|
On April 30 2013 22:47 Kimaker wrote:Show nested quote +On April 30 2013 21:55 coverpunch wrote:On April 30 2013 21:43 Kimaker wrote:
Of course the world didn't end after 90%.
We're so economically ingrained in the fantasy world it won't end for many decades. Until then I suspect you'll continue to see widespread social ills as people experience severe anxiety, stress and neurosis as a result of cognitive dissonance. Regardless of how we decide to "play the game" the fact remains that there comes a point where the market and actual resources fall too far out of synch.
This is all well and good, until they run out of bread and circuses.
You can ignore reality. But you can't ignore the consequences of ignoring reality.
Reality just hasn't caught up yet. Give it time. History is on the side of the inevitable, of collapse. Rome didn't fall in a day, it took nearly 400 years of the entire civilization being an effective, "Dead Man Walking". That's where we are, and that's how our era will be viewed in retrospect. This is not a well reasoned argument. You might as well tell us that we're all going to die sooner or later so just give up now. Reinhart and Rogoff were wrong to say 90% was a threshold, a bright line for the difference between an economy with a debt problem and an economy with a debt crisis. There's no doubt that the United States has a debt problem. The bigger question is whether it's something we need to address right now or if we can sail into the wind and address in, say, five years, when pre-2007 growth levels have resumed. It's far from inevitable that our system will fail, especially not if you're predicting doom centuries from now. That's fair. I concede the implication that it's defeatist from an optimists perspective. I'm not an optimist, and I don't tie my identity to the sinking ship of the modern United States in terms of what constitutes "surrender" or "giving up." Those are personal acts. I could care less about the system. That being said, study history. Government spending will not be scaled back, and it will always be 5 years from now. There is no scenario where this doesn't occur barring the sudden appearance of a post-scarcity economy. Economically, we'll just put off our responsibilities and debts onto the backs of the next generation. And sure, maybe every nation in the world does this and we break even for all intensive purposes. You sill get the nightmare scenario of wealth distribution which only finance can produce. It's all about the zeitgeist, and we've been thoroughly demoralized as a society at this point. Half of the nation no longer sees a world which is in keeping with its morals and they perceive of no way to remedy it. Hence, they surrender. Those who could fix the system are beaten down by the system and instead of social victories they concentrate on small personal ones. Why should they save something they no longer agree with or see the value in? Call them anachronistic, pig-headed, religious gun-nuts, what have you; but that's what it is. You call doom, death. I call it the painful death throes before expiration. That doesn't mean I don't intend on living; I just don't particularly care if the current system does. My existence is not contingent on the system.
I would completely disagree with this but I actually moved to Japan a month ago, so I can't exactly insist on standing your ground.
But I will tell you something funny that I heard a Japanese artist say. During the 70s, he was very excited to hear and read all these stories that the world would end, definitely sometime in the early 2000s, probably at the 2012 Mayan calendar at the very latest. He was glad that he would see the end of the world. Now that it's 2013 and he's approaching his late 60s, the awful truth is sinking in that he's probably going to die and the world will just keep going without him.
So I would encourage you to prepare for the worst. Just don't go Mad Max too early.
|
On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: ![[image loading]](http://www.bloomberg.com/image/i63DIFaTv1io.jpg) This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid.
Haven't read the paper, but does anyone know if they attempted to take endogneity issues into account, and if so, how?
|
On April 30 2013 23:05 coverpunch wrote:Show nested quote +On April 30 2013 22:47 Kimaker wrote:On April 30 2013 21:55 coverpunch wrote:On April 30 2013 21:43 Kimaker wrote:
Of course the world didn't end after 90%.
We're so economically ingrained in the fantasy world it won't end for many decades. Until then I suspect you'll continue to see widespread social ills as people experience severe anxiety, stress and neurosis as a result of cognitive dissonance. Regardless of how we decide to "play the game" the fact remains that there comes a point where the market and actual resources fall too far out of synch.
This is all well and good, until they run out of bread and circuses.
You can ignore reality. But you can't ignore the consequences of ignoring reality.
Reality just hasn't caught up yet. Give it time. History is on the side of the inevitable, of collapse. Rome didn't fall in a day, it took nearly 400 years of the entire civilization being an effective, "Dead Man Walking". That's where we are, and that's how our era will be viewed in retrospect. This is not a well reasoned argument. You might as well tell us that we're all going to die sooner or later so just give up now. Reinhart and Rogoff were wrong to say 90% was a threshold, a bright line for the difference between an economy with a debt problem and an economy with a debt crisis. There's no doubt that the United States has a debt problem. The bigger question is whether it's something we need to address right now or if we can sail into the wind and address in, say, five years, when pre-2007 growth levels have resumed. It's far from inevitable that our system will fail, especially not if you're predicting doom centuries from now. That's fair. I concede the implication that it's defeatist from an optimists perspective. I'm not an optimist, and I don't tie my identity to the sinking ship of the modern United States in terms of what constitutes "surrender" or "giving up." Those are personal acts. I could care less about the system. That being said, study history. Government spending will not be scaled back, and it will always be 5 years from now. There is no scenario where this doesn't occur barring the sudden appearance of a post-scarcity economy. Economically, we'll just put off our responsibilities and debts onto the backs of the next generation. And sure, maybe every nation in the world does this and we break even for all intensive purposes. You sill get the nightmare scenario of wealth distribution which only finance can produce. It's all about the zeitgeist, and we've been thoroughly demoralized as a society at this point. Half of the nation no longer sees a world which is in keeping with its morals and they perceive of no way to remedy it. Hence, they surrender. Those who could fix the system are beaten down by the system and instead of social victories they concentrate on small personal ones. Why should they save something they no longer agree with or see the value in? Call them anachronistic, pig-headed, religious gun-nuts, what have you; but that's what it is. You call doom, death. I call it the painful death throes before expiration. That doesn't mean I don't intend on living; I just don't particularly care if the current system does. My existence is not contingent on the system. I would completely disagree with this but I actually moved to Japan a month ago, so I can't exactly insist on standing your ground. But I will tell you something funny that I heard a Japanese artist say. During the 70s, he was very excited to hear and read all these stories that the world would end, definitely sometime in the early 2000s, probably at the 2012 Mayan calendar at the very latest. He was glad that he would see the end of the world. Now that it's 2013 and he's approaching his late 60s, the awful truth is sinking in that he's probably going to die and the world will just keep going without him. So I would encourage you to prepare for the worst. Just don't go Mad Max too early.
I'm not a defeatist, nor am I a doom prophet.
There is no end. There are only endings. Time moves on with little regard to the scurryings of men. Men move on with equal disregard for one another. It's about what's static (nothing), it's about where you fall on the temporal pendulum and how you're built and how who you are fits into what is.
Socially:
I intend to stand my ground, when I see that the ground is once more fit for standing upon. Lots of things can change that. As it stands, nope.
Every generation the United States is a different country. Nation-states/Countries are strange things. They're extrapolations of the concept of "home," which is itself nothing more than some strange combination of geography, people, time and personal experiences. "Home" is inherently nostalgic, as is the concept of a Nation. When I see my nation reflected in society once more, I'll care. Until then, I'll bite the bit and do what I can without pretending it will all "get better". It might not. It might. That doesn't concern me.
Edit: 2000th post!
|
Cayman Islands24199 Posts
On April 30 2013 23:17 Hider wrote:Show nested quote +On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid. Haven't read the paper, but does anyone know if they attempted to take endogneity issues into account, and if so, how?
"correlation does not imply causation" (but we wrote it in this direction so let's just talk about that!)
|
On April 30 2013 18:53 paralleluniverse wrote:Show nested quote +On April 30 2013 13:16 JonnyBNoHo wrote:On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis  All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit. One of many productive ways to spend the money would be trying to reverse this: ![[image loading]](https://lh3.ggpht.com/-Pi3q7K4IP9E/UX0t-p6dYYI/AAAAAAAAZ-w/MWTiv628FZk/s1600/PulbicBushObama.jpg) More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.htmlThere was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment.
![[image loading]](http://i.imgur.com/jVV1VUb.jpg)
Edited your chart for clarity.
Basically there was a massive spike in public sector employment during last 5 years of bush's term (dare I say related to military?)
Then there was a fairly sharp downward trend beginning in obama's first term, continuing for about 2.5 years. Now there is still a slightly downward trend, but it is fairly close to level.
|
On May 01 2013 00:12 oneofthem wrote:Show nested quote +On April 30 2013 23:17 Hider wrote:On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid. Haven't read the paper, but does anyone know if they attempted to take endogneity issues into account, and if so, how? "correlation does not imply causation" (but we wrote it in this direction so let's just talk about that!)
Yes but they did they use any instrumental variables to check for reverse causation? or did they have another approach?
On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day
NPV varies depending on when it is build. So it is still relevant in terms of deciding which way to spend the public money and should be weighted according to the expected multiplier effect according to Keynesian logic.
|
Cayman Islands24199 Posts
On May 01 2013 00:46 Hider wrote:Show nested quote +On May 01 2013 00:12 oneofthem wrote:On April 30 2013 23:17 Hider wrote:On April 30 2013 22:18 coverpunch wrote:Also, the OP's link is broken. But I would also include this article on Bloomberg.The relevant chart shows that Reinhart-Rogoff's defense is correct that despite the sniping at some mistakes, the correlation does exist between high debt and low growth: This doesn't necessarily change the fact that R-R overreached in their conclusions and that a correlation doesn't necessarily mean much. But I think it is equally overreaching to call their work "debunked" or imply it is completely invalid. Haven't read the paper, but does anyone know if they attempted to take endogneity issues into account, and if so, how? "correlation does not imply causation" (but we wrote it in this direction so let's just talk about that!) Yes but they did they use any instrumental variables to check for reverse causation? or did they have another approach? Show nested quote +
On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day
NPV varies depending on when it is build. So it is still relevant in terms of deciding which way to spend the public money and should be weighted according to the expected multiplier effect according to Keynesian logic.
since they explicitly said no causation i'd guess there was no IV
|
On April 30 2013 18:53 paralleluniverse wrote:Show nested quote +On April 30 2013 13:16 JonnyBNoHo wrote:On April 30 2013 12:31 acker wrote:On April 30 2013 11:18 JonnyBNoHo wrote:Well I can't do a NPV analysis because I do not have all the data. I have just one data point - different financing rates. Sorry, but no complete data no analysis All things being equal a lower financing rate will increase the NPV of the project. The problem with a hypothetical is that a negative NPV at a lower financing rate may simply become less negative (but still negative!). Or it may turn positive (depending on how important financing is). There's simply no way to tell just by looking at the financing rate whether or not the project is viable or not. One last thing, what I'm advocating is not something that's radical. It's a standard part of project analysis that everyone learns while serving time in b-school. The DOT also advocates using it. It's ok Jonny, we know you do your best. That said, didn't you say that you could do the calculations just two posts ago, using Excel? I'm quite aware that the author's analysis is incomplete, but it still remains true that that it's the best approximation currently available to us. If you say that NPV is more accurate (and it certainly is!) but can't use it, we might as well shoot the moon and say we should ask Ernst and Young or the CBO for a writeup. I could do the calculations if I had the data... which I don't, so I can't I any case if someone wants money spent it's their job to provide data and show that the project is worthwhile. "Financing is cheap" just doesn't cut it. Edit: I have no problem with spending more on infrastructure or taking advantage of cheap financing in general. I just don't want that to be an excuse for more million dollar bus stops in Virginia or whatever. I want real, meaningful shit. One of many productive ways to spend the money would be trying to reverse this: + Show Spoiler +More info: http://economistsview.typepad.com/economistsview/2013/04/public-and-private-sector-payroll-jobs-bush-and-obama.htmlThere was also a civil engineer report a while back finding that a lot of bridges in American are structurally deficient. Money could be spent fixing those up. On this project, NPV calculations aren't needed, because the choice isn't whether to do the project or not. The bridge will eventually need to be patched up or it will collapse one day. The question is not "if" to do the project, the only question is "when" to do the project. And given the historically low rates at which the US government can borrow today, now is the best time for the investment.
Why would reversing a decline in public sector jobs be productive? Other than an assumption that a decline is bad you haven't given an argument.
And you're over simplifying the infrastructure issues. You still need priorities. Just because a bridge is "structurally deficient" or "functionally obsolete" doesn't automatically mean you want to restore it to original specs (the current reduced load capacity may be fine). Traffic patterns change, populations change, etc. The infrastructure may need to change with it.
|
On April 30 2013 10:15 Flyingdutchman wrote:Show nested quote +On April 30 2013 09:47 Kontys wrote:On April 30 2013 09:27 Flyingdutchman wrote: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. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run. When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down. Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition. As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels. The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over. I don't need an econ 101, obviously in times of economic prosperity it is easier to balance a budget. Yet, since the 70's the only time the US had a budget surplus was when they were reaping capital gains tax from the dotcom bubble. So in that time frame, if we forgive them the 80's, we should expect some more surpluses besides the 4 Clinton years. If I look at figures like that I feel it is really hard to believe politicians actually give a shit what happens after their terms are over, which was my point. Don't give short-sighted people too much leeway when it comes to policy that they won't follow up on. (I am using the US data as an example, not singling them out in this debate btw). I don't think I read your text on page 2, I will look into it tomorrow or something, now it is time to play starcraft...
The really funny thing is however, the politicians know exactly what they are doing in the long term as well as the short. Sometimes needs must, such as with 80s arms race with the Soviets, but Bush the II's decision to go to war and finance it with debt (while cutting taxes, also financed with debt) was smart politics: He gave the republican congress a lasting legacy of debt, enabling them to squeeze the balls of any future democratic president so to maximize political leverage in times of political disadvantage. It's a win-win strategy too, since republicans generally want a smaller government, and therefore a government-in-debt is much less of a problem for a republican president.
This kind of strategy is not workable in most of Europe, since the executive and legislative powers are generally much more conjoined.
I respectfully have to disagree with your assessment that the Clinton surplus years were due to the dotcom bubble. Capital gains tax is not an insignificant revenue source, but it is not a major one either. Doubling that revenue now, nor in the 90s, wouldn't bring the US government into a surplus. Quickly googling it, CGT amounts to ~4% of total annual tax revenue in the US.
|
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.
Actually, that's incorrect. Debt is good for a whole number of reasons; it actually allows countries to grow economically.
|
On May 01 2013 01:23 Kontys wrote:Show nested quote +On April 30 2013 10:15 Flyingdutchman wrote:On April 30 2013 09:47 Kontys wrote:On April 30 2013 09:27 Flyingdutchman wrote: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. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run. When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down. Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition. As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels. The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over. I don't need an econ 101, obviously in times of economic prosperity it is easier to balance a budget. Yet, since the 70's the only time the US had a budget surplus was when they were reaping capital gains tax from the dotcom bubble. So in that time frame, if we forgive them the 80's, we should expect some more surpluses besides the 4 Clinton years. If I look at figures like that I feel it is really hard to believe politicians actually give a shit what happens after their terms are over, which was my point. Don't give short-sighted people too much leeway when it comes to policy that they won't follow up on. (I am using the US data as an example, not singling them out in this debate btw). I don't think I read your text on page 2, I will look into it tomorrow or something, now it is time to play starcraft... The really funny thing is however, the politicians know exactly what they are doing in the long term as well as the short. Sometimes needs must, such as with 80s arms race with the Soviets, but Bush the II's decision to go to war and finance it with debt (while cutting taxes, also financed with debt) was smart politics: He gave the republican congress a lasting legacy of debt, enabling them to squeeze the balls of any future democratic president so to maximize political leverage in times of political disadvantage. It's a win-win strategy too, since republicans generally want a smaller government, and therefore a government-in-debt is much less of a problem for a republican president. This kind of strategy is not workable in most of Europe, since the executive and legislative powers are generally much more conjoined. I respectfully have to disagree with your assessment that the Clinton surplus years were due to the dotcom bubble. Capital gains tax is not an insignificant revenue source, but it is not a major one either. Doubling that revenue now, nor in the 90s, wouldn't bring the US government into a surplus. Quickly googling it, CGT amounts to ~4% of total annual tax revenue in the US.
What would happen if you added corporate tax gains into the equation? Or increased consumer spending due to higher wealth?
|
It know it was mentioned in this thread a couple of time but it should be mentioned again:
This paper, and their companion paper in Journal of Economic Perspective were NEVER PEER-REVIEWED.
They published it in AER Papers and Proceedings which is just publishes proceeding from an annual American Economic Association meeting. JEP on the other hand is a non-technical journal that provides summaries and more personal views on economic problems. It might be invitation only but I am not sure (need to check it).
But the mistake is super embarrassing.
I should add that in academic circles this results (especially the magic number of 90%) was never taken very seriously because it was never subject to peer-review.
|
"Chocolate is actually good for you because..."
People like good news. Don't think this is a reason to keep spending without care.
|
On May 01 2013 01:05 JonnyBNoHo wrote:
And you're over simplifying the infrastructure issues. You still need priorities. Just because a bridge is "structurally deficient" or "functionally obsolete" doesn't automatically mean you want to restore it to original specs (the current reduced load capacity may be fine). Traffic patterns change, populations change, etc. The infrastructure may need to change with it.
Note: For bridges in the United States, the definition of "functionally obsolete" means that the bridge isn't suitable for current traffic and loads; your critique is incorporated into the definition.
"Structurally deficient" is more complicated, but indicates a defect (any defect, from cracked concrete to total retrofit) that "requires attention" (for current operations). I suspect that only bridges that need defect repair for current operations require attention; to take the most extreme case, an unused bridge would not require attention. I'm less sure on this, though.
http://www.fhwa.dot.gov/bridge/nbi.cfm
http://nationalbridges.com/guide-to-ratings
No doubt the bridge report by the ASCE is simplified, as all such reports must be. As always, you are free to provide a more accurate second-order analysis on the condition of bridges and repair/replacement in America. Nonetheless, it seem that even a second-order answer would indicate quite a few billion dollars are necessary for repairs, retrofit, and replacement.
|
On May 01 2013 01:55 Hider wrote:Show nested quote +On May 01 2013 01:23 Kontys wrote:On April 30 2013 10:15 Flyingdutchman wrote:On April 30 2013 09:47 Kontys wrote:On April 30 2013 09:27 Flyingdutchman wrote: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. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run. When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down. Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition. As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels. The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over. I don't need an econ 101, obviously in times of economic prosperity it is easier to balance a budget. Yet, since the 70's the only time the US had a budget surplus was when they were reaping capital gains tax from the dotcom bubble. So in that time frame, if we forgive them the 80's, we should expect some more surpluses besides the 4 Clinton years. If I look at figures like that I feel it is really hard to believe politicians actually give a shit what happens after their terms are over, which was my point. Don't give short-sighted people too much leeway when it comes to policy that they won't follow up on. (I am using the US data as an example, not singling them out in this debate btw). I don't think I read your text on page 2, I will look into it tomorrow or something, now it is time to play starcraft... The really funny thing is however, the politicians know exactly what they are doing in the long term as well as the short. Sometimes needs must, such as with 80s arms race with the Soviets, but Bush the II's decision to go to war and finance it with debt (while cutting taxes, also financed with debt) was smart politics: He gave the republican congress a lasting legacy of debt, enabling them to squeeze the balls of any future democratic president so to maximize political leverage in times of political disadvantage. It's a win-win strategy too, since republicans generally want a smaller government, and therefore a government-in-debt is much less of a problem for a republican president. This kind of strategy is not workable in most of Europe, since the executive and legislative powers are generally much more conjoined. I respectfully have to disagree with your assessment that the Clinton surplus years were due to the dotcom bubble. Capital gains tax is not an insignificant revenue source, but it is not a major one either. Doubling that revenue now, nor in the 90s, wouldn't bring the US government into a surplus. Quickly googling it, CGT amounts to ~4% of total annual tax revenue in the US. What would happen if you added corporate tax gains into the equation? Or increased consumer spending due to higher wealth?
A good question. Increased consumer spending and corporate tax gains relative to what? The long run average I presume. I think US government going into surplus mid 90s does not reflect the government wrongly anticipating lower revenues, but rather the great upheaval that was the republicans winning the Congress for the first time in decades. This is when government shrinking as official dogma begun to have effect, but the democrats still occupied the White House, meaning that Congress couldn't just cut taxes AND spending at the same time. They needed Clinton's signature to make legislation law, and he would not accept spending cuts for the purpose of cutting taxes.
Economics vise, I took my time thinking about this answer, and it is an interesting question to ask what the real-economic effects of an ongoing stock bubble are. Extensive spending of national savings on an overvalued sector of the economy means financial illness once the bubble bursts, but what does it mean whilst the bubble is still going up? The US never grew as an economy much faster than it's long run average in the 1990s (no more than 1-2 percentage points year on year for some 4-5 years), but could this small figure still hide significantly elevated consumer spending and corporate revenues? I doubt it could.
The story of what happened to the US gov debt position in the 1990s was a matter of politics. The republicans won congress with a cut spending agenda in 1994, and were obliged at length by President Clinton (there were debt ceiling fights and a narrowly averted government shutdown iirc). However no significant tax cuts happened until after Bush Jr was elected.
EDIT: It was 1994 when the Republican party first won the Congress.
|
On May 01 2013 02:17 DiamondTear wrote:
"Chocolate is actually good for you because..."
People like good news. Don't think this is a reason to keep spending without care.
Because public education, infrastructure and emergency housing projects for example are luxury products.
No, seriously, they are, if you aren't dependent on them, which is the case for most well-off people.
Keeping them going even when tax revenue goes slack may still be a good idea though. Public sector tax revenue becomes depressed when the economy is depressed, and recovers as the economy recovers.
This makes me want to phrase a notion that is not often openly stated, though we should be more concerned about it during public discussion. There are people who don't want the public sector to go into debt, because debt is a bad. Then there are people who don't want the public sector to be there, because the public sector is bad. These two positions become easily colluded as speakers may well masquerade as one and in fact be the other.
I'll therefore note that I am honestly in favour of a smaller public sector than the one we currently have in Finland. Pursuing the goal of a smaller public sector through policy implemented now however would be self-destructive, as tearing down existing economic systems during a slump, when there is no strong private sector to pick up the slack (or to put the vacated resources into use elsewhere), would lead to a deeper and more prolonged recession.
|
On May 01 2013 02:58 acker wrote:Show nested quote +On May 01 2013 01:05 JonnyBNoHo wrote:
And you're over simplifying the infrastructure issues. You still need priorities. Just because a bridge is "structurally deficient" or "functionally obsolete" doesn't automatically mean you want to restore it to original specs (the current reduced load capacity may be fine). Traffic patterns change, populations change, etc. The infrastructure may need to change with it. Note: For bridges in the United States, the definition of "functionally obsolete" means that the bridge isn't suitable for current traffic and loads; your critique is incorporated into the definition."Structurally deficient" is more complicated, but indicates a defect (any defect, from cracked concrete to total retrofit) that "requires attention" (for current operations). I suspect that only bridges that need defect repair for current operations require attention; to take the most extreme case, an unused bridge would not require attention. I'm less sure on this, though. http://www.fhwa.dot.gov/bridge/nbi.cfmhttp://nationalbridges.com/guide-to-ratingsNo doubt the bridge report by the ASCE is simplified, as all such reports must be. As always, you are free to provide a more accurate second-order analysis on the condition of bridges and repair/replacement in America. Nonetheless, it seem that even a second-order answer would indicate quite a few billion dollars are necessary for repairs, retrofit, and replacement.
Sort of. All that means is that some benefit would be derived from upgrading/fixing. It doesn't tell you how much benefit you'd be getting or let you know if alternatives would provide greater benefits. It also says nothing as to whether nor not the remedy is cost efficient or not.
As to your point about my hypothetical second-order answer, why do you assume it would result in less spending? Greater rigor and analysis could very well paint a picture of chronic underinvestment in any interest rate environment. Something to keep in mind if interest rates rise back to that historical average 
|
On May 01 2013 04:12 Kontys wrote:Show nested quote +On May 01 2013 02:17 DiamondTear wrote:
"Chocolate is actually good for you because..."
People like good news. Don't think this is a reason to keep spending without care. Because public education, infrastructure and emergency housing projects for example are luxury products. No, seriously, they are, if you aren't dependent on them, which is the case for most well-off people. Keeping them going even when tax revenue goes slack may still be a good idea though. Public sector tax revenue becomes depressed when the economy is depressed, and recovers as the economy recovers. This makes me want to phrase a notion that is not often openly stated, though we should be more concerned about it during public discussion. There are people who don't want the public sector to go into debt, because debt is a bad. Then there are people who don't want the public sector to be there, because the public sector is bad. These two positions become easily colluded as speakers may well masquerade as one and in fact be the other. I'll therefore note that I am honestly in favour of a smaller public sector than the one we currently have in Finland. Pursuing the goal of a smaller public sector through policy implemented now however would be self-destructive, as tearing down existing economic systems during a slump, when there is no strong private sector to pick up the slack (or to put the vacated resources into use elsewhere), would lead to a deeper and more prolonged recession.
The last thing you want is a private education system like they have in the US and other anglo-saxon countries. It's downright attrocious that students have to start their professional lives heavily indebted.
States have obligations towards their citizens. Affordable education is one of them. A country that considers education a luxury (i.e. something that's not really necessary, something only the well-off should be able to get) is basically destroying its own long-term future.
I don't really understand why infrastructure and emergency housing projects should be considered luxury products either. A good transportation system (roads, railroads, cannals) is vital for any economy and no human being should be forced to sleep under the stars. Sure, there are people who lost their homes because of their own mistakes, but there are also those who just had bad luck.
|
I will say that empirically, you need to a little more careful when supporting public works like bridges with so little reservation. The San Francisco Bay Area has been trying to build a new Bay Bridge since 2002. The city's original estimate was $780 million with a completion date of 2007, and as of 2013, they've spent $6.3 billion and the bridge has structural problems that means it might won't open this year either.
I know that the Bay Bridge is a worst-case scenario, but I am trying to point out that there's a difference between wise and wasteful government spending. My biggest problem with liberal economists is their faith that the government should just spend spend spend with very little regard for what they're buying.
The critical difference with the Great Depression is World War II. All governments massively increased government spending, but there was arguably far less waste because each side was trying to win the war. What scares me is that without that focusing problem, too much of the money is just frittered away as waste or corruption.
|
On May 01 2013 01:23 Kontys wrote:Show nested quote +On April 30 2013 10:15 Flyingdutchman wrote:On April 30 2013 09:47 Kontys wrote:On April 30 2013 09:27 Flyingdutchman wrote: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. EU and US have more or less been doing that since the 1930's, yet somehow they always forget the paying off part. Don't give policymakers with short term goggles more excuses to fuck up everything in the long run. When the slump is over the public finances will be back in balance as a matter of course. As the economy recovers, tax receipts go up, and unemployment claims go down. Claims that the US is on an unsustainable fiscal path are political shock treatment, aimed at coercing people (politicians and citizenry) to accept extreme policy based on extreme conditions, never mind the fact that the treatment offered has nothing to do with the condition. As for the EU, now that's an interesting story of many colliding national interests. Also, the euro as currency zone with low overall inflation is very much a mixed bag.. I've written about it elsewhere in this thread and it's getting late (page 2 I think). Suffice to say, the European story has very little to do with overall debt levels. The claim that we always forget about paying off is erroneous. Key piece of evidence would be the development of US and British public debt position following WW2. A development very much like what we should be aiming for once this recession is finally over. I don't need an econ 101, obviously in times of economic prosperity it is easier to balance a budget. Yet, since the 70's the only time the US had a budget surplus was when they were reaping capital gains tax from the dotcom bubble. So in that time frame, if we forgive them the 80's, we should expect some more surpluses besides the 4 Clinton years. If I look at figures like that I feel it is really hard to believe politicians actually give a shit what happens after their terms are over, which was my point. Don't give short-sighted people too much leeway when it comes to policy that they won't follow up on. (I am using the US data as an example, not singling them out in this debate btw). I don't think I read your text on page 2, I will look into it tomorrow or something, now it is time to play starcraft... The really funny thing is however, the politicians know exactly what they are doing in the long term as well as the short. Sometimes needs must, such as with 80s arms race with the Soviets, but Bush the II's decision to go to war and finance it with debt (while cutting taxes, also financed with debt) was smart politics: He gave the republican congress a lasting legacy of debt, enabling them to squeeze the balls of any future democratic president so to maximize political leverage in times of political disadvantage. It's a win-win strategy too, since republicans generally want a smaller government, and therefore a government-in-debt is much less of a problem for a republican president. This kind of strategy is not workable in most of Europe, since the executive and legislative powers are generally much more conjoined. I respectfully have to disagree with your assessment that the Clinton surplus years were due to the dotcom bubble. Capital gains tax is not an insignificant revenue source, but it is not a major one either. Doubling that revenue now, nor in the 90s, wouldn't bring the US government into a surplus. Quickly googling it, CGT amounts to ~4% of total annual tax revenue in the US.
Maybe I was a little too specific mentioning capital gains taxes instead of the dotcom bubble in general. You're spot on with your analysis of US politics imo.
|
|
|
|
|
|
EPT
