Nobody knows the troubles we’ll see
WASHINGTON — Nobody knows.
If the keyboard allowed, I’d type those words in squiggly lines for full effect. Whether talking to a Ouija Board, a Magic Eight Ball, an economist or the president of the United States, the answer is the same. Nobody knows.
And the question is: Will the U.S. economy bounce back after billions and trillions in rescue, recovery and spending?
It’s all a gamble. The Republican attempts to “starve the beast”—slash taxes and force government spending cuts—didn’t work because spending never got cut. So now, apparently, we’re going to feed the beast.
As we cross our fingers (and our toes), our minds warp at the concept of trillions. What is a trillion, anyway?
Chris Martenson’s online “Crash Course” in economics explains a trillion this way. First, picture a million dollars as a 4-inch stack of thousand-dollar bills. A comparable billion-dollar stack is 358 feet tall. A trillion-dollar stack of thousand-dollar bills stands 67.9 miles high.
So, yes, that tightening you feel in your gut is a perfectly rational response. Trillions in government spending, while raising taxes on those who do the most to drive the economy (hiring and investing in risky markets, for instance), is a frightening proposition. Or is it?
That question led me to a sit-down with Matt Miller, one of the saner voices amid the cacophony. Miller, who so strongly resembles Tom Hanks that you want to ask him about “Wilson,” isn’t a shouter. A former Clinton budget aide and author of the path-breaking “The Tyranny of Dead Ideas,” he finds the current hysteria over Obama’s proposed budget misplaced.
Upfront, he says that Obama isn’t coming completely clean on taxes. Everybody, not just the richest, will have to pay more taxes in Obama’s second term (assumptions pending), owing to the strain that retiring baby boomers will put on Social Security and Medicare. Miller figures Obama is hoping that by then, enough people will be pleased with the government his administration has put in place and won’t mind paying for it.
In the meantime, Miller says the key to assessing whether the budget is terrifying or reasonable under the circumstances is by examining spending, taxes and deficits as a percentage of GDP.
Emergency spending in 2009 will raise the percentage of GDP from 21 (last year) to 27.7, which Miller concedes is “scary.” But the 10-year spending average under Obama’s plan (assuming reasonable recovery) will be at about 22 percent of GDP—the same as under President Reagan.
Tax rates, which will return to Clinton levels (but not until 2011), also shouldn’t be alarming, says Miller.
“We know from the Clinton boom of the 1990s that marginal tax rates of 39.6 percent put no brakes on entrepreneurship or growth. And the modest limits Obama is proposing on the value of itemized deductions for mortgage interest and charitable donations puts their value exactly where they were under Ronald Reagan, which no one would say was a ‘socialist’ interlude for the U.S. economy. So everyone jumping up and down about how supposedly ‘radical’ Obama’s plan is should calm down and look at the facts.”
But, I asked, how about this: If deficits are the problem, why not cut spending and taxes, rather than increase spending and impose higher taxes on higher earners to drive the economy?
Because businesses and individuals are pulling back and don’t have enough discretionary money to stimulate the economy, says Miller. And thanks to the huge deficits bequeathed by the Bush administration, Miller says we have no choice but to run even higher deficits for a few years to get the economy out of the ditch.
Feeding the beast, in other words, is unavoidable. But will it work—or will we all be speaking French and eating moldy cheese in two years?
To the “nobody knows” chorus, add at least one strong dissenting voice. Miller says that though stimulus efforts may or may not work, Obama is doing the right thing with the budget.
And no, we won’t be socialists when it’s all over. There will still be room for a “cowboy economy,” he says.
I can’t say that I suddenly have a yippie-kay-yo in my heart, but Miller’s less-scary scenarios, based on facts rather than rhetoric, help tamp down the impulse to build a bigger bunker. If Miller wants to be heard in Rantville, however, he may have to learn to shout.
Kathleen Parker is a columnist for the Orlando Sentinel. Her e-mail address is kparker@kparker.com.
Mar 10, 2009 at 5:23 p.m.
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It's not as far fetched as people may think. You look at the state of Texas; yes they are also struggling in this recession like everyone else, but you will also see unemployment FAR below the national average. Home values that have not dropped much at all, and a GROWING economy. Why is that? It's called a PRO business environment. If they ever would succeed, can you imagine the look of those in congress (Palosi, Reed, ext)? It would be BEYOND hilarious. For one, there is NOTHING they could do to stop them. Military force would be completely out of the question.
Mar 10, 2009 at 9:12 a.m.
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I'm with you kiowamohican, I'm going to TX too!! and don't think your senario can't happen. TX for one has it in their state constitution that they can seceed from the union!! The people should rise up and take control so that doesn't have to happen!! The government works for us, not us for them! I encourage everyonr to watch the Glenn Beck show on friday this week. He is really speaking out about this! I know he's on FOX but he really is unbiased, not of either party. Give it a listen. The first mistake of this reporter writing this article was going to a clinton cronie for her info!!!
Mar 10, 2009 at 1:06 a.m.
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raystone:
Yes, many saw this all coming. In fact, it was really all predicted in the Wall Street Journal MONTHS before it all went down. Just very few wanted to believe it. Most business people and investors are optimistic, and consequently just blew it all off as a few doom and gloomers not knowing what they were talking about. After all the markets have been pretty much bullish the past 20 years, so predicting a total collapse seemed quite bold going against such a monster long term trend.
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The next "shoe to drop" so to speak is in the ALT-A loans. A sham that is very similar to the sub primes, that simply lag behind the sub primes, by the way they were structured. All the data is out there, just few want to look at it, and want to believe it can all be stopped by some idiotic mass government spending.
Mar 10, 2009 at 12:57 a.m.
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I honestly think things could become so divided in this country, that you could literally see a a few southern states succeed from the union (again, lol). You think I'm joking, but when all these big spending, anti business, liberal states (CA, MI, MA, NY, ext) go so far into debt, and the pro business states (TX, UT, MS, AL, ext) are the ones supporting everything through the huge blanket of federal government; you could see it be a situation like the old Soviet Union, where it just all falls apart, and states break off and become their own Republic.
If that happens, I'm relocating to Texas baby!
Mar 10, 2009 at 12:10 a.m.
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It's time to start voting out incumbents from BOTH parties and only vote for challengers who promise to support an amendments to both the Federal and State Constitutions putting term limits on senators, representatives, assemblymen, etc., and change the Senate to a four year term (or make the term limit one term in office).
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It's also time to offer immunity and cash rewards from a legislative crime-stoppers organization. "Rat out" a cheating politician with proof and make a few tax-free bucks on the side. Let's ask John Walsh to start up the Politicians Most Wanted.
Mar 9, 2009 at 6:20 p.m.
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There were a few (Peter Schiff, Jim Rogers, a couple of others) that predicted the current housing collapse, and they have a good idea on the trouble we have yet to see. Schiff, Rogers are now predicting there is still another shoe to drop, that of a U.S. dollar currency collapse due to the Federal Reserve private banking cartel printing money at a rate never seen before.
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The groups that told us that our economic fundamentals were strong, including housing, and everything was fine 6 months before the housing collapse , (Bernanke in the Federal Reserve, the office of the Secretary of Treasury), are now telling us the "stimulus" bill will help get us out of our current recession by the end of the year.
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Who would you believe now ?
Mar 9, 2009 at 5:51 p.m.
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Anyone interested in getting this thing turned around, I've got some ideas that have been implemented that are making a difference. Only people with character and courage need inquire! God bless!
Mar 9, 2009 at 2:46 p.m.
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gixxer...I agree wholeheartedly. That was my point! The trying times we're in is a wake up call for all the citizens of this country that it's time to wake up and take this country back! My point was, our government wasn't designed to be our babysitter or authority! It was put in place to protect the American people from IT! Our govt. is corrupt and it's happened on OUR watch. Until we come to grips with what's truly happening, we can't move forward to fix it. This country needs a proper education and we need to act on it.
Mar 9, 2009 at 1:15 p.m.
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matthew516: I think you need to wake up, what dream cloud are you on, this country has been ran and abused by politicians for years.The government has controlled the citizens through manipulation and scare tatics ever since world war II. You may not realize this, but many,many years ago taxes were a volunter collection from the citizens for war efforts and then once the war was over the government decided to impose it the pubic through fear tatics and it's remained that way ever since!
Mar 9, 2009 at 12:32 p.m.
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We won't be socialist because enough good American people will make a stand and not allow it to happen. Our govt. isn't running this country, the people are. They work for us. This country simply needs a wake up call and it's getting a "trailer" as to what the future holds if more don't get with the program.
Mar 9, 2009 at 12:23 p.m.
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When Bush took office there was a surplus. When Bush left office there was the biggest deficit (sp) this country has ever seen. With Obama being in office less than 2 months how could you possibly blame this on him?
And most of us understood that if the war was ended that we would have that billions of dollars at home and not being spent in Iraq.
Mar 9, 2009 at 10:35 a.m.
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Obama often pointed out during his campaign that if we could spend billions of dollars in Iraq, there was no reason that we could not spend them at home. I often wondered what sort of alternative quantum effect universe he was living in that allowed you to spend the same money more than once.
Mar 8, 2009 at 7:23 p.m.
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Bush's defecits (caused by budgets with not enough spending according to Dems) require even bigger defecits by Obama. Got it.
Bush's defecits were nothing compared to Obama's, and he was fighting two wars! Obama's defecits quintuple Bush's, and even in Obama's lowest years, easily double any that Bush had.
To see who's telling the truth, just listen to the Obama administration: they say it "will take years" to get back to good growth in TV interviews, but when you look at their budget projections, it will only take about 10 months.
What a joke!
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