I seriously doubt it Richard

So the USA has a deal on debt.  In exchange for increasing the federal borrowing limit cuts of maybe $2 trillion in spending have been agreed, and it seems likely that the vast majority  of these cuts will be borne by those least able to suffer the burden amongst the American poor.

This is as a result a day when all who campaign against injustice should rightly be angry.

And let’s remember this deal is not a solution to a real problem:  this deal is a solution to a crisis  deliberately created by far right politicians in the USA  who were determined to increase the wealth of the wealthiest Americans at cost to the vast majority of the rest of the population of that country.  It looks very likely that they have achieved their goal.  It’s hard to celebrate a victory that will bring increased unemployment, an economic downturn, mass hardship  and even a return to destitution  for many Americans  when that outcome has been deliberately planned and imposed by the country’s own politicians.

But there’s something even worse than that  at the core of this deal which would be all too easy to ignore.  The fact is that this deal is not going to solve the US debt crisis.  By putting millions out of work, as I’m sure it will, US tax revenues will decline. Its fiscal position will deteriorate.

Could we have a little proportion here please?

Obama said the agreement will cut about $1 trillion over 10 years and cuts would not happen so quickly that they would drag on the fragile U.S. economy. Another $1.2 trillion would be cut if a joint committee fails to find at least that much in budget savings.

The deal cuts, at maximum, $100 billion a year from spending.This deal and the next deal together might cut $250 billion a year.

Total federal spending is around the $3.8, $3.9, trillion mark.

So we\’re talking about cuts in future budgets of 2.6% to, at maximum, 6.5%, over a decade.

You\’ve got to believe in a really high multiplier for that to cause serious problems you know.

9 thoughts on “I seriously doubt it Richard”

  1. If you’re ignorant enough to measure taxes, spending and deficits in current $ rather than inflation-adjusted $ or % GDP, you shouldn’t even be allowed to comment on the budget.

  2. Dennis pretty well summed the “deal” up. There are no “cuts” as a rational person would view the word, not even much of a damper on increased spending. Richie obviously hasn’t even rea…..wait. Actually, Richie may have read the various opoinions about the “deal”, but as usual, doesn’t have the foggiest idea of the meaning.

  3. What, cos poor people were dying in the streets before Barry started spending 1T more per year than in 2007? Oh wait, he probably believes that, doesn’t he?

  4. I love this idea that ‘cuts’ are being made, when all that’s really happening is that they are hoping to increase spending by less than they had wanted to. And they want credit for this too.

    On that basis, I had wanted to go to the Bahamas this year, and buy a new Mercedes. But I can’t afford it, so I’ll make some economies and only go to Spain, and buy a Mondeo instead. I can’t actually afford that either, but after my ‘savage cuts’ you’ll lend me the money won’t you?

  5. John B: If you’re ignorant enough to measure taxes, spending and deficits in current $ rather than inflation-adjusted $ or % GDP, you shouldn’t even be allowed to comment on the budget.

    Is there a rational reason behind this assertion, or are you just trying to limit debate in arbitrary ways?

    If I remember my statistics lessons correctly, it’s perfectly fine to use whatever units you like as long as:
    1. You’re consistent – don’t mix inflation-adjusted $ with nominal $, or US$ with CA$, or what-not. (Contrasting them of course is useful).
    2. You avoid units with so many zeros either before or after the decimal point that it’s very easy to accidentally lose one here and there. (not always doable if comparing something quite small with something very large).
    3. You say what units you’re using. (Both Obama and Tim lose points here, as indeed do the people authoring the web pages in question).

    As far as I can tell, Tim is comparing the nominal cuts to nominal total federal spending. So he’s obeying point 1, and point 2.

    Of course in some contexts, using inflation-adjusted $ or % GDP is more meaningful than nominal values. Inflation-adjusted $ is when you want to look at real resources going into something, % GDP when you want to look at relative spending. As I follow Keynesian arguments, though, they’re about nominal effects (eg sticky wages, multipliers), so nominal spending makes as much sense as anything else.

    If Tim was dealing with a first-year economics class he might be well advised to spell out that if something is tiny as a share of the US federal government it’s tinier as a share of the US economy. But good writers for adults don’t always pitch their writing entirely at the level of the most ignorant naive newcomer (albeit English-speaking) imaginable, because that bores the rest of their audience.

Leave a Reply

Your email address will not be published. Required fields are marked *