Monday, 14 February 2011

US Budget


What a mess. A cool $12Tn-$13Tn in debt, and increasing at $0.5Tn to $1.5T a year.


But where has this deterioration come from? Some of it is inflation, the numbers get bigger over the years. But Wiki reports on the present causes, comparing 2001 with 2009: the position deteriorated very seriously under George Bush following surpluses under Clinton:
2001 vs. 2009

According to the CBO, the U.S. last had a surplus during fiscal year (FY) 2001. From FY2001 to FY2009, spending increased by 6.5% of GDP (from 18.2% of GDP to 24.7%) while taxes declined by 4.7% of GDP (from 19.5% of GDP to 14.8%). The drivers of the expense increases (expressed as % of GDP) are Medicare & Medicaid (1.7%), Defense (1.6%), Income Security such as unemployment benefits and food stamps (1.4%), Social Security (0.6%) and all other categories (1.2%). The drivers of tax reductions are individual income taxes (-3.3%), payroll taxes (-0.5%), corporate income taxes (-0.5%) and other (-0.4%). The 2009 spending level is the highest relative to GDP in 40 years, while the tax receipts are the lowest relative to GDP in 40 years. The next highest spending year was 1985 (22.8%) while the next lowest tax year was 2004 (16.1%)
So, spending increased and tax-cuts meant receipts declined. Then there was a financial crisis, and a recession.

How much has that effected the position?
2001 vs. 2012
Causes for Changes in CBO Forecasts.

The U.S. budget situation has deteriorated significantly since 2001, when the Congressional Budget Office (CBO) forecast average annual surpluses of approximately $850 billion from 2009-2012. The average deficit forecast in each of those years as of June 2009 was approximately $1,215 billion. The New York Times analyzed this roughly $2 trillion "swing," separating the causes into four major categories along with their share:

* Recessions or the business cycle (37%);
* Policies enacted by President Bush (33%);
* Policies enacted by President Bush and supported or extended by President Obama (20%); and
* New policies from President Obama (10%).

CBO data is based only on current law, so policy proposals that have yet to be made law are not included in their analysis. The article states that "President Obama’s agenda ... is responsible for only a sliver of the deficits", but that he "...does not have a realistic plan for reducing the deficit..." Presidents have no Constitutional authority to levy taxes or spend money, as this responsibility resides with the Congress, although a President's priorities influence Congressional action.

Peter Orszag, the OMB Director under President Obama, stated in a November 2009 that of the $9 trillion in deficits forecast for the 2010-2019 period, $5 trillion are due to programs from the prior administration, including tax cuts from 2001 and 2003 and the unfunded Medicare Part D. Another $3.5 trillion are due to the financial crisis, including reductions in future tax revenues and additional spending for the social safety net such as unemployment benefits. The remainder are stimulus and bailout programs related to the crisis
So, of a $9T deficit projected for 2010-2019 - $5T is due to previous administration, $3.5T is the financial crisis, and the remaining $O.5 Bn is the bailout and 'stimulus'. Hmmm. Obama's fault, eh? Sure.

A couple of things stand out for me:

1) the relatively low level of interest payments. It's a drag on the US economy, no doubt. But it certainly isn't a critical component by size. This alone refutes all the conspiro bullshit about how America is going broke because of interest repayments etc. Rubbish. Plus, apparently half of the debt remains held domestically, so any interest payments go back into American income somewhere.

2) the implication that taxes need to rise substantially across the board - or massive spending cuts. Probably both. No, not much of a novel insight, I know.

So, how to alter spending so as to improve the annual position by, say, $1 Trillion? That should at least be break-even on the current account deficit, and even provide for a surplus. That's 1,000,000,000,000 dollars, divided by US population (300 million). That's $3333 per person in the US. That makes circa $6666 per person in the working population. Per year. Woah!

And it keeps getting worse?

Of course, America's such a strong society, it's so well integrated and social that everyone will readily agree on the necessary measures and they'll soon be pulling together to get the job done. I'm sure. Gulp.


Real Truth Online said...

This is a story? Everyone already knows this! Geesh.

the_last_name_left said...

Hehe. Groundbreaking stuff.

The point is, it is serious - and for all the huffing and puffing the chances of Americans agreeing on what to do about it, let alone doing it, seem very slim.

Also, it isn't true that 'everybody knows' that Obama's contribution is so very small. They don't know it all. That's part of the first point - agreeing on what to do. First one need agree what happened, surely, and that isn't really happening.

Ron Paul and the Miseian nuts would have allowed the economy to crash - in anticipation of a phoenix-like rebirth of some new, more extreme laissez-faire.

Presumably that's their position still. And the TeaParty isn't far off of that.

Whereas the sensible consensus liberal opinion is that essentially bailouts and stimulus were the correct thing to do. Whilst the mainstream left would go further and endorse more by way of stimulus - Keynesianism - as demand drives supply (most obviously turning guns into ploughs etc.)

The point being that these are deeply entrenched mutually exclusive views. How can the American political system reconcile them? And if it can't?

Real Truth Online said...

"Ron Paul and the Miseian nuts would have allowed the economy to crash"

No moron, Paul would have allowed the BANKS to crash, because it is THEIR FAULT and Washington's fault for letting it get to this point. Obama's contribution is SMALL? LOL. Yeah, he REWARDED the banks for their failures. Ron Paul would not have rewarded them with bailouts. God youre a fucking IDIOT.

The Federal Reserve is the main dragon in this. If they are ever abolished, things will get back to normal. It will take a long time, but things would get better. But as long as money keeps getting printed out of thin air and debt increases, it will never EVER get better. Kennedy wanted to bring back the gold standard----and his head was blown apart. Coincidence? Not a fucking chance.

the_last_name_left said...

Banned Larry.

I'm sick of your attitude, bad language, lack of civility, etc. You just can't have a conversation can you?

You've been perfectly allowed to post whatever opinion you want - but you can't do it without coming over like a petulant schoolboy.


the_last_name_left said...

If the banking system had collapsed, it would certainly have spread to the real economy.

Gold standard? There's plenty of arguments against it, most of which the ideological followers of RonPaul ignore - they support gold standard because they believe in RonPaul. The simplistic solution of Gold/silver over fiat and fractional reserve banking has one major drawback, which is its strength and weakness both at the same time - that the money supply cannot be increased. It means the size of the economy is severely limited - people don't have money to spend and can't get more - unless they discover a new supply of gold. Ridiculous.

Divide American gold between the dollars in circulation now and see how much each one is worth? Nothing.

Again - the exact result everyone wishes to avoid is what the Austrians suggest as a solution! Mad.

It's an ideological commitment - to small governemnt, low taxation, laissez faire - it's not a real argument.

Real Truth Online said...
This comment has been removed by a blog administrator.
Real Truth Online said...
This comment has been removed by a blog administrator.
Real Truth Online said...

Yep. Not MAN enough to take your own medicine huh? You can dish out the profanity and incivility to OTHERS, but when you claim they do it to YOU, you cry like a little school girl and piss your panties.

You are a fucking hypocritical shitbag.

You have a lot of fucking nerve saying this to me:

"I'm sick of your attitude, bad language, lack of civility, etc. You just can't have a conversation can you?"

then use the word "fuck" 3 times in the same sentence to then you REMOVED the "f" words from the post! That doesnt change the fact that you originally typed them and said the words!! MORE evidence piled on to the mountains of evidence I already had that PROVES you dont mind profanity!


Real Truth Online said...

I own your blog shithead. I saved the screen shots of your original post of the article with the profanity.

the_last_name_left said...

Thanks for your fascinating contributions, again, Larry.

That's why you are banned, and will remain so.

You can't understand the simplest thing, you can't refrain from insult, you offer nothing.


Real Truth Online said...
This comment has been removed by a blog administrator.