State of the UnionFollow

No, no. He's right. Deficit doesn't roll over. Debt does.

He's still a prat though.

Lol... That's classic!

Deficit is a yearly calculation. It is the difference between the revenue generated that year and the outlays spent that year. Period. End of story. There is no roll over. The only effect previous years have on it, are that some of of the outlays must include interest and payouts on existing debt. The relevance of measuring debt as a percentage of GDP, is that this means that outlays paid out on that debt are also going to be the same percentage of GDP, and thus have no additional effect. So yearA following a year with 35% debt/gdp will be impacted exactly the same as yearB following a year with 35% debt/gdp.


Get it? You don't add up the dollar amounts. The deficit is made up by selling treasury bonds. We don't borrow from next year. Those Treasury bonds are now owed to those who hold it and make up the "debt held by public" (not the same as "national debt" btw). Measuring that debt as a percentage of GDP allows us to know over time the actual effect budget planning is having on our economy. If that number is increasing, we're borrowing too much money. If it's decreasing we're paying off more debt than we're borrowing. If that number stays the same then we are not affecting ourselves one way or the other.

That's why I said that Bush's budgets, deficits and all, were "sustainable". The debt/gdp ratio stayed pretty consistently in the mid 30s the whole time he was in office, only jumping to 40% the last year, primarily due to lost revenues due to economic contraction and a moderate increase in actual spending (previous years saw spending increase by about 100-150B/year, and in 2008, spending went up by 250B or so).

At 40% or even 45% the debt is still manageable. No one's going to worry about whether or not to continue lending us money. They aren't going to demand higher interest rates on the Treasury Bills, so it's unlikely to introduce inflation causing factors. But the Dems and Obama have pushed that debt rate to 53%. That's an insanely high number and it will cause us more problems down the line. And the worst part is that a good portion of that spending wasn't necessary to deal with the economic crisis at hand. They just took the opportunity while the piggy bank was open to spend a ton of money on stuff they liked.

That's why it's bad policy. They're pushing our economy into the danger zone for no good reason.

But the Bush policies continue to add to the deficit annually. There's a legal onus to fund the Medicare expansion. We have to commit money to moving troops out of Iraq. The tax cuts continue to impact the budget every year until they expire, etc.

Gbaji wants to pretend these things suddenly stopped mattering once Bush left so he can pretend that the GOP isn't at fault here for a significant portion of the deficit.

Naturally. It's not like I was defending his position, just the words.



Then I would have said that to begin with. Words matter. Mostly. I think.

It's groundwork for the "we have to raise taxes to pay off the debt" argument which I predicted last year. Dems increase spending, create too much debt, then use that as a lever to push for tax increases. Shocking! Who could have guessed it!?

I'd imagine the meteoric drop in gdp growth had something to do with it. It throws off debt as a percentage of gdp even maintaining the same deficit in numerical terms, which would require large spending cuts to compensate for the drop in revenue and the actualisation of implicit debt from policies previously instituted. Medicare and similar policies increase in cost every year.

I find it somewhat odd that you seem to think that deficit spending is a good way to increase GDP growth if a market is performing under its potential but do not support it when this is most the case (in a recession).

As opposed to the republicans increasing spending, refusing to pay for it, then passing on the bill to the next generation?

You have to keep paying annual costs. That's why they're "annual" and not "one time".

Edited, Feb 4th 2010 4:49pm by bsphil

Just so we get this straight, I'd like to ask the self-described conservatives one thing:

Is the correct order of business "cut spending first, then cut taxes" or "cut taxes first, then cut spending"?

And chalk me up for a vote in column A on this. I'd vote for, almost literally, any lawmaker who would support a bill that put a goal of true annual decreases of 1% in the budget, and automatic tax cuts of the same amount in each year that was achieved.

Republicans aren't conservative.

Too bad you never do that.