No – all he is assuming is that at some point, increasing the size of government relative to GDP starts to hurt the economy. I think “total communism doesn’t work” can be stipulated as a point of common knowledge.
I would dearly love to see some people I know get hold of the massive federal budget and whittle it down to size. It would take some people who are used to adding water to empty shampoo bottles and washing and reusing coffee filters.
Let the Pentagon plead its budget woes before teachers. Some of the Greatest Generation could still take pleasure in cutting the pork from a lot of programs.
Just this weeks I heard on one news program that millions and millions of dollars have gone to South Florida for repairs to homes damaged by the hurricanes last year. The problem is that the homes and businesses that received the money were not damaged. Many people in central Florida are still waiting for the federal funds that have not come.
Meanwhile, if the cops have to handcuff a five year old, it’s in the headlines for days.
There are some really strange priorities to news stories these days. The WH has made several efforts to actually control the news. More and more I rely on British news sources.
If this seems like a hijack, I apologize, but I truly don’t think that it is. I think all of it has to do with corporate greed and power.
You also have to note, though, is that government revenue is at its lowest point as a percentage of GDP since 1968. In other words, the country has been generating more revenue—i.e., getting wealthier—and thus the government has been getting wealthier too in absolute terms. But its wealth relative to total GDP has actually shrunk.
Spending is definitely out of control at the moment (though I think the severe revenue cuts are a problem too.) I don’t see this as an inevitable, systematic problem in governance, though. Again, look at the previous administration: they eliminated budget deficits, reduced federal spending as a percentage of GDP to its lowest point in several decades, and sharply cut the federal workforce. (They certainly didn’t “shrink government” to the point that some of their supporters claimed, but they did significantly rein in* spending in some respects.) The current crop of loonies have been reversing all those trends.
This is not by any means a guaranteed feature of Democratic administrations as opposed to Republican ones: as I said before, all it means is that the previous Chief Exec, as an individual, was a fairly sensible fiscal moderate while the present one is a fiscal imbecile.
But at least it tells us that we can be more critical and observant in applying this traditional conservative Chicken-Little-sky-is-falling-spending-is-out-of-control rhetoric. It doesn’t have to be this way, and we don’t necessarily have to keep slashing taxes in a desperate effort to halt a permanent uncontrollable spending profligacy. All we need is another Administration, Republican or Democratic, with half an ass about basic fiscal common sense.
*Crazy Peeve Hijack: Hey everybody, notice how the phrase “rein in” is spelled? That’s right, no “g”! It means you’re restraining spending by keeping it on a tight rein like a restive horse, reining in its exuberance. When you write “reign in”, though, you are saying exactly the opposite of what you mean, because “reign” means “rule, dominate”! Yes indeed, Bush “reigns in” spending—he rules in spending, he’s the spending king! But for the love of Og, don’t spell it that way if you actually mean that somebody is restraining spending! Thank you!!! (whew, I feel better now.)
I for one am simply glad to find something that breaks through your highly annoying preternatural politeness and civility.
Heh-heh, you evidently haven’t read some of my exchanges with my best frenemy Liberal…
All these responses and no one has debunked the original premise. I guess it’s valid then. Crap.
Sam Stone brings up the problem that increased revenue has not led to long term deficit reduction. The problem, it seems to me, is that spending priorities are severely misplaced. Instead of deficit reduction, increased revenue goes to pork. But if even the Heritage Foundation thinks that some tax increases will be necessary to avert this impending disaster, I’m inclined to think so too. They will, of course have to be tied into some pretty strict spending controls. How to accomplish this with a disinterested, pork addicted congress who seem more interested in Steroid use in the MLB than in solving real problems is beyond me.
I worry that America is like a chain-smoking obese man who hears from his doctor that he’ll have a heart attack eventually but loves his cigs and pork rinds too much to give them up. It will take an actual heart attack to get him to change his ways. Of course that heart attack could kill him.
I think part of the problem is that we dodged a bullet with the large deficits that accrued during the Reagan years. Again, I’m not an economist, but I recall reading a Robert Samuleson (I think) piece where he talked about the factors that mitigated the Reagan deficits. Back then, the Boomers were hitting their earning peak, the dollar was strong, and the end of the cold war brought a peace dividend. Now the dollar is weak, the boomers are retiring, and we have an expensive occupation of Iraq to deal with. Even in the nineties it took an extremely unpopular tax increase by Bill Clinton, certain spending cuts such as welfare reform, and the tech bubble to get us too a surplus.
The problem is the post Reagan years aren’t seen as a lucky bullet dodging fluke. They are seen as proving, in the words of Vice President Cheney, that “Deficits don’t matter.” They do.
This is a bit of a sidetrack (since foreign wars are just a portion of our out-of-control spending), but would there ever be a point at which the economy would be so poor that we would actually decide to (gasp) pull our troops out of our expensive overseas military adventures? Or will those be continued no matter how bad things get at home?
It’s not a question of deciding to pull troops out. If we don’t have any money, we’ll have to. You can’t make payments on your BMW if your checks bounce. Of course this means we won’t only have to pull out of our “adventures” but we’ll have to compromise our security in all sorts of very real ways.
There’s no guarantee that the U.S. will be a world power in perpetuity. Look what happened to Britain.
::looks for intro to Mandarin Chinese::
I guess my question is, more specifically, how bad would things likely be at home before we pulled out. Would the powers that be be more likely to bring troops home or to eliminate all forms of domestic spending?
That may be the case, but in terms of budget deficit, it doesn’t really matter. The deficit (and debt) is a pretty simple matter of revenues vs. spending.
Sam’s point about revenue is perfectly accurate. Raising taxes is not the optimal solution; cutting spending is. The fact is that a government cannot just “raise revenue.” You can raise tax RATES, but the connection between that and revenues is not entirely predictable.
On the other hand, cutting spending is a guaranteed way of reducing your deficit. If you’re in a deficit position the first, immediate, no-questions asked move is cutting spending. If you knew someone who was living an overly extravagant lifestyle, eating out all the time and buying news toys and going on three expensive vacations a year, but their credit card bills were mounting and threatening to become unpayable, and you wanted to give them a peice of advice, would you tell them to find a second job, or would you tell them that the first thing they should do is cut back on the damned spending?
Well, that should be easy to determine. What was the federal government’s revenue in 2000 and what was it in 2004?
RickJay: That may be the case, but in terms of budget deficit, it doesn’t really matter. The deficit (and debt) is a pretty simple matter of revenues vs. spending.
But the level of government revenue as a percentage of GDP is also relevant there. It tells us how much we as a nation are spending on our government compared to other things, and that gives us some information about how we need to balance increasing government revenue and decreasing government expenditure.
RickJay: Sam’s point about revenue is perfectly accurate. Raising taxes is not the optimal solution; cutting spending is. The fact is that a government cannot just “raise revenue.” You can raise tax RATES, but the connection between that and revenues is not entirely predictable.
It’s not entirely predictable, but there’s certainly a correlation, as we have seen in rapidly increasing budget deficits when governments cut taxes without cutting spending.
RickJay: IIf you’re in a deficit position the first, immediate, no-questions asked move is cutting spending. If you knew someone who was living an overly extravagant lifestyle, eating out all the time and buying news toys and going on three expensive vacations a year, but their credit card bills were mounting and threatening to become unpayable, and you wanted to give them a peice of advice, would you tell them to find a second job, or would you tell them that the first thing they should do is cut back on the damned spending?
In our current case, though, the analogy is more like somebody who’s living an overly extravagant lifestyle and tells his employer to slash his salary at the same time. Yes, I’d advise him to cut back on the spending, but I’d also tell him to march back into his boss’s office and get that salary cut restored.
Oops, missed one, sorry:
RickJay: *What was the federal government’s revenue in 2000 and what was it in 2004? *
Federal revenue as a percentage of GDP declined from 20.9% in 2000 to 15.7% in 2004, the lowest level since 1950.
On-Budget Revenue 2000: 2,025,218
On-Budget Revenue 2004: 1,798,093
The people who claim that the deficits are the fault of spending cuts are half right - roughly half the deficit can be attributed to tax cuts. The other half to spending increases. However, have a look at spending:
2000: 1,788,773
2004: 2,318,834
So spending increased by 530 billion dollars, while revenue only decreased by 227 billion.
However, here are the projected revenues for the next couple of years:
2005: 2,036,273
2006: 2,205,666
2007: 2,350,795
2008: 2,485,315
2009: 2,616,397
By 2007, the deficit is projected to be about half of its peak value in 2004. If spending had been constrained by even half of its current growth rate, there would be no deficit, even with Bush’s tax cuts.
This gets to RickJay’s point about the unpredictability of revenue. The simplistic answer is to say that tax cuts are responsible, but if we hadn’t had the tax cuts, its entirely possible that our soft landing from the short recession wouldn’t have been so soft. If GDP had fallen, revenue would have fallen. Also, the out year revenue looks to be climbing quite rapidly, which is what the supply siders would claim - cut taxes now, and of course you’ll see an immediate revenue reduction. But as the effects of the tax cuts stimulate the economy and it begins to grow, the revenue comes back, and then some.
I would support some tax increases if they were tied to offsetting spending cuts. I might even agree to to them if they were tied to, say, a five-year spending freeze. However, I’ve been around long enough to see about a zillion spending reduction plans come and go, some even signed into law. I don’t know how many balanced budget amendments have been floated in the last 30 years. None of it ever makes a damned bit of difference. By now, I’m enough of a cynic to believe that the government will simply spend every nickel it has, plus all it can borrow. It’s exactly like an out-of-control drug addict. Therefore, the only way to keep it even remotely in check is to ‘starve the beast’.
Sam Stone: The people who claim that the deficits are the fault of spending cuts are half right - roughly half the deficit can be attributed to tax cuts.
Niggly nitpick for clarity: you must mean “the fault of tax cuts”. We ain’t had any spending cuts, alas, alack.
Sam: None of it ever makes a damned bit of difference. By now, I’m enough of a cynic to believe that the government will simply spend every nickel it has, plus all it can borrow.
Well, something must have made some difference back in the nineties, when we actually did have not just a balanced federal budget, but even budget surpluses. I agree that that in itself doesn’t justify blithe optimism about any future administration, but it does somewhat contradict your cynical generalization.
Yeah, something made a difference: There was the one-time reduction in spending from the end of the cold war. “The peace dividend”, coupled with an economic bubble that drastically increased government revenue. During Clinton’s 8 years in office, government revenue DOUBLED. Clinton supporters like to give him credit for that, but there’s really very little evidence that government policy had anything to do with it.
And in Clinton’s first term, government revenue went up by over 400 billion dollars, and yet the deficit was only cut by 180 billion. The rest went into new spending. The big fiscal change came in the years between 1996 and 2000, when government spending only increased by about 170 billion dollars, while revenue jumped by over 500 billion due to the dot-com boom.
The government bases its spending on revenue projections. That’s why economic booms can cause a rapid correction in government finances, and why recessions lead to huge deficits. The government can’t account for changes in trends that haven’t happened. But note that once that economic boom is over, government spending rapidly increases to take up the slack. Governments are generally incapable of keeping their hands off the money if it’s available.
Just look at the chart I linked to. Since 1961, there have only been five years in which the U.S. government showed a surplus, and four of them were due to an unprecedented economic boom. During those forty-four years, there have been numerous tax increases, tax cuts, more tax increases, spending control laws, and other attempts to maintain fiscal sanity. NONE OF THEM WORKED.
If government is always going to spend every nickel it has and then some, the only way to keep this from doing huge damage is to reduce the overall size of government relative to the economy so that their malfeasance is a smaller percentage of all that we do.
Looking at the link that Sam provided earlier, it shows only two (recent) years in which we had a surplus in “on-budget” spending: 1999 & 2000. And the surplus in 1999 isn’t hardly worth mentioning - less than 2 billion buck. Looking at 2000, we do, however se a pretty significant surplus in “on-budget” spending - over 86 billion. What’s notable tho’ is a huge spike in revenue in 2000; it is more than 11%. Spending was still increased by 5.5%.
Heh.
Sam Stone said:
I should add that I think Clinton did a pretty good job of fiscal management. You can give him the credit, or claim it was the Republican Congress that kept him in check, but either way, the Clinton years were some of the best in terms of actual management of the country.
This leads me to believe that divided government may be the best way for the U.S. to function. Either elect a Republican and put Democrats in one house, or elect a Democrat and put Republicans in the house and/or Senate. The ensuing gridlock is the only mechanism that helps to actually constrain spending. Politicians make a big noise about how important cooperation is, but the way I see it, as soon as politicians start agreeing on what they want, the last constraint comes off spending and it goes out of control. Thus, we get the obnoxious proposition of Republicans controlling both houses and the presidency - and presiding over a massive expansion in government. You’d see the same thing (in fact, I believe it would be much worse) were it Democrats in control of all branches.
Democrats controlled congress for part of Clinton’s presidency.
During that time they passed the Deficit Reduction Act of 1993 (which was attacked by Republicans because of increased taxes on the top 1.2%, but the Wall Street Journal concluded was incredibly successful).
Ethical issues aside, Clinton’s fiscal ideas are the most successful. Raise taxes on the top 1.2% and curb spending. Republicans predicted doom, but the fact is not only was the economy not hurt but it boomed. The only question is whether the effectiveness of Clinton’s method makes up for the ethical dilemma of taxing the rich being part of the method. If the prospects for America’s future are as bleak as these think tanks say, then I think it does.