By Simon Johnson. My full written testimony to Tuesday’s hearing of the Joint Economic Committee of Congress is available here.
The US has a large budget deficit and a debt-to-GDP ratio that, in most projections, continues to rise over time. Some House and Senate Republicans are arguing strongly that this situation calls for large and immediate cuts to government spending, for example as part of any agreement to increase the federal government’s debt ceiling.
The Joint Economic Committee of Congress held a hearing on Tuesday to discuss whether such spending cuts would be “contractionary” or “expansionary” for the economy in the short-run. My assessment, after participating as a witness at the hearing, is that large immediate spending cuts would tend to slow the economy (a webcast of the hearing is here).
The general presumption is that fiscal contraction – cutting spending and/or raising taxes – will immediately slow the economy relative to the growth path it would have had otherwise.
However, some studies have found that, in particular instances, fiscal contractions – meaning deficit reduction measures – have been consistent with no deceleration of economic growth. The IMF produced the most balanced recent assessment of the available evidence in Chapter 3 of its October 2010 World Economic Outlook, entitled, “Will It Hurt? Macroeconomic Effects of Fiscal Consolidation.” (I was previously chief economist at the IMF, but I left in August 2008 and had nothing to do with this study.)
There are four conditions under which fiscal contractions can be expansionary. But none of these conditions are likely to apply in the United States today.
First, if there is high perceived sovereign default risk, fiscal contraction can potentially lower long-term interest rates. But the US is currently one the lowest perceived risk countries in the world – hence the widespread use of the US dollar as a reserve asset. To the extent there is pressure on long-term interest rates in the US today due to fiscal concerns, these are mostly about the longer-term issues involving healthcare spending; if this spending were to be credibly constrained (e.g., in plausible projections for 2030 or 2050), long rates should fall. In contrast, cutting discretionary spending, which is a relatively small part of the federal budget, would have little impact on the market assessment of our longer-term fiscal stability.
Second, it is also highly unlikely that short-term spending cuts would directly boost confidence among households or firms in the current US situation, particularly with employment still around 5 percent below its pre-crisis level. The US still has a significant “output gap” between actual and potential GDP, so unemployment is significantly above the achievable rate. Fiscal contractions rarely inspire confidence in such a situation.
Third, if monetary policy becomes more expansionary while fiscal policy contracts, this can offset to some degree the negative short-run effects of spending cuts on the economy. But in the US today, short-term interest rates are as low as they can be and the Federal Reserve has already engaged in a substantial amount of “quantitative easing” to bring down interest rates on longer-term debt. It is unclear that much more monetary policy expansion would be advisable or possible in the view of the Fed, even if unemployment increases again – for example because fiscal contraction involves laying off government workers.
Fourth, tighter fiscal policy and easier monetary policy can, in small open economies with flexible exchange rates, push down (depreciate) the relative value of the currency – thus increasing exports and making it easier for domestic producers to compete against imports. But this is unlikely to happen in the United States, in part because other industrialized countries are also undertaking fiscal policy contraction. Also, the preeminent reserve currency status of the dollar means that it rises and falls in response to world events outside our control – and at present political and economic instabilities elsewhere seem likely to keep the dollar relatively strong.
The available evidence, including international experience, suggests it is very unlikely that the United States could experience an “expansionary fiscal contraction” as a result of short-term cuts in discretionary domestic federal government spending.
The best way to bring debt-GDP under control is to limit future spending increases and boost revenue while the economy continues to recover. In particular, health care spending needs to be credibly constrained but doing this properly would mean limiting health care costs as a percent of GDP – proposals that just push costs from government onto firms and individuals are not appealing.
There is also a pressing need for tax reform – to reduce complexity, lower distortions, and in particular roll-back the subsidies for household and corporate debt that have crept into the system. Excessive private sector debts pose a significant systemic and fiscal risk to the economy. The major reason debt surged relative to GDP in the past three years is the deep recession – the result of a financial crisis brought on by the irresponsible build up of debt.
An edited version of this post appeared this morning on the NYT’s Economix blog; it is used here with permission. If you would like to reproduce the entire post, please contact the New York Times.
The Baseline Scenario 
“There is also a pressing need for tax reform – to reduce complexity, lower distortions, and in particular roll-back the subsidies for household and corporate debt that have crept into the system. Excessive private sector debts pose a significant systemic and fiscal risk to the economy. ”
Do you think there should be a corresponding decrease in rates to achieve revenue neutrality? It sounds like that’s the deal being discussed in Washington. It carries a risk that subsidies will creep back in, pushing revenues down further.
To “roll-back the subsidies for household and corporate debt that have crept into the system” will be very challenging. The former must be referring to the mortgage interest tax deduction, and the latter to the absurdly low capital gains and also the ability to deduct interest associated with takeovers, rather than investment in new manufacturing capacity, etc. US citizens do love their tax breaks, and powerful corporate interests will lobby long and hard to preserve their ability to avoid taxes on capital gains and interest.
Since it costs $1,200,000 per year to keep a single soldier in Afghanistan, perhaps closing up shop there should be the first order of business. As Jimmy Carter recently quipped, the exit strategy for Afghanistan will be to reduce expectations so that we can depart without too much embarrassment. The death of Osama Bin Laden can be used to simply say “Mission Accomplished.” All Obama has to do now is put on a flight suit, land on a supercarrier, and make that speech in front of a big banner…
Simon Johnson devotes the first 80% or so of the above article to arguing that spending cuts or tax increases would hinder the recovery. Then in the penultimate paragraph he claims pretty much the opposite, namely that “best way to bring debt-GDP under control is to limit future spending increases and boost revenue while the economy continues to recovery…”
And if there isn’t a contradiction there, it strikes me that Johnson’s “best way” of reducing the debt-GDP ratio is vacuous, and for the following reasons.
If an economy is recovering at the maximum feasible rate, the deficit will INEVITABLY decline, EVEN IF THE DEBT WERE HALF ITS PRESENT LEVEL. In other words to claim that the “limits to spending increases” and “revenue boosts” are a clever way of reducing the debt is a bit like claiming that wind resistance is a clever new way of helping a car slow down.
Alternatively, if, during a recovery, a deficit is ARTIFICIALLY reduced by more than the above AUTOMATIC reduction, then the recovery would be hindered, as Johnson rightly suggests in the first 80% of his article.
Also, in advocating that health care costs need to be restrained, isn’t Johnson moving into politics? That is, the question as to what proportion of GDP is taken by public spending is a POLITICAL question. For example Sweden devotes a much larger proportion of GDP to public spending that the U.S. But despite this, Sweden has a lower debt and deficit than the U.S. (a fact which will have the U.S. political right baffled).
“One plus One equals Two minus Two… equals the negative square root of Zero”
Geithner and Bernanke’s, so called tool-box is empty, period! The “Gang Box”of Six… has laid waste to any semblance of realistic structural change. There’s no financial fail-safe to net`US [?] out the crises. We are in free fall for sure now, with the outdated, and voiced-over clarion calls from the likes of Greenspan, and Stockman! Trumpeting, and madly tooting their latent carved horns of deceit and scare mongering that even a commoner like myself acknowledged years ago. Ironically, and rather triumphantly how life humbles all… and that it was but the wealthy that felt unworthy of this sad tale of delusional grandeur gone terribly bad and rancid at there very bed post.
Obama will cave as usual. Making cuts to entitlements, while Hillary figures out what her role in life is! Romney will role his Sherman tank through the south…like-it or leave-it, taking Bachman along for the victory lap in the Rumble-Seat. While Obama dithers…Libya will burn…and the EU will just keep rolling along the Rhine. With or without Greece… It’s that simple. JMHO
Ref: “The Fiscal and Might of the Greatest Empire Babylon’s Downfall,… look into the eye’s of history?”
“The taking of the city of Babylon was virtually (impossible) impregnable, were it not for its over-indulgence, arrogance, high-and-mighty-Laurels[?], debauchery , and hegemony (note: hegemony)”
“The Rise and Fall of the City of Babylon”
http://www.buzzle.com/articles/rise-fall-of-the-city-of-babylon.html
http://en.wikipedia.org/wiki/Babylon
“The downfall of Babylon was won without a fight? Does this ring-a-tone of deafness, or that of an Alarm!” Cassandra’s need not reply,..just those weary pragmatic traveler’s of discontent? Point being: no money no country,..just lunacy running in circles in our leaders lead-based minds!
PS. The Federal Reserve System (only in America?) has literally placed the United States Republic on the precipice of ruin! We can’t let this happen,…
http://www.bigeye.com/griffin.htm
http://www.huppi.com/kangaroo/Timeline.htm
Thankyou Simon and James
There is tons to comment on here, since the question is: how to deal with our
economic malaise. But there is some terminology in Professor Johnson’s
post that has long puzzled me. He, and many many others writing about this
stuff, talk about debt to GDP ratio. It seems to me that this is comparing
apples with orange _rinds_. For debt is an ongoing quantity that varies
from year to year, while GDP is, basically, a year-to-year measure. In other
words, GDP is a _marginal_ quantity(mathematicians say “derivative”).
I think of GDP as the yearly increment of wealth. The _wealth_ of the United
States is what the debt of the United States should be compared to.
[ Mathematicians among us will see that “rind” above is an apt analogy.
The best way to compute the area of the sphere is to think of it as the
derivative of the volume of the sphere, which latter is an easier integral. ]
We have a present debt of about $15 trillion. The present _wealth_ of the
United States(some total of the value of the property held by USAns) is
about $60 trillion.
Two observations follow from the above:
1. Professor Johnson, and everybody else, should be talking about the
_deficit_ — GDP ratio. Deficit is the yearly increment/decrement of the
debt, just as GDP is the yearly increment/decrement of wealth.
2. Next time your favorite Repub howls about the $50K(*) burden of debt each
of our children is born with, remind her/him that said child is also
blessed with $200K(*) of wealth, which will help said child with her/his
burden!!
(*) Divide by the population of children!.
Best wishes,
Alan McConnell, in Silver Spring MD
Alan,
GREAT POINT.
Simon writes: “Some House and Senate Republicans are arguing strongly that this situation calls for large and immediate cuts to government spending…”
One imagines these immediate cuts applies to a reduction in force, or some other mechanism to reduce the number of federal employees. The Republicans loathe the same government they are paid to serve, so we know what is up their sleeve.
I can’t imagine how thousands more unemployed Americans could possibly have an “expansionary fiscal contraction” on the macro-economy. At this point, the deal is strictly survival.
Maybe some of the more erudite economists on this blog could explain it to me, in plain language?
To my mind, this isn’t unlike the assertion made by the same Republicans that rate cuts to the personal capital gains tax results in job creation. I don’t think it does, I don’t think there is any empirical data to show that it does, and I do think it’s another big lie told to further enrich people who already have a ton of money.
@Ralph Musgrave: “Also, in advocating that health care costs need to be restrained, isn’t Johnson moving into politics? That is, the question as to what proportion of GDP is taken by public spending is a POLITICAL question.”
As I’m sure you know, Mr. Musgrave, there is NOTHING more political than economics. After all, if every poor person on the planet can figure this out, why wouldn’t everyone know it? But I must ask whether Dr. Johnson really understands this. Because his politics don’t look too good…
I yanked these data just yesterday off the CNBC website – and as I always pay attention to dates, please note that this stuff is from 2009 Q3 – which makes you wonder why so much data on which people feed is two years old when trading is in nanoseconds – nanosecond trading takes two years to organize into a coherent “what just happened”?
That ain’t good…
Anyhow, (Letterman Top 10 drum roll please)
Top 20 nations with the biggest debt – USA was 20th, 19th was Hungary, 18 Australia, 17 Italy, 16 Greece (yes Greece), 15 Germany, 14 Spain, 13 Norway, 12 Finland, 11 Hong Kong, 10 Portugal, 9 France, 8 Austria, 7 Sweden, 6 Denmark, 5 Belgium (over one year without an organized Belgium “government”), 4 Netherlands,
3 Switzerland – 378.6% of GDP – 1.91 Trillion Gross External Debt, 314.7 Billion GDP
Hello, Basel?
2 UK
and #1 debt – Ireland – 2.25 Trillion, 172.5 Billion GDP.
I rest my case about how few USA citizens engage on this blog….
So where’s 2011 Q1 data?
Where’s the entire former USSR and the Eastern Bloc…?
Where’s South America, Africa, Middle East…the “stans”, the Far East – not even Japan…?
Numbers never add up, do they? Especially in a “global economy”….
ps – if Basel needs to auction off some assets – I’ll place a bid on just one of those super magnets they got inside the Large Halldron Collider – should keep my town “electric” for quite a while….yeah, bummer that NASA discovered that thunderhead clouds over 40,000 feet produce anti-matter…talk about “uncertain” investments…
Why would the govt roll back incentives to incur debt? Debt (private credit) is the mechanism by which the central banks create demand for currency, giving CBs greater security at the expense of the financial security of households. Debt is the “lifeblood of the economy”. It is the endogenization of money, such that supply of money can be manipulated through rate targeting, which we all know is more efficient than permanently printing this stuff called cash. Nothing makes Bernanke feel better than knowing he could instantly restore the value of the dollar by selling govt debt off the balance sheet, and burn the dollar-carry-traders. And as we all know, when central bankers feel good about themselves, the real economy grows.
BB:
“We don’t have a precise read on why this slower pace of growth is persisting. One way to think aboutit is that maybe some of the headwinds that have been concerning us, like, you know, weakness in thefinancial sector, problems in the housing sector, balance sheet and de-leveraging issues — some of theseheadwinds may be stronger and more persistent than we thought.”
“The best way to bring debt-GDP under control is to limit future spending increases and boost revenue while the economy continues to recover. ….” Ah ha! It’s still the “kick the can” game!
The politicians have been playing that one a very long time. And, now, Simon pulls up a chair at the
table. How very very sad. ….Lady in Red
The dual mandate of the Fed to (1) keep as many people employed as possible, and (2) to promote price stability, are unfortunately at odds with the massive economic restructuring that must occur. T
he size of the finance sector is weighing down the rest of the economy — having gone from perhaps 4% of GDP back in the mid-aughts to 9%, or 10%?,
Alas, the Fed doesn’t care whether people are working useful jobs (manufacturing, r&d, improving infrastructure, math and science education, mining, farming, even pairing investors with entrepreneurs who will create something that improves quality of life) or working extractive/predatory jobs (derivatives, high-frequency trading, mergers and acquisitions, speculation, insurance). This loss of a distinction explains the board’s puzzlement at why the economy hasn’t snapped the US economy back on track. The reality is that a larger and larger percentage of everybody’s paycheck is going for fees, speculative surcharges, interest, insurance, and penalties (add up the tolls, the taxes, the insurance, the fees, the penalties, the interest, and see if it isn’t a significant percentage of your paycheck — this would be a chore, I have yet to compute my own).
As for price stability, propping up prices in the real estate sector to prevent a correction that will involve a haircut for even the senior tranches, not to mention my retirement savings. This would create, as Camus put it at the end of The Stranger, “howls of execration.” I am willing to take this bitter pill, as the bolus administered today will be far easier to bear than what will result by kicking the can down the road for another 5 years.
It seems not to matter whether the GOP wins the presidency in 2012, as Obama is so enamored of the Chicago school of economic mojo espoused by Timmy and Ben and Lloyd and Jamie. Maybe the only difference will be that Obama will fight a little harder to slow the undoing of the New Deal. I guess we can call it the Old Deal (or feudalism or serfdom). Unless the haircut happens soon, the austerity will come soon. I can imagine waiting in line at the toll booth, beholding crews of grim, desperate Americans just happy to have jobs, cutting down the trees by the side of the road to ship to some foreign creditor.
I found an interesting article on a website that I normally consider to be a bastion of myopia.
http://www.washingtontimes.com/news/2011/jun/22/time-to-end-federal-reserve-secrecy/
Why is it that the jesters like Ron Paul, or even Michele Bachmann, are the only ones able to speak the truth to our King Lear?
oops…semi-literate…paragraph 3 should lead with “As for price stability, THE FED WANTS TO KEEP propping up prices in the real estate sector…”
To sum up: While OTHER countries can reap the expansionary benefits of fiscal contraction under not just one, not just two, but four—-yes, four!—-possible conditions……alas! A mass of “perceiveds” and “potentials” and “unlikelys” bars the US from qualifying under even ONE.
Lucky Greece. Poor us. Oh well, party on.
I can tell youse guys something but nobody on this continent will listen:
There will never be a real recovery until we are roused by our leaders to make an energy/environmental revolution. There is an elephant in the room which all the economic experts are ignoring. Our future, our children’s future, is under a huge cloud, and the people know it. We just don’t feel like making and buying and having more stuff. We feel like fixing what is wrong. We feel like preparing for this great challenge which we are facing. Greed and competition can drive a system only so far, and when we are facing life-and-death issues we need to pull together and make sacrifices, just as we do in war. Such social reflexes are built right into us, from long, long ago. And these feelings are right on the surface when I speak with the ordinary people . . along with despair, because they are nowhere reflected among our leaders.
@Carla, Annie and Lady in Red
As usual the gals win again by getting to bottom line quicker than anybody else. They seem to have a penchant for reading between the lines of this “economic jibberish” and recognize it for what it is, politics. Thank you for making the men give an account of themselves.
Simon, such a nice, succinct, straightforward analysis. Sadly, none but your bloggers are likely to be listening, at least as to those who might have some impact on the deficit reduction debate. I noted yesterday that Rep Cantor left the negotiating table, stating that tax “increases” are off the table. It would be nice to believe that rationality is possible in the face of sworn opposition by all Republicans. It is certainly easy to see a crisis looming as the loggerheads persist between those who actually act rationally and those who act according to dogmatic, inflexible and irrational thinking (sort of oxymoronic governance to one who believes that real rational action is the only possibility. Even on the “Debt Commission” there was broad agreement that tax reform was necessary to increase the necessary stream of revenue. The way things are, nothing of note can possibly happen until everything is on the table. There are certainly spending cuts which could happen, mostly those in the area of military spending and agency consolidation, which would help, but otherwise, discretionary spending makes up such a small portion of the overall budget, that it is impossible, literally, to use those alone to control the deficit growth. What looms before us could be viewed as terrifying. Frankly I am terrified that this game of chicken which threatens even more peoples’ job security and our general economic health will prove a massive boondogle. I see nothing that is likely to change that. What will happen in the end is that there will be endless posturing and finger-pointing, and some non-deal will be struck in legislative language that really won’t change much, and will not result in any kind of improvement.
@Annie.
In addition to looking at dates, you should also look at definitions. The CNBC data was not looking at government debt, but at “the combined total of liabilities, plus interest, that corporations, private citizens and the government owe to entities outside their borders.” Ireland is #11 with a 96% debt:GDP ratio if you only consider government debt. Japan is #1 at 225%, but doesn’t make the CNBC list b/c most of the government debt is not external debt, it is owed to Japanese citizens.
Greece is #5 (143%), Italy is #8 (119%). Other countries high on the list are Lebanon (#3), Zimbabwe (#4) & Jamaica (#7).
The problem with the US is not our current #36 standing (59% debt:GDP), but where we are heading. Pres. Obama’s 2012 proposed budget projects that our national debt will climb from $10.8T in 2011 to $16T in 2020. That projection is based on the assumption that discretionary spending will actually decrease and that personal and corporate income tax revenues will increase by 167% over that 8 year period. (Is either assumption realistic?) During that same eight year period, entitlement spending is projected to increase from $2.2T to $3.3T (50% increase) and interest on the debt is expected to increase from $207B to $793B (280% increase). Even if we accept the President’s numbers, is that path sustainable?
Our budget situation today is not unmanageable. But if we continue down our current path, it will become so. And the longer we wait, the more painful it will be to correct.
One more set of numbers may be illuminating. For 2011, entitlement spending alone ($2194B) exceeds all federal tax revenues ($2174B). In 2020, using Pres. Obama’s (IMO optimistic) projections, entitlement spending and interest on the debt ($4066B) will consume 87% of all expected revenue ($4686B).
With the great mass of baby boomers (of which I am one) starting to retire and by extrapolation also entering the first stages of their contribution to the exponential growth in health care costs set to happen over the next 20-30 years, there is at least one – way outside the box as of now – means to reduce long term health care spending that I think might be highly effective. To wit, why not offer some sort of financial incentive (for our heirs) for us to participate in a program that would culminate in an act of assisted voluntary euthanasia. I don’t think it would be too hard to convince many of us who have already witnessed, and wish to avoid, the depressing physical and cognitive degradation and indignity visited by father time upon our own parents – if it ain’t pretty for the greatest generation just think what it’ll look like for us. Ugh! Anyway, such a project could leverage the hospice care system, expanding on it’s current charge of compassionate end of life care for the terminally ill, to produce a palliative for the terminal self-absorption of the me generation by providing otherwise healthy individuals with the opportunity for redemption in the performance of an ultimate act of compassionate service to their country and humankind. And I haven’t even mentioned the added benefit of creating conditions for exponential growth (jobs!) in the end of life care services industry – a profound gift indeed for our children and grandchildren. The financial incentive could be structured in any of a variety of ways and be administered through existing private and public health insurance – it would be variable based on one’s age and overall health at the time of death, and the consequent projected savings to the overall system. Even now I can hear financial calculations clicking out from the inner recesses of the health insurance labyrinth. In this regard a brief account of what could be seen as the first tentative steps by the insurance industry in assessing the potential costs savings of leveraging end of life care appears in the article, “Letting Go,” by Atul Gawande in the Aug. 2, 2010 New Yorker,
Here’s a thought that has been floating around awhile, regarding our Federal Government’s “Land Ownership”… somewhere in the approximate 65% range, as a total aggregate of all fifty states. Data accumulated from various Government entities suggest that there are approx. 70k mothballed or unused buildings with a open marketable value estimated between $1.1tn -$1.6tn in the private market.
Most of these properties are on prime Real Estate locations (location, location, location) that have a win-win benefits windfall for the Government and Reduction of Debt:
#1 Ending cost of Government Administrative Upkeep (Clerical / Labor) etc., etc.,…
#2 Creating Enterprise Zones for local commerce by facilitating community outreach resource centers, and small business,..etc., etc.,…..
This could be, and should be seriously taken up by the gang of six as one of the many ways to reduce the deficit. (JMHO)
@anonymous “….There will never be a real recovery until we are roused by our leaders to make an energy/environmental revolution….”
I’ve been saying that forever….shall we get into how much $$$ and people are involved in maintaining “the establishment”…
But with “the establishment” so desperate as to have Homeland Insecurity goons rip into your financial records and library records to keep you pinned to poverty so that the energy revolution never happens, I think it’s actually gonna happen now…we’ve got everything to lose if it does NOT finally happen…
It’s sick to have to plot out a spy novel in your head in order to get to the library to look up a physics formula last seen in the 1970s….but a girl’s gotta do what a girl’s gotta do :-)….I just have to know if I solved the equation…
What I don’t get is what happened inside USA corporations – if you are in the energy biz, why not keep innovating? In the final analysis, nothing *material* is born full blown from the head of Medusa – it’s all incremental steps and discoveries…
Thanks, bigD for the explanation – I admit I only took in the slide show….
In which of those 20 countries I listed is the “government” not made up of people who were once citizens?
@jeff simpson “Alas, the Fed doesn’t care whether people are working useful jobs (manufacturing, r&d, improving infrastructure, math and science education, mining, farming, even pairing investors with entrepreneurs who will create something that improves quality of life) or working extractive/predatory jobs (derivatives, high-frequency trading, mergers and acquisitions, speculation, insurance). This loss of a distinction explains the board’s puzzlement at why the economy hasn’t snapped the US economy back on track. The reality is that a larger and larger percentage of everybody’s paycheck is going for fees, speculative surcharges, interest, insurance, and penalties (add up the tolls, the taxes, the insurance, the fees, the penalties, the interest, and see if it isn’t a significant percentage of your paycheck — this would be a chore, I have yet to compute my own).”
Agreed. But if we are going to really be honest about the situation, they’ve gone totally into the perfidious predator zone – JPMorgan hosts a yearly pooha for biotechs and they made the *suggestion* to stop collecting ALL the adverse events during clinical trials, you know “streamline the process”. Hedge hogs OWN the data collecting arm of clinical trials….need more lines or can you read between the few I drew….?
No More lines required :)…..hey, so what a few people DIED in the clinical trials, or a few livers were blown out, or a “few” adverse cardiac events happened….all in a days work!
And besides, what the public doesn’t know, won’t hurt them.
It not that these people people are invincible, it’s that they have created an aura of omnipotency, not unlike our benign friend, the Wizard, of OZ. Except these people are pernicious, and dangerous, unlike the Frank L Baum character.
@woop – Hauling Dr. Flowers, the spokesperson for normal minded medical people, out of the *hearings* when the IRS and for-profit Health Insurance companies were concocting their blood sucking schemes was all anyone needed to ever *see* about how pernicious and VERY dangerous *leadership* has become…
Funny how no one, in the months and months of blather about health care costs, ever brought up the SAVINGS from, uh, is it PC to call them *mistakes*?, made in hospitals. There is a direct relationship between mistakes and the rise of profitability the corps who run hospitals started making for themselves…guess they figured out a way to win both ways – pushing the drug and killing you with the drug….sort of like going long and shorting at the same time….
Final table – there is no one with the *nuts* – they’re all lying…
@ Annie, yes, everyone is afraid to speak up, lest they be inserted into a digital database, and labelled a “terrorist”, and then stalked by local police for daring to have the gumption of calling out the big lies, and declaring that a bunch of rotten scumbags are “leading” the world to absolute and abject ruination.
@woop – Cowards used to be less of a weapon of social disintegration than they are now. They went and hid when things got tough and did nothing – which was a good thing.
Now they get *paid* to enter names into the database.
“And then they came for me….”
Two logical errors pervade the discussion of US federal government debt to US GDP:
1. The debt is currently about $ 21 trillion considering the about $ 6 trillion owed by Fannie Mae and Freddie Mac to lenders that is in effect debt of the US since these entities were moved into US gov’t conservatorship.
2. All debt to GDP comparisons whether of the US or other governments are a mischaracterization of what would better be stated as “debt to tax revenues”. That’s because obviously it’s tax revenue and not GDP that governments have access to for payment against debt obligations both recurring interest and principal.
Based on the above, the US fed gov’t is clearly in the same league as Greece or worse because US debt is growing rapidly while the potential for tax increases in the US is flat or shrinking
We often read economists like Krugman and Stiglitz claiming that increases in taxes on the rich will have a favorable effect on revenues without the usual claim of slowing growth. This was the paradigm from 1945 to 1980, and we had enviable growth, a robust economy, strong education spending, stunning innovation, and robust industrial activity in spite of the Korean and Vietnam Wars. Dr. Johnson, isn’t this a good historical lesson for today? It seems both political parties ignore this history and pander to the bankers and the other rich sectors of our economy. I appreciate all the formulae, numbers, graphs, and economic theory, but it doesn’t seem that complex to me. History has spoken and COULD speak again. Why aren’t we posing this argument?
Nobody is proposing large cuts in domestic govt spending. The Republicans are going for peanuts. And any reductions in govt spending can be offset by temporary tax cuts.