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It's not just 'more time to kick the can', which still implies that not trimming debt immediately is irresponsible. If you trim debt by a little and hurt GDP g

by jbooth 14y ago

It's not just 'more time to kick the can', which still implies that not trimming debt immediately is irresponsible. If you trim debt by a little and hurt GDP growth by a little, you wind up with the same ratio you had before. If you trim debt in a way that really hurts GDP, you'll likely increase the debt:GDP ratio. The original paper implied that we'd wind up in a spiral of shrinking GDP, increasing that ratio, shrinking the GDP more, and so on. But it turns out it was complete bullshit.

crusso 14y ago
which still implies that not trimming debt immediately is irresponsible I don't get it. I was in sync with the Left when they decried George W. Bush's no-veto policy and ballooning of the debt. Now that "their guy" is in the WhiteHouse, they no longer agree that it's irresponsible to set the deficit meter on 11 and walk away like we have been. Can't we all agree that this guy was totally correct? http://www.youtube.com/watch?v=1kuTG19Cu_Q http://www.youtube.com/watch?v=1kuTG19Cu_Q I guess I wouldn't be so against some amount of debt if it looked like we had it under control. It's funny that we're dissecting the results of a study on what 90% debt:GDP would do. Well that was back in 2010, we've blown way past 90%. We're at 107% as of 2012 and climbing. It's not just about the debt's exact impact at a certain percentage. If it were just that, we could debate it and fine tune it. It's about our Government's complete inability to get it under control. Maybe 90% Debt:GDP won't hurt too badly, but sooner or later as it rises, it will crater even our economy.
- tdg 14y ago
  A lot of Keynesian economists are arguing that now is not the time for austerity. The government's current mission should be to lower employment even if it means higher deficits (and debt) _for now_. Once we are out of this slump, the argument is that most of the deficit will take care of itself (since some of the deficit is lower tax revenue because of unemployment + cost of automatic stabilizers such as unemployment benefits). We still need to fix the rest of the deficit/debt problem after the crisis, though. The second important argument is that (again, right now), this emphasis on austerity is actively making things worse.
  - crusso 14y ago
    government's current mission should be to lower employment Well since we've exploded our debt to supposedly lower unemployment and the meter has barely moved, maybe we're doing it wrong? We've indulged the Keynesians quite enough over the last $6+ TRILLION dollars, tyvm. I see people in this thread demanding evidence that more debt is bad for the country. Well where the hell is the evidence that shows that staggering debt is good for the country? Maybe we should fall back on common sense "household" or "business" models until that evidence appears, huh? this emphasis on austerity is actively making things worse. What austerity? I've heard some talking about it, but we're not practicing it anywhere. Don't you dare use the word "sequester", because that was a joke.
    - scott_s 14y ago
      The sequester is not a joke. A friend of mine knows postdocs whose NIH funded projects were cut 20%, immediately, when the sequester went into effect. Another friend of mine will be in next class to start with the FBI, but they've been put off until 2014. To be clear, the FBI is not training new agents right now. The sequester is real, but it may take more time for the effects to reverberate throughout the country.
      - crusso 14y ago
        The sequestration has only been painful because the Administration wants to make an example of any efforts to reduce the size of the government. Funny how NIH projects could have a 20% cut when the $44 Billion reduction this year as a result of sequestration is 1% of the actual budget. Where did that other 19% come from? Further, the sequestration only reduced the increase on the baseline budget. We're still going to be spending more this year than we did last year. http://www.realclearpolitics.com/articles/2013/02/27/sequestration_just_the_beginning_of_whats_necessary_117182.html http://www.realclearpolitics.com/articles/2013/02/27/sequest...
        TheCowboy 14y ago
        The idea that this pain is a joke is pretty unfounded. It is based upon the idea that there is waste and waste and waste everywhere. If that is the case, then it should be pretty easy to target such wasteful spending, but that isn't exactly the case at all. Also, these cuts aren't even close to what are desired by a certain segment of law makers. If that desired austerity were to be put in place, and you think agencies at trying to make an examples now, their current examples would pale in comparison to what we would see. If it is so easy to say an agency doesn't need to cut X when they can cut Y, then pass a bill cutting Y.
- bencpeters 14y ago
  This is a common argument, but it's fundamentally flawed. We're in a very different economic regime right now than we were under GWB, and that makes all the difference. I think you'd be hard pressed to find anyone on the left who understands the issues who is seriously arguing that deficits are never a problem, or never have to be dealt with. What a lot of us ARE arguing is that as long as we have an aggregate demand shortfall (everyone in the economy trying to save at once), paying attention to the debt is exactly the wrong thing to do, since the government is the only actor in the economy that has the freedom to act counter-cyclically and make up for the shortfall in private sector demand. The ultimate goal is to start a virtuous cycle of spending that gets us back toward full employment (and increases GDP). Then and only then does it make sense for the government to try to reduce debt through cuts. There's decent evidence (see Delong & Summers 2012: http://delong.typepad.com/20120320-conference-draft-final-candidate-delong-summers-brookings-fiscal-policy-in-a-depressed-economy-1.32.pdf http://delong.typepad.com/20120320-conference-draft-final-ca...) that trying to reduce debt through cuts in an economy like we have right now is counter-productive even on it's own terms (reducing the debt-gdb ratio) because any cuts you make further reduce aggregate demand and thus reduce the GDB side of that ratio even further. It's not a democrat in the white house vs. republican in the white house thing that is causing people who were complaining about deficits under GWB to advocate against cutting short term spending now. It's all about the underlying economic conditions.
  - crusso 14y ago
    The ultimate goal is to start a virtuous cycle of spending And where is that evidence? Included in that evidence, I'd like to see a model that predicted what actually DID happen when we tried the "stimulus" that Obama's economic advisers predicted would lower unemployment to <6% or better. If you don't have a model that predicts things before they happened consistently, then it isn't Science. It's just guessing. If we're going to guess, then we should fall back on models that we do understand and have a lot of data for, like how businesses and households manage debt. Common sense should be trumping guessing based upon esoteric economic models that haven't yet yielded reproducible results.
    - bencpeters 14y ago
- vec 14y ago
  Going into debt to pay your medical bills is very different than going into debt to buy a yacht. No one thinks a ballooning deficit is good, some of us just think it's less bad than cutting social security and medicaid in the middle of a recession.
  - twoodfin 14y ago
    We're in the middle of a recession?
    - TheCowboy 14y ago
      Going by one technical definition, no. If you look at the whole picture you have to either say that this extended period of higher unemployment is the new 'natural rate of unemployment' or admit that something might be off.
- anigbrowl 14y ago
  I don't get it. I was in sync with the Left when they decried George W. Bush's no-veto policy and ballooning of the debt. Now that "their guy" is in the WhiteHouse, they no longer agree that it's irresponsible to set the deficit meter on 11 and walk away like we have been. Let me offer a crude analogy: Before: 'Don't press down so hard on the accelerator (debt finance), or you will drive this car (economy) into the ditch (recession).' (crash) After: 'You need to push down on the accelerator to get out of the ditch and back onto the road.' That's Keynesianism in a nutshell. If/when the economy is again growing at a decent clip, then government spending should be reduced (as a % of GDP and revenue, not necessarily in absolute terms) and debt service increased. Of course, that doesn't always happen. Maybe 90% Debt:GDP won't hurt too badly, but sooner or later as it rises, it will crater even our economy. But the reality is taht the debt probably won't rise that much as time goes on, because it'll be offset by increased revenues from increased growth. The 2010 R-R paper argued (incorrectly) that such growth would never happen due to the high debt load.
- specialist 14y ago
  Now that "their guy" is in the WhiteHouse, they no longer agree that it's irresponsible to set the deficit meter... Um, no. Speaking as a proud member of The Left, we objected to blowing the Clinton era surplus by slashing revenue, starting one (or two) unnecessary war(s), and huge wet sloppy kisses to corporations (eg scripts under Medicare Plan-D). If Bush The Lesser had maintained full employment, deficit or not, The Left would have loved him.
- spot 14y ago
  you are wrong in every way. 1) you only need deficit spending during a recession. during good times, like pre-crash bush, that's when you pay down debt. 2) it depends on what you spend the money on. if you invest in infrastructure, research, etc that's great. if you invest in bombing iraq and graft to your cronies, no so much.
- ZachPruckowski 14y ago
  I think the issue (or at least my issue as a card-carrying member of The Left) was that (a) at the time, we had a very different economic situation, and (b) objections to what the money was spent on. A lot of that debt came about because of things like not negotiating prescription drug prices in Medicare D and spending hundreds of billions and trillions in Iraq and cutting taxes in a way that disproportionately benefitted the well-off. If we were in a deep situation like we're in now or Bush was proposing spending that money differently, I think there would have been fewer Democratic comments about the debt. >Maybe 90% Debt:GDP won't hurt too badly, but sooner or later as it rises, it will crater even our economy. Nobody's suggesting that an infinitely high Debt:GDP is a good thing, but a lot of people were using R-R to argue that we had to prioritize debt reduction now as an emergency even at the expense of stimulating the economy or else we'd wind up as some sort of hybrid Greece/Zimbabwe mess within 5 years. >It's about our Government's complete inability to get it under control. I don't really know that that's clear. We've had a period of time where the budget deficits were run up to pay for a major (Cold) war and the tax reforms, and then we ran very low deficits and surpluses in the 1990s. We were basically set such that we'd run a surplus during strong economic years (as the Tech Bubble was) and a slight deficit in weaker ones. We made a series of policy decisions that harmed the budget balance (Iraq, tax cuts, bad policy in Medicare D) but even then, our deficits were still in the neighborhood of nominal GDP growth. So we're actually doing kinda OK, though obviously not great. Then we have the mini-depression, which (a) reduced GDP well below potential, (b) reduced tax revenues due to people making less money, and (c) caused automatic stabilizer payouts (food stamps, unemployment, disability) to rise. It's not like we've been pushing through un-offset new annual spending this last half-decade, beyond the original TARP and ARRA. So if the economy recovers, we'll probably start to level off back into 2005-era deficits, where the deficit/GDP < nominal GDP growth, causing the debt/GDP to shrink.
- jbooth 14y ago
  I didn't say we shouldn't get the deficit under control. I said that we should calibrate our responses to avoid hurting the economy while doing so. In 2009, debt was not the problem, economic collapse was. In 2013, we should start working on the debt but be careful not to hurt the economy while doing so. Regardless of 'who's guy' is in the White House I maintain there's a difference between inheriting a surplus and turning it into a deficit (during the dotcom bust), and inheriting a trillion dollar deficit and not fixing it right away (during the worst crash since 1929).
- dragonwriter 14y ago
  > I was in sync with the Left when they decried George W. Bush's no-veto policy and ballooning of the debt. The Left never decried Bush ballooning the debt, the Left decried Bush ballooning the debt by cutting taxes in a manner which disproportionately favored the rich and focussing massive additional spending on unnecessary war -- that is, he was decried by the left for the <i>distribution</i> of taxation and spending as the debt was being ballooned, not for the balance of taxes vs. spending. (Secondarily, the Republican Party as a whole was decried by the Left at that time for ballooning the debt to advance those policies after having recently previously taken the position that budget balance was a pre-eminent government priority, a position which Republicans surprisingly returned to embracing once they no longer controlled the White House.)

by jbooth 14y ago

crusso 14y ago

which still implies that not trimming debt immediately is irresponsible I don't get it. I was in sync with the Left when they decried George W. Bush's no-veto policy and ballooning of the debt. Now that "their guy" is in the WhiteHouse, they no longer agree that it's irresponsible to set the deficit meter on 11 and walk away like we have been. Can't we all agree that this guy was totally correct? http://www.youtube.com/watch?v=1kuTG19Cu_Q http://www.youtube.com/watch?v=1kuTG19Cu_Q I guess I wouldn't be so against some amount of debt if it looked like we had it under control. It's funny that we're dissecting the results of a study on what 90% debt:GDP would do. Well that was back in 2010, we've blown way past 90%. We're at 107% as of 2012 and climbing. It's not just about the debt's exact impact at a certain percentage. If it were just that, we could debate it and fine tune it. It's about our Government's complete inability to get it under control. Maybe 90% Debt:GDP won't hurt too badly, but sooner or later as it rises, it will crater even our economy.

tdg 14y ago
A lot of Keynesian economists are arguing that now is not the time for austerity. The government's current mission should be to lower employment even if it means higher deficits (and debt) _for now_. Once we are out of this slump, the argument is that most of the deficit will take care of itself (since some of the deficit is lower tax revenue because of unemployment + cost of automatic stabilizers such as unemployment benefits). We still need to fix the rest of the deficit/debt problem after the crisis, though. The second important argument is that (again, right now), this emphasis on austerity is actively making things worse.
- crusso 14y ago
  government's current mission should be to lower employment Well since we've exploded our debt to supposedly lower unemployment and the meter has barely moved, maybe we're doing it wrong? We've indulged the Keynesians quite enough over the last $6+ TRILLION dollars, tyvm. I see people in this thread demanding evidence that more debt is bad for the country. Well where the hell is the evidence that shows that staggering debt is good for the country? Maybe we should fall back on common sense "household" or "business" models until that evidence appears, huh? this emphasis on austerity is actively making things worse. What austerity? I've heard some talking about it, but we're not practicing it anywhere. Don't you dare use the word "sequester", because that was a joke.
  - scott_s 14y ago
    The sequester is not a joke. A friend of mine knows postdocs whose NIH funded projects were cut 20%, immediately, when the sequester went into effect. Another friend of mine will be in next class to start with the FBI, but they've been put off until 2014. To be clear, the FBI is not training new agents right now. The sequester is real, but it may take more time for the effects to reverberate throughout the country.
    - crusso 14y ago
      The sequestration has only been painful because the Administration wants to make an example of any efforts to reduce the size of the government. Funny how NIH projects could have a 20% cut when the $44 Billion reduction this year as a result of sequestration is 1% of the actual budget. Where did that other 19% come from? Further, the sequestration only reduced the increase on the baseline budget. We're still going to be spending more this year than we did last year. http://www.realclearpolitics.com/articles/2013/02/27/sequestration_just_the_beginning_of_whats_necessary_117182.html http://www.realclearpolitics.com/articles/2013/02/27/sequest...
      - TheCowboy 14y ago
        The idea that this pain is a joke is pretty unfounded. It is based upon the idea that there is waste and waste and waste everywhere. If that is the case, then it should be pretty easy to target such wasteful spending, but that isn't exactly the case at all. Also, these cuts aren't even close to what are desired by a certain segment of law makers. If that desired austerity were to be put in place, and you think agencies at trying to make an examples now, their current examples would pale in comparison to what we would see. If it is so easy to say an agency doesn't need to cut X when they can cut Y, then pass a bill cutting Y.
bencpeters 14y ago
This is a common argument, but it's fundamentally flawed. We're in a very different economic regime right now than we were under GWB, and that makes all the difference. I think you'd be hard pressed to find anyone on the left who understands the issues who is seriously arguing that deficits are never a problem, or never have to be dealt with. What a lot of us ARE arguing is that as long as we have an aggregate demand shortfall (everyone in the economy trying to save at once), paying attention to the debt is exactly the wrong thing to do, since the government is the only actor in the economy that has the freedom to act counter-cyclically and make up for the shortfall in private sector demand. The ultimate goal is to start a virtuous cycle of spending that gets us back toward full employment (and increases GDP). Then and only then does it make sense for the government to try to reduce debt through cuts. There's decent evidence (see Delong & Summers 2012: http://delong.typepad.com/20120320-conference-draft-final-candidate-delong-summers-brookings-fiscal-policy-in-a-depressed-economy-1.32.pdf http://delong.typepad.com/20120320-conference-draft-final-ca...) that trying to reduce debt through cuts in an economy like we have right now is counter-productive even on it's own terms (reducing the debt-gdb ratio) because any cuts you make further reduce aggregate demand and thus reduce the GDB side of that ratio even further. It's not a democrat in the white house vs. republican in the white house thing that is causing people who were complaining about deficits under GWB to advocate against cutting short term spending now. It's all about the underlying economic conditions.
- crusso 14y ago
  The ultimate goal is to start a virtuous cycle of spending And where is that evidence? Included in that evidence, I'd like to see a model that predicted what actually DID happen when we tried the "stimulus" that Obama's economic advisers predicted would lower unemployment to <6% or better. If you don't have a model that predicts things before they happened consistently, then it isn't Science. It's just guessing. If we're going to guess, then we should fall back on models that we do understand and have a lot of data for, like how businesses and households manage debt. Common sense should be trumping guessing based upon esoteric economic models that haven't yet yielded reproducible results.
  - bencpeters 14y ago
vec 14y ago
Going into debt to pay your medical bills is very different than going into debt to buy a yacht. No one thinks a ballooning deficit is good, some of us just think it's less bad than cutting social security and medicaid in the middle of a recession.
- twoodfin 14y ago
  We're in the middle of a recession?
  - TheCowboy 14y ago
    Going by one technical definition, no. If you look at the whole picture you have to either say that this extended period of higher unemployment is the new 'natural rate of unemployment' or admit that something might be off.
anigbrowl 14y ago
I don't get it. I was in sync with the Left when they decried George W. Bush's no-veto policy and ballooning of the debt. Now that "their guy" is in the WhiteHouse, they no longer agree that it's irresponsible to set the deficit meter on 11 and walk away like we have been. Let me offer a crude analogy: Before: 'Don't press down so hard on the accelerator (debt finance), or you will drive this car (economy) into the ditch (recession).' (crash) After: 'You need to push down on the accelerator to get out of the ditch and back onto the road.' That's Keynesianism in a nutshell. If/when the economy is again growing at a decent clip, then government spending should be reduced (as a % of GDP and revenue, not necessarily in absolute terms) and debt service increased. Of course, that doesn't always happen. Maybe 90% Debt:GDP won't hurt too badly, but sooner or later as it rises, it will crater even our economy. But the reality is taht the debt probably won't rise that much as time goes on, because it'll be offset by increased revenues from increased growth. The 2010 R-R paper argued (incorrectly) that such growth would never happen due to the high debt load.
specialist 14y ago
Now that "their guy" is in the WhiteHouse, they no longer agree that it's irresponsible to set the deficit meter... Um, no. Speaking as a proud member of The Left, we objected to blowing the Clinton era surplus by slashing revenue, starting one (or two) unnecessary war(s), and huge wet sloppy kisses to corporations (eg scripts under Medicare Plan-D). If Bush The Lesser had maintained full employment, deficit or not, The Left would have loved him.
spot 14y ago
you are wrong in every way. 1) you only need deficit spending during a recession. during good times, like pre-crash bush, that's when you pay down debt. 2) it depends on what you spend the money on. if you invest in infrastructure, research, etc that's great. if you invest in bombing iraq and graft to your cronies, no so much.
ZachPruckowski 14y ago
I think the issue (or at least my issue as a card-carrying member of The Left) was that (a) at the time, we had a very different economic situation, and (b) objections to what the money was spent on. A lot of that debt came about because of things like not negotiating prescription drug prices in Medicare D and spending hundreds of billions and trillions in Iraq and cutting taxes in a way that disproportionately benefitted the well-off. If we were in a deep situation like we're in now or Bush was proposing spending that money differently, I think there would have been fewer Democratic comments about the debt. >Maybe 90% Debt:GDP won't hurt too badly, but sooner or later as it rises, it will crater even our economy. Nobody's suggesting that an infinitely high Debt:GDP is a good thing, but a lot of people were using R-R to argue that we had to prioritize debt reduction now as an emergency even at the expense of stimulating the economy or else we'd wind up as some sort of hybrid Greece/Zimbabwe mess within 5 years. >It's about our Government's complete inability to get it under control. I don't really know that that's clear. We've had a period of time where the budget deficits were run up to pay for a major (Cold) war and the tax reforms, and then we ran very low deficits and surpluses in the 1990s. We were basically set such that we'd run a surplus during strong economic years (as the Tech Bubble was) and a slight deficit in weaker ones. We made a series of policy decisions that harmed the budget balance (Iraq, tax cuts, bad policy in Medicare D) but even then, our deficits were still in the neighborhood of nominal GDP growth. So we're actually doing kinda OK, though obviously not great. Then we have the mini-depression, which (a) reduced GDP well below potential, (b) reduced tax revenues due to people making less money, and (c) caused automatic stabilizer payouts (food stamps, unemployment, disability) to rise. It's not like we've been pushing through un-offset new annual spending this last half-decade, beyond the original TARP and ARRA. So if the economy recovers, we'll probably start to level off back into 2005-era deficits, where the deficit/GDP < nominal GDP growth, causing the debt/GDP to shrink.
jbooth 14y ago
I didn't say we shouldn't get the deficit under control. I said that we should calibrate our responses to avoid hurting the economy while doing so. In 2009, debt was not the problem, economic collapse was. In 2013, we should start working on the debt but be careful not to hurt the economy while doing so. Regardless of 'who's guy' is in the White House I maintain there's a difference between inheriting a surplus and turning it into a deficit (during the dotcom bust), and inheriting a trillion dollar deficit and not fixing it right away (during the worst crash since 1929).
dragonwriter 14y ago
> I was in sync with the Left when they decried George W. Bush's no-veto policy and ballooning of the debt. The Left never decried Bush ballooning the debt, the Left decried Bush ballooning the debt by cutting taxes in a manner which disproportionately favored the rich and focussing massive additional spending on unnecessary war -- that is, he was decried by the left for the <i>distribution</i> of taxation and spending as the debt was being ballooned, not for the balance of taxes vs. spending. (Secondarily, the Republican Party as a whole was decried by the Left at that time for ballooning the debt to advance those policies after having recently previously taken the position that budget balance was a pre-eminent government priority, a position which Republicans surprisingly returned to embracing once they no longer controlled the White House.)