Like it did over here, Doc? 2 years after the Coalition came in we have gone back into recession. Ricky is right, you are proposing that solutions to medium / long term problems will have a short term impact. We tried cuts and 'allowing' the private sector to step in. However, the interconnectedness of the economy means that the private sector - particularly construction - is suffering and not providing the predicted growth and jobs.

But I don't believe you have a clue about the real economy. How much proper private sector experience do you have?

danivon wrote:Like it did over here, Doc? 2 years after the Coalition came in we have gone back into recession. Ricky is right, you are proposing that solutions to medium / long term problems will have a short term impact. We tried cuts and 'allowing' the private sector to step in. However, the interconnectedness of the economy means that the private sector - particularly construction - is suffering and not providing the predicted growth and jobs.

But I don't believe you have a clue about the real economy. How much proper private sector experience do you have?

Ooh, Danivon plays the "I'm more of a capitalist than you are" card! It's all the more impressive when a socialist/progressive/liberal/whatever he wants to call himself plays the card.

We have had $5T in borrowing over the last three-plus years. That has resulted in . . . . the weakest recovery from a recession in modern American history.

The "unemployment rate" dropped today. [url=In April the number of people not in the labor force rose by a whopping 522,000 from 87,897,000 to
88,419,000. This is the highest on record. The flip side, and the reason why the unemployment dropped to 8.1% is that the labor force participation rate just dipped to a new 30 year low of 64.3%. ]The reality[/url] is a bit different:

In April the number of people not in the labor force rose by a whopping 522,000 from 87,897,000 to
88,419,000. This is the highest on record. The flip side, and the reason why the unemployment dropped to 8.1% is that the labor force participation rate just dipped to a new 30 year low of 64.3%.

There are many reasons for this. Some of it is directly related to some of the President's "greatest" achievements. Dodd-Frank and Obamacare have created such fear and uncertainty in the business sector that many companies refuse to hire. They are concerned about what future regulations will result from these unbounded laws. I was reading on Dodd-Frank yesterday. It gives unprecedented control to the executive branch. They can threaten anyone with the "too big to fail" label. There is no review, no appeal, etc. There are so many regulations yet to be written, can anyone question why the private sector is jittery?

While you, Danivon, are trying to draw a sharp contrast between Europe and the US, the truth is we are pursuing European policies and expecting different outcomes. If we remain on Obama Road, we will soon be in worse shape than the UK. If the plan is to inflate our way to prosperity, why doesn't the President just say it?

All he is doing is running "against" everything responsible. He's against reducing the deficit and debt. He's against resolving the SS/Medicare black hole. He's against producing cheap energy.

Why will the US recover quickly if Obama is defeated? Because we will see the rapid dismantling of Obamacare and Dodd-Frank. The money sitting on the sideline will be invested, meaning people will get hired. Optimism will replace pessimism.

Doctor Fate wrote:Ooh, Danivon plays the "I'm more of a capitalist than you are" card! It's all the more impressive when a socialist/progressive/liberal/whatever he wants to call himself plays the card.

'Socialist'. With pride, I might add.

But I'm not playing that card. I'm not saying I'm a better capitalist, I'm saying you have little real experience of the economic realities of capitalism (or whatever system we are in). as evidenced by the guff you come up with here...

We have had $5T in borrowing over the last three-plus years. That has resulted in . . . . the weakest recovery from a recession in modern American history.

So you keep saying. But it's also one of the deepest recessions in modern American (nay, World) history, and one in which it wasn't just public finances were squeezed but one in which private companies - particularly the banks that fuel the capitalist system - also ended up in massive debt. And the recession itself was more closely tied into the latter than the former, as is the problems of recovery.

In April the number of people not in the labor force rose by a whopping 522,000 from 87,897,000 to
88,419,000. This is the highest on record. The flip side, and the reason why the unemployment dropped to 8.1% is that the labor force participation rate just dipped to a new 30 year low of 64.3%.

There are many reasons for this. Some of it is directly related to some of the President's "greatest" achievements. Dodd-Frank and Obamacare have created such fear and uncertainty in the business sector that many companies refuse to hire. They are concerned about what future regulations will result from these unbounded laws. I was reading on Dodd-Frank yesterday. It gives unprecedented control to the executive branch. They can threaten anyone with the "too big to fail" label. There is no review, no appeal, etc. There are so many regulations yet to be written, can anyone question why the private sector is jittery?

You forget a pretty key reason why lots of people are leaving the workforce that you may well be ignoring:

The baby boomers born in the late 1950s are retiring.

I doubt they care much about regulation as much as they do about being able to take their pensions.

While you, Danivon, are trying to draw a sharp contrast between Europe and the US, the truth is we are pursuing European policies and expecting different outcomes. If we remain on Obama Road, we will soon be in worse shape than the UK. If the plan is to inflate our way to prosperity, why doesn't the President just say it?

We are pursuing Austerity. We are doing what you and Ryan and Romney and all the clever Conservatives want to do in the USA.

Why will the US recover quickly if Obama is defeated? Because we will see the rapid dismantling of Obamacare and Dodd-Frank. The money sitting on the sideline will be invested, meaning people will get hired. Optimism will replace pessimism.

What money 'sitting on the sideline'? Who does this investment stuff? Largely it is banks through lending, large financial institutions with funds (pension and insurance companies) and companies themselves. Why are they not investing? Not because of 'regulations' or whatever, it's something far more simple. They don't have the money. Banks are still reeling from their astonishingly dumb race to lend each other as much bad debt dressed up as AAA as they could blowing up into the 2008 crash. So they can't lend. Pension and other invesment houses took a bath in the recession and are far more eager to invest in safe things, like government bonds, than in equities. And a lot of companies are having a bit of a problem with their cash flows as a result of the recession.

A few legislative purges will not create vast amounts of spare cash 'on the sidelines' that doesn't exist. And investors will not suddenly jump in even if your magic wand cure is waved at the end of January 2013, because the best investors are cautious people.

However, sharp cuts in government spending will result in short term job reductions and in depressed consumer spending, which will actually make it less likely that people will take risks to invest. As we are seeing in the UK.

danivon wrote:

Doctor Fate wrote:Ooh, Danivon plays the "I'm more of a capitalist than you are" card! It's all the more impressive when a socialist/progressive/liberal/whatever he wants to call himself plays the card.

'Socialist'. With pride, I might add.

But I'm not playing that card. I'm not saying I'm a better capitalist, I'm saying you have little real experience of the economic realities of capitalism (or whatever system we are in). as evidenced by the guff you come up with here...

Capitalism is "guff" to you, so . . . whatever.

You forget a pretty key reason why lots of people are leaving the workforce that you may well be ignoring:

The baby boomers born in the late 1950s are retiring.

That's your defense? Really? Prove this is the reason for the shrinking workforce. Is America's population increasing or decreasing? If increasing, would that not weaken your argument, particularly as it has been increasing for . . . decades?

I doubt they care much about regulation as much as they do about being able to take their pensions

.

No doubt. But, what of all the money "on the sideline?" Those who control it want to know what the rules are going to be. Uncertainty is the enemy of growth.

We are pursuing Austerity. We are doing what you and Ryan and Romney and all the clever Conservatives want to do in the USA.

Someone at some point has to tighten his/her belt and get our debt under control. Liberals say we can't have enough debt--ask Krugman. Borrow more!

What money 'sitting on the sideline'? Who does this investment stuff? Largely it is banks through lending, large financial institutions with funds (pension and insurance companies) and companies themselves. Why are they not investing? Not because of 'regulations' or whatever, it's something far more simple. They don't have the money.

???

Really? Are you that daft? Corporate profits are just fine. Many corporations are cash rich. http://finance.yahoo.com/news/apple-hos ... 50673.html

Not all are Apple-rich, but many could hire and will not.

However, sharp cuts in government spending will result in short term job reductions and in depressed consumer spending, which will actually make it less likely that people will take risks to invest. As we are seeing in the UK.

Sharp cuts? Who is proposing "sharp cuts?" What you must mean is "some cuts" because only Ron Paul is proposing "sharp cuts." Meanwhile, President Obama has shown an unprecedented penchant for trillion dollar annual deficits. He is a debt-making machine.

It might not bother you, but most Americans think it is irresponsible and unsustainable. Strangely, that's exactly what candidate Obama said too.

steve

While you, Danivon, are trying to draw a sharp contrast between Europe and the US, the truth is we are pursuing European policies and expecting different outcomes

Is that sane? Pursuing government austerity, and expecting a different result from what government austerity has done to the European economies recovery?
And isn't ironic that Europe, so often held up by conservatives as a cautionary tale for its "socialism" isn't now being held up as a cautionary tale.... When the evidence is very clear that austerity has had very negative short term effect. Oh the lens one sees things through must be cloudy indeed.

steve;

There are many reasons for this. Some of it is directly related to some of the President's "greatest" achievements. Dodd-Frank and Obamacare have created such fear and uncertainty in the business sector that many companies refuse to hire

This is utter nonsense. Obama care doesn't kick in till 2014 and one reason investment stopped was the uncertainty about how the deregulated financial markets would work...Dodd Frank helped bring some predictability to markets that were frozen in uncertainty brought about by insane investment machinations by Wall Street. And its not like this isn't repeated every time that deregulation allows investment firms too much freedom, they screw the economy. (1929, te S&L crisis)
The major reason the labour market is shrinking since 1995, is almost entirely demographic. See below:
One quarter of the decrease since 2008, is because a lot of unemployed are "disabled" and moved to SSID benefits. Part of this may be the less healthy American work force.....However most of the decrease in work force size is explained by the Baby Boom Bubble reaching retirement age., (read Boom Bust Echo) .Or the report below:

The authors conclude that just under half of the post-1999 decline in the U.S. labor force participation rate, or LFPR (the proportion of the working-age population that is employed or unemployed and seeking work), can be explained by long-running demographic patterns, such as the retirement of baby boomers. These patterns are expected to continue, offsetting LFPR improvements due to economic recovery

http://www.chicagofed.org/digital_asset ... 12_296.pdf

What money 'sitting on the sideline'? Who does this investment stuff?

Actually Danivon I think there is a significant amount of money sitting on the sidelines. And a significant amount that is being reinvested is being reinvested over seas. Thats down to the way American corporations pursued internationalism in the 80s and 90s. Where other countries pursued industrial policies that ensured the development of industry and a domestic economy leading american corporations went where they could make the biggest profit and hang the consequences for the American populace. Today a lot of those profits being reported are being reinvested elsewhere.... A consequence of laissez faire capitalism and the utter belief in the wisdom of the markets... Apple making big profits benefits China disproportionally to the US.

While other countries, such as Germany, tend to produce goods in-country for export, the United States has traditionally established outposts in local markets to produce goods for those markets. While those new facilities obviously are employing few if any Americans, opening stores or plants in other countries generally means hiring more people in the United States to provide management and other support for that growth

http://economywatch.msnbc.msn.com/_news/2012/04/27/11431555-big-us-companies-adding-jobs-overseas?lite

Some of the corporate profits sitting on the sidelines are also there because they've been accrused very quickly and the corporations making the profit really haven't got a way to reinvest quickly in their businesses, and are loathe to diversify to industry they do know know.. (Google has trouble in this for instance) There's no evidence anywhere that Obama Care or Dodd Frank has any affect on investment decisions... Health insurance costs (and the underlying health care costs) in the US are part of the problem of competitiveness of US industry. That may force some to invest out of country to where the cost of operating is lower.... mostly to those countries with socialized medicine... But thats not because of Obama care unless its because Obama care is incremental change when a complete change is required to make the US health care system cost competitive.... And nothing from the right approaches a solution on that either...

steve

The money sitting on the sideline will be invested, meaning people will get hired. Optimism will replace pessimism.

Oh the magic of the austerity fairy and the optimist elf!!!!!
Companies invest when they see an opportunity to make money by doing so. When domestic demand is low, those companies producing for the domestic market don't invest. When money is taken out of the economy because of government austerity, it decrease the overall domestic consumer market. Unemployed government workers don't shop too much.
A company seeing an increase in sales in its market doesn't wonder whether or not those products are being bought by government workers... If it sees demand that it could meet by expanding it will do so... The problem right now, is that the domestic demand, which makes up such a large portion of the US economy, is down. Exacerbating that problem by austerity is proven by the European experience to have the opposite effect on the domestic market and that will stop investment dead in its tracks...

What is forcing European austerity? In Greece's case it is that Germany doesn't want to lend them more money. How about France, Spain, and the UK? It will be interesting to see what France does now, and whether it works, and whether the Germans oblige.

Re the US, I don't think austerity describes where we are. It seems like a political term more than an economic one. I'm under the impression that our government spending per person continues to increase, even if you strip away defense and homeland security. We've had deficit spending since 2001 which has severely limited policy options no matter who is in office in 2013. Since we cannot go back in time, we have to figure out what to do NOW. Debts do have to be repaid sometime. At some point credit limits are not automatically expanded.

What is the Keynesian prescription if we continue with tepid expansion for another 4 years and have our debt increase by another $6 trillion?

(Ricky, if you must answer, I insist upon basic grammar. Please don't waste my time with your gobble-goop. I won't read it.)

Gobbledegook.

If there is still growth, however tepid, it's time to be easing back on spending and increasing tax income. A gradual deficit reduction policy would make sense over the next few years.

Chances are that worldwide growth will be tepid anyway. China is trying to put the brakes on.

ray

Debts do have to be repaid sometime. At some point credit limits are not automatically expanded

.

I doubt that the US is anywhere near to its credit limit.
History can provide a lesson. The US grew its accumulated debt from 146% of GDP down to 34% from 1945 to 1980.
Expecting short term solution to debt accumulation is madness, when history has shown a clear path, but a path that the US stopped following in 1980 ....
The short term goal has to be creating conditions where the economy grows at 4 to 5% .... Austerity, which hasn't really been followed in the US full tilt due to the Washington log jam, would serve to obliterate the slow growth that has been accomplished...

The only credit limit is the arbitrary one set by Congress. Markets are not signalling that they see the US as being at a real limit.

rickyp wrote:steve

While you, Danivon, are trying to draw a sharp contrast between Europe and the US, the truth is we are pursuing European policies and expecting different outcomes

Is that sane? Pursuing government austerity, and expecting a different result from what government austerity has done to the European economies recovery?

You do stand-up, don't you?

The US is pursuing "austerity?" So, the largest deficits in Earth's history are "austere?"



I do not think that word means what you think it means. Where are the cuts?

As for Europe, they are paying the price for decades of over-promising. One need look no further than Greece to see how ridiculous your "austerity" claim is. They ask people to accept modest cuts in the government's largesse and there is rioting.

rickyp wrote:

There are many reasons for this. Some of it is directly related to some of the President's "greatest" achievements. Dodd-Frank and Obamacare have created such fear and uncertainty in the business sector that many companies refuse to hire

This is utter nonsense. Obama care doesn't kick in till 2014 . . .

Not so. Some of the provisions have kicked in, or have you missed Uncle Joe Biden boasting about it? Maybe you've forgotten? Up to 26 and on your parents' policy? No one can be refused because of pre-existing conditions?

Some of the taxes have also kicked in. Furthermore, many companies have looked into the future and know exactly how this regime runs things--and it frightens them.

. . . and one reason investment stopped was the uncertainty about how the deregulated financial markets would work...Dodd Frank helped bring some predictability to markets that were frozen in uncertainty brought about by insane investment machinations by Wall Street. And its not like this isn't repeated every time that deregulation allows investment firms too much freedom, they screw the economy. (1929, te S&L crisis)

What do you know about how Dodd-Frank is being implemented? Given that regulations are being promulgated now, how much do you know?

If the act is fully implemented, a U.S. industry once so aggressive and innovative that it came to dominate the world’s financial markets will be reduced to a ward of the U.S. government. The current controversies over the Volcker Rule and the Consumer Financial Protection Bureau, for all the attention they have drawn, are really minor matters compared with the overall structure and effect of the act. Indeed, its most significant elements are hardly discussed at all, even on the business pages.

Let’s start with the Financial Stability Oversight Council (FSOC). Ever heard of that? It’s a new agency made up of all the federal financial regulators—the SEC, the CFTC, the Comptroller of the Currency (regulator of national banks), the FDIC (regulator of most state-chartered banks and insurer of all banks), and of course the Federal Reserve (regulator of bank holding companies and soon-to-be regulator of the entire financial system)—to name just a few.

The chairman of this body is the secretary of the Treasury. Right away, this should raise red flags. The secretary, a top officer of every administration, has now been given authority, through the FSOC, over all the financial regulators. To put this in perspective, before Dodd-Frank, Treasury and White House staffs were forbidden to contact the independent regulatory agencies about policy matters, except under special circumstances, for fear of political interference—or the appearance of political interference—in matters of regulatory policy. Under Dodd-Frank, the council is also exempt from the Federal Advisory Committee Act, so its meetings are not open to the press or public.

In other words, longstanding policies that were intended to promote confidence in the independence of regulatory decision-making have now been wiped away by the act, which has in effect placed all the financial regulators under the direction of the Treasury secretary. This might be good or bad, depending on your view of how much power you think a president should wield, but the point is that this profound change in government policy was never seriously debated in Congress, and is largely unknown to the public.

And power there is. The council may designate any financial firm as a “systemically important financial institution” (SIFI) if in the council’s judgment its failure could cause “instability” in the U.S economy. This applies to all financial firms—insurers, securities firms, finance companies, hedge funds, pension funds, perhaps even mutual funds and private equity firms, and of course banks. All banks and bank holding companies with assets of more than $50 billion are designated as SIFIs in the act, but the designation of nonbank financial firms as SIFIs is left to the FSOC. Other than the $50 billion threshold for banks, there are no numerical or empirically discernible standards for this decision. The FSOC has put out draft regulations for comment that cite such things as “interconnectedness” as a factor in the designation, but how they are to be measured is left completely in the council’s discretion.

In other words, the executive branch has unprecedented and unchecked power. And, they're not done writing this thing up yet.

The major reason the labour market is shrinking since 1995, is almost entirely demographic. See below:
One quarter of the decrease since 2008, is because a lot of unemployed are "disabled" and moved to SSID benefits. Part of this may be the less healthy American work force.....However most of the decrease in work force size is explained by the Baby Boom Bubble reaching retirement age., (read Boom Bust Echo) .

Many are "disabled" because it's easy to get declared "disabled." It takes very little to be found "depressed" and unable to work.

I find it funny that you blame age. So, we're gaining population, but it's all old? Why don't the Democrats just say that?

What money 'sitting on the sideline'? Who does this investment stuff?

There's no evidence anywhere that Obama Care or Dodd Frank has any affect on investment decisions...

Yeah, it's a coincidence that these two programs are passed and now no one wants to invest (hire).

Health insurance costs (and the underlying health care costs) in the US are part of the problem of competitiveness of US industry. That may force some to invest out of country to where the cost of operating is lower.... mostly to those countries with socialized medicine...

Yet, Obamacare was supposed to bend the cost curve downward. And, if socialized medicine is the key, Europe should be taking off. So, what's wrong?

Oh the magic of the austerity fairy and the optimist elf!!!!!

Why do we try to measure things like consumer confidence? Because how people feel about the economy matters. Perception is not reality, but perception shapes reality.

Companies invest when they see an opportunity to make money by doing so.

Right, so you propose lowered demand which must be funded by more government borrowing. How much? How much money must we rack up in debt? A $2T stimulus? $4T? Is there any limit on how much government must prime the pump? Is there any limit on how much the US can borrow without seeing interest rates skyrocket? What tax rate should my grandchildren have to pay to maintain the Debt?

When domestic demand is low, those companies producing for the domestic market don't invest. When money is taken out of the economy because of government austerity, it decrease the overall domestic consumer market. Unemployed government workers don't shop too much.

Interesting point. Pelosi and Biden have said quite the opposite: that unemployment is great stimulus and that we get a terrific return on it.

So, just to be clear, we should hire folks for made-up government jobs? Somewhere down the road that leads to demand? But, if corporations have more money, that won't work because we need more government workers to buy products? It's amazing we ever became an economic power before bloating our government in the 60's and 70's.

danivon wrote:The only credit limit is the arbitrary one set by Congress. Markets are not signalling that they see the US as being at a real limit.

We are near/at GDP now. How much more should we borrow?

One more note: if demand is the problem, as Ricky claims, then how does one explain the up and down job market? In other words, if it is simply demand, we would not see the growth in the private sector jobs we have seen. I don't believe this hypothesis adds up in any way.

Something is holding up the job market. Corporations have money and yet they refuse to invest. Is it possible that President Obama's sniping at corporate America has had an effect?

a lot of companies are still struggling with Sarbox ...

steve

What do you know about how Dodd-Frank is being implemented? Given that regulations are being promulgated now, how much do you know?

Quite a lot actually. And I get views from other people than American Enterprise Institute hacks like Wallison... He seems to think the crash didn't happen.... That the Bush policies that brought about deregulation weren't a disaster . I wonder why?

Some AEI scholars are considered to be some of the leading architects of the second Bush administration's public policy.[7] More than twenty AEI scholars and fellows served either in a Bush administration policy post or on one of the government's many panels and commissions

Another view on the necesssity of Dodd Frank... Without rigourous regulation, the dangers of investing will be so uncertain that the economy will falter. (Which happened, just about 4 years ago....and which Wallison and otehrs would lik people to forget.)

The recent financial crisis underscored the importance of focusing on financial stability.
The foundations of the old regulatory system were based on outdated assumptions about the nature of financial firms, their activities, and their relationships.
Our regulatory structure did not keep pace with how quickly the financial industry was evolving. In significant part, this evolution was spurred by advances in technology, which brought changes in how financial products could be conceived, designed, and priced, and how transactions could be initiated and processed.
The Dodd-Frank Act responds to this need for change by establishing a regulatory structure better equipped to address evolution of product design, business models, transaction mechanisms, and one that can more effectively assess the financial system as a whole, not simply its component parts. The Financial Stability Oversight Council, or FSOC, in which the Secretary of the Treasury participates as Chairperson, is intended to be a dynamic, forward-looking regulatory body that enhances interagency coordination and improves interagency dialogue on identifying risks to the financial stability of the United States. Attention to the impact of technology on financial stability is an important component of Treasury’s efforts as Chair of the Council.
One manner in which we engage emerging technology issues and their effect on financial stability is by working with the Office of Financial Research, or the OFR. Dodd-Frank tasks the OFR with monitoring changes in risk throughout the financial system and with supporting the Council and its member agencies on matters of data, analytics, and research

http://www.securitiestechnologymonitor.com/blogs/idea-exchange-financial-soundness-infrastructure-integrity-30499-1.html

Steve, one of the lessons of the crash is that nations with more riogourous banking and investment regulations didn't crash their economies....... The crash was largely caused by lack of confidence in the investment community. Wallison and his ilk, are simply saying "never mind history, this regulation stuff is just too much trouble".
Thats his opinon. Appreciate that you are quoting "opinion as if it were fact". The one fact he doesn't deal with is that a fundamental cause of the crash, was excessive deregulation. Not excessive regulation.

steve

What tax rate should my grandchildren have to pay to maintain the Debt?
It's amazing we ever became an economic power before bloating our government in the 60's and 70's.

Interesting that you bring this up, since you always seem so reluctant to look at the actual economic history of the US.
The tax rates of post war years were enormous. And yet, as you seem to remember hte US became an economic power house.
And did so by largely following Keynsian rules of running modest fiscal surpluses in good economic times... Those surpluses were considered necessary, as were the high tax rates that generated them.... And yet as you note the US became an economic power house...
Perhaps there is a lesson here for "low tax" adherents.

As for the "bloating". Have any idea about the ratio of government employees to public over the years? Its actually gone down since the 80s. If its Federal spending as a percentage of GDP.... pretty low too historically. The deficit since 2008 is more a revenue problem than a spending problem by 2 to 1.

steve

One more note: if demand is the problem, as Ricky claims, then how does one explain the up and down job market?

go back and reread Steve. And try to retain.
Private job growth was undercut by states laying off people... If the states had kept those people, then growth would have been greater and the ratcheting of the economy perhaps begun.
Austerity of this kind is like bleeding or applying leaches to an anemic patient...