Wednesday, November 10, 2010

Harpooning the whale

The White House deficit commission has given America a preview of the shock therapy required to wean the country off its debt addiction: "Deficit Panel Pushes Cuts."

Of course, there's little chance that the recommendations would even get out of the panel because individual actions require agreement from 14 out of the panel's 18 members. Then they have to get through the Senate and the House, where newly emboldened Republicans will oppose any tax hikes and skittish Democrats will oppose many spending cuts.

My opinion? I'm the anti-Krugman: instead of endlessly griping that the stimulus wasn't large enough, I'm on the side that we should go full-bore on debt reduction. The future of America is already on display in England, France, Japan and Greece where sky-high debt is suppressing growth and leading to austerity measures. Better to take our medicine now than to fall into the debt trap later, where escape that will be all the more difficult once the entitlement bomb hits.

More - Lots and lots of reax at Memeorandum.


Nigel Tufnel said...

The 'newly emboldened Republicans' will run like frightened children from the notion of cutting entitlements to the senior citizens who voted them into office.

The 'newly emboldened Republicans' will grovel at the feet of lobbyists from the defense industry after they find out what will happen to their campaign contributions if they agree to cuts in military spending.

Anonymous said...

Some of the new members might have the guts to take a swing at these things - not that it will make a difference with a Dem Senate and President. And, many of the same Republican old-timers who ran away screaming when Bush proposed some mild fixes to Social Security 6-years ago - back when it might have been fixable.

Our leaders seem to have decided a few more years of good times, followed by a crash is preferable.

Anonymous said...

Oh, goodness. You couldn't have picked a worse boogeyman to invoke than Japan. Following that country's early-90s plunge, only intensive government stimulus spending kept Japan out of a depression. In 1997, and again in 2001, Japan temporarily halted this policy, which twice caused sudden deflation and an increase in the national deficit.

We've got an instructive economic precedent of our own. The U.S. lost almost half of its GDP and almost a third of its money supply in the first 3-4 years of the Great Depression, because everyone was paying down debt and no one was borrowing. The revisionists at the Heritage Foundation are working 26 hours a day trying to deny it, but it was New Deal spending that reversed that spiral.

As for us, eighty years later, that 0.0000001% interest rate we've maintained the last several years is really working wonders.

Anonymous said...

I love how the Statists can destroy an economy while taking credit for saving us all - it's a unique skill.

The New Deal and Hoover's ramp up to it, created the Depression out of a Recession. Anyone in the business world (now or then) can see it.

Western Europe didn't close off trade and spend like crazy - so they came out of the Recession in the early 30's - not a decade later. We didn't follow Japan down the borrow, tax, and spend spiral - so we didn't lose the 90's.

Please, no more government help.

Anonymous said...

Hoover's Congress underspends, economy tanks further. Roosevelt's Congress spends money, economy improves. Rollback in the summer of 1937, economy drops anew. Back to spending, economy improves. And then World War II and we know the rest. This graph ain't hard to draw.

"The New Deal and Hoover's ramp up to it," what an adorable try. Mmm, yeah, those two were truly an inseparable economic team.

Anonymous said...

Sure, government spending - the economic panacea! The more the better - let's spend another $100 trillion, that will fix everything! FDR's spending really had our economy flying by the late thirties. That worked great.

Strange that 10 years earlier, the Harding / Coolidge Administration really cut spending, paid down the debt, and cut taxes during a severe recession. The disastrous result was called the "Roaring Twenties."

Anonymous said...

Taxes were cut because a little spending item called "World War I" came off the books. It also helped a teeny bit on the national debt. However, the philosophy of pay-as-you-go debt reduction wasn't exactly the vogue. Perhaps you've heard of "buying on margin," or Black Friday. It was kind of a big 1920s economic thing.

The dawn of mass production, a massive rise in consumerism and recreational spending, and small, unnoticeable changes to America's infrastructure such as paved roads, utilities and skyscrapers each had juuusssst a little more to do with sparking the 1920s boom than the fine policies you cite.

Hijklmn O'Pqrst said...

Aww. Poor ol' Warren G. Harding. He deserves so much double-secret credit. And to think, the pocket pundits called the Bush economy "The Greatest Story Never Told."

Anonymous said...

"Blck Friday" was a massive market correction. Followed by a short recession. Then Hoover and FDR got into the act and the Great Depression was on.

Government drags on the economy at the rate it spends. Spend more, the eceonomy slows - Macro Econ 101 that libs have been fighting forever. Unfortunately for them, whenever anyone gives them a chance recession and depression follows.

This video might help if you can't track.

Anonymous said...

Great overseas "rebuttal" video; I must have blinked during the part dealing with all of American economic history since McKinley.

The mini-industry trying to debunk the New Deal recovery is a fun little conservative circle jerk, but the Great Depression cratered in February/March 1933. Maybe the revisionists should start claiming that Roosevelt was really elected in 1930.