Deficit Spending

[Rob's House]

I just chuckle when Reaganites talk about the evils of deficit spending. Historically since 1980 when Reagan won on the antitax, antiregulation, antigovernment platform that the Republicans have adopted the greatest accomplishment was not to reduce the size of government but simply to stop paying for it. But for some reason it will be different w/ Mitt Romney today...IDK why but I guess it will...

 

If the Tea Party really wanted a hero would it be Reagan? I really don't see why.

 

What if I suggested there was a theorhetical President that had 4 surplus budgets, actually began to pay DOWN the debt, eliminated 16 thousand pages of federal regulations, cut taxes on the middle class, reduced welfare rolls by lamost 60 percent, reduced the size of the fedeeral work force to the lowest level since 1960, pulled 7.7 million people out of poverty (compared to the 77,000 Reagan pulled out of poverty), and all while seeing the economy produce tons of jobs (92 percent increase in the private sector, largest increase in 50 years)?

 

Does that sound like someone that the Tea Party could get behind? So long as I keep his name out of that paragraph it kind of does. Also so long as I don't mention that we did actually spend (gasp) quite a bit in that time on things that returned value.

 

Anyway it is a tangent all I'm saying is that when I see people who in some topics love Reagan so much discussin things in here I can't help but chuckle. I don't hate Reagan btw, but I do prefer the unamed President I described above. I'm sure you all know who I'm talking about though and my God what a terrible man he was.

You should read the book too. Sure, many on the right don't fully understand the underlying theory, but you mischaracterize Reagan & the relationship between deficit spending and growth. Plus, those of us who know understand that tax cuts, like those enacted under Bush, are only really tax cuts when accompanied by a corresponding cut in spending. The ratio of tax receipts to deficit spending as well as debt : GDP are important as well. All deficit spending is not equal.

 

Here's an interesting bit that touches on a lot of these topics:

 

http://business.time.com/2007/12/07/talking_to_arthur_laffer_about/

[DC Tom]

I just chuckle when Reaganites talk about the evils of deficit spending. Historically since 1980 when Reagan won on the antitax, antiregulation, antigovernment platform that the Republicans have adopted the greatest accomplishment was not to reduce the size of government but simply to stop paying for it. But for some reason it will be different w/ Mitt Romney today...IDK why but I guess it will...

 

If the Tea Party really wanted a hero would it be Reagan? I really don't see why.

 

What if I suggested there was a theorhetical President that had 4 surplus budgets, actually began to pay DOWN the debt, eliminated 16 thousand pages of federal regulations, cut taxes on the middle class, reduced welfare rolls by lamost 60 percent, reduced the size of the fedeeral work force to the lowest level since 1960, pulled 7.7 million people out of poverty (compared to the 77,000 Reagan pulled out of poverty), and all while seeing the economy produce tons of jobs (92 percent increase in the private sector, largest increase in 50 years)?

 

Does that sound like someone that the Tea Party could get behind? So long as I keep his name out of that paragraph it kind of does. Also so long as I don't mention that we did actually spend (gasp) quite a bit in that time on things that returned value.

 

Anyway it is a tangent all I'm saying is that when I see people who in some topics love Reagan so much discussin things in here I can't help but chuckle. I don't hate Reagan btw, but I do prefer the unamed President I described above. I'm sure you all know who I'm talking about though and my God what a terrible man he was.

 

Except the debt increased each year of his term...he never actually began to pay it down. Which should lead one to wonder just how the government was running a surplus under his watch. And "reducing the size of the federal workforce" was in no small part due to contracting so many operations out to private industry...which is why "reducing the size of the federal workforce" didn't actually reduce the size of the federal government.

 

He's still better, domestically, than probably anyone since...I dunno, maybe Eisenhower? But God, so much of what his supporters crow about was just smoke and mirrors.

[Rob's House]

As GG said, deficits act as countercyclical stimulus: they grow during recessions and help prevent a worse downturn; they shrink during expansions as more people are working and paying taxes. Deficits themselves can become a problem if the ratio of debt/deficits to gdp is rising. The big issue currently is to reverse that rising trend.

 

Government deficit spending has created a tremendous amount of wealth, especially during war time. Businesses selling to the government make huge profits, and the bonds issued by government to finance the deficits is a safe liquid asset held (mainly) by the private sector.

To get an idea of the net benefit you have to factor in opportunity cost

 

Except the debt increased each year of his term...he never actually began to pay it down. Which should lead one to wonder just how the government was running a surplus under his watch. And "reducing the size of the federal workforce" was in no small part due to contracting so many operations out to private industry...which is why "reducing the size of the federal workforce" didn't actually reduce the size of the federal government.

 

He's still better, domestically, than probably anyone since...I dunno, maybe Eisenhower? But God, so much of what his supporters crow about was just smoke and mirrors.

I don't think it's fair to say Unnamed President was better domestically than Reagan. Not to say UP doesn't deserve some credit for taking pragmatism over ideology, but Reagan's policies paved the way for that prosperity.

[dayman]

You're preaching to the choir. Some of my favorite examples are the RRs that the government gets credit for. I'm sure it's nothing you don't already know, at least in principle, but Burt Folsom's "The Myth of the Robber Barrons" is a great read. It was eye opening for me.

 

This is why when I hear people pitching high speed rail I ask why, if it's such a good idea, why aren't businesses tripping over each other in a rush to cash in on it? I never get replies.

 

 

This is the book I should read? (just to be clear I've been on a book kick lately so I damn well might read it). And just to sum up quickly I would get what out of it?

 

 

 

I don't think it's fair to say Unnamed President was better domestically than Reagan. Not to say UP doesn't deserve some credit for taking pragmatism over ideology, but Reagan's policies paved the way for that prosperity.

 

Is it unfair to say that Unnamed President left the next guy with the opportunity (not that he took it) to really capitalize on successful groundwork. Reagan left the next guy with a mini-bomb that went off in his face producing a 1-term reign.

[DC Tom]

I don't think it's fair to say Unnamed President was better domestically than Reagan. Not to say UP doesn't deserve some credit for taking pragmatism over ideology, but Reagan's policies paved the way for that prosperity.

 

"Domestic" ain't just money. Reagan gets serious points off for the responds to the emergence of AIDS, in my book.

[Rob's House]

This is the book I should read? (just to be clear I've been on a book kick lately so I damn well might read it). And just to sum up quickly I would get what out of it?

Actually I was referring to Milton Friedman's "Capitalism & Freedom" which would give you a better understanding of the philosophy of classical liberalism (know your adversary), but Folsom's book is good too, but in a much different way. He basically dispells historical myths about many pioneering industrialists.

[DC Tom]

Is it unfair to say that Unnamed President left the next guy with the opportunity (not that he took it) to really capitalize on successful groundwork. Reagan left the next guy with a mini-bomb that went off in his face producing a 1-term reign.

 

He did capitalize on it: gave the "surplus" back to taxpayers as tax cuts.

 

Then 9/11 made everything go catty-wompus.

[Rob's House]

 

Is it unfair to say that Unnamed President left the next guy with the opportunity (not that he took it) to really capitalize on successful groundwork. Reagan left the next guy with a mini-bomb that went off in his face producing a 1-term reign.

That's some selective history. I'm not saying Reagan was perfect, but metaphorically speaking he cleared the clogged pipes so the water could flow. An economic hiccup During Bush I's presidency hardly outweighs his contribution. And contrary to popular belief, W inherited a recession as well. He just didn't handle it so well.

 

And make no mistake, "Read my lips" cost Bush reelection.

 

He did capitalize on it: gave the "surplus" back to taxpayers as tax cuts.

 

Then 9/11 made everything go catty-wompus.

That's not quite accurate. In the waning days of the Clinton administration the tech bubble burst. Not that it was his fault, but it happened. The economy was slowing to recession and the "surpluses" were evaporating before Bush ever passed a budget. The tax cut was a supply side idea to spur growth; I'll not claim whether or not it worked because, like you said, 9/11 makes it hard to quantify, & as I said in a previous post, a tax cut isn't a tax cut w/o a corresponding cut in spending.

 

"Domestic" ain't just money. Reagan gets serious points off for the responds to the emergence of AIDS, in my book.

I'll not speak to that, but fiscally he was far more consequential than UP.