Wow! Scary.
(thanks Greg Mankiw)
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The Budget Balance
Published: February 12, 2009Posted in: Politics, Rant
About the Author
Dan Wilson is a self described computer geek with an opinion on too many things. Regardless of whether the topic is politics, computers, gadgets or social engineering, you can bet he's got an opinion and tends to share. He's currently employed as a software engineer and excels at web development using open-source technologies. 
Who was that crappy President during the late 90s?
Oh wait! So when the red lines are above 0, that’s a GOOD thing. I get it now.
You and I both know the President has very little control over the economy. And the economy was in high gear in the late 90’s. It’s easy to balance the budget when you have lots of money.
The TARP money should rightly go under the 2008 budget. And if you don’t want to give credit to Clinton for the growth and budget surplus in the 90’s, we need to remind people not to blame Obama for the horrendous next 4 years.
Totally agreed… nor should they blame Bush for “causing” the next 2 years.
So who do we hold responsible? The boom/bust cycle isn’t really a natural one of economies left alone. Often it is because of intervention, whether it be corporatism or socialism. There are policy decisions that play a role in the economy. I agree that one can’t lay it totally at the feet of the president (unless he directs the policy changes), but he share some of the credit/blame together with Congress (mainly the House).
I agree the Congress has more effect on the economic cycle. But in reality, there are ups and downs that nobody can predict or control. A lot has to do with the mindset of the citizens. Fear is one of the largest factors in the economy and very few can effectively predict that.
I don’t think this is true that the economic cycle is unpredictable. Economists have been concerned about the ramifications of the housing prices increases for 4-5 years. The problem of wrong regulation of banking etc. has been of concern for years. Many economists from the “Austrian school” of economics (Frederick Hayek and Ludwig von Mises are the principle founders of this school) have predicted this recession for years (as the aforementioned guys did the Great Depression, predicting it in the early 1920’s). Look at the Cato Institute for stuff in this vein.
Only those who don’t pay attention don’t see these things coming. So don’t let the media or government convince you that these things can’t be predicted. They were anticipated by those who paid attention.
I didn’t say that all economic cycles can’t be predicted and controlled. But there are many that cannot. There are unforeseen events that play havoc on the economy (natural disasters, war, etc).
As you said, this one was probably foreseeable. But if economic cycles were more predictable, we wouldn’t have such drastic recessions/depressions. Nor would we have so many prognosticators out there (that are often wrong).
Economists can only look at historical data to develop their predictive models. And although that’s often good enough, it’s sometimes very wrong. In addition, the resulting data from these models can then be “deciphered” completely differently by many different individuals.
All science has this problem… just ask your local meteorologist. Sometimes (seems more often with economics), nature just throws a curve ball.
I understand that most economist don’t get it right, but it’s because they don’t make the right assumptions. Like I said, the Austrian guys and Cato have been getting economics right for about 100 years now. People ought to listen to them, but don’t because of ideological differences. Check it out. To disregard the ability of economics to predict these recession and depression because “most economists can’t” is wrong-minded. The critical determinant is the assumptions and understanding human nature. That’s the difference between the Austrian and the Keynesian school of economics.
There are natural economic laws that are regularly and intentionally disregarded for expediency and convenience and political reasons.
Here are some links:
http://money.cnn.com/2009/01/20/magazines/fortune/okeefe_schiff.fortune/
http://www.eclectecon.net/2008/01/economists-pred.html
and you can go to http://www.mises.org for other great reading material.
Referring to the graph, I do believe that while “W” is not solely responsible (or even primarily so), he can still be blamed because he has supported LOTS of increased spending, along with the rest of the Repubs in congress… they’re big government republicans. Both parties are usually to blame when it comes to government spending…