Barack Obama has fought for higher taxes on the wealthy, and brought them about in 2013, as Bill Clinton did in 1993.
Under Bill Clinton, we had the greatest period of economic prosperity in American history, the rich paid more, and the country did not tank!
Now under Barack Obama, the deficit in government spending is rapidly declining, and the stock market is at an all time high, both occurring as we see higher taxes on the wealthy once again!
The Republicans complain bitterly once again, and again, they are wrong, and economic expansion is occurring, even with the GOP attempts to block it, and instead, draw attention to what they call “scandals”, which, by comparison with scandals and controversies under George W. Bush and Ronald Reagan, pale by comparison!
The result of the GOP political “dirty tricks” is that they will NOT harm Barack Obama’s historical accomplishments, or Hillary Clinton’s chances for the White House, which depend only on her desire to run. If she runs, she is the 45th President of the United States on January 20, 2017!
Remember the Sequester??
“Remember stimulus spending? That’s the stuff that the government is supposed to come up with when the economy goes into recession. The idea is that since government expenditures are one part of overall economic output, when private activity wanes, aggregate output, or “GDP†can be maintained.
It’s intriguing as a theory, perhaps, but in practice it doesn’t work. From 2007 to 2009, inflation-adjusted federal spending went up by a staggering number, 24%. In 2007, we had a big government. By 2009, we had a big government and then some. Yet the recession was severe from 2007 to 2009, the worst since the Great Depression, as we’re always told.
Given this record, it makes you wonder if stimulus spending, or “Keynesianism†or “countercyclical fiscal policy,†as it can go by in professional circles, really has any claim to validity. A 24% further encroachment by our big government couldn’t take the Great out of the Great Recession.
One of the major elucidations of modern economics was the resuscitation, in 1974, of a classical concept called “Ricardian equivalence.†In work that will one day surely win him the Nobel Prize, Harvard’s Robert Barro explained that deficit spending makes people assume that they will be taxed more in the future. Therefore, if governments address recessions by means of deficits, the private sector will respond by shrinking all the more, as earners put away money to cover the inevitable bill from the IRS.
Barro’s analysis was an “Exocet aimed at the heart of the Keynesian universe,†as Wall Street Journal editor Robert L. Bartley wrote (invoking the scary French missile) in his memoir of those years. Today, Ricardian equivalence—between taxes assessed now and those implied by deficits—has proven a useful means of comprehending what happened to us during that 24% government-expenditure increase that came coupled with a harrowing real-sector contraction.
Here in March 2013, policy is different. Government spending is set to go down. The sequester is taking effect, requiring yearly 2% reductions (if against an artificially high baseline), starting now.
Historically, spending limitations have preceded wonderful things in the economy. In 1983, federal outlays, which had been increasing for a dozen years at well over the rate of economic growth, peaked, and then crawled ahead for the next five years at half the rate of economic growth. Next came a spending interregnum. But in the six years following 1992, real outlays increased at only one-fifth the rate of economic growth.
The years after 1983, and after 1992, are, of course, major golden ages in modern American economic history, just as the stagflation years of 1969-82 and the recessionary early 1990s were flops. When government spending increases were seriously fractional against economic growth in the 1980s and 1990s, that growth was 4% or higher, goods and services (and commodities) were inexpensive, unemployment was structural, and opportunity abounded.
Ricardian equivalence puts theory behind this practice. Tax cuts are nice, but spending cuts are nicer. For where tax cuts imply greater room for the real sector to operate, spending cuts all but guarantee it.
Curiously, the stock market (at least the Dow industrials) just now is merging with an all-time high. Throwing a damper on it last week, the investing savant Stanley Druckenmiller said that we should not misinterpret the current market as having shades of 1982.
Why bring up 1982? That was a year in which the market in five months rose 30% off a secular low. That low itself was clear of the recessionary bottom of the stagflation period (hit in 1974) by 35%. At a glance, 2013’s market is uncannily similar. Dow 14,000 is 30% above the low of five months ago, which itself was about 60% above the bottom hit in 2009. You can basically overlay the patterns.
Druckenmiller said that if you want a repeat of what happened after 1982, following that initial 30% gain, don’t bank on it. He referred of course to the greatest bull market of modern times. From the beginning of 1983 all the way to 2000 (and pretty consistently), stocks went up 1,100%, or 14% compounded per year. Incredible stuff.
Were there tax cuts? Sort of. The marginal rate went down, then partially up, and the capital-gains rate did the reverse. But spending went down, down, down. The only time it didn’t—1989-92—represented the only pause in the phenomenal economic run of 1982-2000 that resulted in 30 million new jobs and the tech revolution.
Druckenmiler justified his point by saying that there’s a lot of new spending baked in the cake, namely the entitlements explosion that’s set to come with the retiring the baby boomers. But you can’t gainsay that market optimism too much. Enormous spending blowouts have been with us since the late 1990s. If the federal government catches some modesty when it comes to outlaying other people’s money, or even tricks itself into some restraint as in the sequester, this economy will roar.”
http://www.forbes.com/sites/briandomitrovic/2013/03/05/the-sequester-that-saved-the-economy/
Lulz @ the Guano Droppings!
Hello Professor,
Here is a prediction for you. In a respectable amount of time, you will see President Obama’s likeness on American currency of some sort…..paper or coin.
Reason being as the first black President but more importantly the man who brought us out of the worst Republican caused Depression since the last 1930’s caused Republican Depression.
All Hail President Obama!!
Engineer of Knowledge, your thought and suggestion is indeed wonderful, and Obama would richly deserve it! Lincoln, FDR, Truman all were bitterly criticized while in office, but are now ranked in the top five of all Presidents, and Obama will, over time, move up to the top ten listing!
Hello Maggie,
My site is. engineer of knowledge.WordPress.com
I look forward to seeing you there.
It is from my writings that I was invited to speak on the radio. I pass on how to counter argue the nihilistic view points and talking points of the reactionary conservatives. It is not hard, I just educate others on the science facts, history truths, and the pitfalls of the opposition’s lack of using Freshman English 101, “Logical Argumentation” rules of debating. You know all the tools and rules that Juan uses to present his statement for which his best retort is the childish, “Blah, blah, blah”… He has quite the rapier wit huh.. 🙂
Hello Maggie,
I have pasted the link to my site.
http://engineerofknowledge.wordpress.com/
I also co-author on another blog that includes a lawyer from Britain, a retired University of Toledo History Professor, and an American who lives in the Bordeaux region of France.
http://manwiththemuckrake.wordpress.com/
I think you will like both of them as they are very intellectually stimulating.
I want to compliment you, Engineer of Knowledge, on your two website-blogs, and let you know just how impressed I am with your intellect and foresight! 🙂
Professor you are very kind and as I have stated before, I too enjoy our exchange of thoughts and educational aspects