The Debt Debate: Mr Panic and Mr Don't Worry

[Procrustes Stretched]

The Debt Debate: Mr Panic and Mr Don't Worry

Michael Kinsley, who is as irritating a media personality as they come...has moments of pure clarity. He breaks through the bs here.

Peter G. Peterson

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

Businessman and billionaire Peter G. Peterson is Mr. Deficit Panic. He's spending a billion of his own dollars warning people about the danger of the growing national debt. And yet, speaking about the deficit to Time magazine in December, he said, "I wouldn't enact any measures to reduce it until the economy recovers properly." In fact, he told Time that he actually favors more stimulus spending, "as long as it's well designed and paid for."

Peterson is a bit confused here. If an economic stimulus is paid for, it ceases to be a stimulus. The borrowing isn't incidental: Spending more than you've got is the whole point. But Peterson's basic scenario is this: Let the deficit grow and don't worry about it until economic recovery, then get serious about reforming entitlements and go ahead and raise taxes if you insist. The national debt is what I care about.

Paul Krugman

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

New York Times columnist and Princeton economics professor Paul Krugman is Mr. Don't Worry About the Debt. He believes that unemployment is a much more pressing problem, and that the stimulus at the beginning of President Obama's first term was inadequate. Even now he wants more stimulus, which means more government borrowing and a higher national debt.

Is there any limit on how long we can keep borrowing like this? Yes, Krugman says. When "the economy is robust again," it will be time to start paying down the debt. More specifically, he wrote last year that when the unemployment rate falls to 7%, it will be time to reverse course. Currently the unemployment rate is 7.8%, so we're close.

Krugman probably did not mean actually paying down the debt, since that would involve running an annual surplus, which even Krugman does not see on the horizon. But Krugman and Peterson are in agreement on the right formula: First, you run up the deficit in order to stimulate the economy, and then you reduce the deficit in order to bring the national debt into a safer range

read full Op-ed article here:
Op-ed - editorials, commentary, letters, cartoons, endorsements - latimes.com - latimes.com

 

[Procrustes Stretched]

this should be required reading for people who comment upon the deficit and the budget

 

[Kimura]

First of all, from whom does the US borrow? The US government creates money ex nihilo, regardless of tax revenues or bond sales. As a matter of fact, all government spending by the federal government is 'money printing' by default. Deficit reductions are the fiscal equivalent of a tax increase since both remove income from the economy. One simply affects lower-to-middle income Americans. Sovereign government that issue their own currency don't operate like households on a fixed supply of dollars nor can they go bankrupt, it's operationally impossible.

Secondly, federal taxes don't fund revenues, all they do is create a demand for the currency since tax liabilities are denominated in US dollars. All taxes do is essentially regulate aggregate demand.

 

[EdwardBaiamonte]

The Debt Debate: Mr Panic and Mr Don't Worry

Michael Kinsley, who is as irritating a media personality as they come...has moments of pure clarity. He breaks through the bs here.

Peter G. Peterson

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

Businessman and billionaire Peter G. Peterson is Mr. Deficit Panic. He's spending a billion of his own dollars warning people about the danger of the growing national debt. And yet, speaking about the deficit to Time magazine in December, he said, "I wouldn't enact any measures to reduce it until the economy recovers properly." In fact, he told Time that he actually favors more stimulus spending, "as long as it's well designed and paid for."

Peterson is a bit confused here. If an economic stimulus is paid for, it ceases to be a stimulus. The borrowing isn't incidental: Spending more than you've got is the whole point. But Peterson's basic scenario is this: Let the deficit grow and don't worry about it until economic recovery, then get serious about reforming entitlements and go ahead and raise taxes if you insist. The national debt is what I care about.

Paul Krugman

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

New York Times columnist and Princeton economics professor Paul Krugman is Mr. Don't Worry About the Debt. He believes that unemployment is a much more pressing problem, and that the stimulus at the beginning of President Obama's first term was inadequate. Even now he wants more stimulus, which means more government borrowing and a higher national debt.

Is there any limit on how long we can keep borrowing like this? Yes, Krugman says. When "the economy is robust again," it will be time to start paying down the debt. More specifically, he wrote last year that when the unemployment rate falls to 7%, it will be time to reverse course. Currently the unemployment rate is 7.8%, so we're close.

Krugman probably did not mean actually paying down the debt, since that would involve running an annual surplus, which even Krugman does not see on the horizon. But Krugman and Peterson are in agreement on the right formula: First, you run up the deficit in order to stimulate the economy, and then you reduce the deficit in order to bring the national debt into a safer range

read full Op-ed article here:
Op-ed - editorials, commentary, letters, cartoons, endorsements - latimes.com - latimes.com

of course its perfectly stupid to run up the deficit until there is a recovery since by then we'll have another recession!! Guess what??? We have been running up bigger and bigger deficits( $16 trillion so far!!!) into the largest recession since the depression and the economy just turned down yet again!!!

a deficit causes a recession, of course, as libturd soviet bureaucrats stupidly invest our money for us creating mal-invesment bubbles, like the housing bubble!

 

[Quantum Windbag]

The Debt Debate: Mr Panic and Mr Don't Worry

Michael Kinsley, who is as irritating a media personality as they come...has moments of pure clarity. He breaks through the bs here.

Peter G. Peterson

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

Businessman and billionaire Peter G. Peterson is Mr. Deficit Panic. He's spending a billion of his own dollars warning people about the danger of the growing national debt. And yet, speaking about the deficit to Time magazine in December, he said, "I wouldn't enact any measures to reduce it until the economy recovers properly." In fact, he told Time that he actually favors more stimulus spending, "as long as it's well designed and paid for."

Peterson is a bit confused here. If an economic stimulus is paid for, it ceases to be a stimulus. The borrowing isn't incidental: Spending more than you've got is the whole point. But Peterson's basic scenario is this: Let the deficit grow and don't worry about it until economic recovery, then get serious about reforming entitlements and go ahead and raise taxes if you insist. The national debt is what I care about.

Paul Krugman

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

New York Times columnist and Princeton economics professor Paul Krugman is Mr. Don't Worry About the Debt. He believes that unemployment is a much more pressing problem, and that the stimulus at the beginning of President Obama's first term was inadequate. Even now he wants more stimulus, which means more government borrowing and a higher national debt.

Is there any limit on how long we can keep borrowing like this? Yes, Krugman says. When "the economy is robust again," it will be time to start paying down the debt. More specifically, he wrote last year that when the unemployment rate falls to 7%, it will be time to reverse course. Currently the unemployment rate is 7.8%, so we're close.

Krugman probably did not mean actually paying down the debt, since that would involve running an annual surplus, which even Krugman does not see on the horizon. But Krugman and Peterson are in agreement on the right formula: First, you run up the deficit in order to stimulate the economy, and then you reduce the deficit in order to bring the national debt into a safer range

read full Op-ed article here:
Op-ed - editorials, commentary, letters, cartoons, endorsements - latimes.com - latimes.com

62% of the people who voted for Obama think the debt is the single most important issue in the country and that we need to deal with it sooner rather than later. The idiots are the people who think it doesn't matter.

 

[EdwardBaiamonte]

. As a matter of fact, all government spending by the federal government is 'money printing' by default.

if government spends from tax revenue no money has been printed. Sorry!

 

[Quantum Windbag]

. As a matter of fact, all government spending by the federal government is 'money printing' by default.

if government spends from tax revenue no money has been printed. Sorry!

The government doesn't print the money it collects in taxes?

 

[EdwardBaiamonte]

. As a matter of fact, all government spending by the federal government is 'money printing' by default.

if government spends from tax revenue no money has been printed. Sorry!

The government doesn't print the money it collects in taxes?

yes it prints all the money but it doesn't print money to create the tax revenue it collects. Thats money was printed long ago independent of the taxing and spending.

 

[Kimura]

. As a matter of fact, all government spending by the federal government is 'money printing' by default.

if government spends from tax revenue no money has been printed. Sorry!

Sorry, that's not how monetary operations function under a fiat system. If the US government takes in one trillion in tax revenues, for example, but needs 4 trillion because of Congressional appropriations, where does the 3 trillion come from? The government creates it through deficit spending. It's sort of illogical to think the government needs to collect that which it issues in order to spend.

Either way, from a practical standpoint, all government spending is effectively 'money printing' because it creates reserve balances while taxes and bond purchases destroy those dollars. Money creation is nothing more than a balance sheet operation under a fiat system.

 

[DSGE]

. As a matter of fact, all government spending by the federal government is 'money printing' by default.

if government spends from tax revenue no money has been printed. Sorry!

Sorry, that's not how monetary operations function under a fiat system. If the US government takes in one trillion in tax revenues, for example, but needs 4 trillion because of Congressional appropriations, where does the 3 trillion come from? The government creates it through deficit spending. It's sort of illogical to think the government needs to collect that which it issues in order to spend.

It doesn't really "create money" the way Ed means, creating base money which eventually results in inflation. It borrows it through issuing bonds which it sells on the open market; those bonds can themselves be used as a kind of money.

Either way, from a practical standpoint, all government spending is effectively 'money printing' because it creates reserve balances while taxes and bond purchases destroy those dollars. Money creation is nothing more than a balance sheet operation under a fiat system.

Minor technical point: Only the Fed increasing the monetary base or people choosing to hold less base money as currency can increase reserve balances (that is, the total quantity of bank reserves). But you're right in that it creates a form of money, since government bonds are used in transactions by some institutions. Same way a private bank creates money when it creates a demand deposit or time deposit.

 

[Kimura]

if government spends from tax revenue no money has been printed. Sorry!

Sorry, that's not how monetary operations function under a fiat system. If the US government takes in one trillion in tax revenues, for example, but needs 4 trillion because of Congressional appropriations, where does the 3 trillion come from? The government creates it through deficit spending. It's sort of illogical to think the government needs to collect that which it issues in order to spend.

It doesn't really "create money" the way Ed means, creating base money which eventually results in inflation. It borrows it through issuing bonds which it sells on the open market; those bonds can themselves be used as a kind of money.

Well....an increase in the supply of money isn't solely the cause of inflation. In point of fact, the opposite tends to occur. When the money is paid to people in firms to create more goods and services, the supply of goods, services and real assets increases in tandem with the money supply, so prices don't rise. As long as the supply of real stuff increases at a rate equal to or faster than the growth in the money supply, there cannot be inflation. Moreover, as the stock of real wealth increases, that's the definition of an expanding economy and higher standard of living, so the value of the currency will be stable or even rises, because its in demand as a necessary unit of transaction and to meet higher nominal tax obligations. When the rate of money growth or the speed at which we spend it exceeds our ability to physically make more stuff, that's when bad things like inflation happen.

As far as Treasuries are concerned, they're nothing more than a vestigial leftover from the days of the gold standard. The US isn't dependent upon bond sales to fund government. Like I said, all 'money printing' is essentially government spending by default. For example, those dollars used to purchase bonds come from government spending itself, because the government creates money ex nihilo. Federal spending is basically costless for the federal government. The government is essentially inflation constrained, not revenue constrained, since it can spend as much as it wants to, which is ultimately a policy decision.

Either way, from a practical standpoint, all government spending is effectively 'money printing' because it creates reserve balances while taxes and bond purchases destroy those dollars. Money creation is nothing more than a balance sheet operation under a fiat system.

Minor technical point: Only the Fed increasing the monetary base or people choosing to hold less base money as currency can increase reserve balances (that is, the total quantity of bank reserves). But you're right in that it creates a form of money, since government bonds are used in transactions by some institutions. Same way a private bank creates money when it creates a demand deposit or time deposit.

QE is an interesting example. Everyone kept referring to these large scale asset purchases as 'printing money' when nothing could be further from the truth. QE was nothing more than a glorified asset swap.

Technically speaking, private banks aren't reserved constrained and the money multiplier seems to be largely a mythical construct so to speak.

 

[EdwardBaiamonte]

QE is an interesting example. Everyone kept referring to these large scale asset purchases as 'printing money' when nothing could be further from the truth. QE was nothing more than a glorified asset swap.

you seem so confused. When the Fed buys Treasury debt they, in effect, print money to do it. THis is bad, it is inflationary based on the assumption that when the time comes they won't be inclined to sell the treasuries, let alone able to sell them for what they paid for them.

 

[Kimura]

QE is an interesting example. Everyone kept referring to these large scale asset purchases as 'printing money' when nothing could be further from the truth. QE was nothing more than a glorified asset swap.

you seem so confused. When the Fed buys Treasury debt they, in effect, print money to do it. THis is bad, it is inflationary based on the assumption that when the time comes they won't be inclined to sell the treasuries, let alone able to sell them for what they paid for them.

Trust me, I'm not confused, I was referring to QE, which is an asset swap, not money printing. All the FED does is buy Treasuries and sells US dollars it creates out of thin air so to speak. After this asset swap takes place, the particular primary dealer which sold the Treasuries to the FED now has cash as opposed to Treasuries and the FED has Treasuries as opposed to cash. All of the 'money printing' the FED engaged in went straight into the reserves of the banking system, then the FED received Treasuries.

Also, the FED is precluded by law from directly purchasing Treasuries.

 

[Joe Steel]

The debt isn't a problem. Don't worry about it. Stick to the fundamentals and the debt will take care of itself. Full employment, fair taxation and relief for those who need it is what we need. Forget about the debt.

 

[Sallow]

First of all, from whom does the US borrow? The US government creates money ex nihilo, regardless of tax revenues or bond sales. As a matter of fact, all government spending by the federal government is 'money printing' by default. Deficit reductions are the fiscal equivalent of a tax increase since both remove income from the economy. One simply affects lower-to-middle income Americans. Sovereign government that issue their own currency don't operate like households on a fixed supply of dollars nor can they go bankrupt, it's operationally impossible.

Secondly, federal taxes don't fund revenues, all they do is create a demand for the currency since tax liabilities are denominated in US dollars. All taxes do is essentially regulate aggregate demand.

You folks act as if the economy is finite. It isn't.

It is defined by natural resources, industry and technology.

 

[Sallow]

The Debt Debate: Mr Panic and Mr Don't Worry

Michael Kinsley, who is as irritating a media personality as they come...has moments of pure clarity. He breaks through the bs here.

Peter G. Peterson

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

Businessman and billionaire Peter G. Peterson is Mr. Deficit Panic. He's spending a billion of his own dollars warning people about the danger of the growing national debt. And yet, speaking about the deficit to Time magazine in December, he said, "I wouldn't enact any measures to reduce it until the economy recovers properly." In fact, he told Time that he actually favors more stimulus spending, "as long as it's well designed and paid for."

Peterson is a bit confused here. If an economic stimulus is paid for, it ceases to be a stimulus. The borrowing isn't incidental: Spending more than you've got is the whole point. But Peterson's basic scenario is this: Let the deficit grow and don't worry about it until economic recovery, then get serious about reforming entitlements and go ahead and raise taxes if you insist. The national debt is what I care about.

Paul Krugman

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

New York Times columnist and Princeton economics professor Paul Krugman is Mr. Don't Worry About the Debt. He believes that unemployment is a much more pressing problem, and that the stimulus at the beginning of President Obama's first term was inadequate. Even now he wants more stimulus, which means more government borrowing and a higher national debt.

Is there any limit on how long we can keep borrowing like this? Yes, Krugman says. When "the economy is robust again," it will be time to start paying down the debt. More specifically, he wrote last year that when the unemployment rate falls to 7%, it will be time to reverse course. Currently the unemployment rate is 7.8%, so we're close.

Krugman probably did not mean actually paying down the debt, since that would involve running an annual surplus, which even Krugman does not see on the horizon. But Krugman and Peterson are in agreement on the right formula: First, you run up the deficit in order to stimulate the economy, and then you reduce the deficit in order to bring the national debt into a safer range

read full Op-ed article here:
Op-ed - editorials, commentary, letters, cartoons, endorsements - latimes.com - latimes.com

62% of the people who voted for Obama think the debt is the single most important issue in the country and that we need to deal with it sooner rather than later. The idiots are the people who think it doesn't matter.

Wait, what?

I thought you folks said people voted for Obama because they wanted free stuff.

 

[Sallow]

. As a matter of fact, all government spending by the federal government is 'money printing' by default.

if government spends from tax revenue no money has been printed. Sorry!

If the population goes up..money has to be printed.

What's your point?

 

[jwoodie]

The Debt Debate: Mr Panic and Mr Don't Worry

Michael Kinsley, who is as irritating a media personality as they come...has moments of pure clarity. He breaks through the bs here.

Peter G. Peterson

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

Businessman and billionaire Peter G. Peterson is Mr. Deficit Panic. He's spending a billion of his own dollars warning people about the danger of the growing national debt. And yet, speaking about the deficit to Time magazine in December, he said, "I wouldn't enact any measures to reduce it until the economy recovers properly." In fact, he told Time that he actually favors more stimulus spending, "as long as it's well designed and paid for."

Peterson is a bit confused here. If an economic stimulus is paid for, it ceases to be a stimulus. The borrowing isn't incidental: Spending more than you've got is the whole point. But Peterson's basic scenario is this: Let the deficit grow and don't worry about it until economic recovery, then get serious about reforming entitlements and go ahead and raise taxes if you insist. The national debt is what I care about.

Paul Krugman

Op-Ed
Kinsley: The debt debate
Mr. Deficit Panic and Mr. Don't Worry are more alike than you think.

New York Times columnist and Princeton economics professor Paul Krugman is Mr. Don't Worry About the Debt. He believes that unemployment is a much more pressing problem, and that the stimulus at the beginning of President Obama's first term was inadequate. Even now he wants more stimulus, which means more government borrowing and a higher national debt.

Is there any limit on how long we can keep borrowing like this? Yes, Krugman says. When "the economy is robust again," it will be time to start paying down the debt. More specifically, he wrote last year that when the unemployment rate falls to 7%, it will be time to reverse course. Currently the unemployment rate is 7.8%, so we're close.

Krugman probably did not mean actually paying down the debt, since that would involve running an annual surplus, which even Krugman does not see on the horizon. But Krugman and Peterson are in agreement on the right formula: First, you run up the deficit in order to stimulate the economy, and then you reduce the deficit in order to bring the national debt into a safer range

read full Op-ed article here:
Op-ed - editorials, commentary, letters, cartoons, endorsements - latimes.com - latimes.com

Idiots like Krugman are oblivious to political reality: Spending NEVER goes down.

 

[EdwardBaiamonte]

If the population goes up..money has to be printed.

not if GDP goes down, like it might in a recession or depression

Keep in mind that a conservative will always be 2 steps ahead of you!!
Do you see any liberal here who ever win a debate?? IF you ever do please let me know.

What do you learn from that??

 

[Kimura]

. As a matter of fact, all government spending by the federal government is 'money printing' by default.

if government spends from tax revenue no money has been printed. Sorry!

If the population goes up..money has to be printed.

What's your point?

My point is, that government spending is 'money printing' regardless of tax revenue or bond sales, because there is an automatic increase in reserve balances. This is an operational reality of our modern monetary system. It's basically an operational reality that, in order for bonds to be settled or taxes to get paid, there has to have been loans from the FED to the domestic private sector or previous government spending. This occurs regardless of the FED being legally prohibited from providing overdrafts.

Secondly, inflation is simply not caused by an increase in the supply of money, which any economist will tell you. In today's environment, given our excess capacity, low industrial output, and high unemployment rate, inflation shouldn't even be part of the debate. If we were at full employment, and the economy was at full capacity, then inflation would obviously be a problem.