I like Obama’s idea of a planned attack on deficits which don’t put all the countries moving together toward austerity.

Of course, America is different for several reasons: biggest economy, both imports and exports are very important (or is that exportant? ).

Not funny at all how Nebraska & Germany (with somehow unbelievably low unemployment & debt) won’t play ball with everyone in trouble. They act like they’ve never needed help in a disaster.

Maybe they should study the Gulf oil spill and it’s impact on the gulf states and marine life and how those states actually need lots of help from the federal gov’t.

I don’t think that you would find to many arguments that they don’t need help from the federal government. The arguments you will find are related to some calling for the federal government to come in an take over the clean up. As an arbitrator between states I think they are in a good position. Lets hope this 20 billion dollar cap is enough. I think we will far exceed that amount.

It is interesting to point out that Nebraska does have a low debt. I believe it is stated in their constitution that they not exceed a certain amount of debt. I could not find a link. It was something I heard in a financial debate. I wonder what role that is playing in their low unemployment numbers? It cannot hurt that is for sure. I think I will look up where Texas, Michigan and California also fit into this picture.

Robert Prechter argues that deflation is going to be the final outcome over the next five years. That is a link to an audio file.

At that point he argues that we could enter an inflationary environment. I have been studying this topic for several years now and have devoted some time to studying each camp. His argument is very compelling. He does not believe the government has the will power to create the credit needed to overcome the amount of debt. I am seeing this now. I always thought that the government would fire up the fiat presses. Check out the interview. It would be nice to see an interview of him by a progressive media figure.

I read with amusement that fiscal reform includes raising the retirement age in France up to 62. In U.S. We are already at 67, and the catfood commission is suggesting 69.
Americans live shorter lives than the French already, but that’s probably because they have “free enterprise” healthcare, college education and nursing homes. “Free” means that it isn’t free, you have to pay for it.

No problem. Another war will bail out the world economies.

The only good thing to come of all this: The resolution is non-binding.

“To be honest, it was more than I expected,” German chancellor Angela Merkel said of the G20′s non-binding pledge to halve budget deficits by 2013 and balance budgets from 2016.

In other words, they know full well they’re going to have to do more stimulus, they just want to shut up the bond traders for the time being.

Precter bases his theories on “Elliot wave theory” which is equally scientific as astrology and debunked by reasonable people since the inception of its antecedents centuries ago. These people can’t even make the distinction between matter and thought. That said it it probably about as good as any gambling system that relies on revelation, hubris and hope.

Interesting insight PW.

suggesting that Peter Orszag left the Office of Management and Budget because the White House wasn’t as bloodthirsty about budget cuts as he liked:

Perhaps Orszag will switch places with David Walker of the Peterson Foundation,
who NPR was tongue bathing yesterday.

But, as Krugman points out in his blog, the bond market shows no long term concerns.
It is the Orszags and Walkers of the world who are unhappy.

GAH – the NYT did an austerity piece on a state worker and how she may not be able to eat out with her husband and kid after a 5% salary reduction. OK, now what about the people who are actually going to be crushed?

Central bankers are now controlling the monetary and fiscal policy of nations. They represent their constituents, big banks. Central bankers have only one goal, to save the near insolvent banks from their bad debts. Their bad debts can only be saved by forcing the public, through monetary policy (central bankers buying up the banks debt) and fiscal policy (governments assuming the banks bad debts, ie TARP) to assume those debts.

In order to assume these debts, central bankers are now in debt as are governments. They people must suffer austerity in order for the savings of austerity to be used to pay down these debts. It will not be used to create jobs. Simple.

The big bankers will suffer little consequence for their lending folly and in fact last year gave themselves $150 BL in bonuses. Supposedly, the combined central bank and government bailouts of 2009 were to allow them to improve their balance sheets to avoid a financial collapse. We all know how well it worked. Bankers continue their accounting game of tier 1, 2, & 3 capital most of which is mark to make believe.

Watch carefully.

Before any austerity measures of the cat food commission are enacted. We should mandate austerity among the millionaires, off shore companies, and all corps who pay no tax first. Let them reduce their assets and income to that of the median of an American family and contribute it to paying down the deficit.

A fair tax is the first $30,000 of income (regardless of its source, ie capital gains) is tax free, no deductions. All other income is taxed a various progressive rates, with no deductions. You could substantially eliminate all of the tax code and have fairness for all. Estate tax on all estates over 2 ML. Corp and business tax should be based on a percentage of gross revenue. This governs anyone who does business in this country, no deductions. SS tax would include income up to $500,000.

I am sure that I have forgotten something, like no bid government contracts and tax subsidies to AG, but I think you get the picture.

Bottom line, let them force austerity on themselves first. By forcing it on us, they continue to reap huge profits at our expense.

No problem. Another war will bail out global economies.

“So the deficit commission, and their desire to cut social spending, takes on added importance.”

Seems to me the deficit commission would be trying to gut the social programs even if unemployment were 5%, growth were 3% a year and the budget was balanced in the short term. Fiscal responsibility is just a smokescreen for their underlying philosophical opposition to helping anyone but themselves.

For me the “Hooverism” of which we speak is in reality part of a world wide effort to take advantage of this crisis and leverage it to lower the western world’s workers standards to make them more competitive with Asian workers standards. In this Banker dominated world of thinking raising the standards for workers in asia is an unthinkable option. We are witnessing a world wide race to the bottom in which the world will be occupied by haves and have nots. Princes rule the peasantry. Its a brave and not so new World they envision.

The idea of cutting budget deficits in half by 2013 came from a pledge made by the Obama Administration. But they knew that today’s deficits are huge primarily because of the bailouts and stimulus which are ending and safety-net spending which, if the economy makes a modest recovery, could decrease. And the Bush tax cuts expire this year; Obama proposes to not renew the Bush tax cuts for those above $200-250,000/year, so there will be major added revenues coming in in 2011 and after. Everything else planned that could reduce deficits is trivial compared to these almost automatic adjustments.

That means the US promise was a lot easier for the US to make than it was for some countries in Europe, and the US has been saying, “this is for us, but not necessarily right for you.”

Further, the administration conditioned the recovery on significant increases in exports — to the very countries who are now promising to cut their spending and reduce demand, and in the process, devalue their currencies.

As Obama put it in his press conference last night, we can’t have “everyone head for the exits at the same time,” but that’s what the G-20 communique says they’re doing. Everyone is running towards the clifts of insanity.

If as Krugman speculates we will dip into a long term depression…the Hoover ism of the G20 will not be greeted peaceably across the globe..in this country in the 30s there was violence but this is the age of information and I suspect that here and around the world violence will be on a much larger scale and will not be a peaceful hungry depression. Political upheaval is dawning if the governments around the world including ours adopts a Hooverism stance as they seem to have. The deficit will be the least of the Congresses and the WH problem. The piper wants to be paid and you cannot continue to shit on people who cannot afford to fight back and go un paid mr Pipers……the Tea Party can talk big about 2nd amendment solutions as Ms Angle has blathered about…hungry people will show you what you can do with your 2nd Amendmentsolution.

Blowing out the U.S. federal balance sheet on spending has produced little bang for the buck. The Keynesian notion that $1 of spending produces $1.50 in growth is a myth. That $1 in spending has to come from somewhere, which means higher taxes or borrowing from productive parts of the private economy. Given that so much of the U.S. stimulus went for transfer payments such as Medicaid and unemployment insurance, the “multiplier” has almost certainly been negative.

While some stimulus was justified and an increase in the deficit was understandable and inevitable, permanent tax cuts aimed at marginal individual and corporate tax rates would have done far more to create a climate that encouraged businesses to tap into their vast cash reserves to expand and grow. But of course such policies are an anethema to progressives and Dems in general.

We are told that Congress must continue to spend and borrow until the architects of our current policy say it is time to raise taxes to reduce the huge deficits and debt that their spending has produced. Meanwhile, individuals and businesses are supposed to be unaffected by the prospect of future tax increases, higher interest rates, and more government control over nearly every area of the economy.

Dems have no idea what to do now that the world has figured out that Keynesian economics is a dead-end.

Instead of hiking taxes, we could cut them, especially those that discourage risk-taking at high levels, like capital-gains taxes. Instead of having government intervene in markets to conduct populist social engineering — which is what caused the Great Recession in the first place —government could return to its rightful role as a purely regulatory agency. Instead of burdening American firms in the global market with the highest tax rates and threats to tax foreign income, which would put American firms at a tremendous competitive disadvantage in international markets, we could slim down and streamline the tax burden to enhance competitiveness. Finally, instead of looking for ways to make energy more expensive and therefore make a recovery less likely, we could unleash American ingenuity in getting our own energy resources into play and create hundreds of thousands of high-paying jobs while keeping more of our money here at home.

Won’t happen. Why do you think this and the last administration have taken so much power to oppress their own citizens?. — spying electronically, and now drones have been approved for domestic use, Obama holds the power to shoot to kill orders of anyone he considers dangerous including US citizens. and more. Do you have any idea how many federal law enforcers are on hand for major events? A figure I know goes back to the Atlanta Olympics. It was 200,000. And they have learned from these two wares which are basically on civilians,.

Businesses and investors are sitting on the sidelines with upwards of $ Trillion dollars in cash. Cash that they are holding on to for fear of higher taxes and expanded regulation.

Government spending, does not create permanent jobs, and only saves the jobs of bureaucrats for a temporary period.

Cutting GOVERNMENT spending and taxes frees up capital for the things it does best, create jobs in the private sector. Jobs feed the hungry, not governments.

Cutting GOVERNMENT spending and taxes frees up capital for the things it does best,

Except it doesn’t. As we’ve seen, any loose cash in the Wall Street system gets dumped into excessive bonuses and derivatives bubbles, not job creating investment. And the much-ballyhooed ‘reform’ bill doesn’t stop that.

Except that it DOES when the agencies tasked with regulating and overseeing those industies are not corrupt and entrenched. So, instead of having government intervene in markets to conduct populist social engineering — government could return to its rightful role as a purely regulatory agency. Government must not be able to benefit politically or financially from the industries it regulates.

I don’t really trust Obama. Nice he came out against austerity but he certainly didn’t succeed at the G20. But more to the point, statements like this make me think he is looking for a modicum more of recovery, only to take a hammer to the safety net:

QUESTION: Are there steps your administration can take now to build confidence that the U.S. will, in fact, meet its deficit reduction goals in the medium and long term?

THE PRESIDENT: Several steps we’ve already begun to take: Number one, as I indicated, the budget that we’re presenting — three years discretionary domestic spending freeze. And I’ve sent a clear signal to the leadership when we met, even if we do not get the entire budget package passed through Congress, that top line number needs to stay firm. And I’m serious about it.

We’ve initiated a whole host of measures to cut programs that aren’t working, including, by the way, in the defense area. Bob Gates has been, I think, as successful as any Secretary of Defense in recent memory in actually killing programs, which I think anybody who follows Washington knows is very — very difficult.

We have instituted PAYGO. And although there were baselines built in that took into account the fact that some of this stuff was not going to be solved overnight, it is starting to provide budget discipline to Congress as they move forward.

And we have set up this fiscal commission who will provide reports starting in November – and one of the encouraging things, although there was resistance, ironically, on the part of some of the Republicans who originally had been co-sponsors of legislation to create the fiscal commission and they, in fact, ended up voting against it — what’s been encouraging, based on what I’m hearing both from Democrats and Republicans, is that there’s been a serious conversation there. People are looking at a whole spectrum of issues to get at what is basically a structural deficit that preceded this financial crisis.

Even if — the financial crisis made it much worse, but even if we had not gone through this financial crisis, we’d still have to be dealing with these long-term deficit problems. They have to do with Medicaid; they have to do with Medicare; they have to do with Social Security. They have to do with a series of structural problems that are not unique to America. Some of it has to do with an aging population. And we’ve got to look at a tax system that is messy and unfair in a whole range of ways.

And so they’re looking at the gamut of steps that are going to be taken. And one of the interesting things that’s happened over the last 18 months as President is for some reason people keep on being surprised when I do what I said I was going to do. So I say I’m going to reform our health care system and people think, well, gosh, that’s not smart politics, maybe we should hold off. Or I say, we’re going to move forward on don’t ask, don’t tell, and somehow people say, well, why are you doing that, I’m not sure that’s good politics.

I’m doing it because I said I was going to do it. And I think it’s the right thing to do. And people should learn that lesson about me, because next year when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, because I’m calling their bluff. And we’ll see how much of that — how much of the political arguments they’re making right now are real, and how much of it was just politics.

http://content.usatoday.com/communities/theoval/post/2010/06/obama-signals-coming-battle-over-debt/1

Don’t go knocking the 2nd Amendment.
You people are scared to death you might have to start living within your means after spending like a drunken sailor for years. You also fear big government will turn off the tap of free handouts like unemployment benefits.
It’s time to taste a little discomfort my progressive friends. It’s really the only way you people will learn anything. You’ve been like 12 year olds with a credit card and now it’s time to pay for your sins.
It will hurt but in the end you’ll be better people for the experience.
Trust me.

A nice bit of boilerplate from the Club For Growth, but factually wrong.
“That $1 in spending has to come from somewhere, which means higher taxes or borrowing from productive parts of the private economy.”
Taxes are at their lowest since the 1950′s. What makes you think that cutting them further wil spur growth? Furthermore, the “productive” part of the private economy is Labor, not Finance, but you want to cut taxes on Finance and let Labor pick up the slack.

“While some stimulus was justified and an increase in the deficit was understandable and inevitable, permanent tax cuts aimed at marginal individual and corporate tax rates would have done far more to create a climate that encouraged businesses to tap into their vast cash reserves to expand and grow.”
The idea that we can create jobs by decreasing taxes on the wealthy is comical in it’s simplicity. If you would just take off your ideology blinders and perform a simple correlation between federal tax rates on the top 1% (and yes, if you are in the top 1% of income in the U.S. you ARE wealthy.) and unemployment you would discover that between 1976 and 2006 the correlation is -0.48. That’s right, if anything higher federal taxes on the top 1% has historically corresponded with lower rates of unemployment and higher rates of growth. For example, from 1979-1983 taxes on the top 1% were steadily decreased from 37% to 28% while unemployment increased from 5.9% to 9.6%. From 1992-1996 taxes on the top 1% increased from 31% to 36% while unemployment decreased from 7.5% to 5.4%. While this absolutely does not prove that raising taxes on the wealthy creates jobs it makes it pretty much impossible to assert the opposite. It happens to turn out that the economy is a bit more complicated than that and the amount of taxes paid by the top 1% is not really all that important in the scheme of things. If you’re ideologically opposed to higher taxes on the wealthy that’s your perogative, but claiming that such increases from current rates will stifle economic growth and job creation has no basis in fact or history.

GREAT POST! Get Planning

Indie loves Ayn Ryan,

Indie like most of her kind, never discusses the year Wall Street died 2008.

Problem is, everything he said there was a lie or a gross exaggeration.
they never talk about the CAUSES of these program’s decline. Like putting HMO’s in charge of them and them taking 20-255 of the $$$ for “administration”.

That would be Ayn Rand, Milton Friedman’s and Alan Greenspan’s diva.

nonsense – a second year econ student would know better – know that a static equation may indeed need to balance in the long run but during that balancing period there are many ways the economy can go to get the aggregates in the GDP to balance at some point in the future – and during that time there is indeed an “accelerator” that will make the balance point be at a different level of the GDP than when you started.

Take a few econ course and stop just repeating fools being quoted on Fox if you want “cred” on FDL. You will find those course under “micro-economics” in your local schools economics department, and of course get a good instructor that will explain how those “macro” equations work with the truths of “micro”. Indeed note the lack of studies that support your simplistic equations must balance view – and the many studies that support Keynes