Akvod said:
I don't see how the current financial crisis has anything to do with "stealing from the rich".
In fact, people have been likening to the sub-prime mortgage crisis as a scam made by the rich...
I'm not knowledgeable enough to comment on wealth distribution, income disparity, etc. I do know from basic macroeconomics though, that the austerity drive going on the world is simply counterintuitive. What is it going to do? Businesses invest in order to increase production capacity, and you increase production capacity when there is demand for your products that create the need for extra capacity. In short, you buy machines to make stuff, when you think more people want to buy stuff. I don't see how reducing our GDP is going to increase investment (which is going to further lower GDP, by a lot).
Do you understand that countries going for more austerity are doing it because they cannot afford to keep propping up the economy like you want them to?
The easiest thing to liken it to is a person with an unlimited balance credit card. You still have to pay the interest off, but you can spend as much as you want. The problem is with all of your suggestions is, that there is no knowing for certain when a country will gain its economic footing back for consumer confiedence. The government could be running deficits of 100, 150, 200% of GDP before it happens...And if that happens, so much of the tax monies would be going to pay off interest, there would be little else done with tax revenues.
Countries like Greece, yes. But the problem is, not everyone is Greece. Not every country isn't a terminally unproductive country.
And the problem with credit card analogies, is that it doesn't take into account inflation, and allow the possibility that the credit card holder/government might actually start saving and paying off the debt once they get a hold of things.
This is NOT to say defeceit spending sucks. It sucks. Yes, our children pay for it. But our children will pay MORE if we don't do defeceit spending and keep our economy afloat, and recover it faster.
So it's not like Krugman, me, and other counter cyclicalists are getting a fucking boner to accumulate debt. The problem started because we fucking expanded the economy beyond its normal capacity, and it's compounded by the debt and spending we did in the over seas war.
But, what needs to be done, needs to be done. It hurts, but it'll hurt a lot less if we do this.
Its not counterintuitive, because much of the government stimulus programs aren't going to help consumer confidence, or help the means of production out. A huge amount of the bailout and stimulus went to crooks and stupid people...It hasn't helped, because the money went nowhere that it should of been. So austerity is the only way out - balance the budgets, and when it they reduce their interest payments, either lower taxes to increase consumer confidences (more money for them to put into the market place, increasing consumption) or giving out more benefits.
The stimulus itself doesn't improve consumer confidence. It's by getting back the GDP to its normal rate, unemployment back to its old rate, and keeping it there, and making people think it's staying there, that people will spend more. This isn't an overnight process. People will be reluctant and skeptical to spend their money. But they'll regain confidence this way a lot faster, than if we let everything fall to shit. And also, letting everything fall to shit, isn't just setting ourselves up for a long recovery, but probably a reduction in the long term output itself.
And saying that because the stimulus that was made (which didn't give it to the poor, the ones who spend money immedietly rather than saving it), was crappy, doesn't make a good argument against formulating a proper stimulus. That's not an argument.
I don't see how lowering our GDP (cutting government spending, and subsequently business investment) will restore confidence. And lowering taxes (reducing revenue) and spending money are the same thing. Let's say you reduce 100 USD in tax revenue via tax cuts. Let's say you give 100 USD via stimulus. Both are -100 USD in paying off debt.
And how long do you think it's going to take to "pay off interest"? My analogy is, you borrowed money, then you quit your job. How are you going to pay off the debt, when the GDP (the country's income) goes down?
I don't see what abandoning the unemployed is going to do. The laziness argument can't hold, because 6% of the 10% were employed recently, and it's hard to believe that they were the types that just leached off benefits. Maybe they honestly can't find jobs, due to macroeconomic circumstances, out of their hands?
Could it be that the 10% may have been in jobs that were unfit to even be there in the first place? Rampant overspending has caused the problem(s). Look at the savings rate in America over the past 70 years - people have been spending more than they earn, yielding an economy that was simply unsustainable. You keep purporting the CING graph like its the be-all-end-all.
Suppose it is. If consumers, via debt and overspending, buy more, it will create a glut of jobs in many industries. When such consumers have to finally deal with reality, it will cause what has happened - a recession. The housing bubble can be looked at that way - a glut of loans were given to people that couldn't afford them, via incentives offered by CRA 1999...We have skyrocketing prices for houses, only to be shattered by reality that the housing market was overvalued and lots of people really couldn't own houses.
I don't think consumer spending was the cause of this recession??? I think it was because of the reduction in wealth households experienced, as well as the inflationary gap we had and excessive inventory we had (and the subsequent reduction in investment).
People want to balance the budget, but don't want to raise taxes, want to keep their own benefits, don't want to reform medicare (which is a huge part of spending), etc. Fucking contradictory.
I agree. We should cut spending from virtually everything to balance the budget, then when its balanced (within 10% of GDP), look at tax cuts, and reforms.
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