In case anyone forgot— Every dollar of the deficit = more than a dollar in the

[Freeper]

cthulu2016 (5,890 posts)

In case anyone forgot— Every dollar of the deficit = more than a dollar in the economy


 
Macroeconomics kind of got lost in the shuffle during the drama of the election but, now that we are back to policy, here is what we have learned in the last century, and last decade.

Every dollar of the deficit represents more than a dollar in US economy. If we reduce the deficit by five billion dollars next year then the US economy will be five to ten dollars smaller. (The amount depends somewhat on exactly what was cut, or how revenue was increased.)

Thus anything, and I mean almost anything, anyone does about the deficit short term is destructive... crazy, really. (That fact the average American does not believe this does not change the math.)

Everyone seems to recognize that the "fiscal cliff" would deal a blow to the economy. This is because the fiscal cliff would reduce the deficit—increasing revenue and cutting spending.

People will be panicked by this and will suggest that we need to do something to to fix the problem by increasing revenue and cutting spending. You will note that this supposed solution is the same as the problem.

So sane(r) people will push to increase revenue and cut spending at some fixed point in the future. This is dumb since we know a lot less about the future than we will in the future. The idea that we know today what year it will be okay to raise taxes and cut spending is foolish. Nobody knows that.

It is all politics. The bond market is not currently demanding a deficit reduction pageant so there is no good reason to have one. But we probably wil... or won't, in which case the failure to pass some meaningless deficit cutting deal will be considered the worst thing that ever happened.

And where does this leave the Bush tax cuts for income over $250,000/year?

First off, the income tax is a minor part of the real Bush tax cuts for the upper class. The Bush capital gains rates and (important) the dividend income tax rate are what really matters to the very rich.

So, speaking about that whole wad of tax policy on upper incomes —the economic effect of letting the cuts expire depends on what is done with the revenue generated thereby.

If the upper income taxes increase and the deficit decreases it will please some beltway bobble-heads but it won't benefit the economy any time soon. Quite the opposite. But if taxes on the 1% go up and all of that tax money is spent on needed infrastructure or public employment or assisting the poor and unemployed that would be fine.

As long as the deficit doesn't go down in the short term. (2-3 years)

As to what will actually happen? Beats me. Both parties are apostate Keynesians. Most Republicans believe in Keynes and pretend not to. Most Democrats believe in Keynes, but don't really believe it, thinking it must be a dodge of some sort.

So I never know what to expect from these things.

http://www.democraticunderground.com/10021794605

 

[ChuckJ]

Every dollar of the deficit represents more than a dollar in US economy.

According to this the economy should be booming like crazy.

[Ogre]

cthulu2016 (5,890 posts)
Sun Nov 11, 2012, 09:37 PM

In case anyone forgot— Every dollar of the deficit = more than a dollar in the economy


 
Macroeconomics kind of got lost in the shuffle during the drama of the election but, now that we are back to policy, here is what we have learned in the last century, and last decade.

Every dollar of the deficit represents more than a dollar in US economy. If we reduce the deficit by five billion dollars next year then the US economy will be five to ten dollars smaller. (The amount depends somewhat on exactly what was cut, or how revenue was increased.)

Thus anything, and I mean almost anything, anyone does about the deficit short term is destructive... crazy, really. (That fact the average American does not believe this does not change the math.)

Everyone seems to recognize that the "fiscal cliff" would deal a blow to the economy. This is because the fiscal cliff would reduce the deficit—increasing revenue and cutting spending.

People will be panicked by this and will suggest that we need to do something to to fix the problem by increasing revenue and cutting spending. You will note that this supposed solution is the same as the problem.

So sane(r) people will push to increase revenue and cut spending at some fixed point in the future. This is dumb since we know a lot less about the future than we will in the future. The idea that we know today what year it will be okay to raise taxes and cut spending is foolish. Nobody knows that.

It is all politics. The bond market is not currently demanding a deficit reduction pageant so there is no good reason to have one. But we probably wil... or won't, in which case the failure to pass some meaningless deficit cutting deal will be considered the worst thing that ever happened.

And where does this leave the Bush tax cuts for income over $250,000/year?

First off, the income tax is a minor part of the real Bush tax cuts for the upper class. The Bush capital gains rates and (important) the dividend income tax rate are what really matters to the very rich.

So, speaking about that whole wad of tax policy on upper incomes —the economic effect of letting the cuts expire depends on what is done with the revenue generated thereby.

If the upper income taxes increase and the deficit decreases it will please some beltway bobble-heads but it won't benefit the economy any time soon. Quite the opposite. But if taxes on the 1% go up and all of that tax money is spent on needed infrastructure or public employment or assisting the poor and unemployed that would be fine.

As long as the deficit doesn't go down in the short term. (2-3 years)

As to what will actually happen? Beats me. Both parties are apostate Keynesians. Most Republicans believe in Keynes and pretend not to. Most Democrats believe in Keynes, but don't really believe it, thinking it must be a dodge of some sort.

So I never know what to expect from these things.

WTF is this DUmb@ss talking about, I'm not sure which scares me more his economic stupidity, or the fact that he can vote.

[Big Dog]

Damn. I wish there was a bounty on people this stupid. I'd be a brazillianaire!

Dear DUmshit: The Federal deficit is the difference between the amount of money in the Federal treasury and the amount of money in the Federal budget (or continuing resolutions, as our Senatorial idiots can't seem to pass a budget bill). It is a measure of overspending.

"Reducing the deficit" is shorthand for "not overspending so damned much".

[Freeper]

According to this the economy should be booming like crazy.

It will be in January, the economy will be so stimulated that it should be instant prosperity for everyone.
In case you are lost by that comment, Nancy Pelosi has said that food stamps and unemployment checks stimulate the economy so when we have even more people on both then that will mean the economy is really roaring. Then since the economy will be so strong gas prices will go up. Yep folks happy days are here again!!!111111

 

[Aristotelian]

Gosh, never realised it was that simple.

In that case abolish all taxes, we don't need them after all and double all spending - the economy's going to be going fantastically well after that.

[USA4ME]

cthulu2016

The Bush capital gains rates and (important) the dividend income tax rate are what really matters to the very rich.

This is where the primitives and the political left believe they're going to make their revenue gains, but they're not.  While tax rates of capital gains and dividends does matter to the wealthy, they matter a lot more to another group, a group that neither side dare make angry, a group that collectively has more money than the very rich;  the elderly.

The number of elderly who live off the income from their investments is overwhelming.  There's a lot of people the DC crowd doesn't want to upset, and old people tops the list.  They are very much dependant upon that 15% tax rate.  I have yet to see a single primitive even make note of this.

.

[jukin]

Math it is hard for DUmmys.

GDP in 2009 $14.7T
GDP in 2012 $15.6T
GDP growth in four years $1T+/-

Deficit in 2009 $10.2T
Deficit in 2012 $16.4T
Deficit growth in four years $6T+/-

$6 trillion is, well, six times bigger that $1 trillion.  Now how does deficit spending expand the economy?

I anxiously await a DUchebag to defend the OP's ridiculous post.

[txradioguy]

Actually...and lurkers please PLEASE take note...

For every dollar of revenue brought in by the Feds...they spend $5.60.

Take that factoid back to cthulu2016 and ask he/she/it to explain how that fits into its theory.

[Big Dog]

Math it is hard for DUmmys.

GDP in 2009 $14.7T
GDP in 2012 $15.6T
GDP growth in four years $1T+/-

Deficit in 2009 $10.2T
Deficit in 2012 $16.4T
Deficit growth in four years $6T+/-

$6 trillion is, well, six times bigger that $1 trillion.  Now how does deficit spending expand the economy?

I anxiously await a DUchebag to defend the OP's ridiculous post.

jukin,

The $16 trillion number is the national debt, not the Federal deficit. The Federal deficit for fiscal year 2012 (ended 31 Sep)  was $1.1 trillion.

[thundley4]

jukin,

The $16 trillion number is the national debt, not the Federal deficit. The Federal deficit for fiscal year 2012 (ended 31 Sep)  was $1.1 trillion.

Hasn't Obama ran up a $1T+ deficit every year?

[DefiantSix]

Hasn't Obama ran up a $1T+ deficit every year?

Closer to $1.5T+ every year, but when you're trying to fundamentally transform the United States (into a third world shithole), who's counting??

[Big Dog]

Hasn't Obama ran up a $1T+ deficit every year?

Deficits by fiscal year during O's reign:
2008-2009: $1.89 trillion (includes 3 months of George W. Bush)
2009-2010: $1.65 trillion
2010-2011: $1.23 trillion
2011-2012: $1.22 trillion

In 2008-2009, President Bush proposed a deficit approx. $400 billion. The final figure was the result of significant additional spending by O, with lower tax revenues adding to the deficit.

[Wineslob]

Fixed "fuzzy logic".

[DumbAss Tanker]

The idiot is trying to say that it's like a bank's capital, which multiplies its value when loaned out in a cascading way (If memory serves, it creates an asymptotic curve that approaches a flat line somewhere between six and seven times the value of the actual original loan capital, though I forget what the interest rate and capital reserve requirement assumptions were in the economics lesson that covered it several decades ago, and not being in the banking business I haven't had any need to use the information since then except for other economics classes).

The problem is that the bank's capital on which that model is based is actually a positive liquid asset, not a debt, and the money assembled with the debt instruments is not going into any businesses which are in the business of promoting capital, but instead straight into filling holes in education budgets, transfer payments to generational entitlement program leeches, propping up economically nonviable technologies like ethanol-wind-solar under the guise of 'Investment,' and payoffs to the loyal, all with the added goodness of the very expensive administrative costs of the government disbursing process which can take ten million dollars worth of appropriation and successfully turn in into only six million dollars (Tops) worth of economic activity at the outflow end of the pipeline.

[Karin]

<WHOOOOOOOSH>

That was the sound of a lurker. 

[ChuckJ]

It will be in January, the economy will be so stimulated that it should be instant prosperity for everyone.
In case you are lost by that comment, Nancy Pelosi has said that food stamps and unemployment checks stimulate the economy so when we have even more people on both then that will mean the economy is really roaring. Then since the economy will be so strong gas prices will go up. Yep folks happy days are here again!!!111111

 

I do remember bobolink saying that for every dollar the government gives in food stamps $1.35 goes into the economy which should mean the economy is overflowing with money.

[Randy]

Correct me if I'm wrong but do we not pay interest on that 16 trillion? If so would not every dollar borrowed cost to have been borrowed and the longer it takes to pay it back the more expensive that dollar becomes?

[I_B_Perky]

The idiot is trying to say that it's like a bank's capital, which multiplies its value when loaned out in a cascading way (If memory serves, it creates an asymptotic curve that approaches a flat line somewhere between six and seven times the value of the actual original loan capital, though I forget what the interest rate and capital reserve requirement assumptions were in the economics lesson that covered it several decades ago, and not being in the banking business I haven't had any need to use the information since then except for other economics classes).

The problem is that the bank's capital on which that model is based is actually a positive liquid asset, not a debt, and the money assembled with the debt instruments is not going into any businesses which are in the business of promoting capital, but instead straight into filling holes in education budgets, transfer payments to generational entitlement program leeches, propping up economically nonviable technologies like ethanol-wind-solar under the guise of 'Investment,' and payoffs to the loyal, all with the added goodness of the very expensive administrative costs of the government disbursing process which can take ten million dollars worth of appropriation and successfully turn in into only six million dollars (Tops) worth of economic activity at the outflow end of the pipeline.

If I recall my macro economics class waaaaay long ago in college... I think they call that monetary velocity. Could be mistaking that with something else though. The class was at 8am and I slept thru most of it.