NYT: Economists warn cuts to federal spending ill-timed

[Tulane Skins Fan]

WASHINGTON — The nation’s political leaders agreed on Sunday to spend and invest less money in the American economy, a step that economists said risks the reversal of a faltering recovery, in the hope of improving the nation’s long-term prosperity.

The emerging outlines of a deal to cut spending by at least $2.4 trillion over 10 years, with a multibillion-dollar down payment later this year, would complete an about-face in the federal government’s role from outsize spending in the immediate aftermath of the recession to outsize cuts going forward.

Last week brought the disconcerting news that the economy grew no faster than the population during the first six months of the year, in part because of spending cuts by state and local governments. Now the federal government is cutting, too.

http://www.msnbc.msn.com/id/43966345/ns/politics-the_new_york_times/

I'm not an economist, but this makes too much sense to me. I feel like we are merrily walking into the belly of the beast.

[zoony]

Going into an election the Republicans get exactly what they want. A wrecked economy so their guy gets to win.

Seems like I remember Pelosi and the Dem house trying to pass economic stimulus under Bush (no matter the outcome).

.

[Tulane Skins Fan]

Going into an election the Republicans get exactly what they want. A wrecked economy so their guy gets to win.

Seems like I remember Pelosi and the Dem house trying to pass economic stimulus under Bush (no matter the outcome).

.

You don't think voters will hold the tea party responsible for the economy if it takes a sharp downward turn now?

If the dems can't make the voters see that (if it happens), then they are too dumb to be in office.

[zoony]

You don't think voters will hold the tea party responsible for the economy if it takes a sharp downward turn now?

If the dems can't make the voters see that (if it happens), then they are too dumb to be in office.

There is too much economic noise to demonstrate it clearly. So I don't agree with your second sentence.

[Tulane Skins Fan]

There is too much economic noise to demonstrate it clearly. So I don't agree with your second sentence.

Maybe you're right. But it seems like until now the GOP has successfully been able to blame Obama alone for the bad economy. I think they have had their turn now, and if it gets worse, voters will link the two. Maybe not though. IMO.

[Kilmer17]

Politically, it's a hard sell for the Dems to blame "the GOP".

That works in polls, but it's too easy for Joe Sixpack to say "Yeah, but my Rep is the outlier."

It's much easier to blame Obama.

[Fred Jones]

Obama should be blamed. His lack of leadership is partly to blame. That said, he is no worse than Bush, and the Republicans have put no one up that could do a better job.

I have always been about balance. We are now going to far to the right again. Since no one will accept my original plan of "pain everywhere", I guess I have to settle for eliminating some of those Bush tax cuts for the rich. And, of course we have to cut spending. Need to look at defense as well. Bush never understood that you have to pay to protect the country. Can't have it both ways. And yes, Obama just carried the torch.

[Tulane Skins Fan]

Apparently we missed a big opportunity to reduce our debt when things were booming because we were spending so much to make things boom.

That really is the big problem as I see it. Cutting taxes at a time of great economic prosperity was, as McCain put it back then, reckless.


Politically, it's a hard sell for the Dems to blame "the GOP".

That works in polls, but it's too easy for Joe Sixpack to say "Yeah, but my Rep is the outlier."

It's much easier to blame Obama.

I guess this is the new spiel on this... the tea party is crazy, but my tea party congressman isn't. I don't know that there's any support for that at all, but go with what makes you sleep at night.

[Kilmer17]

That really is the big problem as I see it. Cutting taxes at a time of great economic prosperity was, as McCain put it back then, reckless.



I guess this is the new spiel on this... the tea party is crazy, but my tea party congressman isn't. I don't know that there's any support for that at all, but go with what makes you sleep at night.


How's that Hope and Change working for you guys?

[NoVaO]

Apparently we missed a big opportunity to reduce our debt when things were booming because we were spending so much to make things boom.

You run surpluses during the good times and deficits during the bad times in order to combat big recessions. Since we spent our surplus when times were good, we had a lot less flexibility to combat the recession this time around

[zoony]

It's much easier to blame Obama.

Easier yet to blame Bush and 8 years of irresponsible economic leadership

[Fred Jones]

What I want to do is cut all government funding to all tea party members and let me know how that goes. And, I receive no government funding. Just a middle class person paying his taxes.

[Kilmer17]

Easier yet to blame Bush and 8 years of irresponsible economic leadership

That certainly worked in 08. Probably a harder sell in 2012 to still blame Bush and the GOP when the Dems have been in charge for a full cycle.

[Fred Jones]

Easier yet to blame Bush and 8 years of irresponsible economic leadership

Well, easy to blame someone that was in fact wrong. Easy to blame Obama now because he continued the lack of presidential leadership. I am not a Clinton fan, but I would take him or the older Bush over the current and previous presidents.

[NoVaO]

You don't think voters will hold the tea party responsible for the economy if it takes a sharp downward turn now?

If the dems can't make the voters see that (if it happens), then they are too dumb to be in office.

Voters don't act rationally. If they don't feel the benefits of a recovery, they will look to somebody else. Obama will make this election a choice. Romney or whoever will make it a referendum. Believe me, the choice will be clear, but again, voters don't always vote with their heads.

[NoVaO]

That certainly worked in 08. Probably a harder sell in 2012 to still blame Bush and the GOP when the Dems have been in charge for a full cycle.

Bush still gets the overwhelming majority of the blame for the economy being where it is today. Bush and Wall Street that is.

That doesn't mean people are happy with Obama right now, of course.

And another factor is that Americans really dislike Republicans right now. The GOP house has around a 20% approval rating.

[sacase]

Easier yet to blame Bush and 8 years of irresponsible economic leadership

That's a cop out. Sorry, you wanted to be president, you got it, now fix it, stop blaming the other guy, take responsibility for leadership. Its not that hard.

That being said, Both parties really suck, we are in a bad situation and there is no painless way out of it, everyone needs to feel the pain.

[luckydevil]

The hysteria is amusing coming from some circles. Most of the spending cuts are backloaded.

[Destino]

Spending cuts during an economic down turn is bad? No way...

The problem is that the GOP doesn't have a plan B. In case of surplus, cut taxes and spending on anything the democrats like. In case of deficit, cut taxes and spending on anything the democrats like. In case of alien invasion, cut taxes and spending on anything the democrats like. There is no thought or logic. It's purely political because the goals of the GOP aren't found on this issue. Their goal is to place big business in control of everything.



How's that Hope and Change working for you guys?
Significantly better than deregulation worked for the country.

[Kilmer17]

Significantly better than deregulation worked for the country.

More slogans and blame game.

[zoony]

The hysteria is amusing coming from some ciricles. Most of the spending cuts are backloaded.

psychological impact is immediate. Which, in the science of economics, perception being more important than reality

[Tulane Skins Fan]

More slogans and blame game.

What was your initial post? "How's that Hope and Change working out for you?" That's not a slogan or the blame game?

[NoVaO]

The hysteria is amusing coming from some ciricles. Most of the spending cuts are backloaded.

That's the hope...in addition to hoping some of the uncertainty resulting from this debate is lifted and businesses are a little more open to investing and consumers more open to spending now that all this has been resolved. At least, that is what the Obama administration is hoping will happen. The best they can get is probably a recovery that is real, but very slow moving. The worst case scenario is the economy falling back into a double-dip recession...

[Bang]

More slogans and blame game.

Says the guy who opened with a slogan and justified blame from the outset.

As usual, the GOP thinks everyone is too stupid to see beyond the tripe that is heaped up out of the trough.
it works for their base.

~Bang

[JMS]

WASHINGTON — The nation’s political leaders agreed on Sunday to spend and invest less money in the American economy, a step that economists said risks the reversal of a faltering recovery, in the hope of improving the nation’s long-term prosperity.

The emerging outlines of a deal to cut spending by at least $2.4 trillion over 10 years, with a multibillion-dollar down payment later this year, would complete an about-face in the federal government’s role from outsize spending in the immediate aftermath of the recession to outsize cuts going forward.

Last week brought the disconcerting news that the economy grew no faster than the population during the first six months of the year, in part because of spending cuts by state and local governments. Now the federal government is cutting, too.

http://www.msnbc.msn.com/id/43966345/ns/politics-the_new_york_times/

I'm not an economist, but this makes too much sense to me. I feel like we are merrily walking into the belly of the beast.

Trying to balance the budget as Roosevelt did in 1936 is harmful to a recovering economy. True enough...

But cutting back modestly huge governemnt deficits over ten years with most of it occuring several years down the road..... doesn't seem to be all that ambitious or damaging.....

This "agreement" isn't really a deficit reducing package, it's a debt ceiling increase bill. The deficite reductions were so underwhelming and so enimic that they will almost certainly be replaced by either a future GOP or Democratic congress....

[Kilmer17]

What was your initial post? "How's that Hope and Change working out for you?" That's not a slogan or the blame game?

Jeez. That was a DIRECT response to your post above it about how the GOP was going to go with "the tea party is crazy, but my tea party congressman isn't. I don't know that there's any support for that at all, but go with what makes you sleep at night. "

Pointing out the Dem penchant for sloganing is not in itself sloganing.

[Tulane Skins Fan]

Jeez. That was a DIRECT response to your post above it about how the GOP was going to go with "the tea party is crazy, but my tea party congressman isn't. I don't know that there's any support for that at all, but go with what makes you sleep at night. "

Pointing out the Dem penchant for sloganing is not in itself sloganing.

You are way out on a limb now.

[Kilmer17]

Says the guy who opened with a slogan and justified blame from the outset.

As usual, the GOP thinks everyone is too stupid to see beyond the tripe that is heaped up out of the trough.
it works for their base.

~Bang

Again, pointing out your sides silly love of slogans is not making a slogan.

[Predicto]

Says the guy who opened with a slogan and justified blame from the outset.

As usual, the GOP thinks everyone is too stupid to see beyond the tripe that is heaped up out of the trough.
it works for their base.

~Bang


It works period.

If the economy tanks, Obama will take the blame because he is the current President. That is just the way it is, the way it always has been.

[Destino]

More slogans and blame game.
What you wrote is literally a bumper sticker slogan

http://images8.cpcache.com/product_zoom/443885548v4_225x225_Front_padToSquare-true.jpg

...and you accuse me of slogans? Sorry but my response is no slogan. It certainly is blame.

[Larry]

You don't think voters will hold the tea party responsible for the economy if it takes a sharp downward turn?

Ask yourself "what percentage of the right are 100% convinced that Obaba CAUSED the depression, and then ask yourself that question.

[Kilmer17]

You are way out on a limb now.

How so?

I guess I should just make up a line and apply it to you and then beat it to death. It's the Larry defense, but most of you here have adopted it. Easier than arguing with actual facts and figures I guess.

---------- Post added August-1st-2011 at 01:07 PM ----------


It works period.

If the economy tanks, Obama will take the blame because he is the current President. That is just the way it is, the way it always has been.

Stop making sense.

[JMS]

The hysteria is amusing coming from some ciricles. Most of the spending cuts are backloaded.

Back loaded and extremely modest too. We are running about a 30% deficit spending of our total budget and this bill cuts 6% over 10 years.. That's very very modests. And as you say most of the cuts are backloaded coming years down the line when the economy will be stronger, knock wood.

[twa]

The hysteria is amusing coming from some ciricles. Most of the spending cuts are backloaded.

It would be informative to see what is cut and when....then factor in the increases as well.

amusing we will spend more and consider it cuts

[Tulane Skins Fan]

How so?

I guess I should just make up a line and apply it to you and then beat it to death. It's the Larry defense, but most of you here have adopted it. Easier than arguing with actual facts and figures I guess.[COLOR="Gold"]



What line did I apply to you and then beat death? Seriously, what are you talking about?

You are hacking away now.

[Kilmer17]

What line did I apply to you and then beat death? Seriously, what are you talking about?

You are hacking away now.

From page one. Your quote responding to my post- "I guess this is the new spiel on this... the tea party is crazy, but my tea party congressman isn't. I don't know that there's any support for that at all, but go with what makes you sleep at night. "

[JMS]

It would be informative to see what is cut and when....then factor in the increases as well.

amusing we will spend more and consider it cuts

The deal envisions spending cuts of roughly $2.4 trillion over 10 years, which Congress would approve in two steps -- an initial $917 billion when the deal passes Congress and another $1.5 trillion by the end of the year.

The deal also says something about capping government spending.

[luckydevil]

Seriously, whenever the economy does "recover", both parties better get serious about austerity ( the real kind not some sideshow), because it neeeds to happen at some point. If Canada can cut their government by 20% , we most certainly can.

[CurseReversed]

They are not even cutting anything but future Increases in spending. There will be no reduction in overall debt or even close to a balanced budget. Only a deficit reduction that still leaves them a trillion or more in the red every year. People are already trying to figure out who to blame when the cuts slow recovery. This is about as backwards as you can get. If the US govt continues to print trillions of dollars to fund itself and this recovery any positive results will pale in comparison to the rising prices and cost of living that the resulting inflation will bring.

I think people incorrectly look at our debt as they would any persons or businesses. With the govt it is different. Because it has to borrow from itself, or more specifically it has to ask the FED to print federal reserve notes to buy securities to fund its obligations. It has to increase money supply to fund itself, this is a soft tax on every dollar in circulation and is the real threat to recovery. Rising prices are a far worse outcome then any cutting spending could produce.

If you do not fear inflation or rising prices, then you do not know how many dollars were really thrown out there in the past ten years. Its crazy. Printing more is even crazier. Protect the dollar, or buy gold and hunker down.

There is no plan that continues to fund the govt in anything close to its current state, that does not also destroy the value of our currency. Our currency is everything, once it goes every check will bounce, and there will be no recovery, only destruction.

[Riggo-toni]

Easier yet to blame Bush and 8 years of irresponsible economic leadership

Yup, although
I think Obama's stimulus made a bad situation worse. All these economic models are based on faulty Keynesian assumptions that spending will increase demand. Demand is not lacking for federal stimulus - it's collapsed because of the housing market hangover. In a gloabl economy driven by electronic money, loose fiscal policy merely widens the gap between short and long term interest rates, encouraging banks to continue borrowing from the fed, and then lend the $ back to the gov't at a nice spread with no risk. Investment thru Darpa in new technologies, particularly renewable energy, would be a good investment, but most of the govt dollars are transfer payments;reallocating capital from its most efficient producers to the less efficient (albeit often the most needy).

[twa]

The deal envisions spending cuts of roughly $2.4 trillion over 10 years, which Congress would approve in two steps -- an initial $917 billion when the deal passes Congress and another $1.5 trillion by the end of the year.

The deal also says something about capping government spending.
envisions...nice :pfft:
initial (over 10 yrs)
another(over 10 yrs)

something about a cap?....is that anything like the spending limits we blow thru?:silly:

[luckydevil]

They are not even cutting anything but future Increases in spending. There will be no reduction in overall debt or even close to a balanced budget. Only a deficit reduction that still leaves them a trillion or more in the red every year.

Yeah, just a sideshow. The "compromise" adds 7 trillion to the national debt for the next 10 years.

---------- Post added August-1st-2011 at 01:36 PM ----------


Yup, although
I think Obama's stimulus made a bad situation worse. All these economic models are based on faulty Keynesian assumptions that spending will increase demand. Demand is not lacking for federal stimulus - it's collapsed because of the housing market hangover. In a gloabl economy driven by electronic money, loose fiscal policy merely widens the gap between short and long term interest rates, encouraging banks to continue borrowing from the fed, and then lend the $ back to the gov't at a nice spread with no risk. Investment thru Darpa in new technologies, particularly renewable energy, would be a good investment, but most of the govt dollars are transfer payments;reallocating capital from its most efficient producers to the less efficient (albeit often the most needy).

left wing voodoo

[Larry]

How's that Hope and Change working for you guys?


More slogans and blame game.

No comment necessary.

Edit:

That said, though, my own opinion?

No, the kinds of cuts they're talking about here, are probably pretty safe. Granted, I'm not an economist, but I have trouble believing that our situation is that fragile.

Kind of how I feel about tax hikes. IMO, repealing the Bush tax cuts on the top 1% won't trigger a massive meltdown, because it's too small. In real-world terms, you're talking about a tix increase of 1-2%, on 1% of the country.

Frankly, I suspect that letting all of them lapse would be pretty safe. (Although my gut isn't as certain of that.)

IMO, we're talking about relatively tiny tweaks, here. (Which, IMO, is the right way to do things, at this stage.)

[Kilmer17]

No comment necessary.

Again, pointing out your sides love of slogans, isnt the same thing as using them.

Hope and Change is a left wing slogan. Im making fun of it and those of you who bought it.

[Destino]

Hope and Change is a left wing slogan. I'm making fun of it and those of you who bought it.
With a republican slogan! I guess that proves that Kilmer does not retreat, he reloads.

[Kilmer17]

Now Hope and Change is a Republican slogan?

[Bang]

I think the slogan being epitomized here is "Play as dense as possible":

~Bang

[Kilmer17]

I think the slogan being epitomized here is "Play as dense as possible":

~Bang

It certainly is. Huffingskins post has become the leader in that.

And yes, I get that you were thinking you were disparaging me, just realize I think you are just as dense.

[alexey]

It is funny to see some of our long term ES residents going through these steps:

1) Providing more or less reasonable arguments for positions of their party.

2) Dropping arguments and moving towards slogans.

3) Moving towards more shallow and more rediculous slogans.

4) "I'm just making fun of yall by saying these silly things, you get upset = i win."


Many others, to their credit, jumped off the wagon somewhere between 2 and 3.

[Tulane Skins Fan]

A lot of people are saying there aren't any cuts until 2012... which I think helps the economy sustain itself.

Unfortunately, the jobs-saving stimulus program is coming to an end and so the economy may take a hit on that alone. :(

[GhostofSparta]

I do have 1 question that I think is legitimate and hopefully most of you will feel the same way: Is it ever a "good" time to cut federal spending?

It just seems like there's always a reason to not do it:
-In a recession/depression, you can't cut spending. It will increase unemployment and make a recovery that much harder, unlikely, or shorter
-In a recovery, you can't cut spending. It will shorten or halt a recovery. This will lead to a double-dip recession due to increased unemployment and a shyer business atmosphere.
-In a downturn, you can't cut spending. It will make a recession worse and make the bottom that much farther down to reach. You'll make unemployment worse and completely destroy consumer confidence.

The obvious choice is in a booming economy, but even then is it a good idea? If you cut spending during a boom, you'll create higher unemployment than necessary (as government spending cuts always leads to higher unemployment), some people will feel unfairly affected by cuts (why should I have to suffer when everybody else is doing well, how fair is that?), and having a lower spending number makes it that much more difficult to raise the spending numbers when the economy tanks. This really seems like the most logical choice for various reasons, but am I just wrong on that? Is there just never a good time to cut spending, or does it just have to happen during a spring blue moon in an even numbered year as Saturn enters the 7th house, and even then you can only do it by 3%?

[Bang]

It certainly is. Huffingskins post has become the leader in that.

And yes, I get that you were thinking you were disparaging me, just realize I think you are just as dense.

Right,
But I'm not here pretending no one noticed I used a bumper sticker slogan and then cried that others rely on slogans.

seriously, do you really think it fools anyone? I know your Foxhead method of doing things is to repeat the idiocy as often as possible, no matter whether or not it gets shoved right back into your face. But jeez, at least realize no one is baffled by that bull****.

~Bang

[Larry]

I do have 1 question that I think is legitimate and hopefully most of you will feel the same way: Is it ever a "good" time to cut federal spending?

It just seems like there's always a reason to not do it:
-In a recession/depression, you can't cut spending. It will increase unemployment and make a recovery that much harder, unlikely, or shorter
-In a recovery, you can't cut spending. It will shorten or halt a recovery. This will lead to a double-dip recession due to increased unemployment and a shyer business atmosphere.
-In a downturn, you can't cut spending. It will make a recession worse and make the bottom that much farther down to reach. You'll make unemployment worse and completely destroy consumer confidence.

The obvious choice is in a booming economy, but even then is it a good idea? If you cut spending during a boom, you'll create higher unemployment than necessary (as government spending cuts always leads to higher unemployment), some people will feel unfairly affected by cuts (why should I have to suffer when everybody else is doing well, how fair is that?), and having a lower spending number makes it that much more difficult to raise the spending numbers when the economy tanks. This really seems like the most logical choice for various reasons, but am I just wrong on that? Is there just never a good time to cut spending, or does it just have to happen during a spring blue moon in an even numbered year as Saturn enters the 7th house, and even then you can only do it by 3%?

Granted,just my opinion, but cutting government spending always hurts the economy.

Same with raising taxes. And with running a deficit.

I simply believe that, when the economy's good and strong, then cutting spending or raising taxes doesn't hurt as bad.

[GhostofSparta]

Granted,just my opinion, but cutting government spending always hurts the economy.

Same with raising taxes. And with running a deficit.

I simply believe that, when the economy's good and strong, then cutting spending or raising taxes doesn't hurt as bad.

Thanks for that. So it's not so much that it's ever a "good" idea, but sometimes it's "less bad" than other time. I suppose I can live with that logic.

[zoony]

"The time to repair the roof is when the sun is shining" -JFK

[Kilmer17]

Right,
But I'm not here pretending no one noticed I used a bumper sticker slogan and then cried that others rely on slogans.

seriously, do you really think it fools anyone? I know your Foxhead method of doing things is to repeat the idiocy as often as possible, no matter whether or not it gets shoved right back into your face. But jeez, at least realize no one is baffled by that bull****.

~Bang

Seriously, using a "slogan" that was precicely making fun of you for your slogans is exactly what I was doing. The fact that you and the rest of the liberal lynch mob failed to see that and jumped into a round of "spam Kilmer" shows the weakness in your debate and is a sad example of where this site has fallen.

But quick, Im sure their is laguh a minute "Fox is bad" comment that you can find, or maybe you could tell us all again how you used to be a Conservative.

[Bang]

Seriously, using a "slogan" that was precicely making fun of you for your slogans is exactly what I was doing. The fact that you and the rest of the liberal lynch mob failed to see that and jumped into a round of "spam Kilmer" shows the weakness in your debate and is a sad example of where this site has fallen.

But quick, Im sure their is laguh a minute "Fox is bad" comment that you can find, or maybe you could tell us all again how you used to be a Conservative.

Meanwhile the level of discourse you bring to the table sinks lower and lower.
There's no need for me to tell anyone anything. To tell would require listening, and you've completely forgotten how to do that.

~Bang

[Kilmer17]

Meanwhile the level of discourse you bring to the table sinks lower and lower.
There's no need for me to tell anyone anything. To tell would require listening, and you've completely forgotten how to do that.

~Bang

Ah see. I knew I could count on you.

You try and think you're above the fray Bang. But youre right in the muck with the rest of us. Your just dont realize it.

[December90]

Easier yet to blame Bush and 8 years of irresponsible economic leadership

Can you honestly see no difference to the first 6 years of Bush with a Republican Congress and the last two years of Bush with Democrats leading the congress.

Look up the numbers, it is scary what happened once Pelosi took over as Speaker and Reid became Senate Majority Leader.

Care to take a guess as to what the economy was like the day Pelosi and Reid took their leadership positions? contrast that with what it is today...

The last budget that the Republican Congress and Bush had ran an annual 162 Billion deficit. Under Obama thus-far that would be a normal month.

We need to cut spending not cut the growth on spending. this lame compromise that we are about to be hit with does NOTHING to actually reduce the annual deficit or the overall national debt, its strongest claim is that it might slow the growth of the annual deficits, but those deficits are still growing as is the total national debt.

Can someone please cut up the Government Credit Cards before that number gets to 20 Trillion, (I will bet that if Obama wins another term he will leave office in 2016 with a deficit at least 10% larger than his current projections. (as in at least 2+ trillion worse than he is promising) If we elect a Republican with an actual backbone we can improve on it, but as of yet I have not seen that candidate running yet:(

[mardi gras skin]

Am I the only one that likes the way this turned out?

The debt ceiling was raised. We made a few cuts. We'll have a few more cuts in a few months. Nothing so drastic that it will tank the economy, just a little pruning.

And, only parenthetically, I am fond of all the gnashing of teeth from the extremes on each side who feel their party leaders sold out.

[Larry]

Can you honestly see no difference to the first 6 years of Bush with a Republican Congress and the last two years of Bush with Democrats leading the congress.

Look up the numbers, it is scary what happened once Pelosi took over as Speaker and Reid became Senate Majority Leader.

How about posting some, instead of making claims?

Here, I'll post some for you:

http://www.usgovernmentspending.com/usgs_line.php?title=Total%20Spending&year=2001_2009&sname=US&units=k&bar=1&stack=1&size=l&col=c&spending0=2055.37_2183.25_2295.56_2369.52_2472.20_ 2571.67_2569.30_2749.33_3204.87&legend=&source=a_a_a_a_a_a_a_a_a

http://www.usgovernmentrevenue.com/usgs_line.php?title=Total%20Direct%20Revenue&year=2001_2009&sname=US&units=k&bar=1&stack=1&size=l&col=c&spending0=2196.46_2011.72_1894.06_1942.84_2153.61_ 2330.94_2417.76_2326.63_1917.81&legend=&source=a_a_a_a_a_a_a_a_a

Bush was President for the last half of FY01, and the first half of FY09. He had a Democrat congress for half of 07, all of 08, and half of 09.

Yeah, you're right, it's scary the way that Democrat Congress slashed government revenues in 08 and 09, huh?


Care to take a guess as to what the economy was like the day Pelosi and Reid took their leadership positions? contrast that with what it is today...

Care to apply the same standard to Bush? :) Or to his Republican Congress? :)

---------- Post added August-1st-2011 at 08:25 PM ----------


And, only parenthetically, I am fond of all the gnashing of teeth from the extremes on each side who feel their party leaders sold out.

I understand the feeling. It's tempting to feel that any time the extremes on both sides are ticked, then we've got a good compromise.

Until you realize that the extremes on both sides would be ticked, (or at least, would claim to be), no matter what they got.

Still, I'm gonna bask in the moment, too.

[twa]

I wouldn't say liked, but it is about what I expected

The beast protects itself

Among mankind money is far more persuasive than logical argument. ~ Euripides

add
for Larry :)

http://4.bp.blogspot.com/-M-5t3LsRYAA/TjW1uyPF4pI/AAAAAAAAmhw/ucP9IH5L-sI/s1600/110731-1981-2012-debt.gif

[Predicto]

Care to take a guess as to what the economy was like the day Pelosi and Reid took their leadership positions? contrast that with what it is today...

(

That is one crappy talking point, even by the standards of this debate. :ols:

[mardi gras skin]

TWA, that's the clearest graph I've seen. All those graphs showing which president was in charge and ignoring congress are useless.

But you know what I see in that graph? The "peace dividend" at the end of the cold war, the tech bubble, 9/11, the housing crisis, etc. Red, purple, and Blue just happen to be in office when the good and bad stuff blew up. They really didn't really have much to do with the causes of the ups and downs.

[twa]

We are just passengers adrift in the sea of ****....don't get any on ya :ols:


as to the harm from spending cuts?

http://www.zerohedge.com/news/cbo-scores-bipartisan-plan-half-sp-required-savings-only-2-total-cuts-take-place-obama-reelecti
It was only a week ago that S&P said anything under $4 trillion in deficit cuts would be an automatic downgrade for the US. So according to the CBO’s just released score of the bipartisan budget, the S&P will have to cut its rating of the US in half, since the total budget cuts will be just over 50% of what S&P demanded previously. And here’s the funny part: of the $917 billion in known cuts (the other $1.2 billion is factored but not even the CBO has any clue what it will look like), a whopping 2% in cuts will take places before the Obama election. 2%!

[Larry]

But you know what I see in that graph? The "peace dividend" at the end of the cold war, the tech bubble, 9/11, the housing crisis, etc. Red, purple, and Blue just happen to be in office when the good and bad stuff blew up. They really didn't really have much to do with the causes of the ups and downs.

Oh, I agree. A LOT of the things that affect things like the deficit, are literally nobody's fault.

Or, at least, are only tangentially somebody's fault.

This explosion in the debt isn't Obama's fault. It isn't Bush's fault. It's the depression's fault.

Now maybe you could blame the depression on the economic policies of the previous decade. But IMO, then you're in the land of theories and maybes.

I mean, like, Katrina drove up the deficit. But can you really blame Bush for it?

[RabidFan]

That certainly worked in 08. Probably a harder sell in 2012 to still blame Bush and the GOP when the Dems have been in charge for a full cycle.

Except for the fact that Obama has continued the policies of W. Maher says it best in bashing Obama that he hasn't implemented one Dem ideology yet so if you're a Dem...act like a Dem and do their policies....to keep Rep policies is a ***** way to just not rock the boat/vote and go for only reelection and not try to improve the country with Dem policies(if that is even possible).

JStew has the same sentiment so it's nice to Dem supporters in the media bashing Obama for not acting like a Dem or basically not acting at all.

[Larry]

But haven't you heard? He's the worst President in the history of the US!

Why, he's completely destroyed the American economy, by passing exactly one piece of legislation, that hasn't even taken effect yet.

[twa]

What if the policies W passed on were Dem policies?

[mojobo]

Granted,just my opinion, but cutting government spending always hurts the economy.

Same with raising taxes. And with running a deficit.

I simply believe that, when the economy's good and strong, then cutting spending or raising taxes doesn't hurt as bad.

well we have to do oneor more of those three things in order to have a government at all. Which one do you feel works the best? I don't think that its possible to raise enough tax revenue to cover our cost, and even if we could it would take a dramatic toll on the state and local governments ability to raise funds to pay for the things they need, let alone leaving any money for individuals and businesses which is where the tax revenues come from in the first place. Cutting spending reduces jobs, but those jobs come from either tax revenues or borrowing, both of which take jobs and investments away from either the private sector or future generations government. In your opinion which one of those three things do you do?

[CurseReversed]

Can you honestly see no difference to the first 6 years of Bush with a Republican Congress and the last two years of Bush with Democrats leading the congress.

Look up the numbers, it is scary what happened once Pelosi took over as Speaker and Reid became Senate Majority Leader.

Care to take a guess as to what the economy was like the day Pelosi and Reid took their leadership positions? contrast that with what it is today...

The last budget that the Republican Congress and Bush had ran an annual 162 Billion deficit. Under Obama thus-far that would be a normal month.

We need to cut spending not cut the growth on spending. this lame compromise that we are about to be hit with does NOTHING to actually reduce the annual deficit or the overall national debt, its strongest claim is that it might slow the growth of the annual deficits, but those deficits are still growing as is the total national debt.

Can someone please cut up the Government Credit Cards before that number gets to 20 Trillion, (I will bet that if Obama wins another term he will leave office in 2016 with a deficit at least 10% larger than his current projections. (as in at least 2+ trillion worse than he is promising) If we elect a Republican with an actual backbone we can improve on it, but as of yet I have not seen that candidate running yet:(

You obviously have not been looking hard enough. There is definitely a candidate that fits all those criteria. Something tells me you already know about him but have not looked his way for some reason or another, sometimes its a single issue or negative that does it. He is the only one who can be trusted to fix the budget, the debt and the economy, because he has been warning us about this problem and attempting to fix it for 30 years. All the other candidates are beholden to special interest and corporate sponsors, while he publicly outs their notorious influence in washington every chance he gets.

[Kilmer17]

Am I the only one that likes the way this turned out?

The debt ceiling was raised. We made a few cuts. We'll have a few more cuts in a few months. Nothing so drastic that it will tank the economy, just a little pruning.

And, only parenthetically, I am fond of all the gnashing of teeth from the extremes on each side who feel their party leaders sold out.

I love the way it turned out. I dont think it did much of anything really, but it did take what was typically a 1 sentence bill that was always rubberstamped and made it a big deal.

It set a baseline for debt debate going forward.

[JohnLockesGhost]

"The time to repair the roof is when the sun is shining" -JFK

Is he implying that we shouldn't worry about the roof when the rain is coming down in buckets?

I agree with the sentiment, but the advice doesn't help us out of our current problem, unless you believe sunny days are right around the corner.

[Ignatius J.]

Am I the only one that likes the way this turned out?

The debt ceiling was raised. We made a few cuts. We'll have a few more cuts in a few months. Nothing so drastic that it will tank the economy, just a little pruning.

And, only parenthetically, I am fond of all the gnashing of teeth from the extremes on each side who feel their party leaders sold out.

I don't mind the budget cuts that came out so much, and yes a discussion about the debt levels and some trimming of budgets is probably a great thing to have happen periodically. From my perspective though, I think this was an unmitigated disaster. It was a disaster because it stopped the economy for about a month while people had to worry whether or not we were going to default right now for no reason. True, most people carried on assuming that something would get done, but it was too close for comfort. The drama was bad. But that also would have been fine if it hadn't been for the fact that again we tried to make real cuts to non discretionary spending and came up empty handed. Obama wanted to work with Boehner to come up with some real solutions. Change the tax code and raise the retirement age. Come to a real grand bargain that changes the trajectory of our fiscal future as a country. Instead we got basically nothing. And this is what we held a gun to the head of the economy for? Really?!

---------- Post added August-2nd-2011 at 07:56 PM ----------


Is he implying that we shouldn't worry about the roof when the rain is coming down in buckets?

I agree with the sentiment, but the advice doesn't help us out of our current problem, unless you believe sunny days are right around the corner.

What if some of us are having sunny days and some of us are drowning in rain? Maybe he meant that those of us for whom the sun is shining owe the rained upon a better roof. But that might be stretching the metaphor a little far.

[mardi gras skin]

Obama wanted to work with Boehner to come up with some real solutions. Change the tax code and raise the retirement age.

The Dems in Congress eviscerated Obama for putting entitlements on the table. There was no way they were going to let that happen just like there was no way the Republicans were going to let taxes get raised.

It won't get remembered this way because the extremes drive the narrative, but Obama comes of out this pretty good as far as I'm concerned.

[NoVaO]

The Dems in Congress eviscerated Obama for putting entitlements on the table. There was no way they were going to let that happen just like there was no way the Republicans were going to let taxes get raised.

It won't get remembered this way because the extremes drive the narrative, but Obama comes of out this pretty good as far as I'm concerned.

Any deal between Boehner and Obama would have involved a coalition of Republicans and Democrats. He's the leader of the Democratic party. Democrats in Congress could stomp their feet all they want, but he ultimately would have rounded up the votes necessary because he's the leader of the party. And remember, we are not talking about Medicare benefits that would are being cut. Democrats, while grudgingly, would go along with changes on the provider side of Medicare. That still impacts beneficiaries, but in a less direct way.

[mardi gras skin]

Any deal between Boehner and Obama would have involved a coalition of Republicans and Democrats. He's the leader of the Democratic party.

Really? I don't think that's true at all. If Obama had gone over his leadership's head and cut Medicare, he would have been eviscerated by his own party. No way his base lets him get away with that in his first term.

[December90]

I would like to ask why Washington speak is assumed to be accurate.

What actual "Cuts" have been approved where our Government is going to authorize spending less next fiscal year than it did this fiscal year? When you spend 38 billion trillion dollars this year, then next year say you "need" to spend 50 billion trillion, in Washington speak if you "only get to" spend 48 billion trillion then you have suffered a 2 billion trillion dollar cut???

show me real cuts before you cry about how we are starving the elderly and killing puppies for fun because we simply understand that you should not spend money you don't have.

If you want to defend the way Washington has operated with the ever growing annual deficits and surging national debt, I ask that you borrow 5 to 7 times your annual income and give it to those causes you think are most deserving, then next year, borrow more money to continue to fund those causes that are so near and dear to your heart. (If the cause is worthy then you should be willing to personally go into such drastic debt to keep it going right???)

[CurseReversed]

I would like to ask why Washington speak is assumed to be accurate.

What actual "Cuts" have been approved where our Government is going to authorize spending less next fiscal year than it did this fiscal year? When you spend 38 billion trillion dollars this year, then next year say you "need" to spend 50 billion trillion, in Washington speak if you "only get to" spend 48 billion trillion then you have suffered a 2 billion trillion dollar cut???

show me real cuts before you cry about how we are starving the elderly and killing puppies for fun because we simply understand that you should not spend money you don't have.

If you want to defend the way Washington has operated with the ever growing annual deficits and surging national debt, I ask that you borrow 5 to 7 times your annual income and give it to those causes you think are most deserving, then next year, borrow more money to continue to fund those causes that are so near and dear to your heart. (If the cause is worthy then you should be willing to personally go into such drastic debt to keep it going right???)

I think we are at a point here where a lot of people are being forced into believing just about anything their told.

Who else are they supposed to believe? The other side? They are selling the same lies, just wording it different.

There is nowhere else to go, because the truth is not in the dialectic. There are no real cuts available, only fake ones, please merge left or right please. Thank you.

It has never been more transparent then right now, how few choices we really have. As long as the country is gripped in the two party system nobody can really call out their own party without empowering the other one. Nobody can force them to be honest. Everyone is forced to play ball, and find a way to like it. After all its gotta be better then what the other side is selling.

[NoVaO]

Really? I don't think that's true at all. If Obama had gone over his leadership's head and cut Medicare, he would have been eviscerated by his own party. No way his base lets him get away with that in his first term.

It's very true. And what do you mean had Obama gone over his leadership's head? He is the leadership.

Again, you really need to make the distinction between cuts to Medicare beneficiaries, and cuts to Medicare providers. That is a huge distinction here that has to be made. Democrats would/will not go along with cuts to Medicare benefits. Democrats think there are a bunch of different ways to re-structure Medicare without fundamentally changing the program. This is what Obama was negotiating, and some of this was already put into that trigger that will go off unless the "Super Congress" comes to an agreement.

Notice how the triggers don't include revenue increases, while Medicare is included. Obama can get Democrats to agree to a certain kinds of Medicare cuts. Boehner can't get Republicans to go along with more revenues.

[ABQCOWBOY]

Cuts to Medicaid and Medicare are pretty much none effectual for recipients on the surface. The cuts to those programs are not aimed towards the actual beneficiaries. They are designed to hit the providers. Basically, they are hitting the providers for additional taxes on services. Basically, Doctors will get paid less for services and care takers will pay a higher percentage of taxes on the revenue they have booked. Eventually, this will effect the recipients because the Doctors will stop accepting Medicaid and Medicare and the care takers will cut staff which will effect services. Eventually it will effect service but in the near term, it's the actual providers that will get screwed.

[Riggo-toni]

The Ryan plan, which has been labeled as right-wing extremism, actually ends up with federal spending at a higher % of GDP than it was at the end of the Clinton administration. W grew the size of gov't more in his first 4 years than Clinton did in 8. He didn't just "kick the can down the road," he bought another 12 pack using our credit card. GOPers and Dems both grossly exagerate the significance of "cuts" - the GOP wants you to think they're bold and courageous and making tough choices; the Dems want you to think how extreme those right-wing nuts are and drum up more funds for hiring their most loyal constituents - govt union workers.

[Tulane Skins Fan]

The Ryan plan, which has been labeled as right-wing extremism, actually ends up with federal spending at a higher % of GDP than it was at the end of the Clinton administration. W grew the size of gov't more in his first 4 years than Clinton did in 8. He didn't just "kick the can down the road," he bought another 12 pack using our credit card. GOPers and Dems both grossly exagerate the significance of "cuts" - the GOP wants you to think they're bold and courageous and making tough choices; the Dems want you to think how extreme those right-wing nuts are and drum up more funds for hiring their most loyal constituents - govt union workers.

Honestly, when people start talking about % of GDP the argument becomes unfair. We are in the worst recession since the Great Depression and are GDP actually has contracted at times over the last couple years. Its our GDP that needs to increase. the cuts are significant. they just don't look that big because GDP is so far down. But if GDP increases to a normal level, then we'll see a more appropriate spending level as a % of GDP.

[Larry]

Honestly, when people start talking about % of GDP the argument becomes unfair. We are in the worst recession since the Great Depression and are GDP actually has contracted at times over the last couple years. Its our GDP that needs to increase. the cuts are significant. they just don't look that big because GDP is so far down. But if GDP increases to a normal level, then we'll see a more appropriate spending level as a % of GDP.

Valid point. (Especially when you consider that part of GDP is housing prices, which mean that GDP was being artificially inflated for most of the decade, too.)

OTOH, I observe that no one on the GOP seems to be willing to notice that revenues, as a percentage of GDP, are lower than they have been since before WW2. (And remember, we're talking about revenues, as a percentage of an artificially reduced GDP. If GDP were higher, then those revenues would be an even smaller percentage.)

[Tulane Skins Fan]

Revenues are also lower because of unemployment.

There is some causation effect to these arguments, but its not always so easy to pin point what is causing what. That doesnt stop the talking heads from getting the causal connection backwards though.

[Riggo-toni]

Whatever metric you want to use as being the most "fair" can't hide the fact that in terms of both % and $, the size of the federal gov't has grown drastically and unsustainably over the last decade. Federal outlays went from 1.75tr when W took office to 3tr when he left. The deficit is projected to increase 10 t0 12 tr over the next decade, and people are fighting reducing the projected growth rate of spending by 10 to 15% as radically draconian, which it simply is not. The only reason cuts may be painful is because productive programs like scientific research or food inspections are likely to get axed rather than wasteful counterproductive outlays like agricultural subsidies or outdated army bases.

[Larry]

Revenues are also lower because of unemployment.

There is some causation effect to these arguments, but its not always so easy to pin point what is causing what. That doesnt stop the talking heads from getting the causal connection backwards though.

OTOH, I do think that it ought to be possible to reject the claims of causation that ignore the fact that the effect they're talking about, happened before the cause that they're attempting to blame for it.

---------- Post added August-3rd-2011 at 10:24 AM ----------


Whatever metric you want to use as being the most "fair" can't hide the fact that in terms of both % and $, the size of the federal gov't has grown drastically and unsustainably over the last decade.

Really? That's funny.

http://www.usgovernmentspending.com/usgs_line.php?title=Total%20Spending&year=1950_2010&sname=US&units=p&bar=1&stack=1&size=l&col=c&spending0=15.25_14.42_19.97_21.09_20.42_17.71_17.3 7_17.74_18.42_18.46_18.48_19.25_18.24_18.02_17.86_ 16.44_17.08_18.92_19.58_18.66_18.84_18.65_18.63_17 .78_17.96_20.29_20.38_20.16_20.00_19.67_21.20_21.6 9_22.92_22.87_21.67_22.44_22.21_21.20_20.87_20.86_ 21.60_22.10_21.78_21.14_20.63_20.44_19.91_19.22_18 .79_18.20_17.98_18.11_18.90_19.39_19.32_19.56_19.8 2_19.41_20.65_24.67_25.44&legend=&source=a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a _a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a _a_a_a_a_a_a_a_a_a_a_a_a_a_b

Looks to me like the size of federal spending, as a percentage of GDP, was smaller than the post-WW2 average. (Or at least close to it. I'll confess that I'm calculating the average by using my eyeball.) At least until the Great Depression hit.

Now, if your point is "if you assume that spending grows for the next decade, at the rate it grew when the economy collapsed, then that would be bad", then, well, that's another job for :obvious:.

But all that means is "we should try really hard to avoid having the economy collapse any more than it already has".

[NoVaO]

The Ryan plan, which has been labeled as right-wing extremism, actually ends up with federal spending at a higher % of GDP than it was at the end of the Clinton administration.

A big reason why Ryan's plan takes so long to balance the budget is that he cuts taxes. His cuts are very draconian...you are talking about an extra $6,000 per year out of the pocket of every Medicare beneficiary. They go from paying around 20-something% of their health care costs to 60-something%, and the savings he gets from that goes basically toward tax cuts.


the Dems want you to think how extreme those right-wing nuts are and drum up more funds for hiring their most loyal constituents - govt union workers.

Like teachers, firemen, police officers, and construction workers?

We could actually use more federal, state, and local government employees to do much needed infrastructure work. The biggest reason our GDP and employment numbers have been so crappy recently is because Government is shedding jobs and acting on a drag on the recovery. I believe I saw a report that said 5 of the past 8 quarters have been dragged down because of less Government spending and public sector job losses.

BTW, only 37% of Government employees are unionized.

[ABQCOWBOY]

Valid point. (Especially when you consider that part of GDP is housing prices, which mean that GDP was being artificially inflated for most of the decade, too.)

OTOH, I observe that no one on the GOP seems to be willing to notice that revenues, as a percentage of GDP, are lower than they have been since before WW2. (And remember, we're talking about revenues, as a percentage of an artificially reduced GDP. If GDP were higher, then those revenues would be an even smaller percentage.)

This is not true. I made not of this previously. I assume you consider me GOP or worse.

[Tulane Skins Fan]

Ok, so I don't know if the markets are acting rationally to this bill, or if its totally unrelated, or if its irrational panic, but... stocks are taking a beating today. Down 400 points at one time earlier. Is this a double dip coming?

[PeterMP]

Ok, so I don't know if the markets are acting rationally to this bill, or if its totally unrelated, or if its irrational panic, but... stocks are taking a beating today. Down 400 points at one time earlier. Is this a double dip coming?
Government spending has been keeping the economy going the last year or two, specifically, and really even the last 30 years.

If the government has to balance the budget, how much extra money will you have?

[Tulane Skins Fan]

Government spending has been keeping the economy going the last year or two, specifically, and really even the last 30 years.

If the government has to balance the budget, how much extra money will you have?

Right, that was the point of government spending. And now we've yanked the only spender in the economy out of the economy.

That being said, I poked around and it seems like some of this is fears of the eurozone, japan, and even china not performing very well, in the case of europe, very poorly indeed.

[Hubbs]

Right, that was the point of government spending. And now we've yanked the only spender in the economy out of the economy.

That being said, I poked around and it seems like some of this is fears of the eurozone, japan, and even china not performing very well, in the case of europe, very poorly indeed.

Oh, for ****'s sake. No we haven't. The deal was structured in the same way Vinny would structure contracts for every year's crop of high-priced free agents. The big numbers are in the back end, years away.

[Larry]

Oh, for ****'s sake. No we haven't. The deal was structured in the same way Vinny would structure contracts for every year's crop of high-priced free agents. The big numbers are in the back end, years away.

So, how much dead money we looking at, if we cut the Tea Party?

And can we maybe get a sixth rounder for them?

[twa]

No cut contract...I hear they even got a option to buy the team tucked back

[PeterMP]

Oh, for ****'s sake. No we haven't. The deal was structured in the same way Vinny would structure contracts for every year's crop of high-priced free agents. The big numbers are in the back end, years away.
Yes, but the market doesn't always move on reality, but on perception, and not even current perception, but that of what is going to be. Obviously, I can't prove it, but I think partly what you are seeing in the market is fear that the tea party is going to get its way. Maybe it didn't here, but there are more oppurtunities. That in the near future there might be serious and more immediate cuts in government spending.

[Larry]

Yes, but the market doesn't always move on reality, but on perception, and not even current perception, but that of what is going to be. Obviously, I can't prove it, but I think partly what you are seeing in the market is fear that the tea party is going to get its way. Maybe it didn't here, but there are more oppurtunities. That in the near future there might be serious and more immediate cuts in government spending.

Mostly, I think that the market hates drama. Uncertainty. The thought that Something Big might happen, an undetermined time in the future.

[deejaydana]

Yes, but the market doesn't always move on reality, but on perception, and not even current perception, but that of what is going to be. Obviously, I can't prove it, but I think partly what you are seeing in the market is fear that the tea party is going to get its way. Maybe it didn't here, but there are more oppurtunities. That in the near future there might be serious and more immediate cuts in government spending.


Let me get this straight, Global Markets are moving south because of the Tea Party? Wow. Just wow. One of the strangest things I've read in a long time. I'd love to hear your explication on this post.

[PleaseBlitz]

Both parties have their "solutions" ass-backwards. Democrats want to raise taxes in the middle of this and Republicans want to drastically slash spending. Both incredibly harmful policies IMO.

[Hubbs]

So, how much dead money we looking at, if we cut the Tea Party?

And can we maybe get a sixth rounder for them?

Actually, we offered to trade them to the Washington Donkeys for a fourth rounder, and the Donkeys countered with two seconds and a conditional first in 2013. (The condition is that if we want a first in 2014 on top of it, we can have that, too.)


Yes, but the market doesn't always move on reality, but on perception, and not even current perception, but that of what is going to be. Obviously, I can't prove it, but I think partly what you are seeing in the market is fear that the tea party is going to get its way. Maybe it didn't here, but there are more oppurtunities. That in the near future there might be serious and more immediate cuts in government spending.

Fair point, but if this was just a perception-based drop, that means that general perceptions would have had to been better a few days ago, and I doubt you can find many who had the perception that there would be an even softer deal that this. (Not saying that some weren't theorizing that a softer deal might be possible, but when it comes to putting their money where their mouths were, I don't think there were many expecting something like the incredibly unpopular McConnell plan to pass.) My read on the markets in the last few days before the deal was that there were two main camps:

1) The camp that said that everyone knows a deal will get done at the last minute, and we've heard the general framework of the deal for a month now. The debt ceiling will be raised to the tune of $1.8-2.8 trillion, and there will be corresponding cuts to the ten-year budget, which is only $180-280 billion per year, which, given the fact that the federal government is spending close to $4 trillion a year, really isn't very much at all.
2) The camp that was small-but-growing by the time the calendar hit August, which was made of people who were quietly saying, "Holy ****, these guys are so dug in that we might not get a deal by August 2nd."

I legitimately can't remember reading anyone whose expectations were for significantly less austerity.

[PeterMP]

Fair point, but if this was just a perception-based drop, that means that general perceptions would have had to been better a few days ago, and I doubt you can find many who had the perception that there would be an even softer deal that this. (Not saying that some weren't theorizing that a softer deal might be possible, but when it comes to putting their money where their mouths were, I don't think there were many expecting something like the incredibly unpopular McConnell plan to pass.) My read on the markets in the last few days before the deal was that there were two main camps:

1) The camp that said that everyone knows a deal will get done at the last minute, and we've heard the general framework of the deal for a month now. The debt ceiling will be raised to the tune of $1.8-2.8 trillion, and there will be corresponding cuts to the ten-year budget, which is only $180-280 billion per year, which, given the fact that the federal government is spending close to $4 trillion a year, really isn't very much at all.
2) The camp that was small-but-growing by the time the calendar hit August, which was made of people who were quietly saying, "Holy ****, these guys are so dug in that we might not get a deal by August 2nd."

I legitimately can't remember reading anyone whose expectations were for significantly less austerity.
Well, I think you could say the same thing about the other issues people are raising. Has there been any real movement in the European debt situation?

Also, remember this sort of a snowball affect. Today just didn't happen all of the sudden. The market has really been falling since like the 3rd week of July.

This deal didn't really do anything to relieve the market. It doesn't really address the long term debt situation (most of it is essentially made up from the wars or is so far back that it is irrelevant) or address the shorter term issue of the debt ceiling (as it will have to be raised again in a few months), or how the tea party is really going to fit in.

[Predicto]

Let me get this straight, Global Markets are moving south because of the Tea Party? Wow. Just wow. One of the strangest things I've read in a long time. I'd love to hear your explication on this post.


Well, most of it is Europe, to be sure.

But there is also a perception after the fiasco of last week that the Tea Party will not permit the GOP to negotiate in good faith a grand bargain to bring down the US deficit, so no deal can get done. Markets don't want to hear that.

[PeterMP]

Let me get this straight, Global Markets are moving south because of the Tea Party? Wow. Just wow. One of the strangest things I've read in a long time. I'd love to hear your explication on this post.
There are parts of the tea party that actually want the US government to default. Many others want a pretty massive and large cut in the size of the US government. One directly affects most of the major economies of the world. The other would greatly affect the US consumer, which greatly affects the most of the other major economies in the world.

Couple that with the issues the other countries are having (e.g. European and Japanese debt, global energy prices, etc), and you have the settings for major global economic uncertainity, which means markets tank.

http://thinkprogress.org/economy/2011/07/27/280754/boehner-gop-want-chaos-debt-ceiling/

From July, 27:

"BOEHNER: Well, first they want more. And my goodness, I want more too. And secondly, a lot of them believe that if we get past August the second and we have enough chaos, we could force the Senate and the White House to accept a balanced budget amendment. I’m not sure that that — I don’t think that that strategy works. Because I think the closer we get to August the second, frankly, the less leverage we have vis a vis our colleagues in the Senate and the White House. "

Here Boehner is telling the world that there are people in his party in the HR that WANT a default. Your dillusional if you don't think that sort of talk doesn't hurt the US stock market, that then it appears they'll get another chance in not to long doesn't also hurt it, and the subsequent US stock market and knowing some people in its HR want to cause a default doesn't hurt global markets.

[Hubbs]

Well, I think you could say the same thing about the other issues people are raising. Has there been any real movement in the European debt situation?

Oh, I don't think you can say the same thing at all. Again, we're talking about perceptions. The general perception of the European situation has been steadily deteriorating by the day. The general perception of our deficit situation was worse on August 1st, when there seemed to actually be a legitimate chance that there wouldn't be a deal in time to prevent at least a short-term rapid government shut down, than it is today. Plus, over the past week, trading of several Italian bank stocks has been temporarily halted (only for the tanking to continue as soon as trading resumed), Spain and Italy have canceled bond auctions (the Italians supposedly "found out" that they had billions and billions of extra euros on hand, which, of course, is what always happens to tax receipts when a country is in the middle of a financial crisis, and couldn't possibly be the result of some sort of back room arrangement with the ECB), a major European financial figure (can't remember which one off the top of my head) has acknowledged that the latest EFSF arrangement has already failed, the ECB has signaled desperation by restarting its bond-buying program, German central bank is feuding with the ECB about the bond-buying program, and Switzerland's attempt to intervene in the FX market was successful for all of about seven hours. It's 2008 in Europe right now.

[Thiebear]

Dems in Charge of Congress since 2006?
Dems in Super Majority since 2008?
Dem in Whitehouse since 2008?
Senate hasn't passed a budget since 2009?

and its Bushs fault :), thats a tough sell

---------- Post added August-4th-2011 at 11:58 PM ----------


OTOH, I do think that it ought to be possible to reject the claims of causation that ignore the fact that the effect they're talking about, happened before the cause that they're attempting to blame for it.
---------- Post added August-3rd-2011 at 10:24 AM ----------

Really? That's funny.


I read huge increases in spending in certain areas 2009/2010. Oct 13, 2010 · The Wall Street Journal on the 21.4% federal spending increase in two years.
This is why the huge fight over the "SLOWDOWN" in growth by 3% was laughable considering the previous years.
Especially in the below.
http://sg.wsj.net/public/resources/images/ED-AM376_1spend_NS_20101011181402.gif

[Larry]

I read huge increases in spending in certain areas 2009/2010. Oct 13, 2010 · The Wall Street Journal on the 21.4% federal spending increase in two years.
This is why the huge fight over the "SLOWDOWN" in growth by 3% was laughable considering the previous years.
Especially in the below.

You read huge increases in spending in the second half of 2008.

:secret: That's before Obama was even elected, let alone in office.

:secret: That's because the increase wasn't caused by Obama, or Bush, or Congress, but was caused by the depression.

:secret: And the depression happened before Obama was elected, too.

(And I really love the schtick of criticizing the Senate for not passing legislation, when the unanimous GOP filibuster of everything except naming post offices after people has become such a part of SOP that they've actually come up with procedures and traditions for how to deal with it.)

[mardi gras skin]

This article I read seemed reasonable to me but he admits that his take on what we should do flies in the face of conventional wisdom among experts in economics.

A Contraction Is Not Only Likely, But Needed
http://www.realclearmarkets.com/articles/2011/08/05/a_contraction_is_not_only_likely_but_needed_99165. html

Though most economists casually dismiss any chance of a renewed recession, I have been making the case that a contraction is not only likely but needed. The financial problem of overpriced assets and the economic problem of too much activity predicated on those prices finally crossed paths beginning in 2007, accelerated in 2008, and for most people, came to a successful conclusion in 2009. The end of the crisis is largely credited to Chairman Bernanke and the Federal Reserve's aggressive policies - that is why he was Time's Man of the Year for 2009, after all. They, apparently, saved the system from total calamity and collapse.

So much of the rhetoric of that time centered on the need for aggressive action because without it the entire financial and economic systems would have collapsed into utter failure and chaos. There was this persistent belief that the contraction that was already well underway would not end. The economy had to be forced into recovery, although no real reason was ever given why that was the case.

If I am right about the downward economic trajectory toward a true potential that has been diminished by years of monetary miscalculations and forced imbalances, then we should expect to hear the same arguments advanced for the same policies to oppose that natural progression. The Fed will argue that more monetary stimulus is needed to "force" the economy forward. In other words, the Fed actually agrees with me about the natural direction of the economy, but not whether that direction is appropriate...

...By being steadily aggressive, I believe that the Fed has essentially created an extension of Fisher's debt paradox. The more aggressively the Fed acts to counter deflation that may or may not exist, the more they create counter-pressures that guarantee we end up experiencing the very conditions they were trying to avoid in the first place. The more monetary policy tips the economic boat toward inflation to fight deflation, the more it will capsize in either direction. The bottom line is that deflation is not what they should be concerned about, it is destabilization.

Unfortunately, this new paradox is not a neutral proposition. It has taken up valuable time to get to essentially the same place. And we are far worse off for the trouble (see balance sheet, United States). As bad as it may have gotten in 2009, by now we may have actually grown out of it and into a real recovery. Unhindered price discovery and market discipline may have unlocked the true economic potential that has been hidden behind decades of monetary machinations, putting to rest for good the uncertainty and unease that has plagued these past three years of constant intervention. The Great Recession and its dislocation might have been even larger and more painful, but at the same time short and invigorating.

In a recovery free of intervention, 99 weeks of unemployment insurance may have been more than enough for those unfortunate workers who were caught up in the storm to move to a more sustainable employment position. Instead, 99-weekers are today falling off the rolls into the abyss.

Counterfactuals are always difficult because we will never really know. What we do know, in August 2011, is how monetary interventions have actually performed. If we are truly in the same economic place as 2009, with all that it has cost to get here, we should at least have an informed discussion of what to do next. If interventions have failed as miserably as I and many others strenuously assert, then we need to find another solution. I believe that the Federal Reserve and mainstream economics have proven that they have no answers outside of devaluation, poverty and unending crisis. Perhaps a true market-based approach would be better.

[Tulane Skins Fan]

Oh, for ****'s sake. No we haven't. The deal was structured in the same way Vinny would structure contracts for every year's crop of high-priced free agents. The big numbers are in the back end, years away.

That's true, (for ****'s sake). However, I think you are not appreciating that the stock market is a forward-looking system. They are seeing that in the future the government spending is going to cause a problem for the economy and they are reacting to avoid that.

I don't think there's any question, and I'm not arguing, that the dip yesterday was due to the spending cuts. However, I do think it played some role. Ultimately, I think the market sees a lot of bad things, and I think one of those bad things they are seeing is that a lot of government created economy is going to be disappering in the next couple years.

---------- Post added August-5th-2011 at 08:59 AM ----------


Both parties have their "solutions" ass-backwards. Democrats want to raise taxes in the middle of this and Republicans want to drastically slash spending. Both incredibly harmful policies IMO.

Agreed.

[mardi gras skin]

I think you are not appreciating that the stock market is a forward-looking system. They are seeing that in the future the government spending is going to cause a problem for the economy and they are reacting to avoid that.

Not very forward thinking if this past deal put them in a tailspin. All the options being discussed involved cuts. Clearly, cuts were going to happen. The deal that got done involved the fewest cuts of any of the options on the table.

I can't imagine that the deal that got done shocked the stock market with unexpected cuts.

[PeterMP]

Oh, I don't think you can say the same thing at all. Again, we're talking about perceptions. The general perception of the European situation has been steadily deteriorating by the day. The general perception of our deficit situation was worse on August 1st, when there seemed to actually be a legitimate chance that there wouldn't be a deal in time to prevent at least a short-term rapid government shut down, than it is today. Plus, over the past week, trading of several Italian bank stocks has been temporarily halted (only for the tanking to continue as soon as trading resumed), Spain and Italy have canceled bond auctions (the Italians supposedly "found out" that they had billions and billions of extra euros on hand, which, of course, is what always happens to tax receipts when a country is in the middle of a financial crisis, and couldn't possibly be the result of some sort of back room arrangement with the ECB), a major European financial figure (can't remember which one off the top of my head) has acknowledged that the latest EFSF arrangement has already failed, the ECB has signaled desperation by restarting its bond-buying program, German central bank is feuding with the ECB about the bond-buying program, and Switzerland's attempt to intervene in the FX market was successful for all of about seven hours. It's 2008 in Europe right now.
But the Euopean situation has been steadily degrading by the day for the last few months- most of the time the stock market wasn't going down, but was going up.

I've never heard anybody spin a country that has credit issues "finding" money as bad news.

Spain has been cancelling bond sales.
http://www.nytimes.com/2011/01/18/business/global/18sbonds.html
The market didn't tank.

The Italian bank stock issues go back to June.
http://www.nytimes.com/2011/01/18/business/global/18sbonds.html

I'll admit that I'll never be able to prove it, but I've been arguing here for a long time that the economy (and yes, short term the market can perform differently than the economy, but long term it can't) would benefit from a real long term deal to do something with the deficiet that showed commitment (e.g. tax increases and real spending cuts) by both parties.

We didn't get that. We saw a decline as it became clearer we weren't going to get that (as Obama stepped back from his demands that a long term deal be reached). It snowballed into the plunge we saw yesterday. Yes, the European economies and debts are influencing the problem, but the US economy is the driving issue, and the idea that you might get large cuts in the US budget and/or US default is a major concern.

I wasn't at all surprised this happened and sold several things when I thought this was likely last week.
---------- Post added August-5th-2011 at 09:42 AM ----------


Not very forward thinking if this past deal put them in a tailspin. All the options being discussed involved cuts. Clearly, cuts were going to happen. The deal that got done involved the fewest cuts of any of the options on the table.

I can't imagine that the deal that got done shocked the stock market with unexpected cuts.
I think the market saw it coming, which is why you saw the market was down repeatedly BEFORE the deal was made, but w/o the details the response is muted.

When you then see the actual deal and realize there is likely going to have to be some sort of real deal made again in the near future, and there is no evidence that they'll actually be able to make one, and with the repeated downs and the other issues from Europe (and things like global energy prices), it all snow balls.

***EDIT***
Oh and look, good news about the US economy today, and the market is happier. I'll guarantee you that if that jobs report had been negative, the market would have flopped again today.

But the European debt situation isn't any better today.

[Tulane Skins Fan]

Not very forward thinking if this past deal put them in a tailspin. All the options being discussed involved cuts. Clearly, cuts were going to happen. The deal that got done involved the fewest cuts of any of the options on the table.

I can't imagine that the deal that got done shocked the stock market with unexpected cuts.

I'm not sure it was really smart to cut as much as we did. Although, I realize we were in between a rock and a hard place between the credit agencies and the need to keep the economy going...

[mardi gras skin]

I'm not sure it was really smart to cut as much as we did.

Smart or not, anyone concerned with spending cuts should have been relieved by the size of the deal. If Obama got his way, the cuts would have been $4 trillion.

[zoony]

Smart or not, anyone concerned with spending cuts should have been relieved by the size of the deal. If Obama got his way, the cuts would have been $4 trillion.

over the same time period? (not rhetorical, I genuinely do not know)

[mardi gras skin]

over the same time period? (not rhetorical, I genuinely do not know)

12 years. Like the deal passed, very minor cuts in the up front years.

Went and looked it up and I was wrong. It would be 4 trillion in deficit reduction, but 1 trillion would come from tax increases. Still, its more than the amount that got passed so, again, the market shouldn't have been shocked by the cuts that were made.

[December90]

Government spending has been keeping the economy going the last year or two, specifically, and really even the last 30 years.

If the government has to balance the budget, how much extra money will you have?

A legitimate questions for you you

How much debt does the country have to reach before you see it as a problem worthy of addressing?

Currently interest on the debt only eats up about 10% of our revenues but keep in mind that interest rates are at historic lows right now. it is not unreasonable to assume that a fed funds rate that is less than 1% now could balloon up to 5% in the future. Which in and of itself would mean that all other things being equal, interest would now eat 50% or more of our revenues. Add to that that we are continuing to add large chunks to the principal. Can you envision a time where interest eats up 100% of the revenues if we don't start paying down the debt while some of the payments can still be applied to principal?

Note: I do not suggest that we ever completely eliminate the overall national debt as there are some limited valid uses of debt.

[PeterMP]

A legitimate questions for you you

How much debt does the country have to reach before you see it as a problem worthy of addressing?

Currently interest on the debt only eats up about 10% of our revenues but keep in mind that interest rates are at historic lows right now. it is not unreasonable to assume that a fed funds rate that is less than 1% now could balloon up to 5% in the future. Which in and of itself would mean that all other things being equal, interest would now eat 50% or more of our revenues. Add to that that we are continuing to add large chunks to the principal. Can you envision a time where interest eats up 100% of the revenues if we don't start paying down the debt while some of the payments can still be applied to principal?

Note: I do not suggest that we ever completely eliminate the overall national debt as there are some limited valid uses of debt.
I've thought the debt was a serious enough problem to do something about longer than I have been a member of this board. I will put my track record of being concerned with the debt up against anybody here, except for maybe Hubbs. My concern about the debt pre-dates Obama being President, the current economic slow down, and even George W. Bush being President.

Heck, I remember being excited by Paul Tsongas.

http://en.wikipedia.org/wiki/Paul_Tsongas#Presidential_campaign

With that said, unless there is real and long term spectacular economic growth doing something about the debt is going to have consequences, and when it appears that doing something about the debt might come relatively quickly and in one sided manner, then those consequences are going to come relatively quickly. And that's what this debt deal did. It increased the concern that the tea party is going to get their way, and we are going to see massive and dramatic cuts in government spending relatively quickly.

Boehner told you at the end of last week, there are members of his party in the HR that want chaos because they then think they are more likely to get their way, which is dramtic and immediate cuts. They missed their chance here, but they'll get another chance soon and every time the US government needs to pass a budget. That is going to affect the US stock market.

I think a deal that would have cut more real spending, was coupled with tax increases, but also raised the debt limit so that it would not be an issue again in the short term would have helped the stock market.

As it became more clear that wasn't going to happen, the market started to respond and go down. When it was completely clear there wasn't going to be any sort of long term deal, the market responded (e.g the "official" deal was announced).

[Riggo-toni]

Wow, somebody brought up Tsongas, whom I really wanted to vote for, but he never made it out of the primary.