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White House predicts budget deficits until 2005.
November 28, 2001 1:08 PM   Subscribe

White House predicts budget deficits until 2005. Uh... cause of the war, not monster tax cuts to businesses and billionaires... yeah, that's the ticket!
posted by mattpusateri (19 comments total)

 
Not a surprise. This is how they like to run the economy.
posted by Red58 at 1:26 PM on November 28, 2001


Jpoulos predicts a Democrat will be elected President in 2004. It's the economy, stupid.
posted by jpoulos at 1:34 PM on November 28, 2001


It wasn't last year... The booming economy under Clinton-Gore didn't keep Smirky out of the White House
posted by mattpusateri at 1:40 PM on November 28, 2001


Time to start shrinking!
posted by thirteen at 2:21 PM on November 28, 2001


i thought tax cuts increased tax revenue. whaddayaknow?
posted by lescour at 2:26 PM on November 28, 2001


Are there any fiscally responsible republicans out there? Any at all?
posted by Neb at 2:40 PM on November 28, 2001


The booming economy under Clinton-Gore didn't keep Smirky out of the White House

Neither did losing the election...

I'm sorry if that's a troll. I couldn't resist.
posted by jpoulos at 3:54 PM on November 28, 2001


Jpoulos predicts a Democrat will be elected President in 2004. It's the economy, stupid.

As you imply, Presidential election results are dominated by the health of the economy. But I think it's far too soon to know whether we'll peaking or troughing in 2004.

Sad that the rest of the comments are just snarky nonsense. Anyone have anything to say on the topic that isn't just partisan logorrhea?
posted by marknau at 5:36 PM on November 28, 2001


Anyone have anything to say on the topic that isn't just partisan logorrhea?

Not you, apparently.
posted by rushmc at 6:01 PM on November 28, 2001


jpoulus, a Democrat was elected, he lost on a technicality. (I’d be saying the same thing about Bush if he won the popular vote, was involved with debatable recounts and Gore was President.)

Anyway, Democrats are going to find it very easy to advertise themselves as the fiscally responsible party in a couple years. Opinion polls before 9.11 showed people overwhelmingly blamed Bush for cutting into Social Security. Democrats and Democrat-minded spinners blamed Bush’s monstrous tax cut for throwing off the budget and having the opposite effect on the economy as advertised. When people are in debt they try to pay off bills when random rebates arrive in the mailbox, not buy toasters.

Bush knows he wasn’t terribly popular before 9.11, I think that’s partially the reason for him to say this war will take a long time for him to prosecute. It is a cynical booster to his popularity and partially the truth. I expect pro-Bush ads in ’04 having a lot of Bush as stalwart defender of the borders.
posted by raaka at 6:03 PM on November 28, 2001


This has nothing to do with anything, but while we're talking about Bush and 2004 and stuff. Is Dick Cheney still alive? Is there proof? I'm sorry. I'm out.
posted by grrarrgh00 at 6:23 PM on November 28, 2001


Why break with that odd transatlantic tradition, in which the ostensible party of "more capitalism, less government" runs a huge deficit, and the party of "irresponsible tax and spend" balances the budget and pays down the national debt? What's interesting, though, is that Americans haven't really lived through "war austerity" in recent years: even WW2 was prosecuted without the need for extensive rationing, unlike the UK. Whether Americans are prepared to regard a certain amount of belt-tightening as a "price worth paying to combat terrorism", only time will tell. It could be argued that this long-term prediction is designed to offset the damage until after the 2004 election, so that the cost of the first Bush term is only manifested in the second, by which time there's no risk of him suffering his daddy's ignominious fate; alternatively, it pisses in the economic pool if and when the Dems take control of either the House or the White House, and forces the kind of austerity that hamstrung the Labour government in the first three years of its first term, when it was committed to the Tories' spending targets.
posted by holgate at 6:51 PM on November 28, 2001


Democrats are going to find it very easy to advertise themselves as the fiscally responsible party in a couple years. Opinion polls before 9.11 showed people overwhelmingly blamed Bush for cutting into Social Security.

I was able to find a Gallup poll on the Bush tax cut taken on 8/22. The data do not support your assertion. Quite the opposite, in fact.

When people are in debt they try to pay off bills when random rebates arrive in the mailbox, not buy toasters.

There was a direct link from the prior Gallup page to another poll asking respondents what they were going to do with the money. It seemed that only 17% were going to spend it, 32% said save or invest, 47% pay off bills.

I don't buy the demand-side argument for tax cuts in any event. More compelling is the point that individuals tend to allocate recourses better than the government does. So shifting money from the latter to the former is a good move in my book.
posted by marknau at 6:58 PM on November 28, 2001


Why break with that odd transatlantic tradition, in which the ostensible party of "more capitalism, less government" runs a huge deficit, and the party of "irresponsible tax and spend" balances the budget and pays down the national debt?

You already know this, but I'm saying it for emphasis: The United States does not have a parliamentary system. We don't have a "party in power." This means that it is a grave error to assign responsibility for all of domestic policy to the party of the President.

It is far more useful to examine the nature of the policies to try to determine a causal connection between policy and outcome.

A proper simple analysis of Reagan's Presidency, for example, might be: "Tax cuts didn't decrease real revenue, might have spurred the economy. Vastly increased defense spending coupled with overall spending increases created a growing deficit." To look at this period and conclude instead that "Republicans cause deficits" ignores the bipartisan nature of the policies that were put into effect.
posted by marknau at 7:14 PM on November 28, 2001


Agreed that the systems are different: but it's a somewhat factitious argument, marknau, given that the basic budgetary formula is established by the executive branch, and revised by the legislature, and that any revision considered excessive can receive the veto. (As was the case during the budgetary empasse under the Gingrich House in 1995.) In short, while there's no way that the President can sanction a budget without Congress ("but in consequence of appropriations made by law"), because the President's signature enacts law, the same applies in reverse. (Something I only now appreciate, from pieces like this, so sincere thanks for making me do some more research.) Also, there's no way in which a rejected budget proposal can bring down the President, unlike in the parliamentary system.

In any case, there was very definitely a "party in power" for the first half of 2001. Bush loudly celebrated the fact that he entered office with Republican control of the House and de facto control of the Senate in order to push through his agenda; the budget formula and the tax cut were straight out of the Republican playbook. It's a formula that would have created a deficit without the Current Situation. It was voodo economics. (True, one of the worst aspects -- the bloody refund cheque -- was dreamed up by the Democrats, but that just shows how emaciated the economic left is in US politics.)

A proper simple analysis of Reagan's Presidency, for example, might be: "Tax cuts didn't decrease real revenue, might have spurred the economy. Vastly increased defense spending coupled with overall spending increases created a growing deficit."

Pardon my ignorance, but isn't "vastly increased defence spending" as Republican a policy as you can get, outside a period of actual war (or the current shadow thereof)? Anyway, this period piece from that bastion of international socialism, the Cato Institute, has some interesting comments on the ability of Reagan's administration to combine reckless profligacy with the kind of inflationary monetary policy that undid the effects of its initial tax cuts.
posted by holgate at 9:09 PM on November 28, 2001


marknau, let’s mince words shall we? You mischarecterized my comment by implying that I said “people didn’t like Bush’s tax cut.” What I actually said was quite different. “Opinion polls ... showed people overwhelmingly blamed Bush for cutting into Social Security.”

There are many polls that support this. (The last one doesn’t support the ‘overwhelming’ part, but together Bush and the Republicans catch quite a bit of heat.)

On 9.10 ABC-WP released one (it was in the 9.11 WP) saying people favored trimming the tax cut and that the slow economy, the tax cut and Bush were, in that order, responsible for the lower budget surplus.

“Tightening the focus, this poll asked who's more responsible for the lower surplus, Bush or the Democrats. Bush takes the honors by a 14-point margin, 52 percent to 38 percent.”

“More compelling is the point that individuals tend to allocate recourses better than the government does.”

I sort of agree with that — it depends on your definition of “better”. It’s at least partially the the reason why a business operating under state-controlled capitalism is out-performed by a business operating in state-supported capitalism. A businessman in America can ask for a bailout when he needs it, as opposed to getting one when the state thinks he does.
posted by raaka at 11:56 PM on November 28, 2001


Love the way this thread has gone. Good stuff.

holgate:
the basic budgetary formula is established by the executive branch, and revised by the legislature.

The executive branch's budget is simply a polite request. It is not modified by the legislature. Rather, the entire budget must be created and passed by the legislature from scratch. Article I, section 7: "All bills for raising revenue shall originate in the House of Representatives."

In any event, every step along the way accommodations must be made to the opposition party unless the President's party controls both houses by comfortable margins. This hasn't been the case, for either party, since Carter. We've had two big showdowns over budgets that I recall off the top of my head, where the President refused to sign the bills authorizing funds (threatening to 'shut the government down'). One was under Reagan, and one under Clinton. In both cases, the Republicans lost the P.R. war and wound up caving in.

Regarding Reagan:
Yes, the high defense spending is mainstream Republican, as were the tax cuts. Failure to cut, or even curb the growth of, any other spending programs were concessions to the Democrats. One result of this piecemeal stratagem was a ballooning deficit. Whether other political tactics could have been employed to get a better mix of policy is a very complex problem. I happen to think Reagan did an excellent job of choosing which few battles he could win.

rakka:
Thanks for the links to the other polls. I really was just unable to find anything closer than the one I linked. I could quibble with the "overwhelming," but overall I think your point is made. It is interesting to note that people approve strongly of the tax cut, while blaming Bush for eroding Social Security by doing it. Having cake and eating it as well, America?

A businessman in America can ask for a bailout when he needs it
This doesn't happen nearly as often as you make it out. But I strongly support your distaste for the practice. I would abolish it forthwith if I had my say.
posted by marknau at 1:25 AM on November 29, 2001


I stand corrected; and yes, I like the tone of this thread. One thing: I'm not opposed to deficit spending as a response to exceptional circumstances. You don't raise taxes as you enter recession: although the UK looks as if it'll avoid recession, Gordon Brown's still planning to increase the PSBR for next year. But the Bush tax cut comes across as something akin to dropping your guard before an unexpected punch. ("Events, dear boy, events.") I'm not enough of an economist to be certain of this -- help me out here -- but doesn't this kind of long-term deficit spending create tremendous inflationary pressure, which in turn offsets the value of tax cuts, and hurts savers because of low interest rates?
posted by holgate at 5:17 AM on November 29, 2001


but doesn't this kind of long-term deficit spending create tremendous inflationary pressure, which in turn offsets the value of tax cuts, and hurts savers because of low interest rates?

Not if it is financed by bonds. The government borrows the money it is spending from investors who get a bond in return. And then the government gets to spend that money instead of the investor. So this doesn't tend to increase the money supply, and hence is not inflationary.

Inflation didn't take off in the U.S. during the 80s, for example.

Three caveats:

1) If a government finances its deficit spending by printing more money, then THAT is assuredly inflationary.

2) Government debt creates an incentive to create/allow inflation. Debtors benefit from inflation because they pay back the debt in cheaper dollars down the road.

3) Not every economist would agree with me. (What else is new?)
posted by marknau at 4:41 PM on November 29, 2001


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