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We negate
Contention 1 is industry baby
U.S. farmers are profiting post-covid. USDA ‘22 writes that
Us Department of Agriculture 2-4-2022, "USDA ERS," Farm Sector Income & Finances: Highlights from the Farm
Income Forecast
Net farm income, a broad measure of profits, is forecast to have increased by $23.9 billion (25.1 percent) in 2021 relative to 2020 and is
forecast to decrease by $5.4 billion (4.5 percent) in 2022 relative to 2021. Forecast at $113.7 billion
in 2022, net farm income
would be 15.2 percent above its 2001–20 average of $98.7 billion when prior years are adjusted for inflation. In
inflation-adjusted 2022 dollars, net farm income is forecast to decrease by $9.7 billion (7.9 percent) in 2022 from 2021. Median total
farm household income is forecast to be relatively flat in 2021 at $83,311 and increase to $88,234 in 2022. That is a
nominal increase of 4.1 percent (a 0.1 percent decline after inflation) between 2020 and 2021, and a 5.9 percent nominal increase (a
2.2 percent increase after inflation) in 2022.
Unfortunately, HSR disrupts this in two ways.
First is by Fragmenting Farmland
Because HSR must go in straight lines because of it’s high speeds, Mendiola ‘22 writes that
Mark Mendiola, Wlj Correspondent, 7-18-2022, "Ranchers and farmers resist high-speed train in California," Western Livestock
eb0a.html Accessed 7/18/22 CG
Chris Scheuring, managing counsel for the
California Farm Bureau Federation, said while the Farm Bureau has
expressed reservations, it has not taken any hard advocacy stance in opposing the high-speed rail system. However, it does have real
concerns from a number of perspectives—cost, environmental impacts, rights-of-way cutting through Central
Valley farm land, growth-inducing impact, high speed stations, etc. “It continues to be a very expensive proposition. A lot of folks
are not confident it will ever come to fruition,” Scheuring told WLJ. “Not many farmers and ranchers are going to count themselves among
the passengers. It chiefly will be urban folks going from one urban center to another. … I don’t see agriculture seeing itself as a beneficiary
the rail line could directly impact 3,000 acres, but Scheuring said
the indirect impacts could be greater. In addition to parcels being bisected by the rails, there are other concerns,
including whether pesticides could be applied on farm land near the tracks and additional
regulations would be imposed.
of high-speed rail.” It’s been estimated
Eminent Domain would hurt farmer’s income. Vartabedian ‘19 writes that
Vartabedian 2019 [Ralph, former national correspondent at the Los Angeles.He joined the
newspaper in 1981 and has covered many technical subjects, including aerospace, auto safety,
nuclear weapons and high speed rail.; “High-speed rail route took land from farmers. The money
they’re owed hasn’t arrived”; Accessed: 7/18/2022;
https://www.latimes.com/local/california/la-me-bullet-train-cash-20190610-story.html] ITL
Up and down the San Joaquin Valley, farmers have similar stories. The state can take land with a so-called order of possession by the
Superior Court while it haggles over the price. But farmers
often face out-of-pocket costs , which the state agrees to pay
before the final settlement. Those payments and even some payments
for land have stretched out to three years.
State officials have offered endless excuses for not paying, the farmers say. Eminent domain, the legal process by
which government takes private land, is complicated enough, particularly in California with a maze of agencies involved. But the rail
authority’s constantly changing plans, thin state staff and reliance on outside attorneys have made it more difficult, some say. “They are
bogged down,” said Mark Wasser, an eminent domain attorney in Sacramento who has represented more than 70 farmers and other
businesses losing land to the rail project. “I would draw an analogy to Napoleon’s invasion of Russia.” Many government highway and rail
projects end up seizing private land for the greater good, leaving owners angry about the disruption to their lives and the loss of something
they worked hard to build. In California, the slow payments are adding to the farmers’ frustration.
Splitting land up reduces incomes as Tran ‘19 writes that
Quang Tran, Tuyen and Van Vu (, Huong, 2019, (Institute of Theoretical and Applied Research
(ITAR), Duy Tan University, Hanoi)"The impact of land fragmentation on household income: Evidence
from rural Vietnam" Munich Personal RePEc Archive,
https://mpra.ub.uni-muenchen.de/98171/1/MPRA_paper_98171.pdf, accessed: 7-18-2022 //ZD
Thus, our study fills a gap in the literature on Vietnam by investigating the consequences of land fragmentation for household income. Our
study provides the first evidence that
fragmentation has a negative effect on household income, even after
controlling for other factors in the models. Notably, using the instrumental variables (IV) method, we find that the negative effect is much
greater after addressing the endogeneity of land fragmentation. IV analysis, therefore, suggests that a conventional approach which often
uses the OLS method, ignoring the endogeneity of land fragmentation, is likely to underestimate the impact of land fragmentation on rural
households. In order to answer the question as to what may be the potential causes of the negative effect of land fragmentation on
household income, we further examine the effect of fragmentation on crop income, using an IV estimator. The result confirms that higher
land fragmentation reduces
household income possibly through its negative effect on crop income. The finding thus suggests that reducing
levels of fragmentation are closely linked with lower levels of crop income, which suggests that
land fragmentation or increasing land consolidation can be expected to increase crop income, thereby improving household income in rural
Second is by disrupting water resources
Construction leads to rural water pollution
Yutong Xue, 20, Risk Assessment of High-Speed Rail Projects: A Risk Coupling Model Based on System
Dynamics, PubMed Central (PMC), 7-23-2020, accessed, 7-18-2022,
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7432577/#maincontent, //RD
During the construction of the Beijing-Shanghai HSR, the design institutes did not complete the design work in time according to the
environmental impact assessment (EIA) document, which affected the implementation of the environmental protection measures.
construction enterprises did not carry out unified treatment of waste soil according to their
contracts, instead using it to fill ponds and mountain gullies, thus causing air and water pollution,
which is harmful to the local water and soil environments. Due to a lack of public participation in the HSR planning
Additionally, the
system during the planning of the Shanghai-Wuhan-Chengdu HSR and Shanghai-Kunming HSR, members of the public spontaneously
gathered for demonstrations and caused mass incidents to express their strong appeal for the implementation of HSR transit in their areas.
Additionally, Borda-de-Agua ‘17 writes that
Luis Borda-de-Agua, 2017, “Railway Ecology”, Springer Open,
https://library.oapen.org/bitstream/handle/20.500.12657/27984/1002013.pdf?seque#page=106, 07-18-2022//AG
Infrastructures associated with railways (e.g., leakages of petroleum products from fuel storage tanks) contribute,
together with pollutants, to aquatic ecosystems (Schweinsberg et al. 1999; Vo et al. 2015). Levengood et al. (2015) documented
high concentrations of PAHs and heavy metals in waterways bisected or bordered by railways. They
showed that the PAH concentration was higher downstream than upstream of the railway (Levengood et al. 2015). They
also found that phenanthrene and dibenzo (a, h) anthracene (a PAH element) concentrations at some sites
represented a risk to aquatic life, whereas the chromium (Cr) values were still below the levels of concern for aquatic life
(Levengood et al. 2015). Herbicides and pesticides are other sources of water pollution. For herbicides, Schweinsberg et al. (1999)
discovered that in Germany before the 1990s, a much higher total amount of these compounds were applied on
railway tracks than in agriculture. Recently, Vo et al. (2015) showed that many herbicides applied during the operation of the
railway are at concentrations that are
lethal to most of the aquatic fauna, particularly fish populations; they
indicate that compounds such as Imazapyr or Diuron concentrations can take 6 and 48 months, respectively, to drop below 50% of their
original levels.
Overall, the California Senate Committee ‘11 summarizes that
California Senate Committee on Agriculture, 07-15-2011, "," Senate Publications and Flags,
Within the same period of time that it will take for the high-speed rail system to be completed, California has witnessed a complete demise
of farmland in the Valley of Heart’s Delight—now known as Silicon Valley—and in the cornucopia now occupied by greater Los Angeles. As
recently as the Kennedy administration, Los Angeles was the number one agricultural county in the nation. Today, Fresno holds that
distinction. Today, however, there are no more valleys over the hill. The San Joaquin Valley is the final frontier of California agriculture’s
ability to feed the nation and even the world. We cannot afford to waste a single acre of farmland or a drop of water. So let me elaborate
on both, some of the possible problems that high-speed rail may pose for the San Joaquin Valley and some possible solutions. While the
high-speed rail right-of-way will take about 4,000 acres of farmland out of production, it will have a greater impact on
the farming operations it crosses. It will split farms in two, make parts of fields inaccessible, require the reengineering of
irrigation systems, and interrupt the transport and 59 supplies of farm products. All of these, which will cost farmers money,
[and] profitability—this is ultimately what keeps farming in farming, farmland in farming. So it is quite possible that the loss of
farmland from these indirect effects will far exceed the direct conversion of the right-of-way
The impact is lower income and food shortages. Wang ‘15 writes that
Yuxin Wang, Wenlong Li, Jinping Xiong, Ying Li, and Huaqing Wu, 2019 Aug 15, "Effect of Land
Expropriation on Land-Lost Farmers’ Health: Empirical Evidence from Rural China," International
Journal of Environmental Research and Public Health (PMC),
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6720733 /, accessed: 7-19-2022 //ZD
The first possible explanation for this effect is that land expropriation can affect farmers’ incomes, resulting in a decline in their health
status. Self-reported health of the residents can be improved with increasing income [40,41,42]. When the Chinese government
expropriates agricultural land, the compensation policy may be unreasonable. The current land expropriation compensation policy of
“multiple output compensation” will lead to the low compensation for land compensation. The compensation is much lower than the
market price and the compensation is to be paid to the farmers in a lump sum.
This policy led to the farmers losing a
long-term source of income and income security. They cannot guarantee the basic living standard of
land-lost farmers. In addition, the employment channels of land-lost farmers have changed. The shift from agriculture-related to
non-agricultural sectors and the low education level of the land-lost farmers leave the farmers at a lower level in
regards to income and obtaining employment. The lower level of income and employment has led to the land-lost farmers
not having the necessary resources to devote resources to health-related activities, resulting in the deterioration of the
health status of land-lost farmers. Loss of land may lead to falling the farmers’ income and lack of protection for their
long-term livelihoods. Available literature was identified for this review. They found that land expropriation makes the total
income of farmers drop by 12.7% and the agricultural-related income by 36.8%; the compensation system
of land expropriation damages the basic economy of land-lost farmers rights and interests; the compensation standard is less than 10% of
the current land value-added income and the land-lost farmers are not in good condition; more than 90% of land-lost farmers are not
satisfied with the compensation standards of local governments [43,44,45,46]. The impact of land expropriation on different incomes of
the farmers was used to investigate the income effects in our study.
Lack of profitability in the field is bad as Stroop 2012 explains
Rachel Stroop, February 22, 2012, “Farm Facts: The United States Farmer”
To keep up with projected population growth, more food will have to be produced in the next 50 years as the past 10,000 years combined.
Find out more about the efforts of today’s United States farmers: Today,
the average U.S. farmer feeds 155 people. In
1960, a farmer fed just 26 people. Today’s farmer grows twice as much food as his parents did – using less land, energy, water and fewer
emissions. U.S. farmers produce about 40 percent of the world’s corn, using only 20 percent of the total area harvested in the world.
American farmers ship more than $100 billion of their crops and products to many nations. Agriculture provides more than 24 million U.S.
jobs in all kinds of industries.
Contention 2 is Uncle Sam’s honey jar
US is cutting the deficit to help ease inflation and is cutting government spending
now – Bartash 22 writes:
Jeffry Bartash, 7-13-2022, "U.S. budget deficit in June sinks 49% to $89 billion," MarketWatch,
https://www.marketwatch.com/story/u-s-budget-deficit-in-june-sinks-49-to-89-billion-11657735376, Date Accessed 7-14-2022 // NDF-JM
The numbers: The
U.S. budget deficit shrank 49% to $89 billion in June from $174 billion a year earlier,
U.S. is still on track to post the first
annual deficit below $1 trillion since the start of the pandemic two and a half years ago. Key details:
Government spending fell in June by 12% to $550 billion compared to $623 billion in the same month one year
ago. The government spent extravagantly last year on Covid-relief payments for households and businesses. The amount of taxes
reflecting the end of Covid-relief spending and an increase in tax revenue. The
collected last month rose by 3% to $461 billion from a year earlier. For the first nine months of the current fiscal year, the deficit totaled
$515 billion compared to $2.24 trillion in the same period last year. The fiscal year began last October and ends on Sept. 30. Big picture:
Less government spending and falling deficits might help ease inflation, but not by much. The economy is still
awash in money because of massive federal stimulus early in the pandemic. What’s helping to lower the deficit faster
than expected is sharp increase in tax revenue. Receipts have jumped 26% in the current fiscal year vs. an 18% drop in
spending. Higher tax receipts are the byproduct of a strong U.S. recovery from the pandemic, but high inflation spawned in part by
government stimulus has also boosted inflation to the highest rate in almost 41 years. The Federal Reserve is jacking up interest rates to try
to tame inflation, but it risks a recession if rates go to high. In such a scenario tax receipts would likely fall and government benefits could
rise, possibly reversing some of the decline in the budget deficits. The U.S. national debt recently topped $30 trillion.
Unfortunately, high-speed rail is a big ticket federal item and would necessitate
increasing deficit spending. O’Toole explains in 2021 that:
Randal O’Toole, 4-20-2021, "The High-Speed Rail Money Sink: Why the United States Should Not Spend Trillions on Obsolete
Technology," Cato Institute,
https://www.cato.org/policy-analysis/high-speed-money-sink-why-united-states-should-not-spend-trillions-obsolete, Date Accessed
6-25-2022 // NDF-JM
California has spent an average of more than $100 million per route‐​mile building 220 mph track on
flat land.17 The latest estimates project that the entire 520‐​mile route will cost $100 billion, of which $20 billion is for
120 miles of flat land and $80 billion is for 400 miles of hilly or mountainous territory.18 That works out to $200 million a mile for hilly
areas. At
these costs, Obama’s original high‐​speed rail plan would require well over $1 trillion, while
the USHSR’s plan would need well over $3 trillion. Building a system longer than China’s would cost at least $4 trillion.
High‐​speed rail proponents are likely to predict lower costs, but costs always end up being higher than originally projected. In 1999, the
520‐​mile Los Angeles–San Francisco line was projected to cost $25 billion.19 The most recent projection is $100 billion.20 Even after
adjusting for inflation, costs have nearly tripled. Cost overruns are typical in other countries as well. Britain’s 345‐​mile London–Scotland
HS2 high‐​speed rail line was originally projected to cost £32.7 billion (about $123 million per mile) and is currently expected to cost £106
billion ($400 million per mile).21 Even Japan’s original bullet train had a nearly 100 percent cost overrun.22 Once
built, high‐​speed
rail systems are expensive to maintain. Long‐​run capital renewal requirements include
replacement of rails and train sets as frequently as every 10 years. Transit agencies in the United States
currently have a $176 billion maintenance backlog, mostly for rail infrastructure.23 A country that can’t keep its urban rail systems in shape
is not likely to keep even more expensive high‐​speed rail lines running. Rail planners often ignore these capital replacement costs. The
California High‐​Speed Rail Authority is legally required to earn enough revenues to cover its operations and maintenance costs. The
agency’s business plans estimate future capital replacement costs (which it calls “lifecycle costs”), but when it projects the future
profitability of the project, it only counts operations and maintenance costs, not lifecycle costs, against the revenues.24 This means
taxpayers will be on the hook to cover those costs even in the unlikely event that the system manages to cover its operations and
maintenance costs. Passenger revenues probably won’t even cover operating costs. Amtrak claims that the Acela, its high‐​speed train
between Boston and Washington, covers its operating costs, but it doesn’t count its second‐​largest operating expense: depreciation. By
ignoring depreciation, Amtrak has managed to build up a $52 billion maintenance backlog in the corridor.25 If Amtrak’s high‐​speed rail
corridor through the most heavily and densely populated region of the country can’t pay for its operating costs, then no other corridor will
be able to do so either. Where all this money will come from is even more problematic. In 2008, California voters agreed to allow the state’s
high‐​speed rail authority to sell $9 billion worth of bonds without identifying any source of revenues to repay those bonds. The authority’s
original business plans anticipated that private investors would be willing to offset as much as $7.5 billion of the construction costs in
exchange for being able to profitably operate the line, but no investors have been willing to risk their money based on the state’s
projections that the line can operate at a profit.26 The state also hoped to sell carbon credits to help pay for the line, but revenues fell well
short of expectations.27 Beyond this, California hopes for more federal funding, all of which would come from deficit spending. Proponents
often compare their high‐​speed rail ambitions with the Interstate Highway System, yet that system cost far less to build and didn’t require
any deficit spending. The 48,500 miles of interstate highways connect every state and every major urban area in the contiguous United
States.28 Constructing the system cost about $530 billion in present‐​day dollars, making the average cost of $11 million per mile well below
that for high‐​speed rail.29 If built today, it might cost a little more but would still be less than a fifth of the cost, per mile, of high‐​speed rail
lines. Federal gas taxes and other highway user fees covered nine‐​tenths of the cost of interstate highways; state highway fees paid for the
rest. The interstate system was also built on a pay‐​as‐​you‐​go basis, with no bond sales or other debt financing.30 Since
train ticket revenues are not likely to cover operating costs, much less capital costs, all of the
construction cost would come from deficit spending. While interstates make up only 1.2 percent of highway miles in
the United States, they carry close to 20 percent of all passenger‐​miles and at least 16 percent, and probably closer to 20 percent, of freight
ton‐​miles.31 In contrast, even the most extensive high‐​speed rail networks would carry less than 2 percent of passenger‐​miles and no
freight. One projection by high‐​speed rail proponents estimated that Obama’s 8,600-mile high‐​speed rail plan would carry 25 billion
passenger‐​miles per year, which is less than 0.5 percent of all passenger travel in the country.32 Since the routes in the Obama plan were
the ones most likely to succeed, doubling or tripling high‐​speed rail miles would result in less than double or triple passenger‐​miles. Thus, it
is unlikely that high‐​speed trains would ever carry as much as 2 percent of passenger travel. Because of the lightweight equipment required
for high‐​speed trains, such trains are incompatible with heavy freight trains for safety reasons, so such routes would carry zero freight.
And historic lows in unemployment mean that projects are running 20% higher
than before, thus magnifying the amount of deficit spending required to build a
high-speed rail -- Bykowicz wrote in 2022 that:
Julie Bykowicz, 6-20-2022, "Labor Shortage Stymies Construction Work as $1 Trillion Infrastructure Spending Kicks In ," WSJ,
https://www.wsj.com/articles/labor-shortage-stymies-construction-work-as-1-trillion-infrastructure-spending-kicks-in-11655722801, Date
Accessed 6-25-2022 // NDF-JM
Construction projects across the U.S. are running short on labor just as $1 trillion in federal
infrastructure money starts to kick in, leading companies to get creative in their quest to attract and retain workers. In
Southern states, contractors advertise sunny weather and 12 months of work on help-wanted websites in the frostier Northeast and
Midwest, where highway construction goes dormant during the winter months. Project managers in remote areas are luring employees
with signing and referral bonuses and per diems for housing, knowing they won’t be able to find enough workers locally. Central Florida
Transport, one of the state’s largest aggregate haulers, created a full-time driver advocate position to help its truck drivers with tasks that
are tough to do during a busy workday, such as scheduling healthcare appointments or finding a loan broker. “We wanted to do whatever
possible to help solve their problems because we can’t afford to lose any drivers,” said Myron Bowlin, the company’s vice president.
Historically low U.S. unemployment, the economic rebound from Covid-19 and about $600 billion in
transportation-specific funding expected from the roughly $1 trillion bipartisan infrastructure law have combined to exacerbate
existing employee shortages in the construction industry. Associated General Contractors of America, which
represents more than 27,000 construction companies, said publicly funded transportation projects are routinely coming
in at least 20% higher than government officials anticipated because of added labor costs, as well
as inflationary factors such as higher prices for fuel and raw materials. “The severity of the labor
shortage means you’re paying workers more and your construction schedules are longer, both of
which are big drivers in overall cost,” said Brian Turmail, the industry group’s vice president of public affairs and strategic
initiatives. Moody’s Analytics projects that the bipartisan infrastructure law’s peak impact will be in the fourth quarter of 2025, when there
will be about 872,000 more jobs as a result of all the projects across the country. The higher
labor costs could sap some of the
value from what has been President Biden’s signature legislative achievement. Administration officials are working to address
the workforce shortages, including hosting a “talent pipeline challenge” last week to develop workforce training programs for jobs in
construction as well as broadband and electric-vehicle charging infrastructure. “A lot of my lifetime, the big constraint on infrastructure
work has been just a lack of funding and a failure to invest,” Transportation Secretary Pete Buttigieg said. “We got the funding. Now we
have got to make sure that we have the raw materials, the technical capacity and the workforce to actually get it done.” Industries from
food service to software development have been pinched for workers as the pandemic ends and the economy revives. Infrastructure,
which includes specialty trades such as welding and heavy machinery operation, has an extra set of challenges. The workforce is on average
older and retiring, while younger potential workers are reluctant to sign up for jobs they consider dirty and dangerous, which may not
always offer the same flexibility or pay to work from home or an air-conditioned office, said Joseph Kane, an infrastructure researcher at
the Brookings Institution.
Increasing deficit spending in a supply constrained economy hurts economic growth
and sustains inflation as Bivens wrote in 2020 that:
Josh Bivens, 7-16-2020, "Debt and deficits in the coronavirus recovery: Answers to frequently asked questions," Economic Policy
Institute, https://www.epi.org/publication/faqs-on-debt-and-deficit-and-coronavirus-recovery/, Date Accessed 7-14-2022 // NDF-JM
If the deficit rises when the economy is supply-constrained, then the boost to aggregate demand translates
into upward pressure on interest rates and inflation. Take a hotel, for example. If the hotel is already fully booked and then a boost to aggregate demand from an increase in the
federal budget deficit sends even more customers looking to book rooms, the hotel owner might want to expand the hotel’s capacity. Tangible business investment like this often requires borrowing, so the hotel owner will
try to borrow money in capital markets to finance this investment. In a supply-constrained economy, if the increased public spending were financed by borrowing rather than raising taxes, the hotel owner would find that
they are competing with the federal government for available savings to borrow to finance their desired new investment. This competition for savings would push up interest rates (the “price” of savings) and these higher
interest rates would “crowd out” some private-sector investment projects that might otherwise have happened. For example, maybe the hotel company decides not to build a new wing. Or other businesses likewise take a
pass on potentially productivity-enhancing investments. Remember that in a supply-constrained economy, growth can only accelerate if each worker becomes more productive—i.e., if each worker has a greater store of
rising debt in a
supply-constrained economy can hurt economic growth in the long run if it pushes interest rates
higher and this in turn reduces the pace of productivity-enhancing private-sector investment. It is important to
capital (plants, equipment, and research and development spending) to use to increase the amount of income and production generated in the average hour of work. So
note that right now, and for the foreseeable future, we are in a demand-constrained economy, not a supply-constrained economy. What this means is that for now and into the next year, there is next to no reason to think
that higher debt used to finance relief and recovery will put enough upward pressure on interest rates or overall inflation to hamper economic growth. In summary, in a demand-constrained economy like the U.S. economy
during the coronavirus pandemic, debt provides no countervailing drag on growth. Won’t debt that is taken on now constitute a burden on our children? It will not. Think of wealthy parents with lots of assets but also some
debt (say, a small mortgage remaining on a valuable home). When they die and their estate goes to their heirs, it is true that the heirs will be responsible for the debt. But the heirs also receive the assets. As long as the
assets are more valuable than the debt, the heirs are far better off. The public debt only tells us part of the bequest we’re leaving to future generations. The nation’s assets determine its ability to generate income. If we fail
to act with sufficient scale to provide relief and recovery from the coronavirus shock to the economy now, the nation’s ability to generate income will be damaged for the long run. This is not speculation—estimates of the
nation’s productive capacity collapsed after the Great Recession. By 2018, the economy’s potential output was estimated to be $1 trillion lower than predicted in 2008, in large part because of the economic stagnation
driven by our failure to solve the chronic shortfall of aggregate demand over the decade. Finally, because the debt taken on to finance relief and recovery from this shock is occurring during a time of pronounced slack in
demand, it is not pushing up interest rates or inflation and is not hence crowding out private investment. In short, there is no reason to think there are any downsides to taking on this debt. It is a slam-dunk that our
children’s living standards will be on net higher, not lower, if we take on the debt that is needed to mount a quick and full recovery from the coronavirus shock. Wasn’t debt too high and rising too fast even before the crisis?
There is scant evidence that public debt or federal budget deficits were dragging on economic growth before the coronavirus crisis hit. As noted above, deficits and debt are only harming growth if we are seeing spikes in
either interest rates or inflation. But we have not seen these “data signatures”: In the decade before the coronavirus shock, there was no durable increase in either interest rates or inflation.8 This rule—that fast-growing
debt only harms the economy when it’s accompanied by a rise in interest rates or inflation—is probably the single most important thing to remember about the economics of debt and deficits. This rule tells us that—despite
the increased deficits from the Trump tax cuts for the wealthy in 2017—there is no reason to be stingy in our coronavirus policy response. We can afford stimulus measures equal to the challenge. Why didn’t fast-growing
debt in the decades before the crisis lead to inflation or interest rate spikes? Interest rates and inflation were not spiking in the period before the coronavirus shock. Why were they so subdued, even in the face of persistent
deficits and fast-growing public debt (which were clearly exacerbated by the 2017 tax cuts)? The answer is that the economy’s growth for much of this period was held back by aggregate demand that was low relative to the
economy’s productive capacity (i.e., this growth was overwhelmingly demand-constrained9). The economy sat far below full employment from 2008 and 2016 as it endured and then slowly recovered10 from what was then
the worst crisis since the Great Depression, and it was still demand-constrained even after 2016. As noted earlier, when the economy sits far below full employment—when there isn’t enough demand for goods and services
to have all our producers working at full capacity and all willing workers employed—boosting demand by increasing federal spending and financing it with debt speeds up aggregate demand growth, which spurs hiring and
output growth. This extra production of goods and services keeps inflation and interest rates from spiking. A common colloquial explanation for inflation is “too much money chasing too few goods.” In an economy suffering
from low demand, the aggregate demand boost provided when the government runs larger deficits to increase spending leads companies to increase production, which relieves inflationary pressure. Further, the increased
output and income generated by the boost to aggregate demand leads to more savings being available economywide to finance borrowing (private or public). If interest rates are in some sense the price of available savings
to be borrowed, then an increase in the supply of these savings actually puts downward pressure on these rates. How do we know that the economy’s growth was unambiguously demand-constrained11 from 2008 to 2016
and that it continued to suffer from a demand shortfall after 2016? A key sign is the Federal Reserve’s decisions about the short-term policy interest rates that it controls. The Fed left interest rates sitting right at near-zero for
almost the entire period between 2008 and the end of 2016.12 Even after 2016, as the Fed raised rates, measures of wage and price inflation and interest rates remained quite subdued. Inflation and interest rates did not
spike even after enactment of the tax cuts of 2017 (which cost roughly $2.4 trillion over 10 years, when interest costs are factored in, and which should have provided some measure of stimulus to aggregate demand,
however inefficient13). This chronic shortfall of aggregate demand that has plagued our economy for much of the last decade or so has sometimes been labeled “secular stagnation.” Whatever you call it, this demand
shortfall is clearly the reason why deficits and growing debt since the Great Recession have done little to damage growth, and in fact kept growth from becoming even more stagnant than it would have been. I’m OK with a
bigger budget deficit during recessions, but we need to pull back and start reducing debt as soon as the economy starts growing at all, right? No—federal spending that boosts aggregate demand (i.e., expansionary fiscal
policy) should be sustained until the economy is back at full employment, and this spending should be financed with debt even if this takes years. Pivoting to rapid deficit reduction too early will severely weaken any
recovery. That is what happened in the aftermath of the Great Recession. The Great Recession officially ended in June 2009, with the unemployment rate at 9.5%. In June 2010—a year into the official recovery—the
unemployment rate sat at 9.4%. In June 2012—three full years into recovery—the unemployment rate remained over 8%: a worse rate than the highest unemployment rate reached in the recessions of the early 1990s or
early 2000s. Yet by 2012, federal, state, and local officials had begun throttling back on spending growth (i.e., imposing contractionary fiscal policy), which severely hampered recovery. Between 2010 and 2016, for example,
28 million job-years were essentially lost due to the failure to restore the unemployment rate back to its pre–Great Recession levels (where a job-year is one year of potential work not being done because the unemployment
rate was elevated). We were not in official recession during those years, but the economy’s growth was clearly demand-constrained. With more expansionary fiscal policy, we could have easily returned the economy to
pre–Great Recession levels of unemployment by 2013. Instead, the unemployment rate averaged 7.4% in 2013. As this example shows, the criterion for whether or not the economy needs policy help to boost aggregate
demand (like larger budget deficits) is not simply whether the economy is or is not in a recession: Instead, it’s whether or not growth is demand-constrained. As long as growth is demand-constrained, budget deficits should
not be rapidly wound down. Is it interest rates or inflation that rises when deficits are rising too fast? In some textbook presentations, when the federal government runs a deficit that it needs to finance with debt, the
greater competition for borrowing from private capital markets leads directly to higher interest rates. (Interest rates represent the “price” of available savings and the competition drives up the price, the textbooks claim.) In
the real world of the U.S. economy, interest rates tend not to rise on their own, spurred only by financial market forces. Instead, the Federal Reserve raises short-term rates when it fears that the boost to aggregate demand
caused by larger deficits could stoke inflationary pressures, and this tends to put upward pressure on longer-term rates as well. This fear surfaces when the Fed thinks the economy is at full employment, i.e., is
supply-constrained. As an example, imagine that the federal government sent $1,000 debit cards to all households, financed by debt and expiring in one month. If households tried to spend these debit cards when the
economy was already at full employment, there would be no workers or equipment available to produce the extra goods and services needed to satisfy the new demand. As the greater demand meets an unchanging supply,
prices would go up, leading to inflation. One of the Fed’s two institutional mandates is to keep inflation at roughly 2% annually. If deficit-induced increases in demand threatened to push inflation too far above this target, the
Fed would raise interest rates. Higher interest rates would increase the costs of goods financed with debt (think autos and houses and washing machines), thereby lowering demand for these goods. Higher rates would also
make it harder for firms to borrow money to invest in tangible assets such as plants and equipment (think of a restaurant owner deciding whether to take out a loan to replace the furniture in the dining room). Finally, higher
interest rates increase foreign demand for U.S. assets and thereby increase demand for U.S. dollars in global markets. The resulting stronger dollar makes U.S. exports expensive in global markets and foreign imports cheap
larger budget deficits run when the economy is
already at full employment can threaten to crowd out investment in tangible capital by businesses
and can lead to higher foreign ownership of U.S. assets. This, in turn, can potentially lead to slower
for U.S households, which increases the trade deficit and reduces demand for U.S.-produced output. In short,
productivity growth (as the investment slowdown deprives U.S. workers of more up-to-date equipment), and it also means that more of the income
that is generated within the U.S. is leaving the country to pay foreign owners of U.S.-based assets.
Both of these channels can make future generations poorer than they would have been absent the increase in the deficit.
Sustained inflation brings recession – Pazikey and Falath wrote in 2022 that:
Martin Pazikcy and Juraj Falath, 1-4-2022, "The big risk now for the US is not hyperinflation, but long-term elevated inflation
rates," USAPP,
https://blogs.lse.ac.uk/covid19/2022/01/04/the-big-risk-now-for-the-us-is-not-hyperinflation-but-long-term-elevated-inflation-rates/, Date
Accessed 7-14-2022 // NDF-JM
Although some price increases were expected, US inflation figures have now consistently exceeded
economists’ expectations. Seven of the last ten CPI inflation readings surprised analysts on the upside, while none of them
surprised on the downside. Risks include new, more transmissible COVID mutations, slower vaccine rollouts (causing supply bottlenecks in
emerging countries), and lower vaccine efficacy, supply chain disruptions, climate threats, and rising property and energy prices. Sustained
high inflation is mixed news for debts. A moderate amount of inflation above target could help wipe out some of the record government
debt burden and allow countries to consolidate. However, if
inflation gets out of control and central banks have to
slam on the brakes by sharply raising rates, those record debt levels will hurt much more. Furthermore,
suppressing economic activity too sharply could spur another recession.
And Bradford quantifies that:
Harry Bradford, 4-5-2013, "Three Times The Population Of The U.S. Is At Risk Of Falling Into Poverty," HuffPost,
https://www.huffpost.com/entry/global-poverty-900-million-economic-shock_n_3022420, Date Accessed 6-25-2022 // NDF-JM
Hundreds of millions of people worldwide are on the brink of poverty.
A recent study by the International Monetary
Fund warns that as many as 900 million people could fall back into poverty in the event of an
economic shock like the Great Recession. That figure is three times the size of the U.S. population. According to the World
Bank, 1.2 billion people are currently living on less than $1.25 a day. While the report acknowledges that progress
has been to made to reduce global poverty and strengthen the world economy following the financial crisis, the world is still in a vulnerable
situation. Global unemployment, for example, is the highest it’s been in two decades with 40 percent of the world’s population out of
work, according to the report. And things could get much worse in the event of a macroeconomic shock, of which the Europe and U.S. are
dangerously close. The recent bailout of Cyprus threw the eurozone into chaos, igniting fears that the situation could lead to the next
financial crisis. Here in the U.S., a series of automatic spending cuts know as the sequester could cost the economy hundreds of thousands
of jobs. The cuts have already threatened the stability of safety nets designed to aid the nation’s poorest.. The U.S. continues to fail to
sustain a robust job market, adding only 88,000 jobs in March.
federal sponsored would protect farm lands
Infrastructure bill bad for agriculture, fed gov doesn’t care