The Lady Doth Protest Too Much: CBO Director Asks for a Chat Regarding Our Post on Their Questionable Health Cost Increase Model

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As regular readers may recall, last Monday, we put up a post titled “Fed Budgetary Experts Demolish CBO Health Cost Model, the Lynchpin of Budget Hysteria.” We received a voicemail and a related e-mail Wednesday morning. This is the text of the e-mail:

Greetings, Susan.

I am following up on my voicemail to see if we can arrange a time either today or sometime this week for you to speak with our director, Doug Elmendorf. He wanted to speak with you about your blog post that appeared Sunday on Naked Capitalism regarding CBO.

I am copying Brianne Hutchinson, Doug’s executive assistant, who will work with you to find a convenient time for the call. You can reach Brianne by e-mail or directly at:[xxx].

We look forward to hearing back from you at your convenience.

Kind regards,


Deborah Kilroe
Associate Director for Communications
Congressional Budget Office
2nd and D Streets, SW
Washington, DC 20515
[phone number and e-mail address omitted]

This was our reply, which went out in the wee hours of Thursday morning:

Dear Deborah,

Thanks for your messages yesterday and sincere apologies for the delay in replying.

While I am flattered that Director Elmendorf is interested in discussing my post, I must confess to being puzzled by the request. The piece is a write-up of a journal article by two economists working for the Federal Reserve Board. If the CBO objects to their analysis, those issues should be raised first with the authors. I would of course be willing to issue a new post if they were to modify their analysis after speaking with members of your staff

The post also mentioned other matters relating to CBO which are in the public domain. One is Lan Pham’s claim that she was directed to exclude information such as foreclosure trends and chain of title issues from her analysis of the outlook for the banking sector and the mortgage market and that her efforts to include this and other “negative” data led to her being fired. That is a very troubling charge, given that every private sector housing analyst has used trends in foreclosures as a significant input in their housing price forecasts since the crisis.

The post also cited a paper by Thomas Ferguson and Robert Johnson on the CBO’s forecasts of debt levels relative to GDP and the CBO’s curious failure to present net, as opposed to gross, debt levels. I cited their Roosevelt Institute Working Paper; their paper was later published in the International Journal of Political Economy. I have been advised by an academic in my readership that the paper was brought to the attention of staffers at the CBO, who did not dispute the Ferguson/Johnson analysis but also indicated that the CBO would not correct its public reports. These three instances, taken together, point to a pattern of CBO acceding to Administration interests, so it is hardly far-fetched to question its independence.

I have a policy of not entering into private conversations on published posts. If you feel a correction is warranted, please tell me why in writing. If you can substantiate factual inaccuracies, I will of course make either a correction of the existing post or issue an update, depending on the severity of any error.

Thanks for your interest.



In other words, the CBO asked to have a conversation for unspecified reasons, presumably because they were unhappy about the post they mentioned. That’s fine, but they should make an argument, not try for private chats. Yet after my request for them to present any objections in writing so as to prevent misunderstanding and keep personalities out of the mix, they’ve gone silent.

In addition, if they were confident in their analysis and their lack of outside influence, why would they bother dealing with noise from the peanut gallery? If you are an analyst, you submit your presumed objective view, and your client does whatever he does with it.

But to get a sense of what is at stake, if you read the newest CBO document on the deficit, it is not a dispassionate analysis of budget math alternatives. This is an advocacy document. It has the tone, the use of overly simplified language (below 8th grade level, which is the level used to spoon feed journalists, as opposed to higher reading levels that you see in other types of reports. Contrast both the look and the writing style with this FHFA Inspector General report, as an example: text paragraphs, no nice bullet points and generous use of white space, not much coddling of the reader).

A simple illustration: look at how this paragraph on the first page is not an analysis of budgetary options, which is the CBO’s role. This shows the CBO pushing for a particular set of outcomes (taking immediate steps to reduce the deficit) rather than simply providing analysis of the budgetary outcomes of specific legislative actions (click to enlarge):

And to add insult to injury, it does not take much in the way of investigation to debunk these unsubstantiated arguments. Paul Krugman has already, in terse form, shown how the usual economic models suggest than the outcome of running continuing large fiscal deficits is a weakening of the dollar rather than a rise in interest rates. The CBO needs to explain their theory of monetary policy and primary dealer behavior to explain how the prices of Treasury bonds could collapse and cause a fiscal crisis.

The evidence from the closest comparable to the US, which is Japan in its post crisis era, in fact suggests the exact reverse of the CBO fearmongering, namely, that fiscal tightening in a post crisis economy is likely to precipitate financial firm failures. The collapse of Japan’s real estate and stock market bubbles caused a severe contraction in household consumption and private investment spending which culminated in a brief real contraction in 1994. Once the stimulus from the expanding budget deficit began to work, real GDP growth regained momentum.

By 1996, the same calls for austerity that we hear in the US now led to increases in taxes. The contraction in public spending on top of very fragile private sector spending – akin to the situation that most nations face today – caused a massive contraction in 1997 and 1998 – which increased the budget deficit (via the automatic stabilisers) and added to the public debt ratio (given both debt was rising and GDP was falling). Most importantly, it also led to a second wave of financial firm failure, including one of the four biggest securities firms in Japan, Yamaichi, as well as some of its long term credit banks.

So if I had to guess, this would be the reason for the CBO’s peculiar anxiety. It knows it is going out on thin ice and wants to rein in any inspection of its choice to insert itself in the budget debate on the side of the hawks.

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  1. Christopher Fay

    Our “government’s ability to manage its budget” should already be in question. Hasn’t it been a few years now when no budget has been finalized and approved in a Constitutional process, producing this within its set fiscal years, but has been managing spending by a series of continuing resolutions?

  2. psychohistorian

    I doubt this is the first time that the CBO has been used for “political” purposes.

    You are probably just the first to be able to show that ugly face to us public. The CBO is an agent of the colluded parties, not a surprise to many who read postings here.

    Ratchet the fear or compensation up high enough and none will stand up to say the Empire has no clothes.

  3. run75441


    So now he wishes to discuss Healthcare? I am chuckling Yves as you and many others know my position on Healthcare and the PPACA. The Fed paper was enlightening and added much to the discussion on whether Healthcare can be sustained in this nation. It can and must be as the alternatives to having no healthcare plan are not sustainable.

    Great work Yves and thanks!

  4. Middle Seaman

    In the technical/academic world opposing analyses results are handled through the technical publication medium. For instance, two opposing results in two academic papers are dealt with by proper analysis; they are not resolved by banter or coffee. That is not the case in politics where winning someone over is through informal communication.

    The CBO’s approach, by definition, abandons analysis and takes on politics. In other words, the CBO losses its impartiality to become a political operator.

    1. Jim Haygood

      ‘In the technical/academic world opposing analyses results are handled through the technical publication medium.’

      Quite so, but that process assumes a dialogue between equals. Government is not going to compromise its prestige by treating a lowly citizen — even an articulate blogger — as a peer.

      Yves’ nose-tweaking of the CBO is delightful, but demanding that the CBO ‘explain their theory of monetary policy and primary dealer behavior to explain how the prices of Treasury bonds could collapse’ is a bit over the top. It ain’t the CBO’s job to choose theoretical sides as blind economists like Kurgman tap at the monetary elephant with their canes.

      Sidney Homer’s magisterial History of Interest Rates finds that bond yields exhibit a characteristic bathtub shape over the multi-century course of a nation’s development, dominance and senescence. High rates in the early years are associated with financial underdevelopment; in the twilight years, they’re due to currency debauchment and chronic inflation.

      Don’t swallow Das Bernank’s ZIRP Kool-Aid. Post-bubble periods do exhibit shrunken credit demand for awhile (even up to half a century), but in the long run rising yields are a surer bet than rising sea levels due to global warming.

      During October and November alone, TIPS are getting a full percentage point hike in principal value from inflation indexing:

      But it gets even better with iBonds (that’s a Treasury product, not an Apple debenture!), as Mike Ashton explains:

      Because the people who created I bonds never contemplated a negative real interest rate, or else thought the marketing angle of selling bonds at a negative real interest rate would be too bad, the fixed part of the I bond coupon is floored at 0%. This is significant, since the market rate for a 5-year TIPS bond right now is -1.59%.

      As a consequence of that structural mistake (not allowing a negative real coupon), combined with the TIPS market’s rally since May, the current spread is actually the highest ever seen for the program

      The last few I-bonds issued have had coupons of 0%, since the actual TIPS rate has been considerably below that. And that means that if you are going to buy TIPS, then you should buy your full $10,000 limit on I-bonds, because you [gain] 1.59% compounded for at least 5 years. That’s an extra 8.2% total return on your money over that period!

      1. Yves Smith Post author

        Since the CBOs argues for outcomes that are contrary to what mainstream macroeconomic models and actual experience would lead you to expect, the onus is correctly on them to justify their position.

  5. sporble

    Thanks – excellent work.
    If there’s one’s thing US politics needs, it’s dispassionate objectivity.
    It seems that, despite increasing developments in science, finance, etc., there remains only a small minority who is educated in these fields and can provide truly useful insight about them. Yet many politicians and members of the press are intellectually (if not simply outright) dishonest. The “bottom-feeders” swallow the pap whole or in part, while some others actually hunt for an intellectually honest picture of what’s really going on. Meanwhile, countless disseminators scream bits of pap across all media.
    I am 100% for freedom of speech for everyone, but when those at the top of the information food-chain actively refuse input from those who dispassionately provide it, or twist such information, they abuse their power and violate their responsibility. Could there be some sort of standard against which they could be measured/evaluated, in order to prevent them from doing even more damage to the frayed social/political fabric?
    Once upon a time, the CBO (and others) were noticeably more dispassionate. If everything becomes politicized, analysis will be completely replaced by subjectivity, i.e. manipulation. Is there a way back – or forward – away from this slippery slope?

  6. rob

    not only was the original post a great showing of the illogical position of the CBO, and the two authors raised many salient points…. which iiluminated how the gov’ts current course is contrary to our best intrests….no matter what party you pray to…..BUT…
    having to send a lackey down to attempt to “control” the situation……..which shows they are aware how much their job description has swung to prostitution….
    now that is PRICELESS!

  7. Ms G


    Good for you for declining to engage in “ex parte” discussions with CBO. Their dead silence in response to your invitation for them to lay out their “issues” turned into another Big Story.

    Great job on calling them out. And for educating us with your expertise that allows you to do this so solidly.

    And as an extra, it’s funny reading the page you excerpted from the CBO’s 8th grade “presentation” — it reads just like what one has become accustomed to seeing in the work of the MSM boys at NYT, WSJ, WaPo (etc. etc.), thus offering a crisp example that these “journalists” are nothing but stenographers for the pro-Bank (anti 99%) government agencies that are carrying water for the Neo Lib Austerian Project.

    Ms G

  8. Raskolnikov

    Tell the truth, Yves. Doesn’t it make you a bit nervous that the CBO is parsing everything that’s being said in the blogoshere?

    I mean, c’mon now..this is really creepy!

  9. amateur socialist

    “First they ignore you, then they laugh at you, then they attack you, then you win…”

    They’re done ignoring you, let the ridicule begin heh. Maybe this is the process whereby the veal pen strategy of the DNC becomes as discredited as Karl Rove’s is for the GOP…

  10. Ep3

    Way to go Susan. Fight the machine!

    In regards to the insert from CBO, I would like to make two comments.
    Bullet point 3, gov’ts ability to respond to “….financial crisis”. Heaven forbid we not have enough money to continue to bail out the banks.
    Bullet point 4, total F***ing propaganda. Thats just sickening that a supposed unbiased govt institution published something like that.

    1. TK421

      It’s time for the government to harvest more money from the country so it can spend if it needs to, since the money tree in the Treasury department’s money tree is bare

      That’s where money comes from, right?

  11. PeterP

    Why not meet with the guy? It is not like he can scold you, it is a conversation between equals, why run from it? Maybe he wants to learn more, why reject the opportunity to meet and influence the guy directly? It might have been a great learning experience. It looks like you are insecure and fear this conversation, not good.

    1. sparks

      You are joking, right? If it is a political document (it certainly seemed so to me), there is no way to influence anyone of importance privately. It’s far better to hash this out in public, where all eyes can see what the CBO is up to.

    2. Bill

      You can bet the CBO will have at least two people in the room, not just one. Then their version of what goes on will be THE version.

      Not to be too cloak and dagger (too late I guess) but as a long time govt employee, you never go to a meeting like this alone.

      Of course, Yves has done it correctly, and by publishing the whole thing, guaranteed everything will stay on the up and up.

      That is precisely why they will not follow up.

    3. Ms G

      Whoever this poster is, he/she/it is here for one reason only. Someone is very p***ed off that Yves handled this as it should in an open democratic society where government’s actions should be clear and transparent to all, not a bunch of back room deals hashed out under cover of night. (Oh wait . . . )

      So: don’t feed the Troll!

    4. Susan of Texas

      Nothing is more amusing than seeing someone with an agenda attempt to undermine authority through emotional manipulation. Those who are easily controlled think everyone else is like them. Tthose accustomed to controlling others are scornful of the people they control.

      1. JohnnyGL

        Lambert, I say Yves goes one better than turning down the call. Do the call with the CBO if they’re willing to have the call recorded and a transcript posted to the site!

        Yves, well done, by the way.

    5. James F Traynor

      You’ve got to be kidding. Either you’re an administrator or you’ve never had experience of the breed. I’m a retired technical type (81 years old). This stuff has been going on since Christ was a pup!

      An aside;

      Those little marmosets are cute, but they’re wild creatures and should be left alone. I know something about this.

    6. PeterP

      You guys are paranoid. Nothing bad can come from the meeting, even if CBO lies afterwards on how it went. Facts are facts, if CBO is wrong we can prove it despite whatever meetings take place. A public institution you think is wrong wants to meet – great! Go and teach them the facts. Running is just wasting an opportunity. It is a free option, you never throw it out.

      1. leftover

        There’s nothing paranoid about it. The CBO is a public institution, created as a nonpartisan agency to supply economic data to Congress…that’s us…our representatives charged with a duty to act in our best interest. (Stop laughing…)The people being paranoid here are Kilroe and the CBO.

        This isn’t a national security issue. Closed door private meetings are uncalled for, and completely inappropriate from a (genuine) journalist’s perspective.

        You should be praising Yves for her commitment to professional conduct and ethical standards rarely found these days in any media.

        1. PeterP

          I praise Yves for publicizing the paper, I also think the whole deficit hysteria has no basis in logic (I am an MMT guy), still I don’t see she wouldn’t meet the guy. It obliges her to nothing, she can later publish whatever impressions she got even if very damaging to the CBO.

          1. leftover

            By keeping any exchange public, Yves protects her credibility, reinforces her faith in the credibility of her sources at The Federal reserve Board and from the public domain, and promotes the kind of accountability we should all demand from our public agencies.
            Not only all that…but it also reinforces the belief of someone like me…just another ignoramus trying to raise the consciousness a bit…that Yves is someone that might be trusted…someone who doesn’t expect me to just “take her word for it” and STFU.

            I don’t know if I’m an MMT guy, (Capitalism…what a concept, huh?)…but I find it encouraging Yves is not swayed from her principles by the CBO.

          2. Aquifer

            I suspect the CBO may have actually thought Yves would be flattered by this invitation and would “welcome the opportunity to have a seat at the table” which is a way that TPTB have successfully bought off so many other critics …

            Kabam! So much for that idea – LOL, I love it ….

            The best thing to do with stuff like this, IMO, is precisely that – make it public. If it is “sincere” the other party will pursue it in public – if not it will be dropped like a hot potato …

            And there is another reason, too, i hate to mention, but must always be at least in the back of one’s mind – if gov’t sees one as a “threat” it is best to let the public know

          3. Aquifer

            I suspect the CBO may have actually thought Yves would be flattered by this invitation and would “welcome the opportunity to have a seat at the table” which is a way that TPTB have successfully bought off so many other critics …

            Kabam! So much for that idea – LOL, I love it ….

            The best thing to do with stuff like this, IMO, is precisely that – make it public. If it is “sincere” the other party will pursue it in public – if not it will be dropped like a hot potato …

            And there is another reason, too, i hate to mention, but must always be at least in the back of one’s mind – if TPTB see one as a “threat” it is best to let the public know what has been said/done and who said/did it, if known – always leave a trail …

  12. steve from virginia

    “What are the consequences of rising government debt?”

    – Debt is bad! ( … unless the debts are taken on by tycoons and tycoons-to-be.)

    – The government will run out of money! ( … the government can create as much or as little money as it pleases. It simply chooses not to do so … in deference to the banks.)

    – The economy will fail! ( … the industrial economy has been failing since the industrial revolution began, it is entirely subsidized by debt.)

    – More Republicans must be elected! ( … only Republicans have the balls to blatantly steal from the public, Democrats are too timid.)

    The central government deficit is the private sector’s debt service. Eliminating the Federal deficit eliminates the private sector: IE, businesses cannot run perpetual deficits without failure as can national governments. Because the US government can borrow in US currency — and the government can create the currency if need be — there is no monetary cost to borrowing.

    A better argument is that the country — including the government — lives beyond its means and extinguishes capital as part of the ‘living’ process. As capital costs increase relative to other costs (supply and demand) the instruments of capital extinguishment are stranded.

    Most of US debts private and public relate to automobiles: making cars is the world’s largest single industry. With its dependencies, autos make up almost all of the world’s economies except agriculture.

    The greatest cost against constant expansion of government debt is the loss of borrowers’ credibility. Since all modern tycoons are debtors (they borrow their fortunes) the changing zeitgeist is for the tycoons to lose credibility as well.

  13. Susan the other

    I do think that was a little ominous. The best move was to let everyone know how they approached you. Smart. The only reason they would have for a “chat” is to control your comments. Like they did to all the banking analysts over securitization fraud. We’re talking gestapo tactics here. If the situation is so bad that they cannot admit to it, then what?

    1. Aquifer

      Sto – I posted a similar comment as a “reply” above, before i saw yours – glad to see i am not the only one this occurred to …

  14. Beleck

    on no, the Democrats have just as much balls when it comes to stealing from the public. just never have balls to help the public. ask Obama, Pelosi, your local D senator or representative.

    there is no way the Republicans could have “done” the dirty deeds without the active and complicit help from our wonderful “less evil” Democrats. here in Louisiana we have the wonderful Mary Landrieu/Blue Dog/Republican outshing most Republicans in the hollowing out of the American middle class. and the local Democratic “help” in screwing the middle class goes back a long, long way. Previous Democratic La. Senator Russell Long, very pro Business, help rewrite the tax code years ago to do away with sales tax as a deductible item. i remember when. little by little, step by step, the Democrats helped the “Greater Evil Republicans” in their theft.

    it is wonderful to see such a “response” from the CBO, though i would be fearful as well. those with power don’t take “facts” lightly that disagree with their perceived Faith Based Reality. the Empire always strikes back, and Obama is noted for his “peculiar” fury of attacking the whistleblower as compared to the previous Emperors.

    i liked the response as well. to see such educated people able to expose these perpetrators of evil is really heartening. such deft replies leave these people nonplussed, i bet.
    this is one reason i read this website. Thank all of you very much for your efforts.

  15. LucyLulu

    If anybody doubts that these non-partisan Congressional think tanks are immune to political pressures, they only need to look at the recent CRS report. McConnell and GOP senators had it withrawn after it showed no correlation between tax rates and economic growth.

    Article from NYTimes:

    Copy of CRS Report

    1. Gil Gamesh

      no one’s immune. recall stlloer’s piece on Connaughton’s memoir. it’s called th blob, and it rules the DC “ecosystem”. even jesus c. hrist would become a free-marketeer supply-sider there. simply irresistible.

    2. Stephen Nightingale

      Figure 6 on Page 12, on the income share of the “top 1% and .01%” speaks volumes not directly related to the tax rates. It clearly shows the beneficiaries of the Reagan defence build-up, the ’87 crash, the S&L debacle, the tech bubble and burst, and the housing bubble and burst.

      1. Stephen Nightingale

        Re the Conclusions to the CRS report: So if the average tax rate paid by the 1% in 2009 was 25%, and Mitt has been paying an average of 14%, that suggests that maybe they don’t all have such good accountants as he has. Or alternatively it might suggest that not all of their incomes are as heavily Caymanized as his is – that their commitment to the US of A is about 11% greater.

        1. LucyLulu

          It means the poor slobs, unlike dear Mittens, who pay 25% have to work for a living (have some earned income)….. along with less creative tax strategies, I’m sure.

          The Caymans do have lower limits on account sizes, 100K I believe, as do the Swiss, and I suspect the other tax haven nations he uses (Luxembourg, Bermuda).

  16. craazyman

    It occurred to me that if healthcare gets to 40% of GDP then there will lots of people making lots and lots of money.

    Remember one man’s cost is always another man’s revenue. Women too.

    Think of all the profits from this! Tons of money. Tons. God only knows how fast economic growth will be.

    That means lots of taxes will be paid — even if tax rates don’t go up. That means no deficit problem at all over the long term. There is a very bright silver lining in this cloud. Maybe you can even cut tax rates!

    Everybody should stop worrying so much and enjoy the second half of the football season and do something fun instead of economic analysis. I know they have to do it at the CBO since it’s their job. I respect that. But there’s no point doing so much of it that you strain yourself mentally and lose control of your ability to think clearly.

    1. Gil Gamesh

      malinvestment..we could get far better for a lot less cost. that’s the point. and GDP is an awful metric to rely on when discussing a human right.

        1. craazyman

          it might be possible for it to work.

          It has taken me years to figure out what money is. but I still don’t understand what profits are.

          It seems like one big circle, but the math is an arrow. I can’t figure that out.

          Then they put numbers on it and the arrow rises or falls like an arm pointing at the horizon. But really it’s a circle. This makes no sense to me.

          The numbers seem capricious and unrelated to the reality. The reality can be good or bad, regardless of the numbers you put on it. It is still a mystery to me. Maybe that’s the point.

  17. Gil Gamesh

    Ms. Smith, you’ve spent a lot of time with lawyers.

    Still, they might have made you an offer you could not refuse.

  18. Elliot

    HAH! You scared them! Nice work.

    Shows how thin their case is, how fragile their scrim of falsehoods is.

    Go get ’em, Yves.

  19. BondsOfSteel

    I don’t know. I think it’s kinda awesome the CBO is reaching out to criticism. Listening to other that disagree is how you learn.

    1. athena1

      I hope you’re right, but I’m not sure the neoliberal apologencia (See: CBO COMMUNICATION Dept corresponding) appreciates being called out on partisian neoliberalism.

  20. lambert strether

    Interestingly, the policy of “get it in writing” is also the same policy that should be applied to bottom-feeding collection agentsm who also want to talk to you on the phone.

  21. John Lenihan

    Reply to CBO eighth-grade language argument, also in eighth-grade language:

    It’s about time very smart and experienced people started rudely interrupting the endless nonsense of the plutocrats and their agenda for misery and national failure. Way to go Yves!

  22. Union Agitator

    I don’t recall who said it, but the quote was something like “It’s hard to get the attention of powerful people. If they come down from the tower to slap you down, you’ve already won.”

  23. leftover

    Not being a math geek or overly confident in polls, I knew Nate Silver was onto something when David Brooks and others pointed their name-calling campaign in his direction. I am pleased to see his work, and my confidence in it, validated.

    Likewise, not being as keen on economics as I probably should be…and trying to remedy that situation…these actions of Kilroe and the CBO…and especially Yves response…confirm for me that I am in the right place to get the information I need.

    Well done, Yves. Thank you. Keep up the good work.

    1. Benedict@Large

      Aslo this from Wikipedia:

      “Orszag was director of the Congressional Budget Office from January 2007 to November 2008. During his tenure, he repeatedly drew attention to the role rising health care expenditures are likely to play in the government’s long-term fiscal problems—and, by extension, the nation’s long-term economic problems.”

      So it’s pretty safe to assume that the agency’s current activist stance on healthcare financing is a direct result of Orszag’s tenure there.

  24. evodevo

    Interesting …. are they finally, belatedly recognizing the role of the rational blogosphere ? Wonder if Ritholz, Krugman, etc. got a summons to the principal’s office, too!

    Keep up the good work, Yves.

  25. athena1

    Congratulations, Yves! (And Hudson and Black et al.)

    Like Taibbi said regarding Rush-gate: “They’re blinking.”

    This is a good sign if you don’t end up getting drone-ified over it. (Sadly only kind of joking there.)

  26. looselyhuman

    My only critique is that you passed up an opportunity to be “in the room” so to speak. MMT doesn’t make it into mainstream policy circles very often; maybe the director was open to hearing your case that the CW on debt – which makes what we think of as hawkish advocacy simply seem a matter of good governance – is wrong. We’ll never know.

    1. Aquifer

      In whose room? Do not go into the lion’s den if you don’t have to – make him come out and fight fair and square – if they want to make and hear a case – it can be done in public, If they won’t do that, there is something wrong with this picture –

  27. john bougearel


    You had me smiling at the title, and I just kept on smiling as I sailed through the post. Bet you didn’t know you had it in ya to make your readers smile from time to time.

    Very nice post

  28. Herb Ruhs

    Thankyou. Honesty combined with intelligence is like a drink of water to a dehydrated man.

    My view is that sociopathic individuals will always out compete those with normal brain function where ever and whenever the payoff is good. Honest intelligent people, especially those who are willing to clue the mark, will be destroyed. Over several generations the entire upper echelon of a societies institutions become saturated with pathological liars and human preditors. Thus the cycle always ends in irrational destruction for the better enjoyment of these brain damaged people. Competitive hierarchial institutions, nations and societies always go through this end point when nothing seems to make sense except to the sociopaths who we normals can never understand. Fear and competition will always destroy love and honesty.

  29. Jackrabbit


    I think you need some new topics/meta-topiocs. The tags you assigned ( Banana republic, Banking industry, Politics, Regulations and regulators ) don’t seem to adequately describe the importance of this post.

    It should be easier for new visitors to see the great work that NC does. Something like a “highlights” menu item at the top (corresponding to a “highlights” topic) would help.

  30. Francois T

    Wow! You’re getting under their skins out there, aren’t you Yves?

    I like that! *evil grin*

    I gotta agree with you here: CBO is on very thin ice. Yet, they chose to skate on it instead of staying non-partisan.

    Can’t anyone in that government do its job without having to deal with the fiscal/monetary idiot-syncracies of the billionaires?

  31. Hugh

    I came late to this. The Rubinite acolyte, director of his pet project the Hamilton Project at Brookings, and would-be slasher of Social Security Peter Orszag was director of the CBO (Congressional Budget Office) for nearly two years from January 2007 to November 2008 before moving on to become Obama’s first director of the parallel organization in the Executive Branch the OMB (Office of Management and Budget. That the CBO is going to spout neoliberal dreck is a foregone conclusion. It’s just that among increasing numbers of the economicly literate, it has the sound, and lack of credibility, of physicians diagnosing patients in terms of fluxes and humours.

    I have said this many times, but when rich and the elites want their bailouts, tax cuts, subsidies, or wars, they use the power of our fiat currency to effect these ends. But when it comes to us in the 99%, all that changes. Suddenly, it’s like we never left the gold standard in 1971. Austerity, fiscal discipline, limits, sacrifices all to address what are essentially manufactured debt issues become the order of the day.

    And that’s the important point here both the focus on government debt and how to handle it, the so-called “fiscal cliff” are contrived to sell TINA (There is no alternative.) The CBO snippet Yves cites is laughably idiotic, but it is not there to be factual or accurate. It is there to A) scare the uninformed and B) justify policy choices already in the works which, forget the smidgen of pixie dust here and there, are harmful to the interests of the 99% and which will ultimately benefit the rich and elites.

    As a postscript, I cannot speak for Yves, perhaps she mentioned this already in comments, but I do remember she attended a couple of blogger get-togethers at Treasury.
    They weren’t very productive. They weren’t real discussions. Mostly it came down, in my recollection, to the Treasury officials, no names could be used, really believing the propaganda they were spouting and trying to sell it to the bloggers. While Elmendorf was willing to use his name, a private conversation still leaves him in control of the situation, and other than the flattery leaves the blogger with nothing.

  32. Hugh

    Oh, I should add that Elmendorf, like Orszag, was also a director of Rubin’s Hamilton Project, and that he has always been a debt hysteric.

  33. athena1

    Can someone give me a description of or link to the history of “TINA”? Like, did it come from Thatcher saying something about Thatchernomics or something?

  34. Tony Butka

    Hear Hear! As a recovering bureaucrat, their response is a good thing. Often those in the bureaucracy cannot tell the truth — BUT, if an outsider with a following points out that the Emporer Has No Clothes, they can remind the political appointees that ill-advised actions just might have embarassing consequences.

  35. Doc Holiday


    Obama and The Grand Deal and the destruction of America, all in the name of reducing interest costs for QE3. Great job Yves; this is going to be a very ugly battle and the press is going to be in blackout mode! Good luck!!

  36. E.L. Beck

    “The collapse of Japan’s real estate and stock market bubbles caused a severe contraction in household consumption and private investment spending which culminated in a brief real contraction in 1994. Once the stimulus from the expanding budget deficit began to work, real GDP growth regained momentum.”


    Japanese culture (at the time, at least) coveted savings over spending. Japanese simply didn’t spend, which placed their economy into a tailspin two decades earlier than the U.S.

    U.S. households, on the other hand, countered stagnating incomes with triple-digit percentage increases in debt loads from 1989 to 2004, which kept U.S. “growth” alive until the U.S. consumer finally hit a brick wall and couldn’t take on any more debt.

    And deflation never really let go of Japan since.

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