Waiting for Fitzgerald

[Spanky]

Originally posted by Tyrone Slothrop
I don't need to think that Bush's people can predict the future perfectly to think that they are inflating publicly announced initial estimates so that they can later crow that the hellacious deficits they're running up are nonetheless less than the even hellaciously larger deficits previously predicted.

Do you have any evidence to support this theory?

[Secret_Agent_Man]

Originally posted by Spanky
Let's try and pay attention. Did you miss his statment about differentials? Did you miss his comment where assumed that growth in receipts should equal economic growth? Explain to me how my countering one of the critical assumptions underlying his argument is a non sequitur?

I guess I'm just not smart enough to follow this Board.

The key to communication is how the message is received and understood by by your audience. If you think you say X and everyone else heard something else, you did not say X. The problem may lie with the speaker and not the audience.

S_A_M

[Captain]

Originally posted by Spanky
Let's try and pay attention. Did you miss his statment about differentials? Did you miss his comment where assumed that growth in receipts should equal economic growth? Explain to me how my countering one of the critical assumptions underlying his argument is a non sequitur?

I do not believe I made these assumptions. I am simply trying to test your hypothesis, and making an initial stab at it based on very broad data. If you'd like your hypothesis to hold up, I'd suggest digging deeper into the data.

Your hypothesis was the deficit would have been eliminated without the 1993 Tax Act. That is a fine hypothesis, and I would have been happy to see it borne out. If it were borne out, I could pay less in taxes without worrying about it coming back to haunt us later on. To test the hypothesis, I looked at some very raw, general numbers and saw that in the 1990s, there was a very significant growth in tax receipts, much more significant that the growth in the economy. If you can find an explanation, and I buy bracket creep as a partial but by no mean full explanation, for the full variation, that's great. If the differential in the big numbers was 10% or even 20%, I would have said items like bracket creap may well explain it. Does anyone know if there is data somewhere scoring how much money was raised by the 1993 Act itself? While I know the Republicans claimed it was the largest tax increase in History, I do not have any data for how much money it raised.

We also saw a growth in governmental expenditures that was slower than the growth in the economy. That supports your hypothesis somewhat, and likely comes in part from the "peace dividend". See - I've been doing some of your work. But, that reduction was not enough to have eliminated the deficit on its own.

I will offer a contrary hypothesis, which is that a systematic government policy of deficit reduction was maintained in the 1990s that through a unique set of developments that resulted in both the Democrats and the Republicans backing it. Without Clinton and the Democrats, the tax increase component of deficit reduction likely would have been abandoned. Without the Republicans, the reduction of government expenditures may well have been substantially less (though, note, Republicans have been good at defending military expenditures, particularly during the Bush administration but rapidly increasing military expenditures were also a hallmark of the Reagan years, so it may just be that government expenditures would have been different and that Democrats also need some credit on holding down expenditures).

I will also posit a separate hypothesis, which is that deficit reduction and a balanced budget can only be accomplished by general consensus, because of the tragedy of the commons theory. That means that a high level of partisanship in government, as we have now, is a very bad indicator for deficits. As long as there are heavily fought partisan battles, whoever has the balance of power, the Republicans in this case, are going to try to spend their way to political victory. Whether you think that is a good thing or not, of course, will depend on how partisan you are.

[Captain]

Originally posted by Spanky
Do you have any evidence to support this theory?

I'd be happy if anyone posted an intelligent article taking any position on what the reasons were for bond rates in the 1990s.

While I really do not believe bond markets are the end-all and be-all of economic health, and have no opinion as to whether bond traders are particularly intelligent or insightful in general (don't they mostly yell loudly in a pit for a living?), at this point I have the sense that everyone's position on what happened is based more on oversimplified partisan rhetoric than on anything that may have happened in the bond market in the 1990s. Will someone please prove me wrong?

[Captain]

Originally posted by Spanky
New Orleans was a poorly planned city. With the destruction of large swaths of the city it would be foolish to rebuild it exactly the way it was before if the cities growth was not well planned out. In a metropolitan area you need to be able to do some redisigning etc. when stuff changes or when past government planned poorly. In a metropolitan area property is an easily priceable commodity. People's attachment to sacrosanc property rights in the city is just unrealistic. As long as there is just compensation, cities needs to be able to move stuff around to make the city liveable for everyone.

Just a question for you and the other poster on New Orleans, who mentioned Kelo. Won't some level of redesign and rationalization occur without government intervention? I know that Chicago after the fire was rebuilt in a radically more rational way, but I don't know how much of that was free market forces at work and how much was government intervention.

It strikes me that a rational real estate developer has a better chance of assembling a useful larger parcel for development in the affected area than they had before Katrina, regardless of anything the government does.

[Not Bob]

Originally posted by Tyrone Slothrop
It's impressive that the entire bond market could get a matter of constitutional law so wrong, especially since you were there to set them straight.

Especially since they only make money if they are right, which is why they are always right.

(Except in 1994, when the bond market took a bath. Uh, Piper Jaffray, anyone?)

[notcasesensitive]

Originally posted by Captain
I'd be happy if anyone posted an intelligent article taking any position on what the reasons were for bond rates in the 1990s.

While I really do not believe bond markets are the end-all and be-all of economic health, and have no opinion as to whether bond traders are particularly intelligent or insightful in general (don't they mostly yell loudly in a pit for a living?), at this point I have the sense that everyone's position on what happened is based more on oversimplified partisan rhetoric than on anything that may have happened in the bond market in the 1990s. Will someone please prove me wrong?

You don't really understand how this board works yet, do you? Intelligent article on the subject. Hold you breath waiting for that one. Ha.

[Hank Chinaski]

Originally posted by notcasesensitive
You don't really understand how this board works yet, do you? Intelligent article on the subject. Hold you breath waiting for that one. Ha.

I couldn't even find an obnoxiously long analysis piece to post as "my thoughts" on the subject.

Someone needs to ask Thottam to come here, or maybe Plated, someone controversial.

[Captain]

Originally posted by notcasesensitive
You don't really understand how this board works yet, do you? Intelligent article on the subject. Hold you breath waiting for that one. Ha.

I thought I now waited and ridiculed anyone who posted on the bond markets without citing an intelligent article? Or, if someone cites an article, I post ridiculing it as stupid, partisan, and illiterate? Is that not how it works?

By the way, what is a RINO?

[ltl/fb]

I've been seeing articles on the impending retirements of boomers, and the possible effect of these retirements. It's going to start having an effect on me quite soon (about 4 people I work with fairly closely will be eligible for early retirement (we have a DB plan) in the next few years). There was an article in the WSJ a week or two ago, too.

• It is a mistake to think that U.S. economic gains for the past decades will continue based solely on technology breakthroughs and plentiful numbers of skilled workers. There has never been anything like today's aging population, and the potential economic meltdown it might bring on several fronts.
  From 1980-2002, the U.S. workforce exploded by 50% due to the addition of 38 million baby boomers. Women also flooded into the workforce. Now the baby boomers are aging, and in the decade following 2010, the principal talent pool for managers and workers under age 45 will begin shrinking by 6%. The structural demographic forces are now in place for a real skill war for talent during at least the next 20 years, and the problem will be worldwide.

http://www.benefitnews.com/finance/detail.cfm?id=8081

[ltl/fb]

Originally posted by Captain
I thought I now waited and ridiculed anyone who posted on the bond markets without citing an intelligent article? Or, if someone cites an article, I post ridiculing it as stupid, partisan, and illiterate? Is that not how it works?

By the way, what is a RINO?

Republican In Name Only.

[Captain]

Originally posted by ltl/fb
I've been seeing articles on the impending retirements of boomers, and the possible effect of these retirements. It's going to start having an effect on me quite soon (about 4 people I work with fairly closely will be eligible for early retirement (we have a DB plan) in the next few years). There was an article in the WSJ a week or two ago, too.

• It is a mistake to think that U.S. economic gains for the past decades will continue based solely on technology breakthroughs and plentiful numbers of skilled workers. There has never been anything like today's aging population, and the potential economic meltdown it might bring on several fronts.
  From 1980-2002, the U.S. workforce exploded by 50% due to the addition of 38 million baby boomers. Women also flooded into the workforce. Now the baby boomers are aging, and in the decade following 2010, the principal talent pool for managers and workers under age 45 will begin shrinking by 6%. The structural demographic forces are now in place for a real skill war for talent during at least the next 20 years, and the problem will be worldwide.

http://www.benefitnews.com/finance/detail.cfm?id=8081

Don't we solve this problem by opening our borders to intelligent younger people from around the globe, leaving other countries to deal with aging populations without the benefit of our workforce? I do not mean this entirely in jest. Dealing with a disproportionate number of older people in India, for example, is relatively less expensive, and the kids working here would be able to contribute heavily to maintaining their parents. Shifting the burden can be a net positive all the way around, especially if many of the foreign workers coming here ultimately go back.

I think we sould be loosening immigration restrictions now in prepartion. Perhaps establishing 10 or 20 year brain drain visas.

And thank you for the RINO response.

[sgtclub]

Originally posted by Spanky
8 is just the highest number we have seen in a while. I think, if the current deficits are not tackled soon 8 will seem like a low number.

Congress passes the budget. How many times has congress declared the presidents budget DOA? Pretty much every budget for every president from Carter through Clinton.

When Bond traders talk about the budget they talk about Ways and Means, and appropriation bills etc. In the campaign, communication with the public requires that everyone pretend that the President controls the budget. But educated people should know that this is not true.

Clinton was a centrist and tried to control his party but he had to give way to many concessions to the left of the party to get his budgets and even then he had trouble passing them.

The Republican take over of congress was a big event. For a while, at least while Gingrich was in power, there was fiscal dicsipline that had not been seen in a while. Because of this discipline rates dropped to levels not seen in a long time.

To be honest, I am surprized they have not climbed higher recently.

If you know people in the bond markets. Ask them. I am pretty sure what I am saying is conventional wisdom at the fixed income departments at any investment bank. If they don't predict the deficits right they lose money. If they get it right they make a ton. Anyone know a bond trader at Lehman or at Goldman?

Why hasn't anyone mentioned that Rubin's theory (i.e., that there is a connection between high deficits and high interest rates) has been proven incorrect?

[Spanky]

Originally posted by Secret_Agent_Man
I guess I'm just not smart enough to follow this Board.

The key to communication is how the message is received and understood by by your audience. If you think you say X and everyone else heard something else, you did not say X. The problem may lie with the speaker and not the audience.

S_A_M

The Captain had no problem understanding what I was saying. And he was the one I was talking to. Here was his response, and in my view shows full comprehension of my point.

"I am happy to admit that budget numbers have some level of dynamism and don't respond in a straight line. As you note, there are many factors. These factors, of course, will go both ways.

But given the extraordinary differential (50% growth in GDP, 100% growth in receipts), I am not going to be convinced until you show some evidence that the dynamic factors have that big an impact.

Bracket creep, for example, can increase the rate by a percentage on income over a given level, but that is not a 50% increase in tax revenue."

[Spanky]

Originally posted by Captain
I'd be happy if anyone posted an intelligent article taking any position on what the reasons were for bond rates in the 1990s.

While I really do not believe bond markets are the end-all and be-all of economic health, and have no opinion as to whether bond traders are particularly intelligent or insightful in general (don't they mostly yell loudly in a pit for a living?), at this point I have the sense that everyone's position on what happened is based more on oversimplified partisan rhetoric than on anything that may have happened in the bond market in the 1990s. Will someone please prove me wrong?

Actually my request from evidence was for Tyrones theory about Bush doctoring the numbers.

I am not saying that Bond Markets are that connected to economic health. What I am saying is that they are connected to the federal deficit. Bond traders want to make them low to be competitive, however, if they make them too low and the Federal budget deficit gets out of hand they will end up losing money. These guys have more of a vested interest in predicting the future deficit than anyone else. In addition, what they set the long term rates at can have a significant effect on the economy. That is why Clinton found them so important. If he could convince the bond market that there would be fiscal discipline then the long term rates would go down and the economy would boom. With Rubin as the Treasury Secretary (a former bond trader) and Clinton being the head of the party, the bond market thought that he might be able to reign in Congress. When it was clear that he could not ("the 93 deficit pact") then the bond traders increased the rates because they thought deficits were going to explode. Once the Republican came in the bond markets thought there would be fiscal dicsipline so they lowered their rates. These contributed to the economic boom that lead to the balanced budget.