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That's a good observation. I think stimulus may work...but only under a limited set of conditions that didn't apply to the USA. We already came into this downturn with a mostly maxed out credit card.
The reason our gun had no bullets is because the previous administration kept lowering the damned interest rate.
The interest rate was the number one thing the government had to influence the economy short term. Its one reason why I said Bushs policies where worse then people imagined.
He kept lowering the interest rate to float the idea that his policies weren't as bad as they were. Masking the problem with lowering taxes while increasing spending, and money pool at the top for a decade. Then the bill came due in 2008.
Then neither he, nor President Obama had the bullets needed to rescue the economy, because interest rates where at 0.
"stimulus" spending the way we spent it was bad also. We should have let the banks collapse, nationalize the assets, and then sell them back to the bond holders.
Hindsight is 20/20 though. One thing is for certain, many of us are getting a education in national economics.
You can lead a horse to water, but you can't make it drink. The government can print money and flood the streets with it. We could have dollar bills floating in the breeze like autumn leaves, and it's still not going to mean diddly (except for inflation) if the consumer is maxed out and businesses aren't willing to invest for domestic expansion until they see that the consumer has sufficiently de-leveraged to get back in the came. People who have been buying T-bills do so for a "safe haven" for a portion of assets; if they felt that T-bills no longer fit that definition, they would look for another safe asset. They won't necessarily invest their money into risky economic growth here until they really think things are set to get better. And that will only happen once we sufficiently de-leverage as a society. And that takes a long time.
I guess we'll have to agree to disagree, but I maintain that de-leveraging - both privately and publicly - is painful and will by definition be a near-term drag on the economy. It's no different than when you have to cut your budget to pay off debt. Your "household economy" will nosedive in the short term, even though it's necessary to avoid an even more painful default.
McKinsey looked at some empirical data and did estimates on this - suggesting that we've just scraped the tip of the iceberg on this and can expect de-leveraging to take perhaps seven years or so. I suspect they're right.
Clearly you need to take a sip of reality. The fact that the government "prints" money, and then floods the street with it, doesnt stimuluate, it simply devalues the currency, nor is that reality of what happened. They BORROWED money. If they didnt borrow the money and only printed it, the national debt would have had a credit, not a debt.
Elementary accounting classes would do you nicely.
Don't get me wrong - spending cuts are necessary for long term growth. Just FYI, there is pretty much no way that major spending cuts by government at all levels won't have a profoundly negative impact on our growth in the short term.
Some of that government spending we like to condemn represents salaries for a lot of people who work with federal and local government in various ways - contractors, military, people working on infrastructure projects, police, firefighters, etc. When their income is now cut off, what are they going to do - apply for all the free jobs waiting for them in the private sector? They are now going to join the segment of consumers who are out of the spending cycle.
And it's not like the reduction of government spending is going to translate overnight into a wave of "confidence" for private businesses. Consumers and business investment are stuck in a vicious cycle now; consumers don't spend because businesses aren't hiring, and businesses aren't hiring because consumers aren't spending. So if all else is equal in the GDP equation (GDP = C + I + G + [X-N]), then if that G variable comes down drastically...GDP is going to tangibly suffer in the near term.
So...maybe it's necessary, but get ready for things to get better before they get worse. After the latest anemic Q1-Q2 GDP growth numbers, there's been renewed talk by economists of a much greater risk than previously thought of a double dip recession by the end of the year. I think the level of belt tightening by local and soon federal governments will definitely get us there.
I hope the Tea Party folks told you this in full disclosure when they proposed their platform of cutting government spending. With the way some people talk, it really seems to me like they don't know this.
The average American is too stupid to realize this.
There are no 'drastic cuts', there will not be any kind of 'cuts'.
Washington speak- last year your department got $100 billion, this year you thought you were getting $112 billion but you only get $100 billion.
You call it a $2 billion cut. [but your budget was increased by $10 billion]
If your budget was increased by only $5 billion, you call it 'draconian' cuts because you didn't get $112 billion.
A real cut would be if the Department got less than $100 billion.
Yes, this is the problem. They will surely raise the debt level, and raise taxes of course but no meaningful cuts will be made at all. Obama isn't trying to do any cuts, at best he promises some cuts in "future spending" which won't be done until he's long out of office. There are no cuts.
There should be cuts. The cuts shouldn't be about penalizing the productive but cutting the waste. TANF was already cut to have a 5 year limit, it should be done away with altogether. Medicaid recipients could have a co-pay like Medicare recipients have had. That would cut some of the waste and needless costs. Food stamps could be cut back, limited to only certain food items, all the junk food and luxury food purchases eliminated.
Balderdash. Plenty of cuts could be made to programs, offices, agencies, agendas, etc. that contribute nothing to economic output, and therefore would not hurt economic output.
Funny... Rep. Turd Brain is speaking right now, saying cutting government programs reduces employment... CheesyGawdz... what is that guy drinking. Send those people home, use the funds to pay down the debt... money leaving the U.S. that the U.S. NEVER had, being that it was borrowed.
It's gonna hurt us all but you've got to go thru hell to get to heaven. I'm looking forward to next July04th.
There is no reason to believe the right kind of cuts would put us into a recession. They just never want to consider the right kind of cuts. For example cutting back on foreign aid, how would that put us into a recession?
There is no reason to believe the right kind of cuts would put us into a recession. They just never want to consider the right kind of cuts. For example cutting back on foreign aid, how would that put us into a recession?
It would reduce the redistribution of wealth to countries that deserve it more than we do! You don't win Nobel prizes for that kind of thinking!
It would reduce the redistribution of wealth to countries that deserve it more than we do! You don't win Nobel prizes for that kind of thinking!
What? How do they deserve increasing our debt????
Let them have their own debt if debt is so great. I don't see why we send them money.
I also believe we should stop nation building and instead contain certain countries. If their people had to remain living in them, they might actually do something about reform or limiting family size.
Like Iraq, if they wanted democracy, they'd have done something to get it on their own, the minute we leave, they're going the way of Egypt, we might as well face it.
But yes -- I know you're being sarcastic.
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