Deficits and the Future

[Makalakumu]

The book "Running on Empty" was written by Peter G. Peterson.

Here is a review

Salon July 21, 2004 | Shortly before George W. Bush was sworn into office, an aide to the incoming president called up Peter G. Peterson, a former secretary of commerce under Richard Nixon, to chat about the nation's finances. "You people have a God-sent opportunity," Peterson, one of the Republican Party's fiercest deficit hawks, told the Bush official. At the time, the federal government was awash in cash; after eight years of Bill Clinton's stewardship, the 10-year budget surplus stood at $5.6 trillion, and Bush's legislative challenge looked similar to the problem faced by Richard Pryor's character in "Brewster's Millions" -- finding ways to spend all that coin.

Despite the happy short-term outlook, though, Peterson reminded the Bush aide that the United States faced a frightening long-term balance sheet. This is the same doomsday scenario you've heard a thousand times before, and by now you're probably weary of it: As more than 70 million baby boomers begin retiring later in the decade, the Social Security and Medicare programs are destined to sink into multitrillion-dollar deficits, causing enormous hardships for younger Americans. Bush had a chance to avert disaster, Peterson told his aide. By using the immediate surpluses to fix the looming crisis, the new president could possibly solve "one of the largest fiscal challenges in our history."

It looks like we are in big trouble no matter who is elected...

 

[michaeledward]

Saw an article today ... The White House is setting the scene.

The White House budget director is predicting the Federal Budget Deficit in 2006 will be $400.00 Billion Dollars. This forecast is $60 Billion dollars higher than the previous forecast from July, 2005.

The economy is in pretty good shape (although real incomes are still down, and costs are up) which should lead to increased revenues.

Look for the White House to claim super-human-republican fiscal controls in July, 2006 when the actual budget numbers appear to be a $340 Billion dollar deficit.

President Bush will take credit for "saving" 60 Billion dollars in spending.


Today's numbers are a fantasy, setting the scene to claim triumph and progress six months from now.

http://www.nytimes.com/2006/01/13/national/13budget.html?ex=1294808400&en=83fceae60f71ffbe&ei=5090&partner=rssuserland&emc=rss

 

[Blotan Hunka]

The Surplus Fallacy
By J.J. Jackson

Marxists will say anything to get you to vote for them. They’ll claim President Bush (or anyone even slightly right of center for that matter) is trying to throw old people out on the street by destroying Social Security. They’ll claim that conservatives were trumpeting Weapons of Mass Destruction as the ONLY reason to take out Saddam Hussein, then claim that there were no WMDs even though every major intelligence agency AND their fellow travelers in the United Nations said they were there and the programs to create them have been found. They’ll claim that Republicans want to poison our children because they wont accept ridiculous and suffocating emission restrictions for industry.

 

[michaeledward]

Hey Bluto ...

I see you can copy others' peoples thoughts....

Congratulations.

I'm not sure what you want me to take away from that ... except you seem to (Oops .. sorry ... JJJackson wants to seem to) blame Clinton for everything.

 

[Phoenix44]

Just as a point of information:

A deficit is not the same as the public debt. Deficit is spending more than comes in, or borrowing, over a particular period of time. Debt is the total that we owe.

By the way, who are these "Marxists," "left wing" folks, and "liberals"?

 

[Lisa]

Mod. Note.
Please, keep the conversation polite and respectful and please remember to comply with Martial Talk's Copyrighted Material/Content Policyhttp://www.martialtalk.com/forum/showthread.php?t=26484. Thank you.

-Lisa Deneka
-MT Moderator-

 

[Blotan Hunka]

Sorry about the copyright stuff...why though did the person who fixed it leave in the inflamatory stuff but edit out the explination of how this "surplus" never really existed but was just some fancy number speculating that never existed in reality? The part that was left wasnt my point.

 

[Blotan Hunka]

http://bennett.senate.gov/press/record.cfm?id=226520

I want to discuss that for just a moment. It has been framed with the same kind of statistical maneuvering I have tried to address here. The question that makes for a good headline in a political stump speech is who lost the surplus? They are talking about a $5.6 trillion surplus that was projected at the time we had the tax cut debate. That surplus has now disappeared in the projections that were being made, and we are being asked again and again, Who lost the surplus?

The first point I want to make on that score is the surplus never existed. The surplus was a projection. I can take the Nation back through every projection made by the CBO; before that by the Office of Management and Budget; before the Congressional Budget Office was created, by the old Bureau of Budget; and before the Office of Management and Budget was created, and demonstrate virtually every projection of surplus or deficit made by those entities has always been wrong. Sometimes it has been wrong on the high side. Sometimes it has been wrong on the low side. But the one consistency is every project, surplus, or deficit in future years has always been wrong.

It comes as no surprise to discover the projection of the $5.6 trillion surplus was wrong in this case as well.

I remember a discussion with Alan Greenspan when he was before the Banking Committee, or perhaps the Joint Economic Committee. I sit on both, and he testifies before both. Someone asked him about the projections that were being given to us at the time with great confidence. They said, Mr. Chairman, how likely is it this projection will be realized? He said it will not be realized. This projection will be wrong. He said I cannot tell you whether it will be wrong on the high side or the low side. I cannot tell you and neither can any other economist tell you whether we will reap the benefits of the new age economy to a degree far greater than demonstrated by this projection or whether we will fall on our face and come in flat.

The problem is--I am not now quoting Greenspan--with an economy doing something like $11 trillion a year and subject to the uncertainties of the business cycle as well as the outside shocks that can occur in this world, no one can look 10 years into a crystal ball and tell you with absolute certainty what is going to happen.

I find it interesting that those who insist the loss of the $5.6 trillion surplus is due to the Bush tax cut and solely to the Bush tax cut also say to us why don't we deal with our current economic problems by postponing the effective date of the Bush tax cut? And, after all, that is going to take place in the outyears, anyway. So postponing the effective date will have no particular impact short term.

All right. Hold onto that argument for just a minute and listen to the other argument that we are being told.

We are being told it was the Bush tax cut that blew the hole into the surplus. Wait a minute. If the impact of the Bush tax cut is going to come in later years so it can be postponed without making any difference, how could it have been the primary mover in creating the deficit right now? Well, I can tell you how. I was part of the discussions as we crafted the tax cut. Democrats said to us at the time the tax cut was being considered it would have to have an immediate impact. We have to put money in the hands of people right now. We can't wait for the tax cut impact in the outyears.

The proposal was made primarily from the Democratic side of the aisle that in addition to cutting the marginal rates for taxes there be an immediate rebate, $300 per taxpayer, right away. That was not part of the original Bush proposal. That came out of Democratic proposals. And, frankly, it seemed like a good idea. The Bush administration embraced it. We have a combination of cutting the marginal tax rates over a period of time into the future and a rebate to get money into the hands of the economy and into the hands of people right away.

If, indeed, it was the tax cut that destroyed the surplus right away, it was the rebate side of the tax cut that was proposed by Members of the Democratic party and endorsed certainly by me and other Members of the Republican party.

You cannot have it both ways. You cannot say postponing the effective date of the tax cut won't affect the present situation. You cannot say there was an immediate impact which was bad and then say our proposal will have no immediate impact and that is good. This debate has gotten somewhat into Alice in Wonderland. I hope we can stay with the facts.

US Senator Bob Bennett

As this is public record of a Senate transcript I believe I am violating no copyright laws here right?

 

[michaeledward]

There seems to be some confusion on how the United States government funds its activities.

The government functions on a year-to-year budget. Each year all funding must be addressed.

In the late 90's the government was taking in more dollars than it was paying out. This had not happened since the 60's if I recall. Throughout the 70's, 80's and early 90's. The government spent more each year than it took in. Each year the red ink (called the debt) increased.

It's nice that Japan (in the 80's) and China (currently) are willing to cover that red ink by purchasing American dollars.

When the government takes in more than it pays out .... (what happened under President Clinton) ... it is possible to buy back some of those debt items from foreign countries.

(Incidentally, if you hold United States Savings bonds, you also are covering some of the country's red ink. I do. I am.).

So, while you are arguing that the 'Surplus' never existed, you are discussion two separate items. By having a 'surplus' of yearly revenue, the Federal Government had / had the opportunity to reduce the federal debt.

Most economists think that having some federal debt is not a bad thing. (Much like taking out a 30 year mortgage to purchase a home is not a bad thing). But, when the interest payments on the debt consume a significant portion of the annual budget, and you are spending more each year than you take in, you are getting hit twice, with bad circumstances.

In 2005, the United States government spent 325 Billion dollars on interest payments for its public debt.

Until we can get deficits under control ... that isn't going to change.


http://www.publicdebt.treas.gov/

 

[michaeledward]

Saw an article today ... The White House is setting the scene.

The White House budget director is predicting the Federal Budget Deficit in 2006 will be $400.00 Billion Dollars. This forecast is $60 Billion dollars higher than the previous forecast from July, 2005.

The Congressional Budget Office (a non-partisan organziation) has released its forcast for the coming fiscal year. It seems where the White House sees a $400.00 Billion Dollar Deficit, the CBO sees only a $337.00 Billion Dollar Deficit.

The CBO number reflects the 'On-the-Books' information. It recognizes that there might be some unexpected costs .. such as a war in Iraq .. that will arise 'off-the-books' ... which will result in an actual deficit of approximately $360 billion dollars in red ink.

Looking into the future, the CBO sees an average deficit of over $300.00 Billion dollars annually for the next ten years.

There are two rules in forecasting; 1) forecasts are always wrong and 2) the further into the future, the greater the error.

Look for the White House to claim great progress in six months when the deficit numbers are at the 360 CBO projection.

http://www.washingtonpost.com/wp-dyn/content/article/2006/01/26/AR2006012601964.html?sub=AR

 

[michaeledward]

Saw an article today ... The White House is setting the scene.

The White House budget director is predicting the Federal Budget Deficit in 2006 will be $400.00 Billion Dollars. This forecast is $60 Billion dollars higher than the previous forecast from July, 2005.

The economy is in pretty good shape (although real incomes are still down, and costs are up) which should lead to increased revenues.

Look for the White House to claim super-human-republican fiscal controls in July, 2006 when the actual budget numbers appear to be a $340 Billion dollar deficit.

President Bush will take credit for "saving" 60 Billion dollars in spending.


Today's numbers are a fantasy, setting the scene to claim triumph and progress six months from now.

http://www.nytimes.com/2006/01/13/national/13budget.html?ex=1294808400&en=83fceae60f71ffbe&ei=5090&partner=rssuserland&emc=rss

Well, I was wrong about one thing ... the 'current' new projection is a bit lower than my prediction of several months ago ....

http://www.msnbc.msn.com/id/13813379/

WASHINGTON - 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.

This sentence is interesting ..

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

The income gains, unfortunately are not spread about the entire population, but instead relagated to the 'wealthy' ... the rich get richer.