Why the Deficit Does and Does Not Matter

Saturday night I was at a charity casino night.  Buy a ticket, get an assortment of chips and try and increase them.  I got my initial chip allowance of “$30,000”  and headed for the roulette wheel.  At the end of the evening I had “$740,000” in chips.

This was not entirely luck.  I used a system.  One chip on odd.  When I won,  I bet one chip on odd again.   When I lost, I doubled the bet.  So two chips, then four, then eight, etc.   Sooner or later the ball was going to land in an odd number and I would win.  (Try this with real money at your own risk).   After a while, instead of starting the process with a “$1,000” chip, I started with a “5,000” chip.  I raised the initial amount once I felt comfortable that I had enough money to survive a likely (i.e. short) losing streak.  Eventually, I was starting with a “”$15,000” bet.

I believe the closest I came to bust was when, starting with a “$15,000” bet, I did not win until I had bet “$120,000”.  So I had lost three times in a row.   If I had lost that fourth time, I would have been starting over.  I did not have anywhere near “$240,000” in chips left to double my bet with again.

What does this have to do with the deficit?  As long as there are various entities ready and willing to buy bonds from the United States, then the deficit is not a problem.  But when there is no more money to put back us….

This years deficit is irrelevant.  It might be made relevant if the government decided to spend three or four more trillion this year (maybe a little less, maybe a little more), but given the probable deficit, even with no cuts from congress, the deficit is irrelevant.  Next year’s is too.

The people making the decisions on whether to buy or not buy our debt are fully aware of the projected deficits.   But even so, they still loan us money.  This tells us that the marketplace (where conservatives usually worship) believes that our present deficits are not that much of an issue.

However, it is reasonable to assume that at some point the total debt combined with the projected deficit will become too much for those decision makers and they will start putting their money elsewhere.   Then we are screwed (just as I would have been screwed if the wheel came up even four times in a row).  The money will no longer be there.

In the meantime, the economic recovery continues, slower than we would like, but continues none the less.  Some of the reason for this growth is a large federal government spending deficit.  That deficit is stimulative.  Continuing economic growth is very important for the deficit/debt issue as a strong economy will do much to ameliorate the problem.

The Republicans want to slash current spending which will have a depressive effect on the economy and cost jobs and will have a small effect on the current deficit and might easily increase the deficit over the next couple of years (due to the slowed economy).    It is difficult to understand exactly what the Republican objective is other than they want to handicap the economic recovery hoping for a double dip recession and that the voters blame Obama.

It is their only hope for winning the white house in 2012.

Credit Where Credit is Taken?

You may have heard that the economic recovery has continued to strengthen.  Of course, Republicans are quick to take credit.  Reality presents a different picture:

This chart* is the change in GDP by quarter.  The red represents the end of the Bush administration, the blue the beginning of the Obama administration.

It would appear that the failed stimulus and bailouts really fouled things up!

In any event, the economy was clearly in growth mode before the Republicans had any chance to influence it (especially given that the Republicans have yet to do anything that would have an effect!!!).

But what does evidence mean to a party that largely denies human caused climate change (when they are not denying climate change itself) and mostly does not accept evolution as a valid theory of how life works on earth?

*Chart from The Washington Monthly.

The Inheritance of Beliefs!

Satoshi Kanazawa is a blogger at Psychology Today.  He blogs about evolutionary psychology.  Not everything he has posted has sounded right to me, but some of it seems OK.  But enough is enough.

the fact that Barack Obama’s father was a Muslim Kenyan, descended from a long line of Muslims, will remain true until the day he dies, and nothing he ever does in his life can change half of his genes that he inherited from his father.  His genes are for keeps.  The fact that he has attended Christian church for the past 20 years is not going to change that…Obama is still as (half) Muslim as the day he was born.

It would seem that Mr. Kanazawa confuses ethnicity with religious belief.  And yes, Mr. Kanazawa is talking about religion here…

34% state [Obama] is a Christian (down from 48% in March 2009).  It is disheartening to know that 34% of the population has a dim understanding of human genetics.

This does open a door to an out if and when people become embarrassed about claiming that Obama is Muslim.  Now they can say that they simply meant that his ethnicity is Muslim (although I do not believe that Muslims constitute an ethnicity, but why be concerned with details at this point).

So Good At Communicating He Fails to Communicate

Or something like that.

Obama reminds me of Clinton.  I remember thinking that Clinton would be a liberal Reagan in that he, too, could be a “great communicator.”  I thought that because he seemed to communicate with the public so well as a candidate.  But once he was in office, he stopped.  And the Republicans controlled the message.   Soon Clinton was declaring the era of big government over.

Obama seemed to be able to communicate as a candidate and seems to not be able to do so as a President.  The Republicans control the message and Obama is trying hard to sound more centric in the State of the Union address.

It is interesting that when polled about specific elements that make up (one of?) the health care reform bill, the majority of Americans are in favor of almost all of them.   http://www.kff.org/kaiserpolls/upload/8042-T.pdf

In other words, if people understood what was in the legislation, there would be a lot more support.

I found the poll from a link on Jonathan Chait’s blog at The New Republic.

If only Obama could communicate.

I Can’t Stand It

There is a very old Peanuts strip that I am reminded of lately.  In the strip, Lucy is walking with Linus and explaining to him the origin of telephone poles.  She says something along the lines of “The telephone pole is actually a tree specially developed by the phone company to grow without branches.”

Charlie Brown over hears this lecture, drops his head against one of the phone poles and says “I can’t stand it.”

President Obama plans to deliver an address to the nation’s school children that “will challenge students to work hard, set educational goals, and take responsibility for their learning.”

Conservatives are up in arms that the President wants to indoctrinate the nation’s school children with his “socialist agenda.”

So working hard, setting educational goals, and taking responsibility now constitutes a socialist agenda?

I can’t stand it.

Obama Spoke Stupidly

I don’t blame Obama for what he said.  For a very long time, to be black in America was to be a target for law enforcement (and I’m sure it still is occasionally at least).

But it is also true that for a very long time in America (and, I suspect, anywhere on the planet earth), even a white person can get him or her self arrested for doing nothing more than arguing with a police officer.

Obama admitted he did not have the facts and still offered up an opinion which was based on the past history between police and African-Americans.   Obama spoke stupidly.

Josh Marshall at TPM Media has an excellent post up about the position a police officer is in every time he or she responds to a call.  I recommend it.

A Sea of Red Ink

As, I hope, most Americans are, I am concerned about the federal debt. Already high at the end of the Bush years, the federal deficit is now even higher, and the forecast for future years is even worse.

Clearly this is unsustainable.

I voted for Obama and I support his agenda. But at some point the deficit/debt must be addressed. I believe Obama to be an intelligent man and an astute politician. He surely understands the potential problems of continuing to pile up debt. I have to believe that he has a plan.

And the plan is this.* Effectively dealing with the federal deficit will not be politically popular. Programs will have to be cut and taxes raised. It will take a lot of Obama’s political capital to do this. So much so, that it would be difficult for him to get his other agenda items through after dealing with the deficit.

Of course, getting his other agenda items through might not leave him with enough capital to deal with the deficit. So what to do? By leaving the deficit for later, it continues to grow to obscene amounts. A year (or two?) from now, congress will have no choice but to get serious about the deficit. Democrats will have to accept some program cuts and Republicans will have to accept some taxes. They will be pushing each other aside to cut and raise more than the other.

A guy can dream, right?

*No, I have no inside info. This is completely speculative on my part.