Unemployment Falls

No, that 's not what I said. Please pay attention so you don't sound stupid. There is nothing in Romney's past or current positions to make me think he will be substantially different than President Obama. He is a lot like President Bush. He hasn't even said anything about reducing the national debt, only that he MIGHT make it go up at a slightly slower rate than President Obama.

He's never said what he will do once he repeals Obamacare, If Massachusetts is any indication, he will simply make some cosmetic changes and resubmit it. Health care needs reform, market-based reform. He's not the one to do it.

Both parties are beholding to the major defense, oil, pharmaceutical and banking industries. Romney is no different. Therefore, nothing will change of any significance with him in charge. And I don't think that blaming a predecessor is good policy. The failure of previous presidents to enact appropriate policies does not exempt a current president from doing what is right.

It's easy enough to reflexively state that there's no way Romney could be as bad as Obama, given how disastrous the latter obviously is. And I think that's probably the case. At least, one would expect that he wouldn't seek to aggressively expand the fiscal kamikaze mission we've been engaging in for the last few years, and might seek to at least cut the rate of growth of government spending to some extent.

However...

I think there may be one respect in which a Romney presidency could be even worse than a second Obama term.

To wit:

One thing that's been discussed on a couple of the finance blogs is that Romney has stated his openness to the idea of imposing a VAT.

Obama has little chance of pushing through such a measure, since Republicans reflexively block anything he proposes, whether on principle or purely partisan grounds. It wouldn't have a snowball's chance in hell. But some people in the financial world think that if Romney were to become president, congressional Republicans might help pass a VAT in order to go along with a president of their own party.

If a VAT -- even one with an initially low rate -- gets its camel's nose under the tent, watch out! The European experience shows that big-spending politicians simply continue jacking up the VAT rate as desired. Imagine the lustful cravings for even higher levels of spending that revenue-raising mechanism would engender in virtual armies of political hacks whose favorite sport is buying votes with other people's money.

What's this "my side" stuff? What do you think is "my side?" (Hint: it's not the Republicans.) So: Forgive "my side?" I do no such thing. You're the one who does that, as is obvious to everyone else reading this forum.

You have a side...we only have two parties from which to choose.



If you want to blame a GOP president who actually did have a lot to do with the fiscal hole we're in, why don't you turn your guns on George W. Bush instead? With you, everything's always about Reagan.

Reagan started the GOP koolaide drinkers into thinking deficits do not matter. Ask Dick Cheney.

Although deficits of the '80s are simply dwarfed by current deficits, you seem to have no problem with that. Do you think Obama is acting responsibly? (Of course, I realize there's no way you're going to give any kind of straight answer to that question.)



. Originally Posted by CaptainMidnight

I have a huge problem with Obama. I am for Bowles-Simpson. But my guess is that Obama does not want to wind up like Jimmy Carter, which is put in all the difficult steps and let the next President get all the glory. That is what Reagan did.

So since Carter and Bush I, nobody wants to take any steps to do the right thing.

My main point and I have said it many times is this: Do we have the form of government to fix something before it becomes a crisis? I have stated many times that I think not. Therefore I do not believe any President will do anything until both parties think they have to.

That is the side I am on. I realize you know way more details but you seem to get stuck in those details as if they will be fixed. IMHO they will not be until we hit crisis mode. That is how this form of government seems set up.

Do you disagree with that?

Yep, the hypocrisy can get pretty deep when one is a blind partisan who always thinks that only one party is ever irresponsible.

In the investment world, we often enjoy making fun of the astonishingly clueless and hypocritical Paul Krugman. Nine years ago, he mused about the tendency of irresponsible governments to "print money", both to pay current bills and eventually to inflate away debt. At the time, he worried about 10-year deficit projections that in his opinion were in the neighborhood of $3 trillion.

But now that that they are several times that high, he has no problem with endless deficit spending and money-printing. In fact, he has been calling for much more of it, claiming that we need it to stimulate the economy more by stacking up even more deficit spending! (Even though at no time in history have such efforts ever turned out well.)

Krugman is a Keynes man and you know it. They advocate paying down debt in good times and huge government spending in bad times.

I may not know near as much details as you but I know spin when I see it.

I am not saying Krugman is right or wrong but to compare what he said about government spending then and now is totally wack from that prespective.

While Krugman blasted Bush for large tax cuts (which went primarily to lower-income groups, not the wealthy, contrary to popular belief), he says nary a word in opposition to Obama's decision to leave them in place while adding large payroll tax cuts, which are likely to be politically very difficult to restore. For some of these clowns, perspective always depends on which party is in power.

You just can't make this stuff up!

Here's the article from 2003:

A Fiscal Train Wreck

By PAUL KRUGMAN
Published: March 11, 2003
With war looming, it's time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.

From a fiscal point of view the impending war is a lose-lose proposition. If it goes badly, the resulting mess will be a disaster for the budget. If it goes well, administration officials have made it clear that they will use any bump in the polls to ram through more big tax cuts, which will also be a disaster for the budget. Either way, the tide of red ink will keep on rising.
Last week the Congressional Budget Office marked down its estimates yet again. Just two years ago, you may remember, the C.B.O. was projecting a 10-year surplus of $5.6 trillion. Now it projects a 10-year deficit of $1.8 trillion.

And that's way too optimistic. The Congressional Budget Office operates under ground rules that force it to wear rose-colored lenses. If you take into account -- as the C.B.O. cannot -- the effects of likely changes in the alternative minimum tax, include realistic estimates of future spending and allow for the cost of war and reconstruction, it's clear that the 10-year deficit will be at least $3 trillion.



So what? Two years ago the administration promised to run large surpluses. A year ago it said the deficit was only temporary. Now it says deficits don't matter. But we're looking at a fiscal crisis that will drive interest rates sky-high.

A leading economist recently summed up one reason why: ''When the government reduces saving by running a budget deficit, the interest rate rises.'' Yes, that's from a textbook by the chief administration economist, Gregory Mankiw.

But what's really scary -- what makes a fixed-rate mortgage seem like such a good idea -- is the looming threat to the federal government's solvency.

That may sound alarmist: right now the deficit, while huge in absolute terms, is only 2 -- make that 3, O.K., maybe 4 -- percent of G.D.P. But that misses the point. ''Think of the federal government as a gigantic insurance company (with a sideline business in national defense and homeland security), which does its accounting on a cash basis, only counting premiums and payouts as they go in and out the door. An insurance company with cash accounting . . . is an accident waiting to happen.'' So says the Treasury under secretary Peter Fisher; his point is that because of the future liabilities of Social Security and Medicare, the true budget picture is much worse than the conventional deficit numbers suggest.

Of course, Mr. Fisher isn't allowed to draw the obvious implication: that his boss's push for big permanent tax cuts is completely crazy. But the conclusion is inescapable. Without the Bush tax cuts, it would have been difficult to cope with the fiscal implications of an aging population. With those tax cuts, the task is simply impossible. The accident -- the fiscal train wreck -- is already under way.

How will the train wreck play itself out? Maybe a future administration will use butterfly ballots to disenfranchise retirees, making it possible to slash Social Security and Medicare. Or maybe a repentant Rush Limbaugh will lead the drive to raise taxes on the rich. But my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt.

And as that temptation becomes obvious, interest rates will soar. It won't happen right away. With the economy stalling and the stock market plunging, short-term rates are probably headed down, not up, in the next few months, and mortgage rates may not have hit bottom yet. But unless we slide into Japanese-style deflation, there are much higher interest rates in our future.

I think that the main thing keeping long-term interest rates low right now is cognitive dissonance. Even though the business community is starting to get scared -- the ultra-establishment Committee for Economic Development now warns that ''a fiscal crisis threatens our future standard of living'' -- investors still can't believe that the leaders of the United States are acting like the rulers of a banana republic. But I've done the math, and reached my own conclusions -- and I've locked in my rate.

E-mail: krugman@nytimes.com Originally Posted by CaptainMidnight

I goot go to bed . I got an early flight

There are only two sides because we've been told there are only two sides. Once we see that we are not limited to the two sides of the same coin, we might be able to save this country.

WTF, first of all with regard to the comments you inserted within my preface to the pasted article in post #124:

By "spin", I hope you are referring to the spin typically offered by Krugman under virtually any set of circumstances. As we have discussed in the past, you are correct to note that Keynes is often misunderstood, inasmuch as he advocated running surpluses -- or at least balanced budgets -- in normal times. But please recall that he also strongly opposed creating structural deficits of a nature that return to balance is extremely difficult for political or other reasons. And, of course, that's where we are now.

And you mentioned the advocacy of "huge" government spending in bad times. I have a bit of a problem with the word "huge." It suggests that almost no effort to "stimulate" the economy by fiscal means would be too great. Supporters of this doctrine cannot point to a single instance where it's boosted the prosperity of a nation, and there are plenty of instances where it has simply failed. Look at Japan, for instance. It has been mired in slow growth for 20 years, despite the fact that it has tripled its debt/GDP ratio to a level of about 2.3/1 in repeated attempts to stimulate its economy.

If Krugman thinks the deficits beginning to develop back in 2003 were likely to produce some severe economic dislocations and consequences, then he must think large deficits can eventually destroy prospects for economic growth, ipso facto. Therefore, he cannot possibly think the idea of running deficits several times that large isn't fraught with risks. He may think it's necessary to stimulate the economy, but he cannot possibly imagine that it will be an action that will not produce adverse long-term consequences. You can't have it both ways.

The reason for these obviously irreconcilable statements, of course, is that Krugman, who used to be a respected economist, is now simply a political hack supporting liberal causes. You will see that if you read all his columns and blogs.

As for your statement that I have a "side", since there are only two parties from which to choose, the only "side" I'm on is the one of fiscal discipline and responsibilty. Therefore, I cannot support the candidates that have been offered by either of our dysfunctional major parties. I have voted for the Libertarian candidate in the last six presidential elections, since libertarians are closest to my views. Yes, they are a little far "out there" on some issues; if fact, too much for my tastes. And they may never get a bigger slice of the vote than the tiny one they get now. But I would at least like to see a bigger seat at the table for those of us who favor limited Constitutional government. Idealistic and crazy? Maybe. But that's the way I feel about it.

I have a huge problem with Obama. I am for Bowles-Simpson. But my guess is that Obama does not want to wind up like Jimmy Carter, which is put in all the difficult steps and let the next President get all the glory. Originally Posted by WTF

I have a viewpoint on this that may differ from most.

Carter's biggest problem was that he waited until his term was about two-thirds over before making any tough decisions. (Such as putting Volcker in the Fed chair in August of 1979). He spent his first couple of years making the problem far worse, and in 1978 actually appointed a Fed chairman (Miller) who was even worse than his predecessor (Burns). That stoked an already serious inflation problem and precipitated the dollar crisis of 1978.

One might note that even during that time (1977-78) we were seeing decent period-over-period GDP growth and job ceation, although it was against the backdrop of destructive monetary policy. That should point out how ridiculous it is to credit Obama's economic policies with last month's 250K NFP print. At least until the next crisis or recession occurs, you still can always have what appears to be some growth, since producers always want to produce, sellers always want to sell, etc.

The key point I would make here is that Carter should have undertaken aggressive inflation-fighting measures right away in early 1977. Remember, inflation had been a fairly serious problem for years before Carter took office, although it didn't reach crisis proportions until 1978-79. Delaying aggressive action until 1979 made the ensuing recession much worse than if the problem had been confronted two years earlier. If we had taken the medicine up front, we might have had a cyclical recovery by 1978 or 1979, and inflation would have been a thing of the past. In that scenario, I think Carter would probably have been re-elected.

By the same token, I think Obama should have confronted the problems he initially faced in a more serious way. Instead of a blatantly political agenda, we needed an economc growth and recovery agenda. Instead of just pouring out money with an ill-considered and mostly wasted $800 billion fiscal "stimulus" package, we needed to devote scarce resources wisely to such thinks as needed infrastructure maintenance and development , not just porky projects designed to pay off favored constituencies. If we had combined temporary support for the economy with a real fix for the financial sytem (which Dodd-Frank manifestly was not), a credible glidepath toward deficit reduction (such as Simpson-Bowles or anyting similar, and real tax reform, I think the outlook today would be much better than it is.

My main point and I have said it many times is this: Do we have the form of government to fix something before it becomes a crisis? I have stated many times that I think not. Therefore I do not believe any President will do anything until both parties think they have to. Originally Posted by WTF

No, I do not think we do, so that's why I think we will have a very serious fiscal crisis. That's already baked into the cake. It's a matter of when, not if. Obama obviously has no intention of making any tough decisions. But in the event that Romney wins the election, I doubt that he will either. He would probably start right out from day one running for re-election.

The problem is that these are not normal times, so "normal" politicians will no longer do. We need to government equivalent of a corporate turnaround expert; someone willing to step on some toes and break some china. And I mean almost everyone's toes. We can't possibly keep the promises we've made and maintain tax cuts for everyone. It's simple arithmetic. I know that doesn't comport with Fast Gunn's "alternate reality" view, but that's simply the way it is.

That is the side I am on. I realize you know way more details but you seem to get stuck in those details as if they will be fixed. IMHO they will not be until we hit crisis mode. That is how this form of government seems set up.


Do you disagree with that? Originally Posted by WTF

The only point with which I disagree is your statement that I get "stuck in those details as if they will be fixed." As I've said before, I don't think anything at all will be fixed until we experience a very severe crisis.

Otherwise I think you're spot on.