Covering the waterfront of some recent economic and political matters, herewith some thoughts as you prepare to enjoy your summer’s first Bloody Mary:

I’ve still not seen a supply side response to this wonderful piece by Mark Dow. If anyone has, please drop a link in comments.

President Obama was excoriated recently for his clearly inappropriate comment that “the private sector is fine.” Of course, the private sector is not fine, nor will it be until we’re consistently printing ~200K/month or more nonfarm jobs. To be fair, though, the comment for which Obama was ridiculed was taken a bit out of context. In context, it was really a comparison of the private sector to the public sector:

The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government — oftentimes, cuts initiated by governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in.

On that score, he is exactly right. Let’s take a look, shall we, at what the president is referring to.

What we’ve got above is State (green) and Local (black) jobs, indexed to 100 at January 2001 and January 2009 – the inaugural months of our past two presidents. Also, for the record – and I’ve written about this before – are private sector jobs (gold), which have grown better in this recovery than in the previous one.

Let’s attach some numbers to the chart beyond the percentage change up or down from 100.

(Source: St. Louis Fed, author calculations. Thousands of persons.)

So, where Bush had picked up 800,000 State and Local jobs in the first 41 months of his term, Obama has presided over a loss of 636,000. (On a Federal level – which is by far the smallest of the three public sectors – Obama has added a whopping 34,000 jobs, whereas at this point in his first term Bush had shed 21,000.) These lost jobs are our teachers, firefighters, police and other civil servants. This is what austerity looks like. (Mind you, I don’t recall seeing anyone lambasting Bush for public sector job growth on his watch.)

Obama has simply not presided over a massive expansion of government, in terms of either spending or hiring. Arthur Laffer and Stephen Moore wrote an op-ed in the WSJ titled Obama’s Real Spending Record. In it, they used the following chart to demonstrate what a big spender Obama is. Seriously, they did. The beauty of it was the mental gymnastics they went through to convince their readership to ignore the actual decline in spending we’ve seen for the past 2+ years. See that (very inconvenient) red line moving down and to the right? And they used that chart anyway. Mind bending – I actually could have used their chart in my May piece demonstrating Obama’s relative frugality. To their credit, though, they do get one thing right: “Sadly for fiscal conservatives, the biggest surge in government spending came during the last two years of President George W. Bush’s eight years in office (2007-2008).” As an aside, since they were kind enough to run the chart starting in 1990, can we discuss for a moment who presided over a decline in Federal government expenditures as a percent of GDP and left his successor with a pretty damn good looking balance sheet? To my untrained eye, it appears as though spending really only declines under Democratic administrations.

Moving on, Census recently released an interesting report titled Sharing a Household: Household Composition and Economic Well-Being: 2007–2010 [PDF], which examines the incidence of “doubling up” from 2007 – 2010. The results are, on the one hand, distressing, but on the other hand offer a glimmer of hope for the housing market and, by extension, economy overall. The statistics about the growth of doubling up are indeed troubling. However, we should consider that (hopefully) at some point these individuals will find their way into their own residence. For example: “The number of adults aged 25 to 34 who lived in someone else’s household increased by 18.1 percent, while the number aged 35 to 64 increased by 9.7 percent between 2007 and 2010. The 1.5 million increase in the number of additional adults aged 25 to 34 accounted for about 45 percent of the total increase in additional adults during the period.” At some point, should this economy ever truly gain some traction and hit escape velocity, I’ve got to believe these interlopers are going to head for the exits of the homes in which they’re now doubled up, and that could be a decent tailwind for an improving housing market.

On Bernanke watch, the Fed’s “central tendency” forecast for the unemployment rate in 2014, released on Wednesday after the FOMC decision, showed them ratcheting up from a range of 6.7 – 7.4 percent to 7.0 – 7.7 percent. The Fed has consistently issued rosy forecast after rosy forecast, only to have to downgrade them at a later date. Given the repeated downgrades, it is shameful that they are not doing more. And at this point, as we draw ever nearer to the election, any further action will draw shrill cries of an attempt to help Obama’s reelection chances. So as not to heap all the blame on Bernanke, I’ve rarely – if ever – seen a more useless group of people than our Congress. Though I don’t think Bernanke’s done enough, he looks downright heroic compared to our do-nothing Congress, which has done exactly zero. And that is simply unforgivable. The Fed’s toolbox is limited to whatever monetary tricks Bernanke can pull out of it. Congress could, if anyone ever found a spine, complement Bernanke’s actions with some growth-promoting legislation. And Mila Kunis is going to fall madly in love with me.

@TBPInvictus

Adding: I’m fascinated that everyone seems to want to jump on the Laffer/Moore graph and my comments about it. That part of the post was almost an afterthought. I’m surprised – though I guess I shouldn’t be – that no one seems to want to tackle the meat of the issue here which is, of course, the first chart of State/Local employment vs. private sector. Then again, what is there to say?

Category: Current Affairs, Data Analysis, Economy, Employment, Federal Reserve, Politics

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

53 Responses to “Austerity At Work”

  1. MayorQuimby says:

    http://madashelland.com/wp-content/uploads/2011/04/GovSpending.png

    http://static6.businessinsider.com/image/4f01b98569beddbc69000042-590/meanwhile-us-government-spending-has-continued-to-increase-here-it-is-in-absolute-dollars.jpg

    As for Bernanke not doing enough:.

    http://www.zerohedge.com/sites/default/files/images/user5/imageroot/geithner/Fed%20Balance%20Sheet%2011.25.jpg

    Still won’t give up the lies and bs eh Invictus? Rates are at zero, debts at records vs. gdp, private sector debt soaring, Fed resorting to limitless QE monetization and we have not done enough!!!

    What is truly frightening is that you actually believe yourself.

  2. MayorQuimby says:

    Add…anyone who can claim austerity with over a Trillion in annual deficit spending is simply full of doody.

    At the very least, austerity would mean a balanced budget and at the worst, cuts and tax increases to finance debts.

  3. carleric says:

    So we are agreed that Bush was a lousy president and when you use selected metrics Obama is better?
    Does the story ever change?

    Invictus: Happy to have a look at your metrics. Where, exactly, are they?

  4. rd says:

    The Fed Funds interest rate dropped from about 17% to 7% during Reagan’s term. The only sustained financial market drop was at the beginning of his term and was largely triggered by Volcker’s massive interest rate hike. 1987 was a corrective blip of temporary excesses.

    It went from about 5% to 0% in George Bush’s term with two major stock market crashes and a Great Depression-like financial crisis in the same length of time that Reagan was in office. In early 2008, the interest rate was close to the rate when he came into office after Bernanke had to shove it up to counter Greenspans extended drop.

    I think the supply side positive economic record of Reagan’s term has much more to do with going from unprecedented high interest rates to the normal range than his tax cuts.

    Massive tax cuts in Bush’s presidency seemed to fuel the speculative fire more than the economic fire as interest rates cycled from normal to unprecedented lows.

  5. Joe Friday says:

    MayorQuimby,

    Add…anyone who can claim austerity

    Spending is at Eisenhower levels. By definition, that’s austerity.

    At the very least, austerity would mean a balanced budget

    You’re overlooking that the massive federal deficits and debt are as a result of the massive decline in federal revenue caused by the numerous rounds of tax cuts that overwhelmingly benefited the Rich & Corporate enacted by Chimpy Bush and the Republican Congressional Majority, NOT as a result of spending.

  6. PeterR says:

    “as you prepare to enjoy your summer’s first Bloody Mary:”

    ???

    Done!

    Have a good weekend.

  7. RW says:

    Invictus lays out the data territory and it is clear Austerian foolishness (as well as squabbles between most economic schools) should be heavily discounted or ignored altogether. Good old (circa 1937-39) Hicksian/Keynesian demand-side models have given superior predictive and explanatory results the past six years because we are in a major, depressive demand shock and supply-side models are weak or even completely invalid in that context.

    But IMO Steve Randy Waldman gets closer to a critical truth: The current decent into global depression is actually a choice albeit one that many people are not aware they are making and it will remain a choice until our body politic changes its mind about what is indeed “enough” and throws out policy/political elites who disagree (see final note below).

    Depression is a choice.
    We are in a depression, but not because we don’t know how to remedy the problem. We are in a depression because it is our revealed preference, as a polity, not to remedy the problem. We are choosing continued depression because we prefer it to the alternatives.

    Two quick responses on choosing depression.
    Scott Sumner and Marcus Nunes suggest that our policy failures are in some sense just an “oops!”, that they result from a mix of mistaken theory, institutional frictions, personal quirks, and political forces rather than being, as I argue, a choice. I’d be more sympathetic if these “mistakes” were unique to the United States. Broadly similar choices have been made in Europe, and Japan.

    NB: from something I read but don’t remember where, Democracy is not supposed to make things happen, it is supposed to prevent bad things from happening while providing a means for citizens to make choices among better things when offered. The main problem now is not the choosing part, it is the prevention part and offered choices parts.

  8. rootless says:

    MayorQuimby, you wrote:

    Add…anyone who can claim austerity with over a Trillion in annual deficit spending is simply full of doody.

    At the very least, austerity would mean a balanced budget and at the worst, cuts and tax increases to finance debts.

    You don’t have a clue, do you?

    Definition of “Austerity”:

    “In economics, austerity refers to a policy of deficit-cutting by lowering spending often via a reduction in the amount of benefits and public services provided.[1] Austerity policies are often used by governments to try to reduce their deficit spending[2] and are sometimes coupled with increases in taxes to demonstrate long-term fiscal solvency to creditors.[3]”
    (Reference: http://en.wikipedia.org/wiki/Austerity)

    So, there is nothing in there that says “austerity” means that there was a “balanced budged”. Austerity means budget cuts to decrease a deficit.

    From the Bureau of Economic Analysis:

    Change of real government consumption expenditures
    and gross investment (annualized and seasonally adjusted):

    IV 10 I 11 II 11 III 11 IV11r I 12r
    -2.8 -5.9 -.9 -.1 -4.2 -3.9 %

    Or the same as percentage contributions to the GDP change:

    IV 10 I 11 II 11 III 11 IV11r I 12r
    -.58 -1.23 -.18 -.02 -.84 -.78 %
    (Source: http://www.bea.gov/newsreleases/national/gdp/2012/txt/gdp1q12_2nd.txt)

    Thus, government expenditures have decreased for six quarters in a row now. That’s austerity made in US.

    Isn’t this what you want?

    Not that this would stop people like you from hallucinating of ever expanding government.

    The new recession probably starts this or the next month.

  9. ilsm says:

    Mayor,

    No visible austerity for banksters, cronie capitalists, and war profiteers. Severe lack of austerity where there needs to be cutting (sparing pain for the 1% is on going, the 99% look for themselves).

    The war machine is enjoying a great spending spree, they just got 2 F-35B’s supposedly to fly off amphibious landing ships, and do mach 2, delivered to the training base with a 10,000 ft runaway in Florida, which the F-35 has passed 4% of their tests according the the GAO in June 12. That is a future debt of $1100B through 2037 just what the DoD hopes to spend to keep it ‘ready’ at about 65% (ilsm’s can talk all day about readiness and support costs to try to keep the untested, unreliable things flying, I see huge overruns or under performing in that 1100B!), with the nknown, unbudgeted fixes found by regular pilots dicovering defects, bringing 1000 plus costly “recalls” which is like the one I have where my new vehicle is taken out of service at the depot to make it meet specs, that were paid for several times over.

    The much feared war profits’ sequestion of $500B is 4% reduction in 10 years, a fall off of $1000B is around 8%. Hardly catastrophic, nor austere, except the wailing is from boys buying double digit over runs (GAO reports on each spring), selling war, and looking for good jobs on BoD’s once they retire. Militarism justifies keynesian stimuli, especially when the PAC’s deliver the meme’s.

    “Don’t ask the barber/General whether you need a haircut/F-35.” —Daniel S. Greenberg

    The insolvent banksters are doing just fine, one of your links shows $2000B in MBS assets,plus a few other related succor for the banksters on the FR balance sheet, and the TARP is still on the treasury B sheet, mostly.

    Tax cuts remain.

    Austerity is hitting the local and states work forces and contracts, but most have balanced budget requirements or if in trouble get federal “grants” to keep 2 fire stations open in one small to mid size city I know of.

    Austerity is hitting both sides of medicaid. There are asa result a fair number of lay offs in the medical sector due to stinginess (austerity) in medicaid and medicare, as well as private insurers’ version of death panels and limited treatments and screenings.

    Austerity should start with shuttering insolvent banks, cutting the war business down to size of the German’s about 1.5% of GDP, and raising taxes.

    The US cannot afford to disguise empire as national security, to drag 3% of GDP away from better uses.

    I had no use for a bloody mary, today!

  10. b_thunder says:

    Dear Invictus, have you thought about a possibility that neither austerity nor keynesianism are the answer? Have you thought about a possibility that there is no easy or quick solution to this? (by quick i mean less than 10 years.) Since the beginning of times and until 1930s the Central Banks weren’t involved in the prevention of recessions and governments weren’t in the business of hiring just to keep people employed. And the civilization somehow survived, didn’t it? Yes, the recessions were painful, but I’ll argue that if we had 20% unemployment for 6 months in 2009 and then a quick recovery, it would be much better than having 11% unemployment (counting those that left the labor force) over 5 years. If i was unemployed for 6 month, I’d not lose my house. If i was out of work worked in a McJob for 3 years – i’d be in default long time ago.

    Have you allowed for a possibility that things are FUBAR ( effed-up beyond any repair) that only time can be the real cure ? What if there is no more 4% growth years in the next decade? What if Japan is not something we should avoid, but is the BEST we can hope for? What if 5% unemployment is simply not attainable (unless the gov’t hires 1.5% of the population to dig ditches and another 1.5% to fill them up?)

    Invictus, what if the boom of the 2000s and most of the boom since 1982 was a mirage, a trick, a bubble which made Wall St traders, CEOs, DoD contractors, big pharma, “big oil” and various well-connected speculators fabulously rich at the expense of everyone else? What if the real wealth created between 1982 and today is tiny compared to the gains in paper wealth/debt system and the only way out is reset of the system, debt forgiveness, and total rebalancing of taxes and wages in favor of productive labor and away from favoring “investment” (which in the last 30 years became 98% speculation anyway?)

    This is New Normal. The longer the various lobbyists and bankers trying to grab more wealth (93% of post-recession income gains went to the top 1%, up from 56% under Clinton and 63% under GW Bush) and the Fed is trying to prove (like the Soviets before them) that they can repeal the business cycle, the longer it will take for things to rebalance themselves.

  11. willid3 says:

    there have been no examples that have had a government implement austerity and the economy is better, it doesn’t exist. some point to Latvia. while the government had implemented it , the people have been exporting themselves. because the resulting economic collapse hasn’t worked for them. Ireland is another example trotted out. but if we look at them, they are worse off than when they started. much worse off. and guess what? the people are exporting themselves too.
    what we need is some thing boost the economy now. which the private sector wont do unless some one knows a huge source of new customers that nobody knows of now (must be looking for aliens. because there isn’t one on Earth) . and its really simple as to why that is. jobs are necessary evil to a business because the owner can’t do all the work themselves. unless we get past that threshold, they hire no body. and these are the job creators some think will take off and create new jobs. not. they wont invest unless there is a possibility of making a profit, which requires customers . tax breaks dont encourage them (its like giving a pay raise to some one for doing nothing more than before).
    the source of the deficit is all because the collapse in revenue (think not? its now at 14%, where its normally at 20).
    and those in the 99%, think that when some folks say tax cut, that it means them. but it doesnt. and they need help because incomes haven’t kept up. if the average income was at the same level it was in the 1970s today, the average income would be in 90,000 range as opposed to 50,000 range

  12. Conan says:

    The issue is more profound than being presented…In the last 20 to 30 years Government workers have:

    1) Had steady growth in income and benefits.
    2) Constant increases in overall numbers.
    3) Become the largest Union in the United States.

    this is vs the Private sector, which.

    1) Has had wages stanated and benefits cut.
    2) The “productive sectors” such as manufacturing have been constantly declining in numbers.
    3) The private sector is almost a half century of constant reduction in Union membership.

    So here is the issue….the private sector pays for govenrment…your average Joe’s taxes are supporting Governemtn workers, in his minds eye, at a better rate than what he is able to get…Historically governemtn jobs paid less, but were more secure…Today, the reverse is happening, they pay more but are less secure…

    Lastly at the local level, city level or state level, they can not print money, their ability to tax and borrow is more limited…Thus what they do has to be paid for on a more immediate basis vs the Federal Government which can put off the ramifications for years or decades.

    Bottom line this all started in the 80′s with Re engineering and offshoring in the private sector now it is coming to a head in the public secotor..we are at the end game, just as private debt has been converted to public debt…this massive bubble will have it’s solution and a new day or age will be born.

  13. rootless says:

    b_thunder, you wrote:

    Dear Invictus, have you thought about a possibility that neither austerity nor keynesianism are the answer?
    [...]
    the only way out is reset of the system…

    Have you ever thought about the possibility that there is just no answer within the capitalist system, that there wasn’t anything like a “reset”, after which everything will become fine again? The last time, it needed a devastating world war to “reset” capitalism to start a new expansion phase. That can’t be the answer either. What if things are just going to get worse and worse and worse, not from today to tomorrow, but as a general tendency over decades or perhaps centuries to come, because the capitalist world economy has reached it’s zenith, like other systems before it, until it is going to be replaced by something totally different (about which I don’t know how it would look like), unless the worst case becomes reality.

  14. mathman says:

    http://rendezvous.blogs.nytimes.com/2012/06/21/from-milk-to-peas-a-chinese-food-safety-mess/?src=recg
    “HONG KONG — There’s mercury in the baby formula. Cabbages are sprayed with formaldehyde. Gelatin capsules for pills, tens of millions of them, are laced with chromium. Used cooking oil is scooped out of gutters for recycling, right along with the sewage.

    Accounts of dubious or unsafe food in China are as mesmerizing as they are disturbing — “artificial green peas,” grilled kebabs made from cat meat, contaminated chives, chlorine showing up in soft drinks.

    There have been stories of imitation soy sauce made from hair clippings, ink and paraffin being used to dress up cheap noodles, and pork buns so loaded with bacteria that they glow in the dark.

    A new investigation by the Chinese magazine Caixin has found that “these publicized food safety scandals represent only a fraction of unsafe food production practices. Hundreds of chemical food additives are pumped into products that Chinese people consume every day.” (there’s more)

  15. Petey Wheatstraw says:

    I just had my first Bloody Marys of the summer, and I must say, I’m one drop of Tabasco short of hammered.

    (took 10 minutes just to write that).

    that said, facts be damned – the Republicans will tee-off on this Obama sound byte, and their knuckle dragging, troglodyte base will suck it up and regurgitate it, ad infinitum, until it becomes the modern day equivalent of George Washington chopping down the cherry tree.

    (insert barbershop quartet humming, ‘Three Cheers for the Red, White, and Blue’, here)

    Obama is not what they accuse him of being. In real terms, he’s worse. I wish he was a transformational Socialist, or almost anything but what he is: A right-of-center, status quo supporting, Corporatist lackey.

    Quimby:

    After all this time, you still stop short in your analysis. Our debt has no real cost, as it is expressed in units of unspecified and/or debtor-defined value.

  16. Orange14 says:

    I would love for the dearly beloved MayorQuimby to let us know his elixir for getting out of this mess but that I’m afraid will be a long wait. As for the Wall Street Journal, I gave up on them five years ago and wonder why any of their talented news reporters (and I know a fair number of them still work there; though given cutbacks in the mainstream press I suspect they would be unemployed if they left). The numbers are what they are and unfortunately all of the Republican economists ignore them. I guess this is why they call economics the dismal science. I did read Steve Randy Waldman’s piece (two or three times because while he is quite talented, his prose is very dense) and agree; this is a choice we have inflicted on ourselves.

    Most of us (assumption here) who read BR’s blog are probably well off and financially secure. We may not all be in the 1% (I’m not) but probably are in the top 5%. We are not the victims here but if something isn’t done we will be when the peasants come after us with pitchforks and bailing wire. Too sad really.

  17. MayorQuimby says:

    Hahaha here we go again:

    “Spending is at Eisenhower levels. By definition, that’s austerity.”

    Bullshit. We’re spending Trillions of $$$ we do not have. There is nothing “austere” about that.

    “You’re overlooking that the massive federal deficits and debt are as a result of the massive decline in federal revenue caused by the numerous rounds of tax cuts that overwhelmingly benefited the Rich & Corporate enacted by Chimpy Bush and the Republican Congressional Majority, NOT as a result of spending.”

    Huh? I will repeat. We’re spending Trillions of $$$ we do not have. There is nothing “austere” about that.

    “Austerity means budget cuts to decrease a deficit.”

    Clueless? I think not. By that logic, we could spend WEIMAR-LIKE amounts and push prices of bread to $50 a loaf and then when we cut a tiny miniscule million dollars from the budget we would be enacting “austerity”. Bullshit once again and you know it.

    @ilsm- Yeah – the top is flourishing because the FOMC has engaged in counterfeiting $$$. They are handing free credit to the top which becomes real $$$ in their wallets which are spendable. Those on the bottom are given debt (aka bills every month) to keep up. They can’t give new $$$ to the bottom because that would create hyperinflation so instead they give THEMSELVES money to spend to generate “growth” and investment. How convenient!!!

    “I would love for the dearly beloved MayorQuimby to let us know his elixir for getting out of this mess but that I’m afraid will be a long wait.”

    We have too much credit, not enough collateral and real economic activity supporting it and 2008s will keep repeating until we knock off BOTH the deficit spending AND excess “liquidity” (printing really) to keep us pretending everything is fine when it is not. One would think 0% Fed Funds, record debt to gdp and soaring private debts would signal it is GAME OVER with regards to being able to spend more $$$ than we have….FOREVER (hah). Instead you people have the GALL to say we should spend even more Trillions we do not have?! You are DECIMATING our future to pretend today is fine and THAT is disgusting.

    Not everything in life is completely fixable. You can’t have what you want when you want it, always.

    Adults get that. Children do not. Which are you?

  18. Orange14 says:

    @MayorQuimby – I guess a little 30% unemployment never hurt anybody.

  19. MayorQuimby says:

    “After all this time, you still stop short in your analysis. Our debt has no real cost, as it is expressed in units of unspecified and/or debtor-defined value.”

    Negative. Our money is all debt and is backed by past labor and future labor which is why student loans are not dischargeable (no collateral for “borrowing” aka past labor) and it is also why our dollar is worth so much and the dollars from Zimbabwe are worth so little.

    So – each dollar is tied to future labor units making our debt very much REAL. When TSHTF, you will see behind-the-scenes deal making to rid ourselves of Taiwan, remove bases in Germany etc. all in exchange for debt forgiveness. This is because our debts are REAL, not fake. If they were bullshit debts, there wouldn’t be anything to worry about! Oh but there is…

  20. MayorQuimby says:

    @Orange-

    Your way will bring it just as inevitably as will mine. As you recall, Weimar Germany did not exactly have what you would call a booming economy. Well, it WENT boom.

    You can’t replace inflation created by real economic growth with paper inflation. THAT is the VERY DEFINITION of hyperinflation and THAT road leads not to 30% unemployment, but COLLAPSE.

    Your pick.

  21. Joe Friday says:

    Conan,

    The issue is more profound than being presented…In the last 20 to 30 years Government workers have:
    1) Had steady growth in income and benefits.

    False.

    2) Constant increases in overall numbers.

    False.

    3) Become the largest Union in the United States.

    Only by default.

    They have not become much larger, the private-sector unions have evaporated.

    this is vs the Private sector, which.

    1) Has had wages stanated and benefits cut.
    2) The ‘productive sectors’ such as manufacturing have been constantly declining in numbers.
    3) The private sector is almost a half century of constant reduction in Union membership.

    And ?

    So here is the issue….the private sector pays for govenrment…your average Joe’s taxes are supporting Governemtn workers, in his minds eye, at a better rate than what he is able to get

    And he (as well as you) would be wrong.

  22. philipat says:

    “See that (very inconvenient) red line moving down and to the right? And they used that chart anyway. Mind bending ”

    Excuse me but I think you are looking only at the extreme right of the red line and not the almost vertical part before it but still under Obama. The recent decline is only because there is no more money to spend on worthless projects which have not worked, at least before Obamacare kicks in (If it does not get rejected by SCOTUS, which is more than likely).

    In the Private sector, any CEO blaming endlessly poor performance on his predecessor after FOUR years in the job would be fired.

    Invictus: Comparing private sector to public is apples to oranges. After all, it took Bush the better part two terms to blow the economy to smithereens.

  23. Joe Friday says:

    MayorQuimby,

    Spending is at Eisenhower levels. By definition, that’s austerity.

    Bullshit.

    I’m afraid the independent non-partisan Congressional Budget Office DISAGREES with you.

    We’re spending Trillions of $$$ we do not have.

    Due to lack of revenue.

  24. willid3 says:

    may. a little bit of that 30% unemployment can and will destroy capitalism. it almost did before, and the populace was a lot more forgiving back then. do it now. and they wont just wonder why need capitalism, nor will they believe that its better than any alternative, they will know it. back then people could live on what they grew at home that not longer the case.
    hyperinflation has an economic definition. and that not it
    and 30% unemployment will lead to collapse also. as people decide capitalism doesn’t work better than any of the other systems. it can lead to an economic collapse with no recovery ever. and it could also lead to political collapse too. thats 30% of voters too. if not more.

    the cause of the Wiemar republic isn’t what you think it was. it was a huge foreign debt that was owed to the victors of WW1. which the victors wouldn’t forgive. and there is nothing like that now. and weimars problem wasn’t their spending. it was that they lost a war, and England and France wanted to keep them down. in the end that lead to WW2. and the only reason they didn’t repudiate the debt, was it war reparations. war would have returned as soon as they did. and they were in no shape to fight another one then. not that France and Britain were either. and the victors couldn’t let go of that debt because it would have caused funding issues for them too. because of the gold standard then in effect
    and we have forecasts of huge deficits between now and 2070. of trillions . but we over look the fact that in the same time we will have GDP in the 100′s of trillions (at 15 trillion per year)

    if those who think that inflation can’t be contained (even though its not like we haven’t beat it before. just raise interest rates. when that wont destroy the economy). cause every time we ignore deflation we take a big risk of economic and political upheaval.

  25. MayorQuimby says:

    “Due to lack of revenue.”

    Funny. All those subprime borrowers who couldn’t afford Hummers and McMansions were suffering from the same problem! Suppose there was nothing wrong with the banks “lending” to them all that funny money eh?

  26. MayorQuimby says:

    “hyperinflation has an economic definition. and that not it”

    Sure it is. You incur debts then pay them off with printed money. How is QE any different?

    The road leads to ever increasing deficits, ever increasing inflation, wages collapsing (relatively speaking) and the impoverishment of all.

    If you think our consumer culture will preserve its employment levels when Special K cereal is $17 a box you are nuts.

    Most companies will have disappeared years before that.

    THERE ARE NO “SOLUTIONS” TO BEING BROKE. YOU ARE BROKE. THAT IS THE STATE YOU ARE IN!!!!

    You accept it, make the necessary adjustments, live within your means and work your butt off to get back the things you thought you had but in reality, never did.

  27. willid3 says:

    but in reality governments who control their own currency can actually never be broke. ever

    after all they can print more. or they can raise taxes

    which is actually the model that business uses.
    they can cut spending. but that only fixes a small part of a broken business model. if they can raise salews (aka revenue) they will fall apart.

    that doesn’t apply to governments. cause they can always raise taxes. is that what you are suggesting that we should do? they can cut spending too i suppose. but doing that will reduce the economy and so far the private sector has been AWOL from any leadership in the economy. we give them un paid for tax cuts. and they accomplish nothing, which leads me to believe that they aren’t the job creators that we were soled they were. or they are the most wimpy , scaredy cats of job creators ever.
    without the consumer culture (aka at minimum 70% of the economy. but business buys nothing at all without some one to sell it to). just what is going to replace it? business can’t. they never have as they only buy what is needed to power their business,. take away the consumer, and nothing power’s their business

    the idea that if you work hard, you can get ahead has been dead for a few decades. wall street and business has killed it

    we aren’t broke. raise taxes back to where they were in 2000 and we wont be broke. i can hear it now, but the job creators will stop. they already have. and they never started either

  28. formerlawyer says:

    “You accept it, make the necessary adjustments, live within your means and work your butt off to get back the things you thought you had but in reality, never did.” – That is your solution Mayor Quimby?

    A country is not a household. Repeat after me – a country is not a household. Fiat money gurantees that. There are no bond vigilantes to take the United States down – at least in the foreseeable future. Japan has 200% of their GDP in debt – yes I know it is held mostly by their own citizens but then so did we with war bonds in WWII when our debt was the highest.

    Percentages and rations have both a numerator and a denomnitator – repeat after me – ratios have have a numerator and denominator. We are not raising enough tax revenue. We are not raising enough tax revenue. Repeat after me. The problem is the Republican Parties – fact free blend of belief, ignorance and bigotry that looks at “tax cuts” as a cure-all. Against expert advice and global experience – they are ruining the economy in their hatred of a black man in the Oval Office.

    Is that clear enough!

  29. philipat says:

    “Invictus: Comparing private sector to public is apples to oranges. After all, it took Bush the better part two terms to blow the economy to smithereens. ”

    If that is correct then the Democrats had eight years to analyse the mistakes and had a majority in both Houses for two years, during which time measures could have implemented to correct the problems and change the direction, irrespective of Republicans?

    There is a strange old-fashioned concept called “Living within one’s means” to which some still subscribe. And it is possible because Clinton nailed it.

    Actually, either Dem or Repub makes little difference, it’s all a game of “Divide and Conquer” being played by TPTB to prtect the interests of the few. So far the First, Fourth, Fifth and Fourteenth amandments have been crushed. And counting. The system is badly broken and terminally corrupt but given the unholy fascist alliance between the Corporatocracy and Congress, it is very difficult to see how this can change. Now, back to the election…..

  30. Conan says:

    Here is some reading for Mr Joe Friday:
    1)Pay of Government vs Private sector employees
    http://money.cnn.com/2012/01/31/news/economy/federal_worker_pay/index.htm
    http://www.freedomworks.org/blog/jborowski/local-government-workers-earn-nearly-twice-private
    2) Growth of oerall numbers in botth good times and bad has always beeen up until just now, never a down year no matter what happened in the economy…Every year more and more governement workers:
    http://haywardeconblog.blogspot.com/2011_12_04_archive.html
    3) So why is the Governement Union the biggest by default???? Why the success in the political arena of organizing governement workrs and no similar success in the private sector???? The worker negotiating against a private business for a greater share of the profit, understandable…But what is being done by a government employee negotiating against the American people, who last I heard is their employeer??? There is no profit to be shared, just taxes to be collected and spent…

    Once again I state Local and State Governments can not print money and borrow Like the Fed…Local folks see more clearly who is paid what and know it comes from their taxes…Locals folks are voting to support a resizing of the Government dollars to fit their budgets…These are facts…..

  31. victor says:

    Mr. Invictus: something appears amiss in your analysis of the data with all due respect. As far as I know State and Local have shed jobs because they HAD to in order to maintain (at least the appearance of) their mandated balanced budgets. Stay tuned for California’s $17B budget deficit resolution coming to a head soon this year. Thus your attributing State and Local jobs cuts to Obama doesn’t hold water. Conversely, under Obama the Federal Gov. has added jobs because, you guessed! the Fed. Gov. is not bound by law to maintain a balanced budget, unlike States here or countries such as Germany’s Schuldenbremse.

    @formerlawyer: I think it is inappropriate to bring up the race of our President in this forum regarding the issue at hand. While a country is not a household because my tax is your income and viceversa, I wished our country WERE run as a household not unlike during the good old days when the Clinton Administration worked well with the (horror)! Republican Congress. And your “repeat after me” is at best condescending if not outright disrespectful.

    ~~~

    BR: “the Federal Gov. has added jobs under Obama”

    That is not what the FRED data shows!

  32. andrewp111 says:

    State and Local government expanded relentlessly during the house price bubble because they were feeding out of the same trough that their stupid electorate was. When house prices were rising 20-30% per year, the stupid voters were willing to allow property taxes to soar accordingly. Now the gravy train is over. State and Local government must shrink in both number of employees and in their pay and benefits. An honest graph would also have connected the blank space between 2004 and 2009 with one continuous curve instead of showing each region separately, and this would show State and Local government is still larger than it was 12 years ago, before the bubble.

  33. rootless says:

    MayorQuimby:

    Clueless? I think not. By that logic, we could spend WEIMAR-LIKE amounts and push prices of bread to $50 a loaf and then when we cut a tiny miniscule million dollars from the budget we would be enacting “austerity”. Bullshit once again and you know it.

    The logic is to use words according to their general understanding. If you just give words a different meaning, just some arbitrary one, which you have made up yourself, although the general understanding of them is different, how do you ever communicate with people, successfully? Austerity does not mean that there was a “balanced budget”!

    The other issue is what you seem to be asserting here now, that the reduction in government spending is negligible (or even negative?).

    Once more here are the contributions from government expenditures to real GDP change over the last six quarters:

    IV 10 I 11 II 11 III 11 IV11r I 12r
    -.58 -1.23 -.18 -.02 -.84 -.78 %
    (Source: http://www.bea.gov/newsreleases/national/gdp/2012/txt/gdp1q12_2nd.txt)

    Thus, for instance the change in government expenditures is currently being estimated to have subtracted 0.84% and 0.78% from the GDP change in the last two quarters. I would say that is not a negligible number, compared to the currently estimated GDP change of 3.0% and 1.9%, respectively, in these two quarters. It’s a significant subtraction instead.

    So, if you don’t agree with the number, what can you provide? What about you show some numbers, not just ideology fueled tea party blabber?

    Or, if you say that the current government spending cuts are too small, what about you tell the number that you wold like to see? By how much should the government cut spending over what time period that would satisfy you? By 1 trillion per year? Or by how much? More? Less?

  34. SCTTD says:

    Invictus/Joe Friday

    Revenues are NOT the problem. revenues today are higher than when bush took office and almost back to peak levels. They would be even closer except for the 2% payroll tax cut championed by The Obama administration. Want proof?

    http://www.usgovernmentrevenue.com/revenue_chart_2000_2017USb_13s1li111lcn_F0f

    So that means the real problem for the budget has been the unparalleled growth in spending in a grand Keynesian experiment. And that problem is owned by both branches of our one party government system. As for the argument that Obama has been reducing spending, I don’t see it. 2010 was essentially flat was 2009, benefiting from the reversal of TARP, including repayment vs. additional funding of AIG/FNM/FRE/FHA. Again want proof (including proof that this is owned by both parties)?

    http://www.usgovernmentspending.com/spending_chart_1980_2017USb_13s1li111lcn_F0t

  35. willid3 says:

    revenues are not higher. and no spinning of that will work. as a percentage of GDP is about 14-15%. the average for 50-60 years has been 20-21%

  36. willid3 says:

    and we can see all kinds of charts showing spending has gone up of late. in fact its down. never mind the spin zone web sites

  37. rootless says:

    SCTTD, you wrote:

    As for the argument that Obama has been reducing spending, I don’t see it. 2010 was essentially flat was 2009, benefiting from the reversal of TARP, including repayment vs. additional funding of AIG/FNM/FRE/FHA. Again want proof (including proof that this is owned by both parties)?

    http://www.usgovernmentspending.com/spending_chart_1980_2017USb_13s1li111lcn_F0t

    Excuse me, the last data point with actual data is from 2009 in this graphic. How is this “proof” and how does this refute the statement about reduced government expenditures and the negative contribution to the GDP change from government for the most recent six quarters?

  38. rootless says:

    Conan, you wrote:

    Here is some reading for Mr Joe Friday:
    1)Pay of Government vs Private sector employees
    [...]
    2) 2) Growth of oerall numbers in botth good times and bad has always beeen up until just now, never a down year no matter what happened in the economy…Every year more and more governement workers:

    And your point is?

    Are you suggesting a causal relationship between the pay for government employees and the pay in the private sector? Private sector pay was down because government employee pay was up?

    If you reduce the pay to government employees the private sector still won’t pay more to its employees.

    Or is your point a point of envy toward government employees? You can’t stand that someone gets more pay than you do? Because you are miserable, you want to see everyone else to be miserable too?

    But what is being done by a government employee negotiating against the American people, who last I heard is their employeer???

    So you don’t think government employees do anything that is needed in society. And society would be better of and functioning, if the government was eliminated. The libertarian delusion. As much is clear.

    There is no profit to be shared, just taxes to be collected and spent…

    Exactly, the taxes collected, from which government employees are being paid, are spent again by these employees. Which generates income for the private sector.

    Some don’t seem to understand that taxes are flowing back into the economy, mostly as income for the private sector. It’s all a big circulation. Cutting income for government employees, or cutting government expenditures means less income for the private sector, instead of more income. It’s not helping, when you reduce aggregate demand in an economy even more, if the problem is already a lack of demand.

  39. Joe Friday says:

    Conan,

    Here is some reading for Mr Joe Friday:

    Freedomworks ? REALLY ? You think Dick Armey and the Tea Baggers are credible ?

    What they quoted from Krugman is spot on. Once you correct for age and education, government workers earn LESS. After that the train went off the reality tracks.

    Growth of oerall numbers in botth good times and bad has always beeen up until just now, never a down year no matter what happened in the economy … Every year more and more governement workers:

    Nope.

    As BR already mentioned, the FRED data DISAGREES with you.

    These are facts….

    Only on Bizarro World.

  40. Conan says:

    Rootless, thanks for your comments, lively discussion with differnt views create more robust outcomes…

    So if Government spending is so goood, why not make it the main driver of the economy…I believe France is like 50% of GDP… Are you suggesting that government employment is a greater multiplier in society for one dollar of input vs the private sector?? Are you suggesting that there is no relationship between what the populace is making and what can be spent??? Do you believe that taxing the top 1% or 10% for that matter will solve our problems??? or will any adtional revenues just be spent as fast as collected anyway???

    And No I am not against government, but we have to pay for it, it should represent us and those that work for it are servents to it’s people….not above us in anyway…

    Swiching gears slightly…if all this liberal thought is so good why isn’t it being applied??? Let’s not talk about Wisconsin…let’s use California as an example…Largest state by population by far..if it was on it’s own it would be like the 8th largest economy in the world….hasn’t voted for a Republican President since George Sr..Liberal Governor, liberal legislature, liberal Federal judges, liberal cities (LA, SF, etc) plenty of Hollywood celebreties to sell it…They have the political machinery to do what is asked, plus the grass roots ballot intiative process to put it to a vote….who is doing what you all are arguing for??? If it can’t be done in California, then where can it be done??

    No what most are arguing for is for the Fed to borrow or print money to pay for California’s expenses..they have huge deficits, pay problems and pension issues…So I ask again, if the Califonian citizen can’t get passed what you all are agruing for, then there is no majority support to make it happen nation wide…

    The big reset button is being pushed…all of these inbalaces to taxes vs spending, trade, too big to fail, etc are coming to a Head…we all live in interesting times…we will all be affected and most likely scream while it happens, but this too shall pass and another era will be reborn…what that new cycle is, none of us know….

  41. Joe Friday says:

    SCTTD,

    Revenues are NOT the problem.

    Of COURSE they are.

    After numerous rounds of tax cuts that overwhelmingly benefited the Rich & Corporate enacted by Chimpy Bush and the Republican Congressional Majority, by 2004 federal income tax receipts plunged to the lowest level since 1959 according to the independent non-partisan Congressional Budget Office.

    Hence, massive federal budget deficits & debt.

    So that means the real problem for the budget has been the unparalleled growth in spending

    On WHAT planet ?

  42. ZedLoch says:

    The Republican method of solving the revenue problem is to eliminate EITC, double the student loan rate, and end the payroll tax cut.

    Did you know that 47% of working Americans are too poor to afford any tax liability? Bah! Congressional Republicans are sure to put an end to that nonsense come November.

    We should obviously tax the poor more in this country, because there are more of them, amiright?

  43. gr8newz says:

    As shown on the graph, the index statistics behind the US employment numbers (private, state government, local government) are enlightening. And I further agree that Obama’s recent statements were taken out of context. If the gold line on the graph is accurate, then private job employment is exactly the same as when he took office, so his statement isn’t entirely off the mark.

    But what I don’t understand is why any of the authors (Invictus, Laffer, Moore) suggest that either Bush or Obama have much to do with state government and local government jobs.

    It’s town councils (not mayors) and county governments that are responsible for local government hirings and firings. Similarly, it’s state legislatures (not state governors) that determine state government jobs.

    I get tired of Obama and Bush (or any president) being skewered (or, alternatively, given credit) for things over which they have no responsibility or authority.

    (As a side note… Although I don’t wish unemployment on any particular individual, I cannot say I am distressed to see the number of state government and local government jobs plummeting.)

  44. willid3 says:

    well taxing the top 1% more would likely be more productive and get revenue that taxing the 99%. after all, they do make 20-30% of off income in the US. spread it out to take the top 10%, and your at almost 50% of all income. the bottom 40%? makes about 1% of all income. raising their taxes is a waste of effort. and gains nothing. and we must be envious of government employees. they still get paid. and have benefits. but then again they tend to have PHD’s. some thinking that is extremely rare in the private sector. and if one accounts for education and experience one discovers that they make less in the public sector.

  45. victor says:

    BR: here’s the verbatim quote from Invictus’ text above, right under the FRED curves: “On a Federal level – which is by far the smallest of the three public sectors – Obama has added a whopping 34,000 jobs, whereas at this point in his first term Bush had shed 21,000″.

    34,000 jobs is of course minuscule thus “whopping” is LOL but they were added nonetheless. To Obama’s credit, many of them did go to returning veterans; very commendable.

  46. ilsm says:

    victor,

    Bush II’s second term was the blitz increasing war employnent, and contracting a lot of war services for profits rather than payroll. Iraq was not occupied until Mar 2003entering year 3 of Bush II.

    34000 federal jobs added in past several years are going to reverse as the perpetual wars finally wind down and the DoD money needs to shift from payroll to war profit firms’ “health”.

    Revolving pentagon door is not so good. Makes the seller too close to the buyer, or vice versa. Obama jobs to “returning veterans” really mostly retiring senior NCOs and colonels, with a lot of other retirees going to DoD contractors.

  47. GeorgeMB says:

    BR:

    “The private sector is fine.”

    I beg to differ with your assertion that Obama’s statement is correct when “put in context”. Your context comes across to me as apologist.

    Let me suggest that the painful job data establish a context that should’ve had him say, “Neither the public sector nor the private sector is doing fine.”

  48. Joe Friday says:

    GeorgeMB,

    I beg to differ with your assertion that Obama’s statement is correct when ‘put in context’. Your context comes across to me as apologist.

    In the context that Obama was addressing, that the public sector is hemorrhaging job losses, the private sector IS INDEED “doing fine” after 27 months of job gains.

  49. [...] First Term And Bush's First Term In One Devastating Chart admin Great chart here from Invictus at The Big Picture (via Ben Domenech) showing the job situation under Bush’s first term and Obama’s first [...]

  50. NMR says:

    Invictus:
    ” I’m fascinated that everyone seems to want to jump on the Laffer/Moore graph and my comments about it.”

    This will teach you to avoid confusing folks with facts. I read this Journal piece and rolled my eyes as I usually do with anything that has Moore’s or Laffer’s name attached to it. The graph they put up which completely disproved their central thesis was a hoot. They were however, as you point out, correct about spending patterns in the two years (and indeed the general longer term trend) prior to 2009.

  51. Conan says:

    Here’s one to read to stimulate some thought:

    Obama’s four biggest failures
    Commentary: Liberals will vote for Obama, but they won’t like it

    http://www.marketwatch.com/story/obamas-four-biggest-failures-2012-06-25?pagenumber=1

    Strange election we have coming up..
    Liberals don’t like their candidate, but will vote for him over a Republican.
    Conservatives don’t like their candidate, but will vote for him over a Democrat…

    So the question is who will be truly happy, if either win??? Also I found it interesting the criticism of Mr Obama for carrying on the Bush Policies…..You have to ask, “How did that happen?”….

  52. [...] went on to show the following graphic (which bears a vague resemblence to some work I did here back in [...]