NationStates Jolt Archive

How would you deal with budget deficits? Would you solve them at all, or do you find benefit in them? Those against budget deficits claim that the taking of foreign debt increases trade deficits, and that the taking of domestic debt crowds out investment, thus slowing the growth rate of the economy. A foreign debt can be dangerous as well, as unfriendly nations can accumulate another country's debt and then drop it, causing economic hardship in that nation. However, some claim that budget deficits may be good for a nation. The taking of loans and extra money raises GDP via government spending a la Keynesianism, and the taking of foreign debt makes other countries more helpful to make sure that another nation's economy does well so that they can have their money back.

So, what is your opinion, and what would you do? Feel free to elaborate as much as you wish.

Sell off all the excess military hardware to Iran. :p

Sell off all the excess military hardware to Iran. :p

Well, that's definitely a solution. :p

Getting the damn nation out of debt so we don't need to pay interest anymore. That would do it. Just slash the budgets of useless things and raise taxes a bit. Also stop corruption in the government with a program to search out criminals that are laundering and stealing vast amounts of money.

I wouldn't. All I would mandate is that the "full employment" budget would be balanced, which would still allow the existence of countercyclical fiscal policy and would prevent the economic problems associated with a mandantory balanced budget.

Getting rid of the national debt would be somewhat undesirable from an international finance standpoint.

I'd change the political system.

There's be two lower houses for appropriations. The first would have to pass any spending bill by a supermajority, say 2/3, the second would be able to veto it (though not start its own) with a 1/3 minority.

That would probably reduce a lot of crap, but allow the flexibility to deal with changing demands across the economic cycle.

- eliminate pork (make congresspeople take the time to introduce their own bill, if they want to do things like spend a million of our dollars on West Virginia trail lighting)

- Figure out what exactly are the NECESSARY government programs currently being funded by Joe Taxpayer.

I for one cannot offer an oppinion because my nation doesn't really have that large of a deficit. The only thing I have a problem is that my nation has a 6% unemployment rate which is rediculous even after I made it so that the Military is Mandatory for people without jobs and those who cannot find jobs either are arrested and put into forced labour (otherwise, a JOB!) or just shot. You can be corrupt without having a deficit. I am corrupt but I keep my deficit at a minimum of 3 million compared to my surplus of 3-4 billion...All I say is just when you get the offer, sell to nations...or go 'Shopping' by invading other countries for their precious materials such as Uranium. Because that also boost economic levels. Also, not caring about the enviroment in order to meet your economic standards helps bring you out of the deficit...of course at the cost of the enviroment. If any of this helps, PM me...and if it makes no sense, PM me...

I'd change the political system.

There's be two lower houses for appropriations. The first would have to pass any spending bill by a supermajority, say 2/3, the second would be able to veto it (though not start its own) with a 1/3 minority.

That would probably reduce a lot of crap, but allow the flexibility to deal with changing demands across the economic cycle.
It would also make it horridly overcomplex. I dunno if you guys do it that way in Duestchland, but we in the U.S. feel our system is complicated enough as it is without adding yet another level.

That said, I too would find out exactly what is important and drop what's not, and lower taxes. It would take several years, possibly a decade or so, but it would level out eventually.

It would also make it horridly overcomplex. I dunno if you guys do it that way in Duestchland, but we in the U.S. feel our system is complicated enough as it is without adding yet another level.

That said, I too would find out exactly what is important and drop what's not, and lower taxes. It would take several years, possibly a decade or so, but it would level out eventually.

Yes, it is overcomplicated. That's the point. And it uses the inherent evil of politicians to defeat monitor their stealing.

The politicians in the veto house would have no power but to veto. The only 'record' they could run on is the elimination of unecessary spending. Of course, if they go to far, and cut really important stuff they'll be voted out, yet, if they don't do anything, they'll be branded as 'ineffective' and voted out.

At the moment, the best thing an individual politician can do is loot an appriopriation bill for his or her own district, and there is no check on this behavior, so they all do it. (Unless they are running for national office). My system takes politician's innate desire to accumulate further power and influence, and turns it against their own spending habits. I think it would work.

I'd make sure it's all in long-term debts and then engage in massive hyper-inflation. (1920's Germany)

EDIT: Or I could just order the murder of anyone I owed money to. (1700's Monarchies)

Oh, I see. I misunderstood what you meant. Looking at it that way, then yes, I'd say that seems like a decent idea indeed. It probably won't ever be suggested in Congress--or if it has been it's always turned down--but it is a good idea.

MAke rich people pay taxes.

The US still keeps borrowing money from foreign countries (Arab countries, China, etc) but its people are heavily in debt because they live in a consumerist society. Americans must learn to save their hard-earned money and not to rely on credit companies. America must compete with the arrival of industrial Asia (almost every thing is made somewhere in Asia), meaning, if America cannot produce manufactured products for cheap price then focus on high-end service sector, invest in economically emerging nations (such as Brazil and Chile in South America, South Africa and Egypt in Africa, and especially at Asian nations such as Vietnam, Thailand, Malaysia, Indonesia, India and China). More rich nations should be seen as an interest to American businesses than a threat to the common American Joe.

The US still keeps borrowing money from foreign countries (Arab countries, China, etc) but its people are heavily in debt because they live in a consumerist society. Americans must learn to save their hard-earned money and not to rely on credit companies. America must compete with the arrival of industrial Asia (almost every thing is made somewhere in Asia), meaning, if America cannot produce manufactured products for cheap price then focus on high-end service sector, invest in economically emerging nations (such as Brazil and Chile in South America, South Africa and Egypt in Africa, and especially at Asian nations such as Vietnam, Thailand, Malaysia, Indonesia, India and China). More rich nations should be seen as an interest to American businesses than a threat to the common American Joe.

So, you believe that investment and savings should be encouraged, increasing the MPS (marginal propensity to save), and that government should help shift the investment curve upwards to increase GDP? I think you have it pretty much down.

Also, Dephire, which country is it that you live in?

Lets see, I would:

1) Immediately and unilaterally default on all debt currently owed to non-citizens. This would have two majore benefits. It would drastically reduce the level of debt carried by the federal government and it would severely reduce the amount of money that could be borrowed in the future, effectively forcing congress to spend no more money than it is able to collect.

2) Completely eliminate the Departments of Homeland Security, Education, and Transportation, and consolidate the departments of Housing and Urban Development, Veterans Affairs, Health and Human Services, and Agriculture under the Department of the Interior. Funds that would normally be allocated to those departments can instead be given to the states as grants by act of congress and funds that would normally be spent on the infrastucture of those departments can be saved.

3) Eliminate the DEA, BATF, and Secret Service. Investigations of counterfeiting can be handled by the FBI, and protection of elected officals can be handled by the US Marshalls. Remove the mandate of DEA and BATF by by shifting sole responsibility for the regulation of alcohol, tobacco, firearms, and drugs to the states.

4) Limit executive use of the armed forces to seven days without a declaration of war from congress that states the specific national entity to be initially attacked.

5) Make omnibus or multipurpose bills unconstitutional and make it a federal offense to add language to a bill whose purpose is not directly and substantively related to the purpose of the bill. This would have two major effects: such a situation would drastically reduce the amount of "pork" spending and it would drastically limit the number of things congress could do in a given time period.

6) Mandate that all bills passed by congress have an automatic 10 year sunset clause unless passed by a two-thirds majority. All current federal laws will sunset in 15 years unless renewed.

I would first:

Ban almost all forms of corporate welfare.

Mandate that defense spending be used on the defense of the U.S.

After I see the effects of that, then I could decide what else to do.

1. End "local aid projects" (pork.
2. End foreign aid to Israel, Egypt, or whoever else is on FMS, it's a form of silly pork as well.
3. End the War on Drugs (20 billion/year)
4. Devolve DoE functions to the States.
5. Repeal the NFA and GCA and close down ATF, devolve functions to the States.
6. Devolve EPA functions to the states as much as possible.
7. Close down the FCC, devolve functions to the states.
8. Deregulate banking, return to the Free Banking Era.
9. Pull US forces out of Colombia.
10. Complete the tort reform process. That's bound to improve the economy.

1) Repeal the Bush tax cuts.
2) codify into law that all provisions of bills must a) be explicitly about the subject matter at hand, and b) must be individually voted up or down by the full house by a voice vote before it can enter into law.
3) Ban Omnibus Appropriations Bills.
4) Close existing loopholes on business tax, and add a new proviso: all business income tax shall be based on the location sold, not the company's "base of operations". I don't give a rat's ass if you have a mailbox in the Cayman's: if you sold it here, then you pay taxes on that income.

So, you believe that investment and savings should be encouraged, increasing the MPS (marginal propensity to save), and that government should help shift the investment curve upwards to increase GDP? I think you have it pretty much down.

A high MPS can be very undesirable in the event of a recession; after all, the multiplier is equal to 1/MPS, so a higher MPS will reduce the effect that additional spending will have on the economy. That can reduce the ability of fiscal policy to combat recessions, which is undesirable.

The goal should be to have the savings rate at a level high enough to insure long-term commitments but no higher or less except in cases of inflation or recession.

1) Immediately and unilaterally default on all debt currently owed to non-citizens. This would have two majore benefits. It would drastically reduce the level of debt carried by the federal government and it would severely reduce the amount of money that could be borrowed in the future, effectively forcing congress to spend no more money than it is able to collect.



It would also kill the US economy and likely inflict another Great Depression on the world. That in turn would make balancing the budget even more difficult by reducing tax income.

A high MPS can be very undesirable in the event of a recession; after all, the multiplier is equal to 1/MPS, so a higher MPS will reduce the effect that additional spending will have on the economy. That can reduce the ability of fiscal policy to combat recessions, which is undesirable.

The goal should be to have the savings rate at a level high enough to insure long-term commitments but no higher or less except in cases of inflation or recession.

I would agree about the recession bit. But, see, in the United States we have a pathetically low level of saving. 1% of every dollar earned is saved. 1%. The lack of encouraging capital is going to hurt us very badly in the future, as capital creates productivity, which creates higher real wages, which creates more consumption and more savings and investments, all of which provide for more capital...

now, i don't know about in the US, but in a unitarian system with a unicarimal parliment [NZ is an example], i'd strip the central government back to only the things that it absolutly MUST do, shift as much as possible onto local government, and scrap the rest.

then i would temporaraliy raise taxes untill the deficit was resloved, after which i would drop them back to as low as they could be without once again makeing a loss.

basicly, this would shift all infrastructure to the local governments [roading, power, telecomunications, welfair, etc] while the central government would still have to deal with education, health, defence, and law and order.

also: if it got bad enough, i would nationalise any and all holdings with in the nation owned by non-citizens or companys registered in other countrys. i would then sell them to citizens and companys registured in my country.

non-citizens/forigen companys would then not be allowed to own businesses/servese/whatever in my country. not even shares in them.

i would also nationalise the following, if they were in privet hands, paying for any shaires owned by my citizens, just takeing the rest:

telecomunications
railways
power companys
fuel companys [this could produce some issues because one would still need to get the fuel... but it can be got around]
probibly a few others i haven't currently thought of.

yeah.. there's more details in there, but i got board :P

I'd be Canadian and not have one in the first place.

Silly Americans.

I'd be Canadian and not have one in the first place.

Silly Americans.
We are rather good at that, aren't we?

hehe.. New Zealand's government has a different set of problems. after nearly going bankrupt in the 80s [i think] they're absolutly Paranoid about the budget, to the point where they run on a largeish surplus and still claime not to be able to afford various stuff, amoung other things.

ugh.. i'm awake now but still not functional... curse you lack of sleep!

Here's my plan for solving the US debt crisis.

1. Tell the countries that we owe money to that they can forget about ever seeing that money again. In fact, we can be more blunt and say "Go to hell you greedy hypocritical bastards." No one, NO ONE, ever pays the USA back when we help them out. So you know what, fuck them. If they want to pay back all the debts we were basically forced to forgive (with interest) then we might decide to pay them back. But until that time, they can all STFU about America's debt.

2. End foreign aid. It's stupid and pointless. We help everyone else in the world whenever they have a problem, but I'll bet we got almost no help when Katrina happened. I never heard anything about the world coming to our aid to help us over that troubled time; in fact, probably just about every troubled time in American history we got minimal, if any, foreign help. So you know what, screw them.

3. Cut military spending. Do we really need to be spending a couple hundred billion dollars on military? Methinks not. We are in an arms race with ourselves. We almost outspend the rest of the entire world when it comes to military.

4. On a related note to #3, STOP GOING INTO IMPERIALISTIC WARS! Afghanistan, fine. We were attacked and that's where the attack came from. But Iraq? Come 'on now. And now we are rattling sabers with Iran. I swear, if we go to war with Iran and we weren't attacked, you can call me a Canadian.

5. Stop cutting taxes when we have no money. That's just moronic. Not that I have come to expect any less from the great "conservatives" in the White House. Conservative my ass. What conservative increases the federal debt a few trillion dollars? Hmm, a poser conservative. Basically economically we can switch the party distinctions around. Socially is a different story entirely....

However, some claim that budget deficits may be good for a nation. The taking of loans and extra money raises GDP via government spending a la Keynesianism

I don't think Keynes would be down with that. I think his big point was you can get out of a liquidity trap type recession by increasing demand by printing more money. No need to take out a loan, if you have deflation like Japan has had, you can just print money to create inflation and your economy will pick up. This is how you get out of something like a great depression.

For a more normal recession you could say the idea of the government going into debt during bad years and gaining a surplus in good years to help even out the business cycle is Keynesian, but only doing one half of that equation - just going into debt, isn't what Keynes recommended.

I know some people speak about Keynes as if he were actually Marx's twin brother, but he was actually a capitalist who make a fortune from speculation.

It would also kill the US economy and likely inflict another Great Depression on the world. That in turn would make balancing the budget even more difficult by reducing tax income.

It would be a blow, definately. The US economy would suffer(though not so much as one might think, creditors would simply become very conservative for a period and there would be less venture capital available). American production would continue, and the big tech companies would still make what people want. Defaulting would definately throw Japan into a major depression. It would also likely encourage other countries to go the same route. All of these things would have traumatic immediate results. Those are short term issues. Over the long term, the Us defaulting would lead to credit becoming more difficult to come by, an absence of public debt, and a federal government that would find spending more money than it has difficult even decades down the road. Defaulting would force fiscal responsibility.

Think of it like a person or company going bankrupt: it is the best of a bad set of options that allows someone to start over with certain consequences. Long term deficit spending is just holding off the inevitable, like transfering your debt from one credit card to another. Eventually the debt will have to be dealt with, the only question is on whose terms. I think it has become obvious that neither the Democrats nor the Republicans have any serious interest in reducing spending to pay down the debt.

It would be a blow, definately. The US economy would suffer(though not so much as one might think, creditors would simply become very conservative for a period and there would be less venture capital available). American production would continue, and the big tech companies would still make what people want. Defaulting would definately throw Japan into a major depression. It would also likely encourage other countries to go the same route. All of these things would have traumatic immediate results. Those are short term issues. Over the long term, the Us defaulting would lead to credit becoming more difficult to come by, an absence of public debt, and a federal government that would find spending more money than it has difficult even decades down the road. Defaulting would force fiscal responsibility.

Think of it like a person or company going bankrupt: it is the best of a bad set of options that allows someone to start over with certain consequences. Long term deficit spending is just holding off the inevitable, like transfering your debt from one credit card to another. Eventually the debt will have to be dealt with, the only question is on whose terms. I think it has become obvious that neither the Democrats nor the Republicans have any serious interest in reducing spending to pay down the debt.If they're just going to default eventually anyway, why not borrow as much as they possibly can beforehand?