Cutting spending during a recession

[Double Trouble]

Whenever there's discussion of the deficit and you get into the inevitable cut spending vs raise taxes argument, people bring up the (IMO valid) point that cutting spending in the middle of a recession is a surefire way to tank the economy even further.

That said, why not agree to cut specific spending at a certain point in the future? For example, pass legislation that cuts spending / money allocation by x percent in 3 years, then another y percent in 5. Not bullshit accounting flim flam and baselining cuts, real cuts. That would signal to investors and the public that we are serious about attacking the deficit, but at the same time not undermine the current economy by taking out much needed money. The bonus for the current set of critters would be that they could claim they were fighting the deficit without actually incurring the wrath of those impacted by reductions.

Please keep the partisan hackery out, there are plenty of other treads where you can post the bobo the obummer, job creators, ownership society etc bullshit.

 

[Doppel]

That said, why not agree to cut specific spending at a certain point in the future?

Won't work because congress can always back this out and always will. In fact, the automatic spending cuts set to kick in this year after the debt committee inevitably fails look almost certainly to be wound out as well; ergo, it was just rubbish to begin with.

 

[irishScott]

Good luck with the anti-troll clause.

Like Doppel said, there is nothing tying Congress to carry out said cuts, given that Congress is the law-making wing of government. A future congress could simply propose amendments to said bill and that would be that. To make your approach work we'd need it in the Constitution. Good luck with that.

As for cutting spending during a recession, the recession isn't our only problem here. We have $14,000,000,000,000.00 in debt and counting. If we default on that, it'll make the current recession look like a bull market. We have to combat the deficit somehow, and IMO need a combination of raising taxes and drastic spending cuts (the military could use a good slicing). Unfortuantely I have next to zero faith in our current government to fix the problem. 1/10 unemployed isn't enough to make the drastic changes we need happen, shit's going to have to get a lot worse and anger a lot more people before Washington changes for the better.

Of course, we could also get lucky. Maybe a new world-bubble will give us enough time to get our asses in gear, or scientists will perfect fusion reactors and permanently solve the energy crisis. More likely than the government fixing anything, although they'd certainly try to take credit.

 

[Craig234]

I've got no problem with that.

People need to not lump all government spending together.

There is 'great, 'good', and bad and terrible spending, among others. Some returns more than it costs, some is great for the economy, some does important things for people.

Other spending is corrupt, some is harmful.

But Keynesian economics calls for reduced spending in up times.

The quaint notion of 'balancing the budget' (nearly) went out of fashion with the Reagan 'starve the beast, buy the appearance of prosperity on borrowed money' policies.

We can agree if you support useful recovery spending and spending less after.

The other thing is though, it's not just government spending, we need to tax and spend in a way that reduces our peak concentration of wealth.

 

[Doppel]

We can agree if you support useful recovery spending and spending less after.

Just doesn't seem to be in the cards and that is a big problem, the government hasn't had a surplus in years and so cannot increase spending during recession without pulling from debt

 

[Craig234]

Just doesn't seem to be in the cards and that is a big problem, the government hasn't had a surplus in years and so cannot increase spending during recession without pulling from debt

Yes, the spending for recovery needs to be debt, and then we should be shooting for reducing the debt in better times. Problem is how bad the economic problems are now.

 

[Doppel]

Yes, the spending for recovery needs to be debt, and then we should be shooting for reducing the debt in better times. Problem is how bad the economic problems are now.

And they aren't getting better, but the debt is getting much worse. Greece is inexorably in a debt death spiral and even the eternal optimists (i.e. dreamers) find it hard to deny. The US is in a much slower one, but looking at the same trends it is in one nonetheless. I don't think anybody actually expects the US to "recover" to the point it can ever create a surplus again and actually pay down debt. The only policy now is "hold on tight" as it repeats over and over again.

 

[fskimospy]

Whenever there's discussion of the deficit and you get into the inevitable cut spending vs raise taxes argument, people bring up the (IMO valid) point that cutting spending in the middle of a recession is a surefire way to tank the economy even further.

That said, why not agree to cut specific spending at a certain point in the future? For example, pass legislation that cuts spending / money allocation by x percent in 3 years, then another y percent in 5. Not bullshit accounting flim flam and baselining cuts, real cuts. That would signal to investors and the public that we are serious about attacking the deficit, but at the same time not undermine the current economy by taking out much needed money. The bonus for the current set of critters would be that they could claim they were fighting the deficit without actually incurring the wrath of those impacted by reductions.

Please keep the partisan hackery out, there are plenty of other treads where you can post the bobo the obummer, job creators, ownership society etc bullshit.

Yes, this is in fact the general consensus of what we need to do. More specifically, it is further stimulus spending now along with long term entitlement reform to address the US debt in the future. To be honest, this is quite close to what Obama has already proposed.

 

[Atreus21]

I wouldn't take a promise to cut spending in the future very seriously.

 

[Budmantom]

Yes, this is in fact the general consensus of what we need to do. More specifically, it is further stimulus spending now along with long term entitlement reform to address the US debt in the future. To be honest, this is quite close to what Obama has already proposed.

I love the non binding spending cuts in 10 years....

Obama has tried everything that has been proven not to work and he has promised to double down. Tax and spend & spend some more.

 

[Jaskalas]

And they aren't getting better, but the debt is getting much worse. Greece is inexorably in a debt death spiral and even the eternal optimists (i.e. dreamers) find it hard to deny. The US is in a much slower one, but looking at the same trends it is in one nonetheless. I don't think anybody actually expects the US to "recover" to the point it can ever create a surplus again and actually pay down debt. The only policy now is "hold on tight" as it repeats over and over again.

:thumbsup::thumbsup: Exactly.

The thing is we can simply choose not to continue doing this. We can listen to the Tea Party and cut spending. Probably never going to happen though, with corporate Dems wielding a corrupt GOP in support of Spend Spend Spend! More money for crony capitalism.

Stop the spending, take the short term depression, and save the nation in the long term. No more bailouts, no more stimulus! Just say NO! to crony capitalism.

 

[fskimospy]

I love the non binding spending cuts in 10 years....

Obama has tried everything that has been proven not to work and he has promised to double down. Tax and spend & spend some more.

Saying things are proven not to work is easy when you just make shit up. Then again, if you weren't addicted to some fantasy about how the world operates, you wouldn't be you!

 

[Budmantom]

Saying things are proven not to work is easy when you just make shit up. Then again, if you weren't addicted to some fantasy about how the world operates, you wouldn't be you!

Obama has proven he has no idea what he is doing(4th recovery summer anyone?), unless you would like to talk about the Fast and Furious or Solyndra.

 

[fskimospy]

Obama has proven he has no idea what he is doing(4th recovery summer anyone?), unless you would like to talk about the Fast and Furious or Solyndra.

You're just incoherently babbling now. The OP asked for people to not troll his thread, so why not be an upstanding citizen and do it?

 

[fskimospy]

:thumbsup::thumbsup: Exactly.

The thing is we can simply choose not to continue doing this. We can listen to the Tea Party and cut spending. Probably never going to happen though, with corporate Dems wielding a corrupt GOP in support of Spend Spend Spend! More money for crony capitalism.

Stop the spending, take the short term depression, and save the nation in the long term. No more bailouts, no more stimulus! Just say NO! to crony capitalism.

Greece and the US are nothing alike. It has bond rates that are ten times what ours are. (the primary root of their problem) It has structural deficits far higher than the US's, it's debt to GDP ratio is far worse, it has an noncompetitive economy, and it is unable to use fiscal policy to mitigate its downturns due to being on the de facto gold standard of the Euro. Repeat: Greece and the US are nothing alike.

Greece has no choice but to embark on the foolhardy proposition of cutting spending during a recession, the US is fortunate that we can engage in effective stimulus policy instead (provided we eventually find the political will to do so).

 

[irishScott]

Greece and the US are nothing alike. It has bond rates that are ten times what ours are. (the primary root of their problem) It has structural deficits far higher than the US's, it's debt to GDP ratio is far worse, it has an noncompetitive economy, and it is unable to use fiscal policy to mitigate its downturns due to being on the de facto gold standard of the Euro. Repeat: Greece and the US are nothing alike.

Greece has no choice but to embark on the foolhardy proposition of cutting spending during a recession, the US is fortunate that we can engage in effective stimulus policy instead (provided we eventually find the political will to do so).

We can? Please tell me how spending us into default is going to stimulate the economy.

 

[fskimospy]

We can? Please tell me how spending us into default is going to stimulate the economy.

We wouldn't be spending ourselves into a default or anywhere close to it. Not only is default by the US literally impossible unless we choose to do so, but short term stimulus spending has very little to do with the actual drivers of US debt problems, that being primarily Medicare.

Seriously, people. If you want to talk about this why are you just making shit up?

 

[irishScott]

We wouldn't be spending ourselves into a default or anywhere close to it. Not only is default by the US literally impossible unless we choose to do so, but short term stimulus spending has very little to do with the actual drivers of US debt problems, that being primarily Medicare.

Seriously, people. If you want to talk about this why are you just making shit up?

So our government's debt is meaningless? We can spend whatever we want without consequence to those holding our debt? I want to hear you say that...

 

[Jaskalas]

Seriously, people. If you want to talk about this why are you just making shit up?

That 'made up shit' is exactly what you'll have to contend with in Congress today, and with the voters tomorrow. Given that, you still think you can spend your way out of this? The opposition ensures you cannot get it done.

Still going to try, have you got nothing else?

 

[fskimospy]

So our government's debt is meaningless? We can spend whatever we want without consequence to those holding our debt? I want to hear you say that...

No. The government's debt isn't meaningless, it just doesn't mean what you think it does.

 

[fskimospy]

That 'made up shit' is exactly what you'll have to contend with in Congress today, and with the voters tomorrow. Given that, you still think you can spend your way out of this? The opposition ensures you cannot get it done.

Still going to try, have you got nothing else?

It doesn't really matter. There is the correct fiscal policy and the wrong fiscal policy in this matter. Since it's a binary choice of either increasing or decreasing spending, what can actually be accomplished is largely irrelevant as to what action I would take, it's not like you would elect to do something bad just for the sake of doing something.

The best case scenario would be further stimulative spending. If that fails due to Congress, then the next best scenario is preventing any short term spending cuts from taking place.

 

[irishScott]

No. The government's debt isn't meaningless, it just doesn't mean what you think it does.

So what does it mean sensai? Other countries can simply stop lending us money at any time, which is basically default by a different name. And stimulus without economic reform is little more than a temporary measure that fades the moment the money is spent.

 

[fskimospy]

So what does it mean sensai? Other countries can simply stop lending us money at any time, which is basically default by a different name. And stimulus without economic reform is little more than a temporary measure that fades the moment the money is spent.

1.) No, they really can't. Furthermore, the vast majority of US debt is internally owned. ie: most of the lending to the US comes from US entities, not other countries.

2.) No it isn't. What reform are you talking about, and on what economic principles are you basing the idea that stimulus is dissipated the moment the money is spent?

 

[rudder]

Won't work because congress can always back this out and always will. In fact, the automatic spending cuts set to kick in this year after the debt committee inevitably fails look almost certainly to be wound out as well; ergo, it was just rubbish to begin with.

Very true. A future congress backing out of spending cuts may not even be the congress that legislated them. This makes it easy for current politicians to spend more now and promising the money from future spending cuts. And when it comes time for those spending cuts... the next legislators won't do it.

 

[irishScott]

1.) No, they really can't. Furthermore, the vast majority of US debt is internally owned. ie: most of the lending to the US comes from US entities, not other countries.

2.) No it isn't. What reform are you talking about, and on what economic principles are you basing the idea that stimulus is dissipated the moment the money is spent?

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
1. Actually we owe 4,478,000,000,000 in foreign debt, which means ~30.25% of our debt is foreign held. That's up from 25% 5 years ago IIRC and not going down. Barring some retardedly good luck our current economic issues are going to last for decades, meaning that number will become more and more significant.

2. I'm talking about companies like Solyndra who are given money, spend it, and die. Yeah, that's great for the economy.