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.....

[Gypsy]

Originally Posted by 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.....

True, however the current administration has yet to pass a budget since they took office.

[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 !!

[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!!

[Badger52]

Seemed the appropriate locale, rather than start a new thread. The following snippet from FoxBiz piece seems to encapsulate what happens with the self-licking ice-cream cone when the freezer's empty. Or when the ca$h-cow breaks outta the wire and heads on down the road. ("Run, Bessie, Run!")

"California was counting on Facebook tax revenue to make up for an expected shortfall due to other businesses leaving the state to avoid higher taxes. The state heavily relies on its corporate and personal income tax system to fund its budget. State tax collections fell by $6.1 billion, or down 11%, versus the same period in 2011.

The number of upper bracket taxpayers, with $500,000 or more in annual incomes, dropped by a third from 2007 to 2009, leaving fewer to tax, the California Taxpayers Association notes based on data from the state’s Franchise Tax Board..

As of the 2009 tax year, California listed just 98,610 California tax returns with adjusted gross income of $500,000 or more, down 32.5% from the 146,221 in 2007. Now California admits it can never rely on its own estimates anyway, so nor should you.

(a) taxes up/tax revenue down, (b) tax-victims down because they fled to avoid victim-hood, (c) higher-tax sources down 1/3 because of....
oh, see (b) above. Maybe they should invest in Chick-Fil-A.