No Really -- Bush is Fiscally Responsible ... NOT

For economic and market commentary, go to the Bonddad Blog

From the Washington Post:

The White House and Congress are heading for what President Bush predicts will be a "fiscal showdown" at a time when the nation's financial health has actually improved for the moment.
After years of record-high deficits, both parties are now projecting that the budget can be balanced by 2012. But as each side seeks to outmaneuver the other politically heading into next year's elections, the rhetorical battle between Bush and lawmakers over spending has never been more heated.

"You're fixing to see what they call a fiscal showdown in Washington," President Bush told business leaders. (By Danny Johnston -- Associated Press)

Bush used an appearance here Monday to chastise Democratic leaders for failing to send him even one of the 12 annual spending bills more than two weeks into the new fiscal year, and he eagerly vowed to veto what he deems excessive spending. Democrats fired back by highlighting the one veto Bush has exercised: the rejection of a dramatic expansion of a popular children's health insurance program.

OK -- let's start with some basic economic logic -- and there's even a "play along at home" version. Let's say you balance your checkbook every month. If this was the case, would you find the need to borrow money?

Let's apply that logic to the federal budget. According the "official numbers" Bush has performed an economic miracle of balancing the budget with with his supply-side policy.

However -- and this is a really big however -- The US government is still issuing tons of debt.

According to the Bureau of Public Debt, total US debt outstanding is $9,044,256,689,740.39.

When Bush took office, total debt outstanding was $5,662,216,013,697.37.

In fact, Bush has been so successful at balancing the budget that Congress has had to raise the debt ceiling five times since Bush took office.

The Senate Finance Committee earlier this month approved increasing the limit on the national debt to $9.82 trillion (€7 trillion). That boost of $850 billion (€608.2 billion) would be the fifth increase in the government's borrowing limit since President George W. Bush took office in 2001.

Raise your hands if you think a president that has increased total debt outstanding by over $3 trillion in his presidency and has had to raise the debt ceiling 5 times is actually balancing the budget -- or is even close to balancing the damn budget.

Comments

[LeftRight]

Don't forget, in addition to the debt increasing by almost 100% since he took office, at the time we not only had a balanced budget, we actually had an annual SURPLUS, which would have eventually allowed us to pay down our debt.

[Hoelder]

Is this including the IOUs in the social security fund. There is of course the GAO report that report actually last year that including all IOUs, the deficit last year was closer to $1.5 Trillion with proper SEC accounting rules. I do not know when the breaking point will happen, but in ECON 101 in 8th grade, I learned that the debt service once it reaches a certain point will hurry the government into a default on its debt. For $9 Trillion with an average of lets say 5% interest is $450,000,000,000 or $450 Billion or 1/6th of the total budget. The European Union has a larger GDP than us, but has deficit restriction for member countries which state that the budget deficit can only be 3% of the budget. Lets look at the GDP: $13.2 Trillion is 3.4%, which is far above that ceiling. That in contrast makes the Euro more and more attractive on top of the EU having the largest GDP in the world with 30% and 27% for the US. Add other deficits like in trade, and people are surprised that there is a credit crunch. Again, ECON 101: massive government debt absorbs money that would otherwise go into productive investments and infrastructure. The EU is already courting China and Japan. Both nation are not very happy about US foreign policy and the hens come home to roost or better invest into Euros. By the way I scored better in Econ than the President.

[wldnswmmr]

I have no doubt you scored higher than W in Econ. Bush was probably at a kegger the year his course went by. This is a well-reasoned comment, IMHO. I've been thinking along the same lines. The question is, that 5% interest might work on the "internal part" of the national debt; but will it be sufficient to keep our foreign creditors interested in Treasury IOUs, esp. with the Euro competition you're talking about. Suppose the "real" (non-Social Secuirty & other trust fund debt) part of the national debt is around $4.5 trillion, and foreign creditors begin to demand 1970's era interest to keep them floating our debt. Suppose, as happened not too long ago, interest rates start hitting around 12-13%. If Treasuries lose their investment grade status, why not? Junk bonds need a risk premium to be marketable. If this kind of thing happens, or comes close to happening, it will be Bush's true nightmare legacy, that he pulled a Harken/Spectrum 7 while President and wrecked yet another "company" with his mindless leadership.

[AZM]

Congress should have raised the debt ceiling to an even $10 Trillion. It might have received more attention in the news media.
Back in the old days, when I was young, you had guys like Senator Everett Dirksen going around saying things like "a billion here, a billion there, and pretty soon it adds up to real money". Where have all the real Republicans gone?

[Rescisco]

Excessive tax cuts aimed at the wealthiest among us combined with radical increases in expenditures related to the "War on terror" and the Iraq mess is a prescription for fiscal disaster. While not forgetting other factors that may contribute, it is precisely this lethal combination that contains the seeds for the fiscal "Katrina" we are about to face. Great job Bushie! And shame on all who have supported this idiot and his war(s) without national sacrifice. If these "supporters" believed only half the lies their "leader" has told, they would have been outraged a long time ago at the unwillingness of this administration to challenge us to belly up and pay the bills necessary for our "national security."

[ReasonIsMyReligion]

We keep printing money, control the interest rates to keep inflation minimal, run up the national debt with annual deficit spending, and guess what? The rest of the world -- including currency traders on Wall Street -- ain't fooled.

Hence the plummeting dollar.

[gopgoingdown]

The baby bloomers paid more into Social Security to pay for their retirement, and their kids retirement.
Bush has spent every penny of it. It's broke.
Billions of dollars, that will have to be paid back.

[Mormondude]

No, they didn't pay for their own retirement or their kids' retirement. They paid for their parents' retirement. Just like people sending taxes to Washington today are paying today's retirees.

Your FICA taxes go to Washington and immediately get sent out to retirees in the form of checks. 20 years ago it was the same way. 20 years from now, it will still be the same.

IF the SS system had been set up so that people put money in to fund their OWN retirement rather than their parents' retirement, we could all retire comfortably, and we wouldn't be a burden on our own kids and grandkids. Unfortunately, that system didn't pay off immediately, so we got the current ponzi scheme instead.

[ReasonIsMyReligion]

Re "ponzi scheme," no argument there. ;-)

Note that there are a good number of ways to wrestle the ponzi monster into better balance, noe politically palatable to the particular ox getting gored. Two for starters:

1) Raise the wage cap on Social Security contributions. Why should high income workers not contribute more than middle income workers?

2) Make Social Security benefits MEANS-TEST based. Why should high income retirees get the same benis as low-income retirees?

3) (Frankly I'm not sure if SS benis are taxed. If not, they should be. After all, the money went IN pre-tax.)

VERY rough analogy: You pay more for car insurance on an expensive car than a cheap car. But you don't get it back unless you need to file a claim.

[Overd0g]

Bush is a spending maniac. All Republicans know that. Too bad no party is supporting the idea of shrinking the federal govt. to a reasonable size. All both sides too is argue about how to spend the loot (on credit).

[ReasonIsMyReligion]

But Bush spends on his buddies, so they don't mind.

Re your next point, I believe it was Gore under Clinton who spearheaded a huge drive to streamline and reduce the size of the federal government.

Bush took the savings and blew it -- and then some -- on his cronies, while reducing their taxes (and ours but a pittance).

Re your third point, Clinton argued strongly for a balanced budget, and backed it up. Please reconsider tarring with such a broad brush.

The record is clear -- there is a clear difference.

[ihavenobias]

It is in fact true that the government grew less under Clinton than both Reagan *and* Bush.

[LunaNik]

You've hit the nail on the head. It's not the budget deficit that's of major concern; it's the national debt. Many people don't realize there's a difference. The difference, to use a personal analogy, is your income versus your credit. This misadministration has bankrupted our country by considering credit as income.

While balancing the budget would help--and I mean really balancing it; not just fudging the numbers--it's the incredible debt that needs to be addressed.

And it needs to be addressed before the dollar is devalued further. Since Bush & Co. took office, the costs of running my household have doubled. Groceries, electricity, fuel oil, propane, insurance, gasoline...all prices have at least doubled in the past 6 years. To make matters worse, since I subsist on federal government disability, my income has not changed but for a small COLA each year (not remotely enough to keep up with rising prices).

I have to shake my head in resignation when I hear people proffer the Dow Jones as proof of our "good" economy. Nothing has trickled down to me yet. How 'bout you?

In the meantime, despite the billions of dollars they've spent, the borrow-and-spend Republicans have not addressed one single issue designed to help average citizens. That money might as well have been flushed down the toilet.

[ReasonIsMyReligion]

Using the Dow as a good indicator for the economy overall is to conflate Wall Street with Main Street.

That "record" DOW levels never correct for inflation makes it even more of a joke.

[Mormondude]

When we collectively owe 89 trillion dollars in unfunded liabilities to Social Security and Medicare in the future, spending a trillion or two of their money over the last 20 years really doesn't make that much difference in the big picture.

If we're going to continue careening down this path, then we might as well consolidate all the tax revenues and all the spending and stop playing accounting games.

[ihavenobias]

1)-Both Reagan and the current Bush have spent hundreds of billions of dollars from the social security trust fund.

2)-Reagan doubled the social security tax rather than increasing the $90,000 cap.

In other words, someone making $90,000 a year (or less, which is most people) is taxed on 100% of their income when it comes to social security while someone making $360,000 a year is only taxed on the first 25% of their income for social security.

Reagan (or any president thereafter, including Clinton) could and should've increased the cap AND promoted legislation to put social security funds off limits. No one should be allowed to spend a single penny of that money on ANYTHING other than social security payments.

So yeah, I always get a laugh when someone suggests that social security is inherently unsustainable or doomed to failure because of population trends (baby boomers, etc).

[ReasonIsMyReligion]

No argument there.

But isn't the history of the accounting games important to bear in mind?

My understanding is that those games were set up to keep politicians from poaching Social Security contributions to balance current budgets. (And I do get your point that ignoring outflows makes overall fed budgets look more balanced than they otherwise would.)

Sort of like a wage earner ignoring his 401k contribution before figuring out whether he can swing the monthlies on that new Humvee.

[Mormondude]

"Raise your hands if you think a president that has increased total debt outstanding by over $3 trillion in his presidency and has had to raise the debt ceiling 5 times is actually balancing the budget -- or is even close to balancing the damn budget."

Okay, well by that logic, Clinton never balanced a budget or ever came close to balancing a budget. During his presidency the national debt went up by more than 1.6 trillion dollars. He had to raise the debt ceiling multiple times.

http://query.nytimes.com/gst/fullpage.html?res=9C05E1DB1639F93BA15752C0A960958260

This little article is interesting for another reason...

"Although the Government actually reached its borrowing limit in November, Treasury Secretary Robert E. Rubin has used two pension trust funds for civil servants to avoid defaulting on maturing Government securities."

In other words, even after they ran out of money, they just reached into another different pot of money (a pension no less!) to keep the spending right on churning away.

The federal government has many responsibilities, but there is really only ONE thing that it EXCELS at, and that is spending money.

In the last 50 years, the government has raised its debt ceiling more than *70* times.

At what point do we stop enabling this addiction and intervene?

[joebaggadonuts]

At least the Nobel Prize winners in Economics get it. http://uk.reuters.com/article/reutersEdge/idUKNOA63183020071016

Free Markets are not a complete answer.

Why don't you get it?

[Mormondude]

How is a private entity inherently different from a public one? Really the only difference is that a public entity can FORCE you to participate in a program you otherwise would not participate in, and they can FORCE you to pay for it.

For more than 100 years we have fought against private monopolies. Why? If consolidation is the solution to all our economic concerns, and if forcing everyone to participate in one system makes sense at the government level, why not in the private sector as well?

The argument has always been that monopolies stunt progress and lead to INefficiency (price gouging, etc). Why would it be any different at the government level? There really isn't any reason that a government monopoly is any worse than a private monopoly. They both ultimately cause the same unintended consequences.

If you think that monopolies are actually good, then why not eliminate the trust buster laws and let efficiency reign supreme?

[ReasonIsMyReligion]

Convenient how Mor(m)onDude lumps Clinton's fiscal policies in with Duhbya's.

Well, at least THAT national nightmare of peace and prosperity is behind us.

[cuddletuffy]

good points. LBJ started the social security trust fund raid during the Vietnam war. He set the precedent and every president since has stolen that money from citizens and given it to the military.

g.w. bush is likely one of the worst leaders ever to grace the world stage - ever. still, to pretend like everything went wrong once he took office, along with pretending that suddenly the media took a bad turn ... is irresponsible.

It condemns us to not learn the lessons and take proper action to fix the problems at their root. Neither will we prevent them from recurring for at least a few generations until the lessons are forgotten.

Clinton was way smarter than gwb. However, he was still an imperial scheister. thanks for keeping things honest. we'll never find our way out of the woods walking around blaming our feet instead of stopping, lifting our eyes, taking note of the landscape and crafting a careful plan based on what we observe.

- a liberal who hates labels and identifications that cause thinking and honesty to cease

[Mormondude]

I'll agree with you as soon as we implement 2 simple reforms.

1. No Payroll taxes can be used to fund non-entitlement spending. (i.e. 'lockbox').

2. Only Payroll taxes can be used to fund entitlement spending. (the corollary)

Once we pass a law stating BOTH reforms #1 and #2, you are correct. Until then, it's all one big pot-o-money, and the entire entitlement system is based on an accounting house of cards.

Sure, today money is flowing from payroll taxes into other areas of the budget. But in less than 10 years that flow will reverse, permanently. Will liberals be crying about how income taxes are being 'looted' then?

[ReasonIsMyReligion]

Do us a balanced budget favor, and compare Clinton and Bush by the same standards.

Operators are standing by.

[BillZBubb]

But the trolls will scream "It will be in balance in 2012!". It is always so convenient for them to project a future, long after Bush is out of office, that appears to show something positive.

Bush has been a miserable failure on the budget--just like every other area of his presiduncy.

[ReasonIsMyReligion]

Note that it was in balance before Duhbya got appointed.

[way2muchsense]

And you watch. The next President will spend considerable political capital getting a tax bill through Congress that fixes this, and all the "conservative" dunderheads will line up to give Dumbya credit.

[lisakaz]

No, they won't. They'll criticize Dems for taxing Americans and conveniently forget it is to pay for Bu$hco's fiasco. I say the next president makes all of Bu$hco's buddies pony up all the tax breaks he gave 'em.