I am having a hard time understanding why some folks seem to think it is so vitally important, in the middle of a week recovery, to get our federal government finances in order?
I can understand if folks think the Government spends too much (not necessarily my belief). I get that, so if that is your principle concern and the deficit is kind of more a means to an end, ok. But for some folks it seems to be the main concern, i.e. the end itself.
Am I mis-interpreting this?
I already gave my answer here and you responded as follows:
That is why you should not run deficits in times of prosperity, which George W Bush did in fact do, those are times when you should be paying down deficits. During weak economic times, that is when you run deficits, making deficits the primary concern during these periods is dumb. Yes, historically large deficits have ruined countries, but of course they were ruined by a variety of other things, such as the fact that they suffered through hyper-inflation, thinking they could just print money to get by. There is historical precedent, but we are nowhere near that at this time and the main issue should be getting people back to work and getting productivity up. Having pissing contests about the deficit right now is ridiculous.
That Bush’s spending binge was recklessly irresponsible, I’m entirely in agreement with and I imagine everyone else is too. However, pointing that out accomplishes nothing as far as solving the current federal debt problem.
As for the fact that when a country runs huge deficits, it’s usually hyperinflation that actually demolishes the economy, that’s true, but what causes hyperinflation? Huge deficits, that’s what. Right now our debt is about $15,760,000,000,000. As long as there are enough investors in the world willing to hold that debt, we’re home free. Nothing bad happens to the national economy as a result of the debt. But what happens when investors are no longer willing to hold the debt? We have to raise interest rates in order to entice them to hold it. Basic math tells us that for every percentage point interest rates go up, we’ll pay an additional $157,000,000,000 per year. Right now Spain pays interest rates above 6%. If our interest rates go that high, it will mean the government spending an additional trillion dollars per year on top of what we already pay. If we get into that sort of situation, the only possible way that government can respond is by severely inflating the currency.
So when will investors stop agreeing to hold our debt? No one knows. Macroeconomics is an inexact science. It could not happen for years, or it could start happening tomorrow. I think it’s foolish to just hold onto our lucky rabbit’s foot, knock on wood, and hope that investors remain happy holding our debt.
Remember this. Five years ago, folks in Greece thought that things were going swimmingly. Same with folks in Ireland and Spain. And Italy and Iceland and Portugal and Hungary and… There are no guarantees in world economics. Nations have been crushed by national debts much smaller, as a percentage of GDP, than ours.
First it’s something to beat Obama over the head with.
When Obama took office, and took responsibility for two wars, an economy on the brink, and federal revenue ravaged by tax cuts and economic slow down. In order to keep the Economy from imploding he had to pump more money into the economy and prop up the auto industry. Racking up huge deficits in those circumstances is unavoidable, and not wanting to let a good crisis go to waste his opponents want to knock him down for it.
Second, conservatives don’t like the government telling them what to do whether its not discriminate against blacks, not pollute the air, or not drink super big gulps. By seizing the purse strings, government won’t have the money to be effectual. By being ineffectual its popularity will wain. Having its popularity wain will make it easier to cut its budget, making it more ineffectual… rinse and repeat.
So from that point of view reduced spending is the goal not the means.
Hopefully this is a joke answer meant to simply piss off ‘conservatives’…or make them howl with laughter while simultaneously rolling their eyes. 
Pretty much this, coupled with the fundamental philosophical/economic debate about whether it’s better to spend your way out of a recession or attempt to cut your budget and reduce your deficit. Or, I suppose it could all just be a trick by sneaky ‘conservatives’ to simply beat up on Obama with I suppose.
-XT
It’s not important to them is the answer. To not propose serious ways to reduce the deficit implies a certain level of non-seriousness about the problem. Hardly any of the proposals I’ve seen even come close. Therefore the vast majority of people who claim to hold the debt and deficit reduction so dear are either lying or deluding themselves.
I disagree, at least, up to a point. I see Republicans now campaigning for tax cuts and increased military spending. Bush is personally unpopular, but I see people who appear to be anxious to vote for someone who promises to do the same things Bush did. I think it’s fair to point out Bush’s contribution to the debt as a means of pointing out what policies led to the debt.
I’m just not sure how helpful that will be. Politics is so combative now that pointing out something like that causes the true believers to cling even tighter to their beliefs, rather than to reexamine them.
Many people who claim the debt and deficit are #1 are not really telling the truth IMO. By and large those people think reducing the size of government social welfare and infrastructure programs is priority #1 (or, more aptly, they are for cutting social welfare and infrastructure programs that benefit anyone but themselves and their immediate family). They just see the debt as a vehicle for doing so. You can use the debt as a justification for shrinking social welfare programs and infrastructure investments.
Ask 100 people who claim the debt is their #1 priority how they feel about raising taxes to close the deficit.
Because everyone only wants ‘everyone elses’ infrastructure and social welfare spending to get cut, none of it gets cut since we are all everyone else to everyone else. So government trims around the edges (lets cut congressmen’s pay, lets cut discretionary spending, etc). And then combine those minor spending cuts with gigantic tax cuts and the people who claim the debt/deficit is priority 1 make the debt/deficit even bigger.
I think you are wrong (about folks being really, truly concerned about the deficit and the debt on things like future growth…because YOU aren’t, seemingly, doesn’t mean no one else is), but was more struck by the irony of this argument. It’s true that everyone wants to protect their own rice bowl, while casually waving away others ‘for the greater good’…and liberals are as apt to do this as anyone. IMHO, more so, since they are all about the sacrifice of others for that ‘greater good’, but certainly on par with conservatives at a minimum. That’s part of the problem…both sides have sacred cows that they don’t want to see cut (in fact, want to see grow in most cases), and fight for them fiercely, losing sight of the ‘greater good’ (of the COUNTRY) in their narrow focus to protect their rice bowl, while being all for cutting the throats of the other sides cow and stealing their rice (to fatten up their own). In politics today there doesn’t seem to BE any compromise, and we’ve allowed things to spin so far out of control that no one knows where things will go or how this will end. I keep reading about a cliff we are headed towards like a slow motion train wreck. It’s not the politicians fault (mostly)…not the ‘liberals’ fault or the ‘conservatives’ fault. It’s OUR fault, collectively, because we all want what we want and get pissed off if we don’t get it. We are all about spending cuts…spending cuts to things we don’t care about, of course. And whatever it is we think is important, we aren’t willing to compromise at all over that. And whatever it is we think is important or don’t care about? Well, there is a politician out there willing, even eager to take up our cause and fight for it. For our vote, of course, and the votes of other like minded citizens.
-XT
As I already answered:
You can say it’s a “weak recovery,” as a reason to spend now, but for politicians, it’s always time to spend. All the people who want to use Keynes as an excuse to run huge deficits … did you hear them saying in the 90s or mid-00s “hey, the economy is going good, time to be countercyclical and cut spending.” Hell, no. We want to spend in good times and spend in bad times, because spending is fun, and we imagine there are no consequences, and hey, math doesn’t apply to America.
Let’s test this proposition, shall we?
The debt is my #1 issue, and while I don’t want to raise taxes, if that’s needed to close the deficit (and as a matter of political reality, even if not economics, it probably is). I’m okay with that. So you’re 0-1. I’ll let others chime in.
It depends on whether you think economic stimulus helps or hurts the recovery. If you believe that stimulus and deficit spending speed up recovery, I can understand why you don’t think the debt is a priority at this time.
If you happen to believe that economic stimulus delays the recovery (as it did in the Depression), I can understand why reducing spending now is a priority.
ETA: Wesley Clark is 0-2 so far.
The problem, as far as I see it that a lot of people love Keynes during recessions and hate the guy the rest of the time.
What I mean by that is Keynes believed that governments should run deficits during recessions to boost the economy and then pay off the debt once the economy recovers.
Of course, the first part is easier than the second part and, as far as I can tell, when the recovery happens no one really wants to pay down the debt. Both parties suck at spending less money*.
Then there is the moral hazard. Take some of the European countries as an example. Their economies tanked and they have some real problems. Tax evasion is rampant in many countries because no one wants to pay the high taxes. Lenders are running away because they doubt the governments are going to be able to pay off the debt. For example, a U.S. 10 year bond is at 1.6%. Spain is at 6.28%. Greece is at 28%*. Yet the people want the government to keep spending and spending. At some point it isn’t going to work as no one is going to lend any more money.
I’d be willing and happy to pay more taxes if the debt went down. However I believe that what would happen instead is that taxes would go up, the deficit and debt would keep growing and we’d end up in the exact same place, at best.
Presently it seems that both parties are unwilling to tackle the problem in any kind of sane way. I can fully understand those who are against tax increases because I am not convinced that the tax money would do any good, it’d just be spent on another government program. I can understand those who want to raise taxes and cut spending. I do not believe, however, that it will happen. I can also understand the Keynesian idea however I highly doubt that, when the good times come, the government will pay down the debt.
So I see the U.S. running into the same problem that Greece has. People insisting on entitlements and the government running out of lenders willing to lend us the money because of the mounting debt. Not in the near future, but I am planning on having a kid in the next year or so and it worries me quite a bit.
Slee
*The Clinton years were an exception. I never liked Clinton but I’d much rather have him and the congress of his last term in office right now than what we have now.
**That rate for loans is illegal in many states.
There is virtually no correlation between tax rates and tax evasion.
To answer the OP, I’m pretty strongly against the national debt and think we need to be doing more about it. Running the government budget on a deficit means we end up paying more for everything than we would if we just paid for the same amount of spending outright. And it’s a ongoing drain of resources from this country to foreign investors.
But I agree with the OP that some people are just using opposition to the debt as a smokescreen for some other position. Anyone who refuses to consider the possibility of both reducing government spending and raising taxes isn’t serious about debt reduction. And anyone who changes their position on the deficit spending depending on which party is in power is even less serious.
I was about to say this, but you said it first, and better. 
If the Republicans really cared about deficits they would not advocate tax cuts. If they really cared about unemployment they would not advocate cuts in government spending and hiring. Many of the rank and file do care about these, but the leaders and activists of the GOP want to skew things more in favor of the well to do. They think the rich deserve to be richer, the poor deserve to be more poor, and the unemployed deserve to be unemployed longer.
Taxes are highest in the Scandinavian countries, and they are riding out the Great Recession well.
During the New Deal unemployment declined fairly steadily, except for a year after 1937 when the government cut government spending.
Perhaps they adhere to the Republican delusion that tax cuts generate more tax revenue than tax increases. No amount of contrary experience can change that delusion.
Because everybody knows, the less money you spend, the more jobs you create.
You would have to provide a mechanism by which stimulus spending can hasten recovery. Since it doesn’t hasten recovery, the plodding decrease in unemployment can be explained as the natural course in the business cycle DESPITE anti-business policies.
Why didn’t the drastic cuts in government spending after WWII cause a recession?
You don’t need to keep stimulating the economy one it has recovered. That’s when Keynesian theory says the government should cut spending.
Oh, and the rest of the industrialized world had the shit bombed out of them.