Good news! Biden says to hell with deficits!

At least for now, the days of austerity politics are over.

Let the money machine go brrrr.

Assuming they can bribe guys like Joe Manchin to climb on board, that is. Though I guess there's a chance they can peel away a Repub or two.

(Thank you Georgia.)


Get those printing presses rolling! It's become a cliche that Rs love to cut taxes and then cry austerity when Ds want to spend money that actually helps. 


Cliche or fact?

Anyway, I'm assuming that the 10,000 SALT limit will be going away. I hope its removal is in this package.

I also hope Gateway gets a go.


lol, the Austrians are having aneurysms over this.


10 year old: I wish I had infinity dollars to give to Elon Musk and Jeff Bezos.

Elon Musk and Jeff Bezos: Ooh! Thanks!


Republicans in power:  deficits? what deficits?

Republicans out of power:  deficits BAD!


dave said:

Republicans in power:  deficits? what deficits?

Republicans out of power:  deficits BAD!

 also:

Deficits resulting from tax cuts -- no biggie

Deficits resulting from spending on social programs or infrastructure -- BAD!!


drummerboy said:

lol, the Austrians are having aneurysms over this.

 we've seen deficit spending since 2008 that's been unlike anything since WWII and we haven't had inflation, or "wrecked the economy."  But THIS TIME, they're sure it will.  Shouldn't there be a point at which empirical observation trumps theoretical predictions?


While I absolutely agree with the sentiments behind many of these posts and the wisdom of borrowing and investing during times of low interest rate (i.e. periods of insufficient demand),  ask yourselves this. If deficits don’t matter at all, why do we collect taxes? Why not just print money?


jimmurphy said:

While I absolutely agree with the sentiments behind many of these posts and the wisdom of borrowing and investing during times of low interest rate (i.e. periods of insufficient demand),  ask yourselves this. If deficits don’t matter at all, why do we collect taxes? Why not just print money?

I'm pretty sure the "infinity dollars" argument isn't actually being made by any sensible person.  But as a non-economist, my understanding is that a country can run deficits and increase debt as long as it can borrow at reasonable interest rates.  Would anyone buy the debt of a country that didn't collect taxes and just printed money?


jimmurphy said:

While I absolutely agree with the sentiments behind many of these posts and the wisdom of borrowing and investing during times of low interest rate (i.e. periods of insufficient demand),  ask yourselves this. If deficits don’t matter at all, why do we collect taxes? Why not just print money?

According to Modern Monetary Theory (which I believe is accurate) the purpose of taxes is not to raise revenue. It's partially to offset demand in the economy.

For obvious reasons, most people can't help but think about the federal budgeting process as being the same as our household budgeting process , which is completely wrong.

Peruse this for more details


ml1 said:

jimmurphy said:

While I absolutely agree with the sentiments behind many of these posts and the wisdom of borrowing and investing during times of low interest rate (i.e. periods of insufficient demand),  ask yourselves this. If deficits don’t matter at all, why do we collect taxes? Why not just print money?

I'm pretty sure the "infinity dollars" argument isn't actually being made by any sensible person.  But as a non-economist, my understanding is that a country can run deficits and increase debt as long as it can borrow at reasonable interest rates.  Would anyone buy the debt of a country that didn't collect taxes and just printed money?

They probably wouldn't buy the debt because not collecting any taxes would probably lead to an unhealthy economy. Not because the debt is not backed by tax revenue.


Each of these proposed debt expenditures should undergo a cost benefit analysis. 

Why are we proposing to give $2,000 to everyone below a certain income level? Many, many people (obv those who still have jobs) are better off financially right now than before COVID. This is part of the reason that markets are up. Give checks to those directly negatively impacted - the unemployed and small businesses.


MMT is tripe. I’m not engaging in that discussion again. 


drummerboy said:

They probably wouldn't buy the debt because not collecting any taxes would probably lead to an unhealthy economy. Not because the debt is not backed by tax revenue.

 Probably.


Trump and the GOP gleefully handed over tax cuts, which made the rich richer, when there was nothing "in the vault" to pay for it - and there never was a "cost benefit analysis".

The proposal now is to provide financial support to those who need it, and who will spend it to support businesses which need customers - which seems the basic "cost benefit analysis" that explains the reasoning.


nohero said:

Trump and the GOP gleefully handed over tax cuts, which made the rich richer, when there was nothing "in the vault" to pay for it - and there never was a "cost benefit analysis".

The proposal now is to provide financial support to those who need it, and who will spend it to support businesses which need customers - which seems the basic "cost benefit analysis" that explains the reasoning.

Agreed on the hypocrisy of the Republicans. Taxes should be raised. 

Those who have not lost their jobs don’t “need it”. They’re often spending much less, saving, paying down debt.

General point. Deficits do matter. We can’t ignore basic laws of economics because it conveniently supports our progressive desires.


jimmurphy said:

Those who have not lost their jobs don’t “need it”. They’re often spending much less, saving, paying down debt.

I imagine that a not-insignificant number of them are redistributing the federal checks on their own, to out-of-work relatives, food banks, their favorite local businesses, etc.


jimmurphy said:

nohero said:

Trump and the GOP gleefully handed over tax cuts, which made the rich richer, when there was nothing "in the vault" to pay for it - and there never was a "cost benefit analysis".

The proposal now is to provide financial support to those who need it, and who will spend it to support businesses which need customers - which seems the basic "cost benefit analysis" that explains the reasoning.

Agreed on the hypocrisy of the Republicans. Taxes should be raised. 

Those who have not lost their jobs don’t “need it”. They’re often spending much less, saving, paying down debt.

General point. Deficits do matter. We can ignore basic laws of economics because it conveniently supports our progressive desires.

 My understanding of how economic thinking has changed is that there's a broader understanding of deficits. Money owed by a government to its own citizens, denominated in its own currency, is different than money owed by a government to creditors in a different country, denominated in a foreign currency. Less ignoring basic laws of economics and more looking at countries running long-term deficits that haven't had runaway inflation and rethinking what our understanding of the laws of economics are.

I heard an interview with an economist in the MMT school the other day that I'm going to re-listen to, because I also have been skeptical of the way a lot of MMT is pitched, which can sound like "just print money!". My question has always been, what are the constraints here? I don't recall with enough precision to restate now, but I'll update when I've re-listened.

One thing I do remember is the interviewer asked about situations like hyperinflation in Zimbabwe, and the economist noted how with all the land confiscation food production actually dropped quite a bit, so giving people more money didn't help because there wasn't enough to actually spend that money on. I found that illuminating as it provided an explanation that still hewed to basic supply and demand, but expanded my understanding as I've always thought of inflation as an issue of expanding the supply of money, but hadn't though of the "demand" side much. I suppose one take away for our situation would be that Biden is basically claiming there's a lot of unmet demand in our economy, so increasing the money supply won't be inflationary. The debate then is if that is a true evaluation of the economy.


Dave,

In the aggregate, that is not so.


jimmurphy said:

nohero said:

Trump and the GOP gleefully handed over tax cuts, which made the rich richer, when there was nothing "in the vault" to pay for it - and there never was a "cost benefit analysis".

The proposal now is to provide financial support to those who need it, and who will spend it to support businesses which need customers - which seems the basic "cost benefit analysis" that explains the reasoning.

Agreed on the hypocrisy of the Republicans. Taxes should be raised. 

Those who have not lost their jobs don’t “need it”. They’re often spending much less, saving, paying down debt.

General point. Deficits do matter. We can’t ignore basic laws of economics because it conveniently supports our progressive desires.

On the deficit: you are supposed to reduce the deficit in good times so you can do deficit-spending when you need it. The fact that republicans ran up the deficit through tax cuts when it was not needed at all is terrible policy, but there is nothing I can do about it. We need to spend now. The deficit is on them as far as I am concerned, and I am not going to discuss deficits with people that supported these stupid tax cuts. They should have thought about it then. After we spend, I am fine with raising taxes on corporations and individuals that can bear it.

On targeting the $2,000 checks: it is my understanding this all depends on how much in a hurry you are. If you have time, you can define rules (and check them) so that only the people that need it get the checks (for example below a certain income level, without a job, ...). If time is of the essence though, you cannot really do that, so you will end up sending checks to some folks that don't really need it, which is exactly what happened with the first round of stimulus checks.


basil said:

On the deficit: you are supposed to reduce the deficit in good time so you can do deficit-spending when you need it. The fact that republicans run up the deficit through tax cuts when it is not needed at all is terrible policy, but there is nothing I can do about it. We need to spend now. The deficit is on them as far as I am concerned, and I am not going to discuss deficits with people that supported these stupid tax cuts. They should have thought about it then. After we spend, I am fine with raising taxes on corporations and individuals that can bear it.

On targeting the $2,000 checks: it is my understanding this all depends on how much in a hurry you are. If you have time, you can define rules (and check them) so that only the people that need it get the checks (for example below a certain income level, without a job, ...). If time is of the essence though, you cannot really do that, so you will end up sending checks to some folks that don't really need it.

Given the IRS’ databases, I think they could do it quickly. I could be wrong.

I have a hard time with the idea that we are paying down private debt with public debt. 

And to reiterate, Couldn’t agree more on the hypocrisy of the tax cuts and their use to crowd out legitimate domestic spending, while simultaneously jacking up spending on the the military.



jimmurphy said:

Dave,

In the aggregate, that is not so.

No doubt. All I had in mind was some nonzero amount. Now that I’ve brought it up, I might see if I can find any research on it.


We're in the middle of an ongoing national emergency. Now isn't the time to fret over the deficit when inaction is going to likely mean continued suffering that will have long term negative consequences for an entire generation of economically traumatized people. 


Certainly good points Dave and ml1. No doubt there are those who will get checks and do what was intended - spend the money to support the economy. I guess my biggest issue was with the thread title - to hell with deficits. There are absolutely times to spend in deficit. Now *is* one of those times. But deficits do matter which I know you two at least understand.

My point is that I ‘d rather it go to worthy causes rather than those who don’t need it. Fight harder to support state and local government. Be more generous to the unemployed. Work out the bugs in the PPP. Hell, spend more if it is justified and will be an investment.

Checking out...



jimmurphy said:

Certainly good points Dave and ml1. No doubt there are those who will get checks and do what was intended - spend the money to support the economy. I guess my biggest issue was with the thread title - to hell with deficits. There are absolutely times to spend in deficit. Now *is* one of those times. But deficits do matter which I know you two at least understand.

My point is that I ‘d rather it go to worthy causes rather than those who don’t need it. Fight harder to support state and local government. Be more generous to the unemployed. Work out the bugs in the PPP. Hell, spend more if it is justified and will be an investment.

Checking out...

Biden's plan already does what you're complaining about.

The $2000 checks are already means tested. Biden's plan also adds unemployed assistance.

What more do you want?


What more do I want?

Less actually.  I want fewer direct checks to those financially unaffected.

If you didn’t lose your job or get negatively financially affected by the pandemic, you get bupkus.

This ain’t Oprah - you get a check, and you get a check... 


DaveSchmidt said:

jimmurphy said:

Those who have not lost their jobs don’t “need it”. They’re often spending much less, saving, paying down debt.

I imagine that a not-insignificant number of them are redistributing the federal checks on their own, to out-of-work relatives, food banks, their favorite local businesses, etc.

Or opening accounts at Robinhood. 


can’t get the graphic to post correctly. Grr....

“These are remarkable numbers. When it’s all tallied up, Americans’ cumulative after-tax personal income was $1.03 trillion higher from March to November of 2020 than in 2019, an increase of more than 8 percent. Some of the pessimism among economic forecasters (and journalists) in the spring reflected a failure to understand just how large and influential those stimulus payments would turn out to be.

But income also is only part of the story. Big changes in 2020 also took place on the other side of the ledger: spending.

Spending

Spending decreased

Nondurable goods

+$39 billion

Guess I’ll cook again tonight

Durable goods

+$60 billion

All that home

gym equipment

No trip to Vegas, or

Miami

Total household outlays

Services

-$535

billion

-$575 billion

Interest payments

and misc. outlays

-$59 billion

Thanks, Jay Powell!

Note: Data from March to November 2020 compared with the same time period in 2019.·Source: Bureau of Economic Analysis

By turning to another riveting story, “Personal Consumption Expenditures by Major Type of Product, Monthly,” we see a pattern that may seem obvious with hindsight but was not as easy to predict while the economy was collapsing during the spring.

The obvious part was a decline in spending on services: All those restaurant reservations never made, flights not taken, sports and concert tickets not bought added up to serious money. Services spending fell by $575 billion, or nearly 8 percent.”

https://www.nytimes.com/2021/01/01/upshot/why-markets-boomed-2020.html?referringSource=articleShare


Dave and Cramer, 

Your altruistic spending is the rare exception, not the rule.



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