Cartoon of the Day: Keynesian Economics
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Tuesday, July 17, 2012
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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139 Comments:
mark-
what a great idea. i'm going to start a company to supply these kits.
we'll all be rich in no time.
what's the multiplier on that?
Keynesian?
I think we as a nation are sailing past mere Keynesianism...
Said at a campaign rally in Roanoke, Va: " If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business -- you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet"...
So how much will the person cleaning up the broken glass be paid?
Since this would be a public works project, then the prevailing wage(union) would have to be paid in Washington state.
The prevailing wage for a clean-up laborer in King County pays $40.33 an hour.
paal-
if we just pay them a trillion dollars to do it, who needs a multiplier?
Juandos,
I've built two small retail businesses over the past 20 years. Obama infuriated me with that speech this weekend. My thoughts are at my blog post, Obama Lies! We did build our businesses!
sorta reminded me of how much we pay firefighters to lay around "keeping busy" until we really need them.
so they have firefighters "tidy up" the equipment and stuff when there are no fires.
and they get neat stuff like a full pay check even when there are no fires and they get free health care, free insurance, and really good pensions....
just so we can have them come and save our houses when they catch fire.
we should privatize fire fighters. Pay them minimum wage only when they are not fighting fires... and credit for their pensions only when they fight fires... no free lunch when they are laying around waiting for the next fire, eh?
:-)
Larry,
I'm not surprised you didn't understand the cartoon.
paul-
yup.
it's not surprising that he fails to see the moral hazard either.
paying firemen per fire they put out might seem to incline some less that scrupulous folks to start them so they can get paid to put them out.
imagine what the arrest rates would be if cops were paid per collar or drug use if doctors were paid per prescription.
you need to be very careful about that sort of perverse incentive.
Larry-
We had a big debate on that in one of my undergrad economics courses. It was a lot of fun.
of course, paying firemen to start fires and put them out is a keynsian dream, no?
imagine the multiplier!
you'd need to build a new house, but new furniture, clothes, appliances, stay at a hotel or rent in the meantime, it's be an economic bonanza!
if we all burn our homes to the ground, we'll have this slump licked in no time!
we could have private fire and police, eh?
if you don't pay - you don't get service
eh Jon?
you could have multiple private fire companies... all bidding for your business.
you have have a smartphone app so that when you have a fire - you select the one with the best price!
same with roads.
no public roads.
everything is tolled.
you want to sell goods and services?
fine.. pay your fricken toll... and don't expect to leach off of taxpayers!
if a company needs "educated" workers, fine - go pay to educate them. don't expect taxpayers to provide you with educated workers.
in the minds of MOST voters - taxing to pay for others IS MORAL."
and, as predicted, you run back and hide behind tyranny of the majority.
in 1750 slavery was moral in the minds of most voters. did that make it so?
you have already said no.
what will it take for you to see this inconsistency in your thinking?
i'm honestly baffled that you can keep making these contradictory arguments.
you're equating taxation approved by a majority of voters with slavery guy.
if that is not logical what is? you're essentially saying if a majority of people approve taxation for a purpose you disagree with that you have been "enslaved" and are equating that with actual slavery... no can do.
"if you don't pay - you don't get service"
yep.
you're on the wrong thread larry.
and no, i am not.
i am pointing out that claiming that a majority supports something is not proof that it is just.
you yourself have agreed to this, yet keep trying to make a contradictory argument.
you're on the wrong thread larry.
oops.. you're right.. my bad...
Larry,
we should privatize fire fighters. Pay them minimum wage
It's funny that you think that free markets and privatization equals minimum wages. In fact, the ONLY system ever devised that raised the common man's lot in life above the $3/day mark is free markets.
Also, there are many, many cities around the country that do have privatized fire departments and police. Somehow these places have managed to not become war zones or burn to the ground. Weird, right?
credit for their pensions only when they fight fires
Because as we all know, it's only right that privates sector employees work till the day they die, just so these firefighters can retire at the age of 40. We should all be thankful that these people even work that long, since our entire civilization has been built by these people, right, Larry? It would be a crime to suggest that these people finance their own retirement through a defined contribution plan, rather than a defined benefits plan, right?
Larry,
fine.. pay your fricken toll... and don't expect to leach off of taxpayers!
if a company needs "educated" workers, fine - go pay to educate them. don't expect taxpayers to provide you with educated workers.
Glad to see you're finally talking some sense. This is exactly what should happen to roads and education. It's clear that government has failed on both these accounts.
Spending on both has increased dramatically over the last few decades, yet many bridges are falling down and roads are pitted nightmares. Additionally, American education rates way below many countries despite spending more than any other country on "education" (it's really being spent on the education system, i.e., education administration, not instruction).
so...we should have private fire and police and private roads and private water and sewer, private electricity?
it should be like Cable TV franchises, right?
we should put the interstate highway system up for bid and let the winner privately operate it on tolls, right?
everyone would pay for surface streets with an electronic transponder - you get charged for the miles you use - automatically deducted from your account.
All trucks would pay the same way.
If you had a small business making widgets - when your trucks delivered them thar widgets - they'd pay a toll everyone they went to deliver, right?
i am all for user pays. it makes a great deal of sense for roads, the FAA, public transport, etc.
but in some areas, this gets tricky.
would you want a user pays police force akin to old school "thief takers"? i seem to recall that system having some serious issues including many not being able to afford protection or police simply (and legally) being paid to ignore your report.
Larry,
it should be like Cable TV franchises, right?
Cable TV isn't really a free market, since it's highly regulated and barrier to entry (by government) is very high. But even in this highly regulated market, since it's profit driven, quality has dramatically improved and prices have declined. There are hundreds of times more channels today than just 20 years ago. Additionally, there are all sorts of services that were completely unavailable just 10 years ago (DVRs for example).
If police and firefighters were run well enough to have the same results as cable TV, crime would have been reduced by orders of magnitude, all the while taxes would have declined.
911 should be a private service?
when you call 911, they ask you for your account # and if you don't have one, they hang up?
Oh goody, Larry The Pragmatist is back "just asking questions" again. Don't confuse him with his evil twin Larry The Liberal.
evil twin?
now THAT...HURT Paul... ouch!
Well, this is getting stupid fast
Larry,
911 should be a private service?
If it were private, would the number always be 911?
when you call 911, they ask you for your account # and if you don't have one, they hang up?
Possibly. Should a homeless guy that knocks on your door have the right to come in your house, use your shower, eat your food, or sleep in your bed? Or do you think he should get a job or rely on charity?
Your entire premise relies on the idea that helping people only for a profit motive will end up with bad results. However, the profit motive is far better for the average person and the worst off us, than the altruism of government.
In fact, devising a system that relies on the profit motive, rather than rely on government patronage, is the ONLY system known to man to improve the lot of the common man.
Reagan actually used Keynesian economics when he cut taxes and boosted military spending in a recession, which resulted in a V-shaped recovery.
For those who don't believe in Keynesian economics:
"In case of something to do, don't break glass, and hope for something."
Peak,
For those who don't believe in Keynesian economics:
"In case of something to do, don't break glass, and hope for something."
Wrong.
For those who don't believe in Keynesian economics the sign reads: "In case of nothing to do, you're doing it wrong. There's always something to do. Instead of waiting for others to improve your life or reading silly signs, show some initiative and improve your own life."
Possibly. Should a homeless guy that knocks on your door have the right to come in your house, use your shower, eat your food, or sleep in your bed? Or do you think he should get a job or rely on charity?
well not exactly. are you equating an owner of property of taking from others if he needs an ambulance for his kid but he has not paid his taxes or a parent taking their child to the ER and getting "free" care if they do not have hospital insurance?
Your entire premise relies on the idea that helping people only for a profit motive will end up with bad results. However, the profit motive is far better for the average person and the worst off us, than the altruism of government.
not at all... I fully support privately-operated toll roads for all roads including surface streets and subdivision streets.
I would ask if the electric or cable company wants to string a way past your property to 50 other people if you could demand whatever you wanted to demand and the cable/electric company would have to pay it or not be able to provide service to the 50 people downstream from your property?
In fact, devising a system that relies on the profit motive, rather than rely on government patronage, is the ONLY system known to man to improve the lot of the common man.
so you'd get rid of the concept of public rights-of-ways and govt ability to require them along roads and via eminent domain?
so a big subdivision would require each home owner to approve stringing cable and electric past their home?
Ken, so Reagan was wrong to facilitate a V-shaped recovery?
You wanted to just hope for the best?
Larry,
are you equating an owner of property of taking from others if he needs an ambulance for his kid but he has not paid his taxes or a parent taking their child to the ER and getting "free" care if they do not have hospital insurance?
Of course. If a person hasn't paid for the ambulance, but others are forced to provide one for him, or if a person will not buy medical services, but others are forced to buy them for him, this is exactly what's happening. Those others are having their property rights violated for the person who won't buy an ambulance service or medical service for his kid or himself.
What do you think is happening?
I would ask if the electric or cable company wants to string a way past your property to 50 other people if you could demand whatever you wanted to demand and the cable/electric company would have to pay it or not be able to provide service to the 50 people downstream from your property?
So in your world I own not just my property, but all the property surrounding those downstream of me, preventing them from getting electricity? The only choices are to violate my property rights or not have those downstream of me get electricity?
so you'd get rid of the concept of public rights-of-ways and govt ability to require them along roads and via eminent domain?
Yes. Eminent domain, while noble in theory is one of the most insidious and corruptible powers of the government.
so a big subdivision would require each home owner to approve stringing cable and electric past their home?
Homeowners that have bought houses in subdivisions have signed contracts agreeing to certain things. People can sign whatever contract they like. If the prerequisite to buying a particular home is the signing of this contract and you don't want to sign, there are plenty of other houses elsewhere that don't have that contract.
Contracts are a part of property rights.
Peak,
Ken, so Reagan was wrong to facilitate a V-shaped recovery?
If your assertion is that the economic recovery was due exclusively or even mainly to the military build up, then your assertion is wrong. Additionally, Volcker had far more to do with the economic recovery than Reagan.
You wanted to just hope for the best?
I never advocate for just hoping for the best. I also don't advocate hoping the government will take care of me, which is what you are doing. Advocating for hoping the government will take care of you is the same as just hoping for the best.
I advocate for making your own life better, not hoping someone else makes it better.
Of course. If a person hasn't paid for the ambulance, but others are forced to provide one for him, or if a person will not buy medical services, but others are forced to buy them for him, this is exactly what's happening. Those others are having their property rights violated for the person who won't buy an ambulance service or medical service for his kid or himself.
What do you think is happening?
well.. I AGREE, it IS what is happening.
So in your world I own not just my property, but all the property surrounding those downstream of me, preventing them from getting electricity? The only choices are to violate my property rights or not have those downstream of me get electricity?
nope but you don't have to allow providers of electricity, cable, phone, water/sewer to "use" your property to provide those things to others.
So each property owner does not have to allow the providers to come across their property to bring those services to others, right?
Homeowners that have bought houses in subdivisions have signed contracts agreeing to certain things. People can sign whatever contract they like. If the prerequisite to buying a particular home is the signing of this contract and you don't want to sign, there are plenty of other houses elsewhere that don't have that contract.
Contracts are a part of property rights
Agree. so if you lived not in a subdivision and the county or power company needed to come through your property to serve other customers - you could deny them from access?
and if other adjacent property owners did the same thing - the service providers and those that wanted those services would be out of luck?
so, basically you do not support the concept of public rights-of-ways, correct?
Ken, you don't believe expansionary fiscal policy under Reagan, e.g. tax cuts and military spending, had a stimulative effect on economic growth?
peaktrader: "Reagan actually used Keynesian economics when he cut taxes and boosted military spending in a recession, which resulted in a V-shaped recovery."
Peak, that's not the whole story of Reaganomics. In fact, I think your assessment is misleading, as it implies the tax cuts were a mjor factor in the 1983-1985 recovery.
Here's what happened during Regan's 8 years:
1. total real federal spending declined from 22.9% of GDP in 1981 to 22.1% of GDP in 1989;
2. Reagan continued the deregulation which Ford and Carter had started;
3. Reagan and Volker reduced the growth in money supply, which many believed caused the severe 1982 recession but ultimately cooled inflation for a couple of decades;
4. Reagan cut marginal tax rates to 50% in 1982, to 38% in 1987, and finally to 28% in 1988. (the significant tax cuts did not happen until 1987).
Three of the four policies were supply side factors. The fourth, the slight decline in government spending, was hardly Keynesian.
Jet says: "It implies the tax cuts were a mjor factor in the 1983-1985 recovery."
I'm not implying tax cuts were a major stimulative force in the recovery. They were:
July 29, 1981 - Congress passes Reagan's tax bill. Instead of a 30% tax cut over three years, Reagan accepts 25%.
morganovich:
if we just pay them a trillion dollars to do it, who needs a multiplier?
I didn't know you were into channeling Senator Dirken?
(" A billion here, a billion there, and pretty soon you're talking real money")
Larry,
So each property owner does not have to allow the providers to come across their property to bring those services to others, right?
That's right.
so if you lived not in a subdivision and the county or power company needed to come through your property
Have you EVER seen where a company HAD to go through a specific property?
Additionally, is there something wrong with simply negotiating with the property owner, rather than using the coercive power of government? The primary use of eminent domain looks to be that development companies don't want to pay fair market values for a property, so use their political connections to have politicians take for them.
so, basically you do not support the concept of public rights-of-ways, correct?
Please explain to me what you think this is. This varies so much and people use such language in such loose ways as to mean whatever it is they want.
Peak,
Ken, you don't believe expansionary fiscal policy under Reagan, e.g. tax cuts and military spending, had a stimulative effect on economic growth?
Tax cuts are not expansionary policies. Taking less of people's money is NOT the same as the government spending more. And no, I do not think Reagan's military build up had much to do with economic growth. How can it? Building weapons of war doesn't make people's cars better, homes more efficient, food yields better, stithc more clothing, etc.
Some of the technology from military spending has been good, but this comes at an unseen cost, specifically opportunity cost. If the government hadn't spent this money on military, it still would have got spent on something and more efficiently. Other valuable technologies would have been produced.
so, basically you do not support the concept of public rights-of-ways, correct?
Please explain to me what you think this is. This varies so much and people use such language in such loose ways as to mean whatever it is they want.
it's what allows the power company to string poles on the road in front of your house or the water/sewer folks to put in pipes in front of your house or the cable company to use the poles the electric company put in front of your house instead of putting up separate poles.
is that what you think?
And no, I do not think Reagan's military build up had much to do with economic growth. How can it? Building weapons of war doesn't make people's cars better, homes more efficient, food yields better, stithc more clothing, etc.
Some of the technology from military spending has been good, but this comes at an unseen cost,
paying people to build weapons of war allows them to buy cars, food, clothing...
how can DOD spending be "good" if it's taking taxes and "crowding out" the private sector?
or to put it more succinctly - how do we know when we're spending way more than what is "good" and are spending way more than we should?
Reagan actually used Keynesian economics when he cut taxes and boosted military spending in a recession, which resulted in a V-shaped recovery.
The problem is that he and every other Pres & Congress didn't apply the other side of what Keynes said - - roughly, "pay it back in good times".
In other words, the various poorly educated ones who blame it all on Keynes or "Keynesian clowns" are just displaying that they didn't pass Econ 101.
And please don't misunderstand me, I'm not trying to defend Keynes, just setting the actual & real record straight... with a sometimes side benefit of zapping someone's false world view.
"Economics exists to make astrology look respectable."
-- John Kenneth Galbraith
"I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results"
-- Milton Friedman, in a 1993 letter to Robert Auerbach
"If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand."
-- Milton Friedman
"[Milton Friedman] has always hated the fragmentation and bickering between schools of economics, which has occurred ever since Marx detached himself from the "classical" school of Smith and Ricardo. In 1974, when vacationing at his summer home in Vermont, Friedman spoke informally at a nearby conference about Austrian economics. He bluntly told the audience, 'There is no Austrian economics--only good economics and bad economics'. (Dolan 1976: 4). His point was that any useful concepts coming out of Austrian economics (he specifically had reference to Hayek's contributions) should be incorporated into the body of mainstream economic theory. In 1982, he made the same point at a conference on supply-side economics. 'I am not a supply-side economist. I am not a monetarist economist. I am an economist.' (Friedman 1982: 53)."
-- Mark Skousen, The Making of Modern Economics, pg 432
Ken says: "Tax cuts are not expansionary policies."
If tax cuts aren't expansionary policies, then tax hikes aren't contractionary policies, right?
Building weapons to win the Cold War was just a waste of labor, right? (they could've had leisure instead).
If tax cuts aren't expansionary policies, then tax hikes aren't contractionary policies, right?
got him cornered now... let's see how he answers...
:-)
Larry,
paying people to build weapons of war allows them to buy cars, food, clothing...
Of course, this is the basic flaw in Keynesian thinking. It's equivalent to saying paying people to dig holes and fill them in improves economic growth. It does not.
Building weapons of war diverts resources AWAY from economic growth. The people who got paid to build those weapons of war did so on the backs of those who did productive work and actually grew the economy.
how can DOD spending be "good" if it's taking taxes and "crowding out" the private sector?
Have I ever said DOD spending is "good"? It is necessary to a point, but as I've always said and will always maintain, government is a necessary evil. Defending against tyrants and thieves is necessary, but to say these activities contribute to economic growth is to misunderstand what economic growth is.
Peak,
If tax cuts aren't expansionary policies, then tax hikes aren't contractionary policies, right?
Expansionary policies refer to expanding government. Increasing government spending, regardless of whether taxes are raised or lowered is expansionary.
Building weapons to win the Cold War was just a waste of labor, right?
Yes. If I build something useful, then have to actively defend against theft of that something, this is NOT productive labor. Defending against a tyrannical, imperialist government is NOT productive. It isn't a again. It is protecting against loss.
Larry,
got him cornered now...
In your fevered imagination.
Peak Trader,
You are correct that Reagan significantly cut tax receipts in 1983-1985. I was only looking at top marginal tax rates, which did not drop significantly until 1987.
The buildup in defense spending, though, was offset by a simulataneous reduction in social spending. Government spending increased to 23% of GDP in 1982 due to the severe recession. But it quickly returned to the Carter levels of 22%. Government spending during Reagan's term cannot be described as a Keynesian economic policy.
larry-
that's just babble.
taxes take more from people that are good at making it and are providing a good or service that others value.
that is the only way to make a profit non coercion: you need to provide somehting of value.
taxes do not have this control on them.. they can be exacted unwillingly and the money spent without regard to return.
thus, governments do not get the kind of return on capital and spending that the private sector does nor is there any fail-safe to make sure they get a positive return at all.
taking money away from the productive and giving it to the nonproductive is simply never going to be expansionary.
the whole notion of stimulus is fatally flawed. it does not "prime the pump" it drains the gas tank.
future growth comes from investment in things that work.
even if you can up gdp today by increasing demand (itself untrue as this round of stimulus and the new deal showed) as soon as you stop, it would go right back down. in the meantime you have reduced overall investment.
how could that possibly drive any sort of growth and or prosperity.
i have no idea why i even ask you these questions as you never answer them.
you will just make appeals to authority and majority because you lack any actual knowledge of the issue.
jet-
"Government spending during Reagan's term cannot be described as a Keynesian economic policy."
absolutely. reagan was one of the few presidents with an econ degree. he actively repudiate keynes and believed that his idea were nonsense.
keynsians hated his and said his ideas, which they branded "reganiomics" would never work.
then, they did. not only did they break the stagflation deadlock that carter and the keynsians had created (and that keynsian theory claimed was impossible) but he set off an economic boom.
there was nothing keynsian about he. he just took the government out of the way and broke inflation's back by protecting volcker while he cranked rates up and stopped the keynsian stimulus driven inflation.
alas, one of the great quotes (from a book on bubbles called "devil take the hindmost") is "progress and knowledge in most human fields of endeavor be they medicine or science is cumulative, but, alas, it is only cyclical in finance".
we now find ourselves prescribed the same magic elixir that did so much damage in the 70's by a new class of quacks who rely on most having forgotten what happened 40 years ago.
it's like a charlatan in his colorful wagon. you wait long enough, and you can come back to town to fleece a new bunch of suckers.
Building weapons of war diverts resources AWAY from economic growth.
So does insurance, but most have it... my point being that it's very dangerous to have zero military.
This comment has been removed by the author.
Morganovich,
"..there was nothing keynsian about he. he just took the government out of the way and broke inflation's back by protecting volcker while he cranked rates up and stopped the keynsian stimulus driven inflation."
An interesting side note is the leading Keynesians of the time(and even Alan Greenspan) attacked the Reagan tax-cuts on the grounds they were inflationary. That's one crazy notion I haven't seen come back around.
morganovich: "there was nothing keynsian about he. he just took the government out of the way and broke inflation's back by protecting volcker while he cranked rates up and stopped the keynsian stimulus driven inflation."
Agreed. But the Keynesians will always try to twist the story to "prove" the supply-side policies failed.
bart,
So does insurance, but most have it... my point being that it's very dangerous to have zero military.
First, I wasn't responding to you, I was responding to Larry.
Second, of course, this is true. Insurance is risk management, the same as the military. It doesn't produce wealth, it trades off small spread out losses of wealth for large concentrated losses of wealth.
The same as locks on doors, authentication procedures for online banking, etc. These don't produce wealth. These protect against assholes who destroy and/or steal wealth. They are, sadly, necessary, but my point that I was trying to make to Larry and Peak, is that necessary work doesn't equal productive work.
While it's necessary to protect wealth against predators, this protection doesn't increase wealth. I diverts efforts away from productive activities.
First, I wasn't responding to you, I was responding to Larry.
So what?, unless you're confessing that you're in favor of post censoring.
And yes, you got your a$$ blasted because what you stated was 100% unnecessary. Just keep it up if you want more...
Second, of course, this is true. Insurance is risk management, the same as the military.
...
While it's necessary to protect wealth against predators, this protection doesn't increase wealth.
Which is precisely what I said:
So does insurance, but most have it... my point being that it's very dangerous to have zero military.
Just because something doesn't increase wealth doesn't mean that it (insurance or military or police or firefighters, etc etc) isn't necessary to a greater or lesser degree. Everything doesn't need to *directly* produce wealth.
"there was nothing keynsian about he. he just took the government out of the way and broke inflation's back by protecting volcker while he cranked rates up and stopped the keynsian stimulus driven inflation."
Reagan understood Keynesian economics better than people believed.
Expansionary fiscal policy offset restrictive monetary policy.
And Keynesian policies in the 1970s boosted both nominal and real output to build-up saving.
Everything doesn't need to *directly* produce wealth.
valid point but "how much" is the right amount?
Using the "everything does not ..." rubric, how much should we be spending for DOD?
how do we know what is "too much"?
right now we spend about $2100 per capita.
what's a good way to determine a "correct" amount?
one would think that the average Libertarian would have a small number rather than a large one.
"Obama infuriated me with that speech this weekend"...
I'm not the least bit suprised that you found Obama's hubris upsetting jet...
From your site posting: 'A recent survey by the U.S. Chamber of Commerce revealed that 80% of small businesses say that the taxation, regulation and legislation from Washington makes it harder for their business to hire more people...
Isn't it amazing how so many people either don't know or want to forget about the 10,000 Commandments?
Well jet this site might give you a bit of a chuckle...
Some them are quite good: You didn't build that
"you could have multiple private fire companies... all bidding for your business.
you have have a smartphone app so that when you have a fire - you select the one with the best price!"...
Not suprisingly larry g again professes his lack of history knowledge...
Wiki up lad...
bart says: "If your assertion is that the economic recovery was due exclusively or even mainly to the military build up, then your assertion is wrong. Additionally, Volcker had far more to do with the economic recovery than Reagan"...
Ta! Da!
Thank you bart, that was perfectly stated...
Larry:
valid point but "how much" is the right amount?
What do you think?
But it quickly returned to the Carter levels of 22%
Enough of the Reagan mythology.
President......Spending (% of GDP)
Nixon/Ford...........20.0
Carter..................20.8
Reagan...............22.4
Bush41...............21.9
Clinton................19.8
bart says: "If your assertion is that the economic recovery was due exclusively or even mainly to the military build up, then your assertion is wrong. Additionally, Volcker had far more to do with the economic recovery than Reagan"...
Ta! Da!
Thank you bart, that was perfectly stated...
That wasn't me, but rather Ken.
Obamanomics: In case of nothing to do, break glass, leave mess, wait for food stamps to arrive (blame inferior glass on Bush).
"Enough of the Reagan mythology"
Reagan cut domestic spending when and where he could; just ask any liberal.
"That wasn't me, but rather Ken"...
Oops! My bad...
Sorry about that...
Capitalism Versus Cronyism
Nice explanatory video clip...
valid point but "how much" is the right amount?
What do you think?
less than what we spend right now, it's out of hand IMHO.
I think it's a bit strange that those who espouse Libertarian principles don't seem to have a number or they support the current level expenditures when we have a annual trillion dollar deficit that cannot be erased by entitlement cuts alone.
either we need to pay higher taxes to pay for DOD or we need to cut DOD.
We can't stay where we are right now.
"Enough of the Reagan mythology"...
Amen marmico...
BTW I'm looking at your GDP numbers and I see that they're somewhat different than what James Glassman at Forbes put out there:
(2nd to last paragraph)
As for spending itself, during the George W. Bush years (2001-08), federal outlays averaged 19.6 percent of GDP, a little less than during the Clinton years (1993-2000), at 19.8% and far below Reagan, whose outlays never dropped below 21 percent of GDP in any year and averaged 22.4%. Even factoring in the TARP year (2009), Bush’s average outlays as a proportion of the economy was 20.3 percent – far below Reagan and only a half-point below Clinton. As for Obama, even excluding 2009, his spending has averaged 24.1 percent of GDP – the highest level for any three years since World War II....
Interesting...
Where did you get your numbers marmico?
"either we need to pay higher taxes to pay for DOD or we need to cut DOD"...
Well larry g you as usual shoot the wrong dog even though I grant that DOD wastes a whole lot of money...
Still comparatively speaking DOD could 'almost' be considered amateurs...
When enough people have nothing to do, that is exactly what will happen.
: " If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business -- you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet"...
================================
Yeah, that was a mistake: Instead of "you did not build that" it should hae said you did not build that alone.
The way it is written is uneccessarily insulting. The general message is correct in that successful people do not do it all by themselves: they generally get lots of help.
Well larry g you as usual shoot the wrong dog even though I grant that DOD wastes a whole lot of money...
Still comparatively speaking DOD could 'almost' be considered amateurs...
if we're talking about the general revenues budget and deficit then Social Security is not involved in terms of revenues and expenditures.
It is valid to recognize FICA as a tax and it's spending for SS but if you're looking at the items in the general revenues budget and deficit - as a percent - then DOD is a pretty large slice.
in other words "cutting SS" won't do squat for reducing the deficit (other than writing off the 2.1 trillion intergovernmental debt for SS ( which won't reduce the deficit).
Larry G: less than what we spend right now, it's out of hand IMHO.
I think it's a bit strange that those who espouse Libertarian principles don't seem to have a number or they support the current level expenditures when we have a annual trillion dollar deficit that cannot be erased by entitlement cuts alone.
either we need to pay higher taxes to pay for DOD or we need to cut DOD.
We can't stay where we are right now.
Hard to disagree with that.
Entitlements are by far the bigger problem though, by raw dollars.
I try to stay out of mostly political areas, even though I have definite opinions and even have rough numbers for things like defense cutting etc., since it is much hotter than econ & finance and wildly variable on facts.
My view for years now has been that "it must play out", and until it gets much worse it's usually just a matter of "hope".
The way it is written is unnecessarily insulting. The general message is correct in that successful people do not do it all by themselves: they generally get lots of help.
Very insulting indeed, and of course true about them doing doing the *whatever* alone.
Perhaps a nuance, although I think not, but without that person or persons (or another person or group) the *whatever* would likely not have happened at all.
Entitlements are by far the bigger problem though, by raw dollars.
Not if you separate SS and Medicare Part A which have nothing to do with the general revenues budget which is what is in deficit.
cutting either of them would have no effect on the budget.
but how about listing out the entitlements and their costs ?
My numbers say that when you add the non-FICA entitlements, you get about a trillion and when you add DOD to other National Security expenditures you get a trillion.
Across the board cuts sufficient to balance the budget would take 1/3 trillion each from entitlements, National Security and general govt.
re: doing it alone
by far one of the most socialist concepts ever in the US is roads.
Virtually all commerce depends on publically-paid-for roads from large mega-companies to small businesses.
Note that the nations rails are largely private but their right-of-way was essentially given to them by govt.
What Obama actually said is not what those who are "insulted" are actually quoting. They purposely rearranging the words for maximum insult effect.
Where did you get your numbers marmico?
GPO Table 1.2 here or CBO Table F-1 here.
Junandos, Medicare is depicted wrong in the chart also.
It's combining the FICA-funded Medicare Part A with general-revenue-funded Medicare Part B as well as DOD health care.
Medicare Part A is funded from FICA not general revenues.
and payments to "health care trust funds" do not show that much of that is DOD Civilian, Active and retired military and the VA - which SHOULD be attributed to DOD and not Medicare. It's part of what we pay for - for National Defense not "entitlements"
Also not attributed to DOD is other national defense expenditures listed as "general govt" like NASA and Homeland Security and THEIR health care and pension costs AND both DOD and National defense share of the interest on the debt.
Does anyone else get the point the cartoon is a clear reference to Frederic Bastiat's broken window fallacy? That government superspending isn't creating real wealth? Mark Perry quotes Bastiat all the time... I would think it's obvious.
Not if you separate SS and Medicare Part A which have nothing to do with the general revenues budget which is what is in deficit.
I don't think that's a valid separation in any way, but I won't debate it - partly because there's lots of others.
Not if you separate SS and Medicare Part A which have nothing to do with the general revenues budget which is what is in deficit.
I don't think that's a valid separation in any way, but I won't debate it - partly because there's lots of others.
If your premise is what we are actually spending and what to cut to reach a balanced budget - it does - because cutting SS/Medicare Part A does not reduce the deficit at all.
You could cut both and you'd still have the same trillion dollar deficit.
You could make a separate argument about the legitimacy of FICA/SS but that would not be a discussion involving current budget spending and deficit.
What Obama actually said is not what those who are "insulted" are actually quoting. They purposely rearranging the words for maximum insult effect.
The original quote is also quite insulting to those of us who run built and run businesses.
Frederic Bastiat's broken window fallacy
Of course, but this is the intertubes, and not staying on topic is the rules... -g-
"The way it is written is uneccessarily insulting. The general message is correct in that successful people do not do it all by themselves: they generally get lots of help"
Help from whom? Building on what has already been accomplished can be just as individualistic as discovering or inventing something new.
If your premise is what we are actually spending and what to cut to reach a balanced budget - it does - because cutting SS/Medicare Part A does not reduce the deficit at all.
That requires you to believe that there is no spending in any way, shape or form for SS/Medicare Part A.
Oh...
@Larry
If your premise is what we are actually spending and what to cut to reach a balanced budget - it does - because cutting SS/Medicare Part A does not reduce the deficit at all.
You could cut both and you'd still have the same trillion dollar deficit.
You should try checking out The 2013 Budget
Unless I am completely off base both Social Security and Medicare are both in the red.
For 2011 (which I assume are the actual numbers):
Social Security Outlay -> $725B
Social Security Receipts -> $566B
delta-> -$159B
Medicare Outlay -> $480B
Medicare Receipts -> $188B
delta -> $292B
I realize there there is a Trust Fund exclusively holding Treasury Debt but that trust fund won't last long if we keep running deficits like that.
Military spending was about 55% of Income (individual and corporate) receipts $699B / $1272B (for the record)
In addition the SS/Medicare future prospects are pretty bleak, every projection shows them exploding in the near future.
Something about legailzed plunder ... Sorry, why am I greedy for wanting to keep my own money, but the Baby Boomers are not being selfish by demanding that me and my daughter pay for their retirement because the governement drasically underestimated how long people will live?
That requires you to believe that there is no spending in any way, shape or form for SS/Medicare Part A.
Oh...
oh there IS spending on it but not from the general fund and cutting it won't reduce general fund expenditures but most relevant - Medicare Part A spending did not cause the deficit.
You should try checking out The 2013 Budget
Unless I am completely off base both Social Security and Medicare are both in the red.
For 2011 (which I assume are the actual numbers):
Social Security Outlay -> $725B
Social Security Receipts -> $566B
delta-> -$159B
Medicare Outlay -> $480B
Medicare Receipts -> $188B
delta -> $292B
yes.
I realize there there is a Trust Fund exclusively holding Treasury Debt but that trust fund won't last long if we keep running deficits like that.
FICA is what created the trust fund not general revenues and when the trust fund is gone - SS/Medicare Part A automatically reduce payouts to stay level with FICA revenues - unlike the general fund.
Military spending was about 55% of Income (individual and corporate) receipts $699B / $1272B (for the record)
are you counting ALL of military spending to include other spending under "national defense" including the pensions and healthcare of the employees?
In addition the SS/Medicare future prospects are pretty bleak, every projection shows them exploding in the near future.
not SS/Part A - by law they cannot pay out more than FICA generates.
Parts B/D/D - yes - because they are funded from the general fund and they will have to be cut/reformed.
Something about legailzed plunder ... Sorry, why am I greedy for wanting to keep my own money, but the Baby Boomers are not being selfish by demanding that me and my daughter pay for their retirement because the governement drasically underestimated how long people will live?
libertarian trash talk....
the govt no more underestimated how long that people would live than private pensions plans did - either.
You're blaming demographics that affected all pensions plans on the govt.
if you were buying an annuity from the private market - you'd have the same problem ... the govt did not cause it but they did forsee it and that's why there is a trust fund. The purpose of that trust fund was to buy some transition time to reform SS - but we are now gridlocked to making changes to it so it is being frittered away.
Medicare Part A spending did not cause the deficit.
Can we touch Part B and Part D, or does touching them mean we want old people to die?
I'm 32, there will be no medicare for me, yet I'm going to pay into it my whole life, how is that fair?
Can we touch Part B and Part D, or does touching them mean we want old people to die?
I'm 32, there will be no medicare for me, yet I'm going to pay into it my whole life, how is that fair?
because you are not paying into Parts B,C,D which are all funded from general revenues - unlike Part A.
Obama has proposed cutting 50 billion from Part C and making people pay the full cost of "gap" coverage.
Part B is 3/4 funded from general revenues and 1/4 funded from premiums.
but to really put some perspective here - go to page 79 of the GAO FEDERAL TRUST
AND OTHER
EARMARKED FUNDS
Answers to Frequently
Asked Questions
http://www.gao.gov/new.items/d01199sp.pdf
and skip down to the line that says:
Medicare, Part B (Federal Supplementary Medical
Insurance Trust Fund) and see that it had revenues of 85 billion ( subscriber premiums)
but check the next line that says:
Military Retirement Fund 38 billion.
This is money paid into that fund from General Revenues to pay for military pension plans.
this money is not recorded in the DOD budget itself but rather in "entitlements" - because it is an entitlement - but it's also a legitimate expense of DOD.
if you nose around further in this doc, you'll find the civil service pension fund of which a good percentage of it is DOD civil service and again - not recorded as a DOD expenditure but instead a general fund expenditure for pension funds.
for comparison sake - if you go to the SS Trustee Report:
http://www.ssa.gov/oact/trsum/index.html
and skip down to where it says:
" What Were the Sources of Income to the Trust Funds in 2011? "
you'll see what is funded from FICA and what is funded from the general fund -
Part B labelled as SMI (supplementary medical insurance) is funded at $222.8 billion.
So you'll likely get your Part B Medicare but it's likely going to cost you quite a bit more and/or bigger co-pays and less things covered, etc.
@Larry,
Thanks for the links.
bart,
So what?, unless you're confessing that you're in favor of post censoring.
Nope. I was just pointing out what an unnecessary tool you are.
bart,
Everything doesn't need to *directly* produce wealth.
This doesn't even makes sense.
What Obama actually said is not what those who are "insulted" are actually quoting. They purposely rearranging the words for maximum insult effect.
==============================
Re-arranging or truncating. I have seen the same bad treatment of the quote ins several places, alwys by my conservative friends.
My theory is that the quote was deliberately written as it was, so that it would be easy to misquote/truncate.
This was done with the knowlege aforesight of what would happen: it would be misquoted and conservatives would be called on it for
a) being too stupid to remember from one sentence to the next what a paragraph is about or
b) being deliberately dishonest.
I suggest it was deliberately written this way by some bright Obama staffer, and conservatives took the bait.
I'm 32, there will be no medicare for me, yet I'm going to pay into it my whole life, how is that fair?
============================
You won't need medicare. By then Obamacare will have expanded to full socialized medicine.
I am not too inclined to listen to your complaints about things that have not happened, yet.
but check the next line that says:
Military Retirement Fund 38 billion.
This is money paid into that fund from General Revenues to pay for military pension plans.
=============================
I do not often agree with Larry, but that was well done.
Military Retirement Fund 38 billion.
This is money paid into that fund from General Revenues to pay for military pension plans.
this money is not recorded in the DOD budget itself but rather in "entitlements" - because it is an entitlement - but it's also a legitimate expense of DOD.
if you nose around further in this doc, you'll find the civil service pension fund of which a good percentage of it is DOD civil service and again - not recorded as a DOD expenditure but instead a general fund expenditure for pension funds.
I don't think the budget summary tables counted the VA either. That's another $100B or so.
Basically, all income tax revenue goes to pay for defense, all entitlements pay for themselves and everything else is debt financed?
You won't need medicare. By then Obamacare will have expanded to full socialized medicine.
Well I guess I have nothing to worry about.
Larry,
"in other words "cutting SS" won't do squat for reducing the deficit (other than writing off the 2.1 trillion intergovernmental debt for SS ( which won't reduce the deficit)."
What a complete load of nonsense. Bill Clinton raised taxes on SS(really the same as cutting it)in '93. I guess he and his flunkies weren't aware this had no effect on the budget deficit.
Nope. I was just pointing out what an unnecessary tool you are.
Cool!
Glad you have so clearly admitted that you have nothing but ad hominems and similar.
All you really did is agree with my post... quite entertaining to see you continue with the footbullets!
Ken: This doesn't even makes sense.
You had a choice:
1 Ask for clarification
2 Get somebody to help you understand
3 Make a fool of yourself
4 Do another (implied) ad hominem
Nice job on choosing #3 & #4.
Quality Obsessive Compulsive Epic fail again = Personality Disorder ( http://en.wikipedia.org/wiki/Obsessive-compulsive_personality_disorder )
Keep up the entertainment, that's an order!
I suggest it was deliberately written this way by some bright Obama staffer...
And some wonder about the quality of Obama and his staffers, and how well the country is being run, and what values are being promoted by an administration when spinning speeches to gete that kind of attention... or spinning speeches to cause upset is admired.
And yes, I'd say the exact same thing abut *any* president.
Does anyone have an effing clue what a real leader is???
This comment has been removed by the author.
marmico,
The last two years of Carter budgets - FY1980 and FY1981 - federal government outlays as a percent of GDP were 22.1%.
The last 6 years of the Reagan presidency - FY1984-FY1989 after the severe 1982 recession - federal government outlays as a percent of GDP were 21.9%.
As I stated earlier, after the severe 1982 recession reduced GDP, Reagan reduced federal government outlays to the levels of the Carter administration.
Reagan reduced federal government outlays to the levels of the Carter administration.
You forgot about the 1980 recession.
Bottom line, until Obama was compelled to "clean up" the Great Recession, Reagan was the highest spending administration since WW2. Military keynesianism and debt servicing costs on the exploding (188% in nominal terms) public debt were the hallmarks of his administration.
Reagan was no fiscal conservative.
marmico: "Reagan was no fiscal conservative."
Oh, I agree with that. My argument was simply that Reagan did not expand spending, as a % of GDP, in order to pull the economy out of the severe 1982 recession.
Ronald Reagan and George W. Bush both enacted some supply-side polcieis. But both allowed Congress to spend way more than they should have.
The only time I'm aware of any speding restraint in the past 50 years was FY1997-FY2001. Clinton was president and Republicans controlled both houses of Congress.
marmico: "until Obama was compelled to "clean up" the Great Recession"
And that is pure BS, marmico.
Reagan did not expand spending, as a % of GDP, in order to pull the economy out of the severe 1982 recession.
That is pure bullshit.
"Bottom line, until Obama was compelled to "clean up" the Great Recession,"
Yes, he was "compelled" to do it. He didn't really want to piss all that money away on mostly Democrat voters, he had to do it I tell ya!
"Reagan was no fiscal conservative."
Once again, Reagan cut domestic spending wherever and whenever he could get away with it. He never had a House majority, he had Tip O'Neill and a fairly RINO Senate at best. Read David Stockman's book "Triumph of Politics" and see how much help from the Congress he had at the time trying to cut spending.
Once again, Reagan cut domestic spending wherever and whenever he could get away with it.
You are an idjit. Military keynesianism is not domestic spending, right?
"You are an idjit. Military keynesianism is not domestic spending, right?"
Oh, bite me, Marmico. You're right I should have said non-defense spending. Please show me where Reagan argued the defense buildup as "military keynesianism." From what I remember, it boiled down to "we win, they lose."
I should have said non-defense spending
Then why didn't you say that idjit. Just so you can get over your Reagan Mythology Handbook talking points, why don't you research it. Reagan increased outlays to defence contractors by more than he reduced discretionary outlays to all other Americans. That and his fiscal irresponsibility in the historical record is explanatory.
What a trade! As if Stockman hasn't prostrated on his mea culpa bench recently.
"Then why didn't you say that idjit"
Because this is a blog comment page, douchebag. I comment here when I'm supposed to be working, I have to make it quick and I make plenty of mistakes.
"Reagan increased outlays to defence contractors by more than he reduced discretionary outlays to all other Americans. That and his fiscal irresponsibility in the historical record is explanatory."
Yeah, and he also won the cold war while morons like Obama were arguing surrender. Bill Clinton was able to cut defense spending as a result of Reagan's strategy.
"As if Stockman hasn't prostrated on his mea culpa bench recently."
I haven't seen him retract what he said about the Congress unwilling to cut spending. Perhaps you could link it for me when you're not hurling bigoted anti-gay remarks or snarling at Morganovich for daring to move to Utah.
Also, still would like to know where Reagan ever positioned the defense buildup as "military keynesianism."
the defense buildup as "military keynesianism
You don't know that government expenditures (not transfers) are a component of GDP?
Why don't you research what private GDP was in the Reagan era. Take 80 basis points off for military keynesianism. The so-called "Morning in America" was government sponsored. You are an idjit.
"You don't know that government expenditures (not transfers) are a component of GDP?"
Of course I do.
"Why don't you research what private GDP was in the Reagan era. Take 80 basis points off for military keynesianism. The so-called "Morning in America" was government sponsored. "
Nonsense. If anything, the defense buildup was a drain on the economy.
"You are an idjit."
And you are a frothing, bile spewing lunatic.
The problem for firefighter is that they have very few fires to fight however they continue to grow in number and their pay continues to explode...think about that multiplier!
the fact that most local governments are going bankrupt is the only wrinkle to this brilliance....
http://bluecravat.blogspot.com/2012/07/municipal-bankruptcy-fact-of-day.html
marmico-
paul has the right of this.
you are making 2 mistakes:
1. pretending that the map is the terrain
and 2. assuming that the components of future GDP are independent of those in the past.
you are using to this to create a circular logic.
gdp is not the economy. it's arguably not even a good measure of the economy.
digging holes and filling them in (or filling them with mx missiles) registers as gdp.
but it does not create wealth and prosperity that same way that investing in productive assets does.
this, paul is correct that mispend was a drag on the economy. even if we accept gdp as a measure, then we get money going to unproductive weapons instead of productive assets which slows growth and results in a smaller production possibility frontier in the future.
ignoring this is the basis for the circularity of your argument.
you assume that defense spending has a beneficial affect and because it is in gdp, you point to gdp as the benefit. that's pure definitional circularity, and that's only in a one period world. extend it over several periods, and the effect gets more pronounced due to investment being crowded out.
by your logic, ww2 should have greatly improved the economy and made americans better off.
it didn't. we had rationing, shortages, and all manner of hardship.
ww2 ENDING is what made the us better off and set off a huge boom (in defiance of keynsian predictions).
take a look at your argument at it's core: you are arguing that milspend is stimulative, that somehow taking scare resources and allocating them to non productive uses creates more, not less growth.
how can you possibly believe that to be true?
gdp is not the economy. it's arguably not even a good measure of the economy.
makes sense.
What SHOULD be used to measure actual real productivity?
And you are a frothing, bile spewing lunatic.
And you are what you are, an IDJIT spouting from memory of the now disgraced Reagan Mythology Handbook.
No data, no links, no nothing! That's the work of a clinically demented President of the USA from 1986-1988. The lesson for America is that you don't elect a 70 year old. Sorry McCain!
Morganovich, you are full of crap.
Bay area people have second homes in Park City and don't brag about their 165% returns on a $1,000 investment.
marmico-
you sure seem to spit a lot of bile and personal attacks for someone who has no information.
seriously, what is it with you?
go look us up:
manchester explorer fund.
we're on hedgefund.net
our carr for about 8.5 years is around 18% net.
i'll get the crow cooking on the bbq for you to eat.
note for the future: if you are going to grandstand and tell malicious lies, try not to tell ones that can be readily demonstrated to be untrue.
marmico-
also note:
the irony of your accusing others of being full of crap about something which you obviously know absolutely nothing is no lost on me, even if it is on you.
you are like an exercise in self parody.
larry-
measuring economic output is very complex. there is no one perfect method or even a group of 5 that really lays it all out.
jon and i have had some long conversations on this.
you can look at consumption, jobs, production levels, personal wealth, the things we own, etc. you need to balance that against things like debt accumulation.
my point was not that i had a perfect measure, but rather that one must be very careful in assuming the map is the terrain.
gdp is an attempt to measure economic activity.
it is not economic activity itself nor can it distinguish between useful economic activity (growing an apple) and useless economic activity (digging a hole and filling it back in).
thus, just boosting gdp does not actually make life any better or people any wealthier.
the (X-M) component is particularly problematic. it seems to imply that giving stuff away is growth but getting stuff given to you impoverishes you. i doubt you feel that way about most things.
it pays to sanity check these aggregates.
" measuring economic output is very complex.
"
so .. in terms of the economy, it doesn't care if you're digging a whole are building a innovative machine that increase widget production?
but the economy does "use"/"benefit" the money paid for an activity no matter how unproductive it is.
if you were going to compare the productivity of a private company like Apple or Exxon to the Armed Services and you assigned an arbitrary "productivity" value of "10" for the private sector productivity - what number from 0 to 10 would you assign to DOD?
"so .. in terms of the economy, it doesn't care if you're digging a whole are building a innovative machine that increase widget production?"
i'm not sure i understand this.
what i was saying is that GDP cannot tell the difference.
the components and what makes them up matter.
"but the economy does "use"/"benefit" the money paid for an activity no matter how unproductive it is."
not really. sure, you can take the money i paid you to dig a hole and fill it in and go spend it on dinner, but that's money i no longer have and did not receive value for. so the destruction of my wealth offsets yours. nothing net is gained.
your DoD question is much more complex than you seem to think.
it depends on which dollar you look at.
the initial money spent on DoD might well be very productive. protecting the borders and preventing the us from being conquered provides enormous value. (of course spending $1 on this would be useless and likely valueless) past the point where the borders are safe, the return diminishes. a marginal real dollar spent today likely buys quit little.
this is true of many kinds of investment. you need X to make it work at all, nX to get the peak productivity result, and past that, you see ROI drop. it can even become negative even before opportunity costs (like building too many concrete plants that destroy the profitability of the whole industry)
the private sector and free markets work to keep capital moving toward higher return and away from areas where return is low/negative/dropping.
it's not always a straight line and can overshoot, but, broadly, it works.
government does not have this. they just keep plowing money into things with bad return hoping it will make them work and, when it doesn't, demand more money BECAUSE it is not working.
this is why the G component of gdp has a multiplier so far below that of the private sector (and quite likely less than one).
private investment is like a leopard that evolved in the wilds of africa. government is like a little defenseless flightless bird from new zealand. when they meet, it's small wonder the leopard is much more adept at what it does than the kiwi.
you need pressure to evolve. the private sector has it, government does not.
"if we're talking about the general revenues budget and deficit then Social Security is not involved in terms of revenues and expenditures"...
Ahhh, wrong again larry g even though your statement should be factual...
Sadly it has not worked out the way is was suppose to...
From the Washington Times dated Tuesday, March 16, 2010:
Social Security IOUs stashed away
PARKERSBURG, W.Va. | The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration....
"Junandos, Medicare is depicted wrong in the chart also"...
Only in your dreams larry g and mine for that matter...
larry g even though there are multiple revenue streams the long and the short of it is they all end up in the general revenue fund anyway...
Why?
From the Mercatus Center's Veronique de Rugy a year ago: oday, 43 cents of every dollar spent is borrowed; this amount is about 4 times the rate in 1980...
"GPO Table 1.2 here or CBO Table F-1 here
Thanks marmico and interestingly enough Glassman also used government numbers in his Forbes piece...
re: the trust fund
the trust fund is money that was generated by FICA taxes not general revenues and thus rightly belongs to the people who pay payroll taxes for social security benefit.
while it's strictly true that a relatively small amount of general revenues are used to pay back the money the worst that could happen would be for the govt to not pay back the trust fund money and for FICA and SS to go immediately to a 75% funding arrangement that would normally not happen until the trust fund is fully paid back.
If you think the trust fund is a unique critter that only is connected to SS, you'd be totally wrong:
check out ALL of the trust funds:
starting at page 77:
http://www.gao.gov/new.items/d01199sp.pdf
trust funds include things like Military and Civilian Pensions, gas tax highway funds, etc.
but the most relevant thing here is if you are talking about the current budget and the budget deficit - and what to cut - it makes no sense at all to say that cutting SS would reduce the budget deficit because except for the small amount of annual pay back to SS, the vast majority of SS and Medicare Part A are not funded from General Revenues and further neither program contributed to the deficit either.
larry g even though there are multiple revenue streams the long and the short of it is they all end up in the general revenue fund anyway...
only in the sense that every trust funds revenues go into the general revenues in most cases for a matter of hours or days because it is redeemed back and spent.
FICA is known as an earmarked entitlement - that means that it's revenues cannot be spent on anything but it's designated purpose - SS benefits - this is why it is called Mandatory.
Other entitlements are known as Appropriated entitlements because they ARE funded from general revenues and the money that funds them has to be approved every time a new budget is done.
Medicare Part B, C, and D and MedicAid are appropriated entitlements but so are military and civilian DOD pensions and VA hospitals and Military health care.
and that's the problem with your
how is my money spent".
They classify things like military health care under Medicare and not under DOD.
They do the same thing under "Income Security" where they list military pensions instead of putting them under DOD.
What this does is essentially hide the facts about true military spending while at the same time pretending that FICA/SS are in the general revenue budget.
If you removed the FICA part of th pie and correctly pushed the specific DOD "entitlements back into the DOD slice of the pie and then also included DOD's share of the debt and the other expenditures for National Security - like NASA satellites and the Coast Guard - you'd see clearly that DOD/National Security is a very big slice of the pie.
so it makes me wonder why the guy who did that pie chose to move around what are really DOD-specific expenditures into other non-DOD pie slices.
"FICA is known as an earmarked entitlement - that means that it's revenues cannot be spent on anything but it's designated purpose - SS benefits - this is why it is called Mandatory"...
larry g, larry g, larry g you're just driven to not deal with reality lad...
It doesn't matter what a an odious bureaucrat or politico call it or label it, once there's no more money to borrow the jig is up, finito, end of the ride, the big adios, the sorry sayonara...
No more checks to the proles for any reason...
poor Juandos... he just does not understand.
take a look:
Federal Trust Fund Income, Outlays, and Balances
http://www.census.gov/compendia/statab/2012/tables/12s0476.pdf
Now - the thing to pay attention to beyond SS and Medicare is the Military Retirement Fund and the Federal Employees Health Benefit Fund (as well as the rest of the "funds").
Now, be advised that ALL of these funds exist not as funds but as claims to the treasury ...
and they all redeem treasury notes that they got when they turned over money to the Fed.
there are well over 100 trust funds that all work like this.
now why would you cherry pick just two of them to focus on?
there are well over 100 trust funds that all work like this.
now why would you cherry pick just two of them to focus on?
Probably because they have two largest outlays and are both projected to run out of money in the not to distant future.
"take a look:
Federal Trust Fund Income, Outlays, and Balances"...
Gosh you're such a chump larry g...
Those numbers are absolutely meaningless in real world terms...
They're all just bookkeeping spin...
43 cents of everyone of those dollars does not exist except as something this country owes to someone...
Take a deep wiff of reality...
Probably because they have two largest outlays and are both projected to run out of money in the not to distant future.
but you'd be wrong twice:
They won't run out of money as long as there is a FICA tax.
and why would you focus us them and not, for instance, the military and civilian DOD pensions funds that are also trust funds?
the interesting thing about the military and civilian DOD pensions funds is that they ARE funded from general revenues
so you think SS, funded from FICA will run out of money but you don't think the military pension fund will also?
43 cents of everyone of those dollars does not exist except as something this country owes to someone..
do you think that for ALL the trust funds including the military pension and health care funds?
They won't run out of money as long as there is a FICA tax.
This is complete BS. The Trustees' Report that YOU posted yesterday stated that both funds will run out and specifically that SS will only be able to pay out 75% of benefits in the future.
Expenses Based on CBO Projections
All things being equal I'd just like to keep my 6.2% and opt out of SS.
If people want guaranteed access to healthcare when they retire they need to pay more than 1.45% of their salary for it.
"do you think that for ALL the trust funds including the military pension and health care funds?"...
Yes larry g I do...
For all intents and purposes everything and anything you can lay your eyes on has a lien on it...
They won't run out of money as long as there is a FICA tax.
This is complete BS. The Trustees' Report that YOU posted yesterday stated that both funds will run out and specifically that SS will only be able to pay out 75% of benefits in the future.
TRUST FUNDS run out of money, NOT FICA.
what does "run out of money" mean?
they don't run out of money - they run SHORT of it by 25% but they STILL pay benefits.
that's NOT "running out of money" and it's disingenuous to use that as a pretext for "cutting SS" to reduce it's impact on the budget - which IS total BS.
In fact, all private/public pensions and annuities are subject to the same demographic changes and I hear no one saying that pensions funds and annuities are "running out of money".
but this is a side issue as to whether or not "cutting" SS would actually help the budget and reduce the deficit.
it won't and it's another dishonest narrative being promoted as to how to cut the deficit and balance the budget - by cutting entitlements ...LIKE SS.
that's simply not true.
cutting SS benefits won't free up any money to reduce the deficit since the money for SS does not come from the general fund to start with but instead from FICA.
but we have basically a propaganda effort to say otherwise - and I have to admit it's very successful but it's very wrong.
So... we're really not debating SS on the merits. We're using disinformation instead of facts.
If there is a debate over SS, it ought to be one based on the facts not lies.
Larry G: "cutting SS benefits won't free up any money to reduce the deficit since the money for SS does not come from the general fund to start with but instead from FICA."
Larry, that is not correct. All FICA receipts are deposited into the U.S. treasury accounts. All money paid to scoial security recipients comes from those same U.S. Treasury accounts.
In deriving the federal budget deficit, FICA receipts are included in the total revenue. Social Security spending is included in the total outlays.
You can read this in the CBO's Budget and Economic Outlook.
Larry, that is not correct. All FICA receipts are deposited into the U.S. treasury accounts. All money paid to scoial security recipients comes from those same U.S. Treasury accounts.
In deriving the federal budget deficit, FICA receipts are included in the total revenue. Social Security spending is included in the total outlays.
ALL Trust Funds revenues are deposited into the US treasury INCLUDING the military and civilian DOD health care and pension funds.
those notes are redeemed as soon as benefits have to be paid and in many cases, it on a daily basis.
the point is that the revenues generated are not from general taxes but instead from FICA and other sources and what is put into the treasury is then taken right back out.
The deficit that we have did not result from trust funds but from spending more than we took in - in regular taxes.
FICA/SS is included in the "unified" budget - yes - but it is a dedicated fund with specific TAX - FICA and by law only can be spent on SS/Med A.
no FICA money is spent on the general budget except as a temporary loan that is then paid back - with interest.
That's the way that ALL trust funds work by the way whether it's FICA/SS or Military Pensions.
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