Barack Obama = Premier Bob Rae

[August1991]

Shortly after Bob Rae became premier of Ontario, his NDP opened the spiggots of government spending just as North America went into a recession and a fall in government tax revenues. Ontario's budget deficit ballooned to about 6% of provincial GDP.

With this recent stimulus package, it is estimated that the US federal government budget deficit will be over 10% of GDP in 2010. In all likelihood, federal debt will rise above 100% of GDP during Obama's first term.

I usually argue the government deficits are not a major economic concern as long as the government budget doesn't become a Ponzi scheme. The US government is far from that but we are entering uncharted waters, at least in peacetime. The only other tiems when the US federal government was borrowing at such a rate and had such a high debt compared to GDP was in WWII and during the Civil War.

According to CBO, under current law, the federal deficit will rise to a record $1.2 trillion, or 8.3% of GDP, in 2009. Even without this massive spending bill, the deficit will be by far the highest on record in both nominal terms and as a percentage of GDP during peacetime, easily exceeding the previous record of 6% in 1983 and the highest New Deal level of 5.9% in 1934.

Link

The link above also has a long list of spending measures in the Democrat stimulus package. Pelosi paloosa. [Keep in mind that unlike in 1934, increases in current government spending are on top of government spending that is already a large share of GDP. The US government just became a much bigger player in American society.]

And the government spending, not the deficit, is the real problem. Abraham Lincoln got a united country out of Civil War spending. The western world got a defeat of fascism out of World War II spending. I don't know what anyone got out of Bob Rae's spending except I do know that Bob Rae only got one term in office.

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Edited to fix an unfortunate typo.

Edited February 14, 2009 by August1991

[BubberMiley]

I usually argue the government deficits are not a major economic concern as long as the government budget doesn't become a Ponzi scheme.

You usually argue they are not a major concern when it's conservatives ringing up those deficits...

The US government just become a much nigger player in American society.]

and not a government comprising the likes that you describe.

(But outside of Quebec, I think we call them "darkies.")

[msj]

1) In typical fashion August has to bring up his usual x=y=z nonsense.

Sure, it's fun at first, but after a while we see just how simple this type of thing is and how much this kind of "analysis" leaves out.

2) Given that the stimulus bill is full of short term tax cuts (about 1/3 or so) and short term spending it is laughable to focus only on the increased spending.

3) It is even more laughable if one were to consider that the CBO has already come out and estimated that the GDP output gap is in the $2 trillion range over the next year or two.

As such, the stimulus is not big enough to be effective (whether through all tax cuts or all spending). So, yes, this compromised bill is doomed from the start no matter who tinkers with it. (Funny how this is all Obama's fault - no it has nothing to do with Republican Senators)

4) And, finally, it is especially laughable in that people just don't get it.

It's the financial system, stupid!

Fix that (and yes, we are talking nationalizing some crummy banks), provide some short term stimulus that will really work (spending does have a higher multiplier effect than tax cuts) and wait for the private sector to recover and pull up the slack.

Oh, no, couldn't do that. That goes against the culture.

So, instead, they will fart around until it becomes obvious that we are all Swedes now.

Or at least we should hope that this becomes obvious, otherwise we will all be Japanese.

[bush_cheney2004]

.....Edited to fix an unfortunate typo.

Now I've seen it all...well done!

[punked]

Harper anyone yes no?

I love how Cons use this arguement on everyone but themselves. Come on Right wing you are suppose to push even your side a little.

[bush_cheney2004]

....Or at least we should hope that this becomes obvious, otherwise we will all be Japanese.

Sheesh...make up your mind....are "we" American or Japanese?

[punked]

Republicans scared politicians except a few.

http://www.huffingtonpost.com/2009/02/13/s...o_n_166875.html

[August1991]

1) In typical fashion August has to bring up his usual x=y=z nonsense.

I think Santayana said that those who ignore history are doomed to repeat it. Karl Marx said that history was first played as tragedy and then as farce.

I merely note that too often people think that something is original when in fact there is often a precedent - if we can just find the right one. Obama is doing what Bob Rae and François Mitterand did before him and I suspect that we are all about to pay for a very expensive lesson in economics.

2) Given that the stimulus bill is full of short term tax cuts (about 1/3 or so) and short term spending it is laughable to focus only on the increased spending.

I didn't note the tax cuts in the OP but it's true that if the government borrows money and then just gives it back to us in a tax cut, the whole effort is a wash - except for interpersonal transfers. Unfortunately, only about 1/3 of the so-called stimulus package (as you note) involves tax cuts. I`m not even certain of that proportion. Most of it is bizarre pork.

3) It is even more laughable if one were to consider that the CBO has already come out and estimated that the GDP output gap is in the $2 trillion range over the next year or two.

As such, the stimulus is not big enough to be effective (whether through all tax cuts or all spending). So, yes, this compromised bill is doomed from the start no matter who tinkers with it. (Funny how this is all Obama's fault - no it has nothing to do with Republican Senators)

I gave that link because it comes from a Republican press release detailing all this stuff. Short term spending has a tendency to become permanent spending.

I've been looking for reasonable estimates of where federal spending/deficit will be as a percentage of GDP and I haven't found anything credible. The deficit will likely be around $1.4 trillion on GDP of $14 trillion. This is unprecedented.

4) And, finally, it is especially laughable in that people just don't get it.

It's the financial system, stupid!

Fix that (and yes, we are talking nationalizing some crummy banks), provide some short term stimulus that will really work (spending does have a higher multiplier effect than tax cuts) and wait for the private sector to recover and pull up the slack.

Oh, no, couldn't do that. That goes against the culture.

So, instead, they will fart around until it becomes obvious that we are all Swedes now. Or at least we should hope that this becomes obvious, otherwise we will all be Japanese.

Speaking of unoriginality, msj, but all I have to do is read Roubini and I know what you will post.

-----

I compared Obama to Rae for two reasons: first, Rae's deficit came about because he decided to expand government just at the time the economy was going into a recession. In a recession, government revenues fall dramatically and this one will do particular damage. Aside from decreased economic activity, falling asset values will mean lower wealth tax revenues.

Obama is falling into the same trap that Bob Rae and François Mitterand fell in to for similar reasons. They thought they could buy their way out of a recession.

Secondly, I am beginning to think that Obama is as amateurish and inexperienced as Bob Rae was. Geithner`s show this week gave the impression that they really don`t know what they`re doing. As you put it msj (mouthing the words of Roubini): it's a choice between Sweden and Japan and that apparently is about the level of understanding of Obama.

Sorry, the US is neither Sweden nor Japan and US capital markets in particular are a trifle more complicated than either.

Edited February 14, 2009 by August1991

[punked]

Sorry, the US is neither Sweden nor Japan and US capital markets in particular are a trifle more complicated than either.

Didn't you compare the US to Zimbabwe the other day????? At least Sweden and Japan are fair comparisons.

[msj]

Ah yes, so the person who simplifies "Obama = Rae" is telling us how complicated the US banking system is.

I think that is a and a and a all in one.

Just because you don't try to understand the situation does not mean it is as different as you conveniently allege.

But, of course, that would require spending more time reading all those links than coming up with grand equations.

[August1991]

Now I've seen it all...well done!

What else could I say? "Oops?" I went for a swim and came back to a PM (thanks!) telling me to fix a spelling error.

[bush_cheney2004]

What else could I say? "Oops?" I went for a swim and came back to a PM (thanks!) telling me to fix a spelling error.

No harm...no foul. Just a QWERTY moment.

[August1991]

Ah yes, so the person who simplifies "Obama = Rae" is telling us how complicated the US banking system is.

I was quoting Barack Obama himself in saying that US capital markets are more complicated than Swedens five big, nationalized banks.

US monetary history is a fascinating trip into fantasyland. Excepting two twenty-year periods in teh early 1800s, the US did not have anything even ressembling a central bank until 1913. IOW, for most of their early history, Americans had a monetary system based on Canadian Tire money and American Express Travveler's Checks.

I'm beginning to think that this recent crisis is very much in keeping with American monetary history.

-----

I repeat that I compared Obama to Rae on two points: by circumstance and inclination, he is the author of big government and big deficits. Second, Obama is smart and well-intentioned but inexperienced. Heck, even Mitterand made these mistakes.

Didn't you compare the US to Zimbabwe the other day????? At least Sweden and Japan are fair comparisons.

I never compared Zimbabwe to the US.

The State can only obtain revenue in three ways: it can impose taxes, it can borrow or it can print money. Zimbabwe's government cannot do the first two so it must resort to the third. The US federal government is in no similar situation. If anything, it can tax and borrow too easily.

Edited February 14, 2009 by August1991

[msj]

I was quoting Barack Obama himself in saying that US capital markets are more complicated than Swedens five big, nationalized banks.

Ah, so the "inexperienced" Obama is now an expert on Swedish banks and knows all about the US banking system to give a sufficiently educated opinion.

Right.

[bush_cheney2004]

....Just because you don't try to understand the situation does not mean it is as different as you conveniently allege.

But, of course, that would require spending more time reading all those links than coming up with grand equations.

I think we can easily surmise that anyone who pretends to understand the entire situation hasn't a clue...starting with the so called experts.

[August1991]

No harm...no foul. Just a QWERTY moment.

QWERTY?

I am told that we blush because our blood flows to our face showing that it is no longer in our limbs, ready to fight. A blush is a signal to make peace. (When Canadians add "eh" to the end of a sentence, it is a similar rhetorical fluorish.)

I don't know how to blush on the Internet.

[bush_cheney2004]

QWERTY?

The QWERTY keyboard doomed us to such an eventuality by placing "B" next to "N".

Thanks for today's deepest laugh !

[punked]

Sorry August I was confusing you with Alta4ever my bad.

[msj]

I think we can easily surmise that anyone who pretends to understand the entire situation hasn't a clue...starting with the so called experts.

There is a difference between spending time trying to understand something and being an expert.

No one here is an expert; and only some here try to grasp an understanding of the situation.

Others prefer to piffle away with nonsense about QWERTY.

[Oleg Bach]

QWERTY?

I am told that we blush because our blood flows to our face showing that it is no longer in our limbs, ready to fight. A blush is a signal to make peace. (When Canadians add "eh" to the end of a sentence, it is a similar rhetorical fluorish.)

I don't know how to blush on the Internet.

Just like turn the other cheek - in ancient times if you struck a man with your right hand you would back hand him across the face. The back of the hand was considered a sign of war...where as the flat of the hand on the cheek is a signal of affection and approval......as the assaulter strike with the back of the hand...he finishes the move and now the hand is low and if the assailant needs to strike again he must come up with the hand and the flat hits first....so by quickly turning the other cheek you literally fool the guy into hitting you the good way....I am sure in this quick interation humor and peace would break out. The theory of the blush is very good - but you sure have to have small arms to drain into cheeks...

[bush_cheney2004]

....Others prefer to piffle away with nonsense about QWERTY.

Yet they have not frittered away billions of dollars...like the "experts". Keyboards are very inexpensive by comparison.

[August1991]

Ah, so the "inexperienced" Obama is now an expert on Swedish banks and knows all about the US banking system to give a sufficiently educated opinion.

msj, I was impressed with Obama's quote because as any intelligent person, he was willing to admit what he didn't know. And he's also right.

Canada has five large banks and nationalizing them would be a mess but feasible. Except that in Canada, we also have provincially chartered financial institutions for example. What about them? For example, Quebec's Caisses populaires? (Imagine if the federal government nationalized the Caisses populaires.) In the US, these problems are compounded endlessly.

[Oleg Bach]

Experts are great! For a pultry 3000 bucks you can hire one to go and testify on your behalf in a number of venues...everybody believes and expert - after all experts are the very foundation of acedemic crediblity and achievement - everything that refined society is all about - so we seek the approval of our fellow man the expert even if he is a liar...biblical I say!

[bush_cheney2004]

.....I was impressed with Obama's quote because as any intelligent person, he was willing to admit what he didn't know. And he's also right.....

Agreed.....Obama is in a tough spot, having to rely on the very same "experts" who precipitated the collapse. Lawyers don't like to be in such a perdicament, and neither do presidents.

[Oleg Bach]

Agreed.....Obama is in a tough spot, having to rely on the very same "experts" who precipitated the collapse. Lawyers don't like to be in such a perdicament, and neither do presidents.

Lawyers always panic when there is no conspriacy to guide them --- lawyers and presidents need to get into the in crowd. They have to breathe together. They need to do buisness they need to c o n s p i r e - no one realy rely on experts - experts are not fully deployed untill they are employed - he has to pay the experts first or they are not talking!