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Old 01-06-2004, 01:54 PM   #1
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Tax Cut and Spend Republicans

Bush Readies Budget As Spending Balloons
Mon Jan 5, 8:06 PM ET

By ALAN FRAM, Associated Press Writer

WASHINGTON - Conservatives wait warily as President Bush makes final decisions about his election-year budget, three years into an administration on whose watch spending has mushroomed by 23.7 percent, the fastest pace in a decade.

While Bush has emphasized repeatedly the need to rein in spending, overall federal expenditures have grown to an estimated $2.31 trillion for the budget year that started Oct. 1. That is up from $1.86 trillion in President Clinton's final year, a rate of growth not seen for any three-year period since 1989 to 1991 [like father, like son].

Much of the increase stems from the fight against terrorism and wars in Afghanistan and Iraq. Also expanding relentlessly have been huge programs such as Social Security, Medicare and Medicaid, which grow automatically with inflation, higher medical costs and more beneficiaries.

What has vexed conservatives most is the 31.5 percent growth since Bush took office in discretionary spending. That is the one-third of the budget lawmakers approve annually for defense, domestic security, school aid and everything else except Social Security and other benefits.

Such spending grew by an annual average of 3.4 percent during Clinton's eight years.

Further infuriating conservatives, Bush and the Republican-run Congress have enacted a $400 billion, 10-year enlargement of Medicare; $87 billion in expanded benefits for farmers; and $40 billion for increased veterans' payments and the Air Force's leasing and buying of refueling tankers.

"Re-election has become the focus of Republicans in the White House and Congress. And those in power have determined the road to staying in power is paved with government spending," said Brian Riedl, who monitors the budget for the conservative Heritage Foundation.

Mounting spending has combined with the recession and two major tax cuts to turn a four-year string of annual surpluses into deficits that last year hit $374 billion, the worst ever in dollar terms. Administration officials and private forecasters say red ink could hit $500 billion this year, with more to follow.

Things look bleak in the long run, too. Director Douglas Holtz-Eakin of the nonpartisan Congressional Budget Office has said the Medicare bill could cost from $1.7 trillion to $2 trillion during its second 10 years, as the huge baby boom generation retires and foists added costs on taxpayers.

"The U.S. budget is out of control," the investment bank Goldman, Sachs & Co. wrote its clients, projecting large deficits for the next decade. "Any thoughts of relief thereafter are a pipe dream until political priorities adjust."

In the new budget Bush is to send Congress on Feb. 2, Bush is expected to propose limiting the growth of discretionary programs to 4 percent, perhaps excluding defense and domestic security. Last February, Bush proposed holding discretionary spending increases to 4 percent this year and next, although aides now say he meant to exclude the military and anti-terror activities.

Discretionary expenditures will hit an estimated $873 billion this year, assuming the Senate completes a House-passed measure in January combining the year's seven remaining spending bills. That is $27 billion, or 3.2 percent, more than last year.

"President Bush has been resolute in pursuing his priorities of winning the war on terrorism, protecting the homeland and strengthening our economy. In pursuing those, he's also exercised fiscal restraint," said Joel Kaplan, deputy director of the White House budget office.

Bush, speaking at a fund-raiser Monday in St. Louis, said "we've passed budget agreements that is helping to maintain much-needed spending discipline in Washington, D.C."

Critics say with nine months left in the government's budget year, there's plenty of time for more spending increases, such as for war costs. And they note this year's discretionary spending increase, though low, adds to boosts of 11 percent and then 15 percent in Bush's first two years as president.

"It's an administration that in principle is committed to controlling spending but is unwilling to make hard choices," said Maya MacGuineas, executive director of the Committee for a Responsible Federal Budget, a bipartisan anti-deficit group.

The administration says most discretionary spending increases have been for defense and programs it considers anti-terror the Homeland Security Department and other domestic security efforts.

Of the $209 billion three-year discretionary increase under Bush, which includes $20 billion Bush added for homeland security for 2001 right after the Sept. 11 attacks, the administration says $159 billion has been for defense and domestic security.

That means 76 percent of the increases have been for those programs.

During that same period, spending for all remaining discretionary programs has grown from $331 billion to $381 billion. That's 15 percent, or 5 percent a year.

"There clearly is a need for the Republican majority to sharpen its pencils and return to its foundation of discipline" in spending, said conservative Rep. Mike Pence, R-Ind.

"There is room for more restraint, especially as the economy recovers, but this is hardly the record of a domestic-program spending spree," White House budget chief Joshua Bolten wrote last month in The Wall Street Journal.

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Old 01-06-2004, 06:58 PM   #2
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Republicans tax cuts have lifted the US economy out of recession to record growth levels. The increased spending has been for much needed national security reasons. This is not the comparitively easy going Clinton years in the 1990s.
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Old 01-09-2004, 10:37 AM   #3
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reminds me of the excellent Jeffrey Sachs article Scarletwine posted on the effects of deficits now on future generations (generations where the percentage of older people will increase so that we've got less and less people working to take care of more and more people)

if you think these years are tough compared to the Clinton years you'll be surprised how difficult things are going to get if governments don't take their responsibilities now and make sure that they taek care of their deficits
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Old 01-09-2004, 10:45 AM   #4
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i'd like to see the percentage in increased spending pre-9/11 vs. post-9/11 before i even pass a judgement on this.
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Old 01-09-2004, 10:49 AM   #5
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Quote:
Originally posted by STING2
Republicans tax cuts have lifted the US economy out of recession to record growth levels. The increased spending has been for much needed national security reasons. This is not the comparitively easy going Clinton years in the 1990s.
Republicans love those band-aid fixes.
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Old 01-09-2004, 08:03 PM   #6
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I don't think Jeffery understands that the USA is currently at War. The deficit problem is secondary to national security needs. I'm sure most Europeans are happy that the USA was not concerned about its budget deficits in the early 1940s. USA national debt at the end of World War II was over 100% of GDP, the highest it is every been in history.

Unlike the European population, the USA population is going to grow steadly in the coming decades offsetting the graying babyboom population as it retires. The United States adds 3 to 4 million people to its population every year. The growing hispanic population in the USA is changing the averages on child birth per women.

The problem with workers vs. retires is really a European and Japanese problem. Italy in particular is going to have it rough.

The #1 responsibility of the US government is National Security. Another 9/11, disruption or destruction of global energy Supplies, or WMD war, will be far more costly than any demographic ratio problem of workers VS. retired people.

Deficits should be controlled, but NEVER at the expense of National Security or the economy.
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Old 01-10-2004, 08:02 AM   #7
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Quote:
Originally posted by STING2
Deficits should be controlled, but NEVER at the expense of National Security or the economy.
umm, having the deficits is what will hurt your economy far more than controlling them

I don't think there's much sense in going into the national security debate since we'll never agree on that one due to personal opinion


bringing World War II into this one confuses me though
since you know as well as I do that World War II helped the US economy enormously
so pretending that the US ventured into that one despite the huge economic burden it would bring upon itself is strange
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Old 01-10-2004, 05:59 PM   #8
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Salome,

Ummm, you seem to have missed the points I was making.

It is true that World War II did help the US economy given the state of things because of the Great Depression.

But its also a fact that the largest deficits and national Debt incurred by the USA occured during and as a result of World War II.

The point here being that Deficits and large national debts are not necessarily bad. World War II proves that point time and again. Largest deficits and national debt in country's history created by World War II, BUT, country's economy finally recovers from Great Depression years.

More importantly though, National Security was a good reason to allow a deficit to pile up just as it is today or an any other time when there is a serious risk to one's national security.

If a country( or countries) and its way of life cannot be secured, a budget deficit and a national debt problem will be irrelevant.

A Nation that cannot defend itself or have some other nation defend them risks ceacing to exist.


I don't see how one could discuss the problems of deficits and national debts without discussing National Security. Most of the extra spending over the past few years that has helped to increase budget deficits has been for Defense and National Security issues.



"umm, having the deficits is what will hurt your economy far more than controlling them"

This is actually false. If the Congress and President decided tomorrow morning that the #1 priority of the country was to control the national deficit and national debt, they could.

A near 50% cut accross the board in everything from Defense to Health Care would temporarily wipe out the deficit, but the cost of doing that would bring the country to its knees within a couple of years as well as creating a far worse International Security situation overseas.

The USA has been running deficits and has had a National Debt nearly every year since it declared independence from England in 1776. Yet, the USA has had one of the best economies on the planet.

The USA currently has the 7th highest Standard of living in the World. It is the richest country in the world based on per capita GDP.

The Market that everyone wants to sell to is the US market.


Deficits should be controlled, but never at the expense of National Security and the economy.

Balancing the budget, if done with heavy taxes on consumers, will eventually create a recession, which eventually will lead to a return of budget deficits.
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Old 01-12-2004, 08:50 AM   #9
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highest standard of living lists don't mean much to me
last time Holland was higher on that list than the US
but that doesn't prove that our system of taxation proves to be better than yours (about 45% of my income is spend on taxes)
apparently we're not suffering from a recession yet

World War II shows that investing money in your economy can pay off
given the situation in the world back then it was 90% guaranteed to pay off
many economics are still quabbling about whether there is any real prove that tax deductions by definition lead to higher consumer spendings

as far as I'm aware economics are devided into 2 different groups over this issue
1 group believes its absolutely necessary to take care of your defecit now, because of the graying babyboom will make it nearly impossible to do this later on
the other group fears that too much focus on controlling the defecit will lead to the government not investing enough money in areas such as education, healthcare and into the economy which will lead to even larger problems

not working on your deficit and not directly investing money yourself but hoping for consumers to invest all of it in the economy just seesm kinda dangerous to me
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Old 01-12-2004, 07:56 PM   #10
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Salome,

"highest standard of living lists don't mean much to me
last time Holland was higher on that list than the US
but that doesn't prove that our system of taxation proves to be better than yours (about 45% of my income is spend on taxes)
apparently we're not suffering from a recession yet"

True, but the Netherlands does not have the level of wealth per capita that the USA does. The latest per capita GDP figures for the USA and Netherlands are:

United States $35,277

Netherlands $23,701

The Netherlands may not be in recession, but their far behind the USA in terms of total wealth per capita.

"World War II shows that investing money in your economy can pay off
given the situation in the world back then it was 90% guaranteed to pay off
many economics are still quabbling about whether there is any real prove that tax deductions by definition lead to higher consumer spendings"

World War II shows that running massive deficits and national debt is not always detrimental to the economy.

Consumer spending is 2/3rds of the US economy. Consumers have an average saving rate of 1% of Gross income. There for, most income that is not taxed is spent. A tax cut increases consumer spending which boost the economy.

Tax cuts are expansionary policy which is effective in growing the economy when it is not at full employment.

If I had answered these questions differently in Economics class, the answers would have been marked wrong.


"as far as I'm aware economics are devided into 2 different groups over this issue
1 group believes its absolutely necessary to take care of your defecit now, because of the graying babyboom will make it nearly impossible to do this later on
the other group fears that too much focus on controlling the defecit will lead to the government not investing enough money in areas such as education, healthcare and into the economy which will lead to even larger problems"

True, but the Economist last year did a report which showed that because of the increasing US population, it will not suffer the difficulties that many European countries will in a few decades with the older population.

The average age in the USA is stable and will stay that way into the future. Europe on the other hand is getting older.


"not working on your deficit and not directly investing money yourself but hoping for consumers to invest all of it in the economy just seesm kinda dangerous to me"

Its not an either or thing but a question of balance between competing priorities at the given time. Consumer spending is nearly 70% of the economy and as I showed above, because consumers spend so much, tax cuts naturally give the economy a boosts if its not yet at full employment.
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Old 01-12-2004, 08:02 PM   #11
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Quote:
Originally posted by STING2
Consumer spending is 2/3rds of the US economy. Consumers have an average saving rate of 1% of Gross income. There for, most income that is not taxed is spent. A tax cut increases consumer spending which boost the economy.
But when you aren't paid enough to begin with--remember, a rise in wages is considered "inflation," thanks to the inflation redefinition of the past twenty years--then this is meaningless. We've had "tax cuts" upon "tax cuts" for several recessions now, and what has it proven? That "tax cuts" are meaningless, if people are not paid enough from the onset.

All of our spending in this nation is driven by the availability of credit and not much else.

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Old 01-12-2004, 08:50 PM   #12
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melon,


"But when you aren't paid enough to begin with--remember, a rise in wages is considered "inflation," thanks to the inflation redefinition of the past twenty years--then this is meaningless"

The average American makes more money and lives better than nearly any other countries citizens on the planet. The Average American currently enjoys a standard of living that few people in history have ever experienced.

Certainly there are people that are not paid enough, primarily those that are making the current mimimum wage which needs to be increased. It has been increased over the past decade and did not cause inflation nor did anyone accuse it of causing inflation.

In an economy at full employment like in 1999-2000, a rise in average total wages is a sign of inflation. The wage increase comes from employers competing for the tiny few workers temporarily unemployed and looking for work as well as keeping current employ's from jumping ship and moving to another company.

The tax cuts gave the USA an annual GDP Growth rate for 2003 of 3.1%, stronger than any other European nation or Japan and a big increase over the negative GDP growth that had occured in 2001-2002. Economist forcast that GDP Growth over the year 2004 will be at 4.5% as good as or better than most years of the Clinton administration.

The US economy has always been driven by Consumer Spending since World War II, regardless of the Credit factor and debt incurred by many consumers.
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Old 01-12-2004, 09:23 PM   #13
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Originally posted by STING2
"But when you aren't paid enough to begin with--remember, a rise in wages is considered "inflation," thanks to the inflation redefinition of the past twenty years--then this is meaningless"

The average American makes more money and lives better than nearly any other countries citizens on the planet. The Average American currently enjoys a standard of living that few people in history have ever experienced.
Except when that "history" was 1972--the year considered to be the year the working class had the greatest buying power. We now have a buying power equivalent to the 1950s.

Quote:
Certainly there are people that are not paid enough, primarily those that are making the current mimimum wage which needs to be increased. It has been increased over the past decade and did not cause inflation nor did anyone accuse it of causing inflation.

In an economy at full employment like in 1999-2000, a rise in average total wages is a sign of inflation. The wage increase comes from employers competing for the tiny few workers temporarily unemployed and looking for work as well as keeping current employ's from jumping ship and moving to another company.
It is only a "sign of inflation" because defining inflation primarily in terms of consumer prices, as defined prior to 1982, punished excessive corporate profits. Yes, indeed, if inflation was defined as it always had been, raising the cost of an automobile from $10,000 to $20,000 over a 20-year period would be considered 100% inflation. So, instead, we have it opposite; I guess if the gipper couldn't solve Carter's inflation woes, he could, at least, change what it meant. Corporations can rampantly raise their prices with no punishment, while workers are punished with higher interest rates if they are doing well.

The 1980s did prove one thing, though: "inflation" is meaningless. It means only what you make of it.

Quote:
The tax cuts gave the USA an annual GDP Growth rate for 2003 of 3.1%, stronger than any other European nation or Japan and a big increase over the negative GDP growth that had occured in 2001-2002. Economist forcast that GDP Growth over the year 2004 will be at 4.5% as good as or better than most years of the Clinton administration.

The US economy has always been driven by Consumer Spending since World War II, regardless of the Credit factor and debt incurred by many consumers. [/B]
The U.S. annual GDP growth has much to do with the government's rampant spending problem, and less to do with corporate growth. But it always comes down to employment. Why should any of us care care how "Corporation X" does, if they are sending their jobs overseas? And therein lies the conundrum: corporate greed wants jobs overseas, because foreign idiots will work for peanuts, but if Americans aren't employed, then they can't spend what little money they make on trinkets.

Tax cuts are meaningless these days; just a band-aid on a larger structural problem in this nation.

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Old 01-13-2004, 01:53 AM   #14
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melon,

In 2003, the United States has the 7th highest standard of living in the world according to the UNDP which conducts the survey every year.

You may think inflation is meaningless, but none of the economist I met at University thought so. In addition, inflation is still primarily defined in terms of consumer prices.

If the buying power of the working class of any household is so much weaker than it was in the 1950s or 1970s, it would be literally impossible to buy all the junk that virtually every American household has today in the 21st century, but was non-existent in any form in the 1970s let alone the 1950s. Only in the fantasy's of 1950s Science fiction would people ever think the average middle class household would own multiple TVs, a car for nearly every member of the household, something called a Personal Computer, a VCR, a cell phone for every member of the family, in addition to the home phone ETC.

What got Carters Inflation down was Paul Volkers "Shock Therapy" with interest rates, and yes it worked but gradually.

"The U.S. annual GDP growth has much to do with the government's rampant spending problem, and less to do with corporate growth.

This is not true, government expenditure as a percentage of total GDP is smaller than most other industrialized countries. The USA GDP is roughly a little over 10 Trillion per year right now with government spending at a little over 2 Trillion.

"Why should any of us care care how "Corporation X" does, if they are sending their jobs overseas?"

If a corperation wants to base some of its operations overseas, there is nothing wrong with that. That is someone's company.


"And therein lies the conundrum: corporate greed wants jobs overseas, because foreign idiots will work for peanuts, but if Americans aren't employed, then they can't spend what little money they make on trinkets."

Not all jobs are exportable, and not all "foreign idiots" can do or are ready to do the jobs that are exported. Corperations and individuals have every right to seek workers or employment overseas.

The current unemployment rate of 5.7% is less than most years of Bill Clintons first administration.

Most economist consider the natural rate of unemployment to be 6% and the current unemployment rate is below that.

The fact is that the USA currently has one of the highest standards of living in the world as documented by the UNDP. It also has one of the lowest unemployment rates on the planet as well. Countries like Canada, Japan, Germany, Ireland, United Kingdom, France, Italy, all currently have a lower standard of living than the United States.

Tax cuts are what they have always been, a useful economic tool to revive an economy.
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