Deficit of $490 billion for 2009

This is just grotesque.

The White House on Monday predicted a record deficit of $490 billion for the 2009 budget year, a senior government official told CNN.

The White House blames a faltering economy and the stimulus package for the increased budget deficit.

The deficit would amount to roughly 3.5 percent of the nation’s $14 trillion economy.

The official pointed to a faltering economy and the bipartisan $170 billion stimulus package that passed earlier this year for the record deficit.

The fiscal year begins October 1, 2008.

[...]

“I remember that back when we were discussing the stimulus package, both parties recognized that the deficit would increase, and that would be the price that we pay in order to help improve the economy,” she said.

Bear in mind that such a deficit is not inevitable.  When they do the budget next time, there is absolutely nothing preventing the Congress and the President from enacting a balanced budget.  Well, nothing except the political will to do so. 

1. nothing preventing the Congress and the President from enacting a balanced budget

   Political will, coupled with integrity.

   Impossible odds.

   Posted by dad29 on July 28, 2008 at 2003 hrs




2. This is how your party handles the public’s finances, Owen.

   Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 2027 hrs




3. While I agree that the GOP has failed in managing this properly lately, that fact does not absolve the Dems who have controlled the Congress for two years.

   Posted by Owen on July 28, 2008 at 2029 hrs




4. Indeed, it does not absolve the Democrats from anything. Yet your party has a track record going back a generation now of complete incompetence with fiscal matters, so bad that you’ve actually managed to cede popular opinion on the issue to them.

   Frankly that’s like making it feasible to think a crack whore would be a better adoptive parent.

   Bravo.

   Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 2037 hrs




5. As long as politicians in D.C. have the ability to mask spending into bills that have nothing to do with the heart of the bill it won’t matter. 

   Both sides need to come together and say enough is enough.  Stop trying to blame each other because both sides are pathetic.  The only difference between Republicans and Democrats is that the Repubs think they will spend less and the Dems know they won’t.  At the end of the day they are both as wasteful.  Except of course Flake and Ryan.

   Long story short,,,,shorten the bills so they can’t hide spending.

   Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 2100 hrs




6. And stop sticking by the parties when it’s obvious they have nothing but their own survival in mind.

   Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 2222 hrs




7. This deficit wouldn’t be nearly this bad without the $170 billion in “stimulus” that Bush and Congress BOTH stumbled over each other to give away.

   We need Ross Perot.  I remember in 1992 right after Clinton won, Clinton wanted a $50 billion dollar stimulus package. It didn’t make it, partly because Perot had everyone rightly focused on the deficit.

   Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 2257 hrs




8. Republicans haven’t figured out that they can’t out-promise the Dems by solving every problem with a blank check. They actually managed to out-spend the revenue increase that resulted from the Bush tax cuts (lower rates…more economic activity…more revenue…again!). Their actions squandered the opportunity to teach that lesson to the public.

   Democrats (despite their claims of fiscal conservatism before 2006) think that any level of government spending is acceptable…they just excuse it with their intent to soak the “wealthy” for whatever extra revenue is needed. What they haven’t figured out is that whenever they go after that revenue with higher tax rates, it disappears like a mirage.

   So basically, the net result of both political philosophies has left us with ridiculous deficits.

   Posted by (JavaScript must be enabled to view this email address) on July 28, 2008 at 2317 hrs




9. Wiaggie:

   You were right until the end.

   Tax cuts do not pay for themselves.  They never have. Revenues have gone up after tax cuts, but in nearly every case they would have risen further without the cuts.

   And I’m pretty sure people like you said the economy would collapse in 1993 when taxes were raised, but somehow they didn’t.

   Posted by (JavaScript must be enabled to view this email address) on July 29, 2008 at 0704 hrs




10. Tax cuts do not pay for themselves.  They never have. Revenues have gone up after tax cuts, but in nearly every case they would have risen further without the cuts.

    Now that’s funny.  What do you think happened, the “Revenue Fairy” filled the coffers?  The tax cuts were the reason the revenues increased.

    Seems to me the best way to get both parties to work for the benefit of the nation, and not their own careers, is to enact term limits.

    Posted by (JavaScript must be enabled to view this email address) on July 29, 2008 at 0754 hrs




11. Perhaps a non-balanced budget should require a national referendum.

    Posted by (JavaScript must be enabled to view this email address) on July 29, 2008 at 0757 hrs




12. Tax cuts do not pay for themselves.  They never have.  It’s a false and stupid argument…they do not have to “pay” for themselves because it is not a zero-sum game.  The “pie” can get larger through additional economic activity, which is the object.

    in nearly every case they would have risen further without the cuts. Ahh, a hypothetical argument that can’t be proven.

    the economy would collapse in 1993 when taxes were raised, but somehow they didn’t Because the GOP took control of the purse strings in 1994 and actually exercised some fiscal restraint for a few years (the balance), and the “worst economy in 50 years” was actually starting to roar.

    Posted by (JavaScript must be enabled to view this email address) on July 29, 2008 at 1144 hrs




13. Nice sloganeering Wiaggie but poor grasp on reality. Studies have shown money is better managed under Democrats at all levels of government. Seems to me a big lump in that budget in Iraq, something that has the fingerprints of the GOP all over it.

    Posted by (JavaScript must be enabled to view this email address) on July 30, 2008 at 1234 hrs




14. Wiaggie, in this case a Plaistedism is appropriate: you’ve got your partisan talking points down to a science.

    tax cuts do not have to pay for themselves because it is not a zero-sum game…

    Except that you were the one who mentioned the “revenue increases” that resulted from the Bush tax cuts, which led me to respond that tax cuts do not produce revenues above what would have been collected under the old tax rate (which would in effect be paying for themselves). In other words, whatever “revenue increases” were spent were less revenue than the government would have had without the tax cuts.

    You are correct that it is not a zero-sum game. I am sure at this point you’re assuming I’m a pro-tax liberal, which I am not. I favor a broad-based, low rate tax structure that probably isn’t far from what you like.

    As for your claim that my hypothetical argument cannot be proven, you’re right it can’t, but neither can yours. Statistical modeling and the opinion of any non-hack (and even some hack) economists back up my argument, and not yours.

    For instance:

    http://www.ft.com/cms/s/1/e4dd6506-1689-11db-8b7b-00 00779e2340.html
    “Not a single credible economist endorses the extravagant claims of some Bush administration supporters that the new figures show tax cuts pay for themselves.
    Martin Feldstein, professor of economics at Harvard and former chairman of Ronald Reagan’s presidential council of economic advisers, is perhaps the most respected advocate of supply-side effects. He says…you recover about one-third of the revenue you would otherwise lose”. Most others believe the effects are considerably smaller.”

    http://www.nber.org/digest/jul05/w11000.html
    “In almost all instances, they find, tax cuts are at least partly self-financing. The authors conduct some simple calculations, plugging in numbers that approximately describe the U.S. economy. They find that, in the long run, about 17 percent of a cut in labor taxes is recouped through higher economic growth. The comparable figure for a cut in capital taxes is about 50 percent. “
    http://www.marketwatch.com/News/Story/Story.aspx?dist=n ewsfinder&siteid;=google&guid;={B18C218C-3ED7-4514-898C -F7B2D24FAB43}&keyword;=&print;=true&dist;=printTop
    “(Henry) Paulson rejected notions that tax cuts pay for themselves, but argued that they were nonetheless essential to ensuring economic growth. “As a general rule, I don’t believe that tax cuts pay for themselves,” Paulson said, echoing the opinion of most economists.

    http://www.csmonitor.com/2007/0625/p15s01-cogn.html?page=2

    “The theory is that with lower marginal tax rates, people work harder and longer, thereby raising their income – and paying more taxes on it. But even top Bush economic advisers now reject that thesis.

    “I certainly would not claim that tax cuts pay for themselves,” Edward Lazear, the current chair of the Council of Economic Advisers, has stated.”
    http://www.cbo.gov/ftpdocs/69xx/doc6908/12-01-10Percent TaxCut.pdf
    “The budgetary impact of the economic changes was estimated to offset between 1 percent and 22 percent of the revenue loss from the tax cut over the first five years and add as much as 5 percent to that loss or offset as much as 32 percent of it over the second five years.”

    Heritage Foundation:
    “Extending EGTRRA’s and JGTRRA’s expiring provisions has a positive effect on U.S. GDP, incomes, and employment over the 10-year budget period. It also generates substantial revenue feedbacks ($295.5 billion). Ignoring the macroeconomic effects of the extension plan on individual, non-corporate business, and corporate incomes puts federal tax revenues $991.9 billion below the CBO’s projected baseline levels over 10 years. Taking the dynamic effects of the extensions into account reduces the estimated revenue loss to the Treasury to $696.4 billion over 10 years.[12] In 2009 and 2010, dynamic revenue feedbacks do not exceed about $9 billion. But they more than treble in size in each of the final 6 years, reaching $56 billion in 2016.”

    
    So Wiaggie, and Cynic, and the rest of you hacks: You can provide the response that, “but revenues went up!”. That’s great, Sparky, but third grade reasoning like that is best left in third grade.

    Your final point about the GOP Congress from 1994 to 2000 is a good one. However, while they managed the purse strings far better than they did subsequently, they were also prevented from further reducing revenues when President Clinton vetoed several tax cut bills. Had those bills passed there would have been deficits.

    I’d like you to do something for me: explain why either party should be trusted at this point with fiscal policy. I’m at the point that I favor permanent appointment of a Fiscal Control Board that removes any responsibility for taxing and spending from elected officials.

    Posted by (JavaScript must be enabled to view this email address) on July 30, 2008 at 1646 hrs




15. ATV - Thanks for all the econ homework! I’d agree with Paulson’s statement, which rejects the notion that tax cuts “pay for themselves” but are necessary for economic growth. It all depends on what kind of taxes you’re talking about.

    If we’re talking about individual income tax rates, I’d tend to agree with your point. People have a baseline job/income and, for the most part, are not going to drastically alter that based on a tax cut (i.e., working longer hours or taking a second job). However, from the employer’s perspective, the payroll tax rates have a big affect on things like overall salary levels, use of part-time positions and overtime pay.

    With corporate tax rates, there is also a huge impact - a business owner gauges the cost/benefit of things like company expansion and innovation - if your “reward” of being successful (after financial risk and hard work) entails turning over more than half of your profits to the government, you might think twice. Likewise with capital gains rates, the more the government takes, the less likely people are to engage in certain investments (resulting in zero revenue).

    On the day that President Bush signed into law another open-ended spending bill, I agree that there appears to be little hope of either party showing much fiscal responsibility. As Alexis de Tocqueville wrote over 175 years ago, “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” I believe we’re close to that point as nearly 50 percent pay little or no taxes, yet still are allowed to vote.

    Posted by (JavaScript must be enabled to view this email address) on July 30, 2008 at 2224 hrs




16. See, we agree on more than we disagree.

    Posted by (JavaScript must be enabled to view this email address) on July 31, 2008 at 0724 hrs