Democrats & Liberals Archives

The Democrat's Budget

Over the last couple weeks, Democrats unveiled their balanced budget proposal. The new budget has the same price tag as President Bush’s proposed budget for the next five years, coming in at just under three trillion dollars, but there are some chasmic differences.

The most glaring difference between the two plans is that President Bush's fails to balance the budget. The non-partisan Congressional Budget Office concluded that Bush's budget is "based on too-rosy revenue estimates." No surprise there. The Democrat's plan will balance the budget by 2012, the President's will not.

Another difference is that the Democrat's budget includes war spending for Iraq and Afghanistan. The President's budget ignores the cost of those wars, and would require budget-busting emergency spending bills.

But the most fundamental difference is that the Democrat's budget abides by the Pay-Go rules. Congress must either cut programs or raise taxes to fund new spending. Republicans hate that because it means they must find some way to pay for the renewal of their tax cuts for the wealthy.

Democrats plan to let the tax cuts expire -- exactly as Republicans designed them to do. That's why their plan balances the budget and the President's does not. But now, those fickle Republicans are repudiating their own tax cut plan and calling the execution of the sunset clause they themselves wrote into the package "the largest tax increase in American history."

Well, those whiners should have made them permanent when they had the chance. It wasn't any secret that Democrats were going to balance the budget by letting them lapse as the Republicans designed them to do.

...But not all of them will lapse. The Senate plan renews the middle class tax cuts -- the child tax credits, elimination of the marriage penalty, and expansion of the 10% tax bracket, those being the only middle class tax cuts in the Republican tax cut package.

Since these middle class tax cuts comprise only 25% of the total tax cut package (the other 75% almost exclusively benefit only the most wealthy Americans), Democrats figure it shouldn't be hard to come up with ways to pay for them under the Pay-Go rules, like closing offshore tax loopholes and aggressively going after tax evaders.

So unless you're wealthy like Paris Hilton, you'll still have your tax cuts as well as a balanced budget. I mean let's face it, the Republican plan to cut taxes for the wealthy and make up the resulting budget deficit by borrowing from China was inherently unsustainable to begin with and it's time to stop it.

Interestingly, Republicans -- not willing to let their tax cuts for the wealthy go, and chafing mightily under the new Pay-Go rules -- are trying to save the entire package by cutting $279 billion from Medicare and Medicaid. Ya gotta have priorities, right?

While budget battles are usually boring as hell, this one looks like it'll be interesting and it's already historic: Republicans failed to pass a budget resolution for the last six years, but Democrats got it on the first try. Paris Hilton may not like how Democrats will balance the federal budget, but it will be balanced.

Posted by American Pundit at April 4, 2007 2:31 AM
Comments
Comment #214953

One word comes to mind BOHICA

Posted by: insensitive at April 4, 2007 4:33 AM
Comment #214971

AP, Pay as you go, balanced budget, including the costs of the Iraq occupation in the budget,and quit borrowing from China sounds like what the American people have been asking for. Whats not to like? Seems after only 1/4 year the dems have put a campaign promise into action, who woulda thought?

Posted by: j2t2 at April 4, 2007 9:54 AM
Comment #214979

j2t2,

Let’s not get ahead of ourselves, shall we? AP is a little loose with the details. Only the House version can be considered ‘balanced’ by the terms they use for that (something I think we should discuss but for a later time), but he then goes on to tout the Senate plan for not raising the taxes back onto anyone who isn’t rich (again, apparently middle class people don’t invest or have capital gains, etc) without mentioning that the Senate plan is NOT considered balanced by the terms in use.

Americans are still waiting for an actual balanced budget that doesn’t raise taxes on everyone. What we do know is that the congress is not interested in cutting the size of the federal government and will continue to use our tax money for political bribery, which means eventually they will be calling upon us to help pay for their games.

I’m also curious how they are resolving the notion that tax revenues increased with the tax cuts that they are about to let expire, have they planned in how the reduction in tax revenue that the increased taxes will generate will be accounted for?

Posted by: Rhinehold at April 4, 2007 10:50 AM
Comment #214989
without mentioning that the Senate plan is NOT considered balanced

No, I did mention that the Senate will balance their budget under thte Pay-Go rule by “closing offshore tax loopholes and aggressively going after tax evaders.” Since the middle class tax cuts are only one quarter of the full tax cut package, that won’t be hard.

What we do know is that the congress is not interested in cutting the size of the federal government

How do you know that?

I’m also curious how they are resolving the notion that tax revenues increased with the tax cuts that they are about to let expire.

You’re right, that’s a “notion” that some Republican politicians and think tanks have been pushing. You’d be hard pressed to find a respected economist saying that the modest increase in revenues we saw are sustainable.

In fact, the non-partisan CBO says it’s a result of the one-shot increase in income among high-end taxpayers.

A surge in economic growth is not behind the unexpected increase in 2005 revenues. Real economic growth in 2005 has not been unusually rapid, nor has it been stronger than was projected earlier this year by CBO or OMB.

Thus, the unexpected gain in revenues does not reflect faster-than-anticipated economic growth. In May, CBO said that one possible reason that revenues are coming in faster than it forecast earlier this year is that increases in income may be more concentrated among high-income taxpayers than it anticipated.

The “notion” that cutting taxes for the wealthiest Americans results in higher revenues is just the ‘trickle down theory’ repackaged. It’s still voodoo economics.

Posted by: American Pundit at April 4, 2007 12:16 PM
Comment #214994

Reagan’s economic theories were just Kennedy’s economic theories repackaged. I suppose that JFK may have gotten it all wrong when he cut taxes in order to increase revenue.

As for it being a ‘notion’, it is actually the fact that we are on the far end of the laffer curve for taxation in this country that reducing the tax burden actually increases tax revenue. If we were on the other side of the curve, increasing taxes would increase the tax revenue.

Just about everyone can agree that if an increase in tax rates leads to a decrease in tax revenues, then taxes are too high. It is also generally agreed that at some level of taxation, revenues will turn down. Determining the level of taxation where revenues are maximized is more controversial.

Do you think that US population is over taxed or under taxed?

Posted by: Rhinehold at April 4, 2007 12:30 PM
Comment #214996
What we do know is that the congress is not interested in cutting the size of the federal government
How do you know that?

Well, because they aren’t? Can you show me how this budget is smaller than last year’s budget? In real dollars or adjusted for inflation, either way?

Posted by: Rhinehold at April 4, 2007 12:36 PM
Comment #214997
Reagan’s economic theories were just Kennedy’s economic theories repackaged.

No, they weren’t. Kennedy lowered the top tier tax rate from 90% to 70%. …Unless you’re arguing that the top tier should be 70%, Rhinehold. Then I’m with you all the way.

it is actually the fact that we are on the far end of the laffer curve

No, it’s not. And the CBO numbers I referenced show that clearly.

Although the deficit for 2005 will be notably lower than CBO estimated then, the underlying projections of revenues and outlays for future years are similar to those presented five months ago.

Rhinehold, tax cuts do not produce revenue increases,

economists know that this is not true. Conservative economists know this isn’t true. Even conservative economists who work in the Bush administration have admitted this isn’t true.

As former Bush economist Alan Viard, now at the conservative American Enterprise Institute, said: “Federal revenue is lower today than it would have been without the tax cuts. There’s really no dispute among economists about that.”

Posted by: American Pundit at April 4, 2007 12:41 PM
Comment #214999

AP, a balanced budget does nothing to reduce the national debt, nor the more than 1.1 Billion Dollars PER DAY in interest payments on that debt (more than 45% of which goes to foreign investors).

What could America get for that 406 billion dollars a year in interest payments if it were freed up? Consider that: NASA’s budget is $15 Billion, Education is $61 Billion, and Department of Transportation’s budget is $56 Billion.

That $406 billion a year in interest payments also equals a $1,353.33 tax cut for every man, woman, and child in America.

Democrats act like balancing the budget is something heroic. It’s not. It is nothing more than basic duty and responsibility. If Democrats want accolades for fiscal responsibility, they will need to save Soc. Sec., Medicare, and health care in America WHILE reducing the national debt.

Get back to me when your party has a plan for that. Then, I may be willing to sing praises of Democrats.

Posted by: David R. Remer at April 4, 2007 12:45 PM
Comment #215000

AP,

You’re quoting from an ‘op-ed’, that doesn’t mean much. Economists ARE at odds about whether or not the tax cuts increased revenue or some other factor did, or a combination of factors including the cuts did, etc. I’m having trouble accepting that there is ‘no dispute’ from an editor at the LA Times.

However, it really means little to me, to be honest, whether it does or not. I think that ‘income taxes’ are immoral and only useful over consumption taxes as a means to further play upon the class warfare and use this as a political tool in capturing or maintaining power while convincing people that you are making someone else pay their fair share so that they feel better about having to pay from what they earn without having any choice in the matter.

But I digress….

Increase the taxes, make it appear that you are taxing the rich more than the poor (which isn’t true, if you understand how the economy works). I’m sure you will convince a large number of people that their interests are being served as you actually make life harder for them as prices of products increase because of the tax increases.

But please don’t try to convince people that the democrats are really interested in a) the little guy and b) reducing the size of government.

Posted by: Rhinehold at April 4, 2007 12:50 PM
Comment #215005

Rhinehold, even conservatives such as Bernanke, Greenspan, and others of positive repute, have agreed that tax cuts DO NOT pay for themselves. What they do is buy economic productivity. If you have budget surpluses, tax cuts reduce them. If you have deficits, tax cuts increase them.

Where folks get confused is that this discussion is at the level of NET cost. Yes, tax cuts which result in increased economic activity, do generate more revenues from those business entities which grow as a result, than they would have paid otherwise. And their new employees hired pay more taxes than when they were unemployed. But these increases have not resulted in 100% compensation fro the loss of revenues by the tax cuts. And the difference was added to the national debt.

When economic stimulus is needed, tax cuts can be justified despite their net loss to a balanced budget. But, when an economic stimulus is NOT needed, tax cuts only serve to increase the budget deficit by reducing net revenues.

The debate by those who accept the facts for what they are, is over whether tax cut economic activity stimulus is needed or, whether reducing the size of the national debt and the 1.1 Billion per day interest cost on that debt is needed more.

Posted by: David R. Remer at April 4, 2007 1:09 PM
Comment #215007
AP, a balanced budget does nothing to reduce the national debt

David, I never said it did — but it’s the first step. And it’s a complete 180 to the fiscally irresponsible, record-setting deficit spending we’ve seen for the last six years.

Posted by: American Pundit at April 4, 2007 1:13 PM
Comment #215008

David,

The National Debt still existing is a travesty and must be dealt with. BUT, I don’t see how we are going to pay it down by increasing taxes. The main reason that the debt is there is not because it was inherited, it is a direct result of this government trying to do too much with too little for too long. It is operating well outside if it’s constitutional jurisdiction (imo) and without cutting what we are spending our tax money on there will never be enough tax revenues to pay off the interest of the debt, let alone the debt itself.

I agree with you though, unless we do something about the debt NOW, it will be too late later, the US will become bankrupt.

Posted by: Rhinehold at April 4, 2007 1:15 PM
Comment #215009
However, it really means little to me, to be honest, whether it does or not.

I graciously accept your surrender, sir. :)

Where folks get confused is…

David, it seems pretty simple to me: You’d have to be an idiot to believe that cutting revenues increases revenues. That’s just laughable on the face of it.

Posted by: American Pundit at April 4, 2007 1:19 PM
Comment #215010
The National Debt still existing is a travesty and must be dealt with.

Hey, I have an idea! How about we start by following the principle that every funding increase MUST be offset by a revenue increase, either by raising taxes or cutting existing programs?

We could call it a pay-as-you-go rule, or “Pay-Go” for short…

Posted by: American Pundit at April 4, 2007 1:24 PM
Comment #215014

AP,

Again, that is how it should be and I’ll be interested to see this congress actually do it (instead of inserting spending bills in ‘emergency’ bills as pork and bribery when it won’t count against the ‘pay-go’ rule as they did recently).

BUT, that will NOT do anything at all about actually reducing the debt one bit. We are going to have to cut programs. Which ones will this congress cut? And NO I do not mean a decrease in the increase… Actually spending less than the year before. Actually spending LESS than we take in as revenue to pay down the debt. In real funds, not 10 year projections. NOW.

Posted by: Rhinehold at April 4, 2007 1:31 PM
Comment #215015

Rhinehold and AP, why not cut non-essential spending (Democrats don’t like that) while allowing the tax cuts for the wealthy to expire (the Republicans don’t like that), and call it a wash and allow everyone’s children to pay less in taxes later on.

Except for being eminently reasonable and intelligent, it’s probably a bad political idea, I know.

Posted by: David R. Remer at April 4, 2007 1:33 PM
Comment #215016

David,

I’m not beholden to the tax cuts myself, other than the fact it is just another government money grab from our incomes. I would personally rather see ‘income’ be left alone (on individuals) and taxes be collected from goods and services, where an individual who is in dire straits might be able to stop spending for a month to make up some ground if they chose to instead of having it ripped away with no choice in the matter before they get to touch it…

But, even allowing the tax cuts to expire will do little to nothing to help pay off the debt, don’t you agree? And we both know it will get shifted so the middle class ends up paying it in the long run anyway, that’s how taxes on the ‘rich’ work.

But, I can assure you that the republicans will try to fight this one as simply a tax cut issue instead of tying it to the debt because they aren’t interested either. If they had any guts (and wanted to get out ahead of the democrats) they would offer to allow the tax cuts to expire ONLY if the democrats would cut non-essential spending until the debt is paid off. Then we could cut taxes AND spend a little more if we choose to, without simply spending money on interest.

Of course it would help if most Americans understood this concept as well. But by looking at this chart I don’t think it will happen:

04/02/2007:
Current Debt Held by the Public
5,058,762,478,228.82

Intragovernmental Holdings
3,791,593,576,399.51

Total Public Debt Outstanding
8,850,356,054,628.33

It’s the people who hold the notes on that debt who is making all of the money… Who is that again?

Posted by: Rhinehold at April 4, 2007 1:41 PM
Comment #215017

BTW,

3 trillion dollars? What, for heaven’s sake, are we spending 3 trillion dollars a year on?

Doesn’t anyone else see a problem with this kind of spending?

Posted by: Rhinehold at April 4, 2007 1:50 PM
Comment #215018

Which party wants to be responsible for pink slipping federal employees?
Where will they get another job?
What kind of money would be spent for private contractors who bid on these jobs that were pink slipped?

Posted by: bugcrazy at April 4, 2007 1:56 PM
Comment #215019
Which party wants to be responsible for pink slipping federal employees?

I’ll do it!

Where will they get another job?

Not really my problem. It wouldn’t be their’s either if my company spent itself into bankruptcy and had to let me go.

What kind of money would be spent for private contractors who bid on these jobs that were pink slipped?

What jobs would there be? We would be cutting them, not privatizing them…

Posted by: Rhinehold at April 4, 2007 1:59 PM
Comment #215024

For years Democrats have been criticized by Republicans as the tax-and-spend party. Along comes Bush and the new Republicans and they become the borrow-and-spend party.

Democrats now will balance the budget, as AP so clearly states, and again Democrats are being criticized. Oh, David says, you are not reducing the deficit.

How on earth can anyone reduce this huge budget deficit in one fell swoop? Relax. The Democrats will eventually reduce the deficit. It will take time.

Posted by: Paul Siegel at April 4, 2007 2:43 PM
Comment #215025

Agreed Rhinehold. The major problem is with the two dominant political parties. Too many Democrats don’t know what non-essential spending is. And too many Republicans say Debt doesn’t matter.

We need independent politicians who subscribe to neither parties’ prejudices, biases, and faulty assumptions, but, who look at a problem squarely and point to the two most realistic options to fix it and choose.

Posted by: David R. Remer at April 4, 2007 2:49 PM
Comment #215027

Paul,

The budget will

Meanwhile, in that time, we are paying TRILLIONS of dollars in interest alone and paying nothing at all down on the debt.

How long are we suppose to wait before someone from either party sees this as an actual problem and does something to remedy it?

btw, I notice how you said that they would reduce the defecit. The defecit is not the debt, which is still the elephant in the room no one wants to look at.

Sorry, Paul, but the Democrats are doing nothing about runaway spending, they are still spending the same amount of money and their ‘long term goal’ announced today additionally does not mention cutting spending or tackling the debt at all. More of the same, just wrapped in a differently colored package.

Posted by: Rhinehold at April 4, 2007 2:50 PM
Comment #215028

Paul, its pretty hard to relax when I know that my 16 year old daughter already owes the federal government more than $50,000 and she hasn’t even entered into the work force yet.

Posted by: David R. Remer at April 4, 2007 2:51 PM
Comment #215048
What, for heaven’s sake, are we spending 3 trillion dollars a year on?

I’m pretty sure that’s 3 trillion over five years — and an increasing percentage of that goes toward paying interest on the growing national debt.

The national debt must be dealt with. The first step is to stop adding to it. Unfortunately, the way Republicans left our country’s finances, that’s going to take about five years.

Which party wants to be responsible for pink slipping federal employees?

Under the Reinventing Government program, VP Gore handed pink slips to half a million non-military government bureaucrats.

Bush replaced them all — and then some, but there’s no political reason why he can’t crack down like Gore did. I expect President Hillary to reinstate the Reinventing Government program, just as Democrats reinstated the Pay-Go system.

Posted by: American Pundit at April 4, 2007 5:05 PM
Comment #215070

The sad fact is, several things are already in such sad shape, it may already be too late to avoid the painful consequences. Neither Democrat or Republican politicians are likely to cut government size or spending to any significant extent.

Balanced budget by 2012 ?
Not likely.
That’s just based on track record).
QUESTION: How many times in the last 46 years has the National Debt shrunk?
ANSWER: NONE.
The National Debt has not shrunk since 1960.
The National Debt is now $8.85 trillion.
Social Security surpluses are still being plundered, when we all know there is an entitlements/demographics tsunami on the way, when 77 million baby boomers will be becoming eligible for entitlements at a rate of 13,175 per day!

Yet, Congress is still ignoring the most pressing problems. That’s probably because 90% of the 110th Congress is from the 109th Congress. So why should we believe anything will be different?

However, there is one thing Congress can do faster than you can say “pork barrel”.
They just voted themselves another raise.
That’s the 9th raise in the last 10 years.
Hell of job, eh?
No wonder those cu$hy jobs are so coveted.
Yet, some of our troops can’t even get adequate medical care.

The federal government has a serious problem.
It can’t seem to get anything done.
Why?
Ask any Democrat, and what answer do you get?
Ask any Republican and what answer do you get?

Fueling the circular, divisive, distracting partisan warfare just perpetuates it, yet it rages on.

So, what does it take for voters to finally stop falling for it and start holding all politicians accountable? How is a 90%+ re-election rate holding them accountable? No wonder they are irresponsible and unaccountable. No wonder the nation is fiscally and morally bankrupt.

When will it end?
Like economist Frederic Bastiat wrote: only “when it becomes too painful”, and we finally understand the “great fiction through which everybody endeavors to live at the expense of everybody else” — by Frederic Bastiat 1848

Posted by: d.a.n at April 4, 2007 7:42 PM
Comment #215077

Also, watch out for the methods used to reduce debt.
During Bill Clinton’s second term, debt reduction was accomplished largely by a lot of excessive money printing (between 1995 and 2000).
Some of the M3 increase was growth, but not all $2.5T of it (from 4.636T to $7.117T) !
That causes inflation. Inflation might be good for shrinking federal debt, but it sucks for everyone else (especially the poor and those on fixed incomes). It also erodes entitlement benefits. In general, it is economically destabilizing. So why does the government and Federal Reserve do this?

To really understand why the dishonest fiat monetary system is so popular among some economists, the business community, bankers, and government officials, it is necessary to understand how it gives those that receive the money FIRST an advantage, early in the circulation cycle, BEFORE the currency loses its value due to inflation. It’s like playing Monopoly in which one person can print all the money they want. Before long, that person owns everything, and everyone else is broke or deep in debt. This dishonest abused fiat-funny-money system shifts the losses to others that don’t understand how they are being cheated. It also explains why the nation is swimming in debt (over $42 trillion nation-wide), and it has NEVER been worse.

The federal government is so over-bloated, so sluggish, so irresponsible, and selfish, it is difficult to believe it has turned over a new leaf.
Especially since we still haven’t seen any convincing results yet.

  • No campaign finance reform.

  • No ethics reform.

  • No election reform.

  • No One-Purpose-Per-BILL.

  • No end to government FOR-SALE.

  • No end to Gerrymandering.

  • No end to eminent domain abuse.

  • No end to rampant debt, borrowing, spending, and excessive money printing.

  • No end to illegal immigration (pitting Americans and illegal aliens against each other).

  • No end to pork-barrel.

  • No end to the war in Iraq.

  • No end to selling out American workers.

  • No end to barriers to ballots for independent and third party candidates.

  • No end to Congress voting themselves cu$hy perk$ and raises (9 times in the last 10 years).

  • No end to abused pardons (like the 546 by Clinton (140 on his last day in office).

  • No end to plundering Social Security surplses.

  • No end to pandering and bribing voters with their own tax dollars (e.g. Medicare Prescription drug plan).

  • No end to ignoring the approaching entitlements/demographics iceberg.

Posted by: d.a.n at April 4, 2007 8:15 PM
Comment #215078

dan,

“They just voted themselves another raise.
That’s the 9th raise in the last 10 years.”

Actually that’s technically incorrect.

They voted themselves a cost of living raise 10 years ago that just happens every year,
The raise occurs automatically every year and they have to merely decline to take a vote against it for it to occur.
They have only taken that vote once in those ten years.

Posted by: Rocky at April 4, 2007 8:18 PM
Comment #215105

Rocky,
Yes, I’m aware of that technicality.
Actually, it is even more insidious that they have voted themselves automatic raises every year.

Posted by: d.a.n at April 4, 2007 11:01 PM
Comment #215132

I’ve already solved the debt problem. If each of the Republican voters covered all their Republican presidents debts (Reagan, Bush 1 & 2) and each of the Democracts covered the rest we could just pay it off that way. OK? You Republicans owe $130,000 each. Plus whatever budget busting Mr Bush does over the next 2 years. Likely another $20,000. And all those voting Democratic owe about $40,000 each.

And then from now on in the future you have to pay the debt that your President creates. My version of Pay-Go.

Posted by: muirgeo at April 5, 2007 7:32 AM
Comment #215193

Nice one, muirgeo. Put up or shut up about the debt. :)

Posted by: American Pundit at April 5, 2007 12:35 PM
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