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[counting]

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.

Believe me, it's not just a phenomena in US, but to every country divided into 2 parties. And we always have to vote for the better one in the worst kind. And people ARE in fact not radical and belong to a somewhat no-participate political non-party most of the time. People are busy with their private lives everyday, and only a few days or weeks in years they will think about politic, and policies. And for my experience, most people will base on the feeling in their recent daily lives to decide who to vote for. Hence it's always effective if politicians using short term phenomena and promises in election campaigns.

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.

First, you do agree that we are in the slump (recession what ever you called it, but not to a point of depression). And it's not the absolute number of "inflation" is what I am talking about, but the speed of of jumping from actual "deflation" as -2% (not seen after WWII, and it's different from disinflation, which is the decreasing of inflation) back into actual "inflation" of 3% (as so called normal rate of inflation since 1990s) in just under 2 years. (And recently keeps increasing from 1% to 3% in half a year). So let's talk about "long terms" in years.

Its very different as when you jump from 2% to 7%. in the early 90s (in 4 years), or 5% to 10% (back and forth in 10 years) in the late 70s. Right now it's going from negative -2% to positive 3% in 2 years. And it all done during recession which most agree we are still in it, and this has only one reason for it to be happening - governments artificially stimulate. And of course in the very large scale (50 years), as I said we are in plateau. And in 100 years we may see that the past century since the great depression, everything are going backup during the war and going down in the 1950s, and peak in the 1970s, going down in the late 1980s, backup and again slowly plateau for decades to 2007, then it drop sharply till now. (And you think we are still in plateau? or it can keep going forever?)

And from 1949 to 2007 (till even early 2008, is it long enough?), we are indeed in "inflation" all the time, never one drop into "deflation". We are in inflation for so long, that it seems "normal" to everyone. The problem is not we are in inflation or not, but whether in an unnatural "inflation" changing (Like in the 70s peak from 5% to 10%, even 15%, or like recently dropping to negative and back to positive). And I never said current inflation rate is "high". I keeps saying it's still under tolerate level (not to a dangerous level), and it can keeps going for 1 or 2 years under governments expenditures stimulate. But it will not be able to sustain for much longer (probably by other factors like the national bonds credit level dropping, and other nations no longer willing to possess US government bonds. No one paying, hence no more expenditures). And inflation will keeps going up under this condition.

And the core inflation rate (using CPI-U) is always dropping since 2009, and never once above 2%. (Currently still 1.6% under 2%). Mｙprediction is if the expenditure policies unchanged, than we will see core inflation rate over 2% very soon, as quickly as in Q4 this year. And the unemployment rate is already in an unnatural high almost always above 9% since 2009. The little effect of dropping 1% unemployment rate from nearly 10% last year to 9% this year, is not an impressive effect by any mean. And the zero interests rate setting by the FED can last for a very long time, simply because its a policy not a phenomena observed like CPI. And by past experience in Japan, the 0% or even negative interests rate can last for decades, (and generate many nasty side effects in the process). As for wage growth, it's also not the absolute increasing amount that is important, but the relative increase from inflation is. And if the growth of salary is not keeping up the inflation rate, than people are in fact shrinking their effective wage. This was already happening in Q1 2011.

And I agree that these are phenomena due to recession (and the reactions from government policies), but what I disagree is that if we can keep using the policies to battle the recession, and for how long? The whole topic is not about the phenomena of recession, but whether the actions like rising the debt ceiling can be sustained for long? and how long the recession might last? and how severe it can be? Keynes may say that we can battle and even eliminate the recession effect (by expenditures or other means), hence we can all live in constant growth ever after (except minor fluctuations). But I tend to think like Hayek that there is always prosperity and recession coming and going in cycles, and they are not force you can battle using the resource of public sectors. Rather it must be resolved within the private sectors (using methods related to them), since it's the unbalanced in private sectors created them in the first place. The government budge compare the whole economy is always just a relative small percentage, hence the stimulate it can generate is also proportional, limited and never going to last very long.

From the history I believed that the recession is a process that can last for years even decades, just as the process of prosperity can last and growing for years and decades. And I think we are just in the beginning of the previous and already pass the later.

[vagel7]

There is actually an easy solution to this problem. What makes it hard is that your politicians can't agree on it. Raise taxes and take money from the military. As you guys spend the most money in the world on the military(AKA spending like it is WW3) you guys can take a veeeery big chunk of money from the military.

Problem with that is that rednecks will be mad and people will see this as the government not supporting the troops and that means that both parties will take a serious hit, including the president. Politics don't want that to happen so they are back at square one, which means that. If nobody is ready to take a hit you guys will sink quickly.

[mainiac]

I really don't understand what the intellectual foundation is of your argument.  No where have I ever seen a theory put forward that posits that the size of fluctuations in headline inflation has any macro-economic predictive power beyond the limit extent to which it serves as a negative shock.  The Keynesian argument is straightforward, inflation is linked to aggregate supply and demand and the imbalance in those we are seeing is putting a drag on investment and consumption.

Furthermore I would say that we are clearly in a depression, albeit a relatively mild one.  Interest rates have been at next to zero for more then three years.  We are still experiencing sustained elevated unemployment.  That is a very workable definition of a depression.

If you want to play the Hayek card then you are really changing the rules quite extensively.  For one thing, you are positing that any government spending will crowd out public spending.  I would very much like to know through what channel that is supposed to happen.  Additionally you need to explain why we aren't experiencing hyperinflation, as Hayek says we should have been doing since 2008.

And the 70s comparison is case in point of what I'm saying.  In the 70s, you say huge inflation driven by a feedback cycle of prices and wages.  We are clearly not seeing that today:
http://research.stlouisfed.org/fred2/graph/?g=19R
http://research.stlouisfed.org/fred2/graph/?g=19S

As long as wages and interest rates remain depressed, we are not in an inflationary environment.

All of this really shouldn't be the debate though.  Inflation is negatively correlated to unemployment.  Have you seen those unemployment numbers lately?

[Eagleon]

There is actually an easy solution to this problem. What makes it hard is that your politicians can't agree on it. Raise taxes and take money from the military. As you guys spend the most money in the world on the military(AKA spending like it is WW3) you guys can take a veeeery big chunk of money from the military.

But... the Stargate program Where will we get our aliums?
Seriously, why isn't it a bigger deal to people that we fed 80 billion dollars into nothing whatsoever last year? (blanket "intelligence" spending, appearing nowhere in the official budget) If we're doing something cool with it just let us know, at least some of us would be happy. Otherwise figure out how to intelligence for less.

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.

I was unaware that it was now considered acceptable for the US Government to spend like an 18 year old at his first job in college. Our mistake.

[mainiac]

I was unaware that it was now considered acceptable for the US Government to spend like an 18 year old at his first job in college. Our mistake.

Y'know, people always talk about spending as if spending were sharply rising.  Spending doesn't tend to go above 20% of GDP, low on the international scale and very, very low when you consider that it contains both a huge military and the worlds most inefficient healthcare system.  The US by and large doesn't have a spending problem.

[Eagleon]

Y'know, people always talk about spending as if spending were sharply rising.  Spending doesn't tend to go above 20% of GDP, low on the international scale and very, very low when you consider that it contains both a huge military and the worlds most inefficient healthcare system.  The US by and large doesn't have a spending problem.

Who cares if the rate of spending is rising or not? We're still in massive amounts of debt, and the money that's going towards paying it off now could have been used for more important things, like actually giving our kids a passable education. I had the same math course three years in a row in highschool - they changed what it was called on the transcript, but it was the same general math course, taught by the same teacher. That is unacceptable to me, and to anyone else that wants engineers, or scientists, or competent economists around in the future.

A smart credit owner will pay their balance off as soon and as often as possible, to stay in the green where saving for crisis is possible. That way the money that would otherwise be going towards interest on their debt while they're paying off the bills for their kidney transplant can be spent on normal things like food and shelter. Pretty much common sense - the more you're in debt, the more you have to pay just to keep things afloat.

[Lord Shonus]

Trying to cut spending with the revenue coming in is, to be frank, like giving a man CPR for a gunshot wound to the head. There's just too much money that has to be spent. Not just for domestic needs, either. To continue the analogy, the situation's like a stockbroker's son trying to keep the family afloat after his father decided to quit his job and become a factory worker.

[mainiac]

Y'know, people always talk about spending as if spending were sharply rising.  Spending doesn't tend to go above 20% of GDP, low on the international scale and very, very low when you consider that it contains both a huge military and the worlds most inefficient healthcare system.  The US by and large doesn't have a spending problem.

Who cares if the rate of spending is rising or not? We're still in massive amounts of debt, and the money that's going towards paying it off now could have been used for more important things, like actually giving our kids a passable education. I had the same math course three years in a row in highschool - they changed what it was called on the transcript, but it was the same general math course, taught by the same teacher. That is unacceptable to me, and to anyone else that wants engineers, or scientists, or competent economists around in the future.

A smart credit owner will pay their balance off as soon and as often as possible, to stay in the green where saving for crisis is possible. That way the money that would otherwise be going towards interest on their debt while they're paying off the bills for their kidney transplant can be spent on normal things like food and shelter. Pretty much common sense - the more you're in debt, the more you have to pay just to keep things afloat.

So because we aren't spending enough money on education we need to cut spending?  Where exactly do you think most of the spending cuts of the last three years have been?  (Hint, it begins with "edu" and ends with our economy in the crapper.)

The problem is that we've been cutting taxes like it's going out of style for the past thirty years.  First they cut taxes, then they cut spending to balance the budget then they cut taxes again.  It's no wonder our education is lagging.

But all of this is irrelevant at the moment.  You DO NOT CUT SPENDING IN A DEPRESSION.  But once we are out, it's really time to roll back the insane tax cuts.

[Eagleon]

So because we aren't spending enough money on education we need to cut spending?  Where exactly do you think most of the spending cuts of the last three years have been?  (Hint, it begins with "edu" and ends with our economy in the crapper.)

The problem is that we've been cutting taxes like it's going out of style for the past thirty years.  First they cut taxes, then they cut spending to balance the budget then they cut taxes again.  It's no wonder our education is lagging.

But all of this is irrelevant at the moment.  You DO NOT CUT SPENDING IN A DEPRESSION.  But once we are out, it's really time to roll back the insane tax cuts.

Good job putting words in my mouth You cut spending in a depression when what you're spending does nothing to return us to normal, i.e, our obsession with having the largest military in the world. Who cares now? Nuclear and biological weapons have changed the equation, no one will risk a full invasion of a developed country like the US or Russia. Our paranoia has been out of hand for years.

It was never a good idea to have insane tax cuts, least of all now, when the demand for public services like unemployment are spiking. Indifference is the biggest problem here. The wealthy have the most to lose as well as the most to gain, so of course they're the ones that vote and campaign for every meager cut, down to the bone. Not much we can do to reverse it now beyond paying/forcing people to vote, heh.

[Aklyon]

Make them vote, they'll just be lazy about it.
Pay them, and it'll turn into a bribery competition (though it might help the economy from just paying random people. or not.)

[GlyphGryph]

My reform has always been to treat voting like a Jury pool. A bunch of random people brought together and basically given the job of making the best possible choice (but a secret ballot and numerous corruption safeguards).

[Glowcat]

The debt ceiling thing is, I suspect, just a giant bluff on the Republicans part. Both parties have played this game before... even if this time the bluffer is relying on rabid fiscal conservatives as their base. The corporate interests won't allow their cronies in Washington to ruin them along with the rest of the country.

[counting]

I really don't understand what the intellectual foundation is of your argument.  No where have I ever seen a theory put forward that posits that the size of fluctuations in headline inflation has any macro-economic predictive power beyond the limit extent to which it serves as a negative shock.  The Keynesian argument is straightforward, inflation is linked to aggregate supply and demand and the imbalance in those we are seeing is putting a drag on investment and consumption.

Furthermore I would say that we are clearly in a depression, albeit a relatively mild one.  Interest rates have been at next to zero for more then three years.  We are still experiencing sustained elevated unemployment.  That is a very workable definition of a depression.

If you want to play the Hayek card then you are really changing the rules quite extensively.  For one thing, you are positing that any government spending will crowd out public spending.  I would very much like to know through what channel that is supposed to happen.  Additionally you need to explain why we aren't experiencing hyperinflation, as Hayek says we should have been doing since 2008.

And the 70s comparison is case in point of what I'm saying.  In the 70s, you say huge inflation driven by a feedback cycle of prices and wages.  We are clearly not seeing that today:
http://research.stlouisfed.org/fred2/graph/?g=19R
http://research.stlouisfed.org/fred2/graph/?g=19S

As long as wages and interest rates remain depressed, we are not in an inflationary environment.

All of this really shouldn't be the debate though.  Inflation is negatively correlated to unemployment.  Have you seen those unemployment numbers lately?

I think I said that inflation or CPI-U are all phenomena observed, and thus are indicators very clearly. First of all, economics is not pure mathematical analysis like other science, its always based on observations. Second, economy is not a machine that push as they want and it do as they said, it's more complex as if organic. Hence if you see there is a phenomena like inflation rate, unemployment rate, GDP change rate, import/export change rate, then you know there are causes behind it.

Something very clear that we are observing a recession (I don't believe that it's going down into depression yet, but will gradually sink into it). By observing there are businesses going out or downsize at large scales, there are mass lay off because of that, and wages are cut because of that. Even the ones are hired back will force to accept lower wages. And the production decreased accordingly (you can see that from PPP, it's easy to understand, no workers no products). They are all direct result of the businesses problems, but it's also an observed phenomena, so what's causing business to loose faith? Then that's a big question. I don't think it can be explained easily but over-all it's coming down to the over-confidence in financial market. People chasing the money gain with way too much risks, and many business credits are busted because of it.

Set that aside, let's see what's causing inflation/deflation. And it's a good question too, and what's the root of depression of credibility translate into the change rate of currency/commodity ratio on the open market (namely the price). First, about hyperinflation, its the most easy cause and effect from lose of faith into price. Since there are 3 factors in price - currency, commodity, and open market. Hence first thing about hyperinflation is that it always comes with the underground black market. People's lives goes on, they need to eat, but if you loose faith either with the currency itself or the government supervising the open market, people have to buy goods somewhere. With that more and more commodities driven into black market, price rise up even higher in open market, the negative feedback loop is born. It's straight and simple. And not happening in a country like US with very strong governments and large market infrastructures. Also most modern technologies (electronic transaction, tracking) and monetary supervising system in developed countries have minimized this scenario to happen.

So another more common theme with mild lose in business credit will cause - "deflation". Since business owner lose their credits to borrow more money, or plan future expenses, so they cut their current expenditures. But the market did not changed immediately but slowly, and sometimes more commodities appear in the open market. (Companies may try to sell more commodities to customers in order to compensate future risk). Combining with the reduction of monetary supply (a big cause in this crisis) - not causing by the high interests rate, but simply because financial market went default in their promises, money simply clotting in the financial sectors (liquidity changes). Hence we have less money,  and more products on the market - deflation is born. This scenario has its conditions that the economy is running although not in the top shape, but still 90% strong. (only a figure of speech, not real number)

So here comes the solution of the Kenyans' that since the problem is not enough currency, why not just increase them? Well, there are 2 sides of this policies. First, it is right that artificial increasing the supply of money is a way to solve the monetary clotting situation, as long as they are just restricted in financial sectors. Another side is that, increasing currency flow doesn't equal to printing paper. Currency should be backed by government debts (If the extra spending is not raised by other means like increasing taxes, however it's different from debts since government actually paid them back, someday ). Hence the increased currency actually comes from money borrowed from people. But wait! we encounter a question - If the money is borrowed from the people, and paid back to people (government expenditures), why is there more money on the market?

There are again 2 answers of why expenditure policies work. First is due to the process of "money creation" and the multiplier effect. Simply put, it's the effect that you give businesses more money, then they would want to expend their businesses hence borrowed more money from the financial market, and forcing the clotted money flowing out. Second answer is, bonds as a major part of debts are not only sold domestically. Other nations buy US government bonds in large quantities as well. Since US had been trade deficit for very long time. Many nations (epically in South and East Asia) accumulated enormous amount of foreign exchange reserves, as if these nations are US foreign dollars-deposits. And these nations are willing to buy the US bonds using the US dollars they have, as long as the interests of US government bonds are good enough, and the US government always maintains high credit rating and pays interests back in the past. (Won't default). Thus many less powerful country like Greece or Spain copied this method, with policies of expenditure as well, but their credits are not that good, hence although the bonds were issued, no one want to buy them. No one buy, no money flow, situation became worse and worse, and the their money became less and less creditable. Right now, these nations are suffered from the consequences. And recently we are observing the possible downgrade of US credit rating as well. Scared to become the next Greece? I think its a good reason why I think the government expenditure policies won't last long, and I said this again, other countries had suffered from it, Please be careful.

Y'know, people always talk about spending as if spending were sharply rising.  Spending doesn't tend to go above 20% of GDP, low on the international scale and very, very low when you consider that it contains both a huge military and the worlds most inefficient healthcare system.  The US by and large doesn't have a spending problem.

And I'd like to correct the data again. Not only the total expenditure of US exceeding 20% (over GDP) for a long time, it's even exceeding 30%, at current nearly 39%. (P.S. If you want to use "Government Consumption Expenditures and Gross Investment" as "cleaned up" number, it too over 25%, but it's NOT how other nations calculated their expenditures, for the purpose of compare to other nations I'll use the former, and explained more in next post). And if you are just talking about federal government, without local and state governments spending, than it too exceeding 26% in 2009. But the US total tax revenue is about 28% (Again, it's not a "cleaned up" number), hence its easy to say the difference of 10% in GDP must be compensate from somewhere else, it is mostly from raising debts, and increasing fees. If you want to know how big 10% of GDP is? The 2010 US GDP is 14.66 trillion. The accumulated government debts over GDP is closing 100% (96.3%) in 2010, and increasing at near 10% per years in the last 2 years. You can calculate how much interests needed to be paid at 3.5% with this amount of debts. You can find the detailed statistical data in http://stats.oecd.org. (OECD is an official international organization with statistic database to developed countries.)

That been said, it's correct that US are not alone in this expenditure game. Most European countries has the same expenditures policies and mostly over 40% for a long time, even some over 50% (crazy French and Italian). And they are traditionally high tax revenue countries as well (over 30% closing 40%). Hence able to afford such expensive game. But compare to Asian countries, like India with 27% and China with 21% spending, and only nearly 20% and 18% of tax revenues. You will see it is a game that the western countries are borrowing the money accumulated in the eastern world because of trade deficit. Money running back to the importing countries through governments' debts/bonds from exporting countries, then through importing goods the money flows right back to exporting countries. Again and again, this process increases more and more debts and payment for interests of the western countries. But one day this game will come to an end (when default happens, like Russia in 1998). Especially when the Eastern world no longer trust the high debts in all western world that unable to pay back debts. (Again the seriousness about credits and faith) This phenomena was not recent and occurred recently in the crisis, but already running for decades. Right about the same time you heard made in China all over the street. And it's probably one of the factors causing the unbalance in financial market in the first place, causing the crisis. (International financial flow is quite unreliable, it has multiple currencies and complex financial instruments like the infamous derivatives.)

So we observed and traced some causes behind the recession, what does it tell us the role of inflation as an economy indicator? First, it's a combination of "production area", "financial area", and "market mechanism" effect. Hence the "unnatural change rate" of inflation means one or all of the relating areas are changing out of norm. The constant small inflation rate since the 1990s means there is a constant change somewhere, and most likely not only because of the economic growth, but the improvement of financial instruments thanks to the Internet and computer age (possibly create some "precise math models" for evaluating future risks as well). Also, in theory that if the growth of production and the growth of people are equal, and the business borrowed money from the financial market growth at the same rate, there should be no change in price. But since businesses tend to reserve a certain amount of revenue in case of emergency and the chasing of higher profits, they tend to earn more than they borrowed, hence the money is always in surplus as long as the revenue lost in default companies are comparatively less. (This is what most people called the "healthy economy")

We can see that as indicators - inflation can be caused by many factors, but if inflation becoming deflation, it means the causing factors of the phenomena were shifted. And the following direct stimulate by governments adding one more factors into it. And the sudden change from negative deflation back into positive inflation of this indicators so rapidly, implied that the factors changed again - and largely contributed by the extra factor - by the stimulate from government. Hence its not ONLY the phenomena I observed that worried me and leading to my conclusions, but the obvious effect in this indicator (and many others like the debt/tax, PPP shifting, financial clotting). The extra factor (government expenditure) causes another shifted in the already complex factors all contributed or related to current recession deeply worried me. The other factors as mainiac said are still there hidden and unknown, and most likely the artificial stimulate is what keeps the current economic "book" pretty. (So I am not rooting for immediately stopping of the government expenditure, since it will most likely end in disasters, but as I said many times, "a plan for soft landing" is required right now, instead of keeping it till election days)

Mainiac mentioned the famous Phillips curve that describes the negative association of unemployment and inflation. But, it must under the conditions that other sectors are running as usual. (no change on other factors) The simplest explanation about the negative correlation is that since lay off workers don't have income, hence no money to spend, thus the ratio of money and commodities are lower - inflation drops. However IF it's true, it must not be far from "normal" conditions. (no change in financial market and production capability, etc). But this is purely mathematical model, and it needs to be tested. But there is little data from the economic history in the past, and they are almost all under different conditions. So it's hard to get a definitely answer from simply observations. (Some cases supported it, and some didn't not)

Newer generation of economic researches likes to experiment it using computation models. We see very complex results, and not a simple negative correlation. There are many conditions that inflation and wages can both going up, as in real world it happens in Spain. A simple scenario is that the drop of unemployment rate far off the production capabilities like in Spain as over 20%, it hits the commodities supply as well. And a government expenditure program grantee the unemployment workers as customers (high endowments). And the extra currency flow from the government expenditure supports the price to rise up. But the wage of normal working people are reducing from high taxes and their money flows to the unemployment people. And since the expenditure can not be stopped, or there will be riots on the street. Hence we observed the odd phenomena of increasing unemployment rate, increasing inflation, and dropping wages for working class.

Although I don't believe that the above situations already happened in US (maybe in small scale), but more likely that businesses owners are still insecure about the future, and setting up strict budgets and paying less wages. Also the financial market is not recovering enough for entrepreneurs to create new businesses. Thus all these combined keep the unemployment rate high. There are chances that the expenditure policies are having little effects. (How much is in effect is debatable) And the extra government spending could only flow into capital costs like long-term investment in building factories, and costs from importing goods, but not spending on raising the salaries. Hence businesses are more and more relying on foreign productions. It will lead to the strange money flows around the global like what I described above (still happening), and the inflation will goes up as maniac said due to the importing prices rise. And this is bad news for working class. You got paid less, and the price to buy things increases (not just luxuries, everyday stuffs as well). All because the domestic production area doesn't have the capability to absorb extra money supply, and the money flows outward to other nations.

Again I must say that I don't think the stimulate can last long (due to many reasons described above), and not because I observed this the shifting from deflation to inflation (just one of the reasons), but the fact that the stimulate is causing this side effect (phenomena) looks pretty on the surface ONLY, and not enough real effect on the positive side, like actually reducing the unemployment rate, etc. There are price to pay (credit drops, interests for debts, and loosing faith in financial market) in the future for keeping the face pretty. The negative it brings in my opinion is out weight the benefit we gain now. Raising debt ceiling is one of the policies not just for the keep running of further expenditure, but also a signal that US government is willing to raise debts and paying its debts in the future without actually going default. Despite the outcomes, the government will lose credit either way in the process since debts are already piling up whether you like it or not. (One is actually losing credit rating when default happens, and one is that people view the policies as a stalling tactic, and refuse to buy long-term bonds, losing faith. But only the former will make he ruling party look bad)
 

[counting]

About the everyone favorite "tax cut". It simply not true that the government is cutting tax for 30 years.

Spoiler (click to show/hide)

The percentage of tax revenue related to GDP doesn't change much for 30 years. And in fact it increases for steadily since 1980s when the economic started from 25% to plateau and reaches the highest point of 30% at 2000, before Bush was elected and made the tax cut we remembered today back to 26%. (I wonder how many people remember that Bush said it's just cut back the over tax to normal, instead of actual cutting). And when the Iraq war started in 2003, the tax is slowly going back up from 2004 again till it is dropped due to recession in 2008, and the expenditure policies begins (Remember the spending policies started not from Obama, but Bush government). And the government spending never stopped rising since 2000.

And it's in Clinton's government that increasing tax and reducing expenditure that slowly balanced the budgets and paying debts. It help creating the environment for Bush to spend money. And the policy of raising tax revenue can trace all the way back to Reagan government. And despite the income tax revenue, the increase of spending is almost always related to crisis and wars directly, the 1973 oil crisis (and Arab-Israeli War), the 1980 Iran-Iraq war, 1990 the first Gulf War, 2001 war on Terrorism and ongoing. So yes, the part where government expenditure are used in war machine are definitely a major factor in spending. But the policy of taxes income was not, and relatively stable.

P.S if you are wondering why US government haven't already drowning in debts. Here is another charts of the total revenue and spending.

Spoiler (click to show/hide)

Since the tax are not the only income source of governments, but also include fees, and government own enterprises profits, etc. They consist of 15% to 20% of the total government revenue. And as you can see and remembered that at the end of Clinton administration, the U.S government net revenue were turning from red to black. The total amount of national debts briefly drops for all the accumulation debts since 1970s. Then the Bush government cut the tax and increase spending and growing the national debts again.

The spending has already include the expenditure of previous debt interests, you can cross reference the reports made by the government, compared it as the last projection graph of total spending, none-interest spending, and total receipts, 1980-2085. The orange line is my red line, and green line is my green line, and my charts are drawn using excel with raw data from OECD, and government published statistics. The gov-charts use cleaned data, which means columns, like tax returned (Government collected them in tax, and "transfer" back to people with no net gain or lost) are removed first. The amount of receipts and expenditures which cancel each other are eliminated. It explains why someone paid 30% tax rates but not actually paying that much. However, its not the amount that matter, but the difference between revenues and expenditures and their changing rate over time are important.

[Duuvian]

Thank you very much, Counting. I appreciate what you are doing, as since for some reason no one else will. You are an excellent human being, thank you for spreading your knowledge.