1. TJIC:

    Yeah, but "the rise of the oceans began to slow", so it's worth it.

  2. Benjamin Cole:

    Below are federal agencies, the ones that take your income taxes. (The entitlement programs, which should be trimmed, are financed by payroll taxes.)

    If you want to cut the federal deficit, you have to cut the agencies below, or raise taxes. I have never seen any government official, Tea Party, GOP or otherwise, face these facts.

    Agency/# Employees

    Defense 3,200,000
    Veterans Affairs 240,000 

    Homeland Security 200,000
    Treasury 162,119 

    Justice 124,870 

    USDA 100,000 

    DOT 100,000
    Health and Human Services 62,999 

    Interior 57,232 

    Commerce 41,711 

    NASA 19,198 

    EPA 18,879
    State 18,000 

    Labor 16,818 

    Energy 14,000 

    GSA 14,000 

    I say start cutting, cut from the top, and bring a chainsaw.

  3. Ponzi Claus:

    We don't pay debt with GDP, we pay debt with tax revenues (or the printing press, which is really a tax on cash holdings). Debt is something like 5X tax revenues. There is no choice but to print.

    It's not as bad as it sounds, though. I have found dollars to be softer than Charmin but not as soft as Quilted Northern.

  4. Gregg:

    Yeah. That is a drag, but, on a brighter note, we just got a two month extension of the payroll tax. That should lead to some SERIOUS economic growth.

  5. Capn Rusty:

    The Republicans having failed, for lack of trying, to get the great unwashed to understand basic economics, and worried more about being re-elected than doing the right thing, Boehner had no choice but to cave. It's predictable that the 2% reduction in what us workers will be required to contribute to our Social Security account will never be repealed. Theoretically, the unfunded liability of SS doesn't count as part of the deficit, because it isn't paid out of general tax revenues, but instead out of the Social Security Trust Hoax, er, "Fund.' The 2009 report of the Trustees said the unfunded liability for SS entitlements in perpetuity was $17.5 trillion. (Newer figures likely worse.) If the payroll tax funding for SS has now been permanently reduced by 16.1% (2 / 12.4), funding for that entitlement will to be recognized as coming from general revenues, and added to the deficit. Thus, 16.1% of that $17.5 trillion is now part of the deficit. In one bold stroke, the Democrats have increased the deficit by $2.82 trillion. Stand by for another downgrade.

  6. Mike Zentz:

    Anyone want to take bets on what year our debt will hit 20 trillion? I don't no matter who is right we won't have any money.

  7. caseyboy:

    Relative to the 2-month extension of the payroll tax reduction, I felt that the House should have countered with a 2-week extension to illustrate the shear folly of the Senate compromise. Or maybe they should have suggested a Super Committee to work out the extension. That worked pretty well for meeting the spending cut target.

    2-months, lets call it a year and go home to receive the accolades of the unwashed.

    A do nothing Senate, does it again. 900-days without a budget and crisis to crisis legislation. ARRGGHHH.

  8. Bill K.:

    Mike Zentz, turn that into a Yogiism: The Treasury will print so much money that we won't have any!

  9. Mark:

    @Benjamin, Cut payroll, raise taxes, or grow the economy at a faster rate will lower the deficit. POint is you forgot the growth factor.

    And yes what do you think Ron Paul has been going on about? He wants to cut whole agencies, and most other in the GOP field have at least given token support for cutting the size of government.

    The problem is that once they get in, there is so much resistance that it is hard to do. Especially when congress defines lower increases as cuts. (for all the cuts they made in 2011, spending went up 5%, I wish I could cut my family budget that way!)

    Newt is actually the only one who successfully pushed the issue and got us a few years of balanced budget with Clinton's cooperation.

  10. Benjamin Cole:

    Ponzi Claus-

    Printing more money is a tax on cash holdings. So what? Who is holding cash? Drug lords? Crooks?

    Printing money now is the way to go, print piles of it. Slash federal outlays (ala Ron Paul) and print money, and deleverage.

    Five years of five percent real growth and five percent inflation, and we will be in boom times again. The national debt will be reduced too.

    The right-wing often mistakenly conflates monetary policy and fiscal policy.

    I say go for monetarily expansionist austerity. Balance federal budget and print money to the moon.

    Do not genuflect to gold or paper money. Use money to stimulate growth when you face deflation and recession. Like now. Get out of cash into equities and real estate--help the economy grow by investment, not carrying around wads of cash.

    Japan shows you not what to do--the yen has appreciated and that country is becoming a backwater.

  11. me:

    True. Printing money is wonderful. It rewards all those folks who just knew that house prices only ever go up and punished those nasty savers who caused all the trouble. Furthermore, if we give the banks free money, they are going to invest it wisely and this will benefit everyone. Like it did before. Right? Right??

    Get an economics text book and start reading.

  12. Ted Rado:

    Printing money verges on the criminal. It amounts to stealing peoples savings.

    Another point. If it becomes commonplace to inflate away debt, who will loan money? I loan you $100 in good money, and you pay back the equivalent of $50.

    I don't understand why the USG can't run the governmant the way I run my personal finances. I would love to drive an Italian sportscar, buy my sweetie expensive jewelry, spend spring in Paris, etc. But I can't afford it so I don't do it. Has anyone in the USG heard of only spending what you have? The first law of thermodynamics states that you can't take out more than you put in. The MBA's seem to think that via some fancy paper shuffling wealth can be created out of nothing. What crap. Nobody will save and nobody will lend.

  13. Benjamin Cole:

    There are global gluts of capital. US Treasury auctions are routinely oversubscribed. Due to high global savings rates, we have no problem with capital formation. None. In fact, we may have too much capital.

    Japan has shown what tight money does. It suffocates the economy, industrial production is down 20 percent in japan since 1995. and the yen has soared.

    Savers should be investors---invest in businesses, real estate, equities. Saviung in the form of cash is idiocy and such idiots deserve to have the value of their savings decrease. Only drug lords etc save in the form of cash.

    Ted Rado--if you read what I posted, I recommend balanced federal budgets---but monetary expansionism.

    Genuflect not to gold or paper currency. They are false gods--the real goal is economic growth.

  14. Noumenon:

    In case anyone else was confused, this is Federal Government Debt: Total Public Debt. The CBO frequently uses Federal Debt Held by the Public , which is around $10 trillion.

  15. Jamessir Bensonmum:

    Disgraceful. This country rewards failure and irresponsibility. The minority of Americans live within their means and are productive. A growing number of Americans are just a burden and they're busy reproducing, claiming more benefits, and demanding more entitlements. I wish China and the rest of the world would stop buying our debt. Maybe then we'd get our heads out of our hinies.

  16. Mark:

    @me. The reason banks didn't invest money wisely is because they were forced via government programs, and government paid for lawsuits by activist groups to give loans to people who did not deserve it. The more heavily the government gets into loans the worse the decisions will be.

    Look at when government bypasses banks all together because they think the loan process is inefficient. We get solyndra, and the GE bailout. How many years before GE goes under again. I am guessing 3.

    I would say the government should get out of all lending decisions unless the loan is for illegal activity (funding terrorists and such)

  17. Ted Rado:

    The government should set an example for the citizenry: hard work, honesty, financial responsibility, etc. Instead, they encourage (by example and legislation) wild spending, freeloading, mooching off those who work harder and/or are more productive. It is amazing that in this environment we are doing as well as we are! If we followed the example of the USG, society and the economy would collapse. Can you imagine the father of a family setting such an example?

  18. Ted Rado:

    Benjamin Cole:

    The money supply should match the needs of the economy. Nobody questions this. You can't run a huge economy with $1 in circulation. The problem is that politicians print money to cover their wild spending rather than for a more noble purpose. This must sooner or later cause inflation.

    As a retiree, my biggest concern is that inflation will destroy my pension. The idea that the USG will print money to cover their ass and leave lots of individuals destitute in the process is scary.

    Finally, who will loan money with the expectation that the loan will be inflated away? It seems to me that this situation MUST be avoided.

  19. Benjamin Cole:

    Ted Rado-

    I am not callous to people living on fixed incomes. But if we are to make national macroeconomic policy with just one group in mind, we will have an imbalanced policy.

    The Bank of Japan has beaten inflation---in fact Japan has deflated since the early 1990s. Equity and stock markets are down there 80 percent. Industrial output has fallen 20 percent in Japan, while nearly doubling in the USA, since the early 1990s.

    But they have a huge bond-holding class that fears inflation. So, they are doomed. The higher yen has killed their export markets. But they have to keep money tight for bondholders, who eke out one percent returns.

    In sharp contrast, in the USA we must always reward those who risk equity for business and property formation--passive bondholders are a step below. An we have plenty of capital. This is different from the 1970s or before.

    If you have a portfolio, switch into equities.

    I see major problems for the USA going forward. If the elderly move into bond portfolios (as advocated by financial planners) they will all advocate for low inflation, or even deflation, ala Japan.

    We will follow Japan into monetary suffocation. To stimulate the economy, the US government will borrow and spend, just like Japan, but the economy will be suffocated by tight money. A mess--just like Japan.

    Young people may wish to migrate to more growth-oriented nations.

    Please read up on Market Monetarism---a nonpartisan solution to the current mess we are in,

    Good luck and best wishes in 2012 to everyone.

  20. Dan:

    That's a troubling statistic. A good deal of the blame is on Congress and the last two presidents (Bush and Obama) for spending willy-nilly on foreign interventions of dubious benefit. We've spent over $1 trillion on Afghanistan and Iraq and haven't really gotten much for the money. We're still spending over $600 bln a year on defense, about double where we were during the Clinton years. It's time the U.S. stopped trying to be the world's policeman. (The one point Ron Paul and I agree on!)

    Sad to see that many congresspeople, who are supposedly so concerned about cutting the deficit, refuse to consider sensible cuts to our military that even have been recommended by people like Bob Gates, the former defense sec. Way too much influence from the defense industry, which gets us to campaign finance reform, which of course is a third rail on this site.

  21. Benjamin Cole:

    Dan $4 trillion is the cost of Iraqistan.

    And we get nothing for it.

  22. Ted Rado:

    Benjamin Cole:

    I have been wondering about Bernacke's low interest rate policy to make cheap money available to borrowers and thus stimulate the economy. The low interest rates have more or less wiped out my investment income, and I am living on my pension and social security. I have much less to spend, thus reducing economic ativity. Is the loss of economic activity due to lost investment income more than offset by the other benefits of low interest rates? I have no data on the subject, but I doubt it.
    My loss in investment income exceeds my social security and Medicare drug benefits.

    Have you seen any data on this subject? I am a good citizen and don't mind taking a hit if it does some good, but if the net benefit to the economy is zero, why should we investors and retirees suffer? Benjamin, I am not just whining as a retiree. I am fortunate enough to be financially OK despite the continued f---ups by the USG. I just want to see thing done right!

  23. Ted Rado:

    Benjamin Cole:

    A couple of further comments. Taken as a whole, the Japanese are not a good example to follow. They have gone nowhere in twenty years.

    As to switching to equities, stocks have done nothing in over ten years. I had quite a bit in equities and rode out all the market ups and downs without a problem for twenty years. However, this current "perfect storm" is the worst in memory, and at age 83 I must guard my capital. The only way to make money in equities these days is as a trader, not as an investor. And, on average, the traders are not making money either. The average person makes the average of the market. Period. At my age, I can't stand the volatility and risk.

    For many years, a balanced portfolio of stocks and bonds brought me a good yield with low volatility. Bonds with zero yield don't cushion one against anything.

  24. An Inquirer:

    Yes, Noumenon, the CBO typically focuses on debt held by the public; however, I'm confident that analysis based on total debt is more appropriate. The bulk of debt held by the non-public is held by the Social Security Administration. We Americans do expect that this debt will be paid back -- and that must come from income taxes (or temporarily through refinancing). What must be covered by income taxes is relevant for this discussion.

  25. Dan:


    We did get little out of Iraqistan, agreed.

    The thing we were trying to get out of Iraq - a stable democracy to use as a bulwark against Iran and to deliver huge supplies of oil - hasn't worked out, because of the sectarian warfare that's consumed the country since our invasion. All of which could possibly have been avoided if we had done a bit more planning beforehand. We could have rid the country of Hussein and his henchmen and replaced him with another hardline leader who was less noxious but who still would have held the country together. No, it wouldn't have been a democracy, but the people would have potentially lived with less fear. It might have worked out well for us. Blame Bush and his minions, who never thought about what would happen once the military objective was accomplished.

    The oil is flowing again at pre-war levels, fortunately, and Iraq has huge untapped supplies. Right now production is around 2.5 mln barrels a day, but the idea would be to raise that to 6 mln a day in a few years, which would put it at 2/3 of Saudi production. Getting a safe, reliable oil supply from Iraq should be our main focus now. It's going to be tough, though, with no feet on the ground and with the different sects fighting each other now that we're gone. I'm not optimistic.

    Afghanistan is a tough case. I supported getting rid of the Taliban, because they were hosting bin Laden and his group, which was a horrible threat to the U.S. (and we should have gone in there seriously before 9/11 - had we done so perhaps 9/11 could have been avoided - blame the Clinton and Bush administrations for not adequately assessing the threat and taking action). But we never really focused on Afghanistan because we got consumed by Iraq. Obama's drone war is the right policy, but it's come a bit too late, and unfortunately the mistakes of bombing innocent civilians are turning the population against us. Now, it's unclear why we're still there at all. The drone campaign can be supported from a distance, and the Taliban and al quaida are shadows of what they once were, to which we should take some credit. Afghanistan cannot be made into a functioning democracy. And it can't be conquered. Time to declare victory and leave, while keeping a force nearby (perhaps off shore), that can swoop in if a group there once again appears to threaten our interests.