Steve:

Uh-huh. Recovery? Let's see:

Consumer confidence--down 6 points.

Housing values? Lowest in 5 years.

Private sector hiring last month? 39,000.

Growth of GDP? 1.8%

In about a year after the Republicans have their nominee (and assuming that it is a reasonably decent choice) this may be the key to the election. The election may be a referendum on Keynes. What is the best way out of a recession? It will also be interesting to compare the UK economy (with its relative austerity) with the US economy.

Ray Jay wrote:Steve:

Uh-huh. Recovery? Let's see:

Consumer confidence--down 6 points.

Housing values? Lowest in 5 years.

Private sector hiring last month? 39,000.

Growth of GDP? 1.8%

In about a year after the Republicans have their nominee (and assuming that it is a reasonably decent choice) this may be the key to the election. The election may be a referendum on Keynes. What is the best way out of a recession? It will also be interesting to compare the UK economy (with its relative austerity) with the US economy.

In a sense, you are right. However, I think that's too nuanced an argument. A better one: competence. There is simply no one in history who has spent more money and produced less. I could have given Richard the money with the caveat that it all had to stimulate the economy and he would have done better.

Unless the economy really moves rapidly in a positive direction, I think Obama's in more trouble than most of our liberal friends think--even if the GOP nominates someone "too conservative." As long as he/she seems plausible, Obama will lose if the continuing sense of, um, "malaise" continues.

But to most people fiscal conservatism also means low taxes and low government spending. Fiscal conservatism isn't mutually exclusive with Keynesian, but there's not a lot of overlap. Also to be a true fiscal conservative, you have to approach government solutions to problems very conservatively. There's a general view that the government cure will be worse than the capitalist disease. But on issue after issue, Ricky is in favor of government involvement. Whether it is pollution or trade policy or education policy or energy policy or income inequality, or housing policy, or regulation of financial markets, etc. Ricky believes that government can play a productive and proactive role. That's not a criticism; I sometimes agree, and sometimes do not.

Fiscal conservatism means prudently taking on debt for investment in infrastructure that can contribute to the expansion of a company, country.
It means, for a country, balancing the books or producing a surplus to pay off debt when the economy is going well.
It means the appropriate level of government intervention that produces better results for citizens.
For instance, its wise to invest in the development of industries in a nation the way the US did with DARPA and before that the computer and electronics industry and railroads. (The way the Asian Tigers did with the computer industry. The US Auto bailout was a fiscally conservative intervention. Watching the industry go under and crater the domestic economy would have been radically free market and would have meant a generation or more of dislocation and reduced standard of living.
Fiscally conservative means a willingness to "socialize" the delivery of a necessity like health care because it is more cost effective and more effective in out comes. Its radical to believe in a market driven solution that has 1) failed and 2) can be demonstrated to possess the parameters necessary for a functioning market.
Ray, you're given to looking at labels rather than looking at evidence and outcomes. For instance, in the US fiscal conservatives were braying about eliminating regulations on financial institutions and allowed largely unregulated players to participate in the financial sector.
In Canada, the banking regulations were conservative. The feeling being that if an institution is going to end up being backstopped by the nation at large it should be very carefully monitored. and regulated. In this case, the "conservative approach" was regulation NOT lack thereof. And it was proven to be hugely successful. (Regulated nations like Canada and India had virtually no problem with their financial institutions.)
You seem as many "US conservatives do, to define "fiscally conservative" as laissez faire. Fiscally conservative means to limit risk. What you describe (limiting government) often means accepting greater risk. That's not conservative but radical.
What Reagan's revolution did was to radically change the viewpoint of US conservative to a belief in the wisdom of the markets. Of the rationality of the markets. A true fiscal conservative knows that "The markets can be irrational longer than you can remain liquid."
It reinforced the dependence on private companies defining things like the energy policy. That's radical. It means that a nation has out sourced a very important policy to people who don't hold a particular interest in the welfare of the nation. That's hardly fiscally prudent. And lead to the export of trillions of dollars at the expense of developing domestic sources. Which a fiscal conservative, looking down the road at generational effects, would have focused upon.
Limited govenrment and limited spending do not define fiscal conservatism. Only really since regan has that been the case. What it really means is a prudent approach to both the current accounts, and the investment of capital or resources. That does not ALWAYS mean that private enterprise and limited govenrment intervention or regulation is the more conservative approach. It sure as hell didn't mean that with the recent economic melt down in the financial services industry.
And the mantra of LOW TAXes?
Many countries pay higehr taxes to provide services more efficiently and effectively. Again with health care. 17% of US GDP goes to health care. Thats essentially a higher investment in that area than any other nation. 5% more than Canda. TAxes might be higehr in Canada but the higher taxes decrease costs for business and consumers over all. And thats fiscally conservative.
But again, more limited government in the US , which you think means conservative, delivers results that are in no way "fiscally prudent or conservative".

Ricky, you are passionately making your case (some of which I agree with and some of which I do not), but that's not my point. Here's Wikipedia's definition of fiscal conservatism:

Fiscal conservatism is a political term used to describe a fiscal policy that advocates avoiding deficit spending. Fiscal conservatives often consider reduction of overall government spending and national debt as well as ensuring balanced budget of paramount importance. Free trade, deregulation of the economy, lower taxes, and other conservative policies are also often but not necessarily affiliated with fiscal conservatism.

Here's more that is on point:

Modern fiscal conservatism in the United States

Modern fiscal conservatives remain wary of government spending. They believe strongly in free trade and are committed to lowering the federal budget, paying off national debt, and acquiring a balanced budget.[14] Where fiscal conservatism gets more diverse in ideals is what steps should be taken to balance the budget. Deficit hawks are more willing to increase taxes in addition to cutting spending to balance the budget than libertarians, who want to "starve the beast" by cutting taxes for the purpose of decreasing tax revenue which they hope will cause the government to spend less, and supply-siders, who believe the best way to gain tax revenue is through deep across-the-board tax cuts that they believe will end up completely paying for themselves through the economic growth they cause.[15][16]

American businessman, politician, and current Mayor of New York City, Michael Bloomberg, considers himself a fiscal conservative and expressed his definition of the term at the 2007 United Kingdom Conservative Party Conference.
“

To me, fiscal conservatism means balancing budgets – not running deficits that the next generation can't afford. It means improving the efficiency of delivering services by finding innovative ways to do more with less. It means cutting taxes when possible and prudent to do so, raising them overall only when necessary to balance the budget, and only in combination with spending cuts. It means when you run a surplus, you save it; you don't squander it. And most importantly, being a fiscal conservative means preparing for the inevitable economic downturns – and by all indications, we've got one coming. --Michael Bloomberg[17]

RJ – I wonder if you are already looking at the UK situation. Confidence is falling and unemployment remains stubbornly high. While Steve thinks that annualised 1.8% growth is bad, how bad is zero net growth over the last two quarters? That is what we have seen. The projections for the UK GDP over 2011 and 2012 are getting smaller each time they are issued, and the OECD has changed its mind about the government’s programme of cuts.

Consumer confidence in the UK hit an all-time low in January, and is wandering at around the 40-45 mark. The US is on 60 (having fallen 5.2 points – not ‘6’ in a month). I’m not sure how we can correlate it to the American one given that the 100-mark is defined at a different point, but I can see that while the US figure went to under 30 at the height of the recession, ours was at just over 40 at the same time. So, comparing with late 2008/early 2009 the US is much more confident and the UK is not.

On unemployment, the UK rate peaked at about the same time as the US rate – late 2009/early 2010. The US rate hit 10.1%, whereas ours hit 8.0%. The US rate is now about 9%, and ours is... 7.7%. Again, while the US figures don’t look good, they reflect a greater improvement than ours.

House prices. Well, considering that one of the causes of the recession was the bursting of a housing bubble, we would expect prices to be a lot lower than their peak. However, again Steve seems to be wrong that the current prices are at a 5 year low. It looks to me like the low was in 2009 and prices have recovered slightly and have started to fall again this year. Which is the same pattern as in the UK. I’m not sure that house prices are a good measure anyway, given that they were overinflated up to 2006 and a lot of the problems with credit since then mean that the market is very different to what it was before – buyers are less able to borrow than before because banks are being much more cautious, which means lower demand even if people have the same capital and income as they had before the crash.

This time next year, I think the US will be looking comparatively better than the UK, to be honest. The full extent of the cuts has yet to hit, and already we are not keeping up with your rate of recovery (despite starting off pre-austerity with some good growth).

But the chances of there being a serious comparison between us and you in a year’s time, looking at the different effects of a Keynesian and a non-Keynesian approach? I’d say pretty much nil to be frank.

As usual, Danivon is comparing apples to road apples.

Apparently, he thinks borrowing 40% of what we spend is sustainable. He thinks the economy is turning around. Even if that were true, I suspect we could be experiencing a more robust recovery than we are (this is an historically weak recovery for the US).

The slide continues:

The last month has been a horror show for the U.S. economy, with economic data falling off a cliff, according to Mike Riddell, a fund manager at M&G Investments in London.

"It seems that almost every bit of data about the health of the US economy has disappointed expectations recently," said Riddell, in a note sent to CNBC on Wednesday.

"US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn’t revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing."

"And that’s just in the last week and a bit," said Riddell.

Pointing to the dramatic turnaround in the Citigroup "Economic Surprise Index" for the United States, Riddell said the tumble in a matter of months to negative from positive is almost as bad as the situation before the collapse of Lehman Brothers in 2008.

"The correlation between the economic surprise index and Treasury yields is very close, so the lesson is that whatever your long term macro views are regarding hyper inflation vs. deflation or the risk of the US defaulting, the reality is that if you want to have a view about government bond prices, the best thing you can do is look at the economic data to see what’s actually going on," said Riddell.

"And right now, the economic data is suggesting that however measly you may think a 3 percent yield is on a 10-year Treasury, the yield should probably be a fair bit lower given what’s going on in the US economy," said Riddell.

"You’ve also got to wonder at what point the markets for risky assets start noticing, too."

"QE3 anybody?" asks Riddell.

Liberal Robert Reich:

The US economy was supposed to be in bloom by late spring, but it is hardly growing at all. Expectations for second-quarter growth are not much better than the measly 1.8 per cent annualised rate of the first quarter. That is not nearly fast enough to reduce America’s ferociously high level of unemployment. The labour department will tell us on Friday whether the jobs situation improved in May, but there has been no sign of a surge in hiring. Nor in wages. Average hourly earnings of production and non-supervisory employees – who make up 80 per cent of non-government workers – dropped to $8.76 in April. Adjusted for inflation, that’s lower than they were in the depths of the recession.

Meanwhile, housing prices continue to fall. They are now 33 per cent below their 2006 peak. That is a bigger drop than recorded in the Great Depression. Homes are the largest single asset of the American middle class, so as housing prices drop many Americans feel poorer. All of this is contributing to a general gloominess. Not surprisingly, consumer confidence is also down.

The recovery has stalled. It is unlikely that America will find itself back in recession but the possibility of a double dip cannot be dismissed. The problem is not on the supply side of the ledger. Corporate profits are still healthy. Big companies continue to sit on a cash hoard. Large and middle-sized companies can easily borrow more, at low rates. The problem is on the demand side. American consumers, who constitute 70 per cent of the total economy, cannot and will not buy enough to get it moving. They justifiably worry that they will not be able to pay their bills, or afford to send their children to college, or to retire. Banks, with equal justification, are reluctant to lend to them. But as long as consumers hold back, companies remain reluctant to hire new workers or raise the wages of current ones, feeding the vicious cycle.

Moody's today:

Moody's is out with a comment saying that if there's no imminent progress on the debt ceiling fight, the US credit rating will be cut.

Danivon is about the only "economist" raving about how strong the US is economically. Here's more "good news:"

According to ADP's May Employment Report, the private sector added 38,000 jobs in May on a seasonally adjusted basis. That was well below consensus estimates of 170,000.

The report also revised downwards the estimated change from March to April to 177,000 from 179,000.

"A deceleration in employment, while disappointing, is not entirely surprising," the report said. "In the first quarter, GDP grew at only a 1.8% rate and only about 2¼% over the last four quarters. This is below most economists' estimate of the economy's potential growth rate and normally would be associated with very weak growth of employment."

If Danivon were running Obama's re-election campaign, perhaps "Better than the UK" would be a winning slogan? You know, that cute Obama symbol and then the text? Brilliant!

Better than Britain may sell if you're a Brit, but borrowing $1.6T a year to keep the economy in a malaise may not work here in the more capitalist US.

"I saved you from a Depression" might have worked had Obama not so ostentatiously made so many promises (about unemployment, the precision of the stimulus, etc). However, he will find his financial platform a bit less than sturdy if there isn't a rapid improvement. Most Americans understand he spent a LOT of money and they expect more than meager return on investment.

Doctor Fate wrote:As usual, Danivon is comparing apples to road apples.

Apparently, he thinks borrowing 40% of what we spend is sustainable. He thinks the economy is turning around. Even if that were true, I suspect we could be experiencing a more robust recovery than we are (this is an historically weak recovery for the US).

Yes, it's easy to demolish my argument when you make it up for yourself!

The deficit is not 'sustainable', but the best way to deal with it is through growth promotion. RJ invited a comparison to the UK, so if you think it inappropriate, kindly use your sarcasm on him.

The recovery is weak because this is he worst recession for 80 years. The harder the fall, the tougher it is to get back onto our feet. The UK and US were particularly badly affected because the rot started in out countries with banks lending badly and compounding that with CDS packages that were poorly assessed for risk. But the US is starting to turn around. Actual annual growth (not the 'annualised' quarterly figure) since the recovery started is between 2.25 and 3.25% for each 12 month period. US GDP is now about what it was when the banks started to fail (adjusted for inflation).

If Danivon were running Obama's re-election campaign, perhaps "Better than the UK" would be a winning slogan? You know, that cute Obama symbol and then the text? Brilliant!

Oh, act your age, man.

Better than Britain may sell if you're a Brit, but borrowing $1.6T a year to keep the economy in a malaise may not work here in the more capitalist US.

Again, it was not me who raised the comparison to the UK in the context of next year's US elections. It was RJ. Take your attitude out on your fellow Massachusettsian, ok?

danivon wrote:

Doctor Fate wrote:As usual, Danivon is comparing apples to road apples.

Apparently, he thinks borrowing 40% of what we spend is sustainable. He thinks the economy is turning around. Even if that were true, I suspect we could be experiencing a more robust recovery than we are (this is an historically weak recovery for the US).

Yes, it's easy to demolish my argument when you make it up for yourself!

I apologize. I should not have taken your argument seriously.

The deficit is not 'sustainable', but the best way to deal with it is through growth promotion. RJ invited a comparison to the UK, so if you think it inappropriate, kindly use your sarcasm on him.

So, what in any of Obama's proposals make you think he is cutting the deficit or encouraging growth?

The recovery is weak because this is he worst recession for 80 years.

So, get to it--what is Obama and his team doing?

Let's try this: creating the environment for rapid inflation, thus making a huge deficit less meaningful. However, if they don't get things just right, our lenders will stop lending, right?

Worse: when Americans lose confidence, as they are now, what happens to the economy? Stagnation, which leads to very low (or no growth).

If Danivon were running Obama's re-election campaign, perhaps "Better than the UK" would be a winning slogan? You know, that cute Obama symbol and then the text? Brilliant!

Oh, act your age, man.

After you.

Look, isn't that the case you've made? We don't have it as bad as you because Obama was "wise" enough to dump our money in the sewer while the UK tightened its purse strings?

I boiled it down to 4 words and this upsets you? Someone needs to grow up, and it isn't me.

Make the case that what Obama is doing is working--or will work.

There is little evidence it is working other than "at the moment you're doing better than the UK." However, to do that, he has borrowed trillions of dollars. And, we don't know, in the long run, that it will work.

Better than Britain may sell if you're a Brit, but borrowing $1.6T a year to keep the economy in a malaise may not work here in the more capitalist US.

Again, it was not me who raised the comparison to the UK in the context of next year's US elections. It was RJ. Take your attitude out on your fellow Massachusettsian, ok?

You've made it before.

Ray the ideas of limited government, free trade and deregulation were not historically conservative ideas. In the US, and around the world, they were brought under the umbrella of fiscal conservatism by the Reagan revolution.

If one takes "conservative" as cautious and oppossed to radical change, prudent - well none of those descriptors necessarily fit fit into the concept of limited government.
A fiscal conservative does not want to pay for government that isn't needed or necessary. But a conservative wants to justify making change to governance by proving that the expected benefits from change will occur as a result of the change.
Example: Limited government under Reagan took the shape of something called the S&L crisis. That decade's "deregulation of the financial services sector" was a disaster. And yet, somehow the mantra of "limited government" survived that expensive exposition of folly and we saw the financial services sector again able to accept risks that the country ended up backstopping. Excessive risks.
Now, how is that conservative in nature?
Again, go back to a definition of a conservative and understand that limited govenrment was never originally part of the definition. It only came to mean that with two decades of repeating the mantra.
Same thing with free trade. In some periods free trade would have been anthema to a prudent cautious nation seeking to gain advantage for certain domestic industries that were generally thought to be critical to the nations over all security. But, with the singular exception of computer wafers, those protections were willingly left to international corporations whims during Reagans tenure. And largely since. The result has been hugely negative for the employment base in the US. And for the energy sector.
Again - that was radical. It wasn't conservative. And prior to the acceptance of the mantra wasn't part of conservatism.
People who claim to be fiscal conservatives, need to examine their positions on issues like free trade (When the competitors don't play by the same rules of free trade its not really "free" ) and limited govenrment. Deregulation fits under the banner of limited government. Often, its lead to disaster. But it isn't often a conservative approach to improving an industry sector. Often its radical and dangerous but masquerading as conservatism it gains ready acceptance from people who can't remember the consequences of past experiments.
Its akin to Libertarians complaining about all kinds of laws without going back in history to understand why the laws were enacted. What conditions were there befoe that these laws were meant to change. Did they work, and why would the sudden elimination of the laws not simnply lead us back in time to the conditions that existed before the laws were passed?
The same thing should have been asked about deregulation and about "free trade" . The British domestic economy saw local manufacturing of a lot of products wrecked by its unilateral embrace of free trade (1846 through1900) and yet the US went into almost exactly the same path under Reagan. A conservative would have looked at the results of that period and asked why that adventure was worth taking in a whole hearted fashion....Especially when no one else wanted to play by the rules of free trade... (Japan and china never really have. Nor India)
A lot of the ideas that came to be part of what is now US conservatism and/or fiscal conservatism are actually radical and when acted upon often proven to produce results that aren't as advertised by the proponents.

Steve - glad the tornado didn't take you or your power out. How close were you to the storm?

I don't understand why the UK comparison is so explosive. Unfortunately you can never have a perfect experiment in economics, but I do think it is instructive. The question is whether the US is prolonging its lackluster economy by engaging in excessive government spending and spooking the private sector. Would we be better off to bite the bullet? As in the Reagan years we would have deeper recession, but we would come out of it stronger. Economists are still arguing over whether FDR extended the great depression through his policies. I'm just wondering whether the UK will do very well in about a year. I'm sure Danivon knows more about the US than I do about the UK, but my instinct is that the UK economy will be doing relatively better.

Ricky, take it up with Wikipedia if you don't like the definition of fiscal conservative.

Ray, I'm reading Bill Brysons "The Mother Tongue"
Its quite clear that our common language evolves constantly. And Bills book contains many interesting illustrations of how certain terms have evolved and often mean different things in different parts of the English speaking world.
Its not Wikipedia's fault that the popular connotations for fiscal conservative have been broadened by repeated inclusion of free trade and limited government in what prior to reagan was a tighter definition.
I simply mourn the change that common use and over use has made to the definition because it has made the acceptance of radical and faulty ideas so much easier. Ideas that don't deserve to be held under the same term but seem accetable when labelled as such. .

As in the Reagan years we would have deeper recession, but we would come out of it stronger.

Reagan began a streak of 15 straight federal deficits. He escalated military spending and increased the deficits in periods of expansion. He established the fundamentals of trade imbalance, and the exportation of industry and jobs. The period of economic sunshine that did ocurr was akin to pissing in your pants in the blizzrd. Short term warmth and comfort that will later cause great discomfort . (he was only the start, but he sold the philosophy that brought us to this current place...see above.)

Ricky, after you finish "Mother Tongue" (yes, I know the English language is dynamic), may I suggest "Reckless Endangerment". It's very well written, well researched, and not particularly ideological. It has a different view than you of the cause of the financial meltdown.

Cheers,

RJ

ray
It has a different view than you of the cause of the financial meltdown.

Then it can't be well researched. (Just kidding. I'll read it.)
And remember Ray, that the financial meltdown (That is the collapse of the housing bubble and the financial sector) is not all I'm saying contributes to the current situation.
Include in here the acceptance of rather laissez faire trade policies and univolved industrial policy that were ill suited to defend the US interests in the face of competition from neo-mercantilist polices in Asia and Europe has hollowed out industry in the US that both supported the economy and would have helped its recovery even after a collapse. Those events began as far back as the 70"s .
I'll read your book if you read "The betraylal of American Prosperity" by Prestowicz

Ray Jay wrote:Steve - glad the tornado didn't take you or your power out. How close were you to the storm?

I think about 15-20 miles. It was close enough to keep the kids (who were visiting) here until the warning passed--and make us think about running to the basement. I think we might have enough elevation to steer a tornado away, but I'm no expert.

I was a bit offended when my fellow MA residents compared Springfield to a war zone. It just doesn't compare to Joplin, MO. That was heart-wrenching.

I don't understand why the UK comparison is so explosive. Unfortunately you can never have a perfect experiment in economics, but I do think it is instructive. The question is whether the US is prolonging its lackluster economy by engaging in excessive government spending and spooking the private sector. Would we be better off to bite the bullet? As in the Reagan years we would have deeper recession, but we would come out of it stronger. Economists are still arguing over whether FDR extended the great depression through his policies. I'm just wondering whether the UK will do very well in about a year. I'm sure Danivon knows more about the US than I do about the UK, but my instinct is that the UK economy will be doing relatively better.

QFT!

Brilliant summary!

Spot on!

Etc.