I think you mean : Thus PROVING...

[NOTE: I was intending to be sarcastic.. I guess I wasn't successful, so I've changed the post to avoid further confusion]

Great, Bush has dug us halfway out of the budgetary hole that HE created! Wow, what a victory.

Talk about the soft bigotry of low expectations... Imagine if someone competent was in charge (e.g., a Democrat), would you still be cheering the fact that we have a $247 billion deficit? I didn't think so.

Pro-growth CAN work. But what "pro-growth" policies do we have under this administration? Let's take a peek shall we? First, it seems your argument is thus:

In 2003, The Republican Deficit was 378 Billion dollars, in 2004 it was 413 Billion dollars, in 2005 it was "only" 318 Billion dollars, and now it is "only" 247 Billion! Look at how good we are! we have cut the deficit in half!!!

Um, gee, where do I begin? I guess the first thing to point out is how low the bar has been set. By saying that George Bush has cut the deficit in half from where it was under that spend-thrift George Bush, what are we supposed to think? You conservatives think this is good? Saying that you are better than yourself? Maybe you should rent "The Three Faces of Eve" and watch it. Twice. Once for yourself, and then, just for yourself.

Second, what about the "supplimental" budget? This is the part of the deficit that we don't have to count, if you are a "conservative". Since the start of FY2001, the government has borrowed 577 Billion dollars, which isn't counted in the debt figures. By Comparison, the six previous years only had $21 billion in supplimental budget requests. Why do you conservatives think that borrowing half a trillion flipping dollars under the table (meaning you don't have to admit it, and Mark, you DIDN'T admit this in your post) is a good idea? What kind of people, who think this is a good idea, would even consider calling themselves "conservative"?

You folks are not conservatives, not even remotely. You are populists, who think that cutting your own deficits in half and borrowing a half a trillionn dollars under the table is a good idea. I'm sorry. You folks are just laughable at this point.

I beg to differ. Tax cuts do cause deficits, but of a different kind. Reduced taxes suck the oxygen out of the brains of liberal democrats, thus their many ridiculous claims and ideas. Therefore, the term 'oxygen deficit' is appropriate and renders them incoherent to discuss the subject. Why else are they so adamant that others pay more....even Grandma Pelosi looks ridiculous when she now says 'we love tax reduction'...I laughed at that, and then thought it appropriate for the Halloween season.

would you still be cheering the fact that we have a $247 billion deficit?

You're right, Steve, I wouldn't be cheering a $247 billion deficit if a Democrat were in charge because the deficit would be substantially larger than that if a Democrat were in charge.

Since the start of FY2001, the government has borrowed 577 Billion dollars, which isn't counted in the debt figures. By Comparison, the six previous years only had $21 billion in supplimental budget requests.

Gee, Jim, what do you suppose happened since the start of FY2001 that didn't happen during the previous 6 years? A terrorist attack that killed 3,000 Americans and almost put the hotel & travel industries out of business; a recession; a war in Afghanistan, a war in Iraq, a couple of not-so-nice ladies by the name of Katrina and Rita - just to name a few expensive things that come to mind. I find people like you "laughable" to the extreme, so I guess we're even.

Retired Spook,

At the end of Clinton's term, there was no deficit, there was a surplus. He's a Democrat. Facts are facts, you ignore them at your peril.

Second, yes there have been lots of bad things that have happened in the last 6 years. No one's saying that the government doesn't need to pony up during catastrophic events (although the number one catastrophe, the Iraq War, has been purely a war of choice by the Bush admin.) That ignores the basic question, though: why doesn't the money spent on these things get counted as part of the budget deficit? After all, you count the benefits accrued by all that government spending (increased jobs, increased business revenue and thus taxes, etc.) These benefits are felt in GDP, unemployment rates, and even tax revenues. I don't see anyone discounting out these items, yet you ignore the negatives of that 'catastrophic' spending, the increases to our deficit. Highly dishonest. No wonder Enron was Republican...

Spook,

There are going to be a lot of people out there who beleive that the $247 billion figure includes the War on Terror. It's important to make sure everyone remains aware that the quarter trillion dollar deficit is for domestic spending alone. And if Democrats spent this much you conservatives would be howling, but when Bush does it it's a releif. Go Figure.

Let's watch the next few days and see if any Republican in a tight race says "We reduced the deficit and fought the war at the same time" or some other bogus remark implying the War is included in the $247B. Which one will be the first to do it? Place your bets now.

Democrats don't know anything about economics. If a Democrat were President today they'd be cheering that the deficit was going down, not up.

Tax cuts do NOT cause deficits Matt, and yet there is a $247 Billion deficit this year under Bush?

Sorry, but you must be smoking something pretty good.

If Bush was right, then there would be NO deficit and things would be in the black, like they were under Clinton.

“ the government has borrowed 577 Billion dollars, which isn't counted in the debt figures.
Supplemental budget isn’t counted in the debt? Could you make a more asinine statement?

If I have to spend any more time educating you, I’ll have to start charging.

A Supplemental Budget refers to either the budget considered in even numbered years or changes to the original budget documents submitted based on revised numbers. The Debt is the total amount of liability including service of the Debt that is held either by the government or by investors; the public debt. Once the accounting period has closed, the unfunded deficit is added to the debt, and the service or interest is recalculated.

In what parallel universe would supplemental appropriations, on budget or off budget not be paid back? Do you think the Government has a $577.0 billion debt to nobody that no one expects to receive payments?

axis, Clinton never submitted a balanced budget, never! It's painfully clear that you don't understand government budgets, now run along.

Whoa, Bane, I said exactly the same thing you did, so I will gladly decline your offer to educate me. The $577 Billion supplimental is not included in stated $247 Billion figure (or any other annual figure) released by the Treasury.

Yes, we have to pay it back....That's the whole problem here. We're at 8 Trillion Plus, thanks mostly to Republicans (Reagan, Bush Sr and Jr account for the vast majority of it). That's $24,000 for each man, woman and child in the US. The $247 Billion figure that bush is so proud of (not counting the supplimental, of course) is $823 for each of us.

This is a tax. This is an $823 tax per person, again, not counting the supplimental. We are just allowed to pay it later instead of today, with interest. Why do you call Republicans "Tax Cutters" when they do this? Their "cuts" have not stimulated the economy, otherwise we'd have a surpluss by now.

Sorry if I'm not "educated" enough to jump up and down in rapture about how Our Leader has managed only to be 247 Billion flippin dollars over budget. Please educate me.

The only reason Clinton came close to balanced budgets was due to the OTHER end of Pennsylvania Avenue.

Also the falehood of Jim's statement. If you take out defense spending, this budget has GONE done every year of Bush's presidency.

It's proven that the prescription drug benefit has helped lower medicare/medicaid costs as for the first time America is thinking about preventative medicine as part of it's government funded medicine.

And Jim... what economics training do you have? I ask because even in micro and macro economics 101 they teach you that government holding EXCESS money is a HUGE economy suppressor.

However... the reason why liberals/Democrats seem to be soooooooo good at being "right" (in their minds at least) is that they govern from hindsight.

Every complaint they have is formed from hindsight and they they have the cajones to act like they thought this way the ENTIRE time.

Bill "I only feign anger when I'm called out on my failures" Clinton's success seems to be solely that he put the bar up after he jumped.

Oliver,
No, you didn’t say the same thing. And your “facts” are sadly in error, so much so you are either a high school student that doesn’t know debt from deficit or you’re being deliberately thick. The $577.0 billion is not included in the current deficit numbers because the $577.0 is not part of the deficit! The supplemental budget for 2005-2006 included a $94.5 billion supplemental (off-budget) request which was financed in the 1st quarter. Financing the additional funds is part of the service of the debt.

Supplemental appropriations are in the debt. Period! Your statement that it isn’t included in the debt is foolish. Supplemental appropriations or “off budget” requests are only considered such until the accounting period is closed. At the end of each period the total accumulation of budgetary and off budget appropriations are added. The running total for a period of off-budget requests is deceiving because within each period the appropriation is paid from receipts, added to the subsequent budget, or financed through the issuance of instruments; in any event it is not cumulative. You heard someone talk about this and drew your illogical (absurd) conclusion, if you can’t keep up take notes. Finally, deficit spending is not the same as “over budget.”

The deficit spending is allowable because the expenditures are dynamic; the government must collect revenues over a period of time then allocate the resources as they arrive. But, the debts are also dynamic and the debtors aren’t going to wait for the proceeds. This is why a “Balanced Budget Amendment” is opposed by fiscal conservatives, debt won’t wait.

The preposterous idea that tax cuts would balance the budget in three years accentuates your ignorance of fiscal calculations. The deficit is dropping because the amount borrowed in each period is declining as the interest on the debt is declining because the amount borrowed is declining. Revenues to the government has increased because of the tax cuts (see: Laffer curve) and the payments on servicing are at a favorable rate. After the accounting period has closed; the re-payment schedule is re-calculated accounting for the change in interest, the balance and investors’ interest in purchasing part of the debt.

You can buy my books at Barnes & Noble.

There was a budget surplus when Bush took office.

Here are the facts. They're hard to argue with.
http://nationalpriorities.org/index.php?option=com_content&task=view&id=40&Itemid=110

"If you take out defense spending, this budget has GONE [down] every year of Bush's presidency"

If you take out corporate welfare, there's actually a surplus.

Bane,

Reading posts is fun. Try it sometime. I said, "the $577B is not included in the debt figures.   f-i-g-u-r-e-s. nowhere did I say that it wasn't part of the "debt." Yes, I know that the $577B total in many supplimental requests are off budget and they get capitalized at the end of the fiscal year. I never said otherwise. Why are you having such trouble with this?

Something else you just said:

The preposterous idea that tax cuts would balance the budget in three years accentuates your ignorance of fiscal calculations.

I didn't say that! That is what conservatives say! Why are you accusing me of ignorance, when I never said anything of the sort?

I have no idea where you have gone astray here, what pathology may be aflicting you, or what demons possess you. I simply said that Bush et al were being disingenuous with their $247B figure. As you and I have both said, this is a bogus figure. Why do you not understand this?

Ouch...this is painful to read. Not only does correlation equal causation (e.g. "rock-solid proof! hurrah, sis boom bah!"), according to Matt, but this single instance of correlation of a policy with a short-term economic effect proves exactly what he wants it to prove. Amazing! With such impeccable reasoning on your side, the libs don't stand a chance.

here is a wonderful idea for all of you supply-siders out there - why don't we GET RID of the income tax altogether. the economy will really get humming and the government can simply borrow the value of those lost receipts by selling more treasury securities in the open market. we'll let japan (636 billion), china (332 billion), UK (190 billion), and all of the oil exporting countries (103 billion) ramp up their massive treasury investment in the US thereby playing an increasingly intrusive role in affecting our interest and exchange rates. oh and then there's that bothersome little point that we still have to pay it all back as well. but f**k it, we'll let our grandkids do the heavy lifting.

guys - it's pretty simple, you pay as you go. you all own credit cards (though some of you, judging from your asinine statements, probably don't have the credit to even own a card) so I can presume you understand the very basic tenets of budgeting.

p.s. - figures in parentheses are total holdings of US treasury securities as of july 2006.

here is a wonderful idea for all of you supply-siders out there - why don't we GET RID of the income tax altogether. the economy will really get humming and the government can simply borrow the value of those lost receipts by selling more treasury securities in the open market. we'll let japan (636 billion), china (332 billion), UK (190 billion), and all of the oil exporting countries (103 billion) ramp up their massive treasury investment in the US thereby playing an increasingly intrusive role in affecting our interest and exchange rates. oh and then there's that bothersome little point that we still have to pay it all back as well. but f**k it, we'll let our grandkids do the heavy lifting.

guys - it's pretty simple, you pay as you go. you all own credit cards (though some of you, judging from your asinine statements, probably don't have the credit to even own a card) so I can presume you understand the very basic tenets of budgeting.

p.s. - figures in parentheses are total holdings of US treasury securities as of july 2006.

here is a wonderful idea for all of you supply-siders out there - why don't we GET RID of the income tax altogether.

OA, in the nearly 3 years I've posted here, you're about the 10th Lib to suggest that the peak of the Laffer is zero. In your case, I'm not sure if you're just trying (unsuccessfully) to be funny or if you really are as ignorant as your suggestion implies.

What is the logic behind tax cuts causing expansion? If more taxes are paid that money does not go into a black hole somewhere it is used to pay for goods, services and wages. If less taxes are collected, supposedly the taxpayers go out and spend the money on goods, services and wages. This somehow stimulates the economy more than if the government spend the same money. There is no free lunch. The monies have to come from somewhere. It is just robbing Peter to pay Paul at the expense of future taxpayers.

Milton Friedman explained it this way: "It is a mystery to me why... it is regarded as a sign of Japanese strength and American weakness that the Japanese find it more attractive to invest in the U.S. than Japan. Surely it is precisely the reverse - a sign of U.S. strength and Japanese weakness."

Perhaps we should “pay back” all those investors in Wal-Mart and make the company “pay as you go.” After all, those investors are playing an “intrusive role” and we all see how Wal-Mart is collapsing from the investments.

And you wonder why I don’t trust liberals with my money?

Oliver,
Now you’re just being scary stupid.

The (money) isn’t included in the debt figures? Oh, I see … The debt is included in the debt, but not the debt figures! That makes perfect sense.

**Everyone, just back away slowly, don’t make any sudden moves. We don't want to alarm him.**

You just rest there quietly and I’ll send someone for you.

spook - the laffer curve resolves the optimal tax rate that will produce max revenues and that is not what my position implies. the drum that you all keep beating is that the economy is growing, and it's growing as a result of those tax cuts. well no sh*t. so my position correctly implies that if we cut taxes altogether (saying NOTHING about optimal tax rate versus revenues) we can provide massive economic stimulus, so long as we have lenders who are willing to make up the difference (which is EXACTLY what we are doing now).

bane - don't be an idiot by trying to patronize me. putting aside the fact that equity ownership is not an IOU with a stated maturity date, and putting aside the fact that US citizens are not debtors responsible for wal-mart's obligations, why don't you try to explain to me why running a continuous deficit is sound policy as opposed to pay-as-you-go? as a conservative, i am astonished you don't support balancing budgets.

πορτοκάλι
(Because it’s all Greek to you)

Alright, I won’t patronize if you won’t toss out the leftwing talking points about the debt and the deficit.

First, your challenge is based on an absurd hypothesis; the issue you brought up is foreign investment in US government issued instruments. My response was directed at the misinterpretation you Keynesians have regarding foreign investment. You are correct in that value investment as stocks isn’t the same as Treasury notes, the investment is more like a fungible Notes Receivable, which foreign investors buy, sell, trade among themselves and hold for valuation. The amount of foreign investment in our securities is an example of the strength of the economy; not weakness. Your contention that the investors manipulate exchange rates based on investment is just silly; the foreign countries manipulate the currency exchange rates despite the massive investment in our instruments. To purchase Treasury notes at an unfavorable exchange rate, and then deliberately hold down the value of your own currency is counterproductive; the exchange rate game by China and Japan is done to sell their products in our economy, not to wrangle investment in government bonds.

Further, you imply that the deficit would not exist if we didn’t have foreign investors. This is like saying that hospitals cause death, because so many people die there. As long as we have debts to pay, and as long as we have investors ready to pony up capital for these debts the sales of the notes will continue. The bulk of the money to operate the government comes from taxes, the government borrows from the Treasury to meet its obligations, then pays back or services the debt when the tax revenues arrive. Don't forget that time has a value and the equity of the investment to our debtors is of greater value than the liability incurred. To put it in simple terms, as long as the economy continues growing, the money we take in now is worth more than the money we pay out later, even including interest. And such it ever will be.

Now to the deficit itself; as a supply-sider (conservative) I oppose a Balanced Budget Amendment or anything else that would restrict the governments’ ability to deficit spend. The budget, deficit and the debt are dynamic, not static. Appropriations do not arrive simultaneous with the allocations, liabilities are paid as the creditor demands yet, as a creditor ourselves we cannot demand repayment in the same schedule. For that, and other reasons the government must have the ability to pay as needed and collect as available. Borrowing is a necessary part of this cycle. Do I advocate deficits? They must be good, why else would Clinton have deficits in every budget he presented? Can we eliminate them? Well,

Let’s look at what the tax cuts hath wrought; Starting with corporations, by easing the tax burdens on capital investment (purchasing of plant and equipment) there has been a 50% cash-bonus, productivity-driven corporate profits in the 20% range have generated a 45% rise in business taxes (direct cause and effect). Reduced income tax rates the employment gains of 3 million are generating nearly 6% more in payroll-tax receipts per year, while personal income tax has been bumped by 10% (more cause and effect).

On the personal investment side, stock market advances the dividends and capital gains have increased by 24% since the rate was lowered to 15% withheld. Are you seeing a trend yet?

Here’s a bit of news from the Wall Street Journal; “...The main cause of the deficit decline -- 90% of it, says White House budget director Rob Portman -- is a tidal wave of tax revenue. Tax collections have increased by $521 billion in the last two fiscal years, the largest two-year revenue increase -- even after adjusting for inflation -- in American history. If you're surprised to hear that, it's probably because inside Washington this is treated as the only secret no one wants to print. On the few occasions when the media pay attention to the rise in tax collections, they scratch their heads and wonder where this ‘surprising’ and ‘unexpected windfall’ came from.” It’s not unexpected to Laffer, nor was it to Reagan or JF Kennedy.

bane - i laud your reply, it is one of the most thorough and productive responses i have ever read on this website.

as a former bond trader, i well understand the fundamental mechanisms employed by foreign countries to affect rates of exchange. pardon me for sounding like a cassandra, but the problem lies in the potentiality of an event to occur whereby massive dumping of treasury securities triggers a harmful slide in the dollar, driving up domestic interest rates. sure it may benefit domestic manufactures of exportable goods, but the net result would be a serious brake on the economy and a higher cost of borrowing. all i'm saying is there is a built-in dependence driving US investment that is externally financed and perpetuated by low domestic savings, robust import propensity, and lack of more attractive alternatives.

setting aside the tenuous theory of dark matter, the looming current account deficit only echos the theme above that there exists the potential of additional upward interest rate pressure if the US does not continue to outperform relative to the rest of the world (europe and asia). so again, we rest on our laurels on the expectations that the US will maintain its hegemony.

and finally, one could make the argument that the productivity of US capital is diminished as a result of increasingly large transfers to service a growing debt load. there is no net value to the US economy when a major portion of the 406 billion spent on debt service flows OUT of the country. like any business, borrowing serves as a useful tool to fund investment - i understand that. but when profligate borrowing in a historically low-interest rate environment (as has been for the past few years) becomes habitual and necessary, maintaining that habit becomes far more costly when interest rates go back up.

anyhow, you've given me a lot to chew over.

so my position correctly implies that if we cut taxes altogether (saying NOTHING about optimal tax rate versus revenues) we can provide massive economic stimulus, so long as we have lenders who are willing to make up the difference (which is EXACTLY what we are doing now).

Well, OA, here's something else for you to chew over. To me your statement above implies that you think that the higher taxes are the less difference lenders will have to make up. Is that about right? To use your logic, then, why don't we just make the tax rate 100%, and then we won't have to borrow anything. That makes about as much sense a eliminating taxes altogether.

bane - with respect to this statement:

Tax collections have increased by $521 billion in the last two fiscal years, the largest two-year revenue increase -- even after adjusting for inflation -- in American history.

yes, but what about on a percentage basis?

would it not make sense, if trying to gauge the contribution of these tax cuts to the overall revenue picture, to look at tax revenues as a share of GDP? The supply-side argument posits that a decrease in tax rates should be met with a corresponding increase in tax revenues as a result of the stimulative effect on the economy. thus, the appropriate measure of this effect would be tax revenues as a percentage of GDP. Indeed, the latest statistics indicate that revenues as a share of GDP have in fact fallen since 2000 (when income tax revenues as a percentage of GDP were at a historically high 10.3%, corp. was 2.1%). These figures have since fallen to 7.3% and 1.6 % respectively….

source - http://www.taxpolicycenter.org/TaxFacts/TFDB/TFTemplate.cfm?Docid=205

bane - with respect to this statement:

Tax collections have increased by $521 billion in the last two fiscal years, the largest two-year revenue increase -- even after adjusting for inflation -- in American history.

yes, but what about on a percentage basis?

would it not make sense, if trying to gauge the contribution of these tax cuts to the overall revenue picture, to look at tax revenues as a share of GDP? The supply-side argument posits that a decrease in tax rates should be met with a corresponding increase in tax revenues as a result of the stimulative effect on the economy. thus, the appropriate measure of this effect would be tax revenues as a percentage of GDP. Indeed, the latest statistics indicate that revenues as a share of GDP have in fact fallen since 2000 (when income tax revenues as a percentage of GDP were at a historically high 10.3%, corp. was 2.1%). These figures have since fallen to 7.3% and 1.6 % respectively….

source - http://www.taxpolicycenter.org/TaxFacts/TFDB/TFTemplate.cfm?Docid=205

Interesting conversation, thanks for engaging. Nice research …

My first priority is to answer RS who wrote, “… we can provide massive economic stimulus,” EXACTLY! Contrary to the Keynesian idea of government purchasing, tax cuts allow the private sector to purchase more with their own money, stimulate the economy and receive goods and services for their labors.

orange wrote, “…treasury securities trigger() a harmful slide in the dollar, driving up domestic interest rates” this is valid provided, a) foreign investors have taken a disproportionate percentage of the securities market, and b) the “dumping” by one entity does not have a corresponding buy from another. Currently Japan has reduced its purchases of US securities in fiscal 2006, not out of fear of the markets’ return, but because they are already heavily invested both in real dollars and as a percentage of their GNP. During this period England has increased their investment by three times the amount that Japan dropped, almost all other countries have invested more than previous years. Net investment is greater than previous years.

The “dumping” has to have a purpose; as long as there are buyers, the entity that dumps the instruments will lose some or all of their investment while the buyer will, in the long term pick up a bargain. Currently any foreign investor wishing to dump Treasury notes at a loss will find domestic investors willing to buy-buy-buy. A sudden flood of Treasury instruments would have to be perpetrated for some nefarious reason, and would have to be done by a major investor willing to lose massive amounts of equity, for the purpose of receiving some fungible asset from another entity that has greater value than the equity lost. One such scenario would be if China trades a huge amount of securities for oil. The only reason to do this is if China is in deep depression and can raise capital funds no other way. Then OPEC would be holding the Securities, make a demand on the US Treasury for funds, and (the final irony) the Treasury would have some trouble selling off the securities somewhere else (foreign investments only account for 7% of our economy). In this unlikely event it would mean that the rest of the world’s economies are already in full collapse and the national debt would be the least of our worries.

Regarding the debt service flowing out of the country; this is a real possibility, and you correctly note that the cost to benefit ratio is detrimental to long term investment. But, and here comes the upshot, Wall Street investors feel this is a transitional cost which is easily absorbed into the economy. Don’t forget the US holds billions in foreign securities as well.

Your final post is amusing, sorry but is it your contention that, because the economy grew by 20% (a good thing) the $521.0 billion is smaller to the GDP now than it would have been in 2003? Well, ya’ got me there! Our output of goods and services has outpaced the government’s ability to wring blood from this particular turnip.

But, step back for a moment; remember that the tax cuts have resulted in continuing increases in revenue flowing to the government coffers. One time taxes in 2000 were taken, spent by the government, then they came back and asked for more. Tax cuts stimulate the economy, should reduce the governments need to tax (servicing the debt is lowered because the economy is growing/ interest rates on the debt go down) AND garner the government more money for doing virtually nothing. Not a bad deal all around. (Dynamic vs. static financial system) In other words, if the tax revenues are more than before, how much less in taxes would we have collected if we hadn’t cut taxes? All evidence is the amount would have been substantial.

I say the government "should" reduce the government's need for taxes, but we all know that all political parties spend like drunken sailors when they have the money. The revenues to the government in the 1980's increased exponentially after the Reagan tax cuts; but so did the spending, to wild un-heard of levels, and neither Republican nor democrat did a damn thing to stop it.

Should the Treasury stop issuing 5 year and 10 year notes (stop "borrowing")? Now that the Fed has stopped their incessant raising of rates, the valuation of those securities will be paid at less than current notes outstanding. Investors will be less likely to look to our notes for wild payback; but, it will still be one of the safest investments available. And we’ll still have buyers clamoring for a piece of our economy. As a former trader in bond funds you already know that.

Christ, I can be verbose! I guess a fiscal analyst is more capable of sucking the air out of a room than a retired history teacher.