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I think there is an ongoing obsession in this country to always live in fear and convince oneself that things are always at their worst and the bottom is always

by dkrich 14y ago

I think there is an ongoing obsession in this country to always live in fear and convince oneself that things are always at their worst and the bottom is always about to fall out at any moment. Maybe it's human nature. But I just don't buy this doom and gloom nonsense. Yes the economy is bad, there is no question about that, but the economy has been bad before. Probably the last comparable period was the late 70's. I think more than anything what's changed is our access to information. Before people never really knew how corrupt companies and politicians can be and they never had 24/7 access to the opinions of every person in the English-speaking world to reinforce their pessimism. The U.S. is losing manufacturing jobs, but that could be remedied by a number of changes- import tariffs, a reduction or freeze on minimum wage, an unforeseen economic boost from a new industry (such as auto manufacturing in the 50's or the internet boom of the 90's). One place where I wholly disagree with Chomsky is the unimportance of the deficit. That is a major, major problem. It is true that creating jobs would help shrink the deficit, but I think there is a lot of rampant spending by the U.S. government that does absolutely nothing to grow or maintain the economy or jobs and should be abolished.

jstalin 14y ago
Prepare to get down voted like crazy for pointing out the negative effects of deficits and debt...
deleted 14y ago
[deleted]
nhaehnle 14y ago
One place where I wholly disagree with Chomsky is the unimportance of the deficit. That is a major, major problem. It is true that creating jobs would help shrink the deficit, but I think there is a lot of rampant spending by the U.S. government that does absolutely nothing to grow or maintain the economy or jobs and should be abolished. Take a step back and note that you don't actually point out or argue how the deficit is supposedly a problem. So there are spending programs by the government that you disagree with. Fair enough, I'm sure everybody has some government program that they disagree with. [1] That's what politics is about: disagreement about what the extent of government should be, and in which areas it should be active. What that doesn't give you is an argument that the deficit is bad. If you genuinely think certain government programs are undesirable and should be cut, then it makes sense to simultaneously cut taxes somewhere so that the deficit remains the same. Otherwise you would effectively be squeezing the private sector by reducing the government deficit. [1] Though it seems weird that you would only support government spending that grows or maintains the economy or jobs. What about national parks as an example of a pretty obvious good that has no economic benefit?
- dkrich 14y ago
  Do you really need me to substantiate why it is bad to spend more money than you make? I guess I took for granted that the fundamental laws of economics were understood. I guess that was a mistake. Everybody agrees that running a deficit is harmful. Most disagreement centers around which, if any, cuts in the budget should be made, and how much those cuts will hinder a recovery while the economy is still weak. The U.S. dollar is the worlds' reserve currency, and for that reason alone the U.S. is able to ignore a deficit for some time. But it is a huge mistake to get used to free money and not try to get finances in order. Greece made that mistake for many years and is now paying a huge price (along with the entire European Union). National Parks are fine. They've been around a long time and that accounts for a rounding error of the federal budget. The greatest areas of concern are Social Security and Medicare/Medicaid. Of course the defense budget is up there too, and I believe defense spending should be cut. The bottom line is that the Federal Government has grown by leaps and bounds over the past few decades and its addiction to rampant spending is making the country poor. You can debate about what should be cut but no increase in taxes is going to pay for this spending spree we are involved in right now. Greece was forced into draconian austerity measures when there were no other options on the table. I sure hope the U.S. learns something from that fiasco before it travels down the same road.
  - nhaehnle 14y ago
    Once you understand sectoral balances [2], you realize that having a deficit tends to be beneficial. It is not clear how large this deficit has to be (and there are certainly times when a surplus makes sense, though those are very rare). It is clear that in the long run average you really need a budget deficit to have a well-functioning economy. The reason behind that is actually fairly simple and comes from the sectoral balances, which state that the balances of all sectors in the economy have to add up to zero. So if the non-government sector has a surplus, the government sector must have a deficit, and vice versa. Private actors like to hold monetary assets, i.e. savings, bonds, and so on. This means that somebody else must hold corresponding liabilities. Will the desire to hold liabilities balance the desire to hold assets within the private sector? This is unlikely at best. If there is no outside source of monetary assets, then those private actors who are successful at accumulating assets will force less successful private actors to go into debt until this debt is no longer sustainable. The logical way out is for the government sector to provide the required monetary assets, which is only possible via a government deficit. Even more so, given that nominal GDP will continue to rise by inflation + real growth of the economy, there must be a nominal government deficit. Otherwise, the value of private sector net assets must necessarily decrease over time relative to GDP, i.e. the private sector is squeezed out of its asset position. This wealth-squeezing is certainly going to be contractionary. [3] Under the current institutional arrangement, an ongoing government deficit means increasing government debt [1]. However, unlike for private actors, there is no sustainability problem for a monetarily sovereign government (this is where your comparison with Greece breaks down - Greece is not monetarily sovereign). If you are genuinely interested in the topic, you may want to read Bill Mitchell's Fiscal Sustainability 101 series, starting here: http://bilbo.economicoutlook.net/blog/?p=2905 http://bilbo.economicoutlook.net/blog/?p=2905. His writing is not the most polished, but it's still probably the best analysis on the internet of what fiscal sustainability even means for a monetarily sovereign government. [1] Alternative arrangements are possible, but unfortunately, they seem to be one of the taboos in our contemporary society. [2] http://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-consider-the-deficit-in-isolation http://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-c... [3] The only way I see to reduce private sector assets without contractionary effects is to go to those assets directly, i.e. tax the wealthy. That does make sense for other reasons as well, such as the accumulation of wealth leading to accumulation of power mentioned in the article. However, taxing the wealthy is not something you can deduce from economics alone - there is always a choice.

by dkrich 14y ago

jstalin 14y ago

Prepare to get down voted like crazy for pointing out the negative effects of deficits and debt...

deleted 14y ago

[deleted]

nhaehnle 14y ago

One place where I wholly disagree with Chomsky is the unimportance of the deficit. That is a major, major problem. It is true that creating jobs would help shrink the deficit, but I think there is a lot of rampant spending by the U.S. government that does absolutely nothing to grow or maintain the economy or jobs and should be abolished. Take a step back and note that you don't actually point out or argue how the deficit is supposedly a problem. So there are spending programs by the government that you disagree with. Fair enough, I'm sure everybody has some government program that they disagree with. [1] That's what politics is about: disagreement about what the extent of government should be, and in which areas it should be active. What that doesn't give you is an argument that the deficit is bad. If you genuinely think certain government programs are undesirable and should be cut, then it makes sense to simultaneously cut taxes somewhere so that the deficit remains the same. Otherwise you would effectively be squeezing the private sector by reducing the government deficit. [1] Though it seems weird that you would only support government spending that grows or maintains the economy or jobs. What about national parks as an example of a pretty obvious good that has no economic benefit?

dkrich 14y ago
Do you really need me to substantiate why it is bad to spend more money than you make? I guess I took for granted that the fundamental laws of economics were understood. I guess that was a mistake. Everybody agrees that running a deficit is harmful. Most disagreement centers around which, if any, cuts in the budget should be made, and how much those cuts will hinder a recovery while the economy is still weak. The U.S. dollar is the worlds' reserve currency, and for that reason alone the U.S. is able to ignore a deficit for some time. But it is a huge mistake to get used to free money and not try to get finances in order. Greece made that mistake for many years and is now paying a huge price (along with the entire European Union). National Parks are fine. They've been around a long time and that accounts for a rounding error of the federal budget. The greatest areas of concern are Social Security and Medicare/Medicaid. Of course the defense budget is up there too, and I believe defense spending should be cut. The bottom line is that the Federal Government has grown by leaps and bounds over the past few decades and its addiction to rampant spending is making the country poor. You can debate about what should be cut but no increase in taxes is going to pay for this spending spree we are involved in right now. Greece was forced into draconian austerity measures when there were no other options on the table. I sure hope the U.S. learns something from that fiasco before it travels down the same road.
- nhaehnle 14y ago
  Once you understand sectoral balances [2], you realize that having a deficit tends to be beneficial. It is not clear how large this deficit has to be (and there are certainly times when a surplus makes sense, though those are very rare). It is clear that in the long run average you really need a budget deficit to have a well-functioning economy. The reason behind that is actually fairly simple and comes from the sectoral balances, which state that the balances of all sectors in the economy have to add up to zero. So if the non-government sector has a surplus, the government sector must have a deficit, and vice versa. Private actors like to hold monetary assets, i.e. savings, bonds, and so on. This means that somebody else must hold corresponding liabilities. Will the desire to hold liabilities balance the desire to hold assets within the private sector? This is unlikely at best. If there is no outside source of monetary assets, then those private actors who are successful at accumulating assets will force less successful private actors to go into debt until this debt is no longer sustainable. The logical way out is for the government sector to provide the required monetary assets, which is only possible via a government deficit. Even more so, given that nominal GDP will continue to rise by inflation + real growth of the economy, there must be a nominal government deficit. Otherwise, the value of private sector net assets must necessarily decrease over time relative to GDP, i.e. the private sector is squeezed out of its asset position. This wealth-squeezing is certainly going to be contractionary. [3] Under the current institutional arrangement, an ongoing government deficit means increasing government debt [1]. However, unlike for private actors, there is no sustainability problem for a monetarily sovereign government (this is where your comparison with Greece breaks down - Greece is not monetarily sovereign). If you are genuinely interested in the topic, you may want to read Bill Mitchell's Fiscal Sustainability 101 series, starting here: http://bilbo.economicoutlook.net/blog/?p=2905 http://bilbo.economicoutlook.net/blog/?p=2905. His writing is not the most polished, but it's still probably the best analysis on the internet of what fiscal sustainability even means for a monetarily sovereign government. [1] Alternative arrangements are possible, but unfortunately, they seem to be one of the taboos in our contemporary society. [2] http://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-consider-the-deficit-in-isolation http://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-c... [3] The only way I see to reduce private sector assets without contractionary effects is to go to those assets directly, i.e. tax the wealthy. That does make sense for other reasons as well, such as the accumulation of wealth leading to accumulation of power mentioned in the article. However, taxing the wealthy is not something you can deduce from economics alone - there is always a choice.