Current Events > "Democrats and the Deficit Con"

(+) Yeah! (+)

https://www.jacobinmag.com/2018/04/deficit-budgets-spending-democrats-republicans

Deficit hand-wringing is a venerable American political tradition, a staple of rhetoric on both sides of the aisle especially for the party out of power. But heres the rub: hardly anybody can say exactly how a high deficit leads to serious economic problems, and its not actually clear that it does. Increasingly, left-wing (and even not-so-left-wing) economists are urging us to rethink the accepted notion that government debt is a harbinger of a nations future insolvency. In fact, these economists point out, its far from clear that deficits have any macroeconomic effect at all. Meanwhile, more public social spending is correlated with a host of positive social outcomes for everyone except the wealthiest few.

The deficit-scolding script is familiar: Republicans attack every Democratic effort to increase spending on social programs by agonizing over the nations mounting debt, vowing that soaring numbers spell imminent ruin. Democrats claim that this or that military campaign or top-bracket tax cut is bad because it will break the bank often at the expense of actual political arguments against war or inequality. Not even progressive Democrats hell, not even Bernie Sanders can resist the temptation to use this weapon, even though their own progressive policies rely on a diametrically different logic: namely that social investment is important in its own right, and that reducing inequality is more essential to building a healthy society than frugality in the abstract.
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Much of the 2000 presidential election debate focused on what should be done with the Clinton surpluses, with Al Gore tying the surplus to Social Security and promising to put it in a lockbox. Of course, his Republican opponent, George W. Bush, had no such self-defeating scruples in fact, he justified his tax cuts by openly critiquing Clintons surplus:

The last time taxes were this high as a percentage of our economy, there was a good reason . . . We were fighting World War II. Today, our high taxes fund a surplus. Some say that growing federal surplus means Washington has more money to spend. But theyve got it backwards. The surplus is not the governments money. The surplus is the peoples money.

In 2002, Dick Cheney went a step further and admitted that deficits are a non-issue, famously saying that Reagan proved deficits dont matter. This was, in essence, correct. But at the time, it was a truth that only Republicans were willing to acknowledge.

Of course, once Obama was in office, Republicans quickly forgot that deficits dont matter. The Tea Party made the recession-era deficit the centerpiece of its anti-Obama attacks showing once again how the Right sees the issue solely as a matter of political expediency. In response, Obama followed the liberal script and embraced the deficit issue with utter seriousness, launching (ultimately fruitless) grand bargain negotiations with the GOP in which he conceded what would have been significant cuts to Social Security, Medicare, and other programs.
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Now the Trump administration is doing what Republicans do, spending government money like crazy just not on our public schools, housing, health care, or anything else that improves ordinary working peoples economic prospects and quality of life. And once again, Democrats have leapt at the opportunity to deride Trump as a reckless philistine, constitutionally incapable of real-world budget discipline.
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Attempting to balance a commitment to deficit reduction alongside a theoretical responsibility to protect and expand public programs, Democrats end up imposing false limitations on themselves and neutering their own supposed political agenda.

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dems are remarkably unsavvy with politics

it is sad
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Why wont high deficits have an affect on the economy as a whole? It seems very counterintuitive no?
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Kazi1212 posted...

Why wont high deficits have an affect on the economy as a whole? It seems very counterintuitive no?

There are hyperlinks in the text that don't come through on GameFAQs; that sentence links to a tweet that, well, isn't there. Might have been intended to link to this, though?
https://twitter.com/Econ_Marshall/status/983395146850099201
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hmm according to this the US seems to have deficits thats on par with most countries, I was always under the impression our deficits were much higher.

https://www.cia.gov/library/publications/the-world-factbook/fields/2222.html

Im just a bit skeptical having high deficits consistently wont hinder future generations. Economics is a field grounded in exploring counterfactuals, makes it that much harder to be sure of anything
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Antifar posted...

Kazi1212 posted...

Why wont high deficits have an affect on the economy as a whole? It seems very counterintuitive no?

There are hyperlinks in the text that don't come through on GameFAQs; that sentence links to a tweet that, well, isn't there. Might have been intended to link to this, though?
https://twitter.com/Econ_Marshall/status/983395146850099201

I don't find this particularly convincing.
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The US borrows money at extremely low interest and has a dynamic economy with higher than average growth for the developed world. That's the most important thing when it comes to debt. It's why the debt itself is not as large an issue as people think and why we're in a totally different situation than say, Greece.

Being able to borrow money at low interest is a very good thing when your country is in a recession or you're in need of a large spending project (like infrastructure). The problem is the US has been deficit spending for decades of mostly constant economic growth. Contrary to popular belief our deficits are mostly because of Republican policies so we've had very little to show for it. Tax cuts for the wealthy, wars and the most inefficient health care system in the developed world don't benefit the average person.

^ are you Antifars alt by any chance?
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Kazi1212 posted...

^ are you Antifars alt by any chance?

nope

antfair posted...

Increasingly, left-wing (and even not-so-left-wing) economists are urging us to rethink the accepted notion that government debt is a harbinger of a nations future insolvency. In fact, these economists point out, its far from clear that deficits have any macroeconomic effect at all. Meanwhile, more public social spending is correlated with a host of positive social outcomes for everyone except the wealthiest few.

Then why not borrow 10 trillion and invest it into more social programs?
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I do think there's a good argument that the U.S. has an unique ability to leverage deficit spending, given the status of its currency as the global standard and the lack of reliable alternatives. That could change, of course, but at the moment, that's unforseeable, barring a(n artificially created) default.
Nonetheless, it's obvious there will be significant resistance to a program that ignored the deficit in pursuit of progressive policy goals in a way you did not and would never see towards something like the recent Republican tax cuts. At the same time, simply balancing the budget is simply not a winner at the ballot box. Nor does it address the many(IMO more pressing) issues facing our country.

Broseph_Stalin posted...

The US borrows money at extremely low interest and has a dynamic economy with higher than average growth for the developed world. That's the most important thing when it comes to debt. It's why the debt itself is not as large an issue as people think and why we're in a totally different situation than say, Greece.

Being able to borrow money at low interest is a very good thing when your country is in a recession or you're in need of a large spending project (like infrastructure). The problem is the US has been deficit spending for decades of mostly constant economic growth. Contrary to popular belief our deficits are mostly because of Republican policies so we've had very little to show for it. Tax cuts for the wealthy, wars and the most inefficient health care system in the developed world don't benefit the average person.

It's not the deficit that's the problem. It's the debt.

In either case, you're wrong that it's the fault of Republican policy - two-thirds of both the debt and total spending are made up solely by Medicare, Medicaid, and Social Security.

And while our fiscal situation isn't as bad as Greece, it IS as bad as most of Europe, and most of Europe is teetering on the brink of disaster.
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darkjedilink posted...

Broseph_Stalin posted...

The US borrows money at extremely low interest and has a dynamic economy with higher than average growth for the developed world. That's the most important thing when it comes to debt. It's why the debt itself is not as large an issue as people think and why we're in a totally different situation than say, Greece.

Being able to borrow money at low interest is a very good thing when your country is in a recession or you're in need of a large spending project (like infrastructure). The problem is the US has been deficit spending for decades of mostly constant economic growth. Contrary to popular belief our deficits are mostly because of Republican policies so we've had very little to show for it. Tax cuts for the wealthy, wars and the most inefficient health care system in the developed world don't benefit the average person.

It's not the deficit that's the problem. It's the debt.

In either case, you're wrong that it's the fault of Republican policy - two-thirds of both the debt and total spending are made up solely by Medicare, Medicaid, and Social Security.

And while our fiscal situation isn't as bad as Greece, it IS as bad as most of Europe, and most of Europe is teetering on the brink of disaster.

You are aware that Social Security is nearly entirely financed by its dedicated payroll tax and interest on its assets? In other words, it is fiscally self-sustaining, and will remain so(by current projections) for almost two decades. Cutting Social Security in a way that would be revenue-positive would involve leaving the payroll tax in place while reducing the pay-outs of the program. This would be hugely unpopular, for reasons that should be obvious.

As for Medicare, its expenditures are mostly paid out by two trust funds held by the U.S. Treasury Department: the Hospital Trust Insurance Fund(which funds Part A) and the Supplementary Medical Insurance Fund(which funds Part B and a portion of Part D). Medicare Part D is the only part of the program without a discreet, dedicated funding mechanism(this was by design).

Medicaid is the only one that's actually funded out of general revenue, but every state runs its own program which is, in part, funded by that state. This makes it the most vulnerable to cuts, but given that it exists to give health insurance to poor people, I wonder what you think would be a better use of the money?

Social security being funded for just two decades is a fucking horrifying nightmare, not a positive
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FLUFFYGERM posted...

Social security being funded for just two decades is a fucking horrifying nightmare, not a positive

I dont necessarily disagree, but how do you propose we approach the problem our aging population? Millions and millions of people live paycheck to paycheck that cant even afford saving or putting money into 401ks to prepare for a lengthy retirement. And with longevity increasing over time, this will become an even bigger issue
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FLUFFYGERM posted...

Social security being funded for just two decades is a fucking horrifying nightmare, not a positive

the two decade estimate is based on current interest rates of treasury notes

and no alterations whatsoever to either benefit payout or payroll taxation

i promise to give this thread some thorough responses tomorrow, darkjedilink is spreading severe misinformation

but ive been tweaking sims for 18 hours and my eyes are bleeding

ps kazi: respect for coming to this thread with an open mind, i have been wrong to troll you in the past and won't in the future

pps budget balance is not something to toss into the wind entirely and pc is correct to note that we can't just borrow ten trillion tomorrow to fund the first decade of a UHC
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antfair posted...

jacobinmag

wow how fucking stupid do you have to be to revere the fucking jacobins
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I just don't think "Look at how hypocritical Republicans are" has seemed to be an effective tactic on economic issues. It would be surprise me if a sizeable portion of e.g. Trump's basis actually followed the deficit enough to realize that the tax plan was ballooning it. The deficit is just sort of a parroted complaint about Dems.
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@Darkman124

I think you may misunderstand me, like 90% of the posts are trolling or shitposts, those arent an accurate reflection of my views, im just playing a character more or less. Most of my actual views are quite leftist, its why I always pick on liberals. The only reason Im not trolling in this topic is because Im actually curious about the significance of our deficit in respect to long term health of the economy
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He democrats need a massive rehaul. The voters wanted Conerade Bernie and the DNC stuck them with Hilldawg because thats who they wanted.
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ElatedVenusaur posted...

darkjedilink posted...

Broseph_Stalin posted...

The US borrows money at extremely low interest and has a dynamic economy with higher than average growth for the developed world. That's the most important thing when it comes to debt. It's why the debt itself is not as large an issue as people think and why we're in a totally different situation than say, Greece.

Being able to borrow money at low interest is a very good thing when your country is in a recession or you're in need of a large spending project (like infrastructure). The problem is the US has been deficit spending for decades of mostly constant economic growth. Contrary to popular belief our deficits are mostly because of Republican policies so we've had very little to show for it. Tax cuts for the wealthy, wars and the most inefficient health care system in the developed world don't benefit the average person.

It's not the deficit that's the problem. It's the debt.

In either case, you're wrong that it's the fault of Republican policy - two-thirds of both the debt and total spending are made up solely by Medicare, Medicaid, and Social Security.

And while our fiscal situation isn't as bad as Greece, it IS as bad as most of Europe, and most of Europe is teetering on the brink of disaster.

You are aware that Social Security is nearly entirely financed by its dedicated payroll tax and interest on its assets? In other words, it is fiscally self-sustaining, and will remain so(by current projections) for almost two decades. Cutting Social Security in a way that would be revenue-positive would involve leaving the payroll tax in place while reducing the pay-outs of the program. This would be hugely unpopular, for reasons that should be obvious.

As for Medicare, its expenditures are mostly paid out by two trust funds held by the U.S. Treasury Department: the Hospital Trust Insurance Fund(which funds Part A) and the Supplementary Medical Insurance Fund(which funds Part B and a portion of Part D). Medicare Part D is the only part of the program without a discreet, dedicated funding mechanism(this was by design).

Medicaid is the only one that's actually funded out of general revenue, but every state runs its own program which is, in part, funded by that state. This makes it the most vulnerable to cuts, but given that it exists to give health insurance to poor people, I wonder what you think would be a better use of the money?

I am aware of all of that. However, it doesn't change the irrefutable fact that those three programs make up 2/3 of our debt. You see, while SS is funded by a separate tax, the Trust Fund has been borrowed from every year for decades - this, too, is by design.

You ask what I think a better use of the money would be, and my answer is "literally anything not handled by the government." The best estimates put SS as lasting less than twenty years. That means I'll still be a decade shy of being able to collect, barring some debilitating tragedy. That means that, for the past twenty years, the Federal government has literally been stealing from me, and every attempt during my lifetime to CHANGE that has been met with absolute, iron-willed resistance at every turn.

Fuck Social Security.
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Minute posted...

antfair posted...

jacobinmag

wow how fucking stupid do you have to be to revere the fucking jacobins

lmao didn't even realize he linked to that. that's basically the far left equivalent of breitbart
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darkjedilink posted...

f*** Social Security.

What about the people who are retiring or going to retire with the expectation that they get SS to fund their retirement?
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darkjedilink posted...

You ask what I think a better use of the money would be, and my answer is "literally anything not handled by the government."

Maybe you should stop electing people who hate the idea of government and actively work to dismantle/degrade it then?
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darkjedilink posted...

That means that, for the past twenty years, the Federal government has literally been stealing from me, and every attempt during my lifetime to CHANGE that has been met with absolute, iron-willed resistance at every turn.

I do have to say that it seems unreasonable to me how opposed to raising the benefits age people are considering how much our average life expectancies have increased since the 30s
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Balrog0 posted...

darkjedilink posted...

That means that, for the past twenty years, the Federal government has literally been stealing from me, and every attempt during my lifetime to CHANGE that has been met with absolute, iron-willed resistance at every turn.

I do have to say that it seems unreasonable to me how opposed to raising the benefits age people are considering how much our average life expectancies have increased since the 30s

how much of the average life expectancy jump has been a result of infant mortality rate declines, vs actual people staying alive at older ages?

my understanding of ss is that our biggest concern is the population growth rate

also i'm here now

and i think we can have a reasonable discussion about the impact of govt borrowing on industry, as treasuries functionally compete with corporate bonds
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Darkman124 posted...

how much of the average life expectancy jump has been a result of infant mortality rate declines, vs actual people staying alive at older ages?

hmm, I'm actually not sure what all the increase is attributable to, but actually (unless the government is lying to me):

https://www.ssa.gov/planners/retire/background.html

The original Social Security Act of 1935 set the minimum age for receiving full retirement benefits at 65.
Congress cited improvements in the health of older people and increases in average life expectancy as primary reasons for increasing the normal retirement age.
Since the program first began paying monthly Social Security benefits in 1940, the average life expectancy for men reaching age 65 has increased nearly 7 years to age 84.3, for women reaching age 65, their average life expectancy has increased nearly 7 years to age 86.6.
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mm, so 'most of it', then. that's fair, thanks for doing the digging on that.
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Doom_Art posted...

darkjedilink posted...

You ask what I think a better use of the money would be, and my answer is "literally anything not handled by the government."

Maybe you should stop electing people who hate the idea of government and actively work to dismantle/degrade it then?

Why would I want the government, that is already literally stealing from me, to have more power to do so?
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FLUFFYGERM posted...

darkjedilink posted...

f*** Social Security.

What about the people who are retiring or going to retire with the expectation that they get SS to fund their retirement?

Their SS check is paid for by me. Their pay-ins are already spent.

Fuck them. They should do what I will be forced to - live without it.
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Darkman124 posted...

mm, so 'most of it', then. that's fair, thanks for doing the digging on that.

How do you figure? He was talking about life expectancy of people reaching age 65.
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Any day now, Balanced Budget Amendment...

Questionmarktarius posted...

Any day now, Balanced Budget Amendment...

Who's going to pass it? Dems screamed about dying children when Paul Ryan proposed it before Moody's lowered America's credit rating, and Republicans aren't going to push it now that they run the show.
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darkjedilink posted...

How do you figure? He was talking about life expectancy of people reaching age 65.

well, I didn't specify that in my first post, to be fair. And if you're talking about overall life expectancy in the past century in the U.S., I think it's gone up roughly 30 years or so.
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darkjedilink posted...

Who's going to pass it?

Flyover states, probably, completely unaware that doing so would gut their delicious farm subsidies.

https://www.usconstitution.net/xconst_A5.html

The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as part of this Constitution, when ratified by the Legislatures of three fourths of the several States, or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress; Provided that no Amendment which may be made prior to the Year One thousand eight hundred and eight shall in any Manner affect the first and fourth Clauses in the Ninth Section of the first Article; and that no State, without its Consent, shall be deprived of its equal Suffrage in the Senate.

A balanced budget amendment would be a disaster. Austerity for austerity's sake at a time when debt is cheap and we control the most widely-used currency.
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Darkman124 posted...

dems are remarkably unsavvy with politics

it is sad

That's what you got out of this? I got that democrats are the bad guys for trying to make our country better.
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Questionmarktarius posted...

Any day now, Balanced Budget Amendment...

would not be very useful

so long as us treasury bond auctions are not increasing in supply faster than demand for lowest-risk debt, the programs it finances can have a near-zero ROI and still not be a problem since inflation will consume nearly all of the bond's interest

and that's just from a govt perspective

from an economy perspective it's just a question of making sure not to crowd out corporate bonds and flood/crash the bond market, which would take down equities and thus the economy/jobs.

that said we are coming off 6-ish years of federal reserve bond buying so our perspective on how much debt we can intake is probably a little warped. they're selling those bonds now.
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Questionmarktarius posted...

Flyover states, probably, completely unaware that doing so would gut their delicious farm subsidies.

I think the bigger thing would be major programs, like Medicaid cuts. State governments do like to cut Medicaid, but only on their terms.
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antfair posted...

Much of the 2000 presidential election debate focused on what should be done with the Clinton surpluses, with Al Gore tying the surplus to Social Security and promising to put it in a lockbox.

https://www.youtube.com/watch?v=zDgRRVpemLo" data-time="
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Darkman124 posted...

FLUFFYGERM posted...

Social security being funded for just two decades is a fucking horrifying nightmare, not a positive

the two decade estimate is based on current interest rates of treasury notes

and no alterations whatsoever to either benefit payout or payroll taxation

i promise to give this thread some thorough responses tomorrow, darkjedilink is spreading severe misinformation

but ive been tweaking sims for 18 hours and my eyes are bleeding

ps kazi: respect for coming to this thread with an open mind, i have been wrong to troll you in the past and won't in the future

pps budget balance is not something to toss into the wind entirely and pc is correct to note that we can't just borrow ten trillion tomorrow to fund the first decade of a UHC

I would be eager to see this myself. I only know the basics. Knowledge, as they say, is power.
But no one's proposing to just "borrow" $10 trillion dollars. That post smacks of bad faith to me.

Why not just borrow $10 trillion? Why is that a question in bad faith?

Why not just borrow $15 trillion?
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Deficits matter. We have gotten away with rising debt for so long because rates have been falling. Keep in mind, we have had a bond bull market (falling rates) for 30 years. Before that, we had a 30 year bond bear market (rising rates).

The below video is about Japan, but does a great job explaining to the layman why deficits matter.

https://www.youtube.com/watch?v=Njp8bKpi-vg" data-time="&start=11

Dont be short sighted. This debt will be around a lot longer than we will. If inflation picks up, the Fed has to raise rates. You cant say that inflation wont spike in the next 50 years.
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^^Also, the above video may be seen as somewhat outdated because it was made before the Japanese Central Bank effectively took over the entire Japanese bond market. Seems like a free lunch if the government can roll the same debt over again and again forever, and if interest payments are returned to the government. Problem is, the central bank has been replaced by a money printer that finances the government. If there is ever high inflation, the country is fucked because the way the central bank reigns in inflation is by raising interest rates and selling bonds.

When the whole world switched over to fiat currency and central banking, this isnt what they had in mind.

More related to the OP, both parties are hypocrites when it comes to spending. Paul Krugman freaked out over deficits when Bush was president, and then changed his tune under Obama. You can say that this was simply because he is a Keynesian and Obana dealt with a recession, but Krugman was still calling for deficits under Hillary when he thought she would win. Now of course he is sounding the alarm under Trump again.
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FLUFFYGERM posted...

Why not just borrow $10 trillion? Why is that a question in bad faith?

Why not just borrow $15 trillion?

because available rate depends on the ratio of buyers to sellers

if you have buyers for 5T of debt and want to sell 15T you have to sweeten the pot for the buyers to pony up that other 10T

even without the federal reserve acting as a buying agent to force the rate down, from 2014-2017 treasury rates stayed low despite significant sale of treasuries. because buyers were still willing to buy, so a higher rate was not needed to entice them

your question suggests that there's not many buyers. there are a lot of buyers.

just not 15T of them in one year.

as said, if you spike treasury rates you necessarily spike corporate bond rates since treasuries are more or less the floor for a rate, as they have the highest level of confidence that they will be repaid. a higher rate on treasuries entices people who'd otherwise buy corporate bonds and so corporate bonds have to raise their own rates to bring them back

until the companies are finding themselves in the position where they either can't find a buyer for their debt or they can't sell their debt at a rate that can keep up with the expected growth from their loan

that's when oversale of govt debt can trigger a recession
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tennisdude818 posted...

More related to the OP, both parties are hypocrites when it comes to spending. Paul Krugman freaked out over deficits when Bush was president, and then changed his tune under Obama. You can say that this was simply because he is a Keynesian and Obana dealt with a recession, but Krugman was still calling for deficits under Hillary when he thought she would win. Now of course he is sounding the alarm under Trump again.

That's the point being made by the article, though: Liberals are too happy to play deficit scold when Republicans hold power.
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Antifar posted...

tennisdude818 posted...

More related to the OP, both parties are hypocrites when it comes to spending. Paul Krugman freaked out over deficits when Bush was president, and then changed his tune under Obama. You can say that this was simply because he is a Keynesian and Obana dealt with a recession, but Krugman was still calling for deficits under Hillary when he thought she would win. Now of course he is sounding the alarm under Trump again.

That's the point being made by the article, though: Liberals are too happy to play deficit scold when Republicans hold power.

Yeah. Thats the part I agree with.
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Its kind of interesting how politicians treat the threats of climate change and deficits. In the case of climate, they buy into models that spell doom for future generations if we dont cut emissions ASAP. Maybe people on the left are upset with what they perceive as inaction, but there is still plenty of posturing.

As for deficits? We just assume that the interest rate environment of the past will not come back. Low rates will last forever in their minds. And its not like we are using deficit financing for something temporary like WW2. Our massive and growing welfare/warfare state is here to stay. So that means our deficits arent going anywhere but up in the coming decades.
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