Economist: Deficits, protectionism are key threats to economy
DEAN HOFFMEYER/TIMES-DISPATCH
The Virginia Farm Bureau drew 700 people to its annual meeting. These large door prizes might have boosted attendance.
Published: December 1, 2009
RICHMOND, Va. -- The U.S. economy is recovering from the recession, but massive federal budget deficits are unsustainable and could lead to inflation, an agricultural economist said at a Virginia Farm Bureau Federation meeting.
"As huge as these deficits are, when the economy returns, we must pay down the debt," Barry Flinchbaugh, an agricultural economist at Kansas State University, said as the bureau kicked off its annual convention in Richmond yesterday.
Deficit spending, he said, can help lift the economy out of a recession, but it must be followed up by fiscal restraint.
"The key to long-term economic growth is for the country and its leaders to have the will to bite the bullet when the time comes and get us back on a sound budgetary basis," Flinchbaugh told the more than 700 people attending the annual meeting of Virginia's largest farm advocacy organization.
Delegates from Virginia's 88 county Farm Bureaus are attending the three-day convention to discuss agricultural issues and vote on legislative priorities for the coming year. Issues include farmland preservation, animal welfare, state budget cuts, and proposed federal legislation aimed at reducing runoff into the Chesapeake Bay.
With federal budget deficits now exceeding $1 trillion, "the No. 1 economic issue we face down the road clearly is inflation," he said. "We have sown the seeds of inflation. That is the main consequence of these huge deficits."
Yet neither political party has shown the willpower to bring deficits under control, Flinchbaugh said.
"Frankly, today the Democratic Party in Washington is spending money like a bunch of drunken sailors that just pulled into dock at Norfolk," he said. "The Republicans today have simply come up with no alternative -- they just say no. And the president is not leading; he is still campaigning."
The global economic downturn likely will cause U.S. net farm cash income to fall 30 percent to $68.2 billion in 2009 from a record $97.6 billion in 2008, Flinchbaugh said.
Exports are expected to drop from $115 billion in 2008 to $96 billion in 2009.
"World demand is down. Commodity prices have declined. Our [farm] costs have declined also, but by a much smaller amount than the decline in overall prices," he said.
Flinchbaugh also warned against trade protectionism and advocated the passage of pending free-trade agreements with South Korea, Panama and Colombia.
Other key issues facing agriculture include policies aimed at reducing carbon emissions, and renewable energy.
"I would argue that this nation's energy situation is such that we must use all sources of energy, including nuclear, wind and solar, domestic drilling, ethanol from corn, biodiesel and the second-generation cellulosic ethanol.
"It is not a food versus fuel situation," he said, arguing that agriculture can produce enough for both.
Contact John Reid Blackwell at (804) 775-8123 or
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It is quite the irony that farm subsidies have been a huge part of the debt over the years. Paying taxes to get cheap food or make farmers rich…I wonder.
dmkq, I find your numbers quite interesting seeing as our national debt is around 12 Trillion dollars today. Perhaps what you are refering to is budgetary surplus. Which W did inherit from a Republican Congress ( they do the spending you know )and a compliant Clinton. Under Reagan we where in the grips of the cold war. Absolutely his budgetary deficit increased because the strategy that won the war was a massive military build up that we where not collecting taxes to pay for. Taxes stayed low to sustain economic growth. The theory being that future growth would offset the budgetary deficit. It worked and the golden years of the Clinton economy was the fruit of this theory. Under W we where attacked by muslim terrorists. He latter engaged in two massive fronts that led to needed budget increases. Along with No Child Left Behind and the Prescription Drug Program spending increased still higher. His budget ballooned and to keep the economy pumping through the war on terror he along with congress kept taxes low. I do not know what the net job increase or decrease was for any of this men but in regards to percent, 5.8% is not bad considering the collapse of the tech bubble.
To say our economy was not growing is incorrect. Under W the U.S. GDP grew by 109% (u.s. bureau of economic analysis) It was not just housing and defense either. We had growth in semiconductors, manufacturing (oddly enough), and many others.
I am not putting anything aside. The government cannot create wealth. Follow your logic to its conclusion. How do you create a need? If the government did a “jump start” they give some sort of incentive to buy something. They pay for that incentive with our taxes or by printing more money (read OBAMA). Both methods increase our deficit and lower the value of the dollar. As the dollar devalues EVERYTHING costs more. As prices go up consumers buy less. Jobs you say…well since most everything we buy is not made here how will jobs be created? So the government decides to create its own jobs? Again, using tax funds to pay people when we really dont have any money to spend. The inflation cycle continues as does the rise in debt.
You are absolutely wrong about the defecit increasing under FDR because of WW2. The debt increased because of what you suggest government do followed by how it plays out (as I explained). WW2 bailed us out of debt not put us in it.
This recession and soon to be depression was caused by an artificial housing boom that collapsed. Thanks to Fannie and Freddie ( darling of the Dems ) Millions of people got mortgages they where never ever going to pay back. These mortgates where bundled at Wall Street by a bunch of crooks ( enabled by both parties ) into securities. Once the gig was up and mortgages starting to go in default the bubble burst. All of a sudden credit was a poison pill and it has killed the world economy.
So here we are. People with vast misunderstanding of the facts perpatrated by pop culture and media elect a progressive congress and a blow hard academic president to lead us out of this mess. None of which has actually run a business. Nope, just got their pie in the sky utopian dreams to make the world a better place.
The only way to fix the econmy is to…
1. Do not bail out anybody or anything. 2. Cancel every single gov subsidy. 3. Lower the corporate tax rate to a competitive level so that it makes financial sense for companies to make things here. 4. Repeal the income tax and replace it with a national sales tax. 5. Build community health centers and pay for them with taxes on elective medical procedures used by the wealthy. 6. Eliminate redundant buerocracy such as the dept of Commerce. 7. Put an end to frivoulous lawsuits everywhere. 8. Elect a President who has the guts to get tough with China and tell the American people that short term pain will equal long term gain. 9. Impeach OBAMA (hehehehe just kidding) 10. No government run anything!
RepublicanX…I will concede that I was off on the amount of tax cuts in the stimulus bill. I remembered the republicans were pushing for over $400B in tax cuts. The final bill came in at $275B and almost all to the middle class.
Now with respect to your other statements, as I said before - let’s not let facts get in the way. First of all, it is a fact that when Bush 43 entered the WH, our country was running a surplus and not a deficit. Another fact is that under Reagan and Bush 43, our country’s debt increased the largest of any President aside from FDR (who obviously was funding WWII). Under Reagan (and Bush 41) our debt more than tripled from 909B (1980) to 3,206B (1990). Under Clinton the debt increased to 5,628B (I don’t have the figure for 1992 when Clinton entered office). Under Bush 43, our debt nearly doubled again to 9,985B (2008). It seems that under both Bush presidents and Reagan, we were famous for cutting taxes but still increased spending.
As for Bush 43 tax cuts inspiring a robust economy, his tax cuts led to him being the first 2-term President to leave with a net decrease in job growth. Aside from the housing and defense industries, our economy was not growing. Our unemployment rate actually increased under his leadership from 4.0% to 5.8%. While the GDP grew, the only people making money were Wall Street. In contrast, under Clinton - who increased taxes on the highest earners to balance the budget - the unemployment rate actually decreased from 7.2% to 4% and our economy experienced its greatest growth since the 1950s.
Aside from all this, I wish to ask what would you prefer? Leave it to private industry to put our people back to work? Which industry is going to lead in putting 8 million (some actually say 16M) people back to work? Do we have a decade to wait? The only way we are going to start achieving significant job growth is by creating a need - for new cars, new homes, new appliances, new services, etc… There needs to be some sort of jump start (read government) required to put people back to work. Without it, our country will have to wait for years (decades?) for the private industry to come to the table and start hiring in the volumes that they laid off these past two years.
What irony.
Outside of Social Security and Medicare, payments to Farm Bureau has done more than any single private organization to increase U.S. debt. Income transfer from urban to rural areas in the name of food security is a scandal. The nation finally got rid of the tobacco and peanut programs, but rules on cotton and grains continue to suck money out of the treasury all while the net worth of “poor farmers” have skyrocketed as land values went out of control.
dmkq…too bad your “facts” are just worn out air america talking points. The national debt did not just begin with W. The total debt is a sum of of over 6 decades of presidents. What is alarming and FACT is that the rate of spending for Obama is several times greater than previous presidents. This is not including the bill for his healthcare and global warming boon doggles. It is true that W was a fool to sign the first stimulus at his exit but Obama is an even bigger fool to double down with another stimulus and then promise even more spending. BTW what are you refering to in regard to “50% tax cuts” to business and individuals? I can find nothing on the net to back that up. I would also like to know how you equate trickle down economics to national debt. At the rate that Obama is going he is mirroring FDR and his socialist agenda that drove debt to over 120% of GDP. It took WW2 to get us out of the disaster that FDR presided over. Trickle down economics was practiced by Clinton. Who to his credit worked with the Republican congress to balance the budget and pay down the debt. However he was President during a period of calm prosperity where the biggest thing he had to deal with was covering up his Oval Office trists. W on the other hand had no such luxury. Even still, tax cuts to those that actually pay taxes helped drive a very robust economy from 01 to 07.
Mark…I totally agree with you. Our only hope now is that the wages of the common chinamen increase dramaticaly over the next few years. I would say we consumers should punish the companies that sent our jobs over there but there are non left. Virtually everything we buy is made elsewhere ( usually China ). The greed of majority shareholders cost jobs. The corruption of Barney Frank (D) and Chris Dodd (D) enabled the greed of realtors and home-owners. Obama dances as Rome burns. Ugh
Let’s not let a few facts get in the way of a story…Today’s deficit is caused mainly by the two wars we are fighting, not just “Democrats spending like drunken sailors.“ Another major contributor to our deficit is the bailout of Wall Street and GM initiated by Bush. The stimulus that many Republicans like to point to as wasteful spending was actually over 50% tax cuts to small businesses and individuals. To date, the spending of the stimulus has been way too slow and that is why we still find ourselves in this rut with unemployment over 10%.
If the economist would have been truthful, he would have acknowledged all of this plus the fact that this country could not afford Bush’s tax cuts, especially when conducting two wars. It is the failed fiscal policies of “trickle down economics” that has led us to this tipping point - not spending like “drunken sailors.“
The easing of “protectionism”, starting with Carter, then pushed by Clinton and Bush has pushed our trade deficit to dizzying levels. China is sitting on a trillion dollars and wondering what to do with it (besides loaning it back to our government so it can stay in business). Good paying manufacturing jobs have almost completely dried up. Remember the “pension”? Those used to be common in this country. But when you have to compete with the third or fourth world where your competition might make only $3 a day there’s no room for pensions and you’re unlikely to work at a company long enough to collect one. Will protectionism limit growth? Yes, but look what we’ve done to ourselves with unlimited growth.
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