Balancing the Federal Budget: A Necessity

[Nebula815]

The fact is that the prosperity that we enjoyed for many decades had its roots in two massive government spending programs: The New Deal, and WWII.

The New Deal was a failure in many ways. It was meant to be a "solution" to a problem that never needed to exist in the first place, but it had very mixed results.

At the end of those programs, our debt to GDP ratio was 122%, which is much higher than it is now [we have linked this here many times already]. What is different now is that we are losing our manufacturing base; a problem that you have argued for seven years, isn't a problem. We are losing the capacity to create wealth through exports. Right now, one of the hottest exports is garbage, for recycling in China.

We manufacture more than any other nation in the world still, the difference is that it is becoming more automated. It's like farming. In the late nineteenth and early twentieth centuries, far more Americans were farmers. Today, less than 1% of the population farms, yet we grow far more food using far less land, because the farming has become a lot more mechanized.

Yes, the Republicans left a bigger mess than anyone realized. That is hardly Obama's fault.

Actually, Obama partially contributed to the crises, albeit in a minor way, by being one to vote against the Bush Administration's attempt to bring Fannie/Freddie under greater regulations.

The economic mess overall was caused by a perfect storm of variables that make it where one really can't blame either party.

It would be like when Bush said Clinton left him a recession. Clinton did no such thing. The Dot Com bubble peaked, then burst, in 2000, right when Clinton left office, leaving many people the illusion that Clinton gave a "great" economy in that sense, and others that he "gave" Bush a recession (although it was a so minor a recession that some do not even consider it a real recession).

 

[Nebula815]

How soon we forget.

The Republicans controlled the House, Senate, and White House in 2005.

Nice try though.

Yes, and with that control, they tried multiple times to subject Fannie and Freddie to the same regulation as banks, savings & loan institutions, and credit unions. They were stopped every time by the Democrats in Congress, because Fannie and Freddie have historically been run by Democrats and were enormous sources of campaign contributions for Democrats.

When Republicans were looking into Fannie-Freddie during the 2000s, certain Democrats even claimed this was nothing but thinly-veiled racism (because the head of Fannie Mae at the time, Franklin Raines, is black) on the part of the Republicans.

 

[mheslep]

Yes, and with that control, they tried multiple times to subject Fannie and Freddie to the same regulation as banks, savings & loan institutions, and credit unions. They were stopped every time by the Democrats in Congress, because Fannie and Freddie have historically been run by Democrats and were enormous sources of campaign contributions for Democrats.

When Republicans were looking into Fannie-Freddie during the 2000s, certain Democrats even claimed this was nothing but thinly-veiled racism (because the head of Fannie Mae at the time, Franklin Raines, is black) on the part of the Republicans.

None the less the Republicans had majority control.

 

[Nebula815]

We had a balanced budget and even ran a surplus for several years under Clinton administration.

If Clinton had had a Democrat Congress, I do not think he would have achieved a surplus. He declared that "the era of big government is over," then he got elected, and apparently the era of big government was back. The Republicans taking control of Congress in 1994 is what stopped this, and Clinton then went on to govern, economically, as a center to even center-right President. Many Obama supporters I notice never take this into account, they say, "Well under Clinton we had a balanced budget," yes because Clinton governed like a Republican to a good degree, because of the Republican Congress. The mainstream Democrats despised him for this too from what I understand.

Then the Republicans won the Presidency and did a 180 turn and became big-spenders themselves. They would have railed if Clinton had wanted to expand Medicare by $400 billion I bet ("TAX AND SPEND LIBERAL!") but it was fine for Bush to do this (albeit the idea was to incorporate free-market principles, by increasing competition between the drug companies, but it was still a gamble).

Under clinton, there was the technology bubble which increased revenues, along with the fact that he cut capital gains tax rates, signed welfare reform, and spending was constrained due to the Republican Congress. Defense spending was also curtailed (George H. W. Bush as President engaged in the most massive defense drawdown since the end of World War II, and further cuts occurred under Clinton).

Once the economy recovers, a complete pullout from Iraq and Afghanistan (assuming we don't get into any new expensive wars), plus a complete repeal of Bush tax cuts, should be sufficient to close the gap.

Pulling out could be disastrous long-term, especially regarding Afghanistan, and reversing the Bush tax cuts will likely not close the deficit. Government will never cut spending, they just increase it with new revenue. Also, reversing the capital-gains tax cuts of Bush would probably cause a drop-off in revenues.

Science tells us that it's the correct response to engage in deficit spending during recessions, when your economy is not functioning at full capacity. You incur some debt, but you stimulate the economy by reducing unemployment and increasing GDP, and that typically more than offsets the cost of stimulus. (It also tells us that direct spending is several times more effective, per dollar of deficit, than tax cuts.)

Keynesian economic theory tells us this, but historically this is very debatable. I'm not saying it isn't true, as the Keynesians say we have never spent enough money, but it is still debatable.

But then you have to stop spending and start paying off your debt when unemployment is back down to healthy levels.

Yup.

In a way, Bush administration was justified in passing its tax cuts, even though direct stimulus would've been preferable. The real problem was that it failed to close the deficit when the situation improved circa 2004-05. And now, for some reason, the same people who pretended back in 2005 that everything was fine are suddenly rediscovering virtues of fiscal responsibility, even though this is probably the worst possible time to do so.

Maybe, maybe not, although I agree the Republicans spun a 180 again. They are playing it slick though, saying, "We may have run deficits, but we never spent money in the way this current administration is planning too." Politics, politics, UGH

 

[Nebula815]

None the less the Republicans had majority control.

True; I don't know if it was a filibuster-proof majority or not though. But regardless, they should have been more vocal on what they saw as dangers with Fannie/Freddie.

 

[Char. Limit]

Er... republicans and Democrats won't do that, Nebula (cool name, btw.) . It all comes down to contributions, and CEO's are good at hedging their bets when it comes to that. Simply put, both parties are bought and sold.

 

[Nebula815]

Er... republicans and Democrats won't do that, Nebula (cool name, btw.)

Thankyou

It all comes down to contributions, and CEO's are good at hedging their bets when it comes to that. Simply put, both parties are bought and sold.

As a sidenote, this is why conservatives are always very iffy about government regulation and want it as limited as one can possibly have it (as limited as one can have it where the industry can still be regulated to the degree necessary), because when government regulates an industry, that industry will then seek to regulate the government.

You create a government agency and the industry it regulates takes a very keen interest in who runs the agency and will seek to establish good relations with the agency. Oftentimes, the big corporations of an industry will push for the agency to create regulations that make it tough for smaller competitors, to force consolidation of the industry, so they can dominate. Or lobby politicians to appoint such people to said agencies that will do those things.

Right now we have a whole alphabet soup of government agencies, so industry as a whole takes a very keen interest in government and the politicians, which is why there is so much lobbying.

 

[Char. Limit]

You're welcome. :)

I never thought of it that way... The conservatives might have a point for once.

 

[edpell]

If Clinton had had a Democrat Congress, I do not think he would have achieved a surplus.

He did not have a surplus. What he did was count the social security surplus (500 billion dollars per year) plus the medicaid surplus plus the medicare surplus plus the federal employees pension fund surplus as income and spent it thus having a "surplus". In fact he had a deficit if we include the future obligations that were NOT funded.

One of the big issue now is that the social security surplus is now ZERO. And the federal government will have to start making good on the four trillion dollars of paper owed to the social security trust fund (an off budget item that we will never mix with the budget because it has it's own tax stream LOL LOL LOL).

 

[Skyhunter]

Source?

I originally got the numbers from http://www.grist.org/article/2009-1...new-clean-energy-jobs-thanks-to-recovery-act".

Here is the http://www.whitehouse.gov/administration/vice-president-biden/reports/progress-report-transformation-clean-energy-economy"

 

[mheslep]

I originally got the numbers from http://www.grist.org/article/2009-1...new-clean-energy-jobs-thanks-to-recovery-act".

Here is the http://www.whitehouse.gov/administration/vice-president-biden/reports/progress-report-transformation-clean-energy-economy"

Thanks.

Biden's report is a projection. It is not correct then to say

https://www.physicsforums.com/showpost.php?p=2536130&postcount=30". ​

To make that statement correct it needs amending to something like

"VP Biden's ARRA report projects stimulus spending will create X jobs between now and 2012 or 2015..."​

In counting those jobs, also see footnote 3:

3 All of the job estimates used in this document correspond to jobs that last for one year. Of course, some jobs could last longer – in this case the number of distinct jobs would be reduced proportionately. For example, a project that employs one person for two years would count as creating two jobs.

Thus so far I have had about 25 jobs since college.

 

[Skyhunter]

He did not have a surplus. What he did was count the social security surplus (500 billion dollars per year) plus the medicaid surplus plus the medicare surplus plus the federal employees pension fund surplus as income and spent it thus having a "surplus". In fact he had a deficit if we include the future obligations that were NOT funded.

One of the big issue now is that the social security surplus is now ZERO. And the federal government will have to start making good on the four trillion dollars of paper owed to the social security trust fund (an off budget item that we will never mix with the budget because it has it's own tax stream LOL LOL LOL).

You should be very careful about using Rush Limbaugh talking points as the basis for an argument.

Clinton ran a surplus in 1999 and 2000 above and beyond SS surplus.

http://www.gpoaccess.gov/usbudget/fy09/pdf/hist.pdf"

 

[Skyhunter]

Thanks.

Biden's report is a projection. It is not correct then to say

https://www.physicsforums.com/showpost.php?p=2536130&postcount=30". ​

To make that statement correct it needs amending to something like

"VP Biden's ARRA report projects stimulus spending will create X jobs between now and 2012 or 2015..."​

In counting those jobs, also see footnote 3:
Thus so far I have had about 25 jobs since college.

You are correct. This should teach me to re-read something I scanned a few days ago, before posting it.

What criteria would you use to count jobs?

 

[edpell]

You should be very careful about using Rush Limbaugh talking points as the basis for an argument.

Clinton ran a surplus in 1999 and 2000 above and beyond SS surplus.

http://www.gpoaccess.gov/usbudget/fy09/pdf/hist.pdf"

The document you gave me shows the use of off-budget money to make the so called "surplus". Off-budget=social security

 

[CRGreathouse]

The document you gave me shows the use of off-budget money to make the so called "surplus". Off-budget=social security

Forgive me if I'm misreading the table, but I do see a small on-budget surplus for 1999, as well as a substantial one in 2000.

Off-budget surplus, 1999: $124 billion
On-budget surplus, 1999: $1.92 billion
Off-budget surplus, 2000: $150 billion
On-budget surplus, 2000: $86.4 billion

(I'm making no argument here about Clinton as a democrat, Clinton as a fiscal moderate, the Republican congress, the dot-com bubble, or the like -- just addressing the factual issue of what the on-budget surplus.)

 

[Skyhunter]

The document you gave me shows the use of off-budget money to make the so called "surplus". Off-budget=social security

That is the law, not an accounting trick employed exclusively by the Clinton Whitehouse.

And as CRGreathouse points out, 1999 and 2000 were surplus years above and beyond the SS surplus.

 

[edpell]

And as CRGreathouse points out, 1999 and 2000 were surplus years above and beyond the SS surplus.

As long as we do not think about the fact that the federal employees pension fund money was spent to generate this "surplus" then yes there was a small "surplus" in 1999 and 2000

1999 1.9B "surplus" out of 1,383.2B
2000 86.4B "surplus" out of 1,544.9B

 

[WhoWee]

How soon we forget.

The Republicans controlled the House, Senate, and White House in 2005.

Nice try though.

Are you suggesting that Barney Frank and Chris Dodd were not in position to affect the lending markets?