Tag Archive: GDP

The Deficit Is Shrinking

Cross posted from The Stars Hollow Gazette

Why was this not in the State of the Union address? The deficit is falling faster in the last three years than at anytime since World War II.

Fiscal Lurch photo Web-caphill01-0212_zpsb784b821.gif

To be specific, CBO expects the deficit to shrink from 8.7% of GDP in fiscal 2011 to 5.3% in fiscal 2013 if the sequester takes effect and to 5.5% if it doesn’t. Either way, the two-year deficit reduction – equal to 3.4% of the economy if automatic budget cuts are triggered and 3.2% if not – would stand far above any other fiscal tightening since World War II. [..]

History suggests that there’s little good to be gotten from cutting the deficit much faster than 1% of GDP per year. That’s especially true at the moment, given the nature of our related demographic and budget challenges.

Both of those challenges suggest that growth should be our paramount concern, far ahead of near-term deficit reduction, even as we work to improve the intermediate-term budget outlook.

So the deficit falling too fast is bad? What Ezra Klein said:

And we may well have a coincident recession this time, too. According to the initial GDP numbers, the economy shrank slightly in the fourth quarter of 2012, largely because government spending fell. As federal spending continues to fall and the effects are compounded by new tax increases (the payroll tax cut expired in January, for instance), it wouldn’t be a huge surprise to see more quarters of negative growth. So, given that the typical definition of a recession is two consecutive quarters in which the economy shrinks, this drop in deficits might yet be accompanied by another recession.

Hence, two things to remember in the deficit conversation: First, the deficit is expected to fall faster in 2013 than at any time in the last 60 years. And second, that kind of austerity tends to be accompanied by recessions, and we’ve already seen evidence that the same might be true this time, too.

Austerity and sequestration are really bad ideas and that is what the President should have been hammering in the SOTU.

Shut Up About Austerity

Cross posted from The Stars Hollow Gazette

The U.S. economy contracted slightly in the fourth quarter of last year, shrinking by 0.1 percent. The main factor that is being blamed is cuts in government spending. The report, as Pat Garofalo at Think Progress notes, might have been worse but if the House Republicans let the sequester kick in, as they seem want to do, the US economy is in for another deeper dip:

According to Macroeconomic Advisers, the sequester will knock 0.7 percent off of GDP growth this year. The Bipartisan Policy Center estimates that the sequester will kill one million jobs. [..]

Of course, scrapping the sequester – which includes equal cuts from defense spending and non-defense discretionary spending – does not mean the government simply has to plow that money back into the Pentagon. Domestic spending is headed toward historic lows. The country has a huge infrastructure gap that needs to be filled. And the American Jobs Act, which Republicans filibustered, would have significantly boosted growth according to several independent analyses.

Journalist and author, David Cay Johnston, a specialist in economics and tax issues, discusses why the Republicans keep pushing spending cuts.

Meanwhile, as Suzie Madrak at Crooks and Liars observed, hell may have just froze over at the conservative think tank, American Enterprise Institute where conservative economist John H. Mankin just told the deficit hawks, in so many words, to “shut up about austerity”.

Japan’s lessons for America’s budget warriors

by  John H. Makin, American Enterprise Institute

Lessons for the United States

Congress, take note. Although American deficits do need to be reduced and debt accumulation does need to be slowed and eventually reversed, cries of imminent disaster from “unsustainable” deficits and a supposed bond market collapse will not accomplish this goal. Persistently rising bond prices in Japan and the United States have undercut the “sky-is-falling” rationale for deficit reduction. [..]

If fiscal austerity is applied too rapidly, US growth will drop and the debt-to-GDP ratio will rise, boosting the nation’s debt burden. If the Fed tries to stem the rise with too much money printing, inflation could rise and drive up interest rates, exacerbating the US debt burden. [..]

Congress and the president need to avoid excessive austerity with respect to changes in fiscal policy this year. Over the past four years, on average, the fiscal boost applied to the American economy has been worth about 3 percent of GDP. This year, with tax increases and sequestration, fiscal drag will be about 1.5 percent of GDP. [..]

The lessons from Europe and Japan are that austerity, per se, is not the way to move to a sustainable fiscal stance. Rather, the US economy needs a combination of tax reform to boost growth and legislation enacted now to stabilize the future growth of outlays on entitlement programs.

Economist Paul Krugman, at his NYT blog, Conscience of a Liberal, talks about “incestuous amplification” which happens when “a closed group of people repeat the same things to each other – and when accepting the group’s preconceptions itself becomes a necessary ticket to being in the in-group“.

Which brings me to the fiscal debate, characterized by the particular form of incestuous amplification Greg Sargent calls the Beltway Deficit Feedback Loop. I’ve already blogged about my Morning Joe appearance and Scarborough’s reaction, which was to insist that almost no mainstream economists share my view that deficit fear is vastly overblown. As Joe Weisenthal points out, the reality is that among those who have expressed views very similar to mine are the chief economist of Goldman Sachs; the former Treasury secretary and head of the National Economic Council; the former deputy chairman of the Federal Reserve; and the economics editor of the Financial Times. The point isn’t that these people are necessarily right (although they are), it is that Scarborough’s attempt at argument through authority is easily refuted by even a casual stroll through recent economic punditry.

Will AEI’s resident economics scholar, John Mankin’s warnings be heeded? Or will the “incestuous amplification” continue?

Meanwhile

As there is extremely little private economic growth investment, not a surprise there as our now capitalist society isn’t built on private growth investments, and the government is locked into not investing, that’s only going to get worse, others are quickly taking over what we once were:

Millions of green jobs created in China… probably

World economies as a function of energy use

There is nothing in this world that one cannot get more cheaply by using more oil to get it – whether by importing it, mechanizing its production, or using more energy to extract it.  This is not only true of industry, but of people as well: Americans moved to the suburbs because it was cheaper to drive farther than to work through the problems of urbanization, and one could get a larger house with a larger yard in the bargain. As long as it was cheaper to pay rent to Saudi Arabia for the oil, because that is what we are doing, than to pay rent to the government for a working city, people chose to pay rent to OPEC rather than taxes to the overnment. This ability of oil to be used in place of almost everything else, and not whether there is “enough” oil, is the special property that makes it the basic scarcity of the world economy.

                —  Stirling Newberry, American Thermidor

If you haven’t read it, American Thermidor (part 1, part 2, pdf) is well worth your time.  Personally, I think maybe Stirling goes too far in suggesting that the enoughness of oil is not its critical feature, but your mileage may vary.

Previously, I showed the linear relationship between global energy use and population growth, suggesting that a population crash is the predictable outcome of the coming decline in energy use following peak oil (year 2011), peak gas (year 2020), and peak coal (year 2030).

Photobucket

As if “We’re all gonna die!” weren’t bad enough, it gets worse:

We’re all gonna die flat-ass broke!

Dystopia 20: Tendo

“It turns out, money is power…”–Tim Garrett discussing his  revolutionary equation linking GDP growth to global warming.

Translator’s Take on Medical Care Reform was Bunk 2009

I wrote an essay the other evening about my take on medical care reform.  I got a few positive comments, and hardly any negative ones.  I wrote it to pique (please pardon me for using one of my favorite words) criticism, but was way too confident in what I said.

I was WRONG.  The medical care situation is much more dire than either side in DC would have us know, and I will tell you why.  I will also tell you that, unless someone much smarter than I am can come up with a solution, our system will collapse soon, and that is not an empty threat.

Is Health Care a Commodity, or a basic Human Right? with Poll

Well according to this former HMO Medical Director, she traded Necessary Patients Care, for Career Advancement and a 6-figure Salary:

Linda Peeno MD, testifies



http://www.youtube.com/watch?v…

Question: Are the Patients, who are Denied Care, to save the Insurance Companies Money — DO those Patients have a RIGHT to their Health Care?

Or are Those Patients simply a Commodity — a “Cost Center” — that must be constantly constrained?  

Life, Liberty, and the pursuit of Happiness … and the WE vs ME

There are some things, we just shouldn’t “Leave to the Markets” to decide what’s best

For Example:



Infrastructure



Public Schools



the Unemployed and the Uninsured

Left to their own devices, Private Interests will UNDERCUT the Public Interest, most every time!

That’s what the Profit Motive is all about — it cares more about the interests of ME, instead of the well-being of the WE, from which Societies are built.

US Health Care “Best” in the World — in Per Capita Cost

Since the GOP is fond of saying that “the USA has the Best Health Care System in the World”, I decided to do a little Fact Checking. … And according to the World Health Organization:

Health Performance Rank By Country

United States of America:

Performance: On level of health : 72nd

Performance: Overall health system: 37th

Health expenditure per capita in international $’s

Country Rank:  USA: 1st

http://www.photius.com/ranking…

We’re Number One! alright — BUT only in terms of HOW MUCH WE PAY PER PERSON, for our Health Care! (1st in the World, in terms of Cost)

That’s sounds like a contest, that we just don’t want to keep winning!

Dystopia 3: Detained

“Every citizen silently, but never the less certainly, sustains the government of the day in ways of which he has no knowledge. Every citizen, therefore, renders himself responsible for every act of his government.”

“No action which is not voluntary can be called moral….Any action that is dictated by fear or by coercion of any kind ceases to be moral….Freedom of the individual is at the root of all progress.”

Mahatma Gandhi