it is too early to determine whether the government’s actions to date have been sufficient to put the system on a path to recovery.

CBO projects that the deficit this year will total $1.2 trillion, or 8.3 percent of GDP. Enactment of an economic stimulus package would add to that deficit. In CBO’s baseline, the deficit for 2010 falls to 4.9 percent of GDP, still high by historical standards.
CBO expects federal revenues to decline by $166 billion, or 6.6 percent, from the amount in 2008. The combination of the recession and sharp drops in the value of assets—most significantly in publicly traded stock—is expected to lead to sizable declines in receipts, especially from individual and corporate income taxes.
According to CBO’s estimates, outlays this year will include more than $180 billion to reflect the present-value of the net cost of transactions under the Troubled Asset Relief Program (TARP), which was created in the fall of 2008. (Broadly speaking, that cost is the purchase price minus the present value, adjusted for market risk, of any estimated future earnings from holding purchased assets and the proceeds from the eventual sale of them.) The TARP has the authority to enter into agreements to purchase assets totaling up to $700 billion outstanding at any one time, but the net cost over time will be much less than that amount.
The deficit for 2009 also incorporates CBO’s estimate of the cost to the federal government of the recent takeover of Fannie Mae and Freddie Mac. Because those entities were created and chartered by the government, are responsible for implementing certain government policies, and are currently under the direct control of the federal government, CBO has concluded that their operations should be reflected in the federal budget. Recognizing that cost in 2009 adds about $240 billion (in discounted present-value terms) to the deficit this year.
Economic factors have also boosted spending on programs such as those providing unemployment compensation and nutrition assistance as well as those with cost-of-living adjustments. (Such adjustments for 2009 are large because most of them are based on the growth in the consumer price index over the four quarters ending in the third quarter of 2008.)

http://imarketnews.com/?q=node/15917
The CBO report outlined two long-term budget scenarios, neither encouraging.

Under the current law baseline, the CBO projects that public debt will rise from 62% of GDP in 2010 to 87% of GDP by 2040 and 107% of GDP in 2080.

But this scenario, budget experts observe, is highly optimistic because it assumes all of the 2001 and 2003 tax cuts will expire, there will be no adjustments to the alternative minimum tax, Medicare payments to doctors will fall dramatically, all the cost savings in the health care law are realized, and revenues rise to 30% of GDP.

Under a more realistic scenario, which does not make these assumptions, the CBO said the public debt will rise to 87% of GDP by 2020, 223% of GDP by 2040 and a mind boggling 854% of GDP by 2080.

The CBO said the challenge for keeping deficits from reaching "unsustainable levels" will require the U.S. to raise revenues as a percentage of GDP "significantly above past levels" and reduce outlays "sharply" relative to current projections.

i'm just posting this for fun, and as it does have to do with both zandi and housing maybe malthus won't mind. calculated risk also covers the story, and notes that zandi totally blew calling the housing bubble, but he thinks he's been a good forecaster since (for what that's worth). but what's in the link he posted is rather hysterical, in a sad, sick way. this panel discussion took place in 10/05.

http://www.milkeninstitute.org/events/events.taf?function=show&cat=allconf&EventID=SOS05&level1=program&level2=agenda&EvID=573

"Angelo Mozilo of Countrywide Financial Corporation predicts that the market will slow and even decrease by a couple percentage points “so that incomes can catch up with the price of homes.” His concern reflects the historic low affordability level that prices many potential buyers out of the market unless they resort to creative financing, which is inherently riskier.

With new-loan originations now being comprised of 60 percent adjustable-rate mortgages and 40 percent fixed-rate mortgages, Mozilo concedes that his company “may be selling products to individuals who can’t manage risk.” Risk is particularly prevalent in the expanding condo and apartment conversion market, with 70 percent of condos being sold to speculators who quickly turn their properties around."

....

"But Mark Zandi of Economy.com said other pressures will keep prices from falling.

“Global investors can’t get enough of U.S. real estate,” he said. So although we are seeing record prices, the truth may be a bit more conservative. Demand will decrease as interest rates rise, and prices will level off. But with the constant influx of new residents to California and continued demand for U.S. real estate investments, there will be an ever-expanding base of demand to support current pricing levels."

"don't blame me because Keynesianism is a failed theory."

I can't blame you for something that is not true. You've posted a lot of nonsense - where are your analytical figures, LICC? You know, NUMBERS.

"The Obama stimulus- had little positive effect, but a lot of long-term negative effect."

Really? Like, you mean, increased spending on unemployment, a Social Security COLA when one was not due, etc., etc., and so on and so forth?

Studies, LICC - show me some studies. EVEN from that professor from Northwood University - yes, THAT Northwood University!

How is Mozzilo's tan?

still orange last time i saw a picture. some time in jail might turn him back to a more healthy hue.

Not as good as Boehner's.

This is freaking scary. The debt is out of control.

http://www.cbo.gov/ftpdocs/116xx/doc11659/07-27_Debt_FiscalCrisis_Brief.pdf

Obama's stimulus is running up the national debt so half of it can funnel through states to unions so states can keep bloated budgets and unaffordable pensions, and unions can keep going on without any cuts at all. This is unsustainable, irresponsible and damaging in the long-term.

steve, your straw man arguments do nothing but make you appear even more foolish than usual.

http://www.cbo.gov/ftpdocs/116xx/doc11659/07-27_Debt_FiscalCrisis_Brief.pdf
Crowding Out of Investment
One impact of rising debt is that increased government
borrowing tends to crowd out private investment in productive
capital, because the portion of people’s savings
used to buy government securities is not available to fund
such investment. The result is a smaller capital stock and
lower output and incomes in the long run than would
otherwise be the case.

Obama had help, Bush was terrible on the budget. Cut taxes without cutting spending. I get that.
But past is past, and it's not responsible to keep adding to the debt at these levels.

In all three of those fiscal crises in other countries, sharp
increases in interest rates on government debt forced the
affected governments to make difficult choices. The U.S.
government would also face difficult choices if interest
rates on its debt spiked. For example, a 4-percentagepoint
across-the-board increase in interest rates would
raise federal interest payments next year by about
$100 billion relative to CBO’s baseline projection—a
jump of more than 40 percent. As longer-term debt
matured and was refinanced at such higher rates, the difference
in the annual interest burden would mount; by
2015, if such higher-than-anticipated rates persisted, net
interest would be nearly double the roughly $460 billion
that CBO currently projects for that year.11 Moreover, if
debt grew over time relative to GDP, the effect of a spike
in interest rates would become increasingly pronounced.
A sudden increase in interest rates would also reduce the
market value of outstanding government bonds, inflicting
losses on investors who hold them. That decline
could precipitate a broader financial crisis by causing
losses for mutual funds, pension funds, insurance companies,
banks, and other holders of federal debt—losses that
might be large enough to cause some financial institutions
to fail.12 Foreign investors, who owned nearly half
of U.S. debt held by the public in May 2010 (or about
$4.0 trillion, $1.7 trillion of which was held by Japan and
China alone), would also face substantial losses.13
If a fiscal crisis occurred in the United States, policy
options for responding to it would be limited and
unattractive. In particular, the government would need
to undertake some combination of three actions:
restructuring its debt (that is, seeking to modify the
contractual terms of existing obligations); pursuing
inflationary monetary policy (that is, increasing the
supply of money); and adopting an austerity program
of spending cuts and tax increases

------------------------------------------------------

Inflationary Monetary Policy
An alternative approach is to increase the supply of
money in the economy. But as governments create money
to finance their activities or pay creditors during fiscal
crises, they raise inflation. Higher inflation has negative
consequences for the economy, especially if inflation
moves above the moderate rates seen in most developed
countries in recent years.16 Higher inflation might appear
to benefit the U.S. government financially because the
value of the outstanding debt (which is mostly fixed in
dollar terms) would be lowered relative to the size of the
economy (which would increase when measured in dollar
terms).17 However, higher inflation would also increase
the size of future budget deficits.
Specifically, if inflation was 1 percentage point higher
over the next decade than the rate CBO has projected,
budget deficits during those years would be roughly
$700 billion larger.18 Several factors contribute to that
estimate. Investors, after having their investments
devalued by the rise in prices in the economy, would
demand higher interest rates in the future, even if inflation
was eventually reduced; thus, as debt matured, it
would be refinanced at higher rates. Indeed, even raising
the perceived likelihood of higher inflation during a fiscal
crisis would trigger immediate further increases in interest
rates. Moreover, the amounts of many government
benefits rise when prices rise, and much of the income tax
system is indexed to inflation. On balance, the increase in
tax revenues resulting from higher inflation would be
more than offset by higher payments for benefit programs
and higher interest payments as the outstanding debt
rolled over and ongoing deficits required the issuance
of more debt.19

http://www.cbo.gov/ftpdocs/116xx/doc11659/07-27_Debt_FiscalCrisis_Brief.pdf

Can't you just post the beginning of an article and let people link to the rest, RS?

"One impact of rising debt is that increased government borrowing tends to crowd out private investment in productive capital, because the portion of people’s savings used to buy government securities is not available to fund such investment."

That is ABSOLUTELY TRUE - WHEN there is private investment. The problem in a recession and/or depression is that there isn't any.

See above regarding the velocity of money.

"Obama's stimulus is running up the national debt so half of it can funnel through states to unions so states can keep bloated budgets and unaffordable pensions, and unions can keep going on without any cuts at all. This is unsustainable, irresponsible and damaging in the long-term."

And Bush's tax cuts went to rich people who otherwise didn't need it.

Granted, the stimulus is not perfectly designed - nothing in politics, or the world, is, because no one decide on what "perfect" means. You are correct, "without any cuts at all": that's the whole purpose. For right now, no cuts at all. It would be irresponsible and damaging in the long-run to do anything else. First problems first.

steve you are wrong. The answer is not to reinflate the bubble. A better solution would be for governments to be more fiscally responsible, and reduce or at least stabilize the tax burdens on business. In order to do that, government unions must have pension reform and the size of government must be made smaller and more efficient.

You've been hearing a lot about John Maynard Keynes, the British economist of the early 20th century who, 63 years after his death, is suddenly the single-most important thinker if you want to understand President-elect Obama's plan to get us out of this economic whole.
We're going to do a lot on Keynes. I'm on Morning Edition this Friday and This American Life over the weekend talking about the man.
I've been reading the masterful biography by Robert Skidelsky. Just get it. It's fun and fascinating even if Keynes were not, suddenly, basically running our country.
And I will give plenty of time on this blog and the podcast and on the radio to Keynes's important ideas, but I have to get some things off my chest: the things about Keynes that absolutely drive me crazy. That make me furious and frustrated and angry.
Keynes didn't like Jews.
I spoke with a British Jewish historian who told me most Brits of his day didn't like Jews. And Keynes did have some close Jewish friends.
But I don't find it all that easy to give Keynes a pass. His dislike of Jews was somewhat central to how he understood economics.
Keynes had this idea that Jews had brought the idea of longing for immortality to Pagan Europe. He saw that longing as positive but felt that many Jews distorted it into a longing for money. He thought that the Jews influenced the rest of Europe to love money too much and that had ruined much of European civilization. Keynes believed that by 2020, European civilization would have gotten past its Jewish-inspired love of money and would focus on other things.
It doesn't seem necessary to comment too much on this. One Jewish correspondent pointed out to Keynes that Jews don't actually spend a lot of time thinking about immortality. That's more of a Christian thing. Keynes just ignored that
Keynes didn't like Americans.
OK, this is pretty standard, too, of the time. He found Americans, largely, stupid and incapable of using their vast wealth to run the world. He came to the US as rarely as possible.
Keynes didn't like the working class.
He—again, like many Brits of his day—believed that the purpose of civilization is to create opportunities to experience great art and great thoughts. He was dismissive of the masses who are incapable of experiencing true beauty. He didn't believe the goal of an economy is to get the highest number of people to have decent material conditions. He believed the goal is to have a small elite enjoy art and culture.
Keynes was so narrow-minded.
He had this tiny little world: Cambridge artists and intellectuals. He didn't like people who went to Oxford and wouldn't even bother to think about anyone who went somewhere else. While he traveled the world and met countless world leaders, he doesn't seem particularly worldly. Everywhere he went, he was thinking about a handful of elite snobs in London and Oxford. That was his perspective.
Now, I am not sure all of this is an argument against his ideas. (There are good arguments against his ideas, but ad hominems are always weak tea, as I imagine Keynes saying). I certainly don't think Mr. Obama should avoid a fiscal stimulus because the guy who came up with the idea is a bit of a jerk. (Again, there are other arguments against fiscal stimulus, but jerkiness doesn't merit serious consideration).
But I do find it worth noting that Keynes, hero to so many union members and working class folks around the world, was an elitist, socially conservative snob who wouldn't find it pleasant to spend even a moment with the people who support his ideas the most

-Adam Davidson

No, LICC, I am not wrong. Economic history proves it to be right. You are correct in your analysis of what should be done, just NOW is not the time to do it.

I don't know what you're trying to prove with the Adam Davidson quote; we're looking for REAL studies, REAL data, not uninformed opinions based on nothing.

"it's not responsible to keep adding to the debt at these levels."

Agreed. Let's start by cutting the defense budget. ANyone whothinks the defense budget should be immune from all cuts and freezes is mentally insane.

In fact, if you cut off all spending for Iraq and Afghan. you could eliminate income taxes for the first $35,000 for individuals and the first $70k for couples.

I agree. It's time for Congress to stop forcing the military to buy weapon systems they don't need or request. Like the G.E. F-35 jet engine.

But in 2006, the George W. Bush administration decided that the second F-35 engine was an unnecessary waste and recommended canceling the one being designed by General Electric and Rolls-Royce in favor of the version from Pratt & Whitney. With thousands of aerospace jobs at stake, spread across several states, Congress opted to keep funding both programs anyway — and has continued to fund them ever since, despite annual objections from both the Bush and Obama administrations.

This year, President Obama is putting his foot down. He has vowed to veto any appropriations bill that contains the $485 million to fund the GE engine. Strongly in his corner is Defense Secretary Robert M. Gates, who says the GE engine doesn't meet performance standards and would require an additional $2.5 billion, on top of this year's $485 million, to complete. The House ignored them both. In May, it approved an appropriation bill that funded both engines, and a motion to strip out the GE version was defeated in a bipartisan 231-193 vote. The Senate's version of the bill doesn't fund the second engine, so now negotiators are working to reconcile the two versions.

http://fremonttribune.com/news/opinion/editorial/article_96617376-998a-11df-9c6f-001cc4c002e0.html

No steve, you are wrong. Economic history proves it. The 1930s, the 1970s, 1990s Japan, Obama stimulus.

I posted lots of other analysis on the other thread. Don't blame me because you do not know who Hayek, Mises and Modigliano are.

Cutting waste from the military budget should happen. Removing our military from abroad would be a disaster.

"I posted lots of other analysis...."

No. You posted lots of opinions, with nothing empirical to back them up.

"The 1930s, the 1970s, 1990s Japan, Obama stimulus...."

Every one of those periods has proved you wrong, yet you insist they prove you right. On the last in the list, just read the EMPIRICALLY-BASED article above. Find one that disproves it, & I'll read it. Spout more right-wing Tea Party nonsense, and we get nowhere.

BTW I agree with you on the military.

The current situation is quite unique before prescribing past medecines, be careful to diagnose the patient and don't focus on just one illness.

RS, I agree with a lot of what you say, it's just the timing and the rigidity of it. The first order of business is to right the economy, the second order of business is to right the tax code and pay down the deficit. Where I differ with you is that I believe - and have seen firsthand - that the government is the most efficient supplier of health care, not private, for-profit insurance companies, which have an incentive to exclude the people who need the most care, effectively pushing them onto the general population anyway.

Personally, I would reinstate the estate tax (albeit at a lower rate), simplify the tax code by eliminating most deductions including mortgage interest, make states tax income as a net percentage of federal tax (if they tax income), eliminate double-taxation of dividends, eliminate AMT, eliminate the difference between short- and long-term capital gains and tax both at a flat rate of 20%, eliminate the cap on medicare and social security contributions but exempt the first $25,000 in income (for a family of 4) from them (not the employer portion, however), add a national sales tax but exempt food (not clothing: make your own!), and place federal and currently exempt state workers in the social security system.

I think, done properly, that that would make for more secure tax revenue more stably, make the system fairer and easier to manage, and help avoid fiscal crises like the one we're currently in.

Well, just so you know Steve. I think health care for all is an admirable goal. My qualms have been with the model used to achieve this. I would have preferred something more along the swiss model and use tax credits for those that can't afford a basic health care package. I like using free-market solutions as much as possible, increase information about costs, give consumers more power or skin in the game with regard to the costs, and do something on Tort reform which I believe is a bigger problem than most will admit.

"Like a mantra, officials from both the Bush and Obama administrations have trumpeted how the government’s sweeping interventions to prop up the economy since 2008 helped avert a second Depression. Now, two leading economists wielding complex quantitative models say that assertion can be empirically proved."

So 15 MILLION Americans thrown out of work ISN'T a "depression"? Seriously??

Oh wait -- this assertion was made by two (employed) economists who never lost their jobs in the first place. I could see how their view of the world might be skewed.

Let's be clear, It is Tim Geithner & Ben Bernanke's job to talk up confidence in the recovery.
And as far as others in the Obama administration, they do want to get re-elected and keep as many Democrats in the house as possible. Elections are lost and won based on the economy.

Tim Geithner ... the guy who committed tax fraud, correct? We're supposed to be listening to THAT guy?

Matt, you are an idiot. Oh wait, I'm you, right?

Yes, you are supposed to be listening to that guy. Whatever he did, doesn't change the position of authority he is in now.

Tim Geithner ... the guy who committed tax fraud, correct? We're supposed to be listening to THAT guy?

Absolutely not!

"Whatever he did ..."

What he did was BREAK THE LAW. Tax fraud, in case you're not aware, is a F E L O N Y.

I suppose you would have had the same attitude about "listening to the guy" because of the "position of authority he's in now" if you were in Germany back in the '30s.

He was not convicted of tax fraud.

Did Germans commit tax fraud?

He was one of the Clinton guys who helped create the mess.
He was at the NY Fed when the banks blew up and lied and said he was never a regulator
He never paid his taxes
He undermined Paul Volcker's attempt to implemetnt the Volcker rule.

List goes on..

"He was not convicted of tax fraud."

And yet he still committed it (he admitted it as much himself).

I suppose in your world it's OK unless there's a conviction.

Interesting question. 12 ordinary people didn't find him guilty. But a body of 100 senators did approve his position for which he was selected by the President.

But if you don't want to listen to him, then I guess you can listen to the other Secretary of the Treasury, right?

No it's not tax fraud, and the statute of limitations had already lapsed.

"He was one of the Clinton guys who helped create the mess."

There you go again, RS, from reasonable to partisan: did George II have NOTHING to do with this "mess"?

"No it's not tax fraud, and the statute of limitations had already lapsed."

So if you don't get caught and you wait long enough, it's OK?

Interesting question. 12 ordinary people didn't find him guilty. But a body of 100 senators did approve his position for which he was selected by the President

This was a Robert Rubin deal. He helped bank-roll Obama's Candidacy. No shocker.

"So if you don't get caught and you wait long enough, it's OK?"

That is a fundamental tenet of English (and therefore American) law; it's why the statute of limitations and the statute of repose exist, and why equitable relief (injunctions) can be requested against a party that has not exercised its rights. It applies civilly and criminally (except for murder).

There you go again, RS, from reasonable to partisan: did George II have NOTHING to do with this "mess"?

Nope, The point is he Timmy had his hand in it.
You should not expect those that helped to create the problem to fix it. Because for them to do so would require owning up to their contribution. For Tim to be the right guy would require an epiphany.
It does happen, Gary Gensler is a fine example. He's doing a fantastic job and even jokes that Goldman Sachs was a whole Bar Mitvah ago for him.

George II had nothing to do with the mess that occurred after he was president for 8 years?

Really?

That's not what I said,...
Ignore the word "nope" which you clearly took out of conext.

No I didn't take it out of context, it was unclear, but a) that's a relief, and b) what do you see as his administration's contribution to this mess?

who? Obama, George W or Clinton?

If we're talking George W.
I think he called Fannie & Freddie fairly well. I like Sheila Bair who was a George W appointee as well. She contiues under Obama and is one of his best regulators. The FDIC is well run

Where he doesn't look good is in appointees of regulators.. .
Cox, Dugan & Gilleran were disasters. And disaster doesn't even begin to describe it.

If We're talking Clinton, it's all the Fincial Reform acts. Commodity Futures Modernization Act, Financial Services modernizatin act and the encouragement of Fannie & Freddie loosening lending standards was under Clinton administration. There are other characters...

In congress Barney Frank's role is legendary, and the most indendiary because he claims it never happened.

So Bill Clinton is to blame for financial reform acts, despite the fact that Republicans had controlled Congress since 1996, and it was a Dick Armey invention?

Nothing wrong with the Bush tax cuts, or unfunded wars not put on the budget?

I think Bill Clinton's biggest mistake was reappointing Greenspan. And I do like Sheila Bair, as well.

These were measures he signed which had suport in Treasury. Greenspan ,Rubin & Summers were big supporters of these efforts.

Sorry, the Iraq war did not cause the current financial crisis. You can think the war was a mistkae but it would on different grounds. It would have been better if the Bush Tax cuts were accompanied with real spending cuts. This is the reason problem I have with George W, He was not a fiscal conservative.

Be fair steve. If you are going to look at President-Congress combinations, plenty of Democrats voted for the Iraq war, and the Dems controlled Congress for the last two years of Bush's second term.

You mean the unfunded $900 million Iraq war has no effect on today's deficits? How is that possible?

Cost of Bush tax cuts $2.8 TRILLION from 2001 to 2010.

Current deficit about $13 trillion.

Seems to me that 1/3 of the deficit came from those two pieces of legislation alone.

Which agrees with this:

http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms

So much for "fiscally responsible Republicans": the debt has gone down under every Democratic administration since Truman, and up under every Republican since Ford. George II increased the national debt from 56.4% of GDP to 83.4% of GDP in his 8 years.

This is why I find the Republican position so, well, anomalous: it just doesn't agree with the facts.

"plenty of Democrats voted for the Iraq war"

And EVERY ONE OF THEM was wrong.

RS, what $13 TRILLION in spending cuts would you like to have seen accompany the Bush tax cuts? Please be as specific as possible, as Republicans are on record as saying that tax cuts don't actually need to be offset by spending cuts, which seems odd to me.

If I read the CBO report correctly, they view increasing the deficit as very dangerous.

Agrcicultural subsidies eliminated, Weapon systems not wanted by the military eliminated, Mortgage interest tax deduction eliminated, costs associated with guaranteeing mortgages eliminiated, government buys the cheapest best product without regards to whether its union or non-union.

these are just a few things, I could probably think of tons more.

I would also privatize social security, eliminate the post office, sell off Amtrak, The Tennessee valley authority is sold!

why don't you sell the white house as well and then lease it back?

Also , the government would not fund ACORN, and lots of ther questionable organizations....

Also the president doesn't get a salary after he leaves the white house. All we do is pay for his his security guards.

just bc a black man lives in the house, NOW ya allz wanna sell it.. .that's just fked up on so many levels...

But bf we go selling the white house may I suggest selling the low hanging fruits.
1) fannie/freddie;
2) citibank;
3) geitner's house;
4) GM;
5) Central Park;
6) SEC;
7) justice dept;
8) IRS;
9) Drilling rights to Gulf;
10) Army!

Yeah, baby..... can't wait for my tax refund!

Agrcicultural subsidies eliminated.

Agreed.

Weapon systems not wanted by the military eliminated.

Agreed.

Mortgage interest tax deduction eliminated.

Agreed.

Costs associated with guaranteeing mortgages eliminated.

Agreed.

Now, how much does that add up to?

FYI Acorn no longer exists, & we no longer pay for Secret Service after he leaves office.

"privatize social security"

That would be a disaster (read the history in Chile)

"eliminate the post office"

That would take a constitutional amendment, and would be a very bad idea - we need the mail.

"sell off Amtrak"

Exactly the opposite of what we should be doing: much cheaper than the more heavily subsidized highways and airports.

"The Tennessee valley authority is sold!"

Don't know about that, but privatizing natural monopolies doesn't work so well. Look at ConEd.

FYI, Riversider, your Republican Friends are not going to be too happy with what you want to eliminate - and therein lies the problem: agricultural subsidies go mostly to Red States, weapons systems are bought by Republican generals, mortgage interest is mostly deducted by the wealthy (read: Republicans), ditto guaranteed mortgages.

Easiest way to be fair, is go to flat tax, eliminate deductions both corporate, individual and eliminate tax credits. To the extent we need tax credits it should be as a safety net for those at the bottom for "essential items"..and you can define that as you like, health care, food, shelter......(we will leave this open). People act like credits and deductions don't cost the tax payer but they do.

And of course nobody wants to hear this but the biggest contribution to our deficit is the entitlements. They need to be cut back...... It stinks ,but that is reality.

weapons systems are bought by Republican generals

This is incorrect. They are championed by congressman and senators from the key districts that house the companies that manufacture them.

Mortgage guarantee is conforming and fha/va..so we're not talking the wealthy.

Also most Federal grants should be eliminated.

> morttgage guarantee is conforming and fha/va..so we're not talking the wealthy.

And the guarantees are most costly on riskier loans... meaning poorer folks, and you have to assume cities as well.

more blue for you!

> the nation’s gross domestic product would be about 6.5 percent lower this year.

I think Steve also saved us from the 2nd depression, otherwise we would have been 106.5% lower. he saved us by carrying the 1 and making us trillions!

Sacre Bleu, Riversider, you're proposing taking the majority of fifty-dollar banknotes out of circulation! But why???

Privatizing social security is do-able, but Dems would torpedo any attempts. Raising the retirement age and fixing the COLA increases would save a ton.

And the $13 trillion number is pulled out of a hat. You have no idea what the economy would have been like without the tax cuts, or how government revenues would have been affected. I believe revenues went up in the years after the tax cut.

You also believe in Sea Monkeys, LICcounty, and that the earth is flat.

Condemning millions of retirees to utter poverty is do-able, yes, LICcounty. They do'd it in Chile already, LICcounty.

How about income/asset testing for Social Security payout? That's something everybody can get behind.

Well, if we privatize social security no more games with taxes and raising the retirement age and coming up with convoluted formulas to raise benefits below the increase in our true cost of living. I prefer it more honest.

The way some of this gets sold is the tax rate comes down as progress in bringing down the deficit is made...

Oh and while I'm on this rant, congress loses health care and gets reductions in its perks. no air-force one. they fly coach.

Privatizing social security doesn't work because people simply don't save for retirement. Income is like roads - you spend as much as you can to fill up the available income. (At least most people do.)

Privatizing social security is also a craps shoot: let's say you retired in January 2008, converted everything to cash. Then let's say you retired in December 2008. You'd have a lot less money.

Far too risky. Ask Chile, who did it & undid it.

"Mortgage guarantee is conforming." Nonetheless, only the wealthier own homes, and the deduction is only applicable to people who itemize (above the standard deduction). Therefore, the benefit is skewed not only in terms of amount, but in terms of the tax saved: the wealthier (who itemize) pay a higher rate of tax.

"flat tax" is inherently unfair.

"entitlements": which ones, and by how much?

"the $13 trillion number is pulled out of a hat"

No. It was the official estimate from the CBO.

"I believe revenues went up in the years after the tax cut."

Well you would be wrong. Even the Heritage Foundation will tell you that:

http://www.heritage.org/research/reports/2010/06/federal-spending-by-the-numbers-2010

Revenue has not yet returned to the level of 1999.

As usual, LICC, look thing up before saying them.

Privatizing social security doesn't work because people simply don't save for retirement

Circular... People don't save for retirement because they think the government will do it.
and that's part of the point. In a drive to make its citizens spend more and save less China
is discussing Social Security...

Flat tax is unfair
Define "fair". I guarantee that you will not get the same answer from everyone.

And while I'm in favor of lower taxes, I do recognize that when capital gains rates are lowered it does not promote capital formation but rather capital destruction. Even David Stockman sees this now.

And that, LICC, is the problem with supply-side economics: what it predicts will happen - revenue increasing with decreasing taxes - only happens in extreme situations with tax rates around 90%. It didn't happen under Reagan, and it didn't happen under George II. If it did, I'd be all for it.

But it doesn't.

And continuous deregulation only works in extreme situations, as well, such as in centrally planned economies. It worked for airline fares, but not so much in banking because human beings are inherently bad at managing medium- to longer-term risks: see comment above about privatizing social security.

Finally, trickle-down economics - the original name of supply-side economics before Voodoo Economics - doesn't work either. You merely have to look at the distribution of wealth in countries that adopt it: the very wealthy get wealthier and wealthier, and the very poor remain poor. Which leads to riots and revolutions, and Venezuela.

If you want Venezuela here, just implement the flat tax. It'll work like a champ.

BTW privatizing social security will not cut the deficit, because social security is not a budgeted item.

If all of the magical thinking of supply-side economics worked under normal market conditions, I'd be the first to sign up. Alas, it doesn't.

BTW privatizing social security will not cut the deficit, because social security is not a budgeted item.

Hey, lets not budget for anything??? WTF?

"Circular"

No. Empirically proved. That's why it was started in the first place, and why Chile had to back away from its experiment.

In Singapore they force people to save - they're not doing so badly, eh?

"Fair" is a difficult concept admittedly, but for Warren Buffet to pay a lower effective tax rate than his secretary seems inherently unfair to me. I neither want to soak the rich as, statistically, I'm richer than 99% of the country, nor do I want a situation where, as in Latin America, I have to live behind walls topped with shards of glass and barbed wire, to keep the needy out.

I fall squarely in the middle on that.

"lets not budget for anything"

It has its own, separate budget and trust fund. It does, however, buy up huge amounts of government debt.

It has its own, separate budget and trust fund. It does, however, buy up huge amounts of government debt.

back to square one......

So let's take every part of the budget in deficit, give it its own budget and let it buy up huge amounts of government debt....

Every rational person knows at some point in the future social security runs into trouble. I don't care how you do the accounting but there is a problem.

There is a problem with social security, but not for a long time, & it's easily fixed. It currently has a huge surplus.

But you haven't addressed the other problems with what you want to do, or the fallacy that cutting taxes increases tax revenue. As I posted elsewhere, it's great politics, but crappy economics.

steve, you just keep repeating the same wrong things. Revenues were up in 2006-2008. Thanks for proving my point. Look at the 80s after the Reagan tax cuts. Same thing.

You can't get any fairer than the flat tax. Everyone pays the same rate. If you make more, you pay more. If you make less, you pay less.

Privatize social security the right way and it will work much better than the current system. Of course, government would have less control over people's lives.

of course licc doesn't post a source regarding revenues, because he can't find even a flawed one to really help his argument. i don't know what they were in 2006-08, but the initial effect of the cuts was truly awful. did they take six years to get some return, and what was that compared to, and that with a huge bubble, and are you talking about inflation adjusted amounts? who knows. there's a lot of other interesting stuff in the paper, but i'm kind of under the weather, and too tired to read it all. pulling an rs.

http://www.taxpolicycenter.org/briefing-book/background/bush-tax-cuts/revenue.cfm

"The Bush tax cuts contributed, along with underlying economic conditions, to a historic decline in federal tax revenue. In 2000 total federal tax revenue was as high in proportion to the U.S. economy as it had ever been. By 2004 federal tax revenue in proportion to the economy had fallen to its lowest level in almost fifty years."

"Look at the 80s after the Reagan tax cuts. Same thing."

Revenues went up become Reagan RAISED taxes in 82 and 83:

http://www.nytimes.com/2004/06/08/opinion/08KRUG.html

"Removing our military from abroad would be a disaster."

Please explain how removing our troops from England, Italy, Germany, Portugal, and The Netherlands will be a disaster.

It's like deja vu all over again.

"Easiest way to be fair, is go to flat tax,"

Flat tax = tax cut for the rich

Deja vu? you're a fine one to talk, rs. I found it hilarious that you asked ME about talking about the same old things again.

Appologies A.R. I'm talked out and this is repetitious. Maybe another topic. OK?

you're talked out?

we posted out.

stop.

rs, I don't disagree with the concept but why only in terms of my comments?

I'd be happy to return this to a primarily real-estate oriented board. there are numerous political boards. obviously much political/economic news affects real estate values, as do demographics discussions, etc., but I see little to no effort to tie them together by most people. I'll concede that in your inflation fears there is a real estate element, but with many of the topics here there is no such nexus. or one that is not discussed. I almost feel like posting a thread entitled massive stimulus was good for NYC real estate prices and more would be better. which is likely very true, but I wouldn't do it. because of many reasons.

look, I think you're thinking is much more sophisticated than licc's (not saying that much). but you have been sounding like a partisan hack job. you say that every comment by us has to do with bush? look to your own comments over the past few days and count how many times you've blamed Clinton. Clinton f'd up, but the country was irreparably harmed by the subsequent combination of clintons caving to the right and the total abdication of any semblance of control of a financial world completely out of f'ng control.

and please quit trying to characterize me as socialist. safety nets are important. as are creating an economy in which huge numbers of working people aren't in poverty. if you work 40 hours a week you shouldn't be below the poverty line. if that belief makes me a socialist, I'll take the title.