FEDERAL DEFICIT
In Linda’s post on the budget deficit in the comments it was claimed that the budget deficit was Obama’s fault and a chart was cited that showed the deficit in someone’s estimate of real dollars.
The standard way of comparing deficits across time and across different countries is to show the deficit — past and projected future — as a share of GDP. There are good reasons for this standard practice, as it is the only valid way to make meaningful comparisons over long periods of time when the dollar values change so much. Using other approache makes it too easy for readers to be mislead.
But here are the latest CBO data and projections. The CBO data is the gold standard for making budget comparisons and any other projections are automatically suspect.
The data shows that the budget deficit peaked just as Obama took office. If CBO actually published seasonally adjusted quarterly data it would show that the deficit was over 10% of
GDP before Obama took office and that Obama has actually reduced the deficit since taking office. Moreover, the CBO projections show that in the out years the federal deficit will actually be smaller — as a share of GDP — than it was in the final years of the Reagan administration.
Yes, the federal deficit is a serious problem. But much of what you hear and see about it is pure republican propaganda that massively exaggerates the scope and scale of the problem.
As with most propaganda it depends on the ignorance and/or gullibility of the reader for it to work.
And luckily for the GOP they have no ignorance shortage among their 27%ers.
I was a bit stunned to read that anybody would argue that the deficit is Obama’s fault.
Accordingly, I had to go read the comments for myself, and my view is that CoRev was not so much focused on the state of the federal deficit today but on what he perceives to be the acceleration of the growth of the deficit, which he blames on Obama’s budget. He’s focused on the future of the deficit, not on its present state. Thus, there is a little bit of talking past each other going on here.
That being said, the left versus right/republican versus democrat/big government versus small government narrative has grown immensely tiresome because it simply doesn’t reflect our reality. What we have today is a government that is owned and controlled by private industry. And that private industry works through the government to define the laws and regulations to their benefit. Period. The reason that government does not work right now is that it has been designed to not work. It does not matter which party is in control of the White House, nothing meaningul changes except which people get to bitch about the President.
In the meantime, as we small people bicker about meaningless tripe or call each other names (as CoRev is wont to do), we never address the real problem facing us, primarily because we are blinded from reality by the fictions that we hold dear.
Sad.
“Yes, the federal deficit is a serious problem.”
I wish people would quit parroting that phrase. The Federal deficit is the way the gov’t injects money into the economy. Under some circumstances the deficit can be a problem, under others it can be a boon. Right now it is a boon. (Even if we can improve how the money is spent.)
“The standard way of comparing deficits across time and across different countries is to show the deficit — past and projected future — as a share of GDP. There are good reasons for this standard practice, as it is the only valid way to make meaningful comparisons over long periods of time when the dollar values change so much. Using other approache makes it too easy for readers to be mislead.”
For ordinary people, the deficit/GDP ratio is misleading when the GDP is changing rapidly. That is because non-mathematical people focus on the numerator, assuming that the denominator is background. You can see that in the political rhetoric, which is focused on the deficit and debt instead of the GDP. Politicians and pundits are claiming that we need to reduce the former instead of increasing the latter.
CoRev,
Just in case it isn’t obvious, it’s you that’s being referred to in Spenser’s post. The two graphs which you posted in comments give no reference or attribution. Are you hiding something?
“Because liberalism is a persistent vegetative state.” Confederate Yankee slogan on the masthead.
The charts are from Doug Ross here: http://directorblue.blogspot.com/2010/06/we-are-in-depression-now-and-have-been.html Don’t let jazzbumpa see them…his chart meter might explode.
Now Angry Bear’s masthead says ‘slightly left of center’, which is a moving target especially in this day, so does that makes us slightly vegatative?
Jack, nope. The second graph I’ve used many times. The last time was last week end.
Spencer, I see I have hit a nerve, but why did you have to umh, ahh, state a less than perfect truth? Saying this: “If CBO actually published seasonally adjusted quarterly data it would show that the deficit was over 10% of
GDP before Obama took office and that Obama has actually reduced the deficit since taking office.” In light of charts like that below, just does not make sense. Chart is from here: http://www.usgovernmentspending.com/downchart_gs.php?year=2000_2010&view=1&expand=&units=p&fy=fy11&chart=G0-fed&bar=0&stack=1&size=m&title=US%20Federal%20Deficit%20As%20Percent%20Of%20GDP&state=US&color=c&local=s
BTW, nice attempt to preempt any other sources by citing the CBO as the gold standard. It’s not, and you know it. Relying on CBO projections is foolish. CBO has so many restictions as to what are considerations, especially for projections, that they are throw aways.
Spencer, tsk, tsk! You made this claim: “it was claimed that the budget deficit was Obama’s fault and a chart was cited that showed the deficit in someone’s estimate of real dollars.” Care to show us where that was implicitly or explicitly stated?
Dan, not that’s a good question. Slighly vegetative might also be a moving target. Maybe the bretheren can add some light here. 🙂
“Geithner and Obama have continued to insist that we “spend and borrow more”, along with idiots like Krugman and Summers. Their entire model is predicated on what amounts to a claim of perpetual motion, which anyone with more than one hour of physics class knows is impossible… At some point it is inevitable that we will run out of the ability to continue to compound debt upon debt… This is not conjecture, it is mathematics… It is not open to debate, it is fact and cannot be avoided.”
At the end of the charts.
Of course, it is an absurd accusation. Neither have advocated perpetual budgets.
Well, if we are in election mode, which this feels like, I don’t expect much accuracy and reasoning, and certainly not from CF.
Dan, I think you meant perpetual deficits (not budgets.) But, if you look at Spencer’s CBO chart we see deficits way into the future. So, is long term less/more precise than perpetual? Dunno. I’m just asking because I’m in nonvegetative country. 🙂
Budgets are perpetual…that certainly is one truism we can agree on.
But projections are merely that…projections without regard to changes possible. Long term deficits by themselves don’t concern me.
Perpetual is the word used by Doug Ross. But this person making the charts you showed us has a clear intent, and is interpreting data for one purpose. Change our spending for healthcare overall, which is draining public and private coffers, plus the military expenses, and no deficit. Medicare etc. is only a part of the drain on our resources…
It is very easy to pay off the debt, just return the tax rates to what they were after World War II. Arguing that the debt is too high and government spending is too high is just a way of avoiding the best solution to the problem which is to raise the tax rate on the super rich. The current imbalance in wealth is bad for society and bad for the economic.
Tao
sadly, it does reflect our reality: our reality is that the party out of power complains about the deficit so that the deficit hysteria will get them votes, and also make it easier to cut social security, which, for some reason, the real power wants to cut.
min
exactly. but i think they are required to parrot it as a condition of employment.
Dan
of course we can have perpetual deficits. every going business does it. it always amuses me, just before i blow a fuse, to hear someone claim “this is not conjecture, it is mathematics” just before they make some bogus claim pretending that some irrelevant mathematics supports it.
Peter John
I agree. but just as a show of good faith, i’d be willing to raise the tax on the poor and middle class too. it doesn’t take much of a tax raise to close the deficit and pay off the debt. it’s the insane idea that we can never raise taxes because it will “kill the economy” that has, in fact, killed the economy.
Tao –
Corruption and corp influencel notwithstanding, which party is in control makes a huge difference. Mike Kimmel had posted repeatedly about this for years.
As horrible as Democrats are, they have one huge thing going in their favor. They aren’t Republicans!
Cheers!
Hey – I love charts. Too much heavy stuff there for late on a Sat night, though. I’ll give it some deep thought tomorrow.
Cheers!
JzB
Tao:
Private industry implies the entity produces something of value be it service or manufactured. The entities in control (GS, BofA, Citi, Merrill, Chase, Morgan, etc.) for the most part have produced little in the way of such other than asset appreciation. The battle is still over whether we allow such entities to continue in such business (CDS, naked CDS, etc.). We have yet to wrestle control of this from the financial services entities that appear to control the government.
Hi Dan,
Only government deficits are perpetual.
Government budget deficits are perpetual – because if the domestic private sector desires positive save in the face of current account deficits, then the government must supply the liquidity, i.e., the government must spend in excess of the tax revenues it takes in. Thus, the government is in a unique position to produce net new assets.
The private sector, on the other hand, is subject to the laws of the banking system: for each asset there is a liability. Therefore, all assets net out. Even firms that run long-lived deficits are eventually acquired or go out of business, and debts are resolved or assumed within the private sector.
The framing is important. I suppose that is why the argument about being a job hawk or something strong is being waged…doves versus hawks language instead of real economic issues.
Well said Tao
Updated to complete a thought.
Dan, the real economic issue is the failure of the stimulus to stimulate. The delay in spending (shovel ready) versus immediate private sector and even more individual incentives has extended the pain and suffering.
The administration is showing itself as NOT pro-growth, and that is slowing private sector investment which in turn slows the recovery.
You are very correct in bringing up framing the issue. What I just said is seldom discussed on the left because they have mostly the same beliefs as the administration.
Pro-growth, pro-growth, pro-growth is a big difference in the parties, today. Capitalism and industry are not the enemy.
Rebecca
maybe you know more than i do. but a going concern can run a deficit every year, and roll over its debt forever as long as it is making more money than the interest on what it has borrowed. the government of course has a better chance of being a going concern forever. but otherwise i think that what you said is a bit of a tautology. even the government writes iou’s, so the books balance.
CoRev
I agree that capitalism and industry are not the enemy. short sighted greed-heads are. whether that is bankers, politicians, corporations, small business, or working joes. You have an economy in which everyone is sure someone else needs to pay the bills. And no one is responsible for seeing that there is work, paid work, for the people.
I don’t see that Obama’s stimulus is typical of “the left.” It looks to me more typical of the banking class. Trickle down.
Your Republican campaign on “pro growth” by which they mean lower taxes and bigger deficits… oh they are all for cutting deficits now if it means poor people go without. but they are not interested in cutting spending on useless defense, because that’s where they make their money. This is not because republicans are naturally more evil than democrats. it’s just the luck of the draw. when they drew straws to see who would “represent” the poor, the dems got that straw. And that was okay as long as there was a reasonable balance of power. But something has happened and all the politicians today now believe that Ayn Rand was right. That is not just stupid. It’s dangrous.
Dale said: “I don’t see that Obama’s stimulus is typical of “the left.” It looks to me more typical of the banking class. Trickle down.
Your Republican campaign on “pro growth” by which they mean lower taxes and bigger deficits… oh they are all for cutting deficits now if it means poor people go without. but they are not interested in cutting spending on useless defense, because that’s where they make their money. “
Dale, this stimulus is close to that which the Dems/Left proposed would bring us out of the last recession versus what Bush implemented. So I do disagree.
I also disagree with your characterization of what republicans call pro-groth and do to stimulate it. It may include deficit spending in recessions, but that’s what we all expect. that expectation is not a bad thing. I have yet to see a republican budget, so saying they are/are not cutting anything is just hand waving.
Regardless, the G20 has just bitch slapped our Prez. How more out of step can he appear????
Benefit of the doubt to the new leaders from big spenders Reagan and Bush 2. Don’t see it.
CoRev: “Relying on CBO projections is foolish. CBO has so many restictions as to what are considerations, especially for projections, that they are throw aways.” First and foremost that line is no more than your considered opinion. Given that the Congress and virtually all of professional economics relies on CBO data I’d say that your reliance on someone that is little known seems dubioous at best.
Relying on Chrstopher Chantrill’s posted data as a some how a more valid source is your approach? In Christopher’s own words regarding his point of view:
“Despite 35 years living in Seattle, I instinctively revolted against the suffocating left-coast culture of the Soviet of Washington, and came to revere the four great Germans who helped inspire the Reagan revolution: Ludwig von Mises, F.A. Hayek, Leo Strauss, and Eric Voegelin.”
Jack, I said CBO projections were throw aways and not their data. Quit reacting and read more carefully. CBO projections are limited by what is either said in the budget, which more often than not does not make it through the legislative process.
Plus, CBO projections of cost of bills, let’s say the Healthcare Bill, were/are so restricted by the bill’s wording to only come close to a semblance of reality. How much higher is the latest projection versus the one done to pass the bill?
Liberals really don’t understand mathematics do you… I’m amazed that you can sit here and say that the deficit isn’t that big of a deal after every major country in the world has come out and condemned the spending… Go pick up a freaking economics book and quit “parroting” the left wing BS…. Trillions of dollars in the hole is a problem.. period. It’s like putting money on a credit card to buy new furniture but then the furniture is worn out but you still have the debt and your kids have to pay it back. It sure makes the house look good when you go into debt but in the long run you’re screwed.
Why is the federal deficit/debt a problem at all? Isn’t the dollar the reserve currency of the world? Isn’t all our debt in dollars that we can create in unlimited supply? Isn’t inflation a non-issue? Are not interest rates at historic lows?
WTF is the actual problem here?
Greg
i am, as i have said, sick of people citing “mathematics” when they don’t know what they are talking about. I can add numbers up and down six ways to sunday, but unless the numbers mean something they don’t mean anything.
It’s also funny to hear deficit hawk David Walker, as I did a few minutes ago, try to argue that we need a “stimulus” today (by which he means tax cuts) but will need to rein in spending on entitlements or the future will blow up and destroy the planet. Never noticing that Social Security (his main target) contributes not a damn penny to the deficits and never will if the press ever lets the people find out they can fund their own retirements for an extra twenty cents per week each year.
Here is a clue for you: I have actually done the math. All you do is blow hard about it.
btw
i did pick up a freaking economics book. and i did two things you are incapable of. i read the parts you don’t hear about from Rush. And I have a reserve of skepticism when someone tells me a theory about the world that depends upon assumptions that are never met.
Paul
i think you are right about the interest rates. not so much the ones the Fed sets, but the ones that are set by “the market” suggest that no one is seriously worried about inflation right now.
i am not so sure about the unlimited ability of a country to print money with no consequences, but we can certainly print money to prime the pump and then withdraw it from ciruclation after the private sector picks up the slack. But it doesn’t make a lot of sense to give tax cuts to people who have money and are not spending it. or investing it.
And how is that different than the Democrats complaining about the deficits when a Republican holds the presidency? I see no difference between the two parties.
The Doug Ross chart that stands out is the one on Debt/GDP. Big increases during Reagan and W admins. The only decline came inder the despised Clinton, who coincidentally gave us the best overall economic performance since the last best economic performance, which was under Kennedy-Johnson. Of course, none of this is news to anyone who has read Mike Kimmel’s posts with his eyes open and brain engaged,
Then Ross goes on to say this:
If you want to save this society for your children and grandchildren, I’d strongly recommend voting for the most fiscally conservative candidates you can in November. In other words: not Democrats.
Either he has a weird view of fiscal conservatism which includes spend like a maniac, but ignore the revenue side, or he is blinded by ideology. The other possibility is that he is simply too stupid to understand his own picture, but I don’t want to entertain that one. After all, he does have graphs . . .
All of which illustrates the utter futility of trying to have a rational conversation with right wing regressives, who continually deniy reality, no matter hjow many times it is shoved in their faces, and live in a world where abstract hypotheticals (supply side econ, frex) trump real world results.
And the entire Repug party acts this way in rigid solidarity.
Which is a big part of why we are so well and truly screwed.
Alas,
JzB
I’m amazed that you can sit here and say that the deficit isn’t that big of a deal after every major country in the world has come out and condemned the spending…
Ah. Appeal to the masses. That’s always a good ploy.
It’s like putting money on a credit card to buy new furniture but then the furniture is worn out but you still have the debt and your kids have to pay it back.
How can anybody who has actually read a freaquing economics book make a statement like that?
Cheers!
JzB
Campaign mode again…’your guy’, ‘liberals’, catchwords and no economic discussion other than yelling ‘fire! in the house” and don’t change any spending if it touches our own lobbies in healthcare and military…
You are equating Dems and the left…if memory serves the original proposal was not one third tax cuts and a lot more direct spending.
Dan said: “You are equating Dems and the left” Absolutely, you are not trying to tell us that the Dem leadership is centrist? If that is your belief, then what would you define as left?
We conservatives look at the Dem leadership and equate it to the EU leadership of the 60 and 70s. While the current EU leadership appears to be emulating the US leadership of the 80s and 90s.
BTW, to what original proposal is this referring? “if memory serves the original proposal was not one third tax cuts and a lot more direct spending.”
Dan, read the Ryan road map. Where on this blog has this been said or even implied? “and don’t change any spending if it touches our own lobbies in healthcare and military…” I suspect your disappointment in “YOUR” guy/Prez is showing.
WTF is the actual problem here?
The problem is a Republican congressional seat deficit.
The word is projection, not prediction. No matter where the projection originates (CBO or any other entity), everyone here acts as if Moses brought them dowm from the mountain. After reading all of the posts here, there is one inescapable conclusion: the more you immerse yourself in partisan statistic waving, the further you get from learning the whole story. None of these posts persuades me that people here know how to do anything but find stats that support their incomplete theories of what is happening to American society.
“Statistics are like a drunk with a lamp post: used more for support than illumination.”
Sir Winston Churchill
Your guy again…not policy. Simple campaign mode. Policy debate is excluded.
Dan, just using your own term, “Your Guy.” Anyway, since we are within months of the next election, when do you think it appropriate to discuss campaign politics. From a conservative view point, this administration has not left campaign mode.
Sad, really. Bodes poorly for the remainder of the term.
Jack,
The CBO gives full and complete credit for the doctors pay cuts in the medicare/medicaid every year. Yet every year Congress quietly stops these cuts. CBO is doing their job as they have been asked to do. Doesn’t make the projections any more meaningful.
Here I’ll go with Obama’s plan for the deficit, lots and lots of Red ink with no end in sight. And this assumes all those Dr cuts and some very optimistic growth rates.
Islam will change
Well here are some more projections….
Never my term Corev. You and buff use yg a lot. But if we all look alike to you, what is the point?
Drivebys are so illuminating. We are not debating American society, but economic policy implications. Which must include numbers at some point. And if you think we were using the term prediction, then you aren’t even reading the comments. Moses had his doubts too btw: but you appear to have none.
Buff at least you used the updated graph based on this years comparison and not the one from March 2009 you liked for so long. But if you take a little harder look at this one you see that CBO is projecting significantly SMALLER additions to the ten year deficit than Obama’s OMB is. So who exactly is using the “very optimistic growth rates” here?
What this graph tells me is that over the course of the last year both CBO and OMB reduced their projections of near term deficits over their 2009 assumptions and that while last year CBO was more pessimistic than OMB (something you pointed out with relish in your zeal to discredit Obama), in their Jan update (shown here) are substantially more optimistic with deficits leveling off in the 201 to 2018 time frame at about 1/3rd lower than those of OMB. Now I expect that most of this is a matter of different methodology for handling the expiration of Bush tax cuts, with OMB counting on the middle class ones extending and CBO going with current law that has them all sunset.
The graph you supply, particularly when compared to its equivalent from last year (both posted by me at your request some weeks ago), simply doisn’t support the point you are trying to make. Or at least it is not clear why a $1.8 trillion deficit turned $1.5 trillion one in year one validates your “red Ink with no end in sight” claim. Can you expand on your reasoning here?
CoRev some of us would argue that the failure of the stimulus to stimulate, if in fact that is fair, is because Republicans and Blue Dogs insisted on taking a package that Obama economists suggested would need to be around $1.2 trillion and reducing to a totally arbitrary figure below $800 billion and then restructuring about a third of that in the form of tax cuts.
The Right insisted on castrating stimulus and now are bitching because the steer is impotent. And BTW that less than 8% unemployment claim that Buff likes to deride was based on a stimulus that had a lot bigger set of balls.
Rdan,
If you VOTE Dem you are a Dem. If you vote R your a Rep. If you vote something else, you can pick your poisen. This is exactly the same as the claims that there was opposition by the Dems over the Iraq part of the War on Terror. Nope there wasn’t. Votes of 92-5 in the Senate and many, many other highly lopsided votes in favor of the Presidents policies on the WoT crush any idea of opposition from the Dems. You can call the war lost, failed etc, but if when you finally have to stand and be counted you vote for the policy, guess what, your for it.
So if you voted for Obama he’s “Your Guy”. AB supported with many a post saying we should vote Obama in. Mike’s book implies we should vote whomever the Dem nominee is reguardless of his policies. So refering to Obama as “Your Guy” may be a little sarcastic, it is no less true, in general, of the bulk of the posters at AB.
I don’t mind discussing policies, but don’t ever forget that we are currently discussing the policies of the Democratic Party leader and US President. The fact that the loonies over at DKos or the statest left (i.e. progressives) don’t like getting lumped into the Presidents supporters with “Your Guy”, doesn’t get much sympathey. And if you not a D or and R your off the politcal mainstream…
Islam will change
CoRev I have read the Ryan Roadmap. And it is a total fraud. It sets up two voluntary tax systems, one existing and one with huge tax cuts for corporations and capital, and then has Ryan’s staff insisting on revenue scoring being based on the assumption that revenues will be unchanged. As if no corporation or billionaire would take advantage of the tax cuts.
http://cboblog.cbo.gov/?p=466
http://www.cbo.gov/ftpdocs/108xx/doc10851/01-27-Ryan-Roadmap-Letter.pdf
From page 4 of the CBO letter:
“Other Tax Provisions. The proposal would make significant changes to the tax
system.2 However, as specified by your staff, for this analysis total federal tax revenues
are assumed to equal those under CBO’s alternative fiscal scenario (which is one inter-
pretation of what it would mean to continue current fiscal policy) until they reach
19 percent of gross domestic product (GDP) in 2030, and to remain at that share of
GDP thereafter.”
The Roadmap doesn’t even pretend to present some sort of dynamic supply side scoring of those tax cuts, it is just blithely assumes that tax cuts don’t cut revenues. At all. And to the extent they try to explain this it is by taxing any and all employer supplied health care as regular income for both income tax and Social Security purposes, in other words by a massive tax shift from capital to the middle class.
Anyone can balance the budget if they propose a huge series to spending cuts and no changes to revenue. Which doesn’t make this any less than an attempt to spread magic fairy dust over the discussion.
I can say the same about quotes from Churchill.
Care to explain the significance of either? Particularly since the overwhelming bulk of those job losses were in the months prior to March of 2009 and the admittedly limited gains are from months when the Obama economic plans started to actually go into effect?
Plus CBO is releasing their next Long Term Budget Projection this Wednesday, maybe we could delay the chart presentations until we get some not so state data?
Okay….everyone get out the magic fairy dust.
Bruce,
Once again thanks for providing the updated chart.
As for my comment, “red ink with no end in sight,” . Its sort of obvious from the chart….reguardless if you use CBO or Obama’s projection. And both assumes that Obama is going to get us out of our current recession at some point in the future.
So yes Obama ‘s plan gives us red ink with no end in sight…or at least through 2020…
Islam will change
Bruce,
I didn’t make that claim. Obama did. I just repeated the leader of the Democraic party and my President!
I see that once again, even with majorities that would have made Clinton cry for, the Dems seems to blaime their problems on the Rs. The Dems control it all. Don’t whine about your problems or are you conceding that Obama doesn’t have the leadership skills that Clinton, Reagan, or Bush SR had? They all managed to pass significant legislation with the opposite party CONTROLLING congress. Obama seems to be having trouble even though the Dems control congress!!!
BTW, hows GITMO closure working for you? 6 C-17s and 20 hours is all it would take for me to close the place…
Islam will change
Actually I was hoping to get some better data soon. That chart was getting dated, but it’s message is still clear as ever…and I bet good money that not much will change.
But Islam will
Bruce, thank you for giving the opposition credit for the one part of the stimulus bill that actually stimulated GDP, the tax cuts and rebates.
The stimulus was not too small, but misdirected. Stimulating state/local Govts is not the way to add jobs and grow GDP in a sustainable way.
Bruce, is that all you have re: the Ryan road map? CBO scoring is determined by what the staff states as the revenue goals, 19% of GDP? I would admit balancing on that razor’s edge might be somewhat problematical, but it is also shown historically that that level of revenue seems to be ~19%.
Bruce, when the jobs are being created in the public sector, they are net revenue losers. Many of those job gains have been in the public sector, so we should be very leery of being able to sustain them. 2011 looks to be a very unstable year.
Buff did you follow the political process? Do you understand the need to get 60 votes on anything of substance and how that transferred near absolute power to Deficit Hawk Conservadems prior to Kennedy’s death and then to the Maine Republicans after?
Take that whole Dems had control since 2006 message to the Rubes, people who understand the process as it actually works are not buying.
You know either half of that how? Divine revelation?
After you propose eliminating corporate income tax, tax on dividends, tax on capital gains, and all estate taxes as the Roadmap does? After you effectively eliminate all tax on capital? From the people who claim only they actually pay taxes? That every body else are parasites? None of that will effect that 19% of revenues?
Pull the other finger.
I read the Roadmap. And it’s scoring. Something CoRev seems to have eluded.
To repeat you know this how? Do you really believe that a government contract that hires a $60000 a year private engineer to design a road and a $60000 a year public engineer to approve the design and inspect the installation means the latter is a net revenue loser? On what basis? Each collects a paycheck, pays the same amount in FICA and income tax, and presumedly spends about the same amount so contributing to money velocity. Ya got anything beyond lazy sloganizing? Say something based on actual economic or accounting principles?
Yes but you never articulate that message. What are the implications if any that CBO and OMB flip-flopped over the last year? Can you put those public/private job gains/losses in a meaningful time series?
Otherwise I am reduced to the position of the woman jogger faced with a flasher. “Got that in a man size?”
Bruce,
Sorry, I follow the political process, Obama has Dem Majorities during his entire Presidency. Reagan, Bush Sr, and for 6/8 years Clinton had to face control of congress by the opposite party. They passed significant bi-partisan legislation. Obama has everything on his side and con’t get it through. The difference is leadership.
Heck even Bush Jr, with a Dem controlled Congress got every last thing he wanted for the war. A war the Dems were suppossedly elected to end in 2007. Instead they voted OVERWELMINGLY each and every time to fund the war.
And yet Obama with overwelming majorities can’t seem to get anything done. Even little things like closing GITMO.
And yet you continue to be one of the rubes who beleive its all the Rs fault and not the lack of leadership from the top…
Islam will change
Bruce,
The message of unheard of levels of Government debt? Levels that make Bush Jr look like a fiscal miser in comparison??? Bush Jr spent like a drunken sailor, Obama spends like a drunken sailor on crack….
Or the fact that what job gains we are getting are in the Government sector – a sector that has to be paid for by private job taxes or more debt????
Do you really beleive that the Gov hiring a $60K engineer has the same effect as Microsoft hiring one? From that logic the Gov should be doubling all its workers salaries and hiring new people to dig ditches for $100K a year….in your example below BOTH are net losers. Both jobs require the government to tax or create debt to pay those engineers.
You seem to beleive all GDP growth comes from the government…oops I mean the President…
Islam will change
Obama has gotten more major legislation through than maybe any of them. In the face of a Republican opposition that can’t decide between two varieties of Randism and Palinizing their carpets.
Democrats at their worst never embraced the nihilism of the “We want Obama to Fail” mantra that rules the leadership of the Republican Party today. Comparing the efforts of Democratic majorities since 2006 to block Bush initiatives to the efforts of Republican minorities to block Obama initiatives is to ignore the separation of powers incorporated in the U.S. Constitution.
Unheard of? When considered as a percentage of GDP? Did you just miss Spencer’s argument?
The key to whether debt is sustainable is the ratio of debt service to income. And this works from household to national level. Expressing total debt as the key measure is just dumb. Now it can bite, say if your ARM resets in a down equity market when your income is stagnant, but in the Big Boys World leverage is the key to earnings. Screaming “oh my God we’re leveraged” absent risk analysis tells you nothing.
Buff contracts for B-52s had to be paid for by a combination of taxes on both public and private sector jobs. You seem to exist in an odd world where government employees don’t pay taxes. You are free to make the argument from efficiency between the Lazy B and the Pentagon but the argument that salaries are intrinsically more productive when cut by a defense contractor than a SAC Paymaster is economic nonsense.
Bruce, to whom is your comment directed and to what comment?
Geez Bruce, the whole subject of this thread is the deficit, and not the general economic theory of how the GDP is calculated.
If both engineers in your example are paid by the Govt, the Govt must raise or borrow that revenue. If the jobs volume are increased upon the Govt side AND NOT ON THE PUBLIC SIDE as is happening now, then revenue by definition must go down. Sustaining the same level of public job increases requires increaseing levels of borrowing as the ratio of public to private employess increases.
You’re making a valiant but nonsensical argument based on actual economic or accounting principles. The deficit will go up until that ratio goes down.
You can not create a perpetual motion machine for revenue by borrowing and throwing that money at the public merry go round of employment. So your perpetual motion machine of economics does not exist in the physical “big boy” world. Moreover, the G19 recognizes that. Wonder which of the G20 did not?
CoRev you know tax cuts stimulated GDP. Which is just an article of faith which has no more (and probably less) justification that direct investments in labor productivity contributed to a measure that incorporates that. What part of ‘productivity’ ‘product’ and ‘Gross Domestic Product’ are you missing here? Pay people for product and you get product. Or maybe you could visit that WPA Post Office.
Only if those engineers pay taxes at different rates. If the government has to borrow to pay for that weapons contract the result washes out. It matters nothing who wears the logo.
Bruce, for heaven’s sake you totally miss the point that in your example both engineers are paid from the same revenue stream. Both are net losers.
If your example said the Govt hired a $60000 a year public engineer to approve a bridge design, and Boeing hired an engineer to design a new commercial airliner. Govt engineer paid totally from tax receipts. Boeing engineer paid totally from income stream from selling to private (non US Govt entity) companies. Boeing engineer pays those tax receipts, a net gain. So we have Govt engineer $60K – tax, the difference is a net loss to US Govt. Private sector engineer $0 paid by Govt, tax is gain to the Govt without any loss.
Get it? We’ve been talking about deficits. Not income tax, not GDP, not even Govt budget.
CoRev I picked the road example for a reason, because they are mostly government funded, as are most aircraft. Change your own example from commercial jet to the new KC-X tanker being marketed by Boeing and your argument falls apart.
Try this one. Would it make a difference if that commercial jetliner’s R&D was mostly funded by tax credits? Or cross subsidies from dual use (most of Boeing’s commercial jets serve as platforms for government and military aircraft, think Air Force 1)?
Bruce,
Your making a fundemental mistake (or I just really don’t understand what your talking about – which is probably equally true here).
All Government expendatures must come from either a tax or debt. Paying an Engineer $100K to design the road gets you say $25K back in taxes. Net loss, that must be covered by taxes or debt, = $75K. Every Government job is a net loss to the from a revenue stream to the gov (by itself). The argument is that the Government spending generates private economic activity that allows private taxes to cover the difference. That nice new road lets private companies make enough profit to pay the taxes to cover the engineers salary ($75K) not covered by his own taxes.
The KC-X tanker does exactly the same. The entire cost ($billions) of the tanker program is a net loss to the government. It will get paid for by taxes or debt. The Government though has a constitutional duty to protect the US from foriegn threats and the KC-X has been determined to be part of that defense. In turn the knowledge that the US Gov will defend us adequately lets business florish here and generate the tax revenues to pay for the KC-X and all the rest.
Government enables bussiness which generates the GDP growth and the taxes to keep the gov operating. But it does not generate income or profit. It does not create wealth. (It may redistribute it, but thats for another day).
Every dollar spent by the Gov comes from either taxes or debt. You seem to think the government generates a profit, it doesn’t.
Back to my two projections. The one you updated clearly shows we are going further into debt and are projected by both the CBO and Obama to go further into debt at least as far out as 2020 and at a rate greater than all of Bush’s deficits except 2008 (when the wheels came off). The second one clearly shows that jobs are being created in the public sector, (net tax losses), not in the private sector (net tax gains). We basically are saving Gov jobs in preference to private jobs. That is not sustainable. Its private jobs that generate growth and increased tax revenues.
I didn’t think any of this is controversial….
Islam will change