There’s Class Warfare, All Right,” Mr. Buffett said...

There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

This is the first post in what I plan to be a series of posts on the history, status and immediate future of the welfare of average American citizens and households. 
I will start with two extracts -- the first from a conversation with Warren Buffet reported in the NYT, the second from "Sudden Debt", one of my favorite bloggers:

In a conversation with Mr Buffett  (NYT 2006)

ProfessorBrad DeLong on Macroeconomics

 DeLong summarizes Jean Baptiste Say, JS Mill, Malthus and Niall Ferguson

Copied completely from Professor DeLongs site

 What Does Cutting-Edge Macroeconomics Tell Us About Economic Policy for the Recovery?

from Grasping Reality with Both Hands by Brad DeLong

 (Emhasis mine)

Let us start with one of the first economists, Jean-Baptiste Say.
Say wanted to be a technocrat, and was well on the way—special assistant to Girondist Party Finance Minister Etienne Claviere in the early days of the first French Republic. His patron was fired, purged, arrested, imprisoned, probably tortured, sentenced to the guillotine, which he cheated by committing suicide the day before his scheduled execution.

US Borrowing, Debt and Growth Part 1

Below is a picture (Chart 1), for the last three decades, of the total amount of money Americans borrow each year.  The credit is provided, primarily by American banks for

1. American households, 
2. American businesses, 
3. American banks, 
4. Various branches of American government.

By far the majority of credit is provided to the "private" that is the "non government" sector, which are the first three sectors above.

Contrary to much of Main Stream Media and politician noise, private borrowing and private debt has been our primary borrowing and debt problem.  It has not been government borrowing and government debt.

It was only in the last couple of years (since Q4 2008) that the Bush administration, with the complete agreement of the incoming Obama administration, and the Federal Reserve, that the US federal government (USG) bailed out the private banking system, and thus took on the responsibility for redeeming private debt.

Thus did we middle class Americans have the excretions of bankers and conniving politicians dropped on our unwitting heads.

The USG got involved because the world credit "suddenly" froze and bank lending ceased.

In less than two years, Americans changed from borrowing about $4.5trillion per year to borrowing less than nothing -- whatever that means.  (More on that in later posts).

What does that signify?  Sound and Fury Signifying Nothing?  Just a Bump in the Road of  Perpetual Economic Growth?  A Harbinger of Economic Doom?

You will find my answer at the end of this piece.

This post is the first of a bunch of wonkish, but hopefully commonsense and easily understandable posts on the subjects of American borrowing, American debt and American economic growth (US GDP).

Chart 1.  Total US annual borrowing.  Data from the Fed Flow of Funds Table D2
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GDP Growth Rates, Debt and Tooth Fairies

Last Friday the Bureau of Economic Anaysis (a federal government bureau) issued their corrected GDP numbers for the last several years.  This post uses this updated data to begin the first of a few posts on Growth in a time of Debt.

Chart 1: BEA Quarterly Annualized Seasonally adjusted US GDP growth, 2005q1 thru 2010q2
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President Reagan's Budget Director Finds Religion

David Stockman is (was?) a staunch Republican.  He was director of the Office of Management and
Budget under President Reagan.  Below is his oped piece in the NYT.   It is a short and extremely accurate description of what four decades of living beyond our means and three decades of Reaganomics and subsequent Republican ethics and economics has wrought.  It is well worth reading.

Why the Bush Tax Cuts Should Expire

From the Washington Post -- Emphasis mine

Five Myths about the Bush Tax Cuts

By William G. Gale

Sunday, August 1, 2010

The cuts lowered tax rates across the board on income, dividends and
capital gains; eventually eliminated the estate tax; further lowered
burdens on married couples, parents and the working poor; and increased
tax credits for education and retirement savings. Obama's proposal would
extend most of these reductions, allowing only those for individuals
making more than $200,000 and families making more than $250,000 to
expire....

Drones and Deficit Spending..

Let's see now, what were we saying about increased increased US federal government expenditures and deficit spending under the Obama Administration?



From the BBC Urdu service

Since January 2009 nearly 2,500 people have been killed in Pakistan as a result of US drones and Islamic militant attacks. The graphics above show how Islamic militant strongholds in the border area close to Afghanistan have been targeted by US drone aircraft, while, at the same time, Islamic militants have carried out attacks across Pakistan.

Missile attacks by US drones in Pakistan's tribal areas have more than trebled under the Obama administration, research by the BBC Urdu service shows.

President Obama's Budget Deficit Problem

The US FY 2011 budget (published early 2010) was the first budget assembled by the Obama administration.  It was based on data available in the fall of 2009. 

TARP (approximately $700 billion, initially targeted at bank bailouts), had been passed by a Democratic Congress, and signed into law by President Bush in late 2008.  The incoming Obama administration agreed with TARP.