Bush's deficits and the coming crunch.

[Ned]

Shawn, the Kennedy, Reagan and Bush tax cuts all set off a period of rapid economic expansion. Tax increases, on the other hand, have normally resulted in economic slowdowns. Now Democrats would like to explain this away in order to again raise taxes, like the good socialists they are. But there does appear to be a cause and effect relationship between money in the private economy and economic expansion.

[Mr. Harley]

Ned, we've discussed how the Laffer curve was misapplied in the Reagan administration, do I need to resurrect the data that they chose a $1 taxcut = $1 revenue out of thin air to make it sound good? Nobody has yet, as far as I know (I admit to not being an expert in the field) shown that the taxcuts produce a permanent economic expansion if not accompanied by equivalent spending reduction.

In fact economic theory shows the opposite. Take our current economy. Deficit spending must by it's very nature produce an increase in interest rates. The T-Bill rate is set on a free market auction. If you generate debt as an increasing ratio to your GDP (which we ARE doing) then you will have increased securities on the market. More supply equals lower prices which equals higher interest rates. This isn't me talking, it's Mr. Greenspan.

Note I've said nothing that deficits per se are bad. What's bad is deficits increasing as a ratio to the GDP. The were some good posts showing that we've got the opposite. It's easy to fund a temporary expansion by putting the payment into the future. However, TANSTAAFL. Their ain't no such thing as a free lunch.

I've also said that US voters are spoiled brats. They want spending on the programs they like to continue, but they want increasing tax cuts to. As I've noted, Argentine wrecked it's economy after WW1 with a similar scenario, and has continued to f**k it up with that attitude more than once since. Plus there's the other factor. Do you think it is good for US security when Japan and China hold approximately 1 trillion dollars in US debt? While they cannot play the money card cavalierly, neither can we ignore it. I'll take my indepence from foreign central bankers, thank you.

[Ned]

Shawn, the Laffer curve is real, but only for the highest incomes. The middle class and below work as hard as they can to get by regardless of taxes. The wealthy, on the other hand, put their money where the highest rate of return exists, and this does depend upon tax rates, credits and loopholes. If you lower the rates on the wealthy, they move money away from the loopholes to riskier investments generate profits and tax revenues.

This is why cutting tax rates on the wealthy is so important for the economy.

[Mr. Harley]

Ned - do you remember the thread? It's not that I disagree with the Laffer curve (which is not accepted by all economists, but which does make a certain amount of sense under certain circumstances, like any economic theory), on the Vodoo Economics applications of it (hint, hint - what dirty liberal socialist Democratic called Reagan's supply side economics that - Bush Sr. - uh, wait, he was a Republican, wasn't he :hmm:

The problem if that the Laffer curve has an implicit sweet spot, i.e. the tax avoidence behavior after a certain level reduces government tax collections - which was the primary impetus of the Laffer curve. The increased investment/reduced avoidence will only generate more revenue up to a certain pont. It's a CURVE. Below a certain point, implicitly, you reach diminishing returns. You have higher economic growth, but you still collect fewer taxes.

Now, hold your horses. Between US government debt, Social Security/Medicre/Medicaid, and the Military - which is 67% of the budget, and this does not include most of the cost for Iraq and Afghanistan, probably bringing it up to 68%, we do not have the luxury of reducing the revenues below that base point of the Laffer Curve. Note that 68% includes NO discretionary spending. So you only cut the tax rates on the wealthy to achieve that optimal point on the Laffer curve. Reagan didn't do it, and you will have a whole lot of convincing to show me how that is the policy of the neocons, instead of the stated "Starve the Beast" policy, which is in writing..

Lastly, and again the Republicans control the House, the Senate, the Presidency, and the Supreme Court (their appointees). The tax changes have been full of loopholes, putting the lie to your Laffer curve claim. The current supply siders are anything but, and are using vodoo economics, i.e. just pulling numbers out of a hat and claiming these ar the right ones, to justify the tax cuts.

No traction here, Ned. The Neocons coined the phrase 'starve the beast" and I'm taking them at their word. Their actions are consistant. Their stupidity is to assume we will have a strong US military at the end of the process. People are not going to vote for continued military spending when their chidlren are not getting medical care, when childhood malnutrition again haunts America's poor - cuts to WIC, and when criminals are left free to roam the streets because they made bail and the Federal Courts are taking one-three years to here criminal cases, and Bush wants to cut their budget by it was somewhere between 10-19%.

I already got to bury one family member, and I will be damned if I will listen to the platitudes of this administration while they try to cut veterans benefits. You know, veterans. The guys with the limbs blown off, faces burned, etc. while dealing with a 30-1 patient/nurse load which kills aforementioned veterans coming out of surgery (anything over 4-1 has increased morbidity - a nice way of saying more DIE. This is what your pretty tax cuts are producing. Nice rewards from a couple of military service dodgers.

By Laura Ungar
lungar@courier-journal.com The Courier-Journal, Louisville, Kentucky


The U.S. Department of Veterans Affairs is standing behind a regional directive that says veterans hospitals "may not aggressively take steps to recruit new enrollees or new workload."

"We have not abandoned the policy," said Sandra Glover, spokeswoman for VA MidSouth Healthcare Network, which includes hospitals in Louisville and Lexington. Both local and regional officials argue the policy doesn't preclude all outreach to veterans -- the Louisville Veterans Affairs Medical Center, for example, has participated in numerous such activities, including health checks at an AMVETS convention, a safety fair and smoking cessation activities.

But Amanda Hedlund, acting public affairs officer for the Louisville medical center, reiterated that the hospital is not allowed to "go after" new enrollees. The policy question arose after former Miss America Heather French Henry moved a veterans wellness event from the Louisville Veterans Affairs Medical Center after officials there told her the language on her event posters was a problem.

The posters included the phrases: "New Resolution? Try the VA Solution," "Enroll for VA Healthcare" and "Learn about other Veterans Benefits." Citing growing enrollment and limited resources, a 2002 federal memo directed regional VA health officials to "ensure that no marketing activities to enroll new veterans occur within your networks."

Second memo issued


A 2004 federal memo sought to offer further guidance, reiterating points made in the 2002 memo but also saying network directors need to maintain or improve outreach to veterans and distribute information about benefits and services to eligible veterans.

The MidSouth directive, issued last July, outlined which activities are allowed. "For me, the situation is absolutely shocking. I cannot believe our legislators -- the people in Washington, D.C. -- would allow such a directive. . How can this be when our soldiers are giving their lives?" said Sandra Myers, a retired Army sergeant from Cadiz who is the host of a radio program called Veterans' Voice. "At the bottom line, it's the dollar. Somebody needs to step in and do something."

Mike Penney, state commander of the Veterans of Foreign Wars, said he plans to raise the issue when his group meets with members of Kentucky's congressional delegation in March.

U.S. Rep. Anne Northup, R-3rd District, and a member of a House subcommittee dealing with the VA, said through a spokesman that she plans to discuss outreach policies with the new VA secretary.

"I support outreach efforts to veterans in our community. At the same time, we must ensure that current enrollees receive quality care," she said, adding that VA health-care dollars have risen significantly in recent years.

In response to the controversy surrounding Henry's wellness event, VA officials released a statement this week that said the Louisville hospital has participated in 11 major veteran outreach events, that it will continue to participate in such events and that it will not turn away veterans eligible for care.

Officials pointed out that the Louisville medical center's returning combat veterans coordinator attended Henry's event and distributed brochures -- even though Henry said at the time that she knew of no one from the medical center at the event.
They also said the hospital has increased the veterans it serves by more than 10 percent in the past three years. But the statement also said:

"We are concerned, however, about the possibility that the large increase in demand Louisville and other VA facilities now face may create increasingly long waits to see VA health-care professionals in the future, and so we try to balance our ability to solicit veterans to enroll for our care with our available capacity and resources."

Demand exceeds resources


The 2002 federal memo from Laura Miller, deputy undersecretary for health for operations and management, tied the marketing restrictions to "the continued demand for healthcare services that exceeds our resources."

VA officials said Miller's 2004 memo said the Veterans Health Administration has continued to reach out while eliminating the backlog of patients waiting for VA health-care providers and reducing the number of new enrollees waiting for appointments. It asked regional health network directors to continue outreach "while recognizing the need to balance commitments to new populations with available capacity and resources," and said specific outreach to veterans who fought in Afghanistan and Iraq is especially important.

Five months later, the MidSouth network's "outreach activities policy" said facilities within the network may continue to participate in health fairs, open houses, veterans' service organization conventions and conferences. But they can't, it said, distribute enrollment applications en masse, issue public-service announcements on enrollment, send mailings to veterans about enrollment or collect names of veterans who want to enroll. The directive says it expires "when the moratorium on enrollment marketing, imposed by VA Central Office, is lifted."

Enrollments based on need


All veterans are potentially eligible for VA care, but they must enroll in the program, and the VA enrolls based on priority groups, which include those with disabilities connected to their military service, former prisoners of war and certain low-income vets.

In the Kentucky and Indiana counties served by the Louisville VA Medical Center, there are 166,609 veterans, and 48,892 were enrolled at the end of the 2004 fiscal year. Nationally, federal officials estimate there are more than 25 million veterans, and 7.4 million were enrolled in VA health care facilities at the end of fiscal 2004.

Some veterans and advocates said Congress needs to provide more VA funding.
The Louisville medical center's budget rose 22 percent from fiscal 2001 to fiscal 2004, slightly less than the regional and national budgets. The Louisville medical center's budget is $132.6 million this fiscal year, officials said.

Charles Walter of La Grange, a former VA psychologist who worked in various medical centers, also said the VA needs more money for its medical centers, and agreed that some veterans are unaware that they may be eligible for care.

[Dinner]

Originally posted by Ned
Shawn, the Kennedy, Reagan and Bush tax cuts all set off a period of rapid economic expansion. Tax increases, on the other hand, have normally resulted in economic slowdowns. Now Democrats would like to explain this away in order to again raise taxes, like the good socialists they are. But there does appear to be a cause and effect relationship between money in the private economy and economic expansion.

Just yesterday Alan Greenspan testified before Congress that it is better to have no tax cuts then to have tax cuts and run an unsustainable deficit. The best is to cut taxes and cut government spending but Bush (like Reagan) has been a political coward when it comes to cutting anything of meaning. Instead he plays the candy man and has, year after year, made the largest budget increases in nearly 230 year history of the country.

We're not talking about largest just in terms of dollars but we are talking as a percentage of GDP. Bush, like Reagan before him, is a big government politician. The Republicans always talk about small government and low taxes but they always raise taxes/fees on the poor, lower then on the rich, and expand government spending at unprecidented rates. The Republicans are the party of big government and they have been for decades.

[Ned]

Oerdin, Bull. The tax cuts were across the board. This included every American paying taxes. The tax cuts also eliminated millions of low-income people from paying any income tax. So it is a plain lie that Kennedy, Reagan or Bush raised taxes on the poor.

As to spending cuts, indeed Reagan said that was phase II. He never got the cuts because Congress was then controlled by the Dems.

Now we turn to Bush. Bush cut taxes for the same reason as did Reagan, to put more money into the hands of the private economy and to end injustice such as the marriage penalty and the confiscatory, socialist estate tax whose primary objective was to achieve socialism, not tax revenue.

But he did so at a time of recession. Cutting spending to achieve a balanced budget during a recession is a very, very bad thing to do. I have repeatedly tried to point this out here on these threads, apparently to no avail because it doesn't seem to sink in. The Dems here continue to ignore "context" entirely, as if the budget deficits were increasing during a time of expansion. As we can appreciate then, this complaining about the budget deficits during a recession is disengenuous at best.

So, now we are in a period of expansion and Bush has introduced a bugdet that calls for spending "cuts." What do we hear from Dems?

Approval?

[el freako]

Originally posted by Ned
Now we turn to Bush. Bush cut taxes for the same reason as did Reagan, to put more money into the hands of the private economy....
....But he did so at a time of recession. Cutting spending to achieve a balanced budget during a recession is a very, very bad thing to do. I have repeatedly tried to point this out here on these threads, apparently to no avail because it doesn't seem to sink in.

This would make sense but the the massive shift in the structural deficit - i.e. that which would happen if the economy was operating at trend.

This has seen the largest deterioration for over half a century at 6% of GDP ($720bn a year).
Just to get govenrment spending back to where it was in 2000 (as a share of GDP) would require cuts of $180bn from annual spending.

You have to wonder if a recession would have been better than trashing the nations finances years to come - and remember all this has done is put off the adjustment (indeed it has probably made the coming correction worse)

[Odin]

I'm no economist, but the Laffer curve has always sounded like BS to me.

Voodoo Economics:

[Lawrence of Arabia]

yeah, im always laughing at the laugher curve, and most other voodoo economics.

[Sava]

it's not VOODOO economics guys... with Bush, it's FAITH-BASED economics. They just arbitrarily cut taxes and have faith it will help the economy.

[Lawrence of Arabia]

by economy, they mean the rich and those with offshore corporate headquarters.

[Odin]

Faith-based economics.

[Dinner]

Leaders Who Won't Choose
In Washington, it's business as usual in the face of a national catastrophe.

By Fareed Zakaria
Newsweek

Sept. 26, 2005 issue - Adversity builds character," goes the old adage. Except that in America today we seem to be following the opposite principle. The worse things get, the more frivolous our response. President Bush explains that he will spend hundreds of billions of dollars rebuilding the Gulf Coast without raising any new revenues. Republican leader Tom DeLay declines any spending cuts because "there is no fat left to cut in the federal budget."

This would be funny if it weren't so depressing. What is happening in Washington today is business as usual in the face of a national catastrophe. The scariest part is that we've been here before. After 9/11 we have created a new government agency, massively increased domestic spending and fought two wars. And the president did all this without rolling back any of his tax cuts—in fact, he expanded them—and refused to veto a single congressional spending bill. This was possible because Bush inherited a huge budget surplus in 2000. But that's all gone. The cupboard is now bare.

Whatever his other accomplishments, Bush will go down in history as the most fiscally irresponsible chief executive in American history. Since 2001, government spending has gone up from $1.86 trillion to $2.48 trillion, a 33 percent rise in four years! Defense and Homeland Security are not the only culprits. Domestic spending is actually up 36 percent in the same period. These figures come from the libertarian Cato Institute's excellent report "The Grand Old Spending Party," which explains that "throughout the past 40 years, most presidents have cut or restrained lower-priority spending to make room for higher-priority spending. What is driving George W. Bush's budget bloat is a reversal of that trend." To govern is to choose. And Bush has decided not to choose. He wants guns and butter and tax cuts.

People wonder whether we can afford Iraq and Katrina. The answer is, easily. What we can't afford simultaneously is $1.4 trillion in tax cuts and more than $1 trillion in new entitlement spending over the next 10 years. To take one example, if Congress did not make permanent just one of its tax cuts, the repeal of estate taxes, it would generate $290 billion over the next decade. That itself pays for most of Katrina and Iraq.

Robert Hormats of Goldman Sachs has pointed out that previous presidents acted differently. During World War II, Franklin Roosevelt cut nonwar spending by more than 20 percent, in addition to raising taxes to finance the war effort. During the Korean War, President Truman cut non-defense spending 28 percent and raised taxes to pay the bills. In both cases these presidents were often slashing cherished New Deal programs that they had created. The only period—other than the current one—when the United States avoided hard choices was Vietnam: spending increased on all fronts. The results eventually were deficits, high interest rates and low growth—stagflation.

Bush is not the only one to blame. Congressional spending is now completely out of control. The federal coffers are being looted for congressional patronage, and it is being done openly and without any guilt. The highway bill of 1982 had 10 "earmarked" projects—the code word for pork. The 2005 one has 6,371. The bill, written by the House transportation committee, is called the Transportation Equity Act: A Legacy for Users, or TEA-LU (in honor of chairman Don Young's wife, Lu). This use of public office for private whims would seem more appropriate in Saudi Arabia than America. Perhaps next year's bill will include a necklace for Mrs. Young.

The U.S. Congress is a national embarrasment, except that no one is embarrassed. There are a few men of conscience left, like John McCain, but McCain's pleas against pork seem to have absolutely no effect. They are beginning to have the feel of a quaint hobby, like collecting exotic stamps.

Today's Republicans believe in pork, but they don't believe in government. So we have the largest government in history but one that is weak and dysfunctional. Public spending is a cynical game of buying votes or campaign contributions, an utterly corrupt process run by lobbyists and special interests with no concern for the national interest. So we shovel out billions on "Homeland Security" to stave off nonexistent threats to Wisconsin, Wyoming and Montana while New York and Los Angeles remain unprotected. We mismanage crises with a crazy-quilt patchwork of federal, local and state authorities—and sing paeans to federalism to explain our incompetence. We denounce sensible leadership and pragmatism because they mean compromise and loss of ideological purity. Better to be right than to get Iraq right.

Hurricane Katrina is a wake-up call. It is time to get serious. We need to secure the homeland, fight terrorism and have an effective foreign policy to advance our interests and our ideals. We also need a world-class education system, a great infrastructure and advancement in science and technology.

For all its virtues, the private sector cannot accomplish all this. Wal-Mart and Federal Express cannot devise a national energy policy for the United States. For that and for much else, we need government. We already pay for it. Can somebody help us get our money's worth?

Write to the author at comments @fareedzakaria.com.
© 2005 Newsweek, Inc.

http://www.msnbc.msn.com/id/9379241/site/newsweek/

[DanS]

Hey, the thread's back!

Now I just have to decide what avatar I'm going to have you use...

[Dinner]

Did you read the Newsweek article? Bush announces he wants massive new spending but no tax increases while Delay announces there just isn't anything to cut in the budget.

The end solution will be borrowing more. We should easily top $420.