fiscal policy

[shetuck]

Originally Posted by 'BusNative

From Scent of a Woman:

Charlie: I was calling to see what the move is.

George, Jr.: The move is no move; status quo.

Are you implying that Ben Bernanke is a suicidal blind dude on a final fiscal joyride?

EDIT: HOO AHH!

[Gatorubet]

More bad news.

Economists Warn Anti-Bush Merchandise Market Close To Collapse | The Onion - America's Finest News Source

[NewYorkBuck]

Originally Posted by jimotis4heisman

but its a topic no one will touch, here on BP or in washington. always interesting. maybe since its not a sexy issue?

Because its easily hidden (the govt stopped releasing M3 numbers a few years ago for a reason). It in itself brings no obvious bad news - you wont feel it immediately in your check like taxes or in reduced services. When gas goes to $7 a gallon, pols can blame the "greedy oil companies" or "China" or a whole other host of causes when the primary cause is currency debasement, but no one will realize that. Of the latest run up in gas prices, over 50% of that has been through currency debasement, but I have not heard one person short of Ron Paul mentioning it.

IMO - the govt should have ZERO control over the currency. Its should be in the constitution that the govt cannot increase the money supply faster than GDP is increasing. Period. As Meyer Rothschild said many years ago - "Give me control of a countries currency, and I care not who makes the laws." This is SO true, yet there is about 10,000 times more media minutes spent on issues like the Iraq war than currency debasement, yet currency debasement has a 10,000 times greater impact long term on our country.

[Tresselbeliever]

Originally Posted by Tresselbeliever

This type of fiscal policy is definitely unsustainable. You can't just reduce domestic financing in the form of taxes and increase borrowing from foreign sources at the current level of domestic interest rate. Sooner or later, investments in US government debt will be so unattractive due to the low real interest rate that capital outflow may cause the government to offer prohibitively high interest rates to regain them. By then, you are going to have a real and prolonged economic crisis in your hand, because the fed won't be able to bail anyone out with low interest rates.

Bloomberg warns of possible 'next wave' crisis

By Devlin Barrett, Associated Press Writer

Bloomberg said he was concerned that the credit crisis in the United States may scare off foreign investors that, until now, have been willing to buy debt that the U.S. uses to maintain a deficit.

Cont...

NewYorkBuck is absolutely right about the dangers of currency debasement. The method of printing money, which lowers the value of the dollar, is incompatible with the current realities of fiscal policy and monetary policy. That the Fed did not lower rates this week may be an indication that this is as far as currency debasement/inflationary pressures will allow them to go, but it may also be a sign that easing the terms of credit between banks really does not alleviate the fundamental problem of confidence in these faltering financial institutions. Either way, as this article hints, even this low current rate is unsustainable.

[Tresselbeliever]

YouTube - Charlie Rose - PETERSON / RUBENSTEIN

Charlie Rose interview with Pete Peterson, former secretary of commerce under the Nixon administration, head of Lehman brothers and now the senior chairman of blackstone.

In it, he talks about tax cuts, parties turning into theologues, social security, and a lot of things about fiscal policy. I recommend it.

[Tresselbeliever]

Just in case some of you don't have the time to watch the whole thing, here are some of the points that Peterson talked about:

-3/4 of this unfunded liability comes from entitlement programs, such as social security benefits but mainly from Medicare.

-regarding the SS 'trust-fund', Peterson says that he doesn't understand the supply-side philosophy of trying to outgrow the problem because currently SS benefits is indexed to wages. Says that the way to solve the SS problem is not to eliminate benefits, but to index SS to inflation rather than wages.

-regarding tax cuts, Peterson says that long term or permanent tax cuts for the rich really do not stimulate greater productivity.

-regarding Medicare, which he says is the biggest problem, he says that the United States has to make tough decisions regarding the quality of health care, especially for senior citizens in intensive care units. Says that we spend twice as much as a percent of GDP on health care as other developed nations but has not increased longevity.

-regarding the consequences of heavy borrowing, he says that half of those whom he asked says that there will be some kind of a rough land, in that a flight of world capital will cause abrupt devaluation of the dollar and very high interest rates. Volker said that it had a 75% chance of happening in the next five years (the interview was conducted in '04?)

[Tresselbeliever]

Modernizing Social Security

By Gene Steuerle
Publication Date: September 22, 2008

Many of Social Security's features were designed around a view of the economy and the family that is at least three-quarters of a century old. Congress spends tens of billions more every single year for the program, but few of those extra dollars address the needs of the poor or very old. Meanwhile, the program discourages work at a time when the labor force is growing at a slower pace, and it discriminates strongly against single parents, usually women.

via the Peter G. Peterson foundation.

There are plenty of good reads on the website to keep people informed about the issues.

[Tresselbeliever]

Pentagon Says 5 Weapons Had $206 Billion Cost Growth (Update2)


By Gopal Ratnam and Tony Capaccio

Oct. 24 (Bloomberg) -- Cost increases on five major weapons programs accounted for $206 billion, or 22 percent, of the total jump in spending for new arms so far this decade, a Pentagon commissioned report found.



Lockheed Martin Corp.?s F-35 Lightning II fighter aircraft and Boeing Co.?s Future Combat Systems each contributed more than $65 billion in higher costs, the Defense Business Board said in its latest report, which examined programs from 2000 to 2007.

cont...

[reasonmclucus]

Both presidential candidates are being unrealistic about the ability of the president to reduce the deficit. An across the board freeze like McCain proposes will be DOA in Congress. Obama's statement that he will look at the budget line by line ignores the size of the federal budget or the number of spending programs.

Only members of Congress have the time to determine exactly where federal money is spent and whether that spending accomplishes anything. Unfortunately too many members of Congress have their pet spending programs that they don't want cut and will resist any effort to eliminate those programs.

[jimotis4heisman]

Real Time Economics : As Congress Debates, Tax Revenue Tumbles

The Senate passed its $838 billion stimulus legislation today, setting the stage for negotiation with the House to draw up a final package. While they debate, the government appears to be losing a couple billion dollars a day in tax revenue.
Sen. Susan Collins speaks to reporters after a vote on the economic-stimulus bill Monday.

continued... With a deep economic contraction underway, federal tax revenue declined by about $88 billion — roughly 10% — in the first four months of the fiscal year (which started Oct. 1) compared to the year-earlier period, according to a Congressional Budget Office analysis. Almost half the decline — $43 billion — came from a 43% drop in corporate profit taxes. Tax withholding from paychecks declined $19 billion due to lost jobs, while estimated tax payments declined by $12 billion.
In all, the CBO estimates the Treasury Department will report a deficit of $563 billion over the four-month period, or $474 billion higher than the four-month deficit through January 2008. Even remove the $284 billion in outlays for the Troubled Asset Relief Program and that’s $190 billion in higher spending or lower taxes so far this fiscal year.

[jimotis4heisman]

The Burden of Barack Obama's Stimulus Package Will Be Heavy - WSJ.com

....
The nearby chart shows how the bill will increase the 2009 budget deficit, which is already the largest in modern history. Perhaps you recall the deficit wails from the Reagan years, but the peak deficit was only 6% of GDP in 1983. In the Clinton years we were told taxes had to rise to reduce a deficit of merely 3.9% of GDP. CBO estimates the 2009 deficit will reach 8.3% of the economy, not including the stimulus or bank bailout cash. Toss in those, and analysts at the Strategas Group estimate the deficit could hit nearly $2 trillion, or 13.5% of the U.S. economy
...

[sandgk]

Time to raise taxes?

[NorthShoreBuck]

sandgk

If taxes are raised will the businesses pass on the higher cost, reduce hiring, cut purchases? Will people paying higher taxes buy less? Does this spike inflation and drive the economy further into a recession?

I realize the deficit is being funded by a printing machine and we will pay the costs eventually, I just wonder what happens if we do x, raise taxes, or y not spend money that may not provide a benefit. Some will say any money spent ends up stimulating some part of the economy. Is it enough, is it in the right places?

[jimotis4heisman]

Originally Posted by NorthShoreBuck

sandgk

If taxes are raised will the businesses pass on the higher cost, reduce hiring, cut purchases? Will people paying higher taxes buy less? Does this spike inflation and drive the economy further into a recession?

I realize the deficit is being funded by a printing machine and we will pay the costs eventually, I just wonder what happens if we do x, raise taxes, or y not spend money that may not provide a benefit. Some will say any money spent ends up stimulating some part of the economy. Is it enough, is it in the right places?

busiinesses dont pay taxes. they pass them on to consumers. granted some business dont pay any taxes since they dont make money.

the burdent lies on
1-consumers
2-individuals (ie small business owners, families and individual taxpayers-not the corporations as many think)

[BigWoof31]

I have very little knowledge of international trade law - but is there any chance we could pass on a little bit of this expense to foreign companies looking to do business in America?

Say a $.02 tariff per unit for all goods you want to bring into the largest consumer marketplace in the world?

Add all that up and see if it could take a bite out of the deficit?