Even if you subscribe to this policy, this is not what Obama is proposing; he is proposing to run a deficit both in good times and bad.
FY 2010 Proposed Budget, Summary Tables (warning, PDF)
Table S-8 forecasts full employment and steady GDP growth by 2013-2014. Yet under Table S-1, the budget projections call for a deficit out to 2019.
I agree with you. Did you even read my post?
I think when the economy is doing well, it’s a great time to pay off some debt, maybe even take the opportunity to raise taxes and pay off more debt. That would give you extra ammunition when the inevitable downturn comes and you can lower tax levels while doing some deficit spending. All of this could, maybe, keep the economy on a more even keel. The highs of the good times are not enough to offset the lows of the bad times.
I think a distinction needs to be made between deficits in the next couple of years and the longer-term , say 3- 10 years. In the short-run the US and world economy needs a lot of deficit spending and if absolutely necessary it can be financed by monetization ; there is a barely a hint of inflation despite the quantitative easing that has already taken place. Given unemployment rates nearing double digits it’s unlikely that wage increases will put pressure on inflation in the short run. Increasing the debt/GDP ratio by 15-20 percentage points over the next few years isn’t going to be catastrophic either.
Of course this kind of deficit spending isn’t sustainable beyond 2-3 years and it shouldn’t be. At that point there will have be a combination of tax increases and spending restraint like in the 90’s. If the economy recovers sharply that will improve public finances substantially by itself. The main difference between the White House predictions and the CBO, I think, are about growth forecasts in the next few years. No one knows how that will pan out. The last recession comparable to the present one was in 81-82 and that was followed by a very sharp turnaround so it’s not crazy to believe you will get something similar again in which the case the WH projections will be closer to the mark.
Long-run budget policies can always be adjusted in the future and given the large amount of uncertainty about growth rates in the next few years it makes sense to wait and watch. Certainly right now deficits aren’t of much concern compared with the task of stimulating spending and fixing the financial system. If and when serious deficit reduction becomes necessary I would bet Obama will be very similar to Clinton and manage to get the job done with a combination of tax increases and spending restraint. The Republicans, OTOH, seem to be commited to never ever increasing taxes again and their record in the last three decades is clear for everyone to see. On the whole I think Obama offers a better chance of long-run fiscal prudence.
I believe you, having not read the PDF myself. Since the US infrastructure has been neglected for about 30 years now, I can give the guy some slack. Hopefully, some of the investments in infrastructure can move us into a higher growth rate situation and we’ll do better than the OMB predicts.
Deficits may have been unavoidable, but the sheer outrageous scope of the deficits he’s running absolutely were avoidable, simply by being a fiscally reasonable person.
Which is, of course, an utter lie or a grotesque error on your part. But actually dealing with the problem is hard. Spending imaginary money with no consideration fo the consquences isn’t.
To a point, yes. While the wailing and gnashing of teeth by Republicans over the deficit is akin to the hangover day after the binge drinking, there is still a point in there. So far, I have been put off by the “throw money at the problem” rampant spending done both by Bush and continued by Obama, in response to the economic downturn. I fully understand, and support, much of the stimulus plan, but other parts (more money to banks with little directions or oversight) are, to my mind, faulty. And there is a good deal of spending in Obama’s budget request that is, again to my mind, a waste, including more money to banks, too much tax breaks, and others. I’m not going over the massive budget with a fine toothed comb to pick apart what is good and what is bad spending.
Not all spending is stimulus. And while there is certainly a need for short term deficits to help the economy, Obama’s deficits are simply too much and should be closely watched.
But the Republicans bitching about it. Now that is worth a laugh.
Yes, growing the size of the federal government by 3.5% of GDP by 2019 is absolutely unavoidable. I think the universe would probably implode or something if the federal government didn’t increase its scope and cost over the next ten years.
</sarcasm>
-A- deficit is unavoidable. OBAMA’S deficits are way out of control, and at least twice the size that would have naturally resulted from the downturn and a reasonable, short-term stimulus.
But I’m sure liberals will keep on this track - it seems to be their most effective talking point. The deficit is unavoidable! All spending is stimulus! We have no choice! From here forward, we must borrow money every year and spend it, or the economy will collapse! We must nationalize health care, or the economy is doomed! Anyone who doesn’t agree with every line item in our budget wants to destroy the economy of the United States!
It’s so true, and ironic as well - they’re using basically the exact same fear mongering tactics to get outrageous spending bills approved, that Bush used to get the PATRIOT act passed and get us into Iraq.
“We must do something, anything, to secure our country, right now, or we’re DOOMED!” :smack:
That would all be very relevant and poignant if the value of the dollar was falling.
Except for the tiny little difference that the economy is in ACTUAL DANGER. And that the bail outs are an actual attempt to do something about it, aimed at the actual problem. In order for your analogy to work, these would have to be good economic times, and Obama would have to be sending billions to, say, Madagascar to save the American economy.
I agree, and so did a whole swack of economists, who felt that the Democrats really blew it by bundling real stimulus in with a huge laundry list of pet programs.
A real stimulus would have been, to use the words of Larry Summers, “Timely, Targeted, and Temporary”. Obama’s ‘stimulus’ is none of those things. It spends money by growing federal and state governments. For example, all this money for building new schools - what are they going to do when the stimulus money runs out? Abandon them? No. They signify a permanent increase in the budget of the Department of Education or state education budgets. Which is why some states are turning down those stimulus funds. They don’t want to be saddled with the long-term expenditure for short-term stimulus.
A proper stimulus would have included increased unemployment benefits, perhaps job retraining, mortgage relief, supply side easing through tax cuts, temporary regulatory relief, etc. Stuff that could hit the economy right away, and be removed as needed without changing the permanent structure of the government. Instead, the Democrats used this as an opportunity to expand the size of many government agencies, and as we know, once expanded it’s almost impossible to shrink them again.
I agree, but Obama’s budget contains only tax increases. Spending actually goes up. There is absolutely ZERO fiscal restraint in Obama’s out-year budget forecasts. In fact, it represents a huge expansion in federal spending.
The White House estimates are insanely optimistic. 4% growth in 2011? 4.6% in 2012? Those are boom numbers. He thinks the economy will grow this fast even with 1.4 trillion in new taxes dumped on it, and with plans to ‘re-regulate’ a host of businesses.
The CBO’s estimates are better, but still on the optimistic side. They “only” call for 4% growth in 2012, and a decline of 2% this year (the last quarter decline was over 6% - if the current quarter shows a similar decline, then the economy will have to actually be growing by the third quarter in order to hit an overall target of -2% ).
No, the last recession comparable to this one was the one Japan is STILL going through. It was a ‘balance sheet’ recession caused by a real estate bubble collapse. The result in Japan was a ‘lost decade’ of almost no growth at all, and a debt to GDP ratio of 170%.
You don’t want to know what Obama’s deficit numbers will look like if you assume 1% or 2% growth through the next decade.
Wait and watch, while the Democrats lard up federal agencies, build new buildings, hire new employees, and set up new entitlements that can’t be eliminated?
There’s a whole bunch of bond traders that would take issue with that statement, as would the government of China. You seem to think the deficit is a problem that can just be solved down the road. The reality is is that the current deficit projections are causing trouble NOW. Trouble that could threaten the entire recovery.
If the government can’t find buyers for bonds, it will have to raise interest rates. That will choke the recovery. Under Ricardian Equivalence, people react to signs of future tax hikes or inflation by changing their spending habits NOW. That’s why it’s critical to have a stimulus plan accompanied by a solid plan which shows how the stimulus will be paid off and fiscal balance restored. Obama blew it.
My guess is that he will have to be dragged kicking and screaming to the spending restraint table, unless he tries to restrain it by simply cutting military spending. More likely, he will propose sweeping new taxes because the programs he’s putting in place now will be un-killable. And those taxes will be on the ‘rich’.
Well, seeing as how he has turned out to be far more imprudent than Republicans ever were, I don’t see how you can make that claim. Yes, Republicans are big spenders. Far too big. But the Democrats are making them look like amateurs in the spending department.
Frankly, the U.S. is headed for a cliff, because the tax system will be so progressive that there will be very little room to dig more money out of the ‘rich’, and yet it will be very difficult to raise taxes on the middle class. So my guess is that the U.S. will inflate its way out of this mess. That’s obviously what the Chinese are worried about, too.
How does this in any way counter the fact that Democrats are fear mongering in order to get the public to accept whatever bullshit laws they pass (without even reading)? As opposed to crafting intelligent spending bills that they can justify on their own merits, without having to ‘Doom and Gloom’ the populace into supporting it. The fact that the economy is in danger does NOT justify, lend merit to, or prove that the deficit spending plans, the way they are being crafted by the Dems, are necessary or good.
The PATRIOT Act was an actual attempt to do something about actual security problems post 9/11 - but that doesn’t excuse the fact that it was poor legislation. Same damn thing with the Dem’s enormous deficits.
Well, it doesn’t matter much what the Obama administration thinks, since the chart you wanted us to take a good look at, or at least the dark red bars that one’s eyes are drawn to, are based on CBO numbers, not White House numbers. And the CBO expects the economy to grow at a 2.5% average annual rate over the next decade. Not exactly what I’d call “high” growth.
And for the record, if you look closely at that chart, you’ll see faded-out pink bars that state the White House projection of what the deficit will be. Why the difference? Obama expects 2.8% average annual growth over that period. Now, I’m no expert on projecting GDP going forward, but we’ve averaged around 2.9% growth since 1980. The 2.5% number sounds intentionally (and wisely so, IMHO) conservative. 2.8% isn’t out of the realm of possibility - in fact, it’s well within the CBO’s range of projected growth rates.
Where do you get those projections from anyway?
When do those taxes start? Will we still be in recession then? If not, does it matter that they’re anti-stimulative? In fact, if we’re in a period of strong growth, isn’t an anti-stimulative tax increase good?
Of course…
From what to what?
As far as I can tell, this count is including Social Security. Not generally considered an anti-poverty program, but moreover, its spending is largely an external force on the President’s budget, not something he can cut at whim.
Who cares what the growth is this year? This is the year we want stimulus spending, deficits be damned! What’s the long-term growth rate here, Sam?
This is definitely an interesting thread, but sadly I’m going to be out of town for the next few days, but I look forward to seeing your responses here. Hopefully this thread won’t be zombied before I can get back to it. 
No, it’s not ironic at all. Politicians use tactics that they think will work; in both cases, they’ve been right about what we would buy. We’re getting the government we deserve.
We’ve had almost a decade of deficit spending for stupid, shitty reasons. Now we’re getting deficit spending for good reasons, and the conservatives are suddenly against deficit spending.
They had good reasons for intelligently deficit spending a few hundred billion, but they have no good reasons (hence their incessant fear mongering) for pledging trillions in deficit spending just so they can throw a bunch of shit at the wall and hope it sticks.
But I forget, all deficit spending = stimulus in the minds of Democrats. A trillion in deficit spending is better than a billion in deficit spending - as long as it’s for a good liberal cause! Even if you only needed a billion, better to just spend the trillion!
Right now people are flooding into US Treasury obligations because the dollar is the world’s default reserve currency. Plus people realize that what the Chinese and the Russians are saying is all talk so far. People who hold huge amounts of an asset (like in the Chinese case, something like 25% of their GDP) really don’t want to do anything that will collapse the value of that asset. It is a “don’t look down, and we will be okay” type of situation.
Does that sound familiar? It should. It was in no one’s (except the last sane perseon who sat out the housing boom) interest to deflate the housing bubble. But it got deflated because the fundamentals were so out of whack, somebody finally cried out that the emperor had no clothes. People started selling, before other people started selling.
So far the Chinese have only moved from buying longer term US treasuries to buying shorter term. So they are concerned about the risk of rising interest rates on US dollar denominated assets. Guess why? They are concerned about inflation in the US.
Look, both the US and China agree that the US dollar is overvalued vs the yuan. The Chinese don’t want to fix it because they want to keep exporting cheap Chinese stuff. We don’t really want to fix it, because we are addicted to consuming cheap Chinese stuff. But this is like a dealer collecting IOUs from a junkie. At some point you have to wonder if you are ever going to collect.
I, for one, am really shocked by the size of the deficits. And I’m saying this as a fiscal liberal!
But let’s examine these claims that the huge deficits are caused by the conservative boogeyman, spending. Oooooh, spending is so scary. It’s like the devil. If you don’t watch it, it’ll get ya, and everything bad is caused by spending.
Well, let’s see what the non-partisan Congressional Budget Office says about the deficits:
So it seems that the bigger deficits are more the result of extending most tax cuts than the boogeyman spending, by roughly a 60/40 ratio.
Am I to presume that the OP would support reduction of the deficit by increasing taxes and cutting spending by roughly that 60/40 ratio, since that’s how we’re heading into this trouble?
Also, note the CBO’s kind words for the stimulus bill. It seems that this group of respected economists don’t agree with the right-wing dogma that the stimulus is too late, or not enough tax cuts, or whatever.
The same conservatives that are now going ballistic over the increasing deficit are exactly the same people going ballistic about ending the tax cuts for the richest 5% of America. Does not compute.