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The federal government needs to increase spending instead of cutting spending

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    Josh Bivens, Economic Policy Institute, October 16, 2013: Deal or No Deal on Shutdown and Debt Ceiling, Biggest Fiscal Policy Crisis Remains Unaddressed

    The above link shows a graph that I cannot copy here. Take a look at's quite revealing. From Biven's EPI article:

    "It shows clearly that public spending following the Great Recession is the slowest on record, and as of the second quarter of 2013 stood roughly 15 percent below what it would have been had it simply matched historical averages. This spending austerity has enormous economic consequences—if public spending since 2009 had matched typical business cycles, this spending would be roughly $550 billion higher today, and more than 5 million additional people would have jobs (and most of these would be in the private sector). In fact, this extreme cutback in public spending can entirely explain why the recovery from the Great Recession has been so sluggish compared to recoveries following previous recessions."

    Several economists, most notably MMTers like Warren Mosler, have been calling for increased government spending to lift us out of the recession. But instead, with the forced cuts by sequestration and Republicans saying, "no, no, no," we have been doing just the opposite. The effects of the Great Recession will live on for a long while until we pass a comprehensive Jobs Act and restore other cuts mandated by sequestration.

    Of course, many Republicans do understand this...but any policies and proposals that would make President Obama look good is opposed by the Tea Party.
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    Government spending or tax cuts, depending on your ideology.

    It's all about removing drag that government has put in place w/ the tax structure per the given size of gov't + credit expansion.

    With the currency being a simple public monopoly, it's never 'hands off.' Gov't always has its hands on the private sector.

    And involuntary unemployment and excess capacity is the evidence that GOVT is restricting the supply of dollars the private sector needs to pay its taxes and save what it tries to save.

    In short, if you don't cut taxes when you cut gov't spending, it's just like raising taxes. All that spending by the gov't and income received by the private sector is just gone.

    From this point of view, the Tea Party's debt hawks have ushered in an era of gross overtaxation per size of government, and prevented any sort of bottom-up recovery. And too many Democrats, including President Obama, have bought into the deficit hysteria, despite everything we've learned over these last 4 years.

    There are those that think the Monopolist should restrict supply for no other purpose but reducing the size of the number on its balance sheet, and there are those that think the Monopolist should let our people work.

    Just who is the 'limited' gov't proponent in this debate?
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    The "title" to spent more is "nuts"; sorry to say B.B. is totally wrong. Employment and spending should be a "people's" issue not a government one.
    Governments were put in place to make decent rules so a society can function. It should not be an employment office like it is now.
    Employment of more than half of the population in army's etc and government offices is ridiculous. Such employment is pure waste; it produces nothing. For instance an army job is like a noose around the governments neck. All the cost for one army guy until his death is enormous; let alone the veterans and their widows. Then the expenditure on weapons; which weapons only destroy; not built up a country, like infrastructure.
    I worked in Washington and had dealings with the government; the huge "paper waste" and procedures cost fortunes to follow and in most cases are pure bureaucratic waste things which does not help at all for getting things done. Screening all this waste and dumping the unneeded one's could save billions. Also all stupidity programs of the Pentagon should all be scrapped. 80% of all US deployment overseas should be scrapped. How long have we been in Germany? In Korea (they should by now be able to defend their own border!) What bussiness do we have to be in Mali? Did they attack us? Did the whole country of Afghanistan attack us? No all the ones who attacked us are either dead or aprehended.So why continue a 12 year war? As well have troops stay there after 2014 as nuthead Kerry arranged last week.

    No our goverment should not spent more on this nonsense; this does not keep us safe; the whole country will end up like Detroit, if we continue on this path. Forget the "tax" and "spent" rule. We the people should make this a prosperous country not the government.
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    Gov't spending should be limited to public purpose, and I agree that there's mountains of wasteful spending by the Pentagon.

    Part of the problem with wasteful spending is the way gov't spends.

    If the currency is a simple public monopoly, that means the gov't is a monopolist price setter at the margin. It's not a price taker.

    In other words, if a good or service goes unsold by the private sector, gov't has the capacity as the last buyer standing to set the price for that good. Same thing happens on much bigger scale with something like a single payer healthcare system, where gov't is the only buyer and negotiates prices with providers.

    So you've always got to worry about how gov't is deciding the prices it chooses to pay when spending.

    You want gov't paying prices that encourage the desired level of production. Set the price too low, and producers may give up making that particular item. Set the price too high, and that may encourage inflation and other economic distortions.
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    Cutting spending and increasing spending are grossly over simplistic solutions. I think I better idea would be to discuss how to optimize spending. Making blanket cuts or irresponsible cuts would be dangerous. Politicians are always talking about how they want to cut spending, I wanna know details or else I will assume they aren't educated enough about the subject to be voted in.
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    ..."optimize spending"... Good concept but it won't work as long as the politicians are owned and controlled by the lobbyists and big corporations.

    Lots of them say they want to cut spending but they are not willing to cut their own pork projects, only someone elses pork projects.

    Money runs our politicans and that doesn't seem likely to change. They are there to help themselves and do not care about us. Look at Obamacare: they give a one year break to big business, but not us. They give themselves subsidies, but not us.

    Money runs everything and ruins most things.
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    It's like this:

    Excess capacity and involuntary unemployment is the market's way of telling policymakers that the gov't deficit is TOO SMALL.

    1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
    1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
    1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
    1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
    1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
    1920-1930: U. S. Federal Debt reduced 36%. "Great Depression" began 1929.

    Do you need more contemporary examples?

    Look at this chart.

    How many times are we going to screw up a simple account identity?

    Government deficit=nongovernment surplus.

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    Thanks CBB --

    I actually downloaded into a spreadsheet the federal debt year by year from the 1920's onwards and the correlation is consistent. Whenever there are significant attempts to reduce expenditures and balance the budget, a recession follows...always!

    This is a no brainer for me. Those who demand a balanced budget amendment or balanced budgets do not understand the effect of federal government expenditures on the economy.
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    need to cut spending. we are already close to $20 trillion in hole, what a thing to leave to our grand children.
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    Our government should indeed increase "spending." However, I prefer to think of it as INVESTMENT in our country and our people.

    A frequent mantra of misleading Republicans is use in slinging mud at Democrats, calling them "tax and spend liberals." Thus "spending" has over time taken on a bad connotation.

    I think Democrats should therefore change the narrative to make it clear that when government invests in sensible and reasonable research, job training, parenting education, public education, crime prevention and intervention programs for at-risk youth, infrastructure building and maintenance and other such needed programs, those are indeed investments that pay off in many ways!

    That was proven by the programs of FDR. They put millions of people to work to improve and enhance the quality of farm lands, watersheds and wildlife habitat, the state and national parks, the infrastructure, the environment, and building great public works projects that were great investments that still benefit the country today.

    Consideration the partisan political climate today, we may not be able to repeat those kinds of beneficial investments, but we surely can invest in many things that will benefit our people, our society, and the environment.

    Since Reaganism infected this country, Democrats have allowed Republicans to create the narrative and frame the discussion. So now it's time for us to say enough! They have proven themselves to be utter failures because they have followed a deceptive and false corporate ideology. We must now stand up for truth, justice and the American way. Sounds corny, but it's true.

    Of course, to be able to invest sufficiently, government revenue must increase, as it should. The wealthiest few and big banks and corporations MUST PAY THEIR FAIR SHARE! They have been allowed for too long to get away with paying little or no taxes.
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    I'm all for raising taxes on the wealthy. But that doesn't help put consumer dollars into the economy.

    Right now, we're overtaxing LABOR and under-taxing CAPITAL.

    The federal income tax was originally a tax on so-called "unearned" income.

    Today, "unearned" income is subject to different tax code treatment at lower tax rates than "earned" income.

    So we have a tax code that gives preference to "rent-seeking" and penalizes actual work in the real economy producing goods and services.

    Frankly, I would remove the federal income tax for anybody earning less than a 100k, and completely eliminate FICA payroll taxes, and put the Full Faith and Credit of the United States government behind Social Security and Medicare.
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    I agree, mostly, especially that we're overtaxing labor and under-taxing capital. However, I sort of disagree of one point.

    Raising taxes on the wealthiest Americans on both their "unearned" income and earned income would not necessarily reduce the amount of consumer dollars going into the economy. Indeed, I believe that if they (and their businesses, banks and corporations) paid a fair share on both types of income, it would enable government to be able to provide adequate job training programs and tax incentives for businesses to implement training programs and apprenticeships, etc., which would enable workers to be better trained and get better jobs, receive higher incomes, and therefore put more dollars into the economy.

    As for eliminating the FICA tax that funds Social Security and Medicare, it would depend on how the powers that be interpret the full faith and credit clause in Article IV. If it could be worked out to sufficiently fund Social Security and Medicare, I'd be for it.
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    Gov't is not revenue constrained. Raising taxes on wealthy is purely about wealth/political inequality issues.

    Again, gov't spends first, and then we can pay taxes and buy government securities.
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    Common Sense and fair efforts to bring down the National Debt is vitally important to this countries financial well being and everyone in this country should be willing to assist in this effort, unfortunately, the richest 1% and the Robber Barons (Corporations) in America are not paying their fair share and sometimes nothing at all due to those special tax break laws, subsidies and tax havens.
    The ones who have benefited the most from the creation of this National Debt have been the Robber Barons from war profits, the MIC, that despicably low minimum wage and their very own tax break code compliments of their Stooges in the U.S. Congress and a level of corruption never achieved before in human history. Since America's legal systems refuse to put these billion dollar swindlers in jail I believe they should pay their fair share of taxes, personally, I think they should be taxed up their assets and everything they own confiscated until the National Debt is paid off.
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    All of you make valid points. Its not even about" how" or in "what manner" the government spends our money. 30 years ago there was still a measurable amount of responsibility and accountability in our government and in the private sector. The government sub contracts everything today. We haven't even considered the amount of fraud that has contributed to our 17 trillion dollar debt.

    It seems that on all levels of government, the private sector, and yes, the public. .... there's no loyalty or a sense of accountability in anyone. What happened to corporate responsibility? What happened to worker productivity? Financial crimes and fraud on Wall street, welfare and medical fraud by doctors, pharmaceutical's, and yes ,,,, the public. Financial "irresponsibility" by our government.......Take a look at the class action suits and tort claims in the last 30 years....... The Supreme court continuously restricting our rights .....Our government spying on its own people,....... Two wars,,,,,,corporate monopolies in all industries.......high taxation,,,,,,, lack of "DUTY" in most citizens,,,,,moral decay,,,,,,and a citizenry completely uninformed and asleep.

    Incompetence, bureaucracy , plaguing our government. Social issues dividing this country,,,,,,,,,, A country losing our identity, and Traditions by way of illegal immigration.......No sense of community, respect or empathy for our follow citizens. Too many laws, too many restrictions........WHY????