Our Federal 'budget'

[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.

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.

We had a range of options from Ron Paul to Dennis Kuncinich. The American people rejected candidates they viewed as being at the extremes.

I personal perceived major differences between McCain and Obama. But yeah, neither was a Ron Paul. Ron Paul was an option people could have picked if they were attracted to his vision of America. Only a small percentage are.

That's not a problem with lack of choice.

 

[Kevin_Kennedy]

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.

We had a range of options from Ron Paul to Dennis Kuncinich. The American people rejected candidates they viewed as being at the extremes.

I personal perceived major differences between McCain and Obama. But yeah, neither was a Ron Paul. Ron Paul was an option people could have picked if they were attracted to his vision of America. Only a small percentage are.

That's not a problem with lack of choice.

Certainly there were a few who were not cookie cutter candidates, Ron Paul and Dennis Kucinich are good examples. I was merely remarking on your claim that they would all have given us a "different government," which I disagree with completely.

 

[editec]

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.

Well it will certainly make it worse for SOME people.

Our government's creditors for one.

Exportors or those who sell imported goods for another.

Anyone on a fixed income that does not have inflationary relief clause.

Anyone who works someplace where they cannot force their employers to increase their wages to offset their lossesin purchaing power.

ANYONE who uses commodities which have world market prices.

Who will it help (or at least not hurt so much?)

People with fixed rate debts.

People holding assets with intrensic value.

I EXPECT hyperinflation to be the next problem we're facing.

If I was 100% positive that this would be the next round of our economic woes, I'd attempt to get myself into huge fixed rate debt in order to buy assets with intrinsic value like real estate, gold, silver antiques and so forth.

But since this situation is probably dependent on what the folks in government decide, and I do not have a hotline to the master class which makes such decisions, I can only wonder what the plan will be.

China could easily throw us into an inflationary cycle, too, if they wanted.

They could dump the bonds we owe, thus driving down the value of that paper, which would necessitate that the government pay higher interest for its debts thus creating more dollars in circulation (in the form of debt instruments).

Frankly I don't see how we can avoid inflation in the long run.

We don't make enough stuff, we depend on the rest of the world to make our consumer goods, and since it makes more sense to invest in production off shore, I don't see the American master class willingly investing the kind of money it would take to reconsitute American industry any time soon.

Per usual, I'll tell you that the root source of ALL these problems was our decision to allow FREE TRADE to put tens of million of American out of well paying industrial jobs, and thinking that our service sector economy could take up the slack.

And much of that foolishness was based on the canard that we could easily solve that problem by making millions of American well paid sevice sector workers by educating them.

Well there's probably a million former service sector workers (coming from FIRE industry --finance, insurance and real estate) now looking for work and most of them are those highly edcuated people that we thought could carry us while we systematically fucked the factory workers.

How this all working out for us?

Not as well as many of us hoped, but not nearly so badly as I suspect it will become.

Say FREE TRADE is the problem and everyone assumes that you WANT to become an isolationist.

And THEREREIN is the REAL problem, Kevin.

What we have is not remotely anything like real FREE TRADE.

Real FREE TRADE requires that all nations allow goods into their borders without tariffs and it ALSO requires that all national industries have the same expenses (they don't) and account for their expenses in the EXACT same way, too.

So let's take something like food, shall we?

If the US government does something to HELP the farmers, say they build them a means to get water, are they NOT giving those farmers a TAX ADVANTAGE which another nation might reasonably say means that American farmers are DUMPING their good at below REAL costs?

FYI, many nations accuse us of doing just that, so they impose tariffs on our produce and meat.

The American workers has been paying WITH THEIR JOBS for the foreign policiy decisions which we did in order to win the cold war.

We systematically bribed other nation to be our ally by granting them the RIGHT to DUMP their stuff on our shores.

The economy is much like a balloon.

Push it on one side and something pops out on the other.

There is no hard and fast thing you can say about it with certainty unless you look not only as the FIRST outcome but at ALL the outcomes that follow the first.

FREE TRADE SCREWED THIS NATION.

But it HELPED SOME industries a LOT and destroyed others even worse.

On balance, it cost us more than we get out of it.

 

[Iriemon]

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.

We had a range of options from Ron Paul to Dennis Kuncinich. The American people rejected candidates they viewed as being at the extremes.

I personal perceived major differences between McCain and Obama. But yeah, neither was a Ron Paul. Ron Paul was an option people could have picked if they were attracted to his vision of America. Only a small percentage are.

That's not a problem with lack of choice.

Certainly there were a few who were not cookie cutter candidates, Ron Paul and Dennis Kucinich are good examples. I was merely remarking on your claim that they would all have given us a "different government," which I disagree with completely.

We'd have a completely different executive. It's speculation, but I'd guess that a Ron Paul administration would be doing things a bit different than Obama's is.

 

[Kevin_Kennedy]

We had a range of options from Ron Paul to Dennis Kuncinich. The American people rejected candidates they viewed as being at the extremes.

I personal perceived major differences between McCain and Obama. But yeah, neither was a Ron Paul. Ron Paul was an option people could have picked if they were attracted to his vision of America. Only a small percentage are.

That's not a problem with lack of choice.

Certainly there were a few who were not cookie cutter candidates, Ron Paul and Dennis Kucinich are good examples. I was merely remarking on your claim that they would all have given us a "different government," which I disagree with completely.

We'd have a completely different executive. It's speculation, but I'd guess that a Ron Paul administration would be doing things a bit different than Obama's is.

Yes, Ron Paul would do things differently, and I expect Dennis Kucinich and Mike Gravel may have been different as well. Along with Bob Barr, Ralph Nader, Chuck Baldwin, and Cynthia McKinney. That being said, Giuliani, McCain, Clinton, Romney, Obama would all probably be doing the same things as far as I can tell.

 

[auditor0007]

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.

Reagan had to pull strings to get his tax cuts. He was working with a Democratic Congress. His tax cuts increased revenues, but the Dems increased spending even more. Blaming deficits or surpluses on Presidents is like blaming a Governor for no smoking in restaurant laws. The Executive Branch only signs the bills. If they are against them, all they can do is veto, and in cases of budgets, a veto can create havoc.

 

[Iriemon]

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.

Reagan had to pull strings to get his tax cuts. He was working with a Democratic Congress.

He did, but they were passed by Republicans and a few "gypsy moth" Democrats. Most Dems opposed it.

His tax cuts increased revenues,

His tax cuts actually reduced revenues initially, in real terms. Most of the revenue increases under Reagan can be attributed to inflation. Revenues under Reagan grew significantly slower than GDP.

http://www.usmessageboard.com/1130913-post15.html

but the Dems increased spending even more.

The bulk of the increase in spending was military build-up and stuff like Star Wars. That was Reagan's iniative and budgets, not the Dems.

Blaming deficits or surpluses on Presidents is like blaming a Governor for no smoking in restaurant laws. The Executive Branch only signs the bills. If they are against them, all they can do is veto, and in cases of budgets, a veto can create havoc.

The Executive plays a huge role in the budget process, and if he is popular, far more than the simple veto power he has, which alone gives him far greater power than any individual Congressman.

In Reagan's case, he was the "great communicator" and popular and leveraged these skills to cut taxes and increase spending on the military side.

Reagan never pushed seriously to cut other major spending programs like SS.

In Bush's case, he had a Republican Congress that went right along with him.

In Clinton's case, his initiative was part of the '93 tax increase, which rated the top rate from 31% to 40%. The Dems had the majority in congress then, it was opposed by the Republicans right down the line, passing the Senate only with Gore's pro tem vote.

Thereafter, after the Republicans took over Congress in 1995, Clinton stymied their efforts to slash taxes, evern threatening to shut down the government. In a compromise in 1997 there was a minor tax cut in cap gains taxes, but the income tax rates didn't change.

In 2001, with a Republican now in the WH, they got their way.

 

[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.

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.

Here is the problem with your analysis. When taxes are cut, as they were under Reagan, not so under Bush (I'll get to this in a moment), investment and productivity increased to the point that revenues began to increase. In fact, those tax cuts spurred great economic growth. Based on the statistics you posted, the growth was 83% in eight years. That is a fantastic growth rate. Yet you want us to believe that because the economy grew at such a large rate, that goverment spending should have grown at an equal rate.

Reagan's goal was not to increase the size of government, but it happened anyway due to the Democratic Congress. I'm not all too certain it would have been different had Republicans been in control, however, when Republicans did take control we did see spending levels somewhat reduced as Clinton was in office. This is one of the main reasons Clinton was able to reduce the deficit spending in comparison to past administrations.

Now, under Bush, we did not get the same result. The reason being is that there is a point you reach when it no longer becomes effective. Tax rates were much higher under Reagan to begin with than they were under Bush. Most conservatives will argue that point, but it is obvious you can't increase revenues by decreasing tax rates forever. At some point the return will become less even with greater economic growth. In it's most simple form, if you tax at a rate of 0%, you will collect nothing, no matter how well the economy is doing. In defense of Bush, it was his answer to getting the economy moving again after the recession he inherited. That is why the tax cuts were not meant to be permanent, although that now is supposedly the answer, which it is not.

But getting back to your analysis, you are tying government spending to GDP. And if that is the case, now that GDP is contracting, wouldn't that mean the government should actually spend less to compensate instead of drastically increasing spending?

 

[Iriemon]

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.



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.

Here is the problem with your analysis. When taxes are cut, as they were under Reagan, not so under Bush (I'll get to this in a moment), investment and productivity increased to the point that revenues began to increase. In fact, those tax cuts spurred great economic growth. Based on the statistics you posted, the growth was 83% in eight years. That is a fantastic growth rate. Yet you want us to believe that because the economy grew at such a large rate, that goverment spending should have grown at an equal rate.

The problem with your analysis is that you are not considering inflation. That 83% GDP growth under Reagan was largely due to inflation, not real growth.

Real GDP growth under Reagan was

Year - Real GDP % chng
1981 5,291.7 2.5%
1982 5,189.3 -1.9%
1983 5,423.8 4.5%
1984 5,813.6 7.2%
1985 6,053.7 4.1%
1986 6,263.6 3.5%
1987 6,475.1 3.4%
1988 6,742.7 4.1%

Total change: 27%

Average per year: 3.4%. If you include Bush1's term as well (also had low taxes) the average drops to 3.0%.

That compares to average real growth under Clinton at 3.7%. In the '50s real GDP averaged 4.2% despite top tax rates of 91%, and in the 60s it averaged 4.4% despite top tax rates of 70%.

In truth, despite the tax cuts and therefore tax, the real economy did not grow that great, much less fantastic, and neither did reveues. So what we ended up with was decent growth, but lower revenues, and combined with the military buildup, big deficits.

Source data for this is BEA.gov GDP data.

Reagan's goal was not to increase the size of government, but it happened anyway due to the Democratic Congress.

That was his lip service. But to the contrary, he went on a deliberate effort to increase the size of the government by expanding the military. Military spending during Reagan's term increased from 158 to 290 billion per year -- a 124% increase, far more than GDP growth.

I'm not all too certain it would have been different had Republicans been in control, however, when Republicans did take control we did see spending levels somewhat reduced as Clinton was in office. This is one of the main reasons Clinton was able to reduce the deficit spending in comparison to past administrations.

I'm have mixed feelings about how much credit I give for spending restraint compared to Clinton. In Clinton's first two years the Dems had congress, and spending grew by 2.0 and 3.7% actual, which was about the same level as after the Republicans took Congress in 1995. Clinton pushed a government downsize program, which included the peace divident on the military side. It wasn't Republicans who agreed to hold the level on military spending.

And if you are going to give the Republicans credit as real spending hawks, you cannot explain the spending explosion that occured when Bush took office.

Now, under Bush, we did not get the same result. The reason being is that there is a point you reach when it no longer becomes effective. Tax rates were much higher under Reagan to begin with than they were under Bush. Most conservatives will argue that point, but it is obvious you can't increase revenues by decreasing tax rates forever. At some point the return will become less even with greater economic growth. In it's most simple form, if you tax at a rate of 0%, you will collect nothing, no matter how well the economy is doing. In defense of Bush, it was his answer to getting the economy moving again after the recession he inherited. That is why the tax cuts were not meant to be permanent, although that now is supposedly the answer, which it is not.

I agree that under a Laffer curve analysis, tax cuts made less sense under Bush and more sense under Reagan. I didn't have a problem with Reagan cutting taxes, or more importantly simplifying the tax code, but he went too far, from 70% to 28% top rates.

But getting back to your analysis, you are tying government spending to GDP. And if that is the case, now that GDP is contracting, wouldn't that mean the government should actually spend less to compensate instead of drastically increasing spending?

I was tying revenues more to GDP, because even though they are not perfectly correlated generally when GDP grows so does income and profits and therefore so do taxes and revenues.

Yes, though, from purely a budgetary point of view, when the economy contracts, income contracts, revenues contract, and therefore spending should contract. However, if the Govt wants to stimulate the economy to reduce the recession, the argument is that fiscal spending helps that. What doesn't make any sense is running deficits when times are good.