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Budget deficit of the US

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[quote][i]Originally posted by Ilse[/i]
[br]Guns, Butter And the Deficit
By Fareed Zakaria
Newsweek Feb. 16 issue -

In the past two years, the united states has rediscovered the world. We've seen large increases in funding for all the instruments of American policy—military, political, economic and cultural. Spending on AIDS/HIV, tuberculosis and malaria initiatives has gone from $840 million in 2001 to a projected $2 billion in 2004. Whether you like or dislike specific aspects of George Bush's foreign policy, there's no denying he has outlined an ambitious role for America in the world. Except that within a few years this policy is likely to collapse.

No, the problem isn't Iraq, or Afghanistan, or the French. The greatest threat to America's primacy in the world comes not from its overseas commitments, explains the historian Niall Ferguson in his smart forthcoming book "Colossus": "It is the result of America's chronically unbalanced domestic finances." The mounting federal budget deficits that now stretch out as far as the eye can see will mean—if history is any guide—sharp cutbacks in American military and foreign-affairs spending. We will see a forced retreat of America's foreign policy similar to the years after the Vietnam War—only the cuts this time are likely to be much, much deeper and the resulting chaos far greater.

An open, globalized world needs a leader. And the United States can easily afford its world role thanks to a $10 trillion national economy. In fact, as a percentage of GDP, America's nonmilitary overseas expenditures are now low. In the late 1940s and early 1950s, foreign aid was almost 2 percent of GDP. Today it is 0.2 percent. Even military spending remains moderate by cold-war standards. Today it is about 4.5 percent of GDP. During the Eisenhower presidency it once veered toward 9 percent.

But America is an empire without an imperial culture. Foreign affairs is seen as the most dispensable part of the budget. President Bush's $87 billion request for Iraq had little support among most Americans. Even military spending, protected because it is a series of jobs programs, has always been easy to pare down. The commitments that make up America's world role are tolerated as long as the economy is growing and the budget is large enough to accommodate everything. But if there were a choice between guns and butter, there's little doubt what Americans would choose.

With intelligent fiscal management, such a choice would not present itself. But intelligent fiscal management is not what we have in Washington these days. Much has been written recently about the out-of-control federal budget. The tax base has been eroded at the very moment that a massive new entitlement program, prescription drugs for the elderly, has been added. Increased funding for security measures is inevitable and yet there is no effort to tighten nonsecurity spending. Congress is always irresponsible, but President Bush has not vetoed a single bill since he took office, the first president to show such laxity. He now beats all presidents but Lyndon Johnson at domestic spending. Journalist Mickey Kaus recently spoke with a senior federal official who said, "I've never seen an administration spend money like this... The money's flying out the door. I can barely keep up with it... They give money away on phone calls. No documents. No budget. It's the worst I've ever seen..."

The real problem is that America cannot afford this orgy as it approaches the retirement of the baby-boom generation. When he was Treasury secretary, Paul O'Neill asked two economists at the Federal Reserve Bank in Cleveland to estimate what changes it would take to actually be able to pay for the government's commitments, including Social Security and Medicare. Their answer: either increase income taxes by 69 percent, increase payroll taxes by 95 percent or cut Social Security and Medicare by 56 percent. No wonder O'Neill was skeptical about tax cuts.

Many things about the future are uncerta
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T O P I C R E V I E W
Ilse	Posted - February 15 2004 : 6:51:06 PM Guns, Butter And the Deficit By Fareed Zakaria Newsweek Feb. 16 issue - In the past two years, the united states has rediscovered the world. We've seen large increases in funding for all the instruments of American policy—military, political, economic and cultural. Spending on AIDS/HIV, tuberculosis and malaria initiatives has gone from $840 million in 2001 to a projected $2 billion in 2004. Whether you like or dislike specific aspects of George Bush's foreign policy, there's no denying he has outlined an ambitious role for America in the world. Except that within a few years this policy is likely to collapse. No, the problem isn't Iraq, or Afghanistan, or the French. The greatest threat to America's primacy in the world comes not from its overseas commitments, explains the historian Niall Ferguson in his smart forthcoming book "Colossus": "It is the result of America's chronically unbalanced domestic finances." The mounting federal budget deficits that now stretch out as far as the eye can see will mean—if history is any guide—sharp cutbacks in American military and foreign-affairs spending. We will see a forced retreat of America's foreign policy similar to the years after the Vietnam War—only the cuts this time are likely to be much, much deeper and the resulting chaos far greater. An open, globalized world needs a leader. And the United States can easily afford its world role thanks to a $10 trillion national economy. In fact, as a percentage of GDP, America's nonmilitary overseas expenditures are now low. In the late 1940s and early 1950s, foreign aid was almost 2 percent of GDP. Today it is 0.2 percent. Even military spending remains moderate by cold-war standards. Today it is about 4.5 percent of GDP. During the Eisenhower presidency it once veered toward 9 percent. But America is an empire without an imperial culture. Foreign affairs is seen as the most dispensable part of the budget. President Bush's $87 billion request for Iraq had little support among most Americans. Even military spending, protected because it is a series of jobs programs, has always been easy to pare down. The commitments that make up America's world role are tolerated as long as the economy is growing and the budget is large enough to accommodate everything. But if there were a choice between guns and butter, there's little doubt what Americans would choose. With intelligent fiscal management, such a choice would not present itself. But intelligent fiscal management is not what we have in Washington these days. Much has been written recently about the out-of-control federal budget. The tax base has been eroded at the very moment that a massive new entitlement program, prescription drugs for the elderly, has been added. Increased funding for security measures is inevitable and yet there is no effort to tighten nonsecurity spending. Congress is always irresponsible, but President Bush has not vetoed a single bill since he took office, the first president to show such laxity. He now beats all presidents but Lyndon Johnson at domestic spending. Journalist Mickey Kaus recently spoke with a senior federal official who said, "I've never seen an administration spend money like this... The money's flying out the door. I can barely keep up with it... They give money away on phone calls. No documents. No budget. It's the worst I've ever seen..." The real problem is that America cannot afford this orgy as it approaches the retirement of the baby-boom generation. When he was Treasury secretary, Paul O'Neill asked two economists at the Federal Reserve Bank in Cleveland to estimate what changes it would take to actually be able to pay for the government's commitments, including Social Security and Medicare. Their answer: either increase income taxes by 69 percent, increase payroll taxes by 95 percent or cut Social Security and Medicare by 56 percent. No wonder O'Neill was skeptical about tax cuts. Many things about the future are uncerta
17 L A T E S T R E P L I E S (Newest First)
SgtMunro	Posted - November 20 2004 : 01:33:37 AM quote: susquesus asks: Hey folks- anyone have any thoughts on this? Greenspan is supposed to be some sort of Yoda in regards to the economy, does this worry you? How do we dig out of this without raising taxes? User fees? National sales tax? Raising interest rates? I'm stumped and would like some input. As far as 'digging out', there really is no hurry. As I mentioned before, we have been operating in a deficit economy for more than 40 years. I believe that Greenspan's remarks are a precursor to a change in the interest rate, as his remarks usually are. This will probably be an increase of .5%, to help control the rate of growth in the U.S. GDP, and to help stem any possible trade deficit. P.S.- Hey susquesus, I love your new title, "Mad Hermit of the North Woods", that is just too cool!!! Your Most Humble Servant,
susquesus	Posted - November 20 2004 : 12:17:05 AM Greenspan warns over US deficit By Andrew Walker BBC economics correspondent US Federal Reserve chief Alan Greenspan has warned that the deficit in US trade with the rest of the world cannot be sustained indefinitely. But Mr Greenspan, in a speech in Germany, could not say when or how the adjustment would take place. The deficit in US international trade is large by any standards - more than $500bn over the last year, or more than 5% of the country's economy. Many economists say it is unsustainable and adjustment could be painful. But the deficit has been large for a decade and the adjustment has not happened. Nonetheless, Mr Greenspan has joined the chorus of warnings. He is not predicting certain catastrophe now or indeed at any stage in the future. But the implication is clear, that the inevitable adjustment might come in a disruptive form. comeulative deficits, which result in a marked decline of a country's net international investment position - as is occurring in the United States - raise more complex issues He focused on the financing of the deficit. In essence, a trade deficit needs to be supported by foreigners investing in the US. If they suddenly become reluctant to do so, the result in the financial markets could be either a sharp rise in interest rates or a fall in the dollar. There was also a call in Mr Greenspan's speech for the US government to tackle the deficit in its finances - or even move into surplus - as an effective way of tackling the trade gap. President Bush has said he plans to halve the deficit in the government's finances. But it is clear that the government will continue borrowing. On Friday, the president signed a new law that will allow the government to borrow further $800bn. Hey folks- anyone have any thoughts on this? Greenspan is supposed to be some sort of Yoda in regards to the economy, does this worry you? How do we dig out of this without raising taxes? User fees? National sales tax? Raising interest rates? I'm stumped and would like some input.
susquesus	Posted - November 05 2004 : 7:51:28 PM Did you guys know that they are covering our budget deficits with loans from the governments of China and Japan as well as a small portion that is covered by private investors? Some guy explained it on Charlie Rose the other night, I had never heard how it was done before and thought it was pretty interesting.
lanceman	Posted - October 31 2004 : 7:10:07 PM The problem is that Bush has NOT cut taxes. Taxes are what the government takes out of the private sector. Under Bush, federal spending is up dramatically even if you ignore defense and homeland security. The difference MUST be made up in inflation, higher interest rates or future taxes. The best that can be said is that Bush has deferred taxes. Now if he had cut spending along with tax rates, then I would say he cut taxes.
SgtMunro	Posted - October 26 2004 : 1:31:51 PM quote: Susquesus asks: Does anyone know when the new budget is due to Congress? They should be working on it now, since we are already working with the FY '05 Budget. The U.S. Government's Fiscal Year starts in June, so the FY '06 Budget has to be approved before then. Your Most Humble Servant,
susquesus	Posted - October 26 2004 : 1:25:00 PM Does anyone know when the new budget is due to Congress?
securemann	Posted - March 18 2004 : 9:21:52 PM Amen.
SgtMunro	Posted - March 18 2004 : 8:55:28 PM quote: your an example of whats wrong in this and with this America ./...sarge .. you make no republican sense......................sad, too........boy do i miss bill n hillary...........:) No Anthony, you are an example of what is wrong with this country. An ignorant, vulgar and uniformed citizen who takes part in the political process by having emotion, rather than logic, dictate his actions or debates. It is one thing to spout off about your personal life, and it certainly shows your true colors, since no true gentleman ever discusses his romatic liasons out in the open. It is another when you try to pass your illogical and childish remarks off as fact, in an arena as this one. I think you are straying into the deep end of the pool without your water wings on... Your Most Humble Servant,
SgtMunro	Posted - February 18 2004 : 6:33:05 PM Kurt, Defering projected costs, until the real amount is known, is just good fiscal sense. The reason for this is because the administration knows if they would have pushed for the additional 50 billion with the FY-04 Budget, and didn't use it, the lawmakers would have found something else to spend it on. Supplimental spending bills are SOP in government, for instance the other week the U.S. Senate had approved one such bill for an additional 60 billion allocated to the U.S. Department of Transportation. A projection of 50 billion for future operations is not really all that much, and it prevents the 'feeding trough' effect from occuring amongst our lawmakers. Which still brings me back to my last question, how does the budget "ignore" current military operations? Your Most Humble Servant,
Kurt	Posted - February 18 2004 : 07:43:23 AM White House budget director Joshua Bolten acknowledged that the 2005 defense budget projections did not include spending for ongoing operations in Iraq and Afghanistan. "So we will need supplemental funding to continue that," Bolten told reporters, adding that $50 billion was "kind of the upper limit on what might be needed" in the two countries.
SgtMunro	Posted - February 18 2004 : 03:38:32 AM quote: By tax base I was referring to the actual amount of money collected... The word you are looking for is revenue, the tax base are the actual citizens/corporate entities from which revenue is collected. quote: You know, the one that ignores things like Iraq, Afghanistan, the War on Terror, and the inevitable rise in interest rates. How does it ignore current military operations? And just how would you 'factor in' the "inevitible rise" in interest rates? If you have an answer to that one, perhaps you should run for the office; because no one alive has a crystal ball with those capabilities, not even the current board of directors for Haliburton... Your Most Humble Servant,
susquesus	Posted - February 18 2004 : 01:07:19 AM Secondly, to answer your question, the way you probably intended to ask it, to wit: "So it is possible to decrease your tax rate and increase your budget at the same time?" -Sgt. Munro By tax base I was referring to the actual amount of money collected, by budget I was referring to the big paper thingy Bush hands over that is to detail how that money will be spent. You know, the one that ignores things like Iraq, Afghanistan, the War on Terror, and the inevitable rise in interest rates. I'm looking at the present and the administration is describing a best possible future. I'm sure if things go incredibly well the budget may be realistic, eventually. The way things are going I'm not holding my breath.
SgtMunro	Posted - February 18 2004 : 12:01:26 AM quote: So it's possible to decrease your tax base and increase your budget at the same time? First off you are not decreasing your "Tax Base" when you cut the rate at which said citizens are taxed. One rule to remember is that the more money which is moving around the private sector, the more growth results. As I have said, many times before, wealth is not finite; and it is created by economic activity in the private sector, not government. When you invest in private industry, you cause growth by the creation of both jobs and consumable/durable goods and/or services, this all reflects in a nation's GDP. When you invest in government, the only thing you get is more government. Secondly, to answer your question, the way you probably intended to ask it, to wit: "So it is possible to decrease your tax rate and increase your budget at the same time?" The answer is "Yes", we have done it before and as I said we have also operated in a deficit economy for more than four decades. Now, the deficit will start to level off; as tax revenues collected, from a lower tax rate and greater economic activity, start to increase. "Increase?", you say. Yes, increase, because the increase in economic activity will cause more taxes to be collected at the lower rate. Every stage of production, transportation, retail, and sale are taxable, so that the more of the above you have, the more revenue collected. Pretty simple stuff. Your Most Humble Servant,
susquesus	Posted - February 17 2004 : 10:59:10 PM So it's possible to decrease your tax base and increase your budget at the same time?
SgtMunro	Posted - February 16 2004 : 10:51:48 PM quote: That's because those foolish Democrats haven't figured out how to cut tax revenues and increase spending at the same time yet. You're close, but no cigar. Actually, it is because Democrats still believe that a society can tax itself into prosperity. Johnson thought this, thus was born the 'Great Society' programs of the 1960's, and with it the start of the 40 year deficit I alluded to in my earlier post. Your Most Humble Servant,
susquesus	Posted - February 16 2004 : 6:46:56 PM "The only time the media is concerned about deficit spending is when the Republicans are in a leadership role." -Sgt. Munro That's because those foolish Democrats haven't figured out how to cut tax revenues and increase spending at the same time yet.
SgtMunro	Posted - February 16 2004 : 10:39:28 AM An interesting article, Ilse, but I do believe that Mr. Zakaria's facts are somewhat skewed and lacking. For instance, if he would have cared to do some research, Mr. Zakaria would have found several periods in U.S. History where our economy operated in a deficit mode. The longest period lasting over 40 years, and the last time I checked we are still here and going strong. The only time the media is concerned about deficit spending is when the Republicans are in a leadership role. You didn't hear one peep out of them during the Kennedy, Johnson or Carter Administrations, did you? The military reductions that Niall Ferguson refers to were not the fruit of a weak economy. If he were to be honest concerning his figures, you would see that it was a product of a 'dove' president and legistlature. The spending still remained the same, it was just redirected from national defense (a mandated expenditure in the U.S. Constitution) to social welfare programs (Something which is not mandated by the U.S. Constitution, unless of coure you interpret "...promote the common welfare" to mean pay for it). As for Mr. O'Neill's "research" into the repairs of Social Security and Medicare, I find his conclusions equally dubious. The tax cuts are stimulating the economy, and people should be allowed to privately invest a portion of their 'hijacked' Social Security Taxes to something with a greater return. Let's face facts, Social Security is nothing but a ponzi scheme, and if it were performed the same way by a private party the Government would have pressed Federal Racketeering charges against them. I don't know about you, but when any of my investments return less than 2%, I get rid of them. Overall, I see that Newsweek has continued to practice their traditional fact-finding of articles, ala Brent Glass. Your Most Humble Servant,

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