Deficits do Matter

The idea that deficits don’t matter (promulgated as a matter of politics by Dick Cheney) certainly has sunk in on the Republican side, with tax proposals pushed by John McCain likely to add trillions to our deficit over the next decade (if adopted). The current administration squandered the surplus left by the Clinton Administration, and has deficit spent us into a major problem. The New York Times has looked at the proposals of the three candidates for president remaining in terms of how they would impact the deficit. The result was not pretty.

With the national debt soaring to $9.1 trillion from $5.6 trillion at the start of 2001, in part because of the Iraq war and Mr. Bush’s tax cuts, a crucial question about the candidates to succeed him is “whether they are helping to fill the hole or make it deeper,” said Robert L. Bixby, executive director of the Concord Coalition, a nonpartisan organization that advocates deficit reduction. “With the proposals they have on the table, it looks to me like all three would make it deeper.”

McCains tax plans appear to impact the deficit in the worst way.

Mr. McCain’s plan would appear to result in the biggest jump in the deficit, independent analyses based on Congressional Budget Office figures suggest. A calculation done by the nonpartisan Tax Policy Center in Washington found that his tax and budget plans, if enacted as proposed, would add at least $5.7 trillion to the national debt over the next decade.

Some of the McCain specifics:

The centerpiece of Mr. McCain’s economic plan is a series of tax cuts that would largely benefit corporations and the wealthy. He is calling for cutting corporate taxes by $100 billion a year. Eliminating the alternative minimum tax, which was created to apply to wealthy taxpayers but now also affects some in the middle class, would reduce revenues by $60 billion annually. He also would double the exemption that can be claimed for dependents, which would cost the government $65 billion.

The difference in approach on the Alternative Minimum Tax is stark. Democrats favor elimination as well, but feel that you must replace the revenue or cut spending by that amount. (Pay-Go). Republicans just favor continuation of the deficit explosion. And the words of the candidate himself seem to buttress that argument:

When Mr. McCain outlined his tax cut plan, he backed away from his pledge to balance the budget during his first term, but said that he would do so by the end of his second term. And in an interview last Sunday on “This Week With George Stephanopoulos” on ABC, Mr. McCain said he would push ahead with his tax cuts even if Congress did not approve his spending cuts.

And what of the Democrats:

Mrs. Clinton has calculated that her universal health care plan would cost about $110 billion a year, while Mr. Obama’s somewhat more modest proposal would cost up to $65 billion annually, his advisers say. Both candidates have also talked of new government incentives and investment to encourage the development of alternative sources of energy, which would cost about $15 billion a year.

The Democratic candidates have suggested that they could finance these and other programs by allowing parts of the Bush tax cuts to expire. That, however, ignores projections of the Congressional Budget Office, which has already assigned those savings to deficit reduction.

Democrats, looking to fund items that many feel have been underfunded for eight years, nonethless struggle with how to pay.

On the spending side, Mr. Obama has argued that ending the Iraq war is one way to pay for some of the new programs, including creating a national infrastructure investment bank and increasing the foreign aid budget. But such savings, which Mrs. Clinton does not count on, would not immediately make their way into the Treasury, and some experts say it is not clear whether they would be sufficient to finance all the programs Mr. Obama has enumerated.

With the collapse of the dollar, commodity prices surging, housing prices in full retreat, and the mortgage crisis leading us to the financial brink is it not time to say enough? If a program is worth having then it is worth paying for. If a war is worth fighting then it is worth paying for. There is no free lunch. Lets elect some adults who will not be afraid to make choices, and put our fiscal house back in order. Read the Times story at this link.

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6 Responses to Deficits do Matter

  1. Jim says:

    Well McCain has already admitted that he’s weak on an economics background, but that lack of wisdom didn’t seem to stop the last moron…

    Maybe, just maybe — in his ‘second term’ of course — he’d also advocate another economic stimulus (and for which the resulting debt could again be financed by China) that the citizenry could use to stimulate the economy by again paying off their delinquent bills….Do these people have a disconnect with reality, or are they just doing some really great drugs?!!

    Unfortunately, as far as electing adults not afraid to make tough choices (rather than pandering to the party line which is all that seems to happen now), the electorate has already scared away Dodd, Hagel, Richardson, and Paul….

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  2. Jules Gordon says:

    You Honor,
    It is just as I said in earlier entries, no matter who you vote for this November, the winner will be a liberal.

    Fiscal conservative leaders no longer exist and creates much angst in the conservative community.

    Meanwhile the tax and spend crowd rule the roost, even the Republican members.

    Case in point. The members of the Massachusetts legislator, while facing a withering deficit, are now debating 1.5 million dollars of “earmarks”.

    WHY?

    Jules

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  3. Jules Gordon says:

    Your Honor,

    Creating deficits was a once a tool of the central Government to defeat a depression.

    Now the economy is global. This makes for extremely complex relationships. The old tools do not work.

    We now work with multiple types of government, many money systems, complex trade rules, many global stock and commodity systems and plethora of parameters.

    You guys are right about the lack of courage to do the right thing (if that could be defined). Sometimes it means doing nothing.

    The next presidency is going to be a hoot.

    Question for you gentlemen;
    What will the centralized healthcare system being touted by the Democrat candidates (pandering?) do to the economy?

    Jules

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  4. Bill Manzi says:

    Jules,
    The deficit spending you reference in your first statement is always supposed to be cyclical. Deficit spending to stimulate during a downturn would in theory be made up by surplus during the “economic upturn”. For Washington the “upturn” never comes. Health care is a complex issue not easily reduced to a few sentences, but let me ask you. What has our current health care system done to the big three automakers? Health care is being rationed to some degree now, and the resource issue will just keep getting worse, and more expensive. Jules, at the current rate health care spending will consume most of our national economic output in just a relatively short period. The system is broke and needs to be fixed.

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  5. Jules Gordon says:

    Your Honor,
    I want to reply to your last posting here, but I will do that later.

    I will leave a point of information.

    According to the National DNC newspaper, The New York Times, the economy has grown at a 0.6 annual rate. Apparently we haven’t hit bottom yet.

    I will agree, though, things are dangerous.

    Back at you later.

    Jules

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  6. Jules Gordon says:

    Your Honor,
    I agree with your analysis of health care in our country.

    This problem is the issue is further agravated by the rising costs of fuel and food.

    The rising costs have put cost pressures on business who now wish to shed their escalating health care costs to cover the other costs (fuel).

    We seem to be heading for a universal health care system run by the federal government. Without universal health care, the social programs absorb 50% of the annual budget.

    With Universal Health Care, which will be woefully under estimated, we will drive the budgets so that it is 60 to 75% social.

    The worst of all, the American citizens have become dependant on federal largess to survive.

    I predict we are careening toward socialism.

    Some expressions from the campaign;

    “I’m going to take the excess profits from the
    oil companies” Senator Clinton

    “We will set up a profit board” Nancy Pelosi planning a politburo.

    To clear up the deficit, the Democrats are going to raise taxes.

    America is surrendering it’s freedom without firing a shot. Don’t worry, we will have no deficits.

    Jules.

    Like

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