Obama's Deficit Lies

[Meadmaker]

Gee, that's a tough one, let's see.. oh yeah! Maybe not spend money like a drunken sailor?

OK, fine. Let's consider it. We are projected to have a deficit of 1.75 trillion dollars this year. So, how could we reduce that by 10 billion dollars?

The reason I ask is that people always demand "spending cuts", but when pressed for specifics, they tend to say things like, "all that foreign aid" or "all that welfare" or (my favorite) "all that waste". They aren't really sure what it is, but they're sure that we're spending too much on it.

 

[Tsukasa Buddha]

When exactly have I said a $1 trillion is OK, ever? I criticized the Bush deficits and irresponsible spending, I certainly think the current spending is unwarranted and irresponsible.

I'm sure I can dig up plenty of posters here who were against the Bush budgets but will have no problem with the Obama budgets which are way above and beyond anything in the Bush years as far as deficit spending goes.

eta: TB was ready to become a Libertarian 8 months ago over the Bush deficits: http://www.internationalskeptics.com/forums/showthread.php?t=116767

Not quite. That thread was about deficit in terms of ballooning welfare programs in the future, not about Bush spending.

But still, circumstances do count. And I haven't seen anyone actually critiquing Keynesian economics except for shouting "OMG a pile of dollars 65 miles high!!" or "PORK!!!" or "They aren't REAL work, they are jobs!!"

 

[WildCat]

You miss my meaning. Not speading money like a drunken sailor is not doing something. What should we do?

How about actually stimulating the economy instead of just implementing a decades-long Dem wish list of pork?

What part of this bill is going to spur your average small business to hire more workers?

 

[WildCat]

Not quite. That thread was about deficit in terms of ballooning welfare programs in the future, not about Bush spending.

But still, circumstances do count. And I haven't seen anyone actually critiquing Keynesian economics except for shouting "OMG a pile of dollars 65 miles high!!" or "PORK!!!" or "They aren't REAL work, they are jobs!!"

This isn't Keynesian. Keynes wanted debt to be paid down in good times, we're missing that half of the equation.

 

[WildCat]

OK, fine. Let's consider it. We are projected to have a deficit of 1.75 trillion dollars this year. So, how could we reduce that by 10 billion dollars?

Let GM declare bankruptcy, that's some nice low-hanging fruit.

The reason I ask is that people always demand "spending cuts", but when pressed for specifics, they tend to say things like, "all that foreign aid" or "all that welfare" or (my favorite) "all that waste". They aren't really sure what it is, but they're sure that we're spending too much on it.

End sugar subsidies. End ethanol subsidies. In fact, end most (if not all) farm subsidies.

I think this accounts for at least $100 billion.

 

[Upchurch]

What part of this bill is going to spur your average small business to hire more workers?

My personal small business? Having clients with training needs, primarily in the housing materials, auto, and machining industries. So basically, anything that would (re)start things being built. Infrastructure and related equipment would be fantastic because that would not only rev up the job market in those jobs directly related, but also in supporting businesses like mine. Especially in mine if some of those are new jobs.

eta: Just to be clear, a tax cut for my small business would be completely useless. There is no income coming in to pay less taxes on. If you want us to create more jobs, we need clients with money to spend and more work then we can handle with who we have/had.

 

[Upchurch]

This isn't Keynesian. Keynes wanted debt to be paid down in good times, we're missing that half of the equation.

Not for lack of trying under Clinton....

 

[davefoc]

You miss my meaning. Not speading money like a drunken sailor is not doing something. What should we do?

I'd like to take a shot at this one.

1. The federal government might take a look at the fact that there is rising unemployment and say gee this might be a good time to get some infrastructure projects going because the labor will be cheap and we can get a lot of bang for our buck. What will happen is that the federal government will take money from people who would have spent the money on stuff they wanted or needed and paid a lot of workers to build it and funnel it into projects dominated by connected labor unions with a net loss of overall productivity and a substantial net loss in jobs.

2. The federal government needs to take a serious shot at reducing spending. The out of control agricultural subsidy programs and the ethanol scam are low hanging fruit. Cut or eliminate them both to begin to make some progress on reducing the deficit.

3. The federal government's most important role is to provide for the national defense not to hand out money for projects not necessary to the national defense. The government needs to radically scale back military expenditures. Massive amounts of potentially productive labor is wasted on crony driven military projects.

4. The federal government needs to responsibly begin the process of shutting down the Iraq fiasco. It looks like this one will happen.

5. The US needs to take a serious look at whether manipulating the money supply to stave off little recessions is in net a good idea. Milton Friedman argued that it was counterproductive. It looks like he has been proven spectacularly right. Recessions are a fact of life. There needs to be periods where adjustments are allowed to take their natural course. The government can not eliminate all pain. I am not sure that in net that the government is even successful at mitigating pain at all.

I'm very pessimistic about the chances that the US can avoid another depression. Right now nobody is acknowledging the need to stop doing things that are destroying productivity and while that process continues things are not going to get better. Things will not begin to get better until things are in such a mess that the infrastructure that strives to reduce productivity and economic efficiency can be constrained.

Right now the Republicans just want to keep spending money on their crony driven crap, they don't really want to reduce spending and allow the economy to rebuild itself after being savaged by eight years of Bush craziness. They just opposed the stimulus plan because it focused spending on Democratic crap instead of Republican crap.

And right now the Democrats are being driven by years of pent up enthusiasm for all their crazy ideas and they're not going to easily dissuaded from deploying them regardless of the resulting harm from the financial irresponsibility of pushing them at this time.

I don't think a soft landing is likely. The facts are the country can't endlessly spend more money that it takes in and despite the endless rhetoric of the Democrats the country can't just go off and raise taxes on the rich people to solve this mess.

 

[gdnp]

How about actually stimulating the economy instead of just implementing a decades-long Dem wish list of pork?

What part of this bill is going to spur your average small business to hire more workers?

If a couple of million people don't lose their jobs, then these people will continue collecting wages and salaries that they will spend on housing, food, and consumer goods, thus spurring your average small business to hire more workers or at least not lay off the workers that it has.

 

[WildCat]

My personal small business? Having clients with training needs, primarily in the housing materials, auto, and machining industries. So basically, anything that would (re)start things being built. Infrastructure and related equipment would be fantastic because that would not only rev up the job market in those jobs directly related, but also in supporting businesses like mine. Especially in mine if some of those are new jobs.

eta: Just to be clear, a tax cut for my small business would be completely useless. There is no income coming in to pay less taxes on. If you want us to create more jobs, we need clients with money to spend and more work then we can handle with who we have/had.

So how is propping up GM going to help your business training people for the auto industry? Housing materials will be nowhere for some time, because there is a glut of housing right now.

And from what I've seen, damned little of that budget is going to infrastructure. And the road building segment of the construction industry is the only one that isn't hurting right now. All the Federal money being thrown at it will simply relieve the states from their duty to maintaining infrastructure. I doubt there will be a net gain of jobs in that segment, you're just changing who's paying for it. Well not really, the taxpayes all pay for it in the end. And even if there is a net gain of work being done, any jobs created are temporary. There's no permanent jobs created from a one-time road construction boost.

If a couple of million people don't lose their jobs, then these people will continue collecting wages and salaries that they will spend on housing, food, and consumer goods, thus spurring your average small business to hire more workers or at least not lay off the workers that it has.

What jobs will this budget save? Wall Street doesn't share your optimism.

 

[J. Wellington Wimpy]

And right now the Democrats are being driven by years of pent up enthusiasm for all their crazy ideas and they're not going to easily dissuaded from deploying them regardless of the resulting harm from the financial irresponsibility of pushing them at this time.

I don't think a soft landing is likely. The facts are the country can't endlessly spend more money that it takes in and despite the endless rhetoric of the Democrats the country can't just go off and raise taxes on the rich people to solve this mess.

"There Ain't No Such Thing As A Free Lunch." Bingo.

 

[gdnp]

So how is propping up GM going to help your business training people for the auto industry? Housing materials will be nowhere for some time, because there is a glut of housing right now.

And from what I've seen, damned little of that budget is going to infrastructure. And the road building segment of the construction industry is the only one that isn't hurting right now. All the Federal money being thrown at it will simply relieve the states from their duty to maintaining infrastructure. I doubt there will be a net gain of jobs in that segment, you're just changing who's paying for it. Well not really, the taxpayes all pay for it in the end. And even if there is a net gain of work being done, any jobs created are temporary. There's no permanent jobs created from a one-time road construction boost.


What jobs will this budget save? Wall Street doesn't share your optimism.

State infrastructure repairs will be deferred if the states are struggling to balance their budgets. so if the bridges are not being repaired now, the construction workers are out of jobs

If states are running billion dollar budget deficits, then people will be laid off or retirees will not be replaced. An additional net loss of jobs, not only for those state workers, but trickling down through the economy to all the people with whom they spend their wages. Avoiding massive state layoffs during a time when unemployment is already rising due to contractions in the private sector helps sustain the economy.

 

[WildCat]

State infrastructure repairs will be deferred if the states are struggling to balance their budgets. so if the bridges are not being repaired now, the construction workers are out of jobs

Didn't stop Illinoios from pouring billions into the Illinois First infrastructure project several years ago. Didn't seem to help the economy much, all we have to show for it are the highest taxes in the country (love that 10.25% sales tax here!), probably more toll roads than anywhere else and the CTA is still asking for more money OR ELSE and the Chicago schools still suck. Over $6 billion, who knows where it went. Funny, $6 billion is the low end of what our deficit is projected as this year.

If states are running billion dollar budget deficits, then people will be laid off or retirees will not be replaced. An additional net loss of jobs, not only for those state workers, but trickling down through the economy to all the people with whom they spend their wages. Avoiding massive state layoffs during a time when unemployment is already rising due to contractions in the private sector helps sustain the economy.

You do realize that the state pays for itself by taking money from the private sector, don't you? There is no net gain, no wealth created.

 

[gdnp]

Didn't stop Illinoios from pouring billions into the Illinois First infrastructure project several years ago. Didn't seem to help the economy much, all we have to show for it are the highest taxes in the country (love that 10.25% sales tax here!), probably more toll roads than anywhere else and the CTA is still asking for more money OR ELSE and the Chicago schools still suck. Over $6 billion, who knows where it went. Funny, $6 billion is the low end of what our deficit is projected as this year.

You are mixing apples and oranges. Government spending can be and often is wasteful. It still stimulates the economy by providing jobs.

You do realize that the state pays for itself by taking money from the private sector, don't you? There is no net gain, no wealth created.

Which is why the states cannot provide a Keynesian stimulus: most must by law balance their budget. Only the federal government can run a deficit, thus stimulating the economy in times of recession. Yes, a trillion dollar deficit will have to be paid back. At current interest rates, the carrying cost is about 35 billion a year.

 

[Meadmaker]

Let GM declare bankruptcy, that's some nice low-hanging fruit.


End sugar subsidies. End ethanol subsidies. In fact, end most (if not all) farm subsidies.

I think this accounts for at least $100 billion.

Those sound like reasonable ideas. However, there is a problem. When it comes to agricultural subsidies, these program have some powerful supporters. Senators from farm states won't get behind any bill that includes it.

As for GM going bankrupt, that's a complicated issue. I was among those who said we couldn't let that happen last fall, but I would hope that they would have used the time to make arrangements to sustain operations by now. However, there is a really, really, huge problem with letting them go bankrupt. The biggest single reason they are in a situation beyond repair is that they have "legacy costs". Back when they had about five times as many employees as they do now, they made promises to those employees to take care of them for life, in the form of pensions and retiree health benefits. They can't afford them. In bankruptcy, they would have to just say, "Bad luck. You're on your own." Otherwise, there is no way for GM to be solvent. This results in a whole lot of old people who have no means of support. They will be on the public dole, and they will be on the 6 o'clock news every night explaining that they can't buy medicine because GM didn't follow through with their promises, and demanding that politicians do something about it. Politicians hate that. They hate it so much that they won't let it happen.

Meanwhile, if you try raising taxes you automatically lose every Republican vote, and possible some Democratic votes.

So, every way that you can go at it, there's a very powerful special interest in the way of getting it done. Both parties have promised people, in different forms, something for nothing. The people have grown accustomed to it. You might be in a district where your suggestions would be popular. However, if you kept going until you got to 1.75 trillion dollars, you would eventually have to get to the special interests that control your legislative district, and you wouldn't get reelected.

We have met the enemy, and they are us. The reason we have deficits like we have is that the voters will throw people out of office for not protecting the local interests, and they will throw people out of office for raising taxes, but they won't throw people out of office for ringing up debt.

 

[WildCat]

You are mixing apples and oranges. Government spending can be and often is wasteful. It still stimulates the economy by providing jobs.

And while he's stimulating it he's depressing it by raising taxes. He's going on about closing tax loopholes for businesses, ignoring that the US has some of the highest business taxes in the industrialized world.

Which is why the states cannot provide a Keynesian stimulus: most must by law balance their budget. Only the federal government can run a deficit, thus stimulating the economy in times of recession. Yes, a trillion dollar deficit will have to be paid back. At current interest rates, the carrying cost is about 35 billion a year.

You really think the next budget will be smaller?

 

[WildCat]

So, every way that you can go at it, there's a very powerful special interest in the way of getting it done.

And now we are creating $1 trillion more of powerful interests. Once that gravy train starts flowing it doesn't stop.

 

[BeAChooser]

But won’t the deficit be swollen by interest on the debt run-up over the next few years? Not as much as you might think. Interest rates on long-term government debt are less than 4 percent, so even a trillion dollars of additional debt adds less than $40 billion a year to future deficits.

Obviously, you failed to pay ANY attention to fact that Obama's proposals (even with the best assumptions) won't get the deficit back below $533 billion a year (more than it ever was throughout all of Bush's term, except the last three months) and that by 2019, the deficit will back up to $712 billion a year ... and climbing. Why do you think that is?

 

[BeAChooser]

Yep, stuck on stupid^tmIs it possible that other economists have different models making different predictions?

The fact is, OMB is generally regarded as one of the better prognosticators around. If you don't like their predictions, then offer up the ones that you believe. By all means, gdnp, link us to your more favorable predictions. We are waiting.

And the fact is, the OMB prediction takes a rather rosy view on future events. Indeed, what if oil prices go up? Do you really think that would improve the deficit? And OMB's model assumes a rather modest reduction in GDP, based on the assumption that all these much higher taxes on the wealthy won't significantly alter their behavior when it comes to investment. Likewise, it assumes that all the freebies Obama will give the lower and middle income groups won't make people even more likely to seek dependence. If one can get a nice house, health insurance, an education for one's kids, entertainment and food stamps without really working ... why work? A lot of people (especially supporters of Obama) think that way, gndp. It's the human condition.

And I find it curious that you are defending these much higher deficits, given some of your past statements on this forum concerning deficits. In the past you seemed to me for balancing budgets and against large deficits. Suddenly you aren't?

As just one example of your past statements:

"Some countries have balanced budgets. The US deficit may go to a trillion dollars this year if Paulson's plan goes through. That's 20 billion a year at 2% interest for the rest of our lives. Some countries have a balance of payments surplus, leading to capital that can be reinvested in the economy. The US has huge deficits, leaving us at the mercy of China and Saudi Arabia for capital. US economic growth over the past decades has been driven by consumption and borrowed money, not savings and production. It was not sustainable and now the chickens are coming home to roost."

 

[BeAChooser]

Permanently? That's a pretty extreme claim isn't it?

You too, Meadmaker. I find it curious that you are defending the notion of 10+ years of extremely high deficits given your past statements about deficits and balanced budgets. For example,

"If the economy grows (in real terms) between now and then, he may eventually have more income than you with which to pay it, and the reason why he has more income may be because your country borrowed/spent on his behalf today. If I believed that for a minute, then I could forgive a deficit."

So the question is, MM, do you honestly believe that Obama's programs will grow the economy? Is that why you seem willing to forgive Obama's deficit enhancing program? I take it then, that you don't believe the OMB analysis of the stimulus bill spending which says that 10 years from now that spending will be shrinking the economy. Do you predict that the economy will grow thanks to the stimulus bill in the near term more than the OMB ... which predicts minimal growth at best? And note that most of the massive spending that Obama is proposing over the next decade is NOT oriented towards stimulating or growing the economy ... but towards welfare for those who do not create the wealth. Do you think that can do anything but hurt future GDP?

Here's another of your past statements:

"How about if we just agree to pay the bills. Remember back when the GOP was all for a Balanced Budget Ammendment? Reagan campaigned on it in 1980. Newt made it part of the Contract With America. Why'd they give it up? I miss those days."

Do you still miss those days?

Or this statement:

"When it comes to budgets and taxes, everyone seems to think that if we just spent money on only my favorite programs, and lowered my taxes, that we could end all the problems with debt. Of course that's nonsense. So, instead of looking at whether this program or that program is a good idea, let's look back in the past and see who was successful and who wasn't. Who balanced the budget? Who made the debt get larger? How did they do it? There's a record here that's worth examining, if you ask me."

Do you think Obama has really done that, MM?

And this, talking about McCain:

"I think it is reasonably certain that his tax policies, if implemented, would continue to dramatically increase the national debt. That situation cannot continue indefinitely, and a depression is one possible outcome."

So do you think a depression is a possible outcome of Obama's even more massive increase in the National Debt?

So, calm down. Come the year 2010, Obama's power will probably be significantly diminished by mid term elections. Come 2012, if things are as bad as you think they will be, we will still be a democracy, and there will be a new guy, probably a Republican, to try and undo the damage.

Except that as LBJ proved, it doesn't take many years to get programs in place that will have long term consequence. It's a lot harder to undo mistakes than to make them. We are still suffering from LBJ's mistakes (and FDR's). Finally, it's almost impossible to reverse things unless someone like a Reagan comes along ... and I don't see anyone like him around.

In fact, someone (I think it was Neil Cavuto) recently made the comment that Obama is the anti-Reagan. Someone with the charm and glib tongue of Reagan, and the ideological conviction that Reagan had, but who thinks the opposite of Reagan when it comes to government, the people, and their respective roles. That's what makes Obama so dangerous now.

FWIW, I expected Obama to be more aggressive on deficit reduction, and am disappointed he is not. Four years later, to be half as bad as George W. Bush is an extraordinarily low standard.

This is simply dishonest. Obama will only get the deficit down to $533 billion in 2012 (before it goes back up under his proposals). That is NOT half, but in fact more than the deficit we saw under all eight years of Bush (except the last 3 months of his term). And since Obama has stated that the deficit is what got us in this economic mess, those last 3 months shouldn't count towards what constititutes halving the deficit, if we don't want to find ourselves in this mess *permanently*. Right?