Question on article in ibd

Discussion in 'Politics' started by cartm, Aug 5, 2003.

  1. cartm


    Fri there was a editorial titled 'Econ for dummies'. The author mentions Rubinomics, what it was, and why it was wrong. Basically arguing that surpluses are bad for the private sector, and the economy. Can someone explain to me in detail why this is so, he kind of just left it hanging there at the end. As always TIA.
  2. Rubinomics refers to the idea that budget deficits cause or push up interest rates. Its a pretty good political line to deflect cries for tax cuts when governments are producing surpluses but its just not true. One would just look at Japan and see how budget deficits have been increasing yet rates are anemic. During the Clinton Administration, there is a smooth gradual decline in the budget deficit to budget surplus yet yields during that period, at least on the 10 year treasury bond, bounced around. Its hard to say Rubinomics holds.

    As for budget surpluses I'm assuming the article is relating to the accounting identity. With the U.S. being a relatively closed economy, int'l trade making up a small portion of GDP, public sector surpluses is a result of money being sucked away from the private sector and vice versa. I'll leave it at that. Hope this helps.
  3. cartm


    Thanks, yea that helps a lot, I was having trouble understanding why deficits would be good but its a little clearer now.

    Does anyone here subscribe to or eibd or .......I know the first 2 are almost 300 bucks not sure about the third, are they worth it, out of the 3 which do u prefer?......tia