A discussion continues

This will be a different type of post.  Over the past few days, I have had an exchange of comments on MarketWatch.com, and the format there doesn’t lend itself to that type of discussion, so I’m going to continue it here.

I have no idea if “Marsden” will reply or not, but I hope so, because he seems to be different from my normal antagonists on that site, mainly because he is making an attempt to use facts to support his opinions.

I strongly disagree with some of his opinions, and the disagreement stems from my post a few days ago (A deficit dummy) where I took Robert Frank to task because of numerous errors and half truths in a NY Times article.

Marsden started his reply with “Robert Frank is brilliant and so was his essay.”  So of course I couldn’t leave it alone.  :-)  The rest of his reply was actually thoughtful, and I actually agree with most of it.

Here’s part of his reply: People trade time for things. Precious, irreplaceable time, for useless cr@p which makes them feel better for only a short while. Then, to get even more, they leverage, borrowing from their own (and their children’s) future. This needs to be shouted from the mountaintops imho. Meanwhile we tax production instead of consumption, getting it exactly backwards.

I don’t have any disagreement with that at all – it’s common sense – and if more people thought that way we wouldn’t be in this mess.

Anyway, I replied to the Frank is brilliant part, saying: You may think he’s brilliant, but his editorial is factually wrong. Since he’s an economist and presumably should know economic history, I have to assume that he intentionally lied in order to make his points.  That’s not my concept of “brilliant.”

Marsden replied: All you have done is to repeat your assertions (“wrong!” “lies!” etc). If you want to make a point, feel free to do so. But it will take something concrete by way of example, particularly if you expect to convince anyone.

I assumed (mistakenly) that he was referring to my “deficit dummy” post on here, which I had taken care to document all my opinions with facts.  Plain facts, straight from the source, no news stories or opinion pieces.  So I went a bit overboard in my reply.  I said….

Did you bother to read the link I provided? My “assertions” are documented, complete with source data that documents the facts to show that Robert Frank has his facts wrong. I fail to understand how “brilliant” people think they can base policy positions and decisions on incorrect data, then blame others when their decisions turn out to be wrong.

(I inserted the chart of Hoover’s increased spending here)

Claiming that Hoover cut spending while the facts are that Hoover increased spending by 63% in 4 years is a “concrete” example of my “assertion” that Robert Frank lies as needed to make a point.

I freely admit that this was a bit over the top for a comment on MarketWatch – the misunderstanding will become clear in a moment.

Marsden replied with a lengthy comment that I will respond to here.  I’ll break it up and respond to each area of disagreement.  Hopefully this will make the multiple points of contention more clear.

Marsden starts with I not only didn’t read your link, I didn’t even see it. Definitely my mistake! That explains my over the top response to his comment – we were talking about different things, so of course we disagreed.

He continues About Hoover however, everywhere I turn I see the contention that he cut spending as a mistaken response to the financial collapse. So is this some nefarious plot by Democrats in your view, to misrepresent history?

No, I don’t think it’s a plot by Democrats, and nowhere did I mention political parties.  I do think that it’s a common misconception – reinforced by ignorant economists and journalists such as Mr. Frank so that you see it everywhere you turn – that Hoover cut spending and FDR’s New Deal reversed that and brought us out of the Great Depression.  I merely stated the facts.

Marsden then quotes an Encarta article that simply repeats the lie about Hoover cutting spending – as if by quoting another source which was also mistaken, it wiped out the facts about Hoover’s spending that I had presented.

He continues Meanwhile, do you really think that cutting spending is the proper move when private investment has collapsed?

No I don’t – as long as you have money to spend.  But when the US has to borrow from China, and even resort to printing money (as happened this week when they purchased $7.5 billion of debt on Wednesday, and another $7.5 billion today)  we don’t have money to spend.

I believe that too much debt – public and private – is what caused this crisis.  Borrowing more money and going deeper into debt isn’t going to solve it.  If more government deficit spending actually stimulated the economy, why didn’t the Bush 66.5% spending increase (from $1.79 trillion in 2000 to $2.98 trillion in 2008) prevent the problem in the first place? (Source is CBO, link will open an Excel spreadsheet, and doesn’t include Bush’s 2009 spending.)

Marsden continues Please note, btw, that I am generally violently opposed to deficit spending of any kind, and particularly the kind we’ve engaged in for the past eight years. Also note that I am not one of the people who believe that FDR rescued this nation from the Great Depression. In a way, Hitler did, but in a different way from the way in which he rescued his own nation years before.

I agree with him on that.

Here’s where we start disagreeing. There’s a lot to argue in that link. Is it your writing? For example, the author declares that the budget has never been balanced in his lifetime.
Yes, it’s mine.   And you’re disagreeing with something I never said.  I never said the “budget has never been balanced in my lifetime.”  I said “Politicians and economists have been saying that they’ll balance the budget and start paying down the debt for as long as I can remember – and I’m 47.  It has not happened in my lifetime.  Not once.

Read on, I’ll provide the actual numbers to prove this further down.

But there’s this: http://archives.cnn.com/2000/ALLPOLITICS/stories/09/27/clinton.surplus/ (from the year 2000)

“President Clinton announced Wednesday that the federal budget surplus for fiscal year 2000 amounted to at least $230 billion, making it the largest in U.S. history and topping last year’s record surplus of $122.7 billion.”

And even more to the point (same link): “Instead, the president explained, the $5.7 trillion national debt has been reduced by $360 billion in the last three years — $223 billion this year alone.

This represents, Clinton said, “the largest one-year debt reduction in the history of the United States.”

Since the author says he’s 47 years old, he ought to be aware of that. Or is it more “lies”?

Then he declares: “The last time the US reduced the national debt was 1957. (Source is the US Treasury.)”
The author then provides a link which includes the years up to 1999, but not 2000. How convenient. You should call that a “lie” shouldn’t you?

To be blunt, yes, it’s more lies.  Here are the facts straight from the US Treasury here and here.  (Sorry, they split the data between 1999 and 2000, so I have to use two links.  I should have provided that in my original post so you wouldn’t have wasted your time thinking that I left out a debt reduction year in 2000.)

Year National Debt
9/30/2001 5,807,463,412,200.06
9/30/2000 5,674,178,209,886.86
9/30/1999 5,656,270,901,615.43
9/30/1998 5,526,193,008,897.62
9/30/1997 5,413,146,011,397.34
9/30/1996 5,224,810,939,135.73
9/29/1995 4,973,982,900,709.39
9/30/1994 4,692,749,910,013.32
9/30/1993 4,411,488,883,139.38
9/30/1992 4,064,620,655,521.66

So when CNN says  “Instead, the president explained, the $5.7 trillion national debt has been reduced by $360 billion in the last three years — $223 billion this year alone.” and This represents, Clinton said, “the largest one-year debt reduction in the history of the United States.” they are lying.  Look at the freaking numbers!

The facts are that the national debt increased each and every year of the Clinton administration. Show me where the debt was reduced by even $1 during Clinton’s 8 years.  You can’t because it simply did not happen. 

Look at the facts! Clinton – and CNN – simply lied.  What else can you call it?  What they said and the actual facts -straight from the government, no editing – are simply not compatible.  I call it lying, you may have a more pleasant euphemism, but it’s certainly not the truth.

As to my statement that the national debt has not been reduced during my lifetime, I stand by it.  Again, look at the facts.  Go to the Treasury site and actually look at the numbers. 1950 – 1999 are here.  2000 – 2008 are here. Find the last year in which the actual debt was lower than the previous year.

You’ll see that until you get back to 1957, each and every year the debt was larger than the year before.  In 1957, the national debt was $270,527,171,896.43,  down from $272,750,813,649.32  in 1956.

I was born in 1962.  That’s after 1957, so I stand by my statement.

One last point to make.  Marsden says Finally, with respect to your major point, Frank was careful not to say explicitly that Hoover cut spending. He said:   “In 1929, President Herbert Hoover thought that the best response to a collapsing economy was to balance the federal budget. With incomes and tax receipts falling sharply, that meant cutting federal spending. But as almost all economists now recognize, President Hoover was profoundly mistaken.”

And there are no errors there, much less “lies”, unless you contend that one may balance the budget by cutting taxes and increasing spending. Oh where have we heard THAT before?!

I actually answered that in my original post.  You are correct in that Mr. Frank did not EXPLICITLY say that Hoover cut spending, but I ask you that if he wasn’t saying that, WTF was he saying?  How was Hoover “profoundly mistaken” if he didn’t reduce spending?

Since Hoover actually increased spending, was that his profound mistake?  I don’t think that’s what Mr. Frank was trying to say, and I don’t think you believe that either.  Otherwise you wouldn’t have quoted the Encarta article that states “Hoover sought to cut government spending and raise taxes”.

I have never stated, implied, or otherwise insinuated that you can cut taxes and increase spending and balance the budget.  That’s a straw-man argument that I won’t bother to refute.

Marsden – I appreciate your considered response to my comments on MarketWatch.  Feel free to respond here by posting a comment.  I’ll reply in a like manner and we can discuss anything else you’d like.

I think we pretty much agree on everything except our opinion of Robert Frank.  Once you see the facts I’ve presented about, there will be no disagreement about the debt.

Since you made a reasoned response on MarketWatch, I have high hopes that you’ll agree with me once you see the actual facts, and not some CNN/FoxNews/NY Times/etc distortion of the facts.  Check out a few of the site on my blogroll (especially mises.org) to understand why “almost all economists” are almost always wrong.

Keynesian economic theory simply doesn’t work, yet “almost all economists” – including Mr. Frank – persist in trying to make it work.  They are failing, and I fear they are taking us all down with them.  Read a few other posts here to understand why I feel they are wrong.

Thank you,



3 Responses

  1. Greetings: I’m replying here, for the heck of it. After all, you linked this page from MW, so if there’s anyone actually following this discussion they can easily find us.

    I’m not an economist by any stretch; however since May of 2007 I’ve made an effort to educate myself in financial matters, and just in time as it turned out–I backed out of the markets about halfway that summer (too bad I didn’t back out 100%, but that’s another matter). Anyway, I’m no expert. Nonetheless I’ve engaged in several extended discussions on financial topics, principally at MW and also at BW which is BenzWorld, as its name implies a community of German-car enthusiasts, of all things. In the ‘off-topic’ section of its discussion forums one person in particular, named McBear, has proven to be an intelligent and thoughtful respondent. But there are several others as well, and the point of mentioning all of this is that 1) I’m not and expert and 2) I’m not going to repeat discussions here that I’ve had a dozen times before. I may quote a couple though ;)

    Two points of yours are worth pursuing anyway, and there’s an additional point I made on MW that I’ll also emphasize because I think it’s important.

    1. It remains unclear to me whether or not Clinton actually paid down the Debt. The numbers you present are clear enough, but that hardly means they couldn’t have been “massaged”. Who knows what they include and exclude? I’d need an expert. Your conflation of “CNN/FoxNews/NY Times/etc distortion” leads me to believe that you believe in mass-media conspiracies. (Actually, I sort of believe in mass-media conspiracies but not about Bill Clinton paying down the Debt.) The issue of Clinton’s surplus is so politically loaded that I’ve already waded through a ton of pro-and-con about it in years past. It all depends on what you want to include and what you want to leave out (e.g. our legislators’ perennial raiding of the so-called Social Security trust fund). My take on it is that Clinton left us with a budget surplus or something close to it. There’s *no* questioning the fact that his successor trashed it. And that, along with Greenspan’s easy money, set up our nightmare scenario today. It’s also worth mentioning that both used the same excuse: 9/11.

    Do I think Clinton (and CNN, etc) lied? Not really, I think it’s one way of interpreting the numbers. Yours (posted above) is another way, and I think there are more than one set of numbers in the world, and I’m not motivated at the moment to find others. If you are maintaining, even for a moment, that Clinton’s budgets–especially near the end of his term–were not *vastly* more fiscally responsible than any of Reagan’s, Bush I or Bush II’s, then I’m less inclined to take you seriously. BTW, I am no fan of Bill Clinton’s, and I never was.

    2. Quote: “You are correct in that Mr. Frank did not EXPLICITLY say that Hoover cut spending, but I ask you that if he wasn’t saying that, WTF was he saying? How was Hoover “profoundly mistaken” if he didn’t reduce spending?”

    I think it’s clear that (accurately or otherwise), Frank is maintaining that Hoover didn’t open the spending floodgates. It’s idle to quibble about the exact amount, if we both agree that it was small. I’m convinced that Hoover did *not* endorse a substantial increase in public spending. His quotes to this effect are legion, and you’re probably more familiar with them than I am. No one can call him a Keynesian.

    That’s what Frank is talking about. Should we ramp up spending dramatically, even incurring a substantial deficit, in order to try and compensate for a near-total collapse in private investment? You conclude: “Keynesian economic theory simply doesn’t work.” Then what do you recommend? Here’s where I’ll quote myself, from a similar discussion:

    “This nation’s economy is dead in the water. Business and lenders alike are completely loath to invest now. We’d probably recover without government intervention in a few years, and some things might be better because of it. However, before that would happen we’d have a destructive public insurrection as–rightly or wrongly–people now expect the government to help them when no one else will.

    “It’s all well and good for those of us who are high and dry to prescribe harsh medicine for those who are not. I agree that more debt is not normally a solution for a cataclysm (partly) brought about by too much debt. But right now, business and finance are completely prostrate. They’re not going to be rescuing anyone anytime soon–not even themselves. And the contagion is worldwide–Ireland and Eastern Europe are following Iceland down the drain as we type.”

    (where you can find another 5,000 posts from yours truly ;)

    So what’s your prescription? I’ve no doubt that you’ve spelled it out here on your site, so just link me and save yourself the repetition.

    3. My additional point: Robert Frank is someone I respect quite highly, and obviously we disagree on that. My respect for him is predicated not on his desire for deficit spending at the moment, but on his promotion of consumption taxes to replace our production taxes. I’m firmly convinced that we achieve a much healthier society that way. His book “Luxury Fever” is closely argued and copiously documented. As I mentioned, I read it twice, so obviously I recommend it. However I wonder if you’d get the full benefit, as violently opposed to him as you are.

  2. Still one more remark. My contention has been that the government *should* spend money–to shore up the ‘safety net’ for its citizens. To pay off FDIC-insured depositors, support unemployment compensation and health care, that kind of thing. Essentially strengthening and buttressing existing commitments and guarantees, but not entering into new ones. Even to engage in stimulus activities, one primary purpose of which is to reduce the cost of the foregoing items.

    But not one red cent should be sent to Wall Street to reward them for their financial crimes of ultimate magnititude. Would the financial system then crash and burn? Probably. Should it? Probably. Then, healthy, responsible institutions could form and grow and take the place of these corrupt banks. The free market is capable of neat tricks like that.

    The problem with my “solution” is that so many innocent parties would be harmed so irreparably by the collapse of our financial system. The collapse could and would cascade through our economy until very little was left. This, then, segues into my remark about some of being ‘high and dry’. And we might even find out we were wrong about that.

  3. Thanks for your response. I think we’re basically in agreement except for a couple of points.

    1) Deficit spending. The problem with government spending money it doesn’t have in an attempt to stimulate the economy is that government then decides where it’s spent. That money (future tax receipts) is no longer available for the private sector to invest (not spend) where ever it sees the chance for a future return. When the government spends it – whether on healthcare, alternative energy boondoggles, bailing out badly run banks and auto companies, etc – the money is gone. It would be different if the government actually had saved some money, but face it, the US government is broke. Any money they create and spend simply amplifies the current problem of living beyond our means. You cannot borrow your way out of debt.

    2) I do not believe in conspiracies – mass media or otherwise – I simply believe that many journalists and economists have a liberal mindset, and simply can’t see the possibilities of it being any other way. Every government economist (and most at colleges and universities) are Keynesian. They simply cannot see any other way of doing things. No matter how many times their theory fails. For example, in the 1970′s we had “stagflation”. A combination of little to no economic growth, high unemployment, and inflation. According to Keynesian theory, that’s literally impossible. Yet they persist in espousing their failed theory – and we all have to live with the results.

    I think I figured out how Clinton claimed that the “national debt has been reduced by $360 billion in the last three years — $223 billion this year alone.” If you open this spreadsheet http://cbo.gov/ftpdocs/99xx/doc9957/Historicaltables09-web.XLS, you’ll see there was a reduction in the “debt held by the public” in 1998 – 2001, but that is not the same as the national debt. In short, they distorted the truth to say something that wasn’t true. That’s a nice way of saying that they lied. The national debt (as I showed above) has not been reduced since 1957. That’s a simple fact, not subject to spin or debate.

    No one can call Hoover a Keynesian in part because Keynes didn’t publish his theories until 1936, long after Hoover was gone. Keynes’ book “The General Theory of Employment, Interest and Money” was widely seen as an endorsement of FDR’s spending. Almost everything in it has been repeatedly shown to be false, yet it persists as the bible of liberal economists. Wikipedia has a good (and surprising impartial) writeup: http://en.wikipedia.org/wiki/The_General_Theory_of_Employment,_Interest,_and_Money

    My prescription? Let the bad companies go broke. Let the people who invested in the bad companies go broke. Let the companies who loaned them money via CDS’s and other derivatives lose that money. There is a massive debt bubble that has yet to be popped in this country, and it’s got to happen sooner or later. The longer we wait, the more painful it will be. We’re doing the same thing that Japan tried and it lost them a decade – going on two. Take the medicine and get it over with – we’d be on the way back up by now if government would just let the free market take its’ course. It isn’t pretty, but it works. And it’s survival of the fittest, because the weak go broke, and the strong pick up the pieces and rebuild. Without tax money and other bailouts.

    I may have more to say later, but that’s it for now. Your thoughts?

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