Explaining Why Federal Deficits Are Needed[W:5330]

[Moderate Right]

The baby boom ended in 1964. People born that year will be seventy in 2034, eighteen years from now. I'd say that's not "a few more decades."

And yer misusing the word "exponentially." The percentage of Americans aged 65 and older is projected to increase from fifteen percent to twenty-one percent over that period. That's an annual growth rate of a little less than two percent.

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As I said to John, economics is a whole lot more complicated than his simplistic explanation. People should save money and should save as much money as they can, especially the poorer and the middle class. Do you know why? Because the money actually gets spent eventually. The poor and middle class should save for a down payment on a house. They should save to buy a car or a better car or to pay for unexpected car repairs. They should save to have money to live on during times of unemployment. They should save to go on vacation. They should save for unexpected issues such as medical expenses. You liberals are under the wrong impression that the poor don't earn enough money to save but the truth is they spend just like the federal government does. Every dollar that comes in they spend and if they can borrow, they spend even more.

I have a lot of contact with the poor and I also have a lot of contact with the rich. I have seen the poor and middle class squander money and opportunities on a regular basis for decades. I have seen the rich penny pinch. I know millionaires who have shopped at dollar stores and thrift stores. I know millionaires who use grocery bags to line their garbage cans so that they don't have to buy trash can liners. I have known rich who live in the dark and don't flush their toilets every time because it wastes water and runs up the water bill. Warren Buffet still lives in the same house he bought decades ago for $30,000. It's not that the poor don't have enough money to save, it is the fact that they don't know how to save. The rich know how to save and how to invest. Sure, it's easier for them because they have more money coming in but until we change the spending mentality of the poor they will never get ahead, even when you throw more money at them. We need to fix the leaky holes in the poor's buckets first before we start giving them more money so that they can spend more. Once the holes are fixed we can re-evaluate our system at some point but the poor need to learn how to save and how to not only take advantage of opportunities but how to create opportunities. If all they want is continued hand outs with no incentive to change then they should not expect that we are just going to give them more money.

 

[ludin]

I'm all for people saving some money. That doesn't mean saving is good for the economy, though. Somebody has to make up for the lost demand, unless you want the economy to shrink.

:roll: good thing the economy isn't binary equation.

https://fee.org/articles/saving-is-killing-the-economy/#0

savings does help grow the economy. unless you mean that people are stuffing money in mattresses.

 

[Moderate Right]

I'm all for people saving some money. That doesn't mean saving is good for the economy, though. Somebody has to make up for the lost demand, unless you want the economy to shrink.

I think that is the very first time I have seen any of you acknowledge that. All some of you guys ever talk about is what is good for the economy and that we should give the poor more money, just so they can improve the economy by spending it all. The poor's mentality needs to be changed so they can learn how to save and how to take advantage of opportunities and how to create opportunities. The hell with the economy. If we wind up having a lower GDP but the poor are actually better off then so what? I'm not against a long steady slow growth rate. The higher the economy goes at too fast of a pace just means that it has more room to fall when the time comes.

 

[Conservative]

:roll: good thing the economy isn't binary equation.https://fee.org/articles/saving-is-killing-the-economy/#0savings does help grow the economy. unless you mean that people are stuffing money in mattresses.

i don't think the left has a clue what happens to the money that people put into the banks and money market accounts

 

[ludin]

i don't think the left has a clue what happens to the money that people put into the banks and money market accounts

I don't think they do either even though it has been told exactly what banks do with it.

 

[mmi]

The poor and middle class should save for a down payment on a house.

The poor don't have money to save.

>>They should save to go on vacation.

Boy, that's sad.

>>You liberals are under the wrong impression that the poor don't earn enough money to save but … Every dollar that comes in they spend

Yes, on rent, utilities, food, clothing, and other stuff they need.

>>if they can borrow, they spend even more.

They can't borrow. How would they pay it back?

>>I have seen the poor … squander money and opportunities on a regular basis for decades.

How can they have money to squander if they're poor? That makes no sense. And what are these "opportunities"?

>>It's not that the poor don't have enough money to save

Yes, it is exactly that. That's what poor means.

>>they don't know how to save.

What the hell does that mean? They may not have a bank account, but do you really believe they don't understand the concept of saving?

We went over this months ago. I really don't see the point.

 

[Moderate Right]

The poor don't have money to save.

>>They should save to go on vacation.

Boy, that's sad.

>>You liberals are under the wrong impression that the poor don't earn enough money to save but … Every dollar that comes in they spend

Yes, on rent, utilities, food, clothing, and other stuff they need.

>>if they can borrow, they spend even more.

They can't borrow. How would they pay it back?

>>I have seen the poor … squander money and opportunities on a regular basis for decades.

How can they have money to squander if they're poor? That makes no sense. And what are these "opportunities"?

>>It's not that the poor don't have enough money to save

Yes, it is exactly that. That's what poor means.

>>they don't know how to save.

What the hell does that mean? They may not have a bank account, but do you really believe they don't understand the concept of saving?

We went over this months ago. I really don't see the point.

The poor spend a lot of money on things they don't need. Big screen tv's, smartphones, alcohol, lottery tickets, cigarettes, often times drugs, pets, etc.. And then they wonder why they can't get ahead.

 

[Kobie]

The poor spend a lot of money on things they don't need. Big screen tv's, smartphones, alcohol, lottery tickets, cigarettes, often times drugs, pets, etc.. And then they wonder why they can't get ahead.

A whole lot of poor people don't spend money on any of those things, and still can't get ahead.

 

[austrianecon]

That's why I said "basically", and added that it pays $900 per year. Twenty-two meetings, committee meetings, budget sessions, special meetings ... it's lot of time to spend for $900. Luckily, I don't do it for the money, and last year, donated my earnings back to the parks commission budget because there wasn't much in the city's budget for them.

But it's not basically. You were paid for your time. You chose to "work" for that pay. As you said, you don't do it for the money. Just like a teacher doesn't do it for the money or any military personal who doesn't do it for the money who could get paid 2 to 5 times their basic pay. Civic services is about being selfless and some of the times Civil Servants become corrupt.

The committees are sub-committees of council, Parks is over and above that, another 10 meetings per year and council members are required to be the liaison to one of the commissions: Parks, Planning, ZBA, Historic District, etc. We are not paid for those commission meetings. The non-council members of those commissions are paid only $15 per meeting.

I am not disputing that. I am just saying there are only so many Council members.

Thanks, I enjoy being a part of improving things.

And this is just my experience as person who had a summer job for two years with a local government in the Parks and Recs department.. So take it with a grain of salt because I don't know your town. But sometimes stupidity at the local level is just as great as State and National level. The city I worked for, 32,000 people at the time, wasted (in my opinion) $$$ for a what would be called a Groundsmaster (Toro) today and walk behinds (basically riders could walk or ride on swivel base, can't remember the name off the top of my head). Nobody in Parks and Recs wanted either. We wanted zero turns as we had a John Deer with mower attachment that could do the fields we only mowed for events and zero turns made our mow times faster on ball fields and soccer fields and heavily used areas. City council, Parks and Recs and our director (hired by council) believed in spending every single dollar budgeted for equipment.. in that summer we had tons of rain, alot of rain outs for little league and softball leagues because we ran out of quick dry. The Irony is.. My proposal ( I ran the upkeep of the mowing and upkeep of ball fields, I'll explain in a sec*) to the director and city council earlier in the year to use the money that they were gonna spend on the Groundsmaster should be budgeted to regrade ball fields that were 10 years over due was nixed.

* to explain.. my first year upkeep of the ball fields was the task I was given. At the end of the year every coach of the teams were asked who kept the fields at such high levels to the point the city got a local tourney sent their way (means more money). I came back for my second year and was given a 3 man crew (myself and 2 others) and free reign to keep teams and coaches happy. I had absolute control. I only had a boss when it came to hours worked and cost control of which I was under budget.

But my point is.. the city could have saved hundreds of thousands of dollars over the following years. They still haven't regraded the ball fields.

My post was in response to Conservative's post that state and local communities should handle way more than they do and it should not be under the perview of the federal gov't. So I agree with you, this was a federal discussion.

Yes, we agree on this.. but I tend to lend to Conservatives view on this issue. But I am a libertarian in view point. I actually believe Local and State Government taxes should be higher then Federal. I believe I should be paying 5% in local income tax and then a 2.5% property tax for Schools. As the only way you are gonna make chances and have control over those changes is on the local level. You get the Federal Government involved.. it's gonna end badly. Baltimore, MD relied heavily on Federal dollars to fund it's police and we know how that ended.

So states save when the going is good and spend their savings when it gets bad. Doesn't sound like deficit spending.

All cordial to this point. What I described is 101 Keynesian economics. Save in the good times, spend in the bad. When States save in good times and use that money when revenues fall short, that's deficit spending.

 

[Moderate Right]

A whole lot of poor people don't spend money on any of those things, and still can't get ahead.

There are other things to, not just those. Just about all of the poor spend money on at least one of those things, if not more than one. The reason many can't get ahead is because they spend all of their money and don't save so that when their car goes belly up they have no money to fix it. Many of them also have problems in taking advantage of opportunities or creating opportunities for themselves. I see it all the time. A McDonalds or Walmart employee is asked to get a promotion to a supervisor position for more money and their response is no, they do not want to do that. They are offered a salaried assistant manager position and they say, no they don't want to work 55 hours per week.

The Seattle minimum wage thread has proven that those in Seattle were already making a living wage because they were living on that wage. When the wage was raised up employers cut the workers' hours down and their take home pay wound up being almost identical to what it had been before and yet liberals on this forum claimed it as a success because the workers were able to make the same amount of pay while working less hours. In other words, the workers had been already making a living wage before the raise.

 

[JohnfrmClevelan]

So then.. when its all said and done.. Under Obama.. because he decreased the deficit.. and decreased income... then according to you.. .we should have gone into a recession.. a "smaller contraction".

But we didn't. So explain why we did not go into a recession. According to the economists. the economy GREW. You are saying that the economy didn't grow.. but contracted.

Please explain why your method of calculating growth is better than how all other economists do it. Please explain how our economy actually went into recession.. when the economists claim that it grew.

Are you trying to be difficult? I don't define recessions or growth any differently than any other economist, and I never said that our economy actually went into recession. YOU are the one who is CONSTANTLY misrepresenting things here. Deficit spending is but one possible demand injection.

Deficit spending is about $500 billion, and our economy is about $15 trillion. That makes deficit spending about 3.3% of aggregate demand. What has our growth been like lately? About 2%? That's about $300 billion/year for GDP growth. Now can you see how a reduction in deficit spending might move the needle?

If our deficit spending was, say, $800 billion in 2015, and you reduced it by $250 billion in 2016, you would still get growth, because aggregate demand would be larger than the previous year.

But if our deficit spending was $500 billion in 2015, and you reduced it by $250 billion in 2016, the economy would contract, because aggregate demand would be smaller than the previous year. You still deficit spend, and it's still a demand injection, but now it isn't big enough (along with credit) to counteract the trade deficit and net saving.

 

[Moderate Right]

Are you trying to be difficult? I don't define recessions or growth any differently than any other economist, and I never said that our economy actually went into recession. YOU are the one who is CONSTANTLY misrepresenting things here. Deficit spending is but one possible demand injection.

Deficit spending is about $500 billion, and our economy is about $15 trillion. That makes deficit spending about 3.3% of aggregate demand. What has our growth been like lately? About 2%? That's about $300 billion/year for GDP growth. Now can you see how a reduction in deficit spending might move the needle?

If our deficit spending was, say, $800 billion in 2015, and you reduced it by $250 billion in 2016, you would still get growth, because aggregate demand would be larger than the previous year.

But if our deficit spending was $500 billion in 2015, and you reduced it by $250 billion in 2016, the economy would contract, because aggregate demand would be smaller than the previous year. You still deficit spend, and it's still a demand injection, but now it isn't big enough (along with credit) to counteract the trade deficit and net saving.

Now you're just making up algebra. You assume far too many things.

 

[JohnfrmClevelan]

Now you're just making up algebra. You assume far too many things.

If you can't follow along in your head, write it down. It's just math.

 

[Moderate Right]

If you can't follow along in your head, write it down. It's just math.

You transpose numbers and equations to suit your needs.

 

[JohnfrmClevelan]

You transpose numbers and equations to suit your needs.

I don't transpose anything. If my numbers get lost in your head, that's not my fault.

This isn't that hard. On the other hand, you went so far off the tracks as to think that workers were saving the exact same dollars that retirees were spending, so maybe it is hard for you. But at its core, I am just making additions and subtractions to demand; if demand is larger than it was the previous year, the economy grows, if not, it shrinks. If you weren't so dead set against everything I say, you could probably grasp the idea. At least then, you could make a valid decision on whether or not you believe it.

 

[jaeger19]

Are you trying to be difficult? I don't define recessions or growth any differently than any other economist, and I never said that our economy actually went into recession. YOU are the one who is CONSTANTLY misrepresenting things here. Deficit spending is but one possible demand injection.

Deficit spending is about $500 billion, and our economy is about $15 trillion. That makes deficit spending about 3.3% of aggregate demand. What has our growth been like lately? About 2%? That's about $300 billion/year for GDP growth. Now can you see how a reduction in deficit spending might move the needle?

If our deficit spending was, say, $800 billion in 2015, and you reduced it by $250 billion in 2016, you would still get growth, because aggregate demand would be larger than the previous year.

But if our deficit spending was $500 billion in 2015, and you reduced it by $250 billion in 2016, the economy would contract, because aggregate demand would be smaller than the previous year. You still deficit spend, and it's still a demand injection, but now it isn't big enough (along with credit) to counteract the trade deficit and net saving.

John.. . Tell me.. when the economy contracts.. would that not mean that the GDP for 2016 would be less than 2015? (remember.. less income)

If so.. then why is that not a recession.

 

[ludin]

John.. . Tell me.. when the economy contracts.. would that not mean that the GDP for 2016 would be less than 2015? (remember.. less income)

If so.. then why is that not a recession.

A recession is defined by 2 quarters of negative growth. You could still have positive growth the entire year just not 2 quarters.

 

[mmi]

A recession is defined by 2 quarters of negative growth.

NBER uses monthly data and doesn't look at total production in making its calls. That's how they came to decide that there was a recession in 2001 when GDP fell in only Q3.

 

[JohnfrmClevelan]

John.. . Tell me.. when the economy contracts.. would that not mean that the GDP for 2016 would be less than 2015? (remember.. less income)

If so.. then why is that not a recession.

Jaeger, I'm using simplified examples. I could have said "Year One" and "Year Two," but I didn't think I had to be that explicit. These aren't real world numbers.

But just so you know, a contracting economy does mean lower GDP over two or more quarters. We didn't have a recession because demand kept on growing, albeit slowly, quarter after quarter, year after year. It would have grown faster with more deficit spending, all else being equal, but demand injections were always greater than demand leakages, and that's what you need.

 

[James972]

It would have grown faster with more deficit spending,

if so the world would know it and be able to maintain growth, the economic problem would be solved. in fact deficits have to be paid back and so contract economy more than they grow it.1+1=2

 

[Conservative]

Are you trying to be difficult? I don't define recessions or growth any differently than any other economist, and I never said that our economy actually went into recession. YOU are the one who is CONSTANTLY misrepresenting things here. Deficit spending is but one possible demand injection. Deficit spending is about $500 billion, and our economy is about $15 trillion. That makes deficit spending about 3.3% of aggregate demand. What has our growth been like lately? About 2%? That's about $300 billion/year for GDP growth. Now can you see how a reduction in deficit spending might move the needle?If our deficit spending was, say, $800 billion in 2015, and you reduced it by $250 billion in 2016, you would still get growth, because aggregate demand would be larger than the previous year. But if our deficit spending was $500 billion in 2015, and you reduced it by $250 billion in 2016, the economy would contract, because aggregate demand would be smaller than the previous year. You still deficit spend, and it's still a demand injection, but now it isn't big enough (along with credit) to counteract the trade deficit and net saving.

Here are the Obama deficits from Treasury, where do you get your numbers? Debt Debt Fiscal Yr Oct. 1 Sept. 30 Deficit2009 10.1 11.9 1.82010 11.9 13.6 1.72011 13.6 14.8 1.22012 14.8 16.1 1.32913 16.1 16.7 0.62014 16.7 17.8 1.12015 17.8 18.2 0.4 16-Jul 2016 18.2 19.4 1.2

 

[JohnfrmClevelan]

Here are the Obama deficits from Treasury, where do you get your numbers? Debt Debt Fiscal Yr Oct. 1 Sept. 30 Deficit2009 10.1 11.9 1.82010 11.9 13.6 1.72011 13.6 14.8 1.22012 14.8 16.1 1.32913 16.1 16.7 0.62014 16.7 17.8 1.12015 17.8 18.2 0.4 16-Jul 2016 18.2 19.4 1.2

They are round estimates meant to make the math easier. Jesus, I am so friggin' sick of dealing with idiots who refuse to read the thread.

 

[Conservative]

They are round estimates meant to make the math easier. Jesus, I am so friggin' sick of dealing with idiots who refuse to read the thread.

http://www.treasurydirect.gov/NP/debt/currentRight, round estimates taking deficits spending of 1.2 trillion down to 500 bill

 

[JohnfrmClevelan]

http://www.treasurydirect.gov/NP/debt/currentRight, round estimates taking deficits spending of 1.2 trillion down to 500 bill

That's a dead link. You can't even link correctly.

 

[Moderate Right]

I don't transpose anything. If my numbers get lost in your head, that's not my fault.

This isn't that hard. On the other hand, you went so far off the tracks as to think that workers were saving the exact same dollars that retirees were spending, so maybe it is hard for you. But at its core, I am just making additions and subtractions to demand; if demand is larger than it was the previous year, the economy grows, if not, it shrinks. If you weren't so dead set against everything I say, you could probably grasp the idea. At least then, you could make a valid decision on whether or not you believe it.

It's not that hard to understand that if "X" amount of income inequality happens during a deficit of 1 trillion dollars then with a deficit of only 500 billion dollars income inequality would be cut in half. Nothing wrong with that math. In fact, it is the very same formula that you used. I can do the exact same fuzzy algebra that you do. Just as I am making a false assumption with the numbers in my example, so are you. 1+1 doesn't always = 2. Sorry James.