Deficit Spending- Please Explain the Logic

[pvn]

[ QUOTE ]
I know that there is a school of thought that deficit spending is actually good for America. I must admit that I don't understand it very well. I would like to be able to quit being a fiscal conservative but I can't figure out how deficit spending is good. Our elected politicians seem to not have an issue with it and I know that there is a school of economic theory that says that we could not operate as effectively without deficit spending.

Please explain the logic behind deficit spending and why it is good for the average American. Also:

How does deficit spending continue in perpetuity?
What are the potential risks?
What makes it better than a balanced budget?
Does it have any future effects on taxation?

[/ QUOTE ]

Note that "good for America" is not the same as "good for the average American". That's where your confusion lies.

"Good for America" is a meaningless propaganda phrase.

The "average American" does not exist.

Deficit spending is good for *some* people, that much is certain (else it would not be so vigourously pursued). Who do *you* think benefits?

[Mempho]

[ QUOTE ]
[ QUOTE ]
I know that there is a school of thought that deficit spending is actually good for America. I must admit that I don't understand it very well. I would like to be able to quit being a fiscal conservative but I can't figure out how deficit spending is good. Our elected politicians seem to not have an issue with it and I know that there is a school of economic theory that says that we could not operate as effectively without deficit spending.

Please explain the logic behind deficit spending and why it is good for the average American. Also:

How does deficit spending continue in perpetuity?
What are the potential risks?
What makes it better than a balanced budget?
Does it have any future effects on taxation?

[/ QUOTE ]

Note that "good for America" is not the same as "good for the average American". That's where your confusion lies.

"Good for America" is a meaningless propaganda phrase.

The "average American" does not exist.

Deficit spending is good for *some* people, that much is certain (else it would not be so vigourously pursued). Who do *you* think benefits?

[/ QUOTE ]

OK, I'll take the bait:

My guess is that deficit spending is good for the multinationals and the elites but bad for the middle class.

My guess is that fiscal liberals, which encompass both parties, serve mainly the elites by 1) creating a cause to tax the middle class to the point where "moving up" is very difficult (thereby preventing something that is more of a meritocracy) and 2) providing some minimum level of assistance to the lower class (housing and food) to keep the lower class at bay and from starting an insurrection. Therefore, the elites get the benefits of capitalism but without both of the primary risks:

1) Tax the Middle class so much that better ideas can't come to the forefront (for lack of capital to invest)
2) Keep the lower classes at bay (by providing food and shelter)

In this way, it is (for them) the perfect balance of communism and capitalism since it uses a balance of ideas from both the Communist Manifesto and Wealth of Nations. Further, when the balance gets off-kilter, they generally make changes that are gradual (see gradualism) to keep both the middle and lower classes at bay.

In the short-term, the lower and middle classes have different priorities and that keeps political balance and the illusion of an enemy. (Like the differences between middle and lower classes on welfare).

However, if the truth were told, a different economic system would break down class barriers and monopolies to such an extent that the rising tide would lift all boats. Certainly, there would be losers in this system and the protection of the elites would be dissolved in that they would be forced to compete on the merits of their processes and ideas rather than be protected by being high atop an ivory tower.

That's just my guess, however, and I'd rather not be so pessimistic about what our politicians are doing.

Now, if the middle and lower classes actually knew this stuff well, who would they vote for (if they desired to move up), fiscal conservatives or fiscal liberals?

[pvn]

[ QUOTE ]
That's just my guess, however, and I'd rather not be so pessimistic about what our politicians are doing.

[/ QUOTE ]

I think you're pretty close.

[ QUOTE ]
Now, if the middle and lower classes actually knew this stuff well, who would they vote for (if they desired to move up), fiscal conservatives or fiscal liberals?

[/ QUOTE ]

what about fiscal do-nothings?

[Mempho]

[ QUOTE ]
[ QUOTE ]
That's just my guess, however, and I'd rather not be so pessimistic about what our politicians are doing.

[/ QUOTE ]

I think you're pretty close.

[ QUOTE ]
Now, if the middle and lower classes actually knew this stuff well, who would they vote for (if they desired to move up), fiscal conservatives or fiscal liberals?

[/ QUOTE ]

what about fiscal do-nothings?

[/ QUOTE ]

By that, do you mean status quo? Status quo is an endorsement of deficit spending. I don't think I caught your point. I guess that the best way to put it would be this:

If middle and lower class Americans knew how to vote their best interests and didn't feel relegated to vote for only Dems or Reps, what policy would they endorse?

[pvn]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
That's just my guess, however, and I'd rather not be so pessimistic about what our politicians are doing.

[/ QUOTE ]

I think you're pretty close.

[ QUOTE ]
Now, if the middle and lower classes actually knew this stuff well, who would they vote for (if they desired to move up), fiscal conservatives or fiscal liberals?

[/ QUOTE ]

what about fiscal do-nothings?

[/ QUOTE ]

By that, do you mean status quo? Status quo is an endorsement of deficit spending. I don't think I caught your point. I guess that the best way to put it would be this:

If middle and lower class Americans knew how to vote their best interests and didn't feel relegated to vote for only Dems or Reps, what policy would they endorse?

[/ QUOTE ]

By do-nothings, I mean no fiscal policy, no spending. There's really no difference between democrats and republicans, they both want to spend [censored] of money, just on slightly different things. From this perspective of the hypothetical enlightened lower and middle classes that you asked about, once they figure out what's going on it doesn't matter if someone else is spending your money on a donkey or an elephant, it's still someone else taking your money and spending it.

[Copernicus]

"1) Tax the Middle class so much that better ideas can't come to the forefront (for lack of capital to invest)"

This makes no sense. Mr. Old Elite has the capital to invest in good ideas, and stands to gain far more from finding those investments himself than

A. Risking another Old Elite from investing in the idea and profiting
B. Risking Mr. Middle Class inventor finding a different investor and becoming Mr. New Elite, without Old Elite having a piece of the action.

The only way your theory would hold up is if there were a vast conspiracy amongst ALL of the old elites to kill the middle class inventor. As cartel behavior shows, that kind of conspiracy is doomed from the start.

There would also seem to be far more direct ways to suppress that kind of innovaton than deficit spending and taxes. (Eg legislate out IP protection and adopt an AC style contractual system that is exclusive to the old elites).

In fact, most capital investment for innovative ideas coming from the middle class is provided by venture capital firms, which are themselves capitalized by the old elites. Those avenues wouldnt exist if your "suppression" theory had any validity.

[econophile]

Anyone who takes out student loans to go to college is practicing deficite spending on a personal level. In seems sensible for the student to do this because his current income is low, but is expected to be high in the future.

An analogous situation on a national level could make deficite spending desirable.

[pvn]

[ QUOTE ]
Anyone who takes out student loans to go to college is practicing deficite spending on a personal level. In seems sensible for the student to do this because his current income is low, but is expected to be high in the future.

An analogous situation on a national level could make deficite spending desirable.

[/ QUOTE ]

The only problem with this is that on the national level the people "taking out the loans" are not the ones who will be repaying them. If I could take out loans and make my neighbors pay for them later, my incentives to restrain my spending are very, very low.

[AlexM]

The point of deficit spending is to get votes for cutting taxes while also getting votes for bread and circuses.