The argument about cutting government spending and econ growth | TigerDroppings.com

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SlowFlowPro
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The argument about cutting government spending and econ growth



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i got this article off twitter regarding cuts to the UK government spending and how it's hurting economic growth

quote:

The reason for the UK’s dismal growth performance in recent years can be explained by the decisions around spending cuts. The government’s 2010 spending review (pdf) showed capital expenditure would be cut by 29 per cent over four years compared to an 8.3 per cent cut in current spending (Tables 1 and 2).


with this conclusion:

quote:

Using the government’s balance sheet to ramp up investment, including by immediately capitalising the Green Investment Bank, should be top of the chancellor’s list.


so here is my issue with this line of thinking: to me, seeing these impacts when you remove federal/government spending should be a HUGE warning sign that the economy in particular has become too dependent on government spending

and yes, OF COURSE there will be a loss of growth in the short term when you take that money out of the economy. i don't think anybody honestly believes that cutting that money will positively affect the economy in the short term

it's a long-term solution to a problem that, in my view, is shown by the drop off that occurs when public spending decreases

this is similar to governmental solutions (aka, more bureaucracy) to governmental corruption. if corruption is apparent via government, that's typically a sign that government is too powerful. the last thing you want to do is add MORE government b/c that just adds more layers of potential corruption.








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tigeraddict
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re: The argument about cutting government spending and econ growth


Little pain now vs a lot of pain later





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BlackHelicopterPilot
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re: The argument about cutting government spending and econ growth


Agreed.


I've often said that IF I were "deficit spending" in my household budget and decided to cut back, I'd have a short term negative quality of life experience. However, the stopping my family from going bankrupt and the existence of an actual savings account would lead to a positive long term quality of life.



Said another way: The decline from a FALSE elevated economy to the actual TRUE position of the economy is not really a "decline". It is simply the true state of affairs at that time. And, it leads to positive opportunities while HALTING the potential for catastrophe.






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wickowick
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re: The argument about cutting government spending and econ growth


Even before cuts, the US needs to eliminate baseline budget increases. It currently adds ~7% to the entire federal budget every year...





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Bunk Moreland
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re: The argument about cutting government spending and econ growth


The key is does Mittens have the balls to have this same thing happen on his watch (we know Obama doesn't)? Who in the hell is going to be the guy to ask this country to take its medicine for long term good? Nobody will do that. The human race is borderline incapable of thinking more than month ahead of time.





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SlowFlowPro
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re: The argument about cutting government spending and econ growth


quote:

Said another way: The decline from a FALSE elevated economy to the actual TRUE position of the economy is not really a "decline". It is simply the true state of affairs at that time. And, it leads to positive opportunities while HALTING the potential for catastrophe.

yeah exactly. our economy isn't at the level we believe, and a return to where it naturally wants to be will be a "decline," but it is necessary. we can't just keep borrowing to subsidize our elevated standard of living (on a public and private level)






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SlowFlowPro
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re: The argument about cutting government spending and econ growth


quote:

The key is does Mittens have the balls to have this same thing happen on his watch

unlikely

the nature of elected political officials just adds another layer of government trying to inject short term aid, in order to secure re-election. this is a problem of BOTH parties, and i'm not singling out obama, clinton, bush2, or romney






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WikiTiger
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re: The argument about cutting government spending and econ growth


quote:

The key is does Mittens have the balls to have this same thing happen on his watch (we know Obama doesn't)?


No. He doesn't have the balls and he won't make or push for any significant changes. Neither will Congress.

quote:

Who in the hell is going to be the guy to ask this country to take its medicine for long term good? Nobody will do that.


Exactly.

quote:

The human race is borderline incapable of thinking more than month ahead of time.


It's going to be painful.






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RCDfan1950
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re: The argument about cutting government spending and econ growth


quote:

and yes, OF COURSE there will be a loss of growth in the short term when you take that money out of the economy. i don't think anybody honestly believes that cutting that money will positively affect the economy in the short term


Heck, Pro...I could take my credit card and go on an Alaskan fishing trip, and stimulate the economy. And why stop there...I've always wanted to see that Chinese monster damn that they are building over there; and visit the towns above it. And Machu Picu in the Andes...good art material there. And....and....

Like Captain Redlegs said ("The Outlaw Josey Wales")..."doing right, don't never end".

This is a fascinating study in human progression on the path of Knowledge. We ought to kiss the ground that we are able to observe and appreciate it.






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WikiTiger
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Member since Sep 2007
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re: The argument about cutting government spending and econ growth


quote:

and yes, OF COURSE there will be a loss of growth in the short term when you take that money out of the economy. i don't think anybody honestly believes that cutting that money will positively affect the economy in the short term

it's a long-term solution to a problem that, in my view, is shown by the drop off that occurs when public spending decreases



And this is exactly why I don't see anything significant changing until the shite has actually hit the fan. Even IF a politician or group of politicians step up and start pushing for big changes (and that's a big IF), then whenever their changes come into effect there will be almost immediate pressure to go back to the old ways because everyone will complain that the reforms are too painful.

In other words, in order to fix anything, it all has to come crashing down first. And really, we should be welcoming it.







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colorchangintiger
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re: The argument about cutting government spending and econ growth


didn't want to say anything back to me on twitter? FTR, I completely agree with what you're saying and retweeted it just to stoke the fire a bit. The author, Will, is a friend of mine, but our views on economics are at 180 degrees. What can you expect though, his dad is Jack Straw, a leftist who has been in the upper levels of the British government for Will's entire life.





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Champagne
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re: The argument about cutting government spending and econ growth


I agree with the OP.

I also agree that there are no easy solutions. Should any President, Senate or House combine to significantly roll back FedGov spending, there's a real danger that the electorate will simply throw them out of office and replace them with an "Obama-style" "hope and change" spender.

The US electorate, as a whole body, must understand and embrace the message of Constitutional Conservatism. This philosophy places proper scrutiny on FedGov spending and provides an analytical basis for the review of each particular spending line item. If that FedGov spending is outside of FedGov's enumerated constitutional function or authority, then, that spending program is targeted for reduction/elimination.

Imposing that analytical framework across the FedGov spending budget gives us a chance to put the entire public and private sector economies back on rational footing that does not spend so much more than we take in.

It's the best chance that we have to save our future, because it's the best chance that we have to rein in FedGov spending and over-reach. FedGov won't rein itself in -- informed and committed outside forces from the US electorate must do the job.






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TROLA
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re: The argument about cutting government spending and econ growth


Cuts can be made and somewhat significant while still not torpedoing growth by targeting funds being spent outside the US. Look to military expenditures, foreign aid and investments. Couple this with corporate incentives to bring business home and you can buffer some of the effect. Either way, we have to have some short term pain in an effort for long term health.





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Champagne
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re: The argument about cutting government spending and econ growth


quote:

In other words, in order to fix anything, it all has to come crashing down first. And really, we should be welcoming it.


Do any of us have any idea about what happens when a society as large and populous as the USA, experiences the total collapse of its government, its economy and its currency?

Total breakdown of fire, police, municipal services, corporations and all other such institutions?

I don't think we should welcome this eventuality. We should do everything in our power to avoid this -- because this collapse would be a "mass death" catastrophe.






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Champagne
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re: The argument about cutting government spending and econ growth


quote:

Cuts can be made and somewhat significant while still not torpedoing growth by targeting funds being spent outside the US. Look to military expenditures, foreign aid and investments. Couple this with corporate incentives to bring business home and you can buffer some of the effect. Either way, we have to have some short term pain in an effort for long term health.


That's all it will take, in your view, to put things right? Target funds being spent outside the US on military related items, foreign aid and -- what kind of investments are you talking about?

What kind corporate incentives to bring business home? Are you talking about more FedGov spending here?

Could you elaborate here? You leave the impression that you have found the solution. Please elaborate so that we can understand your plan.






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glaucon
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re: The argument about cutting government spending and econ growth


quote:


so here is my issue with this line of thinking: to me, seeing these impacts when you remove federal/government spending should be a HUGE warning sign that the economy in particular has become too dependent on government spending


Your argument misses the fundamental issue that budget deficits are not a result of an increase in government spending but rather a loss of tax receipts due to an economic downturn. Furthermore, the biggest problem of the current fiscal crisis is the fact that the private sector and households themselves are deleveraging, which retard economic growth. Following a program of government austerity at the same time will exacerbate this problem. As borrowing rates are typically lower for the sovereign, the state should spend money to offset the loss of growth from a contracting private sector. This spending then works itself through the private sector speeding up the rate at which companies and households can start spending again. Government deleveraging needs to take place during boom periods not in the midst of an economic downturn.

quote:

it's a long-term solution to a problem that, in my view, is shown by the drop off that occurs when public spending decreases


The increase in the size of government is in large part a product of the transformation of the United States (as well as other nations in the developed world) into service economies. Thus, those services that government provides namely education, healthcare, and other social services take on greater prominence and share of gdp than they did before. Add onto the fact that you have an increasing population and nominal government spending has to increase over time.

quote:

this is similar to governmental solutions (aka, more bureaucracy) to governmental corruption. if corruption is apparent via government, that's typically a sign that government is too powerful. the last thing you want to do is add MORE government b/c that just adds more layers of potential corruption.


I don't know where you are getting this. Modern liberal democracies are among the least corrupt governments in history in spite of high levels of government spending. Government corruption is not related to the size of government and is rather a product of political and social culture. Seriously, is there any doubt that there was more political corruption in the United States in the 19th century than there is in the early 21st in spite of the huge increase in the size of government?






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WikiTiger
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Member since Sep 2007
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re: The argument about cutting government spending and econ growth


quote:

Do any of us have any idea about what happens when a society as large and populous as the USA, experiences the total collapse of its government, its economy and its currency?

Total breakdown of fire, police, municipal services, corporations and all other such institutions?

I don't think we should welcome this eventuality. We should do everything in our power to avoid this -- because this collapse would be a "mass death" catastrophe.


No. Not at all.

I think you misunderstood what I meant.

I was talking about a collapse of the economy. I don't think anything on the scale that you stated would happen.

There will be some short term violence in big cities. There will be some short term supply chain issues. It will be very hard times. But it won't be anything near what you are envisioning.

And it will all correct itself rather quickly as freer markets save the day.






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Interception
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re: The argument about cutting government spending and econ growth


I don't want to really cut government spending right now.

I believe government needs to continue its current roll at least in the near future.






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JohnnyKilroy
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re: The argument about cutting government spending and econ growth


quote:

In other words, in order to fix anything, it all has to come crashing down first. And really, we should be welcoming it.




This. I will be absolutely SHOCKED if politicians/society voluntarily decides to take the hard medicine necessary. A crash is really the only way I can reasonably foresee actual change in policies.

Sorry to you middle-aged and old folk, but I'd rather have a crash now, when I'm young, versus a crash in 20 or so years when I'm saddled with a mortgage/car notes/family expenses.

I can deal with scraping by as a 20 something single male. Will be MUCH harder if I'm responsible for providing for other people.

I certainly do not support obama, but if he wins and we crash and burn like some predict, I'd take that over a much larger crash in a couple of decades. Maybe I'm selfish.




This post was edited on 10/9 at 9:43 am


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Interception
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re: The argument about cutting government spending and econ growth


I see your point on tax recites etc. but supply siders assume demand will naturally be there which just isn't the case as global contraction is accelerating.


This post was edited on 10/9 at 9:41 am


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