Bush Administration all excited over still ridiculously huge budget deficit.

The Bush Administration has revised their estimate of this year’s budget deficit from $423 billion down to $296 billion and they’re all giddy as school girls about it:

President George W. Bush and Republicans in Congress likely will point to the decline as they argue that tax cuts enacted in Bush’s first term are benefiting the economy and are a reason for voters to maintain the party’s majorities in the House and Senate in the November elections.

Never mind the fact that it’s still the fourth biggest deficit ever or that, as the folks at Think Progress point out, it should’ve been a surplus:

When President Bush came into office, he inherited a surplus of $284 Billion. At that time, the Bush administration predicted a $516 billion surplus for 2006.

The fact that Bush now considers a $296 billion deficit an occasion to celebrate shows how far we’ve fallen.

Almost hard to recall we once had a budget surplus. With a Democrat in the White House who had a Republican controlled Congress to deal with no less. It’s amazing how quickly the Republicans managed to wipe that out and rack up record deficits once they got in charge, eh?

Oh, by the way, Bloomberg is also reporting that rising interest rates and high gas prices are probably going to weaken the economy through the rest of the year:

Federal Reserve policy makers will now need to raise their target rate again this quarter and hold it there for the rest of 2006 to prevent this year’s 35 percent jump in gasoline costs from stoking inflation, according to the survey. A cooler housing market will add to the list of consumer woes.

“With the Federal Reserve being pretty forthcoming in saying their priority is to fight inflation, there is a good chance that they will continue to raise rates despite the fact that the growth indicators will slow,’’ said Sharon Lee Stark, chief fixed-income strategist in Baltimore for Stifel Nicolaus & Co., an institutional brokerage firm. Stark, who this month raised her interest rate forecast, said inflation “will continue to be elevated.’‘

Growth last quarter cooled to 2.8 percent, half the first quarter’s pace, and down from June’s 3 percent forecast, the survey also showed. Three consecutive quarters of less than 3 percent growth would be the weakest since the nine months ended in March 2003.

Yet Bush thinks his tax cuts have done the trick! Denial is more than a river in Egypt.

11 thoughts on “Bush Administration all excited over still ridiculously huge budget deficit.

  1. I still do not understand how any economist can make the claim that Bush’s tax cuts are good for the economy.  The majority of the money goes to people who are so rich, that they do not spend any of it, because they have no need to, they drop it into savings.  The richest 1% of the US save 98% of all money saved in the US.  And even if the rich person was going to spend it, they will likely go on a vacation somewhere.  And when your filthly rich you go to expensive European locations and such.  I doubt that the majority of the tax cut money is being spent within the US or being spent at all, but that is hard to prove or disprove either way.

    Just remember, reality has a well known liberal bias. wink

  2. There are so many economic fallacies in that one post that I could not possible spend the time fisking it. Please buy and read a book on economics. I would recommend Principles of Economics by Greg Mankiw. You should find it acceptable because:

    1. It is the most popular econ 101 text today
    2. Mankiw is a liberal who has criticized supply-side economics
    3. The guy even named his dog Keynes! (the arch-liberal economist).

    Nevertheless even a liberal keynesian like Mankiw has recognized that classical economics is “the real economy in the long run” (as compared to Keynes who said that in the long run we’ll all be dead.)

    After you read and absorb his book, your economics will get much better.

  3. Where you going to point out anything specific or just make a blanket statement?  If you are referring to my stats I mentioned above, those are both out of my Economics book my teacher used.  I do not have the book on me as I am at work right now, but if you want I will post the author title and page numbers tonight.  As far as the book you listed, I would rather use the economics I have learned from my economics teacher and text books, all of which actaully know what they are talking about.

  4. Regardless of whether the tax cuts are a net benefit or net drain on the economy (dropping money into savings is not necessarily a bad thing), the effect is a drop in the bucket compared to overall spending increases.  At best, it’s like ordering a caffeinated diet soda with your third helping of cake.

  5. Dropping money into savings is never a bad thing.  But as far as the economy is concerned, saving does very little to stimulate the economy.  Think of it this way.  If we had two individuals A and B, A has an annual salary of close to 10 million has almost no debt and lives a cushy life.  B has an annual salary of 20 thousand and has almost 30,000 in debt due to old college loans and credit cards.  If you give them both 10,000 dollars what would each individual do with that money?  There is no way to know for sure, but B is going to probably use that money to buy something nice that he couldn’t afford before, maybe a new car, and will probably pay off his debt as much as possible.  A will take that money and likely drop it into savings, why?  He can already afford a new car.  He has no debt.  If he wants to go on a vacation, assuming he has vacation days available, he can already afford it.  As most studies show, people with a lot of money, get that way by saving it, and spending very little.

  6. This economics textbook that you like so much – despite not knowing its name or the author – is clearly suspect. Keynesians have abandoned fiscal policy and the multiplier effect along with the paradox of thrift. Yet the analysis in your post is predicated upon both of those:

    1. Saving money is bad for the economy (this *used* to be a keynesian position). Since rich people save money, we need to tax them in order to stop them from saving. The government can be trusted to spend rather than save the money.
    2. The negative incentive created by the taxes are overwhelmed by the multiplier effect of spending the money. A side effect of taking that position, is that it predicts that an international trade war or a complete emargo on all trade would be a great thing for the American economy.

    These are two old planks in keynesian economics that even Sameulson eventually rejected.

    And while we’re on the subject, I took a quick peak at your blog. Your minimum wage post should include a discussion on the earned income tax credit. You should also discuss the 40% unemployment rate of young muslims in France, which has a $9.00/hour minimum wage. Racist French? Or the fact that strong minimum wage laws create a high barrier to entry into the labor market? You make the call.

  7. If you want to debate what I post on my blog, then comment there, don’t bring it up here, this is not the forum.  If I wanted people to debate what I write on the website’s of others, you would see me post on other people’s websites more often.  But nice try at trying to make me look like an asshole.

    As far as you attempting to dispute what I wrote, so far you have not made one claim that shows fallacy in what I wrote.  All you have said is “that used to be a Keynesian position.”  The point I make is quite simple.  Stop giving money to the rich that don’t need it. 

    I am not talking about communism where everyone gets the same but George’s tax cuts are ridiculously skewed to one end of the spectrum.  An article in Times magazine showed that a family of four pulling in $250,000 a year, from Bush’s tax cuts, will get enough money to buy a new car.  A family of four making $20,000 get enough money to buy a crappy toaster, roughly $75.  Cut back on the tax cuts to the rich and to large businesses and give it instead to those that really need it and to small businesses.  That within itself would stimulate the economy.  The simple fact that we are at war should be reason enough to not have tax cuts, or at least cut them back. 

    But for my textbook, like I said I will post author and page numbers later tonight, I do not carry every book I have ever used in my classes with me everywhere.

  8. Awwww. Justin doesn’t like my entry. Somehow that doesn’t bother me in the least.

    I don’t claim to be all that knowledgeable about economics, but I do know the difference between a surplus and a deficit and when the deficit is still the fourth largest ever recorded it’s hard to get excited that it’s not worse than anticipated.

  9. Macroeconomics:   
    Macroeconomics: Principles, Problems, and Policies by Campbell McConnell

    Microeconomics:
    Microeconomics: Principles, Problems, and Policies
    by Campbell McConnell

    Each textbook was for my Macroeconomics and Microeconomics classes respectively.  I took one class in the Fall 2002 and Spring of 2003.  Surprisingly I still remember a lot from the classes, I guess I tend to remember content from classes I enjoy more.

    Oh I almost forgot, and Justin, I take it since you never voiced your opinion on my website about the post you referred to previously I take it you were just trying to be a fucking dick.

    Your minimum wage post…

    And this just shows further how you are being an dick because my post wasn’t about minimum wage, it was about Capitalism and Socialism, but I guess you don’t really care, you just wanted to make me look like an asshole huh.

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