Good letter, even Mitt Romney recently said that cutting spending would sink the
economy. He probably regrets saying it now, but it was true. That's the
definition of a gaffe: when a politician says something accidentally, that
happens to be true.
Excellent letter Eric. Thanks for making this important point. The tone of
your letter addresses the false impression being presented by Republicans,
especially the presumptive nominee, that spending has increased under the
current adminstration faster than ever before when the exact opposite is true.
"Spending has increased at a yearly rate of only 1.4 percent during
Obama’s tenure, even if you include some stimulus spending (in the 2009
fiscal year) that technically should be attributed to President George W. Bush.
This is by far the smallest increase in spending of any recent president."In Bush’s first term, by contrast, federal spending increased
at an annual rate of 7.3 percent; in his second term, the annual rise averaged
8.1 percent. Reagan comes next, in terms of profligacy, followed by George H.W.
Bush, Bill Clinton and finally Obama, the thriftiest of them all."Yes, the deficit has risen quickly but that is because of lower revenue caused
by unemployment and especially caused by the Bush tax cuts. As stated by the
auther, "Growing the economy will do more to decrease the deficit than any
misguided cuts in spending."Thanks for saying it.
The analogy I've heard is that the austerity measures advocated by the GOP
is, "Our house is on fire, but due to drought, we need to conserve water
first." It should be the other way around -- get the economy moving (put
out the fire) and then when people are working and tax revenues are flowing to
cover spending, we can engage in government auterity measures that will be
covered by a healthy economy.The GOP doesn't understand that
the government is a MAJOR component of the economy. When it builds roads,
bridges, and infrastructure, it uses local businesses to accomplish that work.
Too often I hear conservatives proclaim that all government spending is a waste.
Who built the Internet? Who built the railroads? Who built the
electricty transmission system? Who built the Interstate highway system? Who
built Hoover Dam and Tennessee Valley Authority? All were government projects
that benefited industry and economic development. Were their
failures and corruption in building the Internet and railroads? Of course, but
collectively, it was for the better for the public and economic good.Had the government NOT built the Internet, Google and Facebook would not exist
As we've seen in Europe — austerity doesn't work.Austerity in Europe is dealing with benefits provided to individuals, not
jobs. The reason it hasn't worked is the entitlement attitude of the
beneficiaries. Greece wants a bailout so they can pay their retirement
commitments that start in the early fifties. I can not get those same benefits
until I reach age 67. The revolt against austerity is a revolt about benefits.
The letter is correct. I keep hearing we are getting our grandkids into debt.
Well someone got me into debt too. In fact I have not been alive for one second
in this country where there was no debt. From the get go debt was used to
further this country. Don't stop now. Making a robust economy is
the best bet to curbing our problem. Getting out of debt isn't the issue.
Our sagging economy is. Once everyone has jobs guess who will be complaining
about the debt? NO ONE.
Eric,If we had a relatively low debt load, I might be more inclined
to agree. But high debt levels sends signals to the markets reference inflation
which, in turn, drives interest rates and investment decisions.I
certainly think that both spending control and some level of "revenue
enhancement" need to combine to get our debt under control. Doing so will
result in some short term pain but will also convince businesses and investors
that we have our house in order, that our economy will avoid strong inflation
(or worse, "stagflation") and that investments in both assets and people
are justified. None of this should be interpreted as justification for
draconian cuts.So, I think that getting our house in order (no small
challenge given the political chill) is our first priority. To be sure, it is a
long term, rather than short term play. But I think it wiser over the long run.
Let's cut all taxes on the wealthy. That way they can continue to create
jobs in China & India.
This letter brings to mind a well-known, but appropriate story told about Milton
Friedman told by a colleague of his:"Milton recalled traveling
to an Asian country in the 1960s and visiting a worksite where a new canal was
being built. He was shocked to see that, instead of modern tractors and earth
movers, the workers had shovels. He asked why there were so few machines. The
government bureaucrat explained: “You don’t understand. This is a
jobs program.” To which Milton replied: “Oh, I thought you were
trying to build a canal. If it’s jobs you want, then you should give these
workers spoons, not shovels.”Make no mistake about it: Mr.
Samuelson illustrates the thinking of economists currently in charge of Western
economies, including ours (think Bernanke and Krugman). These are the kinds of
people who created the mess we're in by emphasizing jobs over economic
stability. First you create economic stability, then jobs will come. Creating
jobs with money that doesn't exist is why we are where we are now.
Re: "We cannot create jobs by cutting jobs."Yeah, we can. As
long as we cut the right jobs.The largest anchor of the recession,
and the largest detractor from a sustained recovery is brutally unfair
competition from bloated, unaccountable, unproductive Big Government.Instead of seeking new, ever more deranged methods of filching and
sequestering capital away from the people and private markets, instead of
feeding a mutating, metastasizing, insatiable government beast, we should be
seeking ways energize the productive, private economy.The best way?
Get government out of the way!If growing government and gifting
unproductive, unsustainable bureaucratic jobs to the politically deserving were
a valid economic model, the East Bloc would still be in business and
euro-socialism would be flourishing.See any evidence of that?
Why have the attitude that we need to spend - at any cost?Government
does not create private sector jobs. Government jobs do not increase revenues -
they require revenues.The only way out of this fiscal mess is to
have more tax payers. The only way to have more tax payers is to have more
jobs. The only way to have more jobs is to reduce the amount of money flowing
from the individual taxpayers to Washington so that the individual taxpayers can
buy those goods and services from private enterprise.The federal
government has been charged to handle 17 duties. ONLY SEVENTEEN. It does not
take 2,500,000 government workers to handle those seventeen duties. Spending
must be slashed. People on the government payroll must be fired. Wages to
government workers must be cut. There should be no incentive for people to
leave the private sector to get a job in "government".When
jobs are cut, when spending is cut, when taxes are reduced, when restrictive
regulations are reversed, then the private sector can build businesses and hire
people. Those people will be adding to government revenues instead of spending
"The largest anchor of the recession, and the largest detractor from a
sustained recovery is brutally unfair competition from bloated, unaccountable,
unproductive Big Government."Spoken by someone who has no
knowledge of the contracting policies and procedures of the federal government.
During the Iraq War there were many instances of no-bid contracting and that was
rationalized by the White House as necessary for the circumstances. But in
normal times, government contracting bends over backwards to insure competition.
It is one of the reasons that procurements take such a long time in the
contracting phase. Federal contracting rules were put in place by Congress who
tried to address every contracting injustice ever experienced by their
constituents in private industry.Despite these obstacles that
"bureaucrats" have to overcome, the government has been instrumental in
contibuting to the needs of the private sector as mentioned by Baron Scarpia.
Another success of the federal government is the agricultural extension program
working through land grant universities to help American farmers become the most
productive farmers in the world.Instead of always trying to tear
down government we should recognize the good that can come from government and
private industry working hand in hand.
Re: "Spoken by someone who has no knowledge of the contracting policies and
procedures of the federal government."Actually, my last
active-duty assignment was to a multi-agency OIF/OEF contract fraud task force
[20+ arrests, recovery of $100M+]. I'm quite familiar with "contracting
policies and procedures of the federal government."But
that's beside the point.Unfair government contracting -- as
rampant as it is -- is not the anchor to the recession. Rather, it's
government's brutal, unfair, unseemly competition with the private sector
for capital.It's unfair because bloated, unaccountable
government just takes it. In taxes. No sales pitch, no demonstration of mutual
advantage, no persuasion.Don't pay? Go to jail.And
every nickel brutally expropriated by bloated, unnecessary government is a
nickel that then becomes unavailable to the private sector, except as a reward
to "deserving" friends of government decision makers, either through the
contracting or the appropriations processes.Good CAN come from
private industry and government working together. Now, if we could just convince
politicians and faceless, motherless government bureaucrats.
>Twin LightsSo you're saying that high debt drives up interest
rates? Uh, have you noticed where interest rates are right now? Like the
interest rates at which government is borrowing? Aren't you essentially
saying that cutting spending will conjure up the confidence fairy? Is there any
real difference between so called business confidence and Santa Claus? If the problem was that high interest rates were choking off investment, your
argument might have some merit. But interest rates are low, businesses are
profitable, and there's plenty of investment capital available for
entrepreneurs or business growth. So the deleterious affect of debt has yet to
make an appearance in any discernible way. What absolutely is driving
unemployment has been budget cuts in state and local government. Those data are
not in dispute. As for cutting debt being what's best in the
long run: well, Keynes said it best: "in the long run, we are all of us
There is an excellent article in the Money Watch section of the Wall Street
Journal that does a fine job of debunking the GOP myth that Obama has increased
government spending. Unfortunately, DN's censors won't allow the link
to post here.So try Googling "Money Watch Wall Street
Journal." You'll need to hunt around a bit, but you'll find it.
Rex Nutting is the author.
Spot on Eric. This debt talk is plain and simple nothing more than setting the
stage to default on our obligations, specifically Social Security and Medicare
and lowering taxes on the privileged few. Both parties misread the results of
the 2010 elections. The issue was jobs jobs jobs and neither took it seriously.
It will be through growing the economy that we get it through these times and
you can't grow the garden by starving it. If tax cuts worked it would have
been done. It will be middle America that gets us out and forcing them into
serfdom won't help.
Spend during recessions, employ austerity measures during the good years. Even
Romney understands it since he basically said as much a few days ago (I'll
give him a week to flip his position). There can be some cuts made but the fact
is unemployment would be 7.2% if we didn't cut a million gov't jobs
the last few years between the various levels of gov't, instead of the 8.1%
Re: ECR just as a point of fact the no bid contracting continues today in the
Obama administration and to many of the same companies. It is just not reported
because of the media agenda to support this administration no matter how
much corruption or incompetence.
Helloo - Since the media doesn't report contracting abuses by the Obama
Administration perhaps you could provide us with some specifics about such
violations. Is Halliburton still putting out oil well fires by subcontracting
the KBR who subcontrats to Boots and Coots? If you want to waste and excessive
overhead check out that contract.So please, give us some detail with
some references. Thank you.
Advocates of capitalism are very apt to appeal to the sacred principles of
liberty, which are embodied in one maxim: The fortunate must not be restrained
in the exercise of tyranny over the unfortunate.
It is true that some public sector employees will lose their jobs. For the
longest time, the public sector has been the last bastion of life-long
employment. Maybe government will run better and be more efficient if
government employees have the same ax hanging over their head that private
sector employees have every day. In other words, if you fail to perform to
acceptable standards, you may not be employed tomorrow. It's about time.
Eric,First, I appreciate a civil dialogue. I was not snarky to you
and I would appreciate the same.Second, the fact that we are
enjoying the fruits of world financial instability and of being the reserve
currency should not be a canon of our fiscal house. There is nothing written in
stone that says the US Dollar must be the world's reserve currency. Also,
when the rest of the world calms down, money will flow out.In my
experience, the "confidence fairy" is quite real in financial markets.
The pricing of risk is all about confidence. Much of the recent Great Recession
was brought about by a sudden lack of confidence. Were the longer-term
underlying issues? Sure. But the rapid deterioration and disappearance of
secondary markets was all about the near instantaneous flight of confidence.Employment cannot be managed via govt. over the long term. Also, even
though I agree that there must be allowances made for the short term, we have
done that already. The Fed has virtually carpet bombed the economy with
money.Govt. spending can act as a flywheel for only so long. What
we need to now is to get the engine running.
Obama knows how to create jobs, but his political philosophy will not allow
growth in the private sector. Appointing Jeff Imelt of GE, who has led the way
in exporting jobs and is one of the biggest corporate avoiders of taxes, in
charge of job creation was a cynical political reward to a campaign donor.
Re-cycling money though the government (taxes) does not create durable job
growth nor does government funded crony capitalism. Obama must decide if
sovereign debt is benign as believed by Alfred Keynes and if it is, why increase
taxes to reduce debt? The answer, increasing taxes allows an endless increase in
government spending and not a return to fiscal solvency.
@HemlockWe've gained private sector jobs 26+ months in a row while
we've cut a million public sector jobs during Obama's term. This
notion that Obama doesn't allow growth in the private sector is nonsense
especially since the only reason his private sector job creation is lower than
Bush's is because he inherited a trainwrecking economy that, no matter who
was president, was going to lose millions of jobs in 2009. After all,
Obama's worst jobs month was January 2009, the month he only spent part of
in office as Bush handed him the keys halfway into it.
>Twin LightsI do apologize. I was snarkier than I ought to have been,
and yes, a civil dialogue is very much appreciated. Chalk it up to a Hoosier
distrusting Kentuckians. And please forgive me. It's quite true
that we needn't be the world's default currency. We still are,
though, a reality we should acknowledge, and if necessary, exploit. I
don't see much sign that the world economy is likely to calm down soon.
The world wide financial crisis was tremendously devastating--much more so than
most people realize--and the response in Europe has been inadequate. Austerity
has been a fiasco, has it not? I quite agree that the Great Depression
was caused by a loss of confidence. But surely you would concede that
corporations are quite capable of using an imaginary loss of confidence as a
club to hold over the heads of regulators. And corporate profits seem
sufficiently robust to suggest that a loss of confidence is not, in this case, a
factor.I would argue that government stimulus has worked just fine. The
main cause of unemployment has been state budget cuts. It is not time, yet, to
Re: "Advocates of capitalism are very apt to appeal to the sacred principles
of liberty, which are embodied in one maxim: The fortunate must not be
restrained in the exercise of tyranny over the unfortunate."Good
quote from Bertrand Russell -- early 20th century math/philosophy hack,
"progressive" apologist, anti-religion campaigner, and avowed marxist --
though you should attribute it.Why his political attacks were
limited to capitalism in 1928 [when his 'Sceptical Essays' were
published], when all the excesses of marxism, bolshevism, and trotskyism were
well known? Who knows?Just the nature of disingenuous evangelical
socialists, I guess.
Unfortunately Eric is only half right. The best way of taking care of deficits
will be to get people working becuase as that happens spending cuts will
automatically be made as people become less dependant on the government.As for the austerity measures in Europe, they would have worked and
helped to cut the deficits of countries like Greece and Spain. The problem
isn't that the austerity measures wouldn't work, it is the simple fact
that people wanted to keep their government benefits. In the past we had
Presidents like Harding, JFK, and Reagan who cut spending and cut taxes and had
a decade of growth.If people would accept cuts in entitlement
spending, austerity will work.
Re: spring street SALT LAKE CITY, UT"Advocates of capitalism are very
apt to appeal to the sacred principles of liberty ..."Advocates
of capitalism adopted the maxim: The government can't give to the people
what they don't first take from the people. The federal government can be
compared to giving yourself a transfusion from your right arm to your left arm
..... through a leaky tube.If you are looking for a free ride Obama
has the prescription.
Eric,Thanks. I thought Hoosiers and Kentuckians could trust each
other now that basketball season is over?I think austerity has been
a fiasco in the weakest European economies because they were weak to begin with
and generally somewhat corrupt. When you start with a sicker patient, you may
not employ the same strategies you would with a relatively healthier patient.My problem with exploiting the current low interest rate environment is
that we already have a strong debt load. The world could begin picking up
steam and then we start paying back the debt against a tide of rising interest
rates and higher debt - making us less competitive. Instead of being able to
utilize the upward economic drafts, we will be anchored to our past spending. I
think it is a recipe for malaise. Note that I am not arguing for
huge cuts nor for lower taxes. My simple point is we should not increase our
debt load and we need to put the long term controls in place that will
eventually lower debt.Yes, there are corporations that would hold
loss of confidence over govt. like a club. But that is hardly new.
RedShirt - another half truth. Reagan may have cut taxes, but he sure
didn't cut spending.
To "one old man" again, you show your lack of research. Reagan cut
spending. Read the article at PBS titled "The 1982 Recession". They
state quite clearly that "In an effort to balance the budget, Reagan
propose[d] budget cuts in virtually every department of government. While he cut
back social programs, including school-lunch programs and payments for people
with disabilities".Apparently he did cut spending.
Unfortunately he also made deals with the Democrats that they ignored then when
things started to get better, the Democrats raised spending.
A question to all the commentators. Would the United states and its citizens be
prosperous if neither had any debt under our current monetary system?
>Twin LightsAh, Kentucky won the championship, it still rankles. You're quite right that austerity has been a fiasco in weaker countries.
What nobody has addressed, that I've noticed, is that Greece is crippled by
tax cheats. They have a huge problem with something as basic as tax collection.
I know it's a popular trope to say "we're just like Greece,"
but that's silly--we're nothing whatever like Greece. But austerity
hasn't worked in Britain either. It's just counter-intuitive--you
can't grow your economy if the first step is to shrink the economy. Your concern with debt load is a real one, and one I share. When people say
our current debt habits are unsustainable, I agree. I think there's a time
to make deficit reduction a priority. But not yet. Lower unemployment would
increase demand--exactly what's needed in a demand-side recession, and
would also expand the tax base. As for long-term controls to lower debt,
I'm all for it. But let's wield a scalpel, not an axe. Some national
emergencies require short-term borrowing solutions--a major war, for example.
Now there's an idea. There's nothing like a war to get the economy
going again, right? Isn't that what got us out of the Great Depression?
Wait a minute. We've been spending on wars already, and it has only seemed
to make matters worse. Hmm. Oh right, it needs to be another World War! There
you go, Eric, see if that will help you along. Paul Krugman, after all, thinks
we should spend like it's World War II again, right? That should fix it BUT
Re: one old man Ogden, UT"RedShirt - another half truth. Reagan may
have cut taxes, but he sure didn't cut spending."There is
no question whatsoever that the federal government can create jobs. It can
provide a job that pays $50,000 ...... and it only costs the taxpayers $75,000
to fund it.We'd be better off if the unemployed just stayed
home and we mailed the check for $50K.
>RedshirtCheck again. Reagan did cut domestic spending, but boy did he
expand defense. >RiflemanNice rhetorical overkill. In fact,
federal stimulus job creation is much cheaper than you seem to think. >SEYI was referring to efforts to restrict spending artificially;
things like a balanced budget amendment for example. Deficit spending defeated
Hitler. As for Paul Krugman, you've very badly distorted his views.
Suggest you read his book before characterizing it. And yes, war is a federal
function, and one that actually doesn't have much stimulus effect. WW2 was
a different scenario--we used deficit spending to build a defense industry from
scratch. Which did, in fact, stimulate job creation. Interesting, BTW,
how many posters are responding to an economic argument with entirely
@Eric Samuelsen"Interesting, BTW, how many posters are responding to
an economic argument with entirely ideological ones."We get a
lot of that around here.To put the opposing posters' ideology
into economic terms, many of them seem to be extremely enamored with
supply-side/trickle-down economics. They contend that if government would just
grease the wheels for the wealthy and the business sector through tax cuts and
deregulation, then the economy would take off and jobs would be created; trouble
is, history, and particularly recent history, doesn't bear that out. More
often than not, Say's Law is just wishful thinking -- it isn't
effective in the short run, and to repeat your previous quote of John Maynard
Keynes, "in the long run, we are all of us dead."On the
other hand, the inverse of Say's Law, namely, that demand creates its own
supply, seems to have a much stronger correlation to history. This would
reinforce the case for stimulus spending, particularly for infrastructure and
for grants and other funding for state and local government. This would quench
the declines there that are masking the job gains in the private sector.
Tell you what, Eric. I'll read Paul Krugman when you agree to read Robert
Higgs and his analysis of the bogus claim that deficit spending "defeated
Hitler" and pulled us out of the Great Depression. Do you remember last year
when Krugman suggested that we could solve the recession if only space aliens
would attack us? Isn't that tantamount to advocating war as a cure?
Here's what he said:"If we discovered that, you know, space
aliens were planning to attack and we needed a massive buildup to counter the
space alien threat and really inflation and budget deficits took secondary place
to that, this slump would be over in 18 months. And then if we discovered, oops,
we made a mistake, there aren't any aliens, we'd be better
–"So the cure is, apparently, to spend like it's
World War III, only without all the destruction, right? The American people
won't go for that unless there's a real threat of war. Sound familiar?
The Pentagon is more than happy to assist.Problem is, it's all
a fallacy. Read Higgs, and I'll be happy to read more Krugman.
SG, I can only assume that you somehow think that Keynesianism isn't based
on ideology. It's more of a religion, really. Its failures and fallacies
have been demonstrated over and over by Henry Hazlitt (Failure of the New
Economics), Hunter Lewis (Where Keynes Went Wrong), F.A. Hayek, Ludwig von
Mises, Jesus Huerta de Soto, and on and on. Nevertheless, Keynesians insist on
ignoring the real causes of business cycles (the boom-bust cycle), recessions
and depressions because to do so would be heresy in the Keynesian church. By the
way, I recommend that you read William H. Hutt on A Rehabilitation of Say's
Law before you dismiss it so easily.While the posters who advocate
Keynesian solutions think of them as "real economics" and everything
else as "ideology," I suggest they take a first or second look at what
the authors I've mentioned have to say about it. I'll be the first to
admit that Keynesians are in control of government and academia, but that's
not an indicator of its correctness. It's today's economic version of
geocentrism. We'll be in its dark shadow until it implodes.
its funny that you seem to think the rich do not have their bellies at the
trough of the government. Do you have any idea the number of grants and the size
of the grants given to private businesses every year?
Eric,You are absolutely correct that tax cheats are a problem in
Greece. That is one reason why I mentioned the corruption factor. You are also
correct that we are not very similar to Greece. Other than the obvious
political utility of such comparisons, I cannot understand why folks make
them.I agree about the scalpel vs. the axe. It sounds like our
greatest differences here are in timing and debt tolerance. Perhaps my age
makes me more conservative.One point, deficit spending cannot lower
unemployment for long. Deficit spending is short term by nature. We need the
private sector to provide long-term employment. In direct terms, govt.
ultimately takes from rather than adds to the economy. This is not to say there
are no economic benefits to govt. But they are mostly indirect.This
is my last post. Good luck to Indiana next season.SEY,Not everyone who disagrees with the Austrians is a Keynesian. Both have some
points. But the iconoclasts on both sides simply miss the boat and advance
I think a lot of the local and state cuts, but especially local budget cuts say
in education, have been result of the sinking of property values. Property taxes
fund many local agencies and with this loss of revenue this has caused huge
problems.I'm tired of picking on government workers. Government
workers work hard like private sector workers. The private sector got us into
this mess not school teachers or government bureaucrats.This is not
the time for austerity. I believe Eric Samuelson has said that the debt needs to
be addressed but it's the question of timing. You don't treat the
patient for cancer when he's bleeding to death. Take care of the bleeding,
save the patient from immediate demise and then work on the latter. This seems
to make sense. Cut a bunch of government jobs will only increase unemployment
and misery because the private sector at this time can't absorb these loss