Paul Krugman & others says the way out of the down economy is for the Federal government to spend/spend/spend, putting $ in hands that will spend it again, etc., multiplying its power & stimulating the economy. The other point of view is that spending is already way out of control & we need to cut spending & eliminate budget deficits. This latter point of view seems to have the most resonance with voters at the moment. Krugman says picking the Hoover approach vs the FDR approach will make things worse & put us into an economic death spiral. I wish I knew enough about economics to make an informed decision. I'd welcome any insights you might have.
Replies
62
SoWal Insider
You have the Communist Approach, Socialist Approach and the Capitalist Approach, which is what Reagan did called The Supply Side Theory. This gives the individual iniative to produce since there is less government intervention.
After The Great Depression, Keynes was popular, but only for a short period - this is the one in which the Government controls basically everything - the belief is spend, spend, spend, tax, tax, tax. And, in the middle is the Monetary or Federal Reserve Policy, where the Fed controls growth by tightening and loosening credit to the member banks.
I like Reagan's method.
After The Great Depression, Keynes was popular, but only for a short period - this is the one in which the Government controls basically everything - the belief is spend, spend, spend, tax, tax, tax. And, in the middle is the Monetary or Federal Reserve Policy, where the Fed controls growth by tightening and loosening credit to the member banks.
I like Reagan's method.
Beach Fanatic
There is an excellent recap of Reaganomics here, by one of it's architects (and yet he shows very little bias, if you ask me):
Reaganomics, by William A. Niskanen: The Concise Encyclopedia of Economics | Library of Economics and Liberty
While that administration did wonders for the top tax rates, they also blew the lid off of defense spending - and really, what is that except stimulus for your contributors?
The fascinating thing, in the context of our current problems, is that the author says that there was no "Reagan Revolution": no major programs were cut, no agencies abolished - this was a policy of incremental changes, across the board.
It's also fascinating that the Democratic Congress, who really did not get along with Jimmy Carter, had already decided by the end of the Carter administration that tax cuts and deregulation were a good thing, so Reagan did not have to fight very hard to get those items rolling (in fact, they were already rolling when he took office).
Reaganomics, by William A. Niskanen: The Concise Encyclopedia of Economics | Library of Economics and Liberty
While that administration did wonders for the top tax rates, they also blew the lid off of defense spending - and really, what is that except stimulus for your contributors?
The fascinating thing, in the context of our current problems, is that the author says that there was no "Reagan Revolution": no major programs were cut, no agencies abolished - this was a policy of incremental changes, across the board.
It's also fascinating that the Democratic Congress, who really did not get along with Jimmy Carter, had already decided by the end of the Carter administration that tax cuts and deregulation were a good thing, so Reagan did not have to fight very hard to get those items rolling (in fact, they were already rolling when he took office).
SoWal Expert
I think the deficit matters - because it is so out of control.
It's like charging something on a credit card - okay to do it once or occasionally when you are in a bind, but it starts to cripple you financially when you have a huge balance accruing interest.
It's like charging something on a credit card - okay to do it once or occasionally when you are in a bind, but it starts to cripple you financially when you have a huge balance accruing interest.
Beach Fanatic
The spending of the 30's did not bring the county out of the depression, WWII did. Examine the economic indicators for the 30's to see for yourself. Government borrowing sucks money from the economy and makes it harder for small businesses to borrow the money needed to expand. No expansion=no new jobs.
Banned
You have the Communist Approach, Socialist Approach and the Capitalist Approach, which is what Reagan did called The Supply Side Theory. This gives the individual iniative to produce since there is less government intervention.
After The Great Depression, Keynes was popular, but only for a short period - this is the one in which the Government controls basically everything - the belief is spend, spend, spend, tax, tax, tax. And, in the middle is the Monetary or Federal Reserve Policy, where the Fed controls growth by tightening and loosening credit to the member banks.
I like Reagan's method.
Reagan's alleged success was primarily due to actions of the Federal Reserve, whose chairman Paul Volker was a Carter appointee.
Banned
The spending of the 30's did not bring the county out of the depression, WWII did. Examine the economic indicators for the 30's to see for yourself. Government borrowing sucks money from the economy and makes it harder for small businesses to borrow the money needed to expand. No expansion=no new jobs.
Yes it was the spending of the 40s, a large public works program known as WWII. Isn't it the case that our deficits were the largest in history at that time, as a percentage of GDP?
Beach Fanatic
Yes it was the spending of the 40s, a large public works program known as WWII. Isn't it the case that our deficits were the largest in history at that time, as a percentage of GDP?
The difference is that the WWII spending led to huge increases in manufacturing jobs in the core industries: steel, machinery, textiles, energy etc. etc. NAFTA and other trade agreements engineered by both poltical parties have gutted these industries and so the huge spending this time is not leading to an increase in industry which is where the bulk of the traditional blue-collar, decent wages and benefits jobs come from. Rather then suing Arizona Obama should work on killing the unfair trade agreements and level the playing field for our industry.
Banned
The difference is that the WWII spending led to huge increases in manufacturing jobs in the core industries: steel, machinery, textiles, energy etc. etc. NAFTA and other trade agreements engineered by both poltical parties have gutted these industries and so the huge spending this time is not leading to an increase in industry which is where the bulk of the traditional blue-collar, decent wages and benefits jobs come from. Rather then suing Arizona Obama should work on killing the unfair trade agreements and level the playing field for our industry.
The need for blue collar jobs will continue to decline, because manufacturing keeps getting more and more automated. We could continue to have a jobless recovery, until industry changes enough to create a whole new category of jobs.
SoWal Insider
Paul Krugman & others says the way out of the down economy is for the Federal government to spend/spend/spend, putting $ in hands that will spend it again, etc., multiplying its power & stimulating the economy. The other point of view is that spending is already way out of control & we need to cut spending & eliminate budget deficits. This latter point of view seems to have the most resonance with voters at the moment. Krugman says picking the Hoover approach vs the FDR approach will make things worse & put us into an economic death spiral. I wish I knew enough about economics to make an informed decision. I'd welcome any insights you might have.
It's not that black and white. Governments accumulate debt during downturns, that's expected. There are key questions like how much debt should be accumulated, for how long should government run deficits, and what should the money be spent on in order to get the best ROI. Another question to answer is how will the government unwind the debt after the economy recovers, and what interest will the government have to pay on the debt.
The interest on our national debt is currently running about 400 billion a year. By the time Obama's first term is over, it'll likely be pushing towards around 750 billion a year. The federal government only takes in about 2.4 trillion annually. (It is currently slated to spend over 4.2 trillion in 2011!)
Krugman says we need to deficit spend to get out of this, but really, we already are by a factor of two, and because we've been doing this for so long we're approaching a maximum limit, a point of no return where interest potentially outstrips revenue.
Banned
It's not that black and white. Governments accumulate debt during downturns, that's expected. There are key questions like how much debt should be accumulated, for how long should government run deficits, and what should the money be spent on in order to get the best ROI. Another question to answer is how will the government unwind the debt after the economy recovers, and what interest will the government have to pay on the debt.
The interest on our national debt is currently running about 400 billion a year. By the time Obama's first term is over, it'll likely be pushing towards around 750 billion a year. The federal government only takes in about 2.4 trillion annually. (It is currently slated to spend over 4.2 trillion in 2011!)
Krugman says we need to deficit spend to get out of this, but really, we already are by a factor of two, and because we've been doing this for so long we're approaching a maximum limit, a point of no return where interest potentially outstrips revenue.
That's why a recovery by business, even a jobless one, with increased profitability, would be of benefit. More tax revenue for the government. Deficit reduced. That's the theory.
SoWal Insider
That's why a recovery by business, even a jobless one, with increased profitability, would be of benefit. More tax revenue for the government. Deficit reduced. That's the theory.
Sure, we'd all take any kind of recovery we can get right now right? Question is what will those businesses produce, and who will buy their products? We've just experienced a once in a century failure - a consumer and business credit bubble that popped. With 2/3rds of the economy driven by consumer spending, with consumers completely tapped out with no money to spend, loads of debt and no credit.... ? I don't have the answers, the future looks really bleak.
The federal government can help by getting consumers and businesses back on firmer financial footing... but hey, guess what, the Federal Government is broke and deep in debt too! We're all screwed!
Banned
Sure, we'd all take any kind of recovery we can get right now right? Question is what will those businesses produce, and who will buy their products? We've just experienced a once in a century failure - a consumer and business credit bubble that popped. With 2/3rds of the economy driven by consumer spending, with consumers completely tapped out with no money to spend, loads of debt and no credit.... ? I don't have the answers, the future looks really bleak.
The federal government can help by getting consumers and businesses back on firmer financial footing... but hey, guess what, the Federal Government is broke and deep in debt too! We're all screwed!
We need to think positive. "We're all screwed except me", something like that. Not very inspirational , is it?
Beach Fanatic
We need to think positive. "We're all screwed except me", something like that. Not very inspirational , is it?
You are on the right track. The recovery starts with each one of us doing what we can. Saving a decent amount to provide capital resources for business, buying American if possible, voting for individuals who will support responsible government spending and reasonable taxes and lowering our expectations of what all governments will do for us and increasing our efforts in our communities to help others.
Beach Fanatic
it seems to me (and economics is not my area) that we need to be producing something in this country...but what are we producing?
As Shopper says, it is a consumer driven economy, but almost all of what we buy comes from somewhere else...our manufacturing jobs will never come back the way they were post WWII IMO; so, who is working on producing innovative "stuff"?
We seem stuck in the last century mindset. It's as though we have not prepared for the global economy; have not prepared for the world to be a smaller place due to the instant communication;
and so have no vision of what we will look like in the next 50 years.
We don't have a clue where we are going; so, it doesn't matter which road we take...or, we don't have a clue where we're going, so we are stuck at the intersection unable to make a decision....
Rather ironic that while we stumble along, trying to regain something that has already passed us by, we are spending billions in money and precious young lives trying to build Iraq and Afghanistan into....what?
As Shopper says, it is a consumer driven economy, but almost all of what we buy comes from somewhere else...our manufacturing jobs will never come back the way they were post WWII IMO; so, who is working on producing innovative "stuff"?
We seem stuck in the last century mindset. It's as though we have not prepared for the global economy; have not prepared for the world to be a smaller place due to the instant communication;
and so have no vision of what we will look like in the next 50 years.
We don't have a clue where we are going; so, it doesn't matter which road we take...or, we don't have a clue where we're going, so we are stuck at the intersection unable to make a decision....
Rather ironic that while we stumble along, trying to regain something that has already passed us by, we are spending billions in money and precious young lives trying to build Iraq and Afghanistan into....what?
Beach Fanatic
it seems to me (and economics is not my area) that we need to be producing something in this country...but what are we producing?
QUOTE]
http://www.nytimes.com/2009/02/20/business/worldbusiness/20iht-wbmake.1.20332814.html
More than you think.
But manufacturing in the United States is not dead or even dying. It is moving upscale, following the biggest profits and becoming more efficient, just as Henry Ford did when he created the assembly line to make the Model T car.
The United States remains by far the world's leading manufacturer by value of goods produced. It hit a record $1.6 trillion in 2007 - nearly double the $811 billion of 1987. For every $1 of value produced in China factories, the United States generates $2.50.
So what is made in the U.S.A. these days?
The United States sold more than $200 billion worth of aircraft, missiles and space-related equipment in 2007, and $80 billion worth of autos and auto parts. Deere, best known for its bright green and yellow tractors, sold $16.5 billion worth of farming equipment last year, much of it to the rest of the world.
Edited
SoWal Insider
Reagan's alleged success was primarily due to actions of the Federal Reserve, whose chairman Paul Volker was a Carter appointee.
Yep. However, the fundamentals of what America wanted at that time was apparently less government. It could have been any Capitalist who won in 1980; it just happened to be Ronald Reagan. As the article points out, even Jimmy Carter (who is a very nice man) was not successful in working with Congress then......even Dems were tired of their ways.
Beach FanaticAuthor
The recovery starts with each one of us doing what we can. Saving a decent amount...
The Catch-22 is that if all Americans saved in a responsible manner, it would be bad for the overall economy.
The basic question seem to be
should we spend ourselves out of the bad economy?
or
should we save ourselves out of the bad economy?
??????
Beach Fanatic
it seems to me (and economics is not my area) that we need to be producing something in this country...but what are we producing?
QUOTE]
http://www.nytimes.com/2009/02/20/business/worldbusiness/20iht-wbmake.1.20332814.html
More than you think.
But manufacturing in the United States is not dead or even dying. It is moving upscale, following the biggest profits and becoming more efficient, just as Henry Ford did when he created the assembly line to make the Model T car.
The United States remains by far the world's leading manufacturer by value of goods produced. It hit a record $1.6 trillion in 2007 - nearly double the $811 billion of 1987. For every $1 of value produced in China factories, the United States generates $2.50.
So what is made in the U.S.A. these days?
The United States sold more than $200 billion worth of aircraft, missiles and space-related equipment in 2007, and $80 billion worth of autos and auto parts. Deere, best known for its bright green and yellow tractors, sold $16.5 billion worth of farming equipment last year, much of it to the rest of the world.
Thanks, Buz. So, the things we are producing are those things that "regular" people don't buy often or at all...so, the perception is that we aren't making many things--because the masses don't buy them or see them...maybe.
And perhaps that accounts for the disconnect we often see between Americans and people from other countries. Those from outside the US see the Deere tractors and construction equipment coming from the US and see us as productive: we here in the US see the Kubota and have a different perception.
I still think that we need more Research and Development for those things that are more innovative...what do you think?
Interesting that much of what's in the list above has to do with military needs.
Edited
margarita brocolia
I still think that we need more Research and Development for those things that are more innovative...what do you think?
I wish we would jump on the opportunity for research and development of clean energy. Subsidize these areas to some extent. If subsidies and tax breaks can be obtained by oil companies why not for clean energy R & D? Maybe plants could be built in areas such as Louisiana where many have lost livelihoods due to the oil catastrophe. The workforce and need is there as well as other areas that have been hit hard, like Michigan.
Just support it and move it forward instead of letting other countries take the reins. Some of Denmark's windmill technology came from an American innovator years ago who couldn't get it supported here.
I would be interested in seeing where this might go: American Energy Innovation Council Unveils "Business Plan for America's Future"
Bill Gates' American Energy Innovation Council Unveils "Business Plan for America's Future" | Fast Company
Interesting that much of what's in the list above has to do with military needs.
This popped out at me also. It helps my state of Texas I guess but may also be looked at by some as a reason for staying in conflicts.
.
Edited
SoWal Expert
The majority of the items I buy (except clothes) are made at least partly in the US.
Part of that is where I shop (NOT at Wal-mart), part of it is the brands and shopping habits I was raised with, and part of it is growing up in a company, artisan, and locavore town where employee discounts and a strong customer base made buying local products a no-brainer.
Part of that is where I shop (NOT at Wal-mart), part of it is the brands and shopping habits I was raised with, and part of it is growing up in a company, artisan, and locavore town where employee discounts and a strong customer base made buying local products a no-brainer.
Beach Fanatic
Thanks, Buz. So, the things we are producing are those things that "regular" people don't buy often or at all...so, the perception is that we aren't making many things--because the masses don't buy them or see them...maybe.
And perhaps that accounts for the disconnect we often see between Americans and people from other countries. Those from outside the US see the Deere tractors and construction equipment coming from the US and see us as productive: we here in the US see the Kubota and have a different perception.
I still think that we need more Research and Development for those things that are more innovative...what do you think?
Interesting that much of what's in the list above has to do with military needs.[/quote].
It is what we do best.
As far as innovation goes one of the promises of "green" energy is more jobs in the USA.
Don't forget Subarus are 40% made in the USA.
Beach Fanatic
I agree with the solar/wind/green energy items being a place where we could improve. I have a friend who has been a lobbyist for the Solar Industry for years; she has an almost impossible job because she has to go up against the oil industry's money...
hopefully, that will be changing and Florida can take the lead in something more environmentally friendly.
I wonder if some of the technology that goes into the military productions might not be also used in some more peaceful endeavors...
I love the windmills and think that is such a great way to harness energy. In The Netherlands I am always enthralled with the old wooden ones working right alongside the gleaming silver ones...as we zip past in the train that sometimes goes 200 miles or kilometers an hour!
How I wish the U. S. had high speed trains!
There is so much available in the world that we don't take advantage of here--and yet, as Buz points out, so much where we are the leaders. The point of difference must be the amount of profit that goes to the corporations in charge and the will of the politicians who are "bringing home the pork."
hopefully, that will be changing and Florida can take the lead in something more environmentally friendly.
I wonder if some of the technology that goes into the military productions might not be also used in some more peaceful endeavors...
I love the windmills and think that is such a great way to harness energy. In The Netherlands I am always enthralled with the old wooden ones working right alongside the gleaming silver ones...as we zip past in the train that sometimes goes 200 miles or kilometers an hour!
How I wish the U. S. had high speed trains!
There is so much available in the world that we don't take advantage of here--and yet, as Buz points out, so much where we are the leaders. The point of difference must be the amount of profit that goes to the corporations in charge and the will of the politicians who are "bringing home the pork."
Beach FanaticAuthor
Recovery Faltering As Shoppers Head to Sidelines
Full story at: News Headlines
If Americans are going to be responsible and stop spending just because they have no money, they'll put the country into an economic death spiral.
Full story at: News Headlines
If Americans are going to be responsible and stop spending just because they have no money, they'll put the country into an economic death spiral.
Beach Fanatic
We're not the only ones facing a dismal, indebted future
From the Independent in the U.K. "Britain's debt 4x more than previously acknowledged..."
?4 trillion is about $6 trillion dollars. That is $100,000 per inhabitant in the U.K. (Not per family or per taxpayer...per inhabitant.) A family of four's share is $400,000 today. With an interest rate of 2% and no more deficit spending that family of 4 will owe nearly a half million dollars in 10 years. On top of that, what are the odds that the British government will magically suddenly balance their budget?
A much lower standard of living, inflation, higher taxes, rationing and currency devaluation will ultimately be the way to get out of such levels of debt. Who's up for that?
From the Independent in the U.K. "Britain's debt 4x more than previously acknowledged..."
The true scale of Britain's national indebtedness was laid bare by the Office for National Statistics yesterday: almost ?4 trillion, or ?4,000bn, about four times higher than previously acknowledged.
It quantifies the burden that will be placed on future generations, and it is the ONS's first attempt to draw together the "off-balance-sheet" liabilities that have been accumulated by the state. The figures imply a huge "intergenerational transfer" ? broadly in favour of today's "baby boomer" generation at the expense of younger people and future generations.
?4 trillion is about $6 trillion dollars. That is $100,000 per inhabitant in the U.K. (Not per family or per taxpayer...per inhabitant.) A family of four's share is $400,000 today. With an interest rate of 2% and no more deficit spending that family of 4 will owe nearly a half million dollars in 10 years. On top of that, what are the odds that the British government will magically suddenly balance their budget?
A much lower standard of living, inflation, higher taxes, rationing and currency devaluation will ultimately be the way to get out of such levels of debt. Who's up for that?
Edited
SoWal Expert
Full story at: News Headlines
If Americans are going to be responsible and stop spending just because they have no money, they'll put the country into an economic death spiral.
Americans being irresponsible and spending when they had no money IS what put the economy into an economic death spiral. :roll:
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