How the hell are we going to pay for this?

[Woolleybugger]

Should we tell him about how big the GNP will be? Or how large the money supply will be? Might make his head explode.

 

[degsme]

The U.S. unemployment rate in 1940 was 14.6 percent. The war put a lot of unemployed back to work and took a lot of other unemployed out of the job market and into uniform

And today we have 8.3% unemployment - FAVORABLE. What you forget is that during the war women went to work at substandard wages as men went off to the draft at ... substandard wages. So in essence you are admitting that a stimulus works WELL for dropping unemployment and jumpstarting the economy. EVEN WHEN you start from a large National Debt (roughly 80% Debt/GDP in 1940)

So why do you oppose a stimulus NOW?

BTW, "accounts Receivable" has no meaning at the national level.

We had strong growth PRECISELY BECAUSE OF STIMLUS SPENDING No, Degs --we had strong growth. Stimulus spending hadn't really begun.

Factually wrong. We had been "stimulus spending" since 1933 and had an 8.1% average GDP Growth rate as a result. With the exception of 1937 the one year the stimulus spending was cut back. And as you just pointed out from 1940 onwards we engaged in MASSIVE stimulus spending - albeit in one of the least efficient (Defense) forms of Government spending.

It worked then, why not now? What is FACTUALLY different that is of significance econometrically?

Nonsense. A nation that is owed money and has exports more than it imports is on better financial footing than a country that owes money and imports more than it exports

Why? What is the econometric basis for that assertion?
How does that affect economic growth?

So what if 20% of our debt is structural payment for ongoing entitlement programs? What ECONOMIC consequence does that have IN THE CURRENT PERIOD?

A LOT as we have to continuously pay on that debt, and we can't afford our current expenditures.

Yes paying on the debt is an economic consequence of paying the debt service.

What ECONOMETRIC CONSEQUENCE does that have in the broader economy?

How do I know we can't afford our current expenditures? Because I know we have to borrow money to meet them. When you have enough money to pay your bills

Um what is our current tax collection rate as a percent of GDP? How efficient is our taxation policy currently compared to what it was in 1940?

 

[trapdoor]

]And today we have 8.3% unemployment - FAVORABLE. What you forget is that during the war women went to work at substandard wages as men went off to the draft at ... substandard wages. So in essence you are admitting that a stimulus works WELL for dropping unemployment and jumpstarting the economy. EVEN WHEN you start from a large National Debt (roughly 80% Debt/GDP in 1940)

Except that 8.3 percent unemployment is NOT favorable when you're increasing the deficit, and thereby increasing the debt. It wasn't the 14.6 percent unemployment in 1940 that paid off America's 120-percent-of-GDP debt, it was the fact that unemployment didn't get above 5 percent again until 1958, when it was at 6.8 percent. That low unemployment rate was not the result of governmental stimulus spending, which was basically non existent during the period.

BTW, "accounts Receivable" has no meaning at the national level.

Certainly it does -- being in the red versus being in the black has an impact on your AAA rating whether your an individual or a country.

Factually wrong. We had been "stimulus spending" since 1933 and had an 8.1% average GDP Growth rate as a result. With the exception of 1937 the one year the stimulus spending was cut back. And as you just pointed out from 1940 onwards we engaged in MASSIVE stimulus spending - albeit in one of the least efficient (Defense) forms of Government spending.

Obviously, you're defining stimulus spending in some new way. The New Deal isn't relevant to this discussion, as it has no factor on the period you introduced, that being from 1943 onward. New Deal activities had effectively been called to a halt by the war effort by 1943, and the only remaining New Deal stimuli after the war amounted to Social Security and the various farm bills. If I use you're reasoning, that spending on Defense actually costs the economy money, rather than boosting the economy (I can quote you verbatim on this if you desire), then the war expenditures were not stimulus spending. What improved the U.S. economy during the war was the overseas sales, and the higher salaries temporarily boosted (before FDR instituted wage limits) by men being taken out of the job market and employed as soldiers.

It worked then, why not now? What is FACTUALLY different that is of significance econometrically?

Because it didn't "work then" based on what you're discussing. You compared the paying off the the single-point war debt after 1943, with paying off our current structural debt today. Then we could see an end in sight to our over-spending, and plan accordingly. Today, we see only that the overspending will continue. It's the difference between the one-time expenditure of paying off a war, with the help of debtors, and the continuous ongoing expense of running the government we have today -- which even you must admit is far larger than the government that existed in 1943 when we had a debt that was 120 percent of GDP.

Yes paying on the debt is an economic consequence of paying the debt service.

What ECONOMETRIC CONSEQUENCE does that have in the broader economy?

Multiple consequences. It either means increased taxation to service the debt, which will slow the economy, or it means monetizing the debt which will lead to inflation, which will slow the economy (vis, 1977), or ultimately it means defaulting on the debt which will destroy the economy. We could run a temporarily high debt in 1943 for the purposes of financing WWII. We cannot run such a debt into infinity.

Um what is our current tax collection rate as a percent of GDP? How efficient is our taxation policy currently compared to what it was in 1940?

I can't find figures for earlier than 1950. At that point, our tax collection rate was about 13 percent. The income tax made up 6 percent, and "social insurance" about 2 percent. Today (well, 2010) it is 15 percent of GDP, with the income tax being 8 percent, and social insurance coming to 6 percent (source http://www.deptofnumbers.com/blog/2010/08/tax-revenue-as-a-fraction-of-gdp/). So our tax collection rate is higher both for income tax and entitlements today than it was during that period, at least as a percentage of GDP. And we can't fund our current expenditures -- again, we know this because we have to borrow money to fund them.

 

[Woolleybugger]

To argue that stimulus spending did not factor in demand creation post WW2 is to purposely ignore reality. What was the GNP of Europe the day after the war ended? How did those economies recover? Was it via a massive investment by exiled rich people or through massive government spending? While it is very true that America had a uniquely advantageous position after the war, it is also true that the circumstances forced leaders all across the world to adopt a Keynsian model for recovery. They looked at a situation rationally, took the advice of the best minds in the world and had a population that just saw how important governments were to the survival of a nation and civilization. People looked to the government as a problem solver back then because everything they knew was put at risk over the course of 15 years because of either good or bad government actions. The argument about today should not be about using the same playbook as FDR in 1937. It should be about applying the lessons learned over time for our specific situation today. We have already seen what the affects of free market capitalism have done to us since 1981. If you believe that no government can play a role in managing the economy then you must be very happy with the boom and bust cycles since 1981. If you think we can do better, then propose some remedies and be ready to defend them. I for one see our way of life to be nothing but a race to the bottom for millions with no bottom in sight given the billions of poor desperate people in the world willing to work for peanuts.

 

[trapdoor]

To argue that stimulus spending did not factor in demand creation post WW2 is to purposely ignore reality. What was the GNP of Europe the day after the war ended? How did those economies recover? Was it via a massive investment by exiled rich people or through massive government spending?

My assumption is that Degs was referring to massive domestic stimulus spending, which simply did not exist in the scope and scale he references during the time period (1943-1949) he references. he was not, at all, speaking of the Marshall Plan.

While it is very true that America had a uniquely advantageous position after the war, it is also true that the circumstances forced leaders all across the world to adopt a Keynsian model for recovery. They looked at a situation rationally, took the advice of the best minds in the world and had a population that just saw how important governments were to the survival of a nation and civilization.

I've grown weary of the "conservatives want no government at all" argument, even in its implication as you've done here. We are neither of us discussing the abolition of government -- we're discussing the proper scope, size and legality of a government of the United States via the U.S. Constitution. If you wish to drag other systems in as examples, I have no issue with that, so long as you realize that if the U.S follows those examples in the matter of economy, it must also follow them in other areas. Even among the more enlightened of our allies, such as Canada, there are restrictions on free speech that would simply be impossible here -- should we follow their example in that regard or adhere to our own Constitution and form of government? I have my own opinion in this matter -- I await yours.

People looked to the government as a problem solver back then because everything they knew was put at risk over the course of 15 years because of either good or bad government actions. The argument about today should not be about using the same playbook as FDR in 1937. It should be about applying the lessons learned over time for our specific situation today. We have already seen what the affects of free market capitalism have done to us since 1981.

Oh, we have not, and even implying so is nonsense. Even your political ally in this forum, Degsme, would not say that the U.S. has operated a truly free market at any time in the last 150 years.

If you believe that no government can play a role in managing the economy then you must be very happy with the boom and bust cycles since 1981. If you think we can do better, then propose some remedies and be ready to defend them. I for one see our way of life to be nothing but a race to the bottom for millions with no bottom in sight given the billions of poor desperate people in the world willing to work for peanuts.

And I see people like yourself wanting to tax the successful in ways that will not help "the millions" at all, in the mean time restricting individual choices on those self-same millions in such a way that any freedom left to practice is illusory -- a series of forced choices based on the only remaining options the government will allow.

 

[Woolleybugger]

In essence, your advice here and on Slate has been consistently anti-fiscal policy. At no time have you ever acknowledged the role of fiscal policy in creating demand or shaping an economy. If you are now refining that to say that fiscal policy does indeed have a key role to play in an economy then this is a refreshing turn of events. You and Degs love to argue in the weeds of every discussion. I prefer the bigger picture myself because arguing about how many angels fit on the head of a pin is a great rhetorical debate that is a waste of time IMHO. The debate should be about how to emerge from a 30 year experiment in free market principles that has created more risk in our global economies than we have had since before the 30s. While you can defend yourself by saying no markets are completely free and convince yourself that what we are considering is a black or white issue, no one in a position of power would ever indulge your extreme positions other than a Rand Paul or some tea party ideologue. Our global economy has been shaped by the ideas of Milton Friedman since Reagan and Thatcher forced him upon the first world in the early 80s. Thatcher tore apart the social contract between labor and government, private and public and sold off public assets, destroyed unions and created an economy that was closer to a free market paradise than it had been since the Industrial Age. Reagan did the exact same thing here. Their stated purpose was to unleash the power of the individual, free up assets for more efficient use, get the government out of the economy and cut taxes across the board. Why? Because that is the world they wanted to create not because the world they walked into was an disaster. I would argue that while our lives were quite different up until 1981, our lifestyles were far better than they are today and people had more job security than ever. Income distribution was smoother and yes, government was smaller because there was no need for massive government programs to ameliorate the affects of unequal and unfair income outcomes. Which nation is better off today, Canada or the USA? Denmark or the UK? Look at the headlines on the BBC today regarding their economy and the reality of austerity.

 

[trapdoor]

In essence, your advice here and on Slate has been consistently anti-fiscal policy. At no time have you ever acknowledged the role of fiscal policy in creating demand or shaping an economy. If you are now refining that to say that fiscal policy does indeed have a key role to play in an economy then this is a refreshing turn of events.

I've never been opposed to having a fiscal policy. I merely think that fiscal policy can't be used to revoke the law of supply and demand. If you make something cost more, whether the product is iron, beer, or the ability to produce goods, people will buy less of it for find a place to buy it for a lower price.

You and Degs love to argue in the weeds of every discussion. I prefer the bigger picture myself because arguing about how many angels fit on the head of a pin is a great rhetorical debate that is a waste of time IMHO. The debate should be about how to emerge from a 30 year experiment in free market principles that has created more risk in our global economies than we have had since before the 30s.

We can't have that discussion because it is premised on the idea that we have HAD a 30-year experiment in free market principles, and we have not. In no way did Clinton's market policies align with those of Bush or Reagan, and we didn't have a free market during the years of Reagan, Bush OR Clinton.

While you can defend yourself by saying no markets are completely free and convince yourself that what we are considering is a black or white issue, no one in a position of power would ever indulge your extreme positions other than a Rand Paul or some tea party ideologue. Our global economy has been shaped by the ideas of Milton Friedman since Reagan and Thatcher forced him upon the first world in the early 80s. Thatcher tore apart the social contract between labor and government, private and public and sold off public assets, destroyed unions and created an economy that was closer to a free market paradise than it had been since the Industrial Age

.

Oh, what utter nonsense. Thatcher did nothing to dismantle the English safety net, a fact so obvious that it almost bears no discussion. After Thatcher had "broken" the social contract, English still had nationalized medicine, college stipends, etc. And as for a "free market paradise," England may have once resembled that, but not at any time after the administration of Clement Attlee.

Reagan did the exact same thing here. Their stated purpose was to unleash the power of the individual, free up assets for more efficient use, get the government out of the economy and cut taxes across the board. Why? Because that is the world they wanted to create not because the world they walked into was an disaster.

Reagan took a struggling economy, from 1980 (when there were both high interests and rising inflation), and turned it into a booming one by 1989 (a time when interest rates had fallen and inflation had also done so). Did he eliminate Social Security, Medicare or Medicaid? No. He made some inroads on welfare, nothing as major as what happened during the Clinton administration. Yes, Reagan tried to create a more successful world, to avert a disaster such as the one we face today, not to repair one that had already happened.

I would argue that while our lives were quite different up until 1981, our lifestyles were far better than they are today and people had more job security than ever. Income distribution was smoother and yes, government was smaller because there was no need for massive government programs to ameliorate the affects of unequal and unfair income outcomes. Which nation is better off today, Canada or the USA? Denmark or the UK? Look at the headlines on the BBC today regarding their economy and the reality of austerity.

I would not live in Canada because of its restrictions on the rights of the individual (speech). Neither Denmark nor the UK are truly valid comparisons both because of governmental structure and constitution. The UK is an abject example of what happens when the government tries to be all things to all people -- it runs out of money and then the people are unhappy when it can no longer distribute the goodies to which they've become inured. Who's better off? Any un-zoned rural American living in a trailer house.

 

[degsme]

Stimulus spending is any spending that increases demand in a economy in a Demand Trap.

• it CAN BE domestic spending: which is the most efficient sort (Fiscal Multiplier approaching 3.0 during a recession) and which from 1933-1940 (except 1937) drove a GDP Growth Rate of 8.1%
• It CAN be Defense Spending - which is the LEAST efficient way to do it since the Fiscal Multiplier is only 0.5

Fromr 1933-1939 DOMESTIC spending dominated.
From 1939-1944 Defense Spending Dominated
From 1944-1960 DOMESTIC spending domintated (VA Benefits, GI Bill essentially function like social welfare from an econometric perspective even though they are defense spending from a budgetary perspective).

Now as to the "proper scope" arguement - that is what we are having. But you are in essence arguing for a government of the sort that very loose federations have. And those are all very non-functional in the current modern era.

And I see people like yourself wanting to tax the successful in ways that will not help "the millions" at all,

What you see and what you have been able to LOGICALLY and FACTUALLY support are two different things.

• You've never addressed the research that shows NO correlation between GDP growth and marginal tax rates below 70%
• you've never addressed the research that shows most of the wealthy are INEFFICIENT investors in economic growth
• you've never addressed the research that shows that most of the top 1% earners are NOT "successful" but rather are heirs (the Kochs for example as well as our own dear Paul Ryan)
• you've never addressed the research on Fiscal Multipliers except to complain that you don't believe them even when they are produced by conservative economists
• you've never addressed the research that shows a NEGATIVE correlation between economic growth and GINI indicies over 3.5
  except by pointing to economies with indicies below 2.5 - which we know is ALSO ineffeicient

Basiclaly you SEE an ideology and not the observable verifiable measures.

 

[Woolleybugger]

What world do you live in Trap? Are you arguing that the world's economies have not been shaped almost solely by the ideas of Friedman since the 1980s? You mentioned Clinton as if he was not another proponent of Friedman. The guy sided with Bush against Perot for Nafta for goodness sakes. He deregulated the Telcos, signed legislation abolishing Glass Steagall and loosened the commodities industry on his way out the door. Bush kept it going. Your argument is that unless every single part of the New Deal was abolished, we were not trending in that direction. Everything that has happened in the last 30 years has been a reversal of economic policies that ran our world from 37 to 1980. Sure this or that policy might not have perfectly moved in lockstep with friedman but he won the argument and got what he wanted. Just look at what the IMF did to Russia, Argentina and scores of other nations. The only one that stood up to this was Chavez and that indian guy in Ecuador. For their efforts they were called communists. And what exactly does Canada do to curtail speech? They don't allow Fox news to poison their minds with lies and propaganda? is that their crime? I wish we had more of that here myself.

The gipper on milton...

http://www.youtube.com/watch?v=F7HtZtwyn_c

And the truth from Summers...

http://www.youtube.com/watch?v=CDCllPoroqg

"He seemed so unconcerned with fairness". This sentence explains the last 30 years to a tee. The USA has been unconcerned with fairness since Ronald Reagan. In fact, we have been concerned solely with winning at all costs over the ideal of fairness. To Milton Friedman, fairness is a luxury no nation can afford which is why we now have the most unequal income and wealth spread of any modern state. Milton won in the long term.

 

[trapdoor]

Stimulus spending is any spending that increases demand in a economy in a Demand Trap.

• it CAN BE domestic spending: which is the most efficient sort (Fiscal Multiplier approaching 3.0 during a recession) and which from 1933-1940 (except 1937) drove a GDP Growth Rate of 8.1%
• It CAN be Defense Spending - which is the LEAST efficient way to do it since the Fiscal Multiplier is only 0.5

Degs -- I'm bad at math, but even I can do this equation 1x.5= 1/2. If your fiscal multiplier is correct, military spending is not only not stimulus spending, it is anti stimulus spending as it takes money out of the economy. And for all the pre-war stimulus, when the war broke out unemployment was 14.6 percent. The economy was so "stimulated" by the New Deal that FDR's own economists didn't predict a full recovery to pre-Depression levels until the late 1950s. Fortunately, the war occurred which not only solved the unemployment problem by removing men from the workforce, but also poured an influx of foreign dollars from allied nations into our armaments industries. Before Lend-Lease started, Churchill nearly spent his treasury dry buying American weapons systems from infantry rifles to airplanes. This started with land swaps, and ended in cold hard cash. The assistance didn't start to be "free" (to England) until 1942. (As an aside, I'm reading the excellent book "The Last Lion: Winston Churchill, Winston Spencer Churchill, Defender of the Realm, 1941-1965" which is the completion of William Manchesters three-volume biography of Churchill as completed by collaborator Paul Reid, following Manchester's debilitating stroke and death. That is one reason I have these details at hand).

Fromr 1933-1939 DOMESTIC spending dominated.

And failed, as it still left America in a recovery that, like today, was more a Wall Street than Main Street recovery, a condition that lasted until WWII.

From 1939-1944 Defense Spending Dominated

Which according to you took money out of the economy, not stimulating it. (Don't look at me, its your argument). In any case, the defense spending for WWII was NOT stimulus spending, and was augmented by the expenditures by our allies -- do a little research on the Johnson rifle and who purchased it, just as an object example in how this worked on our economy.

From 1944-1960 DOMESTIC spending domintated (VA Benefits, GI Bill essentially function like social welfare from an econometric perspective even though they are defense spending from a budgetary perspective).

The GI Bill was not domestic welfare -- it was payment for services rendered.

Now as to the "proper scope" arguement - that is what we are having. But you are in essence arguing for a government of the sort that very loose federations have. And those are all very non-functional in the current modern era

.

Well, perhaps I am. At the very least I'm arguing for a federal, not a national, government. Before you say that I am wrong to do this I invite you to read more of what people like Hamilton, Franklin Jefferson and Washington (note I'm intentionally avoiding Madison, even though he agreed with the others in this area) on the differences between a "federal" and "national" government, and what the Constitution was being written to create (hint -- it wasn't a national government).

But it is nice to see you admit that NATO and the UN are nonfunctional. Conservatives have been making that case for years.


What you see and what you have been able to LOGICALLY and FACTUALLY support are two different things.

[*]You've never addressed the research that shows NO correlation between GDP growth and marginal tax rates below 70%

I can't -- I've never seen research indicating that to be the case.

[*]you've never addressed the research that shows most of the wealthy are INEFFICIENT investors in economic growth

See above. In any case, I don't think it matters whether they are inefficient investors in economic growth -- it isn't our government's case to take their private funds from them in order to use it more "efficiently."

[*]you've never addressed the research that shows that most of the top 1% earners are NOT "successful" but rather are heirs (the Kochs for example as well as our own dear Paul Ryan)

What difference does that make, Degs? However the wealthy GOT wealthy is immaterial -- their money belongs to them, not you, me, or the government. It isn't the government's role to penalize the wealthy for being wealthy.

[*]you've never addressed the research on Fiscal Multipliers except to complain that you don't believe them even when they are produced by conservative economists

Actually, I have, and we had that lengthy discussion on the Fray, but I can no longer find the material I used in that discussion, nor do you cite the same studies you used in it (but neither your data nor mine found military expenditure with a multiplier much less than 1). You've yet to describe a mechanism by which a dollar spent on building a bridge outside a military base has one multiplier effect, but building the same bridge on the other side of the fence has another, and I don't think you can.

[*]you've never addressed the research that shows a NEGATIVE correlation between economic growth and GINI indicies over 3.5

except by pointing to economies with indicies below 2.5 - which we know is ALSO ineffeicient

If that's the case we're all screwed, as the Gini index of the U.S. after taxes is .378, and the Gini index of Denmark after taxes is .248. What country would you use as a model of efficiency for wealth distribution. What constitutional mandate give the United States government the authority to act as a redistributor of wealth? (this last is a question you never want to answer).

Basiclaly you SEE an ideology and not the observable verifiable measures.

I provided you with what you said I failed to provide. Now, provide me with what you have failed to provide: The mechanism by which a dollar spent on one thing magically loses its multiplier value when spent on another -- say, a 9/16 bolt. If the government screws this into a bridge abutment for $1, this multiplies by, what did you say, a factor of 2? But if it screws the same bolt into 2 1/2-ton truck engine, it only has a multiplier effect of .5? How.

Provide the source for the marginal tax rate doesn't become inefficient until over 70 percent.

Provide the constitutional mandate for the U.S. government to act as a wealth-redistribution service.

 

[trapdoor]

What world do you live in Trap? Are you arguing that the world's economies have not been shaped almost solely by the ideas of Friedman since the 1980s?

I live on planet earth -- I merely live outside the ivory towered portion of the planet. Certainly Friedman is an influential thinker, but during the entire period your describing the entire world, including the U.S. has seen massive amounts of Keynesian spending. That this was LESS that it would have been without the influence of Friedman doesn't mean that what we've seen are Friedman economics in practice. All we've seen is somewhat less Keynesian spending than we'd have seen sans Friedman's influence.

Y

ou mentioned Clinton as if he was not another proponent of Friedman. The guy sided with Bush against Perot for Nafta for goodness sakes. He deregulated the Telcos, signed legislation abolishing Glass Steagall and loosened the commodities industry on his way out the door.

And in the meantime, he increased taxes, refused to decrease taxes on the middle class (a violated campaign promise he didn't pay for all the polls), and vastly expanded programs through Fannie Mae and Freddie Mac that were strictly Keynesian programs for expanding home ownership as a means of stimulating the economy. This was not exactly the practice of the economics of Milton Friedman.

Bush kept it going. Your argument is that unless every single part of the New Deal was abolished, we were not trending in that direction. Everything that has happened in the last 30 years has been a reversal of economic policies that ran our world from 37 to 1980.

I'm sorry, Wools, but you're off the rails here. The New Deal? We haven't scratched the surface of the paint on the Great Society -- we aren't anywhere near touching the New Deal. As for reversing the economic policies from 1937 to 1980, we haven't had consistent economic policies for that period. From 1937 until Nixon was in office, we were still on a version of the bimetal/gold currency standard, just for openers. One reason for the money-supply shortfall that lead us off that permanent hedge against inflation was that we needed to be able to print money to finance the New Deal/Great Society programs that were already exceeding what we could afford. And that was during the early '70s before the onset of the "malaise."

Sure this or that policy might not have perfectly moved in lockstep with friedman but he won the argument and got what he wanted. Just look at what the IMF did to Russia, Argentina and scores of other nations. The only one that stood up to this was Chavez and that indian guy in Ecuador. For their efforts they were called communists

.

Well Chavez is what should be called a CINO (Communist in Name Only). He's just another wanna-be Fidel. I'm not certain about the other fellow. Are you saying IMF should have put more money into these countries?

And what exactly does Canada do to curtail speech? They don't allow Fox news to poison their minds with lies and propaganda? is that their crime? I wish we had more of that here myself.

In Canada, you can be suit for libel/slander and the truth is not a defense. A prominent journalist was sued by Muslims for a series of magazine articles that contained absolutely no untrue statements. As a former journalist, I think the truth should always be a viable defense.

"He seemed so unconcerned with fairness". This sentence explains the last 30 years to a tee. The USA has been unconcerned with fairness since Ronald Reagan. In fact, we have been concerned solely with winning at all costs over the ideal of fairness. To Milton Friedman, fairness is a luxury no nation can afford which is why we now have the most unequal income and wealth spread of any modern state. Milton won in the long term.

"Unconcerned with fairness" when it comes to the economy, is what our government should be. The government has no role in picking economic winners and losers -- what is "fair" to one person is an irritant to another, and a complete intrusion on a third. Our government is designed to treat us equally, not fairly. There can't be one law for you, another for me, and a third for Warren Buffet -- despite his wealth he deserves no different treatment from the government than the homeless man in his poverty.

Equality is written into our system of government. Fairness is too much of a judgement call for a free society to make.

 

[degsme]

Except that 8.3 percent unemployment is NOT favorable when you're increasing the deficit, and thereby increasing the debt.

Why? that was ALSO the case from 1933-1946. Unemployment was even higher. and we increased the deficit an the national debt. The two are unrelated. In fact you will almost ALWAYS be defict spending when you are stimuluating out of a demand slump. Why? because assuming a balanced budget going into the slump, your baseline has not changed, but because your GDP is down, your tax collections are down, so you already have a deficit. And any stimulus spending adds to that.

We've done this successfully for 120+ years. You've offered no empircal evidence to contradict its success rate.BTW,

"accounts Receivable" has no meaning at the national level.

Certainly it does -- being in the red versus being in the black has an impact on your AAA rating whether your an individual or a country.

And at an international level and a monetary flow level, the USAs credit rating has no bearing on anything whatsoever.

It worked then, why not now? What is FACTUALLY different that is of significance econometrically?

Because it didn't "work then" based on what you're discussing. You compared the paying off the the single-point war debt after 1943,
with paying off our current structural debt today.

1) there is no such thing as 'structural debt'. Debt is Debt. The national debt in 1943 was about 50% from the deficit spending from 1933-1939 and about 50% from the war.
2) ALL debt is "single point".

3) the deficit is a different issue. and has nothing to do with debt/GDP ratios.

Yes paying on the debt is an economic consequence of paying the debt service.

yes nd?

What ECONOMETRIC CONSEQUENCE does that have in the broader economy? Multiple consequences. It either means increased taxation to service the debt, which will slow the economy

Not necessarily. as THE RESEARCH SHOWS, Marginal Taation rates do not affect growth rates as long as they are below 70%

, or it means monetizing the debt which will lead to inflation,

Again, not necessarily. Monetization of the debt is ONE OPTION. right now there is no inflationary pressre

ultimately it means defaulting on the debt which will destroy the economy.

Again, not necessarily. As long as in the long term the debt grows slower than GDP, there is no need to default.

We could run a temporarily high debt in 1943 for the purposes of financing WWII. We cannot run such a debt into infinity.

Why not? The Nation has no lifespan. Why can it not do what it has done since its inception? Namely have an National Debt?

Um what is our current tax collection rate as a percent of GDP? How efficient is our taxation policy currently compared to what it was in 1940?

I can't find figures for earlier than 1950. At that point, our tax collection rate was about 13 percent. The income tax made up 6 percent, and "social insurance" about 2 percent. Today (well, 2010) it is 15 percent of GDP, with the income tax being 8 percent, and social insurance coming to 6 percent (source http://www.deptofnumbers.com/blog/20...action-of-gdp/). So our tax collection rate is higher both for income tax and entitlements today than it was during that period, at least as a percentage of GDP.

Compared to the cherry picked 1950. What is our HISTORIC AVERAGE for the last 30 years? (hint its around 20% of GDP).

 

[trapdoor]

Why? that was ALSO the case from 1933-1946. Unemployment was even higher. and we increased the deficit an the national debt. The two are unrelated. In fact you will almost ALWAYS be defict spending when you are stimuluating out of a demand slump.

Why is it a bad thing? Obviously, because unemployment is high there is no revenue to address the additional spending. People who aren't working don't pay much in the way of taxes.

We've done this successfully for 120+ years. You've offered no empircal evidence to contradict its success rate.BTW,

No, Degs. We've done it, with varying degrees of success, for about 80 years, at most. That is historical fact that I have documented to you multiple times, and I will not relitigate. You are entitled to your own opinions, that the private spending by people like Morgan is the same as government spending, but you are not entitled to your own fact. We have not done government -funded stimulus spending for 120 years, or for 100 years, or at any time prior to the Great Depression.

And at an international level and a monetary flow level, the USAs credit rating has no bearing on anything whatsoever.

That is simply wrong, Degs, particularly as you seem to think we can borrow our way out of debt. At some point, even the U.S. will not have enough credit.

1) there is no such thing as 'structural debt'. Debt is Debt. The national debt in 1943 was about 50% from the deficit spending from 1933-1939 and about 50% from the war.
2) ALL debt is "single point". [\quote]

Nonsense. If you buy a car (or finance a war) you do so knowing that at some point you will pay off the borrowed money, and unless you decide to buy a different car (or finance a different car) that debt is discharged, and will remain discharged. If you borrow money and use it to invest in an annuity (with no sign of additional revenue to replace the investment), you will be saddled with a permanent, structural debt. That is what we've done with our entitlement programs. We can't finance them out of revenues, so we've borrowed money to pay for them and we can't quit borrowing money to pay for them. The solution is obvioius -- find new money (which is what the president wants), or cut benefits (what the Republicans want). Whether either solution is possible is another thing.

3) the deficit is a different issue. and has nothing to do with debt/GDP ratios.

Every year you run a deficit, you must borrow money. You're saying that the amount we borrow, if it increases, has nothing to do with the debt/GDP ratio? Because it seems to me, as the amount of debt changes, its percentage of the GDP also changes.


yes nd?

Not necessarily. as THE RESEARCH SHOWS, Marginal Taation rates do not affect growth rates as long as they are below 70%

What research shows this? As a result of our discussions, I've done quite a bit of reading trying to find any research that shows this, and I'm unable to find documentation for it anywhere. It's an FDA number.

Again, not necessarily. Monetization of the debt is ONE OPTION. right now there is no inflationary pressre

Right now our inflation is ~4 percent, which is low, but it is not "no" inflationary pressure. And monetization of the debt has already begun. That means you and I will take home the same amount of dollars, but that amount of dollars will have less purchasing power by some yet-to-be-determined amount. It's one way of solving a fiscal crisis, but as the Weimar Republic could tell you, there are disadvantages.

Again, not necessarily. As long as in the long term the debt grows slower than GDP, there is no need to default

.

But you're making an assumption that the short-term growth, which is higher than the GDP, will remain "short-term" and not be part of a pattern. This is akin to saying one cold winter means there's no global warming.

Why not? The Nation has no lifespan. Why can it not do what it has done since its inception? Namely have an National Debt?

Ahh, once again you're re-writing history. The nation has not always maintained a national debt. It was debt free during the Andrew Jackson administration. We cannot run a debt into infinity because our tax revenues will, in a calculable number of years, not be sufficient to cover the interest on the debt.

Compared to the cherry picked 1950. What is our HISTORIC AVERAGE for the last 30 years? (hint its around 20% of GDP).

"Cherry picked" (I presented my source) implies that I intentionally used figures beginning in 1950. I would have preferred to use your own start date of 1943, but I couldn't find figures going back that far. We don't CARE about the last 30 years, as they were not your example -- your example was the years used to pay of WWII debt, and you arbitrarily asked me to compare the tax collection rate of 1940 to the tax collection rate today. As I couldn't find a figure for 1940, I started where the source I could find began, in 1950, and compared that to the most recent figures available. Our tax collection rate has improved since 1950. Other than disparaging the numbers I provided, I don't think you have a point here. Our tax collection rate isn't the problem. Our inability to pay for the things we purchase is the problem.

 

[OldGaffer]

 

[Woolleybugger]

Your argument boils down to this: if any part of an economy rests upon the ideas of a former economist then any changes to that economists programs in favor of another one are immaterial to claiming that the economy resoundingly reflects the previous one. If your point is that some of what Keynes advised is still in practice then I grant you that in much the same spirit as we still consider Newtons theories correct even though Einstein corrected him in many areas. You excel at the art of making a very small point the main point in your argument. If I were to believe what you said against my statement then I would have to ignore the Reagan Revolution, the economic transformation of a regulated economy based upon decades of success into a more laissez faire market place. The amount of deregulation that has occured in almost every sector since Friedmans ideas took hold is obvious to anyone with any grasp of our history. By stating that all fiscal policy is de facto a Keynsian policy you completely ignored the essence of what Keynes advised. You only use fiscal policy to correct low demand and a stagnant economy during a crisis. You do not continue that after the crisis is over, in fact, you return to a debt repayment policy once the tide has turned. Any economy that is unconcerned with fairness is an economy that is destined to lead to poverty for the masses. The government is the only institution that can protect us from powerful private interests. This has been true since Caesar made himself a dictator, it is still true today. The line in the sand for us as a nation is how best to share the income generated by our collective efforts to insure peace, provide for happiness and promote the general welfare of the people. Not some of the people, all of the people. This is what the last election was about. It was a referendum on your ideas and our ideas. Your ideas lost. They have lost in every advanced nation on earth in most areas of debate. When your ideas win a small victory, they result in the shit storm we saw in Chile, Argentina, Russia and now in the UK. Iceland and Ireland got it right. They kicked the philosophically devout free marketers out on their asses and protected the common man. You can argue this specific point until you are blue in the face but your argument will fall upon dead ears. No one is buying your historical revisionism any longer Trap.

 

[degsme]

Wrong on the math of Fiscal Multipliers. Consider:

• GDP = $100 Billion, Government spending = $20 Billion, Private sector == $80 Billion
• Economic crash of 9% GDP = all in Private Sector (ie Private Sector drops to $71 Billion)
  1. We do no stimulus spending, And GDP recovers at 2.6%.
  
  Below are 4 charts of three options:
  
  1. No stimulus but no cuts in governemnt spending
  2. No stimulus and Govt runs a Balanced Budget
  3. Gov runs balanced budget, but no stimulus
  4. Gov runs a 2% GDP deficit and kickes economy to a growth rate of 3% (realistically you'd see more like a 3.1% growth)
  5. Gov runs a 4% GDP deficit (Defense FM of 0.5) and kicks economy to a growth rate of 3% (realistically you'd see more like a 3.1% growth)
  
  Notice how the stimulus one creats 5.2% net more wealth than the No Deficits and even the "no cuts but no Stimulus" generates 2.4% more wealth.
  
  Note also that this is a realtively simple model, the reality is that GDP growth would FALL EVEN MORE as governemtn cut spending and grow even faster as the economy takes off
  
  Bottom line IN A RECOVER Stimulus spending works So to your point about an FM of 0.5 "sucking out of the economy"... Notice that under the FM of 0.5 model, the DEBT grows dramatically more - because its an INEFFICIENT stimulus, but because there is no other Demand that it is competing with - there still is a Stimulative effect ( 0.5 x $1 = $0.5 > 2.0 x $0 == $0 )
  

  No Stimulus but no cuts
  	Gov Spend	Private Sector Spend	GDP	Gov Rev. @ 20% GDP	Growth Rate	Govmt Deficit
  Base	20	80	100.00	20.00		0.00
  Post Crash	20	72	91.00	18.20	2.60%	-1.80
  Year 1	20	72	93.37	18.67	2.60%	-1.33
  Year 2	20	72	95.79	19.16	2.60%	-0.84
  Year 3	20	72	98.28	19.66	2.60%	-0.34
  Year 4	20	72	100.84	20.17	2.60%	0.17
  Year 5	20	72	103.46	20.69	2.60%	0.69
  	Net Wealth		582.74		Net Debt	-3.45
  Gov Runs Balanced budget no Stimulus
  	Gov Spend	Private Sector Spend	GDP	Gov Rev. @ 20% GDP	Growth Rate	Govmt Deficit
  Base	20	80	100.00	20.00		0.00
  Post Crash	17.80	72	89.80	17.96	2.60%	0.16
  Year 1	17.96	72	92.13	18.43	2.60%	0.47
  Year 2	18.43	72	94.53	18.91	2.60%	0.48
  Year 3	18.91	72	96.99	19.40	2.60%	0.49
  Year 4	19.40	72	99.51	19.90	2.60%	0.50
  Year 5	19.90	72	102.10	20.42	2.60%	0.52
  	Net Wealth		575.06	115.01	Net Debt	2.62
  Gov runs a 2% deficit stimulus with FM of 2.0 and pushes growth rate to 3%
  	Gov Spend	Private Sector Spend	GDP	Gov Rev. @ 20% GDP	Growth Rate	Govmt Deficit
  Base	20	80	100.00	20.00		0.00
  Post Crash	22.00	72	94.00	18.80	2.60%	-3.20
  Year 1	22.00	72	96.44	19.29	3.00%	-2.71
  Year 2	22.00	72	99.34	19.87	3.00%	-2.13
  Year 3	20.00	72	102.32	20.46	3.00%	0.46
  Year 4	20.00	72	105.39	21.08	3.00%	1.08
  Year 5	20.00	72	108.55	21.71	3.00%	1.71
  	Net Wealth		606.03	121.21	Net Debt	-4.79
  Gov runs a 8% deficit stimulus with an FM of 0.5 and pushes growth rate to 3%
  	Gov Spend	Private Sector Spend	GDP	Gov Rev. @ 20% GDP	Growth Rate	Govmt Deficit
  Base	20	80	100.00	20.00		0.00
  Post Crash	28.00	72	94.00	18.80	2.60%	-9.20
  Year 1	28.00	72	96.44	19.29	3.00%	-8.71
  Year 2	28.00	72	99.34	19.87	3.00%	-8.13
  Year 3	20.00	72	102.32	20.46	3.00%	0.46
  Year 4	20.00	72	105.39	21.08	3.00%	1.08
  Year 5	20.00	72	108.55	21.71	3.00%	1.71
  	Net Wealth		606.03	121.21	Net Debt	-22.79

 

[degsme]

Sarge does not seem to understand that the budgetting principles for a nation that can print its own money and has no finite lifespan ARE DIFFERENT than household budgets.

 

[degsme]

Why is it a bad thing? Obviously, because unemployment is high there is no revenue to address the additional spending. People who aren't working don't pay much in the way of taxes.

Which is why you have a DEMAND SLUMP. Which is why DEFICIT SPENDING ON STIMULUS WORKS. It puts peoeple back to work. The gotcha is WHAT IS THE MOST EFFECTIVE WAY TO DO THAT

• DoD spending is the least effective way with an FM of 0.5
• Supply side is only slightly better with an FM of 0.7
• Infrastructure spending has an FM of DOUBLE THAT (1.5)
• And social Safetynet spending is better than that (approaching 3.0 during recessoinary periods)

That is simply wrong, Degs, particularly as you seem to think we can borrow our way out of debt. At some point, even the U.S. will not have enough credit.

No it is not wrong. Credit ratings agencies are used as guidlines for RELATIVE RISK. Its not an "absolute risk" model. Yes it is true that at some point the USA would not ahve enough credit. That point is somehwere PAST 200% Debt/GDP ratio. We are nowhere near that nor nowhere near GETTING to that. So it is not an issue.

as for Taxation rates and Growth - the recently published (September) Congressional Research Service (funded by the GOP) paper demonstrates that growth and marginal rates are not linked (notice the source) http://online.wsj.com/public/resources/documents/r42729_0917.pdf


Now as to history - no I'm not rewriting it. Jackon did not pay back the French Crown... we still owed $20 Mil to them. The gotcha is that the USA had renegged on that debt in 1795... but it was still a debt, and it has not been paid to this day.

 

[Woolleybugger]

His argument attempts to say that military spending during the war did not reflect a Keynesian stimulus. While Keynes certainly did not argue for an economy that was basically nationalized during the War in order to utilize his demand curve analysis, the affects were the same in terms of impact upon the overall GNP. The two great wars were both massive federal government takeovers of the economy in ways that would make one think of communism rather than capitalism. The net affect of both war time policies regarding the economy was to force the nation into making massive investments in infrastructure in order to increase our capacity to produce war machinery. These investments in both plant, equipment, people, training and infrastructure (Bonneville Dam for instance) led to the prosperity that followed both wars. Managing the aftermath of those wars was not a simple task but as long as we followed lessons learned by Keynes instead of adopting a Hayekian view, we regained our prosperity. It was only when we became fooled by time that we went back to the old ways in the 1920s and then in the 1980s (here comes Hayek to ruin a good thing again) which then led to another debacle. This is pure dialectic. The pendulum swings but at some point, cooler heads must acknowledge that every time we follow one path, prosperity, security and stability return. The other path always leads to the same outcome.

 

[OldGaffer]

Treasury Secretary Timothy Geithner said on Wednesday that the Obama administration was "absolutely" prepared to jump off the so-called fiscal cliff should Republicans not agree to raising tax rates on the country's top earners, according to Politico:


"Oh, absolutely," Geithner replied. "There's no prospect in an agreement that doesn't involve the rates going up on the top 2 percent of the wealthiest."

"The size of the problem in some sense is so large it can't be solved without rates going up," Geithner said about the country's fiscal challenges. "I think there's a broad recognition of that reality now."

Republicans hold no cards whatsoever.