The $12 trillion misunderstanding: Whose budget blunder?

[Richard]

Who's on first? Well...it's complicated.

And so it goes...

Richard

The $12 trillion misunderstanding: Whose budget blunder?
RJ Samuelson, WaPo, 24 July 2012

Call it the $12 trillion misunderstanding.

It ranks among the biggest forecasting errors ever. Back in 2001, the Congressional Budget Office projected federal budget surpluses of $5.6 trillion for 2002-2011. Instead we got $6.1 trillion of deficits — a swing of $11.7 trillion. Naturally, political recriminations followed. Who or what caused the change? President Bush’s tax cuts for “the rich”? The Iraq and Afghanistan wars? The Medicare drug benefit? The financial crisis? President Obama’s “stimulus”?

Doubtlessly, the question will emerge as a campaign issue. But any intellectually honest answer — perhaps futile in today’s politically charged climate — will admit that no single cause explains the change. We now have evaluations from the CBO and two nonpartisan groups: the Committee for a Responsible Federal Budget (CRFB) and the Pew Fiscal Analysis Initiative. They all point in the same direction.

For starters, a weak economy was the largest cause. The CBO attributes $3.2 trillion of the $11.7 trillion shift (about 27 percent) to “economic and technical changes.” “We overestimated how good the economy would be, even before the Great Recession,” says Marc Goldwein of the CRFB.

Consider. In 2001, the CBO projected that the economy would grow about 3 percent a year over the 2002-2011 period. Actual growth from 2002 to 2007 averaged only 2.6 percent. From 2008 through 2011 — the Great Recession started in late 2007 — growth averaged only about 0.2 percent annually. Slow economic growth reduces tax revenues and increases spending for jobless benefits and other assistance.

After the CBO issued its report, Sen. Rob Portman (R-Ohio), a former director of the Office of Management and Budget who is often mentioned as a vice presidential possibility, put out a press release claiming that Bush tax cuts for wealthier Americans (generally $250,000 or more for couples and $200,000 for singles) explained only 4 percent of the debt shift. The CRFB checked his math and concluded he was right. But all of Bush’s 2001 and 2003 tax cuts — which, except for benefits for the rich, are now supported by Obama — had a bigger effect, accounting for about 13 percent of the debt swing.

Together, the weaker economy and 2001-2003 tax cuts explain 40 percent of the debt shift. Here’s how Pew allocates the rest. Its estimates parallel the CBO’s and the CRFB’s, which either cover slightly different time periods or use slightly different budget categories.

Iraq and Afghanistan wars: 10 percent

Increases in discretionary domestic spending: 10 percent

Other increases in defense spending: 5 percent

Obama stimulus: 6 percent

2010 tax cuts: 3 percent

Medicare drug benefit: 2 percent

Other tax cuts and means of financing: 12 percent

Higher interest costs on larger federal debt: 11 percent

So, most theories (often partisan) of the $11.7 trillion shift turn out to be wrong, exaggerated or misleading. There were lots of causes; no single cause dominates.

One other thing: Even projecting surpluses from 2002 to 2011, the CBO cautioned then that large deficits would ultimately return.

“Over the longer term,” then-deputy CBO director Barry Anderson testified before the Senate Budget Committee in January 2001, “budgetary pressures linked to the aging and retirement of the baby boom generation threaten to produce record deficits and unsustainable levels of federal debt.”

Unfortunately, that hasn’t changed.

http://www.washingtonpost.com/opinio...eck=0&denied=1

[Dozer523]

So who's fault is it, REALLY?
It's OUR fault.

Damn.

[mark46th]

It is also the practice of basing budgets on expected revenue. I realize the federal government can't be run on an entirely pay as you go policy but it should be considered for parts of the budget. Say, the part about Congress' salary and benefits package. Maybe cash payments for welfare should be cut back with cutbacks being made up for with bags of beans, rice and blocks of Department of Agriculture cheese. I don't remember hearing of anyone paying for a cruise with a sack of pinto beans.....

[Dozer523]

Originally Posted by DocIllinois

Actually, its you FOGs.

YOU? That's Zonie and Richard. I'm not "one of them", I just hang out with them.

[ZonieDiver]

Originally Posted by Dozer523

YOU? That's Zonie and Richard. I'm not "one of them", I just hang out with them.

Always yipping at our heels: "Can I go, too?" "Let me drive!" "Let me shoot the rifle... pleaaaase." "I'll tell mom!"

[Pete]

Maybe we should not be doing deals like this...........

GM stock falls to new low on Europe woes

From The Detroit News: http://www.detroitnews.com/article/2...#ixzz21kV0oN8t

"...............GM's low stock price has prevented the Treasury from exiting the automaker. It still holds 500 million shares of stock in the company as part of its $49.5 billion bailout, or a 32 percent stake.

It needs about $53 a share in order to break even on its GM bailout. At current prices, it would lose $17.25 billion on the bailout................"

[DR_BRETT]

I'm very new here, and this may get me THROWN OUT,
but since they have a "misunderstanding" -- NO ONE CAUSED IT, right ??
(so they say) --
- "it's the taxpayer's fault -- 100 % TAX would be fair"
- "it's the other Party's fault -- they are mean"
- "we'll just have The Federal Reserve BANK print more $$"
- "we'll just DEEM the budget balanced"

(*sarcasm* heavy)

Seriously, Peter Schiff's new book, "THE REAL CRASH" explains all of it --
the U.S. gov't must declare bankruptcy, as the EASIEST way out and up .

- DR_BRETT

P.S. -- If I do NOT get thrown out -- good to be here !!

[martyn]

"...the U.S. gov't must declare bankruptcy, as the EASIEST way out and up . "

- DR_BRETT


The spirit of Richard's post is that this election will more than likely be adversly effected by political strategists pulling us nose-first through inane blame games. DR_BRETT's suggestion, heavily endoresed by Ron Paul, is one of two possible courses of action in attempting to eliminate the national debt. The first is austerity; the US government defaults on its obligations. The second is hyperinflation; devalue the debt in order to service it. The more the general populus becomes aware of what Richard posted and what DR_BRETT has suggested, the less time we'll waste worrying about "who dunits.", during the time when presidential candidates are laying out their plans to reduce the deficit. -Strictly opinion.

v/r

martyn

[Dad]

it was, I believe, because of that "long term" that George W's first Secretary of the Treasury, Paul O'Neill, was opposed to the tax cuts. He felt we should pay down debt while we could. Soundly defeated on that issue he lobbied for a trigger mechanism if congress could not contain spending. Again, soundly defeated. Some say because of his stances Cheney lobbied behind his back to destoy his credibility.

[DR_BRETT]

"DR_BRETT's suggestion, heavily endoresed by Ron Paul," --

martyn

I assure you, REP Paul did NOT get it from me !!

I OPPOSE, nearly all of REP Paul's plans and ideas,
because he has no philosophical base for them,
but is a "libertarian" -- whatever that is .
(Their ideas are stolen from Ayn Rand,
but not integrated or established philosophically --
the "libertarians" want their cake after having consumed it)

[martyn]

DR_BRETT,

Crediting you with the idea of austerity was not my argument. The original post by Richard, in my opinion, brings to light the notion that no single action, person, or party is solely responsible for the national debt. If you take that information as reliable (his citations are sufficient for me), then making the step from attributing cause to developing solutions is much more likely. My personal opinion of any political figure is irrelevant to this idea. Both austerity and hyperinflation are buzzwords, ideas on the extreme ends of possibilities. However, both have the virtue of being a solution, in the very least. That was my arguement.

v/r

martyn

[DR_BRETT]

To martyn, No. 13:

I understand. The exclamation marks were to suggest sarcasm --
I will use pink color in future.
I did take your argument seriously.

Must use pink color, I suppose, but seriously, NOT A PINK !!

- DR_BRETT .

[Ambush Master]

How much is 1 Trillion??

If $1.00 = 1 Square Inch, 1 Trillion would cover 249.1 SQUARE MILES!!!

[greenberetTFS]

Originally Posted by Dozer523

YOU? That's Zonie and Richard. I'm not "one of them", I just hang out with them.

I'm pissed that I wasn't included in this Band of Brothers,shame on you Dozer.......

Big Teddy

[Dozer523]

Originally Posted by greenberetTFS

I'm pissed that I wasn't included in this Band of Brothers,shame on you Dozer.......

Big Teddy

Take a knee!
You're too young at heart to be lumped in with those foogies!!