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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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Wall Street is pulling Trillions out of the market AGAIN. After all of Ben's work. What a Real Ponzi Scam. What wealth effect?
It's interesting that she brings up WWII GDP to debt. There's a very simple retort to this argumentation: the Great Depression of 1946. The Great Depression of 1946 was widely predicted that reduced government spending from the end of the war would cause a collapse of the US back into depression. Never materialized and GDP did fall, but it was precisely because government spending was no longer crowding out the private sector -- an economic boom ensued. So if this level of deficit spending didn't crash the economy, it was precisely because it was temporary and not structural.
Also, the boom post WWII and reduction in government spending can also be attributed to the lifting of rationing. There are no rations to lift now.
There is nothing temporary about current levels of government spending. There's no magic lever the government can pull this time.
BRUCE why dont you write romer a letter asking for explanation of her analysis
and tell her why your numbers differ... maybe she will say if its not booked
then its not debt yet... because it can be canceled and her number is debt to date...
Oh Yeah, Ask whether she agrees with DAVID STOCKMAN who said in 2011 that
REPUBLICANS BANKRUPTED AMERICA with that silly tax cut is a free lunch BS.
And the US economy boomed because the rest of the industrialized world lay in ruins. The only producer was the USA and the rest of the world consumed what the US produced.
To grease the wheels the US loaned funds and extended credits to foreign purchasers.
The US also sought to diminish European use of coal and replace that energy with US petroleum. This was positive for US producers who had surplus oil and it helped kill the coal miners unions which were hotbeds of socialism.
Plus the US public had significant forced savings due to war bonds and the fact that you cannot spend much when you are stuck on an atoll in the Pacifac.
Plus there was a sudden surge in family formation which triggered huge demand for neighbourhood construction (Levittown) for transport, for schools etc.
Plus there was an across the board skills upgrade due to the GI Bill so the required human resources became available to staff out all the growth.
Plus WWII was the birthplace of operations research and established the importance of scientific understanding and consequent development leading to new innovations, products and technologies. Televsion, airconditionning, jet engines, SCUBA, computers, and ulitmately the Internet were all subsequent outcomes.
There are no similar factors present today.
+1
+1 to cat, sushi, and feeb
Exactly. While the rest of the world was in ruins, the United States was able to produce, driven substantially by the R&D in the preceding 5 years, with a thinned out labor force as a result of a generation of war casualties. Great points, sushi.
what a pig....
No shit! I'll bet she's haired over down under.
Next up, mark-to-model accounting - 101 off balance sheet shenanigans and household [ab]uses by Mr. Krasting.
BRUCE why dont you write romer a letter asking for explanation of her analysis
and tell her why your numbers differ... maybe she will say if its not booked
then its not debt yet... because it can be canceled and her number is debt to date...
Ask whether she agrees with DAVID STOCKMAN who said in 2011 that
REPUBLICANS BANKRUPTED AMERICA with that silly tax cut is a free lunch BS.
Copy/Paste much?
What do you expect? It's in the NYTimes. You think that publication would actually cross-references her allegations and distortions?
NY Times: "All the News that Fits."
NY Times: "All the News that Fits (our viewpoint)."
BRUCE why dont you write romer a letter asking for explanation of her analysis
and tell her why your numbers differ... maybe she will say if its not booked
then its not debt yet... because it can be canceled and her number is debt spent to date...
Ask whether she agrees with DAVID STOCKMAN who said in 2011 that
REPUBLICANS BANKRUPTED AMERICA with that silly tax cut is a free lunch BS.
BRUCE why dont you write romer a letter asking for explanation of her analysis
and tell her why your numbers differ... maybe she will say if its not booked
then its nor debt yet.. because it can be canceled and her number is debt to date...
Ask whether she agrees with DAVID STOCKMAN who said in 2011 that
REPUBLICANS BANKRUPTED AMERICA with that silly tax cut is a free lunch BS.
"We're Fucked"... ...That was her quote on Bill Maher's Real Time. Don't know how much more honest she can be.
The exact quote was"pretty darn fucked."
There is only one political party you boob. Obama-Romney 2012!
Perry - Obama more like it
From time to time someone has to backup NYT main clown Paul Krugman's foolishnesses