patrick.net

If you don't understand how this illustration is different from Keynesian economics, then you need to sign up for an Econ 101 class at your local Junior College. I'm sure there is a program availabe near you and I guarantee it will be time well spent for you.

tatupu ... Your sarcasm is always deeply appreciated. Trust me, I have studied this flawed economic system. Little do you know that John Maynard Keynes was at one time universally considered to be a complete crackpot and his theories to be pure fantasy. I've said it before, I'll say it again: check out the Austrian School of Economics and see for yourself that Keynes is not the only theorist out there. I would appreciate you at least acknowledging that I'm not some drooling idiot just because I honestly question Keynes. I've been around long enough to know it is usually people that are very ignorant themselves that love to belittle others without considering what they have to say. And by the way, I took Econ 101 a long time ago. For your information, it didn't cover John Maynard Keynes and his method of managing the economy via pumping money into the the money supply. LOL

Ray--

I have checked out the Austrian School and I have no idea if you drool. Questioning Keynes is completely legitimate--I don't fault anyone who raises questions/concerns about the prevailing conventional wisdom. Calling Keynesian economics idiotic and completely wrong, and then starting a thread with a ridiculous hypothetical that isn't relevant at all, now that I have a problem with...

I'm surprised that your ECON 101 didn't cover Keynes though. That's usually pretty basic stuff--fiscal policy, the FED, a unit on the Great Depression, etc. It's been a while since I took it though--maybe it was covered in later classes.

imagine the father hires his two sons and the two sons buy some equipment and do farming and produce stuff that they sell and get some money ?

...and then you cross the international dateline. Would that then be a sin, father?

Ray, your example is good. You can't create wealth by spending money that isn't there. The magnitude of the deficits is beyond anything we've seen in our history. Obama promised a "net spending cut" with a "pay as you go" economic policy when he was campaigning for President. The speed in which he betrayed those promises makes clear that he had no intention of ever keeping them. He claimed that increased spending and deficits would spur economic growth and reduce job losses, yet the economy contracted and job losses grew during the spending spree.

Zippy ..... thank you. You've properly understood the point I was attempting to make. As I stated in my post, this was a very simplistic illustration, and meant to be so in order to drive home a point that as you state correctly "you can't create wealth by spending money that isn't there." Japan attempted this same failed Keynesian policy in a big way, and they continue to suffer as a consequence. Recessions need to play out, and when they do, they have a natural cleansing of the economy of the wrongs that would have been corrected had they been left alone. Constantly pumping paper money into an economy in order to prevent corrections only delays the outcome which will be that much more severe once the REAL correction hits. Then what will the Fed do? Pay people to borrow money ?

Furthermore, you can't have a sound economy until you have a sound currency. Unsound, fiat currency leads to inflation. Inflation is inherently dishonest. It steals purchasing power from people who have worked to earn it. A government that deceives and cheats the public is a government that is working against, rather than for the people. This is the definition of tyranny.

The government is grabbing more and more powers and taking on more and more unfunded liabilities. An economic crisis will embolden radical labor and political movements to organize crippling strikes, protests and riots demanding more government "help."

When international lenders are no longer willing to put up with our governments effort to devalue the dollar through stealth inflation and demand real payment - that's when the US government may decide its necessary to extract real wealth - including land, gold, retirement and saving accounts, businesses, perhaps entire industries - directly from citizens in order to keep the government and all its regulatory and welfare machinery running. Even worse, criminal behavior escalates in economic downturns. All of this courtesy of the US Congress.

Congress = none of us is as dumb as all of us.

Except you’re absolutely wrong. You CAN create wealth by spending money that isn’t there.

Absurd beyond belief, because the debts which created the "phantom" jobs must be repaid, one way or another. Jobs may appear, not unlike Ray's example of family members working, but again, it's all temporary until the debts need to be repaid. No different at all from maxing out credit cards to "create employment". So there is NO real wealth creation except in fantasy-world which you subscribe to. Incredible that some people here consider you to be a 'deep thinker'. Shows how little that they know..

Once again, historical facts DIRECTLY CONTRADICT YOUR ASSERTION HERE.
BTW there’s no such thing as a phantom job. If I borrow $300,000 and pay a crew to build me a house, I’m creating real jobs that are creating real wealth.

Congrats genius, you just described what gave us the housing bubble.

Keynesians would intentionally control the demands of goods and services to turn arround the economic situation. Money is just one of the means to do that, not the goal. If someone is spending money for money's sake, that's just an asswipe.

Okay how about this example? I borrow $5000 and pay a guy to build me a sofa. I default on the $5000, but the sofa remains. How was it a phantom job if it created actual wealth?
I admire your understanding of the concept of money but there is something you are missing.
the fact that wealth was created is OK but if you default then only half of wealth was created. its also unfair that you got a free ride, which means you didn't work. if lots of people do it, that means that many people are not contributing , which is not efficient for production. Thats the reason we want to avoid defaults as much as possible.
The best case scenario would be if you paid back the money by working ...example, you did farming and produced food for the $5000 and paid back. now we have a sofa and also food. you get the sofa and the workers get the food.

BTW , i think Keynesian is the best thing after the concept of democracy and freedom.

chanakya says

the fact that wealth was created is OK but if you default then only half of wealth was created

No, the dude I paid for the sofa has that money -- if he hasn't spent it yet then it's HIS savings now.

Savings is not wealth. Somebody lost their savings when I defaulted, but no wealth was destroyed by my default.

RayAmerica says

First of all, when money is pumped into the economy there is no “condition that 100% of the money must be spent” on USA products, so that is an absurd illustration.

That wasn't his claim and bringing the trade imbalance up is a form of fallacious argumentation.

Furthermore, once the jobs that were “created” they would disappear as soon as the influx of created money was used.

How is money "used"? Wallpaper? Kindling?

Case in point is the housing bubble.

Debt service is not money creation. The opposite, in fact.

Money, i.e. credit dried up for a variety of reasons and the bubble popped, leaving devastation everywhere, with more to come.

bank money wasn't the problem, lending it to people who could not repay the loan was. The idiocy allowed 2003-2007 is simply staggering. It wasn't until late 2006 until I inferred (from the Casey Serin story) that banks had essentially abandoned any form of loan underwriting and that, thus, prices were simply unsupportable.

The reason credit dried up was because prices were pushed past any form of affordability and there was no more loan underwriting left to abandon. The Greatest Fool had been found.

Using your logic, Bush was right to lower taxes, increase spending and give tax rebates back to taxpayers. What exactly did that accomplish? MORE DEBT and a fundamentally weakened economy.

Actually, yes, yes he was. The problem was the bulk of the tax cuts went to people who already had enough money. Also, no safeguards were in place to channel this increased buying power into constructive investments and not speculation in land and losses to rent increases.

You also fail to realize the importance of maintaining sound monetary policies. I suggest a study of the Weimar Republic as an example of a nation that has gone insane while running the paper money printing press. If you think the same can’t happen here, you are sadly mistaken.

We are far, far from Weimar. Weimar Germany might as well be on another planet for its applicability. Nearly every industrialized economy has a much greater per-capita external debt than we do now, often 2X.

I don't like the external debt and don't deny the US has serious fiscal issues, but AFAICT ruinous inflation isn't going to be one of them.

Troy says

Money, i.e. credit dried up for a variety of reasons and the bubble popped, leaving devastation everywhere, with more to come.
bank money wasn’t the problem, lending it to people who could not repay the loan was. The idiocy allowed 2003-2007 is simply staggering. It wasn’t until late 2006 until I inferred (from the Casey Serin story) that banks had essentially abandoned any form of loan underwriting and that, thus, prices were simply unsupportable.

It's amazing to me how these debates usually have a political axe to grind. You limit the problem to only the Bush administration. The real fact of the matter is that BOTH parties are responsible for what happened to the housing market. Way back in Clinton's first campaign in 1992, he repeatedly stated that it was his goal to have "all Americans own their own home by the year 2000." Clinton enacted policies that enabled Fannie & Freddie to process loans that were highly questionable (as far as historically accepted underwriting standards) to be packaged and sold to the unsuspecting secondary market. This amounted to an astounding 80% of all home loans. I'm not making this claim from a non-personal perspective, but from one that has been in this business for over 20 years. Underline this: BUSH continued these very same policies throughout his administration, inspite of what many GOPers like to claim. Space is too limited to cover all the other contributing factors, but when the head of the federal Gov't publicly sends a message such as what both of these presidents did, it is very much understood that the Fed regulators would be looking the other way. In practice via loan origination, processing and underwriting this is exactly what happened. Also, the message was given to Fannie & Freddie that the Fed Gov't would back them in the event things turned negative. The Feds obviously have done exactly that.

Troy says

Furthermore, once the jobs that were “created” they would disappear as soon as the influx of created money was used.
How is money “used”? Wallpaper? Kindling?

Read this: RayAmerica says

You like the “blood supply” analogy, I like the “circus comes to town” analogy that economist Thomas Sowell uses: A circus comes to town and of course along with it numerous people that work for the circus. A local diner notices that his business has significantly increased to the point that he believes an expansion is justified. He secures a loan from the bank and builds an addition to his diner and hires more staff to service the new patrons. Everything is going well until the circus pulls up stakes and moves to the next town. Suddenly, the diner experiences a severe decrease in business and is forced to lay off all of the new help he has hired. The owner still has the now unused addition which has increased his property taxes along with the new debt he owes to the bank.

Troy says

Using your logic, Bush was right to lower taxes, increase spending and give tax rebates back to taxpayers. What exactly did that accomplish? MORE DEBT and a fundamentally weakened economy.
Actually, yes, yes he was. The problem was the bulk of the tax cuts went to people who already had enough money. Also, no safeguards were in place to channel this increased buying power into constructive investments and not speculation in land and losses to rent increases.

Absurd beyond belief. You think Bush was correct in lowering taxes, expanding spending and giving money back to taxpayers. I would favor lowering taxes along with a commensurate cut in government spending. Lowering taxes and increasing spending is insane.

Troy says

We are far, far from Weimar. Weimar Germany might as well be on another planet for its applicability. Nearly every industrialized economy has a much greater per-capita external debt than we do now, often 2X.

The Federal Gov't is forced to borrow $2.5 BILLION per day in order to continue to operate. Along with that, since LBJ, every administration has raided the surplus from Social Security and Medicare and replaced those funds with special T-Bonds that cannot be sold by law, i.e. worthless IOUs. The current amount being stolen? $300 + Billion per year. We continue to expand the paper money supply. Federal Gov't spending and debt is expanding at an alarming rate with no end in sight. Millions of people are unemployed with a high percentage of those jobs gone forever. 70% of our economy is consumption (fueled by record debt) that supports basically low end Wal-Mart type wholesale/retail jobs. We've been invaded by millions of illegal immigrants that compete for a limited number of available jobs and are willing to work for far less than what Americans can afford to accept. Former Sec. of the Treasury Paul O'Neill stated back in 2002 that Federal Gov't unfunded liabilities were over $65 TRILLION. That figure has since been increased by independent sources to be as high as $100 Trillion! Quoting our national debt figure without including these unfunded liabilities is Ponzi economics at best. The Federal Gov't has run out of options. They cannot tax our way out of this because that will further collapse an already weak economy. They WILL NOT cut spending because the politicians have purchased political power via their spending programs. The only other option is to print their way out of this. That is EXACTLY what the Weimar Republic government did. I had a liberal tell me the other day when discussing this topic “we can just pass a bill that says we don’t owe anyone anything and the debt will be gone.” Brilliant. Americans never cease to amaze me as to their almost complete denial of the lessons that history teaches. You're the one from another planet if you think it can't happen here.

RayAmerica says

ormer Sec. of the Treasury Paul O’Neill stated back in 2002 that Federal Gov’t unfunded liabilities were over $65 TRILLION. That figure has since been increased by independent sources to be as high as $100 Trillion!

Most of this is unfunded liability is money to be paid to Medicare providers for their services. Clearly we need to drive the profit margins in senior care down significantly if we are going to honor the promises we've made. The profit margins enjoyed by the medical services sector are truly immense. That's going to have to change.

RayAmerica says

I had a liberal tell me the other day when discussing this topic “we can just pass a bill that says we don’t owe anyone anything and the debt will be gone.” Brilliant.

The mechanics of this bill will be nothing more than a tax rise. I consider every bond sold by the government a missed opportunity to tax someone.

You look at the trillions owed but don't see the other side of the ledger, the trillions owned. You mention (obliquely) the Greenspan commission's tax plan to pre-fund the baby boomer retirement by taking their excess FICA payments and reducing taxes on higher wage earners, but can't consider that the time is coming that we're going to have to honor the other side of this deal -- increasing taxes on wages above the FICA cutoff ($106,800).

The Reagan-Bush low-tax experiment didn't work. We've got to either cut government services to the masses or raise government taxation on the top 10% who own 70%+ of everything.

The masses have the vote but the elite own the media and most of the government.

It is a humorous situation.

RayAmerica says

I would favor lowering taxes along with a commensurate cut in government spending. Lowering taxes and increasing spending is insane.

The thing is, government expenditures fund jobs, either directly (Caltrans) or indirectly (like Medicare).

Decreasing government spending makes recessions worse as the jobs lost ripple out into the economy like a nuclear job-loss reaction. Southern California saw this when all the defense jobs in LA went bye-bye.

I don't have any solutions but I certainly admire the problem.

RayAmerica says

Space is too limited to cover all the other contributing factors, but when the head of the federal Gov’t publicly sends a message such as what both of these presidents did, it is very much understood that the Fed regulators would be looking the other way

Not to reflexively defend Clinton or anything, but FNM/FRD lending didn't strike me as suicide lending, either in the 90s or now.

The conforming loan limit was $200,000 in 1993, $214,000 in 1997, and rose to $275,000 in 2001 as incomes rose and money supply took off in the late 90s.

http://research.stlouisfed.org/fred2/series/M3

Where we really screwed the pooch was allowing people to borrow money -- ten trillion dollars from 2001 to 2006 -- they had no ability to repay. This was what should have been a fatal error. Somehow, the financial system is still standing, but there may be another leg down from here that the Obama crew won't be able to spin us out of.

RayAmerica says

Expanding the money supply significantly (note: the Fed no longer publishes their M-3 money supply index) diminishes the value of money in circulation. Back to the diner owner. The new jobs are gone, his business is back to normal, but he has debt to pay into the future. How is that significantly different from how this economy is being managed by our Keynesian economists?

Expanding money supply without increasing the value of the available goods and services does result in price rises.

But you're missing this key point of keeping productive people working and trade functioning. NOT expanding the money supply can have even more serious effects as jobs disappear in a nuclear chain reaction of joblessness. The early 90s saw a taste of this as money supply was held flat.

I don't know why M3 rose like it did in the late 90s, I think the rising trade with China and the reserve status of the dollar required a massive ramping up of money supply to fuel global trade -- everybody was making more things so everybody needed more money if prices weren't going to go into deflation.

Your circus analogy is too silly to criticize, really. Contrary to appearances, I'm no big fan of the Democrats (other than say Russ Feingold, Al Franken, and Howard Dean). But it takes Republicans to turn my government into a circus. This wasn't always the case, not until conservatives took over the Republican party in the mid-70s.

Troy says

Your circus analogy is too silly to criticize, really.

As stated, the circus analogy isn't mine. It is Thomas Sowell, a respected economist that does not subscribe to John Maynard Keynes' theory of economics.

Troy says

I don’t know why M3 rose like it did in the late 90s, I think the rising trade with China and the reserve status of the dollar required a massive ramping up of money supply to fuel global trade — everybody was making more things so everybody needed more money if prices weren’t going to go into deflation.

M-3 has exploded due entirely to the application of Keynesian economics, which is, if the economy slows, prime the pump with money to create economic activity. Japan did exactly that when their real estate and stock market bubbles burst and it had virtually no effect. Kenesians don't seem to understand a basic principle, that being, without confidence in the economy, it doesn't matter what the interest rates are,people will not borrow to expand their businesses. There is only one reason M-3 is no longer made public; they don't want to alarm the world markets by the exploding amount of paper money that is being printed. This is, by the way, a direct violation of the Bretton Woods Agreement of 1944 which established the American dollar as the world's reserve currency.

Troy says

RayAmerica says
ormer Sec. of the Treasury Paul O’Neill stated back in 2002 that Federal Gov’t unfunded liabilities were over $65 TRILLION. That figure has since been increased by independent sources to be as high as $100 Trillion!
Most of this is unfunded liability is money to be paid to Medicare providers for their services. Clearly we need to drive the profit margins in senior care down significantly if we are going to honor the promises we’ve made. The profit margins enjoyed by the medical services sector are truly immense. That’s going to have to change.

Do you have any concept how much $100 Trillion is? Yearly, the entire GDP of the USA is approximately $14 Trillion. How on earth can our obligations ever be met when one considers this staggering amount? The fact that it continues to grow at an alarming rate seems to be no concern to our Keynesian friends.

RayAmerica says

Do you have any concept how much $100 Trillion is? Yearly, the entire GDP of the USA is approximately $14 Trillion

You are a deeply, deeply confused person.

The $100T or whatever is on the infinite horizon, while $14T is an annual measure.

Here's a hint: over the remainder of this century we Americans are going to be paying $175 TRILLION on ground rent -- a commodity with a ZERO cost of production!

If current trends hold we will be paying NINETY TRILLION on defense expenditures over this period when the medicare trust fund goes into actuarial deficit.

You, sir, are an idiot.

RayAmerica says

The fact that it continues to grow at an alarming rate seems to be no concern to our Keynesian friends.

FWIW, I JUST SAID that medicare growth in costs is unsustainable by these numbers. With the boomers retiring and overheads what they are, maybe 20-30% of the economy will be driven by the health services provided to seniors. This is truly insane, unless you are invested in senior health care stocks!

Troy says

The $100T or whatever is on the infinite horizon, while $14T is an annual measure.

Troy says

You, sir, are an idiot.

I was using the illustration of the $14 trillion total annual GDP merely to point out the staggering amount owed for the federal government obligations. Had you READ what I posted and taken the time to think, you would see that is exactly the point I was making. As for me being an "idiot" that's your opinion. To refer to someone as an idiot because they don't agree with your take on things is a testimony of the type of person you are. I've been called worse things by better people than you.

Nomograph says

Don’t hold your breath. These guys get their ideas from fringe blogs and AM talk radio, not real life experience or historical precedence.

I've studied the Weimar Republic. Maybe you don't consider the lessons of Weimar to be "historical precedence." Funny, how you people know everything, we on the other hand know nothing but what we get from "AM talk radio." LOL

RayAmerica says

we on the other hand know nothing but what we get from “AM talk radio.” LOL

you already brought a mouthpiece of the Hoober Institute and his silly analogy as the state being a touring circus here. What else you got, moron?

Weimar Germany had strong labor unions that kept the wage side going in the wage-price spiral. They had reparations in gold and the actual foreign occupation of the Ruhr.

We may not be Japan, but we're certainly not Weimar Germany or Zimbabwe. As you sorta mention above, there is immense systemic risk that the trillions of US debt held in China & Japan will do bad things economically to us and our present cultural norms if not standard of living.

But the situation is not cut & dried. Nobody. Knows. Anything. Anybody who thinks they do is a moron, imbecile, or idiot, depending on their base IQ.

Note I use these terms of derision relative to Alan Kay's "Perspective is worth 80 IQ points" and not a clinical analysis of actual mental capacity, which at one point was defined as:

50-69 Moron
20-49 Imbecile
0-20 Idiot

RayAmerica says

out the staggering amount owed for the federal government obligations

This money is not "owed" at all at the moment. The future scheduled payouts are predicated on a future health care system as shitty as the one we have now.

$10T of your $100T number is straight-out Medicare Part D payouts. All current medicines will fall out of patent during this infinite horizon, yet we're going to be paying trillions and trillions of dollars to Big Pharma for our senior's meds? While the rest of the world has negotiated a fraction of these payments.

Big Pharma's main line items in their income statements are SG&A, shareholder profits, and taxes. R&D and COGS are fourth and fifth.

Medicare as structured will result in this nation becoming a combination National Security State and Elderly Care state. Something's gotta give here.

Troy says

you already brought a mouthpiece of the Hoober Institute and his silly analogy as the state being a touring circus here. What else you got, moron?

I'm a "moron" because I quoted Thomas Sowell, a recognized and respected economist that has authored dozens of books. I find it interesting that you resort to anyone that disagrees with your narrow views are automatically deemed to be a moron. Please name the books you've written so I can do a little more research to find out exactly what you are attempting to say. That way, I can compare your views with the “moron” Thomas Sowell. I’m anxiously awaiting your response with library card in hand. Thanks.

Troy says

This money is not “owed” at all at the moment. The future scheduled payouts are predicated on a future health care system as shitty as the one we have now.

Another blatant falsehood. FACT: Social Security and Medicare surplus funds have been stolen by the Federal Government since LBJ and replaced with special T-Bonds that, by law, cannot be sold. They are nothing but "IOUs." Interesting semantics but not factual. Nice try though. Furthermore, when we borrow $2.5 Billion per day, that money isn’t “owed at the moment? “ Uhh, it is owed over the term of the bond, etc. ….. what I think you meant to say is that it is not DUE “at the moment.” Thanks for another good laugh. This keeps getting better. Please continue to post. I love liberals …. they are so funny and such great entertainment.

Ray--

It's not really a falsehood. The "owed" money is actually a projection of how much revenue and outlays will be in the future. If the government simply removes the social security tax cap on the rich, much of that "unfunded liability" goes away. Poof.

RayAmerica says

Social Security and Medicare surplus funds have been stolen by the Federal Government since LBJ and replaced with special T-Bonds that, by law, cannot be sold. They are nothing but “IOUs.”

That's not how I see it. Sure, there's $2.5T in bonds in a filing cabinet, but those bonds represent ~25 years of FICA OVERPAYMENTS by wage-earning Americans. Funny thing, for most of these 25 years Congress has allowed the federal budget to grow with red ink, and since the wealthy earn most of the money (top 10% earns 70%) that means we have been under-taxing the wealthy by trillions of dollars -- essentially, the wealthy are the ones who wrote those IOUs to FICA payers.

That was the Greenspan Commission's plan. Overtax FICA payers. Lower taxes on the wealthy since they can invest it in more efficient wealth-creation than the middle class.

Soon, we'll be reaching the back-end of this plan, where taxes on the upper class have to be raised to start paying back the FICA payers' holdings of the national debt.

I fully expect every right-wing propaganda source that fills the excuse of your mind -- from the Manhattan Institute to the Hoober Institution, and their media repeaters like FOX and the WSJ Op Ed page (same thing these days, funny that) -- will begin squawking that the $2.5T owed to FICA payers is "money we owe to ourselves" and "we don't have the money any more".

We got a taste of this in Bush's failed attempt to scuttle Social Security in early 2005. We've got the money. Or more accurately, the top 5% of the country does. They own over 70% of the capital savings. They're good for it, but they literally own the media, fund the think tanks, university chairs, and have enough dupes like you to carry their water for them.

If the rich end up stealing this $2.5T from FICA payers, nobody is going to be laughing harder than I.

bob2356 says

Na, no way. It had to be trickle up economics combined with Keynesian activities.

You make good points about WW2. What WW2 also enabled the US to do was US big business to move aggressively into every corner of the earth. Foreign subsidiaries of US companies grabbed 20-50% positions in many economic subsectors in our allies, and resource conglomerates had a free hand to rip off natural wealth from the former colonies (kinda like the events in Avatar in some places). Install some junta, pay them 5% of the take, export the 95% back to the US for processing -- that's some mighty fine wealth creation. Vietnam was a fight to keep the most exposed part of the third world in the dollar bloc -- Walt Rostow was most explicit about this, if Vietnam fell to the communists then so would Africa and Latin America, and then where would big business be.

As for economic history of the late 20th century, I was coming out of college right into the post-Reagan recession. I said "f--- this" and just went to Japan, but indeed, the GUI revolution and follow-on internet boom did dramatically raise productivity. Combined with this was peak oil from the North Sea, lowering energy costs across the board, and the increasing integration of China and India into the first-world economy. In the 1970s and 80s to sell something nice required a domestic manufacturing plant to make it. The 90s saw the transition of this economy to China. Now if we want to sell something, we design it here and make it in China. This is much more efficient, at the expense of domestic jobs and wealth-creation, of course.

RayAmerica says

They are nothing but “IOUs.” Interesting semantics but not factual. Nice try though. Furthermore, when we borrow $2.5 Billion per day, that money isn’t “owed at the moment? “

You're talking about TWO DIFFERENT THINGS.

The $100T is UNFUNDED LIABILITY OVER THE INFINITE HORIZON. It is not a present debt, it is the ACTUARIAL SHORTFALL of EXPECTED EXPENSES vs EXPECTED CONTRIBUTIONS.

Last week you knew this:

RayAmerica says

Quoting our national debt figure without including these unfunded liabilities is Ponzi economics at best.

The federal budget deficit is indeed money the government owes somebody. For the most part, I think every dollar put into bonds should have just been taxed instead, but that is a different discussion.

Unfunded future liabilities IS NOT PRESENT DEBT. To fix the SSTF actuarial imbalance we simply need to eg. add a new FICA contribution for wage earners over $250K. This would increase the wealth transfer from the rich to the poor, but it's about the time the poor got a fair shake in this world.

Medicare has $40T or so of unfunded liability. We can remove $10T of this by just renegotiating the industry giveaway that the genius Republican Congress approved in 2003 (Medicare Part D).

The rest of the unfunded liability can be addressed by single payer, putting everyone into Medicare, like they do in Canada. This would result in 20% efficiency increase in health care delivery, moving primary health care out of the emergency room and into the GP's office. Ideologues like you will continue to fight this, but I hope eventually the fight for socialism here will win.

It is a tough battle.

RayAmerica says

a recognized and respected economist that has authored dozens of books

Paid to author dozens of books by the right-wing media machine. It's a great gig if you can get it. Anything coming out of the Hoover Institution, Manhattan Institute, AEI, Cato, Heritage Foundation, etc. is just utter crap -- where were these clowns when the Bush Economy was busy spinning itself out of control? They were the ones cheering this deregulation on!

The right gets good ROI on funding these propaganda mills, I'll grant you that.

I'm not Keynsian, nor am I an economist, but my own humble opinion is this. Just as most historians concur that too little was done to stimulate the economy during the early years of what became the great depression, we run the risk of going too far in the other direction, and either over stimulating, or mis-directing the stimulus.

My own personal anecdotal observations are that some of the stimulus that took place in early part of the decade seemed to work, in hindsight. The money went to the people, and most people spent it. Granted, it may have been on essentials, as fuel and food prices spiked about the same time, but at least it was spent. It the most recent round, much of that money paid down debt.

But when it comes to BIG stimulus, using the TARP to keep the system afloat, then reusing it to keep the auto industry afloat, and so on... we run the risk of spending beyond our means, even if the means of the federal government are virtually unlimited. There is a fine line between deficit spending and a ponzi scheme, and at the apex of this crisis, we certainly danced on that line a bit more than most Americans would be comfortable with.

Troy says

You’re talking about TWO DIFFERENT THINGS.
The $100T is UNFUNDED LIABILITY OVER THE INFINITE HORIZON. It is not a present debt, it is the ACTUARIAL SHORTFALL of EXPECTED EXPENSES vs EXPECTED CONTRIBUTIONS.
Last week you knew this:
RayAmerica says
Quoting our national debt figure without including these unfunded liabilities is Ponzi economics at best.

Once again (this is really getting old) you completely miss the point that I was making. I was NOT referring to "two different things" as you claim. AGAIN, I was making the point that when referring to our national debt, it is blatantly false not to include our liabilities that are unfunded, i.e. DEBT. This is exactly what former Bush Treasury Secretary Paul O'Neill said. At that time, O'Neill stated our actual national debt MUST include these off budget items and they amounted to a staggering $65 Trillion (has since been increased to $100 Trillion by independent studies). O'Neill's honesty on this issue was what cost him his job with the Bush administration. With all due respect, I think a former Treasury Secretary (that was fired due to his honesty) has a little more credibility than you.

Troy says

Unfunded future liabilities IS NOT PRESENT DEBT. To fix the SSTF actuarial imbalance we simply need to eg. add a new FICA contribution for wage earners over $250K. This would increase the wealth transfer from the rich to the poor, but it’s about the time the poor got a fair shake in this world.

Now we get to the real issue. Karl Marx would be proud of you. I love your statement "we simply need." How very typical of liberalism. Nothing like simple answers for complex questions. Wash't it you that stated "all we need to do is print money to pay off our national debt"" What liberalism never seems to consider is that there are multitudes of reasons why people are "poor." Many are poor because of their lifestyle choices. Many are lazy and simply want a free ride in life. Very few in this country are poor through no fault of their own. These are the ones that should be helped, not the dregs that are taking advantage of the system. Punishing productivity only leads to a less productive nation, thus, lowering the economic tide for everyone. When it comes to real life practicality, liberalism is a complete failure

RayAmerica says

When it comes to real life practicality, liberalism is a complete failure

You're very good at making sweeping generalizations, but not so good at backing them up with facts and data. What exactly are you calling "liberalism"? And could you provide some examples of how it fails?

Because others here have given very good examples of how the free market fails and how laissez-faire doesn't work.