Dangerous targets: Why setting a specific deficit reduction target would worsen the economic and fiscal situation | Economic Policy InstitutePosted: 15 May 2013
It is not important now but as soon as they have milked all the PR they can out of Benghazi, IRS and AP then we will return to the BS of the budget deficit…..you might want to keep up because the airways will be filled with false information very soon……..help fight bullsh*t with facts….
Now that I have the Syrian stuff out of my system I will return to righting the wrongs put forth by the lunatics on the Right…..and now I bet you think this will be some rambling about the IRS or the DOJ and AP…..SURPRISE! I will those for lesser minds!
Later this year the circus will return to the budget and the deficit and there is something you need to know………
This is an economic post….I give warning because when it is talked about too many people glaze over and move on…..why? They get all their info from BS sources……but to pretend that one knows all about politics without a knowledge of economics is just plain stupid…..and there are those that will not let facts change their position.
If you are smart enough to turn on your TV then you know all about the budget deficit and the debate around the issue…….if you are paying attention then you have heard all the flap about the debt as percent of GDP….how this is killing jobs and bankrupting the country……right? But there is a problem with this rhetoric……with all this choking debt the nation’s GDP is still rising, slowly but rising, 2.5% for the 1st quarter of 2013….now if the toilet math of the GOP were correct would not the GDP be dropping?
Well the GOP talking point that debt is 90% of GDP and economic growth will cease and may even start to decline…….they got this information from a report by two economists, Reinhart and Rogoff……..a good piece was written and cited on any given day but Repubs time after time…….the problem is…..it is WRONG!
Yes I said WRONG! Not mistaken but outright WRONG!
I will bet you think since you believe me a liberal that I will go about quoting economists like Krugman…..am I right?
Well, just like the Reinhart/Rogoff paper, you and your friends in the conserv movement…..would be WRONG! Yes, I emphasized the word WRONG!
………….the most recent period of 2000-2009, which in almost all cases will be the most relevant set of experiences with respect to current policy debates, average GDP growth when public debt is above 90 percent of GDP is higher than when the public debt/GDP ratio is between 60 and 90 percent. The findings in our paper are clearly not consistent with the notion that we consistently observe a sharp fall-off in economic growth when the public debt/GDP ratio exceeds 90 percent. As for the misconceptions concerning causality, I encourage people to read the contribution by my professor Arin Dube. His treatment of the topic is highly readable and offers strong evidence that causality runs from slow growth to high debt.
There is not one word in our paper which suggests that a high level of government indebtedness is never a problem. It would be absurd to think that governments never have to worry about their level of indebtedness. The aim of our paper was much more narrowly focused. We show that, contrary to R&R, there is no definitive threshold for the public debt/GDP ratio, beyond which countries will invariably suffer a major decline in GDP growth. The implication for policy is that, under particular circumstances, public debt can play a key role in overcoming a recession. The current historical moment, with historically high rates of mass unemployment in both the U.S. and Europe and with interest rates on U.S. Treasury bonds at historic lows, is precisely the set of circumstances under which we would expect public borrowing to have large positive effects, with comparably fewer costs. Moreover, it is precisely the set of circumstances under which we expect austerity to have substantial negative effects.
But do not take my word for this……..the PhD candidate’s findings are linked above……read it and decide……..I will also post this article in full in a latter post today….read it……
I realize that the mindless regurgitation on the right will not read this or embrace it….and most likely will not understand anything that is not boiled down to a slogan….I would like to believe that Conservs are not idiots just misinformed…..I said I would like to believe it….but I have seen nothing about them that would lead me to think better of them…..
A couple years back two dudes, Simpson and Bowles, got together with a group of guys and had a commission that was suppose to be an alternative to the bullsh*t of the budget debate…….it was a complete failure! Even the prez who created the commission did not take any of their advice for the argument on the deficit….I other words it was a complete waste of time and energy……(go figure….a waste coming out of Washington)…….
Their first plan was a bust ….so what to do next? How about another budget plan?
The former chairmen of President Obama’s 2010 fiscal commission, Erskine Bowles and Alan Simpson, on Friday will release a new deficit reduction plan in the hopes of reviving a debt grand bargain this year.
The two-step plan has about $800 billion more in spending cuts than President Obama is seeking and $1.1 trillion more than Senate Democrats have proposed, while adopting roughly the same amount of new taxes from tax reform called for in Obama’s 2014 budget.
The new Bowles-Simpson plan calls for $585 billion in tax revenue from a reform process that starts by eliminating all deductions — then adds back in only those most needed — adopts a territorial tax system and maintains progressive tax rates. This is less than the $975 billion in tax increases in the Senate budget.
By their measure, the newest Bowles-Simpson plan will achieve $5.2 trillion in deficit reduction including laws enacted since 2010, compared to $4.3 trillion in reductions in the Senate-passed budget and Obama budget. Both of these calculations assume that $1.2 trillion in automatic sequester cuts are going to be turned off.
Bowles and Simpson say that their plan will bring the national debt down from 78 percent of the economy to 69 percent of gross domestic product. This compares to 70 percent for Senate Budget, 73 percent for Obama and 55 percent for the House-passed budget authored by Rep. Paul Ryan (R-Wis.).
The Ryan plan balances without raising taxes by cutting $4.6 trillion in spending, while keeping the $1.2 trillion sequester in place.
The vast majority of the cuts would come from Medicare. Medicaid is largely insulated, except for a plan to eliminate a tax that some states use to drive up the federal government’s share of Medicaid payments.
The new plan would expand Medicare’s means testing — charging wealthier seniors a higher premium — an area where Republicans and the White House agree.
There you have a synopsis of the ‘new’ plan…..but will it be as worthless as tits on a boar…..kinda like their first attempt?
How about a little food for thought? The US has run a budget deficit for 46 of the last 50 years…..and it has not destroyed the country.
This game of battling budget proposals is getting weary……..Recently, whiz kid Ryan offered up his new budget proposal…..here is the rub……the newest budget is almost word for word the last whiz kid proposal…….only the new one says it will balance the budget in 10 years as opposed to the 40 years in the last one…….but do not take my word for it……..
(Newser) – Paul Ryan is unveiling his latest budget proposal, and this time, he says, it’ll balance in 10 years—half the time he claimed for his previous budget, NPR notes, because he’s including new revenue from the fiscal cliff deal. As promised, the new plan calls for repealing ObamaCare, to be replaced with “patient-centered reforms,” Ryan writes in the Wall Street Journal. Ryan would also boost oil drilling and reform Medicare, the tax code, and welfare, Politico reports.
“On the current path, we’ll spend $46 trillion over the next 10 years. Under our proposal, we’ll spend $41 trillion,” Ryan writes. “Because the US economy will grow faster than spending, the budget will balance by 2023, and debt held by the public will drop to just over half the size of the economy.” Among his proposals:
- On taxes: Instead of the current “Rubik’s cube,” “our goal is to have just two brackets: 10% and 25%,” Ryan writes.
- On welfare: “After the welfare reforms of 1996, child poverty fell by double digits,” he notes. The budget would let states “tailor programs like Medicaid and food stamps to their people’s needs.”
- As for Medicare: “Starting in 2024,” seniors will see “a range of insurance plans from which they can choose—including traditional Medicare.” It will be “a premium support program,” notes NPR.
- Meanwhile, Patty Murray, Democrat head of the Senate Budget Committee, is proposing her own plan, which would raise tax revenues by almost $1 trillion as it cuts spending to the same extent, Politico reports. She’ll meet with party members, including President Obama, today.
Why waste time? This budget is dead on arrival at the Senate……..and the Senate budget will be dead on arrival in the House……..and Obama’s budget will just tickle somebody’s fancy…..but wait! This sounds a lot like the budget that Ryan ran on in 2012…..oh yeah, he lost! so why go through this BS? Why waste the country’s time?
I could not pass this one up…….