I think that Keynesian view is that deficits are not only not a problem, but are a necessary thing during a recession.
A problem with rising government debt is the spending the private sector has foregone. Yes, the rich get their tax break but one way or another that money has to trickle back and buy government bonds. Money that otherwise would be spent buying corporate bonds to develop improved technologies is spent buying government bonds to expand the fleet of F-35 fighters and build an 8-meter tall border wall.
Where the government money is spent is crucial. If instead of munitions and a wall the money were spent on education, science, humanities, community development and transportation infrastructure we could feel much happier about it. (Analogies with household borrowing are not as stupid as some suggest. When you apply for a second mortgage the bank may ask “Will you spend the money on roof repair and refurbishing the bathroom? Or will you blow it all on hookers, cocaine and a ten-meter wall?” Congress would do well to ask similar questions.)
What Trump’s team would like is for the Federal Reserve to buy the government bonds, in effect creating fiat money, as it did with “QE” after the Bush-Cheney agenda pushed the nation’s finances into chaos. Then there’d be investment money for the government and corporations too. But the Fed is unlikely to oblige, at least until there is another recession.
I like to distinguish fiat money printed and spent directly by government with central-bank money, which is maintained on balanced books similar to those of private banks. Pedants like to point to a dictionary and allege that central-bank money is also fiat money, but clearly there’s a difference: if the Treasury were just printing banknotes without restraint we wouldn’t be speaking of a debt problem! (We might be speaking of an inflation problem.)
Programs like QE are ways to create a form of fiat money within the central bank framework.
The main idea of MMT, IIUC, is to allow money supply and government spending to expand until full employment is achieved. At its core this isn’t fundamentally different from what proper governance seeks in the present framework. One difference is that fiat money is used instead of debt. This might be OK with a constant inflation rate, but only if the inflation rate wouldn’t accelerate. Would it?
The goal of MMT is to put the unemployed and under-employed to work; many MMT advocates want the government to guarantee jobs for everyone. Obviously they must be useful jobs, not just breaking windows so they can be repaired, or digging holes and filling them up with dirt. Unfortunately the U.S. already has many people working without furthering the common good — a good example is health insurance clerks whose job is to deny needed medicines.
MMT might “solve” the debt problem which is the topic of this thread but would lead to a more complicated debate. Still MMT write-ups should be on the reading list to refute the silly right-wing claim that America cannot afford universal health care.
I don’t know how relevant this is to the debate but I have a long held belief that as baby boomers retire, and deficits again increase, the deficit will become a game-changer in US politics. I suspect the right will benefit from this more than the left. The Federel deficit will become a political problem long before accumulated Federal debt becomes a problem for the State.
If we were having a discussion about the differences between plants and animals, then pointing out that ants, lions, and birds are all animals and discussing what commonalities they share would be useful and relevant information to the topic. Even if there was an entomologist present who was an expert on the subject of ants and could discuss them in great detail. Sometimes experts get so focused on the subject of their expertise, they can’t take a step back and look at the generalities.
What you’re saying is true. But regardless of what you’re spending the money on, there’s still the issue of how you’re obtaining the money.
Let’s say the government is deciding to build a library. Or a fighter jet. And let’s say the school/fighter jet costs $20,000,000.
Which makes more sense; collect $20,000,000 and spend it on the school/fighter jet? Or borrow $20,000,000, spend it on the school/fighter jet, then collect $21,000,000 to pay back the loan and its interest?
That’s the big problem with deficit spending - we end up spending more for everything we buy. If we paid off the debt and established a “pay as you go” policy, we could have the same amount of government spending for less money.
Right now, the annual interest on our national debt is over $300,000,000,000. If we had simply collected money through taxes rather than borrowed it, we would not owe that $300,000,000,000. So abolishing the national debt would eliminate $300,000,000,000 of government spending every year with no other changes to government programs.
More frequently persons without proper understanding of a subject use bad analogies and camp on them, insisting the experts or just the informed persons are wrong because Bad Analogy.
It is to be repeated, there is no good analogy between the personal borrowing and budgets and the company or the state borrowing. None.
It’s not really a matter of what I think or don’t think. It’s a matter of objective fact: “projections near the end of the Obama administration had us scheduled to hit trillion-dollar deficits again, regardless of who won the 2016 election”
Yeah, yeah, you don’t want to acknowledge that conservative policies are making things worse. It’s all Obama’s fault, it was inevitable, blah blah blah.
No analogy is perfect, but an analogy can be good if the salient points correspond. If you are using personal borrowing to show how debt can increase if you continue deficit spending, and you are paying more and more interest on that growing debt, it’s a great analogy. But the reasons that people, company, and governments borrow is quite different so that would not be a good thing to illustrate through such an analogy. An individual doesn’t buy a car for the same reason that a company builds a factory or a government builds a bridge.
If.
Except it is in its essential incorrect and thus a terrible analogy.
While at the extremes the certainly the escalating debt can prodcue the same escalation of the debt servicing, the individual lacks almost entirely the ability that a stable sovereign issuer (or a corporate bond issuer) has to selectively issue its own debt instruments
An individual with the very few exceptions is the price taker and the product taker.
It is not necessarily the case of the large corporation or the state issuer, for the high rated in particular, who can adjsut the lengths of their debt issuances and manipulate the costs - and unlike the individual, the state can issue at different tenors (1, 5, 7, 10, 15, 20 30 etc yrs) the debt and when it is its own currency and hightly rated, can indeed see rates decline on growing issuances under certain circumstances (as was seen in the past decade). These are things that the household analogy completely can not capture. and very much distorts an udnerstanding.
The simplistic comparison of the personal consumer borrowing with the debt issuance of the large corporate via the bonds or the stable state via the bonds, it is wrong on many many levels and leads to very incorrect understandings. It is a bad analogy even on this basis.
Money can be spent on corporate bonds to improve technologies if the corporations think that is the most effective use of their money. Lots of money spent on bonds today fund takeovers which frequently do not pay off.
The recent tax cut is a transfer of money from increased debt to corporations, in part. Much of it was used to buy back stock, which benefits shareholders and executives, but which doesn’t benefit productivity.
Part of the recent market weakness has been the realization that corporations won’t get further growth from new tax cuts. If they had invested the money in productivity improvements, more growth might be likely.
I suspect improving infrastructure would have a bigger payoff than stock buybacks. But is not as popular with the rich.
The problem really is that no one cares about addressing the problem. Classic Keynesian economics says that we should save in good times to spend in bad times, but now it is spend in good times and spend MORE in bad times. Look at the trillions Bush & Obama spent after the mortgage collapse and it barely made a dent in the economic crisis - that is a problem. And heaven forbid any Congressmen feel we should stick to the debt ceiling at the end of a year when we overspend. If we’re going to raise the debt ceiling without having any rational debate on it then why fucking have one?
I have refuted the following ignorance so many times that I’ve lost track. It’s like playing Whack-a-Mole. I’ll try one more time; then you’re on your own, Saint Cad.
With the exception of soaring health-care costs — which is a general U.S. problem, not a government problem — government spending is down not up. Governments in the U.S. are now underspending on education, underspending on social welfare, and underspending on infrastructure. I’m afraid the right-wing Lie Machine has had its way with you, Saint Cad. The reason for the deficit is not increased spending; it is decreased taxes. As just one example the federal corporate tax rate was 53% in 1969, 35% in 1993 and was recently lowered all the way to 21%.
And it’s pathetic the way the right-wing prattles against the “huge spending” of Obama’s stimulus when much of this “spending” took the form of tax cuts, credits, incentives, rebates and cash grants to state and local governments — “spending” which the very same people would be fawning over had a GOPster been in the White House. (Admittedly, many of the credits from the Obama stimulus went to people — the unemployed, food stamp recipients, veterans — that Republicans might not have supported, preferring to give the money to the rich so it could “trickle down.”)
I’d love to see your cite that the stimulus “barely made a dent in the economic crisis.” Visit inaccessible alternate realities often? A 2014 poll of leading economists found that 82% “strongly agreed or agreed that unemployment was lower in 2010 than it would have been without the stimulus.”
Now it’s your turn, Saint Cad. If you think governments are over-spending, what do you think should be cut? U.S. schools rank between Poland’s and Greece’s in one survey — would further cuts in education grants help that? Looking at a pie-chart of government spending, the solution seems simple: Send Granny to the death camp!
I wonder if anyone has ever calculated how much a country has cummulatively borrowed over the years and compared that to how much that same country has payed in interests so far for that money, and how the balance turns out. If the interests paid are higher than the money borrowed (my guess), then the whole borrowing thing would be a lousy affair. Economists, please: show me I am wrong. Adjusting for inflation could be hard, lots of room for manipulation/error.
no, the idea of even bothering gives a headache.
Adjusting for past price levels is not difficult and for your young country relies on well established datas. but the conspiracy sellers will object no matter what to anything not fitting their already decided conclusion.
According to the OMB, total federal receipts were:
$1.1T in 1992
$2.0T in 2000
$2.5T in 2008
$3.3T in 2016
and are expected to hit $4.1T in 2022.
That’s not “decreased taxes” in my book.
?? - it is terrible to interupt your domestic politics argument but … : What does the revenues registered (you are not at all adjusting for inflation or the increase in the size of your economy, the GDP growth) have to do with the level of the taxes?
This is simply completely illiterate in numbers!
If you want to assess if the taxes increase or decrease you have to assess the revenue as the percentage of the GDP or a ratio of the national income (preferably to be adjusted for the inflation).
It is actually totally incoherent to make that kind of comparison. I hope it is joking.
Not a joke at all. Those are figures posted by the Office of Management and Budget.
I generally hold a low opinion of the quality of government employees, but I doubt they’re actually illiterate.
If you’re interested, they also post a “% of GDP” table you could review, but the OMB (and I) obviously perceive some values in seeing the actual dollar amounts.
:smack:
Yes… and? The question is not the figures, it is the literally bizarre conclusion asserted.
No what is illiterate in the financial review is to make a conclusion (any conclusion) about the level of the taxes based on the unadjusted level of the raw receipts of cash, without making adjustment for both the inflation and for the size of the economy -or the taxable base if you will - says nothing very much about the level of taxes!
… :smack:
of course the collection numbers are needed for other calculations… so of course there is “value”
But to make conclusions about the level of taxes is the nonsense.
It is the percent of the GDP that is telling you, as it is normalizing for the growth of the economy and the inflation over time, what level of the taxes is collected.
To draw conclusions on level of taxes from receipts in the raw nominal terms is extremely… bizarre and utterly wrong. Otherwise you would concluding in a situation where there is the shrinking economy but a rising tax rate (but declining receipts from the shrinking of the national income) that the taxes are declining!!! Which would be 100 per cent wrong headed. The opposite is also 100 per cent wrong headed…
In the last 25 years the federal government has tripled the amount of money it collects (primarily via taxes). That’s an INCREASE, not a DECREASE.
Do those two sentences makes sense to you?
It’s not a commentary on the “level of taxes”, it’s a rebuttal to the portion of a post I quoted (“The reason for the deficit … is decreased taxes”).
As you noted in your latest post, federal revenue can, and does, move independent of the “level of taxes”, which is a fine rebuttal to the sentence in septimus’ post that followed the portion I quoted.
Since WWII, the federal government has generally collected 15-20% of the GDP in receipts.