I Will Gladly Pay You in 2014 For A Hamburger Today

The choices we face today range from bad to horrific.  For those naysayers who believe there is no sovereign debt crisis looming, you are just not paying attention.

This week the House will vote on a federal spending bill that will add $26B to the deficit?

But wait Guest Blogger Jeff! – I heard about a jobs bill the House was voting on today to save 300,000 jobs?  And I heard that it was paid for?  Is that what you are talking about?

OK – flip on the Rachael Maddow show, go back to sleep, and just believe that there is a magical money tree growing in the capital atrium.

The bill being voted on is to plug budget gaps in State & Local spending that may lead to cuts in employment in the public sector.  The bill will not create a single job.  It will in fact save jobs, but it will also add to the deficit and let states off the hook in making the tough choices to balance their budgets.  Inevitably we will be voting on another bill like this every 6-9 months over the next 2-3 years just like we keep voting to extend unemployment benefits.  That will add hundreds of $billions to the deficit.

But wait again I say!!!  It’s paid for! – that’s what you conservative scumbags wanted in order to save our heroic teachers and firefighters from having to go on 99 weeks of unemployment benefits!!!!!

Well – not really.  Nearly half the money for the “offset” is coming from proposed cuts to the food stamp programs, which will go into effect in 2014.  Is there anyone who actually believes that in 2014 – about when the 2016 Presidential campaigns will begin, that Congress will actually make the decision on cutting food stamps to pay for these saved jobs?

Of course they wont!

So – does that mean we shouldn’t pass this bill – well – I’m torn.  It will hurt the economy not having these folks able to pump lots of pointless consumer spending into the system.  But by the same token – I know when someone is pulling the wool over my eyes.

Can we get some courage? Can we make a real cut to spending? – How about a pay roll back on government workers of 5%?  That would be a nice sacrifice for the taxpayers continuing to pay their salaries.  What a heroic act for public unions to volunteer pay cuts to keep their jobs!

Did I mention the $16B in Medicaid spending in this bill?  How’s that Healthcare Bill Deficit Reduction Thingy going?

I know where the remains of Jimmy Hoffa are!  They are buried under the capital atrium providing nutrient rich food for the money tree growing there.  And his spirit is fueling the new most powerful force in America.  The public sector workers unions!

What do you think?  Guest Blogger Jeff


18 responses to “I Will Gladly Pay You in 2014 For A Hamburger Today

  1. So, we meet again, Obi Wan Jeff-a-nobi. I see you’re still talking about the deficit. Since you invoke the non-existence of a “magical money tree growing in the capital atrium”, I’ll invoke the non-existent “bond vigilantes” that appear out of nowhere when a country’s debt gets too large and jack up interest rates to confiscatory levels, and we can both cry foul.

    I think I went over this the last time we matched light sabers, but, in the midst of worrying about the deficit (and debt), we should probably ask ourselves what the actual dangers of an unmanageable debt are. Interestingly, this is essentially what Glenn asked Jeff Thiebert (Do you guys know anyone not actually named “Jeff”? Or is maybe “Jeff” an honorific around Politalk HQ?) of the Concord Coalition an episode or two back, and Jeff T said, correctly, that signs of too much debt would be increasing federal bond rates and increasing inflation. If we actually look at American economic data (as opposed to making emotional appeals), we find that bond rates are at historic lows and inflation is so low that we are running the risk of deflation.

    What does that mean? It means that our current debt is manageable, and cries for fiscal austerity in the face of the worst recession in 80 years are not just misguided but potentially economically disastrous.

  2. There has been sooooooo much written about economic solutions and yet there is only one that worked in my lifetime – early on when Ronald Reagan became President.

    Although not facing quite the depth and breadth of recession that we now do, he nonetheless had to clean up the Carter mess – much the same as Obama has to clean up the Bush mess. However, Obama is clearly trying to mop the floor with a dirty mop – hence nothing gets clean.

    Reagan cut government spending and passed the Tax Reform Act of 1986. That spurred real job growth and consequently economic growth (until those fun fellas running S&Ls nearly drove us into the ground.)

    So, it is clear that government spending is not going to get the job done so why not focus on what has worked in the past – revisit Reagan’s playbook. And Republicans – not so fast – under your watch you got us into this mess. So no taking credit for fixing what you broke.

    But there’s an underlying real issue here that will hold our economy back – and that nobody is really addressing – creating jobs for low and semi-skilled labor – our former middle class. In the chase for profits, corporate America has outsourced most of those jobs that our middle class once held by siting manufacturing and service centers overseas (yep I mean our largest competitors now – India, China and others). The only thing we seem to have left here for the former middle class is construction, a little manufacturing, and agriculture (oh yeah I forgot – only migrant workers will do that work – but we don’t want them here anymore). Training for new skills required for what little industries we do have left has not closed this gap – nor do I think it ever will.

    I’m all for free trade – as long as we are on the winning side. Given our huge trade deficits it is clear that we have lost that. So, perhaps, we need to think of being a bit more protectionist, bring back manufacturing and service centers (with tax incentives) before we finish our plummet to obscurity.

  3. Hi Andy —

    I think you may be misremembering what Reagan did. He cut taxes and then spurred spending, driving the deficit to then-record levels. In his 8 years in office, he nearly doubled government expenditures (from just under $700 billion in 1981 to over $1.1 trillion in 1989) and also nearly doubled the size of the annual deficit (from $80 billion in 1981 to over $150 billion in 1989). The average annual deficit under Reagan was nearly twice the average annual deficit under Carter. I was of voting age at the time, and I remember the endless jokes about his economic policies: “We can increase spending while we have less money because …”.

    As a percent of GDP, the deficit under Reagan was higher than it had been at any time time since the end of WW II. If you liked the results, then you’re essentially a proponent of deficit spending, not an opponent of it, and when you say that “it is clear that government spending is not going to get the job done so why not focus on what has worked in the past” you are arguing with yourself.

    What you may be remembering as the part of Reagan’s economics that really worked was Paul Volcker’s term as chairman of the Federal Reserve. Inflation was rampant under Carter; Volcker had the guts to tighten the money supply and raise interest rates to stratospheric levels. In a few years, inflation simmered down, and interest rates gradually coasted downward. Volcker really did save the country’s economic bacon — but he was appointed by Carter, not Reagan, and what he did was independent of Reagan. Volcker’s term as Fed chairman happened to overlap Reagan’s first term (not really an accident, considering how badly Carter had mismanaged things)

  4. Paul – The dark side is strong in you, but your skills are admirable. I’m interested in your take on the Feds move yesterday to re-investment the gains from TARP into buying US Treasury debt. Can you explain the dynamics of that?

    BTW – this is only half a set up – I really don’t fully understand it and I think our readers would be interested.

    It just seems like the Fed stepping into to be a huge buyer of US debt without an acute crisis happening means bad things.

    Is the market for US debt drying up, and the Fed has to step in so there are buyers?
    What are the real mechanics of what they are trying to do monetarily?
    What is the impact of the Govt. effectively loaning itself money? Is it the same as raiding the Social Security trust fund and leaving it with Treasury IOU’s that then need to be turned into cash by borrowing from China?

    But seriously – you seem to be able to shed some light here Lord Vader….

  5. Hi Jeff —

    Good question about the Fed. I’m not an economist, and I don’t do a good job of playing one on the Internet, but here’s how I understand yesterday’s action: By buying and selling debt, the Fed is able to exert control over the size of the US money supply. When the Fed bought the TARP assets a couple of years ago, it injected a large amount of cash into the financial system. Gradually, as those TARP assets have been paid down, the cash has been flowing out of the economy and back to the Fed. Normally this would be fine, as other borrowing activity would be bringing cash into the system and our economy would be growing.

    Unfortunately, the economy is not robust right now, so what the Fed is doing is recycling the TARP debt to get that cash back out into the economy, retaining the size of the money supply. This is good in that it’s not explicitly deflationary, as simply retiring the TARP debts would have been, but it’s bad in that it doesn’t help the economy expand. Instead, it treads economic water.

    The hope (I think) is that, with US debt paying almost nothing in interest because the government itself is financing this current round, foreign capital may decide to flow into the economy directly and get a better return by investing in the corporate bond market. This seems slightly shortsighted, though, in that the current recessionary force is the continued weakness on the demand side; providing businesses with more capital is like pushing a rope. Why would they hire or expand in any way when their sales are flatlined?

    By the way, that’s why extending unemployment benefits was a sound economic choice: Cash given to people who’ve been laid off has a pretty good velocity; it doesn’t get parked in a bank somewhere, but instead is used to buy groceries or pay rent, and so feeds demand.

    So, to answer your questions specifically:

    1.Is the market for US debt drying up, and the Fed has to step in so there are buyers? No. The market for US debt is exceptional. You can always track the health of the market for US debt by following the yield on something like a 10 year treasury note. The last I looked, a 10 year note was still returning less than 3%. Historically, these notes return 5% and above. The difference in yield is the result of eager customers bidding up the price of the bonds. I would say that the Fed’s action yesterday is aimed at precisely the opposite of what your question suggests: They’re trying to get investors to step back from the safety of the Fed window and consider other investments.

    2. What are the real mechanics of what they are trying to do monetarily? I think I covered this one above. Money supply, inflation, deflation, blah blah blah.

    3. What is the impact of the Govt. effectively loaning itself money? It’s all about the size of the money supply and trying to prevent deflation. Well, and maybe encouraging direct investment in the economy.

    4. Is it the same as raiding the Social Security trust fund and leaving it with Treasury IOU’s that then need to be turned into cash by borrowing from China? Wow. I’m not sure what to do with this one. I think I’ll sidestep the whole issue of Social Security and just say that I imagine this debt will be managed like other debt 😀

    Hey, I sent Glenn and original Jeff Facebook friend requests but haven’t heard back from either of them. Tell them to check their Facebook accounts! Are you on there too?

  6. Agree with Paul that Andy is misremembering the 80s. Missed one key point though – Energy prices collapsed, completely. That helps growth (also possibly hurt our rivals, the Soviets).

    Now depending on how you measure it, the US still has one of the largest manufacturing bases in the world (terms of output, share, etc.)

    Otherwise, the long term impact of deregulation at that time may have contributed to the growth of personal debt (see Kevin Phillips “Bad Money.”) as well as allowed the shennigans of the S&Ls.

    Paul gives a great high level rundown on the Fed, money supply, debt market, etc. Personally I hate debt but am more worried about a double dip recession and deflation.

    As for international investors or bond vigilantes and what not – Where are they going to go? Dubai? China? Russia? Brazil? Good luck. In times like these the US is the first and last market of resort.

    Otherwise, I have not heard this many Star Wars references since Enron’s off balance sheet vehicles were revealed.

  7. Hi Andy —

    Yes, good catch on the collapse of energy prices in the mid-80s. You’re right that I’d forgotten about it. And I agree with you: Let’s solve the very real economic crisis of the Great Recession first, then tackle the potential economic crisis of too much debt once our economy has stabilized and unemployment has dropped down below 7%.

  8. Does anyone remember, “Starve the Beast?” I don’t know if this was a hindsight concept, a convenient after the fact excuse, or a legit thing that was talked about during the Reagan era, but I think it’s worth mentioning in this discussion.

    Starve the Beast is a concept kicking around conservative circles during the Reagan Presidency (probably before and after as well) that stated the following. If we deny the federal government (primarily congress) money, then they will stop spending. Meaning, give them less money (lower tax revenue) and they will have to adjust the budgets accordingly. Unlike 49 states however, the federal government is not required to balance a budget, therefore the idea relied purely on congress “doing the right thing” and voluntarily stop spending.

    This was purportedly part of the premise of the Reagan tax cuts. Cut taxes to spur growth and right size government by reducing the balance of Washington’s checkbook.

    Just as the average college student discovers that there are hordes of credit card companies willing to fund their college years of drinking and partying, congress discovered that the market for US debt was quite good, and to their surprise, America was not outraged at the idea of funding the government through borrowing.

    In my opinion, the biggest failure of the Reagan era was this miscalculation. It was the idea that after we grow out of the recession, once the economy was on a good footing, that the government would stop borrowing, pay the debt, and we’d be back to the good ole days.

    Sound familiar?

  9. Hi Jeff —

    I never heard the actual phrase “starve the beast” until recently, but, according to wikipedia, it first appeared in a WSJ editorial in the 80’s.

    Yes, I think you’re right about Reagan miscalculating the effect of decreasing tax revenue. It turns out that people actually depend on some government services and aren’t willing to let them go, and, while they’re in favor of cutting government “pork”, it usually turns out that the “pork” is in somebody else’s congressional district, and federal money flowing into your own is for “worthy projects”.

    Of course, on the other hand, Clinton was able to take the Reagan-era tax structure and turn it into a surplus. It took GWB just a few years to destroy that. If we let the Bush tax cuts expire and end our wars, much of the structural deficit will disappear. And, the more I think about it, the more convinced I am that we need to re-institute a higher marginal tax rate for the very rich (say, 50% on incomes over $1 million) as well as casting a hard eye on those whose income is from capital gains. “Trickle-down economics” hasn’t worked all that well in terms of stimulating economic activity; it’s time to revisit it, and maybe recognize that Bush Sr was right when he called it “voodoo economics”.

  10. As a conservative who still remembers some salient political points from the 1980s let me provide some thoughts regarding “starve the beast” – I think that was the figment of the imaginations of certain irresponsible elements masquerading as conservatives. The idea may have been floated around or before Reagan’s election. However, I think it gained currency when the administration ran up against a wall of opposition to any meddling with social security. Hence Ike turned out to be right – Don’t mess with social security.

    Also, there was a military build up taking place, which was a big, glaring exception to efforts to balanced budget (one though worthwhile given the times, and seeming political momentum with Brezhnev with his military build up, missile projects and expanding influence in the third world).

    More importantly, many so called conservatives were products of the southern strategy, so from the south, where people are conservative except when it comes to spending for themselves (hence net consumer of Fed money, lots of great roads, etc.). That combined with some kookiness from California, where folks seemed intent on avoiding looking at the consequences of tax policies and crafting budgets, and governing, allowed essentially double talk around starve the beast to persist.

    The idea of the balance budget amendment was floated with some earnestness later. However the practicality of the idea seemed dubious: When is a balance budget confirmed? What happens if tax receipts fall of as they do with economic downturns? What are the sanctions?

    Otherwise, as a real conservative, I don’t like messing with the constitution in principle, and feel the need to retain all tools necessary for the country to handle serious contingencies around war or economic disasters.

    It will require hard work to regain fiscal discipline. Just like after WWII and the Korean Conflict (I think Ike brought that to fruition eventually). Unfortunately, conservatives that demonstrate some pretense of discipline and responsibility seem increasingly rare. For instance, I think it was the Republicans who challenged Kennedy and LBJ on tax cuts. That is unlikely to return since modest measures from George Bush senior had been made out to be his down fall (That narrative like others are probably highly suspect but such are the ways of popular political chattering classes).

    Given the current economic circumstance, we will probably have to wait until after 2012 before real fiscal discipline can be pursued. It will be slow and grinding, like the US after WWII and Korea, or the UK after the Napoleonic and World Wars. Nothing is easy. We probably should have been practicing this since the rise of Japan in the 1980s (like 1985).

    The real big issue though is private debt, especially bringing corporate leverage down to more realistic levels (heard companies were still doing 20X borrowing). Not sure how that could be achieved though in this economic climate.

  11. Paul – I would not argue against either of the things you pointed out – expire the tax cuts and try to reduce what we spend on war. (I’m starting to turn into an isolationist Libertarian)

    But neither would address any of our structural debt. Our structural debt is the debt that we can’t get out of without changing the law.

    Social Security, Medicare/Medicaid, and Interest on Debt (and interest we can’t impact at all without promoting runaway inflation). And to a certain extent defense spending since its such a sacred cow. The cuts you mentioned would make virtually no dent.

    But lets talk taxes. While I am in favor of letting the tax cuts expire, and NOT indexing the AMT – mainly because we are just so screwed up we cant afford to reduce revenue – the answer cannot be raising additional taxes on the rich.

    Lets put it in perspective. Many of “the rich” are small business owners who run their shops as sole proprietorships or other corporate designations that basically mean their corporate and personal income tax is one in the same. So if you want to raise taxes on the rich – get ready to turn off the main job creation engine in the country. It’s easy to think of the rich as Big Union Bosses and Wall Street guys, but that’s not necessarily the case.

    So the rich don’t pay their fair share?

    47% of Americans pay $0 federal income tax

    48% of all tax revenue in America comes from the top 10% of wage earners

    Today, wealthy Americans (less than 10% of the population) pay for about 50% of all the stuff in America?

    You are arguing that that imbalance should increase?

    I know, I know. To each according to his need, from each according to his ability…..

  12. The simple fact is revenues need to be raised eventually. We probably have to differentiate between personal income taxes (handle with care, raise where necessary) and business taxes (keep low). With personal income, we will probably have to look at the top 10 percent. Now a huge share of tax receipts comes from that segment because of polarization of our society.

    I don’t think the CIA comprises a bunch of bleading heart liberals, and they had this point on their web site: “Since 1975, practically all the gains in household income have gone to the top 20% of households. ”

    This is probably due to a number of factors, including: Globalization, increasing share of the economy tied to finance, deregulation (let big finance do what it likes) as well as favorable tax policies for the upper brackets.

    My suspicion is that analysis on the basis of median individual income trends, chained to 1975 dollars would provide a darker picture (household is distorted by growing participation of women in the economy and two income families)

    With wars and economic disaster, we probably have to raise the top rates to 45% on income (never like to get to 50% though due to psychological reasons), put in a stiff death tax, and work at removing deductions (aside from tax credits on mortgage interest, health costs and education, I really am not a fan of them, especially not for charity).

    Medicare and Social Security will also probably require a rise of the payroll taxes (like under Reagan), removing caps (social security), and an extension of the time one gets their money (I expect 70 by the time I am 50 to be honest).

    Iraq is winding down, but Afghanistan will grow as a commitment (as will ABM programs), so unless we figure out how retrench the infrastructure (logistical/administrative tail, worldwide bases, gold plated programs), I am not sure how much could be saved there.

    Still the big issues lie with interest rates and corporate debt. Not sure how long we can keep the fed window so low, and allow big finance to leverage up and play money games (kind of a life support right now, but not sure it is sustainable).

  13. Warning – my conservative feathers are about to unfurl.

    Michael – you cite the CIA statistic as if it is a bad thing. That there must be someone to “blame” and therefore tax for the growing disparity of wealth. It’s certainly bad when there are more poor people, or a smaller middle class. But there does not need to be an external force to blame.

    I may have read more into you using that statistic. The reasons you pointed out for the disparity are probably all part of the problem. What I also believe and fear is that many use this disparity to create class warfare, distract us from real issues, foster government dependence and justify continually increasing taxes.

    Which Statement do you believe? (not you literally Michael – the royal “you”)

    The rich are unscrupulous and create their wealth unfairly on the backs of the workers. Literally stealing money from lower classes of society and gaming the system in their favor. Therefore it is right to take more from them and re-distribute it so there is less of a gap between “rich” and “poor”


    The rich are industrious. They invest and create businesses. They become highly educated, invest in their own personal skills, and take full control and responsibility over their personal economic future. Should we dis-incent this behavior?

    The poor are victims of the Man (aka the Rich). They are taken advantage of, their jobs are outsourced, and America has become a country where the average guy cannot make ends meet.


    People need to take more responsibility for their economic future. Social Security is a safety net, not a retirement plan. If your job got outsourced, you could have seen it coming and retooled your skills. Find new skills. Become better educated, take control, take on less debt, don’t wait for government to re-distribute wealth in your direction. Depending on government is a self-fulfilling, and self-defeating proposition.

    I can see not extending tax cuts, but it seems insanity to impose new taxes. Without substantial reductions in entitlement spending – it really would be social democracy European style.

  14. In an attempt to be factual in this discussion, I had a look on the Web for historical data that tied GDP to top marginal rate. My assumption was that, if indeed high marginal tax rates are the economic equivalent of the bubonic plague, then there should be clear and compelling evidence of this in the historical record. I found no such evidence. I found a lot of polemicizing on both sides of the question, and I found scholarly papers that said said “on the one hand this, on the other hand that”, but what I came away with was the sense that there is no historical case to be made for high marginal tax rates murdering the economy. Opponents of high marginal rates can point to the ’20s, when the top rates were slashed and the economy took off like a bullet (only to crash hard in 1929), and proponents can point to the ’90s, when the top rates were raised and the economy also took off like a bullet (well, maybe a nerfball) only to crash in 2001, and everyone can point to the ’50s and ’60s, when the top rate was astronomical compared to where we are today, and yet the economy continued to expand. It almost seems, looking at the historical data, like GDP is decoupled from the top marginal rate.

    So I guess I say: If there’s evidence that unambiguously ties high marginal tax rates in the US to poor economic performance in the US, let’s have a look at it. I do think, though, that simply declaring increased taxation “insane” without also presenting data to demonstrate the insanity and then heading off into cartoonish depictions of people’s attitudes kind of stunts the discussion.

  15. As for the CIA statistic, I don’t think it is an optimal situation. In general I think most would like broad based advances in incomes across different regoins, people, etc. This is probably especially the case for consumer driven economies (you need people to be able to buy things).

    Now I have the suspicion tht one driver for the broad increases in personal debt starting in the 1980s. was the lack of true income gains (the others include deregulation, more aggressive marketing, etc.). So paper over stagnation with greater access to credit.

    As for the scenarios laid out, amongst the leadership teams in private business you probably have a bell curve spanning between those keen on “gaming the system in their favor” to those that are “industrious… invest and create businesses”

    It is just human nature (some demonstrate vision, competence and leadership, while others are just hacks, or out to get rich quick, ethically suspect, or even criminal, etc.). Of course, many existing executives may not necessarily have the entrepreneurial bent like go-getters trying to better themselves (and may not be rich). Along with lust and substance abuse, money seems to be one of those top factors that can make a perfectly good person do something bad.

    I think ideally people in general should “to take more responsibility for their economic future.”

    As for taxes – sometimes they are just necessary on a temporary basis. Like for paying for wars, or rectifying imbalances following an economic disaster (like the public debt assumed). As for payroll taxes for social security and medicare/medicaid, I just don’t see how those will be avoided. Not excited about them, but seems like those are realities that have to be dealt with.

  16. Michael – great comments – Paul too….

    In hopes of us all not having to do internet research till midnight, lets try to consolidate the argument.

    Suppose I cede that there is no evidence that increases in the income tax rate impact the economy.

    Does that make it right to increase the current disproportional burden of running the country to the wealthy, and make it even worse?

    Lets say we give the government all the money it wants. The opposite of starve the beast, we’ll feed the beast. The beast will keep taking and taking and ultimate create a large class of people completely dependent on government with no motivation but to wait around for their checks. Now we also know starve the beast did not work either.

    So the logical next step is some combination of both. If we are going to continue to take from those who succeed, what should the rest sacrifice in return for that economic security, and most importantly, what should government sacrifice?

    Lets say we raised the highest income tax rate to 50%
    We let the Bush tax cuts expire
    We keep the AMT

    Give me 3 things that progressives would be willing to CUT from our current spending habits in return.

    BTW – my quick math says the above puts back at least $2Trillion into the federal coffers over 10 years. The AMT is the biggest piece (see CBO website for good numbers), the Bush tax thing is over a trillion offhand.

    Just give me 3 things with about $2Trillion in savings. Then we would have the starting point for a conversation, and cats and dogs may yet live together.

  17. I don’t want to sound repetitive, but I suspect raising the age threshold for social security to 70 would represent a substantial savings. Maybe have some sort of means test too (although one could argue that would be a hidden tax on those who put contributed to the system but reasonably well off).

    Not sure if the terms for government pensions can be adjusted. Similarly, may want to review head count at the federal level.

    Otherwise, aside from the military, I would assume there is a dog’s breakfast of programs under discretionary spend that could be candidates for cuts – Just not sure they would produce a meaningful impact.

    Cutting the arts would top the list as an item as well as Americorp, community service stuff, faith based initiatives, etc. and maybe trimming the department of labor. Probably worth taking a hard look at construction spend under transportation (but those sort of items are the motherlode for pork, and hence sort of a mother’s milk for politics).

    Similarly we could try to trim agricultural subsidies (and live up to our message of free trade) as well as energy budgets. The thing is, representatives (and constituencies) from agricultural states would go nuts, while some projects in research in energy are pretty important (say nuclear energy, which the liberals would probably like to kill).

    Some other areas if we really want to get austere would be cuts to housing and education (although I thought a good amount of resources passed through in the form of loans – maybe someone could correct me on that).
    If push comes to shove, would probably also suggest killing the manned space program and elements of the national science foundation (although probably best to maintain investments in science and knowledge, to encourage the useful arts as one part of the constitution seems to suggest).

    Probably gave you a grab bag of items more than you wanted. Not sure any of the suggestions can realistically be implemented though.

  18. Hi Jeff —

    I’m not sure that I understand the exercise. You’re saying, “Here’s $2 trillion in increased tax revenue over the next 10 years; now show me how to cut the same amount from the budget”? I admit that I don’t see the point, and I don’t see the relevance to anything that’s happening economically. Wouldn’t a better exercise would be: What’s the best way to use that $2 trillion dollars?

    Given the dire economic straits that we’re in, I don’t think that we want to be talking about cutting government spending. If anything, we should be talking about ways to give the economy another jolt. There was a great overview of the current status of the bond market in today’s NYT called “Rates Fall as Market Fears Economic Weakness”


    “But for now, the financial markets seem to fear recession and deflation much more than they fear deficit spending.”

    If you want to grapple with a genuine crisis, start a discussion of how to get our economy jump started. Once a 10-year T bill is returning 6% or above and / or unemployment has fallen to 7% or below, it’ll be time to be talking about ways to trim the budget. Until then, the federal government should be doing everything it can to stimulate demand, and discussions of ways to minimize federal spending are premature.

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