Not from the Onion

by Russ Roberts on September 22, 2008

in Politics

I don’t know which word in the this AP story is funnier, "deep" or "slash" (HT: Drudge)

Obama vows deep cuts in spending

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Sep 22,  2:53 PM (ET)


GREEN BAY, Wis. (AP) – Democratic presidential nominee Barack Obama
moved to claim the mantle of fiscal responsibility in a roiling
economy, vowing on Monday to slash federal spending on contractors by
10 percent and saving $40 billion.

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shawn September 22, 2008 at 8:55 pm

though…if i never met a tax cut I didn't like, I'd think that a spending cut would be pretty great too.

granted…this is by the same man who's promising to equalize male and female salaries, which would probably cause a commensurate decline in GDP…but it sure sounds good, doesn't it???.

almost good enough to make me spend a couple hours voting. but not quite.

EconStudent September 22, 2008 at 11:31 pm

I liked that Obama plans to create more bureaucracy in order to monitor the efficiency of government programs. He doesn't mention what to do when found inefficient, or even whose measure of efficiency he would use. "The growing bureaucracy is expanding to meet the needs of the growing bureaucracy." -Anon

muirgeo September 23, 2008 at 1:55 am

WOW saving $40 billion that is deep…. compared to spending $800,000,000,000 in one day.

muirgeo September 23, 2008 at 2:00 am

The good news is most Americans by a 2 to 1 margin understand this mess was the creation of republican ineptitude. But those knuckleheaded 1 of 3 who think other wise… well I think they should split the $800,000,000,000 bailout bill amongst themselves.

EconStudent September 23, 2008 at 2:15 am

So, Bush's attempts to regulate the GSE's which were thwarted by democrats are the Republican's fault? Clinton's administration encouraging the acceptance of loans to low-income (high risk) borrowers by FM/FM by promising government protection was the Republicans fault? I guess FM/FM understand who helps them survive and not be regulated away, thus Obama being the #1 recipient of per annum funding from Freddie Mac.

Oil Shock September 23, 2008 at 2:27 am

Quotes from another era…….

1928 January: "There will be no interruption of our permanent prosperity."
~ Myron Forbes, President Pierce Arrow Motor Car Co.

"I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
~ E.H.H.Simmons, President New York Stock Exchange.

1928 November: "We are at the beginning of a period that will go down in history as the golden age."
~ Irving Bush, President of the Bush Terminal Company.

1929 February: ". . .the boom will collapse within a few months."
~ Friedrich von Hayek, Austrian Institute of Economic Research Report.

1929 Summer: ". . . a great crash is coming and I do not want my name in any way connected with it." Ludwig von Mises.

1929 September: "Stock prices are not too high and Wall Street will not experience anything in the nature of a crash."

"Stocks are now at what looks like a permanently high plateau."
~ Irving Fisher graduated from Yale and was regarded as one of America's greatest economists. His reputation was tarnished when he kept insisting throughout the Great Depression that a recovery was imminent.

1929 September: "Sooner or later a crash is coming, and it may be terrific. . .factories will shut down. . .men will be thrown out of work. . .the viscous circle will get in full swing and the result will be a serious business depression."
~ Roger Babson, speaking at his Annual National Business Conference.

1929 October 28th, "Black Monday". . .stock market loses 13%.

1929 October 29th, "Black Tuesday". . .stock market loses 12%.

1929 November 10th: "A severe depression such as 1920-1921 is outside the range of probability. We are not facing a protracted liquidation." Harvard Economic Society.

1929 November 14th: "The end of the decline of the Stock Market will probably not be long, only a few days at most." Irving Fisher, Professor of Economics Yale University.

1929 November. . .. . .. . . stocks have fallen 62% (from 381 to 145).

"Do away with installment buying suddenly and the country might face a real industrial depression."
~ Wall Street Journal (In 1920 less than 100 sales finance companies existed. . . by 1928 there were over 1,000. . . buying on credit had developed into a new industry servicing the new middle class. At the time a banker claimed American's bought 80 to 90 per cent of automobiles, phonographs, furniture, pianos, etc on credit).

1930 June: "The depression is over."
~ U.S. President Herbert Hoover.

1930 August: ". . .the present depression has about spent its force."
~ Harvard Economic Society.

1933: "All safe deposit boxes in banks or financial institutions have been sealed. . . may only be opened in the presence of an agent of the I.R.S."
~ President F. D. Roosevelt.

With increasing optimism, they gave birth to a silly idea called the New Economic Era. This notion spread all over the country. We were assured we were in a new era where the old laws of economics no longer applied."

~ Former President Herbert Hoover writing in his memoirs (about the years prior to the Great Depression).

John Maynard Keynes: in spite of his brilliance as an economist, Keynes failed to see the crash coming and is reported to have remained fully invested and lost one million English pounds in the Crash of '29.

Professor Irving Fisher, Ph.D. Economics, held steadfastly to his view of an imminent recovery from the Crash of '29, and went on to lose close to $140 million in today's dollars. Defying his predictions, the Dow lost some 90 per cent over the next two years and investment trusts crashed 95 per cent.

". . .up to 1927 I should have expected that the subsequent depression would be very mild. But in that year an entirely unprecedented action was taken by the American monetary authorities. . .(they) succeeded, by means of an easy-money policy, inaugurated as soon as the symptoms of an impending reaction were noticed, in prolonging the boom for two years beyond what would otherwise have been its natural end."

"And when the crises finally occurred, deliberate attempts were made to prevent, by all conceivable means, the normal process of liquidation."

~ Freidrich Hayek, Austrian School economist and winner of the 1974 Nobel Memorial Prize in Economics.

vidyohs September 23, 2008 at 6:15 am

Very good Oil Shock, and on top of that it looks as if we have enough prospective FDRs in government to make it worse when we elect them.

When brilliance, Irving Fisher, meets evil, FDR, brilliance isn't able to operate with full knowledge of evil's rules and thus loses.

Obviously Keynes wasn't given the FDR plan of attack on the American people either.

Martin Brock September 23, 2008 at 7:13 am

"This is the end, beautiful friend …

"Ride the snake, ride the snake …

"Kill, kill, kill, kill, kill, kill …

"It hurts to set you free …"

Jim Morrison, The End

Martin Brock September 23, 2008 at 7:55 am

Just thought that was funny. I'm not predicting the next Great Depression.

The elephant in the room these days is the arrival of the leading edge of the "baby boom" (the period between the World War baby bust and the Contraception/Abortion bust) at the customary retirement age, signaled by the peak of the payroll tax surplus.

Bush signed legislation in 2006 requiring corporate pension funds to add half a trillion dollars in assets. Of course, these "assets" are entitlements to rents, like mortgage backed securities, and pension funds presumably are also big buyers of credit default swaps, since they promise "security".

We're inventing as many of these entitlements as necessary to keep all of the promises boomers made to themselves over the last few decades, and the volume of promises is not obviously related to any supply of real productivity available for this purpose.

Social Security is only the tip of this iceberg and probably isn't even the shakiest of these systems of entitlement, if we take the "trust fund" seriously.

I'm calling this theory of the crisis Peak Rent.

Martin Brock September 23, 2008 at 8:04 am

The 2006 bill presumably accelerated the process whereby corporations sell their pension obligations to insurance companies, as my former employer did a few years ago. As an insurance company, AIG presumably sells annuities backed by mortgage backed securities as well as credit default swaps, not to mention the corporate bonds we were aren't discussing, like the one my former employer (the one with the pension fund) sold to finance its own purchase by an investment bank.

Matt September 23, 2008 at 11:20 am

1) yeah, lets add bureaucracy to monitor and reduce inefficiency in government. right.

2) "We will fire government managers who aren't getting results". Obviously, he's never tried to fire a government employee. Instead of "fire", I think he meant "promote".

3) "What we are up against is a very powerful entrenched status quo in Washington who will say anything and do anything and fight with everything they've got to keep things just the way they are …. oh, wait, that includes me. Well, you know what I mean." wink wink

John Smith September 23, 2008 at 2:38 pm

To give you an idea how bad the American economy is, Mexico is now calling for a fence along the border. Stay on your side!

—Jay Leno

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