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Remember, you only need to worry about the "fiscal cliff" if you're a keynesian.

  • BoatShoes
    gut;1317773 wrote: By all accounts, we are on the precispice of another recession.
    We're projected to go into a recession if we go over the fiscal cliff and it isn't resolved thereafter because it will reduce aggregate demand and the FED is largely out of bullets to offset it and you don't do austerity at the zero bound as actions producing a credible path to a balanced budget do not really increase the confidence of investors and households because public finances are on more sound footing because that is all nonsense. :thumbup:
  • BoatShoes
    jhay78;1316979 wrote:Why is Harry Reid beating around the bush with a $2.4 trillion increase in the debt ceiling? Just bump it up $20 trillion and we're good for at least 8 years. :rolleyes:
    Should just eliminate the debt ceiling. It serves no purpose as it is always raised (as it should be).
  • I Wear Pants
    I'm saying it because for my studies I'm currently wading through hundreds of pages of papers and data on austerity measures and from that I've deduced that the shit does not work not because of any indoctrination. At least not any more so than you say what you do because you're indoctrinated by this new wave of libertarian/Ron Paul worshipers. That's not true just as I'm not indoctrinated.
  • gut
    BoatShoes;1318083 wrote:We're projected to go into a recession if we go over the fiscal cliff and it isn't resolved thereafter because it will reduce aggregate demand and the FED is largely out of bullets to offset it and you don't do austerity at the zero bound as actions producing a credible path to a balanced budget do not really increase the confidence of investors and households because public finances are on more sound footing because that is all nonsense. :thumbup:
    Even if we accept Keynesian economics as a truism - despite the fact that no one practices it - then the results would just call for larger and larger deficits because of the dubious "multiplier effect". A govt could target and achieve any level of economic growth just by tweaking it's spending.

    This is, of course, asinine and makes it inherently obvious that even if Keynesian economics does work, it has limits or a tipping point. Even if the negative externalities are lagged, you've pumped so much offset into the system that you've already created tremendous drag on future growth. And you're response to that is just keep increasing spending, but that can't be done into perpetuity. So yes, absolutely, sustainable economic growth must necessarily begin with reducing the deficit.
  • I Wear Pants
    gut;1318274 wrote:Even if we accept Keynesian economics as a truism - despite the fact that no one practices it - then the results would just call for larger and larger deficits because of the dubious "multiplier effect". A govt could target and achieve any level of economic growth just by tweaking it's spending.

    This is, of course, asinine and makes it inherently obvious that even if Keynesian economics does work, it has limits or a tipping point. Even if the negative externalities are lagged, you've pumped so much offset into the system that you've already created tremendous drag on future growth. And you're response to that is just keep increasing spending, but that can't be done into perpetuity. So yes, absolutely, sustainable economic growth must necessarily begin with reducing the deficit.
    Except that fiscal multipliers do exist and you can end up doing more harm by cutting than the amount you cut. The inverse is certainly true as well in that you can get less than $1 of benefit for $1 of spending. The key is to find where the spending that is valuable is and keep it and where the spending which is not valuable is and cut that.

    Austerity measures are for economic booms, not recessions and depressions.
  • gut
    I Wear Pants;1318283 wrote: Austerity measures are for economic booms, not recessions and depressions.
    You're falling into the Boatshoes trap. No one on this board has preached austerity. Cutting $200B is not austerity. We need confidence and some fiscal santiy, and then you can unlock the pent-up growth that is being crushed under these policies.

    Fiscal multipliers exist, but not into perpetuity. But it's nothing special about gubmit spending - the multiplier effect exists for any dollar no matter who spends it. But it's neither stable nor unlimited. Deficit spending can have a positive effect, and obviously it does, but it can also be offset (and then some) by causing an indirect reduction in the average multipliers across the rest of the economy. The rest of the economy is 10-15-20X that deficit spending, and so even a small decrease across that can cause a net negative. That's what we are seeing.

    Classic theory said deficit spending doesn't work because it impacts consumption and investment choices in anticipation of future tax increases. Whether people didn't buy that or didn't sweat it in the past, that is what we are seeing today. We've never run the surpluses to pay for it, and as the debt has spiraled out-of-control and with Obama preaching tax increases it's no longer an uncertainty or something you can rationalize away. People don't have to anticipate this any more - it's a reality. And I believe they are behaving exactly as the classic model predicts.
  • jmog
    BoatShoes;1318077 wrote:Additionally, worth pointing out that the states with the more generous welfare states are handling Europe's problems better than the less generous states like Spain.
    That doesn't change what got them there Boat, you can say "well they are doing better right now" all while ignoring what caused the problem. Its like treating a heart attack with as aspirin.
  • QuakerOats
    If you don't like looking at Europe burn (because of socialism and deficit spending), then simply look at Japan. They threw everything including the kitchen sink at it and nothing helped and they now have debt out of the wazoo, which puts them squarely behind the 8-ball.

    Nothing good can come from debt and deficits (unless you are winning a war against communism and tyranny).