Bush vs Obama Deficits: In pictures.
by Bruce Webb
Reader BuffPilot has been asking Angry Bear for awhile now to post the following graph
http://blog.heritage.org/2009/03/24/bush-deficit-vs-obama-deficit-in-pictures/
If you follow the link you will see that Heritage updated it with new CBO and OMB data this year. That is below the fold.
http://blog.heritage.org/2010/02/05/past-deficits-vs-obamas-deficits-in-pictures/
Which I will amplify with the actual CBO Table
http://www.cbo.gov/ftpdocs/108xx/doc10871/Chapter1.shtml
I am not sure what the take away here is. A year ago CBO was more pessimistic than OMB about the years after 2012, where OMB stay deficits stabilizing at a fairly level percentage of GDP, CBO saw much sharper increases. This year that seems to have flipped flopped some with both OMB and CBO seeing deficits stabilizing through 2018, with CBO seeing smaller deficits than projected the year before and the White House OMB seeing them somewhat higher. probably because CBO is working off current law that would have middle class tax cuts expire, while OMB is counting on preserving them for people making under $250,000. Anyway if you just take CBO scoring things are moving in the right direction policy-wise.
Anyway plenty for people to chew on. Consider this a budget and deficit open thread.
leaving plenty of room for questions like: does it matter?
say i bought a house (or a business) this year and borrow the money for it. raising my budget deficit dramatically. or i could have paid cash and told my kids to quit school and get a job, keeping my deficits low. or i could have not bought the business and foregone any future profits, or not bought the house and been quite comfortable in a tent.
or maybe there is a difference between deficits run up for fighting an off budget war as compared to those run up to fight a depression caused by … raising another question:
are gambling debts different from business investments? how much of the current deficits are caused by a recession caused by tax cuts to enable the gambling we were all celebrating while the party was in full swing?
and, to be fair, how much of the current deficit is well designed to get the business profitable again, and how much of it is going into new gambling?
I’m looking at the “off budget surplus” line. The asterisk says this is the combined surplus of Social Security and the Post Office, combined together in one handy, easy to read line item.
Considering what we think we know about the SS surplus, should we assume the Post Office will emerge as one of the greatest growth stories in American biz history?
Or is there something I’m missing here.
Also, I must be remembering the old CBO data too, because the cumalative number in 2020 was almost 9 trillion from what I recall just from memory. (And either way, they have to add it to the current debt of $12.5 trillion)
Also, note that the debt%of GDP line is only calculated using “debt held by the public”. That is a pet peeve of mine because they don’t add in the near $5 trillion in intragovernmental debt, and that is where our trust fund resides. Then some people like to quote the 67 % of GDP number as no problem for the US to finance.
Coberly,
Sure as hell mattered to you a couple of years ago when it was Bush…Remember?
Your analogy is weak. What you decide to do with your money is your problem, what you decide to do with my money makes me your problem. You weren’t even close.
If your gonna spew the speculative propoganda, let’s see some links, data and analysis?…Not just opinion!
Bruce,
“I am not sure what the take away here is.”
Atfer years of people sceaming about the Bush deficit (including me BTW) and now the deathly silence from the left when Obama runs deficits that by his own numbers, make the worst Bush years look like rounding errors? And that assumes all the rosey projections embedded in these projections. (This silence is purely political, see FISA, Gitmo, the war, etc, now we have a D in office its all good….)
Bruce this chart is THE reason your seeing Obama and company going after SS! And you don’t see the significence???
Bruce I really am amazed you don’t see this.
coberly,
If you hadn’t noticed the hugely popular, overwelmingly bi-partisanly supported war effort is still going on. Those numbers are in there also.
And you will also noticed that there hasn’t been much hauling in the gambling so far. Last I checked the banks are raking in record profits. BUt that’s why we see spencers graph below.
Islam will change
Bruce,
One last thing. Thank you for finally putting this up after over a year of me asking. Its probably the most anti-Dem thing I have ever seen on this site.
Islam will change
Buff, “Last I checked the banks are raking in record profits.”
They are marking assets to make believe, the Fed bought 1.8 Trillion in QE assets and also a couple 100 billion in Maiden Lane toxic paper. The Fed also loans theres’ and ours’ money to banks for almost nothing.
Profits are an accounting gimmick, but they enable big bonuses and secondary stock offerings. Then there are those FDIC backed bond offerings banks do too so they can repay TARP.
But it does make the stock market go up when banks report profits, and everyone cheers the recovery that is almost here!
Islam will change
Cedric,
I agree totally. And I see no one in Obama’s administration planning to do anything about it. (Not that an R admin would be any better on this point).
Do I need to say this? Well, I will anyway.
As much as I gag at the bailouts for the big financial players (patooie!) by both administrations, what do all of you think would have happened if that and other expensive initiatives had not been undertaken in the wake of the eight year storm of mal-, mis- and non-feasance, absent regulatory action, and depending on economic ideas which were false and which have for decades sucked the blood out of the lower 95% of Americans?
When I lead a horse to your door, starved and overworked and probably mangy, and you take pity and take him to the vet, we know two things are true: it’s going to be expensive, and it wasn’t your fault.
Noni
“hugely popular… war effort”? With Halliburton stockholders maybe. Ex-CEOs certainly.
CNN: Jan 22-24 “Do you favor or oppose the war in Iraq” Favor/Oppose 39/60.
CNN: Mar 19-21 “Do you favor or oppose the war in Afghanistan” Favor/Oppose 48/49.
Everyone has a plan, from Geithner to Volker to Frank to Dodd. I’ve seen most descibed as faulty in one respect or another. Problem is doing anything that makes the banks de-leverage any faster, is peceived as bad for the economy. Pumping free money into banks is believed “good”, sort of like assisting in God’s work. So we get extend and pretend instead.
Then the banks go on milking it for big bonuses and they even have a legal group making the legal case that it is unconstitutional to tax bankers in a discriminate way! In addition to the lobbying they are doing to water down any rule changes.
Islam will change.
“Or is there something I am missing here”
Yes lots. When you see stories about ‘vanishing surpluses’ moving up from 2017 you need to understand they are only talking ‘primary’ or cash surplus. Simple Social Security surplus includes interest on a still growing Trust Fund balance which on $2.5 trillion is around $120 billion a year. That $1.2 trillion is almost entirely interest which is why Social Security Trust Funds are projected to grow to about $4 trillion before principal needs to be tapped starting around 2023.
Stick around, you’ll learn plenty about SS finance if you pay attention.
They say it would have been Armaggedon, and it’s hard to argue with that!
Just ask Summers, Geithner, Bernanke and Greenspan, Summers, Geithner, Frank, Dodd, and a slew of R 1990s and early 2000s financial reformers whose names escape me at the moment.
jimi
i don’t know what it is you are spewing but i don’t see any o’ dat ol’ linksdattanalysis.
i don’t remember being particularly worried about bush deficits, but there is a nod in my present comment above about the difference between deficits for war and deficits for fighting a depression,
phrased as a question, in fact. not that you know what a question is. since anything that asks you to think sounds like enemy propaganda to you.
oh, as for what i do with your money…. i assume you vote. and participate in the advantages of living in america. or, as they say, get the hell out.
Buff,
i hadn’t meant to represent the opinion of the “hugely popular” or even “the left.” jus’ us chickens.
and i did mean to imply the gambling was still going on.
noni
you needed to say it. but it won’t do any good.
As to the $9 trillion. When calculating deficits Social Security surpluses count as a positive, when calculating Public Debt they count as a negative. Add that $1.2 trillion off budget increase in Intra-governmental Debt to the on budget $7.2 trillion increase in Debt Held by the Public in the borrowing needed and bingo you are at $8.4 trillion rather than CBOs $6.0
Debt is not a simple total of deficits. Though it will be a cold day in he’ll before any MSM reporter will get the difference.
And most of the near $5 trillion in Intra-governmental assets exists as reserves that in principal should never be tapped. For example under the NW Plan Trust Fund principal, which for this purpose counts as Intra-governmental debt never gets redeemed, it just generates debt service.
Total debt as a percentage of GDP is in the end fairly meaningless, the key is whether you can afford to service it. At 4% we can carry a big amount of debt, at 10% a hell of a lot less. Which is why squealing about deficits in a recession marked by absurdly low interest rates kind of misses the bigger picture.
Question for my economist friends:
Shouldn’t this provide massive stimulus? What happens to employment? Inflation?
I am paying attention. When I read the forcasts elsewhere on when the surplus vanishes, I didn’t realize that didn’t include interest. So you’re saying in this CBO projection here interest payments are shown to be a positive off balance surplus. But forgive me when I get confused when these payments come from the on budget line item, then they sum the on budget and off budget line item, and get a net negative 6 trillion net number in 2020. But accounting is not my thing, so maybe somehow that works.
But I want to believe the Post Office is not expected to do that growth.
Jimi anyone who doesn’t understand that diverting General Fund surpluses that were being used to pay down Debt Held by the Public to pay for tax cuts to the wealthy that end up ballooning that same debt is a little different than running deficits to extract the nation from a deep recession that same spendthrift delivered us into is fundamentally a not serious person.
We would have been a lot better off if we bad just continued to pay off Debt Held by the Public between 2001 and 2005.
Uh-huh………..Typical
Interest on the Trust Fund does not come from the on budget line item until or unless those transfers have to come in cash form. Which they are to the much smaller DI program which is already in cash flow deficit eve as the 10X larger OAS program remains in cash surplus.
You can confirm this by rummaging around in the Analytical Perspectives annex to the Presidents Budget but prepare to have your mind bent. SSA, CBO, and OMB all look at the world through their own lens and manipulate what they see with different methodologies. Apples, Oranges, Bananas.
I find it hard to believe that a change in deficit spending of negative $2 Tilllion over a two term administraion while fighting a war on two fronts is even in the same conversation as $1.5 Trillion deficits as far the eye can see determined within the first year of the first term. Its apples and oranges my friend.
When and Where are the results? The future is gonna be even more difficult with the commitments that have been made. That’s what the point is….Shit gets worse, and all your worried about doing is attacking the wrong people.
Buff I am really amazed that YOU don’t see the difference between dficits caused by massive tax cuts for the wealthy combined with wars that for the first time in history did not have to be paid for and deficits caused by efforts to extract us from those wars and a deep economic recession.
If the people who insist that these wars are a matter of existential life and death for this country were willing to give up their tax cuts or at a minimum not demanding even deeper tax cuts on capital then I could give them some credibility. But they don’t.
At some level I get the philosophical belief that the core responsibility of the Federal Govenment is to pay for the National Defense, and that social welfare is best left to individual effort and charitable impulse. But this belief that Capital has zero obligation to fund National Defense, which for example is the logical implication of the Ryan Road Map is frankly nutty. Trickle down on workers, okay I get the Invisible Hand. But pissing on the Army and the Air Force because you don’t believe billionaires should pay taxes is a little bizaare.
Yet that is the stated position of the Right.
Coberly – “i don’t know what it is you are spewing but i don’t see any o’ dat ol’ linksdattanalysis.”
Links and CBO analysis coming up…
Webb – “A year ago CBO was more pessimistic than OMB about the years after 2012, where OMB stay deficits stabilizing at a fairly level percentage of GDP, CBO saw much sharper increases. This year that seems to have flipped flopped some with both OMB and CBO seeing deficits stabilizing through 2018, with CBO seeing smaller deficits than projected the year before and the White House OMB seeing them somewhat higher. probably because CBO is working off current law that would have middle class tax cuts expire, while OMB is counting on preserving them for people making under $250,000. Anyway if you just take CBO scoring things are moving in the right direction policy-wise.”
This Angry Bear main post is misleading.
The above commentary does not reflect CBO’s analysis of the President’s FY 2011 budget proposal.
First, the Heritage Foundation threw out a little article with a graph and then published a fairly useless update thereafter. Second, Heritage hasn’t published any serious work on President Obama’s FY 2011 budget proposal to my knowledge.
An Angry Bear writer, in this case Webb, posts the old Heritage graphic and related CBO info; Buffpilot is happy. Webb also posts the Heritage updated graphic which was published on February 5, 2010. But Heritage, in support of that graphic, was citing CBO budget outlook data from January 2010 which is not based on the President’s FY 2011 budget submission.
CBO published its analysis of the President’s FY 2011 budget proposal in March 2010. The March 2010 CBO analysis of the President’s FY 2011 budget proposal does not project smaller fiscal year deficits than those projected by the Obama Administration with the exception of FY 2010. CBO is projecting larger deficits for all other fiscal years through FY 2020.
Readers should give serious consideration to reading the CBO March 2010 analysis of the President’s FY 2011 budget proposal and the President’s proposal if interested in the facts and analysis of the Federal Budget submission.
Here’s the latest data on Federal deficit projections derived from the President’s FY 2011 budget submission and subsequent analysis by CBO:
President’s Budget, February 1, 2010
and
CBO’s Estimate of the President’s Budget, March 2010
Federal Budget – Fiscal Year Surplus/Deficit
($ billions)
FY Actual
2001 +129
2002 –158
2003 –378
2004 –413
2005 –319
2006 –249
2007 –162
2008 –410
2009 -1,413 (Bush OMB projected -408)
*all FY rounded up except one year
FY OMB PB CBO OMB CP
2009 -1,413 -1,413
2010 -1,556 -1,500 -1,430
2011 -1,267 -1,342 -1,145
2012 -828 -914 -934
2013 -727 -747 -940
2014 -706 -724 -934
2015 -752 -793 -983
2016 -778 -894 -1,013
2017 -778 -940 -1,042
2018 -785 -996 -1,077
2019 -908 -1,152 -1,227
2020 -1,003 -1,254 -1,346
Notes:
OMB PB – OMB President’s Budget proposal
CBO – CBO March 2010 analysis of President’s Budget proposal
OMB CP – OMB Federal Budget based on current policy (law)
Sources:
CBO – http://www.cbo.gov/ftpdocs/112xx/doc11231/index.cfm
and http://www.cbo.gov/ftpdocs/112xx/doc11280/frontmatter.shtml
or http://www.cbo.gov/ftpdocs/112xx/doc11280/03-24-apb.pdf
OMB – […]
God where to start?
I never claimed that my commentary reflected CBOs analysis of the President’s 2011 budget proposal. A casual analysis would show that both the update graph and the Table were based on CBOs Jan 2010 Budget and Economic Outlook. Strawman one.
Two I linked to Heritage not because of the content of their screeds but because I don’t like to lift other people’s work product (the graphs) without attribution.
From that combination you find some malfeasance.
MG at no point did I reference or hint that any of this had anything to do with the CBO March 2010 CBO analysis of the President’s budget. That just sprang from your own imagination and perhaps some odd sense of grievance. Strawman no 2.
Which leads me to ask the question: “MG, when did you stop beating your strawmen?”
Jimi
Coberly may not have commented on the Bush deficits but I did. Many times. I railed on them and I praised the Clinton surpluses. That was 2-3 yrs ago and I know now that I didnt know a phucking thing about deficits and what they were actually measuring. Nor did I know what reversing the deficits would really mean. I do now. I also know by reading your posts that you are just like I was (except you love Sarah Palin) and dont know shit about how our monetary system works.
When the govt is in deficit we are in surplus. To reverse the govt deficit we MUST reverse our surplus. How much of your financial assets do you want to give up? There is no other way. You cant fight the accounting rules.
IF the govt erases all their debt EVERY retirement account in America loses safe govt bonds. You want to take all those out of retirement accounts? That is income to people.
Try and admit that you dont know what your talking about and go learn about how our monetary system operates. You can still have your conservative views (like Warren Mosler) but you wont be spewing the ideologic based ignorance that you do regarding economics. Deficits are not bad when democrats run them and good when republicans run them. Deficits need to be run any time the private sector is deleveraging or when things like wars need to be paid for that the private sector cant do.
This is the best article Ive seen on deficits/debt. Its very short. I recommend everyone read it.
http://neweconomicperspectives.blogspot.com/2010/04/what-is-responsible-fiscal-policy.html
Bear in mind I’m just looking at the CBO table above and trying to make heads or butts of that.
My mind is bent already. You’re saying the interest on the SS fund (the off budget line item growth, excluding Post Office growth) is paid as more non-marketable treasuries(?), then they redeem them as cash is needed for SS cash outflow to retirees, then that makes the deficit on the “on budget” line item grow (because they need to sell real treasuries to raise the cash, but then they sum the positive “off budget” line item with the deficit “on budget” line and show a reduction the net cumalative deficit????
I’m looking at how they add -7.2T and 1.2 and get 6T. The math looks fine, but I’m consused about the pluses and minuses.
BTW, Obama is on TV right now saying that we are going to Mars!
Jimi your “negative $2 trillion over a two term administration” is net of the roughly $3 trillion projected surplus over that same period. And a casual examination of CBO numbers does not show “$1.5 trillion deficits as far as the eye can see”, instead CBO in Jan saw those deficits falling under $500 billion by 2014 and not growing back to $700 billion or so before 2020. Even last years projection (much more pessimistic) had 2019 numbers at $1.2 trillion.
Exactly where do you see $1.5 trillion annual?
I meant -7.2T and 1.2 and get -6T.
Ok, I wrote my comment above before I read this. Now it makes sense that way, but you understand that I have a problem with the way it’s presented. Like the way the 67% debt/GDP ratio gets bandied about like it’s a fact.
We can say anything that gets rolled over is never really redeemed, and you can borrow forever to pay interest, but you have to have creditors that agree. 18T-20T of creditors is a lot of agreeable folks.
Good since we may need some Martian accountants to explain this to us. Because it is more mind bending then you can imagine.
In an ideally balanced Social Security system all securities get rolled over with just enough of the interest accrued on the existing Tresuaries need to keep that principal at 100% of next years anticipated costs being credited to the Trust Fund in the form of Special Treasuries created out of nowhere (otherwise known as Full Faith and Credit) even as the rest of that interest is transferred in the form of cash from the General Fund. That portion of interest paid in cash will show up in the same category as debt service on any other Treasury, but that proportion of interest retained to build reserves will not becaus it is not financed.
I asked all these questions years ago and nobody had an answer, so I had to dig in. At times my head still spins, none of this is intuitive.
Webb – “I never claimed that my commentary reflected CBOs analysis of the President’s 2011 budget proposal. A casual analysis would show that both the update graph and the Table were based on CBOs Jan 2010 Budget and Economic Outlook. Strawman one.”
I understand that you didn’t cite the latest CBO analysis of projected Federal deficit spending.
Your narrative does not support current analysis and commentary provided by CBO regarding projected Federal budget deficits. A casual blog reader could easily assume that CBO is projecting smaller deficits based on the narrative in the main post as well as examination of Heritage’s second graphic. Well, that’s not case as of now.
Webb – “Two I linked to Heritage not because of the content of their screeds but because I don’t like to lift other people’s work product (the graphs) without attribution.”
I understand that. I can appreciate as well that you were posting Buff’s graph and citing the original source. That’s what I would have done.
Webb – “From that combination you find some malfeasance.”
Not true. The problem is with your narrative which does not reflect current CBO analysis.
Webb – “MG at no point did I reference or hint that any of this had anything to do with the CBO March 2010 CBO analysis of the President’s budget. That just sprang from your own imagination and perhaps some odd sense of grievance. Strawman no 2.”
Your narrative is not supported by the latest CBO analysis. That’s a fact. Had you included the CBO’s analysis of the President’s FY 2011 budget proposal, your narrative would not have made any sense should one review the latest CBO analysis. It’s my opinion that you wouldn’t have written the narrative that I cited had you included the latest CBO analysis. Rather, you could have explained that CBO is now projecting larger deficits than the Obama Administration is projecting and CBO’s analysis indicates that the Federal deficits grow considerably larger than indicated in the CBO January Budget Outlook, which, of course, was based on CBO baseline data.
Webb – “Which leads me to ask the question: “MG, when did you stop beating your strawmen?””
I simply pointed out, quite correctly, that the main post is misleading, and I explained why I believe it is misleading. None of my comment post statements at 9:39:16 PM, Thursday, are inaccurate to the best of my knowledge. The problem rests with your narrative. I don’t believe that would been the case had you also cited the CBO March 2010 analysis of the President’s FY 2011 budget proposal. It was your decision to also cite the latest CBO analysis or ignore it. You ignored it, which is your choice, and your narrative does not hold up based on that latest CBO analysis.
If an Angry Bear main poster created a graphic utilizing the President’s budget proposal and CBO’s March 2010 analysis of the President’s budget proposal, it would not look the Heritage graph. A reasonably well thought out accompanying narrative explaining the new graph and supporting data would be quite different from your explanation in my judgment. I expect that new or casual readers would draw different conclusions from such a main post than may be the case with the existing main post.
As an example, if a person shows someone a photo of a house without a large front porch and a new attached three-car garage and says that is how the house looks and it’s not worth buying, the person may assume that is probably right. If the same person drives by the house later that day and notes that it has a large front porch and a new three-car garage, the person may draw a different conclusion.
I believe that […]
Wow, Thanks Greg that is an impressive piece of writing. As illuminating as it is succinct. In particular I liked this from the concluding paragraph – it describes something I’d noticed in the pronouncements of talking heads on the biz channels but never really registered.
“Wall Street knows all too well that the government cannot go bankrupt, which is why it never objects when the government socializes its losses. Notice how financial gurus temporarily suspend their own deficit phobia until Wall Street’s balance sheets and incomes are restored.”
Quite so.
MG
i would expect nothing less of you. and i hope you understand i smiled when i said that.
bring it on.
MG the question here is what obligation I have in responding to Buff’s request to post a graph to “reflect current CBO’s narrative”? I fulfilled a long standing request, added an update plus an extract from the source that informed that update. And then opened the floor for debate. But because I did not personally extend that debate in directions agreeable to you have been judged ‘misleading’. You were not only free but invited to open your contribution in the form “Interesting as far as it goes, but when we add CBOs March analysis of Obama’s 2011 budget we can expand this in directions X,Y, and Z” and then give all the links you liked.
Why were you compelled to take a shot at Angry Bear and me just because I accomodated the request of a long time commenter in the form he asked?
Something else this piece helped me understand is why certain economists started making dire warnings near the end of clinton’s term that he was reducing the debt too fast and that this would somehow harm the economy ( IIRC Greenspan made some speeches to this effect ) This seemed kind of counterintuitive to me: Wasn’t paying the debt down good for the economy?
But thanks to this:
If we want the government to “correct” its budget stance, then we must necessarily be offering to reverse ours. If we demand that the government run a surplus, then we are demanding that we, the private sector, run a deficit.
I can see that double entry accounting requires surpluses in Washington means pain everywhere else in some sense.
Webb,
The main post narrative is incorrect. That’s the bottom line.
Readers of this blog have ever reason to note errors in Angry Bear posts that are incorrect. Otherwise, people are misled. Dan, the blog owner, supports identifying errors in main posts as well as those expressed in comment threads. That is a fact.
The main post narrative does not reflect CBO’s current analysis. No one should be misled by the commentary in a main post. That is not the purpose of this blog.
I made an observation for the benefit of Dan’s blog readers. Hopefully, a few who read the comment thread will realize that the main post is inaccurate and should not be considered gospel as far as CBO’s analysis is concerned.
You’re going overboard, Webb. It’s just not necessary. Even you can be wrong.
You have made other statements on this comment thread that I consider to be questionable as well as a few which I believe are wrong, but they’re not worth getting into a fight over as few readers visit the comment threads. I only pointed out a main page mistake. It’s not the end of the world.
You performed a kind act for Buffpilot. I respect that. But I am not going to pretend that the main post narrative isn’t misleading. And I’m not going to pretend that others should read the narrative and believe that the CBO is projecting lower deficits when it’s latest analysis indicates otherwise.
You appear to be trying to turn my observation into something personal. I simply pointed an error and explained why the narrative is inaccurate. That’s not taking a shot at Angry Bear or you. Hardly the case. But you could fix the mistake, though I am not convinced that you will do that. Readers who take the time to read the thread have an opportunity to read a difference perspective, can visit CBO to verify what I posted, and draw their own conclusions.
If my grandmother had wheels she would be a bus.
You cannot point to a single error of fact in my post, only that it “does not reflect CBOs current analysis”. It didn’t purport to. You appeal to “loud howling” as if it was I that resorted to “liar” something you have done on a regular basis in reference to me. Well in my book and in yours that was traditionally in the category of “fighting words”.
Plus you have this odd habit of appealing to “Dan” as if you had some special relationship with him “Dan does not support” and “Dan’s blog readers”. Well yes I know you have his phone number. On the other hand I have the passwords to the site and along with a couple other Bears have full power and authorization to manage the site in his absense. (Dan is of today off the grid and is in an undisclosed location where he is sharing a (shudder) land line with a whole household). So I suggest you keep this at the level of analysis and policy and not appeals to authority whether that be intrinsic or external. I don’t respect your authority or your attempts to pull rank by some personal relation to the Siteowner. I have offered on many occasions to walk away from AB if my presense here was embarassing. But not since three days ago.
My resignation was not accepted.
WEBB.
Look how far you’ve taken it this time. What an embarrassment.
You’re discussing matters that should not be stated on this blog. And you don’t have all the facts that you think you have.
Once again, you’re in violation of Dan’s comment policy for his blog.
I stand by my original comment post because it is accurate. End of story.
Webb – “You cannot point to a single error of fact in my post, only that it “does not reflect CBOs current analysis”.”
You’re standing by an old report, acting as though a newer doesn’t exist. That just too funny.
Webb,
Look how far you’ve taken it this time. What an embarrassment.
You’re discussing matters that should not be stated on this blog. And you don’t have all the facts that you think you have.
Once again, you’re in violation of Dan’s comment policy for his blog. You’re engaged in harrassment.
I stand by my original comment post because it is accurate. End of story.
Webb – “You cannot point to a single error of fact in my post, only that it “does not reflect CBOs current analysis”.”
You’re standing by an old report, acting as though a newer doesn’t exist. That just too funny.
You need to drop this matter. It’s reached the point of ridiculous behavior on your part.
Webb,
Look how far you’ve taken it this time. What an embarrassment.
You’re discussing matters that should not be stated on this blog. And you don’t have all the facts that you think you have.
Once again, you’re in violation of Dan’s comment policy for his blog. You’re engaged in harrassment.
I stand by my original comment post because it is accurate. End of story.
Webb – “You cannot point to a single error of fact in my post, only that it “does not reflect CBOs current analysis”.”
You’re standing by an old report, acting as though a newer CBO report doesn’t exist. That just too funny.
You need to drop this matter. It’s reached the point of ridiculous behavior on your part.
MG this is my post. And this is the comment thread to my post. And I am a moderator on this site, one of two officially designated for that, and one of two people with active administrator privileges in absence of the siteowner. And you have the balls to combine the following two statements into one comment?
“You’re going overboard, Webb. It’s just not necessary. Even you can be wrong.”
and
“You appear to be trying to turn my observation into something personal.”
Buh wah? To which you add:
“Look how far you’ve taken it this time. What an embarrassment.”
Man, I hate to think what it would be like if you chose to take it personal. Because exactly what was your opening gambit?
“This Angry Bear main post is misleading.” Today, 6:39:16 PM PDT
MG when your opening salvo is calling me a liar, maybe it is not a surprise that I took offense. And don’t weasel behind ‘misleading’, it literally means directing people onto a wrong path. Stop calling me a liar right off the bat and maybe we can have a civil discussion.
Somebody needs to drop this matter. And I don’t see a lot of non-trolls jumping to your defense.
Plus you seem unaware of the difference between ‘narrative’ and ‘coda’
oh god no good deed goes unpunished with you does it.
Bruce, I stand by MG’s comments. You have personalized a statment of fact, “This Angry Bear main post is misleading.”.
I believe that in 1965, there was no Congressional Budget Office. THe House Ways and Means analysts estimated the cost of Medicare would cost $12 billion in 1990. The actual spending in 1990 was $110 billion.
In 1965, the House Ways and Means Committee estimated that Medicare Part A, the hospital insurance part of the Medicare program, would cost $9 billion in 1990 but the actual cost of Part A in 1990 was $67 billion.
So I really don’t believe any figures that come from the White House. For the past 40 years of voting, I have come to the point that I can no longer vote for any main stream party. They are all corrupt and will eventually send us all down the stream. “THEY” will be living well off the taxpayer funded robust retirment.
Bruce,
Thanks again for posting this. I’m still surprised you don’t understand the fiscal hole Obama and company are drinving us into.
Got to got to Dallas later…
as,
I can’t vote sin Congress. Thats all the counts for popualrity and the wars have been hugely and bi-partisanly popular. Your polls don’t reflect anything…only votes in Congress count and they totally back me up.
Try again
Islam will change
as,
I count votes in Congress. Thats all the counts for popularity and the wars have been hugely and bi-partisanly popular. Your polls don’t reflect anything…only votes in Congress count and they totally back me up. (Or do you think, by your definition the unpopular HCR should have been voted down?)
Try again
Islam will change
Bruce,
You still don’t get it. Keep digging. All of Bush’s deficits don’t hold a candle to what Obama is doing and the wars are still being paid for out of that deficit.
Obama should be raising taxes according to cactus and you. Not digging us deeper into debt. But hey don’t whine at me when Obama fixes SS – you guys wanted him!
Islam will change
I understand that the fiscal situation that Obama is driving us to is not in fact a “hole” but a “peak”. You choose to look only at the govt side of the ledger sheet which has a negative number on it, in this case a big one. I choose to look at the non govt side (which is the side we ALL live in) and see a big positive number. That big number makes me happy but the number does not describe the distribution of the smaller big numbers throughout the sector. Banking has a real big number, education needs a bigger big number, manufacturing needs a bigger big number, Wall St needs a smaller big number. I want the big number to be spread out in a different manner but the overall big number needs to get bigger or I fear (from using the judgement of others whom I have learned to trust on these matters) we will fall in to another recession soon.
You want to focus on the big negative number now while ignoring it for the big positive number on the other side during most of the “oughts”, thats ok. Thats a ploitical stance for you. Dont try to make ANYONE think you are taking these stances for sound economic reasons because you obviously have no understanding of how our monetary system works.
In 1965 the United States had not begun to experience the wonderful world of oil price shock, nor could it imagine an entire decade of inflation, nor was the Vietnam war in full swing.
I do not wonder that the estimates of 1965 failed to predict the actuality of 1990. It was an entirely different world, financially speaking.
Bruce
i am jumping to your defense. MG’s comments are becoming a major distraction. I am almost never able to tell what his points are, though i guess that his links might be useful to some readers, and sometimes when i have time and can think my way to the bottom of his logic i can see the value of “another point of view.”
But you take the bait and get involved in a personalized shouting match with him that does you no good, and sure takes up a lot of vauable cyber-space. Let him alone. There is no chance that anyone would take his comments as a serious slur on your character that requires a meeting in Weehauken.
amamteur socialist
i think you are making the mistake of thinking that the accounting is zero sum. it’s not. doesn’t mean the deficits are not a problem. but does mean almost no one can think clearly about them.
here is my instant doctors thesis: the deficits don’t really matter. money is not what you think it is. the government… and the banks… can always print more, and if they are careful about it no one will notice a thing. this does depend on neither money nor the economy being zero sum.
mostly “the deficit” is just politics.. and excuse for people to make a lot of noise to get the policies they think will help them become fabulously rich. all that really matters is the short run… can i “make money” today. is there anything happening that will make it more difficult for me to make money tomorrow? well, yes. but it isn’t the budget deficit.
blacknblue
see my new comment above yours. the money figures are not reliable, but they don’t mean anything anyway. what difference in your life has been made by the 9 billion turning inot 67 billion.
you want to be a little careful about the answer. if you think you are “paying more taxes” you need to note that you are “making more money” and the actual gain or loss to you because impossible to calculate.
becomes impossible to calculate.
“say i bought a house (or a business) this year and borrow the money for it. raising my budget deficit dramatically. or i could have paid cash and told my kids to quit school and get a job, keeping my deficits low. or i could have not bought the business and foregone any future profits, or not bought the house and been quite comfortable in a tent.”
Say Coberly cant make interest payments on his debt so he loses the business and then has to pull the kids out of school and live in a tent………..
Waot a minute, Coberlys right, it doesnt matter…..its all been about the tent all along
Enjoy your tent Coberly!
When they did the final analysis, the figures were adjused for inflation. And what do you mean they wouldn’t know about the war? It was already happening when Johnson passed Medicare.
I don’t normally go by totals but consider percentages. Percentages give a more clear picture. If you were paying 20% tax in 1970, of course because of rising income your 20% tax on that higher 2009 income will be a larger total.
Now if taxes were 20% in 1970 and 33% in 2009, that would be a double dip into your pocket.
Right. So since Halliburton’s lobbyists have been doing their jobs… Voila! Instant popularity! Nice to know how the standard is applied Buff.
Coberly
How can you say the accounting is not zero sum? It must be. Whatever the negative number is on the govt side of the ledger it WILL equal the positive on the non govt side of the ledger. IT CAN BE NO OTHER WAY. Im not quite sure where you are going with your comment.
The deficit isnt just politics its ACCOUNTING identities. There is politics determining which sectors get big + numbers and which ones get smaller ones, or maybe have to get a – number.
The fact is there will not be net growth of financial assets on OUR side of the ledger unless the govt has negative numbers on their side. Some argue that there is plenty out there and we simply need to persuade those with extra (beyond their consumption needs) to invest in those without any or much. This is a fine and reasonable stance to take but it is not more ECONOMICALLY SOUND. Our economy doesnt end up stronger choosing that option over the option of injection of new money to stimulate economic activity. That is a completely philosophical stance/preference akin to the German model of export led growth, which asks its citizens to put nose to the grindstone and make more than they can possibly consume for the consumption of others. Great for Germany but the reality is that model can not apply to all 200 and some countries. That is not THE model of how to run an economy. Someone needs to be a net consumer somewhere.
amateur,
Let me encourage you to find out more about this type of analysis. Try the following sites and browse for a while. Youll not regret it.
http://neweconomicperspectives.blogspot.com/ Check out all post by Randall Wray, Marshall Auerback and Scott Fullwiler
http://bilbo.economicoutlook.net/blog/?page_id=1667 From here pick a few topics and go from there. Everything under “debriefing” would be a good primer.
http://moslereconomics.com/mandatory-readings/soft-currency-economics/ This article probably should be the first that you read. It really frames things in the proper way.
Enjoy
Bruce,
I’m back for a moment. If you haven’t noticed we are still in both wars. Will be occupying Iraq for decades and have upped the anti in Afghanistan. Obama is just continueing Bush’s policies in spades on the war.
I have yet seen Obama take one step to raise taxes to pay for the war and other than just doing nothing and letting the Bush cuts sunset he is not taking any action to get the fiscal house in order. And he makes Bush’s spending look like a rounding error.
When you find yourself digging a hole the first thing is to stop digging. Obama traded in Bush’s shovel for a front loader….
Islam will chnage
Bruce,
Since you and the rest seem to totally miss the primary point of this (I have been discussing the secondaries for most of this and correcting your guys less than accurate accounting of facts).
It is this simple. This chart blows away ANY notion that the Dem party is the party of fiscal discilpline. Obama took that belief and literally nuked it. The Dems are not the party of fiscal responsibility and we will be paying for this for the rest of our grandkids lives.
At least take ownership of Obama – you voted him in. He is responsible for this no one else. Ask cactus. The second he raised his right hand on 20 Jan 09 it was all yours. Becuase as cactus has said over and over nothing matters but the party of the President. So you guys, buy your own standards, own it all.
That includes GITMO, FISA, escalating war in Afghanistan, permanent troop prescence in Iraq, drone attacks and other targeted combat operations in Pakistan, Somali, Yeman, etc. The add the lack of banking regualtions, the “let’s pass it to see what’s in it” Obamacare, plus upcoming ‘won’t do anything about global warming, but will hurt American jobs’ cap & trade bill, plus more and greater government intrusion in our lives and you have just what you wanted.
The Dems own it all. You should at least embrace it.
Now if the rest of us didn’t need to pay the debt your loading up on us…
Islam will change
Bruce,
Since you and the rest seem to totally miss the primary point of this (I have been discussing the secondaries for most of this and correcting your guys less than accurate accounting of facts).
It is this simple. This chart blows away ANY notion that the Dem party is the party of fiscal discilpline. Obama took that belief and literally nuked it. The Dems are not the party of fiscal responsibility and we will be paying for this for the rest of our grandkids lives.
At least take ownership of Obama – you voted him in. He is responsible for this no one else. Ask cactus. The second he raised his right hand on 20 Jan 09 it was all yours. Becuase as cactus has said over and over nothing matters but the party of the President. So you guys, buy your own standards, own it all.
That includes GITMO, FISA, escalating war in Afghanistan, permanent troop prescence in Iraq, drone attacks and other targeted combat operations in Pakistan, Somali, Yeman, etc. The add the lack of banking regualtions, the “let’s pass it to see what’s in it” Obamacare, plus upcoming ‘won’t do anything about global warming, but will hurt American jobs’ cap & trade bill, plus more and greater government intrusion in our lives and you have just what you wanted.
The Dems own it all. You should at least embrace it.
Now if the rest of us didn’t need to pay the debt your loading up on us…
Islam will change
Bruce,
Since you and the rest seem to totally miss the primary point of this (I have been discussing the secondaries for most of this and correcting your guys less than accurate accounting of facts).
It is this simple. This chart blows away ANY notion that the Dem party is the party of fiscal discilpline. Obama took that belief and literally nuked it. The Dems are not the party of fiscal responsibility and we will be paying for this for the rest of our grandkids lives.
At least take ownership of Obama – you voted him in. He is responsible for this no one else. Ask cactus. The second he raised his right hand on 20 Jan 09 it was all yours. Becuase as cactus has said over and over nothing matters but the party of the President. So you guys, buy your own standards, own it all.
That includes GITMO, FISA, escalating war in Afghanistan, permanent troop prescence in Iraq, drone attacks and other targeted combat operations in Pakistan, Somali, Yeman, etc. The add the lack of banking regualtions, the “let’s pass it to see what’s in it” Obamacare, plus upcoming ‘won’t do anything about global warming, but will hurt American jobs’ cap & trade bill, plus more and greater government intrusion in our lives and you have just what you wanted.
The Dems own it all. You should at least embrace it.
Now if the rest of us didn’t need to pay the debt your loading up on us…
Islam will change
Please delete all my excess posts. I will change computers…
I’ve been saying for a year that Obama has a much bigger problem than the GOP in 2012. He is on his way to getting primaried by a credible antiwar anti-illegal torture chamber Democrat. And I’m ready to write some checks to this person once they step up.
“Senator Russ Feingold white courtesy phone…”
Andy C
I don’t understand your point. but maybe you didn’t understand mine. My point was the hysteria about deficits based on their size and not on whether the debt is a good investment are misplaced if not intellectually inadequate. I don’t even make a claim that the present debt is “good debt.” My guess is that it is not. But I also think that repaying it won’t be the cut-your-head-off-and-despair problem that the press and the deficit hysterics claim it will be.
Coberly,
“MG’s comments are becoming a major distraction”
Pot calling the Kettle Black?
MG,
You are a gentleman and a scholar, and if I knew where you liked to drink your beer, I would buy the first round…Good Day to you Sir!
think of it as a tax cut. remember Dick Cheney said, “Deficits don’t matter.” It will pay for itself by growing the economy.
AS,
God I hope your right…It will allow the idiot Republicans to win without having to do anything!
buff
i assume you’re back from Dallas. you keep missing their point: that is that the O deficit was necessary because of W’s baddies. I happen to agree with that. But I also agree with you that O is now part of the problem.
Greg
i am pretty sure you are describing a non zero sum economy, just like i said. The accounting identities take care of themselves. Consider that a business borrows money, has a deficit. The books still balance. Only person I know who thinks there is an “iron law of accounting” is Peter Orszag, and he’s an idiot.
I probably should not have said the “accounting” is not zero sum. But i meant the economy is not zero sum. nor is money a zero sum commodity. You of all people should understand this.
The problem with the CBO is that they can only review the bill as written. Even the CBO said that if the Dems repeal the Medicare cuts included in the health care bill then it goes into the red.
blacknblue
not necessarily.
another parable: suppose you are a farmer and making a thousand a year off your crop while paying a hundred a year for seed. along comes a mysterious stranger and says he will sell you some seed that will increase your crop tenfold, but he wil want half of your profit. sure enough next year your crop brings ten thousand, but when the guy comes to collect his five thousand you get all emo and refuse to pay. why should i pay fifty percent when i only paid ten percent before, you ask yourself. the answer is that after you pay, you have five thousand whereas before you only had nine hundred.
i am afraid most people are like the angry farmer. the government gets bigger and they get a lot richer, but they don’t want to pay the bill. they think they did it all themselves.
if government was a stock and you invested 30 bucks and got back 70 you’d think it was a good investment. but of course it’s “only” government and because you did some work yourself and the check was in your name you are convinced that YOU are worth 100% of your pay and the government is just a parasite.
SEIU’s lobbyists seem to be doing pretty good as well.
Continuing to prosecute the wars is not spending to get us out of them.
Greg,
What do you mean there is no other way…That’s just plain ignorant.
Interest rates?……Inflation?……Trade Deficit?…….SPENDING? You can claim that the spending was necessary all you want, but you don’t have the facts to back it up.
Nobody is claiming that a rise is the deficit shouldn’t have happend, just not to the extent it has happend with absolutley no results.
The deficit from the war is nothing compared to what’s happend over the past 1.5 year, but nice try.
Greg,
You can’t avoid the pain, something must be adjusted to compensate. Just cause your spreadsheet looks good right now means nothing, in reality it’s worth alot less. Your gonna have to compensate just like the rest of us thru Interst Rates, Inflation, and Taxes and your Kids are going to get the brunt of it.
The political stance, which you don’t seem it have figured out yet, is that the Democrats know there are going to lose their ass and won’t be in power for quite sometime, and are simply pursuing their Ideological Agenda and pinning the bill on the Republicans, so the can do the big con-job all over again.
Why would worry about falling into another recsession when you and your Ilk have no explaination or Plan how to get us out of the current one?
If your ilk don’t a plan how to fix the major issues of Trade, Energy, and Employment then all Monetary Tricks in the world aren’t going to matter.
Coberly,
And he is right…Where the hell is the Democratic growing economy?
Jimi
There is no other way for the govt sector to go from deficit to surplus unless the non govt sector goes form surplus to deficit. ITS A LAW OF MONEY.
When the govt spends it debits its account and credits the non govt account. When the govt taxes it debits a non govt sector acct and credits its account. SO in order to change from a net deficit (more debits than credits) to a net surplus (more credits than debits) it must debit more non govt accounts (ours……you and me) its quite simple and if you talk to ANY central banker you will learn that this is not an OPINION it is an operational reality.
Absolutely no results??? Thats an interesting claim. Bank runs were stopped. Credit markets were stabilized. Jobs that were on the chopping block were spared.
The deficit from the war is not the same level? Yeah so what. Your comparing apples to oranges. Filling the spending gap left by the credit implosion is much higher and requires more than we have already done. The war was unnecessary, this spending was necessary to salvage our economy.
I’m not trying to avoid pain, the pain is already here. The question is where should further stresses be applied. I say apply it to the currency. that soreads it amongst all who use our currency. You want to put it all on the lower wage workers. Let them lose their job or decrease their wage.
“ the Democrats know there are going to lose their ass and won’t be in power for quite sometime, and are simply pursuing their Ideological Agenda and pinning the bill on the Republicans”
YAAAAAAAAAWN
This is Jimis “Mission Accomplished” moment. You asswipes never learn do you. I’m not making any predictions about future elections but I can promise you it will not turn out like you expect. You get a little negative sentment towards dems and start prediciting “permanent majorities” and all that bullshit.
Your ilk has such stellar energy plans (drill baby drill), trade plans (blame the Chinese currency authorities) and employment plans (reduce minimum wage and tax cuts!!) and speaking of monetary tricks, that is what all these deregulated financial companies have been doing the last 12- 15 yrs, not what I am promoting. Monetary tricks were the staple of the Reagan revolution.
Jimi,
What matters is a civil society which may care for people more than corporations paying dividends to the rich.
What matters is over a third of federal outlays, roughly 15% of GDP, is/are spent for militarism and other forms of corporate welfare and uninvested in productivity which are generally waste of resources, far worse that individual welfare to keep old and babies from poverty and keep the US a civil society.
That these wastes are paid with borrowed funds because the recipients of corporate welfare don’t want to pay as they pillage is something that matters and now are NOT to be considered by an Heritage, tax foundation or teabaggers screaming.
The deficit chart can be fixed well and quickly by gutting militarism and corporate welfare combined with raising upper tax barackets to the Clinton levels.
What matters is getting to the details.
Not letting you all shout out the teabagger falsehoods which are for lemming following the next version of Hitler.
Well I dont mean to be pedantic but zero sum games are where my losses equal your gains. Non zero sum are when we can both gain or both lose. So in that respect monetary accounting rules are zero sum. Each credit has an equal and opposite debit.
Now the private sector does not have to be zerosum, but only if it is getting injections from the govt sector (vertical transactions). All “within private sector” transactions are zero sum. When I get a bank loan there is equal and offsetting debits and credits.
My comment was in regard to the fact that govt deficits (debits on the govt ledger) are ALWAYS offset by a non govt surpluses (credits on their ledger) so the total balance is zero sum.
If the govt sector were to add a zero to everyones bank account we(non govt sector) would as a whole be in a non zero sum win win game within our sector BUT still our increase would be equally reflected by a govt deficit. Soooo I’m pretty sure I agree with you we are just using different words.
Buff,
The fiscal mess includes a contraction in GDP over the past 8 or 10 quarters, since 2007 anyway.
That and cumulative pillaging of productive investments for militarism, corporate welfare, waste and warfare madness.
Not to mention fighting two wars, and preparing for several more wasteful and extravagantly expensive dream wars while cutting taxes and borrowing from SS with no assurance the society can grow to pay any of it back, no matter what the borrowing is for..
Militarism, corporate welfare and tax cuts assisted by huge mismanagement of, by and for the frauds on Wall Street make the charts what they are not so much OBAMA!!!
Buff,
ilsm will not chnage any more than you could change Islam.
Buff,
“Now if the rest of us didn’t need to pay the debt your loading up on us… “
How can Merika pay off its debt from the work you are doing?
It has been investing 7% of GDP on you militarists who do nothing for the productivity of society.
The diverted 7% for your time to blog here from your military industrial complex job is productivty the society has been robbed of by your militarism.
How can the society pay anything back with so much waste in the militarism?
Buff,
Are the computers you are changing to hooked up to DARPA Net?
Maybe your CAC card is the issue?
Heck yeah!!
Let’s do a Herbert Hovver and balance the budget during a despression!!!
Partly we are in a liquidity trap. The money in the vaults won’t move out as Say’s Law is suspended.
There are no visible projects wit ROI’s of even .0005%.
How could stimulus work in that scenario?
Maybe balancing the budget won’t hurt, would you try it like Hoover?
The financial commmunity works on skimming off leverage, making money for nothing!!
US G balanced budget shuts down money and banking con artists!!
US G surpluses were endingthe con game.
if you don’t want to acknowledge a difference between lobbying to provide health care and lobbying to blow shit up we aren’t going to have much else to talk about. Really.
If only they could do nothing you might be right. But unfortunately they’re at least going to talk at some point. And once they open their mouths the GOP will end up attracting the same 30% W deadend T party racists that are walking them like a dog now.
Hint: postulate a GOP candidate who will be credible in 2010 from the assortment of loons on sunday talk shows today. Romney? Palin? Jindal? Newt fucking Gingrich? lol Good luck with that.
Then once you’ve given up on the current crop imagine the candidate who will emerge somehow in the next 2 years. That is a steep hill.
Sorry mistyped meant 2012 above.
I gotta agree with Buff on this one — and I say that as someone who is generally center-left. Cheney said that deficits don’t matter, recall Coberly, and the lot of us threw up our hands and hollered, “Ooooooh!”, in indignation. I buy that there is a time to spend public moneys, and the current recession is probably one of them. But the deficits are the Dem’s baby. Maybe the Left can explain them, but the Dems still own them.
I wish that were true ilsm.
Clinton had budget surplus and the conartists did quite well. A simple balancing of the govt blance sheet does nothing to stem cons.
Like the morons who “complain” when they win the lottery that “a third is gonna be eaten up by taxes”. Yeah well you had ZERO before and now you have 2/3 of 10 million.
felipe
I’m not gonna speak for anyone but myself and I WAS one who thought Cheney was an idiot for saying what he did. I also thought Clinton was smart for running the govt into a surplus. I now understand that I was wrong on both counts and personally am quite liberated to start looking at govt deficits in a whole new light. The problem with Cheney is he now acts like he never said such a thing and will now insist that our govt could run out of funding, which shows a gross ignorance of monetary operations.
Sure the current economy is the current administrations problem but that doesnt mean that deficits are a “problem”. Deficits are actually the tool which is used to restart economic growth. No spending no growth. No private spending you need govt spending. When you have govt spending its level gets measured with a negative sign on its ledger sheet (and a positive sign on OURS) We should be referring to the spending as our ASSET level. It is a deficit from the govt standpoint but not ours.
And BTW the govt debt is never “paid for” out of our GDP as buffpiiot suggests above (If that were true how did we EVER make our debt payments when our GDP was negative). We are not passing debt payments to our children we are leaving them with bonds which will provide them with INCOME down the road.
greg
i think that used to be true. at least they told me it was true in that famous econ 101. but nowadays the owners of those bonds may speak chinese. or they may speak bahamian. which is to say that the people who buy bonds are not the people who pay taxes. so i suspect too large a debt can be problematic. but i agree with you it is hardly an unsolvable problem.
and i think you or buff meant “GDP growth.” and by “pay for” he meant as in “it pays for itself”. certainly we can be taxed to pay off bonds even when we are not making more money than we did last year. might not even be a bad idea.
Well they teach a lot of things from Econ 101 that are definitely not true like “crowding out”, “money multipliers”, “loanable funds” and “debt monetization” so I wouldnt go by that.
Yes a portion of “our” bonds, I believe less than a third, are held by Chinese or Japanese interests but think what this actually means. The money to purchase those bonds came from Americans buying their stuff. So we got real goods while they got “paper”. Now they took the paper and placed it in a savings account (which is what a bond is). That account gets interest and that paying of interest would happen whether we taxed at 0% or 90%. We do not require taxation to pay those bonds. So regardless of GDP and revenue levels the bond interest payments will be made at the agreed to rate. In the case of Americans holding the bonds the interest payments are income and therefore taxable. Those interest payments are not a taxpayer liability.
Saying that a large debt can be problematic requires more information than the amount of debt. Lets imagine debt were 1000% of GDP, a GDP of 1 billion, a debt at 10 billion, an interest rate of 5% on the debt and a population of bondholders of 1 million Lets also for arguments sake say that ALL the debt is domestically held and equally held by all members of the society. All this means is the interest payments of 500 milion will result in 500 dollars/yr of income for each of the million citizens. This is before they have gone to work. It is an interest payment from their govt. What affect this has on inflation or any other economic metric is undefinable from this information alone and anyone making broad claims about the effects on an economy is blowing smoke because you cant.
Now 1000% debt levels have been unheard of through history in any western economy but we have people saying that det levels one tenth of that (at an interest rate around 3.5%) is going to bring bankruptcy to govts. Absurdity.
okay
now change your model so only 1% of the population owns all those bonds. and i am afraid you are going to have to tax the people to pay the interest on the bonds. they’d notice if you just printed the money and they would worry.
ilsm
doesn’t that depend on how the “stimulus” was spent. we gave it to people who had less than no incentive to do anything but save it. exactly the wrong thing to do. had the same money been used to hire people…. there is plenty of useful work that needs doing… or lend to people with business plans that would satisfy a real banker… the money would have created more jobs and production… soon enough drawing private money out of the vaults. because unlike what you have been told, private investors invest for profit, and not because taxes are low.
sure glad you got to that last sentence. i often use words in a non standard way to point to a non standard thought. i often lose my audience.
greg
it’s true. they cry real tears over that lost 1/3 million. after all, it was THEIR money.
if the government had taken their first born son they would have complained less.
Here’s the rough breakdown:
Total USG debt 12.5T (not including the 6T in nationalized Fannie&Freddie RMBS
SS Fund 2.5T
Other intragovernmantal debt 2.5T
Chinese Treasuries 900B
Japanese Treasuries 800B
Balance held by US and ROW 5.8T
China also has 500B of the F&F RMBS
The duration and average interest paid on US treasury public traded debt is 4 years and a little over 2%.
Foreign central banks do NOT pay taxes on Treasuries.
30% of US personal net worth is held by 3% of the population.
Generally creditors are supposed to look at the country’s ability to pay when deciding on risk premia, and should be looking at the taxpayers ability to pay more taxes from disposable income. But the US has very high consumer debt levels.
It is more absurd that the USofA has not gone bankrupt yet.
But Europe and Japan are making us look good, so maybe we will be the last to go.
buffpilot
That chart says nothing about fiscal “discipline”. Discipline is not defined by how close to neutral your budget balance is. Thats a constraint that is unnecessarily applied by ideologically motivated people who dont understand how our monetary system operates. Just like the EU Maastricht treaty that puts arbitrary limits of debt to GDP our priests of high finance are picking number out of their asses and saying the debt cannot be above this amount or budget deficits have to be brought below such and such a level. These are completely ARBITRARY numbers and do not consider the functioning of the economy at any given time.
Theres a certain way to show that they are disingenuous with their claims that debt levels above such and such will be Armageddon. Offer them higher interest rates. If the govt said tomorrow they were going to pay 10% on 30yr bonds you’d have “investors” coming out of the woodwork to get them a piece of that action. They dont want us to not issue the debt they only want a better return on it. Magically those debt levels would no longer be Armageddon inducing.
A govt exercising fiscal discipline would spend all that is necessary to get production to its max, which means active involvement in job creation. Direct job creation if the private sector has no wishes to employ all employable people seeking a job.
Actually Coberly all that changes is that 10,000 people get to divide the interst payments and would then collect 50,000$/yr in bond payments. The other 99% would have to get all their income from their job. That 1% might decide not to work anymore (kind of like here and now) but the payment they receive would happen at a 1% or 90% tax rate on everyone else.
The savings account that they are collecting from (which is what a govt bond functionally is) would always be able to pay their interest as long as there is a functioning govt and would not depend on income taxes on the rest of workers.
What percentage of Americans today make 50-100% of their income from interest on bonds alone?
I would imagine its way more than 1%, considering the number of folks almost entirely dependent on SS.
BTW Coberly
What do you mean they would “notice” if you just printed the money. People only notice if the payment that has been coming every month suddenly stops. They do not care where the money came from that shows up in their bank account as long as there is something to buy and they can spend it.
coberly,
NO caught a virus. Took a couple hours to get rid of it and it was doing weird things with the browers. I think all fixed now (unless this turns into 3 posts…)
AS,
Your comment above is the primary reason that Obama may get another term. Just becuase the R’s can’t find anyone to put up that’s credible. If they could Obama will go down like Carter….
Islam will change
not sure i understood much of that but SS income does not depend on bonds.
Greg
i think there is some truth in what you say, but i don’t think the gov can just print money without paying attention to the rate of real economic growth. a little excess money may stimulate that growth (other things being alligned). too much excess money starts showing up as high prices and then people “expect” inflation, and that’s the real driver of inflation.
we more or less agree unfortunately. As much as I wish for a Robert Kennedy style insurgency against Obamas Guns and Butter LBJishness I am realistic too.
buff
note coberly is not ilsm. the mulitple posts was happening to me too. i thought it was a problem with AB’s programming.
i do however share with ilsm a high degree of skepticism about ‘defense spending.’ i think we need to spend on defense. but spending ourselves bankrupt is not good defense. you’d think obody ever heard of the Maginot line.
The Heritage chart is dishonest. 2009 was Bush’s last budget year.
Cato Institute writes more honestly about this. I posted on it at http://www.ourfuture.org/node/44430
Coberly
My only point in the post about the bond payments above was that reducing the number of bondholders to 1% simply give fewer people more money,the total payout is the same but more importantly the ability to make those bond payments does not require the prerequisite of collecting taxes. Those two operations are separate and need not be tied. If we put the tax rate to 0% the central bank would and could still credit the bond accounts of the bondholders (or send them a monthly interest check)
Your second comment is dead on with what Ive been saying, at least what I thought I had been saying. THE ONLY METRIC the govt has to pay attention to when “printing money” (to use your term) is the rate of real economic growth and NOT the level of the “deficit” or the level of the “debt”. All the screaming about deficit/debt levels has been about some arbitrary level which will bankrupt the govt or cause runaway inflation. We’ll see inflation when its here and will be able to fight it. I’m pretty sure expectations dont drive inflation, demand does.
A merchant doesnt wake up in the morning and say I expect inflation today I’m going to raise prices. If he gets lots of people coming through the door wanting his stuff he raises prices so he can keep supplies up. Or if his suppliers raise prices to him he raises his prices. Expectations are not an issue, thats another one of those myths perpetuated by the same economic school of thought that thinks if we simply let the cost of labor fall enough we will solve unemployment.
greg
if people expect inflation they will raise prices to get ahead of it, or pay more in the expectation of having to pay even more later. same with wages. otherwise i think you and i have similar views.
i lost track. did we ever see those numbers as a percent of GDP?
and did they count SS surplus as deficit or income?
okay… i see it in the fine print. i don’t the the numbers look so alarming as a percent of GDP. i’d guess that debt/GDP is more meaningful than deficit/GDP. And it looks to me like they are counting the SS surplus as income, and not counting the SS trust fund as part of the debt. Shame. shame.
Which people? I really dont mean to sound argumentative about this but I think it is quite an important point. You are not the only one who holds these ideas about inflation. What if the guy raises his prices in “expectation” of inflation but his competitor doesnt? Guy A is going to lose his market share.
People have been “expecting” inflation for over a year. Who is raising prices? Some commodity prices are rising but that is a simple matter of more money on the long side of the bet and is in effect an “expectation” play I suppose, but not exactly in the manner you were referring to I believe. Plenty of guys like Peter Schiff have been betting their shirts on inflation ( and thus far losing their shirts)
I tend to think people will pay no more than they have to, regardless of what they think the future holds.
Experts have been expecting inflation for twenty years in japan. It aint happened. The inflation expectation stories told by the neoclassical economists are quaint little just-so stories that dont line up with any objective reality.
I am the “casual” reader of the Bear, not an economist, but very much operating in the “real world.” This post and all the comments remind me that the answers, whatever they end up being, will be political. Most of the commentary here is devoid of political reality, which is, if we want to decrease deficits there are only two ways to do it, or a combination perhaps. Do we tax, cut spending, or do both? The political climate is absolutely toxic either way. Republicans have successfully perpetuated the mythology that tax increases are a form of communism even though personal income tax rates are at historical lows since world war II because the press could care less about reality, and the American people are basically ignorant. And we saw what happened to George Bush when he took on Social Security. If Republicans think they are going to get major program cuts through Congress and survive in office, well, good luck with that. We are either headed for the Californiation of the country, or we will ultimately make the choices that have to be made. My guess is the former, but my hope in tax increases. I will gladly take Obama over George or perhaps any President of my 57 years. He’s the only adult in the room, and should he survive in office, the tax increases will come, along with fully socialized medicine. I am willing to have that polical fight, and could care less about the “principled” debate that is going on here.
Steve
i probably agree more than disagree with you, but two observations:
in theory you can decrease deficits if you “grow” the economy. That is the position of both the recent Republicans and the traditional Democrats. It appears that you can’t count on deficits themselves to grow the economy in all situations. I agree with you that this situation calls for tax raises.
You come too close to saying that cutting Social Security would be a good idea. Not so. Social Security has nothing to do with the deficits. It doesn’t borrow anything. And there is no reason why it ever should. This is an absolutely critical point.
And I am not optimistic about Obama. Maybe he is setting everybody up for the greatest judo trick in history, but it looks to me like he has been listening to the same advisors who brought us the Great Recession.
Hey Steve
You are right about the toxic political climate, one side wants to use govt responsibly the other thinks that govt has no use (except for bombing people they are frightened of). How to work that out? Its like trying to decide whether to eat chinese, mexican or italian and the other says “I want to eat rocks”. What is bad is that politics is affecting even things which should not be political, things which are not opinion based but in fact operational realities like govt spending. Growing the economy without spending is impossible the question is what to spend it on, which should always be the question but when we are feeling good we just spend money on everything and anything. Since growing the economy is impossible without spending who does the spending? If the people with lots of savings want to give up their savings and redistribute it into new income producing ventures fine………..so far it hasnt happened for over two years (in aggregate). More people have been laid off than have found new jobs in the private sector the last 2+ yrs. So how do we reverse that?
What makes a private entity want to hire? The prospect of customers. Where do they get customers? Customers are people who have jobs and want to buy things. See the Catch 22 here.
Someone has to be able to create a job without needing a customer first. Someone has to be able to say I’ll pay you to do x so you can become a customer for all the latent entrepeneurs out there looking to respond to some demand. If all this activity is only taking place in the private sector it is a complete zero sum game. One guys “new money” is another guys savings and it needs to be paid back at some point. No real net financial growth. Is there anyone who can just inject brand new money into the economy and stimulate growth? Why yes there is and he issues $US and when he does issue them the “deficit” rises but thats okay because the deficit just measures the amount of new injection. When people start working and unemployment falls and prices stop falling, begin to stabilize and maybe start to rise he stops injecting and possibly raise taxes to suppress demand either in certain sectors (energy maybe) or across the board. In reality there is no other reason to raise taxes.
Here is an interesting article I found today written in 1946 by a Fed Reserve Governor. This was while we were off the gold standard and before we restored the fixed exchange rate with gold at Bretton-Woods II. Its all about taxation
http://home.hiwaay.net/~becraft/RUMLTAXES.html
I agree with you about Obama being an adult but he still has some misunderstandings about our monetary system that make him more a friend of our conservative brethren rather than a friend of “the people”. I agree with Coberly that my optimism for Obama is not high but he has a few more years.
Dave,
#1- Cato is not a Conservative Think Tank#2 – “After all, on March 14, 2008, then Sen. Obama voted in favor of the 2009 budget which authorized $3.1 trillion in federal outlays along with a projected $400 billion deficit. The 51-44 vote that morning was strongly along party lines with only two Republicans saying “Yes.” When the final conference report was presented to the House on June 5, not one Republican voted for it.”#3 – Was Bush still in office when it was approved, after it had been added to? Did Democratics control the House and Senate since 2006? Is Bush directly responsible for the financial crisis? Is Obama’s 2010 deficit expected to be a large if not larger than 2009, well yes…Why?Bush gets to take the Blame for it, but it isn’t reality, because the finacial crisis can’t be layed strictly on Republicans feet, and certainly can’t be layed at Bush’s feet. The policy’s that led to the Bubble were crated and protected by Democrats, and set in place well before Bush took office.