Yesterday was our last chance. . .

[Conan71]

"The best thing a President can do for the economy is give people confidence in it" -Conanism

[Cats Cats Cats]

People who blast President Reagan's defense spending are forgetting historical perspective of national security at the time.  The Cold War still existed with nuclear holocaust as a very real possibility as we were faced with hostile Soviet leaders until Mikhail Gorbachev.  As well, much of our weaponry and vehicle inventory were aging relics from WWII, Korea, and Viet Nam eras.  There was also a growing third world threat from the middle east with Iran, Libya, and Afghanistan leading the way.  I can still remember incidents like KAL 007 and having a very real concern about whether or not an incident like that could be a catalyst for a major war.

Defense spending creates and keeps a lot jobs here in the U.S.  About 5,000,000 alltogether.  Many of those are very good paying engineering and technical jobs, much like those the space program provides.  Certainly one can argue that money could be spent elsewhere in the budget on different initiatives like alternative energy and transportation and have the same effect, I can't say I disagree entirely.  Many defense projects are necessarily kept in the U.S. for security purposes which means it secures jobs for Americans which cannot be outsourced.  The same can't be said for spending on alt energy (windmills and solar being built in China).

http://www.ips-dc.org/reports/071001-jobcreation.pdf

Reagan's economic philosophies weren't perfect and did not all work as designed.  It's what happens when theory meets reality and is mixed up with politics.  However, he did preside over the longest period of peacetime growth in U.S. history up to that point. That's something even the most jaded economists have agreed upon.

I was just trying to point out that spending increased in 1980 and 1981 by 17% and 14.77%.  Spending government money on defense projects which then helps bolster the economy using government funds.  When Obama takes a 17% drop in revenue and american households lose 11.1 trillion in wealth in 2008 (http://www.nytimes.com/2009/03/13/business/economy/13wealth.html) They increase spending by 17.96% and spend it on non-defense spending (1. we are already spending a crap load on defense spending 2. As we found out when we buy a bunch of equipment we have to spend a bunch to maintain it or retire it).  The income tax brackets are planned to be within 1% of Reagan's (assuming they pass his budget) and I think with a lower capital gains tax than Reagan.

So the threat of nuclear war vs a 1 year revenue drop of 16% and the near meltdown of the entire market.  The same increase in spending, near the same tax brackets.  Except one of them gave amnesty to illegals.

[Conan71]

Except one of them gave amnesty to illegals.

And I suspect the other will as well with a more sweeping bill.  Let's hope this time it includes serious attention to preventing illegal migration as well.

You are right, we aren't going back to near the tax rates of pre-Reagan.  However, there's all sorts of legislation out there with "fees" which curiously aren't really taxes even though they are remittances to the treasury.  One thing the Obama Administration also is not doing which Reagan tried to do was shrink the size and reach of government.  President Clinton made good on continuing that notion, unfortunately the Bushes didn't get that memo.

[Cats Cats Cats]

And I suspect the other will as well with a more sweeping bill.  Let's hope this time it includes serious attention to preventing illegal migration as well.

You are right, we aren't going back to near the tax rates of pre-Reagan.  However, there's all sorts of legislation out there with "fees" which curiously aren't really taxes even though they are remittances to the treasury.  One thing the Obama Administration also is not doing which Reagan tried to do was shrink the size and reach of government.  President Clinton made good on continuing that notion, unfortunately the Bushes didn't get that memo.

To me the basics of "reducing the government" is all about how much money the government spends.  I don't see double digit growth in spending "reducing the size of government".  For example laying off half of the government workers and paying the rest triple isn't "reducing" the government.  Just like dropping costs in the government but then spending WAAAAY more on military isn't reducing the government.  Its just moving where the money goes.  If there really was a reduction in the goverment we probably would have seen some non growth years as we ramped down after the cold war.  (Maybe it took until Clinton, I dunno).  The whole thing is so freaking complicated its hard to tell pancakes is going on.

[Conan71]

To me the basics of "reducing the government" is all about how much money the government spends.  I don't see double digit growth in spending "reducing the size of government".  For example laying off half of the government workers and paying the rest triple isn't "reducing" the government.  Just like dropping costs in the government but then spending WAAAAY more on military isn't reducing the government.  Its just moving where the money goes.  If there really was a reduction in the goverment we probably would have seen some non growth years as we ramped down after the cold war.  (Maybe it took until Clinton, I dunno).  The whole thing is so freaking complicated its hard to tell pancakes is going on.

Even President Clinton's cuts to the federal payroll come under scruitiny and some suggest they never happened and were the result of "parsing".  Don't get me wrong, I give the Clinton Admin serious props for continuing the peacetime growth and many of their fiscal policies.  His record has been distorted on many fronts.  Of course, if you cut government jobs you create more unemployment and in this political climate no one wants to add to the jobless count.  The government could always outsource more services which would require more private sector jobs, but the government still pays in full for those jobs.

My personal belief is you don't create any more bureaucracies like this new agency to oversee the financial industry.  You re-purpose existing agencies to enforce the new regs.  Allow jobs to go away via attrition.  As the need for the postal service shrinks, start cutting back via attrition.  Give people recieving UE benefits contract work until they can find another job.

Someday we may figure out, like in the UK where many live on the dole, there simply are not enough jobs to go around for everyone and we will finally see the foolishness in our lax enforcement of immigration laws.

"Despite declarations to the contrary from elected officials across the political spectrum, the federal government is much bigger, not smaller, than it was 30 years ago.

Only by using the narrowest possible definition of the true size of government--headcount in the federal civil service--could President Clinton declare that "the era of big government is over" in his 1996 State of the Union address. Although Clinton's declaration earned a roar of applause from both sides of the aisle, it was a partial truth at best, a false claim at worst. Counting all the people who deliver goods and services for Washington, while removing the masking effects of the huge Defense Department downsizing, Clinton would have been much more accurate to say that the era of big government was continuing pretty much unabated. And that is precisely what the vast majority of Americans want.

A more realistic headcount begins with the 1.9 million full-time permanent civilian federal workers who get their paychecks and identification cards from Uncle Sam. Add in the 1.5 million uniformed military personnel and 850,000 U.S. Postal Service workers who were counted in the federal workforce until their department became a quasi-government corporation in 1970, and the total full-time permanent federal workforce was just under 4.3 million in 1996, the last year for which good numbers are available on both the visible and shadow federal workforce.

Add in the people who work under federal contracts and grants or mandates imposed on state and local governments and the illusion of smallness becomes clear. In 1996, the federal government's $200 billion in contracts created an estimated 5.6 million jobs, its $55 billion in grants created another 2.4 million jobs, and its array of mandates in such fields as air and water quality and health and safety regulation encumbered another 4.7 million jobs in state, county and municipal governments. Add these 12.7 million shadow jobs to the 4.25 million civilian, military and postal jobs, and the true size of government in 1996 expands to nearly 17 million, or more than eight times larger than the standard headcount of 1.9 million used by Congress and the President to declare the era of big government over. And the count does not even include the full-time equivalent employment of the people who work on a part-time or temporary basis for Uncle Sam--for example, the 884,000 members of the military reserves. "

http://www.govexec.com/features/0199/0199s1.htm

[Cats Cats Cats]

Even President Clinton's cuts to the federal payroll come under scruitiny and some suggest they never happened and were the result of "parsing".  Don't get me wrong, I give the Clinton Admin serious props for continuing the peacetime growth and many of their fiscal policies.  His record has been distorted on many fronts.  Of course, if you cut government jobs you create more unemployment and in this political climate no one wants to add to the jobless count.  The government could always outsource more services which would require more private sector jobs, but the government still pays in full for those jobs.

My personal belief is you don't create any more bureaucracies like this new agency to oversee the financial industry.  You re-purpose existing agencies to enforce the new regs.  Allow jobs to go away via attrition.  As the need for the postal service shrinks, start cutting back via attrition.  Give people recieving UE benefits contract work until they can find another job.

Someday we may figure out, like in the UK where many live on the dole, there simply are not enough jobs to go around for everyone and we will finally see the foolishness in our lax enforcement of immigration laws.

"Despite declarations to the contrary from elected officials across the political spectrum, the federal government is much bigger, not smaller, than it was 30 years ago.

Only by using the narrowest possible definition of the true size of government--headcount in the federal civil service--could President Clinton declare that "the era of big government is over" in his 1996 State of the Union address. Although Clinton's declaration earned a roar of applause from both sides of the aisle, it was a partial truth at best, a false claim at worst. Counting all the people who deliver goods and services for Washington, while removing the masking effects of the huge Defense Department downsizing, Clinton would have been much more accurate to say that the era of big government was continuing pretty much unabated. And that is precisely what the vast majority of Americans want.

A more realistic headcount begins with the 1.9 million full-time permanent civilian federal workers who get their paychecks and identification cards from Uncle Sam. Add in the 1.5 million uniformed military personnel and 850,000 U.S. Postal Service workers who were counted in the federal workforce until their department became a quasi-government corporation in 1970, and the total full-time permanent federal workforce was just under 4.3 million in 1996, the last year for which good numbers are available on both the visible and shadow federal workforce.

Add in the people who work under federal contracts and grants or mandates imposed on state and local governments and the illusion of smallness becomes clear. In 1996, the federal government's $200 billion in contracts created an estimated 5.6 million jobs, its $55 billion in grants created another 2.4 million jobs, and its array of mandates in such fields as air and water quality and health and safety regulation encumbered another 4.7 million jobs in state, county and municipal governments. Add these 12.7 million shadow jobs to the 4.25 million civilian, military and postal jobs, and the true size of government in 1996 expands to nearly 17 million, or more than eight times larger than the standard headcount of 1.9 million used by Congress and the President to declare the era of big government over. And the count does not even include the full-time equivalent employment of the people who work on a part-time or temporary basis for Uncle Sam--for example, the 884,000 members of the military reserves. "

http://www.govexec.com/features/0199/0199s1.htm

I just look at the final numbers.  If he did increase headcount over Bush Sr by a bunch he was damn good at it.

http://www.cbo.gov/ftpdocs/108xx/doc10871/historicaltables.pdf

Clinton outlays increased about 3% every year.  That is pretty in line with inflation.  I don't like the fact they choose Clinton, one of smallest increase in government spending in the last 30 years (by percentage).  To say that the government is big.  My problem is (listenting to people talk about) the "myth" (which they think is true because they don't pay any attention) that Republicans somehow equate to a smaller government when no matter what they do with this job or that job they are blowing 3x that somewhere else and jacking up the debt.  My smaller government spends less money.  A republican's smaller government spends less money on that and 3 times (less money) on the other.

[guido911]

Clinton outlays...

Sorry, back o/t

[Conan71]

My problem is (listenting to people talk about) the "myth" (which they think is true because they don't pay any attention) that Republicans somehow equate to a smaller government when no matter what they do with this job or that job they are blowing 3x that somewhere else and jacking up the debt.  My smaller government spends less money.  A republican's smaller government spends less money on that and 3 times (less money) on the other.

"Don't pay attention to the man behind the curtain"

[Cats Cats Cats]

http://www.marketwatch.com/story/reagan-insider-gop-destroyed-us-economy-2010-08-10?pagenumber=1

Speaking of Reagan .... Here is what his director of the Office of Management and Budget has to say

[Conan71]

I don't put much stock in kiss and tell stories from forgotten members of past administrations. 

It's common sense: passing tax cuts at a time of increased spending doesn't make the best fiscal sense, especially following through with new defense spending required by conflicts in Iraq and Afghanistan and unprecidented natural disasters at home as well as creating a huge new bureaucracy for the Homeland Security Dept.  You had a perfect storm going on in 2001, President Bush could leave everything alone and risk a deeper recession or try and stanch it the best way "fiscal conservatives" knew how: let the wealthy and corporations keep more money and create jobs.  We wound up with pretty much full employment for a sustained period.

Problem was, Congress ignored all the signs of impending doom with Freddie and Fannie and continued to spend like drunken frat boys. 

In my world, I can't simply print more money when I outlive my means and credit limits.  Congress can.

[nathanm]

We wound up with pretty much full employment for a sustained period.

Which we had through much of the late 90s, until the second bubble popped (the first was LTCM, the second was built by Enron, they got better at it after that)

Part of our unemployment problem is simply efficiency increases. To some degree, it takes fewer people to do the same work now than it did 10 years ago. The larger part is the nearly nonexistent inflation scaring people regarding a possible coming deflation. This new normal sucks, and I think it would have helped mightily if we'd gotten a stimulus big enough to be responsive to the problem.

The reason I call this the new "normal"? Sales tax receipts are up in many states, while unemployment is stagnant at best, while inflation continues to trend downward toward deflation. Mild (3-4%) inflation is good for employment. No inflation or outright deflation is not, as it increases the cost of the borrowing necessary for expansion. If the Fed keeps doing its level best to emulate the Bank of Japan, I think it's fair to say we'll continue to look like Japan economically. It doesn't help that banks are mainly lending far in excess of the rate of inflation (obviously the interest rate has to be above inflation, but historically the spread has been lower). Great for bank profitability, allowing them to recapitalize, but not so great for the economy as a whole.

The challenge, of course, is to get inflation back to target without overshooting, which we all know our beloved Fed has been known to do. (They're pretty damn good at helping bubbles along!) Of course, if they responded quickly to signs of inflation increasing above target, they could probably get it back under control without having to go to the Volcker extremes of the early 80s. If they responded as well to it as they have been lately, maybe not. I still think it would be worth it.

Edited to add: And you know what really chaps my donkey? Blaming Fannie and Freddie. Their mortgage book looked vastly superior to most commercial banks, yet they got the blame while the commercial banks had everything possible that could be done, by hook or by crook, to prop them up and make them profitable enough to out earn the steaming piles of smile that were their balance sheets. By all rights, every big bank in this country should have failed, and spectacularly.

Fannie and Freddie's forays into the CDO market were much more responsible than those of Bank of America, Citi, or Chase. Hell, Bank of America was outright lying about their leverage for some years, using repos to hide their liabilities at the end of the quarter in a way that makes Bear & Lehman look like saints, but it doesn't get reported on. The GSEs didn't cause this mess. The banks selling loans to them and the brokers originating the loans are far more at fault here. The first for not doing their job, which was to verify the contents of the loan application, and the second for encouraging people to lie about their income and take exotic loans when the exotic loan was really only better for the broker, who gets paid much more for subprime, interest only, and other weird products that make the banks more money.

The brokers were bad enough that I wouldn't be entirely opposed to forcing their only compensation to be from the borrower, rather than letting them get it from the bank that originates the loan.

Edited to add: Sorry for the novel.

[Conan71]

I think you and I are in agreement about new norms.  Maybe we are finally learning our lesson and we are entering an age of personal and corporate austerity.  That is until someone figures out what the next thing to pump and plunder is 

Efficiency in production is certainly better than 10 years ago, but we've also been very successful in purging a lot of jobs to countries with extremely low standards of living.  After labor gets too expensive in China, Taiwan, Mexico, and India, there will be another cheap labor haven which will spring up. 

Fannie and Freddie were every bit as caught up in the loan gorging as the banks.  They could have clamped down at any time through edict and audit to promote more responsible lending since they were the ultimate guarantor of the loans.  There were warnings which went unheeded for a long time prior to the debacle. 

The problem is, in our current political environment is no one wants to put the brakes on an over-heated economy, so regulations don't come around until AFTER a major cataclysm when it suddenly looks like a great idea to the majority of the electorate.  Clinton didn't want to do it, Bush didn't want to.  Now that there's a huge pile of ashes, Obama is working best he knows how to sweep them up.  The problem he faces is the cadre of greedy Representatives and Senators who want pork in every bill and want the special interests who funded their campaigns to not be affected adversely with any regulation.

The next time the Dow goes up 30% or so in a year or home sales take an unusual spike, we need to take a closer look at what's causing the exhuberance and figure out how to modulate it.  This binge and purge takes such a huge toll on so many when the bottom falls out every time.

[Cats Cats Cats]

I think you and I are in agreement about new norms.  Maybe we are finally learning our lesson and we are entering an age of personal and corporate austerity.  That is until someone figures out what the next thing to pump and plunder is 

Efficiency in production is certainly better than 10 years ago, but we've also been very successful in purging a lot of jobs to countries with extremely low standards of living.  After labor gets too expensive in China, Taiwan, Mexico, and India, there will be another cheap labor haven which will spring up. 

Fannie and Freddie were every bit as caught up in the loan gorging as the banks.  They could have clamped down at any time through edict and audit to promote more responsible lending since they were the ultimate guarantor of the loans.  There were warnings which went unheeded for a long time prior to the debacle. 

The problem is, in our current political environment is no one wants to put the brakes on an over-heated economy, so regulations don't come around until AFTER a major cataclysm when it suddenly looks like a great idea to the majority of the electorate.  Clinton didn't want to do it, Bush didn't want to.  Now that there's a huge pile of ashes, Obama is working best he knows how to sweep them up.  The problem he faces is the cadre of greedy Representatives and Senators who want pork in every bill and want the special interests who funded their campaigns to not be affected adversely with any regulation.

The next time the Dow goes up 30% or so in a year or home sales take an unusual spike, we need to take a closer look at what's causing the exhuberance and figure out how to modulate it.  This binge and purge takes such a huge toll on so many when the bottom falls out every time.

I agree with you 100%.  Only problem is that while middle class earning has stayed relatively stagnant the top earnings have doubled.  So you have a case where all the money with money is growing exponentially and they are who buy the politicians to make the policy.

[Conan71]

I agree with you 100%.  Only problem is that while middle class earning has stayed relatively stagnant the top earnings have doubled.  So you have a case where all the money with money is growing exponentially and they are who buy the politicians to make the policy.

Please, let's not engage the "rich getting richer" meme.  It's old, unproductive, and smacks of jealousy.  Money has always bought influence in this country.  Politicians pander craft their message to appeal to the majority of voters: the middle and underclass so they can get elected to do the work of those who actually paid for them to get the message out: the rich and corporations.  If anything, the volume of millionaires and billionaires has grown by an amazing amount in the last century, so technically more people have more influence on those who make the laws.  They've also employed more an more people in the middle class.  By percentage it's remained stagnant, but it's managed to keep up somewhat well with the growth in overall population.

/talking out of my arse

[Gaspar]