Couple of things in that article kind of jump out...Originally Posted by slapout9
If deficits benefit ordinary people, ordinary Americans at this point should be richer than Croesus. While deficit money does end up in people's pockets, the people it flows to are generally a long way from ordinary: the beneficiaries of government spending are generally as small a group as the corporate elite.Deficits put money in private pockets. Private households get more cash. They own that cash free and clear, and they can spend it as they like. If they wish, they can also convert it into interest-earning government bonds or they can repay their debts. This is called an increase in "net financial wealth." Ordinary people benefit, but there is nothing in it for banks.
That's just wrong. The deficit reduction of the 90s was driven not by bank lending, but by an outrageous and unsustainable surge in the valuation (not value) of fictitious "assets", like shares of Infospace or Pets.com. Yes, the taxes levied on fantasy "capital gains" balanced the budget, and the hiring sprees by companies spending invested money ran up lovely employment numbers, but at the end of the day all those lavishly paid employees weren't generating products, services, or revenues, and the captial gains were going to get sucked back into the black hole whence they came when valuation and value had to equalize. The mid to late 90s, I fear, represent one of the most egregious and unnecessary lapses in economic policy in American history. Government could have acted, had the tools to act, but simply didn't want to: bubbles are fun as long as they keep on growing, and if the Nasdaq's going up and the intern's going down, everything has got to be ok. Until it isn't. We're still paying the price...Increased private lending generates new tax revenue and smaller deficits; that's what happened in the 1990s.
Bookmarks