Stanford Economist on Fiscal Cliff

[bobes915]

John Taylor - an economist who teaches at Stanford was interviewed on the Fiscal Cliff. Part of what he said in the interview is below  perhaps you will find it interesting.  It's pretty amazing to me that our spending has grown that much (as a percentage of GDP) in the last 5 years....



Morgan Housel: And of course you have one side that says, "Don't touch taxes." You have one side that says, "Don't touch entitlements." To create a real, substantial deficit reduction bill that would make a difference over the long haul, do both of those sides need to loosen up their stances?

John Taylor: You know it's only in a political way it seems to me. From an economic perspective, at least my economic perspective, I see a way out of this where you simply bring spending as a shared GDP back to where it was before the crisis in 2007. That's about 20%. Obviously, we can do that. We did it just a short number of years ago. If you do that, you don't have to have revenue increases. You basically will get revenues rising with stronger economic growth and to do that you need to have a sensible reform of Medicare and Medicaid, I think things that would make people's lives better.

So as I see it from an economic perspective, there's a much more sensible way out of this than to try to have to raise taxes in very weak economic times. I think the sense of a bargain you're referring to is for political reasons and obviously we have to face up to that. But I think the more people understand the economics of it, the more chance we have of getting to a more sensible solution.

[Falconer02]

That is interesting, however I will argue about this claim-

But I think the more people understand the economics of it, the more chance we have of getting to a more sensible solution.

Considering the amount of people who still support old and non-working "Reaganomic" ideals and zealously oppose any type of healthcare reform, I think expecting people in this country to understand economics is a pipe dream.

[vp44]

I'm still wondering what are these entitlements they are speaking of. Is it the things the Gov have interest in like their own pet projects or what. 

[southernhorizons]

That is interesting, however I will argue about this claim-

But I think the more people understand the economics of it, the more chance we have of getting to a more sensible solution.

Considering the amount of people who still support old and non-working "Reaganomic" ideals and zealously oppose any type of healthcare reform, I think expecting people in this country to understand economics is a pipe dream.

The only real healthcare reform would involve taking the power away from the drug companies and the insurance companies. Since they are the most powerful lobbyists in Washington, and pay for most of the politicians campaigns, that will never happen. Even a full blown government takeover of healthcare wouldn't work, since the government is so corrupt and so inefficient that they can't run anything except into the ground.

[Falconer02]

since the government is so corrupt and so inefficient that they can't run anything except into the ground.

Time moves forward. Nothin' changes.

[wildequusheart]

I think before people can begin to better understand economics more people need to be functionally literate. An inability to fully grasp the nuance and implications of language written in economic policy can make the consequences of the policy itself impossible to understand.

vp, the entitlements everyone keeps talking about are programs such as Medicaid, Medicare, welfare, food stamps, etc. I'm not sure why they're called entitlements; I've never looked into it.

Personally I think it's sad that what is a lifeline for some is just a political playing card for others. While there is certainly abuse of these programs (crab legs with food stamps? I've seen it.), I know more people who genuinely need them. I once met a woman who started receiving food stamps when she started chemo. She said food stamps were what saved her. I also know a single mother who is on personal disability due to a spinal injury. The money she receives might cover rent of a one-bedroom apartment in a slummy area around here (not including utilities, food, transportation to the doctor, etc.). People born with certain disorders (such as cerebral palsy) are also eligible for these programs. I certainly wouldn't consider most of the people who actually need these programs to be "lazy" or "entitled." Of course, in a perfect world this would all be a moot point, I suppose.

[batmobile]

pretty  soon  the  whole  world  will  b  on  foodstamps  bc  everything  is  so  expensive we cant afford to eat... and we r in debt up to our eyeballs its ridiculous already...and america is like the codependent  mommy still trying to save the world and forgetting our own needs that havent been met yet ...ha!