Re: The Federal Deficit Is Actually Shrinking
posted at 5/2/2013 12:04 PM EDT
In response to skeeter20's comment:
In response to A_Concerned_Citizen's comment:
Ummm ya, except that's not the point of the article.
In a way, policymakers backed into this shrinking deficit. Both the spending cuts and the tax increases are more the product of government stalemate than any deliberate action.
The economy is paying a price in slower growth. Even some conservatives like John Makin of the conservative American Enterprise Institute are now warning that austerity has gone far enough.
That lack of long-term thinking is a different kind of deficit that Washington has yet to overcome.
The GDP formula was changed recently, inoluding such hard-to-value non-comodities like R&D and unrealized royalties, so, the statement thatthe dept is dropping as a percent of GDP is nonsense. In real terms, it is growing worse. GDP, as measured by the "old" formula, as in the formula used last week, when you adjust for federal borrowing, has been shrinking for years, probably about a decade. During this time, spending has been going up, so, it is actually getting worse, so, the Feds changed the optics by changing the formula!
As far as austerity, the idea that what you call austerity, that is, slowing the growth in the rise of unfunded spending, has somehow gone far enough, is laughable.
Government borrowing which cannot be paid back in the existing fiscal cycle is borrowing capital from future generations, and is making it appear that things are ok, but in truth, it is creating a bubble. We sit on top of a bubble, filled with future capital, which is putting our spending n the backs of our children.
Sorry to burst your bubble, so to speak.
Another conspiracy theory that is just plain laughable.
No one has changed the official GDP formula.
If you look at receipts as a percentage of GDP historically it is a full 4% less than it was in 2001 and 5% less than 1999. That is $800 billion less revenue than a decade ago.
Debt does not, in and of itself, rob anyone of anything.
If the country borrows to fix the infrastructure, future generations benefit from that investment. That is especially true today when interest rates are at historic lows and the cost of construction is always rising, at least at the rate of inflation if not more.
So assuming inflation is 2%, and you put off infrastructure spending for 10 yrs, that equates to an increase in costs of $200 million for every $1 billion in spending. You would be getting 20% less return on your investment for every 10 yrs.
That doesn't include the cost of interest on Treasuries.
Currently the Fed pays .2% interest rate. If that rate rises at normal levels over ten years it would be 5-6%. That is another $400 million/$1 billion hit on the cost of future projects versus the cost today.