Re: *** Cheney's Soul Pays a Visit

Ed Huntress wrote:
"John R. Carroll" <jcarroll@xxxxxxxxxxxxxxxxxxxxx> wrote in message
news:LHGJf.49017$dW3.48707@xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Ed Huntress wrote:

As for the Democrats, they may have some good turks but they still
don't have an idea. As many have rightly pointed out here, they
should be in a position to clean house in the midterm elections but
the only reason people have to vote for them is that they're not
neocons. If you had to sum up what they have going for them and turn
it into a slogan, it would be "We're nicer people than the
Republicans." That isn't much of a program. <g>

Financial reality is going to set in Ed. Policy at the national
level is going to become a survival driven sort of thing.
Getting America's finances turned around is going to be a sobering
excercise.

If you're suggesting that the Democrats are going to be in charge of a
financial turnaround, God help us. <g>

I hear ya' Ed but I'm sure you could have heard the same thing in 1932.
I don't think there will be a great deal of room to maneuver anyway so it
won't matter.


A great deal of what comes next will be the result of behavioral
forces generated from the events of the 50's and 60's that have
become ingrained in our culture. The bill eventually comes due.
Taxes and spending will be forced converge as the US is less and
less able to borrow. That is the trend, and when the credit card
stops working fiscal discipline will be enforced from beyond our
borders. National politics won't matter. We'll all be fiscal
conservatives not by choice, but because there won't be another
choice.

As a fiscal conservative myself, I'd like to be so sure.

Regardless, we are all along for the ride.


The
reckoning will come no matter who is in power, and I believe the
remedy will be much the same no matter who is running the show. You
probably recall what happened at the end of the Carter
administration: Jimmy hired Paul Volcker, who bled the hell out of us
with a tough monetary policy, and then Reagan came in and saw that
Volcker's plan was working, so he kept him on. Neither party had a
clue about how to stem the stagflation. Both of them recognized that
they needed a brilliant, tough expert on the subject to run the
program, and that they'd better keep hands off of the basic work.

The same sort of tough policy making that lead Bush 41, and then Clinton, to
impose the largest combined tax increases in American history. It was good
economices but cost Bush reelection. It's my own opinion, but I think he
knew it even as he was signing the legistlation. Here is a quote:
"I feel that every once in a while the president has to do something he
doesn't like and that is to compromise. . . . I can't say this is the best
thing that's happened to us since sliced bread or the elimination of
broccoli . . . . It has got some good things in it. But if we were doing it
my way . . . it would be very, very different. . . . So please don't ask me
to relive the agony of a budget agreement that I am glad is signed and is
now behind us."

That was GHW Bush in October of 1990.

It always cracks me up when I hear someone talk about the 90's and taxes
needing to be reduced to promote economic prosperity and balance between
revenue and spending at the federal level. The "Regan Tax Cut" blah blah
blah conveniently ignore the brief crash of '91. Voodoo economics would work
if marginal tax rates what they were in the 40's and 50's but they aren't.
Modest increases in taxes at some point create a real incentive to economic
growth. They also provide the necessary revenue that reduces competition for
capital. Capital that would have to work harder to stay even - it would. The
idea that anyone would pack up and go home is ludicrous. Just the opposite.

Politicians don't really understand economics, especially the
uncertainties that academic economists live with all the time. The
economists' attitude doesn't comport well with politics. Many
politicians are smart enough to recognize that fact. But some aren't.
Thus, half-trillion-dollar deficits.

There is no incentive. What they do know how to do is get elected.
Incumbents today run the finest campaigns that US tax dollars can buy.
Why wouldn't they? It works!


Bush is asking for another big wad of borrowed cash for Iraq. What
do you suppose would happen if the response were that we didn't have
it or couldn't borrow it? Would he be willing to sell west coast
drilling rights to, say, CNOOC to raise the cash? Put in that light,
or national policies are nothing less than insane.

Well, yeah, they're somewhat insane. There's a slim chance they may
get away with it, however, and I've been astonished at how long
foreigners will keep buying our bonds. But...there are a lot of
"buts," including the fact that buying our bonds remains the best way
the Chinese have of keeping the value of their currency down. The
same is true for the Koreans and the Japanese. They're all running
monetarist policies, disguised as something else. So they may need to
keep buying.

At some point they will internalize their growth Ed. In China's case that
will happen by the end of the decade unless they see political upheaval that
threatens the ruling cadre. The'd really clamp down then, and might even
close their economy and society off to the world to the extent that they
could. The people running that show want to continue to do so and, as you
know, this isn't exactly a small handful of people. A relatively small group
perhaps, but pretty big just the same and they have the hardware and
resources to enforce their will.

India is another kettle of fish and if you have heard their finance minister
speak you'd know they have their *** together for real.
India is putting one foot in front of the other and they have their eye on
the ball every minute of every day. They seem to have been able to reconcile
the fundamentalists in their midst and absent the religious social turmoil
that has been their albatross they will do well.


I know, there are hints that the party's over in that regard, but who
in the hell would buy Euro bonds in an attempt to control their own
currency value? It's the US that is still the only really big market
that will bend over on request, and our GDP is rising despite a
fiscal situation that looks untenable, in conventional terms.

GDP growth may be the wrong metric Ed, at least in the sense you use it
here. Think about this.
In the last 5 years, the manufacturing work force has lost about 20 percent
of it's productive work force but managed to maintain and grow output.
People point to that and say "wonderful" , and it is. What would be even
better, and ought to be the goal in my opinion, is to have the productivity
growth involved and expand both domestic and foriegn markets to the point
where those jobs wouldn't have been lost.
Getting that done hasn't been part of federal policy and it needs to be.


There are some things that, as you say, there is no escaping. I
wouldn't dare to predict how they'll come out. I don't believe that
anyone in the administration knows, either -- they're betting the
ranch on little more than guesswork.

I honestly don't think they care beyond getting their own elected Ed.



My feeling is that the neocons are about out of political capital, no
matter how Iraq turns out, but there are other strong conservative
forces than the neocons, including one that is very fiscally
responsible. And it may be a bias that comes from working in the
healthcare industry, but it looks to me like healthcare is going to
be THE populist issue starting in just a few years. Meantime, there
are some ugly realities underlying our supposed economic "recovery,"
mostly having to do with the low pay of the jobs that are being
generated. If I were a betting man, I'd bet that some confluence of
these two things -- a healthcare crisis and a realization that the
rising GDP is rising mostly for the rich -- that will drive politics
in just a few years. That is, if the Chinese don't find a way out of
buying our bonds first. <g>

They might just figure out that we have become reliant on them Ed.
Addicted, if you will. Domestic markets here rely on them not only for money
but for cheap products.

--
John R. Carroll
Machining Solution Software, Inc.
Los Angeles San Francisco
www.machiningsolution.com


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