Did Obama Blame the Financial Crisis on Budget Deficits?

This was a very strange part of the debate last night.

I would just say this to the American people. If you believe that we can cut taxes by $5 trillion and add $2 trillion in additional spending that the military is not asking for, $7 trillion — just to give you a sense, over 10 years, that’s more than our entire defense budget — and you think that by closing loopholes and deductions for the well-to-do, somehow you will not end up picking up the tab, then Governor Romney’s plan may work for you.

But I think math, common sense, and our history shows us that’s not a recipe for job growth. Look, we’ve tried this. We’ve tried both approaches. The approach that Governor Romney’s talking about is the same sales pitch that was made in 2001 and 2003, and we ended up with the slowest job growth in 50 years, we ended up moving from surplus to deficits, and it all culminated in the worst financial crisis since the Great Depression.

The Bush tax cuts were very bad fiscal policy, and shifted wealth upwards. But budget deficits create public debt, and the 2007-2009 financial crisis was fundamentally a problem of excessive private debt. Conflating the two is an intentional strategy to impose austerity on a population. White House Fiscal Commission co-Chair Alan Simpson has pointed to Greece as a possible future for the US, if the US doesn’t begin reducing its deficit. Bowles and Simpson argue that our budget deficit is heading us towards “the most predictable economic crisis in history”.  In fact, the budget deficit basically exploded because of reduced output due to the financial crisis, and the transfer of private debt to the public balance sheet.

There are many narratives of why the financial crisis happened. The only credible narrative, though, starts with banks and hedge funds manipulating the capital markets to push capital into junk mortgages. There’s a lot more than that, of course, going back to deregulation in the 1970s and 1980s, and a creation of an increasingly national credit and mortgage market in the 1990s (thanks to Clinton), as well as the political corruption underlying all of it. Private debt was exploding throughout. The public debt increase of the 2000s, though it didn’t help the problem, was at best an indirect contributor to it. But Obama doesn’t say that. Instead, he lauds Clinton’s administration for its policies.

Bill Clinton tried the approach that I’m talking about. We created 23 million new jobs. We went from deficit to surplus. And businesses did very well. So, in some ways, we’ve got some data on which approach is more likely to create jobs and opportunity for Americans and I believe that the economy works best when middle-class families are getting tax breaks so that they’ve got some money in their pockets, and those of us who have done extraordinarily well because of this magnificent country that we live in, that we can afford to do a little bit more to make sure we’re not blowing up the deficit.

Deficit hysteria is meant to hide what really happened, a private unregulated credit machine that loaded Americans with debt they couldn’t pay back. It’s telling sign that this is how Obama framed his opposition to Romney’s tax cuts. In Obama’s telling, it’s austerity, or crisis. The historical irony is that Greece is falling apart because austerity. For what it’s worth.

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About Matt Stoller

From 2011-2012, Matt was a fellow at the Roosevelt Institute. He contributed to Politico, Alternet, Salon, The Nation and Reuters, focusing on the intersection of foreclosures, the financial system, and political corruption. In 2012, he starred in “Brand X with Russell Brand” on the FX network, and was a writer and consultant for the show. He has also produced for MSNBC’s The Dylan Ratigan Show. From 2009-2010, he worked as Senior Policy Advisor for Congressman Alan Grayson. You can follow him on Twitter at @matthewstoller.


  1. JGordon

    Personally Matt, I want to opt out of the system where the government, by force of law, makes me use a currency that it can, and always does, debase on a whim. Any ideas on how I can go about that? You know, since my pay hasn’t gone up in the past 4-something years I mean, to keep pace with the debasement.

    1. scraping_by

      Direct production of daily necessities. Garden and chickens in the back yard, shelter from salvaged materials, clothing from raw materials. Transportation is walking. Barter for what you can’t make.

      If, however, you’re stuck with using money, it’s a good idea to keep a close eye on those who print it. Keep them a bit afraid of losing their jobs. Call them down on their bullshit. Remind them they need you more than you need them.

      That last is acknowledged in corporate management, in the hierarchy where rewards flow up and responsibilites flow down. So it might just move to the larger society.

      1. JGordon

        Yep! I have been/am working on all that stuff. These thieves in the private Federal Reserve bank and government can’t steal from me what doesn’t have a dollar value attached to it.

        Of course they could just start doing like the Romans did and tax all my grain and animals directly to support their failing empire. But at that point their precious dollar system would be long gone anyway.

        1. scraping_by

          My kids (early 20’s) are retooling to that mode. The Whole Earth Catalog thing, though I’m not sure if they’ve read mine. Probably. I hid it with my Henry Miller and Charles Bukowski.

          1. JGordon

            Hell yeah! I’m in a permaculture design course right now just so I can know how to live after the SHTF. After spending all of my life being depended on these insane criminals who are running the system into the ground, it sure feels liberating to not have to care what they’re doing anymore.

  2. Sue

    I really wish they would lay off the tax-talk already, as if that is the end-all and be-all of economic policy. The republicans framed this debate and are leading Obama around by the nose.

    Just once, I would like to hear a politician talk about the creation of jobs without once mentioning useless tax cuts. We have the lowest taxes ever right now and the economy is still in the gutter.

    If there are no profits, nobody cares a fig about tax cuts! Employers will not hire EVER unless they have customers, in which case they will ALWAYS hire regardless of taxes, in order not to leave that revenue on the table. Is this so hard to understand?

    Certainly, taxes have almost nothing to do with the financial crisis, but all we hear is TAXES TAXES TAXES.

    1. RT

      No, it’s not hard to understand — given that you aren’t brainwashed… But they are brainwashed, buried under a pile of neolib BS. And it’s not unemployment sticking out of that pile – they don’t care nuts ’bout unemployment b/c u know, that’s either just “natural” or structural or both among moochers – no, what they fear most is inflation whether that’s a real threat or not. They can easily get by a couple years with meagre returns as long as no inflation is eating up their prey. Do you know any better remedy for inflation fears than austerity-driven unemployment? Not me. First, they milk their profits out of the many, and then, laid off, abuse them further as human shields against inflation. Easy. Move on, nothing to see here. They will never ever target full employment again, regardless what they say. Never. Better to crucify workers on the cross of paranoid inflation-fears than to sacrifice one cent of prey to inflation. Big boss forbid! Never.

      1. Shutter

        RT.. if I understand your drift, the Big Old Money isn’t afraid of taxation, they’re afraid of inflation. Their expressed Fear of Taxation is just a dodge to get around the fact they’re burying half of America to keep inflation favorable to them.

        1. RT

          Yep. I strongly believe that Big Old Money, aka the Blob, is quite happy to see a large enough reserve army of unemployed workers for two reasons:
          (i) steady downward pressure on wages
          (ii) keeping inflation at bay
          That’s neoliberal economic wisdom. Do you hear or see any fat cat who is really scared because of the unemployed? I don’t. I see fear only if banks get in trouble or if inflation rate is picking up. Hence, high unemployment rate is here to stay.


      Promises of low taxes buy votes. Very few voters place others’ unemployment above their own desire to have more money.

      It’s not just the rich who are greedy, it’s everyone who acts this selfishly.

  3. jake chase

    Jobs, jobs, jobs! What people need is money. Give the people in the 99% money (in equal amounts) and they will renew effective demand. Offer a return to small savers and they will buy all the Government bonds you can print. You act like people arent working now. Many are working two jobs. Your jobs demand is simply timid cant. Jobs legislation will simply line the pockets of another group of looters cashing in on pork legislation. That Democrats keep returning to this jobs bleat is half the problem. The other half is that they keep caving in to the one percent on every issue. The Clinton prosperity was bogus, based on credit, trickle down. Greenspan enabled a tidal wave of cheap credit, but it went to all the wrong people.

    1. YouDon'tSay?

      You know Jake, at first blush that always sounds like simplistic crazy talk, but it really is true. What the people need is just money. Hate to say it, but W’s simple idea of tax rebate checks, if greatly expanded and not hamstrung by being tied to taxes, would actually work. The answer isn’t “trickle down,” it’s actually “spend up and then let it trickle down again.” You’d think all these hot dog PhD’s would be able to figure out such a simple concept.

  4. wbgonne

    Thanks again for this trenchant analysis of the “Great Debate” last night:

    “The reason Obama did poorly is simple. He is bad at governing America. He hasn’t solved the foreclosure crisis, the jobs crisis, the climate crisis, the energy crisis, the financial crisis, the debt crisis, the health care crisis, or really, anything. He can’t point to very much that Americans broadly like, except killing Bin Laden and the auto bailout. His second term agenda is to cut Social Security, Medicare, frack, cut corporate taxes, bust more teachers unions and pass more neoliberal trade agreements. He is proud of this record. So are his people. But he knows he can’t run on it because it’s unpopular, so instead, he presented himself as a nice likeable guy.”

    Now I see the Obots are claiming that Romney only won the debate because he cheated and lied. Obama never fails, he can only be failed.

    1. The Rage

      Again, how do you solve a crisis that is unsolveable under current structural pillers?

      Your post is mumbling so bad, it should be be allowed to exist.

      1. avg John

        You tear down the pillars, but that opportunity has came and gone. You put the country and the people first and set your political career aside. It’s called leadership and it’s sorely needed. Perhaps if just one of these politicians had the guts to lead they would be surprised at the outpouring of support from the people. At least, they could hold their head up and knowing they tried.

  5. wbgonne

    P.S., Obama’s tweak to Social Security means raising the eligibility age or cutting benefits outright. Either way, older people will have to stay in or return to the workforce. Meanwhile, unemployment is already sky high and young people are especially suffering to the point that they can’t leave their parents homes and start new households because they can’t get jobs.

    Anyone else see a problem here?

    1. Bert_S

      Ya, I think they should let old people retire and young people have the jobs. Instead of scaring the crap out of them and making them believe they can never retire. Then scaring the crap out of young people and telling them their social security is gone and their payments are for nothing.

    2. D12345

      Thanks Wbgonne!!! I am amazed that people gloss over this central point. There is massive unemployment, youth unemployment is staggering and somehow it is a good idea to make old people work longer????

      How about just eliminating the cap on payroll tax payments…

    3. YouDon'tSay?

      Good point, although it’s hardly “Obama’s tweak.”

      Wanna fix SS? Means test the shit out of it, and LOWER the retirement age. PAY old people of modest means to retire EARLY and free up the economy. Should have been done years ago. Not that that will necessarily fix the unemployment problem for the young in the long term (it won’t), but it’s a start.

    4. Yan

      As for retirees: move out of the US. Somewhere nice and welcoming as Tarija, Bolivia. Cheap, slow life where human beings actually are able to suffer -even enjoy- each other. Wine country, clean air, VERY affordable and, believe or not, wonderful health care system (visit to the doctor + antibiotic shot + prescriptions = 4 US$). Globalize my dear elders!

      1. skippy

        True, but, at the same time this is just what the MOB wants… off shore the voters that want, what was contractually promised.

        skippy… output is negative flows… Imagine being offshore when the promise is retracted… ummmm….

    5. scraping_by

      Well, it’s not a problem if you’re following a divide-and-conquer strategy. Barry, like the rest of the right wing, is terrified of real democracy and the truths that underlie it.

      Socrates was forced to drink hemlock because he taught the youth of Athens to violently attack their elders. The subsequent years were violent revolution and anarchy, the young seeing their parents as the enemy. This makes Barry’s ruse tried and true.

      The young and old aren’t fighting over the same scraps, they’re being cheated out of their due and left with scraps.

  6. Conscience of a Conservative

    I would say there is indeed a link between the huge balance of trade defiicts and the sub-prime crisis. We bought goods and borrowed from the Chinese , Japanese, Germans, etc and then to sop up that debt that paid for it all, we let them invest in dodgy mortgages, credit cards and sub-prime auto bonds, sprinked in of course we threw in some junk bonds, clo’s and cdo’s.

    And trade deficits and government budget deficits are linked in the Keynsian equations. We ran deficits in both.

    1. paul

      “I would say there is indeed a link between the huge balance of trade defiicts and the sub-prime crisis. We bought goods and borrowed from the Chinese , Japanese, Germans, etc”

      This is an inaccurate characterization of the dynamic.

      When we buy something from those countries we pay CASH in US dollars. So far no borrowing.

      These countries don’t have enough mattresses to store all of this CASH and putting it in safety-deposit boxes doesn’t pay any interest to guard against inflation.

      These countries therefore CHOOSE to invest in US Treasuries, which are the SAFEST storage medium in existence. Theyare welcom to trade their dollars for euros, yen or whatever in the currency markets.

      I still don’r see any debt here, not in th etraditional sense of the term. Bonds are the preferred method (of leaders long dead) to create money and avoid the inflation monster. Trouble is no empiricle evidence has ever shown there to be a difference between bonds/no-bonds money creation.

      Be that as it may, that is what we must do by law to create new dollars to account for growth and leakages.

      In order to create new money, the government must enter it on it’s balance sheet as a liability (nasty word) because on our side, the non-government side it is an asset. Simple double-entry bookkeeping. The tyranny of accounting.

      As for bonds, by law (again thought up by leaders long dead) we must issue bonds in an amount equal to deficit spending to appease the inflation monster. Never mind that this so-called constraint on money creation has been ignored when it was convenient to do so. Remember WWII?

      It’s about as much a constraint as the 65 MPH speed limit.

      Bonds are savings for those in the non-government that hold them (including the Chinese) and they can spend the money anytime by selling them to someone else.

      Did I mention we can’t sell enough bonds to meet demand and the yield keeps dropping? Before long investors will be paying the government for the privilege of “loaning us money” like the Japanese are doing with their bonds.

      We don’t owe anything to anyone anywhere except for the goods and services those bonds could buy and what a glorious day it would be if they would start spending them. Unemployment would vanish.

      But no, they just want to accumulate more and more of our “debt”. Doesn’t very well support the argument that someday China won’t lend us money anymore does it? But there’s always a boogie man for us to be afraid of if we just try hard enough.

      1. YouDon'tSay?

        When we buy something from those countries we pay CASH in US dollars. So far no borrowing.

        Ahem… CASH from whom? A BANK, issued as CREDIT? I like the thrust of your analysis, but me thinks it’s just a WEE BIT too simplistic.

        1. Paul

          First, all money doesn’t come from banks, thankfully. The government taxes and spends progressively to create government induced flow.

          Second, some net cash is created through deficit spending. If you add up all of the deficits/surpluses over history you will find that the total is greater than bonds held by the public by about $2 Trillion. This doesn’t even include off-budget spending, which totals about $2.6 Trillion.

          Finally, the big companies in the U.S. are flush with cash. Why would they need to borrow from banks to buy stuff?

        2. Ralph

          It’s always amusing to see someone who offers a simplistic and thoroughly conventional explanation for something to claim that his critics are too simplistic.

      2. The Rage

        Good post, your get the dynamic. The demand for government debt is so high, you could get rid of all the foreign ownership of the debt and we domestics would pick up the slack.

        The problem is “why” the demand for government debt is so high, explains the structural crisis in the global economy.

      3. avg John

        I don’t mind if they trade their bonds for finished goods, but if they buy all of our coal, corn, oil, gas and timber, I look for unemployment to continue and the cost of gasoline and a box of cereal to continue to skyrocket.

        1. Ralph

          The Chinese weren’t even allowed to buy a US oil company. They won’t be allowed to buy all our coal, gas, forests, etc.

    2. scraping_by

      First, who’s ‘we’? The trade balance is dinky compared to the money that vaporizes in the derivatives trade. And yes, dollars in financial gaming are the same dollars you and I use to buy lattes at Starbucks.

      Second, who’s ‘we’? I never created an MBS, a CDO, or any other derivative. Nor did anyone I voted for, nor anyone I’m related to, nor anyone I go to church with, nor anyone I even had cocktails and canapes one spring afternoon with. When did other people’s actions become my responsibility, and what part of conservatism sticks me with another’s consequences?

      Third, are we talking about the same Keynes? I don’t remember any bazooka or helicopter building roads, highways, parks, schools, libraries, or financing books, paintings, unions, social settlements, scholarships, or anything else we in the real world can use and point to. I don’t remember where Keynes said that when rich people screw up we should give them enormous amounts of money. Could you point out a reference?

      And government deficits? How much weight can you give them, when they can be vaporized in a single afternoon’s congressional action? They’re as important as the political noise makes them, and no more.

      Bankruptcy laws should be returned to pre-Shrub levels and get the uncollectable debt out of the system. The treasury bonds should be vaporized so they don’t suck up so much tax money. The banksters should act like big boys and admit they shouldn’t have lent that money, and we’ll all get on with the world.

    3. Doug Terpstra

      Good job making Obama’s points for him. But what I think Matt is saying is that while deficits, including trade deficits, may be problems, they are only part of and resulting from the much bigger disaster of banksterism, rigged-trade trickle-down, and casino capitalism run amok, and that the resulting deficits are now being positioned as a weapons to further target the victims and reward the predators.

      It is classic Shock Doctrine using the propagandists’ classic ploy of mixing strategic lies with manifest truths with the primary intent to deceive, and Obama and his handlers are masters at it.

    4. Doug Terpstra

      Good job making Obama’s points for him. But what I think Matt is saying is that while deficits, including trade deficits, may be problems, they are only part of and resulting from the much bigger disaster of banksterism, rigged-trade trickle-down, and casino capitalism run amok, and that the resulting deficits are now being positioned as a weapons to further target the victims and reward the predators.

      It is classic Shock Doctrine using the propagandists’ classic ploy of mixing strategic lies with manifest truths with the primary intent to deceive, and Obama and his handlers are masters at it.

    5. Yves Smith

      Please read this paper. It shows there is no relationship between financial crises and trade deficits. Remember, Japan was running the mother of all debt fuelled asset bubbles when it was also running big trade surpluses:


      It is also a super important paper and you should read it regardless.

      1. Bert_S

        Actualy, I thought Brad Setzer overstated the impact of $500 billion in Chinese MBS purchases. But here is the conclusion of the paper if that helps shed any light for us. Also makes you wonder why the Fed can be the elasticty provider(?) in end markets too.

        The role of global current account imbalances in contributing to the recent financial crisis
        needs to be reconsidered. In particular, we raise two basic objections to the popular “excess
        saving” view. It fails to distinguish sufficiently clearly between saving, a national account
        concept, and financing, a cash-flow concept, thereby focusing too heavily on net rather than
        gross capital flows. And it conflates the determinants of the market and the natural rate of
        interest rate. As a result, the ES view has little to say about the underlying patterns of global
        intermediation that contributed to the credit boom and the transmission of the turmoil, and
        diverts attention away from the monetary and financial factors that sowed the seeds of the
        We have argued that the fundamental weaknesses in the international monetary and
        financial system stem from the problem of “excess elasticity”: the system lacks sufficiently
        strong anchors to prevent the build-up of unsustainable booms in credit and asset prices
        (financial imbalances) which can eventually lead to serious financial strains and derail the
        world economy. Reducing this elasticity requires that anchors be put in place in the financial
        and monetary regimes, underpinned by prudent fiscal policies.
        Analytically, this paper is a plea for a more systematic inclusion of monetary and financial
        factors in current macroeconomic paradigms. The distinguishing characteristic of our
        economies is that they are monetary economies, in which credit creation plays a fundamental
        role. The financial system can endogenously generate financing means, regardless of the
        underlying real resources backing them. In other words, the system is highly elastic. And this
        elasticity can also result in the volume of financing expanding in ways that are disconnected
        from the underlying productive capacity of the economy. In macroeconomic models, the role
        of money and credit should be essential, not ancillary. This calls for a revival of an old and
        highly respected tradition in macroeconomics – one which, sadly, has been largely neglected
        in the current prevailing paradigm.

  7. Bert_S

    Actually I think this is a very strange post.

    I didn’t watch the debates, but I’ll assume this was O’s response to Romney’s 20% across the board tax cuts.

    It’s obvious to me that O is simply saying that the Bush tax cuts did not work as advertised. They were supposed to cause growth which would then close the deficit (The never ending Supply Side economics).

    That didn’t happen. He says it won’t work for Romney either. Simple. End of story. That’s what he said. Be glad. Save the trees and forest analysis for another day and reason.

    I’ll add the other big boo-boo since O missed it, I guess. Medicare Part D. Menzi Chen did some charts on that and showed that was the major reason for Medicare costs exploding. And we know we pay twice as much for prescription drugs as the rest of the world – so we are handing over a huge subsidiary to drug companies for no reason.

    Sometimes there are simple things to focus on.

    1. Doug Terpstra

      “O is simply saying that the Bush tax cuts did not work as advertised.”

      No, I agree with Matt Stoller, who’s really nailed the debate analysis better than anything I’ve read anywhere today — nailed it and Obama with a sledgehammer.

      Obama’s carefully-fabricated theme is all part of the second term setup. In a slightly circuitous way he’s disingenuisly blaming deficit spending almost exclusively for the 2008 financial crisis rather than the obvious actual causes: unbridled casino capitalism, predatory lending, loan sharking and looting. And ultimately, what he’s saying is that we can afford all the corporate welfare, bailouts, tax-subsidized bonuses, unfunded wars for Israel, infinite QE speculation, etc., but we’re just too damn broke to afford anything more than cat food for seniors. The fiscal cliff caused the Great Depression, so we have to cut entitlements to the undeserving dispossessed moochers of the lower and middle classes.

      1. Bert_S

        You right about the all the things that went wrong. I spent a few years following Brad Setzer’s blog which focused on our trade deficit problem, and Conscience of a Conservative(above) described how that works . Then I had Angry Bear training on SS, and of course NC training on the financial crisis. I won’t mention here that I read parts of Zero Hedge everyday

        But really, we are talking a prime time TV debate here, and what is O gonna say?

        I really think he was simply trying to say that Ronney Romney Supply Side Economics hasn’t worked since Ronnie did it the first time(lowering Eisenhower tax rates) and isn’t gonna work going forward.

        Now if he has more time than than prime time TV, then we could listen them expound on their analysis of what went wrong and how to correct it. Like maybe have a Obama-Romney blog debate or something like that.

        1. Bert_S

          BTW- The fiscal cliff is probably the best outcome we could hope for. Half the cuts are defense and SS and even Medicare – which does need fixing – aren’t touched.

          And the Bush tax cuts finally end. Corn ethanol subsidies too.

          I’m a big fan of the fiscal cliff.

          1. Bert_S

            In case you’re wondering, it makes GDP go down 4% – and comes from most of the right places IMO. Then Congress can try and figure out if they have any way to make GDP go back up again. If we are lucky, maybe they will have Ben in jail sometime in 2013 so he won’t keep trying.(that’s just the Zerohedge talking in me)

      2. jonboinAR

        I actually blame more the heavy trade imbalance (Is that what’s called “current account”?) occurring over a little bit longer term. Deeper reasoners, I think, point to peak oil and the end-game in our way of life. But I don’t know anything, just what I read around here, and that’s what I’ve put together for myself.

        1. Bert_S

          The US is notoriously immune from “trade deficits”, the main reason is it’s reserve currency status. Otherwise this, also called the current account, would put downward pressure on the currency in forex.

          Like all things macro, you need to dig below the surface to see if anything alarming is happening.

          Say you are a rich country with a reserve currency and high net worth people are spending savings (stock) and this causes a negative current account(annual flow). This in itself does not sound so bad.

          But if you are offshoreing jobs -increasing your imports and hollowing out your real economy – and foreign holders of dollars have nothing to do with them except re-invest them in US financial assets, and we start making toxic financial products to satisfy the demand, then you can see we have a problem.

  8. steve from virginia

    No progress here until folks stop believing the waste-based US-style economy is ‘sustainable’. What that economy entails is the continued mispricing of capital until said capital is exhausted.

    Ours is an energy crisis in drag. We are at the exhaustion point right now. That “we aren’t” is a long-running establishment lie.

    The problem sits at the ends of your driveway. The world is bankrupted for windup luxury and false-convenience. The cost of fuel + the cost of credit needed to buy both the fuel and what wastes it has become unsupportable. The consequences can be seen right now in Greece, soon to be seen in Spain then France. Afterward is Japan and China.

    There is no way to ‘get back to normal’. We either change our ways or else … (finger cutting gesture across throat).

    1. Kurt Sperry

      I see a lot of utopian romantic nostalgia for some sort of pre-industrial economy where we all grow our own food and barter for simple material goods. But really the West’s profligate lifestyle for better or worse would be probably pretty much indefinitely sustainable through aggressive transition to renewable energy sources, population controls and sane governance. There are some raw material bottlenecks in the way but likely none that would be insurmountable. Technology really can solve large problems. Of course there is no political will to do any of those things.

  9. The Rage

    For the 10000000000000000th time:

    BOOMER PEAK SPENDING IS OVER. PEAK OIL HAS ARRIVED. US consumer demand can no longer power the global economy. Hence, we are in a demand shortfall and have been since Q3 2000. The final boom in credit during the 02-06 surge is over. It was like the Red Giant phase in the credit cycle.

    The denial is amazing. The useless intellectualizations. Get it through your head people. Doing this and that won’t work. Running deficits, cutting deficits won’t work. Nothing will work until the entire global system is changed to reflect the US structural changes listed above.

    1. Nathanael

      A functioning political system could deal with that. Since we don’t have one, catastrophic collapse is inevitable. The question is what comes next, and I think we have a lot of influence over that.

      1. YouDon'tSay?

        It is INDEED gonna be one helluva catastrophic collapse at that! Too bad most of us are actually gonna have to live through it as well. It’ll be one to tell our grandkids about, for sure. Oh wait, they’ll be living its effects too. Nevermind!

      2. The Rage

        Yes, but that leads back to the fault of American people who can’t let go of the post-stagflation era economy, especially William Jefferson era mid-late 90’s surge.

        That party is not coming back. The faster more people realize that, they will go through the primaries and stop electing these people who try to keep the zombie afloat.

        1. YouDon'tSay?

          Small problem. The people who are doing well VOTE to make sure they continue to do so. The people who aren’t do other things – like live on the streets or with their relatives, take drugs and drop out, turn to crime, etc. At some point “the singularity” will be reached, but rest assured, that point is not YET. THAT’s what all the desperate clinging to shit as it currently is, fucked up as it is, is about.

  10. JTFaraday

    “Deficit hysteria is meant to hide what really happened”

    I agree. It’s meant to turn a story about the financial sector into a purely political story, instantly erasing all of Wall Street. It also conveniently contrasts the Republican’s deficit financed tax cutting approach to Rubinomics, making the Republican Party responsible for the crisis.

    This also allows the D-Party to perpetuate their new favorite story about the Clinton/Rubin surplus which they hold is responsible for the 1990s economy.

    Remember how many times the good old days were invoked by Hillary Clinton in the 2008 primary? How often have you heard a D-Bot claiming the D-Party are the “true fiscal conservatives”?

    This new story for a new era replaces the story of the New Deal. Replacing the New Deal in real time will restore the Clinton surplus, and happy days are here again.

    It doesn’t matter if none of it’s true. They make their own reality just like the Republicans and there’s probably enough people out there who will buy it.


    1. scraping_by

      Poor dear. I spent the debates eating gyros and byrani at an Egyptian’s cafe while “The Last House on the Left” played on the big-screen and the pretty girl across the table told me about her day.

      Mitt won? How do you know if Miss Porkbellies wasn’t there to hand him the trophy?

    2. Doug Terpstra

      Kudos indeed. Matt’s debate anaylsis puts MSM pundits to shame. I loved this:

      “The reason Obama did poorly is simple. He is bad at governing America . . . He is proud of this record [solving nothing] . . . But he knows he can’t run on it because it’s unpopular, so instead, he presented himself as a nice likeable guy . . . he’s only a great speaker when it’s all about him, because that’s where his interest is. The talent is there, the character, not.” Ouch! And touché!

      As Matt says, the “race is still Obama’s to lose”, but for a while, it looked like it was time to drop the curtain and turn out the lights on Kabuki Theater. But surprisingly, Romney actually appeared to be alive and to even feign interest in winning. So, while Obama still holds the hill, there is at least a glimmer of hope we might yet rise from the dark despair of faux-messianism and return once again to the glory days of naked crony capitalism and rigged market cannibalism. . . without the pointless pretense of concern for middle- and lower-class moochers.

      This was looking too fixed, so to rekindle audience interest in democracy stagecraft and in Romney, Obama had to conspicuously ignore the lies and avoid the obvious red flags and flashing lights. So there could be no reminders of the actual Ryan economic numbers, no mention of derelict 47%, of Bain Capital, or missing tax returns. Nor would there be discussion of war, free choice, immigration, poverty and inequality, or climate change. And finally, nothing could be said by either stage puppet about financial fraud, amnesty for banksters, foreclosures, the student loan bubble, and investment in commonwealth infrastructure or alternative energy.

      So it was Obamney’s turn to take a dive, and now Robama is back on his feet. Yeah, we still have a breathtaking Trojan horse race!

  11. Dan Kervick

    I’ve given up on trying to understand what Obama’s actual economic philosophy is. But he certainly seems to listen way too much to the David Brookses and Pete Petersons of the world.

    On my very optimistic days, I think the tacit message is this: “I want to raise taxes on the rich and cut taxes on everybody else and spend more on them. I want to do this in order to redistribute wealth and create a more equal society. But this is hyper-capitalist America, and the people who own this place won’t let me use words like “redistribution” and “equality”. So I have to sell this plan as a BS deficit-cutting plan, and I have to tell you that the added spending will just be a short-term stimulative blip in a long run austerity plan.”

    But on most days I think he has just swallowed the Merkel, Cameron, Rogoff, Peterson Kool-aid. In other words he is just another conservative, Tory, Christian Democrat true believer in contractionary expansion, and salvation through public bleeding.

    1. JTFaraday

      No, Dan.

      In addition to listening to teh Treasury Boyz from Goldman Sachs in the Oval Office on a daily basis, Obama listens his own party, which has its very own wise elders and economic gurus and nasty culture war politics.

      The very same party to which you yourself pledged your renewed loyalty just the other day. You want part of it, you get all of it.

      1. Dan Kervick

        You mean this “loyalty pledge”?

        Here’s my plan for early November:

        Nov. 6: Vote to help defeat the Republican Party, the reactionary champions of most of the vile, stupid and backward trends in modern America.

        Nov. 7: Redeploy and go to war against the decadent and corrupt Democratic Party built by the Clintons, Obama, Rubin, Bowles and the rest of them.

        Solidarity, equality, democracy, full employment, progress.

        It’s really time now for a new party, with a stridently egalitarian, vigorously progressive, aggressively pro-work and pro-worker, anti-Wall Street agenda.

  12. TK21

    To go back to a previous topic: I just think it’s hilarious that Obama is universally regarded to have lost that debate terribly. Here’s Jon Stewart lambasting him for not trying harder. Love it!

  13. The Bell

    Aren’t the massive amounts of Private and Public Debt symptomatic of the same cultural/psychological problem? Reckless financing of unproductive projects like the wars and the housing boom indicates a value system completely out of whack. And unfortunately shrinking incomes forced individuals into taking on more debt. But the public at the time never seemed to care about the fact that we were becoming increasingly underpaid for higher productivity. We were dazed into believing the system would keep on paying out. And this was a problem in all levels of society.

    I think austerity is a bad idea because it is ultimately aimed at cutting more things we should be trying to save. But until the public realizes that sacrificing these things in the hopes of bringing back the “capitalist machine of growth” is counterproductive we will continue down that path.

  14. The Gizmo51

    I would love for someone to explain the mitt’s tax plan to me. I may not be too smart but if he says he will not raise taxes on anyone or lower taxes on the rich and gives an across the board 20% tax cut to everyone then, to me, that means I will pay 20% less in federal taxes. BUT, the mitt says it will be revenue neutral meaning, to me, that the federal government will receive the same amount of income after a 20% tax cut. How can it be neutral unless he eliminates an equal amount of tax loopholes thus increasing taxes by 20% to offset the 20% tax cut? So what is the point? Cut taxes by 20% then raise taxes by 20%? I have been told that the republinos do not believe in any sort, type, or way, of any tax increases so where will the additional revenue come from? They won’t, so to balance the budget, to me, the only way is to cut spending from social security, medicare, medicaid, unemployment benefits, education, cancer research, public services, food stamps, and PBS killing Big Bird.

    1. Mike

      He has no tax plan that would benefit either the United States as whole, or any of us mere non-billionaire voting mortals. What he and his backers want, is to get more tax cuts for themselves so they can stash their wealth overseas while the USA collapses. And, no Obama won’t fix any of this either, we just won’t have as terrible cuts in social security and medicare as we would have with the Republicans. But neither party wants to fix anything. They just want anotehr term in office.

  15. Spring Texan

    Yeah, what Obama says displays his mind, and I don’t like it.

    Note also what he said here (caps are mine): “And the magnitude of the tax cuts that you’re talking about, Governor, would end up resulting in severe hardship for people, but MORE IMPORTANTLY, would not help us grow.”

    More importantly? Yeah, let’s just shrug off that “severe hardship for people.”

    A very cold dude.

  16. Rodger Malcolm Mitchell

    When the federal government spends more dollars into the economy than it taxes out, that’s called a federal “deficit.” It also is an economic surplus.

    All federal deficits are economic surpluses, which is why deficits stimulate the economy and surpluses deplete the economy.

    Someone please explain to me why the government wants to take dollars out of the economy (federal surplus) and how that helps grow the economy and cure unemployment.

    Rodger Malcolm Mitchell

    1. Mike

      First, there is not a once sentence answer. The government doesn’t want to take dollars out of the economy, we (the voting public) let them. You do like roads, bridges, public water, sewer, police and fire protection, an electricity and communications infrastructure: there is a lot of “public” money required to have those services with any quality. Infrastructure aside, people who really run the government, not us voting mortals, and no I don’t have a clue hwo they really are, those people found out that they could steal from the taxpayers, then when the whole thing collapses, blame it all on ‘excessive government regulation and taxes’. You seem to fall into that camp. Yes, we should pay taxes to pay for infrastructure that benefits everyone. If you look at how much corporate backing each senator, congressman and president gets, you’ll figure out how things got so broken in this country. Halliburton sure as hell benefitted when the US invaded Iraq and Afghanistan, but almost no private (voting) citisen did. So, that is the answer to your question “why the government wants to take money out of the economy”. Because teh big players who can afford to buy a congressman or senator do in fact benefit from a lot of those dollars.

      1. Ralph

        Your mistake is believing the conventional wisdom that the federal government must first tax or borrow in order to spend, when the truth is the exact opposite.

      2. jonboinAR

        You said:
        “I don’t have a clue hwo they really are, those people found out that they could steal from the taxpayers, then when the whole thing collapses, blame it all on ‘excessive government regulation and taxes’. You seem to fall into that camp.

        Trust me, he doesn’t. You haven’t been around here long enough. He’s an MMM advocate who believes that taxation is only for taking money out of an overheating economy, or something like that. They believe that when the government needs to stimulate, or refurbish infrastructure, it should just print money.

  17. Hugh

    That’s just ridiculous that the deficits caused the financial crisis. Everyone knows it was the confidence fairy.

  18. Anonymoose

    There wasn’t a surplus, it was intellectuals saying that there was a “projected” surplus. The jobs in the Clinton Administration were from the dot.com boom, which imploded before Bush was elected, and we were going into a recession because of it. The mortgages were given to people who couldn’t afford them because banks were forced to by federal regulation. So politicians who approved those regulations were to blame, so look up who was in charge of Congress at that time. No bank would give out those loans otherwise, so yeah, they tried to revamp their losses because no one was bailing them out until 2008. Now, this might be difficult for you to understand math, given that you seem to eat what’s fed to you, but history has proven that when you cut taxes on corporations, they hire more. What does that mean? More people to tax. If people can’t find jobs, how are tax breaks on the middle class going to help. Oh, I guess they could live off the government, but wait, there’s not enough tax revenue coming in to pay for everyone to be out of work.

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