Houngan
1941
That’s what is so infuriating. By doing nothing, absolutely nothing but filibustering and blocking legislation, you could have major cuts to the military budget PLUS revenue increases by letting the cuts expire and they won’t do it. I’ll bet you any amount they won’t.
H.
Dave, I’m pretty sure the “balanced budget over the business cycle” refers to keeping the debt from increasing significantly in relation to growth, not to somehow, rather unbelievably, retiring it. Modest payment down of the debt is certainly possible but just running annual budget surpluses (as opposed to deficits) and continuing economic growth could decrease the debt in relation to GDP.
Houngan
1943
Right, but it seemed like “it never came close to wiping out the debt” is a criticism of the very method we agree could possibly work to do such a thing. You know, I’m running a surplus here, what more do you want from me?
H.
Part of the problem is Obama made a promise in the 2008 campaign that he would not raise taxes on the middle class. Which of course would happen if the bush tax cuts in total expired. For him to keep both pledges (not raise taxes on the middle class, raise taxes on the rich). He needs to somehow decouple the middle class bush tax cuts from the rich ones, or let them expire and provide the middle class with their own tax cut. But how do you do that with a Republican congress?
Remember that while the bush tax cuts take away around $450 billion annually from the budget, about $100 billion of that are the tax cuts for the rich. The rest are for middle and lower class.
Of course my own feeling is its a dumb promise, and one that is handicapping him. And he should raise taxes on the middle class by letting all the tax cuts expire. I think the contraction on the economy would be very slight.
It’s only unbelievable in the context of modern American politics :-). Here’s a quick wiki quote:
The United States has had public debt since its inception. Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly reported value of $75,463,476.52 on January 1, 1791. From 1796 to 1811 there were 14 budget surpluses and only 2 deficits. The first dramatic growth spurt of the debt occurred because of the War of 1812. In the first 20 years following the War of 1812, 18 surpluses were experienced and the US paid off 99.97% of its debt.
The second dramatic growth spurt of the debt occurred because of the Civil War. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war. In the following 47 years America returned to the practice of running surpluses during times of peace, experiencing 36 surpluses and 11 deficits. During this period 55% of the US national debt was paid off.
I’m familiar with the history; the adjective stands. The economics of postwar consensus welfare states - even weird ones like the United States - are rather different from those of early 19th century night-watchmen states. I think in the event that an alien invasion and/or the Rapture made it possible to implement a sound Keynesian fiscal approach the debt would be progressively (but very slowly) brought closer to retirement via debt-to-gdp shrinkage and the increased impact of debt-payment efforts when they did infrequently occur.
Houngan
1947
That’s why I’m for letting the whole thing expire, it doesn’t really have teeth unless you throw in the middle-class chunk. Maybe one less console or $500 electronic doodad for the 8-year-old, but that’s just the hard choice we have to make.
H.
ShivaX
1948
Well we were running surpluses in a time of peace for a while.
We just haven’t had peace in a decade.
Tax cuts sure didn’t help either, those alone destroyed any surplus and that was before we got involved in a bunch of wars.
Agreed, it’s an absolutely necessary first step, and I routinely point to Clinton as the only fiscally responsible President in recent times. In retrospect, my anger over the current crisis led me to overstating my case. I don’t think it would have lasted, though, even had Gore won–Democrats and Republicans alike love to shower largesse on their constituencies. Would have been nice to find out, though–anything would have been better than Bush II, which we’re still paying for, literally.
ShivaX
1950
Plus if you let it expire you could introduce a new tax cut bill for the middle class. Of course the GOP wont let it pass without a cut for rich people, but let them vote down a tax cut and see how that plays with their base.
I don’t think it would have lasted, though, even had Gore won–Democrats and Republicans alike love to shower largesse on their constituencies.
Iraq and the Bush tax cuts are pretty hard to beat in a Democrat-led counterfactual without just piling the wealth of empires in square-mile heaps and dropping napalm on it.
Well you can’t really do that till 2013 though (since thats when they expire). So it doesn’t help much for this election. Good strategy for 2014 though.
That is a great (and very quotable) image.
I’m kind of hoping democrats in the house defeat the deal and we end up with the payroll tax cut and unemployment insurance added to sweeten the deal.
Then again if this deal falls through I’m nervous about the result. Tomorrow’s D-Day
I don’t think anyone is likely to get or give a better deal than this at this point. We take this or push the economy over the ledge.
ShivaX
1956
Oh yeah this is the Dems, their definition of “long term planning” is deciding what to do on the weekend on Tuesday.
Well that might just happen
http://twitter.com/#!/fivethirtyeight
My latest extrapolation from @thehill’s whip count: R’s approve 153-87, D’s against 59-132, bill FAILS 212-219.
My latest extrapolation from @thehill’s whip count: R’s approve 153-87, D’s against 59-132, bill FAILS 212-219.
I really, really hope this is wrong. I’d much rather see Obama’s “cuts + revenue increases” than the curent package, but I’d much rather see the current package than a default.
Haha, awesome job Jeff. Can’t believe you actually got a question through to Bachmann.
As I understand it any modern industrial government is going to need to a run a mild structural deficit to finance long-term projects that shouldn’t be paid for in a single year. The up/down surplus/deficit Keynesian deal is supposed to be relevant to baseline, not absolute.
For a variety of reasons central banks and economists have really soured on Keynesian demand management, preferring to rely on just monetary policy, which can usually get the wanted effect more accurately. When the economy really, really collapses though it’s debatable how much power the central banks really have on demand, which is why Keynes comes back up.
Only about 40% of debt is foreign-held, and since it’s mostly short-term financed devaluation isn’t going to help much. Not sure how much effect the short-term weight impacts the inflation route. The other way to get debt down would be to get the economy moving again; in the GDP/debt ratio GDP matters quite a bit.
Technically paying off the national debt at this point would be a really, really big “forced savings” government program.
