election 2012

[russianspy1234]

That assumes GDP must stay constant. Why must it?

As I wrote in my post, the accounting identity describes one point in time. Other things can happen over time. But what I described is simple accounting. When a check is deposited (or more commonly these days, an electronic transaction occurs), there is a transfer from one account to another. When a government agency spends, its bank account is marked down and a private sector account is marked up. When a person or company pays taxes, that private sector account is marked down and the government account marked up. If the transactions do not balance, there is either a banking error or a theft.

Or a decrease in GDP. What happens when the government lowers spending but does not lower taxation? Since taxation was not lowered, no additional wealth is in the private sector [no increase in C or I]. Spending was lowered [G]. Exports were unaffected. GDP decreases?

Yes, you're right. It's a point I have made myself at other times.

Uhh so OldTrees basically said the same thing I did, and you agreed with him...

[Belthus]

Uhh so OldTrees basically said the same thing I did, and you agreed with him...

Well, he was more explicit. If you meant the same thing, then I agree with you too.

[russianspy1234]

Uhh so OldTrees basically said the same thing I did, and you agreed with him...

Well, he was more explicit. If you meant the same thing, then I agree with you too.

So then you retract your statement that " changes in G must be offset by an opposite change in C+I." ?

[Belthus]

Uhh so OldTrees basically said the same thing I did, and you agreed with him...

Well, he was more explicit. If you meant the same thing, then I agree with you too.

So then you retract your statement that " changes in G must be offset by an opposite change in C+I." ?

Let me think this through. In a transaction, when government spends, the government bank account is marked down and the recipient's (i.e, private) bank account is marked up by exactly the same amount. When the government taxes, the payer's (private) bank account is marked down, and the government's bank account is marked up by exactly the same amount. So I guess what you and OldTrees said exists as a possible effect over time (i.e., a stimulus), not an instant case of account bookkeeping.

The government does have the power to mark up its bank account without collecting taxes (or selling bonds). That's often called "printing money," even though most money these days takes the form of electronic records. However, US law, and more importantly its political environment, makes this difficult to do.

[OldTrees]

Uhh so OldTrees basically said the same thing I did, and you agreed with him...

Well, he was more explicit. If you meant the same thing, then I agree with you too.

So then you retract your statement that " changes in G must be offset by an opposite change in C+I." ?

Let me think this through. In a transaction, when government spends, the government bank account is marked down and the recipient's (i.e, private) bank account is marked up by exactly the same amount. When the government taxes, the payer's (private) bank account is marked down, and the government's bank account is marked up by exactly the same amount. So I guess what you and OldTrees said exists as a possible effect over time (i.e., a stimulus), not an instant case of account bookkeeping.

If the US ___ is over budget then spending has increased without taxation increasing. This is higher G and higher GDP.
If the US ___ is under budget then spending has decreased without taxation decreasing. This is lower G and lower GDP.
If the US congress changes the budget for the US ___ without changing taxes then spending changes without taxation changing. This is G and GDP changing.

Don't these count as instant?

[Belthus]

So then you retract your statement that " changes in G must be offset by an opposite change in C+I." ?

Let me think this through. In a transaction, when government spends, the government bank account is marked down and the recipient's (i.e, private) bank account is marked up by exactly the same amount. When the government taxes, the payer's (private) bank account is marked down, and the government's bank account is marked up by exactly the same amount. So I guess what you and OldTrees said exists as a possible effect over time (i.e., a stimulus), not an instant case of account bookkeeping.

If the US ___ is over budget then spending has increased without taxation increasing. This is higher G and higher GDP.
If the US ___ is under budget then spending has decreased without taxation decreasing. This is lower G and lower GDP.
If the US congress changes the budget for the US ___ without changing taxes then spending changes without taxation changing. This is G and GDP changing.

Don't these count as instant?

The higher government spending is offset by the private sector buying government bonds instead of private consumption (C) or private investment (I). So the higher G is offset by lower C+I. (The bond buyer's account is marked down exactly as much as the government's account is marked up.) However, if the government didn't use bonds but instead created new money, then GDP could be higher instantly.