Fed Deficit Leaps From Under 5% of GDP last year to 15% Now
In the second quarter, the federal deficit leaped from under 5% of GDP last year to near 15% now. This is new record compared to the prior record of almost 10% of GDP that Obama inherited from Bush
Yes, falling nominal GDP played a role, but a weak economy always plays a role in setting new record deficits. But in considering what new stimulus Washington comes up with it will serve us well to remember that the new base line already starts at 15% of GDP.
While economists and others are debating the shape of any economic rebound we may happen to experience, it might serve you well to remember Japan’s lost decade. It was dominated by the government repeatedly providing stimulus with one hand while simultaneously taking it away with the other hand All the while this was accompanied by new record government deficits.
Maybe what we learned from Japan is that government can stop the economy from collapsing, but to get the economy growing again could be a very different issue.
Spencer England:
While economists and others are debating the shape of any economic rebound we may happen to experience, it might serve you well to remember Japan’s lost decade. It was dominated by the government repeatedly providing stimulus with one hand while simultaneously taking it away with the other hand All the while this was accompanied by new record government deficits.
[ Importantly so. ]
December 1, 2008
People Should be Reading Adam Posen
By Paul Krugman
Everyone’s looking back to the 1930s for policy guidance — and that’s a good thing. But we don’t have to go back that far to see how fiscal policy works in a liquidity trap; Japan was there only a little while ago. And Adam Posen’s book, * especially on, “Fiscal Policy Works When It Is Tried,” is must reading right now.
* http://www.petersoninstitute.org/publications/chapters_preview/35/2iie2628.pdf
September, 1998
Restoring Japan’s Economic Growth
By Adam S. Posen
Incorrect. Japan didn’t do much fiscal stimulus, instead went with monetary blather.
They were so in the hole, they would have had to nationalize investment ala WWII to dig out of it.
Terrible choice the DNC put on Biden. His campaign is in trouble. I would yell Willie Brown from the rooftops until she leaves.
Something stopped this time around.
The last few rounds were just wash, rinse and repeat as we see on your charts.
Fortunately, we’re living in the
universe created by Dick Cheyney,
where‘Deficits Don ‘t Matter!’
Does Cheney support running deficits?
https://youtu.be/5D5ruUmFRmo via @YouTube
February 25, 2009
Turning Japanese
By Paul Krugman
Adam Posen of the Peterson Institute for International Economics is the go-to guy for understanding Japan’s lost decade. From prepared testimony for a Joint Economic Committee hearing tomorrow:
“The guarantees that the US government has already extended to the banks in the last year, and the insufficient (though large) capital injections without government control or adequate conditionality also already given under the Troubled Asset Relief Program, closely mimic those given by the Japanese government in the mid-1990s to keep their major banks open without having to recognize specific failures and losses. The result then, and the emerging result now, is that the banks’ top management simply burns through that cash, socializing the losses for the taxpayer, grabbing any rare gains for management payouts or shareholder dividends, and ending up still undercapitalized. Pretending that distressed assets are worth more than they actually are today for regulatory purposes persuades no one besides the regulators, and just gives the banks more taxpayer money to spend down, and more time to impose a credit crunch.
“These kind of half-measures to keep banks open rather than disciplined are precisely what the Japanese Ministry of Finance engaged in from their bubble’s burst in 1992 through 1998 … “
‘Deficits Don ‘t Matter!’
Apparently the ‘reasoning’ is that
if the Nat’l Debt does matter, but
(year over year), the deficits which
increase the Debt, do not matter.
Go figure!