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View Diary: Republicard: spend like there's no tomorrow (91 comments)

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  •  Borrowing to spend (none)
    Deficit spending was one of the key point in Keynes's ideas on how to dig a country out of a recession. All the neo-Keynesians right now that are harping on Bush's spending are just being hypocritical.

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    by jjayson on Sun Dec 21, 2003 at 09:32:07 PM PST

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    •  Re: Borrowing to spend (3.66)
      See the funny thing is ... deficit spending has always been a way to get out of recession, but even keynes argues for the pahse in of revenue and the phase out of of the deficit.

      Don't you see this is Dean's campiagna nd the democrats repositioning themselves so if the economy does pick up[ Bush must repond. If he does you are setting the agenda and can move faster than him. If he doesn't then you have won yourself an issue.

      Dem Adminstrations have never consitantly been about deficits or higher taxes. That line is bull straight from the wurlitzer.

      Personally Miles' brillaint marketing has inspired me to chnage all of the Inland empire's tabling schemes. Starting January we are going to have two small tables. One: Our regular dean table with positive message from Dean. The Second: A table to apply to cancel your "Republicard" a place where democrats, independents, and even Republicans frustrated by the Bush Tax can vent their frustration.

      I am thinking about making arnold his own while I am it.

      This is a great message and an amazing job of reframing. everyone comp[laining about history should look at the lack of credibility of Repubs on National security. they never gained it back until Regan (a Gov. with no National security experience).

    •  Re: Borrowing to spend (none)
      Well, some of it depends on what you get in exchange for the deficits. Piling on deficits to make rich people richer and to fight aggressive wars? Not really good investments for turning around a suck economy.
      •  Depends on the theory you work under (none)
        If you work under a Keyensian/neo-Keynsian view, it makes no difference what you are paying for. Keynes thought that you could pay men to moves boxed around a warehouse all day. His theory divided up the economy into private spending, public spending, and investment. They were all interchangeable, and if private spending fell, then any government spending by the same amount was needed to fill the gap created. Keynes saw the economy driven by consumers, not producers.

        His theories about the rich would only applicable today if the wealth were keeping their money out of the banking system, stuffing under a mattress, since once anybody deposits money in a bank it quickly finds its way back out.

        (Of course, these comments in no way imply that I actually subscribe to these ideas, but I know I am in the minority. Remember kids, politicians make terrible economists.)

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        by jjayson on Sun Dec 21, 2003 at 10:10:41 PM PST

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        •  Re: Depends on the theory you work under (none)
          Ivory-tower metallurgists (e.g. me) also make terrible economists. Thanks for the info.
        •  Re: Depends on the theory you work under (3.50)
          "politicians make terrible economists" - so do amateurs like you.

          Keynes' idea was that fiscal policy could go into debt during recessions, using increased gov't spending to offset declines in private spending, or tax cuts to stimulate private spending, and cuts in interest rates to stimulate private business and consumer capital goods spending. But monetary policy would be relative ineffective when interest rates were terribly low (the so-called "liquidity trap").

          And fiscal policy would be most effective when applied to income groups with a high marginal propensity to spend - low-income groups.  Thus to combat recession it would be best to cut payroll taxes, not the income taxes on the rich.

          But a key point was that the recession budget deficits would be offset by budget surpluses during good times to restrain excessive demand and avoid inflation.  Thus we would have essentially a balanced budget over the course of the business cycle rather than on an annual basis.  

          And this has been built in to the economy with what we call automatic stablizers - unemployment insurance, welfare and food stamp payments that go up automatically in recessions;  and graduated income taxes that create an increasing flow of tax revenues during boom times.

          But we have gotten away from rational fiscal policies in the past several years in the nation much as they have in Kalifornia.  We are becoming increasingly a fiscal trainwreck heading for long-run disaster.

          •  Why are you repeating me? (none)
            politicians make terrible economists" - so do amateurs like you.
            I'm hardly an amateur. I've been involved in things from currency and equity trading to presently grading CBO estimate accuracy.

            Keynes' idea was that fiscal policy could go into debt during recessions, using increased gov't spending to offset declines in private spending, or tax cuts to stimulate private spending, and cuts in interest rates to stimulate private business and consumer capital goods spending.
            This is exactly what I said.

            And fiscal policy would be most effective when applied to income groups with a high marginal propensity to spend - low-income groups.  Thus to combat recession it would be best to cut payroll taxes, not the income taxes on the rich.
            No, he advocated Both. Tax cuts for low-income people were seen as effective since the poor would spend their tax cuts immediately, stimulating the economy. Tax cuts on the wealthy that he saw as hording were seen as useless since that money would only go to hordes. While in his NY Times letter to the President he said the government must increased federal spending he cautioned against increasing taxes to pay for it since that would simply be a transference from private to public spending. Taxing the rich to bring their money back into the churn of the economy would have been a positive, since the money went from sitting under the mattress to a public expenditure.

            The rest of your dealt with the other side of the business cycle, something I just didn't address since it wasn't important to the original comment.

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            by jjayson on Mon Dec 22, 2003 at 01:47:48 AM PST

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        •  Re: Depends on the theory you work under (none)
          Dammit, I'm a marketeer not an economist, but these connnections seem to be going around in my mind. Any comments appreciated:

          A. Banks don't provide social services or education;

          B. Hyper-large deficits will create a hyper-large debt burden.

          C. Servicing a hyper-large debt burden will necessitate eliminating or vastly reducing social services and education spending.

          D. As the uneducated/lower class population in our country grows, banks will see less reason to invest here. The day of reckoning will come when foreign banks start pulling out.

          Conclusion: paying the bank is the same as paying dudes to push boxes around only as long as there is something to invest in domestically.

          George W Bush is now proving that he disdains nation-building - paraphrase of Howard Dean

          by Doug in SF on Mon Dec 22, 2003 at 01:32:36 AM PST

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          •  Many open questions (none)
            You bring up many questions that are, for the most part, still open. Not open as in nobody really has an idea, but open as in there are still competing explanations.

            Hyper-large deficits will create a hyper-large debt burden.
            There are two most common arguments against large deficits. First, government borrowing will crowd out private investment. Every dollar of new government bonds that gets sold means a dollar that doesn't go to a private institution (or state or municipal or etc). This would also cause interest rates to rise. The response some have to this is that it assumes a static amount of dollars in the bond pool. If taxes are lowered on the price of capital then more dollars in the bond pool could be enough to offset the extra bonds being sold.

            The second impact is servicing the debt interest. Sure, you can always float more bonds in the short-term, but that is not a long-term solution. However, some say that if the economy grows faster than debt, those bonds could be thought of like any other investment. For example, if a nation has a $1,000 billion economy with $150 billion in debt (debt is 15% of production), then an additional $50 billion in bonds could be sold off with little adverse effect as long as the economy grew by an additional $333 billion (to keep that same 15% level). If the economy grew by $500 billion, totaling a new $1,500 billion economy with $200 billion in outstanding debt, then the percentage of debt to production would actually fall to 13% and to some extent be cheaper. (Like how if you started to make three as much, any credit card debt you might currently have would all of the sudden seem much less significant.)

            However, if the country does live beyond its means, racking up debt without an equal growth in production, then yeah it could cause problems. There are two major scenarios. First, we would be forced into cutting government spending massively. There is only so much that can be taxed out of the economy before the it become counter productive to tax. (The estimate on how much that is is very widely disputed.) Taxes can be raised temporarily high, but a state cannot maintain high rates of taxation for long. (Again, "high" isn't well agreed upon.) Second, the government will inflation its way out of debt. As long as debt is denominated in dollars, the government was inflate its way to freedom. Of course, that would devastate the economy and interest rates would fly though the roof. (There are other scenarios, but they follow the same general principle of taxation or repudiation.)

            Regardless of how the US markets appear, we are still The Market in the world for investment. While that can be destroyed, it would take much longer than 4 (or even 8) years to accomplish.

            In my personal view though and like I tend to be a broken record about, taxation on capital is far more destructive than personal income tax, as that tends to slow down business create and risk taking far more than anything else. When people talk about taxing the rich, I fear they are talking about things like capital gains. Since, tax the top income bracket at 80% at $1,000,000, and I really won't care that much. However, when people start talking about taxing capital gains like regular income, I get a little worried.

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            by jjayson on Mon Dec 22, 2003 at 02:26:22 AM PST

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