**Fiscal Discipline da 2
Aff-Deficit Spending-Not Cause Econ Decline
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- Political environment stopped follow up Obama stimulus- deficits are not a problem in a depressed economy
- NU—Economy Decline Now
- Economy slowing—consumer confidence and manufacturing reports
- Durable good orders and euro crisis eroding economy
- The US is in a recession.
- In depression now—multiple factors
Aff-Deficit Spending-Not Cause Econ Decline2008 American collapse due to private credit-led speculative boom-not public deficitsBoyer, Economist at CEPREMAP and senior researcher for National Center for Scientific Research,11/1/11 (Robert, “The Four Fallacies of Contemporary Austerity Policies: the Lost Keynesian Legacy”, Cambridge Journal of Economics, November 1, 2011, Accessed 6/28/12)pg 285-286 AHL The rationale behind austerity policies cannot be understood without referencing the American crisis. Of course, the USA has shown a long period of trade and public deficits, but these are not the origin of the present turmoil. Actually, the present turmoil derives from the long-term consequences of a cluster of financial innovations that aimed to separate credit decisions from their subsequent risks by splitting them into various components (associated with default, variability of interest and exchange rates). This has generated an extreme elasticity of credit supply that has favoured high leverage within the financial system and access to mortgage credit for the less affluent proportion of the population. This dissolution of the intrinsic responsibility of the bank within the bilateral relation of credit triggered an explosion of credit that fed the dynamism of effective demand. However, the quality of creditors has simultaneously been deteriorating, and this worsening position was hidden by the complexity and creative nature of fair value accounting (Boyer, 2008). In a sense, the securitisation of subprime loans and related financial innovations have converted the poorest fraction of the population into Ponzi speculators that were convinced to bet upon the endless rise of American housing prices. The financial system has thus experienced large and easy profits that remained unchallenged until the bubble burst. The boom was bound not only to end (Boyer, 2000A), but also to trigger a melting down of Wall Street investment banks that finally reverberated throughout the entire American economy and, subsequently, globally (Figure 1). The overarching cause of the 2008 crisis was thus a private credit-led speculative boom: it was not public deficit generated. Most countries have been affected by the direct and indirect repercussions of the diffusion of toxic derivatives and the collapse of international trade. Some of them even had public budget surpluses because the real-estate boom had been generating high taxes; Spain is a good example of such a pattern (see Figure 9C). Therefore, there remains some doubt about the relevance of typical austerity policies based upon the correction of previous public finance imbalances. Political environment stopped follow up Obama stimulus- deficits are not a problem in a depressed economyKrugman, Nobel Prize Economics and Professor of Economics and Int. Affairs Princeton, 12 [Paul, End This Depression Now, 2012]AHL BY THE FALL OF 2009 it was already obvious that those who had warned that the original stimulus plan was much too small had been right. True, the economy was no longer in free fall. But the decline had been steep, and there were no signs of a recovery fast enough to bring unemployment down at anything more than a glacial pace. This was exactly the kind of situation in which White House aides had originally envisaged going back to Congress for more stimulus. But that didn’t happen. Why not? One reason was that they had misjudged the politics: just as some had feared when the original plan came out, the inadequacy of the first stimulus had discredited the whole notion of stimulus in the minds of most Americans and had emboldened Republicans in their scorched-earth opposition. There was, however, another reason: much of the discussion in Washington had shifted from a focus on unemployment to a focus on debt and deficits. Ominous warnings about the danger of excessive deficits became a staple of political posturing; they were used by people who considered themselves serious to proclaim their seriousness. As the opening quotation makes clear, Obama himself got into this game; his first State of the Union address, in early 2010, proposed spending cuts rather than new stimulus. And by 2011 blood-curdling warnings of disaster unless we dealt with deficits immediately (as opposed to taking longer-term measures that wouldn’t depress the economy further) were heard across the land. The strange thing is that there was and is no evidence to support the shift in focus away from jobs and toward deficits. Where the harm done by lack of jobs is real and terrible, the harm done by deficits to a nation like America in its current situation is, for the most part, hypothetical. The quantifiable burden of debt is much smaller than you would imagine from the rhetoric, and warnings about some kind of debt crisis are based on nothing much at all. In fact, the predictions of deficit hawks have been repeatedly falsified by events, while those who argued that deficits are not a problem in a depressed economy have been consistently right. Furthermore, those who made investment decisions based on the predictions of the deficit alarmists, like Morgan Stanley in 2010 or Pimco in 2011, ended up losing a lot of money. Yet exaggerated fear of deficits retains its hold on our political and policy discourse. I’ll try to explain why later in this chapter. First, however, let me talk about what deficit hawks have said, and what has really happened. NU—Economy Decline NowJobs proves economy not doing finePeter Roff is a contributing editor at U.S. News & World Report. A former senior political writer for United Press International, he is currently a senior fellow at the Institute for Liberty and at Let Freedom Ring, June 11 2012 (US News and World Report, http://www.usnews.com/opinion/blogs/peter-roff/2012/06/11/no-president-obama-the-economy-is-not-doing-fine accessed tm) Indeed, it really is that simple. For more than three years—40 consecutive months—and despite the promises made during the stimulus debate, U.S. unemployment has been north of 8 percent. The number of people who are counted as "long-term unemployed" has doubled. The private sector is not creating jobs. Demand for goods and services is down, largely because people either cannot afford them or are afraid to make major purchases because they are not confident in their personal economic future. There is a problem out there and the president either can't see it or doesn't want to acknowledge what is clear to almost everyone else. Economy slowing—consumer confidence and manufacturing reportsReuters June 15 2012 (http://www.nytimes.com/2012/06/16/business/economy/dip-in-manufacturing-could-suggest-stalled-economy.html?ref=economy accessed tm) Factory output contracted in May for the second time in three months, the Federal Reserve said on Friday, and families took a dimmer view of their economic prospects in early June, signs that the economy’s recovery is on shaky ground. The new data was the latest in a series of reports portraying a weak economy that have led analysts to cut growth forecasts while raising expectations that the Federal Reserve will offer new stimulus measures. Until recently, manufacturing had been a buttress for the nation’s economy, helping it resist headwinds from Europe’s snowballing debt crisis. But in May, factory output shrank 0.4 percent, with plants producing fewer cars and less machinery, Federal Reserve data showed. “It’s more convincing evidence that the economy is stuck in low gear,” said Joe Manimbo, a market analyst at Travelex Global Business Payments. Other reports pointed to cooling factory activity in New York State this month, along with a drop in household confidence in the economy. The fall in confidence poses a serious threat to President Obama’s chances of winning re-election in November. It could also lead consumers to cut back on spending, which would reduce economic growth. “Consumers are scared,” said Sharon Stark, managing director at Sterne Agee in Birmingham, Ala. Consumer sentiment fell in early June to a six-month low. A gauge of household confidence in the economy’s future also dropped to its lowest since December. Durable good orders and euro crisis eroding economyReuters June 15 2012 (http://www.nytimes.com/2012/06/16/business/economy/dip-in-manufacturing-could-suggest-stalled-economy.html?ref=economy accessed tm) The weakening recovery in the United States and a worsening debt crisis in Europe have bolstered expectations of a further easing of monetary policy by the Fed, although economists are divided on whether the central bank will act when it meets on Tuesday and Wednesday. Hiring by the nation’s employers has slowed for four consecutive months, while retail sales contracted in May and new applications for jobless benefits have risen in five of the last six weeks. Within the Fed’s report on U.S. industry in May, the softness in the factory sector was widespread. Output for durable goods dropped 0.5 percent as auto production slid 1.5 percent. Production of nondurables fell 0.2 percent. Record low banking confidence proves US economy is failing. 24/7 Wall Street, June 27, 2012 (24/7 Wall Street, “Confidence in Banks Plummets, June 27, 2012, Accessed: 7-2-12) ADJ As the largest banks in the United States prepare living wills for the government in the event that any of them should become financially nonviable, Americans continue to lose their trust in banks. According to a new poll by Gallup: These bleak perceptions of the nation s banks are consistent with ongoing banking issues worldwide, including the continuing crisis in Europe, particularly regarding European banks. It is also consistent with the major J.P. Morgan trading loss and Moody s recent downgrade of large global banks, including some banks in the United States. As a result: Americans confidence in U.S. banks is now at a record-low 21%, down slightly from 23% in the past two years and one percentage point below the 22% found in 2009. The percentage of Americans saying they have a great deal or quite a lot of confidence in U.S. banks is now about half the pre-recession level of 41%, recorded in June 2007. Unemployment proves economy is failing, hurts consumer confidence. 24/7 Wall Street, June 25, 2012 (24/7 Wall Street, “Why Unemployment Could Rise This Year,” LexisNexis, June 25, 2012, Accessed: 7-2-12) ADJ The number of jobs the economy has added in each of the past four months has been weaker than expected. May unemployment numbers show that only 69,000 jobs were added. The national unemployment rate is 8.2%. Unemployment may well increase in most months over the balance of 2012. Many of the circumstances that helped turn the jobs market around over the past year and a half have vanished. Also, some of the positive trends recently have turned negative. One trend that has continued to be a drag on the overall national job numbers, and will continue for another year or more, is the drop in the number of public employees. Many states and municipalities have not found solid footing financially. Tax revenue for many of these places has not recovered from the recession. And job cuts could move to the federal level, if the austerity measures debated by Congress and the Administration become a substantial part of the plans to balance the budget. Another trend undermining employment at what could be called the federal level is the jobless rate among Gulf War veterans. Bureau of Labor Statistics data show that for 2011: Young male veterans (those ages 18 to 24) who served during Gulf War era II had an unemployment rate of 29.1 percent in 2011, higher than that of young male nonveterans (17.6 percent). As more and more soldiers return to the United States, this figure is bound to rise. The most likely culprit for an increase in unemployment is the most obvious one. The American economy has been undermined by the dual effect of a drop in gross domestic product in Europe, which has hurt and will continue to hurt U.S. exports, and a drop in consumer confidence. The export problem will cause a decline in profits for many domestic firms, which often leads to job cuts. Consumer confidence will erode as Americans look around them at the dimming prospects for a recovery and cut their own spending due to fear about their economic futures. The fate of individual and company tax cuts for next year is uncertain, and it is almost July. Many Americans expect the future of those cuts will remain undetermined until after the election. There is no reason to count on an extension. That means much of the population has begun to prepare for a larger tax bite. For the first time in ages, the balance of things that should help the employment situation has shifted in a negative direction. That will continue for the foreseeable future. The US is in a recession.The Political Wire, June 27, 2012 (The Political Wire, “Has the next recession already begun?,” June 27, 2012, John Hussman, a former professor of economics and international finance at the University of Michigan, LexisNexis, Accessed: 7-2-12) ADJ John Hussman makes the case that the U.S. economy has entered a recession that will later be marked as having started here and now. Very often, the first real-time negative GDP print occurs about two quarters after the recession actually begins. It is only later that the data are revised to show an earlier downturn. For that reason, it s important to pay attention to the joint action of numerous economic data points, rather than selecting any specific indicator as an acid test. We can’t rule out further attempts at monetary heroism from the Fed It s true that in 2010 and 2011, one or two quarters of support for GDP growth was enough to push off emerging economic weakness for a while. At present, the economic headwinds are much more serious, particularly given European strains. So aside from the hope for transitory speculative benefits, it s not at all clear that further quantitative easing would be effective in halting a U.S. recession that, by our estimates, has already begun. In depression now—multiple factorsKrugman, Nobel Prize Economics and Professor of Economics and Int. Affairs Princeton, 12 [Paul, End This Depression Now, 2012, p. 15-17]AHL Amid all the excuses you hear for not taking action to end this depression, one refrain is repeated constantly by apologists for inaction: we need, they say, to focus on the long run, not the short run. This is wrong on multiple levels, as we’ll see later in this book. Among other things, it involves an intellectual abdication, a refusal to accept responsibility for understanding the current depression; it’s tempting and easy to wave all this unpleasantness away and talk airily about the long run, but that’s taking the lazy, cowardly way out. John Maynard Keynes was making exactly this point when he wrote one of his most famous passages: “This long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the sea is flat again.” Focusing only on the long run means ignoring the vast suffering the current depression is inflicting, the lives it is ruining irreparably as you read this. But that’s not all. Our short-run problems— if you can call a slump now in its fifth year “short-run”— are hurting our long-run prospects too, through multiple channels. I’ve already mentioned a couple of those channels. One is the corrosive effect of long-term unemployment: if workers who have been jobless for extended periods come to be seen as unemployable, that’s a long-term reduction in the economy’s effective workforce, and hence in its productive capacity. The plight of college graduates forced to take jobs that don’t use their skills is somewhat similar: as time goes by, they may find themselves demoted, at least in the eyes of potential employers, to the status of low-skilled workers, which will mean that their education goes to waste. A second way in which the slump undermines our future is through low business investment. Businesses aren’t spending much on expanding their capacity; in fact, manufacturing capacity has fallen about 5 percent since the start of the Great Recession, as companies have scrapped older capacity and not installed new capacity to replace it. A lot of mythology surrounds low business investment— It’s uncertainty! It’s fear of that socialist in the White House!— but there’s no actual mystery: investment is low because businesses aren’t selling enough to use the capacity they already have. The problem is that if and when the economy finally does recover, it will bump up against capacity limits and production bottlenecks much sooner than it would have if the persistent slump hadn’t given businesses every reason to stop investing in the future. Last but not least, the way the economic crisis has been (mis) handled means that public programs that serve the future are being savaged. Educating the young is crucial for the twenty-first century— so say all the politicians and pundits. Yet the ongoing slump, by creating a fiscal crisis for state and local governments, has led to the laying off of some 300,000 schoolteachers. The same fiscal crisis has led state and local governments to postpone or cancel investments in transportation and water infrastructure, like the desperately needed second rail tunnel under the Hudson River, the high-speed rail projects canceled in Wisconsin, Ohio, and Florida, the light-rail projects canceled in a number of cities, and so on. Adjusted for inflation, public investment has fallen sharply since the slump began. Again, this means that if and when the economy finally does recover, we’ll run into bottlenecks and shortages far too soon. How much should these sacrifices of the future worry us? The International Monetary Fund has studied the aftermath of past financial crises in a number of countries, and its findings are deeply disturbing: not only do such crises inflict severe short-run damage; they seem to take a huge long-term toll as well, with growth and employment shifted more or less permanently onto a lower track. And here’s the thing: the evidence suggests that effective action to limit the depth and duration of the slump after a financial crisis reduces this long-run damage too— which means, conversely, that failing to take such action, which is what we’re doing now, also means accepting a diminished, embittered future. Directory: files files -> Answer True False 2 points Question 2 files -> Integer programming and game theory files -> 4 Integer Programming files -> Bpa vehicle Window Repair Scenario #1 task: Procure vehicle window relacement. Objective files -> Pop Warner History files -> North Carolina Inclusion Initiative Mapping Where Children with ieps are Being Served Purpose files -> Fall 2013 Spring 2014 Program Data: Standard 1 Exhibit 4d files -> Hanban – asia society confucius classrooms network 2010 request for proposal files -> Northern England’s set-jetting locations Download 0.63 Mb. Share with your friends:
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