Bigger Burden: Federal Debt or Mass Unemployment?

Discussion in 'Economy' started by BakshisMouse, Jun 8, 2012.

  1. BakshisMouse
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    BakshisMouse BANNED

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    Taking data from here, here are the following unemployment rates by age:

    (Quarter 1, 2005) [Quarter 1, 2012]

    18-19 years: (15.2) [21.4]
    20-24 years: (9.6) [13.4]
    25-29 years: (6.2) [9.9]
    30-34 years: (5.2) [8.7]

    The millions of young people who are missing out of employment experience because of employers too uncertain of future economic growth: what should be done about them?

    To those people who say that the key to economic prosperity and jobs is to eliminate or reduce food stamps, welfare, unemployment compensation, capital gains taxes, corporate income taxes, the EPA, the Federal Reserve, Pell Grants, direct Stafford student loans, and make everyone in the USA pay 20% income tax or whatever in an effort to reduce the budget deficit in order to make businesses confident to start investing in human capital, I say fine.

    If people of your mindset make it to the presidency and have a majority in the Senate and the House, I certainly hope the economy recovers under your watch.

    However, if after years of your efforts, the debt to GDP ratio raises significantly, and the unemployment rate is still sky high, I am going to have the biggest burst of Schadenfreude the world has ever seen.

    (This is all a hypothetical strawman agruement. Feel free to drop in with a real opinion of your own.)
     
  2. BakshisMouse
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    In counter to the argument posed by the strawman in the op, I would propose:
    - large federal government spending on productive initiatives, such as new technology and medicines and infrastructure development,
    -federal grants to close the budget shortfall in state in local governments in order for states and localities to rehire personnel.
    - a higher inflation target set by the Federal Reserve

    The federal stimulus enacted in 2009 did some productive work, but the funds from that bill are now spent, and real government spending per capita is falling year from year:

    [​IMG]

    So I think my proposal is sensible, especially given the dire job market.

    The government spending proposed would create government and government sponsored jobs for formerly unemployed people. As these people purchase private goods and services, the private economy will expand, further creating new jobs.

    The higher inflation target would cause nominal revenues to firms to rise. The burden of the debt they took on before inflation would be comparatively smaller. As their employees' salaries are comparatively worth less, they can hire more workers at a lower cost. The workers themselves will probably see a wage increase because of the inflation, reducing the burden of their debts.

    If the debt to GDP ratio rises from its current 100% to 150%, it would be no tragedy if the unemployment rate went sharply down as the debt ratio went down. Japan, for example, has a debt to GDP ratio over 200%, but they are nowhere near default, with their 10-year bond yield below 1%. Our own 10-year bond yields are historically low, but there is no politician in Washington proposing to take advantage of them.

    As the economy becomes robust, revenues to the government will increase. When the jobs market is not dismal, the federal government can start to lower its spending to deleverage itself. You might say that lowering government spending is improbable, but don't you remember the late 1990's, when we had balanced budgets in a time of prosperity? Plus, it is a larger concern to energize the jobs market than worry about the debt.

    Everything that the strawman and I propose is hypothetical.

    What is very real is the dismal job market for young people. When millions are unemployed for long periods, people start to believe that they are losing valuable skills and are unlikely to hire them.

    Paul Ryan, the architect of one of the most austere budget proposals ever, says that the bond market will give up on the USA in two years time. The historical example of Japan suggests he is wrong.

    Why are the politicians in Washington worried about a hypothetical debt crisis rather than the real and present problem with the job market?
     
  3. EdwardBaiamonte
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    dear, the USSR tried that , our liberals spied for Stalin, and built 1000 bridges to nowhere. We stupidly gave BO a little cash to try yet again, here's the result:

    Washington Post Marc Theisson

    ● Raser Technologies. In 2010, the Obama administration gave Raser a $33 million taxpayer-funded grant to build a power plant in Beaver Creek, Utah. According to the Wall Street Journal, after burning through our tax dollars, the company filed for bankruptcy protection in 2012. The plant now has fewer than 10 employees, and Raser owes $1.5 million in back taxes.

    ● ECOtality. The Obama administration gave ECOtality $126.2 million in taxpayer money in 2009 for, among other things, the installation of 14,000 electric car chargers in five states. Obama even hosted the company’s president, Don Karner, in the first lady’s box during the 2010 State of the Union address as an example of a stimulus success story. According to ECOtality’s own SEC filings, the company has since incurred more than $45 million in losses and has told the federal government, “We may not achieve or sustain profitability on a quarterly or annual basis in the future.”

    Worse, according to CBS News the company is “under investigation for insider trading,” and Karner has been subpoenaed “for any and all documentation surrounding the public announcement of the first Department of Energy grant to the company.”

    ● Nevada Geothermal Power (NGP). The Obama administration gave NGP a $98.5 million taxpayer loan guarantee in 2010. The New York Times reported last October that the company is in “financial turmoil” and that “[a]fter a series of technical missteps that are draining Nevada Geothermal’s cash reserves, its own auditor concluded in a filing released last week that there was ‘significant doubt about the company’s ability to continue as a going concern.’ ”

    ● First Solar. The Obama administration provided First Solar with more than $3 billion in loan guarantees for power plants in Arizona and California. According to a Bloomberg Businessweek report last week, the company “fell to a record low in Nasdaq Stock Market trading May 4 after reporting $401 million in restructuring costs tied to firing 30 percent of its workforce.”

    ● Abound Solar, Inc. The Obama administration gave Abound Solar a $400 million loan guarantee to build photovoltaic panel factories. According to Forbes, in February the company halted production and laid off 180 employees.

    ● Beacon Power. The Obama administration gave Beacon — a green-energy storage company — a $43 million loan guarantee. According to CBS News, at the time of the loan, “Standard and Poor’s had confidentially given the project a dismal outlook of ‘CCC-plus.’ ” In the fall of 2011, Beacon received a delisting notice from Nasdaq and filed for bankruptcy.

    This is just the tip of the iceberg. A company called SunPower got a $1.2 billion loan guarantee from the Obama administration, and as of January, the company owed more than it was worth. Brightsource got a $1.6 billion loan guarantee and posted a string of net losses totaling $177 million. And, of course, let’s not forget Solyndra — the solar panel manufacturer that received $535 million in taxpayer-funded loan guarantees and went bankrupt, leaving taxpayers on the hook.

    Are you a communist or just not bright enough to know?
     
  4. Euro
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    The demand for unskilled workers will be lower each year in the western world. Education needs to be sponsored more. What kinda job can you get as a 18-19 year old with high school? Their are a lot of jobs out there for those with degrees that their is a demand for.

    The unemployment is low among those with degrees. Doctoral degrees and 2.5% unemployment is not much

    [​IMG]
     
  5. Vidi
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    Vidi CDZ prohibited

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    Links? Or are you just plagarizing freely now?
    :lol::lol::lol: <----this means Im just teasing you a bit.

    I suspect your info is good, but your insults are innane and miss their mark.
     
  6. BakshisMouse
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    While the government is often not a good judge of what can be productive, as seen from the examples above, they can do the simple stuff.

    Massive government expenditures on weapons in WWII lifted the economy out of the great depression, period.

    Infrastucture development, and I'm not talking about bridges to nowhere, can help the economy grow.

    The most simple solution of all is to grant state governments funds in order to relieve their budget shortfalls and hire more workers.
     
    Last edited: Jun 8, 2012
  7. BakshisMouse
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    Without a doubt, public universities need more funding. The federal government can provide that. Expanded Pell Grant and Stafford Loan programs would help more student get and education as well.

    However, this is not at all a strucural problem. Unemployment has dramatically increased among all sectors:

    [​IMG]
     
  8. BakshisMouse
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    While my OP and comments are unfocused, I notice that no one as answered the pertinent question of the title:

    Which is more of a burden for the current generation: a potential debt crisis or mass unemployment?
     
  9. EdwardBaiamonte
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    its an idiotic liberal question since both are very very negative
     
  10. Euro
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    I’ve seen Obama talking about a 350 billion $ infrastructure package, that will employ construction workers and engineers that have lost most jobs, but pubs dosen’t approve it. So when housing market is down and construction is down in the private sector there are a lot of unemployed labor that can be employed by the government. E.g. building roads, trains etc.
     

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