8 Responses to “Late or Never, It’s All Lame”

1. David in Cal Says:
   May 17th, 2010 at 7:06 pm

   A lot of Dems believe that current federal deficits are comparable to Bush’s. Actually, they’re 4 times as big. Here’s a chart showing the deficit as a % of GDP by year:

   Yr…..GDP…..Deficit as % of GDP
   2001 10286.2 -1.25 a
   2002 10642.3 1.48 a
   2003 11142.1 3.39 a
   2004 11867.8 3.48 a
   2005 12638.4 2.52 a
   2006 13398.9 1.85 a
   2007 14077.6 1.14 a
   2008 14441.4 3.18 a
   2009 14258.2 9.91 a
   2010 14623.9 10.64

   As you can see, during 2000 - 2008 deficits averaged less than 2%. Since 2009, deficits are around 10%. Furthermore, under realistic projections, deficits will remain around 10% indefinitely into the future. If Cap and Trade passes or if health care costs exceed projections, they’ll be even higher. In short, deficits today will run at least 4 times as high as they did in the Bush years — and they were too high then.

   That’s why fiscal conservatives like Coburn are more worried about violating PAYGO than they used to be. It’s the feeling that something disastrous will eventually happen to this country if the Federal Governemnt keeps outspending its income to this degree.

2. Andy Says:
   May 18th, 2010 at 6:01 pm

   What is the point of the comment about deficit as a % of GDP? If you add together the bank bailout and the Federal Stimulus package, do you expect these numbers to be the same as 2001-2008. Go recrunch your numbers and take out the bailout and stimulus and then tell me what % of GDP the deficit is and we’ll see if there’s any validity to the comment. I’m guessing there isn’t.

3. David in Cal Says:
   May 18th, 2010 at 6:58 pm

   Andy, deficit as a % of GDP is one standard way that economists evaluate a country’s solvency. E.g., the chart in this article from the Wall Street Journal shows Euro-zone budget deficit or surplus measured in a percentage of GDP. For Greece, the 2009 ratio is 13.6%.

4. Andy Says:
   May 18th, 2010 at 9:20 pm

   Thanks for the link, David. I understand your point; however, what will be this statistic once we are fully through the stimulus? If the number is back around 3%, is your analysis relevant anymore? If this % were to become the norm, then yes, I agree with you that we’re headed to hell in a handbasket … but until then, I’ll reserve judgment.

5. Hantu13 Says:
   May 19th, 2010 at 10:30 am

   David,

   I’m not sure I agree with your characterization of the problem…

   Yes, it is true that the absolute size of the deficits are larger now than they were under Bush. They key, however, is that Bush managed to run these large deficits while the economy was growing at a pretty brisk pace. The jump in deficits in 2009 overwhelmingly stems from the huge fall in tax revenues as the economy declined- a natural turn of the business cycle- as Andy is implying. You can find some analysis of the source of the deficits here-
   http://www.cbpp.org/cms/index.cfm?fa=view&id=3036

   Also, most economic forecasters are projecting a return to growth which will shrink the size of the deficit. The critical issue is that the structural deficit- entitlement programs + defense are the long term cause for concern. The discretionary spending that folks like McCain and Coburn and Cantor talk about is so ridiculously small, it’s not relevant.

   There are some relatively simple changes to social security- raising the income thresh-hold, raising the retirement age, or means-testing benefits, which can easily solve any problems SS has. Medicare/Medicaid are the root cause of the problem and one of the reasons everyone wants to do something about health care…

   One thing to keep in mind about all this deficit-mania (which only pops up when Democrats are in charge), is that the bond market is the ultimate arbiter of what is acceptable. So far, the yields on Treasuries are historically low (even long term 20 year bonds), and there seems to be no slowing of demand for US gov’t debt.

   One of the reasons for this is that a relatively simple combination of budget cuts and modest tax increases can easily bring this all under control. However, the current iteration of the Republican party will never, ever raise taxes, and from listening to what they say - they have no interest in intelligently cutting any of the key contributors to the deficit.

   I think Obama will play ball, there’s no one on the other side to play with.

6. David in Cal Says:
   May 20th, 2010 at 8:16 pm

   Hantu, I agree that the bond market seems happy with the economy. It amazes me. I wouldn’t touch a long-term bond with a 10 foot pole (except for TIPS, which adjust for inflation). In part I think bonds are a least of evils. Stocks and investments denominated in foreign currencies look even more risky than US bonds and American corporate bonds.

   In principle SS can be fixed by raising the age of eligbility. However, I believe a fairly substantial increase would be needed. So far, our cowardly politicians have shown no willingness to make even a small adjustment. George Bush, to his credit, made a slight attempt, and he got pummeled for his efforts.

   I suppose means-testing could fix SS and Medicare, but it would be theft. I’m a retiree who has paid into these programs for 40+ years. In a sense, I’ve paid in more than my fair share. SS is already adjusted so that it’s a better deal for low wage earners. And, medical care is the same in Medicare for high earners as for low earners. If my benefits were now taken away by a means test, I would feel cheated.

   I disagree with your claim that deficit-mania only pops up when Democrats are in charge. Bush was relentlessly attacked for deficits, even though they were a small fraction of the current ones. I put “Bush deficits” in google and got 1.2 million hits.

7. Michael Says:
   May 23rd, 2010 at 9:04 pm

   David-with all due respect, shenanigans.

   I’ve been paying into SS and Medicare for more than two decades now, and haven’t seen a dime. More than likely, I won’t-the program will go belly up if it isn’t fixed- before I see any of it.

   And this fetish of “but I paid into it” is baloney. The money you, and I, and everyone else paid into it when we were younger is GONE-it went to our parents and grandparents. Social Security has always been generational theft, and it is my generation that is going to pay for it.

   And the question about deficit mania still stands-George Bush didn’t get anywhere near enough heat for his reckless spending. Where were the tea partiers when Iraq and Afghanistan were left out of the budget? When war profiteers stole billions in the desert sands? When Medicare Part D wasn’t paid for? When the thieves on Wall Street lined up at the government trough to get their payouts?

   Concern about fiscal responsibility is a good, and fine, and prudent, and sensible feeling to have. The reason why I, and many others, question Tea Partiers’ sincerity, is why are you upset NOW? Where were you in 2004, and 2005, and 2006, and 2007, and 2008? Why is the problem so serious NOW, when it was real and growing then, and you ignored it? I will believe the Tea Party is a serious political movement with real goals when they carry signs that say “CUT MY SOCIAL SECURITY NOW!” and “END WASTEFUL DEFENSE SPENDING!”. That is what will really affect the deficit. All the other dreamed for cuts are just window dressing.

   A political movement did not arise demanding change when George W. Bush was slinging the dollars around-I believe it was because it was George W. Bush doing the slinging.

8. Michael Says:
   May 23rd, 2010 at 9:17 pm

   And about Coburn-that’s great. I support him. He should stop war funding if it isn’t paid for-in fact, I’m prepared to argue we should stop both wars altogether.

   But that’s another post.

   Once again, though-when Democrats talked about cutting off war funding, people like Coburn said it was unpatriotic, and treasonous, and all sorts of awful things.

   I expect Fox News to begin echoing with the chorus of denunciations of Coburn for defunding the troops any minute now.

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