Wow! The unemployment rate went down again!

The economy is roaring!

ray

At some point we have to restrain government spending if we are to get our fiscal house in order. That's naturally going to drag the economy which is unfortunate but I don't think there's another way out. It's definitely better to tap the breaks rather than slam them so we don't spin out of control.

today's NY Times

The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011, according to private-sector and government economists

.

http://www.nytimes.com/2013/05/09/us/de ... 1&_r=1&hp&

I don't know what the math is, but a GDP 2 points higher would, by nature of tax receipts from economic activity, create revenue that would have mitigated some of the spending.. .
Still, its apparent that "tapping the breaks" has slowed recovery.
Timing is everything....

I would have more faith in our governments ability to "tap the BRAKES" if it showed that it could reduce spending in the good times, and not let the debt (not deficit) get out of control. Clinton had some great economic times, so did Reagan. Did either of them get the debt issue resolved? No, neither did. That is why I cannot trust the current (or previous) administration to have ANY MORE TAXES until it shows that it can be responsible with what they are given already.

We have given plenty of options for reduction, and each has it's own reason that it cannot be cut. IMHO, the lack of BRAKES will lead to a time when the economy BREAKS.

rickyp wrote:ray

At some point we have to restrain government spending if we are to get our fiscal house in order. That's naturally going to drag the economy which is unfortunate but I don't think there's another way out. It's definitely better to tap the breaks rather than slam them so we don't spin out of control.

today's NY Times

The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011, according to private-sector and government economists

.

http://www.nytimes.com/2013/05/09/us/de ... 1&_r=1&hp&

I don't know what the math is, but a GDP 2 points higher would, by nature of tax receipts from economic activity, create revenue that would have mitigated some of the spending.. .
Still, its apparent that "tapping the breaks" has slowed recovery.
Timing is everything....

Oh brother.

So, all we have to do is just raise taxes, spend more, borrow more, and the economy will be rosy?

Says who exactly?

Oh, a couple of economists. Well then, that is it then.

Mr. Shepherdson is a liberal. He may be right. However, I suspect he probably was right up there supporting the Stimulus and affirming the Administration's predictions. How did those work?

Maybe you would like to see a US economy dominated by government borrowing and spending. Most Americans have had enough.

The US economy is growing (albeit slower than many would like), while other countries that have started making cuts have seen growth stall - the IMF are now telling countries (such as the UK) that austerity has limits - which is pretty amazing considering the track record of the IMF over the decades.

Also, one of the main pieces of evidence used to show that high debt would cause problems for the economy was a study by Rogoff and Reinhart of Harvard which identified a debt of 90% of GDP as a trigger point. However, that was cast into some doubt when a UMass researcher tried to replicate the data and failed - discovering some coding and selection errors that specifically altered how high debt countries with growth were reported. Today Rogoff and Reinhart accepted their errors, although maintain the underlying thesis is still true. There probably does need to be a re-evaluation of the idea, as it's been a major factor in the debate.

A very deep recession that has global effects (especially domino effects with delayed effect) is going to be hard to recover from regardless of what solution you apply from the centre. The real issues are related to how the crisis started in the first place - not so much government borrowing (let alone spending or taxation), but the issues around private lending and borrowing - banks were too free with their money and got bitten, and now are reluctant to lend, even with monetarist policies such as very low interest rates and quantatitive easing supposedly reducing their costs. So companies that are looking for lending are finding it hard, either to continue during a rough patch or to expand / invest etc. The outlook is also making those companies with reserves reluctant to spend them now - uncertainty will reduce the tendency to invest that in risk, while keeping hold of monetary assets is a safer bet.

I'm not sure, to be honest, that government spending is a major factor in that. There are risks with either approach: cut now and restrict short-term growth, and you could prolong the slow recovery; cut later and perhaps you would see better short term results with greater costs (and potential drag on the economy) later.

However, what we are seeing in the UK is that while spending cuts hit the deficit in year one of the new government, the deficit has bottomed out since then, largely because growth has been way under expectations. SO we have perhaps the worst outcome - spending cuts that are hitting the economic situation in the short term, but deficits that are stubbornly high adding to the long term debt issue.

Still, underlying the bitter debates about whether to to cut or spend, the US economy is not actually 'dominated' by government spending, as it's only 28% of GDP. It is dominated by the services sector. If you think that the federal debt is dominating the economy, consider that private debt as of 2009 was about $40Tn (four times the Federal debt), and is also growing.

The problems are more systemic than simply pointing at the government (or, to be fair, the previous one) and making them responsible for it all.

danivon wrote:I'm not sure, to be honest, that government spending is a major factor in that. There are risks with either approach: cut now and restrict short-term growth, and you could prolong the slow recovery; cut later and perhaps you would see better short term results with greater costs (and potential drag on the economy) later.

To be candid, I would not favor cuts right now IF the Administration were acting responsibly. For example, does anyone really doubt the cuts to TSA were political? There was NO place in the massive federal government that could have sustained those cuts instead?

(Note well: the President threatened to veto any bill which gave him authority to shuffle the sequester cuts around to make them less painful)

Still, underlying the bitter debates about whether to to cut or spend, the US economy is not actually 'dominated' by government spending, as it's only 28% of GDP. It is dominated by the services sector. If you think that the federal debt is dominating the economy, consider that private debt as of 2009 was about $40Tn (four times the Federal debt), and is also growing.

The issue, eventually, will be the interest on the Debt. This screams for efficiency now, not more government or less government, but better government. That should be a bipartisan issue.

Wow, Rickyp points to an article that tells us all sorts of "if's" and lauds it as a certainty yet in the Benghazi thread he laughs it off as not being sound ...which is it? You can't have it both ways.

And these people who assure us how rosy things could have been, are they the same people who assured us if we had that massive spending bill, unemployment would not go over (what was it 7 or 8%)? Are they the ones who assured us that with the massive spending bill we would quickly bounce back?
And even you Ricky have no idea what the costs would have been, 1% more growth, that's great, but at what cost? That's the bottom line after all. What if I can "Guarantee" you to have your paycheck rise by $1000 but I take $1200 in additional taxes out, so what if you made more if the cost was not worth it?

bbauska

I would have more faith in our governments ability to "tap the BRAKES" if it showed that it could reduce spending in the good times, and not let the debt (not deficit) get out of control

Which would make you Keynesian. And i'd generally agree that this policy makes sense.

And be fair. If the tax rates under Clinton had been maintained by Bush II then the deficit would have been eliminated and the accumulated debt whittled down. At least until the crash of 08.

IF?... Try that in the Benghazi thread.

http://en.wikipedia.org/wiki/Keynesian_economics

Keynesian economics advocates a mixed economy – predominantly private sector, but with a role for government intervention during recessions.

Have we been in a recession since Eisenhower? No, I think not. I am (as I have said before) ok with a little government intervention when needed. The problem is the CONTINUED government assistance w/o any sign of end, and it does not matter if the country is in recession or not.

Do you agree with the statement bolded above describing Keynesian economics? Perhaps you think the government has been in a recession since Eisenhower?

bbauska

Have we been in a recession since Eisenhower? No, I think not.

You don't know much history do you>? US recessions since Eisenhower include:
60-61, 69-70, 73-75, 80, 81-81, 90-91, 2001, the great recession of 07-08

http://en.wikipedia.org/wiki/List_of_re ... ted_States

bbauska

The problem is the CONTINUED government assistance w/o any sign of end, and it does not matter if the country is in recession or not.

Do you agree with the statement bolded above describing Keynesian economics? Perhaps you think the government has been in a recession since Eisenhower

Yes I agree with the statement. And I also agree that the Us government, and most other western nations have been running deficits when they shouldn't. Thats been the focus of my arguments on this board about the failings of Ron Reagan, and the almost uninterrrupted 35 year run in from his deficits that the US has had to get into the Great Recession. That you don't get out of a 35 year period of negligence and poor policy in a couple of years...
Glad you're coming around.

To intercede for bbauska (and perhaps clarify his meaning), I think he was trying to say we have not been in a continuous recession, non-stop, beginning during the Eisenhower Administration and continuing until now.

so despite growth (modest only, but still growth) you are endorsing continued deficit spending? You say we should be spending more yet turn around and agree we should not be running deficits. Again, which is it? you have no real position other than one of blind partisan politics.

Yes, I thought I was quite clear when I said "a recession". This is the singular form of the noun recession.

BTW, great poke at Reagan when the first president to have deficits was who? But it is something that we are accustomed to.

Careful, your bias is showing...

bbauska wrote:BTW, great poke at Reagan when the first president to have deficits was who? But it is something that we are accustomed to.

Careful, your bias is showing...

Probably Washington was the first. However, Reagan saw deficits to the extent that debt as a proportion to GDP went up, having been falling since WWII. Other than a short period in the late 90s, it has been rising since.

That was when Keynes was abandoned and the monetarists took over.