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Thread: The 1938 Recession - Telling 1/3 of the Story

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    Default The 1938 Recession - Telling 1/3 of the Story

    Paul Krugman is at it again. In his N.Y. Times column today he attempts to discredit the fiscal restraint of the Germans and by extension the new found restraint of our own Congress.

    In scolding fiscal conservatives, Krugman once again tells one third of the story of the 1938 recession. He mentions only FDR's attempt to return to a balanced budget which had him rein in Federal spending. He cites that as the only cause for the severe recession of 1938 which lingered into 1941 until Lend-Lease and then Pearl Harbor finally ended the Depression.

    Krugman blithely ignores the REAL causes for the '38 Recession. Roosevelt's tax increases in 1937 and Fed. policy. Both actions slammed the brakes on an economy that was recovering. FDR's cuts in Federal spending just compounded the damage his tax policy and the Fed policy was already doing.

    This is highly relevant today for a number of reasons. First, we are due for massive tax increases in 2011 that will snuff out what little recovery we have had. Second, at some point the Fed has to raise interest rates. Third, Congress will be under increasing pressure to enact ANOTHER stimulus plan. The current one has already petered out. We will get a slight bump from increased highway work this summer after which construction will return to its doldrums. Btw, the Obama Administration made a big deal today of all the Federally funded construction work starting up during the "summer construction season". Proving once again how economically ignorant these Obamanations are. The "cosntruction season" for most of the country starts between Easter and early MAY ! Only in the coldest areas do they usually have to wait until after Memorial Day to avoid overnight lows below 40 degrees Farenheit.

    When, not if, WHEN the economy starts tanking again in 2011, it ought to be kept in mind how and why we got there. It was Fed policy and tax increases.

    If nothing else, Obama's bumbling and fumbling on the economy could finally sound the death knell for Keynesian economic policy and provide incentives for a return to more Free Market economics.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    ^^^ arguably, FDR was the only US president who was allowed to remain in office long enough for the consequences of his policies / actions to actually catch up with him. Just as arguably, a similar set of policies / actions began under LBJ but actually caught up with Jimmy Carter ( with 'extend and pretend' assistance provided by Nixon's abandoning of the gold standard in the middle).

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by Eric Stoner View Post

    When, not if, WHEN the economy starts tanking again in 2011, it ought to be kept in mind how and why we got there. It was Fed policy and tax increases.
    Conservatives were making the same predictions when President Clinton raised taxes. Our country was much better off before Bush's tax cuts than after.

    Quote Originally Posted by Eric Stoner View Post
    If nothing else, Obama's bumbling and fumbling on the economy could finally sound the death knell for Keynesian economic policy and provide incentives for a return to more Free Market economics.
    It was "Free Market economics" that got us into this economic crisis. Allowing banks and other lenders to provide mortgages to anyone they want, on any terms they want, was a disaster.

    If the economy doesn't recover in the next few years, it will be because of the mess created by conservative policies, not because Keynesian economic policies didn't work. Our government could not fully implement Keynesian economic policies because one of the parties in government would rather see a total economic collapse than go against their ideology. The Chinese government, which is not hampered by conservative ideologues, implemented Keynesian economic policies and they were very successful.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    In the freewheeling Reagan era, commercial banks and financial banks (stockbrokerages etc) were allowed to merge their business models. Gradually the old commercial banks began greatly increasing fees, liberalizing loan qualifications, delving into riskier business (loan, investment) practices, but under various government agencies. I guess it was the push to get rich (at the expense of their customers). When Bush got into power, he decided that banks needed to be allowed to make "real" money, so he emphasized de factor deregulation by prompting those government agencies to look the other way. (The same thing with envoironmental regulations and other regulatory initiatives.) Mostly Bush's policies were failures with some dismal failures/catastrophes. The government's job is to regulate and protect us, not to favor one segment of the economy over the others; that's just politics.

    I hope voters will be more circumspect the next time a real conservative comes up for election (or for that matter another extremist on the political opposite spectrum). It will save use from even more fiscal disasters.
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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Our country was much better off before Bush's tax cuts than after.
    America was also much better off before the 9/11 attacks than after as well. Your premise is unprovable since it is impossible to know how bad the US economy might have gotten in 2002 - 2003 - 2004 in the absence of tax cuts.


    The Chinese government, which is not hampered by conservative ideologues, implemented Keynesian economic policies and they were very successful.
    The Chinese gov't was also not hampered by gov't debt ... i.e. the money they chose to spend for domestic stimulus was money they actually had in gov't accounts thanks to a perennial trade surplus with the US ever since Clinton granted China 'most favored nation' trade status. Economically speaking, this is a far different situation from the US borrowing ever greater amounts of money from foreign lenders like China for Keynesian stimulus spending ... but money that also must be paid back with interest therefore serving as an economic depressant for years and years to come !

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by Melonie View Post
    America was also much better off before the 9/11 attacks than after as well. Your premise is unprovable since it is impossible to know how bad the US economy might have gotten in 2002 - 2003 - 2004 in the absence of tax cuts.
    America wasn't any worse off economically after the 9/11 attacks than we were before. While 9/11 was a human tragedy, there was little long-term economic impact. Within a few months, the economy returned to normal.

    Before Bush's tax cuts were passed, it was estimated that by 2010, the national debt would be reduced to approximately $3 trillion. Instead it's around $13 trillion. Bush's tax cuts were a disaster for this country.


    Quote Originally Posted by Melonie View Post
    The Chinese gov't was also not hampered by gov't debt ... i.e. the money they chose to spend for domestic stimulus was money they actually had in gov't accounts thanks to a perennial trade surplus with the US ever since Clinton granted China 'most favored nation' trade status. Economically speaking, this is a far different situation from the US borrowing ever greater amounts of money from foreign lenders like China for Keynesian stimulus spending ... but money that also must be paid back with interest therefore serving as an economic depressant for years and years to come !
    The Chinese government is also not being run by irresponsible conservatives. They're willing to require wealthy people to pay their fair share of taxes, which is why China isn't hampered by debt like the US. In China, the top tax rate is 45%.
    Last edited by eagle2; 06-20-2010 at 11:34 AM.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    While 9/11 was a human tragedy, there was little long-term economic impact. Within a few months, the economy returned to normal.
    you obviously weren't anywhere near New York in 2002-2003-2004 !!! Nor apparently were you near an airport or a 'tourist' city or a major freight port !


    They're willing to require wealthy people to pay their fair share of taxes, which is why China isn't hampered by debt like the US. In China, the top tax rate is 45%
    And just like rich Americans when 45%+ top tax rates were in effect in earlier decades in the US, rich Chinese simply 'hide' their actual earnings from the government ! Hong Kong has been the Asian capitol for financial sleight of hand for the past century, and remains so under Chinese rule !!!

    Indeed China is free of a gov't debt problem. But the reason for this has far more to do with the gov't spending minimal amounts of money on social welfare programs for its 'poor' citizens, as well as the gov't having 'nationalized' a 50% interest in essentially all major (and some formerly privately owned ) businesses and industries. Also, like Canada or Australia, the Chinese gov't directly profits via royalties from the extraction of the country's mineral wealth, from 'rare earth' minerals to oil and gas.


    PS in case you haven't checked lately, the top tax rates for high earners in states like California and New York are also over 45% these days ( or certainly will be by January 1st ). But unlike China, the IRS and state tax agencies are now aggressively tracking down their previously untaxed 'hidden' incomes ( in Switzerland, Panama, and yes Hong Kong !).

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by Melonie View Post
    you obviously weren't anywhere near New York in 2002-2003-2004 !!! Nor apparently were you near an airport or a 'tourist' city or a major freight port !
    There wasn't any major long term increase in unemployment or drop in GDP as a result of 9/11. The unemployment rate had already been steadily rising throughout 2001, before 9/11. In 2002, the unemployment rate was pretty steady.


    There was a drop in GDP 2001 Q3, then GDP growth resumed. There was greater GDP growth the first half of 2002 than there was the first half of 2001.

    http://www.data360.org/dataset.aspx?Data_Set_Id=354


    Quote Originally Posted by Melonie View Post

    And just like rich Americans when 45%+ top tax rates were in effect in earlier decades in the US, rich Chinese simply 'hide' their actual earnings from the government ! Hong Kong has been the Asian capitol for financial sleight of hand for the past century, and remains so under Chinese rule !!!
    What is your proof of this?

    Quote Originally Posted by Melonie View Post
    Indeed China is free of a gov't debt problem. But the reason for this has far more to do with the gov't spending minimal amounts of money on social welfare programs for its 'poor' citizens, as well as the gov't having 'nationalized' a 50% interest in essentially all major (and some formerly privately owned ) businesses and industries. Also, like Canada or Australia, the Chinese gov't directly profits via royalties from the extraction of the country's mineral wealth, from 'rare earth' minerals to oil and gas.
    China's government has spent hundreds of billions of dollars building a first rate infrastructure system, while our government is letting our infrastructure fall apart.

    Quote Originally Posted by Melonie View Post
    PS in case you haven't checked lately, the top tax rates for high earners in states like California and New York are also over 45% these days ( or certainly will be by January 1st ). But unlike China, the IRS and state tax agencies are now aggressively tracking down their previously untaxed 'hidden' incomes ( in Switzerland, Panama, and yes Hong Kong !).
    I was referring to federal taxes. The Chinese also pay additional taxes besides federal. Here are the city maintenance and construction taxes in Beijing:

    http://english.tax861.gov.cn/zgszky/zgszky12.htm

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    There was a drop in GDP 2001 Q3, then GDP growth resumed. There was greater GDP growth the first half of 2002 than there was the first half of 2001.
    ... which could be interpreted as a testament to the effectiveness of GWB's 2001 tax cuts in stimulating true economic growth !!!


    China's government has spent hundreds of billions of dollars building a first rate infrastructure system, while our government is letting our infrastructure fall apart.
    And America has chosen to spend hundreds of billions of dollars per year on social welfare benefits - whereas the Chinese gov't has elected to allow Chinese workers to choose between 'rice paddies' and factories paying <US$2 an hour thus allowing 'diversion' of those hundreds of billions toward Chinese infrastructure buildout.

    Also, China does not need to fund interest and principal repayments on gov't debt to the tune of a few hundred billion every year the way the US gov't ( increasingly ) does. Debt service costs have a 'vampire' effect on individual, business, and gov't finances alike in that debt service payments produce no increase in anything of 'real world' value .


    The Chinese also pay additional taxes besides federal.
    And Americans also pay additional taxes besides payroll / income taxes i.e. sales taxes on purchased items, direct or embedded local property taxes, 'stealth' gross receipts taxes on everything from ethanol gasoline to utility bills.

    ~
    Last edited by Melonie; 06-21-2010 at 03:42 AM.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by eagle2 View Post
    Conservatives were making the same predictions when President Clinton raised taxes. Our country was much better off before Bush's tax cuts than after.



    It was "Free Market economics" that got us into this economic crisis. Allowing banks and other lenders to provide mortgages to anyone they want, on any terms they want, was a disaster.

    If the economy doesn't recover in the next few years, it will be because of the mess created by conservative policies, not because Keynesian economic policies didn't work. Our government could not fully implement Keynesian economic policies because one of the parties in government would rather see a total economic collapse than go against their ideology. The Chinese government, which is not hampered by conservative ideologues, implemented Keynesian economic policies and they were very successful.
    This factually delinquent nonsense has been debunked by Mel and I over and over again. You insist on ignoring Clinton's Tax CUTS and their beneficial economic effects. You refuse to recognize that after JFK's tax cuts; and Reagan's and Clinton's and Bush's ; that Federal revenues went up ! I've repeatedly asked you to "connect the dots" and demonstrate HOW tax cuts cause economic problems and you either can't do
    it or just refuse. Probably because YOUR ideology won't permit to recognize the REAL cause of deficits = SPENDING !

    Twer it only true that we had Free Market economics. Fannie, Freddie , et. al. etc. etc. and the policies of the Fed are NOT part of Free Market Economics. Neither are corporate welfare and bail-outs.

    The Chinese invested in their infrastructure and did not waste billions on transfer payments. Did you notice they are letting the yuan float ? Why do you think they decided to do that ?

    What Keynesian policy haven't we seen from Obama ? How much more debt would you like the government to ring up ? You seem to think that Obama is just returning to Clintonian tax levels. Not true ! As Mel and I have continually pointed out. The Dems control Congress. They have since Jan 1, 2007. It's NOW June 2010. It's NOT the Republicans who are stopping anything Obama and the Dems want to do. It's outrageous for you to claim that failure of Obama's policies can be fairly blamed on the REPUBLICANS !
    Last edited by Eric Stoner; 06-21-2010 at 12:04 PM.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    The oppressive nature of China's economic policies over the years has perpetuated the squalor and extremely low standard of living (and health) that most Chinese have lived in.

    It has been only in recent years that Bush's spending/borrowing policies have changed this around for many Chinese. That spending/borrowing policy was in fact because of Bush's tax cuts and his penchant for getting back at Saddam for the attempt of GW's Daddy's life.

    What a scarifice we made for GW's narcissism!!
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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by threlayer View Post
    The oppressive nature of China's economic policies over the years has perpetuated the squalor and extremely low standard of living (and health) that most Chinese have lived in.

    It has been only in recent years that Bush's spending/borrowing policies have changed this around for many Chinese. That spending/borrowing policy was in fact because of Bush's tax cuts and his penchant for getting back at Saddam for the attempt of GW's Daddy's life.

    What a scarifice we made for GW's narcissism!!
    An area of agreement. Bush's War in Iraq was a colossal mistake BUT even without the war we'd still have deficits. In fact, the budget deficit under Bush was in DECLINE prior to 2008. Revenues had gone UP.

    The reason we are seeing the huge deficits we have now are depressed revenues coupled with over a Trillion dollars in various kinds of stimulus. Add in Federal guarantees and the potential liabilities are even more enormous. Take out the entire Defense budget and we'd still have huge deficits.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by Eric Stoner View Post
    This factually delinquent nonsense has been debunked by Mel and I over and over again. You insist on ignoring Clinton's Tax CUTS and their beneficial economic effects. You refuse to recognize that after JFK's tax cuts; and Reagan's and Clinton's and Bush's ; that Federal revenues went up ! I've repeatedly asked you to "connect the dots" and demonstrate HOW tax cuts cause economic problems and you either can't do
    it or just refuse. Probably because YOUR ideology won't permit to recognize the REAL cause of deficits = SPENDING !
    No, you and Melonie just make up stuff to support your ideology. I have stated multiple times, and you have ignored multiple times, that President Clinton raised taxes. You refuse to even acknowledge this. You want to pretend that the strong economic growth we had before President Clinton passed any tax cuts, did not exist. Tax cuts don't cause economic problems. Irresponsible tax cuts do. Reagan and Bush's tax cuts were irresponsible. We would have been better off without them. Thanks to Reagan and Bush, we went into our worst financial crisis since the Great Depression burdened with $10 trillion in debt. Below is a chart showing our national debt relative to GDP:



    Notice how aside from World War 2, the only time our debt increased relative to GDP was during the Reagan and two Bush Administrations.

    Quote Originally Posted by Eric Stoner View Post
    Twer it only true that we had Free Market economics. Fannie, Freddie , et. al. etc. etc. and the policies of the Fed are NOT part of Free Market Economics. Neither are corporate welfare and bail-outs.
    We did have Free Market economics in the mortgage industry and it was a disaster. Banks and other mortgage brokers were allowed to provide mortgages to anyone they wanted, on any terms they wanted. At one time home buyers were required to make a significant down payment before they could buy a house and banks could not offer mortgages where the rates changed. Doing away with these regulations is what caused the crisis.

    Quote Originally Posted by Eric Stoner View Post
    The Chinese invested in their infrastructure and did not waste billions on transfer payments. Did you notice they are letting the yuan float ? Why do you think they decided to do that ?

    What Keynesian policy haven't we seen from Obama ? How much more debt would you like the government to ring up ? You seem to think that Obama is just returning to Clintonian tax levels. Not true ! As Mel and I have continually pointed out. The Dems control Congress. They have since Jan 1, 2007. It's NOW June 2010. It's NOT the Republicans who are stopping anything Obama and the Dems want to do. It's outrageous for you to claim that failure of Obama's policies can be fairly blamed on the REPUBLICANS !
    President Obama needs to get practically every Democrat in Congress to vote for anything he wants passed, since Republicans are going to oppose everything.

    If we were able to pass a stimulus on the scale of China, we would have got better results. Canada also passed a stimulus program which was very successful. In addition, if the Republicans didn't burden us with $10 trillion in debt going into the crisis, a major stimulus program would have been much more acceptable politically.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by Melonie View Post
    ... which could be interpreted as a testament to the effectiveness of GWB's 2001 tax cuts in stimulating true economic growth !!!
    No, it simply means that once the shock of 9/11 wore off and it became clear it wasn't about to happen again, life returned to normal for most Americans. We would have had a similar recovery without the tax cuts, but we wouldn't have run up trillions of dollars more debt.



    Quote Originally Posted by Melonie View Post
    And America has chosen to spend hundreds of billions of dollars per year on social welfare benefits - whereas the Chinese gov't has elected to allow Chinese workers to choose between 'rice paddies' and factories paying <US$2 an hour thus allowing 'diversion' of those hundreds of billions toward Chinese infrastructure buildout.
    Hundreds of billions of dollars is only 2-3% of our GDP.

    Quote Originally Posted by Melonie View Post
    Also, China does not need to fund interest and principal repayments on gov't debt to the tune of a few hundred billion every year the way the US gov't ( increasingly ) does. Debt service costs have a 'vampire' effect on individual, business, and gov't finances alike in that debt service payments produce no increase in anything of 'real world' value .
    The US wouldn't either if we kept our tax rates at a reasonable level.


    Quote Originally Posted by Melonie View Post
    And Americans also pay additional taxes besides payroll / income taxes i.e. sales taxes on purchased items, direct or embedded local property taxes, 'stealth' gross receipts taxes on everything from ethanol gasoline to utility bills.

    ~
    I doubt the wealthiest Americans pay more in taxes than the wealthiest Chinese.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by eagle2 View Post
    No, you and Melonie just make up stuff to support your ideology. I have stated multiple times, and you have ignored multiple times, that President Clinton raised taxes. You refuse to even acknowledge this. You want to pretend that the strong economic growth we had before President Clinton passed any tax cuts, did not exist. Tax cuts don't cause economic problems. Irresponsible tax cuts do. Reagan and Bush's tax cuts were irresponsible. We would have been better off without them. Thanks to Reagan and Bush, we went into our worst financial crisis since the Great Depression burdened with $10 trillion in debt. Below is a chart showing our national debt relative to GDP:



    Notice how aside from World War 2, the only time our debt increased relative to GDP was during the Reagan and two Bush Administrations.


    We did have Free Market economics in the mortgage industry and it was a disaster. Banks and other mortgage brokers were allowed to provide mortgages to anyone they wanted, on any terms they wanted. At one time home buyers were required to make a significant down payment before they could buy a house and banks could not offer mortgages where the rates changed. Doing away with these regulations is what caused the crisis.



    President Obama needs to get practically every Democrat in Congress to vote for anything he wants passed, since Republicans are going to oppose everything.

    If we were able to pass a stimulus on the scale of China, we would have got better results. Canada also passed a stimulus program which was very successful. In addition, if the Republicans didn't burden us with $10 trillion in debt going into the crisis, a major stimulus program would have been much more acceptable politically.
    You are really so much better than accusing Mel and I of "making stuff up". You KNOW that is not true. You know that we have facts and figures to back up our opinions as do you; on occasion.

    We did have economic growth under Clinton.Some of it did occur AFTER he raised taxes. The primary reason for said growth was the end of the 1991-1992 Recession. A recession btw which was one of the shortest and shallowest on record. It was technically over well before Clinton took office ( October, 1992). The relatively good times under Clinton got even better after he CUT TAXES, although he did so kicking and screaming. Under Clinton,in his SECOND TERM,we had Federal budgetary restraint so that revenues grew much faster than spending. We had solid growth , relatively low unemployment, budget surpluses and low inflation thanks to Greenspan. We also had a strong dollar and very low oil prices. Remember gas for $1 a gallon back in 1998 ? Factual enough for you ?

    If , IF , all Obama and the Dems were doing was turning the clock back and returning to Clintonian economic and fiscal policy, I, for one, would be generally supportive. He is NOT doing anything of the sort. I wish he were. I THOUGHT he'd be sensible enough to work along those lines when I voted for him. I THOUGHT Larry Summers and Geithner would inject some sound economic common sense into Obama's policies. Silly me.

    Mel and I have shown you that revenues went up after Tax Cuts. We got deficits because of spending. Irresponsible bi-partisan SPENDING but the deficits that Reagan and Bush II rang up as a % of GDP were puny compared to what Obama is doing. There is no comparison. And without economic growth and new hiring, Obama could go back to Eisenhower's marginal tax rates and we wouldn't see any serious impact on the deficit. Before it can be confiscated ( excuse me, I mean taxed ) somebody has to make the money. Right now, non bank U.S. corporations are sitting on a pile of cash . $1.3 Trillion, with a "T", to be exact. They are not putting it into new plant and equipment and they are most definitely not spending any of it to hire new people. Our banks are sitting on over $2 Trillion in cash which they are NOT lending. Why do you think so much money is sitting on the sidelines ? I'll tell you the biggest factor : UNCERTAINTY ! Nobody yet knows the extent or impact of Obama's health care and/or tax policies on American business. The foregoing is just major American corporations and the largest banks. For small business and community banks it is even worse. That's not me talking. This situation is easily seen in survey after survey of American business people.

    We most certainly did NOT have Free Market Economics in the mortgage biz. With a Free Market there would NOT be a HUD mandating more lending to low income people. There would NOT be a Fannie and a Freddie buying or guaranteeing such a huge percentage of mortgages. There would be MORAL HAZARD.
    Without GSE's and other Federal guarantees there would have been sounder lending and much better underwriting. In a REAL free market we wouldn't even have a Federal mortgage interest tax deduction.

    The regulations that you think were done away with, for the most part, NEVER existed. That's right. There NEVER were Federal regulations telling banks how much they could lend to whom on what terms. Once upon a time there WERE stricter lending requirements from Fannie and Freddie but it was CLINTON'S appointees , supported by Congressional dimwits like Maxine Waters who started things like "No Money Down " mortgages and ARM's. It was Bush and McCain who tried to rein in both Fannie and Freddie as far back as 2003, but the Dems led by Dodd and Fwank and other "Fwiends of Angelo" stopped them. There were capital requirements set by the Fed. There was some oversight by the FDIC. What we DID have was Glass- Steagall which you and I both agree should NEVER have been repealed. I, for one, could have supported such a thing but ONLY with strict regulation and capital regulation and requirements. Which we both know we did NOT get.

    Your chart is partially true and shockingly incomplete. Both Reagan and Bush the Dumber cut taxes in a recession and increased defense spending. Both were irresponsible in controlling the growth of entitlements in particular and Federal spending in general. Under Reagan the Dems controlled the House for all eight years of his two terms and the Senate for the last two years of his second term. Obama has total control and his deficits, which your chart does NOT list, are even larger. His projected out-year deficits are larger than anything seen since W.W. II ! Your chart of course does NOT note the rise of Federal revenues under both Reagan and Bush the Dumber and the economic growth and near full employment we saw during both their Presidencies.

    I've already explained how the Chinese ( and yes, the Canadian ) stimulus packages differed in important ways than what we got from Obama.
    Last edited by Eric Stoner; 06-23-2010 at 08:05 AM.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by Eric Stoner View Post
    You are really so much better than accusing Mel and I of "making stuff up". You KNOW that is not true. You know that we have facts and figures to back up our opinions as do you; on occasion.
    Then stop ignoring the fact that President Clinton raised taxes and did not cut taxes until his 5th year in office.

    Quote Originally Posted by Eric Stoner View Post
    We did have economic growth under Clinton.Some of it did occur AFTER he raised taxes. The primary reason for said growth was the end of the 1991-1992 Recession. A recession btw which was one of the shortest and shallowest on record. It was technically over well before Clinton took office ( October, 1992). The relatively good times under Clinton got even better after he CUT TAXES, although he did so kicking and screaming. Under Clinton,in his SECOND TERM,we had Federal budgetary restraint so that revenues grew much faster than spending. We had solid growth , relatively low unemployment, budget surpluses and low inflation thanks to Greenspan. We also had a strong dollar and very low oil prices. Remember gas for $1 a gallon back in 1998 ? Factual enough for you ?
    We already had strong economic growth growth by the time President Clinton cut taxes. If I remember correctly, tax cuts were passed in August 1997. The economy was already growing at 4% and tax revenues were already exceeding federal spending. There is no reason to believe that we wouldn't have continued strong economic growth with or without tax cuts.


    Quote Originally Posted by Eric Stoner View Post
    If , IF , all Obama and the Dems were doing was turning the clock back and returning to Clintonian economic and fiscal policy, I, for one, would be generally supportive. He is NOT doing anything of the sort. I wish he were. I THOUGHT he'd be sensible enough to work along those lines when I voted for him. I THOUGHT Larry Summers and Geithner would inject some sound economic common sense into Obama's policies. Silly me.

    Mel and I have shown you that revenues went up after Tax Cuts. We got deficits because of spending. Irresponsible bi-partisan SPENDING but the deficits that Reagan and Bush II rang up as a % of GDP were puny compared to what Obama is doing. There is no comparison. And without economic growth and new hiring, Obama could go back to Eisenhower's marginal tax rates and we wouldn't see any serious impact on the deficit. Before it can be confiscated ( excuse me, I mean taxed ) somebody has to make the money. Right now, non bank U.S. corporations are sitting on a pile of cash . $1.3 Trillion, with a "T", to be exact. They are not putting it into new plant and equipment and they are most definitely not spending any of it to hire new people. Our banks are sitting on over $2 Trillion in cash which they are NOT lending. Why do you think so much money is sitting on the sidelines ? I'll tell you the biggest factor : UNCERTAINTY ! Nobody yet knows the extent or impact of Obama's health care and/or tax policies on American business. The foregoing is just major American corporations and the largest banks. For small business and community banks it is even worse. That's not me talking. This situation is easily seen in survey after survey of American business people.
    President Obama's HCR plan doesn't fully go into effect until 2014. There is no reason for businesses not to hire based on laws that don't even go into effect for four years. Businesses could just as easily lay people off four years from now as they could hire them today. There is one and only one reason why businesses aren't hiring in significant numbers. That is because people aren't spending money. Businesses aren't going to hire people to produce goods and services unless they know there is a demand for those goods and services.

    Quote Originally Posted by Eric Stoner View Post
    We most certainly did NOT have Free Market Economics in the mortgage biz. With a Free Market there would NOT be a HUD mandating more lending to low income people. There would NOT be a Fannie and a Freddie buying or guaranateeing such a huge percentage of mortgages. There would be MORAL HAZARD.
    Without GSE's and other Federal guarantees there would have been sounder lending and much better underwriting. In a REAL free market we wouldn't even have a Federal mortgage interest tax deduction.
    There was a moral hazard. That is why Lehman Brothers went bankrupt. The majority of mortgages were sold to private enterprises. The vast majority of mortgages that went into default, especially in terms of dollars, did not go to low income people. If Fannie Mae, Freddie Mac, and HUD did not exist, it would not have prevented private enterprises from buying risky mortgages provided to middle and upper class home buyers and owners.


    Quote Originally Posted by Eric Stoner View Post
    The regulations that you think were done away with, for the most part, NEVER existed. That's right. There NEVER were Federal regulations telling banks how much they could lend to whom on what terms. Once upon a time there WERE stricter lending requirements from Fannie and Freddie but it was CLINTON'S appointees , supported by Congressional dimwits like Maxine Waters who started things like "No Money Down " mortgages and ARM's. It was Bush and McCain who tried to rein in both Fannie and Freddie as far back as 2003, but the Dems led by Dodd and Fwank and other "Fwiends of Angelo" stopped them. There were capital requirements set by the Fed. There was some oversight by the FDIC. What we DID have was Glass- Steagall which you and I both agree should NEVER have been repealed. I, for one, could have supported such a thing but ONLY with strict regulation and capital regulation and requirements. Which we both know we did NOT get.
    At one time there were state regulations that did not allow risky loans, such as ARM'S and no money down mortgage. The Federal government, under President Reagan, passed the Alternative Mortgage Transaction Parity Act, which overruled state laws preventing these types of mortgages.

    Quote Originally Posted by Eric Stoner View Post
    Your chart is partially true and shockingly incomplete. Both Reagan and Bush the Dumber cut taxes in a recession and increased defense spending. Both were irresponsible in controlling the growth of entitlements in particular and Federal spending in general. Under Reagan the Dems controlled the House for all eight years of his two terms and the Senate for the last two years of his second term. Obama has total control and his deficits, which your chart does NOT list, are even larger. His projected out-year deficits are larger than anything seen since W.W. II ! Your chart of course does NOT note the rise of Federal revenues under both Reagan and Bush the Dumber and the economic growth and near full employment we saw during both their Presidencies.
    The chart I posted goes up to 2004. That was the most current one I could find. The reason why deficits have been so great under President Obama is because of the economic crisis he inherited.

    Revenues originally fell after Reagan and Bush's tax cuts were passed. Even without tax cuts or tax increases, most years tax revenue go up anyway. Just because revenue went up from one year to the next after tax cuts were passed doesn't mean the revenue increased as a result of tax cuts. Most experts say tax revenue would have been greater without the tax cuts. From:

    http://www.factcheck.org/taxes/supply-side_spin.html

    In fact, the last half-dozen years have shown us that we can't have both lower taxes and fatter government coffers. The Congressional Budget Office, the Treasury Department, the Joint Committee on Taxation, the White House’s Council of Economic Advisers and a former Bush administration economist all say that tax cuts lead to revenues that are lower than they otherwise would have been – even if they spur some economic growth. And federal revenues actually declined at the beginning of this decade before rebounding. The growth in the past three years that McCain refers to brings revenues back in line with the 40-year historical average as a percentage of gross domestic product.

    It’s unclear how much of the growth can be attributed to the tax cuts. Capital gains tax receipts did increase greatly from 2003 to 2006, but the CBO estimates that they will level off and decrease in the next few years. The growth overwhelmingly resulted from a sharp rise in corporate tax receipts, the cause of which is a topic of debate.

    Quote Originally Posted by Eric Stoner View Post
    I've already explained how the Chinese ( and yes, the Canadian ) stimulus packages differed in important ways than what we got from Obama.
    You weren't just criticizing President Obama's policies. You were criticizing Keynesian economic policies, which were successful in China and Canada, as I have mentioned.
    Last edited by eagle2; 06-22-2010 at 08:02 PM.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by eagle2 View Post
    Then stop ignoring the fact that President Clinton raised taxes and did not cut taxes until his 5th year in office.



    We already had strong economic growth growth by the time President Clinton cut taxes. If I remember correctly, tax cuts were passed in August 1997. The economy was already growing at 4% and tax revenues were already exceeding federal spending. There is no reason to believe that we wouldn't have continued strong economic growth with or without tax cuts.



    President Obama's HCR plan doesn't fully go into effect until 2014. There is no reason for businesses not to hire based on laws that don't even go into effect for four years. Businesses could just as easily lay people off four years from now as they could hire them today. There is one and only one reason why businesses aren't hiring in significant numbers. That is because people aren't spending money. Businesses aren't going to hire people to produce goods and services unless they know there is a demand for those goods and services.


    There was a moral hazard. That is why Lehman Brothers went bankrupt. The majority of mortgages were sold to private enterprises. The vast majority of mortgages that went into default, especially in terms of dollars, did not go to low income people. If Fannie Mae, Freddie Mac, and HUD did not exist, it would not have prevented private enterprises from buying risky mortgages provided to middle and upper class home buyers and owners.




    At one time there were state regulations that did not allow risky loans, such as ARM'S and no money down mortgage. The Federal government, under President Reagan, passed the Alternative Mortgage Transaction Parity Act, which overruled state laws preventing these types of mortgages.



    The chart I posted goes up to 2004. That was the most current one I could find. The reason why deficits have been so great under President Obama is because of the economic crisis he inherited.

    Revenues originally fell after Reagan and Bush's tax cuts were passed. Even without tax cuts or tax increases, most years tax revenue go up anyway. Just because revenue went up from one year to the next after tax cuts were passed doesn't mean the revenue increased as a result of tax cuts. Most experts say tax revenue would have been greater without the tax cuts. From:

    http://www.factcheck.org/taxes/supply-side_spin.html

    In fact, the last half-dozen years have shown us that we can't have both lower taxes and fatter government coffers. The Congressional Budget Office, the Treasury Department, the Joint Committee on Taxation, the White House’s Council of Economic Advisers and a former Bush administration economist all say that tax cuts lead to revenues that are lower than they otherwise would have been – even if they spur some economic growth. And federal revenues actually declined at the beginning of this decade before rebounding. The growth in the past three years that McCain refers to brings revenues back in line with the 40-year historical average as a percentage of gross domestic product.

    It’s unclear how much of the growth can be attributed to the tax cuts. Capital gains tax receipts did increase greatly from 2003 to 2006, but the CBO estimates that they will level off and decrease in the next few years. The growth overwhelmingly resulted from a sharp rise in corporate tax receipts, the cause of which is a topic of debate.



    You weren't just criticizing President Obama's policies. You were criticizing Keynesian economic policies, which were successful in China and Canada, as I have mentioned.
    I NEVER ignored the fact that Clinton raised taxes. I just refuse to accept the idea that raising taxes promotes economic growth. We had economic growth BEFORE Clinton raised taxes as we came out of recession. We had economic growth AFTER he raised taxes. We had even MORE economic growth and MORE hiring and MORE small business start ups AFTER he cut taxes. The BIG reason we ended up in surplus was a Republican Congress that kept Clinton and the Dems from spending all that revenue.

    The most important thing to remember is that the bulk of Reagan's tax cuts remained after Bush the Smarter and Clinton's tax increases. We did not return to anything near a top rate of 70%. Bradley's Tax Simplification in 1986 did away with a lot of deductions and credits and simplified rates. Unfortunately, Congress has spent the last 20 years or so, toadying to this interest group and that, restoring a lot of them.

    You are NOT keeping up. Parts of Obama's Health Care Plan are going into effect, sooner as opposed to later. The costs of same are NOT clear. And that is only one part of the picture. His tax increases are the biggest problem.

    There are just as many experts who credit Reagan's cuts with economic growth and who show that revenues DOUBLED by the end of his second term. The problem with your chart is that it does not show total revenues vs. total outlays.

    I was speaking about FEDERAL banking regs. You know, the guys in Washington, D.C. You are right that Federal legislation, introduced by DEMOCRAT Congressman St. Germain limited state regulation which led directly to the S & L mess.

    Perhaps if you read Charlie Gasparino's latest book " The Sellout" or "The Big Short" you might be better informed of how Fannie and Freddie encouraged so many risky loans; how those loans were securitized; how overleveraged Lehman, Bear Stearns and Merrill Lynch became; how the HUD regs and CRA played a role in encouraging risky home lending etc.etc. It's all an intertwined mess with plenty of blame to go around.

    Yes. I criticize Keynesian economics. As I pointed out and will do so one last time, China and Canada invested in INFRASTRUCTURE. And both did so from a position of fiscal strength i.e. without anything resembling our monstrous deficits. Obama and Stoyer, Obey, Pelosi, et.al. spent far more on TRANSFER payments and trying to save public employee union jobs.
    Last edited by Eric Stoner; 06-24-2010 at 10:54 AM.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Parts of Obama's Health Care Plan are going into effect, sooner as opposed to later. The costs of same are NOT clear
    Indeed. Health insurance premiums charged to businesses by insurance companies are already up more than 10% ( with individual coverage up 20% per recent news reports) based on the cost ramification of the 'patients' bill of rights'. This involves such things as employers being forced to continue health insurance coverage for employee dependents up to age 27, employers forced to offer health insurance coverage for employee dependents with 'expensive' pre-existing conditions etc. All of these additional costs to businesses are more or less immediate.


    His tax increases are the biggest problem.
    On the topic of taxes, businesses are very concerned that their cost of 'financing' is going to increase significantly after January 1st as the result of an increase in the capital gains tax and an increase in interest rates charged on commercial paper / corporate bonds. The root of the problem is that the rich investors who would have typically purchased low dividend stock shares or commercial paper / corporate bonds in previous years now face higher taxes = lower returns on these invesments, and are instead redirecting their money towards tax free municipal bonds, towards non US dollar denominated gov't bonds, towards precious metals etc.

    Also, businesses are loathe to make long term investments in US facilities right now based on a potential double-dip recession restraining future sales, but also potentially rising energy costs ( carbon taxes ), potentially rising raw material costs, potentially rising environmental compliance costs, potentially rising mandated employee benefit costs ( like unemployment insurance premiums ) etc. Virtually every business person I talk to is constrained by return on investment thresholds that must fall in the 3-5 year ballpark, and the cost increases from the above factors ( or at least their potential cost increases over the next 3-5 years ) are large enough to push most capital investment payback scenarios well beyond the minimum required for approval.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by Eric Stoner View Post
    Yes. I criticize Keynesian economics. As I pointed out and will do so one last time, China and Canada invested in INFRASTRUCTURE. And both did so from a position of fiscal strength i.e. without anything resembling our monstrous deficits. Obama and Stoyer, Obey, Pelosi, et.al. spent far more on TRANSFER payments and trying to save public employee union jobs.
    How is spending on infrastructure not following Keynesian economic policies? Canada and China both had budget deficits as a result of their stimulus programs.

    From 2009:
    http://www.telegraph.co.uk/finance/f...-balloons.html

    http://www.straitstimes.com/Breaking...ry_331240.html

    The main difference is China and Canada were responsible enough not to run large deficits in the years leading up to the crisis.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by eagle2 View Post
    How is spending on infrastructure not following Keynesian economic policies? Canada and China both had budget deficits as a result of their stimulus programs.

    From 2009:
    http://www.telegraph.co.uk/finance/f...-balloons.html

    http://www.straitstimes.com/Breaking...ry_331240.html

    The main difference is China and Canada were responsible enough not to run large deficits in the years leading up to the crisis.
    Free Market Economics does not exclude sensible and necessary government spending. With infrastructure spending, there IS a genuine multiplier effect and other corollary benefits to PRIVATE business. Not so with transfer payments or with protecting government jobs. Mel and I explained and demonstrated this long ago. Please don't ask me to do it again. At some point, the repetition gets boring for the other readers.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    You are twisting and distorting facts. You said, "If nothing else, Obama's bumbling and fumbling on the economy could finally sound the death knell for Keynesian economic policy and provide incentives for a return to more Free Market economics." According to Keynesian economics, during an economic downturn, government should increase spending on infrastructure and other public works programs. That is what China and Canada did and it worked. Keynesian policies do work. Keeping government workers employed does help the private sector. By keeping workers employed, those workers spend more money in the private sector than if they weren't working. The whole basis for your statement is your anti-government ideology. You have never demonstrated anything. All you do is repeat your anti-government, anti-Obama ideology.

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Keeping government workers employed does help the private sector
    This is only true if the 'multiplier effect' cited earlier by Eric is greater than 1 . Right now the 'multiplier effect' is somewhere between 0.7 and 0.8, meaning that gov't borrowing for the purpose of continuing the employment of public sector workers is a net BURDEN on the private sector.


    some plain english background on the 'multiplier effect ' ...

    (snip)"If a decline in demand means mass firing, a rise in demand can mean mass hiring. Even if government spending is inefficient, pork-laden, and financed by future tax increases, the theory goes, it can still create some real jobs, some real output, in both the public and private sectors.

    So what do the data say? There aren’t many studies of the issue. But two stand out: Robert Barro’s work and research by Valerie Ramey, an economist at the University of California–San Diego, on how military spending influences GDP. Both studies found that government spending crowds out the private sector, at least a little. And both found multipliers close to one: Barro’s estimate is 0.8, while Ramey’s estimate is 1.2. This means that every dollar of government spending produces either less than a dollar of economic growth or just a little over a dollar. That’s quite different from the administration’s favored multiplier of four. What’s more, Ramey also found evidence that consumer and business spending actually decline after an increase in government purchases.

    Why this crowding out of private spending? Government spending comes from three sources: debt, new money, or taxes. In other words, the government can’t inject money into the economy without first taking money out of the economy"(snip)

    from

    ~

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Quote Originally Posted by eagle2 View Post
    You are twisting and distorting facts. You said, "If nothing else, Obama's bumbling and fumbling on the economy could finally sound the death knell for Keynesian economic policy and provide incentives for a return to more Free Market economics." According to Keynesian economics, during an economic downturn, government should increase spending on infrastructure and other public works programs. That is what China and Canada did and it worked. Keynesian policies do work. Keeping government workers employed does help the private sector. By keeping workers employed, those workers spend more money in the private sector than if they weren't working. The whole basis for your statement is your anti-government ideology. You have never demonstrated anything. All you do is repeat your anti-government, anti-Obama ideology.
    Infrastructure spending Eagle ( I N F R A S T R U C T U R E ) which even without a real multiplier effect does arguably have corollary economic benefits i.e. faster travel and shipping; less fuel consumption sitting in traffic etc.. With REAL infrastructure spending a LOT of money goes to the PRIVATE sector in salaries and payments to contractors and suppliers.

    That is NOT what Obama and the Dems spent most of the stimulus package on. Too much was nothing more than transfer payments

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    Default Re: The 1938 Recession - Telling 1/3 of the Story

    Too much was nothing more than transfer payments
    Indeed ... a huge chunk of the $787 billion in stimulus spending very bluntly went to individual states ... in the form of increased medicaid funds, block grant money for unspecified purposes etc. that had little to do with money for infrastructure projects. In essence this so-called stimulus package served as a federal taxpayer funded 'bailouts' of states. Or put another way, this infusion of billions of dollars worth of additional funds allowed states to 'kick the can down the road' for another year in regard to taking unpopular actions otherwise necessary to reduce their state budget deficits.

    However, the original stimulus appropriation runs out at the end of 2010. As a result, particular states with the worst state budget deficits i.e. California, Illinois, New York etc. have been strongly lobbying for another years worth of federal 'bailouts' in order to again avoid taking unpopular actions to reduce their state budget deficits.

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