USA is not Greece = cutting deficits will only weaken a still-fragile recovery

[merrill]

Why the United States Is Not Greece


Even for those who understand that cutting deficits right now will only weaken a still-fragile recovery, and that weakening the recovery will only increase deficits, getting past the argument that “a eurozone crisis is on its way” is no easy task. Here is a self-defense lesson.

BY JOHN MILLER AND KATHERINE SCIACCHITANO

For almost two years, we’ve been hearing a new battle cry in the war against government spending: unless the United States slashes deficits we will become Greece, Europe’s poster child for fiscal insolvency and economic crisis.

The debt crisis in the eurozone, the 17 European countries that share the euro as their common currency, is held up as proof positive of the perils that await the United States if it continues its supposedly fiscally irresponsible ways.

Take the Heritage Foundation, the Washington-based think tank that specializes in providing red meat for anti-government pro-market arguments. Heritage introduces its 2011 chart on the rising level of government debt (to GDP) with this dire warning: “Countries like Greece and Portugal have suffered or are anticipating financial crises as a result of mounting debt. If the U.S. continues federal deficit spending on its current trajectory, it will face similar economic woes.”

Even for those who understand that cutting deficits right now will only weaken a still-fragile recovery, and that weakening the recovery will only increase deficits, getting past the argument that “a eurozone crisis is on its way” is no easy task.

What follows is a self-defense lesson on why the United States is not Greece—or Europe. The U.S. economy is far larger and more productive than Greece. The United States has many more tools in its macro-economic policy box than countries in the eurozone.

And while calls for austerity have kept the United States from undertaking government spending and investment large enough to support a robust economic recovery, at least thus far, the United States hasn’t undertaken the same self-defeating austerity measures Europe has. If we learn the right lessons from what is happening in the eurozone now, we never will.


Con't:
Why the United States Is Not Greece | Dollars & Sense

 

[kyzr]

I assume that you're not a math major.

Look thru these
Fileublicly Held Federal Debt 1790-2009.png - Wikipedia, the free encyclopedia

Notice that the Debt keeps climbing.. As that happens our rating gets like Greece and the rate we borrow at also keeps climbing.

So it is in our best interest to Balance the Budget and NOT BORROW as much. Its not that complicated, unless you're stuck on stupid.

 

[Avatar4321]

The 1920 Depression was deeper than the 1929 Depression. Yet the 1929 Depression became known as the Great Depression. Why?

Because in response to the 1920 Depression, the government cut spending and cut taxes. In response to the 1929, the government, under both parties, kept trying to manipulate the economy.

One action lead to one of the greatest economic expansions in human history. We call this period the Roaring Twenties.

The other prolonged a not as serious Depression for 12 years until World War 2. We call that the Great Depression.

It's not a coincidence that cutting government spending spending and cutting taxes grew the economy. See when people are working for themselves instead of working for the government, they tend to work harder, smarter, and more carefully.

When people end up working for the government more and then our government starts borrowing massive amounts of money, It weakens our economy.

 

[thereisnospoon]

Why the United States Is Not Greece


Even for those who understand that cutting deficits right now will only weaken a still-fragile recovery, and that weakening the recovery will only increase deficits, getting past the argument that “a eurozone crisis is on its way” is no easy task. Here is a self-defense lesson.

BY JOHN MILLER AND KATHERINE SCIACCHITANO

For almost two years, we’ve been hearing a new battle cry in the war against government spending: unless the United States slashes deficits we will become Greece, Europe’s poster child for fiscal insolvency and economic crisis.

The debt crisis in the eurozone, the 17 European countries that share the euro as their common currency, is held up as proof positive of the perils that await the United States if it continues its supposedly fiscally irresponsible ways.

Take the Heritage Foundation, the Washington-based think tank that specializes in providing red meat for anti-government pro-market arguments. Heritage introduces its 2011 chart on the rising level of government debt (to GDP) with this dire warning: “Countries like Greece and Portugal have suffered or are anticipating financial crises as a result of mounting debt. If the U.S. continues federal deficit spending on its current trajectory, it will face similar economic woes.”

Even for those who understand that cutting deficits right now will only weaken a still-fragile recovery, and that weakening the recovery will only increase deficits, getting past the argument that “a eurozone crisis is on its way” is no easy task.

What follows is a self-defense lesson on why the United States is not Greece—or Europe. The U.S. economy is far larger and more productive than Greece. The United States has many more tools in its macro-economic policy box than countries in the eurozone.

And while calls for austerity have kept the United States from undertaking government spending and investment large enough to support a robust economic recovery, at least thus far, the United States hasn’t undertaken the same self-defeating austerity measures Europe has. If we learn the right lessons from what is happening in the eurozone now, we never will.


Con't:
Why the United States Is Not Greece | Dollars & Sense

Yer kidding with this, right?

 

[g5000]

The 1920 Depression was deeper than the 1929 Depression. Yet the 1929 Depression became known as the Great Depression. Why?

Because in response to the 1920 Depression, the government cut spending and cut taxes. In response to the 1929, the government, under both parties, kept trying to manipulate the economy.

One action lead to one of the greatest economic expansions in human history. We call this period the Roaring Twenties.

Which was a gigantic stock bubble which lead to the Great Depression.

 

[g5000]

There are six ways any country can reduce its debt, and the United States differs from Greece in only one. Greece has only five options, for the moment.

1. Economic growth. Higher growth means higher revenues.

2. Negotiate a lower interest rate on the debt.

3. Bailout by another entity.

4. Default.

5. Internal devaluation, a.k.a. "austerity measures".

6. External devaluation, a.k.a. "printing money".

As a member of the Euro, Greece cannot fall back on number 6. It has been trying variations of the other 5 for the past two and a half years. If Greece feels trapped, they will leave the Euro and go to option number 6 with a vengeance. And then we are all fucked.

I believe it is inevitable the United States will use 1, 5, and 6 to lower its debt, just as it did following WWII.


The only reason investors are not punishing the U.S. with higher interest yields on our bonds is because we are seen as the least of all possible evils in the economic landscape at the moment.

I would not depend on that lasting forever.

 

[merrill]

The government needs to force new industries thus new jobs to grow the economy. This would be smart use of tax dollars as these jobs would create other jobs throughout communities and pump up the economy overall.

I like the idea of my tax dollars coming directly back to my community rather than going off to war or supporting jobs overseas which do little if anything to grow our local economies.

The more tax dollars pulled from the economy the more unemployment will surface. Which I believe is the repub plan.

 

[Euro]

Why the United States Is Not Greece


Even for those who understand that cutting deficits right now will only weaken a still-fragile recovery, and that weakening the recovery will only increase deficits, getting past the argument that “a eurozone crisis is on its way” is no easy task. Here is a self-defense lesson.

BY JOHN MILLER AND KATHERINE SCIACCHITANO

For almost two years, we’ve been hearing a new battle cry in the war against government spending: unless the United States slashes deficits we will become Greece, Europe’s poster child for fiscal insolvency and economic crisis.

The debt crisis in the eurozone, the 17 European countries that share the euro as their common currency, is held up as proof positive of the perils that await the United States if it continues its supposedly fiscally irresponsible ways.

Take the Heritage Foundation, the Washington-based think tank that specializes in providing red meat for anti-government pro-market arguments. Heritage introduces its 2011 chart on the rising level of government debt (to GDP) with this dire warning: “Countries like Greece and Portugal have suffered or are anticipating financial crises as a result of mounting debt. If the U.S. continues federal deficit spending on its current trajectory, it will face similar economic woes.”

Even for those who understand that cutting deficits right now will only weaken a still-fragile recovery, and that weakening the recovery will only increase deficits, getting past the argument that “a eurozone crisis is on its way” is no easy task.

What follows is a self-defense lesson on why the United States is not Greece—or Europe. The U.S. economy is far larger and more productive than Greece. The United States has many more tools in its macro-economic policy box than countries in the eurozone.

And while calls for austerity have kept the United States from undertaking government spending and investment large enough to support a robust economic recovery, at least thus far, the United States hasn’t undertaken the same self-defeating austerity measures Europe has. If we learn the right lessons from what is happening in the eurozone now, we never will.


Con't:
Why the United States Is Not Greece | Dollars & Sense

It is much easier for US to cut than for Greece. US has low taxes on the rich and a huge military budget. US can cut without the people suffering as in Greece.

They can just put some more taxes on the rich, and slash the military budget to the bone. Greece didn’t have that chanche, they had to cut schools,public services,raise taxes on all.
No one will be affected if US slashes the military budget to the bone and increases the income tax on the 1%.

 

[editec]

Reducing the amount of money going into the lower classes (which is what "austerity really means) is NOT the solution to this economy.

That's rather like saying that when one is out of gas the solution is to buy a more effiient carborator.

While a more efficient carborator is a damned good idea in the longer run, the vehicle needs gas right now!

 

[Oldstyle]

The government needs to force new industries thus new jobs to grow the economy. This would be smart use of tax dollars as these jobs would create other jobs throughout communities and pump up the economy overall.

I like the idea of my tax dollars coming directly back to my community rather than going off to war or supporting jobs overseas which do little if anything to grow our local economies.

The more tax dollars pulled from the economy the more unemployment will surface. Which I believe is the repub plan.

Wow, now THAT'S a statement, Merrill! You actually think that taking tax dollars out of the economy hurts the economy? No wonder progressives struggle with economics.

Look, if you want to grow the economy you don't do it with higher taxes. Even Christina Romer grasped that simple concept. The economy grows when the private sector sees opportunities to make a profit and invests capital.

Your rather bizarre notion that the US operates in some economic universe where the same economic rules that effect Greece won't effect us is naive at best. Yes, we're a much bigger economy than Greece. Yes, we can unilaterally choose to print our currency while they cannot. That being said at some point our debt WILL make us insolvent and continued printing of dollars WILL cause inflation. My question to you is this...Greece goes to Germany to get bailed out of it's fiscal mess...who is it that is going to bail "us" out if we continue to escalate our debt at this rate?

 

[TakeAStepBack]

Good article. If you think that Keynesian economic policies, the ones that got us here in the first place, will actually be able to fix the mess that they create.

Austerity doesn't mean less money going into the "lower classes" (class warfare much?). It means cutting of public services and "benefits". The money supply expansion is another issue entirely.

 

[TakeAStepBack]

The government needs to force new industries thus new jobs to grow the economy. This would be smart use of tax dollars as these jobs would create other jobs throughout communities and pump up the economy overall.

I like the idea of my tax dollars coming directly back to my community rather than going off to war or supporting jobs overseas which do little if anything to grow our local economies.

The more tax dollars pulled from the economy the more unemployment will surface. Which I believe is the repub plan.

Wow, now THAT'S a statement, Merrill! You actually think that taking tax dollars out of the economy hurts the economy? No wonder progressives struggle with economics.

Look, if you want to grow the economy you don't do it with higher taxes. Even Christina Romer grasped that simple concept. The economy grows when the private sector sees opportunities to make a profit and invests capital.

Your rather bizarre notion that the US operates in some economic universe where the same economic rules that effect Greece won't effect us is naive at best. Yes, we're a much bigger economy than Greece. Yes, we can unilaterally choose to print our currency while they cannot. That being said at some point our debt WILL make us insolvent and continued printing of dollars WILL cause inflation. My question to you is this...Greece goes to Germany to get bailed out of it's fiscal mess...who is it that is going to bail "us" out if we continue to escalate our debt at this rate?

No one. Once confidence is lost (in particular our asian donors) and we can no longer sell our debt as bonds, we'll have only two choices left on what to do.

 

[merrill]

The USA is not broke....

How do we know this?

1. Golden Parachutes are plentiful

2. CEO pay packages are quite plentiful

3. Special interest funding of elections is at an all time high

4. Health Care industry has many billionaires

5. Corp jets are still flying

6.There are some very smart and very rich people, and the central banks of Japan, China, and many other countries that hold a large share of their assets in U.S. government bonds.

 

[merrill]

"Merrill! You actually think that taking tax dollars out of the economy hurts the economy?"

Absolutely. Anytime large amounts of revenue is pulled from the economy it impacts availability thus spending and investing by the middle class.

From a variety of sources comes USA industry and the USA is not broke not by a long shot.

 

[skookerasbil]

OK.....Ive seen alot of real stupid threads on this forum over the years...........this one is right up there with the most naive and stupid of them all.

Holy Mother of God..........where do people come up with this shit??


Thankfully for the rest of us...........only about 179 people would agree with this nutty-ass.

 

[FireFly]

There are six ways any country can reduce its debt, and the United States differs from Greece in only one. Greece has only five options, for the moment.

1. Economic growth. Higher growth means higher revenues.

2. Negotiate a lower interest rate on the debt.

3. Bailout by another entity.

4. Default.

5. Internal devaluation, a.k.a. "austerity measures".

6. External devaluation, a.k.a. "printing money".

As a member of the Euro, Greece cannot fall back on number 6. It has been trying variations of the other 5 for the past two and a half years. If Greece feels trapped, they will leave the Euro and go to option number 6 with a vengeance. And then we are all fucked.

I believe it is inevitable the United States will use 1, 5, and 6 to lower its debt, just as it did following WWII.


The only reason investors are not punishing the U.S. with higher interest yields on our bonds is because we are seen as the least of all possible evils in the economic landscape at the moment.

I would not depend on that lasting forever.

On point #2 - the USA does not have to negotiate a lower interest rate on the debt. The Fed will accommodate the treasury.

The rules are different for US because we have the "World Reserve Currency" & "Petro Dollar" We may lose both of these positions over the next 6 years. The US Treasury & Federal Reserve will use all means nessesary including lying to manipulate the US Dollar.

Our most likely path will be the Federal Reserve buying up our debts & writing them down, raising taxes, cutting spending & printing money.

 

[merrill]

Central Banks and Deficit Spending

When economic activity plummeted during 2008 and 2009 in the United States, Europe, and throughout the world, coordinated stimulus spending of nations across the globe prevented the collapse of world output from becoming another Great Depression. Today, deficit spending remains critical as working people continue to struggle through an economic recovery that has done little to create jobs or to lift wages, but much to restore profits.

Governments finance deficit spending by borrowing. Governments sell bonds—promissory notes—to domestic and foreign investors as well as other government agencies, and then use the proceeds to pay for spending in excess of their tax revenues.

In the United States, domestic investors, foreign investors, and government agencies hold near equal shares of government bonds issued by the Treasury and receive the interest paid on those bonds.

The Federal Reserve (“the Fed”), the U.S. central bank, can buy U.S. government bonds as well. The Fed can also create money (sometimes metaphorically called “printing money”) simply by entering an appropriate credit on its balance sheet and spending it.

When the Fed uses this newly created money to purchase bonds directly from the government, it is financing the government deficit. Economists call the Fed’s direct purchase of government bonds “monetizing the deficit.”

By such direct purchases of bonds that finance the deficit, the Fed can fund government spending in an emergency, should it choose to do so. Monetizing the deficit also significantly expands the money supply, which pushes down interest rates, which can also help stimulate the economy.

In the current crisis, the Fed did precisely that. By purchasing government bonds, the Fed financed public-sector spending, and by pushing down interest rates, it encouraged private-sector borrowing. In doing so, the Fed supported a market recovery, but also helped to keep unemployment from rising even higher than it did.

In seeking to lower unemployment, the Fed was exercising what is known as its “dual mandate” under the law to promote both low inflation and low unemployment.

Nevertheless, the Fed’s decision to inject more money into the economy has come under heavy fire from those who worry more about inflation than unemployment, and who think that “printing money” is always inflationary. Neither continued low inflation rates nor persistently high unemployment were enough to change the thinking of these inflation-phobes. Back in August, Rick Perry, the Texas governor and candidate for president in the Republican primary, went so far as to insist that if the Fed “prints more money between now and the election” (in November 2012) it would be “almost treasonous.”

The central banks of most other countries have much the same abilities as the Fed has to inject money into their economies and to buy government debt. As with the Fed, they may or may not choose to use this power. But the power is unquestionably there.

Dollars and Sense

 

[merrill]

The 1920 Depression was deeper than the 1929 Depression. Yet the 1929 Depression became known as the Great Depression. Why?

Because in response to the 1920 Depression, the government cut spending and cut taxes. In response to the 1929, the government, under both parties, kept trying to manipulate the economy.

One action lead to one of the greatest economic expansions in human history. We call this period the Roaring Twenties.

Which was a gigantic stock bubble which lead to the Great Depression.

Every sale of stock on the stock market includes the disclaimer: “the return on this investment is not guaranteed and may be negative” for good reason. During the 20th century, there were several periods lasting more than ten years when the return on stocks was negative. After the Dow Jones stock index went down by over 75% between 1929 and 1933, the Dow did not return to its 1929 level until 1953.

 

[TakeAStepBack]

Nevertheless, the Fed’s decision to inject more money into the economy has come under heavy fire from those who worry more about inflation than unemployment, and who think that “printing money” is always inflationary.

It is always inflationary. Inflating the currency reduces its purchasing power. This is what took the dollar from 1.00, to .04 in value.

Inflation today is always sold to the plebs as "higher prices", which is essentially true, but it isn't the true nature of inflation. It is the purchasing power that has decreased that leads to "higher prices".

It is the Keynesian philosophy that is deflation-phobe. Which will inevitably happen one way or the other.

 

[merrill]

"Today, deficit spending remains critical as working people continue to struggle through an economic recovery that has done little to create jobs or to lift wages, but much to restore profits.

Governments finance deficit spending by borrowing. Governments sell bonds—promissory notes—to domestic and foreign investors as well as other government agencies, and then use the proceeds to pay for spending in excess of their tax revenues.

In the United States, domestic investors, foreign investors, and government agencies hold near equal shares of government bonds issued by the Treasury and receive the interest paid on those bonds."

There are some very smart and very rich people, and the central banks of Japan, China, and many other countries that hold a large share of their assets in U.S. government bonds. Something to ponder.