Snow: Economy Will Help Slash Deficit

dirtboy

Diamond Member
Oct 9, 1999
6,745
1
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Snow: Economy Will Help Slash Deficit

By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON - While concerned about soaring budget deficits, the Bush administration is confident that a rebounding economy will help cut the deficit in half within five years, Treasury Secretary John Snow said Wednesday.

Snow rejected calls by many of the Democratic presidential candidates to roll back some or all of the president's massive tax cuts, which they blame as a major factor in the exploding federal deficits.

Snow said that instead of rolling back the tax reductions, which Democrats contend have gone overwhelmingly to the wealthy, they should be made permanent. He said if the 2001 and 2003 tax cut bills had not been passed, 109 million taxpayers would face tax bills this April 15 that would be on average $1,544 higher.

"Let me be perfectly clear: Failure to make the tax relief permanent would be a huge mistake and would put our recovery in jeopardy," Snow said in prepared remarks to the U.S. Chamber of Commerce (news - web sites).

Snow said that the federal government does face a deficit "in the $500 billion range" in the current fiscal year, which would be a record in dollar terms. However, Snow said this deficit will represent roughly 4.5 percent of the total economy, as measured by the gross domestic product, compared with a modern-day peak of 6 percent set in the 1980s when Ronald Reagan (news - web sites) was president.

He said the $500 billion deficit "is not historically out of range and it is entirely manageable."

But he also conceded that the deficits are a "matter of concern" that the administration intends to deal with by working with Congress to impose spending restraint on government programs.

"With adoption of the president's policies, our projections show a solid path toward cutting the deficit in half, toward a size that is below 2 percent of GDP (news - web sites), within the next five years," Snow said.

Until now, the administration has been vague about what it meant by cutting the deficit in half. Snow's remarks seemed to indicate that the administration was choosing a definition that will make its task easier by avoiding billions in painful budget savings.

Cutting this year's expected $500 billion deficit in half within five years would theoretically mean whittling the shortfall to $250 billion by 2009.

But in his comments, Snow measured the deficit's size as a percentage of the ever-growing economy. A deficit 2 percent as large as the U.S. economy in 2009 ? when it is projected to be $14.6 trillion ? would be a shortfall that year of $292 billion, an easier target to reach.

In the new budget the president will send Congress on Feb. 2, the administration is expected to propose limiting the growth of discretionary programs to 4 percent, perhaps excluding defense and domestic security.

The administration has faced recent attacks from conservatives unhappy over a surge in government spending since Bush took office.

While Bush has emphasized repeatedly the need to rein in spending, overall federal expenditures have grown to an estimated $2.31 trillion for the current budget year that started Oct. 1. That is up 23.7 percent from the $1.86 trillion spent in President Clinton (news - web sites)'s final year, a rate of growth not seen for any three-year period since 1989 to 1991.

Much of the increase stems from the fight against terrorism and wars in Afghanistan (news - web sites) and Iraq (news - web sites). Also expanding relentlessly have been huge programs such as Social Security (news - web sites), Medicare and Medicaid, which grow automatically with inflation, higher medical costs and more beneficiaries.

But conservatives have complained about the 31.5 percent growth in discretionary spending since Bush took office. That is the one-third of the budget lawmakers approve annually for defense, domestic security, school aid and everything else except Social Security and other benefits. Such spending grew by an annual average of 3.4 percent during the Clinton administration's eight years in office.

After his speech, Snow was asked by reporters if the administration was concerned that the value of the U.S. dollar has been hitting record lows against the Euro in recent weeks.

Snow said this development did not reflect any change in the administration position of supporting a strong dollar while letting the dollar's value be set by the markets.

"A strong dollar is in U.S. interest and the exchange value of the currency should be set in open competitive markets," Snow told reporters.

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He probably forgot to consult the AT economic experts before presenting this information, because according to the people here, he is completely wrong.
 

SuperTool

Lifer
Jan 25, 2000
14,000
2
0
This is the same guy who was on CNBC saying we have a "strong dollar policy" while the dollar is in freefall.
 

alchemize

Lifer
Mar 24, 2000
11,489
0
0
Something I never see mentioned is that the US is financing current debt at extremely low (historically) interest rates. I imagine much past debt has also been "refinanced" at these rates. What happens when inevitably the economy heats up and interest rates rise to more normal levels?

Maybe the Fed is playing "buy low, sell high"?

We could see a huge turnaround in the debt in the next 10 years, if the cards are played right. Another method for controlling "entitlement" growth would to have some inflation (i.e. a more traditional 3-5% range) and keep the increase below that.


I'd only support a permanent tax cut if we also pass a balanced budget amendment...something nobody mentions anymore.
 

alchemize

Lifer
Mar 24, 2000
11,489
0
0
Originally posted by: SuperTool
This is the same guy who was on CNBC saying we have a "strong dollar policy" while the dollar is in freefall.
A 10% decline represents a freefall to you? Long overdue, and will probably do more good than harm with current Fed policy.
 

dmcowen674

No Lifer
Oct 13, 1999
54,894
46
91
www.alienbabeltech.com
Originally posted by: SuperTool
This is the same guy who was on CNBC saying we have a "strong dollar policy" while the dollar is in freefall.
Who needs this dollar thing anyway? Euro is the way to go Globally, part of the whole Global Economy loved by all us AT experts in here. How dare the U.S. have a different dinero in the world Economy.

 

SuperTool

Lifer
Jan 25, 2000
14,000
2
0
Originally posted by: alchemize
Originally posted by: SuperTool
This is the same guy who was on CNBC saying we have a "strong dollar policy" while the dollar is in freefall.
A 10% decline represents a freefall to you? Long overdue, and will probably do more good than harm with current Fed policy.
Whatever you think of this, we don't have a "strong dollar policy" and this guy was pretending like we were. The Euro went from 0.90 to 1.27 and is expected to rise another 20%.
Oops, I said dollar instead of euro. The dollar is going nowhere but down with these interest rates and deficits.
 

dirtboy

Diamond Member
Oct 9, 1999
6,745
1
81
Originally posted by: dmcowen674
Who needs this dollar thing anyway? Euro is the way to go Globally, part of the whole Global Economy loved by all us AT experts in here. How dare the U.S. have a different dinero in the world Economy.
I would actually like to see one currency used worldwide.
 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
0
0
Snow said that instead of rolling back the tax reductions, which Democrats contend have gone overwhelmingly to the wealthy, they should be made permanent. He said if the 2001 and 2003 tax cut bills had not been passed, 109 million taxpayers would face tax bills this April 15 that would be on average $1,544 higher.
Alex Rodriguez makes $25million a year and 10 groundskeepers make $25K a year . . . you are either an idiot or arsehole if you "average" their tax cuts.

Snow is arguing the growing economy will cut the deficit in half (to $250B) but he's also factoring in significant fiscal restraint . . . which has yet to materialize in 3 years . . . well except for the EPA enforcement division, National Parks, etc.
 

alchemize

Lifer
Mar 24, 2000
11,489
0
0
Originally posted by: SuperTool
Originally posted by: alchemize
Originally posted by: SuperTool
This is the same guy who was on CNBC saying we have a "strong dollar policy" while the dollar is in freefall.
A 10% decline represents a freefall to you? Long overdue, and will probably do more good than harm with current Fed policy.
Whatever you think of this, we don't have a "strong dollar policy" and this guy was pretending like we were. The Euro went from 0.90 to 1.27 and is expected to rise another 20%.
Oops, I said dollar instead of euro. The dollar is going nowhere but down with these interest rates and deficits.
I think declaring a "weak dollar policy" would probably not be politically wise, but more likely the policy has a floor where action would be taken, and we haven't hit that floor.

Most economists I've read have said that the dollar was overvalued against the euro, and has now overcorrected. In general it seems like that is how currencies operate.

We'll just have to wait and see where the dollar goes, I think it is much more strongly tied to the economy and interest rates than deficits, since the US has been in debt since 1975.
 

dmcowen674

No Lifer
Oct 13, 1999
54,894
46
91
www.alienbabeltech.com
Originally posted by: dirtboy
Originally posted by: dmcowen674
Who needs this dollar thing anyway? Euro is the way to go Globally, part of the whole Global Economy loved by all us AT experts in here. How dare the U.S. have a different dinero in the world Economy.
I would actually like to see one currency used worldwide.
Yep, one less excuse and would go a long way in "leveling" the playing field. Of course all the Religios Fanatics would go beserk because of the One World Currency Prophecy of one step removed from Armageddon.

Speaking of Armageddon, DB and DMC agreeing on something :Q
 

CADsortaGUY

Lifer
Oct 19, 2001
25,162
1
76
www.ShawCAD.com
Originally posted by: dmcowen674
Originally posted by: dirtboy
Originally posted by: dmcowen674
Who needs this dollar thing anyway? Euro is the way to go Globally, part of the whole Global Economy loved by all us AT experts in here. How dare the U.S. have a different dinero in the world Economy.
I would actually like to see one currency used worldwide.
Yep, one less excuse and would go a long way in "leveling" the playing field. Of course all the Religios Fanatics would go beserk because of the One World Currency Prophecy of one step removed from Armageddon.

Speaking of Armageddon, DB and DMC agreeing on something :Q
Good think I disagree then.:D

alchemize - good post.

CkG
 

dirtboy

Diamond Member
Oct 9, 1999
6,745
1
81
Originally posted by: dmcowen674

Yep, one less excuse and would go a long way in "leveling" the playing field. Of course all the Religios Fanatics would go beserk because of the One World Currency Prophecy of one step removed from Armageddon.

Speaking of Armageddon, DB and DMC agreeing on something :Q
It would go a long way and I hope to see that one day.

Wait a minute, we are agreeing.... whoa... :D
 

SuperTool

Lifer
Jan 25, 2000
14,000
2
0
Originally posted by: alchemize
Originally posted by: SuperTool
Originally posted by: alchemize
Originally posted by: SuperTool
This is the same guy who was on CNBC saying we have a "strong dollar policy" while the dollar is in freefall.
A 10% decline represents a freefall to you? Long overdue, and will probably do more good than harm with current Fed policy.
Whatever you think of this, we don't have a "strong dollar policy" and this guy was pretending like we were. The Euro went from 0.90 to 1.27 and is expected to rise another 20%.
Oops, I said dollar instead of euro. The dollar is going nowhere but down with these interest rates and deficits.
I think declaring a "weak dollar policy" would probably not be politically wise, but more likely the policy has a floor where action would be taken, and we haven't hit that floor.

Most economists I've read have said that the dollar was overvalued against the euro, and has now overcorrected. In general it seems like that is how currencies operate.

We'll just have to wait and see where the dollar goes, I think it is much more strongly tied to the economy and interest rates than deficits, since the US has been in debt since 1975.
Just like declaring an exploding deficit is not politically wise. This guy is a political tool, so I don't believe much he says. We have policies that result in weak dollar, but noone wants to call them weak dollar policies. Fine. But don't go around saying we have a strong dollar policy because it only makes him look like a liar.
 

alchemize

Lifer
Mar 24, 2000
11,489
0
0
Originally posted by: SuperTool
Originally posted by: alchemize
Originally posted by: SuperTool
Originally posted by: alchemize
Originally posted by: SuperTool
This is the same guy who was on CNBC saying we have a "strong dollar policy" while the dollar is in freefall.
A 10% decline represents a freefall to you? Long overdue, and will probably do more good than harm with current Fed policy.
Whatever you think of this, we don't have a "strong dollar policy" and this guy was pretending like we were. The Euro went from 0.90 to 1.27 and is expected to rise another 20%.
Oops, I said dollar instead of euro. The dollar is going nowhere but down with these interest rates and deficits.
I think declaring a "weak dollar policy" would probably not be politically wise, but more likely the policy has a floor where action would be taken, and we haven't hit that floor.

Most economists I've read have said that the dollar was overvalued against the euro, and has now overcorrected. In general it seems like that is how currencies operate.

We'll just have to wait and see where the dollar goes, I think it is much more strongly tied to the economy and interest rates than deficits, since the US has been in debt since 1975.
Just like declaring an exploding deficit is not politically wise. This guy is a political tool, so I don't believe much he says. We have policies that result in weak dollar, but noone wants to call them weak dollar policies. Fine. But don't go around saying we have a strong dollar policy because it only makes him look like a liar.
Take a look at the historical value of the dollar Link

You'll see some interesting trends in there, which have nothing to do with the policymaker in place:

High since 1973? Mar 1985 131.59
All time low? Apr 1995 77.81
10 years later, it is 1/2 of its high!

With a little work we could probably find some casual relationship between economy, inflation, interest rates, and deficit.

Graph it out on Excel, and sing the praises of Reagan and trickle-down ;) Or, perhaps recognize it as something tied to the aforementioned variables.

Obligatory footnote: I don't support deficit spending. Problem is, neither party will touch the true deficit explosion of SS & medicare. Defense is mere pennies on the dollar.

 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
0
0
Just eyeballing that text file I would say weak (or less strong) dollars coincided with Carter, early Reagan, late Reagan, most of Bush41, and most of first term Clinton . . . not exactly banner years.
 

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