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Jacob Strauss

That the US Federal Government is going to invest $550 billion on physical capital, R&D, and human capital this year initially sounds impressive, but when Barlett points out that we are still running a net deficit in maintaining our public infrastructure the reality sets in that these numbers are entirely relative. It is unfortunate that because of deficit hawks in congress that any reduction in public spending, whether it be to education or infrastructure, is seen as victory because it addresses the deficit problem in the US, even though it actually makes our country less economically competitive in the long run. Bartlett makes a good point that separating investment spending from consumer spending could solve this problem by showing that spending in the first category will produce growth and a return in the long run, which should exempt it from budget cuts. In this way, the government could then increase spending on infrastructure to lower unemployment and make the US economy more efficient without being criticized for increasing the debt.

Sarah Schaffer

Bruce Bartlett raises a valid point about the nations budgetary spending in this article discussing how savings and investments are viewed in a negative light. The federal budget, unlike household or state budgets, treats any kind of spending as consumption. Approaching the federal budget from this perspective is counterintuitive because there is a distinct difference between consumption and investment. The federal budget being cut is viewed as a beneficial change when in reality it is not necessarily beneficial to cut spending. It would be beneficial for the government to make a change in the way they view consumption, as long as this kind of capital budget was regulated.

Kasey Canon

Bruce Bartlett makes an excellent point by emphasizing the distinction between investment spending and consumer spending. As discussed in class today, investment spending can lead to high returns in the long run. Therefore, as Jacob mentions, investment spending should be exempt from budget cuts. As Bartlett suggests, the government should increase investment spending on physical capital, infrastructure, R&D, and human capital. Increased investment spending would not only lead to returns in the long run, but also decrease unemployment.

Emily Utter

Like the author of this article, I believe we need to change the way we calculate investment ventures for the federal government. People get nervous when the deficit goes up, and therefore American people just see the price tag of big investments, not the long run benefits. Therefore when investments are seen as savings, like the average American household sees them as, American people will be more enthusiastic about them. Therefore, with the American people on board, bigger projects will occur causing more jobs and income. Which will lead to a major improvement in our economy.

Lizz Platt

The authors bring up the notion that policy makers must understand the marginal propensity of citizens in order to create the best fiscal policy. However, policy makers must also examine the forms in which fiscal policy can take. Government transfers in the form of social security and Medicare have a smaller effect on the economy when compared to tax cuts. The study within the article shows that poorer households have a larger marginal propensity to consume compared to wealthier households. By cutting the taxes of poorer households, even by a small percent, allows households to have a larger disposable income. With this extra income, citizens will spend or pay off debt adding to the economy due to the multiplier effect. On the other hand, transfers have a smaller effect on the economy because citizens tend to not spend the entire transfer amount. Thus, policy makers must look at many aspects of the economy and consumers in addition to their marginal propensities.

Syed Ali

I found the author's explanation of how the federal government accounts for its spending, investments, and savings to be very interesting, particularly given its relevance to the current political climate.

The fact that investment spending today is accounted for as consumption spending, or an accounting "loss," seems to be just plain dumb - it does not anticipate the future returns on our investment, and makes it very difficult to deduce the long term costs and benefits of a course of action.

This information makes me want to reconsider much of what I've read in terms of federal programs that "run up" the deficit; how many of them actually are more financially and economically costly than beneficial, and how many are actually more beneficial than costly but simply defer the benefits until a later period?

Mitchell Brister

This article reiterates what Professor Casey has been telling us in class. It also helps clarify a point that I was struggling with. Debt isn't a good thing, but it isn't as bad as people would like to believe. This is especially true when investment spending usually contributes to the deficit because the gains to the economy haven't been recognized due to our accounting policies. Investment spending is one of the biggest keys to growing our long run aggregate spending and increasing our economy and GDP. But under current policy there are incentives for politicians to cut spending in investment. This is a huge problem for America. Much of this pressure is simply for ignorance. For the majority of America they have no idea what government spending and more specifically government investment does for GDP.

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