Are we nearing a 3rd depression? Do deficits matter?
Krugman stated-We need to pinch pennies these days. Don’t you know we have a budget deficit? For months that has been the word from Republicans and conservative Democrats, who have rejected every suggestion that we do more to avoid deep cuts in public services and help the ailing economy. Which is an expensive proposition in its own right — but to let those provisions benefiting only people with very high incomes expire on schedule. Republicans, with support from some conservative Democrats, want to keep the whole thing. Ferguson Replied- The idea of running larger federal deficits could be a wreck less proposal. All governments even the United States has to succumb to the pressure of trillion dollar spending. This is where I stand- The concern and potential condemnation- is when it fail it fails fast and without concern about who it falls over on. You can be concerned about budget shortfalls in state governments, but the real issue is what happens when there is not option on what to spend. Meaning there is no more money. We have built a credit hungry society. Not only the citizens but the governments. Can they simply Tax and spend their way to financial nirvana or do they find themselves hitting the wall of socialistic cataclysmic spending hysteria. It’s possible that the budget they set out for education was wrong. They may have overspent. In California pensions were calculated at a + 7% annual return Krugman has been in favor of stimulus but critical of how that stimulus has been used. Paying higher taxes is not really part of the debate. The issues with economy are deeper than the simple conversation of tax or don’t tax. Business is what will drive the recovery. The reason that business has been reluctant to grow? Lack of a clear future. What will the new healthcare program cost a business owner or even worse a small business owner. What will the passing of cap and trade do to profit margins? What will be the near term tax liability increase? These issues prevent entrepreneurs from assuming more risk. With that risk taking we find ourselves in a very neutral environment that begins to fold onto itself.