Contributors

Monday, December 12, 2011

EuroGraphics

My main source of news, The Christian Science Monitor, recently posted a wonderful summation of the EuroZone economic crisis. As is often the case with the CSM, their analysis is thoughtful and well balanced. Let's take a look at the five graphics they provided. First we have the shadow economy graphic.
When nearly a quarter of your economy is untaxed (as is the case with Greece and Italy), you're going to have problems. Couple this with all the tax evasion that goes on in Greece, for example, and it's both a revenue and spending problem. Next up we have the export issue.

Germany is obviously the behemoth here. Greece is the lowest which is another explanation as to why they are in so much trouble. They aren't selling anything in the global marketplace. To put it simply, they aren't competing. Of course, we also have the issue of public sector size.

And the issue of deficit spending as a percentage of GDP.

Note here the stability of Germany. Finally, we have the main thing that the right in this country focuses on nearly to a fault.

My main point in showing all of these graphics is to stress that it is the summation of all five of these issues (plus interest rates, of course) that is causing the problem. To say that it's simply an issue of spending is ridiculous. Germany, for example has fairly high debt as percentage of GDP but their deficit spending is low and their exports are high. Their shadow economy is much lower as well.

So, it's the whole meal and not just the salad.

138 comments:

Nikto said...

I'm not all surprised to see that Greece is stricken with tax evasion. When we visited there 20 years ago the city were filled with half-built houses -- part of the house looked normal, but the top or one half was bare concrete beams with rusty rebar sticking out.

Later we found out that you don't pay full property taxes on buildings that were "under construction." So everyone started building oversized houses that they never quite finished.

Haplo9 said...

Nope, spending. If you take in x, yet you spend x+y year after year for over a decade, claims that "well, revenue would be higher in my preferred alternate reality!" don't exactly mitigate your earlier decision to spend well beyond your means. Well, except in Mark-land.

Juliet said...

I don't understand. Mark has presented you with more information than just spending and you simply ignore it? Why? I think I understand his frustration as you refuse to accept any new information.

6Kings said...

I don't understand.

Exports talk to expanding the economy which in turn should add to revenue. Shadow economy is potential revenue that may be realized with some enforcement improvements but can never be fully realized revenue without a police state more extreme than you want to experience. Those are two ways to expand revenue.

And so what? Debt and deficits are created by spending more than you take in. For those that are math challenged, that is a spending problem. So, create policies that tackle those two issues among others and wait to see how the revenue adjusts.

Are those potential revenue sources actual? No, and so the spending is more than revenue. If I make x but spend x + y, that still means I am spending y too much even if there is potential for a raise, bonus, or lottery winnings.

Spending more for long periods of time adds to debt which increases interest and principle payments which leads to additional payment obligations....a nasty spiral. Greece is further down the drain than we are with less capability to pull out of it but the principal is the same. Spend less and create policies that encourage growth. Government has a bad tendency to do the opposite.

Markadelphia said...

Hap, this is where your claims of being able to think critically look completely ridiculous. Yes, spending is part of the problem as indicated here but when a quarter of your economy is untaxed, revenue is also a problem. Nikto's point is also interesting as it furthers points out a nation that refuses to pay taxes AND spends money. Your obsession with spending (like many on the right) has clouded your judgement. It's as if you are inside of a bubble and, despite all the shouting that is going on, not a sound gets through.

Now, 6Kings on the other hand, has offered a thoughtful comment which is more balanced. This line

Spend less and create policies that encourage growth

made me think about President Reagan. He spent more (although he said he would spend less) and encouraged growth. And he cut taxes but remember that Reagan too was a Keynesian. Cutting taxes speaks to sparking aggregate demand. Unfortunately, he tried to play both sides of the fence and also bought into the supply side myth as well.

Haplo9 said...

>Hap, this is where your claims of being able to think critically look completely ridiculous.

If only you could understand why that means so little coming from you. You might learn something. You do realize though, that 6Kings and I aren't saying anything different. Right?

Haplo9 said...

Juliet, the reason the information mark presented isn't very meaningful is because they are all versions of reality that don't exist. What I mean by that - there are undoubtedly many different ways that Greece might increase government revenue, reducing tax avoidance being just one of them. The point is that none of those things has actually happened, they are only things that could theoretically happen; therefore, spending money as if those things were actually true is irresponsible. Think of it in personal terms - if I were to go back to school and get the right education, I could possibly increase my own revenue by 200k. However, until that actually happens, (which is not a guarantee), it would be very unwise of me to spend money as if my revenue had increased by 200k. I'll only get myself into trouble. Yet this is what Greece did - you can see from Mark's own charts that they have been running a budget deficit for at least the last decade.

The root of this is drawing a false equivilence between spending and revenue, as if they are both simply variables that can be manipulated at will. Spending is a variable that can be manipulated at will. Revenue, however, is not, not by governments or by people. The best you can do is change your current behavior in the hopes that it will increase revenue in the future, but hell, look at this blog. There is no agreement between Mark and his regular commenters as to what constitutes a "pro growth" policy, for example. More revenue isn't something that you can just conjure up at will. Therefore, spending, the one thing you can directly control, must be subordinate to revenue. Greece has never been willing to do that, and now they are paying the price.

Markadelphia said...

because they are all versions of reality that don't exist

But they do exist, Hap. This is how the arrived at their problem and some of it had to do with revenue. I'm not disagreeing with you on the spending-just the fact that you have made it the sum total of the problem. The fact that you assign the rest of the factors as meaningless is illustrative of your pathological view on government. Is it possible for you to step outside of your bias?

More revenue isn't something that you can just conjure up at will. Therefore, spending, the one thing you can directly control, must be subordinate to revenue.

I'm not sure I follow you on this one. If you are saying that Greece doesn't have the will to collect taxes, well, that's true. They can certainly change that, however. After all, don't we have men that come to our homes with guns if we don't pay our taxes? Governments do have direct control over revenue collection. How they manage that-for good or ill-is up to them. Obviously we do a better job of that as our shadow economy is much smaller than the ones in Europe.

Right?

Wrong. Did you read his first paragraph? Greece and Italy are going to have to cut spending AND increase revenue. That last part you seem to have a problem with and it's because of your ideology.

Of course, none of this even begins to answer a key question: what happens if/when these government cut spending, live within their means, and their economies DON'T grow? Or grow very slowly?

Will you admit that you were wrong? I doubt it but I'd love to be mistaken.

GuardDuck said...

Greece and Italy are going to have to cut spending AND increase revenue.

Mark you wouldn't know logical progression if it hit you on the head.

Problem 1: Mark writes bad checks.
Solution 1: Stop writing bad checks.

Problem 2: After writing multiple bad checks Mark's account is seriously overdrawn.
Solution 2: Work overtime, second job or make major cuts in spending until account balance is in the black.


See that Mark? Those are two separate problems? Problem 2 was caused by Problem 1. If you do not address problem 1 first then you cannot successfully address problem 2.


So if Greece makes x and they keep spending x+y it doesn't matter if they can suddenly start making x+y because then they will simply start spending x+y+z.

You sound like an alcoholic who won't admit his addiction and makes excuses for it. Quit being an enabler for the spending addictions Mark.

6Kings said...

what happens if/when these government cut spending, live within their means, and their economies DON'T grow? Or grow very slowly?

What kind of questions are these? Are you serious?

They don't get to increase spending. Then they have to prioritize their funds - just like everyone else on Earth.

What do you do if you don't get raises or additional jobs and can't reasonably borrow any longer?

Greece and Italy are going to have to cut spending AND increase revenue. That last part you seem to have a problem with and it's because of your ideology.

False. Greece and Italy (and a host of others) have to cut spending and have to cut it less IF they can increase revenue, whether that is through increased taxes, economic growth, or selling their assets. There is no mandate that they have to increase revenue nor is it guaranteed that they can even do that via government decree. I am sure they would rather get more revenue so the cuts are not so painful but is isn't necessary.

You are going to get X revenue and that is a fact. You can choose to spend X or less or X+Y. Notice which one has the choice next to it? That is the discussion.

Markadelphia said...

GD, please stop equating government spending to personal or individual spending. The two are not comparable and, by simplifying the problem to the extent that you are, you ignore the various complexities and intricacies of the government's role in the world economy.

That is the discussion.

What is it with you guys and the imperial edicts? I think I understand now why you (falsely) rip me for saying, "Because I said so!" I have infringed upon sacred territory. For this, I apologize:)

And the same to you that I said to GD. I'm not a government. Nor am I a corporation:) Again, a terrible comparison. I don't see how we can get anywhere as long as both of you have this perception.

Juliet said...

"Juliet, the reason the information mark presented isn't very meaningful is because they are all versions of reality that don't exist."

To pretend that these issues with revenue don't exist is unfathomable to me. From my view, it is as if you do live in a bubble with no new information being allowed inside. You can't keep shoving your square peg into a round hole.

Hey Mark, how do you get words to be italicized in comments?

Markadelphia said...

Put an "i" between <> before the text and do the same after the except insert a "/" right before the "i"

GuardDuck said...

I am not going to stop simplifying Mark.

For two reasons.

One - It is not a complex concept. It is basic arithmetic and logic. You don't even need multiplication tables or a book on critical thinking to understand it.

Two - Any desire to make it more complex than that is either purposely clouding the issue or a symptom of misunderstanding the problem.

6Kings said...

The new look is cool.

Markadelphia said...

Thanks, 6Kings. I just decided to do it on a whim.

GD, again, I get that spending is a problem. But you seem to be operating under the assumption that simply spending less than you are taking in is going to solve the problem. It won't. Hence, the reason why I put up the other info regarding the shadow economies and export issues. This is why equating governments with people when it comes to spending and revenue makes no sense. Countries have a whole host of other issues to consider.

For example, what sort of trade relationships does Greece have with its trading partners? Are they engaging in protectionism? Are their partners? Perhaps these reasons would figure into their export problems and, in turn, their revenue issues. Consider how Greece fits into this global marketplace and how connected they are to the business of other countries.

GuardDuck said...

Which is all utterly irrelevant.

Income=X. Spending=X+Y. Years of overspending=b. Total problem=(X+Y)b.

(X+Y)b may be too large of a number to recompense via some version of Spending<X. Therefore the solution to reducing (X+Y)b may require Income to be greater than X simultaneous with spending to be less than X as well.

But, and this is where you are failing to understand the point and the issue Mark, that previous paragraph has absolutely nothing to do with diagnosing the problem. That paragraph has to do with decreasing debt. That that debt had been incurred and how and why it was incurred is the core issue. And that debt was incurred via no other process than by excessive spending.

Haplo9 said...

>But they do exist, Hap.

So I think Mark and Juliet are not understanding what I mean by "versions of reality that don't exist." I'm not stating they don't exist in some kind of cosmic, "those things aren't real" way. What I mean is that right now, in Greece, Greece either hasn't done those things that would increase revenue or has tried and failed to do those things. Why is that important? 2 reasons:
1. Greece is facing a crisis right now. It's bond yields are somewhere around 35%, which effectively means they cannot borrow.
2. The cause of this crisis is actions in the past, and we can clearly see that regardless of what measures Greece took to increase revenue in the past, they still spent more than they took in. If they hadn't spent that way, they wouldn't be in a crisis.

So telling Greece, "hey, you need to increase your revenue" is about as useful as telling a gunshot victim, "hey, you should have worn body armor." Yes, more revenune would have been nice in the past, and it wouldn't hurt in the future. But the past is.. the past, and Greece chose not to live within their means. They are facing default right now, so telling them they should get more revenue in the future isn't very helpful either.

>They can certainly change that, however. After all, don't we have men that come to our homes with guns if we don't pay our taxes?

Simply not true. Governments don't have nearly the control over revenue as they do over spending, except perhaps in a dictatorship. A modern, representative government cannot instantly increase their revenue, but they can instantly decrease their spending. Sure - they can raise taxes, but there is no guarantee that that will increase revenue, especially if taxes are already high. It may encourage tax avoidance. The economy may tank in the next year. Or a government can try to institute pro growth policies. Except, those policies might not work. Or they might turn out to be anti growth policies. That is why I don't understand why you draw an implicit parallel between revenue and spending. While they reside on opposite sides of the balance sheet, they aren't in any sense equal in terms of the difficulty of changing them.

>Wrong. Did you read his first paragraph?

Yes, and you might want to read it again. He's saying exactly what I'm saying - you can change some policies and hope they increase growth and thus revenues, but its foolish to increase spending before you find out if those policies actually increase your revenue.

>what happens if/when these government cut spending, live within their means, and their economies DON'T grow? Or grow very slowly?

To add to 6Kings answer of doing the best they can with scarce resources, I'd point out that when these governments live within their means, they don't risk a default, and don't make borrowing ruinously expensive, like Greece is doing. Call me crazy, but those seem like good things. No?

>Will you admit that you were wrong?

As always, I'm happy to do so, just as soon as you can explain why I'm wrong. (Coherently, I might add.) Still waiting for that moment.

Haplo9 said...

>GD, please stop equating government spending to personal or individual spending. The two are not comparable

I think we can fast forward this one, because we've seen it before, and this is how it will go:

Commenter: Mark, why are the two not comparable? The concepts are exactly the same.
Mark: because I say so. And, like, trade relationships.
Commenter: What do trade relationships have to do with the ability to borrow money, and creditors' estimation of the liklihood of them getting paid back by a sovereign?
Mark: because I say so.

Haplo9 said...

>From my view, it is as if you do live in a bubble with no new information being allowed inside.

Oh. I see. Juliet, I'd like to formally extend your official invitation to Mark's Yippee Dog Posse. In order to maintain your membership, you must:

- Cast aspersions without bothering to put forth any effort trying to understand the point someone makes
- Cast aspersions without demonstrating any understanding of the subject at hand
- Contribute absolutely nothing substantive to the subject at hand

So far, you are living up to all three. Congratulations!

Santa said...

"Yippee Dog Posse"

Hmm...Reminds me of another word...

- adjective 1. appealing to one's prejudices, emotions, or special interests rather than to one's intellect or reason

2. attacking an opponent's character rather than answering

Now what word is this?

Haplo9, your contiued insistence to discuss in this manner makes it virtually impossible to address your three concerns listed above.

rld said...

It's just impossible for you to discuss it santa because you don't know a whole lot about the subject, which is why you dropped in to only talk about haplo - like the member of the yippee dog posse you are.

Markadelphia said...

Ah, Hap, again with the redirect. Sorry, but I'm not going to limit myself to the constraints that you have placed on the discussion.

Before we go any further, I just want to be clear. When it comes to government spending and individual spending, "The concepts are exactly the same." The issues that states face are exactly the same as the ones individuals face and equating them is perfectly acceptable. Is that accurate?

GuardDuck said...

Lets be clear - are you trying to imply that if an individual and a state spend more than they make then one and not the other will go into debt?

Anonymous said...

Risk management and debt perception. That's the ticket. Tell him Mark. He's stupid.

...

Haplo9 said...

>Ah, Hap, again with the redirect.

I know dude, totally. I redirected from talking about spending and revenue to talking about spending and revenue. Wait, what? No idea what you are talking about.

>Sorry, but I'm not going to limit myself to the constraints that you have placed on the discussion.

You tell him Mark! Wait what? Again, no idea what you are talking about. Though I did figure out a simplified way of saying the point I've been trying to make from the start, it goes like this:
If you can't control your spending, there will never be enough revenue increases.

>The issues that states face are exactly the same as the ones individuals face and equating them is perfectly acceptable.

Hmm. Kind of depends on what you mean by "issues", because off the cuff, I'd say no. "Issues" is not a synonym for "concepts." Concepts:
Debt. Risk. Deficit. Interest rates. Perception. Credit. Borrowing. Default. Bonds. Rate of return. Bankruptcy. Scarcity. This includes the interaction between those concepts - how interest rates are a reflection of risk, for example.

What I think of when you say issues: The government wants to buy something, say, a really shiny healthcare benefit for all citizens, but it doesn't have any money to pay for it. That is an "issue" that an individual isn't going to have to face. (But maybe you mean something else.) However, the concepts involved aren't any different, especially when you talk about a government borrowing money or defaulting. The rules are all the same. The worse the risk creditors think you are, the higher interest rates they'll demand.

Therefore, GD's use of an individual example to illustrate how a government can get themselves into trouble is perfectly valid, because the consequences for a government are the same as for an individual, and for the same reasons. Ie the concepts are the same, even if they are operating on a much different scale. But - feel free to tell us how that isn't true. Just remember - there is no free lunch, not for individuals, or for governments.

Markadelphia said...

are you trying to imply that if an individual and a state spend more than they make then one and not the other will go into debt?

But - feel free to tell us how that isn't true.


No. What I'm saying is that a country being in debt is different than an individual being in debt. There many more layers of complexities with countries when it comes to debt. Individuals, for example, don't really have to consider how their spending might affect aggregate demand in a nation of 300 million people. Of course this is an issue of scale, as you say Hap, but that makes the consequences different.

Wait, what?

I was speaking of the little skits you presented above along with the usual shift of focus from you to me. I'm also not going to allow such a simplistic comparison regarding spending (individuals vs. government). I hear it constantly from the right and it's a nice dog whistle for the followers but has no place in the complexities of the global market. The "we are spending more than we take in" whine is really hollow when you think about it because there isn't any serious solution to back it up...just a lot of rhetoric...what a shock!

If you can't control your spending, there will never be enough revenue increases.

To a certain extent, I agree with you. The issue here, though, is that your definition of out of control spending is much different than mine because you don't feel that governments should spend as much as they do. That's where your ideology prevents you from seeing the bigger picture.

I'd say no.

Well, that's a relief. Now we might actually be able to get somewhere.

the consequences for a government are the same as for an individual

Well, it was nice while it lasted. Ah well...

The government wants to buy something, say, a really shiny healthcare benefit for all citizens, but it doesn't have any money to pay for it.

I assume you are speaking of the PPACA? First of all, that's not really what the government is doing. Second, the CBO initially estimated a reduction of 143 billion in the deficit and likely more in the future. In addition, the government recently cancelled plans for CLASS due to unsustainability.

And we're still not solving the issue of cost regardless of government involvement. I guess I wouldn't mind hearing your take on the inelastic demand of most health care markets and how you would solve that issue.

Juris Imprudent said...

And he cut taxes but remember that Reagan too was a Keynesian.

I didn't know Minnesota had medical marijuana.

I mean, you were high when you posted that, right? Voodoo economics ring any bells? Be sure to look at the History section of that article.

I see I should've trademarked Yippee Little Dog Posse. This should either become a t-shirt or a Flamewarrior entry.

GuardDuck said...

No. What I'm saying is that a country being in debt is different than an individual being in debt.

Great. And the rest of the stuff you posted is so much drivel.

We weren't talking about complex spending issues. We were trying to get past your obstinate refusal to accept the basic logic and mathematics that you cannot go into debt without spending. Ergo debt is a spending issue. Not, as you keep insisting, a revenue issue.

Monkey-Faced Fruit Bat said...

The issue here, though, is that your definition of out of control spending is much different than mine because you don't feel that governments should spend as much as they do.

I agree our definitions are very different, but I disagree with the reasons. I think it's because you think, unlike a person, a family or a business, a government should be able to run deficits in perpetuity, they shouldn't have to pay their debts or balance their budget ever, under any circumstances.

Juris Imprudent said...

on the inelastic demand of most health care markets

We aren't going to discuss any economics until you get beyond reaching into a grab-bag and pulling out a buzzword. You don't understand demand elasticity any more than you do moral hazard. You are not allowed to simply throw economics terms into play when you haven't got a fucking clue what you are talking about.

Markadelphia said...

I mean, you were high when you posted that, right?

The central tenet of General Theory of Employment, Interest and Money (1936) is that the federal budget does not have to be balanced. Keynes argued that during tough economic times, the government should run a deficit. That's exactly what Reagan did. If you look at the historicals (which I have posted here many times) you can see how he ran high deficits.

Further, cutting taxes is a not so sly way of pushing people to use that extra cash to spend i.e increase demand.

Here's some links for you to review.

http://www.usnews.com/opinion/blogs/scott-galupo/2011/11/01/ronald-reagan-practiced-keynesian-economics-successfully

http://mises.org/econsense/ch12.asp

The latter is from Murray Rothbard, an Austrian School advocate who I stumbled across when I was reading up on anarcho-capitalism. Obviously, you have to consider his bias but his case is compelling, don't you think?

Ergo debt is a spending issue.

That's part of the problem but having revenue issues is the other problem. The problem isn't me, GD, it's you. As long as you are foaming about the "fruits of your labor" and "men with guns coming to your house" (Randian adolescent fantasies), we won't be able to look seriously at this issue.

a government should be able to run deficits in perpetuity, they shouldn't have to pay their debts or balance their budget ever, under any circumstances.

Wrong. I think we should make every attempt to run even budgets or budget surpluses, not deficits, as we did under Clinton. This would include spending cuts as well as revenue increases whether it's from higher taxes or the elimination of subsidies which also distort markets. Debt, however, is a different issue than the deficit. We have run a debt every year this country has been in existence (although it was quite small in the 1830s)

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt.htm

I think you may be confusing the issues of "debt" and "deficit."

until you get beyond reaching into a grab-bag and pulling out a buzzword.

juris, it's OK if you don't understand what I am talking about. It's not OK if you think that little of me that I don't understand how to read a simple supply and demand diagram. I'm not sure which is true but here's what I'd like you to do.

Take out a sheet of paper and draw a supply and demand diagram (p for the vertical line and Q for the horizontal line). Now draw the demand curve as nearly a vertical line but not quite. It should look something like this.

http://www.bized.co.uk/sites/bized/files/images/diagrams/big/ped_inel.gif

As you move along the demand curve with the price rising, you will note that the demand does not drop off significantly as the cost increases to consumers. This is because people need the health care product in order to live, thus the inelastic demand. Sure, a few people will leave the market because they got better or they died but most won't.

This is where we run into problems because the suppliers can charge higher prices which erodes efficiency and consumer surplus. This is where the government can come in and help to distribute resources more efficiently. We are, after all, talking about people's lives here, not iPhones.

Juris Imprudent said...

juris, it's OK if you don't understand what I am talking about.

Childish flipping. About as substantial as your overall knowledge of economics, including elasticity. Sorry little boy, but the concept has meaning beyond your juvenile employment. The more you defend your economic ignorance the more I will jump all over your bratty nonsense.

GuardDuck said...

that's part of the problem but having revenue issues is the other problem. The problem isn't me, GD, it's you. As long as you are foaming about the "fruits of your labor" and "men with guns coming to your house" (Randian adolescent fantasies), we won't be able to look seriously at this issue.

MARK YOU ARE AN UNADULTERATED IDIOT.

Where or where have I foamed about men with guns or fruit of my labor?

We are talking math and logic. Neither of which you appear to be even remotely acquainted with.

Please explain to the class how a state can go into debt by spending more than they make. Then explain how a state can go into debt by not spending more than they make. Explain what happens when a state makes more than they expected. Explain what happens when a state makes less than expected.

Using these data points explain the base logic that would make you believe that a states debt problem is not caused by spending more than they make.

GuardDuck said...

Oh, and I'm pretty sure Juris understands in-elasticity of demand better than you do, since you've been using it wrong from the get go.

Juris Imprudent said...

Oh and I will be looking forward to discussing this in the near future. You are going to post about it aren't you M? You should be thrilled that some corporate execs are being held accountable for tanking the economy!

Markadelphia said...

Using these data points explain the base logic that would make you believe that a states debt problem is not caused by spending more than they make.

I laid out the data in this post, Guard Duck and, as expected, you focused on the last two graphics of the issue. At this point, I'm not sure there are any other ways I can agree with you. It's up to you now to get past this point and cease the childish games and OCD about spending.

And, since neither one of you want to refute my points regarding the inelasticity of demand in most health care markets (choosing instead to continue personal attacks), my impetus for further discussion would be...what exactly? If I am off on this, explain how and let's hear your argument using basic economic principles of which you say I know very little. Does that mean that your knowledge is deeper? How? Show me.

Juris Imprudent said...

You wouldn't know inelasticity if it was shoved up your ass - sideways.

You go and learn some basic economic principles before you open your ignorant trap again, mkay? It isn't up to me to provide you with that education. Once you do that, I doubt that you will continue with this absurd abuse of a phrase you call an argument. [Hint: there is such a thing as demand elasticity - but you don't understand it.] Just like you failed to grasp moral hazard.

GuardDuck said...

If you think you've laid out in this post the data I'm inquiring about - then its obvious that you are not listening to what I'm saying. Why don't you stop for a minute and actually try to understand what is being said to you.

Markadelphia said...

juris, I think you are masking your own ignorance of economics with personal insults. If you don't agree with what I am saying, lay out an argument otherwise using economic principals. Last chance and then I'm done here.

GD, I do understand what you are saying. You're simply not listening to me. Also done with you unless you take into account the other issues here and the fact that I agree with you.

Juliet said...

I think you should count yourself very lucky that Mark lets you post here, Juris Imprudent. You are very insulting person who seems unable to admit when Mark is accurate. Speaking of which, here is a link I found to support Mark's point.

http://www.monash.edu.au/lls/llonline/writing/business-economics/economics/2.4.3.xml

Note Point #4.

"[4] This shows the product is inelastic because it is may be addictive or always demanded for health reasons. It is something that people have to have so they can live, and therefore prices can increase, as quantity levels of consumers will not decrease dramatically."

And note that the image below it is exactly the same as the one Mark linked.

GuardDuck said...

the other issues here and the fact that I agree with you.

You agree with me? Well that's news. How would I possibly know that you agree with me that an entity cannot go into debt without spending more than they take in unless you actually, you know, said something to that effect.

Golly gee Mark. Why didn't you say so?

Actually, why don't you say exactly that. Right now.

Juris Imprudent said...

Okay M, here is a question about the economics of health care: what market distortions may be expected when the consumer pays only a portion of the actual cost for the services/products he uses? Do you have the slightest clue? Can you do some rudimentary analysis? Can you at least dig up a relevant link?

I think you should count yourself very lucky that Mark lets you post here

Ah, the typical chorus from the YLDP. If M doesn't wish me to post here he has but to ask me to stop. You of course have yet to offer one single item of substance to a discussion here. Thanks for quoting a writing tutorial rather than an actual economics source. If you will note, I am the one teaching M that the concept exists - but not the way he misuses it (which your very scholarly link does not address).

Anonymous said...

Debt, however, is a different issue than the deficit. We have run a debt every year this country has been in existence (although it was quite small in the 1830s)

I think you may be confusing the issues of "debt" and "deficit."




Nobody else found this ironically hilarious? I assume it was just a brainfart, Mark. Unintentional, of course.

Markadelphia said...

Golly gee Mark. Why didn't you say so?

I have. Several times. Really, this game playing is tiresome. And you wonder why I call you guys childish. The problem here is that you think that this is all of the issue and it's not. You're focusing on one bit of information (the one that you think helps you...win...something...not sure what exactly) and you're not looking at how they did end up spending more than they took in. And why they did. And what that means. And what they could have done differently. I'm fairly certain your answer would've been "just spend less," right? More importantly, why is their debt perceived as more risky? Think about the perception of debt for a moment. What I'm trying to do here, GD, is to get you to broaden your perception a bit and get past this spending thing. Can you do it?

Markadelphia said...

I am the one teaching M that the concept exists - but not the way he misuses it (which your very scholarly link does not address).

Wow, the hubris, juris. And still no answer to my original contention that health care demand is inelastic. Let's see your analysis of that point and how you view it to be invalid. Enough with the questions and the redirect back on me. Stand on your own legs and offer an argument. You guys are always telling me to let the free market sort everything out, right? You yourself have said that if we ditched insurance and just had it be a direct relationship between health care provider (or drug/medical device provider) and customer, that the free market will sort everything out. How will that happen given that the demand in most health care markets is as the image I linked above? Let's see your evidence that illustrates how most health care markets have more elastic demand.

Juliet, thanks for the link. Good info.

GuardDuck said...

The problem here is that you think that this is all of the issue...

No I don't. I just won't let our conversation advance past a point of disagreement until we can clear it up. Doing so ensures there are no misunderstandings later. You are the one who makes such a simple concept so difficult. As we see still. You have not said it - all you say is that you have said it several times. Without actually fucking saying it we are still left with an unclear and easily misunderstood piece of miscommunication.

Juris Imprudent said...

How will that happen given that the demand in most health care markets is as the image I linked above?

Because you say so? You haven't provided a shred of evidence beyond your assumption. Just drawing a graph does not make it reality - how fucking stupid and arrogant can you possibly be?

Health care spending is distorted precisely because we have an indirect way of consuming it. We have no real idea how elastic demand is because right now demand is largely isolated from cost. You also (as usual) mis-state my criticism of health insurance - first it shouldn't be tied to employment (it is due to good old union political cronyism), and second it shouldn't pay for routine care (any more than my auto insurance pays for oil changes). I'll save my criticism of the AMA and ABA for later, as that is of less importance (though not insignificant).

I don't expect much from you, but you continue to disappoint. You don't understand moral hazard which is so basic an economic concept that it exposes your total ignorance. You think you can throw words around without actually understanding them and no one will call you on that. Once again, you are wrong. You might consider learning something from that rather than charging headlong from one error to another.

Juris Imprudent said...

And just to make the point crystal clear about the isolation of price/cost from the consumer, anyone at all familiar with a demand curve will know that Q is a function of P. If you don't know P you cannot derive Q. Thus you can't determine the slope of the curve which is a key aspect (but not the only one) in understanding elasticity.

Markadelphia said...

You have not said it - all you say is that you have said it several times.

No, what I haven't done is play your little schoolyard game. I still won't. I am relieved to see that you don't think that spending is the entire problem here. What I'm looking forward is an accurate assessment of the situation. For example...Greece's current financial woes are due to poor management of their debt which increased negative perception of their risk. This was the result of continued high expenditures combined with a complete failure to adequately collect revenue and manage exports.

Would you agree with this statement? And, unlike yourself, I'm not going to be a child and make you say it. Please do grow up. At the very least, you can prove me wrong when I say that the right behaves like schoolyard bullies and simply address the above statement in either agreement or disagreement.

Markadelphia said...

We have no real idea how elastic demand is because right now demand is largely isolated from cost.

Well, we sort of do on elective stuff that insurance doesn't cover. Lasik, for example, is a great example of how the free market can work. Remember when it first came out? It cost thousands. Now it's just a few hundred because the free market did its thing. I would say that with elective stuff, the demand is elastic. But with dialysis, for example, it's likely to be different.

first it shouldn't be tied to employment

Agreed.

it shouldn't pay for routine care

Well, I suppose it all depends on how you define "routine." That's a fairly qualitative term. Car insurance only pays for accidents and doesn't pay for routine maintenance. Should health insurance be the same? Because if you go in and have routine service on a regular basis (that is paid for by insurance) it would likely save the insurance companies money in the long run which is why many allow free wellness checks. And all of this (car or health) depends on your deductable.

You don't understand moral hazard which is so basic an economic concept that it exposes your total ignorance.

Well, we were good there for awhile and then we quickly turned back to the game again. If you don't have the time to offer a serious analysis of this issue, as always, no problem. Personal attacks won't make up for it.

If you don't know P you cannot derive Q.

But I'm not talking about health care markets with the variable of insurance thrown in. I'm talking about straight up supplier to buyer free markets.

What I'm getting it is how a libertarian can look at demand in the various health care markets (especially the ones that are life or death) and solve the inelastic issue. Most people are going to pay whatever price it takes, right? So what happens then if the market doesn't correct itself? People just go broke, right? From where I sit (and I could be wrong), the libertarian solution is simply to either bankrupt people or let them die-all in the name of the free market. Then the price will go down.

A. Noni Mouse said...

Mark,

Accounting for every single entity—from the poorest person to the largest government—boils down to five basic types of accounts:

Income: Money received

Expense: Money spent

Asset: Something of value owned by the entity

Liability: Money owed by the entity

Equity: The sum of the Asset and Liability accounts

Do you agree or disagree?

Markadelphia said...

For the most part, yes. But when we get into each of these areas, it isn't just the scope that changes but also the details. Individuals don't engage in international trade the same ways that countries do, for example. So when someone says, "Governments should just live within their means like Joe the Plummer does" they're missing many of these details. It's an over-simplification...just like "We have a spending problem, not a revenue problem"....which is actually just out and out dishonest as well. There are complexities involving the money spent (expenses) that tie directly to revenue policies in addition to a whole host of other things to consider.

The other point that I want to reiterate here is that running balanced budgets or surpluses is not always the ideal. How do you guys think we got to where we are today? Deficit spending. There is no denying this fact. So, I guess I'm wondering why you or anyone else think that balancing budgets or surpluses are ALWAYS ideal.

Juris Imprudent said...

I would say that with elective stuff, the demand is elastic. But with dialysis, for example, it's likely to be different.

You miss the point that for both, you are not prohibited from getting service from different providers - contrary to much insurance and HMOs. However, you do recognize a good point - that there are many different kinds of health care, and that it would be foolish to treat them all the same. To say that all health care demand is inelastic is to ignore those differences.

it all depends on how you define "routine."

Whatever is analogous to filling the gas tank and doing preventative maintenance on the car. Sure, that is likely to extend the life of the car, and might even reduce the risk of accident (due to mechanical failure) - but that doesn't put it under the coverage against loss.

But I'm not talking about health care markets with the variable of insurance thrown in. I'm talking about straight up supplier to buyer free markets.

Simple example. I take two prescription medications. I neither know nor care what the actual cost is because I make the same co-pay regardless if it is generic or patent. If I have to pay the actual cost, I might damn well care - even if I choose a slightly less effective medicine due to it being substantially cheaper.

From where I sit (and I could be wrong)

You are, so do you choose to learn or stand fast in your ignorance? I don't think any libertarian would claim that one single side of the equation will cause the whole thing to change. I deferred including the AMA and ABA - but those also have to be considered: eliminating the AMA monopoly on accrediting med schools (and limiting med school enrollments) and addressing the Bar and ridiculous lawsuits (including the standard of knowledge years after the fact). Those, combined with changing the insurance model and encouraging more direct consumer involvement are all elements. Will that yield some perfect solution? Not likely - but it should set the stage for changing much of what is wrong with the system today.

Now, did anyone amongst the YLDP (and yes Juliet that certainly includes you) learn anything from this exchange?

A. Noni Mouse said...

it isn't just the scope that changes but also the details.

Your response sounded like you're trying to weasel out of those basic categories. Are you claiming that income (for example) becomes something different when government does it? (For the record, most international trade is done by businesses and individuals. Governments' primary role is regulation of that trade. It is not "countries" as a whole.)

I am well aware that how government receives income is different than how individuals receive income. For example, an individual cannot collect taxes. But it is still income.

Yes, the scale and details vary, but everything still fits into those 5 basic accounting categories. Agree or disagree?

Markadelphia said...

Your response sounded like you're trying to weasel out of those basic categories.

Agree or disagree?


Well, there is weaseling going on but it isn't by me. I already answered your question above, Noni. Too bad if you don't like qualitative answers but that's how the world works. And I'm well aware of what you are trying to do here and it won't work. You guys believe your own press too much:)

There's a very big difference between an individual engaging in international trade and a country engaging in trade. I buy CDs from Amazon UK all the time because I like Brit Rock. I click a few buttons, my card is charged and I get my CDs from London a week later. I don't think about whether or not Britain is manipulating its currency or whether or not our current trade pacts will upset our trade balance. There are many other factors to consider when looking within these five categories as a country as opposed to an individual.

So, again, it's an oversimplification to say that governments should live within their means just like people. What if a country purposefully wants to maintain a trade imbalance to gain leverage in another area of diplomatic relations? Either in the plus or minus column?

I'd also spend a little time thinking about the "Asset" category. The assets a government has are vastly different than what an individual has. For example, I don't have a military in my house. That's a very different sort of asset than my Comic Book collection (valued at several thousand dollars). Sure, they both have value but I think you will agree that they are both very different, even in how the very basic way of how value is measured.

Markadelphia said...

you are not prohibited from getting service from different providers

True, but what happens when all the providers charge the same high price? There's nothing to prevent them from doing so because they know they have patients by the...well...kidneys. They can raise their price and only a few might leave the market because the demand is inelastic. People will pay what they have to in order to stay alive.

This is where the government can come in and help to distribute resources more effectively. People shouldn't go broke paying for life saving services.

To say that all health care demand is inelastic is to ignore those differences.

True, but I didn't say that. I said "Most" health care markets and, in particular, the ones where a life is on the line.

I might damn well care - even if I choose a slightly less effective medicine due to it being substantially cheaper.

This is a good example of why your suggestion of overhauling health insurance is a good thing. In markets such as this one (and especially if it's not life threatening), the free market should be allowed to work. Some drugs may actually become cheaper.

You are, so do you choose to learn or stand fast in your ignorance?

Well, I'm happy to be wrong if there are libertarians out there who will allow government involvement in life threatening health care markets. Essential care, if you will. And your other suggestions are also ones I'd go along with as well. But I think it's fairly obvious that when we talk about health care, solutions are very complex and the ones that will likely work best will piss off a lot of people.

A. Noni Mouse said...

Well, there is weaseling going on but it isn't by me.

That is why it is impossible to have a rational discussion with you.

Those 5 categories are Accounting 101. They are fundamental and unchangeable. Government Accounting is a SUBSET of Accounting 101. There additional restrictions in larger numbers in government accounting, but those are all within the basic Income, Expense, Asset, Liability, Equity framework.

The problem is that you keep pretending that government accounting is somehow a superset of accounting which makes those five categories meaningless. That is Simply. NOT. True!!

Without such basic agreement, every other financial argument is meaningless.

Let's take a look at your example:

The assets a government has are vastly different than what an individual has.

Bullshit. Military hardware is an asset, like your comic books, computer, lawn mower, etc; only the specifics of the inventory are different. So is real estate. Military bases are an asset just like your house, though most likely larger.

Military personnel are not owned, and thus do not show up on the books as such. They primarily show as expenses, just like every other company that employs people. There is also a category of "intangible" assets such as goodwill, or people with particular skills, etc. These are considered assets and are governed by GAAP rules, which apply to all entities.

Juris, you're wasting your time by trying to argue finances with someone who doesn't even understand or accept Accounting 101 and its constraints.

A. Noni Mouse said...

Doggone it!

Correction: "There are additional restrictions and larger numbers in government accounting…"

juris imprudent said...

True, but what happens when all the providers charge the same high price?

That could indicate that the service is simply expensive - but of course you immediately assume that it is evil people fucking over other people. What a worldview you have. Funny how you see that competition works - then jump to some unlikely imaginary case where it won't.

I said "Most" health care markets

Yes, that is what you asserted without a shred of evidence. No, you do not simply get to employ your articles of faith as facts. The vast majority of healthcare spending is not life or death care. For example.

Well, I'm happy to be wrong if there are libertarians out there who will allow government involvement in life threatening health care markets.

That isn't what I said, and if being wrong means being happy to you - then you must be the happiest sonofabitch I've ever run across.

A. Noni Mouse said...

In searching for a page to explain the differences between commercial accounting and government accounting, I stumbled across Nebraska's state government accounting manual online.

The basics are exactly the same:

Accounting Concepts

Every accounting transaction affects at least two accounts. The sum of the debits must always be equal to the sum of the credits. This is referred to as double-entry accounting.

The following table summarizes the effects of debits and credits on accounts and the normal balance of the accounts.


The table didn't copy and paste well. But surprise, surprise, the same account types are listed:

Asset

Liability

Equity

Revenue
(another name for Income)

Expense

Here's the page that describes the difference between government accounting and commercial accounting (which is also personal accounting):

Governmental Accounting

Bottom line: the difference is "Fund" accounting. Money designated for a specific purpose must be used for that purpose and only that purpose. A fund is essentially a self-contained entity where accounts are calculated without reference to other funds; but still following fundamental accounting rules:

"Funds" are defined as an independent accounting entity with a self-balancing set of accounts. In other words, within each fund, the basic accounting equation (Assets = Liabilities + Equity) still applies.

Markadelphia said...

Agreeing with you folks seems to be harder and harder these days...sheesh. I'll repeat myself (and this will be the last time).

For the most part, yes, I do agree that these five areas are the same between individuals and governments. When you start to look at the details of each of these areas, however, one can see that the statement, "The government should run its books like a person and live within its means" is ridiculous.

For example, I brought up the military because it is an asset in a tangible sense just as you say. But it's also an asset in an intangible way, which you also mentioned...a way that is very different than how one would gauge an individual's assets. Our military, in particular, can be used for diplomatic leverage, in times of crisis, and to avert potential threats. In this example, our government should not live within its means and spend less than it takes in because our military has to provide the things listed above to the world, some of which happen without warning. This sort of issue that the government faces is different than the issues that individuals face.

Remember, I'm not arguing Accounting 101 here. I'm disputing the statement that governments need to live within their means like individuals do.

Markadelphia said...

That isn't what I said,

So, you would be OK with the government regulating certain health care markets?

juris imprudent said...

I'm disputing the statement that governments need to live within their means like individuals do.

Do you think there is a point where a govt could lose its ability to get credit? Or is there no mechanism whatsoever in the world that limits govt spending (and debt)? If there isn't then you have a fundamental difference, if not - it is only a matter of degree.

So, you would be OK with the government regulating certain health care markets?

Some situations - sure. That of course depends on the situation, but I believe there is are reasonable cases where regulation might be needed. Absolutely in the case of dealing with fraud. But you can't get from that to ObamaCare, let alone full-on socialized medicine.

A. Noni Mouse said...

For the most part

And that's why discussing anything with you is a waste of time. There is no "for the most part, yes, for some part, no" about it. It's all math.

our government should not live within its means and spend less than it takes in because our military has to provide the things listed above to the world

So Russia should have spent more on their military so they could compete with us? How did that work out?

Or North Korea? He spent his people into cannibalism to create a military that's only 3rd rate.

How about Saddam? Ok, maybe he should have spent less on his palaces and more on his military. But he still starved his people to do it.

They all tried to use your reasoning. "We gotta create a powerful military. Basic accounting doesn't matter." And they all paid the price for trying to ignore those fundamentals. These are only three recent examples. There are hundreds more scattered throughout history.

Markadelphia said...

And that's why discussing anything with you is a waste of time.

Ah, you're just pissed off that I figured out where you were leading me and wouldn't play the game-again. Saying "It's all math" is the same over simplification trap as "Government should just live within its means." It's a dog whistle for people who like to grouse about government spending. Tell you what...why don't you show me how you would do it?

http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

These are old numbers but it's still an interesting exercise. One can really examine the potential outcomes from choices made. My results are 36% tax increase/64% spending cuts with 549 billion by 2015 and 1.8 trillion by 2030-both beyond the requirement at the time.

How did that work out?

Poorly for them, great for us. We ran record deficits and look what happened. Granted, the end of the Cold War as largely due to Gorbachev simply "depriving us of an enemy" but they couldn't keep up, could they?

And I'm not simply talking about power. What about all the aid we provide to other countries that is possible because of our military? I'll grant you that our model may not work for other countries (especially those that don't support democracy and liberal economic theory) but it does work for us. The countries that you mentioned had/have centrally planned economies and no free market which probably have more to do with their failures that military spending.

Markadelphia said...

Do you think there is a point where a govt could lose its ability to get credit?

Yes. Of course, it depends on the government, their credit rating, risk perception etc..

Ours? Doubtful.

Some situations - sure. That of course depends on the situation, but I believe there is are reasonable cases where regulation might be needed. Absolutely in the case of dealing with fraud. But you can't get from that to ObamaCare, let alone full-on socialized medicine.

Good points and I'm happy to hear it. You're right about PPACA as well as socialized medicine. The problem with the former is that that it's simply an exchange that doesn't address the issue of insurance reform and, in some ways, makes it worse by making everyone have it. This still doesn't address the issue of inelastic demand and price sensitivity either. Yet I can still see why they decided to go this route because it was better than doing nothing.

Full on socialized medicine raises the issue of necessary vs. elective care and the qualitative fall out that would likely result from deciding what treatment is truly life threatening. I guess now we're left with the question of whether or not an eclectic approach-some sort of combination of both-would work. Should the government decide which specific health care markets to heavily regulate and which ones not to? What are the ones with the most inelastic demand?

GuardDuck said...

Ahhh, the old "we are where we are because of deficit spending" canard comes out again. You state this as fact. They are really two facts. One: we are where we are. Two: we have engaged in deficit spending. Correlation does not imply causation. It could easily be that we are where we are despite deficit spending.

juris imprudent said...

This still doesn't address the issue of inelastic demand and price sensitivity either.

What issue? You haven't substantiated it in the slightest. Again, just because you believe in something does NOT make it a fact. Here's a big hint - pick up an economics text and see if inelasticity is common or unusual.

Yes. Of course, it depends on the government

Yes it does. But you agree that there is no carte blanche that fundamentally changes the rules of accounting for govt. Not even being able to print your own money means you can ignore economic (or accounting) reality. That means even our govt cannot avoid such reality. You know why modern Germans are so conservative about their banking/currency - because of the lesson they learned post WWI. Anything that can happen one place, can happen in another.

A. Noni Mouse said...

you're just pissed off that I figured out where you were leading me and wouldn't play the game-again.

It's fascinating how logic is always so consistent and predictable. Of course you can tell where it's going! When you start with basic facts (like the 5 basic accounting categories), fundamental principles (like the three rules of logic), and basic mathematics, there is only one way it can go.

It's obvious that you simply refuse to go there. I'm not going to pretend to know why you refuse. It's sufficient to recognize that you reject fundamental logic and undeniable facts as you continue to cling to your little fantasy world.

A fool does not delight in understanding,
But only in revealing his own mind.

— Proverbs 18:2

Guys, give it up.

Markadelphia said...

It could easily be that we are where we are despite deficit spending.

Well, the main reason why we "won" the Cold War was because they simply gave up so you might be right in your statement. This particular aspect of the Cold War has always fascinated me as both schools of thought at the time (realist and liberal) completely failed to predict that the Soviet Empire would fall apart. Each ideology was way off towards the end there but I still think one can make a compelling case for Reagan's spending spree as an underlying factor in their capitulation.

What issue? You haven't substantiated it in the slightest. Again, just because you believe in something does NOT make it a fact. Here's a big hint - pick up an economics text and see if inelasticity is common or unusual.

Hoo boy...we were going so well there for awhile. I can't believe that I am about to say this but...it's simply a matter of logic. Most individuals are not going to exit a health care market if their lives depend on the service, device or drug. It's logical that they would pay whatever price to stay alive. We don't need a study to show that.

And, as you know, juris, I have Principles of Microeconomics by Greg Mankiw on my bookshelf next to my desk. I got an "A" in the class so, while I'm not an expert economist, I do understand these concepts quite well. Every time you make a personal attack like this, it tells me that may be worried that I may know what I am talking about here and that you...well...may not. I'm not saying that this is a fact but it sure seems that way when you don't refute my points with evidence. So, please, rather than rip me, let's hear your evidence to the contrary.

Hey, how about this quiz? Tell me how you did. You need Java, btw.

http://hspm.sph.sc.edu/courses/econ/Elast/Elast.html

It's obvious that you simply refuse to go there.

It's strange world you live in, Noni, considering I used one of your categories (Assets) to agree and disagree with you. It is possible to both, y'know:)

A. Noni Mouse said...

agree and disagree with you. It is possible to both, y'know

About the exact same thing?!? There's that inability to grasp an extremely simple yet fundament principle of logic:

The Law of Noncontradiction

contradictory statements cannot both at the same time be true

The most certain of all basic principles is that contradictory propositions are not true simultaneously.
— Aristotle

It is impossible that the same thing can at the same time both belong and not belong to the same object and in the same respect.
— Aristotle

Anyone who denies the law of non-contradiction should be beaten and burned until he admits that to be beaten is not the same as not to be beaten, and to be burned is not the same as not to be burned.
— Avicenna

It's so simple, any child capable of using speech understands this principle: "Is not!" "Is too!" "Is not!" "Is too!" Why do you have such trouble with it?

juris imprudent said...

it's simply a matter of logic.

Actually in this case it isn't - so of course you try to assert that. This is a matter of evidence, of empirical data, not airy assertions - such as...

Most individuals are not going to exit a health care market if their lives depend on the service, device or drug.

And most healthcare expenditures are NOT life critical. I already provided one link showing this, I can provide more. You on the other hand have nothing but what you say - well that and waving your hands.

...it tells me that may be worried that I may know what I am talking about here and that you...well...may not.

Childish M, very childish. Is that really the best you can do? Whooppee - you have ONE econ textbook on a shelf. I have a bachelors degree in the subject (and at the time intended to do graduate work in that field). You really think this is something you know more about? I'm not inclined to play this silly little game of yours - but you asked for it. The trouble is you bluff way too much - and when that bluff is called you got nothing.

Of course you didn't answer whether high inelasticity is common or unusual - you just bullshit your way along.

...let's hear your evidence to the contrary.

Nuh-uh. Homey don't play that. You put forth ZIP for evidence - you don't get to demand evidence from me (beyond what I already provided - go back and read it you pissant). Then put up some evidence in suppport of your own position.

Markadelphia said...

It's so simple, any child capable of using speech

Actually, what many children struggle to grasp and have great difficulty with is the world is not absolute black and white. Mentoring the grays is tough whether you are a parent or an instructor.

But this is why I look at the right as largely comprised of either an 8 year old boy having a temper tantrum or an adolescent engaged in a power fantasy. They don't like the grays...just like you don't, Noni. There has to be one right answer and one wrong answer. There's no muddying up the waters with any sort of thoughtful analysis, is there? This is why you guys crack me up when you say you are critical thinkers. Where is that sort of evaluation here? Gone, because someone needs to win the argument and prove me wrong. Once again, you have issued your imperial edicts and included beatings and burnings as well. Wow...really?

Markadelphia said...

Then put up some evidence in suppport of your own position.

Well, you asked me to pick up an economic text and I provided you with a quiz to take which provides some such evidence. Taken the test yet?

Further, check out this link...

http://books.google.com/books?id=O9IFexReV0sC&lpg=PT97&ots=NyIXfeh5hQ&dq=inelastic%20demand%20for%20dialysis&pg=PT96#v=onepage&q&f=false

I figured you'd appreciate the title. Review Figure 5.4 and continue to scroll down. Do you agree with the assessment in the paragraph regarding AIDS medications and dialysis?

And take a look at this...

http://finapps.forbes.com/finapps/BuyHoldSellAnalysis.do?tkr=fms

"Fresenius enjoys predictable cash flow and inelastic demand for dialysis. Fresenius continues to dominate the single-use dialyser market, with around 90% share in the US."

Remember, I'm not saying that there are many examples of perfectly inelastic health care markets. I'm saying that there many that are mostly inelastic due to the fact that it's someone's health.

Now, it's your turn to do what you will predictably do...:)

juris imprudent said...

Well, you asked me to pick up an economic text and I provided you with a quiz

From a public health prof - not an economist. Nice.

Do you agree with the assessment in the paragraph regarding AIDS medications and dialysis?

And from this you deduce that it is representative of most healthcare spending? BTW, may I assume you picked that book (which is not a textbook) because you related to the title.

Interesting how you overlooked this part about FMS...

Diversified revenue stream, with 1/3 of sales outside US, reduces negative impact of potential regulatory changes.With about 75% of revenue generated by dialysis services, FMS is exposed to government reimbursement.Adverse exchange rate fluctuation, most notably substantial weakening in the US dollar.Fresenius could see its payor/patient mix deteriorate as commercial insurance patients potentially drop off to government payors.

Oops.

perfectly inelastic

A phrase which has no meaning. Good thing you aren't claiming that.

You do still claim - with no supporting evidence - that most healthcare products and services have an inelastic demand. Still without understanding if that is a common or unusual market condition. Though I will note that you are sliding away from your previous insistence on life-critical care. I can see the goalposts about to sprint to some new destination.

Markadelphia said...

A phrase which has no meaning.

Then why is it in Economics classes?

http://www.mbs.edu/home/jgans/mecon/value/Popups/pop_up_case1_perfectly_inelastic_demand.htm

I can see the goalposts about to sprint to some new destination.

Here's some more information for you from my insanely large links file.

http://www.usatoday.com/news/health/2009-08-23-dialysis_N.htm

350,000 people a year use dialysis? That's not "rare." 1.2 million people in this country are infected with HIV and need drugs to prevent full blown AIDS. Again, not rare.

Now, I haven't even started in on cancer, heart disease and other serious medical issues. So, yes, I still am claiming that there are many health care markets with mostly inelastic demand. Where is your evidence to the contrary?

Juris Imprudent said...

Then why is it in Economics classes?

Must be an Aussie thing - but congrats on finally actually finding an economics cite. Funny how you have so carefully avoided wiki on this. That's a pretty good article - maybe that's why you ignored it.

350,000 people a year use dialysis? That's not "rare." 1.2 million people in this country are infected with HIV and need drugs to prevent full blown AIDS. Again, not rare.

Out of over 300 MILLION people. It is a very small percentage - if "rare" has you all riled up. And STILL you can't move beyond that. Nor have you proved in the slightest that some evil dialysis cartel is going to "bleed" these people dry.

Claim away all you want - all it is is a claim until you do more than flap your Jagger-esque lips. And those goalposts are going to be in full gallop - running from one sideline to another, from midfield to outside the stadium. Never mind that I already showed you the fundamental problem with determining elasticity at all in these markets (consumers tend to be insulated from P, which precludes determining Q).

More info for you to ignore:

What’s funny, though, is that the same people who defend ObamaCare’s insurance regulations—folks like outgoing Medicare chief Don Berwick, for example—tend to be the same people who think that something like a third of all medical care is wasteful. They’re happy enough to empower small panels of federal bureaucrats to determine which care is valuable and which isn’t, but less interested in letting patients and doctors make such decisions for themselves.

And as a bonus - the expenditure over 10 years of "more than $240 million on erection-enhancing penis pumps". There was more than mere wasteful medical spending on that link.

A. Noni Mouse said...

the world is not absolute black and white.

Some things in this world are gray; but not everything.

But what you are agreeing AND disagreeing with IS a black and white proposition. "All government accounting boils down to those five basic categories." That statement can only be true or false.

It's just like asking if 2+2=4 is true. Either it is or it isn't. There is no middle ground. It is flat impossible for it to be both.

Here is the original statement again:

Accounting for every single entity—from the poorest person to the largest government—boils down to five basic types of accounts:

That is a simple true/false statement. It says all that needs to be said about you that you are trying desperately claiming gray where there is none.

Markadelphia said...

Must be an Aussie thing - but congrats on finally actually finding an economics cite.

It's in my text as well, juris and likely all the ones listed after this article.

http://en.wikipedia.org/wiki/Elasticity_(economics)

A perfectly elastic demand curve is horizontal (with an elasticity of infinity) whereas a perfectly inelastic demand curve is vertical (with an elasticity of 0).

So, I wasn't avoiding wiki. In fact, from your link...

When the price elasticity of demand for a good is perfectly inelastic (Ed = 0), changes in the price do not affect the quantity demanded for the good; raising prices will cause total revenue to increase.

There's also this.

http://www.investopedia.com/terms/e/inelastic.asp#axzz1hE5jM7Ky

When a price change has no effect on the supply and demand of a good or service, it is considered perfectly inelastic. An example of perfectly inelastic demand would be a life saving drug that people will pay any price to obtain. Even if the price of the drug were to increase dramatically, the quantity demanded would remain the same.

So, wtf does this mean, then?

perfectly inelastic

A phrase which has no meaning. Good thing you aren't claiming that.A phrase which has no meaning.

Markadelphia said...

. "All government accounting boils down to those five basic categories." That statement can only be true or false.

And I have already agreed that it is true. Where you fail is when you say that the five categories are characterized in the same way (other than scope) for individuals as they are for governments. It's the qualification of each where your argument falls apart (I know, I know...it's losing an argument...deep breaths, go to your happy place)

They aren't the same and I've offered examples as to why that isn't the case. You've got your panties in a bunch because it's those differences that torpedo your little soundbite ("The government should just live within its means like a person.") that helps further your ideology of government.

Juris Imprudent said...

Oh M you gotcha'ed me! You must be sooooo happy. Given that perfectly elastic or inelastic is a theoretical construct not a practical one, you've proved what exactly - that I made a mistake about terminology? Woo-hoo, you go boy! I just didn't recall "perfectly" being an important part of the concept. You sure proved me wrong.

GuardDuck said...

You've got your panties in a bunch because it's those differences that torpedo your little soundbite ("The government should just live within its means like a person.")


I guess that's because unlike a government, when a person or business fails to live within its means bad things can then happen. Such things never happen to governments....................................................................

A. Noni Mouse said...

Where you fail is when you say that the five categories are characterized in the same way (other than scope) for individuals as they are for governments.

Oh really?!? So you're saying that income … isn't … income?

That expenses … aren't … expenses?

That assets … aren't … assets?

That liabilities … aren't … liabilities?

That equity … isn't … equity?

That a government accounting manual on a government web site stating that the basics of accounting (double-entry bookkeeping and the relationships between the accounts) is exactly same for government accounting as all other accounting … means … it … isn't … the same?

That the examples you gave which fit into those categories … don't … fit into those categories?

I just want to know one thing: How do you do that? How do you take a simple, uncontroversial statement of undeniable facts and deny it? How do you stare reality right in the face, and pretend it's the exact opposite?

A. Noni Mouse said...

Such things never happen to governments

Be fair, GD. Mark did admit that bad things happened to other governments. But he says it can't happen to ours because it hasn't happened to ours … (yet).

I'll bet there was even a time when Mark said he couldn't go bald because he hadn't lost any of his hair… yet!

See how well his arguments work?!? They are just sooooo unassailable!

::: snort :::

Markadelphia said...

That liabilities … aren't … liabilities?

Actually, Guard Duck showed that while the category is the same, government's liabilities and individual's liabilities are different. If an individual reaches his debt limit, he may not be able to get more money. Yet our government votes to raise the debt limit and we do.

In addition, I'd like you to show me, Noni, the individual version of the Marshall Plan. Recall that we purposefully ran a deficit in order to provide liquidity to the international economy. We spread free market ideals and liberal economic theory (which you support) around the world by running a deficit. So, our liability here was actually an asset as well...which is yet another way that a government asset is different from an individual asset.

that income … isn't … income?

Also defined differently with a government because they have taxes and individuals don't. Individuals don't get income from taxes that they place on other people.

How do you do that? How do you take a simple, uncontroversial statement of undeniable facts and deny it?

Well, there are two of my answers. How I do it is that I don't deal in black and white for starters. And then I critically evaluate. Speaking of which, let's here your critical analysis of my points above. More importantly, let's see if you can do it without making a personal comment about me. Good Luck!

Markadelphia said...

You must be sooooo happy.

Actually, I'm not. This would be an example of how I "won" the argument but actually lost because we wasted time, largely because of your hubris.

My goal here is to try to think about the many health care markets that offer critical care and how they are mostly inelastic. The nature of the free market simply won't be able to control costs and that's where I say that the libertarian ideal is very flawed. The government has to be there in some capacity to regulate this sort of commerce. The question is...in what capacity? Setting price ceilings is generally never a good idea unless its done above market equilibrium and even then unforeseen events may occur.

Juliet said...

"How do you stare reality right in the face, and pretend it's the exact opposite?"

It seems to me that you are the one guilty of this. Mark has presented you with several points that very much exist in reality and you have ignored them in order to stick to your guns. I think blk wrote this previously but it's as if admitting error or changing your mind is a sign of Armageddon. I don't get it.

Two categories that Mark did not cover in their differences: expenses and equity. Government expenses have to account for a variety of things that individuals do not have to account for. Defense is one example of this. A person may buy a gun or put up a fence but they don't have to concern themselves with intelligence gathering or the destabilization of certain regions. These can have unpredictable and often volatile expenses.

With equity, I'd say the equity of the United States is much different than the equity of an individual. Ownership equity is both tangible and intangible. The brand name of the United States is not just different in scope but in its very nature compared to an individual or a company. We represent the democratic ideal of the world and that's nothing that's comparable in that regard to individuals. The goodwill of the US means something much different than the goodwill of a person or Apple, for example.

Mark, I still can't get words to appear italicized. It keeps saying that the html tag isn't closed. Drat!

A. Noni Mouse said...

while the category is the same, government's liabilities and individual's liabilities are different.

A liability is money owed. It is that simple. It doesn't matter why the money is owed, merely that it is owed.

Government accounting has an addition restraint in that liabilities (as well as assets, expenses, etc.) are broken down into sub-categories known as funds. For example, there is military, social security, homeland security, etc. In government accounting, money, resources, and liabilities may not be mixed between different funds.

Try it this way: How does owing money on an aircraft carrier differ from owing money on a car? Is it somehow not money owed if it's a larger amount or a smaller amount?

If an individual reaches his debt limit, he may not be able to get more money. Yet our government votes to raise the debt limit and we do.

Which debt limit are you talking about? In your comparison, an individual's debt limit is the amount a lender is willing to let the individual borrow, but the government debt limit you mentioned is a self-imposed limit set by Congress, not the lenders. They are two very different types of debt limits: lender imposed vs. self imposed. (There's that equivocation fallacy again.)

Remember that the last time the self-imposed debt limit was raised by Congress, the U.S. Government's credit rating (as decided by lenders) dropped. That's a sign that government debt is starting to get close to the lender's debt limits.

they have taxes and individuals don't.

So you're saying that when the government collects taxes they don't RECEIVE money from the taxpayers? That it's not somehow income?

Again, both are MONEY RECEIVED!!! The method of receiving that money does not change the basic fact THAT. IT. IS. RECEIVED!!!

let's here your critical analysis of my points above.

Then go back and read them for comprehension this time, if you even read them in the first place.

More importantly, let's see if you can do it without making a personal comment about me.

You mean avoiding snide comments like "go to your happy place," "your little soundbite," "your ideology," "your imperial edicts," "temper tantrum," "adolescent engaged in a power fantasy", etc.? You mean those kinds of personal comments?

GuardDuck said...

If an individual reaches his debt limit, he may not be able to get more money. Yet our government votes to raise the debt limit and we do.


Oh Mark...no! You've said some stupid things before, but this one really shows off you lack of understanding here.

A government debt limit is a self imposed limit upon debt - not a limit imposed by those who are lending that debt to the government.

So the comparison is more apt to be: If an individual reaches the amount he programmed into Quicken as his max debt, he can still override that and enter into more debt - just like a government can easily vote to raise their debt limit.

Or:

If an individual reaches a point where they carry too much debt they may have their credit rating lowered. - just like when a government reaches a point where they carry too much debt they may have their credit rating lowered.


Wow - it's almost like they're exactly they same.

A. Noni Mouse said...

Mark has presented you with several points that very much exist in reality and you have ignored them

And I have to think you didn't read my responses to his claims. Did you visit the government web site with the accounting manual that I linked to? (That's the one that says government accounting is just like commercial accounting, except for the extra constraint of funds.)

Government expenses have to account for a variety of things that individuals do not have to account for. Defense is one example of this. A person may buy a gun or put up a fence but they don't have to concern themselves with intelligence gathering or the destabilization of certain regions. These can have unpredictable and often volatile expenses.

But it is still money spent. That is the definition of an Expense. What it is spent for does not change the fact that it is money spent, and thus by definition, an expense.

That such expenses are volatile simply means that it is necessary to have deeper cash reserves than an individual might need. Cash reserves are a type of Asset.

The brand name of the United States is not just different in scope but in its very nature compared to an individual or a company.

Brand equity is not the same thing as the accounting definition of Equity.

Definitions:

Brand Equity

Define what brand equity means in your organization.

Since the term "equity" likely means something very different to the finance and accounting functions, marketing must ensure that all functions are working with similar definitions.


Equity

Again, go back to my previous responses to Mark, specifically the government accounting manual. It states in no uncertain terms that the formula for the relationship between equity, liabilities, and assets is EXACTLY THE SAME as in commercial accounting. (Compare the formula in the government accounting manual with the formula in the Equity definition link.)

I still can't get words to appear italicized.

Here's how you do it:

<i>This would display in italics.</i>

You must have the "<i>" at the beginning of what you want italicized and "</i>" at the end in order for it to work properly.

GuardDuck said...

the individual version of the Marshall Plan. Recall that we purposefully ran a deficit in order to provide liquidity to the international economy.

You mean like a business expanding into new markets, self loaning of money to purchasers of its products, marketing and good will expenses to bolster its brand name or undercutting its competition to ensure or gain market share?

Or an individual going into debt to obtain an university education in the desire to improve higher future liquidity?

Markadelphia said...

Juliet, sorry you are still having problems. Did you put a "/" before the "i" that goes in between the "<>" at the end of the selected text?

At first glance, I agree with Noni's assessment of ownership equity. Companies have a brand name and spread goodwill around the world (especially now) just like governments do. Obviously, the scope is larger with government but we have excluded scope in this discussion.

Is it somehow not money owed if it's a larger amount or a smaller amount?

It is still money owed but in the case of the aircraft carrier it's uses aren't simply different in scope but in nature as well. Aircraft carriers are used in diplomatic efforts, war, trade, and offering aid. Each of these has implications that speak to very different situations than how a care is used.

They are two very different types of debt limits: lender imposed vs. self imposed.

A government debt limit is a self imposed limit upon debt - not a limit imposed by those who are lending that debt to the government.


Well, here, you've just made my point for me. This is another difference then because with an individual, they may not have to answer to self imposed limits or even have them at all. Further, lender imposed limits are very different for countries and they are for individuals, no? In other words, the criteria for countries regarding debt/credit is different than individuals. It is still debt but the nature of it is different because it's a government.

That it's not somehow income?

No, they are both income but as I have said many times now, it's a different way of receiving income which means there are other complexities involved. The strictest definition of income may be the same for both but the nature of it in each category (individual and government) is different. Again, this is why the "living within their means" meme is silly. Individuals don't collect taxes and legislation based on income collection.

You mean like a business expanding into new markets

Or an individual going into debt to obtain an university education


Sure, there are similarities. But does the business or individual have to be held responsible for stemming the tide of communism's spread in Europe? Or does that fall on the government? Does the person getting an education have to consider the spread of free speech as a result of his/her education?

juris imprudent said...

My goal here...

That M, was just about the biggest pile of gibberish you've ever served up. Added to the daffy accounting you believe in, it was the biggest pile - of something.

Then again when you can decide that words only mean what you want them to, when you want - well, how can anyone keep up?

Oh juliet - your pile of gibberish about how you don't understand even simple accounting concepts was a close second.

I just love how you all routinely flip complexity into simple bits and vice versa - all so it serves the ends you want. Orwell would be duly impressed.

Juliet said...

Companies have a brand name and spread goodwill around the world (especially now) just like governments do. Obviously, the scope is larger with government but we have excluded scope in this discussion.

Hey, it worked. Thanks to both of you for the advice!

I guess from my view I was looking at ownership equity as defined like this:

In financial accounting, equity capital is the owners' interest on the assets of the enterprise after deducting all its liabilities. It appears on the balance sheet / statement of financial position, one of the four primary financial statements.

Ownership equity includes both tangible and intangible items (such as brand names and reputation / goodwill).


http://en.wikipedia.org/wiki/Equity_(finance)#Accounting

In terms of intangible items, there is a difference, not just in scope, but in perception of a government's ownership equity and an individual's ownership equity. The reputation of the US of A is very different (for good or ill) than a company's reputation.

A. Noni Mouse said...

Juliet,

This is a case where Wikipedia is wrong.

Goodwill (sometimes called brand equity) is classified in accounting standards as an asset, never equity. I tried finding a simple definition for you online, but most sites simply assume the well-known definition and immediately jump into the details of the why's and wherefores of intangible assets. This page is pretty good, as is this Wikipedia page.

Here is a simple definition from my copy of GAAP (the "bible" for accounting):

Intangible assets. Those assets which provide future economic benefit but have no physical substance. Examples include goodwill, patents, copyrights, etc.

Since Equity is the result of the combination of Assets with Liabilities, changes in Intangible Assets will produce an indirect change in Equity.

Juris Imprudent said...

the "bible" for accounting

Given how M 'interprets' The Bible what on earth makes you think accounting will be treated with any more respect?

Markadelphia said...

I don't know, guys, I think she may have convinced me although I do see that goodwill is more an asset than equity as Noni says. Yet the goodwill and brand name of the USA is very different than that of an individual.

GuardDuck said...

Very different? Not just different, or a little different, but very different?

Well now you have me. I'm engrossed. Please explain in what ways it's very different.

Markadelphia said...

Just as I started writing this, I realized that this could be a very long comment. I'm going to try to keep it brief.

First of all, there's the logistical point of view. US goodwill in a time of emergency is unparalleled not simply in scope but in complexity. Our military and relief workers are very trained and can do a better job than an individual (obviously) and private organizations.

The brand name of the US carries with it a lot of equity in the intangible sense. We represent freedom in the world in many senses of the word (speech, rights, politics) that are simply more diverse than just one person or an organization.

Both our goodwill and brand name have seen a greater shine in the last decade regarding Africa, for example, and that's largely thanks to George W. Bush's increased efforts of aid during his time in office. It's not simply financial muscle but organizational muscle as well which is where they are very different.

GuardDuck said...

Oh......

So it is only different in scale not in anything substantive?

That's it?


Look, if someone attacks me and kills me that is only different in scale to a country attacking and conquering another country. It is essentially the same thing but writ larger.

As well a country's intangible assets are equally just a matter of scale. The brand name of the US is the sum total of it's history as relating to the world. The world perception of that brand name influences how other countries and individuals interact with us. Sounds just like what a company's brand name does, doesn't it? Even an individual possesses such intangible assets. A persons job history and attendance, trustworthiness, credit score are all professional and business brand names.

Not different, just a different scale.

Markadelphia said...

Let's see if we can look at this a different way. Both my lawn mower and my car have engines that are the same in many ways...just like the five areas of basic accounting are the same for an individual and a government.

Yet there are also differences. My car's engine has to heat passengers and my lawn mower's does not so the engine has to function in a slightly different way as well as have some different gear to make sure this happens (especially in Minnesota!). This is the same for the government. Our goodwill and brand name function in a different way because government serves a different purpose than an individual does.

Indeed, all five of the areas, though the same like each engine, are in a mechanism that serves a different purpose. That's why comparing the two "engines" (government and an individual) is about as silly as wondering why my car can't cut my lawn. Or why my lawn mower can't heat my family in the winter. They have the same basic engine so why not?

Can you now see how inappropriate the analogy is?

GuardDuck said...

Bad analogy Mark.

the engine has to function in a slightly different way

They function in the exact same way. They both produce waste heat from the combustion process - the car harnesses that waste heat to provide climate control to the passenger - the lawn mower does not.

But here's the thing - I could do a few mods and make your car capable of mowing your lawn - and a few to harness the waste heat of your lawn mower in order to provide winter comfort for your family. Because again - they differ in scale and small detail, not in basic function.

Markadelphia said...

Cars and lawn mowers function in the exact same way? This is exactly why I used the analogy. They may have similar engines but they each serve a different purpose-just like an individual does as opposed to the government. They each use the five main areas of accounting but serve different purposes. These purposes aren't just size based either which is why the original analogy (governments living within their means like people) is ludicrous.

GuardDuck said...

Ok fine Mark. They are different. Just like individuals and businesses and governments are different.


But.....

Hmmmm...


Let's think this through.


A lawn mower is different than a car. But if you run either one, burning fuel (debit) without adding to the supply of fuel (credit) for long enough what happens?

What? Yes Mark, they run out of gas and won't work.


So tell me how debits and credits (the fuel) work differently when used in ANY METHOD OF ACCOUNTING? Tell me how any entity that runs on money can possibly spend more than it makes indefinitely? Just because it's a government? Please.

GuardDuck said...

Ok fine Mark. They are different. Just like individuals and businesses and governments are different.


But.....

Hmmmm...


Let's think this through.


A lawn mower is different than a car. But if you run either one, burning fuel (debit) without adding to the supply of fuel (credit) for long enough what happens?

What? Yes Mark, they run out of gas and won't work.


So tell me how debits and credits (the fuel) work differently when used in ANY METHOD OF ACCOUNTING? Tell me how any entity that runs on money can possibly spend more than it makes indefinitely? Just because it's a government? Please.

Markadelphia said...

Tell me how any entity that runs on money can possibly spend more than it makes indefinitely?

Because of perception of risk and credit ratings. The United States still remains one of the best bet in the world, as far as governments are concerned, as well as investment in general. This is why, when the stock market gets volatile, people invest in T bills. It's a safe bet.

And are you talking about debt or deficit? I will agree that running high deficits indefinitely is a bad idea. But we have always had debt in this country from the moment we started and we're still here.

Juris Imprudent said...

So M, if I can convince at least one bank that I am a worthy credit risk, I can spend more than I make for the rest of my life, is that it? Even if I am perpetrating a fraud in doing so? And what happens when I die? Or the banks wise up?

What happens when the U.S. starts inflating the currency, or when foreign govts decide to stop buying our debt? Your argument seems to be - hey they haven't yet, we'll just keep rolling right up to that point without a plan.

Markadelphia said...

No, YOU can't because but that's what I've been trying to tell you guys all along...there's a difference between people and governments. Your response here is an excellent example of the flaws in your thinking. Governments have different rules and you guys don't like that. Oh well, I guess you'll just have to lump it.

We've always been in debt (not deficit, mind you) from day one, juris. How have we done so far? This is why your "what it's" are hollow.

Juris Imprudent said...

Yep, that is it, isn't it? We will just keep doing what we are doing because no one has ever called our bluff, and as long as they don't everything must be okay - no matter how deep a whole we dig. Fuck - what an idiot.

A. Noni Mouse said...

Yep, that is it, isn't it?

Yep. Every single "difference" Mark used as an example was nothing more than a difference of scale, usage, or detail within the larger fundamental categories. Not once could he demonstrate a basic/fundamental difference in how money works for the government. I saw two specific arguments he made:

1. It's just different. 'Cause I say so. M'kay?!?

2. We haven't collapsed… yet.

Neither one is logically sound. Yet he claims to be the "critical thinker."

We've always been in debt (not deficit, mind you) from day one, juris.

Ah, a glimmer of light! Having debt is not inherently bad any more than being entitled to something is inherently bad or being wealth is inherently bad. The problem is when debt continues to grow without control until it can no longer be paid back; or as you said, "deficit".

The problem is that the basic financial categories do hold, even to government. That is why our credit rating is no longer AAA, but has been downgraded to AA. That downgrade is a recognition by the financial markets (and other countries) that our debt level (Liabilities as compared to Assets and Income) is reaching unsustainable levels due to continued deficit spending.

This is why, when the stock market gets volatile, people invest in T bills. It's a safe bet.

And if the deficit spending continues, we WILL reach a point where the government is unable to pay it's debts (Liabilities). Once that happens, buying a T bill will no longer become a safe bet. A T bill is money loaned to the government and is on their books as a Liability. When not all liabilities can be paid, then a T bill is one of those liabilities which might not get paid back, or might have been so devalued by inflation that it is no longer a worthwhile investment.

When that happens, those who "buy" T bills will stop "buying" them, which is just another way to say that they will stop lending money to the government.

GuardDuck said...

Mark, you are either a simpleton or a liar.

We've been arguing deficit for months. Using the words 'spending', 'deficit' and the phrases 'spending more than you make', 'If you take in x, yet you spend x+y year after year for over a decade' and 'spend well beyond your means'.

Then you dare come here and throw up that bullshit 'are you talking about debt or deficit' line.

Let me ask the crowd. Is anyone else here confused about what we have been arguing about? Anyone?

So for the potential idiot version of Mark - you are playing in waters you don't understand, go play with people of your own size.

For the potential lying version of Mark - Fuck off.

Markadelphia said...

That is why our credit rating is no longer AAA, but has been downgraded to AA.

By everyone or just one agency? Be honest and list which ones still grade us as "AAA." And while you are at it, critically examine S&P and offer an honest appraisal of how reliable their ratings have been over the years. Also, please list exactly why S&P downgraded us, including the reasons you don't like:)

When that happens, those who "buy" T bills will stop "buying" them, which is just another way to say that they will stop lending money to the government.

So, this is a foregone conclusion? You don't strike me as an Armageddon fantasist, Noni. I guess I'd like to know where you were during the Reagan Era. Were you as worried then as you are now?

So for the potential idiot version of Mark - you are playing in waters you don't understand, go play with people of your own size.

Ah, that ol' chestnut. I don't like what Mark is saying so he is an idiot. And you wonder why I call you guys childish...

Same question to you, GD. Where were you during the Reagan Era? It seems to me that if you are worried about deficit spending now, you should've been making a lot of brown underpants back then. And how did it turn out? Well, we had four years of surplus spending under Clinton. In other words, it worked out just fine.

Honestly, what do you guys have if you take away the panic mongering?

GuardDuck said...

No, fuck you Mark, you didn't even address my statement.

By what you yourself have claimed, either you are too stupid to know what you have been arguing about for the last month or you are a fucking liar.

juris imprudent said...

So, this is a foregone conclusion?

I am sure a succession of Greek finance ministers thought exactly the same thing. No, it didn't happen all at once - or at least on their watch, so everything they did must have been just peachy.

GD, I think the answer is M is that fucking stupid. I really don't think he is that dishonest - if he was he should be able to lie better.

Markadelphia said...

Guys, c'mon, enough with the insults. I am addressing your statements. Each of you have expressed a deep concern about deficit spending. I'm asking where that concern was during the Reagan Era and how that turned out. I guess what I'm also asking is what is the statute of limitations on your panic....a year? 3 years? If the president is re-elected and we get back down to -3 percent deficit of GDP, would you relax at that point or not? Because we ran -6, -4.8, -5.1 and -5 during the years 1983-1986. I predict that our deficit spending will be in the -3 percent range by 2014. What do you think it will be?

Here are the historical tables (linked 8 zillion times by me).

http://www.whitehouse.gov/omb/budget/Historicals.

From 1970 to 1997, we ran budget deficits. We spent more than we took in. Are we still here? How did things turn out?

Here is a chart showing the deficit over the years.

http://markadelphia.blogspot.com/2011/12/federal-deficit-through-years.html

How does today compare to previous time periods?

juris imprudent said...

You really think throwing out some trope about a Republican and deficits just makes the issue go away?

You are a fucking idiot and partisan hack. And every word you write affirms that judgement, harsh as it is.

Greece is still here too. When this country ends up like them because of the idiocy of you and people like you, no doubt you will express total astonishment.

GuardDuck said...

How does today compare to previous time periods?


Well, those previous time periods didn't have the debt built up from the deficit spending of those previous time periods like we have today.


Remember - x+y may not be too bad, but 20(x+y) starts to be big, insurmountable numbers.

last in line said...

If Markadelphia and I head to shoot guns with Kevin Baker some weekend in the future, will you all join us there for a beer summit?

juris imprudent said...

I'd consider that last - as long as M isn't as careless and wild with a gun (or a pitcher) as he is with an argument.

Markadelphia said...

Well, those previous time periods didn't have the debt built up from the deficit spending of those previous time periods like we have today.

But did we also have the high GDP that we have today? We were at 1.01 trillion in 1970 and at 8.2 trillion in 1997. Today, we are at 14.2 trillion with around 60 trillion dollars in wealth. Wouldn't you say that's significant?

GuardDuck said...

Wouldn't you say that's significant?

No.

Doesn't matter what the actual GDP number is if the Debt as % of GDP grows faster.

http://www.usgovernmentspending.com/include/us_fed_debt_20c.png


You realize that the US govt's debt is now over 100% of GDP?

That level of debt is arrived at by continuous deficit spending. That level of debt will not decrease with continued deficit spending.


As a side - GDP numbers are 'worked'. When GDP increases with inflation and inflation is a bad thing, the bigger GDP is not necessarily a good thing. That's just one issue, another is GDP increases with government spending - making the relationship of gov't spending to GDP less of a benchmark and more of a self leveling and therefore less accurate statistic.

You should read this link Mark:

http://www.stansberryresearch.com/pub/reports/201112PSI_issue.html

Markadelphia said...

Well, those previous time periods didn't have the debt built up from the deficit spending of those previous time periods like we have today.

Doesn't matter what the actual GDP number is if the Debt as % of GDP grows faster.

Well, which is it? It is true that we have higher debt now than we have ever had. But the percentage changes, as you say, so that's what we should really be looking at. This makes your first statement largely insignificant because if we had a 20 trillion dollar debt but our GDP was 40 trillion dollars the size of the debt really wouldn't matter because it's 50 percent of GDP. Just as an aside, our GDP could really take off if we cornered the market on green tech. Of course, that would mean you guys would have to admit that you were wrong about climate change and that's not going to fucking happen, right?

You realize that the US govt's debt is now over 100% of GDP?

Yes. It was also that way from 1945 to 1947. Actually, Japan's debt to GDP (the last time I checked) was 245%. Why have they not been thrown into your boiling pit of sewage yet?

GuardDuck said...

It's both.

If you are deficit spending then you are spending more that you take in - and that builds up debt.If you deficit spend year after year after year after year after year.....those 3 and 4 and 6 and 10 percents add up.

Pretty soon your debt is over 100% of your GDP.

The only way your little fantasy GDP growth program (kinda a invest in lottery tickets strategy) coupled with your GDP grows faster than debt idea would work is if indeed we won the lottery for growth and we kept spending deficits to a minimum - which is....gasp....a spending issue as you've been told over and over and over.


Yes. It was also that way from 1945 to 1947.

Just a quick question to a social studies teacher - Was there perhaps a world wide social, political and economic upheaval during and immediately preceding those years that may account for a country perhaps having to go into debt to pay for their very survival? Can you really expect me to think there is anything even remotely as critical today?

Ahhh, Japan:

The upshot: So long as Japan borrows from willing domestic investors, it can afford to shoulder the world's greatest debt burden.

Even if the Yen weathers this storm, Japan can't expect to hold debt worth twice its GDP forever. High savings were sustainable when the population was younger, wealthy, and growing. Instead, Japan is old, stagnant and saving less every year. That investors have repeatedly failed to short Japanese debt since the early 1990s doesn't mean that Japanese debt is a good bet tomorrow. The country will eventually find itself in a financial catastrophe when the public stops lending money at floor-scraping 1.5 percent rates. Consider this alarming fact: If its interest rates doubled to 3 percent, interest payments would suddenly consume half of government revenue.

http://www.theatlantic.com/business/archive/2011/03/is-japans-debt-doomed/72450/

And this one - you should really pay attention to this quote:

What scholars and government officials now realize is that at some point—perhaps already reached—budget deficits of this order against such a huge accumulated debt can create a situation where debt service becomes impossible without incremental borrowing, that adds to accumulated debt, that increases debt service needs, that requires additional incremental borrowing, that…. In others words, debt finally overwhelms and consumes the entire economy. This is the nightmare Japan faces unless it changes.

http://www.forbes.com/sites/stephenharner/2011/11/18/coming-to-grips-with-japans-government-debt/

Markadelphia said...

Was there perhaps a world wide social, political and economic upheaval during and immediately preceding those years that may account for a country perhaps having to go into debt to pay for their very survival?

Yes. Wouldn't you say that there was an economic upheaval preceding these last few years that may account for our country to go more into debt to pay for our very survival? If you don't think this is the case (and I know you don't), please tell me what would have happened had we not done what we did. Now, if you are talking about the Bush Tax Cuts, the wars and the unfunded Medicare D, well, I would agree that they were a large part of the problem and should not have happened or happened to the degree that they did given our financial state.

Regarding Japan, when is the Armageddon going to take place? In 2000, their debt was around 136 percent of GDP. Now it's over 200 percent. Check out this article from 2001

http://www.oftwominds.com/japan.html

Sounds a lot like you, Guard Duck. While I agree that their economy certainly hasn't been stellar (made worse by the tsunami), I don't recall seeing a "red glow of reckoning" in the last ten years. In fact, here's another perspective,

http://www.zerohedge.com/article/why-japan-200-debt-gdp-much-better-shape-much-indebted-europe

GuardDuck said...

please tell me what would have happened had we not done what we did.

When Mark? From the very graphics you post we've been deficit spending from the 70's till now except for a short period around the turn of the century. We can't blame this on Bush or even Obama (despite his doubling down on spending).

I would agree that they were a large part of the problem and should not have happened

Jesus. A large part of the problem? What percentage of the overall debt or the yearly deficits do these account for? And for how many years out of the last forty have these things accounted for it? You want to see something that would cut our federal spending? Look at how me we have to spend just to pay the interest on our debt. Imagine what we could do if we hadn't already charged up the cards and have to make those huge interest payments.


Your defense of Japan sounds just like your defense of the US. 'We're still going and we're still spending. So there!'

Not much critical thinking in that.

GuardDuck said...

Japan’s AAA Credit Rating Cut for First Time by Tokyo-Based R&I

http://www.businessweek.com/news/2011-12-21/japan-s-aaa-credit-rating-cut-for-first-time-by-tokyo-based-r-i.html

Markadelphia said...

Wow. 127 comments and still going strong. I think it's safe to say that Europe has to fall apart at this point so you guys will be proved right. What if it doesn't? What will that say for your ideology if Armageddon due to reckless government spending does not, in fact, happen? What then?

What percentage of the overall debt or the yearly deficits do these account for?

Well, here are the numbers....

2001 – $5.871 trillion in debt
2008 – $10.640 trillion in debt

Jan 31st 2009 = $10.569 trillion in debt
Jan 31st 2011 = $14.131 tr­­illion in debt

But of the $3.56-tril­­lion increase, 98% was carry over from Bush programs:

Bush: $910-billi­­on = Interest on Debt 2009/2011
Bush: $360-billi­­on = Iraq War Spending 2009/2011
Bush: $319-billi­­on = TARP/Bailo­­ut Balance from 2008 (as of May 2010)
Bush: $419-billi­­on = Bush Recession Caused Drop in taxes
Bush: $190-billi­­on = Bush Medicare Drug Program 2009/2011
Bush: $211-billi­­on = Bush Meicare Part-D 2009/2011
Bush: $771-billi­­on = Bush Tax Cuts 2009/2011

So that means...

Bush’s contributi­­on:

2001 to 2008: $4.769-tri­­llion
2009 to 2010: $3.181-tri­­llion

Total: $7.950-tri­­llion

Increase Since 2001 = $14.131 – $5.871 = $8.26-tril­­lion

Bush’s contributi­­on: $7.950-tri­­llion / $8.26-tril­­lion = 96%

Increase caused By Bush’s Programs: 96%
Increase caused by Obama’s Programs: 4%

GuardDuck said...

Whoa! Back off team blue cheer-leading captain....sheesh.

I don't agree with those massaged numbers - but it's irrelevant - the spending, by whoever is doing it, is the issue. Do you think I would be happier if Obama bankrupted our country than if Bush did it?


Besides, if you are pointing fingers of blame you can't defend the spending. Pick a line of argument, either we can spend willy nilly - and you can't blame anyone for it, or we can't spend forever and then you get to point fingers. But pick one first.

juris imprudent said...

LMAO - not a partisan hack eh?

Bush! Reagan! It's all their fault, and no blame at all goes to the Dems and the Most Holy One.

What is morbidly fascinating is that you have no sense of shame, which I guess facilitates the blatent hypocrisy.

Markadelphia said...

I don't agree with those massaged numbers

Well, you asked. If you don't agree then check the math. One thing I will note that was left out is that, although we did have 5T in debt when Bush took office, we also had four years straight of budget surplus. We were managing our debt quite well.

Pick a line of argument, either we can spend willy nilly - and you can't blame anyone for it, or we can't spend forever and then you get to point fingers. But pick one first.

I choose neither. The problem here is that you have an irrational view about spending. I've tried to point out to you that we've spent far more in our time but that seems to fall on deaf ears.

GuardDuck said...

Well, you asked.

No I didn't. You read into my question your own bias - not what I asked.

The question was What percentage of the overall debt or the yearly deficits do these account for? in reference to your statement that if you are talking about the Bush Tax Cuts, the wars and the unfunded Medicare D, well, I would agree that they were a large part of the problem

You give me an answer that shows how much of the increase in the debt is Bush's fault.

I love this number: Bush: $910-billi­­on = Interest on Debt 2009/2011

Really? Really? Not that I disagree that was the actual interest on the debt for 2009/2011. But to put it out there like that's what Bush cost us? Puhlease! As I've been trying to tell you - that interest number is on the debt that has been building every single year for over forty years.

Then these two:

Bush: $419-billi­­on = Bush Recession Caused Drop in taxes
Bush: $771-billi­­on = Bush Tax Cuts 2009/2011

I find it maddening that people can actually consider a loss of income, for whatever reason, to be a cost. NO IT IS NOT! What is a cost is the continued spending you do after losing the income. Jesus.


Here's the thing Mark, the question I actually asked you was what part of the overall debt or deficit was due to Bush's programs? Specifically the programs you mentioned - wars, tax cuts and medicare D. None of which you actually gave me. Just one year as part of that years deficit or all of it as part of the overall debt. (leave out the voodoo economics of blaming debt on 'lack of income' please).



although we did have 5T in debt when Bush took office, we also had four years straight of budget surplus. We were managing our debt quite well.

Are you bi-polar? Why would you even bring this up when your argument is that there is nothing wrong with deficit spending?


we've spent far more in our time but that seems to fall on deaf ears.

And I've pointed out to you the unique set of circumstances involved during that time - which you have never fucking addressed. I listen Mark - but you don't.

Markadelphia said...

I do agree that those were unique circumstances but there were also unique circumstances when Reagan ran record deficits as well. Our current situation is also unique and calls for thinking outside of the box as opposed to rigid ideology. I certainly wouldn't be for deficit spending if the circumstances weren't unique.

(leave out the voodoo economics of blaming debt on 'lack of income' please).

But that's part of the reason why the debt is so high. We are talking about math here, right? The problem here is that you don't like taxes. Oh well. That's the revenue part and that's reality. This is no time to inject personal feelings into the equation. I will agree that if Bush and the GOP's spending habits were the other part of the problem but it was both...just like the solution is both.

juris "bully weasel" imprudent said...

I choose neither.

Persimmons!

GuardDuck said...

But that's part of the reason why the debt is so high. We are talking about math here, right?

Mark you have really pissed me off. Three weeks ago you said you agreed with me about this. I wanted you to specifically spell it out and you refused, claiming I wanted to make you dance. I wanted us to be clear in our communications. This will be the last time I ever give you that benefit of doubt. Next time you refuse to clarify when asked will be the last time we interact....nicely.


It is a spending issue. It is not math, it is logic. Logic is apparently something you are not acquainted with.

Congress did not think they were getting two trillion and after spending it found out that they only got one trillion. No they did not.

What they did do was after expecting to receive one trillion, they then spent two trillion. That is a spending issue.

Looking at your graphics on the other thread, one can easily see that congress has spent more than they made the majority of the time for the last fifty years. If that were a revenue issue, one would have to believe that the United States government wrongly estimated their revenue the majority of the time for over fifty years. Now I don't think much of government employees but even I think they aren't that incompetent.

Looking again at the deficit graphic one can make a reasonable prediction of future behavior. If congress spent more than they made the majority of the time for over fifty years, what could one predict that they would do next. Taking my example from above, if congress just spent two trillion after we gave them one trillion - and we came to them the next year and said "hey, I saw that you spend a trillion more than we gave you last year. Just so we don't go into debt next year, we'll give you two trillion." If they then spend three trillion are you still going to call that a revenue issue? Please tell you won't, please.

No, logic dictates that we have to assume the spending beyond the income was a purposeful and conscious decision. A decision that was made to spend more money than they had.

The decision to spend more than they made is the factor that makes it a spending issue. If you can show me how, somehow, someway they spent the money and then their revenue disappeared - for fifty straight years - then you might have something that can be called a revenue issue.

Markadelphia said...

As I have said all along, I do agree with you that spending was part of the problem and that there are going to have to be spending cuts and adjustments made across the board. The three main areas where this needs to take place are social security, medicare, and defense. The rest is honestly insignificant if you take a look at the numbers.

But it's also a revenue issue as well. Imagine that the Bush Tax Cuts never happened. The debt would be lower and deficit spending would not be such a concern. Throw in no Iraq. Now how do the debt and deficit look? I agree, they shouldn't have spent the money on Medicare D, for example, without the revenue. With the revenue, I'd still say that Medicare D was probably a bad idea because the entire health care system really needed to be overhauled.

All this being said, in my view you are aren't rational about spending. You view many government programs as "luxury spending." I view many of them, like the Department of Energy which regulates nuclear weapons or the Department of Education which provides a myriad of support tools to educate our citizens, as being vital. Having these programs are what makes our nation (indeed, what made our nation) the powerhouse that it is.

I guess I'd urge you to take a step back from emotions about spending and not treat the people who spend money in government like Hester Prynne. Be reasonable and think critically about the benefits that come with many of these programs. Think about what our lives would be like without them. More importantly, realize that they are mere drops in the bucket compared to the Big Three I listed above.

The decision to spend more than they made is the factor that makes it a spending issue.

I take it then that you would grade Ronald Reagan as a poor president as he did this during his time in office? Dick Cheney as well who said famously, "Reagan proved the deficits don't matter" ?

And look at your statement..."spend more than they made" Made...that's revenue, right? I just don't see how you can ignore that part of the equation. This is why it's so tough to have a conversation with you, mean or not mean. You're very single minded/OCD about spending. Until you can get past that, I fear it's going to be tough to have a critical discussion with you about this stuff. Changing beliefs, as opposed to ideas, can be very difficult indeed.

GuardDuck said...

Reagan: Don't put words in my mouth Mark. We haven't even reached a point where we are discussing approval or disapproval of policies. We can't even agree on the basics of what we are talking about. But if you were to ask me if the debt during Reagan's tenure was due to insufficient revenue or due to spending - what do you think?


OCD? Jesus Mark, I'm just trying to get you to follow a rational and logical set of basics for further discussion to build upon. You know, the building blocks of communication. A Rosetta stone, that if we don't have we can't communicate effectively.

I guess we can't because you just refuse to follow logic in your thought process.


And you are the one calling me emotional?

GuardDuck said...

"spend more than they made" Made...that's revenue, right? I just don't see how you can ignore that part of the equation.

Because it is patently ridiculous to say 'there wasn't enough money for what was spent'.

That is the passive voice, dodging responsibility. It is often used when one says "the gun went off", which is easier than saying "I fired the gun" when there is personal guilt involved.