How would you fix the United States' budget problem?

[Yandere Schoolgirls]

I would fix the US budget, by slashing spending, loosening regulations, gutting welfare programs and completely abolishing income and corporate taxes. Furthermore I would support an amendment paying off 20 % of all tax revenue to paying off our debts, and then have the entire Obama administration tar and feathered on live tv for their incompetence. It would be called the tar & feather big budget spenders amendment.

But I suppose Baby Bush, Papa Bush, and Reagan are off the table.

Bush is on the table, so is Romney if he gets elected.

[Puissancevise]

Stop foreign aid spending, stop importing foreign oil, and legalize and tax marijuana.

[Parpolitic Citizens]

I would fix the US budget, by slashing spending, loosening regulations, gutting welfare programs and completely abolishing income and corporate taxes. Furthermore I would support an amendment paying off 20 % of all tax revenue to paying off our debts, and then have the entire Obama administration tar and feathered on live tv for their incompetence. It would be called the tar & feather big budget spenders amendment.

Do you even have one foot in the pool of reality?



These are the things that are causing the deficit. They can be fixed in relatively easy steps.

[Divair]

I would fix the US budget, by slashing spending, loosening regulations, gutting welfare programs and completely abolishing income and corporate taxes. Furthermore I would support an amendment paying off 20 % of all tax revenue to paying off our debts, and then have the entire Obama administration tar and feathered on live tv for their incompetence. It would be called the tar & feather big budget spenders amendment.

Do you even have one foot in the pool of reality?



These are the things that are causing the deficit. They can be fixed in relatively easy steps.

He's one of those free market types, so no, he doesn't have one foot in reality.

[New England and The Maritimes]

I would fix the US budget, by slashing spending, loosening regulations, gutting welfare programs and completely abolishing income and corporate taxes. Furthermore I would support an amendment paying off 20 % of all tax revenue to paying off our debts, and then have the entire Obama administration tar and feathered on live tv for their incompetence. It would be called the tar & feather big budget spenders amendment.

Do you even have one foot in the pool of reality?



These are the things that are causing the deficit. They can be fixed in relatively easy steps.

ASB tried to explain to him what a market failure was and how it applied to health care a while ago and he sort of responded with "Nu uh!" Best to ignore him, I think.

[Laissez-Faire]

Do you even have one foot in the pool of reality?



These are the things that are causing the deficit. They can be fixed in relatively easy steps.

He's one of those free market types, so no, he doesn't have one foot in reality.

I don't see the free market as causing the recession. I see a lot of failed government programs that have only expanded on our faulty ability to recover from an economic downturn.

[Laissez-Faire]

Unemployment won't "stabilize" on its own. We need a massive temporary expansion of the civil service, with no heed to who we hire, and we need it 3 years ago.

Public works programs ftw.

No. The last thing we need is managers being incompetent due to government's nature of mismanagement and lack of accountability.

Besides, do you honestly think private employers are so untrustworthy without government backing them up while restricting the market of the average laborer?

[Hittanryan]

He's one of those free market types, so no, he doesn't have one foot in reality.

YS is a step below those. He thinks deflation is a good thing.

[Milks Empire]

He's one of those free market types, so no, he doesn't have one foot in reality.

YS is a step below those. He thinks deflation is a good thing.

Yikes! Anyone with even one iota of economic knowledge knows deflation means death to an economy.

[Laissez-Faire]

YS is a step below those. He thinks deflation is a good thing.

Yikes! Anyone with even one iota of economic knowledge knows deflation means death to an economy.

Along with inflation or any monetary manipulation, to be honest.

If it's that route you want to take.

[Mr Bananagrabber]

YS is a step below those. He thinks deflation is a good thing.

Yikes! Anyone with even one iota of economic knowledge knows deflation means death to an economy.

I'm sure you all mean "falling NGDP".

Damn you, Scott Sumner, for making me a pedant!

[Hittanryan]

Yikes! Anyone with even one iota of economic knowledge knows deflation means death to an economy.

Along with inflation or any monetary manipulation, to be honest.

If it's that route you want to take.

Steady, low levels of inflation are usually an indication of stability. Sudden changes in inflation levels usually lead to uncertainty and economic slowdowns.

Deflation, on the other hand, can lead to a deflationary cycle, which is, well, fucking awful.

[Mr Bananagrabber]

Yikes! Anyone with even one iota of economic knowledge knows deflation means death to an economy.

Along with inflation or any monetary manipulation, to be honest.

If it's that route you want to take.

Yes, but deflation (falling NGDP) is a bit worse because nominal wages are stickier downward than they are upward.

[Laissez-Faire]

Along with inflation or any monetary manipulation, to be honest.

If it's that route you want to take.

Steady, low levels of inflation are usually an indication of stability. Sudden changes in inflation levels usually lead to uncertainty and economic slowdowns.

Deflation, on the other hand, can lead to a deflationary cycle, which is, well, fucking awful.

Low levels of inflation over large segments of time only contribute directly to a lack of address of the real structural problems in an economy. Hell, inflation over time is probably worse than Weimar-esque inflation.

Stability is when the market is self-contained rather than cyclic by exacerbation.

[Laissez-Faire]

Along with inflation or any monetary manipulation, to be honest.

If it's that route you want to take.

Yes, but deflation (falling NGDP) is a bit worse because nominal wages are stickier downward than they are upward.

Didn't argue with you. Both, however, are bad.

[Mr Bananagrabber]

Steady, low levels of inflation are usually an indication of stability. Sudden changes in inflation levels usually lead to uncertainty and economic slowdowns.

Deflation, on the other hand, can lead to a deflationary cycle, which is, well, fucking awful.

Low levels of inflation over large segments of time only contribute directly to a lack of address of the real structural problems in an economy.

What do you mean?

Hell, inflation over time is probably worse than Weimar-esque inflation.

No man. Money is super-neutral in the long run. As long as inflation is stable, say around 2%, all variables adjust. Nominal wages increase at an extra 2%, nominal interest rates get a 2% inflation premium. It works out the same whether inflation is steady at 2% or whether it's steady at 0%. The problem is large unexpected changes in the rate of inflation. That's what transfers wealth from borrowers to lenders (or vice versa) and temporarily changes real wages.

[Laissez-Faire]

Low levels of inflation over large segments of time only contribute directly to a lack of address of the real structural problems in an economy.

What do you mean?

Hell, inflation over time is probably worse than Weimar-esque inflation.

No man. Money is super-neutral in the long run. As long as inflation is stable, say around 2%, all variables adjust. Nominal wages increase at an extra 2%, nominal interest rates get a 2% inflation premium. It works out the same whether inflation is steady at 2% or whether it's steady at 0%. The problem is large unexpected changes in the rate of inflation. That's what transfers wealth from borrowers to lenders (or vice versa) and temporarily changes real wages.

Market shifts in wages are natural and stable. Government-induced inflation is not.

I think we are arguing the same thing and misunderstanding each other to a degree.

[Mr Bananagrabber]

What do you mean?



No man. Money is super-neutral in the long run. As long as inflation is stable, say around 2%, all variables adjust. Nominal wages increase at an extra 2%, nominal interest rates get a 2% inflation premium. It works out the same whether inflation is steady at 2% or whether it's steady at 0%. The problem is large unexpected changes in the rate of inflation. That's what transfers wealth from borrowers to lenders (or vice versa) and temporarily changes real wages.

Market shifts in wages are natural and stable. Government-induced inflation is not.

Right, but the market is smart. The great thing about prices is that they're an efficient aggregator of information. If the government says "okay guys, we're going to have the monetary base grow at 3% from now on, no matter what", the market picks up on that and all prices adjust to that information. The problem is when the government tricks the market by, say, increasing the money supply at 5% on the sly.

It's the same if they're targeting the money supply to grow at x%, the price level to grow at x%, nominal income to grow at x%, or the exchange rate to be fixed to something. As long as the government's monetary action are certain and predictable, it's all good.
So if the central bank has a mandate to run inflation at 2% no matter what, that's fine. It's their ability to use discretion that's dangerous.

I think we are arguing the same thing and misunderstanding each other to a degree.

That's very possible.

[Laissez-Faire]

Right, but the market is smart. The great thing about prices is that they're an efficient aggregator of information. If the government says "okay guys, we're going to have the monetary base grow at 3% from now on, no matter what", the market picks up on that and all prices adjust to that information. The problem is when the government tricks the market by, say, increasing the money supply at 5% on the sly.

Government won't induce monetary stability, though. I agree sudden actions have more immediate consequences, but so will slow government intervention, even if just in more incentive to have 'fast-paced, sudden' action.

It's the same if they're targeting the money supply to grow at x%, the price level to grow at x%, nominal income to grow at x%, or the exchange rate to be fixed to something. As long as the government's monetary action are certain and predictable, it's all good.

I'd agree there, at least in terms of a central market economy. Capital moves best when there's security about the rates at which it will be exchanged.

[The Orson Empire]

sat out of foreign affairs, stop lining the politicians pockets with money, and actually help its population

[Mr Bananagrabber]

Right, but the market is smart. The great thing about prices is that they're an efficient aggregator of information. If the government says "okay guys, we're going to have the monetary base grow at 3% from now on, no matter what", the market picks up on that and all prices adjust to that information. The problem is when the government tricks the market by, say, increasing the money supply at 5% on the sly.

Government won't induce monetary stability, though. I agree sudden actions have more immediate consequences, but so will slow government intervention, even if just in more incentive to have 'fast-paced, sudden' action.

Governments around the world have already made considerable effort to do that. Australia, Canada, New Zealand, the UK, the Eurozone, Sweden, Norway, Israel, and others, have all adopted an explicit inflation targeting regime. In the legislation establishing the central banks are explicit nominal targets and a timeframe in which they must be met. Usually it's CPI inflation of somewhere between 1 and 3%. It's not like for the Federal Reserve, where there's this vague "stable prices and maximum employment" mandate which effectively gives the Fed total discretion.

[Laissez-Faire]

Government won't induce monetary stability, though. I agree sudden actions have more immediate consequences, but so will slow government intervention, even if just in more incentive to have 'fast-paced, sudden' action.

Governments around the world have already made considerable effort to do that. Australia, Canada, New Zealand, the UK, the Eurozone, Sweden, Norway, Israel, and others, have all adopted an explicit inflation targeting regime. In the legislation establishing the central banks are explicit nominal targets and a timeframe in which they must be met. Usually it's CPI inflation of somewhere between 1 and 3%. It's not like for the Federal Reserve, where there's this vague "stable prices and maximum employment" mandate which effectively gives the Fed total discretion.

My argument is that agreed, stable manipulation only delays the consequences relative to immediate, unstable intervention. Agreed-upon targeting doesn't help either.

[Mr Bananagrabber]

Governments around the world have already made considerable effort to do that. Australia, Canada, New Zealand, the UK, the Eurozone, Sweden, Norway, Israel, and others, have all adopted an explicit inflation targeting regime. In the legislation establishing the central banks are explicit nominal targets and a timeframe in which they must be met. Usually it's CPI inflation of somewhere between 1 and 3%. It's not like for the Federal Reserve, where there's this vague "stable prices and maximum employment" mandate which effectively gives the Fed total discretion.

My argument is that agreed, stable manipulation only delays the consequences relative to immediate, unstable intervention. Agreed-upon targeting doesn't help either.

What does that mean. I don't understand.

[Laissez-Faire]

My argument is that agreed, stable manipulation only delays the consequences relative to immediate, unstable intervention. Agreed-upon targeting doesn't help either.

What does that mean. I don't understand.

Government manipulation is bad.

[Mr Bananagrabber]

What does that mean. I don't understand.

Government manipulation is bad.

I don't understand how that relates to this conversation.

Look, presumably we both would prefer Free Banking, right? We put that aside, because for now we're stuck with central banks who have monopoly over the issue of currency, and it's unlikely that'll change any time soon. So for the purposes of this conversation, can we take as a given that central banks exist? The question then is, which central bank policy is the least distortionary (I would argue, the one that mimics free banking; the stabilisation of nominal spending).

So the point I made was, whether a central bank fixes the money supply to the price of gold, whether it grows it at a constant rate, whether it grows the price level at a constant rate, doesn't matter (in terms of tricking the market). Markets are smart enough that neither a gold standard or an inflation target will trick them. They get tricked when the central bank unexpectedly deviates from the framework (the obvious answer being, take away their discretion).

So the conclusion is, 2% inflation isn't distortionary, as long as inflation is expected to be stable around 2%.

Within this context, what point are you trying to make?