Huzzah! Fiscal common sense has taken hold of the Senate

[Natoma]

http://www.msnbc.com/news/884208.asp?0dm=N18ON

All senators voted in favor of a resolution that express support for Bush and U.S. troops, said Dorgan, who leads the chamber’s Democratic Policy Committee. He said lawmakers now must provide everything needed to finish the job.

In next year’s budget, however, the president wants to slash taxes while boosting military and other spending, Dorgan said, and the moves would lead to the biggest budget shortfalls in history.

“That doesn’t make sense to me,†he said. “I don’t think it’s right to ask our soldiers to fight this war and then not ask our citizens to pay for it.â€

<snip>

Dorgan said the funds that would pay for the tax cut could go to important domestic programs, including education and the president’s own proposal to have Medicare cover prescription medicine for seniors.

<snip>

Rumsfeld has not given an estimate for the total cost of the war and post-war occupation.

However, the non-partisan Congressional Budget Office has estimated that the cost of a post-war military occupation of Iraq would be between $1 billion to $4 billion a month.

It's about time the democrats stood up to Bush and let fiscal common sense rule the day. It's economic suicide to try and pay for a war/reconstruction that could cost trillions over a decade, and on top of that, shortchange the necessary revenue stream to pay for that, along with social security and medicare for the burgeoning retiring baby boomer class, on top of the costs for Homeland Security/Defense.

I am thoroughly pleased with them slashing the tax cut by half, effectively getting rid of the 'double' taxation of corporate dividends. Way to go dems. Finally showing a spine.

 

[Sxotty]

It is about time everyone one did, as what he thinks are good ideas tend to be retarded

 

[Vince]

It's about time the democrats stood up to Bush and let fiscal common sense rule the day.

"Fiscal Common Sence"? Natoma, hate to tell ya bud, but the Federal budget doesn't exactly work like your personal banking account. Your applying this simplistic and linear thinking to the macroeconomic economy and it's not correct.

"Common Sense" (also a great literary work) dictates that balancing a short-term budget will do nothing if the long-term economic outlook doesn't contain structural increases in revenue - as the budget (governmental expendatures) will only increase going forward. How will we balance the budget in 2 or 5 years if there is no structurally based revenue expansion or a strong push in the commercial sector to incorperate technological innovation?

It's economic suicide to try and pay for a war/reconstruction that could cost trillions over a decade, and on top of that, shortchange the necessary revenue stream to pay for that, along with social security and medicare for the burgeoning retiring baby boomer class, on top of the costs for Homeland Security/Defense.

Your problem is your thinking is static in nature and your not thinking how this situation will play out in the dynamic economy. Saying you have a short-term budget that's balanced might score well when it comes to political capital, but it's not going to solve the problems you mentioned as "proof" of this not being smart. If you balance the budget, where will the increased revenue come from to pay for the so-called "baby-boomer class" and their SS or Medicare?

You need to do some visualization to see this and it can be done in your head execptionally well, but I'll talk threw it anyways:

By not supplying the corperate and (massive) investor classes with added tax cuts and breaks - your solving a short-term problem and creating long-terms problems because these entities aren't spending or investing which ultimatly leads to higher sales, higher revenues, higher production demands which mean more jobs - aswell as increases in R&D which result in added productivity and improved economic viability in the long-term

Thus, you have a more static budget thats not creating an increase in structural revenues and as a result is basically increasing at a small upward slope. When your "baby-boomer" group comes of age, this very linear increase won't hack-it.

What we need to do is create added revenue to the Federal government. As Alexander Hamilton said, use the national debt to your advantage. We can go into a few years of negative budgetary expansion aslong as the long-term effect is to increase the government's structural revenues. Because once the economic expansion begins and the corperate world expands, Federal Revenue will increase dramatically. But, we must entice corperations to spend, aswell as the consumer/investor. Keeping money in the government's hands isn't going to do this.

No matter what you believe concerning the Tax-cuts/Bush budgetary ideology - you have to agree that the only way to suceed in the long-term is to create revenue expansion in the Federal Government. How do suppose to do this in a realistic manner?

Way to go dems. Finally showing a spine.

Finally? Then what has Tom Daschle been doing? Ohh... career suicide, my fault

 

[Fred]

I like the corporate dividend cut, but I tend to agree that bush wants to slash taxes a little too much at this time. In a year or so maybe.

My biggest problem with Bush right now, is that he is a bit of a spender. Military spending obviously needs to go up in the situation we are in now, but he should be taking some hard stances on federal pork. We need to slash some federal budgets, including some democrat favorites (omg they are slashing art spending and hefty bureacratic messes to help the poor, those bastards)

I like supply side, it can lead to surpluses if done right, however we can't have a repeat of Reagan politics in the latter years (which weren't his fault to be honest, he had a democratic controlled house and senate that were hardline spenders).. lowering taxes and hiking spending both at once is not good for the deficit.

I agree with Greenspan on this one, as usual.

 

[Natoma]

Vince, what it comes down to is that there are two outcomes to a Bush-led tax cut.

1) It *will* increase the national budgetary deficit at a time when we really need all of the funds we can get. Homeland security, baby boomer retirement, iraq reconstruction, afghanistan reconstruction, etc etc etc...

2) It *may* lead to economic growth.

There is only one definitive answer from this tax cut. Frankly, with the confluence of all of these negative economic factors in the decade, I don't want to take a chance that this cut is going to bomb, and bomb badly, all the while leaving us saddled with historically unparalleled debt levels.

Many economic advisors far smarter than I have stated that this cut is too much, too soon, and actually, given economic factors, unnecessary.

Greenspan, Lawrence Lindsey (fired because he spoke out against the tax cut), and Paul O'Neill (fired because he spoke out, especially vociferously against the tax cut) among others, have all stated that the cut at this time is definitely unnecessary, and that the economy doesn't need this kind of stimulus.

So as I said earlier, the known quantity is that this cut will drastically increase our national debt. The unknown quantity is whether or not it will actually stimulate our economy. I'm not willing to roll the economic dice in this matter.

I consider that fiscally irresponsible at this time.

 

[Vince]

Vince, what it comes down to is that there are two outcomes to a Bush-led tax cut.

1) It *will* increase the national budgetary deficit at a time when we really need all of the funds we can get. Homeland security, baby boomer retirement, iraq reconstruction, afghanistan reconstruction, etc etc etc...

2) It *may* lead to economic growth.

Natoma, perhaps you didn't read the part of my post that addressed this; but having a short-term national debt isn't a problem aslong as there is revenue creation and structural increases in the economies forwardlooking ability to produce reveneues (eg. Technological innovation, et al).

Saying that the national budgetary deficit *must* be balanced and that balancing the short-term budget is going to solve the long-term problems of the "baby-boomer" generation is insane. By balaning the budget now, your not investing in the future and those monetary funds are locked-within the government and not the free-market. What will result is a slow and linear increase in revenues - Which can't solve the problems of the future

You see to be missing this, as well as not answering how you intend to pay for the dramatic increases in federal expendatures without expanding the gov. reveneues.

PS. AFAIK, Lindsey and O'Neil got the proverbial "boot" due to the Wall Street perception that they were ineffective and that a shake-up of the Administration's economic team would reflect well. In Lindsey's case, his hyper-estimate of Gulf War: Prt II costs didn't help him.

FYI - Lindsey crafted the 1.3B dollar Bush Tax cut and is a strong supply-side advocate whose book The Growth Experiment is nothing but a defense of the Reagan cuts in which he flat out states that the '80s deficit wasn't caused by the cuts, but the budgetary spending. I think your putting him in a totally diffrent light and I'm not exactly sure what your reasons are.

 

[Natoma]

Natoma, perhaps you didn't read the part of my post that addressed this; but having a short-term national debt isn't a problem aslong as there is revenue creation and structural increases in the economies forwardlooking ability to produce reveneues (eg. Technological innovation, et al).

I did read it. But I've bolded what I have a problem with. The key words, "as long as" which means that is a qualifier for this particular type of cut. I frankly have no wish to *gamble* that this cut will or will not work considering what needs to be done in the future. I wouldn't be arguing against supply side economics if I had proof that it actually works, without saddling those in the future with ridiculously high deficits. And that particular case has *not* been proven.

You're right. The government doesn't work like my balance sheet at home. But I'm a deficit hawk through and through at home as well. Debt repayment is the first way, imo, to jumpstart an economy because then the cost of capital goes down as your debt levels go down. Which means that as the debt gets lower, people will have incentive to use more capital for investment, and they'll be able to get their hands on that capital at lower interest rates, which will cause more investment. It's a cyclical pattern.

The government will pay down its debt, which will in turn make capital investment cheaper for everyone. What will happen is that the debt will shift from the government to the private sector as the private sector invests.

But then again, you know this argument. It's the ageless deficit hawk vs supply sider debate. Pay down today's debt in order to free up liquidity at a lower cost in the future? Or borrow liquidity today at higher rates and hope to energize the economy that will be able to grow out of the debt level at a later date.

Frankly I support deficit reduction, and I see no reason whatsoever to gamble with supply side thinking.

O'Neill got the boot mainly because he spoke out far too often against Bush's new tax cut for 2002/2003. He argued that accelerating the cuts from 2004 was unnecessary and irresponsible, and he also argued that the ending of the double taxation of corporate dividends was most certainly overkill in terms of its overall impact on the economy. I spent a good month or two watching business shows while O'Neill was speaking.

Lindsey was the main architect of the 2001 Bush Tax cut, but he did not support the ending of the double taxation on corporate dividends in the current cut. It most certainly didn't help his standing when he came out saying that the war would realistically end up costing around $150 - $200 Billion (a figure that most economists and those in congress are slowly realizing was pretty dead on. see bush's initial request for $74 Billion for this war only covers the first few weeks. Everyone in the administration, rumsfeld in particular, are now letting on that the war will end up taking a few months now, and not a few weeks that they were selling pre-war).