FDR Spent Too Little; Obama Has to Spend More

That's the judgement of "economists" according to the Times.

More government spending beyond the planned $825 billion economic recovery plan, economists say, is probably in the cards as well. Roosevelt is seen as the father of big-spending government, yet the judgment of history seems to be that in the 1930s he was too timid.

“The lesson from the 1930s and early 1940s is that the government has to do much more than it has done so far, both to end the financial crisis and to get us out of the recession,” said Mr. Sylla of N.Y.U. “I do think the Obama team knows this and seems prepared to act on the knowledge.”

But if we're in a crisis triggered by excessive debt - homeowner debt, negative savings, budget deficits, trade deficits around 7% of GDP - how can adding more debt help? I simply lack the imagination necessary to get my brain around that conundrum. Peter Schiff still seems to be the only one making any sense, to me at least.

Barack Obama has spoken often of sacrifice...But apart from a stirring call for volunteerism in his inaugural address, the only specific sacrifices the president has outlined thus far include lower taxes, millions of federally funded jobs, expanded corporate bailouts, and direct stimulus checks to consumers...

What he might have said was that the nations funding the majority of America's public debt -- most notably the Chinese, Japanese and the Saudis -- need to be prepared to sacrifice. They have to fund America's annual trillion-dollar deficits for the foreseeable future. These creditor nations, who already own trillions of dollars of U.S. government debt, are the only entities capable of underwriting the spending that Mr. Obama envisions and that U.S. citizens demand.

In sum, our creditors must give up all hope of accessing the principal, and may be compensated only by the paltry 2%-3% yield our bonds currently deliver.

As absurd as this may appear on the surface, it seems inconceivable to President Obama, or any respected economist for that matter, that our creditors may decline to sign on. Their confidence is derived from the fact that the arrangement has gone on for some time, and that our creditors would be unwilling to face the economic turbulence that would result from an interruption of the status quo.

But just because the game has lasted thus far does not mean that they will continue playing it indefinitely. Thanks to projected huge deficits, the U.S. government is severely raising the stakes. At the same time, the global economic contraction will make larger Treasury purchases by foreign central banks both economically and politically more difficult.

The root problem is...America's GDP is composed of more than 70% consumer spending. For many years, much of that spending has been a function of voracious consumer borrowing through home equity extractions (averaging more than $850 billion annually in 2005 and 2006, according to the Federal Reserve) and rapid expansion of credit card and other consumer debt. Now that credit is scarce, it is inevitable that GDP will fall.

Neither the left nor the right of the American political spectrum has shown any willingness to tolerate such a contraction. Recently, for example, Nobel Prize-winning economist Paul Krugman estimated that a 6.8% contraction in GDP will result in $2.1 trillion in "lost output," which the government should redeem through fiscal stimulation. In his view, the $775 billion announced in Mr. Obama's plan is two-thirds too small.

Although Mr. Krugman may not get all that he wishes, it is clear that Mr. Obama's opening bid will likely move north considerably before any legislation is passed. It is also clear from the political chatter that the policies most favored will be those that encourage rapid consumer spending, not lasting or sustainable economic change. So when the effects of this stimulus dissipate, the same unbalanced economy will remain -- only now with a far higher debt load. [More]

Micro-failures

I have a feeling this kind of thing will be rather common throughout the land in the coming months.

Collection agency's bankruptcy leaves 5 N.J. Catholic schools $1.1M short
by Kristen Alloway/The Star-Ledger
Monday January 26, 2009, 6:17 PM

Five Catholic schools in New Jersey are scrambling to make up $1.1 million in missing payments after the agency that collects their tuition filed a bankruptcy petition earlier this month.

Tuition Program Inc. (TPI) filed a bankruptcy petition Jan. 12 claiming that it owed $3.6 million to 14 Catholic schools -- including three schools in Morris, one in Somerset and one in Middlesex counties -- and $867,000 to Wachovia, according to the document. The Livingston-based company had assets between $500,000 to $1 million, according to the filing.

So the families apparently paid their tuition, but most of it just...disappeared. The article provides no clue as to what really happened, but presumably the service was leveraging the tuition payments somehow and the investments blew up. While markets are hot, this kind of scam is easy to pull off, but no more. If you're using any kind of service to make payments, be wary. I wonder how safe the bill payment services banks use are?

When Will the Obamagasms Cease?

Stanley Fish in the NY Times op-ed page (the Plato's Retreat of Obama coverage) writes that "Barack Obama’s inaugural address is proving to be more powerful in the reading than it was in the hearing." It's the usual stream of heavy breathing and groans we've come to expect.

He aks us to do "what the pundits are doing: linger over each alliteration, parse each emphasis, tease out each implication." The reason the pundits are doing this is that they are lazy shits who prefer to write columns or form commentary that merely requires them to read a single, short text and then to verbally masturbate at will. No work required. They could use the tremendous resource powers at their disposal via the news organizations they work for, and really look into the implications of Obama's stimulus package on our already bloated debt; or how difficult it might actually be to "put people to work"; or consider the actual implications of closing Gitmo. But that's not fun - you might even have to reconsider some of your preconceived notions - who wants to do that? Let's just read a speech and comment away! It's easy.

Surreal Obama Coverage Continues Apace

Following on Steve Sailer's observation that mainstream media Obama coverage is indistinguishable from Onion parodies, CNN asks without even the remotest hint of irony: "Will Obama have to be better because he's black?" Meanwhile, WaPo claims Obama has sent Al Qaeda into a state of desperation just by the mere power of his awesomeness ("Obama Presents New Challenge for Al-Qaeda").

But for now, the change in Washington appears to have rattled al-Qaeda's leaders, some of whom are scrambling to convince the faithful that Obama and Bush are essentially the same...Al-Qaeda's rhetorical swipes at Obama date to the weeks before the election, when commentators on Web sites associated with the group debated which of the two major presidential candidates would be better for the jihadist movement...Soon after the vote, the attacks turned personal -- and insulting.

Good God no - insults? We knew Al Qaeda thought nothing of blowing people up and mass murder, but insulting Obama? Does it get any lower?

The CNN reporter apparently couldn't find anyone who thought that Obama wouldn't be held to a higher standard, although it did hint that such shadowy people could exist.

Rojecki says people who say Obama isn't going to be held to a different standard because of his skin color didn't pay attention to his campaign.

He says Obama had to deal with challenges that other candidates didn't have to face. Obama's run for office was almost ended by his association with his minister, the Rev. Jeremiah Wright, whose incendiary sermons shocked many. But Republican presidential nominee John McCain's relationship with the Rev. John Hagee, who was accused of anti-Semitism, never threatened to end his campaign, Rojecki says. "Obama was held responsible for what his minister said, and McCain was associated with Hagee, but somehow that didn't stick," Rojecki said.

Sure, they're the same thing, Obama's relationship with his personally-selected pastor of 20 years, acknowledged father-figure and inspiration for his best-selling book, vs. McCain picking up an endorsement from some pastor McCain didn't know and...oh, why bother, it's just so depressingly absurd.

Obama to Take On China?

Tim Geithner has signaled a new, tougher stance against China by accusing it of manipulating its currency. According to the Washington Post article, his fellow liberals are all a-twitter with this tough-guy approach.

"It was very interesting to see that Geithner has stated that China is manipulating its currency," said Eswar Prasad, a senior fellow at the Brookings Institution. "Things are going to get quite heated on the China-U.S. front this year. This statement was clearly a shot across the bow, signaling that this administration does not plan to mollycoddle the Chinese."

Good - great, but there's a simple question to be asked here - Who's holding the cards? China has been encouraging saving, discouraging domestic consumption, and concentrating on exports to grow its economy, and has pegged the Yuan to the U.S. dollar to support that strategy. Now that there's a global recession, China could decide to encourage domestic spending to keep its economy growing, but why should it?

Had the Obama administration come into office promising a new, sober, economic retrenchment designed to turn the U.S. economy around from a spend-thrift service economy to a saving-oriented manufacturing one, then China might consider re-thinking its trade policies. But since Obama is instead promising the mother-of-all stimulus programs, designed to get Americans filling in potholes or whatever and piling up multi-trillion dollar deficits to get the U.S. consumer to get back to spending money like there's no tomorrow, why should China even consider Geithner's complaint? All they have to do is wait for the U.S. printing press to start churning and they'll be back in the saddle in no time. I'm afraid that in this standoff all our cards are showing, and China's holding a straight and we've got a pair of sevens.

Livin' Large

18 lbs of contentment. That's his favorite spot. The hard-wood floor may not look too comfy, but he's no fool - the furnace is located directly underneath, making it one of the few truly warm spots in the house (I'm not real generous with the heating fuel).

Oh The One

Well, that was quite the celebration. In the lobby of the office I work in, folks were gathered around the TV watching the inauguration in awed expressions like they were hearing the Sermon on the Mount. I just don't get it.

Sure people were excited when Reagan took office, but they had some particular goals in mind. He was going to kick the commies' butts (check); he would allow working people to keep more of their hard-earned money and pay out less to deadbeats (check!); he would decrease the size of government (oops).

But with Obama what are they thinking? He's going to take all the money from the rich people and give it to the working man? (errrrnnt*). He'll be really nice to the Palestinians who will therefore live in peace and harmony with a similarly assured Israel (errrrnnnt). Terrorists will be frightened of him because instead of using that ineffective and mean torture stuff he's going to hit them upside their heads with cruise missiles if they misbehave? (Let's pray not.) Minorities in America will now say to themselves "Hell, if some half-black kid raised by his well-off white grandparents in Hawaii with a 140 I.Q. can become president, then I can graduate high school with straight A's" (that would be nice, but...)

Watching the celebrations last night on CNN and hearing the blabber on Charlie Rose, I felt like I was witnessing 100 million people with no more clue about what's to come than this poor, lovely lady in this infamous campaign report from last fall:


* attempt at spelling a harsh buzzer sound

In Defense of Carbs

Carb-bashing is all the rage in cyberspace, particularly in the more conservative habitats where I tend to troll - for example, here, here, and here. The basic argument is "it's not the fat, it's the carbohydrates." Particularly, those nasty, refined carbohydrates - that's what really puts on the pounds, they claim. But how can one tell?

The problem is that it is awfully difficult to tease out the actual carbohydrate effect in one's (Western) diet from the fats since carbs - particularly the refined ones - are almost always used as a vector for fat. The typical use for breads is to have something to spread fat on. And when was the last time you had plain, unaccompanied boiled potatoes - never? So I have no doubt that cutting way down on your carbs will help you lose weight, because you'll also be cutting down on fat, and so it's almost certain that total calorie intake will decrease. And I'm sure that more complex carbohydrates (say, brown rice) is better for you than simple carbs (white rice), but is that really the problem?

Consider this: look at all the obesity around us. Do you really think these people got that way from eating too much linguine with vegetables sauteed in olive oil with garlic? Are they wolfing down huge portions of white rice with steamed vegetables? Are they starting off their day with a plain bagel and black coffee? I don't think so.

Think about how people actually eat pasta. It's not linguine with sauteed vegetables - it's more likely Fettuccine Alfredo, most likely the souped-up four-cheese variety, where strings of cheese follow the fork from the plate right to the mouth. Rice is most likely paired with some creamy meat concoction, where it's main purpose is to soak up the excess sauce. Bagels are indeed major calorie hogs, but a typical bagel has about 2 or 3 tablespoons of butter or cream cheese, or else is used for a bacon, egg and cheese sandwich. And our favorite food of all, pizza - one might think of it as a carb, but of course it's really just piles and piles of cheese. Carbs, in America at least, serve the primary purpose of giving structure to fats. And of course there's the potato. No one eats potatoes plain. They are invariable either immersed in fat to fry or soaked in butter after mashing.

What about soda, you might ask? Well true, soda has no fat - but it is often the accompaniment to fast food meals (which as we've been discussing above are mainly fat). Still I have to admit I do see lots of fat people just sipping on soda. But I also see lots of fat people walking around with huge jugs of ice water. Fat people simply drink a lot of fluids, related to their fluid retention, which in turn is aggravated by the salty fast-foods they consume.

A "sweet tooth" is often blamed for obesity, but I contend it's really a "fat tooth." Do you really think those sneaky fatsos are going off and hiding in a corner gorging on Jolly Ranchers or jello? Again, not likely. What they're eating are snickers bars, oreos, twinkies, and ice cream sundaes - and not with low-fat Hershey syrup, but with high fat hot-fudge topping. Yes, these are all loaded with sugar - but they're especially loaded with fat.

To be clear, I'm not arguing that carbs are wonderful and should be consumed with abandon - I am contending though that the notion that fats are fine and it's really carbs that are the problem is mistaken. My preference is the so-called Mediterranean diet. Use more mono- and un-saturated fats. By all means consume whole grains, nuts and fruits (yes - those sugar-laden fruits!). But skip the whole-wheat pasta - it really sucks. If you've ever made pasta by hand, you realize how impossible it is to make good pasta with whole wheat flour. Buy a good brand of pasta - but regular durum/semolina pasta is fine. So is white rice - it's great with sauteed chicken and vegetables. Potatoes are tough to eat without fat, so they're worth skipping. And avoid bread as much as possible for the same reason. But if you can get your hands on a good loaf, eat it with gusto - dip in olive oil, though - skip the butter. Eat a grilled chiken sandwich at lunch - it's not going to kill you - but the melted cheese might, so skip that.