Dan Kervick's picture

    The Way I See It - Bullet Points

    By Dan Kervick on Fri, 07/08/2011 - 10:56am |

    Here's what is happening:

    > A new jobs report today:  Unemployment went up to 9.2% - the third straight monthly increase.   The rate among African Americans held flat at 16.2%.  The rate for high school graduates with no college climbed from 9.5% to 10%.

    > The only way the federal government can reduce its deficit is by some combination of decreased spending and increased borrowing [corr: revenues].  But with unemployment at 9.2%, the federal government should not be decreasing spending or increasing taxes.   Every dollar of deficit-financed money Washington takes out of the economy right now only further chokes the sputtering engine of recovery.

    > There is a very serious private sector debt problem in the United States, including households.  The private sector's efforts to dig out of debt are not helped by federal government austerity.  In fact they are harmed by it.

    > Many state budgets have been obliterated by a combination economic necessity and rampaging Republicans out do destroy progressive government.  Federal government austerity puts even more pressure on state budgets.  States do not have the ability to finance very high deficits without running solvency risks, since they do not control the supply of their own money.   The federal government does not face that risk.   The feds should be bailing out the states, which means continuing to run deficits until the economic picture is brighter.

    > There is no federal government debt crisis.  When the Bush tax cuts expire, and jobs and wages return, government revenues will pick up and the deficit picture will be fine.   The federal government is borrowing now at extremely low rates of interest, and the percentage of the budget devoted to debt service has actually been going down.  More federal borrowing please.

    > Social Security is not in crisis.  It is experiencing a temporary but easily managed cash flow problem due to shortfalls in revenues, and revenues are declining because of massive unemployment.  If we need to raise the payroll tax cap eventually to get more revenue, we can easily do so.  However, we should not increase that tax or any other tax while we have 9.2% unemployment.  We should leave Social Security alone for now.

    > By all means, we should do nothing that increases the reliance of the retired on private sector savings and investments.   The financial sector that manages those savings proved beyond doubt in 2007 and 2008 that it cannot be trusted with the retirement security of Americans.  So in the long run, Social Security should be expanded.

    > The national Democratic Party discussion centered in Washington has been hijacked by an argument over how to win a game Democrats shouldn't be playing at all.  Every minute spent arguing over how to address long-term deficit and debt issues now is a wasted minute.  It's an argument over the least stupid path to a stupid destination.

    > Obama and his advisers are either ignorant of economic reality, or they are anti-progressive conservatives participating in a right-wing fraud on the American people and an attack on progressive government.   They made a terrible decision last year to pivot away from recession-fighting and job creation, and toward austerity and long-term deficit reduction.  Pete Peterson's fans should be happy.  But no Democrat should be happy.

    Comments

    I agree with much of your take.  Though, "The only way the federal government can reduce its deficit is by some combination of decreased spending and increased borrowing (I think you means revenues here)," takes it a little too far.  Another way for the government to reduce its deficits is by growing the revenue base faster than spending grows.  This would be difficult but is not impossible.

    Problem is, as you say, we have a private sector debt problem which, combined with high unemployment and downward wage pressure, is depressing demand.  In the face of depressed demand, businesses hoard money and buy the depressed assets of weaker competitors, further consolidating the economy and also increasing unemployment.  So we're in a negative feedback loop that can only be broken by a dramatic increase in demand, funded by the government.

    Another idea would be to do something about private sector debt.  Some of it could be federally guaranteed, some of it could be forgiven (student loans?) or temporary tax incentives could be offered to people who pay down debts within a certain window, say the next year or so.  We're not helpless, we're just not doing anything.


    by Michael Maiello on Fri, 07/08/2011 - 12:29pm

    Another way would be to increase savings interest rates.  They complain that Americans do not save but there has to be some incentive to put money away for long periods.  I wonder if fewer people would have taken chances on mortgages they couldn't afford, hoping to build a nest egg, if they could have made money on their money.   

    We used to be able to sock some money away in accounts that would allow it to grow.  That doesn't happen anymore.  Not for us little people.


    by Ramona on Fri, 07/08/2011 - 12:55pm

    While it would be nice for people to get some sort of return on insured, risk free savings, the savings rate climbed from 0 to over 5% since 2007.


    by Michael Maiello on Fri, 07/08/2011 - 1:02pm

    Also, you don't want to encourage saving in a weak economy. We need consumers to spend for the same reason that we need the government to spend. (Conversely, in a strong economy, the government should reduce spending and encourage consumers to save.)


    by Michael Wolraich on Fri, 07/08/2011 - 1:32pm

    If people are using increased savings to dig out from debt, then we don't necessarily want to discourage that process from continuing, either by getting people to shift those savings back to spending, or by getting them to start borrowing again at high levels.   What we should do instead is get more income into the hands of consumers.  We can do that in two ways: (i) directly hire the unemployed with funds raised from government borrowing, and (ii) shift wealth through redistributive taxation directly from wealthy people with a very high propensity to save to less wealthy people who spend a much higher percentage of their incomes.


    by Dan Kervick on Fri, 07/08/2011 - 1:57pm

    Discourage the process? You've just spent several hundred words arguing that now is not the time to focus on digging out of debt. One could just as well argue we don't want to discourage the federal government from digging out of debt.

    The fact is that spending spurs economy whether it comes from consumers, businesses, or the government, and frankly, consumers have the bigger impact of the lot. So if you're going to be consistent about keeping the focus on the number one problem in 2011, then you should be arguing that consumers should spend, businesses should spend, and the government should spend. Otherwise we end up like Japan with a fantastic consumer saving rate and a moribund economy.

    My take is that we need a major shift in perspective. We should all be saving like misers in the economic summers (thereby discouraging those pesky bubbles) and spending like sailors during the winters (thereby combating those recessions).

    Now I'm not sure if Americans are can handle this kind of nuance, so it's a little dangerous to encourage spending. But I'm not sure if our politicians can handle it either.


    by Michael Wolraich on Fri, 07/08/2011 - 6:46pm

    Goddammit. I just wrote a ten paragraph reply and the goddam, f-ing text editor ate it! Where the hell did it go!

    by Dan Kervick on Fri, 07/08/2011 - 7:51pm

    In a very simplified nutshell, then:

    1. Households are not the same as national governments!

    2. Households can only spend money they get from income, and income comes from work and investments.

    3. The government can tax!

    4. The government has a printing press!

    5. The government can borrow money at extremely low rates of interest!

    5. Households currently need both to keep paying off their very high debts and start spending more disposable income.

    6. They don't have enough to do both right now, so we need to get households more disposable income.

    7. How?  Well, the rich have a much higher propensity to save then everyone else.

    8. So, we can get households more disposable income by taking money from rich people and giving it to everyone else!

    9. Redistributing from the rich to the poor will raise the overall level of funding for consumption.  It will raise demand, employment and output.

    10. Printing more money is only inflationary if an economy is running close to capacity.

    11. Our economy is running nowhere close to capacity

    12. The government should print money and spend it to generate work and output.

    13. If the government runs a surplus, the private sector will be in deficit.

    14. Given that households are still too indebted and aren't spending enough, a private sector deficit would be bad.

    15. So, the government should run a deficit instead.

    16. Items 1 through 15 are very easy to explain to people.

    17. To explain them, you need to use blunt terms like, "rich", "poor", "take" and "give".

    18. The main reason these "nuances" haven't been grasped by people is that the most powerful man in the world refuses to explain them to people.


    by Dan Kervick on Fri, 07/08/2011 - 8:10pm

    The main reason these "nuances" haven't been grasped by people is that the most powerful man in the world refuses to explain them to people.

    Yes.  Exactly so.  No one else besides the President has the stature and opportunities to communicate this information to the public. I think it's called educating the public. The public is actually educable.  There are limits to that and it takes a conscious effort.  But it can happen. There are even members of the public who want to be educated by their President, who appreciate it if it's explained to them in ways they can follow and if they think that President has their well-being at heart.

    I had a conversation with a colleague at work yesterday, a former (good) speechwriter for our current employer.  It turns out he had read The Fireside Conversations, a book I've been trying to promote, and thought it was outstanding.  He also exchanges emails with Drew Westen, author of The Political Brain, a couple of times a year, he told me.  

    He shared that his experience when he cites FDR's fireside chats as an example of how a president can build a relationship with the public is that people will say he's an old foggy, and that that approach is out of style and irrelevant to our times.  My reply was yes, apparently it's very much out of style to develop an emotional connection with voters and the public, such that they will follow you and support you.  That would be a very dangerous thing to do.


    by AmericanDreamer on Fri, 07/08/2011 - 9:01pm

    No one else besides the President has the stature and opportunities to communicate this information to the public.

    Huh? Not to diminish Obama's failures at communication, but he's not exactly the only person in America with a megaphone. And to be fair, whenever he indulges in nuance, the press criticizes him for being professorial. (Heaven forbid.

    With respect to those fireside chats, Obama has a youtube channel. Ever watch it? Yeah, me neither. Just the first couple of shows. It's all fundraising these days, but it used to be policy focused. It doesn't matter. No one watched anyway.


    by Michael Wolraich on Fri, 07/08/2011 - 9:20pm

    Who do you think has stature that is equal or greater than the POTUS (in America) ... who's words more powerfully shape the national discussion and media narrative?

    I'm not aware of anyone else for whom all major broadcast networks will scramble regular programming to cover anything billed as a "Major National Address". Admittedly, Obama has abused the situation a bit and this has started to lose some of it's potency - but I still can't think of anyone else in America who is pretty much guaranteed such coverage.

    Tossing some vids on a niche social internet site is hardly an example of the president harnessing the potential of his office to aggressively communicate crucial conceptual information to the greatest possible cross-section of the American public. Broadcast media is by far the primary method by which most Americans interface with information relayed by government agencies and officials. Bringing up YouTube is kind of apples and oranges.

    I disagree to an extent w/ what I see as the premise advanced by DK/AD. Obama has totally been using his office to aggressively communicate with the American public. The problem is he has been aggressively communicating that the most important thing for America at this point in time is addressing the deficit and "fixing" independently-funded social programs ... which, BTW, most everyone who has been traditionally held up in more normal times by Democrats as respected seems to agree is the exact opposite message from what the POTUS should be advancing if he shares some pretty basic goals regarding working/middle class recovery.

    Also, are you really putting forth a premise that (fear of) press criticism is justification for Obama not aggressively providing accurate information in a rational and understandable way that would help people make better advocacy/voting decisions? I don't think Obama wants to do what you suppose the press prevents him from doing. But assuming that as an acceptable justification for his inaction, it seems all one would have to do is achieve majority control of a major press operation (and/or arrange for such-minded people to be heavily represented across all major press operations) and criticize the president every time he did or said something not in one's interests to ensure the president never did or said anything that doesn't meet one's approval.


    by kgb999 on Fri, 07/08/2011 - 11:23pm

    I disagree to an extent w/ what I see as the premise advanced by DK/AD. Obama has totally been using his office to aggressively communicate with the American public. The problem is he has been aggressively communicating that the most important thing for America at this point in time is addressing the deficit and "fixing" independently-funded social programs

    Not meaning to advance that premise at all.  Here is part of the rest of the reply I drafted to the Genghis comment you and I are commenting on, which I chose not to include in the comment:

    He has put it to generally poor and unimaginative use so far, a big surprise to many of us who thought he had tremendous promise in that regard.  He simply has not so far been the peoples' President we so desperately need right now, even though the issues were served up to him on a silver platter... 

    The bigger problem, though, now for Obama, is his policies.  Right now, with what he's selling, the best communications strategy in the world will not enable him to offer a narrative that makes him clearly preferable on the jobs issue next year.  Which for a Democrat is inexcusable.  If he wins re-election, which he well might, most likely it will be because his opposition has even more impoverished ideas about what to do to help this country than he has been pursuing.  He has at the moment completely boxed himself in on economic policy by buying into the deficit-reduction trap read of the November elections the Republicans, among others, invited him to step into.   It will be hard, but maybe not impossible, for him to break out of it.  Otherwise the jobs picture does not look good going into next year. Beyond lowballing the stimulus he declined an opportunity to come out aggressively for the House-passed public infrastructure jobs bill that would have positioned him on the right side of the jobs issue last year and going forward. 

    I've been arguing as passionately as I know how to in favor of saying no to any deals on the debt ceiling matter and instead turning the Republicans' gross irresponsibility and recklessness against them to deliver a crushing blow.  Partly because giving in to blackmail is foolish unless he sees it as an opportunity to do things he won't say he supports openly.  And partly because deficit reduction is exactly the wrong thing to do right now for the economy and probably also for his re-election chances.   


    by AmericanDreamer on Fri, 07/08/2011 - 11:47pm

    Hmmm. Appears my comment was phrased inartfully. I was trying to advance that premise myself. It just seems to me that Obama does indeed take the big stage and advance clear ideas. My complaint isn't that he has failed to use his bully pulpit per se. I think he does so from time to time on most major issues. My complaint is that every time he climbs up on the soap-box he takes the opportunity to essentially say "Republicans are right" in a bazillion ways big and small, blatant and subtle.

    Other than that point, I think we pretty much agree on the bigger issues here. I'm seeing almost everyone argue as passionately as they know how on the debt ceiling and related nonsense. I really hope it helps. If not, it certainly won't be from a lack of pressure.


    by kgb999 on Sat, 07/09/2011 - 5:50am

    Well, if your comment was phrased a bit inartfully, mine as well.  I hope it's obvious I don't want him to make effective use of his office to advocate and procure support for bad policies from the public.  I was referring more to him being MIA frequently during the first two years, not delivering the needed message at the needed time, but rather too late (on health care, for example) or not at all (on jobs, for example).


    by AmericanDreamer on Sat, 07/09/2011 - 8:25am

    Also I wrote this on November 3 of last year: http://dagblog.com/reader-blogs/thoughts-how-go-offense-7380

    Since then I've written nothing inconsistent with that point of view, and a fair amount reflecting that view, as I haven't changed my mind on that subject.      

    Frank Rich in his July 3, 2011 piece "Obama's Original Sin" in New York Magazine, wrote: 

    The deficit has never been a top voter priority, no matter how loudly the right claims it is.  At Obama's inaugural, Gallup found that 11 percent of voters ranked unemployment as their top priority while only 2 percent did the deficit.  Unemployment has remained a stable public priority over the deficit ever since, usually by at least a 2-to-1 ratio.  In a CBS poll immediately after the Democrats' shellacking of last November, a debacle supposedly precipitated by the tea party's debt jihad, the question "What Should Congress Concentrate On in January?" yielded 56 percent for economy/jobs and 4 percent for deficit reduction.


    by AmericanDreamer on Sat, 07/09/2011 - 12:47am

    Maybe my point wasn't clear either. Ramona argued that no one besides the president has the stature to explain the economic nuances.

    I agree that Obama has more stature than anyone else. I was making two points. 1) Other people still have plenty of stature which they are not using to effectively explain the nuances. 2) It's not that easy to make people listen to and understand economic nuances--even for the president.

    In other words, the communication failure is the President's problem but not only the President's problem. It's a thorny problem that reaches deep into our politics, institutions, culture, and institutions.


    by Michael Wolraich on Sat, 07/09/2011 - 12:01pm

    Beg to differ.  No one in this country has anything resembling the megaphone he has, based on the stature and prestige of the office he holds. 


    by AmericanDreamer on Fri, 07/08/2011 - 11:26pm

    I'm sorry about the lost paragraph. How did it happen? One good thing about the old rich text editor was that it was fairly forgiving about clicking off the page and hitting the back button. This one seems to lose everything.

    It seems like you're conflating two issues--the current recession (or slump or whatever you want to call it) and wealth inequality. The first is an urgent short-term problem. The second is a long-term problem.

    I read your piece as arguing screw the long-term, we need to address the recession now. And I agree that the recession is an urgent short-term problem that supersedes the long-term federal debt and the long-term wealth inequality (so we shouldn't raise taxes now).

    With respect to consumer debt, however, it seems like you're changing your tune and talking about the long term. I don't mean the people who are drowning in debt and simply cannot spend, but if the recession is a pressing as you say, than those who can afford to spend should be encouraged to do so. Once things stabilize, we can then enact long-term policies to promote saving and wealth equality.


    by Michael Wolraich on Fri, 07/08/2011 - 9:11pm

    I don't think I'm conflating the two issues at all Genghis.  I'm explaining how they are actually connected.  Because the country has spent three decades shifting wealth from the bottom and middle to the top, we are now in a situation where the affluent have so successfully impoverished the foundation classes of the society that the latter can no longer support the affluent in the manner to which the affluent have become accustomed.  Overall prosperity requires an efficiently equal and well-distributed national income that is moving around in a multitude of sectors.  And that is lacking.

    But that's the thing about capitalism.  The sharpies are so good individually at figuring out how to direct the economy's profits into their own bank accounts that over time, and in aggregate, they destroy the very foundation on which their own prosperity rests.

    And the point for the recession right now is that beginning to the wealth back down the ladder, immediately, by direct government action is the very best thing that we can do to get spending and production and consumption moving again, right now.  Inequality isn't just a matter of justice.   It is a major drain on our economy.   We're stuck in a ditch because the people with the highest propensity to consume don't have enough income to spend and aren't buying stuff.   So we need to shovel income in their direction through every kind of direct spending program we can think of.

    I'm not at all saying screw the long term.  I'm saying that the whole idea that we have some massive and dangerously unmanageable long-term debt problem is mainly a ruse.  The "debt scare" of the last two years is a scam concocted by the wealthiest members of the society, and foisted on a gullible public through the politicos and media mouthpieces those wealthy people own and operate.  Ultimately, aggressively smashing the deficit is good for the Pete Petersons of the world, but not for many of the rest of us.  To the extent that there is a long-term debt problem, it will largely be taken care of by growing the economy.  And we're not going to grow the economy by going after the deficit and starving it.

    I haven't changed my tune on anything.  You seem to think that either we must choose between saying "debt is bad and debt service is good right now" or "debt and spending is good and debt service is bad right now."   But the answer is this: public sector debt is good right now and decreasing it is bad right now; private sector debt is bad right now and private sector debt service is good right now; increased private sector consumption is also good right now; and so the redistribution of income in ways that will increase private sector consumption while not stanching the reduction of private sector debt would be excellent right now.   If you don't understand the important differences between private sector debt and public sector debt, you are missing a big part of the picture.

    That confusion has been the whole secret behind the power of people like Peterson to take advantage of the current crisis to help the wealthy cut themselves a bigger picture of the pie and to shrink the public sector permanently: Since people are feeling stressed by their own debt right now they are very vulnerable to the message that the government's debt must be an awful thing, and for the same reasons.   But they are wrong.

    Sure, we could somehow do more to encourage "those who can afford to spend" to do so.  That's Obama's strategy apparently.   Pursue a policy agenda which is beneficial to the well-off, and then beg the rich and the corporations to invest money in production and expansion, even though it appears not to be in their interest to do so at the moment.

    But here's another way:   Take the money from the rich and give it other people who will be more than happy to start spending it right away without any needed extra encouragement at all.

    Maybe you think, "It can't really be that simple, because then a smart, nice guy like Obama would be trying it."  But maybe, (i) he's not that smart, (ii) he's rather conservative, (iii) he has bad advisers, (iv) he's timid and afraid of rocking the boat, and (v) he's the kind of guy who is always kicking the people below him and is overly-eager to win the approval of the people with the highest socio-economic status.


    by Dan Kervick on Fri, 07/08/2011 - 10:11pm

    Dan, I'm aware of the difference between public and private debt and have blogged about it before.

    But debt, whether public or private, is secondary when it comes to immediate growth stimulus. What the economy urgently needs is spending.

    Debt is simply a means to that end. If the government were to distribute money directly to the citizens, and the citizens saved it all instead of spending it, there would be no net stimulus, just a transfer from private debt to public debt.

    Thus, to the extent that the government discourages consumer spending, it will diminish the immediate stimulus effect.

    Now you make a good case that three decades of wealth redistribution is major contributor to our current economic woes. Taxing the rich and encouraging private saving will help address that problem, but what took three decades to accumulate won't be solved in matter of months, and we can only address it effectively with a growing economy.

    So logically, it makes sense to focus on stimulus right now--get people spending with public works, unemployment support, and as you initially recommended, delays in any tax hikes.

    After the recovery, we need to right the wrongs that have led us down this path and reverse the flow of wealth.


    by Michael Wolraich on Sat, 07/09/2011 - 11:39am

    I've had that happen and hate it when it does.  Sometimes if a comment I'm working on is getting longish--that would be most comments in my case--I'll "copy" the text before I hit "preview" to try to keep from losing it if that command goes bad.  That's worked to save me aggravation a few times.  If I don't do that and end up losing a comment, I find I'm usually able to recreate more or less what I'd written if I get back to it immediately.  Plus it distracts me from how aggravated I feel.


    by AmericanDreamer on Fri, 07/08/2011 - 9:13pm

    My reaction to this comment was similar to Genghis'--puzzled.  If we increase income or otherwise get more money to citizens they can basically either spend it, use it to pay down debt, or save it/invest it.  Only the first of these stimulates the economy under these conditions.  

    Paying down debt or saving/investing it adds to the pool of investment capital available. That is not the problem right now.  

    Right now banks are in some cases not loaning money they could loan and probably should loan with reasonable risk-assessment guidelines, to businesses and consumers.  They are gun shy about making loans to smaller and medium sized businesses [ones that apparently have correctly identified a market where there would be sufficient demand, notwithstanding overall slack demand in the economy--I'm a little unclear on how that part squares with the overall assertions that demand is too slack right now] that they think they might get second-guessed on after the fact as too high-risk, if they go bad, following the financial crisis.  

    Larger businesses are sitting on trillions of dollars of capital they are not investing because, with demand so slack, they are not seeing profit-making opportunities.  They can make something or offer a service but not enough people will be buying it, their market research tells them, to enable them to turn a profit.  

    The rest you know.  [But for those newer to basic Keynesian economic theory: the only way the situation changes for the better is if something is done to stimulate demand.  And the only way that can happen is for the federal government to stimulate the economy by increasing deficit spending.  

    Once that is done, it will have a growth-enhancing ripple effect. If they get the stimulus amount right this time instead of low-balling it like they did in 2009, it will launch a virtuous cycle in which demand is stimulated, business picks up, does more hiring, further stimulating consumer demand, increasing tax revenue, bringing down the deficit and the debt, etc.  Repeat cycle and rinse.]

    If we are channeling stimulus money to individuals who will use it to pay down debt, or save/invest, then we need to try to figure out a way of targeting the money better so more of it will be spent now.

    At least that has been my understanding of how the logic of deficit-spending in a recession works.   


    by AmericanDreamer on Fri, 07/08/2011 - 7:41pm

    They are gun shy about making loans to smaller and medium sized businesses.

    My view is that the current problem isn't primarily due to the fact that businesses have identified a lot of very good and potentially profitable opportunities, but that banks are not loaning them money they should be lent because the banks are too gun shy.

    Rather, banks are correctly reluctant to lend money because many of those businesses who want to borrow it cannot demonstrate that they really can make money from the new enterprises.  And they can't make any money from new enterprises because these businesses live in a world of impoverished consumers.   And a lot of businesses are not even trying to borrow money to hire people and expand production.  They have increased their profit margins by firing people, and are now happy to sit of the money they have and invest it only in something safe and relatively unproductive.

    We are not primarily facing a confidence problem.  We have a problem that rests in economic fundamentals.   A citizenry made up in substantial part of of unemployed and underemployed people with declining standards of living cannot generate the demand and spending power needed to get businesses to produce more and hire more.  If your customers can't afford to buy any more than they are already buying, what's the use of spending your valuable money on initiatives that are unlikely to pay off.  That's just throwing money away.

    A big error here is in thinking that because the crisis started with a financial collapse and liquidity freeze the problem is still mainly a financial sector problem.   But it's not.  The problem is that the initial financial collapse had the effect of vaporizing the wealth of millions of Americans, and throwing about a tenth of them out of work.  So now, even with the financial sector returned to health, the smoldering wreck of the workforce cannot generate enough spending to get business moving again.


    by Dan Kervick on Fri, 07/08/2011 - 10:30pm

    Rather, banks are correctly reluctant to lend money because many of those businesses who want to borrow it cannot demonstrate that they really can make money from the new enterprises. 

    I'm unclear on whether this is universally or almost universally true--whether there are basically no parts of the country and local/regional sectors where there is enough demand to start or expand some smaller and medium-sized businesses profitably, or whether there are at least some where the lack of available credit for businesses is a real problem.  

    ​Do you think bankers know, or perceive, that the shortfall in consumer demand is crippling their ability to make profitable loans?  If so, to what do you attribute the fact that the banking lobby is not lobbying for more stimulus?


    by AmericanDreamer on Sat, 07/09/2011 - 12:02am

    I'm sure there is demand in some places and in some businesses.  But if we are looking for an explanation of why business activity and production is only expanding at a sluggish rate, and can't put a dent in unemployment, I think the answer is that there is an overall dearth of opportunity.


    by Dan Kervick on Sat, 07/09/2011 - 1:37am

    Agreed.


    by AmericanDreamer on Sat, 07/09/2011 - 9:04am

    Ramona, remember the Rule of 72? ... if you invest X amount for 72 months (6 years) and never touch it, when it matures you will have doubled your initial investment. It's a very basic investment rule.

    So on one hand you have a saving account takes approximately 72 months to double if you never take any money out, and on the other hand you have the value of a house would double in value in a few years. It doesn't take too much intelligence to see the path to wealth is not with a pass-book saving account ... it's with a mortgage.

    As my uncle once told me ... if you're given an opportunity to get an annuity always chose the one that pays the most out first. The reason for that selection was if you die sooner than later, you would have gotten more out of the annuity than if you took the one than paid a lower amount over a longer period of time.

    The sub-prime mortgage industry was a means by which those who didn't have the necessary financial support for a mortgage to be able to enter the market in hopes they could realize their dream and get on a stable foundation before the rug was pulled out from underneath them.

    But the reason behind the housing crash was based on salaries ... stagnant salaries to be exact. With salaries flatlining while profits rose, people realized their savings was being eaten up by the daily cost of living. So when they noticed their homes were a potential goldmine, they started mining their wealth and adding whatever support structure necessary to keep it's value consistent with their financial needs. That's something a saving account couldn't compete with.


    by Beetlejuice on Fri, 07/08/2011 - 2:19pm

    Beetle, you are forgetting that the rule of seventy-two, which is a good tool for estimating doubling time of an investment, has a variable. The variable is the interest paid on the saved money or the percentage rate of return on the investment. To realize a doubling of your money in six years you would have to get a constant rate of return of twelve percent compounded. If you know of anyone paying that rate please let me know who it is.


    by A Guy Called LULU on Fri, 07/08/2011 - 7:48pm

    The Republican response to the jobs numbers is to insist that we should not raise taxes.

    There is a silver lining in this rhetoric.  By saying that taxes should not be raised, they are admitting that federal fiscal policy has an impact on economic activity, and that extracting purchasing power and demand from a starving economy filled with unemployed people is a very bad idea.  The very same logic says we should not be cutting spending either.  And yet  Republicans will not have the logical acumen to draw that obvious inference.

    So, Obama needs to draw the inference for them.  He should say: "Our economy is starving, and now is not the time either to impose new costs on the American people or withdraw federal government spending that helps support household incomes and demand.  So for now: no new taxes and no spending cuts.   In fact, we should think about both cutting taxes on middle class Americans and increasing spending - especially spending on programs to put America back to work.   Let's agree now to table the budget and debt debate, and  return to it after we have restored our economy to health, and returned prosperity to the American people."


    by Dan Kervick on Fri, 07/08/2011 - 1:20pm

    Look at it this way ... Obama is gonna make Bachmann's candidacy a shoo-in. A lot of Democrats and Independents are going to stay away from the polls simply because it wouldn't make a difference if either one were elected ... neither has a plan to help the public and what little help there is would be scuttled to reduce government expenditures so taxes wouldn't need to be raised. At least with Bachmann, you know up front she's bat-shit-fucking crazy so it would be easier to deal with rather than hoping Obama would do the right thing.

    Seriously, we might have been better off with McCain and Palin in the White House. At least, the GOPer's teflon coating would have worn thin and the shit they've been throwing about would be sticking to them by now.


    by Beetlejuice on Fri, 07/08/2011 - 1:42pm

    Oleeb has convinced me Obama has Republican stripes. Reports say he sidelined Paul Volcker, & his other economic advisors are a discredited shabby bunch of Wall Street shysters, I read that his favorite columnists included thick skulled Brooks of the NYT, and although a genius compared to W,  and an eloquent thinker and speaker, as Watree has observed, Obama does not seem to know yet how to wield power.


    by NCD on Fri, 07/08/2011 - 2:33pm

    I feel that you made some good points until you began to speculate about the destruction of progressive government... as though you even know progressivism is a good in itself....? Take care with that word. Some government action not only doesn't result in progress, it results in nothing, or less _ than _ nothing, i.e. serious setbacks due to over-reach and inept micro-management of affairs that are not in the government's area of expertise.

    Also note that Greece's austerity measure is what opened the door (with notable vocal exceptions) to more bailouts. The troublesome thing about bailouts is that nobody learns anything useful by them, they are artificial... at best are usually a bandage when a more serious infection is lurking beneath the surface. Sometimes, the only way to restore health is through amputation. That may sound harsh, but if you were the one about to lose a hand (rather than your whole arm?) you'd see the wisdom in it.


    by smithers_T on Sat, 07/09/2011 - 3:19am

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