Keynesian policies at work! Shrinking deficit

[Throckmorton]

In terms of what the gov employee does with his/her money, there is no difference between them and a private sector employee so I see that as irrelevent.

Eventually gov sector jobs must be paid for with taxes, even if it's debt now.

My other answer was mentioned above: Gov borrowing sucks up funds otherwise available for the private sector.

Fern

I don't think you are familiar with the concept of time. There is a difference between the current and the future. Currently, we are in a recession and need stimulus spending. In the future the economy will recover and we can tax then. Taxing in the future is not the same as taxing now. Spending in the future is not the same as spending now.

Come on now, is it that difficult? First you can't understand 1+1, now you can't understand now vs later?

BTW, I hope you don't use credit cards or loans of any kind, because you don't see the value in borrowing from the future. Better not start a business, ever.

 

[nick1985]

But Obama said he wouldn't increase taxes for those making under 250,000

 

[Fern]

I don't think you are familiar with the concept of time. There is a difference between the current and the future. Currently, we are in a recession and need stimulus spending. In the future the economy will recover and we can tax then. Taxing in the future is not the same as taxing now. Spending in the future is not the same as spending now.

Come on now, is it that difficult? First you can't understand 1+1, now you can't understand now vs later?

You're misunderstanding, or spinning.

I'll help you:

First you can't understand 1+1

As I've explained above, you're math is faulty. It requires an assumption that states would not have increased their debt to carry those jobs. There's no basis for that assumption.

Moreover, and this being a nuance the left prides themselves on, we're touching on the relative merits of public sector jobs vs private sector jobs. I am contending that private sector jobs are far more valuable in terms of an economic recovery because they produce GDP whereas government jobs do not.

Without that increase in GDP 'future tax' will not be forthcoming.

And

I don't think you are familiar with the concept of time. There is a difference between the current and the future. Currently, we are in a recession and need stimulus spending. In the future the economy will recover and we can tax then. Taxing in the future is not the same as taxing now. Spending in the future is not the same as spending now.

We were not discussing the necessity, or lack thereof, of deficit spending in a recession.

My contention that public sector/gov jobs absorb funds, not create GDP is true regardless of the concept of time. If the money is paid out of current tax revenue, it is a current drain. If it is borrowed, it absorbs funds (via debt) that would otherwise be avaiable to the private sector. This was unrelated to any discussion of deficit spending in a recession, you interjected that element yourself.

It can be also said that, in addition to being off point, you're missing the forest for the trees and tossinn strawmen about:

Most people, whether conservative or liberal, agree that deficit spending - a stim package - was/is necessary during a recession. So your point broadly arguing for deficit spending and implying that I am arguing against one is off-topic and a false attribution to me.

The disagreement centers on how the additional spending is done. Is saving state-level gov jobs the best and highest use of stim funds, or is there something better?

Fern

 

[Throckmorton]

As I understand, states can't run a deficit.

 

[Throckmorton]

So what are you saying fern, the government should only give tax cuts to stimulate the economy? It shouldn't create jobs directly?

The private sector hires people when it's profitable to do so. If that means hiring workers for a government contract, then the employer is only acting as a middleman. If that means hiring people to make more money otherwise, tax cuts have no impact.

 

[Fern]

As I understand, states can't run a deficit.

Here's a link, it's old data, showing budget deficits state-by-state.

http://www.pbs.org/now/politics/budgetmap.html#in

Municipal bonds are state/local debt.

There is currently in excess of $2.67 trillion in outstanding municipal debt.

http://www.investinginbonds.com/marketataglance.asp?catid=31

I'm pretty sure I've read of CA trying to issue more debt but being unable to find any takers.

Fern

 

[daishi5]

As I understand, states can't run a deficit.

Then you don't understand deficits. http://www.treasurer.ca.gov/ The state of california is currently selling bonds. If you buy the bond, you loan the government money, which allows it to spend more money than it takes in. This is deficit spending.

 

[nick1985]

As I understand, states can't run a deficit.

Ah so its clear now. You dont understand this topic.

 

[Fern]

So what are you saying fern, the government should only give tax cuts to stimulate the economy? It shouldn't create jobs directly?

Not really.

I understand the need for the states' unemployment payments (a good part of the stimulous went to help states with extending unemployment benefits etc). I can also understand fed money to states so they won't have to layoff a bunch of gov workers.

But, IMO, those mostly achieve a lessening of the fall. It slows down the rate of lost jobs.

But otherwise I think it has minimal stimulative effect, particularly when compared to jobs that create GDP.

As a financial professional I get a publication named "CFO" (Chief Financial Officer) made available to us all.

There are many reports of businesses who could expand, who want to expand now, and who claim that the market exists for their products thus justifying their expansion, but they cannot get bank loans. I think part of the stimulous should have had provisions addressing that. This could have been loan guarantees to encourage banks to lend. And since it's a loan, it would have been paid back (or least mostly) making it less expensive than outright grants etc.

The private sector hires people when it's profitable to do so. If that means hiring workers for a government contract, then the employer is only acting as a middleman. If that means hiring people to make more money otherwise, tax cuts have no impact.

The point of tax across-the-board-tax cuts is to stimulate accross-the-board-demand. Demand drives growth, that growth drives new jobs etc, all resulting in more GDP and more gov revenue whether from income, employment or excise taxes.

ATM, the tax cuts I could have supported would be those for individuals, not corporations. Businesses will hire when demand dictates it. I'm not presently pursuaded corporate tax cuts are suited for recessionary stimulous purposes. I do think they can be an economic benefit, but not particularly so for curing a recession. I think in a recession with demand down they'd just pocket it unless they saw a need for expansion.

I agree with your statement "The private sector hires people when it's profitable to do so", and that's why I disagreed with another stimulous/jobs bill recently passed. I refer to the credit for employers' portion of payroll taxes.

In a survey of CFO's across the nation, all said they'd be happy to take the money but it wouldn't make them go out hire anybody because of it.

They hire when they need the people and it's profitable to do so.

I.e., another waste of money. Those who were gonna hire anyway just got a handout we can't afford.

Fern

 

[Throckmorton]

Here's a link, it's old data, showing budget deficits state-by-state.

http://www.pbs.org/now/politics/budgetmap.html#in

Municipal bonds are state/local debt.



http://www.investinginbonds.com/marketataglance.asp?catid=31

I'm pretty sure I've read of CA trying to issue more debt but being unable to find any takers.

Fern

But who buys bonds? Is it mostly Americans or is it the Chinese? If people are buying bonds, that's money they aren't using in the economy. The only way it would be the same as federal spending is if those bonds are bought by the same sets of people as federal debt

 

[sMiLeYz]

I don't think you are familiar with the concept of time. There is a difference between the current and the future. Currently, we are in a recession and need stimulus spending. In the future the economy will recover and we can tax then. Taxing in the future is not the same as taxing now. Spending in the future is not the same as spending now.

Come on now, is it that difficult? First you can't understand 1+1, now you can't understand now vs later?

BTW, I hope you don't use credit cards or loans of any kind, because you don't see the value in borrowing from the future. Better not start a business, ever.

truth

 

[sMiLeYz]

No, not confused at all, I'm just waiting for you to give Bush props for his stimulus package like you do Obama.

I can't give props to Bush for something he didn't do. It's very sad, and very telling that some people can't grasp the difference between Fiscal stimulus and TARP.

 

[nick1985]

I can't give props to Bush for something he didn't do.

Are you saying there was not a Bush stimulus package?

 

[PeshakJang]

Are you saying there was not a Bush stimulus package?

I'm getting the feeling that he doesn't read any posts other than his own.

 

[juiio]

It's very sad, and very telling that some people can't grasp the difference between Fiscal stimulus and TARP.

TARP is not to what they are referring. http://en.wikipedia.org/wiki/Economic_Stimulus_Act_of_2008

 

[Throckmorton]

Most people, whether conservative or liberal, agree that deficit spending - a stim package - was/is necessary during a recession. So your point broadly arguing for deficit spending and implying that I am arguing against one is off-topic and a false attribution to me.

The disagreement centers on how the additional spending is done. Is saving state-level gov jobs the best and highest use of stim funds, or is there something better?

Fern

So why did you post this?

Eventually gov sector jobs must be paid for with taxes, even if it's debt now.

 

[Jack Ryan]

I can't tell if you are joking, but if you aren't and you believe that story:

http://boortz.com/nealz_nuze/2010/04/government-math.html

 

[daishi5]

But who buys bonds? Is it mostly Americans or is it the Chinese? If people are buying bonds, that's money they aren't using in the economy. The only way it would be the same as federal spending is if those bonds are bought by the same sets of people as federal debt

Mostly Americans. I believe the Chinese are the largest single buyer, but they don't come close to holding a majority of the debt.

 

[werepossum]

So why did you post this?

C'mon, even the most ardent supporters of the Magic Cupboard Theory of Economics admit that all government jobs must be paid for by taxes. Even if you finance them with debt and then devalue your currency to effectively reduce your debt, they still have to be paid with taxes.

It's a very simple concept - government jobs eat taxes. Forever. Only private sector jobs produce wealth to pay those taxes. If we must have a stimulus package, stimulating private sector jobs are logically easier to sustain after the recession than are government jobs because on balance private sector jobs create wealth - the private sector MUST create wealth on balance to support the wealth-consuming government jobs or the society fails. Otherwise we could all just have cushy well-paid government jobs and be upper middle class or better.

Excellent post, Jack Ryan. Boortz rules.