August 26, 2009
POLITICS: Big Hole
Heritage's Brian Riedl crunches some of the still-staggering numbers on the Democrats' spending spree, including the fact that the projected 2009 budget deficit is larger than the Bush budget deficits for FY 2002-2007 (the six years when Bush had a Republican Congress to work with) combined. A worthwhile fact to recall when dealing with liberals who cannot comprehend how one could be more concerned about Obama's deficits than Bush's (of course, as always my concern is with spending, not deficits - deficits are just a symptom of overspending - but even then, Reidl's point that 43 cents of every federal dollar spent at present is deficit spending is pushing into worrisome territory, especially with important sources of funding drying up). He also walks through the usual budget gimmickry, like how 75% of Obama's projected budget "savings" are from not having another surge in Iraq each year, which was never anybody's plan (note that these are budget numbers that don't include the cost of the health care plan, either).
This year, President Obama will spend a peacetime-record 26 percent of GDP....The 22 percent spending increase projected for 2009 represents the largest government expansion since the 1952 height of the Korean War (adjusted for inflation).
Digest this, as you consider how many of Obama's massive spending plans haven't even been passed yet:
Federal spending per household (adjusted for inflation) remained constant at $21,000 throughout the 1980s and 1990s, before President Bush hiked it to $25,000. In 2009, Washington will spend $30,958 per household -- the highest level in American history -- and under President Obama's budget, the figure will rise above $33,000 by 2019.
Read the whole thing. H/T Mark Tapscott.
Remember: Obama was the man who twice looked the nation in the eye in the October debates and pledged a net reduction in federal spending.
It is almost like he was lying about his plans and agenda during the campaign.
I can't find it now, but there's a chart around which lists out spending broken down to new and continuation of the previous administration. There is very little that is not just a continuation - the bulk of this was the stimulus.
"In 2009, Washington will spend $30,958 per household -- the highest level in American history"
I'm going to guess that in 2008, it was the highest level in American history. And 2007 before that. And 2006 before that.
Yet, I can find rare complaints among the people who bring it up now. I can't seem to find Mark Tapscott's previous articles on this.
"net reduction in federal spending"
I'm willing to give it 2 years. Mostly because with a combination of overly-inflated GDP due to borrowing, as well as not knowing how savings or tax income are going to stabilize, we have no idea what's going to happen. To frantically cry about excess borrowing (for one year) due to a massive falloff in revenue is just silly. Once things improve, we see where we are going.
If you remember, the Republican alternative budget for this year was pretty much in line with Obama's. If they could find some way to balance the budget this year (remember, >75% is Social Security/Medicare/Defense/Interest) I'd be impressed. No such proposals exist from them.
I'm most glad that I never, ever have to hear that 'Reagan proved deficits don't matter' again. Hopefully I can hear 'Regan's growth of government while cutting taxes set a bad precedent for 30 years'.
It is fascinating how people just keep repeating the big lie. Hey guys cuts in tax rates does not mean cuts in tax revenues.Matter of fact tax revenues increase with tax rates decrease-why don't you do a little research instead of recycling DNC talking points. BTW- are you aware that there was deficits for the preceding 12 or 13 years before Reagan became President? Are you aware that they were talking about the deficit problem under Carter? that Carters last deficit by GDP% would have been 500-600 billion today-but you know what just keep repeating what your masters told you.
Found my chart: http://business.theatlantic.com/big%20debt%20graph.gif
What big lie?
"Matter of fact tax revenues increase with tax rates decrease-why don't you do a little research instead of recycling DNC talking points"
Arthur Laffer, tax cuts do not increase revenue
And again, "Well, in some areas it's clear that tax cuts don't increase revenues. But it's clear that in other areas they do, James. I mean, for example, capital gains" (note: this is dependent on rate, and cannot be truly measured)
Greg Mankiw, Bush's CEA Chairman, "there was no credible evidence that work effort would rise by enough to cause tax revenues to rise in the face of lower tax rates"
""Principles of Economics"
Edward Lazear, Bush's next CEA Chairman, "“I certainly would not claim that tax cuts pay for themselves"
Megan McArdle, journalist "spiked a book review because I said that the Laffer Curve didn't apply at American levels of taxation"
David Stockman, Reagan's budget director.
"The way they talked, they seemed to expect that once the supply-side tax cut was in effect, additional revenue would start to fall, manna-like, from the heavens. Since January, I had been explaining that there is no literal Laffer curve."
And no honest economist could argue that is was only tax changes and not overly low interest rates (and our bubble over the past 5 years) that truly moved revenues. This will be only seen after a few years.
I'm going to go with none of these are members of the DNC. Aside from factcheck, since facts have no home in the RNC.
"Are you aware that they were talking about the deficit problem under Carter?"
Who cares? What does this matter at all to my statement castigating Reagan for growing government while cutting taxes, and the problems this set up for generations? And that 5 years after the worries about Carter's deficit, Reagan was well over triple as bad?
'National Debt as a Proportion of GDP'. Make an approximation of 1981, or 1982 depending on how you treat fiscal years.
If you cannot match this up to my statement there is something wrong with you.
And you are outright lying about Carter. His last deficit was around $60B ish, with GDP of ~$2.8T. Compared to 2008's $14.4T GDP this would mean it would be $300B - and that is an overly inflated GDP due to temporary debt. But again - what does it matter? Or is it just the reflexive defense of Reagan?
Too many links given to dch countering his claims, got stuck in the filter Crank. Thanks.
"I can't find it now, but there's a chart around which lists out spending broken down to new and continuation of the previous administration. There is very little that is not just a continuation - the bulk of this was the stimulus."
I'm sure you are right. I tend to think the stimulus was a necessary evil, so I'm willing to tolerate it. But I'm not going to tolerate much more of it.
As for the Laffer curve, it's become too much of an article of faith for supply-siders. Will tax cuts increase revenues? The answer is sometimes. It depends on (1) the shape of the curve, (2) where you are on the curve, (3) and a whole host of other variables that can affect tax revenues. In other words, the relationship is spurious and subject to diminishing returns. The lesson from Reagan is not so much that the Laffer curve is wrong, but rather that you can't balance the budget, increase spending and lower tax rates at the same time.
The problem with the modern Republican party is that they are just as prone to spend money as the democrats, just on different things.
FYI the balanced budgets of Clinton and Bush were the result of tax rate cuts while spending was increasing. Of course there is the issue that we massively underfunded our military/intelligence needs under Clinton. I agree with you regarding republican spending habits and I would just note that there is a difference between conservative, libertarian and republican. Regarding the stimulus everyone knows these things don't work, they have never worked. It is either used to " show" the people that their leaders are doing something or, as is now becoming apparent, to ram through partisan polices under the guise of an emergency and payoff constituent grtoups.
Where are the thousands of shovel ready projects that were just waiting for funding to immediately start?????? They don't exist, Obumbler lied.
"FYI the balanced budgets of Clinton and Bush were the result of tax rate cuts while spending was increasing"
I'd be very skeptical that you could find a study that can establish that with any degree of confidence. There are too many intervening variables affecting revenues. You can believe if you want, but you can't prove it.
"Of course there is the issue that we massively underfunded our military/intelligence needs under Clinton. . .."
Well, this is what I am getting at. If I replace that with: "Of course, there is the issue that we massively underfunded (pick your democratic favorite - health care, national parks, the environment) needs under Bush" - then you have the democratic party. Each party has it's pet spending projects.
"Regarding the stimulus everyone knows these things don't work, they have never worked."
Well, no. The Keynesian multiplier effect works, no one really argues with that. They may disagree about the size of the multiplier, the timing of its effect, or disagree whether we should use that policy tool, but the multiplier itself is relatively stable economic concept.
"Where are the thousands of shovel ready projects that were just waiting for funding to immediately start?????? They don't exist, Obumbler lied."
I can't speak for other states but, there were plenty in Connecticut. I posted about that before. Clearly, this whole thing wasn't perfect in its execution, and it wasn't going to be. Most of the spending was left to the states. Some had more shovel-ready projects than others.
Now we're supposed to believe Reagan didn't stimulate the economy through massive increases in defense spending, which increased the nation's deficit to record levels.
Whoring for the rich never gets old, does it boys?
1st-thanks for the reasonable tone.
Under Clinton, I believe in his last 2 years, the capital gains tax rate was cut. The actual revenues far exceeded the projected revenues with the result being the " balanced budgets". A tax rate cut resulted in a large increase of tax revenue.
Every economic downturn is already underway before any government picks up on it. By the time the govt notices it and then reacts-the economy has already bottomed out and is headed towards recovery. In 1993, Clinton tried to pass a stimulus-it was voted down. The Dems thundered how this was going to prolong the recession... reality the US was already in its 2nd year of a recovery. Look at the great depression and how all the govt intervention extended and made it much deeper. All the massive spending over the last 8 months is only going to result in massive deficits, massive inflation starting in the next year or so and pretty much guarantee a double dip recession.
Finally, I can tell you as an NYC resident I have seen absolutely no new govt funded projects started in the last 7 months and the unemployment rate has now increased by over 20% what we were told was going to be its maximum if the stimulus passed.
"Under Clinton, I believe in his last 2 years, the capital gains tax rate was cut. The actual revenues far exceeded the projected revenues with the result being the " balanced budgets". A tax rate cut resulted in a large increase of tax revenue."
I'd like to see the study.
"Every economic downturn is already underway before any government picks up on it. By the time the govt notices it and then reacts-the economy has already bottomed out and is headed towards recovery"
Yes, this is very good reason to oppose Keynesian-style stimulus. I don't like using fiscal stimulus in minor economic downturns for this very reason. It wasn't necessary in 1993. I like to let monetary policy take care of the minor stuff. And let's not forget, monetary policy is doing most of the work this time as well, as it should.
This current downturn, in my mind, was serious enough to warrant fiscal stimulus, particularly given the risk of serious deflation, which hasn't entirely abated. This is going to be a very protracted downturn. The economy is showing signs of recovery, but the bad news is not going away for awhile.
You are right though - we can't have a 10 year stimulus program. Our ability to respond to these crises has much improved since the 1930's. The markets have to clear at some point, we just don't want them all to crater at once.
Berto, I actually forgot that point about Reagan. He was very much a Keynesian in action if not in words. Defense spending is subject to the Keynesian multiplier as any other kind of spending. So whatever growth you attribute to Reagan, how much is it from spending, and how much from tax cuts? It's empirically impossible to sort any of that out.