Ryan Talking Out His Arse?

[Parsad]

It is the debt load that is crippling the economy.

 

It's not the debt load that is causing the problem.  The economy wasn't suffering when everyone was acquiring debt, nor when debt had reached proportions slightly less than they are now.  Corporations are achieving record profit margins. 

 

It was a credit crunch that led the economy to slow down, and then the subsequent deleveraging which slowed it further.  You then had asset prices deteriorate and consumers naturally decreased their level of consumption...in other words the engine stalled.  The government then tried to prime the pump and fire up the engine, but it's not working very well because you have engines stalling all over the world.  And how did all this come about?  Because of various levels of past stimulus, either through tax cuts, interest rate cuts, lax lending policies to appease various groups and inordinate amounts of capital flowing through the hands of idiots!  Both democratic and conservative! 

 

Romney and Ryan, or Obama and Biden, will all continue their rhetoric.  They will have very little influence on what actually happens going forward.  The system will eventually work it's way through the process, and things they do may speed the process or impede it...think Japan!  But they have no idea what to do, and neither does anyone else.  They are simply capitalizing on Obama's vulnerability, just like he did with Bush (not too hard), and none of them will make an ounce of difference.  If things improve in the next four years, whichever party wins will get the credit, but in reality they would have done little.  The U.S. succeeds in spite of their politicians, not because of them...the system works because capitalism is self-correcting.  Cheers!       

[ERICOPOLY]

I'd rather Romney have picked Portman to reinforce his economic strengths. Portman has a good reputation for working with Dems, whereas Ryan seems an ideologue - see his behavior on the Simpson-Bowles commission, for example.

 

http://www.politico.com/news/stories/0812/79724.html

 

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Now the saintly, do-good aura that surrounds Simpson-Bowles presents an awkward challenge for Mitt Romney and his running mate. Romney is pitching Ryan as a problem solver who wants to use his command of the budget to forge bipartisan deals to solve the nation’s fiscal crisis.

 

But in reality, Ryan, according to the recollection of some commission members and staffers, was a key part of the dynamic that undermined the commission and allowed the triumph of partisan and ideological loyalties over a budget deal.

----------

 

Karl Denninger, a libertarian financial blogger, really dislikes Ryan:

 

http://market-ticker.org/akcs-www?post=210028

 

-------------

And Ryan is one of the liars-in-chief in the House.  If you need your memory refreshed may I recommend you read the following links:

 

(discretionary budget, welfare reform, retirement security and more)

(voted for and supported TARP)

(Medicare, cost-shifting at gunpoint and more)

(more Medicare lies)

(Ryan's fraudulent -- for the second time -- budget proposal) and of course

(Ryan's lies about the sequester ex-post-facto creating exemptions to it)

 

The problem with Ryan is that he's not a "conservative" at all.  Beyond the fiscal mess documented up above -- a mess he not only helped create but is promulgating and continuing, along with the explicit and implicit support of frauds up and down the line in our financial system via TARP and other schemes he also supports blatantly unconstitutional laws on top of it, including The Patriot Act, warrantless wiretaps, retroactive immunity for telecommunications firms that broke the law on warrant requirements and more.

-------------

 

Are you seriously quoting Denninger? I recommend you actually watch the TARP debate video on his site and see what Ryan and Boehner and other republicans were saying. They explicitly stated their objection to the bill but the need to pass it to avert a disaster. Congress passed TARP , Obamas incoming government deployed it...

 

Now if we could just get a group photo of everyone who was holding their nose while agreeing that TARP was necessary to avert a disaster...

 

Wow, that would probably be everyone who voted for it.

[moore_capital54]

It is the debt load that is crippling the economy.

 

It's not the debt load that is causing the problem.  The economy wasn't suffering when everyone was acquiring debt, nor when debt had reached proportions slightly less than they are now.  Corporations are achieving record profit margins. 

 

It was a credit crunch that led the economy to slow down, and then the subsequent deleveraging which slowed it further.  You then had asset prices deteriorate and consumers naturally decreased their level of consumption...in other words the engine stalled.  The government then tried to prime the pump and fire up the engine, but it's not working very well because you have engines stalling all over the world.  And how did all this come about?  Because of various levels of past stimulus, either through tax cuts, interest rate cuts, lax lending policies to appease various groups and inordinate amounts of capital flowing through the hands of idiots!  Both democratic and conservative! 

 

Romney and Ryan, or Obama and Biden, will all continue their rhetoric.  They will have very little influence on what actually happens going forward.  The system will eventually work it's way through the process, and things they do may speed the process or impede it...think Japan!  But they have no idea what to do, and neither does anyone else.  They are simply capitalizing on Obama's vulnerability, just like he did with Bush (not too hard), and none of them will make an ounce of difference.  If things improve in the next four years, whichever party wins will get the credit, but in reality they would have done little.  The U.S. succeeds in spite of their politicians, not because of them...the system works because capitalism is self-correcting.  Cheers!     

 

Sorry Parsad but I just don't have the time to debate this tonight but I vehemently disagree with you here. There is over $5 trillion in new debt in the last 4 years... when the base is rising the debt means little and is even supportive of growth in aggregate demand but only when it comes due is it felt in the economy at which point a delevering is required.. But the Obama administration has been relevering which is what they are supposed to do under the keynsian doctrine only they relevered in the absolute worst ways demonstrating they know nothing about how jobs are created or how business works.

[moore_capital54]

 

Romney and Ryan, or Obama and Biden, will all continue their rhetoric.  They will have very little influence on what actually happens going forward.  The system will eventually work it's way through the process, and things they do may speed the process or impede it...think Japan!  But they have no idea what to do, and neither does anyone else.  They are simply capitalizing on Obama's vulnerability, just like he did with Bush (not too hard), and none of them will make an ounce of difference.  If things improve in the next four years, whichever party wins will get the credit, but in reality they would have done little.  The U.S. succeeds in spite of their politicians, not because of them...the system works because capitalism is self-correcting.  Cheers!     

 

This is where you are totally wrong. The US of today is simply not the US it was in 2008 when Obama was elected. That is why I hope he is displaced. You CAN screw it up just as the japanese did and just how Obama has been doing.. Normally the system would correct itself as you said because there would be a process of delevering in conjunction with a process of levering on the governmental level, then so the theory goes the private sector would recover and through tax revenues the public sector would follow.

 

But when you have someone trying to implement major changes to the fundamentals of the US economy and social fabric such as Obama the engine does not necessarily have to work. And then Bernanke comes in pouring more fuel and yet it does nothing.. We are not growing as fast as we should be at this point in the recovery.

[ERICOPOLY]

We are not growing as fast as we should be at this point in the recovery.

 

I've never seen anyone take a stab at defining the rate at which we should be growing at this point in the recovery.  Normally the people who I hear making your comment are people like Mitt Romney himself, in other words people who are inaccessible to me.

 

However you are accessible so you get the question.  What rate of growth do you use as what it "should be", and what is your method of determining this rate?

 

To me it seems such a difficult task, as we've got historical comparisons to Japan yet they had the rest of the world growing to help drag them along.  Or we've had the numerous comparisons to past recessions, but they all had different contexts as well.

[Parsad]

We are not growing as fast as we should be at this point in the recovery.

 

I've never seen anyone take a stab at defining the rate at which we should be growing at this point in the recovery.  Normally the people who I hear making your comment are people like Mitt Romney himself, in other words people who are inaccessible to me.

 

However you are accessible so you get the question.  What rate of growth do you use as what it "should be", and what is your method of determining this rate?

 

To me it seems such a difficult task, as we've got historical comparisons to Japan yet they had the rest of the world growing to help drag them along.  Or we've had the numerous comparisons to past recessions, but they all had different contexts as well.

 

Yeah Eric, this is what drives me nuts too.  I didn't agree with significant amounts of money spent by the government, in particular much of the stimulus spending, but alot of other things were absolutely necessary to just keep the gears from completely rusting over. 

 

We've just been through the worst period in U.S. economic history since the 1930's, and everyone wants things to improve overnight.  Well, the hard truth is they don't improve overnight and not even over several years in such circumstances.  If it takes the average American family probably about 8-10 years to deleverage from a 120% debt to income ratio, then exactly how long would it take a sovereign nation...four years...please!

 

As Eric stated, Japan had the rest of the world carrying them and it's been almost 25 years!  Tell them about how fast their economy should be growing...they've pretty much done everything under the sun to try and get things moving.  Unfortunately, Japan isn't too keen on immigration, and their demographics have forced them into the very predicament they've feared.  Who the hell is going to buy houses in Japan to reflate assets? 

 

You don't have the same problem here.  Housing is recovering, corporations are generating record profits, banks are the best capitalized they've been in 50 years.  You don't have a credit crunch anymore, but a credit glut...too much capital everywhere and no one wants to use it. Small businesses are still finding it difficult to get funding.  Venture capital is still difficult to find.  M&A's are still slow.  Fear is driving the credit markets right now, not actual fundamentals. 

 

Is there substantial deleveraging still going on...yes, it will continue over the next few years...but there is no real reason why capital markets in North America should remain tight.  It's fear!  And unfortunately, no administration is going to fix that.  It only happens with time as people forget and move forward.  As their lives start to recover.  The U.S. will recover, and it doesn't matter if it's Romney or Obama.  Cheers!

[bmichaud]

Moore,

 

With all due respect to you, Mr. Ryan and anyone else who believes America us on the path toward a Greek-style debt crisis, or hyperinflation, why is the market currently pricing our 10 year debt at 1.65% and 30 year debt at 2.8%? If we were at risk of default, yields would be more along the lines of Italy or Spain, and if hyperinflation was near, yields would be similar to what they were in the 1970's and 1980's.

 

Answer: we are in a deflationary, deleveraging environment not unlike the Great Depression. We should be thanking our lucky stars for both the massive deficits and Bernanke's 2008-2009 monetary operations.

 

I would encourage anyone to read the following Irving Fischer paper, which helps explain how vital of a role the government played to keep us from an all out depression. Put it this way - had Jim Grant been in charge of the Fed during the crisis, there would have been no great market bottom in March 2009....

 

http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf

 

Note the erie similarity between the March 1933 bottoming process due to FDR exiting the gold standard and the March 2009 bottoming process due to QE1....

 

[mhdousa]

http://www.washingtonpost.com/blogs/ezra-klein/files/2012/08/Debt-graph-CBPP.jpeg

[Packer16]

I think is a little misleading and is based upon the assumption that all the spending done was fixed and explains where the financing came from.  The war numbers are fine but the question about the other spending is it better for the gov't to direct that or individuals with a tax cut?

 

Packer

[giofranchi]

You don't have the same problem here.  Housing is recovering, corporations are generating record profits, banks are the best capitalized they've been in 50 years.  You don't have a credit crunch anymore, but a credit glut...too much capital everywhere and no one wants to use it. Small businesses are still finding it difficult to get funding.  Venture capital is still difficult to find.  M&A's are still slow.  Fear is driving the credit markets right now, not actual fundamentals. 

 

Is there substantial deleveraging still going on...yes, it will continue over the next few years...but there is no real reason why capital markets in North America should remain tight.  It's fear!  And unfortunately, no administration is going to fix that.  It only happens with time as people forget and move forward.  As their lives start to recover.  The U.S. will recover, and it doesn't matter if it's Romney or Obama.  Cheers!

 

I don’t think it is only fear. I also think there is a lack of 15%+ investment opportunities. Quoting Mr. Cumming and Mr. Steinberg:

 

"We continue with the same lamentation as in previous years. There are hordes of private equity and hedge funds chasing low returns. While short term rates are very low, long term rates for non-investment grade borrowers such as Leucadia are quite high relative to expected returns.

As a result, opportunities meeting our investment criteria are few and far between. We would prefer higher interest rates and less availability of money, making acquisitions more attractive. We employ leverage in a careful way and do not intend to fall into the traps of employing too much leverage or borrowing short term and investing long. We will leave that silliness to the hedge funds.

 

Given the above, we have reduced Leucadia’s leverage by calling $511.3 million of long term debt in 2012 and retiring other debt during the last three years in market transactions. With those steps, we have cut Leucadia’s leverage by over 40%. Borrowing money at 7% without a clear path to make 15%+ is not attractive and we don’t see many opportunities to make at least that return. This cautious approach was evident in the purchase of National Beef; although banks were beating down our door to lend us more money, we paid cash.

 

A world-wide recovery in the near future is not a foregone conclusion. Europe and the future of the Euro are far from settled. Growth in China is slowing and the risk of a “Chinese Spring” cannot be ruled out. Iran is a big problem. In an environment of slow growth at home and a dysfunctional government, we believe that less financial leverage is better. We expect many other companies and investors share this view. We emphasize that we are not pessimistic, just cautious. We are enthusiastic about the future of our broad array of operating businesses and investments and have our eyes open for additional acquisitions. Never fear, if a good deal comes along we will find a way."

 

When 15%+ investment opportunities are "few and far between", prices must come down… When prices come down, the economy inevitably slows… I don’t think it is only psychology, I don’t think it is only fear.

 

Now, I know, many of you hate me!! There is a lot of optimism on this board and you must think of me as a joy killer… but, paraphrasing Mr. Cumming and Mr. Steinberg, I am not pessimistic, just cautious.

 

giofranchi

[Junto]

With all due respect to you, Mr. Ryan and anyone else who believes America us on the path toward a Greek-style debt crisis, or hyperinflation, why is the market currently pricing our 10 year debt at 1.65% and 30 year debt at 2.8%? If we were at risk of default, yields would be more along the lines of Italy or Spain, and if hyperinflation was near, yields would be similar to what they were in the 1970's and 1980's.

 

Are you assuming that interest rates will hold their current levels? The debt serving costs of the government have dropped significantly during the past four years, what happens when inflation does start to come through? This is my concern. Greek/Europe style debt crisis is not applicable to the US because of its control of the money supply. After all who has been one of the largest buyers of the US debt over the past 24 -36 months as yields have fallen?

 

The larger concern is stabilizing the debt growth to historical levels of GDP and moving towards a balanced budget.  My opinion is that Romney has more and better managerial experience and credibility to appoint the necessary people into the positions of power that can make progress and turn the wheels of government in the right direction. Obama's appointments is where he has not succeeded as a manager/commander of the government.

[ERICOPOLY]

The war numbers are fine but the question about the other spending is it better for the gov't to direct that or individuals with a tax cut?

 

Packer

 

The payroll tax cut was a case of Obama saying it's better for the individuals to spend the money. Same goes for extension of unemployment benefits.

 

Tax cuts on people who already are saving a huge chunk of their income won't encourage them to spend anything.

 

See my comments earlier on the Reagan and Kennedy tax cuts that had a huge demand side component, whereas Romney wants to raise taxes on the demand side.

 

But raising on the demand side in order to balance cuts on the supply side will just lead Buffett to say this:

 

"Well, I have more money but my customers have less.  I'm going to cut production instead of raising production, because I fear that when the customers have less they'll purchase less".

 

It's crazy to raise taxes on the demand side just to hold supply side tax cuts in place.

[bmichaud]

With all due respect to you, Mr. Ryan and anyone else who believes America us on the path toward a Greek-style debt crisis, or hyperinflation, why is the market currently pricing our 10 year debt at 1.65% and 30 year debt at 2.8%? If we were at risk of default, yields would be more along the lines of Italy or Spain, and if hyperinflation was near, yields would be similar to what they were in the 1970's and 1980's.

 

Are you assuming that interest rates will hold their current levels? The debt serving costs of the government have dropped significantly during the past four years, what happens when inflation does start to come through? This is my concern. Greek/Europe style debt crisis is not applicable to the US because of its control of the money supply. After all who has been one of the largest buyers of the US debt over the past 24 -36 months as yields have fallen?

 

The larger concern is stabilizing the debt growth to historical levels of GDP and moving towards a balanced budget.  My opinion is that Romney has more and better managerial experience and credibility to appoint the necessary people into the positions of power that can make progress and turn the wheels of government in the right direction. Obama's appointments is where he has not succeeded as a manager/commander of the government.

 

RE interest rates, all I'm saying is they do not reflect the US being a credit risk, which is OBVIOUS as you point out...

 

If inflation starts to feed through, A) that would raise nominal GDP, thus stabilizing our debt ratios (though, frankly who cares....Japan has spent years well above our debt ratio) and B) it will likely be the result of higher real growth, which will again stabilizes the debt ratio but also brings the deficit down as a result of higher taxes and lower emergency spending (i.e. Unemployment benefits).

 

Over time yes we need to bring down the deficit, as 10% deficits are massive stimulus and once the economy actually picks up, that would be hugely inflationary. But balancing too soon just contracts the economy and makes the perceived debt problem even worse.

 

[ERICOPOLY]

As Eric stated, Japan had the rest of the world carrying them and it's been almost 25 years!  Tell them about how fast their economy should be growing...they've pretty much done everything under the sun to try and get things moving.  Unfortunately, Japan isn't too keen on immigration, and their demographics have forced them into the very predicament they've feared.  Who the hell is going to buy houses in Japan to reflate assets? 

 

The demand side is almost by definition underfunded when there is large unemployment.  To me the US (courtesy of large unemployment) looks to have an underfunded demand side, whereas Japan doesn't (they have low unemployment).

 

Japan doesn't look forward to demand side growth by getting people back to work.  The worst rate they've hit is 5% unemployment. 

 

When every household still has a relatively normal income and yet they're still sliding downhill... wow.  Demand side tapped out and yet still no growth.

 

The US at least looks forward to the possibility of unemployment coming down -- there is untapped potential demand side gains there.  Plus the population is still growing as Sanjeev mentions. 

 

[Tim Eriksen]

In thinking about the long-term future of the country, I know that Romney/Ryan have a more compelling plan and more credibility beyond just having a big checkbook and a printing press.

 

The Reagan tax cuts were dynamite because for years the purchasing power of the middle class had declined as a result of stagnant tax brackets and rapid inflation.  By merely moving the tax brackets, it was a sudden relative jolt in after-tax income for the middle class.  They went out and spent it which led to a boom in consumption, thus output/hiring rose to meet this demand, and ever since the Republicans have been saying that "tax cuts on investment lead to booms... just look at Reagan".  Oh, and they can say that because Reagan also lowered taxes on investment.  So there's room for them to misattributed middle class tax cut economic growth as coming from tax cuts on investment.  This was a convenient excuse for cutting investment tax to 15% under GWBush -- not much firepower was delivered to the middle class consumers, but just to the investors. 

 

So personally I'd be expecting Romney to have learned from all of that.  But no,

 

http://www.csmonitor.com/Business/Tax-VOX/2012/0830/Romney-plan-would-cut-taxes-for-the-rich-Romney-adviser-confirms

 

It looks like he plans to raise taxes on people earning between $100k and $200k, and paying for it by cutting taxes on people making more than $200k.

 

I fear that by raising taxes on the many and paying for it by cutting taxes for the few, we'll wind up with less economic activity as a large number of people have less in their after-tax pay.

 

Romney has clearly stated that this will not happen.  Most of the analysts who have come up with this conclusion have done so by making incorrect assumptions (Brookings I believe).  The percentage of taxes paid by the rich will not decline.  Tax rates will.  Liability will not due to elimination of deductions.  It is really a simplification plan.  It is highly unlikely that the party of tax cuts is going to suddenly stick it to a major income group. 

[ERICOPOLY]

In thinking about the long-term future of the country, I know that Romney/Ryan have a more compelling plan and more credibility beyond just having a big checkbook and a printing press.

 

The Reagan tax cuts were dynamite because for years the purchasing power of the middle class had declined as a result of stagnant tax brackets and rapid inflation.  By merely moving the tax brackets, it was a sudden relative jolt in after-tax income for the middle class.  They went out and spent it which led to a boom in consumption, thus output/hiring rose to meet this demand, and ever since the Republicans have been saying that "tax cuts on investment lead to booms... just look at Reagan".  Oh, and they can say that because Reagan also lowered taxes on investment.  So there's room for them to misattributed middle class tax cut economic growth as coming from tax cuts on investment.  This was a convenient excuse for cutting investment tax to 15% under GWBush -- not much firepower was delivered to the middle class consumers, but just to the investors. 

 

So personally I'd be expecting Romney to have learned from all of that.  But no,

 

http://www.csmonitor.com/Business/Tax-VOX/2012/0830/Romney-plan-would-cut-taxes-for-the-rich-Romney-adviser-confirms

 

It looks like he plans to raise taxes on people earning between $100k and $200k, and paying for it by cutting taxes on people making more than $200k.

 

I fear that by raising taxes on the many and paying for it by cutting taxes for the few, we'll wind up with less economic activity as a large number of people have less in their after-tax pay.

 

Romney has clearly stated that this will not happen.  Most of the analysts who have come up with this conclusion have done so by making incorrect assumptions (Brookings I believe).  The percentage of taxes paid by the rich will not decline.  Tax rates will.  Liability will not due to elimination of deductions.  It is really a simplification plan.  It is highly unlikely that the party of tax cuts is going to suddenly stick it to a major income group.

 

Romney's proposed elimination of itemized deductions raises taxes on those earning between $100k and $200k.

 

Perhaps they aren't the party of tax cuts after all.

 

[Tim Eriksen]

I understand the frustration with Obama, and the disagreement on various policies, actions, etc, but is Paul Ryan going to be any better as Vice-President to Romney?  This guy loves twisting facts to fit his agenda.  I trust Romney far more than I trust Ryan!

 

http://news.yahoo.com/fact-check-ryan-takes-factual-shortcuts-speech-070905927.html

 

Cheers!

 

That is one  of the poorest fact check articles ever written.

1. Ryan claims Obama siphons $716 billion out of Medicare.  This is TRUE.  That some prior House budgets largely written by Ryan proposed siphoning it for deficit reduction doesn't change the fact.

2. Ryan says stimulus was patronage, corporate welfare, etc.  This is TRUE.  That Ryan asked for some funds for his district doesn't change the fact.

3. Ryan said Obama said the plant would be there another 100 years if his policies are enacted.  TRUE that he said it and the plant apparently closed after not before Obama took office.

4. Ryan says Obama did nothing with Simpson Bowles commission report.  Also TRUE.  That Ryan fought against tax increases such that there was no consensus doesn't change the fact.

 

IBD ran an editorial noting how "fact check" articles need to be fact checked themselves.  They are right.  Ryan is not talking out of his arse. 

[ERICOPOLY]

The percentage of taxes paid by the rich will not decline.  Tax rates will.  Liability will not due to elimination of deductions.  It is really a simplification plan.  It is highly unlikely that the party of tax cuts is going to suddenly stick it to a major income group.

 

 

Here is a simplification plan that I would support:

 

1)  Increase the standard deduction for those earning less than $200k such that it offsets the loss of itemized deductions for that income group as a whole.  This ought to boost demand and therefore stimulate the economy because it redistributes the money among everyone earning less than $200k.

 

2)  Eliminate the itemized deductions for everyone.

 

As for the relative loss of revenue in my plan vs Romney's plan:

 

3)  Don't raise it on the demand side!

[moore_capital54]

I understand the frustration with Obama, and the disagreement on various policies, actions, etc, but is Paul Ryan going to be any better as Vice-President to Romney?  This guy loves twisting facts to fit his agenda.  I trust Romney far more than I trust Ryan!

 

http://news.yahoo.com/fact-check-ryan-takes-factual-shortcuts-speech-070905927.html

 

Cheers!

 

That is one  of the poorest fact check articles ever written.

1. Ryan claims Obama siphons $716 billion out of Medicare.  This is TRUE.  That some prior House budgets largely written by Ryan proposed siphoning it for deficit reduction doesn't change the fact.

2. Ryan says stimulus was patronage, corporate welfare, etc.  This is TRUE.  That Ryan asked for some funds for his district doesn't change the fact.

3. Ryan said Obama said the plant would be there another 100 years if his policies are enacted.  TRUE that he said it and the plant apparently closed after not before Obama took office.

4. Ryan says Obama did nothing with Simpson Bowles commission report.  Also TRUE.  That Ryan fought against tax increases such that there was no consensus doesn't change the fact.

 

IBD ran an editorial noting how "fact check" articles need to be fact checked themselves.  They are right.  Ryan is not talking out of his arse.

 

++++++1 thank goodness for you because I simply do not have time to engage in these political debates, I am just appalled at some of the kids on this board.  Just because Buffet supports Obama doesn't mean you should use your intelligent minds to convince yourselves hes good. Hes been the most divisive president in the nations history and hes had enough time to make things happen. The comments he made about success were the straw for me and other self-made successful people who create the jobs in the world! The randian heroes that most of you work for are all anti-Obama I assure you this.  And for those of you that started your own businssess (that are actually successful and generate $500k+ or millions in revenue) I am sure you too can clearly see the stark contrast of an Obama led US.

 

The US was always the beacon of upward mobility and success stories, Obama turned it into society where success is frowned upon or expected to lead a redistribution of wealth bailing out folly and sloth at the lower levels of society. All the arguments about rich people not doing this or not doing that are just so empty and lack perspective. Every time we hear about private equity this and carried interest that were talking about 1-4,000 people that make much more of a good impact on society than what the 15% delta on what they don't pay in taxes would accomplish if the treasury got to spend it on more nanny state programs.

 

How many of the students on here look up to an Ackman or a Loeb, how many of you will purchase investment books and travel to conferences because of these people. That is what is so great about the US or what used to be, that in the US businessmen were like rockstars. No other place on earth was that true. 

[Kiltacular]

I get a bit concerned when I see some very intelligent and economically literate people discussing each side of this debate without accepting that, often, each side is appealing to the center (independent vote who decide elections) without alienting their base. 

 

When one sets aside all of this, it seems clear that people who understand the numbers accept that we cannot endlessly increase debt at a rate of 10% of GDP while the GDP itself grows at a much smaller number. 

 

Someone like Buffett -- who has social views that I tend to agree with -- also has views on the economics that I tend to agree with.  Yet, both parties -- since they are appealing to thier bases -- tend to ignore the very relevent details of his opinions. 

 

On this forum, we should be able to focus on the specifics.  Buffett has said that we cannot continue to run these kinds of deficits -- 10% of GDP (he's also noted that it is a HUGE stimulus).  So, discussing whether this money should be spent as transfer payments to welfare and medicare recipients or whether it should be spent on roads, bridges or the military misses the important point.  It is not sustainble no matter what we do.  Now, how long it can go on at this rate without disastrous repercussions is entirely unclear (at least to me) -- is it 5 years or 50 years.  I don't know but it isn't sustainable.  (As a side note, it is clear that expenditures on healthcare cannot forever increase at a rate of more than twice GDP growth.  The math is simple.  The same is true for the rate of increase in the cost of college.  Again, how long these things can grow at a rate that is much higher than GDP is unclear but was is crystal clear is that it cannot go on forever).

 

But, that WE CAN forever run a deficit that is about 2%/3% (give or take...depends on growth rate of economy) of total GDP.  The debt will forever increase but so will the economy.  The percentage of debt to GDP can, though, remain constant over time. 

 

But, some in the republican party want to have no deficit -- this doesn't make sense.  Meanwhile, some on the left talk as if the absolute rates of increase in debt don't matter at all -- this also doesn't make sense.  The republican side may hurt the optimal rate of increase in wealth per capita.  The democrat attitude WILL eventually cause a crisis.

 

Isn't it incumbent upon those of us that understand the numbers and the math to at least discuss the fact that we can't have an economy where healthcare expenditures (for example) are a larger number than total GDP -- it is IMPOSSIBLE.  At the current rates of growth, we will hit a wall.  That math doesn't lie.

 

Sometimes I do get the feeling that some on the left understand this mathematical fact but expect that those on the right will take the hits as the problem is solved.  But, that is politics.

 

Still, Buffett says he's a democrat and Munger says he's a republican and yet I'm certain they both understand these facts.  Buffett himself recently called our healthcare expenditures -- and the fact they are so much higher per capita than those of our competitors -- the "tapeworm" on American business. 

 

They both know the math but only one of them acts like someone who is willing to take the "hit" of saying difficult choices must be made or they WILL be made for us.

 

What am I missing?

 

 

 

 

[Tim Eriksen]

I get a bit concerned when I see some very intelligent and economically literate people discussing each side of this debate without accepting that, often, each side is appealing to the center (independent vote who decide elections) without alienting their base. 

 

When one sets aside all of this, it seems clear that people who understand the numbers accept that we cannot endlessly increase debt at a rate of 10% of GDP while the GDP itself grows at a much smaller number. 

 

Someone like Buffett -- who has social views that I tend to agree with -- also has views on the economics that I tend to agree with.  Yet, both parties -- since they are appealing to thier bases -- tend to ignore the very relevent details of his opinions. 

 

On this forum, we should be able to focus on the specifics.  Buffett has said that we cannot continue to run these kinds of deficits -- 10% of GDP (he's also noted that it is a HUGE stimulus).  So, discussing whether this money should be spent as transfer payments to welfare and medicare recipients or whether it should be spent on roads, bridges or the military misses the important point.  It is not sustainble no matter what we do.  Now, how long it can go on at this rate without disastrous repercussions is entirely unclear (at least to me) -- is it 5 years or 50 years.  I don't know but it isn't sustainable.  (As a side note, it is clear that expenditures on healthcare cannot forever increase at a rate of more than twice GDP growth.  The math is simple.  The same is true for the rate of increase in the cost of college.  Again, how long these things can grow at a rate that is much higher than GDP is unclear but was is crystal clear is that it cannot go on forever).

 

But, that WE CAN forever run a deficit that is about 2%/3% (give or take...depends on growth rate of economy) of total GDP.  The debt will forever increase but so will the economy.  The percentage of debt to GDP can, though, remain constant over time. 

 

But, some in the republican party want to have no deficit -- this doesn't make sense.  Meanwhile, some on the left talk as if the absolute rates of increase in debt don't matter at all -- this also doesn't make sense.  The republican side may hurt the optimal rate of increase in wealth per capita.  The democrat attitude WILL eventually cause a crisis.

 

Isn't it incumbent upon those of us that understand the numbers and the math to at least discuss the fact that we can't have an economy where healthcare expenditures (for example) are a larger number than total GDP -- it is IMPOSSIBLE.  At the current rates of growth, we will hit a wall.  That math doesn't lie.

 

Sometimes I do get the feeling that some on the left understand this mathematical fact but expect that those on the right will take the hits as the problem is solved.  But, that is politics.

 

Still, Buffett says he's a democrat and Munger says he's a republican and yet I'm certain they both understand these facts.  Buffett himself recently called our healthcare expenditures -- and the fact they are so much higher per capita than those of our competitors -- the "tapeworm" on American business. 

 

They both know the math but only one of them acts like someone who is willing to take the "hit" of saying difficult choices must be made or they WILL be made for us.

 

What am I missing?

 

You are missing the truth about Buffett (and probably Munger).  Buffett has certainly called for higher taxes on the wealthy, but that doesn't materially change the situation.  An extra $80 billion of revenue based on a static analysis of implementation of the Buffett rule when we have $1.2 trillion in deficits is not solving the problem.  Buffett never names specific items to be cut (or to grow at a rate below GDP growth) nor does he call for large tax increases on the middle class.  It will take one or the other or a combination of both.  Any other solution is pandering. 

 

Buffett has said we can run annual deficits of 2-3% of GDP.  Over time, I might agree, but the problem is that there will be recessions and there will be wars.  If the average over time is 2-3% then we have to acknowledge that deep recessions and wars will send it to 8-10% (and a world war could send it even higher) thus in the majority of years the deficit has to be smaller than 2-3%.  Occasionally we should run a surplus.  I'd rather our government run more like the way Buffett manages Berkshire.  We certainly aren't doing that today. 

[ERICOPOLY]

You can't run the government the way Buffett manages Berkshire.  Buffett uses the labor pool as something to be hired and fired as customer demand rises and falls.  Implicitly there is a cost to taking care of these people throughout their working lives, and he treats them as people who only needs income when he needs their work.  I'm not trying to be hard on Buffett, but that's generally how corporations work and his takes part in this to varying degrees. 

 

His system only works if government is there to take care of these people while they are sitting on the bench waiting to get back into the game.

 

Perhaps that is why he is a Democrat.  He recognizes that it's not just pennies from heaven.

[Tim Eriksen]

You can't run the government the way Buffett manages Berkshire.  Buffett uses the labor pool as something to be hired and fired as customer demand rises and falls.  Implicitly there is a cost to taking care of these people throughout their working lives, and he treats them as people who only needs income when he needs their work.  I'm not trying to be hard on Buffett, but that's generally how corporations work and his takes part in this to varying degrees. 

 

His system only works if government is there to take care of these people while they are sitting on the bench waiting to get back into the game.

 

Perhaps that is why he is a Democrat.  He recognizes that it's not just pennies from heaven.

I was referring to the (conservative) financial way he manages Berkshire, not how companies hire and fire.

[txlaw]

You are missing the truth about Buffett (and probably Munger).  Buffett has certainly called for higher taxes on the wealthy, but that doesn't materially change the situation.  An extra $80 billion of revenue based on a static analysis of implementation of the Buffett rule when we have $1.2 trillion in deficits is not solving the problem.  Buffett never names specific items to be cut (or to grow at a rate below GDP growth) nor does he call for large tax increases on the middle class.  It will take one or the other or a combination of both.  Any other solution is pandering. 

 

Buffett has said we can run annual deficits of 2-3% of GDP.  Over time, I might agree, but the problem is that there will be recessions and there will be wars.  If the average over time is 2-3% then we have to acknowledge that deep recessions and wars will send it to 8-10% (and a world war could send it even higher) thus in the majority of years the deficit has to be smaller than 2-3%.  Occasionally we should run a surplus.  I'd rather our government run more like the way Buffett manages Berkshire.  We certainly aren't doing that today.

 

It's not WEB's responsibility to call for specific spending cuts.  That's Congress' job -- and probably the President's as well, whoever that may be come January.  Notably, neither the Romney nor Obama campaign are very specific about their spending cuts, and both resort to magical thinking in their projections.

 

As for tax increases, the consensus appropriately seems to be that no tax increases on the middle class should be implemented until we get closer to full employment and get the economy off of life support.  Isn't that what the "fiscal cliff" idea is all about?

 

I do agree that over the long run, effective tax rates for personal income will likely have to go up across the board, either through direct tax or the inflation tax.  That wouldn't be such a bad thing if it would improve the US fiscal situation, get us back to full employment, and keep the social safety net strong (which actually makes the US more competitive by unleashing the potential of its people).

[txlaw]

http://gigaom.com/2012/08/30/fact-checking-politics-why-we-need-open-journalism-more-than-ever/