Source: IBD

 

Wow, this is a rather surprising data point: “From fiscal 2009 to fiscal 2012, the deficit shrank 3.1 percentage points, from 10.1% to 7.0% of GDP.”

It is even more surprising when you consider its source is the usually conservative Investors’ Business Daily.

Here is a longer excerpt:

Believe it or not, the federal deficit has fallen faster over the past three years than it has in any such stretch since demobilization from World War II.

In fact, outside of that post-WWII era, the only time the deficit has fallen faster was when the economy relapsed in 1937, turning the Great Depression into a decade-long affair.

If U.S. history offers any guide, we are already testing the speed limits of a fiscal consolidation that doesn’t risk backfiring. That’s why the best way to address the fiscal cliff likely is to postpone it.

Yet more proof that the fiscal cliff is a manufactured crisis of minimal importance.

 

Source:
U.S. Deficit Shrinking At Fastest Pace Since WWII, Before Fiscal Cliff
JED GRAHAM
Investors Business Daily, 11/20/2012
http://news.investors.com/blogs-capital-hill/112012-634082-federal-deficit-falling-fastest-since-world-war-ii.htm

Category: Credit, Politics, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

53 Responses to “About That Ballooning Deficit . . .”

  1. rd says:

    Time to invade another country. It is the best way to postpone deficit reduction and inject more money into the military-industrial complex.

  2. ES says:

    I would imagine most of Barry’s clients are rich people who will be paying 23.4% on their capital gains instead of 15% starting next year. I have a suspicion that they don’t consider this fact to be of minimal importance to them.

    ~~~

    BR: We also have them max out their tax deferred accounts (401k, IRA, Keogh, etc) so its much less important

  3. NoKidding says:

    The term fiscal cliff is manufactured to frame an issue, but the story misses the point entirely.

    Debt. Not deficit reduction, total debt. Unless you expect treasuries are on a permanent sub-2 percent plateau.

    Probably not this year, maybe not before 2020, but certainly in my lifetime, there will be major consequences to the deficit spending of these last 10 years (at whatever percentage of whatever arbitrary econometric).

  4. Conan says:

    Here are all the deficits from 1940 till now.

    http://www.davemanuel.com/history-of-deficits-and-surpluses-in-the-united-states.php

    The last year we had a surplus was 2001 & here is the raw numbers since:

    2001 $127.3 Billion Surplus

    2002 $157.8 Billion Deficit

    2003 $377.6 Billion Deficit

    2004 $413 Billion Deficit

    2005 $318 Billion Deficit

    2006 $248 Billion Deficit

    2007 $161 Billion Deficit

    2008 $459 Billion Deficit

    2009 $1413 Billion Deficit

    2010 $1294 Billion Deficit

    2011 $1299 Billion Deficit

    2012 $1100 Billion Deficit

    And look at this graph of Revenues vs Spending. The gap that we have doesn’t convey to me that we are in very good shape. We are back to approximately where we were before the recession in Revenues but where the gap was less than 200 Billion dollars. Today just 4 years later the gap is over a trillion dollars. So this is a growth in the gap of over 5 fold, which to me is quit impressive.

    http://www.intellectualtakeout.org/library/chart-graph/1947-2012-federal-government-tax-revenues-vs-spending

  5. Iamthe50percent says:

    Syria or Iran? Both at once? Probably not, they need to stretch out the wars. I wonder if they will be handing out freight cars full of hundred dollar bills without any records this time too.

  6. mpappa says:

    Who needs taxes when you have a falling deficit? LOL

  7. Apinak says:

    If our political system wasn’t corrupt, we could solve our budget crisis solely through shifting our taxes and spending to smarter priorities. For example, each $1 billion spend on the military creates 11,600 jobs, each $1 billion spend on clean energy creates 17,000 jobs, and each $1 billion spend on education creates 29,000 jobs (http://www.peri.umass.edu/536/). If we cut the $500 billion from the bloated military budget over the next decade as included in sequestration and shift the spending to clean energy or education, two things vital to our future success, we could create 2.7-8.7 million new jobs for no cost.

    As a second example, if we adopted a health care system similar to any of the 37 countries with better health care than the U.S. we could drop per capita health care from the $8,000 we currently spend to closer to $4,000 per person every other country spends. This is a potential savings of over $1 trillion a year.

  8. Conan says:

    Here is another take on the above data:

    All the deficits from 2002 to 2008 = 2,134.4 Billion

    All the deficits from 2009 to 2012 = 5,106.0 Billion

    So in the last 4 years the deficit is 2,971.6 billion dollars greater than in the previous 7 years. Or in other words approximately 2 1/2 times greater in about half the time.

    Again I say impressive, but not in a good way!

  9. Northeaster says:

    “Yet more proof that the fiscal cliff is a manufactured crisis of minimal importance.” -

    I think the amounts CONgress is discussing is minimal, yet thanks to massive public AND private debt(s)(which at this point won’t be paid), why bother?

    I’ll just continue to stuff the mattress relative to my income (as long as I remain employed), I simply no longer have any confidence my own government on their ability to make sound decisions.

    Too much fraud. Too much corruption. Both sides are guilty.

  10. James Cameron says:

    > That’s why the best way to address the fiscal cliff likely is to postpone it.

    I’m not clear what this means, since certainly some important policy decisions need to be made.

    The same data was available last spring, when CBO published its analysis of the president’s 2013 budget:

    http://goo.gl/Axdlk

    As far as whether there are critical policy decisions ahead, one should compare CBO’s projections for different scenarios . . . the short-term issues are economic, the long-term fiscal.

  11. rd says:

    @Iam the 50percent

    Freight cars are just sooo early 20th century. We now distribute hundred dollar bills using more modern methods, such as helicopters and the Federal Reserve Bank of New York. They are still trying to figure out how to do it without leaving e-mail trails though….

  12. Peter Principle says:

    The fiscal cliff is a manufactured crisis, the austerity bomb is not — in fact it’s already going off.

  13. RW says:

    Good chart: When folks ask me why the economic recovery was slow in the USA I point them to that data set. Then I point them to the significantly worse fiscal stranglehold in Europe and ask if they see a pattern. Astonishingly many can’t or won’t.

    You’d think after more than a decade of one side — supply-siders, quasi free-marketeers, austerians, etc — being wrong about most things, from deregulation to the effect of large tax cuts, and then, over the past five years, being wrong about damned near everything from the impact of federal spending to bond prices, that there would no longer be any debate about the deficit much less continuing demands to shrink it now, now, now.

    Don’t get me wrong, I’ve made a lot of money over the past seven years (I began reading Krugman in 2000 and regularly visiting Calculated Risk in 2006) and I’m sure a lot of true believers in the theology of movement conservatism and conservative-libertarianism have been on the other side of my trades (god bless ‘em) but at some point you’ve got to figure the refusal to accept contradictory data has to stop. Wouldn’t you think? /rant

  14. Conan says:

    Next if you were to extrapolate the slope of the line for spending from 1980 to 2000 and extrapolate it out to today. Then spending and revenues would be about the same.

    The problem is the slope of the line for spending went up in the first segment from 2002 to 2007 and then became much steeper again from 2009 to 2012.

    Thus as every number has a numerator and a denominator it is evident to me that the biggest delta change is in spending and it it is not just a revenue question as some propose.

  15. Vincent says:

    Jed Graham oversimplifies the numbers. In 2007 the debt to GBP was -1.2%, in 2008-3.2% than the whopping increase. From 2007 to 2009 the U.S. budget debt increased by $1.252 trillion and during the same time receipts fell by $468 billion. From 2009 to 2012 receipts increased $345 billion while spending increased marginally. In effect from 2007 to 2012 the government increased the debt by over a trillion while real GDP increased by $1.5 trillion. Essentially the federal government bought GDP growth during that period with tax dollars and received back a negligible growth in the multiplier. To return to debt to GDP % numbers pre financial crisis with no cuts in spending receipts would have to increase by $928 billion, a 38% increase from current levels or in effect a 38% increase in taxes on the economy.

  16. 4whatitsworth says:

    If that is true and objective it is encouraging. My guess is that it has some tricky accounting in it. Here is some data on recipts vs outlays. That is how I would look at the financials of a public company.

    http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist01z2.xls

    http://www.whitehouse.gov/omb/budget/Historicals

    http://www.ritholtz.com/blog/wp-content/uploads/2012/11/am-reads.jpg

  17. Apinak says:

    Conan,

    That increase in the debt is understandable when you consider that the financial crisis and recession cost the U.S. economy over $12 trillion dollars.

    http://articles.latimes.com/2012/sep/12/business/la-fi-mo-financial-crisis-cost-better-markets-20120912

  18. forteology says:

    If we really want the numbers to look good, I have an idea. Let’s spend $100 trillion for 3 years, and then reduce that to $50 trillion in the fourth year. 50% reduction.

  19. DeDude says:

    @NoKidding

    The total debt is only a concern if the interest rates are positive and the growth in debt is higher than GDP growth. That may eventually become a problem but right now we have much bigger problems with 8% unemployment (U3) and 15% underemployment (U6). As soon as this bigger problem is solved we should begin working on the smaller problems of national debt and budget deficits as % of GDP. The funny thing is that as soon as you get unemployment solved you get more than half the way of solving deficits and debt, because you get a huge boast in the number of taxpayers and GDP and a reduction in social expenditures.

  20. gman says:

    http://macromon.files.wordpress.com/2011/10/us-as-greece.jpg

    Interest payments for US government debt as % of GDP is at 30yr low!

  21. callotal says:

    holy sausage, 2012 truly is the end of the world—IBD is encouraging deficit spending.

  22. Conan says:

    Apinak let’s see the idea is that the economy lost 12 trillion so a deficit of 5 trillion is no problem or was necessary?? Right???

    So my issue is as follows for 5 trillion dollars what did we get? Did we solve any major structural problem for the US Economy? We spent a lot of money, but borrowed money has to be repaid.

    What long term or even medium term return are we to get for this investment? Or was it just a quick fix without much thought of return? This is really going to sting when it has to be paid for.

    I don’t per say have a problem with spending money, but I do have a big issue not getting a reasonable return on my investment. and please don’t tell me that the only way we could have spent the 5 trillion dollar deficit ( this is just what was over spent, not total spending, there’s a difference) was the way we did. Helicopters in the sky throwing money out the window might have been better. At least the American public would have got their hands on it and made some concrete use of it.

    For example 5,000,000 million in deficit at 330 million Americans is over 15 million dollars for every man, woman and child alive in the US at this time. A staggering sum of money that accomplished very little. just think of what you could have done with your 15 million dollar share, are you happy as to how Washington spent it for you? I’m sure AIG, General Motors, Goldman Sachs, Solyndra, etc, etc, etc are very happy with what happened. Think about it as you and your children will be paying.

  23. Frilton Miedman says:

    I see some convenient cherry-picking of facts above, pointless to debate he same ole yet again.

    Apinak presents the most sensible approach, no offense to Atlas Shrugged fanatics.

    If we’re going to “tax and spend” to undo the mess leftover from Bush’s spending spree & revenues cuts (as the Constitution allows – in the “powers of Congress”), it’s the best bang for the buck to spend on job creation instead of the continued slope of social entitlement dependency.

    I’d rather see more teachers improving my kids education while paying taxes and paying their mortgage, buying stuff, than have the same people having to resort to SNAP, unemployment insurance or welfare because they have no job.

    If that means Dave Koch has to pay more in taxes, Dave will live, though he may have to accept not being able to purchase his 3rd Swiss Chalet in the Alps, he’ll be fine.

    It baffles me how the Neo-cons seem to think jobless Americans just disappear, they don’t, we all fall under one of two categories – Liability or Asset, it’s just that simple.

    This was the reason Milton Friedman advocated a negative income tax, a minimum income guarantee.

    I’d rather see that money go to productive use, than continue listening to Neo-Cons pretend jobless Americans just disappear the way corporate employee’s do when laid off.

  24. Futuredome says:

    The problem with America is general is, they have gotten into their “heads” all the deficits are ‘spending’ related. Now that the “bailout” and “ARRA” have passed, nope they are not.

    One half is still the output left to fill in
    One half is the structural slowdown in the US economy easily understood past peak Boomer spending and automation.

    In otherwords, spending has been slowing down for 2 years now.

    The problem goes beyond spending and even revenues. It is just a simple fact this country is aging and can’t grow as fast. It is the one thing this country won’t accept. So to bring the deficit to the “new normal”, there is going to have to be adjustment in spending/revenue generation not needed for the last 100 years and that adjustment will further slow the return to trend growth(probably about 2.5%).

    People can’t accept this. They want to believe in free market fantasies and intellectual utopias of lassiez faire. My opinion is, if you did have a massive government fiscal withdrawel, it would just not trigger a recession, but destroy the American peoples world view as the recession drags on. That makes for dangerous dangerous times to bourgeois internationalism.

  25. Roanman says:

    Among the factors and if I had to guess without doing the math, my guess for the single biggest factor the deficit has been reduced during this period is the Fed pounding interest rates lower via various QEs, Twists and flat out monetizing Federal debt.

    I’d make it even more profound than the end of Tarp and the other stimulus swindles we have enjoyed.

    Market based interest rates blows holes in government budgets all over this country starting with the Federal government’s.

  26. ceedud says:

    Whew! No worries, I guess. Time to hit the deficits gas pedal! Or just maybe…
    Good point that the cliff is manufactured, but to say we have no worries is short-sighted. Just from the chart above, the fact that the previous 3 yrs average deficit exceeded 6% of GDP is cause for pause. Looking forward, as Boomers retire and utilize social services, these numbers likely ballon to the negative again.
    I’d concede that we extend as needed to avoid the “cliff,” and even tax the rich, however you define it, but we must get serious about entitlement (social security, Medicare/caid) spending.

    ___

    BR: Other than the loons of MMT, no one is saying no worries . . .

  27. 4whatitsworth says:

    Well… I want this to be true and it would change my view however looking at receipts and outlays in 1994 the deficit was -2.9% of gdp vs 1996 -1.4% of GDP (A 3 year period). The change was more than 50%. In 2009 the deficit was -10.1% vs 2011 -8.7% less than a 14% change. The good news is that we are moving in the right direction however it is unlikely that we are moving as fast as the article eludes.

    I would add that in 2008 we were runing a deficit of -3.2 and 2009 was -10.1% (a 250% change that may be the winner for a one year change!)

    http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist01z2.xls

  28. b_thunder says:

    If the rate of deficit growth is negative, the total debt and the amount of interest required to service it (all things being equal) is also growing.

    The patient is sick with high fever. The doctors managed to reduced the rate of “fever growth”, but it gets higher all the time. Ok, not a perfect analogy since the GDP is growing and the Fed is determined to lower the USD (nominal GDP growth.) But nevertheless, we simply do not know at what point the patient will die. Rogoff and Reinhardt studies suggest that the patient (USA) is already well past the 90% debt – the stage of “permanent paralysis.”

    Even if the probability of a major debt-driven collapse is very small, I think we should do EVERYTHING to minimize it even more. Double Mitt Romney’s tax from 13% to 26%? Yes. Triple it to 39%? Triple Yes Yes Yes.

    But unlike CNBC parrots repeating talking points, I’m of the similar opinion on the subject of global warming: we do not know how much more greenhouse gasses we can emit before it’s “too late.” We need to do EVERYTHING to limit that probability as well.

  29. mddwave says:

    The US debt from March 2009 to July 2011 increased at a rate of 4.516 billion per day.

    After the debt ceiling Obama/Republican lead House showdown in July 2011/August 2011, the US debt rate decreased to a rate of 3.578 billion per day. It seems that a joint effort by the president and republican house reduced the rate.

  30. SecondLook says:

    I like to look at the Federal Debt rather than deficits myself. Over the long haul, the level of indebtedness is, I think more significant a factor.

    I think the following table that I constructed might be interesting to some of you; and, what you normally won’t see. What it shows is the Federal Debt adjusted to reflect inflation, i.e. the debt in current dollars. Rounded off for simplicity

    1950: $2.451 trillion
    1960: $2.220 trillion
    1970: $2.195 trillion
    1980: $2.528 trillion
    1990: $5.672 trillion
    2000: $7,555 trillion
    2010: $14.260 trillion

    Note the relative stability of the debt from 1950 to 1980, although nominally it rose from 257 billion to 908 billion. One of the advantages of borrowing in a world where there is inflation, the value of what what was lent increases, but but it’s paid back with cheaper money.

    Parenthetically, in a deflationary environment, you’re not only paying interest, but paying back with money that worth more than what you got. One of the reasons economists consider deflation a real nightmare.

    Worth noting, while we ran a budget surplus from 1998-2001, the Federal Debt still increased by several hundred billion. Mostly due to off-budget items that are extremely rarely discussed.

    We’ve sort of allowed ourselves to forget that first huge increase in the 1980′s, a more than doubling of the debt. On a percentage basis, it was more than what happened in the 2000′s

  31. gkm says:

    So how much of the deficit reduction was a result of capital injection aka money printing? Looks like a fair bit based on the circa 2002 analog. Is that sustainable? It is until it isn’t. The thing is that the previous times cited were real reductions in the deficit, not nominal.

    ~~~

    BR: Printing does not reduce deficits; it (arguably) funds them

  32. Joe Friday says:

    Conan,

    Thus as every number has a numerator and a denominator it is evident to me that the biggest delta change is in spending and it it is not just a revenue question as some propose.

    I’m afraid the independent non-partisan Congressional Budget Office disagrees with you.

    The massive decline in federal income tax revenue as a result of the numerous rounds of tax cuts which overwhelmingly benefited the Rich & Corporate which were enacted by Chimpy Bush and the Republican Congressional Majority are far and away, not even close, acutely responsible for our current and mid-term future projected federal budget deficits & debt.

  33. gkm says:

    Thus, my point. The more capital you inject, the less return you can accrue on that capital. Interest rates in the US aren’t reflecting deficits. They are reflecting the amount of capital.

    The more money you print, the more capital there is. The more capital there is, the less return because the call on real returns can’t increase (dependent on real growth). Interest rates fall, until they can fall no more.

    ~~~

    BR: I have no idea what you are saying. Are you suggesting that printing money reduces the deficit?

  34. gkm says:

    It would have been great if the author had gotten his facts right. “Positive numbers equal smaller deficits“. So large negative numbers equal, larger (and larger) budget deficits with an unrealistic figure tacked on the end as a projection for 2013 possibly based on that cliff thingy. Oops.You get what you pay for.

    ~~~

    BR: I cannot find the quoted statement you reference anywhere in either the column or in any of the comments. Care to explain what it is you are referencing? Or is this merely another straw man argument?

  35. steelhead says:

    Barry:

    I agree that printing does not reduce deficits. There is a need to fund infrastructure projects for the commons. You experienced the lack of electricity and basic services where you have your primary residence. Is it the unions fault, is it a corporate failure, or a lack of cohesion among the residents? Global warming is real. Especially in the North & South Poles. You have the financial resources to rebuild without Federal or State resources. I just do not think that the majority of houses in the affected area should be rebuilt. There need to be a barrier and wetland restoration to act as first wave to avoid another incident.

  36. gkm says:

    When you simply inject capital in the form of money into a system, the returns on the entire system must fall and particularly when the money goes to fund government. Any return from government, if there can be said to be one, would be smaller than the private sector.

    The money that has been injected can only earn a real return based on what would be a fairly fixed amount of output in the short run and a less augmented amount of output in the future because the money financed government and not private entrepreneurship. Said another way: the capital, including the new money, must earn a return based on short term fixed outputs of the economy.

    At present, the more capital the US injects the less the interest rates will be. In the case of circa 2002, I surmise (without the underlying data) that a similar injection of capital brought down interest rates. As the deficit becomes greater and greater, the impact of interest on the deficit is greater and greater. A reduced interest rate helps the deficit year on year. Thus, money printing can reduce the relative amount of the deficit – at least in the short run.

    If the deficit were all interest payment for example and the interest rate falls from 4% to 2%, voila!

    ~~~

    BR: Sorry, the phrase “Inject Capital” is too imprecise for me to follow your argument.

  37. Conan says:

    Good morning Mr Friday:

    1) please go back and note the comments on the slopes of spending, this is important to understand.

    2) Revenues are now back to the levels levels before the “Great Recession”, but spending is far and away greater.

    3) I have commented on taxes, both a flat tax as suggested by Bill Clinton and the 2% Wealth tax, plus the original intent of the 1913 Income Tax Law.

    4) The deficit of 5 Trillion was poorly allocated, it was a show to give a few benefits to the people in need, the vast majority of the money went to Corporations. Please see my comments to Apinak

    5) Now if we confiscated the entire wealth of all the Billionaires in the United States to pay for the deficits. Not saying to raise their taxes, but to take it all. Then we would get 1.37 trillion and have to go after the millionaires for the remaining 3.8 trillion to pay for just the last 4 years deficit!. (Please see below notation) So when you discuss taxes only you won’t get there without going after the middle class. Otherwise you will have to consider that we are way out spending the historical “slope” as I defined from 1980 to 2000.

    http://en.wikipedia.org/wiki/Forbes_400
    In 2010, the combined wealth of the 400 was $1.37 trillion, up from $1.27 trillion in 2009 but still below the total in 2008 ($1.57 trillion) and 2007 ($1.54 trillion). The minimum to make the list in 2010 was once again back to $1 billion. It had fallen below $1 billion in 2009 for the first time since 2006.

    Hope you have a good Thanksgiving!

  38. gkm says:

    I’m not understanding why the definition of capital (Wealth in the form of money or property, used or accumulated in a business by a person, partnership, or corporation.) would be difficult to understand in this context.

    You don’t equate capital with money. What the heck do you think money is then? How can you manage money and not know what money is?

    I sense that there is an opportunity to provide a deeper understanding of the nature of money and many other things, but this isn’t the price point I’m willing to exchange at. You can get hold of me if you want to discuss further.

  39. Apinak says:

    Conan,

    What is it you think we spent $5 trillion on? The vast majority was recession related, automatic spending goes up, revenues decline. Obama can really only be blamed for two factors increasing the deficit. We passed the stimulus bill, $780 billion of which 40% was tax cuts. Most economists believe this kept us out of a much deeper recession and it was only a small part of the deficits. The other mistake he made was extending the Bush tax cuts that were a much bigger driver of the deficits.

    http://m.washingtonpost.com/blogs/wonkblog/wp/2012/08/28/republican-national-convention-the-one-graph-you-need-to-see-before-watching/

  40. Conan says:

    Apinak, Nice article, but the stimulus was 780 billion out of a 5,000 billion dollar deficit or 15.6% and is not representative of the whole negative balance

    So let’s focus directly on deficits:

    Washington Post fact checker Glenn Kessler has looked at this in depth, and made his attempt at adding up who is responsible for the $1.3 trillion 2011 deficit alone. His rough estimate is that economic factors accounted for about 46 percent of this single-year shortfall, while Obama policies accounted for 44 percent, and Bush-era policies for about 10 percent.

    A more useful way of looking at things could be to reslice deficit numbers into cyclical and structural figures. The cyclical deficit is caused by stuff that varies from year to year, like food stamp spending, which is driven by unemployment. The structural deficit is welded into the structure of the federal budget like steel beams. It reflects chronic problems that only worsen, such as the rising cost of health care.

    According to CBO, about $367 billion of the $1.3 trillion 2011 deficit was caused by cyclical stuff. Some $928 billion was structural. This is the part we really need to worry about, according to such budget watchdog groups as the Concord Coalition.

    http://www.csmonitor.com/USA/DC-Decoder/2012/0928/Where-did-the-mammoth-US-budget-deficits-come-from/%28page%29/2

    So bottom line I repeat my former statement, what did we get? Was there any medium to long term benefits? Were any structural flaws in the economy fixed. I have deep reservation that we made a good investment in our future. Further more are we going to keep doing the same thing? Remember what Eisenstein said about insanity!

    Both spending and revenues are out of balance. Revenues will need to go up, but to get the system in balance spending will have to go down ( most likely even more). It is only half the picture to talk about one and not consider the other. We can neither spend our way out of this with borrowed money ( if it could be done the Japanese would be champs) nor can we tax our population to pay for anything that they want ( look at France).

    We need a sensible road in the middle to decide what we want to spend on, who gets it and for how long and an equitable way to raise revenues.

  41. Joe Friday says:

    Conan,

    1) please go back and note the comments on the slopes of spending, this is important to understand.

    That’s a circular and unsubstantiated argument..

    2) Revenues are now back to the levels levels before the “Great Recession”, but spending is far and away greater.

    We had an interceding depression.

    3) I have commented on taxes, both a flat tax as suggested by Bill Clinton and the 2% Wealth tax, plus the original intent of the 1913 Income Tax Law.

    A) As I’ve previously documented, a “flat tax” overwhelmingly benefits the Rich & Corporate.

    B) A “wealth tax” would be an excellent policy.

    C) I’m dubious you know the “original intent of the 1913 Income Tax Law“.

    4) The deficit of 5 Trillion was poorly allocated…

    Indeed.

    It was overwhelmingly created by tax cuts that overwhelmingly benefited the Rich & Corporate.

    5) Now if we confiscated the entire wealth of all the Billionaires in the United States to pay for the deficits. Not saying to raise their taxes, but to take it all. Then we would get 1.37 trillion…

    That’s merely wealth, not income, and it’s just one year. The failed tax cuts have been in effect for more than 12 years. Adjust your metrics accordingly.

    (Please see below notation)

    Wikipedia is OPINION.

    Washington Post fact checker Glenn Kessler…

    Kessler couldn’t find his ass with both hands.

    Try the economic columnists David Leonhardt and Paul Krugman at the NYT.

    His rough estimate is that economic factors accounted for about 46 percent of this single-year shortfall, while Obama policies accounted for 44 percent, and Bush-era policies for about 10 percent.

    Now that’s a kneeslapper !

    The graph Apinak pointed you to is an illustration of the CBO numbers. It’s the tax cuts.

    Revenues will need to go up, but to get the system in balance spending will have to go down ( most likely even more)

    You can’t get there from there. As I recently posted:

    You could eliminate ALL non-defense discretionary spending -

    Eliminate all the air traffic controllers and shut down all the airports, shut down the entire federal prison system (and release all the prisoners), shut down the federal court system and eliminate the federal marshals, shut down the Justice Department along with the FBI and the ATF, shut down the customs service and eliminate the border patrol and Coast Guard, and shut down the CIA/NSA/DIA/Homeland Security, and MORE.

    - and STILL not even come close to balancing the federal budget.

    IT’S A REVENUE PROBLEM.

  42. Lukey says:

    Isn’t this merely a case of an economy recovering from a very sharp recession? It jumped from 3% to 10% as a result of the “great recession” and it has now drifted down to about 7% (which is still more than twice what it was just prior to the downturn). Unless one believes we have solved the sub-trend GDP growth and job creation problem in the US economy, it would seem that 7% is likely the new normal for the structural budget deficit. It might drift on down to 6 or 5.5% over the next decade but it sure doesn’t look like “problem solved” to me. What am I missing?

    ~~~

    BR: You are correct. Now go tell all those eejits belatedly screaming about deficits that it mostly a case of an economy entering a very sharp recession . . .

  43. Conan says:

    http://www.economicpolicyjournal.com/2012/10/the-federal-budget-as-percent-of-gdp.html

    So going forward and using the past to make a better future. It would seem to me looking at this graph that we need to target somewhere between 19 to 21% of GDP for Spending and Revenues. Thus Revenues would have to increase and spending would have to decrease.

    Top areas of spending to look at:

    Discretionary – 31% of the Budget:

    Military spending 57% of Discretionary Budget, 18% of total budget- there is no reason to spend more than the next 19 countries combined and get out of Irak and Afghanistan and close many of the US Military bases around the world.

    http://news.nationalpost.com/2011/10/28/graphic-mapping-a-superpower-sized-military/

    Mandatory 62% of the budget:

    Social Security, unemployment & Labor – 52% Mandatory & 34% of overall budget – Means test it and have it be a flat benefit to guard against poverty, period.

    Medicare & Health – 36% of Mandatory & 24% of overall budget. Let’s see if Obama Care reduces or contains cost. If not we’ll have to try again.

    http://nationalpriorities.org/budget-basics/federal-budget-101/spending/

    Revenues:

    Flat Tax at x% for all Income, with a deduction of say 50,000 dollars. No Exemptions what so ever.

    Wealth Tax of Say 2% for amounts above 2 million, but change the Inheritance tax to exempt amounts up to 5 million to protect small businesses and farms.

    Other new simple ideas to get revenues up to the goal. VAT Tax for consumption?

    http://news.nationalpost.com/2011/10/28/graphic-mapping-a-superpower-sized-military/

    Bottom line there has to be a plan to achieve balance. The more simple and straight forward the better. No 5,000 page bills with hidden benefits for lobbyist and ear marks for pork! I believe if the president brought a clear plan to the people and sold it to them it could be done. Maybe I am naive to believe in the power of the people.

  44. ilsm says:

    The austerity bomb is a good thing, until it hits the military industry complex.

    While the rest of the world has austere militaries the US spends half the world money for war.

    According to the NATO report Apr 2012: Financial and Economic Data Relating to NATO Defence

    US spending in 2010 was 5.4% of GDP,UK 2.7%, Germany 1.4%, France 2.0%, NO without UK/US: 1.6%.

    US military industry complex spends nearly 3 times what Europe spends as a part of GDP.

    US military industry complex needs some austerity!

  45. Conan says:

    Forgot to say under the part for Social Security to allow private pensions, 401K and IRAs to fund retirement. This would allow a way for an individual to plan for what he wants. SS is just a minimum guarantee to prevent poverty.

    Here are the current guidelines:

    http://aspe.hhs.gov/poverty/12poverty.shtml

  46. DeDude says:

    @Conan;

    Social Security and Medicare (with all its components) are supposed to increase its spending as % of GDP. The baby boomers are getting to the benefit age, and unless we decide to rob them of the benefits they already paid for, that part of the budget is naturally going to increase as a higher % of the population get older. Problem is that the trust fund previously was used to pretend that deficits and national debt was lower than it really was, so snapping back to reality will be harder. Doing that by robbing the middle class of the benefits they paid for, is not a solution I find acceptable.

    Social security is not the problem neither on spending nor on taxing. It needs a few small adjustments (or a flu epidemic) to be in perfect shape as long forward as anybody can reasonably look into the future. There is no need to mess with success just so that some arbitrary % of GDP number can be obtained for “national budget”. Just take social security and its trust fund off the national budget (as Nixon did with Fannie and Freddie) then our national spending will have been greatly reduced (plenty of stupid people obsessed with stupid numbers would be fooled).

  47. Conan says:

    Dedude, thanks for agreeing with most of the proposal.

    Medicare I leave up to Obama Care to prove or disprove it’s worth.

    http://swampland.time.com/2012/08/16/fact-check-obamacares-medicare-cuts/

    I still say you have to means test SS. One way would be to treat all incomes as “Income” and means test it the same way they do for income from a job. What difference does it make where the money comes from. Here is how the present system works:

    http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/236/~/how-work-affects-social-security-retirement-payments

    If I’m getting 50k or 100 k or a million dollars in annuity or dividend income or whatever, should it not be counted as Income? Should I still be getting full SS? Here is what SS considers or doesn’t consider to be income:

    Social Security only considers earned income from an employer or self-employment, up to a cap of $106,800.00, to count as income for their purposes.

    Typical sources of unearned income include:

    inheritance
    pensions (from other sources)
    income from investments
    income from annuities
    IRA distributions
    interest earned
    401(k) distributions
    proceeds from the sale of a home or other property
    other government payments
    etc.

    These sources of financial support do not affect the amount of your monthly benefit check, nor are they subject to being taxed under FICA.

    http://wiki.answers.com/Q/What_is_considered_income_while_on_Social_Security

    Bottom line SS is a safety net to protect against poverty. It really isn’t a retirement program to live a middle class dream of retirement. The maximum benefit you can draw is $$2,513 per month. The average amount drawn is $1,230. There is no minimum payment, you could literally receive $1 per month. So Max is $30,156 per year and the average is $14,760. The poverty table I quoted for just one person was $11,170. SO you see the average payment is basically to keep you out of poverty!

    http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/5/~/maximum-social-security-retirement-benefit
    http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/13/~/average-monthly-social-security-benefit-for-a-retired-worker

    So I am not saying SS per say is a problem, but we need to see how it is being spent, for what purpose and to who.

  48. Joe Friday says:

    Conan,

    Social Security, unemployment & Labor – 52% Mandatory & 34% of overall budget … Medicare & Health – 36% of Mandatory & 24% of overall budget.

    Just as a start, all of Social Security and half of Medicare are SELF-FINANCED, and NOT funded from General Tax Revenues.

    I’m afraid your metrics are all wrong.

    Flat Tax at x% for all Income, with a deduction of say 50,000 dollars. No Exemptions what so ever.

    Again, HEAVILY benefits the Rich & Corporate and would bankrupt the Middle-class.

    Bottom line there has to be a plan to achieve balance.

    Nothing you’re advocating would do so.

    The more simple and straight forward the better.

    Great.

    Let’s simply reverse the failed policies that created the problem.

    ~~~

    We know what works. Our greatest periods of economic prosperity in this country were when the top federal income tax brackets were 87% and even 91%.

  49. Conan says:

    Good afternoon Mr Friday,

    1) Percent of budget is percent of budget & already answered the medicare and SS question to Mr DeDude.

    2) You are wrong about the flat tax idea. For examples lets just say X = 25%,

    A) You earn zero to 50 k in a year ( Income can be Salary, Capital Gains, Interest, Dividends, etc) , taxes owed = 0

    B) Say you earned 250k, so minus 50 k you would pay taxes on 200 k or 50 k in taxes.

    C) Let’s say you are a Corporation & since the Supreme Court says they are people you would pay 25%

    further examples
    Romney paid 14%,
    Apple paid 1.9% on foreign earnings because it leaves cash over seas.
    Warren Buffet paid 11.6%
    General Electric paid zero and only 2.3% for the past decade.

    Please re-evaluate your position this benefits the rich and penalizes the poor.

    Finally I am open to your ideas as to what percent of GDP should be the goal and the spending and revenue levels to get there. Do the math, do the research and let me know. But we as a nation have to find balance.

  50. DeDude says:

    @Conan;

    I am not sure we define “means test” the same way. The “means test” proposals I have heard about were proposing that if you had a high level of income, you would not be getting (or only get part of) the monthly check you had earned by your payments of social security taxes. The math of those proposals either hit at rather low income levels, or don’t make much of a dent (denying 30K per year to the 100,000 highest income old people only saves $ 3 billion).

    I agree with expanding the type of income that is subject to social security taxes, although your specific list has certain problems of double taxation (you contribute to IRA accounts with money already taxed by SS). I also think we should change the cap to a two tier system; up to the current cap you pay regular rates and past that cap you should pay 1-2%. Right now the poverty insurance provided by social security is excessively funded by middle and upper middle class people and not sufficiently by high-income earners.

  51. Conan says:

    Dedude, I agree that I misused the term” Means Testing”. Thanks for your feedback.

    However by redefining the word income from the limited use of a salary or self employed to include Capital Gains, Dividends, Interest payments, etc we change the equation for:

    Revenues – tax all income the same, why should there be a difference between making $10,000 by working for it as an Employee, earning it by running my own business or making it as an Investor. We all hopefully made a living and should pay the same amount. ( I favor the flat tax as explained above)

    Medicare as taxing all income will increase the fund.

    Social Security in both the collection of taxes and the way benefits are paid out.

    http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/236/~/how-work-affects-social-security-retirement-payments

  52. Joe Friday says:

    Conan,

    1) Percent of budget is percent of budget & already answered the medicare and SS question…

    You do not comprehend the federal budget.

    2) You are wrong about the flat tax idea.

    Once again, you are arguing with the originators of the “flat tax”:

    Professors Robert Hall and Alvin Rabushka, freely admitted in the 1983 edition of their book, that a ‘Flat Tax’ will be “a tremendous boon to the economic elite from the start”. In an appendix to their book, Hall and Rabushka estimated that their flat tax proposal would increase the tax bill for the lowest income families by 78 percent, and decrease the tax bill for the very richest families by 41 percent.

    Throwing money at the Rich & Corporate has never worked economically.

    Please re-evaluate your position this benefits the rich and penalizes the poor.

    I don’t need to “re-evaluate”. I’ll go with the originators of the flat tax.

    Finally I am open to your ideas as to what percent of GDP should be the goal and the spending and revenue levels to get there.

    Simple.

    Reverse the failed economic policies that created the problem.

    Do the math, do the research and let me know.

    Been there, done that.

    But we as a nation have to find balance.

    Nope.

  53. Okay, thanks for coming by to debate this ad nauseum !