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Old 12-29-2012, 09:50 AM   #21
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IIRC, there have been very few instances in the history of our country where we balanced the books. It seems pretty sad that deficit spending is an acceptable practice for the country, when you consider what happens to individuals that run their households at a deficit.
As long as deficits are at or below GDP (1.5-3%), they're considered sustainable, it is an "acceptable" even desirable fiscal practice. Unfortunately we've been well above that for a long time...
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Old 12-29-2012, 09:56 AM   #22
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Originally Posted by DFW_M5 View Post
IIRC, there have been very few instances in the history of our country where we balanced the books. It seems pretty sad that deficit spending is an acceptable practice for the country, when you consider what happens to individuals that run their households at a deficit.
I don't see how a country/government's spending and a household's spending compare in any way. I don't see that the mission of a government and the objective of an idividual citizen or household line up at all. But that's just me......
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Old 12-29-2012, 10:01 AM   #23
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See chart below and this is what I find even more worrisome than our debt levels. This shows Total Government Spending as a % of GDP. We're now in the 40% range and the trend line is steadily rising. How long before spending is over 50% of GDP? How long can we last with the government as the dominant actor in the economy?

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Old 12-29-2012, 10:04 AM   #24
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That's actually a more complicated question than it looks like.

A large portion of the deficit is due to safety net spending that increased dramatically because of the recession (unemployment, Medicaid, food stamps, etc), as well as a collapse of tax revenues caused by the recession. Another large portion comes from temporary measures designed to help during the recession (extended unemployment, SS tax cut, etc).

So if the economy improves, a large chunk of the deficit will go away as well. The article puts the deficit number at $1.3 trillion (2011), but 2012's deficit was only $1.1 trillion. Every month we are generating about 150k net new jobs. If that continues, that means that by this time next year, we'll have another 1.8 million people that will be paying into the system rather than taking out of it.

Once the economy gets to full employment, the best guesses I've seen put the expected deficit in the $500 billion range, but they are only guesses at this point. Since the economy grows over time, a modest deficit of $200 billion or so is not disasterous (although I think it would be better to aim for surpluses eventually). So our real structural problem in the medium term is probably only $300-$400 billion or so.

I suspect that a return to Clinton level taxes for everyone (not just the 250k+ crowd) would be enough to close that gap. I'm not advocating exactly that, but it's a good baseline to start with.

Some caveats--

We may go back into recession, especially if we don't smooth the fiscal cliff. The economy is still very fragile, and taking $500 billion out of it in a year may spiral us back into a severe recession.

We need to get medical spending under control. Medicare, Medicaid, and the VA are going to eat us alive in a few decades if we don't do something to bend the curve.

We need to get untangled from foreign wars and stay untangled for awhile.
Except all the projections I've seen (gov & private) suggest it will be 2017-18 before we get to 6% unemployment (considered "full" employment by many) given the path we're on. Have you seen any more optimistic?

Obviously growth and reducing unemployment take away the pain, how exactly do we do that under present circumstances?
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Old 12-29-2012, 10:06 AM   #25
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I don't see how a country/government's spending and a household's spending compare in any way. I don't see that the mission of a government and the objective of an idividual citizen or household line up at all. But that's just me......
When you (along with others) are responsible to support government expenses (via taxes), it is part of your personal budget/expenses (and taxes are an expense to the indivudial) that you must account for.

It's simply the case of someone telling you "I'm going to buy this, and you're responsible (or future generations) for paying for it".

Sorry, I don't buy that ...

Government and personal expenses are highly correlated, IMHO.
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Old 12-29-2012, 10:22 AM   #26
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See chart below and this is what I find even more worrisome than our debt levels. This shows Total Government Spending as a % of GDP. We're now in the 40% range and the trend line is steadily rising. How long before spending is over 50% of GDP? How long can we last with the government as the dominant actor in the economy?

I went to the site and fetched the actual chart.

Great site to explore!
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Old 12-29-2012, 10:36 AM   #27
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Originally Posted by BTravlin View Post
See chart below and this is what I find even more worrisome than our debt levels. This shows Total Government Spending as a % of GDP. We're now in the 40% range and the trend line is steadily rising. How long before spending is over 50% of GDP? How long can we last with the government as the dominant actor in the economy?

Hmmm... Federal, State, Local. State & local governments are necessarily addressing deficits more aggressively than Federal (so far), some good news, and borne out by the chart judging by the slopes since the 2009 peak.

The site has a well known bias, though the data appears to be consistent with others.
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Old 12-29-2012, 10:43 AM   #28
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So, just exactly who is this "government"

Is blue in top chart same as blue in lower chart, meaning Fed gov't? If so, the values are different for the blue guys...
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Old 12-29-2012, 10:46 AM   #29
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Just curious about the total federal gov't spending since 1950. How much of the increase was Medicare?
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Old 12-29-2012, 10:47 AM   #30
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So, just exactly who is this "government"

Is blue in top chart same as blue in lower chart, meaning Fed gov't? If so, the values are different for the blue guys...
I knew Fed spending was nowhere near 40% so I looked further. The first chart just lumped all together, I split it out and provided a legend...
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Old 12-29-2012, 10:52 AM   #31
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Just curious about the total federal gov't spending since 1950. How much of the increase was Medicare?
Not sure I trust the site, never seen it before today...so FWIW. Rhetorical question to begin with I suspect...
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Old 12-29-2012, 11:05 AM   #32
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Sadly, we mostly do what we're currently doing until then. We muddle along, knowing that our situation gets a little better each month as about 150k people get work again.

Job growth and getting the economy back on track are more important than deficit reduction. In fact, they are required to accomplish it.

The private economy spent 1980-2007 levering up. It is now in the process of deleveraging. Until it gets most of that done, we are not going to be able to cut the deficit meaningfully without risking a spiral into a deep depression.

Once we have a normalized job market, I expect we'll see a pickup in inflation and we can start cutting the deficit and potentially raise interest rates to deal with that much better problem.


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Except all the projections I've seen (gov & private) suggest it will be 2017-18 before we get to 6% unemployment (considered "full" employment by many) given the path we're on. Have you seen any more optimistic?

Obviously growth and reducing unemployment take away the pain, how exactly do we do that under present circumstances?
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Old 12-29-2012, 11:06 AM   #33
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I knew Fed spending was nowhere near 40% so I looked further. The first chart just lumped all together, I split it out and provided a legend...
All spending in blue chart shows 42%. Other chart in three colors shows >45%.

It might be that the numbers are not the numbers? LOL.

On a serious note, I think it helps if you know what feeds the numbers. In some charts the actual numbers don't come up for 2011, in other charts they are actual. Just an example that points out the datasets aren't all reconciled to each other.
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Old 12-29-2012, 11:14 AM   #34
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Originally Posted by BTravlin View Post
See chart below and this is what I find even more worrisome than our debt levels. This shows Total Government Spending as a % of GDP. We're now in the 40% range and the trend line is steadily rising. How long before spending is over 50% of GDP? How long can we last with the government as the dominant actor in the economy?

"All other" spending looks relatively flat since 1980, and defense has decreased as a % of GDP. So evidently the problem is retirees compounded by health care cost increases well above inflation.
What do you think?
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Old 12-29-2012, 11:20 AM   #35
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I don't see how a country/government's spending and a household's spending compare in any way. I don't see that the mission of a government and the objective of an idividual citizen or household line up at all. But that's just me......
Well in terms of the reality of how we run our country, they don't compare, and as Midpack pointed out a "reasonable deficit" has been OK historically as well as from the viewpoint of many economists. However, the country could learn a lesson in terms of applying common household budget sense in the way it operates. I have kids, and don't feel its fair that they should bear the burden of these foolish deficits that are taking us in the way of Greece.
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Old 12-29-2012, 12:20 PM   #36
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All spending in blue chart shows 42%. Other chart in three colors shows >45%.

It might be that the numbers are not the numbers? LOL.

On a serious note, I think it helps if you know what feeds the numbers. In some charts the actual numbers don't come up for 2011, in other charts they are actual. Just an example that points out the datasets aren't all reconciled to each other.
The difference is probably government transfers, they didn't seem to appear when I tried to break out the numbers. Does that discount the point entirely?
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Old 12-29-2012, 01:19 PM   #37
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I am just looking at it from an engineering perspective. I agree that the present or proposed levels will not meet the outgo. I don't think there is a claim that they will. I mean is it possible to raise taxes high enough to cover it at all? I am not asking for opinions just facts. Would some level of higher taxes cover it? I have no idea myself.
Here is a link from Heritage Foundation that states everyone's taxes would have to double to pay for the future entitlement programs if paid from income taxes.Ouch...Looking at the graph that would be pretty painful if this is true. But since I probably won't be around much after 2050, I would avoid the more painful 2080 tax brackets.

http://www.heritage.org/federalbudge...ates?ipad=true
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Old 12-29-2012, 01:39 PM   #38
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I wouldn't put a whole lot of stock in any projection out to 2082.

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Here is a link from Heritage Foundation that states everyone's taxes would have to double to pay for the future entitlement programs if paid from income taxes.Ouch...Looking at the graph that would be pretty painful if this is true. But since I probably won't be around much after 2050, I would avoid the more painful 2080 tax brackets.

Hiking Taxes to Balance the Budget Would Require Doubling Tax Rates
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Old 12-29-2012, 01:44 PM   #39
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I don't see how a country/government's spending and a household's spending compare in any way. I don't see that the mission of a government and the objective of an idividual citizen or household line up at all. But that's just me......
True, but at the same time for any government to consistently spend more than it is taking in (other than perhaps for capital projects which have long term benefits) is irresponsible as it is just a generational transfer of wealth.
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Old 12-29-2012, 01:51 PM   #40
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The difference is probably government transfers, they didn't seem to appear when I tried to break out the numbers. Does that discount the point entirely?
I believe the point that is being made is valid--that gov't spending as a percentage of GDP is rising. However, if one includes the complete graph (including 0%), then the rate of rise appears differently. Also, at that site it appears possible to generate different graphs, even when we believe the data is the same. But we can work around that.

I think my question then, is, "Are we receiving anything of value beyond what an average citizen received in 1950, for example?" If I seriously count up the things government has fostered that my family benefits from, then my answer is Yes. Can gov't do more with less? That's a tough question. It could mean my job, for instance.

A corollary question would be, "Is a rate of 42% so out of step with what other modern societies spend?" If I scan through the list at Government spending - Wikipedia, the free encyclopedia it appears we are higher than we have to be, but I don't see a decent nation out there that is at 20%, for example. Also, the gov't projections are that we will be heading to lower numbers. The charts in this thread show us headed to 38% and lower in a few years.
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