Bush is getting desperate in his campaign.

[Arrian]

So if you are running a deficit, you must continue to do so? Moving towards a surplus will result in a recession?

So what's the plan, Ned? Just keep borrowing forever? You might avoid a few recessions, but you will eventually hit the mother of all depressions.

-Arrian

[Ned]

Arrian, what's important is whether the deficit as a percentage of GNP is growing or shrinking.

[Arrian]

Answer the question:

Do you advocate running a deficit every year? Borrowing all the time and never paying it back?

-Arrian

[Kontiki]

Originally posted by Ned


I suspect yuo did not read or did not understand the word "moving."

I read it just fine. Maybe you can explain again why you must always run a deficit, and how it's better than having either a balanced budget or a surplus. Feel free to point out the crushing recession we had the followed the first year we went into a surplus (1997). I seem to be missing it from my data.

[Arrian]

Interesting Conservative Opposition to Bush's Tax Cuts (from Slate.com):

The Bush tax cuts (which Congress just voted to extend) are an affront to the most fundamental principles of fairness. They are skewed in favor of those who already pay less than their rightful share of taxes and shift the burden even farther onto the shoulders of the most overtaxed. In other words, the Bush tax cuts are unfair to the rich.

I know there's a lot of hype to the contrary, but look at the numbers. If you and your spouse have a taxable income of $60,000 a year, you've had almost a 24 percent income tax cut since President Bush took office. (And ditto if your income was just $20,000.) Meanwhile, the folks who make $350,000 a year got a cut of only about 12.5 percent; those who make $1 million a year got an even smaller cut.

Pre-Bush, the $1 million a year couple paid 33 times as much as the $60,000 couple; today they pay more than 38 times as much. Here's the big picture:

Overall, the biggest percentage cuts went to the poorest of the poor (those with incomes in the $10,000 range) and the next biggest to those making about $60,000. After that, with some minor dips up and down, the relative size of your tax cut falls off as your income rises.

That's if you pay taxes only on ordinary income. But what about capital gains, dividends, and inheritance—the cuts that supposedly skew the gains in favor of the rich? Well, let's throw all those changes in, and while we're at it let's include changes in the child-care tax credit, the earned income tax credit, the alternative minimum tax, and payroll taxes for Social Security and Medicare.

Here's what we get. The biggest percentage tax cut—about 17.6 percent—went to taxpayers in the second-lowest quintile, that is to taxpayers with below-average incomes. After that, the size of the tax cut falls off as you move from the lower middle to the middle middle (12.6 percent) to the upper middle class (9.9 percent). It rises again slightly for the top quintile, but only to a little over 11 percent.

Moreover, if you break that top quintile down into finer pieces, you discover that the super-rich weren't treated much better than the near-super-rich—and certainly no better than the middle class. If you were in the top 20 percent of taxpayers, your tax cut was about 11 percent. If you were in the top 1 percent, your tax cut was still about 11 percent. And if you were in the top one-tenth of 1 percent? Then you got about a 12.7 percent cut—almost exactly the same as the median taxpayer.

Well, you might say, at least everyone got a tax cut. But that's true only under a ridiculously literal interpretation of the term "tax cut." In fact, federal spending has increased dramatically under President Bush (with only a small fraction of that spending attributable to the war). Sooner or later, somebody's going to have to pay for all that spending, which means that just as the president's been cutting the taxes of today, he's been raising the taxes of tomorrow.

And who's going to pay those taxes? The "cuts" of the past few years have established a precedent that in the future the rich will bear a larger share of the burden than they bore in the past. Thanks to the president, the tax code is more progressive now than it's been in recent memory, and that's a hard sort of change to undo. We got where we are by cutting taxes mostly for the poor and the middle class; to reverse that, you'd have to raise taxes mostly on the poor and the middle class—and think of the outcry that would cause.

So in the not too distant future, most of us will be paying higher taxes, but the rich will be paying a larger share of those taxes than anyone would have expected before the Republicans came to town. How should we feel about that?

My own opinion is that the rich already pay too much—it seems patently unfair to ask anyone to pay over 30 times as much as his neighbors (unless he receives 30 times as much in government services, which strikes me as implausible). If you share my sense of fairness, you'll join me in condemning the president's tax policy.

But if, on the other hand, you believe that the tax system should soak the rich even more than it already does—or, to put it more genteelly, that the tax system should be more progressive than it already is—if, in other words, you are a mainstream Democrat—then George W. Bush is your guy.

Bolding obviously mine.

-Arrian

[Ned]

Originally posted by Arrian
Answer the question:

Do you advocate running a deficit every year? Borrowing all the time and never paying it back?

-Arrian

Yes.

[Arrian]

How can you possibly believe that is sustainable, Ned?

-Arrian

[chequita guevara]

As long as the economy grows faster than the deficit overall, it's sustainable. The problem is, our credit depends on the good will of other countries, who may not have our best interests at heart. At this point, China has us by the economic balls. They could invade Taiwan and if we tried to do anything, they could cut off our credit and send us into a currency crisis.

At some point, we're going to have to swallow some IMF medicine. That's why when I have some money, I'm gonna start buying Euros.

[Arrian]

There are some big IFs there. One, assuming the economy will continue to grow faster than the deficit. And two, that other countries will never call in the loans (one would hope they would be intelligent enough to not want to crash the #1 economy in the world, but hey, people are stupid).

I think it's folly to be in "the red" every year. What is so damn hard about paying back ones debts when the economy is booming? It's pretty clear that the economy is cyclical. So deficit spend in the recessions and pay it back in times of plenty.

-Arrian

[chequita guevara]

Originally posted by Arrian
There are some big IFs there. One, assuming the economy will continue to grow faster than the deficit.

So far, in the long run, it has, at least for us. But this is the reason so many 3rd world economies tanked starting in the late 70s. Their debt to income ratio skyrocketed when OPEC raised oil prices.

[Kontiki]

All of which is ultimately a moot point. If everything works out, you can run deficits indefinitely. However, Ned seems to be asserting that you must run deficits forever or you will drive the economy into the dumpster. We seem to be doing fine by not running deficits. Go figure.

[Ned]

Originally posted by Kontiki
All of which is ultimately a moot point. If everything works out, you can run deficits indefinitely. However, Ned seems to be asserting that you must run deficits forever or you will drive the economy into the dumpster. We seem to be doing fine by not running deficits. Go figure.

You can compensate for the drag on the economy caused by surpluses by keeping interests rates relatively low so that the overall money supply continues to expand. Monetary policy ceases to function however in times of deflation.