Monday, July 28, 2008

The Sheep (don't) Look Up

U.S. Deficit to Reach Record $490 Billion in 2009 (Update3)

By Roger Runningen

July 28 (Bloomberg) -- The U.S. budget deficit will widen to a record of about $490 billion next year, an administration official said, leaving a deep budget hole that will constrain the next president's tax and spending plans.
The projected deficit for the fiscal year that begins Oct. 1 is higher than the $407 billion forecast by President George W. Bush in February. The bigger shortfall reflects dwindling tax receipts because of the U.S. economic slowdown, the cost of a $168 billion economic stimulus package and spending on the wars in Iraq and Afghanistan.

More here.


I listened to Rush Limbaugh on my way in this morning. I like Rush -- not as a human being, I have some skepticism about him at that level -- but as an entertainer. He's witty, though you have to listen to him for a while before you get that, and if you're a liberal the stuff he's witty about is liable to annoy you. But at one point he had a voiceover "tribute to Rush" -- from a guy who said that the core of conservatism was freedom and limited government....

I won't argue freedom; it means different things to different people, though if you're a gay couple who wants to marry the conservative idea of freedom probably looks a lot like bigotry. But escaping that --

I believe in limited government. It's one of the things that, back in the day, used to draw me toward conservative candidates. (I used to describe myself, back then, as a conservative Democrat ... by the time we got into the scorched-earth 90s, "conservative Democrat" parsed as "liberal" for all practical purposes. So I adopted "liberal" without too much difficulty; liberals are the people who disagree with conservatives, and there I am.)

"You're not a liberal," some of my conservative friends write me, "because you believe in X, Y, and Z! And so do we!"

No. Ronald Reagan started this; back in 1979 he campaigned on the idea that deficit spending was a moral evil. I agreed with him then and agree with him now. But the Reagan Administration presided over an astonishing growth in the federal deficit: the Reagan Administration's borrowing took the United States from the world's largest creditor nation to the world's largest debtor, in eight years.

Bill Clinton, with an assist from George Bush Senior, helped put this country back on the road toward sane fiscal policy. And, to be fair, with a little help from the conservative-run House and Senate Clinton had to deal with in 1994, though if you look at the deficit figures, they'd begun a substantial decline before Republicans took the House. But one really interesting stat from the boom boom 90s was the growth in state budgets. Which states had the least growth in spending during that time? In order, it went:

1. States with Democratic governors and Republican legislatures
2. States with Republican governors and Democratic legislatures
3. States with Democratic governors and Democratic legislatures
4. States with Republican governors and Republican legislatures

See #4? That's what happened when Bush and the Republican House and Republican Senate took over this country in 2000 ...

As recently as 2000 Republicans could argue, with a straight face, that they were more fiscally responsible than Democrats. (I disagreed with them, but it wasn't a ludicrous argument on the face.) But the Bush Administration set out to destroy this country's financial security, and succeeded.

In November of 2000, the Euro was worth .85 dollars. As of today it's worth 1.57 dollars.

In 2000, a barrel of crude averaged $28 per barrel. Today people are thrilled that crude's dropped to $125 a barrel; it was close to $150 earlier this year. Oil companies have enjoyed the greatest profits in the history of the world....and how are you doing, bunky?

The budget surplus in 2000 was 236 billion dollars. When George Bush leaves office it'll be a 490 billion dollar deficit: a swing of 725 billion dollars a year.

There was a run at IndyMac -- a local bank, where I live. People were lined up a few short miles from my house, panicked that they wouldn't get their money back. And IndyMac wasn't even on the FDIC watch list.

Seven banks have failed this year. Seven. In July. Washington Mutual -- where I banked, until recently -- lost 3.3 billion dollars -- in the second quarter of this year.

In 2000, if you'd tried to sell an SF story with all these various disasters occurring by 2008, people would have laughed at you.

Latest Gallup tracking poll had Obama up on McCain by 9 points -- a short bump; I assume things will tighten up down the stretch. But I'm amazed that it's even that close.

Water runs downhill. I don't know if it's reached the bottom yetl; I doubt it. Another Great Depression wouldn't surprise me: this country isn't just broke, it's deep, deep in the hole. We owe everyone. We owe Europe, we owe Saudi Arabia, we owe China, we owe Russia -- the whole world is holding American notes. Buddy, they own us.

And yeah; a few of the sheep have looked up. But only a few.

I have a hard time believing this was an accident. Leave George Bush out of it, you all know what I think about the guy; but the people surrounding him are not this incompetent. You have to operate out of the assumption that this was the intended result: that these people, with malice aforethought, set out to weaken this country and strengthen the multionational corporations from whom Bush and Cheney have always taken their marching orders.

There's a Mission Accomplished for you.


Anonymous said...

I agree with most of this post, but I think a new Depression is unlikely. There'll be a global recession, hopefully not a long one, and the world will keep on cycling up and down.

Its true that the USA owes everybody, but at least in part because of that no one can afford for the USA to crash, so I don't think anybody's going to be unloading T-Bills any time soon.
I would talk about better monetary policy but I'm not sure it works like we or the Fed hope it does.

I must say that it does boggle my mind that the USA is running a 17% deficit. And we worry about going over 3%...

Sean Fagan said...

I've got theories about Snippy and his buddies. They're not good theories. They're loony-conspiracy-nutjob theories.

And Snippy has done a good job of making the outré seem plausible. Or even proven correct in some cases.

Oil: Snippy is an oil man, or thinks of himself that way.

Drop in the dollar: benefits the owners of factories -- when the dollar is weak, it results in more exports.

Bank collapse: caused by cheap money being available, in the form of cheap credit. This results in two good things for the top 1%: first, when banks collapse, people who have money can buy the assets for very little money (go watch It's a Wonderful Life, and pay attention to the finances); second, people who are in debt do not have any choices. They have to work at crappy, low-paying jobs. They can't afford to send their children to private school, they can't afford to send 'em to college, they may even have to take two jobs (each adult, even!)... and tired, broke people don't have the ability to fight the oppressive circumstances they're in.

A friend of mine thinks that the real goal is to return to a feudal society. I'm not sure, but he does add something to that list: Katrina showed that people can not count on the government being helpful, only making things worse. And that is the "legacy" of Reagan -- the government is not your friend. Snippy just ensured that you would actually feel that way. (Thus the attempts to discredit and dismantle Social Security and Medicare -- two enourmolusly successful government programs.)

I'm having a small champagne party Jan 20th, at 9AM local time. Feel free to join me.

Daniel Keys Moran said...

I have no sense at all whether a great depression is likely -- but I have no doubt it's possible. I don't know if Mike Morgan is right, but I'm absolutely not certain he's wrong:

Mike Morgan

Daniel Keys Moran said...

BTW, nightface -- I've heard the argument about how the world can't afford to move away from the dollar. I really don't see why not, though -- a couple decades ago, sure; there wasn't another currency nearly as safe anywhere in the world. But today?

If I were China, I'd be looking at the declining dollar and thinking really hard about selling my dollar debt for Euros ...

Sean Fagan said...

Dan, China's already done that.

Right now... the main reason they don't is purely political. They get a lot of money from the US, and we're helping make their economy thrive.

And when they need something from us, they let fly the rumour that they're considering changing their practices. And the dollar tumbles, and the stock market drops, and after a bit... they get what they want, and say "Oh, that was just someone speaking out of turn, he has been disciplined."

The problem with that approach is that, eventually, we will make ourselves irrelevant.

Daniel Keys Moran said...

Sean, yeah, I've followed the Dance of the Chinese about moving off the dollar. Nothing surprising there, they're just using the whip that conservatives handed them.

The problem is we're approaching the point where the dance doesn't do them as much good as simply abandoning the dollar. It's a vicious cycle (or a virtuous one, if you're Chinese) ... when the U.S. stops buying Chinese, the Chinese have no reason to hold dollars any longer (and every reason to dump them, if only to destabilize us.) And the only way the U.S. has been able to afford all these "cheap imports" ... is by giving away our manufacturing jobs and then borrowing to make up for it.

To paraphrase Mike Morgan, we've sold off 200 years of thrift and hard work, destroyed the middle class, and turned the upper class into the sort of hereditary elite Europe has suffered under for centuries.

Mission damn well accomplished, all right.

iamafractal said...
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iamafractal said...
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iamafractal said...

its much worse than you think. be sure to listen to rachel maddow, randi rhodes (nice counter balance to limbaugh),, etc... liberal means free and if i read into trent much, you're liberal. the only thing conservatives wanted to conserve was the tyranny of king george of england. the liberals are the ones who rebelled.

@ sean fagan

they definitely are working toward a feudal society, chad, equatorial guinea, Burma... those are their perfect models for how the us will be. iraq is another example. when people are repressed, the resources are ripe for the taking.

anesthetize the nation with propaganda, and you can suck blood till its all dried out. the mechanism is very similar to the way mosquitoes and vampire bats work.

i think the only solution is to do what fdr did. if you make more than $1M a day, you get a 91% income tax rate. corporations have to die of old age.. maybe in 10 years. if a corporation is taking up more than 10% of the market, its time to divide it. if it sits near 10% for 5 years, divide that too. like steve jobs said, "death is perhaps one of the greatest inventions of life." so why shouldn't corporations suffer that fate too if they're eating us all alive?

Anonymous said...

There's a saying in regards to debt that I find very appropos here.

When you owe the bank $100,000, you have a problem. When you owe the bank $10,000,000 the bank has a problem.

We owe the world more money than any government in history (I think)...

That said, I think we've got so much risk staring us in the face, it's not even funny. I think the next war will be a financial war.

I've diversified a portion of my savings into other currencies. You can do so pretty easily using either ETFs in the stock market, or by buying the actual currencies directly in FDIC insured accounts at EverBank. They've got some blended CDs, one of which pays 5% and is diversified in Canadian $, South African Rand, Australian $ and New Zealand Kiwi.

If I had the financial freedom I'd follow Jim Rogers and sell off all my US assets.

Sean Fagan said...

By the way -- I think I've said it before, but a really good description of the current banking problem can be found in Steven Brust's Orca. Now, it's well into a series, so not everyone will want to get it, but worth it.

Anonymous said...

Dan, I don't think the Chinese will drop the dollar because doing so would cause a run on the dollar, since everyone else would rush to sell their holdings to grab some value.

This would cause: a-huge losses to all sellers as the dollar's value dumps. $2.6 Trillion of US debt are held abroad, an amount almost none of the countries involved can afford to lose.
b-The US economy would crash, worse most likely then the depression.
These 2 effects would cause a global recession at least, more likely a global depression.

The Chinese can't afford this any more then the US can. It would kill their exports, stop their growth and probably cause massive unrest. True, it would do the US more harm, but I'm not sure how much more. It might even help the Indians push ahead of the Chinese, since they're not as far ahead in globalisation as the Chinese.

The dollar may well stop being the standard of value, but it'll go slowly over a decent number of years because nobody wants to kick a hole in the boat.

Anonymous said...

[quote]You have to operate out of the assumption that this was the intended result: that these people, with malice aforethought, set out to weaken this country and strengthen the multinational corporations from whom Bush and Cheney have always taken their marching orders.[/quote]

I can't help but agree. Lets be honest, there really are not 'countries' anymore, just multinational interests. America has been luckier than most.

Anonymous said...

I've sadly reached similar conclusions to those expressed on this comment list.

My dilemna now is, I hope, a practicle one; what is to be done? What is the correct course to maintain the charade that I am a moral creature?

I did not sign on to torture, abolishing the 4th ammendment, looting our treasure, genocide(if you have a better name for what has happened in Iraq, I won't quibble)and the endless other atrocities large and small we have engaged in.
But I am culpable for them, nevertheless.

Now what?

Unknown said...

> Latest Gallup tracking poll had Obama up on McCain by 9 points -- a short bump; I assume things will tighten up down the stretch. But I'm amazed that it's even that close.

I think it is safe to say that the "bump" is over and the "tighten up" period has already begun.

> The Rasmussen Reports daily Presidential Tracking Poll for Monday shows the race for the White House is tied with Barack Obama and John McCain each attracting 44% of the vote. However, when "leaners" are included, it’s McCain 47% and Obama 46%. - Rasmussen

Daniel Keys Moran said...

Yep. McCain ran an ad linking Obama to two highly sexual white women, and et voila. Nasty, but effective.

Anyone doubting McCain's a Republican at heart should rest assured, on both sides. That one was worthy of Rove.