Maxed Out

Via Atrios comes a disspiriting graph, produced by Reuters, illustrating our projected even-more-of-a-record-than-we-thought record defecits:

And no, it's not just the War on Terror putting us in the hole: the percentage increase in non-defense discretionary spending has been almost as great as the defense increase in recent years. Of course, the central culprit here is the recession, which probably just has to be waited out. An unfortunate feature of politics is that it's almost never a live option for an elected official or candidate to say: "yep, this is pretty bad, but I don't have a brilliant recovery plan—we just have to wait for the economy to bounce back."

Comments

[joe]

"I prefer debt over taxation." Yes, and I prefer consuming large amounts of alcohol to having a hangover.

"I would rather pay a little more in interest in the future for this year if that forces Congress to eventually reduce the size of government." And if I eat an entire cherry pie every night before bed, I'll get so fat that I'll have to go on a diet.

[Shiton Taxpayer]

"Yes, and I prefer consuming large amounts of alcohol to having a hangover"

You obviously prefer to steal from the Economist.

This anology is meaningless. I prefer an alcholalic to stop drinking. If that is not possible I would rather he borrowed the money to finance his habit rather than directly taking my money. Rather than subsidizing his habit directly I would rather he was hounded by creditors until he sees the error of his ways.

"And if I eat an entire cherry pie every night before bed, I'll get so fat that I'll have to go on a diet."

No, you will eventually run out of credit to get the pies. And you can then stop eating as much. But most likely you will just scare your spineless whore taxproducers to give you even more resourecs to waste.

[Shiton Taxpayer]

" Problem is, with is profligate spending, they're not tax cuts at all - merely deferrals, with interest."

But they are tax cuts. You pay less in taxes.

What you are really saying is that it is highly likely the goverment will not cut spending and will simply raise taxes to cover the increased interest costs or inflate the debt out of existance (same thing really). A vote against tax cuts is really just a bet that Americans will remain spineless sheep and continue to subsidize this madness.

A safe bet for sure, but not a very sound moral position.

[jacob dreyer]

shiton:
i the US government loses credibility to the point where nobody will lend it money, the world as we know it will die. it'll be like a modern sacking of rome.

and the dark ages doent help reasonable people.

planning to create disaster is stupid. the republicns want to cut spending? why wait for some far off eventuality when they control all of the three branches. they can cut it now if they like.

[Shiton Taxpayer]

" the US government loses credibility to the point where nobody will lend it money, the world as we know it will die"

If it reaches that point, it deserves death. Hopefully Congress will get a clue first and cut spending.

"planning to create disaster is stupid. "

Blame Congress for spending money it doens't have.

" the republicns want to cut spending? why wait for some far off eventuality when they control all of the three branches. they can cut it now if they like."

No they can't. The American public would be driven to a frenzy by the Left in protest. It would be political death for most GOP Congressmen. So they have fight a guerilla war with tax cuts.

[Buck]

Can you be pro war on terrorism / Iraq, and still not be pro Bush?

George Bush = deficit, with or without the W

[Russ Goble]

Please do not take my comments to defend Bush's budgets. I believe we need massive spending cuts. But not spending cuts for the sake of cutting (even though that's still preferable to spending increases). What I wish we had is a real debate on WHAT we are spending our money on and whether or not that expenditure is something the taxpayers should pay for. Neither party has taken on that debate, though the Republicans are closer to it than the Dems.

What I have a problem with is the cult of the balanced budget. There are few policy debates that allow more misunderstanding and mistruths to become conventional wisdom than budget discussions. Both parties lie through their teeth come budget time and the media is flat dumb when it comes to understanding the actual process. Oh, the media may understand the "politics" of the process but they sure as hell don't understand the logistics or the economics of the budgeting process.

Bush is proposing these spending increases for 3 main reasons that I see.

1. This is probably the most important. He's a compassionate conservative. As many conservatives have noted this a nice way of saying a big government conservative. In other words, Bush doesn't have a problem with a big government, he just has a problem with a big liberal government.

2. He's pulling a Clinton-style triangulation. The Education Bill & the Medicare Bill were quite simply aimed at taking issues off the table, principles be damned. They were meant to show that Bush "is doing something." In other words, cynical presidential politics.

3. He, like Reagan before him, buys into supply-side economic theory a little too much. In other words, he believes the budget will come into balance when the economic growth that tax cuts genuinely help spur generates larger than expected revenues. While I believe tax cuts do increase government revenues, Republicans tend to overestimate just how large the increase will be. And in practice, they never actually frickin cut spending and rarely slow the pace of spending, all rhetoric aside.

Again, it is government spending that causes deficits. I'm perfectly willing to accept that Bush has caused the deficit to expand (along with the recession). What I won't accept is that it was his tax cuts that "caused" the deficit.

And again, just because you have a surplus or a balanced budget doesn't mean you are doing craps worth of a job running the government. Like I said before, the obsession with balanced budgets avoids the debate that really matters, the debate about the size and scope of government. This is a primarily libertarian magazine. I would hope some of it's readers can grasp that. Deficit discussions are smoke and mirrors policy debates.

The simple fact is that we have had budget deficits for all but 4 years out of the last 30 years. And during the last 22 years, our nation has seen unprecedented sustained economic growth which included both record lows in unemployment WITHOUT inflation, not to mention low interest rates (in fact, some could argue dangerously low interest rates). My point is that deficits as the great boogieman is simply a load of bull.

And the fact that the original author of this post linked to a chart from hard core partisan Democrat like Altrios really is quite relevant. Altrios is only complaining about the deficit to score political points. His solution to the deficit however I guarantee you would not be to the liking of many of Reason's contributors. After all, outside of defense spending, Democrats as a party have not had any problems with spending increases in at least several generations and it is Democrats who believe tax cuts are "giving" money to people instead of "giving money back."

[Russ Goble]

" the US government loses credibility to the point where nobody will lend it money, the world as we know it will die. it'll be like a modern sacking of rome."

I know this kind of thinking is all what we were taught in Econ 101, Finance, and untold other classes in school. ANd it is theoretically sound. HOwever, it lacks the ultimate measureing stick of reality. That argument you put forth is the same one that has been put forth for a VERY LONG TIME. Yet, it hasn't happened.

How is government debt financed? Through T-Bills. And people buy those T-Bills as an investment, not as a "lending money so the U.S. can finance it's bloated welfare state." The simple fact is this:

Social Security will be reformed or done away with, cocaine will be legalized, a gay man will be elected president WAY before the U.S. will ever default on a T-Bill. Why? Because it would bring the entire financial system crumbling down and that's just plain bad politics for EVERYBODY.

It won't happen. The 30-year T-Bill is the "risk free" bellweather of the financial markets. It's the "beginning" rate of return that all other investments are based on. Every investor on the PLANET views it as the safest investment on the planet because they know the U.S. government is good for it.

We've had record deficits for a long time now and there has been no evidence that investors were squeamish about investing in U.S. T-Bills because they weren't "safe" or that our ability to pay was questioned. It hasn't happened.

Hell, Japan, Canada & most of Western Europe (pre-EU stability pact) carried annual deficits and larger national debts that were much larger as a percentage of their GDPs than our deficit & national debt at it's height and those governments still financed there debt with no problem. Why? Because there will always be a market for government securities that have at least somewhat of a democratic free market propping them up.

Jacob, your comment is sound IN THEORY but it simply isn't the case in the real world.

[jacob dreyer]

"Social Security will be reformed or done away with, cocaine will be legalized, a gay man will be elected president WAY before the U.S. will ever default on a T-Bill. Why? Because it would bring the entire financial system crumbling down and that's just plain bad politics for EVERYBODY."

so we are in agreement then- if the US treasuy gets to the point where it can't collect money this way (which i think is kind of the point) it would "bring the entire financial system crumbling dwn."

[Rob]

Russ:

I tend to agree with your analysis that Uncle Sam will never default on a T-bill, because the consequences would be too awful. But are we really wise to discount a possibility just because the resulting outcome would be so disasterous?

My (conspiracy?) theory on the annual deficit debate is that it's a convenient sleight-of-hand for the gummint. By focusing on the short term, they've kept most of the public from understanding the size and scope of the liabilities that the Congress has taken on.

We're throwing around analyses of the current national debt in proportion to the GDP, but what will happen in ~10 years when Congress no longer has surplus Social Security revenues to rosy up the picture?

Personally, I can't wait for the day of reckoning. Even though those of us who were born after 1960 are going to take a royal screwing, I hope I'll get to see the public at-large recognize Social Security as the giant shell game that it is.

[Anonymous]

Or to reformulate: I have a Treasury bill I want to sell you. It's based on "the full faith and credit of the US Government," also by the way, we'll be paying you in dollars, which are also backed by "the full faith and credit of the US Government." This is all fine and good of course as long as you believe in "the full faith and credit of the US Government." Russ Goble's point is that the world can't afford NOT to believe in "the full faith and credit of the US Government." Well, reasonable people can disagree.

[Russ Goble]

Jacob said: "so we are in agreement then- if the US treasuy gets to the point where it can't collect money this way (which i think is kind of the point) it would "bring the entire financial system crumbling dwn.""

Yes, we are in agreement IN THEORY. My point is that we are still a long way off from being at that point. Here's what I mean. We are actually paying off debt every year. And we are issuing new debt every year. THese are in the form of T-Bills. T-Bills have different maturity's from 30-years to 30-days. If you want to ensure that the debt is paid off, it's real simple. Prohibit the issuance of any T-Bill with a maturity over 1-5 years. While, this would probably have some short term impacts on financial market prices, I think that would even out. Also, all really long term debt would be paid off in 30 years. And we'd be a lot less able to finance a 7 trillion dollar debt with T-Bills that are maturing every couple of years. But, because we have such different spreads on when debt is due and when interest payments are made we (meaning our budget folks) can "manage" it given the size of our overall economy. We are not near the point where we can't afford to pay these off. After all, if we got to that point, we'd have several billion dollars worth of cuts that could be made to ensure that the debts get paid. When they start mothballing the Navy or selling of the exhibits at the Smithsonian, you'll know we are the breaking point. We're not close to that yet.

Think about it. Most people own houses that are worth far more than they make in any given year. Total debt (including credit cards, mortgages & car loans) is at least 3 times anyone's annual income and probably closer to 4 times. Yet, we can manage that level of debt as long as we ensure that we pay our bills on time and don't choose to buy a TV instead of paying the car note. We can manage it if we make paying our debt a priority. Most individuals default because they don't make paying their debt the number one priority. The U.S. government on the hand makes paying it's debt THE number one priority. And that's why investors still buy the T-bills. Because it's a much safer investment than investing in you or I.

My point is that the number one priority of our government budgeting people is to make sure the debt is paid. Everything else is secondary.

Which brings me to this:

Rob said: "My (conspiracy?) theory on the annual deficit debate is that it's a convenient sleight-of-hand for the gummint. By focusing on the short term, they've kept most of the public from understanding the size and scope of the liabilities that the Congress has taken on."

I agree totally. My one beef with your statement is the use of the word liability. My entire point with this line of debate is that liabilities (in terms of debts) is the part of the debate I wish to change. I don't want people spending more time discussing our "ability to pay". What I want is a discussion on our "right to pay." Or more to point: "Should we pay."

Just because we can afford social security (right now anyway) doesn't make it a good system. Just because we can do some reforms to ensure the long term viability of it (increasing the retirement age, or means testing) doesn't make Social Security any less immoral, or any less of a ponzi scheme. It was billed from the very beginning as a social contract, as a benefit/entitlement to our citizens. Yet, it is a tax, pure and simple. It is welfare for old folks. It is a redistribution of income from people currently working to those that are not. That's how it is in practice. The ability to pay for it is irrelevant. It's wrong. It's immoral. It's a bad use of tax payer dollars. That's what I'm driving at here. And not just with social security, but with every level of our government.

Every debate that focuses on deficits focuses on "whose" fault it is or ability to pay. Yet, that's the wrong question. Deficits are merely a sympton of our addiction to government spending. Yes, I believe deficits are meant to change the subject as Rob implied. It's not the liabilities that they don't want to talk about, it's the entire scope of the government that they don't want to talk about.

[Russ Goble]

"This is all fine and good of course as long as you believe in "the full faith and credit of the US Government." Russ Goble's point is that the world can't afford NOT to believe in "the full faith and credit of the US Government." Well, reasonable people can disagree."

Yes, I guess that's what I'm saying. But don't look at is a snide remark that having faith in the government to pay it's bills is naive. It's not faith. It's simple facts. The U.S. hasn't defaulted. There is no evidence other than pure cynicism to believe they will default. Like I said before this isn't a unique issue to the U.S. nor is it unique to the U.S. in 2003. All western market oriented democracies have problems with fiscal responsibility (due to bloated welfare states). Japan's is probably the most severe. And you would think their government securities would be treated like junk bonds as bad off as they are. Yet, they are not. They are more like A or B grade corporate bonds. Why?

Because it's not a matter of faith, but a matter of evidence that these countries put paying their debts as the highest priority. Hell, even if you are cynic, the very reason it is such a priority is because they know they can continue to spend forever. Seriously, show me a case where deficits actually caused malicious harm on an economy that was relatively free. It simply doesn't happen (and the Argentina's of the world don't count as they were never a mature free market economy).

Again, I understand a lot of what you guys are saying. But, it's all theoretical. It doesn't match reality. Bottom line is worry about what we are spending our tax dollars on more than whether or not we can pay for it. Trust me. It will get paid for.

[joe]

OK, Shiton. I won't make you pay for the drinks. I'll just put them on your credit card. Then, by your logic, you're not paying for them.

Since making people in the future pay for services we recieve today is ok with you, I trust you won't be posting on the need to reform Social Security, and the horrible unfairness to future generations that will result from a prescription drug benefit.

[Shiton Taxpayer]

"OK, Shiton. I won't make you pay for the drinks. I'll just put them on your credit card. Then, by your logic, you're not paying for them"

As if I have personal choice in the matter! But as long as you are helping yourself, I would prefer you used the credit card -- along with its debt limits -- rather than spending my food and gas money from now until enternity.

"Since making people in the future pay for services we recieve today is ok with you, I trust you won't be posting on the need to reform Social Security, and the horrible unfairness to future generations that will result from a prescription drug benefit."

First of all I plan on living for a while, so I will be the one who pays. Secondly, both of those systems are inherently corrupt schemes that are doomed to failure. I would rather eat and send my kids to college while I still can rather than pay my entire paycheck to the bureaucrats.

As for the future, either the whole system will collapse, Congress will cut spending or we will be taxed/hyperinflated into 3rd-world status. The first and last option seem terribly likely, so you can excuse me for living for the moment.

[jacob dreyer]

russ:

i am not debating that it takes a long time until the US govt gets to the breaking point.

i am saying: by definition, a theory which only works at the time when the US govt is at the rbeaking point, will at that point, however distant it is, "send the financial system f the world tumbling down."

[joe]

Oh, I get it, Shiton. See, I've been assuming that we're trying to figure out a way that the next generation won't be screwed. By assuming that they will be, no matter what, you've got a much easier task than I.

With your outlook, I'd be passing my credit card around the bar, too!

[Shiton Taxpayer]

"See, I've been assuming that we're trying to figure out a way that the next generation won't be screwed."

We all know the way. Reduce the size and cost of government. But that isn't what YOU want, eh? And neither does the American people or Congress. Reality is a bitch and this is going to be a cold cup of coffee for some people.

[Anonymous]

Trust me. It will get paid for.

Trust you? That sounds like the government speaking 😀 And although there are no guarantees, I was under the impression that the US (since Nixon) is unable to default, since it left the gold standard and can print its own fiat currency?otherwise known as the US dollar! One hopes for the sound management of said currency, but discipline seems awfully lacking and that lack, dare I say, appears politically motivated and short-sighted. As Sanchez notes above, "An unfortunate feature of politics is that it's almost never a live option for an elected official or candidate to say: 'yep, this is pretty bad, but I don't have a brilliant recovery plan?we just have to wait for the economy to bounce back.'"

[Lefty]

Mr. Goble, how come when you pay the rent you don't bitch that it's your money and you want it back?

[Russ Goble]

Wow, no wonder your name is "Lefty." You basically summed up everything that is wrong with the political left's thought process all in one sentence.

You said in response to my referring to my tax dollars as MY money: "Mr. Goble, how come when you pay the rent you don't bitch that it's your money and you want it back?"

Because:
A) I get something in return.
B) I chose to rent or buy. I chose how to rent. I chose where to rent. And my money I spend is the price I choose to pay via my interaction with the free market.

And in case you respond by saying I'm getting something in return with my tax dollars, I'll just say (without going into to much detail) that most of that money I'm putting in is benefitting someone ELSE. I'm willing to pay for certain things. I didn't say I want all my money back. I said government needs to reduced in size. I didn't say it should be gotten rid of altogether.

It really shouldn't be that hard to understand.

[Russ Goble]

Jacob said: "i am not debating that it takes a long time until the US govt gets to the breaking point.

i am saying: by definition, a theory which only works at the time when the US govt is at the rbeaking point, will at that point, however distant it is, "send the financial system f the world tumbling down.""

Agreed. The best way to prevent that day from coming is to reduce government spending and alter our spending priorities. Not to worry about wether or not we have a balanced budget or not (which is probably the 10th time I've said that here). So, yeah, I guess I'm with you.

[Lefty]

"So", said the guy to the whore, "we've established what you are. Now we're just haggling over the price."

[Russ Goble]

Yeah, Sanchez is right. Politicians tend not to say that we should just wait out recessions. Bush senior tried and we know how that all worked out.

Another thing politicians do not do is "predict" recessions in the budget forcasts. So when one happens, there's bound to a reduction in tax revenue, which is a function of GDP. And this will likely result in a deficit because another thing politicians don't do is reduce spending. The last time that was tried the government was shut down and Clinton and the press reamed the Republicans for "savaging" our federal "priorities." And if memory serves, Gingrich was displayed on the cover of Time magazine as Ebennezor (sp?) Scrooge.

[Anonymous]

http://billmon.org/archives/000353.html

---
But there's one final ingredient that also should be folded into the batter: state and local government. As bad as city and state finances were in the early 1990s (and the early 1980s), they're a damn sight worse now -- in part because of reckless financial behavior, but also because the politicians in Washington have made a habit of stuffing unfunded spending mandates down the throats of politicians who are not in Washington.

State and local government have to borrow from the same pool of savings the U.S. Treasury draws on. And the economic effects of that borrowing are identical. So it makes a certain amount of sense to combine federal AND state AND local budgets to arrive at a net government deficit. And when you do that, you find America's fiscal situation already is about as bad as it has ever been -- even before that looming wave of red ink comes smashing down on our heads over the next two years:

[chart]

All this still leaves us with the $64,000 question: Do these enormous deficits matter? There is a respectable case to be made that they do not -- at least in the short term. They may even help. Running big federal deficits in hard economic times is one of those "automatic stabilizers" that help keep recessions from turning into depressions. At this point, they're the main thing separating Shrub from Herbert Hoover.

But when structural deficits -- that is, those not caused by the normal ups and downs of the business cycle -- get out of control, the economic effects can be just the opposite. Bond yields can rise, choking off private investment, making an economic slump even worse. This, of course, was the source of Jim Carville's wistful comment than in his next life he wants to be reincarnated as the bond market, because then he'll be able to intimidate the hell of out of everybody.

This argument hasn't had much traction lately, as bond yields have fallen to 50-year lows even as the deficit has gone up and up and up. In part, this reflected the eagerness of foreign investors to supplement our meager pool of domestic savings with their own. It was also a credit to the Fed's ability to communicate it's gnawing fear of deflation to fixed-income investors, which for a time made even record low bond yields look not low enough.

But the combination of soaring deficits and plunging bond yields always was one of those marriages that makes friends and relatives on both sides shake their heads and say: "It'll never last."

[Gene Berkman]

The writers who want to defend the Republicans might make thepoint that the deficit does not matter, what matters is the total burden of government.
Well, we would not have a deficit in excess of $450 billion unless the entire federal budget were huge - almost $2.5 trillion per year now that Republicans control Congress & the White House.
As for the bad economy increasing the deficit, it seems that the economy has gotten steadily worse since Bush became President.
Unemployment is at a 20 year high, and the economy has seen a net loss of more than 2.5 million jobs since Bush took office.
Calling names, claiming the information is not valid because a "leftist" or Democrat is the source, is not likely to change the facts, or balance the budget.

[Anonymous]

bush appears to be trying to starve the federal government by lowing taxes. Remember, debt is a limited and extremely painful way to finance something.

maybe our idiot politicians will get the clue to not spend money they don't have. but of course Howard Dean will win in 2004 and 2008 and just raise taxes to pay off the debt, which means congress can spend more by taking new debt -- and the cycle begins again until our goverment has sucked all the productive captacity out of its citizens like a vampire.

[Russ Goble]

Unemployment is at a 9 year high, not 20. The economy started to stall at the end of the Clinton administration. and was considered in recession in Q1 of Bush's administration. Even if you think Bush COULD cause the recession, you can't argue that he could have done it that fast, since most of the people who would have done the damage weren't even confirmed yet.

The fact is recessions usually happen with or without the help of government. Government can occassionally make the recession better or worse with certain policies, but rarely is any politician(s) at fault or deserve credit for a boom or bust cycle.

This recession came on the heals of one of the most speculative investment periods in our history (most of the ratios were historically out of wack and were quite similar to those in the 1920s). A large portion of those unemployed are skilled technology workers. This recession also comes on the heals of one of the tightest labor markest in our history, mostly fueled by that speculative investment environment which was giving rediculous salaries to anyone who knew how to turn on a computer. And of course, 9/11 played a small roll in the economic uncertainty.

You could argue that that speculative market was fueld by the 97 capital gains tax cut but I don't think you blame any tax cut on investors thinking Yahoo should be valued as high Ford Motor Company. That's the kind of market it was. Irrational exuberance as Greenspan described it.

The market is correcting those problems now as it usually does. If you believe Bush made the economy worse, then I ask how? If you believe a Democrat would have made it better or worse, then how?

The lumping in of the states into the picture certainly makes things look uglier and that probably isn't helping things. But, the root of that problem is the same as the federal level. They overspent. They made long term spending decisions based on short term economic figures. One thing that government budgeters never do is actually hit their projections on the nose. And when your dealing an economy the size of ours, a 1 or 2 percentage point difference between actual and projected figures can costs or benefit the government billions of dollars.

If you go back and look at the difference between the projected and actual budgets of the last decade, you'll see that nearly the entire surplus can be attributed to the budget writers under-projecting government tax revenues. The economy performed better than expected and resulted in a tax windfall. It was luck, not fiscal responsibility. We are seeing the reverse of that now. No one ever projected a recession, and that resulted in a shortfall in revenues to what they projected.

Bush deserves blame for out of control spending. He also deserves blame in the way he SOLD the tax cuts. He sold the first round of tax cuts based on 10 year projeced budget surpluses. In our lifetime, no U.S. government has correctly projected economic activity and government budget numbers 2 years out, much less 10 years out. But, he does not deserve blame for a tax cut and please don't feed me anything that says the tax cut HURT the economy. That's just not based in reality.

[Anonymous]

actually al gore had a big hand in keeping government spending under control during the clinton admimistration.

[Anonymous]

It figures that Julian would be trolling around Atrios for ideas. I almost expected to read something about rolling back tax cuts in his post.

[Dick Cheney]

Who is this Julian Sanchez who keeps picking on our glorious leader W? I am dropping my subscription to Reason magazine THIS VERY MOMENT. If they continue to hire people who read Mother Jones and communist traitors like Atrios, then I will buy and drop future subscriptions. Let this be a warning to them.

[Anonymous]

nice reverse troll, anyone who makes a peep about anti-bush bias is now a pro-bush troll

how about this troll --> bushies and anti-busies, you are both retards

[Ken]

Bogus graph. The total federal debt never went down, the so-called surplus was an illusion.

[Anonymous]

ken, citation?

[Anonymous]

Ken,

Deficit = annual over/under
Debt = accumulated total

[Gene Berkman]

CNN Financial on Sunday evening made the claim that unemployment is at a 20 year high. This is based on official figures of 6.7%, but the CNN analyst claimed that these figures understate true unemployment.
Even if the economic slowdown started at the beginning of the Bush administration, and can thus be attributed to Clinton, the fact is that economic performance has declined every quarter since Bush took office.
There are many government policies which interfere with growth. Large, continuing budget deficits cause the federal government to sell bonds on the securities market, in competition with private investments - they soak up available capital.
But the real cost over the long run will be serious inflation, which is now hidden because of extreme competition in the retail sector.
If you look at the 2000 Republican platform, they give the GOP majority in Congress credit for the "balanced" budget of the last years of the Clinton administration. Perhaps divided government really deserves the credit, because now with Republicans controlling everything, the federal deficit is at $455 billion for this year, $475 billion for next year, according to official White House figures.

[D Rumsfeld]

Nice troll on the reverse troll of the troll. Anyone who complains about someone complaining about allegedy anti-bushism is a troll. All three of you are 'tards.

[jacob dreyer, or mayeb Elaine]

i have to say, posting this information borders on terrorist behavior

[rvman]

http://www.publicdebt.treas.gov/opd/opdpenny.htm

Issued debt went up over 100 billion in 1999, about 20 billion in 2000. So the accumulated debt increased in the "surplus" years, which is counter intuitive.

My memory isn't clear, but I think the difference is the social security trust fund?

[Anonymous]

http://online.wsj.com/article_email/0,,SB105780270564803300,00.html
"A widening federal budget deficit is expected to push Treasury note net issuance up to $89 billion in the third quarter this year, a 19% jump from that of the previous quarter and a 134% surge from that of the year-earlier quarter, according to a survey of primary dealers conducted by the Bond Market Association."

http://economist.com/World/na/displayStory.cfm?story_id=1893625
"Some conservatives credit Mr Bush with an ingenious plan to starve the government beast: the huge tax cuts will eventually force huge spending cuts. But this is rather like praising an alcoholic for his ingenious scheme to quit the bottle by drinking himself into bankruptcy. There is no better way to stymie the right's long-term agenda than building up the bureaucracy (government being a knife that only cuts leftwards). And there is no better way to discredit tax cuts than to associate them with ballooning deficits."

http://economist.com/finance/displayStory.cfm?story_id=1912021
"Asian economies are supporting America's profligate habits. By buying American government securities they help finance America's large external deficit, hold down interest rates, and so sustain the boom in consumer spending and mortgage borrowing. This may benefit America in the short term, but it allows even bigger imbalances, in the shape of consumer debt and foreign liabilities, to continue to build. The eventual consequences for America?and the world economy?could be more painful."

http://www.cm1.prusec.com/yararch.nsf/(Files)/t_051203.pdf/$file/t_051203.pdf
"While foreign investors have cooled to the U.S. stock market, they can't seem to get enough U.S. Government Agency bonds. These are mostly mortgage-backed securities. Indeed, their appetite for these securities has been growing steadily and reached a record high of $210 billion during the 12 months ended February 2003, with record highs of $110 billion and $71 billion for Asians and Europeans, respectively (Figure 9). So foreigners have become a significant source of funds for the U.S. housing market. Last year, they accounted for 22% of the demand for Agencies."

http://online.wsj.com/article_email/0,,SB105822541250298000,00.html
"It's obvious that Freddie Mac , the mortgage-financing behemoth, has a big problem. It seems to have misplaced somewhere between $1.5 billion and $4 billion of earnings. [...] It's scary that nobody quite knows what Fred, one of the biggest financial institutions in the world, is up to. But more scary is the fact that as a government-sponsored entity, Fred is rock-and-rolling with taxpayer money."

http://online.wsj.com/article_email/0,,SB1057955986494400,00.html
"Treasury Secretary John Snow agreed to testify before a House committee probing accounting problems at Freddie Mac, and is expected to recommend that the Treasury Department take over financial oversight of the huge government-sponsored mortgage company and its corporate cousin, Fannie Mae."

http://economist.com/agenda/displayStory.cfm?story_id=1919390
"With big projects like Iraq and Afghanistan still absorbing large numbers of soldiers, overstretch will remain a worry?even if new wars do not come along. If America ends up (however reluctantly) with an empire of fragile states, it would do well to persuade allies to share the burden of policing them. America has done that successfully in Bosnia and Kosovo, gradually reducing its forces while letting Europeans and others take increasing responsibility. In Iraq, it has not yet been able to do the same. General Franks told his Senate questioners that 19 countries have already contributed troops to Iraq, with 19 more soon to join and talks with 11 others under way. But aside from the British, they are all but invisible?and India's refusal this week to send troops in the absence of a United Nations mandate shows the difficulty facing America's recruitment efforts."

http://fareedzakaria.com/articles/newsweek/071403.html
"The enormous economic advantages of a more multinational process are also obvious. The European Union and Japan, the two donors with big aid budgets, are far more likely to put large sums of money into a U.N. operation than a U.S. occupation. The United States pays about 20 percent of the combined military and administrative costs in Kosovo. If the costs stay in the range of $50 billion for this first year in Iraq, help would be nice."

[rvman]

Yup, no question, the deficit is increasing. Has a tendency to do that during recessions and wars. Ands Freddie and Fannie are having some issues. Again, not a shock in a recession. And, yes, Bush is spending more than we would like, every president does that. Anyone under the illusion that Bush was a libertarian? The issue Ken questioned was that of the "Clinton surplus" which appears to have been a) a relic of the boom, and b) not quite a surplus, just a smaller deficit. (Better than a larger one, but keep in mind, California managed to break even in the late 90's, too. We should have been buying down the debt, at least somewhat, in the late 90's. Instead, it went up. And I will accede to the statement that we did better in that score than in the 80's.)

[Ken]

The federal debt ceiling = reality

"federal surplus" = Enron/Worldcom style accounting

"Guess what? After four years of federal budget surpluses, the national debt ceiling needs to be raised."

http://jacq.org/Heaster/heaster_011205.htm

[jacob dreyer]

"Anyone under the illusion that Bush was a libertarian? "

john kerry

[rvman]

OK, anyone think Bush was a libertarian, who does not himself think that the federal government is spending an atrociously small share of GDP?

[Hovig John Heghinian]

For what it's worth, Reuters now reports that the White House wants to cut the $450b deficit "in half," some time over "the next few years."

http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030715/ts_nm/bush_deficits_dc_6

[Russ Goble]

Official figures show the unemployment rate at 6.8 near the beginning of 94. Unemployment was as high as 8% in the last recession.

Economic performance has not declined every quarter. Go to econstats.com and look for real GDP. The economy has not declined in every quarter. The economy is actually growing, albeit at a snails pace. It is certainly stagnant.

But, the stock market is improving and capital spending is starting to creep up. Unfortunately, unemployment always lags in economic recoveries.

As far as the Republicans taking credit for the surplus. I'm quite certain you are right. I said way above that the budget process is full of untruths and misunderstanding. And Dick Gephardt said that Bush was giving away the surplus "we [those in congress] worked so hard to achieve." They didn't work hard. They lucked into it. All those congressman from both parties lucked into being in office during an unprecedented growth period, one almost entirely caused by speculative investing. They are dishonest as hell during the budget process. And the media is simply ignorant of how things work. Hell, the media still push the falsehood that tax cuts cause deficits (using the some experts line) though it's quite easy to check that in actuality, that is false.

I'll give you that divided government may have had a hand in keeping spending from getting even more out of hand as did presidential politics. But, again, none of those guys (the Rep. congress or Clinton) predicted the surplus. Go back to the budgets and look at their 5 year projections. Like I said, they lucked into it. I know it's hard to think that the government doesn't control how the economy works, but that's largely the cse.

[Anonymous]

http://denbeste.nu/cd_log_entries/2003/07/Theendofthe3rdDivision.shtml
The 3rd Infantry Division is a superb unit. Three years from now it's going to be completely useless. And the reason is that the volunteers that make it up are not going to reenlist in sufficient numbers. The 3rd Division should be home now. I'm aware of the problem on the ground in Iraq, and I'm aware that bodies are needed. But no matter how dire that problem, this is not the right way to solve it. [...] And if we're concerned about a shortage of troops now, we're going to be damned worried about it three years from now when the re-up rate drops to the floor.

http://online.wsj.com/article_email/0,,SB105813345248381600,00.html
Division 39 companies have also found an unlikely ally in their business ventures in South Korea's chaebol, the family-owned conglomerates. During the 1990s, such companies as the LG and Samsung groups bought more than $200 million of gold from North Korean companies and used the mineral in high-tech components. Intelligence officials say they believe that virtually all of this money went into Division 39 accounts, due to its monopoly over the minerals trade. Lee Jong Keun, who heads LG International Corp.'s North Korean operations in Seoul, says that LG bought the gold from Pyongyang through middlemen based in either Macau or Beijing. (Macau reverted to China's rule in 1999.)

http://denbeste.nu/cd_log_entries/2003/07/Wegottahavethebomb.shtml
Reuters reports that a South Korean who used to be in SK Intelligence has reported that North Korean diplomats in New York have informed the US that they've completed reprocessing 8000 fuel rods, which if true would mean they now have enough plutonium to create several fission weapons. Of course, maybe this is a crock. Maybe the SK ex-Intelligence guy is full of it. Maybe NK is engaged in yet more brinkmanship. Maybe they're lying or bluffing. Maybe it's another translation problem. But there's no question that they are reprocessing fuel rods, and soon Bush will have to make a decision about stopping it, and pretty much the only way to do so conclusively is to bomb the facility where it's happening. (Making a deal is no longer a viable choice; Clinton and Carter tried that and NK cheated.)

http://denbeste.nu/cd_log_entries/2003/07/Enemycalculations.shtml
Once they have nukes, they're far better able to deter us from any kind of operation against their interests; not just to deter us from invading, but also the try to perform various kinds of nuclear blackmail to cause us to interfere less with other kinds of things they do. [...] The big problem here is India and Pakistan. They did the same thing and succeeded, and it's not likely at this point that there's going to be any significant attempt by us to try to force either or both of them to disarm again. Indeed, Israel is perhaps an even more important case. They represent a positive example to those attempting to develop nukes, by showing that once you've done so, you probably won't be forced to disarm again.

http://www.costofwar.com/
War affects everyone, not just those directly involved in the fighting. This webpage is a simple attempt to demonstrate one of the more quantifiable effects of war: the financial burden it places on our tax dollars. To the right you will find a running total of the amount of money spent by the US Government to finance the war in Iraq. This total is based on estimates from the Congressional Budget Office. Below the total are a number of different ways that we could have chosen to use the money. Try clicking on them; you might be surprised to learn what a difference we could have made.

[Rick Barton]

From the article:
"And no, it's not just the War on Terror putting us in the hole: the percentage increase in non-defense discretionary spending has been almost as great as the defense increase in recent years"

Bush is no conservative. There are some in congress and we need to encourage them to assert themselves for a platform of frugal government at home and nonintervention abroad. See: http://www.antiwar.com/paul/paul70.html

[Russ Goble]

OK, first, we had a surplus. Was it phony? No, it was real. Because a budget surplus is defined by a single year's difference between revenues over expenses. So, the national debt (which is the sum total) went up. That's not very hard to understand. You can still run a surplus and yet finance greater debt, as long as you are willing to accept that interest payments on that debt will take a greater SHARE of the budget.

Anyway, on the topic at hand. This chart is interesting but it really could use a good dose of caveats. After all, who here believes Atrios would actually support lowering the deficit with spending cuts? Of course he wouldn't. He would support more taxes to "pay" for the debt (i.e. the ploy they tried in 1990 & 1993 that didn't work).

Until anyone on frickin capital hill or any of the folks who bitch about the deficit are willing to accept that cuts in spending are necessary, this is all a useless argument. Yes, the deficit is big. No, it's not as big (relative to GDP) as has been in the past, yet. More importantly, our deficit & our national debt is smaller relative to our GDP than most other western nations. By a pretty good margin too.

Surpluses are not necessarily good and deficits are not necessarily bad. More importantly, they are both functions of economic performance and less to do with actual government policy (except in extremes obviously). Deficit/surplus arguments are merely an exercise in avoiding the bigger debate. The debate between what the government should and should not be spending it's money on. The perception is that if the budget is in surplus, then the government is being well run and deficits mean the opposite. Nothing could be farther from the truth.

Also, if deficits are bad for the economy because they reduce the money supply to you and me and put pressure on interest rates, then can someone please explain why interest rates keep going DOWN?

And who is the one posting all these excerpts from articles as if this comment board is their personal weblog?

[jacob dreyer]

"And who is the one posting all these excerpts from articles as if this comment board is their personal weblog?"

yeah for real that crap is annoying

[Anonymous]

http://economist.com/finance/displayStory.cfm?story_id=1912021
"Asian economies are supporting America's profligate habits. By buying American government securities they help finance America's large external deficit, hold down interest rates, and so sustain the boom in consumer spending and mortgage borrowing. This may benefit America in the short term, but it allows even bigger imbalances, in the shape of consumer debt and foreign liabilities, to continue to build. The eventual consequences for America?and the world economy?could be more painful."

[Lefty]

A little perspective.

The US has annual income of about 2 trillion dollars. The federal debt is close to 7 trillion dollars. The annual interest on that debt is about 350 billion dollars, close to the entire annual defense budget.

This situation equals debt payments as far as the eye can see. Just as we are still paying for Reagan's tax cuts and the S&L bailout of Bush 41, our kids and grandkids will be paying for Bush 43's tax-cut and keep-spending policies.

[Rick Barton]

"then can someone please explain why interest rates keep going DOWN?"

Federal Reserve interest rate determination and Federal Reserve liquidity injection.

[rvman]

Last time I looked, "interest" was an expense. Interest isn't what explains the surplus with an increasing debt problem. Or was interest taken off-budget, and that explains the so-called surplus?

[Rick Barton]

Lefty wrote"
"Just as we are still paying for Reagan's tax cuts and the S&L bailout of Bush 41, our kids and grandkids will be paying for Bush 43's tax-cut and keep-spending policies."

Tax cuts tend to pay for themselves and are benificial to general prosperity as well but Bush 43's BIG spending policies will indeed continue to extract a cost.

[Shiton Taxpayer]

I prefer debt over taxation. Goverments have to pay back debt or else they can't borrow anymore. The slower they pay the worse their credit rating drops, which means they can't borrow as much. This means that if they don't raise taxes (or print more money) in the future, they will eventually have to slow their spending.

The alternative is for the US taxpayer to pay $9 billion this year. And yes I understand that I will eventually pay it and interest. But this is POLITICS and I would rather pay a little more in interest in the future for this year if that forces Congress to eventually reduce the size of government.

To make this gross, lets say that a debter goverment is like AIDS on the economy. A goverment bleeding its citizens to death in taxes (or inflation) is like a shotgun blast to the economy. Either way a big government is death to an economy, do you prefer slow lingering death or massive destrution?

[Heather]

Don't worry a bit folks. The record budget deficit is just an illusion caused the record plummeting of the US doller. Cheers!

[Pat Cameltoe]

RV man: You wrote:

"And, yes, Bush is spending more than we would like, every president does that. Anyone under the illusion that Bush was a libertarian?"

No, I wasn't under the impression that Bush was a libertarian. I WAS under the impression that he was a Republican, and up through the last election cycle, I thought that the reason anybody ever voted for Republicans (the ONLY reason) is that they spent less than Democrats.

That turned out not to be true. They control every branch of government.

Your argument is specious. The problem is not that he spends more than we'd like, it's that his discretionary non-defense spending is INCREASING MUCH FASTER THAN CLINTON'S EVER DID!

That's why, as of this year, I'm no longer a Republican and never will be again. They are worse than useless.

[Anonymous]

have fun voting for the less-government democrats!

[Common S. Ence]

Why does everyone blame Bush and ignore what a shitty job Congress does?

[Pat Cameltoe]

What's the difference??? At least Democrats don't want to hoist monuments to the 10 commandments at every street corner and teach schoolchildren that evolution is "just a theory."

[Anonymous]

hyperbole alert!

[Pat Cameltoe]

Do you have anything of substance to offer, or just snide catcalls?

[Anonymous]

btw -evolution is just a theory, as is most of science.

[Pat Cameltoe]

I know, smart man. It isn't "theory" that's the problem, it's "just". Grow up.

[Russ Goble]

"This situation equals debt payments as far as the eye can see. Just as we are still paying for Reagan's tax cuts and the S&L bailout of Bush 41, our kids and grandkids will be paying for Bush 43's tax-cut and keep-spending policies."

And today I am paying for FDR's expansionist policies and my income is going to pay for the social security of many retired folks. And I am paying for LBJ's keep-spending policies of medicare and the Great Society. And I am paying for a "social contract" that I have no say in or have the ability to opt out of. And I have principly one political party to thank for that.

As for "paying for Bush's tax cuts" that is one of the more ignorant statements you can make. Not a single tax cut in the last 40 years has resulted in long term revenue reductions. In fact every tax cut results in increased government revenue usually within 2 years. The problem is that every tax cut has been made with INCREASED spending (this happened under Kennedy, Reagan, Clinton & GW Bush). ANd with the excpetion of 97 capital gains tax cuts those increased revenues were outpaced by government spending. Tax cuts do not cause deficits. Spending does.

[Russ Goble]

And how do you "pay" for something (tax cuts) that aren't yours to begin with. My income belongs to me, not the government. The government can use it as long as I (through the democratic process) allow them to. Or at least that's the way it should be.

[Anonymous]

Oh well, we are safe then. Thank GOD we have the Republicans to protect us.

[Pat Cameltoe]

Russ:

Agree with your first comment. Bush claims credit for tax cuts, and his base is very happy with them. Problem is, with is profligate spending, they're not tax cuts at all - merely deferrals, with interest.

[Anonymous]

Oh and good thing the debt markets aren't spooked by Bush/Greenspan's plan to reflate us out of existence. Oh wait. Does that mean the free markets don't buy the fiscally sound planning measures the Republicans have undertaken?

[Jimmy Antley]

Pat Cameltoe - have you heard of the Libertarian party? You'd think you would have, since you read this site, but you make it sound like a 2-way choice (D or R).

Gene Berkman - you are wrong about your stats. The unemployment level is still below what is was through the 80's and early '90's and way lower than it was in the Carter years (oh, I don't blame that Jimmy, we all know he's a NICE GUY). Back then it was near 10% or higher. Inflation in those days got well about 15% for a few years. I know you didn't mention inflation, but that's what made most of the 1970's a really bad time economically ( but the music was good until Disco, and till Michael McDonald single-handedly dicked up the the Doobie Brother's sound ).

Note, Gene, that inflation has been damn low for 15 years or so, and that's why even now our economy compares very favorably to the 70's - if you don't believe me, than you must not have been around. Inflation is low enough to where Greenspan and a few idiots at the Wall Street Journal are worried about deflation!! What the fuck? Ok, that's off the subject.

Lefty, you say "'So', said the guy to the whore, 'we've established what you are. Now we're just haggling over the price.'" I've heard that joke about 25 years ago (around the time Michael McDonald dicked up the Doobie Bros.), but I still don't think you get was Russ was saying. Current Federal government taxation is much more like having a whore take your wallet out of your back pocket, keep most of the cash for "administration expenses" and give a guy down the street a blow job because he is from a under-represented minority. I mean, what are you saying? I expected you to get it - Joe, he's just beyond reach.

Russ, those are the best-written posts I've seen on this site yet, better than all the Reason writers, for that matter. Keep up the good work!

[Lefty]

And the current policies are the equivalent of taking your car, driving it over a cliff and then saying, "See? It doesn't work."

Your faith in the private sector is just as dangerous as faith in government. For instance, social security administration expenses are about 2%. It's about 14% in the private health care industry. We don't need to go into Enron, WorldCom, etc.

Thing is, you get to vote for government. Blue Cross could give a shit what you think.

[Anonymous]

Whatever you think about Clinton or how you assign causality, things were much better under 42. You have to spin it so much as to lose touch with reality to believe otherwise. Say it with me: Bush sucks.

[Anonymous]

"Your faith in the private sector is just as dangerous as faith in government. "

Untrue, as a real private system is about choice, while government is a monopoly. I said REAL private system BTW, not the goverment created oligopy we have now.

[Jimmy Antley]

2 things, Lefty:

First the insurance industry is indeed a beauracracy (check my spelling) as you say. Why?? Cause it's freaking regulated like hell by the government. Just try getting into that business (or banking or charter aviation, or defense contracting, for that matter). What do you think the 14% admin. costs are for - it's almost all government paperwork.

Why do you people keep bringing up Enron, etc? How's that worry me about private industry? I wasn't an investor in either of them, cause, personally, I'm not stupid, Lefty.

"And the current policies are the equivalent of taking your car, driving it over a cliff and then saying, 'See? It doesn't work.'". I'm not a fan of the current policy of government right now - we don't have anything close to a free market in most industries.

Yeah, you do get to vote for government. People got to vote for Adolf Hitler, too, BTW. It took a lot of firepower (for the day) to "unvote" for that government. Looks like it'll be the same this time here.

Oops that was 4 things. Sorry bout that.

[Lefty]

Unfortunately, Jimmy, we're stuck here in the real world. Pure free markets, just like pure Communism, never will exist on a national scale. The hybrid we've developed has worked reasonably well, as witnessed by the conspicuous absence of a sustained, killer depression since the New Deal. Huge debt loads of families, businesses, local, state and federal governments, though, threaten this record.

Maybe it'll make us choose our priorities and turn out to be a good thing. I just want those priorities to be good for ALL the citizens of this country and not just a few.

[Anonymous]

>>Huge debt loads of families, businesses, local, state and federal governments, though, threaten this record.

[Russ Goble]

"Whatever you think about Clinton or how you assign causality, things were much better under 42."

What did Clinton do to make things better? Why do you assume the president is responsible for the health of our economy or our society. Go back and read my posts about why we are in recession and why the government has little to do with it. And also read what I said about the surplus being pure luck. What did Clinton & Republican Congress do to get us into surplus. What policies did they put into place? Better yet, what policies did Clinton put into place that Bush wouldn't have?

And the economy started to slide on Clinton's watch. Why doesn't he share the blame? How 'bout you do the spinning now.

Say it with me: What did Clinton do?

"I just want those priorities to be good for ALL the citizens of this country and not just a few"

Spoken like a true marxists. Who will define what's good for all citizens? Of course, I should give you credit, Lefty. I think that was the first post you didn't just throw out a metaphor for an argument. BTW, the federal reserve has far more to do with why we haven't been in depression than anything most any other branch has done (though some of the banking regulations have had SOME positive impact).

[Russ Goble]

"Huge debt loads of families, businesses, local, state and federal governments, though, threaten this record."

This is nothing new. These circumstances have preceeded just about every recession we've had.

BTW, heavy government involvement has done very little to fix Japan's problems. Many experts consider Japan to be in a depression.

And the New Deal did far more to extend the depression rather than solve it.

[Anonymous]

"Pure free markets, just like pure Communism, never will exist on a national scale."

Exhibit 1) Ebay -- Pretty close to a totally free market - the key being easy access to information on the product/service for the buyer. They seem to be doing very well as the middleman, too, Lefty.

"Maybe it'll make us choose our priorities and turn out to be a good thing. I just want those priorities to be good for ALL the citizens of this country and not just a few."

The thing that pisses me off, is that the "Lefties" of the country have plenty of examples of different hybrid markets, etc. in the European countries, Japan, and others. The US Constitution (see Bill of Rights, # 9 & 10) does not allow for Federal government meddling in the economy. You all have plenty of examples and plenty of places to go, if you want to live in a place with the type of government you approve of.

The rest of us real Americans don't. This is the Last Resort. "Some called it Paradise, I don't know why, you call some place Paradise, and kiss it goodbye .... "**

** From Hotel California, and maybe the best Don Henley song ever.

[Rick Barton]

Pat Cameltoe wrote:
"... I'm no longer a Republican and never will be again. They are worse than useless."

Don't blame all of them for Bush's transgressions. Bush has no claim to the conservative mantle of frugal and limited government. No suprise, as he now seems to be under the sway of the neo-cons. But check out: http://www.ntu.org. The National Taxpayer Union rates all members of congress on the Total spending they vote for. The more frugal, the higher the rating of course. ALL the winners were Republicans, both in the house and senate.

[Rick Barton]

"The US Constitution (see Bill of Rights, # 9 & 10) does not allow for Federal government meddling in the economy."

Things would be so much better if the congress and administration actually adhered to the constitution.

[Rick Barton]

Lefty, What is your source for the claim that "social security administration expenses are about 2%. It's about 14% in the private health care industry."?

I've never heard of anything the feds do on just a 2% overhead. Not that S.S. is justified if it is true, as there are a myriad of other problems.

[Lefty]

Look it up yourself. I'm tired of doing research for lazy people who read it and then ignore it.

[Lefty]

Hint: You'll have to type "single payer" when you google it. Go ahead. It won't hurt you.