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The debate continues in the country.  Do we save the economy by reducing the deficits or continue to stimulate with increased federal deficit spending?  One of the major key indicators of an economy is unemployment. This chart shows the rise and fall of unemployment during boom times and recessions from 1890 to today.  There are many theories for the causes of these historical peaks and valleys. These same ideas are being used as examples of how to fix the current economic problems.  Are any of these past fixes applicable to today's problems?

Read more: http://www.deficitaid.com/...
Live U.S. Debt Counter iPhone App Free DeficitAid.com

Unemployment Historical Chart

The debate continues in the country.  Do we save the economy by reducing the deficits or continue to stimulate with increased federal deficit spending?  One of the major key indicators of an economy is unemployment. This chart shows the rise and fall of unemployment during boom times and recessions from 1890 to today.  There are many theories for the causes of these historical peaks and valleys. These same ideas are being used as examples of how to fix the current economic problems.  Are any of these past fixes applicable to today's problems?

Deficit Hawks is a term getting lots of airtime lately, but who and what are Deficit Hawks.  

According to Wikipedia.... "Deficit hawks are fiscal conservatives that believe the best way to reduce the deficit, pay off national debt, and balance the budget is by increasing taxes in addition to cutting government spending.  Some believe that deficit hawks use deficits as an excuse to oppose government spending. William Greider claims that 'their real intent is to stymie the very spending programs that can deliver economic recovery and relief to battered citizens' [1]. He points to the example of World War II spending during the Great Depression, in which the government ran up massive deficits but brought about America's postwar prosperity took greater control over the economy, focusing production on arms and suppressing consumption."  

Paul Kurgman, a left-leaning economist, carries the flag for the "spend more" to stimulate the economy.  Mr. Krugman has impressive resume with Yale, MIT, Princeton, London School of Economics, Nobel Prize, economic advisor to Ronald Regan, author, NY Times contributor, and TV commentator.  He's opposed to Fresh Water Economics that could mean he is in favor of Salt Water Economists.  Although, his Wikipedia site only states he's opposed to Fresh Water Economists.  The differences are described...

Saltwater economists typically tended to find "examples of irrational behavior interesting and important."[5] Like Behavioral psychologists, they tend to be interested in the behavior of single individuals, which they find on an individual basis often deviates from strict "rationality".

Freshwater economists, in contrast, have in general been interested in quantitatively accounting for the behavior of large groups of people interacting in markets, and believe that understanding market failures requires framing problems that way.

The third idea for fixing the economy involves Tinker Bell and fairy dust.  According to Wikipedia, "Fairies can enable others to fly by sprinkling them with fairy dust..."   The site doesn't indicate if Tinker Bell could make the U.S. economy fly again by sprinkling fairy dust on it.  However, there is an indication that the magical dust is very powerful.  

Do Deficit Hawks have it right or wrong?  Are Krugman's ideas right or wrong?  Or, perhaps there are those who think that the Deficit Hawk's conservative policies and Krugman's economic theories will have the same effect on the economy as a sprinkle of Tinker Bell's fairy dust.

Krugman, and the like, think that federal spending on industries will increase productivity, jobs, revenues and jump-start the economy. The debt incurred during the recession can be paid back during the good-times.  Is there really historical evidence that this can work?  Post World War II economic expansion isn't a good example because the United States was the industrial nation still in business after war. Europe, Japan, China, and Russian were leveled.  

Deficit Hawks think too much federal debt is the cause of recession.  Reducing the debt will spark economic expansion, jobs, increased revenue and increase spending with the expansion.  Is there historical evidence that cutting federal spending and increasing taxes will reduce the debt?  Secondly, is there historical evidence reducing debt will spark economic growth?  

One thing is for certain about economies. They are cyclical.  All the historical evidence proves that economies have good years and bad years.  The idea that an economy can only have up years is impossible. So why do governments try to influence the cycles?  No one agrees on what works.  Data can be used to prove or disprove results.  Is the economy a living breathing beast with a mind of it's own?

Perhaps sprinkling a little fairy dust is the best idea of all.  Convince people the dust actually works.  Tell everyone the effects of dust will take about 12 to 18 months before change will occur.  The myth of the dust will slowly create a positive feeling about spending again. The positive psychological feeling will go viral, and then create actual economic growth.  Like magic, the dust fixes the economy after every recession.

Live U.S. Debt Counter iPhone App Free DeficitAid.com

Originally posted to DeficitAid on Mon Jun 14, 2010 at 12:12 PM PDT.

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Comment Preferences

  •  Tip Jar (0+ / 0-)

    Deficitaid.com is dedicated to educating America on government spending issuses

    by DeficitAid on Mon Jun 14, 2010 at 12:12:09 PM PDT

  •  Spend wisely to create jobs. (3+ / 0-)
    Recommended by:
    sjbob, thethinveil, Ezekial 23 20

    Deficit spending can create jobs, but its hard, if not impossible, to create jobs when we're wasting money on counterproductive wars and a "defense" department that can't account for what it spends.

    For the cost of escalation in Afghanistan, we could have 20 green energy jobs paying $50,000 per year here in the United States for every soldier sent to Afghanistan; a job, that is, for each of those former soldiers and 19 other Americans. We're spending on average $400 per gallon to transport gas over extended and difficult supply lines into Afghanistan where the U.S. military uses 27 million gallons a month.  Foreign Policy in Focus, http://www.fpif.org/...

    A Report by The Sustainable Defense Task Force finds that massive defense spending is a major cause of our budget deficit and is hollowing out our economy. The base DoD budget has rocketed 50% in real terms since 1998 and President Obama's budget asks for more. You can do download this important report at
    http://www.armscontrolcenter.org/...

    •  thanks for links (0+ / 0-)

      do you think a strong natiional/international defense is one reason other nations invest in our dollar?   Also, the bill on social security and medicare long term are the big problems.    

      True about accounting practices of Defense Depart.  David Walker, accountant of US. Gov says that most agencies could pass an audit because they don't track expenses.

      Perhaps the only way for our government to be more efficient is to cut their budgets.  Let them learn what it's like to live on less like the rest of us.

      Deficitaid.com is dedicated to educating America on government spending issuses

      by DeficitAid on Mon Jun 14, 2010 at 04:10:21 PM PDT

      [ Parent ]

  •  Too simplistic. (2+ / 0-)
    Recommended by:
    sjbob, Ezekial 23 20

    Krugman thinks we should spend more now, but ALSO thinks that down the line we'll need to cut spending and raise taxes. It's not a question of either/or, but of timing.

    Deficit hawks: where were you during the Dubya years?

    "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

    by HeyMikey on Mon Jun 14, 2010 at 12:37:12 PM PDT

    •  Same place they are now (4+ / 0-)
      Recommended by:
      chuckvw, sjbob, thethinveil, Ezekial 23 20

      Using the general revenues deficit as a pretext to "repair" Social Security by gutting, privatizing, skimming off the top of it, and turning a social insurance premium into a backdoor permanent regressive tax.

      Non enim propter gloriam, diuicias aut honores pugnamus set propter libertatem solummodo quam Nemo bonus nisi simul cum vita amittit. -Declaration of Arbroath

      by Robobagpiper on Mon Jun 14, 2010 at 12:45:32 PM PDT

      [ Parent ]

      •  Greenspan's Plan All Along (4+ / 0-)

        "...turning a social insurance premium into a backdoor permanent regressive tax."

        It is amusing that the deficit peacocks are so atwitter about the Social Security contributions turning negative - at any time.  They clearly became addicted to looking at the FICA tax as a permanent offset to more appropriate levels of the progressive income tax.  Where is that steely resolve Greenspan exhibited back in the 1980s about the government stepping up and repaying the Social Security trust fund which labor was supposed to build over a thirty year period?  Gone in the twinkling of an eye.

        "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

        by PrahaPartizan on Mon Jun 14, 2010 at 01:29:35 PM PDT

        [ Parent ]

        •  They've got a whole lot of people convinced that (2+ / 0-)
          Recommended by:
          HeyMikey, thethinveil

          Social Security benefits are mostly paid out of the "Trust Fund" somehow, making it sacrosanct, as if, when it's gone, Social Security will no longer be paid out.

          Which, of course, is rubbish.

          Non enim propter gloriam, diuicias aut honores pugnamus set propter libertatem solummodo quam Nemo bonus nisi simul cum vita amittit. -Declaration of Arbroath

          by Robobagpiper on Mon Jun 14, 2010 at 01:40:01 PM PDT

          [ Parent ]

          •  The Trust Fund (2+ / 0-)
            Recommended by:
            Robobagpiper, sjbob

            exists precisely to pay the retirement benefits of the baby boomers, who had far fewer kids than their parents did.

            It's supposed to be spent. So long as it lasts until the boomers are mostly dead, it will have done it's job... their kids have had enough babies to sustain them in retirement under the old pay-as-you-go formulas.

            Once the boomers have been paid for, we won't need a trust fund anymore.

            --Shannon

            "It is better to die on your feet than to live on your knees." -- Emiliano Zapata Salazar
            "Dissent is patriotic. Blind obedience is treason." --me

            by Leftie Gunner on Mon Jun 14, 2010 at 03:19:08 PM PDT

            [ Parent ]

            •  We'll need a small one (0+ / 0-)

              There was always a trust fund, intended to cover for temporary shortfalls when the economy and demographics were less favorable than projections, but the giant trust fund of the post-Greenspan reform, absolutely, that will be paid down, it should be paid down, and it must be paid down.

              Not allowing it to be paid down really will mean that the money put in it for the purpose of covering the boomer bump was stolen by the general budget.

              Non enim propter gloriam, diuicias aut honores pugnamus set propter libertatem solummodo quam Nemo bonus nisi simul cum vita amittit. -Declaration of Arbroath

              by Robobagpiper on Mon Jun 14, 2010 at 03:56:44 PM PDT

              [ Parent ]

              •  Purpose of This New Commission (0+ / 0-)

                "...Not allowing it to be paid down really will mean that the money put in it for the purpose of covering the boomer bump was stolen by the general budget..."

                All of the hoopla associated with cries about "raising taxes" in order to redeem those bonds in the Trust Fund is precisely an effort by people like Peterson to raid the Treasury.  How else will the Federal government come up with the funds needed to repay the bonds?  Peterson's only concern is that the plutocrats not be forced to repay the Treasury for the long-term loan at super-low interest rates they received when the Feds cut taxes under Reagan and Bush disproportionately on capital.  They want everyone else to pay for the fiscal follies we've engaged in over the last thirty years, all of which benefited only the plutocrats.  If Peterson is successful, it will be the biggest heist in the history of crime.

                "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

                by PrahaPartizan on Thu Jun 17, 2010 at 07:51:19 AM PDT

                [ Parent ]

    •  agree on dubya (0+ / 0-)

      he was no better, but the fiscal collapse really sparked my interest in learning if my kids have a future or not... thus the commitment to deficitaid... what i would like krugman to answer is how much is too much... that's a fair question.. spending to get out of the recession, but at what point does spending send the dollar into the death spiral... that would be an interesting answer to debate

      Deficitaid.com is dedicated to educating America on government spending issuses

      by DeficitAid on Mon Jun 14, 2010 at 04:03:16 PM PDT

      [ Parent ]

  •  i have never heard of this Paul Kurgman (0+ / 0-)
  •  I'm not sure deficit hawks exist any more. (2+ / 0-)
    Recommended by:
    chuckvw, gavodotcom

    I think deficit cuckoos came along and laid eggs in their nests for them to raise.

    The 'supposed' deficit hawks on the right (or even the left) these days, don't ever seem to be ideologically correct even to their own mantra.  They claim to be all for lowering costs, but when presented with legislation that will actually lower costs but is personally repugnant to them for other reasons, such as actually helping lower income folks, they vote against it.

    Am I cynical? Yes I am! - Bob the Builder's lesser known brother Pete the Politician

    by Ezekial 23 20 on Mon Jun 14, 2010 at 12:49:06 PM PDT

  •  debt, deficits, krugman, etc (1+ / 0-)
    Recommended by:
    thethinveil

    "Deficit Hawks think too much federal debt is the cause of recession."  No.
        Deficit Hawks on the whole believe--incorrectly--that a sovereign state can go bankrupt just like an individual. More sophisticated worriers raise concerns about deficits "crowding out" private borrowing, interest payments as a growing burden on the federal budget, and inflation if the Fed is forced to buy federal securities with dollars. None of these are a problem currently.
        What is a problem? Huge unemployment and loss of GDP, households struggling under heavy debt loads, and state/local tax revenues falling rapidly.  Cutting federal spending at this point, worrying about the deficit at this point, is like taking anti-drought steps in a hurricane.
        Your point that the economy is cyclical...of course.  But as Krugman points out--had you really read his work--this is no ordinary cyclical recession, but rather the result of a gigantic implosion in the credit market similar to 1929 to 1932. Between the reforms of the New Deal and the Reagan-Bush demolition of those reforms, we continued to have recessions: 1958-59, 1973-74, 79-82. But those were much  shorter and shallower  (2 of them triggered by oil price shocks) than the depressions that began in  1873, 1893, and 1929.
        There is plenty of evidence that a depression or recession responds to increased federal spending (less so to tax cuts)...the prime example of them all is how the enormous spending and debts of World War II not only pulled the economy out of the Depression once and for all, it laid the foundation for rapid economic growth for years after 1945.  There is no evidence that reducing the federal debt spurs the economy. Really its the other way around...when the economy grows rapidly (as in the 1950s), the federal debt shrinks as a % of GDP (which is the only measurement that matters, not the actual numerical debt figure). You are correct that the US had an advantage in the post World War II world, but that merely means it was easier to achieve high growth in GDP . Growth is the crucial issue, not debt.

    •  yes, but (0+ / 0-)

      were does the growth come from?  Jobs have gone overseas... Technology? Green?... This is what concerns me more than the spending... Where's the next big up tick come from?  

      thanks for your comments

      Deficitaid.com is dedicated to educating America on government spending issuses

      by DeficitAid on Mon Jun 14, 2010 at 03:57:24 PM PDT

      [ Parent ]

  •  A glib commentary w/little substance, IMHO... (4+ / 0-)
    Recommended by:
    gavodotcom, sjbob, maryabein, thethinveil

    a very weak historical analysis with a few, cherry-picked facts, but not much more than that. Diarist's pseudonym tells us more about the intent of the post than almost anything else. And, IMHO, a focus upon our deficit would be the absolute wrong way to go right now.

    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

    by bobswern on Mon Jun 14, 2010 at 01:54:37 PM PDT

  •  1937 is all the history you need (3+ / 0-)
    Recommended by:
    sjbob, maryabein, thethinveil

    Just as the economy was pulling out of the Great Depression, FDR succumbed to GOPher criticism of his "reckless spending" and tried to balance the federal budget.  He failed miserably and the economy plunged back into the GD from which it never emerged until WWII.

    Economies don't need to run in cycles if governments are smart about their polices.  OTOH, if governments are stupid, an economy may never pull out of a recession/depression.

    John Maynard Keynes figured all this out 75 years ago.  Unfortunately, 99% of Americans have never read anything he wrote.

    •  good info, thanks (0+ / 0-)

      i suppose the problem with having a two party system is one idea can't be right. There has to be two ideas.  Often those ideas must be opposing.   Governing involves using both ideas.  

      Deficitaid.com is dedicated to educating America on government spending issuses

      by DeficitAid on Mon Jun 14, 2010 at 04:14:17 PM PDT

      [ Parent ]

      •  Good governing (0+ / 0-)

        means putting the right policies in place to achieve our goals. In economics,using "both ideas" is a prescription for disaster.

        •  business and unions (0+ / 0-)

          often have influence on govt decisions.. i suppose an economic body of government that had autonomy over economic policy... spending, borrowing, budgets, etc... letting congress do both has failed for a number a reasons...

          Deficitaid.com is dedicated to educating America on government spending issuses

          by DeficitAid on Tue Jun 15, 2010 at 05:58:18 AM PDT

          [ Parent ]

          •  Wall Street's control of Congress (0+ / 0-)

            was a major reason for the financial collapse in 2008.  Economic policy should never be dictated by one group because that group is always acting in its self-interest rather than the common good.

  •  We had this figured out about 70 (1+ / 0-)
    Recommended by:
    sjbob

    years ago; unfortunately it didn't fit the get rich
    quick scheme.  There are very few of us that remember
    the 60's let alone the 30's.  It really is tiring to
    constantly reinvent the wheel; unfortunately this
    country has taken upon itself to spread corporate
    greed via the lottery, self help books, infomercials,
    and (last resort) the RAPTURE.  Since both political
    parties and the MSM spout the same message I'm under
    no illusion that things are going to get better any
    time soon.

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