1921

Well, without them the economy would have been even worse; government spending that keeps going when the economy tanks is of the counter-cyclical factors. The appropriations were something like 1% of GDP this year. Like all government purchases it’s a bit of demand stimulus, but it’s nothing like the gargantuan ~40% numbers of the 1940s. It’s about 5% right now.

I’m not economist, but I gather to really make sure the recession ended the stimulus should have been at least 3 times as large. The early days of the recession keep getting worse and worse in retrospect as more data comes in, and growth it still anemic.

Basically. I’d replace the Tea Party with “the conservative movement” though; these are largely the same people who were voting in GOP primaries back in 2000. They’ve just gotten really strong because 1) conservatism continues to rhetorically outmaneuver everything else and 2) the sane Republicans have gone into hiding. There’s a lot of them in Congress this year because people vote against the incumbent when the economy stinks, they were the radical alternative to vote for, and it was a big GOP year.

1922

That’s true too.

1923

Interestingly enough, not only do you suddenly see the Wall Street Journal spouting an article on the front page stating that Republicans are not exhibiting the kind of maturity that earns them the right to govern, but I recently heard, up here in conservative Iowa, our Senator Graessly (sp) - GOP - saying on the radio that he is hearing extreme displeasure at the GOP from his “supporters in the business world.” I’m sure they are happy at the line being held on taxes, but they also apparently see these wackos willing to let the country go into default, which would cost them gazillions of dollars in, e.g., cost of capital and other loans.

I’m hoping that some big business supporters are telling a LOT of the GOP to get these wackos under control. Hoping. This group tends to be pragmatic rather than idealistic (to a fault.)

1924

Oh, related, the 2010 electorate was incredibly conservative.


This might seem counterintuitive. Didn’t the Republicans win a sweeping victory last year? They did, but it had mostly to do with changes in turnout. Whereas in 2008, conservatives made up 34 percent of those who cast ballots, that number shot up to 42 percent last year. Moderates, on the other hand, made up just 38 percent of those who voted in 2010, down from 44 percent in 2008 (the percentage of liberals was barely changed). The 2010 election was the first since exit polls began in 1976 in which a plurality of the voters said they were conservatives rather than moderates.

This was fortunate for Republicans, because they lost moderate voters to Democrats by 13 percentage points (and liberals by 82 percentage points). Had the ideological composition of the electorate been the same in 2010 as in 2008 or 2006, the Republicans and Democrats would have split the popular vote for the House about evenly — but as it was, Republicans won the popular vote for the House by about 7 percentage points and gained 63 seats.

So the general public hasn’t gone as bonkers, but man, those Republicans.

1925

Gotta share.

At home waiting for the family to get their act together (lots of family here, middle daughter just got proposed to, boyfriend made sure siblings and her best friend were here for the event, big suprise, etc.) Anyway, while waiting, turned on the local talk radio to listen to the top of the hour news. And the local host had Michelle Bachmann on the phone (it’s Iowa.)

So just for fun, as it seemed he was having a hard time getting callers, I called. Screener asked me a question or two, then 'You’re on the air!" So, I asked, can I ask a couple of questions? (it was slow in terms of callers.) He said, sure, as long as you keep them concise.

So - she was giving the whole “Obama blank check” line, and I asked her: You keep saying blank check, but the debt ceiling that you are refusing to vote for is simply paying the bills you have already racked up in Congress. So you are saying you don’t want to pay those current bills? Not future new spending, but the bills from the legislation already passed.

She paused, and the host said “Well, what he says is technically correct, is it not?” She said “Well, the problem he points out is correct, we have racked up far more than we can afford, and I have opposed new spending bills, and as president would assure that we don’t spend more than we make” etc. So I repeated, but you are saying you don’t want to pay our current bills? Because the current debt ceiling is not new spending, it’s paying what we already owe. And she just repeated her slogans.

So he asked, quickly, we’re coming up on the news break, second question? I said “I assume you believe as many do that government has gotten too big and far too intrusive in our lives, and would try to get government out of our lives and affairs if you were president?” She said, absolutely, government was intended to protect the citizens and provide basic services like highways. I said, OK, one of my best friends from high school is gay, has a life partner that he truly loves as much as I do my wife, and they have the same squabbles and fears and joys that my wife and I have - How can you say you support government not intruding in our lives, yet you want government to control who a person can love and marry? Isn’t that the most basic of intrusions of a Big Brother government?

Again, she paused for a second, then simply went into “I was raised to believe that marriage is a sacred bond between a man and a woman, and I oppose all liberal attempts to corrupt our sacred institutions.”

I know, anyone who likes her will not be swayed, but it sure felt good to ask the questions, on the air.

The only thing I like about Bachman is that Palin hates her because she has taken all the Palin media attention.

FWIW

1926

Well done.

H.

1927

Could be you gave her a nasty case of mental whiplash there.

1928

That’s awesome, Jeff. I hope my in-laws were listening and perhaps, just maybe, stopped and thought a bit about your questions.

1929

Doubtful.

1930

And this is also a big part of why Keynesian theory is off in la-la-land. No modern American administration or Congress, no matter which party is in power, will EVER build up a surplus during good times. They’ll just open the spigot wider.

1931

Details are in:

Short form is this: Discretionary spending is capped. $2.4T over the decade to be enacted in cuts in return for raising the debt ceiling. Medicaid/SS/VA exempt, Medicare might be touched in trigger scenario but capped to 2%. All other cuts come from discretionary budget including military. So we’re looking at about 18% in cuts to discretionary spending over the next ten years.

Seems like a lot, eh? And it is but since it’s only coming from one source, it will murder our infrastructure spending unless we spin down the military to the tune of 25%. However this deal doesn’t even bring the current deficit below $1T annually. Let all the Bush tax cuts expire and let all the stimulii spin down and I think we’ll be somewhere around $500B deficit, bringing us to $20T debt at the end of the decade. Yay government.

H.

1932

Clinton had a surplus from 1998 to 2000, does that count as a “modern American administration or congress”?

Besides which, America is not the world. Just because America arguably can’t enact sound Keynesian policies doesn’t make those policies “off in la-la-land”.

1933

Not even close, since a large national debt still existed. A real surplus is just that–all existing debts are repaid and a genuine fund of excess cash exists for when the bad times come around. Clinton managed to briefly run an annual surplus, for which I salute him, but it never came close to wiping out the debt. I stand by my statement that America is incapable of doing this for the decade(s) necessary to generate a real surplus.

1934

So I repeated, but you are saying you don’t want to pay our current bills? Because the current debt ceiling is not new spending, it’s paying what we already owe. And she just repeated her slogans.

This is why most of the time I can’t be bothered with politics. They don’t listen, they don’t care, they just regurgitate whatever script they have memorized.

1935

So it looks like the deal will have a negative short-term impact on the economy, but pretty slight. According to this reuters article it will only contract the economy by .1% (point one percent). That’s because the vast majority of the discretionary cuts are back loaded, with 22 billion coming by end of 2012.

Troy Davig, U.S. economist at Barclays Capital, estimated that the deal would only cut $25-30 billion from government spending in the first year, which could shave about a tenth of a percentage point off economic growth.

1936

That’s the core of the debt ceiling inanity right there, and well done for calling her on it. I’m all for a serious effort to rein in our burgeoning debt, but it must be done during the budgeting process. The debt ceiling is bizarre, possibly unconstitutional, and very, very stupid. It shouldn’t exist at all–our debts should be backed by our full faith and credit, period–but as long as it does it should be raised without protest by the same Congress that votes for the expenditures that necessitate borrowing.

1937

What, he was going to erase a 4T debt with a yearly budget? How is that even worth mentioning? We had a surplus of over 200B vs. a deficit of 4T, so two decades would have done it. Growth was a reasonable 3-4% so it wasn’t that crazy a time, historically, for revenue growth. What really helped was high capital gains taxes during a stock market boom.

H.

1938

Nate makes a good point

http://fivethirtyeight.blogs.nytimes.com/2011/08/01/the-fine-print-on-the-debt-deal/

If you’re a Democrat and you must accede to $1.5 trillion in cuts — and that’s literally the situation that Democrats will find themselves in if the deal passes through Congress — it’s going to be hard to do better than this $1.5 trillion in cuts. They are very heavily loaded with defense cuts, while containing few changes to entitlement programs or to programs which benefit the poor.

So Democrats will have very little incentive to vote for the panel’s recommendations unless they include tax increases. Does that mean that Republicans will agree to tax increases? Perhaps the Republicans on the committee will consider them — but it is unlikely that rank-and-file in the House will give their sign-off.

The “trigger” would likely be better than any deal the committee came up with that didn’t have revenue increases. The question will then come down to whether the Republicans would think cutting defense by a whopping $550 billion is better than increase in tax revenue.

In a way though all this debate is academic until we see what the committee comes up with and what transpires after that. If we end up with tax revenue and entitlements protected, along with cuts in defense, this deal is going to look better in the long run than it does now.

Of course if we ended up with cuts to entitlements that are worse than the trigger with no tax revenue, than this deal would look like a disaster.

Either way though I can’t see how we come out of the committee debate with painful and unnecessary cuts to discretionary spending.

1939

The US national debt is nothing other than the net savings in USD of everyone and everything outside the US federal government. Why exactly do we need to pay it off entirely again?

I can understand that you don’t want it to get above a certain size relative to GDP, and you don’t want interest payments on it to consume an excessive porportion of the annual budget, but there’s no particular virtue in retiring the national debt entirely.

1940

Is there any other way that doesn’t involve massive currency devaluation and/or running the presses?