Lois & Clark Forums Forums General Discussion Off Topic Possible reason for Wall Street crisis

The global economy seems to be on a downturn, and we must all hope we aren't in for a nosedive.

Yesterday, Barack Obama and John McCain gave their views on the present situation. Obama blamed the deregulations of the banking and loan sector carried out by the GOP, and McCain blamed general greed.

A much more pointed analysis comes from Scott Lilly, a left-wing person whose qualifications you can read about here . According to Lilly, the root cause of the present crisis is that the American economy is primarily consumer-driven and heavily dependent on domestic demand. But during the new millennium, Lilly argues, the middle-income American family has become poorer. The reason for this is that President Bush has been redistributing the flow of money in America, diverting it from the low- and middle-income people and sending it along to the rich.

And since most Americans have become poorer, it follows that most Americans have become less able to buy goods and property. Yet the supply sector needs the American people to buy the goods it produces. The supply-side solution has been to encourage low-income people to take risky loans to be able to keep up their spending.

Here are some of the things that Lilly says:

Lilly supports his claims in a report full of facts and graphs that I myself found most impressive.

Ann

Thanks for the info and the links.

alcyone

Hmm... just from reading that snippet, it seems that this guy has a bias against Bush to start with - and the 'left wing' thing seems to indicate the same thing. Does that automatically disqualify what he has to say? Of course not, but it could easily color his research - not the research itself or the conclusion he reaches, but rather WHEN he researches. Does he look at the 90's as well to see if there's anything there that could have helped lead to all this? And it was only in the last couple years that there were no Clinton appointees on the Fed Res Board and all this started long before that.

For instance - even if you desire to stay out of the Palin thread - Roger posted about this very thing here . I don't know his sources, I'm sure he could tell you, but it's in line with other things I've heard elsewhere [but not online and no time right now to find online sources].

One of the other things that jumps out at me... sure, credit was [and still is] easy to get. I know mortgages are more difficult, but I get more credit card offers than I can use all winter for kindling [and that's about all they're good for]. Does that mean that there's no personal responsibility? Shouldn't people have been smart enough not to spend beyond their means? We could have gotten a mortgage for significantly more than we did but we knew we couldn't afford it and went with a fixed rate on the mortgage we did get because when rates are at historical or near historical lows do you really think they're going to go down? Do I really need to point out the mathematical stupidity of an interest only mortgage? One that will, by definition, NEVER go away. Do I want people to end up bankrupt or in foreclosure? Of course not, but at some point it's not MY responsibility [as a taxpayer] to help bail them out because they made bad choices and got in over their heads.

Should the govt have bailed out Fannie/Freddie/AIG? Heck if I know, but they shouldn't have been in the mess in the first place if government had been doing its job to start with.

Just my .02.
Carol

Well, since I'm a left-wing person myself, what Lilly says makes sense to me. Also I think that his data seems sound. Clearly, though, I'm not unbiased here. And I'm not saying that people should not be responsible for their own choices.

As for the Palin thread, yes, I have decided to stay out of it. I could inject a lot of emotion, but no useful information. No one benefits from that. But it has been informative and interesting to read what the rest of you have said.

Ann

A cursory reading of his document show a number of holes where he does not dig deeply into the cause of the numbers he is showing. He also uses a number of statistical fallacies that make his argument look good but don't work when other statistics are used.

Just off the top of my head here are a few of the holes I see:

First he compares today's economy to the Great Depression. That is a typical scare tactic to make people think the economy is a disaster. The economy is far from the Great Depression. First of all, in a truly bad economy, most companies are losing money. Right now, losses are concentrated in the transportation industry, for obvious reasons, and the financials, again for obvious reasons. The rest of the companies are doing reasonably well with individual variations of course. The company I work for, for instance, is a high tech communications company that is making money like gangbusters and is hiring rapidly. Many high tech companies are still making lots of money where typically they are the first to go down as high tech is usually purchased with extra discretionary income.

The conditions under the Great Depression saw 25-30% unemployment while today we sit at 6.1%, a historical low. Just to compare the misery of the Carter era, unemployment stood over 10% while inflation was at 21%. Today inflation is at 5.4%, most of it due to oil. And that is cooling off with oil in free fall. We are still not even in a recession by economist definitions, which require two consecutive quarters of negative economic growth. This quarter is expected to show a small growth while last quarter showed a very tiny drop of less than 1%, annualized. So right off the bat, his comparisons are all wrong.

In his first paragraph about the Bush economic team, he uses another fallacy. He compares the average tax cut of the top 1% of $83,000 to those of those making $51,600. What he doesn't compare is the average percentage of tax cut rather than a raw number. For instance, a person making $1 million a year who gets a 1% tax cut would get $10,000 back while someone making $50,000 who gets a 10% tax cut would get back $5,000. Which tax cut is more effective? $5,000 is worth a whole lot more to the person making $50,000 than $10,000 to the millionaire.

I also question his numbers of less than $1,000 for families making $51,600. Numbers that I had seen earlier showed that number to be closer to $2,500 for families in that income category. I haven't got the time to look it up further.

The argument on the minimum wage is also debatable. A rising minimum wage reduces jobs, so it's questionable whether a higher minimum wage even leads to higher overall wages. While people making minimum wage forever would suffer a loss in real income, people do not stay at minimum wage forever. So those same people five years later are usually not in the same income category. Here is an article by Arthur Laffer I read a couple days ago showing a large degree of income mobility, which disputes the contention that people are losing money.


New Evidence on Taxes and Income

The graph I saw on falling numbers of manufacturing jobs is also misleading. Manufacturing jobs are falling IN ALL INDUSTRIALIZED NATIONS, INCLUDING CHINA. As manufacturing modernizes, this is a natural process.

On stagnating incomes, he does no analysis on why incomes have stagnated. He doesn't even include the negative impact of the dot com bust that coincidentally happened in 2000, the beginning of his statistical comparison. I'd like to see what his comparisons are for 2000-2001, 2001-2002, and so on. By completing ignoring the disappearance of 60% of the NASDAQ and the disappearance of trillions of dollars beginning in 2000 and counting that as simply bad Bush economic policy is misleading at best.

The argument that not enough jobs were made is also fallacious. Over five million jobs were created during the Bush Administration with unemployment falling as far as 5.1%, only to begin rising with the bursting of the housing bubble. If the workforce is growing faster than the number of jobs, unemployment would never have fallen to 5.1%. So that's wrong. Unemployment rises when the workforce rises without a comparable rise in jobs. Just as an example, the latest increase to 6.1 from 5.7% was mostly attributed to a rising workforce of 500,000.

I love the fact that all of his comparisons start with 2000, the height of the dot com boom and the bursting of the bubble. Considering trillions of dollars of income vanished that year meant that there was a huge hole for Americans to climb out of before Bush ever took office, which his statistics don't account for.

That was no small event. Consider that the NASDAQ stood at 5132.52 at its all-time high on March 10, 2000. One year later, the NASDAQ was at 2052.78, less than two months after Bush took office and while the economy was still operating under Clinton economic policies.

Worse of the worst, he does a very superficial analysis on why the real estate bubble was created and why it burst, automatically attributing it to Bush policies, when in fact the largest footprints in the mortgage industry, Fannie Mae and Freddie Mac, were controlled by Democrats, who severely mismanaged those companies, directly causing the current financial crisis. When the president attempted to address the problems before they became a crisis, Democrats stood in the way of reform. Just wait until the twin pending catastrophes of Social Security and Medicare when they begin to fail in just nine years. I might post something about the myth of the Social Security Trust Fund and the swindle those programs represent. Again, the president tried to reform those, only to be stopped by Democrats.

This is true of anything, especially in this polarized season. The fact that this person is from the left should make one cautious, just as anything Roger posts should make one cautious, even if he is not as careful as Ann in linking sources and stating his position or the credentials that back his view. It's clear enough where he stands and what his skew is.

Except of course, there are charts and numbers involved here, which is always extra informative. I rather that than cushy narratives, which tell me more about the person making them than what is actually there. I'm sure places like NRO, etc have their own charts. But their research is just as skewed as this person's towards the Bush administration, if you want to consider methodology.

The economy is a large and unwieldy organism and there are any number of theories for the state we're in. The ideologues would have us believe that they hold the final answer like some unheeded prophets, but the truth is that no, it's not that everyone that disagrees with you is a moron, but rather that people have legitimate concerns with your line of reasoning.

Ultimately it's a matter of where one stands, but that doesn't mean that more information on a diverse set of views is not enriching.

alcyone

If anyone wants another viewpoint, my opinion is that the huge shift of most Western economies from production to financial services is the main cause. In a production-based economy a bank failure is going to inconvenience a lot of people, but relatively few will actually lose everything. In an economy where the main revenue stream comes from financial services a bank failure is going to have hugely disproportionate effects. It really is that simple, though I doubt that economists will necessarily agree.

I'm skewed!?!? And I always thought I was perpendicular.

If links are what you want, here's one to an Investors Business Daily editorial:

The Real Culprits of This Meltdown

Here's a link to the New York Times showing the Bush Administration's attempt in 2003 to regulate Fannie Mae and Freddie Mac, which Democrats stopped cold.

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

Here's another one:

Financial Markets are in a Mess

Here's the direct quote Robert B. Reich, Clinton's Labor Secretary, made on MSNBC, the network no one watches:

Conventional wisdom, even inaccurately mentioned on the Fox News Channel, which is allegedly in the tank for Republicans, says that McCain is universally for deregulation and would not have supported regulating Fannie Mae. This is inaccurate as McCain sponsored the Federal Housing Enterprise Regulatory Reform Act of 2005. Here is a quote from McCain on the floor of the Senate in 2005 as he predicted disaster ahead:

FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005

Obama opposed the bill, in lockstep with Democrats whom he votes with 97% of the time. Anyone still voting for the guy (Obama) who's taking economic advice from the people who caused this problem and couldn't support a fix for the problem when he had the chance to do so? What's he going to change that isn't just going to recreate this financial mess later?

Yay links. *nabs*

alcyone

Roger, you make several valid objections to Scott Lilly's claims, but I think you have really misunderstood Lilly's arguments when you say this:

You are talking about how today's situation compares with the situation during the Great Depression. However, one of Lilly's main points is that today's situation is very reminiscent of the situation just before the Great Depression. The big similarities between then (circa 1920-1928) and now (2000-2008) is that minimum wages were low, money was channeled from the poor to the rich in that worker productivity rose sharply (during 1920-29 by 63%, during 2000-2007 by circa 20%) while inflation-adjusted wages fell (during 1920-1929 by 9%, during 2000-2006 by circa 2%), and the general public became poor enough not to be able to purchase all the goods and products that the supply side was producing. That, according to Lilly, was a major reason for the Wall Street crash of 1929 and the following Great Depression. And while worker productivity has not risen so sharply or wages fallen by so much during the current decade as during the 1920s, this means that there are similarities in the development of the American economy in the decade before the Great Depression and the decade we exist in now.

A few claims by Lilly: During 1994-2000 inflation-adjusted income for middle-income families rose by 14%, while during 2000-2006, the last year for which data is available, inflation-adjusted income for middle-income families fell by 2%. Another interesting figure is that in 2006, the top ten percent of American households accounted for 49.32% of all household income in 2006. This is the highest figure ever. In 1928, right before the Wall Street crash of 1929, the top ten percent of American households earned 49.28% of all household income. In 1996 they accounted for 43% of all household income in the United States, and in 1976 they earned 33% of all household income. If Lilly is even remotely right, the richest people in America have indeed become proportionally richer than other Americans, while the middle-income Americans have become poorer during the Bush years, although they became significantly richer during the Clinton years. (You are right that Lilly does not discuss the Clinton-era IT bubble at all.)

My point is that it is not correct to claim that Lilly compares today's situation with the state of the American economy when the 1930s depression was well underway.

Ann

Well... it isn't just America that's been affected.

You should see how much has carved off one of our Australian share portfolios in the last week... it's depressing!

Thank god we have our investments diversified.

I imagine there are a lot of people out there who rely on their shares to keep them afloat that are going to have a rough time ahead....

I have a very serious objection to something that was said in the Investors Business Daily editorial that you gave us a link to:

Tough new regulations forced lenders into high-risk areas? Who forced them?

In my first post, I said that low-income people were encouraged to take risky loans. Carol pointed out that even if people are encouraged to do stupid things, they are ultimately responsible for their own actions. I agreed, at least partly, because I do think that people can be tricked into doing irresponsible things in situations they do not fully understand.

But the Investors Business Daily editorial claims that lenders had no choice but to do very risky things? They were forced to? Even though it was their job to assess risk and to know that these things were unsafe and potentially unethical? Who forced them to do this?

Scott Lilly's main point is that the global economy suffers because rich people have made themselves richer at other people's expense. The Investors Business Daily's main point is, as far as I can see, that lenders have to make themselves as rich as possible, even at the risk of creating long-term problems or crises. If governments try to regulate these people's behaviour then it is those governments' faults that these people were forced to put themselves and large numbers of other people at risk so that they could keep enriching themselves until things fell down around them.

I'm not impressed.

Ann

The point in question the IBD editorial was making was that the Clinton Administration was penalizing companies that did not lend money to minority and low-income families under the Community Reinvestment Act. Basically, the government was considering it discrimination if the lenders did not lend. So fearful of facing financial penalties, the banks loosened up their lending standards so that they essentially lent to anyone who could "stand up straight" as Robert B. Reich put it.

Whenever government distorts the free market, there is a real danger of economic bubbles forming. Just like the real estate bubble in 1990, that was government induced due to tax loopholes that encouraged bad investments in commercial real estate. When those loopholes were removed, that bubble burst.

The government was not responsible for the dot com bubble. That was mostly due to the "irrational exuberance" people had, feeling we were in a "new economy" where earnings and revenue didn't matter. Eventually the lack of revenue by any of these dot com companies caught up to them, causing them to die. Even companies with large revenue streams were caught in the fallout. The company I worked for, for example, lost 2/3 of its stock value despite record profits each quarter and has only recovered about half of its lost value over these eight years since the collapse of the NASDAQ.

Ann - Again, I don't have sources handy, but I think Roger mentioned it in his Palin post. Lenders were mandated by the Feds [mainly Congress] to allow low income/high risk folks get loans by increasing penalties for not giving loans to low income people because it was prejudice against those with low income [incomeism?]. From a purely economic standpoint, it would be bad business for a bank to give us a loan for a 125K house [on the pretty nice side of average around here] when we only made 20-30K, but as I understand it they were required to.

Around here, 400-500K will get you a REALLY nice house and/or a lot of land. In coastal areas and other big cities, it'll get you a two bedroom with a small concrete backyard [or something like that based on the flip shows]. There's no way that the average family can afford those unless lenders are required to loan the money. The general guideline is no more than 33%ish of your income for the mortgage payment [25% preferable but other things will be taken into account - down payment [equity], other debt, etc]. When the only way to get it to something resembling those ratios is to do the 'creative financing' stuff - interest only for a few years [what happens when you have to start paying interest? Payment triples? Screwed.] or adjustable rates [we can squeak by now but if it goes up we're screwed and when it goes up you see foreclosures go through the roof] or balloons [low payments now and in 5 years [or whatever] the balance is due and if your income or credit score has taken a dive since then, you're screwed]. So banks had to get creative to avoid penalties from the Fed Govt for 'incomeism' and people bought things they absolutely could not afford because someone was willing to give it to them. There's blame on both sides.

We coordinate a financial class put out by Dave Ramsey [who was mentioned in LtL if that rings any bells]. He told a story in tonight's video:

A couple came in for financial counseling. They brought home $1200 a month. Their car payment was $600. God had given them the car, even the finance manager said it was a miracle.

Yes, they should have been smart enough to not buy the car, but the finance manager/whoever should have said 'No, you can't afford this. Here's a nice car with a $125 payment [or whatever]'.

In the case of Fannie/Freddie, if they were running finance manager's office, they would be fined for not giving them the 'opportunity' to finance this nice car even though they can't afford it.

Is there plenty of blame to go around? Heck yeah.

Individuals are conned sometimes, but they also get blinded by 'I can own a home'itis and don't sit down and look at what they can really afford and then buy only that.

Banks/mortgage cos/whatever you call them giving loans to people they know won't be able to afford them and not checking claims [there are loans where you only have to tell them how much you make and they don't actually check it - or they would, probably not anymore] and boosting numbers to make their bosses look good and get bonuses [see: Fannie/Freddy and the millions their execs took in bonuses - very Enronish but since it's federally run, sort of, no one has/is questioning them, subpeoning them, trying them for falsifying records etc].

Government for not overseeing like they should have. SEC, Dept of Housing, assorted committees in Congress for not taking harder looks at it. McCain did call for just such regulations etc in 2005 [Roger linked to that] but it was blocked by Dems [Bush had said something along the same lines as well].

Anyway - how were they forced? By being threatened with huge fines/etc for not giving loans to low income folks.

Carol

ETA: Yeah what Roger said .

I would agree with this. I found these articles measured and informative, if left-leaning:

Fannie Mae and the Vast Bipartisan Conspiracy

Both Obama and McCain have Ties to Loan Giants

All the Marbles

And I saw a link to Fox, so I feel less guilty about linking to the Times:
In Candidates Two Approaches to Wall Street

My take is that opportunity creates greed, which is why regulations are needed--everyone is going to try to work the system. While it's commendable McCain had the foresight to try to regulate FM in 2005, and has experience with FDA tobacco regulations and strengthening requirements after the Eron thing (Sarbanes-Oxley Act), the Washington Post reported that as recent as 2007 he was back into orthodoxy voicing his regret on his vote on the Sarbanes-Oxley. McCain's recent experience as far as I've read seems to lie in telecommunications sectors, where he was--no surprise here-- against regulation.

*shrug* I can see why if you were against government intervention you'd want to err on the side of big companies, but I do not agree.

So, naturally, I'll take my chances with Obama and his curious economic adviser .

alcyone

Interesting. I didn't know that. Thanks for telling me.

However, it seems to me that there would be no way for the Clinton administration or any other administration to force lending institutions to offer loans at such low rates that the lending institutions themselves were sure to make a loss. That would be sheer economic madness, and if Clinton had proposed it, then Congress should have opposed it. Remember that Congress was dominated by Republicans during Clinton's second term. Sure, Clinton could have issued a veto to strike down the objections of Congress, but just think how bad it would have looked to posterity if Clinton had gone on record saying that lending institutions must give loans to low-income people at rates that are below inflation. He can't have done that, because if he had conservative media would remind us of it every chance they got.

So Clinton didn't force lending institutions to offer loans to poor people at rates that are below inflation. In other words, lending institutions were still allowed to make a profit when giving loans to low-income people. However, the way I understand the subprime loans, they generally mean that the person taking the loan has to pay a very low interest rate during the first few years, but then the interest rates shoot up sharply. That means that low-income people may be able to pay their interest rates during the first few years, but when the rate goes up they will be forced to default on their loans.

Surely lending institutions weren't forced to ask for a very low interest rate during the first few years and then a much higher rate after that? Surely they could have asked for a fixed rate from the beginning? That way low-income people would have seen right from the beginning that they wouldn't be able to afford that loan. And I don't see how the lending institutions could have been fined for making low-income people realize the true cost of taking a loan.

Anyway, remember that according to Scott Lilly, inflation-adjusted earnings for middle-income people rose by 14% between 1994 and 2000. During that time, people might reasonably expect their incomes to rise, so that they would be better able to afford a loan. But during the Bush years, middle-income earnings have fallen by 2%, according to Scott Lilly. Lilly also claims that the less you earned when Bush was inaugurated, the more your economic situation has probably deteriorated during the Bush years. And since it was Bush who was primarily responsible for shifting the flow of money away from low- and middle-income people into the pockets of the rich - mainly by way of his huge tax cuts for the rich - you might argue that Bush, more than Clinton, should have realized that subprime loans were becoming a real problem for poor people.

So I still very much question the claim that lending institutions were "forced" by the Clinton administration to offer hugely risky credit to poor people.

Ann

The banks weren't taking losses on loans that were performing, i.e. people were actually making their payments. The losses the financial industry is suffering now is on defaulted property. Government is also exacerbating the situation even further due to their drastic over-response to the Enron situation. Sarbanes-Oxley, an extremely poorly written law with byzantine and unnecessary requirements, was only one part of the government overreaction. The FASB (Financial Accounting Standards Board) controls how accounting operates within the country. When Enron happened, FASB changed the rules of accounting so that property had to be discounted to its lowest value, in many cases zero, when payments for loans were not being made, essentially a worst-case scenario.

Since we all know that real estate cannot be worth zero, the new accounting rules, meant to offset Enron's over-inflation of asset values, went too far in the other direction. In the cases of Lehman, Merrill Lynch, AIG, etc., these companies even warned that the write downs on their real estate were not real losses as many of those properties were written down to zero as FASB required. Yet because of the new rules, their balance sheets of those companies became total disasters, destroying their credit and hence putting them into the boat they're in.

Now how do banks make money with loans? They take deposits which people place into their bank accounts (known as demand deposits) and they make loans on them to other people. Deposits are considered liabilities on a bank's balance sheet while loans are considered assets. As long as the loans are worth more than the deposits in terms of cash flow, then the bank makes money. Note that most checking accounts actually pay zero interest while even savings accounts offer negligible interest rates, clearly giving banks access to money that is depreciating. In a nutshell, banks make money using other people's money, not their own.

You underestimate what people will do to get a loan to buy a house. People have a tendency to push negative news to a later time and will sign onto the many creative financing methods in order to afford what they really can't afford. So while the current loans were affordable, the slightest rise in interest rates would cause many of them to default. Not everyone is versed in economics. People have a tendency to believe that current circumstances can last forever. So the possibility of rising interest rates wasn't enough to deter them. The lure of home ownership, pushed so hard by the Clinton Administration, caused many of these people to sign up for loans they shouldn't have been carrying. If they could afford it, they would not have defaulted and the financial industry would not be in the shape it's in right now.

Owning a house is considered part of the American dream along with the 2.1 kids, two cars and the white picket fence. People will go through quite a bit to obtain that dream, including stretching themselves thin.

I should also bring up that many of these banks did not actually originate the mortgages in question. For instance, AIG carried $600 million in bad Fannie Mae mortgages. Banks buy mortgages through swaps in order to offset the short-term nature of demand deposits and the long-term nature of mortgages. The reasons for swaps are because short-term deposits and long-term mortgages have different risk levels, so banks attempt to balance risks. It's a fairly complex topic that I'll admit I don't fully understand despite having learned a bit about them when I had a securities license with the NASD. Believe it or not, I started my career as a securities broker before becoming a software engineer years later.

As for banks fearing the federal government, just saying the word, "audit," will bring panicked expressions on people's faces. The government has a lot of power, too much power, to impose its will on the markets. The threat of fines if they turned down a low-income or minority borrower is a powerful incentive for them to make those loans. They take the risk, knowing that it could come back to haunt them, but it's better than facing the certainty of fines.

I also disagree with your assumption that money was transferred to the wealthy through tax cuts. Tax cuts, by percentage, went to the lower income brackets so that the burden on the wealthiest actually rose with the tax cuts, becoming even MORE progressive. I'd think you'd be all for that. When I have the time, I may look up the statistics, but you'd be staggered to see what the tax burden is on the wealthy. One figure I remember is that the lower 50% of all wage earners pay 3.6% of the total federal income tax while owning roughly 25% of the income. As with the examples I used in the earlier post, using raw dollar figures doesn't paint an accurate picture since it's really percentages that matter when you determine who benefitted most from tax cuts.

It's also impossible to transfer money from one group to another through tax cuts, only through transfer payments, i.e. welfare. When everyone gets a tax cut, everyone's taxes go down so there can be no transfer involved.

I do have to say Obama supports using the tax code to propagate welfare since he advocates giving tax cuts to people who don't pay taxes. His proposed middle tax cuts are a myth. In reality they are transfer payments disguised as tax cuts.

Why don't you check out page nine in Lilly's report? There is an impressive graph there, claiming that fewer than 15,000 American families got one quarter of the nation's personal income growth bewteen 2002 and 2006. That's staggering, if you ask me. Lilly also claims that while the bottom 90% of Americans got a modest raise of $305 between 2002 and 2006, it is almost certain that most or all of that income raise went to the richest of the bottom 90%. If it wasn't the Bush tax cuts that gave the very richest people such stupendous raises, then where did those amazing raises come from? Particularly in view of the fact that the richest Americans got so much richer while middle-income America became poorer.

If you don't understand why the banks made those swaps in spite of having worked as a securities broker, are you sure that those swaps make any good economic sense at all? Haven't they just been a way for banks to increase their nominal assets and short-term profits?

Maybe it was Clinton who forced them to make those swaps? Sorry, couldn't resist. I remember when I got a 25-page rambling document into my hotmail inbox, claiming that it was Clinton's fault that 9/11 happened. Hey, I'm not saying he was perfectly blameless, but... come on. I suppose Clinton caused Russia's intervention into Georgia, too? Okay, I'm not saying he was blameless. And I guess he was the one who caused the assassination of Benazir Bhutto, the massacre at Virginia Tech, the derailment of that train in Los Angeles, and the fury of Katrina and Ike. Wow. I remember the Clinton years as a period of optimism, prosperity and peace. Who'da thunk he would be found guilty of every disaster that has happened to the United States since he himself left office?

I know. That was unnecessarily provocative. But I'm tired of how some people blame Clinton for everything that went wrong in America after his presidency was over, while at the same time they can find no fault with the people who were actually in charge of the country while the problems and disasters happened.

Ann

Well, sorry, again I can't resist. In today's New York Times, Nicholas D. Kristof writes this column about how Richard Fuld, the chief of Lehman Brothers,

in order to turn his company into dust. That amounts to getting paid 17,000 dollars an hour to do the job of obliterating an 158-year-old firm.

I'm sure he richly deserved that salary!

Ann

More from Times' Business and Tech section, linked to from RCP:

How Financial Madness Overtook Wall Street

And an interesting one from Politico:

Financial fight: GOP hits Bush on econ troubles

alcyone

Swaps are undertaken in order to balance risks and have nothing to do with increasing assets or increasing profits because it is a value-neutral operation. A swap is called a swap because the two "swappers" exchange securities or assets of similar or equal value. Essentially one company trades a short-term asset for a long-term asset while the other company trades a long-term asset for a short-term asset.

When you have short term liabilities and long-term assets, what happens if you have a sudden liquidation of the short term liabilities? You cannot easily sell off long-term assets to pay for them. So what banks do is to perform swaps with other companies in order to make their assets and liabilities similar in term. Some companies like Lehman and AIG are buyers of mortgages. Agencies like Fannie Mae and Freddie Mac are buyers and sellers of mortgages.

Swaps have nothing to do with the government. Companies like AIG believed the mortgages sold to them by Fannie Mae were safe investments. Perhaps they didn't do their due diligence to find out if those loans were risky or perhaps they did but still believed they were safe. I'm not in the AIG conference rooms to find out their thought processes. In any case, they purchased many risky loans and paid the price when those loans defaulted.

When Clinton is to blame, I'll blame him. If not, I won't. For instance, I don't hold him in the least bit responsible for the dot com bust and the resulting economic problems. He had nothing to do with it. But we do have his fingers in the pie when it came to the Community Reinvestment Act and with his cronies running Fannie Mae and Freddie Mac. Democrats hold a huge amount of blame in this financial mess but are getting a free pass in the press, as usual. McCain and Bush get no credit for trying to fix the problem (Democrats torpedoed the attempts to fix them led by Christopher Dodd and Barney Frank), yet get all the blame for the mess now.

Meanwhile we have Obama sitting there as a Senator who failed to support McCain's bill, which would have placed additional oversight over FM/FM (Fannie Mae/Freddie Mac), quite possibly uncovering the true extent of the pending disaster before it took down so many banks. And Obama has as his chief advisors three of the people directly involved in Fannie Mae's gross mismanagement. Jim Johnson and Franklin Raines were ex-CEO's of the failed company while Jamie Gorelick was the Vice-Chair of the board of directors. She pocketed $75 million while Raines pocketed $90-100 million (couldn't find out how much Johnson got) all while they were running Fannie Mae into the ground with fraud and Enron-style accounting and non-existent controls on the lending process.

It's quite interesting you posted that article about Richard Fuld taking hundreds of millions while destroying Lehman. Raines, Gorelick, and Johnson could be soul mates with Fuld as they did the same with Fannie Mae. And somehow Obama gets away with saying how he'll fix the problem when he failed to act when McCain warned his colleagues and while the architects of the problem are standing right next to him as he slams Bush for being culpable. It would be the height of irony if this financial mess somehow got Obama elected since people automatically blame the sitting president and his party regardless of actual culpability. I fear for the financial systems in the future with these people in charge because you know these three will get high profile jobs in any Obama administration. Raines would likely be Obama's pick for Treasury Secretary, as he was rumored to be John Kerry's choice for that position, so the fox would be in charge of the henhouse after the fox has already eaten most of the chickens.

I'm not getting into the whole who's connections are skeevier. I'm way too biased and way too scared of who McCain associates with.

Maybe because one decision to regulate does not counter a history of enthusiastic deregulation?

Besides, while gleefully underscoring Obama's do-nothing stance on the bill McCain proposed, it's all too easy to fail to note that in 2006 Obama did try his hand at legislature to curb some of this mess. Yes, it failed. *shrug* But so did McCain's, except, as I said, McCain has a long history of doing the opposite.

I'm just not quite sold on McCain the visionary yet. I hesitate even more when in 2007, he was saying he never saw it coming.

From where I'm standing, getting a "fundamental deregulator" to regulate would be the irony.

alcyone

ETA: Politifact looks at the McCain as visionary phenomenon.

Just for the record, Roger. Considering we have seen a lot of problems during Bush's two terms - the enormous accumulation of wealth among the richest Americans and the simultaneous shrinking earnings of middle- and low-income Americans, the housing bubble, the Wall Street crisis, the American budget deficit, the sinking of New Orleans, the slow rotting of American infrasturcture, the climate change with increasing drought in large parts of the United States, the growth of international terrorism, the geographical juxtaposition of Osama bin Laden and the bomb (both are to be found in America's ally, Pakistan), the diminishing status of the United states abroad - is there anything you blame Bush or any other important Republican for? Anything at all?

Ann

in 1996 Barack Obama couldn't get credentials to get into the DNC convention and had to take a taxi home because the car rental place wouldn't accept his credit card, yet somehow during Bush's presidency, Noobama accumulated enough wealth to become a viable politician and lawsuit his way into a senatorial office, ALL during Bush's administration despite a "crappy" economy. I TOTALLY blame Dubya for that.

Also, more illegal immigrants have come to the evil wicked polluting earth hating United States during Bush's terms than anytime in history, and that's because Bush is WAY too soft on illegals. I REALLY blame him for that.

Still I guess I can give credit to George for keeping Gore and Kerry out of office...oh wait...that was *my* fault, heh, I didn't vote for those guys.


TEEEEEEEJ

Who does he associate with that you're scared of?

Meanwhile you have no problems that Obama is tied to the Chicago Mayor Daley political machine (oh wait, there's no corruption there!). You have no concerns that he associates with so many people who hate America, including William Ayers the domestic terrorist who wishes he had set off more bombs. And there's Tony Rezko, the Annenberg Challenge, ACORN, plus the people I mentioned earlier who have fleeced Fannie Mae of hundreds of millions of dollars to line their pockets while sticking the taxpayer with a $200-300 billion bill. The list goes on with many shady people, yet you're scared of McCain's associates? The only shady ones McCain has ever associated with are the other 99 Senators in the US Senate. I will agree with you that I'm scared of them, too.

I would reply with a defense if this wasn't a page right out of the conservative smear machine. Also if factcheck/politifact/etc hadn't debunked all these numerous times.

And more importantly, who am I to intervene when you're having so much fun talking to yourself?



alcyone

Hmm, where to start. You incorrectly make the assumption that I think George W. Bush is flawless and is guilty of doing nothing wrong just because I don't criticize him every five minutes. As with Bill Clinton, i will praise him when he's right and I will criticize him when he's wrong. I defend him mostly because no one else will to any significant degree.

Well, here's a start to that list... and it's a long one.

* He started off his administration very poorly by trying to make friends with Ted Kennedy. That gesture led to Kennedy essentially writing the "No Child Left Behind Act" that has so many flaws it's ridiculous. The only thing that would have given teeth to the bill would have been school choice and merit pay for teachers and those were left out of the final bill. Never trust a Kennedy!

* Another poor start to his administration was the imposition of steel tariffs to help the steel industry against cheap imports. As a professed free market trader, he violated his own principles by imposing these. The tariffs eventually had to be removed as the WTO ruled against them.

* In the battle for Afghanistan, he gave far too much power to the lawyers who had to approve every single action taken there (and in Iraq, too, for that matter). The delay cost us our chance to kill Mullah Omar in 2001 when we had his convoy in our sights. A single Predator missile and he would have been taken out.

* He did not continue with his stated policy of a tax cut every year. While he had a good tax cut in 2001 that got us out of the dot com bust and had a decent capital gains tax cut in 2003, after that, nothing. While those tax cuts were taking effect, our economy improved considerably, millions of jobs were created, and the deficit fell in half. Conservatives take tax cuts very seriously and will remember that when election time comes when a Republican goes against his promises. Just look at 1992 and 2006 as examples where the Republican voters came out to fire their incumbents.

* When he did get tax cuts passed, he didn't push hard to make them permanent when they were first enacted. Instead he acquiesced to antiquated Senate rules which allowed sunset provisions to be put into the bill. So rather than having a permanent tax cut people could count on to still be there in the future, people and businesses had to hedge for the possibility that the tax cuts will expire and people will see an enormous tax increase. So now we have two presidential candidates running around claiming they're going to cut middle class taxes when all they'll really do is keep rates right where they are, assuming they even follow through on the promises, which I doubt. That's not a tax cut.

* With Republican control of Congress before our current oil prices started skyrocketing, he should have successfully lobbied for opening offshore drilling and ANWR years ago. Some Republicans resisted, but a deal should still have been done. Enough conservative Democrats signed on to make it bipartisan. Instead, Bush mentioned it for a while but never fought for it. We'd be better off today if that oil was producing now.

* He had a comprehensive energy policy that included new nuclear reactors, new electrical infrastructure for replacing our aging ones, additional refineries, and new drilling as well as huge spending on alternative energy. He barely tried to get it passed. If he had succeeded with Republicans in control of the White House and Capitol Hill, it should have been doable. We would be on our way to lessening foreign dependency on energy instead of stuck in the mud like we are now with oil still at exorbitant prices.

* Bush failed to defend the US dollar. When the dollar first started falling, the markets had the perception, probably correctly, that President Bush supported a weak dollar. So rather than using the Treasury Department to send signals to the market on US intentions to support the dollar even if only just with words, he did nothing and watched while the dollar tanked. Perception matters a lot in the markets. By acquiescing, Bush only served to make the dollar fall further and harder. Only recently when people finally figured out the US economy was stronger than the rest of the world and always has been did the dollar begin to appreciate again. While a weak dollar is good for exports, it didn't help in the long run with our current accounts deficit with oil rising to a high of $147/barrel for Light, Sweet Crude, more than offsetting our large export gains in other areas.

* He did not fire Donald Rumsfeld, General George Casey, and General John Abizaid soon enough. Those men were the architects of the minimum force necessary policy and stuck to it to the bitter end even though it was plain progress wasn't being made. Once he fired them and replaced them with Robert Gates and General David Petraeus, the war in Iraq started going our way, and in a hurry. Unfortunately, now it's too late and his popularity rating is still mired at 30%, making him an anchor on Republicans in 2008.

* Marine General Peter Pace and Admiral Mike Mullen were terrible choices for Chairmen of the Joint Chiefs of Staff. Those men didn't have a clue how to win in Iraq and stood in the way of General Petraeus with petty requests for justification every time Petraeus sent in requisitions for men or materiel since they both opposed the Surge in Iraq, going against their Commander-in-Chief's strategy once the minimalist strategy was rejected. When the president had to finally go around those men by using retired General Jack Keane as a direct conduit between Petraeus and Bush, those men tried to curtail Keane's movements to cut off communications. Once Bush knew of their betrayal, he should have fired them immediately. Mullen is still Chairman, for some unknown reason.

* President Bush tried too hard to be unlike Lyndon Johnson, who was accused of being so involved in military decision-making that he jokingly said he had to give permission for every latrine that was dug in Vietnam. By being too deferential to his generals, he came close to losing Iraq. His generals, who had trained to fight the Soviet Union, hadn't a clue on how to fight an insurgency and win. He should have realized their strategy wasn't working much sooner and gone to a new plan.

* We should have asked Iraq to pay for part of our war effort. I understand Bush wanted to show that we weren't there for oil, but the Iraqis should have at least paid for part of the cost of the war. Instead, they've essentially paid nothing so far and get $75 billion a year in oil revenues. Even a quarter of that would have helped to offset some of the costs.

* He implicitly admitted that Guantanamo was a place of torture by saying that it should be shut down at first opportunity, playing into his enemies' hands. Every visitor to Guantanamo, including the Red Cross, has said that the prisoners there were better off than people in many of America's prisons. Basically Bush had no communications skills and was ineffective in fending off the torture charge. What he should have done was to make it a place for prisoners to fear. Instead, many prisoners gained weight and got better care than our own prison population.

* We should have killed al Sadr when we had the chance after four contractors were brutally killed and dragged through the streets of Fallujah. When the Mahdi Militia first raised its ugly head, we should have cut it off in Fallujah. Instead we sent in an Iraqi colonel who was actually sympathetic to al Sadr's cause. We should have gone in there with overwhelming force and killed him. If he wanted to be a martyr, by all means oblige him. Instead, al Sadr's been a pain in our side for years and has caused the deaths of hundreds of American soldiers.

* He appointed Harriet Miers to the Supreme Court. While she was a decent lawyer, she wasn't Supreme Court material. Fortunately Republicans stopped the appointment and we got Samuel Alito, an excellent pick who doesn't legislate from the bench by making law out of whole cloth.

* He gave up way too easily on reforming Social Security and Medicare, the two time bombs that will detonate sometime within most of our lifetimes that will make Fannie Mae look like a school child who lost her lunch money instead of the $1.5 trillion it will eventually cost our economy. With the power of the presidency and the bully pulpit, he should have gone after that third rail of politics hard. Usually President Bush does what he thinks is best regardless of the cost to himself, but in this case he took the coward's way out. In this, I blame the entire Republican leadership for cowardice.

* We should have given Israel our IFF (Identification Friend or Foe) codes so that they could take out Iran's nuclear capabilities if they were confident of success. Instead, by depriving them of our IFF codes, Israel was unable to launch any attack since they would have been attacked by our own fighters.

* President Bush did an extremely poor job communicating what really happened during Hurricane Katrina, whether it be through surrogates or direct contacts with the media. He knew the media were unjustly painting him with blame for all the failures that happened, but he didn't have any idea how to get the word out about what really happened. Instead he let the media paint him as an incompetent, essentially killing the rest of his presidency. That was the moment President Bush became a true lame duck president. To make matters worse, he apologized for the failures of the federal government, making the media look like they were right.

* The president failed to communicate the discovery of WMD in Iraq. Regardless of whether they were small in number compared to what was expected (roughly 500 warheads discovered), he should have immediately made it public with an a press conference. Instead the administration buried it. When Senator Rick Santorum and Representative Pete Hoekstra asked the president's people why, they were told that the administration was tired of being beaten up by the media and didn't think they could win the media battle after already losing it the first time. Hello! Bully pulpit! The presidency!?!? Ronald Reagan never flinched at that kind of challenge. The Great Non-Communicator. Hmph.

* The president signed onto a horrible Democratic plan to give tax rebate checks to people with the economy beginning to go south. Clearly that didn't work as I had said it wouldn't. A demand-side solution never works. Even though he was a lame duck, he should have painted the Democrats as do-nothings and tried to get a good tax cut passed. A good tax cut goes a lot farther than a brief one-time only rebate check.

* The president agreed to sign a bill for a minimum wage increase to $6.55 in the midst of a declining economy. That will only serve to hurt the economy more and cost more jobs.

* He and the Republicans in Congress broke their promises to restrain spending. 2006 was the voters' revenge.

* When the New York Times spilled the beans about our secret program to track terrorist finances, Arthur Sulzberger and Bill Keller should have been thrown in jail immediately and been charged with treason. By not reacting to this treason, the rest of the media felt free to also spill our secrets, such as our wiretapping programs among others. Abraham Lincoln and FDR never hesitated to jail domestic enemies during wartime. Lincoln even expelled a sitting member of Congress, exiling Democratic Congressman Clement Vallandingham to Canada. There's a joke that goes around about how bin Laden has the cheapest intelligence service in the world that helps him find out what his enemies are doing. All he has to do is to go out and buy a copy of the New York Times for $1 a day. All previous presidents during a period of wartime imposed restrictions on the media except this president for unknown reasons.

* Worst of all of the above is a failure to communicate about Iraq in general. He was far too passive, letting his enemies define him rather than always taking the offensive against the media. Ronald Reagan knew that 90% of the media was against him. He didn't care. He went over their heads to the American people and explained things simply and with conviction. President Bush, instead, went into hiding as Democrats and the press started accusing him of lying about the justifications for war. With the power of the bully pulpit, he could have made mincemeat of the Democrats. Instead he let them paint him as a liar all in the spirit of bipartisanship. By trying to be bipartisan, he stayed silent while watching his enemies destroy him. When he finally decided to fight back, he was too late. His enemies had already successfully defined him. It didn't matter that commission after commission, such as the Robb-Silbermann Commission, the 9/11 Commission, the Butler Commission, etc. always found that no lies were told. When one side attacks and the other side doesn't respond, the attacker always wins.


Is that enough, Ann? I have more, but perhaps you see the point. Despite the problems I have with President Bush, he has one quality that makes him the ideal leader for this War on Terror. He wants to win and doesn't care what happens to him in order to win. Bush has been so successful in the War on Terror that people feel safe. Because they feel safe, other concerns go to the top of the public consciousness. People feel so safe that too many are willing to possibly elect the worst possible president we can have during a time of war, Barack Obama.

I think history will judge President Bush far differently than the electorate currently does. Outside the prism of partisan politics, historians, I believe, will one day look on his presidency as a landmark one, a presidency that laid the groundwork for victory against terrorists and for eventual peace in the Middle East. To support this, I will post a subsequent narrative comparing how another president fared with public opinion and how history sees him today. That may take a while, though, since it'll be rather long.

Perhaps because I don't think they've been debunked, despite what your links say? I already found a problem with one of your links with regards to the rebuttal of the Byron York article. They didn't bother to dig deeply into the meaning of "age appropriate." That could mean anything to anyone, but they didn't check closely.

So, who are the people McCain associates with that you're afraid of?

I see, Roger. Basically you blame Bush for not being right-wing enough. If I get you correctly, almost none of the problems that America is having today would have happened if Bush had been more decisively "radically conservative" (which is a contradiction in terms when you think of it). You will forgive me for doing a double-take when I read your statement that Iraq should be made to pay for your war in that country. Considering America was hardly invited there in the first place, that is a radical demand to say the least. Perhaps your country should consider leaving already?

Anyway, thank you for clarifying your position and saying, basically, that everything that is bad in the United States happens because its present administration, or one of its previous ones, did not push hard enough for a radically conservative agenda.

Perhaps having a President who was consistently very much more right-wing than Bush Jr. has been would have solved your problems at home. I rather doubt it would have solved your problems abroad.

Again, thanks for the clarifications!

Ann

It's interesting that you think killing all these people would change anything in the long run. Their dying as matyres would have made them an even stronger symbol for others than they already are. Killing someone doesn't mean you have proved that his believes were wrong. Others will follow, others who probably wouldn't have become so radical if the USA hadn't begun this war in the first place.

Revenge is never single sided and no matter how many people you kill, it is impossible to kill an idea. The third Reich may have ceased to exist, but there are still Nazis around the world. In Germany, in the USA and in so many other countries. And there will always be people on this planet who don't consider our "freedom" as their way of living.

I don't know how we are supposed to solve this problem, but I'm sure that war is not the right answer.

Lol. Debunking non-partisan sources with... partisan sources?



Not taking the bait. I can tell a rhetorical question when I see one.

alcyone

For anyone who's interested in some more of the FM thing...

I don't know yet about Raines, since I don't trust the campaigns and I don't trust the right/left blogosphere. As far as I know, the campaign got its info from a Washington Post article. The Washington Post dug for a bit and its people say this:

I don't know how reputable the Post's factchecker is. I get the feeling Politifact and Factchecker are more legit. So I'm hoping they dig around too.

But Factcheck's latest entry gives more information:

About the money:

alcyone

Strange how you can read into it something what isn't there and therefore make a sweeping statement saying that I believed all our problems were due to a lack of conservatism. No where did I say that no problems would exist if our presidents had been rock-ribbed conservative, especially with all the times I've said no one in office was to blame for the dot com disaster. I was merely responding to a request to make some criticisms of Bush since I seemed to be an ardent defender.

Katrina, for instance, was not the responsibility of conservatism versus liberalism. The economic damage and the lost jobs would have happened regardless of competence of the local officials, though the death toll would have likely been far lower. That was mother nature. The only impact of Katrina I've discussed has been its political impacts, with only passing mentions of its economic and human impacts. We now had Hurricane Ike with its impacts on all the people who suffered in Texas and all the damage it caused, which will have its own impact on the economy. It's not in the political arena since the left had not tried to make it political. (I can almost guarantee they really wanted to if Governor Rick Perry of Texas or FEMA had messed up)

One of the major points that hurt the American economy was the fall of the dollar and its consequential impact on commodities. That is neither liberal nor conservative. Some believe a strong dollar is good while others disagree. But to allow it to go into free fall is probably something neither liberals nor conservatives would agree upon.

Not everything I said can be seen in a liberal versus conservative prism, such as the ability to formulate strategies in Iraq. I have no idea whether Casey or Abizaid are conservatives, but Rumsfeld certainly was. And I advocated firing Rumsfeld. Dick Cheney and Condolezza Rice, both ardent conservatives, incorrectly opposed the Surge, but they weren't involved in the decision-making. That point was a black mark on Bush's judgment for not seeing the failing policy earlier and correcting it, conservatism having nothing to do with it. Any sitting president in wartime would have to make similar judgment calls. FDR was good at it, and he was hardly conservative. Lincoln and Johnson were bad at it. Bush was bad at it.

We'll never know for sure if the single defining disaster on Sept. 11, 2001 would have happened if Bill Clinton had been a die-hard conservative and responded in much harsher ways when the various terrorist attacks occurred in his administration. We do know he didn't treat terrorism very seriously, but then again neither did President Bush since we were still believing in the myth that our oceans protected us. Ronald Reagan made mistakes in foreign policy, one of the most disastrous being sending the Marines into Lebanon and then retreating. And Reagan was no liberal.

So you're reading a lot more into what I said than what was actually there, especially since a number of items aren't even conservative/liberal concepts.

A conservative blaming a person for being non-conservative at time... Hmm, now that's shocking.

Now I'm being called a radical. To me, it's simply being conservative. I'm no where near as conservative as many others are, as it may shock you. I'm probably not even the most conservative person on this board, just the most "talkative." (I can think of some here who are more conservative than I am) But that's hardly surprising since people have a tendency to think anyone who isn't quite like them is radical.

Now I'll turn it around. Please heap some praise on President Bush and criticism of Barack Obama for those on the left. I've seen nothing but bitter hatred for President Bush and fawning praise for the Messiah (that's what Republicans believe Barack "He who holds back the waters and heals the planet" Obama thinks he is). By asking, you should know I'd be asking for the reverse.


We would not be in Iraq today if al Qaeda had not attacked first, so we did not start the War on Terror. The war was brought to us. Americans see the War on Terror as a defensive war, not an offensive one. No one likes war, not even conservatives, despite what some people think. I wish we weren't in Iraq, but on the flip side, I think it'd be worse for us in the long run if we weren't there. I wish we didn't have to fight al Qaeda, but we must in order to preserve our way of life, if not preserve our lives. But war is sometimes necessary. I'm glad we're killing al Qaeda by the thousands in Iraq, if only because the dead won't be plotting to destroy our cities. If war is ever deemed unnecessary in all cases, as many on the left do feel, then that makes you even more susceptible to attack as our enemies would consider us weak and ripe for an attack. bin Laden even said as much, seeing our limp responses to previous attacks. He called us a paper tiger and began planning 9/11.

al Qaeda is not an organization that can be talked out of its agenda, but rather is an organization that can only be destroyed or made irrelevant. We've already seen the Sunni Awakening Movement that has turned against al Qaeda. The more people see of their true natures, the less they are supported.

As for al Sadr being a martyr, we've killed hundreds of al Qaeda martyrs (granted he isn't al Qaeda), chief among them Abu Musab al Zarqawi. Yet today, al Qaeda in Iraq is in disarray while recruiting is way down. Don't take my word for it. Take the word of Ayman al-Zawahiri, bin Laden's deputy and the one in charge of operations, since we captured one of his letters. Martyrdom hasn't helped al Qaeda much. After a few months, al Sadr would have been forgotten. And we'd have nipped one of Iran's main conduit of influence into Iraq.

Note that we obliged Saddam's request to be a martyr. Yet today many of his Sunni brethren are fighting alongside us, killing al Qaeda.

Actually, it's not rhetorical. I'm genuinely interested in the names of the ones you're afraid of. I'll even promise I won't comment on your answer. I can think of a lot of individuals I'm afraid of who have shaped the way Obama thinks and how he would react. While no one is accusing Obama of being a domestic terrorist, for example, the environment you live in shapes the way you think. Just as Groobie (I hope I got that right) said that she hardly knew any Republicans and was interested in knowing how the other side thought because she didn't know, Obama has never really been exposed to the viewpoints of the other side and therefore would be expected to think similarly to the ones he associated with when he grew up. To me, it's no surprise he's the #1 liberal (even more than self-avowed Socialist Bernie Sanders) in the Senate considering who his associates have been. Many of his associates have been America-haters, believing this country is evil. So again, I'm very curious as to whom you're afraid of who associate with John McCain.

I'll shock you all further. I'd feel A LOT safer if Hillary Clinton were president rather than Barack Obama, and that's saying something.

So you write this:

And everything was going fine until you dropped this:

"Many" "America-haters" "evil"

And I'm supposed to think that you're serious about your first statement? No, right? It's just more posturing so that you can slam Obama.

But just in case I'm misreading you--here's why:

First--the incendiary language doesn't help when you're talking to someone who doesn't agree with you. You're alienating me from the get-go (have been doing so for a while, I add), which undercuts that "genuine" a bit.

Second, content-wise: You do realize you're talking about all the people "who have shaped the way Obama thinks and how he would react" and of those you're focusing on those that just so happen to be the most extreme...

And you truly think that this is a fair assessment? That this is the kind of thing that would lead to dialogue with people who don't agree with you?

Really? O.o

You're kidding, right? You're just messing with me...I mean, I'm pretty left, but I know that while there is some truth to the Bush-McCain connection, there is also much more than that. I don't buy the world of insinuations behind the "90% of the time" gimmick. When it comes to discussions, I think it's an act of good faith to come clean, try to stake a middle ground so to speak.

I guess this is what "middle ground" is to you:

But no, it's not a shock. What a coincidence, the conservative media also has this brand new love Hillary in some weird revisionist history mode (well its kinda fading after the anti-Iran rally thing, but...). If Hillary were running now, you'd be slamming her as somehow suspect on moral grounds as well. Goodness knows if you'd be claiming to want Obama over her even. It's very easy to be cynical with these arguments when they're based on caricatures of the opposing side.

Ultimately, I get no sense of a middle ground from your statements at all, which suggests that any exchange threatens to become a "my candidate is better than yours" exercise. Incidentally, that's where any pointed critique of McCain/his advisors/campaign would lead and why I think it's best for me to move away.

Curbing my very biased outrage at some of what the campaign has done and focusing on defending mine rather than poking at the opposing party when I post is a very conscious choice. Whenever possible, I'd like to avoid being part of an endless back and forth where both sides seem unaware that they're mimicking each other. I can get that on any hard right or left blog.

alcyone

I'm sorry you didn't believe me when I said I was genuinely interested in who you were afraid of because I'm sitting here scratching my head wondering who they could possibly be, but I did mention I would not comment on your reply as a way of reassuring you that I seriously was interested.

In honor of that promise, I will refrain from making any comment even though you didn't actually answer, and I would have had quite a bit to say. The offer is still open if you want to actually reply to my question. And my promise would still stand. I will not make any comments if you answer the question.

Okay, Roger. Instead of making sweeping statements regarding your comments on what you criticize President Bush for, let me examine some of your criticisms in detail and explain why I think your main point is that Bush's problem is that his policy has not been far enough to the right.

The Kennedys are of course a symbol and a beacon of liberal America. If you criticize Bush for co-operating with Ted Kennedy, you are most certainly criticizing him for not being right-wing enough.

Here you criticize him for trying to make war by the book and not overstep international agreements on what amounts to acceptable warmaking. You accuse him of not being a sufficiently ruthless killer. That is a right-wing position in my book.

(The two mistakes that the United States made in Afghanistan are twofold, the way I see it. First, when the Americans were on Osama bin Laden's trail, someone in charge decided that it would be too risky and cost too many American soldiers' lives to confront him directly, since he was holed up somewhere surrounded by armed supporters who had a special knowledge of the terrain that the Americans couldn't match. Therefore, the American troops themselves didn't go after Osama at all, but instead they paid local people whom they considered loyal to the West to risk their lives to capture America's number one enemy. Well, these locals either fled or were bribed not to give Osama's precise location away. In other words, the Americans allowed Osama bin Laden to get away because they were too scared to go after him themselves.

The second and biggest mistake the Americans made in Afghanistan was to basically desert Afghanistan before the job there was done, even though it was Afghanistan that had been the main ally of the real enemy of the United States, Al Queda. Instead President Bush ordered most of his troops to attack Iraq to fight a war against a man who had had nothing to do with 9/11 whatsoever.)

You keep insisting that tax cuts work wonders for the economy and creates millions of new jobs. According to Scott Lilly's report (see page 7 of his report), the number of jobs created outside the farming sector grew by 3.3% between 2000 and 2007, while during the same period the American population grew by 7%. Effectively there were fewer jobs available for the existing population in 2007 than there had been in 2000.

Scott Lilly also claims that workers were not compensated for their increasing productivity between the years 2000 and 2008. Therefore, the extra money that the American workers generated went not to themselves but almost exclusively to the owners of the factories and other workplaces. The employers grew much richer while those who generated the wealth did not get compensated for their increased productivity at all.

Lilly claims that the huge majority of the Ameircan people became somewhat poorer in actual terms between 2000 and 2006, including those belonging to the 60th to 80th percentile (those whose income is higher than 60-80% of the population). Only those who made more money than 80% of the population made any actual income gains. See page 9 for a graph on how the increase in income was divided between households from different parts of the economic spectrum.

Most of the extra money that was generated between 2000 and 2006 went into corparate profits. According to a graph on page 11, annual corporate profits growth between 1950 and 2000 was 1.9%, but between 2000 and 2006 that figure had risen to 10.5%.

On page 12 of his report, Lilly claims that corporate profits grew much faster than GDP during 2000-2006. Between 1950 and 2000, GDP grew by 368 percent while corparate profits grew by 218 percent. The rise in corporate profits was a little less than two thirds of GDP. In other words, between 1950 and 2000 both corporate profits and GDP grew a lot, but the country as a whole increased its wealth more than the corporations did.

Between 2000 and 2006, however, corporate profit grew by 66%, while GDP grew by only 17%. Most of the fresh new wealth that was generated during this time ended up in corporations (and was probably divided among CEOs and other owners and shareholders). See page 12 of Lilly's report.

I find your claim that tax cuts generates general wealth for the entire nation an extremely right-wing and downright unfounded one.

Again you talk about the tax cuts that Bush did pass as something that created general wealth, when all evidence is that his tax cuts enriched those who were already very wealthy and left almost everyone else worse off. And you criticize him for not making his tax cuts for the rich permanent. If that is not a right-wing position, I don't know what is.

Very many people claim that not only does oil pollute the environment, but America's dependence on oil is the root cause of its dependence on dictators of oil-rich countries in the Middle East.

Anyway, drilling for oil is sure to be a short-term solution. It wasn't long ago that you only needed to drill a hole in Texas and there was so much oil there that it was welling up out of that hole of its own accord. How much oil is left now? In Texas? In the world? How long can we keep solving problems by drilling for oil more and more aggressively?

It takes Mother Nature millions of years, maybe hundreds of millions of years, to turn fossils into oil. But it sure doesn't take humanity long to use up that oil. What are we going to do when it is gone, or when it is so deep down that it is commercially impossible to try to get it to the surface? What then? How about looking aggressively for alternative energy sources instead? Asking for more efforts to get Ameirca more oil, while ignoring its needs for alternative energy, is certainly a right-wing position in my book. And I just read somewhere, maybe in the Lilly report, that Bush had cut down federal grants to agencies and scientists working to find alternative energy sources.

Good! Here you voice a left-wing position and a criticism of Bush from the left.

Here is what an admittedly left-wing colleague of mine claims is the reason for the falling dollar. President Bush's tax cuts made him less able to pay for a war that has cost billions. In order to give himself enough money to keep all those troops in Iraq, President Bush simply demanded that the printing presses work harder and produce more dollars. But when you increase the output of dollars without having the increase of true wealth to back up the increase of dollars, you are bound to have inflation. In other words, the dollar fell because of the increasing output of dollars, which was made to offput the effects of the tax cuts and the underfinanced war in Iraq. Not being willing to see this connection is a right-wing position in my book.

At least you and I share a dislike for Donald Rumsfeld.

I find this claim quite staggering. Your country makes war against another country, and you ask that other country to pay for your war there?

The Bush administration has seen to it that those Iraqis it disliked most have been executed or defeated, and instead it has helped Iraqis it likes better to gain power. Now those Iraqis that the Bush administration helped won't pay you. Well, tough luck. Why don't you leave those Iraqis alone and let them fend for themselves? I agree, it is a bad idea to make war for charity.

Well, wow. Guantanamo is a prison which holds some people who are certainly bona fide terrorists and many people who are almost certainly innocent of any real wrong-doing. And you keep them there, year after year, without trial. And you ask the rest of the world to be impressed because conditions in Guantanmo are better than they are in many American prisons? I'm not sure people abroad are impressed. In fact, I think that all over the world, many people still find your imprisonment of people in Guantanamo without honest trials quite shocking. And in my book, defending Guantanamo is very much a right-wing position.

Kill, kill, kill. Do more killing. Criticizing Bush for not doing enough killing is not to criticize him from the left.

I think you are saying here that the United States should help Israel to attack and bomb Iran. I take it you mean that Israel should be allowed to bomb Iran just because Iran may be building a nuclear device, not because they have actually attacked Israel. If you think that America isn't as respected abroad as it ought to be now, wait until you see how people will react to you if you help Israel bomb Iran just because Iran may be getting itself the kind of weapon that Israel already possesses.

I consider the position that Israel should be allowed to bomb Iran an extremely right-wing one.

So the only thing that Bush did wrong during the Katrina disaster was that he failed to communicate that nothing that happened there was any responsibility of his. I suppose the fact that New Orleans is still suffering badly from the devastations of Katrina has nothing to do with a lack of commitment from the administration to help that city recover.

My point is that if Bush had tried to make a big deal about those 500 rather rusted warheads, he would have been made into a global laughing-stock. So those rustbuckets are what could have destroyed the world in fifteen minutes, or whatever Bush's friend Tony Blair said?

It's amazing that rebate checks to poor people are bound to backfire, while tax cuts to rich people will always work like magic. Clearly Moses must have been given a third tablet on Mount Sinai with an eleventh commandment, Thou shalt always lower taxes for the rich. But maybe that tablet was lost somehow and only resurfaced in the GOP headquarters.

The Lilly report said that the minimum wage was at its lowest level for fifty years when it was adjusted upwards in 2007. (See page 3.) Your position is that an adjustment upwards of wages for the very poorest people is a bad thing, while tax cuts for the richest people is a good thing. How can anyone say that that is not a right-wing position?

Right. Everyone who was against the Iraq war was misinformed. There was absolutely nothing wrong about attacking Iraq, and instead the only problem was that Bush failed to teach the rest of the world that they were wrong and he was right.

There is a story about a proud mother who watched her son taking part in a march. Afterwards she explained that all those other boys in the parade took the wrong kind of steps, and only her son had got it right.

All right, Roger. That is why I think that you are attacking Bush from the right.

Ann

I'll take you up on your offer, Roger, when your statements stop coming off as baiting and disingenuous.

Aw, don't worry, I'm sure you'll find plenty of others to participate in the "my candidate is better than yours" game.



alcyone

I can't heap any praise on George W. Bush, sorry. And since I have not discussed Barack Obama at all, I don't feel obliged to criticize him.

I will, however, heap some praise on the previous Republican Presidents that I can remember:

Richard Nixon: With his 'ping-pong diplomacy' he gave the world hope that tensions between the United States and China would lessen. The way I remember it, there were some real fears that there might be a devastating war between the U.S. and China, but Nixon's successful trip to China changed all that.



Nixon shakes hands with Mao. The world breathes easier.

Gerald Ford: He did a more than adequate job at a difficult time, considering the circumstances during which he took office. He ended the war in Vietnam, which had done very serious damage to America's image abroad.



Gerald Ford ended the Vietnam war.

Ronald Reagan: He was someone I had several objections to, particularly over his supply-side economics.

But the man was amazingly presidential and inspirational. He always seemed at ease and perfectly comfortable and confident in his role as the most powerful man in the world. He was fantastically charming and charismatic. What is more, he never seemed to lose that aura of honesty. When he said, 'Mr Gorbachev, please tear down this wall,' how could the world fail to be impressed? And how could the Berlin wall fail to come down a few years later?



Ronald Reagan, amazingly presidential. The Berlin wall didn't stand a chance.

George Herbert Walker Bush: Compared with Reagan, Bush Senior was charmless and dry. But in his own way, he, too, was so very presidential. I was extremely impressed with how he handled the Gulf War of 1991. I was very shocked myself when Saddam Hussein's Iraq invaded Quwait, and I very much wanted the United States to teach him a lesson. Bush Senior did so with amazing skill. He managed to forge an alliance with almost the entire Arab world. Consider that! The United States led the Arab world in a war against Iraq, and basically everyone thought that the war was justified! And rarely has the world been so sympathetic to Israel, which was attacked by Iraq during that war, and rarely has the world been so unsympathetic to the Palestinians, who chose to support Saddam Hussein in this war.



George Herbert Walker Bush handled the Gulf War masterfully.

As you can see, all these Republican Presidents have done important things to inspire the world, to turn the world into a better place, and to make the world feel good about America. But what about 'Number 43', George W. Bush? I don't think he has done anything at all to make the world a safer place, and he has most certainly failed miserably at inspiring the world and making the world feel good about America. Two years ago, John Bolton, formerly President Bush's appointed ambassador to the United Nations, said in an interview on Swedish radio that when the United States intervenes somewhere in the world, it only has its own best interests at heart, and it doesn't care about what its interventions do to other nations and other people.

What do you think that sort of thing sounds like to the world?

But I have one thing to say for George W. Bush. It could be that he was a better President than John McCain will turn out to be, if he is elected. How so? It has to do with how I think of George W Bush's and McCain's respective temperaments.

I think Reagan and Bush Sr. both had brilliant 'presidential temperaments'. They could remain calm, make good decisions, stay strong without appearing aggressive, and they could inspire others.

My prime objection to Bush Junior's temperament is precisely that he comes across as - Junior. I don't get the feeling that he has any of the wisdom and quiet competence of his father, but rather that he is full of a need to prove himself as good as his father. But unlike his father, he doesn't seem to be really and truly interested in the complexities and demands of the role of being President. Bush Jr. seems a lot more cut off from the real world than his father, who very much seemed to understand the world that he had to influence and guide to the best of his ability.

However, I have never heard anyone accuse Bush Jr. of being aggressive. And I have never heard anyone accuse him of being short-tempered. I have also never heard him speak flippantly about waging war against other nations.

McCain, on the other hand, sang in a public speech that America should 'Bomb, bomb, bomb Iran'. The lack of judgement and the lack of presidential restraint that goes into such a song is staggering. Doesn't he realize what that sort of thing sounds like to the rest of the world?

McCain sings \'Bomb, bomb, bomb Iran\'

The New York Times has repeatedly described McCain as short-tempered. Yes, I realize that the NYT wants to paint McCain in a negative light. But judging from several YouTube clips I have seen, I think it is reasonable to question his ability to stay cool. And this man - singing 'Bomb, bomb, bomb Iran', doing a bit of a John Wayne swagger, and having trouble controlling his temper - is he America's next President?

I'll say this for George W. Bush. He was never short-tempered, and even though he bombed Iraq, he never sang songs about bombing them. Or about bombing Iran.

Ann

The National Journal's cover story is a really insightful article on the Bush presidency, which takes a view I've seldom seen. It's really interesting.

alcyone

Thanks for the link. The article is really very insightful - as were many other political posts here recently.

I'm totally swamped with work (having to commute between four different places all over the city really doesn't help my time budget), but whenever I do have a little time, I enjoy reading these posts and following some of the links.

So thank you, everyone, for the interesting debate(s).

Eva

Very interesting, Alcyone. Rather unsurprisingly, I find myself disagreeing with some points the article makes, but I have to agree with several others. One thing is certain. Two years ago, when anyone mentioned the name 'Bush' in many parts of Europe, you could hear the contempt dripping from the speaker's tongue. Now, hardly anyone mentions Bush's name anymore. The anger that used to be there at the United States has also vanished. People have moved on to other things and other worries.

Perhaps the National Journal is right and the footprint that Bush leaves in history will really be a small one.

Ann

This may be right for Iraq. You're country will probably be sucessful at getting al Qaeda out of Iraq. But that won't change one thing - the USA killed Muslims. They started that war in Iraq because they were afraid of Saddam (or because they wanted to get oil). That might not be the reason why Bush or whoever else actually made the discision. But it's what people around the world think is the reason.

It's how propaganda works. It doesn't matter what reason you have to do one thing or another. It's what people think is your reason that actually matters.

Like you, I don't think that you can talk al Quaeda out of their believes. But starting wars all over the world will ultimately lead to more people becoming radical. It's not like there are only people of al Quaeda dying in this war. There might have been a lot of families in Afghanistan who hadn't even heard of September 11th. But what they know is that an US soldier came and killed their relatives. I think that this will be dangerous and will help Al Qaeda to get more support.

It would be better to show many people throughout those endangered countries that the western society is not the enemy. If al Quaeda or any other radical elements cannot win supporters, they will get weaker.

Roger, first I gotta say how amazing you are at holding your own in this discussion and how clearly you've presented all the facts in this thread. I would have lost patience by now trying to make other readers understand. What makes me sad that you've been driven to censor yourself in an attempt to get a sincere response(which has yet to be forthcoming) and I'm compelled at this juncture to point out who has shaped obama's thought process, as we all know this is the complete fact. What's great is that you can respond to my answer all you want.

The most prominent people I have seen presented that are closely associated with Obama are William Ayers and Jeriamiah Wright, two extremist outspoken US HATERS. They've postulated to no end about how much they hate this country to the point of structural damage and warping people's minds.

If John McCain were to hang out with radicals like these guys, I'd question his political stability as well.

As far as Wallstreet, we all know that Franklin Raines and Daniel Mudd, two of Obama's financial advisors for his current campaign, had been bilking Fannie Mae of government funding the whole time they were in charge of it.

Aside from the fact that he's pro abortion, anti defense(the best defense being a good offense, first strike and ALL that), pro tax and spend, I gotta wonder what sort of intellegence he has to hang out with folks like the guys mentioned above. Maybe the messiah hoped that being in his exalted presence would change these rowdy hucksters.

Please feel free to ripsaw at anything I've said if it is incorrect.

TEEEEEEEEJ

There is a huge difference between opinion and fact, TJ. I feel as if I'm banging my head against a brick wall by mentioning it, but others on this thread have been trying, in the interests of having a reasonable discussion, to leave at least some of their political slants and name-calling behind.

Obama is not anti-abortion. He is pro-choice. Maybe you think this is just a matter of semantics, but it's nothing of the kind. Someone who is pro-choice wants a pregnant woman to be able to make a free choice. Whatever that choice may be is up to her. A pro-choice individual has no agenda as to the outcome of that choice - unlike someone who is anti-abortion, who wants that outcome to exclude one option. The implication of calling someone pro-abortion is that they want a woman with an unwanted pregnancy to choose abortion, and that's so far from the truth as to be ridiculous.

(I'm not going to get into the 'anti-defence' accusation, other than to say that making the first strike sounds like being the aggressor rather than the defender, and I don't think any presidents in the past few decades, Republican or Democrat, have subscribed to that principle).

There's nothing wrong with stating an opinion, but please don't try to pretend that it's a fact.


Wendy

Is this a view that is seen outside the conservative media?

Based on what I've read, the Ayers association is not "close" (this is a stretch, the only evidence is a 200$ contribution and that they were on an eight-seven person board). This would entail a radical redefinition of "close." I linked to factcheck about this in the VP thread, so this link is different (Washington Post's factchecker). Oh and here's Politifact with some more context from when Hillary brought it up.

Moving on, I don't think Jeremiah Wright hates America, so much as is a huge critic of the government. He's very much shaped by his past and the struggles of the black community. That's my own view based on having read quite a bit on him and seen several of his sermons in their totality--I also associate with groups (though secular) where this impassioned critique is not uncommon. My view is not a fact, neither is the view that Wright "hates America." These are two interpretations.

The "fact" is, however, that Obama has since repudiated Ayer's remarks/actions and broken off with Wright. He's done it himself, stated it point-blank.

I already posted factcheck's view of the Fannie Mae and Freddie Mac mess. Of course, both left and right will "debunk" it. Both sides will want to spin it into something else to benefit their world view. I trust either side less than a source recognized as non-partisan.

By the way-- the Obama campaign said that Raines emailed McCain adiviser Carly Fiorina early last week (before it hit the fan) to correct her about the factually incorrect assertion that he was an adviser to Obama she made on TV (this was before the McCain campaign got her off the air). The Obama campaign provided a copy of the email to the media.

However, as of today, the McCain camp has remained silent on this. If they were correct in their assertion of the Raines link, wouldn't they jump to deny this?

Also, I haven't read of Daniel Mudd being an financial adviser in my trawling. Is this anywhere that isn't the conservative media? What I did find was an article from Reuters in which both Obama and McCain spoke out against golden parachutes, he would have been one of the people to benefit.

alcyone

This is one area where I will never get into an argument. This issue is far too personal for people and the odds of this type of argument making any kind of headway is pretty much zero. I do have my own opinion on this issue, and you may or may not be surprised at what it is, but I'm keeping this one to myself.

You have quite the talent of reading things into comments that aren't there. I recognize people can have different opinions on whether the invasion of Iraq was justified, but the particular point I was making here was that Bush was unfairly tarred as a liar, for manufacturing evidence as an excuse to go into Iraq. This was the beginning of the end of his presidency as he allowed Democrats to spend five months lying about him before he started fighting back. The nail was Katrina. The point made here had nothing to do with whether he was justified or not as justification isn't even part of the argument. The point was that he went in with the best information he had at the time. The point about WMD stockpiles was wrong, but it was not a lie. The justification argument can be handled separately. I would say it still was justified due to what Saddam was planning, but others will disagree with me. Fair enough.

Democrats who voted for the war resolution could have simply claimed that the incorrect intelligence fooled them as well as the president, but they couldn't leave it at that. Instead, they had to have been lied to in order to vote the way they did in order to satisfy the anger of the leftist fever swamps. So they went out to destroy the president with the help of their media allies, despite the fact that every commission convened showed the president never lied and that the intelligence presented to Democrats on the two Intelligence committees was essentially the same as the intelligence provided to the president. Senator Jay Rockefeller (D-WV), Vice Chairman of the Senate Intelligence Committee even said as much until he was pressured by his fellow Democrats to backtrack. Representative Jane Harman (D-CA), Vice Chairwoman of the House Intelligence Committee, backed up the president and lost her vice-chairmanship and was passed over for chairman when Congress switched sides in 2006 because she dared to tell the truth rather than back the party line that Bush lied, people died.

In politics, everything is fair game and is a blood sport, so I can't complain about what the Democrats did, but I can criticize the president for staying silent for so long and letting himself be tarred as a liar. He had made a promise that he would try to be more bipartisan after winning in 2004 and look where it got him.

As for Katrina, you missed the point again. I never said that Katrina didn't do damage to the country or to the region as you seem to imply. The damage was great and the loss of lives were quite significant. The economic damage was also tremendous as the economy lost over a million jobs and lost $200 billion in damages. But by unfairly tagging President Bush with all the blame essentially paralyzed the rest of his presidency, something you never want to see of the leader of the free world.

I will say one thing. While Bill Clinton was guilty of committing perjury before a grand jury, the Republican reaction was unjustified in that it took Clinton's eye off the ball. He spent much the rest of his administration defending himself against legal matters leading to contempt of court charges and disbarment, but to paralyze the President of the United States with so many dangers in the world is unwise. While Bill Clinton was worrying about lawyers, al Qaeda plotted while his administration did nothing about it.

The same thing happened with George Bush. He tried to be proactive with Katrina only to be rebuffed by the governor and the mayor, yet he was blamed for being aloof and not paying attention and for general incompetence. The press and Democrats crucified him unjustly and his administration was essentially derailed for the rest of his term.

Just as the right suffered from Clinton Derangement Syndrome in the late 90's, the left has a terrible case of Bush Derangement Syndrome right now.

As for all the arguments about supply-side economics, I'll just point to my past arguments, of which there are many pages worth. I don't need to rehash them again except to say that you're misleading people by saying they were tax cuts only for the rich. Tax cuts were always for everyone who paid taxes, and percentage of tax cuts were higher for those in the lower brackets, making the tax code more progressive. I think you object to rich people getting more of their money back, regardless of what the tax cuts do to help the lower brackets. That's fine, but it's definitely wrong to say only the rich got tax cuts. Percentage is what matters, not raw amounts. A richer person will always get more dollar-wise, but that's a no-brainer. They pay a heck of a lot more, so of course they'd get more back. To say they got tax cuts disproportionately in their favor is incorrect.

I don't defend tax cuts for the rich because I like rich people. Rich people will always do well no matter what their tax rate is. I defend tax cuts because rich people supply ALL THE JOBS. Take money from them and you have fewer jobs. It's as simple as that. 70% of all jobs are supplied by small business filing as S-Corporations, proprietorships, and partnerships, which file under personal income tax rates where most of the money goes back into the business rather than into the owners' pockets. So a lot of these "rich" aren't actually as rich as you think with their money tied up in investing in the business. So all those tax cuts for the rich are tax cuts for job producers. For that, I will always contend that is better than raising their taxes.

As for why the rich will always do better, they tend to work harder and take more risks, often working 90+ hours a week with no vacations for years to get their small businesses off the ground. As I said, 70% of all jobs are supplied by these small S-corps, not the mega-corporations. With higher risks, the rewards are higher as well. This is why the gap between rich and poor always grows, during the good times and bad. This is not to say poor people don't necessarily work hard, but a hard working person who takes no risks will never get rich. It's a necessary but not sufficient criteria. The gap grew during the Clinton Administration as well for exactly that reason. The rich don't need help, but the more money they have, the more people they can hire. You don't get jobs from poor people. This is why Europe has a chronically high unemployment rate. Chronically high taxes means chronically few jobs. Europeans would kill for our unemployment rates even during our recessions.

I will say my parents were hardly rich when they ran their little tiny grocery store of perhaps 800 square feet. With their high cash flow, they were in the higher tax brackets and would have been considered the "rich." But they never had a vacation in nine years, worked every day from 6 am until 11 pm seven days a week, and they never had much in actual earnings for themselves even in the best of times. Nobody who knew them would ever have considered them even close to being rich as they practically lived like paupers, just trying to earn enough money to send their kids to a public college (both my sister and I went to UC San Diego and paid in-state tuition) and sock a little bit away for retirement, knowing that Social Security will never be reliable. They never ate out. They never bought a new car, and they wore ten-year old clothes with patches. They lived in a townhouse of about 1200 sq. ft. in Alexandria, VA for all the time they ran the business. My mother, who's 4'9" wore my clothes that I had as a kid. These are the type of people liberals would like to tax into the ground since the left would have considered them rich, according to the tax code.

If Obama wins and he raises the taxes he promises to do, I have to say I'm glad my parents are now safely retired (my mom is 69 and my dad is 84), living on their savings, and now no longer even show up on their tax returns. If they were still in business, they probably wouldn't be for long.

Anyone wonder now why I find it offensive whenever someone says we need to tax the rich and make them pay their fair share? It's their money and what right does the government have to take so much of it and then demand more? It's their experiences and the hard work they had to go through, and the sacrifices they made for my sister and me that made me the conservative that I am today.

You are correct that some of my arguments against Bush were from the right. I am right, so naturally I'd criticize him when he starts acting like a liberal.

Not to fuel the debate between the two political extremes, but I feel that I should point out from a personal perspective that I actually make 4 times as much now than I did in the early 90s. And I am quite fully in the middle class. Truth be told, I would probably term myself poor growing up so making it into middle class has been what I feel to be an accomplishment.

Now that said, I have to admit that I am hardly an economist so I can't say to what lesser or greater extent any government or political party has had on that accomplishment. However, I am somewhat of a semi-expert on human behavior considering what I do for a living so personally I blame a lot of our econmic trouble on individuals.

Now, don't get me wrong. I certainly agree that certain decisions by both parties over the years have added to and substracted from our problems as an economy, but in the 21st century I personally feel that the "information age" has played a huge role in the market.

20 years ago when John Smith cheated on his wife, got a divorce and was forced to dump a large amount of stock in the settlement the market had time to stabilize before Bill Jones found out about the sudden drop in his favorite stock and responded with a kneejerk reaction to what he mistakenly interpreted to be insider knowledge of some impending market force.

Today, however, any market change no matter how small or inconsequential is broadcast to everyone else in the world in a matter of hours if not minutes. Individuals and brokers respond instantly to market changes and destabilize things that really weren't seriously destabilized to begin with and if they were would have stabilized themselves if left alone for a few days.

I saw an interview the other day with an economist who actually suggested that people stay away from financial news except for 1-2 times per week because of just this sort of phenomenon.

Roger, I agree entirely with you about not getting into an argument over pro-choice/anti-abortion, and I definitely don't intend to do that; the only point I was making was that calling Obama 'pro-abortion' is a loaded accusation (and not fact) because being pro-abortion isn't the same thing as being pro-choice.


Wendy

I actually understand your point. Wikipedia's page on abortion, for example, clearly states, "Pro-choice individuals often do not consider themselves 'pro-abortion'..." I can see how you would want to explain the very important difference between being "pro-abortion" in the sense that you are for abortion rights and being "pro-abortion" in the sense that you actively promote abortions as the best choice for women with unwanted pregnancies.

However, I have to say I think some of your words were a bit harsh. "Name-calling"? "So far from the truth as to be ridiculous"? "Don't try to pretend"?

Dictionary definitions of "pro-abortion":

American Heritage Dictionary: favoring or supporting legalized abortion
Dictionary.com Unabridged: pro-choice
Merriam-Webster: favoring the legalization of abortion

Nah, I get Wendy's point, the pro "choice" crowd wouldn't want to be considered baby killers or anything like that. But I stated my opinion that the chicago senator is pro abortion based on his own words that "girls who make bad choices shouldn't be punished for their mistakes." In short the man believes babies are a punishment. Whether he's pro abortion or pro "choice" is to-may-to/to-maa-to to me when I know how the man voted in the circumstance of a premie born during an abortion procedure should end up breathing its last in a trash bin rather than have a pediatrician standing by to administer aid.

It's knowing how he votes that makes obama an unacceptable candidate for me. For example. His voting against McCain's 2005 bill to audit Fannie Mae and Freddie Mac when Franklin Raines was the CEO and then choosing the same man as the financial manager for his campaign, smells like rotten tuna to me.

Roger, I was wondering if you could help me understand something. If Fannie Mae and Freddie Mac were being run/regulated/overseen by the government, how were they able to make contributions to political campaigns, say the $300000 to obama and the $700000 to chris dodd. Isn't that a tiny bit unethical?? I ask you, as so far you've provided the most factual and easiest answers to understand in this discussion so far.

Thanks!
TEEEEEEEJ

This is false.

Franklin Raines is not/has never been Obama's financial manager.

The man spoke on the phone with Obama's campaign--it's been widely documented even by the very newspaper that originally circulated the story (Washington Post).

If that's reason for worry, then that's all in a person's choice. You can criticize Obama for the phone calls all day.

But a phone call to someone does not mean he's the financial manager. That's a false statement.

Please avoid spreading false claims. It's a fraught enough election environment as it is.

alcyone

Ah yes, you are correct, Raines is his financial *advisor* , if this washington post article is correct. Sorry; advisor, not manager; terminology; my bad.

TEEEEEJ

The direct quote from the Sept 23 Post article being:

Being part of a "political circle" is not the same as being a "manager" or "advisor." It's still a false claim.

The Huslin article got explained by the Post itself here . I had already linked to it previously.



I already posted this too but *sigh*

The AP covers the email that got sent out by Raines to Fiorina correcting her assertion before it became big and her silence on it.

Terminology is important.

alcyone

This is from the Washington Post July 15 article:
Example: obama, "Frank, any more contributions coming my way?"

Raines: "Not if you let McCain pass that bill to audit my backside...."

Now I find that the FBI is looking into investigating the fraud committed at these financial institutions, and I'm thinking it's about time they got around to doing it, as our representatives on Capital Hill should have been hollering for investigations from day one. So now I only have to wonder which of our fine congressmen's bottoms are scared tight at this moment? Bet I can guess....

TEEEEEEJ

*sigh*

I know this will be equally disregarded, but I do want to state that the Post's investigation and explanation of the article quoted above is dated Sept 19.

And that the AP article is from four days ago.

I expect any possible FBI investigation will shed some light into the latest claims concerning McCain campaign manager Rick Davis' own association with Freddie Mac as well.

alcyone

Roger, I will come back later with a more comprehensive reply to your latest post. Personally I think it is a very real and very serious problem that the richest people keep getting not only richer but so much richer than most other people in their society. And that is one reason why I think it is downright wrong to give the richest people tax breaks, allowing this mega-rich clique to forge ahead even further and leave the rest of society even farther behind. Becoming so rich is like watching the rest of society through a pair of binoculars which are held the wrong way - everything around you shrinks and becomes insignificant.

For now, let me just quote something that I saw in today's USA Today:

As far as I can understand, quite a lot of today's current Wall Street mess has to do with the behaviour and risk-taking of investment banks. My impression is that these banks have made huge profits while blowing up a housing, mortgage and subprime bubble.

And 50% of the great earnings of investment banks, whose irresponsible behaviour has greatly contributed to today's crisis, has gone to the pay of those who were responsible for the reckless behaviour of these banks, its executives? That's horrendous! No bank should use more than a quite small percentage of its earnings to pay its executives, in my opinion. The way I see it, the culture of allowing mega-rich people to take huge risks so that astronomical sums of money can be channeled directly into their own pockets while leaving ordinary middle- and low-income people to contribute much of the tax money needed to clean up after this mess - that is the sort of culture that can make a few individuals unbelievably rich, while at the same time it erodes the very foundations of society.

Ann

The reason a lot of guys on Wall Street took those risks, Ann, is because they had seen a pattern of the GOVERNMENT BAILING BUSINESSES OUT. If the socialists in our government would keep their busybody noses out of our commerce, free trade would happen as it was meant to and everyone would get a chance to prosper.

As far as the rich getting tax breaks, here's an article from the Wall Street Journal showing that since 2000 the top 1% of income earners pay 35% of all federal income taxes. The top 50% of income earners pay 97% of ALL income taxes while the poor hardly pay any, less than 3-1/2 dollars out of every $100 paid in income taxes in the United States is paid by someone in the bottom 50% of wage earners.

These are income earners buy the way, people who WORK for a living, not the louts who inherited their funds from gram and granpa and have been lollygagging around on their 100 ft houseboat for the weekend(hello algore!!)

For someone from the government to just arbitrarily pop in and tell me that they deserve 22% of my hard earned cash smacks of socialism to me, which, IMO, makes it evil and wrong.

TEEEEEJ

We know who the culprits are in this financial real estate mess. If you want to see who Congress thinks is responsible, just look at the fact that Democrats in Congress have no interest at all in holding hearings to investigate what went wrong and are trying like crazy to find any Republican to blame it on and flailing. Knowing that Democrats will investigate anything if there's a shred of a chance of blaming Republicans, this is telling seeing as they know where the finger will point to. They tried to point the finger at Phil Gramm, who merely sponsored legislation to allow investment banks to participate in more traditional banking. Even Clinton's Treasury Secretary and former CEO of Goldman-Sachs, Robert Rubin, shot that down, saying that the legislation had no impact whatsoever on the current crisis.

If Congress were to ever truly investigate this, people like Christopher Dodd, Barney Frank, and John Kerry would be voted out of office very quickly.

Here's a piece from the Wall Street Journal further outlining the obstruction Democrats played in preventing oversight of Fannie Mae and Freddie Mac, where all the problems stemmed from. The detonation of Fannie Mae/Freddie Mac essentially took out collateral damage such as AIG, Lehman, Morgan Stanley, Merrill Lynch, etc. If Democrats had not stood in the way of oversight, the situation would be far different today.

The White House also put out a press release showing the timeline and actions taken to address the problems and were stymied every step of the way. After auditors pointed out fraud and potential dangers, Democrats like Barney Frank, Chuck Shumer, and Chris Dodd stood up to say that there were no problems and that Fannie Mae and Freddie Mac were not in trouble and that anyone who wanted reform legislation only wanted to discriminate against the poor and minorities by making it hard for them to get a loan.

As for Obama's culpability, he stood with Democrats in blocking efforts to reform Fannie Mae and Freddie Mac.

Here's an article from Bloomberg as well on this issue.

For those who want change, let's vote out the ones who were at fault and keep out of the White House the people who were responsible for blocking reform of Fannie Mae and Freddie Mac. It was liberalism that was at fault for distorting the markets and creating the real estate bubble, not capitalism. And who were the ones in charge? We had Janet Reno at the Clinton Justice Department who threatened companies who didn't loan to the poor or minorities under the Community Reinvestment Act, all in the name of giving people homes who couldn't afford them. We had Jim Johnson (Countrywide Mortgage scandal anyone, and Obama's head of the VP selection committee) and Franklin Raines and Jamie Gorelick who ran Fannie Mae into the ground, fraudulently inflating assets in order to maximize their bonuses. (Ann, where's your outrage at the Democrats here?) We had Barack Obama and his entire party blocking reforms that could have saved taxpayers from hundreds of billions of dollars in losses.

Explain to me why Democrats should be allowed anywhere near the economy?

As for why Fannie Mae and Freddie Mac could make campaign donations (Obama was #2 despite having been in office less than four years with over $200,000), they are corporations and were set up as such. They are Government-Sponsored Entities (GSE's), but are actual companies with a board of directors, a CEO, etc. They do have special government exemptions, which is why they're referred to as quasi-governmental agencies.

Here's another take on how government is responsible for the mess we're in.

After Enron, the government changed the accounting rules in regards to assets. There's a term called mark-to-market where a company must value an asset at how much it can be sold at immediately versus the old way where a company can value an investment in more realistic terms; when it can be sold when markets calm down. Many of these bad mortgages under the new rules were forced to be valued at 0 since no one is buying those properties now. Anyone with a lick of common sense knows real estate is not truly valueless, so the accounting rule makes no sense.

Yet it caused the devastation among the Wall Street investment banks as they had to write down the value of their mortgages to zero. As a result, their credit was downgraded by S&P and Moodys. Investment banks have to maintain assets as a certain percentage of debt. With a lower credit rating, the ratio skyrockets. These banks, as a result, had to increase their assets to maintain a higher asset-to-debt ratio because of the credit downgrades. Unable to summon up the additional cash, these banks became immediately insolvent the second their credit ratings were downgraded.

Under the old accounting rules, none of these banks would have been insolvent since they would have had far different mark-to-market values.


Bad Accounting Rules Help Sink AIG

I don't have time to look up those links about the reasons for the Wall Street crisis. But I agree that the question is not so simple that it can be reduced to a question of Republicans versus Democrats. The problem is not so much who did something, but what was done.

A couple of days ago in my own local newspaper, there was an interview with somebody who talked about the present financial crisis. I don't remember who it was, or even whether he was Swedish or, say, American. But to me, the interesting thing was what he said. According to this man, bubbles and crashes are what you are going to have in a deregulated economy.

This man said that after the Western economies recovered after the crash of 1929, politicians and bankers agreed that a similar scenario must not be allowed to happen again. The solution was tight regulation. And because these regulations worked so well, there were no more crashes until the Savings and Loans crash in the 1980s. But by then, the banking sector had been deregulated. I very recently googled the S&L crash, and according to Wikipedia the roots of that crash could be traced back to Jimmy Carter in the late seventies, since he was the one who started deregulating the banks. And after that there have been three bubbles and crashes: the S&L bubble-and-crash, the IT bubble-and-crash, and now, the housing, mortgage and subprime bubble-and-crash.

So let's not talk about Democrats and Republicans, or at least, let's not say that Democrats have always been die-hard regulators. That's not a fair description of them at all. Let's talk about regulation and deregulation instead. There were no really severe or dangerous financial fluctuations during that long period of the twentieth century when banks were tightly regulated. But those regulations began to be lifted by Jimmy Carter in the late 1970s, and since then we have had one crash per decade: one in the eighties, one in the nineties and one in the 'noughties', as the British jokingly say.

So in hindsight it would seem that deregulation was the culprit, not primarily Democrats of Republicans.

Ann

Has anyone posted this yet?

Sadly, I think MOST voters are ignorant of history and will buy into the distortions - no, make that outright lies - that I'm hearing as I listen to the nightly news...

This crisis didn't happen over night... and if you want to get a better CLUE as to who is at the root of the matter, this article from 2003 is VERY telling:

September 11, 2003
"New Agency proposed to Oversee Freddie Mac and Fannie Mae"
by Stephen Labaton from the New York Times.

"The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates. ... The proposal is the opening act in one of the biggest and most significant lobbying battles of the Congressional session. ...

''The current regulator does not have the tools, or the mandate, to adequately regulate these enterprises,'' Mr. Oxley said at the hearing. ''We have seen in recent months that mismanagement and questionable accounting practices went largely unnoticed by the Office of Federal Housing Enterprise Oversight,'' the independent agency that now regulates the companies. ... Significant details must still be worked out before Congress can approve a bill.

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

For the full article go here:
http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&scp=1&sq=%22barney+frank%22&st=nyt

Thank you Mr. Frank.



The Dems. have been very tenatious in their efforts to block Bush's attempts to "fix" problems like this... like Social Security...

And now Fannie and Freddie are the plutonium core of the economic meltdown...

According to the Wall Street Journal, "How did we get here? Let's review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse."


Seems kinda obvious which side of the aisle is MOSTLY responsible for this mess.

Exactly.

Great links BTW!

I know the administration's not perfect but hearing the "blame" repeatedly placed at Bush's feet gets REALLY maddening, doesn't it?

Politics... I think the Dems were SO hell bent on regaining power that they didn't WANT to fix anything... Now they are reaping what they sowed and STILL trying to blame Bush.

See here . Thanks for the support!

Concern has been expressed about the tone of the thread over recent posts and some of the insults being bandied around.

So, polite warning - do try to rein yourselves in, don't let your personal allegiances go overboard and get out of control in the midst of passionate debate and do try to keep it respectful when arguing your point, huh?

Thanks.

LabRat
Boards Admin Team

Well, since I have been saying that George W. Bush has not done anything to make the world a better place, let me revise that assessment!

This is from today's The Guardian, a British newspaper:

Well, wow! I have to applaud Bush for that decision!

The entire Guardian article is here .

Ann

I realize this thread has gone off on a couple of different topics during various comments rather than just Wall Street, but most comments still contain some semblance of what the discussion was about, so I'm confused why nothing about Wall Street is mentioned here, and I'm kind of wondering how this instance of bad judgement on Dubya's part has to do with the topic of the thread ? Will Wall Street recover if Israel doesn't nuke Iran?


TEEEEEEJ

LOL!! In the meantime I found something amusing in regards to responsible saving and lending!

</font><blockquote><font size="1" face="Verdana, Helvetica, sans-serif">quote:</font><hr /><font size="2" face="Verdana, Helvetica, sans-serif"> The Ant and the Grasshopper, 2008 edition
by Michelle Malkin
Creators Syndicate
Copyright 2008

With what looks like imminent passage of the Mother of All Bailouts (following on the heels of a year’s worth of government-funded rescues of private homeowners, lenders, insurers, and the automakers), Washington has turned Aesop’s famous fable about prudence and hard work on its head. The time is ripe for a revised 2008 edition of “The Ant and the Grasshopper:”

In a meadow on a hot summer’s day, a Grasshopper was chirping and carousing his time away. He watched scornfully as an Ant nearby struggled to store up large kernels of food and build a secure nest. The Ant pulled overtime shifts to pay off his loans and accumulate retirement funds for the future.

“Give it a rest,” the Grasshopper said. “Why bother saving and slaving and toiling and moiling? Let’s party!” The Ant demurred: “I am planning ahead for winter and you should do the same.” The Grasshopper blew off the Ant, squandered his supplies the rest of the season, and abandoned his home while on vacation (paid for by tapping every last cent of his home equity gain) instead of holding down a job.

When winter came, the Grasshopper’s pantry was empty and his shelter ruined from neglect. The Ant, weary from planting, harvesting, and stocking up for months, was dining comfortably in his nest.

Cold, hungry, jobless, facing foreclosure, and up to his two pairs of eyeballs in debt, the Grasshopper limped to the Association of Community Winged Insects for Rescue Now and demanded recourse. The office was swamped with thousands just like him. ACWIRN immediately put the Grasshopper to work registering dead ants as new voters.

Funded with tax dollars from the rest of the meadow’s residents, ACWIRN organized mass protests at the Bank of Antamerica, ambushed its top officials at their private homes, harassed their children, and demanded that the meadow’s politicians halt all foreclosures (”We must keep Grasshoppers in their houses!”) and outlaw discriminatory lending practices against starving, homeless Grasshoppers (”Well-stocked shelters are basic insect rights!”)

The banking industry capitulated; the Orthoptera Lobby secured hundreds of millions of dollars in housing earmarks and grants and counseling subsidies to support the Grasshoppers with the shadiest credit and employment histories. Antie Mae, the meadow’s government-backed home lending giant, fueled the push for increased insect homeownership in the name of biodiversity. Its executives cooked the books and headed for the hills. Katie Cricket and the Mainstream Meadow Media joined the grievance-for-profit circus, profiling Grasshopper sob stories and drumming up ratings as bewildered Ants wondered who was looking out for them.

The banks drowned in toxic debt. More Grasshoppers fell behind on their mortgage payments. Bailout mania and panic gripped the meadow.

Our little Ant, minding his own business, heard a knock on his door one late winter night a year later. It was his old, sneering Grasshopper neighbor. With ACWIRN’s presidential candidate, Barack Cicada, now in office, the Grasshopper had been hired by the meadow as a tax collector.

“I’m here to take your provisions,” the Grasshopper cackled.

But it was the Ant who had the last laugh. “I’ve learned my lesson,” he told his shiftless friend. “Why bother saving and slaving and toiling and moiling? I’ve spent all my savings. I’m walking away from my mortgage. Thrift is for suckers,” the Ant said as he headed out the door, leaving the Grasshopper empty-handed.

Good question, TEEEJ. The reason why I posted it is that a while back, Roger asked me to heap some praise on George W. Bush. I said that I couldn't do it, and the reason was that I felt that Bush hadn't done anything to make the world a better place. But when I read that article in the Guardian, I had to change my assessment of the younger Bush. If he discouraged Israel from making an unprovoked attack on Iran, then I definitely think that he did the whole world a favour by saying no to another war.

Ann

Yes, it's me again, and this time it is about the $700 billion bailout plan. I'm not going to try to rate it or say if I think it is good or bad. The important thing is that the plan has been okayed both by the Senate and the House, and it has also been signed by the President. In other words, the bailout is going to happen. And it is going to cost an additional $700 billion in federal money.

Now this is what I'm wondering about. Where is that additional $700 billion in federal money going to come from? Unless I misheard both Senator Obama and Senator McCain, both of them favor tax cuts along with this bailout.

The thing is that the United States already has a very big budget deficit. Quite simply, the U.S.A. can't pay for the bailout itself. It lacks the federal funds needed to pay for it, purely and simply. Its government hasn't got that much money. And both Obama and McCain propose additional tax cuts, which means, all other things being equal, that the federal funds available to pay for the bailout will shrink even further.

So how will the bailout be paid for? The answer is simple. Someone else will have to pay. Someone, or someones, outside of the United States. Other countries. China. Russia. The Middle East? Saudi Arabia?

The United States will have to go to other countries and ask them for loans. Again. It is not as if the U.S. hasn't been doing that kind of thing before. Which is precisely why America has such a huge budget deficit. Precisely because America has kept going to other countries and asked them for loans, again and again. Loans to pay for the Iraq war, loans to pay for Medicare, loans to pay for tax cuts.

In Time magazine a little while ago, Justin Fox wrote this column about America's debt:

America\'s Number One Export: Debt

Here is a quote from of Justin Fox's column:

As you may have noted, Justin Fox claims that the United States has borrowed $700 billion a year since 2005, just to pay for ordinary expenditure. Now the United States is going to have to borrow another $700 billion, on top of the ordinary $700 billion needed in fresh loans every year to keep America going.

If the United States keeps lowering taxes, then it is quite logical that it will need to borrow more and more money from overseas. What if a tipping point is reached when other countries are not willing to finance America's spending any more?

Ann

I, personally, do not know if the bailout is a good idea or not. There is precedence for such a move. Back in the early 1990's when the S&L's (Savings and Loans) began to go bankrupt after the first real estate balloon popped, the government created a GSE (Government-Sponsored Enterprise) known as the Resolution Trust Corporation whose job was to buy bad investments from the S&L's to get them off the books of those S&L's to make them solvent again and to get the credit markets going again. Sounding familiar, anyone?

In the end, the RTC held those investments for several years until the markets stabilized and began to heal at which point, the RTC began to slowly sell off its investments. By the time the RTC had dissolved itself, the government had actually realized a significant profit, so the S&L bailout didn't cost taxpayers a dime.

Normally, my free market senses tell me this idea is a really bad one, but the fact that the RTC did exactly what it was intended to do and solved the S&L crisis at no cost to taxpayers and then dissolved itself tells me that this bailout may not be such a bad idea after all. What I would strongly oppose is if the government kept its shares in the bailed-out banks after the new RTC dissolved since the government has no business owning commercial banks or investment banking companies. For example, as a condition for bailing out AIG, the government took an 80% equity stake in the company. That is socialism, which I will oppose with every fiber of my being. Seeing as the government caused this whole crisis to begin with because of the interference in the banking industry through the Janet Reno Justice Department's attempts to eliminate red-lining through its enforcement of the Community Reinvestment Act and the involvement of Fannie Mae and Freddie Mac in creating and encouraging the sub-prime mortgage market, government's future involvement should be kept at a minimum to keep this from happening again.

Yes, it'll cost taxpayers potentially up to $700 billion up front that will have to be borrowed and will go straight into the national debt. But if all goes according to plan, and there's no reason to think it won't with the precedent set by the RTC, in the end the taxpayers will wind up with a profit which will go towards retiring that $700 billion debt and then some. Does anyone doubt that the real estate market will eventually recover? As President Bush said in his address to the nation, government is the one entity that can afford to wait for the market to recover while sitting on these bad properties, at which point we will begin recovering all of the $700 billion and then some.

One of the arguments House Republicans had with the original bill was that Democrats wanted to divert half the proceeds into government housing trusts instead of 100% of the proceeds going to retiring the debt. That was where the whole ACORN discussion came from. One of the chief beneficiaries of the housing trust funds is ACORN, a far-left entity best known for conducting massive voter fraud, but which also participates in the low-income housing market.

There are certainly a lot of outrageous riders that went into the final bill that should never have been there. Instead of a three-page bill, it turned into a 450+ page novel full of special interest provisions as is typical of Congress. I'm rather upset that John McCain didn't come out and name names of those who added those ridiculous riders as he promised to do when he is president. Why not start now with such a great example? Another outrageous provision is that judges will decide in bankruptcy court how to renegotiate interest rates AND PRINCIPAL owed on defaulted loans. What bank will loan money when they can't even be guaranteed principal when a judge can just wave his hand and make the whole loan disappear?

By the way, Ann, you're still falling back on the old canard that lowering taxes somehow always reduces revenue when it's not the case. Revenue is directly tied to the health of the economy, which always swamps changes in rates. So if the economy is healthy, tax revenues rise at a dramatic rate while tax revenues fall dramatically when the economy is not healthy. Both McCain and Obama propose tax cuts for the simple reason that it stimulates growth in the economy. Once the economy starts to grow, the deficit will begin falling again. Up until this current economic slowdown, the deficit had been falling very rapidly despite a tax cut, only to reverse the trend when the economy began to slow due to the real estate crash. Remember that Kerry and Bush had both proposed in 2004 halving the deficit by 2010? The deficit had been cut in half by 2006, far ahead of schedule, because of the health of the economy which at that point was growing at about 4% annually. People seemed to have forgotten that during the entire middle of the Bush Administration, we've had a pretty good economy with very low unemployment dropping all the way down to 5.1%. We had the lousy economy at the beginning due to the dot com bust and 9/11, and again near the end of the administration when the real estate bubble burst.

If you want to cut the deficit, you have to get the economy going again as the only way to raise revenue. Even a socialist like John Maynard Keynes would agree with tax cuts at this point. Keynesian economics says to cut taxes during an economic slowdown and to raise taxes during an economic expansion. So at this point in time, socialist Keynes and supply-sider Arthur Laffer would agree with each other. Note that neither Obama nor McCain are supply-siders. McCain opposed most of the Bush tax cuts.

As for whether the supply of borrowed money will eventually dry up, that is always a risk. It has never happened, though, so the likeliness of it happening now is slim unless the credit markets seize up entirely as banks fear further collapse of other fellow banks. That's what the bailout plan is intended to solve. It's to prevent the seizing up of the credit markets.

One of the most important things we can do is to get ourselves more towards energy independence. The main reason the administration supported a weak dollar was because that boosts exports while holding down imports. It didn't work to reduce the trade deficit for the simple matter that oil quadrupled in price. The largest component of our trade deficit is oil, costing us more than $500 billion a year. While the US is setting records every month for exports, our imports continue to increase in price because of oil, leading to even larger trade deficits. If we were energy independent, our trade deficits would have nearly disappeared over the last few years. Granted, that's a big "if."

One of the largest untapped supply of oil in the world is actually sitting right smack dab in the middle of the United States, though it's locked up in shale. When oil was costing $20/barrel, it was unreasonable to tap those energy supplies. With oil at $95/barrel, it becomes profitable for companies to do so. Yet, it's Harry Reid who snuck in a provision into the last energy bill that would prevent any exploration of shale. And even with the lapse in the ban on off-shore drilling, Democrats are relying on their allies in the environmentalist lobby to use the courts to stop any actual drilling. So while the American people are clamoring for more oil supplies from our own territories, Democrats are doing their best to make sure we get nothing at all. No off-shore, no shale, no ANWR.

It's also ridiculous whenever Democrats say it'll be five years before we ever see a drop of oil from these new oil fields. Well, Republicans have been trying for decades to allow for drilling in those areas, only to be stopped every single time. Now if they hadn't opposed drilling for twenty years, we'd have been producing oil from our own supplies for decades. Each time they say no, that five year time frame moves out even further. If they had only said yes, five, ten, fifteen, twenty years ago, those fields would be producing now.

They clamor for alternative energy. Well, nobody opposes alternative energy. To rely on it, though, is sheer folly. It may take ten, twenty, thirty years before we produce even a small amount of energy from those alternative sources to make them worthwhile. So what's the problem with allowing real oil that we know WILL give us energy to be produced until such time that alternative energy becomes useful?

Because of this resistance to drilling, we've gone from 40% dependence on foreign oil to over 60% now. Without additional domestic supplies, that figure will continue to creep even higher, continuing to balloon our foreign trade deficit as well as making the Middle East even more prominent than it is today.

And you keep repeating that tax cuts will increase tax revenue, because when taxes are lowered it means that so many more jobs are created and so many people put in so many more working hours and earn so much more money that tax revenue will increase anyway. You keep repeating this, Roger, but you offer little or no evidence to bolster your case.

How about this alternative scenario? Let's try on this saying, TANSTAAFL. And then let's add, BYCBNAPLM. Or, There Ain't No Such Thing As A Free Lunch. But You Can Buy Now And Pay Later, Maybe.

In other words, the economic boom that has been going on, interrupted by a few hiccups, pretty much since the day of Reagan, may have happened because Reagan and the younger Bush made such drastic tax cuts. And then they borrowed from abroad to fill the holes in the federal budget and make sure that the spendingfest could continue.

Hmmmm... let's see... the housing market implosion... didn't someone say that it happened because a lot of people borrowed beyond their means to be able to spend on housing, and then when somebody asked these borrowers to pay up, they were unable to do so and they lost their homes?

If somebody grants you loans and don't mind too much if you pay back or not, then surely your standard of living is going to improve. If your taxes are lowered and your government keeps spending as if it had the same tax revenue as before, then surely lots and lots of people are going to be better off than they were before.

Until somebody asks them to pay up, that is.

In the latest issue of Newsweek, there is commentary or report on the present crisis written by Francis Fukuyama. I agree with those who consider Fukuyama's reputation as a soothsayer somewhat suspect. In 1992, he published a book called The End of History and the Last Man, where he basically argued that Western liberal democracy and capitalism had triumphed over all other ideologies for all time. That was sixteen years ago, and while the United States is certainly still the only superpower of the world, it is not as if there are no signs of any future contenders.

It seems to me as if Fukuyama is a man who tends to be carried away by the power of the moment and
read more into it than what is necessarily there. So it should perhaps come as no surprise that Fukuyama is now highly critical of the capitalist system that is right now under severe stress. For all of that, it doesn't follow that Fukuyama is necessarily wrong about his analysis of what caused the present crisis. In his Newsweek commentary, he praises the positive and corrective power of Reaganomics when it arrived in 1980. But, Fukuyama writes,

It was I and not Fukuyama that added the italics in that quote. Fukuyama's point, however, is that the tenet that tax cuts are always self-financing is a belief, not a fact. And, Roger, I have yet to see you present strong evidence suggesting that tax cuts always lead to increased or at least sustained tax revenue, all other things being equal.

Fukuyama points out that the belief that tax cuts increase tax revenue is a new idea put forth by neocons and neoliberals, not a traditional belief traditionally embraced the Republican party. Fukuyama writes:

Well, in hindsight and with the 20/20 vision that comes from knowing how things turned out (at least until now), how should we judge the idea that tax cuts increase and not decrease tax revenue? Fukuyama answers,

Fukuyama offers the following evidence to show that the traditionalists were right and the Reaganomics people were wrong:

Roger, I have yet to reply to a claim you made in a post from September 21. There you said,

In my opinion, this is blatantly and obviously wrong. Aren't there jobs that are created from tax money? Federal jobs? Or jobs created from taxes levered by states?

I saw a figure in a Swedish newspaper that every third job in Governor Palin's state, Alaska, is paid for by tax money. I have no idea if that figure is correct. It wouldn't surprise me at all if it is exaggerated. But obviously very many jobs in Alaska are paid for by tax money, and obviously Alaska would hurt rather badly if that tax money disappeared.

In another commentary in Newsweek, written by Robert J. Samuelson, a comparison is made between the Wall Street crash of 1929 and today's situation. Samuelson, who, by the way, is a conservative as far as I know, says that today's situation is definitely better than the situation of 1929. One of the most important reasons, according to Samuelson, is that the government is a so much bigger actor in today's economy than it was in 1929:

Samuelson argues that the government's much bigger role in today's economy helps to lessen the crisis. So if Samuelson is right, then not only is it not true that rich people create all the jobs, but it is also a good thing that they don't, since we may all be much worse off if they did.

Ann

And the deficit got cut in half how, exactly, between 2004 and 2006? Spending certainly didn't go down.

It seems you have a double standard. When the deficit goes up, it's got to be because of tax cuts. When the deficit goes down, it must be because of tax hikes. Oh wait, there weren't any, only more tax cuts. How can that be? Don't you need to raise taxes to get more revenue? Maybe the economy is dynamic in reality instead of static according to government projections, which never take a dynamic reaction to taxes into account. People change their behavior because of the tax code. The collapse of the S&L's in the early 1990's should be all the proof you need that people react to tax changes. Tax loopholes caused all those investments in bad commercial real estate. Tax simplification eliminated those loopholes, directly leading to the collapse of those S&L's.

The health of the economy is the most important reason for tax revenues rising or falling. The best way to get the economy going is through tax cuts, not tax increases. Even Obama admits it himself. He admits that because of the bad economy, he may not be able to raise taxes immediately.

That admission should tell you something. He knows his economic plan is no good for the economy and that only a healthy economy can have a chance of withstanding his tax hikes. So why's he willing to postpone his tax hikes in a bad economy? I thought his economic plan was supposed to save the economy? If his plan were so great, he should be saying we need to raise taxes as soon as we can!

No, the only reason he wants to raise taxes is the same reason all liberals want to. It's not to help the economy. It's to fund his outrageous spending that he's proposing in order to buy more votes. He knows tax hikes are poison to the economy. Anybody who's taken Econ 101 knows that. So he's just proposing killing the economy later, rather than right now. Obama's change isn't change. It's just more of the same tax and spend liberalism that we've all seen before and have rejected numerous times. Republicans get tossed out of office whenever they start acting like Democrats and spend like drunken sailors.

Liberals promise tax cuts during elections but somehow never seem to follow through when they get elected. Remember Bill Clinton who promised a massive tax cut for the middle class? How'd that turn out? It turned into a massive, retroactive tax hike on just about everybody after he'd "worked as hard as he could to give you a tax cut but just couldn't." He even raised taxes on poor seniors by lifting the taxable portion of their Social Security from 50% to 85%. Right after his tax increase, the 4.8% growing economy he was handed by George H.W. Bush turned into a stagnant economy that didn't begin rising until the seating of the GOP Congress in 1995.

Raise your hand if you believe Obama will actually give anyone a tax cut.

I'm not counting his proposal to give cuts to people who don't pay taxes. That's welfare, not a tax cut. Liberals believe in welfare, not tax cuts, so I'm quite willing to concede he will do exactly what he promises here.

Oh on the comment that the rich supply all the jobs, that's true for the private sector. You wanted me to respond to that, so I will.

The point is that you don't get jobs from poor people. By taking money away from the rich, you're killing jobs. Even you have to concede that because it's simple common sense. If an employer has less money, he'll spend less and that means fewer jobs. And that's the point I'm making.

Sure, the government does supply jobs. But no one in a capitalist country will say that the health of the government sector at the expense of the private sector is what's needed to keep an economy going. It's the private sector that matters, not government. I don't have a problem with government getting additional revenue due to growth in the economy, but by taxing it away by raising taxes, you're hurting the private sector.

Or would you be happier if government supplied all the jobs and the private sector withered away? You are from Sweden, though, so who knows? Seeing I go to Sweden every year and know a ton of Swedes who believe government is the end-all, be-all of everything, I wouldn't be at all surprised if you did, but I won't assume you do.

Would you use that kind of argument when it comes to stopping crime, Roger? It's no use trying, because people will find other ways to cheat the law?

I think not. The difference is that there appears to be such an incredibly broad consensus in the United States that taxes are evil, and that governments are only going to steal your money and waste it on stupid things. So cheating on your taxes is not seen as a crime, not something you should be ashamed of, but rather something you should be proud of and something that serves the government right.

Well, look at Wall Street. That was the free market and financial capitalism in all its glory. It didn't levy taxes on people, no. But I doubt that its actions are not going to cost people a lot, in the United States as well as abroad.

Why are taxes so poisonous? Why? Governments collect taxes to use that money for the common good. What is so incredibly bad about it?

A probable reason for the decreasing deficit between 2004 and 2006 is that America's loan-powered economy crested about then. Those were the boom years, so less money had to be borrowed from abroad. Those were the days. Now the United States needs to borrow more than ever.

There you go again, repeating your claim that tax hikes are always bad. But not offering any proof.

To me, Obama is not the Messiah. Just because he says or admits something about the economy doesn't make it the truth. If you say something, that doesn't make it the truth. If I say something, that doesn't make it the truth. If Obama says something, that doesn't make it the truth. Each of us have to try to find supporting evidence to bolster our claims, if we want to be taken seriously.

But I absolutely agree that Obama will not be able to raise taxes as he should, assuming he is elected. The reason is that Americans hate taxes so much that it has become a sort of conditioned reflex to oppose tax hikes in every situation. Say 'tax hikes' and millions of Americans will react as if they have been told something absolutely horrible. What is a Wall Street crash? What is a $700 billion bailout that will have to be paid for mostly by loans from abroad? To so many Americans that's nothing, compared with tax hikes. Because so many Americans believe that they themselves won't have to pay for the Wall Street crash or the $700 billion bailout. So many Americans seem to believe that taxes are the only things that they will have to pay for themselves, and taxes are unfair and harmful. And the reason why so many Americans believe it is, I think, that they have been told so for many years now, particularly by the GOP. And the Democratic party has chosen not to voice any real dissent.

So Obama can't do much in the way of raising taxes, because that is so wildly unpopular in America. It is not quite as unpopular and shocking as it would be to most Iranians to be told that girls should be allowed to walk around in Teheran with no headscarfs and in short skirts, but the gut reactions of tax-loathing Americans and immodesty-loathing Iranians are similar. The ideas of tax hikes in the United States and skimpy dresses for girls in Iran go so deeply against the grain of what people believe in the United States and in Iran.

The United States has borrowed and borrowed and borrowed for most of the time since Reagan became President in 1980, and most Americans have not felt inconvenienced by their country's debt. They have not been told, certainly not by leading Republicans, that this debt is any sort of problem. After all, someone else pays. Why is something a problem if you don't have to pay for it yourself?

So Obama will not raise taxes because he can't. The American people will not let him. That doesn't mean it would not be the best thing to do, if it was possible. It would, but it isn't.

We had a severe financial crisis here in Sweden in the early nineties. It was a housing bubble that threatened our banks. The government bailed us out, because it had to. But how did it do it? Not by borrowing huge amounts from abroad, because that was not possible. Who would be interested in lending huge amounts of money to a small country with then eight million people and a small national currency?

There was only one thing to do. The government had to raise taxes to get the money it needed for the bailout. So it did. It was painful, but it worked. The banks were saved and the economy recovered.

America has the largest economy in the world. Its currency is the world's currency, which is good everywhere. It has been in the interest of other countries, not least China, to buy huge amounts of American debt in order to keep their own currency low and make it easier for their own manufacturers to export their goods to the United States. This has been a solution that both China and the United States were happy with: America got the spending money it needed now that its tax revenue wasn't enough to pay for its needs, and the Chinese made huge export profits. But there is no guarantee that the Chinese will keep up their part of the deal, particularly if America reduces its import of Chinese goods.

You say that sort of thing, Roger. But just because you say it doesn't make it the truth. Just because Econ 101 says it doesn't make it the truth. Because Mulder and Scully were ultimately right. The truth is out there. It is not there in beliefs or ideologies or in things you have been told for as long as you can remember. It is out there, in the real world. And refusing to see the real world, and sticking to Econ 101, will ultimately send you plunging.

Ann

I'm glad to hear that you don't think so of me, Roger. Because I don't. I believe in checks and balances, and a healthy private sector is a good thing to balance the government's influence with.

Ann

Now where to start. Hmm.

It seems that no evidence will be convincing to you that cutting taxes will generate additional revenue. The fact that revenues doubled during Reagan's eight years (about $500 billion to over $1 trillion) will, of course, be discounted by you by external mitigating factors. Even if I were to present a graph with tax rates going straight down and revenue going straight up wouldn't be enough, I see. Fair enough. None of our rules require that you believe me.

Now here are two questions that go to the heart of the matter. Excellent questions, btw. The answers will require digging into Econ 101 which you've essentially tossed out the window as not true seeing as you've said that just because Econ 101 says it's true doesn't mean it is. But we'll have a go at it anyway.


Let's tackle the second one first. It seems from your statement that you believe government only does good. I'll answer why it's actually bad for the health of the economy. Remember a while back while presenting the theory of supply-side economics when I went through the calculations for Gross National Product (GNP)? The following is what you'll find in pretty much any economics textbook, not just one that discusses supply-side.

GNP = C + I + G + EX - IM
C = Consumption
I = Investment
G = Government
EX = Exports
IM = Imports

Let's take a look at that G component. Government, at least in a capitalist economy, produces nothing at all. Every dollar it spends is taken directly from the private sector. So you basically subtract from the C and I components to get G. So G is a net zero gain. Most of government spending is transfer payments, which also adds nothing to GNP because the definition of GNP is the total value of goods and services produced by an economy. This has always been the best measurement at determining the health of an economy, and in turn, highly correlates with the tax revenues generated. Again, that's Econ 101. Ignore it if you wish but these theories exist for a reason.

The parts of G that add the most to GNP are defense spending and infrastructure (roads and bridges) expenditures. But again you can't have any of those without taking something from C and I. Welfare, entitlements, and such, add zero to the G component. Recipients of such welfare do add to C, though. But that's a wash since you have to take away from C and I to indirectly add to C through transfer payments.

Government cannot spend a nickel without taking it from the private sector. So as G gets bigger, I and C get smaller. It's a zero-sum game. You may bring up deficit spending. Isn't deficit spending going to make G bigger while taking away less from I and C? By and large, borrowing has a crowding out effect, making the supply of capital less for the private sector. So deficit spending has an effect of boosting G but making I and C smaller as credit is less available and more costly. If you borrow from abroad, that would be the case where the additions to G would outweigh the losses in C and I, but we are in agreement that heavily borrowing from foreign investors isn't a good thing. What we disagree upon is the impact of tax cuts on tax revenues. Whereas I say the best way to balance the budget is to cut spending and reduce taxes, your prescription is to raise taxes. But we'll see why raising taxes is such a bad idea in a short while.

Let's take a look at the I component. Investment is the most important component of this whole equation and this is where tax rates have a great impact. The basic question is how do you get an economy to grow? Government cannot do it since whatever government adds to GNP is subtracted by what it takes out. Consumption is consumption, adding close to $1 for every $1 spent. Investment, on the other hand, is where growth actually occurs.

In Econ 101, there is the term, the "multiplier effect." The multiplier effect occurs when "money begets money," essentially that the spending of money in turn allows the economy to generate even more money. How is this done? Investment is the expenditure of monies on capital equipment and new businesses. When additional capital is available, more goods and services can be produced. Hence the multiplier effect. Spending a dollar on capital equipment has a return of far more than $1. That $1 creates the ability to create even more goods and services than existed before, so the capacity of the economy grows. With higher capacity, the output of the economy grows. Heavy expenditures on the I component, therefore is really the optimal way to grow an economy. C can't do it alone. G doesn't help the economy grow. The multiplier effect actually has the result of boosting all three components. C is boosted because of the job-generating effects of increased investment. G is boosted by higher tax revenues brought on by higher output.

This leads into the answer for question 1. Why are taxes so poisonous? Companies decide on investments based solely on one calculation, the return on investment, or ROI. ROI is based on the amount of expected revenue subtracting the initial investment AND ALSO SUBTRACTING ANY TAXES PAID ON THE GROSS ROI. When taxes are low, ROI grows and becomes very attractive. When taxes are high, ROI falls. If ROI falls, companies have less incentive to invest and therefore higher taxes result in a drag on investment and reduces the capacity of the economy to grow. Growth slows and net tax revenues fall. So when ROI grows, that's when the I component grows the most and thus, the multiplier effect has a greater impact on the economy.

So lower taxes equal a far faster growing economy. A higher tax rate and higher rate of government spending equals slower growing I component and therefore a slower economy.

I mentioned this earlier; both supply-siders and socialists agree on the stimulative effect of tax cuts. John Maynard Keynes is the economist socialists respect the most, seeing as he was one of them. His theory was to cut taxes during an economic downturn because that would stimulate the economy to grow and get out of recession. During an economic expansion, he advocated raising taxes as a way to slow down the economy to prevent overheating. Overheating economies run the risk of inflation. On the other side of things, Keynes also advocated increasing government spending and running a deficit during economic downturns and also cutting spending during economic expansions.

Roger, you argue from your theory. Basically you say, This is what our theory says, so, ergo, this is what reality is like.

As most of you know, I am an astronomy fan. So let me argue from an astronomical theory and and not from the best available observations of the cosmos. Let me introduce the Ptolemaic model of the solar system and the cosmos:



Ptolemy, who died in 165 AD, taught that the Earth was the center of the universe. According to Ptolemy, the other bodies in the solar system orbited the Earth. The body orbiting closest to the Earth was of course the Moon, and then followed Mercury, Venus, the Sun, Mars, Jupiter and Saturn. They all wandered in circles around the Earth, the center of the universe. Beyond the orbit of Saturn lay the celestial firmament and the fixed stars. These, too, slowly, majestically, wound around the Earth in their yearly cycle.

So don't tell me that the Sun is in the middle of our solar system or that the Earth orbits the Sun, Roger. Can't you see from the model that it is the other way round?

Let's talk about your economic theory. You say this:

Government produces nothing at all? That is an interesting statement. I fully agree that Communist states have never proved themselves really successful, but would you really say that during the circa seventy years that the Soviet Union existed, when the government at least in principle controlled every aspect of the economy, that country produced nothing at all?

So tell me, Roger. I am a teacher, and my job is paid for by tax money here in Sweden. Would you say, therefore, that because I get my pay through tax money, I produce nothing at all? But if I got myself a job at a private school, I would suddenly generate a lot of value, doing exactly the same thing as I do now?

Oh, wait, now I get it. I do the same thing as before, and my students get the same things out of it as before, but the definition of what GNP is says that I produce nothing when I work for tax money, but I do indeed produce something when I work for private money?

You argue from the model, Roger. You don't ask yourself if your model agrees with the real world.


The map said we should row this way!

What we see right now at Wall Street is how unregulated capitalism has destroyed incredibly huge assets. It has almost been like watching a magician perform: Look, here we have a trillion dollars! And look, poof, suddenly it is all gone! But for all of this amazing vanishing act, I suppose that only private interests can generate wealth, because that is what your model says.

I don't have the strength to look it up, but I believe that the Communist Soviet Union crumbled in around 1993 or thereabout, and gave way to capitalist Russia. I do remember what happened in Russia. Suddenly, a lot of people grew immensely richer, while the country as a whole sank into poverty. Alcoholism, which had been a bad problem in the Soviet Union, skyrocketed in the new Russia. Nativity plunged. Life expectancy plunged, from perhaps 75 years to 65, even though there was no new raging disease taking a measurable toll of the population. Everything was just down.

A few years later, I saw an interview with a former Communist official, whose job during the Communist time had been to oversee the production of something and to make sure that the products were distributed according to the orders of the government. When Communism fell, this woman had become a free entrepreneur, and thanks to her various contacts and general position she had become immensely rich. In the interview with her, she said this:

And while she was saying this, Russia was drowning in alcohol and despair.

When I was nineteen years old, a really long time ago, I took a university course which required me to study the basics of Marxism. I don't remember very much of the basic tenets of Marxism, except that it says that capitalists own production plants and use workers to generate wealth. But in order to maximize their own profit, the capitalists will pay the workers as little as possible and put as much money as possible in their own pockets. And according to Marxism, the only way for the workers to liberate themselves was to take control of the production plants themselves.

When I had just read that book on Marxism, I remember thinking that it sounded all very convincing. At the same time I knew that there must be a mistake somewhere, something that Marx hadn't foreseen or realized. What was it?

I couldn't ask anyone what was wrong about Marx' theory. I couldn't ask my parents, because they would be horrified that I believed that Marx could be right about anything whatsoever. And if Marx couldn't be right about anything at all, it was pointless to ask what he was wrong about, wasn't it?

I also couldn't ask the people I took that university course with, because they were all communists and would tell me that there was certainly nothing wrong at all with Marxism. This was in 1974, by the way, when the media and the universities were very left-leaning.

So I couldn't ask anyone and had to think about it myself. I thought long and hard, and finally I thought I knew what the problem was. Marxism seemed to argue for a solution where the workers took over the production plants. In the countries where Communism existed for real, it was not the workers who controlled the production plants, but it was the government. The government in a Communist country controlled all the economy. But it also controlled the law, the courts, and the prisons.

Who would stop the government in a Communist country from abusing their vast power? No one would, that was the answer. In a Communist country, the government was all-powerful, and therefore it could do as it pleased. And it could crush its opponents as it pleased. It could crush anyone it didn't like as it pleased.

And that was what was wrong with Communism. Because it put all its eggs in one basket. That way it gave all the power in the country to the government.

Well, Roger, it seems to me that you want to put all the eggs of the economy in the free market basket. But when the market drops its basket, we are all left with a rather disgusting mixture of raw eggs, pieces of egg shells, and dirt.



I believe in checks and balances. I don't believe in the totalitarianism of the government. I don't believe in the mad and unchecked reign of the free market. And, for the record, I don't believe in tax hikes for their own sake. I believe in tax hikes when the government can put that money to good use.

Ann

You've misinterpreted what I've written. When I said that government produces nothing at all, I qualified that with "at least in a capitalist economy." In a capitalist economy, government does not own the means of production but rather pays the private sector to produce things. When I mentioned that defense and infrastructure account for most of the G component, yet they produce nothing, is because they pay private defense contractors and construction companies to build the products. The government merely acts as a conduit by taking money from the private sector and giving it to contractors. So you misread the intent of that statement. It sounds like you thought I was saying that to be derogatory towards government, which is actually not true. The statement is intended to show the differences between capitalist governments and socialist/communist governments. Since I was speaking of the United States, I didn't bother to explain further with regards to other types of economies.

In socialist or communist economies, governments DO own a large part of the means of production and therefore DO produce things. Since in a capitalist economy, the government DOES NOT own the means of production, that is why I said government produces nothing. That is not the case with socialist or communist governments where a large part of production is controlled by the government. If I were in France or Russia, for instance, I would never have made that statement. In socialist economies, government plays a large role in the I component and do contribute to the growth of the economy. In the United States, the government's contribution to the I component is negligible.

Without investment, the economy simply cannot grow.

I find it interesting your refutation is that the basics behind National Income Accounting are wrong and that all economists are dead wrong. Do you dispute that taxes play no part in businesses determining whether they should invest? If you do, you're on very shaky ground by basically saying all businesses are wrong in making their investment decisions. That businesses use ROI is not theory. That's fact.

You also are terribly wrong by blaming deregulation for the collapse on Wall Street. The only thing the Democrats can point to, in order to deflect blame from themselves is to blame Phil Gramm for the Gramm-Leach-Bliley Act, which permitted commercial banks to get into investment banking by repealing a restriction put in place during the Great Depression, the Glass-Steagall Act. The bill passed in 1999 in the Senate by a vote of 90-8, including a yes vote from Joe Biden, and passed the House with a 352-57 vote with over 150 Democrats voting yes. Bill Clinton signed the popular measure into law. Even the Democrats can't come up with anything else when asked for specifics on what they mean when they accuse Republicans of deregulation. If they could come up with something better to deflect blame, you can be certain they would have found something a lot less flimsy, and one that doesn't implicate themselves as well since Democrats overwhelmingly supported Gramm-Leach-Bliley. The only reason they do use this is because they know the sycophant press isn't going to call them on it and that most people won't know any of the details.

A large number of sources, including Bill Clinton and Bob Rubin, Clinton's Treasury Secretary, have said that the deregulation has actually softened the impact of the disaster. The main companies affected by the bill were commercial banks which bought investment banks. Yet it's the commercial banks that are rather healthy and the investment banks that are collapsing. One reason why Clinton and Rubin say that deregulation has actually helped is that it diluted the impact on the affected companies since their companies are more diversified. Second, commercial banks are able to buy troubled investment banks that they wouldn't have been able to without the law.

See this entry by Clinton Treasury official Brad DeLong .

Here's the quote from Bill Clinton in an interview by Maria Bartiromo on CNBC:

So even Bill Clinton doesn't agree with you. He still blames Republicans but never says why.

You simply have no proof, and neither does anyone else, that deregulation has been the problem. The closest thing you can get to is the Democrats blocking increased oversight over Fannie Mae and Freddie Mac whenever the Bush Administration tried to do so. And that article from the New York Times on how Democrats tried to block the Administration's radical overhaul on oversight has already been posted twice in this thread.

By the way, your analogy of putting everything in one basket is flawed in that capitalism puts its eggs in millions of different baskets. For every failed bank, there are dozens of others that are not failing. For every failed business, hundreds of others exist. With communism and socialism, government is one big basket with very few other little baskets.

The lessons of this crisis are the negative impacts government can have when it distorts the markets.

Roger, look around you. Does the economy look that good to you right now?

When was the last time it looked so bad? I know that the word 1929 has been mentioned many times in the media lately.

I know that proponents of supply side economics, like you, claim that today's crisis has nothing to do with supply side economics, but instead it is a creation of Democrats, who kept interfering in the economy when they shouldn't.

Well, I'm fifty-three years old. I know enough, and I remember enough, to say say that the supply side economics was created by Ronald Reagan. All right, perhaps you could say that it was created as a theory by people like Milton Friedman, and then it was Ronald Reagan who turned it into reality, much like it was Marx who created marxism as a theory and Lenin was the one who turned it into reality. The thing is, supply side economics, with its aggressive tax cuts, didn't exist before Reagan. And it is supply side economics that has been the guiding principle of the economy that is taking a severe tumble now.

Ronald Reagan, implementor of supply side economics, was triumphant for a lot of reasons - because of his uniquely charming and charismatic personality, and because he was elected President in the most powerful country in the world by far and dared take advantage of his country's many strengths. He overwhelmed America's traditional enemy, the Soviet Union. And he did so without going too far, without starting a war.

But as Francis Fukuyama said in that article which I gave you a link to, and which you haven't commented on, it was Ronald Reagan who implemented the idea that America can lower taxes especially for rich people, and yet its government can spend beyond its means by borrowing from abroad. According to Fukuyama, it was Reagan who created the American budget deficit. Clinton, incidentally, wiped that deficit out, partly by rasisng taxes, and created a mighty budget surplus instead. But George W. Bush immediately cut taxes aggressively after he succeeded Clinton, and the budget deficit was back with a vengeance.

According to Fukuyama and many other voices that have been heard during the present crisis, supply side economics has created the current conundrum by teaching wishful thinking economics instead of teaching realism. The one enemy of supply side economics has been taxes. Balancing federal income and federal spending has never been much of a problem for the supply side, since they have argued that you can always create additional revenue by cutting still more taxes and borrowing from abroad if revenue for whatever reason isn't rising as it should.

So, yes, Roger. I argue that the current mess is evidence that your economic theory, as it is articulated by Econ 101, teaches things that are not true. I does so because it teaches that government should matter as little in the economy as possible, and the only things we need to understand about the economy is what works best for private interests. It is this kind of thinking that has ruled much of the world since the days of Reagan, thanks to the mighty influence of the United States. Unfortunately this theory is so much wishful thinking. It doesn't work. It is designed to pamper the supply side, not to worry about reality.

You say that it is the Democratic Party that has created the crisis with its unwanted interference in the affairs of the supply side. But it is supply side economics that is the new thing, historically speaking, not Democratic interference. When was an economic theory allowed to rule supreme without the slightest interference from its critics?

Supply side economics wasn't there before Reagan. Reaganomics has been so successful that the Democrats have embraced it too, more or less, although they have tried to be a little more cautious about it.

To me, however, the idea of blaming Democrats for a situation that has happened after a Republican has been President for eight years, and after this Republican President inherited an extremely strong economy with a super-strong dollar and a mighty budget surplus, is not the sort of position I can take seriously. Particularly if you remember that this mess has happened not only after a Republican has been President for eight years, but also after Republicans have ruled the country for twenty of the last twenty-eight years.

But ultimately is not that interesting to blame Republicans or Democrats. Why talk so much about individual people? People come and go. There will never be person exactly like George W. Bush again. For that matter, there will never be a person like Bill Clinton again, and never another one exactly like Ronald Reagan.

No, I think we should talk less about individual people and more about the ideas they lived by and the ideas they bequeathed to posterity. That is why Reaganomics is so much more interesting to me than Reagan himself. Reagan was successful and triumphant, yes. But Reaganomics lived on after Reagan's term was over, and it lived on after he died. It shaped so many of the rules that has governed Western economies for a few decades now. It has created stupendous wealth, at least for those who were wealthy from the beginning, and also for a few smart entrepreneurs like Bill Gates and for a few dedicated go-getters from humble beginnings. It has created a feeling that in the world of economics the sky is the limit, and anything that prevents hungry capitalists from reaching for the sky is harming the economy as a whole. It has papered over the fact that in the Western world where Reaganomics has ruled supreme, and perhaps particularly in the United States, most people have not made any economic gains at all. I recently saw a figure which claimed, I think, that the richest 1% of the American population has increased its income by 228% since 1979, whereas the median American male has hardly had a raise at all since then. The fact that most American families earn more money today than they did in 1970 is almost exlusively due to the fact that today most women are also breadwinners.

Reaganomics created a mighty and magnificent bubble that almost exclusively benefitted the rich. Admittedly it also created a festive feeling in much of society.

Now we are waking up. The bubble has burst. It proved impossible to live so much beyond ones means. Remember, too, that we have been living beyond our means not only in an economic sense, but also when it comes to exploiting nature. We are facing an ecological crisis. The climate change may or may not be created by humanity, but other ecological problems are certainly mostly man-made. A recent report that every fourth mammal is threatened by extinction says something about how humanity has been using up natural resources, leaving less and less for the other species. And, ultimately, we are going to be emptying the coffers of nature for ourselves, too.

We can't go on the way we have. Indeed, I think we are seeing the end of Reaganomics.

Ann

I haven't read the above comments and responses to the original topic (that seems like too much intellectual stimulation for me at the moment ). But I think I've figured out the reason for the wall street crisis and I can sum it up in a single word: greed.

ML

I can sum it up in another word: power. Democrats have realized for years that buying votes is the only way they have of obtaining power since their economic theories are so toxic to the economy. The attempts to eliminate redlining was solely intended to buy votes, to get as many people as possible to buy homes they couldn't afford and to use the force of government to force institutions to loan money to people who couldn't pay it back. Organizations like ACORN, the organization that employed Barack Obama, was famous for putting pressure on banks to loan to minorities. To avoid the power of government or to avoid the negative publicity that organizations like ACORN could generate, banks rolled over and gave out these bad loans, with a guarantee that Fannie Mae would buy them. Fannie Mae, in turn, would buy these mortgages, create mortgage-backed securities and label them as AAA grade, and then would sell them to unsuspecting investment banks, who didn't do enough to verify the risks on the loans.

Even you've admitted this isn't true in the past. You recognized that the dot com bubble burst under Clinton's watch in early 2000 which was promptly sending the economy into the tank. Yet you try to claim Bush was handed an extremely strong economy. The economy had begun to slide long before Bush won the 2000 elections, tax revenues had already begun to decline, and growth had already disappeared. Bush economic policies had not even taken effect yet as of October 1, 2001 (beginning of the fiscal year) and the economy was already in recession. Many were talking recession long before January 20, 2001 when Bush took the oath of office. Yet you're trying to paint a completely different picture where Bush screwed things up with a marvelous economy, one that you've admitted yourself was on the decline after the dot com bubble burst. So which is it? Was Bush handed a growing, strong economy on the rise, or a declining economy on the brink of recession? Did 9/11 have any impact on the economy as well after the transportation industry went into decline?

You're also blaming Ronald Reagan, whose presidency ended in January of 1989, yet absolving Bill Clinton, who btw lowered capital gains taxes in 1997 from 28% to 20%, which resulted in huge new flows of revenue to the Treasury? You seem to forget entirely that Reagan really WAS handed the worst economy in 50 years from the inept Jimmy Carter, who gave him 21% inflation, over 10% unemployment, turtleneck sweaters that we had to wear because we couldn't turn our thermostats above 68F, malaise, and the misery index. It was Bill Clinton who was handed a growing 4.7% economy on a silver platter despite his demagoguery about the "worst economy of the last 50 years." Nothing of any significance happened on his watch, so he was able to coast for eight years as he didn't have a 9/11 or a bubble burst on him, let alone two that hit President Bush, both of which formed during the Clinton years. Clinton even had the benefit of the "peace dividend" where he sliced a hundred billion from the defense budget, something which we didn't have the luxury of doing after 9/11. It was supply-side economics that had to save the economy from the disasters of Carterism and the dot com bubble, which I'll repeat again I do not blame Bill Clinton for. I don't see you knocking Bill Clinton for either bubble forming on his watch, though, yet you hit Bush for a bubble that began to form before he entered office.

I remember back in 1998, right after I left San Diego, I had just sold my house there to move to the northwest. I had sold my house for about $210,000 for a 1600 sq. ft. attached home. Two years later, my friend who had bought the house, had resold it for about double the price he had paid for it. The bubble was real and it had already begun to form during the Clinton Administration. I know that because I was kicking myself for not being able to hold onto the house for even one more year to reap the gains I would have gotten. Unfortunately I didn't have the money to keep it while getting a home in Oregon at the same time. While I don't blame Clinton for the dot com bubble, I do blame him strongly for the real estate bubble as his Justice Department threatened companies who didn't give out bad loans. So again, how is Bush to blame?

I still haven't seen a shred of evidence from the other side how President Bush could be in the least responsible for the real estate bubble and the current financial disaster while I've provided ample links and evidence showing how the president had recognized a problem and was stymied every way possible by people like Barney Frank, Christopher Dodd, and other Democrats. We even have an article from the New York Times from September 11, 2003 that showed when Treasury Secretary John Snow and President Bush pushed for a radical overhaul of the oversight over Fannie Mae and Freddie Mac. We also have John McCain's floor speech from 2005 warning about the danger Fannie Mae and Freddie Mac presented to the economy if something isn't done to reform them. The same cast of characters, at the threat of a filibuster, stopped all action in the Senate where it had passed out of committee on a party-line vote. The bill had already passed the House.

The same bill was presented in 2006 after Democrats took control of both houses. It never even got a committee vote. Where's your outrage at Democrats, first for lining their own pockets at the expense of taxpayers while committing fraud at Fannie Mae, then for stopping any and all attempts to rein in these out-of-control GSE's? instead we get another broadside at supply-side economics, which has only succeeded in saving the economy twice, first in 1982, then again in 2002.

We know FHMA/FHMC (Fannie Mae/Freddie Mac) were the root cause behind the economic disaster. Those were run by Democrats where Democrats raked in millions through fraud and deceit. Did you know Barney Frank's significant other, Herb Moses, was a top executive of Fannie Mae at the same time he was chairman of the Banking Committee overseeing them? Can we say conflict of interest?

So we have lots of evidence that Democrats are solely responsible for the financial disaster, so I don't buy it when you're trying to blame President Bush and his policies, which tried to stop it. Nobody here or in the mainstream press has been able to point the blame at President Bush or any of his policies outside of a generic wave at the term, "deregulation," without ever saying how deregulation could have caused this problem. I can name names and say what they did. Can you do the same?

Even in tonight's debate, Obama, who fiddled while Fannie Mae burned while pocketing more money from Fannie Mae than anyone except Chris Dodd despite his short tenure in the Senate, tried to again blame Republican deregulation without any support whatsoever. Finally McCain started to name names, though it was so early in the debate that I doubt anyone would remember it. What needs to happen now is to tell the truth over and over until the press is forced to face it and forced to report on it. Time will tell if there's enough time to save us from the disaster Obama will be if he wins. Like the Smoot-Hawley Act, an act of protectionism that turned a recession into the Great Depression, Obama will try to raise taxes, which could plunge the globe into another depression.

My jaw dropped at this one. I think you'll find hatred of Reaganomics, not an embrace, if you talk to any Democrat. I think you'll find that most Democrats will experience the same jaw drop at this statement.

As for Fukuyama, he has some interesting things to say. But he is wrong in two parts. No where in supply-side economics does it say you spend until the cows come home. Conservative economics, not supply-side (which does not address government spending at all) requires spending to be cut and not the phony cuts Washington uses with its current services baseline budgeting which takes 8% increases and somehow defines it as a cut. The Republicans in control of Congress from 2003-2007 (they only controlled the whole thing for four years as the Dems held the Senate in 2001-2003) angered their own constituents by acting like Democrats in spending. That's why so many conservatives were so angry in 2006. Turnout was heavy even among Republicans, who came out in 2006 to fire the GOP for breaking their word.

Fukuyama was also wrong that Clinton's tax increases balanced the budget. He was handed a growing 4.7% economy. Right after his retroactive tax increase, growth basically stopped. In the quarter afterwards, growth was registered at 0.7%. The economy stagnated until roughly late 2004, early 2005 when the dot com bubble began to form in earnest, and also coinciding with the rise of the GOP Congress, which held down spending. They were actually conservative back then. The budget did not balance until 1999, several years down the road after the economy had fought off the negative effects of his tax increases and not until after Clinton signed a very large capital gains tax cut passed by the GOP Congress in 1997 at the urging of Robert Rubin. The tax cut produced enormous revenues, helping to balance the budget. Since you are someone who doesn't believe in supply-side tax cuts, how can a huge capital gains tax cut result in a balancing of the budget? If you were correct, that tax cut would have blown a hole in the budget.

I give Bill Clinton a lot of credit for being pragmatic. He has never been dogmatically liberal, so he was able to be convinced to sign that tax cut. Where's Fukuyama's analysis of that tax cut?

As for tax cuts being self-financing, they have shown that to be the case. Revenues poured into the Treasury between 1982 and 1989, doubling from $500 billion to over $1 trillion. In 2004, the economy grew an astounding 6.4%, due to Reagan's economic policies, helping Reagan win 49 states in his re-election bid (He only lost Minnesota and I guess the other seven states that Obama says we have but hasn't visited yet). I've already shown that a large capital gains tax cut in 1997 preceded the balancing of the budget in 1999. Revenues also increased between 2002-2006 as the deficit that resulted from the dot com bubble and 9/11 was cut in half, yet no taxes were raised. The capital gains tax rate was cut even further from 20% to 10% or 15%. So how did Bush cut the budget deficit in half without raising taxes and without cutting spending and by cutting capital gains taxes, I ask? In fact, that was the height of spending on Iraq. By your criticisms of supply-side, that should not be possible. You can say that the economy was doing well and you would be correct and would therefore be validating supply-side economics, which grows the economy. Supply-side tax cuts do not create more tax revenue in a vaccuum. They expand the economy so that additional tax revenues are generated because of it. You have the cause right, but the effect wrong. The direct effect of tax cuts is not more revenue. That is a side-effect of the growing economy.

Don't believe me on the effect of capital gains tax cuts? See here . Reducing the capital gains rate from 20% to 15% somehow resulted in a doubling of revenue to $110 billion. Note the part about the rich paying a higher share than ever. Every time we have a supply-side tax cut, the share of taxes paid by the rich goes up, which I'd think liberals would support.

In 2006, things began to go south as Clinton's real estate bubble began to burst. With Democrats in control of Congress, though, the only thing that got passed was a demand-side tax cut that I predicted would do nothing for the economy. And I was absolutely right. I'm sure you remember I predicted that. With Democrats continuing to hold Congress into 2009, the odds of a supply-side tax cut are near zero. If Obama gets in office, we'll see how his tax increases strangle the economy.

So, history does match theory. When taxes are cut, revenues rise because of a growing economy. The budget doesn't always balance, but much of that has to do with spending.

How strong or weak was the economy that Bush inherited from Clinton? Check out the link that Alcyone posted here earlier. Scroll down a bit and you will find a graph showing how the American economy has been doing on average during the last forty years, in terms of federal outlays, revenues and deficit, between 1968 and 2008, as percentage of GDP. You can see from this graph that the American economy was really exceptionally strong during the Clinton years, far stronger than during any other part of this forty-year period. By contrast, America was really very much running a deficit during the Reagan years. As for the deficit/surplus graph, Clinton inherited a bad deficit, but during his term the deficit was eliminated and turned into a strong surplus. Take a look at the graph. It shoots upward like an arrow almost all throughout the Clinton years. Doesn't it show how magnificently strong the American economy was when Clinton was President?

And look at what George W. Bush did to the economy. No, he didn't leave it in the worst shape it has been during the last forty years, if the estimated figures for 2008 turn out to be correct. And that is a big "if" indeed. Chances are that the economic situation will be a lot worse than what was predicted when this graph was made. But in any case, no President has done so much damage to the economy during the last forty years as George W. Bush, if we think of how strong the economy was when he took office and how much it deteriorated in terms of deficit during his Presidency. Again I'm reading this from the graph.

So think again, Roger. Yes, the dot com bubble started during the Clinton years. It was, all things considered, a somewhat bad bubble, but not a historically bad one. It wasn't in any way comparable to the housing and banking bubble we are seeing now.

Or if you think it was, Roger, why don't you find statsistics proving that it was?

Ann

So let me explain what I mean. I mean that even Democrats automatically start talking about tax cuts as soon as they need to fix the economy. Never mind that a tax cut most definitely risks leading to decreased revenue and less money for things like pensions and Medicare and other kinds of support and help to people who don't have enough. But those who already earn a lot of money will certainly benefit from tax cuts for the rich. Or, as Jesus said in Matthew 25:29:
That is how tax cuts for the rich works. But today even Democrats think that tax cuts is the big Solution, with a capital 'S', to the problems of the economy.

Ann

You keep blaming Clinton for everything that went wrong in the economy - indeed, you put all the blame on the Democrats. So explain this to me. When George W. Bush was elected, he had a solidly Republican Congress to work with. Why couldn't he fix any of the problems that you insist that Democrats had created all on their own? Or are you telling me that Republicans are so powerless, so paralyzed, that they can't do anything at all to rectify what the Democrats messed up, even when they, the Republicans, at least nominally had all the power?



What, you mean I should do something about the situation just because I know what the problem is and just because I have been elected to deal with things?

Ann

Here is an interesting link to a Fox editorial on last Thursday's vice presidential debate. The most interesting part of it to me was the allegation that FactCheck.org failed to comment on several of the allegations from Senator Biden. It makes me wonder how non-partisan FactCheck really is, or if Fox News is that biased towards McCain and Palin. If the latter is true, it would be the first time I've noted it, since the commentators on the network spend much of their air time telling McCain what he's doing wrong.

Ann, once again, you continue to slam the Bush Administration with absolutely nothing to back it up. You immediately discount the disappearance of trillions of dollars of wealth as all the major stock indices lost anywhere from 40-60% of their value in 2000 and expect it has no effect on the economy. That is a remarkable statement to make. You claim tax cuts were responsible. Well, where's the proof?

Here's the GDP by quarter as you wanted to see:

GDP By Quarter

You'll see that in 1999, GDP growth was rather astounding. First, the dot com bubble was reaching its height and was just about to pop in early 2000. Second, growth was being fueled by a capital gains tax cut, which I noticed you've ignored as well since it conflicts with your theories. That capital gains cut, by all your theories, should have blown holes in the budget and would cripple growth. Yet between 1997 and 2000, we had pretty decent growth.

Fast forward to 2000 before George W Bush took office.

The first quarter had 1.01% growth.
The second quarter had 6.28% in real growth. The bubble popped in the second quarter with the height of the stock market in March 2000.
The third quarter growth was -0.46%. Yeah, no effect from the dot com bubble here since we only lost nearly 7% annualized growth in one quarter.
The fourth quarter growth was 2.08%, a slight recovery.

Now let's go to 2001. Bush took office in January 2001 but his policies were not implemented until October of 2001 since government fiscal years run from Oct. 1-Sept. 30. So in Jan-Oct. 2001, we were operating under Clinton's last budget.

The first quarter showed -0.49%. Again, no measurable impact from the dot com bust, right? You can't even blame the Bush tax cuts since they weren't even voted on until the end of May, more than midway through the second quarter.
Second quarter showed 1.23%. A slight improvement, but still pathetic compared to the 6% quarter we had just as the bubble burst.
Third quarter showed -1.41% decline in real GDP. Hmm, what happened in the third quarter? A couple of planes crashed into a couple of New York buildings and another into the Pentagon, killing 3000 people and crippling the nation's transportation industry as over a million jobs disappeared. According to you, this was due to Bush economic policies and not Osama bin Laden. But wait, Bush's policies had only started to go into effect, a few weeks after 9/11 and hadn't had time to work yet. The third quarter encompasses July 1-September 30, while Bush's economic policies took effect on October 1.
Fourth quarter recovered to 1.58%, which encompasses Oct-Dec, where Bush policies took effect on Oct. 1. It seems a recovery is underway from the hit we took from 9/11, a reversal of 3% from the previous quarter. One quarter by itself is not a trend, but subsequent quarters show an increasing recovery.

From the data I see, it's pretty plain that the dot com bubble bursting had a significant effect on the nation's economy that you simply blame on President Bush, but HE WASN'T IN OFFICE YET. Still think the dot com bubble was just some minor thing where a couple trillion dollars here or there make no difference? Where's the roaring economy you claim Bush inherited from Bill Clinton? Between third quarter of 2000 and third quarter of 2001 under Clinton economic policy, the economy grew a "staggering" 0.59%.

Once again, you exonerate the Democrats from the current financial disaster without a shred of proof. You also claimed Bush had a solid grasp on Congress during his term. Well, let's see if that's true. In 2001, Senator Jim Jeffords (VT-I) jumped ship on May 30, 2001 and turned control of the Senate over to Tom Daschle and the Democrats. Democrats held a 51-49 effective (including Independent Jeffords) majority whereas before the GOP held nominal control with a 50-50 margin with only Dick Cheney casting the tie-breakers. Nope, no solid control there. In 2002 elections, Republicans gained two seats and took control of the Senate with a razor-thin 51-49 margin, far shy of the 60 votes needed for solid control due to Senate rules that give much control to the minority. In 2004, the GOP won four seats in the Senate to have a 55-45 majority. That's a decent majority, but still not enough to stop filibusters. It was during this time that Christopher Dodd and company killed McCain's bill that would have reformed oversight on Fannie Mae/Freddie Mac. The bill passed the House but failed to reach the floor of the Senate with Majority Leader Bill Frist knowing the bill would be filibustered. In 2006, the GOP lost control of both houses of Congress.

So, you postulate that Bush had solid control of Congress. By my count, he had a minority in the Senate for half his eight years, a minority in the House for 2 years, a razor thin majority in the Senate by 51-49 for 2 years, and decent control of 55-45 for 2 years. Again, your accusations hold no water, especially since he had a minority in the Senate in most of his first two years in office, contrary to your claim that "When George W. Bush was elected, he had a solidly Republican Congress to work with." Wrong again. A 51-49 Democrat majority in the Senate doesn't qualify as "solidly Republican."

I also took a look at the House majority in 2001. Republicans controlled 222 seats (incl. one independent), Democrats controlled 212 seats (incl. one independent), and there was one vacancy. The GOP had basically a five seat majority in a body with 434 seats occupied. Again, "solidly Republican" it was not.

As for Bush having a terrible economic record, let's take a look at this piece from the Wall Street Journal:

Bush Has a Good Economic Record