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Bush and the Budget Deficit

January 11, 2009 RSS Feed Print

A useful reminder of economic reality from Jim Glassman of JP Morgan Chase:

The US response to the economic crisis at the beginning of this decade is an affirmative lesson on how to address economic crises. The combined actions of the Bush Administration, the 2001 tax cut agreement, together with two major rounds of economic stimulus measures, including investment incentives and a reduction in the capital gains and dividend taxes, added up to about 5% of GDP all told. This was the biggest fiscal response in memory, since World War II, up to that point. At first the budget deficit deteriorated, as budget hawks at the time were quick to point out. By 2004 the surplus of 2000 and turned into a budget deficit of about 4% of nominal GDP. But the bold fiscal response hastened the recovery and by 2007 the deficit had declined to 1% of GDP. The government’s bookswould have recorded a small surplus in 2007 had it not been for the $200 billion tab for the commitments in the Middle East and the aid to the New Orleans area that is recovering from the damage from Hurricane Katrina in the fall of 2005.

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Apparently you are not aware that the federal government borrows the monthly billions of surpluses of payroll taxes and spends them for under-budgeted items. To account for this, the Treasury Dept. issues special bonds to the Social Security Administration that in turn considers these bonds as Assets in their Annual Reports.
The Trustees of the SSA state in their annual reports that these bonds actually extend the years that it will be able to continue to pay promised benefits.
This has fooled the past and current Presidents and Members of Congress. The amount of these accumulations is in the trillions.
With the sorry mess the Country is in, it is imperative that the truth be known.
Go to, "the debt and who holds it" and find out the amount of debt increases that President Clinton and G.W. Bush have added while in office. This information comes from the U.S. Treasudry.
Members of Congress are fooled into thinking the bonds are real assets that will be available to pay future benefits. Nothing is stated concerning from where the dollars must come to redeem the bonds. Time is running out by 2017.
With the increease in unemployment the payroll taxes have decreased immensely while benefits have increased. Your reply is welcomed.

Joseph F.Vollmer of NC 5:12PM February 16, 2009

This is actually true. I was reading another blog that was tracking the decreasing deficit, and it was on track to equilibrium by 2008 for quite a long time. From 2003-2007 we had ridiculously fast economic expansion, and taxes receipts that increased even faster. You can continue to be pessimistic about the economy and deny the policies that got us there, but we did much better in the 2000's than we could have if taxes were higher and government interference was greater.

Mike H of OH 5:59PM January 13, 2009

You have got to be kidding me.
"The government’s bookswould have recorded a small surplus in 2007 had it not been for the $200 billion tab for the commitments in the Middle East and the aid to the New Orleans area that is recovering from the damage from Hurricane Katrina in the fall of 2005" WHAT else do u want to assume away?
This is fantasy land. How about if we did not make Soc. Security payments or Medicare payments or paid interest.
And then BUT FOR the small matter of the worst recession in at least 25 years and worst credit crisis in 70 years, we would not have had a deficit.
You and Kudlow and all the other supply siders are truly delusional, which if the supply siders had not been influential during multiple Republican administrations would have been merely laughable instead of disastorous for our country.

concerned reader of Pethmeth of 6:17PM January 11, 2009

Bush and the Budget Deficit

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