Headline o’ the day: January 8, 2019 UncleScoopy “ALEXANDRIA OCASIO-CORTEZ FAKE NUDE PHOTOS DEBUNKED BY FOOT FETISHIST” You never know when you might need a foot fetishist detective. Soon to be a new ABC series. Share this:FacebookRedditTwitterTumblrPinterestEmail Post navigation Previous Previous post: It’s Clemson by a mile, 44-16Next Next post: “What the President Could Do If He Declares a State of Emergency” 22 thoughts on “Headline o’ the day:” Ocasio-Cortez economic theories debunked by a pile of decaying roadkill I’ve commented on this before. Both Ocasio-Cortes’ economic theories and virtually all elected Republicans economic theories are based on a school of economics known as ‘Modern Monetary Theory’ which, at its core, argues that ‘deficits don’t matter.’ So, if Ocasio-Cortez’ economic theories have been debunked by a pile of decaying roadkill, then so have virtually all elected Republicans. As I’ve noted before, trying to teach these trolls econ is like casting pearls before swine. I don’t know jack shit about economics, but I find this depressing: every time we elect liberals, they want so spend like a drunken sailor on social programs; every time we elect conservatives, they want to invade every country we’re not currently at war with and increase defense spending while cutting taxes. In the end, the liberals have to fight the legacy wars, and the conservatives have to maintain the legacy entitlements. We get stuck with both, plus low revenues and an ever-increasing debt. Maybe there are no negative consequences accruing from that. Beats me, because as mentioned, I’m an ignoramus on economics. But the size of government outlays versus government revenues seems like a bad omen to me. I’m just one of those guys that likes to spend less than I make, and I can’t seem to get it through my thick skull that governments may not have to do that. Scoopy, your views are about 40 years out of date here. For those on the right, the main cause of increased deficits has been tax cuts that mostly benefit the wealthy, increased defensed spending and wars are a secondary cause. For those on the left, these claims are mostly false right wing propaganda, While it is true that there are a fair sized and possibly increasing number of Democrats in Congress who believe ‘deficits don’t matter’ Democratic Presidents since Lyndon Johnson, especially Jimmy Carter and Bill Clinton either had small deficit budgets, or, in the case of Clinton, surplus budgets. Obama was something of an exception to that in that by the time the U.S economy returned to near full potential output by around the start of his second term, he still had large budget deficits. However, Trump has even better economic growth, less demand for welfare spending and has deficits double what they were under Obama. The Congressional Democrats under Speaker Pelosi have reestablished ‘paygo’ (pay as you go) requirements that mandate that any increase unfunded spending or tax cuts must be offset by tax increases or spending cuts elsewhere. So, with this somewhat exception of President Obama’s second term, in reality, mainstream liberals since the development of Neo-Classical economics, are concerned with and opposed to unrestrained deficits. In regards to the economic arguments behind budget deficits, some of them are common sense but others, like what you mentioned, can be counter-intuitive. There are three main problems with government budget deficits in general, but there are also reasons why some deficit spending is not necessarily a bad thing. 1.U.S budget deficits started to grow considerably starting around maybe 46 years ago. I saw a tweet from a left wing Modern Monetary Theory economist mocking a mainstream economist writing something like “I’ve been saying for 46 years now that large government deficits would damage the U.S economy.” The United States has greater protection from budget deficits because the U.S $ is the ‘world reserve currency.’ Any other nation that had government budget deficits the size of the United States would likely experience a major currency sell off, due to fears of higher inflation or uncertainty over government economic policies, however, the reserve currency status requires other nations to buy U.S $ in order to buy commodities. This greater $ buying activity pushes the U.S $ higher than it would be. A much lower U.S $ would be good for exports and bad for China (Trump would probably love it) but it would also result in much higher commodity prices and other imports which would mean higher prices of goods (and services) in the U.S. Only 40? I’m surprised. With the exception of Bill Clinton’s second term, I can’t even remember the last balanced budget. When did deficit spending come into vogue? Was it Gerald Ford’s administration? The $40 trillion question Alexandria Ocasio-Cortez couldn’t answer. Your hero, genius! Just to clarify for the many readers here who have a brain (so, not Chris) the $40 trillion figure is based on assumptions that are rejected by seemingly every expert in the field other than the person who used the assumption. Specifically, this one expert concluded that a universal healthcare system would not replace much of the spending on healthcare that presently occurs in the private sector, so, this one expert concluded that the increased government healthcare spending would not simply be financed by insurance payments that people (or businesses) already make to private insurance companies, but that there would have to be additional taxes that would be on top of the already ongoing private insurance payments. Every other expert in the field either wholly or in the main rejects this assumption, and this has not been the situation in other nations that have adopted some form of ‘single payer’ health care. This one assumption and the impact it has, comprises the vast majority of this $40 trillion figure (which itself is over 10 years.) Wasn’t referring to Republicans. I was talking about the Socialist loving dipshit elected in NY 2.The second problem is simply that the higher the size of the deficit and the debt in ‘real terms’ (net of inflationary effects) the more a government might have to spend on simply financing that debt. While this depends on interest rates determined by the rate that governments sell bonds, a large government debt makes governments especially vulnerable to rising interest rates. Much of the problem with the ballooning government deficits in the 1980s were the result of interest on already built up debt being added to the deficits. 3.Governments deficit spending can signify a large amount of overall government spending in the economy. Neoclassical liberals agree that total governments (federal, state, county, local) spending of over around 40% of GDP is bad for the economy while Monetarists (there aren’t really any mainstream Monetarists in the United States) argue that government spending of over around 30% of GDP is bad for the economy. The basic idea here is based on the concept of ‘equilibrium.’ As government spending as a share of GDP increases, it has a ‘declining marginal benefit’ and at between 30-40% the benefit becomes a net zero before becoming negative. Again though, the U.S is a bit different. While the amount of total U.S governments spending is not easy to completely determine (government transfers from higher to lower levels are one complication and most likely different governments use different accounting methods) total governments spending in 2017 was around $7.5 trillion on a total GDP of around $19.5 trillion. This places total government spending at about 38.5% of GDP which is, by most measures, not overly large. However, U.S tax rates are low by major world economies standards, so even though total U.S governments spending is not incredibly high relative to other major economies,, U.S government deficits are quite high. The ‘counter-intuitive’ part comes in over whether deficits are inherently a bad thing by themselves (outside of ‘pump priming’ during recessions, where there is broad agreement in support.’ Most mainstream economists say ‘it’s more complicated than that’ at least in principle. The idea that people spend less than they make isn’t actually how people live a good deal of their lives: they accrue debts for student loans (whether that’s worth it these days or not is another matter) and they acquire mortgages for housing (or they’d like to.) While consumer purchases that are ‘paid’ with the credit card are a bad idea, student loans and mortgages can be wise investments. While an individual has a life cycle, governments and nations theoretically go on and on. So, not only does this mean that governments have no debt that ultimately needs to be paid off, it also means that governments have a continuing need to invest in the national equivalent of student debt and housing (education, infrastructure…) While there is increasing interest in measuring to determine whether especially government infrastructure spending boosts overall GDP in the long run, it really isn’t easy to measure. The broader things to keep in mind though are: 1.Governments deficit spending is likely not a problem as long as governments are able to keep making the interest payments without difficulty. In this regard, it is completely false when a person argues ‘the deficit is immoral because our children have to pay the debt back.’ In reality, as long as interest payments continue without problem (and ‘without problem’ includes not simply printing money) the debt NEVER has to be repaid. 2.As I mentioned above, as with an individual, the problem with debts are if a large increase in interest rates occur. Individuals and businesses are ideally subject to ‘stress tests’ to see if they can survive this situation. While (most) governments can borrow much more easily on the open market, ideally it should also subject its borrowing to the same ‘stress tests.’ 3.Governments in the E.U and elsewhere have generally taken this to mean that as long as deficit spending is less than 3% of GDP and is not this high persistently, for a few years it’s not a problem. The U.S Federal budget deficit of around $1 trillion, is around 5% of GDP. The simplest part to understanding the counter-intuitive nature in principle of deficit spending is that if a nation has a total government debt of $10 trillion and GDP is $20 trillion, then it has a debt to GDP ratio of 50%. If the total debt rises to $12 trillion and GDP rises to $30 trillion, then while the total debt has increased, the debt to GDP ratio has fallen to 40% and the nation should actually be in better fiscal health. However, for the U.S and for many other nations, this is an argument in principle, because in practice the U.S national debt is over 100% of GDP, and, as I wrote above, were it not for the U.S being the World Reserve Currency, I would expect that the U.S would have a much lower valued $ relative to the nations with a much healthier debt to GDP ratio. The ultimate of high debt and deficit is that a nation hits the ‘debt wall.’ This isn’t the same as the artificial U.S government ‘debt ceiling’ but when bond holders start demanding higher and higher interest rates from a nation in order to compensate for the uncertainty and the loss from the declining currency that the debt is paid in. The result tends to be the IMF coming in and imposing conditions in return for new loans. Spain and Greece hit the debt wall a few years ago and both are probably the most advanced economies to have down so, however, because both use the Euro, neither were ‘sovereign nations’ with their own currency or central bank, so, it’s debated what impact having those things would have meant for both Spain and Greece prior to them hitting the debt wall. In the 1980s either New Zealand or Australia (maybe both) and then Canada in the early 1990s both felt they were only months away from hitting this debt wall and acted accordingly. Were the U.S not the ‘world reserve currency’ it’s speculated that they would similarly have hit this debt wall by now with a national Debt to GDP ratio of over 100%. Ultimately, the ‘world reserve currency’ will only by the U.S additional time if it does not, at least significantly, reduce, 5% federal deficit to GDP deficits. Unfortunately many on the left and the right would reply to that “when, in another 46 years?” Washington Post – not really a huge bastion of Conservatism last I checked Her comment is silly, but that doesn’t discount that the $40 trillion figure is also based on faulty facts and logic. The thing is, I don’t even really care for Ocasio-Cortez, but I think Chris is clearly trying to separate Republican politicians from her, and the reality is that they agree with different classes of the same Modern Monetary Theory School, and both ultimately have the governing view that ‘deficits don’t matter.’ There are other comparisons between her and Paul Ryan: both of them were first elected before they were 30 years of age and both have degrees in economics (a black mark on the discipline.) I do find the Washington Post article interesting because until the Republicans took back all three branches of government, the major media outlets seemed to truly believe that Paul Ryan was a ‘deficit hawk’ or ‘fiscal conservative’ as well as some kind of sincere public intellectual, and they seemed to be truly shocked when Ryan exploded the budget deficit without a second thought. I disagree with much of Ocasio Cortez’ economic views, but she does seem to be a fast learner (or her and her staff seem to be) and she has clearly used the over the top criticisms of her to her advantage: she seems to have become something of a kind of folk hero to millions of young people, even those who disagree with many of her views. Millions of young people seem to clearly identify with her financial difficulties and the inconsistencies in the attacks: Republicans on Democrats in general: a party of ‘elitists’ Republicans on Ocasio-Cortez “what is a bartender doing running for Congress?” Also: many Republicans “how dare some bartender refuse to debate an Ivy League trained lawyer” (Ben Shapiro) Republicans on Democrats: out of touch Republicans on Ocasio-Cortez “what is a person with large student loans doing running for Congress” I think it’s pretty clear the Republican Party these days has no consistent public views but expresses whatever argument that is believed by some right wingers as long as it fits in the minute, these attacks on Ocasio-Cortez are just a small example. What I’ve never seen before is the degree to which the Trump/Republican cultists/voters believe and regurgitate these attacks. So, when a Democrat is President, the deficit is the most vital issue, when a Republican is President ‘deficits don’t matter’ (unless it’s to cut non social security or agricultural entitlements.) I think there is also no question the modern Republican Party is, at its core, a neo-Feudalist Party that in its economic, social and legal policies wants to reestablish a small genuine wealthy elite with everybody else having been taken down the real road to serfdom. I don’t think it’s necessary a surprise that a political philosophy, especially one born from conservatism, would come to express these views, the history of Europe from Medieval times to the middle of the 19th Century (1848) was all about the nobles/landowners capturing governments (and religion) to suppress the peasants, what is surprising to me is that millions of present would be peasants vote for it and genuinely believe its in their best interests. On this, for instance, it’s frequently taught that the Magna Carta either paved the way for democracy or modern constitutions and, at the very least, prevented Kings from acting in an arbitrary fashion. The reality though, is that the nobles/landowners demanded and received two things from the Magna Carta: 1.The ending of the King from acting in an arbitrary fashion to them. 2.The guarantee that the King wouldn’t prevent the nobles/landowners from acting in an arbitrary fashion to people on their lands (their nobles’ subjects or peasants.) Should say ‘the nobles’ subjects or peasants.’ The peasants were directly subjects of the nobles not of the King. These arbitrary rules were such things as preventing a subject from leaving the land and insisting on a certain amount of completely unpaid labor. In terms of ‘capturing governments’ a major interest of the nobles/landowners was ensuring that the peasants paid a disproportionate amount of taxation. (Hmm, sounds familiar.) In regards to religion, certainly organized religion (or Catholicism at the time, then, of course, the only form of Christianity in Western Europe) began to recede slightly as a major force in conforming peasants after 1450 or so, so, before 1848. I didn’t come here for the economics, I just wanted a link to the pics, so I could, you know, debunk them too… I never did see them floating around in the first place. (I wasn’t looking, because I heard they were fake without previously hearing that they existed.) If I find ’em, I’ll let you do some private debunking. The deficit first started to take off when Lyndon Johnson tried to have both ‘guns and butter’: the Vietnam War and the Great Society Program. It declined again starting around 1971 and then started to sharply increase in 1975 as inflation rose (so that’s a nominal increase in the deficit) and treasury bond rates rose as well which increased the debt financing (the problem with sharp increases with an already existing debt: the ‘stress test’ situation.) Interesting. I just took a look at it, and realized that Dick Nixon basically balanced the budget in his first two years in office. I had forgotten that. I also didn’t realize that the modern budgeting system didn’t exist until 1974. Oh. I’m so out of date. 🎼 Boy, the way Glen Miller played … 🎶 Comments are closed.