This page has been archived and commenting is disabled.
Romer Lies
Romer Lies
.
Christina Romer is one on the leading liberal economist in the nation. She’s no dummy. Valedictorian from Princeton, PHD from MIT, former Chairperson of the Council of Obama’s council of Economic Advisors and now she is a professor of economics at U.C. Berkley. She’s also a liar.
Ms Romer penned a piece for the NYT over the weekend. This was her plea for, guess what, more fiscal and monetary stimulus.
Romer acknowledges that US public sector debt is already too high. But she argues that we are nowhere near the levels that were reached post WWII. Her words:
At the end of World War II, that ratio hit 109 percent — one and a half times as high as it is now.
One and a half times Ms Romer? (This equates to a debt to GDP of 72%) Where does that number come from? A few facts:
First, total debt is now $14.588 Trillion. From Treasury Direct:
GDP as measured by the BLS was running a tad over $15b as of the most recent read. From BLS:
Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 3.7 percent, or $136.0 billion, in the second quarter to a level of $15,003.8 billion.
Put the two together and the actual debt to GDP is currently at 97.25% (and rapidly rising). We will exceed the 100% barrier over the next six months.
What Ms Romer has done to spin her number is to exclude all of the debt ($4.7 Trillion) of the nation that is held by the Intergovernmental Accounts ("IG"). This is fast and loose economics. Ms. Romer knows that. But she elects to mislead the public with a totally false claim.
Does Romer think the debts owed to Social Security, Medicare, Military Pensions and Federal employees pension funds don’t count? If she takes that position, she is flat wrong. I maintain that the Intergovernmental debts are much more toxic to the economy than the debt held by the public.
The simple reason is that the Intergovernmental accounts have to be paid back in full. The process of running down the intergovernmental accounts has already started. It will accelerate very rapidly for the next decade. Every penny of the draw down of these accounts MUST result in an increase in debt held by the public.
The US has a huge outstanding of debt to the public. But neither the interest on that debt or the principal has to be paid back. This debt can be rolled over to a new maturity and a new investor. That happens virtually every single day. That is not the case with the Intergovernmental account. All of those Special Issue Treasury notes held by the various government agencies are going to come due over the next 20 years. When that happens it will result in a dollar for dollar increase in Debt to Public. Exactly the worst possible outcome.
Ignoring the IG debt and only focusing on the debt held by the public is a dangerous thing to do. It is the worst form of denial. To ignore the IG account is equivalent of ignoring the crisis in Medicare and Social Security. But that is precisely what Romer would have our policy makers do.
It’s true that the US economy is running at a pace that is too slow to create enough jobs. I think this is a structural issue. We have a rapidly aging population. We have, for years, been losing our manufacturing base. We have outsourced ourselves to high unemployment and a soft economy. That problem will take years of hard work (and sacrifice) to reverse. Insane levels of deficit spending and an (equally) insane monetary policy that just steals from savers and promotes inflation are not going to address our fundamental weakness.
Ms Romer is one of the Deep Water economists (either coast) who are pushing for more and more debt and more and more spending. She is entitled to her opinion, but she in not entitled to lie about it.
»
- advertisements -
Good stuff Bruce, I saw her contradict herself this am, a couple of times.
I remember her report from a couple of years ago. It had some projections that were counter to the O plan and she was gone.
She is clearly conflicted.
Great post, Bruce,
But please don't follow the New Yawk convention of assuming Ivy League credentials indicate anything. They have small classes consisting of the spoiled and lazy kids of the idle rich, and the affirmative action drones. That's it. A degree from a Pac 10 or Big 10 school means a lot more.
The "U" is the only school.
Ivy ='s Fail, spoon fed.. ready for the CPA & Esquire to take the offshore stuff for themselves!! LOL! SUCKERZ!
People are set in their way of thinking by the time they are her age; for many, long before that. If they think stimulus would work, they are gong to make justification when it doesn't work, stick to it, and take it to their graves.
For better or worse, it is the same thing with many people who comment here and other websites.
Quite correct. It is more than middleaged intellectual inertia. She has dedicated her life to more government; if she were to admit that all this 'stimulus' was just one continuing ruinous idea, she would be negating herself and her coterie.
She and others like Krugman will never admit they are wrong. No matter how much is spent on stimulus, they will say it wasn't enough. After Obama's $800B stimulus failed, Krugman said it wasn't enough. If it was $1.6T and failed, Krugman would have said it wasn't enough.
dammit man she is not paid to be an independent thinker, she is a corporate board member, who puts out the message. why are you people so naive?
And then there is Romer's appearance on Maher's show:
Season 9, Episode 26 Aired: August 5, 2011 August 5th, 2011Chef Anthony Bourdain and economist Christina Romer are the interview guests. Panelists: filmmaker Stephen K. Bannon; astrophysicist Neil deGrasse Tyson; journalist Joan Walsh.
"so, just how fucked are we, Christina?"
isn't this the same cunt that said with the original stimulus unemployment would peak at ~8%???
It's shocking how you girls talk about each other!
Yep, I was going to bring this up. Arithmetic and money management has never been "progressives" strong suit. They specialize in arguments emphasizing that nebulous term "fairness". That's why they dominate the "affluent non-profit sector of the economy" and specialize in the parasitic professions like the "law" or "economics". If you can't create something yourself like a business service or product why not steal it from someone who can is their motto.
In cave man times they were undoubtedly just tossed out of the cave to fend for themselves when they didn't contribute to the food supply due to their hunting incompetance and laziness. Today they're much harder to get rid of and thus are able to reproduce eliminating the forces of natural selection.
earth to Bruce. this is how the world works, (at least since Bush, who labeled himself CEO of America) The CEOA has a board meeting, and they put out the message. The message this week is STIMULUS STIMULUS MORE STIMULUS. You smile a lot and repeat the talking points, or they replace you.
Romer is a salt water economist not a deep water economist.
Glad to see that you've changed your attitude about the SS Trust Fund, Bruce. Yes, the debt is real.
Sorry to hear that you find it a more dangerous shade of debt.
True to your previous cheerleading exposes about its "unsustainability," however, every sign suggests that it will indeed be the first debt written off. The finance industry will no doubt insist upon it to "save the [financial] system" one more day.
A system--not limited to the much, much smaller government piece of it--that writes off so many to benefit so few does not merit saving, imo.
After a low interest rate fueled debt bubble, there should be a deflationary period where the debts are worked through. The consumer is debt saturated, so has to either pay off or default on debt. The gov is unwilling to let this happen, so is intervening in the economy by trying to pick up spending where the private sector left off. This deficit spending to prop up the economy is complicated by the future obligations of the US, and limited growth prospects due to demographics and manufacturing competition. The question being, can the US economy, and the dollar, survive a high debt to GDP ratio and the higher interest rates that should accompany it? Deep concern is justified. Defict spending on infrastructure projects would be a much better tactic. This would produce something of value in the end besides zombie banks, and lower the unemployment rate. Additionally, the material used for infrastructure projects should be domestically sourced.
Answer: no. Not a snowball's chance in hell. Von Mises was right, it is default or print to currency destruction, and we have chosen door #2.
Not even with a wool blanket and a strapon....
http://www.federalreserve.gov/pubs/feds/2004/200448/200448pap.pdf
THank you for your post Mr. Waddams. Even very bright people sometimes try to model the very complex real world with structures that are dependant on an environment that no longer exists. As an engineer I have to observe that engineers sometimes become tools of their tools and rush to apply favorate models to situations than can be better handled in other ways.
This ailment seems to be rampant within certain parts of the financial community today.
How about we concentrate on cutting stuff we really do not need...like more wars. We would save trillions if we end the Iraq occupation and get out of Libya. Bring our troops home and pay then to guard the border and patrol our own streets where crime is soaring now.
http://hotair.com/greenroom/archives/2011/08/05/race-riots-at-the-wiscon...
If we ended the wars and dissolved the military, we would still have a $1 trillion annual deficit. Repeal the Bush tax cuts on top of that, we still have an $800 billion annual deficit.
I'd rather pay police men to patrol our streets. I don't want to see the military doing that. posse comitatus is very important.
Good point. However, over 80% of the police force in my town already consist of ...can you guess?
This grrl don't trust NO COPS.
This grrl's PEOPLES don't trust NO COPS.
LEO lost that trust a long time ago.
FUCK LEO.
If LEO comes to my 'hood like that they better be ready to take some casualties.
Homey don't play.
Nice shtick you got going there!
Perhaps her article reflects the insider knowledge that the US intends to throw grandma and all those other moral but not legal obligations under the bus.
Bruce, you forgot to mention that she looks like Bill "The Big Tuna" Parcells.
Dolores Umbridge
"As I told you, Mr. Potter, naughty children deserve to be punished."
ROTFLMAO! I knew she looked familiar!
Romer's vaunted Keynesian Multiplier Effect of stimulus spending did not work because it was overwhelmed by massive sovereign debt. Romer was apparently not smart enough to figure this out by simply observing the trends over the years that this terminal event was coming, and predictably, on her watch.
The positive effect of stimulus has consistently ratcheted down over the decades, like habituation to heroin, as the national debt has grown. As hardcore Keynesian addicts, Romer and Krugman are merely advocating massive amounts of stimulus to get the same response they are accustomed to in order to try to selfishly validate their theories one more time. It's just sad neither has the intellectual honesty to admit it's a dead end.
Romer (and Krugman) are now reduced to desperately doddering around the country defending their wasted life's work and the Cult of Cul-de-sac Keynesianism. It's an economic theory that was born out of fear of communism and fascism back in the 1930's to legitimize government deficit spending to keep the masses placated and fleece the public through inflation.
Delegitimization of Keynsianism has also delegitimized fiat currencies. Time to move back to the future and honest money with a gold or metals standard.
*
A year ago , the press, when reporting debt/gdp, always excluded intergovernmental holdings. At least now, this has reversed and it is reported correctly. Anyone who doesn't has an agenda.
Bruce, the 72% debt to GDP ratio is a 3 year rolling average...maddening , as public debt doesn't roll back...
Inflation is a tax that arises because the nation's people refuse to pay their inevitable taxes any other way. One way or another, the U.S. is going to pay back its debt in dollars that are worth less, relative to total revenues, than it borrowed them, because it can't or won't raise taxes in a visible way. Ron Paul et all are right that this inflation is a "hidden tax."
But for crying out loud, this tax HAS TO BE HIDDEN. Americans refuse to accept increases in non-hidden taxes anymore, because they've been brainwashed into thinking if they don't pay taxes, government will keep running for free. Everyone wants a military, police force, court system, social security, etc., and no one wants to pay for it. The only way the U.S. govt. can get people to pay taxes anymore is by pretending the taxes don't exist.
This will not be the end of America. Back in the 70s we had massive inflation, and then interest rates of 15 or 20 percent a year. The US didn't collapse. Savers lost big time, but they were trying to scam (put in a dollar, get back two dollars) and so they got scammed, with "high interest rates" that actually just reflected inflation. On the other hand, those who invested rather than saved were ultimately vindicated, as the U.S. GDP grew, and the economy recovered.
The same thing will happen this time. Those who are sitting around carping about the U.S. printing money and the dollar losing value are the same people who are determined not to pay taxes. They are the ones who moan that they will not invest due to the "uncertainty" about whether there will be more taxes or govet. debt. Guess what? They will be paying taxes after all, thru inflation, when their savings loses value due to inflation. They could have just buckled down and used their wealth to be productive, but instead they tried to hide from the cost of participating in society. Won't work, sorry.
All of the speculative opportunities -- stocks, bonds, commodities -- are getting wrecked due to everyone hoping to piggyback on other people's business. This is because everyone is still looking for the free ride. The best way to prepare for this inevitable inflation is not to pile up gold and silver and hide, or to short/long stocks or bonds. It's to recognize that right now is anopportunity to do business, because the vast majority of people are to chickenshit to try, or have already been wiped out in the recent crashes. Don't look for free money. Don't try to multiply the money you have by borrowing or speculatining. Look for real business opportunitites for yourself. That's where the real money is going to be found.
And for god's sake, don't just get a "job," especially not for a big corporation. That just let's someone else use your labor to further their business. Work for yourself.
Great post. I agree whole heartedly. My wife is up in arms because she wants my daughter to go to college. She is in her second year at a really good semi-private academy where she is doing really well in college prep classes. I want to set her up in a business that she would find interesting and start making money. When she is 20-22 if she wants to go to college, fine, she can go to night classes and she will have made some money to help pay for it. Business experience in the real world is the best you could ask for. Not pretty, but real.
You make some good points; however, even new business needs customers that are not retrenching. Also, there is the aspect of feeding the family and surviving. Certainly having your own small business offers many benefits in tough times regarding taxes and write-offs. People often say slow economic times are the times when one should have saved some cash to do the opposite of what other companies are doing: cutting back on marketing, employees, etc... In other words it wouild be helpful to have starter cash, be without dependents, and have some entrenpreneurial skill sets. I have had my own business for 30 years- started as a sole prop. for 5 years, switched to a C-corp with 3 employees for 23 years, and now I am back to a sole prop. with just myself.
All absolutely true. Kudos for your hard work and individual innovation. The exagerated business cycles we suffer from today are being magnified by the massive financial consolidations, everyone working for other people rather than finding ways to be more self-reliant. All it takes is a few big businesses to fall apart, and financial havok results these days.
Back in the 70s we had massive inflation, and then interest rates of 15 or 20 percent a year. The US didn't collapse. Savers lost big time, but they were trying to scam (put in a dollar, get back two dollars) and so they got scammed, with "high interest rates" that actually just reflected inflation.
That's not what happened. Savers were saving, just to get something back, or to not lose value quite as fast as inflation.
Risking your money in a savings account or by investing your money in somebody elses business is never a free ride. You had to work to get that money in the first place, and you deserve to get paid for the risk you take that you might not get it back.
The only free ride I know if is inherited money, to which unfortunately I've never been introduced. You sound like the leftists to whom every success that occurs to somebody else must be a 'free ride'.
"Savers were saving just to get something back."
Not quite. Rather than thinking for themselves, creating value, doing business, etc., the "savers" were simply handing their money over to a large bank, hoping to let the bank do all that work for them. They didn't want to have to think/work with their money, because they were afraid of losing it. In so doing, they denied their local bussiness community the opportunity of working with them. So many people have essentially taken their money out of their local communities, and given their money over to multinational corporations, hoping to piggyback on those corporations' success -- essentially getting a "free ride."
The "risk you take that you might not get it back," for the vast, vast majority of savers, is not an intelligent risk at all. In America, we've been bred for the last 60 years to believe that we should be able to have our money majically compound just by letting someone else (usually a big bank) hold it. The "search for yield" pyramid scheme is caused by the printing of money/inflation to create the appearance of "growth."
Ironically, the more our financial industry pursues "growth" the less true growth is actually created, as money is slurped up out of communities. Everyone is looking for "growth" but no one is actually CREATING growth through actual innovation or local development. Money is misdirected from actual business to the "Markets" where it becomes just another drop in the sea of liquidity.
You should realize that not every person in the world has the desire or ability to start up and run a business and work all by themselves.
i can assure you, not EVERYONE WANTS !
Well said. I disagree with the last sentence though. United we stand. Both the laborers and the owners have to sacrifice some of their earnings for the greater strength provided by a cohesive society.
As a general matter, the laborers have already sacrificed, and the owners have grabbed all of the laborer's "sacrifice" for themselves. Payroll taxes (paid only by laborers, and disproportionately by the poor ones) is threatening to become the largest source of federal revenue, even as corporate income tax shrinks ever-smaller. This despite the fact that the earnings by the two groups are showing inverse growth -- the poor getting poorer, corporate revenues at all-time highs.
The employer-employee relationship is getting close to slavery in many cases. The vast majority of people with "jobs" are producing more than they ever have, and seeing less of the actual value they produce than ever before.
And it isn't going to get better before it gets worse, I'm afraid, because of the huge supply of people who don't even have "jobs" right now. The employee/employer relationship has economically neutered the vast majority of Americans, by sweeping up vast swaths of opportunity.
Now most Americans are economic eunuchs, who cannot find success on their own with their current mindset and education. They have to latch on to something bigger than themselves -- an "employer" -- to handle the economic risks.
As a result, most people are in an all-or-nothing economic situation. They are either incredibly stable, receiving exactly the same amount of income every month and year, completely predictably, or the stream shuts off almost completely , and they are "unemployed."
As a result, most people are lulled into complacency. They can predict their income for years in advance, and thus they spend it for years in advance with 30-year mortgages and 7-year car loans, and 10 to 30-year student loans. Then, once they've spent all of their future income, they quiver in terror at the prospect of "unemployment."
I say all of this because until recently I was one of them. I depended on "employers" for my economic health. It was a rather painful unwinding process once I saw what was really going on, but ultimately the pain wasn't nearly what it would have been had I waited for another decade or two, hoping for mercy from the unemployment Gods.
good post, I wanted to vomit when I saw it, hope you are sending your article to the times. On the plus side the times did have an artivle on hoenig to balance out the crap.
also not sure you included fannie and freddie (BONDS WHICH WE BACK)
The GSE's (Fannie, Freddie, et al) are not in those numbers, they are several trillion dollars by themselves. The trick is that, unlike Treasury bonds, the GSE debt is offset by the value of the cash flow from he mortgage pools they underwrite. Something less than par, but how much.. who knows. In real world accounting, the federal governments balance sheet would show a net liability for the dfference between the value of the debt and the NPV of te future cash flow from the mortgage pools. In government accounting, which is suspeciously similar to Enron accounting, Fannie & Freddie are held as off balance sheet SPV's. Every quarter that the GSE's lose money, which is every quarter, the government spots them enough cash to just stay in the "black".
To compare the nations economic plight today, with that which occured over 65 years ago is completely asinine.
As other posters have noted, about the ONLY thing in common between these two time periods is excessive debt. All other factors being completely different. Ms. Romer unfortunately, is now passing these same faulty thoughts onto a new class of economic thinkers as a teacher. I sincerly hope that these students see through the lies.
What? A lying skeezer with a PhD in "economics" from MIT? Impossible.
How do you think she got that PhD?
The other fallacy in the WWII debt level comparison is the assumption that if we were able to pay down that debt over the next 30 years, we could do it again. That assumes that conditions are the same as then. Back then, 10 million GIs came off the public payrolls and went into the private sector creating wealth (and tax revenue) in a world where the U.S.A. was one of the few modern industrial countries left standing that hadn't been bombed to hell. How is that situation like today?
Fine point, dxj, and yet so obvious it's hard to believe anyone, even a prominent economist, could be dumb enough to miss it. I swear, this is the most difficult, frustrating aspect of following the economic news - it's impossible to sort the stupidity from the cupidity. My hope, by the way, is that we're looking at evil intentions over plain dumbness - the former is reformable.