One must wonder: Does President Barack Obama ever experience cognitive dissonance?
Speaking in New Mexico a couple days back, Obama called the United States' deficit spending “unsustainable.” He warned of skyrocketing interest rates if the U.S. continues to finance government by borrowing from other countries, reports Bloomberg.
“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.” Creditors will tire of buying U.S. debt, causing interest rates to rise. "It will have a dampening effect on our economy."
All very true. But who's this "we" he's talking about? Obama's main accomplishment during his brief tenure in office has been to preside over a doubling of the federal budget deficit -- no easy accomplishment considering the garagantuan budget hole that President Bush created in his last year. The Bloomberg article provides details:
Earlier this week, the Obama administration revised its own budget estimates and raised the projected deficit for this year to a record $1.84 trillion, up 5 percent from the February estimate. The revision for the 2010 fiscal year estimated the deficit at $1.26 trillion, up 7.4 percent from the February figure.
But the good news is, having jacked up the deficit estimate by $92 billion since February, Obama's going to whack it back down by $17 billion -- assuming he can get his cuts through Congress. For the benefit of the reader, I have created a pie chart to show the magnitude of those cuts compared to the deficit (the deficit, not total spending).Here's another way of looking at it. Assuming that $1.84 trillion in debt costs the U.S. about 2% in annual interest (click here to see the yield curve for U.S. treasuries), this one year's deficit will add about $36.8 billion a year to the U.S. budget burden for, oh... forever!
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Boomer Jim,
ReplyDeleteI find it a little strange that a little more than three months into the Barack Obama Admininistration -- after eight years of George W. Bush -- you suddenly come up with a blog because of your concerns about the "direction this country is taking."
Where were you from 2001 to 2008?
Peter Galuszka
My understanding and I will fully admit that I'm no Einstein on these issues...but I ain't no slug either...
ReplyDeletebut my understanding is that right now - today - that we have little choice but to pump large amounts of money into the economy to keep it from going belly-up and that this sets up a paradox which is..that doing this.. is 180% from what we need to be doing long term.
so ..even Obama says this..that downstream..we're going to have to pay all of this back...with interest...
.. and his approach is to make budget cuts and work to ensure that the economy recovers and starts generating productivity gains that ...yes ..will have to be taxed to pay this back.
.. I would liken it to someone in their own personal life encountering a catastrophe that they cannot pay for right now and they have to take out a substantial loan or ...say agree to pay a hospital several thousand a year on their $100K debt... for as long as they live...
I don't like what has happened.. but here's the deal - I don't see a competing alternative path from credible experts.
So... I'd ask... if the "tea party" ..."stop the excessive spending" makes any more sense than the last 8 years of "cut the taxes" and the economy will be healthy made any sense..... both of those recommendations coming from ...essentially the same folks...
doesn't this call into question ANY advice from these folks?
Further, I do not see.. on the table.. a different consensus approach coming from the non-political economic community...
what we're hearing right now is mostly from political people.. activists.. many of whom were pro Bush/Cheney and actively opposed Obama... from the get go...
their 'standing' on the issue is non-existent in my book.
name some folks... that are not primarily known as politicians who are advocating a different approach....
or this - line up the Industrialized World nation states.. and compare on key metrics... like ...debt per capita... average retirement age... average per capita health care costs, etc... use retirement metrics... like life expectancy, average number of years between retirement and death... deaths from obesity and cardiovascular disease...
you pick the metrics.. then.. make the case for the US going off the cliff...
if..instead.. the idea is that the entire G8 is going off the cliff.. then we're talking about something much different than a U.S. budget/deficit issue.. right?
Jim,
ReplyDeleteOne more thing -- while the overall topic of this blog is indeed timely, you might want to rethink this lanmguage:
"How excessive U.S. government debt and the coming global credit crunch will ruin your retirement -- and what you can do about it."
Why blame the "government" for the problem. It is certainly part of it, but for years corporations wanted workers to move into 401 (k)s because it was cheaper and easier for the corner office types. There's plenty more of private sector greed and hubris fanning the crisis. The wording smacks of Reagan Republicanism which is one of the reasons were in this mess. I'm not just blaming the GOP, either. Remember that Al Gore wanted to peg 401 (ks) to the stock market.
I suggest rewriting a bit, broaden it.
Peter Galuszka
Peter, You're right -- the coming federal government insolvency isn't the only thing that's going to hurt peoples' retirements. As you point out, the corporate sector has been shifting risk to individuals, from defined benefit plans to defined contribution plans. And, of course, individuals haven't been saving like they should. I will be exploring all those topics.
ReplyDeleteThe reason I focus on government is this: People have no trouble understanding the idea that corporations are bugging out of the old social contract. But a lot of people find it inconceivable to think that the federal government will ever fail. That last illusion must be dispelled.
As for the Bush administration, I'm not going to let them off the hook. As much as Obama ran against Bush during his election campaign, I suspect that historians will likely note the resemblances in fiscal policy. Indeed, I would suggest that Bush and Obama may go down in history, coupled as the Bush/Obama years for the reckless disregard to fiscal policy on the part of both.
The only people who can't see this are the partisans who insist upon blaming ______ (fill in your partisan bogeyman). It's all the Dems' fault. No, it's all the GOP's fault. That works just find for cable news talk show formats, but it overlooks the degree to which both parties have worked together to create our predicament.
Jim - not defending business as usual ... but I am trying to separate the political vitriol from what different economists might have to say or not.
ReplyDeleteI don't think what we are doing now is the best we can do - far from it.. it's a mess... but I don't buy the "tea party" folks who stood by for how many years before they finally got religion in the first 3 months of Obamaworld which is the same crew that for 8 years said 'cut taxes" and get out of the way of free market capitalism and we'll prosper....
been there. done that.
spending money hand over fist for re-paving interstates and buying hybrids for government workers is not my idea of fiscal conservatism either but then again neither were 8 years of treating the deficit as "off budget".
so I'm all ears for something different than what we are doing now .. AND something different from what we did the last 8 years...
and ..preferably from folks with some credentials in the field beyond political hackism.
I'll tell you - when Greenspan said he was wrong...he pretty much skewered supply-side, free-market economics in my view.
Bernanke seems to be much more of a pragmatic person... to me.. and what he is saying.. is not the same as what the "tea party" folks are saying.. eh?
Larry, I'm not sure what the tea party people are saying, other than the fact that they oppose higher taxes and big deficits.
ReplyDeleteIn a sense, I am copping out. I don't pretend to know how to balance the federal budget. Given the way politics work in our country, I very much doubt that the budget can be balanced again. We managed to do it back in Clinton's late years in office, but that was when (a) we were enjoying the revenue growth from the unsustainable Internet bubble, (b) the peace dividend, and (c) a divided government in which Rs and Ds canceled out a lot of each others' spending initiatives.
Those days aren't coming back. I'm looking beyond the partisan spin game. I believe both parties are to blame. I'm trying to anticipate what comes after the federal government becomes insolvent in 20-30 years. How should states, communities and individuals prepare themselves?
I found this chart interesting:
ReplyDeletehttp://www.nationmaster.com/graph/eco_deb_ext_percap-economy-debt-external-per-capita
as well as the entry in Wiki:
http://en.wikipedia.org/wiki/United_States_public_debt
which says this:
"... The Government Accountability Office (GAO), Office of Management and Budget (OMB) and the U.S. Treasury Department have warned that debt levels will increase dramatically relative to historical levels if entitlement programs are not reformed."
now for me ..the key phrase is: "if entitlement programs are not reformed".
In other words, the tea party folks as well as others who are concerned about the stimulus...debt and "government" spending... are ...as far as I can tell not parroting what Wiki is saying...
..." not sustainable unless we reform entitlement programs"
well.. this is where Obama says he is concentrating ... not only to push for most cost-effective medical care but to go back and look at means testing... and pushing retirement age out...
.. at any rate.. I don't see being in a hole that is impossible to climb out of...
..if push comes to shove.. the government simply backs off of what they will pay for...
just like the insurance companies and pension plans are doing right now....
I think there is a tremendous amount of overconsumption and just plain waste inherent in our current economy - both public and private...
I think the government needs to force more savings into retirement and health care from people's earnings.. deducted from their paychecks.. and the result might well be.. keeping that spiffy new car past the date that it is paid for.. or getting laminate countertops instead of granite.. and vacationing at Myrtle Beach instead of a Celebrity Cruise.
Bottom line - many folks have disposable income that's not being set aside for inevitable health care expenses and pension funding.
Many folks live in 3000 square foot homes.. when what they really can afford is a 1500 square foot home if they had been more financially responsible.
At some point.. the government is going to do with the baby boomers what retirement homes do right now if you need one and that is they take your house in exchange for the services you need.
And that's what's going to happen... the Government is going to start looking at your assets IF you are asking/expecting health care/pension "entitlements".
You will be able to get out of those funds - what you contributed plus interest and then after that - it's going to be a discussion about what your needs are, the cost, and your assets .....
I think it is totally ridiculous that Medicare currently pays the bills of people who can easily be classified as "wealthy" AND he have paid almost nothing into medicare compared to what they are getting out of it.
This has to change.
Remember the Campaign Slogan
"Change you can believe it".
Yes!
I think the pachyderms ... a decade or more ago.. said that out of control entitlement programs like Social Security and Medicare would ultimately bankrupt the country....
ReplyDeletegive them credit.
But then they had 8 years to rein it in... and they did not...
Now... we're banging on Obama for not dealing with it.. in 3 months.....
that circumstance very seriously undercuts anyone who says they are concerned about the problem.
this problem did not get invented when Obama got elected .. and in fact, has been decades in the making... and for myself... I'm willing to give Obama a few years to get his run at the problem a chance..
We've got all these folks raising holy heck about this problem... all of a sudden...right now... where have they been in years past?
why didn't they raise holy heck when the Pachyderms "owned" the Presidency, the House and the Senate?
It seems to me they were more content to pass laws stopping stem cell research and morning after contraception...faith-based abstinence "counseling" ... renditions and torture... instead of dealing with the issues that folks are up in arms about.
I'm no apologist for the tax &spenders nor that tilt by Obama but jesushkeerist... we have a bunch of folks now that say they don't like either party... and want change.
sorry Charlie.. if you are an independent today... what were you last year.. or over the last decade?
were you also an independent then and you did not vote for the Pachyderms?
Are all of those folks who showed up at the tea parties - decade-long independents?
Call me skeptical.
these folks are jumping up and down over the stimulus.. and as far as I can tell haven't said one word about the longer term issue with the baby boomers and entitlements and how to fix that problem.
This comment has been removed by the author.
ReplyDeleteBacon:
ReplyDeleteGood to see the new blog! Right away you have the Lemmings of Liberalism defending Obama no matter what he does.
Obama was cornered into the gigantic deficit because of the gigantic deficits of Bush? Got a hangover? Drink a beer. Got a big hangover? Drink a case.
Tut tut to all Obama apologists.
He went too far. The stimulus is too big. The deficit is too big. The bailouts are too many. It's a matter of degree. Obama went down the right road - he just went too far. The stimulus should have been about 1/3 to 1/2 the size that it is. Of course, that implies that "Barack the Infallible" made a mistake. And we all know that isn't possible. Messiahs don't make mistakes. Or is he the anti-Christ? Is he bound and determined to make the United States into another Venezuela or Cuba? I guess it depends on what blog you read or which channel you watch to get the news.
Is there any chance that President Obama is a well meaning, intelligent patriotic American who is doing some things right and some things wrong? Or does Obama have to be either diety or devil?
Enough is enough ....
You can support the president without thinking that his every move is perfect. You can be progressive with better moral foundations than "Obama can make no mistakes because Bush was so terrible". Jeez. You can also critize the president's plans and actions without being a Bush apologist. And Obama can do progressive things without being a socialist.
It's time to take this whole discussion away from the divisive politics of modern day America. It's time to talk facts, figures, economic theory and consequences.
I hope this blog can get there.
I don't think Obama is perfect by any stretch of the imagination and I also am not sure what the "correct" level of spending and bailout is either but I am paying attention to what the non-political economist and other folks in those allied fields are saying and their level of concurrence or not.
ReplyDeleteWhat makes you think that you are correct in that he's gone too far?
Don't give me political people.
Give me some others whose field is the economy....
otherwise, if you're not such a person yourself nor can you offer folks that you are listening to - and in 3 months you are convinced that are right?
congratulations!
did you vote for Bush/Bush/and McCain?
did you join the tea parties?
just curious.
Let's compare Bush to Obama on economic policy?
ReplyDelete8 years vs 3 months.
How do they differ?
what things do they mostly agree on?
now.. if someone is going to say that Bush is no better than Obama then where were you for the last 8 years?
If Bernanke is wrong.. give me one of his peers that you think is giving different/better advice..???
I'm no defending Obama here... he may well be screwing on but I'm asking what those who think he is are basing their opinion on who is not politically opposed to Obama......
come on.. it's a simple thing guys...
Groveton,
ReplyDelete"Lemmings of liberalism?" You need a trip back to Amsterdam.
Peter Galuszka
Bush, Bush, McCain - not me.
ReplyDeleteTea parties - I lost my Arggedy Ann doll so, not me either.
Apolitical criticism of Obama? How about the CBO? How about thw Washington POst?
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/21/AR2009032101761.html
Peter:
I am in Brazil at the moment. Lemmings of Liberalism? I have been fascinated by terms like that ever since I first heard Nattering Nabobs of Negativism. I need one for the righ too. Ringneck Reapers of the Rathole? I am open to other suggestions.
ANd, from Nov. 26 - here is my written prediction:
ReplyDeletehttp://grovetonsvirginia.wordpress.com/2008/11/26/deflation-cheap-talk/
This wasn't hard ten and it's not hard now
How does Norway get to be number six? They have been ROLLING in oil revenues and they have very high taxes.
ReplyDeleteTHAT takes some irresponsible spending.
How much Norwegian bonds is China holding?
"You can also critize the president's plans and actions without being a Bush apologist. And Obama can do progressive things without being a socialist.
ReplyDeleteIt's time to take this whole discussion away from the divisive politics of modern day America. It's time to talk facts, figures, economic theory and consequences."
Hear hear, and Amen.
The news shows are becoming the new comedy hour for thinking men. Variety shows without the variety or the creativity. Reality shows without the reality.
$40k per person?
ReplyDeleteObama could appoint Dave Ramsey as the debt czar and clean this up in a year or so.
How about Gippers On Paraldehyde?
ReplyDeleteRighteous Ranters for Restraint?
ReplyDeleteLarry and Peter, There is nothing "strange" or partisan about the timing of the start-up of this blog. I've always been concerned about runaway deficit spending. Although I voted for Bush twice, it was with reservations. I regarded his lack of budget discipline as one of his biggest failings.
ReplyDeleteYes, I did vote for McCain, but so what? Does that suddenly discredit any criticism I may have of the Obama administration? Does voting for McCain make me some kind of party hack with no credibility? C'mon. Who did you vote for? Are you partisan hacks?
As for the timing of this blog, I became far more interested in age wave issues when I began working for the Boomer Project in the fall of 2008. I became far more versed than I had been before on the impact of the aging Baby Boomer generation on the retirement safety net institutions we've set up in America. That background informed my views of the fiscal atrocities committed first by the Bush administration, and then by the Obama administration.
I view both political parties as compromised -- in the pockets of different constituencies and special interest groups. If you see any partisan favoritism in this blog, call me on it. But the fact is, Obama's the one in control right now, so most of my attention will be focused on him.
Thank you, Groveton, for your comments of 4:13 p.m. You expressed my sentiments better than I could have.
ReplyDeleteThanks for the explanation of the "timing" and Groveton - thanks for your thoughts also.
ReplyDeletebut no.. I don't consider the WaPo the be all and end all on economics....
The CBO - yes...but the CBO has ALSO been saying that the 600lb gorilla is entitlements.... and where are we on that?
Where was Bush and Bush and an ALL Republican Congress on that for 8 years?
If the party that claims fiscal conservative principles and "sniffs" about RINOs when it comes to tax & spending.. where the heck were they and ..where are they now?
where is THEIR PLAN to change the trajectory.
All I hear is "Obama has spent too much".
What is "too much"
Give me some credible people..experts who are also saying this and are advocating a different path...
What I am hearing is "no" ...and not much else.. and no where near ' "This is what we should be doing instead".....
I think... this is why the Pachyderms got tossed... they were/are exceedingly partisan about virtually everything right on down to really stupid stuff like stem cell research and morning after contraception and they are AWOL on the fundamentals that they used to claim as their territory - fiscal "steady as you go" conservatism.
They've been exposed for what they are - free marketeers.. every man for his economic self and no apologies for those who get run over by speculators and hedge fund gurus...
all I ask guys is for ya'll to name some credible ..credentialed folks who have a different approach... and some politicians who have signed on to that school of thought...
who are they and what are they advocating?