If it really were the standard, no one would pay a moments heed to liberal economic theories Smash. Their theories aren't based on math, or science, or even historical precedent. They are based on the need to appear to have an economic excuse to enact liberal social policies.
What are the mathematical issues you have with Keynesian economics?
The economic formulas themselves, nothing. The application of them? Lots. But then, those aren't actually mathematical issues, are they? Remember when it was you claiming that neo-Keynesian economic was just good math? Remember me saying, "only for a very narrow definition of math"? You're defining math to not be about the adding and subtracting of numbers, but assumptions which really have nothing to do with the math and everything to do with social theory.
I suppose I technically should have said "only for a selectively incorrect definition of math", but I honestly can't remember exactly what you said that prompted that response, so I was probably thinking in terms of math like "Borrowing $1T/year can be fixed by simply raising taxes by $80B/year. Or something similarly silly.
No you don't. You don't know anyone who's "better at math" than Krugman.
Yes, I do. Again though, I'm defining math as actual math as performed by people with degrees in math. You're defining it as "people who assume that higher deficits can be eliminated via massive inflation without any negative effects". That's not actually math though. Which is were the problem arises. It's the same silly claim Obama was making during the campaign when he kept saying "it's just math", when what he was talking about had nothing to do with math at all.
You do understand that a theory which states that rising interest rates will have a given effect on monetary flow isn't actually based on math, right? People like you claim it does because by comparing your pet theories to something concrete and proven like "math" make them seem like they are concrete and proven too. But no amount of saying that something is math makes it so.
Too large a deficit is always a problem. But the causes of that deficit and making sure that we reduce that deficit correctly is even more important. If someone is spending more money than he has and going deep into debt in order to pay for his drug habit, the fact that he's got a budget deficit is a problem, but the correct response is never to just give him more money so he can afford his drug habit. The correct solution is to stop him from spending money on drugs and thus solve two problems at once. Both solutions would solve the deficit problem, but one just masks another problem, while the other solves that.
Yeah just stop with the "If I spend all my monies, then I gots no monies!" analogies. Macro still isn't Micro. It's not easy to understand. It can't be translated to metaphor for people too lazy or intellectually incapable of understanding theory. It's not simple. You've never made any sort of financial decision that even vaguely relates to nation state economic policy. Me either. Most corporations that aren't also sovereign states haven't either. A nation isn't a family or a company, it's a completely different entity. Central banks aren't merchant banks. Etc.
Ok. So meaningless ramblings aside, do you actually disagree that a nation can have too high a deficit? BTW, I don't disagree with you that some deficit is fine and in fact can be economically beneficial for a nations economy. But I think it's pretty reasonable to assume that when deficits reach the point where nations credit ratings start getting downgraded, they are problematic.
Yeah no. I could counter with other analogies that supported my philosophical views about expanding safety net spending or whatever, but they wouldn't speak to economic outcomes for the nation. Because they're only vaguely related. Totalitarian sates can have great economies. Slave labor works fine in the market. Starvation can benefit an economy long term. There are things I believe we should do regardless of economic impact, and there are things I believe we should do because of the economic impact. If you want to cut social security because the idea of entitlements bothers you, just be an adult and say that. I don't particularly care if providing food for everyone in the world is a drain on the global economy. I think it's something we should do as a species. I think it's part of what makes us human. The same holds true for access to medical care, etc. Many of the things I believe, single payer healthcare for example, inarguably also have economic benefits. Some of them, like a very high minimum wage, clearly don't. I don't need to pretend everything I want guarantees a utopian best outcome for everyone
Sure. But you do understand that most people don't agree with you there, and that people like Krugman therefore have to lie to them and convince them that it's actually good for the economy to spend money on the social programs that they want to create in order to get enough people to allow them to create them? Cause that would seem particularly relevant here.
There is no deficit problem at the moment. Because money is close to free. I'm not sure why that's so confusing. The only "problem" that deficits potentially cause is making it harder for the US to borrow money.
And you can't see the problem there? Money ceases to be "close to free" when it becomes harder to borrow it. Funny how that happens when people who think that "deficits don't matter because money is free" borrow too much money. It's almost like it's a self created problem.
What's so startlingly amusing about this, is that you've basically adopted the college kid maxing out the credit card scenario to macro-economics. Just like that kid, who thinks that borrowing money doesn't matter as long as the credit card company keep upping his limit, you can only do that for so long before you do eventually hit a limit. And when you do, you find yourself in a nearly impossible to get out of situation. It's incredibly irresponsible. And yes, before the inevitable "macro isn't micro" response, the big mistake that Keynesian's make is assuming that nations have the equivalent of an unlimited credit card. They don't. The negatives may take different forms, but they are there.
The larger point is that most liberal economists don't care because the negatives are things that they're ok with in some way. Destruction (redistribution in a way) of personal wealth being one. When you want everyone dependent on the government, and spending every dime either consuming or paying taxes for those great government programs, creating forces in the economy which massively dissuade savings and investing is a good rather than bad thing. Again, the math isn't the issue. It's an ideological difference of opinion over what a "healthy economy" actually is. Hell. It's a difference over what the purpose of government policy with regard to the economy should be.
I don't think taxes should be raised on the wealthy to generate revenue to avoid borrowing. I think taxes should be raised on the wealthy to be put back into the economy to generate demand. Alternately, we could just borrow more. I don't really care that much. Philosophically, I think people with the highest incomes who benefit the most from our society monetarily should carry more of the burden for funding that society, but I don't think it has much to do with economic outcomes on a large scale. When it becomes harder to borrow money (which is no time soon) then there's a valid case for raising marginal rates particularly on the high end to generate revenue.
When it becomes harder to borrow money, it will become harder very fast and uncontrollably. We've seen this in past recessionary cycles back when both republicans and democrats were following Keynesian economic models. It'll happen much the same way the current economic downturn began. One day lenders will wake up and realize that lending money isn't actually producing the returns they thought once other economic factor are taken into account. There will then be a huge upswing of interest rate increases to entice them into lending more money. This will lead to inflation, more debt and more lack of return value, necessitating higher interest rates. Rinse and repeat.
When that happens, it will happen very suddenly. We will go from "money is free cause you can borrow as much as you can", to "money is expensive and getting moreso every day". Now, the positive of this is that current debt will become relatively smaller. But the negative is that personal wealth and upward mobility within the economy will be massively impacted. People will lose relative economic value on a level that will dwarf the losses in 2008.
Only the folks on the left think that we can just spend our way out of debt. The irony is when folks like you defend such lunacy by arguing that it's somehow good math.
Yeah, so first of all there is no "left wing math" and "right wing math". There's just math.
Still missing the point aren't you. I'm not calling either position "math". You are.
Secondly, no one's arguing spending will reduce the debt, the argument is that you pay down the debt when the economy is doing well by increasing revenue, and that to stimulate the economy....you spend more money...UNLESS it's expensive to borrow money to spend. See how that works? THE MARKET determines when it's a bad idea to borrow more money to spend by making it more expensive to do so. That's what happened in the 70's. It was a bad idea to borrow money at 14% of whatever Tbills auctioned for in 1977. It would be a bad idea to do that now. On the other hand, slowing the economy even slightly out of fear for running up too much debt when you can borrow money at .017% is idiotic.
Sigh. Except we will end up with interest rates like the 70s if we don't get the deficit under control. You're missing an entire huge component of this.
What's bizarre is that you know what you just said is false. You've argued it in the past. Borrowing boatloads of money is intended to force interest rates and inflation upwards, which will cause existing debt to be smaller relative to those things. That's how you "borrow your way out of debt" in a macro economic situation. Borrow enough money and those rates *will* go up.
You're right on one thing though, but you're projecting the liberal view onto the conservatives. The left does not care about this from an economic point of view. It's all about their social agenda (I thought I said this). They aren't pushing us into a debt/inflation/recovery cycle again just because it's a fun exercise, but because along the way they'll have increased the total relative size of social spending in the US. That's the brass ring here. Tossing the country through a couple decades long economic ringer is a small price to pay to do so.
Get it? The interest rate on debt matters a great deal, for obvious reasons. This is in an inapt metaphor, but since I know you can't do the math required to understand the actual issue: You can understand how it might be a good idea for someone to buy a house now, when prices have come down substantially and mortgages are at ~3% rather than save another 2% for a down payment while interest rates and prices rise, right? Even though they will acquire more debt immediately, the net effect of that borrowed money is much more beneficial now than in the future if interest rates and prices rise.
Yes. That's exactly what I'm talking about. The current economic approach of the left only makes sense if the intent is to spur those future increased interest rates. It's funny because you get this, but then pretend that you don't when it's convenient. In exactly the same way it's a good idea to borrow money to buy a house right now because interest rates are low and that debt will be lower relatively speaking once interest rates increase, the same applies to government spending. It's a cycle. And frankly, it's even a relatively painless cycle at the first part (where we are right now). The pain comes in when you have high interest and inflation rates and no one can save money or get ahead.
I'm not saying that those things are bad "right now", but that if we don't do something about our deficit and resulting debt things will become bad. It's funny because the last time we went though this cycle as the 60s/70s. It took Reagan pushing conservative economic policies to get us out of the back end (the bad side), and for the next 30 years we've had unprecedentedly stable and low interest and inflation rates. But all that stability and upward mobility and wealth generation is just horrible for liberals to see. Can't have people becoming successful can we? So they're intentionally creating conditions designed to put us back through that pain again.
Sadly, far far too many people don't realize this and continue to buy the lies the left sells about this. The "free money" is the bait. But the ultimate intention is to create a high interest high inflation economy where individual wealth acquisition is nearly impossible so that everyone has to live day to day and paycheck to paycheck. That's the environment where liberal social policies sell the best. Which is the real objective here. Get as many people poor as possible. Make sure their opportunities for success are as small as possible. And screw them over if they do happen to be one of the fortunate ones.
It's not an accident that the periods when liberal social programs have experienced the most growth have been the periods when we've been suffering the most economically. Is it really that much of a stretch to conclude that liberals might just intentionally put our economy on a track to create those conditions? I don't think so at all. And I don't think you think so either.