Economically, much of the talk about deficits is hysteria. A budget deficit of less than 4% of GDP is not a good thing, but it rarely results in catastrophe either, because inflation and GDP growth steadily erode the value of past debt. As long as the deficit is less than inflation + GDP growth, the government is unlikely to get into much trouble. It's possible that this borrowing may crowd out private borrowing, but at least over the last decade, this has obviously not been the case.
The reason not to run budget deficits (other than in times of war and depression) is prosier: it's bad political economy. Governments shouldn't run deficits to fund ongoing spending for the same reason that it's not a good idea to run up credit card debt to pay for groceries.
But that's not the point of worrying about the budget deficit. The point of worrying about the budget deficit is to bash your political opponents. Why this works, given the obvious hypocrisy of all parties on this score, is beyond me. But apparently it does, or at least a lot of people think it does, and so we're stuck with the current silly debate over how bad our budget deficits are, and more importantly, who we can blame them on.
Hence this graphic from David Leonhardt and the New York Times has touched off another round of how much can we blame on Bush?
These responses from Andrew Sullivan and Kevin Drum, both serious people, are about par for the course:
Kevin writes:
That is: It Was President Bush, Stupid. That's just a thumbnail on the right, but you can click on it to see the full-size version.
While Andrew says:
Overwhelmingly: the GOP and Bush, a fact the vast majority of the right simply ignored for the past eight years. Leonhardt lays out the facts that Glenn Reynolds and his fellow partisans keep denying
Well, actually, I think there was a Democratic congress involved a couple of times. But who cares?
No, I mean that seriously. Who cares? The whole debate seems totally weird to me, and highly inflected by an arbitrary choice of endpoints which makes it seem as if George Bush squandered an $800 billion deficit bequeathed to him by Clinton, which was his sacred duty to preserve in amber.
But, just for starters, that $800 billion was not a real number. The budget surplus was $232 billion in 2000, about $292 billion in today's dollars, or about 2.5% of GDP. That is, coincidentally, about what we lost in revenue when the stock market bubble burst and we lost all that lovely capital gains revenue. The imaginary number comes from assuming "current law" as of 2000. Due to some quirky rules, this does not just mean assuming that Bush didn't spend more or tax less than Clinton. It actually means assuming away some things Clinton *did* do, like the $50 billion annual "temporary" AMT fix.
Moreover, even if this had been something like a real number, we would not have arrived in 2008 with an $800 billion surplus. Any president would have done about what Bush did--some combination of spending it, and cutting taxes. The American public was not going to happily pay an extra 6% of its income to Uncle Sam so that we could pile up some massive wad of cash. And if they had, by 2008, we'd simply have been pointlessly imposing deadweight loss on the American public through unnecessary taxes.
The correct assessment, I think, is how much of the change from zero that Bush bequeathed Obama. And there, the picture is more complicated. Bush left a very small structural budget deficit--until the massive financial crisis. The change since then has mostly been either structural (tax declines), things that Obama participated in as president-elect or senator (the bailout) or things he authored (the stimulus).
But more importantly, the deficit now is not what matters. Any Republicans who are using it as a political tool to bash Obama should be ashamed of themselves; whatever you think of the stimulus package, one year of massive borrowing is not going to kill us, and the impact on future generations will be small.
The graphic's equally arbitrary end date obscures the real worry: the years after the current crisis. By then, it will make about as much sense to blame them on Bush's fiscal policy, or Medicare Part D, as it would on FDR's fiscal policy, or Medicare Part A. Social Security and Medicare Parts A-C will be driving far more of Obama's deficits than anything Bush did.
Don't believe me? Iraq is now at $120 billion a year, and scheduled to decline. It seems churlish to blame Bush for Medicare Part D, given that the Democrats' main complaint was that it wasn't expensive enough, but let's go ahead and blame him anyway: $35 billion a year. The tax cuts sunset in 2010; after that, Obama has to affirmatively act to extend them. The structural deficit projected in 2010 was a little over $100 billion.
But what about all the debt he racked up? Net public debt rose less than 4% of GDP during Bush's presidency. Net interest (aka Cash Interest We Pay Bondholders) went from $223 billion in 2000 to $244 billion in 2008; adjusted for inflation, and as a percentage of GDP, it actually fell. If we are entitled to expect Bush to close the budget deficit with those kinds of numbers, then we ought to be able to expect it from Barack Obama. Bush's deficits are not holding him back.
But this is what we have been told to expect:
How is a $118 billion structural deficit, $35 billion in Medicare Part D, and a theoretical end to the Iraq presence forcing Barack Obama to spend nearly $1 trillion in 2018? How is it forcing him to spend roughly $650 trillion more than he takes in in 2012?
This is not Bush's fault. And you know what? Even if it were Bush's fault, who cares? It's like those people in their thirties who spend the whole decade in therapy and get into long weepy conversations over bottles of wine about how they can never have a healthy relationship because their father was so cold and distant, and their mother was a perfectionist harpy.
I mean, hey, it sounds like your parents were terrible. But this is not actually very useful information. Dad could get down on his hands and knees and admit that he was the most horrible father in the entire world, and beg for your forgiveness, and guess what? You're still lonely and balding and drinking way too much mid-priced Chardonnay. No matter what Dad did, he can't fix it. You have to be the one to call your girlfriend and say "I love you." If Dad does it, she'll just get all creeped out.
The problem with the budget deficit is not any particular program, or even any particular tax cuts. It is not that George Bush or Obama is a bad person who does bad things. The problem with the budget deficit is that, unlike the deficits George Bush ran, the deficits projected under Obama (and beyond) are actually large enough to potentially precipitate a fiscal crisis. If our interest rates suddenly spiked up, perhaps because lenders were worried about the size of our budget deficits, we'd find ourselves in the kind of nasty fiscal jam that regularly plagues third-world countries. The difference is, no one has enough money to bail us out.
Obama is the one who will have to prevent this. Yet instead of plans, we're getting fairy numbers from the OMB. That's worrying, and it's sure not George W. Bush's fault. His OMB liked to inflate the deficit projections, so that they could take credit for a mostly imaginary reduction.
Not that I want to use the budget projections to bash Obama. For one thing, those out-year projections have hte same fantasy quality as that $800 billion surplus we never had; reality will be very different, and if it follows the pattern of the last ten years, the deficits won't be as high as these projections. (Though cutting them in half would still leave a giant deficit). Also, I assume that Barack Obama does, in fact, have some plans to cut the deficit. I probably won't like those plans, since I expect they involve hog-wild spending and very large tax hikes.
If (when) he does those things, I'll probably scream like a stuck pig. But I promise to confine my criticism to the actual programs, not their theoretical effect on the budget deficit.
Sigh. We get many paragraphs as to why this is all no big deal, and then this-
"The problem with the budget deficit is that, unlike the deficits George Bush ran, the deficits projected under Obama (and beyond) are actually large enough to potentially precipitate a fiscal crisis."
Yes, exactly. Things are way out of control. The fact that the other side is just as bad ("tu quoque") does not make any difference. The American electorate has to get a grip and demand some semblance of responsibility.
The situation is *not* infinitely sustainable. At some point the USG will go the way of California.
And New Jersey. And New York. And Michigan. And any of the 20 other states that are looking bankruptcy square in the eye.
Deficit spending didn't do this. CHRONIC deficit spending did.
It might sound nice to say "as long as we're only borrowing less than 4%/year, inflation and income growth will cover us," but this is the worst kind of foolishness. It presumes that governments are not only highly disciplined, but are also finely tuned surgical instruments.
If there is anything that we have learned since JFK, the Federal and State governments are only marginally more disciplined than pirates, and half as ethical.
Does Bush share the blame? Absolutely. A full, stinking portion. Medicare D was stupid, and every fiscal conservative TOLD him that it was stupid. Out of one side of his face he was complaining that Social Security was going bankrupt, while the other side pushed D. What a complete clown.
No Child Left Behind? Please. Anyone with a school age child knows that it's "no bar set too low," with a side helping of "no barrel not porked."
And, again, conservatives TOLD him that this would happen.
George Bush appears to be a man of great Faith, and I respect that. But that's where it ends. The man is a fiscal fool.
My mother told me "two wrongs don't make a right."
We've gone from a fiscal fool, to a fiscal dolt. As dumb as Bush is about economics, he's a nobel laureate compared to Obama.
As the veneer wears thin on this pop-culture icon it's becoming more and more apparent that he truly is Chauncey Gardner - both in terms of economics and foreign policy.
The NYT picture forgot to mention one thing, that's been mentioned here by people who ostensibly aren't as "learned" as Timmy Geithner: those Obama lines have been done in barely 100 days, while the Bush lines took 8 years.
George Bush steered us into the ice field; Chauncey's now screaming for "Flank Speed!"
Nice.
Yeah, but look, the NYT article with the cute graphic was published so Democrats could have talking points with which to beat Republicans over the head.
That CBO graph has been a killer, and is still out there. This new graph gives Democrats someone to blame, while presenting a "shiny pony" to distract attention.
Funny that.
Do you get the impression that the Democrats almost have an "IT'S OUR TURN TO WRECK STUFF!" attitude? There's almost a petulance to this.
that's what's so infuriating. Instead of either side doing what's right, they're only interested in the spy vs. spy crap against each other.
The people aren't even pawns - we're more like distractions.
This is ultimately how we got into this mess. Each side has contributed plenty to the debt, but the only thing that matters to them is that they get their turn to eat at the trough. For a very long time the economic power of the US economy was able to carry the load.
FDR's borrowing would have been catastrophic if it hadn't been built upon an already very-low debt. Ditto LBJ and Reagan. They all spent like drunken sailors, but they did it against a debt burden that was still relatively low.
It's Reagan, really, who put us on the edge. And it was the 1980's when economists started to ask "is this getting out of control?" Friedmand was very active at that time, and he clearly didn't like the chronic deficits. Neither did Stigler or most of the other Chicagoans.
George W really isn't one of the worst offenders in terms of deficits as a % of GDP. The trouble is, he added his straw to a camel already showing too much strain.
And let's remember: government spending, for the most part, has NOT been investment. It has been consumption. At the heart of things, that's where the wheels come off.
We have poured these dollars into essentially consumption, so it's not as if we can now turn to any kind of "uber-infrastructure" for help.
Our kids are NOT better educated than their peers across the globe.
Our manufacturing base is NOT more technologically advanced, with the exception of a few industries, than Europe, Japan, Canada, etc.
This is the real issue here, and it's why some of us really do see a very, very serious situation.
We've never played this game while also carrying a debt that amounts to hundreds of thousands of dollars per person. We've never tried to spend our way out of a situation while already wondering "are we at our practical credit limit?" We weren't during WWII, and we weren't during Great Society, etc.
We've never had to wonder "what happens if/when we can't make the transfer payments that people have come to expect? Do we just print money? Do we print "Peace Bonds" and ask citizens to loan us the cash? If so, what interest rates will we have to offer? What will that do to mortgage markets?"
Etc.
This is unique, and uncharted, and based on the reaction of the markets... "very not good."
The line with "How is it forcing him to spend roughly $650 trillion more than he takes in in 2012?" should have "650 billion" instead of "650 trillion." The large numbers we've been subjected to recently hopefully do not approach that scale anytime soon...
Meghan,
I was doing some financial planning the other night trying to figure out how much I would need to save to have enough to buy annuity to replace 80% of my income when I hit 67 (I'm 33 now). It was interesting how even minor changes to the interest rate, nflation rate as well as the retirement age caused huge swings in the amount that I would need to save.
I would have to think that these OMB numbers are subject to the same wild swings, if even minor changes are made to expectations. I would have to think that even minor increases in the retirement age combined with some means testing of SS and Medicare and a cut in military spending could clear most of these problems up without too much trouble.
Very interesting post.
I would have to think that these OMB numbers are subject to the same wild swings
I always encourage anyone who relies this stuff to look at the projections from, say, 1998 of the economy in 2002, or 2006 for 2009, and such like. And never mind what they said in 1999 about 2009.
It's a mystery to me why they even bother.
Meanwhile, Republican scientists who presumably spent the last eight years locked in a vault in the basement of Heritage run out into the metaphorical street screaming that they have just made a shocking, horrible, and totally unexpected new discovery: budget deficits will make the economy melt down into a pool of manufacturing-depleted sludge, and also, cause rabies.
This is a bit unfair. Repubs did try to pass a Constitutional amendment in the 1990s to require balanced budgets (Bob Dole tried to make a issue of it and the public yawned), and it was the GOP Congress' much-maligned frugality (remember the gov't shutdown? Newt the Grinch?) combined with a refusal to spend money where a Dem President wanted it spent that produced those surpluses.
Granted, the Bush years were not especially happy ones for fiscal conservatives, but for Dems deficits, like personal ethics, are only important when they can be used to attack Republicans, whose supporters actually care about them.
But neither party is particulaly responsible or honest about deficits; if they were they would end the Social Security surplus charade. The main difference is that for Dems, the answer to deficits is to raise taxes, while for Repubs the answer is to shrink government.
That is not exactly true. Republicans may talk about shrinking gov't, but republican politicians don't seem to actually do it.
True. "Grow gov't less fast" is probably a more accurate description.
You have to understand a certain language. It's called "Washingtonese".
Since you don't understand this very localized language, you don't understand what "cut" means in Washingtonese.
Here's how it goes. program X, any program, is scheduled to go from 1 billion to 4 billion. A politician recommends that, instead it only goes to 2 billion. The headlines will read something like: "Senator wifflesniffle calls for 50% cut in Program X."
That's always how it goes. A doubling of spending is broadcast as a "cut". Cut NEVER means actually spending less money in the future. Of course, even when the spending is actually increasing, the various special interests will jump all over the imaginary "cut". "Oh my God! Women and children will die if the 'cut' is not rescinded". "Crops will wither. There willl be food shortages if the 'cut' is not rescinded." It's always the same bull.
Unfortunately our MSM foes along, because they seem to like love gov't spending (except defense). As a result many don't realize that the gov't that is "cutting" spending is actually increasing it. Hence, everything grows and grows and grows again.
Ed,
I take your point, but a cut in future budget outlays -- a cut in projected spending -- can, in fact, be described as a cut.
This has practical and apolitical applications. If you do payroll budgeting at a midsize corporation that projects an average 4% annual payraise for low-level managers across the board, and you're nistructed to save money by effecting budget cuts, you can create a 3.2% average annual raise for that class of worker.
This is all based on expected growth, and to the person who balanced those budget books -- and to his bosses -- it's clearly a cut. The receiptiant of the raise may not consider a "paycut" at all -- to him, it's not -- but he may fairly consider it a reduction, or cut, from his expected raise.
Factor in that if a program does not grow commesurate with demand for its services, the level of service will in fact be cut. So there are many perspectives from which this is reasonably called a cut.
I'm not married to the language; I care about describing the actual effects of a budget proposal. but it's not dishonest Washingtonese -- the word 'cut' plainly how a reduction in planned spending could always be described as a money-saving measure.
replying to ed:
This is like handing out a mortgage based on a homes future value; and look where that got us.
But it also applies to business; where company A has a contract from company B for widgets. Company B has problems, and cancels contract. Company A then has to scale back the future profits they'd hired/tooled up for producing.
Have the Republicans ever actually shrunk government? Reagan didn't even hold the line against government's expansion, and he was supposedly the most "libertarian" of the Republican presidents. Under GWB, government spending grew faster than at any time during the Clinton administration (even its first two years of single-party Democratic rule).
I would amend your statement to say "The main difference is that for Dems, the answer to deficits is sometimes to borrow more money and sometimes to raise taxes, while for Repubs the answer is always to borrow more money."
The GOP Congresses in the 1990s certainly proposed less spending than Clinton. It was probably generally an increase overall, but iirc in some years the increase was less than the growth in GDP, which is at least a relative shrinking.
Agreed. The Republicans have shown some responsibility with the purse strings when they know that a Democratic administration would be spending the money. I'm not sure what that proves.
But as soon as GWB was elected the drunken sailors in the GOP caucus came out of the woodwork.
"Have the Republicans ever actually shrunk government?"
Absent one notable exception, the Republicans have never had the scope of control over the governement to accomplish such. Reagan was dealing with Dem majorities in both houses of Congress. HW Bush as well for most of his term.
The notable exception -- GWB. I beleive that this squandered opportunity is the single biggest reason for the current Rep malaise. After finally having enough control to really make good on smaller government promises, the Reps in charge went on a spending binge that made them virtually indistinguishable from Dems (their slogan "all the spending, but now with tax cuts!"). 99% of credibility went out the door, along with control over the government.
I assume that's a typo. 650 trillion is a number too large to comprehend.
That being said, a few points.
1. Democrats were very upset over the deficits that Bush was running. Had Obama simply ran the same deficits, I might level some charges of hypocrisy, but that would be the end of that. However, Obama's deficits are four times larger, and all his supporters seem to say that "Bush did it too, and no one was upset about that!"
2. I can see the sense of borrowing colossal amounts of money to avoid a bigger disaster. That it exactly why we keep a very expensive defense force, because it is far cheaper than getting completely decimated in a war with Nicaragua. However, for this proposition to make sense, it has to meet two conditions. There has to be a bigger disaster, and the solution should do something thing prevent it. I suppose we do not know how big of a disaster we are trying to stimulate our way out of. What we do know is that the stimulus bill was proposed and passed in less time than it could take for anyone to read the damn thing, which at the very least suggests to me that it might not have been a very well thought out solution to the problem.
In other words, while borrowing money for a sound investment may be a fine business decision, and borrowing money to avoid a disaster might still be a fine business decision, surely borrowing money for an unexamined investment is a bad business decision?
3. The fact the USA has been running trade deficits for most of the century makes us somewhat like a bank on a fractional reserve. There are more bonds out there than we could reasonably honor if called upon. Still, people and countries continue to buy our bonds, because it is a fairly safe investment. However, if we take steps that make it appear that we might inflate our way out of this debt, thus minimizing the value of those bonds, that may trigger a mass sell off, which would be a great deal like a bank run.
4. The cynic in me wonders if all this spending is not in itself a sound of this bank run. If the political class understand that the situation is unsustainable and a crush is coming, but is not here yet, there a great pressure to spend as many dollars as possible while they are still worth something. The key being to spend quickly, not well.
Heh. Apparently *WORLD* gdp these days is around 46.66 trillion, the US accounting for around 30% of that...
I can see the sense of borrowing colossal amounts of money to avoid a bigger disaster.
The true test will come when the economy starts to recover. Let's say we get two quarters of positive GDP growth in 2010 and the unemployment rate starts to drop - then the question is will a combination of spending cuts, tax increases, means testing, increasing the retirement age, increasing copays as you get older etc. will be rolled out to clean up the budget mess. That will be the true test of Obama's leadership and his presidency.
Megan:
Agreed that parties use budget deficits to bash each other. Parties use all kinds of other things to bash each other too.
Problem is that the Federal deficit, by definition, funds the private sector's demand for savings. Net private sector savings cannot come from anywhere apart from Federal deficit spending. We are no longer on a gold standard.
The damage was done when Clinton/Summers/Rubin ran budget surpluses, draining the private sector of net savings. It took two booms: internet and RE, to postpone the collapse in aggregate demand that savings drain creates. Finally, it all caught up with us and here we are now, with the deficit (driven by unemployment) the only thing putting a floor under AD.
If Obama actually is serious about raising taxes to shrink the deficit, we'll see AD take another down leg. Ouch.
It would be wonderful if the economics profession, and their emanations (I went to U Chicago too) understood how this stuff worked.
This is absurd. You are assuming that the only way the public can save is by buying treasury bonds, and that in the absence of available treasury bonds, no one can possibly stash money in a savings account, invest in corporate stock, buy corporate bonds, or simply stash money under the mattress.
Am I missing something?
Yes, you are.
If you "stash money in a savings account", that requires someone else to go into an equal amount of debt to fund that savings. All financial claims sum to zero. The only way for the private sector as a whole (including the foreign sector) to NET save is for the government to run a deficit. This is an accounting identity, not an economic theory.
And what happens if I stash money in my mattress?
I see your point, that if I save by buying six bonds issued by acme co, acme co is now in debt, so the net result is zero.
But if I buy six treasury bonds from the us gov, isn't the us gov in debt as well, with the result still being zero?
Yes, globally, all financial assets in a given currency must sum to zero. For every liability there is an asset. (This includes the dollar bills under your bed, BTW, which are a government liability just as treasuries are. If you buy treasury bonds from the government, all you are doing is exchanging a non-interest bearing government liability (cash or reserves) with an interest bearing one (bills or treasuries).)
In principle, you can separate the total financial universe however you like: the "jimbarino" vs. "non-jimbarino" sectors, for example, and compare their balances (Unfortunately, at the moment that particular sector analysis will not yield all that much in the way of a positive balance...)
So why concentrate on the "government" vs. the "non-government" sector? Primarily because of the unique nature of the government sector. A currency issuer in a non-fixed exchange rate regime faces no constraints on it's ability to create new financial assets (i.e. "spend money") The government in a modern money regime spends by changing numbers in bank accounts at the federal reserve. This creates reserves, which only then can be exchanged for treasuries (i.e. the money must be spent before it can be "borrowed" - which operation is in fact an interest rate maintainance operation and not borrowing at all) Thus, the sovereign can always service it's debts. Debt that is purely within the private sector, however, must be financed out of current income. Since more people are borrowers than lenders, eventually borrowers run out of the means to service their debt, and you get a crash. This is why private sector expansions tend to be self-limiting.
After the crash (i.e., now), there is a strong excess desire in the private sector to save, to pay of the debts of the previous expansion. But an excess desire to save can only be satisfied within the private sector by a sufficient reduction in economic output to make the ends meet up. In order to provide the net savings desired, the government must deficit spend (i.e., change numbers in bank accounts) until the balance is restored. (This is why on the gold standard depressions were so frequent and so severe - under a gold standard, government does face a financial constraint.)
I think this is my favorite line from the article.
How can that be? Some of his proposals, like a plan to put a price on carbon emissions, don’t cost the government any money.
See, it's a "price" not a tax. And of course economic growth lost to poorly-substantiated apocalyptic environmentalist scares has no effect on gov't revenues, or people's lives.
Runners-up:
First, even if a health overhaul does pass, it may not include the tough measures needed to bring down spending. Ultimately, the only way to do so is to take money from doctors, drug makers and insurers
Oh goody, price and wage controls! Well, they certainly worked wonders in Zimbabwe.
About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government
Heh. Tax cuts are a "cost." Orwell would be impressed.
See, it's a "price" not a tax. And of course economic growth lost to poorly-substantiated apocalyptic environmentalist scares has no effect on gov't revenues, or people's lives.
Environmental disasters are very expensive, particularly when they can be avoided. Don't you think it would have been a lot cheaper to rebuild the levees then to rebuild NOLA?
Yes, but since were headed towards Zimbabwe, you'll get to see the wonders of Matabeleland economics, even yet!
I mean, there was a reason Geithner had them rolling in the aisles in Beijing. He didn't even have to do his Rodney Dangerfield impression.
Yes Megan!
I've harped on this for years. The Clinton surplusses coincided with a stock bubble and yet you're the first person I've seen who has been able to put two and two together. Thanks for your sober analysis.
Likewise with the excuses for Obama's proposed spending. The libs who claimed bloody murder against the Bush deficits and preached 'change' in 2008 bend over backwards to excuse Obama's drunken deficit decisions. I wonder if Sully actually believes his own drivel.
Sully believes anything Obama and his people leak to him.
He's still head over heels smitten over the fact that Obama reads his blog.
I was somewhat blase about the Bush deficits as they pertained to War spending. It was something I view as necessary and short term - we're seeing a natural wind down thanks to success in Iraq and Afghanistan isn't nearly as big a drain. Fiscal conservatives were also raising hell over Bush spending (NRO et al did NOT like part D), trade restrictionism, and well, basically anything done by R Congress that was cynical vote buying.
The conservative base are fairly pure in their attacks on spending and deficits. Republican politicians are malicious hypocrites who too frequently sell us out, but then that's pretty much the relationship that every politician has with their supporters. Need to keep the distinction there - of course not that I expect Drum or Sullivan to do so, no matter that Sullivan is supposedly a conservative.
It wouldn't be nearly as much a problem if the borrowed money had been used for actual capital investment in infrastructure, or had been used far more efficiently for the same purpose, but it wasn't and isn't. We are about the reap our reward for the shortsightedness as the demographics crush the government.
You mean stuff like building public transportation, rebuilding the energy grid, and finding viable alternatives to burning fossil fuels? Rebuilding crumbling schools and government buildings? (You should see the horrific condition of our county court house; sad and dangerous, both.) Or repairing bridges at risk of collapsing?
How progressive of you to suggest this.
I'd like to take this moment to plug a very important book:
http://www.amazon.com/Road-More-Traveled-Congestion-Matters/dp/074255113X/ref=sr_1_1?ie=UTF8&s=books&qid=1244741058&sr=8-1
We are about the reap our reward for the shortsightedness as the demographics crush the government.
And that is our ace in the hole. As bad as our demographic crush will be, it will be infinitely worse in China(1 child policy), Japan and Europe(no child policy).
The only benefit we will get is that we get to see what happens just before it happens to us.
Let us all pray Kurzweil was onto something.
Let us all pray Kurzweil was onto something.
Pretty much. It doesn't have to be his mind-uploading eternal-life colonize-the-universe scenario, but I've come to the conclusion that the only way out of our current situation is massively increased productivity. Two of the "easiest" ways would be full-scale nanotechnology or human-equivalent AI.
So while we may be somewhat screwed our neighbors and trading partners will be worse off?
Hypocrisy is a fallacy!!!!!!
It has absolutely no bearing to the case whether the republicans do as they say, what they say is logically independent of what they do.
This is the deductive explanation of why two wrongs don't make a right.
The only benefit we will get is that we get to see what happens just before it happens to us.
I have my doubts about that scenario. Many of the doom and gloom predictions are based on a relative weakening of the US vis-à-vis the rest of the world. If you look at the financial and demographic pressures facing the rest of the world, the US could come out of this even stronger than before.
That's a point not made often enough.
For years I've been telling people the trade deficit was a double-edged sword. The economic numbers from Japan are truly frightening; I can't imagine what a 15% quarterly drop in GDP (annualized) would be like.
Live by the export, die by the export.
Yancey,
Just something to keep in mind. The low variant projections call for the working age population of Japan to fall from 86.38 million in 2000 to 48.68 million in 2050. Similar things will happen in China and Europe. This could drive investment into the US as investors around the globe loose faith in Germany, France and Japan's dramatically smaller and older population's ability to meet its obligations.
Megan,
What's it like to have a near monopoly on common sense? Thanks as always for the insightful post.
MM - Nice post. I certainly agree with you about the day-to-day politics of deficits. I guess the real difference I would draw between Dem deficits and GOP deficits is that Dem deficits bring us things like national health care (hopefully), infrastructure spending, and safety net services in a time of fiscal crisis. GOP deficits (recently) bring us a horribly misguided war that shows no signs of ending and massive giveaways to corporations.
Canada went through this stupidity until we hit the wall. 70% debt to gdp ratios. In the mid 90's a powerful finance minister essentially had yea/nea power over expenditures, raised taxes and set a standard for politicians in Canada. The political opposition at the time was very strongly opposed to deficit spending, giving the government cover to do the right thing. The current deficit is a cause for shame for the government right now.
The US won't do anything until they hit the wall. How that will happen will be interesting and enlightening. There is no political cost to overspending, and until there is, overspending will be done. It takes a while for it to sink in; >10% chronic unemployment, taxes increasing all the while services from government disappear, sluggish growth, inflation, eventually the populace figures out that some fiscal good sense is required.
The only question is how long it will take.
The blame Bush for the deficit is very stupid and will come back to bite hard. Very hard.
Derek
How is a $118 billion structural deficit, $35 billion in Medicare Part D, and a theoretical end to the Iraq presence forcing Barack Obama to spend nearly $1 trillion in 2018? How is it forcing him to spend roughly $650 trillion more than he takes in in 2012?
The post would have been a lot more interesting if you had actually examined this question, Megan, rather than just throwing it out there. One can approach these via the CBO estimates.
They show that the problem is definitely not drunken-sailor spending, as a lot of people in this thread seem to think. Discretionary spending increases only 2.1% annually between 2008 and 2018.
Rather, it is entitlements and debt service. Debt service alone is projected to exceed domestic discretionary by 2017. Since roughly half this debt is attributable to Bush tax cuts and Iraq, your suggestion that the Bush structural deficit was small misses the mark. Likewise social security - we knew all along that the SS surplus would disappear; the prudent course of action was to pay down debt to cushion this change. Bush figured that was someone else's problem.
Any president would have done about what Bush did--some combination of spending it, and cutting taxes. The American public was not going to happily pay an extra 6% of its income to Uncle Sam so that we could pile up some massive wad of cash. And if they had, by 2008, we'd simply have been pointlessly imposing deadweight loss on the American public through unnecessary taxes.
This is ridiculous. We never were going to "pile up some massive wad of cash." We had plenty of debt to pay off. Breathless 2001 projections of paying off the debt too quickly were transparently not credible at the time. Gore explicitly proposed to use social-security surpluses to pay down the debt - there seems little basis to suggest he would have squandered it like Bush did. Finally, contrary to your suggestion that this would have imposed deadweight losses, many economists believe that current levels of indebtedness are so high that increasing taxes would have a net positive impact on output.
Heh. This is funny. Very funny.
You are regurgitating almost word for word what the Mulroney conservative government said in it's efforts to convince the public that they were serious, no "Serious" about getting the deficit under control. It doesn't matter who spent it. It doesn't matter if interest payments are a huge proportion. It's borrowing money to pay for operating expenses.
I'll tell you what was required to stop deficit spending. Tax increases, substantial ones. Serious, almost collapse inducing cuts in spending in various government entitlement programs, including and especially health. Someone had the brilliant idea that if they stopped training doctors, health costs would go down. Also quite a bit of sleigh of hand accounting by government. No money or very large cuts on infrastructure, military, education. Privatisation of whatever can be done by others, and user fees for almost everything that currently government gives away. Pass costs along to junior levels of government (that is what we call municipalities and provinces up here).
The longer the delay, the worse the cure becomes.
Derek
The net public debt has increased from 35% of GDP to 39% of GDP. The interest cost comes from this years debt, not previous years, as I already wrote. Net interest in 2008 was 242 billion. It cannot explain this or future deficits.
Not making much sense, Megan.
The interest cost in the budget is for debt service on the entire debt, not just the current year's contribution.
Do the math, Megan - to get a $500B interest cost, such as is projected for 2015, the associated debt needs to be on the order of $10T - i.e. the entire debt.
The $4T or so of debt racked up under Bush will continue to cost us money for years to come.
Bush did not rack up $4 trillion of debt. He racked up about 2 trillion--the rest is Social Security, which we would have to pay whether or not we had bonds in the "trust fund".
http://www.whitehouse.gov/omb/budget/fy2010/assets/hist07z1.xls
In the interval, however, GDP increased from less than 10 trillion to over 14 trillion, so the debt as a percentage of tax revenues fell. As did interest rates. The net interest rate--what we actually paid out annually--increased by $20 billion. Further increases will be paying for new debt, not the debt Bush bequeathed.
The reply function is disabled for your comment of 9:11, Megan, so I'll have to put my response here.
Bush's tax cuts and Iraq war added roughly $4T to the debt.
Your suggestion that the annual cost of the Bush increase in debt is low neglects the fact that interest rates were very, very low in the last Bush year. Interest rates are projected to increase and these increases will mean that the annual impact of Bush's addition to the debt will be much, much more than $20B.
Further increases will be paying for new debt AND increases in the interest rate for old debt.
Steve, you also need to consider why the interest rate is going up. The new enormous debts don't just tack on new interest expense, they raise the cost of the old debts as it get roled over at higher rates. The Bush borrowing, up until 08, was done because people were lending to us for basically free. Certainly some of the increase in interest rates we will be paying on that debt can be attributed actions at the end of 08, but his portion of responsibility for the rising rates we'll see is rather insignificant.
Aaron-
I was not claiming that Bush was responsible for rising interest rates, only that the impact of Bush deficits on future debt-service costs should be evaluated in light of projected future interest rates, not recent past interest rates.
I see that Megan is referring to $100M in her lates post, rather than the $20M she refers to here, so that's some progress.
AAAaack.
Billion, of course, not Million. Pardon the slip.
Obama has not even begun to add to the budget his "priorities." That health care initiative is going to be something to see.
My favorite line from that joke of a NY Times article was:
Obama is going to continue with many of those tax cuts. That 95% not going to see their taxes raised schtick. Bush's fault.
I love how presidents can now blame past presidents for forcing them to continue policies. Why stop with Bush, it makes just as much sense to go all the way back to Lyndon Johnson for starting Medicare in the first place.
Obama's budgets, Obama's responsibility. Closing down the departments of Education and Energy would have been a start.
Spending cuts and tax increases to generate a reserve fund for health care reform are in fact in the budget. Look it up.
Regarding tax cuts, I agree with you. These should largely expire and Obama should have this in his budget. Bad campaign promises. Still, you think there is any chance of getting that through congress? The reality is that taxes were much easier to cut than they will be to increase.
You had me right up to the point where you referred to Andrew Sullivan as serious. The guy that spent the whole last election obsessing about who the mother of the Palin baby was.
That was sarcasm dude. It doesn't come across very well in text.
I roll my eyes at all the hand-wringing about the deficit because the solution is obvious and simple: We have to let go of having the lowest taxes in the developed world and raise our taxes to the level of other developed nations. And no, it won't be the end of the world to pay taxes like they do in Europe or Japan.
Or even to pay taxes like we did under Reagan.
Why is the obvious solution not seriously looking at shrinking (or at least slowing the growth of) government?
Granted the voting public is obviously not that interested in doing this, or at least can't hold their elected representatives accountable if you want to give them the benefit of the doubt, but the voting public doesn't seem to be too interested in raising taxes either.
Well, if we can start with the defense department, I'm all for it.
But after so many years of "starve the beast" philosophy, where government still grew at record pace, and with so many boomers about to retire and begin collecting social security and go on Medicare, it's not so easy as it sounds.
It's time to seriously ask if we need to spend so much on defense.
I am ok with cutting defense spending by 25% (provided it's not military payroll, but new weapons systems or base closures) if you will agree to cut SS by 25% (or adjust the age limits, payouts, etc. so the end result is paying out 25% less).
Deal?
(to Sam X)
SSN should have a means test. There's no reason someone with a good pension and/or millions in assets should be collecting.
But cutting defense spending by only 25% still has us spending too much on the art of war.
to zic, 11:46
Except that you forget to mention that those people have paid into the system, so you basically just want to take their money. Especially so if you start raising contribution caps (which I admit I have not heard you speak on)
AndyfromTucson and zic - Defense cuts would of course help the deficit situation (assuming the money just isn't spent elsewhere), but even if you think they are a good and reasonable idea, they won't be enough. Defense has been in a long term decline as a percentage of the budget or of GDP. Entitlements are the real driver of spending increases.
Ken Magalnik - Current retirees didn't on the average pay in to the system as much as they are going to get out.
And when they paid in to the system, they where paying taxes for government spending, just as I "pay in to" defense spending, or farm price supports. Sure there is a difference that people who pay SS taxes expect to get money out later, but there is no money with your name on it sitting in some social security vault or account. You paid taxes, just like you paid any other tax.
I have two problems with this. The first is people who are now collecting Social Security paid in with the understanding they would get benefits regardless of their financial status. The program was sold as a pension program originally, not a welfare program. That represents something of a despicable bait-and-switch, in my opinion.
And second, people make decisions based on the rules. It can't be a good thing for society to encourage everyone to spend all their money before they retire. Personally I will spend the next ten years traveling the world, spending my savings down until I get under whatever level it is that ensures I'll get my money back.
I'm starting to think I'd like to see the age limit adjusted down. Get some of these over paid senior workers, who are really just in the way, out of the way. And moved to less expensive communities where they don't clog up roads and waste gas and time.
Some defense spending should be cut, but I don't think it's the defense spending that's driving up interest rates.
There is also the problem that the defense spending that is what is cut is usually the opposite of what should be cut. It's the maintenance and capability that suffer. What endures is what amounts to entitlement spending on the inefficient bureaucratic support stucture and personnel.
You're still lonely and balding and drinking way too much mid-priced Chardonnay.
I gave up the booze.
Could someone say more about why the top of Leonhardt's graph (800B) isn't a real number?
The figure in the graph should be 800i, not 800B. Hope this helps.
These responses from Andrew Sullivan and Kevin Drum, both serious people...
There's where you went wrong.
Your suggestion that the annual cost of the Bush increase in debt is low neglects the fact that interest rates were very, very low in the last Bush year. Interest rates are projected to increase and these increases will mean that the annual impact of Bush's addition to the debt will be much, much more than $20B.
This is very complicated. The interest on the debt is NOT floating. There's bonds of all different maturities out there and when they turn over the Treasury issues new ones. Only if all the debt had matured in the last year of the Bush admin. and was turned over would it make sense to assume lower interest rates translated into savings on all the debt. You'd have to know how much debt was turned over at those lower rates.
Megan
The reason not to run budget deficits (other than in times of war and depression) is prosier: it's bad political economy. Governments shouldn't run deficits to fund ongoing spending for the same reason that it's not a good idea to run up credit card debt to pay for groceries.
Here it is a good idea to keep in mind the limits of an analogy. Gov't deficits are only *like* a credit card in some aspects. You don't run up your credit card for one very important reason. You will probably not be able to make money for your whole life therefore when that time comes you won't be able to pay off your credit card.
But what if you were always going to get a $5,000 raise every year forever? Well then adding $1,000 to your card balance each year would still leave you better off. Unlike a person, governments do not get old, retire and die. As long as the economy exists they exist and presumably economic growth will be positive in the long run.
therefore the way to look at the deficit is over the *longer* run, is the debt growing as a % of GDP or not. This means in *normal* times the deficit need only be kept less than the sum of growth plus inflation (or nominal GDP growth).
You're still lonely and balding and drinking way too much mid-priced Chardonnay
It's the Chardonnay that's the real crime. Try some Gruner Vetliner, Alsace Riesling or non-oaked American Sauvignon Blanc instead.
Drinking Chardonnay may be a crime, but settling for US Sauvignon Blanc when Marlboro Coast is widely available is at least a misdemeanor.
You're still lonely and balding and drinking way too much mid-priced Chardonnay.
What really sucks is when you start balding in your 20s.
The problem with the budget deficit is not any particular program, or even any particular tax cuts.
Sure there is. Had Bush 43 maintained the Clinton 2000 defense budget as a baseline and simply increased it by some nominal amount such as the CPI, while otherwise maintaining the Bush status quo (tax cuts and all), there would have been a budget surplus. Do a marginal analysis, and this becomes clear quite quickly.
The failure to manage the execution and costs of the war certainly contributed to our problems. To have been cost effective, Iraq needed to be won quickly, something that clearly didn't happen. The tax cuts also didn't help matters, as we were left with four years of a substantial revenue gap
so the debt as a percentage of tax revenues fell
The opposite is true. Look at the federal budget, and you will see that the national debt was 440% of aggregate income and excise tax receipts in 2000 vs. 591% during 2008. [http://origin.www.gpoaccess.gov/usbudget/fy09/pdf/hist.pdf - Compare table 7.1 (debt) with table 2.1 (receipts)]
If you look at the sources of receipts compared to outlays, you will see that Social Security receipts comprised a larger percentage of federal receipts in 2008 than they did in 2000 (36 vs. 32%). Of the increase in overall receipts during the Bush administration, 52% of the marginal revenue came from Social Security.
The basic problem is that war is generally not good for economies, and Iraq has been quite costly in terms of its marginal impact on the budget, particularly when combined with the tax cuts that created a deep hole simultaneously. (WWII was a massive exception to the rule in terms of economic effects, and then only because it required substantial purchases of equipment that placed considerable demands on an underutilized labor market. We no longer fight wars like that, so war is a net minus that imposes costs without a multiplier effect to match.)
Over the long run, entitlement costs are certainly an issue, but during the Bush administration, the main hit to the income statement was war-related. Again, apply the marginal analysis that we studied in business school; without the drastic increases in that cost, the budget outcome would have been quite different.
No. Had the Bush administration done nothing at all except the things Clinton did, there would have been a deficit this year.
other folks have hit the salient points on the task at hand far better than I -- so instead a tangential thought on Megan's post:
Ever since news of the "Journolist" came out, I have taken a (more) cynical view of how articles show up from different points. This is a great example.
A steady buzz has been building around the meme of "deficit spending is Obama's achilles heel".
Then, Austin Goolsbee, WH economist says on June 7 "we inherited the deficits from Bush"
June 9 - NYT comes out convienently with an article that basically absolves Obama for the deficit (with a methodology that essentially gives every benefit of the doubt to the current administration) --- "its Bush's fault".
MSNBC picks up the article under the tag line "deficits not Obama's fault"
Lib leaning bloggers pile on.
You have to explain this better. If you're implying that Megan is somehow pushing a theme on behalf of the progressive community, you'll have explain her distaste for massive long-term spending, single-payer health care, etc., etc., etc. Seems like this post is less about absolving Obama than it is about absolving any one person and blaming govt. as a whole.
Besides that, if she's on the journolist, then her relationship with Peter Suderman gives pause. Is the progressive community tacitly supporting someone a bit to the right of Megan, potentially allowing him to see behind the curtain? A sometimes contributor to National Review, among other evil rags, potentially seeing the journolist, not likely.
Maybe it's all under the umbrella of the Illuminati. . .
You misunderstood me --
Megan isnt pushing the meme -- on the contrary, she is challenging the articles premise that "its mostly Bush's fault"
my point was I just find it beyond coincidental that the WH starts feeling heat over the deficit -- and the WH talking point is very quickly parroted by the NYT. Given the timing of Goolsbee's statement and the timing of the publication of the article, one would suspect that this was happening in parallel --- dare I say coordinated?
and oh-by-the-way -- there is a quasi-secret (as to its membership) group of left leaning journalists / bloggers whose purpose is to make sure talking points get disseminated in a coordinated fashion for maximum effect. Does the NYT author belong? We dont know.
Tangential I know, with some conspiracy theory thrown in.....
Sorry Market Karma. I did misunderstood you. And I am aware of the journolist. I saw that inane thread about whomever's bigotry that Kaus some laid his hands on.
It's the NYT. I'm sure the writer has at least an honorary membership in the journolist if for no other reason than he doesn't need centralized coordination to push the correct talking points.
First of all, a big thank you to Megan for what is, easily, the most thoughtful analysis of budget deficits I've read in a long time.
Second, of course, I can't resist adding my own small contribution to the discussion:
The headline and lede of the Times article commits the oft-seen sin of Bush bashing, but the article itself is actually pretty balanced. To wit: 37% due to economic cycles, 33% due to Bush policies, 20% due to Obama's decision to continue Bush policies, and 10% from Obama (non-Bush) policies. So, it's roughly 1/3 for everybody - Bush, Obama and the economy.
What I find interesting here, and what you alluded to in your post, is that we don't consider the anticipated (or actual) effects of either President's policies on economic cycles. So, for instance, the Bush tax cuts get counted in his 33%, but what would have happened to the economic cycles had he not enacted them? I think everyone can agree that the purpose of tax cuts (at least, the purpose of their tax cuts) is to stimulate the economy, right? So the tax-cut portion of Bush's 33% must have helped lessen the economic cycles' 37%, no? Similarly (before I'm branded a partisan), Obama's stimulus program may cost $145 billion per year right now, but the hope is that it turns the next arrows on the chart (the "economic cycles" arrows of 2010-2012) in the positive direction.
Which brings us back to the CBO estimates, as you said. Regardless of what Obama inherited vs. what he caused, why does his current plan show deficit reduction up through the next election, followed by seven years of expanding deficits, approaching the levels we see today during "crisis resolution" mode?
Again, thanks - an excellent post.
Had the Bush administration done nothing at all except the things Clinton did, there would have been a deficit this year.
Objection, Your Honor, non responsive.
The depth of the economic crisis is due in part to the commodities bubble and weak dollar that were created by the foreign policy. Without the poor execution of the war, we would have had a smaller deficit and there would have been a lot more market confidence in the US' ability to handle the recession, which could have made things less volatile and allowed for less deleveraging.
Iraq is proving to be like Vietnam, in that it has eroded confidence in the US system and weakened the currency. You can't just ignore the expense and pretend that everything would have been just as it is now had the policies been more successful.
If you "stash money in a savings account", that requires someone else to go into an equal amount of debt to fund that savings. All financial claims sum to zero. The only way for the private sector as a whole (including the foreign sector) to NET save is for the government to run a deficit. This is an accounting identity, not an economic theory.
But when you conflate the accounting identity (net savings) with real savings, implying it is necessary for optimal growth (as winterspeak does), it becomes economic theory. I fail to see how this is the case. Why must the government run a deficit for some to save and others (or the same person) to invest said savings and produce?
You are missing the point of "net" savings. True, S = I within the private sector. But S and I are pursued by different entities for different purposes, and there is no guarantee they will meet in the middle. When there are more desired savings than there are desired investments, the only way the private sector can blance the equation is to contract. Federal deficits allow the accumulation of "extra" savings that allows for full output.
I confess I must be missing something, because I still don't quite understand. True, S and I may be pursued by different entities (sometimes people invest their own savings) for different purposes, but so? All other things being equal, a higher aggregate desire for savings than investment should just yield lower interest rates (or lower the 'price' of borrowing). How exactly do deficits "balance the equation"? How do these "extra" savings allow for "full output"? I guess I need you to be explicit when describing the mechanics.
To me, it seems like you're falling into the Keynesian fallacy that "decisions to consume and the decisions to invest", and not actual work and production, "... determine income." If output were a matter of merely printing or borrowing money (a.k.a. running deficits), life would be simple indeed.
Here's a problem. so that we could pile up some massive wad of cash How about paying down the debt? The US government wasn't at 0 and hoarding cash in 2000. They were already trillions in the red. But instead, we went even further on a binge.
I wish y'all would stop using the analogy, "spending like drunken sailors." At least we spend out own money, thank you very much.
haven't had a chance to read the rest of the comments, but I have to say this to you, Megan:
MANY, MANY, INTELLIGENT, NON-WINGNUT PEOPLE
PREDICTED
THIS EXACT RESULT IF
OBAMA
BECAME POTUS
and _you_ STILL voted for him, contributed in that small way to _this._
Sure there is. Had Bush 43 maintained the Clinton 2000 defense budget as a baseline and simply increased it by some nominal amount such as the CPI, while otherwise maintaining the Bush status quo (tax cuts and all), there would have been a budget surplus. Do a marginal analysis, and this becomes clear quite quickly.
Had terrorists not flown hijacked planes into the WTC and the Pentagon much of the red ink from the Bush Era would never have happened. Had Bush been able to push the financial reforms through Congress that he started asking for in 2001 - which the Democrats blocked at every turn - we might not have had a financial meltdown in 2008. You cannot exclude these factors in any analysis of Bush-era fiscal policy. Please note that between 2003 and 2007 the annual deficit DECLINED, even with the additional spending and hits the economy took after 9/11. Quite simply Bush had a choice between saving Americans from international terrorism and balancing the budget: you really can't fault him for his choices.
OBTW: Never take an election year budget at face value: always look at what the guy did when he wasn't worried about an election. The "2000 Clinton Defense Budget" was a joke. It was futzed to make it look like Clinton was increasing the military budget when in fact he was (partially) repaying funds he stole from DoD between 1993 and 1999. Had Gore won he would have gone right back to cutting the military. During the height of the Cold War we kept 6 fighter squadrons on the tarmac, ready to defend the East Coast. On 9/11/2001 there were 7 USAF or ANG fighters on ready alert on the entire East Coast. That's all that the budget that Clinton signed into law in 2000 paid for.
While I hate to be rude, all this is beside the point -- the budget deterioration since 2000 is NOT the fundamental fiscal problem, no matter how much of it one blames on whom and what.
To see this clearly, consider GAO’s budget projections made in 2001 [.pdf] which assume surpluses continuing to run for more than a decade (still today!), with no Bush tax cuts, no 2001 recession, no 9/11, no Iraq war, no 2008/9 recession, no Obama tax cuts or new spending programs, etc.
The result: Annual deficits reach 20% of GDP in the late 2040s at which time the projection is cut short because the cost of government is unsustainable. And that is basically the same projection as today.
How is that possible? Because the killer is not the deterioration in the official budget — the killer is the “off budget” liability for entitlements, unfunded federal employee pensions, et al., that when added in makes a total liability ten times larger that the national debt for on-budget items.
At the end of 2008 the debt held by the public was $6 trillion, while USA Today’s latest story on the debt reports that adding liabilities for the “off budget” items raised it to $64 trillion.
A problem ain't resolved by taking on (and laying blame for) 10% of it.
If the only issue was the deterioration of the budget since 2000, without the “off the record” liabilities for entitlements, federal pensions, etc., we wouldn’t have a problem. But with those other >$50 trillion of liabilities, even if there’d been no deterioration in the budget and we were still running surpluses today, we’d still be heading for national bankruptcy on very near to the same schedule as we are now — as per the 2001 GAO projections.
Here’s some perspective: The SS Trustees project 6% as the long-term rate on T-bonds. The $64 trillion is $550,000 per US household, and 6% of that is $33,000 (and rises every year) in per household carrying tax cost. That’s where we are heading. Average US household income today is $67,000. This is, as they say ... “unsustainable”.
It is the 90% of the problem that is being ignored that must be addressed, fixating on the 10% isn’t going to do it.
People who get all excited about the comparably tiny, official "on the books" deficit (and debt), and the "blame Bush" of it all, aren't helping address the real fiscal probelm a bit, for all that they may pose to themselves and others as being "fiscally responsible" -- they are distracting from the real problem.
You aren't addressing the real problem until you are able to say out loud...
"By 2030: a 50% across-the-board income tax increase on everybody, with more tax increases coming ever after, OR massive cuts in entitlements for retirees, OR a combination of both, OR national bankruptcy -- nothing else matters."
For all those looking for more taxes in this article, as far as I know the taxes you file with your 1040's are the minimum, If you feel that more taxes are need pony up, Don't demand other people pay more so that you don't have to. It is not that the Government doesn't get enough money, it simply spends too much to buy votes.
and by the way that post from Jimbarino is the best I have ever seen on money