Deficit Spending Bankrupts The Nation

[Sanslines]

Ducking the Deficit Issue

Democrats and Republicans are united in their unwillingness to debate it.

http://www.newsweek.com/id/214487

[Naturist Mark]

From Dear Mr. BruAl (http://brual.wordpress.com/2008/08/27/republican-economic-disinformation/)
<blockquote><div class="post-41 post hentry category-politics tag-debt tag-economy tag-fiscal tag-politics"><div class="entry"><div class="snap_preview"><p><img style="width: 502px; height: 306px;" src="http://brual.files.wordpress.com/2008/02/national-debt-gdphalfsize.gif?w=517&amp;h=317" alt="National Debt 1953 - 2008" height="317" width="517" /></p><div><span style="text-decoration: underline;">Administration Change in National Debt as % of GNP</span></div><div>_________________________________</div><div>Eisenhower…………........................……… -16.2%</div><div>Kennedy/Johnson…….......................….. -16.5%
</div><div>Nixon/Ford…………............................……. -2.8%</div><div>Carter………………….......................…..……. -3.2%</div><div>Reagan………………….......................…… <strong> <span style="color: rgb(255, 0, 0);">+20.5%</span></strong></div><div>Bush Sr………………….....................…..… <strong> <span style="color: rgb(255, 0, 0);">+13.1%</span></strong></div><div>Clinton……………….......................…..……… -8.8%</div><div><span style="text-decoration: underline;">Bush Jr……………......................…….…… <strong> <span style="color: rgb(255, 0, 0);">+12.4%*
</span></strong></span></div>
<div><span style="font-family:Calibri;">*End of year 2008 estimate.</span></div></div></div></div></blockquote>

[maliakei]

Notice how the first question is "Who Is To Blame?" It's been done, undoubtedly a Big mess. The question, rather than "Who Is To Blame?" should be "What ought to be done?". By no means an easy answer. The first step is to cut out unecessary spending in areas but that means figuring out Where & How, plus getting the parties to work this out together. The Big questions are on defense, healthcare, education, transportation, jobs. All of major concern, incl. debt to income ratio has gotten way out of control. The gap between rich & poor continues to widen where middle class is disappearing..

[Kouak]

One way to start is to require everything in a bill and its amendments be related. This would help prevent slipping in pork into a large bill and hiding it. If you think a bridge to nowhere is important, then say it out in the open.

[Naturist Mark]

One way to start is to require everything in a bill and its amendments be related. This would help prevent slipping in pork into a large bill and hiding it. If you think a bridge to nowhere is important, then say it out in the open.

Another way is to require Pay As You Go (PAYGO) in all legislation for new spending. That was the rule during the Clinton administration. If a bill increased spending - it had to include compensating cuts elsewhere or a revenue increase sufficient to cover that cost.

Obama intends health reform to conform to PAYGO rules.

[Fitz1980]

Obama intends health reform to conform to PAYGO rules.

Funny how that never gets mentioned in the liberal-media(TM.)

[maliakei]

If a bill increased spending - it had to include compensating cuts elsewhere or a revenue increase sufficient to cover that cost.

Obama intends health reform to conform to PAYGO rules.

Okay, that is one way, But PLEASE.. No more laying off teachers, police, fire fighters, and other badly needed professionals! Doing this creates a Major negative domino effect affecting everyone -- lack of education, medical, safety, unemployment. Arrggh!

[Sanslines]

Notice how the first question is "Who Is To Blame?" It's been done, undoubtedly a Big mess.

The answer to this question is ultimately the American people are to blame. We have ignored any debates and discussions about so many serious domestic policies for so many years. The current health care debate is the first time in many, many years that we have started the process of facing our doemstic problems. In the past, we have always found it easier to criticize foreign nations and to get involved in their affairs then to face our own problems.

We were told by the last administration that 'deficits don't matter anymore'. Obviously, they do. What will eventually need to occur is a frank debate about what programs we wish to continue and how are we gonig to fund them.

California should be a lesson for the entire nation. Out of control spending along with endless accounting tricks and reckless borrowing from the future brought that state to the brink of insolvency. The point has been reached where the day of recogning has arrived. The same day will eventually arrive for the nation as a whole unless people wake up and do the hard work to prevent future catastrophe.

[Naturist Mark]

Okay, that is one way, But PLEASE.. No more laying off teachers, police, fire fighters, and other badly needed professionals! Doing this creates a Major negative domino effect affecting everyone -- lack of education, medical, safety, unemployment. Arrggh!

Those layoffs are not due to PAYGO, they are due to STATE (rather than Federal) spending cuts required to prevent the States from running deficits that result from the sharp falloff of tax revenue due to the recession.

States are not allowed to do deficit spending like the Federal Government. And temporary tax increases are off the table because ... um ... just because.

[ki4kxq]

Another way is to require Pay As You Go (PAYGO) in all legislation for new spending. That was the rule during the Clinton administration. If a bill increased spending - it had to include compensating cuts elsewhere or a revenue increase sufficient to cover that cost.

Obama intends health reform to conform to PAYGO rules.

He may intend it, but several economists including the CBO have said it is far from PAYGO.

However, on a different note, I read this forum and couldn't believe my eyes. I can actually agree with you guys that we need massive spending cuts.

Also, California just doesn't get it. You can't keep adding social programs and expect to be able to keep raising taxes to pay for them. For one, you will never keep up with the whims of what people want. Second, taxpayers can go elsewhere when the burden gets too high. That is what is happening to California now. The taxpayers, especially businesses, are going to friendlier environments.

[paul1961]

"But PLEASE.. No more laying off teachers, police, fire fighters, and other badly needed professionals! Doing this creates a Major negative domino effect affecting everyone -- lack of education, medical, safety, unemployment. Arrggh!"


For the most part, these kind of announcements are really all about doing nothing. They want to create a fear like you see expressed. If they announced they were cutting back office pencil pushers, no one would care. There is plenty of stupid spending at all levels.

[Sanslines]

However, on a different note, I read this forum and couldn't believe my eyes. I can actually agree with you guys that we need massive spending cuts.


Who is advocating massive spending cuts? There are two fundamental problems that face us. One concerns the problem of unemployment and underemployment. The other concerns the belief that I am entitled to something so long as others pay for it.

We don't just blindly eliminate entire programs because there might be some problems with those programs. We use our brains and adopt a rational approach to problem solving rather then bombard people with lies and nonsense. The real tragedy of our society is that far too many have lost the ability to THINK. If people could actually think, they would understand in a millisecond that the nonsense that FOX News promotes as news is nothing more then distortions, lies, and complete and utter nonsense. There actually are people out there who honestly believe that Rush Limbaugh should be President and THAT IS SCARY!

[maliakei]

Those layoffs are not due to PAYGO, they are due to STATE (rather than Federal) spending cuts required to prevent the States from running deficits that result from the sharp falloff of tax revenue due to the recession.

States are not allowed to do deficit spending like the Federal Government. And temporary tax increases are off the table because ... um ... just because.

Okay, thanks for clarifying. Still, whenever budget cutting is needed, many times it happens to be in these areas. Our local hospital is already short-staffed, and to learn of more layoffs means less for our community. Why lay off more paramedics and other health & social professionals? HMSA Big execs make Big profit. In fact HMSA's Chief gets $1.16M despite the losses. No wonder many specialists decided to relocate. The problem isn't the lack of funding. It's the lop-sided manner how it's managed (mis-managed). It's common for patients to be airlifted to Queen's Medical Center (Oahu). Many decide to get treatment on the mainland.

[maliakei]

The answer to this question is ultimately the American people are to blame. We have ignored any debates and discussions about so many serious domestic policies for so many years. The current health care debate is the first time in many, many years that we have started the process of facing our doemstic problems. In the past, we have always found it easier to criticize foreign nations and to get involved in their affairs then to face our own problems.

We were told by the last administration that 'deficits don't matter anymore'. Obviously, they do. What will eventually need to occur is a frank debate about what programs we wish to continue and how are we gonig to fund them.

California should be a lesson for the entire nation. Out of control spending along with endless accounting tricks and reckless borrowing from the future brought that state to the brink of insolvency. The point has been reached where the day of recogning has arrived. The same day will eventually arrive for the nation as a whole unless people wake up and do the hard work to prevent future catastrophe.

Whoever they/we are to blame, it's rare to hear "I'm guilty, Blame me!" Most people find it easiest to point fingers than to admit fault. Regardless, blaming doesn't help. Well Deficits Do matter! CA state is is such deep debt due to the massive spending. We don't hear much happening there except for problems related to illegals, the burden on taxpayers. I don't blame them. CA Governator plans to eradicate welfare.

[Fitz1980]

California should be a lesson for the entire nation. Out of control spending along with endless accounting tricks and reckless borrowing from the future brought that state to the brink of insolvency. The point has been reached where the day of recogning has arrived. The same day will eventually arrive for the nation as a whole unless people wake up and do the hard work to prevent future catastrophe.

Cali's biggest problem has been this:


http://www.latimes.com/news/opinion/la-ed-vote23-2008dec23,0,6986978.story
Most legislative bodies operate by majority rule: Get more votes than your opponents, and you win. It works that way with legislation, and in most of the democratic world it works that way when adopting the annual budget, a political body's most vital policy document. A legislature needs a supermajority only in the most unusual circumstances, such as overriding the executive's veto.

But in California, common sense and basic democratic functions are turned on their heads. This state's Constitution requires a two-thirds supermajority simply to adopt a budget or increase taxes. For most of the 75 years since voters engrafted the extraordinary threshold onto the Constitution, its effect was close to invisible, because budgets were adopted with near unanimity. But in the last several years, the two-thirds law has warped the budget process, giving an absolute veto to whatever minority can cling to just over 33% of seats in either house. In fact, it makes the governor superfluous, because any budget that passes also has, by definition, enough support to override an executive veto.

That helps make California, once the state of optimism and opportunity, the land of "no." Out of fear of choosing the wrong road (deeper cuts or higher taxes? safer streets or better schools? individual empowerment or common wealth?), we have ensured that we are perpetually stalled in the intersection, with economic disaster barreling toward us.

Only a 50% +1 vote was needed to deny gays the right to marry, but a supermajority to pass a budget?

[Sanslines]

Whoever they/we are to blame, it's rare to hear "I'm guilty, Blame me!" Most people find it easiest to point fingers than to admit fault. Regardless, blaming doesn't help. Well Deficits Do matter! CA state is is such deep debt due to the massive spending. We don't hear much happening there except for problems related to illegals, the burden on taxpayers. I don't blame them. CA Governator plans to eradicate welfare.


There are only two solutions to deficit spending. Increase taxes or reduce spending. The states are active in raising their taxes and also reducing their spending.

People will never admit personal fault or responsiblity. It is almost a given that when something 'bad' occurs, people will immediately and automatically look for someone to blame. As you say, playing the blame game doesn't solve problems, but most people don't really seem to understand this.

One of the biggest problems in our society is that we have lost common sense. We have students today who graduate with Phd's and yet have absolutely no common sense. Until we figure out a way to bring back common sense, we will be in for along and difficult ride in any attempt to resolve any problems that face us. We dug ourselves into a deep hole. Obama has attempted to initiate a national discussion debate concerning health care. Hopefully this is the beginning of the process of learning how to face problems by getting the facts, recognizing and ignoring nonsense from the media, and forming sensible and sound resolutions.

[Sanslines]

....That helps make California, once the state of optimism and opportunity, the land of "no." Out of fear of choosing the wrong road (deeper cuts or higher taxes? safer streets or better schools? individual empowerment or common wealth?), we have ensured that we are perpetually stalled in the intersection, with economic disaster barreling toward us.

"Better schools" is a euphemism that politicians and other constantly throw out without supplying any specifics as to what they mean.

What are "better schools"?

[maliakei]

There are only two solutions to deficit spending. Increase taxes or reduce spending. The states are active in raising their taxes and also reducing their spending.

People will never admit personal fault or responsiblity. It is almost a given that when something 'bad' occurs, people will immediately and automatically look for someone to blame. As you say, playing the blame game doesn't solve problems, but most people don't really seem to understand this.

One of the biggest problems in our society is that we have lost common sense. We have students today who graduate with Phd's and yet have absolutely no common sense. Until we figure out a way to bring back common sense, we will be in for along and difficult ride in any attempt to resolve any problems that face us. We dug ourselves into a deep hole. Obama has attempted to initiate a national discussion debate concerning health care. Hopefully this is the beginning of the process of learning how to face problems by getting the facts, recognizing and ignoring nonsense from the media, and forming sensible and sound resolutions.

Yes, I hear you and wholeheartedly agree here. Usually it takes a special force to get the facts and take action. Your last sentence says this. I believe it takes a collective group effort, especially something as massive as healthcare for instance. This is one way to begin chipping away at these problems.

[Sanslines]

Yes, I hear you and wholeheartedly agree here. Usually it takes a special force to get the facts and take action. Your last sentence says this. I believe it takes a collective group effort, especially something as massive as healthcare for instance. This is one way to begin chipping away at these problems.

I think the biggest problem that health care reform faces is that too many people believe that any government involvment will bankrupt the nation. Obama needs to start promoting the idea of health care COST reform too. Obama has been too quiet and needs to start leading health care reform very soon or else any attempts at reform will be doomed to failure.

[Sanslines]

New bull, new bubble, new meltdown?

Yes, Americans want another bull, another bubble, even another meltdown. Guess what? It's already here, folks. The next big market-economic-business cycle has arrived ahead of schedule. This is what makes us America. We love challenges, risk-takers and winners. The nobody who suddenly becomes a big somebody is the biggest of all TV metaphors for who we are.

Yes, folks, a new bubble cycle is already in motion. You can feel the energy building, the kind that fueled the meltdowns of 1998, 2000 and 2007. We never resolved the problems fueling the dot-com insanity. We made matters worse feeding the subprime credit-derivatives disaster with cheap money, Reaganomics ideology and two costly wars. Lessons were never learned, and nothing was resolved. Today matters continue deteriorating.


Behind the hoopla, the Wall Street conspiracy has dumped $23.7 trillion in new bailout debt on taxpayers. The bill will come due. But for now, we're getting their wish: A new bubble is accelerating, thanks to America's "too-greedy-to-fail" Wall Street banks.

Folks, you can bet on it, sure as Regis is hosting "Who Wants to be a Millionaire?" The bull, a bubble and another meltdown are virtually certain and accelerating faster than earlier cycles, coming by 2012. How to profit? Ride it up for a couple years, then pray you'll have enough brain left to bail out in time before the crash (most don't) because at that point the euphoria is blinding, like a cocaine addiction.

The culprit? The Fed, Ferguson says: "Without easy credit creation a true bubble cannot occur. That is why so many bubbles have their origins in the sins of omission and commission of central banks." So the next bubble (and meltdown) is virtually certain, thanks to Washington's $23.7 trillion explosion in debt.

Americans are not going to put up with the "Wall Street Conspiracy" ripping off investors and taxpayers much longer. Wall Street got rich sticking us with mountains of debt for generations to come.


And the collateral damage will be massive and widespread, in areas such as these:


Lobbyists' power becomes lethal to our values. Special interests running and destroying American democracy will self-destruct.


Derivatives: Cap 'n trade will crash worse than subprime. The "Goldman Conspiracy" is spending millions lobbying for trillion-dollar derivatives.


"Too-greedy-to-fail" big banks will trigger harsh backlash. Banks pay huge bonuses yet modify only 9% of 4 million stressed home loans.


America's wealth gap will trigger grass-roots rebellion. Wall Street's greed is so pervasive, gluttonous and obvious, the rest will rebel.


The Goldman Conspiracy will be a target for retribution. Goldman's hubris is most egregious and flagrant. Its arrogance will backfire.


A wave of creative destruction will revive commercial banking. Investment bankers will kill commercial banking, and Glass-Steagall (http://www.bing.com/search?q=glass-steagall&form=MSMONY) will return.


Secrecy protecting Wall Street's unethical behavior will end. Wall Street's control over Washington's lawmaking will come to an end.


The Fed's shadow banking will collapse under excess debt. Central bank balance sheets will be overdrawn, feeding the new bubble with cheap money.


A "Black Swan (http://www.bing.com/search?q=financial-theory+black+swan&form=MSMONY)" of huge unintended consequences. The next bubble will be highly unpredictable, with huge collateral damage on Wall Street.


http://articles.moneycentral.msn.com/Investing/Extra/New-bull-new-bubble-new-meltdown.aspx?page=2

[Naturist Mark]

He may intend it, but several economists including the CBO have said it is far from PAYGO.

Not true.

I've already addressed this in an old post. The CBO analyzed an early version of one of the House bills and said it would cost a trillion dollars over 10 years. That version did not include a public option and other savings included in later versions of the bill. When the CBO re-examined it, they lowered the cost to $600 billion over 10 years (less than this year's stimulus bill). That does NOT include other savings and cost reductions that would ensue from the reform, which lower the overall cost to about $300 Billion over 10 years. This smaller amount is more than paid for by the repeal of the Bush tax cuts on those making over $250,000 a year - a repeal which will happen automatically in just over one year.

Doing nothing does not save any money, just the opposite in fact. Over those same 10 years public spending with taxdollars on health care will increase by $5.66 Billion dollars unless reform succeeds in putting the brakes on the 30 year explosion in health care cost escalation.

Too bad we aren't as smart as the French. They have the best performing health care system in the world, NOT socialized - doctors are not state employees, and their hospitals and institutions are, like ours, a mix of private and public, they are funded by a combination of state and private money that provide universal care, and they do it for less than half the price we pay - in fact they do it for less than the average taxdollars spent per person on health care in the United States. If we had the French system, we could stop paying private money AND get a tax cut. If only the French (http://en.wikipedia.org/wiki/Health_in_France) were willing to tell us how they do it ...

[Kouak]

I have never understood deficit spending. Except for a world war (and let's hope we never go there again), there is no reason for it. The reason you have a budget is to force you to make choices. If you have no constaints on your spending, why would you want to limit your choices or even make any. Just fund everything.

I do understand that politicians want to be re-elected. By bringing home the bacon (read pork barrel), they believe that their electorate will be happy since they may be getting more from the government than they pay to it. People get greedy. Give them a little, and they want more. Politicians learn that deficit spending allows them to do this even more.

We in the US will have **** to pay if China gets fiscally sick. Even a mild cold could wreak havoc. China loans us huge amounts monthly for our deficit. If they are unable to do this even partially for a couple of months, it would force us to actually reduce our deficit spending. This could cause us to go into a very bad recession, which would make the one we just came out of look mild.

We can pay now or later. Now by scaling back our spending in a controlled manner. Later by recession/depression. It is our choice.

[Naturist Mark]

I have never understood deficit spending. Except for a world war (and let's hope we never go there again), there is no reason for it. The reason you have a budget is to force you to make choices.

Actually deficit spending - within reason - makes good economic sense when done right.

Under classic Keynesian theory (http://en.wikipedia.org/wiki/Keynesian), for optimal economic growth and stability the government uses deficit spending to stimulate a moribund economy and then slows growth (and prevents inflationary pressures) during booms by running surpluses.

It was a successful strategy when followed from the depression until the 70s. But along the way the "surplus" half of the equation was gradually abandoned. And that was not altogether wrong either - as long as debt remained a small constant or falling percentage of GNP, deficits were not really a long term problem.

All that changed when Keynes was thrown over by Milton Friedman and the supply siders and monetarists, who preached the gospel that cutting taxes and spending more would save money.

http://i75.photobucket.com/albums/i305/BlueHorde/DebtGNPKeynes.jpg

Even better chart (http://www.alyudesign.com/debt.html).

[Kouak]

Under classic Keynesian theory (http://en.wikipedia.org/wiki/Keynesian), for optimal economic growth and stability the government uses deficit spending to stimulate a moribund economy and then slows growth (and prevents inflationary pressures) during booms by running surpluses.

What I am proposing it the flip of what you said (but may not have meant in the literal sense). I propose saving (for a rainy day) during surpluses to use the savings during times of trouble.

The danger of the reverse of spending extra, i.e., taking out loans, and then replenishing it during surplus times, i.e., repaying the loan, is that it is too easy to skip the repayment part. That is how so many people get into personal credit problems.

[Fitz1980]

What I am proposing it the flip of what you said (but may not have meant in the literal sense). I propose saving (for a rainy day) during surpluses to use the savings during times of trouble.

The danger of the reverse of spending extra, i.e., taking out loans, and then replenishing it during surplus times, i.e., repaying the loan, is that it is too easy to skip the repayment part. That is how so many people get into personal credit problems.

That's the problem. Back in the 90s Clinton was doing exactly that and the only thing the Republicans could do was whine "HE'S GOT A SURPLUS AND HE WON'T GIVE YOU THE HOLY TAX CUT, PRAISE BE TO ST. REAGEN THE GARBLED!!!!"

[nakedstudent]

Under classic Keynesian theory (http://en.wikipedia.org/wiki/Keynesian), for optimal economic growth and stability the government uses deficit spending to stimulate a moribund economy and then slows growth (and prevents inflationary pressures) during booms by running surpluses.

This is one thing that really irks me about politics and finance... why the heck are we quoting theories on policy? Can't we stick to economic laws... There's no proof that Keynes or Friedman's theories are the way things actually work...

What about the economic law that you can't grow your way out of debt you can only accomplish such things by putting yourself on a budget and paying it off? It seems to me that both Republicans and Democrats have spat in the face of common sense over such issues...

I'd say that the Federal Reserve's recent actions to print money to buy our own debt is clear evidence that this is most definitely not a situation where we're "within reason". Whoever developed this ingenious strategy needs to retake basic economics.

(http://www.forbes.com/2009/08/11/federal-reserve-economy-business-washington-dollar.html)

[nakedstudent]

From Dear Mr. BruAl (http://brual.wordpress.com/2008/08/27/republican-economic-disinformation/)
<blockquote><div class="post-41 post hentry category-politics tag-debt tag-economy tag-fiscal tag-politics"><div class="entry"><div class="snap_preview"><p><img style="width: 502px; height: 306px;" src="http://brual.files.wordpress.com/2008/02/national-debt-gdphalfsize.gif?w=517&amp;h=317" alt="National Debt 1953 - 2008" height="317" width="517" /></p><div><span style="text-decoration: underline;">Administration Change in National Debt as % of GNP</span></div><div>_________________________________</div><div>Eisenhower…………........................……… -16.2%</div><div>Kennedy/Johnson…….......................….. -16.5%
</div><div>Nixon/Ford…………............................……. -2.8%</div><div>Carter………………….......................…..……. -3.2%</div><div>Reagan………………….......................…… <strong> <span style="color: rgb(255, 0, 0);">+20.5%</span></strong></div><div>Bush Sr………………….....................…..… <strong> <span style="color: rgb(255, 0, 0);">+13.1%</span></strong></div><div>Clinton……………….......................…..……… -8.8%</div><div><span style="text-decoration: underline;">Bush Jr……………......................…….…… <strong> <span style="color: rgb(255, 0, 0);">+12.4%*
</span></strong></span></div>
<div><span style="font-family:Calibri;">*End of year 2008 estimate.</span></div></div></div></div></blockquote>

The debt would be far more manageable if the dollar was worth anything:

http://one-simple-idea.com/NationalDebt.jpg

Inflation started under Woodrow Wilson and the early Progressive movement... Coincidentally, this was around the time when we got off of the gold standard so we could boost military spending for WW1.

I wonder what caused the rapid devaluation of our money???

[Croydon]

He may intend it, but several economists including the CBO have said it is far from PAYGO.

However, on a different note, I read this forum and couldn't believe my eyes. I can actually agree with you guys that we need massive spending cuts.

Also, California just doesn't get it. You can't keep adding social programs and expect to be able to keep raising taxes to pay for them. For one, you will never keep up with the whims of what people want. Second, taxpayers can go elsewhere when the burden gets too high. That is what is happening to California now. The taxpayers, especially businesses, are going to friendlier environments.

I have a question. Why do you continue to talk? In many instances you post something that is untrue and many instances people often correct you. Here is a tip, if you don't know very much about the topic at hand, DO NOT OPEN YOUR MOUTH. You only do yourself harm b/c you often post false statements and make yourself look ignorant.

CA's economic/budget crisis has nothing to do with "adding social programs" nor is CA raising taxes. I know you republicans dislike the government creating incentives and programs to better the lives of our citizens but it isn't the blame for all of our woes.

A little over 55% of CA's revenue comes from personal tax and the state is dependent on the very very rich to cover 68% of revenue made. The incomes of the very rich are largely dependent on capital gains, which is generated through sales of real estate and/or stocks. With both industries suffering, capital gains revenue is essentially dry. For ex: during the dot com and tech boom in the 90s, CA benefited GREATLY. There was so much money to be made and everyone was happy. Once the boom bursted, no money was left to be made and CA found itself in a pickle. CA's revenue is so volatile that during the dot com boom, CA legislatures were spending money left and right by providing TAX CUTS and other incentives that they never saved any money for a rainy day. When the bubble bursted, CA continued spending and NEVER RAISED TAXES. Instead, they burrowed now to pay later thinking things will turn around and they can start paying back.

The previous governor to Schwarzenegger was advocating raising taxes which got Califronians upset and they ousted him. Schwarzenegger promised no increase in taxes and to avoid that, in 2004, voters approved a $19B bond issue that allowed the state to burrow more money. In addition, Schwarzenegger cut taxes as well.

It is of no surprise that CA is in such a mess and until they change their revenue structure and their 2/3 majority voting rule, they will find themselves in this situation AGAIN.

[Naturist Mark]

The debt would be far more manageable if the dollar was worth anything:

http://one-simple-idea.com/NationalDebt.jpg

Inflation started under Woodrow Wilson and the early Progressive movement... Coincidentally, this was around the time when we got off of the gold standard so we could boost military spending for WW1.

I wonder what caused the rapid devaluation of our money???

When did they stop teaching history?

Wilson didn't invent inflation, it has always been with us. It is the what happens when the money supply increases faster than the supply of goods and services in the economy. It even happens under the so called gold standard.

The "early progressive movement" occurred well before Wilson. Notably under the first President Roosevelt and President Taft.

The US temporarily suspended the Gold Standard during the Civil War, but not WWI - although the British Government did.

In 1933 FDR outlawed the private possession of gold bullion in the US, but not the Gold Standard.

In 1944 the Bretton Woods agreement put international trade under a de facto gold standard since foreign currencies were pegged to the US dollar which was convertible to gold at a fixed $35 per ounce.

The United States officially abandoned the convertibility of US currency into gold (the Gold Standard) in 1971 by executive order of President Nixon.

[ki4kxq]

I have a question. Why do you continue to talk? In many instances you post something that is untrue and many instances people often correct you. Here is a tip, if you don't know very much about the topic at hand, DO NOT OPEN YOUR MOUTH. You only do yourself harm b/c you often post false statements and make yourself look ignorant.

CA's economic/budget crisis has nothing to do with "adding social programs" nor is CA raising taxes. I know you republicans dislike the government creating incentives and programs to better the lives of our citizens but it isn't the blame for all of our woes.

A little over 55% of CA's revenue comes from personal tax and the state is dependent on the very very rich to cover 68% of revenue made. The incomes of the very rich are largely dependent on capital gains, which is generated through sales of real estate and/or stocks. With both industries suffering, capital gains revenue is essentially dry. For ex: during the dot com and tech boom in the 90s, CA benefited GREATLY. There was so much money to be made and everyone was happy. Once the boom bursted, no money was left to be made and CA found itself in a pickle. CA's revenue is so volatile that during the dot com boom, CA legislatures were spending money left and right by providing TAX CUTS and other incentives that they never saved any money for a rainy day. When the bubble bursted, CA continued spending and NEVER RAISED TAXES. Instead, they burrowed now to pay later thinking things will turn around and they can start paying back.

The previous governor to Schwarzenegger was advocating raising taxes which got Califronians upset and they ousted him. Schwarzenegger promised no increase in taxes and to avoid that, in 2004, voters approved a $19B bond issue that allowed the state to burrow more money. In addition, Schwarzenegger cut taxes as well.

It is of no surprise that CA is in such a mess and until they change their revenue structure and their 2/3 majority voting rule, they will find themselves in this situation AGAIN.

No, you are wrong. California has some of the highest taxes in the country. From property taxes, to automobile taxes, income taxes, sales taxes, you name it. They also have more entitlement programs than just about any other state. Add to that the millions of dollars worth of strain that illegal immigration adds to that states budget. From health care, to schooling costs, incarceration costs, etc, all for people who aren't even supposed to be there.

Look at the numbers, people and businesses are leaving California in droves. That with the housing meltdown means that California tax revenues are down despite the high tax rates. Maybe you should read a paper sometime. Start with the Wall Street Journal, maybe you'll learn something.

[Sanslines]

Also, California just doesn't get it. You can't keep adding social programs and expect to be able to keep raising taxes to pay for them. For one, you will never keep up with the whims of what people want. Second, taxpayers can go elsewhere when the burden gets too high. That is what is happening to California now. The taxpayers, especially businesses, are going to friendlier environments.


The enormous wildfires that are happening now in California are going to require enormous amounts of money. California is broke. The federal government will be required to pay. Your taxes will go up eventually.

Would you rather refer to the spending on wildfire control and extinguishment as social spending that should be eliminated? Would you prefer to let California burn? If so, then you will pay even more in property insurance premiums as insurance companies will be required to spend enormous amounts of money to cover property loses in California. This money has to come from somewhere and it will be from higher premiums levied against you.

The bills are coming due - in one way, shape, or form - and you are going to have to pay the piper under penalty of law.

[Fitz1980]

The debt would be far more manageable if the dollar was worth anything:

http://one-simple-idea.com/NationalDebt.jpg

Inflation started under Woodrow Wilson and the early Progressive movement... Coincidentally, this was around the time when we got off of the gold standard so we could boost military spending for WW1.

I wonder what caused the rapid devaluation of our money???

I do hope that your grasp of science is better than your grasp of history. Mark's already pointed out glaring historical errors.

[nakedstudent]

Wilson didn't invent inflation, it has always been with us. It is the what happens when the money supply increases faster than the supply of goods and services in the economy. It even happens under the so called gold standard.

Maybe I was unclear but I don't recall stating he invented inflation... I believe I said it started under Wilson. If you look at the chart I cited earlier, that's when the 3 different lines (1950 dollars, nominal debt, and 2008 dollars) started to split noticeably.


The "early progressive movement" occurred well before Wilson. Notably under the first President Roosevelt and President Taft.

Well before Wilson... this shows just how much of a short term memory libs have... The beginning of Roosevelt's term and the end of Wilson's were only separated by 20 years... hardly "well before" if you ask me...


The US temporarily suspended the Gold Standard during the Civil War, but not WWI - although the British Government did.

Wrong once again...

http://en.wikipedia.org/wiki/Gold_standard#Suspension_of_the_gold_standard

"As in previous major wars under its gold standard, the British government suspended the convertibility of Bank of England notes to gold in 1914 to fund military operations during World War I.[4] By the end of the war Britain was on a series of fiat currency regulations, which monetized Postal Money Orders and Treasury Notes. The government later called these notes banknotes, which are different from US Treasury notes. The United States government took similar measures."

[Croydon]

No, you are wrong. California has some of the highest taxes in the country. From property taxes, to automobile taxes, income taxes, sales taxes, you name it. They also have more entitlement programs than just about any other state. Add to that the millions of dollars worth of strain that illegal immigration adds to that states budget. From health care, to schooling costs, incarceration costs, etc, all for people who aren't even supposed to be there.

Look at the numbers, people and businesses are leaving California in droves. That with the housing meltdown means that California tax revenues are down despite the high tax rates. Maybe you should read a paper sometime. Start with the Wall Street Journal, maybe you'll learn something.

I am wrong about what?

NO WHERE in my post did I make a claim that CA had low taxes. WHAT I SAID was that CA's revenue relies heavily on personal tax, over 55%, which in turn places a lot of emphasis on the very wealthy. I never said anything about CA taxes being low.

[inudist]

Notice how the first question is "Who Is To Blame?" It's been done, undoubtedly a Big mess. The question, rather than "Who Is To Blame?" should be "What ought to be done?". By no means an easy answer. The first step is to cut out unecessary spending in areas but that means figuring out Where & How, plus getting the parties to work this out together. The Big questions are on defense, healthcare, education, transportation, jobs. All of major concern, incl. debt to income ratio has gotten way out of control. The gap between rich & poor continues to widen where middle class is disappearing..

Excellent post here!

This reminds me of a chart I read a long time ago comparing Bosses and Leaders. One sentence stated-

"A boss fixes blame, while a leader fixes problems."

There seems to be a lot of blame fixing and finger pointing going on here, but where is the leadership? Who can lead us out of this fiscal mess we are in?

[Naturist Mark]

Maybe I was unclear but I don't recall stating he invented inflation... I believe I said it started under Wilson. If you look at the chart I cited earlier, that's when the 3 different lines (1950 dollars, nominal debt, and 2008 dollars) started to split noticeably. The only thing to do with inflation that started under Wilson, was the government tracking of inflation - the CPI - which began in 1914. That is why government derived statistics on inflation only go back to 1914, not because that is when inflation "started".

In fact the entire 19th century was remarkable for its very regular severe business cycles every 7 to 12 years of inflationary booms invariably followed by depressions or deep recessions with deflations.Well before Wilson... this shows just how much of a short term memory libs have... The beginning of Roosevelt's term and the end of Wilson's were only separated by 20 years... hardly "well before" if you ask me...An entire generation is but a blink of the eye ... and what percentage of your lifetime is 20 years?

In fact the Progressive movement in the US reached it height under the administrations of Theodore Roosevelt and Taft, but it was around long before that. It was a reaction to the industrial revolution and the concomitant Robber Baron era from the 1870s to the early years of the 20th century. By the time Wilson left office the "Progressive Era" was essentially over at age 50.Wrong once again...

http://en.wikipedia.org/wiki/Gold_standard#Suspension_of_the_gold_standard

"As in previous major wars under its gold standard, the British government suspended the convertibility of Bank of England notes to gold in 1914 to fund military operations during World War I.[4] By the end of the war Britain was on a series of fiat currency regulations, which monetized Postal Money Orders and Treasury Notes. The government later called these notes banknotes, which are different from US Treasury notes. The United States government took similar measures." US Treasury notes remained gold backed, the "similar measures" did not include suspension of the gold standard (http://www.thefreelibrary.com/The+International+Gold+Standard+and+U.S.+monetary+ policy+from+World...-a07698825) in the United States - that didn't happen until 1971.

[nakedstudent]

From Dear Mr. BruAl (http://brual.wordpress.com/2008/08/27/republican-economic-disinformation/)
<blockquote><div class="post-41 post hentry category-politics tag-debt tag-economy tag-fiscal tag-politics"><div class="entry"><div class="snap_preview"><p><img style="width: 502px; height: 306px;" src="http://brual.files.wordpress.com/2008/02/national-debt-gdphalfsize.gif?w=517&amp;h=317" alt="National Debt 1953 - 2008" height="317" width="517" /></p><div><span style="text-decoration: underline;">Administration Change in National Debt as % of GNP</span></div><div>_________________________________</div><div>Eisenhower…………........................……… -16.2%</div><div>Kennedy/Johnson…….......................….. -16.5%
</div><div>Nixon/Ford…………............................……. -2.8%</div><div>Carter………………….......................…..……. -3.2%</div><div>Reagan………………….......................…… <strong> <span style="color: rgb(255, 0, 0);">+20.5%</span></strong></div><div>Bush Sr………………….....................…..… <strong> <span style="color: rgb(255, 0, 0);">+13.1%</span></strong></div><div>Clinton……………….......................…..……… -8.8%</div><div><span style="text-decoration: underline;">Bush Jr……………......................…….…… <strong> <span style="color: rgb(255, 0, 0);">+12.4%*
</span></strong></span></div>
<div><span style="font-family:Calibri;">*End of year 2008 estimate.</span></div></div></div></div></blockquote>

The CBO appears to disagree with this when it comes to projected debt as well.

http://www.cbo.gov/ftpdocs/104xx/doc10455/07-16-Long-TermOutlook_Testimony.pdf

The projections can be found on page 8 of the PDF...

I think we can all agree that the CBO is non partisan... If they say Obama's liberal policies will cause the debt to rise faster, why is there a discrepancy between that analysis and what we've seen in the past?

Why is the CBO wrong?

[Fitz1980]

Well before Wilson... this shows just how much of a short term memory libs have... The beginning of Roosevelt's term and the end of Wilson's were only separated by 20 years... hardly "well before" if you ask me...


So by that logic it would be OK to mix up anything that happened from George H.W. Bush to Clinton, George W Bush or Obama can be thrown in the same bag because it was only separated by 20 years?


"As in previous major wars under its gold standard, the British government suspended the convertibility of Bank of England notes to gold in 1914 to fund military operations during World War I.[4] By the end of the war Britain was on a series of fiat currency regulations, which monetized Postal Money Orders and Treasury Notes. The government later called these notes banknotes, which are different from US Treasury notes. The United States government took similar measures."

OK I don't even understand your point there.......

[Naturist Mark]

The CBO appears to disagree with this when it comes to projected debt as well.

http://www.cbo.gov/ftpdocs/104xx/doc10455/07-16-Long-TermOutlook_Testimony.pdf

The projections can be found on page 8 of the PDF...

I think we can all agree that the CBO is non partisan... If they say Obama's liberal policies will cause the debt to rise faster, why is there a discrepancy between that analysis and what we've seen in the past?

Why is the CBO wrong?

The original version of that graph was made by zfacts.com from data supplied by the Bush White House, which included projections into 2008. It was made prior to the economic crash of 2008 and there is no attempt to show Obama era figures in that graph (but here's their updated version (http://zfacts.com/metaPage/lib/National-Debt-GDP.gif) that does).

The CBO study you linked shows different alternate scenarios - not "Obama's liberal policies". You'll note that the common thread is that the precipitous rise in budget obligations is almost entirely due to the explosion in medical costs.

If only Obama would try to do something about that ...

[LamontCranston]

This reminds me of a chart I read a long time ago comparing Bosses and Leaders. One sentence stated-

"A boss fixes blame, while a leader fixes problems."

There seems to be a lot of blame fixing and finger pointing going on here, but where is the leadership? Who can lead us out of this fiscal mess we are in? Great quote. Looking at the chart Nekkid Student put up I'm not convinced this is a problem. Scroll down and look at it again....

See how the lowest percentage of GDP is debt over the past six decades was during the 70's? Nixon/Ford/Carter. That was also a long flat sideways period on Wall Street, inflation (far worse than the recession we're in now), and a national malaise (imagine U.S. hostages being held anywhere for 444 days today?).

The chart shows me that government spending it's way out of problems since Reagan might be working on a large scale. Of course, sixty years is small. I don't think crushing long term debt is healthy. It must wear down an economy (even one as big at the U.S.) like waves on a sea shore.

[nakedstudent]

The original version of that graph was made by zfacts.com from data supplied by the Bush White House, which included projections into 2008. It was made prior to the economic crash of 2008 and there is no attempt to show Obama era figures in that graph (but here's their updated version (http://zfacts.com/metaPage/lib/National-Debt-GDP.gif) that does).

The CBO study you linked shows different alternate scenarios - not "Obama's liberal policies". You'll note that the common thread is that the precipitous rise in budget obligations is almost entirely due to the explosion in medical costs.

If only Obama would try to do something about that ...

The CBO PDF is from July of 2009 and the congressional budget office. It was neither from the Bush White house or before the economic crash.

[Naturist Mark]

The CBO PDF is from July of 2009 and the congressional budget office. It was neither from the Bush White house or before the economic crash.

Yes, that is what I was saying. Now stay with me here. The original graph was from before the economic crash of 2008 and before Obama took office. It was based on figures that came from the Bush White House. It did not include deficit figures that reflected the economic crash or Obama administration spending, because they didn't know about the crash yet, or about Obama winning the election ...

I posted a link to the updated version of that original graph that does take those into account.

The CBO study that you linked came out this summer. This one came after the crash, so it includes the effects of the crash in its projections. It does take those into account. It also used different scenarios - not just a single prognostication of the future. But the single biggest factor in debt growth, no matter the scenario, was the cost of the explosion of health care costs.