Economist's View: Republicans and the Deficit

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After so much lately about Democrats, politics, and the budget deficit, let's move to the other side of the political spectrum and look at Republicans, politics, and the budget deficit. This is Jonathan Chait:

Neocons and Bush deserve each other, by Jonathan Chait, Commentary, LA Times: News reports are suggesting that Bush plans to send more troops to Iraq. Neoconservatives have been urging ... more troops in general for years — even before the war started. And that's not surprising. ... If you read old issues of the Weekly Standard, which is the bulletin board of neoconservatism, you can find calls for a bigger military going back to the Clinton administration. ...

Bush may have come to believe in the neoconservative mission for the nation's military. But he never accepted the corollary about increasing the military. So he ended up pursuing Dick Cheney's foreign policy with Bill Clinton's army.

In hindsight, we can see that the neocons made two huge blunders. The first was to go along with Bush's enormous tax cuts. When Bush took office in 2001, any halfway honest budget analyst would tell you that he was making a lot of promises that didn't add up. The neocons calculated that, if they supported the tax cuts like good party soldiers, Bush would grant them their defense budget increases later on.

So the Standard enthusiastically boosted the tax cuts. Neoconservative defense hawk Frank Gaffney concurred... "Those of us who look forward to helping you succeed in your efforts to rebuild our defense posture appreciate that your success in reducing taxes is a first and highly synergistic step toward that goal," he wrote. "Consequently, you can count on us in the national security community to support you in both of these important endeavors."

Whoops. It turned out there wasn't any money left over for a big troop increase... Enraged at the lack of a defense hike, the Standard published an editorial calling on then-Defense Secretary Donald H. Rumsfeld, and his deputy, Paul Wolfowitz, to resign in protest of "the impending evisceration of the military."

The Standard lamented its own gullibility. "Those of us who expressed concern about the Bush administration's shorting of the military were told not to worry," the editors wrote. "Bush had to pass his tax cut first. Then the damage would be repaired in the [fiscal year] 2002 and FY 2003 budgets. But that's not the way things have turned out."

Let me translate this passage: We thought Bush was just lying to the American public, but now we discover he was lying to us also!

Let me quote one more passage from that editorial, because it's really incredible. The Standard warned that Bush's budget would make an invasion of Iraq all but impossible: "In practice, assembling a heavy armored force of even four divisions to defeat Saddam's army and then occupy Iraq would require every heavy unit based in Korea, Europe and the United States." Yet, just a few months later, the neocons demanded the very war that they said would be impossible, to be waged by that same eviscerated military.

But if they had only withdrawn their support earlier, before the big tax cut and before Bush invaded with too small of an army to win, the United States would be in much better shape today — and so would the neocons.

There has been a lot of discussion about the budget deficit lately, but the deficit itself is the wrong place to focus. We need to ask a straightforward question. What size government do we want and how do we fund it in the long-run?

We can't just pick whatever size government we want irrespective of our ability to pay for it. Nor can we pick whatever tax rates we want without consideration of our needs. How the party in power should react to a surplus or deficit depends upon an evaluation of our ability and willingness to pay for government relative to how well the existing level of government services is doing at meeting our goals. What do we need, what can we reasonably afford, and who should pay for it?

The answers aren't easy and they differ by party so this requires a political resolution, but it's still better to focus on these questions instead of on whether the deficit taken in isolation is too large or too small.

One way to characterize the discussion from Paul Krugman (with as assist from Brad DeLong) that has generated so much discussion recently is to first recognize that Krugman is starting with the premise of fiscal responsibility. Suppose we are able to generate a surplus relative to the existing budget through fiscally responsible policies. What should we do with that surplus?

We have needs now that are not being met, and we have needs in the future as well. Thus, given the two sets of needs, there is a choice to make. Do we spend the money now, as Krugman has advocated, or do we save it (reduce the deficit) to spend in the future?

Krugman's point is that political realities have lowered the probability that we will be able to meet future needs, and because of this the tradeoff has shifted from future needs toward present needs. It's hard to disagree with that point of view given recent experience, and thus it's hard to disagree with the recommendation to shift priorities to the present until a better commitment mechanism can be enacted. It's really a question of how strongly we can commit to the future and how important our future needs are relative to our present needs.

Posted by Mark Thoma on December 24, 2006 at 03:06 AM in Budget Deficit, Economics, Politics, Taxes | Permalink

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This will a very useful post on this topic. Mankiw started off in a constructive way but then reverted to finger pointing. See Angrybear for my thumbs up to Greg's beginning and strong objection to the rest.

Posted by: pgl | Dec 24, 2006 6:43:25 AM

mark (gist)

'forget too big too small '
that's a relative question

we got to know what size expenditure we want first
and are we will to pay for it
or at least what part we are willing to pay for

are you saying no macro science need be applied ???
yup
we got to know what size expenditure we want first
and what part of it we will pay for it
out of what tax sources
or at least
find the rival sets of wants and pay sources

but isn't there some thunder cloud here
on the horizon

some notion
we can defer this to doomsday

and the bigger the deferal the sooner the doomsday

i contend that false fear drives the little folks spooky
this site is running mad with debt tally fiends
like the population bvombers and the gas warmers

numbers numbers numbers

but what if its mad science ???
what if bill vickrey was right ???

open question science needs
to play a starring role here
not as the heavy of wall street's narrative
but maybe as bill V's total employment
win win white hat

after all
a fed bond is somebody's safest asset

clear that mirage away and sense might reign

Posted by: slink | Dec 24, 2006 7:16:19 AM

"In hindsight, we can see that the neocons made two huge blunders. The first was to go along with Bush's enormous tax cuts. When Bush took office in 2001, any halfway honest budget analyst would tell you that he was making a lot of promises that didn't add up."

Enormous category mistake here. If you eliminate taxation on capital then budget deficits are transformed from liability to income. If you can afford to buy Treasury instruments that are denominated in $100,000 chunks. The British aristocracy got rich investing in Pitt's revolving fund during the Napoleonic while the poor got crushed under consumption taxes. A policy that played out on this side of the water with a Boston Tea Party, cries of 'No Taxation without Representation' and something I like to call 'The American Revolution'.

Take the Economic Right policy as a whole and you get a reversion to Toryism where deficits are not so much burden as opportunity. Taxes are only a burden if you pay them, interest on debt is only a problem if you are paying it and not collecting it. The Neo-Cons knew what they were doing in supporting Bush tax cuts, AEI, Cato and Club for Growth don't plan to be paying the bills. They do expect that the interest on their bond holdings will be paid in full, while the principle on workers bonds will simply be abrogated as "phony IOUs".

Don't fall into the trap of thinking Neo-Cons simply fell for the con, in fact they were the perps. Oh did you think the 'Con' in Neo-Con stood for 'Conservative'?

Posted by: Bruce Webb | Dec 24, 2006 7:27:21 AM

It is revealed preference.

I have been saying all along that we are losing the war on terror because the Bush tax cuts were more important to the republicans then providing the military the resources they needed to win. It is nice to see "someone" agree with me.

Posted by: spencer | Dec 24, 2006 8:11:33 AM

This war on terror has more to do with what we are doing than what anyone else is doing. If Bush is proceeds as he is wont, there will indeed be threat from a global terrorists operation. To date, any escalation in Iraq by the US fuels the conflict, increases support for terrorists and the sectarian conflict in Iraq. We're not wanted in Iraq, in the middle east, and no amount of force will change that. Diplomacy, maybe, but not force.

Posted by: ken melvin | Dec 24, 2006 8:31:12 AM

Oh, good post. Good and well said.

Posted by: ken melvin | Dec 24, 2006 8:32:37 AM

You make a lot of good points. However, the peace dividend is gone. The $300 Billion FY2000 defense budget is unlikely to return anytime soon due to current and future obligations of the Iraq occupation. Under Clinton, revenue was never under 18% of GDP. Under Bush, revenue has never been over 18% of GDP. Clearly, more revenue is needed. For fiscal sanity, we need to back out of Iraq and carve out at least $100 Billion from new program defense spending.

Letting Bush reap political benefits from low tax rates and deficit spending so his successor can be saddled with higher tax rates and continued deficit spending is foolish. Bush should be forced to start paying now to ease the burden on his successor. If the elite Americans get some economic pain to accompany the Iraq SNAFU, maybe they will be less gung ho to get behind imperialism in the future.

Posted by: bakho | Dec 24, 2006 8:52:50 AM

Neocon-ism has always been about the defense of Israeli interests and little else. If the US economy needs to be damaged as a result, so be it. US troops will do all the fighting and dying, and the USA will be steered into an endless war vs. Muslim nationalism and anti-colonialism. So it should come as no surprise that the Neocons' policies have been bad for the US economy. They don't really give a hoot about our economy, other than not wanting it to collapse so that it cannot fund the military that they need to use for their ends.

Posted by: maria | Dec 24, 2006 11:38:44 AM

Spending money on Isreal is what Democrats and Republicans have been doing, unquestioningly, for some time.

Jewish money and power still hold sway, but nothing lasts forever.

Ultimately, Isreali's will be on their own.

The sooner Isreal makes peace with her neighbors, the less complicated everyone's lives will be. Building walls and putting Palestinians in ghettos is not a long-term solution.

Posted by: | Dec 24, 2006 11:55:28 AM

Mark - "Suppose we are able to generate a surplus relative to the existing budget through fiscally responsible policies. What should we do with that surplus?"

Well, let's put the debt issue in perspective before we spend all of that new money:

Imagine trying to manage a household by borrowing $500 a day 365 days a year for years on end.

Imagine trying to run an automobile dealership and in order to "stay in business" you are borrowing $5,000 a day 365 days a year for years on end.

Imagine governing a city, borrowing $500,000 a day 365 days a year for years on end.

Imagine governing a state, borrowing $5,000,000 a day 365 days a year for years on end.

Imagine governing a nation, borrowing $1,200,000,000 a day 365 days a year for years on end. That's what the U.S. is doing with no relief in sight.

Imagine that all of the above interest payment costs are based on piles of six-month, one-year, and two-year interest rate loans, and if the interest rates rise, the cost of borrowing may explode on you, slowly at first, but explode it will. That's the problem.

Interest Costs to Stay Afloat (without interest rate increases):

Household - $182,500 per year
Automobile dealership - $1,825,000 per year
City - $182,500,000 per year
State - $1,825,000,000 per year
Nation - $438,000,000,000 per year

We're going to do what with that new money?

Posted by: Movie Guy | Dec 24, 2006 12:56:22 PM

Mark Thoma - "Krugman's point is that political realities have lowered the probability that we will be able to meet future needs, and because of this the tradeoff has shifted from future needs toward present needs. It's hard to disagree with that point of view given recent experience, and thus it's hard to disagree with the recommendation to shift priorities to the present until a better commitment mechanism can be enacted."

What mechanism? Outlay Republican presidents?

Krugman's bottom line statement was this:

Paul Krugman - "The answer, I now think, is to spend the money - while taking great care to ensure that it is spent well, not squandered - and let the deficit be. By spending money well, Democrats can both improve Americans' lives and, more broadly, offer a demonstration of the benefits of good government. Deficit reduction, on the other hand, might just end up playing into the hands of the next irresponsible president."

He wasn't simply focusing on now. He was dismissing the idea of doing anything to achieve deficit reduction now or in the future. Why? Well, the U.S. might elect another irresponsible President.

Krugman's position is nonsense.

It is unfortunate that others are trying to justify what he actually said.

We're headed for the wall, full speed ahead. Ignore the interest payment obligations on the National Debt. Ignore the fact that interest rates may increase. Spend the extra monies now. Live for today. Ignore future needs and federal program obligations. We don't care about people's needs in the future.

Krugman's approach is fiscal stupidity.

Where are the adults?

Posted by: Movie Guy | Dec 24, 2006 1:17:19 PM

One of us doesn't fully understand the economic consequences of paying interest on the debt.

Posted by: Mark Thoma | Dec 24, 2006 1:21:11 PM

Take your pick:

Speeches and Slide Presentations
David Walker, Comptroller General of the United States

Our Nation's Fiscal Outlook: The Federal Government's Long-Term Budget Imbalance

Saving Our Future Requires Tough Choices Today

Posted by: Movie Guy | Dec 24, 2006 1:25:21 PM

http://select.nytimes.com/2006/12/22/opinion/22krugman.html

December 22, 2006

Democrats and the Deficit
By PAUL KRUGMAN

"The answer, I now think, is to spend the money - while taking great care to ensure that it is spent well, not squandered - and let the deficit be. By spending money well, Democrats can both improve Americans' lives and, more broadly, offer a demonstration of the benefits of good government. Deficit reduction, on the other hand, might just end up playing into the hands of the next irresponsible president."

Wonderful advice; I would add, attempts are significant deficit reduction will almost certainly fail with a Republican President who is determined not to allow tax increases. Not only will deficit reduction fail, but it will decisively alienate voters and lead to another awful Republican Congress which is what Republicans are after. Voters do not wish social benefit programs slashed and do not wish higher taxes, while the President is determined to spend every possible cent on the tragic lunacy of occupying Iraq.

Happily Democrats have the lesson of the Terminator at hand, and never ever go against a Terminator. When California voters grumble about the Terminator, we may learn another lesson, but not not not not not yet.

"Hasta la vista, baby."

Posted by: anne | Dec 24, 2006 1:31:28 PM

Bait and switch is not poltically viable. That's why we just drove the stupid Republicans from their Congresional majorities.

Odd that certain Democrat economists are now in the Dick Cheney "deficits don't matter" camp. After all the opposing outrage that was mounted.

What is the next planned reversal?

Posted by: Movie Guy | Dec 24, 2006 1:33:27 PM

Paying interest redistributes income, but it is not a burden. The burdensome part is the part that flows out of the U.S. That has been rising over time, but it needs to be balanced by the flows of interest payments into the U.S. (simply trading bonds with another country is not a burden since there are reciprocal obligations, so it's net flows that matter, though there may be a risk component to consider).

In addition, there is a fallacy of composition here when you compare the government to an individual. Govs don't die so they can roll over a fixed deficit indefinitely with no change in the burden. In addition, unlike an individual, the deficit is a promise to pay dollars. Guess who prints those? It would be inflationary, but it can always be paid.

In any case, when people calculate the net burden of the interest payments on the debt, it is not that large. That's not to say it doesn't have redistributive consequences.

Drop as many links as you want, it won't change the basic economics nor the basic facts. You can find this discussion in most any principles text.

Posted by: Mark Thoma | Dec 24, 2006 1:34:34 PM

Hasta la vista, fairytale nonsense.

The Terminator is a cartoon character. A fiction. Just like the ongoing embrace to dismiss future needs.

Such pretending...

Posted by: Movie Guy | Dec 24, 2006 1:39:56 PM

Congressional Democrats only have to keep the growth in debt vaguely in line with economic growth to avoid a problem. This should be done readily, though growth in defense spending needs to be closely watched. I do enjoy referring to the Terminator as an example, because we find a Republican who has been sensitive enough to voter needs and wishes to move closer to the Democrats. Were we able to have a Terminator run for president, he could easily be the most popular Republican candidate with the potential to carry California. So, Democrats have watched and learned. As Brad Delong of the Krugman-DeLong Doctrine sort of noted; "We won't be fooled again."

Posted by: anne | Dec 24, 2006 1:45:44 PM

Ah, but the Terminator is the successful governor of bluer than blue larger than large California where voters selectively chose Democrats over Republicans in critical election races but voted for the Terminator who is happily doing what he can to terminate global warming. Voters notice. Paul Krugman noticed, and I noticed.

Posted by: anne | Dec 24, 2006 1:51:06 PM

There are reasons to worry about the deficit. As noted above, the net interest that flows out of the U.S. is a burden and there are redistributive consequences to consider apart from the economic effects.

But the biggest reason to worry, in general, is that deficits raise interest rates. When the gov competes with the private sector for funds as it borrows money, the price of those funds goes up (i.e. the i-rate goes up).

A higher interest rate lowers economic growth. Thus, you can view the deficit is as borrowing from the future. Output is higher today, but lower in the future since growth is lower.

But currently we've been able to borrow at low i-rates even with the deficit because of the rest of the world's willingness to loan us money. Thus, presently, it's difficult to argue that the debt has lowered growth.

But that could change quickly - i-rates could rise fast - and that's the worry. If that happens, and if the debt is part of the reason, then it will become a burden.

Thus, the economy should not be placed in a position where growth is a risk should i-rates increase suddenly.

That's why all of us, assertions here and elsewhere to the contrary, are talking about fiscal responsibility.

People keep trying to twist it into an irresponsible position, but I don't think a fair reading of Krugman and others can come to that conclusion.

Posted by: Mark Thoma | Dec 24, 2006 1:54:02 PM

Mark Thoma - "In addition, there is a fallacy of composition here when you compare the government to an individual."

I didn't compare government to an individual. I compared entities - a household, business, city, state, and nation. The household could go on for decades if not more than a century, as the head of the household could change.

[That too is the Fallacy of Composition]

Mark Thoma - "Drop as many links as you want, it won't change the basic economics nor the basic facts."

As you have explained, you don't read the links anyway. They are for the benefit of others unless you're willing to challenge David Walker. If you want to take on David Walker's assessments, then you will need to read his works and the GAO analysis.

[If he is saying something different from mainstream as expressed in comments here, then yes, this is a challenge. More likely there is no difference once the issues are fully examined.]

[On the links for others, I would encourage people to start with a mainstream principles text rather than links in comments on a website from an anonymous person. The information is there, it's explained thoroughly, and it's been vetted by the profession.]

Mark Thoma - "Govs don't die so they can roll over a fixed deficit indefinitely with no change in the burden."

Governments, on occasion, are replaced. Examples exist.

[That doesn't change what I said - if they are "replaced" it wasn't optimal to pay the debt ...]

Fixed deficits added in successive years continue to add to the interest payment obligations of the cumulative debt and as interest payments rise, the discretionary programs (as in the case of the USA) get crowded out by the combined interest payment obligations and mandatory programs growth vs inbound revenue flows. All of this is addressed in the GAO studies via the links I provided. Other external assessments have demonstrated the same type of concerns.

Debt matters. Interest payments and interest rates matter.

[Yes - they matter just as I've explained]

Posted by: Movie Guy | Dec 24, 2006 1:57:20 PM

Mark Thoma - "Thus, the economy should not be placed in a position where growth is a risk should i-rates increase suddenly.

That's why all of us, assertions here and elsewhere to the contrary, are talking about fiscal responsibility.

People keep trying to twist it into an irresponsible position, but I don't think a fair reading of Krugman and others can come to that conclusion."

Actually, the the IMF reports on the USA should be considered.

Why not do a few main posts on the IMF assessments of U.S. fiscal responsibility?

You might not like putting those words in a main post.

[The assertion is hollow. I have posted critical IMF reviews of the U.S. economy in the past and will do so again when it says something worth reporting. It has nothing to do with like or dislike.]

Posted by: Movie Guy | Dec 24, 2006 2:06:52 PM

I like the abbreviation "i-rate". Very funny.

What happens when the rest of the world, mainly China and Japan it seems, don't loan the U.S. any more money?

Is the reason for the U.S. to be such a military power to......?

Posted by: evagrius | Dec 24, 2006 2:10:42 PM

Warren Buffett's worry and mine echoes Mark Thoma's. While the domestic defict is not a worry for Buffett as such, the growing international debt has reached the point where investment income from abroad is less than investment income paid abroad. We surely do need to save more and invest more, but we are constrained for the time in making this so. So allowing the deficit to roughly increase with economic growth will have to suffice. Also, we can worry all we wish about interest rates but for all the worrying long term rates are to-die-for more or less.

Posted by: anne | Dec 24, 2006 2:17:38 PM

Ah, when the dread IMF urges that we free all sorts of budget money by leaving Iraq immediately, then I will care a fig what the IMF reports. Notice how astonishingly simple it is to worry about budget monsters and not think we could dissipate lots of deficit monster footprints be leaving Iraq immediately. Deficits are only deficits, I guess, when critical domestic programs are the issue.

Care to dissipate deficit monsters, leave Iraq immediately.

Posted by: anne | Dec 24, 2006 2:23:43 PM

Thanks Mark for bringing some sanity to the discussion.

There are a number of variables one needs to consider when thinking what a country's fiscal policy should be. I'm sure somewhere in your basic 101 class you talk about debt dynamics. There are just a few variables. Stock of Debt, growth rate of economy, interest rate, and deficit.

None of these things are discussed in the Krugman article.

What is the Stock of debt and where is it going? What is the interest rate and where is it going? What is the growth rate and where is it going? What is the deficit and where is it going?

It would be nice if Paul could give a bit of perspective on the technocratic aspects of his proposal. We don't even know what he means by pay-as-you-go. Does he mean keeping the deficit constant in percent of GDP or nominally or in real terms?...or just "roughly" because he actually thinks it's Ok to drift up a bit in one or some of these measures. No analysis was offered.

Brad confusingly says pay as you go means the tax cuts that expire will reduce the deficit. I certainly don't understand how. PAYGO means that the Congress meets the rule by spending all of that extra revenue.

Another aspect of fiscal policy is the level of revenue and expenditure. Again, no clue from Krugman's article. I presume he thinks we should have a higher expenditure to GDP ratio but the thought is not articutlated.

With the dearth of analysis that one would expect from an economist disussing the future path of fiscal polciy and the petty political analysis (applied to defense, his analysis would support a "stay the course" policy in Iraq indefinitely so future presidents would not have the freedom to start a new war because we would still be stuck in an old one) behind it no wonder he has caused a storm of protest.

Posted by: Bupa | Dec 24, 2006 2:24:21 PM

Anne Darling,

The staff IMF are not free to express themselves freely. Their recommendations on the US economy are heavily edited to not cause offense in the US Treasury and the White House. You have to read between the lines. There message is pretty clear if you read with such a perspective.

Posted by: Bupa | Dec 24, 2006 2:30:14 PM

Movie Guy - "Debt matters. Interest payments and interest rates matter."

Mark Thoma - "[Yes - they matter just as I've explained]"

Thoma posted at 1:54:02 PM. I didn't see that post as I was writing mine. Regardless, I have been talking about interest payment obligations and interest rates in a number of comment posts long before 1:54 PM. Pgl and others have raised related concerns.

I agree with Mark's post, but there's not much new there that hasn't been covered by others since this general began. Still, it is decent that he added his points.

One point on the links dismissal follow up by Mark Thoma as evidenced with his nonidentified [xxx] which I and other also have used in our own comment posts:

Thoma embedded remark - "[On the links for others, I would encourage people to start with a mainstream principles text rather than links in comments on a website from an anonymous person. The information is there, it's explained thoroughly, and it's been vetted by the profession.]"

This isn't a classroom and we're well beyond that level of discussion.

My comment links normally identify where they are from. I have identified Calculated Risk's charts in such manner with the lead-in comment on another thread, David Walker/GAO on the lead in, and so forth. These are not little league anonymous people or run of the mill scum who haven't performed considerable professional analysis. I don't waste time posting junk. Most people who have ever reviewed any of the links would know that. Thoma, of course, doesn't read my links, rather just bitches about them, so he wouldn't have a clue other than reading the link titles and authors named that I have posted.

As for the other [xxx], it's clear that the quibbling has begun. Time to do other things than engage in this type of predictable banter.

Merry Christmas to all!

Posted by: Movie Guy | Dec 24, 2006 2:31:39 PM

"Hasta la vista, baby."

Just so you know, anne, I thought that was a cute signature. I wasn't trying to kill your sign off.

Now the Terminator thing is a different matter - but that's just a personal preference.

No harm intended.

Posted by: Movie Guy | Dec 24, 2006 2:36:01 PM

Free the IMF, the IMF is not free, who knew? "Free the IMF," I cry. The IMF must be free, at once. Who knew? Are we dating, sweetie pie? Not even in your dreams. "Free the IMF."

Ah, of course, there is no thought of holding the deficit in place because, well, because that would mean cuts since there is inflation and beside lots of programs need to grow in line with economic growth. So the deficit can grow in line with economic growth according to the Krugman-DeLong doctrine.

Could we possibly limit the growth of defense spending? I wonder, but with the growth of number of troops and the tragic insanity of Iraq I cannot see how.

Posted by: anne | Dec 24, 2006 2:38:23 PM

Anne, don't try to control my dreams, you dictator,

The IMF is largely composed of competent technocrats with their hearts in the right place. The number two boss at the IMF is appointed by the US Gov't. That person must clear all stuff written about the US before it it released to the public.

Still, a reader as intelligent as you can surely decipher the important points the IMF staff is trying to get across through the censorship they face. Think of it Voltaire trying to write something meaningful in 18th Century France but getting it through the censors. It is an art.

Posted by: Bupa | Dec 24, 2006 2:47:26 PM

I hope we can all agree, whatever our other differences, that wasting or throwing away money is not good government policy. And the war in Iraq is simply a waste of money and a lot of it; just like throwing it away. So whatever else one might believe, one has to believe that the sooner this insane war is ended the better off we will be.

Posted by: maria | Dec 24, 2006 3:26:35 PM

The net effect of US fiscal policy since Reagan and the Greenspan SS fix has been to increase SS taxes on the low to middle class, give tax breaks to the wealthy, borrow money and make interest payments to the wealthy bond holders. The net of this policy is to transfer wealth from low and middle class workers (by collecting more SS taxes than are paid out) and transferring this wealth to bond holders.

Why pay bond holders interest when the revenue can be collected from them in the form of taxes?

The wealthy can pay a lot higher tax rates without hurting the economy as Clintonomics proved in the 1990s.

Why not make the political point that the Bush Iraq SNUFU is going to require increases in taxes?

Posted by: bakho | Dec 24, 2006 3:42:20 PM