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How the hell are we going to pay for this?

Discussion in 'Economics, Business, and Taxes' started by Sgt Staples, Dec 1, 2012.

  1. Spamature

    Spamature President

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    The right has a lot of nerve when it comes to lamenting about debt. It's has taken over 30 yrs of Republican tax policy and military to get us into this situation. It will probably take 40 yrs of sane tax and military policy to undo it. But it won't be undone until realize this and give up on the delusion that you can run a First World Western govt on the cheap.
     
  2. trapdoor

    trapdoor Governor

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    Jeez, Wools. If you can't learn to use the forum's quote button, at least learn to use your computer's "return" key. This reads like one long sentence written by someone on speed.

    Now, I'll try.

    More of Keynes is in practice than Friedman over the period you describe. Reagan, Bush 1 and Clinton all had Keynesian programs in play. In fact, there has been no time since the New Deal that such programs have not been a key part of the United States government and a large part of U.S. expenditures. Show me how Keynesian spending went away significantly over the 30 years you cited (presumably 1980 to 2010).

    I excel, to the extent that I do, at ignoring the extraneous. God is in the details.

    Ah, but Keynes didn't necessarily believe in free-market controls. He believed in counter-cyclical government spending. His general theory, as published in "The General Theory of Employment, Interest, and Money" has little to do with market regulation, which he saw a secondary to other forms of governmental market intervention.

    I haven't said that, and I'm reluctant to respond as I would be defending a position I haven't taken. What I have said is that our government retained its Keynesian spending throughout the 30 years you define as the practice of Friedman's policies. Friedman is defined only via a lessening of (some) regulations during that period, not via a loss of Keynesian policies nor much of a reduction in stimulatory spending, or counter cyclical spending.

    Then why has the U.S. not returned to debt reduction at any time since WWII? The answer to that is obvious, we have retained Keynesian programs absent a Keynesian crisis throughout most of that period.

    If the government can subdue powerful private interests, think of how much power it then has to subdue the private interests of those without power. You want an interventionist government that "does good." I want a government with less power to do harm. The two goals are almost mutually exclusive.

    If this was the case (and I doubt it, I think it was much more akin to a Roman dictator giving bread and circuses to the masses), then it wasn't much of a referendum. Democrat (if you prefer Keynesian) policies were rejected by nearly half the voting public. Ignore them at your peril, politically speaking.

    And where is it written into our system of government's rulebook that our government is about sharing the prosperity of individuals with other individuals? That's really what you're talking about here. You speak broadly of "our collective efforts" but for the most part "we" don't have "collective efforts." We have our individual careers and jobs and have to exercise our own abilities and utilities for our own ends.

    It is laughable to compare the U.S. with dictatorships, controlled economies, criminocracies and third world nations. If Ireland, and Iceland, "got it right" it isn't reflected in their current economies. I have not provided any revision to history. None.
     
  3. trapdoor

    trapdoor Governor

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    • Degs -- I'm sorry, something is screwy with your tables, and the columns don't line up in any way that I can make sense of (I think it's another software thing at my end). I don't think your numbers can explain how a $1 spent for a bolt in a bridge is different from the same dollar spent on the same bolt if it goes into a tank or the deck of a ship. Any theory that doesn't account for that difference is flawed.
     
  4. degsme

    degsme Council Member

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    I've explained this before, as have economists on both sides of the aisle. A combination of

    • DoD Procurement standards (that bolt in Stores is slated for a mudflap on a truck but MIGHT be needed for a tank, so you set it to Tank Standards)
    • Security clearances and procedures involved in all steps of the process (a favourite way to mine for force strength is by looking at theings like nuts and bolts)
    • and the need to have fairly massive reserve stores (which have very high Opportunity Costs) as opposed to the Just In Time supply chain of infrastructure construction

    are but three fo the most clear and obvious factors.

    That's why there are $120 toilet seats on B52 airplanes, when in the private sector they cost $30. That's a 4x markup, for a product of the same functionality. Thus the DoD spend has a lower velocity of money.

    Its basic monetary economics. Until you understand that, its hard to have an informed discussion with you.


    And to put it to your earlier question about Stimulative spending. Lets put the price of the toilet seat on a Boeing plan at say $40. So that we have a FM comparison of 0.5 (DoD) and 1.5 (Private/Public sector infrastructure spending).

    Both seats get ordered from the same manufacturer. They are identical. So that means that

    • the amount of time the line workers spend making it is the same.
      • So their salaries are the same
        • so they spend in the local marketplace the same
          • So their contirbution to GDP Expansion is the same
    • The amount of machinery wear and tear is the same
      • So their Machinery vendor incomes are the same
        • so they spend in the local marketplace the same
          • So their contirbution to GDP Expansion is the same
    • The raw materials inputs are the same
      • So their materials vendors income are the same
        • so they spend in the local marketplace the same
          • So their contirbution to GDP Expansion is the same
    • etc. etc.

    So in each case the contribution to GDP expansion is roughly the same - but since the COST differential (which is absorbed in the increased costs associated with security, procurement and stores keepin) is HIGHER for the DoD spend. Hence for $1 spent on the DoD plane, vs. say the chartered 737 for the WH Media flying with the POTUS - you have a 3:1 diferential in the impact on the broader economy. (now obviously the Real World processes are more complex and its no just about a toilet seat, it is IN THE AGGREGATE)

    I really don't see what is so hard to understand about this?

    Spend money on Defense and you grow your GDP at a rate less than the private sectore assuming it is investing
    Spend money on Domestic spending and you grow your GDP at a rate HIGHER than the defense spending.

    so in a DEMAND SLUMP - where the private sector is not investing - your choice is

    • do nothing - in which case you crawl your way out of the slump and have dramatically reduced wealth production
    • Spend on DoD which addresses the Demand Slump faster than doing nothing but runs up astronomical costs
    • Spend on Domestic spending which addresses the Demand Slump even faster (ith has broader reach into the Economy) and runs up LOWER costs
    the latter two options create more wealth faster than doing nothing, but only the third option does ite with economic efficiency.
     
  5. trapdoor

    trapdoor Governor

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  6. degsme

    degsme Council Member

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    Notice that I pointed out how even Off the Shelf componentry ends up costing more. I've been involvedin bidding on DoD contracts Trap. It costs more fot the same stuff. It really does.

    And you are wrong about bridge building. Maintenance stores in infrastructure are based on MTBF numbers. In the military they are based on actual hostile fire numbers. Sorry there is no comparison here.

    Look you are trying to argue around singleton examples of why the military does not cost more. Except ALL OF THE RESEARCH including that of conservative economists SHOWS THAT IT DOES.

    That's only true if the government does not exist. Because without government there is no private property there is no market there is only really might makes right your notion is fundamentally an anarchist dream. We've tried this approach for the first 100 or so years of the economy and IT WORKED WORSE. Less net wealth creation, more frequent crashes and a less vibrant economy and it was no more "real" or less "artificial".

    It works but it runs up huge costs. and ICC and General Welfare are also fully sanctioned by The US Constitution, as is the disposition of US Assets in any way the Lege deems fit (absent intrusions into explicitly protected rights). So you have no claim here

    [quote
    Which theoretically works, but is not sanctioned by the U.S. Constitution[/quote]
    Nothing theoretic about it. It is what we have done for the last 120+ years and in the process decreased the frequency of crashes by a factor of 3 and shortened the average recover by a factor of 8. That's not theory THAT IS PRACTICAL EXPERIENCE

    As for Constitution, disposition of Federal Assets is a plenary power as Jefferson asserted in 1789 shortly after the ratifiction of the Bill of rights.

    That is an ideological mantra that has no connection to the empirical world. Wealth is created when the net output of the economic system is greater than the inputs. The source of the inputs does not matter per se. What matters is purely Opportunity cost. And we know from research that certain forms of taxation create GDP growth in excess of what the opportunity cost is in the private sector.

    So this notion that Government Cannot create wealth simply because it uses taxes as funding instead of fees. is just econometric nonsense
     
  7. Bluedog

    Bluedog Mayor

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    I don't think we will in my opinion. Much easier for our elected officials to keep punting responsibility down the line.
     
  8. trapdoor

    trapdoor Governor

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    No, you didn't "point it out" you inferred it, and you are wrong. If anything, the military usually gets lower prices as contractors jump on government spending contracts that include discounts (for example, as a federal employee, I can get a break on the purchase of a PC by buying via a government contractor. So can you, if you're a contractor who has received a contract from the government). It doesn't cost more for the same stuff, it really doesn't.

    It doesn't matter Degs. A bolt is a bolt and a dollar is a dollar.

    Degs, I'm responding to you, and you provided not only a singleton example, but a singleton example of 30 years ago.


    No, the government still exists, it just takes less role in business. What was the government's role in the NYSE in, say 1870? There wasn't any SEC then. That "it worked worse" implies a basis for comparison -- it worked worse than what? Than things work today? That's arguable. RISKS were higher then. Risk is not always a bad thing.


    All government spending is associated with high costs, whether that is buying a tank or issuing EBT cards. General welfare is NOT sanctioned powers, Degs. It is provided as part of a sentence that comes before a colon, after which there is a list of the sanctioned powers -- it is the reason for the sanctioned powers, not a power itself. This Construct is seen throughout the Constitution "This is why we're doing something... (Preamble) This is what we're doing...(Article I).

    Degs -- I'm sorry, but that is a canard, a prevarication -- an outright lie. The US GOVERNMENT did not take part in ECONOMIC STIMULUS SPENDING 120 years ago. Nor did it do so 110 years ago, nor did it do so 90 years ago. In the 1930, it began doing so, quite probably after J.M. Keynes famously mailed his book to FDR (but before the two had their face-to-face meeting). You are, again, attempting to rewrite history to suit your own mental model of how the U.S. government interacts with the economy.

    True, but not relevant.

    Degs -- if it is merely ideology, answer this simple question. What is the source of government funding?



    No. The government's total funding comes from wealth created by others -- by you, me, and Paul Allen. It takes wealth, it does not create it it.
     
  9. Woolleybugger

    Woolleybugger Mayor

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    Keynes never advocated excessive spending in times of economic prosperity. He said to pay down the debts incurred during economic turmoil. You are arguing the every budget which has more spending than revenue is a Keynsian play. Hogwash. What really happened is that supply side economic tax policy resulted in massive deficits. The increase in spending was ideologically based by right wing defense hawks trying to stoke up fear to justify a massive defense industry and a foreign policy based upon imperialism. Friedmans ideas were advanced and accepted as the de facto economic standard for the last thirty years by almost everyone in a position of power. Rare were the Kenysians during this period proven by Greenspans famous admission that we are all Keynesians now. You cannot seriously be arguing that the prudent banking scheme set up by Keynes after WW2 was kept intact after the inflation of the late 70s. This is historical revisionism of the foulest sort. I was an adult during that period, a college student living with my economics Professor and believe me, Friedman was GOD during the late 70s and early 80s. Keynes was almost banished from economics theory for at least 20 odd years. Even now folks like you use his theory to deflect responsibility for massive right wing economic experimentation with tax policy, deregulation and unfettered capitalism. You are making the incredible claim that Friedman was not the key economist in the world from the day Thatcher got elected. You want to know what should have been a Keynesian policy? No Bush tax cuts, no increases in the defense, no unpaid wars and a determination to pay down the debt during the Bush 2 era. That did not happen. What happened instead is a fraud upon the people based upon a hodge podge of economic mismanagement dominated by a few concepts Milton loved to sell. Free markets, deregulation, lower taxes and reduced fiscal policy corrections were his ideas. The GOP did not have the guts to adopt everything Milton wanted because unlike a military junta, they had to get the consent of the governed. So, they lied, they cheated and they misused our trust to completely [Unwelcome language removed] our nation up. You want to know the big difference between the left and the right during the last 30 years? We wanted to raise taxes to pay for the shit we wanted. The right wanted the same shit but refused to pay for it.
     
  10. degsme

    degsme Council Member

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    Military does not get lower prices. No more so than any large contract buyer. Sure you can get a PC discount as a Federal employee, and a Microsoft, or Google, or Apple or even a Walmart exec can as well. One of my son's works in a hardware store chain as he finishes his degreee - he gets huge discounts on building supplies. Nothign new there. I got a lot of my sailing "ropes" from a buddy who worked on a trawler. They use Dyneema string and rope for their nets.

    There is nothing special about the military in this matter. Profit margins are profit margins. If I can't make my ROI in my federal contract, I put my money in the market and vice versa. The bottom line though is that for DEFENSE RELATED contracting, the process is slower, more regulated, and more secure - and hence LESS ECONOMETRICALLY EFFICIENT than the domestic part of the Federal Government.

    So no a Bolt is not a Bolt. A bolt that costs a Dollar to the Domestic side of the government costs $3 to the Defense side LOADED COST (that includes stores, procurement procedures etc). But as you point out the econometric VALUE of that bolt is $1.

    look if you cannot understand why there are different fiscal multipliers for different types of activities that still accquire the same end product, I don't know where to go from that.

    Simply Factually WRONG There is no Econometric Data to support this claim and quite a bit to refute it.

    Wrong. The history tells the story. That 120 some odd years ago The Government had to PARTNER WITH JP Morgan to do the Stimulus spending does not change that it was Government policy that drove the process and that ultimately it was a loan of gold by Morgan TO THE GOVERNMENT so that THE GOVERNMENT COULD ISSUE MORE BONDS and SPEND MORE, that ended that panic.

    And it did so 90 years ago. and in every downturn hence.

    Sure it is. Jefferson is one of the "founding Fathers". And his view AT THE TIME OF THE RATIFICATION was that General Welfare allowed the Lege to dispose of Federal Assets in a plenary manner. Thus Stimulus spending - which is simply a way of disposing of Federal Assets, is a plenary power of Congress.

    either from the printing press or taxes. That has no bearing on whether or not that spending CREATES Wealth.

    Then you don't understand either what "wealth creation" means, or how economics works. This is simply factually wrong.

    There is no difference in "wealth creation" by say a nurse working in the private or public sectors. Both CREATE value (wealth) that did not exist prior to their actions. Whether that is compensated by a promise of labor by an employee somewhere or the promise of labor by a taxpayer someplace else is not relevant to whether or not that act created some amount of wealth.
     
  11. Cotton2226

    Cotton2226 Mayor

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    yeah right! but, don't ask the rich for any monies... take it from the "littl guy!" Tennessee boy, Democrats agree with cutting spending... not an issue.
     
  12. Queen Titania

    Queen Titania Senator

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    ''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.''

    Goddess of the Toilet Margret Thatcher did not do what !!!!!

    That evil stupid humorless power hungry old bitch, who, rather oddly I find, has as did Reagan lost her marbles, completely and utterly devastated every single nook and cranny of this Nation.

    Actually it was a shame that the Transport had ever been Nationalized. It is Private again though but It had ran far better before nationalization, not now and it is outrageously expensive and doesn't work well but as for the NHS, it might look OK from the outside but it ain't. She privatized it in all but name. She broke the powerful Matrons Union which was the glue of the NHS, along with every other Union closed almost all the Mines, Mills, Steel Works, Factories, Ship Builders, and on and on every thing closed down breaking up communities even more................Sold off social housing, closed down Mental Hospital and Doss Houses, throwing vunerable people out on the streets, allowed beautiful old buildings, whole streets often to be knocked down construction business was good £ in her time, closed down Technical colleges ......Oh the list of her destruction is never ending and still it isn't done ............... She didn't even understand half of what she put into practice. I used to travel First Class, back and forth from Europe for most of her reign, once on the train from Dover I talked to a young woman who was something to do Rivers, before Goddess of the Toilet each River had one authority, Thatch cut all the Rivers up into sections so that meant there was in fact No authority ...so it was and still is with everything she touched .................. Education had already been tampered with by both Parties but under her the awful box ticking 'ignorance agenda' began when Gov set the curriculum and ect

    She made us a very unhappy people and we still are .......

    This is who should have been PM ........ instead of her I meant( (Micheal Foot ( socialist ) said of him and us that his not becoming PM was his and the Nations greatest tragedy. )

    http://www.princeton.edu/~sondhi/nonphysics/writings/powell.pdf

    And she bought in 'stop and search, and it became illegal to have more than two people speaking on the street together and on and on .....

    I didn't mean to interruped .....sorry, it is an intersting discussions I just couldn't let Goddess Thatch pass :) Reagan and she took us down the wrong path.
     
  13. trapdoor

    trapdoor Governor

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    Blather.
     
  14. trapdoor

    trapdoor Governor

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  15. trapdoor

    trapdoor Governor

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  16. degsme

    degsme Council Member

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    The government does not always get multiple bidders. And the part of the government that is the least likely to get multiple bidders is... Defense. That is ONE of the factors that drives the Fiscal Multiplier of Defense Spending UP (the example of the "no Bid" KBR contract for field services in Iraq is one such example). There are lots of reasons for this but the fact remains that this is one factor. Similarly, a public bid RFP may not necessarily get more than one bidder: I sat in on some training for how to work on government RFPs. And while the "anti-earmark" legislation has precluded that sort of favouritism from showing up in the Appropriations Legislation itself - once the appropriation is made, there is a bunch of "qualifications" regulations that are written by the Congressional staff. And this "qualifications" set of regs can be constructed to essentially pre-select a particular vendor. Nowhere is this more common than Defense Appropriatiations. This essentiall elevates the "barrier to entry" for all the vendors other than the pre-selected one. And that one can then charge more for that same service.

    Bottom line is defense spending - for a host of reasons - is less econometrically efficient than any other part of the government

    So in Defense Spending, "a bolt is not a bolt". it invarialby costs 2x-3x more than in the domestic side of spending. And no , not all government spending comes particularly laded with adminstrative bureaucracy. Engaging with ANY LARGE VENDOR comes laden withthat. In fact one of the ways Walmart keeps its own operational costs down is by pushing out a lot of those buraucratic costs onto their vendors. Many a company has gone bust thinking it just scored big by being selected as a Walmart Vendor, only to find out that the administrative requirement costs eat up MORE THAN their profit margin.

    When the POTUS goes to JP Morgan and asks him specifically to help and step in by lending NYS the gold - that is a partnership. WRONG.

    And STIMULUS SPENDING is an Econometric concept. The reason it is "government spending" even in the JP Morgan case, is that JP Morgan received the "full faith and credit" guarantess by the Feds that he would be paid back.

    It is STIMULUS SPENDING. And it is precisely the cumbersome mechanism of this "partnership" approach then and in 1907 that lead to the creation of the Federal Reserve: The economic outcome was very succesful, but the unreliability of going to the private sector for the funding was considered TOO RISKY for the future. And hence The Federal Reseve Bank was created to provide the means for The Government to do this themselves.

    So modern economics has expanded the scope of what is understood. So what?

    Where have I sead that?

    Prehaps you should read some economics. Read up on the defintiion of what wealth is. How it is created.
     
  17. degsme

    degsme Council Member

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    They are in particular segments of the economy. And have worked quite well. Yes and?
    Under the previous Democratic Administration. And the one before that.... Hmm odd that.

    Um why not? The interest rates during Carter were the result of commodity price shocks. Which has nothing to do with banking. Nor did "Friedman break stagflation". Volker did. And he did it by driving interest rates up and holding them there despite reactive market fluctuations. This then caused an actual recesion that we used Keynsian stimulus to make our way out of and restart a more normal economy at a higher commodity price meta-stability point


    Depends on the source of the surplus and whether or not there is National Debt.

    If there is National Debt, cutting taxes is not the solution.
     
  18. trapdoor

    trapdoor Governor

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  19. trapdoor

    trapdoor Governor

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  20. degsme

    degsme Council Member

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    The DoD is exempt from competitive bidding rules in many situations. Go look it up. And it is not just "war time" there have been numerous situations where contracts have been awarded to "a strategic contractor" just so that they can "remain a viable business". And the reason given is the strategic nature of another of their products

    No the Bottom line is DEFENSE SPENDING IS LESS EFFICIENT THAN PRIVATE SECTOR SPENDING

    But this is not true for Civillian sector spending. Simply not true. The data shows this to be the case.

    Now as to 1907 Panic - You are correct that Morgan was not PRIMARY in this stimulus funding http://eh.net/encyclopedia/article/moen.panic.1907 it was the NY Clearinghouse Association that was the largest funder of this stimulus (but Morgan and the Federal Government were also http://american-business.org/2646-panic-of-1907.html) and engaged in "Quantitative Easing" - though it actually was QE2 - QE1 having been the artificial support of Knickerbocker Bank's cashflow. And like with Lehman, allowing Knickerbocker to fail caused the panic that caused the crash. the NY Clearinghouse Association issued over $110 Mill in what essentially amounts to TARP (ie Cash for troubled/illiquid assets).

    All this is classic Keynesian stimulus on the monetary side. That only some of it was done by The Government is irrelevant.

    Show a single example. You can't. You once could, but you can't today[/quote] Sure I can. The price of an HP Supedome installed at DoD Healthcare is higher than on Private sector sice. I cannot prove this to you because that would require my giving you access to confidential bidding docs I no longer have access to myself, but I can assure you that is the case.

    Not hardly. Again the point of my Jefferson quote was that disposition of Federal Assets is a plenary power of Congress. And somethig that is a Plenary Power is not limited to just the particulars that Jefferson was enumerating but is in fact P L E N A R Y. There is no new Constitutional "interpretation" here. It is simply the exercise of a plenary power.

    POLITICALLY and IDEOLOGICALLY you have a beef with this, but you have no constitutional case to make. That the government choose a particular time (a crash and recovery) to engage in a larger scale distributive disposition of Federal Assets is not relevant to Congress's plenary authority of the disposition of Federal AssetsB

    True. And that's part of a fully sovereign government's authorty. Sorry I didn't realize you were questioning that.

    You clearly do not since you claim Government cannot create it. And yet the incontrovertible evidence is there that it can.

    Then you don't understand what wealth is. You are associating wealth with ownership. That's not wealth. Not econometrically.
     

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