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April 14, 2008

Comments

Norquist may have been wrong, but Brendan's figures don't show that. Norquist was talking about extra dollars for the war and for domestic spending. That is, incremenetal spending, which would be defined as total spending less the amount that would have been spent if there were no war. Brendan compares total dollars, not incremental dollars.

IMHO it's difficult to measure incremental military spending and virtually impossible to say what non-military spending would have been absent the war. So, I think Norquist's comment is not capable of being validated or invalidated.

Dave -- look again at the tables. They show the change in military and domestic discretionary spending from 2001-2008. That is the incremental change in spending. Of course we can't say with certainty what would have happened had there been no war, but Norquist's claims that "[t]he war spending is a fraction of the spend-too-much problem" and that "[w]hen you want an extra dollar for the war, you have to give Congress $2 for other stuff" are self-evidently disproven by the data showing that most new spending is on the military and defense.

Without attempting to defend Norquist's statement, which I expect is probably exaggerated and incorrect, let me note that logrolling Congress to gain additional war funds doesn't necessarily mean that non-military discretionary spending would rise. The logrolling could take the form of funding weapons systems and other military expenditures that are promoted by key members of Congress, even though the need for them is questionable.

I take your point, Brendan. My comment was based on a too hasty reading of your post. It's certainly plausible to take the change in share of government spending during the war to represent the change due to the war.

One might quibble with a starting point of 2001, since the interview was addressing the war in Iraq, rather than the general war on terror. Also, after 9/11, military spending was bound to increase even if we hadn't gone to war in Iraq.

Solomon asked whether the Bush tax cuts had damaged the country, when she ought to have asked whether they damaged the government. The tax cuts helped every American taxpayer. In that way they helped the country, although they may have also weakened the government's solvency. Equating the government's well-being with the country's well-being is a pet peeve of mine.

"Solomon asked whether the Bush tax cuts had damaged the country, when she ought to have asked whether they damaged the government...."

The National Debt is owed by the population, not the government.

Existing (and growing) debt is eliminated through future tax hikes and/or spending cuts.

Increases in our debt level hurts our currency and can cause increases in inflation.

Yes, if I spend now and don't save (or if I spend now and incur growing debt) I get the benefit of the current spending, but that doesn't mean I am better off.

Isn't that elementary ?

Howard, the actuarial unfunded liability of Social Security and Medicare dwarfs the amount of National debt incurred by George Bush. Yet, that doesn't mean that the country became worse off the instant that these programs came into effect. OTOH, these programs did weaken the federal government's financial strength.

David -

As "the country" would be better off with no taxes, let's just eliminate them completely. That follows from your reasoning.

I think inflation, stagflation (higher inflation and higher interest rates) and/or a dramatically weakened dollar all impact "the country" negatively.

I still don't grasp your distinction between "the country" and "the government".

Howard,

Let's start with the area of agreement. I agree with you that "inflation, stagflation (higher inflation and higher interest rates) and/or a dramatically weakened dollar all impact "the country" negatively." I would add that high tax rates and too much government regulation might also impact the country negatively, because they could reduce business opportunities. Business is the generally the original source of the country's wealth.

Let me try an over-simplified example. Suppose the county's total wealth = W. In fact, I don't know how to measure total wealth. Presumably the figuret somehow reflects the value of our natural resources, our institutions, our onoing businesses, our workforce, etc. But, let's assume, if you're willing, that we can somehow measure W.

Also, assume that the budget deficit is an amount of D per year. Presumably D is somehow reflected in the calculation of W. The existance of the deficit means that the government is less financially solvent than it might be.

OK, now suppose we raise taxes by D, so as to eliminate the deficit. That increases the government's wealth by D, but it reduces the wealth of the private sector by the same amount. Total wealth is unchanged.

I agree with you that if this tax increase prevents inflation or some other economic woe, then it could produce a net increase in the country's wealth. OTOH if the tax increase makes our businesses less competitive, then it could decrease the country's wealth. These are real considerations, but they're secondary. My point is that the primary impact of raising taxes is to increase the government's financial strength, but to leave the country's total wealth unchanged.

We are getting off tangent some (it's a broad topic).

My main point is that revenue that's deferred (deficit spending) has costs. Interest on the national debt is one such cost. Other costs relate to the strength/stability of our economy (such as inflation risks & the value of our currency).

Another "cost" is our ability to sell our Federal Debt to others (mainly foreigners or foreign nations), but these are all inter-related.

If we tolerate prolonged deficit spending now aren't we making "high tax rates" more likely in the future?

Not to give Solomon too much credit (with her highly edited interviews), but didn't she ask that question also?

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