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Tuesday, July 13, 2010

Sources of Our Current Deficit - Grasping Reality with Both Hands

Supporters of President Obama like to point to this chart to bolster the "it was all Bush's fault" case. I have a two questions for these folks:

1. Candidate Obama maintained that the Afghan war was the real war, and President Obama followed through on this by expanding the war. Can the portion of the deficit related to this war now be Obama's fault?

2. If President Obama extends some of the Bush tax cuts, will his supporters go back and update these charts from "Bush-era" to "Obama-Bush Era"?

Posted via email from rhymeswithclown's posterous

6 comments:

J. Strupp said...

1. Yes.

2. Yes. But there's a big difference between extending tax cuts during a severe recession and cutting taxes in times of relative prosperity without offsetting these cuts with reductions in spending. I don't think I need to explain any further as the chart clearly reflects what happens when we pursue the latter.

And I think it's obvious that we could have really used that trillion + dollars in lost tax revenues since these tax cuts were enacted (whether you agree in the effectiveness of government spending or not).

Dad29 said...

I have another question: where in Hell is the SPENDING effect?

Dad29 said...

Actually, Struppster, those "lost tax revenues" WERE used--by the people who were not deprived of their money.

You know--groceries, mortgages, utilities, car payments, clothing--the usual stuff.

Now ObamaNomics wants us to give up some of those things for The State.

J. Strupp said...

"Actually, Struppster, those "lost tax revenues" WERE used--by the people who were not deprived of their money.

You know--groceries, mortgages, utilities, car payments, clothing--the usual stuff."

And I'm not disagreeing with that Dadster. But what I'm saying is that the people who used that money to buy groceries, make car payments, buy clothing, etc. did not boost corporate earnings, real wage growth enough to offset the reduction in tax receipts from the cuts themselves.

Dad29 said...

did not boost corporate earnings, real wage growth enough

"Real-wage growth" has been flat or declining for ~20 years; it has nothing to do with Bush tax cuts.

It has to do, specifically, with labor arbitrage--facilitated by Bill Clinton's MFN grant to PRChina.

J. Strupp said...

Wage growth was flat or falling before that.