I haven’t said much about the debt-limit squabble, for at least two reasons:
First, what’s the point of having a debt limit anyway, if it just gets raised whenever we approach it?
Second, in the real world, as Kevin Williamson points out here, the only meaningful debt limit isn’t one that you impose upon yourself; it’s the limit that you reach when creditors are no longer willing to lend you money. Because the sums the disputing parties are squabbling over are such a drop in the bucket compared to our overall debt (even the four trillion that was being bandied about until recently as a “grand package”, now out of reach, is still only a couple of years’ worth of accumulating US debt, and far less than that if interest rates go up, which they’ll inevitably do if our credit sours).
So, given that we’ve already screwed ourselves beyond all hope anyway, and that all this posturing amounts to nothing more than raising the seat-backs and tray-tables prior to impact, I’d appreciate it if they’d all just agree to raise the damn debt limit — if only for the sake of giving the financial markets a last rally or two before we hit the ground. I’m sure we could all use a little extra cash for batteries, dried food, and ammo.
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Too pessimistic by half, Mal. According to Noble Putz lariat Paul Krugman, what this country needs is more debt, not less. The Obama, another Noble Putz, really knows what he is doing. Don’t despair. Everything is hunky-dory.
Riiiight….
Even Paul Krugman himself (!) is now admitting that the “stimulus” didn’t work (albeit because it wasn’t big enough, wasn’t spent the right way, etc.).
When you see rats in the water swimming away, it’s a good sign the ship is sinking.
Kaus obviously didn’t look very hard. It took me less than a minute. Let’s see what the sagacious and invariably prescient Nobel Prize laureate had to say in February 2009:
Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective – to turn it into little more than another round of Bush-style tax cuts – are so destructive.
http://www.nytimes.com/2009/02/06/opinion/06krugman.html
If Kaus had bothered to read what Krugman was actually saying at the time, he would have found that Krugman was (as usual) dead on. In the winter of 2009, when it looked as though the world financial system was heading for an imminent collapse, Krugman wrote that the stimulus package would restart the economy, but to create a booming economy would require a stimulus package approaching $1.5 billion.
Krugman also correctly noted at the time that the stimulus should be focused more on infrastructure and other job creating programs than on compromising with Republicans to make tax cuts, which account for about a third of the program. So if Kaus bothered to read what Krugman actually wrote at the time, he would have to admit that both of his predictions were entirely correct: the stimulus should have been larger, and it should have had a different composition.
The stimulus was fine as far as it went. American gross national product and corporate profits are at all time highs. More private sector jobs were created in the second year of Obama’s administration than in the entire eight years of the Bush administration. Paulson, Geithner, Barnanke: we should be erecting statues to these guys. They saved the world economic system.
The recession ended about eighteen months ago, and we have had a sluggish recovery ever since. While these types of recoveries tend to last longer, because they are less subject to a boom-and-bust cycle, nonetheless the job creation has been disappointingly slow. This is partly because we have a much more productive economy — we create more stuff than we have ever created before, with about seven million fewer workers — and the labor-intensive construction industry is on its back, as a bubble which took decades to create is delivered. Neither problem (if you want to call productivity a problem) is very responsive to government intervention.
Krugman drives people like Mickey Kaus nuts because Krugman is smart, articulate, and nearly always right. If Kaus looked at the situation honestly, he would have to acknowledge that Obama inherited the worst economic crisis in eighty years, with a trillion dollar budget deficit and a monthly loss of 750,000 jobs the day he took office. He would also have to acknowledge that the cause of the economic disaster was the Iraq war, the Bush tax cuts, the absence of effective regulation, and the economic philosophy that (in Dick Cheney’s words) deficits don’t matter. He would also have to acknowledge that Krugman and other progressives were entirely correct about both the cause and the solution to the problem. But that would require a clear-eyed and objective view of the world, which is well above Kaus’s abilities or inclination.
The fact is that things are getting better, and have been getting better for a long time, which is quite remarkable given how far we have come since the days when nobody knew if the world economy would survive. Kaus should have the decency to STFU and give peas a chance.
Yeah, right: “dead on” and “entirely correct” — with an utterly unfalsifiable counterfactual assertion that if only we had pumped in 1.5 trillion that we didn’t have, things would be roaring along right now.
1.5 trillion dollars.
Nobody here is making any brief for Bush economic policy. (Deficits only “don’t matter” if they are smaller than growth.)
But it’s two-and-a-half years in, and unemployment — that Obama warned us might rise above 8% if there were no stimulus — is now steady above 9% (with real unemployment at about 16%). Even Krugman himself admits that the economy has not recovered. Meanwhile, deficits have soared. At what point does our shape-shifting president actually begin to take some responsibility for current events, and stop blaming George Bush? Sure, some corporate profits are up, mostly thanks to overseas business. But those profits stay on the sidelines, in large part due to fear and uncertainty regarding the capricious and hostile regulatory environment created by this administration.
As for the cause of the crisis: yes, there were many factors — but first and foremost, the precipitating event was the collapse of poorly secured loans to unqualified borrowers, in large part due to constant pressure from the government on the nation’s banks (and yes, the Bush administration was surely culpable here) to relax prudent lending qualifications so as to increase home ownership amongst the poor and minorities. Well, buckle up: here we go again.
Seriously, Peter, you are just about the only man left, on either the Left or the Right, who thinks the stimulus “worked” in any substantial or lasting way. Everyone else has admitted that we’re still stuck in a very bad spot, and are busy trying to make failure an orphan.
Each of your assertions is incorrect.
1) Obama never said that the unemployment rate would be 8%. This is a right wing canard, similar to the myth that Al Gore claimed to have invented the Internet. I suggest you see who made the prediction of 8%, when that prediction was made, and the context in which the statement was issued.
2) The deficits during the Bush administration were well in excess of the economic growth rate.
3) The statement that “some profits are up” distorts the fact that overall profits are at an all time high. Obama’s opponents focus on the unemployment rate to the exclusion of all other economic metrics, partly because — as noted above — it is subject to variables beyond government control. When you take a balanced view which includes a variety of metrics, the delta between the state of the economy on 1/20/09 and its current state is remarkable.
4) “The precipitating event” of our economic collapse was not “the collapse of poorly secured loans to unqualified borrowers.” It was the securitization of those loans into investment vehicles which were then owned by institutions which levered 30 to 1, and subsequently became insolvent when the values of those vehicles collapsed. The economy could easily withstand the foreclosure of dubious mortgages, but it would not easily survive the insolvency of systemically important institutions like Washington Mutual, Bear Stearns, Lehman Brothers, Merrill Lynch, AIG, and so forth.
5) The recession did, in fact, end in June 2009, when the stimulus package had time to take effect. A recession is defined as two successive quarters of economic downturn. The upturn started in 6/09 and has continued ever since.
6) I am far from the “only one” who “thinks the stimulus ‘worked.’” It is, in fact, the consensus opinion:
http://www.nytimes.com/2009/11/21/business/economy/21stimulus.html
1) I refer you to figure #1 in the Jan. 9, 2009, report called “The Job Impact of the American Recovery and Reinvestment Plan“. It warns that unemployment might reach 9% withouit the stimulus package, and suggests that it would peak below 8% otherwise. Even the Times item that you link to in your item #6 mentions the same “canard”:
2) I never said anything favorable about Bush-era deficits. What I said was that deficits are only acceptable if they are below the level of economic growth. They weren’t, and they aren’t.
3) People on both sides of the aisle, including the president Himself, focus on jobs because they are what people actually care about. Nobody gives a hoot if corporate profits are up from selling widgets in Asia if nobody’s got a job, or any money to spend, here at home.
4) Agreed that the exotic financial instruments created by the big banks concealed the riskiness of the situation. But all would have been well if the loans themselves had been sound; the bundling of them was just a way to mask the ricketiness of the underlying securities.
5) Hair-splitting. We’re still in a real pickle, and it’s getting worse, not better.
6) Fine. That the New York Times was able to dig up a minyan (back in 2009!) to support your view is some comfort to you, I’m sure.
Somewhat more recently, however, even the Times‘s appraisal was a good deal less rosy.
1) You did find the source document, so you now know that the economic prediction was not made by Obama, as your post (and the Times) falsely suggest. Moreover, it was made before Obama assumed office, before the auto industry nearly collapsed, and as the economy continued to spiral downward at an accelerating pace. Because trying to quantify economic results during an economic tsunami is like predicting who will win the game at the top half of the third inning, I refer you to the many parts of the document which note that it merely tries to provide “guidance” because “as emphasized at many points in the analysis, there is substantial uncertainty around all of our estimates.”
2) OK.
3) Actually, lots of people give a hoot about corporate profits, including stock market investors, who have pushed the popular averages to a multi-year high.
4) Not really. A lot of the derivatives were based on financial assets other than sub-prime mortgages (e.g., mortgages with higher credit quality, corporate and sovereign debt swaps, currency based derivatives, and so forth). Flaky mortgages played a role, but it was more like the snowball which starts an avalanche. The real problem was the leverage.
5) Every month, the economy grows and produces more private sector jobs. The definition of “getting worse” is a contracting economy which produces fewer jobs.
6) It’s true: we’ve hit a soft patch. The tsunami in Japan and $115 oil had much to do with it. Both of these factors, which were headwinds a few months ago, are now tailwinds, with reconstruction in Japan and oil around $95. Nothing ever goes up in a straight line, but the clear and consistent trend is from lower left to upper right.
1) Sure, Obama wasn’t in office when that report came out, but he was the president-elect, and endorsed it. Yes, you are right that predictions like that are iffy at best. All the more reason to tread carefully.
3) As someone with a lot of money in the stock market, yes, I care about corporate profits. However, stock prices are very sensitive indeed to the jobs figures, as anyone who just joined me in taking a big haircut when Friday’s figures came out will attest.
4) I disagree. The real problem was the unsoundness of the underlying securities. If someone builds a great big house on quicksand, yes, it’s a huge loss when it collapses — but the problem is that it was built on quicksand in the first place, not the size of the house.
5) Wrong. The economy needs to create 127,000 jobs a month just to keep up with population growth.
6) I’d like it if you were right about this, and though I doubt it, I hope you are. Bigger problems are the socialist chickens now coming home to roost in Europe, and our own looming debt crisis.
The good news is our local Survivalist’s Co-op is having a sale. MREs are fully stocked (for once-all varieties), .40 Cals are a hundred bucks cheaper than a month ago and rare of all rarities, 12 guage double ought is available – I bought a 500 round case. Sorry no sabots.
Doubly convenient – the Co-op is at the precise mid-point between my apartment and the liquor store. That’s really good, the temperature outside my door today was 110°.
As “someone with a lot of money in the stock market,” then surely you are grateful to His Awesomeness because stocks doubled during his administration.
I also think the house on quicksand analogy is inapt. If Lehman Brothers was levered five to one instead of thirty to one, they could have easily taken the hit, regardless of the soundness of the underlying mortgages.
But enough bickering. It is time to bask in the exquisite Schadenfreude of watching Rupert Murdoch squirm. Perhaps the right wing control of the media is coming to an end.
Well, perhaps “a lot of money” is putting the case too strongly. “A goodly portion of such meager assets as I’ve been able to set aside for my dotage, after a lifetime of sedulous toil and selfless beneficence” might be more exact.
In the interest of bringing this too-long thread to a close, I’ll pass right by that howler about “right-wing control of the media”.