February 02, 2006
Federal Deficit - Our Senators Favor It

The pork busters in DC are amused by our senators' efforts to increase the federal deficit. Senator Patty Murray and Senator Maria Cantwell are holding classes in three Washington cities to instruct government agencies and nonprofits how to get more funding. And these are all in Eastern Washington; they must have many more sessions planned.

You might think this doesn't make the deficit worse, that people will be vying for funds from a pot whose size is already determined. But what will happen when some of the worthy applicants don't get funded? They will cry in every public venue how President Bush doesn't care about the projects and people they intend to spend the money on. And that will put pressure on ... more spending ... and more ... and more.

Donald Luskin is the Chief investment officer at Trend Macrolytics LLC, an independent economics and investment consulting firm. His blog has an unusual title. He covers the details at The Conspiracy to Keep You Poor and Stupid.

Posted by Ron Hebron at February 02, 2006 09:59 PM | Email This
1. Are you actually stating that the deficit is the Democrats fault? Didn't the Republicans just cut more taxes (and healthcare/education), and make the deficit larger yesterday?

From my point of view:

$12 billion is now cut from the student loan programs, which I use.

Far more is being cut on healthcare, which I plan on using someday.

The deficit is now over 40 billion dollars larger, which I will have to pay off someday.

And worst of all: I get nothing back. His tax cuts won’t save me a penny. (and yes, I just did my taxes and I owe hundreds to the govt.)

I am very happy that Cantwell and Murray are doing something positive in order to help the needy, not millionaires.

Financial Aid helps poor people afford college.
Healthcare helps poor people get medical help.
Tax cuts help the wealthy far more than anyone else.

I'm sick of this...

Posted by: Gerald on February 2, 2006 10:19 PM
2. Gerald

You sound as if you are young enough to sign up for our armed services. Umm, go pick up a gun and shoot a few people that are out to get us.

Then get your pension... oops, sorry if you lost your leg doing this deed... but were with you dude...

Posted by: Ted Bundy on February 2, 2006 11:36 PM
3. I am attempting the impossible, I will attempt to explain to hardcore fiscal conservative, all government is bad, I want to pay no taxes, Republicans and the deficit makes Bush look bad, so their for we should talk about the deficit constantly Democrats, that our deficit not only is decent, but is also in someways good for the economy.

First, lets clarify a couple of terms. The budget deficit and the trade deficit. These are two completely different economic indicators which the media and politicians talk about the most.

The Trade Deficit put simply the difference between imports vs. exports. Are we selling more overseas then we are investing? Traditionally, this has been a good indicator of the strength of our nations production vs. the world. That is no longer true. With globalization and free trade agreements, over half of our trade deficit is to American companies. If ABC Corp use to make Product X in Portland and now they make it in Shanghi. Technically speaking that counts as an import, even though it is American investors who are making money from ABC Corp. So when you factor that in, our trade deficit is not nearly the hit it may look like on paper. The problem with outsourcing still exist, but as a messure of trade, it is now different then it traditionally has been.

To freak out about a budget deficit is to freak out because you owe $250K on your house and you only make $50K a year. At any given time, Donald Trump has multiples of millions of dollars of debt. The problem isn't how much you owe but what you owe it on. In WA State, our major budget debt is currently unfunded liabilities for public employees pensions. That is bad debt because it does not produce anything. A lot of this also exist in the federal budget, but as a percentage it is not nearly as scary as 24 hr cable news might lead you to believe. Tax breaks are "Good Debt" (to a point), because they put money back into the economy to grow. At some point though, tax cuts can actually saturate the market with money and cause inflation (thus negating much of the growth). Currently the Fed has raised interest rates to counter this flooding of capitol investment.

Morals of the story:
(1) In the new global economy, traditional economic indicators do not mean what the always have.
(2) The U.S. economy is in decent shape because we have succeed in investing in "real capitol" like private business and infrastructure (this applies to the Clinton and Bush Admins. as well)
(3) We should be caution of money spent wasted in the public sector, but also revenue squandered on poor public/private investments (which we do have many of).

Currently (in my opinion), the President's economic strategy is successful and the spending is not a major problem. The weak link is that if the President outright refuses to raise taxes for political reasons, we maybe have a rough patch ahead. Growing an economy raises revenue, but it takes time and places a greater demand on said revenue. Taxes raise revenue faster and can be used to check inflation.

I support the war and the President (with minor disagreements), but if Iran, Palestine or N.Korea become more trouble some or Iraq and Afghanistan go to hell, we may need to raise revenue in a hurry.

Don't vote for anyone (D or R) who says we should have a constitutionally mandated balanced budget (Federal only - A State budget is different because we don't complete on as global of a level). We may need to go into debt to grow the economy. And don't vote for anyone (D or R) who signs a stupid (I will never, ever, under any circumstances raise taxes petition. Pure economic stupidity.

Note: or Federal and State tax bases are so over inflated that the time to raise taxes should in theory be centuries off, but the economic logic still applies.

Posted by: T.J. on February 2, 2006 11:39 PM
4. I do understand your point.

I think you are right, except that there are many benefits for paying off the deficit now.

It's like a huge credit card bill. We pay interest on our deficit each year. We are throwing this money away. Also, we will need to pay back the money eventually and why not now? You may argue because we are in a war, but that shouldn't stop us from trying to lower it.

Posted by: Gerald on February 3, 2006 12:19 AM
5. Gerald,

I'm surprised to see you back so soon, as you got spanked pretty hard in the "Muhammad Cartoons" comments.

That aside, you sound a bit like I did 35 years ago; young, idealistic, and ready to change the world. Your professors, some of them left (emphasis on Left) over from the Viet Nam era, have filled your head with all this idealist crap that has failed in every society that attempted to eradicate poverty.

The so called "poor", for the most part, are comprised of people who have made bad choices in life. Excessive alcohol and drug usage, sex outside of marriage (resulting in "fatherless" children) and indolence, are the primary causes of poverty. Most homeless alcoholics and drug addicts do not want help, they want handouts to continue their present lifestyle. Why get sober, if society continues to contribute to the party? Indolence (laziness) is fixable, but why work, when society pays you to lay on your ass? Why stop having illegitimate children, when the taxpayer subsidizes it?

Lyndon Johnson's war on poverty, and every handout program enacted since, have bankrupted America. Helping the "poor" and paying off the national debt are noble causes, but they are like oil and water. You can't eliminate deficit spending without cutting giveaway programs. Americans are the most charitable people on the planet, but we, not the government, prefer to choose who we extend charity to. Enabling destructive behavior by extending a handout to anyone who asks will never cause a drunk to sober up, a lazy man to seek a job, or a welfare queen to stop having out-of-wedlock children. Thirty-five years of adulthood have taught me that conservative policies work, socialism doesn't. The sooner you learn that the sooner you can eradicate "enabling" policies and begin to assist those who want a "hand up" and leave those wanting a "hand out" in the gutter.

Posted by: Saltherring on February 3, 2006 06:28 AM
6. Gerald,

Hang in there.

"If you're not a liberal at 20 than you have no heart. If you're not a conservative by 30 you have no brain." -Winston Churchill

Posted by: cc on February 3, 2006 07:26 AM
7. Hey, cc, I posted the same quote at 7:28 about Gerald on a compliment that got misinterpreted on the voter database.

Don't you think the Cantwell/Murray thing is staged to get Eastern Washington votes? It is not for the good of the order but good of their pocketbooks.

Cantwell, I believe, needs to get a few more percentage points out east to get reelected. McGavick needs to cut into her points in Seattle to get elected and to keep his percentage points from east.

It is all about politics and is not altruistic.

Posted by: swatter on February 3, 2006 07:38 AM
8. Thanks cc/swat. I just hope that by the time I'm 30 I'm not as heartless as a lot of people who post here.

Posted by: Gerald on February 3, 2006 07:52 AM
9. Gerald...
Those that post here are not heartless, but experienced. World of Hard Knocks, working people.

First you say: "$12 billion is now cut from the student loan programs, which I use"

So I assume you are a Student.

Then you go on to say
"And worst of all: I get nothing back. His tax cuts won’t save me a penny. (and yes, I just did my taxes and I owe hundreds to the govt.)"

If you are a student (financial aided) and you are PAYING income tax, I would say you are doing something wrong.

Why do you EXPECT anything back from your taxes. I am a hardworking woman, whom pays into the federal tax system thousands each year, and do you know that my receptionist (PT) pays in less than $1,000 per year and gets a REFUND of at least $4,000 (thru EIC). Who pays that Gerald, do the math, she paid in $1,000 and gets $3,000 more than she paid in. You know why she gets this little bonus each year, because she has children, and is not married. She get food stamps, her childcare is subsidized, and medical/dental care for her children.

WHO PAYS FOR THIS GERALD???? I DO. Mrs. Middle Income. I pay for your Financial Aide too.

If you are paying Taxes, and on Financial aide going to college, there is something wrong with the picture. You have untaxed income from somewhere.

So keep an open mind Gerald....

Posted by: Chris on February 3, 2006 08:23 AM
10. Gerald, that was a like dagger through my heart(less).

Posted by: swatter on February 3, 2006 08:37 AM
11. Sorry, Back on Topic....

I would bet my first born on this little escapade these two are fishing for Votes. Why else are they on the East Side.

Posted by: Chris on February 3, 2006 08:38 AM
12. Gerald,

It's much more "heartless" to enable a person to remain in the gutter than to extend a hand to help them get OUT of that gutter. Some day, when half YOUR childhood friends are dead from alcohol abuse, drug addiction, suicide or car wrecks you'll get a clue. "Drunk" houses and handouts don't help anyone...they only prolong the inevitable. I know, one of my oldest friends OD'ed and died in a Seattle drunk house about this time last year. We'd been friends since the third grade (1960). I talked to his dad this week and felt the elderly man's grief, knowing we both tried to help. And so my list still continues to grow. Someday you'll grieve too, and my hope is that before YOUR list grows too long, you'll learn the difference between enablement and true charity.

Posted by: Saltherring on February 3, 2006 08:56 AM
13. From the standpoint of the benefit of tax cuts, Gerald, I would suggest looking up "Laffer Curve" on Google or the like. Basically the idea is that you can lower taxes and increase revenues at the same time if you're on the right place along the curve, and you can see it at work in the linked site where they discuss the revenue changes to the Feds when cuts were made to capital gains rates.

Posted by: Marc on February 3, 2006 09:06 AM
14. "That aside, you sound a bit like I did 35 years ago; young, idealistic, and ready to change the world. "

It doesn't take an adult to figure out the Republicans have been on a tax-cut and spending frenzy, Saltherring. The results have been routine $400-$500 billion per year deficits, on top of the massive debt Reagan achieved in 8 years.

"Currently (in my opinion), the President's economic strategy is successful and the spending is not a major problem."

What happened to all the REAL conservatives? You know, the ones that used to look out for our wallets? It would appear Bill Clinton and George Bush Sr. were the only ones who gave a dang about mortgaging our children's future. Personal debt is at an all time high, and the federal deficit sets new records each year the Republicans are in charge. We go into debt to purchase cheap overseas goods, and the Chinese own a good portion of our national debt.

It's just not sustainable, Saltherring, and a mature, thoughtful person like you should know better. Instead of acting as an apologist for fiscal insanity, it should be people like you who are sounding the alarm bells.

One can only assume that the hardcore anti-government right wing enjoys running our national debt up. Otherwise, why would they continue on this trajectory? The theory is that if we 25 cents on each of our taxdollars (to overseas banks and governments) there will be less money for programs conservatives hate, like social programs for poor people, and the working poor.

That theory goes like this: "stop me before I spend uncontrollably again."

Posted by: GarySea on February 3, 2006 09:07 AM
15. What happened to all the REAL conservatives?"

This isn't simplistic thinking, but simple-minded thinking, but WTH, I'll respond anyway.


Each of these tested our mettle (and our pocketbooks). We responded as reasonable, compassionate folks. It cost us. A bunch.

Despite the wailings and gnashings of leftist teeth, we are strong, and will not only recover, but continue to demonstrate to the world what can be accomplished.

We feed the world.
We safeguard liberty throughout the world.
We are the tide that raises all boats.

It is expensive to do so.

There has been excesses and unwarranted spending and we will rein that in (something that leftists wouldn't even consider doing).

For every anecdote about "out of control (Republican) spending", I can easily cite 50 equivalent cases of leftist spending. So what?

(Oh yea, now I remember....you do it so that you don't feeeeel so bad about being a loser ;'}

Posted by: alphabet soup on February 3, 2006 09:19 AM
16. GarySea,

I agree with you that spending is out of control, and stated my exasperation in the post you reference. George W. Bush and the Republican Party have not acted in a fiscally responsible manner.

What I believe we differ on, however, is where the irresponsible spending has occurred. The U.S. Constitution states, "...promote the general welfare...provide for the common defense", not vice versa. The founders never intended the Federal Government to be a caretaker or provider, but they did provide for military spending.

If there was a feasible alternative to the present Republican Party, I would gladly vote for the alternative. The Democrat Party is NOT the party I and my late parents voted for years ago and would have to be massively overhauled before I would consider voting for ANY candidate posting their banner.

Posted by: Saltherring on February 3, 2006 09:26 AM
17. If Clinton didn't have John Kasich, budget wonk of the Rs breathing down his neck, he wouldn't have had a balanced budget. Don't forget the cheap gas as payback for the first Iraq War- that stopped inflation right now. The Rs had as much to do with the balanced budget as anyone else.

Now, we did get bombed on 9-11 didn't we?

And didn't we elect Bush, the compassionate conservative? Well, the Rs are paying for the compassion now. What I can't understand is with all the spending on social services, why aren't the Ds enamored with him?

And I can't let go of the misstatement that the Bush tax cuts haven't paid for themselves. I know I let loose with some of my money and so did others. That money we let loose and increased government revenues more than they let me keep. So there, you revisionists.

Posted by: swatter on February 3, 2006 09:38 AM
18. Gerald, If you gave up the earring and ponytail
maybe you could get a better job. The sandals
gotta go to. Better yet, why not start your own
business of some kind. Then you can provide huge
retirement plans and zero copay 100% health
insurance for all your employees AND their families. While your at it you could build a
daycare facility for your employees children
at no cost to the employee, and, they can have
their friends kids taken care of too even the GAY
kids with two or three moms. Ahhh, nirvana.

Posted by: mark on February 3, 2006 10:11 AM
19. CHRIS, you are way ahead of the curve. Excellent
job. Just a guess. Self employed?

Posted by: mark on February 3, 2006 10:22 AM
20. In my alternate universe the feds would stop funding education and social programs. Leave education to state and local governments and the social programs to the non-profits. Allow citizens to provide for their own retirements.
And require all politicians to take an economics class.

Posted by: Daisy Cutter on February 3, 2006 11:43 AM
21. The 2003 Bush cut in the Capital Gains Tax - The Congressional Budget Office predicted a loss of 2-year loss of $27 billion, but the result was a 2-year GAIN of $26 billion.

Lowering the rate of the tax resulted in increased revenue.

I covered this with a link to the original Congressional Budget Office report at http://ronhebron.com/blog/2006/01/2003-capital-gains-tax-cut-paid-for.html

You want more revenue? Then give Bush credit for what he produced.

Posted by: Ron on February 3, 2006 12:56 PM
22. MOre bad news for Democrats:


Unemployment Rate Declines in January

Feb 3, 12:53 PM (ET)


WASHINGTON (AP) - Employers stepped up hiring in January, boosting payrolls by 193,000 and lowering the nation's unemployment rate to 4.7 percent, the lowest since July 2001.

The fresh snapshot of the jobs climate, released by the Labor Department on Friday, suggested that the economy started the new year on fairly good footing.

Although the 193,000 gain in payroll jobs in January fell short of the 250,000 new jobs that economists said to anticipate before the release of the report, it still marked a sturdy showing and was the biggest increase in jobs since November.

"There's no question we're getting back to better days for job creation," said Ken Mayland, economist at ClearView Economics. "There's been a sense of unease in the American workplace and this should help relieve that. The economy is getting on off to excellent start in 2006."

Posted by: pbj on February 3, 2006 02:09 PM
23. swatter @ 7:30 a.m., weird huh? "Great minds think alike!"

Posted by: cc on February 3, 2006 06:27 PM
24. I want to put in contrast the past history of cutting the budget. Over the past 30 years or so The so called programs for the poor or otherwise known as entilements are protected. If they did not grow by 15% every year the Democrats lead by Sen Kennedy said that the Republicans are cutting the budget taking money from the poor. Where have the few cuts from come from. Always defense. You got some idiots that say that if you eleminate Defense spending we can feed the world. What a joke.
Fact Under Carter Each dollar cut from defense saw a rise of 2 dollars in Entitlement programs.
Under Reagan for each Dollar increase in Defense spending. Democrats raised Entitlements by between 1 and 2 dollars. Sometimes more. about 1/3 of the spending increases Reagans watch was due to Increase Defense spending. No attempt to cut any social programs just increase in size.
Under Clinton for each dollar cut from Defense. Entitlement spending increased between 9 and 10 dollars. Once a program starts it does not end.
So when failed programs are cut those people who make the 6 figure salary to run the programs get their clients to scream and yell. It does not matter that maybe 40 cents on a dollar makes it to the people it is suppose to help. (All those high government salaries). Or due to paperwork need a large staff to file a truck of forms about how well they are doing with the money.
Audits are a joke even at the federal level. Department of Education can not pass a single audit yet they get more and more money. Millions of dollars spent with not accountability and no audit trail.
Sure the Democrats want as many people feeding at the trough of Government money because that is the major source of votes. There millionaire buddies who get all the great deals need a mass of people to keep their money flowing to their special interests. It is called political capital. Our tax money to get votes.

Posted by: David Anfinrud on February 3, 2006 08:27 PM
25. I have always believed that a significant amount of blame go to Congress for the out of control spending. Look at the record of the Democrats that typically end up voting for spending increases, then turn right around and manufacture BS about runaway spending when they support it. Face it, both parties are showing to be all for big government.

The Republicans are bums here also, since they vote for the massive spending increases. They should realize that they are giving into liberalism and the nanny state - which will eventually break the spirit of people in this country and become a "New Europe" - makes me sick to think about this @#!$%^!
Its definitely time for a third party if this bloated government garbage continues.

Posted by: KS on February 3, 2006 10:25 PM
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