How do you think cutting the federal spending will help the economy?

Jump to Last Post 1-4 of 4 discussions (62 posts)
  1. JohnfrmCleveland profile image87
    JohnfrmClevelandposted 5 years ago

    How do you think cutting the federal spending will help the economy?

  2. JON EWALL profile image75
    JON EWALLposted 5 years ago

    Spending creates deficits in the government treasury.Today,the interest on the national debt is over $1 billion a day.In the private market  AN OLD SAYING '' YOU NEED TO SPEND MONEY TO MAKE MORE MONEY, more profits on investments.Government, public sector, is just the opposite. Private sector goes bankrupt, government just prints more money, inflation and devalue of currency.

    1. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Yes, spending does create deficits.  But are deficits bad?  If the government didn't deficit spend, where would dollars come from?  The real question is, are we spending too much?  I see no evidence that we are.

    2. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      The money supply had been expanded even when we had no national debt during the Jackson Adm.  The fractional reserves banking system creates new currency every day.  One has nothing to do with the other.

    3. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Banks only create credit, not currency.  Read you dollar bills - they weren't printed by Citibank.  And back in Jackson's day, there were many forms of currency in use - banks and railroads issued paper, so the comparison doesn't work.

    4. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Your way off.  Most of the money in existence is digital.  Very little currency is printed or minted.  The entire purpose of the fractional reserve banking system is to increase or decrease the money supply. Not to mention open market operations

    5. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Banks can't increase the amount of credit without demand for that credit.  And it doesn't much matter what the Fed does with reserve requirements, QE, or any other monetary policy, you cannot increase bank "money" without demand.

    6. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      But the demand does not come from deficit spending, one has nothing to do with the other.  If deficit spending nationally increased demand, than monetary velocity would be on fire after the last decade.  But it's quite the opposite.

    7. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Demand comes from people having money in their pockets to spend.  Deficit spending helps tremendously with that problem, because business isn't doing a sufficient job of it anymore.  Cut government spending, and demand will plummet.

    8. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      How much of that deficit spending has ended up in your pocket ?This is a fallacy. Demand has already plummeted.  And we have the highest debt to GDP ratio's since the end of WW2.All that has happened is indiv/business have hoarded capital out of fear

    9. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Business don't hoard capital out of fear, they hoard capital because they don't see further investment making a profit.  And that's because people don't have enough money in their pockets to spend.  There is no private-sector mechanism to fix that.

    10. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      No business hoard capital out of fear of increased regulation, taxes and reckless monetary policy.  Every client I have ever come across who owns their own business has exactly that concern. An unstable currency effects long term business planning.

    11. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      So please show me some evidence that our currency is "unstable."  This is the problem, Landmark, your line of thought has zero evidence to back it up.  But it's a very popular line among conservatives - they all foretell gloom and doom...  someday.

    12. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Our currency is in a constant rate of decline since about 1913.  Take a look at inflation before we changed how we calculate it for political benefit.  http://www.shadowstats.com/alternate_da … on-charts. The price of Gold tells the real story

    13. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      That actually amounts to a very modest yearly rate of inflation, either way you calculate it.  By your standards, every currency in the world is unstable.

    14. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      10% per year is hardly modest, and well in excess of the upsurd geometric weightings now used.  And in case you haven't noticed, every major currency in the world is in a race to the bottom with Japan in the lead.  Hence the surge in commodities.

    15. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      I don't believe for a second that inflation has been 10% per year, not even close.

    16. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      If you measure inflation under the old method of a "constant standard of living", that's exactly accurate.  Which not surprisingly happens to correlate to the price movement in precious metals.Purchasing power has been crushed from 10yrs of spending

    17. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      I would say instead that wages have not kept pace with modest inflation.  Over the past 30 years, labor has not seen much of the economy's growth.  Money is being made, but labor is not getting paid.  That feels like inflation, but it's not.

    18. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Actually it's both.  But from an inflation perspective CPI is not designed to measure a standard of living anymore.  It was remodeled to slow the growth in the already massive unfunded liabilities. It allows a hidden tax to be passed on to the masses

  3. LandmarkWealth profile image77
    LandmarkWealthposted 5 years ago

    Every dollar that is spent by the gov't ultimately is not used privately for more effective distribution of capital.  Gov't is a necessary evil.  There must be certain essential services provided by gov't.  However, we have gone well beyond the essential roles of gov't.  Gov't now accounts for far too much of our GDP as a nation which is counterproductive to long term growth and innovation.  Cutting spending is a great idea as long as it's not the essential services that are cut first.  But that's exactly what Washington will do.  Very few politicians on either side wish to give up their pet projects.  So they will not cut the excess fat in the budget. Nor will they address the 800 pound gorilla in the room, which is the unsustainable entitlements programs that now consume nearly 2/3rd's of the budget.  Instead they will slash in areas that make the average American take notice.  This way when the average American who is so caught up in the daily chaos of life gets even more frustrated, they'll vote against anyone who suggests of further cuts.  Ultimately those people will pay for these cuts through the hidden tax of inflation as the race to the bottom among global currencies continues.  Washington will continue to sell the population on all of these so called necessary functions of gov't.  All the while real wages stagnate and purchasing power is eroded as the dollar goes a little less further.

    1. profile image0
      Old Empresarioposted 5 years agoin reply to this

      Social Security is not part of the budget, because it's not federal income. It's simply a social security that is deducted from personal income for that purpose.

    2. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Social Security was merged into the general tax fund during the LBJ adm.  And is designed to fail.  If you ran a pension fund the way SS is run you'd go to jail for fraud under ERISA regulations.

    3. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      That consumer demand and spending will go down if the government cuts spending is a certainty.  That inflation will ensue when the money supply is increased is only theory - and that theory is incorrect.  http://www.forbes.com/sites/johntharvey/2011/

    4. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Gov't spending negatively impacts long term aggregate demand,Read Henry Hazlitt "The fallacy of the broken window".You link did not post.  However, we have altered how we calculate inflation numerous times to make it appear more attractive politicaly

    5. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this
    6. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      This article is way off...i would suggest you read a "Monetary History of the US" by Dr Friedman.   Gold is the ultimate universal currency benchmark, and it's price behavior over the last decade tells you how much purchasing power is lost.

    7. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Friedman has been debunked a million times over.  I don't know why anybody still buys into his stuff, but it sure seems to resonate with conservatives.  Also, that's a misapplication of the broken window fallacy.

    8. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Dr Friedman has been debunked..By who ??? He was the most respected economist of the last century. And the concept of monetary expansion causing inflation is not a conservative theory.If we used the same formula as we did in the 70's CPI is over 10%

    9. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      The "natural level of employment" idea was (and is) ridiculous, as is monetarism.  Did you check out that graph from the St. Louis Fed?  The lesson there is that monetary policy can't control the amount of currency in circulation.

    10. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      What is ridiculous about it ? Precisely, because the gov't is not the only place money is created or destroyed. But inflation is not only the result of what is circulating, but also what is owed.The more in debt you are, the less value currency has

    11. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      The more in debt you are, the less value currency has?  Please explain the mechanism behind that assertion.

    12. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      The higher your debt to GDP ratio, the less credibility you have. The dollar has lost nearly 40% of its purchasing power in the last 5 years or so.  The gov't has altered how we calculate inflation numerous times to hide the true impact of inflation

    13. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Debt to GDP means nothing.  Japan's is way higher than ours, and their junk-rated bonds still sell at tiny yields.  The market has nothing to do with those rates.  Yields won't go up until the govt. wants them to.

    14. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Japan has a dramatically higher % of their debt held domestically when compared to the US.  That means they are not subject to volatility as much.  Yet their debt to GDP has led to more than two decades of stagnate growth as a tradeoff. It matters.

    15. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      What volatility?  And please explain HOW you think the debt/GDP ratio hurts the economy.  Declaratory statements aren't swaying me.  There has to be some logic behind your claims, and I'm not seeing any.

    16. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Volatility in the price of japans treasuries.  The first piece of evidence is there GDP is the same size that it was in 1992. Money to support public finances ultimately is transferred from the private to the public sector, and stagnates growth

    17. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      I looked at a history of Japan's treasuries, and they look very stable to me.  They have a few economic problems, but coming up with new yen is not one of them.  There's still nothing tying their debt to their "stagnant" economy.

    18. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      As I said,less volatility because they are held domestically.The debt is serviced by capital sucked out of the private sector, which slows growth. read Reinhardt & Rogoff http://www.economics.harvard.edu/facult … ime_Debt.p

    19. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      I have the same criticism of that paper that these guys (http://www.scribd.com/doc/34947769/Briefing-Paper-271) have - correlation does not equal causation, and if anything, debt follows slow growth, not the other way around.

    20. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Yes, correlation does not always mean causation. Yet they cannot cite an example of a nation deficit spending their way to prosperity. It has not worked in Japan, and will not work here.  It is a theory they simply can't sell to the capital markets.

    21. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Well, it's really never been tried in earnest.  The Keynesian principle of boosting the economy with govt. spending has always been hamstrung by deficit hawks.  We know spending works, but the debt -> inflation thing has never been nailed down.

    22. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      It was tried in a significant way in the 30's. And we got 2 decades of economic malaise.  Versus the 1920/21 calamity that was even more severe.  Gov't cut spending by a massive 65% and the economy rebounded substantially in 18 short months.

  4. profile image0
    Old Empresarioposted 5 years ago

    It won't. But our economic strength has been falsely inflated for a long time, because the Treasury spent more money than it took in (the House of Reps should all resign for letting this happen). Our high GDP is like meeting a guy who lives in a vast mansion full of expensive furniture only to learn that he bought all of the furniture with a credit card and that he's four months behind in his mortgage payments because he can only make a fraction of the payment every month. Solving the problem means he has to live a little more modestly. The sad fact is we can't make the economy better without making it far worse years down the road. The most we can do (without raising taxes on the rich, giving up social security, or shutting down our military empire) is to stabilize the economy at its true level, which will require more recession.

    Even worse, we're letting the Pentagram decide on its own budget cuts, which means it will propose cuts on soldier's benefits and personnel in order to make the President look bad. Meanwhile we have a war going on that provides no return on investment that is receiving full funding.

    They want to stop inflation too. Printing less money means slowing inflation, which means interest rates will go up and borrowing will contract. That means less operating capital for companies, which means less hiring, less marketing, less risk-taking. That means reduced quarterly revenue, which means recession. That is usually followed by overhead reduction. The question is, do we want to see want this economy really looks like behind the facade?

    1. JON EWALL profile image75
      JON EWALLposted 5 years agoin reply to this
    2. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Why do you think that we are "mortgaging our future" by spending today?  The federal budget is not comparable to a household budget, or even a state's budget, because they cannot create dollars.  Federal "borrowing" does not have to be repaid.  Ever.

    3. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      That is simply ridiculous.  More than half of the national debt is owed abroad and does have to be repayed.  Tell that to anyone who owns a treasury bond.  Simply creating dollars is why gold is trading at 1600 an ounce.

    4. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      The national debt isn't going down, is it?  So, in a net sense, bonds are not being cashed in.  But more are being bought all the time.  Cash is just changing hands between buyers of bonds and sellers, that's it.  Think on a macro scale.

    5. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      I hate to break the news to you, but the Fed is the only real buyer these days. Without QE there is no demand for US treasuries.  Without QE, rates skyrocket.  I am going to guess you havent spent a lot of time in the bond market.

    6. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      I understand the bond market just fine.  QE isn't there to stimulate bond demand.  And demand for bonds is there - I don't know where you are getting your information, but they are having no problem selling bonds at all.

    7. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      My information come from 16 years of portfolio mgmt.  The Fed is by far and away the largest buyer of US debt.   The demand is only there at substantially higher rates without QE.  Do you think guys like Jeff Gundlach are buying treasuries...No Way

    8. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Nobody buys treasuries unless they want a risk-free investment.  But they are still getting snapped up at tiny yields, and it's not just the govt. that's buying them.  China is buying at low yields, Japan is buying, banks are buying, etc.

    9. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Treasuries are now know in the investment world as return free risk. They have become precisely the opposite. And foreign gov't are slowly divesting.  They only buy on the short end of the curve these days.  The Fed is the only real demand.

    10. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      The evidence says otherwise.  If it was true that nobody wanted our bonds, then nobody has to buy them.  The Fed cannot force them to do so.  But they still auction off at low yields.  Not that it matters, because it isn't even necessary to do so.

    11. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      There not buying them,Thats the point.  The Fed is dominating the bid with no exit strategy because they know it will be a mess when they leave the table.I suggest you buy some 30 year treasuries and tell me what there worth in 10 yrs.

    12. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Bond sales are not operationally essential in a fiat currency economy, as they are not needed to raise or borrow money that can simply be printed.  If our govt. bought every bond they issued, it wouldn't matter, as it's just a book operation anyway.

    13. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      When money is simply printed in excess based on nothing, the standard of living goes down aka Japan and the US for the last ten years. If printing was the answer Zimbabwe would be an economic super power with their trillion dollar bills

    14. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      But new money's value is not based on nothing, it's based on production.  If your economy can meet the new demand, there aren't "excess" dollars in play - and, there is more production to meet the new demand, over and above what would have been.

    15. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      Yes currency creation should be aligned with the creation of capital.  But that is not what we are doing. Fed policy is just creating cash that is only ending up as excess reserves. There is no current policy that incents capital formation.

    16. JohnfrmCleveland profile image87
      JohnfrmClevelandposted 5 years agoin reply to this

      Capital takes care of itself.  If people were spending money - if they had money to spend - business always does a great job of separating them from their money.  Money starts at the bottom and trickles up, not the other way around.

    17. LandmarkWealth profile image77
      LandmarkWealthposted 5 years agoin reply to this

      That't not true.  New capital comes from new innovations..  That first requires capital formation to put the innov to action.  Which has to come from the top.  Business invest new capital all the time on speculation without current demand.

    18. JON EWALL profile image75
      JON EWALLposted 5 years agoin reply to this

      Check 4/30/13 Deficit Surprise: http://abcnews.go.com/blogs/business/20 … onal-debt/  winning battle to reduce deficits
      5/10/13 http://blogs.wsj.com/economics/2013/05/ … /?mod=e2tw

 
working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)