Posts Tagged ‘Bush deficits’

More Facts That Unmask GOP Lies.

Thursday, March 1st, 2012

As the GOP continues its class warfare on labor and Main Street, the Treasury Dept. has released a series of easy to understand charts based on actual data that refute the GOP economic claims.

  • Private sector has been adding jobs for 23 consecutive months for a total add of 3.7 million jobs.  The economy has been growing at an average 2.4% growth rate for 10 consecutive quarters.
  • Business growth has actually been 3.3% but cuts in government spending have knocked almost 600,000 people out of work, which is why overall growth is 2.4%.
  • Corporate profits are up 76% and exports are up 23%.
  • Under Bush policies US went from surplus of 2.7% of GDP to a deficit of 9.3% of GDP when Obama took the oath of office in 2009.
  • Under the Obama recovery act, household incomes got an additional $1,244 in 2009 and $1,731 in 2010 but GOP efforts against recovery have trimmed the benefit to $344 in 2011.
  • The direct bank funding assistance generated a net return of $14 billion.
  • Since the auto bailout the industry has generated 207,600 additional jobs.
  • Since the surplus in 2001, Bush tax cuts added $3.1 trillion to the debt.  Unfunded wars added $1.4 trillion and other unfunded spending initiatives added $2.3 billion.  In contrast the unfunded Medicare drug expansion added only $300 billion.  Total add to debt of $6 trillion.  In contrast, Obama’s various programs have added $1.4 trillion.
  • Obama’s 2013 budget proposal cuts deficits and stabilizes debt to GDP at 3%. by 2019.

 

Beezer here.  We need to rollback tax cuts for the wealthy and when the economy begins to really heat up and we near full employment, we need to rollback the remainder of the Bush tax cuts.  These tax cuts are the single largest driver of debt increases right now.  Looking further out–more than a decade out–we need to replace the fee for service health care system we now have with one that’s based on outcomes instead.   Raising the cap on SS contributions will take that issue off the table as well.  This assumes the GOP continues to successfully submarine any fiscal stimulus that creates jobs directly–like those Obama proposes for rebuilding America’s infrastructures.  If those programs had been enacted, we’d already be out of this mess.

 

Every Presidential Candidate, and the President Too, Needs To Memorize These Charts.

Friday, December 30th, 2011

Former chieif economist for Vice President Joe Biden, Jared Bernstein, has compiled a series of 2011 charts that our political leadership (and more than a few economists) should memorize.  If they did, we’d be a lot closer to seeing our economy recuperate, if for no other reason than the leadership will start a fact based conversation which is necessary for enacting the right economic policies.  If they won’t memorize these charts, then journalists should do so which would force the leadership to memorize the charts in self defense.

The Best of CBPP Graphs: Guideposts on the Road Back to Factville

Dec 29, 2011

 

My CBPP colleagues contributed many important graphics to the debates of 2011 in lots of different areas, including fiscal, poverty, inequality, health care, and more.  But which ones to highlight in this end-of-year look back at the best of 2011?  I generally used a market test: these are the ones that were most widely circulated.

Tiny bits of commentary where necessary, though more importantly, I’ve tried to provide links to the underlying docs.

Arm yourselves with the knowledge herein, and you’ll be immune to the fact-free hand-waving that too often passes for debate these daze.  Think of them not as wonky graphs, but as guideposts on the road back to the land where facts matter.

#1: A look at which income group reap the benefits of most of the growth in recent years (see here for much more on this; income changes in the figure are adjusted for inflation).

 

#2: The international dimension to the inequality picture.

#3: Yes, it’s true-compared to others, the US is a low tax country.


 

#4: And those at the top of the wealth scale have seen a much reduced tax burden as a share of their income.

#5: This one is invaluable in those incessant discussions about how higher tax rates will kill jobs and growth.

#6: Probably one of the most circulated of all this year, this one makes essential points about the actual sources of the growth in the budget deficit.

#7: You didn’t expect us to do the above for the deficit and not for the debt??!!

#8: Again, a big market test performer.  This one provides a simple but essential look about where Rep Ryan’s budget (now the House R’s budget) goes for its deficit savings.  And remember, this budget had no new tax revenues–to the contrary, it included hundreds of billions in tax cuts for the wealthiest householders, paid for in part by the cuts you see here.

#9: You can’t emphasize this point enough: health care spending grows faster in the private than in the public sector.  It’s just not a normal good, friends, and market solutions, like “everybody get out there and shop for the best deal,” are not a magic bullet.

#10: The actual impact of Rep Ryan proposal to change Medicare from a guaranteed benefit to a premium support program, where the support significantly lags actual costs.

#11: This one is especially important in debates where people make the demonstrably erroneous claim that our poverty programs don’t work.

 

#12: This one clearly shows just what a lost decade the 2000s have been for the middle class–it’s not just a Great Recession story–they were squeezed well before that.  And note the stark contrast with the 1990s.  Middle class incomes fell in real terms in the early 1990s recession, but when the recovery took hold, the middle class got a real piece of the action, something that very conspicuosuly didn’t occur in the 2000s.

 

We Aren’t Really Stupid. We’re Just Lied To.

Tuesday, July 20th, 2010

One of the most astonishing things about the Great Recession is how it has exposed to what degree the public gets lied to.  It’s no wonder we thrash about.

The most recent example of this comes from Mitch McConnell, US Senate Republican leader from Kentucky.  He recently stated:

“The last year of the Bush administration, the deficit as a percentage of gross domestic product was 3.2 percent, well within the range of what most economists think is manageable. A year and a half later, it’s almost 10 percent.”

The point McConnell wished to make was that it was all Obama’s fault the deficit soared.

To which New York Times columnist and Princeton economist, Paul Krugman, replied:

“They really do think that we’re idiots.

So, that 3.2 percent number comes from here (pdf). Where’s the bamboozle? Let me count the ways.

First, they’re hoping that you won’t know that standard budget data is presented for fiscal years, which start on October 1 of the previous calendar year. So this isn’t the “last year of the Bush administration” — they’ve conveniently lopped off everything that happened post-Lehman — TARP and all.

Second, they’re hoping you won’t look at what was happening quarter by quarter. Here’s net federal borrowing as a percentage of GDP, quarter by quarter, since 2007:

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Source

Can we agree that the deficit in the first quarter of 2009 — Obama didn’t even take office until Jan. 20, the ARRA wasn’t even passed until Feb. 17, and essentially no stimulus funds had been spent — had nothing to do with Obama’s polices, and was entirely a Bush legacy? Yet the deficit had already surged to almost 9 percent of GDP. Even in 2009 II, Obama’s policies had barely begun to take effect, and the deficit was already over 10 percent of GDP.

What this chart really tells us is what you should have known already: the deficit is overwhelmingly the result of the economic slump, not Obama policies. But the usual suspects want to fool you.

I’d like to think that the raw dishonesty of this latest Bush defense would be obvious to everyone. But after the past decade, I’ve stopped believing such things. They think we’re idiots — and they may be right.”

Beezer here.  I’m not as depressed about this as is Krugman, but the bald faced lying is a real problem.  And it is a real problem not because some people will knowlingly lie, but because the watchdogs we depend upon in a Democracy, the media, are completely clueless.  It appears they don’t know enough to spot a lie, and as a result the lie goes unchallenged.  What’s the old saying?  “A lie travels around the world before the truth gets out of bed.”

McConnell knowingly lied.  Shame on him.

But sometimes it’s not so much a lie, as it is someone just not understanding the underlying facts.  Even well know authors and economists (well, in this case economic historian) can be uninformed.

In this case it’s Harvard Professor Niall Ferguson.  Ferguson maintains that the real stimulus spending that made a difference for the Great Depression wasn’t from the 1930s, but came about because of the World War II spending.  This has been an argument all along from conservatives who maintain stimulus spending by FDR in the 1930s wasn’t all that great and had little or no positive effect on unemployment or boosting the staggering economy.

Here, it’s economist Brad DeLong who points out Ferguson makes a very rudimentary mathematical mistake.

“Niall Ferguson writes:

Today’s Keynesians have learnt nothing: When Franklin Roosevelt became president in 1933, the deficit was already running at 4.7 per cent of GDP. It rose to a peak of 5.6 per cent in 1934. The federal debt burden [in the United States] rose only slightly – from 40 to 45 per cent of GDP – prior to the outbreak of the second world war. It was the war that saw the US (and all the other combatants) embark on fiscal expansions of the sort we have seen since 2007. So what we are witnessing today has less to do with the 1930s than with the 1940s: it is world war finance without the war…

Could we please have some acknowledgement of the fact that the reason the debt-to-GDP ratio did not rise across the 1930s was because GDP rose, not because debt didn’t rise? Debt more than doubled from $22.5 billion to $49.0 billion between June 30, 1933 and June 30, 1941. But nominal GDP rose from $56 billion in 1933 to $127 billion in 1941.

And could we please have some acknowledgement that our 9.4% of GDP deficit in fiscal 2010 pales in comparison to the 30.8% of GDP deficit of 1943, or the 23.3% and 22.0% deficits of 1944 and 1945?

Niall Ferguson should not do this. The Financial Times should not enable Niall Ferguson to do this.”

And then Krugman follows up on DeLong’s observations.  As per usual, Krugman offers further explanation, and charts, to make sure the reader understands Ferguson’s errors.  (even the math challenged like Beezer)

“Brad DeLong does the necessary on Niall Ferguson; no need for me to pile on. But I think there’s more to be said about Depression-era debt. To get the full picture, you need to go all the way back to 1929.

If you were ignorant of basic facts about the Depression — or if you didn’t know that movements in a ratio can reflect changes in the denominator as well as the numerator — you might think that it’s possible to summarize fiscal policy by looking at the federal debt-GDP ratio, which looks like this from 1929-41:

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Clearly, then, Herbert Hoover was a wild deficit spender, while FDR was much more cautious. Right?

OK, we know that’s wrong. Here’s what nominal debt, the numerator in the debt ratio, looks like:

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So Hoover ran up very little debt — only about 6 percent of 1929 GDP. FDR, on the other hand, ran up a lot of debt, about 47 percent of 1933 GDP. But Hoover presided over a shrinking, deflationary economy, while FDR presided over a rapidly growing (from a low base) economy with rising prices.

I’ve been careful to use the term “presided over”: you don’t want to attribute all the differences in the two sub-eras to policy, let alone fiscal policy. Nonetheless, the fact that virtually all the deterioration in the US debt position from 1929 to 1939 took place under the tight-fisted Hoover rather than under FDR is an object lesson in the crucial importance of growth in dealing with debt. And the Hoover experience also provides a nice illustration of self-defeating austerity — not only didn’t austerity produce economic recovery, it didn’t even improve the fiscal position.

It’s too bad that people who don’t understand any of that seem to have the upper hand in policy.”

Beezer again.  It’s no wonder the public at large cannot figure out what’s really going on.  Even an economist can get it wrong.  McConnell’s statements were intentionally mis-leading.  His is a worst case example of what’s wrong with our leadership.

We must have a better educated and better informed media.  The average citizen simply doesn’t have the time to sift the chaff from the wheat.  Particularly when there’s as much chaff as wheat being blasted out over the airways.

About Those Deficits. Whose Deficits?

Wednesday, March 31st, 2010

The Republicans have been doing a lot of teeth gnashing and hair rending over the purported effects of deficit spending.  They finger Obama’s health reform legislation as evidence numero uno.

So here’s a chart about the deficits created by health care reform vs. those created by the Bush tax cuts, our wars of liberating the near middle and middle east and the Medicare pharmaceutical expansion .  Using the CBO numbers.  From Menzie Chinn ‘s blog econobrowser.  And this chart doesn’t explain how the Republican’s expansion of Medicare drug coverage, and prices, passed without even a cursory nod to paying for it all.  It does show the deficit created, however.

Here is a graph to put things in perspective.

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Figure 2: Impact on budget balance, in billions of FY2010$, for EGTRRA; for JGTRRA; for Patient Protection and Affordable Care Act; and cumulative budget authorization for operations in Iraq through FY2010, in billions of FY2010$, deflated using CPI. Source: CBO, Budget and Economic Outlook: An Update (August. 2001), Table 1-4; CBO, Budget and Economic Outlook: An Update (August 2003), Table 1-8 (revenue implications only); and CBO, “H.R. 4872, Reconciliation Act of 2010: Estimate of direct spending and revenue effects for the amendment in the nature of a substitute released on March 18, 2010,” (March 18, 2010), Table 1; and Iraq costs from A. Belasco, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11, Congressional Research Services (Sep 09), Table 3: budget authorization for DoD, State, and VA Medical; for CPI, historical from FREDII, and forecasts/projections from CBO (January 2010)

Return to Responsible Budgets/Roll Back Bush’s Socialism for the Rich

Saturday, February 21st, 2009

While the bank issues have most recently taken over the public stage, it’s a good time to review the impact of Bush’s Socialism for the Rich and the huge budget deficits and debt he rolled up onto the general population as a result.

Republicans are constantly asserting they are the party of responsibility.  The public now knows they are anything but.  The truth is they are the Socialist Party of the Rich.

Look at the record.  First, let’s consider that Bush rolled up more than $5 trillion in debt and handed it to Obama, along with the global economic crisis.  A responsible President who, rightly or wrongly, decided to wage wars in Afghanistan and then Iraq, would have raised taxes in order to pay for these military operations.  Bush not only didn’t do that, he decreased taxes and thus insured that a huge asset bubble in housing would emerge and then burst.

The most bankrupt aspect of America is the Republican party’s bankrupting adherence to a tax policy that has been shown conclusively not to work in any real sense.  Any wealth created by avoiding the responsibility of paying for government turns out to be illusory.  Smoke and mirrors leaving an unsuspecting public holding the bill. 

And the damage from this irresponsibility has to be listed to understand its severity.  Not only did Bush hand over to  Obama an unecessary $5 trillion in debt but his tax policy amounted to Socialism for the Rich.  The wealthiest Americans sucked up almost 6% more of the income produced during his 8 years in office.  It wasn’t “trickle down” economics, it was “flow up” economics.  As a result, the income disparity grew larger between the lower and middle income classes and the wealthy.  

Not coincidentally, this income disparity eerily mirrors what happened during the 1920s as private wealth increased dramatically more than increases for labor during that decade as well.  That growing disparity, many economists believe, was a main cause for the 1929 stock market crash and subsequent Great Depression of the 1930s.

In the 1920s an increasing concentration of wealth at the top was not recycled into productive investment, but instead drifted into stocks.   Fast forward to today and it can be strongly argued that the same thing has happened, as an increasing concentration of wealth drifted into stock and mortgage backed securities and mortgage derivatives.  In both eras the money was not invested in productive activity.  In both eras the money just pumped up non-productive investments and built the inevitable bubble and an economic crash.

But there’s more.  The flip side of Socialism for the Rich meant Bush didn’t address longterm infrastructure needs, nor the need for an efficient health system.  How could he?  He wasn’t even paying for what he did do.  So he not only handed over $5 trillion in unecessary debt, he handed over a multitude of problems he neglected to address.

And that was before he handed over to Obama the world’s worst recession since the Great Depression.

Not surprisingly, the public at large sensed something had gone terribly wrong and elected a Democrat to the Presidency and also followed that up by electing large Democrat majorities in both houses of Congress.  For the Democrats, the admonishment of “Be careful what you wish for,” rings very true.  Now the Democrats, crippled by irresponsible debt, have to use debt to stimulate an economy flat on its back, while simultaneously starting the necessary structural improvement for the next economy.

If you want to see the scope of work that needs to be done, visit the White House website here.

What Obama first needs to do, other than what he’s already done, is to rollback Bush’s Socialism for the Rich program by restoring tax rates to pre-Bush levels.  With the leverage Obama needs to use now to  mitigate a global recession, restoring some sanity to the tax system is only responsible. 

If socialism is going to exist, it should exist for labor, not the rich.  Under Bush, socialism existed to build a moat around the wealthy.  That’s a perversion of socialism.  Socialism is simply a philosophy that a country has certain social obligations to its citizens.  Universal Health Care is a good example of one of those social obligations.  A caring nation doesn’t tolerate the routine cruelty of 40 million citizens not having health care, for example.

Another legitimate social goal of government is to enable and fund the nation’s various infrastructures.  This goal helps private wealth invest in productive activities.  And this productive investment employs labor, which avoids the income disparity gaps that helped create the Great Depression as well as the current problems. 

It can all be done, of course.  It will take time and Obama will have to present realistic expectations.  He will have to be positive, but also display a determination that overcomes short term doubt.   He has the problems identified accurately, something Bush never got around to doing.  So that’s a big plus.  You have to know where your going to get there.

The sooner he explains and unwinds Bush’s Socialism for the Rich, the closer he’ll be to success in all his endeavors.




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