Bush supporters credit the President with cutting taxes (and, mumble mumble, boosting spending) in order to stimulate economic growth and dig us out of recession. "Works every time!" they say.

Well, duh. Borrowing $1.8 trillion and injecting it into the economy should certainly provide some stimulus. The real question is: does the extra economic growth justify the debt incurred? How long will it take to pay that debt?

To answer that question, and launch a somewhat fact-based discussion, I've put together a spreadsheet that is attached to this post that lets you input relevant variables and see the effect on the deficit, the debt Bush has incurred during his term, and the total national debt.

I start with FY2005. The numbers come from Treasury Department data. I ignore the effect of inflation because I'm not smart enough to calculate it.

For instance, Bush has incurred about $1.9 trillion in debt through the end of FY2005. If we assume that revenue grows a fairly robust 4% a year and spending grows a relatively restrained 3%, we see three things:

1. It will take until 2021 to run a budget surplus;
2. It will take until 2034 to pay off the Bush debt;
3. It will take until 2039 to pay off the national debt.

This assumes the government uses *all* of its extra cash to pay down the deficit, rather than to pay for new programs. The history of government is, shall we say, not encouragin in that regard. When a budget surplus appears, we tend to spend it.

It is therefore doubly irresponsible to borrow huge amounts of money in order to stimulate the economy. First, because the debt will take so long to pay off; and second, because we lack the fiscal discipline to avoid spending the eventual largesse.

For those of you praising Bush for cutting taxes without cutting spending: think fondly of him in 2020, when you're still paying off the debt he rang up on your behalf.

Attached Files

deficit.xls (19.0 KB, 1 views)

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Man up.

In my opinion, though I'm no expert on mathematics, I think that there are only two things that are always negative in economics: Debt and deficits. How the national debt should be paid off is not something that I'll attempt to judge at this point in time. My views have changed a lot, as you know, but I still have to oppose free trade since it has built up a huge trade deficit that causes inflation and hurts our economic leverage in foreign policy, in my opinion.

At least not a true fiscal conservative.

All he and Greenspan have done is employ the same (but more) liberal fiscal and monetary policies that have been employed since Roosevelt's days of Keynesian fixes.

If people want to try to make this character out to be some sort of social conservative, that's fine. I don't know what they're talking about on that issue most of the time anyway, as they (and Bush) seem to make it up as they go. But a drunk sailor on shore leave, in a bordello, wouldn't spend his money as fast as Bush has played funny with the tax payers' future obligations.

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"Tweeter was a Boyscout before she went to Vietnam and found out the hard way... nobody gives a d@mn."

On a financial statement or balance sheet, debt payments and/or debt would be represented as negatives (in the mathematical sense: (_), <_>). But not negatives, in the sense that they are "bad". Properly managed, debt can be a necessary, if not a "good" thing.

But annual deficits add to overall debt. And just as it's not good for an individual to make a habit out of spending more money than is being earned, it's not good for a nation either... especially when there is NO PLAN for working toward reducing the debt. Here's the rub (one of them anyway) as I see it with our situation in the U.S.: a deficit puts you in a guaranteed pinch. When unexpected expenditures arise (Hurricane Katrina, increased spending on the Iraq war, etc., etc.), there is no money... because more than what you had has already been spent. You either have to raise taxes or borrow more money (pressuring the credit markets and digging your hole that much deeper). Thank goodness the Chinese are so in love with getting coupon payments from the American taxpayers.

This is why I get such a kick out of some of the neocons on this board. As some of them run around trying to label others as lefties or some other childish tag, they're singing the praises of one of the biggest liberal spenders this nation has ever known. That doesn't mean I would vote for anyone named Clinton or Kerry... but referring to Bush as a (fiscal) conservative is as ridiculous as referring to Lassie as a cute kitten.

Lassie, you say Mr. Johnson is trapped under his tractor?!

Meow!

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"Tweeter was a Boyscout before she went to Vietnam and found out the hard way... nobody gives a d@mn."

Raising taxes and spending can help an economy in extreme circumstances (i.e. The Great Depression), and cutting taxes and spending, of course, need to be our ultimate fiscal goals. Deficits are always negative, in my opinion, since for every cent of stimulus there is a cent of inflation because the currency is devalued. A trade deficit is basically a net loss for our nation in competition with other nations. Even worse, a trade deficit weakens our diplomatic power. Again, I am no fiscal policy expert, but I don't think that there can be any positive results from deficits of any kind. As for the national debt, it is approaching a crisis level (IMO).

Actually, debt can be good, bad, or indifferent, depending on how it is used. For example, let us say that I open my email and find yet another bank trying to shove their $10,000 gold card down my throat. Let's assume that I actually apply for same. Let's also assume that for godknowswhatreason my application is accepted and I now have a $10,000 gold card. If I were to take a $10,000 cash advance and waste it in one night on prostitutes and showgirls with nary a thought for what the minimum monthly payments are on a maxed out $10,000 piece of plastic, that could justifiably be described as financial stupidity in the extreme. Now, if I were instead to take that $10,000 and use it for start-up capital for some sort of small home-based business and if I've carefully thought through the future profits of said business and found that I will make more money from starting said business than what it will take me to repay the debt, then that is a good use of debt. The problem is that governments don't spend their borrowed money on things that will become self-financing; they borrow to spend ... spend ... spend ... and send the bill to the next two or three generations (people who never even had the fun of wasting the original borrowed money in the first place).

When I first got going, the only way I could really acquire anything was by taking on debt. Yeah, I bought a few stupid things, but my real purpose in taking on so much debt was to acquire income producing assets (usually rental real estate). If 3.99% til the balance is paid in full cards had been available when I got going in the 80's, I'd have bought even more property. I tried, tried and tried some more to explain to my father that I wasn't as crazy and stupid as I looked or acted. He claimed I was even crazier and more stupid than I looked or acted. I've felt extreme squeezes over the years, but I think I've proved to the old man that it is possible to manage debt, especially when there is discipline and a long term goal in mind. My dad is 91 and his generation tends to see debt as an evil thing. To him, cash is king. But I would say that both my father and I are fiscally conservative people - we've just taken different approaches to try to accumulate assets.

Your example made me think of The Rolling Stones song Hang Fire: Take a thousand dollars go have some fun
Put it all on at a hundred to one...

or... Dance Pt. 2:
If I was a hooker, $1000 would be my price.


The old man might have been right about the crazy part.

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"Tweeter was a Boyscout before she went to Vietnam and found out the hard way... nobody gives a d@mn."

Since the government controls the currency, public debt is very different from private debt.

But in order to stimulate a badly sagging economy, a deficit may be necessary. But it should be a once in a blue moon sort of thing... not an everyday way of doing business. People have become so out of touch with reality that they accept deficits, because they're drunk with the presents that show up... and everyday is Christmas.

Many will measure the debt against GDP and say it's really not so bad in real terms. And that's perfectly fine. But can we guarantee that GDP will be at least to the level it was when that measurement was taken... always? Economies do contract, don't they? But the debt, on the other hand, will not contract, not as long as deficits are annually adding to it.

Smoke & mirrors. But until the people wise up and hang a politician for bankrupting the nation's future, why would/should they change their foolish ways? And as individuals, we have nearly a 0% savings rate - one recent measure had it as less than 0% because of heavy home equity borrowing. What's good for the hog is apparently good for the piglets too, I guess. Very sad and disturbing. As my former company (as of 5PM tomorrow - YIPEE!) swirls down the drain because of losses, I can say that corporate America is no better off: GM, Delphi, Ford, Visteon, Collins & Aikman, etc. Debt ridden shells of what they used to be.

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"Tweeter was a Boyscout before she went to Vietnam and found out the hard way... nobody gives a d@mn."

The government can print more money, but it cannot control market valuation of that currency. Witness the recent situation in Brazil or the Eastern/Asian nations in the late 90's... Argentina in the early 80's.

Isn't a credit card very much giving an individual the ability to "print money"? But I think I know what you mean. There are a great many more macro (and micro) implications with what the Fed does monetarily and the Exec/Legis. branches do fiscally. You're very correct.

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"Tweeter was a Boyscout before she went to Vietnam and found out the hard way... nobody gives a d@mn."