The White House announced that the federal deficit this year is 445 billion dollars, a record.
Not included in that figure are the costs for our wars in Afghanistan and Iraq. Somehow, these war costs are not included in our regular budget.
In 2001, when Dubya was advocating his tax cuts to Congress, he estimated that they would result in a 262 billion dollar SURPLUS this year.
Looks like Dubya’s estimate was off by about 700 billion.
Its not even close to the biggest percentage deficit in history…you and me both know that…smarten up.
“percentage”?
It’s the biggest deficit in US history. Period!
Why are Republicans such hypocrites on the deficit? When the GOP is out of the White House, then deficits matter, the size of government is too big, and states rights always trump the federal government.
But as soon as Republicans take control of the White House, deficits don’t matter any more, the size of the federal government balloons, and the power of the federal government grows by leaps and bounds, and trumps state’s rights.
If Kerry becomes president, the GOP will do a quick flip-flop on the deficit, the size of the government, and states’ rights.
A Record Deficit
Editorial
August 5, 2004
THE BUSH administration announced last week its revised figure for this year’s budget deficit: $445 billion. This, or so the spin goes, is good news, because the original forecast was even higher – $521 billion. But outside budget experts had warned that the forecast was inflated, which tarnishes any celebration of the new number. Not that the administration was deterred. “This improved budget outlook is the direct result of the strong economic growth the president’s tax relief has fueled,” crowed Office of Management and Budget Director Joshua B. Bolten.
Mr. Bolten’s argument makes little sense: Economic growth has been no faster than the administration anticipated when it predicted the higher deficit. In any event, $445 billion marks the highest deficit ever (though the administration seems to be setting the stage for a new round of better-than-expected numbers just before Election Day). Only in the administration’s upside-down economic world could a deficit $70 billion higher than last year’s be hailed as progress.
Does this matter? The administration says not: The deficit, though “unwelcome,” is not high when measured as a percentage of the economy. Moreover, the administration assures worrywarts, the deficit will be cut in half in five years. The first assertion is true but misleading, the second likely to be both untrue and misleading. The administration is correct that the deficit as a slice of the gross domestic product is the more telling indicator. But the size of this year’s deficit is masked by the surplus in the Social Security trust funds; without that ample padding, as budget expert Stan Collender has noted, the deficit would be more than 5 percent of GDP rather than 3.8 percent, far closer to the worrisome 1983 record of 6 percent, when the Social Security trust fund was empty. So a true apples-to-apples comparison is hardly reassuring.
As for the promise to cut the deficit in half, the administration manages that feat only by ignoring known or likely costs, such as fixing the alternative minimum tax, funding operations in Iraq and paying for its announced defense plans. The liberal-leaning Center on Budget and Policy Priorities estimates the total in omitted costs at more than $140 billion – meaning that a more honest estimate of the 2009 deficit would be at least $370 billion and perhaps as high as $410 billion.
Worse, the Bush administration’s focus on 2009 – and for that matter Democratic presidential nominee John F. Kerry’s similarly suspect pledge to cut the deficit in half in four years – obscures the real problem: what happens after 2009 as baby boomers begin to retire. That alone – not to mention other budgetary pressures such as the repeal of the estate tax – means that any decline in the deficit in the next several years will be only a passing phenomenon. The trajectory after that points steeply up.
As the administration notes, tax cuts account for 29 percent* of the deterioration in the budget balance in the past three years. The lesson of the new deficit numbers is that these cuts are a cost the country cannot afford.
http://www.washingtonpost.com/wp-dyn/articles/A41149-2004Aug4.html
*Note- I believe that the 29 percent figure is an AVERAGE. When the figures are not averaged, I believe the Bush tax cuts account for over 50% of the deficit this year.
[quote]Lumpy wrote:
A Record Deficit
Editorial
August 5, 2004
THE BUSH administration announced last week its revised figure for this year’s budget deficit: $445 billion. This, or so the spin goes, is good news, because the original forecast was even higher – $521 billion. But outside budget experts had warned that the forecast was inflated, which tarnishes any celebration of the new number. Not that the administration was deterred. “This improved budget outlook is the direct result of the strong economic growth the president’s tax relief has fueled,” crowed Office of Management and Budget Director Joshua B. Bolten.
Mr. Bolten’s argument makes little sense: Economic growth has been no faster than the administration anticipated when it predicted the higher deficit. In any event, $445 billion marks the highest deficit ever (though the administration seems to be setting the stage for a new round of better-than-expected numbers just before Election Day). Only in the administration’s upside-down economic world could a deficit $70 billion higher than last year’s be hailed as progress.
Does this matter? The administration says not: The deficit, though “unwelcome,” is not high when measured as a percentage of the economy. Moreover, the administration assures worrywarts, the deficit will be cut in half in five years. The first assertion is true but misleading, the second likely to be both untrue and misleading. The administration is correct that the deficit as a slice of the gross domestic product is the more telling indicator. But the size of this year’s deficit is masked by the surplus in the Social Security trust funds; without that ample padding, as budget expert Stan Collender has noted, the deficit would be more than 5 percent of GDP rather than 3.8 percent, far closer to the worrisome 1983 record of 6 percent, when the Social Security trust fund was empty. So a true apples-to-apples comparison is hardly reassuring.
As for the promise to cut the deficit in half, the administration manages that feat only by ignoring known or likely costs, such as fixing the alternative minimum tax, funding operations in Iraq and paying for its announced defense plans. The liberal-leaning Center on Budget and Policy Priorities estimates the total in omitted costs at more than $140 billion – meaning that a more honest estimate of the 2009 deficit would be at least $370 billion and perhaps as high as $410 billion.
Worse, the Bush administration’s focus on 2009 – and for that matter Democratic presidential nominee John F. Kerry’s similarly suspect pledge to cut the deficit in half in four years – obscures the real problem: what happens after 2009 as baby boomers begin to retire. That alone – not to mention other budgetary pressures such as the repeal of the estate tax – means that any decline in the deficit in the next several years will be only a passing phenomenon. The trajectory after that points steeply up.
As the administration notes, tax cuts account for 29 percent* of the deterioration in the budget balance in the past three years. The lesson of the new deficit numbers is that these cuts are a cost the country cannot afford.
http://www.washingtonpost.com/wp-dyn/articles/A41149-2004Aug4.html
*Note- I believe that the 29 percent figure is an AVERAGE. When the figures are not averaged, I believe the Bush tax cuts account for over 50% of the deficit this year.[/quote]
http://www.house.gov/budget/fy05fd032504chart6.pdf
http://www.house.gov/budget/fy05fd032504chart4.pdf
http://www.house.gov/budget/fy05fd032504chart7.pdf
Thanks for playing.
If the deficit actually matters to you, I don’t see how you can actually vote for Kerry:
[Side note – the actual article has a great graph showing what I’ve been saying for years: The only government spending Clinton reduced while in office was on defense, and he reduced it enough to cover all his other increases, to the point he could correctly claim to have “reduced government” in total.]
Wall Street Journal Editorial
Fiscal Follies
August 9, 2004; Page A12
In a startling reversal of the usual party roles, John Kerry is staking his White House claim as a defender of “fiscal discipline” to counteract a spendthrift Republican Administration. It’s all the more startling because his publicly announced proposals would actually increase the deficit.
Now, there is a certain satisfaction here for those of us who advised President Bush to veto a spending bill or two. His decision to acquiesce to Congress’s worst spending impulses, from farm subsidies to Medicare, has given the Democratic challenger a chance to score political points simply by announcing his good intentions. It’s true Mr. Bush never campaigned for a smaller government, but after 9/11 he certainly could have argued that the government had to choose between guns and butter. Until this year, he’s gone along with both.
But none of this means the Kerry campaign deserves a free pass. According to last month’s estimate from the National Taxpayers Union, Senator Kerry is promising to increase net spending by $226 billion in the first year, or $6,066 per taxpayer over four years. And that’s a lowball figure. The calculation used the lowest cost estimate of each spending proposal. And it took at face value proposed spending cuts, such as ending subsidies to corporate farmers and reducing federal energy usage by 20%, which may be impossible to implement. Cuts in corporate welfare and the federal travel budget sound good, but they are campaign perennials that never seem to happen.
Even overlooking these flaws, how can Mr. Kerry blow out the budget so badly? It’s not hard if you promise to be all things to all people. On top of Mr. Bush’s huge education spending increases, the Democrats want to add $75 billion more in the first year alone. Another $56 billion is earmarked for public works and social programs. The Kerry health care proposals will cost another $71 billion that year, or $653 billion over 10, according to a former Clinton Administration economist. His original estimate was nearly $1 trillion until he found some miraculous savings.
Meanwhile, as part of his new image of toughness, Mr. Kerry promises to continue beefing up the military and homeland security, to the tune of $24 billion. Most of that will go for personnel benefits, but it will also pay for 40,000 more active-duty troops and to promote port safety, both respectable proposals.
The Democrats are trying to spark nostalgia for the Clinton era of supposed fiscal discipline. But remember the latter was achieved largely by cutting military spending. As the table nearby illustrates, Bill Clinton and a GOP Congress balanced the budget by withdrawing a “peace dividend” at a time when al Qaeda was declaring war. Mr. Bush, and presumably a President Kerry, must now walk that back up the hill.
Yes, you may be saying, but John Kerry says he can pay for all this by taxing those who make more than $200,000 a year – raking in $860 billion over the next decade. There are just a few problems. Current budget projections are based on current laws, which say the Bush tax cuts will phase out over the next five years unless Congress renews them. So the real take from soaking the rich a few years early will be modest, while the deficit projections will increase by a much larger margin if the middle-class tax cut is made permanent, as Mr. Kerry promises. Over the 10-year horizon his overall tax plan would reduce revenue by $602 billion, according to the Urban Institute.
The biggest canard is that Mr. Kerry will control spending by relying on spending “caps” and restoration of the “paygo” system, which required legislators to find offsets for any new tax cuts or spending. These only apply to the discretionary portion of the budget, not entitlements like Social Security and Medicare. The U.S. has just created the biggest new entitlement in half a century with the drug benefit for seniors, and Mr. Kerry wants to expand health spending still further. So paygo will do nothing to control the biggest sources of new spending.
Paygo really means that when the time comes to make the middle-class tax cuts permanent, there may not be enough money left in the discretionary part of the budget to find the offsets. So promises that tax increases will hit only the rich belong in the same category as Bill Clinton’s 1992 pledge to raise taxes only on those making more than $200,000 a year and impose a “millionaire surtax.” A year later that turned into a tax hike on those making as little as $114,000, while the definition of $1 million miraculously expanded to include those making as little as $125,000 a year.
While we agree that Mr. Bush has a lousy first-term spending record, he is now saying that in a second term he’d restrain non-defense increases. Mr. Kerry’s stated agenda is increased spending nearly across the board and tax hikes. The voters can decide which of these better constitutes “fiscal discipline.”
Lumpy,
You again illustrate TWO of the many things that demonstrate that your brand of left-wing leanings just can’t seem to get their hands around.
First, for some reason, economics seems to be way too difficult for you. At the end of the Clinton administration, the stock market (both the NYSE and Nasdaq) were extremely overvalued. The economy; driven by the explosion in technology, production, increased numbers of investors, among other things; was red hot. The problem was, that it was artificially hot. Everyone recognized that we could not sustain that type of growth (for example, just think of the increased numbers of home computers purchased. This was not going to be sustained as more and more households got one.)
So, when the economy begins to readjust after the Clinton administration, the total revenue begins to fall off. The reduction in capital gains tax receipts alone probably totalled billions of dollars. The also results in lost jobs, reducing income tax returns and other tax returns.
Then, you have September 11th. Suddenly, American markets must adjust to recognize the additional risk of major terrorist attacks. General operational costs go up due to increased security costs. Insurance rates jump in order to help off-set the costs of the billions lost in one major disaster. This again results in increased costs, over-valuation of markets which then need to be adjusted, and reduced tax receipts. (It is also these sorts of factors which caused Alan Greenspan, the man who many consider the engineer of the 90’s economy, to say that the slow economy is AT NO FAULT OF BUSH.)
Taking all of this into consideration, overall revenues go down. (And we haven’t even talked about the result in corporate finance that works to spread losses over a long period instead of a one quarter/year hit.) When the revenues crash, even if you reduce spending, you are going to run a deficit. Let’s say you make $50k/yr. If you suddenly get your pay cut to $30k/yr, you could cut $5k/yr from your lifestyle and you’re still running a $15k/yr deficit.
This explains why tax cuts, which spur on the economy, actually lead to increased revenues. A 10% tax on a spurred economy is worth much more than a 15% tax on a slow one. Why is this so difficult to understand?
The second thing that you point out is your desire to try to have it both ways. Listen, when the administration moves to cut government, you bitch about all those they are cutting out. When they don’t increase funding, you bitch because of deficits. When the don’t come out with new programs, you bitch because they are ignoring problems. When they do, you bitch because they are underfunded, because they contribute to the deficit, or because they are growing government.
No matter what, you bitch. You complain. You whine. You find meaningless authors who piss and moan all day about this or that. But you never solve the problem. You never explain how doing something else would solve the problem. And when you do put out a theory, you fail to consider all of the various implications of that idea. For example, okay, don’t go to Afganistan. Alright, where would Al-Queda be today? How much would we lose financially due to attacks by a stronger Al-Queda?
Instead, you bitch. You try to have it both ways, and it isn’t that simple. You are SO MYOPIC in your view that your comments fail upon any close inspection.
So everytime you come out and put out a post, I come along, shake my head and put up a post like this. Everytime you fail to address the concerns I bring up. You fail to discuss how all of the various factors, both Republican and Democrat, come into play. You’re like so many of my friends who bitch but will never step up to propose a theory on how we can address the problem.
You are the epitome of the quote, “It’s easier to sit in the back and take pot shots than it is to stand up front and dodge bullets.”
So just this once, just for me, explain this stuff. Put out your plan and talk about how you’ll address the effects it will have on the economy. Think rationally. Be realistic.
Do I think you will? No. Instead you’ll continue to fill these boards will ill-thought out, ill-prepared, one-sided, myopic viewed articles you and your liberal friends continue to send you.
I find it amusing that most people seem to want to attribute the performance of the economy to one man, the president of the united states.
But if you are going to look at a president’s record, at least remember that the fiscal years go October to October. So Clinton’s budget was in effect until October of 2001. Virtually all the economic damage that was done was done on Clinton’s watch. The bubble burst.
Also, remember that Clinton never planned for a budget surplus - his budgets projected deficits. He just lucked out, with easy money from Greenspan, the tech revolution, and perhaps gridlock.
If you are really worried about deficits you should consider what the war on drugs costs . Between law enforcement and jails we spend well over $100 billion a year with no end in sight. Over the last thirty years the money we have borrowed to fund this war has been substantial. Yet actual positive results have been nonexistant while collateral damage is all around us. Holland was bombed to the ground and had to be rebuilt by the US after world war two. Today Holland has a higher standard of living than America. They don’t waste their money on bad idea’s that do nothing more than fuel crime. Both the republicans and democrats are responsible for this mess. So laying blame about the cost is pointless.
As a side note. It’s ironic how democrats say Bush stole the 2000 election. Because, in Florida there are 400,000 african americans who as a group usually vote democrat who couldn’t vote in 2000. Because in Florida drug possession is a felony!
“Then, you have September 11th. Suddenly, American markets must adjust to recognize the additional risk of major terrorist attacks. General operational costs go up due to increased security costs. Insurance rates jump in order to help off-set the costs of the billions lost in one major disaster. This again results in increased costs, over-valuation of markets which then need to be adjusted, and reduced tax receipts. (It is also these sorts of factors which caused Alan Greenspan, the man who many consider the engineer of the 90’s economy, to say that the slow economy is AT NO FAULT OF BUSH.)”
This ‘9/11 marks a new era of terrorism’ is idiotic. The idea that the world has changed for the worse is simply government spin! Investor confidence and consumer spending could be seriously bolstered by simply stopping the ‘war of fear’ launched against the American public, yes it allows military growth in a sadly millitarising country but the other 200 million who aren’t in the army matter too. Al Quaeda has been around for years. They probably considered doing 9/11 for years, and if they are ever wiped out somebody will just take their place (look at the IRA and the ‘real IRA’). That is how the world is and was before 9/11. 9 years before that it was the communists who were the threat. In effect, then, the slow economy can be partly blamed on Bush because his reassurances of safety are always qualified with a ‘but we still haven’t got them yet’ keeping the public on a constant standby for the worst. Each one of these ‘red alerts’ may be great to get people elected but each one also chips away a little at consumer confidence. If you want a look at how powerful consumer confidence is just look at that there tech boom, or alternatively look at Japan’s economy over the last 15 years. And before anyone says anything yes I know consumer confidence was up 3.3 points last month fuelled by job growth. Looking at ABC News, confidence peaked in 2000, that being the most confident year since the 80s with a +29 average and a high of +38 points in January, 2 weeks after the millenium. 2001 was +4 overall, 2002 was -11, 2003 was -19. Now I’m not going to correlate with the war on terror, its not that simple, but the perception of these being turbulent times is not helping people spend, and much of that perception comes from government spin.
[quote]JohnGullick wrote:
This ‘9/11 marks a new era of terrorism’ is idiotic. The idea that the world has changed for the worse is simply government spin! Investor confidence and consumer spending could be seriously bolstered by simply stopping the ‘war of fear’ launched against the American public, yes it allows military growth in a sadly millitarising country but the other 200 million who aren’t in the army matter too. [/quote]
Actually, we are talking about two different things. When stocks are valued, they are valued based on the asset value of the company plus any other assets/liabilities. The American market is able to retain a higher value because we are less of a risk, than, let’s say Turkey. Since there is less risk of a major incident here (as compare to Turkey) there are fewer potential liabilities. As a result, stock prices can be higher.
Then you have September 11th and people begin to reappreciate what kind of risk massive terrorism holds. Suddenly a couple of $4.99 utensils can be used to cause billions of dollars in damage. This is an additional risk.
Since there are greater risks now, the market adjusts to reflect the additional potential liability. Furthermore, suddenly countries that are not the target of Al-Queda (say France or Germany) have risk levels which become comparably lower after that date. As a result, investors may look to those markets instead.
What you are talking about, in my opinion, is the consumer reaction to this factor. When the stocks readjust and the market falls, consumers become more worried. They see their holdings go down. As a result, they have less confidence.
So while you do bring up good points, you only are addressing the residual effects of something that has happened earlier in the chain.
Also, your comments about Bush are off as well. If you are strong on terror and proactive, then the risk of an attack goes down and the values can go up. If we had done nothing, then there would be lower market values and additional problems. So when the government issues warnings, it demonstrates greater safety, less risk, and can help the markets climb. This will, in turn, help consumer confidence.
Granted this is a simplistic model, but in my opinion it is relatively accurate.
Cory, you’re right, I was talking about consumer reaction, I should have made that clear, ‘the world being the same’ issue I was talking about was more the actual risk as opposed to percieved risk. The idea that Bush’s warnings give higher safety though? I’m sorry but I find it hard to believe that gives people any confidence, it simply increases the percieved risk, be it correct or not. Before there were no warnings and the public was optimistic, now there is something new every week and the public lives in the most fear since the cold war. That public fear seriously benefits a progressively militarising state as it allows the public to back extra defense spending and allows them to support things such as Iraq. The 'ol defense sectors having a good time isn’t it? Now tell me, does the military exist with the sole desire of protecting America citizens or has it got to the point where it exists purely to exist, because those in charge will not let it deflate in any way, even though it could easily do so without affecting America’s security?
[quote]JohnGullick wrote:
…The 'ol defense sectors having a good time isn’t it? Now tell me, does the military exist with the sole desire of protecting America citizens or has it got to the point where it exists purely to exist, because those in charge will not let it deflate in any way, even though it could easily do so without affecting America’s security?[/quote]
Believe it or not, a strong defense of the federation of states was one of the big reasons for having a federal gov’t in the first place. So to answer your question, Our defense industry exists because it is part and parcel to our federal gov’t. To let it go south like Clinton and Carter did is counter to who we are as Americans - much to the chagrin of the Euro-crowd.
Who are you to make any kind of judgement call on our defense needs?
Cory,
Very well thought out and sharply worded retort to lumpy’s crap. I too shake my head every time that guy posts something he pulled off of a leftist nut job website, but I have not been anywhere near as motivated as you to shoot him down so thoroughly. I fail to see how someone can subscribe so completely to liberal ideology to the exclusion of all else, but he’s not alone. His other post about how liberalism is responsible for everything good in our lives was so laughable I nearly choked. Unfortunately, he posted so much crap, I would have had to spend 2 hours picking him apart.
I also notice that he hasn’t answered your challenge…
[quote]JohnGullick wrote:
Cory, you’re right, I was talking about consumer reaction, I should have made that clear, ‘the world being the same’ issue I was talking about was more the actual risk as opposed to percieved risk. The idea that Bush’s warnings give higher safety though? I’m sorry but I find it hard to believe that gives people any confidence, it simply increases the percieved risk, be it correct or not. Before there were no warnings and the public was optimistic, now there is something new every week and the public lives in the most fear since the cold war. That public fear seriously benefits a progressively militarising state as it allows the public to back extra defense spending and allows them to support things such as Iraq. The 'ol defense sectors having a good time isn’t it? Now tell me, does the military exist with the sole desire of protecting America citizens or has it got to the point where it exists purely to exist, because those in charge will not let it deflate in any way, even though it could easily do so without affecting America’s security?[/quote]
Unfortunately – or fortunately, depending on your viewpoint – in the U.S. politicians have to justify programs that annoy citizens. Increases in security at the borders, in airports, in buildings, etc. need justification. As you have pointed out, so do major military operations. This is a function of having a government based on popular sovereignty.
However, all of that does not weigh toward whether the warnings are justified, or whether it is the correct policy. You’ve set up an implicit dichotomy between happy, go lucky consumers who are the epitome of ostriches with their heads stuck in the sand, and people hunkered down in bunkers. In reality, what we have seems to be a fairly good balance between making the public aware of the general threat, while not releasing or emphasizing too many specific details.
For instance, there is the distinct possibility that the U.S. could lose a city to a suitcase nuke sometime in the next decade. The probability is not approaching zero for that, when one considers the missing nuclear devices from the former Soviet republics, the purported number of terrorists on American soil, and how porous the borders are in certain areas. This is, however, not emphasized – rightly so, I think – because it would cause too much panic, and likely an unacceptable level of backlash against Muslims and Arabs.
The warnings, however, also have positive effects: they make the population more vigilant, justify necessary security measures and necessary (in my opinion anyway) military actions.
What I’m saying is that I’m sure they are balancing the positive and negative effects of the warnings they are giving. know you’re not a big fan of militarization, but consider a few things: 1) the defense contracters were set to benefit from a high level of spending necessary to restore the military to operational effectiveness after years of neglect by Bush I and Clinton anyway, irrespective of the terrorism stuff; 2) there really is an organized group of funded, trained individuals who would like nothing better than to completely disrupt our economy and society.
[quote]JohnGullick wrote:
‘the world being the same’ issue I was talking about was more the actual risk as opposed to percieved risk.[/quote]
Prior to 9/11, the perceived risk of an international terrorist attack on American soil was effectively zero. It had never happened. Because of this, Americans were accustomed to believing that the rest of the world did not matter.
So the world is not the same, because Americans are now far more likely to give a shit about what goes on with the rest of the world. The shitstorm on the other side of the ocean has finally reached our borders, and the blissfully ignorant have finally gotten their wake-up call.
Furthermore, prior to Clinton gutting the defense budget, the ACTUAL risk was effectively zero. It had never happened because we had been able to effectively prevent it. Unfortunately, certain people were unable to connect the dots between “budget” and “results”, so we sliced the shit out of the budget and expected the results to continue.
That was also a different world: in 1992, while I was working in the defense industry, we were pretty secure in the knowledge that there would never – COULD never – be an attack of this nature. But as early as 1995, we were guessing which terrorist organisation was going to pop America’s cherry. It was no longer a question of WHETHER, only of WHO and WHEN.
The Kerry Campaign’s Funny Math
By Kevin Hassett Published 08/13/2004
When I was directing the economic team for Senator John McCain in the 2000 presidential election, the most difficult task the team had to perform was a careful score of our candidate’s many proposals. The release of our plan was covered by the media at the time as an important test of McCain’s candidacy. Would his organization be able to present a detailed analysis of his plans that would withstand the careful scrutiny of the talented and aggressive Bush economic team? The challenge was a difficult one. Normally, big economic bills get scored by the massive Washington scoring institutions such as the CBO or the OMB. With only a tiny fraction of the staff, we had to produce something that survived the acid test.
The stress for all of us was very high. My most vivid memory of the campaign was an elevator ride in New Hampshire that I took with the McCains the night before the plan was released. A very serious Cindy McCain paused on her way to their room, looked me in the eye and said, “Kevin, the numbers better add up.” They did, but if they had not, the McCain team was convinced, the media would have had a field day with it.
One of the more curious developments in the presidential campaign is that the media has a strikingly different standard for Democratic and Republican candidates. Senator Kerry litters his stump speeches with countless proposals, but even now, has not provided voters with a careful accounting of how his plan fits together. That job has been left to others.
On the tax side, the Brookings-Urban Joint Tax Policy Center has provided a highly professional analysis of the static budgetary impact of Kerry’s proposals. Research & Commentary | Tax Policy Center
On the spending side, however, no similar study has been done. This omission is crucial, since a key claim by Senator Kerry is that his plan will significantly reduce the deficit. Without a careful analysis of his proposals, that claim cannot be evaluated.
To fill the gap, my AEI colleague Eric Engen and I just completed a detailed analysis of the Kerry spending proposals. http://www.aei.org/publications/pubID.21053,filter.all/pub_detail.asp
To perform the analysis, we combed through Kerry’s web site and public statements to assemble a list of every spending promise he has made, and then dug through the public record to find third-party cost estimates for each of his proposals. When necessary, we adjusted the period for the existing score to the 10-year budget window using standard techniques. When we could not find such cost estimates, we relied on numbers that were supplied by the Kerry campaign. When the Kerry campaign did not provide cost estimates, we set the score for that promise to zero.
Even with that generous accounting, the Kerry spending promises add up to an extraordinary amount of money. Our best estimate is that Kerry’s proposals will add up to between $2 trillion and $2.1 trillion over the next ten years. Since the revenue from his tax proposals relative to the current baseline is actually negative, this implies that the Kerry proposal would increase the deficit by perhaps as much as $2.5 trillion over the next ten years.
On August 3, 2004, the Kerry campaign responded to criticisms such as this with a revised budget plan. The main difference between the first and second plans is that the campaign now claims to be able to save about $300 billion from eliminating corporate welfare. Even if we include this rather implausible savings in our estimate, the net increase in the deficit associated with Kerry’s proposals is on the order of $2.2 trillion.
What would he spend the money on? According to our analysis, roughly half of this additional spending is attributable to Senator Kerry’s health care proposals that would add more than $900 billion in federal outlays. Education expenditure accounts for nearly one quarter of Kerry’s new spending, with almost $500 billion added over ten years. A $400 billion expansion of military personnel and benefits for veterans comprises most of the remainder of Kerry’s spending plans, with the balance distributed among numerous social programs and increases in international aid.
While making all of these promises, Kerry and his surrogates repeatedly have made the claim that they will restore fiscal discipline if elected. They have also promised to adopt a “pay as you go” rule that will guarantee deficit reductions. But they do this at the same time that they promise voters the moon and the stars. It is time for them to state exactly which of Senator Kerry’s promises are no longer valid, or stop all of the warm and fuzzy embraces of deficit reduction. They cannot have it both ways. Our just-released paper has highly specific scores for each of his proposals. Perhaps the Kerry team can tell us which ones are incorrect.
That will not happen for two reasons. First, the numbers are correct. Second, the media appear uninterested in the substance of his proposals, or the fact that they are catastrophically inconsistent. Perhaps, now that both the spending and tax sides have been carefully scrutinized by outside economists, the substance will begin to seep into the popular discourse. If it does, Kerry will have some explaining to do.
Kevin Hassett recently wrote “Kerry and Me” for TCS.
Just remember… Both sides have people in the congress that passes laws requiring money. Everyone is responsible for the budgect in washington, not just Bush. I find Bush gets blamed for all kinds of things as if he is the only one making the choices, and funny enough a lot of them Kerry voted for too!
[quote]moderatextreme wrote:
Just remember… Both sides have people in the congress that passes laws requiring money. Everyone is responsible for the budgect in washington, not just Bush. I find Bush gets blamed for all kinds of things as if he is the only one making the choices, and funny enough a lot of them Kerry voted for too![/quote]
Bush has not vetoed ONE SINGLE SPENDING BILL in four years as president. (I believe this may be a first in our history?) The power of veto is one of ways the president can control spending.
Bush may not have caused the shitty economy single-handedly, but he also hasn’t done anything effective to turn it around! Bush has only ONE idea for the economy: tax cuts, most of which go to the very wealthy.
As I noted, Bush’s 2001 tax cut was supposed to create a budget surplus, and that is how it was sold to the public. There is a saying “when you find yourself in a hole, stop digging”. One way to stop digging is to roll back the Bush tax cuts that went to the top 2% wealthiest Americans (what Kerry plans to do). By rolling back the tax cuts on the top 2% of the wealthiest Americans, Kerry would add 800 billion dollars in revenue, money that could be spent on new industries, job creation, job training, etc.
The fact is that Bush lacks ideas and vision for the future. His tax cuts turned a projected budget surplus (the biggest ever in our history) into our biggest-ever deficit. But since Bush’s presidency is centered around crony capitalism, don’t expect anything different when it comes to giving tax breaks to the wealthiest Americans, as well as tax rebates and handouts to Bush’s corporate campaign contributors.
[quote]Lumpy wrote:
Bush has not vetoed ONE SINGLE SPENDING BILL in four years as president. (I believe this may be a first in our history?) The power of veto is one of ways the president can control spending.
Bush may not have caused the shitty economy single-handedly, but he also hasn’t done anything effective to turn it around! Bush has only ONE idea for the economy: tax cuts, most of which go to the very wealthy.
As I noted, Bush’s 2001 tax cut was supposed to create a budget surplus, and that is how it was sold to the public. There is a saying “when you find yourself in a hole, stop digging”. One way to stop digging is to roll back the Bush tax cuts that went to the top 2% wealthiest Americans (what Kerry plans to do). By rolling back the tax cuts on the top 2% of the wealthiest Americans, Kerry would add 800 billion dollars in revenue, money that could be spent on new industries, job creation, job training, etc.
The fact is that Bush lacks ideas and vision for the future. His tax cuts turned a projected budget surplus (the biggest ever in our history) into our biggest-ever deficit. But since Bush’s presidency is centered around crony capitalism, don’t expect anything different when it comes to giving tax breaks to the wealthiest Americans, as well as tax rebates and handouts to Bush’s corporate campaign contributors.
[/quote]
Ummm, the tax cuts were not even the main cause of the deficit, let alone the sole cause of the deficit. The main cause of the deficit was the decrease in income tax revenue and capital gains revenue caused by the combination of the bubble bursting and the economic slowdown.
You see, with the “progressive” tax system we have in place and which I will assume, arguendo, you favor, revenues fluctuate more because the are more dependent on the fortunes of the richest citizens. The fortunes of the richest citizens are also those that swing to the largest percentages during booms and busts.
Thus, when governments spend like there’s not an end in sight during a boom cycle - especially increasing new “entitlements” or increasing spending in areas that are politically difficult to cut back - and then are faced with decreases in revenue during the bust, the deficits hit. California is the best case in point here – and it didn’t have the “massive tax cuts” to its state taxes that were enacted at the federal level.
If you don’t like this cycle, push for a flat tax – the revenue stream would be more stable, although it would still fluctuate with the fortunes of “the rich,” because 15% of $1M is much more than 15% of $100K.
Now, as to your claim of the “biggest deficit in history,” I’ll have to disagree. While I realize that journalists enjoy headlines that declare things to be “best in history” or “worst in history” because it is their job to sensationalize and catch attention, there are two small matters that simply listing the dollar amount of the deficit does not account for: 1) Inflation; 2) Percentage of GDP.
Inflation matters because you need to compare apples to apples – a dollar today is not the same measure economically as a dollar from 1974, or 1988 or even 2002 (although it’s much closer the closer you are temporily, given any inflation rate).
Size of GDP matters because the deficit is basically talking about debt. When you analyze the debt of a corporation or a person – or a country – it is important to analyze that debt given the assets of the entity. In other words, my being in debt several hundred thousand dollars is different from Oprah being in debt the same amount. In the case of a country, it’s debt as a percentage of the Gross Domestic Product (GDP) that is the relevant measurement.
Why does all this matter? Because, after accounting for the above, while we are running deficits, they are not “the biggest in history.” Nor are they really even close. I would like to see them smaller, but all this puffery is ridiculous.