Who’s Reckless?

by Don Boudreaux on September 15, 2009

in Other People's Money

Here’s a letter that I sent yesterday to Newsday:

You report that “President Barack Obama sternly warned Wall Street against returning to reckless and unchecked behavior” (“Obama warns Wall Street against high-risk behavior,” September 14).

What gall he has.  Following the lead of his predecessor in the White House, Pres. Obama irresponsibly portrayed the economy as being in far-worse shape than it was in – seemingly to justify his increasing, in a single year (2010), federal-government spending by 34 percent over the previous year.  No such percentage increase in spending has happened since 1952.  The resulting budget deficit will be more than 11 percent of GDP – a figure not seen since WWII.

Until Presidents Bush’s and Obama’s rash actions, Wall Street executives, no matter how ‘reckless’ they might have been, at least generally spent only their own money or money voluntarily entrusted to them.  Mr. Obama, in contrast, and expanding on a tradition followed by most recent presidents, irresponsibly spends large amounts of money taken from other people – especially from future taxpayers who’ll be on the hook to service the federal debt.  That is reckless and unchecked.

Donald J. Boudreaux

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David September 15, 2009 at 7:23 pm

When the private sector misbehaves, it’s called “reckless and unchecked”. When government does the same, it’s “bold and decisive”. Clearly the answer is to have the government take control of the entire economy. That way, instead of having a “reckless and unchecked” economy, we will have a “bold and decisive” economy.

Anonymous September 15, 2009 at 8:20 pm

It’s because of the brainwashing of the American public. They’ve been taught that capitalists are greedy, evil bastards and the goobermint is there to save them from said bastards. Just ask anyone on the street.

Dave September 15, 2009 at 7:30 pm

I personally agree with the sentiment of Don’s letter, but I assume someone will point out that our government supposedly has a system of checks and balances. Unfortunately, one of those, Congress, faces the same short term incentives that the President does.

Anonymous September 15, 2009 at 8:09 pm

How do you figure he portrayed the economy as being in far worse shape than it was in? We can’t prove these counterfactuals, but I’m not sure why you think yours is any more credible than his. If also find it odd that public finance and private finance are expected to play by the same rules. They’re fundamentally different beasts. Since when have they been subject to the same constraints or standards of evaluation? A lot of people would suggest that not putting the stimulus in place would be the epitome of reckless.

I know you don’t share that view, but simply saying “look how much he spent” isn’t a refutation at all when the whole point of the contrary position is to spend a bunch of money.

Anonymous September 15, 2009 at 8:19 pm

Daniel – can you ever admit that Obama got pwned? You always try to be counter for the sake of it.

Anonymous September 15, 2009 at 8:23 pm

Do I really disagree just for it’s own sake? Does Don always write counter-letters for the sake of it?No is the answer to both questions I think.The point is simply that saying “he spent a lot” doesn’t really stick as a criticism if the point is to spend a lot. That’s all I’m trying to point out.

Anonymous September 15, 2009 at 8:25 pm

I could write a letter to the people who voted against the stimulus and call them reckless because they didn’t support large deficits.

It wouldn’t get very far as a charge of recklessness, though, because that was their whole point.

Anonymous September 15, 2009 at 8:35 pm

That he intended to repair an economy that may or may not have been hurting as much as he said is irrelevant – it’s the means that he and other presidents employed that is the problem. Spending other people’s money and putting the nation into ridiculous amounts of debt is reckless and immoral. People must be judged on actions, not intentions.

Seth September 16, 2009 at 2:22 am

Write that letter and see how much credibility that gains you.

“It wouldn’t get very far as a charge of recklessness, though, because that was their whole point.”

What definition of reckless are you using?

The fitting definition would seem to be: utterly unconcerned about the consequences of some action. I believe the spending bills would qualify given the speed at which they were rushed through leading to widespread criticism that our elected officials should be, at least, expected to read what they were voting on.

Because they intended to spend a lot of money, and did (or will), doesn’t mean they did it without regard to the consequences.

Anonymous September 15, 2009 at 8:29 pm

Don’s point was the hypocrisy of accusing the Wall Street execs of recklessness when Obama is being reckless.

Seth September 16, 2009 at 2:15 am

“The point is simply that saying ‘he spent a lot’ doesn’t really stick as a criticism if the point is to spend a lot.”

How so?

Anonymous September 16, 2009 at 11:48 am

Daniel is saying, in Keynesian fashion, that the point of the stimulus was to spend like crazy, as only the public sector expenditure could save the economy from settling into a massive depression.

Thus, pointing out that “he spent like crazy” becomes a good, like “that running back ran like crazy up and down the field”.

David September 15, 2009 at 8:30 pm

You could say that the economy was not as bad as people thought it was because, for example, the stock market is only ~12% below where it was pre-crash and people are already saying that the recession is “likely over” yet Obama used the crisis to push a spending plan that has only let out a small fraction of its outlay. Many, such as Krugman, argued strongly for a second stimulus and Obama also entertained that idea. The predictions of unemployment which prompted the stimulus and the stimulus’ expected impact have turned out to be nothing like what was predicted. As far as the handling of the whole situation goes, I see nothing to indicate responsibility on the part of government. I can’t see how refusing to take extraordinary, borderline illegal (using TARP for automakers…) actions could be considered reckless.

Anonymous September 16, 2009 at 2:32 am


As one of my colleagues here points out, if “we” are worried about future generations being on the hook, we can certainly set aside savings today in order for them to be able to pay off this debt. The point is not that government profilgacy is not a problem, the point is, rather, that I can insulate my children (somewhat) from having to bear the brunt of today’s borrowing and spending.

Seth September 16, 2009 at 4:43 pm

Interesting. So, the Don’s claim that the percentage increase in spending hasn’t happened in ’52 and a budget deficit that has not been seen since WWII isn’t a compelling story for being reckless?

I can agree with that. The fact that the country is still here after those two occurrences takes away the punch for an uneducated person like myself who doesn’t know what bad, if any, came from hitting these levels before. In fact, it seems WWII deficits bought a lot of good since we aren’t speaking Hitler’s German now.

I agree that there might be a better way to present the case that spending a lot is reckless for the masses.

Here’s a suggestion (I’m open for factual corrections):
Government is using the same spending and borrowing habits that led millions to foreclosure and the failures of “too big to fail” banks and given the speed at which the largest spending bills in history were rushed through without time to read, let alone vet, the “do as I say, not as I do” act doesn’t hold a lot of water.

I know, too wordy, but is that general concept any more compelling? Why or why not?

Anonymous September 16, 2009 at 9:57 am

Quite a bit of credibility. I hate to break it to you, but most people agree about the appropriateness of fiscal stimulus. The process could always be improved, but most people that are in on this debate find the ones that voted against it to be reckless. That’s all I’m saying – without explaining his logic Don’s letter, I think, will fall on deaf ears.

Anonymous September 16, 2009 at 10:04 am

Ummm – that’s sort of my point. I’d argue that the action of voting against the stimulus was reckless. I’d argue that the failure to pass the stimulus last fall was reckless. That was action greego, not intention. And it’s largely irrelevant what the intention of the people who voted against it was.

muirgeo September 16, 2009 at 1:08 pm

Nice racist little avatar there Grego. Oh I know it’s supposed to be the joker but it’s also conveniently close to looking like the Sambo http://hiphopolitic.files.wordpress.com/2009/06/sambo.jpg pictures you’d like to use to display to show what you REALLY think off the president.

That’s really sad and pathetic!

Anonymous September 16, 2009 at 10:20 am

You are misdirecting. There is a fundamental moral difference between voting to spend other people’s money and voting to abstain from spending other people’s money regardless of the intended outcome. Whereas your support for stimulus focusses on your expected outcome (economic recovery), the objection to stimulus is about means (spending other people’s money) and outcome (the stimulus will create economic distortion and delay recovery).

Anonymous September 16, 2009 at 10:21 am

Also I accidentally clicked on ‘like’ instead of ‘reply’ to your post and don’t know how to remove it.

Anonymous September 16, 2009 at 1:41 pm

I couldn’t give a toss what colour Obama’s skin is, I’m interested only in his words and actions. As for the avatar, it looks cool and is provocative. I’m planning on changing it this weekend to a new one which I’m sure you’ll love. Stay tuned!

Anonymous September 16, 2009 at 1:52 pm

It’s sad that he’s comparing him to a villain, but I’m not sure what your race point is muirgeo.

Anonymous September 16, 2009 at 3:13 pm

My little pet, I don’t think you’re being fair to Sambo.

Sambo was never ears deep in the corruption of ACORN. Sambo never stirred taxpayer dollars to a corrupt organization like ACORN. Sambo never promised ACORN billions of dollars and a place at the presidential table.

But that is by-the-by, only a stupid socialist elitist racist like yourself would have attempted to connect greego’s avatar to a racist caricature of Obama.

Anonymous September 17, 2009 at 5:59 am

The guy who constantly bitches about Asian imports is calling someone else racist. What a hoot!

Anonymous September 16, 2009 at 1:51 pm

Duly noted – I’ll ratchet down my sense of self-worth by one “like” indicator :)

Anonymous September 16, 2009 at 1:54 pm

No more than you’re misdirecting by assuming that the community has no existence independent of being the sum of it’s constituent parts.

If I go into it with your assumptions about what taxation with representation and appropriation with representation is, of course I have to come to your conclusions. What you seem to be missing is that I don’t.

Anonymous September 16, 2009 at 1:59 pm

Misdirecting……ahhhhh yes.

greego, that is why he has become known as Disingenuous Kuehn or Duplicitous Kuehn. It is his mental gag reflect. From the moment he first appeared posting here he has been that way and in response to everyone on everything.

Anonymous September 16, 2009 at 1:56 pm

Exactly. If you think it’s reckless, talk about that. By simply leaving it at “he spent a lot on state budgets infusions, research, construction projects, counter-cyclical income supports, and tax cuts” I’m tempted to respond “wow – I’m glad this president is so responsible”. Don’s letter sounds positively goofy unless you come into it with Don’s assumptions.

Seth September 16, 2009 at 4:44 pm

Sorry, my previous post, beginning with “Interesting…” was meant to be a reply here.

Anonymous September 16, 2009 at 4:54 pm

I think that approach is much more compelling, yes Seth.I’m not sure if we’re duplicating problematic spending patterns, but it is the problem we face. Irving Fisher wrote about the risk of a debt-deflation cycle. How do you address that? You support the debts that pose a risk (mortgages in this case). Now, we’re not adding new inappropriate mortgages necessarily – but by preventing a debt-deflation spiral we are preventing the rapid cleaning out of the rot. That’s for sure. Same with “too big to fail”. Nobody likes maintaining these institutions. The point is that they like the failure of these institutions far less. That’s the whole point of calling it “too big to fail”. Regardless, I think those kinds of specific grounds for criticism are much more useful.And it’s true – just the mere fact that we haven’t done something for fifty years is a good sign that it might be reckless. But it’s also worth asking “Well why haven’t we done it for fifty or sixty years? Could it be that the conditions that prompted it then haven’t reemerged until now?”. And as you point out – we dealt with a 100% of GDP debt burden back then. That should be a clue to our abilities to deal with it now (although on this point it’s important to look back to an earlier post of Don’s – then most of the debt was military and discretionary – easy to cut. Now it’s entitlements – much harder to cut).

Methinks September 16, 2009 at 7:19 pm

I love the avatar! The Democrats wailed about racism when they first saw the picture but began maintaining radio silence as soon as it was discovered the artist was a Palestinian college student, a Democrat and supporter of Kucinich.

Y’know…if the shoe fits.

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