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05-19-2011, 02:33 PM   #1
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Effects of decreasing fed spending?

Politicians of all stripes and the media are in a frenzy about decreasing spending and decreasing revenues at the same time. It is probably going to happen because it is now widely believed as the only way out of a "debt crisis".

The main targets thus far appear to be health care and social programs.

Removing money from social programs seems a dangerous game as that money circulates in the service, food, & housing sectors for a vast number of people, right?

What are some specific things you think will happen as the decreases in federal spending occur in the next few years?

Will there be food lines at charities - where will charities get resources?
Evictions followed by collapse of rental housing?
Employment in social and health services will fall, right?

What happens when more hungry people chase fewer jobs? Will there be less work because there will be less money to buy the products of work?

Sometimes I hear that a cut-back strategy will increase total employment; how can that be possible unless everyone's income falls a lot?

Does mmt have any insights into predicting what will happen other than to say it is not necessary?

Can the public's terrified view of the debt be eased or must this game be played out 'til the ugly end; as things get worse and worse the debt whipping boy will be increasingly blamed and the machinery of government will grind to a halt.

05-19-2011, 02:40 PM   #2
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QuoteOriginally posted by newarts Quote
What are some specific things you think will happen as the decreases in federal spending occur in the next few years?
Adult babies such as this guy will kill himself if the tax payers stop sending him a social security check every month.

Senator questions benefits to 'adult baby' - Washington Times

Lottery winners such as this guy will have to pay for their own food when their food stamps get cut off.
Leroy Fick, Millionaire Lottery Winner, Still Using Food Stamps (VIDEO)

PS I know these are rare cases but seriously, the michigan legislature and the US congress have to devote their attention to these kind of asses who abuse the system instead of focusing on huge problems facing the state of michigan or the united states of america. People will survive just fine in the face of deep cuts.

Last edited by mikemike; 05-19-2011 at 02:46 PM.
05-19-2011, 06:31 PM   #3
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Recession........... followed by a depression..

Actually decresing income will help stave of th depression..


Mostly it will just increase the time of pain until people come to their senses............

or we revolt.. take your pick.
05-19-2011, 10:55 PM   #4
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QuoteOriginally posted by mikemike Quote
Adult babies such as this guy will kill himself if the tax payers stop sending him a social security check every month.
PS I know these are rare cases but seriously, the michigan legislature and the US congress have to devote their attention to these kind of asses who abuse the system instead of focusing on huge problems facing the state of michigan or the united states of america. People will survive just fine in the face of deep cuts.
These kinds of walking hyperboles should not and need not be the focus, but responses like that insure that they are. Part of the problem with our lawmaking is that we make laws and focus attention on the tiny minority of real abusers or worse, blowing the facts out of proportion. Many, many more people will not do just fine in spite of cuts.

05-20-2011, 05:58 AM   #5
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QuoteOriginally posted by GeneV Quote
... Part of the problem with our lawmaking is that we make laws and focus attention on the tiny minority of real abusers.....
Yes it is a serious problem when focusing on outliers interferes with the liberty of the mainstream. Like banning pencils because someone might write a threat. Or banning photos of farms because someone might fear publicity.

QuoteQuote:
Many, many more people will not do just fine in spite of cuts.
For sure....

I'm seeking concrete examples of what may likely happen.

Like cut-rate, for-profit education businesses will boom.
Illegal drug activity will boom to provide income at the low end and to ease personal frustration of users.
Urban & rural violence threats will increase; this will make private security business good (body/property guards etc..)
"Learn photography to make money on your own" businesses will thrive... those taking such courses will not.

I don't expect any change in the flow of wealth from the bottom to the top - rather the stratification of wealth will grow as the wealthy avoid long term investment in industry.
05-20-2011, 06:02 AM   #6
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In terms of humans, I'd say the number of un-medicated and homeless will increase, and the number of un-employed well educated social workers and other human services people will be long term unemployed.

If wage deflation results - to stave off a depression - then house prices will keep collapsing, and the baby boomers will be left poor, under-serviced, and much poorer in retirement. As the boomers are so narcissistic and self-indulgent, and traditionally the elderly vote at a heavy rate, this situation will be tailor made for demagoguery of various stripes.

The wage and asset deflation will ruin banks as loans go delinquent.

Corporate profits - see my other post from yesterday - will begin to crash also.

Perhaps our society will further split between the haves and the have nots. However I do have faith in the political system and a remedy will emerge.

Meanwhile, apart from the monetary 'loss of wealth' represented by wages, assets, and standards of living, there's the consideration of wasted education dollars for the long term under employed.
05-20-2011, 06:04 AM   #7
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A new powerhouse for ridiculous GOP economics - Budget Showdown - Salon.com

QuoteQuote:
But the correctness of Austrian theory is beside the point. Because if it was ever applied in practice by actual politicians, the voting public would become more than just annoyed. If the response of the Bush and Obama administrations to the financial crisis of 2007-08 had been to allow every beleaguered financial institution to go bankrupt while simultaneously endeavoring to balance the budget while government revenues tanked and social welfare obligations spiked, the economic devastation would have been well nigh unthinkable. There simply would be no political future for politicians who simply abandoned the general public to the viciousness of the free market.

Economic crises and bank panics predated the creation of the central bank in the United States; indeed, to many observers, they seem to be endemic to capitalism and unregulated markets. And when markets run completely amok, the public expects its leaders to do something. Dave Camp is well aware of that. He voted for the Bush stimulus in early 2008, for TARP and the bailout of GM and Chrysler. And he'd do it again, if he had to. We expect our government to govern, and if it doesn't, we'll get another one that does.


QuoteQuote:
Secretary of the Treasury Tim Geithner says the U.S. should be allowed to borrow more, but many economists and Republicans say it's a bad idea.

How many economists, exactly? Well, just two actually -- and both of them happen to be employed at Northwood University, an educational titan described by one of the economists quoted in the article as "a private institution of higher learning dedicated to the principles of individual liberty, the free market, and limited government."

Northwood's credo has resulted in ample support from such conservative philanthropists as Amway founder Richard DeVos. With campuses in four states but a total student body around the size of a large high school, Northwood University was memorably described in an entertaining Texas Monthly article in 1986 as an institution for "those who find Southern Methodist University too liberal."
05-20-2011, 06:28 AM   #8
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QuoteOriginally posted by newarts Quote
Yes it is a serious problem when focusing on outliers interferes with the liberty of the mainstream.
QuoteOriginally posted by GeneV Quote
Part of the problem with our lawmaking is that we make laws and focus attention on the tiny minority of real abusers or worse, blowing the facts out of proportion.
Someone should tell this to the liberals who are obsessed with the prosperity of 400 americans or in shaking down 0.25% of the corpses.

https://www.pentaxforums.com/forums/political-religious-discussion/135703-400...-combined.html
https://www.pentaxforums.com/forums/political-religious-discussion/114070-est...icking-me.html

Maybe we shouldn't have aspirational television shows that glamorize bad decisions like "Teen Mom." The liberals have a pattern of painting people who make bad decisions as victims first so that they get a set of benefits then recasting them as heroes for overcoming some struggles. Then when they are cast as heroes for bilking the system when they obviously don't need government charity then the media machine goes into its spin cycle saying that they are not representative of all welfare recipients and tries to place the high burden of proving that every individual receiving a government check on people with better things to do.

05-20-2011, 06:43 AM   #9
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The Pro-Life people would like to make you think we would be much better off if the 50 million unwanted births were not aborted. Most likely those aborted fetuses would have become unwanted babies, uneducated children, rebellious adolescents, unproductive adults and perenniel welfare, food stamp, medicaid and prison drains on our national wealth. Do the math.
05-20-2011, 06:46 AM   #10
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QuoteOriginally posted by mikemike Quote
Someone should tell this to the liberals who are obsessed with the prosperity of 400 americans or in shaking down 0.25% of the corpses.

https://www.pentaxforums.com/forums/political-religious-discussion/135703-400...-combined.html
https://www.pentaxforums.com/forums/political-religious-discussion/114070-est...icking-me.html......
Resources must be plowed back into the system to enable even you to climb. Where can we take those resources? From those who have the most.

QuoteQuote:
The liberals have a pattern of painting people who make bad decisions as victims first so that they get a set of benefits then recasting them as heroes for overcoming some struggles. Then when they are cast as heroes for bilking the system when they obviously don't need government charity then the media machine goes into its spin cycle saying that they are not representative of all welfare recipients and tries to place the high burden of proving that every individual receiving a government check on people with better things to do.
I don't understand what you are trying to say; "and tries to place the high burden of proving that every individual receiving a government check on people with better things to do." who is proving what?
05-20-2011, 06:49 AM   #11
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QuoteOriginally posted by newarts Quote
I don't understand what you are trying to say; "and tries to place the high burden of proving that every individual receiving a government check on people with better things to do." who is proving what?
I am saying that instead of supporting tightening eligibility or eliminating programs placing the burden of proof that someone who is enrolled now still needs the aide they are receiving, they would rather say, "oh yeah that guy is abusing the system but hes the only one."
05-20-2011, 06:55 AM   #12
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This has been a constant merry-go -round. When the economy is doing well, that's the time to hold the line on spending. Not eliminate it but but make darn sure you're bringing in more than you're laying out. The last administration wasn't very good at this. Getting the <bleep> out of Iraq and Afganistan and stop trying to control the world will do a lot to end this problem. Other than Ron Paul, I don't think any other politician has figured this out. We can't afford to be the worlds puppet master.
05-20-2011, 07:03 AM   #13
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QuoteOriginally posted by reeftool Quote
This has been a constant merry-go -round. When the economy is doing well, that's the time to hold the line on spending. Not eliminate it but but make darn sure you're bringing in more than you're laying out.
On the Fed level this is always a bad idea..........

Fed surpluses are private sector deficits............ BASIC assumption of MMT..

Clintons "surpluses" lead to the 2000 recession.....
Cheneys (the real power in DC at the time)"deficits don't matter" is correct BUT then went and spent it in Iraq..

Care to argue that that spending didn't create "private surpluses"...and stimulate "someones" economy???

Is it the fact that it is SO OBVIOUS that makes it so difficult to understand...



Australia and the UK will help show what happens....

QuoteQuote:
Still, the government’s expecting a rebound in its fiscal position in two years and hopes to report a surplus of A$3.5 billion by fiscal 2013, higher than the A$3.1 billion surplus projected last November.

The government intends to reach that target by keeping a lid on spending as the economic recovery gains momentum, planning to hold real growth in spending to an average of 1% a year.

Canberra announced some spending initiatives Tuesday, mainly directed at growing the labor force and for some areas of health care, as well as some savings. New spending is expected to reach A$19.0 billion, while savings will amount to A$21.7 billion, according to UBS economists.
Keep an eye out....
http://www.marketwatch.com/story/australias-budget-surplus-goal-not-a-sure-thing-2011-05-10

more fun:
QuoteQuote:
In this IMF Working Paper (released January 01, 2011) – The Impact of Fiscal Consolidation and Structural Reforms on Growth in Japan we read:

With Japan’s public debt at historic levels, concerns are rising over the growth impact of needed fiscal adjustment. The severe recession and sizeable fiscal stimulus have pushed up Japan’s public debt from 188 percent of GDP in 2007 to 218 percent of GDP in 2009. Bringing down the public debt ratio to more sustainable levels would require a large and sustained adjustment that will weaken aggregate demand.

They then claimed that in this context:

Structural reforms could help offset the negative impact of fiscal consolidation and raise medium-term potential growth. In this context, policies aiming at raising services sector productivity through deregulation or increasing competition and labor market flexibility could support fiscal consolidation through higher tax revenues.

That is the one-trick the IMF always offer – cut public net spending and deregulate (cut workers’ protections and wages) and – somehow – miraculously – expect the impact on aggregate demand to be neutral in the “medium-term”. We are asked to ignore what happens in the short-run to workers who lose their jobs or entitlements and forget about the hysteretic effects relating to consumer and investor confidence.

Firms apparently just love deregulation so much that they will ignore the declining sales volumes as consumers tighten their spending and build productive capacity to allow them to sell more. It just doesn’t work like that. The only times an individual nation has successfully grown as they cut public net spending is when their external sectors and private domestic sectors are growing strongly.


Prior to the crisis, the IMF released a paper (January 2, 2007) – Strategies for Fiscal Consolidation in Japan – which said:

Japan’s key fiscal challenge is to put public finances on a more sustainable footing. Large government budget deficits have boosted Japan’s net public debt to over 85 percent of GDP, one of the highest in the OECD … In the years ahead … the government’s net debt could rise to over
150 percent of GDP.

I could trawl back through my archives and find similar warnings when the debt ratio was less and they were claiming it would get to 80 per cent and 70 and 50 etc.

In fact, the OECD and the IMF have been going on about Japan – relentlessly – for years now and each time they proffer some dire forecast – the situation gets “worse” (by their measurements) and nothing particularly bad happens. In particular, unemployment remains relatively low and their is still a commitment to income security in Japan.

The OECD also follow the IMF lock-step and have pursued a long campaign trying aimed at dismantling worker protections in the service sector in Japan.
http://bilbo.economicoutlook.net/blog/?p=14584

Last edited by jeffkrol; 05-20-2011 at 07:15 AM.
05-20-2011, 07:04 AM   #14
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The attitude of tolerating and celebrating stupidity extends to employment laws and is an attitude that is pervasive around the world. Why should an employer continue to employ someone who likes to lay down on a 2 m high shelf or equipment used to prepare food you serve to your customers to get stupid facebook pictures. Likewise people proudly display their flaunt their abuse of the system and get sacked for calling in sick then posting pictures of themselves at the beach that day on facebook.

I have very little sympathy for stupid and lazy adults or those who hold them up on a pedestal.

QuoteQuote:
"(Planking) is a direct contradiction of our safety and health policy. Our employees have a responsibility to ensure their own safety and the safety of those around them."

One of the nation's leading workplace law firms said planking alone should not be grounds for sacking and employees could potentially sue for unfair dismissal.

Slater and Gordon lawyer Marcus Clayton said a warning might be more appropriate.
Plankers sacked by supermarket giant Woolworths | thetelegraph.com.au
05-20-2011, 07:05 AM   #15
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QuoteOriginally posted by mikemike Quote
Someone should tell this to the liberals who are obsessed with the prosperity of 400 americans or in shaking down 0.25% of the corpses.

https://www.pentaxforums.com/forums/political-religious-discussion/135703-400...-combined.html
https://www.pentaxforums.com/forums/political-religious-discussion/114070-est...icking-me.html

Maybe we shouldn't have aspirational television shows that glamorize bad decisions like "Teen Mom." The liberals have a pattern of painting people who make bad decisions as victims first so that they get a set of benefits then recasting them as heroes for overcoming some struggles. Then when they are cast as heroes for bilking the system when they obviously don't need government charity then the media machine goes into its spin cycle saying that they are not representative of all welfare recipients and tries to place the high burden of proving that every individual receiving a government check on people with better things to do.
Whenever I see a sentence that says "the liberals..." the author just lost any drop of credibility. What follows will be label and discard. Most who write that have no clue what a liberal is or thinks. (Neither do most whom are labeled "liberal" these days) Who are these "liberals" who cast people as heroes for bilking the system? Viacom --owner of Teen Mom? Sumner Redstone?

Any person who gives it some thought can see the difference between being concerned about the 400 most powerful people in the country, and obsessing about every alleged welfare cheat, whose influence is blown way out of proportion to their numbers. I don't know of any "liberal" who wants cheating or sympathizes with cheaters. Most people see it in perspective as an enforcement issue rather than a symbol for the entire program.

Last edited by GeneV; 05-20-2011 at 07:14 AM.
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