Contributors

Showing posts with label Federal Deficit. Show all posts
Showing posts with label Federal Deficit. Show all posts

Monday, July 30, 2012

Indeed

Mark Zandi, chief economist at Moody Analytics, once and for all has settled (with the help of the CBO) the 500+ comments thread from a while back over at TSM.

Some supporters thought the lower tax rates would spur much stronger economic growth, and a few even hoped there would be so many new, high-paying jobs that tax revenues would actually increase, despite the lower rates. There is no evidence that this happened, however. 

The nonpartisan Congressional Budget Office recently estimated that the Bush-era tax cuts cost the U.S. Treasury $1.6 trillion during the 2000s. Combined with the $1.2 trillion spent on the Iraq and Afghanistan wars and the $1.8 trillion needed to fight the Great Recession, this put the federal government deeply into the red. The nation's debt load today is as heavy as it has been since the 1940s and getting heavier.

To put it simply, they didn't generate growth nor revenue. Now that that is settled (although I'm nearly certain that the financial wizards at TSM, with their vast experience and day to day work with economics, will disagree:)), how do we solve the problem of the deficit? Well, exactly like I have been saying...one third tax cuts, two thirds spending cuts.

Extend the tax cuts for everyone except high-income taxpayers. The economy isn't great, but it is strong enough to handle higher tax rates on the wealthy. And we need the extra revenue, which under reasonable assumptions would reduce the federal deficit by nearly $1 trillion over the next decade.

Raising tax rates on wealthier households is necessary, but so, too, are more cuts in government spending. Washington last summer agreed to cut $1 trillion over 10 years as part of the deal to raise the Treasury's debt ceiling. Even with $1 trillion in additional tax revenues from affluent households, it will take an additional $2 trillion in cuts, under reasonable assumptions, to get our fiscal house in order. Given how politically difficult this will be, any agreement to raise taxes on the wealthy should also include more cuts in government spending.

And what will the result of all this be?

If policymakers follow this script, federal tax revenues will eventually rise to equal just over 19 percent of the nation's GDP, and government spending will fall to the equivalent of 21.5 percent of GDP. These are roughly the average ratios seen since 1980. In other words, government's role in our economy and our lives will be about what it has been for the last three decades. The deficit will still equal 2.5 percent of GDP (21.5 percent minus 19 percent); while more than ideal, this will be manageable, given the economy's expected growth.

That's right, folks, it's just that simple. Anyone think it will happen?

Tuesday, November 22, 2011

Nothing Is Fine By Me

Many folks our there are deriding Congress for failing to act on the deficit. Yet by not acting, here's what happens


Sure, there would be painful cuts in both social programs and defense spending. But the Bush tax cuts would expire as well. In other words, we'd do what we have to do to reduce the deficit and, ultimately, the debt. Maybe a "Do-Nothing" Congress is just what we need!

Tuesday, July 19, 2011

A Deal?

It looks like we might be moving closer to a deal regarding the debt ceiling, the debt, spending cuts, and taxes. President Obama and several senators on both sides of the aisle are embracing the "Gang of Six" plan which is considered the grand bargain that the president was looking for for the last few weeks.

The question is how the House will respond. Not well is my guess. Hence, the symbolic vote of a balanced budget vote this week. Much of this is nauseating political theater but it's going to be interesting to see if the GOP can pass up an opportunity like this one. This plan limits the growth of Medicare and Social Security which is vital to reducing the debt we currently hold.

The right has been squawking about this for decades. Will they break their purity pledge on taxes to fulfill their life long dream? Hmmm...

Sunday, July 17, 2011

Are These Numbers Accurate?

Take a look at these numbers.

2001 – $5.871 trillion in debt
2008 – $10.640 trillion in debt

Jan 31st 2009 = $10.569 trillion in debt
Jan 31st 2011 = $14.131 tr­­illion in debt

But of the $3.56-tril­­lion increase, 98% was carry over from Bush programs:

Bush: $910-billi­­on = Interest on Debt 2009/2011
Bush: $360-billi­­on = Iraq War Spending 2009/2011
Bush: $319-billi­­on = TARP/Bailo­­ut Balance from 2008 (as of May 2010)
Bush: $419-billi­­on = Bush Recession Caused Drop in taxes
Bush: $190-billi­­on = Bush Medicare Drug Program 2009/2011
Bush: $211-billi­­on = Bush Meicare Part-D 2009/2011
Bush: $771-billi­­on = Bush Tax Cuts 2009/2011

So that means...

Bush’s contributi­­on:

2001 to 2008: $4.769-tri­­llion
2009 to 2010: $3.181-tri­­llion

Total: $7.950-tri­­llion

Increase Since 2001 = $14.131 – $5.871 = $8.26-tril­­lion

Bush’s contributi­­on: $7.950-tri­­llion / $8.26-tril­­lion = 96%

Increase caused By Bush’s Programs: 96%
Increase caused by Obama’s Programs: 4%

My simple question is...are these numbers accurate? And, if so, why is Obama's spending portrayed as much worse when the numbers show quite clearly that it has not been worse.

Tuesday, May 31, 2011