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Old 12-17-2011, 02:51 PM
Parallax Parallax is offline
Join Date: May 2011
Posts: 219
Default Re: Katherine's pants are on fire

Originally Posted by badhatharry View Post
I'm not sure what this means: how is this related to the fact that the US government did NOT spend more $1000 billion dollars like Mangu-Ward says
Huh? You replied to my comment on Mangu-Ward, you actually quoted it. But there is no logical connection between what you are talking about and my original comment.

Here's what you said: The goal [of fiscal policy] is to shift the total debt burden from households to the federal government. When households have repaired their balance sheets the aggregate demand will return to a normal level and we will see falling unemployment, for example cutting payroll tax by 2% does not create jobs directly but it helps people to pay down their mortgages and student loans and credit card debts slightly faster.

So here you seem to be saying that $1000 or $500 in a tax cut will do all kinds of wonderful things for a familiy's budget. You imagine that these people will dutifully apply their $50 per month to the principal on their credit cards or their student loans. I think that's a wise thing to do and I would encourage anyone to reduce their debt but it seems that the amount is very small and certainly won't substantially repair household balance sheets.
I never said $1000 per person per year would do wonderful things. I don't think I ever said anything that would seem like it either ($6000 per person per year plus major tax reform would actually do wonderful things). Fiscal expansion shifts the debt from households to the federal government and any small amount helps to cut the duration of the households repairing their balance sheets.

Like I said above this has nothing to do with my original post about Mangu-Ward. Not every fiscal expansion is spending and while the entire stimulus bill was less than $800 billion she claims (a) we spent more than $1000 billion, and (b) we have nothing to show for it. Note that if the government tried to balance the budget in the middle of the recession the difference with what happened would have been a lot more than $1000 per person per year.
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