I know I wrote in my last post that I was going to take a break, but the following really is required viewing. On Wednesday, Bruce Bartlett, a former domestic policy adviser to President Ronald Reagan, as well as a Treasury official under President George H.W. Bush, appeared on Hardball for an interview with Chris Matthews. In a five and a half minute conversation, the two men discussed the chart below, and Mr. Matthews, who is well-known for frequentlty interrupting his guests, sat back for a change, and let Mr. Bartlett speak freely. The result was a very concise explanation of exactly where our current debt problems originate, along with some particularly direct criticism for Republicans.
9 comments:
PBI - First, I want to concede W. was not a fiscal conservative. His spending drove me batty. You have heard me say this before, but I repeat that Tom DeLay IS the devil with his belief that he could create a 'permament Republican' Congress with all of his pork and favortism. What an A$$.
With that said, my studies in mathmatical modeling proved to me that manipulation of data is fairly easy to do. I am certain that however the questions were set up to be answered can deliver the results shown on the chart. The problem though is that it is difficult to reconcile with plain straight data from the U.S. Treasury.
Year Receipts Outlays
2001 1,995,365 1,901,100
2002 1,814,262 2,044,936
2003 1,795,521 2,194,581
2004 1,926,213 2,325,249
2005 2,196,369 2,518,145
2006 2,449,993 2,659,209
2007 2,600,358 2,788,298
2008 2,464,813 3,145,282
2009 2,044,758 3,516,053
Of course, you can argue the receipts would have been hire without the Tax Cuts - but would they? Regardless, the revenue increased significantly after the cuts. However, SPENDING increased more. I don't have the numbers for 2010 and 2011, but the outlays are now PERMANENTLY in the $3.5T and higher range. This started with the current Administration and the chicken-$hit politicians are unwilling to apply the main tenent of Keyensian methodology of making these increases timely, targeted and TEMPORARY!!! The only thing they got right was the TARGETED component by picking the winners and losers of the economy with tax-payer money hand-outs.
Net, the Bush years added $2.34T in new debt. I would argue that $500B should have been used to reduce the debt when the Banks repaid (with interest) their TARP funds. Only GM, Chrysler and AIG keep us in the hole for TARP.
Obama Administration took us to $3.5T budgets when we are only bringing in $2T in revenue. Since the spending baseline will not recede, the debt level will increase $1.5T+ EVERY YEAR going forward. You cannot Tax the rich that much and expect the economy to not have a negative reaction, further depressing revenues. This, my friend, is why conservatives say we have a spending problem.
(I'll have to use two comments to answer, as I have exceeded my character limit.)
Let's look at the same source, but go back earlier to clarity a few things:
Year Receipts Outlays
1995 1,351.8 1,515.8
1996 1,453.1 1,560.5
1997 1,579.2 1,601.1
1998 1,721.7 1,652.5
1999 1,827.5 1,701.8
2000 2,025.2 1,789.0
2001 1,991.1 1,862.9
2002 1,853.1 2,010.9
2003 1,782.3 2,159.9
2004 1,880.1 2,292.9
2005 2,153.6 2,472.0
2006 2,406.9 2,655.1
2007 2,568.0 2,728.7
2008 2,524.0 2,982.5
2009 2,105.0 3,517.7
2010 2,162.7 3,456.2
1. Note the drop in revenue from 2000 to 2001 with the first of the Bush tax cuts.
2. Job creation, the driver of tax revenues, was the worst under Bush than under any president since Hoover. Said tax cuts did nothing to stabilize the balance sheet. (See here: http://sensen-no-sen.blogspot.com/2010/12/simple-questions-about-tax-cuts.html). I don't think one CAN argue that revenues would have been higher without the cuts, one HAS to.
3. Barring recession, tax revenues will always increase with a steady-state tax code - the increases shown here have far more to do with organic GDP growth than anything else. A recession will drop revenues as they did from 2008 to 2009.
4. If you're using the numbers above to describe debt, you are conflating debt with deficit; the two aren't the same.
5. Bush kept both Iraq and Afghanistan off-budget. Obama put them into the budget where they belonged all along, and now looks like he blew up the books.
The economy right now is like someone who is unemployed; revenues have plunged and all the debt that's been accrued still has to be paid. In that situation, does it make sense to take whatever meager means one has - whether savings or unemployment checks or whatever - to pay down debt? Or does it make more sense to make minimum payments and use those resources to polish up a resume, get some search advice, travel to interviews, buy a new suit to look presentable, put food on the table and keep a roof over one's head? You may disagree, but I think the latter makes more sense, and that's essentially where we are.
With regard to taxing the rich, I don't think that anyone's saying that's the whole answer; Obama talked about taking a balanced approach repeatedly over the past weeks, and polling shows most Americans want that as well. If the tax cuts were allowed to expire, top rates would be where they were under Clinton. I don't remember depressed revenues then, and the Treasury data doesn't show it. Companies and the wealthy are sitting on record amounts of cash, but they aren't "creating jobs" because there isn't any demand. (See here: http://sensen-no-sen.blogspot.com/2011/06/condemned-to-repeat-history.html). Here's what I wrote last month, and it remains true:
If private industry isn't providing jobs, the only other mechanism capable of putting money in the hands of people who will spend it is the public sector. This can be accomplished through a variety of tactics including social welfare payments, the creation of government jobs, and tax cuts. The last, however, only make sense to pursue if private sector cash reserves aren't already at record highs. Further, social welfare payments are quickly spent by their recipients - they need the money, remember - while tax cuts often result in saving or building cash reserves - as we see today - which do nothing to spark the economic engine.
Exploding national debt didn't start with Bush 2 or Boehner; this started with Reagan (See here: http://www.ritholtz.com/blog/wp-content/uploads/2010/05/National-Debt-GDP-L.gif) and has continued with every Republican in the White House since. Deficits and debt appear only to matter when there's a Dem in the Oval Office. Nobody ever says "boo" about GOP deficits or tries to shut down the government when there's a Republican chief executive, and, in my opinion, this has much more to do with political power than either fiscal responsibility or the nation's welfare.
Anyway, back to the job search! (Speaking of the unemployed...)
Cheers,
PBI
PBI - sorry to hear about the unemployed status, but companies and the wealthy are not sitting their cash on the sideline because they want to. That is clearly note the best use of their cash. Except when the regulatory environment is stifling. If I would have known it was going to cost me over $100K in permits, fees, inspections, etc... to turn a carwash into ... wait for it... a carwash, I would have likely passed. But that was my mistake. I knew Colorado was going to be more than Texas, but adding a 2-year delay to the actual monetary costs has been problematic. Wealthy and Big Biz have the resources to identify this before pulling the trigger - which is what is happening.
I limited my history to Bush, but we can go Clinton. Look at his first 2 years when he had Democratic Congress. Deficits were at same trajectory as Reagan and Bush I (which were also Democratic Congresses). All of a sudden the public rebelled and budgets came under control. Outlays were closer to Receipts as spending was being brought under control. Unfortunately, you have to give Gingrich and Republicans credit for this. Then Delay had to 'f' everything up. (Along with Gingrich's personal BS).
BTW - my best to you on your Job search!
Grip
Grip,
Thanks - I appreciate it!
PBI
Not sure why this isn't posting, but trying again.
To your points we go...
1. Hello - Internet Bubble bursts in March 2001 (To take a page from Obama, you CAN'T blame Bush for that). And then 9-11 attacks brought everything to a screeching halt. Tax Cuts were designed to spur job growth and therefore, revenue.
2. You can't have it both ways. To state that Bush did not create any jobs flys in the face of your 'Job Creation, the driver of tax revenue' statement with significant increase in Receipts during this same period.
3. ...as did the 9-11 attacks and .com bust. These clearly had more impact to reductions in revenue than tax cuts had to do with revenue reductions.
4. Here is my understanding - if I am wrong, I would like clarification. Deficit spending that is never paid becomes long-term debt. We sell bonds to pay for deficits and bonds are then held on the books as long-term debt.
5.The reason I used Treasury Receipts v. Outlays captures ALL outlays whether budgeted or not. Therefore, your argument is mute. The Treasury doesn't have a 'slush' fund out there, right?
I agree with your analogy of the unemployed person. Where we divert is when I say the unemployed person should not continuing the same spending (or worse - increase) habits once they lose their job. He must cut back spending on feel good items and spend only on those things that can get him back on his feet again. You are completely wrong by telling me that increasing the size of Government 25% is our answer out of this stagnant economy. There is absolutely NO reason for (as an example) the Dept of Ed to increase their budget 25% as part of stimulus and then fail to return to Pre-Stimulus levels. What happened to TEMPORARY???
Bottomline - you want to Blame Bush for the Debt, fine. But to reach unsustainable levels and say 'hit the accelerator' is assinine. The spending is the problem. We don't need to borrow money from China and then turn around and give that money back to them with no strings so thay can educate their populace about AIDS. How can stuff like this make sense in your world? How can we give Brazil $4B to kick-start their Off Shore Drilling, but then turnaround and deny it locally? Are we that arrogant to think it is ok for them to have a disaster but not for us (since that is the driving force to restrict drilling, right?) And before you jump on me, I ABSOLUTELY agree that corporate loopholes should be eliminated. (As a funny side observation, why are liberals up in arms about Oil Companies profits when they actually have to engage in an activity of buying, processing and selling gas but you NEVER hear a peep about Visa's et al. increase in profits because they get a % of the final ticket, thus free-riding the pump prices?)
Enough already - sorry for the spewing. I am just so irritated at Government. I do want to help take care of those truly in need, establish safe secure environment/infrastructure, provide for the well-being of our elders, etc.. But, hell man, the Government finds ailments/needs for damn near everybody and I hate how they persist on picking winners and losers versus letting us succeed if we have the talent, dedication, effort and self-made luck!
Grip
Blogger is being a little bitch, so I'm going to have to go with two posts again...
1. Fair point on the internet bubble, but the actual economic impact of 9/11 was small. (See recent study here: http://www.nbclosangeles.com/news/business/Study-bin-Ladens-Strategy-Was-Short-Lived.html)
2. Not having it both ways at all. Per my previous observation, unless you are in recession, if you don't change tax rates, receipts will ALWAYS continue to rise. The Bush tax cuts actually created far fewer jobs than they were predicted to create, and even lost out to the forecast of what would happen if no cuts were enacted.
3. See 1
4. For the most part, but not all deficit spending becomes long-term debt, it can also be shorter term debt. Deficit spending and debt are no doubt related, and to your point, the former adds to the latter, but they're not the same thing. We had a balanced budget under Clinton, but still plenty of debt.
5. "Moot", dude! : ) I like your use of the actual Treasury receipts, but the point I'm making is around budget deficits (rather than negative cash flow), and the concept of budget deficits is what has driven so much of this "crisis" in recent weeks.
I had some heartburn about using the personal finances analogy, for the reason of the example you cite, so I'll cut to the chase: Cutting government spending in a recession is EXACTLY the wrong thing to do. I know I keep saying this to you in these discussions, but this is Econ 101 and bourne out by example after historical example. Look what's going in Britain right now with their austerity measures. Look what happened to the U.S. in 1937 (see here: http://sensen-no-sen.blogspot.com/2011/06/condemned-to-repeat-history.html). Likewise, the definition of "temporary" is however long it takes to get the private sector pump started again, and with 9+ percent employment, we clearly aren't there.
Spending should be targeted domestically - I absolutely agree - but to say "the spending is the problem" ignores both historical fact and decades of economic study. (Not sure about your Visa analogy, but there has been a bill working its way through Congress right now to specifically lower credit card "swipe fees".) Foreign aid is a MINISCULE part of the budget. (See here: http://sensen-no-sen.blogspot.com/2011/04/is-america-finally-waking-up.html)
I don't disagree with your overall closing sentiment, but I think it's extremely important to keep in mind that all of the self-made folks out there are self-made because they live in a country where government at least attempts to addresses some of society's problems. Without a reasonably healthy, reasonably educated, reasonably safe populace, and without strong infrastructure, just about nobody makes it. (That is unless you think setting up a carwash in Mogadishu wouldn't be harder than in either Texas or Colorado.)
The people who are getting punished are the people who do the actual work; we haven't had the kind of wealth imbalance we have today since the Gilded Age. If you read no other links I've cited, I urge you to read these three; they're all data-driven and they'll probably make your brain explode:
http://sensen-no-sen.blogspot.com/2011/05/punishing-worker-success-doesnt-count.html
http://sensen-no-sen.blogspot.com/2011/03/out-of-equilibrium.html
http://sensen-no-sen.blogspot.com/2010/07/land-of-greatly-diminished-opportunity.html
Anyway, I know your heart's in the right place, and I think we agree on a number of topics, but I really urge you to dive into the history and economic theory around public spending in times of recession. Public spending works and austerity measures have routinely shown themselves to be exactly the wrong thing to do in this situation. Cutting government spending just doesn't create jobs unless there is competition between government and the private sector for workers, and I think it would be pretty hard to make that case at this point in time. (And read the three links I supplied in the above paragraph!)
Peace,
PBI
Post a Comment