PDA

View Full Version : The Problem With Deficits



ljb5
07-13-2004, 08:02 AM
On this thread (http://media5.hypernet.com/ubb/ultimatebb.php?ubb=get_topic;f=5;t=016849), Ironmule implied that a large deficit is a bad thing.

Del immediately attacked me for it. Since it was Jeff who brought up the subject of deficits, I can only assume that Del's keyboard malfunctioned and he meant to type 'Jeff' instead of 'LJB5.'

That thread quickly got out of hand after Jeff accused me of oversimplifying:


ljb5 does love to oversimplify thingsand then provided us with this gem:
mortgage=national debt(mistakes/poor planning by previous administrations)
job promotions=GDP growth
kid orthodontial expenses=wars and disaster relief
ageing cars=technological change in the business worldSo I decided to start a new thread about why deficits matter.
<hr>

Testimony of Chairman Alan Greenspan (http://www.federalreserve.gov/boarddocs/testimony/2004/20040225/default.htm)


These scenarios suggest that, under a range of reasonably plausible assumptions about spending and taxes, we could be in a situation in the decades ahead in which rapid increases in the unified budget deficit set in motion a dynamic in which large deficits result in ever-growing interest payments that augment deficits in future years. The resulting rise in the federal debt could drain funds away from private capital formation and thus over time <u>slow the growth of living standards.</u><hr>
Greenspan warns against deficits (http://money.cnn.com/2004/02/25/news/economy/greenspan/)


Greenspan and other economists have warned that, over time, persistent deficits and high government debt will push interest rates higher, hurting economic growth and the nation's living standards.

"If no action is taken at all ... we're going to be confronted within a few years with a marked upward ratcheting of long-term interest rates, which is very debilitating to long-term economic growth," Greenspan said.<hr>

You can call it, "Leftist, pinko, commie, faggit, tree huggin BS," but that's Greenspan's words, not mine.

Meerkat
07-13-2004, 08:54 AM
Not to mention that the total debt is now something in the neighborhood of 70% of GDP. Debt service alone consumes a large percentage of annual tax revenues.

Del Lansing
07-13-2004, 09:43 AM
These were_your_words...
We all know already that Bush turned the largest surplus in U.S. history into the largest deficit. We know already that he is on track to be the first president to preside over a net job loss since the depression. If we look at constant dollars a deficit today of $450 billion would represent $1050 billion in 1980, not hardly a "record" and less than half of the deficit from 20 years ago.


Debt service alone consumes a large percentage of annual tax revenues. The numbers from 2003 (actual #s) is $2.25 trillion federal revenues with $318 billion as debt payment...about 14%. With GDP in 2003 at around $11,000 billion and debt payment of $318 billion that falls well into the established banking limits on income/indebtedness. That's around 2.8%, if you ask a bank for a mortage they ask you keep payments to under 25% of income, so no matter if you look at as a % of GDP or real revenues the debt is well within banking standards. So if a consumer can afford that level of indebtedness why can't the nation? It really is a non-issue. It is simply one more scare tactic used for political leverage. People have trouble thinking in the large numbers involved in the budget, but if you subtract 9 zeros and then compare to typical consumer debt_nothing_is out of line.

ljb5
07-13-2004, 12:23 PM
Originally posted by Del Lansing:
...if you ask a bank for a mortage they ask you keep payments to under 25% of income...Yes, but they also expect you to pay it down every year, not run it up.

Having debt is like having a mortgage (to use an Ironmule style simplification.)

Running a deficit is like taking out a new mortgage every year without paying off the others first.

(Jeff - I'm not trying to get anyone to fight here. I merely posted what you said. When Del attacked me, I pointed out that you are the one who brought up the subject. If either of you wants to fight, leave me out of it. You, Alan Greenspan, economists, politicians and I all agree that deficits are detrimental (although occasionally unavoidable.) If Del wants to fight, there's no shortage of people opposed to him.)

Del Lansing
07-13-2004, 09:19 PM
You, Alan Greenspan, economists, politicians and I all agree that deficits are detrimental (although occasionally unavoidable.) What you posted was still supposition , a range of reasonably plausible assumptions about spending and taxes notice it says assumptions? and history still hasn't played out that a deficit has created any specific problem. Meerkat's post about debt at 70% of GDP as an outrage; think about that, that is similar to saying someone earning $100K a year should not buy anything a large as a $70k house, silly silly silly.

ljb5
07-13-2004, 09:57 PM
Take it up with Alan Greenspan.

Here's a link (http://www.federalreserve.gov/feedback.cfm)

Let us know how it goes.

Marvin E.
07-13-2004, 10:06 PM
from the first sentence of ljb5's fourth paragraph of his opening post:Bush turned the largest surplus in U.S. history into the largest deficit

You, Alan Greenspan, economists, politicians and I all agree that deficits are detrimental (although occasionally unavoidable.)

The first statement, as I understand it, would fit in the complaint file.

The second statement, as I would understand it, accepts the fact that deficits are unavoidable.

Would this be a flip flop?

imported_Conrad
07-14-2004, 12:32 AM
No, not technically. Just because he's confused doesn't mean it was an intentional flip-flop. ;) jlb.5 doesn't seem to follow any real logic, and often loses track of which lie he's currently absorbed in. Ya gotta feel sorry for the guy- he's just smart enough to get the discussion going, then loses control prior to crashing and burning. Then the real fun begins as he tries to dig himself out. :D It was entertaining for a while, now it's too predictable, and best not to "feed the troll." :rolleyes: :eek:

Meerkat
07-14-2004, 12:47 AM
That's occasionally, not every blinking year of every blinking decade for at least the past 60 years!!! - except for the period 1994-2000.

Del Lansing
07-14-2004, 07:38 AM
Meekat, you make my point for me, if you actually hear what you said. It smacks in the face of the network news wonks catch phrases, but... You said there has been 60 years of deficits, and I will again ask, besides your angst, what ill effects has there been? The economy is adding jobs, production is climbing, people are buying houses.
In fact read this, it seems historically it has been debt reduction has preceeded some _really_bad times in the US. Let History Speak (http://www.mosler.org/docs/docs/thayer.htm) The article appears to be from 1997 but the record speaks for itself. The period since 1997 will show also, balanced budget, debt reduction, economy starts slipping in March of 2000. Now debt up, deficit up, economy up. The record speaks for itself. You want zero debt/+surplus or do you want a job? simple stuff.

ljb5
07-14-2004, 07:57 AM
Ocassionally, deficits are unavoidable. Howerver, turning the largest surplus ever into the largest deficit ever is nothing to be proud of.

Everyone gets in a fender-bender once in a while. But I wouldn't give the keys to the guy who gets in bad accidents every single week and doesn't see anything wrong with it.

Marvin E.
07-14-2004, 08:04 AM
Del, your point stands out more than ever this year. The past trends do not exhibit the times we have experienced with the 9/11 impact on the economy.

Del Lansing
07-14-2004, 08:18 AM
The past trends do not exhibit the times we have experienced with the 9/11 impact on the economy. I'm not sure I get what you mean. The economy was slipping at that point, the Dow was down a record amount then Sept 11 happened and things really crashed. Some corrective action was needed. To add to the subsequent crash; while the Dow was flirting with 14,000 many traders and economists were stating that things were trading at an inflated value, many issues were working on overstated values, and the natural set point should be around 10,000. Well the bubble popped, Tyco, Enron, MCI, and where do we find it?? around 10,000. I gotta wonder if a lot more wasn't known than was being told.

Del Lansing
07-14-2004, 08:27 AM
Ocassionally, deficits are unavoidable. Howerver, turning the largest surplus ever into the largest deficit ever is nothing to be proud of. Did you follow the link and read the history? Debt and deficit reduction has historically been nearly always followed by economic downturns. So you yearn for an economic downturn? Greenspan based his statements on "assumptions," history doesn't bear out his conclusions. I keep asking you for one historic incident where a deficit caused a bad effect; you can't do it because the opposite is in fact true. Sorry, facts are facts.

Marvin E.
07-14-2004, 08:55 AM
Del, the 9/11 attack added strain on the natural trends of the high and lows that this country has experienced over time. The airline industry survives on business travelers, for a large portion of its total revenue. The ripple affect was felt across the board in just about every business sector in this country.

Just using one example, hotels and food chains were directly hit, in a down turn, in just the first week after the attacks in New York and Washington, D.C. Paychecks were lost by low to moderate income people being put out of work. Tax revenues for many local economies, were lost. These type cases do not show in the trends represented by history. We have recovered from the natural down turn and the sudden shift in people's habits after the 9/11 attacks, in a very short period of time.

Dan McCosh
07-14-2004, 09:03 AM
Actually Germany in the 1920s had something of a problem with debt and deficits.

Del Lansing
07-14-2004, 09:08 AM
These type cases do not show in the trends represented by history. They are there, just the transitions are slower and due to much more subtle economic pressures. So that the stark impact due to Sept 11 and the rapid fire failing of multi-billion$ firms caused some _severe_adjustments.

ljb5
07-14-2004, 09:14 AM
Del, I am honored to be in the presence of such an undiscovered genius.

To think of all the time and effort wasted by controlling deficits! To think of all the election-year rhetoric, the government shut-downs, the incessant manipulation of the interest rates.

Why don't you send your ideas and your resume along to Alan Greenspan?

Let us know how it goes.

[ 07-14-2004, 10:18 AM: Message edited by: ljb5 ]

Marvin E.
07-14-2004, 09:19 AM
Del, the government has two choices to make in down turn economies. The government can cut services, or borrow money to operate its daily business. The debt percentages discussed earlier, are not out of line with the guildlines used for every American family. The real numbers may not fit in political year politics. But from what you represent, I commend the government and Greenspan for micromanaging these last two years.
I must go now, before my boss see me mishandling his funds.

Del Lansing
07-14-2004, 09:44 AM
To think of all the election-year rhetoric In the end the truth is always there. With this phrase I will agree with you, it_is_all electioneering. You still feel there is impending doom due to the deficit, their election-year rhetoric has convinced you despite the historic record.

ljb5
07-14-2004, 03:09 PM
Certainly some (but not all) is election year rhetoric.

Deficit reduction has been the rallying cry of the Republicans for as long as I can remember.

Of course, they (Reagan, Bush and Bush) have exploded the deficits, while it disappeared completely during Clinton's terms.

This whole subject started with Ironmule's (Republican) comment about Kerry causing deficits. If it's all just pointless rhetoric, then he is guilty of it along with Gingrich and the Republicans who made such an issue out of it that they shut down the government.

If it's not just pointless rhetoric, then the Republicans ought to be held responsible for the deficits they incur.

George Roberts
07-14-2004, 07:58 PM
ljb5 ---

You will note that the interest rates that the federal government are well below what industry pays.

That should be sufficient to indicate that those with money do not think a deficit is important.

ljb5
07-14-2004, 10:23 PM
Originally posted by George Roberts:
ljb5 ---

You will note that the interest rates that the federal government are well below what industry pays.

That should be sufficient to indicate that those with money do not think a deficit is important.That doesn't make any sense. But if you think you understand it, go ahead and send your comments to the Federal Reserve Board.

Obviously, they're a bunch of nincompoops because they actually worry about this stuff. You should include your resume too.

Let us know how it goes.

Del Lansing
07-15-2004, 07:26 AM
while it disappeared completely during Clinton's terms.

... If it's all just pointless rhetoric, then he is guilty of it along with Gingrich and the Republicans who made such an issue out of it that they shut down the government.
Excuse me, the Clintons started that election-year rhetoric over the deficit, it was the war-cry of their campaign. So when they_didn't_balance the budget for 4 years the republican congress forced them to balance it and if Clinton had signed the budget bill the govt wouldn't have shut down; so it was the lack of Clintons signature that shut down the government.

go ahead and send your comments to the Federal Reserve Board.

Obviously, they're a bunch of nincompoops because they actually worry about this stuff. You should include your resume too.
That is so typical of the other side, you can't win the argument with fact so ridicule and call names. I asked for one specific time a deficit caused a problem, you cannot find one; you quote Greenspan who says based on assumptions deficits are bad, neither does he give a historic negative effect of deficits. All I'm asking for is proof . The manipulation of interest rates has very little to do with managing the deficit, that is to control inflation and bolster or slow business investment and consumer spending. Any effect on the deficit from interest rates is a far removed secondary effect.