Obama, Taxes, Spending And How to Stimulate The Economy

Obama, Taxes, Spending And How to Stimulate The Economy

Not just the U.S. but the entire world has bought into economic snake-oil. No country, including and especially the U.S. can cut spending as the road to reviving the economy. President Obama is not on a spending spree. On the contrary, as a percentage of GDP Obama is actually more conservative than G.W. Bush. Obama has offset all new spending with cuts, while Bush and a Republican Congress just spent like crazy and put it all on the national debt card.

The Crumbling Case for Cutting Spending to Stimulate the Economy, by Chad Stone, CBPP: Empirical support for the view that sharp, immediate cuts in government spending would be good for the U.S. economy was never strong, and it’s getting weaker.

    The Economist is on the case, highlighting two new studies showing that austerity and growth don’t mix in the short term. ...

    The first new study is from the International Monetary Fund.  In its 2010 World Economic Outlook, the IMF put the kibosh on the idea that deficit reduction would boost economic growth in the short run.  IMF researchers have now presented a revised and extended version of that analysis reaching the same conclusion.

    The second new study, by Roberto Perotti, backs up those of us who have been arguing for some time that these international examples have little in common with current U.S. budget and economic conditions.  What makes the Perotti study so significant is that he has been one of the leading researchers cited by advocates of sharp, immediate cuts in government spending.

    Perotti conducted detailed case studies of the four largest multi-year deficit-reduction efforts that researchers have commonly regarded as spending-based.  He found that they were actually much smaller, and much less tilted toward spending cuts, than previous studies had assumed.

    Perotti also found that all four countries’ economies benefited from a rapid decline in interest rates and a moderation of wage growth, which in turn made domestic firms more competitive internationally; an expansion of exports was key to economic growth in three of the four cases. ...

    In short, the more closely you look at the evidence for the claim that cutting federal spending dramatically right now would be good for the economy, the less convincing that claim becomes.

Interest rates are already at rock bottom, and wage growth is not a problem, so the key conditions for austerity to work -- if it ever works -- are not present in the US economy.

Republican Wuss of the Week - Why is House Budget Committee Chairman Paul Ryan (R-WI) Afraid of His Constituents

Republican Wuss of the Week - Why is House Budget Committee Chairman Paul Ryan (R-WI) Afraid of His Constituents

House Budget Committee Chairman Paul Ryan (R-WI), the author of the House GOP plan to phase out Medicare, does not like it when constituents publicly challenge him. In fact, people who disagree with Ryan have a habit of getting arrested for it. A few weeks ago, several of Ryan’s unemployed constituents staged a peaceful sit-in at his Kenosha, Wisconsin office to protest his unpopular decision not to hold any free public town halls during the August recess. These constituents didn’t think they should have to pay to ask their elected representative a question. Instead of meeting with them, Ryan’s staff called the police.

So it should come as no surprise that this week, three people who paid to see Ryan speak were arrested and charged with trespassing for protesting the event. One constituent, a 71-year-old retired plumber from Kenosha, Wisconsin, was handcuffed and pushed to the ground by security:

    Video footage taken by an attendee at the event shows that one of them, Tom Nielsen, received particularly harsh treatment — he was pushed to the ground and handcuffed. Nielsen received an additional charge of resisting arrest.

    Ryan was speaking Tuesday afternoon at the Whitnall Park Rotary Club. Protesters gathered both outside his event and inside, standing up and disrupting the congressman’s remarks.

    According to Oak Creek Patch, as many as a dozen protesters were escorted out of the event. Another dozen or so left willingly.

Ryan seemed supremely undisturbed that a senior citizen worried about receiving the Medicare he’s paid into his whole life was treated so brutally. Indeed, Ryan made light of the arrest and quipped to the audience, “I hope he’s taking his blood pressure medication.”

Watch it, courtesy of Wisconsin Jobs Now:

Another woman was shown the door when she challenged Ryan’s claim that the jobs crisis is directly related to the debt crisis. “Our debt is out of control because of the tax cuts you’re giving,” she said. “Our unemployment in 2003 was 6.2% before the tax cuts went through. Now our unemployment rate is 9.1%. What are you doing to create jobs, Congressman?” Another woman was escorted out when she stood up while Ryan was speaking and said, “You won’t talk to us. How can we give our opinions when you refuse to talk to us?”

Ryan has consistently faced angry constituents at his events since his Medicare-killing budget became a top GOP priority. Tired of being publicly embarrassed by constituents who voice their disagreement and say his policies are hurting them, Ryan has resorted to increasingly harsh responses to deal with people who have the audacity to speak up at his events.

I do have a question for the local police. I'm sure you're good folks but why are you acting as strong-arm bullies for this wussball Congress critter. That really is not your job. If one of them tries to physically attack Ryan that is another story. This people are just trying to get straight answers.

Is It True That Obama Went on a Big Spending Spree

Don't believe the Obama big spender hype - The GOP just can't handle the truth: Tax cuts, war and the financial crisis created our huge deficits

How many outright errors of fact can you spot in the following paragraph from an op-ed by Mitt Romney published this Monday?

[Barack Obama's] approach has been to engage in one of the biggest peacetime spending binges in American history. With its failed stimulus package, its grandiose new social programs, its fervor for more taxes and government regulations, and its hostility toward business, the administration has made the debt problem worse, hindered economic recovery and needlessly cost American workers countless jobs.

Let's see. We're at war in Afghanistan, so "peacetime" is dubious. Obama has cut taxes -- income taxes, payroll taxes, taxes for small businesses. Private sector economic forecasters say the stimulus increased GDP growth and kept the unemployment rate from rising higher. We could even range into the subjective, and argue that from the left side of the political aisle, Obama has been anything but hostile to business and hasn't done nearly enough to regulate the financial sector. And we could note, just for fun, that Obama's "grandiose" social program is modeled explicitly after the healthcare reform enacted by none other than Mitt Romney in Massachusetts. (And this guy, most political analysts think, poses the biggest threat to Obama's reelection!)

But nothing is more ridiculous than the notion that Obama is a "binge" spender. Paul Krugman rightfully calls this scurrilous accusation a "zombie lie." No matter how many times you kill it, whether by decapitation, a spike through the heart or immolation -- it just keeps coming back. It's enough to make you despair -- particularly when you consider how many more times we're going to hear this nonsense from Romney and the rest of the Republican presidential candidates from now until the last precinct closes on Election Day 2012.

But as long as the undead keep coming, we have no choice but to fight hellspawn with our own holy fire. So let's review the facts.

The current budget deficit is predominantly an outgrowth of the Bush tax cuts, the wars in Afghanistan and Iraq, Medicare Part D and the financial crisis.

Here's the first thing to understand. Before Obama took office, before he was able to spend a single dime as president, the Congressional Budget Office predicted that the 2009 deficit would be $1 trillion dollars. According to an analysis published by the Center on Budget and Policy Priorities in June 2010, about half of that total -- $500 billion -- can be attributed to the Bush tax cuts and the wars in Afghanistan and Iraq. Another $400 billion was a direct result of the "changed economic outlook" -- the collapse of "tax revenues and swelling outlays for unemployment insurance, food stamps and other safety-net programs."

In the summer of 2009, the New York Times's David Leonhardt (recently awarded a Pulitzer prize for his economic coverage) conducted an indispensable analysis of the budget deficit for 2009. (By that point it was projected to hit $1.2 trillion; ultimately it reached $1.4 trillion -- in part because of stimulus spending and in part because the economy continued to get worse.) Leonhardt observed that since 2000, the year that Bill Clinton bequeathed George Bush with an $800 billion surplus, there had been a negative $2 trillion swing in the health of the government's finances. Crunching the numbers from a decade's worth of CBO reports, Leonhardt discovered:

The 2001 and 2007-2009 recessions accounted for 37 percent of the swing -- again, because of decreased tax revenue and automatically higher spending on social welfare.
Legislation signed by George Bush accounted for another 33 percent -- the tax cuts and Medicare Part D.

"Mr. Obama's main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies -- together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama -- account for 20 percent of the swing."

"About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama's agenda on health care, education, energy and other areas."

The CBPP includes a neat little chart in its analysis that brings home the long-term consequences of the decisions made by Bush and Obama. Yes, the stimulus added to the budget deficit in the short term, but over the next 10 years, its contribution to the ongoing deficit -- along with TARP and the Fannie-Freddie rescue -- is minimal. The real drivers of the deficit will continue to be the Bush tax cuts and the wars -- if both continue. The tax cuts alone will account for some $7 trillion of the additional national debt over the next 10 years. And the interest payments on the debt accrued simply to pay for the automatic safety-net response to the Great Recession will also continue making a meaningful impact for years to come, long after a full recovery.

Fiscal Chart - see above.

Obama, of course, bears some responsibility for continuing the Bush tax cuts and the Bush wars -- but so do nearly every Republican legislator, and it's very difficult to imagine that Mitt Romney as president would have done anything differently. In fact, it's quite possible that the deficit would have gotten worse under Romney, because if he had decided to inject no stimulus at all into the economy, the downturn would likely have been worse, tax revenue would have declined even further, and social welfare spending would be even greater. And if any Republican president had attempted to slash spending in accordance with current party rhetoric, we'd be staring directly into the depths of Great Depression 2.0.

Also crucial to note: Obama's major new initiatives were either designed to be short term, such as the stimulus, or revenue neutral, such as healthcare reform. That's not something you can say about Bush's budget busters.

The budget deficits under Obama are big, there's no doubt about that. But the primary drivers of those deficits are a combination of decisions made by George W. Bush and the worst economic crisis in the United States in 80 years.

Why do conservatives keep spreading the lie that President Obama is a big spender? To distract from the fact they drove the economy off a cliff. Conservatives know they caused the recession by not keeping an eye on Wall St and by not paying for two wars. All the while insisting that we keep tax cuts for the richest who need them the least.

Is Big Government Spending Causing The Deficit

Radical conservatives just can't handle the truth: Tax cuts, war and the financial crisis created our huge deficits

How many outright errors of fact can you spot in the following paragraph from an op-ed by Mitt Romney published this Monday?

[Barack Obama's] approach has been to engage in one of the biggest peacetime spending binges in American history. With its failed stimulus package, its grandiose new social programs, its fervor for more taxes and government regulations, and its hostility toward business, the administration has made the debt problem worse, hindered economic recovery and needlessly cost American workers countless jobs.

Let's see. We're at war in Afghanistan, so "peacetime" is dubious. Obama has cut taxes -- income taxes, payroll taxes, taxes for small businesses. Private sector economic forecasters say the stimulus increased GDP growth and kept the unemployment rate from rising higher. We could even range into the subjective, and argue that from the left side of the political aisle, Obama has been anything but hostile to business and hasn't done nearly enough to regulate the financial sector. And we could note, just for fun, that Obama's "grandiose" social program is modeled explicitly after the healthcare reform enacted by none other than Mitt Romney in Massachusetts. (And this guy, most political analysts think, poses the biggest threat to Obama's reelection!)

But nothing is more ridiculous than the notion that Obama is a "binge" spender. Paul Krugman rightfully calls this scurrilous accusation a "zombie lie." No matter how many times you kill it, whether by decapitation, a spike through the heart or immolation -- it just keeps coming back. It's enough to make you despair -- particularly when you consider how many more times we're going to hear this nonsense from Romney and the rest of the Republican presidential candidates from now until the last precinct closes on Election Day 2012.

But as long as the undead keep coming, we have no choice but to fight hellspawn with our own holy fire. So let's review the facts.

The current budget deficit is predominantly an outgrowth of the Bush tax cuts, the wars in Afghanistan and Iraq, Medicare Part D and the financial crisis.

Here's the first thing to understand. Before Obama took office, before he was able to spend a single dime as president, the Congressional Budget Office predicted that the 2009 deficit would be $1 trillion dollars. According to an analysis published by the Center on Budget and Policy Priorities in June 2010, about half of that total -- $500 billion -- can be attributed to the Bush tax cuts and the wars in Afghanistan and Iraq. Another $400 billion was a direct result of the "changed economic outlook" -- the collapse of "tax revenues and swelling outlays for unemployment insurance, food stamps and other safety-net programs."

In the summer of 2009, the New York Times's David Leonhardt (recently awarded a Pulitzer prize for his economic coverage) conducted an indispensable analysis of the budget deficit for 2009. (By that point it was projected to hit $1.2 trillion; ultimately it reached $1.4 trillion -- in part because of stimulus spending and in part because the economy continued to get worse.) Leonhardt observed that since 2000, the year that Bill Clinton bequeathed George Bush with an $800 billion surplus, there had been a negative $2 trillion swing in the health of the government's finances. Crunching the numbers from a decade's worth of CBO reports, Leonhardt discovered:

The 2001 and 2007-2009 recessions accounted for 37 percent of the swing -- again, because of decreased tax revenue and automatically higher spending on social welfare. Legislation signed by George Bush accounted for another 33 percent -- the tax cuts and Medicare Part D.

"Mr. Obama's main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies -- together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama -- account for 20 percent of the swing."

"About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama's agenda on health care, education, energy and other areas."

The CBPP includes a neat little chart in its analysis that brings home the long-term consequences of the decisions made by Bush and Obama. Yes, the stimulus added to the budget deficit in the short term, but over the next 10 years, its contribution to the ongoing deficit -- along with TARP and the Fannie-Freddie rescue -- is minimal. The real drivers of the deficit will continue to be the Bush tax cuts and the wars -- if both continue. The tax cuts alone will account for some $7 trillion of the additional national debt over the next 10 years. And the interest payments on the debt accrued simply to pay for the automatic safety-net response to the Great Recession will also continue making a meaningful impact for years to come, long after a full recovery.

Fiscal Chart_ see above

Obama, of course, bears some responsibility for continuing the Bush tax cuts and the Bush wars -- but so do nearly every Republican legislator, and it's very difficult to imagine that Mitt Romney as president would have done anything differently. In fact, it's quite possible that the deficit would have gotten worse under Romney, because if he had decided to inject no stimulus at all into the economy, the downturn would likely have been worse, tax revenue would have declined even further, and social welfare spending would be even greater. And if any Republican president had attempted to slash spending in accordance with current party rhetoric, we'd be staring directly into the depths of Great Depression 2.0.

Also crucial to note: Obama's major new initiatives were either designed to be short term, such as the stimulus, or revenue neutral, such as healthcare reform. That's not something you can say about Bush's budget busters.

The budget deficits under Obama are big, there's no doubt about that. But the primary drivers of those deficits are a combination of decisions made by George W. Bush and the worst economic crisis in the United States in 80 years.

If we take away the wars Republicans who controlled Congress refused to pay for, the Medicare drug benefit Republicans passed but refused to pay for, two Wall St bail-out packages Republicans voted for and tax cuts for millionaires, plus the crashed economy Republican left for the next guy to handle - Obama has spent less than Bush. We have a revenue crisis not a spending crisis, and Republicans refuse once again to pay for the bills they put on the national credit card.

Does America Have a Spending Problem - Obama Versus Conservatives

Obama, Conservatives and The Deficit

With President Obama and Republican leaders calling for cutting the budget by trillions over the next 10 years, it is worth asking how we got here — from healthy surpluses at the end of the Clinton era, and the promise of future surpluses, to nine straight years of deficits, including the $1.3 trillion shortfall in 2010. The answer is largely the Bush-era tax cuts, war spending in Iraq and Afghanistan, and recessions.

Despite what antigovernment conservatives say, non-defense discretionary spending on areas like foreign aid, education and food safety was not a driving factor in creating the deficits. In fact, such spending, accounting for only 15 percent of the budget, has been basically flat as a share of the economy for decades. Cutting it simply will not fill the deficit hole.

The first graph shows the difference between budget projections and budget reality. In 2001, President George W. Bush inherited a surplus, with projections by the Congressional Budget Office for ever-increasing surpluses, assuming continuation of the good economy and President Bill Clinton’s policies. But every year starting in 2002, the budget fell into deficit. In January 2009, just before President Obama took office, the budget office projected a $1.2 trillion deficit for 2009 and deficits in subsequent years, based on continuing Mr. Bush’s policies and the effects of recession. Mr. Obama’s policies in 2009 and 2010, including the stimulus package, added to the deficits in those years but are largely temporary.

The second graph shows that under Mr. Bush, tax cuts and war spending were the biggest policy drivers of the swing from projected surpluses to deficits from 2002 to 2009. Budget estimates that didn’t foresee the recessions in 2001 and in 2008 and 2009 also contributed to deficits. Mr. Obama’s policies, taken out to 2017, add to deficits, but not by nearly as much.

A few lessons can be drawn from the numbers. First, the Bush tax cuts have had a huge damaging effect. If all of them expired as scheduled at the end of 2012, future deficits would be cut by about half, to sustainable levels. Second, a healthy budget requires a healthy economy; recessions wreak havoc by reducing tax revenue. Government has to spur demand and create jobs in a deep downturn, even though doing so worsens the deficit in the short run. Third, spending cuts alone will not close the gap. The chronic revenue shortfalls from serial tax cuts are simply too deep to fill with spending cuts alone. Taxes have to go up.

In future decades, when rising health costs with an aging population hit the budget in full force, deficits are projected to be far deeper than they are now. Effective health care reform, and a willingness to pay more taxes, will be the biggest factors in controlling those deficits.

Republicans are running around like Chicken-little on steroids. The sky is falling and its all Obama's fault. As usual nothing could be further from the truth. Reverting the average federal tax rate back to what it was under Bill Clinton will hardly be the end of the world. The tax rate on capital gains, the money made on stock trading could easily be 30% and no one would suffer. American's are paying the lowest taxes since 1950 and yet low taxes obviously are not the secret to creating jobs. Taxes are how the wealthy pay back America for all the infrastructure that makes their welth possible. Not paying taxes is just a way for the wealthy to free load.