The United States needs to increase its budget deficit!

[Post-Keynesian Economics]

I completely agree. Exporting isn't getting them anything actually beneficial.

Other than the fact that they're Europe's largest economy, also they have Europe's lowest rate of unemployment and let's not forget the billions of Euros they spend on research and development each year...

You certainly look smart by making this post. Though it was somewhat unneccessary if you had looked at the way I stepped back on my post about Germany already.

[The Republic of Pantalleria]

Ideally the deficit should decrease. But that shouldn't be our biggest concern. As long as debt growth is slower than GDP growth, debt is not a problem.

I don't see why anyone would want a larger debt/deficit though.

Well, it's still growing faster than the economy is. Cripes, that means the safe levels for debt increases has to be around 500 billion a year at this time.

The fact of the matter is, that the U.S. economy is growing faster than before so it's safe for the budget to be balanced in order for the States to regain its AAA credit rating...

[The Serbian Empire]

Well, it's still growing faster than the economy is. Cripes, that means the safe levels for debt increases has to be around 500 billion a year at this time.

The fact of the matter is, that the U.S. economy is growing faster than before so it's safe for the budget to be balanced in order for the States to regain its AAA credit rating...

The debt is still growing faster than the safe maximum given the current growth rate by about $180 billion a year. It's not all well at this time, but is better than it was a few years ago. The credit rating declining is a product of the politicians not reaching an agreement.

[Post-Keynesian Economics]

Well, it's still growing faster than the economy is. Cripes, that means the safe levels for debt increases has to be around 500 billion a year at this time.

The fact of the matter is, that the U.S. economy is growing faster than before so it's safe for the budget to be balanced in order for the States to regain its AAA credit rating...

We were only downgraded by one credit agency. That credit agency was wrong, and ironically should have lost credibility for making such a silly move. And most importantly, our interest rates are still low, so obviously that credit downgrade didn't matter in the slightest.

[Post-Keynesian Economics]

The fact of the matter is, that the U.S. economy is growing faster than before so it's safe for the budget to be balanced in order for the States to regain its AAA credit rating...

The debt is still growing faster than the safe maximum given the current growth rate by about $180 billion a year. It's not all well at this time, but is better than it was a few years ago. The credit rating declining is a product of the politicians not reaching an agreement.

Where does this "safe maximum" come from, exactly?

[The Republic of Pantalleria]

The fact of the matter is, that the U.S. economy is growing faster than before so it's safe for the budget to be balanced in order for the States to regain its AAA credit rating...

The debt is still growing faster than the safe maximum given the current growth rate by about $180 billion a year. It's not all well at this time, but is better than it was a few years ago.

Yes, which is why the Government should try and reduce it, I realize that, that may mean the GDP growth rate may get cut in half, but at least the interest payments that the goverment has to make will decrease, allowing the Government to worry about other affairs such as healthcare, defence and education...

[The Tundra]

we really shouldn't

printing more money will cause inflation. devaluing our currency now would be a very bad idea, considering our credit rating is sub par (AA, compared to AAA). right now, two large boosts to the economy right now would be a gradual raise in minimum wage (to 10 dollars over the next 5 years) and a complete discontinuation of the penny (pennies have little to no buying power, and costs 1.7 cents to mint 1 penny). bringing up the minimum wage will have the poor to middle working class be able to have more spending power, thus they will buy more consumer good, and propel the economy forward in the longrun. discontinuing the penny will also cut down on our dedicate, decrease the time of transactions, and bring down the demand of copper, which now can be put to better use as electrical wiring.

we have plenty of money, its just stuck in the pockets of the wealthy who literally can't/won't spend it all.

Your entire response rests on a dramatic assumption you make at the very beginning. You say "printing more money will cause inflation." But it really won't. I agree that a lot of money is stuck in places where it won't be spent. But that's why we should print more money and spend or cut taxes in ways that we get it to the poor and middle class.

But more importantly, let's address your claim that "printing more money will cause inflation."

I want you to meet Bob and Joe. They are the only two people in this limited economic system, and they go to the one store in this economic system, Mini-Mart. They each have $2 allocated that they can spend on milk.

There are four dollars total in the system.

Thus, Mini-Mart will charge $2 for milk. Now, inflation would occur if we printed two more dollars and thus now Bob and Joe can bring $3 each to Mini-Mart. Mini-Mart will charge $3 for milk, and inflation will occur while there are six dollars total in the system.

But, let's say INSTEAD two dollars get printed and then given to Fred, who previously could not afford milk. Now, there are again six dollars in the system. Bob, Joe, and Fred each have $2. Mini-Mart will charge $2. There is more money in the system, but prices will not go up.

The end lesson of this tale is that if GDP is not at a potential maximum, and unemployment is not at a potential minimum, then monetary growth will go towards the empty gaps, NOT an increase in prices.

Monetary growth does not necessaarily increase inflation. It certainly hasn't in this country thus far. See the article at the end of my OP.

the problem with that example is that money doesn't flow to the gaps. when new money is released to the market, its almost random to were it starts. Fred might get all that new money in the system because he hit it rich in a casino in the next town over. or Bob might lose all this money to Joe on a bet. or the store might close down because Joe, Bob and Fred aren't willing to spend their money on milk. the rate of inflation should be in sync with the value of the currency, so $1 equals $1. take an idea back in the 1950s america. 15 cents = $1 (for instance, you can get a Small Fry and a Cheese burger for 15 cents.), that is a resulting of the dollar being worth more back then, supposibly because there was less of them(very simple explanation). as the economy got stronger over time more money was printed cause people got richer, thus the price of goods went up, thus the value of the dollar went down.

right now, people are getting poorer, the value of our money is going down, thus the prices of good will eventually go down in sync. however, adding more money to this system now will cause the value of the money to fall faster than the value of the goods, which will cause markets to collapse as they find that the dollar is not that good sense you need so much of it to buy a particular good. please note, that 1 yen acts as a penny, and not a fraction of a whole.

Money is a very fickle thing.

[The Serbian Empire]

The debt is still growing faster than the safe maximum given the current growth rate by about $180 billion a year. It's not all well at this time, but is better than it was a few years ago. The credit rating declining is a product of the politicians not reaching an agreement.

Where does this "safe maximum" come from, exactly?

It's based on the previous year's economic growth as the safe figure of how much debt can be produced based on the GDP of the nation. In the event of the US, that means the debt grows faster than the economy after 500B US dollars of US debt.

[The Serbian Empire]

The fact of the matter is, that the U.S. economy is growing faster than before so it's safe for the budget to be balanced in order for the States to regain its AAA credit rating...

We were only downgraded by one credit agency. That credit agency was wrong, and ironically should have lost credibility for making such a silly move. And most importantly, our interest rates are still low, so obviously that credit downgrade didn't matter in the slightest.

I don't see the problem going away until the House, Senate, and Presidency are all the same party. As long as it's divided, the threat of default is not unreasonable.

[The Republic of Pantalleria]

We were only downgraded by one credit agency. That credit agency was wrong, and ironically should have lost credibility for making such a silly move. And most importantly, our interest rates are still low, so obviously that credit downgrade didn't matter in the slightest.

I don't see the problem going away until the House, Senate, and Presidency are all the same party. As long as it's divided, the threat of default is not unreasonable.

Quite so, after all, they only delayed the problem, not solved it...

[Post-Keynesian Economics]

Your entire response rests on a dramatic assumption you make at the very beginning. You say "printing more money will cause inflation." But it really won't. I agree that a lot of money is stuck in places where it won't be spent. But that's why we should print more money and spend or cut taxes in ways that we get it to the poor and middle class.

But more importantly, let's address your claim that "printing more money will cause inflation."

I want you to meet Bob and Joe. They are the only two people in this limited economic system, and they go to the one store in this economic system, Mini-Mart. They each have $2 allocated that they can spend on milk.

There are four dollars total in the system.

Thus, Mini-Mart will charge $2 for milk. Now, inflation would occur if we printed two more dollars and thus now Bob and Joe can bring $3 each to Mini-Mart. Mini-Mart will charge $3 for milk, and inflation will occur while there are six dollars total in the system.

But, let's say INSTEAD two dollars get printed and then given to Fred, who previously could not afford milk. Now, there are again six dollars in the system. Bob, Joe, and Fred each have $2. Mini-Mart will charge $2. There is more money in the system, but prices will not go up.

The end lesson of this tale is that if GDP is not at a potential maximum, and unemployment is not at a potential minimum, then monetary growth will go towards the empty gaps, NOT an increase in prices.

Monetary growth does not necessaarily increase inflation. It certainly hasn't in this country thus far. See the article at the end of my OP.

the problem with that example is that money doesn't flow to the gaps. when new money is released to the market, its almost random to were it starts. Fred might get all that new money in the system because he hit it rich in a casino in the next town over. or Bob might lose all this money to Joe on a bet. or the store might close down because Joe, Bob and Fred aren't willing to spend their money on milk. the rate of inflation should be in sync with the value of the currency, so $1 equals $1. take an idea back in the 1950s america. 15 cents = $1 (for instance, you can get a Small Fry and a Cheese burger for 15 cents.), that is a resulting of the dollar being worth more back then, supposibly because there was less of them(very simple explanation). as the economy got stronger over time more money was printed cause people got richer, thus the price of goods went up, thus the value of the dollar went down.

right now, people are getting poorer, the value of our money is going down, thus the prices of good will eventually go down in sync. however, adding more money to this system now will cause the value of the money to fall faster than the value of the goods, which will cause markets to collapse as they find that the dollar is not that good sense you need so much of it to buy a particular good. please note, that 1 yen acts as a penny, and not a fraction of a whole.

Money is a very fickle thing.

I do understand where you're coming from, but I think your statements about inflation and the "gaps" are misled, not that my over-simplistic example helped that.

First, I simply ask you to look at empirics. The US Federal Reserve is printing a lot of money right now, yes? And that isn't looking to stop, with the new chairman. We've seen the persistent use of QE. But where is inflation? Inflation is nowhere near these super fast levels that you mention. In fact, inflation isn't even hitting as high as the Fed's target level. All in all, US inflation is low.

Second, I ask you to look back at the "gaps." I entirely agree that money won't necessarily flow to those gaps on their own. But I would claim that the reason inflation isn't increasing right now is because money IS going to those gaps. For the United States, those gaps are the pockets of the unemployed. Right now, there isn't enough money flowing for us to expect businesses to have a job for everyone.

And to be frank, there are simple policies that we could be doing right now to fill those gaps. The American people believe we are in recovery, so they are willing to spend money. As a result, tax cuts or increases in benefits to the poor can directly help fill those gaps rather than the Fed simply throwing money at the private sector and hoping it will grow.

To provide another analogy, look at the board game Monopoly. One of the rules of Monopoly is that if the "bank" runs out of money, you should either get slips of paper to express how much money is owed, or simply create new monopoly money with paper. What would happen if we didn't do this? Well, we would have to simply eliminate a player from the game entirely. One person couldn't play because there wouldn't be enough money for everyone.

[Post-Keynesian Economics]

We were only downgraded by one credit agency. That credit agency was wrong, and ironically should have lost credibility for making such a silly move. And most importantly, our interest rates are still low, so obviously that credit downgrade didn't matter in the slightest.

I don't see the problem going away until the House, Senate, and Presidency are all the same party. As long as it's divided, the threat of default is not unreasonable.

Actually, it is very unreasonable. It is impossible for the US to actually default. But even a virtual default could be avoided if we simply eliminated the useless troublemaking system known as the debt ceiling.

[Post-Keynesian Economics]

Where does this "safe maximum" come from, exactly?

It's based on the previous year's economic growth as the safe figure of how much debt can be produced based on the GDP of the nation. In the event of the US, that means the debt grows faster than the economy after 500B US dollars of US debt.

And what's wrong with that, especially when the economy isn't doing too well?

[Lemanrussland]

There should have been a larger effort towards stimulus, but the US did a much better job than Europe in this regard, and we're making good progress towards recovery now, which is naturally going to lead to a better budget situation (here in California, we're projected to actually run a surplus this year, which is a first for our state in a while).

The focus now should be to continue to facilitate the recovery, these debt ceiling games and calls for austerity need to stop. Our fiscal policy should remain on an even keel, and Congress needs to learn how to effectively reach compromise and pass budgets without so much struggling.

In the long term, we need to come up with entitlement reforms that both put us on a good track fiscally and which don't cause unneeded pain to seniors. Healthcare reform to control cost growth is going to also need to be part of Medicare/Medicare reform.

[The Serbian Empire]

It's based on the previous year's economic growth as the safe figure of how much debt can be produced based on the GDP of the nation. In the event of the US, that means the debt grows faster than the economy after 500B US dollars of US debt.

And what's wrong with that, especially when the economy isn't doing too well?

It can actually lead to a debt death spiral given the US tends to also fight in wars at the same time. Unless the US abandons it's Defender of the World mentality as a government; we will see a situation where the debt is growing out of hand due to economic turmoil while fighting a war. This is a situation where the deficit can grow at 10% of GDP every year for as long as the crisis lasts.

[Lemanrussland]

The debt is still growing faster than the safe maximum given the current growth rate by about $180 billion a year. It's not all well at this time, but is better than it was a few years ago.

Yes, which is why the Government should try and reduce it, I realize that, that may mean the GDP growth rate may get cut in half, but at least the interest payments that the goverment has to make will decrease, allowing the Government to worry about other affairs such as healthcare, defence and education...

I couldn't disagree more. The most important thing we can do to reduce the deficit is to facilitate economic recovery. Repeating 1937 through a sudden, massive tightening in fiscal policy would be a grave mistake, and would probably lead to another string of trillion dollar plus deficits.

[Vetalia]

I agree. I edited my post almost as soon as I submitted it, realizing my mistake.

No harm, no foul. And I can't help but like someone who uses a FRED graph as their national flag...I use their data all the time in my business valuations.

[The Serbian Empire]

Yes, which is why the Government should try and reduce it, I realize that, that may mean the GDP growth rate may get cut in half, but at least the interest payments that the goverment has to make will decrease, allowing the Government to worry about other affairs such as healthcare, defence and education...

I couldn't disagree more. The most important thing we can do to reduce the deficit is to facilitate economic recovery. Repeating 1937 through a sudden, massive tightening in fiscal policy would be a grave mistake, and would probably lead to another string of trillion dollar plus deficits.

I see it as the war mongering of the past as the real culprit of the deficits in the trillions. The US must stop intervening at the tip of a hat or be a limited participant in the wars.

[Ursymnia]

America is so far into debt. Yet its still a first world country. Time to move.

[The Tundra]

the problem with that example is that money doesn't flow to the gaps. when new money is released to the market, its almost random to were it starts. Fred might get all that new money in the system because he hit it rich in a casino in the next town over. or Bob might lose all this money to Joe on a bet. or the store might close down because Joe, Bob and Fred aren't willing to spend their money on milk. the rate of inflation should be in sync with the value of the currency, so $1 equals $1. take an idea back in the 1950s america. 15 cents = $1 (for instance, you can get a Small Fry and a Cheese burger for 15 cents.), that is a resulting of the dollar being worth more back then, supposibly because there was less of them(very simple explanation). as the economy got stronger over time more money was printed cause people got richer, thus the price of goods went up, thus the value of the dollar went down.

right now, people are getting poorer, the value of our money is going down, thus the prices of good will eventually go down in sync. however, adding more money to this system now will cause the value of the money to fall faster than the value of the goods, which will cause markets to collapse as they find that the dollar is not that good sense you need so much of it to buy a particular good. please note, that 1 yen acts as a penny, and not a fraction of a whole.

Money is a very fickle thing.

I do understand where you're coming from, but I think your statements about inflation and the "gaps" are misled, not that my over-simplistic example helped that.

First, I simply ask you to look at empirics. The US Federal Reserve is printing a lot of money right now, yes? And that isn't looking to stop, with the new chairman. We've seen the persistent use of QE. But where is inflation? Inflation is nowhere near these super fast levels that you mention. In fact, inflation isn't even hitting as high as the Fed's target level. All in all, US inflation is low.

Second, I ask you to look back at the "gaps." I entirely agree that money won't necessarily flow to those gaps on their own. But I would claim that the reason inflation isn't increasing right now is because money IS going to those gaps. For the United States, those gaps are the pockets of the unemployed. Right now, there isn't enough money flowing for us to expect businesses to have a job for everyone.

And to be frank, there are simple policies that we could be doing right now to fill those gaps. The American people believe we are in recovery, so they are willing to spend money. As a result, tax cuts or increases in benefits to the poor can directly help fill those gaps rather than the Fed simply throwing money at the private sector and hoping it will grow.

To provide another analogy, look at the board game Monopoly. One of the rules of Monopoly is that if the "bank" runs out of money, you should either get slips of paper to express how much money is owed, or simply create new monopoly money with paper. What would happen if we didn't do this? Well, we would have to simply eliminate a player from the game entirely. One person couldn't play because there wouldn't be enough money for everyone.

i think we are arguing the same point, but with just different wording. on another note, we don't see large increases in inflation because we are taking money out of the system. the Fed destroys currency after a certain date or it gets destroyed naturally (being put through the wash, getting lost, ect.). new bills get put in, old bills get taken out, and the cycle keeps flowing.

the non-upper class doesn't have enough spending power. the poor (who barely get taxed right now) need more money for spending, which can be achieved with a minimum wage increase, the middle class (who are taxed the most out of all the tax brackets) are scared of debt and collapse, so they don't spend money on consumer goods. a tax break on them will increase their spending power. ideally, this would make the upper class (Large Business owners, Corporate Bodies) would need to hire more people to meet the demand of people asking for product, thus circulating more money from places were it will not be moved at all. people will buy their products more, the more transaction there are the more the government gets in % revenue, the more money these companies make. after that we can add money into the system. inflation doesn't really take hold unless the money is stagnant. thankfully, America's money is not stagnant enough for things like the stimulus to cause mass inflation.

its the same effect with different methods, my theory is just abit different from yours

[Post-Keynesian Economics]

And what's wrong with that, especially when the economy isn't doing too well?

It can actually lead to a debt death spiral given the US tends to also fight in wars at the same time. Unless the US abandons it's Defender of the World mentality as a government; we will see a situation where the debt is growing out of hand due to economic turmoil while fighting a war. This is a situation where the deficit can grow at 10% of GDP every year for as long as the crisis lasts.

"A debt death spiral." Interesting. How exactly would this occur? At what point would the debt begin to hurt average Americans, and how would it do this? What happens when the deficit grows that fast?

[The Serbian Empire]

I don't see the problem going away until the House, Senate, and Presidency are all the same party. As long as it's divided, the threat of default is not unreasonable.

Actually, it is very unreasonable. It is impossible for the US to actually default. But even a virtual default could be avoided if we simply eliminated the useless troublemaking system known as the debt ceiling.

The default occurs is roughly a month after the ceiling is reached when government is so stripped of it's ability in administration as to be unable to process the debt payments.

[Post-Keynesian Economics]

I do understand where you're coming from, but I think your statements about inflation and the "gaps" are misled, not that my over-simplistic example helped that.

First, I simply ask you to look at empirics. The US Federal Reserve is printing a lot of money right now, yes? And that isn't looking to stop, with the new chairman. We've seen the persistent use of QE. But where is inflation? Inflation is nowhere near these super fast levels that you mention. In fact, inflation isn't even hitting as high as the Fed's target level. All in all, US inflation is low.

Second, I ask you to look back at the "gaps." I entirely agree that money won't necessarily flow to those gaps on their own. But I would claim that the reason inflation isn't increasing right now is because money IS going to those gaps. For the United States, those gaps are the pockets of the unemployed. Right now, there isn't enough money flowing for us to expect businesses to have a job for everyone.

And to be frank, there are simple policies that we could be doing right now to fill those gaps. The American people believe we are in recovery, so they are willing to spend money. As a result, tax cuts or increases in benefits to the poor can directly help fill those gaps rather than the Fed simply throwing money at the private sector and hoping it will grow.

To provide another analogy, look at the board game Monopoly. One of the rules of Monopoly is that if the "bank" runs out of money, you should either get slips of paper to express how much money is owed, or simply create new monopoly money with paper. What would happen if we didn't do this? Well, we would have to simply eliminate a player from the game entirely. One person couldn't play because there wouldn't be enough money for everyone.

i think we are arguing the same point, but with just different wording. on another note, we don't see large increases in inflation because we are taking money out of the system. the Fed destroys currency after a certain date or it gets destroyed naturally (being put through the wash, getting lost, ect.). new bills get put in, old bills get taken out, and the cycle keeps flowing.

the non-upper class doesn't have enough spending power. the poor (who barely get taxed right now) need more money for spending, which can be achieved with a minimum wage increase, the middle class (who are taxed the most out of all the tax brackets) are scared of debt and collapse, so they don't spend money on consumer goods. a tax break on them will increase their spending power. ideally, this would make the upper class (Large Business owners, Corporate Bodies) would need to hire more people to meet the demand of people asking for product, thus circulating more money from places were it will not be moved at all. people will buy their products more, the more transaction there are the more the government gets in % revenue, the more money these companies make. after that we can add money into the system. inflation doesn't really take hold unless the money is stagnant. thankfully, America's money is not stagnant enough for things like the stimulus to cause mass inflation.

its the same effect with different methods, my theory is just abit different from yours

True, our logic does seem to be parallel. The good news is, though there are negilibile differences in our theories, the policy implications are mostly the same. For example, I am very much for an increase in the minimum wage.

[The Serbian Empire]

It can actually lead to a debt death spiral given the US tends to also fight in wars at the same time. Unless the US abandons it's Defender of the World mentality as a government; we will see a situation where the debt is growing out of hand due to economic turmoil while fighting a war. This is a situation where the deficit can grow at 10% of GDP every year for as long as the crisis lasts.

"A debt death spiral." Interesting. How exactly would this occur? At what point would the debt begin to hurt average Americans, and how would it do this? What happens when the deficit grows that fast?

Inflation will emerge and it looks a lot like 1990s Argentina and might turn into hyper-inflation. The US needs to pare back at it's military intervention otherwise the US might find itself in a Vietnam like conflict and run into an economic crisis.

[Post-Keynesian Economics]

Actually, it is very unreasonable. It is impossible for the US to actually default. But even a virtual default could be avoided if we simply eliminated the useless troublemaking system known as the debt ceiling.

The default occurs is roughly a month after the ceiling is reached when government is so stripped of it's ability in administration as to be unable to process the debt payments.

Which is why there is zero reason for us to have a debt ceiling. We're choking ourselves for no reason at all.