Only 6% Of Public Knows Deficit Is Declining
Prof Barkley Rosser at Econospeak also asks questions on the freaking out over the fiscal deficit numbers:
Only 6% Of Public Knows Deficit Is Declining
Yes, here we go again, massive public ignorance post # I forget how many. This has been floating around out there for awhile but was on Rachel Maddow last night, and here is a link with suitable discussion of relevant facts from Dave Johnson, perhaps important as this silly sequester is about to land on us supposedly driven by the overwhelming need to get the deficit under control,http://blog.ourfuture.org/20130226/deficit-is-falling-dramatically-but-only-6-know-that. As it is, apparently 62% think it is rising, while 28% think it is constant.
Among things that the public is wrong about, this one sticks out for being so far off from the facts. And as is noted, not only is the deficit declining, but it is doing so at a very dramatic rate. Without doing anything we should be able to stabilize the debt/GDP ratio within about two to three years, although to maintain that down the road, further adjustments would need to be made. Being an austerian is one thing, but being completely out of touch with reality is quite another.
And what they don’t know is that their savings are declining, because government deficits are actually our savings. If this continues, we will continue with bad employment, low GDP, and eventually another recession.
I threw up a quick blog post with deficit data broken down by calendar quarter. It makes it clear when the deficit exploded – Q3 2008. Guess who was President then?
http://sustainablestate.blogspot.jp/2013/02/what-94-of-americans-dont-know.html
Chad, what is your point? We need a larger deficit not a smaller one. A government deficit is YOUR surplus. It is one way new financial assets (money) enters into the economy.
Chad I suggest you start here:
http://www.forbes.com/sites/johntharvey/2011/07/02/learn-to-love-the-deficit/
Well there you have it folks – Q4 GDP just announced a paltry 0.1% growth rate – you can attribute that to our shrinking deficit. My guess is we enter negative growth for Q1 with the tax hikes, and reduced deficit.
Most probably don’t know the difference between debt and deficit though.
I think this year’s deficit would be approximately zero if the top 1 percent were to donate income over and above their predecessors’ income levels some 30-35 years ago (inflation adjusted post-tax AGI). Of course, that would eliminate their gains in income share. They prefer government borrowing. The borrowing does create pressure to tax high incomes, but this pressure can be mitigated if it’s blamed on bloated spending–especially spending that benefits the lower 99 percent.
“Being an austerian is one thing, but being completely out of touch with reality is quite another.”
No, it’s not.
PJR, I agree that federal debt and deficits creates pressure to tax all incomes. The problem is this, the governmnet spends first, they do not borrow then spend. In fact, the Federal governmnet does not need to issue debt to spend at all. The whole issue is that the governmnet should direct spending to where it does the most good, which has nothing to do with taxes.
Coberly, I was going to say the same thing.
mmcosker, it may be true that the government does not have to borrow (or tax) to spend. However, don’t banks have a trillion excess dollars in reserves, primarily because companies don’t have enough customer demand to justify investment for expansion? Would it be unwise to put some of it to good use?
PJR, exactly right not enough demand. Private citizens cannot borrow, so the governmnet must defict spend to infuse money into the economy that can be spent increasing demand. The level of deficit right now is too small, and probably needs to be running at $1.5 trillion annually to get to better employment and higher aggregate demand.
Reserves are really relevant, IMO. Reserves are high because QE is swapping bonds for reserves. Interest on reserves serves to keep the fed funds rate at 25bps, otherwise it would go to zero.
Sorry, I meant reserves are NOT really relevant, IMO.
PJR, here is a great post on what level of Deficit we should be running:
http://monetaryrealism.com/the-tc-rule-for-fiscal-policy-screams-lower-taxes-and-more-spending/
Hey mmcosker,
Nice post you found on how much we should be spending.
Regardless of what *should* be happening, the fact is that the deficit has shrunk under Obama. It peaked in Q3 2008 under Bush.