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On April 20 2013 05:12 Areon wrote:Show nested quote +On April 20 2013 04:32 McBengt wrote:
Been saying this all along. Austerity is a pitfall, a publicity stunt with no substance. It retards economic growth and has far more damaging effects in the long run than any stimulus package.
It did horrible things to Europe and will do horrible things to the US if Obama caves in to right wing populists demanding massive spending cuts. And evidence like this goes to show why people who believe increasing debt will never hurt the economy are stupid. It's obvious that time will prove the theories of people like R-R false, there's no surprise there. But that doesn't give kids like you the right to make wild claims supported by no evidence and expecting the world to take you seriously. Grow up. Also how is this a scandal? Paper being debunked =/= scandal; it's called "debunking". Where did the scandal come from?
I'd say it's a rather major embarrassment to the academics concerned. Harvard economics professors don't put their name on items randomly.
Politically it's no-news, because American politics doesn't care about arguments being right or wrong. It's been a fairly randomly cited study in some debates and confrontations (mainly in Britain, this side of the Atlantic), but it's not like anyone gave it sacrosanct value. I recall Professor Krugman being confronted with it by some bespectacled self-styled "venture capitalist". He simply explained that the paper was in no way conclusive, and much more an unconfirmed preliminary result in a line of inquiry academic economics only recently started on.
Areon's claim about horrible things is not sound, at least for the US. The US is through this recession now, and set to resume sustained strong growth. The price of ignoring the sound advice of the "liberal" economists has been paid: The national debt is higher than it would be, the infrastructure that would have been built isn't there, and you've suffered some trillions of dollars in lost production. But the price is paid.
As for Europe, the problem isn't conservatism per se, it's nationalism. We are not one nation but many, and the kind of income transfers that go yearly from the North of the US to the South, are absolutely unthinkable (we are talking major fucking cash here ++100s Bns USD yearly, all tax payer money spent by the federal government), never mind the thought of a public infrastructure and works projects the South of Europe is in dire need of. It's hard enough convincing the average voter that we need to borrow them just enough to keep them solvent (the world would burn otherwise). There's already a rapid uprising of nationalist political opportunism in Northern Europe, True Finns, for example, are preaching that we should just cut the south loose (never mind that this would actually be an utterly unworkable policy) and are swiftly becoming the biggest party in my country.
The ECB is doing it's best to help things, which is key to keep us afloat, but austerity and suffering in the south will continue at least until after the next German parliament is elected. What happens then, will decide what path Europe takes out of the recession.. Whatever decisions come then, I don't think any of them will help with resuming growth in the south. We will most likely see the eurobonds, or some contributing collection of solutions to ensure southern solvency ad-infinity, but high levels of unemployment will be the new normal, until enough people emigrate north..
There simply are no mechanisms in place to allow for the south to regain competitiveness within Europe. Who knows? The next Bundeskanzler will be better prepared for the position he/she'll be in, and potentially even have vision for the future. That'll be the election to follow, and it's coming this September.
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On April 20 2013 06:33 Kontys wrote:
Areon's claim about horrible things is not sound, at least for the US. The US is through this recession now, and set to resume sustained strong growth. The price of ignoring the sound advice of the "liberal" economists has been paid: The national debt is higher than it would be, the infrastructure that would have been built isn't there, and you've suffered some trillions of dollars in lost production. But the price is paid.
I'm going to disagree with you here a bit. The sound advice of liberal economists was largely heeded, repeatedly, early into the recession. Multiple stimulus measures were passed (under both Bush and Obama presidencies). 'Austerity' was ignored until after the recession had passed - which is pretty standard thinking.
Had the US experienced a normal, robust recovery, the current austerity criticism would likely be relegated to fringe opinion.
Ex ante if you wanted the government to support the economy after the recession had passed may have based your opinion on R&R's other work "This Time it's Different" which predicted a slow recovery and lots of debt following a financial crisis.
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Baltimore, USA22254 Posts
Edit - unlocked due to popular demand.
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On April 20 2013 06:56 JonnyBNoHo wrote:
I'm going to disagree with you here a bit. The sound advice of liberal economists was largely heeded, repeatedly, early into the recession. Multiple stimulus measures were passed (under both Bush and Obama presidencies). 'Austerity' was ignored until after the recession had passed - which is pretty standard thinking.
Had the US experienced a normal, robust recovery, the current austerity criticism would likely be relegated to fringe opinion.
Just found this thread.
The bolded is not standard thinking on austerity and stimulus, Jonny. In fact, if you think about it for more than ten seconds, it's terrible advice under almost all circumstances.
Standard advice is to cut spending and raise taxes after output has recovered to long-run output level. This is completely different from cutting spending and raising taxes after the GDP growth rate turns positive...which you are insisting is the standard advice an economist would give.
On April 20 2013 06:56 JonnyBNoHo wrote:
Ex ante if you wanted the government to support the economy after the recession had passed may have based your opinion on R&R's other work "This Time it's Different" which predicted a slow recovery and lots of debt following a financial crisis.
I suggest picking up a copy of This Time Is Different. R/R write directly on this subject and note it's unclear if this is just a natural occurrence or if this is a failure of government action, or if it's some combination of both. It should also be noted that they generally support increasing spending and decreasing taxes in response to financial crises, as they also note in their book.
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On April 20 2013 04:48 Sermokala wrote:Show nested quote +On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets.
It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election.
You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it.
You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation.
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Also, the fact that 2 Harvard economists can get so many citations based off nothing but categorizing countries by debt to GDP and calculating means and medians for growth makes it seem like working in academia is as simple as working in Wal-mart. Any random idiot can do it.
They didn't establish causation, nor did they even attempt to. Hell, they didn't even calculate correlation, they just wrote about the dangers of high debt based on the means and medians they calculated and this 90% number they arbitrarily chose (the number wasn't chosen based on the data, it was chosen a priori).
If it's really that easy, perhaps I should get out of math and start looking for a job as a economics professor.
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having a huge debt is still bad this will never change. Only thing that got shown now is that in theory more than 90% debt should be managable. Economics is hardly a science. all you can do is make educated guesses, so going now and saying "haha we can make as much debt as we want" is just silly.
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Am I the only one that finds it very embarassing for Harvard-level scientists to make such basic Excel mistakes?
On economics: while too much debt is (logically) never a good thing, especially if you need more money each year than you can actually pay back, austerity clearly isn't having the results some people would have hoped. Things are just going from bad to worse in Portugal, Spain and Greece. More than 26% of Spain's population is unemployed. That's plain disastrous.
The cynic in me concludes that Europe now has three countries it can use for cheap labour. In less than three years I've lost all my faith in the European Union. It's like they've forgotten the definition of the word Union. North vs. South is all we see nowadays. Combine this with increasing nationalism across the continent, and we've got ourselves a recipe for disaster.
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Back to Keynes we go  . Honestly I feel like supply side economics is taking so many hits now, especially with this blow to its credibility that deficit spending until economic strength returns; I just hope that supply side economic styles don't become political suicide.
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On April 29 2013 22:16 paralleluniverse wrote:Show nested quote +On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence that there is a need fear high debt in our current situation.
Italy basically isn't even a country most of the time. And its the last nation that should be trusted as a barometer for economic strategy. Populist views hurt the populist most of all. Stimulus is a joke. You borrow tons of money to put into an economy and you hope that it will turn around somehow. Thats how we started out on Obama's 4 years of 1 trillion a year deficit. Do you want Obama last 3 years to also be trillion dollars of debt per year?
Whos honestly that dumb that thinks that having more stimulus in america would have resulted in a lower debt. That doesn't take more then 4 seconds to realize is stupid. All stimulus does is gum up the works of recovery and put a nation a ton in debt.
Austerity is the only thing to lower a nations debt. And when your nations debt is out of control and no one thinks you can pay it off then the austerity will be much much worse then what it is now. No one can save Spain, no one can save the south of Europe. Everyone is just waiting for the end of the world and trying to soften the fall.
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On April 29 2013 22:31 paralleluniverse wrote:
Also, the fact that 2 Harvard economists can get so many citations based off nothing but categorizing countries by debt to GDP and calculating means and medians for growth makes it seem like working in academia is as simple as working in Wal-mart. Any random idiot can do it.
They didn't establish causation, nor did they even attempt to. Hell, they didn't even calculate correlation, they just wrote about the dangers of high debt based on the means and medians they calculated and this 90% number they arbitrarily chose (the number wasn't chosen based on the data, it was chosen a priori).
If it's really that easy, perhaps I should get out of math and start looking for a job as a economics professor.
it's absurd how basic it is. and they can't even do that right... but it didn't matter because nobody noticed! stupefying.
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On April 29 2013 22:16 paralleluniverse wrote:Show nested quote +On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation.
You're arguing him on the wrong level. He's CONVINCED that high levels of debt will destroy a country. He stands on grounds that say "debt is bad in all forms." So much so that he fears debt more than 25% unemployment, or an economic collapse (if that isn't already the definition of "collapse").
Thus, he thinks we're proposing stimulus as a means to control the debt/deficit, when in reality, we propose stimulus to make the economy thrive again. The debt/deficit is almost inconsequential until the point where the private sector begins competing with the government for resources instead of competing for government business.
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On April 29 2013 23:01 Sermokala wrote:Show nested quote +On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence that there is a need fear high debt in our current situation. Italy basically isn't even a country most of the time. And its the last nation that should be trusted as a barometer for economic strategy. Populist views hurt the populist most of all. Stimulus is a joke. You borrow tons of money to put into an economy and you hope that it will turn around somehow. Thats how we started out on Obama's 4 years of 1 trillion a year deficit. Do you want Obama last 3 years to also be trillion dollars of debt per year? Whos honestly that dumb that thinks that having more stimulus in america would have resulted in a lower debt. That doesn't take more then 4 seconds to realize is stupid. All stimulus does is gum up the works of recovery and put a nation a ton in debt. Austerity is the only thing to lower a nations debt. And when your nations debt is out of control and no one thinks you can pay it off then the austerity will be much much worse then what it is now. No one can save Spain, no one can save the south of Europe. Everyone is just waiting for the end of the world and trying to soften the fall.
I'm not pointing to Italy as an example of good fiscal policy. I'm pointing to Italy to debunk you're absurd claim that elections show that Europe is lurching to the right. It's not true. It's lurching against the incumbent, against austerity. It's giving rise to nationalism, Euroskepticism and batshit crazy anti-establishment parties.
Yes, Obama started with a deficit roughly double where it was in 07/08, with over $1 trillion deficits through most of his first term. Why don't you tell me how he managed to pull that off given that the stimulus which was about $800 billion, spent only about $300 billion per year for a few years. Where's the other roughly $700 billion in deficits coming from? It's certainly not Obamacare, because it's not even in effect. And it's not the bailouts, which ended up profitable to the government. Maybe, just maybe, much of the budget is determined by the economic cycle.
The argument for stimulus is not an argument for reducing debt right now. It will increase debt in the short term. It's an argument to increase employment, to put people back to work, and to increase growth. In case you haven't realized, prolonged unemployment has terrible costs, people who have been out of work for a long time are nearly unemployable, skills degrade, human potential is wasted, future tax payers don't make a income and therefore don't pay tax, etc. Reducing the debt can wait until the economy has recovered. Reducing the debt now is counterproductive as Europe shows. No, don't blame the welfare state, the stronger welfare states like Germany or Norway aren't the ones screwed, and don't blame the debt, Spain was in surplus pre-crisis and it's debt is lower than Germany.
What you believe in is faith-based economics. Austerity is the only choice, not because of the evidence, but because you think it has to be true. Stimulus retards growth, well because you say so. And, as you claim, austerity is the only way to reduce debt. Where is the historical precedence for this false claim? Tell me, apart from export-led growth, which isn't really possible in a global recession, what country has cut it's way out of debt? What country has cut it's way to growth?
The highest debt level over last few hundred years of US history was after WWII. At over 100% of GDP, did this debt cause a debt crisis? Was it reduced by a mad austerity drive? No, the US simply grew its way out of debt. It didn't cut its way out of debt.
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On April 29 2013 23:35 aksfjh wrote:Show nested quote +On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation. You're arguing him on the wrong level. He's CONVINCED that high levels of debt will destroy a country. He stands on grounds that say "debt is bad in all forms." So much so that he fears debt more than 25% unemployment, or an economic collapse (if that isn't already the definition of "collapse"). Thus, he thinks we're proposing stimulus as a means to control the debt/deficit, when in reality, we propose stimulus to make the economy thrive again. The debt/deficit is almost inconsequential until the point where the private sector begins competing with the government for resources instead of competing for government business.
How then does he propose to buy a house? Or get a university education?
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On April 29 2013 23:10 nunez wrote:Show nested quote +On April 29 2013 22:31 paralleluniverse wrote:
Also, the fact that 2 Harvard economists can get so many citations based off nothing but categorizing countries by debt to GDP and calculating means and medians for growth makes it seem like working in academia is as simple as working in Wal-mart. Any random idiot can do it.
They didn't establish causation, nor did they even attempt to. Hell, they didn't even calculate correlation, they just wrote about the dangers of high debt based on the means and medians they calculated and this 90% number they arbitrarily chose (the number wasn't chosen based on the data, it was chosen a priori).
If it's really that easy, perhaps I should get out of math and start looking for a job as a economics professor. it's absurd how basic it is. and they can't even do that right... but it didn't matter because nobody noticed! stupefying.
The guy that debunked it passed on the colbert report : http://www.colbertnation.com/the-colbert-report-videos/425748/april-23-2013/austerity-s-spreadsheet-error
He explains that he was asked to try to reproduce the result of a "classic" paper (as an exrecice), and didn't managed to reproduce them. The fact is the author didn't let the data public. So he contacted them and asked if he could see the data to see where his error was, and found out he wasn't the guy making an error.
The problem is that it seems the paper wasn't peer reviewed (aka didn't earned the "science" stamp), and yet politics used it to justify their stuff.
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On April 20 2013 04:17 Sub40APM wrote:Show nested quote +On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is ' accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested.
Normally, I refrain from making statements about matters of such an enourmous complexity.
Here, I'd say that generally I'd agree with the premise you mention. The problem is that many countries have been operating on budget deficits (even when accounted for inflation) for the better part of the last 30 years.
+ Show Spoiler [example-budget deficit] +USA-blue Germany-black Japan-red ![[image loading]](http://upload.wikimedia.org/wikipedia/commons/2/2a/StaaSchuBis2004.PNG)
So countries (which allegedly wanted to operate under your premise) have actually been accumulating debt in times of economic strength. I wonder, how much room does this leave to increase deficit spending during recession?
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On April 29 2013 23:46 paralleluniverse wrote:Show nested quote +On April 29 2013 23:35 aksfjh wrote:On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation. You're arguing him on the wrong level. He's CONVINCED that high levels of debt will destroy a country. He stands on grounds that say "debt is bad in all forms." So much so that he fears debt more than 25% unemployment, or an economic collapse (if that isn't already the definition of "collapse"). Thus, he thinks we're proposing stimulus as a means to control the debt/deficit, when in reality, we propose stimulus to make the economy thrive again. The debt/deficit is almost inconsequential until the point where the private sector begins competing with the government for resources instead of competing for government business. How then does he propose to buy a house? Or get a university education?
By saving for them first. I imagine the idea is that, by saving for them and taking out the government involvement, more people could "afford" them without financing.
Not something I agree with, mind you, but I see the reasoning.
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On April 29 2013 23:35 aksfjh wrote:Show nested quote +On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence to fear high debt in our current situation. You're arguing him on the wrong level. He's CONVINCED that high levels of debt will destroy a country. He stands on grounds that say "debt is bad in all forms." So much so that he fears debt more than 25% unemployment, or an economic collapse (if that isn't already the definition of "collapse"). Thus, he thinks we're proposing stimulus as a means to control the debt/deficit, when in reality, we propose stimulus to make the economy thrive again. The debt/deficit is almost inconsequential until the point where the private sector begins competing with the government for resources instead of competing for government business.
A nation defaulting on its debt like what would happen with every other odd eurozone country these days would destroy a country. Not just obliterate the economies of every other nation that isn't as irresponsible in the euro zone but completely destroy the nations financial basis. No one is going to want to buy greece or spains debt if Germany and china aren't backing them up. This idea that you think that fearing 25% unemployment is somehow better then exponentially exploding debt is nothing more then shitty propaganda from people who just want their governments to collapse.
On April 29 2013 23:36 paralleluniverse wrote:Show nested quote +On April 29 2013 23:01 Sermokala wrote:On April 29 2013 22:16 paralleluniverse wrote:On April 20 2013 04:48 Sermokala wrote:On April 20 2013 04:40 Slaughter wrote:
How is this a "scandal"? It seems like a scientific paper was simply proven wrong. Unless they covered it up or knew of the mistake? The right is winning a lot of elections in the EU right now due to the "austerity" movement that they've championed. People want to blow this up like it invalidates all austerity people so the liberals can get debt much further then that and not have to care again about balanced budgets. It's not left vs right in Europe. It's incumbent vs non-incumbent. Incumbent nearly always loses, due to their crazed obsession with austerity. The left "won" the most recent Italian election. You're painting a strawman when you say that people who oppose austerity believe that balanced budgets never matter. We believe in balancing the budget when the economy is stronger. Bill Clinton did it. You've said that there's no alternative to austerity, when there clearly is -- not austerity, stimulus. And the argument against stimulus, for austerity, is basically that beyond a certain point, 90% RR says, excessive debt somehow causes a debt crisis (although no one has been able to specifically say how that can possibly happen to a country using it's own currency). Yet there is no evidence of this. Because the evidence against a 90% tipping point has now blown up. Now there's no evidence that there is a need fear high debt in our current situation. Italy basically isn't even a country most of the time. And its the last nation that should be trusted as a barometer for economic strategy. Populist views hurt the populist most of all. Stimulus is a joke. You borrow tons of money to put into an economy and you hope that it will turn around somehow. Thats how we started out on Obama's 4 years of 1 trillion a year deficit. Do you want Obama last 3 years to also be trillion dollars of debt per year? Whos honestly that dumb that thinks that having more stimulus in america would have resulted in a lower debt. That doesn't take more then 4 seconds to realize is stupid. All stimulus does is gum up the works of recovery and put a nation a ton in debt. Austerity is the only thing to lower a nations debt. And when your nations debt is out of control and no one thinks you can pay it off then the austerity will be much much worse then what it is now. No one can save Spain, no one can save the south of Europe. Everyone is just waiting for the end of the world and trying to soften the fall. I'm not pointing to Italy as an example of good fiscal policy. I'm pointing to Italy to debunk you're absurd claim that elections show that Europe is lurching to the right. It's not true. It's lurching against the incumbent, against austerity. It's giving rise to nationalism, Euroskepticism and batshit crazy anti-establishment parties. Yes, Obama started with a deficit roughly double where it was in 07/08, with over $1 trillion deficits through most of his first term. Why don't you tell me how he managed to pull that off given that the stimulus which was about $800 billion, spent only about $300 billion per year for a few years. Where's the other roughly $700 billion in deficits coming from? It's certainly not Obamacare, because it's not even in effect. And it's not the bailouts, which ended up profitable to the government. Or maybe, just maybe, much of the budget is determined by the economic cycle. The argument for stimulus is not an argument for reducing debt right now. It will increase debt in the short term. It's an argument to increase employment, to put people back to work, and to increase growth. In case you haven't realized, prolonged unemployment has terrible costs, people who have been out of work for a long time are nearly unemployable, skills degrade, human potential is wasted, future tax payers don't make a income and therefore don't pay tax, etc. Reducing the debt can wait until the economy has recovered. Reducing the debt now is counterproductive as Europe shows. No, don't blame the welfare state, the stronger welfare states like Germany or Sweden aren't the ones screwed, and don't blame the debt, Spain was in surplus pre-crisis and it's debt is lower than Germany. What you believe in is faith-based economics. Austerity is the only choice, not because of the evidence, but because you think it has to be true. Stimulus retards growth, well because you say so. And, as you claim, austerity is the only way to reduce debt. Where is the historical precedence for this false claim? Tell me, apart from export-led growth, which isn't really possible in a global recession, what country has cut it's way out of debt? What country has cut it's way to growth? The highest debt level over last few hundred years of US history was after WWII. At over 100% of GDP, did this debt cause a debt crisis? Was it reduced by a mad austerity drive? No, the US simply grew its way out of debt. It didn't cut its way out of debt.
Are you seriously asking where the other deficits were coming from? The banking bailouts and auto industry bailouts (arguable corporate stimulus if anything) Kinda happened you know.
And again This idea that increasing debt in the short term for countries that are experiencing exponentially increasing debt makes no sense in any way no one is going to give money to an addict so that in some way using is going to help them get better. Reducing the debt isn't something that can just wait for spain, greece, portugal and iceland. Iceland went though a revolution and England still isn't happy about it.
No one gives a shit for what happened pre-crisis. Everyone got their legs kicked out from under them. It doesn't matter where everyone came from it just matters where everyone is right now. What I believe is common fucking sense. I don't put faith in weather forcasters and I don't understand how anyone would put faith in economists.
I believe in common fucking sense. You can't simply say "lets ignore the numbers for the next 5 years" and keep plunging into the red in some mad gambit to turn it around. Some nations didn't keep their house's in order and are paying for it now. The USA after WW2 had the only modern functioning economy, Asia now exists in an economical equation that Europe never had to account for before.
No one is going to give greece or spain the money it needs to support the stimulus packages that you're proposing. Austerity is the only thing left to them.
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On April 30 2013 00:04 ggrrg wrote:Show nested quote +On April 20 2013 04:17 Sub40APM wrote:On April 20 2013 02:40 AnachronisticAnarchy wrote:
Still not a good idea to have debt, least of all 15 digits of it. It's just common sense. No one says accumulating debt is 'good'. what they are saying is ' accumulating debt now, to get more people employed and then paying it off when the economy is growing stronger is better than on top of a weak economy instituting austerity' which is what the RR paper, its political advocates and even R when he gave interviews to conservative papers all suggested. Normally, I refrain from making statements about matters of such an enourmous complexity. Here, I'd say that generally I'd agree with the premise you mention. The problem is that many countries have been operating on budget deficits (even when accounted for inflation) for the better part of the last 30 years. + Show Spoiler [example-budget deficit] +USA-blue Germany-black Japan-red So countries (which allegedly wanted to operate under your premise) have actually been accumulating debt in times of economic strength. I wonder, how much room does this leave to increase deficit spending during recession?
It leaves plenty of room if you are a stable country that prints your own, credible currency. Japan is growing their debt currently, while it's above 220% GDP. Yields on Japanese bonds are still below 1%, so there's no investor worries.
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though I am not a big fan of the german government I think what they did when the crisis struck was right. Basically the german government payed the companies a certain amount of their employees earnings, while the companies worked shorter days, while demand was low for their products.
This allowed the companies to keep their trained staff and at the same time lowered the numbers of layoffs. This is imo the right way to use stimulus money. Artificially keeping the supply side alive with stimulus money while at the same time the demand is breaking apart doesnt help.
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EPT
