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Rick McKee, the Augusta Chronicle

The Case for Obama

It’s the Economy, Energy, and Foreign Policy.


Friday, October 26, 2012
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In what has become a very tight presidential race I’ve not seen any clear and concise case made for re-electing President Obama. When I voted for Obama in 2008 I did so with reservations which have been borne out and even amplified in some ways, particularly on foreign policy.

Yet, come November 6, I am voting again for Obama. Here’s why you should, too, even if you have to hold your nose.

Tam Hunt
Click to enlarge photo

Tam Hunt

It’s the economy, stupid: On the economy, there’s no denying we’re still in very bad shape. The debt and deficit are at record highs, unemployment is still way too high, and we continue to grow at a tepid rate below two percent – about half what is considered a normal and healthy rate.

However – and this is a big “however” – things are nowhere near as bad as the Republican opposition would have us believe. The debt and deficit are far too high, but the number that really matters – the amount of interest we pay on the debt – is not actually that high because interest rates are at historic lows.

Obama has re-financed all the federal debt and we now pay about half what we paid on interest in the 1990s, when we calculate what really matters: the percentage of the U.S. economy spent on interest payments. So even though the debt is way higher than it used to be, the cost of our $16 trillion national debt is actually far less than it was in the 1990s under Bush and Clinton when it was less than $6 trillion. And it will stay low for a while because interest rates will stay low.

It’s also important to point out that Obama has succeeded in bringing Bush’s 2009 deficit (the budget was set by Bush in 2008 before Obama came into office) of $1.2 trillion down to $1.1 trillion for 2012. So we’re moving in the right direction.

Our present rates of growth and job creation are indeed too low, as Romney and other Obama critics charge, but we are moving in the right direction on this issue also, and have been steadily. The unemployment rate is now back to where it was when Obama came into office, at 7.8%. This figure fails to account for many Americans who are under-employed or have stopped looking for work, but, despite the criticisms by Republicans, this has been the case for decades. So there’s no subterfuge behind the Bureau of Labor Statistics (BLS) unemployment rate numbers.

(The idea that BLS and the White House have somehow collaborated to cook the numbers to bring the rate below 8% before the election, as suggested by General Electric’s former CEO Jack Welch, and many others on the right, strikes me as absurd).

More generally, the United States is doing quite well in relation to other developed nations. A recent report from the Financial Times and the Brookings Institution stated that the United States is “the sole bright spot” in the global economy in terms of our current economy and our prospects for growth. So while the economic situation needs a heckuva lot of improvement still, we are not as bad off as our peers, and that does matter for many reasons, including attracting investment, maintaining a strong dollar, etc.

Romney would have us adopt austerity measures to reduce the deficit and increase growth. However, a recent World Economic Outlook (produced annually by the International Monetary Fund) concluded that countries that are pursuing “austerity measures” (labeled “fiscal consolidation” in the report), that is, cutting budgets rather than pursuing stimulative fiscal policy, are doing worse than nations that are not pursuing austerity measures.

This is a strong empirical repudiation of the austerity approach to growth, which has long been part of the “Washington consensus” regarding international development. That consensus is now changing, as many nations realize that while debt is a very serious problem that can’t be ignored, pursuing austerity measures to reduce debt is the wrong approach while the economy is still struggling – the opposite of what is needed, in fact.

Last, taking a historical view, Bill Clinton was right: the U.S. economy really does do measurably better under Democratic presidents. Job creation and economic growth have been far better under Democrats since WWII. This doesn’t guarantee that re-electing Obama will lead to a better economy than it would under Romney, but it’s pretty good support for that conclusion. Democrats seem to be able to find a better balance between taxation and fiscal stimulation than Republicans.

The foreign policy debate: On foreign policy, I was wary of Obama before he came into office, primarily because of his stated intention to flout international law and violate Pakistani sovereignty if the United States perceived a threat in Pakistan and Pakistan failed to act on that threat. Obama actually went even further than this statement in not even asking the Pakistanis to capture Bin Laden before launching the raid into Pakistan than killed Bin Laden.

Clearly, I’m in a minority on this issue because most Americans think Obama’s killing of Bin Laden is a bright spot on his foreign policy resume. I don’t. I think it was a clear example of aggression and extra-judicial execution. But that’s because I’m a rule-of-law kind of guy. While Republicans and Democrats alike trumpet the rule of law as a clear Western value, both parties’ actions strongly belie the rhetoric, favoring instead a might-makes-right approach to foreign policy that exposes our consistent hypocrisy and damages our global standing in many ways.

My feeling is that Obama has been Bush-lite on foreign policy and he has even been more aggressive on some issues, like dramatically expanding the drone war in Pakistan, than Bush was when he left office. A recent joint Stanford and NYU Law School report estimates, contrary to the statements from the White House and other advocates of drone attacks about the accuracy and humaneness of drone strikes, that literally only 2% of drone kills are high-level targets, and that entire communities in Pakistan are being constantly terrorized by the drone presence and the constant threat of strikes. This is sickening and highly counter-productive to U.S. security.

Nevertheless, I have little doubt that Romney would be even worse on foreign policy, judging by who he’s chosen to surround himself with on foreign policy. His foreign policy advisors are uniformly neocons and Realists – the same crew who got us into the Iraq war in 2003, which was a mistake of epic proportions.

The real issue: energy The third major issue I’ll tackle is energy. This is my primary area of expertise and I believe we are in an era that demands an effort akin to that required to win World War II in order to resolve the twin threats of resource depletion (peak oil) and climate change.

Romney pooh-poohs renewable energy, conservation, and government investments in alternatives to fossil fuels. Obama has shifted his rhetoric in the last year, from a strong focus on alternatives to fossil fuels, to an “all of the above” energy strategy. He continues to support subsidies and policy support for alternative energy.

Obama is right to focus on alternatives like energy efficiency and major programs like weatherization of homes (making them more efficient for all seasons). California has long led the way on this front and even though California’s electricity rates are high, the actual power bills that homeowners and businesses pay are far lower than average because we’re far more efficient in how we use energy.

California’s per capita electricity use has stayed almost level since the mid-1970s, even while electronic gadgets have proliferated. At the same time, U.S. average per capita electricity use has climbed about 60%. If the United States as a whole became more like California on energy efficiency, we’d save billions of dollars rapidly – spurring economic growth.

Similarly, Obama is right to push for higher fuel-efficiency standards for cars. Average mileage for cars had stagnated since the 1980s. The Obama administration succeeded this year in implementing an industry-supported plan to almost double fuel efficiency by 2025, to 54.5 miles per gallon. This will save car owners buckets of money due to saved fuel costs, more than negating any increase in vehicle costs.

Obama is also a supporter of extending the production tax credit for wind power, which provides about a 30% reduction in the cost of wind power farms. Romney has stated he would scrap the credit when it expires at the end of 2012. I don’t think wind power or other renewables should receive permanent subsidies (like nuclear power), but I do support one more extension for wind power.

Solar power (photovoltaics or “PV”) is truly the next BIG THING and it is being deployed now around the world at a record pace, doubling in installed capacity every year or two. China now has over 40 gigawatts of solar PV production capacity, compared to a paltry two gigawatts for the United States, according to a recent Bloomberg New Energy Finance report. This global market could be a major economic boon for the United States, but instead we’ve ceded this market to China and other countries who were more far-sighted than us.

Romney strongly supports coal power, ignoring the highly detrimental health and environmental impacts from coal. Obama is not a big supporter of coal.

In terms of oil, U.S. production has increased remarkably under Obama, from about 5.4 million barrels per day in early 2009 to about 6.1 million barrels per day in 2012, continuing an increase that began under President Bush. This increase reversed a seemingly inexorable decline in U.S. oil production since our production peaked at about 9.6 million barrels per day in 1970. At the same time, increased production, along with reduced demand from higher energy efficiency and economic contraction, has dramatically reduced our dependence on oil imports.

I agree with Obama’s critics that he can’t really take much credit for this increased production of oil because it’s being driven primarily by market forces. In case you missed it, oil and gas prices have been at record highs for a number of years now, spurring increased drilling around the world.

At the same time, Romney’s focus on increasing U.S. production further, at the expense of alternatives, is misguided because it is incontrovertible that the long-term decline we’ve seen in U.S. oil production will continue before too long. This is due to unavoidable limits on how much oil is in the ground and the lack of any large conventional oil fields being found to replace today’s conventional oil fields.

There’s a reason companies are being forced to drill in deeper and deeper water: The easily accessible oil is long gone. Far-sighted policymakers will recognize this reality and work hard to wean us from oil – not to exacerbate our oil addiction and leave us without robust alternatives to oil when it becomes even more expensive than it is today.

In sum, Obama will be far better on energy, foreign policy, and the economy than Romney. That adds up to my vote.

Tam Hunt is a Santa Barbara attorney.

Comments

Independent Discussion Guidelines

Wow, that was a long-winded commentary that only an attorney could come up with. It would take too long to go over this piece by piece, but the statement that Obama would be better for the economy flies in the face of established facts. Also the statements made about monetary policy are not policies of Obama, but of Ben Bernanke. This statement of the author really betrays his lack of knowledge in economic matters.

"Obama has re-financed all the federal debt and we now pay about half what we paid on interest in the 1990s, when we calculate what really matters: the percentage of the U.S. economy spent on interest payments. So even though the debt is way higher than it used to be, the cost of our $16 trillion national debt is actually far less than it was in the 1990s under Bush and Clinton when it was less than $6 trillion. And it will stay low for a while because interest rates will stay low."

Although he's right about the cost of the interest on the debt, he's absolutely wrong about the reason. Obama didn't "refinance the debt". Ben Bernanke purchased a large amount of government bonds through quantitative easing which has kept interest rates artificially low. In order to keep those rates low, they need to keep purchasing those bonds which now amounts in the trillions of dollars. Someday all those purchases will need to be unwound. This will result in interest rates rising and the amount of interest on the debt rising to amounts never seen before. But until then, we can just keep buying those bonds with printed money to kick that can down the road a little longer. But the idea that keeping the debt interest payment low is somehow a permanent situation is sheer fantasy. Of course when the bill finally does come due, it will be higher than ever.

Botany (anonymous profile)
October 26, 2012 at 4:44 a.m. (Suggest removal)

Yes! Barack Obama is the best candidate for president. But we also need a congress and senate that understand certain other things, like the basics of representation, science, logic, reasoned negotiation and the ability to move forward rather than backwards. We need a senate and congress that isn't mired in the antiquated regressive belief systems that has gotten us into this mess to begin with. Some/enough in the Democratic Party can be negotiated into regressive policies, but it is the republican side that initiates the policies and moderates us into regressive dark side. Always!

Botanys' using the false argument of "permanent" low debt interest payment is a manipulative statement. I don't think anyone has ever suggested that as a permanent strategy.

DonMcDermott (anonymous profile)
October 26, 2012 at 6:07 a.m. (Suggest removal)

Choose between the lesser of the two evils has been American Voting for years, and it just doesn't cut it anymore, at least with me.
I refrain from choosing the lesser of the two evils, evil is evil and bad is still bad, there is no better of the two worst in politics.
I stopped Voting for the lesser of either back in 2004 and haven't looked back!

dou4now (anonymous profile)
October 26, 2012 at 6:22 a.m. (Suggest removal)

I voted for Obama in 2008, which given the candidates I still think was the right decision.
I already voted and I voted for Romney this time. I believe Romney will turn around the economy by creating sustainable jobs.

loneranger (anonymous profile)
October 26, 2012 at 7:11 a.m. (Suggest removal)

"evil is evil " @dou4now

None of the candidates for president are "evil". It could be stated more reasonably that none of them are "amazing" either.

Words like "evil" and "amazing" have lose meaning in our society through overuse.

Kingprawn (anonymous profile)
October 26, 2012 at 8:19 a.m. (Suggest removal)

Obama has done well and has my vote. Some third party candidates sound good, but they have little track record and no real chance to win so aren’t viable. Hunt’s article is a good analytic summary of many important issues that highlights the differences between the two major candidates. The article doesn’t address the differences that can be expected in Supreme Court justice nominees, and social issues such as women’s and homosexuals’ civil rights. But these (and other) issues would lead to the same conclusion. I am not aware of any evidence that Romney will create ‘sustainable’ jobs, much less that he could create more jobs than the Obama administration. Romney excels, as Cheney did, at making himself and his partners rich. Skills that bring success in business are not the same as those that are needed for success in a political arena.

Faulting Obama for not ‘fixing’ things quickly enough is unfair. When the squawks come from the right wing that supported the previous administration it’s hypocritical or worse. It’s like scared, senseless survivors of nearly fatal jumbo jet crash faulting the pilot that takes the stick from the pilot who flew the plane off-course and into an uncontrolled nose dive, and gets it flying level and on course again, for their flight being uncomfortable and late. Do we want to put our more stable and climbing flight pattern into the hands of a new pilot who uses the same navigators as the one who led us into a nose dive? I don’t.

hodgmo (anonymous profile)
October 26, 2012 at 8:40 a.m. (Suggest removal)

Obama deserves our votes. He is slowly helping the economy along faced with a recalcitrant House and die-hard opposition from Boehner & Co. The austerity measures the EU forces on Greece etc., and PM Cameron's insane austerity policies in UK are NOT helping those economies recover, why trust Mitt with our economy when he is also an austerity guy. "12 million new jobs" is repeated like a mantra by Romney people but he has NEVER given any specifics about just how he would go about this.
Mitt is also very inexperienced internationally, and will starve education and other parts of government many of us deem very important.
Thank you for the incisive analysis, Tam.

DrDan (anonymous profile)
October 26, 2012 at 10:37 a.m. (Suggest removal)

Interesting perspective DD. Taking out all this debt is OK, but trying to keep spending under control or even paying it off is "insane". I hate to see what your finances look like.

Clearly, the European model is what you envison for this country.

Botany (anonymous profile)
October 26, 2012 at 11:12 a.m. (Suggest removal)

"lost" not "lose". Damn you auto-correct.

Kingprawn (anonymous profile)
October 26, 2012 at 11:49 a.m. (Suggest removal)

I'm with Dou4Now.

billclausen (anonymous profile)
October 26, 2012 at 3:12 p.m. (Suggest removal)

On the jobs front Romney automatically is disqualified given his propensity in the past to ship jobs overseas. What jobs does he expect to create or lure back? Never says because he doesn't really know; his only goal is to put "President" on his resume and expand his wealth.

Ken_Volok (anonymous profile)
October 26, 2012 at 3:30 p.m. (Suggest removal)

Georgy (anonymous profile)
October 26, 2012 at 5:15 p.m. (Suggest removal)

That's real class Botany, descending to wondering about another poster's finances -- ha, you have nothing, so you fall into insults, very weak brother, and precisely like those of your ilk. Money, money, money, it's your treasure and all you think about (your hatred of Prop 30, too). It illuminates your shallow thinking and your broken-record WAH WAHing since you so desperately fear having to pay more taxes (which I'm happy to say you will when Prop 30 passes AND when Obama raised your taxes, too: deal with it).
With your pseudonym you get away with this garbage, but clearly you would lack the balls to utter this to my face.
You might learn something from the European model, but, you cannot learn since all your posts say basically the same thing: don't tax me. Grow up.

DrDan (anonymous profile)
October 26, 2012 at 5:27 p.m. (Suggest removal)

DrDan:
I'm no supporter of Botany or his ideas, but I don't think his statement "I['d] hate to see what your finances look like" even remotely qualifies as "wondering about another poster's finances."

It seems a minor rhetorical scratch, based on Botany's thesis that looking only at the benefits of debt without considering the longer term consequences is short-sighted and not the sort of model once would practice at home.

binky (anonymous profile)
October 26, 2012 at 5:56 p.m. (Suggest removal)

Great, now I'm being challenged to a fight. That's mature.

Botany (anonymous profile)
October 26, 2012 at 5:57 p.m. (Suggest removal)

How about an arm wrestling match, 2 outta 3 - loser buys lunch.

Ken_Volok (anonymous profile)
October 26, 2012 at 7:53 p.m. (Suggest removal)

Wow! There's enough violence on television; who knew we'd have Progressives getting aggressive in these posts? Well, other than DM that is. Thanks to binky and KV for some levity and I'm gonna carry a loaded weapon before I view the comments again...
Although I admit I cannot bring myself to read Tam's prose (too long winded, self serving, and boring) so I only read the comments whenever the Indy runs a piece from him...

italiansurg (anonymous profile)
October 27, 2012 at 8:46 a.m. (Suggest removal)

minor rhetorical scratch...? whatever, Binky.
sorry KV, with the apparent state of my finances, in which Botany has some interest, I can only make quick $10,000 bets, and besides Botany would be too cheap to buy a lunch when I slam his [symbolic] arm back on the table. He/she's never known a tax he/she didn't hate.
urg., you can't bring yourself to read Tam's prose because he deals with details, facts (not your factoids), and looks at complex issues which require some complicated thinking. This would challenge you and Botany, of course.

DrDan (anonymous profile)
October 27, 2012 at 10:04 a.m. (Suggest removal)

Well, apparently everyone but DD got it, but my comment about "finances" was a rhetorical comment wondering if DD believed his philosophy of government spending was also applicable to his personal finances as well. But maybe I was just too simple-minded to make that clear.

Botany (anonymous profile)
October 27, 2012 at 10:56 a.m. (Suggest removal)

DD, ro-Botany is probably one of those money worshipers on wall street. Money seems to be it's only concern as evidenced by comments such as:
http://www.independent.com/news/2012/...

spacey (anonymous profile)
October 27, 2012 at 11:42 a.m. (Suggest removal)

As far as taxpayer's money is concerned spacey, I'll agree with you 100%. That's money that's not being used for infrastructure, education or vital government services. That's just a small example of the money wasted at every level of government. That's why the politicians want to tax us more. It's easier to levy additional taxes than to try to change the way the government does business.

Botany (anonymous profile)
October 27, 2012 at 11:52 a.m. (Suggest removal)

yawn, Botany.

DrDan (anonymous profile)
October 27, 2012 at 12:07 p.m. (Suggest removal)

Having worked closely with government groups for many years, I have no doubt that there is a lot of wasteful spending; too many $300 toilet seats without holes, so to speak. Anyone familiar with the corporate world has probably had similar brushes with senseless spending. Even when the result of spending is clearly a poor one, it is often difficult to pinpoint the root causes and formulate logical corrective actions. Sometimes someone with authority (often with the best of intentions) reacts to a fiasco by making a command decision to change operating procedures based on their subjective analysis (“the best information at hand”) and the result may or may not be an improved situation. Other times, it is obvious that someone made changes with less-than-honorable motives.

This kind of fiscal opacity and complexity is unusual in private life (though some could Trump it). Most of us have a pretty good handle on what we make and spend, and if we go into debt, we know why. The upshot is that what makes sense for an individual, for example, a balanced budget, may not make sense for our government. In fact it often doesn’t. Here’s an example:

“In the end, the effort to balance the federal budget, when it involves locking in larger and larger shares of private sector income and wealth, is misguided. An alternative is to fix future changes in government spending to a fraction of the change in private productivity and national income. That type of fiscal reform makes it a certainty total federal spending will not take increasing shares of private sector (and national) income and wealth. “
http://blog.chron.com/insidepolicy/20...

This approach shares a problem that a balanced budget poses: if “private productivity and national income” go down for one year, do we immediately cut spending for schools and roads? If not, how long do we wait before adjusting spending to match income? Does it make sense to bet on a bright (or dark) future? Somehow, fiscal policy has to account for the differences in the time scales of spending for infrastructure and income. And what is our fiscal policy if we decide to start a war? Balance the budget with bonds?

The take-away is that the problems faced by large organizations, such as a government, are not the same as those their constituents typically encounter, and, for large organizations, there are a lot of reasonable options between the extremes of excessive spending and a strictly balanced budget, and it is difficult to predict or deduce the optimum path(s). Much less package and sell an idea to a largely uninformed and often reactive public (how else can certain radio hosts and Fox ‘News’ be explained?).

In the end, in our republican democracy, we have find a way to elect trustworthy, clever and industrious people into office, and then hope that they make productive decisions that benefit the nation as a whole. But you knew that.

hodgmo (anonymous profile)
October 27, 2012 at 4:08 p.m. (Suggest removal)

Well said, hodgmo.

binky (anonymous profile)
October 27, 2012 at 7:15 p.m. (Suggest removal)

@hodgmo, yes indeed well expressed, and funny, when you write,
"This kind of fiscal opacity and complexity is unusual in private life (though some could Trump it). Most of us have a pretty good handle on what we make and spend, and if we go into debt, we know why. The upshot is that what makes sense for an individual, for example, a balanced budget, may not make sense for our government."
Get it, Botany, or is this "too simple-minded" for you?
Nobel Prize-winning economist Joseph E. Stiglitz supports an Obama choice for President (with Tam and me and many) in today's NYTimes when he cogently writes,
"The macroeconomic consequences of the Romney-Ryan economic program would be devastating: it would slow growth and increase unemployment while decreasing the protection of government safety nets just as Americans would need them more."
When Tam Hunt says energy is the real issue, he's only partly correct.
Equal rights for women is a core issue, and Mitt's continued support for Indiana Senate candidate Republican Richard Mourdock's views on abortion make Mitt the wrong guy to elect on Nov. 6. Mitt and Mourdock believe that even when it's a horrible rape of a woman, if life is conceived. "it is something God intended," as Mourdock stated. (Romney will NOT cancel his support for Mourdock.)
With this faith-based viewpoint saturating his political thinking, you know Mitt as President would appoint Supreme Court justices who would agree with Justice Scalia and they would overturn Roe vs. Wade. It is simply amazing that Romney supporters fail to see how his "don't let intrusive Big Government intrude into private lives" mantra contradicts his view that government should be intrusive into the bodies of women!
Vote Obama-Biden on Nov. 6 (or earlier).

DrDan (anonymous profile)
October 28, 2012 at 11:45 a.m. (Suggest removal)

Romney can't stand up to the slightest scrutiny.

Ken_Volok (anonymous profile)
October 28, 2012 at 2:02 p.m. (Suggest removal)

Thanks, Tam. This opinion piece is right on the money.

JohnDouglas (anonymous profile)
October 29, 2012 at 12:50 a.m. (Suggest removal)

Botany, both the federal government, through various departments and agencies, but mostly Treasury, issues debt. The Fed often buys that debt, and is currently holding about half of the federal debt. The debt cycles over time, effectively being re-financed, so when interest rates stay low over an extended time, as they are now, the entire debt is over time being re-financed. Treasury also began issuing 30-year bonds again a couple of years ago, so this bodes well for keeping the debt interest payments at a relatively low level over an extended period.

http://en.wikipedia.org/wiki/United_S...

TamHunt (anonymous profile)
October 29, 2012 at 10:16 a.m. (Suggest removal)

Tam cancels out Botany's screed most effectively in his response above on re-financing the federal debt.
On another thread, Botany agrees with another poster (twin plutocrat Italiansurg.) that the other idiots in that thread "probably never had enough taxable income that the difference between the two [taxes and tax rates] became apparent to them." What a splendid fellow.
The ravings of such plutocrats have only one purpose: don't ever raise my tax rates. It's coming, insufferable rich boys, and you will pay more: parcel taxes A and B, and Prop. 30. [oh yes, and NO on 38]

DrDan (anonymous profile)
October 29, 2012 at 4:34 p.m. (Suggest removal)

@Tam - The treasury issues it's debt through policies set by the Federal Reserve. The Federal Reserve has the primary authority in determining interest rate policy. The Federal Reserve is an independent body that makes decisions that are NOT under the oversight of the executive branch. Although the chairman is appointed by the president,(Bernanke was appointed by Bush in 2006) it's actually under the oversight of congress. The Federal Reserve policies are directly responsible for setting interest rates as well as the quantitative easing programs.

http://en.wikipedia.org/wiki/Federal_...

So the statement that "Obama refinanced the debt" isn't just a stretch, it's factually false. Although I guess a case could be made that under Obama's leadership, the economy has been so bad that the Federal Reserve felt obliged to keep interest rates at zero for an extended period of time to prevent a depression.

Botany (anonymous profile)
October 30, 2012 at 7:24 a.m. (Suggest removal)

Botany, you're misunderstanding the respective roles of the White House and the Fed. Yes, the Fed is an independent entity with some congressional oversight, and yes it sets some interest rates and has various other buttons and levers that collectively are known as "monetary policy." Congress and the White House control "fiscal policy" - spending and taxation.

The Fed doesn't actually set interest rates, however. Rather, it has various tools, mostly bond purchases, that effectively set interest rates in some areas through market forces. In turn, many other consumer interest rates follow, at least as a general matter, the Fed-influence interest rates. There's a close correlation between the ten-year Treasury interest rate and mortgage rates, for example.

However, you are wrong when you write that "Treasury issues its debt through policies set by the Federal Reserve." The Treasury is independent of the Fed, but of course under the control of the White House. So the Treasury issues debt into markets that are strongly influenced by the Fed due to the Fed's role in influencing interest rates. QE3 is of course an ongoing securitized mortgage purchasing program designed to keep mortgage rates low for an extended time b/c the general feeling is that the current recovery, as with most recoveries, must be a housing-led recovery. QE1 and 2 were, however, mostly bond purchasing programs that kept interest rates low more generally, and thus indirectly kept mortgage rates low. The point here, however, is that the Fed definitely plays a large role in federal borrowing and interest rates, in various ways, but it does so independently of the White House and it does not issue debt itself. Rather, it buys debt issued by the Treasury and other agencies.

Whether the Fed's bond and MBS purchasing sprees are wise long term remains to be seen. For now, however, the inflation bogeyman is well under control, and this is the traditional downside to quantitative easing or printing money more directly. So it seems that the policies the Fed is pursuing now can continue for some time without the traditional inflationary fears. And the federal government can continue for some time with borrowing at record-low interest rates, particularly in this time of economic struggle - a traditional Keynesian perspective that has been borne out empirically in recent years, as Krugman and others have argued for some time.

Again, these arguments are not to excuse borrowing or to make it sound like borrowing isn't a problem - borrowing IS a problem. But, as I write in my article, it's just not the problem that Obama's critics make it out be at this point in time. To argue that the debt and deficit are the biggest impediments to economic growth at this time is simply wrong.

TamHunt (anonymous profile)
October 30, 2012 at 10:19 p.m. (Suggest removal)

Why not go back to the gold standard, as well as establishing a flat tax?

billclausen (anonymous profile)
October 31, 2012 at 2:02 p.m. (Suggest removal)

Gold standard will not work, Bill. And the idea of a flat tax is certainly quite unfair to the poor -- why should a guy making $15,000 a year pay the same [flat] rate, e.g. 10%, as a guy making $200,000? Also, the government wouldn't get enough revenue that way. Oh that's right, many want to suffocate the government, except when they need it for example with Sandy hitting back East. The principle of a progressive tax rate has been established since before the 1930s: get used to it.
Oh yes, and for all you ultra-libertarians who hate big government, uh, isn't it great to see BIG government ably assisting the natural catastrophe back east?

DrDan (anonymous profile)
October 31, 2012 at 3:02 p.m. (Suggest removal)

@Tam - There isn't a whole lot in that last post that I disagree with. You have seemed to back away from the assertion that "Obama refinanced the debt". The treasury and the fed work together, however the fed sets the policies that have the most direct effect on interest rates. We can agree on that. You did ask the $64K question if the decision to put billions on the feds balance sheet long term is a wise decision. Now that we have put these billions on the feds balance sheet with the prospect of adding billions more, the question is "can we ever unwind these positions without spiking interest rates or crashing the economy"? Our biggest (and maybe only) advantage over European countries is that we have the power to print our own money and they don't. This has allowed us to kick the can down the road longer than they have been able to. The big worry is if Europe is a window into our future.

As far as the gold standard goes, it's not really needed if you can maintain a balanced budget. If we actually were to balance our budget, the dollar would soar and gold would crash. A balanced budget would render the gold standard a moot point.

And a big government wouldn't be such a problem if it were ever paid for, the problem is that it never is.

Botany (anonymous profile)
October 31, 2012 at 11:20 p.m. (Suggest removal)

Botany, I haven't backed away from my statement that Obama has refinanced the debt. As I explained, he is cycling our debt through to lower interest rates, which is effectively the same as re-financing. Interestingly, one advantage of inflation is that it makes our debt smaller without actually doing anything, so deflation is in many ways a bigger threat than inflation. But, again, inflation is not a problem at this point in time and I anticipate the open-ended QE3 and zero interest rate target will change when/if inflation rears its ugly head.

TamHunt (anonymous profile)
November 1, 2012 at 11 a.m. (Suggest removal)

Don't waste more time on Botz, Tam, he will never get it, never back off, he's just afraid he'll have to pay more taxes, the plutocrats' typical nightmare. Same in his endless opposition to Prop 30, no matter about our schoolchildren.

DrDan (anonymous profile)
November 1, 2012 at 11:07 a.m. (Suggest removal)

@Tam - if you haven't backed away from your statement that Obama refinanced the debt, you haven't made the connection either. As we agreed, the Fed makes the policies that have the greatest influence on interest rates, not the treasury. The Fed is overseen by the congress, not the executive branch. Bernanke was appointed by Bush, not Obama, and interest rates were already at zero when Obama took office. Mickey Mouse could have been president the last four years and interest rates would be exactly where they are now. You'd be able to make a better case that Bush or Boehner refinanced the debt (not that I would) than you can making that case for Obama.

Botany (anonymous profile)
November 1, 2012 at 2:49 p.m. (Suggest removal)

I'm always interested in the backgrounds and biases of those writing these recommendations.

For example, does Tam now or has he ever had a real job, i.e. one in the private sector that does not depend on government funding or charitable contributions and that pays his living expenses? Those who depend on the government for their living tend to be very defensive of government spending - simple Maslow hierarchy at work - since their economic survival depends on it, and therefore very supportive of leftist governments.

Does Tam own any real estate on which he pays taxes to the state? Might affect his opinions about property taxes.

A corollary question is: does Tam get any benefit from Prop 13?

And another corollary question is: does Tam have children in public school?

In other words, what personal benefit will Tam reap if his recommendations are followed? We already know of his investments in alternative power, which he attempts to further with his public advocacy against drilling and in favor of alternative power.

Let's be real clear here. It's not just the so-called "fatcats" that put their mouth where their money is. Most rational people do.

JohnLocke (anonymous profile)
November 1, 2012 at 2:50 p.m. (Suggest removal)

John, I guess we differ in our thinking here. My only interest is correcting illogical arguments or statements.

Botany (anonymous profile)
November 1, 2012 at 3:10 p.m. (Suggest removal)

"...has he ever had a real job...?" @JohnLocke

I almost did an authentic spit-take with my coffee. Very awkwardly funny. Millions of ways that question could have been stated better.

Kingprawn (anonymous profile)
November 1, 2012 at 3:45 p.m. (Suggest removal)

Give me three...

JohnLocke (anonymous profile)
November 1, 2012 at 4:03 p.m. (Suggest removal)

Hahaha. Your request is funny for at least two reasons.

Kingprawn (anonymous profile)
November 1, 2012 at 8:23 p.m. (Suggest removal)

Botany, looks like you missed the point of my statement from the get-go. I was not suggesting that Obama should get any credit for effectively re-financing the debt (though he's had something to do with it through his role as boss of the Treasury). Rather, I'm simply suggesting that b/c he has effectively re-financed the debt that the interest burden of that debt is half what it was in the 1990s. And that gives some perspective on the current hyperbolic rhetoric from his critics.

TamHunt (anonymous profile)
November 1, 2012 at 10:36 p.m. (Suggest removal)

In other words, Kingprawn, you can come up with NO reasons.

JohnLocke (anonymous profile)
November 2, 2012 at 9:20 a.m. (Suggest removal)

JohnLocke, try reading my bio, linked to at the top of the article, for my background.

TamHunt (anonymous profile)
November 2, 2012 at 10:27 a.m. (Suggest removal)

You keep asking me to tell you what you don't know but that's not why I'm here. I want you to figure it out...or to not figure it out. Either way. It doesn't matter.

None of what you or I write here matters. No one has ever made a difference in the world by posting comments here. So, IMO, becoming truly upset over another commenters words would suggest a significant lack of perspective.

This is all for amusement. It's merely entertainment.

Kingprawn (anonymous profile)
November 2, 2012 at 1:12 p.m. (Suggest removal)

Kingprawn's pseudo-ultra Buddhism is worthy of the Dalai Lama, oh great Master and sadguru!
Ahh, all for amusement, the play of petty emotions, spreading out far below our magisterial gaze...
Never to be perturbed by another's annoying internet scribblings...
Tam's been clear in his biography; why question his motives and not simply analyze his arguments as presented? Botany is right there, John. And the fatcats [the 2%] put their money directly to their own interests (John Galt did), so the rest have to tribalize and organize in order to hold their own. I know you've seen the Gini coefficient for the USA, it's disgusting and will ultimately bring on a genuine revolution here.

DrDan (anonymous profile)
November 2, 2012 at 5:03 p.m. (Suggest removal)

Thank you, DrDan.

Kingprawn (anonymous profile)
November 2, 2012 at 6:27 p.m. (Suggest removal)


Thank you, DrDan.

Kingprawn (anonymous profile)
November 2, 2012 at 6:27 p.m

You're welcome.

billclausen (anonymous profile)
November 3, 2012 at 1:30 a.m. (Suggest removal)

Now seriously...is Obama and the mainline Democrats seriously dedicated to ending the war on drugs, the corporate bailouts, getting government out of the business of deciding who can and can't get married, reversing the Patriot Act and the National Defense Authorization Act, as well as ending foreign aid to dictators?

Charade you are!...I'm voting Libertarian. At least I won't be guilty of of the delusion of expecting change while voting for the same ideas over and over again.

billclausen (anonymous profile)
November 3, 2012 at 1:35 a.m. (Suggest removal)

OK Bill, I respect your point of view, especially about reversing the Patriot Act. But otherwise I at least won't be guilty of the delusion that suffocating the federal government & turning it all over to the states or to private forces will make any of the items you list any better.

DrDan (anonymous profile)
November 3, 2012 at 5:55 a.m. (Suggest removal)

Excellent point, kingprawn. I'm not aware of anyone's views being changed by these exchanges.

Tam, I've read your bio. Doesn't say who you are a lawyer for? Private practice or government/NGO - very different things to my earlier point.

JohnLocke (anonymous profile)
November 3, 2012 at 9:13 a.m. (Suggest removal)

I wonder if it would cost the taxpayers less if the oil drilling subsidies were eliminated rather than extending the wind subsidies? Would it put the cost of wind and solar closer to parity with oil? Would this approach satisfy the Republicians feelings toward budget reduction while satisfying the Democrats feelings about pushing solar and wind costs below that of oil?

passagerider (anonymous profile)
November 3, 2012 at 1:23 p.m. (Suggest removal)

Might do. Food would be cheaper without farm subsidies, too, and without incentives to use ethanol to dilute gasoline (Use the corn to feed people instead of making ethanol. Oh, and quit cutting down rain forest to grow corn to make ethanol - i just can't understand how anyone thinks this makes sense). Just a few examples of government tampering that leads to unanticipated consequences.

JohnLocke (anonymous profile)
November 3, 2012 at 6:26 p.m. (Suggest removal)

OK so I've been wildly off topic here. I, too, voted for O'bama, hoping that he was not the neo-Socialist that the second half of "Audacity of Hope" indicated. I'm still not sure about that, and while I think he did a good job internationally, his performance domestically is just too poor. This is not to be confused with an endorsement of Romney, whose stand on women's rights is just too awful.

As one who is conservative financially and liberal socially, I will vote Libertarian - not Ron Paul style but John Gardner style. And since there is no chance that O'bama will lose California, voting my conscience instead of the lesser of two evils is not a wasted vote.

JohnLocke (anonymous profile)
November 3, 2012 at 6:33 p.m. (Suggest removal)

No vote is wasted IMHO. I think it's great third parties are getting more attention. The Dem-Repub stranglehold on the electorate is one of the problems our country faces.

Ken_Volok (anonymous profile)
November 3, 2012 at 8:01 p.m. (Suggest removal)

Agreed.

JohnLocke (anonymous profile)
November 3, 2012 at 8:24 p.m. (Suggest removal)

Go Bullmoose! 3rd parties aside (and forgetting the 2000 Nader disaster - which shouldn't be significant in 2012 CA), an interesting complementary article to Tam Hunt's:

http://www.economist.com/news/leaders...

hodgmo (anonymous profile)
November 4, 2012 at 7:39 a.m. (Suggest removal)

Speaking of wasted votes ... my co-workers and I ran an electoral college pool in 2008 and are doing the same this year. You can make a prediction by building your own nifty map here:

http://www.realclearpolitics.com/epol...

Just click on "Create Your Own Map", then click on states to turn them red or blue (current swing states start out gray).

Don't forget, you need 270 to win. If Obama and Romney tie 269-to-269, the new House gets to decide.

EastBeach (anonymous profile)
November 4, 2012 at 1:41 p.m. (Suggest removal)

Forgot to say, NYT has some electoral college scenarios here:

http://elections.nytimes.com/2012/ele...

Click on the "Next" button to see each scenario.

EastBeach (anonymous profile)
November 4, 2012 at 1:47 p.m. (Suggest removal)

After giving NH to Obama because Joe Biden owns a vacaton hiome there, and giving CO to Romney because Tim Tebow would probably vote for Rick Santorum with Romney as a reasonable facsimille, my electoral prediction is:

Obama/Biden 278, Romney/Ryan 260.

EastBeach (anonymous profile)
November 4, 2012 at 2:52 p.m. (Suggest removal)

JohnLocke - try google - you should get your answer from the first page.

tabatha (anonymous profile)
November 7, 2012 at 10:52 p.m. (Suggest removal)

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