Romney's Big Moment Overshadowed by Ryan Problem

The inevitable happened, which I guess is only newsworthy because we doubted its inevitability for large chunks of the last four years. Mitt Romney is the Republican candidate in the 2012 Presidential Election. Congratulations to Mr. Romney and his family, this will probably be the high mark of his political career. He responded with uncharacteristic grace, delivering one of the better speeches of his political career last night. He didn't let himself get carried away in attacks on Obama, which let him remain happily generic and relatively truthful.



He should savor this moment, because the next several months are going to be a miserable grind. Mr. Romney has a big problem, which pretty much entirely summed up by the other half of his ticket. By completely tethering his horse Ryan and the conservative, he has committed himself to the basic partisan dynamic existing in the US, and he has set his campaign on a course for failure.

It's hard to understand why he should have chosen Paul Ryan in the first place. Vice Presidents have very little influence in Presidential elections. To understand this, you have to remember that the American electorate is incredibly misinformed and apathetic towards politics, which is largely the result of the unending stream of partisan crap sprayed on them. When 49 percent of Americans actually know that Obama is a Christian, don't expect them be won over by Paul Ryan before November. He only has one major prime-time appearance in the next three months, the VP debate.

To make matters worse, Ryan is actually pretty unpopular, despite what a lot on the Right might say about it. He was pretty much unknown to the general public before Romney brought him to the ball, and there has been almost no evidence of Ryan actually helping the Romney ticket's chances in November. Americans also strongly oppose his signature Medicare plan, which is why they've desperately run away it over the last couple of weeks.

Many people viewed the Ryan choice as a "game changing" kind of move that was meant to help Romney narrow the gap on Obama. It was probably the wrong risk to take to. By putting Ryan on the ticket, Romney's strategy seems to be completely based around the conservative base. Unfortunately for him, there just aren't enough conservatives to actually get him elected.

Even worse, the choice of Paul Ryan highlights a bunch of icky social issues, total abortion bans and unrelenting gay bashing, that all Republicans want to avoid. They've thrown away Missouri already, a race that should have been easy for them to win.

Never has a president been reelected when economic conditions are this bad. A candidate like Romney should be the kind of guy to beat him. Unfortunately, the Republican party is so out of touch that they've lined themselves up for a historic defeat. They'll lose the White House when it should have been easy to take; they'll fail to retake the Senate because a Republican couldn't win states like Missouri. Democrats have spent a long time being known for their talents of snatching defeat from the jaws of victory. I have little down that this embarrassment will stick to the Republicans for a long time to come.

The Problem with the Rich

A common misconception on the left is that the rich simply inherent all of their wealth. Mitt Romney, so they say, only got to where he is because of his rich daddy. If he had started poor, like everyone else, he never would have become the incredibly wealthy man that he is today.

Unfortunately, this just isn't true. As Robert Frank helpfully points out, only 9 percent of the net worth of the top 1 percent was inherited (as of 2001). Of course, no one would deny that there is an advantage to being rich. But what happened in the last 30 years in the US has very little to do with people being richer than others. Even in your story about the casino, the money isn't actually inherited. It was earned, regardless of whether the way of earning it is offensive or whether the odds were already stacked in someone's favor (the second part is closer to the truth than the first). If the problem was only inheritance, it could be solved pretty quickly with an aggressive estate tax. Nor would it lead to situations where a small elite continue to skyrocket away from general populace. The problem of inequality is much deeper and much pernicious than just inherited wealth.

George Romney was well off, but he would barely be considered that rich nowadays. He comes from an era where a CEO earned only 40 times more than the average worker. He wouldn't seem all that different than what most people call upper middle class today. The most, MOST, anyone earned back then was about 250,000 a year; and that's in today's dollars.

The problem with Mitt is not that he started well, we're always going to have that, but that he was able to game the system to make unimaginable sums of money for himself and other rich people. Let CEOs give birth to other CEOs, as long as they're all earning 40 times more, like in the past. But now, now they make 3,500 times more than the average worker. That's not some "natural" thing. That's not a "market" reward for higher productivity. That's the result of specific changes in policy. That's the result of the efforts of specific groups to get government to create obscene awards for people like Mitt Romney and Dick Fuld and John Thain and Jimmy Cayne.

The Right tends to put forward the argument that its not "equality of outcomes" that matter, but "equality of opportunity." That hides the fact that the outcomes delivered by the system have fundamentally changed. Some people are rewarded on a scale unfathomable to others. And while they trumpet along about free markets and battling the "evils of socialism," few people seem to be noticing that they're rewriting economic rules to make sure they always profit.

Dan Ariely presented this table originally on his blog. It can be found here.

That's why "we built this" must be the most hilarious slogan any party has put forward. Especially since it's coming from a Republican party that has specifically used government to make itself rich. The stadium they held their little conservative rally in was paid for with taxpayer money. Just like so many of those Republican-owned sports teams are supported by taxpayer money. Many of the businessmen that they paraded across the stage enjoyed government-backed loans. Just like all those whiney financiers made their money through deregulation. And like all how those CEOs who got their compensation rules changed to pay themselves otherworldly amounts of money.

That's not capitalism. There's no worthwhile innovation there. It's all about manipulating the rules to make sure you get to operate in a protected bubble while everyone else fights to survive.

So don't rail against Mitt Romney or others like him for being born rich. Rail against Mitt Romney because he represents the most insidious sides of our "market" economy. He's a man who made the vast majority of his money by gaming the corporate tax system, who considers it patriotic to aggressively avoid actually contributing to the system that made him wealthy. Mitt Romney represents a type of world-view where the rich get to enjoy endless government largesse that is paid for by the suffering of the rest. That's where the casino metaphor is apt. Government is picking winners all the time, just as those doing the picking deny it actually happens. This is what needs to change. It doesn't matter if your rich or poor, we all should be treated the same. Right now, we're not. It's not even close.

The Austerians of Reactionary Keynesianism

Howard Dean has a horrible little video on Big Think, where he talks about the need to "drive over the fiscal cliff" in order to restore our public finances.

This video is wrong for a wide variety of reasons. First and foremost, it violates Charles P Pierce's  basic economic theory: Fk the deficit. People got no jobs. People got not money. When Howard Dean says "there will be a little pain" for everyone, he forgets to mention all of the working men and women that will be thrown out their asses because of a two-quarter long recession. We have spent the last four years essentially shrugging our shoulders at the greatest economic crisis in 60 years; Howard Dean wants to make it worse.

Howard Dean, unfortunately, seems to have spent three years ignoring any and all news about the UK and Europe. His little jab about Greece is the epitome of misinformation (Greece's ultimate problem is currency related), and it's the exact same argument that extreme budget cutters on the Right use to justify their personal madness. Note to any left-leaning politician out there: if there ever comes a moment where you might think you agree with Paul Ryan, slap yourself hard across the face and say the exact opposite.

But there's a bigger issue here. Democrats have essentially ceded the politically beneficial aspect of fiscal strategy over to the Right. They talked about this recently on Up with Chris Hayes. While Republicans, in their permanent minority status from the 40s to the 70s, regularly complained about having to be the tax collectors for the welfare state, they've been able to turn the tables on Democrats recently, essentially making them the Austerians for the tax-cuts state.

The Right gets to be Santa every two years (more tax cuts for everyone!!!), forcing the Democrats into being the party that takes away everyone's money. This kills the Dems in election after election, and it means they're always on the back foot when it comes to average voters' pocket books. Do you really want to vote for the party that's promised, time and again, to raise your taxes? Of course not! It's an easy choice.

The shift in attitudes, as Corey Robin explains so well, is an incredible two-front attack on Progressivism in the United States. On the one side, Democrats' priorities have shifted towards budgetary issues over progressive economic issues. It's the basic complaint many liberals had when President Obama shifted to concerns over the deficit in 2010. At the same time, reducing deficits often means cutting support for social programs, further eroding efforts for economic justice. In one stroke, the Right has discovered away to force supposed liberals to ignore their economic priorities and attack them at the same time.

If you're wondering what happened to the Left over the last thirty years, there's your answer. Our "Left-leaning" party runs on essentially the same governing platform as David Cameron's Tories, giving America has the choice between the Center-Right and the Far Right. Good luck.

So How Can We Fix This Mess?

We continue our talk about debt. Reinhart and Rogoff's book spends a lot of time focusing on the different components of national debt. You can have, for example, public debt owed to foreigners, public debt owed domestically, private debt owed domestically, and so on.

I covered public debt in the previous post, but the other components deserve a little attention too. Despite popular opinion about things like China, the US doesn't have much of an external debt problem. It's only 4 trillion of our 15 trillion dollar public debt, and maybe a third of all debt. On the other hand, it definitely has a private debt problem, which is currently 230 percent of GDP. Don't forget, it was default on private debt, subprime mortgages, that got us into this mess into the first place. So even while we fixate on public debt, the thing killing our economy is the process of paying off the huge debt burden we built up over the last decade.

The Economist argues that this is the key to actual recovery, and I tend to agree. People will not start spending money again until they get free of all their debt. Unfortunately, this can't happen all at once, since my spending is your income and my saving is your loss. Some agent in the economy - consumers, businesses or government - always has to be spending something. Which brings back the earlier question about timing. If you cut government spending now, it means you're putting off private debt reduction until later. If you tackle private debt right away, government is going to have to spend extra.

So how do you do this?

To answer this question, you have to take an overview of basic macroeconomic policy. My previous comments might seem too Keynesian and too forgiving of high debts. I don't want to give either impression. Keynes is a big deal, but the vast majority of economists are not Keynesians. Most are a lot more typical of the free-market ideas that dominate the right.

So to recap, here is what I believe to be the general consensus on deficits among economists. First of all, debt is a big deal, whether it is accrued privately or publicly. The inability to repay debts is the heart of every financial crisis. That's why it's important that governments live within their means, and countries create strong financial institutions (rules and regulations) that prevent people and companies from getting hopelessly indebted.

Unfortunately, in a global depression, which is what we face today (since most countries have still not recovered the output lost during the 2007 financial crisis), austerity measures can be counterproductive. They reduce the overall size of the economy, making it more difficult for people, businesses and government to repay the debts they took on during the boom.

But this is where mainstream macroeconomists begin to diverge. The question is about government's role in promoting the recovery. Those (usually) on the left talk a lot about fiscal stimulus, like building bridges and digging ditches, to compensate for the reduced spending in the private sector. Since my spending is your income, and vice versa, we cannot all reduce spending at once and expect an economy to grow. This fundamental truth is the heart of Keynesian economics.

The more conservative argument, called the monetarist approach, is slightly more technical. Developed originally by Milton Friedman and Anna Schwartz, it focuses on the real interest rate in the economy, which in turn determines the money supply. Here's how it works, and I apologize in advance for the tangent:

I'm pretty sure you understand the dynamics of aggregate supply and demand. Along the demand curve, increasing prices will lower the amount of product demanded. The opposite is true for supply, as an increasing price will increase the amount supplied. In any economy, there exists a point where the total amount of goods supplied and total amount of goods demanded are equal, which is known as equilibrium price level.

The supply and demand for savings, borrowing and investment function the same way, with one additional caveat. If I have a certain amount of money, and you don't, there is an "equilibrium" interest rate that encourages me to lend to you and you to borrow from me. As the interest rate goes up, I want to lend more, and you want to borrow less. Now, your desire to borrow is not only determined by the interest rate on the loan. It also depends on the rate of return that you can earn on available projects. Even if the interest rate on my loan is not particularly attractive, you'll be happy to take it if you know you can invest it to earn a little more.

A recession always leads to a significant drop in the real interest rate. The cause-and-effect is a little murky, since investment is a part of GDP, but the logic is clear. If the economy is contracting, you won't see very many good places to invest your money. You'll demand a much lower interest rate before you borrow. Moreover, at any time within an economy, people have different levels of indebtedness. Some private actors might have borrowed too much, encouraging them to spend less and leading to the decline. But it's always safe to say that not everyone is in debt.

So here's where monetary theory comes in. By lowering interest rates, you encourage those people not in debt to borrow now and pick up the slack. At the same time, you make it easier for everyone else in debt to pay back what they owe. If you owe a loan with a 10 percent interest rate, but you can go to a bank to refinance at 2 percent, you'd be a fool not to take that opportunity. A lower interest rate means you have more money to spend while you pay down that loan. Since your spending can increase, and those people that were avoiding borrowing can now borrow at attractively low interest rates, the economy will increase total spending and start to grow again.

So that's basically the two approaches. The fiscal side says "have government pick up the slack;" the monetarist side says "make it easier for the private sector to pick up the slack." You can obviously combine them as well. You can have a central bank lower interest rates while the government lowers taxes and conducts safety net spending to revive the economy. They counteract each other too. If a government sharply reduces spending, lowering the interest rate won't do much. If the central bank keeps interest prohibitively high, fiscal stimulus will fail.

Both approaches have their limits. A heavily indebted government can't spend more without creating a debt crisis. And interest rates can only be dropped to zero, even though they might need to go even further. The second problem, zero percent interest rates, is known as the zero bound. It's also where we are today. The central bank has set interest rates to zero, the return on federal borrowing is actually negative, and yet we still lack the spending to encourage economic growth.

Solving depressions, moments where the interest rate is essentially zero but spending still is too weak, demands some unconventional policies. But there is a consensus forming that the general goal is to target a specific nominal GDP level (real growth plus inflation) and hold it there for an extended period of time. This concept comes from Scott Sumner, the new face of Modern Monetary Theory, i.e. the new Friedman-ites.

To hit a nominal GDP target, either inflation or real spending needs to increase. If the target is comprised mostly of inflation, no big deal. Since debt contracts describe a specific, dollar-amount of debt that needs to be repaid, inflation makes this debt burden smaller in real terms. Inflation also discourages companies from holding cash and lower interest-bearing assets, which ultimately gets them to spend more.

How long should the NGDP target be held? Monetarists argue that it could essentially last forever, if you had the proper market tools to judge future rates of NGDP. More leftist economists would say that the central bank should raise its inflation rate for a period of time, until its slated NGDP target is fulfilled. Paul Krugman's argument is that we should say we'll tolerate higher inflation in order to get 8 consecutive quarters of 5-7 percent nominal GDP growth, and then we'll start lowering it again.

The government can obviously play a role in supporting that extended target. It can increase its spending to raise real growth and limit the more pernicious effects of inflation on the economy (like when wages are stagnant but prices rise). Once the target is met, both the central bank and the government should begin backing off. The government would need to start paying down its debts; the central bank would start raising interest rates to push inflation back down.

Many monetarists argue that the government should always maintain an essentially fiscal-neutral budget, i.e. deficits should always be less than GDP growth (except for those times when they interfere with the actions of the central). They add that a nominal GDP focus will actually reduce debt without any action from the government, since inflation and growth will reduce the actual debt burden even if much of it isn't repaid.

Keynesians say that we should be paying down budgets during the good times in order to give us the budget flexibility to aggressively increase spending during bad times. The irony of that, of course, is that Keynesians are commonly thought of as "borrower and spenders," when in fact they're pretty aggressive budget hawks during good times. People just don't listen to them in good times.

To be a Keynesian, you need to have a bit of faith in people and institutions. Governments have little incentive to reduce deficits during economic booms, but this is the most important thing they can be doing when the economy is growing. That's not to say this never happens; Clinton and Congressional Republicans were able to get a budgetary surplus during the tech explosion. It's exactly what they should have been doing.

To be a monetarist, you need to kind of believe in magic. A scary large part of monetary policy is based around expectations. This basically boils down to saying that if the Fed says something is going to happen, it's going to happen. That's a pretty bold claim, and it doesn't necessarily always become true. The Fed can lose control over inflation, which happened in the late 70s, and central banks throughout the world fail at their mandate.

Regardless, either approach to macroeconomic policy depends on having strong economic and political institutions (i.e. the rules and practices that we follow when developing policy). A country can pay down very high debts, but it is less likely to do so if it is run by a corrupt elite. At the same time, a central bank can control expectations, but it needs to be seen as independent and transparent to do so. More than any particular policy, I'm starting to strongly believe that this is the real secret ingredient of sustained economic growth. When the rules are fair, when the system treats people equally, and when the organizations within a society live up to the standard set for them, either approach to taming the business cycle is reasonable (hell, do both). Without properly functioning institutions, neither will work.

Is There a Debt Limit?

The national debt is one of the cornerstones of conservative fretting about the future of the nation. We shouldn't dismiss this outright, since the debt is really high. There's a lot of economic research into this topic, and it's worth reviewing.

Reinhart and Rogoff are the go-to economists on this. In general, government debt above 90 percent starts to cause problems for most countries. Unfortunately, there's technical issues with this cut off. We only have a few cases that we have to measure it, and it's hard to apply the average of these small instances to all countries in general.

The key to this is the concept of debt tolerance, which Reinhart and Rogoff talk about a lot in their book. For a lot of "fundamental" reasons, like governance, economic vitality, their relative position versus other countries and general investor sentiment, some countries can manage high levels of debt. For the same reasons, there are many countries that can't. For example, no investor would ever loan money to a country like Zaire if it had debt levels similar to what the US has right now. At the same time, there are extreme instances where high debt has been paid down. The UK, for example, had a debt to GDP ratio of 240 percent after WWII and did not default. The US hit 120 percent at about the same time and got that down without any issue at all.

On the other hand, less debt-tolerant countries have slipped into crisis much sooner. Spain, for example, is a complete basket case as far as its debt goes, but its GDP to debt ratio is only 69 percent. The interest rates on its 10-year bonds regularly jumping over 7 percent, although it's at 6.8 right now (yay Euro summit).

The current US GDP to debt ratio is about 103 percent (but only about 80 percent is actually owed to people; the rest is held by the Fed). The 10-year US Treasury interest rate 1.64 percent (which is actually a negative interest rate once you account for inflation). If you trust markets, and you should, then it's pretty clear that the US is capable of tolerating debt levels much higher than Spain. There's a good question about how much further we can go, but it should be obvious to everyone that we're definitely not in terrible trouble yet.

This doesn't mean that the current level of debt and the rate at which it's growing isn't a problem. The argument among serious economists is not whether or not the debt to GDP ratio needs to be reduced, the argument is about when it needs to be reduced and how it needs to be reduced. There's a few issues here.

As the Euro-crisis proves, you cannot reduce public debt during a depression. Cutting government spending reduces economic activity, reduces the tax base and reduces the government's ability to pay off its debt. Ireland, Greece and the UK have all tried to immediately reduce their deficits, only to fail in the process. Not only has their economic situation become worse, but debt has increased.

At the same time, a country doesn't need to actually pay back any debt to reduce its debt burden. The only important issue is to reduce the rate of deficits (i.e. debt growth) below the rate of GDP growth. The dirty secret about that massive post WWII debt was that it was never paid back. Technically speaking, the nominal value of that debt is still on the books. But once the US economy took off in the 1950s, doubling per capita income over the next twenty years, the burden of that debt was dramatically reduced.

So those are the things you need to keep in mind. When does a candidate plan on reducing deficits? What mix of spending cuts and tax hikes will they use to get them? What is the size of the deficits vs the assumed GDP growth rate at that time?

Neither party differs much in their underlying goals. Obama targets 4 trillion dollars in deficit reductions; Paul Ryan targets 4.4.

The real difference is in the mix of policies and the number of flights of fancy. The Republican plan passes large tax cuts and then reduces spending to levels not seen since World War I. It also involves a big asterisk, in that it promises to eliminate tax loopholes, without specifying which ones. It would likely live the big ones alone, since everyone likes deductions for capital gains and mortgages. That would make it damn hard to raise the taxes to meet the budget's targets.

In other words, Ryan has lots of promises, but not too many actual ideas. It's nice politics, let's just leave it at that.

While far more realistic, the Obama budget looks to mostly stabilize the level of debt at its current levels. This might not be enough to actually solve the problem, but it's very hard to say what the world will be like 12 years from now (10 years ago we had budget surpluses). The biggest problem for the President is that he keeps most of the Bush tax cuts, and only looks to raise taxes on the rich. Even though Obama is in the running for the lowest rate of spending since the Korean War, this probably won't cut it in the end either.

Pretty Much Everything You Need to Know about the Student Debt Crisis

Some stats courtesy of The New York Times:

The size and rate of growth:

• More than $1 trillion dollars in student loans outstanding. 
• The federal balance for student loans has grown by 60 percent in the last five years. 

Most are not being repaid:

• Payments are being made on only 38 percent of those loans. 
• Nearly one in 10 borrowers who started repayment in 2009 defaulted within two years, the latest data available — about double the rate in 2005. 

Most of the cost increases come from cuts in support at the state level:

• From 2001 to 2011, state and local financing per student declined by 24 percent nationally. 
• Over the same period, tuition and fees at state schools increased 72 percent, compared with 29 percent for nonprofit private institutions, according to the College Board. 

I know the math seems weird, but the decline in support and the increase in tuition are roughly equivalent. 100/(100-24) - 1 = .31; this is the amount that tuition needs to grow on its own to account for the decline in funding (as a rule it takes a larger percentage increase to compensate for a percentage decline). Plus the 29 percent growth at private schools, the normal rate of cost increase in the industry - and similar to the rate of inflation (about 3 percent), tuition should have increased 60 percent. That means only 12 percent of the growth in cost over the last decade is not explained by those two factors; only 1.2 percent a year.

Ohio is emblematic of this change:

• Ohio’s flagship university, Ohio State, now receives 7 percent of its budget from the state, down from 15 percent a decade ago and 25 percent in 1990. The price of tuition and fees since 2002 increased about 60 percent in today’s dollars. 
• In the late 1970s, higher education in Ohio accounted for 17 percent of the state’s expenditures. Now it is 11 percent. 

Similar to the subprime mortgage problem, the problem started with a scummy business model and spread from there:

• Students at for-profit colleges are twice as likely as other students to default on their student loans. Moreover, among students seeking a bachelor’s degree, only 22 percent succeed within six years, compared with 65 percent at nonprofit private schools and 55 percent at public institutions. 

Obviously, all of this leads to calls for reforms. The need is obviously there, because the demand for college education isn't going anywhere. People with bachelor degrees make, on average, make twice as much money as workers without. There are a host of other general life benefits that a college education brings too. Including family stability, health and high levels of opportunity for their children.

But if we're going to make changes, what should we do? The answers aren't perfectly obviously, and I normally have very little sympathy for most people with student debt. Most people that incur debt in college manage to pay it off. The average is only 23 grand, the median is half of that (12,800). This means that over half of students who graduate college with debt only have to pay 13,000 dollars back. Considering that almost all (94 percent) of college graduates have some debt, this is a pretty representative description of the "cost" that recent grads face.

For all of the benefits that come from a college education, that's a reasonable debt burden. I don't see any reason to agitate against that.

Once you start to see the problem in that light, the actual issue becomes much more clear. Student debt follows the distribution of a power function. Most people aren't in that bad of shape. But 10 percent of college grads have more than 50 grand in debt and 3 percent have more than 100 grand. This is where something needs to be done.

The challenge with this, though, comes from dealing with the source of student debt and the financing of college. A student union would have to convince everyone else to help pay for the college educations of a incredibly small proportion of total college grads (those students truly drowning in debt). They would directly benefit, while the rest of society probably wouldn't see any obvious increase in their well-being.

At the same time, 90 percent of this debt is held by the federal government. Stopping payments to agitate against "the banks" wouldn't do any good. It's also why discharging student debt is so goddamn hard. You owe the feds, who can be infinitely patient and especially coercive in making sure you pay.

This means that there is some room for flexibility too. Obama keeps talk about debt relief for people with underwater mortgages, maybe something could be done for college grads with underwater college debt (i.e. no hope of ever repaying it). Under normal conditions, they should have qualified for a pell grant or some other form of direct funding. So why don't you just give it to them retroactively?

More important, though, is making sure that the remaining 90 percent still has the means to repay their debt. This is becoming harder because of the state of the economy, and it is not a problem with student debt in and of itself. A normally functioning economy doesn't have baristas with master's degrees. The job market for recent college grads is especially bad right now, even though their long-term prospects remain relatively good. This is just further justification for some efforts beyond monetary policy to help improve the labor market.

Liquidate the Debt!

Continuing on the discussion of the Gold Standard, we have Ron Paul's statements on debt, the lynchpin to the Gold Standard's failure.



I'm not always sure what Ron Paul means by that, and I'd appreciate better clarification. I often worry that it means defaulting on US debt, since this is what Paul seemed to want during the debt ceiling debate. I believe that would cause a lot more harm than good. Since interest rates continue to be low, even though (or maybe because, causality on this isn't always clear) the US is one of the last developed economies that hasn't dropped back into a recession, the US could borrow and spend its way out of the depression.

That doesn't mean borrow and spend forever. But it does mean doing something other like stopping the 15,000 + government layoffs happening every single month.

The chart is indexed, instead of based on a specific value. Pay attention to the trend. Via Matt Yglesias.

If the Federal government would have stepped in and financed state governments further, we'd have saved the jobs of 1.3 million federal workers. That's more than a percentage point in the unemployment rate.

There's a limit to this, of course. You could say that this would last until the private economy adds an average of 300,000 jobs for 6 months straight. By then, recovery should be well set in.

Like the WWII debt, which was never technically paid off, over a long enough horizon, that debt wouldn't matter too much in the long run. If you finance it at 30 years with the tiny interest rates on long-term US bonds, enough growth and moderate inflation would make it go away. As I've written before, it's debt to gdp ratio that matters most, not the nominal value.

I do believe that private debt overhand continues to be a problem and it is a big problem in many other countries. The Obama administration has tried and failed twice to bring some form of mortgage relief to borrowers. I'd be interested in seeing how Paul would manage to do that, since private debt is obviously a huge depressor on private spending right now.