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The irony of Greenspan worrying about Federal debt when he was pushing to NOT pay it off a decade ago -- tax cuts solved that. And setting interest rates bel

The irony of Greenspan worrying about Federal debt when he was pushing to NOT pay it off a decade ago -- tax cuts solved that. And setting interest rates below inflation really killed off the idea of anybody saving money (cash) in the bank only to watch it evaporate. Cursed Fed. Printing money like mad does help generate inflation, though, which helps keep labor costs (our pay) down by effectively handing workers a little pay cut every year.

gaius 15y ago
AKA Krugmanomics
j_baker 15y ago
During normal times you'd be correct. But bear in mind that inflation is (or was) near 0% during the recession. A certain amount of inflation is necessary for the economy and is much less scary than getting stuck in a deflationary cycle like what we saw during the Great Depression.
Spyro7 15y ago
"does help generate inflation, though, which helps keep labor costs (our pay) down by effectively handing workers a little pay cut every year" You do realize that wages are adjusted for cost of living changes over time? (This is a gross simplification of the actual process, but the fact remains that wages are not constant in the face of inflation.) Take a look at this please (using median wage here to make this more clear): http://www.wolframalpha.com/input/?i=all+occupations+median+wage&lk=1 http://www.wolframalpha.com/input/?i=all+occupations+median+... However, here is median wage too: http://www.wolframalpha.com/input/?i=all+occupations+mean+wage http://www.wolframalpha.com/input/?i=all+occupations+mean+wa... It is also worth noting that the average wage back in the '70s was roughly $8,000.00. Edited in Response to Downvoting: Inflation is caused by rising prices, and wages are one of these prices. Your wage is simply the price of your labor. In the long-run, wages are flexible just like all of the other prices. Admittedly wolfram|alpha does not have extensive historical graphs available, but I am not trying to write a book here. If you are down-voting because you have not received a pay increase lately, then you should be aware of the fact that wages are usually a bit more sticky than other prices in the short run. If you are down-voting this, I would appreciate engaging you in honest discussion about the point that I made above. The parent post said that inflation gives workers a little pay cut every year. Painting this wonderful image of a worker sliding into poverty. This is demonstrably false. Yes, a 1% or a 2% rise in inflation will impact your real earnings, but wages are not a static process and they do reflect the actual costs of living changes that take place over time. As an economist, I am constantly amazed by how poorly the press discusses inflation and how little most people know about what inflation is and how it interacts with other variables within an economy. Please read this pdf for some discussion on wages and price inflation: https://www.clevelandfed.org/research/policydis/pd1.PDF https://www.clevelandfed.org/research/policydis/pd1.PDF It is an academic piece, but it is one of my favorites for illustrating the interaction between wages and the greater macroeconomy.
- blantonl 15y ago
  You know, I've gone back before and clarified a post after it got down-voted, but your significant edit strikes me as odd. Why couldn't you let your original post stand as you posted it?
  - Spyro7 15y ago
    What struck me as odd was being down-voted without anyone telling me what it was that rubbed them the wrong way. The reason that I hang around HN is because I learn a lot by doing so. When someone down-votes something and then runs off, no one actually benefits in any way from that (unless the post that was down-voted was complete trash). My extensive edit was an attempt to lure out the down-voters so that I could find out exactly where the wheels came off in the original post. Looking back, I probably should have angled for a less confrontational tone in my edit, but I have a hard time getting tone across in these things. You know, you spend less time typing each post than you would spend on a research paper or an email but more time than a text message. It is a challenging thing to get the tone just right. I much prefer face to face conversation any day of the week, but I like this place a lot. The thing is that this is my first time actually not lurking on a site in nearly 10 years, and HN has its own unique culture. Look, you've been on this site for more than an order of magnitude longer than me. Do you (or anyone else) feel like helping a newbie out: When anonymous down-votes strike, is it better to reply to yourself, keep your edits small, or just walk away?
anamax 15y ago
> The irony of Greenspan worrying about Federal debt when he was pushing to NOT pay it off a decade ago. Some might argue that there's a qualitative difference between $160B/year when you owe $10T and $1.6T/year when you owe $14T. > -- tax cuts solved that. Did they? How much less revenue was collected? Never confuse tax rates with tax revenues. The latter pays for things while the former has only a tenuous relationship with the latter. For example, the US got far more from rich people with low rates than it ever got with high rates.
- coffeepac 15y ago
  Right, to get money out of the rich its easiest to set the tax rate below the cost of a tax lawyer.

gaius 15y ago

AKA Krugmanomics

j_baker 15y ago

During normal times you'd be correct. But bear in mind that inflation is (or was) near 0% during the recession. A certain amount of inflation is necessary for the economy and is much less scary than getting stuck in a deflationary cycle like what we saw during the Great Depression.

Spyro7 15y ago

"does help generate inflation, though, which helps keep labor costs (our pay) down by effectively handing workers a little pay cut every year" You do realize that wages are adjusted for cost of living changes over time? (This is a gross simplification of the actual process, but the fact remains that wages are not constant in the face of inflation.) Take a look at this please (using median wage here to make this more clear): http://www.wolframalpha.com/input/?i=all+occupations+median+wage&lk=1 http://www.wolframalpha.com/input/?i=all+occupations+median+... However, here is median wage too: http://www.wolframalpha.com/input/?i=all+occupations+mean+wage http://www.wolframalpha.com/input/?i=all+occupations+mean+wa... It is also worth noting that the average wage back in the '70s was roughly $8,000.00. Edited in Response to Downvoting: Inflation is caused by rising prices, and wages are one of these prices. Your wage is simply the price of your labor. In the long-run, wages are flexible just like all of the other prices. Admittedly wolfram|alpha does not have extensive historical graphs available, but I am not trying to write a book here. If you are down-voting because you have not received a pay increase lately, then you should be aware of the fact that wages are usually a bit more sticky than other prices in the short run. If you are down-voting this, I would appreciate engaging you in honest discussion about the point that I made above. The parent post said that inflation gives workers a little pay cut every year. Painting this wonderful image of a worker sliding into poverty. This is demonstrably false. Yes, a 1% or a 2% rise in inflation will impact your real earnings, but wages are not a static process and they do reflect the actual costs of living changes that take place over time. As an economist, I am constantly amazed by how poorly the press discusses inflation and how little most people know about what inflation is and how it interacts with other variables within an economy. Please read this pdf for some discussion on wages and price inflation: https://www.clevelandfed.org/research/policydis/pd1.PDF https://www.clevelandfed.org/research/policydis/pd1.PDF It is an academic piece, but it is one of my favorites for illustrating the interaction between wages and the greater macroeconomy.

blantonl 15y ago
You know, I've gone back before and clarified a post after it got down-voted, but your significant edit strikes me as odd. Why couldn't you let your original post stand as you posted it?
- Spyro7 15y ago
  What struck me as odd was being down-voted without anyone telling me what it was that rubbed them the wrong way. The reason that I hang around HN is because I learn a lot by doing so. When someone down-votes something and then runs off, no one actually benefits in any way from that (unless the post that was down-voted was complete trash). My extensive edit was an attempt to lure out the down-voters so that I could find out exactly where the wheels came off in the original post. Looking back, I probably should have angled for a less confrontational tone in my edit, but I have a hard time getting tone across in these things. You know, you spend less time typing each post than you would spend on a research paper or an email but more time than a text message. It is a challenging thing to get the tone just right. I much prefer face to face conversation any day of the week, but I like this place a lot. The thing is that this is my first time actually not lurking on a site in nearly 10 years, and HN has its own unique culture. Look, you've been on this site for more than an order of magnitude longer than me. Do you (or anyone else) feel like helping a newbie out: When anonymous down-votes strike, is it better to reply to yourself, keep your edits small, or just walk away?

anamax 15y ago

> The irony of Greenspan worrying about Federal debt when he was pushing to NOT pay it off a decade ago. Some might argue that there's a qualitative difference between $160B/year when you owe $10T and $1.6T/year when you owe $14T. > -- tax cuts solved that. Did they? How much less revenue was collected? Never confuse tax rates with tax revenues. The latter pays for things while the former has only a tenuous relationship with the latter. For example, the US got far more from rich people with low rates than it ever got with high rates.

coffeepac 15y ago
Right, to get money out of the rich its easiest to set the tax rate below the cost of a tax lawyer.