By the way, I looked at the data on the tax cuts in Obama’s budget. About $1 trillion of the collective deficits for the next ten years relate to extending Bush’s tax cuts for all but the wealthiest Americans, another half trillion relates to continuing the alternative minimum tax patches that have been passed every year for god knows how long, but have never been budgeted for, and $378 billion relates to Obama’s new tax cuts for middle and low income taxpayers. I’m curious which of those tax cuts conservatives wish to throw overboard to help balance the budget.
If the US dollar would just inflate a bit, we’d all be fine. The banks would start loaning again, because loaning money would be more valuable than hoarding it. Almost all of the economic stimulus measures we’re talking about are designed to help spur on a bit of moderate inflation, because the housing crisis has caused such a dangerous bout of DEFLATION that nobody has an incentive to invest anymore.
This thread is hilarious. Sam Stone is regurgitating *every single talking point *from Drudge to Limbaugh to Glenn Beck. It’s remarkable – and hopefully we can have 8 more years of this to point and laugh at. I look forward to it. 
Now to be “fair and balanced”, here’s an article from an eeeeeeviiiiiiil left wing blog about how the silly talking points get to Sam’s laptop, all the way up in Canada: http://thinkprogress.org/2009/03/25/from-drudge-to-fox/
And yet, the funny thing is that I came up with all that independently. I posted my original post simply after reading the morning news - and not on ‘righty blogs’, either. You might notice what my cites are - the AP, Reuters, the Wall Street Journal (the financial pages, not the opinion pages). The only site I used that could be considered ‘right wing’ is the Heritage foundation, and that link I used on this board several days ago, when there were no ‘talking points’.
It is this type of upside down backwards analysis that will cause the next credit pricing bubble and crash.
Inflated dollars + increased debt + increased credit extended leads to skyrocketing pricing of assets (houses, petroleum, commodities, hedge funds, etc, etc). The elevated prices are pushed higher because of imaginary wealth instead of being driven up by real incomes and real productivity.
Imaginary wealth always leads to WTF moments by investors who realize there’s nothing real backing that wealth. The market wakes up and responds by unwinding its risk leading to a crash.
Ok, so the govt adds a trillion dollars of debt to the system. No doubt there will be more trillions of dollars added to “fight” the recession. Where is the trillion $$$ of real wealth to pay this back? Is there a trillion dollars worth of undiscovered petroleum hidden underneath Nevada? Or is there a USA company or govt laboratory that has a new anti-aging-cancer-cure drug to sell on the world market for 1 trillion dollars? Or will there be a trillion dollars of Return-On-Investment from spending on public education? Probably not because education spending, at best, might let the USA catch up to other countries. Education investments don’t magically make the USA leapfrog Japan and Germany to the tune of a trillion dollars of net positive cashflow.
If there is no real wealth to pay back the massive debt, all you’ve done is plant the seed for the next crash (or prolong the recession we’re in now). The irony is that the next crash will be analyzed by the mainstream media and they will determine the cause to be everything but the debt overload.
I have a question: How accurate were CBO predictions from 1992-2000? Did they overestimate or underestimate the deficit?
Dollars to donuts says they overestimated the deficit.
Wouldn’t it be more accurate to say that the reported deficit figures from 1992 to 2000, or at leat from 1996 to 2000 grossly underestimated the deficit, because it included taxes on profits from the dot com boom that were larely illusory. I myself paid tens of thousands of dollars in that period in taxes, that I got back in 2001 to 2005, when the inflated value of my stock options disappeared.
I think you can say the same thing about 2005-2007 as well, with the next asset bubbles, both housing and stocks.
That’s certainly an interesting argument. Is it empirically the case that most of the revenue from capital gains was offset by capital loss deductions when the tech bubble collapse? I don’t know how to go about investigating that.
Even so, that point would only be relevant if CBO was overestimating the deficit because their models understood that the tech bubble was illusory. Otherwise it just seems to be coincidence that they overestimated the deficit and that eventually that misestimation was offset by revenue loss from capital loss deductions. Right?
We haven’t fully realized banking loses yet so predicting deficits right now falls into the same trap that insurance models set with CDS’s.
As the debt increases and the economy/tax base decreases we change the national debt/gross domestic product ratio. Predictions need to be worst case in order to prevent hyperinflation which could lead to defaults on foreign debt.
The personal savings rate in the United States dropped to zero in mid-2005 which means there are a lot of people who were upside down with personal debt BEFORE the housing bubble burst. Hyperinflation with a society deeply in debt will accelerate defaults.
I’m sorry, is it 2019 already? You act as if all this money is spent already. More absurdly, you are putting stock into numbers predicted 10 years into the future. You’re like the investment bankers who got us into this current crisis in the first place. What did the CBO and the White House think the GDP growth would be in 2008 in 1998? I’m sure they far far off the mark.
Is it troubling that we are committing to making sweeping changes that will inevitably cost tons of money? Of course, but the short term reality is that we have no choice; and the long term reality is that the problems need to be fixed.
There won’t be much consumer spending if half the public has low-wage jobs since they didn’t graduate high school. Or because they having crushing medical debt. Or are watching everything they own being swept away after the next hurricane destroys our crumbling, neglected infrastructure.
Honestly, we all get where you are coming from, but the solution is gonna be painful one way or another. We get it. But your solution is to ignore the long term problems, and let the market solve it. Sorry, but the market, in part, is what fucked this country in the first place. Your ideology had it’s run, it failed for a number of reasons. Now we have to try a different approach.
Rest assured that most smart people are not happy with the present situation. The only thing that calms me is that we elected a rational, competent person to try to deal with all of these things. I don’t know what else we can really do aside from elect the people we feel are most competent to deal with the issue.
Cite? Haven’t you been continually disabused of this notion in every thread that you post in? Has there been a time in recent history that the rich have had more wealth than they do now?
You asked an economic question, so of course the answer is, “it depends.”
In 1995, CBO projected (not predicted!) a deficit of $200 billion in 1996, increasing to $284 billion in 2000. In reality, the 1996 deficit was $170 billion, going to a $232 billion surplus in 2000.
In 1998, CBO projected essentially a balanced budget through 2000, with surpluses in the double billion dollar range from 2002 on.
In 2003, CBO projected a deficit of $200 billion, slowly shrinking to a $145 billion deficit in 2010. In reality, deficits have been between $400 and $250 billion, before exploding this year.
So just picking three recent years to examine their projections, they have been pessimistic twice and optimistic once.
If you follow the socialist path the President is taking then salaries will be capped so there wont BE any wealthy people. If you want more milk from a cow you don’t cut it’s leg off.
Not to blow things up here, but do you guys ever tire of being wrong? The US has done BETTER when tax rates were higher. No one has any credible proposals for cutting spending, since SS, medicare, and defense are basically off the table for political reasons. When you add in debt service, that makes up a giant share of government spending. The only thing left is raising taxes, which we can’t do now because the economy is going to heck.
There is a big difference between 39% top rate and socialism with salary caps. Certainly, the difference is larger than between 34% and 39% top rate.
If Republicans or conservatives or whoever are really serious about cutting taxes, let them first cut spending for real (not that earmarks bs, which is a tiny portion of the budget) – see if they can slash SS, medicare, and defense by 1/3 each or something. Then, pay down the debt, to get the debt service down, THEN cut taxes.
The Laffer curve may make sense, but we have no idea where we are on it. It could be that productivity and tax receipts don’t start to come down until you’re at 60%, 70%, 80% marginal rates. No one knows. All we know is that tax receipts will be zero at a 0 rate and a 100% rate (probably), but no one has any idea what it looks like between those two.
The previous administration screwed the pooch so badly with lowering taxes while the economy was (supposedly) booming and while there was a war on. Stupid, stupid, stupid. So, we have nothing left when it hits the fan. Anyone supporting those policies should just STFU for two or three years.
I’m so tired of this argument. <\rant>
I’ll bet you ten thousand dollars there will still be lots of wealthy people in the United States when Obama’s term is over, no matter what path he takes. No, I’ll make it fifty thousand. I’ll give you ten to one odds.
Anyway…
Everyone interested in the topic should watch the PBS “Frontline” dated 24 March, “Ten Trillion and Counting.” For those of you who’re partisans, you won’t like it; it eviscerates the Bush administration but finishes with a serious critique of Obama’s planned deficits, essentially stating that this path can’t possibly work.
Please. This “Obama is a socialist” is one tired Rightwing meme.
If anything surely you’d agree that Obama is way to the right of social democracies such as the ones in effect in Scandinavian countries. And guess what?
Norway can claim the most millionaires in the world
So yeah, I want in in some of that action that RickJay’s offering. In fact, make it a hundred grand.
Nice try, Sam - but it won’t deflect posts like leander’s. Impugning your (imagined) sources instead of addressing your points is what passes for debate these days.
Sam Stone,
Missed your earlier post. I will just stick to some of the key issues.
The main point is that it doesn’t make sense taking medium-range budget projections too seriously because there is enormous uncertainty about growth rates and public finance in the next few years. However the WH house projections aren’t particularly unreasonable in the light of history. In the next year or so unemployment rates will reach double digits and there will be an enormous amount of unused capacity. What this means is that when demand picks up because of fiscal/monetary policy as well as a recovery in private spending, it will be possible for the economy to grow very rapidly for a few years as that excess capacity is soaked up. This happened in 83-84 as well as FDR’s first term which probably saw the fastest growth rates in US history. Furthermore there is enormous uncertainty about how much the banking bailout will cost the treasury. It could be a lot of money or not very much if the assets purchased rise subtantially in value.
What about Japan? In this kind of crisis you need a big fiscal stimulus, a big easing of monetary policy and a major push to clean up the banking system and you need it fast. That is exactly what the current administration has done and what Japan didn’t. Their policy was pursued in fits and starts and not properly co-ordinated.They were also very slow in addresssing the problems of their banking system which they didn’t begin doing till the late 90’s. So there is good reason to believe that the US is going to recover much faster than Japan.
Another important point to remember is that the US has considerable scope to monetize its deficit in the short run if , for example, Chinese demand for treasures reduces. Usually monetization is a terrible policy because it leads to inflation but that is far from being a serious threat today. With unemployment near double digits there isn’t going to be any serious wage pressure for a long time. You also have massive global over capacity which will also dampen any price pressure.
Not spending the money, and biting the bullet.
Nah, that would be unfair to the Democrats and bad for the country.
Well if the unused capacity is going to be so huge, it means that your starting point in terms of income and tax receipts is going to be that much lower. Does the 2009 projection assume that GDP will be 6-8% lower than 2008. Hell no! It assumes that it will be only 2% lower, because after being -6% for the first two quarters we will rebound to +2% in the back half of THIS year. So the starting point is already inflated in terms of revenues, and understated in terms of the cost of the “automatic stabilizers” though these are not so big in the US anyway.