The economic framework for austerity is getting even weaker

[Atreus21]

Yes, the same amount of debt as a proportion of income means something very different for government than it means for a household. Principally, a government that controls its own currency cannot default.

It can't default, true, but it can get into serious other problems due to high debt and printing endless money.

Say you owe $5,000 on your credit card. You owe that to someone who is for all meaningful purposes totally unconnected from you. (some fancy pants banker somewhere) When you pay him that $5,000, it is gone to you forever. Government debt is the collective debt of our society, a debt that we overwhelmingly owe to ourselves. To wade into dangerous "family budget" scenario, you buying government debt is sort of like giving a loan out to your wife. You might be personally $5,000 poorer and your wife $5,000 richer, but the Atreus21 family is exactly as rich or poor as it was before you made the loan. If you owe your wife $1 million your family unit doesn't care. If you owe the bank $1 million, your family unit definitely cares.

Does that make any more sense?

Is the bolded essentially saying that it's not really debt? Where does the money that forms the public debt come from? people buying bonds?

 

[cubby1223]

This is the whole issue to me -

We need more economic activity, which means we need to produce more goods and services, and we purchase more goods and services.

We can ramp up production no problem if there are people to make purchases. So the question becomes, how to we convince people to spend more money? We show them dept-to-GDP charts? I don't think so.

Our debt/deficit-to-GDP ratios were sky high during the 1940's and America recovered. But back then we were the manufacturing powerhouse of the world. We ain't that anymore. Situation has changed.

 

[Attic]

I thought the whole point was to use a scalpel (obamas method) not a sledgehammer (sequester) to cut in a prudent manner wasteful spending and keep or expand investment (infastructure) spending where appropriate. Integrity rules the manner of the outcome, but I think the argument is already to a point where we can discuss the integrity on the paths that ought to be taken rather than which path we should take.

its clear we needed to cut spending in numerous areas and not others. I think it's quite easy to agree with the OPs point as well as those who challenge it if we assume the government is in fact an inefficient but necessary spender of people's labor. We all are arguing for the same thing after all, better future.

 

[fskimospy]

It can't default, true, but it can get into serious other problems due to high debt and printing endless money.

No one is saying that there is no limit to the amount of debt that a government can pile up, just that the acceptable number is much higher than some think it is.

Is the bolded essentially saying that it's not really debt? Where does the money that forms the public debt come from? people buying bonds?

It's debt, it's just debt we owe to each other. (for the most part) It is not debt of the same nature as individual debt, which is why comparing government and family budgets is a bad idea.

 

[chucky2]

Why would we institute a $10T stimulus? That would lead to crowding out.

Why not? Make it $20T. If people can't buy their shit here they'll take vacations to TRoTW, buy more shit, we can have a whole world stimulus at our expense. Except, it won't be at our expense because money doesn't mean anything. We can always print/borrow/GDP away paying it back. What's the problem?

I know you're just raging because you don't actually have a coherent response, but I guess that's sort of what I expected.

Ditto. You're in here raging that austerity hasn't worked when they simply are overspending less, still not living within their means, and there have been no examples given of long term real austerity applied in an economy like the US to judge if real austerity would in fact work for the long term. Conversely, there are no examples of the Spender mantra that have been shown to work long term either.

It's like you're in here crowing that austerity cannot work, shazam ah am ri-ite!, yet you cannot show the Spender mantra works either. Congrats...you've successfully won against your own strawman! :thumbsup:

Chuck

 

[nehalem256]

No, as already covered, stimulative spending during periods of low employment and highly utilized capacity does not encourage economic growth due to crowding out effects. Did you not read the thread?

Did you miss the unemployment rate rising at the beginning of the Bush's presidency caused by the Internet-Boom recession?

 

[1prophet]

Yes, the same amount of debt as a proportion of income means something very different for government than it means for a household. Principally, a government that controls its own currency cannot default.



Say you owe $5,000 on your credit card. You owe that to someone who is for all meaningful purposes totally unconnected from you. (some fancy pants banker somewhere) When you pay him that $5,000, it is gone to you forever. Government debt is the collective debt of our society, a debt that we overwhelmingly owe to ourselves. To wade into dangerous "family budget" scenario, you buying government debt is sort of like giving a loan out to your wife. You might be personally $5,000 poorer and your wife $5,000 richer, but the Atreus21 family is exactly as rich or poor as it was before you made the loan. If you owe your wife $1 million your family unit doesn't care. If you owe the bank $1 million, your family unit definitely cares.

Does that make any more sense?

Until your Chinese mistress refuses to lend you any more money, then you will have to tell your wife(American people) the shopping spree is over.

 

[chucky2]

Did you miss the unemployment rate rising at the beginning of the Bush's presidency caused by the Internet-Boom recession?

What's "odd" is he also missed yearly deficit spending but never a live within your means spending. Which, is odd, because all through that .com boom if we believe the Spenders we'd have been not only living within our means, we'd actually have been - gasp - saving for the bad times.

Can you actually imagine the Fed and State govs running a surplus (without doing BS things to run said "surplus")? <InsertInconceivable!Pic>

Chuck

 

[cubby1223]

It just seems clear to me. If within the country there are a lot of products being produced that the world wants and is willing to purchase, then your country prospers.

If not, then you do not prosper.

I just don't see where dept-to-GDP or specific government spending levels, affect the quality and desirability of our products.

To me, the government's job to spur prosperity is to incentivize the great world products to be created within the country.

 

[fskimospy]

Why not? Make it $20T. If people can't buy their shit here they'll take vacations to TRoTW, buy more shit, we can have a whole world stimulus at our expense. Except, it won't be at our expense because money doesn't mean anything. We can always print/borrow/GDP away paying it back. What's the problem?



Ditto. You're in here raging that austerity hasn't worked when they simply are overspending less, still not living within their means, and there have been no examples given of long term real austerity applied in an economy like the US to judge if real austerity would in fact work for the long term. Conversely, there are no examples of the Spender mantra that have been shown to work long term either.

It's like you're in here crowing that austerity cannot work, shazam ah am ri-ite!, yet you cannot show the Spender mantra works either. Congrats...you've successfully won against your own strawman! :thumbsup:

Chuck

How many more times do I have to say crowding out? Points people make don't disappear just because you ignore them. Kudos to you for starting off with a straw man and then ending by accusing me of using them. Lol.

As for the rest of your post, that's absurd. Countries had to live with low debt or balanced budgets for a long time in the past due to the gold standard. It was a huge problem. After countries learned more about economics they have left the gold standard fiscal flexibility has been enormously helpful to growth.

Your constant argument against sensible fiscal policy is that it doesn't fit a definition you made up in your head. Its boring.

 

[fskimospy]

Until your Chinese mistress refuses to lend you any more money, then you will have to tell your wife(American people) the shopping spree is over.

Nope. China is not a driver of demand for US debt and the Chinese need to buy our debt a lot more than we need to sell it to them. We have then by the balls.

 

[chucky2]

It just seems clear to me. If within the country there are a lot of products being produced that the world wants and is willing to purchase, then your country prospers.

If not, then you do not prosper.

I just don't see where dept-to-GDP or specific government spending levels, affect the quality and desirability of our products.

To me, the government's job to spur prosperity is to incentivize the great world products to be created within the country.

What's going to be absolutely awesome in 50-100 years is when India and China have their citizenry progressed to the level they're putting out as good - or better - competition on the world market as our citizenry...at far less cost. What we'll have then is two countries that are triple our size, thus triple our labor potential, who can not only produce the goods, but also design the goods, consume the goods, account for the goods, deal with legal issues for the goods, etc. etc. etc. That is, the main benefits and strengths of the US will have been completely marginalized. By that time, our $50T of debt that "doesn't matter because look at our flashy GDP number, and oh, we can print money!" might start becoming a problem.

But, don't worry!

We can borrow (from no one, hmmm, that's a problem) and print, just like Zimbabwe! QE48 at that point can be like, what, $15T? Bah, doesn't matter, if there's one thing the US is good at, it's Spending. I'm sure we'll figur, er, spend it out...

Chuck

 

[fskimospy]

What's going to be absolutely awesome in 50-100 years is when India and China have their citizenry progressed to the level they're putting out as good - or better - competition on the world market as our citizenry...at far less cost. What we'll have then is two countries that are triple our size, thus triple our labor potential, who can not only produce the goods, but also design the goods, consume the goods, account for the goods, deal with legal issues for the goods, etc. etc. etc. That is, the main benefits and strengths of the US will have been completely marginalized. By that time, our $50T of debt that "doesn't matter because look at our flashy GDP number, and oh, we can print money!" might start becoming a problem.

But, don't worry!

We can borrow (from no one, hmmm, that's a problem) and print, just like Zimbabwe! QE48 at that point can be like, what, $15T? Bah, doesn't matter, if there's one thing the US is good at, it's Spending. I'm sure we'll figur, er, spend it out...

Chuck

That's an amazing pile of nonsensical babbling.

I really love how the (predictable) reaction to a pretty serious attack on the theoretical underpinnings of conservative economics over the last five years has been met by little more than sputtering rage and ever more forceful declarations that YOU KNOW YOU'RE RIGHT.

I guess those are really the only arguments you have left at this point

 

[chucky2]

How many more times do I have to say crowding out? Points people make don't disappear just because you ignore them. Kudos to you for starting off with a straw man and then ending by accusing me of using them. Lol.

You can say it as many times as you want, doesn't really matter. $3T, $5T, $10T, $20T, they're all rediculous numbers. Throw out your suggested number we re-QE so we can understand the hilarity of what you're advocating. There is no strawman with my arguement btw, nice fallacy. You want to re-QE to yet another higher number because the last one wasn't high enough. I simply suggested a higher number, which is what you want. Now you want to modify your arguement and start putting qualifiers on it, which is good, except you have no specifics. Yet your strawman remains...

As for the rest of your post, that's absurd. Countries had to live with low debt or balanced budgets for a long time in the past due to the gold standard. It was a huge problem.

Haha, yes, I'm sure it was a huge problem. Those Politicians, lobbyists, pet cause folks can't get their policy enacted if spending is actually tied to something. Here we agree: Not making money meaningless is a huge problem to such people.

After countries learned more about economics they have left the gold standard fiscal flexibility has been enormously helpful to growth.

Yes, I'm sure it has. It's been enormously helpful to the growth of debt. Again, we agree. Politicians and the public now can do debt like never dreamed before.

Your constant argument against sensible fiscal policy is that it doesn't fit a definition you made up in your head. Its boring.

Interesting. My sensible fiscal policy is to live within ones means. Your "sensible" fiscal policy is to blow money we don't have at fantastic rates with zero plan or inclination to ever get back to parity. I can see where my policy would be boring...having to actually have money to fund the hookers and blow outings really is a downer...

Chuck

 

[chucky2]

That's an amazing pile of nonsensical babbling.

I really love how the (predictable) reaction to a pretty serious attack on the theoretical underpinnings of conservative economics over the last five years has been met by little more than sputtering rage and ever more forceful declarations that YOU KNOW YOU'RE RIGHT.

I guess those are really the only arguments you have left at this point

Rome, is that you?

We're getting those examples of the debt being paid off in real dollars right? The examples of the yearly budgets (remember that word, budget? Doh! Forgot...we don't need those, they're pesky) that were slashed in the good times so we could have the surplus needed for the bad times? You know, the multiple examples of the Spender ideology you're in favor of?

 

[woolfe9998]

With this new data, does anyone wish to reconsider their beliefs?

That would presume that anyone who believes in austerity has based his or her belief on any data to begin with. People who argue for austerity, at least in the US, usually do so out of opposition in principle to government spending and that's about as far as it gets. When a belief is formed free of facts, it is impervious to any change in facts.

 

[First]

No one well-informed took the study particularly seriously given that it wasn't ever reproduced by fellow peers. This is just the final nail in the coffin.

Much like the anti-amnesty and anti-gay slurs of today, adherents to austerity will go the way of the dinosaur.

 

[nehalem256]

No, the evidence is quite clear that austerity generally makes things worse. Had the US engaged in less austerity the budget deficit would probably be smaller at this point or at least its trajectory would be even more positive. (US growth has been a big part of its reduction)

My point was that the argument that we have not reduced the budget deficit over the last few years is wrong.

Your claim was that austerity will tank the economy and increase budget deficits.

You also claimed we have been undergoing austerity since 2011 and have seen economic growth and an unprecedented decrease in the budget deficit.

It appears you refuted your own claim.

Oh, and you also appear to be claiming that letting the Bush tax cuts on the rich expire will hurt the economy

 

[werepossum]

Yes, many people do. Austerity is defined by economists and policy analysts as policies that reduce government deficits.

Holy shit! So you believe that government deficits should always continue to grow? Even tax increases would be austerity if they include 100%+ new spending?

I'm calling BS (Brother Saul) on this. Nobody can honestly be that batshit insane without accidentally strangling himself with his helmet strap during TV time. You have to be intentionally advocating destroying the country to rebuild it in an image you'd prefer.

 

[fskimospy]

Your claim was that austerity will tank the economy and increase budget deficits.

You also claimed we have been undergoing austerity since 2011 and have seen economic growth and an unprecedented decrease in the budget deficit.

It appears you refuted your own claim.

Oh, and you also appear to be claiming that letting the Bush tax cuts on the rich expire will hurt the economy

No, I have said that austerity has hurt economic growth.

The US has engaged in austerity, but less than Europe has.

Had the US pursued more sensible fiscal policy our economy would be in better shape and our long term deficits would be lower.

 

[Genx87]

I will give the article a read later, sounds like my type of stuff so thank you for posting.

Do you know if they weigh the amount borrowed versus growth in a particular year? If you see economic growth of 2% yet you had to borrow 8% of GDP to achieve that growth, mathematically you went backwards not forwards. The real mathematical problem is that if you are required to borrow money long term for growth, as we are, and there is a spread between percentage of GDP borrowed and growth the law of exponents says that debt must eventually start going almost vertical on a chart. That is bad.....

You mean like this?

 

[fskimospy]

Holy shit! So you believe that government deficits should always continue to grow? Even tax increases would be austerity if they include 100%+ new spending?

I'm calling BS (Brother Saul) on this. Nobody can honestly be that batshit insane without accidentally strangling himself with his helmet strap during TV time. You have to be intentionally advocating destroying the country to rebuild it in an image you'd prefer.

Of course not, as explained by I-dont-know how many other posts.

Austerity is destructive on a depression. As more and more evidence piles up you are reduced to sputtering and ranting. If you believe austerity produces superior economic results, present that data.

I will be waiting.

Again, it is interesting to see that as conservative economics continue to collapse the answer is just frothing and rage as opposed to reconsidering your position.

There is no shame in being wrong. There is shame in continuing to fight long after that's been proven.

 

[cubby1223]

eskimospy - the fact is you are a big opponent of austerity, and you found an article that strengthens your inner beliefs. Congratulations, have yourself a cookie.

I just took another glance at your article. One of the main points of emphasis was the exclusion of a few countries as WWII ended. These were countries where WWII was not fought on. The U.S. as well had high debt & deficit to GDP ratios then and also had strong growth. Well you know what? WWII destroyed large parts of the world. Europe was destroyed. Northern-Africa was destroyed, Russia was destroyed, Asia was destroyed. It is perfectly reasonable to suggest that the countries who were capable of rebuilding the destroyed countries, would prosper.

I mean, go ahead and initiate the destruction of China's infrastructure by military force, and I can guarantee you America can start ramping up our debt spending and still experience strong growth. But guess what, the world is different today. We're not destroying China's infrastructure. We are not recreating the world-wide situation that caused the economic growth the article complains was excluded.

You have added nothing new to the table other than you found an article that strokes your ego. And you have a discussion club thread filled with only people who were already of your same mind-set, stroking your ego. Have fun with yourself, I know you will

 

[MooseNSquirrel]

Well then cubby surely finding studies (and more importantly, data) which contradict his points should be easy peasy.

 

[fskimospy]

eskimospy - the fact is you are a big opponent of austerity, and you found an article that strengthens your inner beliefs. Congratulations, have yourself a cookie.

I just took another glance at your article. One of the main points of emphasis was the exclusion of a few countries as WWII ended. These were countries where WWII was not fought on. The U.S. as well had high debt & deficit to GDP ratios then and also had strong growth. Well you know what? WWII destroyed large parts of the world. Europe was destroyed. Northern-Africa was destroyed, Russia was destroyed, Asia was destroyed. It is perfectly reasonable to suggest that the countries who were capable of rebuilding the destroyed countries, would prosper.

I mean, go ahead and initiate the destruction of China's infrastructure by military force, and I can guarantee you America can start ramping up our debt spending and still experience strong growth. But guess what, the world is different today. We're not destroying China's infrastructure. We are not recreating the world-wide situation that caused the economic growth the article complains was excluded.

You have added nothing new to the table other than you found an article that strokes your ego. And you have a discussion club thread filled with only people who were already of your same mind-set, stroking your ego. Have fun with yourself, I know you will

This is a poor attempt at rationalizing away inconvenient information. I like how finding evidence that supports my position is stroking my ego though. Anything to avoid thinking you might be wrong, amirite?

First, I was unaware that Australia, New Zealand, and Canada drove their economies in the 50s through the rebuilding of shattered Europe. Can you provide evidence for this?

Additionally, I have no idea how that, even if true, in any way affects two of the three critiques, weighting and coding errors. At this point it is really unclear what it would take for supporters of austerity to admit they were wrong. Seriously, what does it take?