either that or foreigners need to start paying a whole lot more for all their fancy new medical care.
we spend a lot of our GDP on healthcare. part of this is due to other countries paying much less for new developments than we do. when you amortize your R&D costs across a small population instead of your whole market, that will mean charging everyone in that small population much more.
my issue isn't especially with the funding so much as it is with ensuring the rest of the world pays what they owe. America has functioned since WWII as a large charity project for those less capable of running a great nation (namely, everyone). i am pretty sick of seeing my tax bill every year and knowing that. so too are many, many others. i am pretty comfortable at a fundamental level with public support for medical research.
i am not comfortable with failing to protect the results of that research and ensuring that if anyone outside the borders of our country wants a scrap of benefit from those, we enforce payment for that benefit.
The deficit is just a reflection of the sectoral balances[1], which governments don't realistically influence through normal policy. They obviously can change them, but it generally results in significant undesirable outcomes.
I'm really talking about monetary creation/inflation - the part of the budget deficit that is new "loans" from another branch of government (Federal Reserve), plus "loans" from the Federal Reserve into the financial industry to do things like grow the housing bubble.
The belief that USD will continue to be redeemable for best in class future goods (technological widgets, military hardware, trade and military alliances, etc) combined with the stickiness of transaction costs (especially at nation-state scale) is what allows that ongoing monetary inflation without commensurate price inflation.
I'm not actually American, but you get the gist. I've taken the liberty of posting the full passage here since it's so good:
For some weeks at this hour you have enjoyed the day-dreams of planning. But what about the nightmare of finance? I am sure there have been many listeners who have been muttering: “That’s all very well, but how is it to be paid for?”
Let me begin by telling you how I tried to answer an eminent architect who pushed on one side all the grandiose plans to rebuild London with the phrase: “Where’s the money to come from?” “The money?” I said. “But surely, Sir John, you don’t build houses with money? Do you mean that there won’t be enough bricks and mortar and steel and cement?”
“Oh no”, he replied, “of course there will be plenty of all that”.
“Do you mean”, I went on, “that there won’t be enough labour? For what will the builders be doing if they are not building houses?”
“Oh no, that’s all right”, he agreed.
“Then there is only one conclusion. You must be meaning, Sir John, that there won’t be enough architects”. But there I was trespassing on the boundaries of politeness. So I hurried to add: “Well, if there are bricks and mortar and steel and concrete and labour and architects, why not assemble all this good material into houses?”
But he was, I fear, quite unconvinced. “What I want to know”, he repeated, “is where the money is coming from”.
To answer that would have got him and me into deeper water than I cared for, so I replied rather shabbily: “The same place it is coming from now”. He might have countered (but he didn’t): “Of course I know that money is not the slightest use whatever. But, all the same, my dear sir, you will find it a devil of a business not to have any …”
Had I given him a good and convincing answer by saying that we build houses with bricks and mortar, not with money? Or was I only teasing him?
…
For one thing, he was making the very usual confusion between the problem of finance for an individual and the problem for the community as a whole …
The first task is to make sure that there is enough demand to provide employment for everyone. The second task is to prevent a demand in excess of the physical possibilities of supply, which is the proper meaning of inflation. For the physical possibilities of supply are very far from unlimited. Our building programme must be properly proportioned to the resources which are left after we have met our daily needs and have produced enough exports to pay for what we require to import from overseas …
Where we are using up resources, do not let us submit to the vile doctrine of the nineteenth century that every enterprise must justify itself in pounds, shillings and pence of cash income, with no other denominator of values but this. I should like to see that war memorials of this tragic struggle take the shape of an enrichment of the civic life of every great centre of population …
Assuredly we can afford this and much more. Anything we can actually do we can afford. Once done, it is there. Nothing can take it from us.And what if we're currently affording more than what we can actually do? And what of going forward when a lot of what we can do gets afforded by other countries calling in those IOUs (which won't end up being fully repudiated for a bunch of reasons) ?
You also didn't address my first point that we're likely currently affording more than we can do, especially in the short term. So shutting down foreign trade would result in a straightforward standard of living decrease. Like yes it is important to remember that finance and money are abstractions on allocating real resources, but currently those abstractions are supremely benefiting the US.
Accepting the IOUs means more exports, which is what everyone seems desperate for at the moment. In fact, Trumpism seems to be all about shutting down imports and increasing exports, which happened jolly fast and wasn't in any way related to an inability to import.
And as I said, the simple response to export demands exceeding capacity is normal - increase capacity through efficiency, import stuff to sell. A good post on exactly this stuff: https://new-wayland.com/blog/savings-are-an-export-product/
It is possible to afford more than you can do yourself when you buy things from other countries. That quote is arguing for ignoring the financial abstraction when it becomes limiting, and focusing on the economic realities of what can be done. But my point is that the financial abstraction is currently benefiting the US. Eschewing the financial abstraction, balancing imports and exports, and no longer being a reserve currency means that we will be able to afford less.
That may be fine if the goal is to achieve other results (eg stable manufacturing jobs that support a middle class, supply chain security). But it's still something to be acknowledged, rather than written off. Effectively the worldwide use of USD to facilitate international trade and as a store of future value is itself an export, the use of which is paid for by ongoing monetary inflation. Reducing the desire of other countries to hold USD means ending that export.
There's no financial abstraction happening here. Exports and imports always balance, it's just that financial assets are an export product that foreigners may wish to hold. If they do, then great, because you can swap financial assets for real stuff. This is not unique to the US; plenty of countries run like this.
Of course you should acknowledge that the situation might change, but there's nothing to indicate that's happening. It's not like there's a ready supply of customers waiting to buy all the stuff the Chinese rely on selling for their domestic employment.
Edit: it's worth noting that the decisions here are largely made by the private sector. The government runs a deficit or a surplus because it has to to balance the sectoral flows [1]. If the private sector wishes to save and import, then if the government wish to not starve the economy of money, they necessarily have to run a deficit.
I tried to meet you there with the terminology of the Keynes quote and you argued definitions rather than address the translated point.
In the general framework you're pushing, if the government does not run a deficit by being a place to park money, then that money remains in the economy regardless - private savings is generally in terms of loans to banks which then propagate the money elsewhere, not simply holding vast quantities of Federal Reserve Notes. (And frankly FRNs should really be considered part of the debt/deficit too)
I think the point I trying to make to is that deficits should not be anything to worry about - they are just a balancing item that reflects normal monetary operations as desired by the population. As long as the country remains capable of producing useful stuff, everything is going to be fine, since that's what _actually_ matters.
Yes, in a previous comment you said this:
> If the private sector wishes to save and import, then if the government wish to not starve the economy of money, they necessarily have to run a deficit
My point is that the private sector saving does not itself starve the economy of money. Savings is generally done into banks, which then choose where to invest that money onwards. What makes it possible to starve the economy of money from this is precisely that the government takes loans from a private sector looking to save - either through banks that buy Treasuries, or even Treasuries bought directly - which forms [part of what is currently considered] the deficit.
> I think the point I trying to make to is that deficits should not be anything to worry about - they are just a balancing item that reflects normal monetary operations as desired by the population
My original argument had an even stronger implicit point - being able to run a deficit without the consequence of significant price inflation is an extremely beneficial situation. It implies an ever growing value of the ecosystem of that currency, sustaining the new money. We can certainly debate how that value should be realized and what it should be spent on. But pulling back from the world stands to destroy that value creation.
I'm not sure if in your final point your implying something about the quantity theory of money, which is something I reject (flows being the important measure). Perhaps you can clarify what you mean by destroying the value creation? Is this a statement about closed economies being less valuable than open ones?
Being that country that makes scientific breakthroughs is a good thing. Name one of these "free loading" countries out there is in better shape because they don't do science and just sit back reap the benefits?
Science doesn't really care about borders and making sure its a winner take all mentality will mean you just wont be included in the game.
By what measure? Life expectancy? Happiness? Wealth? We have the highest economic stratification of almost any nation in the developed world, by a longshot. We're the only developed nation that does not provide universal healthcare, does not guarantee sick time and does not guarantee parental leave. We have the most barriers to unionization of any developed nation We have the highest number of incarcerated people, by both total number and percentage of our population, of any developed nation.
We're also among the worst countries in terms of alignment between what the populace wants for policies and what they get from their elected representatives, so we're failing pretty hard at the whole "democracy" thing, too.
> i am pretty sick of seeing my tax bill every year and knowing that
Great news! I have the cure. All you need to do is google "federal budget percent foreign aid" and you'll feel so much better. It's just one percent of the federal budget.
Since we're on the subject of "paying more than we get back" and our tax bills...what state do you live in, dear commenter who feels ripped off by his tax bill?
you are, of course, correct, we urgently must also end social security and medicare, as they represent large proportions of the budget.
> my issue isn't especially with the funding so much as it is with ensuring the rest of the world pays what they owe. America has functioned since WWII as a large charity project for those less capable of running a great nation (namely, everyone). i am pretty sick of seeing my tax bill every year and knowing that. so too are many, many others.
Man, spoken like a true Brexit voter - absolutely sure that they're tired of how the EU is just leaching off the backs of the unappreciated UK. Placing the blame on those foreigners for all the problems at home, and cutting them off will show them how much they needed us all along.
Some storylines are just too tantalizing to looking into the details of. They must be correct because they feel correct to me.
As the UK so bluntly and drastically learned, getting suckered by those storylines sucks when reality comes calling.
thankfully, America is a much larger and more important nation so we should be able to do a better job of it.