White House Says it Expects at Least 3 Years of Deficits
Meanwhile, the Bush tax cut is the elephant in the room that the administration can’t seem to see.
Yeah, that’ll help :rolleyes:
I can’t see any way that the public isn’t going to blame him for deficit spending and run him out of office. This sounds like an admission that he’s only gonna get 1 term just like 'da.
I don’t seem to see it, either.
Tax cuts have an odd way of increasing government revenue, insofaras they stimulate the economy. The chain of logic being:
The question is, of course, whether the new-income revenue increases outweigh the decreases of the tax cut in terms of collection. Whether that will be the case with this tax cut, in particular, remains to be seen.
But to call the tax cut the elephant is, well, a bit silly. 
A receding economy can do nothing but create government revenue shortages.
Deficit spending hurts him how, exactly? If the economy vastly improves, for whatever reason, count on his reelection.
And just ask our friend John Maynard Keynes what deficit spending does to the economy in the short term.
Cutting taxes and increasing government spending are well accepted strategies for fighting recession. The real trick (both politically and economically) is getting the most bang for your buck by ensuring that the tax cuts go to the right people and that the government spending provides a good return on the investment.
If you’d like to learn more about modern economic management check into your local bookstore and find a good macro-economics text.
So, what’s to debate?
Posteth by Tejota:
Seems like someone’s agenda is showing. :rolleyes:
I wasn’t aware this was a proven proposition. Tax rates during the 90s didn’t seem to slow economic growth, it is debatable that lower rates will make a difference.
This is particularly the case when the country has a glut of production assets. It isn’t the supply side that needs stimulation right now, it is the demand side. Deficit spending provides far more demand side stimulation and can leave improvements in infrastructure tht provide long term benefit to the economy.
Giving a bunch of companies huge tax rebates when they plan no increased investment isn’t going to do much to boost the economy.
Man, how quickly the worm turns - after 30 years of deficits, we get a mere 4 years of surpluses, and now the D word is anathema. Why weren’t all these people bitching in the 70s and 80s?
Anyhow, there is nothing wrong with deficit spending during a recession - indeed, it is probably the correct course of action. Further, there is nothing wrong with deficit spending during wartime - again, it is probably the correct course of action. Put the two together, and the fact that we are going to be in deficit the next few years isn’t at all surprising.
Bush’s tax cut should be criticized, but not necessarily because it is leading to deficits. Instead, the criticism should be about the structure of the tax cut, particularly the smoke-and-mirrors accounting tricks in it. My favorite is the staged abolition then reintroduction of the estate tax. Me, I’m looking to off my parents in 2009 - the only year the estate tax will be completely abolished.
Sua
My problem, Sua, is that at some point deficit spending might not work anymore, because you’re directing so much of your revenue to pay off the debt you’ve already accrued that you are forced to run a deficit at all times. We seem to be on the verge of this already.
Estimates vary, but somewhere around 15% of all tax revenue collected goes to simply paying the interest on the national debt. And we can expect that percentage to steadily rise.
I have another problem about exactly whom those interest payments go to, but that’s another matter entirely.
I’ve been tempted to say in the past, “You like tax cuts? How would you like a 15% tax cut? It’s easy. First, get five trillion dollars…” Unfortunately, that’s not an honest way to make the argument.
As a percentage of GDP, the U.S. current debt is very low.
And I find it really hard to blame Bush for these deficits, because the Sept. 11 attacks were essentially a random act that changed everything. Now the recession is deeper than it would have been, and the government has to spend hundreds of billions of dollars it otherwise wouldn’t have.
The Bush tax cut was probably an even better idea in hindsight, because the economy needs all the help it can get.
But hey, who can begrudge a hardcore partisan any opportunity to take a swipe at Preident Bush? Have fun, Tejota.
And your point is…?
The flip side of that is that our budget is also, by international standards, a pretty low percentage of GDP. Taken side by side, you get back to the point that Sofa King has already made: the debt is too big relative to the size of the Federal budget - and as a result, 15% of your tax dollars do absolutely no good right now, because they’re paying the interest on that debt.
Paying the debt down made sense all along, so that in the future, less tax dollars would go to pay for interest on old debts. Then we could argue honestly over whether the money freed up should go for tax cuts or programs. Instead, we cut taxes (and principally for those that were already rolling in the dough) before we cut down the debt.
This was imprudent last spring, and events have reinforced that. In spades, doubled and redoubled.
We’ve been in a recession since March, they’re telling us now. Yes, 9/11 accelerated and deepened the downturn - but you can never know the future, which is why a prudent man plans for the worst case.
Not only did the Bush Administration fail to do this, it had to get creative with its numbers to justify the tax cuts even under the rosiest of scenarios.
I’ve already dealt elsewhere with the reasons why tax cuts won’t help get us out of the recession, but spending will.
Not to mention we’ve got the example of history. The rate structure in place prior to Bush’s cuts was instituted by Clinton’s '93 tax hike on the rich. The nation’s then-nascent economic recovery was apparently unaffected by that hike. So there’s no reason to expect that the economy will be greatly affected by the reversal of that hike.
Government spending will not get us out of recession. Consumer spending will. Also, we’ve been in a recession since March, a mere 40 days after Bush took office. Hell, Bush had’nt even signed a single bill into law at that point. The Fed. Gov was still operating under Boy Clintons Fy 2001 budget.
As far as tax cuts, its better that the money be in the hands of consumers than in the hands of Congress.
Hmm. I thought that when people elect a democrat they are gonna tax and spend on social programs and when they get a republican deficit spending on “Emergencies” is the rule(SDI,“Drug War”, “Terrorist War”, some sorta “war”).
At this time…America was ready for deficit spending and wars. No biggie.
I agree with you spider, but don’t believe for a minute that this is what Bush wants to do. See the scam for what it is. The Republicans want to make the rich richer during a time of war!
Democrats may be tax and spend, but the Republicans are more like go into debt and spend–which is worse?
Not that I could do any better, but do you have a cite from a more unbiased source?
*Originally posted by Smoker4 *
Perpetual Motion Machine®?
It would be even sillier to call it the donkey, now wouldn’t it?
Ahunter3
The better analogy to the perpetual motion machine is:
-Government takes money out of economy
-Government uses some of the money for non-productive purposes
-Government spends the rest thereby stimulating economy
But whoever robs Peter to pay Paul can always count on Paul’s vote.
Oh absolutely, Sofa. Perennial deficits is a horrible way to run a railroad, and will cause huge problems. My point is that, IMO, what a nation should aim for is a balanced budget over the course of the business cycle. When the economy is booming, run surpluses, for two reasons: (i) to save for the rainy day, and (ii) act as a moderate brake on the economy to help keep inflation in check. When the economy is faltering, go to deficit spending to cover increased welfare, etc. benefits, and to help jump start the economy.
BTW, I would disagree that we are close to the point of permanent deficits. Our national debt was higher both in absolute terms and as a percentage of GDP in the early '90s, and we managed to have four years of surpluses.
Trying to balance the budget in a recession is a BAD IDEA. The Great Depression was elongated because twice (once under Hoover in the early 30s and under FDR in 1937) the feds decided to aim for a balanced budget rather than deficit spending.
Quite frankly, Bush got lucky with the tax cut. Had the economy kept booming, his tax cut would only have served to push up inflation and set us up for a bigger crash. As it is, the tax cut is internally heavily flawed, but the idea of a tax cut at the start of a recession is defensible.
Sua
Ned wrote:
Since when were tax cuts universally based in the supply-side?
I recieved a $300 rebate cheque, and yet I don’t think I qualify as the “supply side.”
(nor do the “rich,” for that matter)
I wasn’t aware that this was a proven proposition.
By “improvements in infrastructure,” I assume you mean wasteful government bureaucracy that passes for infrastructure.
The assumption here seems to be that creating infrastructure (and therefore jobs) promotes growth, but lost in this reasoning somewhere is the fact that jobs and production are just a means to an end on the larger economic scale–that end is profit, and therefore, economic growth.
Money can only ripple throughout the economy if it serves the ends of profit, not government–because when government invests, it generally recieves no return on its investments except what it recieves in taxes–which are themselves just the fruits of private economic gain, ultimately.
I think deficit spending can help certain sectors of the economy, but that it is a tool for general economic improvement is, well, crazy–the underlying proposition is that we can win the economic “game” without trying to score any goals.
I tend to agree that we should attack the problem of sagging demand where it exists, not just anywhere. Definitely, in our current economy, demand is sagging on the consumer front (hence, a glut of production assets).
I’m not actually a trickle-down stalwart; I think that trickle-up–namely, tax rebates to the appropriate demand-side parties–is most prudent.
Small nit to pick here. That money doesn’t simply evaporate; it goes somewhere. Like back to the lenders where is is made available to other borrowers. Who then spend it in the private sector in the acquistion of goods and services, thus providing jobs. It’s not quite true to say it does no good.
I think you have a really narrow view of “infrastructure.” I present to you a simple example of how infrastructure improvements benefit the overall economy, not simply as a jobs program:
The increase in border security after 9/11 has resulted in increased checks on trucks and the like entering the US from Canada, and, therefore, massive delays at border crossings. This is having significant negative effects on the American (and Canadian) economies, given how integrated the two are and how dependent factories on each side of the border are on parts manufactured on the other side of the border. To simplify, the two choices we have to solve this problem and eliminate this drag on the economy is to either cut back on border security, or create more infrastructure - in this case, more cross-border bridges and crossings, allowing more trucks to come across the border and be checked at the same time. Building new crossing points will have the added bonus of creating many temporary construction jobs right in the middle of a recession.
If infrastructure spending is done correctly, it will be a multiplier - not only will it reduce unemployment by creating jobs, but, most especially in transport infrastructure, it will eliminate bottlenecks in commerce.
Sua
SuaSponte:
Your example is limited in its illustration of your point. If the long-term gains in transportation efficiency combined with the short-term economic stimuli do not outweigh the overall tax revenue costs of building and maintaining the new infrastructure, then there is no net gain.
And what is net gain, in lay terms? Profit. Precisely what the government does not seek, inherently. Especially in this case, where the profit is for the economy as a whole and not the government’s coffers.
Furthermore, you assert that:
“If infrastructure spending is done correctly, it will be a multiplier”
That’s a pretty big if–considering that the inherent failure of government to spend “correctly” (efficiently, really) is a primary economic fault of government bureaucracy.
If we could count on politicians and agencies to be virtuous spendthrifts with an eye towards the public good, we wouldn’t need an economy at all (or elections, for that matter).
The Invisible Hand, not wishful thinking, makes for correct spending and economic gain.