Posted on 07/17/2005 12:23:07 PM PDT by RWR8189
bump tidy bump tidy bump bump bump
Resource bump
He's the very conservative newly elected senator from Oklahoma isn't he. He's also a doctor. I'm glad to hear it.
The fact is that if the deficit is 3% of GDP, inflation is 2% and the economy grows 3%, *then* the total debt/GDP ratio of 50% remains near to what it was (up .5%). We could have such deficits for a decade or two without too much harm. At 50% debt/GDP, in fact, 1% deficits are permanently sustainable even under zero inflation and low growth.
I agree that the total debt is much more important than the deficit. However, the relationship between the deficit and the debt is a little different than you describe. If the deficit is 3% of GDP and the economy grows 3%, then the total debt/GDP will move toward 100% (though it may move slowly). That makes sense since the deficit/(GDP growth) = (new debt)/(new GDP) = 100%. Inflation is important only in that it will likely mean higher interest rates which, in turn, will mean higher interest payments on the debt. Points 4 and 5 near the bottom of the page at http://home.att.net/~rdavis2/def06.html talks more about the relationship between the deficit and the debt.
If you have high economic growth and low increases in Govt spending, you have the ability to eventually end any deficit and pay off any debt.
Since spending is one of the two key determinants of the deficit (revenues being the other), that is true. On that subject, we still face very large projected deficits with the retirement of the Boomers. Following are the long-run budget projections from the 2006 U.S. Budget:
LONG-RUN BUDGET PROJECTIONS OF 2006 BUDGET POLICY: 1995-2075 (Percent of GDP) ------------------------------------------------------------- 1995 2005 2015 2025 2035 2045 2055 2065 2075 ------------------------------------------------------------- Discretionary Spending Grows with GDP*: Receipts........... 18.5 16.8 18.5 19.1 19.6 20.2 20.9 21.5 22.0 Outlays............ 20.7 20.3 19.4 21.8 24.8 27.6 30.8 35.1 40.4 Discretionary.... 7.4 7.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 Mandatory........ 10.1 10.9 11.6 13.8 15.8 16.9 18.0 19.5 21.2 Social Security 4.5 4.2 4.4 5.4 6.0 6.0 6.1 6.2 6.4 Medicare....... 2.1 2.4 3.3 4.6 6.0 7.0 7.9 9.1 10.4 Medicaid....... 1.2 1.5 1.9 2.1 2.3 2.6 2.8 3.0 3.3 Other.......... 2.2 2.8 2.0 1.7 1.5 1.3 1.2 1.1 1.0 Net Interest..... 3.2 1.5 1.9 2.0 3.1 4.8 6.9 9.7 13.3 Surplus/Deficit (-) -2.2 -3.5 -0.9 -2.7 -5.2 -7.4 -10.0 -13.6 -18.4 Public Debt........ 49.2 38.6 35.6 38.1 58.7 90.4 130.0 181.3 249.0 Source: Budget of the United States Government, FY 2006, Analytical Perspectives, page 209, Table 13-2
As you can see, the deficit and public debt are projected to reach minimums of 0.9% of GDP and 35.6% of GDP in 2015. They are then projected to climb, reaching 18.4% of GDP and 249% of GDP by 2075.
Mr. Barone is one excellent writer. He really gets to the gist in the above section.
I don't blame them. Why would anyone want to continue following people who appear more and more insane. Its gone far beyond mere political differences, the current Democrat leadership is intent on driving their party over a cliff.
Barone is good...always enjoy his articles.
Barone is good...always enjoy his articles.
you cant cut fat or waste and abuse in govt. govt is not subject to market principles and has no competition
No they will complain about something else...
BTTT!!
""I have a very liberal, lawyer daughter-in-law who got her undergraduate degree in economics""
I have a BS and MS in economics, the economics department should revoke her degree.
simply ask here this:
does a 100% marginal tax rate raise the most revenue possible?
""They are then projected to climb, reaching 18.4% of GDP and 249% of GDP by 2075""
that will never happen
bttt
LOL...I laugh, but you're right.
that will never happen
In fact, I agree. These are projections, not predictions. As such, they are estimates of the debt and deficit if current law does not change. However, something is likely to give out long before the debt and deficit reach those high levels and we will be forced to change current law. Those changes will likely include higher taxes and/or lower benefits and, as a result, those numbers will never happen.
In any case, it should be noted that the decline in the deficit from $333 billion to $162 billion does not include the monies being borrowed from Social Security and the other trust funds. Following are the reported ("unified") deficit, the deficit including the monies being borrowed from Social Security (the "on-budget" deficit), and the deficit including the monies being borrowed from all of the trust funds (the "gross" deficit"):
Budget Totals (billions of dollars) Actual Estimate 2004 2005 2006 2007 2008 2009 2010 --------------------------------------------------------------------- Unified deficit 412 333 341 233 162 162 170 On-budget deficit 567 508 535 438 388 381 375 Gross deficit 595 587 645 578 524 515 509 Gross Federal Debt 7355 7942 8587 9165 9689 10204 10713 GDP 11554 12271 12966 13681 14429 15198 16001 Budget Totals (percent of GDP) Actual Estimate 2004 2005 2006 2007 2008 2009 2010 --------------------------------------------------------------------- Unified deficit 3.6 2.7 2.6 1.7 1.1 1.1 1.1 On-budget deficit 4.9 4.1 4.1 3.2 2.7 2.5 2.3 Gross deficit 5.1 4.8 5.0 4.2 3.6 3.4 3.2 Gross Federal Debt 63.7 64.7 66.2 67.0 67.1 67.1 67.0 Source: 2006 Mid-session Review, Tables S-1, S-8, S-16
As can be seen, even the most recent improved estimates project that the debt will continue to increase by over a half trillion dollars per year through 2010. As a percentage of GDP, the gross deficit will drop from the current 5.1% of GDP to 3.2% of GDP. That is close to as good as things are likely to get as the Boomers will then start retiring, bringing us closer to the Budget's long-run projections, listed in my prior message.
Her view is the view that says all poor people are incapable of improving themselves without massive aid from government. I occasionally bring up little real-life vignettes to make her think. But make no mistake, she's a diehard lib and it will take a lot of persuasion to change her mind. She really believes that all elected and most other Republicans are crooks. When I asked my wife if that included me, my wife said that I'm one of the few exceptions. I had to laugh over that one.
in order for your daughter in law to be right, the labor supply curve would have to be infinitely inelastic...and no one thinks that.
actually Laffer simply expanded upon the idea that lowering taxes would result in more revenue. That idea was initially discovered by an Egyptian philosopher about 5000 years ago. HE noted that when Pharoh raise taxes, grain harvests fell. When they were cut, grain harvests rose
First of all, we're not Bush-bashers, we're Bush critics. There's a big difference because we respect Bush but we disagree with him on some policy issues.
Second of all, there's nothing to celebrate. Gov't spending continues to skyrocket and there's still a deficit. Even in 2008 the deficit will "only" be projected at just over 100 billion. Yeah, let's break out the champagne.
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