I guess it depends on what you mean by "responsibility"

by Russ Roberts on February 26, 2009

in Taxes

Obama, in announcing his budget with a projected deficit of $1.75 trillion, champions responsibility:

In a presidential message preceding a summary of the budget, Obama laid
out elements of the current economic crisis that he said warrant
massive government spending this year and next. In addition to the loss
of more than 3.5 million jobs in the past 13 months, he said, another
8.8 million Americans are underemployed, manufacturing employment has
hit a 60-year low, capital markets are "virtually frozen," and
"trillions of dollars of wealth have been wiped out" in the stock
markets.

"This crisis is neither the result of a normal turn of the business
cycle nor an accident of history," Obama said. "We arrived at this
point as a result of an era of profound irresponsibility that engulfed
both private and public institutions from some of our largest
companies' executive suites to the seats of power in Washington, D.C. .
. . This irresponsibility precipitated the interlocking housing and
financial crises that triggered this recession."

Saying that government has repeatedly failed to confront systemic
problems as policymakers have chosen "temporary fixes," Obama declared:
"The time has come to usher in . . . a new era of responsibility. . . .
This budget is a first step in that journey."

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{ 42 comments }

mcwop February 26, 2009 at 1:45 pm

My favorite is his constant line about the deficit he inherited. This is true, but it is also true that he is significantly adding to that, which he inherited. He is adding about $1.25 to 1.5 trillion over the next few years.

tw February 26, 2009 at 1:54 pm

I was feeling really scared because I thought that a $1.75 trillion deficit was irresponsible. But now that the Ministry of Truth has issued an edict calling such a deficit "responsible," I feel so much better.

mcwop February 26, 2009 at 2:09 pm

TW, I am betting the deficit actually comes in at $2 trillion.

mcwop February 26, 2009 at 2:12 pm

Forgot the reason why I think the above ($2T) is that a massive auto bailout is not factored in.

SaulOhio February 26, 2009 at 2:15 pm

Its amazing how all of that sounds like something I would agree to 100%, if interpreted in the way I would mean it if I said it. The problem is that it is all generalities, and if we substituted specifics, Obama and I would probably end up making exactly the opposite statements. Thats politicspeak at its finest!

Speedmaster February 26, 2009 at 2:29 pm

Screams of newspeak from 1984.

indiana jim February 26, 2009 at 2:29 pm

This propagandist seems willing to say anything to expand the scale and scope of government.

Scott February 26, 2009 at 2:59 pm

Mr. President, you are an Obamination!

We don't have the money for this. We are all ruined!

Goodbye retirement! Never going to happen now!
Goodbye hapiness!
Goodbye hope!

All is lost!

Mike Rulle February 26, 2009 at 3:04 pm

"This crisis is neither the result of a normal turn of the business cycle nor an accident of history," Obama said. "We arrived at this point as a result of an era of profound irresponsibility that engulfed both private and public institutions from some of our largest companies' executive suites to the seats of power in Washington, D.C. . . . This irresponsibility precipitated the interlocking housing and financial crises that triggered this recession."

Soros could have said this. I kind of prefer the "extraordinary claims require extraordinary evidence" mode of exposition. This is junk think. Some people have a hard time believing that mundane and simple things can cause problems. The mundane and simple were lending policies promoted in the sun states plus Michigan. How is that Texas, a border state second only to California in size, and almost demographically identical, did not have the same problems as California? Because they had gone through this before. They did this in the 80s and learned. Countrywide and others were leaders of the securitization brigade in California and the west in general. Texas, on the other hand, learned their lessons. They also are not a tax and spend giant welfare state.

Obama refuses to speak of specifics, when the specifics are right in front of us. He instead tries to make it a "system" issue, mysterious and unknowable, except by only the brightest minds, like his. When we see the word "profound" spoken by a politician, it means hold your wallet. This crisis is many things, profound "this or that" is not one.

Michael Smith February 26, 2009 at 3:15 pm

Professor Robert’s quotes from Obama’s speech:

We arrived at this point as a result of an era of profound irresponsibility that engulfed both private and public institutions ……..This irresponsibility precipitated the interlocking housing and financial crises that triggered this recession.

Irresponsibility?

Who irresponsibly lowered interest rates to record lows and held them there, thereby creating a vast flood of cheap credit? Not the private sector.

Who has irresponsibly followed so persistent a pattern of inflation as to convince virtually every American that asset prices will always rise — that purchasing a home is automatically a “good investment”? Not the private sector.

Who irresponsibly insisted on the lowering — and in some cases, the outright elimination — of credit worthiness standards such that riskier and riskier loans would be made? Not the private sector.

Who irresponsibly created a vast secondary market for these “subprime loans” so as to enable lenders like Countrywide and Wamu to pass the junk loans on to someone else so they could make still more junk loans? Not the private sector.

Who irresponsibly created the cartel of rating agencies that rated securities containing these junk loans as “AAA” — and who is irresponsibly keeping these same rating agencies safe from any competition — and who is irresponsibly forcing financial institutions to continue using these same agencies? Not the private sector.

Who has irresponsibly — and repeatedly — bailed out obviously incompetent financial enterprises, thereby allowing them to pass the costs of their bad decisions on to the taxpayers? Not the private sector.

Who irresponsibly wiped out the Washington Mutual debt holders — thereby telling all investors that any investment in a bank is subject to disappear at the whim of banking regulators — thereby effectively closing the capital market to banks? Not the private sector.

Who has irresponsibly reduced the capital requirements of the commercial and investment banking system such that the former are leveraged over 10 to 1 and the latter 30 to 1? Not the private sector.

Who irresponsibly instituted new accounting rules 2 years ago that prevents a financial institution from valuing its assets based on rationally expected return on investment — and instead forces it to use “market value” — even when no market exists? Not the private sector.

Who is irresponsibly preventing the overbuilt housing market from clearing its excess inventory by preventing foreclosures? Not the private sector.

Who even now is irresponsibly sending the message that those who are struggling to keep their mortgages current need not do so, because government will help them if they default? Not the private sector.

Who is irresponsibly rescuing some firms, while letting others fail? Who is irresponsibly announcing “desperately needed” bailout plans one day — then completely abandoning that plan the next day — followed by the announcement of still-yet another plan the day after that — thereby creating deadly financial uncertainty? Not the private sector.

Who owns the monetary system and has total control over its operations, its regulations, its practices and its accounting methods? Not the private sector.

The private sector doesn’t have the power to create a mess like this, President Obama. Only those of you in government have such power.

Jamie February 26, 2009 at 3:46 pm

I was ticked about two things in that speech: the proposition that the entire ginormous wish-list could and would be paid for by taxing the top 2% of earners (plus cutting defense and subsidies to "agribusiness" but not "small farmers," which presumably means there's a functionary somewhere in government who will decide when a "small" farmer gets too big and constitutes an "agribusiness" – or else that "agribusiness" executives are going to put their kids and grandkids on a tractor a day or two in the summer so they can claim "family farm" status), and the "challenge" to all Americans to go back to some kind of school, regardless of whether they need or want to do so, because it's their patriotic duty. For crying out loud. I do NOT go to school, or to the mall, or to church, or anywhere, because it's my "patriotic duty." I do these things for myself and my family, and efforts to align my first loyalties in any other direction than that (a) will fail and (b) are counter to the country's foundational principles.

Sam Grove February 26, 2009 at 5:24 pm

All taxation ends up as a burden on those who labor to create value.

Seng February 26, 2009 at 6:46 pm

Table S-1:

The "New Era of Responsibility" shows projections through 2019. Not one year does it project a balanced budget. Responsible, indeed.

muirgeo February 26, 2009 at 9:35 pm

Obama is being honest. This post and the replies to it are dishonest. For people who truly do not understand Obama's intentions and plans reading this article could make him sound like a hypocrite and a buffoon. But of course he is neither. He is as Russ well knows following a specific plan that many prominent economist would agree with. But I guess everyone here thinks they are smarter then all those economist and that THEY are the ones with a corner on the truth of how best to clean up this mess. But unfortunately for you all many Americans are "visionist" of history and NOT revisionist who realize Hoover doing nothing for 3 years dug us deep into an Depression that would take many years to unwind.

But of course I could also go back and pull articles from 1993-4 proclaiming the end of our economy from the time Clinton budget and tax raises only to have it followed by 22 million new jobs and a stock market that went up some 166%.

So bitch and whine all you want but your guys had another chance at power and for the second such time in a row they ran us deep into a Depression. Fortunately, this time "FDR" comes to the scene a little earlier in the picture before 3 years of do nothing Hooverism could compound the problem many fold.

Methinks February 26, 2009 at 9:50 pm

I wonder how many posts there will be this time to tell Muirdiot for at least the 754th time that Hoover did not do nothing and that, in fact, the New Deal was rooted in Hoover's highly interventionist policies…

Methinks February 26, 2009 at 10:11 pm

…and Muirdiot,

Your second favourite economist (next to Marx), John Maynard Keynes, thought very highly of hoover. Just imagine how much intervention it took to garner such glowing admiration from the man himself.

Oil Shock February 26, 2009 at 10:17 pm

Sure Muirgeo. Only thing you do on this blog is bitch and whine. I couldn't find one post where you had something positive to say. You are speculating about Obama's good intentions where as many others know from logic about the real bad consequences of Obama's policies. There is one thing that others have going for them, that you don't: Others realize that overwhelming majority of politicians are scums.

Since taxing according to you is such a great incentive for growth, what you should advice Obama to do is to Tax all those "green" energy companies and subsidize the Oil, Coal etc. That will help destroy those traditional energy industries and help grow the green technologies – at least that's what your logic says.

You should also tax the poor people and give welfare to the poor so that we can do "social justice". Yes, I know you have got lies, damn lies and statistics to prove your point.

If you don't like the whining here, no one is forcing you to go through the torture of hanging around here.

Actually the drippy economists that you worship are the arrogant ones. they think they are the masters of the universe. They think they have the world economy by the tail. The ones you call arrogant are actually humble enough to know that they don't know everything.

Muirgeo, if you had any integrity, you wouldn't have used these following words in that order : Hoover doing NOTHING ( nada, zero, zilch ) for 3 years.

What is the point of you posting here? Do you have even a amoeba sized opening to see the opposing point of view? How long have you been coming here? Could you post 10 major areas where this blog has altered your point of view? I bet you couldn't.

Sam Grove February 26, 2009 at 10:18 pm

many prominent economist would agree with.

An argument from authority is as worthless as any of your other arguments.

He reminds me of that character in a science fiction story who discovered a drug that kept him from aging. The problem was that his brain would not change either, so he "healed" from any new information that was given to him.

MWG February 26, 2009 at 11:16 pm

Muir your posts are so repetitive, I could cut a paste responses to your older posts and nobody would know the difference.

MHodak February 26, 2009 at 11:30 pm

My greatest fear about Obama is not about his integrity or his intentions, or even his political nature. I fear he simply doesn't get the difference between market mechanisms and political mechanisms. He talks about the private and public sectors as if they're just different business models, as if they translate human inputs into goods and services pretty much the same way. He doesn't get the difference between a great idea and its market test.

It's not that he's not smart enough. It just isn't anywhere in his background or training to have gotten it. I think he will eventually get it, just as McGovern did, about a decade after he finds himself in the private sector–a decade too late for our nation.

SheetWise February 27, 2009 at 12:07 am

MHodak: "It's not that he's not smart enough."

Yes it is.

Speedmaster: "Screams of newspeak from 1984."

I'm going to have to learn to be happy as a less than equal pig. Discrimination is beginning to hit home, and I have no idea what I did to deserve it.

Babinich February 27, 2009 at 5:40 am

MHodak on Feb 26, 2009 @ 11:30:56 PM

"It's not that he's not smart enough. It just isn't anywhere in his background or training to have gotten it."

SheetWise said it first but it needs to be repeated again:

It is precisely because he is not smart enough. The teleprompter man is heaped with all sorts of praise and powers.

Look what he did for the state of Illinois.

Michael Smith February 27, 2009 at 8:54 am

Obama’s fundamental problem is that he is very much like muirgeo — he has swallowed whole and undigested all the left’s fallacies, lies, distortions, equivocations and myths and only knows how to regurgitate them on cue, albeit regurgitate them quite adroitly and smoothly. He has no capacity to think independently. He is completely impervious to facts, reason, logic or evidence. His mind is turned off.

That’s why he is able — with a straight face — to propose a 1.75 trillion dollar deficit and call it a “return to responsibility”. That’s why he is able — with an equally straight face — to claim that consuming wealth creates wealth. That’s why he is able — with that same straight face — to claim that punishing production encourages production. Only an active mind is troubled by the existence of contradictions.

Obama’s spending, taxation and environmental regulations will crush the economy and leave us — in all probability — in the worst of all economic situations: a hyperinflationary depression, i.e. a situation of mass unemployment accompanied by exploding prices — with massive environmental restrictions on energy production preventing any possibility of recovery.

Unless we figure out some way to stop him, Obama will fulfill the left‘s lifelong dream of destroying the last remnants of American capitalism. He is leading what Ayn Rand called “The Anti-Industrial Revolution“. He will go down in flames. Unfortunately, he is likely to take us all with him.

MnM February 27, 2009 at 9:22 am

"Obama is being honest."

You state this as fact. Do you have any evidence to back it up? On what grounds should I believe him?

"But of course he is neither."

If it were so obvious it wouldn't be very difficult to prove. Care to do so?

"But I guess everyone here thinks they are smarter then all those economist and that THEY are the ones with a corner on the truth of how best to clean up this mess."

The problem is that ALL you have are guesses. No one here presumes to be smarter than anyone. We are, however, intelligent enough to examine a man's ideas and accept or reject them on their own merit. That you would simply accept what "experts" tell you is nothing more than naked intellectual laziness.

"your guys had another chance at power"

Our guys? You mean the ones that axed all cabinet level departments except Defense and State, eliminated the income tax, shredded the Patriot Act, ended Social Security, allowed failed companies to file bankruptcy and reduced spending across the board? Those guys?

P.E. Poole February 27, 2009 at 9:43 am

Obama says that responsibility for our current mess partially lies with the "seats of power in Washington D.C.". Has he ever made it clear who he is referring to? Are they still in those seats?

Sam Grove February 27, 2009 at 10:23 am

George is a memebot.

On another note, look what the Wikipedia entry on Herbert hoover says:

"Hoover deeply believed in the Efficiency Movement (a major component of the Progressive Era), arguing that a technical solution existed for every social and economic problem."

Do-nothing Hoover was actually a progressive!

MnM February 27, 2009 at 11:31 am

Hell Sam, FDR accused him of being a socialist in the 1932 campaign…

muirgeo February 27, 2009 at 4:59 pm

Only an active mind is troubled by the existence of contradictions.

"Obama’s spending, taxation and environmental regulations will crush the economy and leave us — in all probability — in the worst of all economic situations: a hyperinflationary depression, …"

Posted by: Michael Smith

You should listen to your own advice which you give in the first sentence.

The contradiction here is the fact that you guys said the same thing back when Clinton took over and we had as good of economic growth as ever.

Now you have the gall to claim Obama is going to destroy the economy.

NEWSFLASH Mr. "Only an active mind is troubled by the existence of contradictions". The economy is already destroyed. Obama nor the Democratic party have been in charge these last 8 years. And guess what it happened after we massively cut taxes to the wealthy and deregulated the finance industry.

And if you have something to say about Randian principles just remember her good buddy Greenspan has been at the wheel of the Fed.

Now suck up all those contradictions of logic YOU present. I think you should be trouble by them but for some reason your mind appears not to be.

MnM February 27, 2009 at 5:29 pm

Once again, I don't know why I bother.

"You should listen to your own advice which you give in the first sentence."

You obviously missed his point. In the same breath you have said that the free-market doesn't exist and that, simultaneously, it is responsible for the current state of affairs. The assertion is obviously internally inconsistent. There is nothing internally inconsistent with Michael Smith's argument.

"The contradiction here is the fact that you guys said the same thing back when Clinton took over…"

Attributing what others said before Clinton took office to Michael Smith makes about as much sense as attributing what George W. Bush says to…you. Have a care, doctor.

You can either deal with his argument or project your straw-men onto him. If you choose the latter, don't expect anyone here to take you seriously.

Sam Grove February 27, 2009 at 5:40 pm

And if you have something to say about Randian principles just remember her good buddy Greenspan has been at the wheel of the Fed.

What does that have to do with what he has done at the helm of the FED? Rand called him "the gravedigger". Sounds as though she thought highly of him, eh?

So the Democratic party didn't become the majority in the house two+ years ago?

Hmmm.

You probably still think of the GOP as a center of libertarian activism.

Anybody who thinks that must have intellectual cropophagia.

That's right, Hoover was another member of the progressive movement.

MWG February 27, 2009 at 6:11 pm

"Now you have the gall to claim Obama is going to destroy the economy."
-Muir

You stick up for Obama as if he were your mother. A little creepy IMO.

Sam Grove February 27, 2009 at 6:40 pm

Obama is just the headpiece. We acknowledge that the whole "progressive" movement is culminating at this time in history.

muirgeo February 27, 2009 at 9:18 pm

"Now you have the gall to claim Obama is going to destroy the economy."
-Muir

You stick up for Obama as if he were your mother. A little creepy IMO.

Posted by: MWG

No I stick up for the truth and I point out revisionist history when I see it.

Some one saying Obama is going to destroy the economy considering the condition it was handed to him is a little creepy for their blatant lack of intellectual honesty.

But again you guys have no qualms blaming the First Republican Lead Great depression on FDR. Really it just silly at some very basic level.

MWG February 27, 2009 at 9:25 pm

"But again you guys have no qualms blaming the First Republican Lead Great depression on FDR. Really it just silly at some very basic level."
-Muir

Anyone here a fan of Hoover?

Sam Grove February 27, 2009 at 9:33 pm

George places great stock in party labels.

Hoover was "progressive".

We've had "progressive" government since Teddy Roosevelt.

I don't blame "progressives" for trying to hide from that.

Oil Shock February 27, 2009 at 9:34 pm

Muirgeo "I stick up for the truth "

You don't have to too far past to find a muirgeo lie.

Oil Shock February 27, 2009 at 9:38 pm

muirgeo….
bama nor the Democratic party have been in charge these last 8 years.

Why is that number 8 important? WHat if the number to look at is last 2, 4, 6, 10, 12 or 16 or last 100 is more relevant in the current context?

Oil Shock February 27, 2009 at 9:39 pm

Oil Shock….

Muirgeo, if you had any integrity, you wouldn't have used these following words in that order : Hoover doing NOTHING ( nada, zero, zilch ) for 3 years.

What is the point of you posting here? Do you have even a amoeba sized opening to see the opposing point of view? How long have you been coming here? Could you post 10 major areas where this blog has altered your point of view? I bet you couldn't. "

Muirgeo's answer……

Crickets chirping….

the dude February 28, 2009 at 1:03 am

For doktor arrogant blowhard,

All lies and jest,
Still a man hears what he wants to hear
And disregards the rest….Paul Simon

Sam Grove February 28, 2009 at 1:06 am

Could you post 10 major areas where this blog has altered your point of view?

Can he cite even 1?

Babinich February 28, 2009 at 5:45 am

Obama: just how intelligent and responsible can he be? He continues to have trouble placing people in his administration that pay taxes…

His record as a leader of the state of Illinois is lacking. That's putting in nicely.

http://gawker.com/5161837/obamas-chief-vetter-has-his-own-tax-problem?skyline=true&s=x

MWG February 28, 2009 at 12:09 pm

Should we trust a man whose two most recent personal accomplishments were writing two books… about himself?

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