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

Discussion in 'Politics' started by merrill, Jan 20, 2012.

  1. merrill
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    merrill VIP Member

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    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.


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    Why the United States Is Not Greece | Dollars & Sense
     
  2. kyzr
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    kyzr Gold Member

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    I assume that you're not a math major.

    Look thru these
    File:publicly 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.
     
    Last edited: Jan 20, 2012
  3. Avatar4321
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    Avatar4321 Diamond Member Gold Supporting Member

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    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.
     
  4. thereisnospoon
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    thereisnospoon Gold Member

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    Yer kidding with this, right?
     
  5. g5000
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    g5000 Diamond Member

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    Which was a gigantic stock bubble which lead to the Great Depression.
     
  6. g5000
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    g5000 Diamond Member

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    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.
     
    Last edited: Jan 20, 2012
  7. merrill
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    merrill VIP Member

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    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.
     
  8. Euro
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    Euro Senior Member

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    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%.
     
  9. editec
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    editec Mr. Forgot-it-All

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    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!
     
  10. Oldstyle
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    Oldstyle Gold Member

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    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?
     
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