We have, in startup parlance, a high burn, and most of it can’t be considered ‘investment’ but is instead ‘expense’. Spending money on things like infrastructure improvement or new technology that are likely to generate more money in the future helps growth; spending money on the so-called entitlement programs, and parts of the military, does not. Of course medical care and defense are important, and we have to have them—this is a tough balancing act. In some cases, the competitive nature of the private sector may provide a better path. Sooner or later, we are going to have an ugly conversation about our national budget—we can delay it for a long time but not forever. The government, when it needs to spend money at all, should aim to invest.
If you have a high burn, you either have insufficient revenue or excessive costs. I have gotten so frustrated the past four years at the demagoguery of the national debt as a result of excessive costs.
These are the data points I want to point to every time someone suggests our national debt is "unsustainable":
- In 2000, the federal government collected tax receipts of 20% of GDP[0]. From 2009-2012, these tax receipts were around 15% of GDP. This is due to, as you'd imagine, the huge private sector deleveraging that happened in 2008 and the fact that, politically, any suggestion at raising taxes gets you called a Kenyan Muslim Communist. Yet we didn't seem to have a problem with growth when taxes collected were much higher than they were now, as a percentage of the economy.
- 2/3 of our federal budget is spent on Social Security, Medicare/Medicaid, and defense. Any issues with Social Security being considered unsustainable is that only $113,000 of payroll is eligible for taxation. It would seem to me that if you made all payroll eligible for taxation, you would only be impacting those well into the upper-middle class, and would ensure solvency for at least 75 years. Legislation to do so was recently proposed by some Democrats in the Senate[1].
- We spend a lot on Medicare because we spend a lot on healthcare. We spend a lot on healthcare because we are the only first-world country in the world that doesn't put a ceiling on how much health care providers (hospitals and drug companies) can charge, even for basic services. Yet those that have good insurance are completely price-unconscious. We essentially have the worst of both worlds -- not enough free market forces for health providers to price competitively, and yet not enough price controls either. If you have a free 30 minutes, I highly recommend anyone read Steven Brill's recent writeup in TIME magazine[2].
- It is a complete fallacy that we're living longer, so therefore we have to jack up the age of eligibility of programs like Social Security and Medicare. Most gains in expected life expectancy over the past several decades are due to reducing infant mortality -- in other words, the only change is that we have less people that died before they could even pay anything into SS. Furthermore, most life expectancy gains are concentrated on the wealthy -- those that don't even need Medicare. The life expectancy for working-class Americans is actually shrinking.[3]. I'm not really sure why we need to cut government benefits for janitors because lawyers are living longer. Paul Krugman is constantly trying to explain this on his blog[4].
- If you want GDP growth after a recession caused by massive private sector deleveraging, Keynesian government budgets are exactly what you want. Beyond stimulating spending when everyone is clinging on to whatever money they have because they're living paycheck to paycheck, with US treasury interest rates under 2% for years, this is the perfect time for our government to run deficits at cheap interest rates.
The OP says "Borrowing money to get ninety growth cents on the dollar does not count, although that may work for a while." But in current conditions mean we'd be getting much more than ninety growth cents on each deficit dollar. Conversely, cutting each deficit dollar results in much less growth than one dollar. This is known as the "fiscal multiplier," and there is a lot of research showing that in depressed economic conditions, the multiplier is much higher than 1.0. The utter economic clusterfuck in Europe is because too many people in controlling the Euro felt the way the OP does, so you have countries like Greece and Spain cutting their budgets to eliminate deficits, yet resulting in such a harsh economic contraction that their budgets end up with even bigger deficits.[5].
- We obviously have a shitload of waste in the federal government. You can't have a $3 trillion budget and not have some dumb stuff in there. But for the purposes of any macro fiscal impact in terms of GDP or unemployment, it's literally irrelevant. After Social Security and Medicare/Medicaid, you're left with $1.3T in the budget, over half of which is military spending[6]. Yeah, we have too many military bases and we probably have some useless bureaucrats in the Department of Transportation. But for the most part this spending is on core government programs that are helpful and that people like, which is why the only specifics Mitt Romney could give on what programs he would actually cut was Big Bird. I'm sure you could cut $100 billion with nobody really caring, and we should obviously strive to have the least wasteful government possible, but are a few wasteful programs the reason why democracy is going to unravel?
- In the early 1990s, it was legitimate to argue the federal deficit was crowding out private sector growth. Deficit spending required the Federal Reserve to keep borrowing rates high to fend of inflation, which meant it was more expensive to borrow money for any sort of investment. As George H. W. Bush and Bill Clinton passed tax increases in 1990 and 1993 to balance the budget, the Federal Reserve was able to lower interest rates in lockstep, thus preventing any fiscal contraction. In other words, counterbalancing public spending with looser monetary policy can be a good receipt for stimulating growth[7].
However, the Federal Reserve rates have been at zero for years now, because the recession of 2008 pales in comparison to 1991. If you make money as cheap as possible the private sector continues to say "meh, I think I'll just hoard profits" and you don't have any inflation even with absurdly cheap money, then there are no more bullets in the monetary policy gun left, but bless Ben Bernanke for still trying (QE, Operation Twist, etc).
Yeah, yeah, "OMG HYPERINFLATION WEIMAR ZIMBABWE!" The same people have been yelling this for years. Wake me up when the Bureau of Labor statistics reports a CPI inflation over 3%[8].
- 2% growth isn't great, but it's not going to cause democracy to unravel. It may cause democracy to unravel when 99% of the wealth generated by that modest growth is concentrated in 1% of the population, however[9].
In conclusion: in principle, there's nothing really too controversial about what the OP is saying. We should absolutely be talking about the ways to grow the US economic pie so that our political process doesn't keep grinding to stalemates over who gets what of the pie we already have.
Our government isn't perfect. It could do a lot to improve a lot of things to encourage growth, and many of them aren't even fiscal in nature (e.g. patent reform). But if you're just going to point to the national budget, echo popular political talk-show points about "$16 TRILLION IN DEBT OUR GRANDKIDS WILL HAVE TO PAY" and "WE'RE ON THE ROAD TO GREECE" then I'd argue you're completely missing the forest for the trees.
Personally, my biggest beef with the current situation is that we're not borrowing to fund infrastructure. You talk to any corporation in America, offer them the opportunity to make capital investments at 0.1% interest, and they'll jump at it. And we need infrastructure investment. But unfortunately, that idea's a rhetorical casualty of the debate on entitlements, despite being a drop in the bucket by comparison.
demagoguery of the national debt as a result of excessive costs
If you look at government revenues as a percentage of GDP (your first link) over the last century, they've actually stayed within a fairly narrow window between 15%-20%. With the expiration of the "Bush Tax Cuts", they're up to average levels.
If you look at expenditures, historically they've hovered in the same range. Recently, they've climbed to over 24% of GDP.
How can you look at historical revenue AND expenditure levels and call the unsustainability of spending "demagoguery"?
If you look at government revenues as a percentage of GDP (your first link) over the last century, they've actually stayed within a fairly narrow window between 15%-20%.
This is like saying my weight has stayed within a fairly narrow window of 150 pounds to 275 pounds. Your "narrow window" is massive. And it's not even accurate, because there is not one single year prior to 2009 in the Tax Policy Center link showing tax receipts under 16%. Historically, the window is more like 17%-19%.
How can you look at historical revenue AND expenditure levels and call the unsustainability of spending "demagoguery"?
I'm not arguing our government should spend 24% of GDP ad infinitum. I was just as enraged in the 2000s during the W. Bush deficits. Had we been running balanced budgets and not fighting absurd wars in Iraq, running deficits to get out of a recession would not nearly be controversial.
But please, to crusso or anyone else, please explain to me what the causes of our "spending problem" are. The only projected growth in spending is due to Medicare, which is a healthcare spending problem, not a government program problem[0].
So are you suggesting we should cut Medicare? My parents have some health issues, and if it wasn't for Medicare, they'd probably be dead. I left my day job in 2011 knowing that I was unlikely to be financially burdened by their well-being, otherwise I wouldn't have done it. But how many startups will die before they're even born because software engineers are too worried about leaving their day job and covering not just their health insurance but their parents? And when will the deficit-mongers finally realize that while government programs technically require taxation, they can provide a basis of society for us to unleash our maximum capitalist risk-taking potential?
Jeez, man... "Bush Bush Bush Bush". I didn't vote for the guy. I didn't support his war on Iraq or his failure to veto just about anything except for stem cell research... but get over it. He's been gone for years. The guy most in control now is like a human wrecking ball. He's spent far more than Bush did. He's spent more than any person in the history of the world. Let's focus on the current problems and stop using the previous politician as an excuse for continued irresponsible behavior of the current one.
So are you suggesting we should cut Medicare?
I'm saying we match expenditures to revenues, including interest on the debt and considering long term unfunded liabilities so we don't go bankrupt (or the money printing equivalent).
If Social Security needs to be a little means tested and the age raised, so be it. If Medicare needs to be means tested, age raised, or what have you... then so be it. I'd think that all these measures could be minimized if we closed the hundreds of redundant government programs, didn't compensate government employees almost twice the private sector ones, made public sector unions illegal, cut defense (although it's one of the few Constitutional responsibilities of the Feds), etc.
Instead of continuing to punt all this stuff further along, we need to put measures in place to prevent financial collapse. If for no other reason, we have NO RIGHT to burden future generations with exorbitant debt.
I mentioned George W. Bush a single time. I fully recognize the "Bush did it too" or "Bush was worse" is a poor political argument. I also made my original arguments to be as factually based as possible and tried to avoid the usual partisan talking points, since this is ultimately about economics, not politics, and we have things like numbers and math to form lines of logical arguments with. Statements like "he's spent more than any person in the history of the world" are just pure misguiding hyperbole at best, and completely false at worst. In the 1940s, the federal deficit was 22% of GDP. In 2009, the federal deficit was 10% of GDP, and it hasn't been in double digits since. At least amend your statement to, "Obama has run bigger deficits as a percentage of GDP than any president not fighting Nazis," which would at least be accurate.
In any event -- all I'm saying is that I'm very much a "deficit hawk" in any condition where the Federal Reserve has to keep interest rates above. Cut the deficit, offset the spending by lowering borrowing costs, so the private sector can borrow more cheaply for the purposes of growth. Hooray! The problem is when you have such a bad recession that borrowing costs are effectively zero, for the government and anyone else, and you still have high unemployment and no inflation.
You cannot go bankrupt if you print your own currency. You can always print more money, which is why Japan has no problems borrowing money at low interest rates even with a 250% debt to GDP ratio[0]. Yes, I know, "OMG Weimer and Zimbabwe HYPERINFLATION!" This is why the US government doesn't just print money, it issues bonds that the Federal Reserve buys by printing money, giving the Federal Reserve the ability to constrain said money supply if the economy recovers. And by the way, if we have inflation, that is a good thing, as it means enough people have enough jobs and income that they are spending enough money. If you can give me a scenario where we have inflation without full employment, I'd love to hear it. the same people have been ranting about hyperinflation for years. Alan Simpson and Erskine Bowles presented their famous "Simpson-Bowles" budget in 2011, and prefaced it by saying the US needed to take these budget steps or else they would face issues with rising interest rates or inflation in about two years[1]. 2011 was two years ago. Hmm.
If Social Security needs to be a little means tested and the age raised, so be it. If Medicare needs to be means tested, age raised, or what have you... then so be it.
Let me get this straight. Because some entities in our private sector did some really dumb (or malicious) things, and the resulting speculation bust led to massive unemployment, the solution is... cutting core government programs that had nothing to do with it? And you want to do it by turning Social Security into a welfare program (bet it'll still be politically popular after that!) and by raising the age of Medicare, which means all the poor people that will actually need it will probably be dead, because even fewer of them will live to 67 or whatever age you want to raise it to. And we need this to prevent "financial collapse," even though countries with much more debt relative to us have not come anywhere near collapsing.
Yeah, we have a lot of useless bureaucrats in government. But I'd love to see how much of our federal budget they actually take up, because it's probably not as much as you think. I don't like my taxpayer money going to useless bureaucrats either, but it's a complete exaggeration that this is the reason why the US is on the "road to ruin." In general, public sector employment is the lowest it's been in decades[3]. Apparently the man who has "spent more than any person in the history of the world" has not spent enough money to keep all those public sector employees employed.
If for no other reason, we have NO RIGHT to burden future generations with exorbitant debt.
Sadly, perhaps one of the biggest fallacies that usually comes up with the discussion. As I gave in my example, because of Medicare, I don't have to pay for my parents to have health insurance. If the government needs to tax me now or later because of that, I don't consider that a "burden." I consider that something that has freed me to take greater capitalist risks in starting my own company, that should hopefully provide even greater gains for the country's economy. And if we're spending too much on Medicare because we're spending too much on medicine in general, then we should solve that problem, not cut Medicare. For a much more eloquent description of this concept, I refer you to Paul Krugman[3].
And that's all the time we have for today, ladies and gentlemen. After I post this, I'll be editing my /etc/hosts file, as it's now 3pm, and I really need to get some work done. Sadly, arguing economics on Hacker News doesn't grow our economy nearly as much as coding.
When the argument is "taxation vs spending" and the spending side is 33% off historical norms while taxation is within 5% of historical norms... calling something a "spending problem" would seem to be objective.
Listing some of the details for why that spending problem exists doesn't make it any less or more politicized. It's just adding details.
It's absolutely politicized. The obligations driving our spending were on the ledger 15, 30 years ago, everyone knew it. But now we hear about 'overspending during the obama administration' as if it was his decision to have people get old and collect their benefits. Or as if he didn't try to attack healthcare costs first thing out of the gate.
Calling it an entitlement problem highlights the problem. Calling it a 'spending problem' obscures it. Do whatever you want.
Or as if he didn't try to attack healthcare costs first thing out of the gate.
Because he didn't? Instead of attacking the root causes of health care costs, he implemented yet another Big Government entitlement program that was in keeping with his socialist ideology.
It's truly ironic that there you are saying that we all knew about the spending obligations 30 years ago regarding SS and Medicare - yet you call yet another government spending obligation that will certainly spiral our of control an effort to reduce healthcare costs.
USA has very bad social security, in fact unemployment benefits should be increased greatly. People are living in the streets, that's not acceptable in a civil society.
"healthcare cost inflation"
That can be fixed by adopting universal health care.
Scandinavian countries spend way more and can balance the budget (though there's the eurocrisis, but it was possible before the depression). The problem with budget deficit in USA is lack of taxation. Tax revenue per GDP is very low.
Look at the discussion section on that Wikipedia article. A lot of that chart is for crap because the collection of the tax data is not consistent. In particular, the US's State and Local taxes are not included which puts us far lower. I looked at it yesterday, thinking to use it in a discussion, but gave up because it's just not an accurate picture.
Current US (federal) debt is $16.1 trillion, the burden of which is largely hidden by the fact that interest rates are currently extremely low.
Add to the above numbers an inflation tax of about 1.5 - 2.5%.
Your analysis starts by excluding any taxes you find inconvenient (such as, apparently, social security, inflation, tariffs, ad-valorem taxes, and especially state and local taxes -- which you somehow don't regard as governments) to get the numbers you want. If a business did accounting the way you just did, they'd rightfully land in jail.
But if you're just going to point to the national budget, echo popular political talk-show points about "$16 TRILLION IN DEBT OUR GRANDKIDS WILL HAVE TO PAY"...
You fail to mention who's going to pay it then? It must wonderful to be an Entitled One and write checks that someone else has to cash.
...and "WE'RE ON THE ROAD TO GREECE" then I'd argue you're completely missing the forest for the trees.
Unfortunately, you didn't argue it, you merely asserted it without any evidence and worse, started by providing "evidence" that was misleading at best.
As for Greece, I actually lived there 15 years ago. Even then the government was obviously bloated beyond all recognition, with government "jobs" that required little or no work being handed out as political favors. I left in part because I knew that the country would deteriorate eventually, with a rapidly aging population and three -- count 'em -- viable communist parties and one socialist party (PASOK) that was at that time the largest party in the country. Current newspaper reports and email accounts from a friend there sound pretty ominous.
Years ago a prominent foreign politician -- I'm sorry I can't remember who -- was asked how his country went bankrupt. He replied "Two ways. Slowly at first, then quickly."
Your analysis starts by excluding any taxes you find inconvenient (such as, apparently, social security, inflation, tariffs, ad-valorem taxes, and especially state and local taxes -- which you somehow don't regard as governments) to get the numbers you want. If a business did accounting the way you just did, they'd rightfully land in jail.
I had assumed the OP was talking in terms of the federal government, as that is the government debt that is most criticized. Also, did state and local taxes not exist in 2000? I would assume the tax and spending ratios would be close to the same.
Also, if the government got to do accounting the way businesses do, then they would be able to capitalize things like infrastructure costs. But because our governments can't, transportation funds dry up and we end up with decaying infrastructure.
You seem to suggest I'm being deceiving here, but all I'm pointing out is this: We had a recession caused by the private sector. As a result of this recession, tax revenue went down, because taxes go down in a recession. Spending also went up, because spending on safety net programs intended to mitigate recessions goes up. And certain people, like yourself apparently, think this is an unprecendented catastrophe. And our long-run debt projections are almost purely a function of healthcare costs and have nothing to do with aging or population trends.
You fail to mention who's going to pay it then? It must wonderful to be an Entitled One and write checks that someone else has to cash.
Where is it written that a country is required to eventually reduce it's national debt to $0? The US will not "die" and leave a bunch of credit card bills to its heirs, like human being. China is not going to knock on our door, throw a bunch of IOUs in our faces, and demand we pay up or they'll break our legs. The figurative way this could happen is if our debt causes expensive borrowing costs or massive inflation. Why don't we wait for either of those to start to happen -- none of which has happened in countries with much greater debt than US that control their own currency (as we do), like Japan -- before you throw the "future burden of our kids" argument out?
Even then the government was obviously bloated beyond all recognition, with government "jobs" that required little or no work being handed out as political favors.
I posted this link down below, but public sector employment has completely collapsed since the recession[0]. So, I can't imagine too many jobs are being handed out this way.
Greece had multiple problems, and yes, government corruption was one of them. It also has no control of a central bank to increase/decrease the money supply. Its government does not also does not possess roughly $100 trillion in asssets[1]. I don't like the idea of selling Yellowstone to Disney (for example) in the face of fiscal deficits, but if you're going to make the "future generations" argument, it's more accurate to compare the government debt to government assets than the government's tax receipts in a single year.
> We had a recession caused by the private sector.
I was going to stay out of this thread but, no, not with something like this.
The recession was not caused by the private sector. It was caused by government policy that enabled people to buy homes they should not have been able to buy. That was the primary enabler. With at that one gating element what happened would have been impossible. The private sector worked with and within the framework provided by our inept politicians, who never seem to have a handle on the concept of unintended consequences.
Let's not forget the millions of Americans who got on the gravy train knowing, full well, that they couldn't really pay for that million dollar home with their $75K combined salaries. Those among our compatriots who took part in this were another significant gating element. Without their participation this wouldn't have happened.
There are three groups destroying our country from the inside: Politicians, government and unions
Thanks for this very well crafted response (could actually feel my frustration subside as I read through your post). This is precisely the kind of sanity that is sorely lacking in today's pop-discourse.
Regarding obstacles to economic growth, a key factor was mostly omitted in the OP's analysis, regulatory capture. The result of large organizations failing to innovate and, instead, turning to regulators for legal protections from competition (e.g. startups). Lawrence Lessig has become an outspoken critic in favor of reforming lobbying rules[#]. In fact, I believe he mentioned that he came to embrace this cause after having several issues he cared about (i.e. net neutrality, copyright, etc.) defeated at the hands of monied interests.
It seems like we agree far, far more than we disagree.
All I meant by a high burn is that we are net negative more than a trillion dollars per year. I believe we probably need more taxes and less spending to solve it (or just a lot of growth).
Yes, we should just spend less on healthcare. We have a broken system right now.
I agree that social security has a real problem with the income cap. I also don't think I said anything about raising the eligibility ages.
I also agree that discretionary spending is eseentially irrelevant, and entitlement and defense spending is the issue. I believe I said this too.
(Note, this is an honest question on my behalf -- I don't have a preconceived opinion on this matter.)
Do you have any data points about Keynesian deficit spending being effective in more recent times? I was under impression that it hasn't had much effect on Japan's "great recession" or when it was embraced in US under -- ironically -- republican presidents, most recently George W. Bush.
I recall "pump priming" also being used to justify tax cuts which came without accompanying spending cuts.
We haven't needed Keynesian deficit spending in a long time because the Federal Reserve has done a decent job "moderating" economic cycles. Too much growth/inflation, put the brakes by raising interest rates. Too little growth, stimulate growth by lowering rates. Some economists call the 1980-2000 period "the Great Moderation" for this reason.
One of Japan's issues has been that its central bank was not with loose with monetary policy as it could be. Investors expected the central bank to raise interest rates at the slightest hint of a recovery... which they did, thus limiting recoveries. Ben Bernanke wrote a paper in 2000 (when he was a professor at Princeton) criticizing this -- http://books.google.com/books?id=WAgXuZxPvrUC&lpg=PA149&....
You really have to go back to the Great Depression for events that would enable a good analysis of the impact of federal deficit spending. I refer you or anyone else to Christina Romer's paper -- http://elsa.berkeley.edu/~cromer/What%20Ended%20the%20Great%...
Romer was one of Obama's economic advisors in his first term. She suggested the 2009 American Recovery and Reinvestment act should have been $1.8 trillion, instead of the $800 billion it ended up being[0]. She also, under political pressure, gave the estimate that the stimulus would keep unemployment under 8%. Oops.
This is typically what happens in practical execution -- due to political posturing, the stimulus isn't as much as it needs it be or is oversold in its ability to help. Then the opponents say "nyah nyah, stimulus doesn't work, all toy did was cause a bigger deficit, so let's cut government programs instead!" And then everyone acts surprised when cutting spending leads to an economic contraction and everyone ends up with an even bigger deficit. The UK has acted out this drama to the tee, to disastrous consequences[1].
>>> It would seem to me that if you made all payroll eligible for taxation, you would only be impacting those well into the upper-middle class, and would ensure solvency for at least 75 years.
Assuming no change in economic behavior.
Incomes at that level can be restructured into a variety of vehicles (stock compensation, deferred compensation, stock options) that would not be a subject to SS.
If you have a high burn, you either have insufficient revenue or excessive costs. I have gotten so frustrated the past four years at the demagoguery of the national debt as a result of excessive costs.
These are the data points I want to point to every time someone suggests our national debt is "unsustainable":
- In 2000, the federal government collected tax receipts of 20% of GDP[0]. From 2009-2012, these tax receipts were around 15% of GDP. This is due to, as you'd imagine, the huge private sector deleveraging that happened in 2008 and the fact that, politically, any suggestion at raising taxes gets you called a Kenyan Muslim Communist. Yet we didn't seem to have a problem with growth when taxes collected were much higher than they were now, as a percentage of the economy.
- 2/3 of our federal budget is spent on Social Security, Medicare/Medicaid, and defense. Any issues with Social Security being considered unsustainable is that only $113,000 of payroll is eligible for taxation. It would seem to me that if you made all payroll eligible for taxation, you would only be impacting those well into the upper-middle class, and would ensure solvency for at least 75 years. Legislation to do so was recently proposed by some Democrats in the Senate[1].
- We spend a lot on Medicare because we spend a lot on healthcare. We spend a lot on healthcare because we are the only first-world country in the world that doesn't put a ceiling on how much health care providers (hospitals and drug companies) can charge, even for basic services. Yet those that have good insurance are completely price-unconscious. We essentially have the worst of both worlds -- not enough free market forces for health providers to price competitively, and yet not enough price controls either. If you have a free 30 minutes, I highly recommend anyone read Steven Brill's recent writeup in TIME magazine[2].
- It is a complete fallacy that we're living longer, so therefore we have to jack up the age of eligibility of programs like Social Security and Medicare. Most gains in expected life expectancy over the past several decades are due to reducing infant mortality -- in other words, the only change is that we have less people that died before they could even pay anything into SS. Furthermore, most life expectancy gains are concentrated on the wealthy -- those that don't even need Medicare. The life expectancy for working-class Americans is actually shrinking.[3]. I'm not really sure why we need to cut government benefits for janitors because lawyers are living longer. Paul Krugman is constantly trying to explain this on his blog[4].
- If you want GDP growth after a recession caused by massive private sector deleveraging, Keynesian government budgets are exactly what you want. Beyond stimulating spending when everyone is clinging on to whatever money they have because they're living paycheck to paycheck, with US treasury interest rates under 2% for years, this is the perfect time for our government to run deficits at cheap interest rates.
The OP says "Borrowing money to get ninety growth cents on the dollar does not count, although that may work for a while." But in current conditions mean we'd be getting much more than ninety growth cents on each deficit dollar. Conversely, cutting each deficit dollar results in much less growth than one dollar. This is known as the "fiscal multiplier," and there is a lot of research showing that in depressed economic conditions, the multiplier is much higher than 1.0. The utter economic clusterfuck in Europe is because too many people in controlling the Euro felt the way the OP does, so you have countries like Greece and Spain cutting their budgets to eliminate deficits, yet resulting in such a harsh economic contraction that their budgets end up with even bigger deficits.[5].
- We obviously have a shitload of waste in the federal government. You can't have a $3 trillion budget and not have some dumb stuff in there. But for the purposes of any macro fiscal impact in terms of GDP or unemployment, it's literally irrelevant. After Social Security and Medicare/Medicaid, you're left with $1.3T in the budget, over half of which is military spending[6]. Yeah, we have too many military bases and we probably have some useless bureaucrats in the Department of Transportation. But for the most part this spending is on core government programs that are helpful and that people like, which is why the only specifics Mitt Romney could give on what programs he would actually cut was Big Bird. I'm sure you could cut $100 billion with nobody really caring, and we should obviously strive to have the least wasteful government possible, but are a few wasteful programs the reason why democracy is going to unravel?
- In the early 1990s, it was legitimate to argue the federal deficit was crowding out private sector growth. Deficit spending required the Federal Reserve to keep borrowing rates high to fend of inflation, which meant it was more expensive to borrow money for any sort of investment. As George H. W. Bush and Bill Clinton passed tax increases in 1990 and 1993 to balance the budget, the Federal Reserve was able to lower interest rates in lockstep, thus preventing any fiscal contraction. In other words, counterbalancing public spending with looser monetary policy can be a good receipt for stimulating growth[7].
However, the Federal Reserve rates have been at zero for years now, because the recession of 2008 pales in comparison to 1991. If you make money as cheap as possible the private sector continues to say "meh, I think I'll just hoard profits" and you don't have any inflation even with absurdly cheap money, then there are no more bullets in the monetary policy gun left, but bless Ben Bernanke for still trying (QE, Operation Twist, etc).
Yeah, yeah, "OMG HYPERINFLATION WEIMAR ZIMBABWE!" The same people have been yelling this for years. Wake me up when the Bureau of Labor statistics reports a CPI inflation over 3%[8].
- 2% growth isn't great, but it's not going to cause democracy to unravel. It may cause democracy to unravel when 99% of the wealth generated by that modest growth is concentrated in 1% of the population, however[9].
In conclusion: in principle, there's nothing really too controversial about what the OP is saying. We should absolutely be talking about the ways to grow the US economic pie so that our political process doesn't keep grinding to stalemates over who gets what of the pie we already have.
Our government isn't perfect. It could do a lot to improve a lot of things to encourage growth, and many of them aren't even fiscal in nature (e.g. patent reform). But if you're just going to point to the national budget, echo popular political talk-show points about "$16 TRILLION IN DEBT OUR GRANDKIDS WILL HAVE TO PAY" and "WE'RE ON THE ROAD TO GREECE" then I'd argue you're completely missing the forest for the trees.
[0] http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...
[1] http://vtdigger.org/2013/03/07/sanders-reid-defazio-introduc...
[2] http://healthland.time.com/2013/02/20/bitter-pill-why-medica...
[3] http://www.nytimes.com/2012/09/21/us/life-expectancy-for-les...
[4] http://krugman.blogs.nytimes.com/2013/03/05/the-life-expecta...
[5] http://www.imf.org/external/pubs/ft/wp/2013/wp1301.pdf
[6] http://www.cbo.gov/sites/default/files/cbofiles/attachments/...
[7]http://www.washingtonpost.com/blogs/wonkblog/wp/2012/08/06/w...
[8] http://data.bls.gov/timeseries/CUSR0000SA0?output_view=pct_1...
[9] http://money.cnn.com/2012/12/03/news/economy/record-corporat...