The Democrats have it wrong

Theres the Cut Cap and Balance plan the House Republicans are trying to push through. While I know that there are fine details that could be modified slightly, the overall effect and intent of the plan fits exactly with what you just said. A balanced budget amendment would work, with exceptions in times of war, to get the American people to pay for their programs.

Im not saying provide more services. As GDP grows, our population grows as well. Basic services that we can't scrap completely like entitlements, basic infrastructure maintenance, USPS, and some other programs will see increases in cost as more people require services. However, the key thing about keeping spending near a certain amount of GDP i proposed would mean that we would spend around how much we take in every year, with deviations in bad years and surpluses in good years. This would provide the necessary long-term financial soundness as well as still provide govt services.

We still need to reform the public trust fund for SS. Without any significant changes it will go into permanent deficit by around 2020 and by 2040 the total amount of treasury bonds (albeit IOUs not liquid currency) in the trust fund will have run out as well.

Get a balanced budget amendment with an exception in times of war (require a declaration of war by congress to meet this criteria).

 

I admit its the extreme end and i did exagerate but that doesn't make you any more right. When the Treasury department printed out billions of dollars in money, it did create inflation and did not do any good for the economy. If we go by the original poster's intent:

[/quote]To create jobs, demand must go up, and for that to happen, the money supply must be expanded.[/quote]

he clearly supported indefinitely printing more money to spend into the economy as our long-term financial plan. He rejected the private sector as a source of recovery because he went against cutting taxes and cutting spending. Basically he implied that without government interference, the private sector cannot recover from the recession. However even the Federal Reserve know to tightly control the rate new currency is introduced into the economy to minimize inflation. We already printed $800+ billion for a stimlus bill. It didn't work. It promised unemployment well below 8%. Its around 9% today and real unemployment (counting in underemployed people and discouraged workers who can't find work and stopped looking) is actually 17%. If we continue to print money, there is no chance of a recovery and inflation will result due to the market being flooded with USD.


[/quote]All of those depressions and recessions before 1929 are a hoax? Now you're plainly trying to rewrite U.S. History. [/quote]

Keywords: depression, double-dip recession

Im not saying they're a hoax. Its just that their disastrous effects never reached this magnitude until the government started artificially propping up the economy. Stop putting words in my mouth.

[/quote]First, negotiating with unions just means that there is a bargaining contract, which doesn't hurt most companies, because wgaes are usually not one of the larger expenses in many industries. Second, no one is talking about price or wage controls, so again you're relying on hyperbole to make an argument. and third, if those unions and companies agree to terms, they both win: unions with higher wages/benefits for workers and companies with more productive employees. The economy wins with larger demand as a result. I'll note that in other exchanges with you, you dismissed demand with supply-side rhetoric. [/quote]

Once again, you're taking me out of context. zaybu was implying that FDR's policies worked until he eased gov't spending. I was making the point that forcing companies that were barely making it unionize their workers and pay more more money for wages and commodities was a wrong step for recovery in the middle of a depression. I certainly am not advocating rolling back the changes to unions now while we're still feeling the aftermath of the recession and stimulus bill. I was just pointing out to zaybu that FDR's policies didn't work as well as he thought, and that it was the tampering with the economy by this superstitious economic amateur that led up to the double dip recession.

Once again, you've managed to take my words out of context. You really should watch out not to do that again.

 

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There were two large depressions/recessions in the last half of the 19th century, all while we didn't even have an income tax, and very little if any regulation of any industry, nor anything like monetary policy, since we were on the gold standard.

Your position is looking increasingly hypothetical.

 

Actually there's an easier way to do that -- they are called elections. Democracy is for grown ups, and if you start too unfunded wars and cut taxes on billionaires, in the end somebody will have to pay. The only issue is who -- and that's what the next election will be about.

I'm betting the American people finally realize the billionaires should pay and not the working guy down the street.

 

This is false. If the money is used for stimulus reasons, particularly in a recession, any rise in inflation is more than offset by the government spending, as "crowding out" doesn't happen. Particularly in a liquidity trap, like we''re in now.

The supply-siders and Austrian School economists keep getting it wrong because they believe in the crowding out during a recession. Yet, the opposite keeps happening to what they are saying.

 

It still makes me right because for much of the past couple of years we've hovered over a near deflationary period, and needed some inflation to spur investment. Inflation takes away the incentive for people to hoard cash if they are investors.

You're wrong again. Because Keynesian spending policies are designed to be temporary, until the economy is recovered. We haven't seen that yet. And cutting domestic or entitlement spending now would send us back into a deeper recession/depression. Fiscal austerity is the worst thing we can do now. Textbook economics backed up by empirical evidence and all of that.

All of those depressions and recessions before 1929 are a hoax? Now you're plainly trying to rewrite U.S. History. [/quote]

Keywords: depression, double-dip recession

Im not saying they're a hoax. Its just that their disastrous effects never reached this magnitude until the government started artificially propping up the economy. Stop putting words in my mouth. [/quote] You put them there yourself. The market crash of 1929 was the largest crash of banking/financial and stock markets ever, in relative size to the U.S. GDP at the time. Without the New Deal, the Great Depression would have lasted longer and been deeper.

First, negotiating with unions just means that there is a bargaining contract, which doesn't hurt most companies, because wgaes are usually not one of the larger expenses in many industries. Second, no one is talking about price or wage controls, so again you're relying on hyperbole to make an argument. and third, if those unions and companies agree to terms, they both win: unions with higher wages/benefits for workers and companies with more productive employees. The economy wins with larger demand as a result. I'll note that in other exchanges with you, you dismissed demand with supply-side rhetoric. [/quote]

Once again, you're taking me out of context. zaybu was implying that FDR's policies worked until he eased gov't spending. I was making the point that forcing companies that were barely making it unionize their workers and pay more more money for wages and commodities was a wrong step for recovery in the middle of a depression. I certainly am not advocating rolling back the changes to unions now while we're still feeling the aftermath of the recession and stimulus bill. I was just pointing out to zaybu that FDR's policies didn't work as well as he thought, and that it was the tampering with the economy by this superstitious economic amateur that led up to the double dip recession. [/quote] But, as is happening now and back then, many large corporations were stockpiling cash. That was a way to get money out into the ec onomy, and it created long lasting growth as part of the New Deal's approach.

 

There actual is a finite list of roles and responsibilities in Article I Section 8 of the US Constitution. In the introduction to Article I Section 8 it provides the authority for taxation to "provide for the common Defence and general Welfare of the United States" and is followed by the explicit roles and responsibilities the federal government has to provide for both the common Defence and general Welfare of the United States. By way of example to provide a post office and the coining of money are explicitly enumerated roles and responsibilities that provide for the general Welfare of the United States. Funding for the Navy and Army are specifically enumerated to provide for the common Defence of the United States.

Providing health care or retirement programs for Americans or providing US military forces for the defense of other nations are not enumerated roles or responsibilities of the federal government.

If the Congress wants to expand the roles and responsibilities then it needs to submit a Constitutional Amendment to the States and if the States agree then, and only then, would such roles and responsibilies become a requirement for Congress to tax and spend on.

I couldn't agree more. The enumerated roles and responsibilities of the federal government do not change based upon the economy of the United States. The Gross Domestic Product is completely unrelated to the Federal government. Our government has assumed that the GDP belongs to the government and that it owns a percentage of it. This is false and our government is not entitled to any percentage of the GDP. The GDP belongs to the People, not the government.

 

The budget deficit was caused by the Bush Tax Cuts, the two wars Bush started and the Great Bush Recession.

To eliminate the deficit just reverse the tax cuts, end the two wars and pray for a strong recovery.

 

This is partially true. Ending the Bush era tax cuts would result in roughly $370 billion in additional revenues and eliminating US foreign interventionism and reducing the size and role of the US military could provide hundreds of billions of dollars in expendature reductions. Combine the increased revenues and reduced expendatures need to equal about $900 billion per year. I don't believe that enough can be cut as even with the $370 billion in additional revenues it requires $530 billion in reduced spending and the DOD budget is only about $700 billion and it would be left with only $170 billion to spend. Can the US military function for only $170 billion? Actually it can so long as it's solely limited to defending the United States against foreign invasion but I don't believe that Congress will do that.

This does not address the Social Security/Medicare deficits which are about $600 billion/yr and are funded by FICA/Payroll taxes. The Bush era tax cuts did not reduce FICA/Payroll taxes and so combined FICA/Payroll tax increases and reductions in expendatures (which are growing) need to equal $600 billion/yr today and increase every year indefinately thereafter until 2085 and beyond.

 

Republicans: Please read this carefully.

Your economic beliefs are based on a "dumbed-down" macroeconomic ideology that was cooked up in Chicago and Austria. The reason this ideology was hatched in the first place...IMO...was so that "corpratists" would have a weapon to combat the Keynesian economic policies that were in place after the depression. Wealthy people didn't particularly like the idea of the "lower classes" becoming financially stable and comfortable. It makes it harder to control them that way. Unfortunately, every economy is supported by these "lower classes", so as the Keynesian model has been dismantled (since about Nixon), we have experienced some tumultuous economic times. We had Inflation...we had Stagflation...we had bubbles that were simply abnormal...and finally we had a near-collapse.

At some point, you people have to say to yourselves...
'OK, I know it sounds backwards to spend our way out of a recession...especially when we are so far in debt...but what my team has been trying for the last 30 some-odd years, has simply not worked. Maybe we should try another method. Maybe we should return to what worked last time we were in deep doodoo.'

 

I assume you referred to the Long Depression following the panic of 1873? That was caused by the the post-civil war speculative bubble, which was in turn fueled by the government's switch to greenbacks from gold during the civil war. I'd say that counts as major federal monetary policy.

The recession of 1865 can be attributed to the sudden transition from a wartime economy to a peacetime economy and its not uncommon to see a recession directly after a war (War of 1812, WWI, WWII, Korean War). This recession thus was not caused by the lack of regulation but simply the end of the war. Its no coincidence that the recession struck in April 1865 (same month as the peace at Appomattox Courthouse.)

Lack of financial regulation caused no major depressions. I stand by my words.

 

Politicians do too well hiding their spending as well as making empty promises. Americans are too apathetic to care about politics. Many voters don't know a thing about how gov't works and are swayed easily by campaign ads and the class-warfare populist rhetoric you're using. This is what founding fathers like Jefferson as well as Alexis de Toqueville feared in an ignorant electorate that no longer cares.

If we followed the constitution, we wouldn't start many of these unfunded wars because congress would declare war. Congressmen that voted for the war would be accountable to their constituents (especially house members in their 2 year terms). If we really just obeyed our constitutional laws, many of these problems wouldn't occur at all.

Cutting taxes doesn't mean someone will have to pay for it to make up for the drop in revenue. Just cut spending by an equivalent amount. Its not that complicated.

I hope you know that the combined wealth of all billionaires wouldn't make a dent in our annual deficit. Even if we raised taxes on them to 100%, we would still run huge deficits. The important concept here is cutting spending, which you have largely ignored in your usage of class warfare rhetoric.

 

I've always wondered why we don't have an independent counsel who reviews all government legislation for it's validity regarding the Constitution?? If it doesn't pass the smell test...it goes back to Congress!

 

According to the Consumer Price Index as well as inflation calculators, our US dollar has seen inflationary drop in value for 60 of the last 61 years, with the exception in 2009 (after the passage of the stimulus bill). I don't see how your point is valid.

Oh really? gov't spending as exponentially increased ever since the New Deal and you're telling me Keynesian policies are supposed to be temporary? My goodness, someone better tell the politicians in Washington about that.

We just spent $800+ billion in the economy through a stimulus, which is a plus in keynesian economics. However, unemployment is still higher than the predicted goal of the stimulus, and real unemployment is still as worse as ever. If something doesn't work, then don't blame external factors at play. It doesn't work.

At least an economy that doesnt rely on the federal sector as much can sustain itself without prolonged spending. By using keynesian economics, you're creating government jobs that tend to go away once the money is gone. Who do you think will take up the forestry projects of research for fire ants and dragonfly shaped spying vehicles once the stimulus is gone? You're right in that keynesian economics is meant to be temporary, but in reality, the jobs created by spending won't last once the money dries up.

Already addressed in my reply to Landru Guides us. Please refer to there for more details. No recession before 1929 that lasted for more than 24 months was caused by the lack of government interference in the economy. The only 2 major depressions can either be attributed to a shift from war economy to peace economy or the government's over reliance on greenbacks instead of the gold standard.

Yes, but there was no immediate impact on employment. Unemployment decreased from 4.2% in 1928 to 3.14% in 1929, and it wasn't until Hoover's wage increases, Smoot Hawley Tariff, and tax on writing checks that the unemployment rate skyrocketed. Economists from both the right and the left can concur that these actions caused the rapid rise in unemployment. Without this unneeded interference, we may not even had such a severe depression, and instead may have had one of the 19th century's 12 month speculative recessions.

I was criticizing FDR's policies. I didn't advise we take that course in current stances. However, it is wrong to cause an increase in wages during a time of recession or depression, as higher productivity doesn't always create higher demand for the goods. Many studies have studied the effects of the min wage increases (which are supposed to increase productivity) and found little change in productivity but many lost or outsourced jobs as a result. Companies nowadays clearly prefer the highly productive workers in India and China for a much lower cost.

The New Deal created no sustainable nor long-lasting growth. The recession of 1937 showed that many workers were dependent on the government for their jobs. Without the government funneling money into the WPA, the economy couldn't support itself. BUT i thought Keynesian policies were supposed to be temporary? How can the economy recover when so many people get their money only from the gov't payrolls? Instead of letting the private sector hire people and help the economy recover, FDR got the WPA to hire people. What happens when the money is gone? disaster. The recession of 1937 clearly shows that keynesian policies do not work as intended (temporary) and that it creates no self-sustainable (without any outside interference) growth.

If there weren't so much obstacles and costs (union wages, higher corporate tax, illegal immigrant advocate groups that oppose real reform) to having workers in America instead of third world countries, Im certain the effects of outsourcing and illegal workers would not be so severe. Companies now certainly would hire workers. But no, we went with your plan to get money into the economy with the stimulus bill. The economy is still in shambles and we're facing a double dip recession. Congratulations.

 

I have long held the position that any law challenged for Constitutionality should require the unanimous concurrence from the United States Supreme Court. No more 5:4 decisions. If the entire Supreme Court cannot determine the law is Constitutional then it should be struck down as unconstitution. The government should always error on the side of the Constitution as opposed to against it. We should have no laws that are of questionable Constitutionality, ever.

 

Yet we do...what does this say about the direction of the USA...

 

The House already passed it. However, the democrats in congress as well as the president really care too much about their political sway gained from spending money to do what will help our nation.

Actual tax income has always ranged from 15% to 20% for the last 60 years. Even if you raise taxes to higher levels, the effective taxing ability will be lowered because there will be more attempts to avoid the taxes (legally and illegally).

http://www.deptofnumbers.com/blog/2010/08/tax-revenue-as-a-fraction-of-gdp/

Having FICA witholding money from current workers won't be enough to pay out benefits to the baby boomers with longer life expectancy. The current policy will run deficits in 9 years as baby boomer start retire. There simply wont be enough people working to sustain the benefits (because the surplus money saved up from retiree's taxes have been borrowed by Congress to lower the deficits every year).

Well back in the days when we respected the Constitution, the debt accumulated from wars would be lowered or payed off completely in the years or decades following. Jackson paid off the entire national debt accumulated from the Revolutionary War, Barbary War, and War of 1812. If we reinstitute the draft, we'll sap morale due to the selective service system just like vietnam slowly did. A balanced budget amendment would be supported with the wartime exception would work if war appropriations had a provision for the paying back of the war debt by a certain amount of time after peace was reestablished.

 

At best that would be extremely high unemployment. At worst (depending how you see it) that would be the end of capitalism

 

First of all, Keynesian economics was never meant to be permanent. It was supposed to be used in a short-term, temporary time frame that would end once the economy recovered. however, politicians (as well as many economists and ordinary people) seem to forget the original purpose of deficit spending. It was meant to revive the economy to rejuvenate it from a downfall, not to indefinitely prop it up.

But secondly, Keynesian economics often focus on the short-term implications. Why else would Keynes himself have said:

"But the long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean will be flat again."

In the short-run, unemployment will rise. But I don't see any reason why companies won't hire from this new pool of skilled workers (many of whom have unique expertise gained from working for various gov't bureaucracies). Over the long run, I can see nothing but sustainable economic growth that won't depend on an external source of money. With lessened political spending, we will also see positive outcomes in our politics. Less political spending in the economy also means less influence by special interest groups in government who lobby for money. Hopefully, our politicians then will act for the best interests of the people instead of who donates to their Campaign PAC.

 

This is an ignorant comment. Keynesian economics is a sub-school of political economy. Its proved to be a vital one.

Another ignorant comment. We can of course appreciate the reality of the short run: rather than just being about one factor of production being variable (as assumed in the orthodox), we appreciate the damage generated, Unemployment isn't costless. It destroys human capital

You don't understand the labour market

 

So you are saying that the policy of a balanced budget, which means little or no deficit spending, will cause high unemployment and the end of capitalism?

We can still achieve everything we desire by simply having a surplus in place to fund programs until tax revenue catches up...

 

How else do you want to raise aggregate demand? Do you want more monetary policy? I don't see why we shouldn't/can't do both. Remember, public debt is not the same as private debt, although those "government should tighten their belt too" statements seem AWFULLY moral and intuitive, that doesn't mean they are right.

? So we just run a surplus by saying we are? And thus tax revenue catches up (which implies the end of a deficit, not the end of a surplus)? I really don't follow you here.

 

What do you think Keynesianism is all about? Ensuring the reproduction of capitalist profit. Its irrational, in the context of maintaining capitalism, to eliminate the utilisation of fiscal policy