Archive

Posts Tagged ‘Tax Cuts’

Deficits R Us- A Guide to the History of U.S. Deficit Spending

February 16, 2011 Leave a comment

 

You would think with all the angst about government red ink, that this is, somehow, a new thing in the history of this country.  There’s nothing new about it.  For more than a century now, we have been in deficit 70% of the time.

I’ve referenced DaveManuel.com,  a reputable newsletter on financial and Wall Street issues and trends.  Here are their deficit stats .

Here’s the big chart that tells you our deficit history at a glance for the last 72 years, from 1940 through now:

 

That’s 60 years in the red and only 12 in the black.  We had a better record of balanced budgets from 1900 to 1940; 18 years with a deficit, 20 without and 2 in which we broke even.   Total record over 112 years:

78 years with a deficit

32 years in surplus

2 years in which we broke even

Now, I’m no economist and I’m sure my analysis is both amateurish and superficial.  But there are several striking things that pop out at you when you overlay historical events over these deficit charts. 

When did we have our longest periods of budget surpluses? 

Well, we did quite nicely from 1920 to 1930.  And we did well again from 1998 to 2001.  What do these periods have in common?  Boom times.  When the economy was cranking along and people were getting rich left and right and government coffers were getting filled to the brim.

What about our worst periods of budget deficits? 

The period of 1931 to 1946 was a bad 15-year stretch.   Following the roaring 20’s of course, we hit the Great Depression and government spending increased dramatically to combat raging unemployment. On top of that, we funded World War II.

We had a brief period of balanced budgets in the late 1950’s and then went back into debt in a big way in the 1960s.  History shows us Lyndon Johnson was leading the Great Society initiatives and funding the Vietnam War all at the same time.

In fact, from 1961 until 1997…there’s only been one year we had a balanced budget.

So we went through 4 years of surpluses in the late 90s/early 2000’s and then what happened? 

Two things, we were attacked on 9/11 and the Republican version of LBJ.   Instead of Great Society programs, it was across-the-board tax cuts and we funded two wars; Iraq and Afghanistan- all at the same time.  And the next big spike?  The financial collapse of 2007-2008. 

When does deficit spending happen? 

I see three basic circumstances at play that determine our national balance sheet.

1) When we’re in boom times we’re remarkably good at balancing budgets. 

2) When wars and economic adversity hit, we spend like there’s no tomorrow but these are largely external events that we are reacting to.

3) When we fight wars and press for highly ideological agendas- like Democrats with the Great Society programs and Republicans with massive tax cuts.  These are deficits (and some would argue wars- Vietnam and Iraq) of our choosing.

Are deficits dangerous?

They can be if they get past a critical percentage of the size of your total economy.  The deficits we ran in the World War II era represented the largest percentage of deficits against GDP (Gross Domestic Product) in  history; between 21% and 30%.  Our current deficits, as big as they are, represent about 10% of our GDP.

Are we handing a history of deficits and doom to the next generation?

Yes and no.  Lest you feel sorry for all the red ink we’re handing our children, history shows us they’ll be ok because they will spend what they have to on their unforeseen wars, economic calamities and favorite government programs and then hand off the ensuing debt to their offspring.

Obama Finds a Voice; Palin Guts a Caribou

December 9, 2010 2 comments

President Barack Obama this week, may have made himself newly electable for 2012. Meantime, Sarah Palin kills animals on her Discovery Channel show to stock up for the winter. Wait…you say..those two things don’t belong in the same article! You’re right. They don’t.

The Angry Middle

Spot-on article on President Obama’s newly-found, feisty voice from the dean of political reporting, David Broder, of the Washington Post. Broder contends that what the President did this week in finding a compromise with Republicans on tax-cuts and jobless benefit extensions was recapture the middle of American politics. And his standing improves with independents with every howl from the deeply unpopular, Pelosi-wing of the Democratic Party.

It’s also tough for Republicans to keep calling the President a socialist, when an actual socialist, Vermont Senator Bernie Sanders, opposes him so thoroughly and visibly on the Senate floor on all this. Broder confirms what I’ve always suspected of this President. He is a left-of-center pragmatist with a capital “P.”

Sarah Palin’s Refrigerator

My status as an elitist, East Coast urbanite was thoroughly confirmed last night as I accidently came across episode-4 of Sarah Palin’s Alaska on the Discovery Channel. Sarah joined her dad, Chuck and a friend named Steve Becker in hunting down a cute caribou. As they aim their rifles at the defenseless creature, I found myself screaming at my flat-screen, “Run, little guy, run!”

Sarah, as it turns out, is NOT a great shot with a hunting rifle. She missed the creature three times as the weapon jolted up against her shoulder and seemed to cause her to miss high, above the animal’s head. Anyway, somebody (not her) finally wounds and kills the caribou and then they begin gutting it. Sarah explains why it is they cut off the four legs first and pack them up in some container, then adds it was a really good thing they killed this sucker because now everyone will have enough meat to eat for the winter.

What????? It is reported that between speaking fees and book sales alone, Sarah Palin has made $12 million since July of 2009. I respectfully maintain that as a matter of sheer survival, cutting up this caribou they killed last night into dozens of tasty packages tossed into the Palin family freezer…was not entirely necessary.