Friday, March 27, 2015

John T. Harvey — Why We Cannot Afford The Republican Budget

Early this morning, the Senate approved a Republican-authored budget that features deep cuts in spending, no new taxes, and hopes of a balanced budget within the next decade. However, not only could their plan never achieve what they hope, it would be an absolute economic catastrophe. Let’s hope it never sees the light of day. 
The level of ignorance regarding federal government budgeting is horrifying. I don’t just mean among lay people or the general public, but right up the both houses of Congress and the White House-–you know, the people who actually make the decisions. Nor is it limited to one party. While the Republicans have been far more rabid about it, the 
Democrats, too, are anxious to see the day when the budget deficit is not only smaller, but eliminated entirely. Best of all, they say, we might even reach the point of having surpluses that can cut into our massive national debt. While they may prioritize these goals differently, it appears that just about every single politician in Washington shares these sentiments. 
God help us.....
Taking the moron fest to task.

Forbes — Pragmatic Economics
Why We Cannot Afford The Republican Budget
John T. Harvey | Professor of Economics, Texas Christian University


Matt Franko said...

That budget document the House put out last week was like a kick in the stomach for me .... pretty terrible...

Anonymous said...

Because the electorate doesn't know how their own currency works. Politicians are always twisting the fears and spitting them back at the people, no matter what regime.

NeilW said...

We're going to have to learn the hard way I feel.

Ralph Musgrave said...

There’s a possible way out of this, which is to QE the entire debt over a period of years. Doing that would actually produce a set up that Warren Mosler advocated, i.e. where the only state liability is base money which pays no interest. Milton Friedman advocated the same.

Since what motivates the Neanderthals in Congress and other elected bodies round the world are the negative emotional overtones of the word “debt”, the Neanderthals would be thrilled.

In that scenario and given a recession, the central bank and treasury would announce they were going to issue more “savings” (aka dollars) for the private sector. And the emotional overtones of the word “savings” are much better than the overtones of the word “debt”, so the Neanderthals would probably be happy with that.