New York Times ..10 years ago

[YardleyLabs]

Spending cuts? How about just not giving away billions in entitlements and spending billions on what amounts to awarding special interests with our tax dollars?

Has raising taxes ever worked when the nation was in an economic crisis? Why would it work now when in 1937 it did nothing but deepen the depression?

Don't the dems/marxists already plan on letting the Bush tax cuts expire next year? So... spend friggin trillions, raise taxes, then let let tax cuts expire. Then when everyone is bringing their groceries home in a goat cart they can pin bumper stickers on their rear ends about how if "Bush hadn't been in office I would be driving". Ar least we will have gotten rid of the "evil" rich people.

I cannot believe what we are willing to accept in the name of party politics. Sheeple is too nice a word for this.

My comment on eliminating the deficit was linked to stabilizing the economy. For now, a deficit is unfortunately what we need. The problem with Bush was that he continued massive deficit creating policies while the economy was growing rapidly and basically said deficits don't matter. They do matter and were a major factor in our collapse. Entitlements are a form of spending. It would be hard to reduce spending without reducing entitlements. However, that will not be enough. The biggest entitlement program we have is Social Security and that has been running at a surplus for years. That surplus has been drained off to finance operating budget deficits.

[Marvin S]

Once the economy begins to stabilize, the budget must be balanced. This will require a mix of massive spending cuts and substantial tax increases. There is no way to undo the deficits created under Bush without both.

You usually have something you believe supports your statements, I would like to see what you have for the quoted statement.

BTW, GW is no longer POTUS & I believe the lefty's supported much of his spending which real R's were not happy with. I believe we have all stated that on the various threads.

[YardleyLabs]

Originally Posted by YardleyLabs
Once the economy begins to stabilize, the budget must be balanced. This will require a mix of massive spending cuts and substantial tax increases. There is no way to undo the deficits created under Bush without both.

You usually have something you believe supports your statements, I would like to see what you have for the quoted statement.

BTW, GW is no longer POTUS & I believe the lefty's supported much of his spending which real R's were not happy with. I believe we have all stated that on the various threads.

OK. There are two basic statements in my comment:

• Once the economy is stabilized, the budget must be balanaced.
• The deficit is too big to balance with out a mix of spending cuts and tax increases.

With respect to the first, it is a matter of basic economics. In a stable economy -- meaning one that is growing at a steady pace sufficient to support population growth without significant inflation -- deficits have the effect of adding to the money supply creating stimulation that will add to inflationary pressures. In addition, the debt created to finance the deficit competes in the credit markets with efforts to raise capital to support private production, increasing the costs of capital. As debt is purchased off-shore, as has been the case with the U.S., we concentrate more and more effective leverage over our economy into foreign hands.

When the economy is stagnant and productive resources are underused, deficits can help stimulate growth and restart the economy. When the economy is growing faster than our productive resources, government surpluses can help reduce capital in the economy and slow growth to curb inflationary pressures.

Under Keynesian economics, fiscal policy -- meaning the manipulation of deficits and surpluses -- was the primary tool for controlling inflation and growth. The genius of Milton Friedman lay in his understanding of the importance of monetary policy in achieving these same objectives with greater finesse. However, monetary policy cannot help outside of a relatively normal range of variation in economic activity. Thus, we now have target rates for interest pegged at 0-0.25% and an economy that still requires more stimulation. We can't go lower unless we pay people to take our money.

To help combat the recession following the Internet bubble collapse in 2000/2001, the Fed reduced interest rates dramatically, helping to stimulate growth at a time when the budget was in surplus. However, the rapid and massive shift to deficit financing by the government created inflationary pressures that were addressed through substantial devaluation of the dollar in a manner that undermined foreign investor confidence and to moves by the Fed to increase interest rates by eliminating their accommodating policies. Of course, the increases in interest rates triggered resets on variable rate mortgages and contributed to the real estate collapse. All of these were direct consequences of the deficit.

With respect to the question of whether the deficit is too great to close without a mix of both tax and spending changes, our current deficit is now somewhere between $500-$1,000 billion -- we don't know for sure because of the size and uncertainty of the various bailout actions. Assuming that when the economy stabilizes we are looking at a "hard" deficit of $400-600 billion, I cannot conceive of a way to meet that with only spending cuts unless we are willing to accept actions at the level of eliminating the defense department. The deficit originated with unfunded tax cuts that were back-weighted so that the biggest dollar cuts happened in the later years, combined with a war that was never included in the budget. The projections of the future deficit by the Bush administration never incorporated the costs of making the tax cuts permanent. To do so would add several hundred billion dollars per year of new deficits.

How big will the deficit be by the time the economy stabilizes? I suspect somewhere around $11.5 - $12.5 trillion, or more than 80% of GDP, a level not seen since Truman was President, as compared with 60% under Clinton. The big question, however, is who will buy that debt? I do not believe we can count on China to keep carrying our load. As a consequence, we will face a tremendous risk of inflation that will act as a de facto tax on all of us. For that reason, actions need to be taken to reduce the deficit as quickly as possible even at the risk of slowing the recovery. That too argues for a mix of tax and spending strategies.

[Marvin S]

Jeff, I had hoped that you would give me a period in time when the statements you made were actually applied - words mean little to me, Deeds & numbers do.

OK. There are two basic statements in my comment:

• Once the economy is stabilized, the budget must be balanced.

It is difficult to stabilize an economy when there are constant pressures created to unbalance that stability. When large numbers of feel good programs which would be considered Non value added continue to be placed into existence it will never happen. Sort of a disorganized chaos.

• The deficit is too big to balance with out a mix of spending cuts and tax increases.

The deficit & debt in existence today will continue to exist as the incentive to excel is not written into the above statement. I believe spending could be contained by:

1) Eliminating all programs which create a disincentive to be self sufficient.

2) Eliminate all programs in which the Federal government should not be involved. Some examples - The Farm Bill, The Dept. of Education, the Dept. of Housing, Are just some.

3) Privatize functions such as all airports, & I am sure there are other candidates, just haven't looked that hard.

4) Does it not bother you that 3 of the first 6 kids of the octuplets breeder are on Medicare. Does that indicate a program out of control?

As for taxes, scrap the AMT, eliminate the deals, institute a FLAT TAX & forget about raising taxes. Just make sure that everyone pays them including some very illustrious members of your own party.

That would work - you have to understand the Risk Reward ratio needs to be properly balanced so those who take the risk receive the proper reward. 39.6% for taking no risk vs. 60.4 % for taking all the risk is not a proper balance.

& beyond that, I do not believe someone should be able to die & avoid estate taxes, I believe all gains should be taxed at the Capital Gains in effect at the time, but also believe Capital Gains should never be above 15% in any income bracket, nor below 5%.