Francis Bator nails it:
There is no federal debt crisis, as distinct from a governance crisis and a tax-phobia crisis.
Our fiscal policies should be based on the need to restore something like full employment, and our longer-term policies of taxation and expenditure on considered judgments about where an extra dollar of public expenditure will do more good than a forgone dollar of private expenditure.
Bator, who has actually dealt with international financial crises, regards fears of a bond-market revolt as merely chimerical. And he pokes appropriate fun at the notion that our grandchildren - who will be far richer than we are - should somehow be the objects of our pity on financial grounds. We should worry more about leaving them a wrecked planet than about leaving them owing a pile of Treasuries.
“We should worry more about leaving them a wrecked planet than about leaving them owing a pile of Treasuries.”
That also nails it quite nicely. Thank you.
Yup.
I personally think Obama will be fine, but I’d like to hear what the administration will do when it comes to dealing with the prolonged unemployment in the next few years. I suspect nothing more than a plan to rebuild infrastructure would do a lot of good, economically and politically, and am curious about we aren’t hearing more about it, or much of anything, lately. Are they simply trying to get past the budget battle?
Brian J: …a plan to rebuild infrastructure would do a lot of good, economically and politically, and am curious about we aren’t hearing more about it, or much of anything, lately…
Because the entire national dialog has been usurped by the “we’re broke” hurricane…
That is the meme that has stolen all the wind out of every sane sail, not just here, but in many western countries.
Check out this paragraph from the UK by Johan Hari :
I like the argument up above far more than Francis Bator’s.
The question is: Can that argument be made for the US?
If it can, it should be, with just as much salt and vinegar…
Posthaste….
I think nothing disturbs me more about ‘liberals’ than the perpetual rationalization that they don’t have to limit their spending ambitions because it doesn’t matter how deep we go into debt. Like people who think like that are actually going to limit their spending to things that make financial sense…
Yes, they were bust in the past. That’s part of why they don’t STILL rule a quarter of the world. And is that your plan, expecting a new industrial revolution to come along, to rescue you again? A new lend/lease program to pay for beating back the Nazis, with the repayments discounted 90%?
The implicit argument is that government debt leads to inflation, which is bad for seniors who typically live on savings and some fixed annuity payment. So the real motivation for stopping spending, taxes, and debt is to invoke deflation. It is, after all, probably the best thing for seniors. Now is that the best thing for this country as a whole? Probably not, though that is a discussion worth having isn’t it?
Brett, your argument asserts that being broke is OK, you can move on, you can control 1/4 of the world being done broker than you are now. Keep spending. I’m not sure that’s the message your brand wants to convey.
@Benny: In the US you argument has particular poignancy because not only are social security payments indexed, but one of the chief methods being suggested to create deflation is to cut those payments.
Brett, it doesn’t matter how much debt there is, because debt to one party is an asset to another. It DOES matter if one party gets over-leveraged, and on the evidence (bond rates are still very low), we’re not. Yet.
The question is, does it make economic sense to start paying down our (U.S. government) debt right now? And the answer that comes from economists, at least those who respect empirical evidence, is HELL no, this is not the time. Reduced government spending will further reduce demand, which will make the recession worse not better.
None of that means we should never pay down our debt, or never rein in spending.
Brett,
I think nothing disturbs me more about ‘liberals’ than the perpetual rationalization that they don’t have to limit their spending ambitions because it doesn’t matter how deep we go into debt.
Were equally disturbed at the rationalization by conservatives that we could plunge into as many wars as we liked without raising taxes to pay for them, because it didn’t matter how deeply we went into debt? Come on Brett, conservative spending ambitions are at least as great as liberals’, maybe more so. They just like to buy different things, and they sustain themselves by clinging to all sorts of supply-side myths.
“Brett, it doesn’t matter how much debt there is, because debt to one party is an asset to another.”
It will be interesting to see if you stick with that line tomorrow… I desperately want to believe that’s an April fools’ joke, its’ so inane.
Does it even begin to occur to you that, since one party isn’t the other party, it sure as heck DOES matter how much debt there is, to each particular party? And we are, every last one of us, a particular party…
“Were equally disturbed at the rationalization by conservatives that we could plunge into as many wars as we liked without raising taxes to pay for them, because it didn’t matter how deeply we went into debt?”
What, you mean like conservatives just plunged us into war in Libya?
What, you mean like conservatives just plunged us into war in Libya?
Oh come on now, Brett. Are you seriously going to try to conflate what’s happening in Libya with Iraq and Afghanistan? Have you no sense of proportion? Show me something from the left on par with the Project for a New American Century’s wet dreams of two simultaneous middle-east wars being fulfilled by the current action in Libya and I’ll take your point seriously.
Furthermore, are you going to assert that a McCain/Palin administration would have stayed out of it? You know as well as the rest of us that a Republican administration would be all over Libya in a heartbeat. The Republicans have been beating the drums on this one despite the fact that they don’t get to claim credit for it — their biggest criticism of the current administration’s handling of things is that it took too long for Obama to make up his mind what to do about it, and that he had to be convinced by his female subordinates. We’d have ground troops pretending to search for WMD’s in Libya right now if the last election had gone the other way.
Who knows, maybe a conservative administration would have actually asked Congress for permission to start a war? That probably would have concerned you, if it were a Republican starting the war…
Who knows, maybe a conservative administration would have actually asked Congress for permission to start a war? That probably would have concerned you, if it were a Republican starting the war…
This is not responsive to either my question or Freeman’s. Unsurprising.
Yes, we’re broke. Microsoft is gone, Google is gone, GE is gone, and every other Fortune 500 company has vanished. Clearly, we have no means by which to pay our current debts. America once was a bountiful nation, able to plunge headfirst into two wars, cut taxes for a slim minority, build a bridge to nowhere, and give seniors donut-coverage for their prescriptions, funded completely by America’s promise and projection of strength.
Those were the days. Why can’t Liberals simply understand that we have to raise revenue by cutting it? It’s that simple: cut spending and cut revenue and we’ll get back to a fiscally-sound position, like the `80s.
No, we are not broke, yet. We are not broke, in the exact same sense that somebody who is making the interest payments on credit card A with cash advances on credit card B, and visa versa, is not broke until one of the cards comes back “declined”: It’s just a matter of time, but it hasn’t happened yet. And every day we put off doing something about it, fixing the situation becomes more difficult.
It’s not the same as a credit card. A household can only draw on the wage-earning capacity of the residents, and if corporations, businesses or governments lay them off, they may have trouble earning wages (if they can’t hunt or forage or grow food, even worse). A nation can draw on its natural resources to extract and sell in the marketplace. Much different. Not the same at all. An inapt metaphor.
“Brett, it doesn’t matter how much debt there is, because debt to one party is an asset to another.”
Yeah, you’re right, I might as well take out that million dollar loan I’ve been considering. After all, if I don’t win the lottery so that I can afford to pay it off, at least it’s an asset to someone else.
“It’s not the same as a credit card. A household can only draw on the wage-earning capacity of the residents, and if corporations, businesses or governments lay them off, they may have trouble earning wages (if they can’t hunt or forage or grow food, even worse). A nation can draw on its natural resources to extract and sell in the marketplace.”
I understand the distinction you’re trying to make, but it’s really an irrelevant distinction. Your argument is that a nation has more complex and varied sources of potential income than an individual, so the individual is in more of an “all eggs in one basket” situation. That’s true, but if that nation is outspending the cumulative capacity of its natural resources and it’s various sources of potential income, it’s still in the same situation as an individual who is only able to pay off debt by going further into debt.
“A nation can draw on its natural resources to extract and sell in the marketplace. Much different. Not the same at all. An inapt metaphor.”
Not so inapt, a household can start selling the furniture on Ebay, sell the house and move into a shack, and so on. But household or nation, if you can’t stop living beyond your income, you’re on the road to ruin.
Borrowing makes sense in extraordinary circumstances. I’d even rank economic downturns as such. But if you’re borrowing more every single year, you’re not borrowing from extraordinary circumstances. You’re doing it because you want to live beyond your means.
The sad fact is that those who profess to most concerned about the deficit (now that Obama is in office) really don’t want to do much realistic about it. Long-run deficits are due primarily to rising health-care costs, and an unreasonable, one might well say utterly irrational, attitude towards taxes. Yet efforts to rein in health care costs like effectiveness research, taxes on cadillac plans, etc., in the ACA are vigorously opposed by conservatives. And of course they are ready to take up arms at the thought of taxes.
We are beset by a party and a movement which wants to rail about deficits, and fights tooth and nail any realistic attempt to bring them down over the long run. Instead they offer symbolic cuts to programs they don’t like, while pretending that if we raise Paris Hilton’s taxes all hope of economic growth will vanish.
I would take the debt hysterics from the GOP more seriously if their approach didn’t also include cutting revenue. In keeping with the credit card metaphor, the GOP proposal seems to me to be “cut spending and reduce your work hours.”
“Long-run deficits are due primarily to rising health-care costs, and an unreasonable, one might well say utterly irrational, attitude towards taxes.”
Oh, bs, you’re missing the forest for the trees, and maybe intentionally. Long run deficits are due to the fact that spending buys votes, and taxes cost you votes, so politicians want to do as much of the former with as little of the latter as possible. Explanations for why the budget keeps ending up about half again larger than incoming revenue will continuously vary, but that’s the root cause.
And the attitude towards taxes is perfectly rational, given the government’s demonstrated capacity to always spend more than it takes in, no matter how much it takes in. Agreeing to increased taxes just results in the same or greater deficit at a higher level of spending, until some mechanism can be put in place to supply the spending discipline Congress has lacked for most of my life.
“Long run deficits are due to the fact that spending buys votes…”
Tell that to Meg Whitman.
Agreeing to increased taxes just results in the same or greater deficit at a higher level of spending, until some mechanism can be put in place to supply the spending discipline Congress has lacked for most of my life.
You mean a mechanism like electing Clinton President?
Nah, even that doesn’t work in the absence of some mechanism to restrain spending, which was starting to accelerate again in Clinton’s last budget. The reduced deficits during the latter Clinton administration were mostly due to a stock market bubble driven revenue spike.