Is a 2% cut in federal spending really going to make the sky fall?

[Anthony60]

So, the government spends $11 billion a day, and we are supposed to be worried about $44 billion in cuts? That's four days! LOL! On top of that, our largest deficits prior to Obama were in the $400 - 500 billion range, he comes in and adds $ a trillion on top of that. One wonders how the hell we got bye spending a $trillion less than we do now. But all of a sudden, $44 billion is a disaster.

 

[wellwisher]

The government is able to create jobs, but it can't create wealth. If it taxes these government jobs all it does is recyce the same money but adds nothing new. Wealth is how you create new revenue.

For example, we tax and then created the department of homeland security. This creates jobs but does not increase the tax revenue since it is all recycle but nothing new. Since this department can't create wealth, it is dependent on others to keep it afloat, while not contributing to new tax revenues.

With the free market, a private security company can also create jobs and can provide the same services. The difference is these are not propped up but need to turn a profit and be self sufficient. If we cut off its resources from external sources, it is self sufficient and would continue to have jobs.

The analogy is host and parasite. The host can exist without the parasite, but the parasite can't exist without the host. If the host was to die, so goes the parasite. But if the parasite was to die the host returns to health.

As government grows the host has to figure out ways to support a growing parasite.

One solution is to have the government turn a profit. The post office at least earns money to pay for most of its function while still providing services for the country. This earned revenue stream allows it to add to the tax revenue. If this was using the pure parasite approach of the rest of government, we would need to raise taxes again to keep the parasite alive, while losing the revenue stream it is providing for the common good.

 

[Vadinho]

Do you postulate that a person working for the government does not use his income to further the growth of the economy?

 

[Vadinho]

If you think you are competent in economics, prove it. As far as i can tell, you haven't the faintest grasp of it.

 

[JRSaindo]

What does it matter when the two services no one really wants to talk about rise at exorbitant rates above inflation. Healthcare and College tuition. Look at the trends in these two categories over the past two decades and tell me there isn't a problem....

College tuition is up 1200% in 35 years, while healthcare fees have soared by a neat 600% or double the official cumulative inflation. Why? Well, because of two words: "Cheap Credit." This is also the reason why the BLS and the Fed can get away with alleging inflation is sub-2%: because the actual cost for these 'soaring in price' services is never actually incurred currently, but is deferred with the only actual outlay being the cash interest, which as everyone knows is now at the ZIRP boundary thanks to 4+ years of ZIRP and three decades of the "great moderation."

Of course, if one actually were to calculate inflation by how it should be captured in a world in which half the base money is in the form of reserves which are only used to fund risky asset purchases (for now), which includes nominal stock and bond levels, it would be well in the double digits, but that is an exercise for a different day.

So bitch and moan all day about the sequester, because in the long run, it won't hold a torch to the healthcare and college tuition bubbles when they implode. Rather than fix these bloated and inefficiently ran systems, we have a POTUS who passes Obamacare so EVERYONE has to pay into the broken system that is healthcare.

 

[JRSaindo]

Hell, the Fed pumps 84 billion into the system every month. That is 118 million dollars an hour.

This $85 billion a month must go somewhere. It pours out upon the markets and it is no wonder that the American stock markets are hitting new highs. The spice must flow. The FED makes it so. I wish I was 80 so I don't have to live until I do turn 80 if this keeps pace.

I love how Keynesians say "We must spend our way out" but see no end game. When does the game finally end? No one knows, but it will be spectacular.

 

[Anthony60]

The government just spends our money, and produces nothing. For all the trillions of dollars that they suck out of the economy, they add exactly ZERO to the GNP. The local 7-11 adds more than the government.

 

[Cardinal Fang]

LOL!!! You have presented nothing, and I mean NOTHING other than retarded statements like the above which amount to "I'm smart, you're dumb". Your hackery has been nicely displayed. Bravo.

Gee, what happened to my being "dismissed"? That didn't last long. Running away was actually your last best hope here, and now you've gone and bobbled that as well.

Great graph.:roll: Way to end things in 1983... 2 years into an 8 year term.

Tax cuts were in 1981. Your claim is that they were followed by a great expansion. My claim is that they were followed by the worst economic downturn since the Great Depression. You lose.

Your own stupid graph even shows a decline that started in the 3rd quarter of 1981 had already reversed itself and was headed back up by the first quarter of 1982.

As I already told you, the Reagan Recession began in July 1981 and persisted until November 1982. You could have looked that up for yourself, but obviously you didn't.

For about three or four pages now you have been trying to discredit a home run because the batter allowed a strike before knocking it out of the park.

I'm just pointing out ignorance and ineptitude where I see it. You keep bringing grist to the mill.

 

[Cardinal Fang]

So, the government spends $11 billion a day, and we are supposed to be worried about $44 billion in cuts? That's four days! LOL! On top of that, our largest deficits prior to Obama were in the $400 - 500 billion range, he comes in and adds $ a trillion on top of that. One wonders how the hell we got bye spending a $trillion less than we do now. But all of a sudden, $44 billion is a disaster.

Here is your wake-up call: The plan is to run large deficits during times of national crisis. As the saying goes, Bush ran large deficits when he had no reason, while Obama ran large deficits when he had no choice.

 

[Cardinal Fang]

The government is able to create jobs, but it can't create wealth. If it taxes these government jobs all it does is recyce the same money but adds nothing new. Wealth is how you create new revenue. For example, we tax and then created the department of homeland security. This creates jobs but does not increase the tax revenue since it is all recycle but nothing new. Since this department can't create wealth, it is dependent on others to keep it afloat, while not contributing to new tax revenues.

Oh please. The money you pay in taxes is no different from the money you fork over at the end of the grocery store check-out line. Both are turned around and become income for employees which is then taxed according to law with the balance being used for private sector purchases of some sort or other. Private sector counterparties cannot tell and do not care who paid the wages of his customer. A sale is a sale. There is simply no difference between them. Your whole theory is a jumbled bunch of pure crapola.

 

[NAKED N00B]

I try to understand multiple positions. I read Heritage, Cato, Fox, etc. I follow conservative pundits on Twitter. I try to evaluate which positions make the most sense. And even if I don't agree with conservative ideas, I feel like I at least understand where they're coming from. Which makes it so surprising when I see conservatives talking about liberal positions as if the closest they've ever come to a liberal is a weak caricature from a political Cartoon in the National Review.

Liberals don't want unlimited spending. We're not completely opposed to cuts eventually. We acknowledge there is a long term budget problem which should be addressed. But a depressed economy is not the time for cuts. We cannot expect to get out of an economic hole without following pro-growth policies. And growth means an increase in short term budget deficits.

When the private sector can absorb the cut backs of government and monetary policy moves away from the zero lower bound, we can start talking about spending cuts and addressing the debt. But a $44 billion dollar cut is $44 billion out of a weak economy. Pointing out the fact that that isn't a good thing should not be some wildly controversial point.

 

[Cardinal Fang]

What does it matter when the two services no one really wants to talk about rise at exorbitant rates above inflation. Healthcare and College tuition. Look at the trends in these two categories over the past two decades and tell me there isn't a problem....

Of course there has been a problem. Which is why the administration has been hammering on both these things since taking office. Have you not read the paper lately or something?

"Cheap Credit." This is also the reason why the BLS and the Fed can get away with alleging inflation is sub-2%: because the actual cost for these 'soaring in price' services is never actually incurred currently, but is deferred with the only actual outlay being the cash interest, which as everyone knows is now at the ZIRP boundary thanks to 4+ years of ZIRP and three decades of the "great moderation."

What a trainwreck! The Fed has nothing to do with inflation data, and the reason that BLS data show that there has been very litttle inflation of late is that there has been very little inflation of late. Both education and health care services are included in the CPI by the way, right along with expenses for financial services.

Of course, if one actually were to calculate inflation by how it should be captured in a world in which half the base money is in the form of reserves which are only used to fund risky asset purchases (for now), which includes nominal stock and bond levels, it would be well in the double digits, but that is an exercise for a different day.

Aw geez! Vault cash and excess bank reserves are not in circulation. They have no more effect on inflation than does the old can of Campbell's Tomato Soup that is still sitting unseen at the back fo your kitchen cabinet.

So bitch and moan all day about the sequester, because in the long run, it won't hold a torch to the healthcare and college tuition bubbles when they implode. Rather than fix these bloated and inefficiently ran systems, we have a POTUS who passes Obamacare so EVERYONE has to pay into the broken system that is healthcare.

The sequester is bad because it is the opposite of what is needed. It isn't actually relevant to the rest of your babble. You have to pay for health care because everyone does. Just like Social Security. Or the military. That's how a universal system works.

 

[Cardinal Fang]

The government just spends our money, and produces nothing. For all the trillions of dollars that they suck out of the economy, they add exactly ZERO to the GNP. The local 7-11 adds more than the government.

We switched from GNP to GDP twenty years ago. The public sector most recently accounted for a little over 19% of GDP. 7-11, not so much.

 

[Anthony60]

19%? What did they produce? Or do you have a link for that info?

 

[Bronson]

Strassel: Jumping the Sequester - WSJ.com

The phrase "jumping the shark" describes that gimmicky moment when something once considered significant is exposed as ludicrous. This is the week the White House jumped the sequester.

The precise moment came Tuesday, when the administration announced that it was canceling public tours of the White House, blaming budget cuts. The Sequesterer in Chief has insisted that cutting even $44 billion from this fiscal year will cause agonizing pain—airport security snarls, uninspected meat, uneducated children. Since none of those things has come to pass, the White House decided it needed an immediate and high-profile way of making its point. Ergo, it would deny the nation's school kids a chance to view a symbol of America.

 

[WhyNotWhyNot]

Strassel: Jumping the Sequester - WSJ.com

If you have any doubt about whether White House spending priorities are misplaced consider:

In the White House there is an office of Assistant to the President for Communications and White House Communications. Its mission is to devise strategies to promote the President’s agenda and to assure that it is delivered effectively through all media. President Nixon created the position. Republican and Democratic Presidents have expanded its size ever since. The office currently has eleven (11) director level staff positions supported by a significant office staff organized as follows:
• Assistant to the President for Communications and White House Communications Director
o Special Consultant to the President for Media Affairs
o Deputy Assistant to the President and Deputy Director of Communications
o Assistant to the President and Director of Speechwriting
o Director of New Media
o Director of Media Affairs
o Director of Broadcast Media
o Director of Specialty Media
o Director of Hispanic Media
o Director of Citizen Participation
o Director of African American Media

The office of Assistant to the President for Communications and White House Communications works closely with the office of the White House Press Secretary to disseminate the President’s agenda through “news” media. The White House Press Secretary has three supporting assistant management positions (plus office staff). In total the two offices have 15 management level staff designing and delivering the President’s message.

The director titles make it clear that the office has been designed to specially target message delivery to Hispanics and African Americans, two ethnic groups that were key constituencies in President Obama’s election and are considered to be key to his reelection. Normally the top position is filled by someone who was intimately connected to the President’s election management. George Stephanopoulos was President Clinton’s deputy campaign manager and then became the Assistant to the President for Communications and White House Communications, for example.

To paraphrase a famous saying, “If it walks like an election influence machine and quacks like an election influence machine, it must be an election influence machine”

 

[Anthony60]

We switched from GNP to GDP twenty years ago. The public sector most recently accounted for a little over 19% of GDP. 7-11, not so much.

Interestingly, the "public sector" collected 19% of GDP in taxes. As in taking, not contributing. Looks like 7-11 is still ahead of the government.

TaxProf Blog: WSJ: Tax Revenues = 19% of GDP, Regardless of Tax Rates

 

[Cardinal Fang]

19%? What did they produce? Or do you have a link for that info?

Interestingly, the "public sector" collected 19% of GDP in taxes. As in taking, not contributing. Looks like 7-11 is still ahead of the government. [TaxProf Blog: WSJ: Tax Revenues = 19% of GDP, Regardless of Tax Rates]

GDP is by disposition, not by source. I just love it when people who don't know the first thing about a topic start prancing and strutting around like they were some sort of expert. What a freak show!



Do you think you could divide Line 21 by Line 1? Hint: The most recent time period was 2012-IV.

 

[Anthony60]

I'll try to reply without the snarky strutting about that you feel is necessary. I thought I asked a pretty easy question... do you have a link, and what did the government produce? I'd like to examine the source, since you are claiming that the government is producing something.

 

[Cardinal Fang]

I'll try to reply without the snarky strutting about that you feel is necessary. I thought I asked a pretty easy question... do you have a link, and what did the government produce? I'd like to examine the source, since you are claiming that the government is producing something.

GDP data are produced by the Bureau of Economic Analysis. The screenshot above was taken from NIPA Table 1.1.5.

The government meanwhile produces a wide variety of goods and services. Check out a national park, military base, or federal court or prison near you for a few obvious examples. And why would you think that an accountant working in the private sector was productive, while an even better one working in the public sector was not?

 

[Anthony60]

GDP data are produced by the Bureau of Economic Analysis. The screenshot above was taken from NIPA Table 1.1.5.

The government meanwhile produces a wide variety of goods and services. Check out a national park, military base, or federal court or prison near you for a few obvious examples. And why would you think that an accountant working in the private sector was productive, while an even better one working in the public sector was not?

We pay for all that with our tax dollars, government doesn't produce anything. Keep looking.

 

[WhyNotWhyNot]

We pay for all that with our tax dollars, government doesn't produce anything. Keep looking.

There is a very hard lesson to be learned from leaving all pursuit of the future to private enterprise. That is that making money and investment knows no boundaries. A cell phone can be sold in Egypt as well as it can be sold in the US for the same profit. It can be made in Thailand as well as it can be made in the US but for lower cost which is always the choice of private enterprise where the only goal is greater profit and stock price maximization. Invented in the US does not necessarily mean that there will be a foundation for future US growth.

The second very hard lesson is that private pursuit of the future selects ideas that might yield explosive revenue and profit rather quickly, while letting small ideas or ideas that require long gestation time whither. Everyone wants to make a small investment that leads to a big return today! These types of investments are big gambles with high likelihood of failure so the strategy is to make many small investments such that the gains from the few that succeed exceed the losses from the many that fail. Not every path to our future can be one that has potential for quick yield and large return on its venture investment. There are many good mundane ideas that will lead to steady returns and have low risk of failure that are neglected when we solely rely on private investment to define our future. Consider the following example the next time that you know someone who has cancer or recently suffered a heart attack. Nearly every modest sized or larger hospital in the US has a nuclear medicine department where images of cancer tumors, heart arteries, and many other conditions are made so that physicians can determine how to pursue treatment. This was made possible because all of the radioisotope and imaging camera technology was invented and perfected at US Department of Energy laboratories. Private industry adopted the machinery production, isotope production and radiopharmaceutical formulations, and computerized image analysis methods only after the government work had created general acceptance of the medical discipline. Industry only adopted the technology that could be readily converted to commodity products quickly and with minimal investment. Even after 50 years of incredible medical procedure success, private investment in new development is reluctant at best. It is a matter of return on investment and investment risk. Companies that sell radiopharmaceuticals generally also sell conventional pharmaceuticals and medical devices. When they have money to invest in new product development they pursue products that have the best combination of market size, profit potential, and fastest path to market for the least investment. Radiopharmaceuticals tend to have small market size, acceptable but not spectacular profit potential, slow and difficult development and approval cycles, because of the radioactive materials regulations piled on top of the normal drug development control regulations, and they require very expensive production equipment investment. The investor with a choice between conventional new drug investment and radiopharmaceutical drug investment will always choose the conventional drug investment. Our future national health is very dependent on this technology and this medical discipline, yet it cannot effectively attract investment that would allow new ideas to grow. This is a multi-billion dollar per year enterprise that is still looking to US national laboratories to create the future. Here is a specific example. The radioactive isotope 82-Sr is the raw material that is needed for a popular heart blood flow PET imaging procedure. This procedure is the newest and best technology. It is currently available at about 25% of the PET centers in the US. Wider distribution is being held back and the price is being held up because 100% of the world’s existing 82-Sr production capacity is used up. The bulk isotope is made by the US Department of Energy national laboratories. It is sold to drug companies that dispense, package, and sell it to PET clinics. The drug companies make reasonable profits because they do not have to recoup a very large start-up investment in construction of particle accelerators and massive facilities for making and doing chemistry operations on concentrated radioactive materials. The product is proven. The market is grossly underserved. Profitability is proven. You would think that some enterprise would step forward to fill the business void. You would be wrong! The annual return on the new facilities and equipment investment would be less than 2%. The investor would make as much putting the money in a savings account with no risk of loss. Expansion of availability and price reduction through higher volume will only occur if the US Government constructs new particle accelerator facilities. This example illustrates a common condition that is not attractive to private investment –initial investment is too much so that even successful future business essential to the nation cannot produce an adequate return. The interstate highway system is another great example. It couldn’t have been privately built because tolls would never have paid off the investment.- The Wind Of Hope

Here is an example. One that I am personnally involved in.

 

[Anthony60]

There are projects that we allow the government to do because it is the best means to do it. The space program yielded many benefits, as did the Manhattan Project, both too big for individual companies to take on. And, of course, big money losers that they wouldn't take on. We allow government to do these things because there is a need for them. The payoff is not in dollars, but more or less in breakthroughs.

 

[Cardinal Fang]

We pay for all that with our tax dollars, government doesn't produce anything. Keep looking.

LOL! You pay for everything in the private sector in sales prices. Consumers and taxpayers are the very same people doing the very same thing while consuming either private sector or public sector goods and services. The difference comes only in the means by which you pay for them. To use the classic example of defense, it is an indivisible good (everyone is defended, whether they claim to want to be or not), and there is no discrete point of sale at which a traditional sales price could be imposed. That's where taxes comes in. Aside from the funding mechanism however, there is exactly no difference at all between what the private sector does and what the public sector does. As in the question that you didn't begin to answer above, accounting is accounting. If it is somehow productive when done in the private sector, it is when done in the public sector as well. You are simply suffering here from a grand and quite ridiculous economic delusion.

 

[Cardinal Fang]

The payoff is not in dollars, but more or less in breakthroughs.

Payoff? How can there be a payoff from an activity that doesn't produce anything?