Let's Run Government On Credit; And Not Collect Enough Taxes - It'll Be Great!

[Superfreak]

At least he did not cut taxes then borrow... Like someone.

Look at total revenue Garud.

[PoliTalker]

Hello Woko Haram,

No, it really doesn't. Some spending can boost the economy. Some doesn't. And not everything boosts it equally effectively.

Where does government spending go besides into the economy?

No, not really. If that was true, then nations that privatized programs would see a decrease in GDP. Sweden has privatized a lot more now than it did in the 80s, and its GDP growth has greatly improved.

But I don't accept it that simply because two things occurred during the same time period, that there is cause and effect. There are other factors.

There are multiple factors as to whether government spending reduces or increases GDP. Cutting waste in government programs can increase GDP by freeing up resources, for example.

As seen with the stimulus, it almost doesn't matter what the money is spent on. It has an effect, even if government is looking for 'shovel ready' projects. Government could simply decide: "OK, We're replacing this bridge. It's old and we don't want it to collapse before we do something, so we're replacing it." That is going to generate jobs. It didn't have to get done this year or next. It needed to happen sometime, but there is a range of time in which that kind of thing could be done. Whenever it does get done, it produces a bump in economic activity, ie, the GDP goes up. If it didn't get done, GDP would not have been affected.

Now suppose we have a government assistance program for the disadvantaged. We're talking about wealth redistribution. We tax the rich more and give it to the needy. What do they do with it? Well, they didn't have any money until we gave it to them, all they had was needs. They go spend it, that's what they do with it. It all gets spent. It is added directly onto the GDP.

Say we want some fancy new guided missiles or advanced military tracking system. That stuff costs a lot. Government makes a deal with a subcontractor to build it. More jobs. But not all of those people on the receiving end of that are so poor. They don't all go and spend it all. They probably save, buy a house and maybe invest a little. So, most of that military spending goes to the economy but not all, certainly not what gets paid to the executives, politicians and lobbyists. They are all rich. They don't spend everything they get. But most of it does go into the US GDP. Just maybe not all in the current year.

[Saudade]

Hello Woko Haram,

Where does government spending go besides into the economy?

Cronyists' pockets. Not all government spending benefits the economy. For example, nation building in the Middle East supports defense contractors, but it's still a net loss for the economy, since the benefits of the spending go to a foreign country rather than our own. War debts make up a significant part of our overall public debt -- including spending that happens in the aftermath of a war.

But I don't accept it that simply because two things occurred during the same time period, that there is cause and effect. There are other factors.

Sure, but that applies just as much to any GDP growth that happens in parallel with government spending.

As seen with the stimulus, it almost doesn't matter what the money is spent on. It has an effect, even if government is looking for 'shovel ready' projects. Government could simply decide: "OK, We're replacing this bridge. It's old and we don't want it to collapse before we do something, so we're replacing it." That is going to generate jobs. It didn't have to get done this year or next. It needed to happen sometime, but there is a range of time in which that kind of thing could be done. Whenever it does get done, it produces a bump in economic activity, ie, the GDP goes up. If it didn't get done, GDP would not have been affected.

That's only looking at the short term. China has kept its economy going through massive amounts of government spending, and while that has resulted in a lot of GDP growth, it's going to result in a major crash for them when the various ghost cities and pork projects they've invested in fail to provide any long term benefits.

The problem with centrally planned growth is that it's not nearly as efficient as market driven growth, nor does it typically provide lasting benefits for an economy. There are exceptions to this involving infrastructure, like the Interstate Highway System, but few government programs are analogous with that.

Now suppose we have a government assistance program for the disadvantaged. We're talking about wealth redistribution. We tax the rich more and give it to the needy. What do they do with it? Well, they didn't have any money until we gave it to them, all they had was needs. They go spend it, that's what they do with it. It all gets spent. It is added directly onto the GDP.

And we already do this via welfare. If you want to convert to a UBI, then I'm ok with that, but the path toward that doesn't mean raising taxes but rather cutting bureaucracy. The current welfare state is bloated and wasteful. Replacing it with a UBI would likely save more money than it would spend.

Say we want some fancy new guided missiles or advanced military tracking system. That stuff costs a lot. Government makes a deal with a subcontractor to build it. More jobs. But not all of those people on the receiving end of that are so poor. They don't all go and spend it all. They probably save, buy a house and maybe invest a little. So, most of that military spending goes to the economy but not all, certainly not what gets paid to the executives, politicians and lobbyists. They are all rich. They don't spend everything they get. But most of it does go into the US GDP. Just maybe not all in the current year.

Sure, but that doesn't mean that we should just keep spending more money on the military. Government expenditures should always be weighed against the opportunity costs of taxation. If the opportunity cost of taking more money from someone is higher than the benefits of whatever the government is spending money on, then the tax and spending should not be done.

[PoliTalker]

Hello Woko Haram,

Cronyists' pockets.

Who gets money and puts it in their pocket and never spends it in the economy? That would be absurd. They are going to spend it. If it is their income, they are buying a house, groceries, energy, products, etc. Poor people spend all they get. Rich people save some, invest some. Saving and investing do not go directly into the economy like money through the hands of the poor, but do have a deferred positive effect on the GDP. Cronyism can be fixed by passing the Anti-Corruption Act.

Not all government spending benefits the economy. For example, nation building in the Middle East supports defense contractors, but it's still a net loss for the economy, since the benefits of the spending go to a foreign country rather than our own. War debts make up a significant part of our overall public debt -- including spending that happens in the aftermath of a war.

There's one example of who some government spending does not benefit our GDP directly. But it may turn out to be worth while in the long run if it prevents terrorism which causes us to lose things like the twin towers and part of the Pentagon. That day was a big negative on our GDP.

The problem with centrally planned growth is that it's not nearly as efficient as market driven growth,

I disagree. Unplanned market growth is haphazard and inefficient. Capitalism is inefficient. Capitalism bypasses regions of vast potential, wastes huge stores of human capital by leaving them idle. Leaves once producing projects and equipment idle as it moves on, leaves blighted communities strapped to pay for abandoned infrastructure. What does capitalism do for the inner city poor? Nothing. Worse, it leaves them to anguish and fester, only to cause expensive problems which must be dealt with by a responsible government. And the only way to do that is to tax the rich. Foolish capitalism has no guidance. It only seeks the greatest potential profits. The rich are going to be paying for the poor whether the poor are properly utilized to make a positive contribution to society or not. It is in society's best interest to HAVE A PLAN.

nor does it typically provide lasting benefits for an economy. There are exceptions to this involving infrastructure, like the Interstate Highway System, but few government programs are analogous with that.

The benefits of a large government, one which grows in relation to population growth and the growth of technology, are far greater than you care to admit. If one only looks at the negatives, than the negatives are all one sees. This practice overlooks vast potential.

And we already do this via welfare. If you want to convert to a UBI, then I'm ok with that, but the path toward that doesn't mean raising taxes but rather cutting bureaucracy. The current welfare state is bloated and wasteful. Replacing it with a UBI would likely save more money than it would spend.

I agree a UBI system would be far more efficient than the current system of millions of workers whose only task seems to be to determine who is deserving of wealth redistribution. At some point we need to simply say ok we're giving everybody a certain fixed amount so there is no need to run a vast system to determine who gets what. The plucky factor dividing us there is that I recognize that fixed amount needs to be enough to live on comfortably, while you would show no concern for that.

Sure, but that doesn't mean that we should just keep spending more money on the military. Government expenditures should always be weighed against the opportunity costs of taxation. If the opportunity cost of taking more money from someone is higher than the benefits of whatever the government is spending money on, then the tax and spending should not be done.

There is an undeniable logic in your words, but I would add that since we have to go from what we have now to what we would like, that we must consider the consequences of making changes. The problem with government spending is it cannot be cut off without causing unintended consequences. If you have thousands or millions of people making a living at fulfilling government contracts, and you just end it, then all those people are thrown out of work, and all the income they earned and spent would no longer be spent in the economy. That's going to be a big negative for the GDP. Government spending, once begun, cannot be stopped abruptly without harming the economy. There must be a central plan for how to transition from one set of circumstances, the current one, to the desired situation.

[PoliTalker]

Hello Woko Haram,

That's not true. The reason why Houston has issues with flooding is not related to zoning. The entire region that Houston is part of has had issues with flooding for quite some time, and it doesn't matter whether the city is highly regulated or not.

Houston is a region that naturally struggles to drain occasional torrential rains so it is imperative that proper regulation prevents too much urban sprawl which exacerbates the natural flooding.

Once again, it's not about not taxing enough. It's about government being very wasteful and bloated.

I challenge you to name enough government spending which could be cut to eliminate the deficit without negatively affecting the GDP. It can't be done. Revenue must be raised. The Republican tax cut resulted in less revenue than would have been seen with previous tax levels during this growing economy. The increased deficit is directly proportional to the missing revenue which would have been collected.

[Casual Leftist]

I wish Bernie could not only get elected, but have a majority Congress ready to enact his ideas. It would be the best thing that has happened to the USA in a very long time, maybe ever. I just don't see the nation being there yet. Although it is awesome to see it so close.

That'd be great. But remember to be satisfied with the incremental change that would come with having at least Bernie in the WH.

[Casual Leftist]

How do you know revenue would be higher? There's no evidence to suggest this. In fact, history suggests this is not the case.

I don't know what part of history you're talking about - but it's common sense that if you have a revenue cut and you reverse that cut the budget would return to the previous size given no other mitigating factors.

[Blackwater Lunchbreak]

better yet, lets let a select group of about 1000 people make all the money out of nothing and treat the world as their own personal amusement center.


fiat currency. be still and know.

[countryboy]

I don't know what part of history you're talking about - but it's common sense that if you have a revenue cut and you reverse that cut the budget would return to the previous size given no other mitigating factors.

Read a book on economics, because you really have no idea what you're talking about. you can check the statistics yourself, every time there has been a tax cut, revenue to the Federal coffers has gone up. That doesn't necessarily equate to causation, but it does indicate that cutting taxes does not lower revenue to the federal government.

[Casual Leftist]

Read a book on economics, because you really have no idea what you're talking about. you can check the statistics yourself, every time there has been a tax cut, revenue to the Federal coffers has gone up. That doesn't necessarily equate to causation, but it does indicate that cutting taxes does not lower revenue to the federal government.

That's not a matter of economics. You have to look at the details of those cuts and where the money is now coming from.

But also if you do want to look at history the Bush tax cuts of 2001 directly refute your point. In 2000 Fed tax revenue was $2.03 trillion, then in 2001 it was $1.99, 2002 $1.85, 2003 $1.78 https://www.thebalance.com/current-u...urrent-revenue

I know enough of what I'm talking about to provide sources, I suggest you do the same. https://www.taxpolicycenter.org/taxv...ay-itself-2018

[countryboy]

That's not a matter of economics. You have to look at the details of those cuts and where the money is now coming from.

But also if you do want to look at history the Bush tax cuts of 2001 directly refute your point. In 2000 Fed tax revenue was $2.03 trillion, then in 2001 it was $1.99, 2002 $1.85, 2003 $1.78 https://www.thebalance.com/current-u...urrent-revenue

I know enough of what I'm talking about to provide sources, I suggest you do the same. https://www.taxpolicycenter.org/taxv...ay-itself-2018

Lol red herring noted. That was the ill conceived $350 "rebate" tax cut. Bush went on to make meaningful cuts to the capital gains tax, and revenue flowed in. Which is why you stopped at 2003. Nice try.

[Casual Leftist]

Lol red herring noted. That was the ill conceived $350 "rebate" tax cut. Bush went on to make meaningful cuts to the capital gains tax, and revenue flowed in. Which is why you stopped at 2003. Nice try.

It's called sources. Looking at just hard revenue doesn't even make sense given what promises are made to justify those cuts.

Policymakers enacted the 2001 and 2003 tax cuts with the promise that they would “pay for themselves” by delivering increased economic growth, which would generate higher tax revenues.[11] But even President Bush’s Treasury Department estimated that under the most optimistic scenario, the tax cuts would at best pay for less than 10 percent of their long-term cost with increased growth. ... In comparison, the economic expansion of the early 1990s — which followed considerable tax increases — produced a much faster rate of job growth and somewhat faster GDP growth than the expansion of the early 2000s https://www.cbpp.org/research/federa...-bush-tax-cuts

[Saudade]

Hello Woko Haram,

Who gets money and puts it in their pocket and never spends it in the economy? That would be absurd. They are going to spend it. If it is their income, they are buying a house, groceries, energy, products, etc. Poor people spend all they get. Rich people save some, invest some. Saving and investing do not go directly into the economy like money through the hands of the poor, but do have a deferred positive effect on the GDP. Cronyism can be fixed by passing the Anti-Corruption Act.

Pass the act first then. Until then, the issue is that cronyists can spend the money in other economies throughout the world.

There's one example of who some government spending does not benefit our GDP directly. But it may turn out to be worth while in the long run if it prevents terrorism which causes us to lose things like the twin towers and part of the Pentagon. That day was a big negative on our GDP.

I disagree. Unplanned market growth is haphazard and inefficient. Capitalism is inefficient. Capitalism bypasses regions of vast potential, wastes huge stores of human capital by leaving them idle. Leaves once producing projects and equipment idle as it moves on, leaves blighted communities strapped to pay for abandoned infrastructure. What does capitalism do for the inner city poor? Nothing. Worse, it leaves them to anguish and fester, only to cause expensive problems which must be dealt with by a responsible government. And the only way to do that is to tax the rich. Foolish capitalism has no guidance. It only seeks the greatest potential profits. The rich are going to be paying for the poor whether the poor are properly utilized to make a positive contribution to society or not. It is in society's best interest to HAVE A PLAN.

If that's your argument, then it sounds like you favor socialism. Bernie must be your favorite candidate. To each their own, but we are fundamentally at odds on economics.

The benefits of a large government, one which grows in relation to population growth and the growth of technology, are far greater than you care to admit. If one only looks at the negatives, than the negatives are all one sees. This practice overlooks vast potential.

The more government grows, the fewer liberties you keep. That is half of the problem with big government. The other half involves the economic issues I've mentioned.

There are numerous countries throughout the world that have a government more along the lines of what you're discussing, but their personal freedoms are considerably more restricted. If you want that, then maybe you should immigrate to one of them. The UK might be a good fit, or Canada.

I prefer the relatively smaller government here and the much more decentralized authority.

I agree a UBI system would be far more efficient than the current system of millions of workers whose only task seems to be to determine who is deserving of wealth redistribution. At some point we need to simply say ok we're giving everybody a certain fixed amount so there is no need to run a vast system to determine who gets what. The plucky factor dividing us there is that I recognize that fixed amount needs to be enough to live on comfortably, while you would show no concern for that.

Well, you seem to have no concern of freeloading. If you want to talk about economic downturns, a society that discourages ambition and does not encourage work is surely on the path to failure and collapse.

There is an undeniable logic in your words, but I would add that since we have to go from what we have now to what we would like, that we must consider the consequences of making changes. The problem with government spending is it cannot be cut off without causing unintended consequences. If you have thousands or millions of people making a living at fulfilling government contracts, and you just end it, then all those people are thrown out of work, and all the income they earned and spent would no longer be spent in the economy. That's going to be a big negative for the GDP. Government spending, once begun, cannot be stopped abruptly without harming the economy. There must be a central plan for how to transition from one set of circumstances, the current one, to the desired situation.

That's where UBI comes in. Anyone who is capable of fulfilling government work should also be capable of finding private work. If he/she can't then he/she must not have been that economically worthwhile to begin with.

[Saudade]

Hello Woko Haram,

Houston is a region that naturally struggles to drain occasional torrential rains so it is imperative that proper regulation prevents too much urban sprawl which exacerbates the natural flooding.

And what exactly would that regulation do? If you stifle construction, that drives up housing costs if people continue to move into the area. The failed approach that many big cities have tried to respond to this rise in cost is via rent control. That just ends up creating a market where cronies pass properties between each other. The other failed approach is subsidized housing, which just creates ghettos.

I challenge you to name enough government spending which could be cut to eliminate the deficit without negatively affecting the GDP. It can't be done. Revenue must be raised. The Republican tax cut resulted in less revenue than would have been seen with previous tax levels during this growing economy. The increased deficit is directly proportional to the missing revenue which would have been collected.

If you accept that the GDP sometimes dips no matter what, then you should understand that a temporary dip isn't an issue as long as the market is free enough to recover.

It's completely unrealistic to set policies under the assumption that GDP growth can be maintained indefinitely -- particularly via government spending. That is exactly the kind of recklessness that China has been engaging in.

A much more reasonable approach is to cut government spending, weather the temporary dips, and ensure that the market is able to pick up the slack by staying out of the way of business in general.

[PoliTalker]

Hello Casual Leftist,

That'd be great. But remember to be satisfied with the incremental change that would come with having at least Bernie in the WH.

Yeah, I'm not so sure of that. I see him as a one term president if he gets elected.

He won't be able to get any of his grand plans passed, Congress will fight him on all of it, so he won't get anything passed. He will be seen as somebody who couldn't get anything done. It will be a set-back for progressives. They would become frustrated with him, not re-elect him. His message is great but it's not time yet. It would be best if we could wait until there is not only a candidate who supports that, but also a strong caucus in Congress. AOC is a start. We need more like her before we should try for the WH with that. Otherwise it could embolden the other side and cause the movement to fizzle.