$5 billion a year in savings isn’t even a pimple on a $3 trillion dollar budget. You’re going to have to find something else. Something that’s actually substantial and meaningful to cut.

“Medicare is bankrupt. Social Security is bankrupt.”

Curious new definition of bankrupt: making more money than you spend. Social Security (with an exception this year) has run a $200 billion dollar surplus for the past twenty years or so and revenues aren’t expected to not meet expenditures for years to come. That’s not the definition of “bankrupt” that anyone I knows uses.

“We can’t afford these social programs in the capacity that they are operating and on top of it to pay for universal health care?”

We can’t afford to save money? The United States has the highest per-capita healthcare costs of any advanced nation — roughly twice as expensive as any other comparable nation. You know what those nations also have? Universal health care. France has the best health care system in the world, according to the right-wing Economist magazine. What else does it have? Health care costs half of ours.

How can you not afford to spend less money to get a better product?

“So how are people going to live with wages that are worth less and their dollar doesn’t go as far because everything costs more?”

Umm, because inflation affects everything, including wages? I remember my first job in the very early 1980s. My boss used to apologize that he could “only” give me a 10% raise every year. Sure would have loved to have been holding a 5% fixed-rate mortgage at the time.

” 2nd highest corporate tax rate in the world.”

Second-highest statutory corporate tax rate in the world. Lowest effective (~20%) corporate tax rate in the world. Companies pay the effective, not the statutory, rate.

“Fannie Mae and Freddie Mac had their AUS (automated underwriting software) set the standards pretty low. I’ve seen loans approved that I wouldn’t sign. ”

Neither Fannie Mae nor Freddie Mac originated consumer mortgage loans. Given that you were in the industry, I’m surprised that you didn’t know that.

Again, what portion of the loans underwritten by Fannie Mae and Freddie Mac went to “poor people” who couldn’t be expected to pay them back? How does that compare to loans given to wealthy suburbanites who didn’t pay them back?

How about cutting welfare benefits to illegal immigrants–that is $5billion /year in CA alone. There is an increase to give more and more to people who don’t want to work or don’t belong here in the first place. Medicaid is bankrupt. Medicare is bankrupt. Social Security is bankrupt. Sometimes it’s like with your children, you have to say “no you can’t have that. we can’t afford it.”

A government responsibility is to protect its people–military spending can’t be cut in the middle of two wars and a constant threat of terrorism. We can’t afford these social programs in the capacity that they are operating and on top of it to pay for universal health care? There is no more money.

“On the other hand, a higher inflation rate would allow a lot of people servicing fixed-interest home mortgages to inflate themselves out of an underwater position.”

So how are people going to live with wages that are worth less and their dollar doesn’t go as far because everything costs more? People buy less and the economy goes to crap more because we have no manufacturing jobs anymore because expensive, over restrictive environmental standards, unions that can legal extort companies by holding them hostage, and 2nd highest corporate tax rate in the world. We are now a consumer based economy, and that is why the financial melt down hit us so hard.

Bush tax cuts worked to keep the rescession at bay for a while. I don’t agree with allowing Republicans to spend like drunken sailors and drive up the deficit, but this guy in the chair is going to bankrupt us. Social programs need to be cut until we can fix this. I’m one of the people hurting in this and I know that we can’t spend our way out of this. Pork Barrell spending for researching pig odor, building bridges to no where, ect… need to cease.

I was part of the mortgage industry. Fannie Mae and Freddie Mac had their AUS (automated underwriting software) set the standards pretty low. I’ve seen loans approved that I wouldn’t sign. In 2004 I was fired for not signing a fraud loan. Look, as insider let me explain. Stated loans, subprime loans with high debt to income ratios with high loan to values brought down the industry. In the last few years most loans were high LTV, high DTI. Of course there were people like me who said these people can’t afford this house, but we were told to shut up or were fired. People of lower incomes got into stated loans and bought homes they could not afford. Fannie and Freddie were the largest buyer and servicer of these loans on the secondary market. They knew the risks, but the interest rates were higher, and Wall Street firms were selling mortgage backed securities and hedging the money–basically making themselves a little nest egg for the big bomb, and then the CEO’s could fly off into the sunset in the private jet with a golden parachute. The bad loans, and riskier loans were becoming and larger part of the portfolios and Lehman especially was selling the securities like hot cakes knowing this was going to crash at a point. This was right the SEC’s and congress’s noses. That is why in 2005 the Republicans tried to get legislation through that would limit the amount of risky loans and increase the amount of capital and company had in reserve to back these loans up. Of course the Democrats–led by Dodd fillibustered it.

There are no easy solutions to any of this, but Obama is going the wrong way.

Ok, fair enough. So it was the Democrats in the 1980s who enacted tax cuts and restored, in fact greatly increased, spending on national defense — not the Reagan administration. I’ll file that away for the next time one of my Reaganite friends wants to remind me of the Reagan tax cuts and improvements to national security.

“The economy started moving really slow and Bush 2 saw that tax cuts for income brackets targeting small and medium size business was the way to get us out of it. ”

Except that it didn’t, right? Under Bush II the national debt increased by nearly five trillion dollars. Or, in other words, under Bush the national debt doubled. So “tax cuts for income brackets targeting small and medium sized business” not only didn’t get us out of a deficit hole, it widened the hole to a gaping chasm.

“This bill would have forced Fannie and Freddie to limit the amount of risky loans it had and report all fraudulent loans to the Fed for further investigation, and raise the bar for independent audits, and limit golden parachutes. The Democrats who shot it down said that it would limit credit for “poor” folks to buy a home.”

What portion of bad subprime loans were originated by either Fannie Mae or Freddie Mac? Of that portion, what portion went to “poor” folks to buy a home?

My understanding is that the answer to both questions is “a tiny fraction in no way large enough to account for the global economic meltdown.”

” Lower taxes and less spending is what we need now to let the free market fix this.”

70% of all discretionary federal spending goes to the Department of Defense. Are you arguing that what is necessary is to gut military expenditures by 90-95%? Because, as far as I can tell, that’s the only meaningful option we have for cutting spending. You can’t, after all, cut mandatory spending, like payments on interest on the debt, without utterly destroying the american economy.

And you can’t cut mandatory spending like Social Security and Medicare without also cutting OASDI payroll taxes as well. And, since Social Security and Medicare run surpluses, cutting payments (and the associated taxes which pay for those payments) just makes a big hole, bigger.

” We are headed for massive inflation–spending money you don’t have and printing money you don’t have the gold for. ”

Hard to imagine anything better for the american economy than a little inflation given that, right now, we’re teetering on a deflationary precipice. But there seems to be little prospect of inflation on the horizon given the interest rates currently being paid on treasury securities (i.e. the public is still hungry to buy US debt even at extremely low returns).

On the other hand, a higher inflation rate would allow a lot of people servicing fixed-interest home mortgages to inflate themselves out of an underwater position.

But the banks wouldn’t like that. So the meme among to oligarchy’s water-carriers will continue to be “inflation bad!”

Under President Clinton the national debt went down because Republicans had control of congress and Clinton had to work with them. He was smart and decided it was really important while we were still on an economic upswing to balance the budget and changing welfare as we knew it (because that is the only way he could get some of his social agenda done). Kudos to him. He governed left of center and while there were a lot I didn’t agree with him on Domestically for the economy he did a good job. By the end of Clintons tenure with the “dot bombs” the economy started going down and started a “mild” rescession.

President Bush 2 inherited a slight rescession, and had to spend for the projects to keep the economy going in his view. Then came 911 that threw a monkey wrench into the economy. Airlines went bankrupt, and ran out of money through no fault of their own–the government would not allow them to fly, and that was a lot of lost income. We had to bail them out to the tune of $15 billion. There went the surplus from Clinton. The economy started moving really slow and Bush 2 saw that tax cuts for income brackets targeting small and medium size business was the way to get us out of it. It worked up until a few years ago. Where Bush 2 made a mistake was letting Republicans in congress get out of control with the spending. He did not use his veto pen. The conservative right blasted the republicans on conservative talk radio at this time. The criticism was there from the Right. It took him eight years to get to that point though–not six months.

The financial meltdown was caused by Democratic policies. The Republicans tried to get legislation that would reign in Fannie Mae and Freddie Mac (Federal Housing Regulatory Act Of 2005) which was fillibustered by the Democrats. Here is part of the summary of this bill:

Sets forth operating, administrative, and regulatory provisions of the Agency, including provisions respecting: (1) assessment authority; (2) authority to limit nonmission-related assets; (3) minimum and critical capital levels; (4) risk-based capital test; (5) capital classifications and undercapitalized enterprises; (6) enforcement actions and penalties; (7) golden parachutes; and (8) reporting.

This bill would have forced Fannie and Freddie to limit the amount of risky loans it had and report all fraudulent loans to the Fed for further investigation, and raise the bar for independent audits, and limit golden parachutes. The Democrats who shot it down said that it would limit credit for “poor” folks to buy a home. At the time subprime loans were their best freinds, and they were responsible for lenders relaxing the guidelines because they wanted to open up the market more. Some companies used and abused this and responsible for their actions, but politicians started the ball rolling.

We get to the current bail outs–I didn’t support, the Omnibus, is nothing but pork spending that we as a people cannot afford. The stimilus was not a stimilus. Most of the money is not being spent for two years. Over 1 trillion of the bailouts, stimilus, omnibus, that has gone to the states has gone to pay Medicaid. Not to people trying to find a job or who are underemployed and need help–people who don’t want to work that can. Current spending and proposed spending programs by President Obama and the Congress is unsustainable. Why are they burying the reports on the economy? They want to jam healthcare through? They jammed the stimilus, passed cap in trade in the house (this is a total scam my diary: http://www.redstate.com/lisainmd/2009/07/17/cap-in-trade-the-biggest-scam-ever/ ). We are running toward bankruptcy and a dollar worth less than pesos. Most working, tax paying Americans are tired of supporting people who are able bodied, and don’t want to work, and don’t want to pull their weight. Lower taxes and less spending is what we need now to let the free market fix this. When money is given freely and voluntarily to help the less fortunate it is charity, when it is forced it is welfare. People don’t like having to pay more and make more sacrifices just so other able bodied people don’t have to because they don’t feel like it. I’ve been laid off for 3 years from a $90k/ year job, and working temp work $10-$14 when available. Trust me things are tight, I don’t have health insurance, but I don’t think it is everyone elses burden to take care of me, unless I had some major emergency hopefully some charity would step up to help. We are headed for massive inflation–spending money you don’t have and printing money you don’t have the gold for. That is what the cartoon is about. Spending into oblivion is not the answer. California had to make some tough choices, and of course liberals are livid, which means its a good thing.

2. According to http://www.treasurydirect.gov/NP/BPDLogin?application=np, on the day before Bush II’s inauguration (January 20, 2001) the national debt was $5,727,776,738,304.64.

According to the same site, on the day that Obama took office (January 20, 2009) the national debt was $10,626,877,048,913.08

Thus during the “last eight years” Bush II added $4,899,100,310,608.44 of new debt.

3. According to the same source, the national debt now stands at $11,600,488,226,683.25.

Thus Obama has added 973,611,177,770.36 which, last time I checked, was a whole lot less than $4.9 trillion. So why is Bush’s “hole” in the cartoon smaller than Obama’s?

4. In fact, if we look at the treasury data (same site), $9 trillion of the current $11.6 trillion dollar debt was accumulated under the Reagan, Bush I, and Bush II years with the difference ($3.6 trillion) having been accumulated during all the years prior to the Reagan administration (plus a little tiny bit under Clinton).

So why are Reaganite advocates of deficit financing now suddenly crying foul?

Which makes this cartoon all the more important. Excellent job, Toby!