From: dong@oakhill.sps.mot.com (Don M. Gibson)
Subject: Re: All deficits are not created equal.
Reply-To: dong@oakhill.sps.mot.com
Organization: Motorola Semiconductor Products Sector
Date: Wed, 7 Oct 1992 18:39:31 GMT

In article DjA@engin.umich.edu, jwh@citi.umich.edu (Jim Howe) writes:
>In article <1992Oct6.182347.17164@oakhill.sps.mot.com>, dong@oakhill.sps.mot.com (Don M. Gibson) writes:
>|> In article g8B@engin.umich.edu, jwh@citi.umich.edu (Jim Howe) writes:
>|> 
>|> >The main point of all this is to show that the 'deficit' and 'debt'
>|> >are not the bogeymen that most politicians make them out to be.
>|>
>|> the deficit as an isolated occurance is not scary.   it is 10
>|> straight years as $100Bil+ deficits that are scary.  It is the interest
>|> that is the largest portion of budget that is scary.   It is that
>|> fact that the govt. is fiscally impotent during the recession that
>|> is scary.  it is the fact that the deficit sucks up >1/2 of investment
>|> capital that is scary.....
>|> 
>
>How has the deficit made the government fiscally impotent?  Are you
>implying that if we weren't running a deficit we would then be able
>to run a deficit to help the economy?

YES.

>  If Keynesian pump priming is
>supposed to work, why are we in a recession with such a large deficit?

-business cycle
-M2 tightening
-global economic downturn
-no confidence in bush

>As to the fact that the deficit sucks up > 1/2 of investment capital,
>I would like to see a source for that figure.  If the government 
>borrowing is so detrimental, why are interest rates so low?
are they?  some would say that >5% real rates is pretty high for
a pseudo-recession.

>  The point
>is that there is plenty of capital to support the deficit.  It isn't
>adversly impacting the capital markets.  Government intervention and
>spending does more damage than the 'deficit'.

how does govt. spending on say freeways hurt the economy?

>  Eliminating the deficit
>will not help us, we need to lower spending.  If by lowering spending
>we also reduce or eliminate the deficit, great, however eliminating
>the deficit does not need to be the primary target.  Spending is
>the primary target.
>
>|> >As long as the deficit is not monetized, the impact on the economy
>|> >is minimal, at least at current levels.  Does this mean we shouldn't
>|> >do something about it?  No, it just means that it would be foolish
>|> >to ruin the economy in order to solve a 'problem' that really isn't
>|> >as bad as people would like to think.  Perot's proposal is the most
>|> >idiodic.  Many of his ideas would simply kill economic growth, and
>|> >in turn reduce revenues available to the government.  Many of his ideas
>|> 
>|> i hate to argue with such elegant specifics, but the revenue enhancing
>|> features are lowest impact by design.
>|> 1) nothing happens until stagnation ends.
   there are folks
>|> that pay 33% already.  2% is low impact.  he plans to eliminate
>|> the deficit in 10years, not the debt!!!  think about that.
>
>You could just as easily eliminate the deficit by freezing spending.
>Look at the 1980's.  If spending had been frozen (or even increased
>slightly), the additional growth in the economy would have eliminated
>the deficit (not the debt).
this is a smart coarse and spreads the pain out nicely over time.
>
>|> 
>|> >would make the economy worse, and would therefore result in lower
>|> >tax revenues,
>|>
>|> non-sequitur!
>|>
>
>How do you figure?  A smaller economy will generate less tax revenue
>than a larger economy.  Raising taxes is not the way to stimulate
>the economy.
my misunderstanding.  you don't mean *relatively* worse, but absolutely
worse.  in that case i disagree that "many of his [perot's] ideas" (=??) will
result in negative GDP growth.  remember, the second largest tax increase
in history (reagan's) didn't result in negative growth.

>|> 2) phased in gas tax (on prices at historic all time lows).
>|> 3) tax on SS for folks earning >$25K.
>|> 4) change highest marginal rate from 31% to 33%.


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