Deficit problem is over exaggerated - absolutely!

merrill

Gold Member
Dec 27, 2011
2,443
1,015
198
January 2013

The Deficit Is Not as Serious as They Want You to Think

The bipartisan consensus in Washington does not face important facts: There is no serious immediate deficit problem. Actually, the US deficit is shrinking at the fastest pace since World War II, shrinking from 10.1 percent to 7 percent of the gross domestic product (GDP) during Obama's first term.

Economists are pleading with incoming Treasury Secretary Jacob Lew to acknowledge this.

The truth is that the deficit problem, which is being used to justify cuts to Social Security, Medicare, Medicaid and other social programs, is well within control.

Even if it wasn't in control, cuts are unnecessary. One of the few advantages of being an empire economy and holding the world's dominant currency is that we could maintain a high debt-to-GDP ratio. Great Britain, when it was an empire, for more than a century had a debt to GDP ratio of more than 100 percent, sometimes over 200 percent. The US is not Greece.

The American Empire does not have to starve people at home in order to enrich transnational corporations and oligarchs around the world. When our economy contracts, the government can create money to fill the gaps and when the economy grows, it can reduce the stimulus spending.

In fact, the government could mint its own money and cut out the costs of the middlemen - the Federal Reserve and banks. Of course, an even better path for the American Empire would be to bring the troops home and invest in our domestic economy. This would create a more stable economy and strengthen our position as the world's reserve currency.

Military Spending Can Be Cut - absolutely!

Will Exaggerated Deficit Talks Lead to an "Obama Recession?" We Must Still Ask These Questions
 
OP-ED COLUMNIST
Nobody Understands Debt
By PAUL KRUGMAN
Published: January 1, 2012

This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans. But it also revealed something else: when people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about — and the people who talk the most understand the least.

Perhaps most obviously, the economic “experts” on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!

And while they’ve been waiting, those rates have dropped to historical lows. You might think that this would make politicians question their choice of experts — that is, you might think that if you didn’t know anything about our postmodern, fact-free politics.

But Washington isn’t just confused about the short run; it’s also confused about the long run. For while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem’s size.

Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

This is, however, a really bad analogy in at least two ways.

First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.

Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.

This was clearly true of the debt incurred to win World War II. Taxpayers were on the hook for a debt that was significantly bigger, as a percentage of G.D.P., than debt today; but that debt was also owned by taxpayers, such as all the people who bought savings bonds. So the debt didn’t make postwar America poorer. In particular, the debt didn’t prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation’s history.

But isn’t this time different? Not as much as you think.

Con't
http://www.nytimes.com/2012/01/02/opinion/krugman-nobody-understands-debt.html?_r=0
 
Granny says, "Dat's right - Obama slashin' the deficit...
:cool:
Tax timing, Fannie and Freddie help cut federal deficit in half
Monday, May 27, 2013 - CBO forecast shows improved 5-year trend
Washington didn’t take much time to celebrate the dramatic reduction in federal deficits announced by congressional budget analysts a week ago, but Wall Street saw it as reason to cheer and send stocks to record highs. For many investors, the more than halving of the deficit from a high of $1.55 trillion during the depths of the recession is the latest sign that the economy finally has turned the corner and is on a solidly upward path.

Nearly all of the improvement in the government’s finances is a result of the economy, most notably a surge in revenue on corporate bonuses, stock dividends and capital gains payments at the end of last year that was timed to beat the Jan. 1 start date for higher tax rates on wealthier citizens. That helped fill the Treasury’s coffers with a surge of nearly $100 billion in revenue to a monthly record of $407 billion when the tax bills came due in April. At the same time, the government got a big boost from $95 billion in dividend payments from Fannie Mae and Freddie Mac, the two bailed-out mortgage giants that turned profitable at the end of last year amid a rebounding housing market.

The combination of windfalls enabled the Congressional Budget Office to slash its deficit forecast by a record $203 billion for this fiscal year to $642 billion — the deficit’s level before the crisis broke out in 2008. The CBO’s projections show further significant improvement in the next five years as the deficit falls to $378 billion, or 2.1 percent of economic output by 2015 — a fraction of the worrying 11 percent peak hit in 2009 — before turning up again.

While some argue that the April surge in revenue was only a one-time affair, and the long-term deficit problem generated by fast-growing entitlements is far from solved, there are some promising long-term trends. For one, higher tax rates put into place this year ensure that revenue will continue to pile in at higher rates and hit 19.3 percent of economic output by 2015, up substantially from the recession-induced low of 15 percent in 2009. Moreover, while a portion of the spring dividends from Fannie and Freddie were results of one-time tax factors, the mortgage giants must continue to turn over the billions of dollars they make in profits to the Treasury unless and until they are reformed or eliminated.

Read more: Tax timing, Fannie and Freddie help cut federal deficit in half - Washington Times
 
with the Government engaging in "deficit spending" IF THEY WERE SPENDING THEIR OWN MONEY.............problem is, the Government does not generate profit realized income. They take what funds they want to spend on their various adventures from the people, and then spend like a drunken Sailor.

IF deficit spending is SUCH A GOOD THING, then why does the Government punish Citizens who engage in such activities?
 
As is universally true, debt can be a good thing or a bad thing. It depends on what alternatives exist.

The debt from financing the holy wars is to me, a bad thing. They were ungodly expensive with little payback.

The debt from Bush's 2001 and 2003 tax cuts was a bad thing. All they did was redistribute wealth up. In the direction that made much worse our near record setting wealth inequality. No national benefit at all.

The debt from bailing out Wall St and Detroit auto was probably a good thing. Much of it has been repaid and avoiding the addition of the impact of not spending it, to all of our other woes, like unemployment, was probably a net gain.

The debt from keeping workers, unemployed by the great American layoff binge, whole, was almost certainly a good thing as maintaining the demand that those people created when working was probably the main reason why our Great Recession, and its impact of lowering revenues, was much shorter than our global competitors.

I'm sure that it would be possible for someone to estimate the good debt and bad debt included in the present total. Not that there is any relief from having to ultimately pay it off. But, for the part where borrowing was cheaper than not borrowing, we can feel good about our choice.
 
with the Government engaging in "deficit spending" IF THEY WERE SPENDING THEIR OWN MONEY.............problem is, the Government does not generate profit realized income. They take what funds they want to spend on their various adventures from the people, and then spend like a drunken Sailor.

IF deficit spending is SUCH A GOOD THING, then why does the Government punish Citizens who engage in such activities?

The government rewarded me for my mortgages by letting me deduct interest. And I got to live in nice houses before I otherwise could have. I don't know any family, company or country who hasn't used borrowing as part of their financial strategy.
 
Borrowed against their own labor and/or means of production. A little different when your not putting yourself on the line for repayment.
 
The call for a balanced budget is unneccessary, and is really just a call to gut entitlement programs.
 
It has been pointed out that, from a monetary balance sheet bookkeeping "perspective", the government debt means savings in the two other sectors. If the government runs a surplus, the other sectors run a debt. It's a consequense of how the monetary system works.

Domestic private sector + Domestic government sector + Foreign Sector = 0

A3A4EWzCMAE95xj.jpg


So when the gov't reduces the debt (not there yet) it subtracts money from the other sectors.

I'm not saying I like it. *I don't like gravity. *I don't like a lot of things. *But the Wright brother's would never have invented the airplane, complaining about gravity.

If you ask me, the obvious thing is decades of a lack of Domestic Private Sector savings. *That is where the focus should be. *People save then businesses borrow from that to increase output. Then we get a nice return on passbook savings, like the 5.25% that it once paid, not this .1%

Sonthe question that you gotta ask is how come the aggregate domestic private sector doesn't save and get 5.25%?
 
Here are a few numbers to watch tick away
U.S. National Debt Clock : Real Time

Debt is acceptable, provided you can pay it back, and we all know this will never happen. Now to compare the US percentage of debt to GDP with everyone else is simply ridiculous and borders on the absurd. Keep kicking the can down the road and watch the US crumble from within. Just wait for interest rates to rise when QE 4 ends then lets talk.
 
Here are a few numbers to watch tick away
U.S. National Debt Clock : Real Time

Debt is acceptable, provided you can pay it back, and we all know this will never happen. Now to compare the US percentage of debt to GDP with everyone else is simply ridiculous and borders on the absurd. Keep kicking the can down the road and watch the US crumble from within. Just wait for interest rates to rise when QE 4 ends then lets talk.

What, if any, is the actual effect of the deb on the flow of goods and services in the economy? By itself, it is simply numbers. We never run out of numbers. So what is the real effect? Unless there is a real and identifiable effect, it means nothing. If there is a real and identifiable effect, then the issue is the effect. So what is the effect?
 
OP-ED COLUMNIST
Nobody Understands Debt
By PAUL KRUGMAN
Published: January 1, 2012*
*
This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans. But it also revealed something else: when people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about — and the people who talk the most understand the least.

Perhaps most obviously, the economic “experts” on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring. Any day now!

And while they’ve been waiting, those rates have dropped to historical lows. You might think that this would make politicians question their choice of experts — that is, you might think that if you didn’t know anything about our postmodern, fact-free politics.

But Washington isn’t just confused about the short run; it’s also confused about the long run. For while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem’s size.

Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

This is, however, a really bad analogy in at least two ways.

First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.

Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.

This was clearly true of the debt incurred to win World War II. Taxpayers were on the hook for a debt that was significantly bigger, as a percentage of G.D.P., than debt today; but that debt was also owned by taxpayers, such as all the people who bought savings bonds. So the debt didn’t make postwar America poorer. In particular, the debt didn’t prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation’s history.

But isn’t this time different? Not as much as you think.

Con't
http://www.nytimes.com/2012/01/02/opinion/krugman-nobody-understands-debt.html?_r=0

Well, a big percentage is owed to Foreign investors. *We buy foreign goods in excess of exports. They park the money at the Fed, because they see no point is putting it under their matress. *Then later they, presumably, will buy stuff from us. *Pig farms?*


http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
 
Last edited:
We would have a better chance of paying back that debt if obama didn't have a war on domestic productivity.
 
Here is the average productivity per working person.

fredgraph.png


That is $GDP per person and the average is near $112k. So the median income should be $112k.

The median is about $50k. "Since 1980, U.S. gross domestic product (GDP) per capita has increased 67%, while median household income has only increased by 15%."

What makes anyone think that the median income should be any different than the average output?

The average person does the average amount of work and produces the average amount of goods and services using the average amount of resourses. *There is nothing sensical about the median and mode *being different than the average.

Like it or not, the economy is a social system. *It isn't an individual enterprise. *It consists of a lot of individual enterprises, in the form of single proprietorships with one employee, the owner. *But the larger economy isn't an individual enterprise. *It hasn't been since division of labor was invented.

Let's just make it all single employee, owner/employee propietorships. *Then we have a true Libertarian/Democratic economy.

If you can't personally supply the demand, then you have a lock on only the demand you can supply, as long as you get your assets out there and supply it. *And if you can't personally maintain the property, by the fruits of your own labor, you don't own the property.

I like farming. *Family farms are great. *A man does his own work, and enjoys the benefits of having done it. *If he works harder than average, he lives better than average. *If he works less than average, he enjoys less than average. *And if he doesn't do the work, till the soil, plant the seed, water the crops, and harvest the bounty, he doesn't have claim to the land.

This whole division of labor thing and the use of the socio-economic tool of "money" has people confused. *They actually think "money" is the property. *

I see why the Bible says "For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows." *(1 Timothy 6:10) *People confuse it for actual goods and work.

Money has been confusing people for way more than 2000 years. *It doesn't seem to be appropriately representing what it should be representing, a person's actual work ethic.

**Case in point, Bernie Sanders. *We can't trust others to properly assign value. We can't make laws that properly assign value. *Can't trust the government, can't trust business, can't trust individuals. *A monetary system is grounded in trust. *Can't trust people, can't trust money. It says, right there on the US bills, "In GOD we trust". It doesn't say, "In people we trust." *And as GOD doesn't assign value to money, it seems a bit ill defined.

Insanity is repeating the same behavior expecting different results. *If written history serves me correctly, then the insanity has gone on long enough. *If written history doesn't, case in point.

That, or we just give everyone a printing press. *You decide. You can print it or plant seeds. *Inflation will cap when everyone is so hungry, from spending all their time printing money, that they finally get real and do real work.

It just seems pretty ridiculous to me. We can't get 12 people in this forum to agree what money really is. And seeing as it is only what we agree it is, it isn't much of anything.
 
Last edited:
That is $GDP per person and the average is near $112k. So the median income should be $112k.

The median is about $50k. "Since 1980, U.S. gross domestic product (GDP) per capita has increased 67%, while median household income has only increased by 15%."

What makes anyone think that the median income should be any different than the average output?

Your income figure is an average (mean) which is different from the median. In these kind of statistics, the mean will always be greater than the median because the upper income tail is longer than the lower income tail (there is a zero lower bound). The telling figure is that the mean grew 67% while the median only grew 15%, which means that the measure of inequality is increasing.

Like it or not, the economy is a social system.

I agree that economic institutions such as markets are social constructs just like election systems, legal institutions, and the tax code. When they don't work as well as society expects, society will want to change them. Any claim that any social institution has a right to exist absent the benefit it gives society is just hogwash. Society changes and institutions must change also.

This whole division of labor thing and the use of the socio-economic tool of "money" has people confused. *They actually think "money" is the property.....People confuse it for actual goods and work.

Money is defined functionally as (1) a unit of accounting, (2) a store of value, and (3) a medium of exchange. The second is largely obsolete today (except for folks who hoard gold coins!). The other two depend on the concept of a "numeraire", a commodity or instrument that is used to simplify the rate of exchange among many goods. We want to express the price of a gallon of gasoline in dollars rather than in loaves of bread, gallons of milk, and yachts; we can always work back to the exchange rate from the dollar prices of each of these items.

So I don't think "money" is the problem. The problem is thinking about money beyond its functional uses. Money is easy, it's determining prices that gets complicated!
 

Forum List

Back
Top