what is more important: reducing debt or stimulating the economy

People want/demand the Govt to do things like provide jobs so people don't have to collect unemployment but few are willing to pay for that support...

 

You are so confused. As I reiterate, debt interest is 3% of GDP. Let that sink in.

Fact 1: The Fed doesn't need a nickle of tax receipts to fund anything.
Fact 2: Cutting into the debt during a recession is ill-advised, because you have to CUT workers and services, and INCREASE taxes
Fact 3: The debt burden can still be reduced in deficit spending (as it has throughout history) if it is accompanied by growth
Fact 4: Deficit spending causes economic growth

 

Write your idiot Republican politicians and tell them to work on that. That is a problem with spending priorities, not the debt. The debt is 3% of GDP, as I continue to reiterate.

Tax receipts are not needed to fund anything at the Federal level. The are strictly deflationary redistribution of currency.

You are not a government or a bank. Stop making this analogy.

 

Excellent question and I'm pleased to at least try to shed some light on it. Actually I reside in the U.S. now (naturalized citizen), but I travel back and forth. But yes, Spain and other European countries, like America, are engaged in reckless, devil-may-care spending. All of them are heading for disaster.

White, conservatives of Spain (and there are many of us), try to stem back the tide of the impending and obvious forthcoming apocalypse -- but as you know, it's hopeless. And I suppose one can't really blame them -- almost everyone would prefer to enjoy good times today and let whatever will be tomorrow (Que será, será).

Eat, drink and be merry, for tomorrow you may ...

 

News flash; Government does not create jobs.

Your government pays people to do nothing...why can't your government pay people to do something? What was wrong with the WPA?

I don't have a problem with people collecting unemployment but at least they can go out and pick up litter or volunteer instead of zero productivity.

If you observe the growth of US workers compared to the growth of US jobs, you might see that US workers are growing faster than jobs. Today we have 10-15 million unemployed and this number will probably grow during the next decade. You cannot possibly expect government to magically create 10-15 million jobs for people located all over the nation. The private economy must find a way to accelerate growth specifically in creating US jobs. What is our government doing to make sure American business growth is not impeded by government BS/taxes/etc.? Another issue exacerbating the above is the huge quantity of American workers who are unskilled, lower-skilled, uneducated, in which labor supply is far greater than demand, which drives down and maintains lower wages, which means low to no federal taxes...

 

1. $450 billion is extracted from the private sector in taxation every year to pay debt interest payments.

2. There is no recession? I never implied we can reduce debt? I clearly said we will never reduce debt during the next ten years.

3. Reducing deficit spending does not reduce existing debt. Growth helps nothing. No matter if tax receipts are $2.5 trillion or $5.5 trillion, the interest on the existing debt remains.

4. Deficit spending cannot be defined as 'economic growth'. Deficit spending is spending more than receipts. Stimulus spending 'might' provide temporary economic growth but not prolonged economic growth. Deficit spending should, IMO, be used solely for emergency situations, and not as SOP...

 

If we cut government spending, as well as personal spending, the economy declines, unemployment increases, demand on government support increases...kind of an evil situation in which we actually punish ourselves for reducing our spending. We seem to teeter on the brink of the economic abyss just with slight fluctuations in the economy. Is this because we spend every penny plus more on credit? Do we live well beyond common sense means? Millions of us go broke if we are unemployed longer than a couple of months...which equates to little to no savings. We buy more house than we need and newer cars just because and enjoy life on credit cards. We have two areas to consider; government and people...and both are showing no signs of change no matter the issues which face us...carpe diem...

 

Of course it does. Millions of people work for the Govt.

Get your Republican friends to authorize jobs bills to get people working.

Who's going to coordinate all that?

I don't think that is true. Since Jan 2010 the labor force has grown about about 1.5 million versus 5 million more employed, from the household survey.

About 11 million, down from 15 million in Jan 2010. Why do you think the number will probably grow?

You don't need to. You create demand for products and services which will then cause businesses to hire people.

 

Maybe its because, proportionately compared to 30 years ago, about $1.3 trillion per year goes to the 1% instead of the middle classes. What if the $1.3 trillion each year was going to the middle classes, who would spend it, instead of the 1%, who stick large chunks of it in their offshore accounts?

I know, you're happy they 1% is taking so much more of the income and wealth of this country. But if you want to know why the economy isn't recovering like it did in the pre "trickle down" days ....



You think it is just a coincidence that every recovery since "trickle down" has been slower and more sluggish than every recover before "trickle down"?

 

I find that quite sad. We actually know where all this leads, but we can't stop the party. We have to wait until the party stops us.

 

Ok, his entire post was a bunch of hot air.

First of all, Spain's issue is the entire Eurozone decide Austerity was a way to fix their fiscal problems. Epic fail. You don't cut funding to everything when the system is already recessed.

Second, Spain, Greece, and all the Eurof****ed countries did it to themselves when they ceded their currency rights to the European central bank. They have to beg for more Euros like a state does. Had they kept their own currency, they could service their debt and dig themselves out of their own holes. Economists are advocating the easiest way to save the Eurozone is to disband it. They broke the cardinal rule #1: you don't give away your monetary sovereignty.

Comparing Spain and Greece's fiscal problems to the United States is a fundamental misunderstanding of economics.

 

I believe some people only claim to believe in the laws of demand and supply.

 

If you are a Keynesian. If you believe that government creates jobs then yes. The government needs to spend like a drunken sailor.

 

The Govt employees millions of people. So yes, the Govt can create jobs. The problem with spending like a drunken sailor is we've had 3 decades of fiscal mismanagement (excepting the late 1990s), our debt is already too high, and we have folks in control of the House whose number two priority (after getting Obama out of office) is making sure that taxes don't go up so the richest stay rich.

 

I would agree with you that the ultimate solution is the dissolution of the Euro project. Interesting goal, but poor design and execution. The temptation of these governments is understandable though. Before the Euro, these governments were all paying much higher interest rates on their bonds, but with the Euro, they were able to piggyback on Germany's good credit rating allowing them to borrow at much lower rates. Which of course, they did, which is why they are now in the trouble they're in.

However you are mischaracterizing "austerity." You're acting as if it's some alternate economic policy among many options these governments had. Austerity is what you do when you run out of money. None of these governments would be acting in any way austere if they had the option of continuing to borrow lots of money at low interest or getting bailouts. As long as they're in the Euro, they just don't have the money for the sugarplum dreams of those who would like to spend, spend, spend.

 

Why does it seem that some people only claim to believe in capitalism where it only takes money to make more money. Our federal Congress has recourse to an official Mint under our form of capitalism.

 

Yes government creats jos but they create jobs that someone else has to pay for which leaves less money for the private sector, it then borrows money which leaves yet less money available, or prints money which the way things are done today merely expands the apparent size of the economy without actually gaining any private sector jobs of the sort necessary to really expand productive capacity. All in all you are painting a lovely fence around a house that is rotting form the inside out.

 

Nope.. government workers get paid by government dollars, not your dollars.

If you think taxes are needed to pay government workers, you aren't understanding modern economics.

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Austerity during a recession is a proven failure.

The Tea Party wants to convince the public that austerity will brighten the United States' financial outlook. We can get right there on the soup kitchen line with Spain and Greece and their 25%+ unemployment rates. Solution is to cut even more!?

 

It is one thing to say in an abstract theoretical view that the Govt doesn't need taxes because it can simply (with Fed willingness) keep expanding the money supply.

But in practice that would create devastating inflation.

So to say something like "If you think taxes are needed to pay government workers, you aren't understanding modern economics" either shows you don't understand economics, or are intentionally making a bogus logical leap to support your point.

Yes, the Govt could simply print more money to pay its workers and fund its operations. But the cost would be a devastating level of inflation if not hyper inflation. So pretending that the Govt doesn't need to raise taxes to fund its operations is disingenuous if you are purporting suggest that it is some kind of reasonable option.

 

The point I make is while the two are related, they are still different. The government need not collect a cent in taxes to operate. Taxes are strictly a deflationary redistribution of money. They are independent of each other. Modern economics works where the government's means are limitless, only constrainted by hyperinflation (which is much harder to achieve than people think).

 

You're putting it backwards. Taxes are a "deflationary redistribution of money" only if the alternative is the hyper inflation that unlimited printing of money leads to. So to the extent the Govt funding itself by taxes reduces the obligation to print more money, it is not deflationary, but counter inflationary.

Again, this theoretical debate is interesting, but in practice, if the Govt funded itself by printing more money the result would be devastating inflation, and in short order.

To make the claim that the "government need not collect a cent in taxes to operate" implying that that is some sort of reasonable alternative is, IMO, disingenuous. It is not a reasonable alternative.

 

Counter inflationary = deflationary. I don't have it backwards. What you are trying to say is that taxing is a necessity, which is flat out untrue. Taxes are a measure that is used after the fact. Taxes are not needed to fund anything, and that is a fact.

What do you know about devastating inflation in fiat currency? If we added $5 trillion tomorrow would it be devastatingly inflationary? Not really.. money would be worth less but goods would still be bought, sold, and consumed in U.S. dollars. It would affect our overseas trade operations. Our devalued / weaker currency would actually foster more exports.

Print-based hyperinflation normally requires the economy to be at full-capacity. Inflation is far more complicated than printing massive amounts of money.

 

No, counter inflationary = less inflation.

No, what I'm saying is that it is disingenuous to suggest that the Govt could practically fund its operations without devastating consequences in the form of inflation.

Adding $5 trillion into the money supply would increase money in supply by about 140%. And yes that could be devastatingly inflationary.

It normally is but normally require it. In '74-75, '79, and '81 we had sharp recessions where the economy was not operating at full capacity, but still had high inflation.

 

So great...you can solve all of your problems by just having government hire 10-15 million Americans and paying them $55K per year...gotta love how government can create jobs!

This is not a Republican or political issue.

So now coordination is a problem...always an excuse for not working.

If jobs were being created faster than available workers then we would not have unemployment.

Because Obama is forecasting population to increase to 400 million by 2050 yet the 'participation rate' declines over the same period. Unless everyone who is not employed and eligible to work are independently wealthy, all of them will be burdens on government. And, what can possibly be the impetus that will generate 10-15 million new middle-class jobs?

Who creates 'demand for products and services'?

 

Recoveries are different because the economy and society are different. You cannot compare apples and oranges. We have a different work force, different cost of living, different skill sets, different economic factors, different personal behaviors...everything is different.

Obama is forecasting $500 billion deficits through 2023...you can extract $500 billion more from the wealthy and this won't reduce a single dime of taxes paid by everyone else.

And you ignore the opportunities which are lost when you transfer $500 billion from the private sector to government.

What you are basically saying is that common Americans, have become incapable of attending public school, staying out of crime, attending college or trade school, competing for jobs, securing employment and maintaining exemplary performance, living well within their means, saving a percentage of their incomes, saving for retirement...and instead you prefer that those who have put forth these efforts should use their financial rewards to support those who don't wish to put forth those efforts...