Oh, absolutely. Primarily because it is a very incestuous indicator; a rising stock market causes increased investor confidence, which in turn causes increased investment, which in turn causes a rising stock market. This positive feedback is why the stock market is inherently unstable and prone to booms and busts, but also why in the short term it seems to "do what people expect."
So in the short term (6 months or so) it is an extremely accurate predictor of future economic performance. Going longer - say, out to four years - it's terrible, primarily because of that cyclic behavior. Any rise in stock prices is going to be matched by a drop, and the stock market's health is a combination of several of those cycles.
Thus I would expect a solution that makes people happy today and tomorrow and next week - but is really a "poison pill" that will clobber us in ten years - will result in a market rally. It will, of course, be matched by a precipitous decline due to the effects of the poison pill.
LOL, so now you are talking gibberish in a vain attempt to rationalize your error. The bottom line here is that the stock market is a widely recognized leading indicator of economic performance. And the stock market went up dramatically today on news that HR 8 is now the law of the land. The stock market reacts well to good news and poorly to bad news and is a leading indicator of economic performance. Investors, business leaders and academics are a lot more knowledgeable and skilled than you are, and they don’t react well to “poison pills” or any other bad economic news. And they reacted well today on the news of HR 8' passage in the House.
Yes, it does. If we had gone with the $250,000 income limit we would have gained about $440 billion a year. We went with a $450,000 limit instead so that's closer to $180 billion. That's less than 20% of our deficit.
So now we have to make up the other 80%.
I guess you haven’t been paying attention. We are now at 1.8 trillion. We need another 2.2 trillion. It can come from Medicare, requiring Medicare to make drug purchases competitive, similar to what other agencies of government do like the Veterans Administration. Medicare Part D passed by a Republican congress and signed into law by a Republican president prohibits Medicare from using a competitive bid process.
Well, there's the rub. We may not be able to have both a growing economy and a way to pay down the debt. And if we don't pay down the debt it will keep growing until it bankrupts us.
That is nonsense. You have not been paying attention. We can selectively raise revenues and reduce costs (e.g. selective taxation, selective cost containment like Medicare Part D reform).
Why do you think the nation needs to ever pay down its debt? In our more than 200 years of existence we have rarely paid down the nation’s debt. I could count the number of times we paid down our debt one hand and have four fingers left over. As I have said before we need to keep our debt level in line with our ability to service that debt. And let me remind you here, no one in Washington or in the business community or in academia are talking about reducing the nation’s debt. We are talking about reducing the growth of our debt, keeping it in line with our income.
And finally fully sovereign nations, like the United States, do not go bankrupt unless one day they wake up and decide they are not going to pay their bills (e.g. in the case of the US, fail to raise the debt ceiling). Sovereign countries can always pay their bills if they have the will to do so. They can print money – if you had been paying attention you would have known this in part because I have written about it umpteen times including a few in this thread. So all that bankruptcy talk is just more manna for the ditto head.
Keynesian economics says that we can stimulate the economy by spending lots of money. Build a useless bridge and you at least employ a bunch of people who then buy more Miller Lite and movie tickets, which supports brewers and actors, and they then support blah blah blah. But you can't do that indefinitely; at some point you have to say "OK, we got a boost, now we're going to have to pay it back." And that means having to stop the Keynesian spending at least for a while - and that's going to have a negative impact on the economy. There is no way to say "OK let's spend less but not have it impact the economy."
What Keynesian economic policy really says is that in times of slack economic demand the government should be the buyer of last resort, taking up the slack demand in the economy with spending. And in times of prosperity, meaning when an economy approaches full employment, government should slow economic growth by increasing taxation thereby replenishing its balance sheet. That is the nutshell version of Keynesian economic policy.
Keynesian economic policy does not advocate spendthrift behavior like building bridges to nowhere. It does advocate investing in infrastructure during periods of slack economic demand. The best time to invest in needed infrastructure is during periods of slack demand (i.e. at times when you have an excess of unemployed individuals). At those times government can procure goods and services at reduced cost while simultaneously causing economic growth.
And contrary to your statement there are ways to spend less and not impact the current economy. What you don’t seem to understand is this is a 10 year effort. It is not an all tomorrow or its all gotta be done this year project. It is a 10 year project. The 4 trillion dollars we are trying to save is savings over the course of 10 years. The current federal budget is only 3 trillion dollars for God’s sake.
Additionally, you are under the impression that we are going to spend less. That is not being discussed by either the Republican or Democrats. We will spend more each and every year. And the economy hopefully will grow as well along with our population and money supply. What is being discussed is reducing the deficit, the difference between what the government takes in revenue and what is spends. The debt will take care of itself over time as long as we continue to grow the economy and manage our deficits in a responsible manner. Each year the value of our national debt shrinks in value by about 2% due to inflation.
Not really. We solved 20% of the problem. The other 80% - the painful part - we did almost nothing about. If we continue to kick the can down the road (which we will) then our problems just became worse - because we got the tax cuts without the spending cuts.
Yeah really, and your numbers are off. You have not been paying attention. We have solved more than 20% of the problem. Our fiscal problem is not in the near term. It is a long term problem that will need long term solutions. The most troubling problem in our federal budget is healthcare spending. With a large number of people approaching retirement age, the impact on the nation’s healthcare future healthcare expenses will be huge. That is the big problem. Obamacare was a critical first step in getting those costs under control. We pay more than twice what other industrial countries pay for healthcare and have lower quality outcomes to show for it.
What we got last evening was a continuation of the George II tax cuts for those earning under 400k per year and a tax increase for those earning more than 400k per year. And the reason we are taxing those earning more than 400k per year is because those individuals have cash sitting unproductively in banks where it does little to stimulate the economy. If you give the same dollar to someone in the middle class they are much more likely to spend that dollar which will create demand in the economy and be much more simulative to the economy. That is why raising income tax rates on the wealthy is important and much less damaging to economic growth.
I could make mindless rants too, but that would not make them true. Just what is the mechanism that would cause us to will suffer a great depression because of government spending? 