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January 21, 2004

THE WHITE HOUSE'S TRUTH DEFICIT....One of the most remarkable statements in yesterday's State of the Union address was this one:

In two weeks, I will send you a budget that funds the war, protects the homeland, and meets important domestic needs, while limiting the growth in discretionary spending to less than 4 percent....By doing so, we can cut the deficit in half over the next five years.

Now, Max will tell you that the budget the president submits is little more than a dog and pony show anyway, but let's give Bush the benefit of the doubt and assume that Congress passes his 4% budget intact. What happens?

  • The deficit this year is projected to be about $480 billion. That means Bush is claiming that his budget austerity will reduce the deficit to $240 billion by 2009.

  • Now take a look at the chart on the right, which shows deficit estimates from the Congressional Budget Office. The baseline estimate for 2009 (heavy blue line at the top) is a deficit of $170 billion.

  • However, in the SOTU Bush also asked for his existing tax cuts to be made permanent. That's represented by the light blue area in the chart, and changes the estimated 2009 deficit to about $280 billion.

  • The Medicare bill has already been passed. This is the dark blue area on the chart, and when you account for that the CBO deficit estimate deteriorates to about $330 billion.

  • The gray area on the chart represents reform of the Alternative Minimum Tax. It's a no-brainer that this is going to happen, and that takes the 2009 deficit projection to $390 billion.

  • This is bad enough already, but now comes the fun part. The CBO figures assume that discretionary spending rises only by the inflation rate, which they estimate at 2.7% per year. But Bush wants to increase discretionary spending by 4%, a growth rate that's 50% higher than the CBO's estimate. The blue-gray area in the chart overstates this a bit, but even so Bush's 4% pledge still increases the 2009 deficit considerably over the baseline estimate. Once you factor in higher interest costs, we're up to about $500 billion.

So: Bush's own publicly stated policies along with AMT reform that everyone knows is inevitable will increase the deficit to $500 billion by 2009, yet he claims these policies will reduce the deficit to $240 billion. Every single budget analyst in the White House knows this perfectly well. President Bush knows this perfectly well.

Explain to me again why I'm not allowed to call this a lie?

Posted by Kevin Drum at January 21, 2004 10:20 PM | TrackBack


Comments

You can't call it a lie becauseyou're a damn lying liberal!

;)

Posted by: floopmeister at January 21, 2004 10:25 PM | PERMALINK

This may be a silly question, but I assume that your $500 billion dollar figure is inflation adjusted, therefore is an actual increase in the %age of the debt?

Posted by: Another Bruce at January 21, 2004 10:29 PM | PERMALINK

You forgot to include the other taxcut proposals in the SOTU..the deductibility of catastrophic health insurance premiums, lifetime savings accounts, health savings accounts, diverting social security premiums to private accounts.

Posted by: Manish at January 21, 2004 10:34 PM | PERMALINK

And, by now, we should all understand that the major cause of excess government spending is the flat tax, which Soviet Republicans, Communists, Max, Howard Dean and I could have told you 20 years ago. Flat taxes are designed to expropriate more government industries into the public sector, that is their purpose.

Any of you remember social security? A flat taxed based, very efficient, public take over of the life insurance business. It works precisely because it is flat tax based.

Republicans call for flattened taxes whenever they want to spend more money in the public sector, which is everytime they are elected. Republicans run for office precisely because they want to grow government (at the expense of the private sector), listen to their campaigns.

Flat taxes grow government because government is a mixed market of cartels and monopolies that buy and sell government programs. What is congress? A semi-controlled, open air market for the buying and selling of new and old government programs.

What is the best method for selling more government? Lower the cost of government programs via the flatter or smaller tax.

So, Democrats are doomed. They have no choice but to make taxes more progressive, causing the demand for government to shrink, causing the private sector to grow, creating prosperity for their voters, minimizing poverty, releasing immigration pressure, fixing the current account balance, bringing jobs home, and conserving resources.

I am sorry, Democrats, your expectation of bringing doom and gloom and misery on the citizenry will be foiled by your own actions. If you really want what you propose, I suggest you become Republicans.

Posted by: Matt Young at January 21, 2004 10:34 PM | PERMALINK

Bruce: no, I believe these numbers are in current dollars. As a % of GDP the deficit probably goes down slightly. But no matter how you calculate it, it's at least double what Bush claims it is.

Of course, these numbers also assume there are no more tax cuts, not a very good bet with this crowd.

And for even further wonkishness, note that this deficit includes a surplus of about $250 billion from Social Security. If you calculate the actual general fund deficit, it's more like $750 billion by 2009.

Posted by: Kevin Drum at January 21, 2004 10:38 PM | PERMALINK

Manish: yeah, but you can only do just so much. Until we get more detail about this stuff there's just no way to estimate the cost.

Posted by: Kevin Drum at January 21, 2004 10:39 PM | PERMALINK

Kevin,

Allow me to quote Err from the "Mooninites" episode of Aqua Teens Hunger Force:

"Don't question it!"

"Silence, nerd! On the moon, nerds have their pants pulled down and they are spanked with moon rocks!"

Sadly, that makes more sense than any Republican response you'll get. Enjoy.

Posted by: scarshapedstar at January 21, 2004 10:45 PM | PERMALINK

The reason Kevin is because he hasn't submitted the budget yet. So you're speculating.

In a few weeks you may be able to call it a lie, not yet.

Posted by: spc67 at January 21, 2004 10:48 PM | PERMALINK

It's not a lie because It's OK If You're a Republican (IOKIYAR)!

Posted by: Old Hat at January 21, 2004 10:52 PM | PERMALINK

Don't forget the ~$180B surplus various trust funds are running. Just shift that curve another $180B DOWN into the red.

The Feds this month called in 30 year 9% Treasury Bonds from 1979, btw. 5 years early. Wonder if this is a sign of things to come.

Posted by: Troy at January 21, 2004 10:55 PM | PERMALINK

What I love is the DoD budget, not counting ongoing military actions:

2004: 400B
2005: 420B
2006: 440B
2007: 460B
2008: 480B
2009: 500B

A big FUCKYOUVERYMUCH by the M-I complex.

Posted by: Troy at January 21, 2004 10:57 PM | PERMALINK

Kevin, you still have your first amendment rights. Stand up and call it a lie ! Be a patriot !

Posted by: chef at January 21, 2004 11:08 PM | PERMALINK

spc67,

Please come back to reality. Kevin is "speculating" that Bush will do what he actually says.

Well, okay, you have a point; that would be a first, wouldn't it? However, I just can't picture Bush lying to help the country. I'm gonna assume he's actually telling the truth on this one, and surely that's Kevin's line of reasoning as well.

Posted by: scarshapedstar at January 21, 2004 11:18 PM | PERMALINK

You can call it a lie Kevin -- but it won't do any good. It's way too complicated to explain. And even if you could explain to the average American that 500 is not equal to 240, Bush would just say "war on terror" and that would be that.

Complicated lies are not going to result in Bush being perceived as dishonest.

WMD = WMDPRA. Kicking Saddam's butt = War on Terrorism. What's the difference? Bush told the truth. And he's a great leader.

I think it's going to be more effective to argue that Bush's policies just aren't working, and skip the lier bit.

Republicans and independents like the guy, and calling him a lier is not an effective way to sell to them. Saying that his policies don't work -- in fact, that the policies are counter-productive -- seems like a better way to go.

Posted by: decon at January 21, 2004 11:21 PM | PERMALINK

I agree with spc67.
Time will tell if this is a lie, not Kevin Drum's speculation.

Give him his 2 weeks and then you may have your cake, Kevin.

Posted by: bj at January 21, 2004 11:28 PM | PERMALINK

I like Clark's characterization that what Bush practices is "misleadership".

You know, a lot of the campaigns are providing great buzz words that we could use more often so they become a part of the political lexicon.

For instance, don't you think after O'Neill and Diluilio it makes more sense to call it the Bush-Cheney Administration? There's a school of thought out there that says don't-attack-Bush-cuz-he's-an-average-joe but everyone who surrounds him is an evil genius that is misleading him (and therefore the nation). I think stuff like this sooner or later will resonante with the greater non-blogging population.

So. Misleadership. Bush-Cheney Administration.

It's not extreme, but it tilts the field a slight bit (back to the left).

Posted by: outer space joe at January 21, 2004 11:54 PM | PERMALINK

"It's way too complicated to explain"

Explaining it is simple, Republicans spend on big government, more than we can afford.

Unfortunately, if you are a Pelosi death cult Democrat, you also have to explain that Democrats love to spend us into poverty also; and that is where the complexity arises.

Posted by: Matt Young at January 21, 2004 11:54 PM | PERMALINK

The US made $34k last year, and spent all $34k plus $10k on it's credit cards. And it's expected to put $10k more on it's credit cards for every year as far as the eye can see.

Unless it's more. And these guys have been no great shakes at predictions so far. Not the cakewalk they predicted so far.

I don't think it's that hard to explain.

Heck, I like Republicans too, but, apparently, I just can't afford them.

Posted by: David Glynn at January 22, 2004 12:31 AM | PERMALINK

The US made $34k last year, and spent all $34k plus $10k on it's credit cards

Not exactly; for FY04 we are:

Spending $34k but only getting $28k in income.

We will borrow $2k from our 401k, $2k from our rich uncle at 2%, and $2k from some foreign blokes.

Posted by: Troy at January 22, 2004 12:40 AM | PERMALINK

What would happen if you included what a journey to Mars really would cost into the CBO ests?
;)

Posted by: Mats at January 22, 2004 12:42 AM | PERMALINK

Yo, Matt:

WaPo: Government spending now totals $20,000 per household, a level not seen since World War II, said Brian Reidl, a federal budget analyst with the Heritage Foundation. Meanwhile, taxes total $17,000 per household.

"Conservatives are so afraid of losing their majority status right now that they feel a need to . . . pass the other side's legislation to prove how moderate they are," Reidl said. "But they're showing an astonishing willingness to spend now and dump all the cost in our children's laps, and an amazing unwillingness to reconcile the size of government with the amount of taxes needed to fund it."

Tsk, Tsk. Those wacky Heritage Foundation guys. I might clarify your point a bit, if the above article doesn't: Republicans taxcut AND spend, that's what gets one into poverty. Now, wanna see how serious, "death-cult"-type professionals handle serious fiscal policy dilemmas, and fix them? Try this.

Posted by: fouro at January 22, 2004 12:49 AM | PERMALINK

I thought it was a $2.2T spent, with a $500B deficit?

Posted by: David Glynn at January 22, 2004 01:05 AM | PERMALINK

By the way, Kevin, if you are reading this far downthread. I definitely think that the degree of wonkishness that you were talking about should be calculated into the National Debt from now until the exact time that Social Security is supposed to go into red ink. This has been one of the great talking point scams of our time. As far as the current administration is concerned, S.S. will go into the red around 2015 to 2020.

Except, of course, that it won't. The fund is in surplus and will be for the long term future. You just mentioned $250 billion in surplus. This will go on for 15 YEARS! At least. The general fund rape of Social Security is one of the most under reported stories of all time.

Posted by: Another Bruce at January 22, 2004 01:05 AM | PERMALINK

When Truman was in the White House, a visitor admiring the roses was appalled when the president attributed their health to the good manure they were getting. "Couldn't he say 'fertilizer' instead?" the visitor asked the First Lady. Bess replied, "You don't know how long it took to get him to say 'manure'."

Don't call it a lie. Call it utter bullshit.

Posted by: bad Jim at January 22, 2004 01:15 AM | PERMALINK

By the way, When did Carolyn in California morph into Matt Young?

Posted by: Another Bruce at January 22, 2004 01:21 AM | PERMALINK

David Glynn:

yes, I'm wrong. $2.3T in spending for FY04.

With an "official" 350B deficit.

This doesn't count the 87B for the WoT, the 200B or so borrowed from the SS surplus . . . 600-700B seems to be the most accurate estimate for FY04's deficit.

Posted by: Troy at January 22, 2004 01:54 AM | PERMALINK

Kevin: There is a way that Bush can square this circle. It involves dramatic cuts in discretionary spending. See my post on The American Street for an example.

Posted by: Kash at January 22, 2004 02:50 AM | PERMALINK

The rest of Kevin's pet trolls tend to avoid commenting on budgetary nightmares. Debt is not the sort of thing that wakes them screaming in the dead of night.

Posted by: bad Jim at January 22, 2004 02:59 AM | PERMALINK

Matt:

"And, by now, we should all understand that the major cause of excess government spending is the flat tax, which Soviet Republicans, Communists, Max, Howard Dean and I could have told you 20 years ago. Flat taxes are designed to expropriate more government industries into the public sector, that is their purpose."


Matt, I can now spot you on the first paragraph. I don't think that this is because I'm more perceptive, but rather because you're drifting further and further away from reality.

Posted by: Barry at January 22, 2004 03:36 AM | PERMALINK

This is what intelligent Democrats do, from:

http://www.j-bradford-delong.net/movable_type/2003_archives/002921.html

"The Clinton-era economic policies that Rubin played such a large role in devising certainly contributed substantially to the economic boom of the 1990s, and we economists do and will argue about whether they deserve 20%, 40%, or 60% of the credit. But the resolution of the deficit problem did not widen the set of politically-realizable possiblities--or widened them, but not in the way we hoped. Rubin's policies made it possible for George W. Bush to return us to the budgetary ground zero of 1992 through enormous tax cuts for the $200,000+ a year crowd and through big boosts to federal spending--a lot of which looks like Republican pork... "

-----------------------------------------------------

Nancy Pelosi is not an intelligent or honorable Democrat, she is a death-cult Democrat.

She is not worse than the Reaganites, who happen to be the most destructive force in American history since the Civil War. But if she is put in charge, and if she takes her cues from the death-cult political wing in San Francisco, then she very well could exceed the Reaganites in sheer destruction to our nation.

There is no doubting that Art Laffer is the charlaton of modern times, a college professor with barely an analytical mind, who, when coupled with a cheesed brained actor, elected by the most psychotic wing of the Republican party, may have already destroyed the nation.

Yet, we now have Bush.

I suggest that the Clintonians publicly reject the Pelosi wing of the Democratic party, then run on the facts stated above, and put Republicans out of business for the rest of American history. This nation, if it survives, should never again allow a Reaganite anywhere near political power. If the banished Republicans can return under a reformed party, then let them make their case.

Posted by: Matt Young at January 22, 2004 03:52 AM | PERMALINK

Only Repugs are allowed to use the word "lie".

Posted by: PAlolo lolo at January 22, 2004 04:51 AM | PERMALINK

spc67, bj —

Kevin is not staking out a claim that this is absolutely, definitely what will happen. He's simply assuming that Bush's SOTU description of the budget accurately reflects the budget he will submit. Are you saying that Bush wasn't entirely forthright in his SOTU? Otherwise, why not extrapolate?

Posted by: nina at January 22, 2004 05:02 AM | PERMALINK

"The reason Kevin is because he hasn't submitted the budget yet. So you're speculating.

"In a few weeks you may be able to call it a lie, not yet."

But spc67, if he doesn't submit the budget he said he's going to submit, why, that would be a lie too!

Or don't wilfull untruths count as lies if they're in the SOTU address?

Posted by: rea at January 22, 2004 05:02 AM | PERMALINK

So, some time ago I was walking down a street in Detroit near downtown when a wino, sitting on some stairs, called over to me, "Sir, could you spare a little somethin' for a guy in need."

I took a look at him. It was pretty pitiful. So I tells him, "I do have a little money, in fact, I have a whole dollar that I will give you if you promise that you won't buy coffee, you won't buy food, but you will put it towards your next bottle of wine." This guy takes the dollar and says, "I like you, your thinkin's fucked up."

I think of what the wino said to me everytime I read a Matt Young comment.

Posted by: LowLife at January 22, 2004 05:19 AM | PERMALINK

It is not a lie 'cause it doesn't involve sex!

DUH!

Uncap FICA

Posted by: MattB at January 22, 2004 05:23 AM | PERMALINK

Explain to me again why I'm not allowed to call this a lie?

I think it's because most Americans don't like the fact pointed out to them that their math skills aren't really good enough to figure out this sort of thing by themselves. So, Bush might as well go ahead and lie to them, because it doesn't really mean much more to them than hearing the truth, which is likely going to make them resentful anyways -- "You think I wouldn't know if the President were lying flat out to me? C'mon, man, get a grip on your hatred of President Bush."

I mean, I could scoff hearing Bush's proposal to cut the deficit as clearly too good to be true, but I never would've guessed he was having the gall to present a budget in the same freaking speech that would totally contradict that same promise.

Well, maybe I would've guessed a little bit. But I couldn't have told you why, in this sort of clear-cut way. I wish I had a news media that would bother pointing these sorts of glaring contradictions out... I'm glad someone does.

Also, I think the point is we're borrowing that extra cash from our kids, not our rich uncles. Have fun, junior!

Posted by: mc_masterchef at January 22, 2004 05:33 AM | PERMALINK

Explain to me again why I'm not allowed to call this a lie?

Because we all know that honor and dignitude have been restored by the grown-ups. To say otherwise is practicing the politics of class warfare and division. And since the Patriot Act has deemed certain types of class warfare to be financial terrorism, you may have just committed a felony.

... or something like that.

Posted by: def rimjob at January 22, 2004 05:43 AM | PERMALINK

Kevin: There is a way that Bush can square this circle. It involves dramatic cuts in discretionary spending.

Um, Kash, Bush proposed a 4% INCREASE, not cuts, in discretionary spending.

See my post on The American Street for an example.

And how are your proposals to cut discretionary spending relevant to whether or not Bush's promises to halve the deficit comport with his promise to INCREASE discretionary spending by 4%?

Matt, what are "death-cult democrats" and is there a basis for your flat tax comments? (From your description of it, Grover Norquist should be trying to make taxes more progressive in order to starve the beast.)

And, by now, we should all understand that the major cause of excess government spending is the flat tax, which Soviet Republicans, Communists, Max, Howard Dean and I could have told you 20 years ago.

Is there any evidence (other than anecdotal) to back up this assertion? Are there any studies on the subject? (Or even any quotes from Howard Dean?)

It would seem obvious that the smaller a given person's portion of the tax burden, the more likely that person would be to support programs from which he or she would benefit. To be precise, if a person would get more out of a given program than they would be required to give up to pay for it, self interest dictates that they are more likely to go for it. Thus a flat tax should decrease the drive for government spending, not increase it because the typical (median) taxpayer's portion of the bill is greater under a flat tax system than under a progressive one.

Posted by: exgop at January 22, 2004 05:45 AM | PERMALINK

I'd say its a lie, based on what we know now. I agree the budget details might prove it not to be, but there is no reason to think the budget will be any different than his proposals.

But suppose I really care about the deficit. Who the hell am I going to vote for? Even factoring in all the tax hikes proposed, every democrat is proposing raising spending by far more than Bush is.

Posted by: Reg at January 22, 2004 05:46 AM | PERMALINK

By the numbers:

Is Bush privatizing public education?
Nope, he is socializing private education.

Why did Ted Kennedy support the prescription drug plan? Simple, he knew it to be socialization of the drug industry. It doesn't matter that it was socialized from the management side, it socialization none the less.

What is Faith Based Initiative? Partial socialization of the religion industry.

Hyrogen subsidies, the same.

Now Bush is introducing socialized insurance, via regulation and mixing it with state medicaid. The liberals will claim that he is privatizing medicaid, but in fact he is socializing private health care insurance.

Bush can do all of this government expansion because he cut taxes, flattened them and lowered the apparent cost. What Kevin's chart shows is the future maintainence cost. But Republicans will claim that all this socialization, like social security, can be put on a flat tax, pay as you go system, eventually dropping the cost.

We have a name for all this, communism. Conservatives even admit as much when they tell us that big government under their plan is good, because they know how to run government industry. They admit to being good communists.

How does Dean intend to pay for socialized medicine? Simple, flat tax monthly payments.

Why didn't Clinton do any of this? Because Clinton ran a progressive, higher tax and thus created a massive opposition to increased government spending. That is Clinton raised the cost of socialization. Clinton did this to increase prosperity and save the private sector.

Pelosi believes, incorrectly, that we can have higher progressive taxes and more government.

The Reaganites and the Heritage Foundation believes we can have lower, flatter taxes and less government.

This contradiction between tax and spend policy is destructive.


The Democrats need to move Dean and Kennedy over to the Republican party, and get the Republican moderates back in return. Pelosi and her death cult can decide for themselves whether they want small progressivly taxed government; or large flat taxed government.

In fact, all liberals should make this choice, either join the Democratic party or join the Reagan Communist Revolution. And liberals should quit the fiction that they are somehow morally or economically different than the Reagan communists. Liberals should know that when you socialize industry, eventually you end up the Bush plan.

Posted by: Matt Young at January 22, 2004 05:46 AM | PERMALINK

This may be a silly question, but I assume that your $500 billion dollar figure is inflation adjusted, therefore is an actual increase in the %age of the debt?

You don't inflation adjust debt numbers in this context. The deficit creates a debt of five hundred billion nominal dollars, not real dollars.

Posted by: dsquared at January 22, 2004 05:53 AM | PERMALINK

Explain to me again why I'm not allowed to call this a lie?

Because then the terrorists will have won.

Posted by: Anarch at January 22, 2004 06:14 AM | PERMALINK

Kevin, can you adjust the GIF for the $40,000,000,000 supplemental for Iraq scheduled for the day after the election? (Continue 40Bn a year Iraquagmire Fund indefinitely, I suppose.)

Posted by: Andrew Lazarus at January 22, 2004 06:44 AM | PERMALINK

I didn't need a chart to know that claim was total baloney. When I heard that in the SOTU I busted out laughing. But hey, the Bush team has been practicing the creative accounting they learned from his good buddy Kenny Boy Lay, so maybe it does make sense in their wacky world.

Nope, Kevin is right. The whole thing is garbage.

Posted by: four legs good at January 22, 2004 06:51 AM | PERMALINK

Matt, your last post was the most coherent of the bunch. At least up to the point where you wrote "This contradiction between tax and spend policy is destructive." Save it and use those points instead of the "death-cult" Democrat comments. That statement only makes you seem like a complete nutjob.

Posted by: PigInZen at January 22, 2004 06:56 AM | PERMALINK

Can we call this "Schwarzenonmics"?

Posted by: dstein at January 22, 2004 07:03 AM | PERMALINK

"Even factoring in all the tax hikes proposed, every democrat is proposing raising spending by far more than Bush is."

Reg knows this to be true, without citing specific proposals, because in GOP-world, raising spending is what Democrats do! To hell with so-called "reality"!

Posted by: rea at January 22, 2004 07:06 AM | PERMALINK

This thread reminds me of the how the incredible surpluses forecast in 2000 were followed quickly by forecasts of deficits "as far as the eye can see" when Congress passed the tax cuts.

Much attention has been focused on the gap between revenues and expenditures, and rightly so. I am gratified that eveb some in the President's party, including John McCain, are beginning to raise doubts about the projected deficits.

What I think the current debate lacks, however, is an understanding of future GNP growth, and its dynamic relationship with government revenues. We were surprised by the projections in the late 1990's and subsequently felt the impact of the recession that started in November 2002. What will be the nation's future growth trajectory?

Who knows?

Posted by: Pixelshim at January 22, 2004 07:10 AM | PERMALINK

Explain to me again why I'm not allowed to call this a lie?

Well, this is some pretty complicated math, adding and subtracting big numbers that are actually financial projections.

If you're going to claim that Bush really understands this stuff and is purposely misleading the country, then you can call it a lie.

However, then you have to take recant the position that Bush is an idiot. Me, I'm not willing to go that far, even as a Republican. So, I'll just play nice and say he's been duped by his speechwriters again.

Posted by: Out4Blood at January 22, 2004 07:11 AM | PERMALINK

Guys, Matt Young is on to something here.

Ignore his bizarre language for a second, and think about what he's actually saying.

Matt's point, as I understand it, is that he favors progressive taxation because it arouses hostility to big government among those in the top tax brackets.

He says that supply-side economists, by flattening the tax code, actually make it easier for these folks to support big government. Most of these people's support for small government, it would appear, is based not on principle but on a simple aversion to taxation.

I'm sure many of us know people who crow at the office about all of the deductions they're taking, loopholes they've found, etc. Yet these are the same folks who love to take advantage of taxpayer-funded highways, the taxpayer-funded court system, etc.

Where I differ from Matt is in his assertion that big government is responsible for low population growth. It's clear to me that as a country develops and its women enter the workforce, the opportunity cost of having children rises. This, not big government, is why Europe's population growth is flat if not negative.

And as an environmentalist, that's OK by me. I don't think we need more people.

Moreover, fewer births does not equal more deaths. Sorry, Matt.

Posted by: praktike at January 22, 2004 07:14 AM | PERMALINK

Rea writes: "Reg knows this to be true, without citing specific proposals, because in GOP-world, raising spending is what Democrats do! To hell with so-called "reality"!"

From Volokh Conspiracy, citing study found here: http://www.ntu.org/main/press_release.php?PressID=549&org_name=NTUF

"NTUF found that every one of the contenders for the Democratic nomination would increase spending even more than it has grown under President Bush. The thriftiest Democrat, Senator Lieberman, calls for only $170 billion in new spending. By comparison, Governor Dean calls for $223 billion in new spending and Senator Kerry wants to spend an additional $265 billion. The loftiest would-be spender is Reverand Sharpton, whose campaign wish list is over $1 trillion, so be thankful he hasn't a prayer in the primaries. To put these numbers in perspective, NTUF notes the projected federal revenue reduction from the 2003 tax cuts some Democratic candidates want to repeal is only $135 billion."

Well, a deficit hawk has no choice but to vote for Bush, unfortunately. It would be great were there somebody proposing cutting the deficit. But there isn't.
I suppose one could make Sully's argument that a Democrat would cause gridlock and slow spending, but there are enough RINOs, willing to cave into any popular spending program that I doubt that would work.

Posted by: Reg at January 22, 2004 07:34 AM | PERMALINK

Newsflash - Die Welt is reporting that Bin Laden was captured.

Posted by: Hipocrite at January 22, 2004 07:35 AM | PERMALINK

Reg -- isn't that the study that's been savaged over on Tacitus?

Posted by: Anarch at January 22, 2004 07:44 AM | PERMALINK

My newsflash is no longer operative. Sorry.

Posted by: Hipocrite at January 22, 2004 07:45 AM | PERMALINK

exgop: Oops, thanks for pointing out that I should have mentioned above that the dramatic cuts in discretionary spending that I proposed in my American Street post take place after the election, i.e. starting with 2005.

Posted by: Kash at January 22, 2004 07:47 AM | PERMALINK

Hipocrite: Die Welt's crawl still says it -- but no American networks have picked up on it yet.

Posted by: Anarch at January 22, 2004 07:48 AM | PERMALINK

stupid link: Die Welt

Posted by: Anarch at January 22, 2004 07:53 AM | PERMALINK

Also, I think the point is we're borrowing that extra cash from our kids, not our rich uncles. Have fun, junior!

No, our rich uncles will hold the debt, but the term is long so our kids will have to pay it back.

Pretty tricky alternative to balanced taxation -- let the wealthy lend the money to the gov't instead of just taxing them like every other first-world society does.

Posted by: Troy at January 22, 2004 07:55 AM | PERMALINK

From Corrente:
In the last three years, Bush has proposed almost $1 billion in cuts to job training and vocational education – meaning the President's "new" proposal really is simply a push to restore a fraction of his own massive cuts.

Posted by: MattB at January 22, 2004 07:57 AM | PERMALINK

"Well, a deficit hawk has no choice but to vote for Bush, unfortunately."

Easily the most preposterous statement on this thread.

Posted by: SavageView at January 22, 2004 08:01 AM | PERMALINK

Bin Laden was not captured, US officials say...

Posted by: Motoko Kusanagi at January 22, 2004 08:13 AM | PERMALINK

"Explain to me again why I'm not allowed to call this a lie?"

You're allowed to call it anything you want. But calling it a "lie" would be inaccurate.

It's not a lie if the Bush administration is projecting more robust growth in the economy than the CBO. Those high-growth estimates may be naive or unrealistic, but that doesn't make it a lie.

CBO projections are not proven facts, they are estimates. Also, in this case, the CBO projections you are referencing are 5 months old. It's easy to believe that more current projections (incorporating 3rd and 4th quarter economic figures) would be a little more optimistic.

This administration is hardly the first one to rely on projections that differed from the CBO estimates at times. Clinton did it. The elder Bush did it. Both parties in Congress do it at times. Everyone ignores CBO estimates when they want to present a rosier picture (or a more pessimistic one).

There is a decent margin for error in such projections (see the CBO explanation).

Per the CBO:
"On average, the absolute difference .. between CBO's estimate of the federal surplus or deficit and the actual result was 0.5 percent of gross domestic product for the ongoing fiscal year and 1.2 percent for the budget year; by the fourth year beyond the budget year, CBO's estimate (adjusted for the effects of subsequent legislation) rose to 3.2 percent (see Table 5-1). If those averages were applied to CBO's current baseline, the actual surplus or deficit could be expected to differ in one direction or the other from the corresponding projection by roughly $55 billion in 2003, $135 billion in 2004, and $450 billion in 2008, aside from the effects of legislative changes."

So according to the CBO, based on the past 20 years, the average expected error for their projections for 2008 is $450 billion.

The AMT changes are not current law and they were not addressed by Bush in his speech. His budget projections will probably not be based upon your assumption that they are a given.

Not including the AMT adjustments, you computed that the CBO projections combined with Bush's proposal would result in a deficit of ~$440 billion. It would be more accurate to say that the 2008 budget is projected to most likely have between a $10 billion budget surplus and a $890 billion budget deficit based on the 2003 CBO economic projections.

When Bush submits his proposed budget, his administration will also submit year-by-year budget and economic projections for the next 5 years. The CBO will come out with their own new estimates a month or so later. It will be interesting to see how these projections differ.

Posted by: Joel Barrett at January 22, 2004 08:18 AM | PERMALINK

"Easily the most preposterous statement on this thread."

Well, except for the part in the very beginning where Kevin claimed he knows two weeks ahead of time what the Bush budget will say...

Posted by: Al at January 22, 2004 08:18 AM | PERMALINK

Deficit projections are always reported in 'nominal' or 'current' dollars, which means not adjusting for inflation.

The arithmetic here is not complicated. Bush proposes to reduce deficits below those currently projected. The projected deficit assumes that discretionary spending will grow below three percent a year.

Bush proposes faster spending growth than three percent, less revenues (by making tax cuts permanent, and by adopting new tax cuts announced by the Treasury), no new taxes, and no change in the other spending categories (entitlements and net interest).

The only way to reduce the deficit in this framework is to assume much faster economic growth. I don't see how they can do it.

In any case, the President's budget is strictly for show. The Republican Congress will do what it likes, and Bush will sign the bills, as he always has.

Sidenote: four percent total discretionary spending growth that includes faster defense spending growth means literal cuts in non-defense. Ain't gonna happen.

P.S. If it's not too obvious, my friend Matt and I disagree on a few things.

Aaarrrggghhhhh!!!

Posted by: Max B. Sawicky at January 22, 2004 08:20 AM | PERMALINK

"Reg -- isn't that the study that's been savaged over on Tacitus?"

I guess that depends on your definition of "savaged". First, Tacitus defends the study, its the commenters who are criticizing it. And though I only read about 50 comments down, the only savaging was to question the source's objectivity. I have no reason to disbelieve it unless somebody shows the numbers to be wrong.

One who wishes to cut the deficit would not likely vote for a person wanting to raise spending even more than the current president. (unless he is convinced gridlock would reduce spending, something I'm not convinced of).

Posted by: Reg at January 22, 2004 08:23 AM | PERMALINK

I should have read Joel B's post before I wrote. He anticipates some of my remarks. I agree the AMT adjustment won't be in the budget. It's still hard to imagine a growth estimate that gives them the result they are claiming. Oh and the CBO report comes out Monday (the 26th).

Posted by: Max B. Sawicky at January 22, 2004 08:23 AM | PERMALINK

Who is preventing you and why is their opinion so important. I recognize that you are calling Bush a liar in this post and doing it in a way that doesn't turn up the heat and the polarization.

But in some ways your reticence seems quaint.

Kevin, I think you like to orient yourself around a picture that we are engaged in civil discourse with people who generally have the interests of the country at heart and loosely share enlightenment standards of rationality. Calling them liars breaks that bond.

But really, these people are barbarians driven by a delusional ideology and an impulse to kleptocracy. Calling them liars is just the beginning.

The more mysterious piece is what is in it for supporters of the adminstration to go along with all the lies? What's the payoff for them? In some cases they get paid off to support the lies. In other cases, it's just the security of being stupid.

Posted by: copithorne at January 22, 2004 08:28 AM | PERMALINK

Reg, I suggest you read the tacitus thread more closely.

Posted by: praktike at January 22, 2004 08:35 AM | PERMALINK

Re: praktike on Matt Young's bizarre language.

M.Young is recasting political-economics in a "general systems" way. He has stepped "way far out" to see "way far in" -- all from the context of his unique perspective.

Whether that perspective is true or false, or some rational number in-between is beyond my current ken.

But this sort of wholesale rewrite necessarily creates bizarre language.

Those of you who have read Buckminster Fuller, and I am sure many have, understand what I am getting at here. Fuller had the chutzpah to redefine the word "wealth" and question if anybody in power even knew what the word meant.

Matt is redefining and recasting the political landscape in his own unique way.

More power to him.

For me...the phrase "Soviet Republicans" brought a genuine belly-laugh.

And in the political-economy I've defined for myself: belly laughs are worth more than gold.

Posted by: -pea- at January 22, 2004 08:36 AM | PERMALINK

exgop wrote, Is there any evidence (other than anecdotal) to back up this assertion? Are there any studies on the subject? [regarding Matt Young's claim that we should all understand that the major cause of excess government spending is the flat tax, ].

praktike wrote Matt's point, as I understand it, is that he favors progressive taxation because it arouses hostility to big government among those in the top tax brackets.

I don't see any reason to believe the claim about the connection between "flat taxes" and government spending, but there's definitely an emipirical relation, at least in recent years, between taxation and spending: more taxes, less spending. People discussed this many months ago on Brad DeLong's website.

Posted by: sinister at January 22, 2004 08:53 AM | PERMALINK

NTUF found that every one of the contenders for the Democratic nomination would increase spending even more than it has grown under President Bush.

Reg, that's an almost meaningless study putting forth a completely meaningless conclusion. When Bush puts his budget proposal on the table, then we can compare who is the bigger spender. But comparing Dem candidate plans beginning in 2004 with Bush's actual spending from 2000-2004, rather than his proposed spending beginning now is comparing apples and lug nuts. When Bush's budget comes out, I suspect it will land below Sharpton/Kucinich, but pretty much in line with everybody else's, maybe a little higher.

Further, a Dem president would almost certainly be facing a GOP Congress that has shown no ability to rein in spending when proposed by their own party's leader, but a decent ability when the WH is held by the other party.

Posted by: apostropher at January 22, 2004 08:53 AM | PERMALINK

Historically, Republicans really do outspend Democrats.

Posted by: taktile at January 22, 2004 09:03 AM | PERMALINK

Thanks, Joel B, for sanity on estimates, and Pixelshim for noting that GDP growth needs to be in the mix.

Kevin, you calling a set of estimates a "lie" is silly, and should be beneath you. Just as you claim Soc. Security is not broken, since it just takes a few changes (higher taxes, lower benefits) to fix ...

If the deficits don't increase the long term bond rate, the cost to borrow money, they're not so important. If/ when they do, they can become huge problems.

The real lie, since LBJ, is the idea of increasing taxes (on the rich, the rich), in order to help the poor. What happened, has happened, and I claim will always happen, is that the tax dollars spent by the gov't are mostly wasted in pork for the rich and middle classs.

If it hadn't been mostly wasted, we wouldn't have poor today. This, unfortunately, doesn't PROVE US gov't can't really help the poor, long term (3 generations needed to judge policy), but it's pretty strong evidence.

Matt Y may be (not sure) right about the rich, but it seems clear they do care about big gov't, just about taxes. They want small taxes on the rich -- and lots of regulations on the middle class and ways to avoid downward mobility. Whenever Dems support big gov't, to help the poor (wink wink), we should all know that this means the big gov't will be, at some point, coopted by the powerful to help the rich (stay powerful) and the powerful (to get richer).

The one function the gov't DOES have, is to protect Americans. Without needing permission slips.

Posted by: Tom Grey at January 22, 2004 09:13 AM | PERMALINK

And yes, a Rep congress would stop a LOT more Dem Pres pork than stop Rep Pres pork.

Too bad there's no Dem willing to admit taking out Saddam was damn good; and hope for democracy for humanity's oppressed is also damn good.

Which, BTW, if any Dem starting saying this, would prolly be OK with most Dems on Iraq (we're stuck there after all), and then all the REST of the anti-Bush folk could maybe get on board.

How about a swing on this, Kevin?

Posted by: Tom Grey at January 22, 2004 09:18 AM | PERMALINK

I went to the CBO's website to get more detailed data. The linked page has the current estimates, based on the 2003 baseline. It assumes discretionary spending increases at the rate of inflation, for which 4% a year is a reasonable guesstimate. Toward the top of the table, is the deficit. Estimated at $480 billion in FY04, decreasing to $197 billion in FY08. If you believe the CBO's estimates, it seems that Bush's proposal is to do nothing. And I am willing to bet, if you call Bush a liar, he just say this is what the nonpartisan CBO predicts.

Posted by: Proper Response at January 22, 2004 09:19 AM | PERMALINK

This is off topic, but if I remember correctly, back in college German I was told that Die Welt was the German analog to the National Enquirer. Now, that was nearly 20 years ago, so things may have changed, but I wouldn't consider Die Welt to be a trustworthy source.

Posted by: Phillip J. Birmingham at January 22, 2004 09:21 AM | PERMALINK

I would just like to know why democrats never implemented impeachment procedeings.
bush has went against our constitution more than any other pres. in history and our elected officials let him keep doing whatever he wants. what gives?

Posted by: sheri at January 22, 2004 09:31 AM | PERMALINK

Forgive me if someone else pointed this out, but the baseline actually shows a surplus by 2013. A surplus of 211 billion dollars, according to the CBO paper you reference.

Second, the budget projections were made last August. At that time, they projected a 2003 deficit of $401 billion and a 2004 deficit of $480 billion.

The actual deficit in 2003 turned out to be $374 billion, $27 billion less than the projection. Nothing to write home about, but at the turn of the fiscal year (October) the economic indicators were just beginning to take off big time. And it's worth remembering that the CBO projection was made only two or three months before the actual numbers came in, so less than three months after the CBO projection, there's already almost 7 percent error. I would be very surprised if the deficit for 2004 turns out to be as high as $480 billion.

Third, given the assumptions made by the CBO, that light blue area in the graph represents money kept in the productive private sector over that period of time. Theoretically, I believe, (my math is rusty) the total amount over the nine years would have something to do with the area of the light blue part. Might be fun to add it up, and ponder what effect this would have on the economy.

Posted by: tbrosz at January 22, 2004 09:38 AM | PERMALINK

Reg, you've largely been answered on the "study" you cite, which comes from a politically dishonest source and comapres apples and oranges.

When it comes to spending, as honest conservatives like Cato will tell you, Bush is in a class of his own. Dems who want to increase spending in a context of increased taxes are exceptionally more responsible in comparison.

Tom Grey, there are simply no circumstances under which Bush can cut the deficit in half. None. It would require substantial changes in policies on both tax-cutting and spending that he is committed to. That's what makes the claim a lie; all the rest about the precise level of GDP growth, the precise level of spending, and so forth are merest details in comparison to this big picture reality.

But given your inaccurate portrayal of Social Security (no, it's not broken, read the trustee reports) and on Dems (no, no one isn't happy that Saddam is out, what many of us are unhappy about is that this war was packaged and sold dishonestly, is costing a large amount of blood and treasure, is teetering on leaving a failed state that can attract terrorists in its wake, and hasn't improved our national security position one whit), i assume that, like bush, you don't do nuance.

Posted by: howard at January 22, 2004 09:42 AM | PERMALINK

"NTUF . . . Well, a deficit hawk has no choice but to vote for Bush"

Reg, this study has been taken aprt pretty well in a Tacitus comments thread. Basically, you're comparing apples to oranges. The "increase" figures for the various Democratic candiates are increases over present spending, not increases over Bush proposals. While various Democrats want to increase spending, Bush wants to increase spending more, and cut taxes more (by making the earlier tax cuts permanent) than his Democratic rivals.

Posted by: rea at January 22, 2004 09:48 AM | PERMALINK

Go ahead. Call it a lie.

To quote my predecessors in the Holy See, "Te absolvo in anticipo" and "It is what it is."

Pope Adam I

(What do you mean they never said that? Don't contradict me. I'm infallible; says so right on the label.)

Posted by: admadm at January 22, 2004 09:53 AM | PERMALINK

Reg wrote: "And though I only read about 50 comments down, the only savaging was to question the source's objectivity. I have no reason to disbelieve it unless somebody shows the numbers to be wrong."

They numbers are wrong, Reg. You should have read further. The study you cite looks at the Democratic candidates proposals but it looks at Bush's last budget, not his proposals -- they're comparing apples to oranges.

The study simply ignored the very things that Kevin's post discusses. When you factor in the cost of everything that Bush has proposed or is going to be proposing, the Democrats don't look bad at all.

Moreover, unlike the Democrats, the Bush administration is not willing to actually pay for its proposals, which means that the deficit imbalance will be worse under Bush.

And one final point worth considering is that the Democratic candidates do not have a chance in hell of getting the most expensive of their proposals past the Republican House, whereas Bush will. If you're really for fiscal responsibility, your only hope is to vote for a Democratic candidate.

Posted by: PaulB at January 22, 2004 09:55 AM | PERMALINK

Considering that both Bush and Frist have said that one of the first orders of business in 2004 would be the passage of additional tax cuts, I think it's safe to assume that the picture is even worse than it looks.

I can hardly wait to see what taxes they're going to cut this time....

Posted by: PaulB at January 22, 2004 10:00 AM | PERMALINK

"The study you cite looks at the Democratic candidates proposals but it looks at Bush's last budget, not his proposals."

Okay, this may be, but is Bush proposing 170 billion in new spending? I don't think so, though if you know where I can . And are the Dems proposing raising taxes beyond what Bush cut to pay for their proposals? I don't think they are doing that either.
Look, most of you are doing with your Dem candidates what you are accusing Republicans of doing, closing their eyes to the deficit spending. Are there any Democratic candidates actually proposing to pay for all their spending hikes? No. When it comes to the debt and the presidential candidates, its at very least, a wash. It still seems to me that Bush is proposing less unfunded spending than the Democrats are, even factoring all his spending proposals in.

Posted by: Reg at January 22, 2004 10:22 AM | PERMALINK

Reg, it's nice to see that you're trying to think about this, but unfortunately, your thought process is clouded by right-wing propaganda.

Go back and read carefully what Max, PaulB, Rea, and I wrote. If it's fiscal responsibility you want, every Democrat still standing has more of it on display than George Bush.

Now, personally, i'd like to see a democrat come out against farm subsidies and missile defense systems (permanently) and the Bush version of the Medicare drug benefit (both in terms of the substance of it and in terms of not being able to afford it until we get our fiscal house back in order), but i'm not hoping for the moon. As Eric Alterman says, elections aren't therapy.

But enacting (to pix the best of the lot) the Wes Clark tax proposals (plus some additional spending) will put us in far better deficit shape than any variant that Bush and DeLay cook up that suits their base.

Deficit leadership begins in the White House (notice, sadly, how many Dems voted for the omnibus appropriation today because of the pork, even though they get nothing but snout, ears, and hooves compared to the gop); there is none in the Bush White House. We have 3 years of empirical evidence on that score (not to mention Bush's dishonesty on matters fiscal on the campaign trail and his 13-times repeated "trifecta" lie) to affirm that judgment.

Posted by: howard at January 22, 2004 10:36 AM | PERMALINK

"is Bush proposing 170 billion in new spending?"

None are so blind as those who WILL not see, Reg.

Making the earlier tax cuts permanent, as GWB proposed in the SOTU the other night, ALONE is enough to exceed that figure--just look at Kevin's chart.

Scroll down on Kevin's front page to see the costs of GWB's social securtiy privitization proposals.

Not to mention the costs of Iraq--or Mars.

Posted by: rea at January 22, 2004 10:39 AM | PERMALINK

Hey Kevin,
waiting to call the WH gang a bunch of liars on the budget is like...

...after someone pulls a gun and orders everyone in the bank to the floor, but haven't had the tellers fill up some bags with cash. Can you call them a bank robber at that point, or not?

Too bad the same process (terrorize the people, grab the loot) is being applied to the entire nation. We're seeing a Treasury robbing in process, and the freeper morons don't want anyone to sound the alarm "yet". Sure.

Posted by: Satan luvvs Repugs at January 22, 2004 10:39 AM | PERMALINK

Reg wrote: "Okay, this may be, but is Bush proposing 170 billion in new spending?"

We're not sure because a) he hasn't been upfront about how much his proposals will cost (the moon/Mars mission) and b) we don't know the details of some of his proposals (the new tax cut(s) and the Social Security proposal).

Assuming he does indeed go through with everything he has planned, the answer is yes, he has in fact proposed more than $170 billion in new spending.

"And are the Dems proposing raising taxes beyond what Bush cut to pay for their proposals? I don't think they are doing that either"

That depends on the candidate. Dean, for the most part, is just talking about rolling back the Bush tax cuts. Some of the other candidates (Clark, Edwards) have new proposals on the table. The details vary widely in what they have proposed to spend, as well.

"When it comes to the debt and the presidential candidates, its at very least, a wash. It still seems to me that Bush is proposing less unfunded spending than the Democrats are"

You're confusing two separate and distinct items: 1) spending and 2) the deficit. It is entirely possible for a Democratic candidate to call for higher spending than Bush and yet still have a lower deficit because more of his spending is paid for. Keep in mind that the bill for the deficits will one day be called to account. At that time, someone's going to have to pay for it. I'd prefer that that bill be as low as possible. Your mileage may vary.

You're also ignoring the point that Bush's proposals have a much higher chance of actually making it through Congress, unlike a Democratic president's proposals. Do you really think that Tom DeLay will allow a major new Democratic proposal to go through the House of Representatives? It's also worth noting that the type of spending proposal matters, just as does the type of tax cuts. Not all spending proposals are alike, just as not all tax cut proposals are alike.

Posted by: PaulB at January 22, 2004 10:46 AM | PERMALINK

Does anyone know how much economic growth would be required to make the budget work as claimed?

Posted by: Indiana Joe at January 22, 2004 10:51 AM | PERMALINK

I'm waiting for the day when a republican president uses apppropriate rhetoric to back up his ideology. If Bush had stood before the American people on Tuesday and said, I dramatically cut taxes, and the government has a lot less money available to address your problems, therefore, the federal government will no longer ... and then he would put forth the laundry list of things he proposes that the government STOP doing. Instead, Bush goes through his laundry list of new spending and new initiatives.

If the government is supposed to do less, have the courage of your convictions, and tell us what you don't want to do. The Gingrich loonies were true believers, they said they wanted to get rid of the Department of Education. Bush doesn't have the balls to say that. What problem does Bush believe the federal government should get out of the business of trying to solve? He's just a gutless, wishy washy, non-leader.

Posted by: pj at January 22, 2004 12:28 PM | PERMALINK

"And are the Dems proposing raising taxes beyond what Bush cut to pay for their proposals? I don't think they are doing that either"

Um, reg, the president wants even more tax cuts. Your question only addresses part of the equation. To determine the deficit impact of a given set of proposals, you have to look at both the changes projected in revenue and spending. The increase in spending minus the increase in revenue is the increase in the deficit. Bush is proposing a negative increase (i.e., a decrease) in revenue while the democrats are proposing increases. That gives them room for more spending while still having a smaller deficit. And they aren't even planning a mission to mars.

The point made by others about the likelihood of passage of a proposal by a dem WH compared to a gop WH should be considered, too.

Posted by: exgop at January 22, 2004 12:58 PM | PERMALINK

"The Gingrich loonies were true believers, they said they wanted to get rid of the Department of Education. Bush doesn't have the balls to say that. What problem does Bush believe the federal government should get out of the business of trying to solve? He's just a gutless, wishy washy, non-leader. "

No, his advisors have learned (painfully) that revolutionary polemic doesn't sell or even poll except to that small minority of true believers: note Ginrich's new job.

This is a silent revolution, save for those who can hear the clanging of the contradictions, false claims, and outright fallacious bs.

Or an attempt to completely revise the field of logic...


Posted by: me at January 22, 2004 01:34 PM | PERMALINK

What do you expect from the man responsible for making an oxymoron of the phrase "American credibility."

Posted by: bbb at January 22, 2004 02:15 PM | PERMALINK

Troy wrote:

"The Feds this month called in 30 year 9% Treasury Bonds from 1979, btw. 5 years early. Wonder if this is a sign of things to come."

Treasury bonds from before 1985 have a call option during their last 5 years. Since 5-year rates now are much lower than 30 year rates were in 1979, Treasury is exercising these call options as soon as possible, and will almost certainly continue to do so.

I think there's nothing to glean from the action.

Posted by: Richie at January 22, 2004 03:20 PM | PERMALINK

Why has no one mentioned what Bush would say to questions about how to add up all these big ole numbers: "That's just fuzzy math."

Posted by: Basharov at January 22, 2004 04:11 PM | PERMALINK

This isn't a lie because it is not a false statement knowingly made with the intent to deceive. The statement is false given one set of assumptions, and true given another set of assumptions. The key word: "ASSUMPTIONS."

Financial projections more than a year or two in the future are worthless when it comes to analyzing the federal budget -- there are too many variables affecting both revenue and expenses. A very small change in the growth rate of the economy has a substantial effect on tax revenues (a few tenths of a percent could affect revenues on the order of hundreds of billions of dollars). Also, there is no reliable way to predict spending, since Congress passes a new budget (with new spending priorities) every year.

In short, disagree with the President if you will. Point out the weaknesses in his assumptions and his economic forcasts. Argue why your policies are better than his. Don't accuse the President of the United States of dishonesty when his statements are not dishonest.

Posted by: Ben at January 22, 2004 04:23 PM | PERMALINK

"The Feds this month called in 30 year 9% Treasury Bonds from 1979"

There is something to glean from this, which I picked up from a financial analysis out of a major brokerage firm. I won't bother with the reference, but give the summary.

Long term bonds are not favored by the treasury department as much, favoring to push short term debt to cover government debt. This is new to Bush-2, Clinton pushed a stable long term bond market.

The problem with this is that the consumer and capital equipment industry finance short term purchases by backing up the credit with long term bonds. Credit angencies "arbitrage" long term debt, which they they purchase, down to short term debt they sell. THis is the basis of the goods finance industry.

The basis for this arbitrage is that long term interest rate give an indicator of the health of the American economy, and provide a very good fix for what investors estimnate the health of the economy in the short and lmedium term. When government removes this long term pricing standard, then a host of short term derivitives and hedge paper proliferate with less and less stability to back them up.

The problem we face right now is the proliferation of hedging instruments, short term paper valued on the apparent price of other short term paper. There is less of a long term pricing standard. Much of the recent stock market gains result because Europeans with a strong Euro are making short term currency hedges. In terms of the Euro the stock market has been relatively flat.

The lack of job growth results from no long term investments. Companies are running up short term revenue and insider selling is way up as insiders capture the gains before the collapse of the short term paper market.

What will happen soon is that commodity price rises will signal long term gloom, this will start the short term paper collapse, the stock market will drop back to its expected value, and long term interest rates will see a sudden rise.

We know this will happen, what we don't know is that it will happen more suddenly than necesary.

But we do know that the finance industry will have very fond memory of Rubin and Clinton when the adjustment comes.

Posted by: Matt Young at January 22, 2004 04:33 PM | PERMALINK

Again this author ignores supply and demand.

"It is entirely possible for a Democratic candidate to call for higher spending than Bush and yet still have a lower deficit because more of his spending is paid for."

Not quite, the spending increases proposed by the Dems will be substantially reduced as taxpayers are required to pay for them. If Democrats actually stated this up front, they would likely win in a landslide.

Just say to voters, as a Dem I will increase taxes on the rich and support greater spending. But you voters should be aware by now, that getting more spending is very difficult when taxpayers have to pay for it.

In fact, the liklihood is that increased taxes will actually decrease spending in absolute and relative terms from the Republican budget.

These Reaganites will actually make the argument against a President Edwards, that allowing the free market to bring prosperity to the poor is against the Republican communist tradtion. Republican Reaganites are an awfully stupid lot, about as stupid as Pelosi and her death-cult policies.

Posted by: Matt Young at January 22, 2004 04:42 PM | PERMALINK

Ben, actually, for the record, you're wrong.

Yes, assumptions matter, but there are honest and dishonest assumptions.

But more important, no, the consensus GDP growth forecast this year is 4.0%. A 4.2% GDP growth does not produce hundreds of billions more in revenues.

Posted by: howard at January 22, 2004 04:50 PM | PERMALINK

howard -- you put too much faith in the forcasts: my point is that they are bunk. The record of reliability for "consensus" forcasts 1 year out is ridiculously low; move to 5 years out and you can plausably argue in favor of not wasting your time making forcasts.

Posted by: Ben at January 22, 2004 05:05 PM | PERMALINK

As an aside, howard, recall the forcasts 5 years before the 1st balanced budget in the 1990's: the projection was for deficits as far as the eye could see.

Posted by: Ben at January 22, 2004 05:16 PM | PERMALINK

Ben, your example works against you, not for you. Because the Clinton administration took the general trendline of the forecasts seriously, they worked (with Dems in Congress who were willing to vote for tax increases) (and with Republicans in Congress who favor controlling spending when a Dem is in the White House) to change the conditions that produced the forecast, leading to a different outcome than was forecasted.

There are no circumstances under which George Bush and the GOP congress back away from the tax cuts they've passed, and there certainly don't appear to be any circumstances under which they control their desire to spend, so there is simply no conceivable set of circumstances within those constraints in which they cut the budget deficit in half in five years.

Forecasting the outcome of the presidential election of 2008: that's a fool's errand. Focussing the general parameters of what the budget deficit will look like in 2008 - that's a rational activity.

Your argument is sadly reminiscent of Rumsfeld's about why postwar planning for iraq was such a botch: who the hell knows what's going to happen, he essentially says? Well, it's true that none of us know whether the world is going to end tomorrow, or the Rapture is going to arrive by Sunday, but we have loads of empirical evidence upon which to base deficit forecasts if the underlying policies don't change.

Now, should we be lucky enough to elect a Democrat and restore adulthood to the white house, then the forecasts based on a continuation of the Bush trendlines doesn't stand for much, but that's a different matter.

Posted by: howard at January 22, 2004 05:35 PM | PERMALINK

howard -- Do you realize how much of your argument is based on opinions and pre-conceived notions vs. how much is based on fact? Your post doesn't contain a single fact -- which is precisely my point about forcasts: They are simply guesswork based on rational assumptions. Your argument assumes that their will be no backing away from tax cuts, coupled with no spending cuts -- this assumption is unwarranted. Moreover, you don't allow for the possibility that the tax cuts will stimulate growth further -- again, an unwarranted assumption.

You cannot state with any confidence the exact economic growth rate for 2004, let alone 2008. The best you can do is suggest a reasonable range of growth rates, and that range becomes wider the farther into the future you go. This means that all of the numbers are highly speculative. Example: If you suggest that the average growth rate of the economy for 2004-2008 will be 2%, and I suggest that it will be 3%, we will arrive at radically different pictures of the 2008 deficit (assuming spending and tax rates remain constant, a dubious assumption to be sure). It will not be possible for either one of us to suggest that the other is completely crazy, because both estimates are reasonable based on past experience (which itself is not necessarily a reliable guide).

My larger point is that the numbers are way too speculative for anyone to draw the kinds of conclusions that seem to be made here.

Posted by: Ben at January 22, 2004 06:56 PM | PERMALINK

Ben wrote: "Your argument assumes that their will be no backing away from tax cuts, coupled with no spending cuts -- this assumption is unwarranted."

Actually, it's quite warranted, given the public pronouncements of the Congressional leadership and the Bush administration. Or do you consider it wrong to assume that they mean what they say and that they will do what they have said they will do? It's even more warranted in this case because we can judge their words against their past deeds. And sure enough, reducing taxes and refusing to rein in spending are precisely what they have done every year under Bush.

"My larger point is that the numbers are way too speculative for anyone to draw the kinds of conclusions that seem to be made here."

They aren't that speculative, Ben. There are ranges of numbers, it is true, just as there are different sets of assumptions. When you do the math on the numbers and the assumptions, though, you can arrive at the probability of certain outcomes.

If you run the numbers on Bush's proposals, the only set of assumptions that make the Bush promise work is a set of assumptions that is at the extreme end of the probability scale, which is why Bush's economic policies are getting criticized from both the left and the right.

Bush has joked in the past that he "hit the trifecta." Well, he needs to hit a "trifecta" in the other direction for his SOTU statement to come true. It's somewhat akin to my going on a spending spree and confidently telling everyone not to worry because my budget will be balanced in five years when I win the lottery.

In short, it was a lie.

Posted by: PaulB at January 22, 2004 07:52 PM | PERMALINK

Thank you, Paul B, for saying everything that needs to be said in response to Ben's rant, but since he aimed it at me, i'm going to stir myself to pile on with a few more comments.

Of which the most important, Ben, is not only were there a variety of "facts" in what i wrote, the single most important "fact" is one that you ignore: faced with awful deficit forecasts, clinton led congress to change the underlying behaviors that were producing the forecasts.

This wasn't random chance, it wasn't happenstance, and it certainly doesn't disprove the validity of 5-year federal budget forecasts.

Of course, Ben, there is uncertainty in everything: cyberterrorists could knock down the internet before i finish writing this, and it will never get posted, so i'd be wasting my effort, but i'm going to carry on on the probabilistic assumption that cyberterrorists aren't going to knock the internet down in the next 3 minutes.

Similarly, of course projecting 5-year budget outcomes is fraught with peril, but not that much peril. That's why planners plug in a variety of assumptions when they examine a question like this.

But the assumption that Bush is going to have a road to Damascus experience and decide that we are undertaxed has a probability of 0% of occurring. The assumption that Bush and the GOP Congress are going to cut spending is also very close to 0% in likelihood, although under pressure from the handful of honest conservatives, the possibility of slowing spending growth can't be ruled out altogether. However, that doesn't fit with the agenda Bush laid out in the SOTU.

Denial, Ben, is a powerful human condition that afflicts all of us in one way or another, but to believe Bush when he says they're going to cut the deficit in half takes denial of a very tall order, which is why Kevin's basic graph is going to be proven basically right.

Short of policy changes. As I said, a Democratic president will definitely give us policy changes to improve the fiscal stature of the country; it's also likely, in my estimation, that the bond market is literally going to choke on absorbing all the US government paper that funding this deficit requires (if it weren't a concious policy of chinese and japanese bankers to support the dollar as an export subsidy, that moment of reckoning would already have happened) and force policy changes, which will also throw the chart off.

But the reason the bond market will force those changes is because it understands the underlying probabilities of the bush fiscal picture.

Posted by: howard at January 22, 2004 08:41 PM | PERMALINK

Since some of you seem to have overlooked my earlier post:

According to the CBO, based on the past 20 years, the average expected error for the CBO deficit projections for 2008 is $450 billion.

"If you run the numbers on Bush's proposals, the only set of assumptions that make the Bush promise work is a set of assumptions that is at the extreme end of the probability scale"

On the contrary, Bush's projections (as described in the SOTU address) are well within the margin for error on the CBO estimates from last August. Since the economy has improved since last August, the next set of CBO estimates may be very close to Bush's estimates.

Posted by: Joel Barrett at January 22, 2004 08:51 PM | PERMALINK

You do understand, Joel, don't you, that CBO estimates are constrained by law and can't do exactly what Kevin did? And that therefore, important as you think your message is, the reality is that of course we need to massage CBO numbers, since they are forced into inaccuracy by their legal requirements.

Posted by: howard at January 22, 2004 08:56 PM | PERMALINK

With this administration I am continually driven back to the Reagan years. I remember Ronnie telling us he would balance the budget by 1983.

He was about as trustworthy as Bush is, and for the same reasons.

Posted by: Silence Dogood at January 22, 2004 09:04 PM | PERMALINK

I understand the CBO projections just fine Howard, but I don't think that you do. You do realize that almost all of the "massaging" Kevin performed was actually drawn directly from CBO estimates of various policy alternatives, don't you?

The expected error of $450 billion for 2008 (as computed by the CBO) is based on historic errors AFTER adjusting the projections retroactively to account for legal changes (such as tax law changes).

In other words, $450 billion is the expected error that will remain in 2008 AFTER performing EXACTLY the kind of adjustments performed by Kevin.

Posted by: Joel Barrett at January 22, 2004 09:37 PM | PERMALINK

What a fascinating thread--this is the place for people who remember a 1990s where Bill Clinton was fighting to balance the budget, where the budget was balanced before the boom and not after, and this is definitely the place for people who say that we have to raise taxes to balance the budget, but propose more spending than they do tax increases.

Posted by: Thomas at January 22, 2004 09:47 PM | PERMALINK

Joel, that was very edifying, and i appreciate your forcing me to go back and read through the CBO link you provided up above. Your point was subtler than i realized, and i apologize for responding too quickly rather than scrolling up to re-read what you said hours ago.

That said, i'm still doing to disagree with you, in several ways.

First, I don't see how there is any chance that the Bush Administration won't deal with the AMT problem.

Second, the CBO self-assessment says that roughly half the error range comes from business cycle issues, which they don't project, while the other half comes from economic trendline issues (people with foodstamps, rate of unemployment, productivity levels, and so forth). For Bush to get the deficit down to $240B (or less) - even accepting your AMT presumption - we essentially have to be in the upper 30 percentile of positive trendlines in both GDP growth and economic trendlines. That's simply asking too much for Bush to be sure of.

(I'll go further and say it's asking too much for the economy to produce, btw.)

Third, it's my presumption that Kevin is too generous on assuming that discretionary spending only rises 4% (although i've noted already there is a possibility that pressure from Bush's conservative flank may hold that in line - my personal projection is much worse, because i think interest rates are headed towards 6 over the next 12 months, and higher still after that, which really croaks the interest number, but that's coverd in the economic assumptions).

Finally, yes, there's a range, but there's a center to that range, and it's a level significantly worse than the target that Bush claims will be met.

In short, after this whole excursion, i still say, not under what we know of Bush and the GOP congress....

Posted by: howard at January 22, 2004 10:37 PM | PERMALINK

Didn't the administration predict that Iraqui oil would pay for rebuilding the country? That is, after the population greeted us with flowers and gratitude for liberating them? What part of the deficit will represent payments to corporations formerly run by Dick Cheney? Can we trust the administration to tell the truth? What would a graph of reality vs. what they told us look like?

Posted by: Celia Shortface at January 22, 2004 10:51 PM | PERMALINK

I guess the same reason we can't call Democrats liars for their proposals that would also increase the deficit as well. The go on and on about the defict, but when you start to add up their spending and revenue enhancing policies you usually end up with a number that will increase the deficit.

There is no candidate that is serious about deficit reduction (and yes that includes Bush). I'm wondering why anybody is shocked by this.

Posted by: Steve at January 23, 2004 01:08 AM | PERMALINK

PaulB & howard -- I wrote a long response to your posts, but there was a technical problem that prevented its being posted. I don't have the time or the energy or the interest to rewrite it. Therefore, let me just say that you cannot call someone a liar for making assumptions that you disagree with or believe are unrealistic, unless you can demonstrate that those assumptions are so far beyond the realm of possibility as to be unreasonable.

Posted by: Ben at January 23, 2004 08:51 AM | PERMALINK

Give us a short form, Ben: which assumption are you willing to make for Bush?

That he will increase revenues?

That he won't deal with AMT (which is Joel's assumption)?

That he will say "I was wrong about Medicaid drug benefits, we can't afford them?"

That interest rates won't go up and ratchet up interest payments on the debt?

That he will limit the growth of discretionary spending?

That inflation won't be higher than 2.7%?

That GDP growth will exceed 5% for 5 years running?

Look, Ben, i don't waste my time on calling Bush a liar on WMDs, because that does get into a realm that it's hard to judge - what did he actually know and believe? I limit myself to saying that he didn't make an honest case on WMDs.

But with respect to cutting the deficit in half, i can see no realistic assumptions to make.

PS. You probably lost your post because it got too long - i've had that problem too.

Posted by: howard at January 23, 2004 09:25 AM | PERMALINK

It is not my assumption that Congress will actually hold growth in discretionary spending to 4% per year.

But Bush's SOTU claim was that the deficit could be cut in half in five years IF growth in discretionary spending was held to to 4% per year. Claims that Congress will never go along with such disciplined spending do not invalidate Bush's claim.

It is not my assumption that Bush and Congress won't deal with AMT.

But Bush did not mention AMT in his speech, and the only legal changes he indicated were included in his deficit projection were extending the previous tax cuts. So projections that include hypothetical AMT adjustments can not be used to invalidate Bush's claim.

Posted by: Joel Barrett at January 23, 2004 11:48 AM | PERMALINK

If you study the CBO error analysis carefully enough, you will see that (by their own calculations) there is only a 50% chance that their projections will be within $310 billion of the actual results for budget year + 4. There is slightly more than a 10% chance that they will be off by more than $750 billion in budget year + 4. Kevin is relying on their projections for budget year + 5, which have an even broader error range.

You will also see that they acknowledge that historically the error range is even broader in post-war economies, and they do not know if the current economy should count as such.

The administration's current 5-year projections are apparently ~$200 billion rosier than the CBO 2009 estimates from last year (by Kevin's calculations), though Kevin is comparing last year's CBO estimates to current administration projections.

By CBO's methodology, the chances of the CBO having overestimated the 2009 budget deficit in 2003 by more than $200 billion was ~35%. By CBO's own estimates, using their 2003 projections as the baseline, there is approximately a 42% chance that the actual 2009 results will be closer to the administration's current projections than their own.

Calling the administration's projections a "lie" under these circumstances is irrational.

The kicker is that I wouldn't be surprised if the administration has seen previews of the soon-to-be-released 2004 CBO projections, and is partially relying on them.

Posted by: Joel Barrett at January 23, 2004 12:00 PM | PERMALINK

howard --

I am not willing to make any assumptions for Bush -- he's quite capable of making his own. I will also freely admit that the situation could just as likely end up being worse than anticipated as better. My point is that the error rates are so high that far out in the future that it doesn't make sense to consider the numbers firm. For me, the issue is whether the assumptions and projections are reasonable. In this case, there is no question that they are; they may not be the best possible set of projections, but they are within the realm of reason (which is good enough). In any event, we are not going to know whose projections are better for 2009 until some time in 2010.

I am all for argument on these subjects. If you want to criticize GWB because you believe his estimates are unreliable, then do so. That, however, is argument about opinions. It is not an issue of truth or falsity because the answer cannot be verified. One cannot lie unless he knows the truth -- since nobody in this thread knows the truth about economic performance in 2009, nobody can lie about it (unless it is so far out of the realm of possibility as to be unreasonable -- i.e., I would be much more sympathetic to your argument if the numbers only worked out based upon projected annual growth of, say, 50%, which is clearly unreasonable).

Posted by: Ben at January 23, 2004 12:45 PM | PERMALINK

Ben, how many economic and job projections of the Bush administration have been even remotely close to accurate?

Posted by: PaulB at January 23, 2004 12:58 PM | PERMALINK

PaulB -- Substitute the words "Clinton," "Bush I," "Reagan," "Carter," "Ford," "Nixon," "Johnson," "Kennedy," "Truman," "Eisenhower," etc., etc., etc., and you might be on to something.

Posted by: Ben at January 23, 2004 03:26 PM | PERMALINK

PaulB -- My entire point is that ALL OF THE NUMBERS ARE BULLS--T! Bush's numbers are as likely to be right as CBO's; THEREFORE, BUSH DIDN'T LIE! I fully expect that both sides numbers will be wildly inaccurate.

Posted by: Ben at January 23, 2004 03:28 PM | PERMALINK

Ben

CBO is staffed by economists who are supposed to try to be impartial. Bush is ??? and seems to have trouble keeping economists working for him.

Both will probably be wrong, but I would certainly bet on the CBO estimate being a lot closer to what actually happens.

Posted by: ____league at January 23, 2004 05:11 PM | PERMALINK

Nice try, Ben.

Posted by: PaulB at January 23, 2004 09:02 PM | PERMALINK

___league -- thank you for proving my point: in that arena of uncertainty, YOU CANNOT CALL SOMEONE A LIAR -- Perhaps overly optimistic, but not a LIAR.

Posted by: Ben at January 24, 2004 11:38 AM | PERMALINK

Perhaps Bush meant that the deficit, as a percentage of GDP. would be cut in half? Given, he didn't actually SAY that, but still...

Over the next 5 years, at 4% growth a year, that gives him 21.7% growth, and hopefully the same increase in revenue, which is a fair bit of wiggle room.

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