Free Markets, Free People


14 Trillion Deficit?

With all the “new” figures out there concerning deficit and debt numbers, plus the old, it’s rather confusing as to which can be believed. Greg Mankiw cites the Concord Coalition who makes the case that perhaps neither the CBO or the White House have their finger on the real deficit numbers:

The Concord Baseline makes some key assumption changes to the CBO baseline. CBO is required to assume that congressional appropriations continue increasing only at the rate of inflation for the 10 year baseline. They also extend emergency supplemental at their “current” level plus inflation over the duration of the baseline. For tax legislation, they assume current law will govern–so if there are tax cuts that have sunsets (as the 2001 and 2003 tax cuts have), CBO is required to project revenues assuming the tax cuts expire as written in the legislation. They also project economic growth in a very conservative fashion–they do not try to anticipate major changes in the economy, either recessions or accelerations.

The Concord Coalition takes the CBO baseline and adjusts it to assume appropriations increase at the same rate as the economy (GDP growth). This increase is closer to the historical average rate of increase. We also assume that supplemental appropriations do not continue indefinitely. For recent appropriations for the wars in Iraq and Afghanistan, we include realistic estimates from CBO about how much will be spent under a scenario where troop levels slowly decrease to about one-third of their level at the time of the estimate. For taxes, we assume that all of the major tax cuts will be extended beyond 2010. We also assume the one-year patches to the Alternative Minimum Tax will continue to be enacted, holding the level of taxpayers hit by the tax roughly constant throughout the baseline period. Finally, we include a calculation for the increased debt service (interest payments) that these policies would cause by their increasing the deficit. We do not make any changes to CBO’s economic assumptions.

With those seemingly more complete assumptions and numbers, the Coalition finds that we’re most likely looking at much higher deficits over the next 10 years than either CBO or OMB are projecting:

August_CBO_Plaus_Baseline

As you can see, the Concord Coalition believes their projections to come from a more “plausible” set of baseline assumptions than either CBO and OMB. If so, and reading the description above, I see nothing that is implausible in their assumptions, we’re seeing the deficits understated by almost half.

Another in a long line of reasons not to be enacting any new and huge entitlement or cap-and-trade. In fact, the business of Congress right now should be a long and detailed look at how it can cut entitlement spending and scale back government.

But they’re not. Instead they’re busily engaged in expanding multi-generational taxation without representation. Didn’t we once fight a revolution over that?

~McQ

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23 Responses to 14 Trillion Deficit?

  • The deficit is real, and at this pace we are looking at inflation as an almost certainty, likely stagflation, and even a risk of hyperinflation. Obama’s stimulus package has made things worse, I supported it out of hope, but I was wrong — that was too much spending.

    That said, tax cuts are as necessary as spending cuts. The health care debate has to be about saving money. If money that now goes to pay the massive amounts to the insurance industry gets controlled and shifted in part to government sponsored programs, that could actually help control deficit growth. Right now we’re paying to give insurance industry profits and a big business — that’s why we pay so much more than others, while our life expectancy is lower and infant mortality higher. Moreover, only through a universal approach can we remake medicaid and medicare, which are already dysfunctional, and will become utterly unsustainable in a few years.

    The US is on the brink of an economic catastrophe that rivals the decline of the USSR. For all the bickering and flame wars, this is a crisis that has been built with bi-partisan mistakes, and has no easy solution. Both parties have to be willing to make dramatic changes or else we face an on-going, long term crisis and perhaps the end of the United States as we know it.

    • I’m stunned at your admission. Nice job for your first paragraph.

      The rest, not so much.

    • Scott,

      The insurance company profits are about 3.5% on revenues. That is hardly some plump bird ripe for the picking. It appears that Medicare fraud is substantially more than those profits. I do get a little weary of the left claiming there is this huge pot of money that can bet gotten out of the health insurance company profits.

      I am also a bit weary of the nonsensical claims regarding infant mortality and life expectancy. We count as a life birth any child that draws a breathe. Other countries do not count premies or distressed babies. Life expectancy is also a false number. If you are measuring the health care system, you need to factor out accidents and other no health related deaths. When that is done, we compare favorably. Then, too, the statistics on survival rates in the US for various cancers are extremely impressive. I do get annoyed at the false trashing of the US health care system in order to provide more fuel for a government take over.

      I think you are right with your last paragraph. We cannot handle these deficits. Not can we tolerate any government program which increases the cost of living and reduces employment. We are going to have trouble getting back to full employment with the reductions in credit and income that are staring us in the face.

      Rick

    • Both parties have to be willing to make dramatic changes or else we face an on-going, long term crisis and perhaps the end of the United States as we know it.

      The U.S. as we currently know it needs to end, Scott. As Dale wrote a few weeks ago, the two ideologies have reached a crossroads. They are incompatible with each other and the status quo can’t be sustained. We fight, fight, fight! for control of the federal government constantly, each trying to shape the country until we’ve created the distorted thing we have now. Partisan snipes, character attacks, and shouting down opposition are the methods used to wage the unending war for federal control.

      So what are the options your side has? You surely know by now you can’t convince your oppositely-minded fellow citizens to go along with the liberal utopia. You may believe you can continue shaping federal laws, when you can, to fit your ideology, and the rest will go along with the rules of the game. However, your problem is the opposition opposes specifically the existence of the rules. They believe there is a point where the federal government goes too far and they will no longer recognize its authority. And believe me, the liberal utopia lies beyond this point.

      So again, what options do you have? To ever reach your utopia you’re going to have to deal with a sizable revolt, possibly 50% or more of the population. It seems your side hasn’t thought this through at all. You have few choices. You can either reveal yourselves to be the jackbooted thugs you claim you’re not and force capitulation (I don’t think you have the numbers or capability). You can give up the dream of the liberal utopia. Or you can use the American way as it was intended to create the liberal utopia at the state level and forgo the ill-conceived attempt for control at the federal level.

      What you’re doing now makes no sense. Why are you expending so much of your time, wealth, talent and energy for control over the White House and Congress? If you have a dream of utopia, you should embrace federalism. Reduce the power of the centralized federal government so that it can’t interfere with any state’s lurch toward the utopia it deems fit. A large majority of Americans would agree with reduced federal power since it benefits both sides. You could spend your resources on actually creating utopia and you could finally prove to us retards in the south and midwest that you are right and we are wrong. All we retards hear now is stuff like this:

      Obama’s stimulus package has made things worse, I supported it out of hope, but I was wrong

      Despite numerous educated, historical and economic arguments about why it wouldn’t work, your group went with hope and screwed us all. You can’t control something as large and complex as America because there isn’t anyone smart, wise, humble, or omnipotent enough to be in charge. For example, you’re an educated and passionate and caring person with good intentions, but your opinion on health care as written above is based on several falsehoods that you’ve laid out as support. Not opinions, things that are factually incorrect that you’ve likely ignored/misunderstood by accident. I don’t fault your contribution, I welcome it. But there’s no way I’m putting my eggs in your basket when you obviously don’t know how to make a sound basket.

      So let’s end the U.S. as it is now. Let’s get it back to the way it was supposed to be – reduced centralized power and increased state authority so that we will be better able to govern ourselves. That way, when you morons want to spend your wealth on your state government utopia, us retards won’t care and can spend our wealth on religion and guns.

      • Zozo, the problem is liberals and conservatives, ideologues who get so caught up in wanting things fit their image of the best society that they can’t work together to solve real, practical problems. No utopia, no “isms,” just pragmatic problem solving is the only way forward that won’t lead to division and decline.

        • You’re kidding. This is the best you can do?

          Some further points:

          1. You blame ideologues for the problems and appear position yourself as a pragmatic neutral party. In some comments, that is. In others, you lay out how you think American culture is shifting to the left and tell everyone to “get used to it.” When you’re proven wrong, you don’t revisit that subject. Are you the problem or the solution? You can’t seem to make up your mind.

          2. You say there’s no liberal utopia, yet just five posts ago you lionized Kennedy and claimed, “he got a glimpse of the liberal promised land with Obama’s election and the invigorated youth. He certainly died confident that the country was on the right path, and even to the end he helped put us there.”

          3. This blog, which isn’t conservative, offers pragmatic problem solving from the authors and commenters. You almost always reject it. It boils down to reducing centralized federal power and letting states solve these “real, practical problems” themselves. We’d get multiple experiments and multiple results. With the communication technology we have now states can share positive and negative results quickly and learn from each other. We would use a modern distributed approach to solving problems that works faster and cheaper than the old, centralized, top-down method. Plus, decisions would be made closer to the voters, which surely you agree is a good thing.

          If you’re objective really is to solve practical problems, and your position really is that the two sides must come together to do this, can you give me your opinion on reducing federal power to accomplish it? And if you don’t think that will work, can you explain why not?

          • “You’re kidding. This is the best you can do?”

            No, he’s not kidding. He doesn’t even mean what he’s saying, as shown by the contradictions you’ve caught him in.

            He’s just in his rare “let’s kiss and make up” mood right now because he got body-slammed by a gang of us on this thread. I think getting pwned over his Palin smear was the final straw, especially after his “Palin smear? Little ole’ me?” followed by line and verse quoting him.

            So he’s trying to ingratiate himself by admitting his mistake over the stimulus. But no one knows, not even himself, whether he really means it. As your own examples show, he may come back with something contradictory next week.

            His usual “I’m such a wise pragmatist, I don’t believe in ideologies” schtick is just his way of explaining that he’s got no principles. Another way of looking at it is that pretty much all of his positions are driven by emotion, and he desperately wants to pretend they are driven by something else, so he prattles about his “analysis” which somehow always seems to steer him towards the position that appeals to him emotionally.

            In many respects, he’s more contemptible than the typical leftist, who is at least honest and relatively consistent about what they think.

          • Zozo, not only are simply throwing off base ad hominems out there, but you aren’t making logical sense. However, I do not you were not able to counter anything I said. Your ad hominem argument is a logical fallacy, so my points stand.

            But what you say is silly. Yes, the demographics and country is shifting leftward, and the right will have to get used to it. At some point they will shift back to the right and the left will have to get used to it. That’s acknowledging the reality of what I’ve often called the pendulum of politics. Your second point is even sillier. I’m stating what Kennedy’s perspective was at the end of his life — he believed the country was on the right track, and it was akin to Moses seeing the promised land — after years of wandering in the conservative wilderness, things were changing. Yet you conveniently not that I said ‘it may not really happen that way’ (or something to that extent), making it clear that I did not think Kennedy’s perspective was the right one.

            I’ve given many ideas on solving the problem of expanded federal bureaucracy. Unfortunately, I’m not optimistic they will happen. My preferred solution would be to go back to something like the Articles of Confederation, and have many smaller units, where less power could be centralized. That’s not a perfect solution, but large bureaucratic nation-states are not only dangerous, but in a globalized high tech world, losing power to big money. The movers and shakers pulling the strings of govenrment — from the executive to Congress to the bureaucracy — are from big banks, big corporations, and interests outside of government.

            The left sees the danger from big money, but ignores the danger of big government. The right, and libertarians, see the danger of big government, but often dismiss concerns about big money.

          • You worm. You pathetic worm. Erbie, you’ve bleated incessantly about how you want people to “engage” with you and discuss the issues. Zozo did that completely above board. He asked reasonable questions. And all you can do is shout “ad hominem!”

            Yet again you expose yourself. You bend every term to suit yourself. In this case, ad hominem just means someone pointed out a contradiction in your own postings, and you don’t know how to respond. You don’t really want to discuss anything. You want to lecture to others, and have them agree with everything you say, and when they pin you to the wall on one of your many stupidities, you either vanish and pretend it didn’t happen, or whomp up some pretend reason why you are offended. Pathetic, I say.

            Why do you come here and embarrass yourself this way? Just to feel good about lecturing to the rest of us? Can’t you see that you commit all the things you accuse others of doing?

            No, you can’t. You are just pathetic.

            You’ve done such a good job of demonstrating it this week that I’m ready to take a vacation from pointing it out. But you can go forward with the assurance that you’ve shown your ass, and everyone here has seen it. Think what you like to sleep at night. We know what you are.

          • Scott,

            Thanks for the explanation. It appears we agree on the idea of less centralization of power and “smaller units”. I honestly would not have guessed that from your writings I’ve read so far, so I do appreciate the insight.

            I also agree that partisans tend to miss the dangers of the major players that are in their individual camps: corporations and government. I typically refer to both of them as “gangs”, where they each use collective power over individuals. One particular problem I worry about is that while corporations are an obvious collective entity that wields power, many view government solely as the benevolent protector-agent of the individual versus the corporate gangs. It’s a nice idea, except government is made up of flawed human beings – just like corporations – and forms its own gang. In many respects it is a more dangerous threat to the individual, as we have authorized it to use violence (or the threat of violence) to force capitulation.

            Also, my second comment was not an ad hominem attack. I wasn’t questioning the validity of the left’s position when I brought up your previous comments, I was questioning your position regardless of its relation to the left’s position. I don’t think your position validates or invalidates the left. That wasn’t a logically fallacious ad hominem attack. That was just an attack. :)

            Yet you conveniently not that I said ‘it may not really happen that way’ (or something to that extent), making it clear that I did not think Kennedy’s perspective was the right one.

            Not only did I conveniently not include that you wrote “it may not really happen that way” (or something to that extent) when I quoted you from the thread, I was actually clever enough to make you not even write it in the first place. But that’s okay, blogs are a loose medium and if you intended to point out in that thread that you didn’t agree with his perspective then this clarification is good enough for me.

            One final thought, all snark aside. Your comments are attacked quite often on this blog and I’ve wondered why you continue to visit. Based on what you write when talking about your fundamental principles and beliefs, I think the answer is you’re much more in line with the authors here than the commenters believe. However, while you’re a good writer, you’re not communicating effectively most of the time. Your points are not getting across the way you intend. As you probably know, effective communication means the receiver fully understands the sender. If this does not happen, it is the fault of the sender, not the receiver. It’s obvious to me that there is a communication problem between you and the rest of the QandO community. Discussions here may be more productive, civil and interesting if you can figure out a way to fix that problem.

            I understand this was unsolicited criticism but it is honest and part of my profession. After you let me have it for offering it, please consider that what I’ve said might be true – and what could be gained if you can bridge the gap. Nearly every argument is based on miscommunication. Once people reduce an argument to its base, they often find themselves on common ground where they can effectively communicate and work toward resolution. This is how the pragmatic solutions that can be discovered by debate will be found.

  • I was wrong — that was too much spending

    I’ll give Erb credit for this. It’s too bad more people didn’t see this a year ago.

  • a few years ago Paul Krugman said that a 500 Billion deficit was a very bad thing, however now he says that a 9 trillion deficit isn’t reall that bad.

    Difference, Obama vs bush, hilarious that anyone listens to this piece of sh1t

    http://www.nytimes.com/2009/08/28/opinion/28krugman.html?_r=2

    • Krugman’s argument has some logic, but I think it rests on faulty assumptions. First, it’s assuming economic growth by 2019 to get to the 70% of GDP number. He admits he’s assuming a low interest rate for a decade, which I think is extremely optimistic.

      In short, if this is just a business cycle bump, if we’ll get back to our consumer driven lifestyles like 2006, and if the economy was built on solid ground before this crisis, then Krugman’s argument is sound. If, however, we are experiencing a necessary restructuring after running up unsustainable public and private debt, creating a bubble economy which supported a huge unsustainable current account deficit, then high deficits only make the problem worse. They will cause inflation which will raise interest rates, stymie growth (perhaps creating stagflation), and put us deeper into crisis.

      Ironically, I think many Democrats are making a mistake on the economy that is very similar to the kinds of mistakes the Republicans made after 9-11 in choosing a ‘social engineering’ war (to spread democracy and alter the political terrain of the region) as a response. We live in interesting times.

      • Ironically, I think many Democrats are making a mistake on the economy that is very similar to the kinds of mistakes the Republicans made after 9-11 in choosing a ’social engineering’ war (to spread democracy and alter the political terrain of the region) as a response.

        Social engineering is trying to force society to be less free and thereby less fit to human nature. This is not what the Iraq war was about, it was about altering the political landscape of Iraq to be more fit to human nature, and thereby giving an example to the rest of the “ummah” which would erode support for the Islamist’s jihad. Ending support for that jihad is exactly the only thing which can prevent another 9/11 sort of incident, nothing else can work to keep the bomber from getting through but ensuring few enough want to launch.

        The Democrat’s mistake is in thinking more Government is the answer, when Government created the occasion for the question.

        Greed has always been with us, it took Government putting it’s thumbs on the scale to de-rate risk in the mind of the investor to create the real estate bubble.

  • Tom, you are assuming that western ideals = human nature. It’s the common error, to think that the “way we think” is “natural.” Iraq and Afghanistan were about trying to socially engineer a society to operate in a way contrary to its cultural development. That’s why it failed.

    • The simplest way to describe your error is that you are conflating the specifics of culture and accidents of history with being differences in human nature. To put it another way, when the Founders undertook the revolution, they were not regrettably engaging in social engineering. The ideals of that revolution are universally applicable to humanity and perhaps all sophonts, and we are the better off the more universally and consistently they are put into practice.

      • Well, Tom, you can believe that the particular cultural ideals of the US revolution are applicable to all humanity. I’m sure Muslim fundamentalists believe that about their approach as well. Everyone thinks that the ideas they were raised with are THE right ones applicable to all. That sad naive way of thinking is a major cause of death and destruction in the world.

    • Tom, you are assuming that western ideals = human nature. It’s the common error, to think that the “way we think” is “natural.” As I’ve told you all many times before, they’re just wogs who don’t know any better, so expecting them to actually have a free and open society is preposterous. They are just panting to give all their newfound freedom over to their Iranian masters, because religion trumps everything over there. You just wait. Iran will be the winner here because Iraq could never, ever become anything like a modern society, given that they’re just wogs. I decree it.

      Iraq and Afghanistan were about trying to socially engineer a society to operate in a way contrary to its cultural development. You just can’t turn wogs into modern functioning human beings. That’s why it failed.

  • Another in a long line of reasons not to be enacting any new and huge entitlement or cap-and-trade.

    Really high deficits require spending cuts and finding a new way to tax. Cap’n'Trade is the new moral taxation, projected to take billions in revenue.

  • Grocky, you’re funny. I answered Zozo directly. You just get yourself into an emotional tizzy over me. Funny. *eyes rolling*

  • Krugman versus Krugman is a big debate over the deficits.

    In it, one of the Krugmans seems to have overlooked 62 trillion dollars.

  • Zozo,

    I visit here because I learn interesting information that otherwise would be outside what I read, and I try to understand a perspective that in some ways is different from my own, but sometimes with which I agree. For all the criticisms each way, I find the writers here to have a creatively interesting approach to politics.

    There are some issues that always arouse emotions. I am very opposed to US foreign policy, consider it imperialistic, wasteful of money and lives, and ineffective in truly promoting US interests and security. Many people here have a military background, and find that position on its face to be worthy of ridicule and dismissal. When I provocatively put forth those ideas, I get people made. I try to hold myself back, but sometimes if I think someone is being really misguided I let emotion get the better of me and I write something intentionally provocative.

    I also think the scientific evidence on global warming is overwhelming that it is partially caused by humans, and agree with Obama’s nobel prize winning cabinet official (Dr. Chow? The name escapes me now, he was interviewed in TIME last week) that political opposition that tries to cherry pick stories to make it seem that the evidence is weaker than it is, is irresponsible. Science, not politics, should make this call. I think that for political reasons people aren’t accepting that human activity can have a profound impact on the ecosystem. That said, I don’t know what to do, I’m not necessarily in favor of current government efforts to try to fix it — I’m undecided on how to respond. But the fact I believe humans are part of the cause is something some commentators can’t accept.

    Finally, while I agree that government bureaucracy is harmful, and governments are the most deadly and dangerous things humans have ever created, my experience and study has led me to conclude that too much faith in markets is just as misguided. There is no single correct “system,” in part because governance must match cultural and social situations (a Burkean/conservative view there, really) and in some cases a free market might be effective, in others it would fail miserably due to corruption and people trying to circumvent it. My distrust of markets, even if combined with a distrust of governments, is anathema to many here. I also have very “libertarian” views on social and civil issues, which many dislike.

    All that said, I really believe people who disagree can still learn from each other and get along. I do find that even when people attack me, they often have ideas and perspectives I can learn from. I can take the insults — if those bothered me, I’d be long gone. And, to be sure, I don’t visit here as much as I used to because I’m busy (and sometimes I end up not responding to people because of that). But if it wasn’t for a suggestion here that I go do my own blog and get my own readers and not comment here so much, I’d not have started my own blog. The people I’ve met and blogs I’ve discovered there have been really worthwhile (and tend to be less about just politics than this one — I’m not as much of a political junkie as most people here, I don’t follow day to day politics in the US very closely).

    Bottom line: I’m not sure what the right political course of action is in these times of crisis. My leanings are leftward, and I’m anti-militarist, but I see the dangers of big government and am considering different perspectives. I think I’m far less certain, and far more willing to change my opinion on many things (such as Obama’s stimulus as I noted earlier in this thread) than people realize. In political debates people forget we’re fallible humans with limited information who may be wrong. I try to remember that.