10-03-2004 00:57									#211
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Well it was 5% this year.

	10-03-2004 01:00									#212
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Including debt growth.

	10-03-2004 02:47									#213
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Just one more observation, if the GDP grows at 5% and the private sector is 70%, the private sector is growing at roughly 7/3 * 5 or 10%, which was about my original estimate. The true cost is of borrowing vs. taxes is the difference between this 10% and the cost in interest, which is now around 3%? In other words, the deficit actually yields a 7% return. Not bad.

All this illustrates is why every time we have gone into a balanced budget we also go into a recession or a depression. Balanced budgets cause the recession. Deficits drag us out.

	10-03-2004 02:58									#214
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quote: According to this report, GDP is expected to grow at an annual rate of about 5% for the forseeable future.

would this report be written by the same people who said that we would create 200,000 jobs a month this year?

	10-03-2004 04:26									#215
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Alright Lawrence and Mr. Baggins, et al., which grows the private sector faster

1) invest money in it;
2) withdraw money from it?

	10-03-2004 05:16									#216
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Just to clarify...

That 5% a year growth in GDP is the nominal growth rate (i.e. that before adjusting for inflation) - real growth is more likely to be 3% to 3.5%.

However the fact remains that even if the economy booms like it did in 1996-2000 the deficit will remain large (over 3% of GDP) due to the siginificant structural changes.

If nothing is done, and Bush's tax cuts are made permanent (as seems likely) then the US will face budget deficits of 10% to 15% of GDP 15 to 20 years time.
That would either imply the abolition of a major government spending area (like pensions, or education) or a rise in taxation to the levels currently prevailing in europe.

	10-03-2004 05:50									#217
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quote: Originally posted by Ned Templar, the question is not whether the government will be better off, but whether the entire country, which is 70% private sector, would be better off.

Is that the entire country in the aggregate? Or is that everybody better off? Because if venture capitalists are better off while normal people are stuck paying the tax bill, then that's just redistribution of wealth - from rich to poor.

Nor will that money necessarily "trickle down" - the venture capitalists could spend and invest outside of the US. In that case, the rich get richer, everyone else foots the interest payments, while the monetary gains get spent in a way that does not benefit Americans - i.e. the people who are paying the tax bill on the interest. This is what happened during the '80s and the Reagan "revolution".

I am familiar with your arguments. But history suggests that a bigger pie is not desirable from the average person's point of view if their share is ever shrinking. Suppose the gains by going into debt are not equally distributed, which follows the historical patern (80s and 90s). Then even if everyone pays equally for the resulting interest in the debt (and this doesn't happen either since capital gains have such a sweetheart tax), the average person pays more in tax without reaping the benefit.

No thanks on the increased debt thing unless the government shifts the tax burden thereby created wholly onto the direct beneficiaries. And why should they complain if they are doing better than breaking even?

Distribution, as always, is the most important question.

	10-03-2004 05:58									#218
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Just so we are on the same page, here are some data from OMB.

code:

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005-2009 2005-
2014 

code:

 1,782 1,817 2,049 2,256 2,385 2,506 2,644 2,786 3,036 3,272 3,441 3,629 11,840 28,004 

code:
 
2,158 2,294 2,411 2,525 2,652 2,783 2,912 3,047 3,198 3,296 3,457 3,616 13,282 29,897 

code:

 -375 -477 -362 -269 -267 -278 -268 -261 -162 -24 -16 13 -1,443 -1,893 

code:
 
-536 -631 -535 -464 -477 -504 -507 -511 -421 -299 -294 -277 -2,487 -4,288 

code:
 
161 154 174 195 211 226 239 249 259 275 278 290 1,045 2,395 

code:

 3,914 4,393 4,771 5,055 5,338 5,630 5,912 6,185 6,356 6,388 6,409 6,399 n.a. n.a. 

code:

 16.5 15.8 16.9 17.8 18.0 18.1 18.2 18.3 19.1 19.8 19.9 20.1 17.8 18.7 

code:

 19.9 20.0 19.9 19.9 20.0 20.1 20.1 20.1 20.2 19.9 20.0 20.0 20.0 20.0 

code:

 -3.5 -4.2 -3.0 -2.1 -2.0 -2.0 -1.8 -1.7 -1.0 -0.1 -0.1 0.1 -2.2 -1.3 

code:

 36.1 38.3 39.5 39.9 40.3 40.6 40.7 40.7 40.1 38.6 37.0 35.4 n.a. n.a. 

Attachment: 498501.gif
This has been downloaded 59 time(s).

Last edited by Ned on 10-03-2004 at 06:10

	10-03-2004 06:15									#219
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One can see the spike in revenues as a percentage of GDP is what forced the economy into the tank.

	10-03-2004 06:18									#220
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Ned, your graph's projections beyond 2010 assume the sunset provisions in the Bush tax cuts are not removed and the cuts made permanent.

But your graph also proves my point - during the Reagan revolution - the heyday of supply side - gigantic debts result without the revenue to recoup the cost. The graph also hides the fact that even when revenues exceed outlays, the debt from the past has not yet been paid off. So we are still in debt. Great.

	10-03-2004 06:20									#221
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quote: Originally posted by Ned One can see the spike in revenues as a percentage of GDP is what forced the economy into the tank.

You're jumping from correlation to causality. Post hoc ergo propter hoc and all that ...

	10-03-2004 06:24									#222
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quote: Originally posted by Ned One can see the spike in revenues as a percentage of GDP is what forced the economy into the tank.

The revenues increased because of economic growth. But that's not what caused the recession. The recession was caused by overinvestment in the private sector and subsequent fall out. Do you realize that you are arguing that govt revenues caused private investment to fall?

	10-03-2004 06:29									#223
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Kid, not only did revenues grow, but so did revenues as a percentage of GDP. This forced the budget into surplus. Just as it went into surplus, the wheels came off.

	10-03-2004 06:31									#224
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quote: Originally posted by el freako Just to clarify... That 5% a year growth in GDP is the nominal growth rate (i.e. that before adjusting for inflation) - real growth is more likely to be 3% to 3.5%. However the fact remains that even if the economy booms like it did in 1996-2000 the deficit will remain large (over 3% of GDP) due to the siginificant structural changes. If nothing is done, and Bush's tax cuts are made permanent (as seems likely) then the US will face budget deficits of 10% to 15% of GDP 15 to 20 years time. That would either imply the abolition of a major government spending area (like pensions, or education) or a rise in taxation to the levels currently prevailing in europe.

You make a giant leap. Anyway let us worry about 15 to 20 years in at least 10 years time. To do otherwise is just not usefull.

edit: If you plan for 15 years your economy will be screwed in 5 years as well as 15 years.

	10-03-2004 06:35									#225
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quote: Originally posted by Ned Kid, not only did revenues grow, but so did revenues as a percentage of GDP. This forced the budget into surplus. Just as it went into surplus, the wheels came off.

I think it's more accurate to say that the wheels came off because of the fall out in private investment, and we should have created stimulus immediately to keep the economy growing. Unfortunately, there was no political will to do the right thing at the right time.

	10-03-2004 06:42									#226
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quote: Originally posted by Ned Kid, not only did revenues grow, but so did revenues as a percentage of GDP. This forced the budget into surplus. Just as it went into surplus, the wheels came off.

Still waiting for you to serve up some causality with that correlation ...

	10-03-2004 08:35									#227
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*Harry comes back from the war...*

What the hell are you guys talking about now?

	10-03-2004 08:36									#228
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i remember reading somewhere about a bunch of failed states in africa which had such huge deficits and debts...

	10-03-2004 08:37									#229
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incidentally, i don't recall any of them ever having a surplus...

	10-03-2004 08:40									#230
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Well if they had huge deficits and debts, then no, they wouldn't have a surplus .

	10-03-2004 09:16									#231
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quote: Originally posted by Q Cubed i remember reading somewhere about a bunch of failed states in africa which had such huge deficits and debts...

Failure results in deficits. Deficits don't always result in failure even when they are considerable. The US deficit is no real danger. If interest rates go up we should pay it off or do something about the interest rates. It's completely managable.

	10-03-2004 09:25									#232
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i point that out because i'm not sure i buy this claim by ned:

quote: Kid, not only did revenues grow, but so did revenues as a percentage of GDP. This forced the budget into surplus. Just as it went into surplus, the wheels came off.

yes, it's true that it happend, but it also could very well be coincidence. where is the causal link?

of course, rules in the nedaverse might operate differently...

	10-03-2004 09:54									#233
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quote: Originally posted by Q Cubed i point that out because i'm not sure i buy this claim by ned: quote: Kid, not only did revenues grow, but so did revenues as a percentage of GDP. This forced the budget into surplus. Just as it went into surplus, the wheels came off. yes, it's true that it happend, but it also could very well be coincidence. where is the causal link? of course, rules in the nedaverse might operate differently...

That's two of us that want to see some causation.

	10-03-2004 10:00									#234
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Ned,

The thing is that taxes don't cause recessions unless total disposable income decreases as a result.

	10-03-2004 23:26									#235
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quote: Originally posted by The Templar Still waiting for you to serve up some causality with that correlation ...

I just noted the timing of events. The wheels came off when we went into a surplus due to a large spike in tax revenues as a percentage of GDP. Saying the wheels came off because of x or y in the private economy is little better than saying he wheels came off because the wheels came off.

	10-03-2004 23:46									#236
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quote: Originally posted by Kidicious Ned, The thing is that taxes don't cause recessions unless total disposable income decreases as a result.

Kid, I don't have DI figures for 1999-2001 period. But the point remains that prior to 1999 the budget deficit was stimulating the economy. Thereafter, the surplus dampened it.

We also know that Greenspan hiked interest rates at the same time.

The combined effects began to cause the stock market to go done. That added to the dampening effect.

And the rest is history.

However, Kid, it clear to me that part of the problem we had was the surplus. We might have been able to sustain a surplus IF Greenspan had not at the same time hiked interest rate. This was a double-whammy of sucking money out of the private sector.

	10-03-2004 23:53									#237
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Again, the reason I am pointing this out here is that even though the Republicans have "historically" been in favor of balanced budgets, they were wrong. Guys like Kennedy showed us that cutting taxes and stimulating the economy through deficits is the way to go (so long as the deficit does not exceed the growth for an indefinite period, as that will only lead to a financial collapse).

There used to be a saying that the Democrats were better for the economy. The reason for this had a lot to do with deficits.

Now that the Dems are calling for balanced budgets, it appears that there has been an historic shift in the parties on this issue. I think the Repubs now have the better position.

	11-03-2004 01:28									#238
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So when are we supposed to pay it back? Or are we never supposed to pay our debt back? So one day we can have crippling interest rates which will destroy our economy (forget about a soft landing)?

	11-03-2004 01:54									#239
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quote: Originally posted by Imran Siddiqui So when are we supposed to pay it back? Or are we never supposed to pay our debt back? So one day we can have crippling interest rates which will destroy our economy (forget about a soft landing)?

Never is the right answer.

You can still run a deficit, but so long as it less than the GDP growth, the level of debt to GDP will shrink.

Why should we allow inflation to get out of control again? Carter taught America a lesson we will never forget. Without inflation, interest rates should stay low.

	11-03-2004 02:03									#240
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quote: Never is the right answer.

Oh lord... if you were running the economy, I'd flee the country. As interest rate increases to such a point that the country goes under, you'd still want a higher deficit!

as el freako said:

If nothing is done, and Bush's tax cuts are made permanent (as seems likely) then the US will face budget deficits of 10% to 15% of GDP 15 to 20 years time.

I doubt we'll grow at 15% anytime soon.