The Deficit Problem Is Not “We, the People,” It is “You, the Incompetent Elite”

[Joanne98]

New York Times columnist David Leonhardt told readers today that the problem of the debt is “we, the people.” Is that so?

Was it we the people who were too dumb to see an $8 trillion housing bubble and recognize that its collapse would wreck the economy? No, that was the job of the great Maestro Alan Greenspan and his sidekick Ben Bernanke, the brilliant scholar of the Great Depression. It was also the job of all the economists who do research and opine to the public on the macroeconomy. Virtually all of these highly educated highly intelligent economists either did not see the bubble or insisted it was not worth their time.

Our deficit today is due to the collapse of this bubble. There is no dispute about this. If there had been no bubble and the economy was still chugging along with 4.5 percent unemployment, the budget would either be balanced or close enough that no serious person would be expressing alarm (check out the pre-crisis CBO projections).

Is our huge deficit a problem today? Not if you think people should have jobs. Private sector demand has plunged because of the collapse of the bubble. If the public sector does not fill the demand gap with deficit spending, then we have less demand and fewer jobs. That’s worth saying a few hundred thousand times since the deficit hawks have filled the airwaves and cyberspace with so much nonsense.

People who want smaller deficits want fewer jobs – that is the way the economy works right now. There is no plausible story through which cutting demand from the public sector will generate more jobs in the private sector.

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[mrcheerful]

1. Well you see we are going to blame those nasty freeloading poor people who bought homes

they couldn't afford without looking at the lenders who created the housing bubble then bundled those loans and sold them thus driving the price of housing up, oh and as a added bonus every time we sold those bundles we allowed the buyers to jack up the original price of the loan that people started out with to where they couldn't handle the loan, so the house went into foreclosure and we the loaners then resold the house at a jacked up price caused by our manipulations of the loan market.

The SO and I are buying a small house for $33,000 on land contract, the house is valued at $29,000 to $35,000 currently. The guy we bought it from 5 years before we put a down payment on the house paid almost $80,000 for the house. He decided that it was better to sell the house at a loss then hang onto it waiting for the price to rebound and having to pay for the up keep of the house while waiting for a rebound that might not happen.

[MIprogressive1]

2. The lenders should be at fault.

But the people who bought the house they could not afford are at fault as well. Personal responsibility is almost non existent in America right now.

[Dr.Phool]

4. When did banks start giving people money they KNEW they couldn't pay back?

When they found out they could make a quick, big buck off of it. Slice and dice it, and sell it to Wall Street, who could make a quick, big buck off of it, and then sell it to investors, by lying about the risk.

Then, somebody (think Goldman Sachs), with inside information, on just how bad these securities are, comes along and buys a whole bunch of insurance policies (credit default swaps) on securities they have no interest in, and sit back and watch it explode. And make a killing. Bye-bye AIG. Hello. bailout.

[girl gone mad]

6. At most, they are at fault for getting bad financial advice.

Our government and the entire banking industry and real estate industries were relentlessly selling housing as a brilliant investment strategy during the boom. Mortgage brokers told people to buy as much home as they could afford. Realtors claimed home prices would never go down. The Fed chairman was telling people that subprime ARM and interest-only loans were a great idea. The President was pushing citizens to join the "ownership" class.

There were many people smart enough to see what was going on, but you can't blame sheep for getting sheared. There were larger forces out to create the bubble and convince Americans to jump on the bandwagon. as busy as people are and as complex as some of these loans have become, it's not right to expect the average person to be able to make good choices when even the supposed experts were completely wrong. That's what they were paying Realtors and mortgage brokers for, but in the screwed up system we have, both of these groups work on commission and had their own vested interests.

[MIprogressive1]

9. But in the end. They signed their name.

[girl gone mad]

10. And on the other side of that coin..

the banks were also party to these contracts, but when the markets inevitably went south, the banks demanded massive and ongoing bailouts from the American taxpayer to get out from under the bad debts caused by their greedy, fraudulent, even criminal lending and securitization activities. Then they took the money and used it to pay themselves the biggest bonuses in history and to speculate even more in stocks and commodities. But what they didn't do is the one thing they insisted they needed the money for in the first place: increase lending to businesses and consumers. In fact, they did just the opposite, they cut lending every month since the bailouts started flowing.

So, you tell me, where should the responsibility start? With the wealthy and powerful connected people who write the rules, or with those who are the least knowledgeable about these products and markets, and have no wealth and no connections and put their faith in a formerly sound system which in the last decade was grossly manipulated for the sole purpose of looting the middle class?

I say responsibility should start at the top.

Let's not forget that there are memos which prove the banks were out to take advantage of the American consumers low financial intelligence and this misplaced sense of loyalty to the economic overlords that you label personal responsibility. It's one reason the banks felt so comfortable writing massive amounts of subprime, ninja and liar loans.

[bemildred]

3. After WWII, the USA really did bestride the world like a colossus.

These arrogant fools that pretend to be the people's betters have pissed that all away with their imperial fantasies and greedy self-interest, and now they want to blame US?

[patrice]

5. The economic royalists weren't "dumb"; they gambled and won. They knew this was

coming, so they were busy spreading their constituency. Maybe there are even some who hoped that our "buy-in" would (since the Iraq War failed to produce the political capital necessary to do so) result in the privatization of Social Security.

[truedelphi]

7. Of course they expect that the privatization of Social Security

is to come about. Every other article in the news media is about how the pensions funds are at unmanageageable levels, how big the greedy Baby Boomer generation is and how they sure better not expect to get their 7 to 15% contribution per year of their working life returned to them.

And on and on.

And they are right - we simply cannot afford both the Bailouts and the lack of return in terms of jobs regarding those Trillions sent on the Banksters who scored big with the Bailouts, but who also made sure that no jobs came back to us.

I am listening to some podcasts on how the Chinese have stolen American jobs. If we had more jobs here, the taxes and pension plan contributions to the Social Security funds and the pension funds would help make things more amenable.

Especially hard hit are New York and California. So many in those states are on food stamps and unemployment, while China goes trucking along. And interesting also, to hear that the Chinesse government could expand their economy even more if they off shored their jobs to the cheaper work forces of bangladesh and Vietnam, but the Chinese government wants its workers to have jobs.

[Karenina]

8. At some point we the people will reclaim our power

from the bloodsucking parasites or bleed out. Recent events support this concept. So many of our institutions have unsustainable models as foundations. Murkowski just made it that much harder to make them pay for the damage they cause. All by her little lonesome. ;-) Would that some might get loud. :evilgrin: