No More Bailouts...

[Tripp11]

For starters, I typically don't post anything over here on this political discussion forum; however, I'm just about at my boiling point with the trend in government spending.

Personal Finance 101 is simple. You don't spend more than you make. Thus, if your income goes down, you should also decrease your spending.

However, the federal government has been doing the exact opposite. With all of the job loss and tax revenue decreases, the federal goverment is expanding in size and scope. Stop the madness!

Now, today, I read about how the House Democrats are coming back from a recess (which just began) to spend another $26B of taxpayer money. This time to "bail out" individual states who have been operating for so long in the red, they don't think any other color on the spectrum exists. Imagine this, one of those states would be California who expects to receive $1.5B of the bailout money.

When will those elected officials begin to understand the idea of fiscal responsibility (i.e. balanced budget)? The current trend cannot be sustained, period...which means difficult choices and decisions will only get harder the longer will prolong the inevitable.

 

[rambone]

I agree with you. If states can't pay their employees they should cut public entitlement programs like welfare, state health care, & & "free" college. Cut the fat in all departments. Privatize where ever possible.

 

[lashicoN]

I don't want my tax dollars to go anywhere except Indiana. Washington D.C. and California need to pay their own way, but it's hard to do when everyone works for the government, instead of having real jobs (like I've been saying for months), isn't it?

 

[kludge]

I don't want my tax dollars to go anywhere except Indiana. Washington D.C. and California need to pay their own way, but it's hard to do when everyone works for the government, instead of having real jobs (like I've been saying for months), isn't it?

This didn't happen before the 16th amendment. When taxes were apportioned to the states based on population, California got a big bill to go with their big spending, and the people had a check and a balance on the spending of the federal government.

Now it's mob rule at the ballot box.

 

[downzero]

For starters, I typically don't post anything over here on this political discussion forum; however, I'm just about at my boiling point with the trend in government spending.

Personal Finance 101 is simple. You don't spend more than you make. Thus, if your income goes down, you should also decrease your spending.

However, the federal government has been doing the exact opposite. With all of the job loss and tax revenue decreases, the federal goverment is expanding in size and scope. Stop the madness!

Now, today, I read about how the House Democrats are coming back from a recess (which just began) to spend another $26B of taxpayer money. This time to "bail out" individual states who have been operating for so long in the red, they don't think any other color on the spectrum exists. Imagine this, one of those states would be California who expects to receive $1.5B of the bailout money.

When will those elected officials begin to understand the idea of fiscal responsibility (i.e. balanced budget)? The current trend cannot be sustained, period...which means difficult choices and decisions will only get harder the longer will prolong the inevitable.

1. It is foolish and ridiculous to cut spending during a recession, especially a nasty recession. Any macroeconomist, not just a Keynesian, will tell you this. GDP = C + I + G + NX Cutting G means GDP goes down. That means the recession gets worse. This is not a profound statement, merely a statement of an accounting identity.

2. This does not mean that government should increase its spending during a recession. That is a different discussion in which I won't engage, even though I suspect most of you will agree with me.

3. A balanced budget will never happen at the federal level. There are a number of reasons for this, but the most important one is that it'd require them to run a surplus in good times, and rather than spend that surplus, they'd have to save it. Spending money is one of the ways that they gain power politically, so it'll never happen.

Defining fiscal responsiblity in terms of the budget deficit or surplus isn't entirely accurate. Our problem isn't that we spend more than we make. The real problem is that we've promised to pay people money in the future that we will never have.

Everyone likes tax cuts, but nobody realizes that we are going to need a nasty increase in taxes as well as a huge cut in spending in order to meet our financial obligations in the future.

Our government is bankrupt, and it all started with Reagan. Nobody wants to hear it, but it's the nasty truth.

 

[thunderchicken]

rambone- You mentioned privatizing where ever possible. Trust me that is not such a good idea. The problem with a private business handling public services and equipment is they don't care. For example equipment maintenance, in the private sector people would claim things need fixed that aren't really a problem. Kind of like taking a car to Jiffy Lube and they tell you the belt needs replaced and you just had it replaced a month ago. Too often they have the "the city has money" attitude. When the reality is that those of us working for the government agencies know the financial constraints. We see things a little different since whe know the problem and can make decisions as to what really needs repaired or replaced. The private setor works on flat rate. The more hours of book time you can charge the more money you make. City & state employees are hourly, so it can be budgeted in advance, privatizing would be detrimental, not advantagous. I could go on and on. For years gov agencies have been cutting the fat, there's really not much fat left. The area that needs to see some cutting is public safety. The local gov hears the words public safety they have no problem handing over the money. Kind of like the Fed has been doing. Privatizing is not the answer.

 

[Tripp11]

1. It is foolish and ridiculous to cut spending during a recession, especially a nasty recession. Any macroeconomist, not just a Keynesian, will tell you this. GDP = C + I + G + NX Cutting G means GDP goes down. That means the recession gets worse. This is not a profound statement, merely a statement of an accounting identity.

2. This does not mean that government should increase its spending during a recession. That is a different discussion in which I won't engage, even though I suspect most of you will agree with me.

3. A balanced budget will never happen at the federal level. There are a number of reasons for this, but the most important one is that it'd require them to run a surplus in good times, and rather than spend that surplus, they'd have to save it. Spending money is one of the ways that they gain power politically, so it'll never happen.

Defining fiscal responsiblity in terms of the budget deficit or surplus isn't entirely accurate. Our problem isn't that we spend more than we make. The real problem is that we've promised to pay people money in the future that we will never have.

Everyone likes tax cuts, but nobody realizes that we are going to need a nasty increase in taxes as well as a huge cut in spending in order to meet our financial obligations in the future.

Our government is bankrupt, and it all started with Reagan. Nobody wants to hear it, but it's the nasty truth.

Good post with good points, but perhaps my initial post was more of a vent than a logical post.

Perhaps, I just think differently though (and yes, I read all about The New Deal back in highschool) and so do several economists with one being Milton Friedman.

During the Great Depression, do you believe free market capitalism failed? Thus, the need for government intervention?

Now think about that thought for a second...free market capitalism failed. Everything about this great country, which other countries admire about the US, failed.

What was sold to the American public? Market economies were too unstable, right? Wild and irrational market speculation caused all of this, right? Oh my...what will we all do? Not to worry, my fellow American, the government was Johnny on the Spot to institute all sorts of regulations and massive federal spending.

Now to me, and obviously Friedman, this just sounded absurd. We're going to spend our way out of this mess? We're going to print some "funny money" or borrow our way out of this financial disaster?

Obviously, folks like Friedman, Schwartz and even Bernanke know much more about economics than I'll ever know; however, Bernanke appears to have agreed with Friedman's assessment of the Great Depression by saying, ""Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna (Schwartz) regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again." Apparently, those folks believed the Federal Reserve's hasty decisions and regulations in the aftermath of the crash were to blame. So, perhaps instead of fiscal policy changes the correct and more prudent course of action would have been monetary policy changes.

Recently, we've taken some more of those monetary policy changes but we're also getting a healthy dose of the fiscal policy changes too (spending).

For me consumer confidence is everything, and I'm having a difficult time getting "warm and fuzzy" with the economy when I see the deficit growing exponentially larger by the day and our federal goverment spending money like there's an endless supply.

Difficult decisions. Hard choices. Today, not tomorrow.

Alright, now to something which pays the bills. Have a good one, friend....and shoot straight!

https://www.indianagunowners.com/forums/#cite_note-46

 

[downzero]

I don't think free market capitalism ever fails. I also don't think we have free market capitalism today, nor do I think the great depression was a referendum on free market capitalism.

Providing liquidity when banks are failing was Friedman's prescription, and no mainstream macroeconomic school of which I am aware suggests that anything else ought to be done. MV=PQ. In a recession, V contracts. That means that if the money supply (M) is not increased, deflation will result. There are a lot of reasons why deflation is generally far scarier than inflation that we wish to avoid. So, the risk of inflation by expanding the money supply during a recession is nowhere near as important as the risk of deflation.

So, perhaps instead of fiscal policy changes the correct and more prudent course of action would have been monetary policy changes.

Maybe you're just unaware of the facts, but there have been massive monetary policy changes since fall 2008. The money supply has doubled. The interest rate is hovering at historic lows, and has been for the entire duration of this recession. The monetary policy changes haven't been "recent." If anything, they preceded the fiscal spending.

If you ask me, the biggest and most terrifying effect that our markets currently face is uncertainty. The democrats are talking about new regulations, passed financial reform, threatened to nationalize 1/6 of our economy through health care "reform," are threatening to allow the Bush tax cuts to expire, cap and trade, etc. Regardless of the cheap money availability due to the changes in monetary policy, uncertainty is never good for businesses. Business decisions are made on projections. Those projections depend on educated information about probability. Even small changes in the probability of success or failure have a huge impact on the expected value of an investment. If our economy needs anything right now, it's a dose of stability, regardless of other (albeit important) concerns. With a government as big and powerful as ours, businesses rightly fear the punitive effects of changes in policy.

Consumer confidence is everything because we have built our economy on consumption. Investment is the driver of productivity growth, and for our economy to be healthy in the long run, we need to return to the days when our savings fueled investment. Maybe it will be consumption that will return output (and thus employment) to, say, 2007 levels. But if we expect to grow and remain a first-rate economic power in the world, we must find ways to grow our economy beyond the dismal 3-4% that we've observed for the last few decades. China and India, while undergoing even nastier contractions than we are, have the potential to grow and compete with us. Sure, they won't reach our level of productivity in my lifetime, but that doesn't mean that we can afford to do anything other than maximize our growth rate. A few decades of solid growth could radically change the economic reality of our world, and we definitely don't want to be on the sidelines.

 

[Old Reliable]

I won't go into economic theory, but I will say this:

Cutting government spending during a recession would probably hurt. It should be cut, trimmed, made efficient, whatever during good times. We all know that will never happen.

If Reagan started the government towards bankruptcy, then guns "just go off". For every person that thinks this, there are many more that think the opposite. I respect the opinion, but I don't believe it based on what I have seen/ studied.

I work for a private company that works closely with a lot of government agencies, departments, etc... Many of these employ people that do the same job as us. In 100% of my experience with the government employed folks, they can't hold a candle to us in quality, cost, and overall efficiency. They spend crazy amounts to replace things that do not need replaced. They buy things that won't do what they "need" them to do. They endlessly find ways to spend money on things that are not needed, then laugh and joke to me about it. In the end they can't get things to work and call us to come in and clean up the mess. They sit around watching us work while getting paid more than me to do it. You bet I'm bitter about it. They spend our tax money wildly doing a poor job, then spend even more of it to get me to come in and make the equipment they didn't need in the first place work. This all sound a bit vague. I wish I could be more specific, and use real names. You would all get a kick out of it. There are many good government employees and a few well run agencies, but all in all, I've not seen much to give me much hope that it is the majority.

Seems to me that the federal government is doing a fine job of taking care of government and union workers, but they are crushing the private sector. They are propping union, government workers up, while the rest of us fighting to survive.

Interesting conversation and good posts.
Thanks for giving me some space to vent, and as always....I could be wrong!

 

[rambone]

For years gov agencies have been cutting the fat, there's really not much fat left.

Cut the agencies themselves...

Start with these Federal agencies. ATF, DEA, DOE, EPA, FEMA, DOA, SSA, DHS, TSA, IRS, FDA, OSHA.

[Incomplete list]

 

[downzero]

If Reagan started the government towards bankruptcy, then guns "just go off". For every person that thinks this, there are many more that think the opposite. I respect the opinion, but I don't believe it based on what I have seen/ studied.

You can call it opinion all you want. The fact is that we have never had peacetime deficits like those in the 80s. Never. You can interpret that fact however you want.

This is from Wikipedia, thus NOT copyrighted. You tell me what to think about the remarkable change of the direction of the lower curve around 1980. Perhaps you can explain the inflection point better than I can or did.

I work for a private company that works closely with a lot of government agencies, departments, etc... Many of these employ people that do the same job as us. In 100% of my experience with the government employed folks, they can't hold a candle to us in quality, cost, and overall efficiency.

I'm not surprised to read this at all.

They spend crazy amounts to replace things that do not need replaced. They buy things that won't do what they "need" them to do. They endlessly find ways to spend money on things that are not needed, then laugh and joke to me about it. In the end they can't get things to work and call us to come in and clean up the mess. They sit around watching us work while getting paid more than me to do it. You bet I'm bitter about it. They spend our tax money wildly doing a poor job, then spend even more of it to get me to come in and make the equipment they didn't need in the first place work. This all sound a bit vague. I wish I could be more specific, and use real names. You would all get a kick out of it. There are many good government employees and a few well run agencies, but all in all, I've not seen much to give me much hope that it is the majority.

I spent 7 years of my life working for the Federal government, as both a Soldier and a civilian. My experience is perhaps even more shocking than yours.

 

[Tripp11]

Maybe you're just unaware of the facts, but there have been massive monetary policy changes since fall 2008. The money supply has doubled. The interest rate is hovering at historic lows, and has been for the entire duration of this recession. The monetary policy changes haven't been "recent." If anything, they preceded the fiscal spending.

My comment about fiscal policy versus monetary policy was talking about the actions or inactions immediately after the Great Depression....not current day. That was what Bernanke was apologizing for in my quote, because he too felt that the Great Depression could have been avoided if the US would have focused on monetary policies and not fiscal policies. My apologies if you interpreted my post as anything other.

If you ask me, the biggest and most terrifying effect that our markets currently face is uncertainty. The democrats are talking about new regulations, passed financial reform, threatened to nationalize 1/6 of our economy through health care "reform," are threatening to allow the Bush tax cuts to expire, cap and trade, etc. Regardless of the cheap money availability due to the changes in monetary policy, uncertainty is never good for businesses. Business decisions are made on projections. Those projections depend on educated information about probability. Even small changes in the probability of success or failure have a huge impact on the expected value of an investment. If our economy needs anything right now, it's a dose of stability, regardless of other (albeit important) concerns. With a government as big and powerful as ours, businesses rightly fear the punitive effects of changes in policy.

Good thoughts here and I enjoyed reading it.

Consumer confidence is everything because we have built our economy on consumption. Investment is the driver of productivity growth, and for our economy to be healthy in the long run, we need to return to the days when our savings fueled investment. Maybe it will be consumption that will return output (and thus employment) to, say, 2007 levels. But if we expect to grow and remain a first-rate economic power in the world, we must find ways to grow our economy beyond the dismal 3-4% that we've observed for the last few decades. China and India, while undergoing even nastier contractions than we are, have the potential to grow and compete with us. Sure, they won't reach our level of productivity in my lifetime, but that doesn't mean that we can afford to do anything other than maximize our growth rate. A few decades of solid growth could radically change the economic reality of our world, and we definitely don't want to be on the sidelines.

Ditto.

 

[downzero]

Ahh, now it's more clear. The US really didn't use fiscal policy to try to stimulate the economy until long into the 30s. In fact, the government tried to balance the budget for several years through the worst parts of the depression.

I always thought Bernanke's comment referred to not allowing banks to fail. Thats' what Friedman always thought caused the depression. We were also on the gold standard then, though, so it was a different world--the money supply depended on mining a mineral from the ground.

 

[Fletch]

Ahh, now it's more clear. The US really didn't use fiscal policy to try to stimulate the economy until long into the 30s. In fact, the government tried to balance the budget for several years through the worst parts of the depression.

This doesn't ring true to me, but I don't have my books handy to check it out at the moment.

I always thought Bernanke's comment referred to not allowing banks to fail. Thats' what Friedman always thought caused the depression. We were also on the gold standard then, though, so it was a different world--the money supply depended on mining a mineral from the ground.

Same here... I'm under the impression that we'd already begun the process of cutting ties to gold, but can't be sure without checking my references.

Not saying you're lying or anything, it just seems like I've read something different.

 

[rambone]

I always thought Bernanke's comment referred to not allowing banks to fail. Thats' what Friedman always thought caused the depression.

Did the US bail out banks prior to the Great Depression? I didn't realize this.

 

[Blackhawk2001]

An example of one way the federal government is less efficient than private business:

The place where I'm working had a requirement for x number of "widgets" of a particular manufacturer/model to work with another system. We got quotes from various vendors and a direct quote from the manufacturer, with a guaranteed delivery. After gathering all this data, we turned the project over to "Purchasing", who vetted the vendors, questioned us for a week on whether we _really_ needed the specified manufacturer/model (wouldn't this cheaper one do as well?), then gave the purchase contract to a minority-owned vendor for a higher cost per unit. Contract delivery said "x units by y delivery date". That date passed two months ago, and we still haven't seen even a partial delivery of our order. Most private companies would have long since cancelled the order and purchased from the manufacturer.

 

[Zimm1001]

Here is the solution (won't happen) and a few facts.
Fact: Lower tax rates increase tax revenue. Higher taxes decrease tax revenue.
Fact: Politicians see the budget as just numbers and they are spending other peoples money without accountability or punishment for bad choices. (argument: they get voted out of office. Response: nice try since they have jobs waiting for them once they leave office)

Solution Federal Level (won't happen)
Constitutional amendment: A certain amount of federal debt helps and is necessary. Too much is very harmful. Amendment as follows: Federal debt cannot exceed X % of GDP. Until the % is met each year $100B is to be paid on the debt. Also growing the GDP (what a novel idea). No deficit spending is aloud until GDP goal is met.
The Federal Government must reduce the budget by reducing spending and lowering taxes. Raising taxes is not aloud unless approved by 2/3's of state senates. Congressman and the President do not get paid unless budget is balanced and debt reduction achieved under the above constraints.

Reasons for success:
1.Building t

 

[Zimm1001]

Reasons for Success:
1. Building the economy only way to increase spending.
2. Raising taxes not aloud unless approved by the states.
3. Congress and President hampered and controlled by constitution. They are also held accountable if they do not comply by not getting paid.

I know it won't happen. It makes too much sense and the Federal Gov't won't give up any power to the states. Only take our money

 

[Blackhawk2001]

It takes 37 States to declare a Constitutional Convention.

 

[downzero]

Fact: Lower tax rates increase tax revenue. Higher taxes decrease tax revenue.

The Laffer Curve, fact? Really?

What happens when I lower the tax rate from 1% to 0%? Does that increase tax revenue? Does raising it from 0 to 1% decrease revenue?

One would have to be quite ignorant to believe that this is a fact, or anything even close. The Laffer curve is nothing but a joke to anyone with a fundamental understanding of economics.