[jeffkrol]

J

No. There is no historical evidence to support this. Clinton reduced government spending and the economy grew at a healthy pace.

nope this contraction brought on the Bush recession...........

Clinton's Budget Legacy

In addition to being remembered for a strong economy, Bill Clinton is remembered as the last President to preside over balanced budgets.

Given the salience of the national debt issue in American politics today, the surpluses are a major mark of pride for the former President (and arguably the entire country). They shouldn't be.

"I think it is safe to say that we are still suffering the harmful effects of the Clinton budget surpluses," says Stephanie Kelton, an economics professor at the University of Missouri Kansas City.

To understand why, you first need to understand that the components of GDP looks like this:

\mathrm{GDP} = C + I + G + \left ( \mathrm{X} - M \right )

In the above equation, C is private consumption (spending). I is investment spending. G is government spending. And 'X-M' is exports-minus imports (essentially the trade surpus).

Here's a chart of the government budget around the years during and right after Clinton, in case you need a reminder that the government was in surplus near the end of his tenure.

Read more: How Bill Clinton's Balanced Budget Destroyed The Economy - Business Insider

you do know it is going to boil down to "my guys vs your guys" again don't you.........

How Clinton Destroyed The Economy

The bottom line is that the signature achievement of the Clinton years (the surplus) turns out to have been a deep negative. For this drag on GDP was being counterbalanced by low household savings, high household debt, and the real revving up of the Fannie and Freddie debt boom that had a major hand in fueling the boom that ultimately led to the downfall of the economy.
And that brings up a broader question that people who advocate balanced budgets must answer.

What's the point of it?

Despite the budget surplus, interest rates were higher. And the surplus provided no protection of the coming slump. And if anything, it just weakened the most brittle part of the economy: households.
Furthermore, there is a pattern of this.
Japan ran a budget surplus in the year right before its economy went into terminal decline, as this chart from Trading Economics shows

Read more: http://www.businessinsider.com/how-bill-clintons-balanced-budget-destroyed-t...#ixzz2DSGFpew5

just a funny article I found............semi- related on it is not what the fed spends but what it spends it on......

Which is why we need to be careful about budgeting and get our tax rates and our spending more or less in balance over the long term, running surpluses in good years and deficits in bad ones. The Bush tax cuts did the opposite: $3 trillion worth of tax cuts were predicated on the premise that we were returning the people "their" money. As it turned out, the money wasn't there to return. Even without the tax cuts, the wars, or anything else, the government would have entered 2011 with $1.3 trillion in debt, not $2.3 trillion in savings. Basically, in the grip of careless enthusiasm about the economic future, we borrowed $3 trillion from bond markets and handed it out to citizens in rough proportion to how rich they already were. In the middle of a recovery. This is not a useful thing for the government to do.

* I've changed the wording in this paragraph to avoid any potential reader confusion between annual budget surpluses, which Clinton-style budgets would have generated, versus an overall buildup of sovereign wealth rather than debt, which they wouldn't have. (Incidentally, the fact that we don't even have a readily available word for a buildup of sovereign wealth in the vocabulary we normally use to talk about the American government seems kind of worth noting.)

http://www.economist.com/blogs/democracyinamerica/2011/07/deficits

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Last edited by jeffkrol; 11-27-2012 at 01:03 PM.

[Winder]

First off in my view:

■Additional taxation.
■ Government spending financed by borrowing from the public

BOTH completely irrelevant in a modern fiat currency... TOTALLY irrelevant..

Leaving only the 3rd one;

IF we lived in system where the value of money was determined by the rule of law and not by the economy, then you could have a valid argument, but we are not at that point, and we may never get to that point. It may be your view that he first 2 are irrelevant in a modern fiat system, but that does not change the actual system than we are operating in.

[jeffkrol]

IF we lived in system where the value of money was determined by the rule of law and not by the economy, then you could have a valid argument, but we are not at that point, and we may never get to that point. It may be your view that he first 2 are irrelevant in a modern fiat system, but that does not change the actual system than we are operating in.

Does not make it "correct" either..

just "it is what it is"............not very scientific...

seems to not work very well doesn't it...

and I fail to see how the economy would not still determine (w/ partnership of the fed) the "value of money" whatever that REALLY means..

also my "dream"...

HR2990.. did you read it????


not very popular.. also does not make it "wrong".............

The US monetary system, which has been in place since the Federal Reserve Act of 1913, is desperately outdated. The adoption of that act abdicated the authority of the Federal Government to create money and gave it to the private Federal Reserve system. It is time that the US modernize its monetary policies and reclaim its constitutionally granted authority to originate, spend, and lend money into circulation as needed. H.R. 2990 does just that. It replaces the current Federal Reserve system in an orderly manner, ending the Fed as we know it.

The current system, as practiced under the Federal Reserve, is a debt-based monetary system, where money comes into existence primarily through private bank lending. This can neither create nor sustain a stable economic environment, and has proven to be a source of chronic financial instability and frequent crisis, as evidenced by the near collapse the financial system in 2008. It has also resulted in a situation where unaccountable private financial institutions have an undue influence over public policy.

H.R. 2990 creates a Monetary Authority which will pursue a monetary policy based upon the governing principal that the supply of money in circulation shall not be inflationary or deflationary in and of itself, but will be sufficient to allow goods and services to trade freely and in a balanced manner. It will maintain the long-term growth of the system, provide for efficient public investment in capital infrastructure, and effectively promote the goals of maximum employment, price stability, and long-term interest stability.

By signing this petition, we ask our elected representatives to do what they can to support H.R. 2990, the NEED Act of 2011. It is time to put America back to work. It is time to modernize our outdated monetary system so it works for all of us. It is time to pass H.R. 2990!

http://www.change.org/petitions/support-h-r-2990-the-national-emergency-empl...se-act-of-2011

always reminds me of Galileo.. without the "inquisition" of course........

[jeffkrol]

IF we lived in system where the value of money was determined by the rule of law and not by the economy, then you could have a valid argument, but we are not at that point, and we may never get to that point. It may be your view that he first 2 are irrelevant in a modern fiat system, but that does not change the actual system than we are operating in.

Actually many already do know that........... it is in vested interest for many powerful people not to acknowledge it.........

"Reagan proved deficits don't matter" Dick Cheney................... no truer words spoken nor completely ignored.. Except for the Bush wars.. again.. WHEN was the last time ANYONE insisted we "pay for them"?????

Really can't see the obvious huh.............

nobody really cares if we do or do not pay for them......of course we can continue to argue about WHO doesn't have to pay for anything (that we really have no need to pay for)...i.e Bush tax cuts...
Or to incessantly argue about "debt passed down to our children" though the Fed has an (in theory) unlimited supply of money .. since it is the de-facto creator of such..to pay for it.

Now before you misunderstand again.. ANYTHING pushed to it's limits will fail...it is the defining those limits that is bathed in ideology.. not facts..

Interesting take.. and soo little time..so little understanding.........

Now you can look to Vietnam for an example of a war that maybe should have been paid for with lower taxes. The Vietnam-era policy situation was very expansionary, which kicked off the early phases of the Great Inflation of the era. The Federal Reserve could have kept inflation in check with higher interest rates, but that would have crowded out potentially useful private investment. But during the Bush years, we had low inflation, low interest rates, and plenty of private investment. What would higher taxes have accomplished? There are lots of valid criticisms to be made of Bush-era fiscal policy. Low taxes could have gone to bolstering working class incomes, for example, rather than those at the high end. We could have made potentially useful domestic public investments rather than spending all that money in Iraq (according to HSR opponent Randall O'Toole, for example, a 12,800-mile nationwide true high-speed rail network could have been built for roughly the cost of the war). But the idea that we should have relied more on taxes and less on borrowing doesn't hold much water.

http://www.slate.com/blogs/moneybox/2012/10/15/joe_biden_wars_on_a_credit_ca...the_money.html

WHY borrow???? ever.. That is just a perk for the bank and a safe haven for the "pool of money"...

A "paper loss"................

In recent years, Republicans have been characterized by two principal positions: They like starting wars and don't like paying for them. George W. Bush initiated two major wars in Iraq and Afghanistan, but adamantly refused to pay for either of them by cutting non-military spending or raising taxes. Indeed, at his behest, Congress actually cut taxes and established a massive new entitlement program, Medicare Part D.

http://www.forbes.com/2009/11/25/shared-sacrifice-war-taxes-opinions-columni...-bartlett.html

I'd never ague against Fed spending .. I'd certainly argue on WHAT they spent it on...............Maybe I'm some hybrid Republican.. they sure like to spend..

On Nov. 19, Rep. David Obey, D-Wis., introduced H.R. 4130, the "Share the Sacrifice Act of 2010." It would establish a 1% surtax on everyone's federal income tax liability plus an additional percentage on those with a liability over $22,600 (for couples filing jointly), such that revenue from the surtax would pay for the additional cost of fighting the war in Afghanistan.

It's doubtful that this legislation will be enacted. But that's not Obey's purpose. He will probably offer it as an amendment at some point just to have a vote. Republicans in particular will be forced to choose between continuing to fight a war that they started and still strongly support, or raising taxes, which every Republican in Congress would rather drink arsenic than do. If nothing else, it will be interesting to see those who rant daily about Obama's deficits explain why they oppose fiscal responsibility when it comes to supporting our troops.

Obey makes no secret of his motives. He knows that deficits need to be reduced at some point and this will put pressure on spending programs he supports. "If we don't address the cost of this war, we will continue shoving billions of dollars in taxes off on future generations and will devour money that could be used to rebuild our economy," Obey explained in a press statement.

He is not alone in his fear that war presents a threat to the Democratic agenda. As Boston University historian Robert Dallek told Obama at a White House meeting earlier this year, "war kills off great reform movements." He cited the impact of World War I in ending the Progressive Era, World War II in killing the New Deal, the Korean War in terminating Harry Truman's Fair Deal program and the Vietnam War in crushing Lyndon Johnson's Great Society.

At this point, Republicans are probably nodding in agreement. If it takes wars to end ill-conceived social programs, then that's another argument in favor of continuing the Iraq and Afghanistan campaigns. But that's a very short-sighted view because, as essayist Randolph Bourne once put it, "war is essentially the health of the State." Historians Robert Higgs and Bruce Porter, among others, have documented the pernicious effect of war on the size and scope of government. It creates a ratchet effect in which taxes and spending grow and civil liberties are restricted permanently, because when war ends, we never go back to the status quo ante.

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Last edited by jeffkrol; 11-27-2012 at 04:10 PM.

[jeffkrol]

interesting read:
Keynes?s Case Against Fiscal Policy: For Public Works and Full Employment | Global Research

All forms of trickle-down rationale are repudiated in authentic Keynesian policy. On the contrary, as Hyman Minsky noted, “..instead of the demand for low-wage workers trickling down from the demand for high-wage workers, such a policy should result in increments of demand for present high-wage workers ‘bubbling up’ from the demand for low-wage workers.” (18)

Most self-professed Keynesians have failed to note that Keynes regarded government stimulus to be ongoing and permanent. The considerations elaborated above, showing that the system of private investment and consumption cannot sustain full employment, are not specific to periods of slump. There is every reason to expect joblessness to persist through the expansion. And it has. Paul Krugman’s characterization of Keynesianism as “depression economics” is a lie. The Golden Age habit of defining full unemployment as unemployment of no more than around 3.5-4.0 percent has no basis in Keynes.

Since truly effective policies designed to eliminate unemployment have never been adopted in the US, we should expect the pattern of joblessness since the end of the Second World war to display a worsening trend symptomatic of deeply rooted structural contradiction. Two current trends are a good measure of the depth of industrially mature capitalism’s affliction. We are seeing both the mass destruction of full-time jobs, many of which will never return, and record levels of long-term unemployment (unemployed for 15 weeks or longer). Most revealing is that long-term unemployment has been rising since the late 1960s, well before the triumph of neoliberalism. The short-term unemployed have been a shrinking percentage of all unemployed throughout the entire postwar period. Looking at the business cycle over the last forty years, an ominous trend emerges: in each business-cyclical expansion, the long-term unemployment rate remains either at or above the level of the previous expansion. In a word, for the last forty years the short-term unemployed have been a declining, and the long-term unemployed an increasing, percentage of all unemployed. By Keynes’s own standards, pretend-Keynesian fiscal policy has been a seventy-year bust.

[falconeye]

If you graph government spending by quarter on the horizontal axis from 1950 through today and +/- economic growth rates on the vertical axis you will see that there is not correlation. There is not upward sloping line showing a positive correlation and there is no downward sloping trend showing a negative correlation. The graph will look like a bunch of random dots.

Actually, in an ideal world, this graph should show an exact anti-correlation: Gov. spends much when economy is down (it then gets most for the money (think infrastructure etc.) and fuels the economic resurrection); and spends little when economy is up (wouldn't get value for the money and economy doesn't need the extra spendings).

But of course, the political system is such that this isn't done (as it would require a wealthy gov. which unfortunately isn't a political goal).

OTOH, a lack of correlation between spending and growth proves nothing.

[Winder]

HR2990.. did you read it????

Yes. I have read it.

"Reagan proved deficits don't matter" Dick Cheney

Do you really consider Dick Cheney and expert in economics? Really? I will give him some credit when it comes to foreign policy, but not much when it comes to economics.

WHEN was the last time ANYONE insisted we "pay for them"

T-bills are term investments. Nobody can "demand" we pay them prior to the expiration of the term. We have never missed a payment. We may simple be refinancing the debt and paying with other borrowed money, but we have never missed a scheduled payment.

[Winder]

OTOH, a lack of correlation between spending and growth proves nothing.

It is relevant if you are trying to show that government spending can drive an economy out of a recession. The USA has spent the equivalent of 2 Canadian economies in the form or stimulus as QE in just a couple of years and the result was a flat line. Most of that money was created from thin air either through credit expansion or direct injection of currency.

[kswier]

It is relevant if you are trying to show that government spending can drive an economy out of a recession. The USA has spent the equivalent of 2 Canadian economies in the form or stimulus as QE in just a couple of years and the result was a flat line. Most of that money was created from thin air either through credit expansion or direct injection of currency.

I have often wondered whether this is because QE did not work, or if positive effects were gained by QE were washed out by problems in Europe.

Regardless, I think everybody in the US has to realize that the economy will take time to "heal" (we were in a bubble...and now it seems everybody expects the United States to reach the top of the bubble again..after just a few years). I am unsure if we should be spending on large stimulus efforts when the economy is slowly and steadily increasing.

[jeffkrol]

Yes. I have read it.


Do you really consider Dick Cheney and expert in economics? Really? I will give him some credit when it comes to foreign policy, but not much when it comes to economics.


T-bills are term investments. Nobody can "demand" we pay them prior to the expiration of the term. We have never missed a payment. We may simple be refinancing the debt and paying with other borrowed money, but we have never missed a scheduled payment.

Again .. WHY borrow money when you (obviously and undeniably) are the "creator" of such............
As to Cheney..........
That statement, and his support of gay rights.. are the only 2 things I'd ever give him credit for.. and being a pi$$ poor shot..

BTW: that statement is not really true as to what HE thought it meant.. as in "reward our rich friends"...

O’Neill quickly concluded that a small group surrounding the President made most of the key decisions. It consisted of Karl Rove, Bush’s political adviser; Karen Hughes, his communications adviser; Andrew Card, the White House chief of staff; and Dick Cheney, whom O’Neill had known for almost thirty years. As Stockman’s book made clear, the Reaganites, however much they may have misled the public, were true believers engaged in an ideological crusade to reinvigorate the economy. By contrast, most of the senior members of the Bush Administration come across in Suskind’s book as political opportunists with no real interest in economics. They are much more concerned with delivering goodies to the President’s political base of wealthy corporate executives and conservative activists, regardless of long-term consequences.

Read more: http://www.newyorker.com/archive/2004/01/26/040126ta_talk_cassidy#ixzz2DUdDEweX

In our time, the Republican Party has compiled an impressive history of talking about fiscal responsibility while running up unrivaled deficits and debt. Of the roughly $11 trillion in federal debt accumulated to date, more than 90 percent can be attributed to the tenure of three presidents: Ronald Reagan, who used to complain constantly about runaway spending; George Herbert Walker Bush, reputed to be one of those old-fashioned green-eyeshade Republicans; and his spendthrift son George “Dubya” Bush, whose trillion-dollar war and irresponsible tax cuts accounted for nearly half the entire burden. Only Bill Clinton temporarily reversed the trend with surpluses and started to pay down the debt (by raising rates on the wealthiest taxpayers).

Republicans in Congress likewise demanded balanced budgets in their propaganda (as featured in the 1993 Contract with America), but then proceeded to despoil the Treasury with useless spending and tax cuts for those who needed them least. Even John McCain, once a principled critic of those tax cuts, turned hypocrite when he endorsed them while continuing to denounce the deficits they had caused.

But was Cheney wrong when he airily dismissed the importance of deficits? In the full quotation, as first recounted by Paul O’Neill, Bush’s fired Treasury Secretary, he said, “You know, Paul, Reagan proved deficits don’t matter. We won the [Congressional] midterms [in November 2002]. This is our due.” What he evidently meant — aside from claiming the spoils — was that the effects of deficit spending tend to be less dire than predicted. And that insight deserves to be considered if only because all the partisan barking over the projected deficits in the Obama budget is so hysterical — as if nothing could be worse than more federal spending.

Such is the institutional bias of the Washington press corps, which habitually refers to deficits “exploding” and to the nation “engulfed in red ink,” and so on. But in fact the United States has recovered from considerably deeper indebtedness than that now on the horizon. Besides, as history warns, there are things much worse than deficits and debt. One such thing was the Great Depression, prolonged when Franklin Roosevelt decided to curb the deficits that had revived the economy, and ended only when he raised spending even higher in wartime. Another was worldwide fascist domination, a threat defeated by expanding America’s public debt to unprecedented levels during World War II. No sane person cared then that public debt had risen well above gross domestic product.

Those scary charts and graphs often deployed to illustrate our parlous state of indebtedness rarely date back as far as the Forties and Fifties — and the reason is simple. The massive deficits incurred during the war didn’t matter, as Cheney might say, because the wartime national investments in industry, technology and science undergirded a postwar boom that lasted for nearly three decades, creating the largest and most prosperous middle class in human history.

The average annual growth rate remained close to four percent for that entire period — and over time the combination of constant growth and smaller deficits reduced the ratio of debt to a fraction of its postwar dimension. What mattered more than the size of the deficits was whether they were spent on things that enabled consistent growth.

Dick Cheney was right - Salon.com

The reoccurring theme is "it's not how much you spend but what you spend it on......... for biz and the Fed.

Priorities..............

Seeking Cheney's advice on budget discipline was a curious choice for congressional Republicans. One wonders whether they will next seek lectures from Scooter Libby on grand jury procedure, Paul Wolfowitz on nonviolence or Donald Rumsfeld on charm.

Cheney's hosts kept his visit quiet, scheduling no public events and having the former vice president escorted through the halls by a protective Sen. John Barrasso, R-Wyo. Cheney, stooped and thin but looking stronger than before the transplant, refused to answer reporters' questions as he walked through the corridors, although I provoked a crooked smile when I asked, after his meeting with Republican senators, whether he had "set them straight."

Said Cheney: "I'm just here to see old friends." Those old friends included the entire Senate GOP caucus, House Speaker John Boehner, R-Ohio, and other House leaders. Politico quoted an unnamed Republican saying that Cheney's visit was meant to get lawmakers "ginned up" about avoiding defense cuts.

That Cheney would be the man to get Republicans ginned up is appropriate, because he and his Bush administration colleagues spent money like drunken sailors during their eight years in office. When then-Treasury Secretary Paul O'Neill counseled against further tax cuts because of the Sept. 11, 2001, attacks and the war in Afghanistan, Cheney informed him that "Reagan proved that deficits don't matter," according to O'Neill's telling.

Cheney continued to champion spending late in the Bush administration, urging skeptical House Republicans to support Bush's plan to bail out Wall Street. He returned later in 2008 in an unsuccessful effort to persuade Republicans to back a bailout of Detroit, warning lawmakers that "if we don't do this, we will be known as the party of Herbert Hoover forever."

http://www.oregonlive.com/opinion/index.ssf/2012/07/dick_cheney_to_congressional_r.html

[jeffkrol]

I have often wondered whether this is because QE did not work, or if positive effects were gained by QE were washed out by problems in Europe.

Regardless, I think everybody in the US has to realize that the economy will take time to "heal" (we were in a bubble...and now it seems everybody expects the United States to reach the top of the bubble again..after just a few years). I am unsure if we should be spending on large stimulus efforts when the economy is slowly and steadily increasing.

QE didn't work WELL because it didn't actually get into the economy.. It just fed the banks who did............................. nothing worthwhile.

funny thing though:
A Few Charts That Show Why Quantitative Easing Was A Miserable Failure - Business Insider

Jun. 4, 2011, 9:49 AM

The bond market is giving some very heavy signals that it sees trouble ahead. One thing you can count on. This divergence will not last for long. Either interest rates are going to rise in the coming months or stocks are going to take a hard whack.

Crystal ball broke????

The U.S. is scheduled to auction $35 billion of two-year notes on Nov. 27, an equal amount of five-year securities the next day and $29 billion of seven-year debt on Nov. 29.

“I don’t think the supply should weigh the market down too much,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald LP in New York, a primary dealer. “We have six Fed operations.”

Ten-year notes will yield 1.74 percent by Dec. 31 and 1.97 percent by June 30, according to a Bloomberg survey of banks and securities companies with the most recent projections given the heaviest weightings.

http://www.businessweek.com/news/2012-11-24/u-dot-s-dot-yields-rise-first-ti...cliff-optimism

[Winder]

Again .. WHY borrow money when you (obviously and undeniably) are the "creator" of such............

The government creates currency, they don't create money. The quantity of the currency is not as important as the value of that currency.

The reoccurring theme is "it's not how much you spend but what you spend it on......... for biz and the Fed.

And how does the Federal government know "what" to spend money on? How do they know what the best use of that money is?

[jeffkrol]

The government creates currency, they don't create money. The quantity of the currency is not as important as the value of that currency.

Keep pretending that is more important than it is..... The basic problem is moral.. IF the gov. can AFFORD anything.. why not provide everything.. thus debasing the currency.
This is a social/moral dilemma.. not a fiscal/money dilemma...but one I believe is handable.. even today..
Having the Fed freely spend on infrastructure and even "employer of last result.. will not make the US dollar worthless.. On the contrary it would strengthen it.. PRODUCTION strenthtens the dollar be it funded by the fed or biz or aliens for that matter..
Currently we need production and no amount of "prodding" will get biz to do it while the demand (and freely flowing money) is down. circular trap.....

And how does the Federal government know "what" to spend money on? How do they know what the best use of that money is?

In it's simplest terms..........

Before the effective date, the Secretary,
11 after consultation with the heads of Executive branch de12
partments, agencies and independent establishments, shall
13 report to the Congress on opportunities to utilize direct
14 funding by the United States Government to modernize,
15 improve, and upgrade the physical economy of the United
16 States in such areas as transportation, agriculture, water
17 usage and availability, sewage systems, medical care, edu18
cation, and other infrastructure systems, to promote the
19 general welfare, and to stabilize the Social Security retire20
ment system.
2

I'm pretty sure you get the picture but don't "believe" in it....

[Winder]

Keep pretending that is more important than it is..... The basic problem is moral.. IF the gov. can AFFORD anything.. why not provide everything.. thus debasing the currency.

Why is Yemen not as rich as Saudi Arabia? If it were simply a matter of printing presses then there would be no poverty. It does not matter how much money Yemen prints, its currency will never have value because value is not determined by the government. IT is very important factor that you gloss over to make your ideas appear possible.

In it's simplest terms..........
I'm pretty sure you get the picture but don't "believe" in it....

I will believe it when I see it. From China's ghost cities to the economic wasteland of the Soviet Union. Governments typically make very poor decisions when it comes to resource allocation. Politicians pander to the herd and consider long-term to be the 4 year election cycle. Kicking the can down the road for the next guy to deal with is a sport in the world politics.

[jeffkrol]

It is relevant if you are trying to show that government spending can drive an economy out of a recession. The USA has spent the equivalent of 2 Canadian economies in the form or stimulus as QE in just a couple of years and the result was a flat line. Most of that money was created from thin air either through credit expansion or direct injection of currency.

spent money............ flat line

AND no questioning on WHAT they spent it on or where it should have went ???

Is this your attempt at bad logic or moralizing???


Certainly doesn't have anything to do w/ facts..