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Debt, November,And You

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  • Debt, November,And You

    From an op-ed in The Baltimore Sun:
    -----------------------
    A trail of red ink
    By Robert B. Archibald and David H. Feldman

    THE CLOSE of a president's term provides an ideal time to review his fiscal legacy and to compare it with his predecessor's. Let's ask which president, Bill Clinton or George W. Bush, left the nation's fiscal house in better order.
    When President Bush took office, the federal government had just run a budget surplus for 2000 of more than $236 billion. In the eight years of the Clinton administration, the burden of the national debt on the average American family of four had fallen by $9,200, measured in constant 2003 dollars. The Congressional Budget Office was forecasting a $2 trillion surplus between 2002 and 2006.
    By contrast, the CBO forecast for this year is a deficit of $422 billion, and over the past four years the federal government has racked up almost $900 billion in added debt. This is a $3 trillion budget turnaround.
    The administration would like you to believe that this sea change in the federal budget is a result of the mini-recession of 2001 and the slow recovery. A few years of economic growth and all will supposedly be well. The facts tell a different story. The recession did indeed eat up the surplus in 2002, but recent deficits have soared despite good economic growth in 2003 and this year.
    Even assuming that the recovery will continue to produce solid real income growth averaging 3 percent a year, the CBO forecasts sizable deficits for the remainder of the decade. These estimates understate the likely flow of red ink since they don't include pressure on discretionary spending due to population growth and their projections assume a 15-fold increase - to 33 million - in the number of taxpayers subject to the alternative minimum tax. Congress would never stand for that. The CBO forecasts beyond 2010 are rosier because they presume that the Bush tax cuts will expire.
    The budget mess is not a result of explosive spending growth. When Mr. Clinton left office, federal spending consumed only 18 percent of the nation's income, down from the 22 percent he inherited from the first Bush administration. The Clinton administration was truly fiscally conservative. Despite increased spending on homeland security and the war in Iraq, the government now spends only 20 percent of the nation's income, which is actually less than the average over the past 25 years.
    The bleak budget picture is driven largely by the Bush administration's signature tax cuts. In 2000, federal taxes raked in nearly 21 percent of gross national product. This year, that figure has fallen to 16 percent, a number not seen since a brief dip in federal revenue and spending right before the Korean War in 1950.
    Why should the average American care about arcane budget numbers once derided by candidate Bush as fuzzy math?
    The first reason is that spending on Medicaid, Medicare and Social Security is about to begin a sustained increase. The government will need to shift revenue to these programs or severely prune the benefits. But exploding national debt means revenues that could be used for these social programs must be diverted to pay added interest costs. Brookings Scholars Alice Rivlin and Isabel Sawhill estimate that by 2014, $1 out of every $5 of individual income taxes will be needed to finance the extra debt service costs of our higher national debt.
    Government borrowing also competes with private firms for scarce funds. Less financial capital available for private firms means less investment in productivity-enhancing tools or research and development. The result is slower wage growth in the future.
    Foreigners now purchase well over half the debt issued by the U.S. government. Nearly $2 trillion of the national debt is owed to foreign holders, and the interest on this debt represents a foreign claim on U.S. tax revenue that cannot be shirked. Their historical appetite for U.S. debt obligations has kept investment in the United States higher than it otherwise would have been. But this dependence on foreign capital is risky.
    If foreign investors lose their appetite for buying ever-increasing volumes of U.S. debt, the result could be a precipitous decline in the value of the dollar and/or a spike in U.S. interest rates. The dollar already has weakened substantially against the euro, and in this era of globally mobile capital, foreign dollar holders have alternative ways to hold their wealth that were not available in earlier decades. While not likely at present, an Argentina-style currency crisis is no longer unthinkable.
    Mr. Bush's tax cuts have squandered the surplus that originated with his father's more responsible tax policies and that was nurtured by the Clinton administration's own tax policy and spending restraint. The costs of this fiscal train wreck cannot be avoided forever. Today's children and young adults will pay higher taxes and earn lower wages in the future as a consequence.

    Robert B. Archibald and David H. Feldman teach economics at the College of William and Mary in Virginia.
    Originally published *September 15, 2004

    Copyright 2004, The Baltimore Sun
    [volun2]
    NS Game Officer. TF2 Admin. BF2 Admin / Scripter. PM with issues.
    Tempus: Pokerface is nailing it right on the head. Everyone who is arguing against him is simply arguing against reality.
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    <LazyEye> yeah when I play on TG the server digs though my trash

    Arm yourself with knowledge: TG NS TF2 BF2

  • #2
    Re: Debt, November,And You

    I think that article chooses to ignore some key facts though.

    For example, Clinton didn't spend any money towards the fight against terrorism and oppression in the world while Bush has requested Congress to fund a war against Terror.

    Second, the CBO forcast of a surplus was based on an assumption that the economy was never going to cool down but to keep on growing. However, if you look at the past economic figures, it shows the economy was slowing down during Clinton's last term. GWB inherited an economy that was already slowing down, throw in the crisis of 9/11 and the war against terror after and you can see where the "suppose" surplus went to.

    Blaming the current state of the economy on a figurehead is an ignorant excuse.

    Comment


    • #3
      Re: Debt, November,And You

      I think we can all agree that Bill Clinton and George W Bush have presided over vastly different times and issues. Bush inherited a deepening recession (my company began laying off people in Aug '00 and the flash reports pretty much told us that was coming early Q2 '00), Bin Laden gave us a war.

      I suppose we could argue that Bush would have served the country better by taking more money out of my pocket, or the economy would have been better served by taxing "rich" people more, but this comparison of apples to oranges is facile.

      If one is serious about fixing the budget, one must look at social security and medicare/medicaid, which comprise some 41% of the budget and getting bigger.

      Comment


      • #4
        Re: Debt, November,And You

        Originally posted by Wolfie
        For example, Clinton didn't spend any money towards the fight against terrorism and oppression in the world while Bush has requested Congress to fund a war against Terror.
        Originally posted by The Article
        The budget mess is not a result of explosive spending growth. When Mr. Clinton left office, federal spending consumed only 18 percent of the nation's income, down from the 22 percent he inherited from the first Bush administration. The Clinton administration was truly fiscally conservative. Despite increased spending on homeland security and the war in Iraq, the government now spends only 20 percent of the nation's income, which is actually less than the average over the past 25 years.
        Talk about ignoring key facts... sheesh. It prints RIGHT IN THE PIECE how explosive spending growth is not to blame.

        Originally posted by Wolfie
        Second, the CBO forcast of a surplus was based on an assumption that the economy was never going to cool down but to keep on growing. However, if you look at the past economic figures, it shows the economy was slowing down during Clinton's last term. GWB inherited an economy that was already slowing down, throw in the crisis of 9/11 and the war against terror after and you can see where the "suppose" surplus went to.
        How did the CBO miss that? Wankers. Who let THEM be in control of the budget, anyway?

        Let's forget about the rosy 2000 forecast then. What freaks me right the hell out is this passage:
        Originally posted by The Article
        Even assuming that the recovery will continue to produce solid real income growth averaging 3 percent a year, the CBO forecasts sizable deficits for the remainder of the decade. These estimates understate the likely flow of red ink since they don't include pressure on discretionary spending due to population growth and their projections assume a 15-fold increase - to 33 million - in the number of taxpayers subject to the alternative minimum tax. Congress would never stand for that. The CBO forecasts beyond 2010 are rosier because they presume that the Bush tax cuts will expire.
        That says that even if things start hitting a good stride, we'll STILL be tush-high in debt for a decade.

        Originally posted by Wolfie
        Blaming the current state of the economy on a figurehead is an ignorant excuse.
        Then who do I point the finger at? There's someone around here who proposed tax cuts and advocated them through Congress to make sure I got a $300 check that I'll be paying for for the next 10 years... now where did he and his administration run off to? :P
        [volun2]
        NS Game Officer. TF2 Admin. BF2 Admin / Scripter. PM with issues.
        Tempus: Pokerface is nailing it right on the head. Everyone who is arguing against him is simply arguing against reality.
        <anmuzi> it is not permitted to have privacy or anonymity
        <LazyEye> yeah when I play on TG the server digs though my trash

        Arm yourself with knowledge: TG NS TF2 BF2

        Comment


        • #5
          Re: Debt, November,And You

          Originally posted by leejo
          I think we can all agree that Bill Clinton and George W Bush have presided over vastly different times and issues. Bush inherited a deepening recession (my company began laying off people in Aug '00 and the flash reports pretty much told us that was coming early Q2 '00), Bin Laden gave us a war.

          I suppose we could argue that Bush would have served the country better by taking more money out of my pocket, or the economy would have been better served by taxing "rich" people more, but this comparison of apples to oranges is facile.

          If one is serious about fixing the budget, one must look at social security and medicare/medicaid, which comprise some 41% of the budget and getting bigger.
          Originally posted by The Article
          The first reason is that spending on Medicaid, Medicare and Social Security is about to begin a sustained increase. The government will need to shift revenue to these programs or severely prune the benefits. But exploding national debt means revenues that could be used for these social programs must be diverted to pay added interest costs. Brookings Scholars Alice Rivlin and Isabel Sawhill estimate that by 2014, $1 out of every $5 of individual income taxes will be needed to finance the extra debt service costs of our higher national debt.
          The article addresses the Medi* and SS issues. And it says they'll take care of themselves, since we'll not have any money to spend on them due to an "exploding national debt". That's one way, I guess.

          So far as Bush better serving the country... well, that could spawn a whole new thread (and probably already has :P), but frankly, I'd rather have money taken out of my pocket than have the nation dipping into the pockets of foreing investors. I don't charge the kind of interest they do.
          [volun2]
          NS Game Officer. TF2 Admin. BF2 Admin / Scripter. PM with issues.
          Tempus: Pokerface is nailing it right on the head. Everyone who is arguing against him is simply arguing against reality.
          <anmuzi> it is not permitted to have privacy or anonymity
          <LazyEye> yeah when I play on TG the server digs though my trash

          Arm yourself with knowledge: TG NS TF2 BF2

          Comment


          • #6
            Re: Debt, November,And You

            Originally posted by Pokerface
            Then who do I point the finger at? There's someone around here who proposed tax cuts and advocated them through Congress to make sure I got a $300 check that I'll be paying for for the next 10 years... now where did he and his administration run off to? :P
            If you are going to blame the government, blame everyone in the government, including Democrats.

            Do you really think if Kerry gets elect to President he is going to slash spending?

            Comment


            • #7
              Re: Debt, November,And You

              Originally posted by Wolfie
              If you are going to blame the government, blame everyone in the government, including Democrats.

              Do you really think if Kerry gets elect to President he is going to slash spending?
              I'd prefer he make more money, actually, as opposed to cutting taxes and expecting to fund a war with his happy thoughts. But I'll take my chances.
              [volun2]
              NS Game Officer. TF2 Admin. BF2 Admin / Scripter. PM with issues.
              Tempus: Pokerface is nailing it right on the head. Everyone who is arguing against him is simply arguing against reality.
              <anmuzi> it is not permitted to have privacy or anonymity
              <LazyEye> yeah when I play on TG the server digs though my trash

              Arm yourself with knowledge: TG NS TF2 BF2

              Comment


              • #8
                Re: Debt, November,And You

                Originally posted by Pokerface
                I'd prefer he make more money, actually, as opposed to cutting taxes and expecting to fund a war with his happy thoughts. But I'll take my chances.
                Not to be nitpicking, but the President can not cut taxes or change the way to fund the various departments of the government. That is handled by Congress. If you are unhappy with the current way the government is being funded, shouldn't you be directing your anger at Congress and not the President?

                Comment


                • #9
                  Re: Debt, November,And You

                  Originally posted by Wolfie
                  Not to be nitpicking, but the President can not cut taxes or change the way to fund the various departments of the government. That is handled by Congress. If you are unhappy with the current way the government is being funded, shouldn't you be directing your anger at Congress and not the President?
                  And if you think that the president doesn't influence how the money get spent, then I've got some beachfront property in Colorado for you, right on the Indian Ocean.

                  I know my civics as well as you do Wolfie, but to say that things like the tax cuts of recent years are the sole fault of the Congress who passed bills (and not the President and his administration that signed them into law) is laughable.
                  [volun2]
                  NS Game Officer. TF2 Admin. BF2 Admin / Scripter. PM with issues.
                  Tempus: Pokerface is nailing it right on the head. Everyone who is arguing against him is simply arguing against reality.
                  <anmuzi> it is not permitted to have privacy or anonymity
                  <LazyEye> yeah when I play on TG the server digs though my trash

                  Arm yourself with knowledge: TG NS TF2 BF2

                  Comment


                  • #10
                    Re: Debt, November,And You

                    In all fairness to Pokerface, the President has a lot of power in this regard. Unless congress is prepared to override a veto, the President can dramatically affect legislation.

                    In all fairness to everyone else, if you think the war in Iraq is expensive, wait 'till this thing really gets rolling. Before it's done, we're going to basically have the USA, Europe, and Russia vs. the middle east. That's how I see it, and have for a while now. That's why Iraq, for many other reasons but especially this one, is a brilliant strategic move.

                    Anyway, time will tell.

                    Comment


                    • #11
                      Re: Debt, November,And You

                      Originally posted by leejo
                      Before it's done, we're going to basically have the USA, Europe, and Russia vs. the middle east.
                      I agree, except you forgot to add Israel in the vs. middle east list. Bah...that's another thread in itself....

                      Comment

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