Open thread May 5, 2011 Dan Crawford | May 5, 2011 5:00 pm Tags: open thread Comments (43) | Digg Facebook Twitter |
It concludes with: “
The CBO explored the issue at length in an October 2000 report, noting that “under most of the assumptions CBO used, a fiscal imbalance eventually develops whether or not surpluses are realized. If the nation’s leaders do not change current policies to eliminate that imbalance, federal deficits are likely to reappear and eventually drive federal debt to unsustainable levels.”
In other words, even if the Bush tax cuts never passed, if Sept. 11 had never happened, if Bush had never invaded Iraq or Afghanistan, if two recessions had not occurred, it wouldn’t have spared liberals from having to confront the fiscal nightmare caused by an overly generous welfare state.”
Are we sliding into another recession?
Just wait till they try to tax their way out of this, and realize the hole gets deeper, well after it’s too late. It’s gonna be more comical than the “Who’s on First” skit.
This is a provocation to economists and non-economists. I see a connection between these two posts but the implications if any are quite unclear to me. Thoughts?
First, at http://ipeatunc.blogspot.com/2011/05/problem-with-economics-is-economists.html
(Excerpt: “Economists sometimes mention politics, usually in reference to why their pet models don’t work, but they rarely consider that pragmatic study of the economy outside of the political and social context it exists in makes little sense. The original political economists — Hume, Mill, Marx — understood this, . . . “
Second, at Krugman’s blog today, he quotes Keynes on “the ideas of economists and political philosophers” ruling the world and how “in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age.” He goes on to reference the importance of . . . Mundell-Fleming.
Bruno, there are fewer and fewer the Dems wish to punish with taxes.
51% of Households Pay No Income Tax; Share of Taxes Paid by Rich Growing Faster Than Income
The Senate Finance Committee yesterday held a hearing on Is the Distribution of Tax Burdens and Tax Benefits Equitable?
Democrats note that the incomes of higher earners have been growing far more rapidly, so it’s only natural that they would pay a higher share of tax. As for those Americans who pay no federal income tax, most of them still pay Social Security and Medicare payroll taxes that can take a significant share of their income, Democrats said. …
Upper-income taxpayers have paid a growing share of the federal tax burden over the last 25 years. A 2008 study by the Organization for Economic Cooperation and Development, for example, found that the highest-earning 10% of the U.S. population paid the largest share among 24 countries examined, even after adjusting for their relatively higher incomes. “Taxation is most progressively distributed in the United States,” the OECD study concluded.
As a non-starter for the blame on the deficit, laying it on liberals is just fluff I think. Not to say they were not involved.
http://delong.typepad.com/sdj/2006/08/hoisted_from_co_11.html” target=”_blank”>Brad Delong 2006
http://www.angrybearblog.com/2006/08/save-social-security-first.html” target=”_blank”>pgl says
http://www.angrybearblog.com/2006/08/just-say-no.html” target=”_blank”>other CR
And a proposal not fraught with overriding values in other arenas imposed upon the deficit frenzy. Try on HR 3 for size.
http://www.calculatedriskblog.com/2011/04/comment-on-deficit.html” target=”_blank”>CR comments on the deficit in 2011:
http://www.calculatedriskblog.com/2009/09/comment-on-deficit-and-national-debt.html” target=”_blank”>CR in 2009
Blame those liberals for Medicare part D? Hmmm.
I can’t think any good reason why you are so narrow in laying out the problem.
Dan, to who/what was your comment in response?
This is true CoRev although the key word is EVENTUALLY and the key variable was how much of the projected surplus would be removed via tax cuts and spending increases. The tremendous long-term impact of growing health care costs was apparent back then, but CBO-projected surpluses said we can pay for that and be debt-free for 40 years. The CBO also examined scenarios in which surpluses would go as low as zero–they did not consider the possibility that we’d go into deficit spending again, as we chose to do. See figure 3 at http://www.cbo.gov/doc.cfm?index=2517&type=0
PJR, I’m not sure I agree with your interpretation of that section of the Report. The lead up to figure 3 says: ” If off-budget surpluses were saved, and health costs, population, and productivity followed CBO’s midrange assumptions, the federal budget would run large surpluses and the government would pay down the federal debt over the next 13 years (see Table 4 and Figure 3). After retiring debt held by the public, the government would continue to run surpluses and by 2020 would have accumulated a stock of assets equal to about 7 percent of GDP, or about 1½ percent of the nation’s net wealth. (Such assets might include equities or debt issued by private firms, or foreign government debt.)…”
There is no mechanism, nor have there been any suggested when studied. Note it says the Government would own a growing portion of the wealth.
Also retiring debt held by the public actually retires the safest investments in many retirement accounts.
To summarize running surpluses as afar as the eye can see is a truly foolish proposition.
Cinco De Mayo!!
Celebrate the defeat of a French army in Mexico, 1862, an overmatched Mexican force at Puebla enforced the Monroe Doctrine while the US was in Civil War.
That it took 140 odd years for the US to take up the celebration…………..
I have had my Modelo and my Corona. And an Irish Red Ale, too. Nothing serious tonight.
PJR, the above comment was actually to your 8:45:45PM response.
Dan, your last reference ends with: “The time to concerned about the structural deficit was in 2001 through 2006, and hopefully again starting in 2011 or 2012.”
And since this is 2011 and we are discussing the 2012 budget along with the debt/deficit (in all its forms), are we not attempting to solve the structural deficit? Isn’t the discussion about how best to do it on the right and the why do it on the left? The why do it discussions seem to center upon attempts to protect the spending on entitlements/mandatory side of the budgets. Causes of a deficit include spending more than revenues. So, changes to both, spending and revenue, are needed to solve the debt/deficit problem.
Finally, one party appears responsible in trying to solve a growing and serious debt/deficit problem, and the other appears to just be playing politics.
Dan, your references appear to be both dated and circular, relying on the Calculated Risk view of the debt/deficit issue. Furthermore, the dated material is focused upon the SS/SSTF issue from 2006. That is interesting historically, but with the amount of misinformation and angst shown here in recent articles and comments, appears the solving the SSTF and deficit issues in 2006 was a prudent approach.
Why is it so political today? Only one party seems to know that answer.
The reason the “right” don’t talk “why” is their “why” (which is just busting the poor folks) don’t justify their “how”. Which is explained under a cloud of dust, masked riders, smoke and missors.
The right-wings’ how is defective it does not address:
Fixing the recession, improving the distribution of income and raising employment-to-population ratio adding up would fix unemployment and a part of medicaid.
Top five root causes of deficits, from the Big Picture chart:
Continuous War (opportunity costs)
Preparing for continuous war ala WW I (60 years accumulated opportunity losses, debt taxes and loss of pursuit of happiness)
Federal Aid to States: Unemployment and recession
Federal aid to state Medicaid
You can argue 1-3 their order.
4 and 5 are small (accumulated since 2009 not over the entire range 2001 to 2010) related to 1-3.
Please explain calling these SS and medicare entitlements which are mainly funded from payroll taxes collected from every pay check in the US as contributing to deficit:
Medicares is spending down its trust, slowly.
SS needed its interest in part in cash in 2010
Your Mileage Varies………………..
beezer said in reply to Main Street Muse…
Of course it’s exactly wrong. Educated folks create jobs. Jobs created by MIT grads, and the GDP resulting, challenges California in size.
Wide income disparities are debilitating for economies too. Conservatives always cite that 45% of workers pay little or no, net income taxes. That they don’t is reason to create jobs that pay wages high enough to incur net income taxes. Conservatives cite the data then ignore the underlying cause. Seems to be a growing problem with conservatives in general.
As soon as the public takes away conservative’s ‘get out of jail free card’–the laissez fairy–we will have strong growth.
It’s always good to recognize the potential bias when the source of a story is not the original producer of the story’s content. In this case a columnist at the Washington Examiner reporting on a report from the CBO. The Washington Examiner as described by Wikipedia:
When Anschutz started the Examiner in its current format, he envisioned creating a conservative competitor to The Washington Post. According to Politico.com, “When it came to the editorial page, Anschutz’s instructions were explicit — he ‘wanted nothing but conservative columns and conservative op-ed writers,’ said one former employee.” The Examiner’s conservative writers include Byron York (National Review), Michael Barone (American Enterprise Institute, Fox News), and David Freddoso (National Review, author of The Case Against Barack Obama). Conservative blogger Matthew Sheffield is in charge of the Examiner’s web site.”
I really just love laissez fairy.
Lessons From The Land Of 15% Growth
As the U.S. languishes, Chile posted a head-turning 15.2% yearly gain in GDP in March, and forecasts for the year are rising……
A year ago, Chile lay in rubble, victim of the world’s fifth most powerful earthquake. So Chile’s 15.2% growth is a big bounce from a bad setback……
Such numbers are so alien to the U.S. in the economically debilitated Obama era, it makes sense to look at what Chile has done.
First, Chile’s policies for long-term growth were put into effect in the 1980s by the group of Milton Friedman-inspired economists known as the Chicago Boys.
Under them, Chile’s pension privatization cost nothing and left the country with no net debt. The private funds now hold assets worth 90% of GNP ($185 billion) — capital used to develop the country. Already, Chile’s education and infrastructure are the best in Latin America as a result.
Second, there’s free trade, of which Chile is a global champion, signing at least 58 treaties to gain access to 2 billion customers.
That’s a big reason Chile is close to full employment and is scrambling to attract growth-hungry U.S. entrepreneurs — and getting them……
Bamrud says Chile has been turning heads with investors the past year and a half because of its emphasis on improving its corporate environment, its tax regime and its economic freedom, all of which rate highly……
Corporate taxes are the second lowest in Latin America at 18%, behind Paraguay’s 10%. The Latin average is 28%.
Meanwhile, Goldman Sachs’ chief economist for Latin America, Alberto Ramos, says Chile has wisely fostered growth by reducing the size of government and not printing too much money.
In 2011, it cut government spending to 5% of GDP……
In other news this week the House GOP leadership has quietly (they hope) abandoned their war on Medicare/Medicaid after getting an earful from constituents on this wildly unpopular proposal. But Harry Reid has vowed to hold a vote in the Senate on it and Senator Schumer has promised the GOP controlled house will own their votes on the issue.
So they forced the membership to vote en masse on a proposal they quickly abandon. Well played Boehner!
it’s good to hear that the Republicans are not playing politics. I feel better already.
I don’t know who the 45% are who are paying no taxes. But I pay taxes and I am not rich.
Consider the following “model”: Imagine a country where the top 2% of the population make a million dollars a year or more. The bottom 98% make just barely enough to buy groceries and pay rent to the top 2%.
Now in that country would it be “unfair” if the bottom 98% paid no taxes, and the top 2% paid 100% of the taxes?
If you say “no,” then you need to ask “how much does the united states resemble that imaginary country and to the extent that it does not, where do you draw the line on who pays “no” taxes?
Or you just have to accept that you are talking nonsense.
I suspect the percent of people paying “no” taxes went from 45% to 51% because the unemployment rate is about 6% higher than “normal.” Not because the Democrats were feeling more generous.
And while we are on the subject… just to get you on the record… what do you suppose “we” do about the “surplus population” during the bottom of the “business cycle”? let them starve? let them steal? let them sell drugs? or do we want to preserve some of them in case we need workers in the future, or soldiers, or just a country where it is safe to go out at night?
notice I am not making any appeal to your generosity or humane feelings.
once again CoRev
treats us to an official quote which he applies CoRev logic to and arrives at a conclusion so bizarre we are tempted to be mean to him.
or “in other words…” if we project an infinite future in which we refuse to pay our bills, an unsustainable debt will emerge.
now i, overly generous nightmare stater that i am, suggest simply paying for our own Social Security benefits with a tiny tax increase, paying for our own medical care with a similar tax increase, lowering the cost of medical care by doing what the rest of the civilized world does… let the government act to reduce the “money or your life” pricing system, paying for the guns we want with more taxes, or putting off the guns we want until we need them.
and, oh, yes, in case buff is listening… replacing the overly generous welfare system with an industrial policy that creates and protects real jobs for real workers.
or, of course, you could go with CoRev’s non political logical certainty.
you see, CoRev, it’s not your politics I object to, it’s that you seem completely unaware that you have any politics… you think that what you say is “logical.”
it drives me crazy.
Chile has no war burden, let the US emulate that.
Oh, wait the republican HASC marks are adding money to the adminsitration’s already ficititious war friendly authorization bill.
In the case of missile defense some mid east threat which may arise some day, and more money for a failed missile defensive system for Boeing!! By 2022 who knows the Boeing thing may be more real than the mid east threat.
Who in the mid east is investing what to cause the US to go off and keep throwing money into the Star Wars hole? A few bucks to get the US to squander tens of thousands of millions of dollars a year on failed prototype tests.
ILSM, after the thousands of words in articles and comments here at AB, I am amazed at your question: “Please explain calling these SS and medicare entitlements… as contributing to deficit: ” Two fundamental and relatively easily understood facts/processes regarding federal budgets, should be understood by you by this time, and actually while you worked for the Govt. As I have said a couple of times this week, your questions are telling.
Al Qaeda admits bin Laden’s death online Militant group says blood of leader killed in U.S. military raid “will not be wasted,” calls for more attacks
Your mileage does vary (YMDV)!
You mean the SSTF is different than privately held debt, I have heard that and it is wrong, it is a legal and moral obligation. The use of formulae to tell the number does not affect the validity of the debt nor the reason for its accumulation in federal instruments.
Heck, the defense authorization and appropriation bills are based on anxiety, mendacity, and keeping the ‘for profits arsenals’ in the black for the PAC’s, far less substance than entitlements formulaics.
What was the other thing?
Oh yeah, I recall!
Power of the purse, congress can fail in its duty to approriate cash to pay off privately held debt as well as the SS trust fund.
It is not the power to default, leave treasury in the lurch.
Because you see it on Fox News or from libertarian talkers don’t make it so.
Even though TV and the web are miracles.
We can’t be. Obama is President and he is from the ‘D’ party. By definition the economy should rapidly be expanding since we have a ‘D’ President and we all know that the President controls US GDP growth rate. We should be getting 5% year-on-year GDP increases and 5% unemployment any time now. I have been promised it right here, on AB, by the science of economics. We all know how Clinton was directly responsible for his GDP rate by raising taxes to the exact optimum level to maximize growth. Not one percent to high or too low. Its all economic science! I even built a barn and a corral for the pony when it shows up.
Islam will change
I will repeat your inability to discuss using consistent and meaningful terms are telling. You first said: “Please explain calling these SS and medicare entitlements… as contributing to deficit.”
You then go off on: “…the validity of the debt nor the reason for its accumulation in federal instruments.”
There is a difference between deficit and debt. Understanding that difference is fundamental to understanding an answer to your original question. That is why I commented as I did regarding your lack of understanding after the many times it has been discussed here.
Furthermore, I never mentioned “default”. That is your term and an oft used scare tactic from those who do not want to actually attack the entitlements portion of the deficit.
Buff, I’m planning on trading my pony for a used tractor. I’m getting a little concerned, as you can see from my question. Oh well, time will tell. 😉
I Want a Pony too?
“There is a difference between deficit and debt.”
ILSM, the simplest description is: Debt includes/sums a historical running total of all federal debts (of intragovernmental (TFs etc) and public debt/annual deficits. Deficit is an annual running total of publicly held debt, the difference between expenditures and revenues.
The federal debt is calculated from the last time we had none, ~1835 (IIRC). Quite a difference don’cha think? Not understanding that basic difference or using them interchangeably shows a serious lack of understanding.
Wrong the US debt is the accumulation of deferred taxes. Which the deficit is deferred taxes.
Wrong? Deferred taxes? Care to find an official Federal Government definition for it relative to federal debt/deficits? I prefer using the CBO and GAO definitions, but go for you own source. Moreover, where can we find the accounting for those deferred taxes? It should be covered in the many official federal government accounting documents.
You’ll haved to be patient, M’boy.
And why is Goldman Sachs so wise on Chile’s economy but so useless on ours? Bastardos!
I gave you the mathematics of debt.
Defend hypotheses if you have any.
I do not string questions back and forth interminably. You provide answers then I will address you.
I am busy.
“Equations are more important to me. Because politics is in the present, but an equation is something for eternity.” Quoting Einstein, Stephen Hawking.
Two nonsense answers in a row.
The discussion on the right to date is how to get rid of programs that some see as socialism or unchristian…the how to is still at a pet peeve stage.
Not really….it has been amazingly election time political so far.
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Hello there! I could have sworn I’ve been to this site before but after looking at a few of the articles I realized it’s new to me.
Regardless, I’m certainly delighted I found it and I’ll be book-marking it and checking