Who Cares About Balanced Budgets?

[andyfox]

The Democrats are whining about the deficits. But they don't really care about balanced budgets, just about winnings political points. And the Republicans don't care about balanced budgets either. Evidence:

-The Bush administration has increased spending on education by 61%; on energy by 22%; on health and human services by 21%; and on the Labor Department by 56%. Overall, an increase of more than 15% in his first three years in office.

-Republican-controlled state legislatures increased spending an average of 6.54% a year from 1997 to 2002. This compares with 6.17% for Democratic-controlled legislatures.

-Tom Delay, in 1995, said, "By the year 2002, we can have a Federal Government with a balanced budget, or we can continue down the present path towards total fiscal catastrophe." What is he saying now?

I'm not arguing that deficits are good or bad or unimportant or anything. Just that politicians in both major political parties are full of crap.

Duh.

[Wake up CALL]

I should point out to avoid confusion that merely increasing spending does not necessarily increase the deficit. Additionally I would like to know how much the costs of 911 attributed to the increased spending percentages in 2001 and 2002.

[MMMMMM]

They both spend way too much.

[Wake up CALL]

-Republican-controlled state legislatures increased spending an average of 6.54% a year from 1997 to 2002. This compares with 6.17% for Democratic-controlled legislatures.

To me this indicates that states under Republican control are better run, more prosperous and can afford to spend moore than the pooly run states controlled by Democrats. Pretty convincing, thanks Andy! /images/graemlins/smile.gif

[adios]

I've pointed out many times on this forum that federal outlays have increased every year since 1965. Since 1965 the annual increase in federal outlays has increase at a compounded annual rate of 9.5% (geometric yearly avg). I haven't factored in the effects of inflation so with inflation nearly non existent at this point in time the increase in budget expenditures in the Bush administration is more or less what we've seen since 1965. Also as I've pointed out many times on this forum the budget should be analyzed in terms of a normalized GDP number. As GDP increases so do expenditures which is quite logical when you think about it. Anyway as a percentage of GDP expenditures were approximately 18.3% of GDP in 2000, 18.6% of GDP in 2001, 19.46% of GDP in 2002, and are projected to be about 19.9% of GDP for 2003. The larget contributer to the federal budget deficit (as well as state govt budget deficits) is the slow economy which has reduced federal govt revenues for 3 straight years including projections for this year. This hasn't happened since 1930-1933. There have been increases in defense spending but during the Clinton years defense spending as percentage of GDP was at pre WWII levels and IMO with some justification. My point is that the federal govt. has demonstrated that defense spending can be controlled. IMO the most out of control spending (and I believe many members of Congress would agree) is in medicare/medicaid. The increases in expenditures is expotential. I know I'm repeating myself but given all the politician speak I think it bares repeating. Also during the Clinton administration medicaid/medicare spending growth was more or less linear which reversed a long time trend of expotential growth in outlays. Again as I've pointed out before, Clinton got tough on medicare/medicaid fraud and was IMO hostile to excessive prices for drugs and medical care. This is to the Clinton administrations credit IMO. During the Bush adminstration IMO medicaid/medicare spending has resumed it's expotential growth. Not a good reflection on the Bush adminstration IMO.

[andyfox]

The president is endorsing a prescription-drug benefit for seniors, which he says will cost $400 billion over ten years. Which means it will probably cost a lot more.

The spending increases on health and human services and the Labor Department surely aren't caused by 9/11. ]

But even if they were, that's not my point. One can agree or disagree with the spending increases or the significance of deficit spending. What I'm saying is that when the Republicans preside over deficits, the Democrats complain about fiscal irresponsibility and catastrophe. And when the Democrats are in charge, the Republicans bemoan. The evidence seems clear that making themselves look good is far more important to both parties than care about spending.

[adios]

Stuff I've heard is that the Republicans in the House are dead said against the Bush proposal on prescription drugs. I'd point out that Graham-Rudman and the policies of the Clinton administration were significant in controlling the budget deficit IMO so score one for each party. I agree almost all the talk is rhetoric from both sides. IMO the Bush administration is too lenient with the health care industry.

[Zeno]

[ QUOTE ]
I'm not arguing that deficits are good or bad or unimportant or anything. Just that politicians in both major political parties are full of crap.


[/ QUOTE ]

Have you been reading H.L. Mencken? /images/graemlins/grin.gif

-Zeno

[brad]

one thing which is never discussed is how deficit spending (even if it is fiscally totally responsibly done etc.) is actually a tax upon the poor who have no money to invest. i'll let my new best friend wakeupcall elaborate /images/graemlins/smile.gif

[adios]

"one thing which is never discussed is how deficit spending (even if it is fiscally totally responsibly done etc.) is actually a tax upon the poor who have no money to invest. i'll let my new best friend wakeupcall elaborate."

So elimination of transfer payments to balance the budget would reduce taxes on the poor. Interesting since the top 50% of the wage earners in the USA pay 96% of federal taxes.

[brad]

well maybe average joe rather than 'poor'

a} middle class doesnt mean has investments

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my point though is that rather than say hey, we need to tax so much money, and do it in an open and democratic process,

people are taxed, (sure mostly middle/upper middle class (50-200k ?) but hey these are not rich people and even a lot of these dont save much after all bunch of spending)

then money is borrowed from basically untaxed entities (foreigners, corporations, mega rich), and the taxpayers above have to pay this back.

so my point is that the taxpayers are paying a lot more tax than they realize under deficit spending.

now what has happened in last 20 years i think is that politically no one wants to take responsibility for this hidden tax and so they just hot potatoe it (yeah i know its a joke /images/graemlins/smile.gif ) and roll it over.

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but in the big picture what happens? whats happening now. its hard to get a job, especially if youre poor/unskilled.

maybe its the double tax that did them in /images/graemlins/smile.gif

heh

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ok just a ramblings but you know theres some truth here somewehre.

[MMMMMM]

I think the essence of the problem may lie in the ever-increasing expansion of federal government, its powers, and its supposed custodial duties.

Try slashing federal programs to be in line with what is originally outlined in the Constitution and see what happens to the federal budget and deficit--and taxes.

The states and private groups and individuals can take care of nearly everything else anyway. Yes a number of people would get hurt, but overall the IMMENSE savings would be worth it IMO because of the resulting much greater prosperity for the entire country as a whole.

[adios]

Ok the top 5% of wage earners pay greater than 50% of federal taxes as the top 20% of income earners if you will make about 52% of the income. FYI a link to US median incomes in 2001:

Median Income of Households by Selected Characteristics, 2001 (http://www.infoplease.com/ipa/A0104688.html)

[nicky g]

"Yes a number of people would get hurt, but overall the IMMENSE savings would be worth it IMO because of the resulting much greater prosperity for the entire country as a whole. "

This isn't in direct response to your main point, but surely the US is already immensely prosperous. The problem isn't a lack of prosperity. The benefits from cutting taxes would go mainly to the very well off. If all those savings went to the already megarich, created a couple more billionaires, what good would it do?; the country is insanely prosperous now, but still has large numbers of people living in terrible poverty, lacking basic facilities (eg medical care) etc. Surely the problem isn't how to make the country more prosperous but how to better share the prosperity? Obviously you're not going to agree with me on that; but really, what is the need to create yet more wealth by cutting back on taxes etc when there is already many many times more money to go around than is needed?

[andyfox]

"Try slashing federal programs to be in line with what is originally outlined in the Constitution"

Originally outlined in the Constitution? Chances are one F-14 costs a lot more than what was originally outlined in the Constitution. And, as we have discussed, what was originally outlined in the Constitution is not always clear.

[MMMMMM]

First of all the country isn't insanely rich; it isn't nearly rich enough. In fact no country in the world is as rich as it could be--the entire world could be much richer, and by that I don't speak to redistribution but to greater overall prosperity.

It's a common youthful misapprehension that wealth is a zero-sum game. It isn't. Greater overall prosperity can and does benefit almost everyone.

The average work week in Western insustrialized nations consists of far fewer hours than it did at the turn of the century. People have more free time due to greater technology, greater interaction of markets, and various other factors of progress and enterprise.

Wealth can be a positive-sum game as it tends to be under free enterprise, or a negative-sum game as it tends to be under communism.

I'm not saying some small amount of balancing or redistribution is necessarily bad. However the answer to greater overall proserity for everyone lies primarily in free enterprise, not in redistribution.

Money not spent can be invested and turned to greater profit. That goes for corporations, Mom & Pop corner stores, and individuals who can buy or build houses instead of renting if they have been able to save for a down payment. And a lot less federal spending would equate to
less federal taxes taken from the average Joe, who could then sooner afford to buy instead of rent. Also money saved can be invested to start a businees or to expand one. Also, more money in the pockets of consumers means they spend more which is good for the overall economy.

Cutting costs, and encouraging growth, are the two cornerstones to prosperity and that goes for individuals, businesses and nations.

If we slash federal spending to the bare bones I bet we could easily halve (or less) the federal budget.

Government and bureaucracy have one inherent, insurmountable disadvantage: the cost of overhead, while producing nothing. Some government is essential for order and security. Beyond that, it represents a drain on the economy. The bigger the government, the bigger the drain on the economy.

[MMMMMM]

National defense is one of the key functions of federal government according to the Constitution. I'll look up the other one.

[adios]

It's hard to cut someone's taxes when they pay zero taxes or close to it. FWIW my wife and I were discussing the Democratic candidate "debate" last night. Regarding health care we realized that there isn't one person in the state of New Mexico where I live that isn't enttiled to heath insurance irregardless of their indigent status. A year ago or so I had an x-ray (seemingly simple) done on my arm for which the insurance was billed for around $750. It cost me $83 in out of pocket expenses. I took one of my dogs to the vet a month ago and he got an x-ray and I was charged $91 for the visit.

[nicky g]

"It's a common youthful misapprehension that wealth is a zero-sum game. It isn't. Greater overall prosperity can and does benefit almost everyone."

Dammit, I should never have posted my age here /images/graemlins/tongue.gif.

In an unequal society it benefits most those who least need to be benefited. Obviously increasing prosperity is a laudable goal. But you say it's worth hurting a few people to increase it. My point is that surely enough people get hurt by the current system already. I disagree that Western countries aren't rich enough; making them richer would be great, but given the current state of the world, and even of the poor in portions of the West itself, I think giving priority to reducing poverty is a moral imperative.

I can understand why people say that it is immoral for the government to forcibly take people's wealth away; I don't agree with it but at the end of the day that's more of a personal value. But the idea that trickle down economics works for the poor is obviously absurd; you just have to look around you. If it were true that increasing overall prosperity is the best recipe for helping the poor then the poor in America would be the best off in the world. They clearly aren't.

Obviously I agree with cutting back on bureaucracy. But as to cutting jobs, benefits, services etc - there are enough poor people out there already.

"The average work week in Western industrialized nations consists of far fewer hours than it did at the turn of the century. People have more free time due to greater technology, greater interaction of markets, and various other factors of progress and enterprise."

This is interesting. The US is more prosperous and has lower taxes than Germany for example. Yet people in Germany have a lot more free time, work shorter hours, etc. I agree that technology makes a massive difference. You once said to me that you prefer the opportunity to get rich enough to never have to work than to "only" have to put in 35 hours a week, 46 weeks a year - but for the vast majority of people, that's no more likely than winning the lottery.

[MMMMMM]

Well nicky I agree that reducing poverty should be a primary goal. And the best way to achieve that is by encouraging growth, and having people keep more of what they earn, which both improve the overall economy.

Not only does welfare create a disincentive to elevate one's position, but there is great overhead cost associated with implementing it. And aid to relieve foreign poverty often ends up in the pockets of corrupt regimes rather than alleviating the suffering for which it was intended.

It might be a platitude but it's also true: Give a man a fish and feed him for a day, teach him how to fish and feed him for a lifetime. Charity has its place but it cannot truly fill the void. And the overhead associated with governmental charity makes it an incredibly ineffecient use of resources.

Also try this thought experiment. Does redistribution actually produce anything? Any goods or valuable services or useful inventions? Does redistribution perform any labor, does it harvest the corn or mop the floors or write software programs?

Only producing things, services or ideas achieves anything or creates any prosperity. Merely shuffling your chips does not gain anything for anyone, and a giant chip-shuffling machine would be not only fairly useless overall but a waste of resources and time, and as for the cost of running it, well... (and this despite the fact that it would probably sell well for a brief period;-))

[andyfox]

It says it's a key function?

[MMMMMM]

come on, andy, you know what I mean...one of the principal functions or duties or purposes or whatever.

[Munga30]

It doesn't say any such thing.

[Wake up CALL]

If it were true that increasing overall prosperity is the best recipe for helping the poor then the poor in America would be the best off in the world. They clearly aren't.

Wow, now just how did you derive this little tidbit Nicky?
I'd be interested to know just where else in the world the poor people are better off and in what manner.

[MMMMMM]

Well here's an excerpt, Munga, nice little troll that you seem to be. Hope you find this somehow useful:

Section 8. The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States;

given that the Congress referred to is a national Congress, I think this pretty clearly states what some of the key duties of the federal government are. In other words the key duties or purposes of the federal government are:

1) to pay the debts

2) to provide for the common defense

3) to provide for the general welfare

...of the United States of America

So I hope that qualifies as saying "any such thing" at least.

[Actual Jake]

...politicians come in only two fiscal persuasions: those who favor inflationary policies and those who favor hyper-inflationary policies?

[andyfox]

But I don't read that providing for our defense is any more important than providing for the general welfare or collecting taxes. So one could argue that the AFDC program (or whatever has replaced it today) is just as important as the Defense Department.

Anyway, we're on a tangent here. The idea that Republicans are fiscally responsible and Democrats fiscally irresponsible seems wrong, an impression generated by the polices of the 1930s thru 1960s that has no relevance to today. Both parties only care about a balanced budget when they can blame the other party for a deficit.

[MMMMMM]

The AFDC is sort of a program within a program. You might be able to make some sort of comparison between the Department of Defense and the entire Health and Human Services Department though, if you wanted a better analogy (not that I much agree with the point, in practice).

I think both parties spend WAY too much.

[brad]

just for the record that section of const. or anywhere in there actually has anything to do with modern welfare state, which was instituted under fdr and pushed through only because of his expansion of supreme court, which would have struck down new deal as blatantly unconst.

[nicky g]

Without offering any evidence to back this up, I'd say Sweden, for instance. Or even Belgium. Or Canada.

[nicky g]

"Also try this thought experiment. Does redistribution actually produce anything? Any goods or valuable services or useful inventions? Does redistribution perform any labor, does it harvest the corn or mop the floors or write software programs? "

Also try this thought experiment. Does redistribution actually produce anything? Any goods or valuable services or useful inventions? Does redistribution perform any labor, does it harvest the corn or mop the floors or write software programs?

It keeps more people healthy and alive. Growth is obviously a good thing, but it often totally fails to affect the lot of the poorest. There are any number of instances of economies experiencing growth while poverty continued to increase.

[adios]

Don't know for sure either but I'd venture to say you're probably right.

[nicky g]

"It might be a platitude but it's also true: Give a man a fish and feed him for a day, teach him how to fish and feed him for a lifetime. Charity has its place but it cannot truly fill the void"

I agree, but how do you teach a man how to fish without spending money? And where does tha money come from? As for global poverty, people in third world countries know how to fish, farm etc. Their problem is that they can't access foreign markets to sell their produce etc.

[adios]

As you know I'm a strong advocate of free markets and capitalism. I readily admit that capitalism can be a cruel system to some.

[adios]

I'm up here early in them morning killing time before I do my daily early morning walk so that's why I'm answering your posts. Anyway regarding third world country agriculture we really need to see some data to do a microeconomic analysis such as supply and demand curves, fixed costs and variable costs. I'm fairly certain that at a certain point prices are very inelastic i.e. a significant drop in price won't result in significantly more demand. If those price points are less than the fixed costs of producing the product, there's no way or incentive to ever produce. In other words bringing more supply to market won't help. Even in at elastic price points this is true but I'm assuming that third world countries can produce agricultural products at a profit up to a point.

[nicky g]

Unfortunately I'm not the person to provide that data; in fact I will admit to not really understanding some of your post. In layman's terms, my argument is high tariffs on developing nations agriculural goods, along with subsidies that help western farmers undercut third world farmers prices, make it difficult for those farmers to export, or even sell in their own countries. Creating more demand for such goods isn't the problem as I see it; it's more of question of allowing them to compete with Western producers.

"If those price points are less than the fixed costs of producing the product, there's no way or incentive to ever produce. "

I'm not quite sure what you mean by this, but Western agricultural goods are in fact often sold for less than the cost of their production; partly because of subsidies, and partly because of oversupply (which is partly because of subsidies). This also often forces other producers to lower their prices correspondingly, and operate at a loss - which of course ultimately leads to them shutting up shop in droves, which is hugely damagin to developing countries' economies. As I say I'm not much of an economist, so I can't back this up in the way you'd like me to, but it seems persuasive to me.

I'm really going to have to stop posting for a bit or I'm going to get fired /images/graemlins/frown.gif.

[adios]

I'm addressing if subsidies are eliminated.

Price Elasticity of Demand (http://www.quickmba.com/econ/micro/elas/ped.shtml)

For arguements sake say that US farmers can produce an agricultural product at lower fixed costs than 3rd world contries can due to their superior technology. I think that's probably the case a lot by the way but I don't know for sure. A tomato from the US is basically the same as a tomato from a third world country as a hypothetical example. Not much value added in buying a tomato from a US producer as opposed to a 3rd world producer. If US producers have fixed costs that are much, much less than the fixed costs of a 3rd world producer, they can simply sell the tomato at a price that is less than the fixed costs of the 3rd world producers fixed costs and drive them out of the market (I'm assuming that subsidies are removed). If they're close enough in fixed costs and the price of a tomato was elastic enough a decrease in price would increase demand enough so that the increased supply on the market could be absorbed and the 3rd world farmers make a profit. However, I suspect that at a certain point dropping the price of many agricultural products does not increase the demand enough to absorb if you will more supply. If these price points are lower than the fixed costs of 3rd world countries to produce the product they can't make a profit, it makes no economic sense to try and compete in an open and free market, and they are more or less in the same predicament that they're in now.

[nicky g]

"If those price points are less than the fixed costs of producing the product, there's no way or incentive to ever produce."

Tom,

I am almost certain this is not the case. At some point in the near future I'll try to post some evidence. For the moment however I'm going to impose a moritorium on myself posting from the office, as I'm really behind on my work and spend far too much time posting here (well, it's time I enjoy so I don't see it as too much, but from the point of view of getting anything else done it is).
Anyway, this may be my last post for a while, or at least marks the beginning of a quiter period from me. Is that the pop of champagne corks I hear. Actually I've said this before and was back to the usual frequency within about a week, but, er, this time, I mean it.

[adios]

Ok sorry to see you leave be sure to come back. Anyway about fixed price I mean average fixed price i.e. fixed price per unit sold. Any data would be appreciated as I haven't found much but have basically only looked for data on cotton. I'll make more of an attempt myself.

[Munga30]

First you said:

[ QUOTE ]
National defense is one of the key functions of federal government according to the Constitution. I'll look up the other one.

[/ QUOTE ]

Then you said:

[ QUOTE ]
come on, andy, you know what I mean...one of the principal functions or duties or purposes or whatever.

[/ QUOTE ]

Finally, you quoted the Constitution, which, of course, does not use the two words I emphasized above in connection with national defense. I was going to do the same in my previous response, but thought that would be too insulting. I'll stop responding to your posts so that you won't have to keep calling me names.

[MMMMMM]

So we're going to gripe about using precise words rather than what is the essential meaning? Whether the Constitution literally calls it a "key" function, it is so, and is laid out to be so in the Constitution.

As for calling you a troll, perhaps I had you confused with someone else. If so, apologies.