Debt deal done

August 1st, 2011 at 3:00 pm by David Farrar

A deal has been done on the US ceiling, with agreement on around US$1,000,000,000,000 of spending cuts over the next decade. That is not enough to get back into surplus, but is a promising start. And no tax increases.

The Washington Post looks at the winners and losers:

Winners

  • Senate minority leader Mitch McConnell
  • Tea party
  • President Obama
  • Congressional Budget Office
  • , President of Americans for Tax reform
  • David Wu (as the crisis overshadowed his sex scandal)

Losers

  • Congress
  • Gang of Six
  • Commissions
  • Liberals

Americans for Tax Reform played a big role in keeping the Republicans from agreeing to tax increases as many Republican representatives and senators had signed pledges to never vote for a tax increase. If they broke that pledge, they knew they would face a primary challenge.

I quite like how they have made sure of a second round of spending cuts:

The first step would take place immediately, raising the debt limit by nearly $1 trillion and cutting spending by a slightly larger amount over a decade.

That would be followed by creation of a new congressional committee that would have until the end of November to recommend $1.8 trillion or more in deficit cuts, targeting benefit programs such as Medicare, Medicaid and Social Security, or overhauling the tax code. Those deficit cuts would allow a second increase in the debt limit, which would be needed by early next year.

If the committee failed to reach its $1.8 trillion target, or Congress failed to approve its recommendations by the end of 2011, lawmakers would then have to vote on a proposed balanced-budget constitutional amendment.

If that failed to pass, automatic spending cuts totaling $1.2 trillion would automatically take effect, and the debt limit would rise by an identical amount.

So if they can not agree on the next $1.8 of deficit trimming, then they vote on a balanced budget constitutional amendment (a good idea), and if that does not pass then $1.2 trillion of extra spending cuts takes place across the board – including defence spending, but excluding welfare entitlements.

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75 Responses to “Debt deal done”

  1. JamesP (76 comments) says:

    Deficit reductions are not cuts. They are only reductions in proposed spending increases.

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  2. Sonny Blount (1,845 comments) says:

    Obama a winner?

    He kicked off by asking for a clean $2.5 trillion increase in the debt limit. His polls have dropped sharply over the last few weeks, I will be interested in the next ones.

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  3. wreck1080 (3,735 comments) says:

    I was looking forward to seeing what would happen on default.

    Makes you wonder though,how can the US just continue to borrow more and more.

    Will they cut spending or just defer spending increases?

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  4. Bovver (144 comments) says:

    I would rather have Obama as President than any of those nut jobs in the Tea Party, can you imagine Michele Bachmann or Sarah Palin with their finger on the nuclear trigger.

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  5. F E Smith (3,302 comments) says:

    A very good point, JamesP. That mirrors the UK, where all of the protesting has been about reduced increases in spending, not actual reductions in spending.

    And, like Sonny, I cannot see how this benefits Obama. Other than not defaulting, he didn’t get the tax increases that were, for him and his left wing core constituency, bottom line. This will cost him a lot of support within the Democratic Party itself, although he might not mind that (so long as there isn’t a challenge at the primaries) as he is already re-positioning himself towards the centre, same as he did for 2008.

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  6. mikenmild (10,766 comments) says:

    wreck

    At the moment the US has only agreed to defer spending increases and find unspecified cuts. As there is no practical likelihood of the US government defaulting on its debts, its ability to borrow money remains unaffected. Any actual solution would require a combination of spending cuts and revenue increases.

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  7. Other_Andy (2,326 comments) says:

    Hold on DPF
    Obama might think a deal has been done on the US debt ceiling but he is jumping the gun.
    While House Republicans and Senate Democrats have come to an “agreement,” the bill has not been voted on in the Senate, or in the House.

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  8. Manolo (13,401 comments) says:

    Unfortunately, the Messiah is a profligate spender, as any other supporter of wealth-redistribution. His Obamacare will make things worse.

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  9. Other_Andy (2,326 comments) says:

    As previously stated.
    The debt deal is NOT done yet.
    http://www.reuters.com/article/2011/08/01/usa-debt-idUSN1E76U00H20110801
    Wishful thinking?

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  10. PaulL (5,875 comments) says:

    mikenmild: the Republicans / Tea Party folks have been quite successful so far. They’ve moved from no consideration of spending cuts at all, and maybe some fiddling with the rate of increase in spending, to a world where spending cuts are not just possible, but mandatory. That’s a big achievement.

    I think what some people underestimate is the nature of partisan politics in the US, and the exact incentives driving the Republicans. It’s very hard at the moment for them to agree to any revenue increase – tax rise, loophole closing, removal of a subsidy even, because of the timing in the political cycle, the particular mess that the US economy finds itself in, and the years of big spending Republicans that people are now sick of.

    Interesting that, once again, compromise favours the most unreasonable. Learnings there for how to run a political movement.

    Medium term, there will be revenue increases, but they’ll be fudged somehow.

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  11. Adolf Fiinkensein (2,799 comments) says:

    Yes Other Andy. It seems to me the media has not greatly reported the deep unhappiness in the loony left for this current farcical masquerade. Obama’s poll ratings are rock bottom and it would not take a hell of a lot for the Doncs to conclude he is unelectable and pull a primary on him.

    Hillary for Pres? Hell he husband to whom she has stuck through thick and thin wouldn’t be able to resist.

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  12. Jimbob (640 comments) says:

    You would have to be dreaming if you think the Yanks will ever pay off 16 trillion dollars and counting. They will default most of it, as eventually they will lose their reserve currency status.
    It is how we get there is the problem.
    BTW the total debt owed by Americans is 54 trillion dollars, quite a nice pile of cotton, ink and wood pulp.

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  13. Michael (896 comments) says:

    Ruth Richardson for POTUS. (Pity she can’t run, but someone needs to tell the US that they can’t keep funding the pet projects of Senators forever.)

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  14. SPC (5,397 comments) says:

    President Obama is a hostage victim agreeing to the terms for his release, calling him a winner is Orwellian.

    Republicans cut taxes under their own President and now are forcing a Democrat one to agree to spending cuts.

    Republicans in the House getting Senate Democrats to agree to compromises that party from revisitiing the result.

    Total victory to the Tea Party movemnent, the USA deserves to reap the grapes of wrath.

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  15. Other_Andy (2,326 comments) says:

    @SPC (1,067) Says:

    “Republicans cut taxes under their own President and now are forcing a Democrat one to agree to spending cuts.”

    You don’t really know what you are talking about, do you?

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  16. PaulL (5,875 comments) says:

    There’s a grain of truth in what SPC says. The problem comes in three parts:
    – Obama (and Bush) going into massive spending mode to save us from the GFC, and locking that level of spending in rather than it being a one-off
    – The GFC and associated downturn greatly increasing govt spending (for welfare and the like, as well as lower revenues from lower profits and therefore lower taxes)
    – The pre-existing deficit that Bush and others created, that shouldn’t have existed at a time of massive plenty for all

    I’d score that as 50%/50% to the left and the right. The spending for the GFC was largely an Obama thing, Bush did a bit. The GFC itself was also a bipartisan affair, with the left pushing policies that made it easy for people to get into debt they couldn’t service, and the right pushing policies that insulated banks and others from the consequences of their decisions. The pre-existing deficit – well, also a bipartisan affair, both Bush and Clinton did their shares on that one.

    Of course, the people most to blame in all this is the voters, since they put up with, and even voted for, all this crap. And that’s where the Tea Party is a good thing – the voters are starting to have a say on “business as usual” in politics. Sure, some of their policy prescriptions are wacky, but they do have a clear view on whether politicians should say one thing and do another, or even worse, just promise crap that’ll never work purely to get elected.

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  17. SPC (5,397 comments) says:

    So, Other Andy what’s your opinion, the Washington Post was right to call Obama a winner?

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  18. Other_Andy (2,326 comments) says:

    @SPC

    Personally, I do not take much notice what either the WaPo or the NYT are reporting.

    Now your statement:

    “Republicans cut taxes under their own President and now are forcing a Democrat one to agree to spending cuts.”

    1. Who approved the tax cuts under Bush?
    2. What happened after the tax cuts with the tax intake?

    And no, I am no fan of Bush but Obama is even worse (On many fronts).

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  19. SPC (5,397 comments) says:

    PaulL

    Yeah right.

    The history of American budget problems began with the Laffer curve and Reagan’s tax cuts response – a programme designed to force government spending cuts.

    There were continuing budget deficts resulting and an accumulated debt build-up.

    Clinton’s administration dealt with this by restraining spending and using growth to reduce the deficit.

    George W Bush’s administration re-applied tax cut policy (on top of easy credit and the wars) and so deficits built up again (more accumulated debt) during a period of growth – leaving large problems when growth ended (as it would when the price of the easy money came to be paid).

    So this time after a brief period of bi-partisan support for spending after the GFC, the focus is all on spending cuts including programmes that were afforded in the 90′s with a balanced budget.

    If that aint a victory for the Republicans and a Democratic defeat of epic proportions I do not know what is.

    An America wealthier than ever now unable to afford programmes basic to the average OECD democracy, not because the economy cannot deliver but so corporate tax breaks and tax cuts given in recent years can be sustained.

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  20. SPC (5,397 comments) says:

    Other Andy a Republican majority in the House delivered the tax cuts Bush wanted and this Republican majority in the House is demanding spending cuts and by using the debt default card is forcing the Senate Democrats and President to go along with it.

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  21. Clint Heine (1,563 comments) says:

    This is of course rubbish and a failure at all levels. You cannot commit to cutting budgets for future governments, senates or congress. This is a token arrangement that cannot be enforced from one term to another.

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  22. Other_Andy (2,326 comments) says:

    @SPC

    I unreservedly apologise and retract my comment on 7.37
    The tax cuts were introduced during the sitting of the 109th United States Congress which was a majority Republican Congress.
    You were right, I was wrong.
    No argument.

    The following is an interesting detail though;
    After enactment of the 2003 tax cut, which lowered the marginal effective tax rate on new investment, gross domestic product surged 7.5% in the third quarter, the fastest pace since 1984. And for 26 straight months unemployment stayed below 5%.
    The Bush tax cuts also led to increases in tax revenues, and after 2004 the revenues grew faster than the economy. The ratio of tax receipts to GDP rose to 18.8% in 2007, above the 40-year average, and the deficit was just 1.2% of GDP.
    From 2004 to 2008, capital gains realizations grew by 60%; from 2004 to 2007, corporate tax receipts nearly doubled, adding a full point to the revenues-to-GDP ratio.

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  23. SPC (5,397 comments) says:

    No one is arguing that tax cuts don’t stimulate the economy (but when combined with easy credit it’s a little extreme), the problem is that in the cyclical downturn the lows are all the larger and more scary in budget management terms.

    And there is some point at which continued tax cuts leave government under-funded and the nation with accumulated debt problems.

    The Laffer curve idea is now operating in the more global market economy that leaves its efficacy less certain.

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  24. Falafulu Fisi (2,176 comments) says:

    So the (over) spending can now continue…

    Bovver said…
    I would rather have Obama as President than any of those nut jobs in the Tea Party, can you imagine Michele Bachmann or Sarah Palin with their finger on the nuclear trigger.

    Are you an economic illiterate or what? You seemed to be. What’s the cause of the US debt problem? Keynesian economics. What do Bachmann/Palin? They’re anti-Keynesian. Do you know the difference?

    Besides, economic collapse is more dangerous than a nuclear trigger. Hillary Clinton raised that scenario earlier this year.

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  25. Luc Hansen (4,573 comments) says:

    It’s obvious that Obama was a big winner on the day. He very cleverly manipulated the Tea Party odds and ends (with the emphasis on the odds), the hyperactive tail of the Republican congressional dog, to appear to paint him into a corner where even Democrats have no choice but to back an austerity programme, with far worse to come soon into the next presidential term, no matter who the POTUS is.

    Just so you’all know, my choice for the next POTUS team is for a Romney/Bachman ticket.

    I know that will surprise many, but my reasons are solid.

    First, let’s deal with Bachman. Bachman for VP? Why not? She’s easy on the eye and strings a sentence together much more fluently than Palin, even if the content of the sentence has only a tenuous connection with reality.

    And Romney is an excellent manager who remains, to my knowledge, the only person ever to organise a modern Olympics Games that ran at a profit. And he may be able to swing the tax increases that the US badly needs.

    Which leads to a final point:

    Falafula Fisi accuses Keynesian economics of causing the US debt problem. This is nonsense. The last few Republican presidents have run up huge debts through tax cuts for the wealthy while maintaining or even increasing entitlements – the latter to ensure the party political support essential to winning elections in democratic nation.

    Clinton restored the finances through a mixture of tightening eligibility rules for certain entitlements and tax increases. And the economy grew solidly.

    Then Bush II threw it all away again, with tax cuts and wars, so Obama inherited an existing huge debt (part Hayekian and part plain carelessness).

    THEN Obama instituted a form of Keynesian stimulus, but as it was mainly aimed at saving bankers skins, it was pretty ineffectual for Joe Public.

    Meanwhile, US infrastructure continues to crumble. Their nuclear plants are all nearly obsolete, only kept going by reducing safety margins and existing coal plants are becoming increasingly untenable purely on aerosol pollution grounds, let alone carbon dioxide pollution! Without clean energy, the US is going to find it increasingly difficult to maintain its place in the world.

    I hope.

    Back on topic, what all these shenanigans in the US brings home is how much the world as a whole has swung to the right, politically, that is. The US has two extreme conservative parties sharing power, and most, if not all, other OECD nations have two moderately conservative parties or coalitions of parties, including NZ and Australia.

    Mind you, my choice of choices for VP would be Nicky Haley because it appears she shares it around a bit!

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  26. Jeff83 (771 comments) says:

    I wouldn’t call Ruth Richardson evil, but I wouldn’t want her around for dinner.

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  27. Falafulu Fisi (2,176 comments) says:

    Luc Hansen, stop arguing with with yourself as if you know. This problem has been around for many decades during presidents from both the Republican and Democrat. It’s Keynesian Economics After All. You seemed to think that the debt problem is something that just happened only in the last 2 decades.

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  28. kiwi in america (2,438 comments) says:

    Plus the deal’s not officially done yet and may yet change.

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  29. Elaycee (4,305 comments) says:

    “It’s obvious that Obama was a big winner on the day.”

    Bwahahahahaaaaaaaa

    ROTFALMAO. :P

    Is the weather OK on your planet?

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  30. mikenmild (10,766 comments) says:

    Overall, the Republicans have come out winners, preserving the insane Bush-era tax cuts and imposing spending cuts to harm the US economy ahead of the 2012 elections.

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  31. Luc Hansen (4,573 comments) says:

    There goes Falafulluvit again!

    If he can’t raise a decent debating point, which is pretty much his permanent affliction, he just projects (ie, lies).

    Get this, debt, per se, whether government or corporate or personal is not necessarily a problem. Reagan turned the US from the world’s biggest creditor to biggest debtor in a very short time, and it only took a short time to turn that around. Then Bush II repeated the cycle.

    As I keep pointing out, this is not a belief of mine based on support for one or the other of the major American parties – I have little time for either, but I must admit, I haven’t yet seen a Republican I could support (except for those with attractions beyond politics!) but the odd Democrat can be superficially attractive, until you see how they support wanton attacks on the poorest people in the world, mass murder and colonialist oppression.

    And cuddle up to murdering dictators.

    Back on topic, governments can and should go in and out of debt as necessary. Neither is there anything inherently wrong with being permanently in debt if certain conditions are met.

    So the point is, just to be clear, the existence of debt is not necessarily indicative of a debt problem.

    I fail to see the point of the link you provided. I would agree that the US has largely been governed by Keynesian economics since the Great Depression, especially when Democrats are in charge, but I don’t call starving the government coffers of tax revenue by cutting taxes for the already rich or starting wars Keynesian in intent or result, especially when it’s all funded by Chinese money.

    And it is primarily these two actions, by Republican administrations, that has put the US into the bind in which it now finds itself.

    However, it the US would only lift its head over the lip if the fossil fuel well it is drowning in, and put a national effort into new, clean, green (peaceful) technologies, the whole world would be winners.

    Finally, this

    balanced budget constitutional amendment (a good idea)

    surely takes the prize for the most economically illiterate statement (excepting the mouthfrothers in the US congress, that is!) I have seen for a long time.

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  32. Luc Hansen (4,573 comments) says:

    Nancy Pelosi currently making her excuses on C-Span.

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  33. grumpyoldhori (2,410 comments) says:

    Would yanks vote a draft dodging Mormon in as president ?

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  34. Luc Hansen (4,573 comments) says:

    Why not?

    They voted for an imbecilic draft dodging crackhead!

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  35. mikenmild (10,766 comments) says:

    And a secret Muslim socialist!

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  36. Falafulu Fisi (2,176 comments) says:

    Luc said…
    If he can’t raise a decent debating point, which is pretty much his permanent affliction, he just projects

    Luc, I posted something for you to read, then you called me a liar. Can you explain the US Historical Federal Debt from the following graphs? See the graph if you can spot when Keynes and his theory of general equilibrium was first proposed?

    US Federal Debt in the 20th Century

    Luc said…
    Get this, debt, per se, whether government or corporate or personal is not necessarily a problem. Reagan turned the US from the world’s biggest creditor to biggest debtor in a very short time, and it only took a short time to turn that around.

    So, can you tell me at what level of Govt debt is a safe level? You don’t know do you? How about Creece? Ireland? Have you heard of risk? Can you relate it to debt level?

    Luc, I suggest you stick to pro-Palestinian suicide bombing & pro-Govt wealth redistribution/ anti-capitalist because that’s what you’re good at.

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  37. Falafulu Fisi (2,176 comments) says:

    Luc, how about you do some more reading on the risk level of growing public debt, huh?

    Scale-invariant properties of public-debt growth

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  38. Luc Hansen (4,573 comments) says:

    mikenmild

    Muslims are not socialists.

    Therefore he is either not a Muslim or not a socialist.

    Falafula

    There you go again. What is it about you that you need to skew any attempt at reason off to outliers? Are you just permanently bitter and twisted?

    Greece, in fact, hardly ranks as a Keynesian example because the problem arose mainly from protecting privilege. I haven’t spent much time on the Irish question, but the way I see it, the EU is big enough and ugly enough to look after its own!

    But nowhere do I see you discuss any responsibility on the part of lenders to lend, well, responsibly.

    There is no hard and fast rule about safe level of government debt: most simply, it depends on the circumstances. But the more secure the income stream, the higher the level of debt that can be safely assumed. Greece is a classic fail in that regard, while Ireland has a stronger export base.

    Finally, supporting a cause does not necessarily entail supporting actions carried out in the name of that cause. Martyrdom was only ever a tactic of a small group amongst millions of dispossessed and oppressed, and has now been seemingly repudiated, thank goodness. Meanwhile, if you opened your eyes, you would see that Israel’s regular and irregular army kill and maim Palestinians, men, women and children, almost every single day of the year.

    And America’s path to austerity and an uncertain future continues with the passage of Obamacare v2.0.

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  39. kiwi in america (2,438 comments) says:

    Deal is done in the House – Senate set to follow early tomorrow morning. With Paul Krugman and the NY Times editorial writers so angry at the deal I’ll take that as a conservative win on points.

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  40. Luc Hansen (4,573 comments) says:

    I rest my case with your argumentation, Falafulu. The paper you posted pretty much supports what I’ve been saying. Do you actually read these or just look for an impressive title?

    Here’s a couple of snippets:

    <blockquote<While public debt can be used to invest
    in a country’s development via physical infrastructure,
    technology, and social programs, its use requires respon-
    sible governance.

    With the current
    global credit crunch, their is an increased need for respon-
    sible use of government debt.

    The authors use a lot of maths to end up merely stating the obvious. And proving that spelling mistakes can happen to anyone!

    I note that nowhere do they suggest that no government debt is a necessarily desirable goal.

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  41. Elaycee (4,305 comments) says:

    Luc – I’m sure you also meant to add balance by including this too: Meanwhile, if you opened your eyes, you would see that Palestine’s irregular army kill and maim Israeli men, women and children, almost every single day of the year.

    Of course, leaving this part out was just an oversight on your part….

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  42. Falafulu Fisi (2,176 comments) says:

    Luc said…
    The authors use a lot of maths to end up merely stating the obvious.

    What a dumb comment. The point of the study is show that there is empirical functional relation between risk of default and public debt? If it is obvious, then tell what exactly the debt-to-GDP ratio is the cut-off point? You don’t know do you? The gives a rough estimation of where the cut-off, because it is a number that is arbitrary decided.

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  43. Luc Hansen (4,573 comments) says:

    Problem is, Elaycee, like much of the nonsense posted here, that is simply not true.

    Why don’t you open your eyes?

    http://www.theheadlines.org/

    I have to go now, sadly, just when I’m starting to have fun…

    On topic again: a win for conservatives (including the president) but a loss for Joe Public, sadly, and now we have Europe and the US setting sail into the headwinds of needless austerity.

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  44. Elaycee (4,305 comments) says:

    Luc – the problem with you is that is anyone else’s view differs from yours, you simply try to discredit is by using smoke and mirrors and bluster short on fact. And then you run away.

    But FYI – I prefer to keep both eyes open to what is happening in the Middle East and can appreciate that there are issues on both sides. But in your case, you simply prove time and time again that myopia is alive and well. Sad, really.

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  45. kiwi in america (2,438 comments) says:

    Elaycee
    Luc’s blog tells you all you need to know about his balance (or lack thereof) concerning the issues in the Middle East – it is easily summed up: Palestine good Israel bad

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  46. Paulus (2,503 comments) says:

    Obama wins – he won’t actually do it, but will talk about doing it – form a committee.

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  47. Elaycee (4,305 comments) says:

    @kiwi in america – I have to agree with you. One of the big problems with myopia is that all sense of perspective is lost.

    But some of the comments from Luc are so deviod of facts / lack balance or are so wide of the mark that they deserve to be called for what they are – propaganda based bullshit.

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  48. SPC (5,397 comments) says:

    If Obama does not promise the Democrat Party that he will run on a policy of ending the Bush tax cuts in 2013 his nomination is now at risk – his base is really pissed off. Why 4 more years of this and then for it to be followed by a real Republican in office who would block the work of any Democrat majority then emerging in the House.

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  49. Mark (1,368 comments) says:

    How long before the US dollar loses its reserve currency status?

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  50. kiwi in america (2,438 comments) says:

    Correct SPC – a most inviting prospect!

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  51. Luc Hansen (4,573 comments) says:

    Falafula Fisi: I understand that English is not your first language, but even so, sometimes I’m surprised at your lack of comprehension of the written word.

    I gave you the answer to your question. The answer is quite clear, regardless of mathematical gyrations so compelling to the cause of economic analysis that the paper is published in a physics journal. The answer is: it depends.

    You know as well as I do that bivariable analysis is next to useless. DPF does it all the time. Therefore…never mind.

    What you really need to do with this brilliant intellect and mathematical training of yours is to get published! I’m still waiting for you to come to us skiting about having a paper accepted in Nature Climate Change (I’m a subscriber) that shows the remorseless rise in global average temperature, rising sea levels, migration of species etc etc are NOT the result of CO2 but, rather, perhaps, with specified uncertainties, the farts of maggots. More people equals more maggots. Simple really.

    Elaycee: I can’t agree with you if the facts don’t back you up. I called you out and you resorted to deflection. The link I provided you gives a pretty comprehensive account of the day to day abuse of Palestinians by Israel. If you have proof that the extent and impacts of Palestinian resistance in any way approaches that of the most militarised state in the Middle East, please furnish it. PS, I had to go to work earlier.

    KIA – for you to accuse me of a black and white view is a most egregious example of the pot calling the kettle black. In fact, I look at both sides and even a generous interpretation of the facts informs me compellingly that the cause of the Palestinians is just. This does not mean Palestinians are good and Israelis bad. That is just nonsense. But I suspect you adhere to the reverse view. Bear in mind that my blog is purely to rebut the hasbara of New Zealand-based supporters of Israel, so the content reflects that.

    At the moment, in Israel/Palestine, the bully boys reign supreme, both in the military contest and the propaganda narratives. That will change. Look at history.

    Finally, again back on topic, my point with the debt deal is this: Obama is naturally inclined to cut entitlements; he has made that clear in his comments leading into the final bill. That the Republicans are crowing about their “win” is good cover for Obama. Reports I have seen indicate that Obama offered far more cuts than the Republicans even wanted!

    But Obama lost on the revenue raising aspect – or did he? The bipartisan committee being set up will not, by definition, agree to increased taxes, so Obama can safely say to his biggest donors, with a nod and a wink, it’s all OK, boys, business as usual!

    I also think that while Obama thinks he is doing the smart thing, he doesn’t accept the advice of leading economists that he is adding to the woes of the economy leading into an election year. He may have ensured any recovery stalls, and that may be fatal for his election chances.

    Didn’t he campaign last time on ending the Bush tax cuts? Who would believe him this time around?

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  52. kiwi in america (2,438 comments) says:

    Obama wanted revenue increases – he talked incessantly about “fairness” and “a balanced approach” in every public utterance on the debt ceiling debate – that’s liberalese for tax increases. He didnt get them and wont get any out of the super committe. The debt ceiling increase came out of spending cuts. Obama got his major concession though – an extension of the debt ceiling beyond 2012 so he wont have this particular specific fight before the election. The Tea Party has changed the debate to pretty much HOW and WHAT spending cuts away from Obama and the Dems desire and dream for tax increases – elections have consequences! Obama caved on the extension of the Bush tax cuts and this plan has enraged his base so I do believe both actions show some degree of Obama accepting the new reality of a GOP controlled House.

    By far his biggest problem is the state of the economy. Most observers believe the stimulus failed to do what is proponents claimed it would – cut unemployment. All the stimulus did was shore up State and City government budgets for another cycle or two and now that the cupboard is bare, the States are forced to make the cuts they should’ve made in 2009 hence the upswing in unemployment coming from laid off government workers.

    The extremely poor Q2 GDP figure and the sharp (from 1.9% to a measly 0.4%) downward revision of the Q1 GDP figure points to a significant weakening in the recovery indeed it is the weakest shallowest recovery from any recession since WW2. Private job creation is extremely weak due to vast sums of cash staying on the sideline with employers choosing to not hire banking on being able to extract greater productivity from the existing workforce. The unpredictable nature of the Obama Admins regulatory overreach is having a deletorious effect on hiring due to unknown new regulations to stem from the Obamacare legislation, a slew of new compliance measure yet to be promulgated from Dodds Franks and now an attempt by the EPA to regulate the defeated Cap and Trade bill via a contorted interpretation of the Clean Air Act vis a vis building emissions. The coal industry alone could lose 1 million jobs and the green jobs sector is suffering because it cannot survive without Federal government subsidies and the money for them is running out.

    A failed stimulus, faltering growth bordering on a double dip recession, rising unemployment, falling consumer spending and job killing regulatory overreach – middle America is looking at the fruits of an inexperienced President with strong liberal tendencies who prefers class warfare demagogery to policies known to create real private sector jobs and his re-election chances are looking dimmer by the day. He counted on a ‘weak’ GOP field – wait until Gov Rick Perry enters the race. He will easily topple Romney from his shaky front runner perch and run hard and effectively against Obama despite the fundraising advantage Obama has.

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  53. Elaycee (4,305 comments) says:

    @Luc Hansen says: “Elaycee: I can’t agree with you if the facts don’t back you up. I called you out and you resorted to deflection. The link I provided you gives a pretty comprehensive account of the day to day abuse of Palestinians by Israel. If you have proof that the extent and impacts of Palestinian resistance in any way approaches that of the most militarised state in the Middle East, please furnish it.”

    Oh, bollocks. The ‘account’ you provided can hardly be called neutral – it was written by the protagonists!

    Luc, you have a myopic view on the Middle East [Palestine = good / Israel = bad] and your tactic of trying to discredit any counter view (or even a balanced view), is typical of a zealot. You haven’t called me out at all – you merely reverted to type and brought in the propaganda in an effort to support your own jaundiced view.

    In my view, there is fault on many sides within the Middle East. But I’m probably lucky that I open both eyes and clear my mind before I form an opinion. As I’ve said already, your own myopia prevents you from gaining a balanced view. And it shows.

    If I wanted propaganda, I’ll just read from….. er, Palestine Today.

    You’re one sad puppy.

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  54. Falafulu Fisi (2,176 comments) says:

    Luc said…
    I understand that English is not your first language, but even so, sometimes I’m surprised at your lack of comprehension of the written word.

    No, Luc. I fully comprehend written words in my domain and that is science and engineering. You do understand everyday common language and that doesn’t translate to English in engineering and science. Your problem is that you don’t understand the English language in their application to science and engineering and you must deal with that fact, otherwise you would be a brilliant engineer or scientist.

    Luc said…
    I gave you the answer to your question.

    No, you didn’t give an answer. I stated a fact, which a 5 year old English speaker can understand. Here is what I stated in my post above. I said, the cause of the US debt problem? Keynesian economics. Keynes is interference is the free markets via Govt spending. Stimulus? Debt is borrowing to spend and that’s the fact. Spend on what by the Govt is irrelevant. Govt doesn’t borrow to not do anything with it. They do it for the reason to spend (Keynesian), which you quoted the following from the paper, While public debt can be used to invest in a country’s development via physical infrastructure, technology, and social programs, its use requires responsible governance. You don’t need a mathematical mind to understand what you’ve just quoted is a short for Keynesian or perhaps you didn’t get it, did you?

    Luc said…
    The answer is quite clear, regardless of mathematical gyrations so compelling to the cause of economic analysis that the paper is published in a physics journal. The answer is: it depends.

    No, the answer is not dependent but quite clear. Kill Keynesian economics, adopt Austrian economics and the problem disappears. The paper is an econophysics one, and that’s the reason it was published in a physics journal. This young field has advanced economic theory over the last decade with new understanding that traditional neoclassical economics had never been able to explain. The traditional method that is being used in Physics as Zipf Law had been adopted by the authors of the paper I quoted above. BTW, there are lots of econophysics that are being submitted and published in Nature journal as well, just in case you wondered where are those econophysics researchers are being published.

    If you want a summary of developments from this new field (from conference proceedings editorial of Econophysics 2010), then read the following so just to educate yourself.

    Econophysics: Bridges over a Turbulent Current.

    Luc said…
    You know as well as I do that bivariable analysis is next to useless. DPF does it all the time. Therefore…never mind.

    Bullsh*t. The paper that I quoted is not about bi-variate analysis but establishing a power-law , which is a signature of complex systems at work. You cannot predict dynamics of a complex system but you can roughly estimate the risk, which is much better than traditional econometric or statistical analysis, because it accounts for the fat-tail of the probability distribution. Bi-variate analysis deals with normal Gaussian (bell shape) probability distribution but not fat-tail or skewed distributions, which is why it underestimates risks. Lobbyists in society do claim to find problems in every facets of our lives. Binge drinking problem, obesity problem, poverty problem, etc,… But when is something become a problem? Does the society have a problem because there are 2 obese people in the population? How about 100 people? If not, then how about 10000 people? So, it is basically arbitrary isn’t it? The paper that I quoted above thus established a rough guide to estimating the likelihood of default based on certain risk level based on empirical evidence, which eliminates guess work.

    Luc said…
    What you really need to do with this brilliant intellect and mathematical training of yours is to get published! I’m still waiting for you to come to us skiting about having a paper accepted in Nature Climate Change (I’m a subscriber) that shows the remorseless rise in global average temperature, rising sea levels, migration of species etc etc are NOT the result of CO2 but, rather, perhaps, with specified uncertainties, the farts of maggots. More people equals more maggots. Simple really.

    Luc, if you are willing to pay me at the rate that I currently earn at the moment, then I will jump and do research in climate science. I don’t need re-training in that area since I know the all the deep fundamental physics concepts that it is based on plus the high-end calculus knowledge one requires to do modeling in climate science. All I do is start picking up research papers in climate science and read. However, if you’re not willing to pay me, then NO, I’m not going to do it.

    Why don’t you enroll for a PhD at University to study climate science, if you’re so passion about the topic? I have opinions on climate science based on my knowledge, but it doesn’t mean that I have to become a boring climate scientist. It is far more interesting to me doing what I do now then become a boring one dimensional climate scientist, since I read many scientific journals far more wider than climate scientists. I can be one if I wish to, but nah, boring. You should encourage your lord Jim Salinger (former NIWA) to continue doing R&D in climate science, huh? Anyway, you’ve deflected the argument here on debt crisis to climate change in order to evade what I’ve argued above on the cause of it, since you knew that I cornered you in the argument and the only way to get out of it is to weasel and deflect.

    As Elaycee said above, that you the problem with you is that is anyone else’s view differs from yours, you simply try to discredit is by using smoke and mirrors and bluster short on fact. And then you run away. That’s exactly what you’ve just done here on this thread. You called me a liar for stating the fact that Keynesian is the main problem. I posted a paper for you to read, which you didn’t fully understand it in its entirety, then complain that it was published in a physics journal as somehow it makes worthless. You then went on to deflect by saying that I should publish articles in climate journals. The reason you did that because there isn’t enough neurons in your brain. Your best option is to deflect and obfuscate.

    As I said above Luke, stick to pro-Palestinian suicide bombing because that’s your expertise. You seemed to have a PhD in that topic.

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  55. mikenmild (10,766 comments) says:

    I didn’t see Luc supporting suicide bombing. Did I miss something?

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  56. kiwi in america (2,438 comments) says:

    mikenmild
    I doubt Luc has ever written the phrase “I support suicide bombing” – he’s much more subtle about it. He sympathises with the Palestinian’s plight, he rails against the evils of Israel’s ‘occupation’ and he understands why Palestinians feel the need to combat what he sees as state sponsored Israeli terrorism with a home grown ‘improptu’ response such as suicide bombing. He will decry a specific event but always qualify it with a “but Israel is worse because…….” I believe he sees Palestinian suicide bomings (and Hamas rocket attacks aimed at civilian targets) as a legitimate tactic – because Israel has killed civilians in the midst of its various wars and skirmishes in the region. I would have modified Fala Fulafisi’s description of Luc as having a PhD in Palestinian grievances. He pretends to be oh so neutral and to have merely taken the Palestinian’s side after an ‘objective’ viewing of the facts when in reality he is a deeply partisan protagonist to the point of reading and believing the most distorted revisionist Palestinian histories of matters such as ancient Jewish ethnicity and ties to the land of Palestine. He will quote large swarths of this material as if it is immutable fact without ever acknowledging the incredible bias of the authors. Even well regarded neutral but ISRAELI historians are ignored – because they must really secretly support the Zionist State. He further reveals his obsession by finding any excuse to hijack almost any thread by making cryptic pro Palestinian anti-Israeli comments. He retreats into a bluster of obfuscation when confronted, he cloaks his responses in faux outrage that his measured and tempered views could ever be seen as biased and he frequently engages in nasty snide put downs of anyone who challenges him all the while trying to portray himself as a disinterested academic merely seeking the truth.

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  57. Elaycee (4,305 comments) says:

    KIA – Good post. However, IMO Luc is less subtle than you suggest – he is openly pro Hamas and openly anti Israel.

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  58. mikenmild (10,766 comments) says:

    Thanks KIA. It is a difficult topic area and one on which it is hard to find truly balanced views.

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  59. tom hunter (4,436 comments) says:

    Having just returned from three weeks in the USA I’d have to say that the recession and unemployment do not actually hit you in the face. In fact things seemed to be cooking along fairly well when one looked at the cars, people in diners and so forth. Most of my time was spent in Chicago, which is supposedly one of the financial crisis cities, sitting in the midst of the Illinois state financial crisis – just like LA in California or NY, NY.

    I guess it’s just another example of anecdotal data not being as trustworthy as measurements.

    And on the latter point I delayed most purchases until the last possible moment as the US dollar continued to drop against the NZ. Saved $500 on a bunch of Apple gear.

    The one thing I did note with some teasing delight in Chicago was that none of my Obama-voting/raving comrades had anything to say about the man. Not that they said anything bad – they just did not fight back, even when I taunted them by suggesting that it was a replay of Jonathan Chait’s comment in 2008 that perhaps conservatives had been … right about Bill Clinton all along?

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  60. Scott Chris (5,896 comments) says:

    kia – A bit rich of you to point the finger at Luc Hansen’s bias, when you yourself are such an Israeli apologist. The question remains, regardless of who is the villain or victim, of who has the power and means to make a difference in this conflict. The sad irony for me, is that the Jewish people, who have been so sorely persecuted over the centuries, seem to have learned so little from their tormenters.

    On a purely psychological level, what motivation could drive so many to resort to blowing themselves, and their perceived enemies, up? Isn’t this indicative of something to you? (and please don’t argue the evil Islam line….. remember the story of Samson’s suicide?)

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  61. Elaycee (4,305 comments) says:

    Back on topic:

    Anyone still thinking that Obama has emerged from this debacle with reputation intact – please advise.

    I have a bridge for sale. Going cheap. :)

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  62. kiwi in america (2,438 comments) says:

    The difference is Scott Chris that I make no bones about the fact that I am pro – Israel whereas Luc contorts himself through fake hoops in an attempt to try and show how agnostic he is on the subject when he is shamelessly partisan. He just needs to own his partisanship and stop being so silly trying to pretend otherwise.

    All Israelis crave peace – heck if they knew they could get an enforceable lasting and valid peace treaty with the Syrians, Hezbollah, Hamas and the Palestinian Authority I reckon they’d give up the West Bank. Sadly these organizations see peace with Israel as being Israel surrendering and agreeing to commit suicide by allowing its land to be completely overrun by whatever Arab thinks it has a right to live there and that’s the kind version of their dream – the nastier version is a complete annihilation after a triumphant war – actually the very goal the Arabs had in 1948. The 2 state solution proposed by Balfour, Peel, the UN and Clinton has always been rejected.

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  63. tom hunter (4,436 comments) says:

    KIA – re my comments on Chicago above – how are things in your neck of the American woods?

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  64. kiwi in america (2,438 comments) says:

    Elaycee
    You only have to read what the partisans on the left are saying to know who won here. A few purists on the right are fretting (Bachmann, Sean Hannity) but when you control 1/2 of 1/3 of the government (the House) your options are limited. Fiscal conservative and Tea Party types should be thrilled that in 2 short years Washington has gone from how can we spend more and tax more to what can we cut to reduce the deficit WITHOUT tax increases! Huge paradigm shift with only control of the House but the battle is not over. The left will use the super committee to try and wangle back their big government agenda.

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  65. kiwi in america (2,438 comments) says:

    Tom
    I read them with interest and my thought is that America often looks like that to Kiwi eyes because America, despite its woes, still has a much higher standard of living than NZ so the average American, even in recession-like spending lockdown and with so much unemployment and fear of unemployment, they can afford bigger newer cars, more gadgets and have more discretionary income to enjoy life. In AZ life is pretty tough – we are groud zero for the collapse of the property bubble with Maricopa County being one of the top 5 for foreclosures for years. I waited and did not buy but plan to soon so I am not hurt by negative equity but almost everyone I know is ‘upside down’ as the Americans say and I know a dozen people who lost their homes. Business incomes are sharply down, jobs hard to come by (a good mate an expert software programmer found work last month after 2.5 yrs unemployed), fear of unemployment is rampant. Anyone under 70 will say that these are the toughest economic times they’ve ever experienced. Washington DC is the only exceptionas I was there only last month – it is still growing nicely, property values up and restaurants busy – all on the backs of the growth of the Obama Adminstration’s expansion of Federal government.

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  66. tom hunter (4,436 comments) says:

    Thanks KIA

    That was my conclusion also, given the years I lived and worked there. Still, I somehow expected it to be more obviously worse in terms of people’s comments. But even one of my sister-in-law’s associates – a lawyer who has had no real legal work for two years and little expectation of getting any soon – had a classic American attitude: she’s earning money via teaching aerobics classes and such like and she simply shrugs her shoulders about how tough it is. She’s also a Democrat voting liberal, which is rather a mirror of the arguments peddled in What’s the Matter With Kansas?.

    My niece also came through the city for a flying visit, never having visited Chicago. She’s living in D.C. and is yet another lawyer. Former barrister in NZ, she’s just done the D.C bar exam following a two year Masters at a top-flight law school. No dice for work for her either, but hubbie is a government employee who is basically rolling in it so she at least has that as a backdrop. Since she also has a geology degree and has employed it literally at the coalface in Australia (specifically the goldface) I’ve told her to go for that instead. Various engineering friends told me their industries are screaming for such people, which fits with a response to Instapundit where a guy described first-time, qualified welders getting $62 per hour at his drilling sites in Arkansas.

    In turn my niece told me of one of her female friends who lives in LA. Her husband is a cop and recently overtime was wiped out in a desperate effort to save the LA city budget. That destroyed 1/3 of his overall pay – with the result that they lost their house.

    So there are spotlights of grimness, just not as much as a I’d expected. Perhaps people are just tired of talking about it?

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  67. kiwi in america (2,438 comments) says:

    Tom
    Americans are perennial optimists and even in the midst of hardship maintain a can do cheery disposition. There is a fierce streak of independence and where I live, a real aversion and discomfort with welfare handouts. There are heaps of under employed people I know – working in jobs below their skill level because it was all the work they could find but they’ll do anything to provide for their family without outside assistance. Families help each other out – church charities are much more prevelant here than in NZ and less of the welfare state mentality than in NZ. When I detail the government’s package for residential red zone home owners in Christchurch they are flabbergasted at the generosity of such a scheme as they know residents in the San Francisco earthquake in 1999 had no such package offered. A cursory listen to Radio NZ after the package and since reveals the typical whining moaning welfare mentality types who decry that the government didnt give them enough. My sister in the west of Chch cant believe the ingratitude of these people considering the financial condition of the country and feels the package is pretty good.

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  68. SPC (5,397 comments) says:

    Of course there is an aversion to welfare handouts, because they are time limited … resorting to them is a cause for some trepidation that they will soon no longer be available.

    When the USA moved to faith based providers of this time limited welfare they were conditioning people to dependence on charity when in need.

    This lack of welfare support is why so many Americans lose their homes in economic downturns and the impact of that on family life – a high divorce rate – is obvious.

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  69. kiwi in america (2,438 comments) says:

    SPC
    The aversion is to even going on welfare in the first place – a completely separate issue to the time limited nature of welfare payments. Its the mindset which is quite different to NZ.

    Americans lose their homes more readily because the foreclosure laws in almost all states are so much loser and more generous in favour of the borrower than the mortgagee sale process in New Zealand. Almost all home loans in NZ require the borrower to personally guarantee the loan so that any loss on a forced sale must be repaid by the borrow on pain of bankruptcy. In most US states you can walk from your mortgage or short sell the house (sell for less than the mortgage) and the lender cannot chase you for the shortfall. Whilst your credit takes a one off hit here it is so much easier and quicker to restore your credit because the credit ratings here are a flexible score that uses a complex algorithm of variables to determine vs NZ’s blunt reporting of a loan default that is stuck on your history for 7 years regardless of subsequent good credit behaviour.

    Finally I think you’ll find that NZ’s divorce rate is pretty much the same as America’s so that assertion is also incorrect.

    0 for 3 tonight my friend.

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  70. SPC (5,397 comments) says:

    Na – the food stamps nature of welfare is the reason for the stigma (has created the stigma) and the time limits now even delays people from resorting to it.

    We all know about the areas of the USA left with empty homes after jobs there are lost – the direct link to unemployment of loss of a home is inescapable.

    And the divorce rate in the USA is way higher than here (50 to 33%)- 1 and 2 explain why.

    It’s 0/3 all right.

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  71. Luc Hansen (4,573 comments) says:

    Falafulu Fisi

    You really need to calm down and smell the roses. I spend my days caring for our two year old (well, me and the caregiver share, but I like to maximise my time with my daughter) and I work nights/evenings (which I don’t particularly enjoy), all of which makes me very, very busy. And I type slow (no doubt you would say I also think slow!). And the toddler is a bit crook right now, so blogging is a low priority.

    And I do enjoy winding you up, which a bright boy like you should know by now!

    But this was your original statement that attracted my attention:

    What’s the cause of the US debt problem? Keynesian economics.

    Firstly, does the US really have a debt problem? Only 5% of its GDP is derived from exports, so the wealthiest nation in the world has huge potential to simply, selectively, stoke up domestic demand and use the revenues to retire debt. Or, in fact, it can just print money. So any so-called debt problem is purely a matter of perception. The US has a AAA rating, after all.

    Did I not mention above that the Secretary General of the OECD recently pointed out to Stephen Sackur that once the US can get its economy cranked up again the 14 trillion debt pile will disappear pretty quickly?

    Secondly, you state that the debt problem is caused by Keynesian economics. Here I definitely disagree and I have stated my reasons above, but to repeat, one major cause of the current level of debt of the US (and a major contributing factor to its great recession) are the Bush tax cuts that a good Keynesian would never have agreed to; a second is the wars in Iraq and Afghanistan. I don’t think I ever read of Keynes advocating war as part of a stimulus package.

    Now we have the obscene situation occurring almost all over the developed world of the middle class, the aged and the poor being required to pay for the excesses of the rich and successful. The US was somewhat of an outlier until now, even though Obama’s stimulus and QE were never going to be enough to fully do the job. This is a shame because it did provide a limited chance for real time comparison. But ideology has come up trumps.

    Speaking of ideology, I see you now you come out of the woodwork as an Austrian, advocating a theory that Keynes demolished in the 1930s. But debate has revived, I admit, and I have been following it.

    Try this BBC programme: http://www.bbc.co.uk/programmes/b00y2bwz entitled “Yo Hayek” hosted by an ex-Kiwi, Jamie Whyte, an Austrian and a very clever guy. It also features the great rap video: http://www.youtube.com/watch?v=d0nERTFo-Sk – Hayek and Keynes head to head!

    Radio 4 is also running a debate held recently at the LSE, also featuring Jamie Whyte, and I’m hopeful they will put that on podcast, too.

    Finally, I don’t need to do climate science, great scientists already do that for me. I look for credible refutation of their work but haven’t found it yet. You and others of similar mindset wallow in loony tubes conspiracy theories and simply have no credibility – in fact, you are really a bit of a crank!

    Nighty night.

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  72. kiwi in america (2,438 comments) says:

    SPC
    The most recent marriage/divorce stats for NZ and the US that can show a common baseline is 2008 so it is not possible at this stage to assess the impact of this recession on divorce rates but in 2008 there were 21,900 marriages in NZ and 9,700 divorces or about 44% http://www.stats.govt.nz/browse_for_stats/people_and_communities/marriages-civil-unions-and-divorces/MarriagesCivilUnionsandDivorces_HOTPYeDec08.aspx .

    In 2008 there were 2,157,000 marriages in the US and you have to extrapolate the divorce number from the national per 1,000 rate from the CDC numbers because 6 states data were not included in the raw divorce number = 1,063,726 divorces or 49% http://www.cdc.gov/nchs/nvss/marriage_divorce_tables.htm so my assertion that there is not that much difference between the two countries divorce rates was correct. It is also apparent that the divorce rate in the US, after years of climbing steeply has reveresed that trend somewhat and the rates have scaled back. We won’t know for a few years if the recession has reversed this slight decline.

    Food stamps are but one of a variety of welfare services assessible in the US. They are not dispensed as stamps anymore rather a bland normal looking Visa Debit card (like an EFTPOS card) – David only allows 2 weblinks per post so just look up Electronic Benefit Transfer in Wikipedia for information about how this works but the general consensus is that the Debit cards have taken away the stigma attached to food stamp assistance. Where benefits are time limited it is usually 5 years (solo parent, sickness equivalent), unemployment insurance varies from state to state but is a minimum of 6 months whereas the truly permanently invalided have long term options without the normal time limits. If I were in need of a benefit the fact that it would expire in 5 years or 6 months time would not deter me from applying as almost all people even in NZ seeking government assistance usually initially intend to only be on assistance temporarily. My point was that Americans generally are more independent thinking and less likely than NZers to turn to the state for assistance even when eligible. To claim the time limits put people off is silly -the limits just send a signal that the assistance is temporary and to plan accordingly.

    I never said there was no link between unemployment and loss of a home – that link is demonstrated in all 1st world economies. What I said was that there are additional legal structure and credit reporting factors in the US that make it much easier and less potentially damaging for future credit acquisition for those under financial duress to walk away from their home. The higher rate of foreclosure in the US vs mortgagee sales in NZ is not just a function of the higher unemployment rate in the US – I know what I’m talking about here having been a mortgage broker in both countries.

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  73. Falafulu Fisi (2,176 comments) says:

    Luc said…
    Or, in fact, it can just print money.? …
    … Secondly, you state that the debt problem is caused by Keynesian economics.

    Luc, you seemed to apply contradictory logic. You admit that I’m right (without being conscious about it) by saying, they should just print money. This is keynesian stimulus (didn’t you know that) which makes the US dollar worthless. Stimulus using money created from thin air won’t solve the long debt problem.

    Luc said…
    Bush tax cuts that a good Keynesian …

    To blame tax cuts is to imply that they have a revenue collection problem which is not. Spending is the problem (thus leading to further debt) and it is unbelievable that you can’t see that.

    Luc said…
    Speaking of ideology, I see you now you come out of the woodwork as an Austrian, advocating a theory that Keynes demolished in the 1930s. But debate has revived, I admit, and I have been following it.

    Luc, Keynes theory didn’t destroy Hayek in the 1930s, because historical evidence showed otherwise. Politicians adopted Keynes ideas early on without any evidence that it worked. You should stop reading online economics materials from cartoonists (either online or print) and start reading economic peer review researches. Keynesian theory was exposed as false during the US stagflation in the 1970s. Economics Nobel Laureate (1995), Prof. Robert Lucas was the main critique at the time (and still today). That’s when economists realized that Keynesian economics is nonsense.

    The reason I do support Austrian economics, is because it is consistent with findings from researches in econo-physics. Many physicists, think that Hayek in particular was the brilliant precursor of complexity theory, he stressed the inherent limits to knowledge. Hayek and Austrian School of thoughts believe that order in market systems is spontaneous (or emergent) in that it is the result of human action, but not the execution of any human design. This is SOC (self-organized-criticality).So, empirical evidence from researches in econo-physics are on the side of Hayek. Dig further on the topic of complexity theory and economics, and you will find lots of references on the net.

    Since, you are a warmist, you may as well be interested in the potential application of complexity theory in climate science. Here is a good review.

    Self-Organised Criticality and the Atmospheric Sciences: selected review, new findings and future directions

    You say that the war in Irag and Afghan were the main cause of the debt problem. I agree with that, but then national defense is a legitimate role of a govt. The moral justification for existence of a government is to protect its citizen’s rights and national defense is its core functionality. Wealth redistribution is not a legitimate role for the government. If they accumulate debt because of war, then it is legitimate. If they accumulate debt because of entitlements and wealth redistribution, then that is not a legitimate role for the government. So, debt incurred as a result of wars for national defense is justified even it is horrible.

    Whatever you study or read about economics (either online or from print media), your reading is from a perspective of a non-researcher, which means you may tend to be mislead by your confirmation bias since you hold-on tightly to a specific ideology (ie, leftist ideology). Where as when I read economics (mostly peer review papers), i can see all the debates, who published which papers and who counter-published papers to critique those previous publications. In this way, I can see the trees and the forest in my understanding of economic theories, while you yourself can only see the forests.

    I’ll leave you with the following good online article from one of the modern day critique of Keynesian & neoclassical economics, Prof. Steve Keen.

    The Creative Destruction of G8 Economics

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  74. Luc Hansen (4,573 comments) says:

    Patronising crap, Falafulu Fisi, but a wonderful example of the triumph of ideology over evidence.

    Your adherence to scientism only ensures you inhabit a very narrow sphere of thought.

    I would remind you that the forerunner of the scientific method, which I admire, but not to the exclusion of other methods, was Natural Philosophy. In fact, according to an Einstein biographer, the theory of relativity was a thought experiment (natural philosophy; the great man called it a “brain explosion”) and Einstein called in help to do the maths.

    I don’t have any problems with the superficial validity and attractiveness of Hayek’s theories, but it is pretty obvious why democratic governments only ever dabble their toes in that particular pond! And they tend to withdraw pretty quickly, too! For them, the unemployment queues are only an election away.

    I’m afraid Keynes had it all over Hayek, whose academic career in economics was destroyed by the debate. But there is only so much sympathy one should afford an underdog.

    Your simplistic political views are fun, but you don’t really seem to practice what you preach as regards complexity.

    But another time, perhaps…

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  75. SPC (5,397 comments) says:

    Na, food stamps helped develop the welfare stigma (even if a card is now used) and this enabled the 1996 era welfare reforms which included time limits for the unemployment benefit and limited time on food stamps for adults without children – only 3 months in any three year period. And of course this means the cost of carrying the unemployed only really bites in a recession (coz when the middle class lose their jobs time duration is waived to protect home ownership/banks) – leaving the Tea Party to campaign to cut back entitlements.

    The constraint to only 3 months use of food stamps in any three year period for adults without children (suspended in 2009 only because of the recession, but could return at any time) as well as time limits on the unemployment benefit do deter take up.

    It’s simply a fact that unemployment is a major reason for home loss (well that and divorce coz of the stigma of an unemployed provider ends their marriages …). Easier access to foreclosure is only a reason for opting out of the home if property values are falling, otherwise time duration welfare is the determinant (and divorce caused by the unemployment of the husband because of stigma and her access to longer term welfare as a mother than he can get on unemployment benefit).

    For others interested

    14% of the population are on food stamps.

    http://blogs.wsj.com/economics/2010/11/04/some-14-of-us-uses-food-stamps/

    As for divorce rates, I count it as the number of past marriages that end in divorce – not the number of marriages now compared to divorces now ending past marriages. 33% of marriages c1970 here have been ended by divorce.

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