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May 29, 2003 REPUBLICAN DEBT....Let's see, the current level of U.S. debt is right around $6 trillion. But according to a Treasury report from last year, it's likely to get just a wee bit higher:
$44 trillion, eh? I guess that might explain why Paul O'Neill is out of a job, even if the report was just a "thought-piece to stimulate discussion." Of course, this report comes from the alarmist and notoriously leftist Financial Times, so there's probably nothing to it. Go about your business. UPDATE: Just for the record, yes, that was a joke about the Financial Times. Posted by Kevin Drum at May 29, 2003 09:25 AM | TrackBackComments
Interesting, although I'm not sure I've ever seen an economic forecast that goes more than about six hours into the future be accurate. And, certainly, a $350B tax cut isn't going to lead to a $38T increase in the deficit. Posted by: James Joyner at May 29, 2003 09:31 AM | PERMALINKOf course, this report comes from the alarmist and notoriously leftist Financial Times, so there's probably nothing to it. Go about your business. You know, you assume too much when you assume that people will recognize this as sarcasm. It is sarcasm, right? I have a half-dozen friends who follow politics closely and the only one who would get it is the one who's a business analyst for Deutsche Bank. Posted by: Mitch Schindler at May 29, 2003 09:33 AM | PERMALINKOn the Financial Times: Actually, it's pinker than just the paper. The FT used to have the largest number of reporters who were members of the Communist Party of Great Britain of any British newspaper. The reason for this was because the UK used to have the strongest trade union movement in Europe - and trade union action was a major economic & political issue in the 1970s and early 1980s. CP members had the best sources within the trade union shop stewards, and so got hired into FT covering strikes & labor unrest. So, you had Charles Leadbeater as the head labor editor for the FT, but who was also on the editorial board of & a contributor to "Marxism Today". (Leadbeater is now a leading light in the UK think-tank "Demos", and has a fair amount of influence in the Blair government). But its economic commentators aren't pinkos. (Martin Wolf is really good, and Christopher Caldwell of the Weekly Standard has a good column on the weekend staff). Posted by: Tom at May 29, 2003 09:48 AM | PERMALINKi think every blogger and their mothers have posted something about this article. i can't even believe the numbers. later in the article, it puts it in perspective, noting that this sort of deficit is equal to 90% of all household assets in the US. so, in a very literal way, bush has mortgaged our entire future. Posted by: Marc at May 29, 2003 09:49 AM | PERMALINKMarc: "so, in a very literal way, bush has mortgaged our entire future." As James Joyner noted, we can't blame a $44 trillion deficit on a $350 bn tax cut (okay, okay, really a $800 bn tax cut). The major cause seems to be the baby boomer retirement. From this NYT article on this same topic, this quote is particularly worrying: ... closing the gap would require the equivalent of an immediate and permanent 66 per cent across-the-board income tax increase. Not just a 66% rate, but a 66% increase ?! Kevin, you've been arguing that SS is not a fiscal calamity if we could just increase taxes by 4% of GDP, and that too gradually. Is there an elephant in the room that you/we have all missed? Posted by: Gautam Vallabha at May 29, 2003 10:01 AM | PERMALINKEr... a 66% increase is less than a 66% rate if taxes are (as they are) lower than about 40%. Posted by: Matthew at May 29, 2003 10:07 AM | PERMALINKNot just a 66% rate, but a 66% increase ?! Yes. Kevin is arguing for a 75% increase. 66% of 3% is 2%. Therefore, a 66% increase on 3% is 5%, not 69% (for example) Posted by: John Yuda at May 29, 2003 10:09 AM | PERMALINK"a $350B tax cut isn't going to lead to a $38T increase in the deficit." Of course not, James. But what should a responsible President and Congress do in the face of such a dire economic outlook? Throw yet another party for the wealthy? Posted by: Quaker in a Basement at May 29, 2003 10:17 AM | PERMALINKa $350B tax cut isn't going to lead to a $38T increase in the deficit. James, if you actually read the post you'll note that this study was started by Paul O'Neill, who got shitcanned long before the most recent tax cut because he dared to talk sense in a cabinet meeting. I suspect this study was the reason he publically doubted more tax cuts. So, if anything, this new tax cut will make the predictions of that study even worse. Posted by: John Yuda at May 29, 2003 10:32 AM | PERMALINKEither SS will be insolvent, or it won't. You can't have it both ways. Only a measley 4% of GDP, eh? And, at what point did the Baby Boomers retirement and the insolvency of the SS system become "Republican Debt"?!?! I thought FDR signed SS into law. Suddenly, the insolvency, long ago predicted, is "Republican Debt." i don't need to follow any links to read spinsanity, it's right here. Posted by: Survivor Type at May 29, 2003 10:56 AM | PERMALINK
I guess I misinterpreted that NYT quote. You are right, it makes more sense to read it as X% to X+(.66*X)% rather than (X+66)%. Whew! Thanks for pointing that out ... Posted by: Gautam Vallabha at May 29, 2003 10:57 AM | PERMALINKSurvivor Type, we can either do something to ensure the solvency of Social Security, or we don't. Currently, the administration is doing nothing to ensure it. And yes, it is Republican debt now - this is their tax cut, and they're funding it with my Social Security taxes. If they were funding these tax cuts because general revenue taxes were high enough, that would be one issue, but they're funding it by taking revenue earmarked for Social Security and using it for general revenue by putting a big IOU in the Social Security Trust fund. I think you seriously need to start doing some economic research, for you clearly show no sign of understanding the fundamental problem at hand. The problem isn't solvency of Social Security - our current Social Security Taxes are enough to ensure the liquidity of Social Security well into the future. The problem is that the revenue collected for Social Security is being spent elsewhere, and in one of the most unjust of ways - the surplus of a regressive tax is being used to fund tax cuts for the rich. This is a Republican debt in all senses of the word, and it will be paid come next election. Posted by: Trickster Paean at May 29, 2003 11:14 AM | PERMALINKIf we scrapped the entire tax cut, how much of that surplus would NOT be spent anyways. The spending of this surplus has been going on since before I was born. If you did not know that, then it is YOU that needs to do some research. This tax cut, if scrapped immediately, would do NOTHING to solve this problem. Then, how would you blame the Republicans for the sky falling? This insolvency, as I noted before, was predicted YEARS AGO. It has been tweaked and bandied about by both parties. It has also become a political hot potato, and it is the Dems that are to blame for that. There will not be a Social Security Reform proposal forwarded by the Republican party, because any reform will be used by lying leftists who will try to claim that we are trying to kill the programs and everybodies grandparents while we are at it. Seeing it forwarded as "Republican Debt" at this point only illustrates the absurdity of this situation. If you on the left are so hot to have this issue solved, why don't you come up with your own solution... Oh wait, you already have. It's only a 4% of extra GDP we need to tax away, and then that will solve it, right. Last I checked, the democrats could try to introduce a bill in congress to save SS, same as republicans can. Posted by: Survivor Type at May 29, 2003 11:25 AM | PERMALINKWait a second. I must be reading your argument wrong. Let me sum up: This isn't Bush's fault, despite the fact that he's cutting taxes in the face of a giant debt because: 1) We wouldn't have used the surplus to fix it anyways, so we might as well cut taxes and make the deficit worse? "Last I checked, the democrats could try to introduce a bill in congress to save SS, same as republicans can." Actually, no. Since the R's control the agenda (one of the perks of being in the majority), no bill can be introduced unless they allow it to be placed on the agenda. Posted by: CN at May 29, 2003 11:53 AM | PERMALINKIn case you might not have noticed, we have not used the SS surplus for anything but pork for a long time now. Blaming Bush at this point is pure demagoguery. We have the SS program thanks to a democrat 50(actually 65) years ago. That SS program IS now forming into a real problem. This problem was seen coming long ago, and no one has done jack about it. If you want to save SS, by all means, put your proposal on the table. But, you'd rather demagogue. So, what is your solution? Scrap the tax cut? That takes care of $350b, I'll even give you the $800b. That leaves you with a minor budget shortfall of $43,400,000,000,000. I don't remember GWB cutting our taxes by $43.4T, do you? If their ever was a sacred cow in party politics, it has to be SS. How many Democrats are leading the charge to fund or reform SS? If you want something done right, do it yourself. Since the left has made it quite clear to any Republican that any changes to SS will be demagogued from here to Sunday, how do you expect them to deal with it? The blame is flying here. The solutions are nowhere to be found. Posted by: Survivor Type at May 29, 2003 12:02 PM | PERMALINKActually, if you scrapped the current tax cut, and anything that hasn't taken effect in the second, and used all of that money to make payments on the debt, you could get knock 8% of our spending (interest on the national debt) down quite a bit. We'd still deficit spend this year, and probably the next as well, but we'd move back into surplus when the economy recovered, IIRC. Part of the problem, Survivor, is that continued deficit spending enlarges the debt, which enlarges the percentage of government income spent towards paying interest on the national debt. Currently sitting at about 8%. You must have missed Kevins chart. George Bush's two tax cuts will be close to 2 trillion dollars by 2010. Or, roughly, en entire year's worth of government spending. Maybe even more. I'm not sure if those numbers factor in fixing the AMT. Posted by: Morat at May 29, 2003 12:35 PM | PERMALINKAlthough I do like the implication that the Republicans are simply too scared of the Democrats to do the responsible thing. I can't really decide if you're claiming the Democrats are simply "too scary" to risk tangling with, or the GOP is simply too scared to try. I mean, either way, you're just making excuses. The GOP controls the Federal Government. They could fix Social Security. They're choosing not to, in favor of making the problem worse. And you try to blame the Democrats for that? To quote Buffy: "Your logic bears no resemblence to our Earth logic..." Posted by: Morat at May 29, 2003 12:37 PM | PERMALINKSurvivor Type, you are probably one of those that ridiculed the idea
of Gore's lock box because you did not understand it, which Clinton
started as a way to prepare for this problem. Now, as predicted, Bush
blew through that money and is now raising the debt ceiling. It is
asinine not to blame Bush for this problem. This has been predicted
since his plan was announced. It is also, IMO, ridiculous not to hold
Bush responsible for this recession, as it coincided almost exactly with
the likelihood that his monstrosity of an economic program would be
enacted. others disagree, but no one can claim that Bush's Financial
team spread confidence to the in difficult times. I have no idea how anyone came up with this figure of $42 trillion. But blaming it on Social Security is nonsensical. According to a recent (2002) study, the Social Security shortfall over the next 75 years is projected to add up to 0.72% percent of the Gross Domestic Product over this period. In contrast, the cost of Bush's tax cuts (as of 2002, so this doesn't include the most recent round) is projected to be 1.68% of GDP. So, the SS shortfall is less than half the Bush tax cut. In other words, SurvivorType, I think you're completely wrong on this point. Now a different concern is the cost of medicaid. Maybe this is what is contributing to the $42 trillion debt. I have found an estimate of total health care costing $2.6 trillion per year by 2010. Much of that will probably be paid for by medicaid. Posted by: Daryl McCullough at May 29, 2003 01:06 PM | PERMALINKKevin, or Daryl, can you do the math on medicaid if we had implemented a National Healthcare system in '93 and our healthcare costs were brought back to an average of other industrialized nations, and then we used the differnce in GDP towards paying off the debt nad preparing for SS revenue shortfalls? Posted by: theCoach at May 29, 2003 01:23 PM | PERMALINK"If you want to save SS, by all means, put your proposal on the table." OK, ST. How about this one? "I want to take one-half of the surplus and dedicate it to Social Security, one-quarter of the surplus for important projects, and I want to send one-quarter of the surplus back to the people who pay the bills. I want everybody who pays taxes to have their tax rates cut." OK, I admit it. This wasn't my idea. But the guy who promised this didn't follow through. Posted by: Quaker in a Basement at May 29, 2003 01:24 PM | PERMALINKOne reason the FT is leftist - and yes, it is leftist - is because it is populated by Balliol hacks, and Balliol has the strongest Left Caucus of all the Oxford Colleges (also it's traditionally strongest in PPE - Politics, Philosophy, and Economics). Charlie Leadbeater, for instance, was a Balliol JCR - Junior Common Room, i.e. undergraduate - President (and leader of a successful rent strike). Posted by: Andrew Boucher at May 29, 2003 01:34 PM | PERMALINKAnyone interested in this topic should read the raw material first. Go to www.ft.com/us and you will find a link to the full study--all 55 pages of it--and links to transcripts of the FT's interviews with Smetters and Gokhale. Both make it quite clear that their study was not surpressed for political reasons, and that much of the substance is in the budget anyway. Furthermore, the study makes clear that the real problem with the budget is not insufficient revenues or tax cuts, but exploding spending, especially for Medicare. The obvious conclusion is that we should absolutely not increase health entitlements by adding a prescription drug benefit to an already bankrupt Medicare system. Posted by: Bruce Bartlett at May 29, 2003 03:29 PM | PERMALINKTo paraphrase the late, great, Republican Senator from Illinois, Everett Dirksen - A trillion here, a trillion there, pretty soon you're talking real money. Posted by: pessimist at May 29, 2003 04:33 PM | PERMALINKWow. I figure I'm a fairly conservative, well-off, and widely-read person ... and I just have to say, "Survivor Type", what planet are you from? Posted by: Squiddy at May 29, 2003 04:43 PM | PERMALINK"The obvious conclusion is that we should absolutely not increase health entitlements by adding a prescription drug benefit to an already bankrupt Medicare system." But a few trillion in tax cuts won't hurt anything? I don't think your conclusion is at all "obvious." Posted by: Quaker in a Basement at May 29, 2003 05:22 PM | PERMALINK"...we should absolutely not increase health entitlements by adding a prescription drug benefit to an already bankrupt Medicare system." Bartlett, if you happen to visit these comments again, could you please point me to where you're getting the "already bankrupt" info about the Medicare system? Thanks. Posted by: Quaker in a Basement at May 29, 2003 09:37 PM | PERMALINKThe obvious conclusion is that we should absolutely not increase health entitlements by adding a prescription drug benefit to an already bankrupt Medicare system. I agree wholeheartedly. We should scrap Medicare and Medicaid in their entirety, hose the health insurance industry, and go to a single-payer health care system. We'd end up spending less money and the health of the country would go up. There's absolutely no reason not to do it other than ideological nonsense about free markets. But, really: liberals are happy b/c everbody can go to the doctor. Conservatives are happy because it costs less money in the federal budget. Both sides could go out and claim it was their idea and aren't they great for giving you health/saving your money. Everybody wins. Nobody loses. Why the hell not? Posted by: John Yuda at May 29, 2003 09:40 PM | PERMALINKAnyone interested in the precarious condition of Medicare should examine the most recent trustee's report at www.ssa.gov. Posted by: Bruce Bartlett at May 30, 2003 07:08 AM | PERMALINK"According to a recent (2002) study, the Social Security shortfall over the next 75 years is projected to add up to 0.72% percent of the Gross Domestic Product over this period. In contrast, the cost of Bush's tax cuts (as of 2002, so this doesn't include the most recent round) is projected to be 1.68% of GDP."
What you are saying? Is the cost of the Bush tax cut passed in the beginning of his presidency = to 1.68% of GDP for the NEXT 75 YEARS? Or, perhap, were you trying to compare apples with oranges? Was that 1.68% of the GDP of the year 2002, or of the years that it will be in-force, because I very much doubt you are talking about it costing 1.68% of GDP for 75 years. The difference is huge. I just want to make sure we are all clear on this. Posted by: Survivor Type at May 30, 2003 08:19 AM | PERMALINKperhaps what was trying to be stated is that the country could perhaps use a tax reform instead of a tax cut. is it a tax cut if the same year it is instituted the cost of college goes up nationwide by over $10,000... that year alone it is not a tax cut, but a redistribution of tax downward screw his tax cut and those dumb enough to defend him Posted by: Reform Blog at October 27, 2003 12:19 AM | PERMALINKExcellent site I have bookmarked your site yet and I will come back soon! 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