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[personal profile] miss_s_b

Gov't SHOULD Manage Its Finances Like a Family

Date: Wednesday, June 6th, 2012 10:46 am (UTC)
ext_368239: (Default)
From: [identity profile] millenniumelephant.blogspot.com
Yes, the Infamous Brad is spot on here.

Of course, the problem we're faced with is that the other fellers did exactly what the bad family does and blew all the cash during the good times and we're left picking up the shrapnel.

He's right that we ought to be investing in education and infrastructure and letting military adventures go hang for the moment, though.

Re: Gov't SHOULD Manage Its Finances Like a Family

Date: Wednesday, June 6th, 2012 03:37 pm (UTC)
From: [personal profile] po8crg
This, oh so much this.

You can make an argument (Krugman does) that we're in a big enough shortfall of aggregate demand (AD-shock) that the Keynesian multiplier is huge. I think he was arguing for seven last time I was looking closely. That's high enough that tax revenue would actually go up by more than spending, which would mean that there is a real magic money tree.

But there really isn't a good way to fit that into the analogy.

Date: Wednesday, June 6th, 2012 11:04 am (UTC)
From: [personal profile] po8crg
The economics is pretty solid there. Doesn't cover everything, but what it covers is solid.

The biggest thing is misses is that, for a government, inputs and outputs are connected to each other in a way that a family's (or any other private actor's, even a really big company's) aren't, which is why there is such a thing as a Keynesian multiplier.

There's also a bunch of stuff about the money illusion and seignorage that it misses, which is very relevant in the banking-crisis situation we're (still) in. But, to be fair, that would completely ruin the analogy to a family...

Date: Wednesday, June 6th, 2012 03:32 pm (UTC)
From: [personal profile] po8crg
I won't bother trying to explain the third para.

But the point for governments is that part of their income derives from their own spending. So, if they spend more, then the economy gets bigger, and so does their tax revenue. It's actually true for any actor in the economy - when you spend money, the whole economy gets bigger. You're 1/100,000,000 of the economy (or so), so if you spent a million quid, you'd get 1p better off.

You can actually see this happen in a small enough real economy: football.

Manchester City started spending money like crazy and the whole football economy got richer, resulting in players that City sold selling for more than they would have done before - so their revenues in the player market went up noticeably (but not as much as their spending!).

In certain circumstances (AD-shock recessions; the), Keynes reckoned that increased government spending would result in the economy growing by more than the amount of spending. At the moment, I've heard estimates that the multiplier is about seven, so increasing government spending by £1bn would result in £7bn of economic growth (and about £2bn of additional tax revenue). Yes, it's a magic money tree. It's real; it works. But only when the economy is totally dire.

The problem with the Keynesian multiplier is the same as the problem with the Laffer Curve - it tempts politicians to increase spending / cut taxes (things that they want to do anyway) by positing that it won't actually cost money. They're both right, but only in certain (rare) circumstances. The top of the Laffer curve is somewhere around 75% marginal tax, which is why cutting the top rate from 50% to 45% won't increase revenues. Keynes only works in a severe negative demand-shock (where there's lots of unused resources that the Keynesian spending can put into use without opportunity costs). Brown and Balls were trying to argue that their deficit spending in the mid-2000s wasn't a problem because it was investment (infrastructure) spending, which is trying to invoke the Keynesian multiplier but in a completely inappropriate situation.

Date: Thursday, June 7th, 2012 01:51 am (UTC)
telegramsam: Sarcastic Pee Wee Herman (peeweeblah)
From: [personal profile] telegramsam
Hm, that gallup poll in that article... I have no reason to believe Americans more or less stupid on some inherent genetic level than any other population of humans inhabiting this planet, and there are also countries out there with high levels of religiosity where 'young-earth creationism' is less prevalent.

The real problem, I believe, is rooted in the education system, and not even in the STEM subjects, but rather in basic literacy skills. You'd be surprised how many people graduate from high school in this country who do not read on what is considered to be a high school level. Many do not read on an 8th grade level, which is the cut-off point under which a person is considered "functionally illiterate".

The way in which local school systems receive federal funding is based upon "performance" and attendance, which pushes schools to keep as many seats as possible filled with warm bodies and advance as many of those bodies through each grade as possible. Students who might benefit from repeating a grade, or from extra tutoring or special education often are pushed on unready for the next step, and over time they fall further and further behind their peers.

(Parents who don't instill any sense of value for education in their offspring are also a factor, but that of course is outside of a school's control).

Simply put, not only does this system produce an overabundance of individuals who cannot comprehend science or history texts, they also cannot even read their Bible. Beliefs are often formed solely by whatever is coming from the pulpit on Sunday morning and repeated throughout the week by family & peers, and little else. There's not even any room for "critical thinking skills" to come in, because you're dealing with people who can't fucking read.

You can't even begin to explain that the books in the Bible were largely not written for simple historical or informative purposes, anyway. It is at most a narrative history. The Old Testament especially is rooted an ancient oral tradition passed via memorization and repetition from one generation to the next, which allowed a nomadic and often oppressed people to retain their culture, religion and heritage surrounded by fairly hostile neighbors. It's a very old style of story-telling that has more to do with meaning (often on multiple levels) than facts - but trying to explain such subtleties to people who struggle with even simple metaphors is a bit of a lost cause.

Honestly this is all driven by a political situation that has little to do with either science or faith, anyway. It is in the vested interest of various parties to keep the general public as ignorant and easily manipulated as possible and this creationism thing that is promoted as part of a whole "package" of political social conservatism that also includes your usual anti-environmentalism & misogynist policies that benefit certain industries & individuals...

Date: Thursday, June 7th, 2012 12:05 pm (UTC)
von_geisterhand: (Default)
From: [personal profile] von_geisterhand
"A question to the Avengers" would be brilliant satire, if it wasn't real. :-/

Date: Thursday, June 7th, 2012 04:38 pm (UTC)
rhythmaning: (Default)
From: [personal profile] rhythmaning
Facebook only shows me 12% of my friends' posts?!?!!! Jeez. I didn't know that. That is a big, big fail!

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