Another Take On The Debt & Deficit Crisis

[Conan71]

This was forwarded to me earlier today and seemed worthy of consideration and discussion.

The media were enthralled by former Federal Reserve chairman Alan Greenspan's suggestion on Sunday's Meet the Press that we should immediately end the Bush tax cuts and raise the marginal brackets to what they were in Clinton's last year in office.

Before conservatives summarily cast this aside, maybe it should be considered with one caveat: we also go back to former House Speaker Newt Gingrich's spending levels in 1999.

Consider the numbers before thinking me crazy.

Gingrich's last budget before he resigned as Speaker had total unified expenditures -- meaning including Social Security and Medicare -- of $1.7 trillion. Adjusted for inflation, that would be $2.3 trillion today.  As the Office of Management and Budget is estimating tax receipts of $2.5 trillion this fiscal year, we would produce a $200 billion surplus.

Imagine the economic benefits as the dollar exploded in value along with treasury prices bringing long-term interests rates down, while pushing oil and commodity prices as well as inflation far lower too.

For those questioning this causal relationship, professional investors for years have been shorting the U.S. dollar and buying gold and other commodities.  This has been tremendously rewarding for quite some time.  Anything that ended this decline in the dollar -- a balanced budget, for example -- would result in a huge unwinding of this carry trade that would have very positive impacts on our economy.

Sure, we'd all pay a little more in taxes, but this would easily be made up for by the economic and stock market explosion it would likely create.  The decline in long-term interest rates might also help the almost dead housing market which could then spark new construction hiring while firming up all our balance sheets.

To get to this spending number, we'd have to see massive cuts in defense that could be almost impossible given our involvement in three overt wars and at least one covert one.  But the reduction in programs despised by the Tea Party would be just as big, requiring the kinds of entitlement reforms proposed by both Congressman Paul Ryan (R-Wisc.) and the President's debt commission, maybe even more so.

Consider that total Human Resource spending in 1999 -- Social Security, Medicare, etc. -- was only $1.1 trillion.  Adjusted for inflation, that's $1.5 trillion today compared to the projected $2.5 trillion for fiscal 2011.

In order to cut that additional $1 trillion, all entitlement programs would require radical reforms that of course would have to be phased in over a number of years so as not to negatively impact those currently receiving benefits or those soon to be.  However, that's the kind of discussion that would be necessary to make this happen.

Isn't that the kind of conversation conservatives desperately want?

The point here is that Obama and his minions see the panacea for everything as being tax hikes on the rich.  As American Thinker reported last week, and CNS News and the Wall Street Journal reported Monday, taking all of the income from top wage earners wouldn't come close to balancing the budget.

As such, this fallacy needs to be exposed and quickly before virtually the entire gullible class believes that's all we need to do to fix our fiscal mess.  When that happens, forget about any serious deficit reduction discussion.

With this in mind, rather than running away from the myth that the Clinton budgets were a magic elixir, let's embrace it.

The left all view the Clinton era as being the shining example of fiscal policy creating a strong economy, but what they ignore is the spending restraint that happened in the '90s that was a huge factor in creating those so-called budget surpluses as well as the powerful recovery.

After all, only a liberal would believe raising taxes stimulates an economy.

Despite the other obvious factors involved in the '90s expansion -- loose monetary policy early in the decade, the end of the Cold War, and a once in a lifetime technological boom with associated stock bubble -- this period also witnessed unusual fiscal restraint in Washington, as total federal spending only grew by 42 percent.

Compare this to the '80s when outlays rose by 115 percent, which was actually down from 184 percent in the '70s.  Spending grew by 107 percent in the '60s, and more recently, 117 percent in the '00s.

Read on here:

http://www.americanthinker.com/2011/04/would_you_accept_clinton_tax_r.html

[carltonplace]

I'm game, but I think this part wasn't necessary to his point:

With this in mind, rather than running away from the myth that the Clinton budgets were a magic elixir, let's embrace it.

The left all view the Clinton era as being the shining example of fiscal policy creating a strong economy, but what they ignore is the spending restraint that happened in the '90s that was a huge factor in creating those so-called budget surpluses as well as the powerful recovery.

After all, only a liberal would believe raising taxes stimulates an economy

If we want to build coalitions and find real sollutions we have to stop lobbing flame grenades.

[Conan71]

I'm game, but I think this part wasn't necessary to his point:

With this in mind, rather than running away from the myth that the Clinton budgets were a magic elixir, let's embrace it.

The left all view the Clinton era as being the shining example of fiscal policy creating a strong economy, but what they ignore is the spending restraint that happened in the '90s that was a huge factor in creating those so-called budget surpluses as well as the powerful recovery.

After all, only a liberal would believe raising taxes stimulates an economy

If we want to build coalitions and find real sollutions we have to stop lobbing flame grenades.

Agreed.  I would love it if we started thinking of ourselves as Americans rather than liberal or conservative.  Polarized ideology is why we are no closer to real solutions at this point when it's obvious there needs to be some giving on both ends for a good solution somewhere in the middle.

[Hoss]

Agreed.  I would love it if we started thinking of ourselves as Americans rather than liberal or conservative.  Polarized ideology is why we are no closer to real solutions at this point when it's obvious there needs to be some giving on both ends for a good solution somewhere in the middle.

Post of the day.  I know you and I don't see eye to eye on a lot of things, but fiscally we have more in common than you think.

I still say we push to start the Oklahoma chapter of the New Whigs....

[guido911]

Agreed.  I would love it if we started thinking of ourselves as Americans rather than liberal or conservative. 

Where's the fun in that?    Seriously, and unfortunately, we don't live in a perfect world. As long as people have different wants and needs, there will be disagreement and discord. Political ideology is the result, not the cause, of these differences in my opinion.

[Teatownclown]

Agreed.  I would love it if we started thinking of ourselves as Americans rather than liberal or conservative.  Polarized ideology is why we are no closer to real solutions at this point when it's obvious there needs to be some giving on both ends for a good solution somewhere in the middle.

That sounds just like Obama. Are you guys sipping earlier in the day due to the heat or tanning up?