You want to peg spending to GDP, e.g. (Federal spending)/GDP = .2. That’s what we geeks call a ratio. You want to limit the values that ratio can take on, rather than addressing spending specifically.
The problem is that GDP isn’t some fixed quantity, nor does it always grow. So your plan calls for arbitrary spending cuts when GDP goes south.
The conservative failure to even notice that spending as a fraction of GDP is a ratio is responsible for a great deal of current conservative idiocy. “Federal spending is going through the roof - it’s now 24.5% of GDP!” they holler. Um, no: the main reason for the recent jump in spending as a fraction of GDP is that GDP took a dive.
If you’re going to fix the problem, you have to know where the problem came from.
As you know, the U.S. government, from a spending POV, is an insurance program for the elderly with an army attached. What your proposal amounts to, in event of another nontrivial recession, is that we should either cut defense spending, or cut Social Security, Medicare, and Medicaid for the elderly, disabled, and children (since that’s something like 86% of Medicaid expenses) just because GDP is down.
I’m all for cutting defense, but I’d like to do so in an ongoing way that reflects the fact that we aren’t fighting the Cold War anymore, rather than cutting it in some years just because the economy’s in the crapper.
And I’m not for failing to provide social insurance for the elderly and disabled when we certainly can provide that insurance, just because the economy’s in the crapper.
I’m sorry you are for these things, but fortunately you don’t have a vote down here.
But getting back to our ratio, if spending/GDP is going up because GDP is nosediving, the right remedy is to fix the nosedive in GDP.
Instead, you’d rather go with a ‘solution’ that has nothing to do with the causes of the problem, and have substantial real-world consequences.
This is conservative idiocy (and innumeracy) at its worst.
Wasn’t a major part of Canada’s economic growth in the 1990s due to a devaluation of the dollar? I think it was. A quich google gives me this, the value of the Canadia dollar versus the US dollar during the 1990s :
So yet more nonsense from you. You’re just incapable of posting anything accurate.
Tax cuts increasing revenues is not a “complex issue”, it’s a cut-and-dried issue except for nutjobs like the Heritage Foundation, your favourite source to cut and paste nonsense from. And Canada maintaining actual regulation of their banking system allowed them to dodge the worst of the 2008 meltdown. You really are incapable of posting anything remotely accurate. No the wonder you end up in every thread defending all the stuff you post.
And the evidence shows quite clearly that countries where the government runs the healthcare system have the lowest healthcare costs. here’s some more actual evidence for you :
http://www.kff.org/insurance/snapshot/images/OECDChart3_1.gif
from the OECD. The two biggest private sector healthcare countries at the top, the two biggest government systems at the bottom.
Just picking a number you’d like to see government spending stay at like 18% makes you a numerologist – look it up – rather than somebody with a serious opinion. If it’s more efficient for the government to run the healthcare system or a social insurance system, surely it’s a waste of resources to let the private sector do it inefficiently? And everybody agrees that healthcare especially is going to increase dramatically over the next few decades, so it is inevitable that governments will have to take a bigger share of GDP.
Have a look at Ireland or Iceland’s experience of small government. Also Canada has four or so points of GDP bigger government than the US, so surely that shows that the US should be increasing its share of GDP?
Actually, it’s the other way around. I thought your argument was something more sophisticated, because the one you just presented is utterly trivial and obvious.
Yes, GDP fluctuates when major recessions happen. But it doesn’t fluctuate by that much in the course of a normal business cycle.
No, you don’t want to have a ‘peg’ to GDP measured on a quarter-by-quarter or even year by year basis - you don’t want government spending to fluctuate that much.
What we’re talking about is general targets. You generally want government spending to match average annual revenue. Since the historical trendline is around 18.5% of GDP for revenue, you want your government spending to land in that range in the general case.
That means that you’re not going to cut spending willy-nilly every time the economy takes a dive. It also means, however, that you’re not going to increase spending willy-nilly every time the economy lands in a bubble.
What you have to do is to be realistic. For example, it’s true that government spending is higher than the average as a percentage of GDP because the economy took a hit and GDP fell. However, it’s also true that part of the increase is due to permanent spending increases, including the ongoing new debt servicing costs incurred by the stimulus package.
So we have to ask whether it’s realistic to assume that GDP will recover fast and return to the previous trendline, or whether what we’ve seen is a permanent correction. If it’s a permanent correction, then you need to either raise another 5% of GDP in taxes, or reduce spending by 5% of GDP. My point is that extracting another 5% of GDP in taxes (10% from where you are now) does not look feasible given the historical relationship of tax rates and overall taxes. Actually, it’s possible, since European countries have managed to maintain tax rates above 20% of GDP. How do they do it? With a VAT, and with higher consumption taxes overall (excise taxes like gas taxes and sin taxes). You’d also have to allow all the Bush tax cuts to expire, including the ones on the middle class, and raise income taxes on everyone.
Are you proposing a VAT? Or do you think you can raise your revenue by just raising marginal rates on the ‘rich’? Proposing a VAT would be intellectually honest and mathematically defensible. Extracting 5% of GDP out of the top 5% of the population is not.
Do you geeks also understand regression lines? Or derivatives and integrals? Because the geeks in my corner are approaching the problem at a little higher level than “Oh noes! There’s numerators AND denominators!”
Only if a sophisticated analysis or ongoing evidence shows that the GDP decline will not recover to the previous trend line. And note that doesn’t just mean recovering to the previous rate - if it did that, the new trend would be offset from the old one leaving a permanent gap. It has to be a higher rate so that the economy recovers and gets back on the same growth line it was on before.
There’s no evidence that this is happening, and plenty of evidence that it won’t. For example, if debt reduces growth, then the additional debt picked up during a deep recession will act as a permanent brake on future growth. That has to be factored in, and you can’t just assume that you can spend all the money your little Keynesian heart desires then hope that you magically get back to where you were before, even though your Keynesian binge blew out the debt by a trillion or two.
Man, you’re smart. Conservatives dumb. They don’t understand fractions.
Yes, you do. And you have to understand that you may reach a new equilibrium that is not the same as the old one, and adjust accordingly. But you learn about that some time after fractions, so maybe you haven’t gotten there yet.
You liberals have no standing to call out conservatives on math. You keep harping on taxing the rich more to balance everything out, despite being shown repeatedly that the rich simply don’t have the money. You just make stuff up out of thin air so you can play your class warfare card. In the meantime, faced with a ballooning deficit and debt, you put your head in the sand and assume that somehow magically the problem will go away if you just borrow and spend even more money or tax the rich. It’s ridiculous.
Oh, don’t worry - so long as you’re borrowing 10% of GDP every year, that choice will be forced on you even if you managed to line up and shoot all the evil conservatives in government. Magical thinking is no replacement for hard-headed assessment of exactly what kind of freight train is headed your way.
Good thing no one suggested that then, Captain Straw-Man.
WHAT??? You simply post a chart of the dollar, and that simply explains economic growth? It is your impression that devaluing the currency automatically results in GDP growth? If so, perhaps you’d like to explain why Canada is doing so well now that our dollar is at $1.05 US?
It’s like you just Google some factoid, declare it to be the refutation of everything your opponent says, throw in a personal insult, and declare mission accomplished. I don’t think you’re even trying to debate honestly.
I’ve asked you to prove this obnoxious cut and paste smear before, and you couldn’t. So retract that and go away.
I wind up defending every post I write because people like you come up with a million crazy straw-man arguments and idiotic cites to attack every single point I make, like you and RTFirefly have just done here.
You’ve got one outlier - the U.S. The rest of them are trending about the same, and the differences in expenditures are going to have more to do with the health of the populations and the level of care available. Again, you toss out a chart with no other context and declare the argument over. And then you accuse ME of debating dishonestly. The arrogance is breathtaking.
Another idiotic statement. I picked a number and justified it. Numerologists seek special meaning in numbers themselves. If I said 18% because one and eight are magical numbers, or because 2 X 9 is significant, that would make me a numerologist. Look it up.
Oh, you mean the Ireland that has a debt equal to 94% of GDP? That Ireland? Or maybe the Ireland that has taxes about 5% of GDP higher than the U.S?
Ireland’s problem is purely debt related.
Another fact that isn’t true. Here’s a chart of government size as a percentage of GDP: World government spending as a percentage of GDP. The data will be from 2010. This year, I believe Canada’s government will actually be smaller than the U.S’s. Oh, there’s a country called “Ireland” on there, and its government is 3.1% of GDP bigger than the U.S.'s. Must be some other Ireland, since yours was used as an example of the perils of smaller government.
No, that’s the point where lawmakers, in a sensible world, ask themselves if there’s anything they can do to boost GDP back to the previous trendline, or whether they’re going to let it *become *a permanent correction.
You know, deal with the denominator.
Then bring out the geeks that GOP policymakers are actually listening to, because the ones in your corner that have no influence on anything don’t count.
And the GOP policymakers have yet to have that “Oh noes! There’s numerators AND denominators!” moment, sad to say.
For example, if pigs could fly.
This is shit. There IS NO FUCKING CROWDING OUT. Businesses are sitting on piles of money, they just have no reason to spend it in the absence of increased demand for their products.
Things that are imaginary don’t have to be factored in.
That would be $500 billion in spending, and $300 billion in tax cuts whose purpose was simply to keep GOP politicians happy. Howe does that compare with the $5 trillion in debt that Dear Leader Bush rang up, or the Bush Crash that has caused the loss in trillions more of revenue?
Hard to argue with that. I’m starting to wonder if they can manage addition and subtraction.
I’m sure there are liberals who say that. And there are conservatives who are clearly motivated by racial bigotry.
The difference being that I don’t tar conservatives generally as racists.
You, you, you!
You - you talkin’ to me?
Seriously, Sam, this is indefensible gibberish. I don’t say these things, most liberals don’t say these things, but you’re just making up an army of huge strawmen.
Oh, please.
This sort of flailing, hysterical rant used to be way beneath you.
And this is the crux of the entire argument - how exactly can government boost GDP permanently? There’s only one way - to remove barriers to wealth creation. Keynesian stimulus may or may not work when you are in a recession caused by a collapse in aggregate demand, but even Keynes would have told you that it’s not an answer for permanently increasing GDP growth.
In fact, even the CBO admits that the ‘stimulus’ will ultimately result in a loss of GDP in the long run. The whole point to the stimulus is to steal growth from the future and transplant it into the present where it’s presumably needed more. No one is suggesting that government stimulus through permanent spending increases is a way to increase growth over the long run.
So, how exactly is the government supposed to increase GDP growth over historical levels, and actually increase GDP growth beyond that level to recover the ‘lost years’ of the recession, AND increase it even further to cover the drag on the economy from the debt? Be specific, please.
That’s because they live in the world of politics. You don’t see Democratic lawmakers making sophisticated arguments either. Politics today is about soundbites and saying what you think the public wants to hear.
For example, it appears that both you and I agree that the only way you can fix the problem by raising taxes is to make the taxes very broad-based through a VAT and by elminating the Bush and Obama tax cuts on the middle class. But do you hear any Democrats talking about that? Nope. They keep talking about taxing the rich more, and the rich simply don’t have that kind of money. But they’re saying what their constituents want to hear. A pox on both their houses.
You don’t know what you’re talking about. We’re not just talking about crowding out here - that’s a criticism of Keynesian stimulus. Big debts create a drag on the economy for other reasons. For example, they create debt servicing costs which must be taxed out of the economy. By 2015 or so, American citizens will be paying close to $500 billion per YEAR in debt servicing costs, much of which is going to be paid to China and other foreign creditors. That’s $500 billion that won’t be spent on consumption in the U.S. or invested back in the economy. That’s a deadweight loss on the economy, year in and year out.
Another way big deficits can hurt you is that they will over time drive up interest rates, which act as a brake on the entire economy. Right now, something like 70% of the deficit is being funding by the fed printing money and buying its own debt under QE2. That’s why the American dollar is devaluing. But creditors will not stand to have their assets devalued in this way, so they will either stop buying the debt, or you’ll be forced to raise interest rates to compensate them for the risk of dollar devaluation or default. That puts a drag on the entire economy.
QE2 ends in June. Then we’ll see what it will take to find foreign buyers for all that debt. My guess is that we’ll see “QE3” and a further devaluing of the dollar.
Since we’re talking in grade school math terms, this is just like running up your credit cards to maintain your consumption. At first, the bank might lend you money at a lower rate. Eventually, you become too risky for the bank, so you start borrowing from credit cards at a higher rate. Then you run out their willingness to take on risk, and you start borrowing against your paycheck at even higher rates. In the meantime, more and more of your takehome money goes towards the minimum payments on all your debt, slowing the rate of growth in your standard of living. Eventually, your rate of growth takes a major hit as you pay off all that debt, or you go bankrupt.
As for all that money businesses are sitting on… Of course they are. When risk goes up and uncertainty increases, people demand higher rates of return on their investment. If they can’t find those rates of return, they don’t invest. What that $2 trillion in capital businesses are sitting on represents is the amount of investment potential that is not being realized because the government has created conditions that make those investments unwise. If the government keeps up this foolishness, that money will eventually find a home - outside of the United States. Capital flight is a guaranteed result of bad government.
And Democrats want to fix this problem by imposing more regulations and taxes on businesses and the wealthy, therefore raising the bar for capital investment even higher. Sure, that’ll work.
You’re talking about gross public debt, which Bush did indeed push up by 5 trillion, to his shame. It took him 8 years to do that. Obama, on the other hand, increased it by 3.5 trillion in his first two years in office - a rate almost 3 times faster than Bush’s.
Part of that is the recession, but then a big chunk of Bush’s deficit came in the last two years of his administration because of the recession as well. And we’re talking gross public debt, which includes the money 'borrowed from the Social Security trust fund - the ‘off budget’ debt.
The fact is, under those conditions Obama has increased the size of government and cut taxes, making the problem significantly worse. And the ‘temporary’ stimulus wound up permanently increasing the size of state budgets as much of the money was used to pump the salaries of public employees, and salaries are sticky and hard to reverse. This was also predicted by many of us.
Oh, come on. I was just making a point in a humorous way. Stop being so sensitive. The basic point is that changes are coming to Social Security and Medicare, and there is nothing you can do about it. It’s not the fault of Conservatives, although I’m sure you’ll do your best to point the finger at them. The bottom line is that the government of the U.S. has for decades been making promises it knew it couldn’t keep, and every time someone tried to point out that the system was unsustainable politicians of the time kicked the can down the road.
The problem is no longer able to be kicked much farther. The insolvency of the U.S. entitlement system is starting to affect the long-term markets and inhibit long-term investment. It needs to be dealt with now. Every year you leave it from this point forward will make the problem significantly more difficult to solve. In the meantime, the sheer size of the deficit and the debt are getting to the point where they could implode any time. Currency crises sneak up on you - everything looks sustainable until a treasury auction fails or a significant event triggers a crisis in confidence, then everything hits the fan.
The warning signs are there. S&P has warned the treasury. Businesses are not investing back into the economy. Traditional creditors like China are making statements about reducing the size of their U.S. dollar holdings. Countries around the world are looking for a safer haven for their money than the U.S. dollar. The BRIC countries are trying to set up a basket of currencies so they can get off the U.S. dollar.
You’ve had plenty of warning to get your act together. The Republicans at this time seem to be the only ones taking the warning seriously.
Your comment was about the paragraph where I said, “Even if you lined up all the conservatives and shot them.” I assume that’s what you took umbrage to. So of course you have to come back with something completely different.
But I keep forgetting- you’re not trying to engage in real debate. I’m the ‘enemy’ and this is a ‘battle’, so you’re just going to do whatever you can to dissemble, deflect, chortle, guffaw, accuse, etc.
If that’s not true, then how about you address the substance of my posts, and stop trying for all the ‘gotchas’?
No, what I initially “took umbrage to” was all the handwaving of ‘all you liberals’ characterizations that are largely a product of the conservative id rather than any sort of reality, presented as sincere debate. I didn’t feel particularly insulted by this stuff, since I’ve been hearing some of this wild-ass stuff since well before I characterized myself as a liberal. It’s just tiring to have to go through all this bullshit in a GD post to see if there’s any ‘there’ there.
What I’m now ‘taking umbrage about’ is your representation of those characterizations as a big joke. Libruls “just make stuff up out of thin air so you can play your class warfare card.” Man, that’s a laff riot. And pretending some baseless characterization was meant as a joke, and people bothered by it should just lighten up, is right out of the Rush Limbaugh standard procedure manual.
Yeah, I find that annoying. This forum isn’t exactly in need of Rush Limbaugh games.
And the claims I highlighted were your idea of real debate.
And my liberal heart bleeds for poor, persecuted you.
Because, quite honestly, there’s no hard and fast line anymore between the ‘substance’ and the bullshit. There’s a few nuggets of hard-and-fast substance, there’s a whole bunch of warmed-over conservative talking points that have been repeatedly shown by reputable economists to have no basis in reality, there’s a bunch of other conservative talking points mildly denigrative of people on the left side of center, there’s stuff that’s barely connected with reality that’s full of ungrounded slams, and there’s totally wild-ass, made-up, arm-waving nonsense.
It’s all in a grayscale from one end to the other. And quite frankly I’m getting tired of sorting one thing from the other, so I’m just going to call you out on your total bullshit until you shape up and stick to substance.
No, I simply caught you making stuff up again. You claimed that Canada’s dollar strengthened due to its suaterity cuts in the 1990s. The opposite actually happened and it was loose monetary policy that fuelled an export boom to the US that helped Canada’s economy improve. And you just outright made stuff up here.
I already did. You copied an argument practically word for word from a Heritage Foundation article, an argument that was a . total; bs and that b. nobody else on the internet was making. You then cut and pasted even mo0re of the Heritage Foudation article. I’m amazed you still can’t admit to what you did in the face of the evidence. You wind up defending every post because almost everything you post is outright bs. You have a long and storied history of this kind of posting on this board. This isn’t something that you just did, you have a documented history over years of doing it.
I picked the US (biggest proportion of private sector healthcare, top spender) and Switzerland, (second bioggest , second biggest spender). I also showed countries with the largest government input have the lowest costs. Because the facts show this to be unarguably the case, shouldn’t the government run these things as letting the private sector be involved on a big scale is just a waste of resources?
You picked 18% and said this was ideal. But like I already said with healthcare, if the government can run things like social security and healthcare better than the private sector, then most peopl would advocate the governemt running them even though they’d take a bigger share than 18%. Wanting to maintain 18% when the economy can be run more efficiently with a bigger government share is ascribing majical powers to the 18% figure in the face of facts and evidence, the definition of numerology.
Before the 2008 meltdown Ireland had a budget surplus. they have a massive deficit now due to the catastrophicv failure of the private sector and the government assuming private debt to prevent total economic meltdown due to private sector failure. An object lesson for you. Also, see iceland.
Your oen cite shows Canada still spending more than the US*, so clearly Canada’s higher government spending produces a better economy than America’s.
*and America’s is currently higher than usual due to the damage caused by the private sector market failure of 2008, when the government had to step in with massive spending to prevent total catastrophe caused by an unregulated private sector.
Do you know what the problem with your chart is? It’s cherry-picked. It starts in 1990, but Canada’s government size peaked in 1992, and didn’t start to decline rapidly until 1994. We didn’t start paying down our debt until 1996. Your chart ends in 2004. But the dollar continued to climb, and is now somewhere around $1.05 US - a number that is quite literally ‘off the chart’.
A strong dollar has a lot of causes, and I wouldn’t claim that shrinking the size of government was the only, or even the primary cause. But it is indicative of the fact that with a smaller government Canada has managed to maintain a decent fiscal balance, while the U.S. has been printing money to keep its economy afloat and its Treasury Bills circulating.
Why don’t you post a link to that thread? If it’s the one I’m thinking of, I’m pretty sure you got slapped down for that accusation, even from some people on your side. So of course you just slink away, then repeat the smear at some point in the future. Go ahead: Link to your proof. Please include the whole thread, so everyone can see the context.
My point stands - you showed a graph in which there is one outlier - the U.S. Everyone else is pretty much clustered together we can’t draw any conclusions between their small-ish differences in health care spending and small-ish differences in outcome without understanding a lot more about underlying factors.
But I didn’t even dispute that public health care might be more efficient. I’ve said many times that there are serious market failures in the way that the U.S. delivers healthcare. There are also serious goverment failures. Did you know that the U.S. government spends almost exactly as much on health care for the people as does the Canadian government (about 7% of GDP)? Your government seems awfully inefficient if it spends that much money and can only cover a small part of the population. Or maybe, you know, it’s hard to compare different countries in this way.
What I said is that, so long as you can only raise around 18-20% of GDP in revenue for the government, you should only have a government that’s around the same size. I ALSO said that it was possible to raise more, but only through the imposition of broad-based taxes like a VAT. If you can get the American people to vote themselves a 7% national sales tax after you’ve rescinded the Bush tax cuts on the middle class, then by all means spend 25% of GDP on the federal government. The historical record shows that so long as you’re focused on taxing ‘the rich’ or raising revenue through screwing around with progressive tax rates and more corporate/capital gains taxes, you won’t raise the revenue.
Again: I gave you a justification for the 18% number. There’s nothing magical about it. Stop reaching - it belittles your own arguments.
Ireland is a hell of a lot more complex than that. And again, I gave you the counter-examples of Canada and New Zealand. Canada reduced its government dramatically and lowered taxes (including corporate taxes, by a substantial amount), and we’re doing fine.
As I said, the forecast for this year is for The U.S. to move past Canada in total size of government with respect to GDP. Canada’s spending is just a hair under 40% of GDP right now (up because of the recession), while the U.S. is projected to be just slightly higher than 40% this year.
That marks a huge difference from 1992, when Canada’s government was 53% of GDP, and the U.S.'s was about 36%. If big government is more efficient and results in better economies, perhaps you could have a look at how Canada was faring against the U.S. then - and now?
In 1992, Canada’s unemployment rate was 11.3%. today, it’s 7.6%.
In 1992, the U.S. unemployment rate was 7.5%. Today it’s 9%.
Today, our dollar is worth almost 20% more than it was in 1992.
Trust me - as a Canadian, I saw how much better Americans were living than Canadians in the early 1990’s. And I’ve seen how much closer we are now in 2011. Yet our government got smaller, and yours got bigger. Funny, that.
As you can see you didn’t even dispute the allegation and were terrified to reply once you’d been caught and had to be prodded into it. You made a (bs) point almost word for word that only one other guy on the internet was making. If you didn’t copy and paste it from the Heritage Foundation where did you get it from?
It’s a graph that shows the US and Switzerland top spenders and systems like the UK NHS lowest spenders. Can you show and country with predominantly private sector healthcare and low or even average spending levels?
So 25% is now OK. Excellent.
Explain how Ireland is more complex than a massive private sector failure leading to a government that was in budget surplus having to save the whole country from total meltdown. If it wasn’t the private sector failing on a huge scale, exactly what was it that caused the meltdown/recession in Ireland?
The US is only up to 40% of GDP because GDP has collapsed and the government is spending more bailing out the private sector. Hasn’t there been a massive increase in private debt in Canada that’s taken the place of government spending over the past decade? Canadians are a lot more indebted then they used to be, right?
So let’s go back to the 1990 budget. Bush agrees to raise taxes and I believe the deal was $3 in spending cuts for every $1 in increased revenue. Yet spending went UP over $100B and the deficit was increased. As a function of GNP, spending in 1990 went UP 0.6%.
So why should the Republicans trust the Democrats to cut spending when they already broke their promise once and used the increase revenue to make the deficit worse?
