Federal Obligations Exceed World's GDP

[Winehole23]

Cycle of Democracy

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover they can vote themselves largess from the public treasury.

"From that moment on, the majority always votes for the candidates promising them the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.

"The average age of the world's greatest civilizations has been 200 years. These nations have progressed through this sequence:

"From bondage to spiritual faith;

from spiritual faith to great courage;

from courage to liberty;

from liberty to abundance;

from abundance to selfishness;
from selfishness to apathy;
from apathy to dependence;
from dependency back again into bondage."

Dr. Alexander Tytler, a Scot professor, wrote a scholarly tome, from which this concept comes, called "The Athenian Republic" which was published shortly before the thirteen American colonies gained independence from Britain.

The quotation is disputed.

But it is very typical of 18th century philosophy of history after Vico.

The idea that history is a movement from antique heroism to modern decadence and irony was a humanistic reaction to Cartesian rationalism. The ancient element is the theory of world cycles; the modern innovation is the anti-progressive emphasis on necessary stages of development, which somewhat paradoxically, was subsequently taken up by historical materialism and other devotees of automatic progress.

The difference between mechanical decadence and mechanical progress is a matter of perspective, I guess.

Worse to get better, right?

[Viva Las Espuelas]

Its like talking to a wall with some of you. The notion that Obama's statement has any measurable impact on this economic situation is pretty laughable but you provide an excellent example of the partisan bull being thrown around.

man, people act like whatever obama says is coming from The Burning Bush, and you for one shouldn't be throwing "partisan bull " around. i'm surprised you aren't on his payroll. i compared obama's statement to bush's stupid statement. how in the is that partisanship?

[Viva Las Espuelas]

So you would rather the president be some sort of Polyanna?

If things really are that bad, wouldn't you rather have a president who talked to us like we were grow-ups?

Seems to me that you want a cheerleader who says things are great no matter how bad they really are.

We tried that, and things got bad anyways.

I personally would rather have someone who was at least willing to assume that I am intelligent enough to know that it isn't raining when someone is pissing on my shoes...

what i want is a president that says things are going to be tough. really tough. that we're going to have to change our ways. from top to bottom. bottom to top. it's going to take some time. it's not going to be easy, but we must not let it get us down. not a president that says government is the only way out. i like dealing with black or white. no gray.

[MannyIsGod]

man, people act like whatever obama says is coming from The Burning Bush, and you for one shouldn't be throwing "partisan bull " around. i'm surprised you aren't on his payroll. i compared obama's statement to bush's stupid statement. how in the is that partisanship?

You're right. Partisan was the wrong choice. Re ed would have been a much better choice. Although the two words are obviously related they are not synonyms. Please accept my apology and correction.

[ChumpDumper]

what i want is a president that says things are going to be tough. really tough. that we're going to have to change our ways. from top to bottom. bottom to top. it's going to take some time. it's not going to be easy, but we must not let it get us down.

That's exactly what Obama said.

He thanks you for your support.

[MannyIsGod]

[mogrovejo]

This point is well taken, but rather than just calling it socialism I'd stress the convergence with Europe and call it social democracy.

Intriguing. Expedience is king, so long term planning loses out to the short end payoff.

Any suggestions?

Yeah, I call it socialism here and I'm going to call it there as well, but social democracy can do.

Suggestions: The Federalist Papers have plenty of them - it's one of the best do ents about this issue.

You can't have so many democratic input on the political decision making process. More delegation of power into non-elected organisms is probably the best way to go - replication ins utions like the Supreme Court on other realms of the government.

Of course, things like electing the Senators and ins uting primaries were bad ideas. Things like Proposition 13 terrible ones. Political parties, with all their flaws, are still a better option (or a lesser evil) than unmitigated populism and random politicians who are hostages to some pressure groups. I doubt there's anything that can still be done on that department though.

But yeah, some deepo ins utional reforms are needed, I think. The Fed should have a single and clear mission: control the inflation. Monetary policy shouldn't be used as a way of "stimulating" the economy. The definition of the guide-lines of the fiscal policy should be delegated to a Fed-like ins ution. Guys who don't owe favours and don't need to please rent-seekers in order to be reelected should be handling these policies.

A reform that should be a priority: the appropriation process at the federal level. Federal legislators shouldn't be allowed to earmark. Earmarks are a powerful incentive to a bad legislature, it empowers those who are more worried about being re-elected and please their cons uents than with fulfilling their cons utional obligations. Earmarks are generally disregarded as unimportant because it's peanuts and the money was going to be spend anyway, but the secondary effects are more powerful and dangerous than people assume. Then, make the legislature less open and reactive. Things are too easy to rent-seekers these days. Politicians are generally decent people, but they have to many incentives to misbehave.

Of course, convincing those politicians to give up political power they currently have is very probably a pipe-dream. Even more: it would require the people, the voters, to give up power they currently have.

Anyway, the cure for the ailments of democracy is less, not more, democracy.

[Winehole23]

You can't have so many democratic input on the political decision making process. More delegation of power into non-elected organisms is probably the best way to go - replication ins utions like the Supreme Court on other realms of the government.

More bureaucracy and technocrats. I don't think you could sell that to Americans, but maybe it could be crammed down our throats, given a bad enough emergency.

Of course, things like electing the Senators and ins uting primaries were bad ideas. Things like Proposition 13 terrible ones. Political parties, with all their flaws, are still a better option (or a lesser evil) than unmitigated populism and random politicians who are hostages to some pressure groups.

Appointing Senators had its own problems, and swapping open primaries for smoke filled rooms at party conventions (as you point out) is unlikely to be very appealing to most.

I assume you meant this Prop 13. It sure does look like a mess.

But yeah, some deepo ins utional reforms are needed, I think. The Fed should have a single and clear mission: control the inflation. Monetary policy shouldn't be used as a way of "stimulating" the economy.

I don't think we should pay interest on our own currency, but if there must be a Federal Reserve, inflation fighting seems like the proper mission.

The definition of the guide-lines of the fiscal policy should be delegated to a Fed-like ins ution. Guys who don't owe favours and don't need to please rent-seekers in order to be reelected should be handling these policies.

And how will we get rid of fiscal guys in bed with special interests? There's an inherent advantage to elected policymakers.

You're not a big fan of the American system, are you mogrovejo?

A reform that should be a priority: the appropriation process at the federal level. Federal legislators shouldn't be allowed to earmark.

People will buy this.

Of course, convincing those politicians to give up political power they currently have is very probably a pipe-dream. Even more: it would require the people, the voters, to give up power they currently have.

But this will never fly. Popular sovereignty is still pretty popular, and the self-regard of pols is legendary.

Anyway, the cure for the ailments of democracy is less, not more, democracy.

Less democracy would be a cure for democracy, I guess. You'll have to package it a little differently if you want anyone else to go along with you.

It's refreshing if also a little weird to hear an anti-democratic perspective in here.

If I may ask, where do you originally hail from, mogrovejo?

[Cant_Be_Faded]

I'm so sick of mother ers like AHF. This isn't a political problem, its a society and lifestyle problem. You want your cake and you want to eat it too. We have enjoyed and unnatural share of the worlds wealth in this country for a long ass time and all of these problems are merely symptoms of that condition.

The US GDP is undergoing a contraction because at the root of things, we as a society have spent more than we have and thats coming back into balance. We've been racking up a balance and now after years of GOP led deficits due to trickle down economics (trickle down works - but it doens't work as some sort of bubble where the US is seperated from the rest of the world - did any mother ers stop to think that those in the US aren't at the bottom of the trickle down chain?) you have to audacity to lay this at the feet of the guy who just stepped into the hole?

Americans want to keep their standard of living and Obama is doing the nessecary to keep that. Its a high risk situation but the fact of the matter is that tax cuts aren't going to make it happen. Someone's got to make up the GDP shortfall and its not goign to come from anything other than government spending because they are the only ones with the will and ability to make it happen.

This is not to say major changes aren't needed. You need to find a way to revamp the way we spend money as a whole in this country and if you want America to maintain a high relative standard of living then you have to make sure we're able to compete with the rest of the countries in the world which means building up an exceptional workforce. The one truth that most politicians can't share with you at the moment is that american workers are terrible when compared to the rest of the world. We have very little advantadges and cost a of a lot more.

LOL. Dude, you would have freaked if you had read this Wall Street Journal op-ed article that was something along hte lines of "Reaganomics vs Obamanomics".

It suggested that instead of Obama's plan, he should follow Reagan's foolproof 4-pronged plan of getting the nation out of a pickle:

1) cut taxes (el oh el)
2) deregulation (for the market's sake of course)
3) cut government spending
4) pursue an anti-inflation monetary policy

It's ing gold....it doesn't even acknowledge the overall deficit Reagan ran up....here's a link.

http://online.wsj.com/article/SB123431484726570949.html

It's like designed for AHF's to jack off to.

BTW, the flaw in your line of thinking is that every American wishes to keep this superficial "we are the top" standard of living. I, for one, know for a fact that for my income, I live a modest lifestyle, and well within my means. Do I seriously give a if less people can go to Carraba's at the end of the week? Could I give less of a if people can't get their video games at Best Buy? No.

I will always think the idea of solving our debt problems with more debt is a bad idea, and I firmly believe if we were not throwing this niblet into the mouths of the metaphorical wolf, the market would already be on it's way to fixing itself.

[ChumpDumper]

CBF actually brings it for a few posts in multiple threads.

[LnGrrrR]

There used to be a time...not so very long ago, where Americans were known for their dedication to "making sure our children have a better life than we did."

It was the characteristic most cherished by the WWII and Depression era generations.

This generations most cherished characteristic (demonstrated by both the GOP and Democrats...championed as of late by the Obamaistas) is "give it to me...I want it now...and our children, children's children...children's children's children...

Note the 5 fold increase in debt when you add SS and Medicare. This is the legacy of FDR. Social "en lement" spending has been the underlying cancer that will ultimately kill the golden egg .

Anybody celebrating this "stimulus" bill...is a disgrace not only to themselves, but the generations that follow who we are leaving this debt too.

We are ing our children's and country's future...and celebrating it.

We should be hanging our heads in shame.


"Not me baby!!...it's party time!!"

SIG

Define "THIS generation". If you're talking about the Boomers, than I agree.

[LnGrrrR]

Americans want to keep their standard of living and Obama is doing the nessecary to keep that. Its a high risk situation but the fact of the matter is that tax cuts aren't going to make it happen. Someone's got to make up the GDP shortfall and its not goign to come from anything other than government spending because they are the only ones with the will and ability to make it happen.

Man... it sucks being a Millenial.

[LnGrrrR]

You know, I am one of the first people to bust on others for the proverbial "Think of the CHILDREN!" types who need GPS on their kids and helmets when they ride bikes and such.

But this is the first time in my life I can honestly say it with a straight face. I dont even have any (nor do I want to bring them in this ing blackhole of a world either), but what our government is and what it does is constantly at the expense of future generations.

They never once would allow the market to correct itself because that would mean loss in "standard of living", which means no votes come election time.

Theyre not leaders. Theyre politicians, lawyers with an agenda and a power trip.

What the is so bad with the idea of educating Americans about necessary market corrections and conditions? Why is it so unbelievable for some to understand that we are adults and we can handle the truth.

I am not a ing child and cannot stand it when spoken to like one, no matter who is doing the talking.

I just found out yesterday that I'm going to be a father. Thanks for reminding me what a ed up world I'll be bringing him into... lol

[mogrovejo]

Sorry for taking so long to answer, only now I read your post.

More bureaucracy and technocrats. I don't think you could sell that to Americans, but maybe it could be crammed down our throats, given a bad enough emergency.

Non-democratic ins utions are very popular among Americans: the Fed, the Supreme Court, the military... those ins utions are lead by people nominated by the politicians but not directly elected by the people. Yet, people trust and like them much more than they do like, say, the Congress. There's a reason for that.

Appointing Senators had its own problems, and swapping open primaries for smoke filled rooms at party conventions (as you point out) is unlikely to be very appealing to most.

There are no perfect or optimal solutions. Imperfection is the most permanent and eternal mark of any political arrangement. The alternative is a system where politicians are hostages of interest groups and syndicates of votes. Political parties are very needed in a republic: they filter and mediate the relationship between the politicians and the voters; and protect the politicians from the venal interests of their cons uencies. The Founding Fathers knew that. And the reason why the voters don't actually respect the officials they elected is precisely that one: they are forced to bend their ass too often. And how can one respect guys who always on their knees ready to lick one's feet?

I assume you meant this Prop 13. It sure does look like a mess.

I don't think we should pay interest on our own currency, but if there must be a Federal Reserve, inflation fighting seems like the proper mission.

Agreed.

And how will we get rid of fiscal guys in bed with special interests? There's an inherent advantage to elected policymakers.

Again, there are not perfect solutions. However, those guys wouldn't be dependent on getting votes - and, most importantly, on finding financing to get votes. They'd need to have some independence from those who would nominate and, in extreme cases, fire them. A similar situation to the FED would work, I think. Then one would have to trust that those guys would have a conscience. But I think the situation would be better.

You're not a big fan of the American system, are you mogrovejo?

Well, I think I am. I more or less believe that the American republic was once the most perfect political system ever created by the man. These days, not so much. I doubt I could find a better one though.

But this will never fly. Popular sovereignty is still pretty popular, and the self-regard of pols is legendary.

There's nothing in what I said that affects or limits in any way, shape or form, popular sovereignty. Let's not confuse things: democracy is merely the way of selecting public servants by an electoral process. Nothing more, nothing less.

Less democracy would be a cure for democracy, I guess. You'll have to package it a little differently if you want anyone else to go along with you.

I was sarcastically paraphrasing a famous quote from John Dewey : "The cure for the ailments of democracy is more democracy". Obviously, I think he was dramatically wrong. But that has been the route followed by the Americans since last century - more democracy, more democratic forms of democracy, like the referendums and other forms of direct democracy. Great intentions, no doubt about that, but the results haven't been pretty.

It's refreshing if also a little weird to hear an anti-democratic perspective in here.

I'm not anti-democratic at all. Democracy has some great advantages. But democracy is only about picking "who" rules. In an utopian perfect political system like, say, Oakeshott "civic association", it wouldn't even matter who would rule - it's only important because presently governments do a lot more than ruling, they "manage". Anyway, democracy has lots of dangers. Limited democracy is another form of tyranny. Tyranny of the majority or, more accurately, of a vocal minority (this is even more dramatic in the case of direct democracies). So, one must find limits to democracy in order to preserve Liberty. Let's not forget that some of the most horrific totalitarisms were pretty democratic - in fact, unlimitedly democratic. Just like the Classic Greece - it was a democracy, for sure. Socrates death was decided in respect for the rules of the democracy. But would you like to live in such a world?

If I may ask, where do you originally hail from, mogrovejo?

I'm from Portugal. I've been living in Spain and Italy for awhile.

[mogrovejo]

This isn't a political problem, its a society and lifestyle problem. (...)

That sentence and the following reasoning - building an exceptional workforce and stuff - is frightening - it's the basis of every totalitarian philosophy. It reminded me the texts of some sovietic and fascist officials and thinkers.

It's a political problem. People are what they are and you can't create the new man. People will always react to incentives. As long as the government is creating money out of nothing or borrowing him from future generations, people will spend it. Keep bailing out those who created fiduciary money without measuring the risks and nothing will change. That's what happened and that's what's happening again, they're trying to cure the disease with another dose of the same venom that caused it.

It's a political problem because what it's needed is a political solution: how to incentive the politicians not to behave like this, how to self-limit the tendency of the people to pressure for the adoption of policies with a short-term reward, how to help the politicians to resist to these presurres, etc.

This has nothing to do with lifestyle - it has been happening since the beginning of the civilization.

[Aggie Hoopsfan]

That sentence and the following reasoning - building an exceptional workforce and stuff - is frightening - it's the basis of every totalitarian philosophy. It reminded me the texts of some sovietic and fascist officials and thinkers.

It's a political problem. People are what they are and you can't create the new man. People will always react to incentives. As long as the government is creating money out of nothing or borrowing him from future generations, people will spend it. Keep bailing out those who created fiduciary money without measuring the risks and nothing will change. That's what happened and that's what's happening again, they're trying to cure the disease with another dose of the same venom that caused it.

It's a political problem because what it's needed is a political solution: how to incentive the politicians not to behave like this, how to self-limit the tendency of the people to pressure for the adoption of policies with a short-term reward, how to help the politicians to resist to these presurres, etc.

This has nothing to do with lifestyle - it has been happening since the beginning of the civilization.

Good post. I forget where I read it, but they did a study asking people across different demographics and countries about their spending/saving/investing habits if all the money in the world were taken and split evenly among all the people in the world.

The study concluded that within a year's time all the money would be right back to where it is today.

That touches on the lifestyle side of the problem, but the bottom line is we are where we are because politicians have increasingly spent our money on programs, 'rebates', and handouts not for the greater good of our country but to keep themselves elected and getting their handouts from lobbyists and special interests.

We need D.C. to get away from spending our money to keep themselves in power and back to a strict cons utional spending program - nothing not enumerated directly in the Cons ution is funded by taxpayer money.

[Marcus Bryant]

IMO the most important thing to do is to level with the banks and the American people about default. Good god, we've spent 2 trillion so far on the financial sector and we don't control any of it yet? ing nationalize already. Quit throwing money down the toilet.

That seems to be where we're at. A number of banks relied on commercial MBS to invest their capital and the meltdown in commercial property has lagged residential, but it's coming.

I'm in favor of receivership for insolvent banks, 86'ing Fair Value Accounting and Basel II capital rules and hefty payroll tax abatement for starters. Saying that stimulus is the only option is simplistic. I understand that doing nothing isn't an option for politicians, so I can't really join you in applauding a forced move that may wreck our bottom line, our currency and may not even avert deflation.

If you grant this possibility, the door is open for consideration of the chance that deflation is not a greater disaster than the course we're currently on.

Indeed. Otherwise we're just hoping the fire is put out and someone down the line has to deal with it.

The US economy contracted from 1930-1934. My grandparents survived. What makes you think we wouldn't?

Deflation destroys bad debt and malinvestment, allows price discovery, consolidates productivity and strengthens the currency. I'm not saying it isn't very very painful, and not a little bit risky, but there's historical evidence it's survivable, and it does have a silver lining.

Right, but that is not acceptable in a society in which having to cut back your latte consumption from 5 to 4 a week would be viewed as a 'sacrifice'. Americans today have had it too good for too long, and have gone in hock to maintain that, since the Chinese have been so willing to buy our debt to maintain the present trade pattern.

What goes up must come down. The idea that the government can prevent the business cycle from following its own due course is historically not well founded. In fact, it's a big part of how we got into this mess. If Greenspan hadn't lowered interest rates so dramatically in 2001 there might not have been such a destructive debt bubble.

True. This latest bubble (surprise, surprise) leads back to the Fed. The Fed seems to have two policy prescriptions: easy money and even easier money. The point of having a central bank is ultimately to provide stability, which, of course, means at some point not fueling a boom once it takes off (or removing the punch bowl from the room just as the party gets started - whatever that famous quote about the Fed's true role). Naturally the one part of the financial markets where the Federal government not just has a heavy influence, but it actually owns it - it screws up.

There's plenty of blame to go around, but this is a representative democratic republic and at some point, the people need to look themselves in a mirror and realize they are the ones to blame. Stop expecting the federal government to be Santa Claus. Stop buying beyond your means. Stop expecting something for nothing. Try deferred gratification once in a while. This at ude has poisoned our politics, business and our society at large.

Yes, our forebears lived through it and found a way.

Unfortunately the result of this crisis will be a set up for an even greater catastrophe to come our way. There's no way we aren't going to continue to hit the easy money button until we get out of this mess.

[LnGrrrR]

The GOP has controlled the govt. for exactly SIX of the past SIXTY years - and yet you lay this at their feet???

Sucker.

Uhmm care to define 'government' there? You know it's made up of more than one part, right? Just checking.

[LnGrrrR]

that. You seem to think that power eliminates culture. You're wrong.

Winehole23, haven't you noticed the defining aspect of conservatives nowadays? It's fear.

OMG! Mexicans are going to ruin our nation!

OMG! Terrorists are coming in the middle of the night to kill you!

OMG! Liberals are trying to take your money!

OMG! Heathens are trying to ban teaching creationism in our schools!

Etc etc.

Don't get me wrong... the left has a good amount of doomsayers along the global warming front as well. But it's not the overriding factor that it is for so many conservatives.

[Marcus Bryant]

eh, that cuts both ways. Both sides use fear. The scary ones are the ones who believe their side doesn't do it as much as the other.

[MannyIsGod]

MB, solid posts in this thread.

[Winehole23]

Sorry for taking so long to answer, only now I read your post.

Thanks for the thoughtful reply, mogrovejo.

Non-democratic ins utions are very popular among Americans: the Fed, the Supreme Court, the military... those ins utions are lead by people nominated by the politicians but not directly elected by the people. Yet, people trust and like them much more than they do like, say, the Congress. There's a reason for that.

This is a good point, but the reasons for the 17th Amendment included inefficiency and the public perception of venality and clubbiness.

Well, I think I am. I more or less believe that the American republic was once the most perfect political system ever created by the man. These days, not so much. I doubt I could find a better one though.

Thanks for the clarification. My own political preference is fairly similar, I think.

You do realize we're dinosaurs, right? Pining for the restoration of the first 100 years of the US republic is a worthy philosophical position but it is an antique and a conversation piece more than a viable ideology. The liberalism of the 18th century is way too conservative even for most so-called conservatives, and there's no way to put the welfare state back in the box absent some kind of radical, precipitating event IMO. At least, not without a great deal of social pain.

There's nothing in what I said that affects or limits in any way, shape or form, popular sovereignty. Let's not confuse things: democracy is merely the way of selecting public servants by an electoral process. Nothing more, nothing less.

And you have the hard-assed republican take on it. I respect that. I also resemble it slightly.

I was sarcastically paraphrasing a famous quote from John Dewey : "The cure for the ailments of democracy is more democracy". Obviously, I think he was dramatically wrong. But that has been the route followed by the Americans since last century - more democracy, more democratic forms of democracy, like the referendums and other forms of direct democracy. Great intentions, no doubt about that, but the results haven't been pretty.

Agreed. By and large the referendum system allows special interests to capitalize on transient populist moods with horrible results for government, like Prop 13 in California.

I'm not anti-democratic at all. Democracy has some great advantages. But democracy is only about picking "who" rules. In an utopian perfect political system like, say, Oakeshott "civic association", it wouldn't even matter who would rule - it's only important because presently governments do a lot more than ruling, they "manage".

The New Deal turned our erstwhile republic into a technocratic/theraputic manager of everyday life. It may have been socially warranted, but the political consequences were decisive for republicanism IMO.

Anyway, democracy has lots of dangers. Limited democracy is another form of tyranny. Tyranny of the majority or, more accurately, of a vocal minority (this is even more dramatic in the case of direct democracies). So, one must find limits to democracy in order to preserve Liberty.

This topic is hard for Americans b/c "democracy" ever since Woodrow Wilson has been an icon of the civil worship. The distinctively American aversion to history further enables the idolatry, to the point that off the rack US cons utional republicanism looks spooky, radical and anti-democratic in the demagogical sense.

Our own putative form of government has been defamiliarized by 75 years of continuous technocratic management.

Let's not forget that some of the most horrific totalitarisms were pretty democratic - in fact, unlimitedly democratic. Just like the Classic Greece - it was a democracy, for sure. Socrates death was decided in respect for the rules of the democracy. But would you like to live in such a world?

Probably not. But I don't revere democracy unlimitedly either.

I'm from Portugal. I've been living in Spain and Italy for awhile.

Thanks for your candor and your in detail reply. Much appreciated

[DarrinS]

I'm so sick of mother ers like AHF. This isn't a political problem, its a society and lifestyle problem. You want your cake and you want to eat it too. We have enjoyed and unnatural share of the worlds wealth in this country for a long ass time and all of these problems are merely symptoms of that condition.

An unnatural share of the worlds weath?


Damn, Manny, how anti-American are you?

[DarrinS]

How much is our natural share?

[Winehole23]

An unnatural share of the worlds weath?


Damn, Manny, how anti-American are you?

Unnatural may not have been the best word choice, but the staggering current account deficit must come back into balance for there to be any sustainable recovery. The statue quo ante led us to where we are now and IMO can't-- and shouldn't -- be restored.

The gripe that we've been living beyond our means is obvious and it has already had disastrous macroeconomic results. IMO your dispute with Manny is semantic and a bit captious. You're catching at words instead of acknowledging the underlying condition to which Manny was referring.