Balance the Budget - Destroy the Economy

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QUOTE: "Explaining why cutting government spending (or raising taxes, which is the functional equivalent) is such an idiotic idea in the midst of the worst recession since the Great Depression is actually relatively straightforward. The real challenge is dislodging the conventional wisdom that is already so deeply-seated in people’s minds (including those of both Barack Obama and Paul Ryan).

There was no technological reason, for example, for the suffering during the Great Depression. We had the ability to continue to produce output at the 1920s level; what was missing was sufficient demand to hire everyone willing to work. As a consequence, living standards collapsed. That’s where the system breaks down, as it did in October 1929 and December 2007.

Situations like the 1930s and today benefit no one. Unemployed workers would like jobs, employed workers would like not to have to support (formally or informally) the unemployed, and entrepreneurs would like to sell more output. There is an obvious solution: the federal government can supplement demand.

Whence comes the money the government uses to pay the soldiers, airmen, sailors, marines, librarians, teachers, police officers, firemen, social workers, and national park rangers? It could tax the private sector, but that’s not terribly effective since it raises demand in one place by lowering it in another. So, they should deficit spend. To keep with my desire for simplicity in this entry, let’s say the manner in which this is accomplished is direct borrowing from the Federal Reserve (something that is illegal at the moment but can be, and is, done via a less direct route). This means the Treasury sells its debt to another branch of the government, in exchange for which it receives the cash it needs to pay those workers. When the debt becomes due, they sell more. Because all US debt is owed in a currency we are legally permitted to print, it is impossible to face debt default. We can choose to default, but we are never forced to.

Nor is this inflationary. This is true for a variety of reasons, the most critical of which being that it does not represent more money chasing fewer goods since the quantity of the latter rose–that was the whole point of the exercise. We wanted to lower unemployment and produce more output. I have, incidentally, two longer entries on how inflation really works:" John T. Harvey, Forbes

http://www.forbes.com/sites/johntharvey/2011/06/05/how-to-destroy-the-us...

Money Growth Does Not Cause Inflation!

What Actually Causes Inflation (and Who Gains from It)

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm

Comments

This too, will go right over everyone's head.

Bush_Wacker's picture
Bush_Wacker
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Jun. 25, 2011 7:53 am

In terms Rubio's hero Tupac would use, true'dat!

Phaedrus76's picture
Phaedrus76
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Sep. 14, 2010 8:21 pm

It's only destroying the economy for the average non connected working stiff.

But its a corporate predator/profiteer/rentiers wet dream -

increased monopolistic profits and a completely captured government - especially the executive branch - ok congress isn't any better -

Scappoose's picture
Scappoose
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Mar. 30, 2012 7:49 am

Funny how the repub zombies were asleep from 2000-2008 and rose out of the earth when the black guy was elected. I don't think you can ever cite George Bush using the words balanced budget.

DynoDon
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Jun. 29, 2012 10:24 am
Quote DynoDon:

I don't think you can ever cite George Bush using the words balanced budget.

Don't you remember January 2001 when Alan Greenspan was warning us that we would pay off the debt too fast? I don't remember if this was one of the arguments Littleboots used to lower tax rates.

chilidog
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Jul. 31, 2007 4:01 pm
Quote polycarp2:

We had the ability to continue to produce output at the 1920s level; what was missing was sufficient demand to hire everyone willing to work.

Unemployed workers would like jobs, employed workers would like not to have to support (formally or informally) the unemployed, and entrepreneurs would like to sell more output. There is an obvious solution: the federal government can supplement demand.

I agree this is true for the 1930's, but today we do not manufacture the things we consume, and we don't manufacture things any other nation wants. Any new dollar put into the pocket of an American consumer does not become a dollar in the pocket of another American's paycheck.

chilidog
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Jul. 31, 2007 4:01 pm
Quote chilidog:
Quote polycarp2:

We had the ability to continue to produce output at the 1920s level; what was missing was sufficient demand to hire everyone willing to work.

Unemployed workers would like jobs, employed workers would like not to have to support (formally or informally) the unemployed, and entrepreneurs would like to sell more output. There is an obvious solution: the federal government can supplement demand.

I agree this is true for the 1930's, but today we do not manufacture the things we consume, and we don't manufacture things any other nation wants. Any new dollar put into the pocket of an American consumer does not become a dollar in the pocket of another American's paycheck.

Every dollar put into the pocket of an American consumer DOES go into another American's paycheck. At least a portion of it does. That's the problem. Nobody has money to spend into the economy. Most American's spend nearly every dollar they make. Whether it be for groceries or clothing or bills. The more they spend the more jobs there will be to deliver the demand. The more jobs created from the demand creates more money to spend back into the economy. Manufacturing is great but it's not the only means of production.

The other side of the coin which is known as austerity goes in the other direction. Cutting back on government spending takes money out of American's pockets. That's money that won't be spent into the economy. That leads to cutting more jobs because of a lack of demand. Less jobs leads to even less spending money and the downward spiral continues. Less money in the economy and less tax revenue for the government to spend which stimulates economic growth. The bottom line is that they need to spend whatever is neccesary to get the spiral moving upward again. The more the economy moves upward the less tax revenue is needed for "entitlements" and the less people that are in need of "entitlements".

Bush_Wacker's picture
Bush_Wacker
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Jun. 25, 2011 7:53 am

The job growth has been in the private sector even though Rubio's and Paul's lines state that the government got the stimulus and did the hiring.They also say govt doesn't create jobs, but the sequester will kill jobs that weren't created. Taking the carried interest bamboozle back would cut the deficit and no one would be effected.The revenue has to approach 20% of gdp to be healthy. The current 15% is ridiculus as history has shown the revenue average around 17% during the growth phase.

douglaslee's picture
douglaslee
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Jul. 31, 2007 4:01 pm
Quote chilidog:
Quote polycarp2:

We had the ability to continue to produce output at the 1920s level; what was missing was sufficient demand to hire everyone willing to work.

Unemployed workers would like jobs, employed workers would like not to have to support (formally or informally) the unemployed, and entrepreneurs would like to sell more output. There is an obvious solution: the federal government can supplement demand.

I agree this is true for the 1930's, but today we do not manufacture the things we consume, and we don't manufacture things any other nation wants. Any new dollar put into the pocket of an American consumer does not become a dollar in the pocket of another American's paycheck.

Government can rectify that...by simply creating/spending money to purchase U.S. steel, U.S. concrete, U.S.-made renewable energies, etc. If it wanted to re-boot garment manufacture, it could even purchase school uniforms and distribute them freely through public schools. Government needn't borrow to do that. It has sovereignty over its own currency should it chose to exercise it. It can simply create/spend money equal to idle labor and idle productive capacity. If there is idle capacity capable of producing garment plants, it can utilize that as well.

If government buys from sources produced abroad as it did under the first stimulous program....it undermines its own intent. The Chinese benefited from our stimulous program more than we did. Note that when China instituted a stimulous program...products bought by government had to be made in China.

Retired Monk - "Ideology is a disease"

polycarp2
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Jul. 31, 2007 4:01 pm
Quote DynoDon:

Funny how the repub zombies were asleep from 2000-2008 and rose out of the earth when the black guy was elected. I don't think you can ever cite George Bush using the words balanced budget.

What about principled people, mostly libertarians, who criticized Bush during 2000-2008 and continued to criticize Obama since 2008? And for the same policies!!!!! Don't lump all Obama critics together, please

LysanderSpooner's picture
LysanderSpooner
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Jul. 31, 2007 4:01 pm

It's easy to be principled in OZ.

DynoDon
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Jun. 29, 2012 10:24 am

I often envision a society that is streamlined, spartan, waste free and sustainable. It is far away from what he have today. Most people accustomed to the exuberance of our credit driven society might not like it. Those living below my vision however would most likely embrace it. It is where the world needs to be rather than the imbalanced situation we have now which just would last much longer.

I think about the food in our supermarkets and the jive turkey who process food and put things in fancy boxes just so it will sell better. What a waste! We would probably be better off if most things were bulk like at a co-op. Oh but that is "Communist" or so the lunkheads think. How much longer can we keep filling up the land with the waste from these products. Our communities want to ban plastic bags but what about the far more wasteful paper and plastic in a lot of processed food products. Sure some of the paper in that is recyclable and some not.

My other vision is the earth as a bag of flour and human beings like weevils infesting it. Nature should eventually do in the infestation. And that is a less appealing scenario.

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captbebops
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Jul. 31, 2007 4:01 pm

Costco does real well with affordable products and treating their employees as most civilised cultures do. Their starting wage is above $11 an hour. You can purchase pharamaceuticals without a costco membership, too. The bulk packaging might seem more than necessary but learning how to apportion the purchase is easily mastered.

The balanced budget is an obsession and unneccessary. Investment requires debt, all successful enterprises borrow. Homeowners borrow, it's called a mortgage. Debt financing is also a scam for bain style financiers. Trump borrows beyond his means, files bankruptcy and forces bondholders to take a haircut. Casinos always win unless it's a trump enterprise.

ERISA was passed to prevent the looting of pension funds but the practice is still considered a viable business strategy. It is similar to mafia restaurants loaded with debt suddenly getting struck by lightning and burning down. Buy insurance for pension default from PBGC and loot all you want.

douglaslee's picture
douglaslee
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Jul. 31, 2007 4:01 pm

Economic recovery that works and it's not some neoliberal, libertarian fascist plan, it just works. The states with balanced budget amendments killed the recovery as austerity has killed everywhere it was applied.

WY is raising their taxes, cheney must not have as much sway as he used to. His state believes in paying for things, now.

CO has an idiotic clause that requires surpluses be refunded. No saving for a rainy day for them.

http://robinhoodtax.org.uk/ is a good idea.

douglaslee's picture
douglaslee
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Jul. 31, 2007 4:01 pm
Quote douglaslee:

Economic recovery that works and it's not some neoliberal, libertarian fascist plan, it just works.

"libertarian fascist". Really?

Who is a libertarian?

"Zero Aggression Principle":

A libertarian is a person who believes that no one has the right, under any circumstances, to initiate force against another human being for any reason whatever; nor will a libertarian advocate the initiation of force, or delegate it to anyone else.

Those who act consistently with this principle are libertarians, whether they realize it or not. Those who fail to act consistently with it are not libertarians, regardless of what they may claim.
— L. Neil Smith

There are a few definitions of fascism, but none of them can be confused with any definition of libertarianism.

LysanderSpooner's picture
LysanderSpooner
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Jul. 31, 2007 4:01 pm

I love non-violence. I believe war is the failure of politics, not their extension, by other means. War thinking needs to begin with how much worse the politics of peace will be after the war than they are before it. Playing the Great Satan according to the bin Laden script was hardly the best way to keep 9/11 in proportion and to prevent any further terrorist attacks.

I do not believe that people should be coerced to work by want or forced to submit to masters in order to eat. Your "liberty" needs to be in mutuality, and that requires more than autonomous individual 'responsibility.' What do you do about the individuals who are not responsible and who exploit others and take advantage of human vulnerability and need? Here comes the state, here comes the state, and you had better be involved in the governing or you will be ruled over.

drc2
Joined:
Apr. 26, 2012 12:15 pm

Lysander wrote: A libertarian is a person who believes that no one has the right, under any circumstances, to initiate force against another human being for any reason whatever; nor will a libertarian advocate the initiation of force, or delegate it to anyone else.

poly replies: Does that mean you are against private ownership of land and its resources? Before they were privatized, no one was coerced into working for another for a livelihood. The means to support oneself were freely available in the vast commons known as the planet.

That's how Europeans found the No. American Continent when they arrived. It seems Native Americans deemed working for another as slavery...and set up an economic structure where that was never required of their citizens.

Today's "Libertarians" are a poor imitation of Native American libertarianism. They had weak, yet effective goverments...their social/economic structures didn't require strong hierarchies.

The only recessions/depressions were nature induced. The nonsense of hunger and homelessness amidst plenty would have been seen as the absurdity it is.

Woe is us, woe is us. All that corn sitting in a field and we don't have the money to pick it let alone eat it. Head for the dumpster for dinner. We consider that "normal". Other societies consider it nuts.

Retired Monk - "Ideology is a disease"

polycarp2
Joined:
Jul. 31, 2007 4:01 pm

–How can we bankrupt America in one easy step? « #Monetary Sovereignty – Mitchell is another blog by Mitchell dealing with the same topic at

http://rodgermmitchell.wordpress.com/2012/10/06/how-can-we-bankrupt-amer...

The answer is, of course, balance the economy.

pshakkottai's picture
pshakkottai
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Jul. 11, 2011 11:27 am

Thom had a couple on his conversations with great minds discussing their new book on monetary theory and modifications in place already. Miles are a ghost currency now, though initially it was just a marketing ploy. You can now purchase 10,000.00 siver dollars from the US treasury on your credit card and collect 10,000 miles or points for products. Deposit your silverdollars in the bank with autopay and if your 10,000 miles/points are convertable into groceries and merchandise [some programs do] you might be able to live on just buying silver dollars from the treasury. They used to offer free delivery [usps parcel post].

money-as-debt is the story of our money today. Poly has posted it many times.

douglaslee's picture
douglaslee
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Jul. 31, 2007 4:01 pm

I remember people playing tricks like this back in the late 80's and early 90's. The game back then involved buying travelers checks or money orders on a credit card that had a zero balance, immediately depositing the travelers checks or money order, then writing a check and mailing it to pay the bill before interest was charged.

This worked best if you were able to buy the travelers checks or money order with little or no fee.

The value of the miles you were awarded was far more than the overhead of the transaction.

Some adjustment was made to the cards or purchasing of money orders or travelers checks to not allow credit transactions, only cash or checks (or fees were charged to make it not economical).

I don't know if those changes were system wide or not.

The fees on getting a cash advance and the interest charged from the date of the transaction makes the deal not as lucrative.

This whole deal reminds me of a certain Seinfeld episode ...

Seinfeld: The Michigan Deposit Bottle Scam

But, of course, that ain't the ending! (whoops!)

***

Yada, yada, yada ...

The Bottle Deposit

The Bottle Deposit, Part 1

miksilvr
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Jul. 7, 2011 12:13 pm

Currently Chatting

Get. Money. Out.

Last week, the United States Senate actually considered a constitutional amendment on campaign finance. Last Monday, the Senate advanced Tom Udall's proposed amendment, which would allow Congress to regulate money in politics. Seventy-nine senators voted to allow debate on the measure.

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