Socialized Healthcare Does Not Work

[MaggieD]

I think using some debt to grow the economy is OK, but I would cap it at 20% of GDP during a recession, 0% of GDP during normal times, and be much more liberal with it for a war (as long as the war is a real war and not a "police action" or something else)

Expecting a government to operate without debt is unreasonable. IMO the government should be capped at a debt load of 30% of gross income. And should have to retire the debt with regular paydowns. Just like I do.

 

[Slartibartfast]

Expecting a government to operate without debt is unreasonable. IMO the government should be capped at a debt load of 30% of gross income. And should have to retire the debt with regular paydowns. Just like I do.

The idea is to actually use Keynesian policy instead of some bastardized version that we have right now. The 20% is essentially a shot in the dark (I don't know what the proper % is, but it shouldn't be too high) while the 0% is based on the idea that it will have to be paid back when times are good. And then there is war, in which case, if the nation is threatened (and I am not talking about something like Iraq, but a real threat) than we should pull all stops to defend it.

 

[MaggieD]

The idea is to actually use Keynesian policy instead of some bastardized version that we have right now. The 20% is essentially a shot in the dark (I don't know what the proper % is, but it shouldn't be too high) while the 0% is based on the idea that it will have to be paid back when times are good. And then there is war, in which case, if the nation is threatened (and I am not talking about something like Iraq, but a real threat) than we should pull all stops to defend it.

I wonder if Keynes would agree with you that we are using a bastardized version of his policy. We certainly have mass redistribution of wealth. We certainly prime the pump with Federal spending. Our social programs allow the poor to become consumers. We're at war right now, so gvmt spending's been ramped for years. What is bastardized about it? Maybe that we're not increasing the money supply because that's a double-edged sword?

I know beans about Keynesian policy other than a quick read just now. So not trying to sound smarter than I'm NOT. ;-) Very curious.

 

[Slartibartfast]

I wonder if Keynes would agree with you that we are using a bastardized version of his policy. We certainly have mass redistribution of wealth. We certainly prime the pump with Federal spending. Our social programs allow the poor to become consumers. We're at war right now, so gvmt spending's been ramped for years. What is bastardized about it? Maybe that we're not increasing the money supply because that's a double-edged sword?

I know beans about Keynesian policy other than a quick read just now. So not trying to sound smarter than I'm NOT. ;-) Very curious.

The basic idea is that we use government spending to stabilize the business cycle, sort of as a counterweight. So in times of recession, government spends more and in boom times, government reduces debt. What ends up happening is that debt increases no matter what, and that is where the bastardization comes in. We have doing it half way, so to speak. However, we also need to consider the type of recession. If its a demand problem, we spend more. If it is a supply problem, we cut taxes. Either way, debt would go up as a result, assuming all other things being equal.

Also, I am making a distinction between a justified war (such as a threat to our existence as a country) and us lollygagging around the globe such as we did during the cold war and we are currently doing with Iraq. Also, there is a degree of difference between Nazis and Russians vs some hicks with rocket launchers.

 

[MaggieD]

The basic idea is that we use government spending to stabilize the business cycle, sort of as a counterweight. So in times of recession, government spends more and in boom times, government reduces debt. What ends up happening is that debt increases no matter what, and that is where the bastardization comes in. We have doing it half way, so to speak. However, we also need to consider the type of recession. If its a demand problem, we spend more. If it is a supply problem, we cut taxes. Either way, debt would go up as a result, assuming all other things being equal.

Also, I am making a distinction between a justified war (such as a threat to our existence as a country) and us lollygagging around the globe such as we did during the cold war and we are currently doing with Iraq. Also, there is a degree of difference between Nazis and Russians vs some hicks with rocket launchers.

Then it would seem that government spending combined with tax cuts ought to be the double-barrelled approach in this case. I'm having a bit more respect for Obama's policies right now. 'Course that argues leave the tax cuts in place for all and cut 'em some more...

Just an observation: Only took 79 posts to get to Nazi. ;-) What's the name of that "theory" ??

 

[Slartibartfast]

Then it would seem that government spending combined with tax cuts ought to be the double-barrelled approach in this case. I'm having a bit more respect for Obama's policies right now. 'Course that argues leave the tax cuts in place for all and cut 'em some more...

Just an observation: Only took 79 posts to get to Nazi. ;-) What's the name of that "theory" ??

Its a sliding scale. Tax cuts are more effective in solving some problems and spending is more effective at solving others. If we have $X to spend, we have to choose one, the other, or some combination.

 

[phattonez]

The basic idea is that we use government spending to stabilize the business cycle, sort of as a counterweight. So in times of recession, government spends more and in boom times, government reduces debt. What ends up happening is that debt increases no matter what, and that is where the bastardization comes in. We have doing it half way, so to speak. However, we also need to consider the type of recession. If its a demand problem, we spend more. If it is a supply problem, we cut taxes. Either way, debt would go up as a result, assuming all other things being equal.

Also, I am making a distinction between a justified war (such as a threat to our existence as a country) and us lollygagging around the globe such as we did during the cold war and we are currently doing with Iraq. Also, there is a degree of difference between Nazis and Russians vs some hicks with rocket launchers.

What is "insufficient demand" and how exactly does it come about?

 

[MaggieD]

What is "insufficient demand" and how exactly does it come about?

:2wave: I know! I know! Mega prolly knows better, but several reasons for insufficient demand might include tight credit -- we've got that now. And hoarding of cash because of fears about the economy. Got that, too.

 

[phattonez]

:2wave: I know! I know! Mega prolly knows better, but several reasons for insufficient demand might include tight credit -- we've got that now. And hoarding of cash because of fears about the economy. Got that, too.

What causes tight credit? What causes "fears about the economy?"

 

[MaggieD]

What causes tight credit? What causes "fears about the economy?"

Oh, go ahead, make me think. The tight credit right now is caused by banks being fearful of borrowers....of borrowers' credit ratings being in the toilet...of borrowers over-extending their purchasing power...all compounded by the recession and, especially, the real estate melt-down. No more using one's home as an ATM with HELOC's. Fears about the economy come from my next-door neighbor John being laid off. And I'm afraid it's going to happen to me.

 

[phattonez]

What initiated it? I know you'll probably say the housing market, but then why did all of a sudden home prices just plummet?

 

[MaggieD]

What initiated it? I know you'll probably say the housing market, but then why did all of a sudden home prices just plummet?

Home prices plummeted because buyers dried up. We'd been selling homes for YEARS to people who couldn't even buy LUNCH. 0% down; inflating home prices by 4% so the seller could give the buyer a 4% credit at close for his downpayment; lenders loaning money at 1% interest rates (or even ZERO) for a year or two so that a home buyer THOUGHT he could afford to buy his home -- then when the rate reset, he was out of luck...couldn't afford his new payment, had none of his OWN money in the deal, and simply walked away.

Home prices, like everything else, depend upon supply and demand. The demand side was FILLED with people who were NOT bona fide buyers creating an artificial shortage driving up the cost of homes beyond reality -- and into the bubble territory we experienced.

 

[phattonez]

And so would artificially propping up demand fix this problem? Should we prop up demand to keep up with production, or should production settle where the demand is?

 

[MaggieD]

And so would artificially propping up demand fix this problem? Should we prop up demand to keep up with production, or should production settle where the demand is?

In my opinion, doing anything artificial just prolongs the pain. But, whado I know? In the case of the housing market, until the glut of foreclosures is worked through, home prices are destined to stagnate -- or even double dip. It's not pretty right now. President Obama chastised the banks for tightening credit back some months ago. I cringed, since their "loose credit" is exactly what got us into this mess.