Budget deficit tops $1 trillion for forth year

It is getting better, but not very fast.

We are almost getting accustomed to this, but these are really big numbers. We hit the trillion dollar deficit for the first time in 2009. Now it looks like we may never get away from it.

Of course, we cannot keep this up forever or even very long. The simple truth is that this is not sustainable and things that are not sustainable are not sustained. But the longer we don't deal with this, the worse the crash will be.

We are also heading into a demographic crisis as the baby boom retires. We have seen this crisis coming for forty years, but still we are unprepared. When the baby boom was in its prime, there were five of us carrying every one retiree. In a few years, only two of our children will be shouldering that same burden. It is not fair to them. Something has to give.

Democrats want to tax enough to pay for all this. They say they just want to tax the rich. But look at it logically. If we have two earners supporting each one retiree, where are all these rich folks coming from? Are half of all young workers going to be called "rich" so that Democrats can tax the shit out of them?

And what about the rich old folks? Some people have saved and invested wisely. We should laud that good behavior. But some old folks have access to funds and income significantly greater than the median income. In addition, they will be getting SS. Sweet deal. Maybe we need to rethink the system.

Posted by Christine & John at October 12, 2012 10:30 PM
Comments
Comment #354521

Shouldn’t the cost of the War in Iraq during the Bush administration be included in the annual deficits? Why not publish a chart that includes this? That War cost a lot of money. It played a big role in adding to the debt.

Of course, what happened is the Bush administration kept the costs of the War off budget, while the Obama administation put the costs of the War in the budget.

Posted by: phx8 at October 13, 2012 12:26 AM
Comment #354525

phx8,
I was thinking the very same thing as I read the article. But as I’m sure you’re already aware, Republican amnesia unfortunately won’t allow for any discussions or serious considerations of what happened during the Bush administration.

Posted by: Adrienne at October 13, 2012 2:32 AM
Comment #354529

phx8 & Adrienne

The chart and the underlying data includes all government expenditures. Iraq and Afghanistan are indeed, part of the cause of the deficits in 2002 anon.

The war was not kept “off-budget”; people are confused because it was not broken out as separate expenditure in the DoD budget. Opponents of the war can claim with some justification that this move hid the true cost of the wars, but the expense was reflected in the budgets.

If you look at DoD budgets, you can make some estimates re the costs of the wars.

2001 — $290.9
2002 — $332.1 (14.2%)
2003 — $388.9 (17.1%)
2004 — $437.1 (12.4%)
2005 — $474.4 (8.5%)
2006 — $499.4 (5.3%)
2007 — $529.9 (6.1%)
2008 — $594.7 (12.2%)
2009 — $636.8 (7.1%)
2010 — $666.7 (4.7%)
2011 — $678.1 (1.7%)

The costs are in billions and the percentages show year to year increases.

In other words, the costs of the wars are totally reflected in the budgets, even if not broken out as that cost.

You can say the wars cost too much. You cannot say that they were tacked onto only Obama.

The total spending on defense makes up less than 20% of the budget. That is still a lot of money. But you would never be able to balance the budget by just cutting defense, even if you cut all of it.

The thing that bothers some of the Obama folks is that draw downs in Iraq were planned under the Bush Administration. I personally witnessed withdrawals of Marine regiments in 2008. The idea of the surge, that you can see reflected in FY 2008 budgets, was to make a big push and then draw down. In fact a big part of our planning was how to continue work when most of the military left. What that meant is that budget “savings” were already projected into the planning. When Obama came in, he wanted to claim that these were “cuts” he made.

I would also point out that the word “cuts” in the Federal bureaucracy almost always means slower growth of spending, not actually giving money back to the treasury. The biggest sin a bureaucrat can commit is to give money back. It happens rarely.

Sorry to give non-partisan boring details to your partisan enthusiasm, but life is sometimes more prosaic than it seems in the stories.

Posted by: C&J at October 13, 2012 9:11 AM
Comment #354532

C&J:

What the TEA Party and other groups critical of the debt want us to believe for their own political gain is there was somehow a solution for preventing trillion dollar deficits over the last 4 years and that Democrats and Obama failed.

You can hammer our government for this debt but what is the solution? CBO has sounded alarms about any attempt to shrink this debt quickly when we’re teetering on the edge of economic collapse again on multiple fronts. But CBO also sounds alarms about the prospects of long term debt and at this point “long term” isn’t that long anymore, it’s just a few years away.

So what do we do? Some would argue Volcker took actions to reduce inflation in the Carter years knowing it would harm economic growth. Do we do the same with runaway debt? Do we essentially cause a recession next year if it means better growth and less debt starting a few years after that? Or is there a solution that deals with debt in a way that not only protects economic growth in the short term but doesn’t just kick the can down the road on the runaway debt?

This is the kind of thing we should pray daily to have adults in Washington working on and making good decisions about. This kind of thing scares the hell out of me. That’s why I build webpages for a living instead of leading anything.

Posted by: Adam Ducker at October 13, 2012 9:34 AM
Comment #354534

Adam

I think we have to get government to exit many of the things it has taken responsibility for. Everything costs more for government … almost everything.

You know that when a government official travels, he/she usually pays about twice as much for the ticket as you would? Why? Because government bureaucracies and rules make it impossible to take advantage of any flexibility and there is no incentive for the bureaucrat to save money.

Government must be run by bureaucracies, since some organization needs to administer laws and rules made by our political leaders. A bureaucratic system is limited in its innovation because it is rules based. And it must be rules based, since any other operation would be a usurpation of the authority of political leaders and the people.

So we should apply government solutions sparingly, only to places where a bureaucratic form can work.

The reason private property works so well is that it allows dispersed decision making. As a private person, I can make choices and suffer the consequences, good or bad. The bureaucracy makes collective decisions; usually a person very far from the action is the final word.

It is the system. It is not an American fault. This has been the nature of the system since the Sumerians. It will never change. The American government is one of the best functioning in history of the world, but the system has its limits.

Government has grown as it has responded to demands, but often it cannot keep its promises, even those made in good faith.

Re your core question - we need to pay down the debt by shrinking government to its more essential functions. We also need to grow faster. In the 1990s, we did both. Mostly growth created the surpluses.

I do not believe that core liberal or conservative ideas make much sense. Liberals see government as the solution to many problems. This is wrong. Some problems cannot be solved by government and some problems cannot be solved at all. We need to accept this. Conservative see government as bad and want to cut it. This is also wrong. There are many legitimate places were government should GROW.

We need an ideology of APPROPRIATE government. Deploy government in places where the bureaucratic control system works well. Use other means for other things.

Consider how Smithsonian works. It is a public private, NGO partnership. Government picks up the tab for many of the boring infrastructure. They keep the building in shape etc. This is well suited to a bureaucracy, since it is predictable and can be rules based. Private firms and individuals often pay for temporary exhibitions or expeditions. This is an innovative and -frankly - more fun task. Then there are thousands of volunteers. Each part is doing what it does best.

We need to look at successful partnerships like this. Each application will be different and constantly evolving.

We also need priorities. Government cannot be the final solution in every matter. Sometimes the official needs to say, “I think this is very important and we are very concerned, but we are not the appropriate organization to address the problem.” You can see how hard this will be.

Posted by: C&J at October 13, 2012 10:05 AM
Comment #354536

C&J, yes, yes, yes and yes. Good post and a good thread, geared toward solutions.

In getting my two cents in, we didn’t just fall off the turnip truck to get here. Some very bright people running gov’t and my best conspiracy theory is that the Corpocracy is looking for a new world order. By that I mean harmonized trade, international law, and banking. Wages are a big part of trade and economy. Most of the work has been done but balancing wages is still a work in progress.

Gov’t prefers to do their work out of the purview of the public where possible. Think ‘fast and furious’, Iran Contra, and the Libyan consulate, the NAU and so on - - - they don’t want to engage in ‘fixing’ SS, etc.

The better way for gov’t to do the heavy lifting required is to let things go to a point where the public is pleading with gov’t to ‘do something’. And, we are surely hearing enough of that lately. Best example is this upcoming ‘fiscal crisis’. One could say it’s been coming from the day Bush signed the ‘tax cut’ legislation. Not like there hasn’t been time to plan, etc.

So, come Jan 1 we will automatically be relegated to continue in recession. So, one has to ask, why would gov’t allow this to happen? I can only conclude that it is a prelude to the new world order, i.e. within a few years your paycheck ain’t going to be what it used to be.

My main complaint is that the 1% continues to soar while the 99% do their best swan dive.

Otherwise, we have the Corpocracy we deserve.

Posted by: Roy Ellis at October 13, 2012 11:20 AM
Comment #354538

C&J: “Re your core question - we need to pay down the debt by shrinking government to its more essential functions. We also need to grow faster. In the 1990s, we did both. Mostly growth created the surpluses.”

So what do we do in 2013? What do we do in 2014 and 2015 depending on what we decided in 2013?

Posted by: Adam Ducker at October 13, 2012 11:30 AM
Comment #354539

Adam

I am a moderate on these things. I don’t expect to pay off the debts in a year or two.

I think we are living in revolutionary times. We have to decide now, or soon, if we want to continue to grow government or if we want to depend more on society and choices.

The first thing to do when you find yourself in a hole is stop digging. We should freeze spending at current levels. This does not mean that nothing gets more money; it just means that if we give to one, we need to take from others. Set priorities. This will make the political and bureaucratic process more interesting and fruitful.

The goal should be to bring government spending to the size it was in 2000, adjusted for population change and inflation (the last time we all agree things were okay) and tax sufficient to cover those costs. If we were doing that, I would be much less worried about the debt. The debt would shrink in % of GDP as the economy grew. The Federal government needs to have some debt. It is how the currency et al is managed.

Freezing spending would get the deficits in line. In government-speak, not giving as large an increase is a cut and it is in fact true, since we expect other things to grow.

As some point, maybe 20 years, we would have to worry about the results of our fiscal virtue and come up with a different plan. That one will be very easy to pass, since it will give people more. They will be effectively collecting the dividends on our prudence.

Posted by: C&J at October 13, 2012 12:04 PM
Comment #354541

I’ve heard the promises my whole life. The problem is that the Republicans assume their supply side theory is right, and nothing, not tax cuts that fail to head off recessions, not tax cuts and base broadening that fail to head off deeper budget deficits from the tax cut, has discouraged them from their belief.

Republicans simply don’t have the numbers in the real world to get where they want to go with the tax cuts. Romney promises what he can’t deliver, and the basic failure mode for his tax cut is the same as all the others: to increase the deficit.

This is irresponsible fiscal policy, and hypocritical coming from those who blast the administration for budget deficits restarted by similar policy.

Republicans haven’t learned their lessons from the real world, they’ve only rededicated themselves to a cult of politics that insists this policy will work. America needs better, if its ever to recover, and get its house in order.

Posted by: Stephen Daugherty at October 13, 2012 2:51 PM
Comment #354542

Stephen

Romney is not promising to cut taxes in the aggregate. He has specifically said that he will cut no taxes on the rich nor enact any tax cuts that will add to the deficit. He wants to make the tax system simpler, fairer and easier to understand by cutting loopholes.

Making the tax code simpler and fairer is itself a stimulus. I know that I have not taken some business decisions because I didn’t understand that possible tax consequences and I didn’t want to get in trouble. I am reasonably intelligent and I have an MBA. I imagine many people are confused about their taxes.

The Obama plan of just raising the tax rates will leave intact all the mess and just let us all pay more.

Posted by: C&J at October 13, 2012 3:24 PM
Comment #354557

C&J-
Yeah, I know what he said, we all heard what he said. The trouble is, unless a Unicorn walks into the Congressional Budget Office and touches its horn upon the bill, it will not behave in the real world like Mitt’s advertising it to be.

Also, you know the process. The Lobbyist will certainly not find the door barred in the House where this tax policy will have to originate. The code isn’t complicated in spite of what your party’s been doing the last twenty years, it’s complicated because of a lot of what your people have been doing, the tax breaks and tax writeoffs.

I think the political pressure in Congress is going to steer things towards a policy that aggravates the deficit. I think you’ll find that the promises on the rate cut will be easier to maintain, whereas your House will portray any attempt to cut deductions and tax breaks as an attempt to raise taxes. They’ve done it before, it would not be out of question for them to maintain that kind of fiscal ideological approach.

There is stimulative value to a tax cuts, and you’ll be glad for a second or two to hear me admit it. Unfortunately for you, It’s been estimated that you’re wasting two thirds of every dollar of revenue you lose, to stimulate just a third of that much economic activity. If we are going to run a deficit stimulating the economy, shouldn’t we pay for public works, jobs programs, economic safety net programs commonly regarded to get better than a buck back in value?

There’s also a problem, if you’re looking to stimulate via tax cuts, in that usually the point is not to replace the money. If that rich guy out there has to pay the same, what’s the stimulus? Where’s the extra money. You can say that moves will be made more confidently, but this is just like your saying that there will be growth down the line to make up the shortfall. Which supposedly shouldn’t exist, if this is supposed to be revenue neutral.

Here’s what my cynical side is telling me: the promise to cut deductions and everything else like that is bogus. Mr. 47%, the guy who thinks those who don’t pay income taxes, but aren’t rich pillars of the community like him, will be happy to let taxes go up on the middle class, or barring that, to cut programs he has no political love for, or run a deficit to avoid a difficult decision, something I doubt would be out of character for him.

I think it is what it’s always been: a pretext. The reality is, those who push tax cuts are more interested in cutting programs they don’t like, and giving their friends among the 1% their big windfall than they are in actually balancing the budget. It wouldn’t surprise me to learn that they simply view the unbalanced budget as an unfortunate fact of life, or something that should be addressed by tearing down the social safety net. After all, we should be running this country by the law of the jungle, especially if they think of themselves as the Apex Predators of the lot.

The truth is, we will have to raise taxes as time goes on. President Bush left a big bill to be paid on credit, so he could be all things to all people, so Grover Norquist, at some point, will simply have to go jump in a lake, if we want a system that functions.

It’s human nature to want all of the benefits and none of the obligations. Rather than seek a balance, the GOP’s instead taken the side of the rich on a permanent basis, never truly considering that those people may be no wiser, no smarter, no more competent than anybody else on certain matters.

Posted by: Stephen Daugherty at October 14, 2012 11:02 AM
Comment #354558

Stephen

We know that same unicorn will need to show up to prevent Obama from raising taxes on the middle class.

Romney has said he will be flexible and work with Democrats. He has a much better chance of NOT cutting taxes on the rich than Obama has of NOT raising taxes on everybody else.

I agree with you about taxes. My guess is that taxes are going to rise no matter who is in charge no matter what they tell us now. In that respect, both my guy and Obama are lying to the American people. It is politician thing.

But of the two, I think Romney’s idea to simply the tax code has a better chance of costing us less.

Simplified tax codes will make life easier for us and more just for all Americans. Romney has promised that the rich as a group will not pay less than they do now. I believe him and I believe that is possible to do. Obama says that the middle class will pay less. I believe he knows he is lying. Even he can do the math.

Posted by: C&J at October 14, 2012 11:29 AM
Comment #354581

C&J-
Why don’t conservatives these days make original arguments? Y’all aren’t even that witty about how you do it.

Romney’s promises have been preceded by the promises of three prior Republican. He would come into office with the policies of his preceding Republican president still wreaking havoc on the budget.

So, rationally, given that no Republican President has succeeded in jumpstarting an economy or making back the money the tax cut loses, should we not ask for more policy upfront?

And if we are confronted with a policy where basically we have to count on the unprecedented success of that policy in order to avoid deeper deficits, shouldn’t we reject it out of hand?

Obama’s policies start out better than revenue neutral. Yours must succeed where none have in order to avoid broadening the deficit.

Posted by: Stephen Daugherty at October 14, 2012 8:34 PM
Comment #354583

Stephen

What original argument should we make. Romney wants to reform the tax system. He promises that the rich as a group will continue to pay the same or greater % of taxes that they do today. He has also promised not to make any tax cuts that would add to the deficit. In other words, he will be flexible.

We agree that taxes will rise under both Romney and Obama, although neither will admit it. There is not enough money among “the rich” to balance the budget as Obama is spending now. That means that there will need to be spending cuts and some tax increases on all taxpayers. Neither candidate is admitting that.

Posted by: C&J at October 14, 2012 9:14 PM
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