Our Federal 'budget'

[Brainactive]

Hey Washington, I've got a 4 year old daughter and a 2 year old son. When I read the garbage that you folks mistake for a 'budget', I get sick to my stomach , thinking about the economic reality that their generation will face. Let me educate you all. I just took out my Webster's dictionary and looked up the definition of budget. It reads:

"a plan or schedule adjusting expenses during a certain period to the estimated or fixed income for that period"

Let me ask you Washington, what part of this definition do you fail to understand? Can we at the very least stop calling this spending fiasco a budget? Lets call it what it truly is, maxing out the credit cards of our children and grandchildren.

We are at the tail end of an era of peace and economic prosperity which spanned the most economically productive years of the boomer generation. During this period, have we stashed away a rainy day fund for future hard times? Have we invested heavily in the nations transportation, education, and energy infrastructure? Or have we simply pissed it away and run up a debt which now exceeds $30,000 per citizen? Now the new 'budget' plan proposes doubling this debt within the next 8 years.

I don't know how this debt conundrum will unwind, but I do know it will be an extremely painful process. For years we all sat by and watched as sub-prime loans created an unsustainable bubble in the housing market. As time went on, the interest rates crept higher and the debt load grew too heavy for the market to bear. The result was a great crash which rattled the entire world economy. So now as I watch the national debt grow by billions of dollars each day, I ask this, what happens when the world comes to the realization that the US government is a sub-prime borrower with massive credit card balances and no plan to pay off their debt?

 

[WillowTree]

I wish you had seen Bawney Fwank yesterday on c-span.. He waited till almost everybody had gone home.. Then demanded an hour's time to try and talk his way out of any involvment with the FM and FM debacle.. Ha! three Republicans stayed to put history in it's proper place. When they get back from yet another "break" I suspect the lies will fly once again from the Fwank!

 

[Brainactive]

Please don't reduce my rant to simple partisanship, there's plenty of blame to go around on both sides of the aisle. In fact if I had to blame 1 politician for this era in which fiscal responsibility vanished, I would blame Reagan.

 

[Iriemon]

Please don't reduce my rant to simple partisanship, there's plenty of blame to go around on both sides of the aisle. In fact if I had to blame 1 politician for this era in which fiscal responsibility vanished, I would blame Reagan.

Reagan changed the meaning of "conservative" from having a balanced budget to cutting taxes damn the consequences.

And then you had the "Deficits don't matter" Cheney administration.

I'm thrilled many folks are all of a sudden interested in the national debt. I only wish the pundits that are now raising this issue had been around in 2000, when we as a nation squandered a rare opportunity to do something about the debt.

 

[editec]

I suspect we're going to have to hyperinflate our way out of this mess.

The rest of the world will not be amused

 

[Brainactive]

I do hope fiscal conservativism makes a come back sooner rather than later. It also would be nice if it didn't have the baggage of all the moral conservatism that the populace seem to flock to. Remember, people were all fired up about the federal debt back in 1992. Then we decided Ross Perot's ears were too big for him to be taken seriously.

Where are you now Ross, the public could use a few of your charts and graphs.

 

[auditor0007]

Please don't reduce my rant to simple partisanship, there's plenty of blame to go around on both sides of the aisle. In fact if I had to blame 1 politician for this era in which fiscal responsibility vanished, I would blame Reagan.

Why would you blame Reagan? He increased government revenues dramatically. The Dems, at the time, increased spending even more than the increased revenues. Bush did the same; he increased revenues but this time around, the Republican Congress increased spending even more. Congress, whether Dems or Reps, just can't seem to control their spending.

 

[auditor0007]

I do hope fiscal conservativism makes a come back sooner rather than later. It also would be nice if it didn't have the baggage of all the moral conservatism that the populace seem to flock to. Remember, people were all fired up about the federal debt back in 1992. Then we decided Ross Perot's ears were too big for him to be taken seriously.

Where are you now Ross, the public could use a few of your charts and graphs.

I'll have to agree with you when it comes to moral conservatism. The worst thing about social conservatives is that a great many of them are really not fiscal conservatives, but they keep more liberal minded fiscal conservatives away.

 

[Brainactive]

I blame Reagan, because he started this era in which balanced budgets are optional. Do you remember all the dotcom companies of 1999 which would lose millions every quarter, but brag about growing revenues by 25% (their losses also grew by 25 or 30%). At the end of the day, the bottom line is what matters and most of those companies failed. Now is it ok to run a deficit in times of war or financial crisis? Yes, but you need to pay off that debt as soon as the crisis passes. WWII was a huge financial burden, but the debt was paid down very quickly. Reagan ran up the debt to stimulate the economy in the early 80s...........no problem with that. But then once the economy was humming, he should have started paying down that debt. Instead he doubled down and let the debt tick higher and higher. Shame on us for not calling him or his successors on it.

 

[Iriemon]

I suspect we're going to have to hyperinflate our way out of this mess.

The rest of the world will not be amused

Total Debt:GDP is now about 70%; it was 120% immediately after WWII. The "greatest generation" paid high tax rates (top marginal rates up to 88%) and had politicals who thought "conservative" meant a responsible budget, and by 1981 the debt was only 33% of GDP. The the "pass the buck" generation elected politicians who pandered tax cuts while running up trillions of debt.

We can work our way out of the debt. But it will take sacrifices on the revenue and spending side. I don't think we need put top tax rates at 88% yet, but they now need to be higher than the 40% we had in the 90s before we ran up another $5 trillion under the Bush administration.

On the spending side we cannot continue to spend more than the rest of the world on the military, fight wars, and have the most expensive health care system in the world, and provide free retirement funds to the wealthiest.

We could do it.

But we now have one party that is unwilling to compromise one iota on the revenue side, or compromise on its pet programs on the spending side. And the other party, well we'll have to see what Obama does I guess. I'm not encouraged by his apparent willingness to maintain a certain level of deficits. I had supported Clinton because of the lot she seemed to be the one that was most focused on this issue and wasn't promising to cut taxes further.

 

[editec]

Reagan put a face and legitized the mistaken notion that government is the problem.

Of course what few people are willing to acknowledge is that is NOT what Reagan ACTUALLY SAID.

What he actually said was THIS government (meaning the Carter administration) was the problem.

 

[Kevin_Kennedy]

I suspect we're going to have to hyperinflate our way out of this mess.

The rest of the world will not be amused

Hyperinflation is not a solution in any way shape or form because all it does is destroy the purchasing power of the currency. Look at the Weimar Republic and Zimbabwe, do you really think that hyperinflation got them out of any kind of mess? Hyperinflation would be far worse than the downturn we're currently experiencing.

 

[Brainactive]

Of course government is the problem. Not that should shock us. Ninety percent of small businesses fail, not because they are run by bad people or stupid people, but because capitalism is highly selective. The failed businesses cease to exist while the successful ones grow larger. Natural selection is not present in government. Do you think if we had 10 governments to choose from the one that we currently have now would necessarily prevail? And even if it did, it would improve based upon how its competitors ran their operations. Now having said that, there are some roles that only government can fulfill.............exactly what those roles are is a matter of debate.

 

[WillowTree]

I do hope fiscal conservativism makes a come back sooner rather than later. It also would be nice if it didn't have the baggage of all the moral conservatism that the populace seem to flock to. Remember, people were all fired up about the federal debt back in 1992. Then we decided Ross Perot's ears were too big for him to be taken seriously.

Where are you now Ross, the public could use a few of your charts and graphs.

I thought you didn't want this to be partisan???

 

[Iriemon]

Please don't reduce my rant to simple partisanship, there's plenty of blame to go around on both sides of the aisle. In fact if I had to blame 1 politician for this era in which fiscal responsibility vanished, I would blame Reagan.

Why would you blame Reagan? He increased government revenues dramatically.

This is a myth spun by historical revisionists. Revenues did go up during Reagans term, but a lot of that growth was inflation generated, and not real revenue increase.

Year - Actual Rev. - Real 2000$ rev.
1980 517.1 956.8
1981 599.3 1013.7
1982 617.8 984.9
1983 600.6 921.1
1984 666.5 985.1
1985 734.1 1053.0
1986 769.2 1079.6
1987 854.4 1167.3
1988 909.3 1201.3

This table is based on actual revenues reported by the CBO at CBO.gov, and the real (inflation adjusted) numbers are converted to 2000 numbers based on applying the inflation factor used by the BEA.gov when it produces GDP figures.

Thus, while revenues increased an impressive sounding 75% in actual number, in real terms, they only increased 25%.

More importantly, revenues during Reagan's term lagged behind GDP:

Year - GDP
1980 2,789.5
1988 5,103.8
% Chng: 83.0%

Year - Rev.
1980 517.1
1988 909.3
% Chng: 75.8%

Revenues weren't keeping up with GDP, constrasting, for example, Clinton's term were after the '93 tax increase revenues grew significantly faster than GDP:

Year - GDP
1992 6,337.7
2000 9,817.0
% Chng: 54.9%

Year - Revenues
1992 1091.3
2000 2025.2
% Chng: 85.6%

The fact that revenues grew slower than GDP under Reagan would have been OK if spending was kept down below GDP growth too, but Reagan implemented on a massive military spending increase as well. As a result the deficits went thru the roof and the national debt increased 150% during Reagan's term.

The Dems, at the time, increased spending even more than the increased revenues.

Again you have false information. You may want to consider the reliability of your sources as you are being provided incorrect information.

Year - Revenues
1992 1091.3
2000 2025.2
% Chng: 85.6%

Year - Outlays
1992 1,381.7
2000 1,788.8
% Chng: 29.5%

And simple mathematics tells you when that happens your deficits decrease, which they did.

Bush did the same; he increased revenues but this time around, the Republican Congress increased spending even more. Congress, whether Dems or Reps, just can't seem to control their spending.

Again, not fully accurate. Revenues did increase overall during Bush's term, but only after this:

Year - Revenues
2000 2025.2
2001 1991.2
2002 1853.2
2003 1782.3
2004 1880.1

Despite an economy that was growing in actual terms 3-6% per year, revenues plummeted hundreds of billions of dollars because of the tax cuts. It took five years for revenues to climb back to pre-tax cut levels.

And you are correct, these falling revenues were not matched with spending cuts; instead spending increased even faster as the Govt greatly expanded military spending, wars, and new programs like the Drug Company Profit Enhancement act.

Comparing Revenues to GDP we see the relative story of revenues during Bush's term:

Year - GDP
2000 9,817.0
2008 14,264.6
% Chng: 45.3%

Year - Revenues
2000 2025.2
2008 2523.6
% Chng: 24.6%

Despite the fact that the economy grew 45% from 2000-08, revenues grew only half that amount. That is about as big a reason for why the Govt borrowed $5 trillion more during his term as the increases in spending.

 

[Iriemon]

Of course government is the problem. Not that should shock us. Ninety percent of small businesses fail, not because they are run by bad people or stupid people, but because capitalism is highly selective. The failed businesses cease to exist while the successful ones grow larger. Natural selection is not present in government. Do you think if we had 10 governments to choose from the one that we currently have now would necessarily prevail? And even if it did, it would improve based upon how its competitors ran their operations. Now having said that, there are some roles that only government can fulfill.............exactly what those roles are is a matter of debate.

In essence didn't we have a choice between 10 possible governments? How many Republican candidates were there? How many Democrats? Each would have give us a different government. We only can choose one and that's for a 4 year hitch. Unless you say you'll change the constitution, well, you know, we all want to change your head.

 

[Iriemon]

Reagan put a face and legitized the mistaken notion that government is the problem.

Of course what few people are willing to acknowledge is that is NOT what Reagan ACTUALLY SAID.

What he actually said was THIS government (meaning the Carter administration) was the problem.

Reagan used to joke about the scariest thing in the world being "Hi, we're from the government and we're here to help." But if I was an investor with Madoff or found that a company was dumping toxic chemicals next to my house, damn right I'd be happy to see guys from the govt.

 

[Kevin_Kennedy]

Of course government is the problem. Not that should shock us. Ninety percent of small businesses fail, not because they are run by bad people or stupid people, but because capitalism is highly selective. The failed businesses cease to exist while the successful ones grow larger. Natural selection is not present in government. Do you think if we had 10 governments to choose from the one that we currently have now would necessarily prevail? And even if it did, it would improve based upon how its competitors ran their operations. Now having said that, there are some roles that only government can fulfill.............exactly what those roles are is a matter of debate.

In essence didn't we have a choice between 10 possible governments? How many Republican candidates were there? How many Democrats? Each would have give us a different government. We only can choose one and that's for a 4 year hitch. Unless you say you'll change the constitution, well, you know, we all want to change your head.

I don't know that all the candidates were all that different. Look at Obama and McCain, for instance. They were in different parties and weren't very different. They both wanted to increase government spending, just on different things; they were both pro-war, just different wars; and they both supported bailing out failed businesses to "save Capitalism from itself." Oh, and both are apparently ignorant on economics.

 

[editec]

I suspect we're going to have to hyperinflate our way out of this mess.

The rest of the world will not be amused

Hyperinflation is not a solution in any way shape or form because all it does is destroy the purchasing power of the currency. Look at the Weimar Republic and Zimbabwe, do you really think that hyperinflation got them out of any kind of mess? Hyperinflation would be far worse than the downturn we're currently experiencing.

If you think I do not understand what hyperinflation is you're mistaken.

I fully understand how hyperinflation can cripple a society.

Now can you understand how having a debt load that is paid by with money that actually DOES have value can ALSO cripple a nation?

So our government is, or will be facing that moment in time when they can no longer borrow money from other nations, and when, thanks to the depression, they do NOT bring in enough revenues to pay back the debts they currently have.

Using your crystal ball, what do YOU THINK these nitwits will do?

Bite the bullet and tax the people to satisfy our creditors?

Or do you think they'll start printing worth-less to satisfy those debts?

I susepct that they will take the easy way out because they've been taking the easy way out for the last thirty years.

And a whole LOT of American won't really mind because they do not HAVE money in the bank, they are NOT creditors, and the ONLY ASSET most of them have is real estate which WILL RETAIN its intensic values in comparison to the worthless dollars.

POLITICALLY, I suspect what our government will decide is that inflating the money supply is easier than actually paying back the debts with money that has REAL purchasing power.

And what will the outcome of that be?

Enormous energy costs, but a dramtic DECREASE in imports since the costs of things in US dollars will climb dramtically.

Hey, I didn't say it was a good thing, I'm just saying it';s a PROBABLE thing to expect.

 

[Kevin_Kennedy]

I suspect we're going to have to hyperinflate our way out of this mess.

The rest of the world will not be amused

Hyperinflation is not a solution in any way shape or form because all it does is destroy the purchasing power of the currency. Look at the Weimar Republic and Zimbabwe, do you really think that hyperinflation got them out of any kind of mess? Hyperinflation would be far worse than the downturn we're currently experiencing.

Hey, I didn't say it was a good thing, I'm just saying it';s a PROBABLE thing to expect.

Noted.

It seemed that you were saying that hyper-inflation was a logical choice to somehow pull us out of this recession, when it would simply make the situation much worse.