The Immediate Effects of Budget Deficits
Budget deficits have many effects. But they all follow from a single initial effect: deficits reduce national saving. National saving is the sum of private saving (the after-tax income that households save rather than consume) and public saving (the tax revenue that the government saves rather than spends). When the government runs a budget deficit, public saving is negative, which reduces national saving below private saving.Harvard
What Do Budget Deficits Do?
Laurence Ball and N. Gregory Mankiw
(h/t Subborn Mule)
Anyone see a problem here? :o
Some discussion at Stubborn Mule here.
13 comments:
i aint no fancy talker, but that really makes no sense to me.
I think he's having an identity crisis.
Good thing I didnt go to Harvard.
BWAH... deficits raise interest rates...
"government budget deficits reduce national saving,
reduce investment, reduce net exports, and create a corresponding
flow of assets overseas. These effects occur because deficits also
raise interest rates and the value of the currency in the market for
foreign exchange"
What planet are they on?
They also made up something that doesn't matter....
"National Saving"
National saving is the sum of private saving (the after-tax income that households save rather than consume) and public saving the tax revenue that the government saves rather than spends).
When was this written? I couldn't find a date.
DanF
What Do Budget Deficits Do?
Published April 1996
National saving is the sum of private saving (the after-tax income that households save rather than consume) and public saving the tax revenue that the government saves rather than spends).
National Savings = trade deficit.
:o)
Mankiw really has no clue that everyone can't run a surplus at the same time. Your income is someone else's spending, follow that idea to the Nth degree.
reading that statement I can see that Mankiw knows what time it is. He ran right over private savings and highlighted the fictional national savings. Bait and switch. He knows he's bleeding.
Wasn't that also an "ACCOUNTING TAUTOLOGY"? Sounded like a long way to say that budget defecits creates private savings which means that your not running a surplus. You can't make this stuff up!
Complete opposite of reality. Stunning. Charts of sectoral balances must have to be shredded before they come anywhere near anyone of his classes.
it appears he's attempting to define "national" to mean private savings + public savings (as if there is a limited supply of stock to be shared between the two). Perhaps we should tell him that we have a fiat currency issued and controlled by "the public"?
Here's the good news that I see with this....he's at least aware of the MMT-type deficit arguments against him and his "ideas." I predict that he's going to "break down" in a cascading series of "revelations" as the economy "progresses" just as Krugman did with interest rates thanks to the EU crisis. Let's hope so anyway!
What did they say about building your house on sand again?????
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