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Should eliminating federal deficits be a priority of the U.S. government?
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Results so far:
| Yes | 81% | 58 votes | Total: 72 votes | |
| No | 19% | 14 votes |
Yes
by D-Source
Created on: January 09, 2009
One of the most important concerns we, as United States Citizens, should have; is the size of the deficits. However, it is important to keep everything in perspective. Of-course it feels good to be able to look at everything in life, business, government and finance, etc., in black and white. Wouldn't it be wonderful if we could simply say "Yes, we definitely need to do that" or "No, definitely not that"? Unfortunately, there are many things in life, business and almost every thing you can think of that has gray areas.
You have all heard that there is a time and place for everything. Well, there is. When deciding what to do about anything, we have to consider the who, what, where, when, how and any other consideration that may arise or be relavent. How the government should spend tax payer money is no different. There are two primary economic theories: Spend Heavily or Tighten the Budget. Most everyone agrees that to do nothing, is not an option. If you ask people on both sides, you will hear two different colors, if that is possible. From one side; you will hear the absense of all color, which is black and from the other side; you will hear the combination of all colors, which is white. But my theory is that there is much more of a neutral color required than either side thinks.
Sure we need to watch the deficits, but lets not watch them so hard that we take our eye off the ball. We must not let the continual bleeding of jobs go on. We must also do someting about the nose dive of Real Estate Values. People need equity in their homes and that will not appear magically. It will take rising home values and time for people to pay down principles. But they don't have time because foreclusure is right around the corner. It will take tax payer money to stop the huge Foreclosure Rate, which is creating a surplus of underpriced homes, which is reducing the demand, which is pushing down the property values. This, of-course, is eliminating the equity in peoples homes, thereby making it impossible for many people to borrow money to consolidate their high interest credit card debt, do home improvements, or consume, which is killing the economy. Whoops, there goes watching the deficits.
I don't think that taking billions of dollars out of the tax base to give everyone a $500.00 tax break is worth much, because many people will buy drugs, many will save it, many will spend it on foreign goods and it will be gone in a puff of smoke. Poof! I think that it will feel good to all who receive it, including me. We could all use it. But I think it would be better spent giving $250,000.00 to the 20 or 40 worst school districts in the country or some similar project. How many new computers can that buy to improve education for our youth and how many jobs at Dell and other Computer Manufacturing Companies will that save, while benefiting education at the same time? Education is the key to our economic future. How can companies afford not to be in the country with the most well educated workforce in the world? That is what we need to be working toward. Unfortunately and fortunately, our new President Elect understands politics and realizes that he has to offer those tax cuts because he promised them and because he has to compromise with those who want them, in order to get the other more important aspects of his proposal done. Do I hear some gray?
I do, however, believe that the economic plan should include eliminating some programs that are not working and making some good programs more efficient. This will offset some of the cost of the economic package. We need to begin to renegotiate tarrifs ASAP and offer tax incentives for companies to stay in the US and/or move back. These are long term fights that can not be part of this rather immediate boost that is needed right now, but must be part of the solution for the near future.
In summary, the time to reduce deficits is always at hand, but the time to spend for a recovery is at hand, as well. There is no black and white, clear cut way to go. We need to spend our way out of the recession, while we work to become more efficient with how we spend money. We need to renegotiate Fare Trade Agreements and offer tax incentives for companies to create jobs in The US. We need to eliminate programs that don't work and possibly replace them with programs that will generate new jobs in the industries of the future, such as Renewable Energy, Research and Development, Education, Health Care and Technology, etc. Our recovery will not be based on one theory, but many. It will require many instruments working together in harmony like a fine tuned orchastra. It will take time for people with different philosophies to learn to play together, but the sound of success will be sweet.
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No
by Reuven Solomon
Created on: January 22, 2009
An order to balance the Federal Budget and thus eliminate the deficit during an economic recession is a recipe for continuing the current global recession at a time when citizens of this country feel they are already being let down by their government. The projected deficit for this fiscal year 2009 is something like 8% of GDP which is, it must be admitted, historically large by any standard, domestic or foreign. But what eliminating the deficit means is cutting popular programs like federal aid for public services, social security and health benefits for the elderly. All of these programs have a redistributive element to them, meaning that more wealthy people pay more of the costs and more economically disadvantaged people reap proportionately more of the reward, an effect of democratic government running the economy. Other areas of government outlays like Defense and interest on borrowed loans are non-discretionary, meaning if we don't pay them our creditors/enemies will hurt us for it. So it is unlikely that cuts can be made to the budget. And tax hikes, at least in this "slow" economy seem very unlikely on the scale we need to eliminate the deficit.
There is a way that government can pay for these accumulating public debts which accrue each year and still not completely eliminate the perpetual federal deficit: seignorage. Seignorage is the "money" that the government receives from the public due to the effects of inflation and the difference between the production costs of coin and its face value. This is theoretically a controversial means of paying for the deficit in that savers bear the cost of seignorage in the form of a hidden tax. So long as deficits do not expand too far out of hand, there is no need to make the government run on a balanced budget. If you can't tax 'em, then show 'em the consequences: inflation will pay the government's bills.
This is not to say that I am not worried at all about the ability of the U.S. government to pay its future debt. Since the end of the Gold Standard, the value of the U.S. dollar has plummetted relative to gold. But since the U.S. dollar is (now but one of) the world's reserve currencies, its value is still artificially high: it hasn't fallen as much as others have. If the dollar were to fall precipitously, as it seemed it would for a brief period in 2008, the whole house of cards would be in trouble. But every country in the world would stand to lose if the dollar were to lose most of its value. Many countries are still trying to become more developed, that is, more like the United States. In order to develop, and to reach other goals like stabilizing their own economy, they need dollars (or maybe euros). This guarantees seignorage revenue to the U.S. government so long as it maintains the dollar's status as reserve currency.
But the truth is that as long as the treasury sells long term (30 year) U.S. debt at less than 5% interest, and competent people run the government, there is no reason why the government can't run a deficit and simply pay with more inflation. The problem will only come about when the rest of the world no longer wants to be like us, that is, they don't like looking at our dead presidents in their country's bank vaults, sitting there, losing their value. Want to know how long we can maintain a budget deficit? Ask the European Central Bank.
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