Monday, May 6, 2013

Political Party and the Deficit.

The GOP and the DNC have competing claims about the deficit.  Let's take a look at the actual results.
(Source of most of my data)

Keep in mind that due to inflation, each succeeding President having a higher Deficit is not that bad.  But also keep in mind that we can totally eliminate the deficit, even getting a surplus.  It's called a Balanced Budget when the deficit is at (or near enough) zero.

Lets start with President Kennedy (D).  He had a deficit of $7 billion in his first year, $5 in his last.

Next came President Johnston, (D).  In his term, the deficit started at $6 billion, ballooned up to $25 billion in one year, but then he got it under control and dropped managed to eke out a $3 Billion SURPLUS.  Note that term, surplus.  You won't see it again till the word's President Clinton appear.

Then Nixon (R) manages to get elected.  It immediately becomes a $3 Billion deficit again.  He brings that Deficit up to $23 Billion two years in a row, before it drops back down to $6 Billion.

Gerald Ford (R) keeps up Nixon's record, boosting that deficit above $50 billion for all three of his terms, hitting $74 billion in his middle year.

Carter (D) gets it back down to $41 Billion, but ends it at $79 Billion.

Reagan (R) takes a page from Ford and immediately tries to doubles the budget deficit.  He starts at $128, gets it all the way up to $221 billion.  He manages to get it back down to $153 Billion.

George H Bush sees it reach $290 billion, but get's it back down to $255 Billion.

Finally Bill Clinton (D) gets into power, In his first year he has a $203 Billion dollar deficit.  It is also his worst year.  During his first 4 years, he slowly manages to bring it down to a $22 billion deficit.  The last time it was that low was back in 1974, under Nixon. 

But that's nothing.   In his next term he maintains a SURPLUS for all 4 years. In fact the surplus hits a high of $236 Billion dollars.  He ends his term with a $128 billion surplus.

Boom, we get hit with the disaster know as George W Bush (R).   George W Bush immediately creates a $158 Billion deficit.  He ends his term with a Deficit of of $1.16 TRILLION dollars - note that number does NOT include the Obama Stimulus act money which we are assigning to Obama)

Finally we get another Democrat.  Under Obama, the deficit immediately went up to $1.56 Trillion dollars  (Actually only $1.294 trillion, but we needed to also add in the money we spent in the last year of George Bush's presidency as part of the Stimulus Act).   But in 2013 he starts to eliminate it.  By 2012, he has it down to $901 Billion.  Yes, that billion with a "B".  As in lower than George W Bush's  best year.

A couple of obvious points.

  1. Of the past ten presidents, five Republicans and five Democrats, the only two that had a surplus are Democrats.  Note if you go back before Kennedy, every single president - Republican or Democrat had at least one year with a balanced budget.  Basically, the Deficit thing is a modern invention.
  2. Note, it's not that hard to balance the budget.   You look at how much you are spending, you ask the accountants how much your taxes should take in. Oh, you might be off by a small amount, but next year you just adjust the taxes up or the budget down. It won't work every year, but any year the economy grow more than you predicted, you have a surplus.  You should get at least one every 4 years.
  3. President's don't really have that much control over the Deficit.   Obama had to pay for Bush's economic disaster and also his wars, and to be honest, the war against Afghanistan is not Bush's fault.  Not to mention the fact that Congress controls the Budget.

Most interesting is the Modern invention of the Budget Deficit.   It is a direct creation of the Republican Party.  I know, you are saying "That's just liberal propaganda."

Nope, it's a fact admitted by the Republican Party.   They  deliberately increased the deficit as part of a plan to reduce spending.  The Democrats had a good plan called "PayGo" which required you to raise taxes every time you increased spending.  The Republicans tried to replace it with "CutGo" which refused to ever increase spending, instead cutting old spending whenever you introduced new spending.  Apparently it doesn't take inflation into account, or the concept of emergency funding (i.e. war/disaster).

But this plan is not new, it's old.   The entire concept is decades old.  Raise deficits than use them as an excuse to cut spending.

It started under Ronald Reagan with "Voodoo Economics"  the professed claim was that lower taxes on the wealthy would stimulate the wealthy to spend more money.  It failed of course, actually increasing the deficit.  

They realized they could use the deficit as a propaganda weapon to cut spending.  Which they actively pursued for quite a time.

The problem is that it didn't work.  Instead of saying "We need to cut spending", people said "We can live with the deficit".  Which they have done.

Honestly, right now the higher deficit is not a problem - for one major reasons:  Interest rates are low.

Frankly, given treasuries rates of of 2.83% per year for a thirty year bond (source)  we would be crazy NOT to borrow tons of money.

If someone offered me a loan at 2.83%, I would max out my credit rating and invest the money.  For me, that means mutual fund.

But for a country, investing means spending money on:

  • Education
  • Infrastructure
  • Scientific Research
  • International Aid 
  • Environmental Clean up
  • Healthcare for the working poor
The last one is key - by keeping the working poor healthy, we get healthier employees that stay working and paying taxes, rather than moving them to Medicaid/Medicare

Note that most of these things are the very things the idiot GOP wants to cut.  In effect, they are saying they don't want to invest, instead they want to spend our cheap money on pleasures:  tax-cuts (which Reagan proved do not increase tax income) and military spending (which often we don't need - see here.)

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