January 27, 2004

Debt

from - smijer

I notice the conventional wisdom on the right is that the historic deficits now being run by the government are more a result of increased spending than decreased taxes. I've never bought that. Yes, spending has increased - but taxes have been cut even more dramatically. It is akin to a situation where a person making $50,000 and spending all of it decides he can afford to take a job that only pays $30,000 while increasing spending to $55,000 with the help of a credit card. It's just bad economics. So I had kind of a sense of validation when I read this:

A recent study by the Center on Budget and Policy Priorities does the math. While overall government spending has risen rapidly since 2001, the great bulk of that increase can be attributed either to outlays on defense and homeland security, or to types of government spending, like unemployment insurance, that automatically rise when the economy is depressed.

Why, then, do we face the prospect of huge deficits as far as the eye can see? Part of the answer is the surge in defense and homeland security spending. The main reason for deficits, however, is that revenues have plunged. Federal tax receipts as a share of national income are now at their lowest level since 1950.

Of course, most people don't feel that their taxes have fallen sharply. And they're right: taxes that fall mainly on middle-income Americans, like the payroll tax, are still near historic highs. The decline in revenue has come almost entirely from taxes that are mostly paid by the richest 5 percent of families: the personal income tax and the corporate profits tax. These taxes combined now take a smaller share of national income than in any year since World War II.
{emphasis added}

OK, OK, it's from a Krugman op-ed.. However, he's relying on a study from the Center on Budget and Policy Priorities, who got their data from the Congressional Budget Office. The math isn't all that complex, and pretty easy to follow. I'm not sure where he got the data on who gets all the tax cuts, but what he says makes sense.

I'm not sure I buy into the theory that the policy-makers in the Bush administration are opting in to the "starve-the-beast" philosophy of Grover Norquist and his ilk... meaning I'm not sure whether this is a deliberate sabotage against popular New Deal entitlements. I do know that it is irresponsible, and not just on the spending side.

Something to ponder while we wait on the NH returns.

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Posted by smijer at January 27, 2004 12:32 PM
Comments

Personally, I don't understand all of the issues yet. Is the budget deficit projected? or are we actually in the red now?

Personally, I would like to see a 5%, across the board spending cut (as a good start).

univar.jpg Posted by CJG on January 27, 2004 01:03 PM
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We have a large national debt that is projected to continue to grow quickly. We have been running deficits every year since Nixon (IRC), though we had neared a break-even and had projected surpluses near the end of Clinton's term. We are back to running large yearly deficits now.

univar.jpg Posted by smijer on January 27, 2004 01:14 PM
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The key word here is "projected." This basically means that we never did break even. I'm more interested in what the actual numbers turn out to be.

univar.jpg Posted by CJG on January 27, 2004 01:54 PM
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We've been running deficits since the 50s, and that's just the "on paper" kind...the national debt has risen every year for more than 150 consecutive years.

Since the US gov'ts budget site projects '04 to be around a 17.0 rate, I'll give the CBPP about as much credence as I would a GOP 'study' on the matter.

They pulled "15.8" out of their nether regions.

univar.jpg Posted by Ricky on January 27, 2004 06:15 PM
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That was the CBO who projected revenue to fall to 15.8, that's the Congressional Budget office. It's their figure, the CBPP was just citing it.

univar.jpg Posted by smijer on January 27, 2004 06:19 PM
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Ah, the CBO.
I'm not being snarky because I feel this way about the CBO during any administration: The fabulous body that can't predict a deficit within 5% three months away. :)

I'd almost be willing to make a bet that we don't end up at 15.8, I'm so sure it's wrong (jeez, it was 17 last year and that's before the economy moved into high gear at the end).

Methinks someone forgot to move the decimal during a calculation. :)

univar.jpg Posted by Ricky on January 27, 2004 11:33 PM
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The CBOs initial figures on the medicare prescription drug bill was just upped by A THIRD, blowing our deficit even further.

I feel a little vindicated in my earlier comments. :)

univar.jpg Posted by Ricky on January 30, 2004 01:28 PM
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