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revefsreleets
12-02-2008, 12:21 PM
I'm in no way joking. We are being subtly prepped by the major media outlets (who, by the way, have spent the last 8 years telling us how horrific Bush was for running a deficit and how bad deficits are) for a government spending program that will make the all deficits we have previously ran up in this Country look like Monopoly money. We will be TENS OF TRILLIONS of dollars in the hole when all is said and done. While this op/ed piece makes some good points, there is no way that the interest we will be forced to pay will in any way balance out the end results. The net effect is that we will have leveraged our future to the eyeballs.

http://www.ohio.com/editorial/commentary/35355384.html

Deficit worriers have it all wrong
By Paul Krugman


Published on Tuesday, Dec 02, 2008
NEW YORK: Right now there's intense debate about how aggressive the U.S. government should be in its attempts to turn the economy around. Many economists, myself included, are calling for a very large fiscal expansion to keep the economy from going into free fall. Others, however, worry about the burden that large budget deficits will place on future generations.
But the deficit worriers have it all wrong. Under current conditions, there's no trade-off between what's good in the short run and what's good for the long run; strong fiscal expansion would actually enhance the economy's long-run prospects.
The claim that budget deficits make the economy poorer in the long run is based on the belief that government borrowing ''crowds out'' private investment — that the government, by issuing lots of debt, drives up interest rates, which makes businesses unwilling to spend on new plant and equipment, and that this in turn reduces the economy's long-run rate of growth. Under normal circumstances there's a lot to this argument.
But circumstances right now are anything but normal. Consider what would happen next year if the Obama administration gave in to the deficit hawks and scaled back its fiscal plans.
Would this lead to lower interest rates? It certainly wouldn't lead to a reduction in short-term interest rates, which are more or less controlled by the Federal Reserve. The Fed is already keeping those rates as low as it can — virtually at zero — and won't change that policy unless it sees signs that the economy is threatening to overheat. And that doesn't seem like a realistic prospect any time soon.
What about longer-term rates? These rates, which are already at a half-century low, mainly reflect expected future short-term rates. Fiscal austerity could push them even lower — but only by creating expectations that the economy would remain deeply depressed for a long time, which would reduce, not increase, private investment.
The idea that tight fiscal policy when the economy is depressed actually reduces private investment isn't just a hypothetical argument: It's exactly what happened in two important episodes in history.
The first took place in 1937, when Franklin Roosevelt mistakenly heeded the advice of his own era's deficit worriers. He sharply reduced government spending, among other things cutting the Works Progress Administration in half, and also raised taxes. The result was a severe recession, and a steep fall in private investment.
The second episode took place 60 years later, in Japan. In 1996-97, the Japanese government tried to balance its budget, cutting spending and raising taxes. And again the recession that followed led to a steep fall in private investment.
Just to be clear, I'm not arguing that trying to reduce the budget deficit is always bad for private investment. You can make a reasonable case that Bill Clinton's fiscal restraint in the 1990s helped fuel the great U.S. investment boom of that decade, which in turn helped cause a resurgence in productivity growth.
What made fiscal austerity such a bad idea both in Roosevelt's America and in 1990s Japan were special circumstances: In both cases, the government pulled back in the face of a liquidity trap, a situation in which the monetary authority had cut interest rates as far as it could, yet the economy was still operating far below capacity.
And we're in the same kind of trap today — which is why deficit worries are misplaced.
One more thing: Fiscal expansion will be even better for America's future if a large part of the expansion takes the form of public investment — of building roads, repairing bridges and developing new technologies, all of which make the nation richer in the long run.
Should the government have a permanent policy of running large budget deficits? Of course not. Although public debt isn't as bad a thing as many people believe — it's basically money we owe to ourselves — in the long run the government, like private individuals, has to match its spending to its income.
But right now we have a fundamental shortfall in private spending: Consumers are rediscovering the virtues of saving at the same moment that businesses, burned by past excesses and hamstrung by the troubles of the financial system, are cutting back on investment. That gap will eventually close, but until it does, government spending must take up the slack. Otherwise, private investment, and the economy as a whole, will plunge even more.

The bottom line, then, is that people who think that fiscal expansion today is bad for future generations have got it exactly wrong. The best course of action, both for today's workers and for their children, is to do whatever it takes to get this economy on the road to recovery.
Krugman is a New York Times columnist.

fansince'76
12-02-2008, 01:33 PM
While this op/ed piece makes some good points, there is no way that the interest we will be forced to pay will in any way balance out the end results. The net effect is that we will have leveraged our future to the eyeballs.

I agree. I'm no economist, but I don't think a Keynesian (record) deficit spending approach will cure what ails this economy.

xfl2001fan
12-02-2008, 03:34 PM
Well, unfortunately studies have shown that politicians are bad for the economy.

Anyone got a giant can of Raid we can spray at our Nations Capital?

GBMelBlount
12-03-2008, 05:57 AM
Well, unfortunately studies have shown that politicians are bad for the economy.



Of course they are. It's not their money. It's like giving an american express card to a trophy wife.

GBMelBlount
12-03-2008, 06:02 AM
We are being subtly prepped by the major media outlets (who, by the way, have spent the last 8 years telling us how horrific Bush was for running a deficit and how bad deficits are) for a government spending program that will make the all deficits we have previously ran up in this Country look like Monopoly money.

Yep. The media bashed Bush for EVERYTHING he did, right or wrong, so that Obama needed only to run as the "Anti-Bush" in order to win. Now that Obama has won, he will adopt a lot of Bush's strategies and the media will now see it as their job to "sell it". The real trick will be to sell America on everything still being the fault of Bush/Republicans in 4 years. Just watch.

Just like when the first Bush wrongly raised taxes, they made that his legacy. When Clinton did it, it was OK, because he cares about people so when HE lied and raised taxes, it must have been absolutely unavoidable. Complete double standard.

Who is John Gault?

http://en.wikipedia.org/wiki/Atlas_Shrugged

revefsreleets
12-03-2008, 07:54 AM
I hate to break it to the Utopians, but there is no change coming. Obama's cabinet is all centrists, so it looks like more of the same. I think we can look to the congress of the last 4 years as to the direction this country will be heading in the next 4 years. If so, that ain't good!

SteelCityMan786
12-03-2008, 02:18 PM
I hate to break it to the Utopians, but there is no change coming. Obama's cabinet is all centrists, so it looks like more of the same. I think we can look to the congress of the last 4 years as to the direction this country will be heading in the next 4 years. If so, that ain't good!

and they can pretty much expect the Republican Party should they be able to repair their brand to either be the majority party in Congress or holding the White House.

BrandonCarr39
12-04-2008, 07:13 PM
First off, they need to abolish the Federal Reserve. But sadly, they won't.

revefsreleets
12-04-2008, 07:31 PM
First off, they need to abolish the Federal Reserve. But sadly, they won't.

And a return to the Gold Standard. What most people don't realize is that we don't even hold most of our own gold anymore. If all the international chits were called in during a worldwide economic collapse, we'd be effed for awhile.

In the end our massive supply of raw materials would save us, but it'd be ugly for a bit.