I’m curious what dopers make of this Dana Milbank column in the Washington Post. (You may need to register).
The gist of it was that we are running pretty severe deficits and that our soaring debt will lead us into the same problem Argentina had recently.
So what do you think? 2040 might be far away, but neither party seems likely to raise taxes and cut spending. It’s trite to say Republicans won’t raise taxes and Democrats won’t cut spending since neither party wants to do either.
Can anyone debunk this or are things as bad as the column says? After all Brookings and Heritage rarely agree on anything. If they’re both worried, I’m worried.
Seriously, part of the question is how much is a prediction of 2040 going to do for deciding policy today? Will it be viewed as accurate and if it is, is it enough for current politicians to be politically expedient about?
Heh. I used to be against this, because I figured it was just a ruse for Republicans to slash spending for things they didn’t like, such as the arts, food stamps, etc., after they cut taxes and forced the issue. And I still think I was right.
However, I think there’s a real need for it now. Neither of the parties can be trusted to not do moronic things like increase spending after decreasing taxes. I think the rules of what gets cut simply needs to be incorporated. For instance, the amendment might read that you’re not allowed to cut taxes without first cutting spending or that taxes automatically increase to cover the deficit.
I think it would be fun watching the Congress critters scramble to figure out a way to get their pet projects funded without triggering the automatic tax increases. Good times.
Neurotik:Neither of the parties can be trusted to not do moronic things like increase spending after decreasing taxes.
I agree in general, but I think it’s only fair to point out that we did have some balanced budgets, and even budget surpluses, under the most recent Democratic administration. The level of fiscal irresponsibility being shown by the current administration is kind of in a class by itself, IMHO.
However, that says nothing about the comparative fiscal trustworthiness of the two parties in general. Merely that the individual Chief Execs involved were, respectively, a fiscal moderate with some common sense and a run of good economic luck, and a tax-cut fanatic who is either outright loony or depending on the Second Coming of Christ, and/or a subsequent administration, to nullify some of his borrow-and-spend extremism.
(Note: I am not actually as much of a Bush-basher as that last sentence sounds; I oppose most of his policies but can find a few good things to say about a number of his positions. However, in the fiscal-responsibility area he strikes me as just totally batshit. I don’t necessarily buy the alarmist claims that the US economy is in for a sudden meltdown in the near future, but it seems blatantly obvious to me that whatever benefits we’re getting out of this “ever more debt, ever more tax cuts” approach are just not worth the costs of running ourselves so far into the red.)
Maybe, but it was also a time when the Republicans were still concerned with budget deficits and fiscal responsibility. So you had both sides working together towards a common goal. Now neither side is working together towards it.
Neurotik: *Maybe, but it was also a time when the Republicans were still concerned with budget deficits and fiscal responsibility. *
True. How the hell did the Republicans ever come to this pass where their leaders can get away with any amount of budgetary mayhem as long as it reduces tax levels?
Republicans seem to only be worried about deficits and spending when it’s Democrats doing the spending. Republicans, when they are in power, spend like crazy. I suspect the small-government rhetoric we get from Republicans is just a way to stop Democratic spending plans from going through. As long as the money is being spent on Republican pet projects, belly up to the trough, piggies!
This is Bush’s biggest failing - he turned out to be the biggest spender since LBJ. I actually think the tax cuts were a good idea, because I think the fear of huge deficits is the ONLY thing that keeps spending in check. If taxes are raised and the budget balanced in a new high-tax regime, then eventually spending will increase until deficits become the limiting factor again. Except this time spending will be even higher and taxes higher will little room to go up without hurting the economy.
The real answer is not tax increases, but spending cuts. And neither party wants to do that.
Well, if we experience something like a tech boom we could grow out of it. I reckon neither thinktank’s analysis figures on that. When the Reagan/Bush deficit was big in the 80s/90s, similar predictions were made. However, the deficit now is pretty bad, and I do believe we’re getting closer to the edge. Conditions for the US to have a boom in anything are not good right now.
I don’t think that’s so much part of the question as it is the root of the problem. I think what the speakers were getting at was that their models show that if nothing is done their models show the deficit growing until 2040, when the economy “blows up.” Presumably if we took painful but livable steps now, the problem could be averted. These steps would involve both tax increases and spending cuts. People from both think tanks seemed to agree that both steps were neccessary, though the Heritage people felt that the emphasis should be on spending cuts, and the Brookings people thought it should be on tax increases.
I think it’s a given that politicians aren’t going to do anything unpopular to avert a potential disaster in 2040. Milbank reports that the reaction of the handful of senate staffers who actually sat in on the discussion was to reflexively blame the other party. The story itself was buried in the Post. My question is, are the think tankers right? My knowledge of economics is pretty dismal (heh) so I’m hoping I can get some insight from more economically gifted dopers.
Yeah, like Neurotik, I’m starting to think this might not be such a bad idea. But some deficit spending should be allowed in times of national crisis. The problem is that we now seem to have a steadily ballooning deficit. If an amendment, backed up by real, unpopular action can cure this, it may be the way to go. I like Neurotik’s idea that taxes automatically rise to cover the deficit. That should cure pork, if nothing else does.
Also, I’d like it if the thread please did not turn into reflexive Bush-bashing–or Bush-praising for that matter. While I agree with Kimtsu regarding Bush’s fiscal irresposibility (especially when compared to, of all people, Bill Clinton), what I’m really hoping to get at is if the problem really is as bad as the think-tankers say. If it is what should a president–any president and the congress and the people too-do about it?
Because they got caught between a rock and a hard place. They can’t slash programs with the country so closely divided, since they’ll risk losing support. Where are the spending cuts going to come from? Ag subsidies? They’ll make token gestures, but there’s no way they can make the major cuts needed due to their need for rural support. Defense? Well, since defense is a key Republican issue, they can’t do that. Transportation? Watch people scream when the highways go down the tubes, so that’s out. Etc., etc.
On the other hand, cutting taxes is key to their “conservative image” so they have to do that. It’s popular with most everybody, especially their wealthy campaign funders.
Basically, they have to play to their conservative core by cutting taxes in order to maintain their credibility with the right, but they also can’t cut spending without losing support in other places. So they’ve basically decided that short term popularity is more important so they have their cake and eat it, too. Plus, they can always get their spin machine to place the blame for the deficits on “tax and spend” liberals when the piper comes calling.
You are assuming that, entirely irrespective of deficit spending, the lower government spending is proportional to GDP, the better off the national economy is. Do you have any cite for that, as a general rule of economics?
Seems to me most European nations have healthier and more sustainable economies than we’ve got now – that’s the impression I got from The United States of Europe by T.R. Reid (http://www.amazon.com/exec/obidos/tg/detail/-/1594200335/qid=1116513503/sr=8-1/ref=pd_csp_1/102-8052781-0422517?v=glance&s=books&n=507846) – and they all have welfare states that would be unthinkable here. Whether their public budgets proportional to GDP are larger than ours is another question, and I have no cites handy. The European nations have huge welfare states but negligible defense budgets, compared to the U.S. OTOH, they have less of a deficit-spending problem – no country is allowed to join in the euro unless its budget deficit is less than 3% of GDP.
Because they discovered that cutting taxes and increasing spending wins elections.
The budget will be balanced when the people demand it. As long as people are more concerned that their state or district gets its share of pork, and as long as voters will elect anyone that pledges to lower taxes no matter what the impact, the situation is not going to change. We cannot expect politicians to lower the deficit as long as we continue to reward them for increasing it.
Yeah, and if wishes were horses we’d all be eating steak.
Which is why neither thinktank, which do tend to shill for their sponsors’ philosophies, can’t get it up to be optimistic. When those two groups agree that something is bad I get scared.
I don’t mean to start any big sidetracking partisan debate, honestly, since I think that this is an important topic that we have to address (are we headed into the crapper and how do we best change that). However, I do think it is important to check this idea that Democrats are fiscally irresponsible and are the party of spending, or that Republicans have jettisoned a previous interest in fiscal responsibility.
First of all, as it turns out, the economy does better, in terms of nearly any measure that we can think of, under Democratic administrations. So, one question in terms of this debate is, even if it were true that Democrats were inherently big spenders, is big spending inherently bad? It seems to me that spending should be judged by its outcome, not by a flat moral determination that spending is bad.
However, the assumption that Democrats (in contrast to Republicans) isn’t accurate either. Not just in terms of the current administration, but going back over 40 years before them. The website eRiposte.com has summarized analyses produced by a number of sources, including data related to spending. Between 1962 and 2001, the percentage growth in total federal spending by Democrats was 6.96%, and by Republicans was 7.57%. During the same time, the percentage growth in non-defense spending specifically was, for Democrats: 8.34% and for Republicans: 10.08%. The yearly budget deficit was $36 billion for Democrats and $190 billion for Republicans. The increase in the national debt under Democrats was $0.72 trillion, and under Republicans was $3.8 trillion. If we included Bush’s data, I can only assume the contrast would be that much more stark.
The label of Democratic big spenders and Republican fiscal responsibility was, in my opinion, merely a successful, yet false, marketing strategy by the Republicans, who like spending just fine, as long as it is on the wealthy (another set of data is out there to prove this, but that remains for another debate).
Sam Stone:If taxes are raised and the budget balanced in a new high-tax regime, then eventually spending will increase until deficits become the limiting factor again. Except this time spending will be even higher and taxes higher will little room to go up without hurting the economy.
It would take some awfully steep increases to put us where taxes have “little room to go up”, though. For example:
Corporate income taxes as a percentage of GDP are currently lower than they’ve been since the 1930’s. Although the official corporate tax rate is 35%, given the plethora of tax breaks and tax-code loopholes for corporations, the majority of the Fortune 500 corporations are now actually paying less than 20% in taxes.
Federal income taxes have been drastically cut from the levels of a few decades ago: from a top marginal rate of 70% pre-Reagan to 50% and then 28% under Reagan, rising again under Bush I and Clinton to 39.6% and cut back by Bush II to 35% (while the bottom rate was cut from 15% to 10%).
Reductions in other taxes (e.g., the estate tax, dividend and investment income tax) and increases in tax credits further reduce the overall federal tax burden.
Payroll taxes have risen steeply, and state and local taxes have ratcheted up to offset the costs of federal service cuts and tax sharing. But other than that, we aren’t getting anywhere close to being overtaxed.
Especially not the wealthy. After-tax income levels for high-income taxpayers have been growing rapidly and dramatically over the past several years. These people could easily afford to pay somewhat higher taxes.
Warnings about tax increases “hurting the economy” have to take into account the economic damage done by high deficits and/or inadequate services. The conservative anti-tax faction has gotten away with too much simplistic rhetoric suggesting that higher taxes always = bad, lower taxes always = good.
Paradoxically, the anti-tax/anti-government passion for cutting taxes and spending may end up producing more spending commitments than a more moderate approach would have done. For example, I would bet that current cuts to Medicaid funding, if states end up drastically cutting or even eliminating Medicaid programs, will bring about a nationalized health-care system at least five to ten years earlier than it would otherwise have taken. When services are reduced to the extent that people get genuinely desperate, it tends to overcome their repugnance to raising taxes and makes them more willing to contemplate large-scale governmental solutions. Witness the Depression and the New Deal.
Which is why, IMO, genuine conservatives ought to be hollering louder than anyone right now for moderate tax increases and moderate spending cuts in the near future, and repudiating the current Administration’s budget policies. If we keep all the current tax cuts and slash domestic expenditures to match them, it may look like the libertarian New Dawn of minimal government for a little while, but the widespread outrage and desperation of the struggling non-wealthy will soon pull the pendulum back in the other direction.
There’s no way in hell our political system (including BOTH major parties) are going to tackle an issue that won’t impact us for 35 years. I seem to recall Tocqueville saying that our system isn’t very good at handling long-term issues, and I think that’s true today. 35 years may as well be a millenium.
On the other hand, I bet $5 (not adjusted for inflation) that there’ll be at least 5 BBQ Pit threads on the subject in 2041.