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Thread: Obama sending Congress $4T budget replete with new spending, taxes

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Conservative View Post
    Very good post, thank you. What I wanted to point out is that there are Obama supporters here giving him credit for reducing the deficit and what I pointed out is that he has no interest in reducing the deficit but only spending more money to implement his commitment to transform this country into a European economic model. He is nothing more than a big spending, irresponsible, incompetent individual whose goal is to continue creating dependence and thus a permanent liberal leadership in D.C.
    That argument is an easy to make, all we have to do is evaluate actual spending vs. wanted spending (i.e. go back through Obama's submitted wants going back to 2009.)

    The major source of contention will then become our economic model. If we can show well that our model is based in dependence on government spending, then it is elementary to suggest Obama is just further sliding the scale towards higher levels of dependence. Dependence equates to votes.

    But we already know what is permanent from DC these days from ole (D) and (R.) Elections based upon the promise of less contribution to the treasury in taxation, more spending from the treasury in dependence, or some terrible combination of the two.
    "Every time something really bad happens, people cry out for safety, and the government answers by taking rights away from good people." - Penn Jillette.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Conservative View Post
    It is about self preservation and keeping a job for life. Power is created by creating dependence and that is what entitlement spending has done. Term limits will solve much of this
    I, too, used to think that Term limits could be a panacea for less corruption and more accountability. Then I came to wonder how much it would really improve the Federal govt. Would we just be replacing current puppets with new puppets?

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by OrphanSlug View Post
    Overall principle to keep in mind with these things is the perspective of spending and taxation as percentages of GDP.

    GDP for 2014 is estimated at $17.4 Trillion, the estimate for 2015 seems to be close to $18.2 Trillion which seems ambitious to me given how far off the CBO usually is. Spending for 2104 seems to be somewhere in the $3.65 Trillion range (20.9% of GDP) with revenues being somewhere in the $3.0 Trillion range (17.3% of GDP.) Political gridlock over the 112th and 113th Congresses allowed for the gap in spending and revenues to close, but it also put us in an awkward position to handle spending in our economic model that is now entirely dependent upon continued spending increases. Unfortunate consequence of economic policy devoid of economic principles. But at the end of the day Obama does not get to claim he cut the deficit, political gridlock did more for that than any spending intentions Obama has proposed at any point during his Presidency.

    Obama's spending / taxation changes plan for 2015 has several flaws. One that ambitious GDP growth estimate for 2015 over 2014. According to the CBO we are looking at an almost 5% jump in GDP for this year. Might happen but we have enough economic indications that growth might continue to slow down. Assume for a moment we see a 3% growth for this year and that equates to $17.9 Trillion for 2015 GDP. That would mean that Obama spending wants becomes 22.3% of GDP (or higher and roughly the 2010 percentages in spending to GDP.) And that is a two way street, meaning if GDP growth under-performs then odds are revenues under-performs and we see deficits inch back upwards. Also, Obama's plan destroys us getting Total Debt below 100% of GDP.

    The good news is much like previous Obama spending / taxation desires he now faces an all Republican 114th Congress who will most likely ignore the budget / taxation requests and we see another round of "class warfare" type mic time. In the end I suspect that spending will still inch upwards from the $3.65 Trillion 2014 number but probably not to the extent that Obama would have liked. Continued gridlock will be the story for the next 2 years, that will include budget constraints, but still increases year on year.

    You also have to keep in mind that politically Republicans will talk about fiscal irresponsibility *so long as* political opposition controls the White House. Now, assuming that 2016 is favorable to Republicans where they keep Congress for the 115th and get a Republican President then they will go on a spending spree. Odds are just with a marginal GDP growth for 2015 and 2016 we will eclipse spending more than $4 Trillion in a year anyway in spending as a percentage of GDP perspective. 2016 seems to be the target for that to happen regardless of political gridlock or the economy at the time. If Republicans go with the normal mantra of tax cuts and wealth protection route in 2016 at the same time as these high 20% ('ish) spending as a percentage of GDP they will inflate the deficits as well putting a strain on the cost of debt. Right about the time debt becomes more expensive again.

    Seems to me we need a real fiscal conservative to come in and decide what spending we can live without. And that is extremely unlikely given today's political climate and this weak, debt based, and prone to bubble and pop economic model we run.
    I would just like to note that when we talk about government spending as a percentage of GDP that tends to obscure the fact that government spending is a component of GDP. We must remember that the GDP figure we see can be dramatically effected (for political purposes) by increased government spending. For example, if Gross Consumption, Investment and Net Exports remain unchanged year to year a 2% increase in government spending will show a 2% increase in GDP even though the only thing that happened is that the government handed out more money.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Lutherf View Post
    IFor example, if Gross Consumption, Investment and Net Exports remain unchanged year to year a 2% increase in government spending will show a 2% increase in GDP even though the only thing that happened is that the government handed out more money.
    Close, but not quite.

    Federal spending is around 20% of the US GDP. A 2% increase in federal spending is a 0.4% increase in GDP.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by SlevinKelevra View Post
    inflation, a larger population to service, and negative real interest rates.

    LOL !!

    How would this budget help '' service " more people ?

    And how does it help the middle class and American consumers ?

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Monte View Post
    I, too, used to think that Term limits could be a panacea for less corruption and more accountability. Then I came to wonder how much it would really improve the Federal govt. Would we just be replacing current puppets with new puppets?
    The difference being you wouldn't have to deal with those incompetent puppets forever like you do now.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Visbek View Post
    Close, but not quite.

    Federal spending is around 20% of the US GDP. A 2% increase in federal spending is a 0.4% increase in GDP.
    Hell, then why not increase Federal spending to 40 percent of GDP ?

    It would according to you equate to higher GDP numbers.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Lutherf View Post
    I would just like to note that when we talk about government spending as a percentage of GDP that tends to obscure the fact that government spending is a component of GDP. We must remember that the GDP figure we see can be dramatically effected (for political purposes) by increased government spending. For example, if Gross Consumption, Investment and Net Exports remain unchanged year to year a 2% increase in government spending will show a 2% increase in GDP even though the only thing that happened is that the government handed out more money.
    Correct, in macro economic terms GDP = C + I + G + NE (Ex - Im) or GDP is equal to Consumer Spending on Goods and Services (C) + Investment made by Industry (I) + Government Domestic Spending (G) + Net Exports (or Exports - Imports, NE.) In our case NE is still not positive the last time I looked.

    Our issue is handling the fundamentals of the economic cycle. There is a point on the cycle where it makes sense for government spending (G) to increase in a way as to influence investment made by industry (I) and start to compensate for consumer spending on goods and services (C.) That is a matter of handling aggregate demand deficiencies in an economy, or deal with recessions and handling the recovery points of the cycle.

    To your example if we can show GDP is on the rise faster than increases in government spending then we can safely assume that consumer spending and investment by industry is starting to increase. What we are seeing is a split in behavior from 2009 to 2013 and then 2014 to projected numbers out to 2020. Between 2009 and 2013 we saw elevated spending from $3.51 Trillion in 2009 to $3.61 Trillion in 2011 and back down to $3.52 Trillion for 2014. We have not spent below $3.45 Trillion nor gone above $3.6 Trillion during the time period. But spending as a percentage of GDP has seen us fall from 24.4% in 2009 to 20.3% in 2014. So it is then safe to say we are dependent upon that government spending to push GDP upwards but it does not represent all our growth.

    For this thread what Obama is proposing is an increase in spending back towards the 22.3% range (or higher) with dubious suggestions on increasing tax revenues from overly optimistic GDP growth numbers. That is a big potential problem if GDP growth ends up just as you suggest, only pushed upwards by the government spending part of the equation where all other elements of the equation go stagnant year on year. It means tax revenues cannot possibly go up enough to cover the increased spending. If the increased spending does not equate to handling aggregate demand deficiencies then it means we add to Total Debt via Debt held by the Public from increased deficits *and* we see a rough recovery slow down even further. Or, more dependence and debt as the OP suggests.
    "Every time something really bad happens, people cry out for safety, and the government answers by taking rights away from good people." - Penn Jillette.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by Crovax View Post
    Our debt/gdp ratio cant hold like this forever....
    Actually, it can. A 100% debt-to-GDP ratio causes no issues whatsoever, as long as the government has sufficient revenues to make interest payments. The claims that a 100% ratio impedes an economy are false.


    ss, medicare and medicaid will be underfunded in a few years.
    Medicaid is funded directly by the federal and state governments. By definition, it cannot be "underfunded."

    SS and Medicare are pay-as-you-go systems, which are funded by payroll taxes. For decades, payroll taxes have brought in more revenues than they spent, and for many years the surplus went into a trust fund. What will happen in a few years, if we don't adjust things, is that payroll taxes won't cover those costs.

    However, this is pretty much just sleight of hand. Taxes are taxes are taxes, and there's nothing magical about payroll taxes, except that we've struck this arrangement to make people pay for these services out of wages rather than all forms of income. It's like a man saying he's dying of thirst, because he wants to drink only from the empty glass in front of him, and he refuses to drink from the full mug next to it.

    That said, yes SS and Medicare will take up larger shares of the budget, and we really ought to do something about it. The real issue in that regard is factors like the rising cost of medical care for the elderly, and demographic bubbles that are beyond our control.

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    Re: Obama sending Congress $4T budget replete with new spending, taxes

    Quote Originally Posted by OrphanSlug View Post
    Correct, in macro economic terms GDP = C + I + G + NE (Ex - Im) or GDP is equal to Consumer Spending on Goods and Services (C) + Investment made by Industry (I) + Government Domestic Spending (G) + Net Exports (or Exports - Imports, NE.) In our case NE is still not positive the last time I looked.

    Our issue is handling the fundamentals of the economic cycle. There is a point on the cycle where it makes sense for government spending (G) to increase in a way as to influence investment made by industry (I) and start to compensate for consumer spending on goods and services (C.) That is a matter of handling aggregate demand deficiencies in an economy, or deal with recessions and handling the recovery points of the cycle.

    To your example if we can show GDP is on the rise faster than increases in government spending then we can safely assume that consumer spending and investment by industry is starting to increase. What we are seeing is a split in behavior from 2009 to 2013 and then 2014 to projected numbers out to 2020. Between 2009 and 2013 we saw elevated spending from $3.51 Trillion in 2009 to $3.61 Trillion in 2011 and back down to $3.52 Trillion for 2014. We have not spent below $3.45 Trillion nor gone above $3.6 Trillion during the time period. But spending as a percentage of GDP has seen us fall from 24.4% in 2009 to 20.3% in 2014. So it is then safe to say we are dependent upon that government spending to push GDP upwards but it does not represent all our growth.

    For this thread what Obama is proposing is an increase in spending back towards the 22.3% range (or higher) with dubious suggestions on increasing tax revenues from overly optimistic GDP growth numbers. That is a big potential problem if GDP growth ends up just as you suggest, only pushed upwards by the government spending part of the equation where all other elements of the equation go stagnant year on year. It means tax revenues cannot possibly go up enough to cover the increased spending. If the increased spending does not equate to handling aggregate demand deficiencies then it means we add to Total Debt via Debt held by the Public from increased deficits *and* we see a rough recovery slow down even further. Or, more dependence and debt as the OP suggests.

    I've also got a problem with "Aggregate Demand" since it counts government spending twice. It's counted directly one time and then it's also counted as a function of Consumption.

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