commondreams.org — Turn on any of the television or radio gab shows and it won’t be long before you hear someone proclaim that government must live within its means just as families do and businesses must.
But the truth is neither families nor businesses balance their books in the sense of forgoing borrowing. And even if they did, to insist that government do the same would extinguish whatever remains of economic growth and job creation, not ignite them.
Jan 8, 2012 View in Crawl 4
ixtahdoomJan 9, 2012
FTA: a mortgage does NOT mean "spending money you don't have". The house is the equity, which the bank still owns. Perhaps the author should start with ECO 101 first before attempting to educate us between deficit spending economics and the clusterf**k we have now.
atomheartmotherJan 8, 2012
Do families or businesses borrow forty cents out of every dollar they spend? If they do they're not going to stay solvent for long.
More whistling past the graveyard from Progressives. You can't ignore reality forever.
FrankLuskaJan 8, 2012
Nothing wrong with borrowing money, but the article leaves out one important fact, people normally pay off their debts instead of just piling on more and more. The real difference is they have too, where the government just prints more money or borrows from another country.
IxodoiJan 8, 2012
Yes, but eventually we are the ones paying the price for the money printing...
countess666Jan 8, 2012
not really.
as long as oil is only traded in dollars the fed's have a licence to print vast amounts of money with little or no consequences.
the demand for dollars will remain strong, even if you sprint money in bulk.Comment is buried, click here to see the rest.
spatula7Jan 8, 2012
Ya, with our multiple cars, homes and big screen TV's and our cheap food and ability to fly anywhere in the world and our...wait, what was the price again? Oh, you're talking about the Aliens that will come on day and foreclose the planet? Is that it?Comment is buried, click here to see the rest.
glbernsJan 9, 2012
What most people don't think about is probably the biggest difference. The U.S. government can borrow at rates lower than what they lend at. No other entity in the world can do that. So while they borrow for 1%, they lend for 4%. This is a huge difference and really prevents any metaphors to families borrowing money.
FrankLuskaJan 9, 2012
Are you talking about borrowing money from other countries or borrowing (printing money from thin air) from America?
johnnysoftwareJan 9, 2012
Of course unemployment is low when you pack up the entry-level wage earners and ship them off to the opposite side of the world at public expense, backfilling their jobs as necessary with cheap, illegal, exploited foreign labor.
Of course when those same entry-level wage earners return into that new domestic status quo, unemployment will absolutely ...
... and real estate prices will predictably ...
In other words, the ride is not over yet.
U_logic_error_broJan 8, 2012
well yeah since the government makes a lot of money just to spend our money and running a huge debt for over 12 years without penalty because the working class winds up paying for it, yeah its safe to say the government needs to be more spend thrifty here. and as far as the government creating jobs, tax breaks didn't do it, subsidies just move jobs to different sectors more than really creates any... there is a good reason why many CEO's become politicians hint hint...
barackalypseJan 8, 2012
"When a family takes out a car loan, a student loan, or a mortgage on a house, it’s spending money it doesn’t have."
Of course, but the difference is once the credit cards are maxed out and the mortgage is due, a family can't just go to the bank and raise its debt ceiling to borrow more money to use to pay the loans it already has. The bank is expecting to get its money back and at some point it will stop lending.
Also, the family typically has made an actual investment with the money. They have equity in a house or the promise of future earning through with a college degree they are funding. The Government isn't investing in anything other than debt. Money wasted on wars in Afghanistan don't increase our productive capacity any, we have no infrastructure to show for it, we aren't actually investing, we're just spending.
Graf_OrlockJan 8, 2012
http://www.youtube.com/watch?feature=player_embedded&v=Li0no7O9zmE
Stolen from another post earlier today on the debt.
barackalypseJan 8, 2012
Thank you sir, I was actually looking for that exact video to post.
rednipJan 8, 2012
The Bush tax cuts were passed by claiming it would stimulate the economy with a nearly all Republican vote.
The brief Clinton surplus was created by the 1993 Omnibus tax bill which was passed without a single Republican vote. The 1994 elections saw the GOP use that vote to gain power saying that the Democrats raised taxes and cut medicare.
barackalypseJan 8, 2012
What does that have to do with my point that so much of our Government spending isn't actually an investment in anything? Giving taxpayers $300 billion isn't an investment. Building a freeway is.
icwydJan 8, 2012
You really should talk to your conservative colleagues then. Explain to them that they need to pay for things instead of running up the bills and not paying for them. You are against the people who want to pay the bills and put them on the books for all to see. Unlike the conservative way of hiding everything and not paying for it and screaming bloody murder when the truthful and up front progressive try to pay for it.
aadyssJan 8, 2012
rednip,
Are you claiming the higher the taxes, the better the economy?
atomheartmotherJan 8, 2012
"The brief Clinton surplus was created by the 1993 Omnibus tax bill"
Advent and expansion of the web and the dot com bubble had nothing to do with it, huh?
bobcat7407Jan 9, 2012
Not to mention that it isn't real. The debt went up every year under Clinton.
johnnysoftwareJan 9, 2012
But for two to three months during that period, the Republican party politicians were hammering away at the country and Democrat politicians saying it would be immoral and a bad business decision if we did not _spend_ that surplus.
They made a campaign issue about it and poisoned the waters for any politician running for reelection who did not capitulate and go along with them.
Most politicians were and so ultimately did.
That was a Republican lead disaster, under the flag of the moral way to run the nation's finances.
Now, when we are supposedly not in a bubble, they are saying exactly the opposite.
The party is also acting like it never said spending those accumulated funds was something they never pushed the country into doing.
johnnysoftwareJan 9, 2012
According to the chart on this page, the Federal Debt decreased during Clinton's last year (2000) in office. The chart also shows the GDP increasing that same year.
http://en.wikipedia.org/wiki/History_of_the_United_States_public_debt
Study the chart below.
http://home.adelphi.edu/sbloch/deficits.html
It clearly shows that the increase in the Deficit tracks strongly with one independent variable:
- the President of the US being Republican => larger&largest Deficit
This remained true until the point when George Bush, junior announced to the country during the final month(s) of his 2nd term that economic advisors told him that the US was headed "towards the worst economic disaster since the great depression".
The invasion of Iraq had cost the country a fortune more than it had. Bush kept the cost of it off the books as long as he could but he was still spending the money.
His justification was the necessity of Iraq war came as such a surprise. But no one was ever able to find a reason for him declaring the invasion that came from anything other than him deciding to do it, if you leave out things he and VP said which were proven bogus.
Choosing to [claim to] believe 'Curveball', that Iraqi fugitive who worked at Burger King in Germany after making up the phony WoMD stories in order to illegitimately obtain a green card, was a proven disaster.
Republicans say little about this and instead attack efforts to recover from it.
China got the lucrative oil deals in Iraq and mining deals in Afghanistan following US bombardment in those countries.
Bush's DoD head said before the war that it would last several months, cost something like $100 billion or less, and "pay for itself" with Iraqi oil revenues. Things turned out drastically different than that.
The ultimate cost of the war(s) turned out be at least $5 trillion when you account for various direct effects; immediate expenditures, obligations to pay for soldier's costly chronic health expenses for the majority of a century down the line, etc.
That's leaving off other likely effects which will cost the country plenty:
- businesses holding positions for National _guardsmen_ for a decade
- businesses not holding those positions which means unemployment
- businesses backfilling those jobs with cheap/illegal workers
- soaring influx of ultra violent gangs into the US
- creation of a real estate bubble by hiring then firing those workers
- lost goodwill in countries where US mercs/troops raped/tortured/murdered local populace
- creation of an actual sectarian civil war between two conservative sects that included among other things: death squads, militant vigilantism/gangsterism, unprecedented corruption, shadow employees on payrolls, massive proliferation of firearms from US to Iraqi populace
- fueling real estate and finance bubbles by not regulating those industries as necessary and mandated by FDIC, FHA, etc. -- just letting them run off the rails and leaving the country on the hook
- financial industry which supposedly powered the 'strength' of the US economy during the war imploded; and afterwards got even more dismal as its executives went to trial for financial shenanigans and its workers wound up on unemployment in droves -- in other words, the strength of the wartime economy was a man-made 'mirage' with all the costs finally recognized in the year starting AFTER Bush left office
In other words, the thing that seems to be getting overlooked a lot is that Bush did not pay for or even acknowledge the expenses of almost all of his 8 years in office.
The first breath of Bush's admission that maybe something super duper was wrong with the financial industry, the auto industry, and the economy in general came just before he left office -- and handed all 3 disasters to Obama to solve & pay for.
You can't say Obama "did" that or Obama decided to "buy" that.
lew2048Jan 11, 2012
First, the national debt decreased under Clinton only as a %age of the GDP, not in absolute terms.
Second, most everyone agrees with you that Bush was a terrible president, and that Obama inherited his problems, just like Bush inherited Clintons problems, etc. all the way back to Washington, who was a great figurehead.
All most of us are saying here is that one should avoid any partisan politics. The problem before us is one of teasing out what went wrong. In the world of manufacturing, they call it a 'Root Cause Analysis'.
Once we can understand the Root Cause of the current set of problems, we can change the system to avoid the problems.
I believe that a lot of people finally understand that the Root Cause is NOT Left vs Right, D vs R, or any such partisan BS. Maybe even enough to sway elections.
Big progress over the situation in 1930 : thank God for the internet.
lew2048Jan 11, 2012
There was never a 'Clinton Surplus'. If you check, the national debt has increased every month for the last 30 years, except for one month.
The accounting trick is to use Social Security income to buy treasury bonds, and thus spend that money, but not to count the bonds as a liability 'on the books'.
countess666Jan 8, 2012
the point is, government don't have to pay back debt. the WW2 debt was never repaid for example. it just became more and more insignificant as the economy grew and steady inflation caused it to decrease in value.
any analogy with a families finances is wrong and mute.
what governments should do is not 'spend within their means' but spend less extra then the growth in the economy can account for. in good economic times that is.
all the democratic presidents since ww2 did exactly that, and the WW2 debt became almost insignificant.
but Reagan and the bush's failed miserably in doing that. and now we have little reserves when we needed them.
bdbrJan 8, 2012
Your first paragraph is essentially stated from a recent Krugman article. Some people make arguments about historic tax revenue as if the economic context was meaningless, to give their arguments a false appearance of credibility. After WWII we were in an extremely advantageous situation where much of the developed world was destroyed (except us), leaving us with over half the world's manufacturing capacity.
Your last paragraph accurately describes the real world today. We have not been heading in a direction to make this debt "irrelevant" for several decades. We entered the great depression with debt-to-GDP of 16%, and by 1939 it was still only 50%. We entered the great recession at 70%, and now it is over 100%. Accruing significant debt in good economic times leaves less headroom for poor economic times. Rates will only stay low until confidence in full repayment (in non-devalued dollars) wanes.
MrFrogyJan 8, 2012
You are right, I read that Krugman article, too. His logic is flawed for two reasons. First, the historical reasons you stated are correct. Second, for that formula to work our economy needs to outpace the debt - and it's not!
spatula7Jan 8, 2012
You really don't understand economics at all do you? You can't spend on nothing...you can spend on more productive things for certain groups of people, but not on nothing...someone is always benefiting in the transaction....then you have to understand we are in a global economy where other governments are spending their money on supporting their businesses and you have to realize that if you stopped investing in your own country your country would become less competitive...so this all or nothing attitude of yours is completely wrong...if the US stopped spending it's economy would collapse and their would a lot of unhappy people here and around the world who've invested in the US government and are expecting it to grow and therefore are expecting it to invest...that is why, when countries invest, their markets do really well and, when they pull back into austerity mode, their markets do really poorly....but this is really really basic stuff.
timedalkatJan 8, 2012
A family and a country are two very different things.
As always, the conservative mentality has to break things down into the most simplistic analogy.
Guess what? Sometimes it is rocket science.
muxmasterJan 8, 2012
Governments that think that they can just spend spend spend are deluded
countess666Jan 8, 2012
no they are exactly right.
they can spend more then they get in and yet have a dropping debt-to-GDP ratio.
and its that ratio that's important, not the actual amount.
If its dropping, investors will be confident their bonds will be repaid and interest rates will be low.
Angry_MuppetJan 8, 2012
Right up until the point it stops dropping. Then your left holding a s**t-load of debt with no viable way to pay it back.
Borrowing within ones means is perfectly feasible. Borrowing as an investment (mortage, education, automobile) is prudent. Borrowing because you can't stop pissing money away?
countess666Jan 8, 2012
"Right up until the point it stops dropping. Then your left holding a s**t-load of debt with no viable way to pay it back."
if that happens to such a large extent that quickly you have far bigger problem's. like total economic collapse.
if its not quickly then inflation will render it far less then "a s**t load" in a few decades... and that's only necessary if you have no economic growth during that time. which first of all is unlikely and second of all brings you back to point number 1: you have far bigger problems.
skyislandJan 8, 2012
No balance sheet would be complete if it was not noted that the house we all live in burns..
Right now CO2e is at 394ppm when 350 or lower is considered what's needed for safety.
Acceleration of emissions of greenhouse gasses is happening along with focus on preservation of wealth and systems of capital generation most beneficial to the wealthy..
What will be the value of money when Earth loses capacity to use sunlight to produce sugar
bcronosJan 8, 2012
CO2 has been as high as 1800 ppm in the past with no runaway greenhouse effect... Go save the whales or something and stop perpetuating this scam...
johnnysoftwareJan 9, 2012
At what rate per decade were the rain forests being chopped down during that period?
What giant peat bogs were melting releasing huge amounts of methane?
What glaciers and iceberg regions were rapidly defrosting themselves?
How much 'fresh" water was being dumped into the sea in various areas at that time?
How many gargantuan "dead zones" swirled around in gulfs' waters?
How rapidly were invasive species being transferred into zones on the opposite side of the world from where they came from?
We sped up the clock rate in the few centuries, particularly the latest one, like never before. The next one will pick up the pace even faster.
We don't even know what we need to steer toward or away from specifically, and we're only going to find out after the die is cast how much is too much.
We do know we are doing a lot of things at once to a drastic degree. If you look at our "accidents" alone, you will see a huge amount of animal life shows up dead at the scene afterward.
So you can't argue that we are not doing any harm.
countess666Jan 9, 2012
you mean that time BEFORE plants started growing on the surface? when the sun was much younger and therefore less dense, and therefore less hot?
johnnysoftwareJan 9, 2012
It's actually common practice in the countries with the biggest/most plant life to burn/chop it down as fast as they can.
Rain forests of South America inhabited by native peoples are just being torched away by third parties so they can raise methane-producing cows on the formerly CO2=>O2 scrubbing acres of land.
Russia's timberland is being cleared of trees to sell to the West to build with ... or burn.
Pretty sure that people are more than taking care of that plant infestation problem you refer to in your post.
Plants in the southern US that used to be indigenous to that area are dying off due to the overall warmer climate.
In addition, you have Texas trying to be a showcase for burning plant life throughout the year in 2011.
In some cases they blamed it on drunks leaving cooking fires unattended. In other cases they blamed it on nature. But the fact is, the state just burned like mad all year long and declared itself a disaster area to FEMA every single month.
Doesn't change the fact that Texas plant life was being converted to CO2 at a high rate that even Texans were not happy with.
Oh, and Africa has a killer drought.
Doesn't look like plants can catch a break anywhere under the status quo.
skyislandJan 9, 2012
Where do you get your number on CO2 concentration? It's my suspicion you are mixing up CH4 in parts per billion from some old something you heard somewhere or that you pulled it out of the air.
lew2048Jan 8, 2012
If I fully agree with that, there is nonetheless the practical difficulty of 'what to do' and 'how to do it'.
With the oligarchy owning the world, almost all practical steps are blocked.
Thus, it seems to me, that all of the 'major-issue' groups in the world are in the same position. Therefore, they need to combine to remove the oligarchy, and make sure it stays dead. That last bit, 'making sure it stays dead' requires, in my understanding of how we got here, that we have a strictly minimum government and very strong individual rights coupled with very strong property rights.
Then we can begin to deal with all of the other accumulated problems.
ferretmanJan 8, 2012
What a silly article, trying to justify poor behavior with an argument that boils down to "everybody does it".
Everybody does NOT do this...irresponsible folks who don't do any *planning* handle their budgets this way.Comment is buried, click here to see the rest.
goatheardJan 8, 2012
Governments (local, state, and fed) spend money like a lot of families....they buy usless junk the first three weeks of the month then realize they have no money left for food or rent. They then justify borrowing because it is a "necessity". Budgeting means filling the fridge before buying the video game system.Comment is buried, click here to see the rest.
atomheartmotherJan 8, 2012
"spend money like a lot of families"
Right, the irresponsible ones.
lew2048Jan 8, 2012
There is a lot of history on this subject. For example, David Hackett Fisher's "Great Wave".
In all of this history, there is no example of a successful country that followed Keynsian / Progressive policies or any of their previous centralization of power cousins.
All of the countries that have done so either already have, in past history, or are about to, in our current history, died as a result of their debts. Their debts are the result of Keynsian policies. As their economies break down, their social systems will begin to do so. In past history, this has lead to very much crime, riots, rebellions and outright wars that kill many millions of people.
The Great Depression was our last experience with this, and there is a lot more to fail in the world of 80 years later. Now we all get to see if we are any wiser than any of the previous countries that walked into this trap.Comment is buried, click here to see the rest.
rednipJan 8, 2012
I would claim that throughout history, there is no example that the fascist/conservative policies as generating long term growth.
lew2048Jan 8, 2012
OK, claim anything you want, doesn't mean it is so.
And then, so?
As an example of displaying what is inside your head, this post was great. As an example of an actual exchange of understandings intended to increase both of our understanding of the external world, not so good.
rednipJan 11, 2012
"OK, claim anything you want, doesn't mean it is so."
That was exactly my point,
You made lots of random sweeping claims, practically blaming a twentieth century economic professor for the black death. When in reality your image of his work is a reactionary straw man.
lew2048Jan 11, 2012
Read "The Great Wave". Historical parallels are perilous (read Fisher's "Historian's Fallacies" for that), but they are quite striking in this case. Fisher's books are all really interesting.
This is not the first time in history that governments have borrowed too much money. Keynes is just the latest reason. This will not be the first episode in history where governments have had to be rebooted because of too much debt.
"Fascist/conservative policies don't generate growth". Those are 2 different concepts, and conservative policies, at least as I understand that, have clearly generated economic growth throughout history. Hong Kong is a very good example.
In fact, all of the Asian Tigers, who had 12 - 20% growth of GDP for 10-20 years in a row, are examples. There are a lot of studies showing a negative correlation between growth of the GDP and 'total government burden' == taxes + regulations. Hundreds, I believe, comparing countries at different stages in the evolution of their govs and also one gov to another at points in time.
One more time : there are no successful big-government countries. Period. Every big-government country in the world has built very deep structural problems into its politico-econo-social systems and every one of them will be involuntarily rebooted because of it. This includes the US.
copycat042Jan 9, 2012
you are conflating fascism, with fiscal conservatism. Fascism, socialism and applied communism all fall under the label "statism". This is "top down" economic planning. It has NEVER worked. What has worked is a free market, where those who produce, decide to what use their production is best put. Bailouts, a fiat money system, a central bank and welfare (corporate and otherwise) are interventionist policies. They are statist, and have always failed.
spatula7Jan 8, 2012
Holy delusional Batman, recovering from the Great Depression is THE case study of how successful Keynesian economics can be...
lew2048Jan 8, 2012
You should read some of the studies of the Great Depression that were done by people who weren't Keynesians. Hazlett and Rothbard are good places to start.
One of the problems in the modern world of consolidated power is that it is very hard to tell where your information is coming from. The Fed funds almost all of the research and study into monetary policy. Among other things, this means the academic world is filled with people who learned using Samuelson, but Samuelson and most of the other academic economists are all Keynesians.
bobcat7407Jan 9, 2012
"After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years."
http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx
johnnysoftwareJan 9, 2012
I think they also produced a study on the west coast that said that if you eat oat bran and don't eat animal fat then the amount of animal fat in your system goes down, therefore eating oat bran must be getting rid of animal fat.
/facepalm
Throughout the previous decade, Republicans were claiming that global warming was not happening and we were in fact having global cooling, based it turns out, on the data gleaned from one particular weather satellite while ignoring data from dozens of others.
It turns out that one had a design flaw and was lying. [Kind of like 'Curveball', eh?]
bobcat7407Jan 9, 2012
So do you actually have an answer to the point? Because nothing you posted matters on the topic at hand.
FrankLuskaJan 9, 2012
Ha, Ha, That's Funny, Seriously, ever though of reading a history book.
copycat042Jan 9, 2012
Keynesian easy credit and the reactionary reduction of the money supply caused the great depression. Government spending with the "new deal" prolonged it. Even WWII didn't end it. It was not until everyone else's productive capacity had been destroyed in the war, and they HAD to buy US goods, was there any sort of meaningful recovery.
Keynesian economics has no allowance for the structure of higher order capital goods. He willfully ignored it. Keynesian thinking is "here and now" not long term. As he put it, "In the long run, we're all dead."Comment is buried, click here to see the rest.
lew2048Jan 8, 2012
One more thing. You all seem to accept that Keynesian is 'the way to go'.
Keynesian economics was dead and buried until the political system + oligarchy needed to resurrect it a few years ago. The Keynesian Fed is responsible for the booms and busts, the shift of wealth everywhere from the 99% to the 0.1% oligarchy.
Any partisan discussion of Left vs Right, Democrat vs Republican, etc. is silly, as those only designate 2 arms of the Oligarchy.
draconwolfJan 9, 2012
Just a little fact checking from the article (coming from someone who knows the car business in MA):
While exact numbers are not available about the privately held Boch auto dealerships, rest assured that Boch’s company borrows to put the cars on his lot that he sells to the public or to build yet another dealership.
This isn't true. Boch is one of very few dealerships in the country to pay for all of their inventory with cash. Ernie Boch is a very, very rich guy and one of the few dealers with no mortgages on their cars.
Alright, carry on. :)
Closed AccountJan 8, 2012
Weird..the ultra lefty sites like commondreams were screaming about balancing the budget for 8 years. Now it is not a big deal.
Besides..even the BIGGEST f**king idiot ultra lefties (novenator, anomaly, philspective, etc.) have to realize how horrible this article is.Comment is buried, click here to see the rest.
Obviously not the latest dumb f**k, mikeymicron...which describes the size of his brain.Comment is buried, click here to see the rest.
countess666Jan 8, 2012
spending more then you get AND more on top of that then economic growth can account for during normal economic times is stupid. that's what Reagan and the bush's did.
spending more then you get in but less extra then economic growth can account for during normal economic times is good. it gives you a dropping debt-to-GDP ratio and provides investors with confidence and therefore low interest rates.
that's what the presidents since WW2 have done to 'pay off' the WW2 debt.
it also gives you reserves to spend when the economy isn't good. like now.
to bad Reagan and the bush's happened or we would have had this beat already.
your ultra-right-wing brain can't seem to comprehend governmental financial accounting. or why sometimes debt it preferable and other times its not.
stay out of politics.
Closed AccountJan 8, 2012
We just thought it was kinda crazy that you people were touting Bush's supposedly amazing low unemployment stats (we heard no talk about the "real" unemployment numbers from right wingers) without any concern for the fact that most of Bush's spending and borrowing was off the books. When Obama was elected to clean up the sh*t storm you pretended was drizzle for 8 years (and you actually now *see* that tax cuts and multiple wars aren't free) you start acting crazier and accusing Obama of all manner of crimes against humanity.
bobcat7407Jan 9, 2012
I'm not sure who the "you" is that you're generalizing about, but one thing I like about Obama is that he put the cost of the wars on the books. It's about time we saw the real cost of our endless wars.
Closed AccountJan 9, 2012
"I'm not sure who the "you" is that you're generalizing about..."
--The people who are now studying employment stats with a fine tooth comb and pretending to be economics scholars.