Economics, Media Criticism, Political Commentary

The War That Broke Us

67 Comments

Not.

Just a reminder to people like the ignorant idiots in the Space Politics comments section as to why NASA’s budget is almost certainly going to take a whack from the coming Deficit Commission. It’s not the war, stupid. And note who was in charge of the Congress (and then the White House) when it skyrocketed. Note also that even with the dreaded “tax cuts,” it was declining, indicating that it wasn’t a revenue problem, or at least not one caused by the lower tax rates.

67 thoughts on “The War That Broke Us”

  2. You realize, Bill, your statement is patently absurd. If by BIG number, you mean Obama’s spending is GIGANTIC; then perhaps you are only foolishly trying to spin things.

  5. “It’s GINORMOUS number like a really big burrito, dewd. Yeah, I’m gonna be like an economist or somethin’…”

  6. Willfull ignorance in the face of direct factual evidence such as that blatently displayed in the 1st post make me fear for the Republic. So typical of those totally consumed by ideology.

  11. Yeah that TARP thing keeps coming up a lot. Here’s the deal, a certain junior senator from Illinois voted (along with a lot of other senators, including his opponent) for TARP. Some might suggest that he is as responsible as anyone else for it. Just a thought.

  12. “What your chart is also not showing is that, due to the recession, revenues fell off a cliff in 2009.”

    And spending headed into the stratosphere.

  13. Gee Bill, who was the Speaker of the House and Senate Majority Leader in 2006 and 2007 and 2008?
    The facts are that Bush bribed the democrats with inane prescription meds bills and other useless social spending (like the discredited Head Start program which just got a billion dollar boost after being proven to be absolutely worthless) in order to get their agreement on his war spending. Pointing at Bush doesn’t win you any arguments with people like me either. The degree of Bush spending is completely overwhelmed by the insane spending under the democrats.
    Meanwhile, Obama has played more rounds of golf in two years than Bush played in 8 years, but of course, Bush was the callous lazy one, right?

  14. Both Bill W and Chris G are ignoring the real message from that graph. The Bush marginal tax rate cuts and funding for the Iraq war are both in place from the beginning of the graph in 2003 onwards, yet the deficit continues to decline until 2008 (I assume it is FY2008, not calendar 2008), where it changes direction, then skyrockets when Obama comes onboard and the Recession kicks in. Let’s ignore the last part of the graph for a moment, and look at the rest of it. If Bill and Chris are right (i.e. that the tax cuts and war funding are a cumulative drag on the economy, and thus the source of our woes), why does the deficit continue to DECLINE during the period of FY2003 – FY2007, despite increased spending? Clearly revenues are increasing during this period, which is precisely what the tax cuts were supposed to do, and a quick look a the graph shows that the war funding was hardly enormous by any standards. Whatever the cause of the massive increases in the deficit in FY2008-FY2010 (hint: which party took over congress after 2006?), one need only look at the first part of the graph to see how little support the ‘tax cuts and war’ school of thought has…

  15. “TARP was enacted under President Bush, FOX News revisionary history notwithstanding.”

    Yes, it’s a little known fact (taught only, I believe, in the Chris Gerrib School for History) that Barack Obama led the Democrats in a valiant fight to defeat TARP. Alas, Republican Marxists led by Red Diaper Baby George Bush carried the day.

  17. TARP was enacted under President Bush

    Yeah, he is out office now.

    TARP was created by a Democrat Congress. They’ll be out of office soon.

  20. “Obama is a Keynesian.”

    That’s one way of putting it. Sure, Keynesian. That’s the ticket.

  22. That is an informative plot – thank you.

    Here is one that shows revenue and spending over the same period.

    Revenue seems to have sharply increased soon after the tax rate cuts, not that this necessarily means the two are related (though it is a little suggestive). Revenues also seem to correlate strongly with the boom and then bust of the great recession.

  23. How long are the leftists going to continue to get away with the lie that tax rate cuts equal revenue receipt cuts?

  24. Uh-oh. I wouldn’t respond to a Chris Gerrib post, Cecil. You’ll now be pulled into to a time-sucking miasma swamp of shifting-sands arguments, straw men, bogus history, and what I think Voltaire termed “invincible stupidity.”

    What happened to the “Clinton budget surplus”? No doubt the Friedmanite Democrats tried to scale back the size of the State but were thwarted by Republican socialists, or something.

  25. Cecil Trotter – so one Republican Congress gave us a surplus, another one took it away?

    Bottom line – we reduced tax rates, fought two wars (Iraq and Afghanistan) and a surplus became a deficit. The math isn’t very hard.

    We could increase tax rates back to the Clinton era rates (during which the economy seemed to do just fine) or massively reduce spending and leave millions of people in the lurch. Those are the choices.

  26. I’d prefer that to China funding our debt.

    Congress seems to disagree with you. Maybe you should try to find a way to achieve your aims that goes around Congress, instead of through it.

  27. Cecil – if you look at Pete’s link, you’ll see revenue tracking consistently with tax rates. Or just use simple math – if you tax anything at a lower percentage, you will get a lower amount of revenue.

  28. …so one Republican Congress gave us a surplus, another one took it away?

    Yes, the Republican Congress that was reining in spending of a Democrat president gave us a surplus. The one that was going along with a free-spending Republican president, combined with a recession caused by the popping of the bubble of the previous administration and an attack on the nation took it away.

    …if you tax anything at a lower percentage, you will get a lower amount of revenue.

    Only if that thing you’re taxing has a size independent of the tax rate. But I understand that dynamics is too complicated for you.

  29. With the great recession, revenue has not decreased to the extent that spending has increased, inferring that the blowout in the deficit is dominated by increased spending.

    Normally during a recession, both government revenues and expenses decrease. But Keynesian economics has changed the definition of normality somewhat.

  30. Rand – simple math for you. A 39% tax on $1 equals 39 cents. A 36% tax on $1 equals 36 cents – a revenue reduction.

    To come out equal at the lower rate, that $1 needs to increase to $1.08 – an 8% expansion. Since 3% tax cuts historically have not yielded 8% annual GDP growth, arguing that tax rate reductions are “revenue neutral” is false.

  31. Despite having nearly six hours to do so, neither Chris or Bill has said anything at all that discredits the graph than Mr. Hoven has generated or contradicts the actual numbers (helpfully provided by the Fed.gov itself) that he used.

    Talking points are not an argument, gentlemen. Neither is waving your hands or changing the subject.

    Game, set, match to Mr. Hoven. Thanks, for posting this, Mr. Simberg.

  32. Chris, thank you for proving Rand’s point about not understanding dynamics. Now please tell us again how spending over $700 billion in money you do not have will make more money rain down like maana from heaven?

  33. “Now please tell us again how spending over $700 billion in money you do not have will make more money rain down like maana from heaven?”

    Because Obama is magic!

  34. “We could increase tax rates back to the Clinton era rates (during which the economy seemed to do just fine) or massively reduce spending and leave millions of people in the lurch. Those are the choices.”

    What makes you think raising taxes won’t leave people in a lurch? That’s quite an assumption and we know what those do to us. I like your either or strawman.

    Yes, those TARP funds repaid by banks that didn’t need or want the money and were forced to take it sure pad the statistics.

  36. I guess that’s the difference between a liberal and libertarian. The latter knows how to count.

    When one actually looks at the U.S. Treasury’s website there seems to be this odd thing that occurred during Clinton’s halcyon days of surplus. The debt continued to rise every year. In fact the surplus was nothing more than smoke and mirrors. Clinton paid down the public debt somewhat (in dollar amounts that always seemed to match proclaimed surpluses) but only did so by borrowing far more money in the form of intragovernmental holdings. The dotcom bubble produced so much revenue that social security started to run surpluses above what was being paid out to retirees. When this happens the Social Security administration is bound by law to buy U.S. securities with the surpluses. Clinton used these securities as the basis for his budget. He used some of the money to pay down the public debt but the majority went to fund his budget overruns. Because the total national debt is computed by adding public debt to intragovernmental holdings the bottom line showed that Clinton’s budgets ran in the red year after year. In other words, he borrowed his way to surplus which makes about as much sense as spending your way to recovery.

    Then there is the final nail in the coffin to the “Bush squandered the Clinton surpluses” charade. Clinton’s last budget ran through fiscal year 2001. That year nearly 133 billion dollars was added to the debt using Clinton’s budget. But because Bush was in office most people ignorantly pin it on him as an example of how irresponsible he was with spending. When in reality it was the Clinton budget and its reliance on IOU’s to social security which were quickly drying up in the face of the bursting dotcom bubble. Any perceived surpluses that existed in 2001 were used up under Clinton’s budget.

  37. This graph is more of an indictment of Bush and the mainstream GOP than anything else. Its always been clear that non-defense spending under Bush increased much more rapidly than defense spending. Since Bush had a GOP dominated congress during all but the last 2 years of his second term, this ramp up in non-defense spending cannot be attributed to “log rolling” with democrats as was Reagan’s huge spending increases. The GOP, with both Bush and congress, was largely responsible for the increases in government spend (and commitment growth of government itself) during the Bush era.

    It is certainly true that the spending increases of Obama have put Bush to shame. However, in view of this graph itself, the mainstream GOP cannot be considered a proponent of limited government.

    The tea party needs to recognize this reality and work to transform the GOP into a true limited government advocate, or work to create a new political party. The tea party must break out of its co-dependency with the GOP.

    Its time to recognize that Bush and much of the GOP was not and has never been economic “conservatives”.

  38. Reason – I understand dynamics. I actually measured how much dynamic response was needed. The $700 billion TARP program was a short-term loan to prevent a financial collapse, not a stimulus. The $800 billion stimulus was supposed to prevent layoffs. It was too small, as Krugman, et. al. said at the time, but it did prevent some layoffs and shutdowns.

  40. According to Sorkin’s excellent “Too Big Too Fail” – the Bush Treasury in early 2008 had a White Paper they’d called “In the event of a Financial Disaster Break Glass Here” – they, this is Hank Paulson and his team, came up with a number needed to stabilize the banks and save the economy from a depression.

    That number circa March 2008 was $1.7 Trillion – and that was before they knew the real extent of the mess the major financial institutions were in.

    Hey, and that’s a NICE graph of the cost of Iraq… I wonder what would happen to the numbers if they factored back in the costs of Afghanistan and ran it back to 2001 like the CBO report referenced does…

    You guys do make me chuckle.

  41. “You guys do make me chuckle.”

    You have the advantage then, sir. You State-shtuppers make me nauseous.

  42. Or just use simple math – if you tax anything at a lower percentage, you will get a lower amount of revenue.

    Of course the economic “pie” never grows, and if it did that growth would not be affected by taxation in any way so if you live in “disconnected from reality land” your simplistic assumption would be correct, but not in the real world.

  43. Yeah, Daveon, it is a shame we listened to the idiocy of Paulson at all. If we had listened to Sorkin at the time, GM would have gone into bankruptcy for the purpose of curtailing UAW benefits such that it could be profitable. Alas, morons like Olberman deemed him “worst man in the world”, and President Obama gave a halfass implementation of Sorkin’s idea. So, we got a G.S.B. that gave UAW the ability to survive bankruptcy with out giving an inch on benefits. The end result: GM will now put out cars that require at least a tax refund for the consumer to break even.

  47. “Yep, more taxes mean more revenues, the above link proves it I am sad to say…..”

    No doubt. More looting means more loot for the looter. Probably every time the James Gang held up another train, their revenue increased.

  48. Chris Gerrib Says:
    August 23rd, 2010 at 9:39 am

    ‘To come out equal at the lower rate, that $1 needs to increase to $1.08 – an 8% expansion. Since 3% tax cuts historically have not yielded 8% annual GDP growth, arguing that tax rate reductions are “revenue neutral” is false.’

    Epic fail. You are assuming that EVERYONE was taxed at 39%, and that income growth of those who had their rates cut was the same as overall growth in GDP.

    Josh Reiter Says:
    August 23rd, 2010 at 10:27 am

    Excellent I’m clipping that one for later reference.

  49. Yep, 40% higher taxes got them a whopping 4% more revenue.

    That graph is a graph of Art Laffer kicking Keynes squarely in the nutsack.

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