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Romer Lies
Romer Lies
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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.
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Thanks for clearing the up "Wang."
How could you read this website for the better part of two years and remain so cluless?
Impressive...
IG is money borrowed from programs, as an example with social security surpluses. There are no more surplus and the SS payouts are now greater than the revenue received. So not only do you have more money (cash flow) going out, you are paying interest in the debt you are revolving. The payouts for what IG was suppose to support is not available as it was spent for other things. So you know have cash flow expenditures with no savings account. If you look at it in terms of total debt, you could say that the total debt of the country is about $90 trillion, and only $15 trillion is recognized at this point. If governmental spending and programs are not changed, you will accrete more and more of the unrecognized portion, which infers a larger cash flow expenditure.
Where did those green up arrows go?!
Really what you're arguing is that the government can default on all of it without the repercussion of being an actual "default." Take that old people! Go eat cat food while we play war in the various sandboxes.
The government can and already is defaulting on their SS obligations without repercussions. Some of the old people aren't eating cat food now because they can't afford it and air conditioning too. Maybe they can eat the cat?
Social security payments had a guaranty of inflation protection. That has now been reneged on. It is only a matter of time until those SS payments will buy nothing for the recipients.. Where was AARP when this took place? This should prove to the retired people who really owns AARP.
Politicians used to be afraid of the elderly because they tended to vote as a bloc. They no longer seem to be afraid. Perhaps that's because nobody's vote means shit anymore.
This is always the case, the retirees get hurt the worst. Former generals and politicians were begging in the streets in Weimar Germany. Pensioners in the former Soviet Unition experienced multiple (and very delayed) pension reforms. One study I read said they were being paid 2200 rubles a year but the subsistence level was 2700.
When I was in St. Petersburg in the late 90s, the pensions had become worth less than $15/month and even that wasn't being paid because the government pension system couldn't afford it. Their savings were worth nothing and they had savings from the many years of working in government factories with little consumer goods to spend their savings on. The old women -- the men had already died from alcoholism -- had taken up begging in the streets and selling cigarettes by the each to survive. Reportedly they had to sleep with strangers to keep from freezing to death. The younger Russians helped them out by giving them a little money.
This is what the retired folks have to look forward to in the U.S. It ain't pretty.
+1
you are forgeting the 6% earned by the Share Holders of the Federal Reserve for every dollar printed out of thin air!
God Bless the Bankers!
$+%
The moot point in all modern arguements regarding governemental borrowing.
Couper et Sectionner!
The IG doesn't matter you say??
Every cent of the IG account will have to be borrowed from the public over the next 20 years. You're flat wrong if you think that is not a threat to our solvency.
You think the IG account could be $200 Trillion and it would not matter??? Check the math. The average debt service cost of the IG account is 4% today. Apply that number on yr 200t and you get ON BUDGET interest expense of EIGHT TRILLION dollars. That is 55% of GDP. That is 3X total federal revenue. That is a number that would destroy our system.
If we had 200T of IG today we would be bankrupt, busted, finished. Our rating would be a D. That means total default.
Yes, IG debt doesn't matter. But I am not ignoring the debt crisis. I am on the record predicting a US debt default. I believe I am far more pessimistic on the US debt crisis than you.
Read the S&P statement explaining their downgrade. Do they include IG debt? No. They exclude it. Their number was in the mid 70s for net debt because they included state and local debts.
You're probably right that the IG debt will be paid down over the next 20 years. But that is not why the real debt will be going up. Real debt will be going up because total spending will outpace total revenues. If IG debt was zero now, would that reduce the government's need to pay mounting SS and Medicare benefits over the next 20 years? No, not by one penny. Real debt would grow at the same pace. Because it's being driven up by the excess spending vs revenues, not by the paying down of IG debt, which has ZERO real impact on anything.
I am not ignoring the SS and Medicare components of the debt crisis. Their projected shortfalls ate far, far bigger than the irrelevant IG debt. By pointing all your attention to the IG debt, I would say you are, perhaps unintentionally, downplaying the true scale of the shortfalls.
The IG debt could indeed be $200 trillion and it still would not matter. The math does not matter either, but here it is. Take your 4% average interest estimate. So the general budget pays $8 trillion interest to the trust funds annually. And borrows it all right back, plus or minus the trust funds' total real surpluses or shortfalls. The IG debt grows by $8 trillion. Next year the general budget pays 4% on about $208t. And borrows it all back, plus or minus the trust funds' total real surpluses or shortfalls. The only thing material happening here is the trust funds' real surpluses or shortfalls (not counting interest on. IG debt), which the general budget either grabs if it's surplus, or funds if it's shortfall.
SS trust fund isn't a trust fund at all. It fails to meet any legal requirements for a trust.
SS trust fund is a scam to make people think they have SS money saved up.
SS is a scam. FICA is just another tax. On the benefit side it's just another welfare program.
People on SS look down their noses at people on food stamps and section 8 housing and such.
They're just as guilty. Getting that SS check every month is no different than getting those food stamps every month.
SS was created to buy the senior citizen vote. Just like every welfare program is created to buy votes.
Obama knows he's losing the senior citizen vote. So he's cutting SS benefits. Putting that money elsewhere.
More like wiping out SS benefits. He wants to gut SS to nothing almost. And he will.
+1.
And it's not to your avatar.
Thanks for sharing.
Can you say Voodoo?
You make the same mistake as Romer. You assume that IG always grows and is never paid back. I tell you again. That is wrong ALL of the IG ac MUST be paid IN FULL over the next 20 years.
If you want to play ecnomic fantasy land, be my guest. But this is lousy public policy you are advocating
Sorry, Bruce, you're simply wrong. It is not not true that IG debt must be paid back. On present course, it will be, because the SS and Medicare trust funds are set to run large deficits. But if Congress increases the trust funds' dedicated revenues, and/or decreases SS and Medicare benefits, by enough to close those deficits, then the IG debt will not be paid down. It's politically unlikely but technically simple. It's not voodoo.
But my real point is that it's irrelevant whether or not the IG debt is repaid. What matters are the revenues, the benefit payments, the real borrowing from the market that the government is conducting to fund the shortfalls, the real interest that the government pays on that borrowing.
You're fussing over a debt that the government owes to itself and the interest that it pays to itself on that debt. Why??? It's immaterial. Absolutely immaterial.
You are absolutely right that the government's real debt that it pays real interest on is set to skyrocket, but that's because its projected benefit payments vastly exceed its projected revenues, and would be just as true if there were no such thing as IG debt.
As for what I advocate, I have no idea what you're talking about. A $200 trillion IG debt? I was using an extreme example to illustrate the point that the size of the IG debt is immaterial. I advocate balancing the budget now. I would not extend the payroll tax cut or the Bush tax cuts, and I would slash the military, social and housing programs and a lot of other stuff before going after SS and Medicare, which I think is unfair as those were supposed to be quasi-insurance programs. SS could break even with gradual minor adjustments. I would socialize the provision of Medicare; I know that's not ideal, but the social payer, private provider, fee-for-service model is impossibly expensive.
I think it's fair to say that you and Bruce are talking past each other.
Overall - while I'm a huge BK fan - I'm persuaded by tom's argument.
The thing is, saying the IG debt doesn't matter at all, while arguably accurate, it doesn't tell the whole story.
Assuming tom's take on IG is true, I'd phrase Bruce's point like this: the current trajectory will increase public debt as if the current IG debt must be paid down.
Say the IG debt were wiped out tomorrow - forgiven.
Then the SS/MC shortfalls would be made up by increased deficits - increasing the public debt.
As it is, the shortfalls will be made up by selling the IG debt to the public - increasing the public debt.
Same difference.
It seems to me that Tom is correct in the sense that the IG debt is only owed IF the government pays out on SS etc as promised/projected.
If, for instance. they introduce chained CPI, and means testing, and slash SS etc expenditures by half, then can't a lot of the IG debt be 'forgiven' with no affect on the deficit?
Of course, whether they'll actually do that is another matter...
This thread's getting old, but yes, BigJim and Lewy, you guys get it. Just minor points here.
@Big - If SS & Medicare payouts are slashed, the amount of IG debt would stabilize, or even grow, if the cuts were really radical. Even in that unlikely scenario, the IG debt won't ever be forgiven, as that would alarm SS and Medicare recipients who imagine that the IG debt means something, and since the IG debt costs the government ABSOLUTELY NOTHING to service, the government doesn 't care how big it is and has no incentive to reduce it. Imagine the trust funds were running a stable $40b deficit, IG debt was $1t, and the average rate on IG debt was 4%. The general budget pays $40b a year in interest on the IG debt, and the trust funds use that to cover their deficit. Now imagine the trust funds were running a stable $40b deficit and the IG debt is zero. The general budget pays $40b a year to cover the trust funds' deficit. The difference on the federal government's bottom line is exactly zero. You can come up with a thousand different examples, and as long as the trust funds' deficit is the same, the bottom line will be the same, no matter what the IG debt is and no matter what the interest rate on it is. IG debt is a completely irrelevant accounting maneuver that makes no difference whatsoever to the federal government's bottom line, ever. So there's nothing to be gained by forgiving it.
@Lewy - Yes you're right, except that the IG debt is a special kind of debt that can't be sold to the public, so actually Treasury will sell new debt to the public and use it to repay the IG debt. Minor technical point. I can see what you're saying about the public debt going up "as if" it were substituting the 5 trillions of IG debt. OK fine, I can grant that much. But I still think putting it that way grossly downplays the problem. Debt will be going up to satisfy the tens of trillions of unfunded SS & Medicare obligations. And it would go up just as exactly as fast if there were no IG debt.
IG is simply a means of plundering any trust fund assets the Federal Government once had, while avoiding the need to save any going forward. In order for your view to make sense you have to believe those trust fund assets were never going to be needed, which is not the case. Now sit down, take a deep breath and accept the fact you are not remotely as smart as you think you you are, kid.
Reese , allow me to cast some pearls
To think that those entitlements will remain anything close to their current form is beyond naive. In all likelihood we're looking at 2025 as the real drop dead date and everyone knows it, so between inflation and drastic changes to the programs (and to the current American way of life) those funds will not be needed. If you somehow believe that you will enter (if you're not already there) your golden years with the help of the government you are truly and sadly delusional.
Yes, I am familiar with that liberal turd, I mean pearl. However, I don't expect this country to be able to meet its debt obligation no matter how much they debase the currency, so I don't expect entitlement commitments to be met either. What I don't understand is what that has to do with the debate regarding IG debt. Endeavor to screw your head on straight and think clearly, please. Awkward...
take some anger management Reese and I think you meant to say swine not turd (ask you mom she'll explain it)
anyway, I was responding to your statement:
" In order for your view to make sense you have to believe those trust fund assets were never going to be needed"
so I guess you agree afterall
nuff said gotta go
Perhaps I should be nicer to the illiterate. But even your avatar is stupid. Good luck because that's your only chance Sparky. And one more thing: unless you are a woman don't talk like one. Successful people don't want to hire pussy boys.
U need to separate soc sec from medicare. The latter is a grant not a transfer.
No need need to list her credentials, her PigHD is well documented. Big academic without a speck of practical know how. She now belongs in Greenspans harem and should STFU!
And frankly Bruce, I don't see any need to argue line items with this dingbat.
Wild Bill,
Did you watch her on Bill Maher last week? It was horrible. I recommend it.
Here is my problem with this woman. Either she agreed with Summers and Geithner which I doubt, or she allowed herself to be bullied and kept her mouth shut, which is even worse. she stood by quietly while the thieves went to town.
All this claptrap about the stimulus elixir, is claptrap leading to more debt. It's in her nature.
Mr. Krasting,
I'm gonna humbly disagree with my buddy WildBill. There is a need on the behalf of ole janus; as he's still emerging from this way of thinking -- or should i say he's just now able to sort these things through after years of allowing others to do this sort of thinking for him.
and i'm really enjoying the IG debate. seems to me it's like this:
to how many folks must one debt be owed/
before you can call it a debt?/
yes and how is an asset marked to a market/
when no such market exists?/
the answer my friends is commin like a storm/
the answer is commin like a storm,
janus (my apologies bob dylan)
All other opinions aside, she has a face like Mr Ed.
that was a face?
Is she the one the moeky ripped the face off of and they stapled some dead person's face on her head? Yes?
I am sure that I speak on behalf of horse faces everywhere, and that comment is a callous and unjustified insult to horses.
Bruce, you are loosing your precious time to tell us that she is a Liar.
We already know that she is, she was lying on TV every time we saw her when she was working for Obama. She was the cheerleader who is telling us" Everything is so good, economy is improving, we are doing great" bla bla bla...
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.
The measure of intellect depends on who is taking the measurements of the intellect. If a group of like thinking intellectuals conclude her intellect mirrors theirs that she is highly intelligent in their decisions. Persons outside of this group of individuals would conclude, based on the results of her performance, she is a complete incompetent fool.
It takes a lot of neural processing power to do what she's done. She's no dummy. She knows she's lying. Rule #2- When someone is lying to you and you know that they know they're lying, grab your wallet, they're trying to steal from you. Money or power, she's trying to steal what is yours. The two questions that arise are what is she trying to steal and how do we protect ourselves. The answers are not obvious to me. She is no longer nominally in the position of power that she once was so what does she gain at this point by carrying Obama's water. She's no longer paid to be a shill so why is she still doing it? If she's being paid under the table (grants, etc.) what are the goals of the ones who paying her??
Professor Romer has proven beyond reasonable doubt that she can garner maximum approval ratings from that special class of people that have agreed to committee constantly and talk about wonderful solutions but never risk a paycheck eating their own dogfood.
I have a Ph.D. and it could have been a straight-jacket but fortunately the environment in NorCal can open one's eyes to the real world.
i'm no phd, but i have done dissertational work on committees. my summary was as follows:
committees are collections of the incompetent;...formed by the indifferentt;...to accomplish the unnecessary.
my conclusions regarding modern democracy are of a kind.
yer huckleberry,
doc holiday
"I have a Ph.D. and it could have been a straight-jacket but fortunately the environment in NorCal can open one's eyes to the real world."
LOL, so how long have you been growing dope?
And I thought I was growing smarter rather than your rope-a-dope-atude.....amongst the best and brightest trying to change the world and have a bit of fun at it.
We NorCal Phd's prefer to call it natural pharmaceuticals.
NATRACEUTICALS
Excellent. Ether way, it is a free-er market than most. At least until it becomes legal and the big tobacco boys drive everyone out.
technically, it will be big tobacco's sock puppets, the government functionaries, the regulators, who will drive every free marketer out of that market with the endless rules and regulations.
No worries. Nature finds a way to get needs filled.
visit
regulatemarijuanalikewine.com
to see a template
and then the 28th Amendment for one corporation, one vote.
It was almost legalized last election cycle by a proposition sponsored by... Big Tobacco.
Everyone that profits from locking up drug users/growers had a hand in killing the proposition.
You seem to confound intelligence with education.
I don't know the American school system, being European, but I know that in my country having a college diploma means being good at spitting out learnt-by-heart words and dates, no matter the quality of your language, culture or reasoning.
If she were really intelligent, she would go on the field to measure the consequences of her politics, not stay in the ivory tower of typical insecure academics.
In the USA, when young minds aspire to follow the creed of devout Communists they must attend the proper institutions of higher learning....Berkeley on the West Coast and Swarthmore on the East Coast. This is all you need to know.
Wall Street has ALREAY been Paid Trillions!
Wall Street can last a while longer..
Let Main Street go without even more..
Let Main Street BEG for the Money!
and then!!
when the Money gets turned back on!
Leave main Street out, AGAIN!!
Trillions to Wall Street!
$0 for Main Street!
and now the FED is stopping printing? LOL
You are right Bruce! Make Main Street BEG! for Wall Street to get more money!
Same shit different decade!