Originally Posted by alan

Thanks for the post about the Northwest, Vince. The only thing that I would dispute would be the statement that no one is moving away because of the recession. Its not massive here in Seattle, but it is noticeable and has been mentioned often in local media. Our traffic congestion has eased off, I think the reduction has been said to be about 7-10 % during rush hours.
Also, something which you never saw during the Bubble were for rent signs. Now they're all over the place for apartments and houses and they often stay up for over a week or more. Lately I've been seeing houses with for sale signs up with "Price just reduced!" One sign said "50,000$ reduction!"
My own personal indicator is daytime parking on my block. During the boom people would dump their cars here every week day, totally jamming our neighborhood, and ride the bus into downtown. Free Parking! But now, we have lots of room, all day long.

I noticed the same thing about the traffic, Alan, when I was in Seattle in January for job interviews-- except I would have guessed that traffic was off by more like 25-30%. I mused cynically that my old employer, the Washington State Department of Transportation, can pretty much kiss any new revenue goodbye this year since the late-90s transportation woes have been solved by the advent of 4T.

One thing that blew me away was that in spite of everything, home values have continued to rise! From a casual perusal of home prices it appears my cute little 700 sq ft cottage in West Seattle, which i bought in '92 for $117,000 and sold in '01 for a whopping $210K, would apparently now fetch 230-240 g's. Then again, perhaps these are merely pie-in-the-sky asking prices....for all I know the homes that are actually selling are going for much less-- witness the $50,000 off sign that you described.

In my field, civil engineering, at least I was able to score interviews in the Northwest, several of which may still pan out. For me, Seattle and Portland are no worse off than anywhere else-- things are very, very bad everywhere. Hmmm....maybe I ought to call Governor Frank about his ambitious road building program in Alaska :-?

The figures for the fourth quarter of 2002 are in over at the Federal Reserve Website. Total Aggregate Debt is now 31.7 Trillion Dollars (yes that's right, TRILLION) up by 2.3 Trillion over last year's 29.4 Trillion. On a percentage basis this represents an increase in Total Debt of 7.85 percent. The long term average is 9.4 percent, anything much below this indicates recession (obviously). 2.3 Trillion is enough to keep the GDP and Real Estate balloons inflated, but not enough to reflate the Stock Market balloon. The Total Value of the Stock Market is now 11.7 Trillion after a peak in 2000 of 20.3 Trillion.

The Little People are grimly hanging on to their stocks hoping for a comeback after the police action in Iraq is successfully concluded. Unfortunately, the market decline which started in 2000 has absolutely nothing to do with Iraq and everything to do with too much debt and not enough corporate profits. Oh, there'll be a Relief Rally after it's all over but then don't be too suprised when the decline resumes.

The ramp up last week wasn't a good sign (volitility is NEVER a good sign) but was a standard Bear Market Short Squeeze designed to frighten the Shorts and staunch the decline of the past month.

Actually the longer the Buy and Holders hang on the better the Shorts and the Bears like it. They can mercilessly drive the market down with short selling then switch and ride the rallies up and make money off the Little People on both legs. They should have sold long ago. Old Stock Market Addage: He who panics first, panics best.

This could be a harbinger of things to come.

http://www.delawareonline.com/newsjo...inancesfo.html

Tight finances force Winterthur changes

By JENNIFER GOLDBLATT
Staff reporter
04/30/2003

When Henry Francis du Pont decided to turn his country estate and treasure of American decorative arts and antiques into a museum, he wanted to create a place to study and learn.

When he opened Winterthur to the public in 1951, he did so with delicacy. Just 20 visitors a day, by appointment only. Guests were escorted in groups of four on six-hour tours. No children allowed.

Connoisseurs and scholars flocked there. But the masses stayed away.

Over the last decade, stewards of du Pont's estate have wrestled with how to carry out du Pont's original mission while attracting a wider audience and the money crucial to the museum's survival.

As the economy has soured, the challenge for Winterthur and other museums has intensified. The falling stock market has shrunk endowments, attendance has slipped, operating costs have soared and corporate giving has waned.

About a year ago, Winterthur's 31-member board realized the museum would be $1.5 million short at the start of the fiscal year beginning July 1. Cutbacks were announced last month.

Cash crunch forces cuts

Winterthur today includes the 1,000-acre estate, 85,000 objects, a children's garden, a nationally-known research library, a 60-acre naturalistic garden, two retail stores, a catalog operation, a graduate program and five historic houses in Odessa.

With 100 buildings, 703 employees, 26 miles of roads, a fire department and post office, the estate dwarfs many American towns. About 200,000 people visit each year.

Increases in insurance premiums, oil prices, salaries and benefits are weighing on the $22.5 million budget, while the endowment has shrunk by 30 percent in the last three years, to $267 million, said Leslie Greene Bowman, Winterthur's director.

Winterthur uses about 5 percent of the endowment each year, which equals about $13 million, or 60 percent, of the operating budget. Donations and membership dues collectively fell 11 percent in 2002, to $3.5 million.

Attendance in the first eight months of the current fiscal year slipped by 15 percent from the previous year. The number of visitors in 2002 fell 9 percent from 2001, when the 50th anniversary celebration and opening of the Enchanted Woods boosted attendance.

Cuts announced last month included eliminating 46 positions, cutting pay by 2 percent to 5 percent, raising ticket prices by as much as 50 percent, closing on Mondays and closing the five Historic Houses of Odessa for at least a year.

Problems felt nationwide

Winterthur reflects a trend among foundations and museums across the country that are experiencing financial strain. The Detroit Institute of Arts, the Metropolitan Museum of Art in New York, the Denver Art Museum and the New York-based Guggenheim organization have reported major cutbacks in recent months. Foundations such as the Pew Charitable Trusts and the Annenberg and Connelly foundations have reported 23 percent to 50 percent drops in their endowments over the last five years.

George Vogt, director of the Hagley Museum and Library, considers his institution lucky because its endowment dropped by just 17 percent in the last three years, to $96 million. No layoffs are planned, but Vogt and his 85-person staff are looking for savings and money-making opportunities.

At Longwood Gardens near Kennett Square, Pa., the 1,050-acre gardens opened by Pierre S. du Pont, a second cousin of Henry Francis du Pont, the endowment has shrunk by 30 percent in the last three years, to $436 million. Attendance fell by 17 percent, to 768,000, hurt by the harsh winter and summer drought that closed Longwood's fountains, said Dennis Fischer, Longwood's business division manager. Longwood has raised admission fees by $2, to $14, during the peak season, beefed up the schedule of events and reduced hiring.

The Associated Press contributed to this article. Reach Jennifer Goldblatt at 324-2877 or jgoldblatt@delawareonline.com.

There are not two economic phases (expansion & recession), but rather, four (expansion, peak, recession, and trough). The last recession was from sometime in 1990 to March 1991. This is when the huge spike in unemployment occurred; when the rate increased quickly. From March 1991-1993 was the trough. Unemployment slowly rose and slowly fell, but was still high. People still talked about how bad the "recession" (actually over by this point) was. Then, from 1993-1999 was the expansion. Unemployment quickly fell. The stock market rose quickly. 2000 was the peak. This is when the unemployment rate quit falling but was very low. The stock market quit rising but was still high. March-December 2001 was the recession. Unemployment rose quickly. Since 2002, we have been in the trough period again. The unemployment rate is higher than it was in December 2001, but the rate has been increasing much slower than it was in 2001. So, we are basically out of recession but we are not out of the tunnel, so-to-speak, either.

Originally Posted by Marc Lamb

Originally Posted by Mike Alexander '59

Marc you are dodging the issue. Do you think a $500 billion deficit is good policy? Is what is good for me always the same thing as what is good for the nation?

We ran deficits during WWII and we are running them now (to the tune of $159 billion). But with an economy on the rebound that number should decrease, not increase to $500 billion.

Deficit stands at $280 billion over the 12 month period ending in March 2003:

http://www.fms.treas.gov/mts/mts0303.txt

I'm going to post this in its entirely, then comment on a few parts later on.

http://www.delawareonline.com/newsjo...ingelseto.html

Something else to worry about: deflation
Fed warns of price, salary cuts

By PETER G. GOSSELIN
Los Angeles Times
05/13/2003

WASHINGTON -- For a half century, Americans have assumed that when it comes to prices, there is only one direction - up.

We railed against this apparent fact when the inflation of the 1970s eroded the value of our money. We reveled in it when the boom of the '90s sent our stock values through the roof. But one way or the other, we've always taken it for granted that prices only rise.

Now comes word from the folks at the Federal Reserve that up may not be the only direction after all, and that we may be on the verge of a deflation - a broad price decline.

If they're right, hold onto your hats. We could be headed for a looking-glass world in which all the familiar rules of work, money, investment, even daily life get turned on their heads.

"Alice in Wonderland has nothing up on deflation. It would upset almost every settled notion we have about our economic lives," said Roger M. Kubarych, a former senior Fed official who now is an executive with HVB Americas Inc., the U.S. subsidiary of a major German bank.

To fully appreciate how different an era of down could be from the now possibly passing age of up, it's important to make a distinction.

People generally associate deflation with cataclysms such as the Great Depression, when prices plunged along with almost everything else in the economy.

But it doesn't have to be this way. Prices can fall gently while the economy rises, and they have for substantial chunks of American history; for instance, for much of the period from the end of the Civil War through the start of the 20th century.

Of course, that wouldn't make the experience of deflation any the less strange -- or unsettling - for modern Americans.

Take raises. Most people assume that sooner or later they will get one. It may not be as big as they want. It may not cover their growing appetite for wide-screen TVs and DVD players. But it's still a raise.

However, if deflation were to set in, raises would almost certainly vanish, and pay cuts would become the order of the day.

That's because as prices across the economy fall at, say, 3 percent a year, each dollar you receive in wages would be able to buy that much more and so would be that much more valuable to you - and to your employer.

A good strategy: "You should march in to your boss and announce that you will not accept a penny more than you make right now as long as he agrees not to pay you a cent less," said Marc Weidenmier, an economist at Claremont McKenna College in California.

Or consider debt: Americans were happy to load up on it during the inflation-wracked 1970s and early 1980s, when rising prices ensured that the dollars with which they repaid their loans were less valuable than those they borrowed. And they have been happy to load up again in the early 2000s, when low interest rates seem to be erasing the cost of borrowing.

Paying off loans

But matters would look considerably different if prices went into a general decline, causing repayment dollars to become more, not less, valuable. Consumers and companies probably would react by paying off loans as fast as they possibly could.

Given such a disruptive possibility, there is some mystery about why the Fed chose to highlight the deflation danger last week.

After meeting Tuesday in Washington, the central bank's policy-making Federal Open Market Committee issued a statement that represented an abrupt shift from its half-century obsession with eliminating inflation. It warned that over the next few quarters, "the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup."

The mystery is only deepened by the fact that evidence that a generalized decline in prices is under way is mixed.

To be sure, some prices have been falling so fast that it is hard to imagine how companies stay in business. Personal-computer prices, for instance, have been plunging at better than a 20 percent annual rate for the nearly five years that the Bureau of Labor Statistics has been keeping track. New-vehicle prices have been sliding at as much as a 2 percent rate during the same period, according to the bureau. Television prices have been going down for at least a decade.

Other costs rising

But for each of these declines, there are prices of other, perhaps even more important, goods and services that have been going up. Health insurance, for example, has been rising at an 8 percent annual rate. Private college tuition and fees have been climbing at an almost 6 percent clip.

Deflation could be dicey, if falling prices feed into a downward spiral of wage cuts, layoffs and plunging demand. But not so dangerous if the price declines are caused by improving productivity and remain mild. And not necessarily bad for ordinary Americans.

Mild deflation would assure working people (who fend off pay cuts) of steadily rising real wages. A 3 percent-a-year decline in overall prices translates directly into a 3 percent boost in people's buying power.

It would offer Americans an appealing alternative to the maddening task of trying to pick investments, and a tax-exempt one at that. Just sew your money in a mattress and watch its value rise.

I'm going to post this in its entirely, then comment on a few parts later on.

http://www.delawareonline.com/newsjo...ingelseto.html

Something else to worry about: deflation
Fed warns of price, salary cuts

By PETER G. GOSSELIN
Los Angeles Times
05/13/2003

WASHINGTON -- For a half century, Americans have assumed that when it comes to prices, there is only one direction - up.

We railed against this apparent fact when the inflation of the 1970s eroded the value of our money. We reveled in it when the boom of the '90s sent our stock values through the roof. But one way or the other, we've always taken it for granted that prices only rise.

Now comes word from the folks at the Federal Reserve that up may not be the only direction after all, and that we may be on the verge of a deflation - a broad price decline.

If they're right, hold onto your hats. We could be headed for a looking-glass world in which all the familiar rules of work, money, investment, even daily life get turned on their heads.

"Alice in Wonderland has nothing up on deflation. It would upset almost every settled notion we have about our economic lives," said Roger M. Kubarych, a former senior Fed official who now is an executive with HVB Americas Inc., the U.S. subsidiary of a major German bank.

To fully appreciate how different an era of down could be from the now possibly passing age of up, it's important to make a distinction.

People generally associate deflation with cataclysms such as the Great Depression, when prices plunged along with almost everything else in the economy.

But it doesn't have to be this way. Prices can fall gently while the economy rises, and they have for substantial chunks of American history; for instance, for much of the period from the end of the Civil War through the start of the 20th century.

Of course, that wouldn't make the experience of deflation any the less strange -- or unsettling - for modern Americans.

Take raises. Most people assume that sooner or later they will get one. It may not be as big as they want. It may not cover their growing appetite for wide-screen TVs and DVD players. But it's still a raise.

However, if deflation were to set in, raises would almost certainly vanish, and pay cuts would become the order of the day.

That's because as prices across the economy fall at, say, 3 percent a year, each dollar you receive in wages would be able to buy that much more and so would be that much more valuable to you - and to your employer.

A good strategy: "You should march in to your boss and announce that you will not accept a penny more than you make right now as long as he agrees not to pay you a cent less," said Marc Weidenmier, an economist at Claremont McKenna College in California.

Or consider debt: Americans were happy to load up on it during the inflation-wracked 1970s and early 1980s, when rising prices ensured that the dollars with which they repaid their loans were less valuable than those they borrowed. And they have been happy to load up again in the early 2000s, when low interest rates seem to be erasing the cost of borrowing.

Paying off loans

But matters would look considerably different if prices went into a general decline, causing repayment dollars to become more, not less, valuable. Consumers and companies probably would react by paying off loans as fast as they possibly could.

Given such a disruptive possibility, there is some mystery about why the Fed chose to highlight the deflation danger last week.

After meeting Tuesday in Washington, the central bank's policy-making Federal Open Market Committee issued a statement that represented an abrupt shift from its half-century obsession with eliminating inflation. It warned that over the next few quarters, "the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup."

The mystery is only deepened by the fact that evidence that a generalized decline in prices is under way is mixed.

To be sure, some prices have been falling so fast that it is hard to imagine how companies stay in business. Personal-computer prices, for instance, have been plunging at better than a 20 percent annual rate for the nearly five years that the Bureau of Labor Statistics has been keeping track. New-vehicle prices have been sliding at as much as a 2 percent rate during the same period, according to the bureau. Television prices have been going down for at least a decade.

Other costs rising

But for each of these declines, there are prices of other, perhaps even more important, goods and services that have been going up. Health insurance, for example, has been rising at an 8 percent annual rate. Private college tuition and fees have been climbing at an almost 6 percent clip.

Deflation could be dicey, if falling prices feed into a downward spiral of wage cuts, layoffs and plunging demand. But not so dangerous if the price declines are caused by improving productivity and remain mild. And not necessarily bad for ordinary Americans.

Mild deflation would assure working people (who fend off pay cuts) of steadily rising real wages. A 3 percent-a-year decline in overall prices translates directly into a 3 percent boost in people's buying power.

It would offer Americans an appealing alternative to the maddening task of trying to pick investments, and a tax-exempt one at that. Just sew your money in a mattress and watch its value rise.

I'm going to post this in its entirely, then comment on a few parts later on.

http://www.delawareonline.com/newsjo...ingelseto.html

Something else to worry about: deflation
Fed warns of price, salary cuts

By PETER G. GOSSELIN
Los Angeles Times
05/13/2003

WASHINGTON -- For a half century, Americans have assumed that when it comes to prices, there is only one direction - up.

We railed against this apparent fact when the inflation of the 1970s eroded the value of our money. We reveled in it when the boom of the '90s sent our stock values through the roof. But one way or the other, we've always taken it for granted that prices only rise.

Now comes word from the folks at the Federal Reserve that up may not be the only direction after all, and that we may be on the verge of a deflation - a broad price decline.

If they're right, hold onto your hats. We could be headed for a looking-glass world in which all the familiar rules of work, money, investment, even daily life get turned on their heads.

"Alice in Wonderland has nothing up on deflation. It would upset almost every settled notion we have about our economic lives," said Roger M. Kubarych, a former senior Fed official who now is an executive with HVB Americas Inc., the U.S. subsidiary of a major German bank.

To fully appreciate how different an era of down could be from the now possibly passing age of up, it's important to make a distinction.

People generally associate deflation with cataclysms such as the Great Depression, when prices plunged along with almost everything else in the economy.

But it doesn't have to be this way. Prices can fall gently while the economy rises, and they have for substantial chunks of American history; for instance, for much of the period from the end of the Civil War through the start of the 20th century.

Of course, that wouldn't make the experience of deflation any the less strange -- or unsettling - for modern Americans.

Take raises. Most people assume that sooner or later they will get one. It may not be as big as they want. It may not cover their growing appetite for wide-screen TVs and DVD players. But it's still a raise.

However, if deflation were to set in, raises would almost certainly vanish, and pay cuts would become the order of the day.

That's because as prices across the economy fall at, say, 3 percent a year, each dollar you receive in wages would be able to buy that much more and so would be that much more valuable to you - and to your employer.

A good strategy: "You should march in to your boss and announce that you will not accept a penny more than you make right now as long as he agrees not to pay you a cent less," said Marc Weidenmier, an economist at Claremont McKenna College in California.

Or consider debt: Americans were happy to load up on it during the inflation-wracked 1970s and early 1980s, when rising prices ensured that the dollars with which they repaid their loans were less valuable than those they borrowed. And they have been happy to load up again in the early 2000s, when low interest rates seem to be erasing the cost of borrowing.

Paying off loans

But matters would look considerably different if prices went into a general decline, causing repayment dollars to become more, not less, valuable. Consumers and companies probably would react by paying off loans as fast as they possibly could.

Given such a disruptive possibility, there is some mystery about why the Fed chose to highlight the deflation danger last week.

After meeting Tuesday in Washington, the central bank's policy-making Federal Open Market Committee issued a statement that represented an abrupt shift from its half-century obsession with eliminating inflation. It warned that over the next few quarters, "the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup."

The mystery is only deepened by the fact that evidence that a generalized decline in prices is under way is mixed.

To be sure, some prices have been falling so fast that it is hard to imagine how companies stay in business. Personal-computer prices, for instance, have been plunging at better than a 20 percent annual rate for the nearly five years that the Bureau of Labor Statistics has been keeping track. New-vehicle prices have been sliding at as much as a 2 percent rate during the same period, according to the bureau. Television prices have been going down for at least a decade.

Other costs rising

But for each of these declines, there are prices of other, perhaps even more important, goods and services that have been going up. Health insurance, for example, has been rising at an 8 percent annual rate. Private college tuition and fees have been climbing at an almost 6 percent clip.

Deflation could be dicey, if falling prices feed into a downward spiral of wage cuts, layoffs and plunging demand. But not so dangerous if the price declines are caused by improving productivity and remain mild. And not necessarily bad for ordinary Americans.

Mild deflation would assure working people (who fend off pay cuts) of steadily rising real wages. A 3 percent-a-year decline in overall prices translates directly into a 3 percent boost in people's buying power.

It would offer Americans an appealing alternative to the maddening task of trying to pick investments, and a tax-exempt one at that. Just sew your money in a mattress and watch its value rise.

I'm going to post this in its entirely, then comment on a few parts later on.

http://www.delawareonline.com/newsjo...ingelseto.html

Something else to worry about: deflation
Fed warns of price, salary cuts

By PETER G. GOSSELIN
Los Angeles Times
05/13/2003

WASHINGTON -- For a half century, Americans have assumed that when it comes to prices, there is only one direction - up.

We railed against this apparent fact when the inflation of the 1970s eroded the value of our money. We reveled in it when the boom of the '90s sent our stock values through the roof. But one way or the other, we've always taken it for granted that prices only rise.

Now comes word from the folks at the Federal Reserve that up may not be the only direction after all, and that we may be on the verge of a deflation - a broad price decline.

If they're right, hold onto your hats. We could be headed for a looking-glass world in which all the familiar rules of work, money, investment, even daily life get turned on their heads.

"Alice in Wonderland has nothing up on deflation. It would upset almost every settled notion we have about our economic lives," said Roger M. Kubarych, a former senior Fed official who now is an executive with HVB Americas Inc., the U.S. subsidiary of a major German bank.

To fully appreciate how different an era of down could be from the now possibly passing age of up, it's important to make a distinction.

People generally associate deflation with cataclysms such as the Great Depression, when prices plunged along with almost everything else in the economy.

But it doesn't have to be this way. Prices can fall gently while the economy rises, and they have for substantial chunks of American history; for instance, for much of the period from the end of the Civil War through the start of the 20th century.

Of course, that wouldn't make the experience of deflation any the less strange -- or unsettling - for modern Americans.

Take raises. Most people assume that sooner or later they will get one. It may not be as big as they want. It may not cover their growing appetite for wide-screen TVs and DVD players. But it's still a raise.

However, if deflation were to set in, raises would almost certainly vanish, and pay cuts would become the order of the day.

That's because as prices across the economy fall at, say, 3 percent a year, each dollar you receive in wages would be able to buy that much more and so would be that much more valuable to you - and to your employer.

A good strategy: "You should march in to your boss and announce that you will not accept a penny more than you make right now as long as he agrees not to pay you a cent less," said Marc Weidenmier, an economist at Claremont McKenna College in California.

Or consider debt: Americans were happy to load up on it during the inflation-wracked 1970s and early 1980s, when rising prices ensured that the dollars with which they repaid their loans were less valuable than those they borrowed. And they have been happy to load up again in the early 2000s, when low interest rates seem to be erasing the cost of borrowing.

Paying off loans

But matters would look considerably different if prices went into a general decline, causing repayment dollars to become more, not less, valuable. Consumers and companies probably would react by paying off loans as fast as they possibly could.

Given such a disruptive possibility, there is some mystery about why the Fed chose to highlight the deflation danger last week.

After meeting Tuesday in Washington, the central bank's policy-making Federal Open Market Committee issued a statement that represented an abrupt shift from its half-century obsession with eliminating inflation. It warned that over the next few quarters, "the probability of an unwelcome substantial fall in inflation, though minor, exceeds that of a pickup."

The mystery is only deepened by the fact that evidence that a generalized decline in prices is under way is mixed.

To be sure, some prices have been falling so fast that it is hard to imagine how companies stay in business. Personal-computer prices, for instance, have been plunging at better than a 20 percent annual rate for the nearly five years that the Bureau of Labor Statistics has been keeping track. New-vehicle prices have been sliding at as much as a 2 percent rate during the same period, according to the bureau. Television prices have been going down for at least a decade.

Other costs rising

But for each of these declines, there are prices of other, perhaps even more important, goods and services that have been going up. Health insurance, for example, has been rising at an 8 percent annual rate. Private college tuition and fees have been climbing at an almost 6 percent clip.

Deflation could be dicey, if falling prices feed into a downward spiral of wage cuts, layoffs and plunging demand. But not so dangerous if the price declines are caused by improving productivity and remain mild. And not necessarily bad for ordinary Americans.

Mild deflation would assure working people (who fend off pay cuts) of steadily rising real wages. A 3 percent-a-year decline in overall prices translates directly into a 3 percent boost in people's buying power.

It would offer Americans an appealing alternative to the maddening task of trying to pick investments, and a tax-exempt one at that. Just sew your money in a mattress and watch its value rise.

Here's an old post of mine from the Longwaves board made really close to the stock market peak. (post at the bottom)
http://csf.colorado.edu/forums/longw.../msg00577.html

From: Mike Alexander [mailto:malexan@net-link.net]
Sent: Friday, March 10, 2000 11:50 AM
To: lwside1@eGroups.com
Subject: [lwside1] Re: Old-economy firms will annihilate dot.coms andmanyhigh-flying techs...

Joe Flood wrote:
I have to say I get a bit sick of all this talk about the "10 to 20 years of the secondary depression ahead". What sort of possible justification do you have, either in terms of the long wave or more generally, for such a prediction? Is it just because the stock market is high? This seems to be contrarianism carried to extremes.

I'll take a crack at your question, its a good one. Here is my webpage that deals with the longwave:
http://csf.colorado.edu/authors/Alex.../longwave.html

Here is my webpage that deals with the stock cycle (secular bull and bear markets)

http://csf.colorado.edu/authors/Alex...stretcom1.html

a secular bull + a secular bear market constitute a stock cycle.

this web page shows that their are two kinds of stock cycles

http://csf.colorado.edu/authors/Alex.../sec_bear.html

In one type the different between secular bear and bull market is inflation versus disinflation. The current cycle is this type with an inflationary secular bear from 1966-1982 and a disinflationary secular bull from 1982-present.

In the other type the difference between bear and bull is earnings/economic growth. I call this type a "real" cycle as opposed to monetary cycle since it are based on real (constant dollar) economic (earnings) performance. The most recent example of this is the 1929-1949 (bear) and 1949-1966 (bull).

Using an independent assessment of the stock cycle using P/rBV (this has nothings to do with the longwave) I arrived at 1999 as the end of the bull market

http://csf.colorado.edu/authors/Alex...Stanpor3a.html

I had been looking for a 1999 peak since 1997:

http://csf.colorado.edu/authors/Alex...Mike/stock.htm
http://csf.colorado.edu/authors/Alex.../Stanpoor.html
http://csf.colorado.edu/authors/Alex.../Stanpor2.html

In July 1999 P/rBV (this is the old name for P/R) got to 1.46. In Jan 2000 it got marginally higher (1.48.) but its fallen since then. If the S&P500 moves strongly above 1500 in 1Q 2000 or above 1600 anytime in 2000 it will invalidate my P/rBV analysis. This hasn't happen yet, and the longwave stuff is still valid until 2004. If no secular bear market develops by 2004 then you can throw out the longwave too IMO.

So what this means is fairly soon. probably within two years, and (if P/rBV is still valid) this year the secular bear market will end and with it, the current economic expansion. Even though the recession may be quite mild the associated bear market will not (my stock market model projects 600-1000 on the S&P500 for a 1990-type recession). The stock market cycles says that this bear market will be the beginning of a secular bear market and that the S&P500 will like not pass its all-time high for 10-20 years. My stock market model says for this to happen it means that the length of the average economic expansion during this period will have to be much shorter than at present (maybe 4-6 years). This means that the secular bear market will be characterized by a period of more frequent recessions like the 1970's, but without the inflation, and not like the 1980's and 1990's. This period of frequent non-inflationary recessions is what is called by the secondary depression. If it happens, as Richard's and my interpretation of the longwave suggest, overvalued stocks of all types will do very poorly.

An investment in CSCO made today, for example, may well be under water 20 years from now. This does not exclude much higher prices for CSCO in the short term. From a trading perspective, buying tech stocks will be highly profitable until the end of the secular bull market. Exactly when it ends cannot be known, or the market would know it and so the bull market would have ended years ago. Thus, there are only two probabilities: (1) the bull market will not end for a long, long time or (2) it will end in such a way as to trap as many traders as possible, including you, unless you get lucky. Skill will not protect you. As with so much in life, it is better to be lucky than good.

Now Eric von Baronov has been invested continuously over the pasts several years when the bears have been predicting doom and gloom. Eric believes in view number (1). He bases his view on an interpretation of the longwave that is incomprehensible to me. I too had been 100% invested until last summer. Since then I have been in cash in by 401K. In my taxable account outside the 401K my long positions have fallen so far since 1998 (50-80%) that I believe I have already experienced the crash and so have no fear that any future crash will take the few pennies I have left. I was invested in 1998 since I strongly believed that the bull market would not end before 1999. Well for small cap value it ended in 1998, just as it did in 1928 (as I later found out). And with that April 1998 peak went my hopes of early retirement.

I'm a value guy and I believe in buy and hold. Maybe my battered stocks will come back some day (and maybe pigs will fly). Hell I'm still trying to buy a few REITs at 15% dividend yields. I even have a little money in high-flying tech stocks just so I have at least a few stocks that go up every day rather than down

Anyway, I am writing a book now on this topic (I finished the first draft and I am having it reviewed). I will probably publish it on one of those net outfits that let you download a copy for $5 or $10. Maybe some of the longwaves group will buy it

Here's an old post of mine from the Longwaves board made really close to the stock market peak. (post at the bottom)
http://csf.colorado.edu/forums/longw.../msg00577.html

From: Mike Alexander [mailto:malexan@net-link.net]
Sent: Friday, March 10, 2000 11:50 AM
To: lwside1@eGroups.com
Subject: [lwside1] Re: Old-economy firms will annihilate dot.coms andmanyhigh-flying techs...

Joe Flood wrote:
I have to say I get a bit sick of all this talk about the "10 to 20 years of the secondary depression ahead". What sort of possible justification do you have, either in terms of the long wave or more generally, for such a prediction? Is it just because the stock market is high? This seems to be contrarianism carried to extremes.

I'll take a crack at your question, its a good one. Here is my webpage that deals with the longwave:
http://csf.colorado.edu/authors/Alex.../longwave.html

Here is my webpage that deals with the stock cycle (secular bull and bear markets)

http://csf.colorado.edu/authors/Alex...stretcom1.html

a secular bull + a secular bear market constitute a stock cycle.

this web page shows that their are two kinds of stock cycles

http://csf.colorado.edu/authors/Alex.../sec_bear.html

In one type the different between secular bear and bull market is inflation versus disinflation. The current cycle is this type with an inflationary secular bear from 1966-1982 and a disinflationary secular bull from 1982-present.

In the other type the difference between bear and bull is earnings/economic growth. I call this type a "real" cycle as opposed to monetary cycle since it are based on real (constant dollar) economic (earnings) performance. The most recent example of this is the 1929-1949 (bear) and 1949-1966 (bull).

Using an independent assessment of the stock cycle using P/rBV (this has nothings to do with the longwave) I arrived at 1999 as the end of the bull market

http://csf.colorado.edu/authors/Alex...Stanpor3a.html

I had been looking for a 1999 peak since 1997:

http://csf.colorado.edu/authors/Alex...Mike/stock.htm
http://csf.colorado.edu/authors/Alex.../Stanpoor.html
http://csf.colorado.edu/authors/Alex.../Stanpor2.html

In July 1999 P/rBV (this is the old name for P/R) got to 1.46. In Jan 2000 it got marginally higher (1.48.) but its fallen since then. If the S&P500 moves strongly above 1500 in 1Q 2000 or above 1600 anytime in 2000 it will invalidate my P/rBV analysis. This hasn't happen yet, and the longwave stuff is still valid until 2004. If no secular bear market develops by 2004 then you can throw out the longwave too IMO.

So what this means is fairly soon. probably within two years, and (if P/rBV is still valid) this year the secular bear market will end and with it, the current economic expansion. Even though the recession may be quite mild the associated bear market will not (my stock market model projects 600-1000 on the S&P500 for a 1990-type recession). The stock market cycles says that this bear market will be the beginning of a secular bear market and that the S&P500 will like not pass its all-time high for 10-20 years. My stock market model says for this to happen it means that the length of the average economic expansion during this period will have to be much shorter than at present (maybe 4-6 years). This means that the secular bear market will be characterized by a period of more frequent recessions like the 1970's, but without the inflation, and not like the 1980's and 1990's. This period of frequent non-inflationary recessions is what is called by the secondary depression. If it happens, as Richard's and my interpretation of the longwave suggest, overvalued stocks of all types will do very poorly.

An investment in CSCO made today, for example, may well be under water 20 years from now. This does not exclude much higher prices for CSCO in the short term. From a trading perspective, buying tech stocks will be highly profitable until the end of the secular bull market. Exactly when it ends cannot be known, or the market would know it and so the bull market would have ended years ago. Thus, there are only two probabilities: (1) the bull market will not end for a long, long time or (2) it will end in such a way as to trap as many traders as possible, including you, unless you get lucky. Skill will not protect you. As with so much in life, it is better to be lucky than good.

Now Eric von Baronov has been invested continuously over the pasts several years when the bears have been predicting doom and gloom. Eric believes in view number (1). He bases his view on an interpretation of the longwave that is incomprehensible to me. I too had been 100% invested until last summer. Since then I have been in cash in by 401K. In my taxable account outside the 401K my long positions have fallen so far since 1998 (50-80%) that I believe I have already experienced the crash and so have no fear that any future crash will take the few pennies I have left. I was invested in 1998 since I strongly believed that the bull market would not end before 1999. Well for small cap value it ended in 1998, just as it did in 1928 (as I later found out). And with that April 1998 peak went my hopes of early retirement.

I'm a value guy and I believe in buy and hold. Maybe my battered stocks will come back some day (and maybe pigs will fly). Hell I'm still trying to buy a few REITs at 15% dividend yields. I even have a little money in high-flying tech stocks just so I have at least a few stocks that go up every day rather than down

Anyway, I am writing a book now on this topic (I finished the first draft and I am having it reviewed). I will probably publish it on one of those net outfits that let you download a copy for $5 or $10. Maybe some of the longwaves group will buy it

Here's an old post of mine from the Longwaves board made really close to the stock market peak. (post at the bottom)
http://csf.colorado.edu/forums/longw.../msg00577.html

From: Mike Alexander [mailto:malexan@net-link.net]
Sent: Friday, March 10, 2000 11:50 AM
To: lwside1@eGroups.com
Subject: [lwside1] Re: Old-economy firms will annihilate dot.coms andmanyhigh-flying techs...

Joe Flood wrote:
I have to say I get a bit sick of all this talk about the "10 to 20 years of the secondary depression ahead". What sort of possible justification do you have, either in terms of the long wave or more generally, for such a prediction? Is it just because the stock market is high? This seems to be contrarianism carried to extremes.

I'll take a crack at your question, its a good one. Here is my webpage that deals with the longwave:
http://csf.colorado.edu/authors/Alex.../longwave.html

Here is my webpage that deals with the stock cycle (secular bull and bear markets)

http://csf.colorado.edu/authors/Alex...stretcom1.html

a secular bull + a secular bear market constitute a stock cycle.

this web page shows that their are two kinds of stock cycles

http://csf.colorado.edu/authors/Alex.../sec_bear.html

In one type the different between secular bear and bull market is inflation versus disinflation. The current cycle is this type with an inflationary secular bear from 1966-1982 and a disinflationary secular bull from 1982-present.

In the other type the difference between bear and bull is earnings/economic growth. I call this type a "real" cycle as opposed to monetary cycle since it are based on real (constant dollar) economic (earnings) performance. The most recent example of this is the 1929-1949 (bear) and 1949-1966 (bull).

Using an independent assessment of the stock cycle using P/rBV (this has nothings to do with the longwave) I arrived at 1999 as the end of the bull market

http://csf.colorado.edu/authors/Alex...Stanpor3a.html

I had been looking for a 1999 peak since 1997:

http://csf.colorado.edu/authors/Alex...Mike/stock.htm
http://csf.colorado.edu/authors/Alex.../Stanpoor.html
http://csf.colorado.edu/authors/Alex.../Stanpor2.html

In July 1999 P/rBV (this is the old name for P/R) got to 1.46. In Jan 2000 it got marginally higher (1.48.) but its fallen since then. If the S&P500 moves strongly above 1500 in 1Q 2000 or above 1600 anytime in 2000 it will invalidate my P/rBV analysis. This hasn't happen yet, and the longwave stuff is still valid until 2004. If no secular bear market develops by 2004 then you can throw out the longwave too IMO.

So what this means is fairly soon. probably within two years, and (if P/rBV is still valid) this year the secular bear market will end and with it, the current economic expansion. Even though the recession may be quite mild the associated bear market will not (my stock market model projects 600-1000 on the S&P500 for a 1990-type recession). The stock market cycles says that this bear market will be the beginning of a secular bear market and that the S&P500 will like not pass its all-time high for 10-20 years. My stock market model says for this to happen it means that the length of the average economic expansion during this period will have to be much shorter than at present (maybe 4-6 years). This means that the secular bear market will be characterized by a period of more frequent recessions like the 1970's, but without the inflation, and not like the 1980's and 1990's. This period of frequent non-inflationary recessions is what is called by the secondary depression. If it happens, as Richard's and my interpretation of the longwave suggest, overvalued stocks of all types will do very poorly.

An investment in CSCO made today, for example, may well be under water 20 years from now. This does not exclude much higher prices for CSCO in the short term. From a trading perspective, buying tech stocks will be highly profitable until the end of the secular bull market. Exactly when it ends cannot be known, or the market would know it and so the bull market would have ended years ago. Thus, there are only two probabilities: (1) the bull market will not end for a long, long time or (2) it will end in such a way as to trap as many traders as possible, including you, unless you get lucky. Skill will not protect you. As with so much in life, it is better to be lucky than good.

Now Eric von Baronov has been invested continuously over the pasts several years when the bears have been predicting doom and gloom. Eric believes in view number (1). He bases his view on an interpretation of the longwave that is incomprehensible to me. I too had been 100% invested until last summer. Since then I have been in cash in by 401K. In my taxable account outside the 401K my long positions have fallen so far since 1998 (50-80%) that I believe I have already experienced the crash and so have no fear that any future crash will take the few pennies I have left. I was invested in 1998 since I strongly believed that the bull market would not end before 1999. Well for small cap value it ended in 1998, just as it did in 1928 (as I later found out). And with that April 1998 peak went my hopes of early retirement.

I'm a value guy and I believe in buy and hold. Maybe my battered stocks will come back some day (and maybe pigs will fly). Hell I'm still trying to buy a few REITs at 15% dividend yields. I even have a little money in high-flying tech stocks just so I have at least a few stocks that go up every day rather than down

Anyway, I am writing a book now on this topic (I finished the first draft and I am having it reviewed). I will probably publish it on one of those net outfits that let you download a copy for $5 or $10. Maybe some of the longwaves group will buy it

Here's an old post of mine from the Longwaves board made really close to the stock market peak. (post at the bottom)
http://csf.colorado.edu/forums/longw.../msg00577.html

From: Mike Alexander [mailto:malexan@net-link.net]
Sent: Friday, March 10, 2000 11:50 AM
To: lwside1@eGroups.com
Subject: [lwside1] Re: Old-economy firms will annihilate dot.coms andmanyhigh-flying techs...

Joe Flood wrote:
I have to say I get a bit sick of all this talk about the "10 to 20 years of the secondary depression ahead". What sort of possible justification do you have, either in terms of the long wave or more generally, for such a prediction? Is it just because the stock market is high? This seems to be contrarianism carried to extremes.

I'll take a crack at your question, its a good one. Here is my webpage that deals with the longwave:
http://csf.colorado.edu/authors/Alex.../longwave.html

Here is my webpage that deals with the stock cycle (secular bull and bear markets)

http://csf.colorado.edu/authors/Alex...stretcom1.html

a secular bull + a secular bear market constitute a stock cycle.

this web page shows that their are two kinds of stock cycles

http://csf.colorado.edu/authors/Alex.../sec_bear.html

In one type the different between secular bear and bull market is inflation versus disinflation. The current cycle is this type with an inflationary secular bear from 1966-1982 and a disinflationary secular bull from 1982-present.

In the other type the difference between bear and bull is earnings/economic growth. I call this type a "real" cycle as opposed to monetary cycle since it are based on real (constant dollar) economic (earnings) performance. The most recent example of this is the 1929-1949 (bear) and 1949-1966 (bull).

Using an independent assessment of the stock cycle using P/rBV (this has nothings to do with the longwave) I arrived at 1999 as the end of the bull market

http://csf.colorado.edu/authors/Alex...Stanpor3a.html

I had been looking for a 1999 peak since 1997:

http://csf.colorado.edu/authors/Alex...Mike/stock.htm
http://csf.colorado.edu/authors/Alex.../Stanpoor.html
http://csf.colorado.edu/authors/Alex.../Stanpor2.html

In July 1999 P/rBV (this is the old name for P/R) got to 1.46. In Jan 2000 it got marginally higher (1.48.) but its fallen since then. If the S&P500 moves strongly above 1500 in 1Q 2000 or above 1600 anytime in 2000 it will invalidate my P/rBV analysis. This hasn't happen yet, and the longwave stuff is still valid until 2004. If no secular bear market develops by 2004 then you can throw out the longwave too IMO.

So what this means is fairly soon. probably within two years, and (if P/rBV is still valid) this year the secular bear market will end and with it, the current economic expansion. Even though the recession may be quite mild the associated bear market will not (my stock market model projects 600-1000 on the S&P500 for a 1990-type recession). The stock market cycles says that this bear market will be the beginning of a secular bear market and that the S&P500 will like not pass its all-time high for 10-20 years. My stock market model says for this to happen it means that the length of the average economic expansion during this period will have to be much shorter than at present (maybe 4-6 years). This means that the secular bear market will be characterized by a period of more frequent recessions like the 1970's, but without the inflation, and not like the 1980's and 1990's. This period of frequent non-inflationary recessions is what is called by the secondary depression. If it happens, as Richard's and my interpretation of the longwave suggest, overvalued stocks of all types will do very poorly.

An investment in CSCO made today, for example, may well be under water 20 years from now. This does not exclude much higher prices for CSCO in the short term. From a trading perspective, buying tech stocks will be highly profitable until the end of the secular bull market. Exactly when it ends cannot be known, or the market would know it and so the bull market would have ended years ago. Thus, there are only two probabilities: (1) the bull market will not end for a long, long time or (2) it will end in such a way as to trap as many traders as possible, including you, unless you get lucky. Skill will not protect you. As with so much in life, it is better to be lucky than good.

Now Eric von Baronov has been invested continuously over the pasts several years when the bears have been predicting doom and gloom. Eric believes in view number (1). He bases his view on an interpretation of the longwave that is incomprehensible to me. I too had been 100% invested until last summer. Since then I have been in cash in by 401K. In my taxable account outside the 401K my long positions have fallen so far since 1998 (50-80%) that I believe I have already experienced the crash and so have no fear that any future crash will take the few pennies I have left. I was invested in 1998 since I strongly believed that the bull market would not end before 1999. Well for small cap value it ended in 1998, just as it did in 1928 (as I later found out). And with that April 1998 peak went my hopes of early retirement.

I'm a value guy and I believe in buy and hold. Maybe my battered stocks will come back some day (and maybe pigs will fly). Hell I'm still trying to buy a few REITs at 15% dividend yields. I even have a little money in high-flying tech stocks just so I have at least a few stocks that go up every day rather than down

Anyway, I am writing a book now on this topic (I finished the first draft and I am having it reviewed). I will probably publish it on one of those net outfits that let you download a copy for $5 or $10. Maybe some of the longwaves group will buy it

William Safire, in today's Times, on "Economic worrywarts":

• "First, deflation, which is more newsworthy than the other two possibilities, inflation and stagnation, because few brokers alive today sold apples on Wall Street for a nickel."

More...

William Safire, in today's Times, on "Economic worrywarts":

• "First, deflation, which is more newsworthy than the other two possibilities, inflation and stagnation, because few brokers alive today sold apples on Wall Street for a nickel."

More...

William Safire, in today's Times, on "Economic worrywarts":

• "First, deflation, which is more newsworthy than the other two possibilities, inflation and stagnation, because few brokers alive today sold apples on Wall Street for a nickel."

More...

William Safire, in today's Times, on "Economic worrywarts":

• "First, deflation, which is more newsworthy than the other two possibilities, inflation and stagnation, because few brokers alive today sold apples on Wall Street for a nickel."

More...

It's baaaack!

Ending Poverty In California? Or just making it worse, like the energy crisis?

It's baaaack!

Ending Poverty In California? Or just making it worse, like the energy crisis?

It's baaaack!

Ending Poverty In California? Or just making it worse, like the energy crisis?

It's baaaack!

Ending Poverty In California? Or just making it worse, like the energy crisis?

• "The most direct and significant kind of federal action aiding economic growth is to make possible an increase in private consumption and investment demand -- to cut the fetters which hold back private spending. In short, to increase demand and lift the economy, the federal government's most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures." -- John F. Kennedy (1962)

The Republicans Party On

NYTimes.com > Opinion May 22, 2003

• "You will find that tax cutting in Kondratiev winter has quite different effects on key Republican constituencies as does the same activity during Kondratiev fall. Therefore although much of what Bush does is objectively identical to what Reagan did, it won't have the same outcome." -- Michael Alexander

Against some of the best economic advice in the land, President Bush and his Republican Congressional leaders have concocted a benighted final tax-cut plan that will do far more to deepen the nation's deficits and debt than to stimulate the wallowing economy. In a rush for approval by Memorial Day, the leaders have cannibalized parts of competing packages into a tentative $318 billion grab bag that again offers the most significant relief to the upper-bracket Americans so dear to the administration. Dividend taxes will be cut, not eliminated as the president hoped, but so will capital gains taxes. The latter was a conservative chestnut rejected two years ago when the first Bush cuts were enacted in the long-ago euphoria of an actual budget surplus.

This time, with the budget hemorrhaging red ink, the G.O.P. takes care to include $20 billion in much needed fiscal relief for battered state and local budgets, whose problems can be traced in part to the first Bush cuts. And the leaders are wrapping their package in middle-class sweeteners like child-care credits and relief for married taxpayers. But those boons are cynically "sunsetted" to expire after three years to fit into fictitious limits of fiscal responsibility. In contrast, there is no such asterisk on the accelerated cut in all tax rates, including the most controversial drop in the top rate, to 35 percent from 38.6 percent ? a windfall of scores of thousands of dollars annually for wealthy Americans.

This version of the president's "growth" plan will increase the deficit by hundreds of billions of dollars across the next decade. To help pay for it, the G.O.P. budget hawks of yore, born again now as deficit spenders of record proportions, will soon have to raise the national debt limit by almost a trillion dollars from the current $6.4 trillion. This is particularly urgent now that the current year's deficit is ballooning beyond estimates, toward $400 billion, with the two Bush tax cuts expected to add well over $2 trillion in deficits by 2013. "Deficits do matter," the Federal Reserve chairman, Alan Greenspan, warned Congress, sounding like a Dickensian wraith ominously foreseeing a future of red-ink borrowing and rising interest rates. But the Republicans appear set to party on now and roll the tab over the far horizon.

Originally Posted by IRS

.................... *




* Source: Internal Revenue Service, Statistics of Income Division, Unpublished Statistics, September 2002.

The cynicism and crass class warishness dripping from this editorial today reeks of sheer hypocrisy; a hypocrisy that not only has ignores history but reeks of pure partisan blindness as well.

Thus, I have sought to give it some balance with my pull quote from a time not too long ago. A time when gross corruption permeated the White House, and endangered this country for years to come. To these people actually breaking the law and and tossing America's security to the wind was no vice, so long as the "most ethical administration in history" and the Democratic Party were the ones do it. But Bush and the boys must be utterly above reproach. And by no means are they to be permitted to cheer themselves for having cleaned up the gawd-awful stinking mess let behind by the Clinton gang.

My, how soon we forget all that.

Growing the Political Economy

NYTimes.com > Opinion May 23, 2003

• A key missing piece in the inquiry into the financing of the 1996 elections has fallen into place. Congressional investigators had long suspected a "China plan" to buy influence and access and even specific concessions, now federal prosecutors have squeezed Johnny Chung, a California Chinese American fund-raiser who had pleaded guilty to tax and fraud charges. He reportedly has said he received funds from Chinese intelligence and passed on $100,000 to the Democratic Party. -- Washington Post, May 19, 1998, Editorial "The Chinese Connection"

After helping the Republican Party collect a cool $22 million for its House and Senate candidates at a dinner on Wednesday, President Bush is ready to turn his attention to his own re-election drive with fund-raising events in New York, Florida and Washington next month. Solicitations have gone out at $2,000 per ticket, with chrome-plated options for the big money raisers, like a $50,000 "leadership luncheon" with Karl Rove, the White House campaign guru. "Make your commitment now," exults Gov. George Pataki in handing out ascending V.I.P. slots, with those who raise $200,000 at the top. A tenth of that garners a photo-op with the beaming president, presumably in mufti, not "Top Gun" costume.

The timing for testing the party faithful's generosity could not be better, as the president's latest tax-cut victories are cheering upper-bracket Americans. The president could easily score $200 million for a primary season in which he has no challenger, but G.O.P. officials are now discreetly talking about restraining themselves and aiming a little lower.

While money is already pouring in for a president on a crest of postwar popularity, Democratic aspirants have been aching for attention. They hope to negotiate a d?tente on monthly debates to stir some TV air time. Republicans suffered similarly during Bill Clinton's 1996 re-election drive, but unlike Mr. Bush, Mr. Clinton chose to accept public financing limits that restricted the amount he could spend.

The formidable Bush machine is already approaching hegemony in the money-raising duel with Democrats, with better than a three-to-one edge. Feted lawmakers poured into Wednesday's dinner after a hard day of negotiating the latest tax cuts, hailed by one House leader as rich with opportunity for all Americans, including "aspiring capitalists."



Posted for discussion purposes only (emphasis mine).

http://www.boston.com/dailyglobe2/13...f_pain_+.shtml


An economic 'menu of pain'

By Laurence J. Kotlikoff and Jeffrey Sachs, 5/19/2003

OUR GOVERNMENT is going broke. The feds face bills that are far beyond our capacity to pay -- by $44 trillion to be precise. The longer we ignore them, the bigger they get. Yet President Bush is working overtime to deepen our fiscal trap. This $44 trillion figure is not ours. Nor is it some other academics' calculation. It was produced last fall by economists and budget analysts at the US Treasury, the Federal Reserve, the Office of Management and Budget, and the Congressional Budget Office. The study was ordered by then Treasury Secretary Paul O'Neil and was slated to appear in the president's budget, released in February.

O'Neil instructed his team, led by Jagadeesh Gokhale, Federal Reserve senior economist, and Kent Smetters, then deputy assistant secretary for economic policy at the Treasury, to answer the following question: Suppose the government could, today, get its hands on all the revenue it can expect to collect in the future, but had to use it, today, to pay off all its future expenditure commitments, including debt service net of any asset income. Would the present value (the value today) of the future revenues cover the present value of the future expenditures?

The answer is no, and the fiscal gap is the $44 trillion. Now, that is big bucks by anyone's definition. It's four times current GNP and 12 times official debt. Imagine everyone in the country working for four years and handing over every penny earned to pay this bill, and you'll grasp its size.

Unfortunately, we can't ascribe the $44 trillion calculation to overly pessimistic assumptions. On the contrary, the assumptions are optimistic with respect to future longevity as well as growth in federal health expenditures, discretionary spending, and labor productivity.

Gokhale and Smetters asked a follow-up question: By how much would taxes have to be raised or expenditures cut on an immediate and permanent basis to generate, in present value, the $44 trillion? Their ''menu of pain'' is mind-boggling. Entree A is raising federal income tax collections (individual and corporate) by 69 percent. Entree B is raising payroll tax collections by 95 percent. Entree C is cutting Social Security and Medicare benefits by 56 percent. Entree D is cutting federal discretionary spending by more than 100 percent, which, of course, is not feasible. Combination platters are also available. For example, we might select quarter portions of entrees A through D. But no matter what combination we order, digesting this medicine is going to be plenty painful.

Why are the nation's fiscal affairs in such a mess? The reason is straightforward. Baby boomers are just five years from starting to collect Social Security retirement benefits and eight years from starting to collect Medicare benefits. When all 76 million boomers are retired, we'll have twice the number of elderly beneficiaries, but only 15 percent more workers to pay their benefits.

If the fiscal gap and its associated menu of pain are unfamiliar, there's a reason. You can scour the thousands of pages of the president's FY 04 budget, and you won't find the analysis. It never made it in. When Secretary O'Neill was replaced last December, the analysis was yanked from the budget.

To be clear, limiting our need to know is not just a Republican responsibility. When it came to publishing a generational accounting analysis in the FY 92 budget, President Clinton's political watchdogs overruled OMB and pulled the same trick. And bankrupting has been a collective effort of all postwar administrations, each of which has cared more about the next election than the next generation.

Our current team leader, President Bush, is doing his part. Taken together, his first tax cut and his proposed second tax cut, which is about to be passed by Congress, account for roughly a sixth of the fiscal gap. The president, an ardent believer in voodoo economics, is convinced his tax cuts will stimulate growth and dramatically raise revenues. Neither economic theory nor economic facts supports this view. In fact, the president is not only burying us in explicit and implicit debt, he's undermining the economy's future performance.

The stakes are now too high for more political games and flaky economic theories. Democrats and Republicans alike need to send our leaders a firm message: Deal responsibly with the coming generational obligations! If we don't, we can look forward to massive cuts in future Social Security and Medicare benefits, tax hikes, high inflation, and bitter political strife. Putting aside the president's latest tax cut would be an excellent start on the road to responsibility.

Laurence J. Kotlikoff is chairman of the Department of Economics at Boston University. Jeffrey Sachs is professor of economics at Columbia University.

This story ran on page A11 of the Boston Globe on 5/19/2003.
? Copyright 2003 Globe Newspaper Company.

The solution is simple:

1. All, or almost all, Boomers continue to work ... and work ... and work ...
2. All, or almost all, Boomers die.
3. Make absolutely certain that items 1 and 2 end simultaneously.

Problem solved.