Episode 93 – Republican Prospects and a Big Christian, Tea Party and Gay Tent

This week, the PoliTalk boys dig into the mid-term election primaries. Jeff delves into the numbers and draws a conclusion that is favorable to the Republicans, while Glenn sees an advantage for the Democrats. Jeff asks the question “What more can the government do for the economy?”. Glenn takes this opportunity to describe why the government is not the solution, rather it is left to business and individuals. Glenn also describes why government debt actually hinders economic recovery. Jeff declares himself a fiscally conservative progressive. Glenn introduces the idea of a third party that is needed called the “Common Sense Party”.

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5 responses to “Episode 93 – Republican Prospects and a Big Christian, Tea Party and Gay Tent

  1. Glenn – I’ll have to disagree with you a little bit on your premise of government spending hurting the recovery today. Its not really helping that much, but I don’t think its causing short-term harm.

    The dynamic you described in general is correct and is often referred to as “crowding out”. It’s a pretty broad term when you look it up on Wiki, but I think that’s what you were saying.

    When the government borrows lots of dollars, those are dollars that the private sector cannot access. If you then buy into the premise that a $ of private sector investment in R&D for example, produces more economic value in the long run than a $ spent on a bureaucrats salary, then crowding out has a negative long term effect.

    I think in the long run you are right; the larger debt will continue to “crowd out” that private sector investment.

    In the short terms however, this is all about risk. There is no shortage of cash. There is somewhere between $2-$3 Trillion sitting out in the private sector not getting invested.

    If I am a CEO of a big multinational, I probably just had great earnings like many companies in America. Over the past 2 years I laid off 10% of my workers because my revenues were down. But now my revenues are up, and I am making profits. Making profits and growing – without 10% of my workers. I ask myself – why hire them back? Well the only reason to hire them back is if I want to grow faster or if there are competitive threats (like my competitors are making investments).

    So if no one is investing, then there are no competitive threats to me. If I invest first, its risky, and I am making money right now. So why risk it? I sit on my cash.

    Banks being the funding source for these businesses are thinking the same thing and are not inclined to encourage businesses to invest.

    We are in and investment ice age! Tons of cash is sitting around. No amount of additional government spending, or tax cuts will unleash this cash.

    The only thing that will unleash this cash is risk taking. Businesses want to take risk but they must have a government who does not scare the crap out of them.

    Our government scares the crap out of them.

    I wish there were another way, but Obama, Geitner, and Bernanke need to get in a room with the top 100 CEO’s and Bankers, and close the door. Whatever gets said in that room, when the door opens, money needs to start flowing into new ventures. Whatever back door promises govt. needs to make, it has to make them.

    Government needs to be creative in working with the private sector to get things moving. Vanilla government spending that increases the debt is not very creative. Its debilitating as Glenn alludes to in the Episode. If there was ever a time for back room politics, this is it.

    Great leaders rise to the occasion.

    It’s time Mr. Obama

    • Jeff,

      Happy to have my wise sage of the blog take me on!

      You said “It’s [government spending] not really helping that much, but I don’t think its causing short-term harm.”

      My point, at least the one I was trying to make, is that if the US had come into this recession with the surplus left after the Clinton years, we would be better off than we are now. In general, governments have the ability to increase spending during economic downturns. This is a basic Keynesian principle. Whether you agree with this or not, most should agree that massive deficits are not the norm during economic boom times. The recent Bush years saw an unprecedented increase in deficit spending despite good economic times during most of it. Simply put, government has the ability to spend when few others are, then they can recoupe that when times are good and the economy is generating wealth… yes this means taxes.

      Simply put, we are entering uncharted territory as the government went on a spending spree when times were good and maxed out the credit card. Now during bad times they went out and got ten more credit cards and are maxing them out. Nobody really knows what the impact will be short or long term. We don’t know what will happen to the dollar. We don’t know what will happen with monetary policy. We don’t know how it will impact a recovery.

      You make a great point about the CEO who has trimmed staff and is starting to see profits again. Politicians see this and say, let’s spend more money. This is a dangerous position. In general, a dollar spent by the government is far less effective that that spent by the private sector.

      So the real question is what do we do? Well, we can’t just make the companies spend. I would also argue that we can’t just keep excessive government spending in non-incentive areas as a way to compensate. How about a way to incent businesses to spend?

      We spent over a trillion dollars in a war effort to defeat an enemy that spent less than $10,000 to take down the World Trade Centers. The simple question I ask is… financially, who won?

      Think about it. If we are going to run a deficit, okay, but what do we do to create that deficit? I suggest that we change the incentives for businesses. Let’s consider tax incentives and even changes to IPO regulations to make it easier for companies to raise capital and grow their business with them taking the risk and not the government. A little dot com bubble would go a long way here.

      Economic growth comes from the private sector. We should be looking to see how we can reduce inventories so businesses will need and want to hire again.

  2. There was a question (Does this make me a progressive?) asked that struck a cord with me because it reminded me of something I have been thinking about a long time. The biggest problem with this country is the successful branding of ideologies. The reality is that no one is any particular ideology. Take myself, people would here my views and immediately call me a progressive. So when I comment on things (at places like CNN or Yahoo) I immediately get called a lazy liberal who needs to get a job and quit trying to tax away everyones money (I am a civil engineer and pay my taxes thank you). Those people would consider themselves conservative. So that must mean they want to keep defense spending where it is and even though they call themselves conservative, none of them would give up medicare and social security. When you step back and look at the argument without the labels of progressive and conservative, what do you find? The progressive while raising taxes is actually the fiscally responsible person, while the conservative just keeps talking about cutting taxes and that all of these are assumptions based on some ideology that may not reflect a person’s views at all. As you really break arguments down like this you begin to see the fallacy of ideologies.

    The point of all this is that idealogical boxes are ruining any discussion. I think that is why you see such a dearth of voter turnout. You mention a common sense party. I agree with the premise (although anybody will say that their solutions are common sense, so the name may have to be tweaked) but isn’t the idea of a party the problem. Maybe a better party would be the nonideology party. Take my home state, Minnesota, the Republican wants to solve the deficit by cutting $6 billion in spending. The Democrat wants to make it up by taxing everyone making more than $150,000. The independent (non Tea Party Republican) wants to add a sales tax to clothing. So what do you get when people follow their parties ideology to a “T”? Massive undecideds,low turn out and no realistic or applicable solutions. Most people I talked to about it don’t like anyone and I feel that is why this election year is so unpredictable. You will get your automatic 25% for each side from the people who are afraid of the ideologies of the opposing side, but what your seeing now is the other 50% seeing that there vote really doesn’t matter. They vote Republican and things stay the same or get worse, they vote Democrat and get the same or worse. There is an anti-incumbent vibe, the problem is that people are begininng to realize that there is no otherside. There is just the same arguments over the same ideologies. What those disenchanted people want is a leader of the country, not of some particular ideology. They want Obama to go on TV and say, “I’ve made some mistakes the last 2 years, I realize I can’t please everyone. I was elected because you believe in me and so I will do what is necessary to fix this country no matter what the solution. If that means cutting taxes for the rich so be it , if that means massive investment in infrastructure, so be it. But I will do what I think is right and you can judge me on my merits in the next election.” We want champions of America, not champions of conservatism or progressivism.

    Basically ideologies have been turned into religions. The Republican always wants to cut taxes and the Democrat always wants to expand social programs. Instead of looking at a crisis and asking which ideology would provide the best solution for this problem, we dig our foxhole and defend “our” particular ideology to the death. So are you a progressive? Probably at least a little. Are you a conservative? Probably at least a little. Ideologies are not gods that should apply to every situation everytime. They are theories that are possible solutions to problems. Sometimes we cut taxes, sometimes we raise them, not one or the other all the time.

  3. I vote team common sense. Thanks guys, I’ve been listening to you lately. Always very wise opinions that have helped shape my view and actions concerning our great country.

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