rehmwa 2
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QuoteQuoteMaybe we need to think about rewarding investment that puts money where it can be used to hire people and build industry, and not favor financial markets that spin a bit of real investment sugar into a big fluffy ball of inflated stock market cotton candy.
maybe the tax code should just get the hell out of 'favoring' anything and just tax the income that citizens generate in any imaginative way they can and let the market take care of it
Why do you hate the elderly?
rehmwa 2
QuoteQuoteQuoteMaybe we need to think about rewarding investment that puts money where it can be used to hire people and build industry, and not favor financial markets that spin a bit of real investment sugar into a big fluffy ball of inflated stock market cotton candy.
maybe the tax code should just get the hell out of 'favoring' anything and just tax the income that citizens generate in any imaginative way they can and let the market take care of it
Why do you hate the elderly?
my side hurt from you making me laugh - you'll hear from lawyer now
...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants
QuoteQuoteQuoteQuoteMaybe we need to think about rewarding investment that puts money where it can be used to hire people and build industry, and not favor financial markets that spin a bit of real investment sugar into a big fluffy ball of inflated stock market cotton candy.
maybe the tax code should just get the hell out of 'favoring' anything and just tax the income that citizens generate in any imaginative way they can and let the market take care of it
Why do you hate the elderly?
my side hurt from you making me laugh - you'll hear from lawyer now
Eat Me.
ShcShc11 0
QuoteQuote
Then do explain me how the Greece situation (+ PIG crises) is any way a good comparison to the current American situation?
They've all been over-spending for too long.Quote
Austerity is actually contractionary after all.
That depends upon how much of the economy is dependent on government spending. Granted, where we are now, government austerity is going to be contractionary .Quote
It comes down to the same league as Austrian economics where they keep predicting/predicted hyper-inflation of the likes of the 1920-1930 Weimar Republic and Zimbabwe.
I assume you're aware that Hayak and von Mises actually lived through this. It wasn't just a theory on their part. No doubt their personal experience with hyperinflation was significantly related to the Versailles treaty.Quote
I think we can both agree at how disastrous such a policy was to the EU and how the ECB backtracked from this decision. “The rest of the democratic world” (i.e: Europe) is in worse shape because of decisions like these… Germany and the EU is facing a possible catastrophic deflation yet Merkel is adamant in preventing hyper-inflation.
My point, again, is that most western governments have been over-spending for too long. Their approach is not sustainable.Quote
Fact is, the low rate is indicative of a stagnant American economy (i.e: lacking growth) and people are more than willing to park their money into the U.S.
If "normal" market forces were in play, I could agree with this statement. The fact of the matter is, "normal" market forces have not been in play for a while now. The Fed has been buying up every piece of paper in sight. They've actually turned into a profit center!Quote
http://www.crossingwallstreet.com/
Thanks for posting the site. I have a new web site to check outQuote
By his calculations, The Fed’s rate in late 2008-2009 should be at -5% if he wanted to bring U.S economy back to full employment. Of course, in real life, the Fed’s rate cannot go below zero. If it cannot restore normal employment at zero, then we have a classic case of liquidity trap. That is why events such as the 1930s are very relevant.
So, his model is advocating inflating our way out of the problem? Is that a fair read on this?Quote
Spending should not be used in every recession, but most definitely so in a major recession involving liquidity trap.
You're faith in Keynesian economics is noted.
==================================================================
For those following along in the conversation, googling some of the information found in ShcShc11's web links dredged up some very interesting stuff:
------------------------------------------------
1) Wikipedia's description of liquidity trap:
http://en.wikipedia.org/wiki/Liquidity_trap
This is a pretty good description, with links (as usual) to key words.
------------------------------------------------
2) A New York Fed in house article describing the theoretical justification for the Fed's policy of announcing future interest rates (...i.e., this is why they told everyone they're going to keep interest rates low). No where does it discuss the fact they don't have any choice in the matter because as soon as rates start going up US govt debt service requirements are going through the roof...
http://www.newyorkfed.org/research/economists/eggertsson/palgrave.pdf
Some fascinating stuff in here. Pure Keynesian thinking applied. Some points of note from this article:Quote
.....The aggregate demand relationship that underlies the model is usually expressed by a consumption Euler equation, derived from the maximization problem of a representative household(pt 1)....
The previous section illustrated, however, that shaping expectations(pt 2) in the correct way can be very important for minimizing the output contraction and deflation associated with deflationary shocks. This, however, may be difficult for a government that is expected to behave in a discretionary manner. How can the correct set of expectations be generated?
Perhaps the simplest solution is for the government to make clear announcements about its future policy through the appropriate ‘policy rule’. ... There is a large literature on the different policy rules that minimize the distortions associated with deflationary shocks. ... They show that, if the government follows a form of price level targeting(pt 3), ...
If the central bank, and the government as a whole, has a very low level of credibility(pt 4), a mere announcement of future policy intentions through a new ‘policy rule’ may not be sufficient.
I've taken liberties here in cutting and pasting. Hopefully, I haven't done so in such a way that skews the context. That's not my intent.. I quickly read through the article a few times. Several things jumped out at me, and stuck with me...
pt 1) The basic equation (the Euler equation) targets a "household". No where did I get the impression they were attempting to model how a company would maximize its utility, which is very different from how a household would maximize it's utility. That's a gaping hole because in a capitalistic society you must have companies to have households. I believe this is one of the major differences between Hayak and Keynes. Reading Hayak is way more difficult than reading Keynes. Keynes very much focuses on a macroeconomic view, while Hayak prefers a microeconomic view and all of the ensuing myriad details. Hayak does this by emphasizing "intermediate levels of production", which I'm now viewing as modeling how a company maximizes its utility, instead of just modeling "household" utility.
pt 2) The Fed has been reduced to managing expectations. On the street, there's a widely known phrase that says "perception is reality". It's a piss poor way to live your life, IMO. It's down right frightening the Fed is bringing that philosophy off the street and applying it to the economy as a whole. I'm taking some liberties in making this leap, but just wanted to share my "OMG, WTF!" shock at this.
pt 3) Uhm, government setting prices, or even thinking about that... never works. Properly functioning markets set prices.
pt 4) In managing expectations, the Fed is admitting that government credibility is an essential part of what they're dealing with. I've seen for some time now that Geithner and Bernanke are not truly independent of Obama, and now I understand why. The problem, and it's beyond their control, is that private capital is expecting Obama to continue to make a mess of things (he's gotten pretty much everything he's asked for in his time in office, and things are worse, not better). The Fed is facing a losing proposition.
I could be missing somethings here, but I have even less confidence in Geithner and Bernanke now.
------------------------------------------------
Philadelphia Research Intertemporal Stochastic Model (PRISM)
The Philadelphia Research Intertemporal Stochastic Model (PRISM) is a medium- scale economic model being developed by the Philadelphia Fed’s Research Department.Quote
About the PRISM Model
The PRISM model comprises about 40 equations and is estimated/simulated using the MATLAB programming language....
OMG!!! 40 equations??? MATLAB??? This is the best they can do?
------------------------------------------------
I'm going to close out this post with a quote from today's WSJ article that I posted earlier:Quote
Reagan appointed a large number of economic officials who also were firmly committed to moving away from interventionist policies. No members of the original Council of Economic Advisers under Reagan had come from the Keynesian school of thought...
Bottom line: Keynesian theory is not going to solve our problem for us.
Good to see you again.
It's good to see more in-depth convos...
QuoteThey've all been over-spending for too long.
That is unfortunately an incomplete assessment of the Euro-crisis.
Did Greece spend too much? Absolutely.
Did all the Euro-countries been spending too much? No.
You seem to be a fan of the WSJ and I wanted to post something which the WSJ commented on back in December 2011.
http://online.wsj.com/article/SB10001424052970203501304577088221198128632.html
http://blogs.wsj.com/economics/2011/12/09/eu-debt-story-isnt-simple-morality-tale/ (if you don’t have WSJ subscription, you can get it here too)
I removed a few useless paragraphs and added bold on some of the things I want to emphasize.
**
“In 2007, before the crisis struck, Spain had a modest debt load representing just 36% of its economy, according to European Union figures. And those responsible Germans? They had 65%.”
During the past decade, Germany repeatedly breached the euro rules by running too large a budget deficit. Spain actually ran a modest budget surplus in the years before the crisis hit.
But haven’t things changed since then? The German economy has powered through the crisis while the Spanish economy has languished, so you would think the two would have traded places.
You’d be wrong. Last year, Spain’s public debt load represented 61% of its economy. Germany’s rose to 83%. In fact, Spain’s debt burden last year remained below that of the Netherlands (63%), France (83%) and, for comparison, the U.S. (93%).
So if public debt is your yardstick, then the Spaniards were paragons of virtue. They borrowed lightly despite the fact that their euro-zone membership gave them an all-you-can-eat buffet of financing at bargain-basement rates.
“The whole euro-zone strategy is predicated on the assumption that fiscal ill-discipline caused this crisis,” said Simon Tilford, chief economist for the Center for European Reform. “That is a radically incomplete analysis.”
If you believe that Spain’s problem was that its government spent and borrowed too much, then the solution is simple: more austerity. But Spain’s problem wasn’t public debt — it was private debt. ”
**
Now I need to emphasize on that last part. The U.S too has a major major “private debt” problem. This is what made the Clinton bubble not too bad while the Bush housing bubble became so catastrophic.
There is so much talk about public debt; people seem to have forgotten how private debt paralysed the economy. There used to be correct reports in 2008-2009 how normal households had too much debt and now they seem to have vanished from all media reports.
Please look at the bottom of my post where I have attached a chart in regards to Private/Public Debt.
[CHART private vs public debt]
To someone who doesn’t understand economics will spout: “Blasphemy! Look at all those Government debts!!”.
We can see that a major uptrend growth in Private debts during 2000-2008 and when the housing bubble popped, the private sector had no other choice than to deleverage and hope to drastically diminish its debt. What happens when everyone wants to diminish its debt? Demand in the economy collapses and bringing it to a freefall. The only other entity that is truly capable of replacing is the Government and did what it was supposed to do. Keep the economy afloat by creating its own demand and once the private sector recovers and gets it debt in check, THEN it is time for the Government to stop going into deficit spending. In other words, the economy would be sufficiently healthy without Government intervention.
This is also why things such as tax cuts would have less of a multiplier (less effect) than spending. The households are in dire need to diminish their private debt and would not be able to boost sufficient demand (aka Saving/Hoarding). But like I said before, if spending was politically impossible, tax cuts would still be a good thing because it actually diminishes private debt.
(continued on the post below...)
ShcShc11 0
As the WSJ, IMF, S&P and many many others already wrote about Europe’s austerity program:
“As Europe scrambles to find a solution to a debt crisis that’s threatening the world economy, it’s crucial to understand what actually happened in countries like Spain. Otherwise, policymakers will end up prescribing the wrong medicine, with disastrous results.”
...
If you (or anyone else) want to look at the numbers more closely about Europe, you can look at this site:
http://www.voxeu.org/index.php?q=node/7491
including these two (if people want a summary of it):
http://www.voxeu.org/sites/default/files/image/FromAug2011/CafisoFig1(1).gif
http://www.voxeu.org/sites/default/files/image/FromAug2011/CafisoFig2.gif
It essentially decomposes the whole Debt/GDP ratio for Greece, Ireland, Spain, the United Kingdom and Italy.
If you don’t want to look at the numbers and just want a SUMMARY of the link above:
Countries that spent beyond their means: Greece, Portugual and the U.K
Countries that spent WITHIN their means: Spain, Ireland and Italy.
So no, the European crisis is much more than “countries ran up debts for far too long”. Europe has a far deeper structural problem. It tries to act like a country when it is not. Remember that whenever a state faces a deficit in the past, the Federal Government would help transfer money and Americans could freely go work from one state to another (without too much trouble). Europe cannot and is not willing to do that. Germany opposes any “transfer union” and workers are far less mobile.
Another link about the whole “PIIGS debt going out-of-control” myth:
http://www.cepr.net/index.php/blogs/beat-the-press/spain-did-not-run-up-high-public-debt?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29
And here’s another chart about GIPSI/PIIGS debt ratio (see bottom of post).
[SEE CHART PIIGS]
Maybe I’m blind, but I do quite believe their debt was diminishing up until the 2008 shocks.
...
I’m going to cover about another countries: Ireland
Why Ireland? It spent within their means yet still got into the crisis. The Government subsequently underwent severe austerity.
[SEE CHART IRELAND]
One reason why things like Quantitive Easing, monetary policy at zero bound and spending is important is because internal devaluation is a far far more difficult thing to achieve. In order for austerity to truly work (without any sort of QE), the country must become more competitive by cutting workers pay. It is a substantially difficult task to do. It’s easier to depreciate/de-evaluate a currency for everyone (thus making the country more competitive) than for EVERY firm of a nation negotiate every worker pays and wages.
So how is the austerity working out for Ireland (praised by Cameron as being a “model” to Europe).
Ireland is well at 14-15 percent unemployed...
[SEE CHART IRELAND 2]
Very slow and sluggish recovery for so much pain.
New York Times article on Ireland’s austerity:
http://www.nytimes.com/2011/12/06/business/global/despite-praise-for-its-austerity-ireland-and-its-people-are-being-battered.html?_r=2&hpw&gwh=220AD0387D8A777B7010D6114726611E
“Nearly 40,000 Irish have fled the country this year alone in search of a brighter future elsewhere; the trend is expected to continue.”
““This is still an insolvent economy,” said Constantin Gurdgiev, an economist and lecturer at Trinity College in Dublin. “Just because we’re playing a good-boy role and not making noises like the Greeks doesn’t mean Ireland is healthy.””
From the article:
http://www.project-syndicate.org/commentary/orourke1/English
“August 2011 saw the largest monthly decrease in eurozone industrial production since September 2009”
“A second, related lesson is that it is difficult to cut nominal wages, and that they are certainly not flexible enough to eliminate unemployment.”
“...where tax revenues in November ran 1.6% below target as a result.”
A more complete guide about Ireland is found here:
www.bruegel.org/download/parent/663-a-tale-of-three-countries-recovery-after-banking-crises/file/1534-a-tale-of-three-countries-recovery-after-banking-crises
Summary: Ireland’s austerity experiment doesn’t look so good so far.
So in spite of 14-15% unemployment rate, the IMF says that Ireland has “room for further progress on improving competitiveness”. In other words, Ireland is not out of the ditch at all.
IMF report:
http://www.imf.org/external/pubs/cat/longres.aspx?sk=25438.0
My question is:
Do you really expect the American public to accept their country to go well into double-digit unemployment rate? People want to cut the deficit, but want to see their economy recover/unemployment recover.
Choose one.
But I like the fact that StreetScooby at least acknowledged that “it would cause pain”. Far too many people seem to live in fantasy where they can cut the deficit and unemployment recovers.
Anyway, it’s a lengthy post, but I do think there are important myths to demystify and lessons from Europe over what not to do.
I want to continue the post talking about the Bank of England...
“As Europe scrambles to find a solution to a debt crisis that’s threatening the world economy, it’s crucial to understand what actually happened in countries like Spain. Otherwise, policymakers will end up prescribing the wrong medicine, with disastrous results.”
...
If you (or anyone else) want to look at the numbers more closely about Europe, you can look at this site:
http://www.voxeu.org/index.php?q=node/7491
including these two (if people want a summary of it):
http://www.voxeu.org/sites/default/files/image/FromAug2011/CafisoFig1(1).gif
http://www.voxeu.org/sites/default/files/image/FromAug2011/CafisoFig2.gif
It essentially decomposes the whole Debt/GDP ratio for Greece, Ireland, Spain, the United Kingdom and Italy.
If you don’t want to look at the numbers and just want a SUMMARY of the link above:
Countries that spent beyond their means: Greece, Portugual and the U.K
Countries that spent WITHIN their means: Spain, Ireland and Italy.
So no, the European crisis is much more than “countries ran up debts for far too long”. Europe has a far deeper structural problem. It tries to act like a country when it is not. Remember that whenever a state faces a deficit in the past, the Federal Government would help transfer money and Americans could freely go work from one state to another (without too much trouble). Europe cannot and is not willing to do that. Germany opposes any “transfer union” and workers are far less mobile.
Another link about the whole “PIIGS debt going out-of-control” myth:
http://www.cepr.net/index.php/blogs/beat-the-press/spain-did-not-run-up-high-public-debt?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29
And here’s another chart about GIPSI/PIIGS debt ratio (see bottom of post).
[SEE CHART PIIGS]
Maybe I’m blind, but I do quite believe their debt was diminishing up until the 2008 shocks.
...
I’m going to cover about another countries: Ireland
Why Ireland? It spent within their means yet still got into the crisis. The Government subsequently underwent severe austerity.
[SEE CHART IRELAND]
One reason why things like Quantitive Easing, monetary policy at zero bound and spending is important is because internal devaluation is a far far more difficult thing to achieve. In order for austerity to truly work (without any sort of QE), the country must become more competitive by cutting workers pay. It is a substantially difficult task to do. It’s easier to depreciate/de-evaluate a currency for everyone (thus making the country more competitive) than for EVERY firm of a nation negotiate every worker pays and wages.
So how is the austerity working out for Ireland (praised by Cameron as being a “model” to Europe).
Ireland is well at 14-15 percent unemployed...
[SEE CHART IRELAND 2]
Very slow and sluggish recovery for so much pain.
New York Times article on Ireland’s austerity:
http://www.nytimes.com/2011/12/06/business/global/despite-praise-for-its-austerity-ireland-and-its-people-are-being-battered.html?_r=2&hpw&gwh=220AD0387D8A777B7010D6114726611E
“Nearly 40,000 Irish have fled the country this year alone in search of a brighter future elsewhere; the trend is expected to continue.”
““This is still an insolvent economy,” said Constantin Gurdgiev, an economist and lecturer at Trinity College in Dublin. “Just because we’re playing a good-boy role and not making noises like the Greeks doesn’t mean Ireland is healthy.””
From the article:
http://www.project-syndicate.org/commentary/orourke1/English
“August 2011 saw the largest monthly decrease in eurozone industrial production since September 2009”
“A second, related lesson is that it is difficult to cut nominal wages, and that they are certainly not flexible enough to eliminate unemployment.”
“...where tax revenues in November ran 1.6% below target as a result.”
A more complete guide about Ireland is found here:
www.bruegel.org/download/parent/663-a-tale-of-three-countries-recovery-after-banking-crises/file/1534-a-tale-of-three-countries-recovery-after-banking-crises
Summary: Ireland’s austerity experiment doesn’t look so good so far.
So in spite of 14-15% unemployment rate, the IMF says that Ireland has “room for further progress on improving competitiveness”. In other words, Ireland is not out of the ditch at all.
IMF report:
http://www.imf.org/external/pubs/cat/longres.aspx?sk=25438.0
My question is:
Do you really expect the American public to accept their country to go well into double-digit unemployment rate? People want to cut the deficit, but want to see their economy recover/unemployment recover.
Choose one.
But I like the fact that StreetScooby at least acknowledged that “it would cause pain”. Far too many people seem to live in fantasy where they can cut the deficit and unemployment recovers.
Anyway, it’s a lengthy post, but I do think there are important myths to demystify and lessons from Europe over what not to do.
I want to continue the post talking about the Bank of England...
ShcShc11 0
QuoteAs the WSJ, IMF, S&P and many many others already wrote about Europe’s austerity program:
“As Europe scrambles to find a solution to a debt crisis that’s threatening the world economy, it’s crucial to understand what actually happened in countries like Spain. Otherwise, policymakers will end up prescribing the wrong medicine, with disastrous results.”
...
If you (or anyone else) want to look at the numbers more closely about Europe, you can look at this site:
http://www.voxeu.org/index.php?q=node/7491
It essentially decomposes the whole Debt/GDP ratio for Greece, Ireland, Spain, the United Kingdom and Italy.
If you don’t want to look at the numbers and just want a SUMMARY of the link above:
Countries that spent beyond their means: Greece, Portugual and the U.K
Countries that spent WITHIN their means: Spain, Ireland and Italy.
So no, the European crisis is much more than “countries ran up debts for far too long”. Europe has a far deeper structural problem. It tries to act like a country when it is not. Remember that whenever a state faces a deficit in the past, the Federal Government would help transfer money and Americans could freely go work from one state to another (without too much trouble). Europe cannot and is not willing to do that. Germany opposes any “transfer union” and workers are far less mobile.
Another link about the whole “PIIGS debt going out-of-control” myth:
http://www.cepr.net/index.php/blogs/beat-the-press/spain-did-not-run-up-high-public-debt?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29
And here’s another chart about GIPSI/PIIGS debt ratio (see bottom of post).
[SEE CHART PIIGS]
Maybe I’m blind, but I do quite believe their debt was diminishing up until the 2008 shocks.
...
I’m going to cover about another countries: Ireland
Why Ireland? It spent within their means yet still got into the crisis. The Government subsequently underwent severe austerity.
[SEE CHART IRELAND]
One reason why things like Quantitive Easing, monetary policy at zero bound and spending is important is because internal devaluation is a far far more difficult thing to achieve. In order for austerity to truly work (without any sort of QE), the country must become more competitive by cutting workers pay. It is a substantially difficult task to do. It’s easier to depreciate/de-evaluate a currency for everyone (thus making the country more competitive) than for EVERY firm of a nation negotiate every worker pays and wages.
So how is the austerity working out for Ireland (praised by Cameron as being a “model” to Europe).
Ireland is well at 14-15 percent unemployed...
[SEE CHART IRELAND 2]
Very slow and sluggish recovery for so much pain.
New York Times article on Ireland’s austerity:
http://www.nytimes.com/2011/12/06/business/global/despite-praise-for-its-austerity-ireland-and-its-people-are-being-battered.html?_r=2&hpw&gwh=220AD0387D8A777B7010D6114726611E
“Nearly 40,000 Irish have fled the country this year alone in search of a brighter future elsewhere; the trend is expected to continue.”
““This is still an insolvent economy,” said Constantin Gurdgiev, an economist and lecturer at Trinity College in Dublin. “Just because we’re playing a good-boy role and not making noises like the Greeks doesn’t mean Ireland is healthy.””
From the article:
http://www.project-syndicate.org/commentary/orourke1/English
“August 2011 saw the largest monthly decrease in eurozone industrial production since September 2009”
“A second, related lesson is that it is difficult to cut nominal wages, and that they are certainly not flexible enough to eliminate unemployment.”
“...where tax revenues in November ran 1.6% below target as a result.”
A more complete guide about Ireland is found here:
www.bruegel.org/download/parent/663-a-tale-of-three-countries-recovery-after-banking-crises/file/1534-a-tale-of-three-countries-recovery-after-banking-crises
Summary: Ireland’s austerity experiment doesn’t look so good so far.
So in spite of 14-15% unemployment rate, the IMF says that Ireland has “room for further progress on improving competitiveness”. In other words, Ireland is not out of the ditch at all.
IMF report:
http://www.imf.org/external/pubs/cat/longres.aspx?sk=25438.0
My question is:
Do you really expect the American public to accept their country to go well into double-digit unemployment rate? People want to cut the deficit, but want to see their economy recover/unemployment recover.
Choose one.
But I like the fact that StreetScooby at least acknowledged that “it would cause pain”. Far too many people seem to live in fantasy where they can cut the deficit and unemployment recovers.
Anyway, it’s a lengthy post, but I do think there are important myths to demystify and lessons from Europe over what not to do.
I want to continue the post talking about the Bank of England...
A very humorous order was written by the Bank of England not too long ago.
The Bank of England.
http://www.bankofengland.co.uk/publications/fsr/2011/fsrsum1112.pdf
It represents a bit what is going on over here in America.
Emphasis on this:
“The Committee reiterates its advice to the FSA to encourage banks to improve the resilience of
their balance sheets without exacerbating market fragility or reducing lending to the real
economy.”
Did you understand what they are ordering?
The Bank of England says “Improve your balance sheet, but without reducing your lending”.
It’s hard to understand how the Bank of England can give out such distinctly contradictory orders. You either improve your B/S by diminishing lending or help the economy by permitting banks to lend more.
And this is the constant dilemma in which we are in. A bunch of contradictory orders from the bottom asking the Government to lower unemployment while reducing the deficit short-term.
When you hear the same arguments over & over, you end up realizing that people don't truly understand what debt is for a country.
A good summary on the debt:
http://www.creditwritedowns.com/2012/01/friedman-functional-finance-government-budget-constraint.html
**
Milton Friedman, Functional Finance and the Government Budget Constraint
Last week we examined Milton Friedman’s version of Functional Finance, which we found to be remarkably similar to Abba Lerner’s. If the economy is operating below full employment, government ought to run a budget deficit; if beyond full employment it should run a surplus. He also advocated that all government spending should be financed by “printing money” and taxes would destroy money. That, as we know, is an accurate description of sovereign government spending—except that it is keystrokes, not money printing. Deficits mean net money creation, through net keystrokes. The only problem with Friedman’s analysis is that he did not account for the external sector: he wanted a balanced budget at full employment, but if a country tends to run a trade deficit at full employment, then it must have a government budget deficit to allow the private sector to run a balanced budget—which is the minimum we should normally expect.
Somehow all this understanding was lost over the course of the postwar period, replaced by “sound finance” which is anything but sound. It was based on an inappropriate extension of the household “budget constraint” to government. This is obviously inappropriate—households are users of the currency, while government is the issuer. It doesn’t face anything like a household budget constraint. How could economics have become so confused? Let us see what Paul Samuelson said, and then turn to proper policy to promote long term growth.
Functional Finance versus Superstition. The functional finance approach of Friedman and Lerner was mostly forgotten by the 1970s. Indeed, it was replaced in academia with something known as the “government budget constraint”. The idea is simple: a government’s spending is constrained by its tax revenue, its ability to borrow (sell bonds) and “printing money”. In this view, government really spends its tax revenue and borrows money from markets in order to finance a shortfall of tax revenue. If all else fails, it can run the printing presses, but most economists abhor this activity because it is believed to be highly inflationary. Indeed, economists continually refer to hyperinflationary episodes—such as Germany’s Weimar Republic, Hungary’s experience, or in modern times, Zimbabwe—as a cautionary tale against “financing” spending through printing money.
Note that there are two related points that are being made. First, government is “constrained” much like a household. A household has income (wages, interest, profits) and when that is insufficient it can run a deficit through borrowing from a bank or other financial institution. While it is recognized that government can also print money, which is something households cannot do, these is seen as extraordinary behaviour—sort of a last resort. There is no recognition that all spending by government is actually done by crediting bank accounts—keystrokes that are more akin to “printing money” than to “spending out of income”. That is to say, the second point is that the conventional view does not recognize that as the issuer of the sovereign currency, government cannot really rely on taxpayers or financial markets to supply it with the “money” it needs. From inception, taxpayers and financial markets can only supply to the government the “money” they received from government. That is to say, taxpayers pay taxes using government’s own IOUs; banks use government’s own IOUs to buy bonds from government.
This confusion by economists then leads to the views propagated by the media and by policy-makers: a government that continually spends more than its tax revenue is “living beyond its means”, flirting with “insolvency” because eventually markets will “shut off credit”. To be sure, most macroeconomists do not make these mistakes—they recognize that a sovereign government cannot really become insolvent in its own currency. They do recognize that government can make all promises as they come due, because it can “run the printing presses”. Yet, they shudder at the thought—since that would expose the nation to the dangers of inflation or hyperinflation. The discussion by policy-makers—at least in the US—is far more confused. For example, President Obama frequently asserted throughout 2010 that the US government was “running out of money”—like a household that had spent all the money it had saved in a cookie jar.
So how did we get to this point? How could we have forgotten what Lerner and Friedman clearly understood?
In a very interesting interview in a documentary produced by Mark Blaug on J.M. Keynes, Samuelson explained:
"I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say "uh, oh what you have done" and James Buchanan argues in those terms. I have to say that I see merit in that view."
The belief that the government must balance its budget over some timeframe is likened to a “religion”, a “superstition” that is necessary to scare the population into behaving in a desired manner. Otherwise, voters might demand that their elected officials spend too much, causing inflation. Thus, the view that balanced budgets are desirable has nothing to do with “affordability” and the analogies between a household budget and a government budget are not correct. Rather, it is necessary to constrain government spending with the “myth” precisely because it does not really face a budget constraint.
The US (and many other nations) really did face inflationary pressures from the late 1960s until the 1990s (at least periodically). Those who believed the inflation resulted from too much government spending helped to fuel the creation of the balanced budget “religion” to fight the inflation. The problem is that what started as something recognized by economists and policymakers to be a “myth” came to be believed as the truth. An incorrect understanding was developed. Originally the myth was “functional” in the sense that it constrained a government that otherwise would spend too much, creating inflation. But like many useful myths, this one eventually became a harmful myth—an example of what John Kenneth Galbraith called an “innocent fraud”, an unwarranted belief that prevents proper behaviour. Sovereign governments began to believe that the really could not “afford” to undertake desired policy, on the belief they might become insolvent. Ironically, in the midst of the worst economic crisis since the Great Depression of the 1930s, President Obama repeatedly claimed that the US government had “run out of money”—that it could not afford to undertake policy that most believed to be desired. As unemployment rose to nearly 10%, the government was paralysed—it could not adopt the policy that both Lerner and Friedman advocated: spend enough to return the economy toward full employment.
Ironically, throughout the crisis, the Fed (as well as some other central banks, including the Bank of England and the Bank of Japan) essentially followed Lerner’s second principle: it provided more than enough bank reserves to keep the overnight interest rate on a target that was nearly zero. It did this by purchasing financial assets from banks (a policy known as “quantitative easing”), in record volumes ($1.75 trillion in the first phase, with a planned additional $600 billion in the second phase). Chairman Bernanke was actually grilled in Congress about where he obtained all the “money” to buy those bonds. He (correctly) stated that the Fed simply created it by crediting bank reserves—through keystrokes. The Fed can never run out “money”; it can afford to buy any financial assets banks are willing to sell. And yet we have the President (as well as many members of the economics profession as well as most politicians in Congress) believing government is “running out of money”! There are plenty of “keystrokes” to buy financial assets, but no “keystrokes” to pay wages.
That indicates just how dysfunctional the myth has become.
A Budget Stance to Promote Long Term Growth. The lesson that can be learned from that three decade experience of the US is that in the context of a private sector desire to run a budget surplus (to accumulate savings) plus a propensity to run current account deficits, the government budget must be biased to run a deficit even at full employment. This is a situation that had not been foreseen by Friedman (not surprising since the US was running a current account surplus in the first two decades after WWII). The other lesson to be learned is that a budget surplus (like the one President Clinton presided over) is not something to be celebrated as an accomplishment—it falls out of an identity, and is indicative of a private sector deficit (ignoring the current account). Unlike the sovereign issuer of the currency, the private sector is a user of the currency. It really does face a budget constraint. And as we now know, that decade of deficit spending by the US private sector left it with a mountain of debt that it could not service. That is part of the explanation for the global financial crisis that began in the US.
To be sure, the causal relations are complex. We should not conclude that the cause of the private deficit was the Clinton budget surplus; and we should not conclude that the global crisis should be attributed solely to US household deficit spending. But we can conclude that accounting identities do hold: with a current account balance of zero, a private domestic deficit equals a government surplus. And if the current account balance is in deficit, then the private sector can run a surplus (“save”) only if the budget deficit of the government is larger than the current account deficit.
Finally, the conclusion we should reach from our understanding of currency sovereignty is that a government deficit is more sustainable than a private sector deficit—the government is the issuer, the household or the firm is the user of the currency. Unless a nation can run a continuous current account surplus, the government’s budget will need to be biased to run deficits on a sustained basis to promote long term growth.
However, we know from our previous discussion that fiscal policy space depends on the exchange rate regime—the topic of the next blog.
Further, we want to be clear: the appropriate budget stance depends on the balance of the other two sectors. A nation that tends to run a current account surplus can run tighter fiscal policy; it might even be able to run a sustained government budget surplus (this is the case in Singapore—which pegs its exchange rate, and runs a budget surplus because it runs a current account surplus while it accumulates foreign exchange). A government budget surplus is also appropriate when the domestic private sector runs a deficit (given a current account balance of zero, this must be true by identity). However, for the reasons discussed above, that is not ultimately sustainable because the private sector is a user, not an issuer, of the currency.
Finally, we must note that it is not possible for all nations to run current account surpluses—Asian net exporters, for example, rely heavily on sales to the US, which runs a current account deficit to provide the Dollar assets the exporters want to accumulate. We conclude that at least some governments will have to run persistent deficits to provide the net financial assets desired by the world’s savers. It makes sense for the government of the nation that provides the international reserve currency to fill that role. For the time being, that is the US government.
**
Anyway, it was a lengthy post, but what's happening in Europe is very relevant as they have outrightly rejected any sort of spending.
ShcShc11 0
QuoteI assume you're aware that Hayak and von Mises actually lived through this. It wasn't just a theory on their part. No doubt their personal experience with hyperinflation was significantly related to the Versailles treaty.
If we are more precise, it is the payments in relation to the Treaty of Versailles. It called for the Weimar Republic to pay reparation money which Germany did not have.
Now a reparation money is very different from let’s say spending on infrastructure. Reparation money is giving a country’s money directly to another country while spending on infrastructure would essentially give money to the same country.
If anyone forgot: Even the smallest countries sell most of their production/work to themselves. The United States sells 85-90% to themselves.
Now let’s remember what happened afterwards...
The French invaded and occupied Germany’s Rhineland territory in 1923 and demanded the Weimar Republic to pay in full... which led to the hyperinflation. I have the numbers somewhere in Adam Tooze’s book if anybody needs.
Rhineland was Germany’s industrial center. So unless if we are threatened to have New York invaded by Foreign Powers and have a harsh debt repayment that lasts to 2080, then events of the Weimar hyper-inflation is highly irrelevant.
[NOTE: (Germany’s reparation was predicted to last to 1980-1990) back when Versailles was signed in 1919...thus the reference 2080. ]
In all honestly, Nazi Germany’s 1930 would probably be far more relevant than Weimar Republic Germany. The causes and symptoms are much more alike. But of course, Merkel and Sakorzy seem to ignore that period because it’s part of a dark European time which they want to forget. Oh... and they probably don’t want anybody to use Godwin’s law against them lol.
QuoteReagan appointed a large number of economic officials who also were firmly committed to moving away from interventionist policies. No members of the original Council of Economic Advisers under Reagan had come from the Keynesian school of thought...
Reading these two quotes and I can probably pinpoint where you’re misunderstanding is. You make it as if this is an all or nothing. Either they are right 100% or wrong 100%. Hayak’s micro-economic models are pertinent, but only pertinent to certain situations (some of them are very pertinent in fact). But it is still a model that is still flawed and fairly limited to real-life comparisons.
Every economist recognizes that their models are inherently flawed and it will never fully account of every variables of a real-life situation. This goes with Keynes models too. They are very specific to a certain situation.
And this would explain why you seem adamant to bring up Reagan’s time to compare with Obama’s time when the situations are completely different and irrelevant. Yet, why isin’t there any serious comparisons with 1990 Japanese lost decade? What about the current U.K austerity program comparison?
I remember the good ol’ times when there used to be a flood of articles in which economists have failed to predict the 2008 crisis (which is entirely true). Many models failed to even recognize that it was possible at all! So the models might be relevant to stagflation, but not a liquidity trap. Different causes therefore different remedies are needed.
Oh and in response to the “Reagan economists weren’t Keynesians” therefore that’s proof Keynes is wrong:
“President Ronald Reagan, the idol of conservative Republicans, was the only president to sign legislation raising capital gains taxes to the same level as income taxes. Most tax experts consider the historic 1986 Tax Reform Act, which was passed with bipartisan congressional support, to be one of the greatest legislative accomplishments of the past fifty years. It rid the tax code of dozens of special loopholes, including the tax exemption for capital gains, while reducing rates on earned income. Bruce Bartlett, who was a senior economic adviser to Reagan, recently wrote: "In the end, the key compromise that made the 1986 law work was Reagan's willingness to raise the capital gains tax to 28”
I’m neither pro or against capital gain taxes, but if you follow Reagan’s economists to the letter, why not also raise CGT like they did?
Quote
Let's say I'm an investor, and I've put my money into a stock that has been successful. I keep my money in that stock, because it's working. My understanding (kelpdiver help me out here) is the government actually taxes your "unrealized gains". Even though you haven't cashed out the stock, the government steps in and taxes your gains, anyway, every year. Thus, as an investor facing a call from the tax man, I have to go and sell my successful stock to pay the tax man. In order to ease what many consider the unfairness of taking cash from something that hasn't been cashed, the government graciously accepts just 15% instead of the normal amount.
I basically have ignored this thread as I'm uninterested in debating what "fair" means. We know what it means - fair is what I believe is fair, and fuck you all. But I stumbled in and saw this.
Wendy answered it. No, you do not pay taxes on unrealized gains on stocks. However, if the capital gains rate goes up, either to the former 20 or 28%, or to your marginal tax rate, then there is going to be a shitload of selling before the new rate takes effect. It will be a short term bear market, and a boon for the trading companies along with those who have either good insight or insider information from the market makers.
Longer answer as an FYI:
1- you don't pay taxes on unrealized gains, but you do owe taxes on the dividends paid out. This is true even if you are set up with a DRiP (dividend reinvestment program). Most dividends are qualified and qualify the for 15% rate. Some are full marginal rate. Because you paid taxes on this amount (say for $200 in dividends from Altria), you can also raise your capital basis (buying price) on the stock by $200, so when you sell you aren't paying taxes on the gain twice.
2- ETFs behave more closely to stocks, but mutual funds are a different beast altogether, enough to make me want to avoid them as a rule. Actively managed mutuals can have a portfolio turnover of 40-500% each year, generating lots of short term and long term capital gains. Your fund could lose money and yet you'd still be on the hook for this. Some are managed to minimize this, others are focused on balls to the wall trading and in a taxable account can dramatically alter the true return. Several years back there was some appetite to alter the rules so that it would be treated more like stocks, but no traction.
Getting a bit out of my direct knowledge - so verify before relying:
3- Stocks passed on due to a death have some very favorable rules. I believe this is true in general, but definitely for a spouse - when you die and pass on 1000 shares of Intel purchased in 1970, the value of the estate is today's prices, so if you pass that $3M barrier (or whatever it is), that could lead to estate taxes. But the recipient of the 1000 shares gets a stepped up cost basis based on the price at the date of death, not the purchase 40 years ago. If they sell immediately, there is unlikely to be much of a bill at all (depending on the changes between the death and the sale). It's a pretty good tax dodge for estates under the limit. And unless my recollection is off base, it's a huge benefit for married couples over say, domestic partners.
ShcShc11 0
Quote
QuoteI assume you're aware that Hayak and von Mises actually lived through this. It wasn't just a theory on their part. No doubt their personal experience with hyperinflation was significantly related to the Versailles treaty.
If we are more precise, it is the payments in relation to the Treaty of Versailles. It called for the Weimar Republic to pay reparation money which Germany did not have.
Now a reparation money is very different from let’s say spending on infrastructure. Reparation money is giving a country’s money directly to another country while spending on infrastructure would essentially give money to the same country.
If anyone forgot: Even the smallest countries sell most of their production/work to themselves. The United States sells 85-90% to themselves.
Now let’s remember what happened afterwards...
The French invaded and occupied Germany’s Rhineland territory in 1923 and demanded the Weimar Republic to pay in full... which led to the hyperinflation. I have the numbers somewhere in Adam Tooze’s book if anybody needs.
Rhineland was Germany’s industrial center. So unless if we are threatened to have New York invaded by Foreign Powers and have a harsh debt repayment that lasts to 2080, then events of the Weimar hyper-inflation is highly irrelevant.
[NOTE: (Germany’s reparation was predicted to last to 1980-1990) back when Versailles was signed in 1919...thus the reference 2080. ]
In all honestly, Nazi Germany’s 1930 would probably be far more relevant than Weimar Republic Germany. The causes and symptoms are much more alike. But of course, Merkel and Sakorzy seem to ignore that period because it’s part of a dark European time which they want to forget. Oh... and they probably don’t want anybody to use Godwin’s law against them lol.QuoteReagan appointed a large number of economic officials who also were firmly committed to moving away from interventionist policies. No members of the original Council of Economic Advisers under Reagan had come from the Keynesian school of thought...
Reading these two quotes and I can probably pinpoint where you’re misunderstanding is. You make it as if this is an all or nothing. Either they are right 100% or wrong 100%. Hayak’s micro-economic models are pertinent, but only pertinent to certain situations (some of them are very pertinent in fact). But it is still a model that is still flawed and fairly limited to real-life comparisons.
Every economist recognizes that their models are inherently flawed and it will never fully account of every variables of a real-life situation. This goes with Keynes models too. They are very specific to a certain situation.
And this would explain why you seem adamant to bring up Reagan’s time to compare with Obama’s time when the situations are completely different and irrelevant. Yet, why isin’t there any serious comparisons with 1990 Japanese lost decade? What about the current U.K austerity program comparison?
I remember the good ol’ times when there used to be a flood of articles in which economists have failed to predict the 2008 crisis (which is entirely true). Many models failed to even recognize that it was possible at all! So the models might be relevant to stagflation, but not a liquidity trap. Different causes therefore different remedies are needed.
Oh and in response to the “Reagan economists weren’t Keynesians” therefore that’s proof Keynes is wrong:
“President Ronald Reagan, the idol of conservative Republicans, was the only president to sign legislation raising capital gains taxes to the same level as income taxes. Most tax experts consider the historic 1986 Tax Reform Act, which was passed with bipartisan congressional support, to be one of the greatest legislative accomplishments of the past fifty years. It rid the tax code of dozens of special loopholes, including the tax exemption for capital gains, while reducing rates on earned income. Bruce Bartlett, who was a senior economic adviser to Reagan, recently wrote: "In the end, the key compromise that made the 1986 law work was Reagan's willingness to raise the capital gains tax to 28”
I’m neither pro or against capital gain taxes, but if you follow Reagan’s economists to the letter, why not also raise CGT like they did?
QuoteI've seen for some time now that Geithner and Bernanke are not truly independent of Obama, and now I understand why. The problem, and it's beyond their control, is that private capital is expecting Obama to continue to make a mess of things (he's gotten pretty much everything he's asked for in his time in office, and things are worse, not better). The Fed is facing a losing proposition.
Though I very much enjoy reading on your take, there are some pre-assumptions that are being made and it keeps wondering how and where you bring your conclusions. “The whole Europe overspent for far too long” is understandable because so many in the media got it wrong, but some of the statement that “Obama made things worse, not better” seem as if you made this out of thin air.
I would recommend “The New Yorker’s” recent articles on Larry Summer’s memos to Obama 2009-2011. Obama has clearly taken advices from Geithner and Summers (almost to the letter) where the stimulus was needed to help the economy.
http://www.newyorker.com/reporting/2012/01/30/120130fa_fact_lizza
Both Geithner and Summers’ team said that if “more stimulus is required, then they can easily go back to Congress and get more of it”. Clearly, they underestimated the GOP politics. And clearly, they knew there was a very good probability that a bigger stimulus would be needed (see the New Yorker link I posted above in the Europe section).
Ben Bernanke, is one of the biggest critics over Japanese handling of its own economic crisis during the 1990s’ lost decade. He overtly criticizes them many times that Japanese should have taken more action (i.e: stimulus) in order to bring its economy back to running order.
http://www.iie.com/publications/chapters_preview/319/7iie289X.pdf
This is well known. To say that Geithner and Bernanke had its hands handicapped by Obama is just plain false. If anything, as the Larry Summers memos indicates, it is the GOP who clearly impeded what they wanted to do.
“he's gotten pretty much everything he's asked for in his time in office”
I would really love it if I can find out HOW you came to these conclusions. They were nowhere near anything he wanted. In fact, the whole GOP vs Democrats debacle handicapped any real stimulus and it was nowhere near anything he wanted (nor in substance or in quantity). Remember that even the 2009 stimulus had a major portion of tax-cuts (that gives a much lesser multiplier) and most of it was sent in order to aid states with a major budget deficit. Thinking that a measly 200-300B$ to help cover a 3T$ GDP gap output is simply delusional.
Now let’s go over Ben Bernanke.
Ben Bernanke has many times over expressed its frustration over the political paralysis because people were sceptical of QE. It’s difficult to understand why people seem so susceptible to the line that “Obama made things worse” when the numbers clearly indicate that things have improved. Would it have been nice to have 4-5% full employment? Of course. But when people are timid about stimulus package (a measly B$ to cover a 6% GDP hole), then the country will have to live with an economy that will not perform to its expectation. Bernanke knew it was inadequate. Summers knew it wasn’t going to restore full employment. Geithner knew it wasn’t going to restore full employment.
“To accomplish a more significant reduction in the output gap would require stimulus of well over $1 trillion based on purely mechanical assumptions — which would likely not accomplish the goal because of the impact it would have on market.”
“it is easier to add down the road to insufficient fiscal stimulus than to subtract from excessive fiscal stimulus.”
They got everything it wanted? Hardly.
ShcShc11 0
QuoteHere's the rationale behind taxing long term capital gains at a lower rate....
Let's say I'm an investor, and I've put my money into a stock that has been successful. I keep my money in that stock, because it's working. My understanding (kelpdiver help me out here) is the government actually taxes your "unrealized gains". Even though you haven't cashed out the stock, the government steps in and taxes your gains, anyway, every year. Thus, as an investor facing a call from the tax man, I have to go and sell my successful stock to pay the tax man. In order to ease what many consider the unfairness of taking cash from something that hasn't been cashed, the government graciously accepts just 15% instead of the normal amount.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=161
I’m neither pro or against a higher capital gain tax (at least for now) though I do want to mention that Capital Gain Taxes at 15% are at an all-time low in U.S history. Even during the Reagan Administration had a significantly higher CGT.
I’ve seen cases for both, but I continually see some odd blind faith that lower is better without much justfications.
Though here are some compelling reasons to be against:
http://botc.tcf.org/2011/10/10-reasons-to-eliminate-the-tax-break-for-capital-gains-.html
And I wrote this before, but this is a fun fact:
“President Ronald Reagan, the idol of conservative Republicans, was the only president to sign legislation raising capital gains taxes to the same level as income taxes. Most tax experts consider the historic 1986 Tax Reform Act, which was passed with bipartisan congressional support, to be one of the greatest legislative accomplishments of the past fifty years. It rid the tax code of dozens of special loopholes, including the tax exemption for capital gains, while reducing rates on earned income. Bruce Bartlett, who was a senior economic adviser to Reagan, recently wrote: "In the end, the key compromise that made the 1986 law work was Reagan's willingness to raise the capital gains tax to 28”
[SEE HISTORICAL CAPITAL GAIN GRAPHS]
But I remember statistics in regards to CGT taxes where if you raised it by 10 percent, it would only bring a few hundred million $. Hardly anything to solve anything. The military and mid-term future entitlements are where the money is at.
QuoteQuoteBush didn't just cut taxes, he kept spending like a drunken sailor, also.
At first, yes... but by FY 2007 the deficit was down to ~160B.
You're still repeating this nonsense? I already corrected you on it once, suggested you show us a source.
http://money.cnn.com/2007/08/31/magazines/fortune/deficit_sloan.fortune/index.htm
or just look at the debt picture:
http://en.wikipedia.org/wiki/United_States_public_debt
Slide down to the chart "National Debt for Selected Years"
You're (and the back slapping Bush Admin jokers) are using the value from column 5, debt held by public. But the real debt, primarily Social Security and federal pension accounting, shows it to be 500 or 501B.
The 8 years of Bush correlated with substantial (near 100%) increase in the debt. The tax cuts of 2001 were not a bad thing, given the state of affairs with the bubble bursting and the 9/11 disruptions. But the spending like a drunken sailor bit, esp the war in Iraq, cost us dearly.
mnealtx 0
QuoteQuoteQuoteBush didn't just cut taxes, he kept spending like a drunken sailor, also.
At first, yes... but by FY 2007 the deficit was down to ~160B.
You're still repeating this nonsense? I already corrected you on it once, suggested you show us a source.
You only corrected anything in your fantasies.
As for the numbers, tell it to Fed.gov, since that's where the number came from, and the source was provided to you before - feel free to take advantage of it.
QuoteYou're (and the back slapping Bush Admin jokers) are using the value from column 5, debt held by public. But the real debt, primarily Social Security and federal pension accounting, shows it to be 500 or 501B.
Incorrect as usual - when I speak of the DEBT (as opposed to the DEFICIT), I use the total debt outstanding from the Treasury, which includes intergovernmental holdings.
QuoteThe 8 years of Bush correlated with substantial (near 100%) increase in the debt. The tax cuts of 2001 were not a bad thing, given the state of affairs with the bubble bursting and the 9/11 disruptions. But the spending like a drunken sailor bit, esp the war in Iraq, cost us dearly.
Not quite 100% in straight dollars, but close. Adjusting for 2001 dollars, it was a 54% increase.
Of course, Obama is *that* close to surpassing Bush's spending in straight dollars in half the time - as of 24th, he's at 94% of Bush's straight dollar total in only 38% of the time.
Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706
I love you, Shannon and Jim.
POPS 9708 , SCR 14706
Quote
And you're throwing a strawman into the argument - we are talking about the budget DEFICIT, not federal DEBT.
Try to learn the difference between the two words.
The DEBT increases each year by the amount of the DEFICIT. Not the DEFICIT-WE-ADMIT-TO value, which you're clinging to as validation for bad fiscal policy.
Sloan's article covers it perfectly. No corporation would be allowed to get away with these sorts of lies. As much as you want to say we only overspent by $160B that year, which would seem respectable in the era since Reagan, the reality is we took on 500B in red ink, which is not respectable at all.
*and yes, the current trillion+ situation is even worse. Not germane to blatant cheerleading of false facts.
mnealtx 0
QuoteQuote
And you're throwing a strawman into the argument - we are talking about the budget DEFICIT, not federal DEBT.
Try to learn the difference between the two words.
The DEBT increases each year by the amount of the DEFICIT. Not the DEFICIT-WE-ADMIT-TO value, which you're clinging to as validation for bad fiscal policy.
Sloan's article covers it perfectly. No corporation would be allowed to get away with these sorts of lies. As much as you want to say we only overspent by $160B that year, which would seem respectable in the era since Reagan, the reality is we took on 500B in red ink, which is not respectable at all.
*and yes, the current trillion+ situation is even worse. Not germane to blatant cheerleading of false facts.
Again, tell it to Fed.gov - they show 160.7 billion.
Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706
I love you, Shannon and Jim.
POPS 9708 , SCR 14706
maybe the tax code should just get the hell out of 'favoring' anything and just tax the income that citizens generate in any imaginative way they can and let the market take care of it
...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants
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