Why try to balance the budget?

[EconomicNudity]

Now you have me confused; not that it's all that hard to do. The OP was a discussion of what target budget deficit would be appropriate and in support of that an attack on the common analogy of governmental budgets to business and household budgets. I belong to the school that advocates a budget target meant to generate the highest level of growth (lowest rate of unemployment) consistent with a modest rate of non-accelerating inflation. We haven't gotten to why I pick this standard because I was hoping someone would propose another standard better than the zero deficit solution.

I think the fallacy here is the amount of credit you are giving to the government as a driver of the economy. Your assumption is that the deficit has a direct impact on and can further "economic growth, efficiency, technological advancement, sustainable standard of living, reduced maldistribution, moderate inflation, adequate national defense, effective trade and foreign policy, and so on."

If that is the case, then why not have the trillion dollar deficits? What is the correlation you are seeing between the deficit and the other "drivers" you mention? Perhaps you are suggesting this could be a surplus as well? There are examples that your "drivers" can thrive in either economy.

 

[EconomicNudity]

The OP was a discussion of what target budget deficit would be appropriate and in support of that an attack on the common analogy of governmental budgets to business and household budgets

Although the end goals may be different, the fundamentals of finance on a corporate, household, or government leavel are still similar. You said:

"I am suggesting that the entire exercise of computing a national "net worth" is a fool's errand."

I can agree. But at the same time, liabilities remain in all 3 instances that have consequences. Just because the goals and objectives are different doesn't mean the fundamentals of finance change.

None of this is to say that -0- is the magic number... But why not -0-? Isn't -0- + 2% of outlays just as arbitrary? The idea of a balanced budget is more responsibility based than anything... How can you let spending run amuck when Medicare taxes are enacted that don't even go to the Medicare fund?

 

[EconomicNudity]

Statistical "validity" refers to the degree to which a statistical formula measures what we want to measure. For example, the question of how well the CPI is for a proxy of inflation is a question of statistical validity. The common argument against the CPI is that sampling makes it less valid; the answer to that is other measures such as the Billion Price Project yield almost identical results.

What we are trying to measure is the "burden of servicing the national debt". The first approximation is to adjust interest on the debt for inflation. We then either express this as a per capita amount (which adjusts for population growth but not economic growth) or as a percentage of GDP. People who view the deficit with horror tend to use per capita figures and those who do not tend to use percentage of GDP. Which is more meaningful, to say that inflation-adjusted interest on the debt is $XXX per household or that it is $0.YY of every dollar of income?

I understand what statistical validity is. My point is that using the percentage of debt to GDP is an invalid measure. Try to pay something with GDP... The debt can only be repaid from revenue which is much more volatile. Especially when GDP remains relatively constant and you have multiple year trillion dollar deficits...

 

[EdwardBaiamonte]

What kind of budget target would be most helpful in promoting the economic goals you would like to see?

A Balancd Budget Amendment would be perfect to end the financial turmoil the country is always in.

 

[OnePercenter]

liberals like debt because it makes it easier to pay for crippling welfare entitlements

conservatives don't like debt because it is irresponsible and because it makes it easier for liberals to pay for crippling welfrare entitlements.

Really? Then perhaps you can answer this:

Think about that. The largest, wealthiest, most powerful organizations in the world are on the public dole. Where is the outrage?

Where Is The Outrage Over Corporate Welfare - Forbes

Seems you have misplaced rant.......

 

[EdwardBaiamonte]

Where Is The Outrage Over Corporate Welfare - Forbes

Seems you have misplaced rant.......

dear, you are always an idiot liberal. Name the best example of corporate welfare you can think of or admit you lack the IQ to be here?

 

[TakeAStepBack]

Frankly I consider the budget deficit and national debt as largely unhelpful numbers that should only marginally drive policy. The real drivers should be economic growth, efficiency, technological advancement, sustainable standard of living, reduced maldistribution, moderate inflation, adequate national defense, effective trade and foreign policy, and so on.

So the point is that the federal deficit is a proxy for the direction of fiscal policy, one of the tools available to further the goals I mentioned above, or any other set of economic goals posited.

So I'll ask again, why bother to target them at all? Mostly what you've said in the post I took this quote rom was just posturing to get to this point. If deficit is just a proxy for fiscal policy, why even bother with it at all?

I expect everyone interested in this forum has some economic goals in mind that the budget deficit has something to do with. What kind of budget target would be most helpful in promoting the economic goals you would like to see?

My economic goals have nothing to do with the federal government other than their legal tender laws. I'd like to see people with a whole lot more economic freedom to support efficiency in markets, technological advancement and sustainable standard of living. Right now you're kind of getting what you want, no? i mean, debt doesn't matter, deficits do not matter really (though it's nice to see it decreasing short term right now). We track the numbers, but ultimately it doesn't really shape policy in any significant manner.

The interesting observation in this is that with all of the efforts of the government to enhance all those goals you're interested in, they've done an abject failure of a job. I mean, absolute failure.

Perhaps you have just spent too much time pondering economic central planning.

 

[EdwardBaiamonte]

debt doesn't matter, deficits do not matter really

why would you say that?

Do you want to pay my share of the taxes I must pay to cover the debt?

Do you like that China and Japan can buy our debt with their WalMart dollars rather than buy our product?

Do you like that debt make it very easy for govt to expand crippling welfare programs without coming to us for more tax money?

 

[TakeAStepBack]

Oldfart said that, I re-iterated it. Do try to keep up. And i was making a point.

 

[EdwardBaiamonte]

Oldfart said that, I re-iterated it. Do try to keep up. And i was making a point.

what was the point you were making??

 

[TakeAStepBack]

Oldfart said that, I re-iterated it. Do try to keep up. And i was making a point.

what was the point you were making??

That he's been day dreaming about central planning for too long essentially. I was trying to be more nuanced about it, but I see you're not the gentle understanding type intellectually.

 

[EdwardBaiamonte]

Oldfart said that, I re-iterated it. Do try to keep up. And i was making a point.

what was the point you were making??

That he's been day dreaming about central planning for too long essentially. I was trying to be more nuanced about it, but I see you're not the gentle understanding type intellectually.

yes , he's a typical lib but is very slow and sneaky about how he tries to make his points. He is so subtle as to be 100% worthless.

 

[oldfart]

Have you seen what Japan is going through by any chance?

Yes. If you want to discuss Japan, I recommend a separate thread.

My point is that we're traveling a very, very similar path in our race to the bottom. There are definitely considerable differences, but as far as monetary policy is concerned, and how the government is using it's debt...not so much.

The thread on Ken Rogoff goes into his current views on Japan, which you might be interested in.

 

[EdwardBaiamonte]

Have you seen what Japan is going through by any chance?

doesn't seems they are going through that much really. All the new inventions of the last 20 years are very widely used throughout Japan which is the surest sign of continuing economic growth.

 

[TakeAStepBack]

Have you seen what Japan is going through by any chance?

doesn't seems they are going through that much really. All the new inventions of the last 20 years are very widely used throughout Japan which is the surest sign of continuing economic growth.

Really? That's what you see?

 

[EdwardBaiamonte]

Have you seen what Japan is going through by any chance?

doesn't seems they are going through that much really. All the new inventions of the last 20 years are very widely used throughout Japan which is the surest sign of continuing economic growth.

Really? That's what you see?

yes I've actually been there and tried to convince them that things were bad. They didn't buy it.

 

[TakeAStepBack]

OK, cool. There debt and sustainability problems are clearly just nocturnal.

 

[oldfart]

Basically I am arguing for deconstructing national income accounts to identify public investment and factoring that into discussions of the national debt and deficit.

Factoring it in in what sense? The only way this works is to put these public investments onto a ledger as collateral to debt and deficit. Meaning that these "investments" can be sold. And I circle right back to where I ended my post last time.

My point is that not all spending is created equal. The simplistic Keynesian straw man argument for employing people to dig holes in the ground on even number days and to fill them up on odd numbered days does indeed create more demand and thus stimulates the economy; but it does absolutely nothing for the supply side (public investment) of the argument. I think this is what most people think of when they use the phrase "waste".

Now there is nothing that says (except for Ed) that government spending is necessarily more wasteful (or efficient) than private spending. It makes a difference in the long run what kind of spending stimulus measures take. By "factored in" I mean that we are better off if we have stimulus projects that add to future productive capacity as opposed to "wasteful" projects.

IMHO anyone who thinks our public infrastructure of roads, bridges, public buildings, and so forth is perfectly OK is an idiot. I would rather have stimulus money go to repairing bridges and schools and veteran's hospitals than to for it to go to tax incentives for shipping jobs to Thailand.

 

[oldfart]

Now you have me confused; not that it's all that hard to do. The OP was a discussion of what target budget deficit would be appropriate and in support of that an attack on the common analogy of governmental budgets to business and household budgets. I belong to the school that advocates a budget target meant to generate the highest level of growth (lowest rate of unemployment) consistent with a modest rate of non-accelerating inflation. We haven't gotten to why I pick this standard because I was hoping someone would propose another standard better than the zero deficit solution.

I think the fallacy here is the amount of credit you are giving to the government as a driver of the economy. Your assumption is that the deficit has a direct impact on and can further "economic growth, efficiency, technological advancement, sustainable standard of living, reduced maldistribution, moderate inflation, adequate national defense, effective trade and foreign policy, and so on."

I believe that both the size and the composition of public spending, and of tax policy, have an effect on all of the goals I mentioned. So do a large number of factors outside the control of the federal government, like demographics and private investment. Obviously some independent variables have more influence on the goals than others, and all of them interact. That's what econometrics is for. I'm not giving government credit for more than it can do, I simply am stating that government should accountable for the use of the tools it has available in achieving the goals it is set.

If that is the case, then why not have the trillion dollar deficits? What is the correlation you are seeing between the deficit and the other "drivers" you mention? Perhaps you are suggesting this could be a surplus as well? There are examples that your "drivers" can thrive in either economy.

Someday we will have trillion dollar deficits. We may even have trillion dollar surpluses. Without specifying when, these absolute numbers are as meaningless as the size of the surplus in 1832.

The inter-relations of the "drivers" is the subject of econometrics and statistical analysis, specifically heterostochasticity. For example there is a well know mathematical proof that a necessary (but not sufficient) condition for the existence of a solution set to a linear programming problem is that the input-output matrix have an equal number of independent policy tools as there are output goals in the objective function. For more look up Wassily Leontieff.

I'm not being snide here. This is what mathematical economics is. It has about the same level of complexity as genetic engineering. I am totally lost in discussing evolutionary biology because I have no background in genetics. I do have an education in mathematical economics. Back in the day, the federal government paid good money to have me work on the model of the Soviet economy for which I am immensely grateful both for the cash support and for the lifetime supply of samizdat humor I acquired. You would be amazed at how they made a bus under Gosplan, and why they "recycled" precision ball bearings for the military aviation industry.

 

[EconomicNudity]

I'm not being snide here. This is what mathematical economics is. It has about the same level of complexity as genetic engineering. I am totally lost in discussing evolutionary biology because I have no background in genetics. I do have an education in mathematical economics. Back in the day, the federal government paid good money to have me work on the model of the Soviet economy for which I am immensely grateful both for the cash support and for the lifetime supply of samizdat humor I acquired. You would be amazed at how they made a bus under Gosplan, and why they "recycled" precision ball bearings for the military aviation industry.

I could be wrong, be it seems to me all you are being is snide. I have statistics education. I use R daily. My graduate research paper in quantitative methods was on gender discrimination in Russia. I know about GOSPLAN and perestroika. That information along with everything you said above has absolutely nothing to do with this thread unless you intention is to be "derogatory or mocking in an indirect way."

Next time start a thread called "Look at me and let me tell you how smart I think I am."