Worst Economic President in US history

[Gustaf]

A point I believe should be considered is the context in which the presidents acted. Most people seem to agree that the state of the economy when the president takes power should be accounted for, but I personally think that the state of economics should also be included in the analysis. In the nineteenth century people didn't know much about economics, since the science had recently been founded. When the Great Depression hit people didn't really know how to handle it. Hoover largely acted on what was the conventional economic wisdom of the time (Keynes invented Keynesianism largely by studying the Depression).

For that reason George W Bush ranks highly on the list to me. Everyone of my 250 fellow students who took basic macroeconomics this spring could have told him how stupid it was to unbalance the budget and stimulate the economy with huge tax-cuts during a time of prosperity.             

[Gustaf]

For that reason George W Bush ranks highly on the list to me. Everyone of my 250 fellow students who took basic macroeconomics this spring could have told him how stupid it was to unbalance the budget and stimulate the economy with huge tax-cuts during a time of prosperity.             

The tax cuts didn't stimulate the economy - they were only tax cuts for the wealthy.

I don't understand what you get out from making a fool of yourself all the time. You should really stick to subjects like buying hookers that you actually know something about. It's frankly a bit embarassing to discuss economics with you.

(as a little hint this time, who gets their taxes cut is not relevant to my point in this case. But I guess you wouldn't understand, given that you don't know anything about economic policy)

[Gustaf]

The tax cuts didn't stimulate the economy - they were only tax cuts for the wealthy.

To be fair, they stimulated a lot of speculative bubbles.

Well stated.  Also indirectly, but perhaps more importantly, the bubbles were stimulated by the 'easy credit' and low interest rates which are a necessary result of a lack of demand precisely caused by right-wing economic policy of low tax rates and inadequate redistribution.

I don't understand what you get out from making a fool of yourself all the time. You should really stick to subjects like buying hookers that you actually know something about. It's frankly a bit embarrassing to discuss economics with you.

(as a little hint this time, who gets their taxes cut is not relevant to my point in this case. But I guess you wouldn't understand, given that you don't know anything about economic policy)

Your post seems to be a personal attack Gustaf.  I know all about your side's idea of economic policy, I just disagree.  Tax cuts for the wealthy, particularly like the one's we had in the early 2000s (from 40ish to 30ish percent) do nothing to stimulate demand, which is the only effective way to stimulate the economy.  As memphis points out above the only thing such cuts could stimulate would be destructive speculative bubbles.

I would say that your supply side claims are rather more embarrassing, since instead of simply saying openly that you support privilege you try to justify it with all sorts of absurd claims.

Since I'm not like you I don't confuse my personal political opinions with facts. I'm not sure what claims I did that you think are wrong. I'm claiming that (unfinanced, one should maybe add) tax-cuts stimulate the economy. That is a given. Where they go is not of fundamental importance. This is clearly true, given how things turned out.

Whether the stimulance is a good thing is another matter. I explicitly said it was not.

And I don't see it as a personal attack. You've admitted the obvious yourself in the past - that you don't know anything about economics. I gently pointed it out to spare you the embarassement of barging in through open doors with political ramblings unrelated to the topic at hand.

[Gustaf]

I'm claiming that (unfinanced, one should maybe add) tax-cuts stimulate the economy. That is a given. Where they go is not of fundamental importance.

And I am claiming that tax cuts for the owners do not stimulate demand.

This is clearly true, given how things turned out.

Clearly true?  We're in a depression caused by lack of demand, you silly Swead.

economics... political ramblings unrelated to the topic at hand.

But that is precisely the point, Gustaf - you imagine that economics is separate from or independent of politics.  This is your error.  Economics, even giving it the most credit, is just the accounting of political power.

Against all reason I will give you the benefit of the doubt a little bit longer. It may be genuine ignorance on your part, after all.

You seem to think that demand = the economy. This is wrong. Do you think the economy was shrinking during the early Bush years? That demand was collapsing? That is nonsensical. I thought everyone knew that the economy over-heated. That is the reason for the current problems. The economy was over-stimulated. That's what created the bubbles in the stock market and in the housing market. People had too much money.

Also, you seem to think that money which isn't immediately consumed by its owners disappear. This is not true. Money which is saved is borrowed by other people who use it to consume (or directly invested).

Let's say Fred is an owner and gets a lot of money through a tax-cut. Fred can consume for this money, but let's assume that he doesn't. He may then invest it. Maybe he builds a factory or a house. In that case the money goes to the workers building the house, or factory, or whatever and they in turn consume and demand is stimulated. I can already hear you say that most of it will be pockted by another owner. Well, then that owner faces the same choices. Eventually, the money goes to consumption.

Fred may also save it, putting it in his bank account. What does the bank do? Deposit it in a secret vault where it waits for Fred? Surely, even you must know that this isn't the case. The bank will lend it or invest it. And, again, eventually the money is likely used to consume for. This is a bit over-simplifying of course and I'm not claiming the effects are exactly the same. Right now people are not willing to borrow nor lend money and thus the patterns are different. But back in the Bush years this is pretty much what happened. That's why stocks and house prices were soaring.

Of course, I so far haven't even touched your ridiculous assertion that the Bush tax-cuts were merely for the rich. They may have benefited the rich in an unfair way, or whatever, but as I recall lots of people recieved tax-cuts, not just rich people. That certainly increased demand.

I feel that because you are not a particularly intellectual person you fail to grasp that I consider the Bush tax-cuts bad, even though I explicitly stated that, so I will do it again for your benefit:

I think the Bush tax-cuts were B-A-D for the economy.

What's sad, you silly American, is that you don't even know enough to properly disagree with me.

[Gustaf]

So, I guess you might save face here by claiming inability to read rather than inability to comprehend economics. When I was talking about the Bush tax-cuts, who took place during the early years of his presidency, you thought I was talking about hypothetical tax-cuts taking place now during the Obama presidency. How that is even possible I have no idea.

Anyway, you do seem to grasp, albeit in a rather shallow sense, why stimulating the economy can be a bad idea. Perhaps you will one day realize that this is true of all kinds of stimulances, not just the ones you are ideologically opposed to.

[Gustaf]

Ok, then explain why annualized nominal GDP growth per quarter from 2003-2006 never fell below 4% and had temporary highs at 8-10%?

Here is a statistic for nominal GDP growth rate in the US (%):

2000   5,9
2001   3,2
2002   3,4
2003   4,7
2004   6,6
2005   6,3
2006   6,1
2007   4,8
2008   3,3

(Source: http://www.bea.gov/national/index.htm#gdp)

Note especially the years 2004-2006 when the stimulations really kicked in and created the bubble. So, how does this reflect a collapse of demand? Or let me guess - while I based my statements on actual facts you based them on your opinions on how the world should be to fit your pet theories.

[Gustaf]

The collapse in demand occurred in 2007/2008, Gustaf.  By the way, why do you use nominal rather than 'real' gdp?

Because nominal GDP reflects the creation of a bubble more accurately, taking inflation into account.

So, you admit then that the collapse of demand did not occur during the early Bush years when the tax-cuts we discuss were actually made, but after that when the bubble created in the early Bush years imploded?

Sounds very much like you do not actually contest anything I've said, but merely foam at the mouth when you hear tax-cuts.

[Gustaf]

The collapse in demand occurred in 2007/2008, Gustaf.  By the way, why do you use nominal rather than 'real' gdp?

Because nominal GDP reflects the creation of a bubble more accurately, taking inflation into account.

So, you admit then that the collapse of demand did not occur during the early Bush years when the tax-cuts we discuss were actually made, but after that when the bubble created in the early Bush years imploded?

Sounds very much like you do not actually contest anything I've said, but merely foam at the mouth when you hear tax-cuts.

No, I only made the claim, and continue to do so, that the tax cuts had little or no effect on demand.  The bubble was created not in consumption but in asset prices, due to the excessive use of only the interest rate lever of economic policy.  The collapse of this same bubble was caused by a lack of corresponding increase in incomes for the working class (the lower 90%).   In other words a great deal of credit was pushed in an attempt to prop up demand in the face of increasing inequality and falling real incomes for workers, but was insupportable due to this self-same lack of income (lack of redistribution).

The Bush tax cuts had only the most peripheral effect on any of this, if any effect at all.  Only in the sense of a 'negative' effect - as in if that several trillion had, instead of being wasted on the rich, been given to the poor where it would have propped up demand.

But you are making no sense at all! The collapse in demand that you talk off occured after the bubble burst - you identified the time frame yourself as 2007 to 2008. I posted numbers indicating that there was no collapse in demand before the crisis and you admitted to this.

Are you so stuck in your dogmatic thinking that you are unable to admit to being wrong? You have admitted to pretty much every factual statement I've made. Why is it so hard for you to admit to that?

The problem here seems to be that you decided to like certain terms and for that reason don't want those terms to be applied to policies you dislike for ideological reasons. That is a fairly naive and childish approach, imo.

For instance, it seems as if you like to be in favour of stimulating demand. But you don't like tax-cuts. So you don't want to think that they stimulate demand. You have admitted yourself though that demand for stocks and houses certainly went up.

I might write more later, but it's beginning to feel ridiculous.

[Gustaf]

Funny that this opposition to exploting slave-labour comes from someone who goes to Thailand to buy cheap hookers, explicitly because things are too expensive in the US. I guess you don't want to endure yourself what you want to force upon others.

It is also funny how you love inflation, yet always complain about how expensive everything has become in America. But logic does indeed not seem to be your strong suite.

Now, since I've actually taken macroeconomics I know that the output-gap, the measure of general economic performance, is affected by several different things. One is private consumption, one is public consumption and one is private investment. There are other aspects as well, but those are the most important ones.

I already described to you how investment=savings and how this does in fact stimulate demand. You then answered that this is not true when we're in the middle of a depression. That is correct but obviously not what I was referring to. During the boom years of the Bush presidency the problem was precisely that people did borrow too much and spent like mad. That created the bubble.

You also seem to think that only "owners" own stocks and houses. A lot of people bought houses during the boom years, but maybe you missed that aspect.

Anyway, houses is something people buy. There is demand for houses. If demand for houses goes up, demand has been stimulated. The desire to buy a house is certainly not increasing supply, even you must see that surely?

[Gustaf]

1. So, your compassion for the poor does not even extent to refraining from joyfully stepping on them. Can I assume that you support others' abuses of the poor as much as you support your own?

2. Eh. You seem to think that increasing wages won't lead to an increase in prices. That is a somewhat strange opinion to hold.

3. "Everyone here has taken economis" I worry about your grasp of reality sometimes, I really do. Besides, if you have studied the subject it certainly doesn't show.

4. So, let me get this straight: you think stimulating demand for houses is supply-side economics. I suggest you re-take that economics course to see if you can understand it this time, because it doesn't really seem to have worked for you back in the 80s.

(small hint: stimulating DEMAND is usually associated with DEMAND-side economics whereas SUPPLY-side economics is more commonly thought to be somewhat linked to stimulating SUPPLY)

[Gustaf]

2. Eh. You seem to think that increasing wages won't lead to an increase in prices. That is a somewhat strange opinion to hold.

Not really. You seem to think that increasing profits can be accomplished without an inflationary effect.   Look at it this way, Gustaf - our economy is enormously slack over the last 30 years.  We have not passed on much if any of productivity increases to workers.  We could afford to redistribute a tremendous amount before the balance would tip from deflation to inflation.

3. "Everyone here has taken economis" I worry about your grasp of reality sometimes, I really do. Besides, if you have studied the subject it certainly doesn't show.

Christ man, everyone takes a few economics courses in college.. its standard.

4. So, let me get this straight: you think stimulating demand for houses is supply-side economics. I suggest you re-take that economics course to see if you can understand it this time, because it doesn't really seem to have worked for you back in the 80s.

Yes, as it is stimulated through interest rate reductions, which are the one policy lever allowed government under supply-side economics.

Such credit-based stimulation is, while perhaps not part of the rantings of supply-siders, an inevitable result of their poor policy.  The type of attentions to the supply-side which these crackpots espouse, coupled with their refusal of proper fiscal redistribution, leads to a disastrous dearth of demand.  For a while the only institution standing (the central bank) attempts to paper over or mask this mess, but in the end it leads to a bust.  It has always been thus.  Keynes offered us the perfect way out, but they oppose him purely on grounds of 'principle' (aka spite).

1. Do you deny that the US has had inflation, not deflation for the last, I don't know, century or so?

2. The wage-share of GDP has remained more or less constans for the last 50 years or so. http://en.wikipedia.org/wiki/File:AdjustedWageShareUSAFRGJapan.PNG

It is true that it went down during the Bush presidency, but that is to be expected given that it is a counter-cyclical measure. It went down in Japan and Germany as well, as can be seen in the link.

Besides, the real hourly wage has been going up for the last nine months:

             |                             |
             |       Average hourly        |       Average weekly
             |          earnings           |          earnings
    Year     |_____________________________|_____________________________
     and     |              |              |              |
    month    |    Current   |   Constant   |    Current   |   Constant
             |    dollars   |    (1982)    |    dollars   |    (1982)
             |              |   dollars(2) |              |   dollars(2)
_____________|______________|______________|______________|______________
             |              |              |              |
2008:        |              |              |              |
    June     |      3.6     |     -1.7     |      2.6     |     -2.5
    July     |      3.5     |     -2.4     |      2.9     |     -2.9
    Aug.     |      3.8     |     -1.9     |      3.5     |     -2.2
    Sept.    |      3.6     |     -1.7     |      3.0     |     -2.3
    Oct.     |      3.9     |      -.1     |      2.9     |      -.9
    Nov.     |      3.9     |      3.3     |      2.6     |      2.0
    Dec.     |      3.9     |      4.6     |      2.4     |      3.1
2009:        |              |              |              |
    Jan.     |      3.7     |      4.5     |      2.5     |      3.2
    Feb.     |      3.5     |      4.0     |      2.0     |      2.5
    Mar.     |      3.4     |      4.3     |      1.2     |      2.2
    Apr.     |      3.1     |      4.3     |      1.0     |      2.2
    May(p)   |      3.0     |      4.6     |      1.2     |      2.8
    June(p)  |      2.7     |      4.5     |       .9     |      2.6
_____________|______________|______________|______________|______________

http://www.bls.gov/news.release/archives/realer_07152009.htm

And, of course, in a longer perspective you alway claim that the Carter days were the glory days. I guess it depends on data interpretation. Real weekly wages did indeed peak during Carter's presidency. At the start of it. In fact, the two largest annual decreases in the data in real weekly wages occurred during the two last years of the Carter presidency, 1979 and 1980. So if your argument is that Carter killed wages I guess that may have some support.

http://www.workinglife.org/wiki/Wages+and+Benefits%3A+Real+Wages+%281964-2004%29

Now, this does not however, account for changes in hours worked. Looking at real hourly wages we can study this graph.
http://www.stateofworkingamerica.org/tabfig/03/SWA06_Fig3D.jpg

As you can see the median income-earner has the same real wage now as in 1973. And as you can see the last decade has seen real income increase for everyone.

Furthermore, this does not take into account the fact that costs of living has been increasing disproportionately for high-income earners: http://www.econ.berkeley.edu/~moretti/inequality.pdf

But I guess being factually wrong won't change your opinion, right?

And, before you try anything, let me remind you that the owners are only those who don't work. As you've stated yourself repeatedly, high-income earners like doctors or CEOs are just as opressed tools of their masters as anyone else.

[Gustaf]

The tax hikes and government aid to business did not really come until 1932, much closer to the bottom than the top. It is well worth nothing that the 90% top income tax bracket remained in place from 1932 until 1964, so it certainly did not prevent recovery from the Depression, nor did it cause the Depression. There are also scholarly reassessments of how much Smoot-Hawley actually contributed to the Depression.

It came towards the end of his presidency, but I'm not just referring to the top rate (although I personally have no doubts that does in inhibit productivity). Aside from raising the top rate from 25% to 63% he also reduced personal exemptions, increased corporate taxation, AND added a check tax. There is considerable evidence that the money contractions of the early 30s were exacerbated by the latter policy alone.

Not only does this fail to address the issue of my post, but every tax you speak of further reinforces my point. The more Hoover raised taxes in 1932 under the Revenue Act of 1932 (under which all of your taxes, and more, fall under) passed that June, the more evidence there is that tax hikes did not prevent the recovery in the stock market which began that July or the recovery in the economy which began the following March. FDR again raised taxes in 1934, 1935 and 1936. Compared to June 1932, taxes in 1936 were astronomically high and would remain so for decades. During this time the Dow rallied over 300%.

The the study you linked on the money supply is rather beside the point. After being on the downtrend for years, the money supply was on a clear uptrend from 1932 to 1934, as was the national economy. So even if some marginal connection between the check tax and a reduced multiplier can be found, it was not remotely central to the causes of the Depression, and it did not prevent a strong recovery.

Reagan hiked taxes throughout the mid-1980s, a time of great expansion. Of the Clinton tax hike of 1993, Dick Armey said "Clearly, this is a job-killer in the short-run. The impact on job creation is going to be devastating." Newt Gingrich opined that "The tax increase will... lead to a recession... and will actually increase the deficit."

And we are entering a depression right now with no tax hike in sight (nor indeed any major tax hikes of any kind, except on cigarettes, since 1993)- and Obama has committed to cutting taxes, just as was Hoover's instinct in 1929. If there is a comparison, it is in that. The idea that tax hikes are always bad economic policy just flies in the face of the accumulated facts.

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A.k.a. he engaged in voluntarism.

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Hoover's voluntarism and his few infrastructure projects were swamped. To his credit, the size of the federal government was so small at that time and he didn't have enough time to expand it properly. The New Deal had more of an effect, but it was preceded by a dollar devaluation and shuttering the banks, remember.

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Which did not come until mid-1932, again.

Edit: Also, nearly all of the loans made by the RFC were repaid, although this is probably partially a result of the program's timing. But it is worth nothing that the RFC's most active years were 1933 and 1934, just as things were turning around.

Debating conservatives on the Great Depression is exasperating. They feel so strongly about a historical matter in which the empirical evidence, as far as any historical economic story goes, is about as one-sided as it can possibly be against them. But they have so many sources and theories to try and explain it the other way. It's almost amusing. You never hear liberals trying to argue that Volcker's policies prolonged inflation. We know when we're beat.

*cough*

I love the smell of intellectual cowardice in the afternoon.

I honestly have no idea what all this is about?

[Gustaf]

1. Do you deny that the US has had inflation, not deflation for the last, I don't know, century or so?

It is very hard to say with any degree of confidence, Gustaf, as all such figures are quite politicized.  But given the relative benignity of a few percent inflation compared to the disaster that even a little deflation represents, I'd rather err in favor of the former..

2. The wage-share of GDP has remained more or less constans for the last 50 years or so. http://en.wikipedia.org/wiki/File:AdjustedWageShareUSAFRGJapan.PNG

Those figures are meaningless.   Labeling an income 'wages' is done arbitrarily by the payer, so we cannot know what is the actual position behind it.  For example my parents pay themselves 'wages' out of their companies, in addition to 'taking profits', but they do no 'work', but rather are owners.  Also you figures say nothing whatever about the increasing inequality within the 'wage income' designation.  Finally, the share of the economy represented by wages should be going up as productivity increases.

And, of course, in a longer perspective you alway claim that the Carter days were the glory days. I guess it depends on data interpretation. Real weekly wages did indeed peak during Carter's presidency. At the start of it. In fact, the two largest annual decreases in the data in real weekly wages occurred during the two last years of the Carter presidency, 1979 and 1980. So if your argument is that Carter killed wages I guess that may have some support.

In any case, the main point is that the Keynesian past - overall - was better than the supply-side present, for workers.  Ups and downs over particular quarters are probably not going to be as reliable a way to evaluate this as whole years or even decades.

As you can see the median income-earner has the same real wage now as in 1973.

Yes!  This is precisely the point - the real wage should have gone up enormously since 1973 due to increases in productivity.  That it did not is testimony to the political power of the owners, who usurped the entire gain.

And, before you try anything, let me remind you that the owners are only those who don't work. As you've stated yourself repeatedly, high-income earners like doctors or CEOs are just as opressed tools of their masters as anyone else.

And yet they also have a capital-based advantage over their class inferiors, Gustaf.

I'm going to end this now with a couple of notes:

1. I consider the come-back "well, facts and figures shouldn't be trusted" to be rather weak.

2. How is showing you data over 3 decades in any repudiated by saying that one should study data over "whole years or even decades." You again seem confused about reality to a worrying degree. 

3. Whether the real wage "should" have gone up or not is a subjective political idea of yours that I have no interest in. This is your typical strategy. First you make a factual claim and when that is disproven you claim that it "should" be as you wish. Or something. Your inability to separate reality from your personal, subjective moral opinions is honestly a bit strange. Especially considering that you claim to be such a hard-headed cynic.

4. You still seem to fail to realize that the unchanging share of GDP made up by wages means that owners did not capture all the gain. You also conveniently ignored the point on equality that I made.

5. Since you are a rather sad little man, with probably the most miserable existence of anyone on here, unloved even by your own parents, I'm going to let you go now. My heart just isn't in it anymore. If it is really so important to you to pretend that you know economics, fine, carry on. I doubt these delusions of grandeur are healthy, but I'm not your shrink.

[Gustaf]

3. Whether the real wage "should" have gone up or not is a subjective political idea of yours that I have no interest in.

Dude, whatever the real wage did was a political choice, not something that 'just happened'. 

4. You still seem to fail to realize that the unchanging share of GDP made up by wages means that owners did not capture all the gain. You also conveniently ignored the point on equality that I made.

Why should workers accept the same measly share of GDP?  Isn't progress a reasonable goal?

5. Since you are a rather sad little man, with probably the most miserable existence of anyone on here, unloved even by your own parents, I'm going to let you go now. My heart just isn't in it anymore. If it is really so important to you to pretend that you know economics, fine, carry on. I doubt these delusions of grandeur are healthy, but I'm not your shrink.

Gustaf, what motivates your desire to make these personal attacks?  It seems you must be an awfully bored, sad little swede.  Just because you hold all those typical spoon-fed right-wing economic delusions doesn't motivate me to attack you.   You might in fact be a very nice, pale, flaxen haired youth with good intentions, even though you seem otherwise.

And you are a true economic genius. All the cheap hookers you've bought in Thailand puts you so highly above all the provincial Americans that you alone can see the truth.

After all, why should workers settle for a constant share of GDP. They have a right to increase their share of GDP for all eternity.