LJWorld.com weblogs Over a cup of coffee...
Posted
by Karl Rubis
February 2, 2010 at 10:39 a.m.
Talking about Deficits
As I read the news this morning, I couldn't avoid (even if I wanted to) discussion of the budget. Since President Obama issued his budget proposal, there have been never-ending stories about it. How much money is going where, who is getting the money, who isn't, etc, etc...
One of the most interesting stories was in the New York Times. Actually, it isn't the story that caught my eye, it was one of their interactive graphics on the side of the page. It compared (in graphic form) the projected state of the budget with what actually happened. It starts in the late 90s. It shows Clinton's and Bush's anticipated economic state with each budget delivered. The varyance compared to what happened is intriguing. Clinton's budget in '96 did not anticipate the revenue and surplus of the end of the century, and Bush's '06 budget planned for good time; neither event happened. I recommend taking a look at it.
But one of the issues with the issuance of the budget is fascinating to me (this is actually the point of this entry); the discussion of the deficit. Basically, so many of the stories predict dire consequences if the deficit continues into the future (ranging from mild national discomfort to the end of the republic) . I agree the deficit needs to be dealt with, but the suggested solutions vary radically.
It makes me think of what worked in the past. How did we deal with it previously? So many comparisons compare our situation to the Great Depression (the 1937 recession is one of the points being used to defend the lack of belt-tightening President Obama is proposing). But, I can't help return to WWII (the so-called Greatest Generation) to see how they dealt with it. We often forget that during WWII, the federal government expanded the tax base to virtually everyone in the country, in other words the government raised taxes, a lot! Prior to WWII, the tax exemption line actually meant something; if you didn't make enough money, one didn't have to pay. That tax exemption line was lowered enough so that no-one would be excluded from paying. I know, I know; there was a war on and it demanded hard measures. However, the tax policy didn't return to the higher level when the war ended. It stayed right where it was.
I listen to the talk of cutting taxes to spur economic growth. I agree with that, but to a point. I think that may only go so far. I can't see any subsitute for increasing revenue through higher taxes to realistically reduce the deficit and return the US budget to solvency. Then, just maybe, we can discuss what should be the real issue in economic policy...how to reduce the national debt.
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