Bush Job Creation Promises Failing to Deliver

[DanS]

As for Bush "mending the deficit by budget cuts", well I just don't see how that could possibly work if he maintains his tax cut. It would require (at the very least) massive cuts in military spending, which does not seem likely.

(1) Bracket creep raises income taxes naturally during good economic times.

(2) The big military spending increases are over after this year. For the other stuff, just reducing the amount of spending increases will eventually bring the budget into balance.

As it all settles in, I would like to see the federal government spend 18% or so of the economy, down from the current ~ 21%. This is achievable.

[Kidlicious]

Originally posted by Lawrence of Arabia
but utility changes depending on circumstances. if you had enough water and were homeless, then you'd want to get a house, which is worth more to you. so how does this get factored in?

If you have enough water then any additional water would provide much less utility. That is the law of diminishing returns. After your immediate needs are met rational people move to less immediate needs like shelter. After all of your needs are met you move into your desires.

Then you get into irrational people. Homeless people who could be in a shelter, but are crazy, and soccer moms with shopping addictions. Those screw everything up.

[Ned]

Originally posted by DanS


I didn't reference those conditions, but they impact my thinking on the subject. Once the labor market starts picking up (any month now ), the recession in all of its forms will have ended and the reason for the deficits will have vanished.

If Bush wins reelection, he has 5.5 years of unencumbered policy-making in front of him. This seems to me to be more than enough time to mend the budget back to something close to balance by budget cuts.

Better. But what bothers me is that there are many politicians and many economists (or should I call them, Imraniacs) who never discuss the economic effects of deficits and surpluses and simply assume that a balanced budget is always good all the time, and a surplus is better -- something to be proud of and trumpeted as did Clinton during his SOTU speech in 1999.

What is clear is that surpluses drain disposable income and really put the brakes on an economy. Under certain circumstances, this may be good, but it is hard to imagine them. What we did see is that the economy slowed in 1999 and tanked in 2000-2001 when we went into a surplus.

I think we can learn lessons from the events of 1999-2001 and from the Reagan boom. The lesson is that fiscal policy is paramount in controlling the business cycle while monetary policy is best used to control inflation.

[DanS]

Better. But what bothers me is that there are many politicians and many economists (or should I call them, Imraniacs) who never discuss the economic effects of deficits and surpluses and simply assume that a balanced budget is always good all the time, and a surplus is better -- something to be proud of and trumpeted as did Clinton during his SOTU speech in 1999.

Well, I would say that balanced budgets are always good most of the time.

I think we can learn lessons from the events of 1999-2001 and from the Reagan boom. The lesson is that fiscal policy is paramount in controlling the business cycle while monetary policy is best used to control inflation.

I think that's false. Fiscal policy is a very blunt instrument. Bush 43 and Reagan used it about as effectively as politicians can. But Bush 41 was unable. Clinton, Carter, and Ford would have been unable.

What is clear is that surpluses drain disposable income and really put the brakes on an economy. Under certain circumstances, this may be good, but it is hard to imagine them. What we did see is that the economy slowed in 1999 and tanked in 2000-2001 when we went into a surplus.

I'm no fan of big surpluses and think we should err on the side of deficits. That said, I don't think the latest recession had much, if anything, to do with the surpluses.

[Lord Merciless]

All the deficits would have vanished if there had not been a tax cut in the first place.

But then the economy would not have grown as nearly as strong these days.

It's probably a good idea to revoke the tax cuts once unemployment rate starts dropping significantly.

[DanS]

While manufacturing represents only a modest portion of the economy, the last two months of manufacturing output have shown increases of .8% and .7%, respectively. The manufacturers are going to have to start adding employees in a fairly big way one of these months.

[Kidlicious]

Originally posted by DanS
While manufacturing represents only a modest portion of the economy, the last two months of manufacturing output have shown increases of .8% and .7%, respectively. The manufacturers are going to have to start adding employees in a fairly big way one of these months.

Not necessarily. Is the increase due to higher productivity or higher demand. We already know that productivity has increased, and demand has increased some. If the increase is due primarily to higher productivity we will see just the opposite. I think we are seeing increase in productivity and demand at the same time, but I don't expect there to be any strong hiring.

[Ned]

DanS, of course the surplus had an contributing effect on triggering the current recession. The 1999 article I quoted all but predicted it because of the surplus. http://www.levy.org/1/docs/pn/99-3.html

[Kidlicious]

Originally posted by Ned
DanS, of course the surplus had an contributing effect on triggering the current recession. The 1999 article I quoted all but predicted it because of the surplus. http://www.levy.org/1/docs/pn/99-3.html

For God's sake Ned, when incomes increase some of that increase is taxed. That doesn't decrease disposable income.

They ****ed that article up. Get over it.

[DanS]

DanS, of course the surplus had an contributing effect on triggering the current recession.

Really, I don't think so. There was so much that was unsustainable in the economy, that it seems foolish to ignore those features in favor of the surplus-led-recession theory.

[Vanguard]

Lag post

[Ned]

DanS, "led?" I said, "Contribute."

[Vanguard]

1) Bracket creep raises income taxes naturally during good economic times.

Only if you have brackets to creep over. A large percentage of income in the US is already at its maximum bracket, due to the flat capital gains tax and the lack of high end tax brackets.

2) The big military spending increases are over after this year. For the other stuff, just reducing the amount of spending increases will eventually bring the budget into balance.

Not in 5.5 years it won't. Not unless they are five years of really good growth.

What is clear is that surpluses drain disposable income and really put the brakes on an economy

This is not clear. But if you repeat it over and over, I'm sure people will start to believe it.

[Ned]

DanS, "led?" I said, "Contribute."

[DanS]

Ned: But then you link to an article and say that it predicts the recession based upon the surplus. That seems a little more than contributing.

In any event, I'm guessing that the impact of the surplus was proportionally minimal.