New Year’s Catnip


ow that it’s the New Year, what happened to the Sound and the Fury?

Let me get my nose out of my eggnog. I’m not just talking about a holiday hiatus.

Where’s the rage over federal debts and deficit spending? Remember all those months of harrumphing about Arma-and Boomer-Geddon? How we are doomed by negating the Protestant Work Ethic? That we, and Obama, are a bunch of spend-thrift, gluttonous slobs?

Where’s EMR and his Calvinistic lectures on “mass overconsumption.” Where’s Boomer-Jim (although he actually sounded sane on his CNN interview)? Groveton?

To be sure, the Big Bacon questioned Bob McDonnell in his quest to explain Virginia’s AAA bond rating to the nabobs on Wall Street. I kinda of agreed with the moronic idiocy of this. But then Bob tells the Richmond Times-Disgrace that’s 2011 is going to be a very different kind of year. He’s going to be a take-charge guy. Forget about Deepwater Horizon, ABC stores and Confederate History Month. That’s like, so yesterday.

But why the silence? Where’s the scolding? I mean, I enjoy not being told once again what kind of free-spending slob I am. Could it be the Republican victory in November? Groveton and Bacon are secret Republicans despite their claims of indepdence. EMR answers to neither clan, I know.

Just to start the New Year out right, let’s quote from the despised Paul Krugman of The New York Times (in this case, on the tax cuts, which is catnip to the Groveton-Bacons, which may be why they are so asleep on the issue):

“One day deficits were the great evil and we needed fiscal austerity now now now, never mind the state of the economy. The next day $800 billion in debt financed tax cuts, with the prospect of more to come, was the greatest thing since sliced bread, a triumph of bipartisanship.”

So what about it, guys?

Peter Galuszka

Share this article


(comments below)


(comments below)


53 responses to “New Year’s Catnip”

  1. Larry G Avatar

    I think one of the most telling truth with regard to the illicit Republican narrative about "runaway govt" spending and social security going "bankrupt" is that hardly a penny of the 14 trillion dollar deficit that we have right now is due to …social security nor Medicare.

    Since 2000 – the Republicans willingly and nakedly agreed to fight two wars and funding them on the Chinese credit card – and if that was not enough of an budgetary insult -they decided that tax cuts would also be a "good" thing to do.

    Since that time – they've added a trillion dollars a year to the longer debt debt – and they have continue to blather their butts off about "run away" govt spending….

    uh huh….

    So, how come when you ask Eric Cantor and his fraudulent buddies what "runaway govt spending they would cut" – the cat gets their collective tongues?

    The FICA Tax – for 60+ years has not only fully-funded the Social Security and Medicare programs – but actually generated surpluses – which the Republicans now "blame" for Social Security going "bankrupt".

    what a bunch of hypocrites!

    I don't excuse the Democrats willingness to spend money they don't have also – but I have special contempt for those who portray themselves as fiscal conservatives – who are nothing of the kind.

    We have a 14 trillion dollars deficit – hardly a penny of it due to "deficits" in Social Security and Medicare – but instead spending more on the military and home land security than we take in -in income taxes.

    The most important thing that we have not addressed in this issue – is the truth.

    We can no more begin to address the budget issues until we are at least willing to admit the truth.

    And the simple truth is that our deficits and debt is not due to FICA-funded entitlements but income tax funded government and military.

    How much confidence do I have that the Republicans will stop lying their butts off in the New Year?


  2. James A. Bacon Avatar
    James A. Bacon

    OK, I'll chase the catnip.

    As I understand it, the great bipartisan tax compromise will add roughly $800 billion to $900 to U.S. budget deficits over the next two years. Needless to say, I'm not a big fan — and I think the precedent augurs ill for the new Congress.

    The best lipstick you can put on this pig is that it is a stimulus package, heavily weighted toward tax cuts. As far as stimulus packages go, it's far preferable to the American Recovery and Reconstruction Act, which was of comparable impact on the budget. If you want stimulus, academic surveys suggest that you'll get more of it from tax cuts than from government-directed spending, mainly because the private sector applies the money more productively rather the government, which tends to divert it to uneconomic but politically favored functions.

    Still, that's scant comfort. I guess I'm what the Wall Street Journal refers to as a "deficit scold" conservative. I'm all in favor of promoting economic growth. But I truly believe that the federal government is heading toward default, and Obama and the Republicans just hit the gas pedal. And when the federal government goes into default, the economy will get very, very ugly… calamitously ugly. It is an event to be avoided at all costs.

  3. Larry G Avatar

    All I can say about government spending is that the best "stimulus" for Virginia is full-time government jobs that we have in such profusion that we are 3 percentage points better on unemployment.

    The ARRA "stimulus" produces jobs also but they are not permanent and even "shovel-ready" projects take months or even years to fully play out so the money does not hit the economy right away.

    Our school system is using stimulus to keep from laying off teachers. How do you "measure" that?

    The thing about government spending is that it does NOT go into some black hole like the critics of it imply.

    I'm not defending it. I'm actually opposed to spending a trillion dollars more than we are paying for – but one look around NoVa and the exurban counties arrayed around NoVa ought to tell anyone that government "spending" does not go into a black hole.

    And here's the irony for Virginia – if and when Obama and the Republicans actually decide that they will make the required cuts – NoVa and Hampton Roads – and Virginia will know for sure that "government spending" does not go into a black hole but instead in the pockets of those who are now laid off.

    So my question is just what percentage of Virginia's "economy" is …. "government"?

    Is it 5 or 10 or 20%

    Isn't it ironic that the same Va politicians who say the government spends too much raised holy heck over the idea of cutting the Joint Forces command?

    Why.. you would have thought that they would have stepped up to the plate and told everyone that this is exactly the kind of tough love the country needs and that Virginia will lead by example.


  4. Larry G Avatar

    And if you REALLY LIKE ironies, consider the act that the Feds are consolidating the military and other allied operations to Fort Belvoir and Quantico and guess what – there is wailing and gnashing of teach over the "gridlock" that will ensue.

    Any other place in the nation would be on bended knee saying "thank you God, thank you" but not NoVa – nope.

    NoVa Chutzpa is saying that the Feds need to pay for the infrastructure havoc they will create.

    Can you believe it?

    This just goes to show you that Virginia and NoVa live in an alternate universe when it comes to "govt spending".

  5. How did you get the picture of my cat?

  6. If govt controls the spending, it can direct policy, like spending on wind farms. Given the same money, private enterprise might use it to export coal to China.

    More immediately productive, but………….

  7. Generally speaking, govt spending is 30% of the economy. Nova/HR are close to 40% of the Virginia economy and they must be close to 50%.

    That puts all of VA at close to 35%.

    Cutting the federal budget in half would mean a 17% overall reduction in the VA economy.

    Rova ought to be cheering for Novas success instead of promoting federal spending reductions.

  8. Larry G Avatar

    anyone who thinks that government is incapable of acting in a ruthless capitalistic fashion – successfully – has a huge blink spot when it comes to China.

    anyone who does not recognize the inherent competitive advantages of companies that operate in countries that have universal health care are similarly blind to the real world.

    The problem with our folks is that they think that capitalism free of government is better/stronger/better than capitalism combined with government.

    I suppose these folks – are ready to throw the "no fair" flag and demand that Europe, Japan and China all make private industry to health care so we can more fairly "compete" with them?

  9. Capitalism combined with government.


  10. Anonymous Avatar

    Larry G – "The FICA Tax – for 60+ years has not only fully-funded the Social Security and Medicare programs" the FICA tax receipts have never gone exclusively towards SS/Medicare and are being spent on the 'pork' from day one….

  11. Larry G Avatar

    The surplus of FICA was put into U.S. govt securities – which as as bad as that sounds is better than some of the stock market alternatives that could have been chosen – and, in fact, were by States like Va – that promptly lost about 17 billion in equity.

    But the more important point is that Social Security and Medicare are not "broke" and not a Ponzi scheme as claimed by some but a well-funded program that has not run deficits – UNLIKE the income-tax funded part of our government.

    SS/Medicare and FICA are about to encounter some serious problems if action is not taken in the next decade or so – and that problem is fairly easily fixed by a number of available options – one of which would be to set the retirement age to be equivalent to what it was when Social Security was originally created …or another option would be to just extend the amount of income subject to the FICA Tax.

    The point here is that the FICA/SS/Medicare issue is separate from the Federal Budget issue.

    You could fix SS/Medicare tomorrow and it would not fix the 14 trillion debt that we have nor the annual trillion dollar deficits.

    And here's the bigger problem.

    It's called ignorance.

    Either willful or benign or stoked by misinformation by those who oppose the concept of Medicare/SS and want to use the "debt crisis" as an excuse to harm it – even as those same people ignore the budget problem that we have of spending a trillion dollars a year more than we take in – in income taxes.

    These would be the same Republicans – like Eric Cantor who since 2001 has maintained that we have runaway govt spending but, as far as I know, has NEVER proposed his own balanced budget proposal but instead make excuses and blame others.

  12. State Tax Revenues Increased by More Than 6% in 2010, The Largest Incrase in More Than 10 Years


    Granted, this is from a huge low, but prospecst and cash flow is up.

  13. Larry G Avatar

    to the deficit hawks – the increased revenues mean that you're taking even more money away from people instead of returning it to them… eh?

    so..we should have a Constitutional amendment that says tax increases even in recovering economies are illegal.

    so each time we have recessions and revenues drop – we give back any increases due to the recovering economy.

    so you see.. if you play your cards right – economic downturns – can be used to lower taxes – right?

  14. Groveton Avatar

    I think Obama's tax compromise was brilliant – for Obama.

    What was it that Clinton famously said (besides, "that's a nice blue dress you're wearing today, Monica")? Oh yeah … it's the economy, stupid.

    Deciding not to raise taxes will get Obama re-elected. Why? Because he will get credit for the recovered US economy by the next presidential election. Increasing taxes had the substantial chance of retarding the recovery.

    This was one of Obama's best political plays.

    As for economics? I am not so sure … either way. GDP growth is a lot more important than a cosmetic tax hike on "rich people". I think waiting two years for consistent GDP growth with improved employment was smart. I also think extending the unemployment benefits was smart.

    The big question will come once the recovery is obvious and unemployment is back to better levels. Will Obama and The Congress raise taxes then? They should…but will they?

    I see LarryG has made no blog-related New Year's resolutions. His rambling about Republicans "willingly and nakedly" agreeing to fight two wars …". I guess after Sept 11 there was substantial pushback from the Democratic Party over attacking the terrorists in Afghanistan? I guess Obama (who brokered the tax compromise) is now a Republican?

    LarryG … I have deal for you. You stop lying about the Republicans and I'll stop telling the truth about the Democrats.

    By the way … that was the only good line in the generally awful Wall Street II movie.

    Happy New Year to all the knuckleheads on this board.

  15. No, Larry. Increased revenues means the recession is over.

  16. Larry G Avatar

    Groveton – my man – I have no great loyalties left or right although I have noticed that i one is critical of the Republicans, it makes them a "liberal".

    I am a fiscal conservative. But more than that – I think people should pay user fees for much of what they want – including roads and the non-core academic parts of schools.

    I believe in insurance mandates because it's the only other answer to people who won't save if you don't have the guts to let them die in the streets later when they are old and did not save.

    I am not along on that.. here are the countries in the world that agree with that logic:

    Norway 1912 Single Payer
    New Zealand 1938 Two Tier
    Japan 1938 Single Payer
    Germany 1941 Insurance Mandate
    Belgium 1945 Insurance Mandate
    United Kingdom 1948 Single Payer
    Kuwait 1950 Single Payer
    Sweden 1955 Single Payer
    Bahrain 1957 Single Payer
    Brunei 1958 Single Payer
    Canada 1966 Single Payer
    Netherlands 1966 Two-Tier
    Austria 1967 Insurance Mandate
    United Arab Emirates 1971 Single Payer
    Finland 1972 Single Payer
    Slovenia 1972 Single Payer
    Denmark 1973 Two-Tier
    Luxembourg 1973 Insurance Mandate
    France 1974 Two-Tier
    Australia 1975 Two Tier
    Ireland 1977 Two-Tier
    Italy 1978 Single Payer
    Portugal 1979 Single Payer
    Cyprus 1980 Single Payer
    Greece 1983 Insurance Mandate
    Spain 1986 Single Payer
    South Korea 1988 Insurance Mandate
    Iceland 1990 Single Payer
    Hong Kong 1993 Two-Tier
    Singapore 1993 Two-Tier
    Switzerland 1994 Insurance Mandate
    Israel 1995 Two-Tier

    Because these other countries do this – they pay half as much for health care and it's 1/2 as much a part of their economy as ours – and they all live longer and have lower childhood death rates.

    That's COST-EFFECTIVE Fiscal Conservatism"

    The FICA Tax in our country has generated surpluses for the vast majority of the 60 years that it has been collected.

    In fact, it's biggest sin – is that those surpluses were spent by Republican politicians on the regular budget to finance their wars and over spending in general but even that was not enough to stop them from adding a trillion dollars a year in debt from 2001,2002,2003,2004,2005 to the debt – effectively doubling it from 5 trillion to 10 trillion dollars.

    That's the truth Groveton.

    No lies from me. I tell the truth on this.

    But if you believe the Republican frauds like Eric Cantor – he will tell you that the reason we have deficits and debts is entitlements and "out of control" govt spending.

    but if you ask him what cuts he would make towards actually balancing the budget what does the man say?

    So.. I call out the Republican frauds on this issue.

    It's one thing to claim or not claim you are a fiscal conservative but if you are a Republican and you claim to be a fiscal conservative – I expect you to perform and the truth is these guys are shysters and frauds.

    Even Jim Bacon will acknowledge this.

    You're coming around Groveton but you're still a little slow on it.

  17. "But more than that – I think people should pay user fees for much of what they want – including roads …."


    O geez. Isn't a fuel tax dedicated to roads a user fee? Isn't any other tax based on road use directly equivalent to (and covertible to) a fuel tax? Shouldn't a user fee be limited to the user caused costs, and not transferaable to other uses (unlike the fuel tax revenues)? Since almost all of use the roads and depend on the roads, and get non-use benefits from the roads in terms of land value, then what is the point or the nexus for charging ON USE ONLY?

    If you are a fiscal conservative, why would you want to WASTE MONEY with a huge beaurocracy to track every niggling cost?

  18. Groveton Avatar

    Entitlements are a lot more than Social Security and Medicare, LarryG.

    So, when you criticize Eric Cantor I think you should be clear about what he actually said.

    Welfare, food stamps, agricultural subsidies, etc could all be considered a form of entitlement.

    I won't argue the relative pros and cons of these programs (all of the programs have both pros and cons).

    However, even with all that, I don't believe the federal government has done as good a job investing my FICA payments as I could have done myself. I have the data to back up that thought. In addition, I would have invested in the private sector rather than buying government securities. That would have had two effects:

    1. More jobs and a faster growing GDP (providing more revenue to tax).

    2. Less demand for government securities forcing the government to pay more to borrow. Hopefully, this would have resulted in less borrowing.

    Your logic for the government as the insurer and retirement provider of last resort makes sense with one big, big caveat …

    The government has to be solvent to make good on the claims once they come due. Jim Bacon questions whether the government will remain solvent. So do I.

    You seem to believe that the government will never go bust. That's why you think I should be forced to pay into its schemes. That's why you don't call these payments taxation. But why shouldn't I be able to waive my payments to the government for retirement and insurance so long as I can prove I am providing an alternate means of insurance and retirement? There are two answers:

    1. It's really a tax and I should continue to be taxed.

    2. The government can never go bankrupt so the government issued insurance or retirement benefits are guaranteed in a way that I could never guarantee myself.


    As for your list of other countries … I am not sure I'd use Ireland, Italy, Greece or any number of other companies as examples right about now.

    Also, why are other countries always a good example when discussing Social Security or health care but never a good idea when discussing immigration reform? Try overstaying your visa in Germany and then looking for a sanctuary city to provide you with public services. Ask the nice German government officials to please speak English because you don't speak German.

    What is it that Angela Merkel said? Multi-culturalism in Germany has failed? Should the US emulate that attitude too?

  19. That's COST-EFFECTIVE Fiscal Conservatism"


    Well, OK, but it doesn't mean that it is not socialism.

  20. I won't argue the relative pros and cons of these programs (all of the programs have both pros and cons).


    OK, so entitlements could have pros and cons. What, then, is the point of attempting to try to demonize things you don;t like with such a label?

  21. I don't believe the federal government has done as good a job investing my FICA payments as I could have done myself. I have the data to back up that thought.


    Me too, but we are probably above the norm in the smarts department.

    Also, we are both free to invest more agressively BECAUSE we have the FICA payments to back us up.

    I don't see how you disaggregate the benefits you recieve from FICA, just because your best investments outperform your poorer or more conservative ones.

  22. Larry G Avatar

    If the Feds had "invested" the FICA money like Virginia had done to their pension fund – guess what would have happened?

    On the point about entitlements – then why do those who say that entitlements "are the problem" – say that it is Social Security and Medicare that are going "bankrupt" instead of the entitlements that you speak of?

    I don't think the government will not go bankrupt any more or less than I do any insurance type program when you pay a premium for years and then you get a benefit.

    That's the way that private insurance works also.

    When their payouts exceed their premiums they have to either increase premiums or cut benefits just as the government must.

    and those other countries – what about the ones that have had entitlement programs for DECADES and are STILL just fine?

    It's not the fact that you have an entitlement Groveton – it's how well you operate that program and clearly some countries have overspent but in this country – FICA has run a SURPLUS – as well as many other countries that have done just fine.

    Your benefits have to match your premiums – not matter what country and no matter whether the plan is public or private.

    the same rules apply.

    If you pay out more than you take in -you're in trouble.

    conflating immigration with FICA is further muddying the waters.

    You might want to ask what happens to illegals who pay the FICA tax – but never will collect it….

    but here's the bigger point…

    the folks who SAY they are concerned about deficits and the debt – just slide off of one issue to another when you get them dead to rights on the specific issue.

    So they'll tell you that Medicare and SS are going bankrupt until you prove to them that FICA is in surplus and then they'll shift to start blaming immigration or those who get other entitlements.

    In other words – we don't match the issue with the solution.

    We just have a laundry list of what is wrong with the country that we can blame on others and make excuses as to why we won't deal with the real issues.

    The two deficit commissions laid out in chapter and verse what the problems are – and how to approach fixing them – but that has not stopped the right wing propaganda machine from continuing to spew disinformation…. blame.. excuses.. and obstructionism to solving the actual problems.

    Ask Mr. Cantor what his solution is to "run away govt spending" and what he thinks needs to be done to balance the budget.

    Ask most Republicans this question and see what answer you get.

    That's my point.

    With the possible exception of Ron Paul and Paul Ryan – the others are frauds.

    How many of them signed on to one or the other deficit commission proposals OR came back with their own alternatives?


    that's why those guys are total frauds.

    and that's no lie.

    and it's amuses me that folks still defend their feckless behavior.

  23. 1. More jobs and a faster growing GDP (providing more revenue to tax).


    Not necessarily. A lot of our GDP growth comes from more efficiency. We may get more GDP an not get a corresponding growth in jobs.

    The rich get richer, but that's OK because it is their investment.

    Except it is not OK because it is a self fulfilling prophecy and therefore a logical fallacy.

    Besides, why would you want more revenue to tax? the whole point is to have smaller government. Assuming you could actually increase revenue this way, what would be the first thing to do?

    Lower the tax rates. At what point do the tax rates become tooo low? Or, when do you believe the Lafer curve turns against you?

  24. "Less demand for government securities forcing the government to pay more to borrow."


    Huh? How does that follow?

    Demand forces the price up, less demand means governmnet pays less.

    Anyway, are you suggesting that government securities are where people go when they don't have anything better to invest in, like Bernie Madoff?

    Are you saying that you should invest in goverment spending when the market is doing badly?

  25. That's the way that private insurance works also.


    Yeah, well, they go bankrupt.

  26. conflating immigration with FICA is further muddying the waters.


    Economists generally consider that immigration, legal or not, provides a net benefit. costs arguments are overblown and outweighted by the benefits.

    Importing cheap labor is good for the economy for the same reason importing goods that are cheaper than you can make them here is good for the economy.

    Better, because cheap goods buy nor products and pay no taxes.

    You want cheap labor working for you, or overseas competing against you?

  27. If you pay out more than you take in -you're in trouble.


    You cannot make that statement until you define the system boundaries.

  28. With the possible exception of Ron Paul and Paul Ryan – the others are frauds.


    Great. Our choice is between frauds and kooks.

  29. As for your list of other countries … I am not sure I'd use Ireland, Italy, Greece or any number of other companies as examples right about now.


    What has Irelands health care got to do with the fact they got killed in the housing bust? OK without health care they would not have run out of money so soon: they would have gotten killed later.

    Same goes for any government expenditure you wish to cut, except maybe health care, because without health care you would have died sooner and not been around to get killed financially.

    And maybe financial oversight.

  30. Also, why are other countries always a good example when discussing Social Security or health care but never a good idea when discussing immigration reform?


    Germany and other countries have alrady reformed immigration. Germany, for example has a strong guest worker program. They can afford to send people back, because they have rules that work.

    Where do you suppose all the Irish fleeing Ireland are going? All they all illegals, someplace?

  31. Larry G Avatar

    Canada has a strong guest worker program also – and it basically works by the use of severe sanctions against employers who try to go around the law.

    Insurance companies DO go bankrupt – but not ALL of them – ONLY the ones who fail to balanced their costs with their revenues.

    On taxes, I don't excuse the tax & spenders predilection to "spend" and try to tax.

    They're pretty up front about it anyhow. In their view "taxes" are "investments".

    Folks can disagree with them on the merits – and that would be fine.

    The problem with the Republicans these days is that they CLAIM to be fiscal conservatives – the "more responsible" alternative to the tax & spenders.

    But the actual performance of these self-avowed fiscal-conservatives over the last decade as been anything but…

    They inherited a surplus and then promptly killed paygo and lowered taxes even though we had two wars going on.

    When the budget went belly-up with trillion dollar deficits – some of the more brazenly dumb of them said "deficits don't matter".

    So they made excuses for causing a trillion dollar deficit then tried to blame others including immigration and the lower income earners who don't pay Federal Taxes (but do pay virtually all the others).

    In other words, they no longer take responsibility for the deficit.

    It's someone else's fault.

    Now Groveton says that because I point this hypocritical behavior out – that it makes me a "liberal".

    ha ha ha

    I say that I have put my finger on the real problem.

    When you have a politician like Eric Cantor – elected in 2001 and since that time says that govt spending is "out of control" (he's correct) but then when you ask him HOW to BALANCE the budget – what exactly would he cut – he runs away and hides.

    So… pointing out this fraudulent and feckless behavior makes me a "liberal" apparently.

  32. Galbraith said Reaganomics consisted of claiming the rich don't work because they don't have enough money and the poor don't work because they have too much.

  33. Private companies go bankrupt or refuse to pay more often than governments. Private companies strive for monopoly and government strives for beaurocracy. Both expect us to pay.

  34. Larry G Avatar

    I have a much simpler perspective. No matter what your tax policies are – or are not – at the end of the day you don't run a deficit.

    We cut taxes on everyone – proportionally as far as I know and the result of doing that was a trillion dollar deficit.

    And Instead of making the spending cuts to balance that budget – we made excuses and now – we try to find someone to blame.

    Fiscal Conservatives – at least my view of who they are – don't make excuses and don't blame others – they get to the point of addressing the deficits and how to reduce and minimize them – either through spending cuts or tax increases or both.

    Now days, we have folks who call themselves fiscal conservatives who do neither.

    And instead they won't address the deficit, and instead, make excuses, and blame others.

    that's irresponsible and it's hypocritical …

    REAL – Fiscal Conservatives – ADDRESS the deficit – and propose spending cuts and tax increases or some combination just as the two deficit commissions did.

    If you want to claim Fiscal Conservative credentials – you have to perform accordingly.

  35. Larry G Avatar

    the nature of capitalism is that in the end – you – the consumer will pay – for electricity, for cable, for fire and auto insurance, etc – and that while some companies may well go broke because they are incompetent and inept – others will take their place and survive – and in the end – you will pay.

  36. You don't run a deficit.


    Too simplistic. Depends on where you draw the system boundaries. You can have a ponzi scheme for a very long time, running a deficit that is paid for with new sales, and increased borrowing against assets of increasing value.

    Many marinas run this way for tens of decades.

  37. You left out an important part. When someone is inept and goes broke, someone else gets a bargain. I lost three good tenants, because they bought foreclosures.

  38. Larry G Avatar

    It's not that simplistic. Most people know they're in deep doo doo when they're spending more than they're making.

    States and Counties know this also.

    You can run a deficit for a short period of time – if you know the situation is temporary and you'll at some point bring in enough additional to pay it back.

    but you cannot run a structural deficit – on a sustainable basis.

  39. Larry G Avatar

    there are no necessarily any bargains when someone goes broke.

    There may be some bones to pick through like vultures on carrion but more often than not – a bunch of creditors get stiffed.

    The creditors take some of the loss.

  40. " but you cannot run a structural deficit – on a sustainable basis."


    No, but you can do it for a very, very long time. More than several lifetimes, so the observable effect is small, and may even be nil.

    For example, you go into debt to build the Bouler dam in 1930, but what is it worth today? Many times what it cost to borrow to build it. And if you had waited until today, it would cost many times more to build, and you would have to borrow even more.

    As long as you borrow well, it PAYS to borrow and costs less than nothing.

    I know this is heresy in todays political thinking, but it is true: Reducing our borrowing too much will cost us money.

  41. "The creditors take some of the loss."


    Fair enough.

    The creditors also took the risk of profit. And they probably balanced their risk (or thought they did) with equity and other kinds of protection.

    Are we to believe that creditors are always 100% protected, have no skin in the game, and borrowers are always 100% prudent and 100% liable?

    Good luck with that. Its a good way to bring the economy to a screeching halt, as we have just seen.

    Creditors take a risk when they lend money: they may profit and may not. When they go broke, it is their creditors that take a hit against THEIR assumed profits, and so on up the chain.

    Say the bank took a loss on the three homes my tenants bought, and that loss was the culmination of ten or fifteen years of ongoing payments in the properties. The banks loss may actually be pretty small, on each home.

    My tenants buy the home and successfully make payments on it for ten or twenty years. It is very possible that their gain then EXCEEDS the banks loss.

    That is why yous have to onsider the system boundaries in space, time, and level of transactions before youcan jump to any conclusions.

  42. The bank that lost out in my tenant situation was the one that sold to my tenant who paid cash for her new home.

    The bank might have had positive cash flow for fiteen years, a little dip on the forclosure, and positve cash flow for the next 20 years.

    Instead, that cash flow ended when she bought the place outright, but even that erased a portion of the dip.

  43. Larry G Avatar

    you can run a trillion dollar annual structural deficit that accumulates a debt substantially more than 14 trillion without the interest on the debt essentially destroying your economy?

  44. Larry G Avatar

    Many creditors are simply suppliers of goods and services …not 'investors'

  45. But they usually bill through visa to keep themselves out of the credit business. Otherwise the carry their own accounts and do their own credit checks and they decide how much risk to take in delivering unpaid for goods in pursuit of profit.

    I'd like to continue to supply this Guy. If I cut him off he may go under (or somplace else) and I lose his cash flow. How much can I risk to keep that cash flow? How much can I risk if the cash flow is erratic?

    They are still creditors and the evaluation they make and the motivation is the same.

  46. Are debt.

    We are about to find out, aren't we?

    Indonesia and Argentina crashed and they still have economies.

    We don't have to worry about our debt. The Chinese and Saudis do.

  47. Anonymous Avatar

    In response to the original question, I know Dr. Risse was out of the Region for a while and believe he is again on travel.

    Were he here, he might gently suggest that both Mr. Bacon and Mr. Groveton read “Aftershock” by Robert Reich. Reich demolishes the idea that any good will come from tax cuts for the rich or that the rich (especially the top 1 percent) are not paying enough in taxes.


  48. Larry G Avatar

    no problem with debt?

    I guess you don't worry about the interest payments which could rise to about 1/2 of our total budget ?

    you better worry about debt, guy.

    We might not be destroyed physically but destroyed fiscally won't be much better.

  49. Anonymous Avatar

    AZA is right about Dr. Risse's tarvels.

    Even if Professor Risse was in the Region, I know from the drafts I have seen that he is deeply involved in five new projects.

    When I saw him between trips he told me of a great website for Accurate – Transition Houston: Building Community Resilience


  50. They are not going to collect a trillion from me, so I'm not worried. It is probably outside my event horizon, anyway.

    If we have to start paying it then we will have become the grandchildren the debt got passed down to.

    Let some immigrants in and charge them 2X taxes for the first ten years.

  51. Andrea Epps Avatar
    Andrea Epps

    …Try overstaying your visa in Germany and then looking for a sanctuary city to provide you with public services. Ask the nice German government officials to please speak English because you don't speak German.

    Amen Groveton! Although I recognize the sarcasm, I also appreciate it.

  52. Yes, but Gernany also has a workable guest worker system. they have rules that are reasonable, and if you break them…..

    In this country, you can sponsor someone for a guest worker visa and guarantee their trip home, and get dead silence in response to your application for three years.

    No wonder people break the rules.

  53. Heard today Germany has a shortage of guest workers. Many Turks are returning home.

Leave a Reply