The New Republic

Nuts: Read the S&P downgrade It was due to inability to reduce the debt going forward. Implicit is the assumption that the debt was too large and growing too rapidly. Come on. You can do better

- mr_rationale

August 19, 2011 at 7:02pm

such amnesia - the GOP, including Mitch McConnell, want to repeal ACA/Obamacare. The only way to do that is for Obama to be a one-term president. ACA was the wrong use of political capital when the Dems had their strongest one-party rule since LBJ, AND had inherited the great 2008 meltdown. NO excuses now that 'we did not know how bad it was in 2009'. NO EXCUSES for not knowing. Pelosi should have focussed on reforming Medicare and Medicaid, and stealthily expanding coverage through those programs, e.g., access to Medicare for anyone over 50 or 55 who lost their job and then lost their COBRA. Instead, the Dems just had to re-invent health care insurance in a gigantic unreadable bill. today's Dems are Cowards who extended the irresponsible Bush43 tax cuts instead of letting them expire on schedule. Cowards who do not understand that only 21% of voters are LIBERALS. You don't want Blue Dogs? Fine - hand the USA over to the GOP.

- K2K

August 19, 2011 at 7:44pm

Rat wrong again. You said it was looser money and fiscal stimulus. I said it was brinkmanship. Here is what the news said: To avoid a downgrade, S&P said the United States needed to not only raise the debt ceiling, but also develop a "credible" plan to tackle the nation's long-term debt. I don't know why you insist on being wrong all of the time. I assume you don't know any better.

- Nusholtz

August 19, 2011 at 9:21pm

Rat, that is actually very funny. As I have noted before, you obviously do not know a single thing at all about macroeconomics. Nada. When the government spends money, it prints it, that is it creates it. In order not to produce inflation, the government then soaks up most of the money it has printed in one of two ways, taxes or borrowing. There is absolutely no economic reason whatsoever why the government cannot use taxes to do so as, either way, that money will not be spent by the private sector. The private sector can only produce and consume that for which it has the capacity AFTER the government has spent its share. If the government doesn't soak up the money it prints, there is more money than the private sector needs for its transactions and inflation results. Too much money chasing too few goods. Once the government soaks up the money, the money supply is exactly where it was before the government spending. So, little or no inflation. The point, rat, is that government spending does not require debt at all. We can always finance it out of taxes if we choose to do so. The government gets the money either way. One way it gives back a piece of paper, an IOU. The other way it doesn't. The reason we have debt-financed government spending is purely political, specifically that we have fruitcake supply-siders who have been in power and in a position to create structural deficits such that debt is an increasing rather than decreasing percentage of GDP. That means you, rat! You and those who think like you are the deficit problem, not government spending. If the government spends the money well, on infrastructure, education, research, i.e., physical, human, and intellectual capital, then the result will be higher output by the private sector more than sufficient to cover the cost. If not, it won't be. Like so many things, it matters whether the thing is done wisely or not. In many cases, the capital spending is necessary and would not occur but for government. And, in general, our post-war government spending has been a boon. Do you notice how much all advanced economies spend on these things (well, ours used to, but now we are letting it decay)? Do you think it is because they are stupid in Hong Kong, Germany, Singapore, Japan? Or do they understand the importance of this public capital? ______________ What have I been doing? Let me see. Started out as a commercial banking lawyer in a fancy Wall Street firm representing big international banks. Worked on a couple of billion of financings in the late 70s and early 80s. Then went to business school and got a job with an LBO firm, eventually becoming a principal. Along the way I was the acting CEO of a manufacturing company that got into financial trouble, reorganizing it so that it could be sold at a small loss. Was the de facto CFO for a number of companies, including manufacturing companies, as the representative of the financial shareholders. Wrote a successful plan for bringing one of the country's largest trucking companies through reorganization. Then went into statistical arbitrage, trading stocks. Now studying for a doctorate in economics. And what do you know about creating wealth, rat, or anything else for that matter? For example, do you know what demand is and why it matters in a market economy?

- roidubouloi

August 19, 2011 at 10:41pm

This just in: Rat demands to see Roi's birth certificate!!!

- NR409654

August 20, 2011 at 12:06am

Rimshot!

- Sophia

August 20, 2011 at 2:39am

Rat. is the ultimate parasite. He stole someone else's writing and passed it off as his own. Yet like his namesake a rat he still doesn't have the guts to come out and admit it. Pathetic. He is one big chickensh-t!

- MikeB.

August 20, 2011 at 10:46pm

Now, let's not rush to judtement about mr-rationale's economic theory. He might be on to something. All that massive government deficit spending incurred in the course of waging WWII, which dwarfed the New Deal government deficit spending which had immediately preceded it, may well explain why the US never recovered from the depression, never over- came the crushing debt to GDP ratio (worse even than today's) which existed in 1945, and which did not lead to 30 or so years of economic expansion - which would have been the greatest, most sustained in the history of the world, if it had only had a chance to happen. But of course it didn't, because right wing economic/political polemics made it theoretically impossible.

- Haole45

August 21, 2011 at 12:15am

Roid, Your experience helps me understand your ignorance. At the end of the day you have never created any economic value. And you don't understand that the Gov doesn't either. Ways in which Roid has destroyed economic value: 1. As a lawyer -- need I say more 2. Working for a LBO firm, which creates returns for investors by gutting companies, but no economic value. LBO revolves around changing capital structure to lever up debt and service that debt, 99% of the time by reducing employee costs to improve EBITDA 3. Day-trader on roids--- like we need more volatility in the markets. You have never participated in the primary economic market. Financial markets are secondary. Unlike you, I am an actual CEO (software). An operator who actually creates value. I hire people, develop new products/services, grow revenue and profits, drive benefits for customers, create an environment for employees to grow. You know, the basis of our society. Your entire argument is dependent on an easily disprovable fact, you write "If the government spends the money well, on infrastructure, education, research, i.e., physical, human, and intellectual capital, then the result will be higher output by the private sector more than sufficient to cover the cost. If not, it won't be. Like so many things, it matters whether the thing is done wisely or not" The Gov does not, has not, and never will be able to spend wisely. Spending $1B on a $200M infrastructure project is not wise. Spending more on education that most countries yet lagging in achievement is not wise. Spending $75k to create an unsustainable $50k job is not wise. Gov doesn't create higher output by the private sector because they don't spend wise.

- mr_rationale

August 21, 2011 at 1:22pm

Nuts, you wrote/quoted: To avoid a downgrade, S&P said the United States needed to not only raise the debt ceiling, but also develop a "credible" plan to tackle the nation's long-term debt I wrote: It was due to inability to reduce the debt going forward. Implicit is the assumption that the debt was too large and growing too rapidly. You do understand that you are agreeing with me, right? "credible plan to tackly the nations long-term debt = ability to reduce debt going forward" Drink some caffiene.

- mr_rationale

August 21, 2011 at 1:25pm

MikeB --- point??

- mr_rationale

August 21, 2011 at 1:27pm

Hail Mary: Liberals need to stop using WWII to supports massive Gov spending. why? 1. Not representative. Not even close. 2. To make an inductive argument you need dozens of data points, not just one Why is it not representative? well, lets see: - drafted all able bodied men into Gov service in military - dramatically expanded size of workforce with women in factories, et al - drafted almost all private sector industry into Gov contractor role, producing weapons and war goods - rationed consumer goods during war, when war ended caused a huge spike of demand - bombed/dis-abled competitor country ability to produce consumer goods - bombing also created strong demand for re-construction. So unless you are advocated a Gov program like WWII -- be quiet my foolish liberal.

- mr_rationale

August 21, 2011 at 1:34pm

mr-rat: "Dramatically expanded size of workforce" ? Well, perhaps some increase in size in workforce, but perhaps less than you suggest. After all, as you point out, virtually all able- bodied men had been drafted, so were no longer part of the workforce. (Yes, having all those men in the service dramatically reduced the enemployment rate, you could say 'artifically' so - but the real point is what the huge stimulus did for the long-term benefit of the economy, not the short-term employment rate.) The composition of the workforce changed, for sure, more so than the numbers. Yes its true, that a very large part of productive capacity was directed toward weapons and war goods - and also true that virtually none of that prodution, except to the upgrades in productive capacity of factories themselves ended up being useful, permanent infrastructure once the war was over. Most of it became instant junk, war surplus sold at a heavy discount, recycled or simply discarded. Think of how a large spending program directed at producing actual infrastructure improvements, instead of instant junk, might not only 'dramatically increase the size of the workforce' for the short-term (a good thing), but leave us with increased capacity to generate and transmit energy, move goods and services around the country with greater efficiency, etc. It is also true that there was a huge pent-up demand for manufactured goods by war's end. How did people pay for those things? Why, for starters, with the money they'd earned working in those facories which ran on money borrowed by the government. (Factories, in many cases, rendered more efficient in the course of the war. This is when we improved techniques of quality control, for instance - which we then exported to Japan, who took the lessons to heart, but that's a different story...)Your other points are mostly smoke, as they are either irrelevant or selective, partial readings of the facts. Anyway, what if I am advocating a government program at least a little like WWII? (Minus the killing, destruction, drafting, and production of useless junk, but instead focused on making econonically useful things and putting people to work, for the purpose of providing a very large stimulus to the economy? You have conceded the point that it worked the first time, in your concluding statement, my silly reactionary.

- Haole45

August 21, 2011 at 3:08pm

"The Gov does not, has not, and never will be able to spend wisely." Ratty, the government, as it consists of human beings and their institutions, will not be able to act with anything resembling perferct wisdom. However, as it consists of human beings and their institutions, government can also enable discussion, compile assessments, draw on expertise and knowledge, and if we're lucky act on the general basis of protecting the public good. Hence, while there are always reforms worth doing, flaws to be corrected and corruption and waste to be eliminated, spending on research, security, law enforcement, environmental protection, education, and other areas of common endeavor are indeed wise expenditures in the bigger framework. Simply because private enterprise cannot be expected to do the job of coordinator of large public frameworks that by their nature require longer-term thinking and planning. It's not what it's good for -- private enterprise is indeed the economic driver but the roadworthiness of the vehicle is not entirely a private affair.

- ironyroad

August 21, 2011 at 3:24pm

Hail Mary: You miss the point. To make an inductive argument, you need multiple data points and they all need to be representative of situation at hand. WWII satisfies neither. For example, I could find a chain smoker, who drank heavily -- but worked outdoors his entire life, eats like a caveman, and came from a family that lived on average to 100. Lets call him Hal. Your argument is similar to saying "look at Hal, we can smoke and drink all we want". Not taking into account his lifestyle, eating habits, and genetics (or the fact that we can't find more than 1 Hal for every 1M people)

- mr_rationale

August 21, 2011 at 4:45pm

Ironic, We are in agreeement that Gov should spend money on a limited set of Gov goods --- defense, judicial system, law enforcement, health and safety. And private sector happy to pay for these services. That however, is not what we are arguing about. The massive Keynesian stimulus that liberals advocate is about intervening in the private sector in a much larger and more disruptive manner. And it doesn't work. Has never worked. So if Gov can not spend wisely on items beyond the basic set of Gov goods -- then it shouldn't spend and create more debt or more taxes. Pretty basic logic right. Wouldn't you agree?

- mr_rationale

August 21, 2011 at 4:50pm

It is indeed what we are arguing about, because in a difficult crisis situation where disruption is happening as a result of market failures and the private sector is neutralized and cannot act as the driver of the economy, then it's the government's responsibility -- or should be -- to adopt a temporary interventionist strategy. This has always been accepted, even by Republicans, and they are only against it because Obama is in the White House. You can certainly oppose such an approach on philosophical grounds, but you can't oppose it on pragmatic grounds as there is simply no other alternative out there: if the markets are frozen/sluggish and private enterprise won't expand and hire (and this has gone on for three years now) then targeted public investments (which can be as individual as unemployment benefit or as social as infrastructure repair) are the only way you can help get things moving again. Your final sentence makes no sense.

- ironyroad

August 21, 2011 at 6:03pm

Sorry, I meant your final para makes no sense.

- ironyroad

August 21, 2011 at 6:04pm

How telling that an article about Charles Krauthammer, the Obama hater-in-chief, has devolved into tiresome and repetitive expositions of economic theory mostly divorced from any analysis of CK's editorial style. I remember a few years ago, when CK wrote a column referencing a TNR author's frank acknowledgement that he (the TNR writer--I have forgotten the name) hated GW Bush. CK used this as some kind of proof of the invalidity of the author's argument(s). I have since been unable to ignore CK's visceral and almost irrational hatred for Obama, to the point that some of his columns have simply lost touch with anything even pretending to reasoned discourse. I used to almost subconsciously try to find some middle ground with CK, at least on the terms of the debate and reaching an understanding of the areas of honest disagreement [for example, unlike many of my liberal friends, I agree with much of what he writes about the Middle East]. But that 'middle ground' ship left the dock years ago. The man is just way off kilter. I absolutely agree with Mr Chait.

- elmont

August 24, 2011 at 2:32pm