And in 8 years, Obama's deficits will exceed what was done in the entire prior History of the United States:
Posted on 04/14/2009 6:57:06 AM PDT by sickoflibs
WHEN DICK CHENEY SAID, "Deficits don't matter," economists took that as proof of the economic illiteracy of the Bush administration. But it turns out there is a case to be made that Cheney was onto something
On the deepest level, the vice president was echoing, in slightly exaggerated form, an idea put forward a few years ago by Irving Kristol, the Godfather of the neoconservatives who have had such a wide-ranging effect on Bush administration policy. Kristol wrote then, and still believes, that "We should figure out what we want before we calculate what we can afford, not the reverse."
On the political level, treating deficits as a non-issue also proved a successful strategy. After all, despite the torrent of red ink that splashed across the national budgets during his first term, George W. Bush was reelected by a substantial margin. Among John Kerry's other failures was his attempt to saddle the president with the label "profligate."
Which brings us to the economic level. The deficits that Bush ran up in the years in which the country was teetering on the verge of a serious recession had the beneficial effect of righting the economy. In that sense, deficits not only didn't matter, but were a force for economic good.
But that was then, and this is now. The economy, growing at an annual rate of 3.5 percent to 4.0 percent, is hardly in need of further fiscal stimulus. Yet the budget that the president sent to Congress last week promises deficits as far ahead as the eye can see--if the eye is practiced in reading these massive documents.
The president claims that his $2.57 trillion budget is the first step on the road to fulfilling his campaign promise to halve the deficit by 2009, even if Congress agrees to make his tax cuts permanent and enacts still more reductions. That claim is completely unfounded. Indeed, if the White House team that drafted this budget were subject to Sarbanes-Oxley, criminal indictments would be flying.
Start with the fact that most of the spending reductions the president proposes will be rejected by Congress. The budget calls for the elimination or curtailment of some 150 programs. But last year the president proposed eliminating 65 programs for a savings of $4.8 billion--and Congress agreed to eliminate only four programs for a savings of less than $200 million. Although Congress is under some pressure to keep spending down, it is under even more pressure from the farm lobby, the business lobby, the veterans' lobby, the poverty lobby, and the oldies' lobby, to mention only a few groups that will fight Bush's cuts.
But even if the budget is adopted, it will not begin to cut into the federal deficit, for several reasons. First, spending on the largest items--Medicare, Social Security and the military--is scheduled to increase. Second, the budget does not include any money beyond this year's outlays for the wars in Iraq and Afghanistan. Third, it does not include the trillions that will be required if the president succeeds in persuading Congress to allow some participants to divert to private accounts a portion of the money they are now paying into the Social Security system.
On the other hand--and in all fairness--we can't ignore the fact that previous Bush budgets were also pronounced DOA--and then adopted within the spending limits the president had proposed. Moreover, the projected budget deficit is not threateningly large, relative to GDP. Larry Lindsey, Bush's former chief economist, points out in his latest client advisory that "The projected 2006 budget deficit of 3.0 percent of GDP is reasonable if the economy continues to grow."
And grow it seems likely to do. The Institute for Supply Management reports that the manufacturing sector expanded in January for the twentieth consecutive month, due in part to renewed international competitiveness flowing from the lower dollar, and in part to a scramble to restock depleted inventories. My own tour of shopping malls from Phoenix to Chicago to Washington revealed that retailers had been caught by surprise by the strength of Christmas and post-Christmas sales. While not bare, the shelves have large empty spots.
The housing market remains strong; the unemployment rate is a low 5.2 percent; over two million new jobs have been created in the past year; the service sector is growing; inflation is low, as are long-term interest rates; and U.S. companies are increasingly optimistic, "bolstered by unprecedented cash flows," according to Goldman Sachs. The budget deficit may be larger than we would like, and Dick Cheney may have been overstating things a bit, but so far it hard to say that his view of budget deficits is clearly wrong.
The trade deficit is another matter. Alan Greenspan stopped in London last week to speak at Chancellor of the Exchequer Gordon Brown's latest entrepreneurship bash, and to assure one and all that the market is gradually taking care of that problem. The dollar has fallen, giving American manufacturers an edge over their European competitors and making some imports more expensive. Short-term interest rates in the United States are now above those in euroland and Japan. Added to the more rapid growth being experienced in America, this rate differential will make investment in America even more attractive than it has been. I am less certain than the Fed chairman that we have seen the end of the dollar decline, but it would be foolish to bet against a man who has got things right through years of international and domestic turmoil.
In short, all may not be for the best in a best of all possible worlds, but almost everything seems to be--unless you are a euroland exporter, caught between a falling dollar, China's refusal to allow the renminbi to rise, and the appalling regulatory and tax environment in much of Europe.
Irwin M. Stelzer is director of economic policy studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.
WHEN DICK CHENEY SAID, “ Deficits don't matter,” economists took that as proof of the economic illiteracy of the Bush administration. But it turns out there is a case to be made that Cheney was onto something...clip....The budget deficit may be larger than we would like, and Dick Cheney may have been overstating things a bit, but so far it hard to say that his view of budget deficits is clearly wrong.
“ On the political level, treating deficits as a non-issue also proved a successful strategy. After all, despite the torrent of red ink that splashed across the national budgets during his first term, George W. Bush was reelected by a substantial margin. ”
What can we learn from this?
“ On the political level, treating deficits as a non-issue also proved a successful strategy. After all, despite the torrent of red ink that splashed across the national budgets during his first term, George W. Bush was reelected by a substantial margin. ”
This statement encapsulates one of the central political problems of our time. Whatever you think of John Kerry (I pretty much think of him as a snobbier form of Al Gore -- but still an idiot) he didn't lose the election to GWB by all that much. It was close. So the Media making blanket statements about the centrality of a single political idea -- like Deficits Don't Matter -- is both wrong & dangerous. A whole lotta Americans, including Conservatives, thought runnaway spending & deficits were a problem.
I’m going to pull rank here.
Small and occassional deficits do not matter. Big and continuing deficits matter a lot.
Basically, when the financial market perceives that a country will have difficulty servicing its debt, it will begin to require a default or inflation-risk premium. When this kicks in, it is probably already too late to do anything.
When Cheney said what he did, the natioanl debt was maybe 30 percent of one year’s GDP. It has now suddenly increased to 70 percent. We were in the safe zone when he said what he did. We are now risking default or inflation.
I trust what I said is plain old common sense. You can my word for it, there is very good economic theory and experience to support what I said.
'Reported' data doesn't mean squat when numbers are constantly massaged and polished, then argued over by 'the highly educated'. Then, it usually, at some point, easily simplifies down to:
Cash Inflow versus Cash Outflow and bankruptcy being defined as an individual or business that cannot pay its debts in a timely manner.
Global economic theory is just that...way too many variables w/ regards to greed and human nature, unstable governments, war, etc., to accurately rely upon.
It's called selling “Your government is free”, but it is NOT free and we have seen where it ends, 2009, disaster!.
But it is BAD political theory. Once you break the piggy bank lock all hell breaks loose. Then everyone wants theirs, and if it destroys the country, voters might as well get theirs before it's too late. MSNBC showed polls yesterday showing the polled would rather have more spending on health care and education, than control deficit, DUHHHH
Well said!
Another way to put the difference for those that think money grows on trees is in 20 months 0's deficits will exceed those that were incurred during 8 yrs of the Bush admn. Also, every trillion represents about 50 billion of interest that has to be paid every year.
The more immediate question is what % the fed govt budget is of GDP.
Sure as long as someone else is paying for it.
The adults are long gone. The govt and media are run by perpetual adolescents. They think you can just print money and tax the producers. Any adult sees where this leads, money with no value and producers who produce somewhere else.
All you have to do is look at Detroit and you will see the model that is being brought to the entire country.
Good point, the lock on the piggy bank has been cut. 2010 is going to be a very bad year w/ regards to the domestic and global economies. PMSNBC's polls are as reliable as the Yugo.
Greenspan and others sold a bunch of snake oil to then incumbent polticoho's.
0 and company are trying to sell the same stuff today, but it's gone rancid. Some koolaid drinkers are lapping it up. Most folk with any brains are rushing to get out of debt and stocking up.
Seems the only economy that will soon to be running is that of government employees.
RE :”PMSNBC’s polls are as reliable as the Yugo.”
True, I notice that, but deep inside you believe this one too.
True, ignorance is an abundant commodity here in the US.
It is common sense.
When it comes to money matters - AMOUNTS MATTER. And the amount that matters is the level of burden on the economy.
Our concern should be over the ability to service the future debt created from our deficits. Whether a deficit is a concern is based on the level of the deficit, and whether we are able to grow our way out of it.
Obama's plans to have huge deficits through his massive spending increases - COMBINED WITH ECONOMIC POLICIES THAT WILL STUNT GROWTH - will lead to a large increase in the economic burden of debt service.
Reagan's deficits in the end were not a detriment because under Reagan the economy grew by one-third. The debt burden was not significantly higher at the end of his term (relative to the economy) than at the beginning.
With Obama, this will be starkly different, and the reason is that Obama is both racking up deficits far beyond what any prior PResident has done, AND he is proposing tax increases, cap-and-trade regulations, bailouts and subsidies and the worst sorts of welfare-system increases ... that combined will stunt the economy.
The numbers involved are staggering. The GOP put forward an alternative budget THAT WOULD BORROW $3.5 TRILLION LESS than the Obama plan!!
Its why my tagline asks: Why is Obama trying to bankrupt America with $16 trillion in spending over the next 4 years?
http://www.heritage.org/Research/Budget/wm2377.cfm
Answering President Obama’s challenge for critics to present alternatives, the House Republicans have offered a responsible budget blueprint that:
* Borrows $3.6 trillion less than the President’s budget;
* Would create $23,000 less debt per household than the President’s budget;
* Keeps federal spending just above 20 percent of the gross domestic product (GDP)—the same level as before the recession;
* Avoids all tax increases and even simplifies the overly complex tax code;
* Includes a temporary moratorium on earmarks; and
* Begins reforming the unsustainable costs of Social Security, Medicare, and Medicaid.[1]
(more details at link; worth reading to get a sense of the STAGGERING numbers involved in the Obama budget proposal)
Correct.
If you study the Congressional bills and votes, you’d find the obvious to be true: liberal Democrats voted for more spending. They did it when they were in a minority and they are doing it now as a majority. The result is plain. Spending under the Democrat-led Congress is going up by DOUBLE DIGITS.
Bush beat Kerry because Kerry came off as too weak and liberal to fight to win the GWOT. The economy was doing okay in 2004 so it wasnt a big issue, but nobody was voting for Kerry based on fiscal responsibility, as it would be absurd based on Kerry’s votes; Kerry never voted for less spending to close deficits. Contrawise, Bush got very little political gain from his going along with extra spending.
This blame-Bush-for-deficits are very liberal-friendly memes that are retreads of what Democrats have been saying all along. Throughout 2000-2008 the Democrats called for more and more spending, while at the same time blaming Bush for the deficits that such over-spending created. They got away with such hypocrisy and double-talk because they were unburdened with power in 2002-2006, and shared power in 2007-2008, and the media would never call them on their hypocrisy.
Fact is this: Bush and the Democrats TOGETHER share the blame for the over-spending of 2000-2008. Democrats held both houses of Congress for 2 of those years and another house for another 2 years; they plus the RINOs held fiscal conservatives to a minority throughout.
Now the Democrats own the WHOLE BALL OF WAX. Well, Democrats, show us what your made of - show us how to stop having deficits ... Oh wait, Obama have a ‘fiscal responsibility summit’ THE SAME WEEK that he signed the $800 billion in deficit-spending faux stimulus.
This was just one month after Obama signed the Democrat SCHIP expansion that tripled the spending on that program and added a tax on smokers to boot.
Oh, and then 2 weeks later he signs the $430 billion over-spending bill from the Democrat COngress that Pelosi and Reid didnt send to Bush, because it was a full $40 billion higher (ie 10% too much spending) than Bush would agree to. So they waited for big-spending Obama to sign it.
The Democrats - owning the whole ball of wax - have managed to sign up for more deficit spending in the next 8 years than what we’ve had in 200 years of prior American history.
That’s why I ask in my tagline: Why is Obama trying to bankrupt America with $16 trillion in spending over the next 4 years?
SPENDING MATTERS.
Deficits are a symptom, but the underlying problem is over-spending.
SPENDING matters. All deficits derive from over-spending that is not paid for from taxes.
SPENDING matters. It is SPENDING that determines the actual cost of Government.
Deficits actually don’t matter much compared with spending, since deficits are a result of accounting for how to pay for Govt. Deficits are taxation-by-installment-plan. We pay later.
Lowering deficits by increasing taxes does NOTHING to reduce the cost of Government; it just shifts the accounting forward on the price paid for that cost to the present day from a future one. As such, attempts to close deficits by higher taxes can create more pain in reduced economic activity for very little gain in terms of added revenue. The result, which you see in Cali, Michigan or third world countries, is a death spiral of Govt unable to pay for itself. The fundamental cause is not “deficits”, but a GOVT THAT IS SPENDING BEYOND ITS ABILITY TO PAY.
Changing tax laws and tax reform likewise can reduce burden of taxation if improved in a way to make taxes less punitive and more efficient (eg lower tax rates improve the economy via less tax avoidance), but tax reform and tax reduction can NEVER REDUCE THE COST OF GOVERNMENT. Only changing the SPENDING can do that.
School that pay for things with bonds could conceivably raise taxes to pay for those same things, but the burden to taxpayers is not reduced thereby. For such capital expenses, bond-based deficit spending has been used to good effect. But it remains that all spending is eventually paid for somehow, now or in the future. So SPENDING MATTERS.
The USA under obama may well enter in a zone of unsustainable over-spending. The CBO scoring on Obama’s budget is beyond tragic - $10 TRILLION in new debt in 8 years, driven by a Federal spending level that next year will eat up close to 27% of GDP. The Govt is taxing at the 17% level. Higher taxes will cripple the economy NOW, $10 trillion in new debt will cripple the economy LATER. That is a Hobson’s choice - the real answer: Fix the SPENDING.
That mismatch of price of Govt via taxes and cost of Govt through spending creates deficits. In the case of Obama, this is a huge yawning chasm.
Since 100% of spending eventually has to be paid for,
SPENDING MATTERS.
Focus on the SPENDING - fix the spending - and you can resolve the deficit and the problem with excessive burdens of taxation as well.
As Carville would put it: It’s the SPENDING stupid.
“The more immediate question is what % the fed govt budget is of GDP. “
Under Obama next year it will go to almost 27%!! That is higher than at any time since WWII.
Don't forget the gasoline, low interest rates and created money. That is the gasoline poured on the house and lit so we don't freeze, it's always fun for a while, they the house gets too hot, then it burns to the ground, then we borrow more wood to start over again.
And in 8 years, Obama's deficits will exceed what was done in the entire prior History of the United States:
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