09-26-2017, 05:28 AM
(09-25-2017, 06:44 PM)pbrower2a Wrote:(09-25-2017, 05:10 PM)Warren Dew Wrote:(09-25-2017, 01:46 PM)pbrower2a Wrote: OK, so what would a 'real' recovery be like? Would it be one that begins after American standards of living fell to those of the early 1930s? After people started to starve?
Never let the perfect be the enemy of the good.
A real recovery would be one that recovered the economic losses, returning to the previous trend line, instead of just picking up a new, lower trend line starting at the bottom of the recession. You know, like the 8% postrecession/tax cut real growth in 1983, or the 6% postrecession growth in 1961, or the 8% post tax cut growth in 1965.
As with the meltdown of 1929.4-1932.4, the year and a half of the meltdown of 2007.4-2009.2 started with the bursting of a bubble. Bubbles devout capital that accountants book but end up worthless. The Reagan tax cut put an end to stagflation which was not the problem of either the 1920s or the Double-Zero Decade.
So unlike most on the left here, you agree that the Reagan tax cuts were useful. You're just arguing that the circumstances were different in 2008. Sure.
Quote:The "Reagan recovery" depended upon the lowering of expectations, with people settling for less than their dreams (like recent college graduates settling for jobs in retail and food service).
College students settling for jobs in retail and food service was only a temporary effect during the 1981-1982 time frame, unlike today when it seems permanent. In the 1980s, eventually the ones who were competent went back to getting jobs comparable to what they would have gotten in the 1970s.
That said, you're correct that there was lowering of expectations relative to the 1960s. This was because the 1970s were so terrible that people were glad to get anything at all. They got slightly rising wages in the 1980s, plus the boost in take home pay from the tax cuts, which all looked good relative to the declining real wages of the 1970s. They did not get a return to the rapidly rising wages of the 1960s.
But that's all about wages, not about economic growth. Starting in the early 1970s, wages detached from productivity. Thereafter, real wages were largely stagnant - falling a bit in the 1970s, rising a bit in the 1980s - but productivity continued to improve, permitting economic growth. It's just that the benefits of economic growth after about 1972 flowed to the producers of raw materials and the owners of capital rather than to the workers.
Quote:The slow-growth 1950s was the result of government trying to pay off national debt from World War II.
Economic reality is very different late in a 1T (circa 1960), the 2T/3T cusp (early 1980s) and the start of a Crisis Era. The market crashes of 1930 and 2008 were very similar in severity and immediate effect. he last three Crisis Eras began with financial panics (1857, 1930 -- the real crash was in 1930, and 2008). In a 3T people enjoy the warmth of an active volcano. The 4T begins with the eruption of the volcano.
Tax cuts mean something when the economy is humming along. When revenues crash in an economic meltdown, tax cuts are practically meaningless. In an economic meltdown, businesses are rightly more concerned with sales revenue than with taxes paid. It's the bubble that devours capital that could be going into productive activities that does the damage; the panic shows how pointless the investments were. Americans were not investing in plant and equipment.
Good to see you agree with the Austrian analysis of what happens to capital in a bubble. But you have to remember that the 2001 crash was also the bursting of a bubble. Tax rate cuts were part of the solution to that one, from which we recovered much better than we did in 2008.
That said, I'm not arguing that further tax rate cuts were the way to go in 2008. I do think that Obama's tax rate increase was foolish, but that doesn't mean further cuts were the answer. Bush had gotten tax rates to about the right place, neither too high nor too low.
Quote:The meltdown that began the Great Depression began when FDR backed the banks. The Obama bull market began when the government backed the banks. The difference between the two meltdowns was when the meltdowns ended, and not their severity after a year and a half.
I assume you mean that the meltdown that began the Great Depression ended, not began, when FDR backed the banks. If not, please explain.
If so, I agree. And while I note that it was Bush rather than Obama who backed the banks, I agree that ended the immediate meltdown in 2008. However, ending the meltdown is not the same thing as facilitating a recovery; more on that in a bit.
Also, the FDIC did not exist in 1930. In 2008, it did. That provided a better option than bailing out the banks. In particular:
Quote:It is best that the worst actors, the ones who created the mess, go out of business.
Yes. And we allowed that to happen in 2001, which is why we didn't get a long period of stagnation afterwards.
In 2008, the bad actors were people who had taken out mortgages they couldn't afford and banks who gave them those mortgages. People can't really go out of business, though many rightly had to abandon their houses, so the Fed attempted to soften the bursting of the housing bubble. The Fed still hasn't liquidated their mortgage securities, so it remains to be seen whether that has been successful.
The bad actor banks, however, were bailed out. With the FDIC in place, it would have been better to provide the FDIC with an unlimited line of credit, and allow the bad banks to fail and their assets to be sold. As long as the FDIC was in place to make depositors whole, the bank failures would not have destroyed trust in the banking system.
Quote:Government can promote the recovery of others. The auto industry was not particularly culpable in the real-estate fraud that was the illusion of wealth-creation in the Double-Zero decade.
The industries that did not participate in the bubble do not have false capital on their balance sheets to work off. They don't need government intervention to recover, and government intervention doesn't help.
In the case of the auto industry, Ford survived without help. The government helped Chrysler and GM, which both went bankrupt anyway. Government bailouts of the auto industry did essentially nothing.
Cash for clunkers might have helped a bit, but its primary benefit was to get some old gas guzzlers off the road.
Quote:Something else is happening this time: the end of scarcity in manufactured goods. There is no easy way in which to make money by simply making stuff. America got through the Great Depression by making more cars, appliances, and furniture that people did not have going into the Great Depression. By most accounts, life was better in the late 1930s than in the late 1920s. All that was down was stock prices. Consumer electronics are often dirt-cheap. You can buy a cell phone for about $20 bucks. Sure, it is a 'dumb phone' that won't give images or data... I have a reader and a camera, so I don't need data or photographic capacity on my cell phone.
Radio Shack is dead. J C Penney and Sears are dying. Toys 'R' Us is in a 'reorganization' intended to protect its suppliers. That's retail.
To the contrary; by most accounts, life in the late 1930s was still worse than in the late 1920s, before the crash. Civilian consumption didn't recover until after WWII. It was better only for the high end of the labor market that were part of the FDR coalition, and far worse for the rest of the labor market who were not in the coalition.
More importantly, it was thought in the 1930s that we'd reached the end of scarcity in manufactured goods as well. The cars, appliances, and furniture that you mention were being manufactured in larger amounts than there was a market for, and manufacturers had to resort to increasingly desperate schemes to get rid of them, notably deferred payments.
The most notable thing about your post, though, is that you don't even attempt to rebut my primary point: Obama's supposed "stimulus" spending did not result in a recovery. Just like FDR's policies - other than the prevention of bank failures - Obama's policies just served to keep us mired at the economic bottom for close to a decade. Only now, with Obama's policies starting to be reversed, are we seeing growth edging above 2% in the beginnings of an actual recovery.