Government Workers are Next for layoffs & furloughs

[OrphanSlug]

So show me how the billions in bailouts since 2008 have benefited the middle class. After all those bailout $$$$ billions, the middle class must be doing really great; the money just flowed in. Let's see your "metrics". Let's see your stats. Put them up here, so we can discuss them.

So you do not have anything, we get it.

 

[Waddy]

So you do not have anything, we get it.

You're the one making the claim the bailouts helped the middle class, and printing boat loads of money doesn't matter. I'm just calling you out on that nonsense.

 

[JohnfrmClevelan]

That's simply an unreasonable expectation, and therefore unfeasible.

It's not unfeasible at all. A lot of the government spending I'm talking about would be tied to automatic stabilizers. A job guarantee, for example, increases govt. spending when unemployment is high, and comes back down as the private sector rehires labor.

In a market oriented economy, productivity is driven by private investment.

I understand this. Nobody is trying to replace private investment.

And still you continue to push the demand leakage argument. Trade deficits are a byproduct of a savings mismatch. Their existence doesn't mean money is leaving the economy. Mercantilisim has been abandoned for more than a century.

Well, then tell me what happens to the income that we spend on imports that don't get spent on U.S. production. It's just saving by foreign parties. Net savings from income doesn't purchase goods.

Sectoral balances cannot explain economic growth.

It's not meant to explain growth. It's just meant to illustrate that govt. deficits end up as surpluses in the private and foreign sectors.

Because you are emotionally and physically invested in an economic reality where such a thing cannot exist.

No, I just never learned about crowding out in school. Maybe if I had, I'd be invested in that theory, too. But it makes little sense to me. I can understand it in the context of, say, a WWII-type govt. takeover of the economy, but not in normal times. I just don't see how the govt. issuing bonds, especially at low yields, negatively affects investment, since the dollars go right back into the private sector. But I can understand why deficit spending, and it's affect on demand, would encourage more investment.

Crowding out occurs when deficits grow in tandem with output, while labor markets exhibit little or no slack.

I think we also disagree on slack in the labor market. I see plenty of slack, even when official unemployment numbers look good. Underemployment is slack, too. So is labor that isn't counted for various reasons.

 

[OrphanSlug]

You're the one making the claim the bailouts helped the middle class, and printing boat loads of money doesn't matter. I'm just calling you out on that nonsense.

No, I am the one claiming what the purpose of federal spending is to GDP when there is an aggregate demand fault.

And the phrase "printing boat loads of money" pretty much ends the debate on what you know.

 

[Waddy]

No, I am the one claiming what the purpose of federal spending is to GDP when there is an aggregate demand fault.

And the phrase "printing boat loads of money" pretty much ends the debate on what you know.

Come on', man... put up your stats showing how the bailouts helped Joe the Plumber. I know they helped the 1%er's, but your contending it helps the middle class. prove it.

 

[OrphanSlug]

Come on', man... put up your stats showing how the bailouts helped Joe the Plumber. I know they helped the 1%er's, but your contending it helps the middle class. prove it.

We did, you slept through it.

 

[Waddy]

We did, you slept through it.

I accept your surrender.

 

[OrphanSlug]

I accept your surrender.

A very hollow victory lap for you given that you have yet to be right about anything in this thread.

 

[JohnfrmClevelan]

Come on', man... put up your stats showing how the bailouts helped Joe the Plumber. I know they helped the 1%er's, but your contending it helps the middle class. prove it.

Of all people, you shouldn't be the one demanding proof. All of your posts are just a series of declaratory statements, and most of what you say runs completely counter to what most people can agree on.

 

[Waddy]

Of all people, you shouldn't be the one demanding proof. All of your posts are just a series of declaratory statements, and most of what you say runs completely counter to what most people can agree on.

OK, John, YOU provide some proof that the billion dollar bailouts have helped Joe the Plumber, or anyone besides the 1%. orphan seems incapable of doing so; maybe you're the guy to prove your case. So, come on', man...put up the numbers. But of course you can't, because it's all nonsense.

 

[Lord Tammerlain]

Come on', man... put up your stats showing how the bailouts helped Joe the Plumber. I know they helped the 1%er's, but your contending it helps the middle class. prove it.

The Auto bailouts in 2008 and 2009 saved plenty of manufacturing jobs in the US while wiping out wealthy investors in the Auto industry.

The bank bailouts prevented economic collapse keeping millions more employed than otherwise would be.


As for the current bailouts I can not comment if the average person benefited.

I do know that the stock market is far higher than it should be

 

[Kushinator]

It's not unfeasible at all. A lot of the government spending I'm talking about would be tied to automatic stabilizers. A job guarantee, for example, increases govt. spending when unemployment is high, and comes back down as the private sector rehires labor.

You're refusing to acknowledge pork that is always attached to spending initiatives. Congress is simply not capable of controlling both monetary and fiscal policy.

I understand this. Nobody is trying to replace private investment.

It can happen even if you're not trying.

Well, then tell me what happens to the income that we spend on imports that don't get spent on U.S. production.

It's used to buy dollar denominated assets in the event that the home country refuses to allow their currency to appreciate with respect to economic gain. However, you are assuming that the U.S. output would be the same in a state of autarky. In our current reality, aggregate production processes are geared to drive our comparative advantage. Money invested into manufacturing non-durable goods (which China currently produces on an epic scale) is money that isn't available for the investment of higher-order goods/services. Furtheremore, it would be exceedingly expensive given the standard of living differentials between China and the U.S..

It's just saving by foreign parties. Net savings from income doesn't purchase goods.

The goods are already purchased. The savings arises from the fact that nations protect their currency. China's RYB would trade at something like 2:1 to the dollar if they allowed it to float. Meaning, in subsequent years, the amount of goods purchased from China would actually decline, and U.S. exports would grow.

It's not meant to explain growth. It's just meant to illustrate that govt. deficits end up as surpluses in the private and foreign sectors.

Then it doesn't tell us anything of value.

No, I just never learned about crowding out in school. Maybe if I had, I'd be invested in that theory, too. But it makes little sense to me. I can understand it in the context of, say, a WWII-type govt. takeover of the economy, but not in normal times. I just don't see how the govt. issuing bonds, especially at low yields, negatively affects investment, since the dollars go right back into the private sector. But I can understand why deficit spending, and it's affect on demand, would encourage more investment.

Crowding-in is certainly something that happens from government spending and investment. I've never denied this. However, you refuse to acknowledge my argument in its entirety, as crowding out is visible with respect to interest rate differentials. When the economy is growing, deficit spending has the potential to increase the cost of private investment. If you can't see how or why this is the case, perhaps you need to spend more time studying other aspects of economics instead of obsessing over the same thing.

I think we also disagree on slack in the labor market. I see plenty of slack, even when official unemployment numbers look good. Underemployment is slack, too. So is labor that isn't counted for various reasons.

Again... this is covered in an intro macro course.

 

[Kushinator]

As for the current bailouts I can not comment if the average person benefited.

A free $1200 check and $600 additional weekly unemployment benefits certainly have helped the average person.

 

[Lord Tammerlain]

A free $1200 check and $600 additional weekly unemployment benefits certainly have helped the average person.

That amount came out to if I recall correctly around $400 billion, the stimulus was 2 trillion or so

 

[Kushinator]

That amount came out to if I recall correctly around $400 billion, the stimulus was 2 trillion or so

Here is the breakdown:

 

[JohnfrmClevelan]

You're refusing to acknowledge pork that is always attached to spending initiatives. Congress is simply not capable of controlling both monetary and fiscal policy.

Even pork is commerce, though.

It's used to buy dollar denominated assets in the event that the home country refuses to allow their currency to appreciate with respect to economic gain. However, you are assuming that the U.S. output would be the same in a state of autarky. In our current reality, aggregate production processes are geared to drive our comparative advantage. Money invested into manufacturing non-durable goods (which China currently produces on an epic scale) is money that isn't available for the investment of higher-order goods/services. Furtheremore, it would be exceedingly expensive given the standard of living differentials between China and the U.S..

I also get comparative advantage, and I don't think that output would be the same in something closer to autarky. It's simply a question of the dollars, used to buy imports, not coming back into the U.S. economy to buy goods. Buying "dollar denominated assets" doesn't do it, especially of those assets are Treasuries. Trade deficit -> Chinese profits used to buy treasuries -> govt. exchanges bonds for dollars (which makes no difference to them). Those dollars don't re-enter the economy without further deficit spending. The govt. is making up for the demand leakage, not China.

The goods are already purchased. The savings arises from the fact that nations protect their currency. China's RYB would trade at something like 2:1 to the dollar if they allowed it to float. Meaning, in subsequent years, the amount of goods purchased from China would actually decline, and U.S. exports would grow.

Yes, the goods are already purchased. But today's purchases are tomorrow's income for somebody, and that income is going to the Chinese, not Americans. Where is the income that American labor will spend tomorrow?

Then it doesn't tell us anything of value.

You would be amazed at how many people don't understand that simple bit of accounting.

Crowding-in is certainly something that happens from government spending and investment. I've never denied this. However, you refuse to acknowledge my argument in its entirety, as crowding out is visible with respect to interest rate differentials. When the economy is growing, deficit spending has the potential to increase the cost of private investment. If you can't see how or why this is the case, perhaps you need to spend more time studying other aspects of economics instead of obsessing over the same thing.

How the heck does deficit spending increase the cost of private investment? Deficit spending isn't driving up interest rates.

 

[Kushinator]

Even pork is commerce, though.

When the economy is reeling, it's better than nothing. When the economy is growing, it's allocating resources in a manner that reduces potential output.

It's simply a question of the dollars, used to buy imports, not coming back into the U.S. economy to buy goods. Buying "dollar denominated assets" doesn't do it, especially of those assets are Treasuries. Trade deficit -> Chinese profits used to buy treasuries -> govt. exchanges bonds for dollars (which makes no difference to them). Those dollars don't re-enter the economy without further deficit spending. The govt. is making up for the demand leakage, not China.

China is manipulating their currency in this situation in order to keep their goods cheap enough to maintain export growth. U.S. firms and the Treasury are willing to look the other way as it is a cheap source of credit which is used to finance both public and private operations. When a Chinese company uses funds earned from trade to purchase an office building or corporate debt or you-name-it dollar denominated assets, it is a source of both liquidity and cheap credit. The firms that sold these assets will now have the dollars earned from trade to build new durable assets or grow their operations.

You have to remember that imports are almost perfectly correlated with that of economic growth. So while you intuitively view outflows as a negative (leakage), in reality, import growth is a sign of improving economic conditions, such that households and firms are willing to forego saving to consume.

It should also be noted that we've been running relatively large deficits for close to 20 years and we haven't seen the same economic improvement across the dispersion of incomes. So yes, the federal government is giving people money for non-durable consumption like necessities, but these types of expenditures haven't translated into higher incomes, greater health outcomes, more education, etc.... Instead, deficits in our current environment have only trickled up to the ultra wealthy. People continue to face medial bankruptcy and have an insane amount of student debt. Had government been investing more in people (health care and education) and less in guaranteeing income streams to the largest companies, i would argue there would be less need for various types of means-tested welfare.

Yes, the goods are already purchased. But today's purchases are tomorrow's income for somebody, and that income is going to the Chinese, not Americans. Where is the income that American labor will spend tomorrow?

The U.S. economy does not possess the ability to produce all the goods that are imported while simultaneously maintaining its current production trajectory. Again, it's a matter opportunity cost and attempting to gear toward -- for lack of a better word -- exploiting our comparative advantage. How many engineers are you willing to trade so there are more low-cost manufacturing jobs?

For some reason, you're not fully understanding opportunity cost and comparative advantage in a macro sense. IMO, it's because it negates your premise. You're better than this!

How the heck does deficit spending increase the cost of private investment? Deficit spending isn't driving up interest rates.

I've been having the same discussion with you for years. Crowding out is very real. Not in the sense where you inaccurately attribute it to world war. In fact, during times of global warfare, government spending actually crowds in private investment by providing a backstop or guarantee in times of uncertainty. Crowding out occurs during periods of economic growth, and it necessarily reduces long term productivity by diverting resources away from more productive private endeavors.

How??? If the economy is at full-employment and government is running a deficit, firms will have to pay a premium to acquire financing. Why? When the government is borrowing at the same time businesses are borrowing, real interest rates increase thereby increasing the cost of capital. What would have cost $1 million now costs $1.1 million. And sometimes, firms will forego certain investments in situations such as these.

And why??? So the government can ensure income streams for our largest companies. That's why i don't trust politicians to make good choices. They are beholden to their donors and vote in ways that have only enriched the rich.

 

[JohnfrmClevelan]

When the economy is reeling, it's better than nothing. When the economy is growing, it's allocating resources in a manner that reduces potential output.

I question whether it really is using up resources that would otherwise be used. It's bird in the hand; at least with pork, something gets built for sure, and people get paid. I agree that pulling workers away from real projects isn't good, but I just don't think that's happening. Not since WWII, really.

China is manipulating their currency in this situation in order to keep their goods cheap enough to maintain export growth. U.S. firms and the Treasury are willing to look the other way as it is a cheap source of credit which is used to finance both public and private operations. When a Chinese company uses funds earned from trade to purchase an office building or corporate debt or you-name-it dollar denominated assets, it is a source of both liquidity and cheap credit. The firms that sold these assets will now have the dollars earned from trade to build new durable assets or grow their operations.

Chinese investment in companies, sure - but isn't that accounted for already, in the current account? But "investment" in treasuries doesn't fund government spending. And that's the "savings" I''m referring to (and the surplus that sectoral balances refers to). Treasuries are just dollars at rest, usually forever. With or without the Chinese (or anybody else) buying treasuries, the deficit would remain the same.

You have to remember that imports are almost perfectly correlated with that of economic growth. So while you intuitively view outflows as a negative (leakage), in reality, import growth is a sign of improving economic conditions, such that households and firms are willing to forego saving to consume.

It should also be noted that we've been running relatively large deficits for close to 20 years and we haven't seen the same economic improvement across the dispersion of incomes. So yes, the federal government is giving people money for non-durable consumption like necessities, but these types of expenditures haven't translated into higher incomes, greater health outcomes, more education, etc.... Instead, deficits in our current environment have only trickled up to the ultra wealthy. People continue to face medial bankruptcy and have an insane amount of student debt. Had government been investing more in people (health care and education) and less in guaranteeing income streams to the largest companies, i would argue there would be less need for various types of means-tested welfare.

That, I blame on bad policy. Savings have always accumulated with the rich, there is no way around that, but the more that labor can demand, the less we need deficit spending.

The U.S. economy does not possess the ability to produce all the goods that are imported while simultaneously maintaining its current production trajectory. Again, it's a matter opportunity cost and attempting to gear toward -- for lack of a better word -- exploiting our comparative advantage. How many engineers are you willing to trade so there are more low-cost manufacturing jobs?

None, of course. But that doesn't mean a large chunk of our labor force has to remain idle, either. I'm not looking to compete with the Chinese in low-end manufacturing.

For some reason, you're not fully understanding opportunity cost and comparative advantage in a macro sense. IMO, it's because it negates your premise. You're better than this!

I'm truly not coming at it from that direction, from trying to defend my premise. I see real faults in that reasoning. One of those faults seems to be disregarding simple accounting in favor of trends and graphs. Income is what buys the vast majority of stuff, and when income is lost to savings, that's a real loss that needs to be made up for. Demand leakages are very real, and they are not just an MMT idea.

 

[JohnfrmClevelan]

(cont.)

I've been having the same discussion with you for years. Crowding out is very real. Not in the sense where you inaccurately attribute it to world war. In fact, during times of global warfare, government spending actually crowds in private investment by providing a backstop or guarantee in times of uncertainty. Crowding out occurs during periods of economic growth, and it necessarily reduces long term productivity by diverting resources away from more productive private endeavors.

I just don't see that happening in reality. Too much unemployment and underemployment to believe that labor is one of those resources. And what else are we running short of, to the point where prices are rising because of too much demand? I just don't see government spending overlapping with private sector investment.

How??? If the economy is at full-employment and government is running a deficit, firms will have to pay a premium to acquire financing. Why? When the government is borrowing at the same time businesses are borrowing, real interest rates increase thereby increasing the cost of capital. What would have cost $1 million now costs $1.1 million. And sometimes, firms will forego certain investments in situations such as these.

But the government is borrowing at crazy low rates, rates that they set. They aren't competing with businesses. People buy treasuries for safety, for pension funds, etc. Further, when you consider that every dollar used to buy treasuries goes right back into the private sector, where is the dollar shortage?

And why??? So the government can ensure income streams for our largest companies. That's why i don't trust politicians to make good choices. They are beholden to their donors and vote in ways that have only enriched the rich.

Well, I agree with this, as I said earlier. But I'd rather have politicians making their decisions based on better assumptions than to have them hold back needed spending because they are afraid of the national debt.

 

[Kushinator]

I question whether it really is using up resources that would otherwise be used.

Your questioning is arbitrary.

Crowding out private investment isn't a matter of competition for resources. Again, i'm describing crowding out of private investment when the economy is growing.

It's bird in the hand; at least with pork, something gets built for sure, and people get paid. I agree that pulling workers away from real projects isn't good, but I just don't think that's happening. Not since WWII, really.

When the economy is growing at it's potential, deficits necessarily raise real interest rates. It is rare in our current environment given the relationship between tax revenue and economic growth, such that during extended growth periods, deficits decline. However, there have been instances where the economy has been operating at it's potential and deficits have risen, thereby crowding out the private sector. This does happen whether you can see it or not... investments that would have been made are moth-balled and the long term trajectory of the economy is undercut.

Chinese investment in companies, sure - but isn't that accounted for already, in the current account?

The current account includes public and private investment of foreign funds. I don't understand why you would say it's already accounted for. Foreign investment is a component of investment in the NIPA identity.

But "investment" in treasuries doesn't fund government spending.

Of course it does. While there are no broker dealers that take orders from Beijing, Chinese funds used to purchase treasury securities do flow into the overall economy.

And that's the "savings" I''m referring to (and the surplus that sectoral balances refers to). Treasuries are just dollars at rest, usually forever. With or without the Chinese (or anybody else) buying treasuries, the deficit would remain the same.

Sectoral balances tell us nothing about the economy that is not already known.

That, I blame on bad policy. Savings have always accumulated with the rich, there is no way around that, but the more that labor can demand, the less we need deficit spending.

Deficit spending is needed when the economy is operating below it's productive potential. When the economy is operating at it's potential, as already stated, deficit spending is a headwind to long term economic growth. In other words, future consumption, investment, government spending, imports, and exports will likely be lower than they would have been otherwise, without a net benefit to the short run.

None, of course. But that doesn't mean a large chunk of our labor force has to remain idle, either.

Frictional and structural unemployment are a reality that simply can't be waved away with deficits.

I'm not looking to compete with the Chinese in low-end manufacturing.

Do you believe imports are a negative for economic growth, all else equal?

Income is what buys the vast majority of stuff, and when income is lost to savings, that's a real loss that needs to be made up for. Demand leakages are very real, and they are not just an MMT idea.

We've already agreed that investment is derived from savings. Do we also agree that investment is a determinant to long term economic growth?

I just don't see that happening in reality. Too much unemployment and underemployment to believe that labor is one of those resources. And what else are we running short of, to the point where prices are rising because of too much demand? I just don't see government spending overlapping with private sector investment.

This point is entirely arbitrary.

But the government is borrowing at crazy low rates, rates that they set. They aren't competing with businesses. People buy treasuries for safety, for pension funds, etc. Further, when you consider that every dollar used to buy treasuries goes right back into the private sector, where is the dollar shortage?

They don't crowd out private investment when the economy is operating below it's potential, for the same reason that downturns occur... firms are not willing to invest at previous levels. Had firms felt confident enough to earn higher rates of return from the private sector, investment would grow.

Well, I agree with this, as I said earlier. But I'd rather have politicians making their decisions based on better assumptions than to have them hold back needed spending because they are afraid of the national debt.

Look at the recent stimulus. They really didn't hold anything back this time, other than choose to bail out businesses at a rate of 2:1.

 

[OrphanSlug]

Here is the breakdown:

... and people think none of the above helped the middle class.

 

[Kushinator]

... and people think none of the above helped the middle class.

I agree... it's strange. However, i do believe the money could have been better appropriated.

 

[RealityNow]

A sales tax used to "pay off" the national debt amounts to this: the govt. takes more dollars out of the active economy (consumption), and gives it to rich bondholders; or, it uses the tax revenues for spending so fewer bonds need to be issued in the future (depending on your understanding of "paying off the national debt"). Either way, demand would be negatively affected, and for no good reason.

If you want to "pay off" the debt without harming the economy, we should simply institute a wealth tax. Take money away from rich people, basically, since they are the ones holding most of the bonds. Not sure how that would help the economy, though.

They are the one who created the Nations Debt.... because they shipped industry away, collusive-ly skirted paying taxes for 4+ decades and cause the prices of goods to skyrocket with their destruction of competition in industry.... Over paying for houses, while fighting to keep property tax from rising with the high property cost, while expecting more city services.


The young people will UNCOVER all of it.....they have a level of knowledge and a thirst for information that gives them better understanding, and they will articulate their findings. They've already shown their power... before when the Occupy Movement was in force, they did not set frame to have and create a national leadership structure... but they learned from that mistake. They are alert and they don't trip over the same stumbling block as the generations of the past did, and they don't try to sanitize it away and make excuses for keeping it in place.
They've been taught by a impatiently greed driven older generations, that time is important but not for the same reasons as the Older Greed Monsters... to the Young Time is important to push REFORMS.....

No matter how much these old head baby boomers and their first generation of offspring scream and whine, they will not subdue the young. They are not controlled by money the same as the old greed monsters who would "do anything for money", and "damage anything to get money"....

America will be moved forward by a generation that will stop the game of Mass Debt being assumed by companies all for the sake to Destroy Competition.... They don't believe in the "Frenzy of the Trade Game The Stock Market is based upon in Today's society".... They will RE-DISCOVER why the Stock Market was created and they will force it to go back to the values it was founded upon.

People simply need to pay attention, as we will see a dramatic change in how Universities Teach... the "Greed by any means" is OUT!!!

They will find ways to change the dynamics of greed impact on Housing... and they will make it change. Homes should never have been made into a gambit game of price escalations at the rate and pace that is existing today. I would think, they will break down the "Plantation System of 30yr Mortgages"... because they see its a way of making people pay for a house 3-4 time through excessive Interest Payments.

The Pandemic showed America it needs massive change and the protest is showing America that it needs changes in "All" of its systems.

Those who fight it trying to cling to the old, will simply find themselves again whining "We've Been Left Behind'... and it will be revealed to them, they did it to themselves by trying to stagnate the world and running backwards chasing the past and trying to recreate the vain and bigoted vile that surrounded them in their youth... with all its bias and racist formats and monetary based obsessions of greed.

"The young don't accept a world being made "Un-affordable to live in"..... nor the system of Confederacy Ideology and Imperialist Agenda that created such madness and spread it across the world of nations."

In the next 4 yrs many of the Old Guard of the Republican System will be voted out of Congress and within the Democratic Ranks the Old heads that Lean Right and can't face change, will be voted out as well. Information that was hidden will be exposed and in that exposure it will detail how complicit the old guard has been in promoting what damages society.

 

[wellwisher]

Liberalism and Democrat policies is what has made the country so expensive to live in. Once the Lib's broke up the family, then the amount of housing that was required nearly doubled. Now the same family needed two homes, one for dad and one for mom and the children. The law of supply and demand says if the demand is suddenly doubled and the supply does not keep up, the price goes up. Before this social change, the average lower middle class family could afford a home.

With the brake up of the family , two residents got too expensive for one income. Women had to go to work and we also needed more social welfare for woman who did not work and to take care of the children during the day. The Government never turns a profit, while only the free market does. The latter is called the growth in the GNP.

More welfare means more money does not grow via the free market, Rather the money shrinks through deficit spending and a negative rate of government return. One bad Liberal policy was able to harm the economy more than you know. If we admire bad ideas, the system break down faster and we off to a totalitarian state. We can reverse this by going back to what was more efficient for all.

 

[Ignatius]

If every state had their own Fed, they wouldn’t need congress to bail them out. (Sarcasm)

If things worked as intended each state would take care of itself but the govt has essentially been expanding to eliminate states rights almost since day one