Attention: Deficit!

[Puppycow]

Are you talking Deficit or Debt, cause these are different things.

The Deficit in 2013 (est) will be around $900 billion, not $6.165 Trillion.

I'm talking about the deficit for the last ten years (2004-2013), not the deficit for 2013 alone. That's what the forecast was about. You add up each annual deficit for the last ten years to get it. The debt of course, is the sum of all deficits and surpluses since the founding of the government. $6.165 Trillion is the amount by which the debt increased over the last ten years due to annual deficits.

 

[PhantomWolf]

I'm talking about the deficit for the last ten years (2004-2013), not the deficit for 2013 alone. That's what the forecast was about. You add up each annual deficit for the last ten years to get it. The debt of course, is the sum of all deficits and surpluses since the founding of the government. $6.165 Trillion is the amount by which the debt increased over the last ten years due to annual deficits.

Ahh, still this isn't something you can place at Obama's door, the world hit a massive economic speed bump, and the majority of that debt and the deficits over that time have been caused by the massive drop in growth from 2008 to 2010. Without extensive and destructive cuts to the budget that would have sent the US economy into a tail spin it likely wouldn't have recovered from, it was a case of wait it out and as the economy recovers the deficit drops back under control.

 

[lupus_in_fabula]

Attention: Surplus!

Clinton inherited a $290 billion deficit from Bush Snr, and over 8 years turned it into a $236 Billion surplus, this gaining +$526 Billion over his 8 years in office.

Obama was handed a $1.4 Trillion Hospital Pass, and has since got this down to $900 Billion, an improvement of +$500 Billion over 6 years during one of the biggest depressions ever. Projections are that the deficit will continue to drop and even may even go into surplus in the next few years if the economy continues to improve.

Compare this to the last Republican Presidents....

Bush Jr: -$690 Billion in 8 years
Bush Snr: -$135 Billion in 4 years
Regan: -$82 Billion in 8 years

And just when people though they would see public sector surpluses as far into the future as the eye could see – perhaps forgetting the basic tenets of national finances? – distinguished scholar Wynne Godley issued an epic takedown of such hubris. One of the best papers I have come across. W. Godley (2000): Seven Unsustainable Processes | Special Report (pdf).

This paper takes issue with these optimistic views, although it recognizes that the U.S. economy may well enjoy another good year or two.
…
No parody is intended. No other story would make sense of the assumption now commonly made that the balance between tax receipts and public spending has no permanent effect on the evolution of the aggregate demand. And nothing else would make sense of the debate now in full swing about how to "spend" the federal surplus as though this were a nest egg that can be preserved, spent, or squandered without any need to consider the macroeconomic consequences.
...
The central contention of this paper is that, given unchanged fiscal policy and accepting the consensus forecast for growth in the rest of the world, continued expansion of the U.S. economy requires that private expenditure continues to rise relative to income. Yet while anything can happen over the next year or so, it seems impossible that this source of growth can be forthcoming on a strategic time horizon. The growth in net lending to the private sector and the growth in the growth rate of the real money supply cannot continue for an extended period. Moreover, if, per impossibile, the growth in net lending and the growth in money supply growth were to continue for another eight years, the implied indebtedness of the private sector would then be so extremely large that a sensational day of reckoning could then be at hand. In sum, if a truly strategic view is taken, covering the next 10 to 15 years, one is forced to the conclusion that the present stance of policy is fundamentally out of kilter and will eventually have to be changed radically.

Recession followed already in 2001 but habits didn't really change. The Private sector continued its borrowing binge (households more so than businesses) far in excess of income until 2007-2008.

 

[Fudbucker]

And just when people though they would see public sector surpluses as far into the future as the eye could see – perhaps forgetting the basic tenets of national finances? – distinguished scholar Wynne Godley issued an epic takedown of such hubris. One of the best papers I have come across. W. Godley (2000): Seven Unsustainable Processes | Special Report (pdf).



Recession followed already in 2001 but habits didn't really change. The Private sector continued its borrowing binge (households more so than businesses) far in excess of income until 2007-2008.

Am I the only one confused about the point you're trying to make with a 13 year old paper?

 

[lupus_in_fabula]

Am I the only one confused about the point you're trying to make with a 13 year old paper?

The basic message is that talking about the Clinton era surplus also has to be evaluated in a macroeconomic context, and not just in a political one. Politically it may seem like a feat, especially in light of current conservative obsessions over balanced budgets. Yet as an economic policy it may not have been such a feat at all.

A government in a modern monetary economy with a deteriorating current account simply cannot run persistent surpluses unless the private sector goes even further into deficit (which over time becomes unsustainable). The government can however run sustainable deficits – which in turn allows for private sector surpluses. Policy should take such basic relationship into account. Hence, the push for government surpluses in late 1990s only served to exacerbate the existing unsustainable macroeconomic condition prevalent at the time. Thinking about sustainable government surpluses long into the future was just plain silly.

As a corollary to past experiences, Obama pushing too hard for any kind of surplus would probably not end well, economically speaking, that is.