Bush's deficits and the coming crunch.

[Ted Striker]

And finally increased government spending has become a permanent fixture in our economy, growing many times what it was in the 1930s.

I think this spending provides an important buffer and stimulus for the economic fluctuations in the free market economy.

Provided, of course, that it is spent wisely.

[DanS]

have yet to see any data to that effect. perhaps they are correct, at the extremes (say if the tax rate was at 90% and all the sudden it dropped to 30%.) However, from 34% to 32%, it just doesnt seem likely.

Prescott's research shows the high elasticity of labor. Income and payroll tax rates on labor will have a substantial impact on whether people choose to work or choose leisure instead.

[Lawrence of Arabia]

Secondly the economy DID recover because of increased G. It was when G was reduced, "weaning" as you would say, when things got worse again. This again was in an effort to balance the budget, which meant reduced spending, and a big slowdown of stimulus, which was not recovered from until foreign orders started to show up for WW2.

yeah but thats like losing weight by using pills, and then getting off of it and gaining it all back again. you wouldnt say that the diet works.
what did work was the war effect. however, in normal times, if there wasnt a war, they couldnt have kept this spending up. since the economy couldnt live without it and one point we would have run outta funds.

And finally increased government spending has become a permanent fixture in our economy, growing many times what it was in the 1930s.

which is of course unfortunate.

I think this spending provides an important buffer and stimulus for the economic fluctuations in the free market economy

monetary policy is the only thing needed to keep the economy going. only in rare cases is G needed (when interest rates approach zero, when real interest rates approch zero, and when there is deflation)

[MRT144]

i dont believe this for minute. someone isnt going to say, "im not going to work cause taxes are too high"

[Lawrence of Arabia]

Prescott's research shows the high elasticity of labor

really? what is elastic about the demand for labor (from the workers point of view) do you have a link? i would think that it would be rather inelastic (no work, no money, you starve)

[Ted Striker]

Originally posted by Lawrence of Arabia


yeah but thats like losing weight by using pills, and then getting off of it and gaining it all back again. you wouldnt say that the diet works.

Bottom line is that it worked, first by government spending, then by massive government war spending.

what did work was the war effect. however, in normal times, if there wasnt a war, they couldnt have kept this spending up. since the economy couldnt live without it and one point we would have run outta funds.

We seem to have done it the past few years with no problem. Plus eventually the private sector would have come back around. In this case it was from the war.

which is of course unfortunate.

Depends on who you talk to.

monetary policy is the only thing needed to keep the economy going. only in rare cases is G needed (when interest rates approach zero, when real interest rates approch zero, and when there is deflation)

When you make soup you need more than one ingredient. One ingredient by itself and you have one nasty concoction.

[Dinner]

Originally posted by Kidicious
Where is all this spending going to come from again?

Bush's current deficit in his budget is around $400 billion but it doesn't count any money spent in Iraq, Afghanistan, nor emergency supplimental bills (which there are always), nor Bush's Social Security proposals. If those add up to $20 billion I win. Now, Dans has an advantaqge in that last year was an election year so the politicians were spending like mad to get every last penny.

I will never the less continue to have faith in the financial mismanagement of the Republicans. It has always been a good bet in the past.

[Ted Striker]

The best situation is to have one party in Congress and the other in the White House.

[Dinner]

Originally posted by Kidicious
2) The war shouldn't cost more this year than last.

Last year it cost $160 billion and Bush has not included any Iraq war expenses in his budget which he has given to Congress.

BTW there is good reason to believe that this year will have more expenses then last year since in most of 2004 we had 100,000 soldiers in Iraq but in the lead up to the elections we had 140,000. Even so Bush's budget doesn't account for any Iraq spending so even if it is the same I have a padding of $100 billion.

[Dinner]

Originally posted by DanS
Now why would you think the CBO is incorrect in its forecasts?

Surely, you're nothing more than a Bush apologist.

Bush's own numbers say the Deficit will be $427 billion in 2005. He might do better, we will see.

http://msnbc.msn.com/id/6862777/

BTW the CBO's forcst for 2004 was $400 billion but Bush & the Republicans came in at $412 billion. If anything the CBO has a history of under estimating the size of deficits. That makes sense since the CBO's job is to make politicians look good.

[korn469]

Didn't they ask for 80 billion dollars today?

[Dinner]

Originally posted by korn469
Didn't they ask for 80 billion dollars today?

Something like that. That's good for my bet but bad for America's deficit. I'm pretty sure DanS will be right about the taxs taken in being $20-$30 billion more then last year but if the war spending continues to outpace income growth I should be a winner. We will see.

[Kidlicious]

Originally posted by DanS


Prescott's research shows the high elasticity of labor. Income and payroll tax rates on labor will have a substantial impact on whether people choose to work or choose leisure instead.

What do think people say, "Hey boss payroll taxes are just too high. Call me when they're lower. I think I'll live off my savings for awhile. My wife won't care."

I can't believe you fall for this crap.

[Kidlicious]

Ted Striker


No one will borrow money in a depression LoA. The problem is not shortage of money. The problem is that no one will spend the money that they have.

[DanS]

I'm pretty sure DanS will be right about the taxs taken in being $20-$30 billion more then last year

Perhaps I didn't make myself clear earlier. We are $22 billion ahead of where we were last on the deficit.