First of all, -since some want to talk about whether living on a paved or an unpaved road is better... (I was speaking figuratively about living with a paved road vs. an unpaved road.) Personally I think most people would prefer paving at a cost through their taxes; I'm sorry if some of us prefer to drive within squalor.
But I'm not talking about that so let's take it up a notch.
More literally speaking -we are talking about federal taxes. The literal "pavement" is things that the Federal Government pays for. A great deal of our Federal tax dollars goes to social spending -it's a fact. Defense is also a significant expendature.
Without actually considering the numbers (or politics,) we can note that both these expendatures are going up. For example, the number of unemployment claims has made a significant rise since Bush came to office. One could also say the same of the defense budget.
Obviously, the wars Aghanistan and Iraq are a federal expendature. Whether they are "just" or not is the topic of another thread, but whether they could be managed better... especially
fiscally better is perfect for this one, now.
A simple fiscal fact about war is that the more parties you have on your side -the more the economic burden of war can be distributed (shared) with allies. At least in the Afghanistan war, Bush had the chance to include Allies, but snubbed them... It doesn't make sense in an economic sense.
Furthermore, if you are trying to determine the state of the economy and you really want to consider "the numbers" -rather than just plugging various numbers in (from various sources):
Why not read what the Experts have to say?
http://www.nber.org/feldstein/wj030403.html
Quote:
Originally published in The Wall Street Journal
March 4, 2003
Stimulate Now
By Martin Feldstein
Today's economic outlook is far from rosy. Consumer confidence is at a 10-year low, retail sales are declining, share prices continue to fall, and oil prices are spiking. A substantial tax cut now would reduce the risk of slow growth and possible decline in the months ahead. While such a fiscal stimulus will increase the budget deficit, there is ample time to reduce unnecessary spending and wasteful tax features to achieve budget balance in the years ahead.
The reason for a fiscal stimulus is not just the recent economic news. Consumer spending over the next few years is particularly vulnerable if households raise their saving rates to rebuild the wealth lost by stock-price declines. Weakness in Europe and Japan suppresses American exports. State governments must cut spending. Low capacity utilization will restrain business investment even after the uncertainties of the Iraq war are resolved
Monetary policy is now appropriately expansionary. The Fed's policy shows, more clearly than its words, its concern about potential economic weakness. With current economic conditions, past experience implies the federal-funds rate would be set at about 3%, well above the current 1.25% rate. Money supply is also growing much faster than nominal GDP. In other words, the Fed has gone unusually far to provide a margin of safety.
In contrast, there is virtually no additional discretionary fiscal stimulus in the pipeline for 2003 and 2004. The shift of the cyclically adjusted federal budget from a $108 billion surplus in 2001 to a $117 billion deficit in 2002 added $225 billion to aggregate demand last year, helping to achieve the 2.7% GDP growth. The Congressional Budget Office now projects that the cyclically adjusted deficit will rise by only $32 billion in 2003 -- less than 0.3% of GDP -- and that this will be reversed by a $36 billion fall in 2004.
President Bush's tax proposal would double the fiscal stimulus in 2003 and add a fiscal stimulus of about 1% of GDP in 2004 (an estimated $113 billion). The resulting increase in GDP may be more than these direct fiscal measures imply. Advancing to 2003 the tax cuts scheduled to phase in over the next five years would not only put additional cash in taxpayers' pockets but would boost household spending by removing uncertainty about whether the projected tax cuts will ever occur. Similarly, eliminating double taxation of dividends would raise share prices, an added stimulus to consumer spending and business investment. The president's tax proposal would provide a very useful stimulus as well as a substantial improvement in long-term economic incentives.
Congressional Democrats would prefer to stimulate demand by one-time aid to state and local governments and by one-time payments to low-income households. The negotiations between Congress and the administration could lead to a choice between enacting both the president's and the Democrats' plans or a stalemate in which both are rejected. To reduce the risk of a new downturn and increase the prospect for solid growth in the years ahead, it would be far better to accept some combination of both plans than to have no additional fiscal stimulus.
Critics of the proposals for fiscal stimulus have rightly questioned the impact on the fiscal deficit and the resulting increase in the national debt. The disadvantage of increasing the deficit and debt must be balanced against the desirability of both the short-term fiscal stimulus and the long-term improvements in tax rules. The president's proposal is officially estimated to reduce revenue by $665 billion from 2004 to 2013. That's less than one-half of 1% of the total GDP over those years. And even that overstates the likely revenue loss because it ignores totally the favorable effects of the tax changes on GDP and taxable income
Even if we increase the officially projected deficits to include the effects of making permanent the tax changes enacted in 2001, extending a variety of other expiring tax provisions, revising the alternative minimum tax so it does not affect most taxpayers, fighting an Iraq war, and increasing the discretionary government spending in line with rising GDP, the CBO's estimates imply that the total cumulative deficit over the next 10 years would be only 1.8% of the corresponding GDP, and the ratio of national debt to GDP at the end of the 10 years would remain at the current 35% level. The budget deficit in 2013 would be only 1.4 % of GDP and the ratio of debt to GDP would be declining. These numbers are fundamentally different from the deficits that averaged more than 4% of GDP in the mid-1980s.
The bond markets are clearly quite comfortable about the projected deficits. The 10-year Treasury interest rate is only 4%, down from 4.9% a year ago, and the corresponding real rate on inflation-protected treasuries is only 2%, also down from a year ago. The low current deficit and debt and the public's confidence in the Fed's ability to maintain low inflation imply that even an excessively strong fiscal expansion will not start a spiral of rising inflation or unstable output.
Decisions about monetary and fiscal policy require a balancing of risks. A more stimulative policy now would reduce the risk of rising unemployment and a weakening economy. Even if it turns out to have been unnecessary, the adverse effect would be small and not hard to correct. The balance of risks clearly calls for more fiscal stimulus now.
Mr. Feldstein, chairman of the Council of Economic Advisers under President Reagan, is an economics professor at Harvard and a member of the Journal's Board of Contributors.
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