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September 17, 2012


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I'm not complacent. My worry is that Democratic voters will not be motivated because they think Pres. Obama has it in the bag.

Side note: I've posted a comment regarding Mr. Talton's "hate mail" in the previous thread, and (insofar as it was required) a rebuttal.

Mr. Talton is correct to be skeptical and vigilant. The polls show a statistical dead-heat and, more to the point, polls change every week. The election isn't until November 6th, and a lot can happen before then.

The problem with using progressive blogs (or others) to handicap the election is that virtually none of the electorate (much less the Electors) makes decisions on that basis. Many have limited information and very short memories. This makes the race far more volatile than some would suppose. A clever (or at least effective) last minute ad blitz could turn the tide, being the latest (and last) thing the voters can remember. I hope this doesn't sound elitist: I consider it simply realistic.

Then there is the economy. Right now there is considerable consternation among Republican circles about how Romney is running his campaign. A downturn in jobs numbers together with a more savvy professional speechwriting and ad campaign could allow Romney's numbers to surge.

The good news is that much of the Republican electorate is luke-warm about Romney, and being registered to vote doesn't affect the outcome of events if you aren't motivated to actually go vote. If you look at polls that ask individuals who they expect to win, rather than who they would vote for, Obama has a significant lead. In the past, this has been a more or less consistently reliable method of predicting the outcome of a presidential race (unlike polls asking who you would vote for).

The bad news is that many Obama voters are also apathetic. The race is shaping up to be, not a titanic battle between fire and ice, but between margerine and butter. I don't mean to belittle the (considerable) differences between candidates, and I fully agree with Mr. Talton's assessment of the need to vote for Obama and of the consequences of apathy.

The Oliver Wendell Holmes quote needs a bit of context. According to historian Conrad Black in Franklin Delano Roosevelt, Champion of Freedom, the remark was made after FDR left a meeting at the home of the then 92 year old jurist. After FDR left, "Holmes remarked that his distinguished visitor's cousin had appointed him to the Supreme Court, and then said: 'A second-class intellect but a first-class temperament'".

So, it's quite possible that Holmes was speaking of Teddy Roosevelt, not FDR. There had been bad blood between Teddy and Holmes:

"TR later viewed the appointment of Holmes as the major mistake of his presidency because he and Holmes disagreed vehemently about the value and interpretation of the Sherman Antitrust Act. Of Holmes, TR said, 'Out of a banana I could carve a firmer backbone.'"


If Obama wins, we lose.
If Mitt wins, we lose.

Hell of a choice.


I used to think like "Jennifer" in the last thread. Let's give the women a chance to run things, what could it hurt.

Then we got Big Sis.

Granted she ain't neither sex, but damn, what a bad experiment.

Hillary? Pants suits-another girl/guy.

Brewer? Zombie, not human.

Girls?? Are these your best and brightest?

Please try harder.

This afternoon, Mother Jones posted a secret video...
May I take this moment to say that I'm really getting quite fond of this Internet thingy?

U like Mother
try Slate and a white christmas


Sounds like Karl Rove's PAC may be re-focusing their support on a game plan to try and re-take the Senate. The Romney/Ryan ship appears to be taking on water . . bigtime. In that scenario, I'm not exactly looking forward to the next term.

Most the intelligent commentary on Rove's plan is that he is going to ride another Bush to presidential victory in 2016 (ol' Jeb). There's a real chance of changes in party leadership in both chambers, but government "gridlock" remains good for corporations and the rich and only the middle class and below get locked out.

That Romney expressed such sentiments to a nodding-their-approval audience of oligarchs is really no surprise. We are the ungrateful hired help who builds, services, and then takes their shit.

I hope Rove is banking on Jeb. I think W. may have sullied the brand for good, and Rove will meet his Waterloo.

A case can be made for Jeb's relative "reasonableness," but Rove is all about branding... die by the sword.

That's a well-played update Jon. Clearly this video is a spotlight stealer. For a while, even the BBC had it as the lead. It's as revealing of Romney as the Watergate tapes were of Nixon.

The rightwing and its looter elites are always blaming the Democrats for waging class warfare. Well we can throw that "not us" argument into the Koch coke furnace. This is as clear an enunciation of class warfare waged from the top down as we will ever likely see.†

Romney is a dirty bastard.
He's shown America his ass...
And refused to apologize for it.

What a despicable creature...

† Without major amelioration of CO2, I suspect we'll see a future where it is the rich against everyone else. That's a miserable scenario though. Step 1: Defeat R-money. Step 2: Tax the wealthy. Step 3: Begin carbon sequestration and tree planting big time.

koreyel for President. (Tongue-in-cheek, but not snarking.)

Yep - the Obama foreign policy is falling apart so lets throw out a video of Mitt to distract the voters. Its pretty apparent that Mitt was responding to a question about how he gets a majority in the election and he stated, quite realistically, that there is 47% of the electorate that he probably can't get, so he isn't worried about them but needs to focus on the votes he can get. Its a strategy statement not some blanket statement that he doesnt care about that part of the population. Context is important folks.

Welcome, Brad. Dissenting views welcome, too.

My dissenting view is that the election won't be close. The MSM likes a horse race, so its nose-to-nose-down-the-stretch is all we'll get until the votes are counted and then it will all be a BIG surprise to them.

How is Obama's foreign policy failing apart? The Empire is still safe and woe be unto all who oppose the Empire. Same policy as Bush, Clinton, Bush, Reagan.

Its a strategy statement not some blanket statement that he doesnt care about that part of the population.
That may or may not be true, Brad - but you have to admit that in the court of popular opinion it sounds like he generally doesn't care about that part of the population.

I'm not so sure that they're not right about that, either.

(May I also echo Jon's welcome.)

Am still wondering what a Romney/Condi Rice ticket would have meant. She would have brought much needed foreign policy gravitas . . . even with the Bush hangover. Could be Romney has bad instincts along with inept advisors. If his inclination is to kiss Bibi's ring, bomb Iran and goose defense spending, he must be living in a different world!

As a 72 year old registered Republican I thought George W Bush was the world’s worst president and I felt bad for his family. (Jeb isn’t that dumb). Now comes, Romney a really WHITE guy supported by a cult and begrudgingly accepted by crazy driven tea party kooks.
I kinda thought Romney was a slightly moderate Republican but somewhere right of the Udall’s. But I think Romney’s bottom line is to save the wealthy and insure that the LDS LLC becomes the world’s largest corporation. This is the Republicans election to loose and losing it they are. Now I am feeling bad for Romney as he is getting slam dunked by the left and knit picked to death by the right. His own party is going to defeat him.
I don’t think Obama’s foreign policy is falling apart. I think once again the CIA is not on the ground and listening! And this embassy security was really poor?
As Jon has noted, many are unhappy with Obama including me. But while we sit at our keyboard the Arctic is melting rapidly and the air is becoming UN breathable. We need less people.

The Obama/Romney election is an act of musical chairs. Irrationality has possessed the electorate and it takes much hubris to think Obama has bagged the election at this point.

Romney can't connect personally with his base, independents or his political opponents. How will he be able to lead as president?

George Orwell from 1942:

"You can go on and on telling lies, and the most palpable lies at that, and even if they are not actually believed, there is no strong revulsion either. We are all drowning in filth. When I talk to anyone or read the writings of anyone who has an axe to grind, I feel that intellectual honesty and balanced judgment have simply disappeared from the face of the earth. Everyone's thought is forensic, everyone is simply putting a 'case' with deliberate suppression of his opponent's point of view, and, what is more, with complete insensitiveness to any sufferings except those of himself and his friends.... But is there no one who has both firm opinions and a balanced outlook? Actually there are plenty, but they are powerless. All power is in the hands of paranoiacs."

All power is in the hands of paranoiacs.
You got that right and, boy, do they have a base.

I just saw two Romney apologists over on FB pull out the "Muslims are gonna get us" card. One, presumably if we don't elect Romney, the other, that it would "dim the memory" of Mitt's "47%" gaffe (so I guess that means a pre-election strike.)

So we're to be distracted by what passes for "foreign policy" issues, I guess.

Paranoia, soul destroyah.

you seen one theocracy U seen them all.

Excellent updates, Mr. Talton!

Incidentally, Romney's comments regarding the "47 percenters", while quite idiotic (what else would you call the assertion dismissing half of the country's population as "dependent", "entitled", and "taking no personal responsibility and care in their lives"), are fully consistent with Republican rhetoric and the out-of-touch, essentially insane conceptual models it is based upon. This is further verified by writers like "Brad" rushing to the defense in the above comment:

"Its pretty apparent that Mitt was responding to a question about how he gets a majority in the election and he stated, quite realistically, that there is 47% of the electorate that he probably can't get..."

Brad, like Mitt Romney, has apparently never heard of blue-collar Republicans, some of whom tune into conservative talk-radio on a regular basis to vent spleen against minority welfare queens and other easy targets. What a surprise THIS blowback will be! (Maybe not: spin control is the order of the day in conservative media, and most of them won't be turning to Mr. Talton's blog to get the facts.)

Petro wrote:

"This afternoon, Mother Jones posted a secret video... May I take this moment to say that I'm really getting quite fond of this Internet thingy?"

The latest secret video shows Romney saying that the Palestinians "don't want peace" and that nothing can be done about the Middle East situation except to "show force" and "kick the can down the road".

It looks like someone has finally figured out how to break the silence on those Big Money dinners where journalists are excluded and only heavy hitters able to pay the door charge are admitted:

Step 1: Buy a hidden video camera (which these days can be hidden in virtually anything);

Step 2: Using either an alias or a cut-out, have an innocuous (i.e., no problematic background) attendee buy their way in.

Step 3: Record the video, put the choice bits in an edited video, and upload to the Internet.

So easy! All it takes is money. Surely there are some Democratic operatives, or some media corporations, out there with money (in the case referenced by Mr. Talton, $50,000 a plate).

I look forward to the next instance of Romney-gate.

"AZRebel" wrote:

"If Obama wins, we lose. If Mitt wins, we lose. Hell of a choice."

Exactly the sort of moral equivocation I'd expect from someone who once said that they would be voting for the Libertarian Party candidate for President:

"I will vote for Gov. Gary Johnson and my conscience will be clear."


Personally I think that the Sith Lord "cal Lash" has been busy working on AZRebel. Run for the light, AZRebel! It knows what scares you!

"The Rule of Two was instituted by Darth Bane, once a student at Kaan's Sith academy, in response to what he viewed as inevitable, self-destructive infighting within the Sith Order. The Rule of Two states that there would be only two Sith at one time, a Master and an Apprentice, guaranteeing that when the Apprentice becomes powerful enough in the ways of the Dark Side to take the title of Master, only then would they be worthy of the title. This transfer of power would only take place when the Apprentice takes their Master's life and finds a worthy student to repeat the cycle. Both Master and Apprentice were considered to be Sith Lords."


P.S. Hurry up and knock the old goat off.

It's been speculated that the video was taken by a "server" at the event. Ah, the 99% strikes back, eh ??

Mitt Romney's Mom says that Mitt's Dad was "on welfare relief for the first years of his life":


Sure, she's trying to make Daddy Warbucks sound like Tom Joad, but she said it.

Good stuff Emil, good stuff.

But Sith Lord?

I always leaned towards being Lando Calrissian.

Emil: admire your energy but am concerned about what could be causing an adrenaline rush so late in the day! Rumor has it that cal doses up his Coco Puffs with Kahlua, which would explain his early morning flights of fancy . . .

The faithful remain smitten:


I'm with AZrebel, but not as smooth (more like Chewbacca). A vote for a third party is the best protest. Who knows, maybe we'll end up with a democracy?

bearsense, you beat me to it.


I just wanted Carrie Fisher.

Mr. Taxevader told a bit of truth in his unplugged appearance: the Israeli-Palistinian problem will not be solved. You don't say. But not for the reason he mentioned.
Look at this:
and this:

Does that look like a plan for peace and prosperity in the Holy Land?


A postscript to "Burn out?": I think the more relevant risk is 'Rogue fatigue'. "Rogue Columnist" probably has enough powder left (especially the historical material) but at some point that powder is gone. We already know about Rogue's opinions about the world at large and there is only so much left to say without going around on a beaten path. I speculate that's why soleri left. Even his comments, brilliant as they were, started to sound samey.

Conservatives used to brag about getting the working class OFF the tax rolls. Here's Ronald Reagan from "Remarks on Signing the Tax Reform Act of 1986" (October 22, 1986):

"For all these reasons, this tax bill is less a freedom—or a reform, I should say, than a revolution. Millions of working poor will be dropped from the tax rolls altogether, and families will get a long-overdue break with lower rates and an almost doubled personal exemption."


Nothing repetitious in the current blog item. Highly topical and informative. And frankly, there's too much information out there about critical issues for me to simply read it once and possess a mastery of it (or even remember all of it) thereafter. If there was a period when Mr. Talton was "going through the motions" it passed quickly.

Just FYI, AWinter, readership keeps growing.

Where do all those federal income tax non-payers live, anyway?

"Out of the 10 states with the highest percentage of filers with no liability, all but one — Florida — are reliable Republican stalwarts."


Here's the list of states, by percentage of non-payers, with data (Arizona ranks 14th):


AZRebel wrote:

"Good stuff Emil, good stuff. But Sith Lord? I always leaned towards being Lando Calrissian."

You wanted to be the guy who betrayed his old friend, Han Solo?

"One day, Darth Vader arrives and threatens Calrissian to take over the city unless he gives his old friend Han Solo over to the bounty hunter Boba Fett. Unwilling to leave the city in the hands of the Empire, Calrissian reluctantly betrays Han..."


Can you imagine how Casablanca would have turned out if Lando Calrissian had been running the casino?

Strasser: Betray Laszlo the Resistance Fighter or I'll shut down your club.

Rick: OK, just as long as you don't arrest Ilsa...

Dear readers,
Deadline Hell prevents a post today. So I turn the thread over to you for whatever topics you wish...

Cool, I have the conn.

First, I was an acquaintance of Han, not his friend, so get your own cape if you want a shot at the Princess.

Second, new topic, Gov. Gary Johnson's Presidency.

All in favor, vote with your brain, not via remote control from your party.

Mr. Talton has suggested a reluctance by conservatives to post comments here. By and large, that's probably a good thing, judging from many of the unenlightened online comments at the Arizona Republic.

That said, I do occasionally come across an interesting (and by this, I mean thought-stimulating) point made by conservative writers.

Here's something that's been simmering on the back boiler. From a Robert Robb column in late May:

"Keynesian economists scoff at the size of the initial Obama stimulus of $800 billion. But that’s too constrained a focus. Over the last four years, deficit spending has totaled over $5 trillion. Federal spending is now 24 percent of GDP and the federal deficit is 8.5 percent. During the New Deal, federal spending never exceeded 11 percent of GDP and the deficit never exceeded 6 percent. So, we’ve already had considerably more stimulus than FDR threw at the Great Depression."

To see the figures from 1930 to 2017 (projected), click on Table 1.2 (and keep in mind that FY 2009 started in October 2008 so it actually applies to Bush rather than Obama).


The size of federal spending as a percentage of GDP isn't relevant to the question of Keynesian stimulus and can be disregarded; but the size of the deficit as a percentage of GDP does seem relevant.

That the deficit is a large as a percentage of GDP as it has been is strictly a result of continuing low revenues, not increased spending, as I've demonstrated before (I can post the information again, upon request).

Nevertheless, the fact is that between two presidents (Bush and Obama) we've seen four years of deficit spending that was significantly higher each year, as a percentage of GDP, than ran under any of five years from FY 1932 through FY 1936, before austerity proponents decreased deficit spending (ushering in a recession in calender year 1937).

It's interesting that Roosevelt was able to reduce unemployment from 25% to 15% through comparatively smaller Keynesian stimulus over a period only a year and a half longer.

One thing I noticed is that, if one looks at combined federal, state, and local government receipts as a percentage of GDP, and compares them to the same total for expenditures as a percentage of GDP, the difference between the two (deficit) tracks much more closely during the Great Depression than now. Here's a particularly readable graph from the Urban Institute using Bureau of Economic Analysis data:


Places in the graph where the blue line is above the red line indicate surpluses; places where the red line is above the blue line indicate deficits; and the space between the two indicates the relative size of the surplus or deficit.

World War II shows a mammoth jump in government spending (and deficits) as a percentage of GDP: a Keynesian stimulus far larger than the comparatively timid stimulus spending FDR could get Congress to pass (and the courts to uphold) in the 1930s, thus indicating how the Great Depression was actually, finally ended.

Equally to the point was the fact that the war machine added hugely (via deficit fueled capital investment) to the manufacturing base of the United States, and that after the war this expanded manufacturing capacity didn't evaporate but was instead redirected to civilian (consumer) purposes as factories refitted from wartime to peacetime production; an infrastructure investment dividend which continued for decades to come.

I'd really appreciate some comments on this from a Keynesian perspective. I understand that the federal government is not only making up (with its deficit spending) for decreased private sector (consumer) spending, but also being counteracted by decreased state and local government spending (the decrease in the latter being historically unusual for recessionary and slow-growth post-recession periods). I still don't think I quite understand this, and I'd like to see both explanatory text and some numbers crunched.

I wrote Krugman about this, but never heard back. Of course, the volume of emails that Krugman receives must be daunting. Still, I've never seen this point addressed anywhere, and it certainly seems worth addressing.

A related point:

In inflation adjusted 2005 dollars, GDP dropped from $976 billion in 1929 to $716 billion in 1933, a decrease of 26.7 percent. Using the same measure, from 2007 to 2009 (pre-recessionary peak to trough), GDP decreased from $13,206 billion to $12,758 billion, a decrease of 3.4 percent.


This is probably the clearest contrast between the Great Depression and the Great Recession possible, and ought to silence those (not Mr. Talton) who construct superficial comparisons between the two.

Note the real-dollar increase in the size of U.S. GDP from 1929 to 2010: remember, those dollar figures are adjusted for inflation and expressed in 2005 dollars for all years; so the difference represents real economic growth insofar as this measure is able to accurately capture it.

Dog knows I'm the last person to be weighing in on this question, Emil, but:

Doesn't the fact that a significant portion of that "stimulus" was poured into the black hole of the negative-productivity sector called the finance "industry" have something to do with the answer?

This may not encompass all your issues, but...

1. The Obama stimulus was too small, and poorly targeted, and hobbled by having to save state governments damaged by 30 years of tax cutting.

2. The administration underestimated the severity of the downturn, and could have added more stimulus through reconciliation. It didn't.

3. This downturn has some comparisons with the Great Depression. E.g., 2008 was in some ways worse than 1929. But because we had learned, and before the extremists became so powerful had assembled a set of tools and policy responses, the crisis was arrested before it entered Depression territory.

4. I did one take on Keynes here:


Just a bit more, and I don't mean to hog the thread.

FDR was very complicated, cagey and shrewd. His great advantages included a willingness to experiment and to make use of a stellar group of advisers in the "Brains Trust," such as Adolf Berle, Raymond Moley, Harry Hopkins and Tommy Corcoran.

He confronted a "great contraction," as Friedman put it, that had been turned into a Great Depression by the constrictions of the gold standard, Fed misteps (where Friedman, along with Anna Schwartz, made his mark as a great economist, as opposed to a right-wing pitchman), a weak banking system and vast structural changes in the economy.

That government had to act was not in doubt. Herbert Hoover, contrary to the Roosevelt hagiographers, was very aggressive in trying to address the collapse. Some of his programs went on to be big successes in the New Deal. But Hoover couldn't countenance federal help for individuals, or the scale of the intervention necessary. This one-time TR Progressive became more reactionary.

As for the New Deal, there were several. It was endless experimentation, and, faced with growing business resistance and the oncoming war, never reached its full potential, even in stimulus. It did, however, improve the lot of people and the economy, contrary to all the efforts of the right-wing to rewrite history.

Thanks to Mr. Talton (and Petro too) for the feedback on this issue.

I don't want to be too quick to dismiss any of it, and will let it percolate a bit. However, both parties are missing the essential point:

"Over the last four years, deficit spending has totaled over $5 trillion."

So, the size of the official "stimulus" isn't relevant. The deficit in FY 2007 and 2008 was $161 billion and $459 billion respectively (current dollars), or 1.2% and 3.2% of GDP respectively.

The deficits from FY 2009 through FY 2012 have all been well in excess of $1 trillion and range from 10.1 to 8.5 percent of GDP. Each of those years constituted a large "stimulus" to the extent that federal deficit spending (both absolutely and as a percentage of GDP) soared beyond the pre-recessionary baseline. Roughly a trillion dollars a year beyond the baseline, in fact, which was a little larger than the official stimulus. This spending wasn't called a stimulus, but that's only a semantic distinction.

If you have feedback on this (questions, counterarguments, etc.) by all means share them. I seem to be feeling my way toward a solution but I'm not there yet.

Some facts that may or may not bear upon a solution:

In 1929 the combined total of federal, state and local government spending constituted about 10 percent of GDP; it went up to 15 percent during the Great Depression years. By contrast, at the start of the Great Recession this total constituted a little over 30 percent of GDP, and climbed during the recession to a little over 35 percent of GDP.

So, in both cases federal spending as a percentage of GDP went up about 5 percentage points; but it also has to be remembered that GDP in the Great Depression decreased about 27 percent from 1929 to 1933, whereas in the Great Recession GDP decreased about 3.4 percent from 2007 through 2009.

So, it's better to look at dollar figures when seeing how much government spending increased. In 1929 federal (only) outlays were $3.1 billion dollars; but by 1936 they had grown to $8.2 billion dollars, an increase of 165 percent; whereas in 2007 federal expenditures were $2.7 trillion and by 2011 had grown to $3.7 trillion, which is an increase of only 37 percent. But in 1930 federal (only) spending was only 3.4 percent of GDP, whereas in 2007 it was about 20 percent of GDP.

To put it another way, as of September 14, 2012, about $773 billion of Recovery Act (official stimulus) money has been paid out. The unofficial stimulus paid out about a trillion per year over the last four years, or about $4 trillion total, or roughly five times as much as the official stimulus has spent.



As Voltaire would say, I'll define my terms.

When I say "stimulus," I mean federal dollars above and beyond the official budget that are spent on job- and productivity-creating projects. E.g., building high-speed rail, a major new research and development effort on renewable energy (not tax credits), etc.

Most of Mr. Obama's stim was badly targeted, partly on tax cuts for the middle class which were probably mostly used to pay debt, and backfilling state budgets. This stimulus won't leave behind, say, a 21st century transportation system with not only the construction jobs to build it but operating jobs and entire companies to build the equipment.

The federal government was very small in 1929. It's very large today. A huge part of the economy. Whether it mostly supports the economy for the best productive and equality outcomes is open to debate. Hoover didn't have two wars going. The Army was about 125,000. He didn't have a permanent and huge defense establishment, largest arms exporter in the world. Or big corporate welfare for the fossil fuels and pharma industries, among others.

The deficit is entirely a creature of 1) The Bush tax cuts which failed to create jobs or much productive investment; 2) Two wars, one entirely elective and the other now looking ill-advised and neither leaving the countries involved more stable and less dangerous; 3) Medicare D, unfunded, and Big Pharma doesn't have to even bid for the best prices as it does with the VA, and 4) The costs of the Great Recession in lost tax revenues and rising need for governmental services. Beyond this, the banksters evaded the rule of law or any meaningful clawback of the damage they did.

Beyond this, one will hear even sensible journalists such as David Leonhardt talk about how Medicare is the big problem sending the deficit rising for the future. No, the problem is an unsustainable for-profit health care industry. The Republicans' answer, because "competition" doesn't work in health care beyond things such as cosmetic surgery, is to let the worse off die. My answer is Medicare for all, or at least a public option.

I agree about Medicare / a public option. Public healthcare is proved to be much more effective and efficient when provided by NGOs/governments in aggregrate terms (your personal experience may vary -- turned down for that lung transplant cause you're too old?, long wait at the doctor's office? etc.)

And also agree about the Keynesian argument. Unfortunately, for the reasons RC has shown the two situations are vastly different because of the size of government and the size of corporate and general welfare compared to the 1920s and 1930s. The nation state is much more vast these days (maybe is too big, but that will have to be sorted out in the future). There are also the problems of debt deflation (which continues unabated even with more QEs from the Fed) and the liquidity trap.

A jobs program rather than continued federal bailouts of the TBTF banks and Wall Street would go a long way to restoring the economy. Light and high-speed rail systems are good long-term projects for the national and local infrastructure. Short-term projects in public lands and national parks and forests would be good too (getting rid of non-native plants like salt cedars in AZ for example).

Abnormally low federal revenues are THE reason for the large federal deficit. They went from $2.6 trillion in fiscal year 2007 to $2.1 trillion in FY 2009, a decrease of half a trillion dollars. See Table 1.3:


If revenues had just been the same in 2009 as in 2007, without considering any other factors, the deficit would have been half a trillion dollars smaller in 2009 (it was $1.4 trillion, and instead would have been $900 billion).

If (as in normal years) there had been economic growth from 2007 to 2009, even just a mediocre 2.5 percent a year, by 2009 federal government revenues would have been $130 billion higher, which means the deficit would have been down to $770 billion.

There was also emergency spending driving up expenditures: higher than normal unemployment benefits because far more individuals were unemployed; emergency aid to states (to stop deep cuts in essential services); an increase in Medicaid spending as the unemployed lost their jobs and qualified for public health insurance. This is at least $400 billion in additional spending annually that wouldn't have been required had the economy not tanked.

That's another $400 billion taken off the budget deficit for 2009: now we're down to a deficit of $370 billion, which is only $50 billion more than the deficit in 2005 when the housing boom and the economy was in full swing.

As much as I agree with Mr. Talton's latest comment, it just isn't responsive: he's arguing politics, and I'm trying to discuss economics.

Now that we've dispensed with questions of culpability and reasons for the deficit, I'll try to steer this discussion back to the issue I've actually raised (next comment).

Mr. Talton wrote:

"As Voltaire would say, I'll define my terms. When I say "stimulus," I mean federal dollars above and beyond the official budget that are spent on job- and productivity-creating projects."

That's a political definition. I'm talking about Keynesian economics, which says that government should increase deficit spending during recessions in order to maintain total economic demand. Total demand = private-sector demand plus public-sector (i.e., government) demand.

When private-sector demand decreases during a recession, employers will tend to lay off workers, which further decreases private-sector demand, which leads to a vicious circle.

By increasing public-sector demand to compensate for the decrease in private-sector demand, total demand is maintained and employment levels can be maintained (or restored, since the increase in public-sector demand occurs after the fact) until the underlying structural factors in the economy (which caused the recession to begin with) can be fixed (either by markets or the government or both).

In the current case, the underlying structural factors are:

(1) The housing crash, which erased 1/3 of household wealth and locked many homeowners into houses they cannot sell, because the paper value of their homes (mortages) are now priced higher than their appraised home value.

Consumer demand was previously pumped up by such things as capital gains from home sales in a rising market; cash-out refinancing deals; and second-mortgages and/or home-loan lines of credit. That source of consumer funding has dried up and as a result consumer demand (the bulk of private-sector demand) has declined. This problem hasn't been fixed because the housing market is still disfunctional.

(2) The financial crash as it affects consumer spending: previously, consumers demand was pumped up by credit card purchases. Aggregate (total, national) credit card balances are down 22 percent since the peak in late 2008. Credit card usage has declined steadily since then. This is the other main source of consumer funding that has dried up, as lenders charge much higher credit card rates, now, for all except those with sterling credit (which are a lot rarer after so many layoffs, bankruptcies, and foreclosures). This hasn't been fixed either, though lenders are beginning to relax standards and many consumers have switched increasingly from credit card loans to vehicle title loans.

(3) Unemployment. Unemployment insurance, even for those who manage to collect it, is much lower than the wages and salaries collected before its beneficiaries lost their jobs. Unemployment hasn't been fixed either, but this leads directly to the issue I've been trying to discuss.

Now we know why consumer demand (i.e., private-sector demand) declined. The question is why the large increase in public-sector demand (that is, the federal government portion of it) hasn't done more to improve total economic demand and thus hasten the virtuous circle of increased hiring leading to increased consumer demand, leading in turn to increased hiring.

Out of online time today. Maybe with these preliminaries out of the way, I can get to the issue next time (possibly not until Monday).

I'm just a simple, small-town boy from Phoenix so you are likely operating far above my pay grade.

Everything I have discussed is an economic concept. To be sure, it bleeds into the political, which is why the Dismal Science was once called "political economy."

Our times are very different from the Great Depression. For one thing, the actions taken at the end of the Bush administration and by the Obama administration prevented a much worse outcome in the collapse of aggregate demand.

Unlike the Depression, the world is awash in capital, not sitting on vast unused industrial capacity. But now much of that capital is sitting in corporate treasuries or is being used to gamble in capital market functions divorced from the productive economy, i.e. one that would fund new ventures and create more jobs. Indeed, the returns on these investment plays are dependent on killing jobs or not hiring. More than 30 years of "business friendly" policies have ensured continued redistribution of wealth upward from the middle class. This is a very different situation from the virtuous cycle that shared economic growth much more widely.

Thus, it's impossible to leave policy out of the discussion and believe there is this hard science called "economics" that will provide all the answers.

Also, as I tried to make clear in my column, it is impossible to know what Lord Keynes would make of our circumstances, which are different in many critical ways from the 1930s.

Beyond this, I will have to leave it to smarter people than me.

I just meant that defining "stimulus" in terms of specific types of spending (in your case, specific types of infrastructure projects) instead of the Keynesian (economic) definition of stimulus as (additional) deficit spending by government during a recession (or depression), is a political definition of stimulus, not an economic one.

(Note: Please don't start that corn-pone crap, Mr. Talton -- I get enough of that from "cal Lash".)

Mr. Talton wrote:

"Unlike the Depression, the world is awash in capital, not sitting on vast unused industrial capacity. But now much of that capital is sitting in corporate treasuries or is being used to gamble in capital market functions divorced from the productive economy, i.e. one that would fund new ventures and create more jobs."

All true, but a supply-side explanation (which is what you've written above) isn't very convincing, to me anyway, when it comes to explaining why job growth remains so slow despite massive multi-year increases in federal deficit spending.

Employers hire when additional demand requires it, not because they have extra cash, because (as you point out) cash can be invested with a better return than using it to create make-work jobs for unneeded employees.

The real question is, with the four trillion dollar plus federal stimulus over the past four years (under both presidents), why does aggregate demand remain so low that employers don't need to hire more to keep up with it?

More aggregate demand requires more manufacturing, more salesmen, more distributors, more clerks and cashiers, more waitresses, more computer programmers -- you name it -- to meet the additional demand.

Employers are not reluctant to hire when it means the chance to increase revenues and profits by retaining or increasing market share. (You don't want to be so stingy hiring that you can't keep up with customer demand and your customers turn to your competitors.)

So, I have to conclude that growth in aggregate demand remains relatively small and slow. Why?

You did suggest something earlier that I intend to examine further: paying down debt.

Not just tax cuts can be used to pay down debt: money from wages and salaries can also be used for that purpose. Money is fungible, so maybe some of that additional government spending is being used to offset (or enable) additional paydown of mortgage and consumer (e.g., credit card) debt.

This is not a bad thing in the longer term, because when consumers have less debt in future years their spending (consumer demand) will pick up again. In the short term, it produces economic doldrums.

It's difficult for me to quantify this, because part of the decrease in debt has been because of foreclosures and bankruptcies where debt has been wiped out rather than repaid, which has to be separated out. I'm sure that there is good data available to movers and shakers in private reports, but finding it in a publicly accessible form on the Internet using Google is difficult.

Emil, no disrespect, but you get "corn pone crap," as you call it, when you insist on being the smartest guy in the room. My points were not "supply side."

The weak demand we're seeing is fairly easily explained: 1) The worst financial collapse since the Great Depression; financial collapses always cause big demand holes and take much longer to recover from compared with other kinds of downturns.

2) The aforementioned consumer debt overhang, which has been building up for decades as most Americans saw their wages stagnate but their access to credit expanded.

3) A historic collapse of housing, which in many places was the last major "manufacturing" industry. Even a return to the "old normal" leaves a giant hole in demand.

4) Globalization and the trade deficit.

5) The administration and the Fed consistently underestimating the severity of the downturn and not providing adequate or properly targeted stimulus to fill the demand hole or address deflation and the liquidity trap.

Put it all together and here we are.

Mr. Talton, you keep ignoring this:

"Over the last four years, deficit spending has totaled over $5 trillion...So, we’ve already had considerably more stimulus than FDR threw at the Great Depression."

Now, do you agree that this is true, or not? If true, why is demand so weak?

Please don't restate my points and pretend you're telling me something. Also, don't play games: you go from insincere corn-pone about "smarter people" to saying how "easy" it is to explain weak demand. I'm not interested in your insecurity, which is what you reveal when you talk about my "insisting on being the smartest person in the room".

I give up. I acted in good faith but it was a waste of time. The comments section belongs to the readers, provided they don't get all AzCentral on us.

This would be a lot more interesting if, instead of viewing this as a personal or political attack requiring you to dig deeper into preestablished defensive trenches, you looked at it as an abstract economic problem to be explored.

Let's take a careful, close look:

Federal deficit spending as a percentage of the national economy (GDP):

1931: 0.6
1932: 4.0
1933: 4.5
1934: 5.9
1935: 4.0
1936: 5.5

After which it declined precipitously until the eve of WW II.

2007: 1.2
2008: 3.2
2009: 10.1
2010: 9.0
2011: 8.7
2012: 8.5 (estimate)

(Note: fiscal year 2009 began October 1, 2008; budget by Bush.)

See Table 1.2:


I've already noted above that during the Great Depression, GDP dropped 27 percent from 1929 to 1933; whereas in the Great Recession GDP dropped 3.4 percent from 2007 to 2009. In the Great Depression, unemployment peaked at 25 percent. In the Great Recession it peaked at 10 percent.

The question isn't why the Great Recession decreased aggregate demand: I've already explained that in several comments above. The question is what might be absorbing a substantial part of the considerable government stimulus (and it is a stimulus, economically speaking) of increased deficit spending. It's hard to imagine what could do that -- take all this money out of the consumer economy -- except for accelerated debt repayment.

Mr. Talton wrote:

"I give up. I acted in good faith but it was a waste of time."

Neither passive-aggressive, insincere, exaggeratedly self-deprecating corn-pone, nor hostile misrepresentation ("you insist on being the smartest guy in the room") is consistent with good faith action. My comments were entirely impersonal until you insisted on turning this into a battle of egos with defensive nonsense.

Mr. Talton wrote:

"My points were not 'supply side.' "

Here's the point (not points) I referred to as "supply side":

"Unlike the Depression, the world is awash in capital, not sitting on vast unused industrial capacity. But now much of that capital is sitting in corporate treasuries or is being used to gamble in capital market functions divorced from the productive economy, i.e. one that would fund new ventures and create more jobs."

That's supply-side economics. You're blaming the lack of jobs on what employers choose to do with their money, rather than a demand-side argument which recognizes that employers won't spend to create new jobs until motivated by a demand sufficient to make hiring part of a good business plan.

Humans have hard-wired and have learned behaviors which took 2 million years to get programmed into their DNA.

Whether you look at things through a "political" lens or an "economic' lens, if you discount those behaviors, while you view and analyze the world from your lofty towers,you do so at great risk.

You could take Mother Theresa and over a ten year period give her large amounts of power and money. At the end of those ten years, she would serve roast orphans to guests at her castle.

Economics depends on the premise that logic is a dominating human trait.

Enjoy your dreamland.

I've had a hard time considering Mother Theresa a saint after reading Hitchen's scalding write-up on her. Evidently, becoming a saint has more to do with the cash you can raise than alleviating suffering.

The economic stimulus went to the corporations so that the banks wouldn't fold or miss their insurance payouts. A trickle-down approach that did not create many jobs as demand is low. So how to increase demand? A bottom-up jobs program (because the bottom 80% spend their money rather than saving it) and letting the TBTF banks fail and then splitting them up.

Eclecticdog wrote:

"The economic stimulus went to the corporations so that the banks wouldn't fold or miss their insurance payouts."

No. You're confusing the (official) stimulus with the Troubled Asset Relief Program (TARP). Two completely different beasties.

The (official) stimulus, by contrast, has spent $298 billion on tax cuts; $242 billion on contracts, grants, and loans; and $233 billion on entitlements; totalling $773 billion.


I posted this above in a reply to Petro but apparently nobody bothers to click on links.

The TARP program (bank bailout) was originally authorized for $700 billion; had this amount reduced to $475 billion by Dodd-Frank; will actually pay out $431 billion; and the Congressional Budget Office estimates that the total cost to taxpayers, including "grants for mortgage programs not yet made", will cost only $32 billion.


I call that a bargain, for stabilizing the nation's financial system.

Yes, this still leaves the problem of too big to fail: by all means, break up the biggest banks using anti-trust laws and reinstate Glass-Steagall.

Most of the $4 trillion plus economic stimulus (see above discussion) has gone for the usual things the federal budget spends on, only more in regard to emergency assistance (including direct payments to individuals and states).

As for increasing demand, as I've pointed out countless times before, just tax the rich (say, top 15 percent) and redistribute to the bottom 1/3 in the form of an expanded earned-income tax credit. (An additional motivation to be employed full-time hours, since it won't be available to someone sitting in their double-wide trailer all day watching Ricky Lake reruns.)

That will take money now used for non-consumption (to bid up the notional value of paper assets) and instead direct it toward consumption.

All of the usual conservative arguments against this are nonsense: this will not take money that would be invested by employers in job creating businesses, for the simple reason that the redistributed money won't disappear from the financial system; it will be spent by the recipients on the goods and services sold by these very same employers; and the whole time all such funds will remain in the banking system where it can be loaned out.

Because this would be permanent rather than temporary, it would eradicate "uncertainty". And because it would be funded by taxation instead of borrowing, it would eradicate big increases in federal deficits and debt.

P.S. If some of this redistributed money is used (initially) to pay down debt, well and good. The economy will just be spinning its wheels until the problem of overhanging personal debt is addressed.

Also, the metering out of these redistributed funds can be controlled, so as to avoid inflationary pressures (insofar as that is possible).

We're on the same page Emil!

US GDP is 15 Trillion in 2011. 773 Billion isn't going to move an economy that large.


But as I keep trying to point out, the stimulus wasn't limited to $773 billion; only the official stimulus.

Any (borrowed) money which the government spends in addition to what it had been spending, is also an economic stimulus.

Take a look at the table I quoted from above, showing federal deficits as a percentage of GDP. Then click on the link and look at the whole historical series.

Incidentally, I have this puzzle figured out now, and will be posting something on it very shortly.

I wrote earlier that differences in the size of government, then (Great Depression) and now (Great Recession and post-recession) might be a clue to the solution of the puzzle of why so much recent federal deficit spending (as a percentage of GDP) has had comparatively little effect. This wasn't a criticism of "big government" (I said I was talking economics, not politics); and today the answer clicked.

Back in 1930 federal spending was only 3.4 percent of GDP, whereas in 2007 it was about 20 percent of GDP.

From 2007 to 2009 (fiscal years) GDP decreased about 3.4 percent. However, federal revenues decreased about 20 percent over the same period, from $2.6 trillion in 2007 to $2.1 trillion in 2009.

If the federal government had cut spending by the amount that its revenues dropped (half a trillion dollars) that would have resulted in a decrease in total economic demand of roughly 4 percent of GDP (20% of 20% = 4%), which would have more than doubled the actual decline in national GDP.

So, just to maintain its own portion of total demand, the federal government needed to increase its deficit by half a trillion dollars by 2009. Added to the $161 billion preexisting 2007 deficit, this already accounts for $661 billion, or 47 percent of the 2009 deficit of $1.4 trillion.

All this before the federal government could even THINK about additional deficit spending to offset the decline of private sector and state & local government spending/demand: also an economic necessity since if total demand shrinks, so does GDP; the recession continues and deepens, as newly shrunken GDP leads to still lower personal/business income and government tax revenues, and thus another round of spending cuts, resulting in a vicious, self-perpetuating cycle.

So, in the time of the Great Depression nearly all of the federal increase in deficit spending (Keynesian countercyclical stimulus) went toward offsetting the decline in private sector and state/local government spending; whereas today, because the federal government is a larger part of the economy to begin with, it must also engage in oodles of deficit spending just to maintain its own demand as a share of the economy.

That's the part of the puzzle that was missing, and it's a major reason why such large deficits as a percentage of GDP merely make the economy shrug its shoulders and say "meh". Nearly half of the Keynesian countercyclical stimulus (i.e., 2009 federal deficit spending) had no external effect: it went merely to offset the federal government's own decrease in revenues.

Note that the liquidity trap of accelerated debt paydown by consumers, that I suggested in earlier comments, likely also remains part of the solution to the puzzle.

P.S. Don't be confused by the technical term "Keynesian countercyclical stimulus": it simply means that Keynesian economic theory requires the central government to increase deficit spending during times of recession to offset the decline in total demand (including private sector consumer demand) until such time as the underlying, foundational problems that caused the recession can be fixed, either by markets or by government intervention, or both.

Also: Note that since 2009 total government expenditures (federal, state and local) as a percentage of GDP have decreased nearly 2 percentage points, from 37.1 percent of GDP in 2007 to 35.4 percent of GDP in both 2010 and 2011.

So, even though federal revenues are beginning to recover, the objective size of the stimulus has decreased.

See Table 15.3 (toolbar page 350, internal page 346):


Furthermore, in fiscal year 2011 (latest actual figure) federal revenues ($2.3 trillion) were still well below the pre-recession peak for fiscal year 2007 of $2.6 trillion.

Federal revenues are not expected to recover beyond the 2007 level until FY 2013. See table 1.3


More to this, but out of online time today.

Some additional points:

(1) Government (particularly state and local governments) have been fighting economic recovery with job cuts, contrary to past economic recoveries:

"In normal recoveries, government hiring helps economies rebound from recessions.

"Not this time.

"When you count the 7,000 public-sector jobs lost in August, governments at all levels — federal, state and local — have slashed 670,000 jobs since the recession ended in June 2009. By contrast, private companies have added 3.5 million jobs.

"It's the first time since World War II that governments have shed jobs this deep into an economic recovery. At this point — three years and two months — into the nine previous postwar recoveries, government jobs had risen an average 8 percent.

"This time, they're down 3 percent."

— Paul Wiseman, AP Economics Writer


In other words, layoffs in the government sector total roughly 20 percent of private sector job creation.

This means that had governments simply not laid off workers this time around, total job creation would be 20 percent higher; instead of a net new 2.8 million jobs (3.5 million private sector minus 670,000 public sector jobs) we would have 3.5 million total net new jobs.

If governments had, instead of cutting jobs by three percent, added jobs according to the post-recovery average of 8 percent, there could be as many as an additional 2.5 million jobs (670,000 + 1,800,000). Of course, some of the layoffs among the 670,000 may have found private sector jobs, so the total might not be quite as high; but such public layoffs also absorb private sector job creation capacity, so the effect is roughly the same in any case.

An additional 2.5 million jobs would have lowered the unemployment rate to 6.5 percent as of August 2012.

(2) A number of major federal spending programs are indexed to inflation (e.g., Social Security Benefits) with the increase written into law by past Congresses. So, the mere fact that federal spending increases from one year to the next does not in itself indicate profligacy by the current administration. Inflation in 2011 averaged 3.2 percent. Inflation in the first eight months of 2012 averaged 2.1 percent.

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