Ray Jay wrote: 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.

The problems of the early 80s and now are very different: in the 1980s inflation was brought under control by extremely high interest rates, which forced a recession. It was pretty clear what needed to be done, it was difficult, but clear. Our economic situation is very different than it was 30 years ago, and I don't think anyone knows what "biting the bullet" means now. Increasing rates? Cutting gov't spending? What's the bullet to bite to make things "better?"

geojanes wrote:

Ray Jay wrote: 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.

The problems of the early 80s and now are very different: in the 1980s inflation was brought under control by extremely high interest rates, which forced a recession. It was pretty clear what needed to be done, it was difficult, but clear. Our economic situation is very different than it was 30 years ago, and I don't think anyone knows what "biting the bullet" means now. Increasing rates? Cutting gov't spending? What's the bullet to bite to make things "better?"

There are different theories and I think it is hard to know for sure.

One thing is clear: Democrats have proposed that someone else needs to "bite the bullet." Raising taxes on the rich, won't solve the problem but it calls for only a small number to sacrifice. Continuous borrowing tells our children and grandchildren to "bite the bullet." I think we are in danger, as a nation, of promising future generations a lesser America so that "we" can avoid sacrifice. To me, that is immoral and why I am so against the Obama/Democratic status quo.

What is the government doing to "bite the bullet?"

QE2 (and 3)? That's not painful now, although it may be later (almost surely will be). But, again, who are biting the bullet? Not us--at least not now.

We might be the first generation of Americans ever to shrug our shoulders at future generations and simply say, "Not our problem." To me, it's shameful.

Btw, unemployment up today.

If we're in this kind of funk a year from now, Obama has no chance at reelection. None.

steve

Raising taxes on the rich, won't solve the problem but it calls for only a small number to sacrifice

Sacrifice by going back to the taxation levels of only a decade ago...
You're pretty loose with the term sacrifice.
Would it be fair to say that only those under 55 are being asked by Ryan and the GOP to sacrifice access to Medicare as it has been known?

Ray Jay wrote: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.

Indeed. I'm not sure why it's pressing Steve's buttons. Is it the comparison to

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.

The problem is that there's this odd idea of 'crowding out', that somehow the public sector spending is stopping private sector expansion. The problem is that there are a lot of things that preclude private sector expansion already - consumer spending is down, banks are not making it easy for companies to borrow and other forms of investment are also sparse. So where do the demand and supply come from?

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.

Again, I ask you to look at what the projections are and were for growth in the UK. About a year ago, most predictions were for about 2.5% this year and nearly 3% next year. Now they are at about 1.7% for this year and 2.2% for next year.

I'm wondering what it is you think is going to happen to UK to restart our recovery. It was all going ok until the emergency budget in June.

(Steve, in the interests of not annoying everyone else, I'll let your snark drop. I'll note that you seem pretty happy about the unemployment figures today)

rickyp wrote:steve

Raising taxes on the rich, won't solve the problem but it calls for only a small number to sacrifice

Sacrifice by going back to the taxation levels of only a decade ago...
You're pretty loose with the term sacrifice.
Would it be fair to say that only those under 55 are being asked by Ryan and the GOP to sacrifice access to Medicare as it has been known?

I am under 55 and will gladly make the sacrifice. Why? Because it's the right thing to do.

Medicare is a pyramid scheme. We pay today for those who have passed the magic age. They paid a fraction of their projected costs. It's like Social Security on steroids, because as medicine improves and enables us to live longer, the payments we made become a lesser percentage of the actual cost. So, when I hear people say "I paid for it, it's mine," my reaction is "No, you didn't" and "No, it's not."

I won't demand my grandchildren pay more in taxes, substantially more, on my behalf.

That's what is at stake. And, that's why Democrats are demagoguing--because they suspect people's greed will blind them to what they are doing to future generations.

The line must be drawn heyah!

danivon wrote:Again, I ask you to look at what the projections are and were for growth in the UK. About a year ago, most predictions were for about 2.5% this year and nearly 3% next year. Now they are at about 1.7% for this year and 2.2% for next year.

Analysts are constantly correcting their too rosy forecasts for the US. The media plays each new batch of bad numbers as "unexpected." Well, that's true. Obama said it would be better. A year ago, Biden said we would be adding 250K jobs a month by now.

It's a question of whether short-term pain might yield long-term gain or whether trying to avoid pain altogether (the Obama model) will lead to prosperity or bankruptcy. Bankruptcy is gaining.

And, look at the man! "Pass a clean debt ceiling raise."

Even Pelosi voted against it!

But, President Obama won't budge. He's determined to keep borrowing and spending. If he just gets a few more pulls on the one-armed bandit, why, he's just sure he'll hit big money.

(Steve, in the interests of not annoying everyone else, I'll let your snark drop. I'll note that you seem pretty happy about the unemployment figures today)

No, I'm not happy about it. It is the predictable result of the Man's policies. Look at the new (proposed) Secretary of Commerce. He's a brilliant choice--if the number one concern is greening the environment and protecting endangered species. On the other hand, if one is interested in jobs . . .. Obama has surrounded himself with Leftists, Environmentalists, and nearly everything except actual job creators. He is far more interested in economic justice (read his biographies) than in growing the economy.

Ray Jay wrote: 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.



The problems of the early 80s and now are very different: in the 1980s inflation was brought under control by extremely high interest rates, which forced a recession. It was pretty clear what needed to be done, it was difficult, but clear. Our economic situation is very different than it was 30 years ago, and I don't think anyone knows what "biting the bullet" means now. Increasing rates? Cutting gov't spending? What's the bullet to bite to make things "better?"

I was hoping that someone else had a crisp answer to your question because it is a really good one. I certainly think there are important incremental things that we can do, such as ending ethanol subsidies (which drive up food prices), open up to more drilling (to bring down the cost of gasoline) and getting rid of so many of our bad regulations. But that's just low hanging fruit and not biting the bullet.

I think the key is to have a comprehensive plan to reduce government spending. This will not do anything about today's unemployment numbers or today's low growth. In fact, it should make it worse. But somehow we have to have a society that understands that economic growth is a function of business, and not a function of government. I've worked for the private sector, the public sector and the non-profit sector. I've had clients in all 3. It's the private sector that creates value because every transaction is voluntary and not coercive.

By the way, I really hate when Republicans talk about today's unemployment numbers and say that Obama is not creating enough jobs. Democrats say that because they believe that it is the government's job to make sure that people are employed. But the Republican view is that the government should get out of the way. It's up to the private sector to create jobs, and furthermore, it's up to the unemployed to figure it out for themselves. There's plenty of moneyed people out there who want stuff, and want people to do it for them. Am I missing something?

P.S. I understand that the Republicans are saying that they can do a better job than Obama. I think they can. What I'm reacting to is the subtext that blips in the unemployment rate are the President's responsibility. Does anyone else feel this way, or am I becoming a cranky old man?

Ray Jay wrote:P.S. I understand that the Republicans are saying that they can do a better job than Obama. I think they can. What I'm reacting to is the subtext that blips in the unemployment rate are the President's responsibility. Does anyone else feel this way, or am I becoming a cranky old man?

It's politics, Ricky. When you are in opposition, every bad thing that happens is the government's fault. When you are in power, every bad thing is the opposition's fault.

The way that the US measure unemployment seems to be fairly sound, but is not perfect at removing seasonal variations (none are, as the seasonal factors change over time). What matters is the overall trend. Looks like unemployment has been going down slowly from the end of 2009, but the rate of improvement has slowed.

But I don't see how deficits cause unemployment to change in the short term. It's more likely to be related to the market conditions (and a problem of companies getting and maintaining credit)

Anyway, looking at the data, private employment went up and public employment went down. I'd have thought that would be what conservatives want, even if the numbers aren't large enough.

danivon

But I don't see how deficits cause unemployment to change in the short term

The effect on interest rates? If investment loans are more expensive they are less likely to be undertaken by companies.
Thats one reason the tax increases on the wealthy may actually help reduce unemployment. The money that was foregone hasn't been used in this fashion apparently but by helping to reduce the deficit interest rates can be maintained lower... the tax would be a positive factor.

Ray Jay wrote:P.S. I understand that the Republicans are saying that they can do a better job than Obama. I think they can. What I'm reacting to is the subtext that blips in the unemployment rate are the President's responsibility. Does anyone else feel this way, or am I becoming a cranky old man?

The public puts way too much responsibility and gives too much credit to the President with regard to employment. The government does not control it.

However, the government can influence it. In Obama's case, he has done some remarkable things--like shut down drilling in the Gulf, costing thousands of jobs. With the EPA, the NLRB ruling in the Boeing case, and rapidly marching environmentalism, this Administration has created an aura of being anti-business that is unlike any Administration in memory. I really keep waiting for the President to "pivot to jobs" as we've heard every 3 to 4 months during his Presidency.

rickyp wrote:danivon

But I don't see how deficits cause unemployment to change in the short term

The effect on interest rates? If investment loans are more expensive they are less likely to be undertaken by companies.

But the government set interest rates are at historic lows. It is the banking sector which is setting high differential rates between savings and lending - primarily because they are much more risk averse and are trying to recover their losses.

I agree that in the long term higher interest rate would lead to employment problems. But given that they are now low and that the unemployment problem is happening now, I suspect your guess is wrong.

I heard that supply chain problems as a result of the tsunami in Japan was affecting manufacturing worldwide. I daresay that the flooding and tornadoes had a less than positive effect.

Thats one reason the tax increases on the wealthy may actually help reduce unemployment. The money that was foregone hasn't been used in this fashion apparently but by helping to reduce the deficit interest rates can be maintained lower... the tax would be a positive factor.

It's possible. This is one reason why comparisons with the UK may be problematic. The previous government increased taxes on the wealthy which came into effect this April, and the coalition have not repealed them. But the coalition's tax policy was to increase sales tax, which disproportionately affects the disposable income of the lower paid.

However, when it comes to our austerity package, another set of people who previously backed the government are now saying that the policy is not working.

Steve - the moratorium on drilling in the Gulf came after a major disaster in the Gulf. The Boeing thing was really a response to the WTO (and a similar case that was raised against Airbus and the EU). Neither can be shown to be simply down to the President being 'anti-business', as they are in a wider context.

fyi, the flooding and tornadoes have had a minor impact if any on global manufacturing supplies. They were mostly limited to rural areas, farms and farm employment were struck hard, food costs may go up, but manufacturing supply chain effects were affected in a minor way if at all. Sure a small plant here and there, but small.
I am not dismissing the losses only pointing something out you may not be aware of is all.