Explaining Why Federal Deficits Are Needed[W:5330]

[Absentglare]

That makes no sense whatsoever... It's a psuedo-Keynesian theory that holds no water in the real world. The gov't should never stick it's nose into the private sector's ability to be profitable. Our private sector needs to stand on it's own and control it's own destiny. Handing over that responsibility to the gov't means that we depend on the gov't to be competitive instead of depending on our own innovation and smart business choices. Take away the safety net and businesses make better decisions, take fewer risks that have catastrophic results if they fail and work towards a better business model. Having that safety net means that businesses can make stupid decisions and the gov't will keep them from having to face the results of those failures. The classic example iso ur banking industry having so many of it's loans underwritten by the gov't in the form of Fannie Mae and Freddie Mac. Since the banks know that the loans are 100% covered, they are willing to loan money to anyone, knowing full well that they will make money on the fees alone, even if they never earn a dime of interest.
The amount of the deficit should be determined by the needs of the gov't to provide Constitutionally defined services who's funding exceeds the current income. They should be be short term deficits with clearly defined paths to their elimination. Common sense state that no deficits ever doesn't work, but neither does a constant deficit. It's the fact that was have had a constant deficit for decades that has made it look like it's a necessity. The deficit has become a positive feedback monster that we have become dependent on and we need to break that dependency.

Oh ? And what country in this world demonstrates the success of your "business anarchy" idea ?

 

[Absentglare]

They do ... ???

Denmark "... is financed by the world's highest taxes. A value added tax of 25% is levied on the sale of most goods and services (including groceries). The income tax in Denmark ranges from 37.4%[25] to 63% progressively, levied on 4 out of 10 full-time employees.[26] Such high rates meant that 1,010,000 Danes [Denmark has a population of around 5 million] before the end of 2008 (44% of all full-time employees) were paying a marginal income tax of 63% and a combined marginal tax of 70.9% ..."

https://en.wikipedia.org/wiki/Economy_of_Denmark

Happiest country in the world.

Isn't it conservatives who rant about how nothing is free ?

 

[American]

The Clinton surpluses were followed by a recession. The private sector wasn't overspending; people were playing the stock market, especially dot.com stocks. Those surpluses happened because people were paying taxes on their stock gains; then, the dot-com stocks tanked, because there was no business behind them that could justify their price.

Remember when Bush was supposedly talking down the economy during the 2000 campaign, by discussing the recession?

 

[Fenton]

That makes no sense whatsoever... It's a psuedo-Keynesian theory that holds no water in the real world. The gov't should never stick it's nose into the private sector's ability to be profitable. Our private sector needs to stand on it's own and control it's own destiny. Handing over that responsibility to the gov't means that we depend on the gov't to be competitive instead of depending on our own innovation and smart business choices. Take away the safety net and businesses make better decisions, take fewer risks that have catastrophic results if they fail and work towards a better business model. Having that safety net means that businesses can make stupid decisions and the gov't will keep them from having to face the results of those failures. The classic example iso ur banking industry having so many of it's loans underwritten by the gov't in the form of Fannie Mae and Freddie Mac. Since the banks know that the loans are 100% covered, they are willing to loan money to anyone, knowing full well that they will make money on the fees alone, even if they never earn a dime of interest.
The amount of the deficit should be determined by the needs of the gov't to provide Constitutionally defined services who's funding exceeds the current income. They should be be short term deficits with clearly defined paths to their elimination. Common sense state that no deficits ever doesn't work, but neither does a constant deficit. It's the fact that was have had a constant deficit for decades that has made it look like it's a necessity. The deficit has become a positive feedback monster that we have become dependent on and we need to break that dependency.

They think they can stop the bussines cycle with deficit spending and achieve full employment.

 

[faithful_servant]

Oh ? And what country in this world demonstrates the success of your "business anarchy" idea ?

Bureaucracies like to take control, so they don't allow this kind of model. It's runs counter to the goals of the bureaucrats, so you don't see it. For bureaucrats, gov't money equals power, so giving away access to gov't money means a loss of power. So you don't see it happening because the very people who should be making these kind of decisions are the ones fighting against them.

It's not anarchy, it's not allowing a government ran economic totalitarianism to take root. The private sector will make the best choices to make them money and if that means that they make money at the taxpayer's expense by way of gov't intervention, then that's what they'll do. Take the gov't out of the profit and loss side of our economy and allow businesses to focus on making money by way of carrying out business instead of finding ways to manipulate the rules to get the gov't to manage their profits and you have a much healthier, long term economic structure. Once you make the gov't's short term perspective to take over, you cripple the private sector's ability to lead and innovate (since those are things which lead to long term profitability over the short term gains that the gov't provides).

 

[Eric7216]

They do ... ???

Denmark "... is financed by the world's highest taxes. A value added tax of 25% is levied on the sale of most goods and services (including groceries). The income tax in Denmark ranges from 37.4%[25] to 63% progressively, levied on 4 out of 10 full-time employees.[26] Such high rates meant that 1,010,000 Danes [Denmark has a population of around 5 million] before the end of 2008 (44% of all full-time employees) were paying a marginal income tax of 63% and a combined marginal tax of 70.9% ..."

https://en.wikipedia.org/wiki/Economy_of_Denmark

I am simply trying to get those "progressives" who see Scandinavian countries as such a high goal worthy of emulation also see the other side of the coin. They have high taxes on everyone, not just the 1%ers. They have regressive taxes with the 25% VAT. If progressives want Danish and Scandinavian values I want them to be willing to pay for it and have a fiscally conservative budget. And not this MMT debts don't matter dreamlike utopia.

 

[Absentglare]

Bureaucracies like to take control, so they don't allow this kind of model. It's runs counter to the goals of the bureaucrats, so you don't see it. For bureaucrats, gov't money equals power, so giving away access to gov't money means a loss of power. So you don't see it happening because the very people who should be making these kind of decisions are the ones fighting against them.

It's not anarchy, it's not allowing a government ran economic totalitarianism to take root. The private sector will make the best choices to make them money and if that means that they make money at the taxpayer's expense by way of gov't intervention, then that's what they'll do. Take the gov't out of the profit and loss side of our economy and allow businesses to focus on making money by way of carrying out business instead of finding ways to manipulate the rules to get the gov't to manage their profits and you have a much healthier, long term economic structure. Once you make the gov't's short term perspective to take over, you cripple the private sector's ability to lead and innovate (since those are things which lead to long term profitability over the short term gains that the gov't provides).

You don't seem to understand how the market works.

Do any economists actually endorse a completely unregulated market ?

Adam Smith was smart enough to see that kind of plan as a miserable failure in its infancy. We saw it in the 20s.

Complaining that bureaucrats have too much power is just prejudice. The fact is that the Waltons have far more wealth than the Clintons, what, 500 times as much ? That kind of consolidation of power is far more detrimental to society.

Our government isn't a totalitarianism. When it makes policies that benefit the people, you can't just complain that they want to hurt the people.

Only circular logic can conclude that the private sector is best by itself because leaving the private sector alone is the best for private sector. It might be the best for the Rockefellers and Carnegies, but not for the people. In fact, the very system you endorse is far closer to the consolidation of power indicative of a totalitarian state than one of free people where liberty is obtained by empowering the common man.

 

[faithful_servant]

You don't seem to understand how the market works.

Do any economists actually endorse a completely unregulated market ?

Adam Smith was smart enough to see that kind of plan as a miserable failure in its infancy. We saw it in the 20s.

Complaining that bureaucrats have too much power is just prejudice. The fact is that the Waltons have far more wealth than the Clintons, what, 500 times as much ? That kind of consolidation of power is far more detrimental to society.

Our government isn't a totalitarianism. When it makes policies that benefit the people, you can't just complain that they want to hurt the people.

Only circular logic can conclude that the private sector is best by itself because leaving the private sector alone is the best for private sector. It might be the best for the Rockefellers and Carnegies, but not for the people. In fact, the very system you endorse is far closer to the consolidation of power indicative of a totalitarian state than one of free people where liberty is obtained by empowering the common man.

I never said anything about an unregulated market, that's your lack of comprehension. There are regulations that are needed, but the gov't shouldn't be in the business of picking winners and losers, it should be a completely objective 3rd party to economics. The gov't should be a referee, not a player/referee or an owner/referee. The gov't shouldn't be picking winners and losers, it should be making sure that everyone plays by the same set of rules. Like most liberals, you can't even conceive of this and resort to only thinking that keeping the gov't out of the job of picking winners and losers means throwing the gov't out of economics altogether. There is place for the gov't o be involved, but it's not as a competitor, it's strictly as a referee.

 

[Critter7r]

I never said anything about an unregulated market, that's your lack of comprehension. There are regulations that are needed, but the gov't shouldn't be in the business of picking winners and losers, it should be a completely objective 3rd party to economics. The gov't should be a referee, not a player/referee or an owner/referee. The gov't shouldn't be picking winners and losers, it should be making sure that everyone plays by the same set of rules. Like most liberals, you can't even conceive of this and resort to only thinking that keeping the gov't out of the job of picking winners and losers means throwing the gov't out of economics altogether. There is place for the gov't o be involved, but it's not as a competitor, it's strictly as a referee.

What regulation could there be that wouldn't be an influence on the "picking winners and losers" schtick? There is no regulation that could be implemented that isn't beneficial to someone and detrimental to someone else.

Also, government spending isn't a competitor, it's a consumer.

 

[austrianecon]

The government owes itself some money, that's all. It's just accounting. I could loan myself a million dollars on paper, then pay it back tomorrow and be square.

No, the Government doesn't own money to itself. It's money collected via FICA and Gases taxes which are specifically to pay for certain programs. US Government can't write off that borrowing as that money has to be paid back to the funds to make payments in social programs. We aren't talking about $1m either. We are talking about $5t.

 

[Absentglare]

I never said anything about an unregulated market, that's your lack of comprehension. There are regulations that are needed, but the gov't shouldn't be in the business of picking winners and losers, it should be a completely objective 3rd party to economics. The gov't should be a referee, not a player/referee or an owner/referee. The gov't shouldn't be picking winners and losers, it should be making sure that everyone plays by the same set of rules. Like most liberals, you can't even conceive of this and resort to only thinking that keeping the gov't out of the job of picking winners and losers means throwing the gov't out of economics altogether. There is place for the gov't o be involved, but it's not as a competitor, it's strictly as a referee.

Any interaction can be construed as "picking winners and losers." That's just a talking point that is arbitrarily abused to refer to any policy one might disagree with.

 

[Absentglare]

No, the Government doesn't own money to itself. It's money collected via FICA and Gases taxes which are specifically to pay for certain programs. US Government can't write off that borrowing as that money has to be paid back to the funds to make payments in social programs. We aren't talking about $1m either. We are talking about $5t.

When the government goes into debt by selling bonds to the private sector, that requires money from the private sector to own the bond.

When the government goes into debt by selling bonds to itself, the money doesn't come out of the private sector. The debt simply represents one arm of government being indebted to another.

And, again, the government can only default on its debt obligations if it chooses to.

So ...

I don't see a cause for your hysteria.

 

[austrianecon]

When the government goes into debt by selling bonds to the private sector, that requires money from the private sector to own the bond.

When the government goes into debt by selling bonds to itself, the money doesn't come out of the private sector. The debt simply represents one arm of government being indebted to another.

And, again, the government can only default on its debt obligations if it chooses to.

So ...

I don't see a cause for your hysteria.

Now let's follow that logic all the way through.. hopefully you get there.

1. US can't default on debt obligations to itself as it would send the bond market in a tiffy.

2. US would have to borrow to pay back that debt obligation.

3. Money still has to be borrowed, either way or you have a major social issues arising from Retirees.

 

[Fenton]

Happiest country in the world.

Isn't it conservatives who rant about how nothing is free ?

Highest taxes in the World and highest per capital of anti-depressant use

 

[Absentglare]

Now let's follow that logic all the way through.. hopefully you get there.

1. US can't default on debt obligations to itself as it would send the bond market in a tiffy.

2. US would have to borrow to pay back that debt obligation.

3. Money still has to be borrowed, either way or you have a major social issues arising from Retirees.

I still don't see the problem.

If i, say, pull cash out of my wallet instead of using my credit card and borrowing it from someone else, sure, i have less in my wallet, but how can you claim i've gone in debt to myself ...?

 

[Absentglare]

Highest taxes in the World and highest per capital of anti-depressant use

Must be nice to have healthcare.

 

[austrianecon]

I still don't see the problem.

If i, say, pull cash out of my wallet instead of using my credit card and borrowing it from someone else, sure, i have less in my wallet, but how can you claim i've gone in debt to myself ...?

If that cash you pull out of your wallet is used to buy something that it's not earmarked for, it means you have to borrow to pay for that earmarked item. So if you spend $200 on whatever but you need that $200 to pay your rent.. guess what?!?!?! You have to borrow to pay for that rent. Thus you go into debt. Now you can't sit there and in month from now when you that pay back that $200, you can write it off because you borrowed from yourself (as JfCs analogy states). You have to reduce spending in another to make up that loss. That means maybe $200 less in food or $200 less in leisure or whatever. But you have to pay it back in some form by either cutting your budget or borrowing against future revenue in which you spread out those cuts, but they still take place..

Have none of you actually done a budget? Ever over spent and was short this month or next month?

 

[austrianecon]

Must be nice to have healthcare.

Except one of the reason why they have healthcare is because they pay 40% plus in taxes... including the poor. Visualize making $7,000 and pay 40% in taxes. There system is step to share the burden, not shift the burden to the Rich.

 

[Absentglare]

If that cash you pull out of your wallet is used to buy something that it's not earmarked for, it means you have to borrow to pay for that earmarked item. So if you spend $200 on whatever but you need that $200 to pay your rent.. guess what?!?!?! You have to borrow to pay for that rent. Thus you go into debt. Now you can't sit there and in month from now when you that pay back that $200, you can write it off because you borrowed from yourself (as JfCs analogy states). You have to reduce spending in another to make up that loss. That means maybe $200 less in food or $200 less in leisure or whatever. But you have to pay it back in some form by either cutting your budget or borrowing against future revenue in which you spread out those cuts, but they still take place..

Have none of you actually done a budget? Ever over spent and was short this month or next month?

Correct me if i'm wrong. Let's switch this to a car loan.

Let's say i want to buy a car. I can spend $40,000 in cash now on the car that i had earmarked for a house remodel in 2034. OR, i can hold that money in savings and borrow $40,000 now (let's say the borrowing is out of a fixed rate HELOC so the interest rate is the same whether i borrow now or later).

By the time i get around to the house remodel, in one instance i would pay $0 in interest until the year 2034, in the other i would pay interest until paid off or until 2034, whichever comes first.

Now, tell me, assuming we have inflation is it better to borrow money as soon as possible for future expenditures, or is it better to borrow later when that money is actually needed ?

 

[Absentglare]

Except one of the reason why they have healthcare is because they pay 40% plus in taxes... including the poor. Image making $7,000 and pay 40% in taxes. There system is step to share the burden, not shift the burden to the Rich.

I understand that it's a very different approach, but it seems to have its own merits.

 

[austrianecon]

Correct me if i'm wrong. Let's switch this to a car loan.

Two different issues but okay..

Let's say i want to buy a car. I can spend $40,000 in cash now on the car that i had earmarked for a house remodel in 2034. OR, i can hold that money in savings and borrow $40,000 now (let's say the borrowing is out of a fixed rate HELOC so the interest rate is the same whether i borrow now or later).

And this is why we have debt issues. You borrow $40,000 on a car loan which is at a cheaper rate then a HELOC. A 60 month car loan on a new car will be at 3.36%, a Fixed HELOC at $30,000 to $50,000 will run you between 4.10% to 4.68%. Also a fixed rate HELOC is only fixed at the time you borrow. You have to borrow today to get today's fixed rate. You can't borrow in 18 years and expect to get the same rate.


Fix the underlying premise and i'll address it after you correct it.

 

[austrianecon]

I understand that it's a very different approach, but it seems to have its own merits.

Just don't think it will fly in the US.

 

[Absentglare]

Two different issues but okay..



And this is why we have debt issues. You borrow $40,000 on a car loan which is at a cheaper rate then a HELOC. A 60 month car loan on a new car will be at 3.36%, a Fixed HELOC at $30,000 to $50,000 will run you between 4.10% to 4.68%. Also a fixed rate HELOC is only fixed at the time you borrow. You have to borrow today to get today's fixed rate. You can't borrow in 18 years and expect to get the same rate.


Fix the underlying premise and i'll address it after you correct it.

Oh give me a break.

The point i was making was that if the interest rate is constant, there's no advantage to borrowing money long before you need it, you'll just end up spending more money sooner when it's more valuable due to inflation.

 

[austrianecon]

Oh give me a break.

The point i was making was that if the interest rate is constant, there's no advantage to borrowing money long before you need it, you'll just end up spending more money sooner when it's more valuable due to inflation.

But no interest rate is constant. Go look at Treasuries and they go up and down all the time. Government is paying interest to those trusts (no different then borrowing from the private) but at special rates. So it's more costly to borrow from Trust Funds. Say a 10y is at 2% today but Uncle Sam says screw it.. lets take from Social Security because it's a pain to raise taxes or politically better to hide deficits. Social Security will get a Treasury bill/bond with a 2.5% coupon. So it's more costly then biting the bullet and being truthful.

 

[Fenton]

Must be nice to have healthcare.

Liberty is better and didn't Sanders State of Vermont successfully switch over to Single payer ?