Exploring Opinions on Mitt Romney's Candidacy

[CAC1001]

He's a Republican. They seem to think like that.

The Obama administration is making large defense budget cuts, even though the defense budget fuels a huge amount of industry and employs a lot of people. Generally though, it gets quirky arguing about whether reducing govenrment spending will hurt the general economy. If done by a massive amount all at once, maybe, but gradually, I doubt it.

One thing that always gets me is if someone talks about "reducing government spending" and people act as if this is literally "taking money out of the economy." It isn't. Where do they think that money came from in the first place? Government spending is money that was already taken out of the economy in one form (usually taxes or debt) and then re-injected back in another form. Reducing such spending might hurt certain industries, but other industries will make up for it.

It would be like if you cut the defense budget over time by $200 billion and reduced the budget by $200 billion. Net, no money was taken out of the economy, it's just the defense industry that would get hit. But the general economy now has that $200 billion back in it that was previously being removed to go to the defense budget. If done all of a sudden, then yes it could increase unemployment as the defense industry was hit hard and unemployment shot up, but done gradually, the private economy should be able to employ people at the same rate as the defense industry would be firing people.

 

[Rob D]

I'm no economist but it seems to me that the analogy to a household budget is almost direct. You have an income which is predictable. Your spending, however, exceeds that income so you have to borrow to cover it. Once you decide to return to financial responsibility, you as quickly as is possible reduce your expenditures by the amount you are borrowing. This you do aggressively and even ruthlessly if need be. Then you live within that income. My wife and I do it every month.

The only other way is to increase your income, again by the amount that you have been borrowing. Then you live within that amount however, you may not like the job you have to do to get that much income.

Simplistic I know but please show me where it's wrong.

 

[ParticleGrl]

Where do they think that money came from in the first place? Government spending is money that was already taken out of the economy in one form (usually taxes or debt) and then re-injected back in another form.

Some of that money is from banks purchasing treasuries. If they weren't buying treasuries it would be still be sitting in reserves. You forget that money isn't 0 sum- there is a printing press in play.

If done all of a sudden, then yes it could increase unemployment as the defense industry was hit hard and unemployment shot up, but done gradually, the private economy should be able to employ people at the same rate as the defense industry would be firing people.

Yes, a perfect world is one of full employment. HOWEVER, unemployment has been very high for YEARS now. The private sector is failing to employ all the workers being let go. Thats the whole reason cutting spending in a recession is bad- if unemployment is already high, having the government fire workers clearly won't make the situation better.

 

[Angry Citizen]

I'm no economist but it seems to me that the analogy to a household budget is almost direct. You have an income which is predictable. Your spending, however, exceeds that income so you have to borrow to cover it. Once you decide to return to financial responsibility, you as quickly as is possible reduce your expenditures by the amount you are borrowing. This you do aggressively and even ruthlessly if need be. Then you live within that income. My wife and I do it every month.

The only other way is to increase your income, again by the amount that you have been borrowing. Then you live within that amount however, you may not like the job you have to do to get that much income.

Simplistic I know but please show me where it's wrong.

The opposite is true. Let's say you'd like to be an engineer, but you're just a high school student. In order to become an engineer, you have to go into college - but you can't afford college without an engineering job, so you go into debt in order to get the education to get the job. This is analogous to the effects of government spending on the economy. In order to get this extra money, you go into debt long enough to get some increased income, whereupon you can pay back your debt. This is Keynesian economics. The government borrows and goes into debt when the economy contracts, and spends like crazy. Then, when the economy recovers and starts growing like mad as a result of all that stimulus, and all that extra revenue comes pouring in, you pay down the debt you incurred. Trouble is, no one bothers to do this except the more successful Keynesian countries - Scandinavia, etc.

 

[ParticleGrl]

I'm no economist but it seems to me that the analogy to a household budget is almost direct...Simplistic I know but please show me where it's wrong.

The government has somethings the household does not- a printing press and an army. You should be able to figure out why that makes things very different.

Government bonds are an instrument of policy, not a necessity. If it wanted, the government could simply print money to buy what it wants and pay its workers. This is far from ideal, but it COULD. It could decide not to pay for goods, and simply throw you in prison if you don't provide what it wants...

 

[CAC1001]

Some of that money is from banks purchasing treasuries. If they weren't buying treasuries it would be still be sitting in reserves. You forget that money isn't 0 sum- there is a printing press in play.

Yes, but the banks got the money sitting in reserves from people in the private economy depositing it in the banks.

Yes, a perfect world is one of full employment. HOWEVER, unemployment has been very high for YEARS now. The private sector is failing to employ all the workers being let go. Thats the whole reason cutting spending in a recession is bad- if unemployment is already high, having the government fire workers clearly won't make the situation better.

I wouldn't say full employment is a perfect world, as full employment is very attainable, it's just of a healthy economy, which right now we don't have as you point out. That's why I said do it over a longer period of time, but I see your point. We have a real crapper of a problem because we have a large structural deficit which does need to be cut. But we also have a weak economy.

It's like a catch-22 in that in order to reduce the deficit, we need a healthy economy to replace the lost government jobs. But it may well be the case that in order for the economy to begin recovering, we need to reduce the deficit.

 

[CAC1001]

The government has somethings the household does not- a printing press and an army. You should be able to figure out why that makes things very different.

Government bonds are an instrument of policy, not a necessity. If it wanted, the government could simply print money to buy what it wants and pay its workers. This is far from ideal, but it COULD. It could decide not to pay for goods, and simply throw you in prison if you don't provide what it wants...

True, but government printing money to try to pay for expenditures will result in inflation. It will ultimately just de-value the currency which is basically a variant of the government not paying for goods.

 

[Angry Citizen]

But it may well be the case that in order for the economy to begin recovering, we need to reduce the deficit.

What exactly is the 'huge' deficit doing to us at present? Nothing. It's a number locked away in a tight box. It has no tangible effect on the economy until credit agencies start downgrading our credit en masse or until the dollar starts to depreciate significantly. That is not the cause of the current economic mess. The current economic mess is now being driven by a massive dearth in demand caused by lack of employment and enormous levels of income inequality. If anything, more spending to create jobs (which the government most certainly CAN do) would benefit us, not hurt us.

Random aside: It is fitting that the levels of income inequality seen today have not been seen since the Great Depression. Causal, or coincidental? Hrm...

 

[ParticleGrl]

Yes, but the banks got the money sitting in reserves from people in the private economy depositing it in the banks.

If I deposit money in the bank, and stays in reserves instead of getting loaned out- its effectively out of the economy. By deficit spending in a recession, the government can move money out of reserves and back into circulation. Thats the whole point. Its idle resources being utilized. Some unemployed people get to work, and some unused money gets to command a small rate-of-return.

It's like a catch-22 in that in order to reduce the deficit, we need a healthy economy to replace the lost government jobs. But it may well be the case that in order for the economy to begin recovering, we need to reduce the deficit.

There is no evidence whatsoever that the deficit is creating any kind of drag on the economy. Interest rates are low, so debt servicing has actually gone down in recent years. The deficit is a long-term problem, mostly due to growing health care costs. Worrying about the deficit now is spraying for termites during a house fire.

 

[CAC1001]

What exactly is the 'huge' deficit doing to us at present? Nothing. It's a number locked away in a tight box. It has no tangible effect on the economy until credit agencies start downgrading our credit en masse or until the dollar starts to depreciate significantly. That is not the cause of the current economic mess. The current economic mess is now being driven by a massive dearth in demand caused by lack of employment and enormous levels of income inequality.

You're relying on a lot of assumptions here. You say the deficit is doing nothing. How are you certain of this? The mere fact that many people are concerned about the future effects of the deficit (such as a credit downgrade or dollar depreciation) mean that it is having an effect on the economy. This is not a short-term deficit that will end soon, like during World War II, it's a structural deficit, and that entails some possibly big problems for the future. Also I never said that the deficit caused the current economy. But it certainly is not helping with the recovery either.

Regarding the dearth in demand, I agree there, however, I do not agree that "income inequality" has anything to do with that. Income isn't something that exists in a finite supply that is then doled out to members of society by some central authority. Income is based on what goods/services/skills a person has to trade in the economy. Income and wealth inequality are both the natural outcome of a free society.

If anything, more spending to create jobs (which the government most certainly CAN do) would benefit us, not hurt us.

What makes you so certain that the government can create jobs? Or that more spending would benefit? We have thirty years of economic research showing that fiscal stimulus mostly does not work. Government unto itself doesn't create jobs. Any government "job" is the result of borrowing money (taxing the future economy) or taxing money out of the current economy, which means any government job means shorting the private sector of a job.

More spending means taking on more debt, which itself there is a lot of evidence hamstrings the economy once it reaches a certain level, and it is very questionable whether government spending can increase demand at all. It's questionable even whether the government should seek to increase demand even if it could, because if it does, it might crowd out private-sector demand and private-sector investment (these are things some believe all the stimulus spending in Japan resulted in), and thus keep the private economy permanently depressed. It can also lead to inflation.

Random aside: It is fitting that the levels of income inequality seen today have not been seen since the Great Depression. Causal, or coincidental? Hrm...

I'd say neither. The Great Depression was the result of bad monetary policy at the Federal Reserve and bad fiscal and economic policy by the government. The current crisis is the result of excessive government intervention in the housing market, excessively low interest rates from the Fed, and a complete lack of regulatory oversight of the derivatives industry, along with some other things.

ALTHOUGH...Raghuram Rajan, a Chicago School university economist, who argues that Fannie and Freddie played a large role in the crisis, ALSO argues that inequality (inequality of wealth not income) DID play a role in the crisis in that it caused the government to create the very policies that (as he sees it) led to the crisis occurring.

 

[CAC1001]

If I deposit money in the bank, and stays in reserves instead of getting loaned out- its effectively out of the economy. By deficit spending in a recession, the government can move money out of reserves and back into circulation. Thats the whole point. Its idle resources being utilized. Some unemployed people get to work, and some unused money gets to command a small rate-of-return.

Yes, but banks only keep a small amount of the money desposited into them on hand. That's why it's called a fractional reserve banking system, because the banks only keep a fraction of the deposits (if you have a run on the banks, that's where the Federal Reserve is to act as the lender of last resort). The rest of the deposits, the banks loan back out into the economy. So only a small portion of bank deposits are really literally "out" of the economy.

Deficit spending in a recession means the government is taking on debt to try and stimulate the economy, not taking money out of the banks' reserves. If the banks don't want to lend, they don't have to. The problem was prior to the crash, then lent too wildly. Now they are being too cautious.

There is no evidence whatsoever that the deficit is creating any kind of drag on the economy.

There's no way to know for sure. The psychological aspect may be creating a drag. You could run a deficit that, mechanically, should not do anything to the economy, but if enough people mistakenly believe it will wreak havoc in the near future, that in and of itself will cause the deficit to inadeverdently hurt the economy. A variant of this happened during the Great Depression when the Bank of the United States was allowed to fail. Economics-wise, the failing of that bank shouldn't have been a problem. But psychology-wise, a whole lot of people didn't understand that that was just the name of the bank, they thought it was literally the bank of the nation and thus when it failed, panic ensued.

Right now, there is a lot of uncertainty in the economy because no one knows what the future holds for running a structural deficit of this size. We just have no idea. It could result in a large amount of inflation, or the inflation may never come. Also, the constant adding of debt could be constraining the economy (this isn't fully understood, but generally nations with lots of debt don't fare well economically).

Interest rates are low, so debt servicing has actually gone down in recent years. The deficit is a long-term problem, mostly due to growing health care costs. Worrying about the deficit now is spraying for termites during a house fire.

It would be a long-term problem if it was small, but this is a big deficit. The deficit for 2011 was $1.3 trillion. That could be a short-term problem.

As a side note (and not referring to you ParticleGrl), what is interesting is how so many of the people in the media who lambasted the Bush administration over its deficits and debt growth, now all of a sudden have switched to a view that the whole concern over the deficit and debt is way overblown and the deficit and debt are not a problem

 

[WhoWee]

The government has somethings the household does not- a printing press and an army. You should be able to figure out why that makes things very different.

I'll assume you support Romney - he wants a strong military.

 

[mheslep]

The Obama administration is making large defense budget cuts,...

Would that this were so. The spending that is being 'cut' is the previously planned increase. Defense spending will still increase under budget sequester 18% over ten years, versus 20% without the sequester. By contrast Paul's proposed cut is really a cut: in half over time, i.e. back to the peak of Reagan's cold war spending.

 

[AlephZero]

The government has somethings the household does not- a printing press and an army. You should be able to figure out why that makes things very different.

I hope you meant "a printing press and a legal system". Sure, there are a few governments that use the army for law enforcement, but I don't think it's generally considered a good plan.

 

[CAC1001]

Would that this were so. The spending that is being 'cut' is the previously planned increase. Defense spending will still increase under budget sequester 18% over ten years, versus 20% without the sequester. By contrast Paul's proposed cut is really a cut: in half over time, i.e. back to the peak of Reagan's cold war spending.

Defense spending will continue to increase, but as a percentage of GDP, from what I understand, it will decline:

http://www.heritage.org/budgetchartbook/charts/2011/national-defense-spending-600.jpg

 

[Char. Limit]

Going by the text in that graph, am I really the only one who thinks even right now, we spend too much on defense?

 

[turbo]

Going by the text in that graph, am I really the only one who thinks even right now, we spend too much on defense?

No. We spend way too much on war-making capability and equipment, materials, and foreign bases. That money should be going toward health-care, education, general welfare, etc.

At the top of every income-tax return there should be a check-box asking if the US needs to be the world's policeman. When the payable tax is computed, there should be another line that says "if you checked box 1, multiply your payable tax by 2x".

It is very difficult to see where Romney will come down in the general election, though he has criticized Obama's plans to withdraw from another ME conflict. I find it tough to sympathize with politicians who want more wars or don't want to wind down current ones. Who are they kissing up to? Certainly not the poor families that provide most of the cannon-fodder.

 

[Gokul43201]

Would that this were so. The spending that is being 'cut' is the previously planned increase. Defense spending will still increase under budget sequester 18% over ten years, versus 20% without the sequester. By contrast Paul's proposed cut is really a cut: in half over time, i.e. back to the peak of Reagan's cold war spending.

Defense spending will continue to increase, but as a percentage of GDP, from what I understand, it will decline:

http://www.heritage.org/budgetchartbook/charts/2011/national-defense-spending-600.jpg

This is awesome. Raw defense spending increases, but relative to GDP it decreases. This makes it possible to choose whether you want to deride Obama for (i) being reckless with money, or (ii) being reckless with national security.

Once again, it seems Obama has chosen the dreaded middle-path; the only one that makes it possible for everyone in the country to hate him for choosing it.

Edit: Oops! Thought this was the Obama thread.

 

[Oltz]

It is very difficult to see where Romney will come down in the general election, though he has criticized Obama's plans to withdraw from another ME conflict. I find it tough to sympathize with politicians who want more wars or don't want to wind down current ones. Who are they kissing up to? Certainly not the poor families that provide most of the cannon-fodder.

I must admit Turbo that as a Disabled Vet I find this a little insulting. We do not need to get into the value of the wars in the ME on this thread, but if you would like to have an honest discusion about my personal experience in Iraq with chemical weapons and the people who were willing to use them then send me a private message.

The point is that region is not stable. Some governments in the area are supportive of hurting us for ideological reasons. It is better to fight on another lands soil then in your yard.

I do not want to be a police force, but I see that as action in countries that actually have no impact on us. Think Bosnia/Somolia in the 90's or the one we did/don't get involved with in the Congo or how about Libiya. Those were police state actions not the current/former ME engagments.

 

[turbo]

I must admit Turbo that as a Disabled Vet I find this a little insulting. We do not need to get into the value of the wars in the ME on this thread, but if you would like to have an honest discusion about my personal experience in Iraq with chemical weapons and the people who were willing to use them then send me a private message.

The point is that region is not stable. Some governments in the area are supportive of hurting us for ideological reasons. It is better to fight on another lands soil then in your yard.

My father and many others who are now 85+ years old gave their all in WWII. The Nazis and their allies had engulfed all of Europe in war, and something needed to be done. In contrast, Saddam was the US's bully-boy in the region until he invaded Kuwait, and then he suddenly became a monster with weapons of mass destruction.

I honor veterans, and honor their service. I do not condone government policies that put our service-members at risk without a clear and present danger. I am not a blanket pacifist, but I am very distrustful when factions of our government claim that we "have to" invade someplace. I am on the edge of 60 years, and I have lost family friends and relatives to Viet-Nam. We don't need any more of that idiocy.

 

[mheslep]

Defense spending will continue to increase, but as a percentage of GDP, from what I understand, it will decline:

Yes. So? Defense spending should be tightly correlated to threats against the US, not the size of its economy. With that in mind, one could argue that defense spending should be half what it was at the height of the cold war (though I don't go that far), not double.

US defense spending, constant dollars:

 

[Alfi]

I must admit Turbo that as a Disabled Vet I find this a little insulting. We do not need to get into the value of the wars in the ME on this thread, but if you would like to have an honest discusion about my personal experience in Iraq with chemical weapons and the people who were willing to use them then send me a private message.

The point is that region is not stable. Some governments in the area are supportive of hurting us for ideological reasons. It is better to fight on another lands soil then in your yard.

I do not want to be a police force, but I see that as action in countries that actually have no impact on us. Think Bosnia/Somolia in the 90's or the one we did/don't get involved with in the Congo or how about Libiya. Those were police state actions not the current/former ME engagments.

ah .. from the turbo comment ... cannon fodder ...
Sorry, I jumped in the reading a page later and couldn't figure the Romney connection to the post.
... all caught up now ... and I refreshed my popcorn supply. Please continue.
It's been an interesting read.

 

[turbo]

Yes. So? Defense spending should be tightly correlated to threats against the US, not the size of its economy. With that in mind, one could argue that defense spending should be half what it was at the height of the cold war (though I don't go that far), not double.

That is a reasonable baseline start with. We project more air-and-sea power around the world than any other country (by far), but that capability doesn't make us safer, IMO. Instead, it allows the hot-heads in our government to react hastily to any perceived (imagined or real) threats. By the time we have found out the havoc that they have created (thanks to the compliance of our media), it is far too late to mitigate the damage.

 

[CAC1001]

Yes. So? Defense spending should be tightly correlated to threats against the US, not the size of its economy. With that in mind, one could argue that defense spending should be half what it was at the height of the cold war (though I don't go that far), not double.

If the economy is growing at a healthy rate, then I agree, but with the economy growing very slowly, I do not think reducing defense spending as a percentage of the GDP is wise. The current percentage of GDP that defense makes up is for a reason, and what Iraq and Afghanistan showed is that even that wasn't really enough. We don't exactly know what threats there will be against the U.S. say ten or twenty years down the line. Current spending isn't just for the current global situation, it's an investment for what might pop up in the future. Just because we don't want to do another Iraq invasion doesn't mean such a situation might not occur again and the military's current vehicles and equipment need repair and replacing.

For defense to decline as a percentage of GDP due to a growing economy I think is fine, but for it to decline as a percentage of GDP due to actual spending cuts or spending limits with the economy growing very slowly could be dangerous. All government spending increases over time, what's bad is when it increases to where the government is growing as a percentage of the GDP. If the current levels of defense spending will grow the defense budget to a large percentage of GDP due to the sluggish economy, I'd think limiting spending to make it where it remains the same percentage of GDP is okay, but not to where it shrinks as a percentage of GDP.

 

[CAC1001]

No. We spend way too much on war-making capability and equipment, materials, and foreign bases. That money should be going toward health-care, education, general welfare, etc.

We already spend more per capita on public education than most other Westernized countries. If anything, we spend too much on public education and the amount needs to be reduced. Healthcare, it is questionable whether the government should even be involved there, or whether more government involvement over the current amount would fix anything. General welfare, well we have seen the dismal results of the welfare state and how that had to be cut. Sound social safety nets I am all for though.

At the top of every income-tax return there should be a check-box asking if the US needs to be the world's policeman. When the payable tax is computed, there should be another line that says "if you checked box 1, multiply your payable tax by 2x".

IMO the U.S. should be the world's policemen. It makes for a safer world than to have a bunch of countries where no one is strong enough to handle any threat on their own. Better to have one central superpower, backed up by the other nations when required.

It is very difficult to see where Romney will come down in the general election, though he has criticized Obama's plans to withdraw from another ME conflict. I find it tough to sympathize with politicians who want more wars or don't want to wind down current ones. Who are they kissing up to? Certainly not the poor families that provide most of the cannon-fodder.

Obama's withdrawal from Afghanistan is political in nature. The generals are not in favor of it. While no one wants troops in harm's way in a place like Afghanistan, just leaving it might lead to the terrorists making it a haven again.

That is a reasonable baseline start with. We project more air-and-sea power around the world than any other country (by far), but that capability doesn't make us safer, IMO. Instead, it allows the hot-heads in our government to react hastily to any perceived (imagined or real) threats. By the time we have found out the havoc that they have created (thanks to the compliance of our media), it is far too late to mitigate the damage.

Our naval power keeps the sea lanes open and thus underwrites global trade. It also serves a major humanitarian purpose for when other countries get hit with major natural disasters. Aircraft carriers, for example, their nuclear powerplants can supply power to on-shore facilities, their aircraft can fly out and rescue people, their medical facilities and personnel can provide medical care to injured people, their kitchens can cook up food to serve to people, etc...air and sea power aren't just about power projection.

 

[Gokul43201]

That money should be going toward health-care, education, general welfare, etc.

We already spend more per capita on public education than most other Westernized countries. If anything, we spend too much on public education and the amount needs to be reduced. Healthcare, it is questionable whether the government should even be involved there, or whether more government involvement over the current amount would fix anything. General welfare, well we have seen the dismal results of the welfare state and how that had to be cut. Sound social safety nets I am all for though.

Lest we head down the path of conflating a nation that provides for the "general welfare" with a welfare state, let us step back a moment and recall where those words come from.

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

 

[CAC1001]

Lest we head down the path of conflating a nation that provides for the "general welfare" with a welfare state, let us step back a moment and recall where those words come from.

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

I assumed that by "general welfare," turbo meant the whole slew of other government programs that make up the welfare state and the safety nets.

 

[ParticleGrl]

Regarding the deficit-

There's no way to know for sure.

Of course there is! Markets aggregate opinion. If people truly believed our debt was a problem, then they'd stop buying our debt. This has not happened- the market doesn't see a problem with it. Point to any evidence that the deficit is currently creating drag on the economy.

Trust the market!

It could result in a large amount of inflation, or the inflation may never come. Also, the constant adding of debt could be constraining the economy (this isn't fully understood, but generally nations with lots of debt don't fare well economically).

Right now, the market expect incredibly low inflation. Look at break-evens on TIPs. Expected inflation is only a problem IF PEOPLE ARE EXPECTING INFLATION, which they aren't. People worried about default is only a problem IF PEOPLE ARE WORRIED ABOUT DEFAULT, which they aren't.

Everyone who cares enough to bet is betting on low inflation and treasuries continuing to be a safe investment. If the deficit were any kind of drag, it would show up in bond markets. TRUST THE MARKET!

As a side note (and not referring to you ParticleGrl), what is interesting is how so many of the people in the media who lambasted the Bush administration over its deficits and debt growth...

You do understand that a time of surplus is different than a time of recession? As you yourself have said- the time to draw down government is while the economy is healthy.

Also, obviously, the concern over the deficit during the Bush years doesn't begin to compare to what's happened lately- nothing remotely resembling the debt ceiling crisis happened.

 

[CAC1001]

Regarding the deficit-

Of course there is! Markets aggregate opinion. If people truly believed our debt was a problem, then they'd stop buying our debt. This has not happened- the market doesn't see a problem with it. Point to any evidence that the deficit is currently creating drag on the economy.

Trust the market!

People will keep buying out debt even if they see a problem because the U.S. is still viewed as the safest haven out of the alternatives. But also, I wasn't referring to those who buy the debt so much as the general U.S. population. There is a lot of uncertainty right now in the economy. Part of that is likely due to the debt and deficit.

Right now, the market expect incredibly low inflation. Look at break-evens on TIPs. Expected inflation is only a problem IF PEOPLE ARE EXPECTING INFLATION, which they aren't. People worried about default is only a problem IF PEOPLE ARE WORRIED ABOUT DEFAULT, which they aren't.

Everyone who cares enough to bet is betting on low inflation and treasuries continuing to be a safe investment. If the deficit were any kind of drag, it would show up in bond markets. TRUST THE MARKET!

The market may expect low-inflation, but just because low inflation is expected doesn't mean it will be how things turn out. That people keep buying the bonds doesn't mean the general public and the business community have no concern over the deficit and debt. Here is an article on the issue of inflation and debt: http://faculty.chicagobooth.edu/john.cochrane/research/papers/Cochrane_Inflation_and_Debt_National_Affairs.pdf

You do understand that a time of surplus is different than a time of recession? As you yourself have said- the time to draw down government is while the economy is healthy.

Also, obviously, the concern over the deficit during the Bush years doesn't begin to compare to what's happened lately- nothing remotely resembling the debt ceiling crisis happened.

My point was that certain of those who lambasted the government over excessive spending during the Bush years do not have a problem with excessive spending (if they like it) during the Obama years.

 

[Astronuc]

Mitt Romney touts his experience at Bain Capital as a strength, but not the experience with leveraged buyouts.

http://www.thedailyshow.com/watch/tue-january-31-2012/indecision-2012---bain-man

 

[ParticleGrl]

I wasn't referring to those who buy the debt so much as the general U.S. population. There is a lot of uncertainty right now in the economy. Part of that is likely due to the debt and deficit.

Can you think of any situation where worries about the deficit would stop a small business owner from expanding his business to maximize his profit? Can you think of any situation where worries about the deficit would stop someone from buying an ipad if they wanted one? What mechanism are you suggesting?

I stand by my assertions- IF PEOPLE ARE WORRIED IT WOULD SHOW UP IN BOND MARKETS. You propose a situation where people are worried but do literally nothing to act on those worries- and YET somehow this harms the economies. In other words- you don't trust markets at all.

So you don't trust markets- what do you trust? What evidence could we expect to find for your proposal that the short term deficit is a drag on the economy?

The market may expect low-inflation, but just because low inflation is expected doesn't mean it will be how things turn out.

Sure, the market might make a mistake. My point is that the markets show how much people are worried about inflation. If no one is worried about inflation- it can't be causing a drag on the employment.

That people keep buying the bonds doesn't mean the general public and the business community have no concern over the deficit and debt.

Yes, it does. If the business community were worried about inflation, they'd be loading up on TIPs to protect their business. If John Cochrane thought there was a possibility of high inflation, he'd load up in TIPs and profit- which would drive their price up.

The break even on TIPs is the aggregated measure of what businesses expect inflation will be. Its very low.

You are making assertions that businesses are stupid- they are worried about high inflation but not willing to buy inflation protected bonds to protect themselves. You are postulating a market failure of epic proportions.

My point was that certain of those who lambasted the government over excessive spending during the Bush years do not have a problem with excessive spending (if they like it) during the Obama years.

My point is that there is a consistent economic argument that Bush should have used the surplus to pay down the deficit and that Obama is forced to spend heavily due to the massive recession. I'm not suggesting that's in everyone's minds, but its a logical stand to take. Some of the people with the behavior you suggest may be behaving consistently.

 

[CAC1001]

Can you think of any situation where worries about the deficit would stop a small business owner from expanding his business to maximize his profit? Can you think of any situation where worries about the deficit would stop someone from buying an ipad if they wanted one? What mechanism are you suggesting?

It depends on the person. A person concerned that the deficit might lead to economic chaos of some kind might decide not to expand their business or make such a purchase. The deficit and debt are part of the uncertainty that exists among people in the economy right now.

I stand by my assertions- IF PEOPLE ARE WORRIED IT WOULD SHOW UP IN BOND MARKETS.

The bond market deals with people who buy the bonds, which is not, generally, the average person.

You propose a situation where people are worried but do literally nothing to act on those worries- and YET somehow this harms the economies. In other words- you don't trust markets at all.

So you don't trust markets- what do you trust? What evidence could we expect to find for your proposal that the short term deficit is a drag on the economy?

I'm not proposing a situation where people are worried but do nothing to act on those worries, my argument is people being worried can change their behavior. They may not make purchases like they normally would, they may not make investments the way they normally would. Such behavior from enough people can have a drag on the economy.

Sure, the market might make a mistake. My point is that the markets show how much people are worried about inflation. If no one is worried about inflation- it can't be causing a drag on the employment.

The bond market can show how much investors are worried about inflation, but the average person often doesn't know about investing.

Yes, it does. If the business community were worried about inflation, they'd be loading up on TIPs to protect their business. If John Cochrane thought there was a possibility of high inflation, he'd load up in TIPs and profit- which would drive their price up.

The break even on TIPs is the aggregated measure of what businesses expect inflation will be. Its very low.

Does this measure take into account small businesses (as I doubt all the owners of such businesses know about investing)? The break-even on TIPS is one measure used to try to determine inflation expectations among businesses, but it has shortcomings (although your point there is taken as it is still an inflation expectations measure). My understanding however is that our knowledge about how to determine inflation expectations in the overall economy is lacking: LINK

Note on businesses (bottom of the 16th paragraph):

Information on the price expectations of businesses--who are, after all, the price setters in the first instance--as well as information on nominal wage expectations is particularly scarce.

Measures such as the breakeven on TIPS cannot tell us how the overall general public thinks about inflation, or necessarilly what the small businesses think.

You are making assertions that businesses are stupid- they are worried about high inflation but not willing to buy inflation protected bonds to protect themselves. You are postulating a market failure of epic proportions.

Larger businesses I agree, but smaller businesses, I don't know.

 

[ThomasT]

Mitt Romney touts his experience at Bain Capital as a strength, but not the experience with leveraged buyouts.

http://www.thedailyshow.com/watch/tue-january-31-2012/indecision-2012---bain-man

Interesting point ... and an entertaining video.

 

[ThomasT]

Referring back to my post #173 which immediately preceded the latest flurry of posts of yesterday and today, I'm currently of the opinion that Romney's '59 points' (post #16) are, on the whole, a recipe for disaster. Only a few seem to address problems whose solutions would benefit the majority of Americans.

He apparently wants to severely constrain government regulatory capability, decrease tax revenues, decrease the social safety net, and import more foreign labor, among other things.

 

[skeptic2]

If Mitt Romney wins the primary, which he stands a good chance of doing, who do you think would be a good VP for him? My own personal choice if I were in his shoes would be Marco Rubio. He's skilled, he doesn't have many black marks, and he helps deliver the Hispanic vote.

Perhaps a better choice would be Haley Barbour. If Romney ever did anything he could be impeached for, at least he could count on a pardon.