Great op-ed piece in The Washington Post by Bill Gross, founder and co-CIO of the investment management firm Pimco. The whole quote is:
"...an anti-Keynesian, budget-balancing immediacy imparts a constrictive noose around whatever demand remains alive and kicking. Washington hassles over debt ceilings instead of job creation in the mistaken belief that a balanced budget will produce a balanced economy. It will not."
Mr. Gross also makes the following astute observation:
"But while our debt crisis is real and promises to grow to Frankenstein proportions in future years, debt is not the disease — it is a symptom. Lack of aggregate demand or, to put it simply, insufficient consumption and investment is the disease. Debt has been simply an abused sovereign and private market antidote to sustain it. We and our global market competitors are and have been experiencing a lack of aggregate demand for several decades. It is now only visibly coming to a head, as the magic elixir of leverage is drained and exhausted."
This is a must-read article!
Showing posts with label Federal Budget. Show all posts
Showing posts with label Federal Budget. Show all posts
Thursday, August 11, 2011
Tuesday, August 9, 2011
Republicans/Tea Party own this downgrade (says pretty much everyone.)
Noahpinion has an interesting read. Very well said:
"Debt is now approaching 100% of GDP...If the Reagan-Bush I debt runup had not occurred, we would only be at 70%. If the Bush II tax cuts had not occurred, we would probably be around the same level or slightly higher. If neither Republican debt binge had occurred, anyone who tried to question U.S. solvency would be laughed out of the room."
Along the same lines, Joe Nocera writes in today's column pretty much the same thing:
"The downgrade, after all, was less about economics than politics. S.& P. was frightened by the same thing that has scared most Americans: the spectacle of an unyielding minority of Tea Party Republicans ready to push the country into default rather than accept even modest tax increases to help bring down the deficit. “The effectiveness, stability, and predictability of American policy-making and political institutions have weakened at a time of ongoing fiscal and economic challenges,” wrote S.& P. in its downgrade report. Who can disagree?
Has any president in American history left behind as much lasting damage as George W. Bush? In addition to two unfinished wars, he also set us on the path to our current financial mess. The Bush tax cuts, which turned a surplus into a growing deficit, have been disastrous."
That's why Peter Orszag's recommendation to let the Bush Tax Cuts expire makes sense:
"...the most straightforward way to raise the needed revenue is to allow all of the 2001/2003 tax cuts, not only those for high-earners, to expire at the end of next year. That would lower the 10- year deficit by more than $3 trillion. (Democrats who bemoan the role of the tax cuts in driving up the deficit but then favor extending the vast majority of them are suffering from cognitive dissonance.)"
At some point the Republican Party needs to say enough is enough to the Tea Party. Unfortunately I can't imagine a day when that will actually happen.
"Debt is now approaching 100% of GDP...If the Reagan-Bush I debt runup had not occurred, we would only be at 70%. If the Bush II tax cuts had not occurred, we would probably be around the same level or slightly higher. If neither Republican debt binge had occurred, anyone who tried to question U.S. solvency would be laughed out of the room."
Along the same lines, Joe Nocera writes in today's column pretty much the same thing:
"The downgrade, after all, was less about economics than politics. S.& P. was frightened by the same thing that has scared most Americans: the spectacle of an unyielding minority of Tea Party Republicans ready to push the country into default rather than accept even modest tax increases to help bring down the deficit. “The effectiveness, stability, and predictability of American policy-making and political institutions have weakened at a time of ongoing fiscal and economic challenges,” wrote S.& P. in its downgrade report. Who can disagree?
Has any president in American history left behind as much lasting damage as George W. Bush? In addition to two unfinished wars, he also set us on the path to our current financial mess. The Bush tax cuts, which turned a surplus into a growing deficit, have been disastrous."
That's why Peter Orszag's recommendation to let the Bush Tax Cuts expire makes sense:
"...the most straightforward way to raise the needed revenue is to allow all of the 2001/2003 tax cuts, not only those for high-earners, to expire at the end of next year. That would lower the 10- year deficit by more than $3 trillion. (Democrats who bemoan the role of the tax cuts in driving up the deficit but then favor extending the vast majority of them are suffering from cognitive dissonance.)"
At some point the Republican Party needs to say enough is enough to the Tea Party. Unfortunately I can't imagine a day when that will actually happen.
Thursday, August 4, 2011
"Today, the U.S. defense establishment is the world’s largest socialist economy."
Fareed Zakaria explains in his Washington Post column today something that should make conservatives cringe:
"Serious conservatives should examine the defense budget, which contains tons of evidence of liberalism run amok that they usually decry. Most talk of waste, fraud and abuse in government is vastly exaggerated; there simply isn’t enough money in discretionary spending. Most of the federal government’s spending is transfer payments and tax expenditures, which are — whatever their merits — highly efficient at funneling money to their beneficiaries. The exception is defense, a cradle-to-grave system of housing, subsidies, cost-plus procurement, early retirement and lifetime pension and health-care guarantees. There is so much overlap among the military services, so much duplication and so much waste that no one bothers to defend it anymore. Today, the U.S. defense establishment is the world’s largest socialist economy."
"Serious conservatives should examine the defense budget, which contains tons of evidence of liberalism run amok that they usually decry. Most talk of waste, fraud and abuse in government is vastly exaggerated; there simply isn’t enough money in discretionary spending. Most of the federal government’s spending is transfer payments and tax expenditures, which are — whatever their merits — highly efficient at funneling money to their beneficiaries. The exception is defense, a cradle-to-grave system of housing, subsidies, cost-plus procurement, early retirement and lifetime pension and health-care guarantees. There is so much overlap among the military services, so much duplication and so much waste that no one bothers to defend it anymore. Today, the U.S. defense establishment is the world’s largest socialist economy."
Wednesday, August 3, 2011
How Clinton Handled His Debt Ceiling Crisis Better Than Obama | The New Republic
Many people I know would agree with this but The New Republic does add some caveats to its assessment, including this very important point:
"THE MOST CRUCIAL difference between Clinton’s debt limit battle and the current crisis is that, in 1996, the Republicans were bluffing. No Republican seriously considered defaulting on the debt to be a viable option."
My how times have changed...
"THE MOST CRUCIAL difference between Clinton’s debt limit battle and the current crisis is that, in 1996, the Republicans were bluffing. No Republican seriously considered defaulting on the debt to be a viable option."
My how times have changed...
Why The Math Doesn't Work
Ezra Klein starts off clearly:
"There are now two sides in the American tax debate: the Republican Party, which refuses to have a serious conversation about taxes, and the Democratic Party, which . . . refuses to have a serious conversation about taxes."
...then goes on to explain why the math doesn't work:
"The debt-ceiling deal simply proves the point. Let’s say the spending cuts go exactly as the Republicans hope: We cut $900 billion now and $1.5 trillion later. That’s more cuts than the White House says it would ever agree to, but ignore that for a moment. Now let’s say the tax side goes according to the White House’s plan: Most of the Bush tax cuts are extended, but the break for income of more than $250,000 a year expires. Are we done?
I asked Jim Horney of the Center on Budget and Policy Priorities to run the numbers. In 2021, that scenario would leave the debt above 75 percent of GDP — and growing. That’s well above the 60 percent of GDP most deficit hawks think we should shoot for, and it doesn’t leave us at all prepared to deal with costs related to the retiring baby boomers."
Definitely an informative read.
"There are now two sides in the American tax debate: the Republican Party, which refuses to have a serious conversation about taxes, and the Democratic Party, which . . . refuses to have a serious conversation about taxes."
...then goes on to explain why the math doesn't work:
"The debt-ceiling deal simply proves the point. Let’s say the spending cuts go exactly as the Republicans hope: We cut $900 billion now and $1.5 trillion later. That’s more cuts than the White House says it would ever agree to, but ignore that for a moment. Now let’s say the tax side goes according to the White House’s plan: Most of the Bush tax cuts are extended, but the break for income of more than $250,000 a year expires. Are we done?
I asked Jim Horney of the Center on Budget and Policy Priorities to run the numbers. In 2021, that scenario would leave the debt above 75 percent of GDP — and growing. That’s well above the 60 percent of GDP most deficit hawks think we should shoot for, and it doesn’t leave us at all prepared to deal with costs related to the retiring baby boomers."
Definitely an informative read.
Tuesday, July 19, 2011
The magic 18% number and its (un)reality...
A blog post at The Incidental Economist as well as Matt Miller's column in The Washington Post both talk about how capping taxes at 18% of GDP is a pipe dream:
"...if we maintain our 40 year historical average of 18 percent of GDP raised in taxes, the we will have a deficit simply due to paying for interest, health care, social security and defense in 2021. That means that even with no FBI, FAA, NIH, NEA, Homeland Security, and nothing else but these line items–18% of GDP collected in taxes still won’t be enough to produce a balanced budget. With NO federal spending other than these categories, we will have a deficit in 10 years if our tax code brings in 18% of GDP."
Miller goes on to write about how capping federal spending at 18% is not possible in this day-and-age either:
"The “cap, cut and balance” plan passed by the House Tuesday night captures Republican denial perfectly. The plan would cap federal spending at 19.9 percent of GDP by 2018, with the goal of lowering it to18 percent over time. Similar caps have been endorsed by most of the GOP’s presidential candidates.
You’d never know from listening to Republicans that these goals are mathematically and politically unattainable.
But they are. Why? If there’s one fact you need to emblazon in your mind to make sense of the current debate, it is that Ronald Reagan ran the federal government at 22 percent of GDP back when our population was much younger. (Under President Obama, the extraordinary measures enacted to fight the recession – plus a collapse in the denominator, GDP -- have boosted spending to around 24 percent, while revenue has dropped to 15 percent from its 18-19 percent longtime average).
It is simply not plausible to argue that as we double the number of seniors on Social Security and Medicare, Uncle Sam will be able to operate at spending levels 10 to 20 percent below those over which America’s modern conservative icon presided. (Though, as [The Washington Post's] Dana Milbank notes, Reagan agreed to raise taxes 11 times.) Today there’s no question: Taxes must rise."
Read both articles. You'll be much smarter having done so.
"...if we maintain our 40 year historical average of 18 percent of GDP raised in taxes, the we will have a deficit simply due to paying for interest, health care, social security and defense in 2021. That means that even with no FBI, FAA, NIH, NEA, Homeland Security, and nothing else but these line items–18% of GDP collected in taxes still won’t be enough to produce a balanced budget. With NO federal spending other than these categories, we will have a deficit in 10 years if our tax code brings in 18% of GDP."
Miller goes on to write about how capping federal spending at 18% is not possible in this day-and-age either:
"The “cap, cut and balance” plan passed by the House Tuesday night captures Republican denial perfectly. The plan would cap federal spending at 19.9 percent of GDP by 2018, with the goal of lowering it to18 percent over time. Similar caps have been endorsed by most of the GOP’s presidential candidates.
You’d never know from listening to Republicans that these goals are mathematically and politically unattainable.
But they are. Why? If there’s one fact you need to emblazon in your mind to make sense of the current debate, it is that Ronald Reagan ran the federal government at 22 percent of GDP back when our population was much younger. (Under President Obama, the extraordinary measures enacted to fight the recession – plus a collapse in the denominator, GDP -- have boosted spending to around 24 percent, while revenue has dropped to 15 percent from its 18-19 percent longtime average).
It is simply not plausible to argue that as we double the number of seniors on Social Security and Medicare, Uncle Sam will be able to operate at spending levels 10 to 20 percent below those over which America’s modern conservative icon presided. (Though, as [The Washington Post's] Dana Milbank notes, Reagan agreed to raise taxes 11 times.) Today there’s no question: Taxes must rise."
Read both articles. You'll be much smarter having done so.
Friday, May 20, 2011
Social Security's "Mason-Dixon Line"
A great explanation of Paul Ryan's Social Security proposal:
"If there was ever going to be a generational war in this country, that high school class of ’74 would be its Mason-Dixon line. It’s the moment when Bill Clinton’s promise—“if you work hard and play by the rules you’ll get ahead”—began to lose its value."
"If there was ever going to be a generational war in this country, that high school class of ’74 would be its Mason-Dixon line. It’s the moment when Bill Clinton’s promise—“if you work hard and play by the rules you’ll get ahead”—began to lose its value."
Friday, April 29, 2011
The rest is just commentary...
From a blog post on the Economist:
"...neither party is prepared to make the basic compromises that are essential to a deal. Republicans refuse to accept that taxes will have to rise, Democrats that spending on “entitlements” such as health care and pensions must fall. No real progress is likely until after the 2012 presidential election."
This is the entire issue at hand here. The rest of the column is just commentary, which makes me wonder if the work of the Gang of Six can be so promising with the 2012 election hanging in the background:
"The popular culture tends to treat “politician” as a synonym for “craven.” But I think the Gang of Six is the kind of undertaking that should give politics a good name. After all, true believers are usually the ones who get us into wars; negotiators get us out of them. Revolutionaries are the people to see if you’re trying to overthrow a bad government; politicians are the folks to call if you’re building a better one.
In my experience, the great reformers tend to have three things in common. They are optimists, because reform begins with a sense that things can be better. They have the courage to stand up not only to their adversaries but also to their allies. And they can bend. People tend to remember Nelson Mandela as the moral champion who liberated South Africa by suffering in prison for 27 years. The fact is he liberated South Africa by sitting down and cutting a deal with the white leaders who put him in prison."
"...neither party is prepared to make the basic compromises that are essential to a deal. Republicans refuse to accept that taxes will have to rise, Democrats that spending on “entitlements” such as health care and pensions must fall. No real progress is likely until after the 2012 presidential election."
This is the entire issue at hand here. The rest of the column is just commentary, which makes me wonder if the work of the Gang of Six can be so promising with the 2012 election hanging in the background:
"The popular culture tends to treat “politician” as a synonym for “craven.” But I think the Gang of Six is the kind of undertaking that should give politics a good name. After all, true believers are usually the ones who get us into wars; negotiators get us out of them. Revolutionaries are the people to see if you’re trying to overthrow a bad government; politicians are the folks to call if you’re building a better one.
In my experience, the great reformers tend to have three things in common. They are optimists, because reform begins with a sense that things can be better. They have the courage to stand up not only to their adversaries but also to their allies. And they can bend. People tend to remember Nelson Mandela as the moral champion who liberated South Africa by suffering in prison for 27 years. The fact is he liberated South Africa by sitting down and cutting a deal with the white leaders who put him in prison."
Friday, April 15, 2011
Tuesday, April 12, 2011
Playing chess among checkers players...
The details of the budget cuts are coming out and the Right isn't happy about it. A key blurb from the article:
"The full details of Friday's agreement weren't being released until overnight as it was officially submitted to the House. But the picture already emerging is of legislation financed with a lot of one-time savings and cuts that officially "score" as savings to pay for spending elsewhere, but that often have little to no actual impact on the deficit.
As a result of the legerdemain, Obama was able to reverse many of the cuts passed by House Republicans in February when the chamber passed a bill slashing this year's budget by more than $60 billion. In doing so, the White House protected favorites like the Head Start early learning program, while maintaining the maximum Pell grant of $5,550 and funding for Obama's "Race to the Top" initiative that provides grants to better-performing schools."
Before everyone jumps off the deep end, this is actually the first example of true compromise in a long time. One important aspect of negotiation is to allow your adversary to back out of the deal without losing face. The adversary for Obama here wasn't the Rebpublican leadership but rather the Tea Party. This deal allowed John Boehner to get it passed with the votes he needed and the votes Harry Reid needed in the Senate without Boehner having to rely upon the Mike Pences and Michele Bachmanns of the world.
This also allowed Pence and Bachmann to continue kowtowing to the Tea Party by voting 'Nay' on the continuing resolution.
See, everybody wins!
"The full details of Friday's agreement weren't being released until overnight as it was officially submitted to the House. But the picture already emerging is of legislation financed with a lot of one-time savings and cuts that officially "score" as savings to pay for spending elsewhere, but that often have little to no actual impact on the deficit.
As a result of the legerdemain, Obama was able to reverse many of the cuts passed by House Republicans in February when the chamber passed a bill slashing this year's budget by more than $60 billion. In doing so, the White House protected favorites like the Head Start early learning program, while maintaining the maximum Pell grant of $5,550 and funding for Obama's "Race to the Top" initiative that provides grants to better-performing schools."
Before everyone jumps off the deep end, this is actually the first example of true compromise in a long time. One important aspect of negotiation is to allow your adversary to back out of the deal without losing face. The adversary for Obama here wasn't the Rebpublican leadership but rather the Tea Party. This deal allowed John Boehner to get it passed with the votes he needed and the votes Harry Reid needed in the Senate without Boehner having to rely upon the Mike Pences and Michele Bachmanns of the world.
This also allowed Pence and Bachmann to continue kowtowing to the Tea Party by voting 'Nay' on the continuing resolution.
See, everybody wins!
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