It’s thyme to plant a garden. I’m up to my ass in thyme and oregano in my garden.
Oh sorry.
I thought we were playing “let’s look at a limited number of data points and draw our preferred conclusion”. My mistake.
I do enjoy that game, although I also like “Studies show” and “A lot of people”. In fact, studies show a lot of people believe posted inflation rates 83% of the time, and these people are 23% more likely to know all the words to American Pie.
Did you know that 79% of all statistics cited on the web are made up on the spot by the author?
“Did you know that 79% of all statistics cited on the web are made up on the spot by the author?” - Abraham Lincoln?
Donovan?
*** Extremely obscure “Talkin’ World War III Blues” joke.
Sage advice.
Best taken with a grain of salt.
But keep the silliness cumin. Lest we sound too much like dill-berts. Ed’s celery depends on it.
The current inflation is mostly likely a mix of short-term shortages due to the pandemic, and structural inflation due to the insane amount of money printing that has been going on in the last couple of years.
Have a look at this chart of the supply of money and what’s happened to it recently:
The only thing keeping inflation down was that the velocity of money dropped due to the pandemic. Now that things are opening and velocity is increasing, inflation is rearing its ugly head.
If the Biden administration passes a giant infrastructure bill that uses printed money for financing (as it must), all of these trends will get worse. Resources will become more scarce, labor problems will get worse, and inflation will go higher. Higher inflation will lower real wages and decimate retirement accounts and pensions - if the central bank forces interest rates to stay low, the damage will continue. Retirees and pension funds will be in big trouble.
I’m no expert. But the way you keep saying this comes off as odd to me. Isn’t the whole point of funding infrastructure is that doing so is supposed to actually increase GDP? It’s an investment, not a money hole.
That’s what it seems to me that @Exapno_Mapcase is getting at. He’s arguing that austerity shrinks the economy, and thus reduces value, but that investing in the right things results in the economy growing.
It’s often more expensive on the outset to do something, but then, in the long run, it will save more money. That seems to be the general argument I’ve seen for any government expenditure that focuses on helping out the economy.
The proposal included new revenue to pay for it. As I’m sure you know.
This is what I was talking about. Looks like they want to drop the tax increases on wealthy individuals and corporations, and lower spending to $1 trillion.
Frankly this is too much. The bill should at the very least be delayed a year, until shortages of goods and material ease up.
Remember when everyone was a Keynesian not long ago? Keynes would be telling you to raise taxes and either leave spending alone or cut it as well, and use the revenue to pay down the debt incurred from the time when the economy was really in trouble and the spending shored up demand. None of those conditions exist today.
It was not long ago that the main argument for spending at the time was that Keynes says to borrow and spend when there is a demand shortfall, then do the opposite when and if inflation starts to increase and the economy overheats. This will shrink the money supply by lowering demand and lower inflation.
But now everyone is cheering for the exact opposite policy: throwing gas on the fire with printed money and increasing demand for the things that are currently priced very high. Every dollar the government spends right now will crowd out the private sector. They will be competing for the same steel as Tesla, the same engineers and architects needed by industrial companies. The extra printed money will drive up inflation further.
I am basically repeating the same arguments used to justify the American Recovery Act on this board. We are now advocating for the opposite policy.
Keynes is still solid. Interest rates have been low for over a decade, but it will not always be thus. The mantra of most current governments: “Debt does not matter, only various ratios as a function of GDP” implies the GDP won’t be decimated by black swans like Covid, along with the debt. Just not sure when balanced budgets are going to come back into vogue.
You make several assumptions:
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That the money will be targeted to critical infrastructure that can be shown to be holding back economic growth. There is zero evidence for that. Presidents and other poluticians on both sides have always whined that the infrastructure is crumbling, because ‘infrastructure’ is seen as a valid reason to hike spending, and because ‘infrastructure’ spending is a giant sea of political pork opportunity that can be used to pay off constituents and lobbyists.
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The notion that only government builds infrastructure, and that public borrowing and spending on public infrastructure won’t crowd out private infrastructure. Amazon has built massive amounts of infrastructure. Starlink is infrastructure. Fed Ex revolutionized package delivery by building massive infrastructure. The private freight rail system in the U.S. is massive and the most efficient in the world. I spent my entire career working on infrastructure, and never once did it have anything to do with government.
Now, if we were in a recession and had 10% unemployment, at least an argument could be made that the government should step in while the private sector is drpressed, raw materials are cheaper and available and there is slack labor demand.
But when the economy is overheating, resources are at all-time highs, and businesses can not find workers, every person the government hires will be taken from a private job. Every pound of steel the government uses will drive up prices for everyone else. And since the government has to print money before it can spend it, it will drive up inflation and devalue the dollar, making imports for everyone more expensive.
- This government is calling anything it wants ‘infrastructure’. So new child care programs are ‘infrastructure’. Tearing down parts of an interstate that cuts through a poor community is ‘infrastructure’. Increasing salaries for home sare workers is ‘infrastructure’. Forcing ‘made in America’ rules and demanding that US ships be used to ship materials is ‘infrastructure’.
You can argue the merits of any of these, but they are in fact costs and not GDP enhancers, Made in America rules are straight up protectionism, as are requirements that American-flagged vessels be used in trade.
Then there’s the borrowed money. At 2% interest, Biden’s 1.9 trillion spending plan will have an annual cost of $38 billion dollars per year, and that amount will have to be paid for decades. That’s on top pf the $345 billion the U.S. paid last year to service the debt. The interest on the debt is a deadweight loss every year.
Finally, the idea that the federal government can be relied on to efficiently target important infrastructure and wisely spend on it in a cost-effective way is not borne out by the history of federal spending. The likely detailed spending plan will be more informed by politics and lobbying than by any rational cost-benefit analysis. And the actual execution will be rife with cost overruns, delays, pork, and corruption. The federal government is really bad at this stuff no matter which party is in power because it has to rely on lobbyists and insiders for implementation details, and because to get anything passed requires paying off ll kinds of special interests.
In the meantime, if they pay part of it by taxing other businesses and wealthy, they will simply depress private sector investment in infrastructure, and the private sector is much better at it.
All sane economists agree that Obama’s stimulus, pitched way too low because of opposition from the right, failed to do the work necessary. All sane economists agree that Trump’s tax cut and weird spending hurt the economy tremendously. All sane economists agree that real infrastructure is decades overdue for rehab and that only government can do that.
You keep trotting out the same argument, almost word for word, every time. I’m done refuting them. The real world does that far too well. You’ve been wrong continuously for more than a decade.
tl;dr. Every time the government follows the prescription you want, the country is hurt badly. We desperately need to break your cycle.
By ‘Sane economists’ you mean those that agreed with your side’s positions.
Would you like a list of Nobel Prize winners and other top economists who didn’t?
Besides, What Obama did was during a financial collapse and a sharp recession, which is the only time Keynesian fiscal stimulus makes sense. And the results came nowhere near what was promised.
If you agreed with the policy then, you can’t possibly agree with it now, because the conditions are completely different.
I’m using sane in the same way I use it in: All sane doctors agree that hydroxychloroquine is not a cure for COVID.
Here’s an example of a consistent economist. This is Jason Furman on Twitter. You may remember him - he was Obama’s chair of the Council of Economic Advisors, and a big proponent of Obama’s stimulus. Here’s what he is saying now:
To be fair, he says that if there had to be an up and down vote, he’d probably vote for it. But he recognizes the risks and admits that they are substantial. And that’s from a died in the wool Democrat and Keynesian.
Larry Summers, another of Obama’s chief economists, is less charitable.
And I picked those two because they are both Democrats who were architects of Obama’s stimulus. They want to support Democrats, yet this stuff scares them.
Imagine what the economists in the center and the right are saying.
As for the consensus of economists that Biden keeps saying he has, Here’s what Politifact has to say about that:
Note that all of this was before we started seeing the rapid increase in inflation of the last few months, and before we started to see major shortages of primary economic goods.
And when those economists were being surveyed back in January/Feb, none of the current emerging risks were there.
Here’s what the Chairman of the Fed said in February:
And here’s Powell now:
To give you an idea of how precarious the debt situation is, even Powell’s calibrated-to-be-mild statements about possible persistent inflation and a future possible rate hike, maybe in 2023, caused the markets to puke and go negative for the rest of the week, down over 1,000 points so far.
Since then, another central bank governor predicted that rates would have to go up in 2022. And all this is without Biden throwing a 1.9 trillion dollar gasoline bomb onto the fire. And he wants to spend 4 trillion more after this.
Yep, always “someday I’ll be right.” Yet austerity never works. It’s been tried all over the world and it always fails. The victims are always the same people: those not at the top the wealth pyramid. Tens, hundreds, of millions of people suffer in the short term.
The why is also always the same, the same group of right-wing politicians and their appointees who pass tax cuts and scant on sharing wealth to anyone who is not part of the favored few who supported them to perpetuate the cycle.
I used the hydroxychloroquine analogy deliberately. Your economic prescriptions are exactly as wrong and dangerous to the public as pushing a phony medical cure. We know that Obama’s stimulus was too small: you yourself conceded that it didn’t accomplish its aim, even though it rescued tens of millions following Bush’s recession. We know that Trump’s tax cuts brought wealth only to a tiny set of the already wealthy. We know that another partial stimulus under Trump saved more millions from ruin during the pandemic. We know that government spending works in real time and that austerity fails in real time; we have the evidence of the entire world economy as proof.
I happen to be represented by Democrats in Congress so I can’t fight this madness by voting against them. You are an ever-giving substitute, constantly wrong, constantly predicting ruin that never comes while ignoring the economic slaughter of millions in real time. I can’t close my eyes to the world around me in that way. Actual help for actual real life Americans is close to hand. We must fight for it as vigorously as we fight against global climate change, failing infrastructure, lack of child care, a health care system that no one will defend, and the other disasters doing nothing has laid on our heads.