Should there be more cuts to budget in the short term, even with the threat of austerity looming?
There must be a balance. Cutting funding for public-aid and programs that are meant to help the least well-to-do members of our society should be a last resort, and should be done in a manner that reforms current policies constructively (a little redundant, I know), but also in making them more efficient that will have a positive effect on the budget as a whole.
And yes, there should be more cuts to the budget in the short term. I'm no economist, but there are more than a million loose ends in Washington, and in our economical structure that could be addressed before resorting to austerity. So, yes.
Absolutely not! Government spending is an important part of our economy, even in good times. In bad times, when consumer spending is not strong, government spending needs to pick up the slack.
Businesses don't care who buys their products and services - government dollars are just the same as consumer dollars. And because the dollar is a fiat currency, the government does not go into debt to create dollars and spend them (despite what most people claim). As long as our economy can meet the increased demand, deficit spending only boosts the economy.
Without question. Contrary to popular opinion...gov't does not create growth through gov't spending. The problem is that way to much of the GDP is dependent on gov't spending. The problem with present measures of national output is the inclusion of governments deficits as a net contributor to reported GDP. Because accounting must acknowledge the increase in private sector incomes that results from the portion of government spending financed solely through credit creation, there is an illusion that deficit spending is a form of economic stimulus. It is a stimulus to statistics regarding GDP, but stimulating statistics is not the point of economic interchange and subsequent organic growth. The first step is a serious attempt at actual cutting rather than this baseline budget nonsense. Then a serious attempt at reforming the waste and redundency, which will probably never happen. And a good portion could be achieved via attrition. In terms of the fallacy of gov't spending...I would refer you to Henry Hazlitt and the fallacy of the broken window...It goes something like this....
The Fallacy holds that when a vandal breaks a window he will actually create an economic benefit because he creates work for the glazier who will make the repair of the window. While it is true that the glazier, those that supply the glazier, and their employees will benefit, the shop owner must pay to repair the broken window. He now subsequently has less money to spend on other items. The visible benefit the glazier will see is then offset by the less visible harm done to the shop owner, his corresponding suppliers, and his employees. The shop owner might have planned to buy a new suit. Yet he must now spend that money to merely return his window to its previous state. The money that would have gone to the tailor to buy the new suit has now been given to the glazier. Economic benefits do not result from destruction but from production. Economic benefits result from creating value, not destroying value.
Job creation is not something the gov’t can do becuase it simply transfers resources that would have otherwise been utilized in more productive ways. The negative results are often not visibile as in the broken window theory. The gov’t can only create economic liabilities (both necessary and unnecessary liabilities). But the gov’t cannot expand the economic pie. Go'vt can only create a hospitable environment for business to flourish with proper policy that is favorable towards capital formation. Every dollar that the govt spends will produce at a minimum and equal detractor for each positive it creates. In terms of increases in aggregate demand created by gov't stimulus...they are transient in nature and non-sustainable.
The government can and does expand the economic pie, every time it deficit spends. Dollars are only created through deficit spending. A reasonable number of new dollars added to the economy demands production that would not have otherwise happened.
Increasing the monetary base is by no means increasing economic activity. One has no correlation to the other. Increased money supply does not increase velocity. And dollars are created in numerous ways such as the fractional reserve banking system.
But the govt. doesn't just increase the amount of money out there - they spend it. And those dollars continue to cycle through the economy. So velocity, or more accurately total activity, does increase. Also, banks can only create credit.
That is not true. We are currently flooding the system with monetary expansion and corp USA has 2 trill on their balance sheets with no cap ex expansion. And the fractional reserve system does create money.Very little of currency is physical anymore
I love this subject. Should we move this discussion to one of our articles?
Feel free...I wrote this several months ago...have a read. http://landmarkwealth.hubpages.com/hub/ … reate-Jobs
The size and scope of the US Government is too large and to extensive. This costs the tax payers more money and it increases all the time.
Reduce the government benefits, and pensions to government employees, just like the companies in the private sector have been forced to do because of the economy. This would include reduction in force, reduction in benefits, and no job security.
While that could be part of an overall deficit reduction bill, it would only constitute a fraction of a percent of the total budget. Fun fact: during Obama's presidency, the government has cut over 600,000 government jobs.
The jobs are not the issue. It's the budget. Federal spending ballooned to unprecendent levels before he lost the super majority. Fed agencies received 30% permanent budget increases. Total discretionary spending went up over 20% in 2 years.
Actually, the govt. has been cutting back like crazy. My wife is a federal employee, and has been for a while now. The general trend is hiring freezes and foregone raises and bonuses. Another trend - outsourcing to the private sector.
But, from an macro standpoint, the budget deficit has gone down. It's still high, but will only get smaller as sequestration hits. They could retroactively replace the cuts, I suppose, and they most likely will, but it will be deficit reduction.
Not by a long shot. The budget deficit was about 400 billion at the end of 2008. Today it's over 1 trillion. And as a share of GDP it is substantially larger. Gov't cut backs only came after an unprecedented spike. And it is due to gridlock.
You're correct about the 2008 budget deficit. The 2009 budget, however, was enacted June 5th, 2008, which is far before President Obama took office. It included a 1.4 trillion dollar deficit. It was not due to his spending.
The Federal stimulus signed by Obama had an 80% increase in discretionary spending. 20% was on a permanent basis. That was unprecendented. The deficit you are refering to included TARP which was paid back in full. Estimates also had 3% GDP...LOL
I would like to see a link to those cut jobs.
There not cuts in jobs, there cuts in projected hiring. That's what baseline budgeting is all about. Slowing the rate of growth, not cutting. Sad...but true
Furthermore, let's look at how to deficit went down once he took office.
2009 (not his budget, as I stated previously): 1.4 trillion
2010: 1.267 trillion
2011: 1.59 trillion
2012: 1.3 trillion
2013: 901 billion (estimated)
The current estimates by the Obama administration are that the deficit will go down to $575 billion by 2018 before rising to $704 billion by 2022. So, the notion that he has exploded federal spending is well...inaccurate. While the national debt has gone up (obviously), the deficit has overall gone down and will continue to do so.
Estimates use static models, which incorprated a 3% GDP expansion. Since we got a negative print on GDP in Q4, that estimates isn't worth the digital paper it's not printed on. The deficit will be driven by GDP. With near ZERO cap ex...again.lol
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