January 25, 2005
From the desk of Jane Galt:Talk about burying the lede!
This New York Times article on the budget puts the most important point way down in the middle of the article:
he Congressional Budget Office predicted today that the federal government will run a deficit of $368 billion this year, a figure that does not include a request that administration officials plan to unveil later today for $80 billion more in funds for the wars in Iraq and Afghanistan.
The figure also does not include the cost or savings from any of the proposals President Bush is expected to make in the budget he will submit to Congress shortly.The deficit for the 2004 budget year was $412 billion, representing 3. 6 percent of the nation's total economic activity. The deficit projection for this year, excluding growth in military spending and other budget changes, would represent 3 percent, the budget office said..
Last year's deficit was the largest ever in dollar terms, although the deficits run under President Reagan in the 1980's were larger as a percentage of the economy. President Bush pledged during last year's campaign to cut the deficit in half by 2009, and aides have said that his new budget will include a number of spending cuts.
Spending on military operations, however, seems likely to continue to grow.
The request for $80 billion would bring projected spending on the conflicts in Iraq and Afghanistan to $105 billion for the 2005 fiscal year - a figure that far exceeds the administration's pre-war estimates of overall costs.
The spending in 2005 would bring the total cost of the two conflicts to almost $300 billion.
The nonpartisan Congressional Budget Office also projected the 2006 budget deficit at $296 billion, and released a 10-year fiscal projection that estimated budget shortfalls over the next decade at $855 billion, down from its projection last year of $2.3 trillion. But the new reported noted that the 10-year figure, like the projection for the coming year, would predict larger shortfalls if the full amount actually being spent on the conflicts were included.
Perhaps I'm being partisan: after all, isn't it important that we're about to spend a bunch more money on Afghanistan and Iraq? Yes! This is just the sort of timely tidbit that keeps us going back to the Times when so many other publications lure. But is that information so important that we need to spend three full paragraphs reading about it before the article so much as hints that projections of the future budget deficit have fallen by more than half in the last year? No!
That is a very important piece of information. For one thing, it means editorial boards are going to have to stop claiming that we could fix our future social security problem if we just closed that darn deficit! For another, it means that tax revenues are rebounding faster than expected (after declining more quickly than expected during the 2001 recession.) This is joyous news not merely for deficit hawks, but also for followers of the economy everywhere, since it means that incomes are finally starting to bounce back. Perhaps most importantly, it should alert readers to the incredible volatility of budget projections.
From the conservative point of view, this is nice because it means honest liberals will want to stop complaining that Bush's budget swung from a projected huge surplus to a projected (somewhat smaller) deficit, as if those numbers represented something other than the wild assed guess of some nice folks in the budget offices, based on some pretty simplistic trendline extrapolations that assumed that everything that had happened in the last eighteen months would pretty much continue to happen forever. [You seem to have caught Mickey Kaus disease--ed. Yes, it's infectious, but not fatal--I hope.]
From the liberal point of view, this is nice because visions of increased domestic spending may be swimming into view on the horizon. Remember, it only took a few years of surprise surpluses under Clinton, plus a nasty shellacking in the '98 midterms, to send Congress off on a hog-wild domestic-discretionary-spending binge from which we are only now recovering. [Does this mean that you don't think the Clinton administration produced the surpluses?--ed. Yes, it does. Now go away, you're distracting me.] If the budget deficits continue to fall faster than expected, the liberals may lose a talking point, but it's not one they cared about anyway, except for a few pointy-heads at the DLC. Plus, it's not like it actually worked in the last election. You're not losing a campaign plank, you're gaining a fat new roster of domestic spending plans!
And from the deficit-hawkish point of view, this is nice because it means that maybe, just maybe, people will realise that they shouldn't make fat long-term spending commitments on the basis of budget projections that change so radically every few years.
[What about tax cuts?--ed. As I've said before, it seems to me that tax cuts are pretty ephemeral . . . the legendary Reagan cuts lasted only a couple of years, though the simplification survived longer. On the other hand, we've still got those "strategic" wool and mohair subsidies, even though we haven't made military uniforms or blankets out of wool for decades.]
[But what about . . . That's it! I'm yanking your contract.]
Update This Wall Street Journal article says that the drop is a statistical artifact, and that in fact the deficit projection has risen by $20 billion this year. Mea culpa. But how did the NYT miss this?
Double update My liberal interlocutors will be un-pleased to note that the budget deficit would have fallen by quite a lot if not for the huge, expensive (but not expensive enough for Democrats) Medicare prescription drug benefit, which wasn't in the last budget.
Posted by Jane Galt at January 25, 2005 1:54 PM | TrackBack | Technorati inbound links"...nasty shellacking in the '98 midterms, to send Congress off on a hog-wild domestic-discretionary-spending binge from which we are only now recovering." That would be the Republican majority Congress, wouldn't it?
Uh--I was in the Marines in the 1980s, and we had both wool uniforms (Dress Blues and IIRC the Class A uniform jackets and trousers were made from wool) and the blankets I slept on were wool--now, I'll admit that the blankets may have been made decades before, but the Uniforms were relatively new.
I'll be able to tell you more about the current Air Force uniforms in a couple weeks.
Of course, this isn't to justifiy wool or mohair subsidies as we don't *need* to make them out of wool, they just look better that way.
And yes, this is totally orthagonal to the point of this peice.
For what its worth, OMB is forecasting a budget deficit larger than CBO and larger than last year's actual deficit.
Jane-
My understanding is that the 2004, higher, deficit estimate includes the supplemental spending on Iraq, and the 2005, lower, estimate does not. See table 1-1 in the CBO report.
The apples-to-apples comparison, excluding supplemental spending from both, shows the projected deficit going up, not down.
Eamon -- I just looked at mid-year review numbers, and I saw a smaller projection than either last year's numbers, or the CBO's estimate. Can you point me to your figure?
Me--Yes. Why?
Me,
Congresscritters are still critters no matter what the party. While the Reps tend to have more realists than the Dems, they both love to bring home the pork to get re-elected. That's why we depend on the Pres to veto lots of bills, which is the main thing I have against the current Pres.
I don't think I'm misunderstanding it, although I'm open to be convinced otherwise. Look at note b under Table 1-1: "CBO's September 2004 baseline extrapolated $115 billion in supplemental funding (mostly for activities in Iraq and Afghanistan) throughout the 2005-2014 period. Excluding the extension of such funding reduces outlays over that period by $1.4 trillion (including debt-service costs)."
What I understand that to mean is that the higher, September 2004, projected deficit includes 115 billion for Iraq and Afghanistan, projected forward as if it were to be a yearly expense. The lower, January 2005, projected deficit doesn't include any such projected yearly expense. When you exclude the 115 billion (projected forward, etc.) from the September 2004 projection, you get a lower projected deficit as of September than as of January 2005.
If I'm misreading the chart, walk me through it -- otherwise, it looks as if the deficit projection hasn't actually gone down.
Sorry -- did a comment get deleted? I thought I was responding to something.
And on the update? Lots of Democrats thought that the Medicare prescription drug benefit, as passed, was a worthless boondoggle that only benefitted pharmaceutical companies. Didja try and figure out the effect Bush's tax cuts have had on the deficit, while you're waving blame around?
That is a very important piece of information. For one thing, it means editorial boards are going to have to stop claiming that we could fix our future social security problem if we just closed that darn deficit!
Why exactly would this be the case?
Okay, y'all may not like the structure of the benefit, but the fact is that the benefit y'all were pushing cost 50% more, so you're hardly on some deficit busting moral high ground here. The total cost of all the Bush tax cuts, some of which I support, and some of which I could care less about, is $2.1 billion over 10 years . . . less than the deficit the CBO projected last year. It got pushed over that only by the Medicare prescription drug bill. The Medicare prescription drug bill that the Dems were pushing would have been just paid for by Kerry's repeal of the Bush tax cuts, plus his new taxes on the rich. Unless you are in favour of raising taxes on the middle class and the poor (or raising them on "the rich" to levels that really do make even moderate economists start to worry about deadweight loss), you can't credibly complain about the deficit, because you don't want to do anything about it.
Bottom line: anyone can blame the deficit on anything they want, by cherry-picking their items. Democrats would like it covered by raising taxes; Republicans (although not their legislators) by cutting spending. But this is hardly helpful, since Democrats want high spending, and Republicans low taxes, whatever the state of the budget; talk about the deficit is just window-dressing for existing preferences.
But neither spending nor tax cuts is the dominant cause of the switch from surplus into deficit; over 50% of the effect is economic change. It is no easier, nor harder, nor morally better, nor morally worse, to be a deficit hawk and a defender of Bush's tax cuts, than it is to be a deficit hawk, and a defender of more domestic spending; it simply means you've prioritised something over the budget, which is a perfectly valid policy goal. Democrats are vulnerable to the charge of hypocrisy, because damn few of them cared about deficits before Bush ran one, but then so are Republicans, because they talk a good game but in the end they let their politicians spend like drunken sailors.
Because the deficit projection is now much smaller than the Social Security deficit projection, Boonton.
My liberal interlocutors will be un-pleased to note that the budget deficit would have fallen by quite a lot if not for the huge, expensive (but not expensive enough for Democrats) Medicare prescription drug benefit, which wasn't in the last budget.
Good point, moreover it should also be noted that the huge and expensive (but not expensive enough for the Democrats) Medicare prescription drug benefit was made larger and more expensive by Senate Democrats’ threat of a filibuster. Hence instead of a $300 Billion benefit, we have a $534 Billion one and even then House and Senate Democrats were fighting for their alternatives bills that cost $700 and $900 Billion.
I'm further puzzled by why you say the NYT 'missed' this. The last sentence you quote explains the situation -- if you've got any gripe with the Times, it's that their writing confused you (you seem to have read 'larger' in that sentence as 'larger than the Jan. 2005 projection' not, as was meant, 'larger than the Sept. 2004 projection), not that they got any facts wrong.
Okay, y'all may not like the structure of the benefit, but the fact is that the benefit y'all were pushing cost 50% more, so you're hardly on some deficit busting moral high ground here.
I don't remember pushing for any particular benefit myself but wouldn't it also make sense to compare what you're spending the money on? If the alternative proposal really provided some great benefits but cost 50% more I might be inclined to bite the bullet and go for it. If Bush's proposal was not doing any serious good, though, I'm well within my rights to bash it as an unnecessary expansion of the deficit.
But neither spending nor tax cuts is the dominant cause of the switch from surplus into deficit; over 50% of the effect is economic change.
I agree with this yet that leaves 50% of the deficit due to non-economic change...in other words causes other than the business cycle. There's simply no blaming Democrats for this. The Republicans have been running the show for nearly half a decade now.
No, Lizardbreath, I didn't miss it; it's not there. The NYT piece says that the numbers would be larger if the amounts spent on Afghanistan & Iraq were included; I noted that. The NYT piece does not mention, AFAICT, that the decrease from last year's projection is largely due to a change in methodology, which is what the WSJ piece says.
If there had been a Democrat in office for Bush's first term, we'd be spending a heck of a lot less in Iraq. Like, nothing.
A hundred billion here, a hundred billion there -- pretty soon it starts looking like real money.
Democrats are vulnerable to the charge of hypocrisy, because damn few of them cared about deficits before Bush ran one, but then so are Republicans, because they talk a good game but in the end they let their politicians spend like drunken sailors.
To be fair, the GOP does seem to be reining in increases in non-defense/homeland security discretionary spending (as it did prior to Jeffords defection which gave Democrats control of the Senate and lead to the spending binge) which is a somewhat hopeful sign. If we succeed in slowing the rate of growth of Social Security (e.g. going from wage-indexing to price indexing and possibly phasing in a higher retirement age) this would also be positive to controlling spending. There also seem to be some signs that the House GOP wants to revisit Medicare reform both in response to the $534 Billion prescription drug benefit that was supposed to cost “only” $400 Billion and in light of the latest reports of Medicare’s unfunded liabilities.
Because the deficit projection is now much smaller than the Social Security deficit projection, Boonton.
HAHAHAHAHAHAHAHAHAHAHA
http://www.ssa.gov/OACT/TRSUM/trsummary.html
Social Security is projected to be in surplus until 2018 (if you don't count interest earned on its T-bonds and 2029 if you do). I see nothing in the article you've cited to indicate that the CBO projects a surplus in the general budget or even combined budget for the next ten years.
Well, let's compare:
Bush, it is alleged, will have spent $300 billion on Iraq by the end of 2006.
On the other hand, with a Democrat in office, we presumably would have had a prescription drug plan more along the lines of what the Dems were proposing . . . in the $900 b range.
Iraq may or may not have been a good idea. But the budget is not a good battleground for its Democratic opponents. Even by his own campaign's account, Kerry's budget deficit was a wash with Bush's, and that involved some heroic massaging of his health care plan's numbers, to the tune of $500 billion--or almost double what he said it would cost.
"And on the update? Lots of Democrats thought that the Medicare prescription drug benefit, as passed, was a worthless boondoggle that only benefitted pharmaceutical companies."
Completely correct Lizard Breath. What reveals better the dishonesty of the Republican mind when it is the Democrats who come in for criticism when the subject is a "huge, expensive benefit" proposed by a Republican President and passed by a Republican Congress? Come on Jane, be honest and say it: the bill was the fault of a Republican President and a Republican Congress. It's *your* party which is running the country into the ground. If you can't be honest about that, you might as well put on your Yankees hat and go out to the ball game, because all you seem to know how to do is to root for a home team.
Jane:
1. It's pointless to try to guess what would have happened if Dems had been in office based on campaign plans. Let's recall Bush campaigned on ending racial profiling of Arabs and paying off the national debt. Clinton campaigned on universal healthcare yet none of these things happened.
2. $300B spent on Iraq is more or less present dollars. I'm sure the $900B that would have been spent on alternative drug proposals would be at least partly future dollars. Finance 101 Jane tells us that you have to discount that $900B into current dollars to do a fair comparison.
Indeed, I was vitriolic on the subject of the Medicare prescription drug benefit . . . I am, and remain, opposed to any such thing. But for Democrats to complain that it was insufficiently expensive, and then turn around and complain about the budget deficit, is more than a bit rich.
Boonton, my darling, last time I looked, they discounted the 10-year cost by the inflation rate. And I am not the one who started with "If there were a Democratic president in office . . . "
Jane, I found it on Reuters. http://reuters.com/newsArticle.jhtml;jsessionid=5L4U1EAOB4U5OCRBAELCFEY?type=politicsNews&storyID=7426389
It includes the cost of Afghanistan and Iraq, according to a "senior administration official."
Let's see -- the Republican budget doesn't include the costs of a useless war, and we don't get broad-based health care benefits. The Democratic plan includes all of its costs, and we get broad-based health care benefits. And they cost the same.
I dunno -- the Democratic plan looks pretty good to me.
Jane,
If the cost was indeed discounted then I apologize. I suspect it wasn't, though, since the undiscounted number would be larger & hence would be a better one to use for critics.
But for Democrats to complain that it was insufficiently expensive, and then turn around and complain about the budget deficit, is more than a bit rich.
Which would be true if 'expensive' was the only criteria being used to measure the proposal.
And I am not the one who started with "If there were a Democratic president in office . . . "
No, but you are the one who seized the occasion of admitting that you had completely misinterpreted a news story to throw in a random slap at Democrats, blaming them for the cost of a program backed by Bush and the Republicans in office. Not only unjustified, but irrelevant to the story and particularly irrelevant to your correction.
Really, whatever happened to "Whoops. Misread this one. Ignore this post and go in to the next."
Lizardbreath, you're talking as if the costs of those two things are the same. The cost of the Iraq & Afghanistan campaigns is $300 billion over four years, with a declining committment in out years. The cost of Kerry's health care plan was something close to twice that per year, with an increasing committment in out years.
This is petty and childish. The Bush administration has spent too much money, for which I have repeatedly chastised them, and in my opinion as a confirmed deficit hawk, should repeal the tax cuts on wealthier Americans. But even cutting the spending and repealing all of Bush's tax cuts for those making more than $200K, I recognise will not close the deficit. To advocate this, on the grounds that the budget deficit is a bad thing, and then to simultaneously advocate massive amounts of new spending, is hypocritical partisan silliness, not serious policy discussion.
Lizardbreath, you're talking as if the costs of those two things are the same. The cost of the Iraq & Afghanistan campaigns is $300 billion over four years, with a declining committment in out years. The cost of Kerry's health care plan was something close to twice that per year, with an increasing committment in out years.
No, I'm pointing out that one is a budgeted cost and the other isn't. IThe cost of the wars in Iraq and Afghanistan are in addition to the budget, not included in it.
Lizardbreath, I emphatically did not misread this news story. The news story omitted a critical piece of data, which I found somewhere else. When I found that piece of data elsewhere, I immediately updated the piece to reflect the fact that there had been what accountants call a "big hit" moving the projections downward. On second thought, I also updated the piece to reflect the fact that there had been another big hit moving the projections upward--the Medicare prescription drug bill--which menat that my original diagnosis of improving tax revenues remained intact, but had been overtaken by the enormously expensive new benefit. You're the one who got your panties in a twist because I dared to point out that domestic spending, just like military spending, means bigger deficits.
I have no idea what sort of distinction you're trying to draw: you seem to be saying that supplemental spending is in some way different from regular spending. The money goes out just the same whether or not Kerry puts his magic "presidential budget" stamp on it.
The point is that you raised Bush's and Kerry's projected budgets, and called them a wash. Bush has shown a penchant for substantial discretionary spending that doesn't get included in budgets -- if both sides are offering the same level of budgeted expenses, track records show that Bush is going to spend more.
And just for grins, can you quote the language from the WSJ article that gave you necessary facts omitted from the Times article? I don't see an explicit statement that war costs were included in last year's projection in either. Careful reading makes it clear from both stories, but the WSJ story hasn't, as far as I can see, got any additional information in it.
I agree with Jane Galt that the budget isn’t a good ground for Democrats since they’re objectively worse on spending than the GOP. However I have two quibbles.
First, much as some Democrats have tried to claim otherwise this isn’t “Bush’s War” this is a war that both Republicans and Democrats – including the Presidential and Vice-Presidential nominee of the Democrat Party voted to authorize. While granted, their nominees did later vote against providing the supplemental funding for our troops in Afghanistan and Iraq, they share responsibility for the intitial costs as well.
Second, in terms of overall spending while I agree that Kerry required quite a bit of massaging of his numbers to get the same level of deficits, there is no reason to believe that his health care costs were completely accounted for as health care costs are notoriously difficult to project given changes in treatment, life expectancy, etc. A new entitlement that was supposed to cost “only” $895 Billion might have cost double that. Also even so, Kerry was – having supported all or higher levels of the baseline spending than Bush while proposing another couple of Trillion in new spending on top of that - objectively worse than Bush on spending anyway which would have made him a poor alternative for any fiscal conservative.
I only agree to a limited degree with Jane that the argument about deficits is about preferences (GOP for low taxes Dems for high spending). I think there has been a very real paradign shift among Republicans. Sometime around Clinton's second term they started believing that deficits simply do not matter. There is a very real perference by Democrats for lower budget deficits while Republicans perfer not to care about the deficit.
This leads one to suspect a Democratic administration would have restrained the budget more than Bush did in the last 4 years. Trying to compare proposals is pointless. Proposals on the campaign trail almost always give way to reality in office.
LizardBreath wrote:
The point is that you raised Bush's and Kerry's projected budgets, and called them a wash. Bush has shown a penchant for substantial discretionary spending that doesn't get included in budgets -- if both sides are offering the same level of budgeted expenses, track records show that Bush is going to spend more.
Except that Kerry’s track record is also one that shows that he is willing to spend money on things that aren’t initially accounted for in a budget such as his support of supplemental appropriations for operations in the Balkans and “emergency” farm relief in the 1990’s.
"I agree with Jane Galt that the budget isn’t a good ground for Democrats since they’re objectively worse on spending than the GOP."
Objectively, as in "I only care about what I imagine?"
And in any case, there are two sides to any budget, one being receipts and the other spending. How much into the red has your dear leader's tax cuts put us?
I'll have to admit that I don't have the costs of either the supplemental farm spending or the supplemental spending on the Balkans at my fingertips. Are you representing that they are comparable to the costs of the Iraq war?
"Except that Kerry’s track record is also one that shows that he is willing to spend money on things that aren’t initially accounted for in a budget such as his support of supplemental appropriations for operations in the Balkans and “emergency” farm relief in the 1990’s."
Oh give me a break. There's a big difference between voting as a Senator and proposing as a President. In the first case you have to vote yes or no to what is in front of you - it's binary. In the second you get to choose from the continuum of possibilities and select the one you apparently think is best.
Jane,
You are right that the NYT article is confusing. As the CBO itself says today's estimate is not really comparable to the one from last September. They should have made that clear.
But I don't understand why you insist on comparing the Dems and Bush on budget deficits. Maybe expenditures under Dem administrations would have been the same, maybe even higher than under Bush but so would have revenues. Now you may disagree with that specific policy mix but any Democrat following Clinton would have had a hard time increasing deficits. If necessary they would have raised taxes.
It seems that you can't accept that the two parties' standing on the budget have changed, especially for the GOP. As noted above the GOP leadership has made clear they don't care about deficits anymore.
I would think that any responsible free-marketer forced to choose between borrow-and-spend and tax-and-spend would pick the latter.
Also it can be hard to capture what is really being done by just looking at the vote. The vote against the $89B was properly viewed as a protest against how Bush conducted the war (BTW, there was an alternative proposal for just $60B to take care of immediate troop needs and not also fund a $19B 'slush fund' that could be used however Bush wanted too...that proposal which many Dems supported was not even voted on). Yet it is stupid to tally this up as nothing more than a vote for or against 'spending'.
From a game theory POV, though, one would expect Senators to be more inclined towards spending than Presidents. A Senator can appeal to specific groups by pointing out that he voted to fund their interests. A President, though, tends to get judged more on his overall performance so should be more reluctant to embrace a budget full of waste. If this theory has any weight then Bush would have been much worse on spending than Kerry if Bush was a Senator.
And if that were the choice, I would. But, of course, that isn't the choice. As you of course know, I, like the CBO, am of the opinion that Clinton had a rather minor impact on the budget deficit, with the lion's share of the shift from deficit to surplus being accounted for by surprise tax revenues generated by teh bubble. Kerry evinced no interest whatsoever in closing the budget deficit. Thus, the choice is between borrow-and-spend-more, and borrow-and-spend-less. Whatever you may enjoy telling yourself, there was no way in hell that Kerry was going to raise taxes sufficiently to close the current deficit, much less pay for the new spending he'd promised.
Boonton, numbers are adjusted for inflation. But whether or not they are is irrelevant, since the two numbers are generated the same way; the Democrat's plan would be larger than the Republican one by the same amount in real terms, or nominal.
Of course Kerry would have had to have dealt with a Republican Congress. Two observations:
1. A stalemate like this has two solutions: Do nothing or spend like crazy to buy off everyone's interest groups. Clinton's 2nd term was an example of the former, Nixon the later.
2. As I've said a million times before, it is more relevant to look at spending as a % of GDP rather than raw dollars. In that world lots of pork & other silliness vanishes to almost nothing because each year of positive growth automatically allows nominal spending to increase without really altering the fundamentals. Also in this world most spending is on auto-pilot. The only real way to alter it is to dramatically alter entitlements or dramatically increase spending in one area (like defense).
A Kerry-Republican split would almost certainly have not added an extra entitlement. Republicans would nit pick any Kerry proposal until it was as lean as it could be (if even that was enough to pass something). Considering how bad spending has risin under Bush, it seems that the most likely equilibrium would have been for Kerry to have pushed on the deficit while the Congress would be in the awkward position of arguing for spending.
Kerry evinced no interest whatsoever in closing the budget deficit.
You know, you can say that his plan was unworkable, or that you don't beleive it would have been effective. Saying that he evinced no interest whatsoever in closing the deficit is a little weird, given that he harped on it constantly throughout the campaign.
In any case, this argument is going nowhere. I understand that your position is that although the deficit keeps on going up, no one else, certainly no Democrat, could have done any better, so any complaints about it will be ill-received. And the tax cuts were irrelevant.
Understood.
Boonton, numbers are adjusted for inflation. But whether or not they are is irrelevant, since the two numbers are generated the same way; the Democrat's plan would be larger than the Republican one by the same amount in real terms, or nominal.
Errr no. Even with constant dollars $300B on a war today is not the same as $900B on drugs in 2015. The future number has to be both adjusted for inflation AND discounted into present dollars. That was the original comparison that was made, between the war and the alternative proposal. I'll give you the benefit of the doubt that the alternative plans were more expensive than Bush's drug plan.
Like I said, I suspect the $900B was not discounted because political rhetoric does not place a high premium on economic accuracy.
Well I've yet to see any evidence that the GOP is spending less than the Dems. Particularly since a Gore or Kerry admistration would have had to deal with a GOP Congress.
And I never said Kerry need have raised taxes to cover the deficit in full. But neither he nor Gore would have cut taxes and they may have even tried to raise some taxes with the end result being higher revenues. Much higher revenues.
As for Clinton even if he had done nothing there is the political perception he did and that's what I was referring to. Neither Gore nor Kerry would have wanted to leave huge deficits after Clinton was ackowledged to have produced the first surpluses in decades.
Finally the numbers show that the fiscal adjustment under Clinton was roughly half from higher revenues and half from lower spending (as % of GDP). And certainly a good part of the higher revenues was raising tax rates. And none of the lower spending (mostly military) had anything to do with the tech bubble. So while Clinton's polices were not 100% responsible for the roughly 7% of GDP fiscal turnaround they do explain a good chunk of it.
If one read the numbers put out by the Kerry campaign, anyone who could do arithmetic would see that at best, they were deficit-neutral to Bush. I'm not attributing malicious motives to Kerry; I'm just saying that his own campaign literature showed no budget-deficit-closing. It's equally fair to say that Bush shows no interest in closing the deficit, his rhetoric to the contrary. Nor did I say that tax cuts didn't matter; I said that they mattered precisely as much as spending. Anyone on either side who is trying to sell the notion that the deficit could be closed by working only on revenue, or only on spending, is either lying or deluded--particularly since the Democratic plan was to repeal only 1/3 of the revenue losses to Bush's tax cut.
Yes, Boonton, but the annual cost of the $300b is just about the same as the annual cost of the Medicare bill . . . more if you assume that the medicare bill will, like every other Medicare bill in history, encourage people to consume more and thus cost more than projected. The 900b doesn't all come in a balloon payment in 2015; it's spread out.
The problem with that argument is that the spending decreases don't seem to be correlated with Clinton; they're correlated with the Republican congress, and abruptly reversed themselves after the Republicans got their asses handed to them in the 98 midterms.
Hmmm --
When you say, "got their asses handed to them", you mean "retained control of Congress", right?
And when you say "correlated with the Republican congress", you mean "correlated with the Republican Congress under a Democratic President", right? Because it's a Republican Congress that's doing all the spending now, and for the last four years.
And where is that 900B number for the cost of the Democratic alternative Medicare benefit from, anyway? It's new to me, and I can't find it looking around online.
http://www.ssa.gov/OACT/TRSUM/trsummary.html in the 'Estimate Operations of Trust Funds' table has what I assume is the new drug benefit under column D. It begins at $3B in 2004 and rises to $102B in 2008. Total cost from 2004-2008 is $287B.
I don't have a similar table for Kerry's plan but I expect it would have been similar but higher. I don't think it would have started at $300B & continued onwards.
I think we are getting nowhere here to be honest with you.... I already won on the social security issue ;)
Jane
That is not true.
Check the numbers in the CBO website.
Spending began falling in 1992 and poicked up pace the next year. The GOP Congress did not have a say in the budget until 1995/1996.
Oh, and spending continued falling even after 1998. It only went up after Bush came to office.
1991 22.3%
1992 22.1%
1993 21.4%
1994 21.0%
1995 20.7%
1996 20.3%
1997 19.6%
1998 19.2%
1999 18.6%
2000 18.4%
2001 18.5%
2002 19.4%
2003 19.9%
Nope, I don't mean "under a Democratic president". In 1998, the budget called for decreases in domestic discretionary spending. In 1999, after the 98 fiasco when Republicans lost House seats, Congress turned in a budget in which spending jumped over 3%. The trend continued in 2000, raising spending to 4.9%. With a one-year blip in 2002, which contained most of the 9/11 spending, Bush's spending has risen just about in line with this trend, or perhaps slightly slower.
GT, you know better than that. Look at the increase in discretionary spending, not the % of GDP, which of course hurt Bush with a recession at the start of his term. Come on. We're not in high school writing book reports.
Republicans lost House seats
But they continued to hold the House. You can't credit a Republican congress with low spending before 1998, and then ignore the fact that all the congresses since 1998 have also been Republican controlled.
Boonton, I think I may sense the source of our misunderstanding. You're apparently confused about the $300B figure. $300B is the total four-year figure for Afghanistan and Iraq (and I presume you'll want to argue that any Democrat would also have done Afghanistan?), not the annual cost.
Jane,
Discretionary spending shows the exact same pattern.
1991 9.0
1992 8.6
1993 8.2
1994 7.8
1995 7.4
1996 6.9
1997 6.7
1998 6.4
1999 6.3
2000 6.3
2001 6.5
2002 7.1
2003 7.6
Lizardbreath, I've been very critical of both congress and the president for spending. I will be more than happy to concede that the Republicans have been irresponsibly spending since 1998 -- in fact, that's what I'm arguing. But that's neither here nor there. The fact is that if one looks at the actual percentage changes in domestic discretionary spending, they track a lot better with the Contract with America, which all political observers agreed went to its death in November of 1998 when the Republicans lost seats in the House, and hence began to mend fences with Clinton, and spend wildly, in hopes of hanging onto their seats. Cutting doesn't begin in earnest until the first Gingrich congress; it stops as soon as the Gingrich congress is dealt a political blow. I'm sorry if this challenges the happy narrative of an economic boom and budget surplus happily induced by Clinton's incredible foresight in raising taxes (which, if you consult the CBO, you will find neither raised as much money as the Clinton administration projected, nor went very far towards closing the deficit), but there you are.
To paraphrase Kling, unless one is willing to explicitly say "no" to granny, one does not have anything remotely serious to say about fiscal policy. Thus, no elected official has anything remotely serious to say about fiscal policy. A person's time is better spent watching "The Apprentice" than "Meet the Press", at least in terms of matters relating to money.
So this leaves us with the fact that a Republican congress does not, over the last 20 years, predict cuts in discretionary spending unless combined with a Democratic president. Funny, I could have sworn that was where I started.
Something else I find myself idly wondering -- comparing the Bush and Kerry close-the-deficit plans: I know Kerry explicitly accounted for fixing the AMT, which will be hellaciously expensive. Did Bush? Or is that still sitting out there unaccounted for?
The fact is that if one looks at the actual percentage changes in domestic discretionary spending, they track a lot better with the Contract with America, which all political observers agreed went to its death in November of 1998 when the Republicans lost seats in the House, and hence began to mend fences with Clinton, and spend wildly, in hopes of hanging onto their seats.
Interesting that this pattern doesn't show up in the figures GT cited. In 98 spending was 6.4 and fell to 6.3 in 99 and 2000. In 2001 it rose to 6.5 (only 0.1 above the 98 figure) and shot up to 7.1 by 2002.
I don't remember exactly when the Contract with America thing happened but the 92 number was 8.6 and fell 0.4 to 8.2 in 92 and fell again to 7.8 in 94.
Will,
If Kling actualy said that it would be strange, almost silly. It assumes that you can only be serious if you say no, which is nonsensical.
You can be very serious by saying yes so long as you are willing to pay for it.
Boonton,
Although I posted all discretionary spending even if you focus just on domestic discretionary spending the pattern holds. Jane simply has her data wrong.
It would be interesting to look at spending patterns following elections in which control of Congress came closer to an even split, without actually changing hands. There probably aren't enough data points since the New Deal to really be informative, but it is not unlikely that a closely divided Congress, as has been the case since 1998, gives substantial impetus to greater spending, since the marginal vote becomes more valuable, and therefore more worth some pork.
Jane,
The last paragraph of your 3:29 response went to the point I was raising, the disconnect I see on the Republican side between the rhetoric of deficit reduction and fiscal restraint against those "tax and spend liberals" and the actual state of the budget and the current deficit. I will (a little less blithely) grant that a similar disconnect comes from some quarters of the left that scream about the deficit today and propose ever larger discretionary and entitlement spending tomorrow. I commented because you seemed unwilling to credit Clinton with any impact on the deficit (again, granting his good timing to be President during the internet bubble) but a bit quick to be pleased at the extraordinary (and non-existent) "drop" in the same. The difference in deficits between the recent Democratic and Republican administrations seems to seen as an aberration by Republicans; they want the credit, not the blame.
That said, I read you because I don't often agree with you, but I appreciate the contrary opinion well proffered and the invitation to think twice.
Actually, what you are saying is strange, GT, in that you assume a limitless ability to tax. One cannot pay for everything that any interest group would like to have. Desires are limitless, wealth is not, and unless one is willing to say "no" to any interest group, one is not worthy of any attention. I turn the channel the moment any of our elected charlatans begin speaking on fiscal issues. They aren't worth the time.
GT, I'm afraid it is you who has your data wrong. What are those numbers? Percentages? Of what? I have a spreadsheet open on my desk, direct from the OMB, that shows the following absolute #'s (1994 marks the first budget Clinton authored; 1996 the first budget out of the Gingrich congress, 1999 the budget that was passed right around the November 1998 elections):
Total domestic discretionary w/% change from last year:
1993 290.8 +2.4%
1994 298.0 +2.5%
1995 301.7 +1.2%
1996 288.5 -4.4%
1997 292.8 +1.5%
1998 296.5 +1.3%
1999 305.9 +3.2%
2000 319.9 +4.6%
2001 334.9 +4.7%
2002 367.3 +9.7%
2003 391.9 +6.7%
2004 417.5 +6.5%
2005 419.5 +0.5%
Perhaps you were simply unaware that the budget years have to be advanced to years to correspond to the electoral term in which they were passed?
LizardBreath wrote:
Because it's a Republican Congress that's doing all the spending now, and for the last four years.
Not true of course as Democrats controlled the Senate for about the first half of Bush’s first term. Which BTW is also the time that non-defense/homeland security spending was gong up by double-digits (e.g. Tom Harkin’s farm bill, etc.). Prior to that, overall discretionary spending was increasing by about 4 percent. Since the last election and the GOP increased their majorities in the House and Senate, growth in non-defense/homeland security spending has slowed further.
As far as the point about supplemental appropriations, it was rather obvious. Kerry has a track record of supporting not only many of the supplemental spending proposals that were passed under Bush but in voting for those that were passed under Clinton. Ergo, if you want to argue that we cannot look at just the proposed budgets in comparing the candidates because Bush has supported supplemental appropriations in the past, it is just as true for Kerry which makes it a non-starter.
A few points:
1. Why are you using nominal numbers? % of GDP is much better for comparisons across time and much better analytically since it tells you how much of available resources are being used.
2. Even by your calculations the Clinton and no GOP Congress years had much lower average growth (1.85%) than the period with GOP control of congress (3.8%). All the data shows that GOP control of Congress is not an explanatory varisble. Why do you keep bringing it up?
3. And if we are talking about the whole budget deficit why do you keep focusing just on discretionary domestic spending, a pretty small part of it all? The correct thing is to focus on all spending and all revenues, or at least all discretionary spending, not just domestic.
Will,
No one is assuming a limitless ability to tax. That is a total strawman argument.
But federal taxes are about 16% of GDP now. We could double, even triple that if we needed to. We have in fact (WW2).
There is nothing stopping us from raising taxes if we want to say yes to granny. It's a policy decision but one well within our reach.
BTW Jane all data is from the CBO website as I've mentioned. It's % of GDP, the normal way to compare fiscal numbers over time (just see any Wall Street report).
GT, that's a very silly response. You know exactly what I'm saying -- that it was the political situation, not Mr Clinton's alleged deficit-reducing agenda, that produced the spending restraint, and when the political situation changed, so did the spending restraint. I am further stating that the revenue side of the equation improved only in small part due to Mr Clinton's tax hikes, with the lion's share accounted for by economic growth and underlying structural changes in the tax base on which he had no effect. I am not saying that if we elect Republicans we will get spending discipline, although given the campaign platforms of the various parties, they seemed to my personal taste to be the mildly lesser of two evils. You are not, I think, so dim that you are really unable to understand what sorts of numbers would be actually appropriate to discussing my argument; and if you are, there's really not much point in continuing.
As for your other point, while there are many "normal" ways to compare economic figures, it varies by the figure. While the tax burden is indeed calculated as a percentage of GDP, that is not a very useful figure for talking about domestic spending growth, since we don't expect GDP growth to, for example, bring us a perfectly correlated increase in the amount of farm subsidies or unemployment insurance. Furthermore, while there are certainly problems with using an unindexed number over a period of years, in this case what we are looking at is the percentage change from year to year, for which, in the low-inflation environment of the 1990's, nominal numbers are perfectly appropriate. If it makes you feel better, you may deflate each of those numbers by 2% of itself. This won't be visible on my table, as it will disappear into the second or third decimal place, but it may make you feel that you have won a moral victory.
Will Allen wrote:
To paraphrase Kling, unless one is willing to explicitly say "no" to granny, one does not have anything remotely serious to say about fiscal policy. Thus, no elected official has anything remotely serious to say about fiscal policy.
I disagree, there are pretty clear differences between the parties and their candidates when it comes to entitlement program. Bush to his credit has said he wouldn’t rule out phasing in a hire retirement age for Social Security and the GOP House Committee Chair wants to hold hearings on discussing raising it for both Medicare and Social Security. The administration apparently wants to go from wage-indexing to price-indexing on Social Security (something that was actually rather close to what Kerry hinted he would do). Both supported a Medicare prescription drug benefit but the GOP’s was smaller in cost and introduced means-testing to Medicare (something that ought to be expanded to both the overall Medicare program and Social Security), got us health care savings accounts, and introduced at least some competition to the Medicare program. It’s also a hopeful sign that the House leadership seems to want to fix the original prescription drug benefit to pare it back to the original $400 Billion cost as well as find some comprehensive fix to Medicare overall. Both Democrat presidential candidates that were defeated by Bush also campaigned on creating additional entitlements for Social Security and health care respectively on top of the ones that the GOP and Democrats already supported.
While I agree with Jane that Republicans deserve much criticism for the original Medicare prescription drug benefit and discretionary spending (although objectively they are clearly better than the alternatives offered by Democrats), they are clearly preferable when it comes to dealing with the entitlement mess overall.
GT, one focuses on discretionary domestic spending because that is the segment of the budget elected officials have the most, well, discretion, to change. It is a lot easier to to cut defense spending after the Soviet Army is no longer a threat to pour through the Fulda Gap. It is much more difficult to hold the line of defense spending after foreign nationals have slaughtered 3000 citizens. Put another way, people who do not reside in the United States have much more input as to the budget of the Department of Defense than they do the Agriculture Department, so it makes sense to look to domestic spending as a gauge of how elected officials are acting on the spending front.
Jane,
That makes no sense. As the numbers clearly show a drop in spending (a slowdown in nominal growth so that it represents a smaller % of GDP ) started BEFORE the 1994 elections. It was NOT due to GOP control of Congress.
I simply don't know what you are trying to say or why. Most of the drop in spending was due to a drop in military spending, a clear policy choice by Clinton. You can disagree with the policy choice but it doesn't change the fact that it was a choice, a policy decision. And it was one of the main reasons (about 35%) of the fiscal change under Clinton.
And Clinton's tax increase also had an impact. They don't explain 100% of the revenue increase but they do explain a good portion.
The numbers are very clear. Under Clinton the fiscal situation improved, not 100% due to Clinton but a good chunk of it (maybe 55%?).
Under Bush the fiscal situation got worse due to higher spending (not just military) and reduced revenues (in part due to the tax cuts).
And GOP control of Congress is not an explanatory variable. The numbers are also clear on this. We shouldn't repeat this anymore. Maybe a divided goivernmnet helps.
Bush to his credit has said he wouldn’t rule out phasing in a hire retirement age for Social Security and the GOP House Committee Chair wants to hold hearings on discussing raising it for both Medicare and Social Security
Bush says a lot of things to his credit. The problem is, he often doesn't follow up on them.
Thorley, call me when the votes are cast on changing SS benefit structures.
GT, if you think WWII levels of taxation are sustainable in an economy that has not been mobilized to wage total war, well, it's probably best to avoid raising the spectre of strawmen. The fact remains that any discussion of fiscal policy which does not include restraining the growth of benefits to people are not working is simply unserious, and does not merit attention.
According to the CBO, GT, less than 1/3rd of the improvement was due to Clinton . . . and that's crediting Clinton with that 4.4% spending reduction, which I hope we can all agree was Uncle Newt's last stand, not Bill's idea.
Will,
If you bother to look at the historial data you will notice that changes in domestic discretionary spending are mostly irrelevant for the overall budget picture. They vary within a narrow range, from 3% to 4% of GDP in the last 20 years and an even narrower range lately. It's simply not big enough.
Jane,
I'd love to see that CBO study since just the drop in military spending is more than 1/3 of the fiscal change. Or are you just talking of the revenue side?
And you can give the -4.4% of domestic discretionary spending to Newt if you want. It is irrelevant in the whole budget picture.
GT, come on. You are not this *$@# stupid. I'm not positing some simple "GOP control of congress" variable; I'm positing a specific "Contract with America" variable. That 4.4% drop in 1996 is unquestionably due to Uncle Newt; no reasonable political observer would even try to argue anything else. That 4.4% is responsible for years of low spending following it. Then in 1998, everything changes. You can completely ignore the election cycle, and decide that it was some third factor, but then your model has to explain, as mine does, why Bill Clinton, who you are arguing had previously been a model of spending hawkishness, suddenly decided to throw caution to the wind and jack up spending in his last three budgets. My model has internal consistency and explanatory power, yours has "I won't admit Clinton wasn't responsible for the surplus! I wont, I won't, I WONT!!!!!!!!!!!!"
Will,
Our economy can easily, easily, support much higher taxes if we so choose. it is your political beliefs, not any economic limitations, that support the idea that we need to say no to granny.
Of course that doesn't mean we need to say yes to everything granny wants. But we will be saying yes to a lot.
GT, to credit, or blame, the Clinton Administration for reductions in defense spending ignores the unique aspect of defense spending, which I outlined above; actors outside the U.S. have a far greater impact on defense spending than they do domestic spending. This a very silly way to analyze a President's propensity to spend.
FDR did not wake up one fine Sunday morning, and proclaim to his aides, "Ya know, I've undergone a revolution in my thinking regarding how large a percentage of the U.S. economy should be devoted to defense spending!" There were some outside actors who made that decision.
Jane,
I'm sorry I made you so angry that you feel the need to be insulting but you keep making the same mistake of focusing on domestic discretionary spending. That is a very small part of the budget. If you want will give 100% credit to any changes in that to the GOP ahd it still doesn't change the points that I made.
Remember, we are talking of the WHOLE budget. Most of the spending drop was due to lower military spending. Domestic spending was a very small part of that. From 1991 to 2000 all discretionary spending fell 2.7 points of GDP. Domestic discretionary spending was only 0.2 points of GDP. Like I said, irrelevant in the overall picture.
You can completely ignore the election cycle, and decide that it was some third factor, but then your model has to explain, as mine does, why Bill Clinton, who you are arguing had previously been a model of spending hawkishness, suddenly decided to throw caution to the wind and jack up spending in his last three budgets.
The answer is pretty simple:There was plenty of $$$$. Politicians of all stripes LOVE spending a surplus. Its the best of all possible worlds. They can get tough on crime with more cops and prisons, they can pour money into education, be tough on defense with more bombs, be more green with more Superfund $$$..It's win/win for all politicians involved.
Willie,
The problem is that Jane's description of the Clinton's last years is simply wrong. The only way she can support that is by looking at nominal growth numbers of a small part of the spending.
If you look at all spending and you compare using the widely accepted method of % of GDP there is no jack up of spending. On the contrary spending continued to fall.
. FDR did not wake up one fine Sunday morning, and proclaim to his aides, "Ya know, I've undergone a revolution in my thinking regarding how large a percentage of the U.S. economy should be devoted to defense spending!" There were some outside actors who made that decision.
No outside actor "makes" the decision. They can certainly have a great influence, but in the end it is the president along with congress that makes the decision taking into account the outside actor. In FDR's case, it wasn't Hitler that made the decision to to spend all that defense money in the United States. There was a serious debate in the U.S. at that time as to whether this was even our war to fight. FDR make a conscious decision to join Churchill in fighting Hitler. Similarly, Reagan increased defense spending but not because of ouside influences as much as his political and economic philosophies.
GT, if you cannot discern the difference between your proposed "much higher levels of taxation", and your proposed WWII levels of taxation, well, the discussion is pointless.
Nice to see you agree, however, that granny will have to be told "no" on occasion, if I am to take it that your concession that "yes" cannot be the constant response means the same thing. Hopefully, our elected officials will come to the same conclusion sooner rather than later, but it is not a confident hope.
Finally, I agree that lack of control of non-discretionary domestic spending (somewhat of a redundancy) is far more of a problem than lack of control of discretionary spending. My entire point is that having a huge segment of the budget labeled "non-discretionary" is fiscal madness perpetrated by both parties, and since defense spending is hugely influenced by entities outside the U.S. political system, what delineations that can be made regarding the spending propensity of a President must be made in the area of discretionary domestic spending.
Where are you getting that number? A little background: in 1992, the budget deficit peaked at $340 billion under Bush. In 1993 Clinton was elected, and the deficit dropped to $300 B. In 1994, his first budget, it was further reduced to $258B, with a drop in military spending of 18.3B, a rise in domestic spending of $10B, and a secular improvement in tax revenues due to the end of the recession, as well as Clinton's tax increases. In 1995, we have another $25B drop. Then the drops start getting serious; between 1997-9, the budget moves from a $174B deficit to a $20B surplus. Meanwhile, military spending went from $390B in 1991, to $340B in 1993; further base reductions under Clinton brought that figure to $300B at teh end of the 1990's. Meanwhile, we've seen the budget deficit reduced by over $300B. Military spending was not even 1/6 of the reduction, much less 1/3rd.
Angus, even if FDR had decided to stay out of Europe, the fact that a huge percentage of the Pacfic Fleet was lying on the bottom of Honolulu Bay by the afternoon of December 7, 1941, and that MacArthur's forces were to be soon destroyed in the Philippines, meant that a huge increase in defense spending was inevitable, albeit not on the scale that occurred. To say otherwise is naive. Presidents, Senators, and Congressmen simply do have nearly the discretion in regards to defense spending as they do on domestic spending, for the simple reason that actors outside the U.S. can force them to engage in spending.
You people are arguing about peanuts.
According to the Treasury, the defict for 2004 -- using the accrual accouting that the rest of the world and all honest accountants use -- was $11.1 trillion, with a "t".
http://www.fms.treas.gov/fr/04frusg/04mda.pdf , page 11.
Jane,
From the CBO website.
In 1993 the deficit was 3.9% of GDP. By 2001 (and that may be the wrong year but let's use that) we had a 1.3% surplus. That's a 5.2 points of GDP turnaround.
In that same period defense spending dropped 1.4 points of GDP, about 27% of the fiscal change.
Also, your statement that "spending continued to fall" is false. I'm looking at the overall discretionary numbers; they start rising again in 1997.
Complaining that I'm only looking at "a small portion of spending" is ignorant of how budget discussions work. Almost all discussions of spending focus on discretionary spending, because the effect of presidents on non-discretionary spending is always one way--up, when they increase unemployment benefits temporarily, or raise social security benefits, or enact a new Medicare prescription drug benefit, or what have you. Thus, in discussing spendign cuts, non-discretionary spending is pretty much irrelevant.
GT, % of GDP is irrelevant when talking about military spending. We don't suddenly need more tanks because the stock market had a great year.
Jane,
I have written many country analysis pieces. I have over 300 Wall Street and think tank (like the IIF) and IMF country reports in my hard drive. No one that I have ever read compares fiscal numbers over time on nominal data. They all use % of GDP. Every one of them. If you don't know why that is I'm not sure this is the place to debate that.
And I didn't say you were wrong to focus on discretionary spending. You were wrong to focus just on domestic discretionary spending.
Jane,
You mentioned that the federal Republican switched into high-spending mode in the late 1990s because they were shellacked by the Democrats at a federal level and decided to adopt Democratic strategies. People have argued about the degree of the shellacking (there were more Republican Senators following the election than there were now, and the same number as before, but it's the momentum that counts) but I want to question the causation.
Shouldn't we look at other trends in the late 1990s as possible factors? Here's why I brought it up. Looking at state and local spending in the 1990s, I see this trend in year-over-year averages:
1995: 4.3%
1996: 4.0%
1997: 4.4%
1998: 5.1%
1999: 6.0%
2000: 7.1%
(Chart 422, 2001 Stat Abstract)
Now, I suppose one could say the victory of Gray Davis alone might account for this acceleration in spending growth, but at the same time as California was zooming Democratic, Florida was racing the other way by electing Jeb Bush and an all-Republican legislature. Most of the other big states (New York, Texas, Pennsylvania, Illinois, Michigan, Wisconsin, Ohio, New Jersey, Massachusetts), elected or reelected Republican Governors, with those in the biggest states facing token opposition. (Quick: name George Pataki's 1998 challenger! If you can do that, name the guy who challenged Tom Ridge!)
There was some turnover at the top in small southern states but I doubt the fiscal impact was significant. State legislatures did not see much change, either.
Why should they have? It was a status quo election at the state level, the economy was booming, and as you've pointed out time and again, this drove up tax revenues.
If states were increasing spending at an accelerating rate, do we really need a "big bang" explanation for why the feds changed course? At the very least, shouldn't the "big bang" explain why the federal effect was distinct from the wealth effect washing over the states?
Perhaps the Republicans didn't need the Democratic devil to tempt them.
Quick: name George Pataki's 1998 challenger! If you can do that, name the guy who challenged Tom Ridge!)
Peter Vallone. Now what do I win?
Ooops. I missed part two. My search says someone named Ivan Itkin ran against Ridge. I'll take their word for it.
Jane,
(Assuming my quick calculation is correct) if you allowed only inflation increases in military spending since 1962 (a year of very high defense spending) today's defense budget would be $329 B instead of the $454 B we spent on 2004. Yet according to you that would be more than enough since it hasn't changed in real terms. If we did the same from 1978 we could only spend about $300 B, about 2/3rds of todays budget.
The price of the military (and most other things government provides) does not follow inflation. It increases in real terms. That's why we use % of GDP as the best comparison.
Eamon: congratulations! Stop by any time to pick up some official campaign letterhead and the password for the ValloneforNewYorkin1998.net website.
GT, that's partially true -- when we talk about a primary surplus, we talk about it as a percentage of GDP. But we certainly don't claim, for example, that a president has cut military spending, simply because economic growth has made increased military spending a smaller percentage of GDP. If you are under the impression that that is the correct usage, then you need to go back right now and correct your old reports. Nor is it common, to go over some of the other claims that you've made, to try to chain weight nominal growth figures between two years, unless there is hyperinflation involved; to never separate domestic discretionary spending from military spending; to attribute the budget of the year in which he was elected to the head of state; to compare discretionary (rather than non-discretionary spending, which is normally discussed in % terms) numbers purely in % terms; or any of the other interesting economic devices you are claiming are not merely standard, but mandatory. The way I am discussing the budget is the normal way that one goes about discussing the US budget, about which I write a fair amount. It is especially normal when talking about the political budget process, which is what I'm now doing.
As for your latest salvo, it rather makes my point better than yours. Had we kept military spendign constant as a percentage of GDP, military spending in 2002 would have been $1 trillion, rather than the $331B we actually spent. Also, your number is wrong; the latest OMB estimate for 2004 defense discretionary is $414B, not $454B, making the difference rather smaller.
But let's make this simpler.
How would you analyse the change? If you were asked to write about the change from a $300B deficit to a $130B surplus over Clinton's 8 years what % would you say revenue changes and spending changes played in that? How mch for each, and why?
GT, the fact that you treat defense spending purely as a function of domestic politics reveals that you really don't want to discuss the issue seriously. To "credit" President A for achieving lower defense spending, without reference to global arena in which his options were made available, is really quite silly. If Curtis Lemay had been reincarnated and elected President in 1992, defense spending would have decreased, so it says absolutely nothing about President Clinton that defense spending decreased after he was elected.
Yes, Will I don't want to discuss the issue seriously. You caught me.
Why, that depends, doesn't it, GT? If I was trying to paint a picture of the economy's overall structure/health, I would give spending as a percentage of GDP. But of course, I wouldn't bother breaking out discretionary spending or anything else, since the economy is fairly indifferent to what government spending is spent on. On the other hand, if I were tyring to isolate the causes of the increases in spending, I would look at actual numbers, since otherwise I would get too much noise from variations in GDP or underlying changes in the structure of the tax base; your approach would only make since if legislators got GDP numbers in real time, and then immediately ensured that all sorts of spending ran in lockstep with the growth unless they decided to "cut" the spending by reducing the rate of growth. I can't imagine where I would ever use your approach of disaggregating spending numbers into various sorts of percentages and then trying to measure the growth rates as a percentage of the percentage of GDP, nor am I aware of any think tank or academic report that uses this method. As I just showed above, in the US, % of GDP is a dreadful proxy for normal growth rates in defense spending; it's used only to compare relative resource allocation over time, which is useful, but not in the year-to-year time periods that we are looking at. Your usage uses "cut" in a way that is no standard among journalists, any of hte academic economists that I read in the course of my work, or the various economists at national budget offices who I presume know a little something about calculating budget figures. Your usage is common among politicians who are trying to accuse their opponents of "gutting" programmes because they haven't increased spending on them as much as the politicans would like, but none of those politicians are, as far as I know, economists.
No, no.
Let's focus on what we are discussing which is why the budget moved from a deficit of about $300B to a surplus of about $130 B under Clinton.
Obviously the budget balance is simply the difference between revenues and expenditures. Any improvement is due to more revenues or less expenditures or both.
So which is it and why? How much is it due to revenues and how much to expenditures? I'm trying to understand how you compare fiscal data over 9 years without using % of GDP.
BTW, I have no idea what think tanks or economists you have in mind. Just go to Brookings and check for a fiscal paper by Auerbach, Gale and Orzag (some of the best names in this field) and you'll see they only use %of GDP for fiscal comparison across time.
Here's an example:
http://www.brookings.edu/views/articles/gale/20040524.htm
And there are lot more there.
Or if you have access to the IIF, all their reports are based on % of GDP when comparing across time.
Same for the IMF reports (freely available).
In fact can you show me ANY report by a reputable analyst that uses nominal growth rates when comparing fiscal numbers over 10 years?
My biggest argument with Jane's post is twofold. First, the projections she cites ignore the impact of Bush's push to make his tax cuts permanent and the Republican rumblings about their strong desire for further cuts, which I feel she too cavalierly dismisses as "ephemeral". She also keeps mentioning the four year amount of spending on Afghanistan and Iraq. What's that time frame again? Aren't we really going to be spending a lot of money there for another five years or so on top of what we've spent so far? So, yes, I think she's really stretching it in order to maintain her partisan credentials.
GT, it seems you can't read your own evidence, which lists nice, fat integers, as well as percentages. Moreover, percentages of GDP are more appropriate for forecasts, particularly ones like Social SEcurity, which are closely correlated with GDP growth.
On the other hand, when using past figures, for which I actually have numbers, I would look at the integer change in revenue, the integer change in spending, and see which one accounts for more of the change. Seems to make alot more sense than inserting an assumption that all spending should be indexed to GDP, with its attendant noise.
Economic analysis is not some kind of magic formula, where each subject has one number that provides the magic key. Your arguments that n o one uses the numbers I'm using are disproven by the very documents you offer as proof, and of course I'd be happy to offer you tons of think tank studies that use integer numbers; you can start with Orzag and Gale on the fiscal gap, for which they, last time I looked, offered a hard figure of $57 trillion; Gokhale and Smetters, who get a number for social security and medicare of roughly $44 trillion, and any number of economic forecasters, including those dolts at the CBO and OMB, who give nice integer estimates for changes in spending.
To "credit" President A for achieving lower defense spending, without reference to global arena in which his options were made available, is really quite silly. If Curtis Lemay had been reincarnated and elected President in 1992, defense spending would have decreased, so it says absolutely nothing about President Clinton that defense spending decreased after he was elected.
It is equally silly to suggest that the president is merely a spectator in the arena of defense spending and simply accepts what world events force upon him. One has only to look at Carter and Reagan to see that this is not the case. Both faced the same Soviet Union with the same military stregth and the same leader for a period. Yet they produced dissimilar military budgets despite the fact that there was little change in the threat or perceived threat from the Soviet Union.
Angus, Carter changed directions after the Soviet invasion of Afghanistan, which was my point. Please don't erect a strawman by asserting I suggested the President was a mere spectator,as you erected a strawman by suggesting that the massive increase in defense spending after December 7, 1941 was solely a byproduct of an elective option to wage war on Germany. The point is not that Presidents are 100% reactive, but that entities outside the U.S. political system have huge influence on defense spending, thus making comparisons of defense spending under different Presidents a very, very, silly way of
comparing those same Presidents in terms of their propensity to control, or not control, overall spending.
Thanks for conceding, GT. Let me know when you wish to discuss defense spending in a manner that resembles real world phenomena, instead of as a means for you to grind an axe.
Sure Will, whatever.
Jane,
You keep dancing around the issue. Of course there are some integers but comparisons across time are done as % of GDP. I have no idea why you keep fighting this really basic aspect.
I used % of GDP figures where it makes sense, when trying to analyse the relative contributions of spending and revenue changes to the budget balance over several years. The integer numbers you offer are for a different purpose altogether, the value over time of just one series (fiscal deficits, say) not the comparison of relative contributions. Integers are also used when doing one year comparisons, even of relative contributions, but not over 9 year periods. That's why the examples of integers you provided are not relevant to the discussion we are having. I'm focusing on one very specific point, how much of the fiscal improvement is due to the revenue side and how much to the spending side.
The method I use and for what I use it is very standard. Here's yet another example, a directly comparable one:
http://www.cbpp.org/1-25-05bud.htm
You can see that they are also trying to decompose the relative effects of revenue and spending changes and they use % of GDP for this comparison.
If you think % of GDP for this particular analysis is wrong I ask again, what do you use? We know that in 1993 the budget defict was about $300B and by 2001 it had turned into a $130B surplus (from memmory so I may be off but the trend is what I'm focusing on). We also know that the budget balance is the difference between revenues and expenditures so that the improvement is due to either an increase in revenues, a decrease in expenditures, or a combination of both. (Decreae in this context can mean slower increase. It doesn't have to refer to an actual nominal cut.)
So how would you calculate the relative contributions? You can use other series for the comparisons such as revenues. Is that what you have in mind and if so, why?
And since my daughter won't let me sleep one last post.
If you as a journalist talk to people who do budget analysis for a living ask them how they would calculate the relative contributions of spending and revenues to the budget balance during the Clinton years. Maybe they can point you to some research piece.
Yes, I said one last post but who's counting?
Jane, this particular subbthread started when you posted at 4:52 pm that the spending decreases don't seem to be correlated with Clinton; they're correlated with the Republican congress.
After much back and forth it then turned out you were talking about a subset of all spending, domestic discretionary spending. You never explained why that is relevant.
But even if you look just at nominal data it shows that domestic dicrestionary spedning is hraldy the relevant figure when trying to calculate why the budget inproved. DDS rose by about 42% during the Clinton years and the growth rate was higher when the GOP controlled Congress. Meanwhile defense spending, which is a bigger portion of the budget, rose only 5% in that same period.
It's clear that it's lower military spending that explains the bulk of the spending side changes even using your methodology. And it's also clear that there is no correlation with the GOP Congress, as you claimed.
Angus: Soviet invasion of Afghanistan, maybe?
That accounts for SOME of it, but not all. In fact, not most. To suggest Reagan wouldn't have engaged in massive defense spending without the Afghan invasion is silly and ignores the fact that Reagan had long championed a tough stance toward the U.S.S.R. and wanted more spending. And while Carter did in fact increase military spending in response, he did propose spending on the scale that Reagan did and most likely never would have.
Will Allen:
I have erected no straw man. You have made several statements which clearly demonstrate that that you believe the president simply sits around and waits for events to dictate the amount of defense spending. For example, vis a vis FDR you posted this: "There were some outside actors who made that decision." Not influenced him, or guided him, or tipped the scale but MADE THE DECISION.
So, just to check if I'm roughly up to speed here (118 comments on this? - not reading that), the point is as follows:
Once you've accepted GWB as your personal political Jeebus, along with being allowed to see (i)the glorious Victory that is our Iraq policy, (ii) how taking away citizens' basic right to a trial makes us freer (y'know - liberty), (iii) the True meaning of "crisis" (leadup to Iraq, SS), you also get to know that (iv) in a rising deficit, the important thing to focus on is that sub-part of the deficit that is falling. If you haven't accepted GWB into your life, your hate will blind you and you won't be able to see that.
Is that about right?
Now, Angus, it must be concluded that you are either disingenuous, or not too bright. Yes, when a foreign enemy has sunk a good portion of the Pacific Fleet, they have made the decision to have the U.S. greatly ramp up defense spending, unless, in your apparently peyote-laced world, major miliatry powers simply endure such attacks without response. Are you truly so obtuse?
Next, you ignore my clear initial statement...
"Put another way, people who do not reside in the United States have much more input as to the budget of the Department of Defense than they do the Agriculture Department, so it makes sense to look to domestic spending as a gauge of how elected officials are acting on the spending front."
...in erecting a strawman by asserting that I stated Presidents were only spectators in regards to defense spending.
Yes, in the wake of a Pearl Harbor-style attack, Presidents are spectators as to whether defense spending is going to rise or not. Defense spending, in the wake of such an attack, is going to rise regardless of who is President; there is literally no prospective President in such a situation in which defense spending will not rise. If there is not a single prospective President on the face of the earth under which defense spending will not rise, then, in such a situation, Presidents are spectators in regards to whether defense spending will rise or not. This is not synonymous with saying that Presidents have no effect on levels of defense spending. Now, are you normally this dishonest, or are you truly so obtuse that this had to be laid out in such excruciating detail for you?
GT, similarly, when the hostile foreign empire which has been the major strategic focus for more than four decades decides to dissolve, there is not a single prospective President on the face of the earth that will fail to oversee a substantial decline in defense spending. Thus, when you assert the following...
"Most of the drop in spending was due to a drop in military spending, a clear policy choice by Clinton. You can disagree with the policy choice but it doesn't change the fact that it was a choice, a policy decision. And it was one of the main reasons (about 35%) of the fiscal change under Clinton."
You are being disingenuous or obtuse (I suspect the former), given that the circumstances dictated the policy choice for 99.9999999999% of the people who could have been elected President in 1992. There really was no policy choice to be made. Defense spending was going to greatly fall in the wake of the Soviet Empire dissolving. Your argument is disingenuous, and you now simply ignore it's disingenuous nature has been recognized, because, for some irrational reason, your are hell-bent on portraying President Clinton as some sort of spending sheriff, stoutly standing in the path of those who sought to wantonly deplete that national treasury.
The reality is that Bill Clinton was like nearly all Presidents, in the sense that his defense spending was driven by strategic realities, and he attempted nothing in the area of restraining the largest part of the budget, non-discretionary domestic spending.
Calm down dear William. First, it has been my experience that those who have to resort to childish ad homimen attacks tend to be those who are obtuse and are projecting there shortcommings onto others. I merely used your own words against you. First, you claim the decision is forced upon the president entirely then you claim it only influences him. Which is it old chap? You HAVE made contradictory statements, whether you are bright enough to realize it or not. Accusing me of drug use won't change what you have written and makes you appear to be on the verge of an intellectual Chapter 7 filing. If you want to discuss things logically, fine, I have no problem with that but can the juvenile attacks on both myself and GT.
Will Allen wrote:
The reality is that Bill Clinton was like nearly all Presidents, in the sense that his defense spending was driven by strategic realities, and he attempted nothing in the area of restraining the largest part of the budget, non-discretionary domestic spending.
Non Discretionary domestic spending is NOT the larges part of the budget in most years. For starters,non discretionary spending as a general category is almost always outnumbered by mandatory spending. Broken down even further, discretionary spending on the other two caterogories recognized by CBO (military and foreign) always outnumber domestic discretionary in the numers available on the CBO website
No, angus, there is nothing contradictory about asserting that there are situations in which a President will have no control on whether defense spending will increase, and asserting that a President is not merely a spectator in regards to defense spending. That you cannot discern this means that you are obtuse, and it is no more an ad hominem attack to describe you as such than it is an ad hominem attack to describe me as obtuse regarding the proper procedure for landing a 747. These are merely factual descriptions.
GT, I'm afraid it is you who has your data wrong. What are those numbers? Percentages? Of what? I have a spreadsheet open on my desk, direct from the OMB, that shows the following absolute #'s
Absolute #'s are not as interesting IMO since they do not show the underlying relationship to the economy which is more relevant. Ditto for inflation.
Another problem with this line is that we are looking at what? 30% of the budget & trying to make conclusions based on that? The difference between 95 and 96 is a whopping $13.2B while the increase from 93 to 94 (when we were still worried about the Bush recession) was only $7.2B.
It would also be interesting to know how discretionary spending was defined. It doesn't take much imagination to see how simply redefining some spending as 'mandatory' could create an artifical drop in discretionary spending.
The data at best supports the thesis that a Dem President and GOP Congress results in restrained spending while giving the GOP everything results in exploding spending.
Willie, constitutionally, there is no such thing as "mandatory spending". The closest thing there is to mandatory spending is interest payments on issued debt. Are you asserting that there are larger outlays than Social Security and Medicare payments?
"GT, that's a very silly response. You know exactly what I'm saying -- that it was the political situation, not Mr Clinton's alleged deficit-reducing agenda, that produced the spending restraint, and when the political situation changed, so did the spending restraint. I am further stating that the revenue side of the equation improved only in small part due to Mr Clinton's tax hikes, with the lion's share accounted for by economic growth and underlying structural changes in the tax base on which he had no effect.
Translation: Clinton raised taxes on the upper brackets, because the economy boomed those in the upper brackets increased also increasing tax revenue.
It's stretching it to say that Clinton had no effect. Joesph Stiglitz laid out a very convincing case that the boom was caused by the signal the market received by making deficit reduction a priority (actually deficit control since the market looks more towards future projected deficits).
As for your other point, while there are many "normal" ways to compare economic figures, it varies by the figure. While the tax burden is indeed calculated as a percentage of GDP, that is not a very useful figure for talking about domestic spending growth, since we don't expect GDP growth to, for example, bring us a perfectly correlated increase in the amount of farm subsidies or unemployment insurance.
Why not? If farm subsidies are tied to farm production then wouldn't increasing growth cause increased subsidies? An expanding labor force to be meet with more people who find themselves unemployed at a given moment? Also isn't spending growth relevant only in as much as it takes more resources from the economy. If spending did not grow but the economy contracted it the spending would become a larger long term burden.
Will
so it makes sense to look to domestic spending as a gauge of how elected officials are acting on the spending front.
You mean aside from actual spending? I wasn't aware that the Constitution gave Al-Qaeda a vote on the defense budget. Like anything else an increase in spending is not in itself good or bad. If it is spent on useful things (like homeland security) then it is good...if not (like a missile defense system that doesn't work) then it is bad.
GT, to credit, or blame, the Clinton Administration for reductions in defense spending ignores the unique aspect of defense spending, which I outlined above; actors outside the U.S. have a far greater impact on defense spending than they do domestic spending. This a very silly way to analyze a President's propensity to spend.
Explain to me why a budget that was previously designed to fight against a superpower armed with nuclear weapons and hundreds of thousands of troops is not sufficient to defend against a few thousand people with boxcutters and homemade bombs? We both know huge amounts of dollars are thrown away simply because putting the 'defense' label on them makes them immune from criticism.
You might as well tell us that spending on education is out of a President's hands since poor test scores dictate it.
Jane
Complaining that I'm only looking at "a small portion of spending" is ignorant of how budget discussions work. Almost all discussions of spending focus on discretionary spending, because the effect of presidents on non-discretionary spending is always one way--
Interest on the debt is non-discretionary yet it hasn't always gone up.
Jane's figures are only relevant if you want to examine the political process that drives a small part of the budget that has little overall economic significane.
That you cannot discern this means that you are obtuse, and it is no more an ad hominem attack to describe you as such than it is an ad hominem attack to describe me as obtuse regarding the proper procedure for landing a 747. These are merely factual descriptions.
I can discern that, but it isn't what you wrote at first. You wrote in no uncertain terms that others made the decision on how much FDR spend on defense. Your words are up there.
It IS an ad homimen attack to call someone obtuse, whether it is true or not. An ad homimem attack has nothing to do with its accuracy, but whether it is an attack on the speaker rather than on what he is saying. Calling Michael Moore "fat" might be true, but it is still an ad homimem attack. Accusing me of drug use is just childish.
As for the substance of you charge of being obtuse, I take with a grain of salt any charge from someone so ignorant of the federal budgetary process that they think domestic discretionary spending is the largest component of the budget. Your own credibility on budget matters is not good at all.
Boonton, I can't make heads or tails out of your question. The point is that when the Soviet Empire, the focal point of more than four decades of defense budgeting, dissolved, defense spending was going to fall rapidly, no matter who was President. There was literally no person on the face of the earth in 1992, who had a chance of becoming President, who would not have proposed decreases in defense spending. Not one. There was no possible Congressional make-up that would have resisted such decreases. Therefore, it is silly to ascribe the decreases in defense spending which occurred to Bill Clinton's unique policy choices.
In the real world, as opposed to some fantasy as the poster Angus has constructed, entities outside the U.S.political sysytem DO have a voice as to how much money the U.S. spends on defense, and sometimes the definitive voice. FDR had exactly zero real choice as to whether defense spending was going to increase after December 7, 1941. The Japanese Imperial Navy had made that decision for him. The situation in 1992 was merely the mirror image.
Will,
You argued that post 9/11 defense spending increases were caused by 9/11 hence should not count if we are trying to examine gov't spending. Yet it is spending & it isn't beyond the scope of gov't. Since we are spending more on defense than we were during the Cold War it is only fair to ask why this should be and not assume it was because Bin Laden made it so.
GT, let me recap your grossly ignorant treatment of the budget so far:
1) You made a basic error in assigning the responsibility for various budgets, apparently believing that Clinton somehow had responsibility for the 1992 budget even though he didn't take office until January 1993, and the 1993 budget, which simple checking would have revealed to have been passed in mid-1992. When corrected in this error, you immediately moved to error number two:
2) A $50 billion cut in military spending was more than 1/3 responsible for a $350 billion change in the deficit. Correcting this assertion spawned bizarre statement number 3: