What Warren said....Follow

Those who do not learn from history are doomed to repeat it.

In 1989, the S&L crisis was billed as the worst banking crisis since the Great Depression. We spent just enough money to bail out the banks, a small amount of stimulus to make people feel good, and the economy recovered. A few years later, no one even thought about it. The point being that there's always a lot of rhetoric that gets tossed around, largely because there really is a need to take some direct action to fix the problem and so you need to make the public realize how important it it. It's dangerous when those doing the rhetoric forget this though and actually buy their own "sky is falling" story.

When we set the rhetoric aside and look at the numbers, we can say that financially the most recent crisis was larger than others. That's in terms of the sheer numbers of dollars of assets at risk. But in terms of the immediate impact on other economic indicators? It wasn't really out of bounds relatively speaking. When we look at relative lost revenue and relative GDP growth loss it was actually pretty similar to other recessionary crises.

As I keep trying to point out the really glaring difference isn't in the formation of the crisis, but in what happened *after* it happened. There are two major problems with our economy right now: Unemployment and debt. Those can both be logically tied together. High debt raises the fear of higher taxes, which reduces the amount of employment based investment in the economy. It's a simple and (dare I say it?) obvious relationship. The debt can be directly tied to spending. As I've said, if we look just at revenue loss, this recession was similar to others. Between 2001 and 2003 our revenue as a percentage of GDP dropped from 19.5 to 16.2, or 3.3 points. Between 2007 and 2009, it dropped from 18.5 to 14.9, or 3.6%.


Despite nearly identical relative revenue drops over identical periods of time, in one case, we recovered quickly, while in the other we are not. The difference? Spending.

During that same time period (2001 to 2003), spending as a percentage of GDP increased from 18.2 to 19.7, or 1.5 points. Between 2007 and 2009, spending increased from 19.6 to 25. That's an increase of 5.4% of GDP. It's absolutely massive. This is why we conservatives keep saying over and over that this is not a revenue problem. It's a spending problem.


I can toss out similar numbers for past recession-causing crises:

Between 1981 and 1983, revenue dropped from 19.6 to 17.5 (2.1%). Spending increased from 22.2 to 23.5 (2.3%). We recovered quickly.

Between 1989 and 1992 (S*L crisis actually was a slower burn, so it was 3 years from low to high unemployment effects), revenue dropped from 18.4 to 17.5 (.9%). Spending increased from 21.2 to 22.1 (.9%). We recovered quickly.

What this shows is that varying levels of revenue drop didn't make much difference in terms of recovery. Spending also doesn't seem to make much difference as long as the increase is modest. The one glaring exception is the one time we had significantly higher relative spending increase (5.4% of GDP between 2007 and 2009), we had an anemic recovery and unemployment stayed high.


I'm aware that correlation is not the same as causation, but when there's a pretty rational explanation for why a factor like spending might slow down economic recovery (especially in the domestic job market), and when we look at the data we see exactly that correlation, that's a pretty strong case that said factor *is* the cause of the result we're seeing.

Everyone is worried about closing the deficit entirely. That is a lofty, unnecessary goal. Returning the top tax rate to Clinton-era-rates would generate the greatest revenue. Nothing we can do will shore the entire deficit up.

Wouldn't raising the top tax rate even higher generate even more revenue? Why stop there?

The question isn't whether something would increase revenue, but whether that's the right solution in the first place. I don't believe that it is. Lowering tax rates didn't create our current economic problems, so why think that raising them would fix them?


More to the point, historically speaking changes in the top marginal rate has only a very very loose relationship with actual relative tax revenue as a whole. Let me throw a ton of data at you: For most of the 70s, we had a top rate of 70%, and revenues ranged between 17.1% of GDP to 19% of GDP. From 1981 to 1986 we had a top rate of 50%, and revenue ranged between 19.6% to 17.5%. From 1986 to 1990 the rate was 28%, and revenue ranged from 17.5% to 18%. From 90 to 92, it went up to 30%, and revenues ranged from 18% to 17.5%. From 1992 to 2000 the top rate jumped up to 40%, and revenue ranged from 17.5% to 20.6%. From 2000 to 2002 it dropped to 38% and revenues ranged from 20.6% to 17.6%. From 2002 to today rates have been at 35% and revenue has ranged from a low of 14.9% (during 2009/2010 btw), to a high of 18.5% (in 2007).


There's little correlation. Sometimes, raising rates decreased revenue, sometimes it raised it. Sometimes lowering rates lowered revenue, sometimes it raised it. It's far easier to correlate recessionary cycles to lower relative revenue than it is to correlate top marginal rate to the same. The last decade is a great example of this. Bush lowered rates over the first two years of his terms from 40% to 35% (certainly not one of the bigger rate shifts). Revenue dropped significantly, but remember that we also had a recession starting right at that point. We went from a 40+ year high point revenue wise (20.6%) to around 16% in those first 2-3 years. But after that, despite the tax rates remaining unchanged, revenues increased until 2007 when it was 18.5% (which is in the top 25% in terms of revenue collection over the previous 40 years. Revenues dropped after that point, but clearly because of the economic crisis and *not* because of tax rates. The trend during Bush's term was higher tax revenue even with the rate at a relative low point.


Rates don't really correlate to actual generated revenue. What the rate does do, however, is affect the degree to which those with money are likely to work to avoid paying those rates. It's a question of whether you want more economic activity which less taxes levied on each, or less economic activity with higher taxes levied on each. Personally, I think that the former is better for us. It'll create more jobs even if it does nothing else (more economic activity is going to usually also translate to more jobs, everything else staying the same).


I just think that you're asking the wrong question.




We don't have to shore the entire deficit up. Just enough of it so that the debt being accrued isn't ruinous in the long run. Raising taxes is an iffy proposition in terms of actually increasing that revenue. The most consistent effect we can expect from that is lower employment (as I've argued in this thread, we're already seeing that effect just from the threat of higher taxes). Cutting spending is guaranteed to decrease that deficit and wont hurt us in terms of jobs. And in some cases, it will actually help us. Ending the ridiculously long extension of unemployment benefits is an obvious case. In a recovery phase of a recession you need people working. Even if they initially end out working at a job that doesn't pay as much, at least they are working and producing something. This will spur economic growth and help recover the economy to the point where they can get a job more equivalent pay-wise to what they had pre-crash. But as long as we keep paying them not to work, they are more likely to choose to remain not working rather than accept a job that represents a significant pay cut. Doubly so if that job isn't much better than what they can get on unemployment.


We don't need to close the deficit gap. What we need to do is stop shooting ourselves in the foot with misguided attempts to "fix the economy" by spending more money. It's the wrong approach.

What do you mean "No"? He spent that money fully aware of how much money had already been spent on TARP. I'm not sure how you justify absolving him of the responsibility of the choice to spend more money even over the complete objection of the GOP.



That's irrelevant in the context of "who put us into the current debt crisis", isn't it? But for the record, the kind of spending in TARP (more or less) is the same kind of spending we do every time there's this sort of economic crash. And it generally works. Or at least it has in the past. Why blame TARP for this? It's just strange that you seem to want to make this spending equivalent to the spending that came after, when there really is no comparison between the two.



Stop downplaying this. 100% of the TARP money lent to the financial sector has been paid back. 100%. Not "some", "all". The only TARP money that hasn't been fully paid back is about $25B of the money the Democrats inserted into the bill which went to bail out the auto industry and in an extreme example of "wtf!?" to shovel some money to teachers unions. In fact, those are about $60B short IIRC, the reason the full bill is only $25B short is because of the interest paid on the debt that was paid. So the big evil rich people not only paid back all the money they borrowed, they paid for some of the money the Dems handed out to their buddies as well.



No, they didn't cost roughly the same. They cost nowhere near the same. In terms of effect on our debt, Obama's spending has added about 50 times more debt than Bush's spending. Want to know why? Because the stimulus money isn't getting paid back. It's just spending. We can only measure its value based on the economic recovery it promised to deliver.

Do you think the economy has fully recovered? Did we get a trillion and a half dollars worth of recovery? I don't think so.



Wrong. TARP was necessary. A small amount of direct stimulus might have been helpful and wouldn't have hurt. The massive spending on stimulus done after we'd already spent money on TARP was completely unnecessary.




No, they didn't! Holy hell! Do you just make stuff up. The total remaining balance of TARP to be paid back is $25B.





Lol!




Can we please stop talking about job creation when net unemployment rose between the time the recovery act was passed and today? That's just silly.



Nope. I'm pointing out a reality. I don't think it's wrong for people to avoid paying that top rate if they can. That's why I argue that it's wrong to think that by raising it, we'll magically fix all our problems. If history is any indicator, we'll just make them worse.



Sigh...

The stimulus money is the problem. It's why the economy isn't recovering. I keep trying to explain this to you, but you aren't listening.

Ah, yes, Barney Frank's reign of terror in 2005 when the Republicans were helpless to stop him, controlling only the House, Senate and Executive branch of government. What a monster he must have been to single-handedly defeat all who opposed him and force the government to bend to his whims against their every desire.

Golly, I heard some people were scared of being called a racist and so were powerless to act!

Edited, Aug 25th 2011 2:11pm by Jophiel

Of course I am. They were the people in charge. There was no "bomb" and it's pathetic that you'd try to make that comparison to cover for the lack of stewardship in the Republican party that was apparently so incapable and inept that they couldn't do anything to stop the mighty and terrible Barney Frank minority-party juggernaut.


So if a guy threatened to stick his tongue out at the security guards, you'd give them a pass for running to the bank vault, falling all over themselves to be the first one to open it rather than putting forth even a half-assed effort towards stopping him?

That seems... well, in the words of Sterling Archer, "Classic you".

Edited, Aug 25th 2011 3:54pm by Jophiel

So they were afraid of the Dem version of the Tea Party?

But if the other side does it ("it" being descending somewhere en masse and protest/march), you condemn it. I notice he doesn't even bother to try to defend bad behavior from his side of the isle, while you go out of your way to trip over your feet to defend any and all actions and condemn the other, regardless of what that behavior might be. Believing that the group you identify with can do no wrong and are always right while opposing groups can do no good and are always wrong isn't support; It's zealotry. It's fanaticism. It's unhealthy for yourself and the whole. Seek help.

Needs a smidge of a correction.There we go, that's more accurate of what you really do. Maybe you just don't notice? Arguing that your guy is right is perfectly reasonable and normal; Arguing that your guy is right no matter what based purely on group is unhealthy.

You can, but in your case it's an accurate portrayal of your behavior. Your calling it meaningless is just your denial to your own behavior, which is expected. You don't want to outright admit you're a zealot. Not many people do. I figure Joph was simply conceding the point, but he's also in no position to have stopped that behavior. The guys you're defending, however, were in a position to do so, but they chose not to. And the reason you gave was they didn't want the protestors. That's much more detestable behavior. According to you, they knew it was wrong but chose not to do anything about it. That makes them an accessory to the behavior. He's saying "Okay, he did bad. Next topic" while you're going out of your way of trying to detach responsibility from your group's lack of action to prevent it from happening. I'd more respect you if you'd have said something like "Yeah, okay, the Republicans could have grown a pair and stood up for what they believed," but instead you're trying to say standing up for your beliefs is irrelevant.

Really, it more sounds like you're saying Republicans are pussies that are too afraid of the public opinion of them, which in turn makes it sounds like they're more concerned with keeping their jobs and themselves and not making America a better place.

Edited, Aug 25th 2011 7:50pm by lolgaxe

For the record, I'm not saying Frank was the reason for anything and think trying to make him the primary cause is a remarkably shallow talking point argument. But it astounds me that the GOP AM radio class has glommed on to this and yet refuses to take it to its actual conclusion -- that the party is power over the legislative and executive branches just sat back and let this supposed travesty occur. There is no argument for ******** about Frank that doesn't also include an admission that the GOP is incapable of governing if they can't even prevent the terror which is the premise of the entire argument when they're in control.