From: mykes@shell.portal.com (mike myke schwartz)
Subject: Re: Conservative Values (Re: New group proposal:  alt.conservative.forum)
Followup-To: alt.fan.rush-limbaugh,sci.econ,talk.politics.misc
Organization: Portal Communications Company
X-Newsreader: TIN [version 1.1 PL7]
Date: Sat, 9 Jan 1993 04:17:38 GMT

Russ Anderson (rja@mahogany126.cray.com) wrote:
: In article <C0J9yq.Lqy@unix.portal.com>, mykes@shell.portal.com (mike myke schwartz) writes:
: > The recession started in July in large part due to the media.  In Jan. 1990,
: > almost Jan 1 to the day, the press was saying how the 80's were the years
: > the baby boom lived it up and that the 90's would be the years the baby
: > boomers started feeling their age and started saving for retirement.
: 
: I don't think "the media" was a "large part".  The tangible factors (below)
: were much more important.
: 

Do you think that when EF Hutton talks, people listen? :)  I do.  A "buy"
recommendation on a stock influences people to buy that stock, as is evidenced
by the stock going up.  When the media talks, people listen, too.  Otherwise
Bush would have been reelected :)

: > Additionally, elimination of mortgage and credit card debt caused a lot
: > of people to spend their money on debt payments instead of new goods.
: 
: The change in credit card deductability is certainly a factor.  Consumer
: debt in 1991 was less than 1990, the first time since WWII that consumer
: debt was less than the year previous.  This is good in the long run, but 
: is a drag on the economy in the short run.
: 

According to VISA card companies, a huge amount of this year's Christmas
boom was paid for by credit card.  This implies that those cards used weren't
so close to their limits...

: > And the government also restricted the money supply by forcing banks to
: > keep a higher percentage of reserves.
: 
: This is the major factor in the credit crunch.  Banks were forced to 
: increase their capital holding, forcing many to cut back on lending and
: some to even call loans.
: >                                        Bush and Cheney also worked hard
: > to cut the military by $30 Billion.
: 
: DoD cuts have hurt (esp in New England & CA), although this also is 
: better for the economy in the long run.
: 

How is a loss of high-tech jobs good in the long run?

: >                                      Adding a tax hike to further limit
: > the private sector's spending/borrowing power was significant fuel for the
: > fire.
: 
: The tax increase is a good example of the problems of government fiscal
: policy (another is the Cinton stimulous package).  It takes at least a 
: couple years to get a tax/spending change through Congress, so what 
: was sould policy when proposed will go into effect when the economy does
: not need it.  Had the tax increase been passed in 1988, the economy 
: would have been strong enough to handle it.  Actually, Clinton's stimulous
: package should have been passed in 1990 and the 1990 budget deal passed
: in 1993 (so it takes effect as the economic recovery is picking up steam).
: 

I don't agree with much of this.  No tax increase in 1988 would have been 
good for the economy.  We'll see congress pass a poor excuse for a
tax/spending bill on Clinoccio's behalf in a matter of months.  Clinton's
stimulus package is dubious at best, and it is questionable it should be
passed at all.  In fact, he is clearly waffling on it.

In my view, contracting the money supply when it should have been expanding
was the only mistake.  Well, the 1990 budget act was another :)


: >        The boom would have continued if the private sector were encouraged
: > to spend money (by giving it money) on goods, creating demand, and so on.
: 
: Another factor in the recession was the oil price increase (due to the 
: Iraq invasion of Kuwait).  One economist I heard estimated the effect as
: the same as a $50-75 Billion/year tax increase (sent to foreign oil producers).
: This did not cause the recession, and oil prices did come back down, but 
: did slow the economy for about a year.

I submit your "one" economist was wrong.  And as well, 100 economists can
easily be wrong...  Our allies in the war, Saudi Arabia for one, quickly
picked up any slack in oil production.  And the price of oil was high for
a couple of weeks.

: 
: > But remember, 1990 was a year of Reverse Reaganomics (tm) and that in an
: > all-out attempt by the Democratic Fascist Party (tm) in Congress to force bush
: > into going against his no new taxes pledge.  I'm sure you are aware that bush
: > refused to sign the tax bill 3 times, and 3 times the government went into
: > Gramm/Rudman sequester.  And 3 times, congress extended the date the 
: > sequesters would take effect.  I bet Bush would have allowed the sequesters
: > to happen for good, but if congress can get around its own rules by taking
: > a vote at will, no sequester would have happened anyway.  The government
: > operating without a budget would have been terrible for the economy...
: 
: Would it?

Of course it would.  Without a budget, the government does not draw from
the treasury.  Instead, it issues IOUs that bear interest.  The banks will
accept those IOUs from govt. employees, medicare and SS beneficiaries, etc.
But only for a month or two.  Then the shit hits the fan when the banks stop
accepting the paper money substitutes.  It happened here in California for
60 days last year, and many many good causes were harmed in the process.

: > : Could you name some of these economists?
: > 
: > Robert Reich, for one.
: 
: Reich certainly does know that deficits matter.

Reich really doesn't know much.  Defecits don't matter, as long as we can
pay the interest costs, and as long as the borrowed money is spent wisely.
Debt payments matter only if you are unhappy with what you spent the borrowed
money on.  Damn, I took that vacation on my visa card 3 years ago and I'm
still paying for it...  It would be REAL nice if I could use that interest
payment to buy a TV or a car :)

: 
: >                        I'm not holding my breath that Clinton will keep any
: > of his promises wrt middle class tax cut and stimulus package.  In fact,
: > I expect to see 95% of what Bush proposed end up as Clinton's package.
: > Balanced Budget Amendment, line item veto, capital gains tax cut, first
: > time home buyer tax credit.
: 
: Does that mean you like 95% of Clinton's package?

Clinoccio has no package.  Yet.  I can't tell you if I like it or not.  If
he decides to borrow tons of money for worthless "investment" and the
economy turns sour, the whole lot of his people ought to be hung by their
thumbs :)


: > What do Bush's revenue estimates show?  Negative growth?  Decent positive 
: > growth?
: 
: I've been looking for those numbers, but have yet to find them.

Look, Russ...  There is a very simple way of looking at government finance.
Revenues = tax rate x GNP.  GNP is also a function of tax rate, too, as it
declines as the rate increases.  But if you assume a tax rate that does not
change and a growing GNP, then revenues must increase.  And I KNOW you've
seen that GNP does indeed grow.  It has even grown in all but 2 quarters
in the last 4 years...  If the govt's debt payments increase by $100 Billion
and revenues increase by $200 Billion, what difference does the debt make
at all?

I still say that borrowing and using today's dollars today for investment
today is not a problem at all.  In fact, it is brilliant.  Debt offers
the power of leverage...

: Russ Anderson    |  Disclaimer: Any statements are my own and do not reflect
: ------------------              upon my employer or anyone else.  (c) 1992
: EX-Twins' Jack Morris, 10 innings pitched, 0 runs (World Series MVP!)
Newsgroups: alt.fan.rush-limbaugh,talk.politics.misc