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Molycorp, Inc. Message Board

  • casstech1964 casstech1964 Dec 13, 2012 11:40 AM Flag

    AUSTERITY

    EQUALS DEPRESSION

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    • The essence of Keynes is that the government fiscal operations can be counter-cyclical. In economic contraction, the government can spend more and tax less, and in expansions the government can tax more and spend less. The problem has been that expansions have not had the counter-cyclical government fiscal contraction. We have been operating at deficits in GOOD times.

      There needs to be a plan that acknowledges the austerity necessary for debt reduction AND acknowledges that a counter-cyclical fiscal policy is better. We do eventually need austerity. But it needs to be as part of a counter-cyclical plan. The FED is ahead of the curve with there unemployment based interest rates. We need the economy to grow, and we need to have a plan for increasing revenues and decreasing spending over a long time frame.

      People are unable to grasp that the personal economic pressures of recession that generate personal austerity and frugality are not appropriate for the public policies. Reflect on the story of (Joseph and) the Pharaoh who received a prophesy of a future drought. Taxes were collected for 7 years and food was distributed for 7 years, and his nation survived the famine. He operated a counter-cyclical tax plan ... higher taxes (as grain) in the expansion, and used the taxes (grain) to feed the nation in the economic contraction (drought and famine). The Pharaoh could have argued that it was necessary for the government to tighten its belt, as all the people in the nation were forced to do. But that would have been wrong. Counter-cyclical policy was to stop the taxes, and to distribute the accumulated grain, while the drought stalled the agrarian economy.

      Currently we are still crawling back from the contractive effects of the housing bubble and derivatives crash. Austerity makes little sense. Yes there is a very frightening amount of debt, but that has to be addressed in a prioritized manner. First priority is keeping the fragile economy expanding. It is painful to keep operating at a deficit, but it is necessary.

    • Out of control Government spending equals B.K. It's all Greek to the Demos if you know what I mean....

      • 1 Reply to doowop59
      • Not so. As a democrat I want a balanced budget. I would prefer that economic stimulus in recessions was from budgetary surpluses built up in rainy day funds. The current set of republicans is arguing for immediate austerity. There is a huge debt and if there truly was an immediate debt problem, I would have to agree that an immediate balanced budget is a necessity. But currently there is a surplus of money to lend to the US government at lower and lower interest rates. Debt is now being re-financed at historic low interest rates.

        The country needs a fiscal plan that balances the budget, and pays down the debt. But that plan should by necessity be long term. We need to have a plan the gradually reduces spending and gradually increases revenues.

        There is a very real threat of debt default by some nations. The US is currently not at any risk. Greece is. But there are very real differences between their situation and ours. We CAN prioritize economic stimulus at the moment, financed by tremendously low interest rates. They cannot.

        Democrats are the party of fiscal responsibility. Republicans are the party of tax cuts.

 
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