Deficit Spending
posted by: Marc Seltzer 149 days ago
California government struggles.
Forced to match public spending with revenue (some monkey-business excluded), leaders have only two good options: Cut spending or raise taxes. You would think that this would be easy enough. But either option takes money from people who feel it should be theirs. The conflict is so fierce, the interests so entrenched, that leaders will walk dangerously close to default, to failing to meet obligations, rather than give up what they defend.
In the federal government, we have a different problem.
The Bush administration did away with Clinton-era commitments to pay for spending increases or tax cuts by finding sources of revenue. Without even that modest amount of discipline, legislators, who get elected by pleasing their constituents, consistently spent their way into incumbancy.
I do not fault the Bush or Obama administrations for their emergency efforts to buy off an economic Depression (or substantial risk thereof) through massive deficit spending on short-term stimulus. It was the best judgment of the experts, and it seems to have worked. A Depression is far more costly than the money spent on stimulus. But neither does this deal with the underlying problems in long-term public spending. How do we reverse course and begin to bring the long-term spending equation in line with the revenue picture?
It may be that our political system is able to solve the problem. The public is aware and concern over public spending is growing. President Barrack Obama has called for a return to "pay as you go" legislation. This will make it far more difficult for Congress to add new deficit spending. Even the roughly one-trillion dollars discussed as a budget for health care reform is being treated as "pay as you go" spending requiring an offsetting spending cut or tax increase to protect the overall national budget.
However, we have traveled so far down the path of deficit spending, that we will have to do more than maintain our course. Bloomberg podcast -- "Rivlin Says Fed More Concerned About Deflation Than Inflation"
The nation has already made commitments to spending on Medicare and Medicaid that will dig us deeper in debt over the next ten years. We would have to legislate cuts in Medicare and Medicaid in order to get out of those commitments, if we wanted to. Therefore, new efforts must be made to raise revenue or cut spending in order to just maintain the level of deficit we have now. We need courageous leadership, willing to ask for sacrifice from all parts of our society, and we need disciplined leaders, willing to put their careers on the line in order to do what is right.
The recession will end and revenue will therefore increase, but that does not mean we will be out of the woods. If Congress is not able to legislate long-range fiscal responsibility we will need new solutions. One approach, discussed in the past, is across-the-board spending cuts. Another would be to create a deficit Czar or independent commission with responsibility for recommending spending cuts and revenue increases that would lead to a reasonable deficit.
We should think of the deficit as a percentage of the national economy, not a dollar figure. When the percentage begins moving down, towards historic norms, we will be on the right track.
It might be that a group of leaders we trust, who are not elected officials, could do a better job giving us tough medicine than the people we pay to give us only good news. In any case, the sooner we take the medicine, the sooner we will begin the road to recovery.
Forced to match public spending with revenue (some monkey-business excluded), leaders have only two good options: Cut spending or raise taxes. You would think that this would be easy enough. But either option takes money from people who feel it should be theirs. The conflict is so fierce, the interests so entrenched, that leaders will walk dangerously close to default, to failing to meet obligations, rather than give up what they defend.
In the federal government, we have a different problem.
The Bush administration did away with Clinton-era commitments to pay for spending increases or tax cuts by finding sources of revenue. Without even that modest amount of discipline, legislators, who get elected by pleasing their constituents, consistently spent their way into incumbancy.
I do not fault the Bush or Obama administrations for their emergency efforts to buy off an economic Depression (or substantial risk thereof) through massive deficit spending on short-term stimulus. It was the best judgment of the experts, and it seems to have worked. A Depression is far more costly than the money spent on stimulus. But neither does this deal with the underlying problems in long-term public spending. How do we reverse course and begin to bring the long-term spending equation in line with the revenue picture?
It may be that our political system is able to solve the problem. The public is aware and concern over public spending is growing. President Barrack Obama has called for a return to "pay as you go" legislation. This will make it far more difficult for Congress to add new deficit spending. Even the roughly one-trillion dollars discussed as a budget for health care reform is being treated as "pay as you go" spending requiring an offsetting spending cut or tax increase to protect the overall national budget.
However, we have traveled so far down the path of deficit spending, that we will have to do more than maintain our course. Bloomberg podcast -- "Rivlin Says Fed More Concerned About Deflation Than Inflation"
The nation has already made commitments to spending on Medicare and Medicaid that will dig us deeper in debt over the next ten years. We would have to legislate cuts in Medicare and Medicaid in order to get out of those commitments, if we wanted to. Therefore, new efforts must be made to raise revenue or cut spending in order to just maintain the level of deficit we have now. We need courageous leadership, willing to ask for sacrifice from all parts of our society, and we need disciplined leaders, willing to put their careers on the line in order to do what is right.
The recession will end and revenue will therefore increase, but that does not mean we will be out of the woods. If Congress is not able to legislate long-range fiscal responsibility we will need new solutions. One approach, discussed in the past, is across-the-board spending cuts. Another would be to create a deficit Czar or independent commission with responsibility for recommending spending cuts and revenue increases that would lead to a reasonable deficit.
We should think of the deficit as a percentage of the national economy, not a dollar figure. When the percentage begins moving down, towards historic norms, we will be on the right track.
It might be that a group of leaders we trust, who are not elected officials, could do a better job giving us tough medicine than the people we pay to give us only good news. In any case, the sooner we take the medicine, the sooner we will begin the road to recovery.
comments
Well Mark what you're suggesting is what got us in this mess in the first place. The rich need to be taxed and corporations need to be regulated. Left alone as they were leads to these financial crises over and over. When the rich were taxed like after the Great Depression which by the way had the same kind of unregulated corporate scenario you say we need, for 50 years there were no economic bubbles busting and the middle class had grown significantly increasing general prosperity everywhere. Only when Reagan cut taxes of the rich in half did we see an economic crisis soon to follow. The same happened again with Bush 1 and again with Bush 2. What you're asking for next is a Bush 3.
send green star
why is this inappropriate?
"Cut spending or raise taxes. You would think that this would be easy enough. But either option takes money from people who feel it should be theirs."
Yes, but only one option takes money from people that actually IS theirs.
The ONLY way out is to grow the actual economy - not grow the government which doesn't produce anything. The only way to grow the economy is to grow business. The best way to grow business is to cut personal and corporate taxes and limit regulation. This will (and always has) increased tax revenue. Since most business are small businesses, and most small businesses are actually taxed at the personal tax rate - not the corporate one - taxing the "rich" more will only hurt growth and jobs. Every penny that the government has, or that we have, or that charity has, or that churches have, etc, etc was made in a business somewhere at sometime - usually a small one.
What the government is doing now is and will continue to hurt growth, jobs, and tax revenue.
Too bad the average American knows nothing about real economics or we would not allow our government to run this scam.
send green star
why is this inappropriate?
http://www.couragecampaign.org/page/community/post/roberticruickshank/C2R7
This article talks about the real reason why California is in big trouble.
send green star
why is this inappropriate?
Walter G, blaming the victim for the crime won't solve the problems and California's problems are the nation's problems. We are 16% of the entire GDP.
Loss of jobs and bank foreclosures on homes led to most of this budget deficit and that is something not unfamiliar to the State of Nevada(which per capital has one of the largest home foreclosures in the US) or for that matter every other state in the union.
send green star
why is this inappropriate?
Catherine overturning Bush's tax cuts to the rich would straighten out the budget. The sad part is the rich own the politicians.
send green star
why is this inappropriate?
continued:.
corporate campaign finance that buys our politicians along with a plain unwillingness by the rich to pay for programs they will never need.
send green star
why is this inappropriate?
The biggest problem with California(and we have many) is that we have the most millionaires per capita then any other state. These people do not need welfare, nor food stamps, nor public schools, nor universal health care and their money is a major influence on our entire political system. That is why at a time when the governor proposes slashing benefits for those who need in home care, at the same time he gave corporations the biggest tax cuts in state history.
Another big problem is the 2/3rds majority vote canard which was established in 1986. In all that time California has only successfully approved 3 budgets on time. So all those other times we were forced to borrow money at high interest to keep things going. This of course is great for the big banks and lending houses. But it's been accumulating debt for decades.
As for slashing Medicare to balance the budget, that is also a canard. Corporations want to put an end to Medicare and Social Security, calling it a strain on the budget while every other tax dollar goes to the real draining of the coffers, the immense defense budget that amounts to the combined defense budgets of the rest of the world combined. Here is where the cuts should really happen yet as we have seen while everything else is on the chopping block defense spending has actually increased. America's bid to become the primary Imperialist state is what is really running us into the ground. That and corporate campaign finance that buys our politici
send green star
why is this inappropriate?
We scrapped welfare for the poor; this resulted in increasing poverty, suppressing wages and increasing the length of time people stay in poverty. It contributes to increasing health care costs and costs related to crime, and to a diminishing overall quality of life in the US. Welfare for the poor used a fraction of the amount of taxpayer money put into corporate welfare; it increased state costs by significantly increasing foster home placements. Desperate people do desperate things, and coupled with increasingly dictatorial laws, the prison population exploded. Throw in the myriad costs related to the serial wars of the past quarter century. Meanwhile, we continue to provide massive "tax relief" for the rich/corporations that in no way benefits the general population. Altogether, these policies have caused the US to fall far behind the more modern nations in virtually every respect.
send green star
why is this inappropriate?
the only thing i hate about taxes is that we tax necessities the same as luxuries. if someone wants a show piece instead of transportation, they should be taxed through the nose. why not a crap tax on soda, chips, cookies, etc. raising taxes on beer alone would probably solve the problem.
send green star
why is this inappropriate?
Sure, so long as I don't have to share with California. I think Nevada would look better with a coastline.
California has ruled the trends for nearly two centuries now, even before it was a state. It has exported its oil movies, food, excessive life style, scams, and drug gangs all over us.
Excess spending and denial of responsibility are the hallmarks of California lifestyle, so if you like the idea of subsidizing their personal income, go ahead, pay for their mistakes.
I think the truth is that California is well able to get out of its predicament, it is just another scam.
send green star
why is this inappropriate?
Facebook account:
Disclaimer: The views expressed above are solely those of the author and may not reflect those of Care2, Inc., its employees or advertisers.
1189424