Unleash Fiscal Policy Now, or More Severe Recession Ahead
The economy is failing. Banks are hurting and credit continues to dry up. Consumer debt is dangerously high; foreclosures and credit-card defaults are mounting. Consumer demand is dropping precipitously and exports can't begin to make up the difference.
It's now clear the Fed can't and won't stimulate the economy. This leaves fiscal policy as the sole remaining vehicle. Distributing those little stimulus checks this month were like dispensing aspirin for pneumonia. Blue-dog Democrats, Calvin Coolidge Republicans, and Ross Perot Independents all must understand the critical importance of deficit spending right now. It's all we have left.
Congress only has a few weeks left and must put on the President's desk a genuine stimulus before it recesses permanently, and the President must sign it if he has any hope of being remembered as even halfway competent. The fastest and strongest fiscal stimulus would be a one-year exemption of the first $15,000 of income from payroll taxes, starting as soon as the bill is signed.
This should be followed up by a major infrastructure spending bill soon after the next president is sworn in, based on a newly-formed capital budget. (Don't get me wrong: I'm not in favor of large, permanent and growing deficits, such as McCain's economic proposals will get us, and which will load America and the dollar with even more foreign IOU's. The next fifteen months is when we need the fiscal stimulus.)
And then a far more progressive tax structure, so the middle class begins to have the buying power it needs to keep the economy going.
Unless fiscal policy is unleashed, the current recession has a 50-50 chance of turning into something far worse by this time next year.
It's now clear the Fed can't and won't stimulate the economy. This leaves fiscal policy as the sole remaining vehicle. Distributing those little stimulus checks this month were like dispensing aspirin for pneumonia. Blue-dog Democrats, Calvin Coolidge Republicans, and Ross Perot Independents all must understand the critical importance of deficit spending right now. It's all we have left.
Congress only has a few weeks left and must put on the President's desk a genuine stimulus before it recesses permanently, and the President must sign it if he has any hope of being remembered as even halfway competent. The fastest and strongest fiscal stimulus would be a one-year exemption of the first $15,000 of income from payroll taxes, starting as soon as the bill is signed.
This should be followed up by a major infrastructure spending bill soon after the next president is sworn in, based on a newly-formed capital budget. (Don't get me wrong: I'm not in favor of large, permanent and growing deficits, such as McCain's economic proposals will get us, and which will load America and the dollar with even more foreign IOU's. The next fifteen months is when we need the fiscal stimulus.)
And then a far more progressive tax structure, so the middle class begins to have the buying power it needs to keep the economy going.
Unless fiscal policy is unleashed, the current recession has a 50-50 chance of turning into something far worse by this time next year.
posted by Robert Reich | 10:21 AM
72 Comments:
Dr. Reich:
We need you in the Obama cabinet !!!
A true voice in the Bush wilderness.
Other than that, Mrs. Lincoln, how did you enjoy the play?
At this point one might suggest that optimism is not your strong suit.
Do we start the one year exemption right away or wait until the beginning of 2009?
Do you realize the costs to businesses, large and small, for alterations to their payroll software? Software changes should be done in a manner that makes reversing the change simple and doable by each customer otherwise when we get past the year new software updates would be necessary again.
Are you suggesting the exemption would be for employee and employer portions of the tax? If yes, more software modifications and the expense savings would increase income taxes on businesses. If not, adds insult to independent contractors, although they should be used to it.
In aggregate a lot of money, individually $930 for one year and in dribs and drabs rather than one fell swoop. I am assuming your only referring to the SS portion. If exemption from Medicare as well then $1147.50. Better but still in dribs and drabs.
Also leaves out us retired folks. Not as important, perhaps, as working folks but we spend as well.
Plan on raising the cap along with it so as to recoup from the higher paid?
All in all Doc, rebate checks might be far more efficient.
Doc:
Couple more thoughts; at ~$100/month most likely be used to make credit card payments with minimal additional spending. In one time total, more likely to be spent outright, at least a large portion of it.
The more horrible the state of the economy is, the more likely the democrats claim the white house...
seeing that its an election year, im not sure any serious fiscal move will pass anytime soon...
aly k
The more horrible the state of the economy is, the more likely the democrats claim the white house...
seeing that its an election year, im not sure any serious fiscal move will pass anytime soon...
aly k
As a Department of Labor employee having you at the helm as Secretary of Labor was inspiring and I was proud of your work. You continue to voice your own opinions and work in the public's interest much in the vein of Harry Truman. You appear not to be beholden to any person or group. In essence you say it like you see it.
You know, it is sad. The much maligned Jimmy Carter declared declared "the moral equivalent of war" with regard to our energy policy, only to have thoughtful energy policies sidelined in Favor of "Big Oil". We are all paying the price now, especially for the Petroleum Presidency.
Oil is too valuable as a commodity to be burned for transporting people. Its true value lies in manufacturing. Think plastic. In terms of medicine alone it is invaluable.
Mercedes Benz just announced that they would no longer manufacture vehicles using fossil fuels by 2015.
Investment in a national infrastructure for non-fossil fuel vehicles would derive a two fold benefit in terms of jobs, and reduction of our national debt. Similar investments should be made in wind, solar and other renewable energy sources.
We should invest in our manufacturing sectors, and in our crumbling infrastructures such as roads, power transmission lines, water and sewer, etc.
If we fail to invest in ourselves and our future we will not survive as a viable society.
Funny, EVERYBODY knows that the economy is always better during election years, to help keep the incumbents in office. (Economic stimulus checks this year.) It would seem that the party of Bush hears the last call bell ring. They'll all be calling themselves democrats in a couple of years.
A fiscal stimulus plan to bail out an economy which only NOW realizes the foolishness of relying on consecutive overlapping speculative bubbles, of possessing an auto-centric built environment, on depending on consumer-spending to grow 70% of GDP, of out-sourcing jobs, of having consumer debt become strangleholds without a safety valve...we want to bail THIS out?
What do we have that's worth propping-up only to be dumped onto the lap of the next generation to fix?
I understand we complacent Americans fear change & the unknown. But this on-going De-Leveraging and Bubble Deflation processes will result in far more realistic and sustainable asset valuations. A wide ‘U’-shaped, or preferable an 'L'-shaped recession will give the sustainability and Green Economy movements enough time to gain more adherers and affect long-needed changes to our economic and social systems, and built environment.
I want to see this painful but necessary transformation occur while this current generation of policymakers, appointed officials (including Mr. Rubin), CEOs, Wall Street bankers, bank regulators, union chiefs, entrepreneurs, industrialists, judicial officials, military heads, individual stockholders, institutional stockholders and our blessed baby-boomers are very much alive and kicking and have maximum skin in the game in the form of their own homes, securities, pensions, 401ks, and trust funds.
I don’t want to see these ‘opportunists’ get a chance to postpone their pain until they’re aged with dementia or already departed the scene. They were at the wheel when this calamitous mess was made and then made worse.
I agree with Avl. We need to let this play out. Any false sustaining of the economy just keeps consumers and business levered to an unrealistic amount of consumption. It's time we put our priorities back in perspective. We need to save more. Propping up this bubble will not do that. Let's take our medicine and move on.
Dr. Reich,
Great that you raise this option, Dr. Reich, but ...
there are five fundamental factors pushing Consumption down:
1. Continuing rise in already high oil and commodity prices
2. Credit crunch and drop in Investment financing
3. Current consumer personal high debt situation
4. Extremely low Consumer Confidence
5. Consumers are now on "Fire Alert" about trivial spending knowing government as well as their own debt situation is precariously high.
These obstacles would seem to justify such a stimulus. But
how likely is it they can be overcome to generate a net increase in Consumption with a one-year tax exemption amounting to +-$1000?
This stimulus also seems like another 'aspirin' for a migraine headache.
People will probably simply pay down their debts and/or put the money in the bank ... good for system liquidity but not so good for stepped-up Consumption over next 18-24 months.
So, I'm afraid another "Quick Fix" like this will have nil effect on Consumption because households are far too far in debt. On other hand, assuming an emergency situation, solving the existing personal cash problem would be quickest and easiest to administer by a tax rebate, as suggested by Art Layman.
You put no price on this fiscal action and its effect on the Deficit. Your opinion of a possible negative impact, if any, on Dollar's value is also missing. We do know Bush's recent tax stimulus cost the Treasury -+$150 billion --borrowed from China or Europe -- didn't help the Dollar.
We need to avoid impression of jumping from one hasty decision to another with no integrated policy Plan. Does your urgent tone reflect a fear of a major economic deterioration on immediate horizon? If so, explain great urgency, real risks, and how these can be offset or minimized by another one-year tax stimulus -- taking into consideration five factors slowing down Consumption noted above. I'm with you all the way if these concerns can be addressed more precisely.
Otherwise, we should take the recession "hits" to clean house until the next Administration gives careful thought to balanced strategies to meet all investment priorities facing our nation (already discussed) and the financial options to pay for them ... rather than relying on Debt financing, as was disastrously done to keep up household living standards during years 2001-2007.
To put it directly, can we afford to ignore or casually dismiss added Deficit growth and Dollar decline from another one-time tax rebate without a Tax Inflow/Outlay assessment as part of an Overall Plan?
This would be throwing Mad Money at the economy and hoping for the best... not a fiscal gamble I would recommend unless it's a matter of extreme urgency.
Frank Thomas, The Netherlands
Dr. Reich, Your first paragraph says it all, but these faults are all the result of campaign dollars from special interests that want taxpayer assets in return. And they get it. And Obama had an opportunity to send a message to the public about public funding of campaigns, and he blew it. Big! Only when we get the elections funded by the people the politicians should be beholden to – the taxpayers – will we see reduced spending and reduced taxes and the extra money needed to correct shortfalls in other areas.
Personally, I do not have a great plan regarding what the government should do to curve the economy away from a possible recession. Although I feel that the Fed should leave the interest rates alone. Stop lowering the interest rates, inflation is bad enough right now. As for the average American, like my self, we need to stop unnecessary spending. Such waiting in line at the local Tim Hortens drive thru (save that $4.00 a gallon fuel, it will not kill you to walk in side) to buy a $3.50 latte. You could save at least $840 a year by cutting that habbit. Stop using credit cards. Why pay extra for something? Always use cash! Yeah the green paper in your wallet. You will save a ton of money in the long run. My personal opinion is that it is not that bad out there. I still see people waiting 20 deep in the Mcdonalds drive thru every morning. Despite the whining and crying about $4.00 a gallon fuel. People blow my doors off on the freeway, (I drive 60mph) and most of the time it is somebody driving a huge SUV. I could go on and on but I think you get the point. The best way to handle the "Severe Recession Ahead" is to better manage our own personal finances, even if it means cutting back on some unnecessary spending.
Sincerely
Debt Free
1) The data say we are not in recession.
2) The professionals who make their living at the top of the field of economic forecasting project continued GDP growth throughout 2008 and 2009. And, there is nothing alarming in any aspect of their forecast.
3) But, if naively believing the media hysteria provides you with emotional satisfaction, so be it. That’s how Dems roll.
P.S.) Dems claim the consumer is in deep trouble. But, throughout the entire course of this so-called economic crisis, Personal Income has continued to grow faster than inflation (even when the normally excluded energy and food inflation is included).
Sure, Real Retail Sales have declined (when compared to year ago).
But, in general, that is primarily because the psychology of the average American has been adversely impacted by what the propaganda arm of the Democratic Party (aka the media) has fed them.
And, the encouraging news is that Personal Consumption has steadily increased throughout 2008 (see line item 24 in this table). More than that, Personal Consumption showed a particularly large increase in May. So, even that metric belies the myth that we are currently in a recession!
The entire Dem ideology is PURE MYTHOLOGY!
Lots of folks looking to fall on the sword.
Does anyone realize that the "fat cats" will weather the storm fine? Oh, yea, some could lose a lot of paper wealth, some could even lose their jobs but when did you ever see the CEO be the first to get laid off? This time around there will be no jumping out of 20th floor windows.
Those CEOs and executives whose businesses are still running but in low gear, will still get very nice severance packages, maybe not "Golden Parachutes" but they won't be "Tin Cup Parachutes" either.
Those companies that keep on operating, and it will be many, will lay off "little people" and maybe a few execs but operating companies need management so the bulk will remain.
Even during the Great Depression there were still a large number of people working, suffering little or no hardship. Everyone didn't show up on the bread lines.
A significant recession will destroy a lot of lives. People with mortgages that are not subprime will lose their homes, their cars. Many of those renting will be evicted for nonpayment of rent. College educations will have to be abandoned. Many newborns will suffer malnutrition. Crime will escalate exponentially.
Never forget the old adage; "Be careful what you wish for". Maybe those of you proposing castor oil are in good enough shape to withstand the scourge but there are millions who are not.
They need to be punished because they did what our culture suggested was the right thing to do? Spend! Spend! Spend!
Get it together folks! You really don't want to see a major recession. Doubtful many of you have experienced a serious one so you are unaware of the devastation to be wrought.
Something needs to be done. I don't think pumping up the demand/consumption side is the answer. I think, if I were in the driver's seat, I'd opt for a bigger gamble and jack up interest rates to hopefully drive up the value of the dollar.
Since little is happening in the credit world, as far as loans are concerned, I'd chance that a rising dollar would drive oil, and maybe food prices, down enough to at least level us off and then maybe fiscal policy could be used from there.
That action could cause a recession but it seems a better risk than increasing consumption which might not work, as Frank points out, and could end us up in the same place but with bigger deficits and with an even lower dollar.
Good old sbvor:
Pretty graphs but with no comprehension.
Is it surprising that personal incomes, in the aggregate, are up when the CEO of Exxon gets an 18% increase to $21.7 million/year earnings. Inquiring minds want to see the quintiles not some aggregate that lumps the sins with the virtues.
sbvor, you really do need an education. Try one of those online universities. Right off the bat take a course in forecasting. Forecasts are forecasts. They are based on a set of assumptions given the known facts at the time coupled with the guesses of what's going to happen. If facts change the forecasts ain't worth a dime.
Let's take a look next Friday and see how close the Conference Board comes to their 5% unemployment for the 2nd quarter.
I give you all this valuable feedback on your graphs and you fail to learn.
Art,
You could have:
A) Shown me your quintiles (or any other evidence germane to the issue)
Or
B) Engaged in nothing more than your usual and predictable ad hominem
But, I knew which one you would choose before you did.
sbvor:
LOL.....
Add to the ever growing list that of soothsayer.
In higher education you are taught that doing affords better learning than parroting.
Therefore, in the interest of your education, it is better that I leave it to you to find and figure out than to supply you with the information so that you might regurgitate it.
SBVOR said: "But, in general, that is primarily because the psychology of the average American has been adversely impacted by what the propaganda arm of the Democratic Party (aka the media) has fed them."
Thats funny, I could have sworn that it was 4$/gal gasoline and the falling value of housing was responsible for falling retail sales. Again I surrender to your overwhelming understanding of the American economy. Its reassuring to know that the democrats have wrecked our economy. I was starting to think that our problems were more complicated then that.
So who pays you to make these posts anyway?
sbvor, I simply don’t care if GDP is growing, because I know it is being driven by high gas, food and health care prices whose profits go to the CEOs and executives of the respective industries. And I don’t care if the “average” personal income is rising faster than inflation. And I don’t give a damn whether you call all of this a recession or not.
What I do care about is that an ever-higher percentage of personal income is going to the millionaires that line the pockets of the politicians, and less of our money is going to savings and to our family needs.
To me that’s a “recession.”
Now, as a point of disclosure, I am a retired CEO that makes zero income from anything other my SSI and investment income. You can see my disclosure HERE and a more detailed disclosure at the bottom of that page.
How about you? What is your occupation, and do you get paid by or receive grants from any of the right-wingers that you are carrying water for?
These Keynesian mixed economy interventions never address the underlying roots of social and economic inequality. This model has consistently failed to produce any kind of meaningful change in the discrepancy between rich and poor. It’s therefore seen as a means to perpetuate the current system rather than something that would promote genuine social justice. It’s like prescribing a carton of cigarettes to a patient with lung cancer.
notsofast:
I'd love to have a prescription for a carton of cigarettes so insurance could pay for them.
Your criticism of the Keynesian model has some merit but FDR didn't do bad essentially following the model. And it lasted until the advent of Reagan.
Poverty wasn't eliminated but the middle class grew, the wealthy didn't accumulate absurd, exhorbitant wealth, and the bridge from poverty to middle class was easier to cross.
The problem is much less the economic model and much more the glorification of extreme wealth accumulation, exacerbated greatly by globalization.
jack:
There are those among us who feel that the best CEO is a retired CEO.
Just kidding. Don't want to malign my elders.
jack:
One must always remember that sbvor excels at "barking at the moon".
notsofast, one need only compare the graph of campaign contributions to that of the growth in inequality to recognize why the rich are getting richer. We have a corrupt political system with a prognosis not unlike Mexicos.
And Art, the truth is that you could fire 100% of the CEOs in this country and the respective companies would manage quite nicely with the management they have. Including my own. But the CEOs know who are protecting them (the politicians) so there is no chance that will happen soon.
Avl Guy said...
"I want to see this painful but necessary transformation occur while this current generation of policymakers, appointed officials (including Mr. Rubin), CEOs, Wall Street bankers, bank regulators, union chiefs, entrepreneurs, industrialists, judicial officials, military heads, individual stockholders, institutional stockholders and our blessed baby-boomers are very much alive and kicking and have maximum skin in the game in the form of their own homes, securities, pensions, 401ks, and trust funds."
Interesting post. Out with old and in with the new.
jack:
And Art, the truth is that you could fire 100% of the CEOs in this country and the respective companies would manage quite nicely with the management they have. Including my own. But the CEOs know who are protecting them (the politicians) so there is no chance that will happen soon.
I wholeheartedly concur. My experience, by and large, is that CEOs are, at best, cheerleaders and many are ineffective at that role. Have run across a couple that were worth their salt but all in all many organizations continue to function, sometimes well, when the office is vacant.
Am often bemused by this idea that shareholders of large public corporations can impact CEO salaries or have any other siginificant impacts on the corporation's direction.
Art, if the politicians were not on the payroll of the corporations, they'd have long ago changed corporate law to mandate that (a) all boards were selected only by shareholders, (b) proxie votes were prohibited on board votes, and (c) all CEO salaries had to be voted on by the shareholders.
But when the corporate CEOs are funding the political campaigns, don't expect reason to prevail.
The 1% Americans who now own the rest of us have accomplished with usurious debt and wage slavery what they set out to do. The constitution now is only a historical documentemt. We are subjetcs of the oligarchs.
jack:
Not disagreeing with your CEO/political marriage argument, but shareholder voting for those things you suggest is for the most part folly. In the first place, in most large public companies, various funds hold blocks of stock that would give them a much stronger vote than groups of smaller shareholders. Members of those funds benefit from continuing the idea that CEOs must be paid like superstar athletes in order to keep the fraternity whole.
Frequently shreholders of 5% to 10% or a little more have enough clout to rule the day. Another easy way around that kind of legislation would be stock options or stock awards to board members and/or CEOs sufficient to gain controlling vote majorities.
Eliminating proxies is meaningless, to a great extent, it would just mean issues would pass absent votes from all the shareholders.
I believe better solutions might be attained through your taxation suggestions, although problematic in their own right.
I agree, Art, that fewer votes would be cast if proxies are eliminated, but proxies go to the CEO or board, depending on the vote. I’d rather have the “shares” voted even if it gives larger shareholders an advantage. Give smaller shareholders an advantage is not useful.
>>> “…. issues would pass absent votes from all the shareholders.”
But I think that is better than giving those votes to the CEO or board.
But a lot of this would be resolved if we had a non-conflicted political system. Get the money out and these b*astards will start voting for their people and the corporate favoritism will end virtually overnight.
Comrades,
Per this chart:
1983 - The marginal tax rate was 50%
2005 - The marginal tax rate was 35%.
This chart breaks out the impact of lower marginal tax rates on the various quintiles (and more).
What is extremely clear is that if you want the bottom 80% to pay a LARGER share of the total tax burden, then raising the marginal tax rate is what you should advocate for.
So, the question is…
What price are you willing to impose on the middle class in order to satisfy your irrational hatred of capitalism and wealth?
2 outta 3 ain't bad.
Forget the $15000 stimulus. A quick check with a calculator says that would add up to about 500 billion. That would push next years deficit to over 1 trillion!!! How would the world financial markets react to a U.S. deficit of over a trillion?! What would it do to interest rates if it's even possible to finance it?
No! Our problems are debt driven and to add such an amount to our debt would shake the economies of the world. And besides, much of it would end up in Oil company, mid east oil producing countries, and Chinese manufacturing hands. This suggestion is a big big gamble, and I think we would loose.
Simply go to the 2nd and 3rd suggestions. Massive infrastructure (alternative energy, mass transit...) investments, funded by Reversal of the Bush tax cut to the rich, a one year "save America" 5% tax on all income over $150,000. The stimulus would be greater, but not as soon. We need investments with payoffs, not give aways and finger crossing.
The bad news is, a tax cut will play in an election year far better than being fiscally responsible. The good news is, congress could never get it's act together to pass this before it recesses.
Anonymous,
What the media (quite deliberately) fail to do is put $4 gas in context.
Dr. Perry has done so here.
And, The St. Louis Federal Reserve has done so here.
That said, the entire world economy would benefit from lower gas prices. And, that is why I advocate for “Drill Here, Drill Now”.
jack:
If the end result is the same where's the beef?
The various ways for corporate money to influence politicians are so plentiful that there is no simple "one size fits all" solution.
The very same talent that provided us with a plethora of products in the marketplace will continue the influence peddling of money in politics. Innovation and creativity!
In a frail, old hose that is leaking water, plugging up one hole will just cause another hole to develop. The answer is integrity on both sides of the equation and that appears a value long missing from our process.
My sense is our only hope is in the old, much quoted adage:
"If you can't drink their liquor, kiss their women, take their money and then vote against them in the morning, you don't belong in politics."
sbvor:
You certainly make a huge dent in Learning Curve Theory.
Your charts really say nothing. They show what happened and then subtly leave an implication of cause and effect.
Could it be that the rise in effective tax rates on the top 20% is due to a significant rise in incomes of that group. Conversely could the decline in the lower echelons be declining wage growth?
Maybe I should give you the benefit of the doubt and guess that you didn't read my earlier post on the same graph. Nah, I think not. You see a new Dr. Reich post and assume that it's a whole new audience.....LOL
Maybe spend a little more time researching text and less time rummaging around for charts that you think say something to support your premise when they do not. Are you familiar with the term "pathetic"?
Art,
If you have any objective, quantitative evidence of “declining wage growth” I would be happy to examine it.
But, as we see throughout this entire blog, Dems rely exclusively on utterly unsubstantiated rhetoric and never produce objective, quantitative data. I wonder why. Well, not really.
sbvor:
Apparently you don't read your own blog. I still haven't looked into posting links so I will paste the response I made to you, re, the same subject. Could it be you conveniently forgot it? In law school they teach you to never ask a question that you don't know the answer to.
Art A Layman said...
svbor:
Most folks seek out those sources that have sufficient professional status and credibility as to not require constant “fact checking”. I might take exception to the conclusions of Paul Krugman or Robert Reich or any number of esteemed economists but seldom would I be presumptuous enough to disagree with their economic “facts”. They are far more capable of acquiring and interpreting economic data than am I. If, over time, they exhibit a tendency to be correct in their assessments, there is little sense in “fact checking” them. Other “facts” that I may know are invalid from personal empirical evidence are seldom worth “fact checking” either. We all know the sun rises in the north.
A couple of examples regarding my average worker and stagnant wages comment:
FRBSF Economic Letter
2006-33-34; December 1, 2006
As Figure 1 shows, from 1973 to 2005, real hourly wages of those in the 90th percentile—where most people have college or advanced degrees—rose by 30% or more. As I will discuss later, among this top 10%, the growth was heavily concentrated at the very tip of the top, that is, the top 1% (Piketty and Saez 2006). This includes the people who earn the very highest salaries in the U.S. economy, like sports and entertainment stars, investment bankers and venture capitalists, corporate attorneys, and CEOs. In contrast, at the 50th percentile and below—where many people have at most a high school diploma—real wages rose by only 5% to 10%.3
Adding here: That's, at the 50th percentile, over a 32 year period in total not average annual.
I don't know how to paste a chart on here but you can go to the San Francisco Fed website and view it.
http://www.npr.org/templates/story/story.php?storyId=7180618
Again can't put the chart here, follow the link.
The wealth gap in America has long been in the making. In the 30 years between 1975 and 2005, U.S. households in the bottom 80 percent income bracket saw their share of national income actually fall. Those in the bottom 40 percent saw a drop in their incomes when adjusted for inflation. Only the top 20 percent of households experienced an increase their share of the total national income; much of that went to households in the highest 5 percent of the income bracket.
Seldom would the top 20% be considered average.
Best not ask the question if you don't really want the answer.
Don't base your assessment of everyone else's capability on your own incapability.
sbvor:
You will forgive me if, after you have examined my data, I don't give a lot of credence to your evaluation?
To date you have not established sufficient professional status and credibility.
The way we get integrity, Art, is through public funding of campaigns like they have in Arizona, Maine and Connecticut. Politicians can "opt in", which makes the system constitutional. If they want to continue taking private money, they can (if they think they can get re-elected). Cost to the public is about $5/$10 per taxpayer per year (state/federal). Cost of the current system when calculating all of the government giveaways to the special interests that now fund the elections: $1300/$3000 per taxpayer per year.
If politicians are to be beholden to their funders, those funders should be the taxpayers. In AZ and ME about 70% of the elected politicians refused private money (which is a requirement for the public grant). Under this arrangement government is NOT corrupt. If they take money on the side they either go to jail or lose their seat. Over 70% of these state's voters selected these systems by forced referendums.
Why do politicians not want Clean Elections? Because they work, and they don't like being hampered by a level playing field.
(Still waiting the hear sbvor disclose his/her occupation. I'm sure that will be interesting, though he seems to like the anonymity of the Internet. But if I'm going listen to BS I like to know who's dishing it out.)
To; Toast
Thanks for costing out $15,000 tax exempt idea in +-$500 billion range. Even if the cost figure were half this, the effect on the Dollar's value would be devastating ... causing further spikes in oil and commodity prices.
That's why we must creatively balance the Debits and Credits before rushing headlong in this direction or that direction with poor strategic and financial syncronization of policies and programs.
We need brighter ideas than this that show world we're regenerating our economy with a well-thought out harmonious mixture of lower-middle class tax rate reductions offset by an upper tier tax rate increase, tax incentives, selective tax increases, budget cuts (e.g., Defense), etc. ... all to keep Deficits and Dollar fron collapsing further in wrong directions while we simultaneously undertake critically needed investments social-infrastructure and committment to energy independence, efficiency, and conservation.
This approach (properly refined and computer model tested) will eventually bring our Deficits into surpluses in 4-6 years time. This assumes, of course, increasing incentives for Savings so that within 6 years
Consumption/Investment/Savings relationships are in far more Prudent, Stable balance than they are now.
In my humble judgment, that better balance is Consumption at 63-65% of GDP (vs. sky high 70% of GDP now); Investment at 6-8% of GDP (vs. low -4% of GDP now); and Savings at least 5-6% of GDP (vs. an average of ZERO last 3 years).
jack:
Reasonable assumptions but first question would be is option for public funding a lifetime commitment or election by election?
What of the now defunct "Millionaires' Amendment"? Does the millionaire owe allegiance only to himself because he funded his campaign?
My point was that corporations and lobbyists will find ways to skirt or circumvent the laws, legally, to heap rewards on politicians who go along. Campaign contributions were only an easy way.
Low interest mortgage loans; access to financial deals; special travel arrangements; hobknobbing with the elite; all these will be utilized to create advantage. Politicians always run the risk of being voted out but incumbent advantages often work in their favor.
Relying on the voting public to exercise sound judgment, if they even know about the facts, will not make a betting man rich.
The other problem with public funding is that the donor(s) is transparent to the recipient. I take public financing and I vote in a way that infuriates some of those donors. Does that mean I am not being responsible to them?
Perhaps one of the first things we need is for the populace to better understand "representative democracy".
There are no Valhallas out there, just reality. An educated populace exercising sound judgment would go along way to solving the problem.
jack:
Ain't likely you'll ever hear about sbvor's bona fides. My guess is he ain't got any.
Not uncommon for him, when faced with a little humiliation, to run to the next post and begin again with his supposedly new audience.
He's great at posting his propaganda and wrestling with those who don't have time to investigate his dogma. When he's faced with any serious resistence, he either runs away or ignores it and posts somemore of his tripe.
I doubt he's getting paid by anyone. Anyone seeking to pay for blogging surely would look for someone more competent.
The commitment is on an election by election basis, Art. We have such a millionaire in our state (Herb Kohl) and I think he makes some pretty stupid votes. But I know it’s his stupidity and not that of a special interest. Nonetheless, the public candidate gets a reasonable grant to run a credible race, and if outspend they get matching funds up to a certain amount. But millionaires versus Clean candidates don’t fare very well in the elections. Even millionaires are best advised to stick with the public limits if they want to get elected.
…. corporations and lobbyists will find ways to skirt or circumvent the laws, legally, to heap rewards on politicians who go along. Campaign contributions were only an easy way.
Not under the AZ,ME,CT models. Politicians can lose their seat.
…..The other problem with public funding is that the donor(s) is transparent to the recipient.
If you take public money and do anti-public things, you stand a good chance of being unelected.
See www.WiCleanElections.org
.... The other problem with public funding is that the donor(s) is transparent to the recipient.
I ignored this statement, Art. Transparency is not an issue. Every donor (taxpayer) gives the same amount of dollars ($5 at the state level).
Art,
I started by attempting to trace the ultimate source of the data presented in this chart.
What I found was circular citations within the same organization, ultimately winding up with utterly ambiguous citations such as this chart citing “Author’s Analysis”.
“Author’s Analysis” of WHAT DATA from WHAT SOURCE?
As time permits, I may try again to trace the ultimate source of the data (assuming it’s not just made up).
Meantime, you might want to take a slightly more skeptical approach to your sources.
Art,
If you find this chart from this speech so credible, take a stab at tracing the raw numbers back to ANY source what so ever!
My attempts thus far ALL wind up at dead ends.
And, THIS is what you base your Class Warfare “mentality” on?
GEEZ!
SHOW ME THE NUMBERS! SHOW ME THE SOURCE!
If the (very partisan) Economic Policy Institute is the ultimate source of the raw numbers, how did they collect them?
Deficit spending is most certainly not all we have left. We have the power, as a government for the people, by the people, and, at the last, of the people, to: COIN MONEY!!! We do NOT have to borrow from that infamous knotty cartel of bankers obfuscatively known as the Federal (they are not federal and in no way are part of the government of this country) Reserve. Don't get hung up on the coining bit; that was just the main way they made it when the Constitution, that dreary old rag, was written. True, any President (Lincoln was the last) who tried it got shot. Hey...now we have Kevlar.
Hope you have noticed this from Bill Gross in 6/30 WSJ: June 30, 2008, 9:23 am
Pimco’s Gross to ‘President’ Obama: Double the Budget Deficit
Bond king Bill Gross called on presidential nominee Barack Obama to double the federal budget deficit to $1 trillion by fiscal 2011 if he became president.
“The economy will need an additional jolt of $500 billion or so of government spending real quick,” said Gross in a letter to “President” Obama posted on Pimco’s Web site. “It must replace both reduced residential investment and consumption whose decline has placed the U.S. economy near, if not in a recession.” .......
This post has been removed by the author.
sbvor:
Are you totally inept or just uneducated?
First of all, this was a speech given by the President and CEO of the San Francisco Federal Reserve Bank, and she stated that the speech was her evaluation and not the Bank's. Now we're not talking slouchs here. We're not talking outlandish political type economists here, spewing garbage from their website to any unknowing imbecile that happens by.
This lady is giving a:
President's Speech
Speech to the Center for the Study of Democracy
2006-2007 Economics of Governance Lecture
University of California, Irvine
By Janet L. Yellen, President and CEO, Federal Reserve Bank of San Francisco
November 6, 2006, 4:00 PM Pacific Standard Time
Now it is understandable that you cannot comprehend all that but what it means is that a lady of this stature, associated with an employer of their stature, is not running around giving BS speechs to inflame the masses. Those of whom she speaks and to whom you reference with your tired conservative bullcrap about class warfare, would never even know about this speech being given or the facts she presented.
Go back and reread my credibility statement. Somewhere in your head there has to be a semblance of a brain.
Now the EPI (Economic Policy Institute): no doubt an organization founded by professionals leaning a little to the left side of the spectrum but an impressive group, nevertheless:
Who founded EPI?
EPI was founded by a group of economic policy experts that includes Jeff Faux, EPI's first president; economist Barry Bluestone of Northeastern University; Robert Kuttner, columnist for Business Week and Newsweek and editor of The American Prospect; Ray Marshall, former U.S. Secretary of Labor and professor at the LBJ School of Public Affairs, University of Texas-Austin; Robert Reich, former U.S. secretary of labor and professor at Brandeis University; and economist Lester Thurow of the MIT Sloan School of Management.
The graphs come from a book:
EPI's flagship book The State of Working America 1998-99 was released by Cornell University Press on January 1, 1999.
Where did they get their information? Buy the book! The cheaper alternative would be to THINK, a chore for you I realize. Who is it that produces this kind of information? What government agencies are the only ones capable of amassing the data necessary to compile this information? I'm sure if you go to those sites and you spend a few hours, or maybe days, you can duplicate the charts they produced. While you will be disappointed that your dreams and those of your heroes have been dispelled, you can sleep nights knowing that you are capable of compiling major league stuff, not just stupid blogs.
I have been more than reasonable with your inane requests. You take it from here and unless you can find errors in their work or in Ms. Yellen's speech I suggest you put your mouth where the sun don't shine.
You are loutish and clownish. I have provided a good start for you but I doubt you can understand the data once you find it. Your expertise lies in finding pretty pictures which you think mean something and then conjuring up pretty blue links to show the world just how bright you are.
You and bright is an oxymoron.
The data I presented comes from far more reliable and professional sources than the interpretations you apply to your fancy graphs.
Art, you are using words far too big for sbvor to understand. Can you put it into a graph?
Art,
To summarize your typically excessively verbose retort:
1) As long as the speaker has an impressive title, one need not fact check her data or her sources.
2) You have no idea where the numbers come from, but blindly accept them as unassailable fact (simply because your find them emotionally satisfying).
3) The large majority of your retort, as we all have come to expect from you, is purely ad hominem.
In other words, your retort was exactly what I expected. Very predictable, you are.
And sbvor, to summarize yours, "everything is okay, sit back and relax while we pick your pocket."
Still waiting to hear your occupation. Lobbyist?
Jack,
The closer one moves to a free market, the less opportunity anybody has to pick anyone’s pocket (without their full consent and cooperation).
sbvor:
It is difficult to contain one's self when dealing with pseudos.
If you dig a little you will find that the graph in question was compiled from analysis of data issued by the CPS (Current Population Survey) from their ORG (Outgoing Rotation Group). For information regarding the CPS go to:
http://www.census.gov/cps/
As I told you the only organizations that compile this level of detail are government organizations. Don't think you will find that specific graph at the:
//www.ceprdata.org/cps/cps_documentation.php
website but the raw data is downloadable from there should you wish to reconstruct the graph. Likely over your head but, what the hell, you learn by trying.
If you notice the other graph from the npr website, referenced from the Bureau of Census, which by the way you didn't suggest any concerns with, is consistent with the graph you do question. There is a difference in specificity but the two graphs paint the same picture. This information is also consistent with other data that has lead most experts to agree that working class wages have been stagnant or declining, in real terms, for the past thirty years.
You do, not surprisingly, talk out of both sides of your mouth, maybe even more than both sides. You posted, among a whole plethora of graphs, a graph from Dr. Perry, depicting, 1000 Gallons of Gasoline as a Percent of Per-Capita Disposable Income January 1980 - May 2008.
One must assume that you have thoroughly vetted his numbers and have substantiated them to be correct. In larger part, what exactly does his graph tell us? Per-Capita merely means he took total Disposable Income and divided it by some population number, assumedly all those with Disposable Incomes. This means we have the CEO at $10 million dollars of Disposable Income averaged out with the janitor with $12,000 of Disposable Income.
Now I don't know much about Dr. Perry, other than he is a conservative nutcase, but I wouldn't even consider questioning the veracity of his graph. Given his credentials I would accept that his numbers are valid.
I would, and do, question the worth of his presentation. In typical conservative fashion he is presenting accurate but meaningless information, with the implication that it is important and telling. To be meaningful, personal income data, in an economy the size of ours, can only reflect meaningful information if you break down whatever you are trying to present into the quintiles or the percentiles. When you aggregate personal incomes in the millions with those in the tens of thousands you don't get a clear picture of anything.
I realize that much of this is beyond your ability to comprehend but I notice recently that you've picked up a pet phrase, "ad hominem", and that was probably due to some searching you were doing for something. That portends, albeit only cursorily, that you may have the ability to learn and that is a hopeful sign.
Doubt I will live long enough to see you further your education much but it is always marvelous to watch a child as he learns new things.
You, I, like all of us, have to rely on informational analysis from "experts". Depending on the source, questioning that analysis is not unreasonable. Sources with a political bent will obscure, spin and explain data in ways that further their agenda. Data from politicians are always suspect. Data from people holding highly respected positions presented to an audience that is more academic/professional than political can be presumed to be objective, absent evidence to the contrary.
In either case, "experts", always mindful of reputations, are not usually given to presenting charts and graphs that are fallacious. They may, as in Dr. Perry's case, present accurate but meaningless information; they may put a spin on explaining the results, but they seldom represent as fact data that their peers can easily disprove.
Should George W. Bush tell me that this is Tuesday, July 1, 2008, I would go to great lengths to verify it. "Facts" expressed by Dr. Reich or Krugman or a variety of other "experts" I am much less likely to have serious doubts about. Should I have doubts I research it, otherwise I depend on the integrity of those "experts".
sbvor:
Geez, that's the problem! You are living proof that life exists on Mars. It must be because your post to Jack suggests that you haven't been on this planet very long. Use the internet to look up, Enron, Worldcom, Tyco, Adelphia and a multitude of others. Those bastions of the free market picked more than a few pockets.
Art,
As always, I chose my words carefully. Neither “closer” nor “less” are absolutes.
Within a free market, there will always be criminal activity among a tiny minority.
Prosecuting such crimes is a legitimate function of government.
But, criminal activity among a tiny minority is not a valid argument against free markets.
The three legs of a free and prosperous society are:
1) A democratically elected government
2) Rule of law
3) Free markets
sbvor:
But, criminal activity among a tiny minority is not a valid argument against free markets.
No but given the economic hardship that this "tiny" minority wraught, "free markets" with strong government regulation are called for.
"Free markets" do not operate with built-in moral boundaries. The "free market" is a survival of the fittest world and there is little concern for who gets hurt in the process of gaining exploding profits.
You may or may not choose your words carefully but it's abundantly clear that you don't think carefully.
In your careful wording you forgot to define prosperous society. There are many "prosperous" societies where the "free market" does not exist without significant regulation.
Art,
Excessive government regulation (among other government excesses) has done far more harm to far more people than corporate criminal activity (alleged or real) ever has or ever will. But, that very rarely makes the headlines because:
1) It is not an emotionally satisfying narrative).
2) It is not a narrative which comports with the political ideology of most so-called “journalists”.
sbvor:
Ever true to type, you post inane statements and then follow them up with links to fatuous propaganda. In the immortal words of someone:
SHOW ME THE FACTS! SHOW ME THE SOURCE!
If one could sense that you had even a tad of knowledge about how the world works, one could occasionally give you the benefit of the doubt. Alas!!
Art,
Clearly, my greater crime was one too many closing parentheses! ;-)
Don’t you ever tire of slinging your playground insults?
sbvor:
Don’t you ever tire of slinging your playground insults?
When you begin to exhibit a reasonable degree of intellectual discussion, expressing facts and opinions that are less influenced by ridiculous political hyperbole, I would be inclined to alter my vehemence.
In the interim I am quite capable of meeting vitriol with vitriol.
In my estimation I have gone much farther in explaining and justifying my assertions than anything I have seen from you.
Linking to a bunch a meaningless graphs does not good argument make. Nor does referencing books written by conservatives tend to present objective analysis.
You have seemed to have toned down a lot of the demeaning, attacking bullcrap that you started with but you haven't reached my acceptance threshhold yet.
Keep trying and maybe you'll get there. In the meantime if you continue with illogical argument I fear I will not change my ways. I do not suffer fools gladly.
Art,
You indicate I referred you to “books written by conservatives”.
However, if you ever actually read the book I referred you to, you might want to pay special attention to the section where Bernie talks about how:
“Dan Rather and Tom Brokaw tried to smear Goldberg as a ‘right-wing ideologue’ -- though he had never voted Republican!”
Poor Dems! Smearing and slandering is all they know. But, lacking objective facts, what else could they do?
You see? Once again, the beauty of being a Conservative is that the Conservative point of view is so mainstream that I can not only cite The New York Times and The San Francisco Chronicle in making my points, but I can also cite books written by self-described Liberals with nearly 30 years of experience working inside the heart of darkness.
You, on the other hand, refer me to a book which, by your own typically understated admission, represents the collective “wisdom” of those who are “leaning a little to the left”. A “little”? ROTFLMFOA!
Can we say “hypocrite”? Sure we can! It’s synonymous with Dem!
sbvor:
As I suspected you don't learn quickly, if at all.
I've seen Bernie Goldberg on the Factor numerous times. He doesn't qualify as a bleeding heart liberal. Like you I don't really care who someone voted for in assessing their political bent.
I didn't reference that "book" as enlightened reading for you (enlightenment and you is also an oxymoron) I merely suggested you read it to find the graph you were so upset about; upset ignorantly.
The rest of your rant is not worth responding to, except:
ROTFLMFOA! Best be careful with that activity since your head is generally affixed to the vicinity.
Darn it Art, you didn't even catch my misspelling of ROTFLMFAO! ;-)
When one is viewing the world from the outer most fringes of The Left, everybody, including Bernie Goldberg appears to be to their Right.
But, as I said before the political spectrum does not run from Left to Right. The political spectrum runs from Freedom to Totalitarianism.
sbvor:
I may criticize your thinking, or lack thereof. I might engage in semantic arguments simply for the pleasure of it. Given the number of misspellings that appear on blogs I don't even regard them as long as I get the point.
Continue your imbecilic raving but don't worry about your spelling. If your spelling was perfect it would not lend any credence to your lunatic assertions.
No, stimulus is not all we have. If we stopped mercantilist Asian currency interventions, the improvement in the current account would add more to demand for U.S. output than the last fiscal stimulus. We have excess aggregate demand. Why must we continue to borrow to fuel export-led growth in Asia? This strategy must eventually end in tears.
Prof. Reich et al ~
An immediate (30-60 days) 50% reduction in per barrel price of oil from current levels ! Sounds good doesn't it?
The can you please explain why almost all media/commentary is excluding follow-up coverage of the June 23, 2008, House Subcommittee on Oversight and Investigations hearing "to explore whether weak regulation of the energy futures market has permitted pension managers and currency hedgers to flood the oil futures market with so much money that, at a time of tight supply and demand, oil prices have become disconnected from underlying supply and demand.?"
Here is a link to transcripts in case you missed the C-SPAN coverage of the extremely compelling testimonies of, in particular, Messrs. Fadel Gheit, Roger Diwan, Michael W. Masters, Edward N. Krapels - et al.
http://energycommerce.house.gov/cmte_mtgs/110-oi-hrg.062308.EnergySpec.shtml
These gentlemen have demonstrated a clear understanding of the Energy Futures Markets-functions/purposes, short-term and long term problems, physical investors vs. electronic/paper investors, the impact of speculators in the futures market on price discovery in the spot market, and the immediate remedies required to be incorporated in legislation that bring the price of oil in line with real market conditions within 30-60-days.
Any thoughts on why the drafting of this legislation from an apparently bi-partisan, forward thinking sub-committee is not on a fast track as the expert testimony assured that the price of oil would decrease ~50% from its current price level as a result of appropriate legislative action.
Looking forward to your thoughts ...
Do you propose this $15,000 income tax exemption is for every individual tax payer? This would definitely help the average consumer consume more, but the credit rating system aka the FICO system is also very out of control. For example I need a car to get to and from work. I did not qualify for credit to purchase a $9,000 new car but I did qualify to purchase a $17,000 used car. What kind of nonsence is that and how are middle class workers ever going to be able to use credit effectively? You know the problem is that keeping average people in debt is the business of credit companies and until that fact is found to be unconstitutional, life will continue to be financially hard for the working class American. Gangsters still exist; legalized gangsters in the form of the FICO scoring system, insurance agencies and the Welfare and Medicaid systems, just to name a few. The things they all have in common is if you qualify, you pay through the nose for your services or you don't qualify yet you pay the largest chunk out of each paycheck you get for programs that you never qualify for. The fiscal policy needs to have a government control on it. The business community profits regardless of recession, depression, war whatever but the taxes that they are required to pay back into this country are written off via tax cuts. The Representatives and Senators in our States and in Washington have to be held accountable to make the American people as a whole prosperous and stop letting the wolves feast on the sheep.
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