Economy Ruminations

I enjoy reading the continuing conservative and liberal commentaries relating the Great Depression of the 1930's to our Great Repression today. One aspect of my enjoyment relates to how each side selectively presents data to buttress its positions.

Some ruminations:

I fail to understand why former President Clinton bears any blame whatsoever for the present economic mess, as vigorously promoted by some conservative commentators. (Yes, his sexual morals demand opprobrium that should lead to guild and then to repentance.)

Admittedly, the Clinton Administration passed the legislation encouraging/forcing banks and other lending institutions to write home mortgages for people who didn't, or only marginally, qualify under more traditional criteria. I am confident that some loan officers inappropriately pushed these loans on the applicants, in effect encouraging them to purchase homes with values beyond the reach of the applicants to pay. The decision to accept the mortgages nevertheless was solely the applicants' responsibilities. The situation is much like an overweight person's decision to continue eating to excess: No one makes the overeating persons put food in their mouths. We have free will but with it comes responsibility.

Furthermore, if my conservative brothers and sisters believe this Clinton program was inappropriate, why didn't we hear from them during the succeeding eight years of the George W. Bush administration? Even if countervailing legislation proposed by the conservatives had not passed through Congress, the Bush Administration still had the bully pulpit and could have tried to mobilize public opinion. At least my conservative brothers and sisters would have been firmly on the record as opposing this "inappropriate" misguidance of mortgage policy rather sounding like a bunch of retrospective blame shifters.

What is the real reason there was no countervailing legislation during the GWB administration? I suspect politics of the most callous type: (1) The program was popular with a broad segment of the population, including normally conservative people at the lending institutions eager to profit from the situation and the conservatives didn't wish to antagonize these new homeowners, and (2) The conservatives properly realized that, as liberal leaning voters become property owners saddled with mortgages and other homeowner responsibilities, these liberal leaning new homeowners tend to become more conservative and vote Republican.

My liberal brothers and sisters in the Democratic Party once again have become confused about economic reality and "good works" with the so-called stimulus bill. (Actually, I like the term "Prokulus" bill that one conservative brother applied to the legislation." As I will argue in a subsequent post, the application of Keynesian economic theory - increased governmental spending including deficits - actually blunted the effects of the Great Depression of the 1930's and other recessions prior to this one. The stimulus bill, if "pure", would have been expected to do the same for this Great Recession. (There's no need to try to "educate" me on this point until after my next post.)

What did the Democratic Liberals do that has jeopardized the clean application of Keynesian economics? The Democrats loaded up the stimulus bill with an inordinate amount of "good works" projects. Now, don't get me wrong. Some (a few, many, most - take your pick) of these "good works" have arguable merit and should be funded. The problem is that the funds for these non-stimulatory "good works" were included in the stimulus bill rather than having been debated as separate funding authorizations. Shame on the Democrats in Congress and shame on President Obama for allowing this perversion.

I very much enjoy the Republican bluster about President Obama's forthcoming budget in which he proposes to restore taxation on individuals making more than $200,000, about 1 % of all taxpayers, I believe. President G W Bush's administration essentially wiped out, or massively reduced, the tax burden these affluent persons payed in an attempt to apply "trickle-down" economic theory. That is, these individuals, relieved of their tax burden, would subsequently and quite naturally use their increased funds for investments that would stimulate the economy.

Unfortunately, the GW Bush administration not only failed to reduce governmental spending but increased it and incurred massive deficits. Let us look at the data: A significant budgetary surplus at the end of the Clinton Administration, a humongous mutli-trillion dollar deficit at the end of the GW Administration. The data are irrefutable. Clearly, "trickle-down" economics don't work without accompanying reductions in budgetary spending.

Don't posit the War on Terrorism (for lack of a better term, and which includes the Iraq, Afghanistan, and other worldwide conflicts as the reason for the deficits because the costs involve only about 10% of the deficits of the GW Bush years.)

As a penultimate comment before I have my afternoon cocktail: Would someone please explain to me why the interest we pay on the national debt (about 1 in 10 taxpayer dollars at the present time) is not equivalent to paying increased taxes to keep the budget in equilibrium?)

Finally, I hope that my conservative and liberal brothers and sisters (including myself) will remember Einstein's dictum: Insanity consists of doing the same thing over and over and expecting a different result.

I feel the need for the euphoric effect of, at least, 3 oz of sour mash.

Blessings to all.