It depends on your definition of extinction. You can’t destroy the physical land of Greece or Italy through chronic financial irresponsibility but would you honestly use them as a good example of what happens when entire nations engage in that type of behavior? Both of those are the bastard children of the EU right now because they didn’t care enough about balancing long-term budgets. Germany is one the correct side of this position and has to support them. Who would have thought that? Those are small countries. The stakes are much higher when it comes to the U.S. and it has global implications.
I have zero respect for anyone that advocates continual budget deficits. It is almost like dealing with a drug addict. Sure, the consequences are bad if you take the drug away but things will get much worse if you continue to engage in the same behavior. It is better to arrest it now rather than later. There will be direct negative consequences from it but that is the only way to ensure long-term economic stability.
I am using the one that includes the whole world not laughing at them because they are so fiscally irresponsible yet you have a some ‘friends’ by prior agreement (Germany and France in this case) in the short-term that can bail them out but also put severe stipulations on future behavior. Even those friends aren’t doing all that great themselves but they give it because they have to and they resent having to bail out the people who can’t seem to manage their own finances at all. The U.S. is starting to fall into the dysfunctional category and the global implications of a major failure here are profound worldwide. The same thing happens with dysfunctional arrangements on all scales even down to the family level.
If you disagree with those examples, check out Japan. They were once a world economic superpower and then crashed and burned and may never recover fully. The payments to service their debts are too high and their low population growth cannot sustain the promises that were once made. Those low population growth estimates will affect all countries with two generations. That is a good thing overall for other issues like the environment but it does require a radical shift of economic policy.
Let me put it this way. It is a simple math problem at the high school level yet an astounding number of people cannot begin to wrap their minds around it. Most major economies are built with the assumptions that both population and economic growth will continue much the same way it did in the 20th century. That is false and impossible. It cannot and will not occur. World-wide population will level off (no one disputes that) and natural resources are finite. We are near the limits now. We have to adjust economic policy to account for it. It is completely irresponsible to push debts onto future generations when they will have no way to pay the interest and maintain anything resembling a decent life. It is already started and it will only get worse if something isn’t done.
Nitpick: The Federal government probably sits somewhere between a household and a business. Businesses generally run at a deficit because they have the expectation of growth (and they’re spending over their budget in order to grow). But if a business goes bankrupt, it isn’t a very big concern (unless it’s a very large business). While a person might expect his salary to increase over time, there’s very little that he can budget on that basis, so in general he must budget based on his current earnings. Governments don’t “grow” quite like a business, but they can put money in investments into business, they can try to develop relationships with other nations or fund research into new technologies with an eye to increasing the GDP and thereby the tax base, and of course they can expect the population to grow (for another few years at least).
I would expect the Federal government, if you averaged over several decades, to run at a mild deficit, but nothing like what we have today.
I agree. There are situations like a war or economic crisis where a government needs more money than it has on hand. And in those cases deficit spending is a good tool.
There’s also the theory that a deficit is good for nation building. When people are invested in government debt they have a stake in the ongoing existence and prosperity of the government. But I think the United States is well past the point of needing this.
This alludes to the real reason for deficits. What politicians are really caught in is a “I don’t want to control the deficit because it’ll hurt my chances at winning the next election” trap. Spending money and buying stuff is easy and fun and makes you popular. Earning money and paying your bills is not fun and nobody enjoys it.
Deficit spending makes it possible to have the fun part now while putting off the not-fun part until later (later being after you’re out of office).
No, the only way to have a sustainable economy on any scale over the long-term is to produce more than you take in, which the American economy has done for most of its history and is doing now.
We have quite different views and values if that is your position. It is true that the land that represents Greece, Spain and Italy still exist just like they always have and people still live there even if under duress and outside influence. I can’t see how that is something that anyone would want to emulate. It is also true that they royally screwed up their own economies and had to be bailed out by the people went into prior economic agreements with.
The core economic conservative position is dead-simple but it isn’t fun. All you have to do is manage expenditures within your allocated budget. It isn’t even anti-liberal in the social sense. There is plenty of room to play around with social experiments as long as they can pay for themselves in aggregate. It is all about responsible allocation of resources. Some of those are debatable and flexible but the core position is not. It is beyond me why anyone would be opposed to such an idea. It isn’t even a suggestion in the long-term, it is the law that goes beyond anything we can dream up.
But the government of Greece still would exist now, and never would have been in any danger of extinction, even if no other governments had been willing to bail them out.
You asked me a number questions, now it is my turn.
I am having trouble figuring out where you are coming from. Greece would have been an isolated economic disaster if no one else stepped in to bail them out and force them to reform. That is a tiny an inconsequential country but it serves as a good benchmark of what can happen. Spain, Italy and Japan are other really bad examples.
Do you really want the U.S. to go down that same road or do you somehow think that we are magically immune to the same sorts of problems given endless deficit spending? Expound in detail why or why not that would or not be a good idea at a high level if you can.
CAPT. LOUIS RENAULT:
Some people think you forgot to go back and edit “four” after you counted the actual types.
Others think you’re counting the fourth but unindexed type “someone who doesn’t like paying taxes, but adds the “economic” qualifier to show he doesn’t oppose smoking pot.”
I like to think you’ve just lost your mind – it’s the romantic in me.
SEPTIMUS BLAINE:
Maybe it’s a combination of all four.
Answering a few questions would help us to understand your views, and to know whether you’re debating only with strawmen. Very few economists propose perpetual deficit (please cite if you know any); those that do may be coping with exasperation from the behavior of economic liberals like Reagan and Bush Junior.
So do tell us you understand those two are the egregious liberal Presidents you denounce. All your rhetoric should be ignored until we know explicitly we’re all on the same page.
You do understand that the big bump in deficit after the credit crisis of 2008 was necessary to avoid Depression, right? Can we agree to strengthen regulations to make future such events less likely?
The one giant fiscal problem facing our future is not, as social conservatives would have us believe, lazy immigrants who want to suckle the taxpayer, but aging people who will get government-paid healthcare. Contrary to much of the complaining here, that’s a fiscal problem that’s more real than imaginary. Start another thread to debate whether sane cost reductions or death panels is the better solution.
"And what in heaven’s name brought you to Great Debates?
“My curiosity. I came to Great Debates for the facts.”
“The facts? What facts? We’re on the internet.”
“I was misinformed.”
I am not debating any strawmen whatsoever. I am a true economic conservative even though some people believe such a thing does not exist and the term gets tainted with other people trying to hijack the label under false pretenses. I already gave my core position. It doesn’t matter if no economists think it is a good idea to run continued budget deficits but allow for some deficit spending in times of true emergencies. That’s great, I believe the same thing.
What isn’t so great is that a large number of politicians do not believe the same thing or at least use the fact that most of the voting public doesn’t have the will or the discipline to sacrifice what it takes to get back to that sustainable level. I would personally pay more in taxes for exactly zero immediate benefit if it made the long-term fiscal health of the U.S, more sustainable if that helps clarify my position for you.
As for the ranking of the presidents, like I said, I am not basing my arguments on politics at all but I can do it if you wish.
George Bush the elder was a decent economic conservative followed by Bill Clinton. Bush Jr. was the worst followed by Obama. Reagan wasn’t a good economic conservative but I understand his tactics growing up during the Cold War and it worked so that counts for something.
Aren’t these effectively the same thing? What the government produces are services for its citizens. And what it takes in is tax revenue. If the government is giving out services that cost more than the taxes it’s taking in, then it’s not a long-term sustainable economy.
We’re here to fight ignorance, so I’d like to focus on this a bit. The highest deficit in U.S. history was of the 2009 budget associated with GWB. The 2nd highest was of 2010. Both of these needed to cope with the biggest banking crisis since the Great Depression – reduced revenues, bailouts of AIG, Fannie Mae, etc., stimulative tax reductions.
Shagnasty is it your position that insolvent institutions, including AIG and various important banks, should have been left to fail? You can’t have it both ways, denouncing BHO for saving Wall Street, but objecting to insane Hyperlibertarian plans to plunge the world into its worst financial crisis ever.
On my planet, the stock market is about buying a share and selling it 20 milliseconds later. On your planet maybe they still trade under a tree.
IPOs are news because they are so rare.
This is not true, under standard Keynesian theory deficit spending is stimulative and non-deficit spending is not. Trying to stimulate an economy by spending which is paid for by taxes is like trying to get rich by transferring money between accounts at different banks. Stimulus is a temporary boost of deficit spending so consumers do not stop spending and the paradox of thrift causes the economy to tank.
I am not a Keynesian and do not believe that the economy works like that, but that is the basis for believing government stimulus is possible.
The economic harm caused by deficits is the fact that the debts will have to be paid back at some point. Future tax hikes will be needed to pay back the governments debt. Those future tax hikes are what causes the economic damage, not the deficits themselves. That is why spending levels matter more than deficits. Deficits are just future taxation and if raising taxes in the future to pay for current spending will harm the economy of the future then so is raising taxes in the present to pay for current pending will harm the present economy. For the purposes of simplicity I will ignore how variations in interest rates affects this.
What were the economic impacts of the record deficits of the 1980s? The economy of the 1980s grew faster than almost every other nation on earth. The only economic consequences were that Bush had to sign a compromise budget which raised taxes. This led to the mild recession of 1991-1992. The deficits themselves did not cause the recession, the tax increases to fix the deficits did. If the tax increases had occurred concurrently with the spending than there would have been no deficit but the recession would have moved up and the previous decade of growth would not have happened.