Wednesday, July 6, 2011


Over time I've tried to explain in as simple terms as possible how we got into our current budget mess. In April I wrote how republicans refuse to go after one source of our budget bills - wasteful corporate subsidies, write-offs, tax deductions and other unnecessary giveaways - which add well over $1 trillion to our national tab.

Then, in another post, I pointed out how President Bush's policy choices effectively squandered budget surpluses, and discussed the same points in an op-ed I wrote for the Bakersfield Californian. All of this created a fiscal and economic mess that the GOP and their Tea Party sycophants have no problem blaming on President Obama.

I've also pointed to Alan Greenspan's ridiculous cage matches with himself, and the Ayn Rand inspired policies he supported, which helped drive our economy into a ditch (this takes us down another road, that we can avoid for now).

The point is very few people on the far right want to believe that President Bush and the Republican Party's tax cut jihad are to blame for our current budget problems. This is why these CBO projections from 2001 are so important to look at today. Every year the Congressional Budget Office makes 10-year budget projections, based on spending, revenue, and laws then in place. In 2001 the CBO projected a cumulative surplus of $5.6 trillion through 2011.

Let me repeat, in 2001 the CBO projected cumulative surpluses of $5.6 trillion through 2011.

What this means is that if we had continued with Clinton era tax rates, and avoided some of the reckless wars and other policies pursued by the Bush administration, we would be paying off our entire national debt at the end of this year (or at least seeing the fiscal light at the end of our economic tunnel). Instead, as a result of the Bush years, we've seen a collective swing of $11.8 trillion (from the January 2001 projections), and record budget deficits.

Check out the CBO projection numbers here, and what it looks like in graph form here ...

So, what happened? George Bush happened. I really can't make it any simpler than that.

- Mark


Modus Ponens said...

To blame free markets for the current fiscal woes of the federal government is laughable.

It should be axiomatic to say that whatever money that the federal government spends ultimately destroys wealth. If I spend a dollar, it is because I've earned a dollar. If Microsoft spends a dollar, it is because they've earned a dollar.

If government spends a dollar, it means that they've collected...$1.25 or a $1.30 in taxes (or they've printed money as you Keynesians are so fond of doing). This inefficiency of government spending can NEVER be overcome unless and until the government goes into productive business for itself.

That 25 or 30 cents is a real loss of wealth, of resources that could have been put to far more efficient use in the free market. It doesn't matter where the government spends its dollar because it consumed 25 or 30 cents in order to do it.

In any case, you Keynesians ignore the true source of wealth, which is productivity, not spending. The government destroys wealth via spending, even on necessary services like defense on police and courts. The more wealth that is destroyed, the more difficult and distasteful it becomes for producers to continue to produce.

You guys need to face the facts: if Keynes was such a genius, why did The Great Depression last as long as it did? Why hasn't the EU buried us yet? Still waiting for "the right people" to lead the show? Do you think Greece has collapsed because of free markets? Or perhaps it has collapsed because the Greek government has destroyed too much wealth through profligate spending.

We bear an enormous financial burden on behalf of Europe, and they still can't come close to being as productive as we are. When anyone in the EU comes close to spending as much of the GDP on the military that we do, we'll really see economic problems over there, not just the ho-hum ones of chronic 9 or 10% unemployment and so forth.

Therefore, as Rand, Greenspan, Hayek, von Mises, Friedman, and most of our founders pointed out, government should be kept small and to the bare essentials.

Unknown said...

MOdus, please tell me you're toking. When we have had responsible taxation in this country (ie, no crazy tax cuts for the super rich), we have experienced economic upturns.

Other countries tell the same story. How is this hard to understand?

And if FDR had tried modern republican economics, it's likely that the US would have collapsed entirely.

Further, the government has to spend money. It is unavoidable. Not only that, but government spending also creates jobs.

Most importantly, Bush tax cuts helped the richest people in america, but did nothing of real value for the people who actually create jobs and thus wealth. That is, the middle class business owners, whose businesses actually create over half of the nation's jobs.

R. M. said...

Wow, what irony. The guy calls himself Modus Ponens, yet, can't seem to put one and one together. Maybe one of Dr. Martinez's colleagues from the philosophy department can help him out. I would suggest Newberry.

"In any case, you Keynesians ignore the true source of wealth, which is productivity, not spending. The government destroys wealth via spending, even on necessary services like defense on police and courts."

After reading this, there is no need to continue commenting. It's just silly.