Wednesday, February 1, 2012

Another $1 trillion deficit...what else is new?

According to a Reuters report, the CBO is forecasting that 2012 would be yet another year with a deficit over $1 trillion:
The non-partisan Congressional Budget Office said the fiscal 2012 deficit would rise to $1.079 trillion from its previous estimate of $973 billion made last August. If Congress extends payroll tax cuts through year-end, as expected, the deficit would likely rise by another $100 billion through December.
That will be four years in a row for the Obama Administration. One can't help but ask when we're going to see some of that fiscal responsibility we were promised. And one also can't help but wonder what the hell that fight was about over the debt ceiling, given that we're still running ridiculous deficits. Oh, that's right: without the debt ceiling deal, the deficit might have been $1.1 or $1.2 trillion for 2012.

And the Republicans claimed that as a victory in cutting spending, while the Democrats whined about such drastic "austerity" measures. I'm really not sure which side is the more ridiculous, in the this regard. But be that as it may, the CBO goes on to make the now-automatic argument that the issue with the deficits is all about the Bush tax cuts:
CBO Director Doug Elmendorf said Congress faces a difficult choice. Allowing the Bush tax cuts to expire would hurt near-term growth and push up the unemployment rate to 9.2 percent by the end of 2013 but will aid longer-term growth. Leaving the cuts in place would spur more short-term growth, but would pile up another $8 trillion in deficits by 2022, leaving the United States with an "unsustainable" debt burden.
Oddly though, it allows that ending the cuts would be bad for employment. Go figure. But of course, wrongly projects out the consequences of the cuts on a static model to arrive at an imaginary figure of $8 trillion. This is not to say that such a figure is unrealistic; it's not. But it won't be because taxes were not increased, it will be because spending was not decreased.

The writers of the article label that kind of thinking "radical":
The more radical Republicans backed by the fiscally conservative Tea Party movement want steep spending cuts immediately.
Understand? Suggesting that not spending money we don't have is "radical" thinking.

What a world.

Cheers, all.

5 comments:

  1. I am really baffled at this debate. Leave the debate about tax cuts to a separate time. As I mentioned in a comment on another post, you can't realistically expect revenue to be above 19% of GDP on average. This means, that even if you allow for a 2% of GDP growth, you need to cut spending to 21% of GDP. This is not a brain surgery. Spending today is what, 24-25% of GDP. After you did that, you can discuss how to bring the revenue to 19% instead of say 17%.

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  2. It plays to emotions, Dm, to equate spending cuts with a lack of compassion or empathy. Thus, it's an easy tactic for politicians to employ. And piss-poor economic analysis backs them up.

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  3. Oh, I understand the tactic, but I am really at a loss as to people who are obviously intelligent enough to understand the reality I outlined and still employ this tactic. I mean, some of them might think that deficits are not a problem, but what about the rest? Hoping that the reckoning comes after their time? I just don't understand. After all, it is possible to do both. It is possible to say you want to raise taxes or whatever to make sure you are at the top of that revenue range (whether it would work or not is another discussion, but at least there is something to discuss), but I can't understand people not coming to grips with the fact that revenue is not going to be 24% of GDP whatever is done on taxes (unless they completely revamp the tax code and then it is up in the air). At some point you actually expect people to do their job and not just ponder for votes.

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  4. Pardon me while I shill for somebody who gets it. :)

    “It should be a scandal that I am the only presidential candidate who is offering real solutions to our fiscal mess. My ‘Plan to Restore America’ cuts $1 trillion dollars in spending immediately and gets our economy on the way to much needed reform. But my proposal is rarely reported on by the elite media, and rarely even mentioned by my opponents or those who claim to be concerned about the financial health of our nation."

    “Back in 2010, Chairman of the Joint Chiefs of Staff, Admiral Michael Mullen said that our debt is the greatest threat to our national security. And since he’s said that, things have not improved one bit. I firmly believe in a strong national defense, and I realize that if we do not take decisive action to deal with this debt crisis, we will not have much of a nation left to defend. That is why I offered my plan as a starting point to move toward solving this issue."

    http://www.ronpaul2012.com/2012/02/01/ron-paul-issues-statement-on-cbo-debt-report/

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  5. Trying to sell Ron Paul to me? Really? Even putting aside the fact that I find his views on foreign policy disturbing, I am not a libertarian. And even in the conservative spectrum, I am relatively close to the center in my economic views, even if they are rooted in conservative ideas. On spending, I generally don't see much of a problem in growing spending as long as you keep it below reasonable expectations of GDP growth. Without reading too much details, Paul Ryan's last year's proposed budget approach looked like a reasonable approach to at least start the process going. In addition, I actually lived through budget cuts (real ones) in Israel that were significantly less drastic than what Paul proposes, and I experienced the shockwaves. Large beurocratic bodies have trouble adapting to such reality wisely. They usually cut in all the wrong places etc. and it takes a lot of time to get the ship back on course.

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