Asymmetrical Information

I think a split Congress could lead to gridlock as they won't be able to agree on anything. That would be a good thing. It may be too much to expect good decisions out of Congress, however no decisions would be an improvement over bad decisions.

If the Dems retake the house, we'll see this comment before November 15th:

"We are absolutely committed to deficit reduction, but that has to be seen in the context of a real prescription drug benefit as well as genuine health care reform for all Americans."

In other words, they'll be blowing out the spending limits before they're even sworn in.

"....how long it takes them to find some pressing need that overrides deficit reduction?"

It will be sometime after the election but well before swearing in of the class in January.

Old Nan clearly hasn't been keeping up with the news on tax receipts and expected size of the deficit lately.

We should ask Pelosi to endorse a proposal I made last month: if the budget's not balanced, Congress doesn't get paid.

"In other words, they'll be blowing out the spending limits before they're even sworn in."

Considering that spending is growing so quickly one should really ask if it is actually possible for it to conceivably grow any faster than it is now?

In the past few decades we enjoyed examples of a unified Democratic gov't, a split Democratic-Republican gov't, and a unified Republican gov't. It seems clear for anti-spending hawks the unified Republican gov't is the worst of the mix and ironically the split doesn't seem to be necessarily better than the unified Democratic gov't.

IMO too many Republicans have combined a 'starve the beast' idea with a quite frankly Marxist idea of letting things get so bad that they will have to blow up. I've dealt with a few Republicans who seem to enjoy the run up to entitlement spending because they think it will just accelerate the eventual 'collapse' which they believe will usher in a glorious revolution lead by true conservatives.

Revolutionaries, though, should be mindful that historically revolutions are difficult to control and often get out of hand quickly. While the American Revolution worked out pretty well revolutions in Russia, France, Iran, Cuba, China, and so on have had pretty mixed results at best.

To clarrify, I don't think the current fiscal irresponsibility will lead to a huge collapse among which the second coming of Ayn Rand will rise up to lead us to the promised land of Libertariania.

I think the results of the current fiscal irresponsibility will be like the results of a diet of junk food. No instant heart attack and death but rather a general long term slide into ill health, obesity, lackluster energy and so on. In other words it will bring on a slow wasting away rather than an immediate collapse.

Anyway, the Democrats were more than correct to savage Bush's Social Security plan. Of all the entitlements Social Security is the most secure, most stable in the long run and least contributor to the deficit even in the medium and long term horizons.

Bush's plan would have almost certainly made the problem worse by:

1. Grafting additional spending on top of current spending as the program transitioned away from intergenerational transfers to a private account system.

2. Created a huge hidden liability down the line. There is absolutely no way the US would politically allow the retirement of millions of Americans to be battered in a market crash or serious correction. The result would be gov't bailouts of 'private' retirement accounts that go south. As we all should know, being able to play stocks with a gov't security against losing means the most logical game to play would be to take risky bets in hopes of a big payoff (the gov't has you backside after all)...basically the S&L crises all over again except instead of having to cover a few hundred S&L's Bush would have the taxpayer cover everyone's 401K.

In the past few decades we enjoyed examples of a unified Democratic gov't, a split Democratic-Republican gov't, and a unified Republican gov't. It seems clear for anti-spending hawks the unified Republican gov't is the worst of the mix and ironically the split doesn't seem to be necessarily better than the unified Democratic gov't.

A statement which is absolutely false as the double-digit increases in non-defense/homeland security spending began while we had Democratic control of the Senate. Prior to that all discretionary spending was increasing at or below the rate of inflation and since Republicans regained control of the Senate, while it has continued to grow, the rate of increase has slown.

More importantly the greatest area of concern in the budget is entitlement spending, particularly Medicare, Medicaid, and Social Security (each of which were created under unified Democratic governments). Currently only Republicans have shown any interest in reforming these programs in a way that reduces spending or at least slows down their rate of growth. During the 1980’s, the last time we tried to fix Social Security it was done under a “divided government” (Democratic House, GOP Senate and President) and Democrats used their leverage to kill any option that would let younger workers opt out while also sticking us with a higher FICA tax. During the Medicare Part D debate, Senate Democrats used the threat of a filibuster to run up the cost from originally about $300 Billion to $749 Billion (and even then they wanted a plan that would cost $900 Billion) while fighting tooth and nail against any form of means-testing.

I love voting for politicians who promise to RAISE my taxes.

Pelosi would do well to review the political careers of Walter Mondale, and Paul Tsongas.

Bob

Pelosi actually said this with a straight face, as if she expected anyone to take her seriously.

A statement which is absolutely false as the double-digit increases in non-defense/homeland security spending began while we had Democratic control of the Senate. Prior to that all discretionary spending was increasing at or below the rate of inflation and since Republicans regained control of the Senate, while it has continued to grow, the rate of increase has slown.

Ahhh yes, a Republican Kool-aid drinker.

Notice all the weasel phrases? "non-defense/homeland security spending". Are we paying defense contractors in monopoly money rather than US dollars these days? Or even better we 'discretionary spending' rates! Are you aware that 'discretionary spending' is a small portion of the budget?

More importantly the greatest area of concern in the budget is entitlement spending, particularly Medicare, Medicaid, and Social Security (each of which were created under unified Democratic governments).

Indeed and you got the order of the problem down perfectly going from worst to best. Ironically unified Republican gov'ts made the worst more worse in terms of spending and tried to make the best worse!

It will only last as long as it takes to write the first Universal Health Care Bill. Once they have done that (regardless of whether or not it passes) they will already have backed out of their promise to maintain a balanced budget so will feel they have excused themselves from the promise.

My question is - how likely is it that Democrats gain control of Congress by promising to raise taxes?

There's no need for a universal health care bill to be financed by deficits. You can use taxes instead which is how we fund unemployment compensation, social security, and even Medicare at the moment.

Let's not forget that "republican" control of the Senate hinges on the votes of a group of senators not known for their ability to stand up and fight for tax reduction and lower spending. What we would end up with would be strong Demo control of the House (historically, house demos have been very good at enforcing whip discipline) and a Senate controlled by Demos and "moderate" GOP senators who are loathe to be called obstructionist by the Demos and who will therefore vote much more closely with the Demos than the GOP. In effect, we would have a "majority-minority" party in the Senate who wouldn't be able to stop anything the House proposed.

First, I believe there is little chance the dems can retake the house. I know, Republican numbers are low but so are Democrat numbers. And the dem's biggest problem is they have yet to tell a single voter why we should vote FOR them. It all what's wrong with Republicans. That is not a winning strategy. In fact, it's not much of a strategy at all.

But if, by some miracle, they pull it off, they still won't have a veto proof majority. Even with RINOs in the house it is a virtual impossibility for the dems to have the votes to override a Bush veto of a spending bill. That is, of course, assuming Bush can find his veto pen.

Interesting point Ron but then I'll return to my first question, could even a Democratic Congress possibly break the spending record Bush and the GOP Congress has racked up?

According to http://www.heritage.org/Research/Budget/wm1149.cfm:

Since 2001, federal spending has leaped 45 percent. Defense and homeland security account for less than one-third of this increase. Education has increased 137 percent, international spending by 111 percent, and health research and regulation by 78 percent. Anti-poverty spending now tops three percent of GDP for the first time ever. Even after a freeze in FY 2007, non-defense discretionary spending will be up 42 percent since 2001—double the increase enacted in President Clinton’s first six years in office.

Overall spending has grown 9% this year alone. Are seniors even capable of taking so many more prescription pills over the next 5 years to pull this off again?

http://www.gpoaccess.gov/usbudget/fy07/sheets/hist01z2.xls has a good table showing outlays as a % of GDP. Since 1968 as a percentage of GDP the average of the Fed. Gov't has been 20.7% with a standard deviation of 1.33 points. This, IMO, a useful sample because it includes all the major current entitlements (Social Security, Medicare, Medicaid) as well as a diverse range of different political combinations (Dem Presidents, Congresses, Rep Presidents, Congresses, divided gov't etc)...also it is a more modern sample whereas previous years have the distortions caused by the Depression and WWII.

This leads me to ask if there is some long run process that basically keeps spending somewhere around 20% of GDP regardless of which political party holds power? From an economic theory perspective, there are clearly those who lobby for additional spending. There are also, though, those who lobby against additional spending (either attacking overall spending levels or attacking certain types of spending because they object to it like arts funding, military buildup, etc.)

Just to toss the idea out there, it seems that as spending increases the intensity of the anti-spending lobby should likewise grow. At the same time, as more is spent the pro-spending lobbies are satisfied. Before you jump on me crying "no one ever says they have enough money"....that's true but let's imagine you have spent years lobbying for some type of spending...say subsidies for corn farmers. Yes you'll still lobby for more spending on corn subsidies but look, here comes someone who wants subsidies for soybean farmers! If this guy gets his way they might pay for the soybean subsidies by splitting the corn subsidy in half! Even if they don't do that now five, ten years from now some smart ass might propose merging the two or worse giving all the subsidy increases to the soybean guy and not corn! Now all in the sudden the pro-spending corn subsidy lobby has switched into an anti-spending lobby.

Historically it seems like the two forces balance each other around the 20% of GDP mark. Any thoughts?

I'm certainly not interested in defending the spending record of Bush or the Republican Congress. I think it's shameful and it's precisely what makes people say things like, "there's no real difference between the two parties." But, at least Bush is committed to cutting taxes and don't think for a minute that dems will EVER be interested in that.

The bigger issue for Bush should the dems retake the house is impeachment. Whether justified or not, and I do not think it would be justified, the dems will pull out all the stops to impeach Bush. They'll never convict him in the Senate but he'd still be impeached, just as Clinton was.

Ron,

I seriously doubt that unless something really damming comes out about Bush. As for cutting taxes, economically speaking that is just spending by another name. If the gov't spends $100 per year that should be evaluated as $100 a year in taxes. If it just happens that the gov't only collects $80 this year it simply means next year it will collect the other $20 plus a few bucks in interest! By that reckoning Bush has been the least interested President of all in terms of tax cuts.

Difference being when the files on both are opened, Bubba will still come out worse.

In the past few decades we enjoyed examples of a unified Democratic gov't, a split Democratic-Republican gov't, and a unified Republican gov't. It seems clear for anti-spending hawks the unified Republican gov't is the worst of the mix

"It seems clear for anti-spending hawks who have never heard of the post hoc fallacy", you mean.

True, perhaps Federal spending is determined by something other than the people in Congress and the White House...perhaps sunspots?

Interesting point Ron but then I'll return to my first question, could even a Democratic Congress possibly break the spending record Bush and the GOP Congress has racked up?

Oh, hell yes.

Well, at least if they are trying to impeach Bush, they aren't passing new law or spending new money.

I dont' know Charlie, historically the data says no they couldn't break Bush's spending record. We seem to be at a local peak for Federal spending.

Believe it or not it does get harder to keep spending more and more. I work as a financial analyst for a marketing department of a huge corporation, the marketing people are judged on first whether they spent their budget and second on whether they spent it wisely. Believe it or not there is always a constant struggle for them to find ways to spend the money given to them and underspending is NOT considered a good thing.

To see how this can happen let's imagine a Democratic Congres & President decide to 'go crazy'. What are they going to do? Expand Medicare to children under 18? Well that will certainly increase spending but not by as much as Bush increased it. Assuming there are an equal number of children as old people the fact is kids don't need as much medical care so giving them a drug plan simply will not cost as much as giving the oldsters a plan did.

AS you keep going, though, your enemies increase. Expanding Medicare, for example, will draw the ire of not only doctors and hospitals (who already put up with low reimbursement rates for the old patients) but also insurance companies who now make good money selling policies to families and employers. Keep trying to beat Bush's record and the enemies mount.

How long will it take them to renege on that promise? My guess is that they'll have done it by about this time next week. They'll keep making that promise right up until the election, of course, but they'll be lying through their teeth. What do you expect of politicians?

"the enemies mount."
Maybe a few more people join the Libertarian Party. But my experience, with lots of "small-government" business types is that they join the parade to Washington asking for more and more handouts in a quest to "get back some of the money my company is being taxed to pay x, y & z."
Individuals, too, are more apt to join the mad scramble for handouts than stand, like the fellow in China, in front of the government handout juggernaut.

If the incentives are to just join the scramble for handouts then how has Fed spending remained so stable for the last 30+ years? Certainly while we all can think of forces pushing for more spending there has to be forces pushing against otherwise spending as a % of GDP would have shot thru the roof long ago.

So far I can think of just a couple.

1. People offended by certain spending...for example some Christian types don't like schools offering free breakfast programs because they think it encourages women to work outside the home more often. The more spending you do the greater the chance that someone somewhere is going to be offended and raise a stink.

2. People who don't want to share the pie. People may be getting a handout now but they figure if you get a handout too someday their handout will be cut to fund your handout. Hence better to keep you out of the party altogether. Needless to say, as the party gets bigger everyone wants the door to slam shut behind them so this pressure to slow or stop spending more also mounts.

3. Unsuccessful attempts to hijack new spending. Remember the Democrats in the 80's? Well I do only a bit 'cause I was a kid but two of the big things I recall was them opposing Reagan's Star Wars as well as certain defense systems (like the MX missile....odd defense systems no longer seem to be a campaign issue anymore). So they stall or stop new spending in the hopes of directing that elsewhere however they are only powerful enough to do half the job. In other words, A opposes new spending program X because he wants it to go to new spending program Y. He manages to get X stopped by convincing everyone it's a bad idea but fails to get them to go along with Y. Net effect spending is stopped even though no one wanted to stop it.

For every $1 added to the spending table there's probably ten different ideas for spending that $1. If everyone agrees then it's easy to get that dollar spent but after going on a huge spending binge the spending everyone agrees with has already happened...what will be left is the stuff that cannot so easily get a consensus around it.

So there's 3 forces that oppose spending that increase as spending increases.

What the heck does "focus on deficit reduction" MEAN, anyway? Let's see a list of programs they're planning to add or expand, programs they're planning to eliminate or reduce, and how the balance sheet works out.

Kerry talked about focusing on defict reduction, too. But the fine details of his plan involved raising taxes while raising spending even more.

Ross Perot's idea back in 1992 was to raise gasoline taxes 50 cents a gallon (to start) and raise quite a bit more taxes all over the place. All those tax increases would be subsequently "dumped" into that black-hole we all refer to as the Federal Debt, On top of that, he was going to slash every single federal program (even the ones that Tip O'Neal said that Congress worked so hard for them never to be investigated to see if they are worthy.) And take all that savings and have it "dumped" into that black-hole we all refer to as the Federal Debt.

I believe that Ross would have done that.

I do not believe that Nancy will cut spending. I only see her raising taxes that much more to eliminate the deficit. The Dems simply can not be permitted to form any type of legislation. We don't need their recklessness, least of all during a war.

True, perhaps Federal spending is determined by something other than the people in Congress and the White House...perhaps sunspots?

If you want to blame federal spending on Congress and the President, go right ahead. But you're trying to blame the *deficit* on the party *affiliation* of Congressmen and the President, which is an entirely different matter.

And take all that savings and have it "dumped" into that black-hole we all refer to as the Federal Debt. I believe that Ross would have done that.

Given what low interest rates we're borrowing the money for the debt at, that would have been a really stupid way to use that money. You'd get a better return by leaving it with its original owners to invest.

Also, the President doesn't raise taxes. And if you think Congress would have passed a 50-cent gas tax hike, well...

As for cutting taxes, economically speaking that is just spending by another name.

I'm not an economist; maybe that's why I don't understand this. If for some reason I have to take a pay cut, that's not spending by another name, that's a loss of income. I can choose to spend the same amount and amass debt, but I do have another choice - to cut my spending and live within my means.

Taxes are the government's source of income, and if they are cut, Congress likewise has two choices. Maybe you're right and it's too much to expect the government officials we all support to manage our money wisely, but in that case, aren't we better off limiting how much we let them manage?

There is absolutely no way the US would politically allow the retirement of millions of Americans to be battered in a market crash or serious correction. The result would be gov't bailouts of 'private' retirement accounts that go south.

I find this argument convincing. Wasn't there a scandal last year when a company went bankrupt and the government had guaranteed its pensions? I remember reading that both the company and union involved had been reckless about increasing the pension because they knew the safety net was there if the company failed. I could see that happening with social security, and its size makes the prospect much worse.

Notice all the weasel phrases? "non-defense/homeland security spending". Are we paying defense contractors in monopoly money rather than US dollars these days?

You had best hope so, if your plan is to bring government back into the hands of Democrats AND lower the deficit. Since the Democrats have consistently showed a willingness to increase social spending by hundreds of billions of dollars in a single shot (see also, Prescription Drug Plan), raising taxes won't do the trick unless there are noteworthy cuts somewhere else, such as defense.

Bad news: The bliss-ninny-nineties are not coming back. No sane person in living memory of 9-11 will support the starvation-level defense spending the US suffered under Clinton; and I got a hunch those contractors will reject the Monopoly money. So, unless the Lieberman-type centrist manages to carry the day in this theoretical Democratic victory, the Democrats are left with only two options: either (1) take the current Republican position of "Constituents? What constitutents?" and renege on their campaign promises, or else (2) screw us all royally in the defense category.

You're welcome to try and convince me with a third option, but I should warn you that if it smells even vaguely of Tinkerbell, I'm armed and dangerous with a loud horselaugh.

As for cutting taxes, economically speaking that is just spending by another name.

Um, no, it isn't. Fiscally speaking it is, but economically speaking there's a huge difference between taxation-and-redistribution and leaving the money in private hands.

Well, the Democrats will control one half of one of the four branches (executive, judicial, Federal Reserve, and legislative) of the government, so how are they going to manage to spend any money?
I mean, Bush spends like a Democrat, but not AS a Democrat, if you get what I mean.

I might believe Pelosi if any democrats had voted against the spending bills of the last 6 years. Why should we expect a change?

My deficit reduction plan is to pay the legislature but dock their pensions and retiree health care whenever there is a deficit.

Now all you have to do, Will, is get them to vote for it.

sprite said: "Wasn't there a scandal last year when a company went bankrupt and the government had guaranteed its pensions? I remember reading that both the company and union involved had been reckless about increasing the pension because they knew the safety net was there if the company failed."

Ah yes, PGBC abuse. There will be much more of this. And using bankruptcy court to get NLRB on your side to cut pension contracts and/or health benefits, like in the airline industry and GM. Companies have to operate in one economic situation and set of laws, form these guarantees, then the economy gets much more competitive, the laws change, and those solutions are unworkable.

As a *gasp* union member, I got a mailer the other day asking me to get politically active to lobby to keep state retirement benefits. Nope. I don't have state retirement benefits, I'm all 403b, baby! So I read this appeal as a taxpayer only, and pitch it in the trash. Defined benefit pensions are disappearing like dinosaurs and the sooner we all adjust, the better.

anony-mouse wrote, "No sane person in living memory of 9-11 will support the starvation-level defense spending the US suffered under Clinton;"

Key words: sane person. There's a lot of rabid Dems that hate military power, want to tear it down and reduce it and starve it, but c'mon, WTF? Have these mouth-foamin' types been totally ignoring the news? What exactly do they propose regarding our national security, dealing with terrorists, and the current world situation? Please, no criticism, just solutions.

*dead silence*

(pun intended)

The more Pelosi talks, the less likely Dem success will happen in the midterms.

If you want to blame federal spending on Congress and the President, go right ahead. But you're trying to blame the *deficit* on the party *affiliation* of Congressmen and the President, which is an entirely different matter.

No I'm just making an observation of a recent historical sample we have. If you want to caution that correlation does not equal causation or that correlation based on small sample sizes is dangerous I have no objection.

sprite
I'm not an economist; maybe that's why I don't understand this. If for some reason I have to take a pay cut, that's not spending by another name, that's a loss of income. I can choose to spend the same amount and amass debt, but I do have another choice - to cut my spending and live within my means.

I call this the 'ATM theory'. Let's say you go to the ATM and you take out $20 but you see your balance is $100 more than you thought. You smile and decide to take out another $40 so you can have fun. In that case spending is caused by your income....if that $100 check you had written cleared then you might have decided not to take out the extra $40!

But gov't spending is more like your rent or car payment. If your boss suddenly cuts your overtime hours do you suddenly stop paying those things? No you'll either find a better job or borrow. In the case of borrowing your income cut actually increased your spending because now you will be paying off your debts with interest.

In the very long run you might choose to live somewhere cheaper and swap your car for one with a smaller payment. Historically cutting gov't income has been more like the second case than the first. The 'starve the beast' theory simply does not work and probably works in the opposite direction since it reinforces the notion you can get $1.25 of gov't for just $1.00 of taxes today.

Bad news: The bliss-ninny-nineties are not coming back. No sane person in living memory of 9-11 will support the starvation-level defense spending the US suffered under Clinton; and I got a hunch those contractors will reject the Monopoly money.

Historically we are probably at an overspent point in terms of defense (BTW, your 'starvation level' under Clinton was higher than the min. spending on defense in the last 30 years...remember when we were facign the USSR? Now you're telling me facing a bunch of guys who live in caves requires more money than a superpower with million+ armies and thousands of nuclear warheads?).

Why do you find it logical to exclude defense from evaluations of gov't spending just because we are in a war? We are also in the midst of an aging boom with lost of people getting old, should we then exclude Medicare and Social Security and just focus on whether spending on bathroom facilities in National Parks increased by 10% or 15% under Democratic or Republican rule?

Can Democrats win the House? Safe seat redistricting has left very few competitive districts. In 2004, only 7% of all House seats were won by less than 55%. I think only two incumbent Republican congressman lost their seats two years ago, in a very close national election. To gain control in 2006, Democrats will need to win 15 Republican seats and lose none of theirs.

I agree with kentuckyliz: Pelosi talking about tax increases will not win any voters.

It is ironic that Bush built his own tax increases into his budget. Most of his tax cuts (such as the estate tax) were set to expire after so many years...after which taxes go back to where they were before the cuts. Some of the deficit problem can be resolved by simply preventing Bush from getting his cuts renewed.

Why was this done like this? Because when Bush presented his budget he wanted to show a smaller deficit cost for his cuts so the timeclock was added. The neat thing about this is that when Republicans accuse Dems of raising taxes by not letting them pass extentions Dems can simply and honestly reply that Republicans raised taxes by voting for a bill that had an expiration date for tax cuts.

Boonton,

With all due respect, I think your comment "But gov't spending is more like your rent or car payment." is a huge assumption. Where is it written that government spending has to be at some level? Because the political class refuses to do without? Moreover, I assume you are aware that Social Security and Medicare are off-budget. The arguement for all three is that there is little discretion in any of them.

Bill,

Who refuses to do without? Those receiving Social Security and Medicare are hardly the 'political class' nor are those receiving interest on the national debt (aka bondholders) yet right away you take that off the table and you're not far from arguing about 'discretionary spending' (i.e. the cost of bathrooms in national parks).

I think the analogy is quite apt. Fundamentally your rent and car payment are discretionary...there's plenty of people with no car payments and whatever your rent or mortgage is there are people paying less. No one says you could not downsize. However the typical person will not downsize unless they are confronted with a huge problem. If they have a small shortfall in income they are more likely to treat such spending as mandatory and make up the difference with borrowing or nitpicky cost cutting.

The 'starve the beast' theory of cut taxes and soon gov't spending will fall suffers from this simple fact of life. The 'starve the beast' method requires first maxing out the gov't's capacity to borrow. Doing that, though, would lead to an economic diaster and in the meantime it is pretty clear that decision makers in the trenches have gotten the message that now is the time to spend.

Also we still have the fact that fed. spending seems to oscillate around 20% of GDP. If we just had an out of control political class that figure should be constantly growing yet it seems to vibrate around it as if it was...say....an equilibrium point.

The first equilibrium point we learn about in economics is supply and demand. It can be summed up as the force of people who want to buy more for less and the force of people who want to sell more at more. Equilibrium is when these two opposite forces cancel each other out and we have a market clearing price.

It seems like there are forces that restrain spending as well as forces that push spending and they cancel each other out at around 20% of GDP. If you want to explore this subject seriously you should look at the forces that restrain spending and ask why they are too weak below the 20% GDP level to keep spending down.

Historically we are probably at an overspent point in terms of defense (BTW, your 'starvation level' under Clinton was higher than the min. spending on defense in the last 30 years...remember when we were facign the USSR? Now you're telling me facing a bunch of guys who live in caves requires more money than a superpower with million+ armies and thousands of nuclear warheads?).

Meaning...what? That you favor defense spending cuts? Good luck winning seats with that one. Also not sure what "the past thirty years" have to do with anything; seems to me that 1950-present would be a better time frame for anlayzing US 'superpower' defense spending, and to be meaningful, the analysis should consider spending both in PPP-adjusted absolute terms, and as a percentage of GDP.

But let us grant your grossly simplified point about a 'bunch of guys living in caves'. Are you proposing that we save on defense expenditures by simply dropping nukes indiscriminately until we're sure we've got 'em all? If not, then I presume those milliion+ armies are supposed to do the job. Again: with what? Probably not while wearing their civies and carrying RadioShack walkie talkies, especially if you agree with the goal of minimizing civilian casualties (which often requires a lot of technology).

Why do you find it logical to exclude defense from evaluations of gov't spending just because we are in a war?

Who made that argument?

Incidentally, many of the war-specific expenditures come from special one-time spending provisions; the Department of Defense budget of late (which doesn't include some types of military-oriented research) has been holding at about $500B/year. Congressional democrats were proposing to add nearly that much on to the prescription drug plan over and above what actually passed. Which brings us to:

We are also in the midst of an aging boom with lost of people getting old, should we then exclude Medicare and Social Security and just focus on whether spending on bathroom facilities in National Parks increased by 10% or 15% under Democratic or Republican rule?

This presumes that an aging boom means automatic entitlements to Medicare and Social Security benefits, as those programs are structured now. It may have come to your attention that this sentiment is not universally shared.

But let us return to the topic: Where are these mythical fiscally conservative democrats going to come from? I think it is reasonably well established that raising taxes alone will not cover the kinds of spending Democrats are willing to engage in, which means either the cuts have to come from other unpopular areas, or else the talk of closing the budget deficit is exactly what it appears to be: idle jaw flapping that people will inexplicably believe in an election year if "their" side says it.

Meaning...what? That you favor defense spending cuts? Good luck winning seats with that one. Also not sure what "the past thirty years" have to do with anything; seems to me that 1950-present would be a better time frame for anlayzing US 'superpower' defense spending, and to be meaningful, the analysis should consider spending both in PPP-adjusted absolute terms, and as a percentage of GDP.

You are free to do so. However I don't think as a percentage of GDP is very useful. That just tells you what portion of your income you spend on defense. You should be spending enough that is necessary. If that is, say $400B a year then you shouldn't spend 5% more next year just because your economy grew 5%.

I looked from 1968 onwards because I was looking at US Fed. spending in general and I thought that was a good period because it included all the major entitlements of today. Regardless we are probably overspending on defense right now....more than we did at the height of the Cold War, equal to the height of Vietnam (when we still had to maintain a force to face the USSR in addition to the hot war over there).

I suspect we have been spending unwisely. Lots of battleships, nuclear subs etc....great stuff for contractors and generals who like fighting the last war and a lot less on anti-insurgent R&D. This is why despite all this spending we still hear stories about soldiers without the latest body armor and so on. Rumsefield wanted to remake the military as a scaled down, heavy tech but light on manpower '21st century' institution but a lot of his ideas that were good died in the red tape. What did, unfortunately, survive was his idea that you occupy a country with few people.

But let us return to the topic: Where are these mythical fiscally conservative democrats going to come from?....

The only myth here is the fiscally conservative republicans. During Reagan they said claimed they couldn't stop spending because while they had the White House they didn't have Congress. During Clinton II they had Congress and only briefly held spending somewhat down. When they got the White House and Congress they exploded spending all over. So I point out again I don't think it is even practical for a Democratic President and Congress to beat the record these Republicans set up even if they wanted too.

anony-mouse,

I just want to quickly back up your point re defense spending, if I may. The bulk of it is to pay the million+ armies. Historically, not paying your army has been suboptimal policy.

They get cranky.

Boonton,

The fact that the bulk of defense spending is on manpower does make the percentage of GDP argument relevant. Like any other labor force, military wages have to be kept up with the general labor market.

Just because the economy grows does not mean the wage rate goes up. An economy can grow simply from population growth (GDP per person remains constant) or it can grow because of productivity growth (each worker gets better...say because of computers or better knowledge) but military spending as a % of GDP will shrink even if you keep the quality of military constant.

Here's a simple thought experiment. Let's say you need 100 troops and you pay them in one icecream cone per year. If the economy makes 1000 cones per year then defense is 10% of GDP. Suppose that a new invention lets the economy make 2,000 cones per year. Then defense is 5% of GDP but despite the 50% drop it is still the same 100 man force.

Likewise suppose the productivity of the military increases so 50 troops can now do the job that 100 troops used to do. Defense spending as a % of GDP will drop even though the quality of the force is the same.

If the GDP growth causes workers to demand more pay this will not carry over to the military unless the military also enjoys productivity growth was well. (Or pro-gov't spending politicians are able to push pay increases simply because the economy's growing).

I do think there's a connection between GDP growth and the amount of needed military spending but it is more your enemies GDP that counts. If the USSR's economy grew then they could afford a bigger military which would mean more spending here whether or not our GDP was growing. But I don't think this applies to the 'war on terrorism' where the enemy is not directly supported by any countries GDP.

Boonton,

You may well argue that the US is over-focusing on new technologies that have no practical application, and possibly I would agree with you were we to pursue that argument, but that's besides the point. The relevant facts are that the DoD's running budget has been holding at around $500B/year, a majority of this goes into manpower, and even the entire budget (let alone the portion that could be saved by stripping pork) is a drop in the bucket compared to the kind of spending Democrats have regularly shown a willingness to engage in. Therefore, there is no untapped reserve of reallocable monies in Defense, even if you reallocated the entire bloomin' thing, that would cover the gaping hole we have now.

Instead of answering the original point, however, you have largely dodged it. Few people here are arguing in favor of the fiscal responsibility of the present, Republican-dominated Congress. What they are debating is your bizarre (and continuingly unsupported) assertion that the Democrats would be better, simply because they would raise taxes.

And my position remains: Garbage. They would raise taxes and then spend even more. The threshold for me being convinced otherwise is variable, but a Democrat claiming that we need to raise taxes and withold ALL new spending would be a start. Of course, that's not a good way to get or stay elected, so good luck finding a politician who will propose that.

anony-mouse,

I didn't say that the defense budget could yield savings to close the budget, only that it seems to be overspending at the moment by historical standards. This might be useful for someone thinking of taking some type of long run short position in defense stocks.

As for Democrats spending more, recently history simply proves you wrong. Of course Democrats spend but it seems like Republicans just spend more. Why is this? I think part of it is that Republicans have become more interested in cutting taxes and they can cut taxes by signing onto big spending. I think another part of it is that Republicans have started getting too drunk with ideology and power. They are starting to take a Marxist tactic of assuming if they let things get bad enough there will be some type of revolution that will usher in their version of an ideal utopia. I've encountered more than a few who say something like "Yea, the Medicare drug plan will push the gov't deeper in the red! Good it will just make the collapse happen all the sooner!!!"

The left had this phase too....when they hated the moderates and pondered whether the country would be better off with Nixon rather than accept any comprimise with Humphrey. Rather than getting a revolution they managed to marginalize themselves for about a generation.

Ohhh, I still think that the Republican record is no so bad that it CANNOT be matched. There is simply no practical way Democrats can equal the spending increases we have seen. There's probably no way even the Republicans could do it again.

Does the fact that America experienced the largest terrorist attack in its history right in the middle of a recession, and is now in the midst of fighting a costly war against terrorism factor into why the republicans are spending so much?

Granted they didn't hold the line on entitlement programs, but it's not like Bush came into office and all the fantatical muslims started hating us...they've always hate us and will point to anything we do or don't do as a reason for it...

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