The Tulsa Forum by TulsaNow

He's making tough and painful decisions in paring down the budget in Great Brittain.  Hopefully politicians are beginning to see what unsustainable levels of government look like.

"Two cheers for David Cameron: By announcing some sharp cuts in government spending this week—paired with an honest stab at welfare reform—the British Prime Minister is doing one of the better imitations of New Jersey Governor Chris Christie we've seen lately. Our main regret is that the Tory leader didn't look to Margaret Thatcher as his role model as well.

Mr. Cameron, who came to office in May facing a budget deficit that had swollen to more than 11% of GDP from 3% in 2008, didn't shrink from some necessary decisions in the 106-page spending review he and Chancellor George Osborne unveiled Wednesday. Hefty cuts include a 26% decrease in contributions to local councils by 2015, a 24% cut to the Foreign and Commonwealth office, and another 24% cut to the Department for Culture, which includes the BBC. The Beeb's notorious mandatory annual license fee of £145.50 ($229) will be frozen until April 2017, which will no doubt help the budget medicine go down better among the British public.

Also taking a hit is the U.K.'s Ministry of Defense, whose budget will shrink by 7.5% in the coming years. That means that Britain will immediately retire an aircraft carrier and the fleet of Harrier jump jets that helped win the Falklands War. It will also mothball one of the two replacement aircraft carriers it is currently building and shrink the size of its land forces. These cuts are especially painful given the important role British troops have played in Iraq and Afghanistan. But a diminished role in the world is what happens to nations that opt to spend as lavishly on entitlements as Britain has in recent years.

Taken together, the cuts could bring the budget deficit to 1.1% of GDP by 2016, although that depends on economic growth. They would pare public spending to the pre-crisis level of about 40% of GDP, down from the near-50% it is today. That's still too high for our taste; for all the commentary about this being the most draconian exercise in austerity the West has seen in a generation, spending will still rise by £43 billion ($67 billion) over the next five years, at least in nominal terms.

Still, Mr. Cameron deserves credit for bucking the neo-Keynesian consensus—and the occasional wagged finger from the Obama Administration—and pulling Britain back from the spending brink.

Equally commendable is the Prime Minister's efforts to reform the U.K. welfare system, spending for which rose by some 40% during the governments of Gordon Brown and Tony Blair. Currently, the effective marginal tax rate for getting off the dole in Britain is a whopping 95%, hardly an incentive to find a job. That will be cut, although only to about 70%, and the current smorgasbord of welfare programs will be dramatically simplified.

So far so good. But if a government is going to move people from welfare to work, it's also going to have to offer a pro-growth agenda that permits businesses to create jobs. And here is where Mr. Cameron's austerity blueprint falls short. Mr. Osborne this week has promised that he would soon introduce the "maximum sustainable" tax on banks, calling into question the future attractiveness of London as a global financial capital. The government had already announced a 2.5-percentage-point rise in the VAT, to 20%, an increase in capital gains tax to 28% from 18%, and it has no plans to bring the top marginal income tax rate down from its current 50%.

Nor does it help for the government to continue to fund fashionable environmental boondoggles, such as £1 billion "commercial scale carbon capture and storage demonstration project," or the £200 million it means to spend for wind-power generation.

If Mr. Cameron's government wants economic growth, it will have to move in the opposite direction, especially on taxes; a diet of budget cuts alone won't do it. It will also leave his government politically vulnerable to the charge that mediocre economic results are the result of insufficient spending. The truth is that government can neither spend nor cut its way to national prosperity. Its role is to create the conditions in which businesses and entrepreneurs can do it themselves.

That's an economic lesson Mrs. Thatcher understood. Mr. Cameron, Mr. Christie and other conservatives on this side of the Atlantic could all benefit from it."

http://online.wsj.com/article/SB10001424052702304023804575566431921159198.html

Again, (and again...and again...and again...and again);  where was all this new enlightenment when Ronald Reagan doubled our deficits and quadrupled the debt??

And on and on and on and on and on....

I'd love to explain it to you in depth, but honestly I think it's a sheer waste of time if you are that bent on the "failures" of Reaganomics which led to unprecidented peacetime growth.  The true failure was for Congress to not make a more earnest effort to pay down the debt and deficit when things were rolling along better.  The missed lesson seems to be that Congress thought if a little debt and tax cuts worked so well, borrow even more and tax even less.  That's hardly Reagan's mistake.

Yeah, I think there's probably something we could learn from David Cameron. 

But I have a sinking feeling that that thing will get lost in the ahistorical and illogical deficit panic sweeping Washington. 

Here's what I think:  we should learn from Cameron that 1) everything should be on the table and 2) our response should be proportionate to our debt and to our troubles.  Neither is likely, though, I'm afraid.  I think we'll cut things we precisely shouldn't and do it in a measure and a time frame that will cause maximum damage to our recovery.  This is because a certain fear-positive party will see it as an opportune time to cut things they've had the knives out for for 70 or so years, while leaving their own sacred cows untouched.

Could be true from either side of the D/R fence.

I think to a certain degree yes, but I see this willingness to bend over backwards on the D side that's mostly nonexistent on the R side.  I already see the sacred cows on my side of the aisle not only under attack but -- if the conventional wisdom is true -- mostly ushered out the door, while R's haven't and won't consider a good number of things (compare/contrast raising the age of social security eligibility vs letting some of the Bush tax cuts sunset). 

I'd caution in general against the tendency to draw equivalences between the two parties.  There are stark differences in approach, philosophy, and ability to conduct politics.  They are simply not the same.   

Would you like a recommendation for an Optometrist?

The sacred cows are different but I see the defense of them to be similar and the opposition to the "other" party's sacred cows to be just as vigorous.

That's a pretty broad generalization.  I don't recall there being a whole lot of back-bending by Democrats when the GOP had control of both houses and I'm really not sure what you think they are bending over backwards for now.  Tax cuts are sacred cows to Republicans, that's one of the major issues at the moment and very much under attack by the administration and Congressional leaders.  As far as ushered out the door?  Hellooo, the single largest spending and control bill in U.S. history was ushered in the door: Obamacare.

Each party simply has different priorities but the Democrats have a credibility issue now, amongst those politically active.  When someone like Nancy Pelosi brags of draining the swamp, yet the most corrupt members of Congress still remain, it creates cynicism.  Now when she makes desperate claims of "no new deficit spending" (I was just waiting to hear "read my lips" she sounded just like 41 when she said that) I don't trust her.  Claiming unemployment benefits are good for the economy is just some of the dumbest sounding crap I've heard coming from DC and I've heard a lot of stupid smile in my life.

To those less politically inclined, all they know is two years worth of promises, major spending bills, health care overhaul, and blaming Republicans for log-jams still has not made a significant dent in unemployment.  I think job losses have stabilized, but that doesn't mean a thing to someone who has been unable to find a new job commensurate with their skills for two years.

Europe is necessarily learning years of long holidays, lifetimes spent on the dole, and early retirement is unsustainable.  In other words, everyone is sucking the government teat dry.  We did that a long time ago, the note simply hasn't come due yet, but when it does we are fu**ed.

Won't work.

Spain and Ireland are already trying this, and the resulting impact to already hurting economies actually have increased deficits instead of the intended shrinking.

Source?

http://www.reuters.com/article/idUSLDE68T0SR20100930

http://www.nytimes.com/2010/06/29/business/global/29austerity.html

http://online.wsj.com/article/SB10001424052702304915104575571931343754978.html?mod=googlenews_wsj

Scary stuff

I don't think anyone is ignoring the fact there's going to be a whole lot of pain prior to the tide shifting.  The alternatives seem to be, either keep falsely expanding an economy via government borrowing and spending, or cutting government spending and paying higher rates to borrow.  It's not wiping out all borrowing, but it's exposing what years of unmitigated government spending looks like when it becomes unsustainable.

What is the point of contracting the public sector and government spending in a recessionary economy if it just results in smaller tax revenues and larger deficits?


Look, These austerity measures are going to fail, all they are going to succeed in doing is to damage already weakened economies. Keynes predicts this and is being proven correct all over again. Just like Keynesian economics predicted our crash.

It’s very basic, we overheated our economy with deficit spending in an expanding economy.  Keynes predicts that the larger the upturn, the larger the resulting downturn. Which is exactly what happened. Keynes instructs that during an expansion period governments should cool the economy and keep it growing by running surpluses via lower government spending and higher taxes and during periods of contraction taxes should go down and spending go up in order to lessen the downturn. Keynes goal is to lessen the wave curve of the economic cycle on both the upturn and downturn to result in a gradual upward trend of growth with only small fluctuations up or down.

We fought Keynes with huge deficit spending during a growing economy pre 2008 and now Europe is fighting Keynes again with “Austerity” and it’s biting them all over again. It’s like we learned nothing from the Great Depression.

I'd love to explain it to you in depth.... as if!

Billy Bob's recovery was first.  Johnson (mid 60's) was second.  Reagan's "unprecedented growth" was only about third in line.  And the Baby Bush recovery took more years than this one is taking.  (See the chart below.)

Can you spell "veto"??  Neither could Reagan, Bush, Bush for spending/debt programs.  And Reagan also brought you the biggest tax hikes (cumulative - 3 of them) in the history of the world after his initial tax cut.  But hey, who cares about reality, right?  Talk about a missed lesson!!

Oh, yeah...there was a short period in the '90s when an effort was made to pay down the debt and spending was held in check.  Yep, you guessed it - it wasn't the Republican administrations of the last 30 years.  Oh, well, too bad it doesn't fit into the Murdoch/Rove script.

http://www.ritholtz.com/blog/2010/03/change-in-us-employment-recession/

FAIL!

If you wish to be taken seriously here, drop the libtardese.

LOL, LOL, LOL!!

Seriously??  Wouldn't it be nice if some here would/could take reality seriously!  Oh, well, everybody's gotta have a dream!

Do woodchucks chuck wood?

Kumbaya, everyone!
http://www.youtube.com/watch?v=O3EimMuTbJQ&feature=related

Remind me again which party took control of the US House of Representatives and Senate in 1994.

Does Heironymouspasparagus save 15% on his car insurance by watching Geico commercials of woodchucks chucking wood on TV?

Remind me which administration continued to push deeply unpopular military base closures and which Congress passed the tax increases that closed the gap. (and sadly canned the superconducting supercollider among other "big science" projects as part of that effort) The stage was set to balance the budget before the Republicans took over.

It's interesting how party or ideological lines can attribute success to either the Administration(s) or the Congress.  My take on it is that it only took Clinton 8 years to ruin what took 12 years of Republican Administrations and then a Republican Congress to set in motion.  Parts of the economy were on the way down before the 2000 elections.  I know the part of manufacturing where I was working was on the way down.  As I have stated before (and got scolded), I almost voted for AlGore in 2000 just so he would get credit for the failing economy.  I know your opinion is different and no amount of facts will convince either one of us differently.

Along the lines of what Red is saying, I find it fascinating how we are quick to discredit the efforts of those we don't agree with.

To a Republican, the fiscal responsibility under President Clinton was the result of a very conservative Congress.  To a Democrat, they only credit President Clinton with the fiscal restraint. 

I'm still not real sure what transpired under Bush 43 and the GOP-dominated Congress other than unprecidented natural disasters, ill-timed tax cuts, and changes in national security after 9/11.  However, looking at the last two years of his administration, spending was way up with a Democrat-controlled Congress, and Bush gets the blame for run-away spending those last two years.

President Reagan is blamed for a burgeoning debt, yet he was working with a Democrat-controlled house.  To a liberal, his fiscal policies were a disaster, yet the country pulled out of the nose-dive we were in during the Carter years and began a great run of prosperity.

To a Democrat, Carter was simply handed a pile and did the best he could.  Nevermind he was the Inspector Clouseau of U.S. Presidents and was working with a Democrat-controlled Congress.  That was all still the fault of the misguided policies of Nixon and Ford.

Medicare Part D and No Child Left Behind, neither of which were paid for when they were voted in.  They were both quintessential unfunded mandates.  The Democrats essentially had to start finding ways to pay for them just about the time they took control of the house. 

And don't turn your nose up at the tax cuts.  Those alone were enough to drive the deficit into hyperdrive.  One trustworthy estimate (http://www.washingtonpost.com/wp-dyn/content/article/2010/08/01/AR2010080103287.html) puts their cost at $2.3T over the first ten years.

I guess no one making observations about Reagan's time were there to experience the thrill.  Reagan had a 'rubber-stamp' Congress that literally did anything and everything he wanted - as so wonderfully exemplified by "Star Wars" (Strategic Defense Initiative.)

And it continued that way until 1994, when the roles were reversed with the Newt-nick "Contract On America).

Great run of prosperity under Reagan - yeah, topped only by the great runs of prosperity under Billy Bob and Lyndon Johnson (remember ole' "guns and butter"??).

As for spending AND debt increases, no one comes even close to Baby Bush.  Even Obama has a ways to go before reaching that mark.

I'm sorry, but the facts get in the way of your analysis. As I pointed out, the hard choices were made before the Republicans took over. The Democratic Congress raised taxes. The Democratic Congress, at the behest of the Democratic President allowed a bunch of military bases to close. The Democratic Congress, in opposition with the Democratic President canceled a bunch of basic science research. (as I mentioned before, the SSC really sticks in my craw, we would have had a particle accelerator 3-4 times more powerful than LHC completed 15 years ago if they hadn't canceled it..the 15 years ago part is nearly as important as the power level, too)

The Republicans went on to spend most of their time attacking the President's personal life rather than making the hard choices. They implemented more and more earmarks, to the point that Clinton was able to convince a bare majority of Congress to give him the line item veto. It's no wonder, then, what happened under Bush II and the Republican-controlled Congress (although as I have mentioned previously, the war on terror made things worse, budget-wise, than they otherwise would have been).

Hard choices?  Democrats raising taxes, cutting the military and scientific research is hard choices?  Seems like business as normal.  I wasn't a JFK fan but at least he understood that cutting taxes had it place and he realized the benefits of the space race to the world in general. 

Line item veto is a good thing.  More lines should be deleted.

Heirony,

I believe you are old enough to remember Nikita Khrushchev banging his shoe on the table at the UN saying the USSR would bury the USA.  He didn't mean militarily as in smoking hole.  He meant economically.  Remember air raid drills in school?  Duck, cover and kiss your butt goodbye. Remember home fallout shelters?  We didn't have one,  partly because we lived about 2 miles from a Nike base and it wouldn't have done any good if we did survive.  Star Wars ran the Russian economy into the dirt and pretty much ended that threat.  Sure the Congress did a lot of what Reagan wanted but they spent a lot more too. 

I remember the economy being in better shape when Bush I left it to Billy Bob (really Billy Jeff) than Carter left it for Reagan.  There is a lag time so while mentioning the Carter economy I will cut a bit of slack to Obama but add that he should have better indications of a better economy by now if not actually achieving a better economy.  I believe that lag time also led to some of Clinton's good years.  By the end of the Clinton years, the economy was on the way down again.  Would Clinton have signed welfare reform without the pressure of a Republican Congress?  Even Fox news says Clinton was smart enough to drift a bit toward center from the left after the Republicans took over Congress.

I remember LBJ painted Goldwater as a war-monger while campaigning for election.  By then I was a teen and worried about the war in Laos and Viet Nam.  Of course LBJ built up the war after the election.  War economies are generally more robust than peace time ones.

It won't take Obama 8 years to spend as much as Bush II did in 8 years.

We all remember what makes "our" candidates look good compared to the "other guy's" candidates.  Your memory is just as selective as everyone else's.

I suppose you believe that Republicans have a monopoly on passing unfunded mandates.

I don't know . . . have anything particular in mind? 

The awesome thing is that the Republican unfunded mandates we were talking about happened along at the same time as two wars, a new state security apparatus, and a couple trillion dollars in tax cuts. 

I'd call that excellent timing, and as someone who's currently in despair over the competency of his own party, I'd have to give the win on this one to the Republicans who seem to know, beyond a shadow of a doubt, how little deficits actually matter.

Nothing in particular.  I got so used to Democratic party ideas getting implemented, often by regulation rather than a specific law, that I stopped counting.  Not all were bad ideas, just unfunded.

Yeah, it's a hard choice to make to raise taxes in a recession, and cutting the military budget definitely wasn't "business as usual" in 1992. Afterwards, the Republicans were happy to sit around obstructing government in every way possible in a blatant attempt to derail Clinton's Presidency, just like they're hoping to do if (and it looks likely) they take over the House.

Sort of like they promulgate blatant lies about the timing of the bailouts and try to push the blame onto Obama, who was a part of the stimulus, but the wall street bailouts and all that was set in motion by Bush and the ever-compliant-in-a-crisis Congress went along with it.

That's weird.  I'm not sure how writing regulations is an unfunded mandate. 

Are you talking about, like, the Clean Water Act?  or food safety regulations from the FDA, something like that?  I guess I honestly don't know how, after the Clean Water Act goes through, the enforcing agency (which I guess would be the EPA) then determines how much $$ it needs to implement it.  I think, too, that costs are born on several different levels by different entities:  the fed gov, state and local govs, individuals (through specific taxes) and industry. 

Are you saying that that's where the cost of Democratic rule is, in overly expensive regulations?  I'd sure love to see some hard numbers on that, and in comparison to, say, defense spending during Republican administrations.

Red, your argument about robust economies in war should make this a booming time.  What happened?  Oh, yeah.  All the other crap from the past.

And for raising taxes, there have been no equals to the combined raises of Reagan, Bush I.  Even Kennedy/Johnson increases didn't come close. 

Amazing how much tunnel vision accompanies the chant about "cut taxes".  When every single cut since WWII has been accompanied by hikes except for Baby Bush.  What it shows is that every President except Baby Bush understood the reality of the damage done to the economy when deficit spending runs rampant.  Econ 101. 

Apparently US News thinks we may be better off than the Murdoch/Rove lie machine would have you believe.  Depends on which side of the education and job situation you are.  College educated - 4% unemployment; up 1% from several years ago.  That more than anything shows how much of our manufacturing has been gutted by the policies of the last 30 years.  By both Republicontins and Dummycrats.

http://money.usnews.com/money/blogs/flowchart/2010/10/26/whos-gained-and-lost-under-obama-so-far

Good thing we have had government regulations or we would never have made ANY progress.

Chancellor Merkel is stealing my talking points: "Growth that is not sustainable"  Really?  They build better cars, motorcycles, roads, buildings, etc.  I bet they can do economics better too.

"Back in August 2009 I made a bet that Germany would recover before the US because they were doing far less stimulus than were we. In fact Germany's Chancellor Angela Merkel said:

“The crisis did not take place because we were spending too little but because we were spending too much to create growth that was not sustainable. It isn’t just that the banks took over too many risks. Governments allowed them to do so by neglecting to set the necessary [financial market] rules and, for instance in the US, by increasing the money supply too much.”

[Mrs. Merkel] is robustly unapologetic when discussing the origin of the global financial meltdown. The fault, she says, ultimately lies with misguided efforts in the US, both by the government and the Federal Reserve, to re-start artificially the economy after September 11 by pumping ever-cheaper money into the financial system. “We must look at the causes of this crisis. It happened because we were living beyond our means. After the Asian crisis [of 1997] and after 9/11, governments encouraged risk-taking in order to boost growth. We cannot repeat this mistake. We must anchor growth on firmer ground.”'

http://seekingalpha.com/article/231578-germany-defies-keynesian-stimulus-and-recovers

At some point our debt will become unsustainable, that you can take to the bank.  Personally, I believe it already is.

http://www.marketwatch.com/story/qe2-a-ponzi-scheme-says-pimcos-gross-2010-10-27

NEW YORK (MarketWatch) — The Federal Reserve’s highly anticipated plan to engage in quantitative easing to pump money into the economy is a “Ponzi scheme,” said Bill Gross, who manages the world’s biggest bond fund for Pimco.

The actions of the Fed, led by Chairman Ben Bernanke, will “likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers and, yes, equity managers to adjust to a new environment,” he wrote in a commentary posted on Pimco’s website Wednesday. See Gross’s full commentary.

“Check writing in the trillions is not a bondholder’s friend; it is in fact inflationary, and, if truth be told, somewhat of a Ponzi scheme,” he said. While the U.S. has sometimes paid down its debt, “there was always the assumption that as long as creditors could be found to roll over existing loans – and buy new ones – the game could keep going forever.”


AM Report: Federal Reserve Gears Up for StimulusThe Fed is close to embarking on a new round of monetary stimulus next week despite doubts among economists and some Fed decision makers. Jon Hilsenrath discusses. Also, John W. Miller discusses Europe's tougher line on trade with China, as the EU focuses on China's process for bidding on contracts.
Two-year Treasury yields /quotes/comstock/31*!ust2yr (UST2YR 0.37, -0.05, -12.20%)  , which move inversely to prices, fell to the lowest level on record -- 0.33% -- recently as bond investors increasingly expected the Fed to announce a second massive bond-purchase program after its meeting on Nov. 2-3. Read more on Treasury bonds.

Yields on 10-year notes /quotes/comstock/31*!ust10y (UST10Y 2.67, -0.06, -2.27%)   fell to the lowest since January 2009 and the dollar index /quotes/comstock/11j!i:dxy0 (DXY 77.30, -0.85, -1.08%)  , a measure of the U.S. currency against a basket of major rivals, has dropped back to the weakest levels of the year. Read about dollar.

Going into next week’s elections, Gross said voters need to realize that this Ponzi scheme is unusually “brazen” and has been brought on by the government – of every political party – and its citizens.

“It is not a Bernanke scheme, because this is his only alternative and he shares no responsibility for its origin,” he said.

Such a plan “raises bond prices to create the illusion of high annual returns, but ultimately it reaches a dead-end where those prices can no longer go up,” Gross wrote. “Having arrived at its destination, the market then offers near 0% returns and a picking of the creditor’s pocket via inflation and negative real interest rates.”

Really?  I think you're fishing.  What do you consider an unfunded mandate? 


You're getting close.


Do you really think you're going to get off that easily?  A good portion of the cost is in the attitude of entitlement that leads to a lack of personal responsibility.  That leads to programs to protect "me" from "myself".  Regulations are nothing more than laws that the Congress has delegated to an agency to write without the specific approval of the voters.

As far as military spending, I'm sure you are familiar with the phrase "provide for the common defense".

I especially liked the cars of the mid seventies.  Power, economy, handling ... nothing quite like it since then.

However, I do like seatbelts in cars and there have been some significant safety improvements which has been thoroughly beat to death in other threads.

I don't know.  It worked in WWII, Korea, Viet Nam.  Must be Bush's fault.


I actually did pretty good during the Reagan, Bush I era.  I have to admit that I was beginning my Engineering career after my time in the Navy.  The usual salary increases from beginning engineer to experienced engineer make it difficult to track the actual tax structure.  I know the marginal rates on my Federal Income Taxes were down for a while.  Social Security is a tax that certainly went up but it is one I expect to personally get a return on so I kind of consider it a forced retirement saving plan.   Bush I reneged on "no new taxes" and it probably cost him a second term.


Well then, let's tax our way to prosperity.  Also the subject of many threads before.


I'll agree that manufacturing has been gutted. We probably disagree on specific policies that caused it if for no other reason than we like to disagree with each other.

How is the Clean Water Act or FDA food regulations protecting me from myself?  Perhaps you're unhappy with state motorcycle helmet laws?  Or some of those local school districts who've decided to ban soda from elementary school cafeterias?  or maybe you're against anti-smoking efforts?  

Yeah, I'm fishing.  All I'm hearing are the same old platitudes . . . artfully stated, of course, but the same old platitudes nonetheless.  So I'm trying to get you to tell me what the nannystatism you object to is, and what specific rules you think Democrats have used to so inflate the government's budget that it's toppling over.  

While you are thinking of what you think an unfunded mandate is, I'll work on some of your requests.   

In some cases, the answer will be subjective.  How clean is clean water and at what price?  Do you want to dip a glass directly into the Arkansas and drink from it?   

I have to get up at 6:00 so I'll have to go for now.

Where does it say we should spend more on our military than the entire rest of the world, combined.

Third paragraph, second page.

Quick one for you Red,
How about being able to scoop up a cup of water out of the Arkansas and not be scooping up raw sewage from Sand Springs?

One of the many liability considerations that caused the downfall of the KRMG Raft Race.  Every time they "flushed" the Arkansas the day before the race, a massive shot of Sand Springs S*** would go running down the river.  EVERY raft was accompanied by a large glob of brown foamy floating stuff!  Or more than one.