Do you give a damn about the "deficit"?

[bluestateguy]

This alleged, so-called deficit seems to be a subject of obsession of newspaper editorial boards, think tanks and Georgetown cocktail party pundits. But who gives a shit? Do you really hear ordinary people in coffee shops lamenting the "deficit"? Or people at the watercooler at work? I see no evidence of that.


*If they want to be climate change deniers, then two can play at that game, and I can be a deficit denier.

[slackmaster]

1. High federal deficits now guarantee higher taxes and/or inflation in the future

There's no getting around it.

[el_bryanto]

4. As well as gobbling up a larger share of the available credit in a society

Bryant

[NightWatcher]

2. I have no problem financing the future to pay for today

Everyone's making payments.

When you need a car, you put a little down, then agree to make payments for years into the future in order to drive today.
Right now, we are broken down on the side of the road and need a ride.

[Statistical]

3. Except it is more like having $30,000 income and putting $40,000 on a CC every year

The doing that every year non-stop year after year after year.

Your analogy fails because govt doesn't deficit spend only to build/purchase major investments. The govt deficit spends every single year for business as usual.

[Bragi]

5. It doesn't matter much what Americans think of the deficit

What really matters is what the rest of the world --especially China -- think of the U.S deficit. If China concludes the U.S is in too deep, they will demand deficit reduction, and if harsh cost-cutting isn't done, they will stop loaning money to cover the U.S debt.

Americans need to get over the idea that they are still in charge of their own economic future. That era is over. The U.S is now a debtor nation, and will eventually be forced by its creditors to stop spending.

Given the horrific inequalities in the U.S, and the fact that the U.S political and economic system is designed to ensure the well-being of rich people, the crackdown on spending will have quite ugly social as well as economic consequences.

Like the worst effects of climate change, the worst possible social outcomes seem inevitable for the U.S at this point.

- B

[slipslidingaway]

6. Old article - Fun With Funding...THE critical issue looking ahead is COST OF FUNDING

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4053996&mesg_id=4053996

http://contraryinvestor.com/2008archives/mosept08.htm

September 2008

"Fun With Funding...You know that for some time now we have been preaching about what we believe to be one of the most important macro themes of the moment that is deleveraging. Important both for financial market and real world economic outcomes ahead. And, whether we like it or not, it's a theme that we believe will be with us for a good while to come...

...Once again, in the clarity of hindsight, the initial Japanese response to the equity and, several years later, property bubble peaks and subsequent busts was to lower interest rates. Classic monetary policy 101. As the decade of the 1990's wore on, the cost of what was accelerating government spending (expansion in the government balance sheet), was indeed in very good part supported and able to be accomplished by a lower interest rate structure. As Japanese government funding needs expanded, the cost of that funding declined. Why? It was financed internally. Just what the doctor ordered. The following chart is a proxy for longer term interest rates in Japan over the identical period covered in the chart above...


We hope that by now you can see why we believe the forward US funding issue is so important. We believe the question mark is huge as to who will be willing to meet these funding needs during a period of greater US non-government sector balance sheet contraction. Will the US continue to be able to procure low nominal cost funding as its already very large balance sheet (liability) expands ever further by necessity in the coming period? The US faces a series of obstacles that were absent in the similar cycle reconciliation experience of Japan. And THE primary obstacle and question mark is cost of funds. We're not preaching end of the world here. In fact, we're really not even questioning the ability of the US to procure continued foreign funding. THE critical issue looking ahead is COST OF FUNDING. At the outset we asked the question, will the US face a funding problem at some point, given that the US is beholden to foreign financing? It's the cost of funding that will be key to forward outcomes both in the real US economy and financial markets..."

[Bragi]

8. That was the case even before the 2008 meltdown

Since the date of that article, the U.S has assumed the debts of the banking and financial sector, bailed out stupid corporations using public debt, and injected stimulus into the economy using even more public debt, it is now, what, $3 trillion more in debt than it was when the article appeared.

[slipslidingaway]

20. Exactly ...

this is the second paragraph from that article.

"...But perhaps another major issue that is not being given enough attention is the fallout consequences due to the one balance sheet not destined to shrink during this process of deleveraging we have described, and that's the balance sheet of the Federal government. While the financial markets, the household sector and in good part the corporate sector engage in long overdue deleveraging, a natural offset to avoid either the reality or perception of collapse will be the continued expansion of the government's balance sheet. And this process of expanding the Federal balance sheet, as you know full well, has already begun in full force. For now, the de facto bail out of the GSE's and the residential mortgage bail out bill are two poster child examples of this phenomenon at the exact point of acceleration. Even the auto manufacturers have their hands out. Will it be the airlines next? Unfortunately, we expect a lot more where this came from ahead. In one sense, the government really has no choice. This is the price all US taxpayers will bear for years of regulatory self induced blindness. Could our current set of circumstances have been avoided? Of course, but regulatory oversight simply turned a blind eye in deference to the Wall Street and credit cycle driven profit motive. Let's face it, a lot of individuals became very wealthy during the prior credit cycle mania period, now clearly seen to be at the expense of the larger US taxpayer base. Privatizing profits and socializing risk. Sounds like Russia a decade ago, no? Welcome to the USSA. As Jim Grant recently opined, "where is the outrage?". We have no idea...

[harun]

7. Deficits come up when the political leadership is talking about social

services, like expanding health care (or medicare, or education, or social security). If the political leadership was cheerleading a new war, those editorial boards wouldn't speak a word of "deficits".

[Bragi]

11. I don't think that is true any more

Global elites now know that the U.S can no longer afford its wars and its non-productive military sector. Given this, it's unlikely that bond markets would finance another U.S war, other than a war of necessity that other countries felt was necessary. (Hard for me to imagine such a war happening, actually.)

[Raspberry]

12. Bit of a difference--

Wars usually have an end-point sometime in the future. (At least until Bush's war.) Social programs never do.

[harun]

31. Social programs have a return on investment.

There is no ROI for the occupations of Iraq or Afghanistan. Not for the American people anyway.

[Egalitariat]

28. Deficits come up when it appears the next 10 years will create more new debt than the previous 250

[Raspberry]

9. I do

People I know do. One way or another, we are going to be forced to tighten our belts, each and every one of us, or lose everything we have, including social security and medicare.

[doc03]

10. If you don't you should be, there are three ways to get

out of it cut spending, raise taxes or inflation. Our government is totally dysfunctional neither party has the guts to touch SS, Medicare or War spending. The Republicans are against any taxes so you have total gridlock. The deficits are going to bury us as it is, now what if we have another downturn in the economy or another war to add to it? The only way out I see is inflation such as we had in 70's or worse. That only thing that stopped the inflation was when Reagan deliberately put us into a recession. The price of a car more than doubled between 1973 and 1977, I bought a Ford Bronco in 1973 that stickered for $3900 and in 1977 traded it in on a new Blazer that stickered for $8500. That Blazer was the big one that cost like $45000 and up today.

[Raspberry]

13. I'm no economist

but have you ever heard of the Laffer (Laugher?) Curve? It's something I've been hearing about lately, where the lower taxes are, the higher the tax revenue is. It doesn't make a lot of sense to me . . .

[doc03]

16. That is what Reaganomics was based on, it's called trickle

down economics. We are experiencing the results of that failed policy today. The idea was if you give the rich tax cuts they will invest that money and create jobs for us pee-ons. The trouble is they invested the money in China and in ponzi schemes.

[Raspberry]

21. But did tax revenue increase?

That's my question. Even if it didn't create jobs, did the government get more $$$ through taxation?

[doc03]

23. That is the Republicans claim. I think they use smoke and

mirrors to prove that point, for instance if you lower capital gains tax, investors will sell their winners to take advantage of the tax break. There may be a slight surge in revenues at the outset but it dries up the next year. If that was true why isn't the government just swimming in money after all those tax cuts the rich had over the last 30 years? We had a 90% tax bracket back in the 50's and it was the best economy we have ever seen and we weren't running big deficits.

[Raspberry]

26. I see n/t

[slipslidingaway]

22. Our first mortgage - 14 3/4 percent ...

Treasury Market and Mortgage Rates - chart 1977 - 2007

http://mortgage-x.com/general/treasury.asp

"Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5- year ARMs, e.g.) are pegged to shorter-term securities. So when bond yields drop, typically, conventional mortgage rates fall as well (see historical graph below). Conversely, when yields rise, so do mortgage rates. Why? If a lender chooses to sell your mortgage loan to an investor, the lender will likely use Treasury yields as a benchmark for value."

[laughingliberal]

14. I don't but I think those on the right work to scare people about government spending

That said, the deficit does need to be addressed. The questions are how do we address it and when do we get serious about it. I fear big cuts in government spending for social safety nets as I believe that will lead to another slump. I believe another stimulus program which would put more people to work would be a help although it seems counter intuitive to spend more money when you're in a hole. Creating jobs, though, creates tax payers and increases revenue.

In short, I believe the deficit is a problem but I believe it is more important to create jobs and strengthen the social safety net at this point. Cutting military spending would be a good idea but few have suggested that as of now.

[whattheidonot]

29. pay

either the government or industries have to start paying people. people are going to be an expense one way or the other. Put them in the poor house or train and pay them. The government should , with these circumstances, take over the economy and get it going. it cost more to have people doing nothing. private industry will not hire because they are on a different business model, shareholders will not go for it. Hire , get people buying and saving,. young people especially have to be hired at a good wage. Why not, nobody has the will yet. The rich do not want to hire, do not want to be taxed, so what good is the money doing?

[RoyGBiv]

15. "The" Deficit ...

This question is always a trap, albeit sometimes an unintentional one. That is, I'm not suggesting you're laying a trap. It's the nature of the question itself. The problem is that there are different kinds and levels of deficit. People often don't know what they're talking about when discussing it and are usually parroting some political position they were handed by a talking head.

Yes, I do care about the deficit, and I do hear ordinary people talking about it. What I care about though, at the moment, is long-term deficit, which is unsustainable and will lead to disaster if left on the present course. Seemingly paradoxically, we're going to have to carry some massive short-term deficit in an attempt to get back to a place where we can actually address long term deficits substantively. Long-term deficits are affected by short and mid term deficits, of course, but the point is that a large short-term deficit is not the problem.

And there's the trap. The distinction if very seldom made in the popular press between the two, and often they are intentionally conflated. The incessant complaining about the stimulus, TARP, et al that references the damage to the deficit is almost all of the latter type.

[NNN0LHI]

17. Deficits are only important when Dems are running things

http://www.ontheissues.org/2004/Dick_Cheney_Budget_+_Economy.htm

Cheney to Treasury: "Deficits don't matter"

Former Treasury Secretary Paul O'Neill was told "deficits don't matter" when he warned of a looming fiscal crisis.
O'Neill, fired in a shakeup of Bush's economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from "the corporate crowd," a key constituency.

O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. "You know, Paul, Reagan proved deficits don't matter," he said, according to excerpts. Cheney continued: "We won the midterms (congressional elections). This is our due." A month later, Cheney told the Treasury secretary he was fired.

The vice president's office had no immediate comment, but John Snow, who replaced O'Neill, insisted that deficits "do matter" to the administration.

Source: Adam Entous, Reuters, on AOL News Jan 11, 2004

[Winterblues]

18. "Reagan Proved Deficits Don't Matter"

Need I say more....:sarcasm:

[stray cat]

19. Yes - I hate having the federal government put 30,000 or more on my credit card

[laughingliberal]

33. For me, it depends on what they use it for

If it is being spent for programs which will generate jobs or provide people with money to buy food and essentials they could not, otherwise, buy it has a stimulative effect on the economy and generates tax revenue which will, eventually, help pay down the deficit. Military spending and tax cuts for the wealthy? Not so much.

[deaniac21]

24. I only mind them when the repubs are in power.

[SlingBlade]

25. Do you give a damn about the "deficit"? NOPE ! ....

Remember when tens of thousands of Americans sent the Gubmit their own hard earned
money to reduce the deficits during the Clinton Administration ?

And remember how well it worked ? ... Surpluses !

But also remember what the republicans did with that surplus ?

Do you give a damn about the "deficit" ?
Nope. Not anymore I don't, Not ever again will I be concerned about a gubmit deficit.
I'll leave it to the Re-Pukes and their TeaBag'n doppelgangers to worry.

Now, remind me again why any republican that utters the word "deficit" should
NOT have their faces slapped ?

Better yet, Remind me why any democrat who hears a republican utter that word
isn't the one doing the face slapping.

Oh, That's right, That would be "Look'in Backwards", Wouldn't it.

Never Mind.

[Egalitariat]

27. It's by far the biggest long term threat to American stability that we face.

[DCBob]

30. Two denys dont make a truth..

The deficit is for real and needs to taken seriously or we are headed for yet another economic crisis.

[reformist2]

32. Nobody cared about loose lending standards in housing...

...until 2008. The loose lending to governments will prove to be at least 10x greater, imo.

[Johonny]

34. depends

I have no problem in harsh times running a federal deficit. I have a problem with what the Republicans do which is run up huge debt even when the economy shows no short term problem that requires a need for it and a tax policy that basically has no possible way of ever breaking even.