http://www.whitehouse.gov/omb/budget/historicals
table 1.3
Since 1977, the typical year has seen revenues equal to about 18% of the GDP and spending equal to about 21% of the GDP. This is what I would call the "business as usual deficit" - equalling about 3% of the GDP.
Notably, in 1998-2001, the federal govt ran a surplus by raising revenues to around 20% of the GDP, while reducing spending to less than 19% of the GDP. This is what I would call the Ideal Goal - with credit to Clinton's tax increases in 1993 and the GOP's spending restraint after 1994.
But in 2002-2008, the unfunded tax cuts and wars brought us back to the "business as usual deficit".
The recent economic crisis has caused revenues to drop to unprecedented low levels (less than 15% ) and TARP and the stimulus plan have raised spending up to 25% - giving us a VERY unsavory annual deficit of 10% of the GDP during the 2009-2011 period.
Once the economy recovers, the revenues are projected to return to around 19% of GDP, and once TARP and the stimulus expire, spending should drop back to 23%, putting us back in the "business as usual range"
Balancing the budget means getting back to the Ideal Clinton-Gingrich model of the late 1990's - this would mean some combination of relatively modest spending reductions and tax increases to get both the revenues and the spending back to around 20% of the GDP. IT'S NOT THAT HARD TO DO THIS!!!
Originally posted by Melanerpeswe don't really need all that (cruft) we're buying. especially services.
http://www.whitehouse.gov/omb/budget/historicals
table 1.3
Since 1977, the typical year has seen revenues equal to about 18% of the GDP and spending equal to about 21% of the GDP. This is what I would call the "business as usual deficit" - equalling about 3% of the GDP.
Notably, in 1998-2001, the federal govt ran a surplus by raising revenues to ...[text shortened]... enues and the spending back to around 20% of the GDP. IT'S NOT THAT HARD TO DO THIS!!!
Originally posted by zeeblebotThe first step is to balance the budget. As I have shown, it is something that we have done in the recent past and something we can do again.
we don't really need all that (cruft) we're buying. especially services.
Once we have a balanced budget, we can debate further on what services we want or don't want.
In all likelihood, we'll end up agreeing on spending about 21% of the nation's GDP like we've always done. But whatever it is we order from the menu, we need to have the discipline to pay full price for it.
Right now, the government isn't paying much for it's debt. Yield on the 10-year T-bond is 3.69% today. Compare that to your mortgage. Compare that to your credit card rates.
I keep saying, the government is getting cash ridiculously cheap, and it's taking advantage. I think this is a big reason why you're seeing both sides of the aisle going crazy with their pocket book. Sure, they may complain, to look good for their constituents, but they both know what's up.
A few years from now when inflation roars you'll see the government tightening its belt, not now.
Originally posted by joneschrThe global economy is in recession. While all the people with money wait until its safe to invest in something, all that money gets parked in US T-bonds. When the economy starts to really recover, all that money will leave the parking lot and those T-bond rates will rise.
Right now, the government isn't paying much for it's debt. Yield on the 10-year T-bond is 3.69% today. Compare that to your mortgage. Compare that to your credit card rates.
I keep saying, the government is getting cash ridiculously cheap, and it's taking advantage. I think this is a big reason why you're seeing both sides of the aisle going crazy wi ears from now when inflation roars you'll see the government tightening its belt, not now.
We don't have to balance the budget immediately - BUT it would be good to have a plan to balance the budget within 5 years in place before the interest rates start rising again. The time to start designing this plan is now.
Changing the rate of deficit growth by a targeted percentage each year, like on a REAL budget, with actual planning towards balance and then towards surplus, is what we need. It may not be easy to do it in 5 or 10 years, but it is easy to move in that direction and take some of the excessive risk off of our economic lives.
Right now we are living paycheck to paycheck much like Greece... and China is the increasingly worried family lender, doesn't want the member of the global economy to crash and burn, but doesn't see how he's gonna get paid back if things keep going the way they're going and if the debtor in this case has control of the currency the debt is demonominated in...
Stabilizing the debt-to-GDP ratio is enough for solvency. There's no need to repay everything. Some simplification (regarding debt denomination) notwithstanding:
- If GDP is growing, the denominator grows (rate g).
- If the country is in debt then the numerator grows (at the average interest rate r).
- A surplus is then required only to cover the differential between interest and growth rates: (r-g)*Debt. If g>r a country can stabilize the debt-to-GDP ratio and exhibit a primary deficit.
Originally posted by PalynkaI understand what you are saying. If the US economy resumes it's historical growth rate of 2-3%-yr, we can actually sustain a (real dollar) deficit of around $400Bill without increasing the current GDP-debt ratio.
Stabilizing the debt-to-GDP ratio is enough for solvency. There's no need to repay everything. Some simplification (regarding debt denomination) notwithstanding:
- If GDP is growing, the denominator grows (rate g).
- If the country is in debt then the numerator grows (at the average interest rate r).
- A surplus is then required only to cover the differ ...[text shortened]... (r-g)*Debt. If g>r a country can stabilize the debt-to-GDP ratio and exhibit a primary deficit.
The problem is that the typical voter isn't going to understand this. But the typical voter does have much concern about the size of the current deficits and debt - and the recent economic crisis has made the typical voter increasingly aware of the importance of balancing budgets.
I believe that one of the best ways of stimulating the economy might be for Congress to enact a serious plan to balance the budget within 5 years. Even if it was "anti-stimulative" on paper, I believe the positive psychological impact on investors and consumers would be much stronger.
Originally posted by MelanerpesWell, stimulating the economy does not solely depend on whether or not the budget is balanced. Some expenses stimulate the economy more than others. For example, military expenses stimulate the economy much less than education.
I understand what you are saying. If the US economy resumes it's historical growth rate of 2-3%-yr, we can actually sustain a (real dollar) deficit of around $400Bill without increasing the current GDP-debt ratio.
The problem is that the typical voter isn't going to understand this. But the typical voter does have much concern about the size of the cur ...[text shortened]... believe the positive psychological impact on investors and consumers would be much stronger.