Supporting my contention that individual Americans will grow the economy almost no matter what our federal government does, a WSJ Review and Outlook looks at “The Hard Fiscal Facts“. “The feds rolled up another $1.1 trillion deficit for the year that ended September 30, which was the biggest deficit since World War II, except for each of the previous three years. President Obama can now proudly claim the four largest deficits in modern history.” That’s no surprise since the president remains in office based on liberal spending and the resulting good will of the people. Federal spending is at “about $3.54 trillion, or some $800 billion more than the last pre-recession year of 2007.”
However, look at this, tax revenue still increased, “up 6.4% for the year overall, and at $2.45 trillion it is now close to the historic high it reached in fiscal 2007 before the recession hit….Individual income tax payments are now up $233 billion over the last two years, or 26%.” Not bad, America. Those inclined to prosperity manage to prosper despite low economic growth and high unemployment. No wonder people do not take Republican gloom and doom about the economy seriously. But consider this, the government stalemate of the last two years, with a recalcitrant Congress restraining the President, may have done more to increase tax revenues than any increase in tax rates would do.
The bad news is that what was “stimulus spending” is now expected spending. Going forward, there is the promise of even more spending to come through Obamacare and other election promises. We must figure how to handle that, the worry being that the president’s proposed tax rate increases could kill the current actual tax influx. However, look at what we have. The people returned to Congress a Republican majority, all of whom ran on promises to restraint government spending. This, while returning a president and senators committed to increasing spending. What the people elected was political drama. Right now, that’s good news. They can argue and America can get along with its business.
November 12th, 2012 | 9:24 am
Um, have you seen the workforce participation rates for the last five years? Or the deficit numbers, especially compared to the laughable projections put out back in early 2009? Given their record, their horrible projections for the future should have everyone looking for their own private bolthole.
Those of who who were right about how the last four years would play out economically aren’t haters, and certainly aren’t anti-American as the Dems laughably insist now. But we are right that the next four years are going to be just as disastrous (actually more so, thanks to all sorts of fun new policies given the administration’s new “flexibility”).
The Dems still think that the economy can support whatever insane plans they have, no matter how extravagant the promises, because it always has in the past. But those superficial supergeniuses don’t get the demographic realities that actually matter for current times.
Yes, I know that anyone daring to raise these issues in public must subjected to their own personal Two Minutes of Hate. So be it.
November 12th, 2012 | 12:32 pm
I don’t have two minutes of hate for you, Brian, but I would point out that the Republican house leaders can fix the deficit problem by simply sitting on their hands and refusing to negotiate. On Jan 1 there will be massive budget cuts as well as a rise in everybody’s taxes. This should at least slow the growth of the deficit, if not provide extra revenue to retire some of it.
The ball really is in their corner.
I really can’t see how a conservative can argue against this if they are a deficit hawk. If someone here like Kate and the rest is willing, I would love to see them try. Or you. In the absence of such an argument the conservative position amounts to, “Just stop spending on the stuff I don’t like,” which is fine policy rhetoric, but hardly getting serious about the issue.
Short of depriving the other party the right to vote, you simply can’t take away ALL the things that like, and the notion that you can is a little silly.
November 12th, 2012 | 2:05 pm
Mr. Marshall: There’s nowhere near enough revenue from the impending tax hikes to come anywhere close to filling the deficit hole. Not even close. Nor is there a tax system in the history of the United States that has ever raised enough revenue (as a fraction of GDP) to balance the current budget, let alone future ones. But the MSM and Democrat Party will never tell you that, so I guess you can go on pretending otherwise…
As for the planned “massive budget cuts”, they are neither “massive” nor really “cuts” (and the Senate still will refuse to pass a “budget” in the coming years, so we have the trifecta!). My final sentence from the above paragraph applies here as well…
Whether I “like” something is meaningless. Sure, I’d love for someone else to pay for my health care when I’m old, and not care about the cost. That would be really sweet. But it’s just not going to happen. Throwing a hissy fit about it won’t change that reality.
As for being “silly”, I’m not the one here denying that two plus two equals four. The math involved isn’t that hard.
In the words of Turbo Tax Timmy: “we’re not coming before you today to say we have a definitive solution to that long-term problem. What we do know is, we don’t like yours.”
THAT’S the Democrat Party position: We have no plan. And we won. So go suck an egg, Math. You too, Economic Reality. You’re not a constituency that we care about. You’re yesterday’s news, something out of a Norman Rockwell painting.
P.S. Saying “The GOP are poopy-heads too!” isn’t a valid response. This is true. Also irrelevant.
November 12th, 2012 | 2:49 pm
Here, McCraw on Hamilton’s view of public debt.
November 12th, 2012 | 2:58 pm
Kate:
1. What was GDP in the post-Revolution period (which is what debt is usually compared to)? I can’t find any numbers in a quick online search.
2. In Hamilton’s day the US gov’t didn’t have rapidly escalating entitlement programs to worry about. That’s the real problem we face. There’s no historical analogy to our current predicament.
November 12th, 2012 | 8:57 pm
@Brian no one knows, but for about 100k I think you could get together a team of economists and historians and answer the question. I can tell you that in the history of economics GDP is a relative new commer. (It wasn’t until 1991 that the US got rid of GNP for GDP). What McCraw’s copyright suggests is that Hamilton was closer to being a modern day macroeconomist. Maybe. I tend to agree with McCraw. But in my opinion the best early macroeconomist was actually Gallatin. To try to rebuild GDP you would need to go to the Library of Congress and dig into the archives of the U.S. Treasury. I think to do this you might have to employ elements of all three methods of calculating GDP, and almost certainly quite a bit of controversial guess work.
Essentially GDP is the “intellectual property” of the administrative state. No bureaucrats authenticating/calculating a number equals no number.
@ Joseph Marshall, luckily for me I am not a deficit hawk.
“2. In Hamilton’s day the US gov’t didn’t have rapidly escalating entitlement programs to worry about.”
True, they also didn’t have a calculated GDP, widespread indoor plumbing, cars, planes, iphones et al. So Hamilton might say that your worries stem from real wealth or real GDP.
The only thing we should be worrying about is the capacity of Patent to outrun Global Warming/Malthus. The problem you think you face Brian isn’t a real problem at all.
“There’s no historical analogy to our current predicament.”
True, except for the fact that there is always a historical analogy that can and will continue to be made. In addition often times even when there is no historical analogy to our current predicament, historical analogies continue to be made.
One problem is that GDP was designed partially by Keynes (the creation of both american and british bureaucrats) to think about an economy under the monetary system designed/negotiated at Bretton Woods.
Under Bretton Woods deficits do matter. Post-Bretton Woods they do not. Under Bretton Woods GDP/debt is a more important ratio, post Bretton Woods it isn’t.
Under Bretton Woods politicians were externally constrained and had to ballance budgets, thus from World War II to the end of Bretton Woods (around 1972) national debt continued to fall. (it continued to around 1974) because of a general time lag in policy.
Slowly, very very slowly because academia loves historical analogy and because modern day bureaucracy is so “conservative”…folks are starting to peel away from the notion that budgets have to be ballanced in the first place. (at the federal level ONLY…no constitutional change to state government funding, it just isn’t the unit which is monetarily sovereign.)
So I actually believe in multiple macroeconomic theories, but what I think you (and all deficit hawks) are doing Brian is thinking like Bretton Woods is still in effect. The only thing that should restrain us from Dick Cheney’s technical truth that “deficits do not matter”, is Eisenhower’s warning in his farewell address that a Richard Nixon, a Ronald Reagan a Dick Cheney and a Newt Gingrich would come.
Am I scared of this Living Constitution enabled by Richard Nixon in 1972?
Maybe.
“As for being “silly”, I’m not the one here denying that two plus two equals four. The math involved isn’t that hard.”
You are being “silly”. No one is denying that 2+2=4. Nor are we denying that 2 oz of gold + 2 oz of gold=4 oz of gold. What I am saying is that the math remained the same, but the identity of what you were adding together changed. I see your 2+2=4 and raise you 1000+2345=3345! Indeed I don’t see what believing in pure math will do for your case. I am sure that you can add together a number that is larger than 3345, and indeed perhaps you will…this in my view is the direction of history for our national debt. But how are you going to pay for the 3345? (economic reality?) Easy: 19872+3345=23217… i.e. I am going to pay you in dollars for dollars. The government will raise taxes and cut spending to fight inflation, and indeed this is the only pure reason post 1972 to bother raising taxes or cutting spending. State governments tax in order to raise revenue, the federal government doesn’t need to do this. The federal government should only raise taxes and cut spending to fight inflation and employment.
No politician ran on a mandate to fight employment, therefore the deficit hawks should leave.
November 12th, 2012 | 9:49 pm
The simple point of Hamilton is that a growing economy absorbs debts and deficits. Growing the economy is not really government business. Its interventions never work very well. Today, even conservatives howl about government “doing something” about growing the economy when what it could do that would help the most is to get out of the way.
November 13th, 2012 | 9:02 am
Mr. Lewis: Thank you very much. It has been a while since I was treated to a “Silly child, trivial things like ‘budgets’ and ‘math’ and ‘gravity’ and ‘reality’ don’t apply to macroeconomics. Now go sit in the corner and let us grownups go on running things” essay.
I’d also be interested in your thoughts on winning strategies for quidditch, and for any recipes you might have for unicorn.
November 14th, 2012 | 8:44 am
Now I have to say that the way “government spending” is talked about in conservative circles reminds me of nothing so much as a game of Three Card Monte.
Take the notion that the “amount of the deficit” should be compared to the GDP. Why? The two sets of numbers are logically independent of one another. Each can increase in the presence or absence of an increase in the other. The only direct link between them is the amount collected by the government in taxes, which is still a third number that can increase or decrease in the absence of changes in the other two.
If I independently audit Hewitt Packard, I can compare their expenditures, their assets and income, and their debt to one another. These three things are linked by logical necessity. There is no such link of logical necessity to the S&P 500 figures for the year, and no serious audit would include those numbers on a balance sheet.
Second, “The Deficit” is a piece of base intellectual coinage used to talk about several completely different things as if they were identical: the total amount of indebtedness, the debt service on that indebtedness, the ratio of planned expenditures (“the budget”) to probable revenues, and the ratio of actual revenues (the tax intake) to actual expenditures (the Congressional appropriations and the ways in which they are spent by the Executive Branch). Once again all these numbers are related, but only circumstantialy and not by logical necessity.
Of these, the actual amount spent is the only thing that a President has at least partial control of on his own, and even this is severely limited by law. Everything else is either set by prior law, or changed through future law, which is in the control of Congress, and over which the President has only a yes/no decision of veto which the Congress can override.
Now the mere fact that they already know all of this dosen’t mean that Conservatives use the knowledge to talk about government debt in a sensible and objective way. Largely, they don’t.
Third, the total debt itself is talked about as if it had only one relationship to the overall economy. It doesn’t. Most of the debt is held in US treasuries and circulated in US dollars inside the domestic economy. The interest on the Treasuries goes back into the economy as either investment or consumer spending, and the principal can be in long term or short term bills.
The Federal Reserve controls both of these and uses the US debt to impact the short term unemployment and inflation figures. By law, this process is independent of both Congress and the Presidency. And with good reason.
It also intrudes little, if at all, into conservative rhetoric about the debt.
Finally, other pieces of base coinage such as “liberal spending” are used as if they were categories that can be put on a balance sheet and influence the way the numbers add up. It isn’t.
“Liberal spending” is an independent political evaluation of why money is spent and has no logical relation to how it is spent, how much is spent, or who can spend it.
Thus a statement such as, “
November 14th, 2012 | 9:10 am
“President Obama can now proudly claim the four largest deficits in modern history,” is a large crock of irrelevant rhetorical Horsefeathers.
In 2009 a President McCain would have confronted exactly the same numbers on the balance sheet as did President Obama and President Obama will confront the same balance sheet as would have a President Romney.
Any of these Presidents, real or imaginary, could do only two things about this: talk about it (just like you and me) and do the actual spending.
The only measure of Obama’s responsibility is the size of and speed at which the money is spent.
The Obama Administration has spent less, by percentage,
November 14th, 2012 | 9:32 am
(For some reason my I-pad has decided to actually submit these comments on its own. I apologize, but I can’t control it.)
than any since that of Dwight D. Eisenhower. Period. And by percentage is the only way to do this comparison because the actual economic value of the numbers changes over time.
If you really want to do anything more than use spurious number values as a club to beat Obama with, then you have to talk sensibly about three questions:
How much, in numbers, do you want the government to take in by taxes, and what way do you want it done?
How much, by percentage, do you want the government to borrow against tax revenues?
(Don’t be silly and ask for the retirement of all US Treasuries since you would not be silly enough to ask Hewett Packard to retire all its common stock.)
How much money do you want the Government to spend, in numbers, and what do you want it spent for, by percentage?
These are precisely the questions conservatives, both inside of Congress and out persistently refuse to address.
So how can anyone else take you seriously?
November 14th, 2012 | 10:52 am
Mr. Marshall: Regarding your questions–You first. You first, pal. I’d love to see your answers. The Senate Democrats are so craven and pathetic they have refused to pass a budget for three years. Obama’s budget proposals have never received a single affirmative vote from even one Democrat senator, as far as I am aware. Paul Ryan and the House passed a (flawed, imperfect, insufficient) budget knowing that the Dems would ruthlessly demagogue it, with their position being brilliantly summed up by Turbo Tax Timmy: “we’re not coming before you today to say we have a definitive solution to that long term problem. What we do know is, we don’t like yours.”
So spare us all comments about conservatives being the ones who are unserious. What a sick joke.
November 14th, 2012 | 12:25 pm
I don’t have real numbers in front of me at the moment, so I don’t know where we stand. And I have already taken more time away fron the household chores than I really should have, so I do not have time to dig them up. I can only answer those questions comparatively. But I think those comparisons can be fairly clear. I can be more specific with the percentage questions. We can also discuss the why I make these choices down the road.
I also will not address your remarks about the actual Congress, past or present, since they, once again, have no logical relationship to the answers anyone gives to the questions.
I want the government to take in enough tax revenues to permit a sizable payment on the principal of the total debt as well as maintaining debt service in order to get total borrowing well below the debt ceiling.
I want it collected in a relatively more progressive income tax with fewer exceptions and deductions, as well as by a return to prior levels of estate and capital gains taxes. I also think a European style value added tax is appropriate as a compromise for these tax increases as long as it is kept low enough not to interfere with State and local sales tax levies. I would also like to see significant temporary cuts in income taxes when unemployment is down to about 2% removed when unemployment rises above 6%. I would, finally like to see the cap removed on Social Security tax rates for the wealthy.
I would like to see regular government borrowing rates roughly equivalent to corporate indebtedness to earning flows since Treasuries are investment implements. But this should only happen when we get some headspace below the debt ceiling.
I would like to reduce the total military budget to levels that would reduce the active duty military’s size to no more than 50% larger than anyone else’s military. I would also like to see a shift in spending to development of lower tech weapons such as the drones, and a large reduction in spending on developing weapons such as newer air superiority fighters and ground combat planes.
This would probably work out to 25-30% of total expenditures of the entire government.
I would like to see a 20% supplement of the SS fund by money from the general revenues, and a 10% increase in spending for other entitlements and social safety net services which already exist.
In terms of priorities, I would first like to see the tax increases first, then enough spending increase to give the Fed back the power to alter the economy by moving interest rates. Then I would like to see the borrowing goals accomplished. Then the redirection of the actual spending percentages.
Now in the absence of numbers, I can’t claim that these things will be wholly compatible with one another, nor can I complain if these proposals endure substantive and specific refutation or attack.
But I do think its time that we stopped talking in abstractions like “liberal spending” and focus on real proposals rather than fuming over present political relations in Congress.
November 14th, 2012 | 12:30 pm
I don’t have real numbers in front of me at the moment, so I don’t know where we stand. And I have already taken more time away fron the household chores than I really should have, so I do not have time to dig them up. I can only answer those questions comparatively. But I think those comparisons can be fairly clear. I can be more specific with the percentage questions. We can also discuss the why I make these choices down the road.
I also will not address your remarks about the actual Congress, past or present, since they, once again, have no logical relationship to the answers anyone gives to the questions.
I want the government to take in enough tax revenues to permit a sizable payment on the principal of the total debt as well as maintaining debt service in order to get total borrowing well below the debt ceiling.
I want it collected in a relatively more progressive income tax with fewer exceptions and deductions, as well as by a return to prior levels of estate and capital gains taxes. I also think a European style value added tax is appropriate as a compromise for these tax increases as long as it is kept low enough not to interfere with State and local sales tax levies. I would also like to see significant temporary cuts in income taxes when unemployment is down to about 2% removed when unemployment rises above 6%. I would, finally like to see the cap removed on Social Security tax rates for the wealthy.
I would like to see regular government borrowing rates roughly equivalent to corporate indebtedness to earning flows since Treasuries are investment implements. But this should only happen when we get some headspace below the debt ceiling.
I would like to reduce the total military budget to levels that would reduce the active duty military’s size to no more than 50% larger than anyone else’s military. I would also like to see a shift in spending to development of lower tech weapons such as the drones, and a large reduction in spending on developing weapons such as newer air superiority fighters and ground combat planes.
This would probably work out to 25-30% of total expenditures of the entire government.
I would like to see a 20% supplement of the SS fund by money from the general revenues, and a 10% increase in spending for other entitlements and social safety net services which already exist.
In terms of priorities, I would first like to see the tax increases, then enough spending increase to give the Fed back the power to alter the economy by moving interest rates. Then I would like to see the borrowing goals accomplished. Then the redirection of the actual spending percentages.
Now in the absence of numbers, I can’t claim that these things will be wholly compatible with one another, nor can I complain if these proposals endure substantive and specific refutation or attack.
But I do think its time that we stopped talking in abstractions like “liberal spending” and focus on real proposals rather than fuming over present political relations in Congress.
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