August 6, 2003
From the desk of Jane Galt:Ahhh, nostalgia. . .
Listening to Democrats positioning themselves for 2004 talk about the 1997 budget deal as if it was the source of all that was good and right in the 1990's, not to mention their insistence that the budget surpluses were part of Clinton's Master Plan for Economic Rectitude, it's fun to come across items that show you how it looked then:
This was a deal made both easier, and worse, by the fact that, at the eleventh hour, plummetting deficit estimates from the Congressional Budget Office (CBO) gave the negotiators an extra $225 billion in projected revenues over five years to play with. The budget arithmetic was already skewed, with the cost of tax cuts after 2002 ballooning hugely above the savings, many still unspecified, that were meant to pay for them. With the arrival of the CBO’s windfall, even more fiscal rectitude evaporated. Suddenly, extra money was found for dicretionary domestic spending; and, more lamentably, two small but sound proposals for long-term structural reforms were struck from the negotiators’ lists.
For those who don't have a subscription to the Economist, the basic gist is that when the deal was cut, the budget was expected to balance for approximately one year, with never-never spending cuts, to be done when Mr Clinton was safely out of office, meant to balance it thereafter.
The surpluses in the 1990's, in other words, were not part of a master plan on the part of either party; they were a total surprise to everyone, which is why the government didn't get around to spending the bejeesus out of them until a couple of years later, when they were soon to be gone. . . gone with the wind. . .
Posted by Jane Galt at August 6, 2003 3:39 PM | TrackBack | Technorati inbound linksWho says that the 1997 budget deal created the 90s boom? That deal was pushed on Clinton by a Republican Congress (I remember Clinton stating that he would do no more than a 10 year balanced budget plan and that any time frame shorter than that would be too cruel-- he ended up signing a 7-year plan).
All this is moot anyway, because Dems in reality believe that it was the 1993 budget deal (and tax increase) that created the 90s boom.
That's a bit of a strawman argument.
The issue was never back then budget SURPLUSES. As you correctly point out they were not expected.
The issue was an improvement in the fiscal numbers something CLinton managed FROM DAY ONE. The federal budget balance improved EVERY year under Clinton, not just as % of GDP but in absolute terms as well. Please note that it happened every year for those that will come up with the discredited "But it was due to the GOP Congress" excuses. It wasn't.
The idea that they "didn't get to spend them" is also wrong. Spending dropped under Clinton as % of GDP EVERY YEAR as well, meaning that it wasn't just due to the fast growth of the second half of the 90s. Fiscal discipline started at the beginning with the tax increases. And,of course, Bush did manage to spend it, and rather quickly.
Clinton made a strategic decision early on his admnstration to signal to the markets his commitment to a better budget balance (remember his comments about bond traders?).
Sheesh, talk about strawmen! To speak of the budget trends during the Clinton years without reference to a small developemt like the collapse of the Soviet Empire, with the attendent change in defense spending, or to speak of Clinton's spending restraint without reference to the single biggest proposed spending program since the Great Society, the Clinton health care proposal (which, thankfully, never got traction in Congress), indicates that one really doesn't wish to have an honest discussion on the topic.
Spending dropped under Clinton as % of GDP EVERY YEAR as well
Only because the GDP grew faster than expected. Also bear in mind that the economy was just recovering from a recession when Clinton took office, so one would naturally expect things to improve during his term.
Just as it was easy, in 2000, to observe that whoever won the election that year would (a) have to deal with a recession and (b) get blamed for it.
Yeah, the bubble surprised everyone. On the other hand, Clinton raised taxes in 1993 and kept even non-defense spending under pretty tight control (under both Dem and Republican congresses), so he certainly deserves some credit for fiscal rectitude.
However, Will is right that his healthcare proposal would have increased spending considerably.
Giving Clinton credit for spending restraint is like giving an airline credit for a crash free flight record after the planes have been unable to attmept a takeoff due to lack of fuel.
Pretty tight control, Kevin? Grew 8% a year, IIRC. Only the rapid rise in GDP made it fall as a percentage, and only late in the presidency. I believe it was the 10% reduction in spending due to military cuts, and falling interest rates accompanying a steady fall core inflation, that reduced the budget.
totally off topic:
all right jane, i've gone ahead and put asymmetrical information back on my blog roll, mainly becuase you're such a sweet talkin' gal.
are you sure you can't convince mindless to add mine to yours?
I'm not a very smart guy, but I can keep some basic facts straight: we had a budget in balance when Clinton left, and under Bush the federal deficit is mind-boggling huge.
Period.
Thank you and have a nice night.
Hrm... how much of that balanced budget was propped up by social security money?
Will,
I did not get into the reasons of why the budget improved under Clinton. I only mentioned the fact that it did improve. Yes, defense spending dropped. So? I never said it hadn't. I just said he kept spending under control. Maybe you would have preferred he spent on other things. That's another point.
Your airline analogy is historicaly inaccurate. Clinton made a clear choice to keep good fiscal numbers and even with a Dem Congress did not raise spending as % of GDP. Also, the idea that a GOP Congress limits spending makes no sense. They never did. Have you read the newspapers lately? They may have different spending priorities but they spend the same or more.
And, contrary to what Jane says, Clinton's record is not simply due to high GDP growth which did not materialize until the end of his presidency (while the budget improved from say one). Same with Dan's point. GDP did not grow faster than expected during the first years of Clinton. Have we all forgotten that Dole ran, in part, saying the economy was growing too slowly?
Tight control is a relative issue. Maybe Jane and others would have preferred spending to have dropped even further than it did under Clinton. Fine. That's a political preference.
What's undoubtable is that Clinton was, fiscally speaking, much more restrained than Bush or Reagan were, who both raised spending while cutting revenues.
Let's not forget that one reason Bush can so easily have $450 billion deficits is that overall fed debt dropped from about 49% of GDP to 33% of GDP under Clinton. That's more than 15 points of GDP of extra maneuvering rom for Bush. Of course Bush will leave a mess for the next president.
Finally on the point at hand.
If Jane meant to say that there are Democrats that claim that they predicted the surpluses back in 1997, yes the article mentioned is a good rejoinder. But I don't know of any Democrats that say that.
What Democrats have said, correctly, is that Clinton's prudent fiscal policies, cutting spending and raising revenues, improved the nations' fiscal situation, leading around 1998 to the first surpluses in decades. Without the combiantion of drop in spenidng and revenue increase Clinton effected the late 90s boom would have improved the budget but not created a surplus. The combination of the two was a powerful one.
Funny how conservatives and Repoblicans, who so loudly proclaimed that Clinton's 93 tax increases would lead the country to disaster, and who happily claim credit for Reagan for the 1980s recovery, now explain Clinton's good times as pure luck.
Funny.
Mason,
A good chunk. Although in 1999 and 2000 the budget was in surplus even without SS receipts.
I haven't checked these numbers myself, but here's what Cato said a few days ago about Clinton's first three years:
"...in inflation-adjusted terms, Clinton had overseen a total spending increase of only 3.5 percent at the same point in his administration. More importantly, after his first three years in office, non-defense discretionary spending actually went down by 0.7 percent. This is contrasted by Bush's three-year total spending increase of 15.6 percent and a 20.8 percent explosion in non-defense discretionary spending."
That sounds like tight control to me. Are Cato's numbers wrong?
How can it logically be stated that a politician exercised tight control, or had prudent fiscal policies, when he tried to institute the largest single spending program since the Great Society? To employ another analogy, it is akin to giving an obese man credit for modifying his gluttony because he fell overboard from an all-you-can-eat cruise ship, got stranded on an island, and had to live on berries for 8 years. Clinton TRIED to spend a helluva lotta money (especially since health care spending proposals are nortorious for low-balling what the costs will eventually be), but since he failed in his quest, he is now nonsensically given credit for exercising prudence. It is, as GT would say, funny.
Also, GT the following....
"The issue was an improvement in the fiscal numbers something CLinton managed FROM DAY ONE. The federal budget balance improved EVERY year under Clinton, not just as % of GDP but in absolute terms as well."
certainly insinuates that Clinton "managed" events that led most dramatically to improved fiscal performance, such as the collapse of the Soviet Union, which is just a tad narrow-minded or disingenuous.
>>The issue was an improvement in the fiscal numbers something CLinton managed FROM DAY ONE. The federal budget balance improved EVERY year under Clinton, not just as % of GDP but in absolute terms as well
But note again that was NOT what the Clinton people expected, or planned their policies to produce at the time.
*After* they passed their tax increase and "fiscal responsibility" legislation they projected *increasing* deficits each year and forever out into the future. E.g with deficits rising from $140 billion in 1996 to $246 billion in 2000 to $405 billion in 2006.
That's what they *expected* their policies to produce.
So not only did the actual surplus of $236 billion in 2000 arrive as a $482 billion surprise to them, but the declining annual deficits that you give them credit for came as an equal surpise to them.
Yes, they did some things to constrain what they expected to be the continuing growth of the deficit.
But as for the actual results they got, declining deficits every year to the point of a surplus, there is no doubt about it -- they were lucky. Very lucky. That was very unexpected good luck.
Kevin, I haven't looked at the year-by-years. But the budget cycle means that by this point in his presidency Clinton had presided over exactly two budgets. One of which was stalled for months during the 1995 showdown with Uncle Newt, which would have produced a rather abnormal drop in domestic spending. The overall numbers showed DD going up at a healthy clip, while military spending dropped.
GT, we're not arguing pretty correlation, we're arguing causation. It it not enough to state that GDP grew -- we know that. But tax revenues started growing abnormally in Clinton's third year in office -- 1995, when the bubble started taking off. The previous two years were coming off a recession. Neither of which is something Clinton can exactly take credit for. And since he didn't plan to balance the budget until a) a Republican congress forced him and b) unexpected revenue growth made it possible to do so without making hard choices, I think the legend of the Clinton administration's master plan to balance the budget and save the world can safely be put to rest.
Will Allen: your 2:16 post was very, very funny.
OK, I will consider the idea that President Clinton did a good job of managing the budget -- at least as far as his powers as head of the Executive Branch allowed him to do, understanding there is a House of Representatives and a Senate that have some say in the matter, and some millions of wild-eyed entrepeneurs who also have some effect on GDP and tax revenues.
I will cheerfully accept the idea that President Bush is not managing my money as wisely as might be hoped, even taking into account current events.
My question is, what is the Democratic Party going to do for me in 2004? Are they going to put forth a candidate who combines a foreign policy that builds upon President Bush's good work, combined with fiscally responsible domestic policies? Or will they merely offer endless strolls down memory lane?
I'm not an economist, so I'll limit my remark to a question:
Why has no one mentioned the 1991 budget deal? Wasn't that crucial to the government's ability to raise revenue during the 90s?
Sweet Lou wrote:
OK, I will consider the idea that President Clinton did a good job of managing the budget -- at least as far as his powers as head of the Executive Branch allowed him to do, understanding there is a House of Representatives and a Senate that have some say in the matter, and some millions of wild-eyed entrepeneurs who also have some effect on GDP and tax revenues.
That seems a reasonable starting point if someone can show where it is that President Clinton demonstrated any real spending restraint (I’ll stipulate to his continuing the first President Bush’s reductions in defense spending). IIRC not only did he attempt to add another $500 billion to the deficit in the name of “health care reform” but also during the budget negotiations, he fought to keep a number of corporate welfare programs (e.g. “high tech investments”) that the GOP-lead attempted to eliminate.
I will cheerfully accept the idea that President Bush is not managing my money as wisely as might be hoped, even taking into account current events.
I don’t think too many GOPers/conservatives/libertarians would disagree that President Bush (43) is culpable for not vetoing the orgy of discretionary spending and supporting terrible ideas like restoring farm subsidies, another Medicare entitlement in the form of “free” prescription drugs, energy policy (like spending federal tax dollars on fuel cell R&D that ought to be paid for by the private sector), the Department of Education (which should be abolished), $15 Billion for “AIDS,” etc.
My question is, what is the Democratic Party going to do for me in 2004? Are they going to put forth a candidate who combines a foreign policy that builds upon President Bush's good work, combined with fiscally responsible domestic policies? Or will they merely offer endless strolls down memory lane?
I agree, the question was asked in an earlier debate what would everyone cut spending-wise and IIRC not a single Democrat could come up with any real spending reductions (just like none of them were really serious about Medicare and Social Security reform). They all pretty much seemed to just want to raise taxes.
IIRC, in the 90s the only portion of the federal government that shrank in budget and personnel was defense. Every other department and agency grew. When was it when we decided we didn't have to be so worried about fighting a multiple front war? If this is the record that Dems want to run on, that's great. You will get crushed when people start to connect the dots on why we don't have the reserve capability to rotate fresh troops into Iraq and Afghanistan. When your record of spending restraint amounts to hamstringing the one asset of the federal government that we need the most right now, you might want to toot that horn a little more quietly.
From GT "What's undoubtable is that Clinton was, fiscally speaking, much more restrained than Bush or Reagan were, who both raised spending while cutting revenues."
Are you really claiming that tax revenue declined during Reagan's eight years?
I seem to recall that one of the last years of Clinton's administration (1998? 1999? I can't remember) saw the size of the government as a percentage of GDP being the second largest in history (behind, I think, 1944). That doesn't sound much like fiscal restraint to me.
BTW, I consider this stat more of a black mark on the GOP than the Democrats. What good is a GOP majority in Congress if the government just keeps growing?
Also, anyone who is shocked at Bush's free-spending ways wasn't paying attention during the 2000 election. What did you think "compassionate conservatism" meant?
Sweet Lou may be holding the Dems to too high a standard; isn't the question whether their candidate will give us any reason to believe that he will be fiscally more responsible than has been Bush? As someone who voted for Dole in '96 and Bush in 2000, I happen to think that Bush has set a surprisingly and dismayingly low standard to surpass. I remain very skeptical of Dean, but Kerry (much has he makes me shudder) and especially Lieberman strike me as potential candidates that warrant strong consideration.
I agree with the posters who view Clinton's health care plan as a terrible, potentially devastating program that we thankfully avoided. But I believe that Bush learned the wrong lesson from it. Say what you will, Clinton attempted to solve a difficult (and still growing) problem with the approach his party believed in, even though he knew it was potentially damaging politically. What has Bush done remotely resembling that? Nothing on Social Security reform; nothing on farm programs; nothing on medical costs. Federal spending has increased dramatically during his presidency, revenues are decreasing, and the majority of his tax cuts are still ahead of us. Does anyone believe that he will lead a fight to decrease federal spending enough to offset the looming revenue reductions?
"Are you really claiming that tax revenue declined during Reagan's eight years?"
We're not supposed to ask that question, mailman.
Jane told us a few days ago that people like you and me are uninformed about the influence of tax cuts on treasury revenues in the 1980s, being hapless victims of right wing talk radio.
There seem to be a lot of strawmen arguments flying around. I never claimed, nor do I know of any Democrats that have (although there may be some), that there was a master plan to balance the budget.
Nor did I claim that luck had nothing to do with the fiscal changes. Certainly luck played a role. But it certainly wasn't all.
Shall we look at the numbers?
In 1992 the budget deficit was 4.7% of GDP. In 2000 we had a 2.4% surplus for a 7.1 points of GDP swing. How did that happen?
It was about half in increased revenues (47% of the change) and half from reduced expenditures (53%).
Let's start with revenues. Most of that increase is from higher personal and corporate income taxes. And why were they higher? Part of the reason is the higher growth of the late 1990s, 1997-2000 to be exact. In 1995 GDP growth was 2.7%, hardly a bubble. It was the over 4% growth each year from 97 to 99 that was the "miracle" or the "good luck". But that's not all the picture, not at all. Taxes began growing even before the bubble years due to, of course, higher tax rates. And even during the bubble years tax collections were higher than they would have been, again due to the 1993 tax increase.
Clearly the revenue increase were a combination of luck and prudent fiscal policies (ie raising taxes to reduce the deficit).
What about spending?
Most of it, but not all, was a drop in defense spending, about 60%. (BTW, I never denied that. That was a policy choice. ) But we also benefitted from lower interest payments on our debt, not so much due to lower interest rates but to lower overall debt. In 1992 we were paying interest on debt equal to 48% of GDP. By 2000 that had dropped to 35%. Just based on the CBO numbers it seems the effective IR was roughly the same those two years (about 6.5%) for all debt, but it was a quick calculation and I may be wrong.
A drop in defense spending, while important, explains only about 1/3 of the net change in the fiscal balance during the Clinton years. Jane's standard "they didn't predict it therefore they get o credit" is wrong. No they didn't predict it. But that doesn't mean their policies didn't have a great effect on the fiscal change. They clearly did.
Finally the argument that Clinton was 'forced' to reduce spending because he lost on health care. It makes no sense. Even if he couldn't get healthcare passed that doesn't mean there wasn't other spneding that would have been approved, if he had asked for it. Clinton made the strategic decision to cut military spending significantly while also reducing discretionary social spending, even if less dramatically.
Yes, Clinton was influenced by his cirsumctances. All presidents are. If we apply Will's standard (he was forced to do something so he gets no credit) the same applies to Bush's war on terror. Bush never cared about terrorism until 9/11.He shelved the Terrorism report and Cheney, who was supposed to come up with a new one, instead spent his time on the energy task force. Bush's position on the Middle East was "let them solve it by themselves" and he talked about eliminating profiling of Arabs.
Of course all of that changed after 9/11. He was 'forced' to change. So that means that Bush has nothing to do with the war on terror?
" Why has no one mentioned the 1991 budget deal? Wasn't that crucial to the government's ability to raise revenue during the 90s?"
And to control spending too. Give Phil Gramm a lot of credit for the Clinton boom, as he also helped to defeat Hillarycare, and the spending boondoggle known as a stimulus package (proposed during an already recovering economy!).
Even the Tax Reform of 1986, which cleared away a lot of loopholes in the tax code worked in Clinton's favor. Clinton goes down as the luckiest SOB ever to be President. He inherited a recovering economy that he couldn't screw up because he lost control of congress to the Republicans. He bequeathed a declining economy and a war to his successor.
Mycin,
You recall incorrectly. Federal government spending as % of GDP fell every year, every single year, under Clinton and was lower than under Reagan.
Mailman,
Federal govt revenues were 19.6% of GDP in 1981. They dropped to 17.5% by 1992.
GT wrote:
Mailman,Federal govt revenues were 19.6% of GDP in 1981. They dropped to 17.5% by 1992.
That’s nice to know but it wasn’t an answer to the question that Mailman asked which was “are you really claiming that tax revenue declined during Reagan's eight years?"
In 2000, tax revenues hit a historical high of 20.4% of GDP. In 2003, they are below historical averages in the 19% range. (No final numbers yet.) The lion's share of that change, according to the CBO and the OMB, is "technical change"; in other words, changes in GDP growth and the structure of the revenue base. New spending and tax cuts each clock in at less than 25%.
The Democrats are arguing an interesting position: Clinton's tax hikes are largely responsible for the surplus. Yet strangely, they did not result in a surplus until six years after they were enacted -- after, one might add, he gave a substantial portion of them back in the "targeted tax cuts" of the late 1990's, which were valued at hundreds of billions of dollars.
More reasonable estimates, such as those from the CBO, reckon that roughly 1/4 of the increase in revenue came from tax increases (although since this analysis assumes NO deadweight loss from taxation, it's certainly too high). Most of the relatively non-partisan analysis I've seen concludes that the real reason we had a budget surplus was that Clinton wouldn't let the Republican congress cut marginal income taxes, and the congress wouldn't let Clinton raise spending. A situation that was already reversing itself in 2000, as lawmakers found ever-expanding uses for the extra money in their districts.
G.T., if a President actively attempts to markedly increase spending, by passage of a gigantic new spending program, it is logically impossible to credit him with an attempt to restrain spending. The Bush analogy with 9/11 would only be apt if Bush had attempted to have jet airliners flown into the WTC, but had failed to succeed, and therefore was credited for successfully fighting terrorists. Clinton cannot be credited with spending restraint, because he actively sought to have a giant increase in spending. I suspect you simply don't wish to address the underlying logic of your position.
Jane,
I do not claim that Clinton is responsible for all of the fiscal improvement. I claim that he is responsible for an important part. That's all. Even if the 1/4 figure you mention is correct on taxes (I'd like to see what you base it on) as I explained above revenues only explain half the change. The rest is explained by spending cuts. And he is directly responsible for most of that. Between the two Clinton's policies are probably responsible for about 50% of the fiscal change (more if it turns out that the 1/4 figure is higher).That's pretty significant, wouldn't you say?
There simply is no proof for your allegation that the GOP stopped Clinton from spending. If you bother to look at the proposed spending in Clinton's budgets you'll notice it's not that different from what was finally approved. And Clinton had two years with a Dem Congress and that made no difference. A GOP Congress and a GOP President are now presiding over the largest non-defense increase in govt spending in decades. Hopefully the idea that GOP Congresses limit spending can safely be put to rest, as you would say.
Will,
Are you saying that people never learn from their actions? Even if I agreed with your characterization of the healthcare plan (which I don't but no need to revisit that) how does proposing it mean that Clinton couldn't limit spending afterwards? You make no sense. You are saying that because Clinton proposed a large spending program he could never change his mind afterwards. It's been well documented how Rubin and Summers helped convince Clinton that his best economic bet was to convince the bond markets that he was serious about fiscal restraint. Maybe Clinton did expect to push heavy spending when he was inaugurated but that changed very quickly.
People change their minds based on reality all the time. Bush did not think terrorism was a priority. Therefore, using your logic, he can't think it is a priority today. Of course that's silly. 9/11 changed his mind. Rubin and Hillarycare changed Clinton's mind about spending and that was reflected in his budgets.
Have you read anything aboput Clinton? He was always a pragmatist, changing his mind based on circumstances. Have you read nothing about how he acted as a governor?
Thorley,
You do know how to measure real revenues over time, right?
Hint, you don't base it on nominal data.
Yes, G.T., what changed Clinton's mind about his hugely expensive health care proposals was having his butt kicked in the '94 elections, so if you wish to give him credit for recognizing a butt kicking for what it is, I'll go along with that. I won't go along with Clinton having spending restraint, because he did not wish to restrain spending. To the contrary, he wished to expand it greatly. Again, the Bush analogy is a poor one, because Bush did not actively seek to have terrorists strike the United States.
GT wrote:
Thorley,You do know how to measure real revenues over time, right?
Hint, you don't base it on nominal data.
Mailmain asked if anyone was “claiming that tax revenue declined during Reagan's eight years” which you evaded answering with an irrelevant statistic about federal revenue as a percentage of GDP when what he was clearly asking was whether or not the actual dollars collected by the federal government decreased during that time.
Whether or not the federal government collected fewer dollars as a percentage of larger economy may be interesting but it doesn't answer his question.
I was always taught to use inflation adjusted numbers when measuring across time. That may just be me though. Unless you are arguing that the only thing accounting for increases to GDP is inflation. By using % GDP you are using nominal increases, not real increases.
Hint, real=nominal-inflation. Hope this helps.
Will,
Bush "wished" to not focus on terrorists. He also "wished" to get rid of Arab profiling. But he got his "wishes" kicked in 9/11 and recognized the butt kicking and changed his mind. I won't go along with Bush being tough on terrorism because he didn't want to focus on that, he was forced to.
Maybe you are right and it was the 94 elections (of course that fails to explains his previous budgets but so be it). In any case the point is the same. Clinton, for whatever reasons, decided to focus on fiscal restraint. And that was my point all along.
Thorley,
Joe is exactly right.
If the question was "did NOMINAL revenues fall during the Reagan years" the answer is no (even this is not completely true though). Of course, the question is useless and tells us nothing.
The useful question is if REAL revenues fell. There are several ways of adjusting nominal revenues. You can adjust for growth, for inflation, for population growth. No one is perfect but I prefer using % of GDP as the best proxy. Most everyone who comments on this uses that ratio.
Have you read anything aboput Clinton? He was always a pragmatist, changing his mind based on circumstances. Have you read nothing about how he acted as a governor?
Are you saying Clinton LIED with respect to his intended policies?
No, I don't really think that. I just encountered someone on a different blog who insisted that Bush lied when he said he thought the tax cuts would stimulate the economy. So, maybe a liar is just a guy who hasn't changed his mind yet, eh?
Joe wrote:
I was always taught to use inflation adjusted numbers when measuring across time. That may just be me though.Unless you are arguing that the only thing accounting for increases to GDP is inflation. By using % GDP you are using nominal increases, not real increases.
Hint, real=nominal-inflation. Hope this helps.
I agree, that’s the method I was taught as well and it really the only relevant number in determining whether or not federal tax receipts declined, increased, or stayed constant over a given time period.
Tax receipts as a percentage of GDP is irrelevant to the question.
Unfortunately, GT, you wrote the following:
"The issue was an improvement in the fiscal numbers, something Clinton managed FROM DAY ONE."
Now if you wish to explain how one can "manage" "an improvement in the fiscal numbers", while at the same time actively working for a giant increase in spending, I eagerly look forward to seeing this breakthrough in logic.
Tell me, if a heroin addict newly relocated to Singapore, as a result of a spouse's new job, actively seeks to obtain a fix every day, but fails because he can't find a dealer, do we say that the addict has "managed to reduce his heroin consumption from DAY ONE", or would it be more accurate to say that the addict's rate of heroin consumption has improved, despite the efforts of the addict to maintain consumption?
GT, if I am exactly right, then you are exactly wrong. By using %GDP you are using the nominal, not real rate of growth. The real rate of growth is not the total growth of GDP, but has growth from inflation subtracted from it. The 5.7% increase that was just released as an annualized quarterly growth rate was the nominal rate of growth, to get to the real rate of growth you would need to subtract the annualized quarterly inflation. Saying in 1990 we had X% GDP in tax burdene and 2003 we had Y% GDP in tax burden isn't informative if you want to discuss the increase or decrease in tax revenue. It is the equivalent of saying Roses are red, Violets are blue, therefore tax revenues fell in Z time span. What you would want to do is say in 1990 constant dollars we had revenues of $X trillion in 1990 and $Y trillion in 2003. This, and only this comparison will show what you want to say, unless the only thing that was causing GDP growth was inflation. Any other mathematical comparison will show nothing more than you know how to run a calculator.
Will,
Because he pushed a tax increase from day one.
Remember?
The fiscal numbers are a result of the difference between revenues and expenditures.
As the numbers I posted above show about 50% of the fiscal correction during Clinton's administration was due to higher revenues.
BTW, you keep referring to a giant increase in spending from healthcare. For purposes of the argument I have simply accepted that. But not becasue I really agree. Do you have any links as to how much, exactly, you are talking about?
Er, no Joe.
By using % of GDP you are correcting for inflation (at least for the GDP deflator).
You have to be careful. If Thorley only cares to know if the nominal tax intake dropped then all you look at is nominal data. But that doesn't tell you much.
What I was referring to, and should have made explicit, is to changes in real revenues. It is not enough to adjust for inflation. Even if inflation were 0% you would expect an increase simply from the fact that the labor force increases over time. Also, you want to adjust for an increase in the taxable amounts, as the economy gets bigger.
There is no one single perfect way to do this. There are different ways depending on what you want to accomplish. It just happens that using GDP percentages is one of the best proxies. That's why if you pick any economics textbook fiscal time series comparisons are alwyas done using % of GDP. This is not controversial stuff.
Today's government collects more taxes trhan we did prior to the New Deal. We all agree on that. But if you ask any economist to prove this with numbers he will not use nominal data. Nor will he use data adjusted for inflation. Even adjusting for greater labor force and inflation may not be enough, since it won't take care of real GDP. He will use revenues as % of GDP which, although not perfect, adjusts for all of this..
Yes GT, and the fact that you cannot concede that the 1993 health care proposal would have entailed an increase in government expenditures simply indicates that you don't wish to address the topic in an intellectually honest fashion. Let me guess; you will accept any source which lowballs the the cost of such a program, while ignoring the historical record of every health care program ever introduced for true costs being gigantically higher than the projected costs. Believe what you wish, GT; you seem to have a nearly religious need to believe that a person can propose x amount of spending (while the historical record shows that the true cost will be x + y), and the person's record on fiscal matters should not reflect his desire to spend x dollars, to say nothing of x + y. It is a very strange way of presenting the historical record, but, hey, it's a free country.
Sweet Lou may be holding the Dems to too high a standard
The most depressing thing I've read all day. So MattJ thinks Senator Lieberman and Senator Kerry might meet the bill.
Well, it's something. I hope one of those two guys makes it past the primaries.
Thanks, MattJ.
No, I have data, but I simply don't wish to take the time to retieve it, for no better reason than to satisfy your doubt as to whether the '93 health care proposal would have entailed some expenditure of public monies. Believe what you wish.
No, not some expenditure. Hiring an extra doctor would qualify for that.
You said a giant increase in govt spending.
So you can't back it up?
"The useful question is if REAL revenues fell. There are several ways of adjusting nominal revenues. You can adjust for growth, for inflation, for population growth. No one is perfect but I prefer using % of GDP as the best proxy. Most everyone who comments on this uses that ratio. "
But that doesn't really make any sense for measuring trends in revenue or expenditures. The interesting trend is spending in proportion to CPI * population. If that number increases, then the government is spending more real money per person than it did previously. Just because the people themselves are wealthier does not mean that they automatically need more government spending. Government spending as a proportion of GDP ideally should go down over time; if it stays constant or increases, then people's cost of government is getting jacked up, and that should be reflected in the numbers we use, and there should be a reason for it to occur other than "just because".
The GOP congress made exactly one serious attempt to restrain spending, in 1995. President Clinton responded to this attempted fiscal responsibility by vetoing the budget and allowing a government shutdown. So much for Clinton's desire for spending restraint.
Well yes, GT, we can examine the history of EVERY government health care spending proposal, and see that EVERY one has wildly outstripped projected costs. Now, if you wish to argue that the program which was designed to cover the entire American population would be the exception to this trend, go right ahead, it's probably no more harmful, in the context of this dialogue, than believing in the tooth fairy.
GT, I don't think Will's middle name is Google, nor do I think that that 'Will Allen' is a cover and his real name is Google. When he says that EVERY medical program has overshot projections, he is not exagerating. Literally every program ever run by the government related to health care has cost more than the government planned.
42!
" The GOP congress made exactly one serious attempt to restrain spending, in 1995. President Clinton responded to this attempted fiscal responsibility by vetoing the budget and allowing a government shutdown. So much for Clinton's desire for spending restraint."
Exactly.
"The interesting trend is spending in proportion to CPI * population."
Assuming a marginal preference for government spending of zero?
I'd settle for a zero rate of increase on per-capita spending. Or something like that.
The question isn't what you'd prefer; it's what the voting population wants. It strains belief that the population wants to spend *all* of their yearly income increases on private goods.
Goodness, why not, Jason? What public goods do people demand more of as they get wealthier, except the EPA, which is a trivial amount of government spending, and defense, which you're ready to cut? Perhaps people demand more charity -- but if we're all getting wealthier, there ought to be less need. Maybe roads, but areas with actual population increases have pretty much frozen road building. I don't feel like I need more from the Bureau of Indian Affairs, Medicare, or the USDA every time I get a raise.
I guess Jason's overlooked that I just may be part of the voting population.
David, it is considered a problem that they are working to rectify. Please be patient.
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