The Economist graphs what has contributed to the U.S. federal deficit (wars, TARP...)

[Throckmorton]

Well I like Economist and I am a subscriber, but it's no denying that Economist is left leaning and loves Obama and this arctile totally missed the point.

Yes government budget is affected by many previous president's programs and decision but everything single president has to deal with the hands previous presidents delt him, not just Obama. And Obama's deficit is not just few billion, not just few hundred billion, but over a TRILLION for every single year he is a president. Government deficit jump from 2%, 3% of GDP during Bush Year, 5%, 6% during the Reagon years, -1%, 2% during Clinton years to ~10% in Obama years.

Yeah we can defend Obama if it's just a small difference compared to previous president, but Trillions of deficit? 10% GDP? Not just one year, but every year of his presidency and foreseeable years too?

To make matters worse, yes we know we have budget problem, but what is Obama doing? More big government program-Healthcare/Insurance. More troop deployment in Afghan. Yeah we know he wants raise tax for people making certain amount, that's typical left government would do. But there is no constrain in government side of spending.

There is only so much you can blame the previous admin, every President do that when the going gets tough. But we all know where the buck stops, and 14 month ago we thought Obama was gonna be different.

The economy crashed. That means less revenue. Government spending has to increase to preserve the economy. It definitely can't shrink. That means bigger deficit.


Even with a graph a lot of people apparently can't understand such basic economics. That is what really makes me worry about the future of this country.

 

[rchiu]

The economy crashed. That means less revenue. Government spending has to increase to preserve the economy. It definitely can't shrink. That means bigger deficit.


Even with a graph a lot of people apparently can't understand such basic economics. That is what really makes me worry about the future of this country.

umm...sure, Obama is the only President to deal with a bad economy.....put it in historical perspective. the only time US's deficit as PERCENT OF GDP was in double digit was in the 2 world wars. Even in the hight of Great Depression it was under 5%. But here we are with Obama and his 10% GDP deficit spending.

Is Obama dealing with a depression worse than Great Depression? I think not. Maybe you are the one who don't understand basic economics and US history.

 

[CallMeJoe]

umm...sure, Obama is the only President to deal with a bad economy.....put it in historical perspective. the only time US's deficit as PERCENT OF GDP was in double digit was in the 2 world wars. Even in the hight of Great Depression it was under 5%. But here we are with Obama and his 10% GDP deficit spending.
Is Obama dealing with a depression worse than Great Depression? I think not. Maybe you are the one who don't understand basic economics and US history.

Restraint of government spending worked so well during the Great Depression! Definitely the model to follow...

 

[Throckmorton]

umm...sure, Obama is the only President to deal with a bad economy.....put it in historical perspective. the only time US's deficit as PERCENT OF GDP was in double digit was in the 2 world wars. Even in the hight of Great Depression it was under 5%. But here we are with Obama and his 10% GDP deficit spending.

Is Obama dealing with a depression worse than Great Depression? I think not. Maybe you are the one who don't understand basic economics and US history.

Obama IS dealing with the worst economy since the Great Depression. And by complaining that the deficit is too high, you are are basically saying that he needs to NOT do any stimulus spending, cut Bush era spending while somehow maintaining the wars. Do you not realize the devastating effect that would have on the economy?

You might want to look at this deficit graph. Note the spending that actually got us out of the Depression. You might also want to do some research on the effects Hoover's cost-cutting had.
https://www.mygovspending.com/includes/history-charts2.php

 

[Bateluer]

I gather two things from those graphs.


1. The Bush tax-cuts are hardly contributing to our deficit. That is OUR money that we are simply keeping. Seems silly to call that contributing to deficit. That's like saying if we don't tax everyone another 20% that contributes to our deficit.

Exactly, the tax cuts were not a deficit. Your money back in your wallet is not a deficit.

 

[Jhhnn]

Exactly, the tax cuts were not a deficit. Your money back in your wallet is not a deficit.

Denial at its finest. Let's say I quit my day job, kept my part time job, and started charging heavily on my credit cards, then I wouldn't be engaged in deficit spending....

Deficits occur when spending is greater than income, regardless of the reason for the difference. Negative cashflow, pure and simple.

 

[rchiu]

Obama IS dealing with the worst economy since the Great Depression. And by complaining that the deficit is too high, you are are basically saying that he needs to NOT do any stimulus spending, cut Bush era spending while somehow maintaining the wars. Do you not realize the devastating effect that would have on the economy?

You might want to look at this deficit graph. Note the spending that actually got us out of the Depression. You might also want to do some research on the effects Hoover's cost-cutting had.
https://www.mygovspending.com/includes/history-charts2.php

Sure the government needs stimulus spending, but what level is reasonable without bankrupting the country? If you know economy you'd know that throwing money is not going to solve problem and there is diminishig return as you throw more money.

Using Great Depression as a reference. The government threw no more than 5% of GDP at the height in 1933, and that was enough to gradually reduce the unemployment from ~25% in 1933 to ~15% in 1940. It was only because of WW2 the government was able to spend 25% of GDP, but given the scale of the war, I don't think anyone would have problem with it.

What justification does Obama have to spend double the deficit as percent of GDP compared to Great Depression when the current recession is not half as bad? Has Obama's program done anything to help the unemployemnt? What is on Obama's up coming agenda? More cuts or more spending? We already know the US economy is looking at ~5% GROWTH next year, what's the justification for continued 10%+ GDP deficit spending?

 

[sandorski]

Willful blindness, as usual, and as expected.

I'll grant that spending cuts are part of the answer, no doubt. So, uhh, where do we find enough cuts to actually approach balance?

How about that bloated pig of military spending? Cut it by half- I can hear the fearmongering and raving from the Right even before we start. So-called "entitlements"? They're not really that much, but, go ahead, cut where you can. Medicare, Senior drug benefit? Watch seniors swing en masse to whatever party promises to keep 'em alive the longest... Federal bureaucracy? great. Where will the replacement jobs come from? Nowhere? Yeh, that's right, we already don't have enough jobs to go around.

Head on down the list, make all the tough decisions you can, and there's still not enough income to support what's truly healthy, what the public demands, what's enough to keep us from being eaten alive by corporate interests.

Righties talk a good game of spending reduction, but when it comes right down to it, they can't, won't deliver. Republicans controlled the executive and both houses of congress from 2003-2007, created the biggest deficits seen to that point in time and an economic disaster in the process.

Taxes have to go up. It's that simple. You can't get blood out of a turnip, and when you need money, you go to people who have it, so that means we must start at the top, work our way down until we put the govt on a sound financial footing.

It's not like wealthy people were having trouble making ends meet pre-Reagan, so it seems unlikely they'll have trouble today. Less money for investment? So what? They just pound it into offshoring enterprises anyway, and creating market bubbles to sustain their greed...

Yup. Perhaps if recent US History is not enough proof of this, some relatively recent Canadian History will add to the Point.

Around the time of the Mid-East Oil Embargo Canada entered a period of Deficit Spending that lasted until the Mid-90's. By the time the 80's began the Deficit was becoming a major problem exacerbated by that periods High Inflation. The Liberal Party has been the dominant Power in Canada since its' inception(1867) and so this issue was a natural for the PC(Progressive Conservative--a coalition of Conservatives) Party. After years of campaigning on the Deficit Issue they finally gained Power in the Mid-80's. So they began to tackle the issue. Cut Spending of the usual conservative dislikes, Arts, Social Programs, etc until they came up to CPP. CPP(the Canada Pension Plan, equivalent of SS in the US), was to be De-Indexed from Inflation, but a shitstorm erupted amongst Seniors over the idea and soon the PC's backed off and cooled to the whole idea of Cuts. From then on Deficits continued to rise and the PC's went the Increase Revenues route, introducing a national Sales Tax(GST-Goods and Services Tax).

Between the CPP controversy, the GST, the FTA(Free Trade Agreement that eventually became NAFTA), 2 controversial failed attempts to Amend the Constitution, and the continuing growing Deficit, the PC's lost Power in the early 90's back to the Liberals. The issue regarding the Deficit was more urgent than ever and it was clear to everyone that some drastic measures needed to be taken. Enter Finance minister Paul Martin and his "Come Hell or High Water" declaration against the Deficit. Spending Cuts across the board, Tax/Fee Increases on practically everything, and most importantly staying the course despite Public Opposition.

After 6(ish) years the Deficit was eliminated and Surpluses began. We had a Surplus until the Fall of 2008, when this Recession began.

I suppose the comparison is not entirely fair, I mean Canadian Conservatives are quite different from American Conservatives, but recently when I saw Republicans completely backing away from Medicare, SS, and other issues regarding Seniors, I just couldn't help but experience some deja vu.

Another unfair comparison between the US and Canada is that in Canada, when a Party wins a Majority in Parliament, they completely control the Agenda. The Opposition(Minority parties) can't systematically hold up Legislation in limbo, what they can do is to influence Public Opinion. What's going on in the US right now with the Filibuster is complete lunacy IMO. You can't Govern for the People when a Minority can block anything on a whim.

 

[sandorski]

Sure the government needs stimulus spending, but what level is reasonable without bankrupting the country? If you know economy you'd know that throwing money is not going to solve problem and there is diminishig return as you throw more money.

Using Great Depression as a reference. The government threw no more than 5% of GDP at the height in 1933, and that was enough to gradually reduce the unemployment from ~25% in 1933 to ~15% in 1940. It was only because of WW2 the government was able to spend 25% of GDP, but given the scale of the war, I don't think anyone would have problem with it.

What justification does Obama have to spend double the deficit as percent of GDP compared to Great Depression when the current recession is not half as bad? Has Obama's program done anything to help the unemployemnt? What is on Obama's up coming agenda? More cuts or more spending? We already know the US economy is looking at ~5% GROWTH next year, what's the justification for continued 10%+ GDP deficit spending?

Stimulus = The Value of the Shrinkage in the Economy. Last figure is approx $2.4trillion(subtract the $300-800billion already initiated).

 

[Whoozyerdaddy]

Willful blindness, as usual, and as expected.

I'll grant that spending cuts are part of the answer, no doubt. So, uhh, where do we find enough cuts to actually approach balance?

How about that bloated pig of military spending? Cut it by half- I can hear the fearmongering and raving from the Right even before we start. So-called "entitlements"? They're not really that much, but, go ahead, cut where you can. Medicare, Senior drug benefit? Watch seniors swing en masse to whatever party promises to keep 'em alive the longest... Federal bureaucracy? great. Where will the replacement jobs come from? Nowhere? Yeh, that's right, we already don't have enough jobs to go around.

Head on down the list, make all the tough decisions you can, and there's still not enough income to support what's truly healthy, what the public demands, what's enough to keep us from being eaten alive by corporate interests.

Righties talk a good game of spending reduction, but when it comes right down to it, they can't, won't deliver. Republicans controlled the executive and both houses of congress from 2003-2007, created the biggest deficits seen to that point in time and an economic disaster in the process.

Taxes have to go up. It's that simple. You can't get blood out of a turnip, and when you need money, you go to people who have it, so that means we must start at the top, work our way down until we put the govt on a sound financial footing.

It's not like wealthy people were having trouble making ends meet pre-Reagan, so it seems unlikely they'll have trouble today. Less money for investment? So what? They just pound it into offshoring enterprises anyway, and creating market bubbles to sustain their greed...

You're thinking politically... in terms of 'how will I get re-elected after cutting all of this'. Put that worry out of your mind and concentrate on what is really good for this country and things become really simple.

Republicans may have controlled congress from 03-07 but conservatives didn't. The only way to solve the problem we're in is to stop spending the money. Even if you eliminated the Bush tax cuts the deficit would still be astronomical. Way above even what it was when Dub was prez... and that was pretty bad. It's time to live within our means. Believe it or not, the country will survive if the gov can't fork out the cash. It survived prior and it will survive former... That's how we are.

We need to live within our means. It's a simple concept that congress has seemed to have forgotten decades ago... It may be time for new, realistic blood.

 

[yllus]

I gather two things from those graphs.

1. The Bush tax-cuts are hardly contributing to our deficit. That is OUR money that we are simply keeping. Seems silly to call that contributing to deficit. That's like saying if we don't tax everyone another 20% that contributes to our deficit.

2. Medicare/Medicaid needs to be fixed. We need to find solutions that are teh most fiscally conservative.

Exactly, the tax cuts were not a deficit. Your money back in your wallet is not a deficit.

Okay, let me explain how I see things and the two of you (and others) can then tell me if I'm off.

The title of the thread is, "The Economist graphs what has contributed to the U.S. federal deficit (wars, TARP...)" We know that at the end of the Clinton administration, there was no budget deficit - annual revenue was greater than annual spending:

Then during the Bush administration, certain actions were taken and certain things occurred to lead to year after year of deficits. When the Obama administration took over next, they again engaged in certain actions and had several things occur to continue the trend of annual deficits.

We switch our attention back to the first graph. Its purpose is to tell us what actions/events contributed to that annual budget deficit, how big a hit each were, and how they might scale into the future:

Now if all of the above is true, how is the statement "tax-cuts are hardly contributing to our deficit" sensible?

Wikipedia: Deficit

A budget deficit occurs when an entity spends more money than it takes in.

Dictionary.com - Deficit

1. the amount by which a sum of money falls short of the required amount.
2. the amount by which expenditures or liabilities exceed income or assets.

Spending is outstripping revenue and the tax cut in question is a large contributor to that occurring. That is literally the dictionary definition of a deficit. How on Earth did the two of you come to your conclusions?

 

[Farang]

An observation on the back and forth between woolfe9999 and ProfJohn.

Woolfe9999 posted the Bush administration's estimates for the economic benefits of a tax cut only covering 10% of the cost of the tax cut, by their best estimate.

ProfJohn responded again by saying that the increased economic activity is so complex that it cannot be quantified.

My question is how can you so rigidly support something that you are absolutely convinced cannot be measured? Where, then, did you ever get the idea that tax cuts increase economic activity? How, then, can you be so sure this cause-and-effect relationship exists? You can't be, unless you're wrong on one of your two points--either that tax cuts increase economic activity, or that economic activity is so complex that the effects of the tax cuts cannot be quantified.

You're wrong on the latter--the effects of tax cuts can be reasonably quantified. And they amounted to little of the cost of the tax cuts.

 

[Atreus21]

Why do you people not listen? Tax-cuts are not a "cost". Costs are outlays - you know... spending?
As to trying to calculate contributions to the deficit - it's laughable to try to put a number to it since you don't know what the situation would have been without it.(ie you can't assume the same economic situation for calculations). So no matter how hard you leftists try to blame the tax-cuts by Bush for ALL taxpayers - it simply doesn't hold up to scrutiny.

I'm going to go talk to my employer, and tell him that he's costing me an awful lot of money by not giving me a million dollar raise. I should levy his assets.

 

[daishi5]

That's not what I said. You dodged what I said.



Well, funny enough. when the government did 'double its spending' - on completely wasteful activity, in fact - many credit that with having an excellent effect on the economy, it's called WWII.

But unlike you, I recognize there's a balance to an economy - it needs, for optimal results, a combination of private and public spending, and either can go too high and too low.

Excessive concentrations of wealth are one of the things that hurt useful spending.

A few own too much and too many resources go to simply their enrichment rather than fueling the economy - note the peak of concentrated wealth just before the great depression - and now.

You forgot an important part of the WWII spending, bombing the infrastructure of almost every other industrialized nation into oblivion. I know our economy went up after the government spending on the war, but you cannot classify it as spending on nothing, that spending was actively used to destroy the productive capabilities of the enemy, who at the same time was trying to destroy the productive capabilities of our allies. I don't think you can expect the same results from increased spending as you got from WWII if you do not also include the destruction of competing economic entities.

 

[Throckmorton]

Sure the government needs stimulus spending, but what level is reasonable without bankrupting the country? If you know economy you'd know that throwing money is not going to solve problem and there is diminishig return as you throw more money.

Using Great Depression as a reference. The government threw no more than 5% of GDP at the height in 1933, and that was enough to gradually reduce the unemployment from ~25% in 1933 to ~15% in 1940. It was only because of WW2 the government was able to spend 25% of GDP, but given the scale of the war, I don't think anyone would have problem with it.

What justification does Obama have to spend double the deficit as percent of GDP compared to Great Depression when the current recession is not half as bad? Has Obama's program done anything to help the unemployemnt? What is on Obama's up coming agenda? More cuts or more spending? We already know the US economy is looking at ~5% GROWTH next year, what's the justification for continued 10%+ GDP deficit spending?

Unemployment has gone up by a couple points and because of that you're claiming that the stimulus package had no effect. I see a fallacy. A dollar is a dollar. Without stimulus going to state and local governments, many more jobs would have been lost. What effect the 40% composed of tax cuts had is more questionable.

Here is an analogy to the fallacy that you and the right are throwing around. After a relatively warm winter day it starts getting cold as the night falls. You put on a sweater. An hour later you feel colder than you did before. Does that mean the sweater had no effect?

Edit: BTW, weren't taxes higher during the Great Depression? Should we raise taxes to those levels to get to 5%?

http://www.ustreas.gov/education/fact-sheets/taxes/ustax.shtml

In October of 1929 the stock market crash marked the beginning of the Great Depression. As the economy shrank, government receipts also fell. In 1932, the Federal government collected only $1.9 billion, compared to $6.6 billion in 1920. In the face of rising budget deficits which reached $2.7 billion in 1931, Congress followed the prevailing economic wisdom at the time and passed the Tax Act of 1932 which dramatically increased tax rates once again. This was followed by another tax increase in 1936 that further improved the government's finances while further weakening the economy. By 1936 the lowest tax rate had reached 4 percent and the top rate was up to 79 percent. In 1939, Congress systematically codified the tax laws so that all subsequent tax legislation until 1954 amended this basic code. The combination of a shrunken economy and the repeated tax increases raised the Federal government's tax burden to 6.8 percent of GDP by 1940.

 

[Doc Savage Fan]

Don't all Bush tax cuts expire 1/1/11? Wasn't the bulk of the tax breaks for the rich (top 1%) suppose to occur last year and this year? Didn't the Dems have the power to repeal these cuts a year ago? This blame Bush crap is getting old.

 

[yllus]

Don't all Bush tax cuts expire 1/1/11? Wasn't the bulk of the tax breaks for the rich (top 1%) suppose to occur last year and this year? Didn't the Dems have the power to repeal these cuts a year ago? This blame Bush crap is getting old.

So where does the blame go?

 

[Craig234]

You forgot an important part of the WWII spending, bombing the infrastructure of almost every other industrialized nation into oblivion. I know our economy went up after the government spending on the war, but you cannot classify it as spending on nothing, that spending was actively used to destroy the productive capabilities of the enemy, who at the same time was trying to destroy the productive capabilities of our allies. I don't think you can expect the same results from increased spending as you got from WWII if you do not also include the destruction of competing economic entities.

It's a fair point to note the war gave the US an advantage over competitors with their destruction - allies and enemy alike.

But one point is that the global economy was a lot less then than it is today.

Also the Marshall plan to rebuild economies was yet MORE big government spending (and it worked).

Another is the economic effects of the war and the US spending are two separate economic events - the war could have happened without any US involvement in economic theory. The big US spending either hurt the US economy or helped it. Few if any have said 'because the US government wasted (in an economic sense) vast sums of money in the war, it was weakened not to benefit from the compettive advantage'.

After the war was yet more big increases in government spending on things like 'socialist' programs the GI Bill - paying for citizens to get housing, paying for citizens to get education, paying for VA healthcare.

Now imagine the government spending the WWII big bucks not on wasteful weapons but on economically beneficial things - it'll help even more.

There's a clear lesson that all this 'socialized' spending done that was 'excused' by being 'for the troops' had big economic benefits.

 

[Craig234]

Don't all Bush tax cuts expire 1/1/11? Wasn't the bulk of the tax breaks for the rich (top 1&#37 suppose to occur last year and this year? Didn't the Dems have the power to repeal these cuts a year ago? This blame Bush crap is getting old.

No, they might 'only' have 55 votes in the Senate to do it, which under the Republicans' abuse, isn't enough. This 'blame Democrats for Republican abuse' is getting old.

 

[Doc Savage Fan]

No, they might 'only' have 55 votes in the Senate to do it, which under the Republicans' abuse, isn't enough.

Don't you think Dems should at least go on record on such an important issue? Isn't it their responsiblity to our country to do so?

 

[GuitarDaddy]

Here is my two cents, and I am a self-described Libertarian with leanings toward the Republican side of things.

Historical precedent demonstrates that during a recession the best course of action is for the government to go into deficit spending. It's just how it is. Therefore the Bush tax cuts, and government spending in general, was absolutely needed. Frankly to think otherwise is to ignore historical precedent on how to manage a recession. If the tax cuts were not passed, we could have been in a far worse place.

However to get the country out of this debt, government spending will either have to significantly go down (likely to unacceptable levels), taxes are going to have to go way up (again probably to some unacceptable levels), or a combination of the two. So I wanted to note that even though I would normally consider myself fiscally conservative, I think the objective prudent course of action is to increase taxes while also reducing spending. It's politically dangerous to talk about increasing taxes, and the pure conservatives don't want to hear it, but that's just how the math works out, like it or not.

The real problem is that this is a sort of "perfect storm" with the deficit growing to be a significant part of GDP as well as a recession going on. If it was just one of those issues we were dealing with, then it would be somewhat "easy" to figure out.

So basically Obama is in a crazy tough spot and I don't envy him. Either he increases government spending and/or reduces taxes so as to best handle the recession or he decreases government spending and/or increase taxes to reduce the deficit.

Nice try sneaking the Bush tax cuts in there as a necessary fix to economic recession, but thats total bullshit. The economy was in a period of growth when the tax cuts were inacted, they were not done as a result of an economic downturn, and in fact had a large part in causing the financial crash of 2008/2009. Convienent how you tried to turn a cause into and effect

 

[Doc Savage Fan]

So where does the blame go?

I'm more interested in solutions than blame...and the Dems right now hold all the cards.

 

[blackangst1]

In reality, the reason for the deficit is congress cant balance a budget. All programs aside, spening above your means is a CHOICE. Funny no one thinks that. The trend now is to blame past presidents for the fact the current president wont cut spending, and justify increases.

 

[Craig234]

I'm going to go talk to my employer, and tell him that he's costing me an awful lot of money by not giving me a million dollar raise. I should levy his assets.

Actually, I suggest he stop paying you. He can give you IOU's. It's *his* money, not yours, so his keeping his own money isn't a 'pay cut' for you.

After all he has no more obligation to pay for your services instead of running up IOU's for the, than the government has to pay for the services it receives on behalf of the citizens, running up IOU's for them.

Your business can then cut costs for its customers by the amount of the money you don't get the same way the federal government can cut taxes.

Indeed, they should cut prices to their customer even MORE, and just tell their other creditors to take more IOU's. Who needs to charge prices - or taxes? Yay debt.

 

[blackangst1]

So where does the blame go?

With any congress that does not submit a balanced budget. Thats it. Presidents dont spend money without congress's blessing, and doesnt spend money congress doesnt approve. 100% of the blame goes to congress. They hold the purse strings. Blaming Obama, Bush, Clinton, et al is a deflection.