The Guardian Unlimited: The Deficit Hawks: When Did They Stop Being Wrong About the Economy?

[Wrong Direction]

But let's consider somebody that is REALLY abusing the system and has been doing so for a while.

Right now, you cut them off of SS, what is going to be the effect.

They haven't been employed for a while, they probably haven't kept on any sort of educational level that would allow them to get a job.

Do you think they are going to get a job (do you think everybody that is currently un/under employed doesn't want a job)?

I believe it's an outlet to get people out of work and that the best thing for society is to remove those outlets and force them to contribute to society however they can. I don't like the mentality that people are above fast food service, or day laborers, or [insert entry level position here].

You don't need a college education to succeed in this world. You need a foot in the door, a good attitude and a willingness to show up on time and learn. With those things, you gain experience and knowledge that helps you move up as you become more qualified. By subsidizing people to not work, we're not only paying for many people who could earn the same benefit themselves (an unnecessary strain on our budget), we're also removing that potential for personal professional growth. In short, we're subsidizing a second-class citizenry. This is the crux of the welfare reform argument from the 90's and it's just as true today.

[Edit: oops...deleting some of the quoted post to comply with site rules immediately after seeing Jumbo's post above mine.]

[Tulane Skins Fan]

So, economy shrank this last quarter, actually contracted .1%: http://www.washingtonpost.com/business/us-economy-shrinks-01-pct-first-time-in-3--years-deep-cut-in-defense-spending-key-factor/2013/01/30/9dc71c80-6ae1-11e2-9a0b-db931670f35d_story.html?hpid=z1

Due to... a lack of government spending.

[Wrong Direction]

How do you think that will create jobs, or increase GDP?

Wasteful spending is unproductive spending. By definition, unproductive spending produces lower utility than productive spending. Right now, throughout the federal budget (IMO), we have budgets that are capped out with unproductive spending and we're paying interest on that spending as far as the eye can see. You can see it with just about every tennis court or bike trail in the recovery act, you can see it at the end of the year when most federal departments dump their EOY money into technology gadgets or any other contract vehicle just so they don't lose the funds. It's everywhere in Medicare and likely to be similar with defense (I have more background on the former).

And the government spending is a choice. We can either let politicians and bureaucrats decide what to spend without any self interest except the politician's desire to get re-elected, or we can let the private sector decide how to spend on something that benefits them directly.

This is a general philosophy. Don't assume I'm saying all private spending is more productive than all federal spending. Nothing is absolute. However, by constraining budgets, you force the feds to better prioritize their resources, which means we get more for our money than we are today and we leave more to the private sector for better targeted projects (micro) or simply a stronger dollar by virtue of lower debt (macro).

---------- Post added January-30th-2013 at 09:28 AM ----------

So, economy shrank this last quarter, actually contracted .1%: http://www.washingtonpost.com/business/us-economy-shrinks-01-pct-first-time-in-3--years-deep-cut-in-defense-spending-key-factor/2013/01/30/9dc71c80-6ae1-11e2-9a0b-db931670f35d_story.html?hpid=z1

Due to... a lack of government spending.

That's waaaay too simplistic. If we had a strong private sector, any very small cuts in federal spending would be outweighed in the GDP by the private side. What were those huge federal spending cuts in Q4? The real reason is likely the public's respose to the unknown (fiscal cliff).

[Tulane Skins Fan]

That's waaaay too simplistic. If we had a strong private sector, any very small cuts in federal spending would be outweighed in the GDP by the private side. What were those huge federal spending cuts in Q4? The real reason is likely the public's respose to the unknown (fiscal cliff).

I agree with the part about if we have a strong private sector....

the problem is, we don't have that now. Its strengthening slowly, which still tells me its not times for cuts. IF we had a strong private sector, I would say its time for government cuts.

What I'm saying is that cutting government spending does not CAUSE a strong private sector. Agree or disagree?

[Wrong Direction]

I agree with the part about if we have a strong private sector....

the problem is, we don't have that now. Its strengthening slowly, which still tells me its not times for cuts. IF we had a strong private sector, I would say its time for government cuts.

What I'm saying is that cutting government spending does not CAUSE a strong private sector. Agree or disagree?

I don't think the answer is as simple as posed.

Some government cuts affect bad guys (tax cheats, fraudulent docs, entitlement mooches). If you're looking only at headline numbers like unemployment, the cuts usually won't help in the short run. However, the underlying story is more important, IMO. If you put the country on the right path now, you help the budget for years to come. A stronger budget means a stronger dollar. A stronger dollar means more for your money. More for your money means we will end up buying more things. Buying more things helps more producers. Healthy producers means you have more people employed. More people employed means you have less entitlement spending, an even stronger dollar, more purchasers, etc.

This is the case for ending entitlement mooching too, but that also ripples through our culture. Work is associated with better behavior in general, meaning less crime, less fatherless children, less drug abuse, more dignity in general. The more we allow people to mooch on government, the more our culture will decline. Might that result in a short term increase in unemployment? Yes. However, leaving those programs unchecked simply results in a longer term drag on employment anyway, so it's a choice between mediocre at best current and future numbers and slightly worse current numbers and better future numbers.

[Tulane Skins Fan]

We're really arguing about sequence. My point is that you get the economy going first, and then make those cuts for a longer term view. Now is not the time.

And I think its true that if we did this 4 years ago, or even 2 years ago, we would be much worse off today than we are.

[Fergasun]

1) There are discretionary spending caps in place as a result of the "Budget Wars of 2011-2012". The discretionary spending caps for FY13 are subject to sequestration on March 1 of this year. Contrary to what folks want you to believe, these caps were put in place through some type of budget process that went through the House and Senate.

I think discretionary spending is now frozen to FY2011 levels and levels are set through FY2021.

2) We can assume Paul Ryan's FY13 budget will be similar to his FY11 and FY12 "Path to Prosperity" budget. Even so, if you want a more austere budget you can look at the Republican Study Committee budgets for FY11 and FY12 (not sure if they did anything for FY13).

3) Contrary to what SHF has posted, "austerity" has hit DoD with budget cuts. More will hit with sequestration right around the corner. No doubt sequestration cuts could get offset from somewhere else in the budget.

4) No one wants to be singled out for "austerity measures". If there's no stomach for the "doc fix" every year how are there going to be further cuts to Medicare? The only way any "austerity" will be done is through some grand bargain. The GOP is there politically (and the far right was there when Obama came into office), but the rest of the country isn't. I really wonder if Romney would even be pushing for these, he didn't make it part of his campaign at all.

5) Everyone wants to attack "wasteful spending" but how much is really wasteful? Even if it was something like 5%... cutting wasteful spending may unintentionally go after useful spending.

6) If you look at the long term trends, government spending is keeping us from recognizing a 10-15 year depression. One way of looking at this is "good... things could be worse". Another way of looking at this is "tons of companies/individuals are functionally bankrupt, yet government spending is keeping them marginally afloat". So we've got basically marginal growth over 10 years, and marginal growth over the next 10 years as a country.... potentially.

A potential policy change could be for Federal policy-makers (and Fed Reserve) to go in the opposite direction and force everyone into bankruptcy. It seems like this would result in a ton of economic pain over the short term; but then markets would clear out (at least those who propose this believe). What would we do if 20M more people were unemployed/bankrupt lost houses, etc. (which in turn would force the banks to de-lever?).

I don't know what this would do for global economic instability... seems like it would be good domestic policy for deficit hawks, but very bad in terms of global economy.

[PeterMP]

Wasteful spending is unproductive spending. By definition, unproductive spending produces lower utility than productive spending. Right now, throughout the federal budget (IMO), we have budgets that are capped out with unproductive spending and we're paying interest on that spending as far as the eye can see. You can see it with just about every tennis court or bike trail in the recovery act, you can see it at the end of the year when most federal departments dump their EOY money into technology gadgets or any other contract vehicle just so they don't lose the funds. It's everywhere in Medicare and likely to be similar with defense (I have more background on the former).

And the government spending is a choice. We can either let politicians and bureaucrats decide what to spend without any self interest except the politician's desire to get re-elected, or we can let the private sector decide how to spend on something that benefits them directly.

This is a general philosophy. Don't assume I'm saying all private spending is more productive than all federal spending. Nothing is absolute. However, by constraining budgets, you force the feds to better prioritize their resources, which means we get more for our money than we are today and we leave more to the private sector for better targeted projects (micro) or simply a stronger dollar by virtue of lower debt (macro).

1. Your assuming that the industry will spend the money, and even more so that they will spend it in the US in a way that benefits the US.

2. A strong dollar has disadvantages too. A strong dollar makes it harder to export, which means fewer jobs and normally means more imports so more money going to other countries.

As for your response to me (one of the other above posts), I don't disagree with anything you've written really, which I though would have been pretty clear in my initial post.

That doesn't mean that right now doing those things, especially in the context of actually cutting the federal budget, is good for the economy. I do agree it always makes sense to minimize waste and fraud where possible, but I don't see why the relevant money couldn't be redirected to other things that would have more value.

[JMS]

Paul Ryan's plan balances the budget in ten years supposedly.

Lots of people are calling for a balanced budget.

No and No..

Actually that's not really true at all. Paul Ryan's "budget balancing act", endorsed by the entire GOP was never about balancing the budget, or fiscal responsibility. Ryan's goal was smaller taxes and smaller government, not fiscal responsibility or actually ever balancing the budget. It's a reiteration of the ideology which created the deficit

not a path to address the deficit.

Remember during the campaign Ryan declined to mention a year when his plan would actually balance the budget.

(Paul Ryan's Plan) wouldn’t balance the budget until after 2040. (28 years out... the fiscal planning equivalent to never).

In fact, looking at the next 10 years—the budget window that really matters to Congress—Ryan’s deficit would be roughly identical to the Congressional Budget Office’s baseline. At the end of the period, in 2022, they’d be exactly the same.

http://www.forbes.com/sites/beltway/2012/08/14/paul-ryans-real-goal-its-not-a-balanced-budget/

---------- Post added January-30th-2013 at 12:07 PM ----------

Wasteful spending is unproductive spending. By definition, unproductive spending produces lower utility than productive spending. Right now, throughout the federal budget (IMO), we have budgets that are capped out with unproductive spending and we're paying interest on that spending as far as the eye can see.

(1) Yes we are paying a whopping 1% interest on our debt.... not that much..

(2) On unproductive spending, You say our current spending is capped by unproductive spending. I would argue any infrastructure spending is by definition productive, as the economy will get the benefit of that investment for decades to come... while any excess military spending is by definition unproductive because if you need 10 tanks and build 20, there is no benifit to the economy beyond the jobs created by building the excess tanks,

The real reason is likely the public's respose to the unknown (fiscal cliff).

Exactly... The GOP's propensity to driving the country into financial crisis as a negotiating tactic is a disaster. Quarters where the country faces a GOP self inflicted fiscal gunshot wound we see no investment, no jobs, and little growth. Quarters where we don't face GOP's threats of causing impending disasters, our economy actually starts to recover....

You would have thought they would have leaned their lesson when they caused our credit rating to be reduced from AAA to AA...

[Kindred]

No and No..

Actually that's not really true at all. Paul Ryan's "budget balancing act", endorse by the GOP was never about balancing the budget, or fiscal responsibility.

Ryan's goal was smaller taxes and smaller government, not fiscal responsibility or actually ever balancing the budget. It's a reiteration of the ideology which created the deficit

not a path to address the deficit.

Remember during the campaign Ryan declined to mention a year when his plan would actually balance the budget.

This. IMO Obama has us on the EXACT path we need to be. An initial stimulus to restore consumer confidence and stabilize the economy to pull it out of a recession. Outside of the stimulus, no significant growth in regular govt spending. Once the economy picks up a little, higher taxes on the rich (which has a minimal impact on demand), and moderate cuts in govt spending. As the Affordable Care Act goes into effect we'll get healthcare reform, and hopefully we'll be able to tackle reforming the other entitlement programs as well. We are gradually restoring fiscal responsibility in this country.

[JMS]

1. Your assuming that the industry will spend the money, and even more so that they will spend it in the US in a way that benefits the US.

Ultimately the liberal argument isn't for the government to employ everybody and continue these monster deficits. The liberal argument is for the government to spark the economy, create demand, and give private business the incentive to invest the trillions of dollars on their books which based upon current economic conditions private industry leaders see no reason to invest. Private industry's perception that their is no money to be made is ultimately what is keeping the economy from returning to full capacity and health. If the initial spark could be created to induce private industry to return to investing in their businesses, government wouldn't need to prop up the economy with these huge deficits.

Coarse we don't have any liberals in positions of responsibly in government anymore... we have only pragmatists and whackadoodles... Pragmatists lead by Obama don't want to dramatically cut spending (*) sharply because it will lead to a contraction of GDP, unemployment to spike, the deficit to get larger and our national debt to be harder to pay back. That's the plan we have been on... Crawling our way forward.

(*) Obama has actually cut Deficit to GDP number by 30% over his first term in office... He's done this mostly by growing GDP via responsible fiscal policies... ( not pulling the rug out from under the country, or advocating policies designed to collapse segments of the economy).

The whackadoodles lead by Ryan (**), the Tea Party, and seemingly representing the GOP, who created the deficit, don't care about the deficit... They want to use the crisis to roll back government specifically the new deal programs they've tried to roll back ever since they were passed 70 years ago. They have no plan to reduce the deficit, no demonstrated capacity over the last 30-40 years to reduce the government... They want a return to the "golden era of capitalism" as they see it.... The 1890's when trusts ran the economy, when most of the people lived at or below the poverty line, and when 1 out of every 11 industrial workers could expect to die on the job in any given year. They see the current crisis as a great opportunity to push that agenda, while not actually addressing the crisis..

I think Dick Cheney summed up the GOP position the best.

"You know' date=' Paul, Reagan proved deficits don’t matter."

[url']http://www.salon.com/2009/03/27/deficits/[/url]

The silence by all other GOP senators and congressmen at the time was deafening and turned me from a life long Republican

into a Democrat for the foreseeable future. The three pillars of conservatism under Reagan were Fiscal, Social, and Foreign Policy..

The only conservatives left in the GOP today are social conservatives...

(**) This is not to say Ryan is a whackadoodle... I don't think he is... He is worse... A whackadoodle believes in his extreme position, Ryan doesn't. Ryan never met a budget bill or a record deficit he didn't endorse before the democrats took over the white house in 2008. Ryan voted for the budget's which created this crisis under Bush and only started pretending to care about fiscal responsibility after the tea party ushered in the largest freshman class of congressmen since the new deal. Ryan is a political opportunist who caters to the whackadoodles in order to elevate himself... So far it's working out great for him, not so much for the country.

[ncr2h]

^^ Man, I thought this type of propaganda would end after the elections.

Let me see if I'm up to speed. The good guys just want everyone to be happy and wealthy. The bad guys are plotting to take the country back into the dark ages. They want 1 out of every 11 workers to die on the job, so long as it means a few hundred more dollars in their pockets every year from the taxes they don't have to pay. The only thing keeping the good guys from beating the bad guys and living happily ever after is that the leadership of the good guys is afraid to make any truly bold moves. Is that how it goes?

Cmon JMS, we've seen much, much better stuff from you on this board in the past. This is just the typical, "Oh, you'd like to end social security? YOU EVIL CREATURE, YOU MUST WANT EVERYONE TO DIE!" that we get during elections, which effectively constrains the debatable topics to basically nothing. Oh, you want to stop sending aid to Israel? Anti-semite. Hitler v2.0. Oh, you want an immediate withdrawal from Afghanistan? Vagina.

[PeterMP]

Since there was talk of a strong dollar, I thought I'd give some real info on that front:

"Nonetheless, it’s narrow-minded to talk about a strong dollar and ignore the fact that U.S. exports have increased sharply in recent years, in part thanks to a weaker greenback. Four years after the Great Recession ended, American exports are up 44% through June 2012, according to Census Bureau data. In 2010, exports’ share of U.S. GDP was 13%, up from 11% the year before, the World Bank reports. Roughly 10 million full-time jobs are directly related to exports, based on 2008 data, the International Trade Administration advises, which equates with nearly 7% of total employment.

Exports, in short, are big business, and getting bigger. A recent Brookings Institution report notes:

U.S. export sales grew by more than 11 percent in 2010 in real terms, the fastest growth since 1997. In terms of job creation, the number of U.S. total export-supported jobs increased by almost 6 percent in 2010, even as the overall economy was still losing jobs.

Unsurprisingly, the data show that a weaker (stronger) dollar is linked with higher (lower) exports, as the chart below shows. It’s not a perfect relationship, but nothing ever is in macroeconomics. What the relationship implies is that a stronger dollar at some point will trim exports and, perhaps, jobs, and vice versa. Funny how that risk is never discussed by the folks who bang the table for a strong dollar."

http://www.capitalspectator.com/archives/2012/08/exports_a_stron.html

In a situation like the current economy, if your doing well and have a steady/dependable job (which includes me and my wife) a strong dollar is good.

If your unemployed or on the margins depending on manufacturing jobs to make a living, that's not so much good.

Sort of like how are leaders seem to weight lowering of the stock market (an emergency situation that has to be corrected) as compared to high unemployment.

[alexey]

...

Let me see if I'm up to speed. The good guys just want everyone to be happy and wealthy. The bad guys are plotting to take the country back into the dark ages. They want 1 out of every 11 workers to die on the job, so long as it means a few hundred more dollars in their pockets every year from the taxes they don't have to pay. The only thing keeping the good guys from beating the bad guys and living happily ever after is that the leadership of the good guys is afraid to make any truly bold moves. Is that how it goes?

...

How about, big middle class is good, growing income disparity is bad, Government taxing rich people and spending that money on infrastructure, research, and programs that helps less rich people can be a good thing and 1) equating such policies to socialism is idiotic, 2) there is a clear connection between our prosperity and government spending

[JMS]

^^ Man, I thought this type of propaganda would end after the elections.

You miss represented most of what I said in order to attempt to make your point.... But what is your point? Do you disagree that the GOP leadership has said deficits didn't matter when they were in charge of both houses and the white house? and pursued that policy for the last 30 years? Do you disagree that they want to roll back social programs? Do you disagree that Ryans budget which called for draconian cuts wouldn't cut the deficit or that Ryan himself wouldn't/couldn't identify a year even decades out when he targeted it to do so.

Do you disagree the time of unfettered capitalism is the GOP Golden age? If so when do you think their golden age was? Go for it.. please...

Dude do you even realize what conservatism means? By definition conservatives when faced with adversity seek solutions from a previous time. A previous time when to their eye things were working. That is the heart of what it means to be conservative. When faced with a problem, to seek known solutions from history... To oppose change and hold onto tradition. This generally leads to safe, dependable and predictable improvements because you are dealing with knowns... only not always because there are times when change is necessary.

The bad guys are plotting to take the country back into the dark ages. They want 1 out of every 11 workers to die on the job, so long as it means a few hundred more dollars in their pockets every year from the taxes they don't have to pay.

I never mentioned dark ages, I mentioned the 1880's... GOP policies object to consumer protections

instituted by the Johnson Administration of the 1960's..want to roll back New Deal laws passed in 1933, and don't want to enforce

the Sherman anti trust laws passed in 1890.... They call for big business to basically write their own regulations.... There ideal is

to get government out of the way... exclaiming government doesn't do anything right, never has, if gov would just get out of the way,

business would make all the right decisions. That's how I date their targeted golded age of the 1880's....

They want 1 out of every 11 workers to die on the job, so long as it means a few hundred more dollars in their pockets every year from the taxes they don't have to pay.

The GOP doesn't advertise that, but that is the reality of the 1880's and 1890's, when corporations ran the markets rather than consumers. When corporations were free to prey upon consumers and one another, stifle competition, and were unfettered by worker's protection. Basically what the GOP advocates we return too.

Cmon JMS, we've seen much, much better stuff from you on this board in the past. This is just the typical, "Oh, you'd like to end social security? YOU EVIL CREATURE, YOU MUST WANT EVERYONE TO DIE!"

Only GOP leadership has called for an end to social security the most successful government program ever which raised 80% of seniors above the poverty line when passed in 1933. The GOP called for that in 2007 and again in 2010; and then said they were the ones who could be most trusted to save it during the elections in 2012..... Basically their same argument they tried in 1936 as recounted by FDR's famous speech in Philadelphia..

Cross there hearts and hope to die the Republicans believe in Social Security..

http://www.youtube.com/watch?v=SUZGkNAUSvY&feature=player_detailpage

The only thing keeping the good guys from beating the bad guys and living happily ever after is that the leadership of the good guys is afraid to make any truly bold moves. Is that how it goes?

Our current choice of leadership is between pragmatism and lunacy... One has us crawling towards progress, which is bad, the other would cast us down into an economic abyss, which is worse. Yes I do think there is another way which neither party is advocating, and yes that is one of the problems with not having a liberal choice in government... Liberals by definition are folks with new solutions to problems and new solutions are what we need not the same thinking which got us into these troubles.... but then again pragmatism is better than stupidity, if those are my only choices.

[ncr2h]

Ok, I'm going to go back to hoarding my savings, laughing at struggling poor people, and murdering the elderly out of sheer spite. This thread is clearly only for the good people who want prosperity for all.

[JMS]

Ok, I'm going to go back to hoarding my savings, laughing at struggling poor people, and murdering the elderly out of sheer spite. This thread is clearly only for the good people who want prosperity for all.

Well if you are a republican you could also go back to satanic blood rituals, as one of those was put up for a senate seat recently by the GOP...

"Let's have a movie and a sacrifice!!"

Or you could attempt to harness your acerbic wit and actually address some of the charges you disagree with and we could discuss them.

Fundamentally current GOP leadership see's empowering corporations as a way out of our economic morass. That's there solution. It's the work horse "counter trey" standard in their playbook and has been for decades. What Ronald Reagan successfully did in the early 1980's they want to do in the 21st century. The fact that the issues involved in 1980 after 40 years of regulation are not the same as they are in 2012 after 30 years of deregulation are secondary to this primary distinction...

Rather than categorizing the GOP being the bad guys and the Dems being the good guy...Something I don't believe stands up to scrutiny over an extended period of time. Because I think their policies are more similar than they are different, right now, when in power. The big difference recently has been competence in the last two administrations, not really their policies. It's really the growing fringe in the GOP which scares me... and the conservative swing among Democrat leadership which annoys me.

[Elessar78]

How about, big middle class is good, growing income disparity is bad, Government taxing rich people and spending that money on infrastructure, research, and programs that helps less rich people can be a good thing and 1) equating such policies to socialism is idiotic, 2) there is a clear connection between our prosperity and government spending

For the most part I agree with you, but the discussion about infrastructure and other types of investment is moot because it doesn't address social security and Medicare. So we do tax the wealthy but it just ends up in the form of transfer payments to the poor. IF the taxes went to productive, un-extensively abused/gamed/wasted expenditures then I don't think there would be such a big backlash.

It's fine to help the poor but it has to be a little bit saner.

[Kindred]

The fundamental dichotomy between the Democrats and the Republicans is that the republicans believe in a philosophy that benefits individuals over the community, more specifically, benefits the rich and wealthy over the mass poor. Partly because of influences such as Ann Rand, partly because of the belief in trickle down theories, partly because of their own self (conflict of) interests, and partly because of influences from massive financial donors, lobbyists, etc. (the wealthy are able to push their agendas). The massive flaw in this concept is that wealth is funneled UP, not down (this is a fundamental DRIVING FORCE of capitalism). The wealthy and corporations look after their OWN interests first (as does everybody), not the interests of the community. So trusting that companies can self regulate or will do what's best for the country (create more jobs/invest in new opportunities even when there is no demand) is flat out ridiculous. It is the Govt's JOB to look out for the people, NOT by proxy of looking out for the interest of companies in the assumption that this will benefit the people. Our govt should determine and drive economic and tax policy DIRECTLY with efforts which increase job opportunities for the people, and increase salaries of the people. And not just the sexy high end jobs, but ALL jobs across all economic classes. Plumbers, carpenters, day laborers. We need to increase the wealth of the poor and middle class more than any other element of this economy. Think about it. Increase the wealth of the consumer mass >> increases nondiscretionary spending (i.e. they MUST spend this money to survive as opposed to discretionary spending by the wealthy that they MAY spend (on foreign goods and services at that)) >> increases demand for companies >> increases jobs >> increases tax payers >> increases budget surplus. And thus we get a beneficial cycle.

Bottom line: focus on policies that help the foundation of the economic pyramid and the economy will thrive, focus on policies which help the top of the pyramid only and the foundation crumbles and the top falls down.

[JMS]

For the most part I agree with you, but the discussion about infrastructure and other types of investment is moot because it doesn't address social security and Medicare. So we do tax the wealthy but it just ends up in the form of transfer payments to the poor.

Social Security isn't an issue.... It's made a profit for every year it's been around ( 80 ) except 1 - 2? If we do nothing it will be solvent for another 20 years or more... With modest tweaks it could be put in the black again and remain solvent for 70 years..... Again though for what we saved by repealing the bush tax cuts for ten years, we would pay for the current social security deficit for 70 years.....

The big problem is healthcare and medicare is a subset of that. Which is why Obama care was such an important first step. and why it's incredible the GOP fought him tooth and nail on that reform...

IF the taxes went to productive, un-extensively abused/gamed/wasted expenditures then I don't think there would be such a big backlash.

It's fine to help the poor but it has to be a little bit saner.

I think the problem is the folks on both sides of the argument don't agree on the fundamental reality of where the country is.

[Elessar78]

I think the problem is the folks on both sides of the argument don't agree on the fundamental reality of where the country is.

Which is what specifically?

[Wrong Direction]

Peter:

Re: strong dollar equals less exports...that's definitely true.

There's a real tradeoff. A stronger dollar generally gives consumers greater purchasing power. This is important for everything we purchase; particularly gas, food and maybe healthcare. A weaker dollar means more of our disposable income goes to that stuff, but it also means our products are cheaper on the world market, which results in more exports.

The argument is about the net impact of one versus the other. In a bubble, you want the strong dollar because the job growth from domestic production/services is greater than job growth in exports (which will only exist if America continues to become poorer relative to other nations). However, the reason we almost have to have a weak dollar now is because a strong dollar will often coincide with higher interest rates (to control inflation). Higher interest rates explodes our debt. This is one big way that the debt is constraining our growth both short and long-term.

---------- Post added January-30th-2013 at 04:02 PM ----------

This. IMO Obama has us on the EXACT path we need to be. An initial stimulus to restore consumer confidence and stabilize the economy to pull it out of a recession. Outside of the stimulus, no significant growth in regular govt spending. Once the economy picks up a little, higher taxes on the rich (which has a minimal impact on demand), and moderate cuts in govt spending. As the Affordable Care Act goes into effect we'll get healthcare reform, and hopefully we'll be able to tackle reforming the other entitlement programs as well. We are gradually restoring fiscal responsibility in this country.

To be honest, I don't necessarily disagree the result of this post, but I don't credit Obama. The truth is (IMO) that divided governmet has kept either party from going off the deep end on taxes or spending. Time will tell about implementation of health care reform. I'm not hearing good things re: status, but I haven't spoken to the people in the know about major specifics in months.

[alexey]

For the most part I agree with you, but the discussion about infrastructure and other types of investment is moot because it doesn't address social security and Medicare. So we do tax the wealthy but it just ends up in the form of transfer payments to the poor. IF the taxes went to productive, un-extensively abused/gamed/wasted expenditures then I don't think there would be such a big backlash.

It's fine to help the poor but it has to be a little bit saner.

On one hand I see reasonable, justified concerns about various problems with the government, and on the other hand I see this "big backlash" happening as a result of political rhetoric that is simplistic to the point of being idiotic.

I would call myself a "moderate Republican" if there was a meaning to the term in these crazy times.

There is nothing wrong with giving transfer payments to the poor... as long as you add free birth control and reduce those payments for people with more than 2 kids

It seems that we are not having meaningful conversations about government policy and other such things. There are entities benefiting from every aspect of the current system. Change is hard and the political dialog is naturally set against it.

[PeterMP]

Peter:

Re: strong dollar equals less exports...that's definitely true.

There's a real tradeoff. A stronger dollar generally gives consumers greater purchasing power. This is important for everything we purchase; particularly gas, food and maybe healthcare. A weaker dollar means more of our disposable income goes to that stuff, but it also means our products are cheaper on the world market, which results in more exports.

The argument is about the net impact of one versus the other. In a bubble, you want the strong dollar because the job growth from domestic production/services is greater than job growth in exports (which will only exist if America continues to become poorer relative to other nations). However, the reason we almost have to have a weak dollar now is because a strong dollar will often coincide with higher interest rates (to control inflation). Higher interest rates explodes our debt. This is one big way that the debt is constraining our growth both short and long-term.

1. But you only painted one side of the picture in your previous post. You paint lowering the debt as a win-win because you are going to strengthen the dollar. In this environoment, when a large part of the problem appears to be lowered consumption and less spending (in the private sector and at the individual level), exports are one way to grow the economy.

http://www.bloomberg.com/news/2012-09-28/consumer-spending-in-u-s-stagnates.html

"Consumer Spending in U.S. Stagnates"

http://www.cbs.nl/en-GB/menu/themas/bedrijven/publicaties/artikelen/archief/2012/2012-11-20-m17.htm

"Sharp drop in private sector investments"

In that environment, it is hard to imagine what you are talking about in terms of internal US consumption driving a recovery (I will also point out that our oil output is at record highs (we actually were a net exporter of refined oil products), same with natural gas, and we've always been a leader in agriculture and healthcare so if those industries are taking in a large portion of the income of Americans, then at least they are staying in the country to a large extent and so helping to grow the US economy, while I'll bet that most of American discretionary income goes for stuff NOT made in the US and so leaves the country and does NOT help grow the economy. I.E. a strong dollar makes junk from other countries cheaper and therefore encourages IMPORTS and weakens the US economy.).

2. You could have a strong dollar and low inflation, but especially during an economic crisis that tends to be bad.

http://econmkts.blogspot.com/2009/08/wages-employment-problem-with-low.html

[Zguy28]

Well, apparently some people are admitting they are after a balanced budget (like you), and others are trying to deny it. All I'm saying is a balanced budget is an austere budget, by definition really.

I don't think its the best thing for an economy, personally, but I'm not an expert. Its just based upon loose information gathering.

I don't really care what you call it, austere or otherwise. Common sense says that you cannot outspend revenue year after and year and ultimately survive.

How is that good for an economy in the long term? Its just a mortgage that will never be paid back.

Call me crazy (or austere if you prefer), but I like what the bible says here (big surprise right?) - The wicked borrows but does not pay back - Psalm 37:21