Republicans put cutting spending over aiding tornado victims

^^ The problem is also, people don't like a "restrained boom cycle" often advocated by Keynesians to smooth out the boom/bust cycle. They like prosperity and actually seeing things like wages go up significantly in boom times. The attitude was especially prevalent in the early 1990s. We had low growth, higher inflation, yet we were not in recession most of that time. People hated that kind of stagnation and no amount of sugar coating or long-term assurance against recession is going to stop that resentment.

Economics is just as fickle in regards to politics as it is unexplainable by scientific means. The point being, if people don't perceive prosperity, they will perceive recession and start cutting back demand in response. Thus the idea of smooth out the boom/bust cycle to prevent recession ends up causing one.

edited 26th May '11 8:34:41 AM by MajorTom

Tom, unrestricted/unregulated markets will accelerate any boom until it crashes. We saw this in 2008, in case you didn't notice. If we actually had put on the brakes properly, we wouldn't be in the doldrums we are now. Of course it's a balancing act, but you don't control a volatile system through positive feedback.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

Define "put on the brakes", do you mean shut the shit down in the housing industry that was promoted by government? Yes the practices employed by Fannie and Freddie were a direct result of government pressuring them to give out more home loans especially to people who couldn't possibly afford them. High home ownership rates became politically advantageous in the late 1990s because of this.

The roots of that problem date back to the 1970s with efforts to get banks and other financial institutions to lend to the poor in order to combat poverty. Prior to that, the purpose of a bank was get a loan for something you needed a one-time purchase for such as a car, home or funding a startup businesses or as a depositor for your checks. It wasn't this credit agency rodeo that gave out 0% APR loans to those with 500 credit scores making barely above minimum wage as it was made to be in the 1990s under Clinton.

So Fannie and Freddie are responsible. Yay, ho hum, yawn. How about the banks that gave away the ridiculous loans in the first place (literally firing people who told them it was a bad idea), then (fraudulently) sold them on the bond market as AAA securities, then hedged their bets with credit-default swaps, then blackmailed the government with their "Too Big To Fail" bullshit when things came crashing down around them? Remember the savings and loan scandal during Reagan's time? That was peanuts compared to this.

And don't you dare blame the people getting the loans. Sure, some of them knew it was fraudulent, but the banks never should have offered them in the first place. Why the CEOs of all of the major banks are not in prison right now is a mystery explainable only by Screw the Rules, I Have Money!.

edited 26th May '11 8:57:20 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

...government being so predictable and prone to propping up things they like in the name of good politics that they'll come to the rescue of anyone "too big to fail" and spend taxpayers' money to save something not worth saving.

Classical economics dictates that those companies should have been left to rot, indeed we're going to have the same problems from many of the same companies (or their successors) in about 10-20 years tops all because in government's "infinite wisdom" they decided to pull the welfare state route and save them via reckless spending instead of never promoting that kind of system in the first place.

^^^ How do you explain the bubble in commercial property?

edited 26th May '11 9:05:07 AM by storyyeller

Blind Final Fantasy 6 Let's Play

@76: And people like busts better than slow growth?

There's no magic bullet for dealing with the farce humans make of any economy. However, moderated cycles at least give people a better chance of rising out of poverty.

Still, amplitude philosophy aside, the fact remains that we have hit the debt ceiling. If you want to fix that (and don't want to make the debt ceiling proportional to revenue), you need income to surpass expenses and start paying it off. Pretty much every possible cut either would make a insignificant dent, or would cause social chaos and further mire the economy in uncertainty. If we don't raise taxes until the deficit is under control, we are stuck.

Then, of course, one has to wonder what a massive tornado storm does to a local economy...

edited 26th May '11 9:05:39 AM by Tangent128

Do you highlight everything looking for secret messages?

The way I hear it, the CEOs came begging to Congress for bailout money and basically handed them an ultimatum: Give it to us or you have Great Depression Mark II. We literally had no choice. We let Lehman Brothers go down and the economy nearly collapsed as it was. Do you seriously advocate the kind of catastrophe that would have ensued if we had just washed our hands of them? Do you actually think the rich folks in charge would have suffered one whit? No, the people who suffered would be the millions out of work, starving in the streets. Orders of magnitude more than the paltry 9% unemployment we have now. How's 25% strike you? Is that what you actually want?

Long-term, I think we need to forcibly break up large financial institutions under anti-trust law. Force competition and prevent all of this "too big to fail" crap.

edited 26th May '11 9:08:52 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

^ We're already in the Great Depression Mark II! The bailouts didn't save a thing!

Also did you know the 9% unemployment rate is a deliberate underrepresentation? The Feds don't count those "Not in the labor force" meaning those who are otherwise unemployed but aren't searching for work and they don't count the underemployed e.g. those with part time work who want full time work. The true unemployment rate including all factors is about 17% and change. So really a 25% unemployment rate is little different than we have today.

Yeah they really had no choice. The reaction to Lehman Bros. going under was UGLY. Like it or not, the gun was to the proverbial head and there was no real choice. Now, that they were GIVEN that gun in the first place is a real problem.

As Tom said on the last page. The problem with debt is that it restricts long-term capabilities. The Republicans ran up the debt for exactly this moment, in order to attack social programs so unemployment would rise so wages can be driven down. Which would make the debt worse, rinse and repeat.

I'm actually a fan of balancing the budget, when appropriate like most progressives. It's just that with 9+% unemployment. (To be honest. I hate unemployment as a metric. I'd rather use employment as a metric, as I think it's much more useful). It's nowhere near appropriate.

Edit: Ninja'd by Tom. Weird. Actually the US always understated the unemployment rate compared to other countries. Also, the bailouts did save something. They saved the investments and retirement funds (to a degree) for people. Now if this was worth saving is a different story (I personally say no. If Social Security is good enough for the poor, it's good enough for the middle-class as well). But politically...the US political establishment has a fetish for "swing voters". It's these people that would have been hit the hardest by letting the financial system meltdown.

Also, banks were about to revoke lines of credit, resulting in companies missing payroll. Which is insane on so many levels, but it is what it is.

edited 26th May '11 9:23:12 AM by Karmakin

Democracy is the process in which we determine the government that we deserve

Massive overrepresentation there, Tom. If you think this is a Great Depression, you clearly don't know anyone who was around in the 20's, and have never read anything about them. We're actually growing now, albeit slowly, and the bailouts did save the financial system. We didn't have 50% bank failure rates. The dollar didn't collapse. Wars were not triggered. You and I have food to eat.

What arguably failed was the economic stimulus Obama pushed, and even that's more a matter of degree. It should have been twice the size, but it was hamstrung by the same Republicans that we keep talking about. The ones who set up a cycle of escalating debt specifically so they can yank the rug out from under their hated social programs.

edited 26th May '11 9:27:05 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

You know, I'd like to remind everyone of the old saying: "Never attribute to malice what can be attributed to stupidity."

Not that I like the Republican moves, but I highly doubt they would intentionally bring the U.S. to the verge of collapse just for their own political benefit.

Expergiscēre cras, medior quam hodie. (Awaken tomorrow, better than today.)

You'd be surprised. I've seen a remarkable number of posts on the topic from conservatives who seem to feel that the best solution to a "clearly broken" system is literally to tear it down and rebuild it from scratch. Whether they actually don't understand the kind of catastrophe this would cause or don't care is somewhat irrelevant.

Honestly, for a while I too was of the opinion that we should have let Fanny, Freddie, AIG, BofA, Merrill, and the other big houses go bankrupt. Serve 'em right for the mess they made. But then I realized that I'd like to have food on my table tomorrow and not have to fight roving packs of bandits for the scraps looted from abandoned grocery stores.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

Sadly if we let the banks go under, we'd be in an even greater mess.

Damned if we do, damned if we dont. We chose the lesser of evils.

And I said elsewhere (I think in a debate over TV Tropes policy), being in a "lesser of two evils" decision means you screwed up somewhere. Either you didn't identify your options correctly, or you backed yourself into a corner...you get the point.

Expergiscēre cras, medior quam hodie. (Awaken tomorrow, better than today.)

The worst part of it is, whichever solution we choose, it's not the CEOs and other bigwigs who suffer. Sure, a few go to jail over the most stupidly blatant of abuses, but the vast majority are as immune from prosecution as the Pope, because they can always claim, "we were just following the market," and they can afford legions of lawyers to fend off accusations of actual wrongdoing. Oh, and they have lots of middle management to throw to the wolves.

Also, if things go completely south, they have money. They'll always have money. They can afford 90% losses and still get on a private jet somewhere far removed from the social chaos. They have no real accountability to anyone.

The recession increased the disparity between rich and poor in the country, and now we're debating over whether or not we can afford to give disaster aid to people. Coincidence? The sheer heartlessness of it all is enough to make me sick with disgust.

edited 26th May '11 9:57:15 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

I know this is getting off topicish, but I'm really curious to see how Tom would follow up this train of thought -

Do nothing to stop or slow down crashes, don't try to prevent them via regulation, just let everything crash. Massive upheaval results, people lose their life savings, unemployment even worse than what we have now, etc. This is where the opposition stops because allowing this to happen in the first place is unthinkable for them, but let's keep going as an intellectual exercise.

You let it happen... and THEN what, in theory?

Furthermore, I think Guantanamo must be destroyed.

Savage: Sorry for the late reply, but concerning insurance: I thought I understood that - private insurance, if you've got it for your house and business, will help to pau for the rebuild. It's the public infrastructure that isn't insured; unless local governmnets can insure roads, water mains, telephone poles, electric distribution grids and all that other stuff.

Granted, I can't imagine that a check from your insurance company will magically transform into a new house - you still need to get workers, material, equipment and all that other stuff into the area to clean up the mess, clear the land and actually hammer together a new building.

But, isnt there a system in place where local government does what they can, asks the state for help, the state does what it can, and then they get the feds to help? I'd imagine that local gov is pretty much tapped out, as is state, so that leaves fed gov to pick up the slack.

Happiness is zero-gee with a sinus cold.

But that's their explicitly stated strategy! Ever heard of "starving the beast"?

edited 26th May '11 10:19:49 AM by storyyeller

Blind Final Fantasy 6 Let's Play

^^^ The economy self-corrects in a hell of a hurry and begins climbing again.

Want a historical example? The Depression of 1920. Little mentioned compared to its "bigger" brother 9 years later but the Depression of 1920 was unique in that it was every bit as harsh or harsher than the 1929 one except it lasted less than a tenth of the time and didn't end by means of world war. What did people do to make such a harsh depression last so short? Nothing. The governments of the world let the economy self-correct and it was over in less than 18 months maximum. You didn't see this mass fleeing to socialist governments and styles, you just saw people wait it out and it didn't last long as a result. A recent UCLA study (that I've linked to on more than one occasion here) places that government intervention in the 1930s prolonged the Great Depression in terms of economic hardship. (Consensus either way attributes the end of the Great Depression to the Second World War rather than any socialistic scheme or government work program)

Eh, it took me all of five seconds of Googling to find contradictory economist interpretations of that event, so unless someone wants to, say, total up the economists on each side or something, I'm not seeing any resolution beyond 'Believe what you want to believe since there are proponents on both sides, as usual.' In a more general sense, I remain highly skeptical of 'do nothing' as a valid solution to any problem, economic or otherwise.

Furthermore, I think Guantanamo must be destroyed.

Looking from here, here's what I think would happen if the US let a recession handle itself completely, including allowing "too big to fall" corporations to die:

The CEOs would abuse every loophole that they've lobbied into legislation in the past century to avoid paying almost anything or having any responsibility; they'd lose less than half of their personal fortune, while the economy would be destroyed and dozens of millions would be unemployed and/or homeless.

Then the CEOs would figure out whether or not the country could be abused by their ever growing power (of which they now have more, as big investors are desperately needed so they can ask any deal or any legislation they like) to an extent that would make up for the inconvenience of having to live in a second-world country.

If they decide to stay, the US will lose most of its democratic institutions as the courts and government become de facto private institutions owned by the top 2% (at the moment, the situation is the same except that the courts are at least somewhat free and the government is owned by the top 10% or so.)

If they choose to leave, they'll move to a tax haven (instead of just moving their money there) or a very wealthy country where they can live the high life until they die. Places like Dubai, Monaco or Singapore.

Quod gratis asseritur, gratis negatur.

^^ Especially since the Hoover administration already tried "do nothing" for the first three years of the great depression.

edited 26th May '11 10:53:53 AM by storyyeller

Blind Final Fantasy 6 Let's Play

The Austrian school abandons a little thing called "nuance." That lack of nuance is basically what makes it totally inferior to Keynesians. KEYNES RULES! WOOOO!

In all seriousness, wasn't this about Republicans cutting spending on aiding tornado victims, rather than, you know, the validity of Keynesian economics vs. Lazy Fair?

Insofar as Tom has commented on the original topic, his position appears to be 'Republicans are doing the right thing in not giving with the right hand without taking with the left, because deficit = evul.' And after that is around when we started derailing, but the train track kind of skipped over the point that the limit IS getting raised, no matter how much politicians may bicker about it to score points with voters. The question is, is disaster relief an appropriate area to bicker over or not in the meantime.

Then again, maybe they all deserve it for living in tornado-heavy areas. Let the housing market correct itself. -whistle-

Furthermore, I think Guantanamo must be destroyed.