From Federal Budget Surplus, to Disaster, in Just Six Years
 

In <a href="http://www.tfproject.org/tfp/showpost.php?p=2134078&postcount=34">another thread</a>, UStwo posted this excerpt, this is my response:

It comes down to the fact that you want to enjoy a low tax rate, even as the deficit that is aggravated by the impact of recent tax cuts, and out of control republican spending, destroys the fiscal soundness of the US in the not too distant future. As far as a shift of government control to "the loony left", as you describe it, others reading this can mull over the fact that the treasury deficit declined every year, starting with the end of 12 years of "responsible conservative management" of the federal budget, and resumed it's trend of increasing, massively, when republicans returned to power, in 2001:
In 2004, 3 years after the 2001 tax cut trend began, SSI revenues collected were the same $151 billion as they were in 2000. Revenue from inidvidual income tax, however, was down to $1,880.3 billion, or $125 billion lower than the $2025.4 billion collected in 2000.

The actual 2006 treasury deficit, with "off-budget" appropriations for Katrina "relief" and military operations in Iraq and Afghanistan, added, will total <b>$574 billion</b>, vs. $553 billion in 2005, $496 billion in 2004, $555 billion in 2003, $421 billion in 2002, $133 billion in 2001, and just $18 billion, in 2000,
down from $347 billion when "the loony left began to manage the budget in 1993: http://www.publicdebt.treas.gov/opd/opdhisto4.htm
The economist who recently wrote this column:
also wrote this one:
Year GDP Revenue Spending Surplus/Deficit
1993 ______1,154.5 1,409.5 -300.4

2000 9,817 2,025.5 1,789.2 86.4
2001 10,128 1,991.4 1,863.2 -32.4
2002 10,470 1,853.4 2,011.2 -317.4
2003 10,971 1,782.5 2,160.1 -538.4
2004 11,734 1,880.3 2,293.0 -568.0
2005 12,487 2,153.9 2,472.2 -493.6

<b>Deficits in right column, above, do not include "off budget" appropriatins.....</b>
GDP growth 2000-2005, 27% total, 4.9%/year.
Revenue growth 2000-2005, 6.3% total, 1.2%/year.
Spending growth 2000-2005, 38% total, 6.7%/year.

So....aside from wanting to avoid increased personal income taxes, necessary if the "loony left" has any hope of coming in and cleaning up "the dog poop on the carpet", which is the mismanaged state of federal budget management and spending, today.....contrasting sharply to the state of the budget when "the loony left" handed control over to "responsible conservatives", less than six years ago.....and neccessary if you want to be responsible enough to commit to avoiding passing a bankrupt government to you own children, as your legacy, can you seperate the preceding facts, data, and descriptions, from your own political prejudices and preconceived notions.

The federal budgeting and spending of the last 25 years, provides a model that strongly suggest that the opposite of everything you've posted on the justification of your political preferences, is invalid. It is a presciption for temporarily low income taxes now, in exchange for a curency crash and a bankrupt federal treasury, before 2015.

Why would you not let the political party with the budget and spending management organization, with the strongly superior reputation and past record for success, an organization that...in just 7 years in the 90's reversed a record of deficits that had grown, on the 12 year watch of "responsible conservatives", to a level that was an even greater percentage of GDP than it is now? .....And instead......disparage the competent alternative with insults, and support a political organization that has managed us into crisis deficit levels.....not once.....but twice.

Consider where the economy will retreat to, without the artificial stimulus of <a href="http://calculatedrisk.blogspot.com/2006/09/gdp-growth-with-and-without-mortgage.html">MEW</a>.......
Consider that, in 2005, even with the stimulus to US GDP of a $553 federal deficit, and consumer withdrawal from home equity of at least $600 billion in 2005, GDP rose from $11,734 billion in 2004, to $12,487 in 2005, an increase in GDP of only $753 billion, and...even with all of that added stimulus, personal income tax revenue to the US treasury, was $2153.9 billion, only $128 billion higher than the $2025.5 billion collected in 2000, when the GDP total was $9,817 billion, or $2,670 billion less than 2005 GDP. GDP had increased 27 percent in 5 years, and income tax revenue rose just $128 billion in the same period....or just 6.3 percent.
So, combined MEW and deficit stimulus to the economy of $1,153 billion, only increased GDP by $753 billion in 2005. Receding housing prices will result in huge decreases in economic stimulus from MEW, as "cashout" refinancing disappears, and with a deficit forecast to decline, what will be left to "prop up "GDP? IMO, it won't be possible to raise tax rates without further strain on a GDP that needed an $1,153 billion input in 2005, to effect a $753 billion, 2005 GDP increase. There are no solutions, and IMO, no hope. The "responsible conservatives" have destroyed the stable federal budget of 2001, in just 5 years..........

<b>Can anybody justify labelling the political party that reversed the 1992 deficit, and ended it by 2000, only to witness it's rise to even higher levels, after they lost control of the federal government, "The Loony Left"?</b>
Can anyone post reasons to continue to vote for the current party, given this history of budget mismanagement?

Yes host republicans have been bad boys spending, something Clinton couldn't do since he lost the house. I've posted this before. This is why they should lose the house, and why many republicans are upset.

It was also projected surplus, and we had that little recession, we all knew it was comming yet somehow was such a shock to people after 2000.

Edit:As a side note I'd love for ratbastid to be correct on this one, I'd like it to be a grand plan instead of porkbarrel :)

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"Bad" might be putting it lightly.
Interesting. I'd say the spending going on in this administration is anything but conservative.

Bush has gone overboard with spending, and his fellow Republicans have not restrained him.

However, ignoring a recession (which was coming before Bush was elected)... and the high cost of fighting the war on terror is intentionally putting blinders on reality. We have gone vastly into debt after EVERY war, it'll happen.

Hey, your boys have said as much.

I've posted these links before, so I'm not going to quote them here, just give the URLs again.

The financial mismanagement of our nation isn't at all accidental or the result of incompetence. It's a deliberate scheme to bankrupt the nation and force smaller government.

http://www.pkarchive.org/economy/TaxCutCon.html This is long, the relevant stuff starts about 1/3 of the way down the page. The tone of this is pretty partisan, but it makes a pretty compelling case nonetheless.

http://en.wikipedia.org/wiki/Starve-the-beast Wikipedia article, very thorough and factual.

This isn't a conspiracy theory. This was the stated financial policy of the Regan administration. "Supply-Side Economics" is the pretty face of it. There are many other articles there, ripe for the googling.

ratbastid, the data....the math.... confirm that <b>"a deliberate scheme to bankrupt the nation and force smaller government"</b>, is a fait accompli.

Two remarkable results, that the reversal of the downward trend in ederal borrowing and deficit spending was accomplished in such a short time, and that folks will continue to support this financial coup, with their rhetoric and at the ballot box, until the ballot is pried from their "cold dead hand".

The excuses for "why it happened", and the rationale to vote for "more of it", seem to be stunning denials of the intent of those who did it, and of the damage that it caused/is causing.

Dispute of the data and the math in the OP is not included in the posts that attempt to justify this treason against the treasury and the currency. This "tax cut" and massive borrowing and spending scheme required, in 2005, $1.15 in deficit "inputs" and MEW from home refinancing, for every 75 cents increment of GDP increase. The MEW source has dried up.

Let us see what happens to the economy, and the direction of the deficit, next:
There is now a second "force" working to destroy US financial prospects. It is the result of "low doc", "no doc" loans to unqualified mortgage applicants, interest rates driven down by Fed rate cuts, and then increased by Fed rate increaeses, 103 percent mortgage loans, initial zero interest rates on adjustable rate ARMS (mortgage applicants were approved only on the basis of their ability to make payments on the temporarily low, initial payment schedules on their loans...) and by the repackaging of multiple mortgage loans into "groups" that were sold by Wall Street to investors, as MBS's (Mortgage Backed Securities) that disguised the actual quality of the individual loans; the actual ability of each individual borrower to reliably make the monthly mortgage payments.

Appraisers co-operated by providing residential realty appraisals on the "high side", aided by "flippers" who invaded the market and pushed realty prices ever higher. Builders built for a rate of demand growth artificially stimulated by the flippers and second home buyers influenced by a "can't lose" mentality..."if we don't use the second home enough or if it turns out to be too expensive to own, we can always sell it....whenever we want to....for much more than we are paying now..."

The question now is....sell to whom? The folks who extracted money from their rapidly rising home values, and the builders who stimulated the GDP growth by seemingly building as many new housing units as possible, as quickly as possible, drove increases in GDP that actually validated the bullshit mantra that "tax cuts" create more federal revenues, not less....

If this was true, why did the party in power, stop at such comparatively modest levels of tax reduction? The truth is, that GDP and revenue collected from individual income taxes, did not rise because of tax cuts, at all. Now the "process" that "goosed" the GDP is in the infancy of a long period of unwinding, and this is a glimpse of what it will look like:

http://globaleconomicanalysis.blogsp...s_archive.html

Will there be any homebuilders, subcontractors, realtors, or banks still in business, who are now overexposed to this ridiculous speculative bubble after the scenario reported at the link above plays out, over and over....in every local market in the US?

Will any political party be able to lower the rate of increase of the treasury deficit, or increase taxes, without further extracting stimulus for GDP growth?

I don't see how....

Sometimes, some people just have to learn the hard way.

Let them reap what they sow and refuse to listen to them cry later.

Then be quite liberal with the "I told you so" :)

Except in this case we're all reaping what they have sown. And our children and grandchildren will be crying later.

Yes, when the baby boomers are told there are no funds in the SS "Trust Fund" to pay them back.

We generally....already know the reality

such is life

Question:

Can it be wise for a government to spend more than it collects ?

Answer:

Yes, when the return on the money spent is greater than the cost of borrowing.

Ok...and?

What does this have to do with the conversation at hand? Are you implying there is a "return" coming that covers all of this?

Example:

There was deficit spending during WWII. Most agree the return on the money spent was well worth it.

Assumption:

The conversation at hand gave the impression that government deficit spending is bad regardless of the circumstance. This is a false assumption.

From where do you derive that assumption? The same mythical place from which people support the current spending? Just because you justify a "War on Terror" as the intellectual benefit of financial idiocy doesn't mean everyone does.

I'm not trying to attack you, but the difference in budgetary balance between Clinton and Bush makes me irate when I consider how much of my money was wasted.

Even if I operated under the assumption that everyone supported our financial waste in Iraq and Afgahnistan, that wouldn't in any way defeat the argument that there are more cost-effective ways to destroy countries and take their oil.

I don't want to get into a discussion about the Iraq war or the war on terror. I can not add anything new to that topic.

I thinke there is a big difference between government deficit spending and wasteful government spending. I do not think wasteful spending is new - and that it did not occur during the Clinton years. Given the size of our economy and our normal economic cycles, I am not sure an annual measurment of the effeciency of government spending in terms of deficits is reasonable. I would perfer 5 or 10 year measuring periods. Given that - I don't think most Presidents will see the impact of their policies until their terms in office are over.

I do not give Clinton full credit for the economic boom during the 90's, nor should Bush get the blame for the economic slow down during his first term in office. I believe we will see budget surpluses again, and then after that we will see deficits again.

I do agree our federal government wastes a heck of a lot of money.

We don't take oil nor destroy countries. I don't understand this point.

I believe that both major parties are responsible for over taxing and over spending and it will make little difference as long as we keep on electing them.

I wonder if it is even possible to get elected without funding voter's pet projects and campaign contributor's pet causes. You probably can't get elected by telling people that you will have to raise their taxes and/or that they will have to cut back.

The big issue is people refuse to cut the stupid pet projects because it looks bad no matter how craptastic the program is.

So we keep the same entitlement programs and then add new pet ones.

We don't need to raise taxes, we don't need to cut back our own budgets, we need to spend less as a government. We need to quit buying votes with other peoples money, we need to state that the government is not a nanny state and if you don't work, plan, and save you are going to starve or hope for private charity.

The republicans were put in place in 1994 to start doing that, and they blew it. Now there really isn't a choice beyond whos new pet projects you like the best.

<b>The deficit accumulated over 212 years, increased by 50 percent in just the last five fiscal years! This came after a period of reducing it from $347 billion to $18 billion, in just 7 years.....with no negative impact on GDP growth......</b>

Your "belief" either has to be suspended, or you have to ignore "the math" in my OP, to sustain your belief.

!993 to 2001....annual treasury deficit reduced from $347 billion <a href="http://www.publicdebt.treas.gov/opd/opdhisto4.htm">Historical Debt Outstanding - Annual</a>
09/30/1993 $4,411,488,883,139.38
09/30/1992 $4,064,620,655,521.66

.....to $18 billion....

09/30/2000 $5,674,178,209,886.86
09/30/1999 $5,656,270,901,615.43

The reduction was accomplished by reducing the size of government. A measure of that, is the fact that is that there were a smaller number of federal employees, in addition to the 284,000, mostly civilian DOD jobs that were eliminated, by the end of Clinton's 8 years, in office, than at the beginning.

1993 progressive tax increases that were designed to avoid additional taxes on those most likely to spend all of their income, due to the smaller size of that income, vs. the economic circumstances of the wealthiest taxpayers,
also contributed to elimination of the deficit.

Here is what happened after the 2001 inauguration:
(From my OP):
The annual deficit exploded from just $18 billion in 2000, to $421 billion in 2002. If "recession" is the excuse for this, and the "GWOT", consider
tha the 2002 $421 billion deficit was accrued between 10/01/2001, and 9/30/2002.

The "recession" never even amounted to an impact of negative GDP growth:
There was a small impact on the increased deficit, by 9/30/2002, because of the commencement of GWOT spending, and a much bigger impact, because of
tax cuts that even included the mailing of rebate checks to most taxpayers.

The facts demonstrate a massive overreaction to the "recession", further justifying tax cuts that were promised by Bush during the 2000 presidential campaign.

We have enough information now to conclude that the current administration is incapable of sound fiscal management. The "other party" achieved "cred" in this area, massively so....when compared to the deficits that occured before their 1993 to 2001 administration, and more dramatically, after it.

flstf, for the life of me....I see nothing besides ideology to validate your belief, and I see nothing besides ideology that would prevent concerned voters from voting for representatives of the "other party".

The point of this thread is to compare the fiscal management track records of both parties. The accomplishments in that area, of the "other party", in just 8 years, compared to the record of nearly 18 years of the "responsible conservatives", makes the painting the "other party" with the label, "loony left", a ridiculous mistake. Voting for more of this "responsible conservative" total control of the federal government, simply because you don't want to pay higher taxes, or because the "better represent your values", while they bond your children's future to horrific deficit obligations and backbreaking interest payments that further increase that deficit, is mindnumbing to observe.

What entitlements are people willing to give up, what are you willing to give up?

I think the tax deduction for mortgage interest is unfair to those who rent or those unable to itemize. I personally benefit from the deduction but I would give it up.

Congress controls spending and your charge against the administration is unfair in my opinion. Social Security, a problem not even included in the numbers you cite, is a much bigger problem. Bush wanted reform, congress did not.

Perhaps a comparison of discretionary spending would better support your point. When budget items are mandated by law today that impacts budgets ten years from now who gets the credit, who gets the blame?

The "math" in my posts here, totally counter the points in your post. IMO, they are nothing but a variation of Reagan's divisive, misleading, "welfare queen", propaganda.

The government that you accuse of "coddling" the poor, the lazy....is actually spending, without accounting for it as part of the deficits, more than $150 billion per year in surplus SSI payments that are supposed to go into the SSI trust fund.

By far, the largest measure of wasted spending goes to farm subsidies to agribusiness, and to the defense industry, as a direct result of the "one party" "K Street" lobbying conglomerate. That is what has changed, in addition to the budget busting tax cuts passed into law since 2001.

Your predictable tactic of "demonizing" the "poor and the lazy", is an attempt to divert attention from what we know....from your own fellow "conservatives":
<center><img src="http://www.heritage.org/Research/Budget/images/11362187.gif"></center>
It is a fact that Tom Delay cut off access to lobbying firms that employed democrats as lobbyists. Partisans who make reliable points to support their arguments are...partisan. Partisans who post propaganda are propagandists.

For the sake of clarity please give a few examples of Republican programs you would cut. I think you wrote that you would cut farm subsidies and defense(I am not sure those are "Republican programs", but I won't argue that point). Would those cuts be enough to generate surpluses? If not what else would you cut?

I, for one, would pretty much cut the whole war on terror. Or shrink it to something affordable that might actually work.

I know, I know, I'm handing the terrorist the keys to the kingdom. Whatever. There'd be about 1/10th the number of terrorists in the world right now if we hadn't declared war on them.

psssssst, rat. they declared war on us first ;)

ace, the following partially addresses your earlier statement that Bush, "wanted to reform Social Security", and congress did not." It should be framed in a more accurate context, and it is, below. It also partially addresses your questions, above. You offer no support for your "reform of SS" comment. I don't have to pick individual programs. I've provided enough support for the idea that voting for more of these folks' "control", is indefensible....

by the way....the author is a journalist on the subject of economics, not an economist, as I earlier described him:
If you think that the author is partisan, google his name with Kerry....

On the issue of support - Here is a link to Bush's plan:
http://www.whitehouse.gov/infocus/social-security/

I am not aware of any action on the part of congress to fix Social Security.

Also a general note - Quoting the opinions of journalists means nothing to me. I am a numbers guy, and a big picture guy. Numbers can move my opinion. The logic in an argument can move my opinion. The author of the source you cite presents his opinion with nothing to support it, so why not give your opinion rather than his, I would find that more interesting. I generally disagree with his assumptions, but that is not the point of this thread.

Well, okay, and they spent a few thousand dollars to do it, and there were fewer of us when they were done. How come we're not so efficient?

By the way, it's a good thing this thread is about economics, because it saves me having to post a five paragraph diatribe on this mythical notion called "them".

Since this is a thread related to partisanship - I love the irony in the Democratic response to this issue. A) When asked about specifics - you get a response like the one above. B) The pretense that a Democrat Party controlled congress would actually cut spending. You have to agree the best they would do is raise taxes and hope for the best.

yeah. I think we've done that enough.

The issue is not the annual budget deficit. The far more serious issue that has long-term fiscal impact is the total accumulated national debt.

Reagan and the Bushs have increased the national debt at a far greater rate then recent Democrat presidents. You can blame Democratic-controlled Congress at the time, but the fact is the President submits the annual federal budget; Congress acts on it and often adds spending to benefit their districts or pet interest group, but the President has the final say and can veto any budget bill. (sorry about the size of the chart)

http://www.cedarcomm.com/~stevelm1/u...s/image002.gif

The current total national debt is over $8.5 TRILLION and growing exponentially if the full BUsh tax cuts are made permanent.

Currently, the interest alone is over $400 BILLION/year...the third largest expenditure in the federal budget and not a very good return on the money,particularly since over 20% of our national debt is owned by foreign governments and banks, with Japan, China, UK and OPEC leading the way.

http://www.optimist123.com/photos/un...chartmar06.gif

Clinton and the Repub Congress demonstrated how you can have a responsible fiscal policy by drawing down the national debt with sensible and disciplined spending and without tax increases

I'll save my comments re: Bush's so-called Social Security reform for another time

This graph paints a different picture. I agree spending is out of control in Washington, but it is not going to lead to disaster. We survived WWII, we will get through this war too.

http://zfacts.com/metaPage/lib/National-Debt-GDP.gifhttp://zfacts.com/metaPage/lib/National-Debt-GDP.gif

http://www.marktaw.com/culture_and_m...ptsOutlays.gif

Here is another graph I found. Also paints a different picture than yours. I guess the main point is that no administration has controlled spending

That first chart certainly makes you wonder why we let the Republicans portray themselves as the party of small government and controlled spending.

Ace...I fail to see how your charts paint a different picture than mine.

Your first one shows how the national debt as percent of GDP went down during all Dem presidents and up during Reagan/Bush I and Bush II

Your second shows how receipts exceeded outlays for the first time in a long time under Clinton(i.e. surplus) and how outlays are exceeding receipts under Bush. And, the annual budget deficit has been worse in each of the last 5 years than anytime since WWII.

Maybe you can explain your interpretation a little better.

I dont think it will lead to a disaster, but simply that the fiscal policy of the last 5 years has taken us in the wrong direction.

The fact that the interest on the national debt is the third larget expenditure in the budget does not promote a productive economy and the fact that a growing percent of our debt is owned by foreign governments and banks, particularly when its China and OPEC, is not in our financial or security interests.

A) That's not specific enough for you?

B) I don't have to agree any such thing, nor does anyone who actually looks at the records of our last five administrations.

It shows an upward trend during Clinton's first few years in office, then a decline. When Bush II comes into office the down trend reverses but stays in the same range as it was when Clinton was in office. Like I posted earlier, I think you don't see the impact of a new administration immediately. I think the downward trend started during Clinton's term was in part a result of the previous administration. I also give Clinton some responsibility for the reversal during Bush II's term. I think today we are getting some announcements on deficit reductions due to the Bush tax cuts.

True. I also see an overall upward trend in outlays. An argument could be made that the dot com bubble burst had an impact on tax collection at the start of Bush's term. The increase in deficit spending was a result of a sudden drop in tax collections. This drop seems to have occured before the Bush tax cuts would have had an impact.

Looking at the deficit in absolute dollars is misleading. If your income is $100,000 and you have $50,000 in debt, that's a 50% ratio. If you income is $1,000,000 and the debt is $250,000, that's a 25% ratio. I would not compare the $50,000 to the $250,000, I would compare the percentages. equally important, at least to me, is measuring the deficit in consistant dollars, or making adjustments for inflation.

An important question is what was the cause. I don't think the cause was a policy issue or the tax cuts. The overall trend shows no spending discipline in Washington - democrat or republican

One more observation. If you look at my second graph, and the look at the receipts line - if you draw a straight line from 1996 to 2006 connecting those two points. What you see is an anomoly - a 'N' pattern. This tells me there was a spike in reciepts and then a sudden drop. This had nothing to do with spending, but had a big impact on the deficit both positive and then negative. If you see it and agree, then we need to discuss the cause of that pattern to arrive at our answer.

ace....the portion of your statement that I highlighted in bold, above is bullshit.
This was the second quotebox in the OP:
The deficit trend was headed up under Bush I, and there is absolutely no case to be made that supports your attempt.....to move from the extreme numbers of Reagan & Bush I, reversed and actually ended under Clinton's watch, and then renewed and launched to extreme new highs, in just two years, under Bush II, that does not demonstrate fiscal mismanagement in all but the Clinton period of budget oversight... This is reinforced by the fact that total federal employment under Clinton declined vs. Bush I, and accelerated under Bush II....

I thought you posted that you are persuaded by "numbers". This example convinces me that nothing sways you. You've spun this badly, ace...

Perhaps my eyes decieve me. But I am looking at the graph. I did not spin. All I did was show two different kinds of graphs compared to earlier graphs presented. I also explained why I don't give as much weight to absolute dollars as comparared to the ratios or percentages. I understand folks not agreeing with my approach, but my approach is not spin.

If I am the "village idiot" for saying the world is round, when everyone else says it flat - I proudly accept the label.
If you see no substance in what I presented - that's cool with me. However, I do accept the substance in the OP, I just disagree with the conclusions drawn from the data.

So you credit, in part, the downward trend during CLinton's term to Bush I and you blame, in part, the upward trend in Bush II. to Clinton.....and you don't spin?

The Center on Buget Policy Priorties did an analysis last year of a CBO report on the causes of the deficit.

The new Congressional Budget Office budget projections released today show that the nation faces a fourth consecutive year of substantial budget deficits. Some seek to portray “runaway domestic spending” or growth in the costs of entitlement programs as the primary cause of the shift in recent years from sizeable surpluses to large deficits. Such a characterization is incorrect. In 2005, the cost of tax cuts enacted over the past four years will be over three times the cost of all domestic program increases enacted over this period.

The new CBO data show that changes in law enacted since January 2001 increased the deficit by $539 billion in 2005. In the absence of such legislation, the nation would have a surplus this year. Tax cuts account for nearly half — 48 percent — of this $539 billion in increased

The Administration has repeatedly defended its tax cuts as a needed stimulus during the recent economic downturn. But the downturn is behind us, and the cost of the tax cuts is scheduled to increase in the years ahead. Indeed, some of the tax cuts enacted in 2001 that benefit only high-income households have not even started to take effect yet. The repeal of the “personal exemption phase-out” for high-income taxpayers, as well as repeal of the limitation on itemized deductions for high-income taxpayers, do not start to phase in until 2006 and do not take full effect until 2010. Estate tax repeal also does not take effect until 2010.

A growing number of studies from highly respected institutions and economists have concluded that the negative effect on long-term growth of the increased deficits that the tax cuts are generating is likely to cancel out — and quite possibly to outweigh — any positive effects on long-term growth from reductions in marginal tax rates and other tax incentives in the 2001 and 2003 tax-cut packages. Stated simply, the tax cuts are more likely to reduce long-term growth than to increase it.

http://www.cbpp.org/1-25-05bud.htm

http://www.cbpp.org/1-25-05bud-f1.jpg

Of course, you can question the credibility of the CBPP analysis.

.....................

Let's be clear. I spin stuff regularlly, but I did not spin the graphs. The graphs speak for themselves.

I need to understand who I am dealing with on this issue. I think there is latency in federal tax and spending policy. Do you agree or not - and why?

P.S. - I am betting $100 to your favorite charity that you avoid a direct answer to the question. If by chance you do answer the question, one way or the other - I think it can lead to a more productive exchange.

In todays news.

http://www.marketwatch.com/News/Stor...2FA5987D2C3%7D

The OP noted when the deficit started to drop and gave credit to Clinton. Now we have a peak in '04, a drop in '05 and another drop in '06. Who gets the credit for that?

There are both immediate and long term impacts of tax and spending policies.

But.....

Much of Bush I's budget deficit and contribution to the national debt was the result of excessive spending....the primary reason why Perot ran in 1992. The downward trend in deficits/gdp under Clinton came four years into his term and as a result of spending limits that he and the Repub Congress agreed to. Show me any data that suggests it was in any way the impact of Bush I tax/spending policies.

Under Clinton, tax revenues were the hightest in US history and spending was frozen for many domestic programs. The Bush II contribution to the debt is coming more in his second term (and beyond) than the first. Again, show me how the disciplined tax and spending policies of the late 90s is contributing to the exponential growth in the national debt.

The biggest reason for the "low" deficit number is that borrowing from the Social Security trust fund is "off-budget". All reason Presidents have used the SS trust fund to pay for current programs and put an IOU in the trust fund.

But no recent president has raided the SS trust fund anywhere near the level that Bush has.

I will say what I said previously....the annual deficit is not the real issue....it is the accumulated national debt that is the concern of most economists and fiscal analysts. And no president has added to the national debt as much as Bush, with no indicators of any draw down on the debt in the foreseeable future.

I don't know if I should take that to mean yes you agree or no you don't agree. I won't make an assumption or read into what you wrote.

Spending increased during Clinton's term, I am not aware of any administration that had spending reductions.

In '92 revenues increased 3.4%
In '93 +5.7%
In '94 +9% and stayed above 7% and peaked at 10% in 2000. In 2001 there was a 1.6% decline in revenues.

Who gets the credit or blame for the decline?
Who gets credit or blame for the above norm growth in revenue during the mid and late '90's?

The reasons deficit spending is important is that it lays the foundation for discussion on the debt in my view. Shouldn't finish one topic before starting another? And the OP was about the deficit.

As I said, I agree that tax and spending policies have both a short term and long term effect.

And as I also said, looking at the numbers and trends, I dont give Bush I policies much credit for the decrease in the annual deficit EVERY YEAR during the Clinton adminstration. It was primarily due to controlled spending (about 4%/year as opposed to 7%/year for Bush II) by Clinton and a policy that spending increases had to be matched by revenue increases ("pay as you go")

I also agree revenues fell in 2001 as a result of the mild recession and that is something Bush II inherited. But revenues continued to drop for the next 3 years, and I attribute that more to the 2001 tax cut and the 7%/year increase in spending by Bush , much as I attribute the rise in the annual deficit by Bush for four years.

You can see the numbers for revenues, outlays and debt for the years covered (see table 459)

http://www.census.gov/compendia/stat...ent/fedgov.pdf

I agreed that spending is out of control.

In regard to Bush's tax cuts -

In '04 revenues increased 5.4%
In '05 revenues increased 14.5%
In '06 revenues increased 11.8%

I am sure the '06 numbers are still subject to revision. As I look at the numbers I can not conclude that the tax cuts have been the cause of the deficits during Bush's term. However, I can support orther causes: 1) Recession 2) War on terror (including homeland security issues) 3) Spending

ace, your post #39 on this thread....a PR piece from the white house that falsely touts spending cloaked in "off-budget" machinations as "deficit reduction", was thoroughly debunked in my post #31, on your thread:
http://www.tfproject.org/tfp/showthread.php?t=105663

.....4 months ago, when you tried to "offer it" here, the last time.

These points in the OP, IMO, put the points in your last post, in proper context:
ace, anybody....even incompetent management.....can "increase" GDP (or....revenue) by 75 cents for every 1.15 dollars of combined "true" deficit spending and Mortgage Equity Extraction, added to the economy annually....

ace, this will probably be my last post related to our discussion here....the message that you telegraph to me in post #39 is a repeat of this, on the last post on your thread of four months ago:
http://www.tfproject.org/tfp/showthread.php?t=105663
......ace, when the Bush administration came into office, it brought an agenda that included two major "to do" items: ....removing Saddam from power in Iraq, and reversing the tax burden of it's wealthy patrons.

We see the results....dual fiascos... in Iraq, and in federal spending. Just as the stable and cost effective system of containing Saddam with a "no fly zone" and sanctions strategy had cost no downed aircraft in 12 years of allies "no fly zone" enforcement, and by Wolfowitz's estimate to congress in early 2003, about $30 billion.

The following table must be posted again, because it contains the federal treasury annual debt total....(that is why I call it "total") actually accrued.
The marketwatch PR piece that you posted in #39 here, continues part of the debt and some excuses. The following uses the same criteria for the last four presidents...."total debt".

It displays a parallel to what happened since 2001 in Iraq. A budget and taxation regimen that had produced a downward trend in deficits, from 1993 to 2000.... ($360 billion annual deficit, down to $18 billion, annually), and still afforded satisfactory GDP growth, was "revised" by the incoming Bush administration, and the results are similar to the "results" in Iraq:
IMO, ace, the Bush II era tax cuts have been a fiscal disaster, much like the decision to discontinue the "no fly zone" and sanctions to keep Saddam in what Cheney described in 2001, as "a box", and replace that policy with invasion and occupation.

MEW and a smaller deficit would, without budget busting tax cuts, have supported GDP growth. Temporary and more progressively designed tax cuts, (as in the 1993 tax cut compromise between Clinton and republicans in congress) in response to severe recession....which, thanks to the ramping of the housing bubble, never happened, should have been saved, along with large federal deficit spending, until an actual GDP decline, emergency.

What recession fighting "weapons" are left for the next presidential administration, ace? The one that took office in january 2001, had three key options available.... the option to lower interest rates, easy because there was no predicament of huge federal borrowing needs that forced higher interest rates to attract potential foreign treasury bond purchasers....

...the option to increase deficit spending for it's stimulative effect on GDP growth, either by temporarily cutting taxes, or investment in capital projects as the Japanese officials have done since 1990....or....when oil prices starting rising...by funding R&D and tax incentives for alternative energy investment, as Carter had done in the late 1970's.....

ace, you get the idea, I'm sure. The next administration has only one option,
lowering interest rates. Cutting taxes and increasing deficit spending are harder to do now than in 2001....before five years of vigorous tax cutting and when the deficit was no higher than $32 billion annually..........

It they try to lower interest rates, they run into the problem of how to attract buyers of $500 billion in annual treasury bill issuance, vs. just $32 billion in 2001. They also have the gnawing, deficit aggravating problem of servicing the interest on existing debt of $8500 billion, compared to only $5674 billion on Sept. 30, 2001.

They've fucked this up so badly, ace...compared to the tools and options that they inherited, just 5 years and 9 months ago, that it is amazing that the opposition party would even been willing to attempt to reverse this disaster, or that anyone would seriously try to mount an obfuscatory argument in defense of what they've "accomplished", in less than 6 years...

...it also reminds me of this:
....and this, today:
ace, <b>You're defending a system of "one party rule" that does only two things well.....destroy critics by hounding them.....ala Ken Starr in his 6 year, $71 million "witch hunt", and now....in this attack of the already confessed and cleared, Sandy Berger....a recently vocal critic of the Bush admin., in defense of Clinton's policies and actions....the other "thing", ace....is a penchant for doing the opposite of whatever Clinton did....and we're now reaping the expense and the security impact of this "anti Clinton" agenda, as governing policy......</b>
[/quote]

I don't like "off budget" items, never have, never will. Has the CBO changed the way the do accounting for "off budget" items? The data in OP did not adjust for "off budget". Now it is the basis for you to stop the discussion?

We continually get new data. Tax revenues are at the highest point in history - inspite of the Bush tax cuts. The economy is strong, inflation and unemployment low and the economy is creating new jobs. There are some problem areas. The economy has never been perfect.

Please explain. I agree the overall 5 year numbers are poor, however the more recent numbers are good - showing a positive direction. I don't see the conflict, nor do I understand "proper context"



I don't know where to start with this one. I will simply say that - perhaps the same applied to Clinton and the dot com boom.

I understand. Somtimes it is easier to run, than to defend a position.
What about his oil buddies?
What about his buddies in the defense industry?
What about his religious right wing buddies?

I thought his agenda included those folks too.

[/QUOTE]

I only do this as an occasional diversion. It is better to hit me with bite size points - one at a time - if you want to keep my interest.

See you in about 3 or 4 months when the topic comes up again - with new and improved results further going counter to your premise. One thing we know is that time will prove who has been right and who has been wrong

Well. . I'll tell ya where I'm confused. I'm really confused based on present and past statements of Republican "economists."

See, back when Reagan got elected he started this "cut taxes and increase spending and we'll all get rich" idea. It's a concept, by the way, that his vice president called "voodoo economics" until he was picked as Reagan's running mate, at which point suddenly Bush the Elder was rabidly behind it.

So anyway, 8 years of Reagan and 4 more years of Bush 1 to try out voodoo economics and the voodoo just wasn't doin' it. We were mired in a recession, which has a lot to do with why Bill Clinton got elected.

In 8 years Clinton seemed to have turned it around. We were on track to paying off the debt, people were prosperous, and everything seemed to be working well.

Here's where it gets entertaining. The Republicans came out and said "Hold on wait a minute, that's not Clinton! It takes 8 to 12 years for a president's economic policies to have an effect! It was Reagan all along that's why everyone's doing so well!"

The logic already began to break down, btw, because by that logic we shouldn't have been in a recession at all in 1992 after 12 years of Voodoo. And yet, strangely enough, we were!

But it gets better! Bush 2 got elected and promptly set out to undo all the damage Clinton had supposedly done to the economy. Within a few months, we're back in the ol' recession again, and that was all Clinton's fault.

Now, by the logic of the Republicans' earlier statements, we should continue to stay in financial difficulties for at least another 2 years - possibly 6, in order to fill out the "8 to 12 year" deadline for a president's economic policies to have an effect.

And yet miraculously enough after only 6 short years, Bush 2 and his cronies are taking credit for the supposed good news that this year's deficit is lower than last year's (frankly I don't think spending $248 billion more than you earned is good news, especially when you calculate that by subtracting $300 billion coming in from social security which we're not supposed to count as a liquid asset).

How can this be? Can Bush possibly have done what his fellow Republicans declared impossible? The man's either a certified genius (and one minute of any one of his speeches will tell you that ain't it) or a letterman in the varsity bullshit league.

Aceventura3 says the current numbers are good because they (on paper, after financial trickery) look better than last year's. I'd say the comparison would be akin to saying "well last year my 3 year old was eaten by a crocodile. This year it only chewed off my leg."

Pretending that running a 1/4 TRILLION dollar deficit in a single year is "positive" is absurd to the point of laughability.

Currently if we wanted to pay off the national debt we'd have to invest between $25,000 and $30,000 PER PERSON, including children. That's bad enough but when you add a million dollars to that number every 45 seconds, that's just plain irresponsible.

Yes, well, since when have facts ever been important to politicians?

Bush I was correct based on what you stated above. The original premise of Supply Side Economics was to cut excessive tax rates and reduce spending. Reagan cut excessive tax rates and increased spending. I think this had something to do with the cold war.

Bush I did not stay the course. He raised taxes. I did not vote for him. As I recall Clinton's economic policies were middle of the road, with a hostile republican congress. This combination worked, I don't and have never disputed that.

Everything worked well until people invested in technology lost 80 to 90% of their portfolio.

Here we go again. Example: Clinton signed welfare reform legislation. What was the impact of that legislation the year it was signed, the year after, 5 years after, on the federal budget?

Example: Reagan reduced long-term capital gains rates - what was the impact of that in year 1, year 5, year 10?

Example: bush II Perscription Drug Plan for seniors? I am scared to think about the long-term costs. But when the costs peak - Bush will be a distant memory. I pity the President 15 years from now.

Business cycles are greater than the President in the fact that noone has ever figured out how to prevent economic slow downs after periods of above normal growth.

Not all Clinton, but not all Bush either.

Begining to loose me here.


I just pointed to the trend. The trend is your friend. When the trend is up - join the fun. When the trend is down - get out while you can.

If Bush's policies where harmful why would the trend reverse on his watch?

Bush cut excessive tax rates and increased domestic spending (an average of 7%/yr for discretionary non-defense, non-homeland security)

Why do you think this voodoo economics is any more successful than it was under Reagan?

Bush is reversing the trend? The national debt is increasing faster than any time in history, and the worst of the Bush tax cut impacts havent kicked in yet. Bush will likely need to raise the debt ceiling again in '07, the 4th time in six years.

The bulk of the cost of the Iraq war has been off-budget since its inception because as Rumsfeld said in March '03:

"It makes no sense to try" to come up with cost estimates for a war in Iraq because the variables "create a range that simply isn't useful."

"We have no idea how long the war will last. We don't know to what extent there may or may not be weapons of mass destruction used," Rumsfeld said at a Pentagon news conference. "We don't have any idea whether or not there would be ethnic strife. We don't know exactly how long it would take to find weapons of mass destruction and destroy them."

"Until someone decides that there has to be a conflict and that the conflict's over, you're not going to know the answer,"

The cost of the war has been met, for the most part, with "emergency" supplemental appropriations, rather than direct budget allocations in each of the last four budget cycles, primarily by pillaging the SS trust fund in each year, like no president before him.

* FY2003 Supplemental: Operation Iraqi Freedom), made in March 2003, was for $74.8 billion. Passed within a month of the request, the final allocation amounted to $78.5 billion, at least $54.4 billion of which was for the war in Iraq.
* FY2004 Supplemental: Iraq and Afghanistan Ongoing Operations/Reconstruction, for $87 billion, was submitted in September 2003 and passed Congress in November 2003. The final allocation amounted to $87.5 billion, of which $70.6 billion was for Iraq.
* Budget Amendment: $25 Emergency Reserve Fund (Department of Defense - Iraq Freedom Fund) was made in May 2004 and was passed by Congress as part of the Department of Defense appropriations bill in July 2004. Based on Iraq War spending, of the $25 billion appropriated, about $21.5 billion was for the war in Iraq.
* Estimate #1 - Emergency Supplemental (various agencies): Ongoing Military Operations in the War on Terror; Reconstruction Activities in Afghanistan; Tsunami Relief and Reconstruction; and Other Purposes - 2/14/05 was made in February 2005 and passed by Congress in April 2005. The final allocation amounted to $82 billion, of which about $58 billion was for the Iraq War.
* Department of Defense appropriations for fiscal year 2006 (i.e. war funding not initiated by a supplemental request) included $50 billion in a 'bridge fund' for war funding. Based on past Iraq War spending, approximately $40 billion of that can be counted for the Iraq War.
* Estimate #3—FY 2006 Emergency Supplemental (various agencies): Ongoing Military, Diplomatic, and Intelligence Operations in the Global War on Terror; Stabilization and Counter-Insurgency Activities in Iraq and Afghanistan; and Other Humanitarian Assistance—2/16/06 was for $72.4 billion, of which about $60 billion war for the Iraq War.
* Department of Defense appropriations for fiscal year 2007: War funding was initiated by a "placeholder" of $50 billion in the administration's budget released in February. Congress passed $70 billion in a 'bridge fund' for both Afghanistan and Iraq.

WIth two exceptions which were included in the Defense Dept. apppropriation bills, more than $250 billion (and counting) is "off budget"

How many times do I need to state that I think spending is out of control.

If you re-read what I have been writing I think you will find my position reasonable. I have been calling it like I see it. I just don't buy in to the Bush bashing, I like the tax cuts, I think the economy is strong and getting stronger and I think Presidents get too much credit and too much blame for things outside of their control when it comes to the economy.

I can see how any defense of Bush makes me a Kool-aid drinker in the eyes of many - but I think objective thinkers can see the points.

Somtimes we are talking about the deficit and sometimes the debt. In this thread I have been trying to focus on the deficit. Perhaps a new thread on the debt is in order, but I am not going to start it - I am a simpleton or whatever.:suave:

When you posted the chart in #30, which projects a steady increase in the national debt through 2010, according to Bush's OMB I thought it was relevant to the discussion. :)

I wouldnt characterize critcism of a president's policies as "bashing", particularly when you have the same criticisms: you think "spending is out of control" and you "don't like off budget items, never have, never will."

The only difference between your position on these issues and many other people here is that I (and they) attribute them to Bush directly while you seem to prefer to couch your objections in general policy terms.

Yes, I can see why some might describe your position as being "a Kool-aid drinker" for Bush.