Posted on 05/23/2011 4:31:33 PM PDT by The Magical Mischief Tour
Last week David Stockman was on Tom Keene, making the usual media rounds (sometimes we marvel at his patience and endurance), as one of the few voices of fiscal prudence available to TV producers who seek to hold a balanced debate on the topic of US insolvency. Today, Reagan's budget director was again on Bloomberg TV explaining the reality of the situation to Matt Miller for the nth time (by now even a 2 year old will understand the cul-de-sac facing the US), although presenting a new spin on the situation, namely that we have gotten to a point where both parties are implicitly pushing for a US default, while though their inability to reach a political compromise, blaming each other for this inevitable outcome. "The real problem is the de facto policy of both parties is default. When the Republicans say no tax increases, they're saying we want the U.S. government to default. Because there isn't enough political will in this country to solve the problem even halfway on spending cuts.
When the Democrats say you can't touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well...That is the question that really needs to be understood better and appraised by the bond market.
Both parties are advocating default even as they point the finger at each other."
(Excerpt) Read more at zerohedge.com ...
Stockman is wrong.. something ELSE may be defaulted on but not the debt..
And despite the fact that it is an unnecessary action and that the US is still in a situation, that if it had the political will, it could pull itself out.
This is the path.
Yeah Stockman - the one who convinced George Bush to not read his own lips!
He still doesn’t realize that supply-side economics works. Cut taxes, make conditions favorable for business, and spend less, and we can make it out of this cesspool. Too bad that has never been tried in the lifetime of nearly all living Americans.
>>Cut taxes, make conditions favorable for business, and spend less, and we can make it out of this cesspool.<<
It’s too late for that.
David “The Hogs Were Really Feeding” Stockman — our freakin’ hero.
Thanks The Magical Mischief Tour.
My seven-point plan for economic reform and growth
Implement this seven-point plan and the US economy will be roaring in less than a year.
No, we can’t.
This is what the GOP needs to learn: Some math.
The mathematics say that now, there is no way to “grow our way out of this” without > 6+% GDP growth, without fail, for a decade or more.
That simply will not happen. We might see GDP growth (organic GDP growth, not government spending) of 3.5 to 4% per year *in certain quarters*, and maybe in one particular year, but that’s going to be the top end of what we can now achieve. We’ve off-shored too much of our economy, and there’s too many Republicans who think that trade tariffs are anti-American to re-establish the rate of growth necessary to outgrow our economic situation.
We have allowed the problem to fester for so long, the Bush administration piled on so much more social welfare spending that we can no longer grow our way out of it. We have to both slash spending and increase taxation, JUST to service the debt we have already built up. When interest rates start going back up, even if we balanced the budget today, and added no additional debt, the interest on the debt will balloon from where it is now to nearly $1 trillion/year if we only resume historically normal 10-year interest rates on US debt.
Again, I have to hammer this point home: There is NO WAY to “grow our way out of this” now. There was prior to 2002, but there isn’t now.
At the rate that Obama is spending and piling on additional social spending, there is absolutely no way to grow our way out of this. We can’t. And the Republicans who keep hammering on this idea of “grow our way out of it” look like absolute retards to those of us investors who can do the mathematics of this situation. I’m talking in particular about ratchet-jawed dispensers of monkey doodle like Larry Kudlow.
Second, we need to increase the base of taxes. About 50% of Americans no longer pay income tax. Everyone should have some skin in the game, even if it is only $5/year. There should be NO ONE getting a free ride. Bush’s tax cuts increased the number of people getting a free ride, and the Earned Income Tax Credit of Reagan’s era created a huge welfare system for people who need to simply work harder.
Third, we need to eject the illegal aliens from the US, and we need to clamp down on immigration in general. We no longer have the ability to create enough jobs for US citizens and immigrants at the rate they’re coming in. We face the same problem as the FDR administration faced in the 30’s, and they clamped down on immigration back then for the same reason: When you cannot create enough jobs for those already here, you stop accepting more people into the country.
The Republicans won’t do what needs to be done to turn this around. Even Boy Wonder Ryan’s plan will not get us anywhere close to a balanced budget. He merely cuts the deficit from about $1.6 trillion to about $400 billion. In no universe that I know of will a $400B deficit be sustainable. His entire plan consists of “sucking less” than Obama’s spending plans. Oh, and his plan came up with absurd ideas of how low unemployment would go - lower than 4%, which is laughable.
Your plan is an excellent starting point. The problem is that we’ve had audits of government agencies and nothing gets done.
We need to force Congress to make actual cuts. Short of stuffing a deer rifle up their noses, I no longer see any way to make actual spending cuts happen. Crybaby Boehner has shown that when he says “spending cuts,” he doesn’t mean it.
Paraphrasing the immortal words of Inigo Montoya: “They keep using that word. I don’t think it means what they think it means.”
But it was done in the 20th century, in 1921-22 President Harding applied these actions to the government he headed and the economy he inherited and brought an end to the depression of 1920-21.
Everything from "hyper inflation" to "hyper deflation" to "hyper deflation and inflation at the same time" to "food shortages" to "cheap food, but not money supply" to "lawlessness" to "the end of the Federal government as we know it" to "a New World Order with a New Monetary System", to "No Welfare or Social Security checks mailed out" to "everything will just be fine", etc., etc., etc.,
I have some hard questions, and I'd like some hard answers. Is my mortgage just "defaulted" like everything else? No? I guess I saw that one coming. Well, is my mortgage now "worth" $334 dollars in real earning power then, and can I pay it for almost nothing?
No one knows.....just guesses, and more speculation.
From the article: “Both parties are advocating default even as they point the finger at each other.”
If so, then it’s the first time in recent memory that I’ve actually agreed with both political parties. Default is where this is headed. And I advocate it because the best choice amongst truly rotten choices. The debt is simply too big. It can’t realistically be paid back and we’re getting to the point where the interest payments alone will be unmanageable. Why should future generations agree to be beggared for a debt they had no part in generating and will see no benefit from?
I have long been saying that given the lack of balls any and all our politicians have these days, going default would be the best thing for us, and for bring these career idiot-ridden politicians back crashing into reality. =.=
“No one knows.....just guesses, and more speculation.”
You’d have to look at more recent history. The problem is that a U.S. default would be the mother of all defaults, so history might not be as good of a predictor.
Default is rotten. But what would be worse would be to sell off everything at a fire sale, beggar the population for a generation, and then end up defaulting anyway.
“I have long been saying that given the lack of balls any and all our politicians have these days, going default would be the best thing for us, and for bring these career idiot-ridden politicians back crashing into reality. =.=”
Default also would finally bring about some sense of fiscal sanity, and a balanced budget mechanism through the Constitution or other means. The Federal budget will never be balanced until it’s the only remaining choice on the table.
The debt is too large for that.
When anyone gets too deeply in debt, there is only one course of action: stop spending except for survival requirements, cut costs, sell all toys, sell assets to raise cash to pay down debt, pay off debt from earnings, or convert debt to equity. Keep production where it is profitable to do so, cut all loss making activities. The USA is going to have to do the same exact things that any insolvent entity has to do. Whether a family, a business, a corporation, or a country, the solution is the same. Financial health comes with discipline, hard work, and a habit of spending the least for maximum benefit. In other words, the way to solve the problem is the opposite of what Washington is talking about.
Someone famous (2000 years ago) once said, "A house divided against itself cannot stand."
Buy gold.
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