question about the National Debt for all of you economist types....

[clarice]

I can already hear some of the responses this will invoke...but it IS a serious question.
Can someone explain to me in simple terms..how can an 18 trillion dollar deficit be GOOD for
ANY Country? I doubt that any of us run their households like that...why should they?

Also, I remember when Mr. Bill erased the deficit while he was in office. Didn't we think that that was a GOOD thing at the time?
Why would it be a bad thing now?

[rufus dog]

1. Generally it is bad, depending on timing

Govt can't run like a business or a household.

So the theory (and effectively used for years) is basically as follows.

When business and consumer spending in contracting you increase govt spending to stimulate the economy. So if Obama tightened spending in 2008 the shit would have really hit the fan.

That being said the current debt is almost entirely caused by Republican admins. As you stated, Clinton had us on track to eliminate the debt. Problem was W cut taxes on the wealthy, money goes to savings or offshore, thus no stimulus, AND increased spending.

This is nothing new, Arnold pulled the same crap in CA, the repubs do it all the time, as a plan, so they can then ask for shared sacrifice, which in reality is cuts in social programs along with increased local fees so in effect the poor get shafted and the middle/upper middle class takes a bigger portion of funding everything else while corporations and the rich see decreased contributions.

[clarice]

2. Thanks Rufus....

but what your describing sounds like Keynesian economic theory. I would think that the last stimulus bill would have buried that
antiquated theory once and for all.

[pampango]

3. It seems Keynesian. Krugman posits that the last 7 years are proof that Keynes was right.

Keynes Is Slowly Winning

For conservative hostility to Keynes is not an intellectual fad of the moment. It has absolutely consistent for generations, and is clearly very deep-seated.

http://krugman.blogs.nytimes.com/2015/05/20/conservatives-and-keynes/

Keynes Derangement Syndrome

[clarice]

4. You can't be serious.lol.nt

[pampango]

6. Me or Krugman? n/t

[jmowreader]

5. I find relying on any macroeconomic theory to be a singularly unsatisfying experience

Classical economist Jean-Baptiste Say wrote the "Law of Markets," which says aggregate production necessarily creates an equal quantity of aggregate demand. Says Monsieur Say,

"A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its value.

As each of us can only purchase the productions of others with our own productions - as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase."

I believe anyone can see the logical fallacy of that statement: What if you produce that which no other man desires to buy? You and I can sit there and filet beef rectums for weeks on end but never have the value of that we can buy be equal to the value we can produce because people wouldn't eat asshole even if you paid them.

[hfojvt]

9. are you buying Republican propaganda that the stimulus did NOT work?

It is false. The stimulus was not large enough, but it was still fairly effective.

http://www.democraticunderground.com/10025697641

[clarice]

10. This is an economic conversation....no need for politics..thanks though. nt

[hfojvt]

18. well back in the old days

economics used to be called political economics. Economics is often about policy

and it is a fact that there is a whole bunch of right wing spin that has been attacking the stimulus.

And it is nonsense.

[Xolodno]

12. Wrong.

Its a Keynes economic "policy"...but not Keynes economics. Keynes economics hasn't been used in any significance for over 30 years. Prior to that, only some of his theories were actually used, which many advocate is what caused "Stagflation", if they had implemented Keynes theories more fully, may have never been a problem.

As for the size of the debt, that's relative to the size of the economy. And the next question, "what is debt?". Wild baseless numbers have been cited that include things that should NOT be included. For example, the trade deficit...that isn't "money owed" by the US government, but a balance between trade accounts, it as nothing to do with debt...and yet, right wing hit pieces will include it. And they will equate deficit to debt which is not the case.

Oh and the stimulus plan did work, we should have had 25 to 35% unemployment and stayed in the Depression (yes, it was a depression, recession is just a word they used not to scare people) of 2008 a lot longer.

Finally, Keynesian economics is probably the ONLY PROVEN CAPITALIST system to work fairly well. Monetarism (system we currently use and is screwing everyone) has dramatically increased the Gini Coefficient and area of the Lorenz Curve.

NOTE: By not embracing Keynesian economics, it may have led to the current movement in the USA to start embracing European style socialism. The obsessive greed of of the wealthy, ironically are creating the circumstances Karl Marx warned about moving from Capitalism to Socialism (just without the violence he said would occur). They are in essence, slitting their own throat.

Almost forgot....your dismissal of Keynesian economics (without truly knowing the history of its lack luster implementation)...understanding of the stimulus spending....you're lack of understanding the difference between debt and deficit, what should be counted as debt and what shouldn't, and lack of complete comprehension of economies of scale in regards to debt, deficit, production, etc.

I suggest you bail before you hurt yourself. No online "news" opinion piece is going to save you. As a former die-hard Monetarist Economist who has seen the error of his ways and embraces Socialism....I can see right through all the RW BS talking points.

[clarice]

14. Thank you....you've proven my point...

and also...the vehemence of your rebuttal allows me to think that I've slaughtered one of you dying sacred cows. How wonderful.

Do yourself a favor.. don't EVER play poker. You are as transparent as you are obtuse

And lastly, your dependence on the RW talking points bromide tells the rest of us at the table that you have a very weak hand. I thought by now, people would have learned to be civil with Clarice, for her keyboard is sharper than a mamba's fang. Go, and don't look back.

Oh, and one more thing, please refrain from insinuate yourself into what WAS, a civil discussion. It shows a shocking lack of breeding.


note to jury
Please read the preceding post when evaluating mine.

[Xolodno]

15. Predictable.

That's all you got? Really? You went "all in" on a seven deuce off-suit and I called your bluff. You are pushing proven over and over failed economic policies. We've all been there, tried it....and it failed....and you want to continue push the BS....while ridicule policies that have proven to work every where else.

Nor do I have any dependence on RW talking points, I actually get a good chuckle at times from the sheer lack of comprehension. Its also kind of sad that people (apparently you are one of them) who fall for it, hook, line and sinker (Yes, in addition to playing poker, I also fish). But I still laugh when I recollect an article in Forbes when the lame brained author got the Law of Diminishing Marginal Returns confused with Return to Economies of Scale.....in order to defend Microsoft's monopoly. But people fall for stuff like it, every time (present day example...see Trump).

Don't worry about me alerting...you aren't worth the time. You wanted a thread to appease your Monetarist views...and didn't get it, that brings me more joy. Because now you know what you are trying to advocate is baloney. You will still advocate your baloney, but now its always going to nag you at the back of your mind that you....don't know what you're talking about.

[clarice]

16. Ho hum. I expected better...set..match..Clarice. nt

[Yo_Mama]

7. We thought it was a good thing at the time, but much of it was due to a bubble.

A bubble that was not sustainable. In many ways our current difficulties date back to that period - that was when the Depression-era firewalls between investment and commercial banks were broken down.

Bubbles produce temporarily high tax proceeds, but then the tax proceeds later drop by more than they increased.

Countries that run too high deficits for too long do get into problems.

The metric to look at is total debt (not just government debt) as a percent of GDP. If total debt gets too high, much of the productive capacity (annual income) is diverted into servicing debt, and economic growth slows in a very intractable way.

So, yes, controlling our overall debt levels will be necessary for future growth.

[clarice]

11. Best post of the day. Thanks mama. nt

[hfojvt]

8. first of all you said deficit when you should have said debt

The debt is the sum total.

The deficit is just for the current year.

As for Bill Clinton reducing the deficit. Well, in some ways, very large ways, it was the Republican Congress that did that, by capping spending growth.

Then, they turned around and passed tax cuts for the rich and tax increases for the poor. Yes, Bill Clinton too. http://www.democraticunderground.com/?com=view_post&forum=1002&pid=2665533

As for whether it is good or bad. Well, that depends. Take the Bush recession (please) Republican idiots did not want to have a stimulus bill because that would (gasp) increase the debt. Except that not having a stimulus bill would be far more damaging to our economy and society than the little bit of debt would be.

Same thing with deficits. Sorry, but the economy has cycles. When things get bad, well the deficit goes up. Logically, when unemployment is higher a) you have fewer people paying taxes and b) you have more people needing a safety net. Same as the stimulus. To try to balance the budget at that point would not only be inhumane, it would damage the economy in the long run.

Now as for household. Again, first the Government simply is NOT a household. It is more like a corporation and corporations generally increase their debt every year (and in theory the debt matches the value of their assets. There is much talk about the debt of the Government, but less talk about assets. Things like highways, planes, national parks, etc.

Second, yes we do run households this way, Many households will buy a home. When I bought my home in 2001 I took on $32,000 in debt. I did that because that investment was going to help me in the long run.

Finally, for all that talk above, I am NOT necessarily against reducing the debt. Dishonest Republican politicians though, they always CLAIM to care about the debt. Consider the Ryan budget. It is supposed to reduce the debt. Yet the one thing it specifies - tax cuts for the rich. Basic math says that a balanced budget comes from revenue greater than expenses. Well, with only brief small reversals, it has been tax cut, tax cut, tax cut since about 1981. It's like saying the household needs to balance the budget, but then we decide to stop charging rent to our rich uncle who lives on the top floor of our house. When you do that (I mean when Ryan and Republicans (and many Democrats)) do that, but then cry about the debt and deficit, they are NOT to be taken seriously. They are NOT honest brokers.

[clarice]

13. HF.... very interesting post......a few more questions/observations if you don't mind..

1. Yes, I miss-spoke. I meant debt

2. "Except that not having a stimulus bill would be far more damaging to our economy and society than the
little bit of debt would be". Not so sure about that.

3. Agreed...the economy has cycles. But I have NEVER agreed with throwing money at a "recession"

4. " and in theory the debt matches the value of their assets.". There's the rub.

5. "tax cuts for the rich" Please don't go "ballistic" when I say that that oft quoted term falls from the lips
very easily but when closely examined, may not be that simple. If someone makes 1,000,000 from a company that they founded themselves, often involving years of sweat and sacrifice, (as in my case). They would pay approximately $400,000 in taxes.
Now, common courtesy alone would necessitate a simple "thank you" for the 400m clams. Who else has put that much into the pot?
Instead of a thank you, that person is excoriated for making a lot of money! Doesn't that seem bass ackwards to you?
I also wonder, once we've soaked the rich ( I'm going to insert a codicil here. When I say "The Rich", I'm not talking about
the Soros's and the mega rich inheritance kids, I'm talking about hard working every day risk takers who have EARNED their money) After we soak them here in America...where do we go next? Another Country? Soak them? It seems like throwing the baby out with the bath water

[hfojvt]

17. the debt/deficit thing was not a big deal

but it did need to be pointed out.

Nobody really said anything about "throwing money" at a recession, but policies which slow the fallout are certainly better than a) doing nothing or b) doing trickle down.

It's actually fairly simple. IF 1,000,000 people lose their jobs. Well you have both suddenly flooded the job market and also depressed consumer demand. You have also cut Government tax revenue. If there is no income, there is no income tax. If you cut spending to match that, you would just be adding to the problem. Let's say you are a Republican politician and refuse to help those people. What happens to the economy then? Well, maybe some of them have savings or can find another job (although with the economy shedding jobs, that is unlikely). Most of them do not. So they cannot pay their bills. They cannot buy anything because they have no money. So they lose their house. Now the bank has a house, but it has lost value because of all the joblessness. So businesses lose money too. Now the grocery store has to lay people off because their sales are down. Now a couple of restaurants go out of business, creating even more joblessness, and so on. If you prop things up with things like unemployment and food stamps and such, you can slow the downward spiral. Now those unemployed people can at least get something, which puts money (borrowed money) into the economy.

As far as taxing the rich, well I happened to have studied that quite a bit http://journals.democraticunderground.com/hfojvt/169. It is not so much about saying "I hate rich people." But they do kind of earn that in some ways though. Because when they have $1,000,000 in income and yet still seem greedy. Even in the post Reagan era of 1986 the average tax rate for the top 1% was 33%. By 2008 that was down to 23%. You think it helps to balance the budget, to reduce the debt by giving that millionaire a $100,000 tax cut every year?

And "soaking" them? That's just pro rich rhetoric. As if life was so tough for the rich in the 1970s before Reagan gave them a whole bunch more money. Or before Clinton and then Bush gave them huge tax cuts. Oh I can just imagine the hardship of having to live off of $400,000 after taxes instead of being able to live on $600,000 after taxes.

Actually I can not imagine it. What would somebody do with that much money?