TheCenturion
09-19-2007, 01:15 PM
Editor's Note: This is a Der Spiegel interview from March of 2003. Of course, we all know that The Murdering Criminal Scumbag And Chief along with his GOP(erv) henchmen in Congress have made things substantially worse since, as we are witnessing today. But, it does provide an academic overview into just one more area of staggering incompetence and arrogance which has become a hallmark of The Most Corrupt, Incompetent and Flagrantly Criminal Administration in American History.
__________________________________________________ ________________
A Form Of Looting
Der Spiegel, Interviews George A. Akerlof, an economics professor at the
University of California, Berkeley, who was named the 2001 co-winner of the
Nobel Prize in economic sciences.
SPIEGEL ONLINE: Professor Akerlof, according to recent official projections,
the US federal deficit will reach $455 billion this fiscal year. That's the
largest ever in dollar terms, but according to the President's budget
director, it's still manageable. Do you agree?
George A. Akerlof: In the long term, a deficit of this magnitude is not
manageable. We are moving into the period when, beginning around 2010, baby boomers are going to be retiring. That is going to put a severe strain on
services like Medicare, Medicaid and Social Security. This is the time when
we should be saving.
SPIEGEL ONLINE: So it would be necessary to run a budget surplus instead?
Akerlof: That would probably be impossible in the current situation. There's
the expenditure for the war in Iraq, which I consider irresponsible. But
there's also a recession and a desire to invigorate the economy through
fiscal stimulus, which is quite legitimate. That's why we actually do need a
deficit in the short term - but certainly not the type of deficit we have
now.
SPIEGEL ONLINE: Because it's not created by investment, but to a large
extent by cutting taxes?
Akerlof: A short-term tax benefit for the poor would actually be a
reasonable stimulus. Then, the money would almost certainly be spent. But
the current and future deficit is a lot less stimulatory than it could be.
Our administration is just throwing the money away. First, we should have
fiscal stimulus that is sharply aimed at the current downturn. But this
deficit continues far into the future, as the bulk of the tax cuts can be
expected to continue indefinitely. The Administration is giving us red ink
as far as the eye can see, and these permanent aspects outweigh the
short-term stimulatory effects.
SPIEGEL ONLINE: And secondly, you disagree with giving tax relief primarily
to wealthier Americans. The GOP argues that those people deserve it for
working hard.
Akerlof: The rich don't need the money and are a lot less likely to spend
it - they will primarily increase their savings. Remember that wealthier
families have done extremely well in the US in the past twenty years,
whereas poorer ones have done quite badly. So the redistributive effects of
this administration's tax policy are going in the exactly wrong direction.
The worst and most indefensible of those cuts are those in dividend
taxation - this overwhelmingly helps very wealthy people.
SPIEGEL ONLINE: The President claims that dividend tax reform supports the
stock market - and helps the economy as a whole to grow.
Akerlof: That's totally unrealistic. Standard formulas from growth models
suggest that that effect will be extremely small. In fact, the Congressional
Budget Office (CBO) has come to a similar conclusion. So, even a sympathetic
treatment finds that this argument is simply not correct.
SPIEGEL ONLINE: When campaigning for an even-larger tax cut earlier this
year, Mr. Bush promised that it would create 1.4 million jobs. Was that
reasonable?
Akerlof: The tax cut will have some positive impact on job creation,
although, as I mentioned, there is very little bang for the buck. There are
very negative long-term consequences. The administration, when speaking
about the budget, has unrealistically failed to take into account a very
large number of important items. As of March 2003, the CBO estimated that
the surplus for the next decade would approximately reach one trillion
dollars. But this projection assumes, among other questionable things, that
spending until 2013 is going to be constant in real dollar terms. That has
never been the case. And with the current tax cuts, a realistic estimate
would be a deficit in excess of six trillion.
SPIEGEL ONLINE: So the government's just bad at doing the correct math?
Akerlof: There is a systematic reason. The government is not really telling
the truth to the American people. Past administrations from the time of
Alexander Hamilton have on the average run responsible budgetary policies.
What we have here is a form of looting.
SPIEGEL ONLINE: If so, why's the President still popular?
Akerlof: For some reason the American people does not yet recognize the dire
consequences of our government budgets. It's my hope that voters are going
to see how irresponsible this policy is and are going to respond in 2004 and
we're going to see a reversal.
SPIEGEL ONLINE: What if that doesn't happen?
Akerlof: Future generations and even people in ten years are going to face
massive public deficits and huge government debt. Then we have a choice. We
can be like a very poor country with problems of threatening bankruptcy. Or
we're going to have to cut back seriously on Medicare and Social Security.
So the money that is going overwhelmingly to the wealthy is going to be paid
by cutting services for the elderly. And people depend on those. It's only
among the richest 40 percent that you begin to get households who have
sizeable fractions of their own retirement income.
SPIEGEL ONLINE: Is there a possibility that the government, because of the
scope of current deficits, will be more reluctant to embark on a new war?
Akerlof: They would certainly have to think about debt levels, and military
expenditure is already high. But if they seriously want to lead a war this
will not be a large deterrent. You begin the war and ask for the money
later. A more likely effect of the deficits is this: If there's another
recession, we won't be able to engage in stimulatory fiscal spending to
maintain full employment. Until now, there's been a great deal of trust in
the American government. Markets knew that, if there is a current deficit,
it will be repaid. The government has wasted that resource.
SPIEGEL ONLINE: Which, in addition, might drive up interest rates quite
significantly?
Akerlof: The deficit is not going to have significant effects on short-term
interest rates. Rates are pretty low, and the Fed will manage to keep them
that way. In the mid term it could be a serious problem. When rates rise,
the massive debt it's going to bite much more.
SPIEGEL ONLINE: Why is it that the Bush family seems to specialize in
running up deficits? The second-largest federal deficit in absolute terms,
$290 billion, occurred in 1991, during the presidency of George W. Bush's
father.
Akerlof: That may be, but Bush's father committed a great act of courage by
actually raising taxes. He wasn't always courageous, but this was his best
public service. It was the first step to getting the deficit under control
during the Clinton years. It was also a major factor in Bush's losing the
election.
SPIEGEL ONLINE: It seems that the current administration has politicised you
in an unprecedented way. During the course of this year, you have, with
other academics, signed two public declarations of protest. One against the
tax cuts, the other against waging unilateral preventive war on Iraq.
Akerlof: I think this is the worst government the US has ever had in its
more than 200 years of history. It has engaged in extraordinarily
irresponsible policies not only in foreign and economic but also in social
and environmental policy. This is not normal government policy. Now is the
time for people to engage in civil disobedience.
SPIEGEL ONLINE: Of what kind?
Akerlof: I don't know yet. But I think it's time to protest - as much as
possible.
SPIEGEL ONLINE: Would you consider joining Democratic administration as an
adviser, as your colleague Joseph Stiglitz did?
Akerlof: As you know my wife was in the last administration, and she did
very well. She is probably much better suited for public service. But
anything I'll be asked to do by a new administration I'd be happy to do.
SPIEGEL ONLINE: You've mentioned the term civil disobedience a minute ago.
That term was made popular by the author Henry D. Thoreau, who actually
advised people not to pay taxes as a means of resistance. You wouldn't call
for that, would you?
Akerlof: No. I think the one thing we should do is pay our taxes. Otherwise,
it'll only make matters worse.
Interview: Matthias Streitz
http://www.bartcop.com/bike-flat.JPG
__________________________________________________ ________________
A Form Of Looting
Der Spiegel, Interviews George A. Akerlof, an economics professor at the
University of California, Berkeley, who was named the 2001 co-winner of the
Nobel Prize in economic sciences.
SPIEGEL ONLINE: Professor Akerlof, according to recent official projections,
the US federal deficit will reach $455 billion this fiscal year. That's the
largest ever in dollar terms, but according to the President's budget
director, it's still manageable. Do you agree?
George A. Akerlof: In the long term, a deficit of this magnitude is not
manageable. We are moving into the period when, beginning around 2010, baby boomers are going to be retiring. That is going to put a severe strain on
services like Medicare, Medicaid and Social Security. This is the time when
we should be saving.
SPIEGEL ONLINE: So it would be necessary to run a budget surplus instead?
Akerlof: That would probably be impossible in the current situation. There's
the expenditure for the war in Iraq, which I consider irresponsible. But
there's also a recession and a desire to invigorate the economy through
fiscal stimulus, which is quite legitimate. That's why we actually do need a
deficit in the short term - but certainly not the type of deficit we have
now.
SPIEGEL ONLINE: Because it's not created by investment, but to a large
extent by cutting taxes?
Akerlof: A short-term tax benefit for the poor would actually be a
reasonable stimulus. Then, the money would almost certainly be spent. But
the current and future deficit is a lot less stimulatory than it could be.
Our administration is just throwing the money away. First, we should have
fiscal stimulus that is sharply aimed at the current downturn. But this
deficit continues far into the future, as the bulk of the tax cuts can be
expected to continue indefinitely. The Administration is giving us red ink
as far as the eye can see, and these permanent aspects outweigh the
short-term stimulatory effects.
SPIEGEL ONLINE: And secondly, you disagree with giving tax relief primarily
to wealthier Americans. The GOP argues that those people deserve it for
working hard.
Akerlof: The rich don't need the money and are a lot less likely to spend
it - they will primarily increase their savings. Remember that wealthier
families have done extremely well in the US in the past twenty years,
whereas poorer ones have done quite badly. So the redistributive effects of
this administration's tax policy are going in the exactly wrong direction.
The worst and most indefensible of those cuts are those in dividend
taxation - this overwhelmingly helps very wealthy people.
SPIEGEL ONLINE: The President claims that dividend tax reform supports the
stock market - and helps the economy as a whole to grow.
Akerlof: That's totally unrealistic. Standard formulas from growth models
suggest that that effect will be extremely small. In fact, the Congressional
Budget Office (CBO) has come to a similar conclusion. So, even a sympathetic
treatment finds that this argument is simply not correct.
SPIEGEL ONLINE: When campaigning for an even-larger tax cut earlier this
year, Mr. Bush promised that it would create 1.4 million jobs. Was that
reasonable?
Akerlof: The tax cut will have some positive impact on job creation,
although, as I mentioned, there is very little bang for the buck. There are
very negative long-term consequences. The administration, when speaking
about the budget, has unrealistically failed to take into account a very
large number of important items. As of March 2003, the CBO estimated that
the surplus for the next decade would approximately reach one trillion
dollars. But this projection assumes, among other questionable things, that
spending until 2013 is going to be constant in real dollar terms. That has
never been the case. And with the current tax cuts, a realistic estimate
would be a deficit in excess of six trillion.
SPIEGEL ONLINE: So the government's just bad at doing the correct math?
Akerlof: There is a systematic reason. The government is not really telling
the truth to the American people. Past administrations from the time of
Alexander Hamilton have on the average run responsible budgetary policies.
What we have here is a form of looting.
SPIEGEL ONLINE: If so, why's the President still popular?
Akerlof: For some reason the American people does not yet recognize the dire
consequences of our government budgets. It's my hope that voters are going
to see how irresponsible this policy is and are going to respond in 2004 and
we're going to see a reversal.
SPIEGEL ONLINE: What if that doesn't happen?
Akerlof: Future generations and even people in ten years are going to face
massive public deficits and huge government debt. Then we have a choice. We
can be like a very poor country with problems of threatening bankruptcy. Or
we're going to have to cut back seriously on Medicare and Social Security.
So the money that is going overwhelmingly to the wealthy is going to be paid
by cutting services for the elderly. And people depend on those. It's only
among the richest 40 percent that you begin to get households who have
sizeable fractions of their own retirement income.
SPIEGEL ONLINE: Is there a possibility that the government, because of the
scope of current deficits, will be more reluctant to embark on a new war?
Akerlof: They would certainly have to think about debt levels, and military
expenditure is already high. But if they seriously want to lead a war this
will not be a large deterrent. You begin the war and ask for the money
later. A more likely effect of the deficits is this: If there's another
recession, we won't be able to engage in stimulatory fiscal spending to
maintain full employment. Until now, there's been a great deal of trust in
the American government. Markets knew that, if there is a current deficit,
it will be repaid. The government has wasted that resource.
SPIEGEL ONLINE: Which, in addition, might drive up interest rates quite
significantly?
Akerlof: The deficit is not going to have significant effects on short-term
interest rates. Rates are pretty low, and the Fed will manage to keep them
that way. In the mid term it could be a serious problem. When rates rise,
the massive debt it's going to bite much more.
SPIEGEL ONLINE: Why is it that the Bush family seems to specialize in
running up deficits? The second-largest federal deficit in absolute terms,
$290 billion, occurred in 1991, during the presidency of George W. Bush's
father.
Akerlof: That may be, but Bush's father committed a great act of courage by
actually raising taxes. He wasn't always courageous, but this was his best
public service. It was the first step to getting the deficit under control
during the Clinton years. It was also a major factor in Bush's losing the
election.
SPIEGEL ONLINE: It seems that the current administration has politicised you
in an unprecedented way. During the course of this year, you have, with
other academics, signed two public declarations of protest. One against the
tax cuts, the other against waging unilateral preventive war on Iraq.
Akerlof: I think this is the worst government the US has ever had in its
more than 200 years of history. It has engaged in extraordinarily
irresponsible policies not only in foreign and economic but also in social
and environmental policy. This is not normal government policy. Now is the
time for people to engage in civil disobedience.
SPIEGEL ONLINE: Of what kind?
Akerlof: I don't know yet. But I think it's time to protest - as much as
possible.
SPIEGEL ONLINE: Would you consider joining Democratic administration as an
adviser, as your colleague Joseph Stiglitz did?
Akerlof: As you know my wife was in the last administration, and she did
very well. She is probably much better suited for public service. But
anything I'll be asked to do by a new administration I'd be happy to do.
SPIEGEL ONLINE: You've mentioned the term civil disobedience a minute ago.
That term was made popular by the author Henry D. Thoreau, who actually
advised people not to pay taxes as a means of resistance. You wouldn't call
for that, would you?
Akerlof: No. I think the one thing we should do is pay our taxes. Otherwise,
it'll only make matters worse.
Interview: Matthias Streitz
http://www.bartcop.com/bike-flat.JPG