Critics Still Wrong on What’s Driving Deficits in Coming Years

Good article in the Center on Budget and Policy Priorities: 

Economic Downturn, Financial Rescues, and Bush-Era Policies Drive the Numbers

By Kathy Ruffing and James R. Horney

The events and policies that have pushed deficits to these high levels in the near term, however, were largely outside the new Administration’s control. If not for the tax cuts enacted during the presidency of George W. Bush that Congress did not pay for, the cost of the wars in Iraq and Afghanistan that were initiated during that period, and the effects of the worst economic slump since the Great Depression (including the cost of steps necessary to combat it), we would not be facing these huge deficits in the near term.

This non-partisan organization focuses on fiscal policy and public programs that affect low- and moderate-income families/individuals.  Their analysis shows that the budget deficit will continue to grow if the Bush tax cuts remain.  They don't distinguish the different aspects of the tax-cuts; i.e., "high income", which Obama & Democrats want to let expire, and "middle/low income", which they plan to renew.

The graph to the right illustrates the impact of the various programs on the growth of the deficit into 2019.  It is quite unfortunate that none of the high profile Republican politician and pundits, or conservative media (CNN or FOX) bother to read anything that doesn't come out of their own think-tanks.  

Without the economic downturn and the fiscal policies of the previous Administration, the budget would be roughly in balance over the next decade. That would have put the nation on a much sounder footing to address the demographic challenges and the cost pressures in health care that darken the long-run fiscal outlook.[7]

Comments

[Curt Doolittle]

I have absolutely no idea how you are coming up with this chart, and what assumptions it's based upon. But it's correspondence with reality approaches zero.

Our tax revenue problem is far deeper and far more structural than whatever assumptions you're relying upon. These include the dollar, the world economy, structural unemployment, and demographic changes.

Most importantly they involve the class and race issues involved with different occupational distributions, and the resulting difficulty in putting vast numbers of our population (in particular, males) into industries that are permanently lost to us. We have expanded enough of the bottom end of the labor force through immigration, that we cannot push down our existing labor force into less interesting, but certainly productive, jobs. No society can survive 20% of the male population living in frustration. This anxiety will be directed somewhere.

The country, as both a domestic and international empire, is too insufficiently homogenous to permit higher taxation and redistribution. It is contrary to human nature. There is no evidence of it in history. There is no evidence of it in behavioral testing.

The costs of conducting these poorly managed external wars do not account for the cost of not prosecuting them, which are not insubstantial, and perhaps greater.

Our domestic political mythology is a conflict between the erroneous assumptions of the twentieth century, and the expired political technologies of the eighteenth century.

Neither side is going to get their desired future. We are headed toward the south american model of class and racial segregation of urban centers and a powerless central government. This pattern is evident in immigration and emigration moving patterns, demographic changes, domestic trade, domestic cash movement, re-regionalization of identity, and a loss of confidence in both the government and the nation itself.

Conservatives live in a fantasy that the colonial republic is possible to reinstitute. Liberals live in a fantasy of the homogenous egalitarian society. But democratic republican government cannot function at our current scale for the same reason socialism cannot function at scale - information and incentive problems. Even if politicians want to make good decisions, law and taxes are insufficient tools for doing so. Only credit and banking and provide sufficient granularity of management, and our state is not structured any longer to assist in building the economy, only in resolving conflicts between interest groups. Furthermore human beings do not, never have, and never will operate in an egalitarian fashion across status class and race boundaries because status is more liquid and valuable in-group than extra-group. And because epistemologically, human beings do not possess sufficient perception, information, and intelligence to operate as creatures without status signals to tell them which actions are good and bad for them, any more than they can cooperate in large numbers without pricing signals to tell them what actions are good and bad for them.

I am sorry if this is to complex an analysis for a posting on tax and spending policy. But I am speaking to the false assumptions that underly the graph that you presented here.

I would love to live in an egalitarian redistributive society. But to accomplish that goal, you will have to fragment the empire into regions, reduce the federal government to banking and military functions, return the legislative control to the localities, and allow the natural preference that people express to associate within race and class. And that is antithetical to the underclass fantasy - a fantasy which is more concerned with status than it is with money.

But every society is composed of classes. Not just economic classes, but social classes, and 'greater and lesser productive classes'. And each of these groups pursues its own interests. And because those interests are epistemological in nature ( people need to know how to act ) they are permanent. And as permanent features, they will, especially under prolonged economic duress, be expressed by citizens. Either openly or in black markets, racism, and corruption.

You will never achieve equality outside of a few million people of very similar racial and cultural preferences, with very similar economic interests.

Otherwise, The only equality is in poverty.

And that set of problems underlies the

people will become more conservative. ie: they will express sentiments of group persistence and attempt to implement those sentiments by legislation. We are destined to decades of political hostility.

Because the US is now an empire, both domestically and internationally. And while internationally the government has lost legitimacy. THat is irrelevant compared to the loss of legitimacy of the government here at home.

The only thing we can do is contract the empire and attempt to get our people employed in, while getting the upper and middle classes to try to create jobs and we may have permanently displaced our society by trade policy. THe germans build their society to produce disciplined craftsmen. This is important, because craftsmen can create exportable hard goods. But we have tried to create a service economy. And a service economy must bring people INTO the country in order to serve them. We can create a medical tourism industry. But that is not sufficient. We can close our educational system to foreigners. but that is not sufficient. We can devote vast labor to building nuclear power plants, a new power grid, and electric automobiles. And that might be enough. But we can never put people back into building houses. It creates expensive sprawl. But most importantly, it doesn't make people 'skilled'. It's the intellectual equivalent of ditch digging, and as such it is a vast loss of human capital.

Thats the reality of it.

So your deficit prediction is based on the assumption that the nation was not at a structural crossroads by the fall of socialism in 1989. It is based upon the assumption that american productivity will continue as it has. But neither the society we call america, or the advantage that was western, or the advantage that was american, persists any longer.

We are in for another decade of this economy, and if history is any measure, we are also in for something unpleasantly disruptive in the next generation. And neither side has a plan for getting us out of it.

[Wanda]

Curt, the chart is from the non-partisan Center on Budget and Policy Priorities, based Congressional Budget Office estimates. They obviously do not, or cannot, share your worst-case scenario views of the state of our nation (at least not publically). What they do point out is that if the Bush tax cuts are not allowed to expire, we will be in even worse shape deficit-wise. We can tax-cut our way out of this; we know that doesn't work.

You point out a lot of structural issues with the economy and the political underpinnings of our country; I know many who share your views. You challenge the assumptions underlying the CBO and the CBPP analysis. I actually agree with some of the points you raise. My citing of their article was not to support all of their assumptions, but to point out the idiocy of the 'keep the Bush tax-cuts' mantra of the Republican congressional leaders and pundits.