patrick.net

Bap33 says

Is that stupid of kinda make sense?

I know you're talking to Vincent, but just wondering whether you understand. I'm sure you must, but then I don't understand what you're suggesting.

The deficit is the annual amount by which our government spending exceeds our govt revenues. Currently I believe the annual deficit is near 10% of GDP, which is two high (note GDP growth has been terrible - a big part of the problem).

Our debt is our total accumulated debt, currently near 100% of GDP.
There are three ways (at least) for debt as a percentage of GDP to shrink. Either run a surplus or default, or increase GDP by more than you increase the debt.

But since debt is now 100% of GDP, even running a surplus somehow next year, might only bring the debt down to 95% of GDP.

We need higher GDP and lower deficits. But since government spending (deficit spending) contributes so much to our current economy, this is not a simple problem.

In boom or even just moderately good economic times times, I really like the idea of having a rule that we must run a surplus. That is, I do think there is something to your idea, of forcing the issue, but it is immensely complicated by our government's significant role in the economy, which is appropriate for modern times.

Bush's tax cuts, killing what were overestimated to be "surpluses as far as the eye can see," was one of the greater government mistakes of modern times. But it's easy to understand how it happens. The leaders are all rich, and there is a retarded philosophy out there that says even when taxes are low, lowering them more, will help the economy so much that it will increase revenue to the govt.

You can almost see the wheels turning in the typical rich guy's head. "You mean if I believe this, then I get to believe that more money for me(via lower taxes), is the best thing for everyone ? That is SO AWESOME !!"

Bush probably also saw the cuts as helping to reduce the chance of a bad recession at a time when it was extremely natural to have one (that is dealing with the deflation of the stock market's irrational exuberance we had going in to the millennium.) Bush was right in thinking that a bad recession would have been bad for him politically. But look at the cost of his tax policies.

We put off the big recession, and had a much worse one later instead.

I think something like a balanced budget or surplus when GDP is growing by a certain amount, and a sliding scale, allowing deficits up to a certain level,, maybe 6% of GDP when in a recession , and maybe real small deficits when the GDP growth is flat might make sense.

Strong growth should require surpluses, mostly so that when GDP and revenue drops, it won't cause deficits to be too big.

But it has to rely on well defined measures of past GDP, and I don't know that those exist.

marcus says

We put off the big recession, and had a much worse one later instead.

Wasn't really the tax cuts that made the system unsustainable. . .

Here's an update of an earlier chart:

yellow is the cumulative household debt stimulus
red is the cumulative deficit-spending stimulus under Bush
green is the cumulative deficit-spending stimulus under Obama.

Bellingham Bob says

Wasn't really the tax cuts that made the system unsustainable. . .

I believe that that all three factors:

1) tax cuts

2) war spending

3) bs credit driven continuing real estate bubble

contributed to the bad recession we should have had, starting somewhere around 2002, being postponed to the much worse recession we had starting in 2008.

@Vicente

>Now when my X-Ray machine errors out and gives me a lethal overdose, my family can try to sue a bunch of Chinese subcontractors. Awesome! I'm so glad they are making best use of GE tax benefits to offshore jobs, layoff Americans, and enrich communists. Everything seems going according to the Koch Brothers plan nicely.

Great one! I just read it today...

@Troy

Thanks again for the graph...

HousingWatcher says

Of the 50% of the country that does not pay federal income tax, 75% of them make LESS than $20,000 a year. So youw ant to raise taxes on peopel all the way at the bottom while not raising taxes at the top?

Yes. I never said that it had to be a lot. When I made that little (or less) I had to pay income taxes.