U.S. budget deficit "out of control"

[The diplomat]

I think the deficit will undoubtly drop in the coming years. A new report finds that the US economic growth has gone by 8.2% in the 3rd quarter!

http://money.cnn.com/2003/11/25/news/economy/gdp/index.htm?cnn=yes

[JohnT]

You Americans have always had a problem with being taxed.

That's what makes us Americans and so lovably irritating.

[JohnT]

Originally posted by The diplomat
I think the deficit will undoubtly drop in the coming years. A new report finds that the US economic growth has gone by 8.2% in the 3rd quarter!

http://money.cnn.com/2003/11/25/news...ex.htm?cnn=yes

I thought these revisions were always downward? Che? Kid? What's going on here?

[Ned]

Conservative talk radio is apopletic about the new Medicare Bill due to its enormous cost. Trent Lott is beside himself and stormed out of the Senate. Democrats are condeming the AARP because the Repubs have stolen their issue and the AARP. Liberals condemn the deficits and blame the tax cuts. But the economy is now booming as it never has before. 7.2% growth last quarter. 8.3% this quarter.

This is a very bizzare world. Times they are a changing.

Bush has protected the farmers with subsidies and the steel unions with tarriffs. He has given the elderly prescription drugs and a lot more. He has waged the war on terror and liberated Iraq. He has done all this and cut taxes as well.

No terror attacks since 9/11. Tax cuts, subsidies for farmers, unions, and the elderly. The economy is booming!

What are we to make of this? Can we find anything wrong in Bush's America? Deficits? But how long can they last if the economy begins to generate higher tax revenues due to dramatic growth?

The Democrats are mad as hell. What is their issue? Conservatives have no party to support. Quo vadis Eisenhower's ballanced budget conservatism?

What is happaning here?

[DanS]

7.2% growth last quarter. 8.3% this quarter

Rather, growth last quarter was 8.2% revised from 7.2%. Growth in the 2nd quarter was a lot less.

Bush has protected the farmers with subsidies and the steel unions with tarriffs.

[Ned]

DanS, yes, I misread the story on CNN. Thanks for the correction.

[el freako]

Originally posted by DanS
Comparing per capita GDP growth create does not create a truer picture when we are comparing budget deficits.

Well you were the one that brought up the differences in growth.
If Nevada (with population growth of 5.2% a year) has a simmilar deficit deterioration as Iowa (population growth 0.5%) how much of Nevada's better growth is due to the budget balance and how much to a higher input of labour?

You are saying:

Originally posted by DanS
deficits shouldn't be looked at in a vacuum.

But then saying that population growth has no effect on relative incomes?

Surely this is inconsistant if you were another poster I would assume you were focusing only on that data which would prove your point, but I think you are above that DanS.

Yes the deficit spending has given a kick-start to growth - but the mortgage refinancing boom was at least as responsible - but the question is can the US sustain this level of structural deficit (over 4% of GDP), and if not what is being done to reduce it (nothing as far as I can see).

[DanS]

I'm confused. Just go with a long-term overall economic growth rate, which takes in population growth. Why are you suggesting we look at per capita growth?

The end goal of this whole analysis is to figure out whether our debt as a percentage of our economy is going up, down, or staying the same. If the deficit % of GDP is greater than the GDP growth %, then that's no good. How much greater the deficit is than GDP growth is an indication of how bad it really is.

but the question is can the US sustain this level of structural deficit (over 4% of GDP)

No, we need to keep it at or below 3% in order for it to be sustainable. And we will not have this structural deficit in the future, since taxes always go up in our system if left untended. The only worrying thing for me is if we continue doing Christmas Tree bills like the Medicare bill just passed.

[Alexander's Horse]

The problem with all this comparative analysis is the U.S. economy is so large that when it runs a deficit the effects are very far reaching.

[el freako]

Originally posted by DanS
If the deficit % of GDP is greater than the GDP growth %, then that's no good. How much greater the deficit is than GDP growth is an indication of how bad it really is.

Are you talking about the nominal growth in the economy (money GDP), if so then what you are saying only applies when the debt is above 100% of GDP.

Originally posted by DanS
No, we need to keep it at or below 3% in order for it to be sustainable.

make that 2%, to keep the debt/gdp ratio stable at it's current level and to run a deficit of 3% of GDP you would need nominal GDP growth of over 7% a year - as the long-term trend growth rate of the US is 3% to 3.5% then you are implying inflation of 3.5% to 4% a year.
I think that nominal growth will be more like 5%, which equates into a 2% structural deficit to maintain the debt/gdp ratio at it's current level.

Originally posted by DanS
And we will not have this structural deficit in the future, since taxes always go up in our system if left untended.

You keep saying this, and yet you also say (correctly) that the tax take as a share of GDP has been remarkably stable over the last 30 years - if there was this bias why has the tax take stayed the same, and if the reason for that is that whenever it rose polititians cut the taxes what makes you think that that will change this time?

[Case]

Originally posted by Alexander's Horse
The problem with all this comparative analysis is the U.S. economy is so large that when it runs a deficit the effects are very far reaching.

...not to mention it's effects on world geo-politics: the Chinese have been buying up a lot of US government bonds as part of their fixed exchange rate policy. As long as the US government keeps running a deficit, the Chinese grasp on America's short and curlies gets a lot tighter.

[Cruddy]

Originally posted by GePap
Don't try to figure out US politics, it is all madness.

It's quite possible to argue that all politics is madless and overlooks the fact that politicians exist because most people don't want to be involved in leadership decisions.

It's gives us all someone to point the finger at and say "It's YOUR fault".

[Q Classic]

i will vote for a president who says, "hey, this is our ****. we shouldn't force our kids to pay for our long and wild orgy at the trough on their dime!"

too bad all the ****ing old people who are getting electing are ****wits who will be leaving me with the bill. we young people should say **** off and vote for someone who won't shaft us like that.

[Urban Ranger]

Originally posted by Ted Striker
there are 2 wars going on

duh

Are you on drugs, Ted? Did GWB not declare war was over in Iraq ages ago? At any rate, there is no war in Afghanistan.

Unless you are talking about the War on Drugs and War on Terrorism. Har har har.

[KrazyHorse]

Originally posted by JohnT


congratulations on making the 2,510,000th post on Apolyton, KrazyHorse. I wonder who was post 2.5 million? Anyway, back to the bickering...

And you are proud that your government is overtaxing the citizenry? While $250,000,000,000 deficits are nothing to be proud about, allowing my government to steal more from my pocket then even they can spend is just as sad.

Ummm...that's an interesting viewpoint, but the last time I checked the government wasn't pocketing the money and running; they were using it to pay down the debt (which is from money previously spent on us, the citizenry....theoretically). This choice is especially valid when you realise that for about 5 straight years in the 90s public opinion polls listed paying off national debt as the top spending priority for the federal gov't. So as I see it, we decided what we would do with our money, and we did it. Whereas it seems that you've identified what you'd like your government to do: borrow money in order to pay for its functioning, instead of paying for it up front. This is your choice, but it might not be the wisest one. Actually, as somebody who will be paying US taxes for the intermediate future and who will then be leaving, I encourage this choice as strongly as possible. Ignore my previous hesitation.