A tiny sliver of reality about presidents and debt

by: Paul Rosenberg

Sun Jan 31, 2010 at 08:30


This week, Rachel Maddow did an excellent segment on presidents and the debt:

There's just two problems--not for Rachel, but for the entire Democratic establishment, and frankly the entire supposedly fact-checked and "objective" media: (A) What took so long?  and (B) Where's the endless repetition?

As you can see from the following chart (same underlying figures the second chart in last weekend's diary, "Everything Versailles says about the debt is wrong") Republican's haven't engaged in responsible budgeting since Ronald Reagan rolled into town 30 years ago:

It's not just that Republicans are "fiscally irresponsible."  It's that they're constantly using Keyensian-style deficit spending to drive the economy, all the while claiming that what's driving the economy is the "free market forces" they've "unleashed."  Of course, Keynes never said that government should run deficits all the time.  They were supposed to run countercyclically--when non-governmental demand plummeted, the way it has since mid-2008. Running deficits all the time--not little ones--has a really bad effect on the economy, because it more than "unleashes" those magical "free market forces", it gets them turbo-charged, intoxicated and headed right off the nearest cliff.

I don't care how smart you are.  You can't make good policy against a background chorus of constant lies.

Paul Rosenberg :: A tiny sliver of reality about presidents and debt

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This is by design: (4.00 / 4)
1) Plunge the nation into a crisis

2) Blame it on "socialism"

3) Institute fascism

They aren't just bad people acting stupidly: they're bad people enacting a plan.


I Don't Think Obama Is A Bad Person (0.00 / 0)
I think he's clueless.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
I don't think he is clueless (4.00 / 2)
Problem is he is too much of a 'moderate' for the times.  He is not capable of changing the dominant economic policy (neoliberal) because that is not what he wants to do.  And that is a huge problem.

We have severe economic defects that moderation or even 'patches' won't cut it.  IMO, our economy works best with a balance between neo-liberal and Keynesian/other progressive economic policies.  Currently, we are out of balance - leaning too much in favor of neo-liberal.  What is required is more Keynesian/progressive economics to even it out.  But that is not what we are getting from the Obama Administration.

You can't get a proper balance if one side (dominant) is from right and other side is starting from center and advocating - that's not balance.

One last thing, where Obama may be clueless, IMO, is what was the root cause of this crisis.  It was economic policy - a policy that says wage growth as inflationary and that allowed more debt and asset price inflation (such as in homes and stocks) to replace wage growth.  The recklessness and incompetence of Wall Street was a symptom of this cancerous economic policy.

RebelCapitalist - Financial Information for the Rest of Us.


[ Parent ]
I don't think Obama is bad or clueless (4.00 / 4)
I think everything says that he is too intelligent to be clueless and who are any of us to say he's bad?   I am disturbed that he lies to cover up his campaign promises, but I believe he is convinced that by making minor changes in the Bush economic and foreign policy he can get things right.  I think most at this site would disagree with him that small changes can correct the course of our economy.  In fact, most Americans apparently disagree with him presently.

I think the concept of neo-liberalism is more about campaign financing than government policy.  In order to become a neo-liberal one has to essentially support the donors more than the electorate.  Both of the Neo-lib presidents have failed to convince me that they have any principled Democratic core.  But I think this is a calculated and clever route to public service.  This was very evident when Obama secretly negotiated positions with the drug and insurance industries.  Neither agreement being particularly favorable to the people who voted for Obama.

"Oh. My. God. .... We're doomed." -- Paul Krugman
http://krugman.blogs.nytimes.c...">http://krugman.blogs.nytimes.c...">http://krugman.blogs.nytimes.c...


[ Parent ]
Except (4.00 / 2)
That explanation really doesn't hold water with Obama if you look closely enough.  Sure he got a ton of money from the financial industry.  But he got a lot of money from others as well.  Saving the bad apples in the finance sector doesn't even benefit the sector as a whole, much less the other industry sectors.  And that's not even considering the mass of small donors who are most obviously being left out in the cold.

So it's not that he has to go along because of who's paying the piper.  It's much more to do with my old bugaboo, hegemony.  Within the Democratic elite, it's simply unthinkable to embrace policies that actually work.  During his campaign, Obama lead us to believe that while he accepted some of that dreck, he didn't embrace the mindset whole hog.  That was a lie.  He is a more zealous true believer than either of the Clintons.

And that alone qualifies as utterly clueless in my book.

But that's only part of the picture. I'll cite more evidence of his clueless in the next diary I have coming up.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
I'm really not sure what you are saying here (0.00 / 0)
Within the financial sector Obama was more about saving the model of business than about saving the bad apples (Although, when you compare it to the auto industry, it would seem that he was very generous with the financial sector management).  It just happens that the most rotten apples were at the top of the barrel.  That is, the Wall Street sector, the people who had helped sustain the economy by making the financial sector and stock market the shining light of the American economy.  Unfortunately their business model more resembled fraternal order mischief than any reasonable model of Capitalism.  To sustain them Obama has allowed Wall Street to rob the treasury of generations of tax money.  

"And that alone qualifies as utterly clueless in my book."

I have the greatest respect for your thoughts and enjoy reading them.  I wouldn't mind that you might be more right than me. But I feel that a significant body of others can reasonably assert differently.  Your premise of his cluelessness seems to hold the most water when you are allowed to define clueless.

Perhaps others could just as reasonably find Obama's actions as crafty.

"Oh. My. God. .... We're doomed." -- Paul Krugman
http://krugman.blogs.nytimes.c...">http://krugman.blogs.nytimes.c...">http://krugman.blogs.nytimes.c...


[ Parent ]
There's Nothing Moderate About Bailing Out The Banksters & Letting Main Street Fend For Itself (4.00 / 5)
Reaganomics was a failure from before day one.  Reagan's OMB Director, David Stockman, admitted as much.  The fact that Obama still hasn't gotten the news qualifies as "clueless" in my book.


"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
But it was the easiest thing to do and required not upsetting (4.00 / 1)
status quo.  What were some good alternatives that would have upset the status quo:

1) Early on: macro mortgage principal reduction

2) Nationalize and recapitalize ALL insolvent institutions

These would be bold moves and the economic circumstances would have warranted such action but there was no way that this administration was going to do it.  It is not that he and his advisers are clueless it just that they don't believe in progressive and bold solutions.

He tries to strike a happy medium with his policies.  I will say at times like the SOTU speech there are a lot of neoliberal overtones.

But, hey, I certainly don't want to defend this Administration for its lack of courage and leadership.

RebelCapitalist - Financial Information for the Rest of Us.


[ Parent ]
"Easy" =/= Moderate (0.00 / 0)
Sorry.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Will you run that by us again, Dick? (0.00 / 0)
Forget where I saw it, but quote from Dick Cheney a few years ago, on the deficit he and W ran up: "Reagan proved deficits don't matter".

Think I saw it in one of Krugman's books.


Good point until the end. (4.00 / 3)
"I don't care how smart you are.  You can't make good policy against a background chorus of constant lies."

Just a quibble. You can MAKE good policy and fight for it but fail when the oppo "constant(ly) lies" and succeeds with their lies. You move straight to failure when you make concessions to your opposition before the fact and constantly go the the "bipartisan" well. If the Obama administration just made good policy, put that good policy out for everyone to see and fought like the devil to get it passed we'd be in a much better position come the mid-terms because people would see just exactly who was obstructing progress. Of course it's not just the Republicans getting in the way of good policy, It's the entire Washington process that stands in the way of good governing. A process that defends and promotes the interests of Big Money of the interest of regular folk.  

"Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it." - Mark Twain


I wish you could edit posts. (0.00 / 0)
A process that defends and promotes the interests of Big Money of the interest over regular folk.  

"Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it." - Mark Twain

[ Parent ]
Your point was easy to understand and it is right. (0.00 / 0)
[ Parent ]
You're Missing A Key Point Here (4.00 / 3)
Obama isn't opposing the chorus.  He's joining in.  Not on every syllable, not even every line... of the verse, at least.  But he's swaying with them all the way, and joining in enthusiastically at key points.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
Politics and demagoguery of budget deficit aside (4.00 / 5)
Economically it could be feasible to run a deficit for long periods and without being inflationary with qualification:

1) economy is not running at full capacity or Full Employment (ooh, there is a word you won't hear in Washington today);

2) government spending is focused on productive investments that put people back to work.

Federal government doesn't operate like a household or business.  So when I hear politicians or even people say "when households are strapped they cut back" blah, blah, blah.  It sounds good but it is economically not true in the case of the federal government.  It doesn't have the same constraints - mainly insolvency.  Federal government, contrary to what gold bugs say, cannot be forced into insolvency.  

RebelCapitalist - Financial Information for the Rest of Us.


Sure, You Can Run Deficits Forever (0.00 / 0)
If debt-to-GDP ratios fall over the course of a business cycle, debt can grow forever with virtually no downside at all.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
What about who owns that debt? (0.00 / 0)
Like right now the U.S. is into the Chinese government for I don't know how much, but a lot.

[ Parent ]
This is one of the issues that makes me want to quit (4.00 / 9)
Republicans routinely pretend to be deficit hawks, the media relay and amplify their fraudulent claim, the Democrats cringe and whimper, and the average voter buys the whole lie hook, line, and sinker. It's like Reagan and the Bushes never even were President, except that Reagan is a hero.

I alternate between Klein's "Shock Doctrine" theory of deliberate neoliberal sabotage intended to restructure the world, and thinking that th U.S. is being torn apart and destroyed by predatory con men with no long-term plan at all. Is it a conspiracy, or is it a bunch of morons sleepwalking off a cliff?

This has been going on now for almost 30 years now with no significant resistance.


"the media relay and amplify their fraudulent claim" (4.00 / 2)
Is the main issue.  If there was a "factual" MSM there would be a level playing field.  Time and again absolutely ridiculous statements and actions by the GOP are reported as true.  How many times a day do you see MSM anchors and reporters leaving false statements completely unchallenged?  The fact that MSM depends upon the advertising revenue from the same companies that support the GOP and the neo-libs leaves me with a rather pessimistic outlook for the people of this country.  

"Oh. My. God. .... We're doomed." -- Paul Krugman
http://krugman.blogs.nytimes.c...">http://krugman.blogs.nytimes.c...">http://krugman.blogs.nytimes.c...


[ Parent ]
For example, Clinton was responsible about debt (4.00 / 7)
He did this at the cost of abandoning much of his own liberal program. And when it started looking as though the debt might actually get paid off, Greenspan got worried and sabotaged him. There may have been sound economic reasons for that, but I'm sure that Greenspan was primarily working to preserve a rightwing talking point: "We can't afford that".

As soon as Clinton had the mess pretty much cleaned up, Bush rolled up his sleeves and mad a bigger mess. And there were no real consequences. Obama came into office, sure, but the job he was assigned was cleaning up Bush's mess. And Bush's accomplices are loudly demanding that.

David Stockman proposed sabotage-by-debt as a strategy, and as far as I know it's been Republican policy ever since. And the Democrats have dutifully played their assigned role.

Paul is right about Obama. Sad but true.  


[ Parent ]
Both (4.00 / 2)
I think it's both, John.  It's like Minsky's Financial Instability Hypothesis, with its 3 types of investors--hedge, speculative and ponzi:

   * for hedge finance, income flows are expected to meet financial obligations in every period, including both the principal and the interest on loans.
   * for speculative finance, a firm must roll over debt because income flows are expected to only cover interest costs. None of the principal is paid off.
   * for Ponzi finance, expected income flows will not even cover interest cost, so the firm must borrow more or sell off assets simply to service its debt. The hope is that either the market value of assets or income will rise enough to pay off interest and principal.

I'm not sure off the top of my head what the analogy of hedge finance would be, but the "rational" Shock Doctrine types are to speculative finance as the psychopaths are to Ponzi finance.  Except, of course, that the "rational" Shock Doctrine types are responsible for promoting the psychopaths (Pinochet in Chile was the prototype), which is pretty psychopathic thing to do, no matter how rationally you explain it.

The analogy holds, however, in that they don't really expect the psychopathy to spread, just as speculative finance recognizes that Ponzi finance is out there, but doesn't expect it to spread.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
Or? (4.00 / 1)
Barry Eisler has a new book coming; Inside Out.  Jim White at Firedog Lake got an advanced copy to review and referred to it in this post.

In a book to be released next June, former covert CIA operative and author Barry Eisler incorporates many of these actual events into a fictional account of a variation on the destruction of the CIA videotapes of interrogation. Near the end of Inside Out, protagonist Ben Treven begins to understand the significance of a statement from an erstwhile opponent: How can there be a conspiracy when everyone is complicit?

In developing this theme of everyone being complicit, Eisler hits on a very convincing description of how it occurs. Branding our situation as being dominated by oligarchs, he points out that rather than being hidden, it is in plain sight. Also, "there aren't any secret handshakes". Rather, "It's just a collection of people in business, politics, the military, and the media who recognize their interests are better served by cooperation than they would be by competition."

This opens the possibility for me that the "intentionality" is less grand design, or historic over a long planning horizon, but more plodding, one foot in front of the other, taking opportunities as they arise.  Complacency, a sense that everyone's doing it, and go along to get along might be all that is needed to produce the circumstance we now face.

And, as a typically astute commenter, Mary, speculates in Jim's thread, realizing the horrible hash this complacency has produced, the overarching fear is the loss of institutional credibility, and social destabilization.  She's speaking specifically of the Department of Justice.  But, those fears could apply equally well to our system of governance and the economy.  Ergo, tweak at the edges and hope for the best.  To do anything more might risk an even larger, and more difficult to manage, systemic breakdown.

It's just another thought to add to the mix.


[ Parent ]
This Is A Description of How Hegemony Works (4.00 / 2)
It changes the "common sense" of what people do without really thinking.  It changes the default positions of what's done and what's "just not done."  And yes, the hegemony framework is a clear alternative to conspiracism as a mode of explanation.

Of course, the reality is more complicated, because there are conspiracies out there.  And over time they can become more and more important as the "common sense" changes to become more and more forgiving of them.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
And just what makes you think .. (0.00 / 0)
and (B) Where's the endless repetition?

Democrats in DC are interested in repeating those "talking points"?  We know of at least six Senators right off the bat(Bayh, Ben Nelson, HoJo, Landrieu, Max Baucus, Feinstein) that wouldn't get caught dead helping Democrats advance the agenda .. and there are others(Jim Webb, Bill Nelson) that are problems .. but less so compared to the above "Gang of Six" .. Will Rogers' words ring as true today as ever


True About Those (4.00 / 1)
But if the rest of the Dems just repeated the basic facts over and over again, even the GOP wouldn't be able to take the line that the conservadems push today.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
The "debt" issue is a non-issue. Change the frame. (0.00 / 0)
As long as progressives think that the government has to "pay for" spending when the government is the provider of the currency and issue it by changing numbers in a spread sheet called the Federal Reserve account, they will be sabotaging themselves. It's not possible to "pay for" a truly progressive agenda based on conservative principles, and it is not necessary either because those principles are ideological and bear no relation to the reality of the monetary economics that applies today.

Buying into the conservatives' game, whether Republican or Democratic, is suicidal for progressives. The president had already lost when he led with the condition that health care reform had to be deficit neutral, for example, and we have high unemployment now because the president advisors are economic conservatives. Larry Summers admitted he doesn't know how the monetary system works when he told Warren Mosler, "I don't understand reserve accounting," when Warren tried to show him where he was wrong when Larry was Treasury Undersecretary for Bill Clinton. The result was a disastrous fiscal surplus that forced the private sector to accumulate debt to make up for reduced net financial assets.

Progressives need to stop buying into the conservative universe of discourse by even debating this non-issues like debt and deficits growing "too big,"  and instead start using reality based-monetary economics to rebut their false assumptions.

Under a non-convertible floating rate monetary regime, a monetarily sovereign government like the US and most other countries (the EU countries gave up monetary sovereignty to the EMU) is not financially constrained. It doesn't have to "fund" its deficits with taxation or "finance" them with debt. Government issuance of Treasury securities is simply to clear excess reserves so the Fed an hit its target rate in the overnight interbank market. The same thing could be done without borrowing at all, just by paying a support rate equal to the target rate to prevent excess reserves from driving the overnight interbank rate below the target rate.

All the talk about the so-called danger of the national debt and the growing deficit are ideologically biased, based on the gold standard convertible fixed rate currency that no longer applies in today's world.

See for example Warren Mosler, 7 Deadly Innocent Frauds, and Bill Mitchell's L'horreur economique (it's in English).


You Always Have To Do Two Things (4.00 / 1)
When you don't control the narrative, you have to be able to disrupt the existing one before you can introduce a new one.  So the fact that Republicans are the ones who roll up record deficits is something that has to be pounded home over, and over and over again.

But while we're on the topic, I think it's fair to point out that Warren Mosler is not exactly a credible source.  It's one thing to point out that a sovereign entity is not constrained the way that ordinary entities are.  But Mosler goes far beyond that.  As best I can tell, he is talking pure gibberish in places.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
It's about changing the framing. (0.00 / 0)
When you don't control the narrative, you have to be able to disrupt the existing one before you can introduce a new one.  So the fact that Republicans are the ones who roll up record deficits is something that has to be pounded home over, and over and over again.

Paul, we disagree on this. My reasoning is based in large part on the work of cognitive scientist and progressive activist George Lakoff, who has written two books on cognitive and science and progressive politics, Don't Think of an Elephant, and The Political Mind, showing how it is futile to allow oneself to be sucked into a debate of issue framed by the other side. It's a trap. Even if they are shown to be wrong rationally, it just reinforces that frame at the level of brain functioning, when the challenge is to open new neural pathways that support one's own frame.

Someone authoritative has to stand up and say that the emperor has no clothes. If the president would do this, then the game would be up once the facts were on the table. Of course, there would be monumental propaganda pushback, but given this cover, a lot of people who know better would have to agree or risk looking foolish. Instead, the president is mounting the argument that the Dems are not as bad fiscally as the GOP was. This is a losing strategy, because it's not about who is right but about the framing.

But while we're on the topic, I think it's fair to point out that Warren Mosler is not exactly a credible source.  It's one thing to point out that a sovereign entity is not constrained the way that ordinary entities are.  But Mosler goes far beyond that.  As best I can tell, he is talking pure gibberish in places.

I don't know why you think that Warren is not a credible source. He understands monetary economics perfectly well and although he is in finance rather than economics he has co-authored papers with well-respected academics in monetary economics. He also happens to be very successful. But I am not pushing Warren. I am just saying that 7 Deadly Innocent Frauds is a demolition of the false government-household finance analogy, a metaphor that most people are operating under the illusion of, including President Obama. There are others writing and blogging in this field, such as Bill Mitchell, Scott Fulwiler, Randy Wray, Marshall Auerback, and Winterspeak, all of whom treat Warren as a person who knows whereof he speaks.

Modern (post 1971) monetary theory (MMT) is a description of how the current monetary system operates. It also shows what is and what is not possible under this system. It is possible to apply this understanding to different policy somewhat differently in way that is reality-based. Warren comes down a bit on the conservative side, although he is more progressive than most progressives, since he is not operating out of either the neoliberal or New Keynesian monetary frame, as they are. Bill Mitchell is at the other end of the spectrum, being an extreme progressive, if not a radical. The others are somewhere along the spectrum between them. But, as I said, Bill and Warren have co-authored papers, so they agree on the monetary economics even if they different somewhat with regard to policy, based on value-preferences.


[ Parent ]
I Know All About Lakoff (0.00 / 0)
I first read Lakoff in 1989.  I met him in 1994, when I helped produce a lecture series on cognitive linguistics.  I reviewed Moral Politics for the Christian Science Monitor in 1996.  So you really don't have to explain him to me.  In fact, what I'm doing here is reframing--it's reframing Republicans as being fiscally irresponsible.

Now, you actually object to this by latching onto bogus rightwing economics from Mosler, which he successfully confuses with the sound point that sovereign entities aren't fiscally constrained in the same ways everyone else is.

I'm sorry, but Lakoff never recommended anything like this.  His argument is that we should reframe debates on the basis of values.  And the basis of values embodied in what I'm advocating is a whole lot more solid than Mosler's.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3


[ Parent ]
"Fiscal responsibility" is a GOP meme (4.00 / 1)
Fiscal responsibility is a MORAL concept (value-based and ideologically biased), not an economic one (reality-based)!!!! IT is a GOP meme based on an ideological frame that uses "traditional values" (ideological prescriptions and conventions) as its norms. Fiscal responsibility functions performatively in the GOP framing that rules the current political/economic universe of discourse. It is a primary normative and prescriptive metaphor of that frame.

The US as currency issuer has no, zero, zip, "fiscal responsibility" in anywhere near the same sense that individuals do, as the president himself suggested in the SoU, advancing the GOP frame.

The responsibility of the government as currency issuer is different from households and firms (and states in the US) which are currency users and are revenue constrained. The US government is not financially constrained. Its monetary responsibility as monopoly currency provider is to issue the correct amount of currency to balance spending power (nominal aggregate demand) with the potential of the economy to produce goods and services at full employment with price stability, not issuing too much so as to cause inflation and not to little to cause deflation, recession and rising unemployment. Neither the size of the national debt and the amount of the deficit matter to this at all.

"Fiscal responsibility" is a pretend game that has nothing to do with economic facts and everything to do with being "moral," whatever that means. In fact, the fiscal responsibility meme leads to using unemployment as a buffer against inflation , which is not necessary under the current system, and also a means for capital to undermine the bargaining power of labor, which is using economic nonsense as a political weapon. The Democrats should not reinforce this frame and progressives should be calling them out on it when they do.


[ Parent ]
Oh Please Paul.. (4.00 / 1)
You can't make good policy against a background chorus of constant lies.

At what point does the advocate of an idea have the responsibility to rebut, counter or otherwise refute opposition to that idea, however principled that opposition may or may not be? It's almost as if you think that the GOP just this past year discovered how to spin their opposition to liberal governance. Give.. me.. a.. break. Dems have their microphones too (including, oh, one in the White House press room) and if GOP arguments and spin against Dem ideas can't be effectively rebutted by the Dem own vast communications machine then either the ideas are crap policy or Dems are simply inept in communicating their value. Either way, good policy speaks for itself when the light of day is shined on it and if whining about GOP 'lies' is the best explanation the Democrat progressive arm has to offer for its party's impotence in selling its ideas then those ideas (and the party delivering them) deserve the outcomes that they're currently getting.

good policy speaks for itself when the light of day is shined on it (4.00 / 1)
That's precisely my point.  Obama & the rest of the neolibs are offering nothing but warmed-over GOP lite, rather than shining the light of day on the far superior social democratic policies of FDR & LBJ, and the many ways that people have proposed updating those for the 21st Century.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]




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