Budget Deficit Question

[Keith Wilson]

I have a serious question for those who support Mr. Bush, to which I would like a serious answer with a minimum of partisan mudslinging, please.

Large federal budget deficits are generally acknowledged to be a bad thing. The deficit during the current administration has gotten very large, through a combination of large tax cuts and considerable spending. Explanations please? Why are they doing this? I can think of several at least halfway reasonable explanations, which I have listed in order of how favorable they are to the current administration. Note that I don’t necessarily agree with any of these, I’m just interested in others’ thoughts.

1. Fiscal Stimulus. This is standard Keynesian economics; run a deficit to stimulate demand to help recovery from a recession. However, the way the tax cut was done (mostly at the top of the income scale, not at all broad-based, mostly taking effect in a couple of years) I would think would seriously reduce the fiscal stimulus. And now he’s arguing to make the cuts permanent, which would very significantly increase the deficit even over the current projections. This is not consistent with a short-term fiscal stimulus

2. National Security: The invasions of Afghanistan and Iraq were pretty expensive, and the reconstruction even more so. This, however, is only a small part of the problem.

3. Not really a problem: If the economy grows enough, the problem will go away eventually. This assumes very unlikely rates of growth, particularly with the retarding effect of large deficits over time.

4. Rigid Ideology: Tax cuts are good, and be damned to the consequences. Or possibly, the benefits of tax cuts far outweigh the disadvantages of large deficits

5. Political expediency. Tax cuts are popular, spending cuts aren’t, and we’ll think about it once we get reelected.

6. Political force majeure: We can pass tax cuts but not spending restraint, and now look at the pickle we’re in!

7. Blundering: Geez, this doesn’t look good; how did this happen?

8. Machiavellian Plot: We can pass tax cuts fairly easily. There is little popular support, and quite a lot of opposition to dismantling a lot of federal social programs. If we make the deficit bad enough, then people will agree to radically revise all sorts of currently popular programs like Social Security, Medicare and the like out of dire necessity. We’ll de-fund the Federal Government, and this will force a radical redefinition of the government’s role in society whether people like it or not. (This was David Stockman’s contention about the Reagan tax cuts, FWIW.)

[Sharpie21]

Wow. Noticing that this post is six years old, and interested no one, is mind boggling. Keith, ask yourself those same questions with the current administration in mind, especially the last (Machiavellian) one. This whole arguement about federal spending has taken on a dimension that just a few years ago (2004) would have been thought to be impossible to to envision. Yet, here we are.

I did a search to find you Keith because I remember you posted a graph last month that illustrated federal deficits, if I remember correctly, as a series of red bars that extended down below a zero dollar baseline. I want to reference that graph in a discussion I am having with a friend on another site. Do you remember it?

[Keith Wilson]

The original post was written in a time of economic growth and at least moderate prosperity. Things are very different now. We avoided a second Great Depression by a damned narrow margin, largely through concerted and surprisingly intelligent action by governments in lots of countries. The answer currently would be #1 almost entirely - and compared to Bush's upper-income tax cuts, spending by the Obama administration is much better-designed to spread the stimulus money around pretty broadly and generate more demand, exactly what's needed to reduce the severity and duration of the recession. It's not sustainable over the long term, of course, and they're taking steps to address that problem, but the essential thing is to get the economy growing again.

I don't remember that chart specifically; how about this one?

http://www.usgovernmentspending.com/usgs_line.php?title=US Federal Deficit As Percent Of GDP&year=1900_2010&sname=US&units=p&bar=0&stack=1&size=l&col=c&spending0=-0.20_-0.27_-0.34_-0.24_-0.06_0.01_-0.12_-0.30_0.02_0.09_-0.11_-0.12_0.01_0.02_0.20_0.56_0.31_1.82_11.88_16.86_-0.68_-0.91_-0.68_-0.66_-0.73_-0.47_-0.67_-0.98_-0.68_-0.46_-0.96_0.17_2.78_3.27_3.11_4.12_4.76_2.84_1.42_2.32_ 3.02_3.73_12.04_28.05_22.35_24.07_9.06_-1.32_-4.33_-1.48_0.43_-2.30_-0.06_1.52_0.49_0.37_-1.21_-1.15_0.01_1.59_-0.48_0.65_1.22_0.77_0.89_0.20_0.47_1.04_2.77_-0.33_0.27_2.04_1.89_1.08_0.41_3.25_4.04_2.64_2.58_ 1.59_2.65_2.53_3.93_5.88_4.72_5.03_4.96_3.16_3.04_ 2.78_3.81_4.49_4.58_3.83_2.87_2.21_1.37_0.26_-0.79_-1.34_-2.37_-1.25_1.48_3.39_3.48_2.52_1.85_1.14_3.18_12.91_8.54&legend=&source=a_a_a_i_i_i_i_i_i_i_i_i_i_a_i_i_i_i_i_i_i_i _a_i_i_i_i_a_i_i_i_i_a_i_a_i_a_i_a_i_a_i_a_i_a_i_a _i_a_i_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a _a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a _a_a_a_a_a_a_a_a_a_a_a_a_b_b

[John Smith]

The original post was written in a time of economic growth and at least moderate prosperity. Things are very different now. We avoided a second Great Depression by a damned narrow margin, largely through concerted and surprisingly intelligent action by governments in lots of countries. The answer currently would be #1 almost entirely - and compared to Bush's upper-income tax cuts, spending by the Obama administration is much better-designed to spread the stimulus money around pretty broadly and generate more demand, exactly what's needed to reduce the severity and duration of the recession. It's not sustainable over the long term, of course, and they're taking steps to address that problem, but the essential thing is to get the economy growing again.

I don't remember that chart specifically; how about this one?

http://www.usgovernmentspending.com/usgs_line.php?title=US Federal Deficit As Percent Of GDP&year=1900_2010&sname=US&units=p&bar=0&stack=1&size=l&col=c&spending0=-0.20_-0.27_-0.34_-0.24_-0.06_0.01_-0.12_-0.30_0.02_0.09_-0.11_-0.12_0.01_0.02_0.20_0.56_0.31_1.82_11.88_16.86_-0.68_-0.91_-0.68_-0.66_-0.73_-0.47_-0.67_-0.98_-0.68_-0.46_-0.96_0.17_2.78_3.27_3.11_4.12_4.76_2.84_1.42_2.32_ 3.02_3.73_12.04_28.05_22.35_24.07_9.06_-1.32_-4.33_-1.48_0.43_-2.30_-0.06_1.52_0.49_0.37_-1.21_-1.15_0.01_1.59_-0.48_0.65_1.22_0.77_0.89_0.20_0.47_1.04_2.77_-0.33_0.27_2.04_1.89_1.08_0.41_3.25_4.04_2.64_2.58_ 1.59_2.65_2.53_3.93_5.88_4.72_5.03_4.96_3.16_3.04_ 2.78_3.81_4.49_4.58_3.83_2.87_2.21_1.37_0.26_-0.79_-1.34_-2.37_-1.25_1.48_3.39_3.48_2.52_1.85_1.14_3.18_12.91_8.54&legend=&source=a_a_a_i_i_i_i_i_i_i_i_i_i_a_i_i_i_i_i_i_i_i _a_i_i_i_i_a_i_i_i_i_a_i_a_i_a_i_a_i_a_i_a_i_a_i_a _i_a_i_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a _a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a_a _a_a_a_a_a_a_a_a_a_a_a_a_b_b


You're wasting your efforts. The greatest growth of our national debt, following the war, came under reagan, Bush, and Bush. Under those presidents I was told the debt didn't matter. It mattered to me.

It still matters to me, but for people to speak as if Obama invented it is simply being dishonest; not just with us, but with themselves.

The very first post I made on a forum was on Bill Maher's, and I asked why we are so concerned about importing so much of our energy, but so unconcerned with importng so much of our everything else.

There are several brutal truths that are ignored by the conservative folks, the big Reagan fans, and his growing debt is among them. You listen to the people who speak today at the Tea Party, and find they bash Obama over the nuclear treaty, and seem to forget their hero signed the first such treaty.

The biggest truth that is ignored by the anti-Obama crowd is that the day he took office, there was no option available to immediately cut the debt or not pass a huge debt onto my grandkids. Such a debt is going to be passed onto them, and Obama had now way of changing that fact.

The best I can hope for, on behalf of my grandkids, is they'll grow into a country where health care isn't such a burden, and they'll have good opportunites for good paying jobs and the debt, though larger, will be less of a burden to them.

[BA.Barcolounger]

I have a serious question for those who support Mr. Bush, to which I would like a serious answer with a minimum of partisan mudslinging, please.

Large federal budget deficits are generally acknowledged to be a bad thing. The deficit during the current administration has gotten very large, through a combination of large tax cuts and considerable spending. Explanations please? Why are they doing this? I can think of several at least halfway reasonable explanations, which I have listed in order of how favorable they are to the current administration. Note that I don’t necessarily agree with any of these, I’m just interested in others’ thoughts.

1. Fiscal Stimulus. This is standard Keynesian economics; run a deficit to stimulate demand to help recovery from a recession. However, the way the tax cut was done (mostly at the top of the income scale, not at all broad-based, mostly taking effect in a couple of years) I would think would seriously reduce the fiscal stimulus. And now he’s arguing to make the cuts permanent, which would very significantly increase the deficit even over the current projections. This is not consistent with a short-term fiscal stimulus

2. National Security: The invasions of Afghanistan and Iraq were pretty expensive, and the reconstruction even more so. This, however, is only a small part of the problem.

3. Not really a problem: If the economy grows enough, the problem will go away eventually. This assumes very unlikely rates of growth, particularly with the retarding effect of large deficits over time.

4. Rigid Ideology: Tax cuts are good, and be damned to the consequences. Or possibly, the benefits of tax cuts far outweigh the disadvantages of large deficits

5. Political expediency. Tax cuts are popular, spending cuts aren’t, and we’ll think about it once we get reelected.

6. Political force majeure: We can pass tax cuts but not spending restraint, and now look at the pickle we’re in!

7. Blundering: Geez, this doesn’t look good; how did this happen?

8. Machiavellian Plot: We can pass tax cuts fairly easily. There is little popular support, and quite a lot of opposition to dismantling a lot of federal social programs. If we make the deficit bad enough, then people will agree to radically revise all sorts of currently popular programs like Social Security, Medicare and the like out of dire necessity. We’ll de-fund the Federal Government, and this will force a radical redefinition of the government’s role in society whether people like it or not. (This was David Stockman’s contention about the Reagan tax cuts, FWIW.)

It is amazing that this thread got no replies back in 2004, especially considering the number of Republicans who now claim that they were against Bush's rampant spending.

[Paul Pless]

You're wasting your efforts. Clearly!

three replies in 6+ years:rolleyes:

[Keith Wilson]

Sharpie, I'm glad you dug it up. I still think it was a pretty good question, and I'm surprised it didn't generate any discussion. It's interesting to compare the situation now and then.