re: #615 DeafDog

Now, it’s not “middle of the road.” It’s hard left economic thinking.

I accept “middle of the road” = “mainstream” thinking. You can try to put it on an ideological scale of left-right, with “left” being socialized wealth/risk and “right” being Laissez-faire, in which case I’d agree that current plans are “leftist” (though I don’t know what you mean by “hard left.”)

Still, my point remains… what Obama has proposed and is proposing is well within the mainstream of American politics. His adding to the US debt is completely expected as that is what his predecessors did, especially his immediate predecessor.

Prior to 2008, the govt. debt as a % of GDP has stayed relatively constant. Now, it is balloning.

At times the total debt percentage had been steady (as a percent of GDP), yes, but it always goes up in totaly value. (And therefore when GDP is going down, as it is now, the ratio has to go up.) And, there were times when growth in debt exceeded growth in GDP. ( But that begs the question about growth in GDP and how it is accounted.)

Second, the RTC actually made a small profit for the government. So saying that extending that model to the current situation involves increased borrowing is incorrect.

Whatever is finally agreed for the banks, similar to the RTC the current assets (that are material, like houses that are mortgaged) will still be around to be sold later by the gov’t. While it is not impossible for the gov’t to come out with a small profit this time around, I believe it is unlikely.

However, even with the RTC, going into the dissolution of the S&L industry are you saying the gov’t knew for sure that the RTC could recover all the costs? From my memory (and this was 20 years ago) it seemed the gov’t acted to (1) save whatever assets it could, and (2) to calm the nerves of people; the gov’t did not go into the whole S&L dissolution (and RTC establishment) with the goal of making money. (Are you claiming it did?) It was a government action to bring about stability.

That is why I drew the parallel to today’s situation. The US citizenry accepted the gov’t to be the actor in the case of the S&Ls. (And yes, the final outcome did not prove to be a financial disaster for the taxpayer.) Today, Americans are expecting the gov’t to be the actor. That doesn’t make them hard leftists.

Finally, before spending our childeren’s $, don’t you think it makes more sense to encourage private investments?

And how do you plan on doing that? We’ve already seen various foreign entities try to buy in and prop up big banks. Are you thinking that Dubai, Qatar, Kuwait or Abu Dhabi will come in with more $$? Are you expecting private citizens in this country to pick up new bonds issued by the banks? In either case, how would that help the problem of the (apparently extremely) large set of non-performing loans that have to be dealt with?

My friend, the horse left the barn a long time ago. Keynes won long before Obama won. We accept that the gov’t spends money, in large quantities, as a means of social welfare and to influence the general economy. There are very few individuals in the Congress who don’t fully embrace that (though some may demagogue otherwise.)