Should we worry about the deficit now, or later?

[Frodo]

That is the question.  In which camp do you fall in?
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Staggering Budget Gap and a Reluctance to Fill It
 
By PETER S. GOODMAN
Published: July 7, 2009

No one argues that the staggering deficits run up by the American government in a bid to rescue the economy are desirable, healthy or even sustainable — not if the national debt continues to swell at its current pace. But considerable debate centers on when and how vigorously to start easing off Washington’s borrowing habit, with substantial risks at both extremes.

Pull back on government spending now, the argument runs, and condemn an already hobbled American economy to years of mass joblessness and anguish. Indeed, some economists are already arguing that with unemployment near double digits, the government must consider giving another dose of stimulus spending now, despite the fact that this will add to the deficit.

Keep spending with abandon, goes the counterargument, and invite the possibility of a debt crisis with spiking interest rates, crippling inflation and a plunging dollar.

Those arguing for tighter federal spending to contain the budget deficit contend the nation has already borrowed so much money that the people who have lent it may get spooked and abruptly refuse to supply more.

China’s central bank and other foreign creditors might curb their purchases of American government savings bonds, which finance so much national spending. That would force the Treasury to pay higher interest rates to attract other buyers of its debt, lifting interest rates throughout the American economy.

And that would increase the costs of borrowing for companies and ordinary families alike in the midst of economic weakness, like a wet blanket thrown on an already weak fire.

“We are not an island,” said Martin N. Baily, chairman of the Council of Economic Advisers under President Bill Clinton and now a fellow at the Brookings Institution. “We are part of the global economy, and there are concerns out there among those who have been buying our debts that we owe too much.”

But others argue that now is precisely the wrong time to worry about the deficit. Yes, the risks of growing indebtedness are real and unpalatable, but there are no appetizing options on the menu — not at a time of 9.5 percent unemployment. In this view, debt must take a back seat to the imperative to spend money and stimulate the economy to create jobs.

In this view, pulling back now in the interest of limiting the deficit would be akin to withholding pharmaceuticals from a patient stricken with a potentially fatal disease because the treatment might itself leave long-term damage.

[Lief 🗽]

Budget deficits are something that we have the luxury of worrying of when we're not in a Depression.

[Marokai Backbeat]

Later, without a doubt.

If you cut back on spending now you make the current situation worse (Think the Recession of 1937) and would bulldoze any theoretical benefit (What are they, anyway?) of cutting down the deficit. By spending on proven effective and efficient programs and projects we can shorten the recession and improve the infrastructure for prosperity down the road, and have the capacity to deal with cutting the deficit then.

[King]

The more debt based we become, the less valuable our dollar is unless we discover the a giant reservoir of diamonds and gold nuggets floating in an a vast, endless underground pool of oil in a national park.

The less valuable the dollar becomes, the less powerful a $1 trillion stimulus becomes.

[○∙◄☻¥tπ[╪AV┼cVê└]

We need to stimulate the economy now. However it is wrong to imply that Keynesians don't worry about the deficit.

[??????????]

We need to stimulate the economy now. However it is wrong to imply that Keynesians don't worry about the deficit.

No one cares about discredited economic ideologies.

[King]

We need to stimulate the economy now. However it is wrong to imply that Keynesians don't worry about the deficit.

No one cares about discredited economic ideologies.

I don't know about that considering every election for the past 30 years has been the New Deal vs. Reaganomics.

[Lief 🗽]

We need to stimulate the economy now. However it is wrong to imply that Keynesians don't worry about the deficit.

No one cares about discredited economic ideologies.

Yes, yes, which is why the Republicans are out of power and hated by much of the country.

[Marokai Backbeat]

We need to stimulate the economy now. However it is wrong to imply that Keynesians don't worry about the deficit.

Right you are. I care very much about a balanced budget and reducing our debt, the difference is the two sides disagree on how to go about it. It is rather unfair to say the left doesn't care about deficits, we do.

[War on Want]

I am going to echo everything said here and say that we should worry about the deficit later. Chances are that the Republicans will take back Congress in the next 4-6 years so there will be a very high chance it will get balanced. By this time the economy should have recovered somewhat so I might be okay with this to an extent too.

[opebo]

We need to stimulate the economy now. However it is wrong to imply that Keynesians don't worry about the deficit.

No one cares about discredited economic ideologies.

Dude, its discredited by what?  The fact that its abandonment has led to the current depression?  The fact that you think $14/hour is a reasonable wage?  Man, I'm as inured to the idea of no hope and no progress as anyone, but at least Keynesianism works, unlike the nonsense peddled by your side.

As for the original question, later obviously, though I definitely believe that raising taxes upon the rich has virtually no effect on economic growth.

[Small Business Owner of Any Repute]

If only all this record deficit spending was actually doing anything...

[opebo]

If only all this record deficit spending was actually doing anything...

The hole is deeper than the spending, that's all.

[Richard]

Should you worry?  No.  The time for that is long gone.  Whether you cut back or go all out is the same.  So you may as well go all out, which is what Obama is doing.

[opebo]

Should you worry?  No.  The time for that is long gone.  Whether you cut back or go all out is the same.  So you may as well go all out, which is what Obama is doing.

You've got to be kidding.  Almost nothing has been done.  'All out' is not just spending a little more money, Richious.  'All out' is probably not going to happen under the current so-called 'democratic government'.

[The Duke]

Right you are. I care very much about a balanced budget and reducing our debt, the difference is the two sides disagree on how to go about it. It is rather unfair to say the left doesn't care about deficits, we do.

Liberals do care about deficit reduction.  Its just that they care about other things a lot more.

If I see a man who is morbidly obese because he eats too much, I would be a fool to presume that he wants to be morbidly obese.  Of course he would prefer to be fit and trim, he just doesn't care enough to stop his self-destructive behavior.

The point is, liberals are only in favor of deficit reduction that does not involve compromise.  That is why so many of them have bought into this nonsense from Peter Orszag about health reform: It allows liberals to have their cake and eat it too.

The trouble is, when your strategy is to have your cake and eat it too, you end up being morbidly obese.

[Marokai Backbeat]

Right you are. I care very much about a balanced budget and reducing our debt, the difference is the two sides disagree on how to go about it. It is rather unfair to say the left doesn't care about deficits, we do.

Liberals do care about deficit reduction.  Its just that they care about other things a lot more.

If I see a man who is morbidly obese because he eats too much, I would be a fool to presume that he wants to be morbidly obese.  Of course he would prefer to be fit and trim, he just doesn't care enough to stop his self-destructive behavior.

The point is, liberals are only in favor of deficit reduction that does not involve compromise.  That is why so many of them have bought into this nonsense from Peter Orszag about health reform: It allows liberals to have their cake and eat it too.

The trouble is, when your strategy is to have your cake and eat it too, you end up being morbidly obese.

That's cute and all, though I would have preferred an argument one way or another instead.

[Gustaf]

Later. You don't cut deficits during depressions. What you do is that you spend the surplus you've accumulated during the good years. Unless you elect George W. Bush and run a huge deficit during the boom years. Then you're just screwed, and that's that.

But I guess worrying about it is something you can start doing right now. It is worrying.

[opebo]

The point is, liberals are only in favor of deficit reduction that does not involve compromise. 

What the?  'Compromise'?  Liberals have totally compromised to the point of being meaningless as a political force, Ford.

For gods sake man, the top tax rate in the US is something like 30% is it not?  And you say its the liberals who won't compromise?

[The Duke]

Right you are. I care very much about a balanced budget and reducing our debt, the difference is the two sides disagree on how to go about it. It is rather unfair to say the left doesn't care about deficits, we do.

Liberals do care about deficit reduction.  Its just that they care about other things a lot more.

If I see a man who is morbidly obese because he eats too much, I would be a fool to presume that he wants to be morbidly obese.  Of course he would prefer to be fit and trim, he just doesn't care enough to stop his self-destructive behavior.

The point is, liberals are only in favor of deficit reduction that does not involve compromise.  That is why so many of them have bought into this nonsense from Peter Orszag about health reform: It allows liberals to have their cake and eat it too.

The trouble is, when your strategy is to have your cake and eat it too, you end up being morbidly obese.

That's cute and all, though I would have preferred an argument one way or another instead.

My argument is that liberals are being disingenuous about their desire to reduce the deficit.  You may not be explicitly against deficit reduction, but you prioritize deficit reduction below almost everything else.  The effect of saying you support reducing the deficit but not actually doing anything about it is no different than the effect of not caring about reducing deficits in the first place.

You say you care about reducing the deficit.  That may be true, but you don't seem to care all that much.

[CARLHAYDEN]

Later. You don't cut deficits during depressions. What you do is that you spend the surplus you've accumulated during the good years. Unless you elect George W. Bush and run a huge deficit during the boom years. Then you're just screwed, and that's that.

But I guess worrying about it is something you can start doing right now. It is worrying.

Uh, with a rare exception when the Congress restrained spending 1995-2000, there was no surplus in the federal treasury, whether the President was Republican or Democrat!

[Marokai Backbeat]

Right you are. I care very much about a balanced budget and reducing our debt, the difference is the two sides disagree on how to go about it. It is rather unfair to say the left doesn't care about deficits, we do.

Liberals do care about deficit reduction.  Its just that they care about other things a lot more.

If I see a man who is morbidly obese because he eats too much, I would be a fool to presume that he wants to be morbidly obese.  Of course he would prefer to be fit and trim, he just doesn't care enough to stop his self-destructive behavior.

The point is, liberals are only in favor of deficit reduction that does not involve compromise.  That is why so many of them have bought into this nonsense from Peter Orszag about health reform: It allows liberals to have their cake and eat it too.

The trouble is, when your strategy is to have your cake and eat it too, you end up being morbidly obese.

That's cute and all, though I would have preferred an argument one way or another instead.

My argument is that liberals are being disingenuous about their desire to reduce the deficit.  You may not be explicitly against deficit reduction, but you prioritize deficit reduction below almost everything else.  The effect of saying you support reducing the deficit but not actually doing anything about it is no different than the effect of not caring about reducing deficits in the first place.

You say you care about reducing the deficit.  That may be true, but you don't seem to care all that much.

Yes, it's true, many left-wing types including myself prioritize spending over reducing the deficit most of the time, but that's not to say the drive to balance the budget isn't there. The problem is that our measures for saving money are often not politically sexy. It's not easy to sell tax hikes and defense cuts to the public, among other controversial measures.

[Gustaf]

Later. You don't cut deficits during depressions. What you do is that you spend the surplus you've accumulated during the good years. Unless you elect George W. Bush and run a huge deficit during the boom years. Then you're just screwed, and that's that.

But I guess worrying about it is something you can start doing right now. It is worrying.

Uh, with a rare exception when the Congress restrained spending 1995-2000, there was no surplus in the federal treasury, whether the President was Republican or Democrat!

I'm not sure whether that contradicts or is relevant to my post? I use neither the term Republican nor Democrat in my post. I merely note that George W Bush got elected after a cycle of budget surpluses during good economic times and promptly spent all of it plus more creating a huge deficit before the crash. That was an extremely unsound economic policy which will hurt America for a long time. I'm not calling that policy inherently Republican nor conservative. I would point out though that few conservative Republicans can say today that they fought or voiced much concern over Bush's unbalancing of the budget.

[Torie]

The point is, liberals are only in favor of deficit reduction that does not involve compromise. 

What the?  'Compromise'?  Liberals have totally compromised to the point of being meaningless as a political force, Ford.

For gods sake man, the top tax rate in the US is something like 30% is it not?  And you say its the liberals who won't compromise?

The top rate is 35% opebo, going to 39.6% in 2011. The effective top rate is about 3% higher than that due to phase outs of Schedule A deductions. FICA taxes are on top of that, and 1.9% of that tax goes on forever, and that needs to be added too. So the current top effective rate is around 40%, going up to about 45% in 2011, plus whatever the Dems manage to add on with new legislation.

[opebo]

The point is, liberals are only in favor of deficit reduction that does not involve compromise. 

What the?  'Compromise'?  Liberals have totally compromised to the point of being meaningless as a political force, Ford.

For gods sake man, the top tax rate in the US is something like 30% is it not?  And you say its the liberals who won't compromise?

The top rate is 35% opebo, going to 39.6% in 2011. The effective top rate is about 3% higher than that due to phase outs of Schedule A deductions. FICA taxes are on top of that, and 1.9% of that tax goes on forever, and that needs to be added too. So the current top effective rate is around 40%, going up to about 45% in 2011, plus whatever the Dems manage to add on with new legislation.

So my point still stands - top tax rates are exceedingly low in the US, so we can't really in fairness say the 'left' or what passes for left in the US has failed to compromise.

Now if top tax rates were still 70+% maybe.