The Bursting Bubble Defense

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Did the "bursting bubble" play SOME part in the state's budget woes? Sure. But bear in mind that Davis was in charge, with a huge Dem majority in the Legislature, since January 1999. Any wise person, Dem or Rep, would have realized that the state's upsurge in revenues stemmed largely from capital gains on stocks and options ... and, thus, would not have agreed to (and would have vetoed) the huge increases in ONGOING PROGRAM spending that Davis approved. At worst, he only should have OK'd ONE-TIME projects in infrastructure, e.g., "We have an extra $1B here, so we'll build this hydroelectric dam that will last 40 years, employ hundreds, and provide nonpolluting power to thousands." But no: he agreed to huge increases in PROGRAMS that just continue without end, year in, year out.

So you are saying the US economy was not in a downturn in 2000?

"Downturn" means a deacrease, of course. But decrease from what? The gloom and doom referred to as "downturn" is completely false. If one's salary increases rapidly for 10 years, and then declines one year after that --- is that a significant downturn?

Moreover, there is this perception that the economy is not supposed to have downturns at all. That is a purely socialist notion, and most of people in this country do not know that because we had it too good for too long --- we forgot. What we should be saying is exactly the same thing we say satisfyingly on a morning after a good party: that was a h-ll of a party. Surely, we do not fell well at the time of speaking these words: we are tired, and may have a bit of a hangover. But we blame anyone that the party is over? Not at all. We know that games end, and there is time for work. So, instead of b---g, "why did it have to end," we look back with a smile and move on.

The country had a h--ll of a party from 1982 to 2001. Look back and smile; there is nothing to b--ch about. And even The Scary Bubble burned mostly speculators: inverstors have a fine return over the last 10-20 years, even with the bubble having burst. The unemployment is at the level that until recently haws been considered lowest possible. There is no economc tragedy: we are back to normal life after a great party. That's all there is about the BIg Mean DOWNTURN.

Thank You TopQuark,

I had hoped you would not assert that I am uninformed and then not take the opportunity to inform me.

And I agree with what you have said, your points are well made and taken.

My point is though, is the average consumer of bits and bytes of information sophisticated enough to understand what you have said? And do the politicos on both sides seek to inform the average tax payer/voter or do they seek to distort these perfectly normal occurances for their own gain?

My opinion aside, the point of my post was that in the political war of words even though the decline from irrational exuberance was more of a return to normalcy, the "excuse" of the bursting tech stock bubble is used to describe the declining fortunes of some but not others.

We are fed bits and pieces, this number is less than that number and the red arrow on the chart is pointing downward.

There had to be a strong economic price paid for what happened when sanity returned to Wall Street even though it was a correction that was needed and looking at the long term picture we are still in good shape.

The "gloom and doom" you refer illustrates my point. The gloom and doom is the fabrication of those who could use such things for political gain, not an accurate representation of reality.

Thank you also for your thoughtful post. I agree with you entirely: the politicos will, and do, exploit the ignorance of the population. This ignorance is of a very special kind. The "average consumer of bits and bytes of information" may not understand our discussion, but economic agents ON AVERAGE are amazingly smart. Great many people that have foregone playing the market in the 1990s --- and therefore the spectacular returns as well --- and had their money in certificates of deposit were also chuckling at the dinner table in 2001: they have preserved all of their capital and made some money. The average Joe that has been putting money into "safe" companies for the last 20 years sees also that his portfolio is worth only 10% less than at the peak of the market and, most importantly, TEN TIMES more than in 1982. People are very smart when it comes to common sense.

The problem exists, however, because the younger half of our population was not educated properly: the schools have been notoriously dumbed down --- in the last 15 years especially -- and their personal experience was an unprecedented economic boom. It is these people that most b----h about Bush, bubble, economy, jobs, CEOs, Grasso --- and Martha Stuart. Remember her? She was the first one that politicos had to sacrifice to appease the masses.

This younger half of the population is manipulated by the media, which has a clear socialistic bias. It appears to work, and the "downturn" has become DOOM and GLOOM. I do not remember when this country was so anti-corporate as it is now.

There is, of course, a purely economic consequence to the pessimism. As you know, the consumers --- not individual ones, but in the aggregate --- have rational expectations; that is, the equilibrium in the economy depends on what the consumers believe about it. The prophesy becomes self-fulfilling. When people are made feel insecure, however artificially and without foundation, they buy and invest less, and prolong the "downturn" and delay recovery of the economy.

It is unfortunate that, rather than behaving as responsible leaders, the politicos will exploit the situation for their personal gains, as you pointed out. Thanks again for the discussion.

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