Transfer payments *do* add nothing to the economy and that is the majority of government spending. There is no new production, no added value in any of that. It's just seizing money from one person to give to another. If the government did something like build roads you could argue that spending has economic value but transfer payments do not.
Bull. Simple example: The government pays me to write software for their planes. I get paid for such work. I spend the money on a new car (a Prius, if anyone cares).
Guess what? I just stimulated the economy, due entirely to government spending. And guess what? That care I brought? It requires gas, repairs, and allows me to go out and purchase other goods (in short: Its a walking multiplier effect), so the net economic gain is several times what I paid for that care.
So don't claim that a transfer of payments doesn't create economic growth, or that you have to physically create some product to create growth. Both are false arguments.
Both arguments are flawed. For the first, understand that the reason you shrink the debt/GDP equation during the good times is to give yourself room to work during the lean times. The best way to handle recessions is to tackle them head on, and make them go away, ASAP, debt be damned. Spending a recession to death early is ALWAYS cheaper then letting them hang around for 5-6 years (see FDR in 1936, Carter in 78, Reagan in 82 for reference).
Secondly, the spending you so decry in 2008 did exactly what it was supposed to do: Plug the hole that vanished in consumer spending, and stopped the downward trend in the economy. For those who forget, the economy lost almost 800,000 jobs January 2009. Just a year later, the job numbers were break even. Thats, frankly, a job turnaround unequaled in american history. The reason we're still stuck in an economic quagmire, is that while the stimulus plugged the economic hole, there was never a second stimulus to get the economy moving again, so we're stuck in the "we can't hire because there's no demand, which there won't be until people spend money, which they can't until we hire" loop.
Wow, I wish I were living in the la-la land you are. Keynesian economics and its bailout/stimulus has been discredited several times over- including the lack of effect during the last four years. The spending in 2008 did not do much of anything. The recession was due to the housing bubble going "pop" and people who spent way more than they could afford on over-inflated housing prices suddenly defaulted. Also there was a big oversupply of housing. All of that cleared out in the next couple of years after the people who were grossly underwater ended up foreclosing and a grinding halt of new construction for a few years corrected the housing oversupply issue. The bailouts didn't do much of anything. The banks sat on and continue to sit on the stimulus money. The auto bailout didn't have much effect on the car makers themselves either. They both ended up going through a bankruptcy, investors took a haircut, and contracts got re-negotiated just as if they had not had any government interference with their bankruptcy. All the stimulus did was guarantee that the UAW just got 100% of its obligations met by the taxpayers rather than taking a haircut like all of the other investors.
Again, false. For one, I ask you this: What entity, in the spring of 2008, was going to give the auto companies the money they needed to continue to operate?
*crickets*
After all, its not like the banks had the cash on hand...
Secondly, you fail to understand that the housing collapse, by itself, wasn't the cause of the recession. The root cause was said housing collapse dragged the banks down with them, drying up credit. And since the consumers share of the economy hasn't grown since the 80's, our economy is based around credit being available. Credit drys up, and so does economic growth.
Secondly, how would you explain the massive job turnaround that occurred within a 2-3 months of the stimulus going into effect? From 800k jobs lost to break even in 9 months? Oh wait, that happened all on its own, because the economy is magic and runs on pixie dust! Find me another period in american history where you had a postive net change in jobs of that ratio at any point in US history (not counting times of war, for obvious reasons).
Then again, you can look at Ireland/Greece/Spain for repudiation of cutting spending during recessions; all that occurs is a loss of economic growth, declining tax revenue, and larger problems then you had then before you started to cut.
And if you want real numbers from the so-called "recovery," economically we are no better off than we were in the middle of 2008 and in many cases worse off. The stock markets are pretty much at the exact same level as they were five years ago. Private sector production is actually a touch down. Employment is not good either as the U6 is about twice what it was five years ago. We have decreasing unemployment only because people "fall out" of the calculation from being unemployed for so long. The Obama "recovery" is anything but. That is not surprising as businesses are scared to do much, lest they get whacked with new regulations and taxes. Obamacare was a huge new expense, for example. That's why everybody is sitting on their money, they are scared of what Obama might come up with next.
Please, stop it.
1: Stocks were far overvalued in 2007-2008, up a good 40% from 2003-2004. A correction was inevitable.
2: Private sector production is slightly down, but I'm sure that has NOTHING to do with the lower amount of workers. Production doesn't occur if the product in question can not be sold, which requires actual consumers. If no one will buy my product, I will not hire someone to make it. Hence, lower production of goods. Even then, manufacturing is up, significantly, from where it was in 2008 as manufacturing jobs continue to drag us back from recession.
3: You fell into the trap of not knowing how unemployment is calculated. It is NOT based on unemployment checks like so many claim (because they don't know better), its calculated via survey. While the number is probably depressed slightly due to people not bothering to look for work, thats why there are a total of SIX rates posted by the labor department each month. [The U3 rate is the most reported since it was the only one that remained unchanged when the definitions were updated during Clintons term [todays U3 = historical U4]]. Secondly, Unemployment is a trailing statistic; I generally look at the job gains/month for a better indication. The private sector has LONG since recovered in full (generally +125k to +200k month to month), but losses in the public sector continue to drag the economy down. [Irony: The same people who complain about government being to big complain about the unemployment that results from shrinking the government.]
There's a reason why the debt/GDP has jumped so much since Reagan: The abandonment of sound economic policy (Keynesian economics).
Keynes was about as correct as a stopped clock, and you know it.
Yep. Its not like the entire Western Worlds economies didn't grow by several times during the 40 years his principles were followed, or the fact that massive amounts of debt didn't begin to accumulate until AFTER his principles were abandoned, or that other economic policies [Supply-Side] has NEVER had a single year where Debt/GDP has shrunk.
Oh right, pure coincidence.
No offense, we're still larger then the rest of the world combined. No one else is CLOSE economically. We drive all economic activity, every other economy is dependent on trade from US, not the other way around.
Last time I checked the EU has a higher GDP than we do and China is about 80% of the GDP as the U.S. We *don't* drive economic activity like we used to.
Do you even LOOK at numbers?
US GDP: $15.811 Trillion
China GDP: $7.30 Trillion
EU GDP: $17.578 trillion
(No, PPP numbers are not applicable here)
Though are you REALLY going to take the entire EU combined? REALLY?
Simple solution: Loosen the immigration rules Reagan put into place. No idea why it takes years to get immigrants in; should take hours instead. This will have to happen at SOME point, due to declining birth rates (which itself points to greater economic problems ahead).
That is one thing I actually somewhat agree with you on. Immigration policy does need some tweaking. However relying on massive population growth to sustain Ponzi scheme entitlement programs like Social Security isn't sustainable for very long and those entitlement programs absolutely need to be addressed.
Please. Social Security works the same way as other insurance programs. Hell, you can fully fund it instantly if you remove the upper level cap on income that is applicable to the Payroll tax. (Though I do support raising the age to match life expectancy, and instituting a "means test").
Plenty of new industries come and go with time. Its always in hindsight that we recognize them.
I am pretty sure the U.S. knew that it was a manufacturing powerhouse after WWII and that the computer boom was well known when it happened. You don't remember all of the "e-this" and ".com" that and "Dow 36,000" during the 90s?
You again assume you need to create some physical good to have an economic effect.
Yet Clinton had no problems making us money. Or the fact revenue is well below historic norms.
The tech boom, a
gridlocked government, and the Baby Boomers being in their peak income earning years brought us a roughly balanced budget for a few years. You forget that Clinton was elected in 1992 and had a Democrat Congress until the end of 1994. The economy and budget didn't look very good until the Republicans swept the Democrats out of Congress in 1994 and gridlocked the government for the next 6 years.
I'm sure that the fact he had to clean up Bush's mess first had NOTHING to do with the economy that followed. Then again, lets instead point this out:
1) No Republican President since Nixon has shrunk the Debt/GDP, regardless of which party controlled Congress.
2) Carter/Clinton shrunk the Debt/GDP, regardless of which party controlled Congress.
Both are true statements. So why can a Democratic President shrink the debt, and a Republican can't, regardless of party control of Congress?
Then again, there's number 3 as well:
3) Post WWII, no President, regardless of party, increased the nations debt as a percentage of the countries GDP until Republicans gained control of the Presidency AND Congress (1982).
Hence why I continue to advocate Hunstmans plan: Remove all deductions, and reduce the rates overall for the lower/middle classes. The tax code is NOT the place to try and drive economic activity.
That makes sense but it is absolutely opposite of what Obama and the Democrats are pushing. They are pushing for a small minority of the population to pay huge amounts of taxes while the majority pays little to none.
Oh, so you're one of the "Tax the poor" Republicans then? Watch the cost of every single program skyrocket out of control if you do that. Whats the POINT?
Uh oh, here comes the "lets tax the poorest of us" argument. Nevermind you'll just increase the costs of Medicare and other Federal programs faster then you can tax that segment of the economy.
Secondly, after deductions, I paid my $1 of taxes. Kinda proves my point about needing to get rid of deductions, no?
You contradict yourself. About half of people pay NO federal income tax due to deductions and exemptions meeting or exceeding their low to moderate incomes and thus having no taxable income. Removing deductions and exemptions will largely result in people who currently pay little to no tax paying significantly more because the high earners already are very limited in the amount of deductions and exemptions they can take (see the Alternative Minimum Tax.) So you are actually in favor of "taxing the poorest." You also don't have to increase the amount of federal spending on entitlement programs. You can control that with something called a budget, which Obama has not had in three years.
I said, specifically, to reduce the rates overall. The idea is to significantly reduce the rates while removing deductions, so the poor pay no taxes (economically idiotic to make them pay), the middle class pays about the same (and yes, some people will probably be screwed. No plan is perfect), and the wealthy and business pay more (not due to higher rates, but the removal of deductions).
Failing that, I'd argue for a national sales tax AS A REPLACEMENT to the income tax, even though its slightly more anti-competitive (new business with large startup costs suffer, but its "better" then what we have now).
In this case, the loss in revenue is driven entirely by the decline of people working. No income, no income tax. Hence the argument for a second stimulus, since it gets people to work, and thus starts to restore BOTH GDP and Revenue, all in one stroke. (Even better, get them to work upgrading our infrastructure, so we get a trifecta for one spending measure.)
I already explained this, I only counted the private sector portion of the GDP. And yes, the decrease in revenue was due to fewer people working and paying taxes. However the stimuli did NOT work, otherwise we would have seen a recovery in the U6 unemployment rate and an increase in the revenue/GDP ratio back to what it was prior to the recession. We have seen neither; the stimulus failed. The money got sat on by banks and went to China via people using their checks to buy madeinchina crap at Wal-Mart. The infrastructure projects weren't useful either. In my locale the money went to upgrading transit buses that already ran around empty and putting in fancy bicycle lanes nobody actually uses. In other words, a complete waste.
Again, no.
January 2009, the economy lost ~800,000 jobs.
January 2010, the economy gained ~10,000 jobs.
So don't give me "the stimulus didn't work". Unemployment is a trailing economic indicator. The stimulus plugged the hole in missing economic activity, and was large enough to stop the downward trend. It was NOT large enough to cause an upward trend, however, so we're basically stuck in economic purgatory, with a very slight upward trend.
Secondly, if the infrastructure funds weren't well spent, then I would start voting out the state representatives that pushed the projects in question. I know it was spent well here in NY, as I saw a TON of construction work at that time.
Next up, the BTC's did NOT increase revenue/GDP. The first of the cuts was implemented in 2001. That year, Revenue/GDP was at 19.5. The next three years, this declined to 17.6, 16.2, and 16.1. 2004 was the one year GDP cracked 3% growth under Bush though, so Revenue/GDP recovered the next few years (17.3, 18.2, 18.5), as one would expect with rising GDP. Note the PERCENTAGE of Revenue to GDP, even at its peak under Bush, was still 1% lower then it was in 2001. This is significant, due to the rise in GDP, so that 1% comes out to a few hundred Billion/year in lost revenue.
Likewise, when the economy recovers from this recession, the revenue/GDP will naturally rise as well. But remember, a 1% difference in Revenue/GDP in a 15 Trillion economy is 150 Billion in lost revenue. Thats how much, per year, was lost at the economic peak due to Bush's tax cuts.
And the continued recession due to heavy regulation and threat of yet more regulation from Obama and the Democrats has depressed revenues despite massive failed stimulus programs. You are arguing about $150B/year when Obama increased the deficit by 8 times that much and has continued to run that high of a deficit ever since being anointed. We have a massive spending problem even by your calculations, although you absolutely refuse to admit it.
Also, mark my words, we will not get out of the recession until something gets done about the wet blanket of regulation and threat of more regulation that is smothering the economy.
Obama did not increase the deficit by "8 times as much" as you claim. Remember, the Fiscal Year starts in October, so the FY2009 budget was passed under the watchful eyes of G.W.B. The first budget Obama passed, FY2010, saw a 2.4%
DECREASE in Federal Spending. So again, the numbers prove you wrong. [Coincidentally, 2009 saw a 2.6% growth in GDP, and 2010 saw a 2.0% drop in GDP, which kinda proves my economic point in the first place].
And yet, despite a 2.4% spending decrease, the debt increased by 12.5%. Thats your lost revenue due to the recession. So let me ask you: If spending DECREASES and the debt INCREASES, whats the primary driver?
Also, as far as regulation goes: If you hand't seen the Depression era banking regulations overturned in the late 90's [specifically, the separation of investment and banking industries], you wouldn't have had this recession in the first place! Short term profits should NEVER trump long term economic growth.