Reducing the Deficit... Is it really that important ?

[firstandten]

On this board I don't normally link to blogs unless its a well known person in his/her field. However I ran across this one and it interested me for one major reason. It questioned conventional wisdom and by doing so it made in my mind a strong case that this reducing the deficit talk may be nothing more than a red herring. He says that maybe we are asking the wrong questions. For those of you who will watch gavel-to gavel coverage of the Repubs convention you will hear more talk about the deficit than you heard the last two years. But is it really the demon that the Repubs are making it out to be.

http://www.sighedeffects.com/news-2/...g-the-deficit/

He starts out by asking three questions
-Why do we need to reduce the deficit ?
-What does it mean ? and
-What will it solve ?

He then makes an argument that the question people want to really ask is why is there no jobs ? He feels that people want to link the deficit to lack of jobs but he says the facts don't support that conclusion
He then makes a case that deficit reduction should not be a priority right now.

Then finally he states we are asking the wrong questions. We are asking about what is government doing about the deficit, when we should be asking why if employers are seeing record profits there are no jobs ?

I like when people question conventional wisdom because I have been reading about the conventional wisdom within the health community as it relates to obesity and what causes it. People are making great cases to the effect that the conventional wisdom as to what causes obesity is not necessarily true.

[ghettopalmetto]

"Reducing the Deficit" is code for "Cut Government Spending on Which Ordinary Suckers Depend".

Cut the programs we all need, and we all go to work for our new slave masters. It's the Deep South gone nationwide, son!

[TKshreve]

On this board I don't normally link to blogs unless its a well known person in his/her field. However I ran across this one and it interested me for one major reason. It questioned conventional wisdom and by doing so it made in my mind a strong case that this reducing the deficit talk may be nothing more than a red herring. He says that maybe we are asking the wrong questions. For those of you who will watch gavel-to gavel coverage of the Repubs convention you will hear more talk about the deficit than you heard the last two years. But is it really the demon that the Repubs are making it out to be.

http://www.sighedeffects.com/news-2/...g-the-deficit/

He starts out by asking three questions
-Why do we need to reduce the deficit ?
-What does it mean ? and
-What will it solve ?

He then makes an argument that the question people want to really ask is why is there no jobs ? He feels that people want to link the deficit to lack of jobs but he says the facts don't support that conclusion
He then makes a case that deficit reduction should not be a priority right now.

Then finally he states we are asking the wrong questions. We are asking about what is government doing about the deficit, when we should be asking why if employers are seeing record profits there are no jobs ?

I like when people question conventional wisdom because I have been reading about the conventional wisdom within the health community as it relates to obesity and what causes it. People are making great cases to the effect that the conventional wisdom as to what causes obesity is not necessarily true.

But in the case of jobs, I can't keep from coming back to one main point of conventional wisdom:

If trickle down economics is the best format for the economy, and the Tea Party was hired in on the promise of jobs, and tax cuts for the rich equates with job creation from the job creators........ Where are these jobs? I do not refer to the Keystone Pipeline as viable jobs either.

We should be swimming in jobs from 30 years of raw, unfettered capitalism.

What I think has resulted from this free market, is the raw deregulation of our capitalist economy, leaving the fox in charge of the hen house. Big business, the wealthy elite and wall st. did not hold up their end of the agreement. Instead they pursued an endless greed.

Which is why we've arrived at this partisan fork in the road. The decision is simple, but the disagreement between the haves and the have-nots has never been more heated.

[Zacha341]

Nope. Not that important - just kick the can further down the road.

The dems and repubs are guilty of this - usually buttressed by the 'our turn' justification.

[Papasito]

Why cut deficits?
Look at Greece.

That's the US. Either that or we sign over the country to China without them firing a shot.

Spending money on programs that feel good is easy to do when it's not your money. Sure, it's good things being done with good intention, but if the nation can't afford it, you're hurting more than you're helping.

This country is on a crash course with collapse, and the debate over whether or not to do something about it shouldn't be happening now, it should have been happening 20+ years ago and repaired 20+ years ago.

[TKshreve]

Spending money on programs that feel good is easy to do when it's not your money.

I believe the SCOTUS just declared tax cuts are in fact "programs".

[ghettopalmetto]

This country is on a crash course with collapse, and the debate over whether or not to do something about it shouldn't be happening now, it should have been happening 20+ years ago and repaired 20+ years ago.

We've been hearing this Chicken Little shit for 30 years now, ever since Reagan caused massive deficits with his tax cuts. YET, the United States is able to borrow money at RECORD LOW interest rates. Why is that? Is that because we're on the verge of collapse.

You can't humanly be this terrible at math, Papasito. Less fear-mongering more facts. Thanks.

By the way, "should" is a bullshit word when you don't define any objective parameters. Jus sayin.

[firstandten]

But in the case of jobs, I can't keep from coming back to one main point of conventional wisdom:

If trickle down economics is the best format for the economy, and the Tea Party was hired in on the promise of jobs, and tax cuts for the rich equates with job creation from the job creators........ Where are these jobs? I do not refer to the Keystone Pipeline as viable jobs either.

We should be swimming in jobs from 30 years of raw, unfettered capitalism.

What I think has resulted from this free market, is the raw deregulation of our capitalist economy, leaving the fox in charge of the hen house. Big business, the wealthy elite and wall st. did not hold up their end of the agreement. Instead they pursued an endless greed.

Which is why we've arrived at this partisan fork in the road. The decision is simple, but the disagreement between the haves and the have-nots has never been more heated.

Thats pretty much what the author of the blog is saying plus he has a lot of charts and data to support his point

[ghettopalmetto]

It works like this:

1. Cut spending
2. Hopefully balance budget
3. CONFIDENCE!!!
4. $$$$$
5. Cut taxes
6. Repeat, ad nauseum, or until the next electoral cycle, when the voters see that your made-up bullshit hack economics has more holes than the arm of a Thai prostitute.

[firstandten]

Nope. Not that important - just kick the can further down the road.

The dems and repubs are guilty of this - usually buttressed by the 'our turn' justification.

Yes, but its the Repubs that are trying to scare people half to death with this deficit reduction talk. Also by saying kicking the can down the road you are intimating that this is a problem that we are not addressing. The author of the blog is saying that this isn't an issue we should even be dealing with now.

[oladub]

Jobs and profits are being created. The problem is that many of the jobs are not being done by US workers. Moving production overseas and setting up a caste system in this country of illegal alien labor is profitable and does not require the hiring of more expensive US labor. Solve that problem and there would be a natural demand for US workers who would then demand a larger share of the national economic pie. A resurgence of unions would be one expression of this demand. Neither party wants this. Also, the Federal Reserve was discovered to have handed $16T out to its banker friends and owners. This creates a bubble. The money has to go somewhere. Some of it wound up pumping up the stock market. We have had the Nasdaq bubble and the housing bubble recently for the same reasons.

Obviously, Democrats do not think that deficits and the debt are problems. Bankers love them. Both parties are richly endowed by bankers. Printing $16T increased the supply of money which, in turn, is temporarily suppressing interest rates. Record low interest rates won't last forever though.

Dividing the $16T national debt by 310m Americans equals $51,613 of federal debt per American. President Obama is by no means solely responsible for this. The first 43 preident accumulated $11T of the debt while President Obama has only added $5T, so far, in his first term. Every one percent the interest rate goes up will cost every American about $516. If the federal government has to pay 5% to market bonds, an average family of four would owe an extra $10,323/annually just to pay down the interest on its $16T debt.

China has a budget surplus and is investing its surplus in Canadian oilfields, farms and colonial population settlements in Africa, forests in S. America for its future generations. Meanwhile, we are burdening our future generations with debts. Who owns the future? Maybe the debts and interest on our kids were the chains Joe Biden was warning us about.

[Zacha341]

Yep. Everyone is 'using' the deficit for their own purposes and agendas; one against the other! I am not impressed with the repubs cries and moans. They spend too. The problem is bigger than its serviceable USE ultimately.

Kick the can? Because the expanding deficit is not being addressed, fully - I might add - because like most issues with this country its reality and consequences are being hidden within the cage of partisan politics.

Yes, but its the Repubs that are trying to scare people half to death with this deficit reduction talk. Also by saying kicking the can down the road you are intimating that this is a problem that we are not addressing. The author of the blog is saying that this isn't an issue we should even be dealing with now.

[rb336]

Why cut deficits?
Look at Greece.

The Greek debt is WAY higher as a percent of GDP, and Greece produces very little. Japan's debt to GDP ration is higher still, while Spain's is half of ours. What happened in Greece was the EU forcing high-interest loans on them and then demanding implementation of austerity measures. Same with Spain and Portugal. Venezuela's debt as a percent of GDP is 36%. All those Northern European social democracies stand at around 40-60% except Ireland and Iceland [[homelands of truly epic bank failures). Austerity measures taken in time of economic stress have proven to be HUGE failures again and again [[see again, Spain, Greece, Italy and Portugal). What did the Northern Europeans do? they raised taxes on the wealthy and restructured the corporate taxes. The best way to cut the deficit and debt is to get more people back to work, tax the wealthy based on the percent of the wealth they control [[it is purely just to have those who control 90% of the wealth to pay 90% of the cost of maintaining the society in which they accumulated that wealth.). An expanding middle class tax base, which we haven't really had since the Kennedy tax cuts, will do more to cut the deficit than anything. If you look at what is CAUSING the deficit, it's none of the FICA tax programs, it's defense spending, by far the largest item in the discretionary budget.

Screaming "It's the deficit" is mere fear mongering by the Right, and mere simplemindedness by those who repeat their mantra

[firstandten]

The best way to cut the deficit and debt is to get more people back to work, tax the wealthy based on the percent of the wealth they control [[it is purely just to have those who control 90% of the wealth to pay 90% of the cost of maintaining the society in which they accumulated that wealth.). An expanding middle class tax base, which we haven't really had since the Kennedy tax cuts, will do more to cut the deficit than anything. If you look at what is CAUSING the deficit, it's none of the FICA tax programs, it's defense spending, by far the largest item in the discretionary budget.

It seems that Repubs want to frame this deficit debate as either cut government spending or raise taxes in order to balance the budget.

However as Rb mentioned probably the best way to reduce the deficit is to get people back to work. However the reason this doesn't work for the Repubs is that supply side economics doesn't work. The guy who wrote the blog even stated that. Also as much as Repubs would also like to expand the middle class tax base they don't want the unions that would come with it.

[rb336]

Also as much as Repubs would also like to expand the middle class tax base they don't want the unions that would come with it.

I doubt that that last is even true. It would mean cutting CEO pay

[oladub]

The Simpson Bowles plan is probably the closest Congress has come to dealing with the economy. It was voted down in the Senate 53-46. I haven't heard either party bringing it ip lately. We have the "Fiscal cliff" coming up otherwise. This is the Simpson Bowles plan's broad outline from Wikipedia.

On November 10 NCFRR co-chairs Simpson and Bowles released a draft proposal for consideration by other commission members. The proposal presented five "steps"

1. $200 billion reduction per year in discretionary spending with proposed cuts including reducing defense procurement by 15% and closing one third of overseas bases, eliminating earmarks, and cutting the federal work force by 10%.
2. $100 billion in increased tax revenues through various tax reform proposals, such as introducing a 15 cent per gallon gasoline tax and eliminating or restricting a variety of tax deductions such as the home mortgage interest deduction and the deduction for employer-provided healthcare benefits.
3. Controlling health care costs by maintaining the Medicare cost controls associated with the recent health care reform legislation, in addition to considering a public option and a further increase in the authority ofIndependent Payment Advisory Board.
4. A reduction in entitlements, including farm subsidies, civilian and military federal pensions and student loan subsidies.
5. Modifications to the Social Security program to raise the payroll tax and the retirement age.

The co-chairs also recommended some measures they felt would stimulate economic growth, such as a cut in the corporate tax rate from 35% to a more internationally competitive 26%.

[ghettopalmetto]

The Simpson Bowles plan is probably the closest Congress has come to dealing with the economy.

The economy? Or thedeficit

There's not a damned thing in Simpson-Bowles designed to grow GDP, so I have to think you meant the latter.

[rb336]

Simpson Bowles commission plan was pretty well balanced, which meant it was doomed from the start

[oladub]

The economy? Or thedeficit

There's not a damned thing in Simpson-Bowles designed to grow GDP, so I have to think you meant the latter.

The National Commission on Fiscal Responsibility and Reform [[often called Bowles-Simpson/Simpson-Bowles from the names of co-chairs Alan Simpson and Erskine Bowles; or NCFRR) is a Presidential Commission created in 2010 by President Barack Obamato identify "…policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run." -wikipedia

gp, I surprised that you are saying unkind things about an Obama initiative although I haven't heard him promoting Simpson-Bowles lately either. Maybe he didn't like the result of the people he chose.

I link "the fiscal situation" and "fiscal sustainability" with growing the GDP. Imagine the confidence businesses would be given to invest in this economy as opposed to considering investing in the banana republic handout system we now have.There are some huge things in Simpson Bowles that Republican [[15% military spending decrease) and Democrats [[upping the age of Social Security) obviously don't like. But Democrats and Republicans are too afraid of their own constituencies to to even speak about the obvious things that need doing.

A assume that the Simpson Bowles plan also ends the Bush/Obama tax cuts for the rich but the wikipedia article didn't say. That would add another $300B of revenue annually to the $100B of new taxes proposed by Simpson Bowles.

Obama has had his opportunity to grow the GDP by running up deficits. Despite running the federal debt up from $11T to $15T in less than four years [[from $35,484 to $51,613 per American), the economy remains sickly. Harding, conversely, slashed government spending in a worse recession and employment blossomed within two years. Spending our children's money does not guarantee economic recovery or a higher GDP. Exceptions I can think of are Roosevelt's hydro electric projects and Eisenhower's highways although those big ticket items took decades to repay themselves.

I tried to make the point in my last post of the difference a budget surplus in China's case vs. deficits in our case will make to future generations. Chinese will own the future while our descendants are destined to be debt slaves paying off Republican and Democratic deficits.

[firstandten]

The National Commission on Fiscal Responsibility and Reform [[often called Bowles-Simpson/Simpson-Bowles from the names of co-chairs Alan Simpson and Erskine Bowles; or NCFRR) is a Presidential Commission created in 2010 by President Barack Obamato identify "…policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run." -wikipedia

gp, I surprised that you are saying unkind things about an Obama initiative although I haven't heard him promoting Simpson-Bowles lately either. Maybe he didn't like the result of the people he chose
.

I heard two reasons why Obama distanced himself from Simpson-Bowles

One, if he was seen to be championing this initiative then it would be doomed by Repubs who don't want to do anything but say no to whatever Obama wants. He was hoping to lay back and come into the fray at a later date, however it turns out that neither Repubs or Dems was ready to work with the results of this commission.

The other reason is that Simpson-Bowles would have required him to raise taxes on the middle class and that was a campaign promise that politically he couldn't break.

[ghettopalmetto]

I link "the fiscal situation" and "fiscal sustainability" with growing the GDP. Imagine the confidence businesses would be given to invest in this economy as opposed to considering investing in the banana republic handout system we now have.

The "confidence" argument is hokum, as has been stated by economists time and again. What measure of Confidence does the United States need before things will turn around? How many more Quantifiable Units of Confidence do we need? How many Units of Confidence do we get for each dollar cut from federal spending?

Oil companies and Wall Street are still making enormous profits. Are they lacking confidence?

Bank lending rates to the U.S. Treasury are at record lows. Is that a lack of confidence?

The EU has embraced austerity in the name of promoting "confidence". They are doing measurably worse than the United States in GDP growth over the past three years. Where's the CONFIDENCE?

Until you can show some numbers how gutting the federal budget inspires "confidence", this is really just hackneyed faith-based economics. I'm pretty CONFIDENT that you're just guessing, and going on a wing-and-a-prayer. Just like tax cuts are supposed to increase revenues--another Republican Wet Dream.

You know, Henry Ford II built the Renaissance Center in Detroit hoping to inspire "confidence" in the real estate market, and thus lead to an imagined turnaround. I think he aptly illustrated that when it comes to business and economics, blind faith in intangible, immeasurable, abstract concepts has no place in the discussion.

[oladub]

firstandten, Whatever the President's excuses, didn't he promise to not raise middle class taxes before setting up the Simpson Bowles commission?

gp, I don't know that the confidence argument is hokum but I sure wouldn't invest in any enterprise that can't control spending and without a sufficient stream of income. I doubt but cant prove that investors will hesitate floating the US government forever either. In fact, much of the federal debt is now sold to the Fed for lack of customers. The Fed just prints the money to pay for the debt. I already addressed governmental and fed causes of bubbles. The EU is printing money and crossing it's fingers too. How is that austerity? Germany, on the other hand is trying to get Greeks to pay taxes. Maybe that is what you are calling austerity.

I agree with your last paragraph. That is why I don't support mindless government spending. The Simpson Bowles plan is a reasonable and moderate way out both parties should be able to support. I prefer Rand Paul's plan to balance the federal budget in five years but that won't even fly with Republicans who are also big spenders.

You never addressed my contention that investing surpluses in the future as China is doing is better than saddling our children with federal debts plus accrued interest or that President Obama has increase the average American's share of the federal debt from $35,484 to $51,613. What did you get out of the $17,129 of federal debt which President Obama has billed each you, your spouse, and your children? How will you each pay it back plus interest? Or is it ok to just keep going like we are. That is kind of faith based too.

[ghettopalmetto]

You never addressed my contention that investing surpluses in the future as China is doing is better than saddling our children with federal debts plus accrued interest or that President Obama has increase the average American's share of the federal debt from $35,484 to $51,613. What did you get out of the $17,129 of federal debt which President Obama has billed each you, your spouse, and your children? How will you each pay it back plus interest? Or is it ok to just keep going like we are. That is kind of faith based too.

Anyone who has ever run a business knows that no matter the size of your bills, you can't pay them if you don't have sufficient REVENUE. So you can wish your bills away in the face of continuing fixed operating expenditures, or you can GROW YOUR REVENUE.

What you're promoting is akin to a restaurant selling its stove in order to make a week's payroll. It's sheer insanity.

[oladub]

gp, Promoting the Simpson Bowles plan is more like suggesting that a restaurant raise its menu prices and cut unnecessary spending so it doesn't go bankrupt continuing to make 40% of its purchases with the owner's kids' credit cards. The Simpson Bowles plan would increase REVENUE toward that end. .

[ghettopalmetto]

gp, Promoting the Simpson Bowles plan is more like suggesting that a restaurant raise its menu prices and cut unnecessary spending so it doesn't go bankrupt continuing to make 40% of its purchases with the owner's kids' credit cards. The Simpson Bowles plan would increase REVENUE toward that end. .

You could theoretically raise tax rates to 100%. If people aren't working, you're not maximizing your revenues, no matter what the rates. That's why it's necessary to return to something resembling full employment and normal economic growth as soon as possible. And frankly, that can't be done when government keeps shedding jobs in the name of "fiscal responsibility".