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I think most of what you are saying is overshadowed by two points that were made in the article:

1) Every bridge, road, factory, and in fact most of our economy is build on the (nearly) free energy that we get from pulling hydrocarbons out of the ground. I'm not morally justifying it, but if a couple hundred billion spent on war, allows Iraq to quadruple oil production, then we will recoup those hundred billion by using that (nearly) free energy found in those Iraqi hydrocarbons.

2) Regan's or any other era's budget deficits pale in comparison the the unfunded liabilities of Medicare and Social Security. The deficits are manageable, but the retirement and health promises are not.

how does a 'couple hundred billion' = nearly free energy. It clearly isn't nearly free if you are paying a couple hundred billion. If US gdp is 14 trillion, a few hundred billion for access to energy is a fairly significant number.

Let's say the energy cost of building a new bridge is $500,000 worth of hydrocarbons. Now, let's compare that to non-hydrocarbon energy sources. Historically, this might be steam from burning wood, or a team of mules. What I am saying is that $500,000 worth of wood or mules is so much less energy than $500,000 worth of oil, that the oil is nearly free in comparison.

Think about it: what other fuel is just sitting around, storing millions of years of solar energy, and waiting to be extracted and burned???

This is a key economic concept that must be understood when discussing oil.

1) what about the cost of diverting resources to finance the war? what of the health costs we incur for the health benefits of the wounded, support of their families, etc? You're not addressing my point. You're merely reinforcing it by being as short-sighted as the author of the article and not going far enough to compute the actual costs.

2) huh? did you see the debt reagan left us? and again, my issue is we're spending money on wars and cutting it from education and other vital investments, anyway. medicare and social security are a different discussion.

Oil is THE resource right now. The author is saying that when that ceases to be true, all bets are off, and we won't even recognize civilization.

Plus, you don't think healthcare depends on oil?

"Regan's or any other era's budget deficits pale in comparison the the unfunded liabilities of Medicare and Social Security."

Actually, the biggest unfunded liability is the interest on the money that our Department of War spends. We borrow that money, and leaving alone the issue of defaulting on these loans or inflating them to nothing, borrowing all that money has a huge cost. I like to toss out the amount of $1.5 trillion a year on "defense," adding the cost of the interest on the loans - probably not a bad estimate.

> Cutting taxes while also increasing spending is not fiscally responsible

Reagan didn't cut taxes. He cut tax rates but revenues actually increased. You can argue that revenues would have been even higher without the tax rate cuts, but then you get to argue that people don't respond to tax rates.

> FDR didn't get us out of the Great Depression. That's right. WWII did, deficit spending did.

Actually no. FDR waged a war on production until WWII made that impossible. You can't have an arsenal of democracy that doesn't produce things.

> Green technology (nuclear, solar, whatever, let them dish it out with some subsidies to offset initial costs) has to be the answer nowadays.

Spain is finding that each green job costs more than one not-green job, and the green jobs are temporary while the not-green job losses seem to be more persistent.

debt as a percentage of gdp: http://zfacts.com/p/318.html

It frustrates me that people who are crying foul over our current debt praise Regan and his policies. He's not to blame only. The congress at the time has it fair share, of course.

edit: didn't read the article (just view the plot, it's the first i could find)

IIRC Reagan proposed a balanced budget, had the Grace commision recommending large cuts in government spending/programs through privatization. This was completely rejected by Congress, and Tip O'Neal said the budget was 'Dead On Arrival'.

Why does Reagonomics get such bogus credit for fiscal responsibility?

Bit of historical trivia: Reagan wanted to cut taxes and cut spending. The Democrats let him cut taxes but were going to give him a good thrashing if he tried to control spending. He decided he would rather be popular than have a fight, so he took the tax cuts and ran the deficit up.

Untrue.

Year after year, Reagan rejected budgets Congress allotted and always sent it back for more spending, not less.

Reagan arrived in Washington with a full head of steam, vowing, as he put it in the major economic speech of his 1980 campaign, "to move boldly, decisively, and quickly to control the runaway growth of federal spending."...To help compensate for the tax cut, his first budget called for slashing $41.4 billion from 83 federal programs, only the first round in a planned series of cuts. And Reagan himself made known his desire to eliminate the departments of Energy and Education, and to scale back what his first budget director David Stockman called the "closet socialism" of Social Security and Medicaid....At the start of his administration, with Social Security teetering on the brink of insolvency, Reagan attempted to push through immediate draconian cuts to the program. But the Senate unanimously rebuked his plan, and the GOP lost 26 House seats in the 1982 midterm elections, largely as a result of this overreach. The following year, Reagan made one of the greatest ideological about-faces in the history of the presidency, agreeing to a $165 billion bailout of Social Security.

http://www.washingtonmonthly.com/features/2003/0301.green.ht...

$41.4 while eliminating the department of education.

$165 billion bailout of social security.

Okay, that doesn't mean much. Put it in context. How much was Reagan spending on defense and other discretionary items? That's the track record I'm talking about.

http://www.heritage.org/Research/Features/BudgetChartbook/De...

(first plot i could find)

> get us out of the Great Depression ... WWII did, deficit spending did.

Absolutely false. Personal well being continued to fall dramatically through the war. GDP went up because the government was buying weapons, i.e. digging and filling holes. Unemployment went down because people were drafted, essentially enslaving the unemployed. The depression did not end in any meaningful sense until the war ended and government spending was reduced. Only in 1946 when you finally had the conditions that both the New Deal morons were gone and the war economy was being shut down did living standards begin to improve.

> the point is to evaluate the true cost of something

Only the free market can evaluate the true cost of things. A panel of human beings cannot possibly make a meaningful calculation: there is too much ambiguity and unknowable data. The things "worth the cost" win out and the things not worth the cost go bust in the market.

Your points about the government subsidies to the petroleum industry are quite valid, but you seem to miss that the basic failing is government itself. If oil related businesses had to carry all security and business risk related costs themselves, that would be clearly reflected in prices and substitutes would be more competitive. The problem is that somebody in government decided geopolitical hegemony is "worth the cost."

Everything you said about the post WW2 recovery is accurate I believe. Keynesians at the time were convinced the depression would resume once the war ended.

It is interesting to note that the modern Keynesians have turned on FDR. They always are unhappy with his trying to balance the budget after years of New Deal policy failed. They have turned on Hoover because he gave up as well after his version of the New Deal failed. They seem to forget that Keynes himself approved of what Hoover was doing. Their instance on the notion that a stimulus program is never large enough to explain their failures is a pretty old one.

It's obvious government spending had to decrease and that's what should happen after the country is somewhat back on track and growing. But did WWII and (thus deficit spending) not get us out of the great depression? It's obvious the quality of life wasn't great when you had people forgoing resources to fund an important war.

The growth after the great depression came as a result of the Cold War when the US started spending on nuclear technology, missile defense, what have you. The US also invested on its citizens and education with the GI Bill among others, etc. This does not refute my point--and that is, to clarify, perhaps, that the problem isn't government spending, it's what it gets spent on.

Only the market can evaluate the true cost of things? This assumes markets have all the information or that someone is willing to invest the money to obtain it--otherwise you have an inefficient market. Here's where for the good of all, some central body like a government, can put in the cost to find out or to avoid a market collapse. For example, what would have been the cost of letting AIG and major banks fail? The markets wouldn't care since every individual would be concerned with their losses in the panic. That is, the markets aren't always as rational as people make them out to be--you know this. To argue otherwise is as idealistic as well, you name it. In fact, your last point validates this point. The cost of not passing TARP and the Recovery act would have been passed on to us--and some argue, and I believe, such cost would be greater... also, assuming you can control spending when the country is back on track (due to debt). So either way, we're paying... might as well, then, ensure our financial system is stable and that we can continue to invest in education and green technology instead of risking an entire system collapse as we ensure our economy grows.

When interest rates are at 0% and the country isn't growing, something has to give. Cutting government spending is stupid. If you're running a business how's a tax break going to help you? Will you keep people employed? Not very likely. So as employment continues to rise, more people freak out, and more people are let go. Is that the kind of downard spiral we want? This is when a government needs to step in and say, no.. we're keeping these jobs, we're creating some here, otherwise, who's going to take the risk? There's a psychology to this, I think, that often gets lost in "market analysis." People who are uncertain about the economy will stop spending, so how do you promote spending? By giving them a few hundred dollars without ensuring that their job isn't going to be there a year or two from now?

I was also taught this story that WWII got the US out of the Depression, but I suspect it may not actually be true. The bottom of the stock market was in 1932; from that point till 1938, when fears of war caused another crash, it was sharply up.

http://symonsez.files.wordpress.com/2008/10/graphic_chart_cr...

Right. Technically we came out of the great depression, had a recession in between, etc. That's where neo-keynesians criticize FDR. The dip in 1937 coincided with a FDR being pressured into balancing the budget. It's much more complicated than this, but I used the WWII reference because usu. the next best answer is WWII. Now I'm told, that WWII wasn't responsible either!? What gives?

The Federal Reserve was able to start the boom bust cycle again until 1937 when the bust started another mini-depression. I'm sure speculation about war had some part to play in this but the markets are usually bad about predicting wars. The immediate impact of war in Europe wouldn't have been that bad for Americans at least because international trade had dropped off considerably following a wave of rising tariffs and uncertainty in the global banking system.

World War 2 more than anything else forced the government to cut spending and pay off debt and while there was a depression following the war it followed the pattern of the 1920-1921 depression. In that depression the government did nothing to intervene and the recession while severe was over and almost no one remembers it. The other major factor in the recovery was the fact that the US had almost no competition for its factories and agriculture having been basically untouched at home by the war.

In the end war cannot create wealth it can only direct the wealth that was created for peaceful means elsewhere for the purposes of destroying wealth somewhere else.

"World War 2 more than anything else forced the government to cut spending and pay off debt"

Yer what? US debt-to-GDP ratio in WWII was at an all-time record high, because they were busy paying for the whole war thing. War is extremely expensive. See this graph: http://www.preemptivekarma.com/archives/National-Debt-GDP.gi...

After the war the US was forced to cut spending and pay back debt. The spending they had to cut were the New Deal programs that were holding back the economy from recovering.

> markets have all the information

Markets do have all the available information. But no person or group of people can ever process all the information in a meaningful way. Only the market itself can process the huge amount information dispersed among participants.

The rest of your post is silly "animal spirits" pseudo-keynesianism. No, the government cannot usefully manipulate the business cycle or limit damage from failing businesses. Even Keynes himself only ever really tried to say government could stop a major slide from happening in the first place. He said it would be too late to intervene post-crash.

Markets don't have all the information. You didn't disprove that.* My point is that someone needs to help with making "all available info" (whatever that means) possible in the first place. It's not always efficient for markets to do that themselves, at least upfront.

*For markets to have all information upfront, it means we know exactly how the universe works and we can predict that an 8.8 earthquake is going to strike Chile on February... etc. Because of this, markets are greatly reactionary and my point above is also that markets don't always react rationally. I'm not arguing that they are not the most efficient system we have under most industries, also--to be clear.