Reality intrudes...

Discussion in 'Economy' started by Bullypulpit, Aug 8, 2006.

  1. Bullypulpit
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    Bullypulpit Senior Member

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    As we head into autumn, some economic realities are coming into focus.

    The CEO's of major US companies report declining confidence in the world economy in general, and the US economy in particular.

    <blockquote>...the forces that caused a recession five years ago never went away. Business spending hasn’t really recovered from the slump it went into after the technology bubble burst: nonresidential investment as a share of G.D.P., though up a bit from its low point, is still far below its levels in the late 1990’s. Also, the trade deficit has doubled since 2000, diverting a lot of demand away from goods produced in the United States.

    Nonetheless, the economy grew fairly fast over the last three years, mainly thanks to a gigantic housing boom. This boom led directly to unprecedented spending on home construction. It also allowed consumers to convert rising home values into cash through mortgage refinancing, so that consumer spending could run far ahead of families’ incomes. (Americans have been spending more than they earn for the past year and a half.) - Paul Krugman, 8/7/06</blockquote>

    The long and the short of it is that the housing bubble is collapsing, with more than 500,000 unsold new build homes, and the number is growing, and a decline in constuction employment in the housing industry. And there is no new "bubble to replace the housing bubble as was done when the tech bubble collapsed.

    With the budget deficit growing like a cancer, and the spiralling costs of the Iraq war, the situation is growing worse, not better. As for any fiscally sound economic stimulus package, given recent history, that seems unlikely. Chimpy and the Republicans in Congress will only use it as a chance to slip in more tax-cuts for the wealthiest Americans.

    And don't forget, real wages of most US workers actually dropped during the last three years of Chimpy's "economic recovery". So, for those of us who work for a living, "BOHICA baby!" (<b>B</b>end <b>O</b>ver, <b>H</b>ere <b>I</b>t <b>C</b>omes <b>A</b>gain)
     
  2. red states rule
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    red states rule Senior Member

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    The facts are againist you. Revenus are growing, the defict is shrinking, and the libs are ranting.


    http://apnews.myway.com/article/20060711/D8IPRQVO2.html
    Budget Deficit Drops $296B Under Estimate


    Email this Story

    Jul 11, 11:01 AM (ET)

    By ANDREW TAYLOR

    WASHINGTON (AP) - President Bush touted new deficit figures Tuesday showing considerable improvement upon earlier administration predictions, saying it shows the wisdom of his tax cuts.

    Bush himself announced the figures - a task that for the most part has been left to lower-ranking administration officials in the past. The new figures show the deficit for the budget year ending Sept. 30 will be $296 billion - much better than the $423 billion that Bush predicted in February and a slight improvement over 2005.

    Bush said the improvement is due to tax cuts he pushed in 2001 and 2003 and his clampdown on domestic agencies funded by Congress.

    "These tax cuts left nearly $1.1 trillion in the hands of American workers and families and small business owners. And they used this money to help fuel an economic resurgence that's now in its 18th quarter," Bush said. "Economic growth fueled by tax relief has sent our tax revenues soaring."

    Impressive profits and big income gains by the wealthy are largely responsible for the surge in revenues and, in turn, the deficit drop.

    However, the results are less impressive when compared to the $318 billion deficit posted last fall for fiscal 2005. Despite strong revenues, the high costs of the Iraq war and Gulf Coast hurricane relief have weighed on the deficit - as have higher interest payments paid on the national debt.

    The deficit for next year would ease back up to $339 billion, the White House predicted. It would drop to $188 billion in 2008.

    "The 2006 deficit may be a bit lower, but it represents a $600 billion swing from the surplus projected in 2001. And a deficit of $296 billion is still a large deficit. In nominal terms, its one of the four largest in history," said Rep. John Spratt Jr. of South Carolina, top Democrat on the Budget Committee.

    "Let's not boast about a $300 billion deficit," said Senate Minority Leader Harry Reid, D-Nev. "Any statistic you look at recognizes the rich in America are getting richer, the poor are getting poorer and the middle class is getting squeezed."

    Revenues are running $115 billion greater than expected earlier this year, the White House said, reflecting particularly strong growth in taxes paid on corporate profits and income taxes paid by wealthier people and small businessmen who pay taxes quarterly instead of having them withheld by employers.

    Taxes paid by individuals are growing at an 11 percent rate, the White House says, while corporate taxes are rising at a 19 percent rate.

    "Bold pro-growth tax policies enacted by Congress and the president have sparked unprecedented economic growth," said Senate Budget Committee Chairman Judd Gregg, R-N.H.

    But Gregg and budget experts across the spectrum say the real challenge lies ahead, when the retirement of the baby boomers threatens to swamp Social Security and the Medicare health plan for the aged.

    For his part, Bush reiterated that Congress should enact the line-item veto to help him crack down on wasteful spending passed by Congress.

    The economy is estimated to grow at a 3.5 percent rate in real terms, a slight slowdown from the 5.6 percent rate of the first quarter of the year.

    "We've had extraordinarily good profit growth, and when you have better profit growth than wage growth you tend to have windfall tax revenues because taxes on profits are higher than taxes on wages," said Diane Swonk, chief economist for Mesirow Financial, a Chicago-based financial services firm.

    Swonk predicted that the unexpected revenue surge would ease around the end of the year as profits peak.

    Bush has had few opportunities to boast about the deficit over the course of his time in office. He inherited in 2001 a surplus estimated by both White House and congressional forecasters at $5.6 trillion over the subsequent decade, and it quickly dwindled.

    Those faulty estimates assumed the late-1990s revenue boom - fueled by the stock market and dot.com booms - would continue. But that bubble burst, and a recession and the Sept. 11, 2001, terrorist attacks started a flow of red ink. Several rounds of tax cuts, including Bush's signature $1.35 trillion tax cut in 2001, also contributed to the return to deficits four years ago after four years of budget surpluses.

    Some budget experts say the steep rise in tax receipts looks more impressive than it really is since revenues are bouncing back from a three-year decline during Bush's first term, drops not seen since the Great Depression.

    "The current so-called revenue surge is merely restoring revenues to where they were half a decade ago," said Robert Greenstein, executive director of the liberal-leaning Center on Budget and Policy Priorities think tank. That's after accounting for inflation and population growth.

    Still, the new figures allowed Bush to claim that he will meet his promise, made in early 2004, that he will cut the deficit in half by the end of his second term. Bush's deficit-halving promise was based on 2004 estimates projecting a $521 billion deficit for the 2004 budget year, setting the goal of $260 billion.
     
  3. Bullypulpit
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    Bullypulpit Senior Member

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    And you are delusional.

    With the costs of the war and fiscally irresponsible tax-cuts the deficit will only continue to increase. The revenue increases are the result of one time event. Increases due to the expiration of some tax cuts, and income from higher capital gains revenues due to short term gains in the stock market. Neither are a basis for long term deficit reduction. Chimpy's numbers have already been exposed for the smoke and mirrors they actually are.
     
  4. red states rule
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    red states rule Senior Member

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    The deficit has DROPPED for the last 3 years. Please read this article the last time the deficit DROPPED.

    You can hope for the opposite, but the facts are against you


    http://www.nationalreview.com/kudlow/kudlow200501131420.asp
    Psst, the Deficit’s Shrinking
    Why won’t anyone say it?

    Here’s one story you won’t find on tomorrow’s front pages: “The U.S. Budget Deficit Is Shrinking Rapidly.” The headline would be accurate, but the mainstream media is much more interested in talking down this booming economy than telling it like it is.

    This week’s Treasury report on the nation’s finances for December shows a year-to-date fiscal 2005 deficit that is already $11 billion less than last year’s. In the first three months of the fiscal year that began last October, cash outlays by the federal government increased by 6.1 percent while tax collections grew by 10.5 percent. When more money comes in than goes out, the deficit shrinks.

    At this pace, the 2005 deficit is on track to drop to $355 billion from $413 billion in fiscal year 2004. As a fraction of projected gross domestic product, the new-year deficit will descend to 2.9 percent compared with last year’s deficit share of 3.6 percent.

    Wire reports are loaded these days with accounts of an expanded trade gap (driven mostly by slower exports to stagnant European and Japanese economies, along with higher oil imports from the peak in energy prices). But there’s not a single report I can find that mentions the sizable narrowing in U.S. fiscal accounts. Behind this really big budget story is the even-bigger story: The explosion in tax revenues has been prompted by the tax-cut-led economic growth of the past eighteen months.

    With 50 percent cash-bonus expensing for the purchase of plant and equipment, productivity-driven corporate profits ranging around 20 percent have generated a 45 percent rise in business taxes. At lower income-tax rates, employment gains of roughly 2.5 million are throwing off more than 6 percent in payroll-tax receipts. Personal tax revenues are rising at a near 9 percent pace.

    Meanwhile, in the wake of strong stock market advances over the last two years, non-withheld revenues from individuals — including investor dividends and capital gains that are now taxed at only 15 percent — have jumped by over 14 percent.

    Following the Clinton cap-gains tax cut and savings expansion bill of 1997, investment-related tax collections led to bull-market budget surpluses in the pre-9/11 period of 1997-2001. However, despite the flood of new revenues, this year’s federal budget is still overspending. Domestic spending on non-entitlement programs (excluding homeland defense) is rising at a 4.1 percent rate. That’s more than twice the pace of core inflation. But this may be changing.

    According to the Washington Post, the Bush budget totals planned for fiscal year 2006 may be essentially unchanged from the totals for fiscal year 2005 (excluding defense and homeland security). According to reporter Jonathan Weisman, the administration’s first really tough budget request (due out next month) “would freeze most spending on agriculture, veterans and science, slash or eliminate dozens of federal programs, and force more costs, from Medicaid to housing, onto state and local governments.”

    The rapid growth of federal health care and other entitlements would also be slowed markedly. Though the numbers are not yet available, this sounds a bit like Ronald Reagan’s tax-cutting budget of 1981. In addition to reducing the top personal tax rate to 50 percent from 70 percent, the Gipper proposed budget cuts that would be worth nearly $100 billion in today’s dollars.

    Of course, the political screaming over the forthcoming budget has already begun. A passel of Democrats and at least one Republican, Sen. Craig Thomas of Wyoming, have written a protest letter to Josh Bolten, director of the Office of Management and Budget. Former-Gov. John Engler of Michigan, a Republican and the current president of the National Association of Manufacturers, has pledged to fight the elimination of various protectionist subsidies to his member firms.

    However, Sen. Judd Gregg, the New Hampshire Republican who is the current chair of the upper chamber’s budget committee and a long-time Bush ally, is set to support the administration’s new budget discipline. This includes, by the way, Bush’s plan to reduce Social Security benefits by replacing wage indexing with a price-level formula and extending the retirement age — one or the other, or both — in return for personal saving accounts.

    By the way, Treasury Secretary John Snow just completed a Wall Street tour where leading bond traders told him not to sweat the transitional costs for personal accounts. The traders said that an additional $100 billion a year over the next decade for transitional financing will be easily manageable. “A rounding error,” one senior trader told Snow.

    A supply-side tax-reform movement, a shrinking budget deficit, newfound spending discipline, and a determination to confound conventional wisdom by reforming Social Security has George W. Bush’s second term off to a roaring start — even before he is officially sworn in.

    — Larry Kudlow, NRO’s Economics Editor, is host with Jim Cramer of CNBC’s Kudlow & Cramer and author of the daily web blog, Kudlow’s Money Politic$.
     
  5. OCA
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    OCA Senior Member

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    RSR buddy, do me a favor, post a link to this piece just for copyright reasons......thanks.
     
  6. red states rule
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    red states rule Senior Member

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    Sorry about that. Link is now with article.
     
  7. Bullypulpit
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    Bullypulpit Senior Member

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    Sadly, a Department of the Treasury report released on July 25th, contradicts the rosy picture painted by Chimpy <i>et al</i>. And mind you, this department is headed up by Adminstration hacks who are in love with Chimy's tax cutting policies. Here's a sample, with link:

    <blockquote>On July 25, the Treasury Department released its report. Despite the fact that Treasury is managed by Bush appointees who profess a deep affection for Bush’s tax-cutting policies, the results offer no comfort to supply-side true believers.

    Instead, Treasury’s study found that extending Bush’s tax cuts would have essentially no beneficial effect on the U.S. economy at all. But, the report casually implies, it could have grave consequences for the ability of our government to deliver the public services that Americans depend on.

    Specifically, Treasury found that extending Bush’s tax cuts might increase the size of the economy by a bit under 1 percent in the “long run.” Or just as likely, it might reduce the size of the economy by about the same amount. Thirty years from now, when the “long run” apparently begins, that translates into plus or minus a few hundred dollars in per capita GDP in today’s dollars. Put another way, over the next 30 years, per capita GDP is expected to grow by a total of about 50 percent. If the tax cuts are extended, the growth might be 49 percent or it might be 51 percent. Given the uncertainties of economic forecasting, that’s no difference at all.

    In making its projections, Treasury looked at two possible scenarios. What’s intriguing is that both assume a balanced federal budget starting in 2017, despite continuation of the Bush tax cuts. Treasury says it was forced to make this assumption because, by itself, “a permanent reduction in taxes … would lead to an unsustainable accumulation of government debt relative to GNP.”

    How can we get the budget into balance by 2017 and still keep the Bush tax cuts? Treasury offers these options: (a) slash government services by about a fifth or (b) “feed the beast,” in Republican jargon, by increasing taxes in some way. - <a href=http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=11782>The American Prospect</a></blockquote>
     
  8. Annie
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    Annie Diamond Member

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    I vote (a). Phase out SS and Medicare. Stop all federal education funding, end Department of Education. End farm subsidies.
     
  9. red states rule
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    red states rule Senior Member

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    Is this the same souce that said we would have a $500 billion dollor deficit in 2002 (we did not) and larger deficits year after year? (we did not)

    Number do not lie. the econmy is continuing to grow, the deficit is shrinking, and liberals cannot accept it

    http://newsbusters.org/node/6400
    Media Deficient on Budget Deficit Reporting
    Posted by Noel Sheppard on July 13, 2006 - 09:53.
    President Bush announced some great news about the economy Tuesday, but the media weren't in any mood to celebrate. Though the budget deficit for 2006 looks to be significantly lower than forecast just five months ago, TV news outlets were quick to rain on the president's parade.

    CNN's Ed Henry cynically compared this announcement to the president declaring an end to major combat operations in Iraq in 2003. Meanwhile, NBC's Brian Williams downplayed the good news by stating “administration critics say the White House has deliberately inflated its own deficit projections in the past few years to score political points when the actual numbers came in lower.”

    At the same time, ABC's “World News Tonight” and CBS's “Evening News” used this positive report as a segue into downbeat financial stories about how little people save for retirement and the “sharply rising” cost of cancer drugs.

    President Bush was more upbeat when he announced that surprisingly strong tax receipts in the first nine months of this fiscal year would reduce the budget deficit to $296 billion. This is well below the previous estimate of $423 billion, and would be the smallest amount of red ink created by the federal government since 2002.

    Unfortunately, the media didn’t cheer this report, with CNN adding to the gloom. Kitty Pilgrim, on “Lou Dobbs Tonight,” quickly dismissed the good news by stating, “Democrats said the new numbers cannot hide the fact that middle class Americans are being squeezed” before passing it off to correspondent Ed Henry.

    After playing some quotes from Bush, Henry took his sarcastic swipe. “But the president's celebration reminded some budget experts of another moment in his presidency when the champagne may have been popped a little early,” said Henry. This conveniently led into one expert claiming, “This is the budget equivalent of the president landing on an aircraft carrier and declaring mission accomplished.”

    Henry followed this with a statement lacking economic perspective. “It's still the fourth largest deficit in American history,” he argued. Now, in straight dollar terms, that was accurate. However, $300 billion today is much different than $300 billion in the ’30s. So this description ignored the way many economists look at the data. Economists, when comparing deficits of one year versus another, like to quote the data as a percentage of the Gross Domestic Product.

    With that in mind, the current projections say the 2006 deficit will be roughly 2.3 percent of GDP – only the 42nd highest since 1930. That’s a far cry from the fourth largest in history. In fact, there have only been eight years since 1974 that the federal government did a better job of balancing the budget.

    That view of the president’s fiscal successes wasn’t evident at CNN Tuesday, and any historical reference to 2006’s deficit was conspicuously absent in “The Situation Room” as well. Wolf Blitzer echoed Kitty Pilgrim’s concerns: “But critics say the government still is awash in red ink and that's leaving a huge mark on the middle class in the United States.”

    Both Blitzer and Pilgrim chose to ignore most of the details of this announcement, as well as what the Congressional Budget Office released July 7 on this subject. As The New York Times reported on July 9: “An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.” What did the Times claim was the cause? “The main reason is a big spike in corporate tax receipts, which have nearly tripled since 2003, as well as what appears to be a big rise in individual taxes on stock market profits and executive bonuses.”

    Taxes on capital gains and executive bonuses typically impact the highest wage earners. In addition, the huge surge in corporate taxes will generate almost 14 percent of the total revenues taken in by the government this year. This was almost double the 7.5 percent that was collected in fiscal 2001 under President Clinton’s final budget.

    Add this up, and the percentage of the total taxes from lower- and middle-income Americans has actually declined in the past five years. The burden shifted to corporations and the wealthy, a fact that news outlets didn’t share with their viewers. This was particularly disturbing giving the media’s penchant for portraying tax cuts as only benefiting the rich as reported by the Business & Media Institute in May. Of course, this anti-tax cut mantra has been a mainstay of the press since shortly after Bush was first inaugurated as the Media Research Center reported in April 2001.

    All three broadcast networks did report the deficit news and the worst was clearly turned in by the NBC “Nightly News.” After going through some of the numbers, Brian Williams chose to downplay the good news by suggesting something nefarious. “Now many economists and administration critics say the White House has deliberately inflated its own deficit projections in the past few years to score political points when the actual numbers came in lower,” he claimed. Williams didn’t point out that the Congressional Budget Office – which is not under the White House – also reduced its deficit projections just four days earlier.

    The CBS “Evening News” gave some of the pertinent facts from the announcement, and even allowed the president to take a bow for the good news with anchor Bob Schieffer reporting, “He gave the credit to his tax cuts, saying they stimulated the economy and boosted the amount of money coming into the Treasury.”

    However, without the slightest break, Schieffer charged right into the next downbeat story with the following segue: “The sharply rising cost of some prescription drugs is busting the budgets of many cancer patients and may have an effect on their long-term health prospects.”

    ABC’s “World News Tonight” used a similar tactic to quickly get the viewer’s mind off the president’s good news and onto bad financial news. Substitute anchor Kate Snow finished her short report on this subject by stating, “President Bush said the improvement is the result of strong economic growth, which led to an unexpected surge in tax payments by corporations and wealthy Americans.”

    Much like Schieffer, without any break, Snow immediately introduced a Betsy Stark piece on how Americans don’t feel they have enough money saved for their retirements. “Last year, Americans spent $42 billion more than they earned. With the Baby Boom generation approaching retirement, analysts say the savings rate should be rising, not falling.”

    Even with these less-than subtle connections, the broadcast networks did a better job of reporting Bush’s announcement than CNN. None came close to doing justice to the news. Apart from leaving out how much it appears the tax burden has moved from the lower and middle class to the wealthy and to corporations, there are some other positives from the July 7 CBO report that went totally ignored.

    For instance: “For the first nine months of fiscal year 2006, CBO estimates, total receipts rose by 12.8 percent compared with the same period in 2005. That increase represents the second-highest rate of growth for that nine-month period in the past 25 years (surpassed only by last year’s strong growth).” That’s an amazing two-year performance unnoticed by these news organizations.

    Those same outlets also ignored the good news on wages. “Withheld individual income and payroll taxes grew by almost $88 billion (or 8 percent) during the first nine months of fiscal year 2006 compared with 2005. That rate of increase probably indicates that wages and salaries have been growing at a robust rate,” stated the report.

    In the end, it is quite sad that this truly positive information was not shared with viewers Tuesday evening, and only adds to why Americans don’t feel the economy is doing well.

    Business & Media Institute
     
    • Thank You! Thank You! x 1
  10. Bullypulpit
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    Bullypulpit Senior Member

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    Like I said....Delusional. Dismissed.
     

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