Another note about yesterday's summit

2/24/09 11:23AM EST

As I noted yesterday, Barack Obama reiterated his promise to return to pay-as-you-go rules. "In recent years, we've strayed from this rule," he said, "and the results speak for themselves."

The pay-go approach is based on a very simple concept: You don't spend what you don't have. So if we want to spend, we'll need to find somewhere else to cut. This is the rule that families across this country follow every single day -- and there's no reason why their government shouldn't do the same.

This is sort of ridiculous. Americans everywhere expend beyond their immediate means all the time. It's gone too far in the last many years, but there's nothing wrong, in principle, with buying some stock, taking on a bit of credit debt, having a mortgage on a house, or putting money into a certificate of deposit account. We'd actually have some pretty big problems on our hands if Americans suddenly turned to pay-as-you-go personal budgeting, even though they're certainly moving into less risky positions as the economy nosedives.

It goes to show, I think, that even America's least neo-Hooverite politicians sometimes think in neo-Hooverite terms--with the peculiar belief that regular people shouldn't invest in their own futures, especially when times are hard, and that the government should set a good example for them.

Comments

Most US states require a balanced budget. So in good times they fight and compromise to balance the budget. When bad times occur, they cut the budget and cut services. The later is very bad for bad times, because it subtracts public spending at the same time as the rest of the economy is contracting.

This is cyclical policy as we practice it. And that practice is bad, so the Fed. gov't usually ends up acting contra-cyclically to fill the potholes in the state spending cutbacks. The Feds wouldn't have to do this if states kept a rainy day fund of surpluses in good times to spend when bad times occurs and state revenues fall. But they don't.

Similarly, the Fed government doesn't have a rainy day fund of surpluses in good times (except the much abused social security trust fund, which is regularly used as ready cash even though it is supposed to fund future payments decades away). And, the Feds usually run big deficits to pump up spending to counter bad times (in addition to the spending they send to the states for their negative revenue gaps).

Bottom line: Pay/Go can't work as current practiced. We don't set aside rainy day funds when times are good, so in bad times we always have a revenue shortfall and a great reluctance to cut spending because that makes the bad times even worse.

Over the 'business cycle' (good times and bad times taken together), we don't balance revenue and expense. So, on average, annual deficits (good times and bad) become added to previous deficits making the national debt larger (along with interest we pay to borrow the money to pay the debt).

I have never seen any time except under Clinton when annual budget surpluses were proposed and enacted, and they probably will never occur again. Alan Greenspawn denounced the surpluses as dangerous to our national economy! GW Bush promised to give the people their money back, and he did, and then some more. So much for rainy day funds (surpluses in good times to offset deficits in bad times).

Neva happen!

Posted by: JimPortlandOR on February 24, 2009 12:15 PM

meksıka biber hapı

Posted by: biber hapı on August 26, 2009 04:08 AM

Posted by: Rap on September 7, 2009 05:23 PM

kelebek chat

Posted by: kelebek sohbet on November 1, 2009 12:52 PM

en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.en eğlenceli site burası.v

Posted by: sikiş izle on November 13, 2009 05:06 PM

sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.sesi videolar burada.

Posted by: seksi on November 13, 2009 05:06 PM

bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.bütün filmler burada.v

Posted by: film izle on November 13, 2009 05:06 PM

Another note about yesterday's summit

Comments

Post A Comment

About

Recent Entries

del.icio.us

Articles

Recent Comments

Blogroll

Search

RSS Feed