Gov. Pawlenty announced his short-term budget cuts yesterday (MPR). Local impact? Nlfd News says: Northfield to lose $356,000
Figures released today by Gov. Tim Pawlenty show Northfield’s anticipated Dec. 26 aid payment will be $356,000 short of what city leaders expected… The governor’s decision reduces the amount Northfield will receive next week by a little more than 4 percent — from $1.56 million to $1.21 million. It’s unclear how the city will deal with the unallotment. The city is required by law to balance its annual budget.
Today’s editorial in the Nfld News: Gov. Pawlenty, give back our money
Taxpayers are not legally allowed to tell the state that they didn’t make enough money this year to pay their taxes, so why should the governor be allowed to use essentially the same argument? … And while they’re at it, perhaps legislators should consider ending the governor’s authority to unilaterally take money away from our communities through unallotment.
Sen. Kevin Dahle blogged about the impending LGA cuts earlier this week:
If the Governor is set on using LGA to fill that gap, I hope he makes proportional cuts that will allow cities and counties to still receive badly needed checks this December instead of a blindsided approach that leaves our local governments reeling.
Seems to me that Pawlenty handled it reasonably well, especially in his sparing small towns and small counties from the short-term LGA axe… as well as military, veterans, K-12 education, and public safety (press release). I saw Northfield resident and Minnesota Association of School Administrators (MASA) Executive Director (and blogger) Charlie Kyte at GBM this morning and he agreed.
Besides, we’re not in such bad shape here in Northfield. City Finance Director Kathleen McBride commented here on Locally Grown back in early Dec when I asked her about City’s vulnerability to further cuts:
We have already received notice of our 2009 state aid amounts. The dilemma is what the potential cuts could be and when they would be made. It is possible that the governor – and the legislature could “un-allot” 2009 aid in 2009. This would cause local governments to have to make mid-year budget reductions.
The City does have a $722,000 “revenue stabilization” reserve for this very purpose. This at least allows us some wiggle room should the cuts occur suddenly.
Rep. David Bly blogged about the State’s BIG budget problem earlier this month. He alerted me to it via email:
In my most recent post I talked a bit about the budget crunch we are facing at the State level, I encourage constituents to weigh in on suggestions for the resolving the budget problem. It occurred to me that Locally Grown might be a place to generate some discussion. I do genuinely want to hear ideas from those who are interested in offering them. The $5.2 billion short fall will not be made up by using one approach or by a simplistic solution and the more ideas we have to work with the better.
Sen. Dahle makes a similar plea in his Thursday blog post.
We’re planning to have both Rep. Bly and Sen. Dahle on our radio show/podcast in the next two weeks, so now’s a good time to start the discussion.
How would you balance the State’s short- and long term budget problem?
The history of Enron, according to the documentary by the same name, is one of capitalists running amok. Had there been meaningful government oversight, such as stopping their speculative rather than actual accounting practices, Enron would have either prevented itself from its muck up or it would have been stopped at an early point.
I love a free market with honorable marketeers. The honor code is incompatible with capitalism.
Who was it that was spiking cigarettes with nicotine, to boost addictions? That’s free market at its best.
Jerry -- if you want to define Capitalists as people who derive most their income by lobbying for government contracts then I am all behind your being against them. But that has little to do with free markets. Free markets are those where sellers choose “freely” to sell, buyers choose “freely” to buy and prices are set “freely” between the two. In the case of energy, “sellers” are not allowed in to compete (utility), “buyers” have to buy at “prices” set by fiat. In the case of Enron, the government was supposed to oversee the process but was bamboozled by hucksters.
Cigarettes are allowed to be freely marketed and sold because of the tax revenue. Interestingly, as an aside, Robert Bork was defeated as a supreme court justice by large infusions of money to liberal groups from the tobacco lobby. He had ruled in Puerto Rico that the first amendment did not apply to advertising gambling because if a community could ban gambling itself then it would stand to reason they could also ban gambling advertising. The cigarette companies were horrified that this ruling could be seen as analogous to their operations.
Peter:
You say:
Are you serious? Among rich countries the US is probably less in love with socialism than any other.
Is any theory not “flawed”? And what brand of socialism to you refer to as “it”? Or are all socialisms, from Scandianavia to North Korea, essentially the same?
Seems to me that all countries have to choose, in practice, some blend of theories that works as well as possible for them, even if “flawed.”
Paul Zorn,
I should have added “recent love affair”. I refer to socialism as to what happens in Europe. North Korea is communism which is a fascist form of socialism.
I don’t care for either of them, because they both have too much government power to any degree or another.
Jerry,
The difference between Enron and the government is, that as a consumer you have a choice, not to buy in to Enron or can take Enron to court. Especially if you’ve been miss treated or an illegal act has been committed. Try that with the government.
Paul Zorn,
I should have added “recent love affair”. I refer to socialism as to what happens in Europe. North Korea is communism which is a fascist form of socialism.
I don’t care for either of them, because they both have too much government power to some degree or another.
Jerry,
The difference between Enron and the government is, that as a consumer you have a choice, not to buy in to Enron or can take Enron to court. Especially if you’ve been miss treated or an illegal act has been committed. Try that with the government.
David: You reinforce my position.
If capitalism is a “free market”, cigarette companies spiking their products and concealing that fact is taking unfair and hence unethical advantage of buyers. This is kin to adding cocaine to sodas. It’s the government’s role, socialist or not, to put restraints on businesses so the public is not taken advantage of.
If Enron was supposed to have government oversight and the gov’t was asleep at the wheel (or bribed, or anything else of the sort), then you seem to agree with me that had Enron been properly regulated, everything would probably had worked out fine. Because Enron was given virtually free reign, the public was grievously hurt.
I am a great fan of merit and accountability. I’d like businesses to thrive and fail based on their own cunning, but not if they commit fraud against the public. I want a minimum of smart regulations, I want a minimum of socialism, to let people be free to buy and sell, and to protect people from crooks in suits.
Ray:
Right on about needing to examine the price of government. You and I might differ some as to what that price should be, but I think we agree that the price should be clearly understood.
As you say, this price has tended to hover around 16% or 17% in recent years. (I’m not sure what those percentages refer to, but they seem to agree with the state’s own numbers.)
Is 16% or 17% a fair or wise price? If one sees government spending as purely wasteful (as I know you don’t, Ray), then of course any level is too high. But if you think that a lot of government spending is, or can be, investment in our public and private lives, then the calculation is different. Sure, there are such things as waste and fraud and abuse, and nobody I know supports them. But they’re not the whole story.
As for comparisons with other states’ spending, I have no reason to doubt your numbers:
Fair questions.
But isn’t it fair also to ask why Minnesota has long been and remains more prosperous and by most measures more successful than these two neighboring states — despite having had higher taxes here for many, many years? Maybe we’ve gotten something for the extra money.
Yah, you betcha. Begone, dinosaurs.
David H.: It’s a logical fallacy to assert that simultaneous events are causually related simply because they’re simultaneous. Yes, many aspects of the way we do big government now, including lobbyists and the military-industrial-privatized-security complex, are related to the increase in wealth, but certainly not all of them. Credit default swaps and sub-prime mortgages were not invented by big government, though private enterprise will always try to find ways to work the system to its advantage. Single-payer health care might result in more lower-paid bureaucrats tending the system instead of high-paid health care CEO’s.
Ray, you’re part right about the goose and golden egg, but you’re barking up the wrong tree. It’s not only the price of government. It’s also that there are things fundamentally wrong with the economy and what some consider the “free market.” It’s built on an incredible amount of waste. We use commercials and ads to convince people to want things they don’t need, and in this way, expect such an economy to continue to grow at a given rate, or Wall Street and the investors might take a hit. We don’t have a sustainable economic vision, but necessity is a mother, and eventually we start hitting the wall.
If we were focused more on a sustainable economy, it would not simply be a matter of controling government spending. It would also use taxes and other measures to encourage sustainability. If our economy served our needs more than it did the profits of a select few, people could all be employed and work shorter work weeks.
So you’re commenting more with the symptoms than on the disease.
Paul F, trying to have a country where a small group decides what everyone “needs” leads to chaos (as we are now in from promotion of housing) and ultimately civil war when people decide they need “a few things” the planners are not offering.
Absolute power corrupts absolutely. You and Jerry and Paul Z make arguments based on a fantasy of the honorable selfless government leader who is going to be an incorruptible steward of the nations resources -- yet history shows a 1000 times that this is pure fantasy.
The ideal is decentralized power structures whether private or public that check each other as much as possible. Not big government to regulate big business
Paul Fried,
You are right about this:
But who will be the arbitrator of what is excess and what isn’t. Who will decide on how much “stuff” every body needs.
In a way the current crisis is a punishment for some of the excesses created both by consumers and suppliers. The right “punishment” is to let the market re adjust itself by making people pay for their own stupidity.
The bailout does the exact opposite, which is wrong IMHO.
i prefer that the market takes care of itself then have a bunch of politicians try to interfere.
You seem to be agreeing with me here??
The question again is “Who’s vision”?
Didn’t we create a government “by the people and for the people” and fought a war so that we won’t be ruled by a central government, that is detached from it’s people and decides what is best for us??
Charging the government with the task of prescribing a “sustainable economy” goes back to the times when George III would decide what is best for us.
In the spirit of stimulating the economy…who wants to go party and spend the $ 13 granted to us by DC???
Source Washington Times
Other spending questioned by Republicans — but not considered on the chopping block — are $275 million for flood prevention, $200 million for public computer centers at community colleges and libraries, and $650 million for the digital TV converter-box coupons.
The list goes on: $1 billion for administrative costs and construction of National Oceanic and Atmospheric Administration office buildings, $100 million for constructing U.S. Marshals office buildings, and $1.3 billion for NASA, including $450 million tagged for science.
Then there is the $300 million for hybrid and electric cars for the federal government. *The funding includes golf carts for federal workers.*
I thought golf carts actually were electric??
David H: I wasn’t talking so much about a small group deciding, but with a huge and broadening gap between rich and poor, we have a small group of the wealthiest making most of the decisions anyway, so I don’t see it in such pessimistic terms as you do.
I know there is no ideal and incorrupt leader, but small government and decentralized power is also what anarchists talk about. If everyone just owns a gun, that’s decentralized power for you.
Truth is, some people are worthy of trust and power, and it’s OK to try to find ‘em and have them do the job.
In past times of emergency — consider WWII — FDR said we needed rubber and steel for the war effort, as well as all sorts of other things, including canned goods. He said we needed victory gardens, so folks grew them. Wasn’t such a bad idea.
It’s true that centralized leadership like that can miss the mark, especially as far as some local needs and resources go.
But the free market surely doesn’t do that much better at deciding what we need — sub-prime mortgages, home equity loans to buy stuff, credit default swaps, bundled mortgage-backed securities and ponzi schemes, for example. Gosh, a little more leadership and a little less free market can sometimes be a good thing.
Peter: I don’t think that sustainable economy means going back to monarchs. Thomas Jefferson warned that we should not privatize the control of money and hand it over to the banks; the constitution gives the power to print and coin money to the feds. Instead, we moved toward a private bank control, to the great benefit of some bankers, but not the common good of the country as enshrined in the constitution.
Ray: It strikes me that you apply the goose and golden egg analogy backwards.
I mentioned the growing income and wealth disparity in the US, which has a greater problem in that regard than Europe or Japan, so when I talk of raising taxes on the rich, you suggest that might be like killing the goose that laid the golden egg in order to get all the gold, as the story goes.
But killing the goose is what the rich have been doing to the middle class and poor:
Middle class wages have been stagnant or decreasing in the face of rising medicare and social security withholding and health care costs. The tax breaks of Repbulicans have not kept pace with the tax increases for the middle class.
Consumers are bombarded with new things to want and “need”: Cell phones for every family member, iPods, high speed internet and cable, and other endless gadgets. Consumers kept shoveling out the money, and companies and CEO’s kept raking in the profits in record figures. Then, in order to finance sending kids to college, or keeping up with consumtion, we get low-rate home equity loan offers to take equity out of our homes, so we can shovel more wealth toward the CEO’s, and toward expensive health care.
If there’s any goose being cut open and cooked, it’s the middle class.
If we want less and consume less, then gosh, the economy will go sour, and we’ll lose jobs. Some folks don’t want that to happen, so in the spirit of Dubya, they want us to go out and keep shopping. It’s not the answer. Our economy is fundamentally flawed and not sustainable.
For example, wind and solar power have their limitations, but if we could use more of them instead of coal and oil, we’d help Minnesota economy a bunch; we would not send so much cash overseas and to coal states, where their economies are not sustainable either, but addicted to our energy dollars.
In November, our total (one month) US trade deficit was smaller than what we spent on foreign oil in one month when the price per barrel hit its peak over the summer in July or June. Economic stimulus that builds renewable energy and shrinks the energy portion of the deficit would soon pay for itself, and it would not kill the goose. During Eisenhower’s time, when taxes were 92-91% on the wealthiest (not counting tax shelters and loopholes), businesses still thrived, and rich folks still bought mansions.
The suggestion that it would kill the goose seems a stretch. We know it’s not historically true. Are the rich that much more spoiled now, that they’d lose all incentive to live and work if taxed at a higher rate? Maybe it would take a while for the shock to wear off. I don’t know.
Paul F, you are against Ipods, enough said -- now I know your ideaology will never take hold
Paul Fried,
I wasn’t suggesting that having a sustainable economy means going back to monarchs.
My point was that we can not let government dictate what qualifies as a sustainable economy.
This should be left up to the people and their own decision making.
Sorry for the confusion.
Seems like the feds take Jefferson’s advice, because we sure do print enough money these days. Out of thin air but printing we do nevertheless.
Paul F the only people worthy of the type of power you describe and those the refuse to accept it.
Paul Fried,
Are you suggesting that this behavior is the fault of the rich?
Nobody puts a gun to anybodies head to participate in this wild consumerism.
People have take responsibility for their own actions. If one is foolish enough to make bad financial choices, why does it become the responsibility of those who are more frugal to bail out those who act foolish?
Since a lot of American on the left have such a love affair with Europe I suggest you read the following article of the failures of the “cap and trade scheme”.
Signs of things to come in the USA?
http://www.openeurope.org.uk/research/etsp2.pdf
Even the Europeans are starting to realize that an utopian approach to global warming will have disastrous consequences.
http://www.heritage.org/Research/EnergyandEnvironment/wm2168.cfm
Balance this….
http://blog.heritage.org/2009/02/12/true-cost-of-stimulus-327-trillion/
According to the CBO the real cost of the “stimulus bill” will be over $ 3 Trillion dollars.
I thought going in debt was not good??
I didn’t see anything in that link I didn’t like.
Anthony and Peter: FDR put the U.S. into massive debt to pull us out of the Great Depression. The idea was that money was needed in order to re-stimulate the economy. FDR’s critics believed that the U.S. would never recover, but we did and then some.
I don’t necessarily that Obama will create the same success as FDR. I only pose that the U.S. was in worse shape back then, and the “stimulus” idea worked great.
I’m eager to see more reliance on U.S. goods and labor. As a young adult, I used to think tariffs were a bad idea, favoring a more pure idea of capitalism. Now, seeing how corporations — after the mighty profit — send jobs overseas, and after understanding how easy foreign governments trump human rights, labor, environmental, and other safeguards, I’d like to see tariffs or their equivalent back in place, to favor U.S. workers. Capitalism is fine so long as human rights, etc., are not an issue. So I would reduce or eliminate tariffs if foreign governments raise their labor and production standards at least to U.S. levels. I don’t demand that foreign workers get paid identically to U.S. workers, but, for example, foreign workers should have 8-hour work days, truly voluntary and premium-paid overtime, mandatory breaks, etc.
Jerry,
You are correct about FDR. However FDR didn’t have to deal with Government obligations of medicare and social security.
http://www.fms.treas.gov/fr/08frusg/08guide.pdf
Despite on which side of the aisle you sit, this will hit all of us, if we don’t start to become fiscally responsible.
The stimulus bill is doing nothing more then to reward bad behavior.
We need political leadership on this issue, not pandering.
Peter,Jerry,
The stimulus package is nothing more than a drug addict (debt addicted economy) switching from private drug dealer (bank debt), who has gone bankrupt, to a public dealer (Gov debt), who will soon also go bankrupt, to sustain his unsustainable bad habit (excess debt/credit and over consumption).
The Total Credit Market debt as a percent GDP graph in the link below is all one needs to look at to understand the overwhelming economic issue starring us in the face!
http://www.highyieldblog.com/2008/09/total-us-credit-market-debt-versus-gdp.html
The expansion of public and especially private debt over the past 25yrs is what has driven the “American miracle” economy. It is nothing more than a massive debt pyramid scheme! Due to this debt I would have to say we are actually in worse shape today than in the 1930’s! This excess credit artificially pumps up the economy with stock bubbles, real estate bubbles, commodity bubbles. What’s next, the renewable energy bubble?
To work down this Credit/GDP ratio to a level of what we had in say the 1960’s for an economy that is 70% consuming will be nearly impossible. This ratio may actually increase as it did in the 1930’s as the economy contracts faster then people can pay down their debt. This growing mountain of debt can potentially crush what’s left of the so called economy.
It took 25yrs to build this bubble up and will take probably that long to wind it down, especially if Gov interferes by artificially propping up the debt monster longer with more stimuli, (trying to prop up over priced assets) as with the current package.
There are only 3 solutions to fix this problem and none are pain free. 1) Liquidation- the bankruptcy and foreclosure of all (banks, businesses, individuals) who are financially mal-invested! This is the CORRECT economic solution, which will clean out the mal-investment(e.g. bubble overbuilding), but the effects to the economy will be devastating (Greater Depression) and you will not hear one politician of any stripe advocate this. 2) Boondoggles- this is the current Stimulus Plan approach, it’s effects will be very short lived and only leads to the inevitable easy political solution which will be, 3) Inflation- this will be the way the Federal Gov will ultimately try to wash away all the debt with cheap monetized money.
I expect that all Governments of the world will do a coordinated currency devaluation within the next year or so. Much like FDR did in 1933 with Gold revaluation, which helped a lot, but did not clear out the mal-investment. Can you say $6/gallon gasoline! Good news though, now your depreciating home that was $300,000 in 2006 but fell to $200,000 in 2009 will be “worth” the new dollar price of $600,000. Ahh, the magic of the printing press in a fiat money system! Welcome to the United States of Zimbabwe!
Peter, you write, “My point was that we can not let government dictate what qualifies as a sustainable economy. This should be left up to the people and their own decision making.”
So you’re in favor of leaderless economic anarchy, so that monied interests that have the most power can exploit the middle class, the weak and the poor with impunity; and then you want to blame the middle class, weak and poor for letting themselves be exploited, rather than blame the exploiters?
That’s called the bootstrap shell-game (follow the pea under the nut shell, now you see it, now you don’t). When this game is played, it’s claimed that people should pull themselves up by their own bootstraps, and those who fall down get the blame, not only for their own irresponsibility, but for the moral vacuity of the greedy who helped them fall.
Mike: I don’t doubt that the drug addict analogy is spot on. And personally, I favor the bozos who got us into this mess going bankrupt. My understanding of history, however, is that the U.S. was in worse straits some decades ago and after FDR’s stimulus, we more than recovered.
Paul: You said in a few paragraphs what I said earlier in one word: Enron.
Peter M and David H, it seems to me that the two of you consistently offer a kind of distorted presentation of the idea of free markets and Adam Smith’s concept of the “invisible hand.”
As I understand it, Adam Smith believed that, in a well-functioning marketplace, you may have one blacksmith charging $10 for a hammer. If another comes along and makes one that’s just as good, and charges only $1 and still makes a profit, the first will either have to charge less, or change his production methods, or sell only to an elite market that drives BMW SUV’s and feels better about their lives if they pay $10 for a $1 hammer. If the guy selling the $1 hammer consistently makes crappy hammers, he’ll have to adjust too, or lose business. The invisible hand of the market will decide who stays in business, or who has to adjust to stay in business.
That is, in an ideal, well-functioning system where some multinational corporation doesn’t buy up all the hammer manufacturers, or where the government doesn’t contract to buy a thousand of them for $100 each. Adam Smith came from another time and economic world.
Adam Smith was not against taxation. In fact, he believed the rich should pay more because they had more disposable income. Adam Smith was not against government, or the need for taxation to pay for roads or government or walls, or a navy or army.
Sometimes so-called free market advocates claim that the government should not get involved to regulate, or to invest in infrastructure, or public education, or highways, or internet, etc. All should be left to the free market, because free markets have the invisible hand, like a kind of god, to guide them, while governments are always bad.
I don’t think Adam Smith would agree. But he’s dead, of course, and in light of that, I don’t think the free-market-alone approach makes sense.
If the human activities of government are always so bad, how can we place so much trust in the invisible hand of the market, which represents the human activities of people, all looking primarily after their own self-interests, or irresponsible urges, or desire for a thousand-dollar trash can, or a new corporate jet, or sub-prime mortgages and NINA loans (no income no asset) so that money and fees can be made off of selling loans to folks who can’t afford them?
Adam Smith never envisioned a world with multinational corporations, or lobbyists, or a military-industrial complex, or corporate boards of directors where other CEO’s vote in favor of giving a fellow CEO an obscene income, so that they can claim the market supports ALL CEO’s getting obscene incomes.
The free market Adam Smith described was not about getting rid of government, or the police force, so that everyone can just buy a gun and use bootstrap policing (pull yourself up by your own gun and bootstraps, and let the market for guns decide who lives, and which laws get observed or broken).
Granted, there are many things in corporations and government that need reform, but the free market alone will not solve them all. Adam Smith never believed that.
Paul Fried,
You are jumping to extremes or maybe I didn’t make myself clear enough.
Of course I am not advocating an economic anarchy. The real answer lies between economic anarchy and centralized market economy.
I made my point in connection with the current stimulus bill, which is noting more then rewarding bad economic behavior.
Yes, Jerry I agree that those that have created this mess should go bankrupt, that is exactly my point.
Where we do differ is and our perception on who is guilty and who isn’t.
Here is my list of bankruptcy candidates. Financial institutions for creating those nasty derivatives. Certain elected officials that put bad regulations in place that created this environment. People that bought houses and got in to mortgages they couldn’t afford.
Paul, In this case I agree with you that the big banks are an illegal trust and should be broken up with the leadership either jailed or told to head off to a tropical island. Obama is not doing this, he is re-inflating a popped tire and is afraid to get it on with the big banks. Not one person in the street that I have ever spoken with(Liberal or Conservative)agrees that the banking elite that got America in to this problem should be bailed out by tax payers and left in power. And yet to my knowledge not one national politician is railing against these bankers -- THAT MY FRIEND IS POWER! Obama is in a tough spot because to save America he really needs to become like Teddy Roosevelt or Buford Pusser and give some powerful elites a major walloping.
Jerry,
If the definition of FDR’s success is moving unemployment rate from 24% to 17% in 6 yrs, then no.
The GDP did grow from ’34 to ’37 but if it’s all nothing more than dollar devaluation and Gov deficit spending then it is not REAL growth.
Did his stimulus save the country from political disintegration, yes.
http://www.u-s-history.com/pages/h1528.html
http://themessthatgreenspanmade.blogspot.com/2009/02/real-gdp-since-1930.html
The reality is WWII is what ended the Depression. After the complete destruction of Europe and Japan, and 16 years of consumption deprivation of the US, and casting the US dollar as a reserve currency of the world, it is hard to see how we could not have succeeded in growing the economy after the war.
That said, History may not repeat it self but it sure does rhyme, for those who do not remember their history. I would say we are at about 1930 or 31 rhyming time scale. still need to hit bottom in a year or so, followed by a slow climb from the bottom.
As Nationalism , Stat-ism, and protectionism (“Buy American” in the current Stimulus bill)grow like it did in the 1930′s throughout the world ,I can also see what the final economic fix might be.. WWIII.
David H and Peter M: There was a brief piece in the news where Obama and Pelosi were talking about, but for now, ruling out nationalizing banks that were bankrupt. If they have more liabilities than capital, it could help to do this temporarily, but I don’t know why there has been so little interest: 1) fear that the move would hurt the markets more? 2) fear of Rush Limberger and conservative shock-jock backlash regarding socialism? Repug Lindsey Graham recently admitted that nationalizing bankrupt banks may be needed. Perhaps they are just taking a slow approach to an inevitable choice.
Meanwhile, in Europe, Tony Blair and others in the shadow of Iceland are talking about the need for a new economy based more on values (?) than on short-term profits. As Obama said, Americans now are just as willing and able to work as they were two years ago before the inevitable meltdown increased in pace. Maybe we need to rethink economies so they are more grounded locally (local, green energy for one), and more able to withstand the global economic storms.
And regarding debt: When banks loan money to 1000 people for homes, they don’t have to prove they have all the money in the vault at that second. They get someone to sign a mortgage, and they consider that mortgage a promise of money, like money itself. They create money out of thin air, out of signed contracts, which they sell. They charge money to do this. If the government were to compete with private banks, and if it were to collect interest, there would be less need for taxes, and more money to invest in needed infrastructure.
I disagree with the idea that governments creating paper money is necessarily a bad thing. And yes, I have seen the photographs of people in Europe, moving around wheelbarrows of money. I don’t think it has to come to that, or always does. If people are put to work and productive, stimulating the economy, this increases demand, and could offset the effects of decreasing the value of currency.
The currency in a country should not be based on how much gold is in a vault, but on how many goods and services need to be exchanged. Wealth comes from natural resources, but also from creativity, from intelligence and efficiency, from services as well as goods. People need currency in order to exchange the value of their work for the goods and services they need.
Mike Z: Yes, it was the war spending, but it wasn’t the war that saved the US from the depression. It was a few things: 1) It was much harder for anti-New Deal industrialists to oppose war spending (they would look unpatriotic). Some of them supported Mussolini and Hitler, but it was like the Dems after 9-11: You’d risk looking unpatriotic if you voted against giving Bush power to invade Afghanistan and Iraq.
2) Many industrialists profitted greatly from the war spending, so while high taxes were imposed, some still made off like bandits.
It was not the war, but the war spending, and GI Bill spending, and the spreading of wealth around, that got people back to work and stimulated the economy. The more industrialists and bankers profitted, the sweeter the harsh pill was to swallow.
We could do that just fine without a war, but we might have to arrest Rush Limberger and Anne Coulter on charges of treason first. They did it at Nuremberg to a German radio propagandist. We may have to do that to the right-wing shock jocks who are plotting the downfall of the US.
Mike and Paul: Paul’s assertions are my understanding of FDR’s economic success. WWII was not the reason why the U.S. recovered, but it was a factor among several other factors.
Nonetheless, it would be funny (for me) if Limbaugh and Coulter were tried for treason, albeit terribly unconstitutional. Which would make it very unfunny.
Paul Fried,
Why do you consistently refer to name calling when talking about the right?
By doing that you are no better then they are or at least the way you think they are.
Far left rhetoric is as least a damaging as far right rhetoric is. However this is a free country and you are entitled to your opinion.
This is a vent.
Here I am 50 years old. Working all my life with barely a sick day. Always play by the rules. Always pay my bills and mortgage on time…and here we are.
I bought my house two years for $ 315000 dollars. It is now worth $ 260000. Despite that my property taxes went up 12% this year alone.
Obama just gave away $ 70 billion dollars of our money to people that don’t deserve it. Bailing out people who maybe shouldn’t have had a house in first place, is just plain wrong.
I still need to get my three kids through college and every time I turn around more of my money is being taking away from me.
This is frustrating and certainly not the change I was hoping for.
Paul F.,
You have opened my eyes. More Gov spending is the answer. Looking at the chart below it would appear that we had 25% increase as a percent GDP in Gov spending in 1940 get us out of that crisis. Today, that would translate to $4.2 Trillion increase for say 3 years.
http://carriedaway.blogs.com/carried_away/images/economics/u.S.%20Spending%20And%20Revenue%20In%20Relation%20To%20GDP.GIF
My question then is why is Obama trimming around the edges with $789Bil when we need something like $4.2 Trillion? And if we are not going to spend it on weapons production then where does it go?
Also, you are right about increasing taxes to. In the graph you can see in charts US had huge tax increases in 1940 and 1941. We need to raise taxes more for all Americans. The treasury said that from 1939 to 1945 the number of taxpayers increased from 4mil to 43mil, with tax rates of 23% on $500 to 94% on $1million!
Obama, should have kept his campaign pledge to raise taxes.
How did people survive before 1929 when total Gov spending(Fed,State,Local) only totaled 6-7% of GDP?
It would appear that empire does have a cost associated with it ?
Paul F.,
You have opened my eyes. More Gov spending is the answer. Looking at the chart below it would appear that we had 25% increase as a percent GDP in Gov spending in 1940 get us out of that crisis. Today, that would translate to $4.2 Trillion increase for say 3 years.
http://carriedaway.blogs.com/carried_away/2003/10/us_government_s.html
My question then is why is Obama trimming around the edges with $789Bil when we need something like $4.2 Trillion? And if we are not going to spend it on weapons production then where does it go?
Also, you are right about increasing taxes to. In the graph you can see in charts US had huge tax increases in 1940 and 1941. We need to raise taxes more for all Americans. The treasury said that from 1939 to 1945 the number of taxpayers increased from 4mil to 43mil, with tax rates of 23% on $500 to 94% on $1million!
Obama, should have kept his campaign pledge to raise taxes.
How did people survive before 1929 when total Gov spending(Fed,State,Local) only totaled 6-7% of GDP?
It would appear that empire does have a cost associated with it ?
Paul,
So what I think you are saying is that the Fed Gov should spend more to pull us out of the economic crisis? I mean the current $790 Billion is on pare with what the 6% increase that FDR ran up from 1930 to 1939 as a percentage of GDP. The war increased spending to 33% from about 8% of GDP, a full 25% jump. that means we should probably have a stimulus package of $4.2Til, for three consecutive years.
Also, you are right about increasing taxes. Taxes were increased hugely in 1940 and 1941. The Treasury says that the number of taxpayers increased from 4mil to 43mil from 1939 to 1945, with rates going to 23% on $500 to 94% on $1Million. Obama is going to regret backing off of his tax increase pledge.
Americans forget that the cost of warfare/welfare Empire has its price!
Consistently? Not regarding all the right (Peter, you’re on the right, and I’m willing to say I’m sorry that I called you a “free market advocate” — if you want me to).
But regarding Coulter and Limberger, well, OK, I’m fairly consistent in my approach to them, and I admit I’ve called him Limbo (the Catholic in me?).
But I’m not always advocating Guantanamo for those two. Other prisons could work. I hear there’s one in Afghanistan.
Also, that part about prison and treason was a joke, meant to be funny in a dark and unfunny way (Jerry, glad you got it).
And Peter, I agree with you about home value and bailouts and college for the kids. I feel your pain. You’re reading my mail, as they say.
Paul Fried,
Your tone is definetly combative, which i personally don’t mind, because I just be combative as well.
I use the American Thinker, Heritage Foundation and others for sources. You prefer media matters, Huffington and moveon.org.
Those sources are not exactly “mainstream”.
It concerns me that some Republican politicans and media figures (not here at LoGroNo, but elsewhere in the country) are being combative and distorting the history surrounding the New Deal. Such things should be exposed.
Mike Z., besides the New Deal jobs programs and the war spending, FDR also made some fundamental changes in the way farmers dealt with the markets, and this also helped.
Steve Conn wrote a recent piece about Republicans trying to revise history regarding the New Deal. I know Democrats, at times, are also accused of this Orwellian revisionism, but Republicans seem to do it often lately.
Here are some clips on the New Deal from an article by Conn, who teaches history at Ohio State U, and who writes for the History News Service. This piece appeared in McClatchey Newspapers:
(Paul adds here: this dismanteling continued under Clinton, with the help of some of the folks in Obama’s administration; this should make Republican Free-Market fans glad, but should strike fear and concern in the hearts of the rest of us.)
That’s Steve Conn’s opinion anyway.
But if you’re a free-market conservative Republican, and if you believe that people should always pull themselves up by their own bootstraps, here’s another solution: As the real income of the middle class shrinks, and while the rich get richer at an exponential rate, the middle class should simply sell their homes, take a loss, move into trailer parks, and eventually tents, and put the kids up for adoption.
Maybe some rich family will adopt ‘em, and if there are a few kids left over, they can be hired help and mow the lawns.
While the richest 20% (and especially the richest 1%) is getting richer, the serfs should simply be responsible for themselves and downsize on their way to the poor-house. And then when folks talk about raising wages or shifting the tax burden, like Ray Cox recently here at LoGroNo, you can talk about killing the goose that lays golden eggs. Maybe that will hold ‘em off for a while.
That is, if you’re a conservative, free-market, bootstrap-loving Republican, promoting this kind of personal responsibility (in isolation from just as serious questions about an irresponsible society and system) is the sure way to arrange for the death of your party--don’t you think?
Instead of the stimulus package, Obama might have just admitted that 20% of the country owns 85% of the wealth, so the richest 20% should hire the other 80% to shovel their walks and wash their windows, and maybe donate some money for the building of Hoovervilles, so the workers can have a place to sleep at night. If you tell them it’s their patriotic duty, the rich and the free market may just take care of it. Ya think?
Oops, here’s the link for the Steve Conn article:
http://www.mcclatchydc.com/homepage/story/62401.html
Paul F,
I did mean to send 3 responses above, I thought the first two were lost to the internet ether, so I tried resending 2 new messages the best I could recall.
I hope you aren’t grouping me with Republicans? I have equal contempt for both parties. I believe they both work for the moneyed elite class.
I am not trying out Republican revisionism on FDR, just stating some facts from the time. Actually, I very much respect him for his leadership skills, and I am intrigued by the legacy of the monumental projects that New Deal had built.
However, unlike the 1920′s and early 30′s when Gov used to have balanced budgets, where we could afford to do a some deficit spending. Today its a different story where Gov,corporations (especially banks),and individuals are choking on massive debts. Inflating the debt pyramid (I posted above) with more Gov debt due our kids just doesn’t make sense if it is not going to have a strong return on investment.
My idea of a good ROI with the stimulus money would have been to build a literal interconnected smart Grid of HVDC power that spans the whole continent. HVDC can be buried underground. once in place the energy investors can build their renewable and conventional energy systems where they can get optimized operation and power can be directed to loads anywhere in the country. An REA upgrade if you will!
Bottom line, We can’t keep spending our way (both public and Private) to prosperity like we have been the last 25 yrs. Until we direct resources into a sustainable economy of savings and investment we will continue our decline.
Paul, you are correct about the concentration of wealth at the top. It peaked in 1929 just like it has today. The coming years of bankruptcies, regulations ,taxes and jail time(Bernie M. etc) should re balance the wealth spread. No matter what economic system your under, the serfs always take a beating!
Two points that have been bothering me in this discussion:
1) The term “free markets” is used in a way that concerns me. “Freedom” is really the goal. To the degree that citizens are “free” then “free markets” are a given. But just having “free markets” is not the same as “freedom.” Even if “freedom” is bad for ‘the economy’ then that is too bad for the economy. And “freedom” is very bad for a super socialist controlled state that makes economic choices for its citizens.
2) This idea of ‘did the New Deal work or not work’ sort of ignores the million other non-socialist non-governmental factors at work. Factors like ‘automotive technology,’ ‘telecommunications advances,’ ‘cheap land,’ ‘war created markets,’ ‘technology usurped through war,’ ‘immigration,’ and ‘ballooning demographics,’ etc etc.
Some clarifications:
1. I’m in favor of economic freedom, but I’m in favor of achieving it by limiting mega-corporations and monopolies and abuses of individual freedom as much as I am in favor of individual freedom. Oppression comes not only from socialist governments, but perhaps even more often by abuses of wealth and power. Lobbyists are hired to promote legislation that favors rich corporations, favors off-shore corporate headquarters and outsourcing of jobs, etc. This is not a simple free market, but the use of wealth and power to accumulate more wealth and power at the expense of many individuals’ freedom and the commom good.
Discussion of the common good has become hijacked by anti-tax advocates. The US wasn’t founded on the idea of no taxes. The founders were in favor of no taxation without representation. We fail to use our power and freedom to let our elected officials know about our priorities and opinions when it comes to taxes and other policies, so we get what others pay for instead of real participatory democracy.
Having some things paid for from public funds is a good thing, especially if there’s democratic consent involved: Highways, schools, single-payer universal health care, and at least temporary nationalization of failed banks can be good examples. This is not socialism, and it is a stretch to compare it to the restriction of personal freedoms in an oppressive socialist system.
Paul F, if you read Jefferson -- it appears we threw out the constitution regarding banking to our peril along time ago. Maybe the US citizens need to revisit some of these issues before the country is totally ruined.
For those who are interested David Bly and Kevin Dahle will have an open town meeting in the Public Library.
They are looking for input on the MN budget.
Be there.
When is the town meeting, Peter? I don’t see anything about it on their blogs.