Goldman Sachs: House Spending Cuts Will Hurt Economic Growth(Keynesian gloom and doom)

abc news ^ | February 23, 2011 | Jonathan Karl

[spunkets]

"What is written in the report ... There is nothing political in it, just well-established economics. It reflects no political motives or beliefs.

BS. It's socialism and that's both political and economic.

"I have not heard a repudiation of a positive observation, namely, that reduction in spending will reduce growth."

I believe that no one ever made such an observation. Growth refers to the entire economy's growth, not just that of GS, or any particular groups favored by those in power. Also, the spending relevant to the discussion is -PLEASE PAY ATTN- govm't spending of other people's money via govm't credit increases, on unproductive endevors. The only growth occurring, outside of what GSachs expects to take from their share of the redistributed capital, is in fiscal and total debt of the economy. That's a shrikage in GDP, not only for the present, but for the future also.

[gleeaikin]

“Isn’t Goldman Sachs a bank that was part of creating this disaster?” Wasn’t Goldman Sachs former CEO they guy who helped President Bush set up the bank “rescue and bailout” program? Actually, a lot of this money has been repaid during the Obama years. Now the banks are just sitting on a lot of cash and not lending it for business/job creation.

Here is a link from Market Watch that points out that the latest bonuses are less than they were in 2007. That and 2008 were the peak of the bankster CEO salaries. In 2007 the CEO of Countrywide Financial had $140 million salary. In 2008 as finance began to tank he cut it to a paultry $100 million. In the same period Lehman Brothers almost doubled their CEO salary to over $70 million. By 2009 both companies were dead as doornails. On the other hand Goldman Sachs in the same period also increased the CEO salary to over $70 million. In fact in spring 2008 the top 3 executive of GS were paid over $65 million. Forty three % of their stockholders voted in favor of a Shareholders Advisory Vote on Compensation. [Forbes CEO Compensation site has lots of interesting data on this subject.]

http://www.marketwatch.com/story/wall-street-bonuses-declined-in-2010-2011-02-23?dist=bigcharts#

Last year after my GE stock plumeted from $50/share to $5, I was shocked to see that for the past 3 years the top 7 GE executives had salaries from $ 11 million to $22 million. Neither here nor above do the figures I quote include stock options, bonuses and perks. At any rate GE has been hovering between $15 and $20 for a year. We stockholders have to TAKE BACK OUR POWER. This spring many of us will receive Proxy documents with recommendations on how to vote for Proposals. Last spring, AGAINST managment’s advice, I voted FOR a STOCKHOLDERS ADVISORY VOTE ON COMPENSATION. I urge you all to do the same, before the government decides they have to do it for us.

[Gasshog]

http://www.youtube.com/watch?v=XnAT7FZpmg0&feature=related

[AFreeBird]

Chess game indeed.

[spunkets]

"There is also nothing nefarious in an economist serving as a political analyst and then returning to economics. Some economists specialize in what is called social choice theory and some are well versed in politics."

Social choice theory-that's where big daddy gov., er um "the people" redistribute wealth to achieve a state of GSachs, er um "Pareto" optimality, as per the welfare clause.

"A confidential new report prepared by Goldman Sachs for its clients says...

Oh, bless their hearts! They're providing us "people" with free confidential reports! They're continuing their tradition!

[stevem]

Goldman Sachs: House Spending Cuts Will Hurt Economic Growth(Keynesian gloom and doom)

Maybe Goldman Sachs should liquidate now while there is still some value in the name. They would certainly not be missed.

[meyer]

Keynesian economics is basically the equivalent of kicking the can down the road. It is a “tool” that politicians use to give themselves a temporary boost in popularity, knowing that they’ll be long gone from office by the time the bill comes due.

[jdsteel]

Economists and others can argue forever about what “could have happened if”. If we look at the money spent (that we didn’t have) on the stimulus and take at face value the current administrations claims about the number of jobs saved and economic activity, the benefits fall short of the cost. In light of recent news that most of the money went to protect state or federal employees jobs and/or pensions, the actual benefits are a tiny fraction of the money spent, at the cost of an exploded debt.

[MichaelCorleone]

Not in a million years would I have thought that the likes of GS (and even GE) would be complicit in the destruction of this great country which, namely, is by carrying the water for the Obama Marxists.

Obviously they know better than to demagogue the issue, but it's more important to bankrupt the nation that gave them their wealth and freedom I guess.

[MichaelCorleone]

“Looks like Zero’s “investment” in Sachs is paying off.”

Yes, and I frequently wonder about Warren Buffett. As I remember it, he invested 5 billions into GS during the 2008 financial crisis reportedly to demonstrate his ‘confidence’ in the future of America.

Did he know about the goings on between GS and the FedGov and simply want to join the party? Is that where his confidence came from?

What does that say about the railroad he bought (Norfork Southern, I think)? Is this supposed to be a beneficiary of Obama’s high-speed rail baloney?

[TopQuark]

Economists and others can argue forever about what “could have happened if”. I don't think there is any disagreement among the economists: if AIG were to go down after Lehman, there would a run on all major banks. I don't think there is an economist in the world who thinks there would another outcome in the absence of any action.

If we look at the money spent (that we didn’t have) on the stimulus...

I have never advocated or condoned the stimulus as it was promulgated. We appear in agreement here.

...and take at face value the current administrations claims about the number of jobs saved and economic activity, the benefits fall short of the cost.

I completely agree and more. In fact, we never had a stimulus package: what we had under that name was a reform package, one that changes the economy into a more statist (fascist) one. Roosevelt has done the same: under the guise of fighting the Great Depression and stimulating growth, he actually did everything to reform it. That is why there was not much growth; that is why the unemployment stayed over 16%. The "stimulus" jobs were distribnuted out of... offices of the Democratic Party (incidentally, it is since then Blacks vote 4 to 1 for the Dems; they voted at least 3 to 1 for the Republicans prior to that).

Same here: of the $800B only about $70B has any potential to stimulate the economy. The rest was disbursements to unions to ensure their future votes.

Just as in the case of Roosevelt, this administration does not wan to stimulate the existing, still capitalist economy; it wants to change it into something else. And is doing just that, to the cheering of the leftists and socialists among the "conservatives."

[AFreeBird]

I guess buying a railroad, and it’s right of way, would be to take advantage of Zero’s government funded HSR boondoggle.

[ZULU]

Goldman Sachs is an internation criminal enterprise.

[GOPJ]

Thanks for the ping.

[secretagent]

I don't think there is any disagreement among the economists: if AIG were to go down after Lehman, there would a run on all major banks. I don't think there is an economist in the world who thinks there would another outcome in the absence of any action.

There were experts those who questioned Paulson's fears of a "systemic failure":

http://www.americanbanker.com/usb_issues/119_2/-372029-1.html

[CottonBall]

the report merely states economics fact

The report is someone at G&S's opnion, not fact:

•The spending cut package that passed the House of Representatives would have a deeper effect. Under the House passed spending bill, the drag on GDP growth from federal fiscal policy would increase by 1.5pp to 2pp in Q2 and Q3 compared with current law. However, we don’t see this scenario as likely; while we expect discretionary spending to be cut, the current House proposal doesn’t appear viable in the Senate, and the president has already threatened a veto.

Their opinion is that cutting government spending as proposed by the House will cut GDP by 2 percent. In other words, they ONLY way G&S sees to stimulate our economy is to have the government intervene. Not exactly a conservative ideology.

And the number of employees they have is irrelevant. It's the management and G&S that is doing this report. That was a silly argument.

[CottonBall]

the report merely states economics fact

The report is someone at G&S's opinion, not fact:

•The spending cut package that passed the House of Representatives would have a deeper effect. Under the House passed spending bill, the drag on GDP growth from federal fiscal policy would increase by 1.5pp to 2pp in Q2 and Q3 compared with current law. However, we don’t see this scenario as likely; while we expect discretionary spending to be cut, the current House proposal doesn’t appear viable in the Senate, and the president has already threatened a veto.

Their opinion is that cutting government spending as proposed by the House will cut GDP by 2 percent. In other words, they ONLY way G&S sees to stimulate our economy is to have the government intervene. Not exactly a conservative ideology.

And the number of employees they have is irrelevant. It's the management and G&S that is doing this report. That was a silly argument.

[TopQuark]

"Their opinion is that cutting government spending as proposed by the House will cut GDP by 2 percent. In other words, they ONLY way G&S sees to stimulate our economy is to have the government intervene. "

The word ONLY is the culprit here. It is plugged in solely by you. This is a false premise.

To most people versed in economics and/or physical sciences. The statement means the opposite: ceteris paribus --- all other things being the same --- the GDP would fall by 2%. The statement isolates the effect of a single variable: government spending. The degree of a drop is an opinion, but the direction of change seems to be a quite established fact.

No report would even try to make a claim as strong as you suspected. If it tried to say that other variable will never change or that we they would have no effect, those people would be laughed at and lose their jobs. Most juniors in college don't make that mistake.

I am sorry you misread the statement. If that is what you thought it said, your conclusions would be reasonable. The premise of your argument is unfortunately false, however.

And the number of employees they have is irrelevant. It's the management and G&S that is doing this report...

My remark about the number of employees had nothing to do with the report: it was a reply to a specific statement of another poster.

...That was a silly argument.

As you can see, it is helpful to ascertain at least what the argument was about before you use such strong characterization. Do you think it makes you look smart when you characterize something as silly while not even knowing the topic?

[TopQuark]

There were experts those who questioned Paulson's fears of a "systemic failure"

Of course there will be "experts" that would question Paulson's fears. Some experts make entire careers on doing just that: explaining after the fact, with the benefit of more informaton and hindsight, why your decision, made in real-time and with the benefit of limited information, was wrong.

People's actions can be judged only in view of the-existing circumstances and then-available information. But disregarding this fact is a way for some people to publish books and be visible otherwise. There will always be experts...

Here is an excerpt from the expert you cited:

While there is no denying that we are mired in a very serious financial crisis," Marenzi writes, "this does not yet appear to have been transformed into a general credit crisis. In aggregate, credit and lending markets appear to be functioning well, and in many cases are actually operating at historically high levels."

Mired, does not appear, appear to be functioning well... Blah, blah, blah...

He is even factually incorrect: credit has entirely froze at the time; banks were not lending regardless of the interest rates [ as you know, interest is the price of money, which depends on perceived risk; when banks think they face greater risk, they increase loan rates; they did not because they could not even estimate the risk ] Ironically, the only credit market that was still functioning at the time was the securitization market, which socialist propaganda tries to portray as the culprit of the crisis. But facts be damned.

So I don't know what time the author refers to here.

More importantly, when Bush and Paulson acted, they has a single objective: to prevent the runs on American banks, the runs that have already started to occur. They have already let go of --- Lehman. AIG was next, and there was no end in sight.

So compared that simple but harsh reality to the author's response: mired, does not appear, appear to be functioning well...

Thank G-d he only writes books and can do no other damage.

[TopQuark]

"choice theory and some are well versed in politics." Social choice theory-that's where big daddy gov., er um "the people" redistribute wealth to achieve a state of GSachs, er um "Pareto" optimality, as per the welfare clause. "

Spunkets, it's OK not to know something, but why do you insist on appearing like a complete moron? Why don't you at least browse the Web a little before you start spewing this nonsense and make yourself look ridiculous.

"A confidential new report prepared by Goldman Sachs for its clients says..."

You are not quoting me now, are you? This is from the article. Write that author to whine and complain about something (you are unsure of what to complain because you don't understand a word of it; but you are looking for something to whine about --- I am sure you'll find it).

"Oh, bless their hearts! They're providing us "people" with free confidential reports! "

It is clear that you are very angry but don't really know at what. Reports are confidential when they are sold to paying customers. It appears that the report in question is of that kind: experts at GS analyze the situation and issue their opinions, those that believe in their expertise and value their opinions (I know you are not one of them, you know better) pay for those reports.

The author of the article read it probably as stolen property. He, the author of the article and not the authors of the report --- now reveals that information to you. He has nothing to do with GS, but you appear to view the author of the articles and the authors of the report as one and the same.

You've got to think a bit more before you come to conclusions and especially before you voice those conclusions in accusatory form.

You can now take both feet out of your mouth.