Interest on the National Debt

[hubcap]

It is predicted that in 12 years the interest on the National Debt will be the single largest budgetary item in the Federal Budget.
"Within 12 years…the largest item in the federal budget will be interest payments on the national debt," said former U.S. Comptroller General David Walker. "[They are] payments for which we get nothing."
To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

So do we cut spending or raise taxes? Or both? Seems that raising taxes in a recession is a bad idea. In any event, I believe we are all screwed.

[Hydro]

I suggest to cut spending, stop outsourcing to Asia and to rebuild your industrial complex before you end up like the UK.

[Causa Mortis]

It is predicted that in 12 years the interest on the National Debt will be the single largest budgetary item in the Federal Budget.

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

So do we cut spending or raise taxes? Or both? Seems that raising taxes in a recession is a bad idea. In any event, I believe we are all screwed.

Until unemployment gets below 7% or inflation over 3%, you don't worry about either.

I suggest to cut spending, stop outsourcing to Asia and to rebuild your industrial complex before you end up like the UK.

Because the UK is an impoverished war zone?

[IrishGuy]

Well, the national debt is going to explode off of entitlement programs, so the sane thing to do would be to cut these programs or eliminate them altogether. I think they're projected to cost upwards of 80 trillion dollars over 20 years. Since the boomers in general failed to save for retirement I think we should declare a one generation moratorium on medicaid and social security (this will never happen unless we get desperate).

Also, taxes will have to be raised because we need to generate surpluses and because every spending cut and tax increase will be a long, hard-fought political battle. Thus, we need to hit the problem from multiple fronts in order to generate the surpluses to pay off our debt.

The last stage will be to rebuild our industrial complex. This will be the most difficult task because the global market is already flooded with Chinese goods (producing more will only drive the prices further down and make us less competitive). Relying on tariffs is a bad idea since it encourages everyone else to do the same resulting in artificially high prices on everything, less competition, and slow economic growth/depression. Basically, one country could monopolize steel production and be protected by a tariff but they would have to import iron ore from another country who has a tariff. The tariffs add up in the value chain making the end product much more expensive for everyone; fewer people can afford the product resulting in lax demand and slow growth. And no, no country can produce everything without importing. So how do we rebuild our industrial complex?

The US will need to remove it's currency as the global store of value, since this drives up the value of our currency relative to everyone else (lots of countries hold dollars, reducing the supply of dollars and increasing its value). This will reduce our capacity to borrow (hence the budget fights have to happen first). To replace the dollar we need a basket currency which could include the dollar. I know the Chinese suggested this, but I think it is the right thing to do.

We need to make the Chinese float their currency. This will stimulate internal consumer demand, which will help to reduce the amount of goods flooding the market and will also drive the development of China's service sector. This in turn will create more demand for manufactured goods globally, while also reducing the number of Chinese going into manufacturing. Essentially, the Chinese economy will be more balanced. Once this has happened the rest of the world (including the US) can re-equilibriate their economies. For the US this would mean more manufacturing (not a lot but enough to help our economy limp on) and less service oriented work.

However, getting China to do all of this will require international pressure and stigma since they seem to still think Mercantilism works in spite of all of evidence to the contrary (European powers anyone?). So even if the Chinese refuse to do the above the economy will force them to. The only thing the above paragraph will change is how everyone hits the pavement. You can use a parachute and the ground to stop or just hit the pavement. Either way you stop.

[Hydro]

Because the UK is an impoverished war zone?

No, because there is not much industry left in the UK and you can't keep a country running by just cleaning shoes and cutting hair...

[Causa Mortis]

No, because there is not much industry left in the UK and you can't keep a country running by just cleaning shoes and cutting hair...

I've been to the UK. The standard of living is basically the same as it is in the US.

And their manufactuing share of GDP is the same as ours (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.) - about 15%.

[Warrior]

We're definitely going to have to cut spending. Entitlement programs, which in general are not the function of the federal government, seem like the best place to start.

As for raising taxes, at what point does raising taxes errode the tax base itself? We're probably already there. Lowering taxes has increased tax revenue practically every time it has been tried. Of course there is a limit somewhere - clearly lowering taxes to zero will not produce any revenue.

[Causa Mortis]

We're definitely going to have to cut spending. Entitlement programs, which in general are not the function of the federal government, seem like the best place to start.

Except entitlement programs have essentially zero deadweight loss. The economic case for cutting them is pretty weak.

Peter Lindert (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.=onepage&q=&f=false) on spending.

Military spending has the largest deadweight loss (by far) and contributes zero social good. We also spend a significant multiple of any other power on defense goods, ergo I'm not really sure what benefit is being gained from the last 200 billion or so of defense spending.

As for raising taxes, at what point does raising taxes errode the tax base itself? We're probably already there. Lowering taxes has increased tax revenue practically every time it has been tried.

Bollox - you may see nominal increases in tax revenues, but you'll see declining taxes as a percent of GDP and the real net receipts at any existing tax rate today.

Clearly cutting taxes from 90% to 39% had an impact. But the 39-36% cuts? I think you'll struggle to support the notion that these significantly impacted labor participation or economic activity generally.

[IrishGuy]

Also, note that there are at least 2 conditions that must be met in order for tax cuts to be effective.

1) The tax cut must not result in a government deficit since deficits ensure inflation and higher taxes in the future.

2) Tax cuts must be systemic, meaning, that it is pointless and possibly counter-productive to cut income taxes if you are just going to increase corporate taxes. A tax is a tax.

Also, note that deadweight losses increase and decrease exponentially. Depending on where we are in that sensitivity will determine the effect of a tax cut. Seeing as taxes have generally been cut the last 20 years I would think that we are going to see that tax cuts are going to be ineffective.

Causa Mortis alluded to the reason why I stated that we must increase taxes and cut spending. Republicans generally want to cut social programs, while Democrats generally want to cut military spending. The fight over what to cut is going to be brutal and all avenues to close the budget gap must be pursued at the same time. It's kind of a shotgun approach; you lose the military cuts but get the tax increases. The next day you go out and fight again over this stuff. Also, our corporate taxes tend to be low relative to the rest of the world, so there is room to grow and there might be enough animosity towards corporations to increase those taxes.

[Warrior]

I'm not necessarily opposed to cuts in teh military, but that is a proper function of government and would require a lot more scrutiny than something that isn't.

I don't think one nation's corporate taxes being low compared to the rest of the world is any justification for raising them. Animosity is certainly not a reason. The tax code is not a weapon to be used against those you don't like. What's next? You vote against your senator and he raises your taxes in retribution?

[lurk]

Since the boomers in general failed to save for retirement I think we should declare a one generation moratorium on medicaid and social security (this will never happen unless we get desperate).
The viability of the social security system is not related to boomer saving habits. The system's parameters were never adequate to deal with the increase in life expectancy, and the goat-in-the-snake quality that the boomer generation represents. You can't blame us for that one, it belongs to FDR. I have little to no expectation of obtaining payouts that are anything like the purchasing power I've paid in over these past 40+ years, since I expect that inflation is the only real way out the debt mess. The trick will be to do it without completely destroying the currency (not to imply that the 95% loss in purchasing power since the Fed's creation isn't destruction).

While it's apparently true that many boomers have not sufficiently provided for their retirement, it seems to me that the likely result will be that they won't retire. In my estimation that's the expected result of relying on the government to look out for your welfare. Undoubtedly they will place a serious strain on the healthcare system and the likely result will be that their healthcare will be rationed, at least in terms of Medicare. But however it comes about, I'm sure it won't be called a Death Panel.

[Warrior]

The viability of the social security system is not related to boomer saving habits. The system's parameters were never adequate to deal with the increase in life expectancy, and the goat-in-the-snake quality that the boomer generation represents. You can't blame us for that one, it belongs to FDR. I have little to no expectation of obtaining payouts that are anything like the purchasing power I've paid in over these past 40+ years, since I expect that inflation is the only real way out the debt mess. The trick will be to do it without completely destroying the currency (not to imply that the 95% loss in purchasing power since the Fed's creation isn't destruction).

While it's apparently true that many boomers have not sufficiently provided for their retirement, it seems to me that the likely result will be that they won't retire. In my estimation that's the expected result of relying on the government to look out for your welfare. Undoubtedly they will place a serious strain on the healthcare system and the likely result will be that their healthcare will be rationed, at least in terms of Medicare. But however it comes about, I'm sure it won't be called a Death Panel.

I have little expectation of SS payout, too. I'd like to see an eventual end to the whole SS system. Anyone on it today keeps their benefits. Those above a certain age (40? 45?) can continue with the system as-is or opt out completely. Those below that age are out. No more payments in and no expectation of payments out. Certain parameters can be tweaked, like the age cutoffs, and maybe those that opt out have to continue to pay for a couple years, but we could at least start to get away from the system andreturn to encouraging personal savings and responsibility.

[IrishGuy]

I have little expectation of SS payout, too. I'd like to see an eventual end to the whole SS system. Anyone on it today keeps their benefits. Those above a certain age (40? 45?) can continue with the system as-is or opt out completely. Those below that age are out. No more payments in and no expectation of payments out. Certain parameters can be tweaked, like the age cutoffs, and maybe those that opt out have to continue to pay for a couple years, but we could at least start to get away from the system andreturn to encouraging personal savings and responsibility.

I don't expect to get social security either, but I see no reason why I should pay for a generation that failed to save and act responsibly. I think you can target the boomers. Some say they will just end up working longer. I say they will try to work longer, but the fact that many employers pay a significant portion of health care costs and the lower productivity of very old workers will factor into hiring practices. Older people are more likely to get sick which means higher premiums for those corporations. Also, as boomers struggle to find employment to maintain their standard of living (which has been artificially high seeing as they haven't saved much) they are going to demand more money from entitlements. This will strangle military and education spending which are essential for maintaining a strong economy. Politically, the boomers have failed to adequately amend or do away with SS.

Having to pay for my retirement without SS and theirs with SS is just going to hurt my standard of living. I don't even get a chance to have a higher standard of living. Boomers need to eat the mess they made.

As far as military cuts are concerned, the government's obligation is to provide adequate defense of the country, not to be world police. We have military bases in over 150 countries including hundreds of thousands of soldiers (not including the soldiers fighting in Iraq and Afghanistan). We have 10-11 Aircraft carriers (one is set for decommissioning soon) while the next closest countries (UK, Italy, and China I think) have 2 a piece. Granted there are advantages to having this huge military, but the sustainability of it is questionable as is it's function with regard to the constitution (calls for common defense of the country and not global stability).

With regard to the corporate taxes, it is just an option. Taxes squeeze any entity that they are imposed upon (dead weight loss) and if other countries are squeezing theirs a lot more than ours then we can afford to squeeze a little more out of ours without too much adverse harm. Don't get me wrong, I don't find higher taxes in any form very palatable, but we have a lot of debt and it must be paid.

[Causa Mortis]

The viability of the social security system is not related to boomer saving habits. The system's parameters were never adequate to deal with the increase in life expectancy, and the goat-in-the-snake quality that the boomer generation represents. You can't blame us for that one, it belongs to FDR. I have little to no expectation of obtaining payouts that are anything like the purchasing power I've paid in over these past 40+ years, since I expect that inflation is the only real way out the debt mess. The trick will be to do it without completely destroying the currency (not to imply that the 95% loss in purchasing power since the Fed's creation isn't destruction)..

On the contrary, all that needs to happen is that we index SS to inflation instead of wages and make it a flat tax instead of a regressive one. We will grow our way out of it without any real reduction in the basket of goods the elderly can buy with it.

[Melchizedek]

Military spending has the largest deadweight loss (by far) and contributes zero social good. We also spend a significant multiple of any other power on defense goods, ergo I'm not really sure what benefit is being gained from the last 200 billion or so of defense spending.

Research... we have the benefits of military research. It's thanks to the military that we have the internet, among other things.

[Warrior]

I don't expect to get social security either, but I see no reason why I should pay for a generation that failed to save and act responsibly. I think you can target the boomers. Some say they will just end up working longer. I say they will try to work longer, but the fact that many employers pay a significant portion of health care costs and the lower productivity of very old workers will factor into hiring practices. Older people are more likely to get sick which means higher premiums for those corporations. Also, as boomers struggle to find employment to maintain their standard of living (which has been artificially high seeing as they haven't saved much) they are going to demand more money from entitlements. This will strangle military and education spending which are essential for maintaining a strong economy. Politically, the boomers have failed to adequately amend or do away with SS.

Having to pay for my retirement without SS and theirs with SS is just going to hurt my standard of living. I don't even get a chance to have a higher standard of living. Boomers need to eat the mess they made.


I share the sentiment, but I don't think just stopping all SS tomorrow (which is how I understand your comments) would be a viable way to approach getting something like that done.

[Causa Mortis]

but that is a proper function of government and would require a lot more scrutiny than something that isn't.

As deemed by you.

At the margin, we have way, way too much military spending. There's just no need for it. You can reduce spending by a signficant margin without shifting any geopolitical factors.

At the margin we do not have enough health care.

I don't think one nation's corporate taxes being low compared to the rest of the world is any justification for raising them.

Actually this conversation is much ado about nothing because US corporate tax rates are the highest in the developed world.

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

Personal taxes need to go way, way up, especially on the wealthy.

---------- Post added 02-18-2010 at 04:58 PM ----------

Research... we have the benefits of military research. It's thanks to the military that we have the internet, among other things.

And R&D is what fraction of defense spending? Its not 10%, and we could still continue the R&D in other areas with federal spending.

We don't need another flipping aircraft carrier, period.

[Mader]

Social Security has been 'off budget' for as long as I remember.

This means that it is not included in the yearly budget. Sort of like keeping two sets of books, except when us regular folks do it we get in trouble.

We have been at war since 2001. War is expensive. But that is no excuse for the rest of the spending we have been doing. But I disagree that we need to cut military spending, not everyone in this world is our friend. But we can certainly spend that money more wisely. I also believe in the deterrent affect from having a large military.

We have to cut everything, across the board, by 10-15% (the President wants to add more jobs to the government, an increase of 15%!!!!!).

I would suggest changing the tax structure to a flat tax, whatever number makes sense. This would clear out the IRS, save us billions in collection costs and make business folks very happy.

Payroll taxes HAVE to be cut for awhile. Tax credits for hiring new employees are useless - noone is going to hire new employees until they can afford to keep the employees they already have. Cutting payroll taxes benefit the business immediately, meaning the very first week. This will allow businesses to start back up again, which will bring in more income from taxes.

Wall Street seems to have figured out what the Obama administration is doing - it was slow because they didn't know which direction to go in. 'If the President does this, then we can't make money here, but we can make money over there'

Shrinking government is essential, essential. Too much overhead. And the government needs to get out of the business of business.

I would also suggest looking at Social Security for the wealthy retired. I know this is sacrilege, and I know that everyone who has paid into the system did so with the promise of getting something back, but really, if a person has a retirement income of $200,000 per year, do they really need that Social Security check??? Warren Buffet gets Social Security (don't know if he keeps it or donates it). In a few years, Bill Gates will qualify and receive Social Security. This suggestion goes directly against my belief that it is noone's business how much anyone else makes, and my rejection of monetary redistribution, but we are in an emergency situation and my proposal will do no harm to the wealthy.

[Warrior]

As deemed by you.

Obviously.

At the margin, we have way, way too much military spending. There's just no need for it. You can reduce spending by a signficant margin without shifting any geopolitical factors.

I agree that there is wasteful spending in the military that could be cut, but the government has a responsibility for national defense. We would need to make sure critical capabilities are not harmed.

At the margin we do not have enough health care.

The more the government is involved, the less we will have.

Personal taxes need to go way, way up, especially on the wealthy.

How much should "the wealthy" be paying in taxes?

[EricJ]

I think that spending cuts (with the exception of focused defense cuts) and raising taxes in a recession are equally bad ideas. I do support deficit spending at the moment. I also believe that we need to move towards a more robust, progressive tax structure and destroy tax loopholes. Currently, our tax revenues manage to cover Social Security, Medicare, Medicaid, and defense. Our current tax rates in relation to our spending are unsustainable and well below the rates of other developed nations. I am including myself in this proposal. Unlike many, I don't expect the government to solve problems and cut my taxes at the same time. I find the upcoming expiration of the Bush-era tax cuts comforting. However, I also believe that it is crucially important for us to move towards a balanced budget and begin phasing out debt gradually.

The Center for American Progress has a nice, informative proposal for a balanced budget which will lead us in to a surplus.

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.


I also think it is important to start considering new ways to do business, to revivify our manufacturing sector and, thus, to generate wealth. I think this is especially important in the long run, because manufacturers create wealth by creating things of value. This translates into government revenue. Pundits, strategists and politicians constantly reference the need for a competitive economy against countries like China, Germany, South Korea, and Japan. These countries build things and export. We also export large amounts of goods, but that means nothing if we are spending more wealth on imports than we gain from exports. We need to close our trade deficits with them and really compete. Upping our exports, investing in modernized industrialization, and increasing outputs also makes sense as a way to ensure the continued growth of our economy post-recession. These types of programs are what the jobs bill or a second stimulus should be focused on, and what should have been present in the first stimulus.

The move towards a more ecologically sustainable economy provides an excellent platform for much of what I have discussed above. Even if you are a climate change denier or completely apathetic about the welfare of our planet, it is in our interests to create innovative new products. Especially with regards to energy. Unlike service-oriented energy sources which are based on extractive processes and are single projects (in the sense that you build a single power plant, which reaps profit by charging fees for use), solar/geothermal/wind industries operate on the basis of continuous manufacturing outputs. Factories also require more labor than power plants, which means more people are employed. We should get in on this new sector, and quickly.

Cleveland is implementing an innovative new economic program at the moment. Although many of the new businesses are service-oriented instead of industrial, I think it encapsulates the type of public-private relationship society needs if we hope to stimulate our economy.

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.



I brought all of this manufacturing stuff up because the creation of wealth is an important method of balancing the budget, beyond tax increases and spending cuts.

[hubcap]

Social Security has been 'off budget' for as long as I remember.

This means that it is not included in the yearly budget. Sort of like keeping two sets of books, except when us regular folks do it we get in trouble.
The expenses for Social Security may be "off budget" but unless I am mistken, the money has already been spent buying US Treasuries in order to finance spending that is "on budget". Since Social Security is going to be taking in less than it is paying out this year and for the forseeable future, the budget deficit will go up accordingly.

[Causa Mortis]

I agree that there is wasteful spending in the military that could be cut, but the government has a responsibility for national defense. We would need to make sure critical capabilities are not harmed.

For true national defense we need less than 1% of GDP spent on a defense budget. We'd need satellite recon, long range mutli role platforms at Guam and Taiwan, a handful of Seawolfs, and a large enough land ability to counter the deadly threats of Mexico and Canada.

---------- Post added 02-18-2010 at 10:26 PM ----------

The expenses for Social Security may be "off budget" but unless I am mistken, the money has already been spent buying US Treasuries in order to finance spending that is "on budget". Since Social Security is going to be taking in less than it is paying out this year and for the forseeable future, the budget deficit will go up accordingly.

Right but the solution really is not that difficult or painful. You just index it to inflation instead of to wages, and make it a flat tax instead of a regressive one. Problem solved...reasonable people can agree on this stuff, ideologues cannot.

[IrishGuy]

I would suggest changing the tax structure to a flat tax, whatever number makes sense. This would clear out the IRS, save us billions in collection costs and make business folks very happy.


Only problem I see with this is that we are going to lose tax revenue if we switch to a flat tax simply because a flat tax ignores the marginal utility of money. We currently tax the rich at about 36-39%, but the poor either do not pay taxes or pay very low taxes of about 15-20%. We will not be able to create a flat tax anywhere near 40% which means the rich will get to keep a lot more of their money and the poor a lot less. Just think of it this way:

If I double my earnings from $20,000 to $40,000, does my standard of living change a lot?
If I double my earnings from $40,000 to $80,000, does my standard of living change a lot?
If I double my earnings from $20 million to $40 million, does my standard of living change a lot?

It's the same with taxes, only in reverse. You can take more from the rich without hurting their standard of living than you can from the poor simply because their is a limit to how well you can live, regardless of the amount of money you have. Although, I'll admit you are going to get your flat tax in a way. The high amount of debt we have is almost a guarantee of inflation, which is essentially a flat tax.

As deemed by you.
Actually this conversation is much ado about nothing because US corporate tax rates are the highest in the developed world.

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.



My mistake. I was under the impression it was the other way around. Anyways, just change "corporate" to "personal."

As far as Aircraft carriers are concerned. I think the military has one under construction. They seem to be maintaining 10-11 as the standard. If I were to start cutting military budgets I would start with the foot soldiers since they are among the most expensive things on the budget (the aircraft carrier they are about to retire is from the 60's and has been retrofit a couple of times). I forget who wrote the theory about how a strong navy is essential for global power, but aircraft carriers embody both naval and air power. We could drastically downsize our foot soldier presence without compromising our global position too much and our ability to project military power. That could be a nice compromise between the "military purely for national defense" and for "global police."

[hubcap]

For true national defense we need less than 1% of GDP spent on a defense budget. We'd need satellite recon, long range mutli role platforms at Guam and Taiwan, a handful of Seawolfs, and a large enough land ability to counter the deadly threats of Mexico and Canada.
I certainly agree that we spend too much on our military budget. The defense contractors have done a fine job of lobbying Congress and getting appropriations for unnecessary big ticket items. How many times has Congress appropriated money for projects the military didn't even want? One of the biggest wastes of money was the B-2 Bomber. With a price tag of well over $1 Billon per unit it was just a project that the Air Force guys were giddy about because of the high-tech toy, when in reality strategic bombing is a thing of the past, not to mention that the current B-52's are slated to remain in service until 2040. If you need to deliver tactical nukes a missle works just as well at a much lower price tag.

[rahdam]

For true national defense we need less than 1% of GDP spent on a defense budget. We'd need satellite recon, long range mutli role platforms at Guam and Taiwan, a handful of Seawolfs, and a large enough land ability to counter the deadly threats of Mexico and Canada.


What about the Ohio-class? Those are the best deterrent in the entire world.

[Monte314]

Paying the interest on the massive debt racked up by the President is an enormous burden his young supporters will bear for many, many years; perhaps their entire lives.

There really isn't an easy way out. "Quick fixes" (like abrogating some of these obligations) will either destroy confidence in the dollar or induce substantial inflationary pressures. Either of these would send prices spiraling, which is equivalent in effect to forking over a bunch of money to pay interest.

Fortunately, I'll soon start sucking cash out of your paychecks in the form of social security for a couple of decades or so, then die before the debt has to be paid off. This will leave the young idealists to pay off the debt incurred by the ChangeMeister, who will himself be drawing a huge government salary and living in a mansion somewhere.

[phej]

Fortunately, I'll soon start sucking cash out of your paychecks in the form of social security for a couple of decades or so, then die before the debt has to be paid off. This will leave the young idealists to pay off the debt incurred by the ChangeMeister.

Maybe not. Maybe they'll add some sense to the whole system and move to means testing or raise the retirement age. (As a relative youngster, I can dream, can't I?)

[IrishGuy]

Paying the interest on the massive debt racked up by the President is an enormous burden his young supporters will bear for many, many years; perhaps their entire lives.

There really isn't an easy way out. "Quick fixes" (like abrogating some of these obligations) will either destroy confidence in the dollar or induce substantial inflationary pressures. Either of these would send prices spiraling, which is equivalent in effect to forking over a bunch of money to pay interest.

Fortunately, I'll soon start sucking cash out of your paychecks in the form of social security for a couple of decades or so, then die before the debt has to be paid off. This will leave the young idealists to pay off the debt incurred by the ChangeMeister, who will himself be drawing a huge government salary and living in a mansion somewhere.


The youth hardly ever show up to elections. I think with Obama only about 30% of the eligible 18-25 year olds actually voted compared to around 60% for the general population. Not to mention the younger generations are smaller than the older ones. Are you suggesting that they (18-25 year olds) were the difference between victory and defeat for McCain? Would McCain have actually spent less? When was most of that 10-11 trillion dollar debt accrued?

[Monte314]

Are you suggesting that they (18-25 year olds) were the difference between victory and defeat for McCain? Would McCain have actually spent less? When was most of that 10-11 trillion dollar debt accrued?

I believe that most of the debt was incurred by the Democrat-controlled Congress at the behest of our current President.

And, no... I don't actually know or care who elected this guy. But I like jerking liberals around and there aren't many old ones here, so I blame them for stuff.

[Lucid]

I believe that most of the debt was incurred by the Democrat-controlled Congress at the behest of our current President.

Do you also believe in fairies? Because they're fictional too. :rolleyes:

[Night Runner]

I believe that most of the debt was incurred by the Democrat-controlled Congress at the behest of our current President.
I had no idea that Reagan, both Bushes and Obama were the same person. :stunned: I've learned something today... (source (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.))

[Monte314]

I had no idea that Reagan, both Bushes and Obama were the same person. :stunned: I've learned something today... (source (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.))

Yes, when debt is expressed in units other than dollars, Obama doesn't look quite so bad. However, the debt has to be paid back in dollars, not GDP points.

[Night Runner]

Nice swerving. Here is what you originally said:
I believe that most of the debt was incurred by the Democrat-controlled Congress at the behest of our current President.

Your belief is incorrect, as demonstrated on the site to which I linked in my previous post. Most of the national debt was racked up by Reagan and the two Bushes. Not a belief - a fact.

[Causa Mortis]

Yes, when debt is expressed in units other than dollars, Obama doesn't look quite so bad. However, the debt has to be paid back in dollars, not GDP points.

Oh it clearly can't continue forever, and Japan running its debt to 200% of GDP hasnt' gotten it out of a two-decade long recession. Fiscal policy probably works, its just that its prone to getting watered down in democratic societies, and doesn't provide a lot of "bang for the buck".

What's missing in both cases is expansionary monetary policy, which reduces deficits and will get us from deflation to mild inflation almost overnight. It has the same impact as fiscal policy...its just that its free and the Fed (run by economists who know better how to manage long and variable policy lags) is a better institution than Congress for issues pertaining to macroeconomics.

The deficits aren't anything to lose sleep over, but they probably have a somewhat mediocre "bank for buck" impact compared to monetary policy.

---------- Post added 02-19-2010 at 09:05 PM ----------

I had no idea that Reagan, both Bushes and Obama were the same person. :stunned: I've learned something today... (source (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.))

The site assumes that deficits are the primary driver of ups and downs. They're not - monetary policy dominates fiscal policy regardless of whether you look at the early 1930s (expansionary fiscal, tight monetary, deflation), the 1970s (tight fiscal, expansionary monetary, inflation), the 1980s (expansionary fiscal, tight monetary, no inflation), or today (very expansionary fiscal, very tight monetary in areas with a high velocity, deflation). Monetary expansions reduce deficits and don't come with the smathering of public choice issues that fiscal expansions do.

We're running gargantuan deficits and its not making much difference in the face of a Fed that's done very, very little to increase the effective money supply while bending over backwards to help bad banks.

Scott Sumner's blog is quite excellent and readable with a foundational understanding of economics. He's gone to great lengths to show that Bernake's response to the crisis has been...let's just say lacking, and I think most economists would struggle to disagree on positive grounds with him.

To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

[Night Runner]

CM,
I'm right there with you when it comes to shaking a fist at the horrendous fiscal responsibility of the Powers That Be. I just wanted to set the record straight - regardless of people's "beliefs," most of our debt was not, in fact, incurred by the current administration. I'm not taking political sides - just trying to set matters straight.

[LaoTzu]

Protectionism, and a return to (at least) Regan era tax policy.

Modest cuts across the board.


I wouldn't advocate massive military cuts, because that's a genie that just wont go back into the bottle overnight... it also guarantees beneficial trade policy (which is what it's main purpose has always been... projecting power).
When there is a de-facto power that is capable of taking the mantle, then it can be passed off, and a draw-down can safely be done. (like when the UK passed it to the US)

[Causa Mortis]

Protectionism


Why do you think protectionism will help us in our current economic crisis?

[LaoTzu]

The coming interest on the national debt isn't what I'd consider a current crisis. There is time to fix it.

Clinton balanced the budget just over 10 years back.... getting back to that would be another good start.


Protectionism can be phased in to allow for some carry-over of current policy to a point where outsourcing is less viable than it has been made under GOP administration a little further down the line.

[Causa Mortis]

Protectionism can be phased in to allow for some carry-over of current policy to a point where outsourcing is less viable than it has been made under GOP administration a little further down the line.

When you stop outsourcing, you'll get two domestic effects:
1. You'll get a jobs effect in whatever industry is being protected.
2. You'll get a general loss of economic efficiency associated with higher prices or lower profits for that individual product, which won't show up in the industry but will harm the general competetitiveness of the economy as a whole. These impacts can't be seen but clearly exist.

...which on balance are probably ambiguous. The issue is that:
3. Foreign countries will retaliate with their own tariffs, undeniably causing net job loss domestically.

Outsourcing is good for general macroeconomic competitiveness. Its bad for some demographics - ie manufacturers and unskilled labor. Help unskilled labor in other ways.

[Lucid]

Help unskilled labor in other ways.

I'm not opposed to this idea, but I'm interested in what ways you think would be effective. Can you expand on this?

[Causa Mortis]

I'm not opposed to this idea, but I'm interested in what ways you think would be effective. Can you expand on this?

Sure.

Relocation assistance to move out of areas where unemployment has been greatly increased because of international competition (ie Detroit)
Retraining to close substitute skill sets when a worker's given skill set has been made irrelevant by international trade. This includes manual skills like the skilled trades, which the government has typically not been nearly as generous in helping with as university education.
Loans and subsidies to assist families with maintaining a decent level of consumption while retraining and/or relocating.
In extreme cases - ie the worker is 61 and no one is likely to hire/retrain them at that age - then you probably subsidize their wages at a low-skilled job until they're ready for social security.

The details would be a bit tricky (where do you and do you draw the line between a declining industry because of technology and because of international trade? What types of skills would you retrain for?), but the gains from free trade are very large even if we financed this with inefficient forms of taxation.