Stocks today went down 500+ points! Ouch! The sad thing is I think this will become the new 'norm' for the next 5 years or so.

Can't happen! The good news is that it can't keep doing that for more than four weeks!

(Because the Dow would then be at 0, and while individual stocks can and have become worthless, neither they or the Dow Index can be less than zero; i. e., be a negative number. ..
yeah, I know that's not much comfort. ;) )

NEW YORK (Reuters) - Fitch Ratings on Tuesday confirmed the United States' top-notch credit rating and, in blatant disagreement with rival Standard & Poor's, gave a vote of confidence to Washington's deficit-reduction efforts. Fitch also kept a stable outlook on its U.S. AAA rating, less than two weeks after S&P downgraded the United States to AA-plus with a negative outlook.

The agency said, however, that it will revisit its decision at the end of the year. It threatened to slap a negative outlook on the rating at that time if lawmakers fail to implement the $2.1 trillion in savings that were agreed earlier this month or if the economy deteriorates significantly. (IOW, if it continues to do what it's doing now -- TT.)

....

Moody's Investors Service stands in the middle. The agency confirmed the U.S. AAA rating earlier this month with a negative outlook, threatening to downgrade it in the next two years for the same reasons Fitch raised -- if Congress doesn't fully implement the agreed $2.1 trillion in savings or if the economy falls into recession.

"S&P had a very specific basis for their concern, which was that there was no long-run plan for budget control," said Pierre Ellis, senior economist with Decision Economics in New York.

"Fitch is putting a little more faith in the common sense of Congress and the administration with respect to getting the budget situation under control," he added.
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Survey: How many of you have "faith in the common sense of Congress and the administration" - with respect to the budget, or in regards to anything else, for that matter?

According to the most recent Rasmussen poll regarding Congress,
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Tuesday, July 26, 2011
Voter approval of the job Congress is doing has fallen to a new low - for the second month in a row. Just six percent (6%) of Likely U.S. Voters now rate Congress' performance as good or excellent...
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So.... do six percent of you rate Congress favorably? More? Less?

Still seems kind of silly for Moody's and Fitch's to have far more faith in Congress than the American public has, doesn't it?

if the US debt is a result of our recent policies (which S&P's downgrade would suggest), why are countries throughout the eurozone experiencing similar struggles with exploding debt? the right would have us believe that Obama's to blame for the debt but i think it's actually the result of policies that have been in place for years. the reason it's exploded so much recently is the bailouts and the wars, if you askk me, not social spending. our safety net sucks in this country. if we were really spending ourselves into oblivion for social programs and entitlements, at least we'd have something to show for it. but we don't.

what do you think of the suggestion that the massive debt is a result of globalization and the move away from gold-backed currency? i'm no economist but it would explain a lot. i hate to sound like a ross perot wingnut or one of those austrian school guys, i consider myself an FDR liberal, but it seems to me they've got a point talking about fiat currency and the resulting ability to print money endlessly. they also have a point decrying globalization. i think that's an experiment we can pretty much say has failed.

if the US debt is a result of our recent policies (which S&P's downgrade would suggest), why are countries throughout the eurozone experiencing similar struggles with exploding debt?
Not *all* of them are, but I agree that far too many countries have adopted deficit spending as an addiction.  (One is too many.) Buying votes with social programs and entitlements, without facing the public anger of raising taxes, gets people re-elected, but it's terrible budget policy. The US is talking about raising the retirement age for Social Security to as high as 70; in Greece, it's 54. (!)

the right would have us believe that Obama's to blame for the debt but i think it's actually the result of policies that have been in place for years.
Much truth to that, but the *rate* of growth of the US national debt has increased sharply on his watch. See attached chart. (The bumps in the 1940s were from WWII.)  Note the skyward movement of the line during the past two years or so.

Please note that I'm not a huge fan of GWB, either, with several parodies to prove it. :) But looking at the numbers, the debt under Bush's eight years grew by a little more than $4 trillion, or about $5-600 billion/yr. (Not happy about that myself.) In fairness to Bush, Democrats controlled both houses of Congress during his term, and only Congress can approve spending. This is the same Congress that approved the 2002 Iraq War Resolution.

Under Obama, the debt grew by $3.5 trillion in two fiscal years, or about $1.75 trillion/yr. The current fiscal year has a couple of months left to run, but as of August 3, 2011, the gross debt was $14.34 trillion, a growth of about $4.4 trillion in a little over 2 1/2 years, continuing the $1.75 trillion/year rate of growth in the debt.

So since Obama took office, the debt has been growing about 2.5 - 3x as fast as under his predecessor - with *no apparent end in sight*, which is what particularly rattled S&P, IMHO.

Congress gets plenty of blame, but for the first two years of O's term, his party held not only majorities, but supermajorities, in both houses of Congress, meaning that he could essentially have passed any legislation he wished. What he did do -- cash for clunkers, first-time home-buyer credit, etc., barely made a dent in the recession, but added to the debt.

Another reason why I think some of the criticism of Obama is justified: Traditionally, long before next year's budget must be approved, the POTUS prepares his own budget and submits it to Congress, who can accept it as is, modify it a little or a lot, then send it back for Presidential approval or veto. Yet President Obama *never* submitted a budget proposal of his own this year: Not at the start of the process, as is customary, nor during the months-long wrangling in Congress. He just gave some ideas of the kind of things he wanted and the kinds of things that he would and wouldn't accept, but no actual specific budget made public or presented to Congress. It seems to say either that he has no specifics to propose, or that he's trying to avoid responsibility for the reaction to them or for the outcome. True leaders are willing to stick out their necks by presenting their ideas. Not doing so, IMHO, is not leadership, is not Presidential, and is why it's legit to fault the Pres here. YMMV.

(For the record, I find plenty of fault in plenty of Republicans. I'm not a Republican or a right-winger. I've been a registered Libertarian ever since I was old enough to vote.)


the reason it's exploded so much recently is the bailouts and the wars, if you askk me, not social spending. our safety net sucks in this country. if we were really spending ourselves into oblivion for social programs and entitlements, at least we'd have something to show for it. but we don't.
Yes to the bailouts and wars. But in fiscal year 2010, Medicare, Medicaid, and Social Security were 43% of all Federal spending. I couldn't immediately locate and isolate out the figures for welfare, food stamps, subsidized housing, etc., but expect that it would push that to more than 50%.

By comparison, defense spending was only 20% of the total, even with the two wars going on.

As far as "something to show for it", that's exactly the problem with give-away programs: People spend the money, and it's gone. Money in IRA/401k, or with a private life insurance/annuity company,  may be invested in stocks or bonds of companies that actually produce something, or in CDs of banks, who then lend the money to companies who actually produce something. The SS and Medicare taxes paid in don't come anywhere close to covering the costs; they're heavily taxpayer-subsidized; and SS was in the hole from the beginning. FDR bribed older workers, who had paid *nothing* in SS tax,  to leave the work force and live on SS, to "create more job openings" for younger unemployed workers, and counted on the contributions by the latter to pay for the former.

It's always worked that way for SS. In contrast, with a private pension fund, 401(k), life insurance annuity, etc.,  you pay in, and when you retire, what's there is your *own* money -- not the taxpayers' -- plus whatever interest and capital gains your IRA or 401(k) might have made. And it belongs to *you*, not subject to the whims of Congress or of being bankrupted by Congress. It's been calculated that if every dollar we pay into SS over our working lifetimes were instead paid into our own IRAs, the amount of principle and the level of pension generated by the time we retired would be about three or four times what a SS recipient receives -- and the latter has no claim on any lump sum, unlike your own retirement plan. It's a Ponzi scheme, which would be illegal if you or I did it.


what do you think of the suggestion that the massive debt is a result of globalization and the move away from gold-backed currency?
Two different questions, so let's take one at a time.

i'm no economist but it would explain a lot.
I *am* an economist, and the part about gold *does* explain a lot. See our parody on the economic history of the United States, including the back-story of the disconnect from gold, and how the Fed and the switch from gold-backed to fiat currency were the root causes of most of our major economic ills. 

i hate to sound like a ross perot wingnut or one of those austrian school guys,
What's wrong with sounding like one of those Austrian school guys? The US became the world's largest economy under what were essentially Austrian principles, long before that school of thought was formalized. Much of our troubles stem from deviating from that general school of thought, usually to the Keynesian school (after John Maynard Keynes, upon whose ideas FDR relied heavily), namely, that the Gov should take responsibility for "fine-tuning" the economy by intervening in it, using deficit spending during recessions, and repaying the deficit during prosperous times. Aside from the objection about Gov trying to manage or micro-manage the economy in the first place instead of letting each of us manage our share of it on our own, even the Keynesians have forgotten, or ignored, the part about repaying during prosperity. Instead, spending and deficits seem to grow in both bad times and good, the vast majority of the time.

Great, short, easy-to-read, free e-book online, "Economics In One Lesson", by Austrian-school economist Henry Hazlitt, here. It answers a lot of your questions, and explains our problems, very thoroughly, much more than I can do even in this long-winded post.  ;)

i consider myself an FDR liberal, but it seems to me they've got a point talking about fiat currency and the resulting ability to print money endlessly.
Absolutely.

Creation of the Federal Reserve Board in 1913, with its ability to print fiat money endlessly, caused the boom of the "Roaring 20s". When the bubble burst, as they all do sooner or later, we had the Great Depression of the 1930s, the worst in our history, and much worse than the recessions that believers thought the Fed could somehow prevent.  (That's in the parody as well.)

they also have a point decrying globalization. i think that's an experiment we can pretty much say has failed.
Not sure what kind of "globalization" we're talking about here. Increased trade is always beneficial. Without it, you wouldn't have spaghetti. (Marco Polo brought it back from his expeditions to China.) People who object to trading with foreign nations rarely have a problem with Californians buying goods made in South Carolina (like Michelin tires, e. g.), or vice versa, yet many European nations are comparable to the larger states of the US in terms of population, economy, etc. Global economy increases competition and consumer choice, which is a win-win for consumers and for economies as a whole. Economic isolationism (high tariffs, trade barriers, etc.), usually termed "protectionism" because of the mistaken belief that it "protects" a country from the imaginary "threat" of foreign goods entering the country, actually stifles competition, choice, and efficiency. It was tried by many nations during the 1930s depression, which was global in scope, and it made things worse. It also leads to viewing foreign countries as "enemies", and as the cause of one's problems, which leads to war. (WWII).

As someone much smarter than TT once said, "War ends when countries decide that it's more profitable to trade with foreigners than to kill them."

Globalization of banking: International Monetary Fund (IMF, or "Impossible Mission Force" - how descriptive! - if you remember the TV show, "Mission Impossible"), international bailouts, etc. - meh. You're right that the experiment failed; I don't think it should have been tried, and would have predicted bad results. No more reason for a prudent country to bail out an irresponsible one than for the US Gov to take money from prudent taxpayers and corporations to bail out irresponsible citizens and corporations.

No objection here to private (non-Government) banks having international branches; just wish that they -- like all persons, corporations, and Governments -- would always act in a prudent and sustainable manner.

Sorry for the length of this post. They were excellent questions about complex issues, to which a quick answer wouldn't do justice. 

well, defense/security (including DHS etc.) is more than half of all discretionary spending. it's odd to include social security in those figures because we pay into that. it's not like a handout program like welfare. but we pay around as much on "defense" as the rest of the world combined. you have a hard case to make if you're going to argue that that's not a very significant part of the current problem, probably the main one.

the US became the world's biggest economy after world war II, under truman/eisenhower/JFK. i wouldn't call those guys' policies austrian, not by a long shot. basically, we had FDR and then new deal keynesianism was basically the default position until reagan, and from looking over the history books, it seems to have treated us pretty well. i don't buy austrian economics at all, i think they're right about fiat currency but only in the broken-clock-twice-a-day kind of right.

that's exactly the problem with give-away programs: People spend the money, and it's gone.

it's not just "gone." it goes to buy food, pay rent, etc. it goes back into the economy and helps to create more demand as the people that money's given to spend it in turn. if you want to make money disappear, turn it into a bomb and drop it on a wedding party in afghanistan, or make 1000 joint strike fighters out of it and have them sit on the tarmac for want of enemies or let hotshot pilots play "top gun" with them until they become obsolete and are melted into scrap metal.

also, and i hope i'm not coming off as combative, i'm just giving my side of things, i'm not a big obama guy, not by a long shot (i voted for him, but that's just because i thought he'd keep his promises  ;D ) but i don't think the deficit is a result of his being a big-spending social program democrat. i hear that a lot, but when i ask what obama spent the money on, i don't usually get a very clear answer. ok, yes, the stimulus and the bailout, but the bailout was an inherited program and the stimulus was basically a consensus decision, real shock-doctrine stuff. i thought bush was leaving behind a projected trillion-plus-dollar budget, that basically came out of the policy of printing money and giving it to the banks, hoping they would lend. obama picked up that ball and ran with it, and he added a stimulus bill as well, but from what i hear the stimulus was one-third tax cuts, and most of the rest was yet more money lent to the banks in the hopes that they would lend it out. there was precious little shovel-ready type programs, infrastructure programs, public sector initiatives, green energy initiatives, the sort of thing i was hoping to see happen. i wanted a new new deal, but the obama stimulus does not seem to have been that, at all. which is too bad because now it's being seen as another referendum proving the failure of keynesianism, but it's not keynesian! just like obama's failures are being seen as a failure of big government liberalism, but he's not a liberal! his administration is full of big money wall street guys, and his policies, when you look past the rhetoric, are scarcely discernible from bush's. he's another sign that the government is becoming inextricably interwoven with the corporate power structure. and you know what mussolini said about that, and that's a process that's been going on since the 70s.

I'm glad you replied, because I had some afterthoughts, but was reluctant to edit the previous to make it even longer.

First, there's some definite validity that Obama is in the wrong place at the wrong time, as almost 100 years of bad policy finally starts to boil over. It's sort of like what happened to Herbert Hoover. The Federal Reserve was proposed in 1913 by President Woodrow Wilson, a Dem. The vote in Congress was mostly along partisan lines: Dems for, GOP against. As stated, the funny money fueled a bubble, with stocks selling at ridiculous prices in relation to their earnings, and people mortgaging the family farm to get in (like in the dot com bubble of the 90s, or the housing bubble early in this century.)

Hoover had to slow the flood, because since those paper dollars were redeemable for gold, people began doing exactly that, as the paper declined in value. Which would have emptied the vaults eventually. But just like withdrawal from narcotics or alcoholism, the withdrawal from an artificially-induced "high" (lol) in the economy led to the collapse. Again, just like housing in the past decade. But because Hoover, a Rep., was in the hot seat at the time, he was blamed for the depression, which is kind of like blaming the rehab facility for your withdrawal symptoms when you stop snorting coke. The Dems have been running against Hoover for 80 years, and most people still seem to think it was his fault.

Obama definitely shares that stigma. You're right, he didn't do all this damage in two years. But judging from his speeches and his actions, he would have supported the flawed policies had he been around over the years. And he did nothing to change the course, and probably won't; just more of the same.

For example, Bush badly miscalculated the Iraq war. You're right that that, and the war in Afghanistan, are major factors in the overall (bad) picture. Let's skip for the moment the question of whether Iraq should have happened in the first place, because, e. g., then-Senator Hillary Clinton (Dem) voted for it. As for faulty intelligence, she admitted that she never even read the National Intelligence Estimate that was used to justify the invasion. She also refused to disavow her earlier vote during the 2008 primaries, and I think that hurt her badly. "I shouldn't have voted that way, but I relied on the White House info", would, IMHO, have helped keep her huge early lead in the Dem primaries. So, omitting partisanship.... both sides responsible for the ensuing fiasco.

Rumsfeld's famous quote on how long the war would last: "Six days, six weeks, probably not six months." And nine years later.... yep, still adding to the deficits.

*But* Candidate Obama promised repeatedly during the 08 POTUS campaign that he would have all troops home from Iraq within one year of his inauguration, i. e., by Jan. 20, 2010. Here it is August 2011, and 50,000 troops still there. Which costs billions in salary and benefits, current and future medical care at VA hospitals, not to mention the grief of lives lost. I'm disappointed that he didn't keep his promise, which would have lessened the budget and debt pressures tremendously. Both parties screwed up.

And Obama has expanded the war in Afghanistan. I agree that we can't police the entire world, and there's more of the budget problem. We agree on that. But O has to take some blame -- he could end it if he wanted to.

More bipartisan screw-ups: Democrat Franklin D. Roosevelt started the disconnect of gold from paper money, and Republican Pres. Richard Nixon put the final nail in the coffin, three decades later. (Also in the linked parody on econ history.) I call 'em as I see 'em, irrespective of party, and one POTUS from each party bears guilt for the switch to fiat currency. Hard to think of Roosevelt and Nixon as brothers under the skin, but on this issue at least, they were.

it's odd to include social security in those figures because we pay into that. it's not like a handout program like welfare.

See previous post. What we pay in from our paychecks isn't nearly enough to cover what the Gov pays out in benefits, for the reasons mentioned in that post. General tax revenues are needed, and the amount by which future benefits are expected to exceed future paycheck deductions is estimated at about $50 TRILLION dollars, dwarfing the budget and the deficit. So it's already something of a handout, and will become more so.

There is no "trust fund" for SS. They show it on the books, but the Gov uses FICA (SS) contributions for general spending, and pays benefits from general revenue + borrowing. That borrowing will have to increase tremendously, or SS or other taxes raised hugely, or else the money will have to be printed -- inflation. Another support for S&P's long-term downgrade. Same with Medicare, as described in the footnote to this much-shorter parody. It will bankrupt us, or require massive inflation, or massive tax hikes, or drastic cuts in benefits, probably with many doctors refusing to treat Medicare patients. or (E) all of the above.

the US became the world's biggest economy after world war II, under truman/eisenhower/JFK. i wouldn't call those guys' policies austrian, not by a long shot. basically, we had FDR and then new deal keynesianism was basically the default position until reagan, and from looking over the history books, it seems to have treated us pretty well.

One could just as easily say "in spite of those policies" -- more in a moment.

Under Eisenhower, inflation was near zero for three consecutive years, 1957-59, which is why it was used as a "baseline" for measuring inflation. The result of reasonable fiscal prudence.  When the numbers got too high, like approaching 200% of baseline, they just changed the baseline to a later time period.  Roosevelt's policies did not end the Depression, or even mitigate it very  much; a look at the attached chart shows that unemployment never got much below 15% on his watch, until the approach and entry into WWII.

One reason that we became the world's largest economy after WWII  is that the losers were wiped out, and smaller winners, like UK and France, were hit much harder, not only financially, but by damage to things on their own soil, which we didn't suffer.

After WWII, there was a tremendous explosion of pent-up demand from a public for whom things like sugar, butter, and auto tires had been rationed for years. Hence the huge growth under Truman. There was also tremendous growth of technology, which increases productivity per worker. I give JFK credit for motivating the moon program, even though he was probably more concerned with keeping up with the Soviets than with scientific knowledge. But the spinoffs from that, along with the growth of the nascent computer industry and other means of increasing efficiency, definitely contributed to the US' continued economic expansion.

Oddly enough, many who laud JFK as a great Pres regard space exploration as a waste of money "that could be used here at home". But without those satellites, how would we be having this conversation on a global Internet that couldn't have been invented? The computer on board the Saturn V that got men to the moon had 1k of RAM (memory). My Atari Pong had 2k. My current computer, which is six years old. has a million times as much memory as that Pong game, and two million times as much as the Moon vehicle. The need for smaller, lighter, faster, more powerful computers in future space vehicles (Shuttle, e. g.), contributed greatly to this progress, but of course it wasn't the only factor. Anyway, technology creates efficiency and prosperity.

So I tend to think how much richer the country, and all of us, would have been, and would be today, without the high taxes and Gov spending on social programs, many of which have been shown to be useless or even counter-productive. LBJ's Great Society, and increased involvement in Vietnam, started another huge round of deficits, borrowing, and inflation, culminating in the near-hyperinflation of the 1970s *and* a stagnant economy. Hardly ever before had both occurred at the same time, coining a new term, "stagflation", which cost Jimmy Carter his 1980 re-election bid. The high unemployment and inflation were both brought under control within only about two years under the more Austrian-like Reagan, compared to ten years of depression under Roosevelt, which might have continued forever without the war.

The economy grew well under Clinton's watch. But attributing that all to him misses two points: That the computer became affordable, not just for giant corporations, but for small businesses as well, and soon, for homes. Big increases in productivity, big savings on inventory management and even postage, etc.

Also, the 70% total growth under Clinton exactly equals the 70% growth in consumer non-mortgage debt during that period. (IOW, credit cards, installment loans to buy cars and boats, etc.) It was all financed with borrowed money. Then, when house prices started to rise sharply, consumers could refinance their homes at a lower interest rate than their credit cards charged, and pay off the credit card debt. We've seen how well that worked out in the long run.

it's not just "gone." it goes to buy food, pay rent, etc. it goes back into the economy and helps to create more demand as the people that money's given to spend it in turn.
Yes, of course you're right. But when soak-the-rich taxes are proposed, your statement is derided as the "trickle-down theory" - that the wealthy, who cause more employment for yacht workers and mansion builders and everyone else, leave only a "trickle" to the working and middle class builders of yachts etc. Economists call it the "multiplier effect", and in a reasonably free market, it tends to run at around 6 or 7 dollars added to the economy for each dollar spent on actual goods and services (not salaries of useless bureaucrats, featherbedding unions, or make-work jobs.) So soaking the rich will indeed lessen employment. (If you say, the Gov could hire the yacht workers, well, why pay the Gov to be the middleman? Much more efficient for the money to go from Rich Guy to Yacht Factory directly.)

But there's something that's even more productive of employment and prosperity, and that's investing in new or more efficient methods of production, new businesses, etc. Punishing entrepreneurs, successful people, savers, and investors is not the way to create more jobs. They don't tend to stick it under a mattress; they invest. But not if they don't know what new tax or regulation or health care cost or minimum wage is going to be imposed on them next year, or the year after, or....

This is why I see our relative prosperity as being *in spite* of most Gov policies, and  how much wealthier we all could have been under more restrained Gov policies. But since we can't "see" that, or put our finger on it, no one realizes exactly how much we've lost to fiscal imprudence.

I'm totally with you on the money spent on Korea, Vietnam, and other excursions against countries that did not present a genuine threat to the safety of the US. (But hey, look at all those jobs for top gun pilots and jet-fighter manufacturers! -- what was said before about useless or make-work jobs.)

and that's a process that's been going on since the 70s.
I'd say, since the 1940s. Eisenhower himself warned of the "military-industrial complex". He intended to say, "military-industrial-governmental complex", but his speech writers convinced him to omit the latter, so as not to offend Congress and cause strained relations.

One last point that I really should have made at the start (okay, two points):

1) S&P's downgrade applied *only* to US obligations with a maturity longer than one year. IOW, they did not imply that the Treasury note you hold that has a maturity of July 2012 will not be repaid. (That point seems to have been missed in most of the media and public hysteria.) They were worried about the long run, because the US issues bonds with maturities as long as 30 years, just like a typical home mortgage loan. But there's a difference: With the conventional home loan, you make payments every month of *both* principal and interest. It's mostly interest in the first few years, then the amount of each payment going to interest gradually decreases, and the amount going to pay down principal gradually increases. At the end of thirty years, your $100,000 mortgage (let's say) is fully paid, and you own the house free and clear.

Treasury securities that are issued with maturities greater than one year pay interest only, and only every six months. So in 2041, the Gov needs to come up with the entire $100,000 (plus that last interest payment) to pay you off. Is this difference clear? Ratings companies must estimate the likelihood of that 30-year stream of interest being paid, *and* that the entire principal will be available, more than a generation later. Lack of Constitutional restrictions on debt, and a trend that is going tn the wrong direction, could surely give pause before declaring a debt due in 2041 to be virtually certain to be paid in full, on time.

2) AA+ is still a *very* good rating. An AAA bond is thought to have only a minuscule chance of defaulting, and AA+, slightly more than minuscule. Most private corporations, States, counties, and cities would love to have an AA+ rating. As of last month, only 11 States had AAA ratings; 13 had AA+. So fewer than half the States have the US's AA+ or better. Counties and cities tend to have somewhat lower ratings, since they're drawing on a smaller tax base. Private corporations can't tax people at all. A rating of AA+ speaks well for a city's or corporation's general prudence. See attached chart, which I had to zoom up to 200% to be able to read without getting a headache.

So I see the "downgrade" as a wake-up call, a warning to get the house in order (and the Senate, lol), versus the ever-increasing deficits and debt, which if continued would indeed make one think twice before laying out 100k and waiting thirty years for the Gov to pay it back. Your thoughts?

I think this is long enough (or too long) for one post, so will address more of your second post at another time. (I won't be available all day Thursday.) But be assured that you're not coming across as combative. If two (or more) parties listen to each other's opinions, then cite their own, and give reasons why they differ, that's an intelligent discussion, and I enjoy it. if either party starts heaving personal attacks or insults at the other, it's not a discussion, it's a flame war. I'm grateful to have a chance to air these things, and hope you (and others here) find the discussion thought-provoking and worthwhile.

I hope you find time to read the e-book by Hazlitt mentioned earlier, as it refutes a number of fallacies of "generally-accepted" economic thought, and explains Austrian-type thinking in clear, non-academic language. No degree needed. :)

... i'm not a big obama guy, not by a long shot (i voted for him, but that's just because i thought he'd keep his promises  ;D )
You'd think by now, we'd have learned not to trust *any* politician to keep his promises, eh?

Good quote in footnote from a different parody, not yet mentioned in this thread, that rants against *both* parties:
"Vote for the man who promises least; he'll be the least disappointing." – Bernard Baruch (an immensely successful financier, and part of FDR's staff).

Still, from what I read, many Liberals and Leftists, who were O's strongest supporters during the campaign, are disappointed at the failure to keep the campaign promises. As mentioned, withdraw from Iraq, plus close Gitmo, etc. I've often thought how the landscape would change if politicians could actually be held liable for breaking or failing to keep their campaign promises (in the absence of some overwhelming and unforeseeable catastrophe - nuclear war or whatever). Sue them, boot them out of office, maybe jail for fraud. Obtaining a juicy Gov salary and benefits under false pretenses - how is that any different from obtaining food stamps under false pretenses? (i. e., by concealing your affluence)

Imagine: probably most pols would be kicked out within a year or two of election, and perhaps fewer mesmerizers would run, and more people who have a plan and intend to stick to it would run -- the latter being those who find it hard to get elected these days, because the winner must be "all things to all people". Your thoughts?

but i don't think the deficit is a result of his being a big-spending social program democrat. i hear that a lot, but when i ask what obama spent the money on, i don't usually get a very clear answer. ok, yes, the stimulus and the bailout, but the bailout was an inherited program and the stimulus was basically a consensus decision, real shock-doctrine stuff.
The bailout was not inherited:

"The Economic Stimulus Act of 2008 ... was passed by the U.S. House of Representatives on January 29, 2008, and in a slightly different version by the U.S. Senate on February 7, 2008. The Senate version was then approved in the House the same day. It was signed into law on February 13, 2008 by President Bush with the support of a majority of Democratic lawmakers, as well as a minority of Republicans. (So Bush went against his own party in approving a bill passed by the Dem-controlled Congress.) The law provides for tax rebates to low- and middle-income U.S. taxpayers, tax incentives to stimulate business investment, and an increase in the limits imposed on mortgages eligible for purchase by government-sponsored enterprises (e.g., Fannie Mae and Freddie Mac). The total cost of this bill was projected at $152 billion for 2008."

There's nothing in there that provides for action in 2009, after the change of POTUS.

"The American Recovery and Reinvestment Act of 2009, ... commonly referred to as the Stimulus or The Recovery Act, is an economic stimulus package enacted by the 111th United States Congress in February 2009 and signed into law on February 17, 2009 by President Barack Obama."

Supermajority-Dem Congress, Obama signs. I don't mean to be combative either, but what's inherited, or consensus, about that? Even more so:

"Both the House and the Senate versions of the bills were primarily written by Democratic Congressional committee leaders and their staffs. Because work on the bills started before President Obama officially took office on January 20, 2009, top aides to President-Elect Obama held multiple meetings with committee leaders and staffers. On January 10, 2009, President-Elect Obama’s administration released a report that provided a preliminary analysis of the impact to jobs of some of the prototypical recovery packages that were being considered."

I can't see that as "inherited". If anyone is thinking, "He inherited a mess, and this was a way to try to fix it",

"ARRA was very controversial and contentious during the legislative process because of differing viewpoints on macroeconomic theory, differing political ideologies, debate on specific spending projects, the sense of urgency to respond robustly to the recession, and the significant cost of the bill. The controversy continued years after it became law as the actual effectiveness of the fiscal stimulus was debated, and as the cost of it contributed to the U.S. national debt which ballooned during this time period and became a significant issue during the 2011 U.S. Debt Ceiling Crisis."

It seems that 200 noted economists signed a letter in support, and 200 other noted economists took out full-page ads opposing it. We have the luxury of hindsight: Short-term pop, as usual, then back to unemployment worse than when O took office, and debt much greater.

Also of note: stats on what the Federal Reserve Board's previous round of stimulus, "QE2" (second round of throwing fiat money into the economy) resulted in: A stock market rally that lasted a whopping *eight months*, from September 2010 to early May 2011. Then it skidded, recovered a bit, and as of this writing, the Dow is down about 1600 points, or about 12.5%, from that May 2011 high. And here's a shocker: It's at, or very slightly below, where it was in November 2010, when the Fed's QE2 purchases actually began. Need one say more? It's as said before -- it's like a shot of adrenaline (or a snort of coke or an injection of meth -- choose your poison) that creates a "high" (boost) for a while, then you come down, usually to lower than you were before. Which we are. Which is why trying it again is a bad idea. "Insanity is doing the same thing and expecting a different result." (author unknown)  -- more on that a bit later. 

Can he possibly escape responsibility for "Cash 4 Clunkers", which did just as above: It boosted new car sales while it was in effect, but when it expired, sales went back to *below* their previous levels (before C4C). People who might have saved up to buy a car a year later, rushed to buy then while they could get the handout, which also meant they had to come up with less cash down on their own. But that takes away the sales of a year later that those buyers would have made. In Econospeak, we say that the program merely cannibalized future sales. Again, focusing on short-term props vs. long-term solutions.

i thought bush was leaving behind a projected trillion-plus-dollar budget,
The Bush proposal for 2009 *projected* a $400 billion deficit. But as usual, almost *all* Gov estimates, by *both* parties, tend to rely on optimistic assumptions -- in this case, that the economy would improve in 2009 more than it did. (See below). Because of that, tax receipts were $600 billion less than projected, and spending (consistently underestimated by both parties) was $400 billion more than expected. So yes, total deficit of $1.4 trillion for fiscal year 2009.

The difficult question here is allocating blame - Did Obama's policies damage the economy, or cause it to grow less than anticipated, thus causing the shortfall in taxes? Or not?
Did actions by Obama and his party's Congress increase spending, or not? Surely there's enough blame for everyone  :) but we can look at a few things.

First, the 2008 stimulus under Bush was about $170 billion. The February 2009 stimulus, passed by Obama and the Dem supermajorities, was almost $800 billion. That's quite a leap - more than four times as much. And surely that $787 billion was not in Bush's proposed budget. How much might have been recovered by the short-term stimulus is hard to tease out, but overall, it's pretty clear that the money didn't do what it was supposed to, so it was a net increase in spending, and the struggling economy did not meet rosy expectations of revenue (Bush's people of course can bear some blame for the rose-colored glasses, too.)

But you make a good point about "the mess (Obama) inherited" -- *and* promised to fix.

I've been trying to get figures on the daily, monthly, or annual cost of the wars, but the Pentagon hides a lot of stuff under other categories. It's more than just the salary and supplies for the soldiers, etc. As mentioned, 50 years of present and future VA health care at Gov expense, which I'm sure is regarded as just part of DoD's overall budget, "medical care". But soldiers in the US don't tend to get sick or injured as much as those in combat. Plus - I DK this -- $500,000 death benefit to survivors of those killed in action. (They deserve it, surely.)

Best "official" figures seem to be about $200 billion/yr for all present wars combined. The factors above, and others, seem to justify doubling that to $400 billion/yr. Bringing all the troops home would then chop the current annual deficits by almost 1/4. (And probably cause S&P to restore the AAA, but that's a minor point. ) Per the Constitution, the POTUS is also the Commander-in-Chief of the armed forces of the US. And since none of these wars were declared by Congress (a violation of the Constitution right there - they're *all* unconstitutional), but rather by Congress delegating authority to the Pres to start them, why, then, the Pres can end them. Yet Obama has said we'll have a long-term presence in *Pakistan*, and although the cost of Libyan support is not large, he did that on his own, with no legal authority whatsoever. (He does a lot of stuff that way, and has said he'll do more -- if Congress doesn't do what he wants, he'll do it himself by Executive Order, a power which does not exist, despite having been used by POTUS of both parties for the past century.) So if Libya turns into a long-term involvement, that cost is on his hands. 

that basically came out of the policy of printing money and giving it to the banks, hoping they would lend. obama picked up that ball and ran with it,
As opposed to the "Change you can believe in" that he promised?

and he added a stimulus bill as well, but from what i hear the stimulus was one-third tax cuts, and most of the rest was yet more money lent to the banks in the hopes that they would lend it out. there was precious little shovel-ready type programs, infrastructure programs, public sector initiatives, green energy initiatives, the sort of thing i was hoping to see happen. i wanted a new new deal, but the obama stimulus does not seem to have been that,

No argument here that the O stimulus hasn't been successful. So without debating Keynesian economics at all, we have finally agreed!  8)

at all. which is too bad because now it's being seen as another referendum proving the failure of keynesianism, but it's not keynesian! just like obama's failures are being seen as a failure of big government liberalism, but he's not a liberal! his administration is full of big money wall street guys, and his policies, when you look past the rhetoric, are scarcely discernible from bush's. he's another sign that the government is becoming inextricably interwoven with the corporate power structure. and you know what mussolini said about that, and that's a process that's been going on since the 70s.

Again, not meaning to be combative, but it's Keynesian in that it advocated deficits to stimulate the economy, period. That is straight out of Keynes. IIRC, Keynes wasn't specific about shovel-ready jobs, since it couldn't be known in advance what expenditures would be most productive under his theories.

his policies, when you look past the rhetoric, are scarcely discernible from bush's.
A lot of us have been saying for decades that there's very little fundamental difference between the two "major" parties, only on the details.

Big Government = Big Spending, and that clearly hasn't been working for us. We went for 137 years with a very limited Gov, as advocated by Jefferson and others of the Founding Fathers, and it was inherently limited by the limited taxing power of Congress. The Constitutional Amendment making the income tax legal (it had previously been passed, but quite properly declared unconstitutional by the Supreme Court, because it was beyond Congress' defined powers) gave Congress a blank check on the wallets of every one of us. The passage of the Federal Reserve Act of 1913 gave the Gov the power to manipulate the money supply at will. Both of these measures were huge expansions in Gov power, and resulted in huge expansions in its size and spending.

To repeat, *both* parties have been guilty over the years. It isn't Bush vs. Obama -- Bush was a deficit spender who vastly enlarged Gov power with, among others, the USA PATRIOT Act (totally subverts the Constitution). It's "Limited Gov and Limited Spending" vs. "Big Gov and Big Spending".

Bush and his "neo-conservatives" are not at all close to true conservatives, who advocate fiscal responsibility. I think that this is what prompted the formation and strength of the Tea Party movement. Regardless of whether you agree or disagree with various of their ideas (I'm mixed), the term "conservative" had been co-opted by big spenders and Big Brother Government advocates. Hence the need to separate themselves from the neo-cons and parts of the GOP.

I stick with a return to the gold standard - which it seems you too do -- and a Constitutional amendment requiring balanced budgets. That's been the Libertarian Party's position since it was founded in 1971.

Sorry to have taken so long to get back to you. I like to do my research and have the facts ready before posting on complex tipics like this.
Also, I gave a lengthy reply to a question about the recent sell-off in gold (now recovering), at the US economic history parody, which took some time, and I intend to post more there when time permits, following up the explanation for the selloff (IMHO) with the explanation for the recovery. I DK if you were the commenter who asked, but don't need to know. It was a good question, and I enjoy writing about this stuff. I only hope that at least some people enjoy reading it.  ;)

Edited: Corrected length and timing of effects of Fed QE2. The mere announcement in August 2010 (same time schedule as the recent one this past week, August 2011, at Jackson Hole, WY - he should go in the winter; the skiing's good, and Grand Targhee is even better, if the pass is open) sparked the rally in anticipation, even though the actual buying of Treasury bonds by the Fed didn't start until November 2010.