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[mainiac]

Back in 2000 we were told that we needed TEMPORARY tax cuts to get rid of the Clinton surplus

Why is surplus a bad thing? I mean, sure, if you got money just sitting around doing nothing you're wasting opportunities. But AFAIK USA still had debt during that time. Shouldn't times of surplus be used to pay off debt so you can borrow again when you need it without hitting the debt ceiling?

Ding ding ding ding ding!

And having money in the bank isn't a bad thing either.  Sovereign wealth funds can be invested both domestically and abroad, meaning that the money is hardly idle.

[counting]

Back in 2000 we were told that we needed TEMPORARY tax cuts to get rid of the Clinton surplus

Why is surplus a bad thing? I mean, sure, if you got money just sitting around doing nothing you're wasting opportunities. But AFAIK USA still had debt during that time. Shouldn't times of surplus be used to pay off debt so you can borrow again when you need it without hitting the debt ceiling?

Ding ding ding ding ding!

And having money in the bank isn't a bad thing either.  Sovereign wealth funds can be invested both domestically and abroad, meaning that the money is hardly idle.

Something about budgets is interesting, that there is never enough spending at all time. Every time there is surplus and an apartment in government will try to squeeze it's budget in. And with a surplus that can pay for it in short term, most of the time the congress will pass the budget for a short term solution then to deal with the debt in the long run, simply sine the election next year is more important than the debt no needs to be paid in 10 years.

And like every credit card holder, once have surplus cash, the first thing you think of is not how to paid the debt from before, but how to spend the cash that lie right in front of you. And the temporary satisfaction will not give you mental warning about some possible future debt default. How can anyone in 2000, foreseen there will be just 8 years before another economic crisis happened? You probably were thinking the economic growth can last for 20 or even 30 years, and paying debt will be the problems of the future, not a 4 years or even 8 years runs problem.

[mainiac]

It doesn't have to be that way though.  Plenty of governments have taken another route.  Heck, the US was taking a different route from 1996-2000.

But we shouldn't be doing that now.  You don't try to pay off debts in the middle of a horrible recession.  That's like trying to pay off your debts right after getting laid off.  What we should be doing is ramping up spending to get the economy back to full capacity, then once we are there making the deficit a priority in good times.

The heart of the matter is that all the "fiscally conservative" budgets out there are actually far worse for the budget then if congress went home tomorrow and let the bush tax cuts expire on schedule.  And the budget proposal that would balance the budget soonest is from the House Progressive Caucus.  Naturally it gets no media time in the least but it is far more fiscally responsible and it budgets for shot term stimulus.  But everyone knows they are spendthrift liberals despite all the evidence to the contrary.

[counting]

It doesn't have to be that way though.  Plenty of governments have taken another route.  Heck, the US was taking a different route from 1996-2000.

But we shouldn't be doing that now.  You don't try to pay off debts in the middle of a horrible recession.  That's like trying to pay off your debts right after getting laid off.  What we should be doing is ramping up spending to get the economy back to full capacity, then once we are there making the deficit a priority in good times.

The heart of the matter is that all the "fiscally conservative" budgets out there are actually far worse for the budget then if congress went home tomorrow and let the bush tax cuts expire on schedule.  And the budget proposal that would balance the budget soonest is from the House Progressive Caucus.  Naturally it gets no media time in the least but it is far more fiscally responsible and it budgets for shot term stimulus.  But everyone knows they are spendthrift liberals despite all the evidence to the contrary.

I believe the US government, and many governments in the world during 2008-2009 recession ALREADY done the expending expenditure policies. And 3 years later today, we have seen the effects, and side effect as well.

The money flows did reduce unemployment rate (a little), bring back GDP growth, etc, but the side effect of increasing inflation rate (almost back to where it was in 2007), and increasing government debts, etc. Although all these are much to be expected as usual, but the problem now is - should we keep these policies going? There is no afterward contingency plan for these kinds of policies, and no history lessons can be used to help and see how to "soft land" it. (The last time this being used ended due to WWII erupted)

Generally speaking, all the indexes related to the side effects are not reaching a dangerous level, hence it's a natural tendency for keeping it going, and see if it can bring back the good old prosperity like the end of last century. However, in my own opinion, that this artificially created expenditure has its limit, like shooting morphine to ease the pain for your body and heal over time, but this has to end sometime before being addictive to it.

P.S the monetary policy trick is used up already, making a near zero interest rate by FED, hence right now it's double stimulate already in theory.

[dragonshardz]

This entire thread:

Yet more proof that the USA is fucked because politicians are idiots.

Well done, dumbasses.

...*clap*...*clap*...*clap*...

Well, at least that still works.

[Aklyon]

...*clap*...*clap*...*clap*...

Well, at least that still works.

Do we need to put a politician into a potato to make it work, though?

[Heron TSG]

Well done, dumbasses.

Would you mind not being so hurtful?

[counting]

Well done, dumbasses.

Would you mind not being so hurtful?

It's a phase, it will pass. 

[Aklyon]

Everyone gets mad at the politicians when they do crap, but reverse as soon as the politicians start doing things right again.

[mainiac]

The money flows did reduce unemployment rate (a little), bring back economic growth rate, etc, but the side effect of increasing inflation rate (almost back to where it was in 2007),

Inflation briefly dropped below 0% a bit back and has only spent a brief period of time above 2% since the crises.  Generally, we've been looking at around 1% inflation.  The inflation target is supposed to be around 2.5%-3% so clearly we have less inflation then we are supposed to.

Also keep in mind that it's not usual wage/core inflation that is leading to the very mild inflation we are experiencing.  Instead it's rising imported commodity prices leading to inflation in a few things while price stickiness keeps everything else basically stagnant.

In summery any description of the past few years which talks about us having inflation is wrong, wrong, wrong, wrong, wrong.  We have stronger disinflationary pressures right now then at any point since the great depression.

That's the entire point of stimulus btw, have the government buy up the excess supply of goods and labor so that the economy returns to a normal balance and a healthy, typical level of moderate inflation.

[counting]

Inflation briefly dropped below 0% a bit back and has only spent a brief period of time above 2% since the crises.  Generally, we've been looking at around 1% inflation.  The inflation target is supposed to be around 2.5%-3% so clearly we have less inflation then we are supposed to.

I think the data needs to be update a little
http://www.fintrend.com/inflation/Inflation_Rate/CurrentInflation.asp
And you are right about the deflation in 2009, but that are the aftershock right after 2008 with banks are closing down, so there were simply not enough money supply floating around. But watch the inflation rate go up so quickly to last month of 3.56% (in less than half a year), it's a signal that although not to a level of critical as I mentioned before, but its clearly a very strong sign of artificial stimulate. Someone may interpret it as the combination effect by economic revived, but I am not convinced, and I think it will keep going up till new policies arrived, and I predicted that in the next year, governments will try everything they can including masking the number to keep it down (or just the looks of it). But the policies of expenditure will keep going till the election.

Also keep in mind that it's not usual wage/core inflation that is leading to the very mild inflation we are experiencing.  Instead it's rising imported commodity prices leading to inflation in a few things while price stickiness keeps everything else basically stagnant.

In summery any description of the past few years which talks about us having inflation is wrong, wrong, wrong, wrong, wrong.  We have stronger disinflationary pressures right now then at any point since the great depression.

That's the entire point of stimulus btw, have the government buy up the excess supply of goods and labor so that the economy returns to a normal balance and a healthy, typical level of moderate inflation.

Deflation is mostly natural in recession, it's the general phenomena when demands are demolished. But what I am saying is that the artificial stimulate created by governments right now, are a very temporary shots, and has already done its part. It ALREADY creates the exact effects it supposed to. (Not as effective as many people hoped for, and unemployment rate had already going back up since Q2 2011)

As in my previous post saying - it's not the policy is not effective, but rather when and how to end it (prepare soft landing)? A signal like keeps raising debt ceiling is not a sign that the government is ready to let go, but rather it wants to keep it going. And my opinion is it's time to plan how to end this temporary policies RIGHT NOW, or we will have a bigger "hard landing" waiting ahead instead of healthy recovery. 

P.S About the rising prices of importing goods, it's simply due to the lack of supply in international markets. Every countries in the world are busy saving themselves, trying to hold on to their capitals domestically. But the increase demands created by US government expenditures and money borrowed from national debts are whats keep the price up. It's a sign that's even more alarming about over expenditures, since it means the domestic productions in US were not keeping up with the growth of demands created by this policies. (But as the theory goes that it will catch up eventually, since the capitals put into long-term investments will not show up in the short run, and THAT should be the foundation of a true economic recovery process)

[mainiac]

You are looking at a very, very noisy data set.  Just look at the data for 2006, at one point it shows 1.31, at another it shows inflation above 4%!  This was back when the economy was still operating in normal conditions.  I don't know exactly where this data is coming from but generally one tends to focus on "core inflation" which is more concerned with wages and price trends over time.  And core inflation is very low, barely above zero.  In fact wage growth has been negative recently by some recent surveys, a very, very bad sign when you consider that wages tend to be very sticky downwards.

To understand the dangers of using a noisy data set to consider inflation, think about what the effect would be of say... political unrest in the middle east.  Gas would get more expensive meaning that simple, headline inflation would go up.  But employment wouldn't go up, business confidence wouldn't improve, etc.  All in all, it would be bad for the economic recovery and would discourage, not encourage investment but headline inflation would go up.  But wages and business and consumer confidence would not go up meaning the core inflation wouldn't be rising.

[counting]

You are looking at a very, very noisy data set.  Just look at the data for 2006, at one point it shows 1.31, at another it shows inflation above 4%!  This was back when the economy was still operating in normal conditions.  I don't know exactly where this data is coming from but generally one tends to focus on "core inflation" which is more concerned with wages and price trends over time.  And core inflation is very low, barely above zero.  In fact wage growth has been negative recently by some recent surveys, a very, very bad sign when you consider that wages tend to be very sticky downwards.

To understand the dangers of using a noisy data set to consider inflation, think about what the effect would be of say... political unrest in the middle east.  Gas would get more expensive meaning that simple, headline inflation would go up.  But employment wouldn't go up, business confidence wouldn't improve, etc.  All in all, it would be bad for the economic recovery and would discourage, not encourage investment but headline inflation would go up.  But wages and business and consumer confidence would not go up meaning the core inflation wouldn't be rising.

The data I believe is used from the US department of labor, and if you go into Bureau of Labor Statistic and find the CPI index section (which I'll give you link), and you can see the statistic done by the government itself. And the raw data adjusted of "CPI annual change in June 2011 for urban wage and earners and clerical workers" (CPI-W : that is the definition of inflation rate for general population, which means it affects the working class more) is 4.1%, and CPI-U (for all urban consumers) is 3.6% as in the previous post, which is the most commonly used index in most economy statistic charts.

Let's see what does it mean by core inflation rate - that is CPI-U for all goods but food and energy (Let's not discuss if this is valid or not yet). And you should NOT compare inflation rate of all things with just "core inflation rate" (You can't compare an orange with a slice of an orange). You should compare them within the statistic group. The "subgroup of the CPI-U changes rate in all less food and energy" (core inflation rate) is 1.6%, and in CPI-W it's 1.7% (June 2011). And by comparing with the core inflation rate itself. You will see a different pattern in the long-term scale (since it measure the "relatively non-volatile" commodities, so it's not an index to compare month by month). It drops from nearly 2.5% in 2001, to just above 1% in 2004, than climb back up to 2.3% peak at 2007-2008, than drop strait down from 2009 to 2010 at 1.5%. It never drop below zero like inflation rate (CPI-U change rate).

Then let's see what this means. Since food and energy is not included in the statistic, hence the money you spend on gas, and buying food and everything related is not included. So it generally it does NOT be a good indicator of the whole economic environment. By nature, the core inflation rate does not easily be affected by the over all economy. Hence it's right that it is an indicator tells us that no one are spending more on things other than foods and gas, but since the wage of working class is actually shrinking, and with the food and energy price are shooting way up. The people with low income will find daily lives been harder and harder.

Let's see if we just observed the CPI-W changes for food only. And it's consistence with the general CPI trend. (also climbing back up to Jun-2011 as 3.7% in CPI-W). And it wend down below zero during the crisis. (Keeps growing to the new high before and at the beginning of crisis in 2008 till over 6%, which is hard for the poor). And if we just looked at the transportation department, or medical department, we will see that they all hit hard during the crisis. But all climbing back up from Q3 last year 2010 by a lot. (A interesting thing when looking at the housing department, you will see that its inflation rate is even lower than core inflation rate at only 1.3% in June 2011, and it means the housing market is lagging behind and still not recovering, its mostly around 0% since 2009)

If you simply observed the trend of core inflation rate, you may come to an conclusion that the crisis is not over. But if you just look at it ONLY, you may come to a strange conclusion that the 2008 crisis never happened (it never went down in 2007 or 2008 but it DO went down since 2002 till 2004). Hence I don't believe that it's a valid reason for keep supporting expenditure policies going. And if you look at a even longer period of 50 years, than in fact we are still in the high plateau since late 1980s. It peak at around 2006, and expected to go downward for the next 15 to 20 years. Hence if you want to argue that we are still in a steady (downward) train, I don't think it's wrong, and again I think the temporary stimulation can NOT reverse the effect of longer trends for long. It will only boosted so much in the short run and is nearly coming to the end. (can still last and tolerable maybe in 1, but 2 years top) Then economy may land strait down even harder in the future if the policies unchanged.

P.S Right now, we still have time to plan a soft landing, although expenditure policy itself was originally meant for the soft landing. However the government and the people tend to think it's a policy for the glory of extensive economic boosts, like it's still the good old 90s. I don't think most people realized that the time and the world were already changing. (Possibly at a crossroad right now). I got a feeling that we are repeating the different perspective of the famous keynes vs. hayek factions debate here.

[RedKing]

Everyone gets mad at the politicians when they do crap, but reverse as soon as the politicians start doing things right again.

Nah, they pretty much stay mad at them all the time. It's a social norm in America to blame politicians for all the ills of society. It's also a social norm to paint yourself as a detached, unbiased nonpartisan who is equally disgusted with both parties, even if you vote 99% of the time with the same party. We're full of shit that way.

[mainiac]

Counting, you still haven't addressed the fact that you are looking at a very noisy data set.  Are we supposed to conclude that in the summer of 2006 the US economy was overheating but three months later it was running way below capacity?  You simply can not be making predictions based off that noisy a data set.  It would be like trying to judge a teams pennant chances based off how well they played in the 4th inning last night.

That data index shows only one year in the last decade where inflation wasn't below 2% at for at least one month.  At the same time it shows only two years in the past decade where inflation wasn't above 3% for at least one month.  So far this is a year where it shows inflation below 2% then above 3%.  What are we supposed to conclude from the fact that we've got monthly data above 3%?

Look at the long term measures, wages, long term interest rates, prices for sticky goods and you will see absolutely no sign of inflation.

I'd be more then willing to put my money where my mouth is on this one btw.  I'd bet you 100 big ones that this so called high inflation is just a fluctuation in a noisy data source.  The test I would suggest is that in the next 8 months we are again going to see inflation on the core CPI acrording to the BLS below 2% for a month.  Here are a few other amazing predictions I'll offer:

Unemployment will remain above 8% for the next year because we aren't recovering from the slump.
Long term non-indexed Interest rates will remain below trend in the next 12 months (unless there's a default due to political posturing) because we aren't recovering from the slump.
Wage growth will remain below 2% in the next 12 months because we aren't recovering from a slump.

They're all symptoms of the same cause.