The babyjesuschristsuperstar on Board: filling the moral void of Clinton’s legacy

[Sidd Finch]

Originally posted by Spanky
Having a free economy, in no way implies no government involvement just as a free society (or political freedom) does not imply no government. Without government we would have no political freedom just as without government we would have no economic freedom.

In a country were the government is oppressing peoples political freedoms you could be "anti-government" without believing in anarchy.

I can think our government is too large, or involves itself too much in our economic life, or even believe that free markets are preferrable without being an anarchist.

I believe that our government interfers too much in our economic life and our government has grown to large, but that does not mean I want to end government, or even come close to ending government.

Yes, but you are rational (on this issue, anyway). I would not characterize you as an "anti-government" type, or as a pseudo-libertarian fantasist, and I was not referring to you in my post to Captain.

[Spanky]

Originally posted by Captain
Are you looking at growth or inflation? Even with growth, if we enter a deflationary cycle (such as the one that last about 40 years at the end of the 19th century), deficits can be devastating. I believe you are assuming both growth and inflation.

And in terms of "just balancing the budget" - how likely is that to happen?

When was the last time we had deflation? 1930s? At the end of the 19th century we had deflation because we were on the silver standard and the value of money was not controlled by the Fed but tied to a limited resource.

Ever since Jimmy Carters stagflation of the late 1970s the Fed keeps the inflation rate at the rate of growth. That seems to work and there is no reason to think that will change. I can't even think of a modern industrialize economy that has had deflation over the past fifty years. Japan and Germany have come close to zero inflation but never deflation.

The economy has grown consistently with occasional problems since the founding of this nation. So as long as the nation grows and and even if the Fed keeps a strict monetary policy (which we have had since the 1980s) todays huge deficits will be tomorrows chump change.

We don't need to pay the money back. We just need to balance the budget and everything will be fine. In fact, paying off the national debt could be a disaster. The entire world economy is dependent on the interest our government provides on our debt. The number our government uses to determine our interest payments sets all sorts of different numbers for the economy, and without the US government setting that number no one knows what will happen.

[sebastian_dangerfield]

Originally posted by Sidd Finch
The number of people who claim to be "anti-government" on this board, and even make goofy claims like "government doesn't help me make a living", is sometimes laughable, sometimes shocking, always absurd. Particularly given that this is a board of lawyers, none of whom would have jobs if their pseudo-libertarian fantasies were to become real.

Govt doesn't help me make a living doing anything but being an unproductive paper pusher. Are you really suggesting we're better off with mountains of absurd regulations and laws and govt interference - nearly all of it totally inefficient and wasteful - than with a much smaller, less ambitious, less invasive govt? Are you suggesting the armies of tax specialists and lawyers and buraeucrats are a good thing?

You're just advocating maintenance of a flawed, wasteful system to protect your paycheck.

[Mmmm, Burger (C.J.)]

Originally posted by Spanky
In fact, paying off the national debt could be a disaster. The entire world economy is dependent on the interest our government provides on our debt. The number our government uses to determine our interest payments sets all sorts of different numbers for the economy, and without the US government setting that number no one knows what will happen.

All that hand-wringing about that issue a few years back is not irrelevant. But I don't remember any good justification for having no debt. There are plenty of private debts people are willing to assume. And we can still have bonds even with virtually no debt--Anyone without a mortgage can do that--it's a savings account. OR a mattress.

(BTW, there's no reason to connect inflation rate and growth rate. Monetary theory says that the money supply should grow at the same rate as GDP, which will mean an inflation-less environment.)

[Captain]

Originally posted by Spanky
When was the last time we had deflation? 1930s? At the end of the 19th century we had deflation because we were on the silver standard and the value of money was not controlled by the Fed but tied to a limited resource.

Ever since Jimmy Carters stagflation of the late 1970s the Fed keeps the inflation rate at the rate of growth. That seems to work and there is no reason to think that will change. I can't even think of a modern industrialize economy that has had deflation over the past fifty years. Japan and Germany have come close to zero inflation but never deflation.

The economy has grown consistently with occasional problems since the founding of this nation. So as long as the nation grows and and even if the Fed keeps a strict monetary policy (which we have had since the 1980s) todays huge deficits will be tomorrows chump change.

We don't need to pay the money back. We just need to balance the budget and everything will be fine. In fact, paying off the national debt could be a disaster. The entire world economy is dependent on the interest our government provides on our debt. The number our government uses to determine our interest payments sets all sorts of different numbers for the economy, and without the US government setting that number no one knows what will happen.

Significant components of our economy are structurally deflationary right now. Technology and retail are two examples. There are demographic shifts that could turn large portions of the real estate market deflationary - deflation in the past has been linked with shrinking populations, and many regions have been experiencing loss of population.

I am not saying there will be deflation, merely saying that our planning should not rule it out. Some cycles are very long, and the inflationary/deflationary economy is one of them. But there has never been an inflationary economy that did not ultimately turn deflationary. In 2001, I remember hearing about the end of boom/bust cycles. We had it under control; the stock market and the economy could expand forever. What happened?

[Hank Chinaski]

Originally posted by Sidd Finch

Hank is either a whole lot older than me (I doubt it), or from a very odd part of the country. Growing up in the burbs of NYC in the early 70s, the only thing we heard about duck-and-cover drills was our teachers joking about how they used to do them, in the 50s. The revised drill involved bending over and "kissing your ass goodbye".

I never had a "duck and cover" but we did go sit along the wall in the hallway, as a "tornado-civil defense" drill. To the extent it was for the nuclear bomb, I suppose it's purpose would be to make cleaning up the corpes easier.

[Sidd Finch]

Originally posted by Hank Chinaski
I never had a "duck and cover" but we did go sit along the wall in the hallway, as a "tornado-civil defense" drill. To the extent it was for the nuclear bomb, I suppose it's purpose would be to make cleaning up the corpes easier.

So did Reagan find a way to prevent tornados, too? Now that would be something worth paying (or borrowing) for.

[Sidd Finch]

Originally posted by Spanky
The economy has grown consistently with occasional problems since the founding of this nation. So as long as the nation grows and and even if the Fed keeps a strict monetary policy (which we have had since the 1980s) todays huge deficits will be tomorrows chump change.

Spanky, you need to check your facts.

The deficit in 1985 was $221 billion (including money borrowed from Social Security). That was 5.3% of GDP then.

The present value of that amount, using the CPI to adjust, is $388 billion. That would be 3.7% of today's GDP.

The current deficit is certainly higher -- 2004 was $521 billion, or 4.9% of GDP -- but to suggest that $388 billion in today's money is "puny" or "chump change" is simply absurd.

Or do you mean to suggest that, 20 years from now, the annual deficit will be a trillion dollars or so, and 8% of GDP, and that today's deficits will seem small by comparison? If so, then I guess your work for the party has been really successful.

We don't need to pay the money back.

Huh?

We just need to balance the budget and everything will be fine.

Yes, and some manna from heaven will help too. Is there some deficit reduction plan in existence that I'm unaware of? Even Bush's campaign platform was only to reduce the deficit by half in his second term (and even that required some extremely silly accounting tricks).

In fact, paying off the national debt could be a disaster. The entire world economy is dependent on the interest our government provides on our debt. The number our government uses to determine our interest payments sets all sorts of different numbers for the economy, and without the US government setting that number no one knows what will happen.

If we were to pay off the national debt in a year or five years, this would be true. But there is no danger of that happening.

Personally, I am far more scared of the way our mounting debt increases our dependence on China. Not that we should have anything against a Communist dictatorship, but....

[sebastian_dangerfield]

Originally posted by Sidd Finch
Personally, I am far more scared of the way our mounting debt increases our dependence on China. Not that we should have anything against a Communist dictatorship, but....

How is that going to happen?

[Southern Patriot]

Originally posted by Spanky

We don't need to pay the money back.

One of the few good things about the North's victory in the War of Northern Agression was that we never had to pay back anything we borrowed. Yes, I believe I still have some of the fine Yankee artwork I "obtained" during our forays north of the Mason-Dixon line.

Perhaps we can find a similar way to avoid paying these debts.

[Southern Patriot]

Originally posted by sebastian_dangerfield
Govt doesn't help me make a living doing anything but being an unproductive paper pusher. Are you really suggesting we're better off with mountains of absurd regulations and laws and govt interference - nearly all of it totally inefficient and wasteful - than with a much smaller, less ambitious, less invasive govt? Are you suggesting the armies of tax specialists and lawyers and buraeucrats are a good thing?

You're just advocating maintenance of a flawed, wasteful system to protect your paycheck.

We'll take care of you with some of that there tort reform.

Yankee.

[Hank Chinaski]

Originally posted by Sidd Finch
So did Reagan find a way to prevent tornados, too? Now that would be something worth paying (or borrowing) for.

None have hit my house since he was President.

[Spanky]

Originally posted by Sidd Finch
This is such bullshit. Interest on the debt is one of the biggest line items in the budget. Clinton would have balanced the federal budget much more quickly, had the gov't not still needed to pay so much interest on the Reagan debt.

I was responding to the future generations B.S. Our grandchildren will have no problem paying off todays debt. It is only the recent debt that hurts.

Originally posted by Sidd Finch The deficit in 1985 was $221 billion. In 1985 dollars. That is hardly insignificant, and while it is dwarfed (in nominal dollars only) by the Bush II deficits, that is not a good thing.

221 Billion is not that much money compared to the two trillion dollars in revenue we receive every year.

Originally posted by Sidd Finch Moreover, we are not just paying interest on the 1985 deficit. Year after year (under Rep presidents), those 9-figure deficits mount up. The interest on my credit card debt from last January may not be killing me, but if I ran up an even higher unpaid balance every month after that, it starts to get pretty punishing. Just as the interest on the current federal debt is punishing.

It is just the interest that in the last twenty years is pretty punishing. The interest on the debt accumulated more than twenty years ago (a generation) is insignificant. The difference between you and the federal government is that the federal government salary is guranteed to grow every year by at least three percent and you never have to retire. That income will come in forever and will increase forever.

Originally posted by Sidd Finch And if the debt is not a problem, then just what was Bush crowing about on Social Security? No trust, no fund? Just a bunch of IOUs?

It didn't say the debt is not a problem. It just doesn't have to be "paid back" as long as the budget is balanced. Social Security is a whole different issue. The past debt is a fixed cost. Social Security is an unfunded mandate (pretty much an entitlement) that keeps growing every year. Medicare and Social Security are like the national Salary in that these are costs that continue to grow every year forever. So if these costs exceed your annual revenue you are screwed because the costs continue indefinitely. That is the problem we are facing.

Originally posted by Sidd Finch
That is one reason, but the reality is more complicated. Deficit spending reduces growth. But raising taxes to prevent deficits also reduces growth. And cutting spending, too, can reduce growth (look how various industries and various parts of the country panicked when the USSR fell and the military budget was potentially to be cut). So, the issue is finding the right balance. Everyone (well, Republicans) claimed that the tax increases under Clinton would destroy growth. But they didn't, at least in part because they helped eliminate the deficit.

True. And if it starts raining $100 bills tomorrow (without any inflationary effect), that will solve the problem too. And if only the Iraqis really had greeted us with sweets and flowers, we wouldn't have spend $300 billion there, either. Also, I'd like a pony.

You are missing my point. Deficits are a problem. I never said they were not. Crowding out by deficits reallly hamper growth. So deficits should only occur in recession years. However, this stuff about future generations have to pay it back is B.S. I was just pointing out that if we balance the budget then future generations won't have to pay back the debt. You don't ever need a surplus.

[Spanky]

Originally posted by Sidd Finch
Yes, but you are rational (on this issue, anyway). I would not characterize you as an "anti-government" type, or as a pseudo-libertarian fantasist, and I was not referring to you in my post to Captain.

I Guess I thought you were confusing your position with Tys. Ty seems to think that since the government is necessary to allow free markets, then there is really no such thing as a free market. Which is similar to saying that since governments are necessary to create political freedom, there really is not such thing as political freedom.

If I set up a law that says you can not scream fire in a crowded theater, that law does not eradicate the right of free speech, just as requiring disclosures when you list a stock on the NYSE makes does not make the New York stock Exchange not a free market.

[Sidd Finch]

Originally posted by Spanky
221 Billion is not that much money compared to the two trillion dollars in revenue we receive every year.

Wow, you really are a Bush Republican, aren't you?

You cannot be unfamiliar with the notion that a dollar in 1985 is worth more than a dollar today. And yet, you compare the 1985 deficit in nominal dollars to today's government revenues to make a "point".

So, where do I start? First, as I pointed out (and you gleefully ignored), 221 billion in 1985 dollars is about $388 billion today.

Second, 2004 revenues weren't two trillion. You're only off by six percent -- it was 1.88 trillion -- but 120 billion is a pretty big error, no? Between that error and ignoring inflation, you reduce the problem by two-thirds. Faith-based budgeting, indeed.

Third, even using your (false) numbers, you are talking about 11% of revenues. Using the real numbers, it's 21% of revenues. In my book, that hardly qualifies as "chump change".

As for your other points -- yes, if somehow we miraculously balance the budget for the next 20 years, all will be well. Now, how exactly is that going to happen -- particularly when people like you are spouting the "it just doesn't matter" garbage?

And, by the way, some of us see those "future generations", that you consider as a distant hypothesis, every day. They are our children, and for many of us on this board they will be adults in a decade or so, or even less. How much will interest on the national debt be then?