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Over the next generation fiscal policy will regain it's place (see post war era) as the primary growth tool as opposed to monetary policy. Monetary policy has l

Over the next generation fiscal policy will regain it's place (see post war era) as the primary growth tool as opposed to monetary policy. Monetary policy has led to a glut in capital that has no idea what to do with itself: it's led to huge asset bubbles as seen with housing and start up evaluations. The US should absolutely lock in these low interest rates to fuel green infrastructure and technology. Debt used to fund infrastructure and technology is the most effective use in our current environment.

Retric 7y ago
That would be reasonable if the US was funding investments with debt. Instead it’s subsidies mostly tax breaks and consumption for little long term return. Lowering the cost of debt is still a good idea, but let’s not pretend we are in a fiscally sound situation.
- Despegar 7y ago
  >Instead it’s subsidies mostly tax breaks and consumption for little long term return. There's nothing wrong with consumption. Consumption is what drives the US economy and makes it the powerhouse that it is. The American consumer is what is keeping the US out of a recession while export-driven economies like Germany are heading into recession. The problem with our fiscal policy was that the tax cuts passed by Trump almost exclusively went to the richest people who have a low MPC (marginal propensity to consume). There's nothing wrong with expanding the deficits, the US doesn't need to worry about debt and the falling bond yields confirms that. But that fiscal spending should have been targeted at the poorest people in America. It should have been to give them universal health care or free higher education, not cutting corporate taxes.
  - 40acres 7y ago
    Fiscal policy and the private sector have not done enough to ensure long term growth -- as mentioned asset inequality has lead to a lot of capital in the hands of actors that do not spend money. Advancement in technology is deflationary by nature and so a lot of growth is only realized by the top. In times like this the public sector must intervene to frame the future for it's citizens and economy: focus on the health and education of your citizens, mitigate future risk by funding solutions to climate change, secure safety by spending on military and providing equal opportunity to quell internal social unrest. If you have strong instutions and control the currency that your debt is in (US, UK, Japan, China -- as long as the communist party maintains its current strength) this is the way to go, globalization will take a hit but will cycle back in the future.
  - ericd 7y ago
    Why has this idea that consumption is wealth-generating caught on so thoroughly? Consuming, consuming, consuming seems like it's just burning the stored wealth of the country, by selling off our valuable productive assets in exchange for trinkets (really, we're selling dollars, but those come back looking to buy up real estate, companies, etc). What's really wealth generating is investing in things that fuel long term productivity growth at a higher rate than the cost - education, automation, useful infrastructure (here's looking at you, Chinese ghost cities), tools/machinery, and R&D. Everyone buying TVs is the complete opposite, yet it would show up as a short term boost to the GDP.
    - Despegar 7y ago
      The problem is that you're under the impression that "consumption" is somehow less virtuous than "investment". You mentioned China, but that's a perfect example of an economy that isn't driven by consumption. And they desperately want it to be. China is extremely reliant on exports and state-driven infrastructure spending. If there was actual domestic demand for everything they produce they'd be in a much better spot and that infrastructure would actually be utilized.
      - ericd 7y ago
        I'm under the impression that the main driver of long-term wealth is increases in productivity. Hence why "investment" in productive assets (including a well educated populace) is a larger driver of long-term wealth than "consumption". They're reliant on exports and state-driven infrastructure spending because they're not yet wealthy, per capita. It's the stored wealth that allows a consumption-driven economy, not the other way around.
        mlazos 7y ago
        Most Americans are in debt and have no stored wealth. I know that intuitively it seems like stored wealth should be good for an economy but it’s not the case. Spending more money than you have (debt) is actually better for the economy because it results in more movement of goods and services. Leveraged consumption grows businesses which hire more people which creates wealth. I do think that education is important, but you also need consumption to drive demand for educated professionals in growing businesses. In short you need both for the economic cycle to work.
  - stanfordkid 7y ago
    Blindly investing money into “the poor” is a foolish endeavor that yields little strength to a country. Herd immunity and preventative health is a quantifiable thing and so I support universal healthcare. But we have to stop this disasterous assumption that the only reason people are poor is their circumstances. The best way to help poor people is to lower the minimum wage so they can get jobs. Subsidizing the poor increases consumption which is bad not only for the first order effect (throwing away money)... but also for the little thought of second order effect: it incentivizes people to build businesses that cater to consumption that was in the first place unsustainable. Smart people that could have been doing something else instead facilitate the creation of businesses that are only funded by inflation and cheap credit. This is the story of the US economy in the past 30 years. The two largest disasters in recent history: the student loan bubble and the housing bubble, were both founded upon the notion that we should “give money away” without any real measurement of whether or not there would be a return on capital. Our government should invest the majority of capital in basic research, healthcare, education and infrastructure... not the creation of a consumption driven bloated welfare state.
    - coldcode 7y ago
      We should force the poor into indentured servitude or slavery as a proper solution, as the South was better off when workers were all unpaid and uncared for. Giving everyone's tax money to wealthy people will result in a better world for everyone. /s Libertarian fantasy must be a pretty dull medium. Always the same story.
      - voldacar 7y ago
        This wasnt a very substantive comment... People go to HN to avoid discourse like this :(
    - SubiculumCode 7y ago
      A serious and frequently permanent loss of productivity occurs when people live on a financial cliff where minor unfortunes can propel even smart individuals into unemployment and homelssness, and their children into poorer education outcomes, while minor investments and more equitible distributions of wealth in a society create robust sustainable growth. In the case of student loans, they should have come with restrictions on increases in admin costs at the college as tuition has inordinately increased. In terms of the housing crisis, do not discount the role of predatory lending by institutions that used to engender trust. I find your position to ignore context and subtelty, and to propogate myths about poverty and the impoverished as primarily being the result of a meritocracy.
- gtfratteus 7y ago
  You can't subsidize a tax break. That doesn't make any sense because you don't need to spend money to give people a tax break.
  - usefulcat 7y ago
    > you don't need to spend money to give people a tax break. Only if the government is running a surplus, and the tax cuts are less than the size of the surplus. When the government is running a deficit, any tax cut results in additional debt, the financing of which is paid for by future taxpayers. So yes, in this case (running a deficit) there are measurable costs associated with tax breaks.
    - anticensor 7y ago
      Surplus is not needed as you could print Treasury "banknotes".
      - Retric 7y ago
        Printing money is just another tax, this time on people holding your currency.
      - usefulcat 7y ago
        Yes. The notes you refer to are exactly what I was referring to when I used the word "debt".
  - jussij 7y ago
    Since the Trump tax cuts add another trillion dollars to the national debt, the government is actually borrowing money to pay for those cuts. That also means it will be a future generation that eventually has to pay for those tax cuts.
  - mwfunk 7y ago
    If a tax break isn't matched by a corresponding budget cut, it is literally spending money to give people a tax break. What really sucks about unsubsidized, targeted tax cuts is that it's the result of politicians essentially taking everyone's money (the American taxpayers), then instead of using that money for the sorts of things taxes are supposed to be used for (the government), they just hand out a bunch of money to their donor class and essentially defraud the government. The biggest R donors have literally made a profit off of this over the years. It's less a tax break and more like vulturing public money to pay off their friends and maybe buy some more votes. Unsubsidized tax breaks of this nature, by these people, for their stated reasons over the last 40 years are really just ripping off the entire American public and funneling it to the likes of Betsy Devos' family, and the Koch brothers, and the Mercers. And obviously Trump himself has been dipping his beak in it, any way he possibly can. A better man would do everything in his power to avoid even the appearance of corruption, but he has been utterly shameless about it. Example: raising the fees for Mar-a-lago membership from $100k to $200k at the same time as he became president. I believe they are $500k now. That makes a lot of sense, I'm sure there's nothing weird going on there and that's just a totally normal thing to happen in plain sight. But seriously, it sure as hell looks like base corruption to me, nothing high-minded or philosophical about it. The Austrian economic philosophies used to justify the whole R fetish for unfunded tax cuts were the economic equivalent of healing crystals and magnetic bracelets 40 years ago, never mind now. Now it's just embarrassing to see anyone making these claims. Especially the whole notion that it is somehow fiscally conservative to have huge unfunded tax cuts, because cutting taxes will magically increase tax revenue by fueling growth. They may as well change their platform to, if elected they promise to be really good boys and girls and will donate the additional gifts from Santa to the IRS, thereby offsetting the huge transfer of public funds to their donor class. Of course there are no shortage of people who think of themselves as smarter than average (and unburdened by weaknesses like empathy, or feelings of great responsibility towards their fellow citizens) might excuse it as a "starve the beast" scheme, but if anything that's even more idiotic. "Starve the beast" is a shitty excuse for passing the buck in the shittiest way possible, when all you really want to do is take a bunch of everyone's money and give it to yourself and your donor class. It is such a weak excuse, and is especially feeble when it's used in the name of some brand of fiscal conservatism. I remember a comedian in the '90s fondly describing Republican politicians as, more than anything else, "mean old men who will guard your money". Like, sometimes you need that- you need people who will make it a priority to guard public money tooth and nail, and fight to lower taxes and let people keep more of their money. I don't know if I would vote for that person, but I get it, and for most of my life at least that's how they've unapologetically presented themselves. And I kinda get it, there's a need for fiscal watchdogs like that in the government. They're still using a lot of the same words that they did in the '80s and '90s, but they have never been more hollow, or used to this degree to defend what appears to be the diametric opposite of their fiscally conservative claims: bankrupting the government and paying off their donors and trying to brush it off as some noble act that somehow increases freedom and prosperity for all of America.
- pishpash 7y ago
  Tax breaks are just borrowing using the good credit of the US on behalf of the private sector. Because the Treasury can borrow so cheaply is it bad that it is the one borrowing?
  - jacques_chester 7y ago
    Yes, because different borrowers receive different rates than would otherwise occur. That distorts the discovery and prioritisation of opportunities in the private sector. In particular, it elevates rent seeking over productive risk taking.
Gibbon1 7y ago
I saw this clip earlier this morning which reminds me of our current central bankers trying to manage economic policy all by themselves via short term interest rates. https://www.youtube.com/watch?v=8GhJNjt9IT4 https://www.youtube.com/watch?v=8GhJNjt9IT4
phkahler 7y ago
What about fiscal responsibility? If you have your house in order there are lots of options.
incompatible 7y ago
I'm not sure what "glut in capital" really means. Capital is the "means of production" and includes things like buildings, developed land, and equipment. A glut in capital would mean that there are too many of these things and many are left idle, e.g., empty houses because nobody wants to pay even a low rent to use them. Where I live, for example, there's a shortage of housing and houses are rented for higher prices than they should be. This is a capital shortage, not a capital glut. Monetary policy, such as governments running up large debts and central banks keeping interest rates low, leads to a large amount of "paper wealth" in circulation, which doesn't relate directly to physical capital. People and organizations are apparently happy to hoard this paper, so that it doesn't lead to inflation in the real economy.
dsfyu404ed 7y ago
>The US should absolutely lock in these low interest rates to fuel green infrastructure and technology. The best time to build infrastructure is yesterday. It's always cheaper to do it before you truly need it. Bring on the 6-lane highways nobody wants and the subway stops that nobody needs. That said, maybe I'm just jaded from living in a dump of a state where one infrastructure plan after another gets neutered by rich people who don't want it where it should be.
toomuchequate 7y ago
I have a bad feeling the libertarians will be right about Bitcoin. Or at least if the US can't bully the world into using USD.

Retric 7y ago

That would be reasonable if the US was funding investments with debt. Instead it’s subsidies mostly tax breaks and consumption for little long term return. Lowering the cost of debt is still a good idea, but let’s not pretend we are in a fiscally sound situation.

Despegar 7y ago
>Instead it’s subsidies mostly tax breaks and consumption for little long term return. There's nothing wrong with consumption. Consumption is what drives the US economy and makes it the powerhouse that it is. The American consumer is what is keeping the US out of a recession while export-driven economies like Germany are heading into recession. The problem with our fiscal policy was that the tax cuts passed by Trump almost exclusively went to the richest people who have a low MPC (marginal propensity to consume). There's nothing wrong with expanding the deficits, the US doesn't need to worry about debt and the falling bond yields confirms that. But that fiscal spending should have been targeted at the poorest people in America. It should have been to give them universal health care or free higher education, not cutting corporate taxes.
- 40acres 7y ago
  Fiscal policy and the private sector have not done enough to ensure long term growth -- as mentioned asset inequality has lead to a lot of capital in the hands of actors that do not spend money. Advancement in technology is deflationary by nature and so a lot of growth is only realized by the top. In times like this the public sector must intervene to frame the future for it's citizens and economy: focus on the health and education of your citizens, mitigate future risk by funding solutions to climate change, secure safety by spending on military and providing equal opportunity to quell internal social unrest. If you have strong instutions and control the currency that your debt is in (US, UK, Japan, China -- as long as the communist party maintains its current strength) this is the way to go, globalization will take a hit but will cycle back in the future.
- ericd 7y ago
  Why has this idea that consumption is wealth-generating caught on so thoroughly? Consuming, consuming, consuming seems like it's just burning the stored wealth of the country, by selling off our valuable productive assets in exchange for trinkets (really, we're selling dollars, but those come back looking to buy up real estate, companies, etc). What's really wealth generating is investing in things that fuel long term productivity growth at a higher rate than the cost - education, automation, useful infrastructure (here's looking at you, Chinese ghost cities), tools/machinery, and R&D. Everyone buying TVs is the complete opposite, yet it would show up as a short term boost to the GDP.
  - Despegar 7y ago
    The problem is that you're under the impression that "consumption" is somehow less virtuous than "investment". You mentioned China, but that's a perfect example of an economy that isn't driven by consumption. And they desperately want it to be. China is extremely reliant on exports and state-driven infrastructure spending. If there was actual domestic demand for everything they produce they'd be in a much better spot and that infrastructure would actually be utilized.
    - ericd 7y ago
      I'm under the impression that the main driver of long-term wealth is increases in productivity. Hence why "investment" in productive assets (including a well educated populace) is a larger driver of long-term wealth than "consumption". They're reliant on exports and state-driven infrastructure spending because they're not yet wealthy, per capita. It's the stored wealth that allows a consumption-driven economy, not the other way around.
      - mlazos 7y ago
        Most Americans are in debt and have no stored wealth. I know that intuitively it seems like stored wealth should be good for an economy but it’s not the case. Spending more money than you have (debt) is actually better for the economy because it results in more movement of goods and services. Leveraged consumption grows businesses which hire more people which creates wealth. I do think that education is important, but you also need consumption to drive demand for educated professionals in growing businesses. In short you need both for the economic cycle to work.
- stanfordkid 7y ago
  Blindly investing money into “the poor” is a foolish endeavor that yields little strength to a country. Herd immunity and preventative health is a quantifiable thing and so I support universal healthcare. But we have to stop this disasterous assumption that the only reason people are poor is their circumstances. The best way to help poor people is to lower the minimum wage so they can get jobs. Subsidizing the poor increases consumption which is bad not only for the first order effect (throwing away money)... but also for the little thought of second order effect: it incentivizes people to build businesses that cater to consumption that was in the first place unsustainable. Smart people that could have been doing something else instead facilitate the creation of businesses that are only funded by inflation and cheap credit. This is the story of the US economy in the past 30 years. The two largest disasters in recent history: the student loan bubble and the housing bubble, were both founded upon the notion that we should “give money away” without any real measurement of whether or not there would be a return on capital. Our government should invest the majority of capital in basic research, healthcare, education and infrastructure... not the creation of a consumption driven bloated welfare state.
  - coldcode 7y ago
    We should force the poor into indentured servitude or slavery as a proper solution, as the South was better off when workers were all unpaid and uncared for. Giving everyone's tax money to wealthy people will result in a better world for everyone. /s Libertarian fantasy must be a pretty dull medium. Always the same story.
    - voldacar 7y ago
      This wasnt a very substantive comment... People go to HN to avoid discourse like this :(
  - SubiculumCode 7y ago
    A serious and frequently permanent loss of productivity occurs when people live on a financial cliff where minor unfortunes can propel even smart individuals into unemployment and homelssness, and their children into poorer education outcomes, while minor investments and more equitible distributions of wealth in a society create robust sustainable growth. In the case of student loans, they should have come with restrictions on increases in admin costs at the college as tuition has inordinately increased. In terms of the housing crisis, do not discount the role of predatory lending by institutions that used to engender trust. I find your position to ignore context and subtelty, and to propogate myths about poverty and the impoverished as primarily being the result of a meritocracy.
gtfratteus 7y ago
You can't subsidize a tax break. That doesn't make any sense because you don't need to spend money to give people a tax break.
- usefulcat 7y ago
  > you don't need to spend money to give people a tax break. Only if the government is running a surplus, and the tax cuts are less than the size of the surplus. When the government is running a deficit, any tax cut results in additional debt, the financing of which is paid for by future taxpayers. So yes, in this case (running a deficit) there are measurable costs associated with tax breaks.
  - anticensor 7y ago
    Surplus is not needed as you could print Treasury "banknotes".
    - Retric 7y ago
      Printing money is just another tax, this time on people holding your currency.
    - usefulcat 7y ago
      Yes. The notes you refer to are exactly what I was referring to when I used the word "debt".
- jussij 7y ago
  Since the Trump tax cuts add another trillion dollars to the national debt, the government is actually borrowing money to pay for those cuts. That also means it will be a future generation that eventually has to pay for those tax cuts.
- mwfunk 7y ago
  If a tax break isn't matched by a corresponding budget cut, it is literally spending money to give people a tax break. What really sucks about unsubsidized, targeted tax cuts is that it's the result of politicians essentially taking everyone's money (the American taxpayers), then instead of using that money for the sorts of things taxes are supposed to be used for (the government), they just hand out a bunch of money to their donor class and essentially defraud the government. The biggest R donors have literally made a profit off of this over the years. It's less a tax break and more like vulturing public money to pay off their friends and maybe buy some more votes. Unsubsidized tax breaks of this nature, by these people, for their stated reasons over the last 40 years are really just ripping off the entire American public and funneling it to the likes of Betsy Devos' family, and the Koch brothers, and the Mercers. And obviously Trump himself has been dipping his beak in it, any way he possibly can. A better man would do everything in his power to avoid even the appearance of corruption, but he has been utterly shameless about it. Example: raising the fees for Mar-a-lago membership from $100k to $200k at the same time as he became president. I believe they are $500k now. That makes a lot of sense, I'm sure there's nothing weird going on there and that's just a totally normal thing to happen in plain sight. But seriously, it sure as hell looks like base corruption to me, nothing high-minded or philosophical about it. The Austrian economic philosophies used to justify the whole R fetish for unfunded tax cuts were the economic equivalent of healing crystals and magnetic bracelets 40 years ago, never mind now. Now it's just embarrassing to see anyone making these claims. Especially the whole notion that it is somehow fiscally conservative to have huge unfunded tax cuts, because cutting taxes will magically increase tax revenue by fueling growth. They may as well change their platform to, if elected they promise to be really good boys and girls and will donate the additional gifts from Santa to the IRS, thereby offsetting the huge transfer of public funds to their donor class. Of course there are no shortage of people who think of themselves as smarter than average (and unburdened by weaknesses like empathy, or feelings of great responsibility towards their fellow citizens) might excuse it as a "starve the beast" scheme, but if anything that's even more idiotic. "Starve the beast" is a shitty excuse for passing the buck in the shittiest way possible, when all you really want to do is take a bunch of everyone's money and give it to yourself and your donor class. It is such a weak excuse, and is especially feeble when it's used in the name of some brand of fiscal conservatism. I remember a comedian in the '90s fondly describing Republican politicians as, more than anything else, "mean old men who will guard your money". Like, sometimes you need that- you need people who will make it a priority to guard public money tooth and nail, and fight to lower taxes and let people keep more of their money. I don't know if I would vote for that person, but I get it, and for most of my life at least that's how they've unapologetically presented themselves. And I kinda get it, there's a need for fiscal watchdogs like that in the government. They're still using a lot of the same words that they did in the '80s and '90s, but they have never been more hollow, or used to this degree to defend what appears to be the diametric opposite of their fiscally conservative claims: bankrupting the government and paying off their donors and trying to brush it off as some noble act that somehow increases freedom and prosperity for all of America.
pishpash 7y ago
Tax breaks are just borrowing using the good credit of the US on behalf of the private sector. Because the Treasury can borrow so cheaply is it bad that it is the one borrowing?
- jacques_chester 7y ago
  Yes, because different borrowers receive different rates than would otherwise occur. That distorts the discovery and prioritisation of opportunities in the private sector. In particular, it elevates rent seeking over productive risk taking.

Gibbon1 7y ago

I saw this clip earlier this morning which reminds me of our current central bankers trying to manage economic policy all by themselves via short term interest rates. https://www.youtube.com/watch?v=8GhJNjt9IT4 https://www.youtube.com/watch?v=8GhJNjt9IT4

phkahler 7y ago

What about fiscal responsibility? If you have your house in order there are lots of options.

incompatible 7y ago

I'm not sure what "glut in capital" really means. Capital is the "means of production" and includes things like buildings, developed land, and equipment. A glut in capital would mean that there are too many of these things and many are left idle, e.g., empty houses because nobody wants to pay even a low rent to use them. Where I live, for example, there's a shortage of housing and houses are rented for higher prices than they should be. This is a capital shortage, not a capital glut. Monetary policy, such as governments running up large debts and central banks keeping interest rates low, leads to a large amount of "paper wealth" in circulation, which doesn't relate directly to physical capital. People and organizations are apparently happy to hoard this paper, so that it doesn't lead to inflation in the real economy.

dsfyu404ed 7y ago

>The US should absolutely lock in these low interest rates to fuel green infrastructure and technology. The best time to build infrastructure is yesterday. It's always cheaper to do it before you truly need it. Bring on the 6-lane highways nobody wants and the subway stops that nobody needs. That said, maybe I'm just jaded from living in a dump of a state where one infrastructure plan after another gets neutered by rich people who don't want it where it should be.

toomuchequate 7y ago

I have a bad feeling the libertarians will be right about Bitcoin. Or at least if the US can't bully the world into using USD.