January 27, 2004
The Clown Show Continues
And in the center ring of the clown show that is Bush administration economic policymaking, George W. Bush:
WSJ.com - Outlook for 2004 Deficit Stays Bleak: The [Congressional Budget Office] report suggests that Mr. Bush's recently stated goal of narrowing the deficit by half within five years is attainable. It shows the deficit -- projected to be 4.2% of gross domestic product in 2004 -- could reach 2.1% by 2006.... [But] Congress is likely to extend many of the temporary tax breaks it passed in recent years, and could even add more breaks at Mr. Bush's urging -- such as making his big 2001 tax cuts permanent at the end of the decade... both defense and nondefense spending could continue to rise somewhat more rapidly than the inflation-based rate that the report assumes. On the stump in Little Rock, Ark., Mr. Bush repeated his call to extend his tax cuts despite the persistent deficits. Congress "ought to make this tax relief permanent, let people keep more of their own money to keep driving this economy forward," Mr. Bush said in a speech.
Is shrinking the deficit a goal, or isn't it? If it is, policies to shrink the deficit--not increase it--are needed, and those policies are not forthcoming and definitely do not include further tax cuts. So why pretend that shrinking the deficit is a goal?
Posted by DeLong at January 27, 2004 01:36 PM
Red Ink Realities
By PAUL KRUGMAN
ven conservatives are starting to admit that George Bush isn't serious when he claims to be doing something about the exploding budget deficit. At best — to borrow the already classic language of the State of the Union address — his administration is engaged in deficit reduction-related program activities.
But these admissions have been accompanied by an urban legend about what went wrong. According to cleverly misleading reports from the Heritage Foundation and other like-minded sources, the deficit is growing because Mr. Bush isn't sufficiently conservative: he's allowing runaway growth in domestic spending. This myth is intended to divert attention from the real culprit: sharply reduced tax collections, mainly from corporations and the wealthy.
Is domestic spending really exploding? Think about it: farm subsidies aside, which domestic programs have received lavish budget increases over the last three years? Education? Don't be silly: No Child Left Behind is rapidly turning into a sick joke.
In fact, many government agencies are severely underfinanced. For example, last month the head of the National Park Service's police admitted to reporters that her force faced serious budget and staff shortages, and was promptly suspended....
"deficit reduction-related program activities."
George Bush is a shallow, ill-informed individual who hasn't learned a new thing in years. He is surrounded by CEO-oriented "yes people," and he doesn't welcome contrary opinions.
Of course he thinks it's possible to keep cutting taxes and deal with the deficit. where's he going to learn otherwise?
Kash over at AngryBear has an excellent review of the sources of the deficit. Fair and balanced, he also presents the conservative view as opposed to the White House view. The White House view links to pretty pie charts from OMB. Silly analysis but pretty nonetheless.
Just as the resolution of BushCo's Iraqi problem is timed for July, deficit reduction is an important issue only until the elections are behind them. At that point, the real agenda emerges, if Bush wins. If he loses, the Democrat is faced with unprecedented challenges in both the domestic and foreign arenas. It seems like if we win we lose, and if we lose we lose.
If it weren't so damned important to appoint some moderate judges on the Federal bench, improve the environment, fight corporate power, get a good heathcare program, reprogressivize the tax structure, balance the budget, improve international relations, and jettison the doctrine of pre-emption, I would almost wish Bush be re-elected so the American people (the ones who aren't paying attention anyway) would get a real feel for the goals of unwashed corporatism.
Shrubco,Inc.,doesn't care about the effects of their policy for anything except getting elected. He ran Texas into the ground,too. Great pilot,huh?
If you have learned nothing else about the Bush form of governance, it should be this: Everything is couched in the biggest possible falsehood. I can think of nothing--not one single thing--where Bush (or one of his henchmen) has made a policy statement that was true.
Tax policy, education, environment, foreign policy, economic policy, trade policy--every one of these and more was presented to the public with a baldfaced lie as the opening statement.
So why does it come as any surprise at all that Bush claims he wants to reduce the deficit when in fact he's working to increase the deficit? It's just one more policy area, just one more lie.
According the the faith based economic model (that all right wing GOP Reagan sychophants and Mr. Bush hold as immutable truth) the tax cuts will stimulate the economy and the increased growth will pay back the lost tax revenue. They truly believe this with all their heart. Therefore, Mr. Bush can say that he is going to cut taxes and reduce the deficit in the same breath. He says it because he believes it to be true. Nevermind that no competent economist agrees. Mr. Bush is under the delusion that his tax cuts will pay for themselves. He is not about to negotiate with himself on this.
The Bush administration does not accept the CBO projections or standard economic models.
My impression of the Bushies & Congressional rightwing fundie types (such as DeLay)is that they plan to decrease the deficit by making most government agencies, such as the FCC, FDA, EPA, NOAA, et al, mere shells, and further cutting (if not getting rid of altogether) any and all domestic spending programs (food stamps, etc.). I also expect the Bushies to find a way to "reform" Social Security by essentially defaulting on the government bonds currently in the trust funds. It would be too logical for the Bushies to say, change permits to exploit public lands (mining permits, etc.) from the mere pittances and subsidies they are now to to a percentage of the proceeds with no federal subsidies in the form of logging road construction and maintenance, etc. I have wondered why, when people such as Bush keep saying that US businesses are so wonderful and creative why it is so necessary to continually subsidize and protect them from horrible threats like unions, employee desires for safe pension plans, safe working conditions, and environmental protection laws.
Regardless of whether or not the deficit shrinks from one year of this clown show to the next, we are still piling it on. A best case is that in 2006 the deficit goes down to 2.1% of GDP. On a $12T+/- economy that's merely a $250B bag of popcorn for just one year of the show. Maybe I'll stay home from this circus and drink cheap beer and watch wrestling.
This is a thread on the deficit, but we have to keep in mind where this is leading. Who is going to pay all this funny money back? Not me, here's my excuse...I won't have the incentive to work hard, innovate, or invest in new businesses in a future environment of high marginal tax rates. Schlock, I know. And I'm just talking about the interest.
Starting to percolate in the investment community is the prospect that US Treasury debt will not be repaid. (For how much longer will it be considered risk free?) It can't be repaid in current or anything near current dollars. The choices are inflate or repudiate, regardless of whether 2006 will have a 2.1, 6, or 4% deficit.
What's startling to me is that there isn't the usual strong rhetoric about how economic growth is going to shrink the deficits, Bush' tax cut discussion aside. Even fiscal hawks are going out to 2013 before they see the deficit improve.
He has to satisfy the "base" of moderate fiscal conservatives who would never go in for bankruptcy as a means of forcing cutbacks in spending. Say one thing, and do another. Used to be called lying, or at least hypocrisy. Now it's just policy as usual.
Don't be fooled. The Republican plan is to spend taxpayer money like lunatics.
But, we all know the first measure is the ratio of government spending to private sector spending. This ranks first among measures. The second measure is to make folks pay as closely as possible for the government services they receive. After these two are accomplished, then tax the hell out of the rich, just for fun.
He's a coke-head, and like most cocaine users -- typically people in the advertising industry, flakes, con men, and highly paid sales professionals -- he is over-optimistic, immune to real world effects of actions, and blithe as long as the pay keeps coming.
Let him be blithe: nothing will stop his pension, nor his investment income.
Let him, however, be separated from his present job: America and the world have had enough of his crackhead economics and cocaine fantasy foreign policy.
(Oh, yeah, there goes Lloyd-Jones again, dragging up that tired old stuff from campaigns past, George Bush's drug use and its possible effect on the well-being of the Republic. Guilty as charged. Only one thing has changed: we now have empirical evidence of the effect on the Republic.)
"He says it because he believes it to be true. Nevermind that no competent economist agrees. Mr. Bush is under the delusion that his tax cuts will pay for themselves. He is not about to negotiate with himself..."
This must be the core of The Supply-side School of Economics that I had trouble digesting earlier--the kernel, if you will, of the WH operating system.
And I'm still choking on it.
This is the triumph of politics, then, over economics.
Cheney's "Reagan proved that deficits don't matter." remark is a political statement not to be confused with a vindication of some economic platform.
I see this as an absence of economics--that Bush doesn't get as far as "(believing) the tax cuts will pay for themselves" but only as far as 'this will get me re-elected (after all Cheney says so)'.