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Debt Has Bipartisan Support

Posted on Oct 20, 2008

The owners of the national debt clock in Manhattan are planning to refurbish the digital billboard to add a couple of digits.

There’s one thing Democrats and Republicans in Congress agree on these days: When it comes to raising hundreds of billions of dollars to bail out banks or stimulate the economy, better to go further into debt than cut costs or raise taxes.

But even groups such as the Committee for a Responsible Federal Budget agree that might not be such a bad idea.

Here’s hoping China doesn’t ask for its money back.

New York Times:

“Right now would not be the time to balance the budget,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan Washington group that normally pushes the opposite message.

Confronted with a hugely expensive economic crisis, Democratic and Republican lawmakers alike have elected to pay the bill mainly by borrowing money rather than cutting spending or raising taxes. But while the borrowing is relatively inexpensive for the government in a weak economy, the cost will become a bigger burden as growth returns and interest rates rise.

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Anarcissie's avatar

By Anarcissie, October 21, 2008 at 5:24 am Link to this comment

Part of what we’re observing now may be attributable to one or more business cycles, but part of it is due to a huge and unsustainable expansion of credit driven by the Federal Reserve Bank, which created large bubbles in the equities and real estate markets (which are now collapsing).  This policy was accompanied by huge budgetary and trade deficits.  It’s hard for me to see how Keynesian deficit spending can be usefully applied to a situation like this—in the circumstances, it’s simply more of the same.  The most likely outcome seems to be hyperinflation and depression.

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By P. T., October 20, 2008 at 2:12 pm Link to this comment

“The short answer is the year is 2008 not 1929. We live in a much different world.”

Beside the point.  Same old business cycles.

You’re in a pre-Keynesian world, which fell apart in the 1930s.  For you, I suggest Econ 101 (macro).

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By BlueEagle, October 20, 2008 at 12:44 pm Link to this comment

The short answer is the year is 2008 not 1929. We live in a much different world. I don’t know much about where Hoover cut spending. Perhaps, you can help me out.

I do know this… the US Empire is unsustainable and it will fall. We can either cut spending, by ending foreign aggression, nation building, and policing of the world or our rampant spending will send our currency into a hyper-inflationary state.

As we can see our national debt clock ran out of digits. The day will come when foreigners will no longer lend the US any more money. We will then have to print more than we are doing today to pay for all the social programs, prop up the failed banking system, the 130 military bases around the world and the aggressive wars.

The choice is simple cut spending now or the spending will cut down the US. As you can see the cuts are already happening - banks are bankrupt, the debt based monetary system, based on a fiat currency and fractional reserve banking, is collapsing. The Federal Reserve Note is worth 2 cents what is was worth in 1913 and gold has gone from 20 FRN/oz to 1000 FRNs/oz in the same time period.

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By P. T., October 20, 2008 at 12:08 pm Link to this comment

Make that “disastrous.”

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By P. T., October 20, 2008 at 12:05 pm Link to this comment

“cutting spending would be the best thing the government could do at the national, state and city level”

That’s what Herbert Hoover hoped, with disasterous results.

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By BlueEagle, October 20, 2008 at 11:10 am Link to this comment

P.T. - cutting spending would be the best thing the government could do at the national, state and city level.

If you really want to see the economy go gangbusters all you’d have to do is eliminate the income tax. All those extra monies earned would flood the system.

The question remains… do we really want a strong economy? Look at the damage it has done to our planet. All the consumption has destroyed the environment. The destruction of American, which consumes at the highest per capita rate in the world, would be a wonderful thing to curb pollution and the betterment of planet as a whole.

Of course, this will all happen in good time, but not the way it was intended. All Empires and fiat currencies come to an end. The US Empire and Federal Reserve Note (aka dollar) will as well.

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By Anarcissie, October 20, 2008 at 10:55 am Link to this comment

jackpine savage: ‘And what else can they do? ...’

Print money.

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By P. T., October 20, 2008 at 8:41 am Link to this comment

You really don’t want to cut spending or increase taxes during a recession.  That would make the recession worse.

The time for doing that is during economic expansions.  The problem is that during economic expansions the Republicans want to cut taxes for the rich instead of taking advantage of such situations to pay down debt.

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By I've got a terrible feeling, October 20, 2008 at 8:19 am Link to this comment
(Unregistered commenter)

As far as I’m concerned, the bailout took the bloom off Barack Obama.  From what I can tell, the only reason the Democrats voted for a bailout without strings was to avoid being blamed for the subsequent failure of international finance.  For that our grandchildren will be living in a diminished world and paying off our bills. 

There was an alternative.  Obama could have pointed out that this was typical Bush poker, the same move the administration used to get Democrats to endorse the Iraq war.  In other words, dramatize, shock & awe, scream about the need for immediate action, all the while threatening Democrats with blame if they did not go along.  The supine way to react to this kind of threat, which should be in a category forever known as a Bush or Rove threat, is to appease the threatener.

Which is what Obama did. 

He was evidently unwilling to risk his cash machine or his considerable popular support to use his platform, the best in the world, to denounce the Bush/Paulson tactics once and for all.  In other words, it would appear that the Democrats just want to cash in on the system the Republicans invented to enrich themselves.

Now, we know that Obama is a smart guy.  We know that he is relatively nonideological.  However, the only people available to consult with after 30 years of poisonous state capitalism are nominal Democrats who profited from the system.  Bill Clinton, as I’ve said before, was a terrible president who looks good only because his term was bracketed by the two worst presidents in modern memory.  And his advisors are even worse.  That Madelaine Albright—Allstupid in our house—those desparately toxic economists from the propaganda departments at Chicago and George Mason, not to mention the Senator from the Headquarters of Financial Criminality,  Biden.  These are people who need to be buried in the dust heap of history, not made part of a presidential team. 

What did we avoid when the Democrats, led by Obama, caved? It would have been great theater, blaming the Democrats for the subsequent falling stock market (which was, for people with short memories, the Dow’s worst week in history).  More importantly, we missed out on what would have been one of the greatest speeches of our time, the speech by our most eloquent leader in almost 50 years, the speech denouncing Bush and Rove for the destruction of the world’s two hundred year experiment in self-government, our country.

How sad.  And what a foretaste of the coming four years.

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By AT, October 20, 2008 at 8:10 am Link to this comment
(Unregistered commenter)

Voting, just voting is not enough. That was what one man said on “Democracy Now” today. Right on !

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By Back bencher, October 20, 2008 at 6:39 am Link to this comment
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By jackpine savage, October 20 at 4:09 am #

“And what else can they do?”

They could take a symbolic pay cut (from their 200K per year salaries (plus perks) to show their constituants they are in this with us.

They could stop taking pac money from banks and other institutions they regulate.

They could re-enact banking legislation dismantled by Jimmy Carter, Ronald Reagan, GHW Bush, and Clinton.

They could make banks buy “failure insurance PRIVATELY as they make us pay for auto insurance. Rates based on past performance.

Instead of outlawing “Golden handshake” dismisals they could tax them at 50%

They could make the banks pay the bailout money back at the same intrest rate these banks charge their poorer customers for holding credit card debt; right now that is from 18% to 33%. They might also charge late fees if the economy turns further down and the banks are unable to make timely payments.

They could treat stock portfolios over 1 million dollars as they treat homes, property tax based on the price for which it might sell.

There are lots of things the political class “might” do… but they won’t because it is not in their best intrests.

It is in our best interest to get rid of them…but we won’t do that either!

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By jackpine savage, October 20, 2008 at 5:09 am Link to this comment

And what else can they do? They can’t cut social security, medicare, medicaid, etc. As Pat Buchanen pointed out in his last op-ed (and i can’t figure out how the man can be so different writing and speaking on TV) the only thing that we really have to liquidate is our empire. Don’t bet on our representatives cutting back on that; after all, it’s what makes them feel powerful.

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By nino, October 20, 2008 at 4:11 am Link to this comment

It was amazing how fast they (Rep & Dem’s) pushed through billions for the very group that have already taken so much. All the while 100:1 calls and emails from the public said “NO” to the bailout.  That’s called taxation without representation. Why can’t they do that for healthcare, or energy…?

Remember that on November 4th.

(Our congressman voted “no” both times!)

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