Federal Deficit Cut In Half Three Years Earlier Than Expected

• October 9, 2006

Just another reason why Democrats and their allies in the media would like to keep Mark Foley in the headlines as long as possible:

A huge point has been virtually if not totally ignored since the announcement on Friday that the reported federal deficit for the fiscal year that ended a week ago was $250 billion — The Bush Administration has done what it said it would do about the deficit three years ago, and has done it a full three years early, i.e., in half the time predicted.
This continues what has been a very difficult past few years have been for those who deride supply-side economics. If Washington, with a little help from the states, lets the supply-side engine continue to chug along for next several years, the results could be so positively stunning that it would become impossible for supply-side detractors in touch with any part of the real world to hang on to the comfort of their static-analysis fantasyland.

Meanwhile, Nancy Pelosi is promising to raise taxes and increase government spending if Democrats get a majority in Congress, both of which would likely reverse this fantastic growth we’ve seen in our economy.
Which should be reason enough by itself to vote Republican come November.

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http://Array ellinas

A good measure of a good economy would be how much in interest we are paying on the debt now compared to when the tax cuts were instituted.
robert108

ellinas: You really should read up on the difference between economic debt and personal debt.
The money I use to create a factory, build or buy the building, acquire the property, furnish the inside of the factory with the necessary equipment, hire the workers, buy the raw materials and do whatever else is necessary to make the business go, is all debt until the factory starts producing and selling product. Then, the business stays in debt until the initial outlay, in addition to the daily expense, is paid off, then the profits start rolling in. In other words, economic debt is absolutely necessary for economic growth.
If I buy some gold chains for myself, on the other hand, that is personal debt that I have to pay. If I am a rap star, though, and need the gold chains for my image in a series of rap videos, that debt is amortized in the startup cost of the videos, and is paid off by the profits from the videos. Then it’s economic debt, which not only pays for itself, but generates wealth for the economy in general. Get it?
robert108

ellinas: Once again, social spending, since it doesn’t return anything(or very little) for what is spent, is bad debt. Remember, there is a difference between economic and personal debt, and social spending is equivalent to personal spending by the politicians who are buying votes with it. A great deal of our National Debt is this sort of debt, and we get nothing in return for it. On the other hand, we are wealthy enough to afford it, by far; that doesn’t mean we should continue to do it, and cutting back on social spending should definitely occur, and will some day, but it’s not dangerous at all to us. You have fallen for the 19th Century populist scareology.
http://SayAnythingBlog.com The_Whistler_ofnd

Elinas it’s less good to be in debt, but your reaction to the debt is going to make things worse. Raising taxes to pay the debt will hurt the economy so less income. It will also put people out of work so you get more spending.

What’s important is to grow the economy FASTER than the debt grows. That means each year our debt as compared to our income is lower.

Robert points out that there is a place for debt. I would say in the case of government it would make sense to bond for productive assets (such as roads).

Our tax revenues have grown very well since the Bush tax cuts. The problem’s been that Congress has spent too much.
ellinas

Debt is debt and has to be repayed. I rather not owe anyone anything. Nothing wrong with pay as you go.
Are you lads trying to convince me that it is ok to be in debt? My personal belief is the sooner we repay the better. IMO, those that can afford to pay more should pay more, those that subsist on government handouts should receive less and the government should never spend more than it takes in. It will be rough but we can do it. Debt is never good.
http://magyartruth.blogspot.com/ Chief RZ

In debt… yes, if the rate of inflation is greater than the interest rate. Simple economics. We just about had deflation in the mid 90s.
http://SayAnythingBlog.com The_Whistler_ofnd

Just continue to stick your head in the sand.
robert108

ellinas: Your massive cut and paste of numbers is meaningless without the relevant percentages. Even so, there is a vast difference between economic debt and personal debt. The National Debt is economic debt, except for the part that is incurred for social engineering programs, which are a waste, like buying lottery tickets. It’s not productive, no matter who holds it. Cutting those expenses should be priority number one.
ellinas

Are you lads trying to convince me that it is ok to be in debt?
http://SayAnythingBlog.com The_Whistler_ofnd

Elinas;The vast majority of this interest is collected by foreign interests such as China.

I asked for a link, rather you gave a bunch of unintelliglbe gibberish.

So for the rest of us I’ll actually provide the information in a usable manner.

First of all our debt is about $8.5 Trillion dollars. Of that about 40% is held by other government agencies. (Your Social inSecurity “trust fund”)

That leaves a real debt of $4.83 Trillion.

I found where you did the big nasty cut and pasting here. From that we learn the total debt held by foreigners is 2.1 Trillion.

So if you consider the debt held by the public foreigners own less than half.

However if you consider the “total” debt foreigners own less than a quarter.

See that wasn’t hard was it?
http://SayAnythingBlog.com The_Whistler_ofnd

IMO, those that can afford to pay more should pay more,

I’m sure that by definition doesn’t include you.

The way to get out of debt is to grow the economy out of it rather than tax out of.

If the economy grows faster than the debt we are in effect “paying it off.”

Raising taxes will actually hurt economic growth, hurt tax receipts and require more spending.

We should be lowering tax rates to keep the economy humming.
jpe

This continues what has been a very difficult past few years have been for those who deride supply-side economics.

Not really. Supply side is testable: lower taxes will lead to increases in GDP, which will cause increased revenue. GDP growth has been fairly modest, and not large enough to cause the increase the receipts to the levels we’ve seen.
http://SayAnythingBlog.com The_Whistler_ofnd

JPE could it also be that the lower tax rates ALSO results in wealthy people NOT sheltering their income?

Plus we’ve got more people working on the books than ever before.

Take the sales tax. There isn’t that much cheating because the rate is relatively low. If the “fair tax” were implemented you’d get a lot more “cheating.” (Not that there isn’t plenty of “cheating” with an income tax.)
jpe

Receipts are growing faster than GDP, and that’s the problem for the supply side theorist. SS tells us that tax cuts (1) causes GDP growth(2), which in turn causes higher tax receipts(3). We’ve got (1) and (3), but not (2); SS can’t explain the rise in receipts.
FlyOnTheWall

jpe

I think we’ve got wealthy pulling investments out of tax exempt funds and laying more into traditional investments but paying taxes. That would be why tax receipts don’t track perfectly to the GDP.
http://SayAnythingBlog.com The_Whistler_ofnd

So you doubt that tax receipts are growing faster than GDP?
robert108

Woof: Who collects the interest paid on the “National Debt”?

Who gets that money? Isn’t it the debtholders, in other words, us? You would create the impression that we are “losing” this money, but that isn’t true, is it? For many Americans, buying US Treasury notes and govt bonds is a good investment. This whole “interest on the National Debt” meme is just more leftie scareology.
http://www.dartemis.net/blog/ sayanything-42

Woof,

What say we make a 10% cut in ALL non-defense Federal Outlays then?

Out Here
Rodney Graves
rodney.g.graves@gmail.com
ellinas

MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES (in billions of dollars) HOLDINGS 1/ AT END OF PERIOD Jul Jun May Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul Country 2006 2006 2006 2006 2006 2006 2006 2005 2005 2005 2005 2005 2005 —— —— —— —— —— —— —— —— —— —— —— —— —— Japan 636.6 635.3 637.9 639.2 637.3 655.6 652.4 669.0 666.8 667.0 672.8 670.0 669.4 China 332.7 327.7 324.6 321.5 319.8 319.6 316.6 310.8 303.9 301.7 306.3 302.1 296.4 United Kingdom 2/ 190.3 201.5 175.0 166.8 179.1 162.3 157.2 146.0 135.5 100.3 95.8 87.2 73.2 Oil Exporters 3/ 103.1 101.5 102.6 99.1 98.0 96.2 89.4 78.2 79.3 75.4 66.1 65.2 64.1 Carib Bnkng Ctrs 4/ 68.9 60.4 58.5 61.5 61.8 54.3 65.3 78.5 82.6 75.0 68.3 67.4 65.2 Korea 68.4 68.9 68.8 70.9 72.4 72.8 71.2 69.0 68.8 63.7 64.1 62.4 62.6 Taiwan 66.7 67.1 67.5 68.9 68.9 68.9 68.7 68.1 68.3 68.9 68.9 68.4 68.8 Germany 49.8 48.3 47.2 46.7 46.4 47.9 48.0 49.9 48.6 47.3 46.4 47.9 44.8 Hong Kong 48.9 48.8 48.4 49.4 46.6 44.9 44.6 40.3 42.8 44.0 44.4 43.6 44.7 Mexico 45.7 45.7 43.4 41.9 40.1 37.6 36.5 35.0 36.6 34.9 32.1 32.9 32.0 Canada 42.3 41.3 40.9 36.8 34.7 33.3 29.6 27.8 28.6 26.3 22.4 23.0 21.4 Luxembourg 38.0 37.4 38.5 37.5 36.6 36.2 35.2 35.6 36.6 36.7 37.6 38.2 36.9 Singapore 34.3 34.6 35.7 36.7 33.1 33.5 32.9 33.0 33.4 33.9 33.9 34.2 34.1 Brazil 31.7 33.4 32.9 30.8 31.4 33.3 30.1 28.7 28.8 27.1 27.5 25.0 24.5 Switzerland 31.0 30.6 30.5 31.1 30.9 31.2 30.4 30.8 30.7 32.6 32.0 32.9 32.3 France 25.3 28.9 30.7 30.1 34.7 34.9 32.0 30.9 31.3 30.0 28.6 28.5 26.4 Turkey 21.8 19.1 21.5 21.6 21.0 21.6 18.9 17.4 18.5 15.7 14.6 15.5 16.6 Ireland 19.7 20.0 19.0 17.7 19.6 19.3 21.1 19.7 23.0 22.1 19.1 18.9 23.1 Sweden 18.3 18.2 18.1 18.0 17.9 17.1 17.4 16.3 17.1 16.7 16.8 16.8 16.4 Belgium 18.2 16.9 17.5 17.4 17.1 17.2 16.7 17.0 15.6 15.4 15.7 15.8 15.6 Netherlands 15.9 16.9 15.4 15.4 15.3 15.0 15.7 15.7 16.9 19.1 18.2 18.7 19.6 Thailand 15.8 15.8 15.5 15.6 17.5 17.9 17.0 16.1 16.2 16.2 14.8 15.7 15.6 Italy 14.6 15.2 14.2 13.9 13.7 14.3 15.0 15.4 16.5 15.1 14.2 14.9 14.4 India 13.4 12.5 12.2 12.3 11.2 10.0 10.3 9.9 11.6 11.3 11.8 13.9 14.9 Poland 12.8 11.4 13.3 12.3 12.2 12.4 11.3 13.7 13.4 13.2 12.9 12.1 12.2 Israel 10.4 11.4 13.4 13.4 12.3 12.4 12.5 12.5 10.8 11.9 11.8 11.4 10.5 All Other 127.4 120.8 126.3 138.3 150.5 156.6 152.9 149.5 152.2 142.7 132.7 143.1 143.4 Grand Total 2102.2 2089.5 2069.4 2064.6 2080.3 2076.2 2048.9 2035.0 2034.4 1964.3 1929.6 1925.9 1899.2 Of which: For. Official 1280.3 1273.0 1284.5 1300.5 1307.6 1315.4 1297.3 1280.4 1286.9 1267.1 1256.7 1267.8 1261.9 Treasury Bills 187.1 188.0 195.1 197.5 215.5 216.0 210.5 201.9 214.9 199.8 195.4 205.4 203.2 T-Bonds & Notes 1093.2 1085.0 1089.4 1103.0 1092.1 1099.3 1086.9 1078.6 1072.1 1067.3 1061.3 1062.4 1058.7 Department of the Treasury/Federal Reserve Board September 18, 2006 1/ Estimated foreign holdings of U.S. Treasury marketable and non-marketable bills, bonds, and notes reported under the Treasury International Capital (TIC) reporting system are based on annual Surveys of Foreign Holdings of U.S. Securities and on monthly data. 2/ United Kingdom includes Channel Islands and Isle of Man. 3/ Oil exporters include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria. 4/ Caribbean Banking Centers include Bahamas, Bermuda, Cayman Islands, Netherlands Antilles and Panama.
jpe

Perhaps you have access to data to support the supply side thesis, Whistler. Or is there a new version that hypothesizes growth in receipts without GDP growth?
robert108

ellinas: You are sadly mistaken. The vast majority of US debt is held by private US citizens. The leftie scareologists have been trying to gin up paranoia about the increasing amount of US debt being held by foreign interests, but it is still a fairly small percentage of the total. We went through this scareology when the Japanese were buying up our real estate, if you remember. Nothing came of it, especially when it was revealed that the British owned a lot more of our real estate than the Japanese did. Talk about your “yellow journalism”. All it means is that our country is a good investment, otherwise no one would want our “paper”.

The national debt is costing every american citizen $733.33 annualy in interest alone.

This statement has no meaning without saying how much is collected percapita. Nice try, though.
http://SayAnythingBlog.com The_Whistler_ofnd

The vast majority of this interest is collected by foreign interests such as China.

Link please.
2Hotel9

The deficit is going down, now if we could cut entitlement spending we would be started on the right road.
http://SayAnythingBlog.com The_Whistler_ofnd

I’m sure this will get a lot of play in the media with the election coming up.
ellinas

Blog (RSS)Woof: Who collects the interest paid on the “National Debt”?
robert108 on October 9, 2006 at 12:10 pm
The vast majority of this interest is collected by foreign interests such as China. If the money payed on this interest was collected by “us”, because “we” are the debtholders than “we” would be ok. But “we” dont have that kind of money, so “we” borrow. The national debt is costing every american citizen $733.33 annualy in interest alone.
WOOFX

the government’s interest bill is expected to rise in 2006, from $184 billion in 2005 to $220 billion this year, up nearly 20 percent. That increase — $36 billion — makes interest the fastest-growing component of federal spending, and continued brisk growth is likely. According to projections by Congress’s budget office, the interest bill will grow to $249 billion in 2007, and $270 billion in 2008.

Deeper and Deeper

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