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Bush, Deficits, And The Future

Finance Deficits Bush 2004

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#1 Kevin Street

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Posted 13 January 2004 - 08:15 AM

I've been poking around on The Economist's website recently, and I found a really interesting article that talks about the Bush administration's penchant for big-spending, then looks at the choices future Presidents will have to make in the 21st century:

George Bush's big-government conservatism: Can't last. Between 1998 and 2001, America's federal government ran a surplus on its accounts. The prospect now is of years, even decades, of deficits. Is that scary?

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IN HIS first three years as president, George Bush has cut taxes three times and yet orchestrated a sharp rise in public spending—not just, or indeed mainly, on foreign wars and "homeland security", but also on domestic matters. For instance, spending on education has jumped by three-fifths since 2000, and spending on transport has risen by nearly half. Lower taxes, higher spending: the outcome is that the federal government, despite a steep fall in the interest it pays on its debt, has swung sharply into deficit—$450 billion this fiscal year, by most accounts.

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A new and frank report by the Congressional Budget Office (CBO) shows that rising health-care costs and an ageing population mean that federal "entitlement" programmes—notably for Medicare, Medicaid and Social Security (pensions)—will claim a much higher share of the country's economic output over the coming decades. Currently, Social Security funds run a surplus that helps to finance other parts of government. But by 2015 surplus will swing to deficit, and by 2030, on current policy, the cost of Social Security will have risen from 4.2% of GDP to 5.9%.

Spending on pensions pales in comparison with health care. The range of estimates is necessarily vague, since they involve assumptions about the future rate at which health-care costs will grow faster than per-head GDP each year: since 1970, the "excess-cost growth" for retired people on Medicare has been around 3%. The CBO calculates that, if future excess-cost growth of both Medicare and Medicaid was only 2.5%, then federal spending on these programmes would jump from 3.9% of GDP in 2003 to 21% in 2050.

It is clear that holding back the growth in non-entitlement (or "discretionary") programmes, such as defence and transport, will not be enough to ensure a sustainable budget in the long run. Unless entitlement programmes are cut too, or taxes raised to unprecedented levels, or both, the country is on a financially unsustainable path over the next half-century. "An ever-growing burden of federal debt held by the public", the CBO concludes, "would have a corrosive and potentially contractionary effect on the economy."

Check out what they're saying:

- no increases in spending for transport and defence

- cuts in Medicare, Medicaid and Social Security

- higher taxes

All for the forseable future, maybe for decades to come.

This is one reason why I don't think a "Pax Americana" can work, there's just no money for it. The economy needs to grow, and grow a lot, just to keep things stable, and taxes have to rise.

What do you think? Is this overly pessimistic, and is there a way out? Or is this a cold dose of reality?
Per aspera ad astra

#2 Delvo

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Posted 13 January 2004 - 09:17 AM

There is indeed a way out: Spend far far less money. But the public is so ignorant of the situation and politicians are so afraid to try to tell the truth about it or act on it that no such discipline will ever be applied. The USA will simply wilt and die, rather than being conquered or destroyed by outside enemies. Those of us around right now can only hope it's slow enough that we either die or have time to prepare to move to some other country before it's too bad here.

#3 achile444

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Posted 15 January 2004 - 01:41 PM

Well when Bush want to go on moon or Mars to THINK BIG well that happen. Don't cry America
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#4 tennyson

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Posted 15 January 2004 - 02:14 PM

No, money hasn't even been budgeted for that, and it was a combination of loss of revenue due to the economic downturn and the various tax cuts that resulted in this round of deficits not the spening per se. The Mars project doesn't even have any money attatched to it yet.
"Only an idiot would fight a war on two fronts. Only the heir to the throne of the Kingdom of Idiots would fight a war on twelve fronts."

— Londo, "Ceremonies of Light and Dark" Babylon-5


#5 Lover of Purple

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Posted 15 January 2004 - 03:17 PM

Actually, the government has worked under a deficit for most of the last seventy years and the country is still here. Don't get me wrong, runaway spending is a problem. I just don't think the country will fold up because of it. Bush's thoughts, I beleieve, are that ifthe economy grows the increased taxes will pay for most of this. Think of it, where is most of this tax money spent? into our economy. So a deficit still grows the economy.

Strange as it may sound. :)

#6 tennyson

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Posted 15 January 2004 - 04:17 PM

Yes, deficit spending has been with us for a while now, I was just trying to pointout where the most recent deficit increases were coming from. and now that I've had time to think about it the Clinton era plan of debt reduction wouldn't have worked anyway because even with a Gore presidency the economic factors that led to the current recession would have happened anyway, which means that the Clinton plan wasn't based on economic trends that were going to continue and therefore would not have been able to payoff the debt either.
But I think the current debt load the country has is unhealthy and needs to be dealt with, which is why I didn't support the second Bush tax cut and a few other programs. Although I'm fully in favor of this space exploration plan as long as it is actually carried out.
"Only an idiot would fight a war on two fronts. Only the heir to the throne of the Kingdom of Idiots would fight a war on twelve fronts."

— Londo, "Ceremonies of Light and Dark" Babylon-5


#7 AnneZo

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Posted 15 January 2004 - 04:29 PM

My biggest problem with deficit spending is, well, it has more to do with the way the idiots in Washington* spend Social Security "excess funds" to keep the deficit number from looking outrageous.

That money is supposed to be a trust fund for retirement for those who contributed (and who didn't get a choice about it).   The way the government spends that money, you'd think they didn't understand that they're going to need to replace it someday.

Or maybe they all just comfort themselves with the idea that it will be someone else's problem.

(* Let's be clear. Bush didn't invent the idea of co-opting 'excess' Social Security funds to pay for short-term programs, and I know that. I've heard the fights over "borrowing" Social Security for years and years.  On the other hand, the deficits the Bush Administration is creating are going to make it all-but impossible for future Administrations to pay back what's been spent out of that particular fund.)

P.S.  Tennyson?  I doubt that Gore would have decided that the last two years were an excellent time to hand huge tax refunds back to the wealthy classes, okay? Or are you arguing that starving the government of tax revenue isn't related to deficit spending?

Edited by AnneZo, 15 January 2004 - 04:32 PM.


#8 aphrael

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Posted 15 January 2004 - 07:17 PM

Over the last three days he has asked for $8.2 billion dollars more.  $1.5 for the marriage incentive, $1 billion for Space, and today he asked for $3.7 billion for religious based charities.  Once again I ask were is the money coming from?   :eek2:

How high does he and congress  plan to take the deficit?    :barf:


:elf:

#9 AnneZo

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Posted 16 January 2004 - 07:05 PM

Well, I'll withhold judgement until I actually see him ask for money.

He's introduced a number of "policy initiatives" and subsequently forgotten :) to fund them.



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