Any help with this Econ Blog post

[edhopper]

I posted a comment on this economic blog about deficits.

http://blog.mises.org/archives/004558.asp

I was immediately attacked as a left wing weenie. Not being an economist, I don't have the tools to answer. I think their comment about Clinton and including Soc Sec in the deficit is BS. Any one want to go there and post and answer?

[Sammy Pepys]

1. on the Mises blog!

Ballsy!

[OrangeCountyDemocrat]

2. Left Wing Weenie = Better Than Right Wing Asshole! nt

[Warpy]

3. Well, they were right about Clinton

The whole thing went like this: Johnson got social security overpayments (at the time, a small amount) put into the general fund along with all other revenues collected to help defray the cost of the Vietnam War. It was just enough for him to submit a balanced budget on his way out of office.

In fact, it wasn't much of a problem until Reagan got in. Reagan dropped taxes on the richest of the rich and threw the country into a fiscal crisis. He then raised OASDI (then FICA) a total of six times, yammering all the time about strengthening social security but putting the huge overpayments into the general fund to fudge the numbers on what a fiscal disaster his tax cuts for the rich had been.

Clinton simply kept OASDI payments high and the overage pouring into the general fund, and yes, that is exactly where his "budget surplus" came from, off the backs of the poorest workers in this country.

The yowling about Clinton in that forum is unseemly, since he only continued the rotten policy of two of his predecessors, Johnson and Reagan, by keeping ridiculously high OASDI taxes on the poorest workers (taxable income is now capped at about $90K, meaning anything a piggy makes over $90K is not subject to OASDI) and by robbing the overpayments to fudge his numbers on the latest, disastrous tax cuts lavished on the wealthy.

[fasttense]

7. So what?

It is not like brush stopped using the SS surplus to hide the deficit. Brush is still using it to hide how far in debt we are. You can't have it both ways. You can't bitch about Clinton using it to decrease the size of our debt while brush is doing the same thing. Take out the SS surplus and we are even further in debt under brush. So what?

Even the rabid dog repuke Greenspan warned in 2000-2001 about how we shouldn't pay off the national debt too soon, that it could be bad for the economy and the government. So even he saw that we were going into the black very rapidly. Well... at least until the super rich and corporations got their tax cuts.

[ticktockman]

4. A response to the Mises Blog

I posted a comment on this economic blog about deficits.

http://blog.mises.org/archives/004558.asp

I was immediately attacked as a left wing weenie. Not being an economist, I don't have the tools to answer. I think their comment about Clinton and including Soc Sec in the deficit is BS. Any one want to go there and post and answer?


As Warpy says in reply #3, the Social Security surplus has been used to make the deficit appear smaller since at least Johnson. The following graph helps illustrate this point:



The gray line is the "Unified Deficit" which is the deficit that is always reported. It is very nearly equal to the "Public Deficit" (the blue line) which is the change in the debt held by the public. This does NOT include the additional money that is borrowed from Social Security and the other trust funds. If you include the money borrowed from Social Security, you get the green line. If you include the money borrowed from all of the trust funds, you get the red line. This is the "Gross Federal Deficit" and is the change in the Gross Federal Debt (which is currently around $8 trillion).

As you can see, the Unified Deficit did become a surplus from 1998 through 2001. If you don't include the Social Security surplus, however, only 2000 was a surplus. If you don't include any of the trust fund surpluses, then we never did quite reach a surplus. You can see the actual numbers and sources at http://home.att.net/~rdavis2/def06.html . In any case, I'll try to answer a few of corrigan's specific points:

Clinton's surplus was (a) an accounting fiction since overall debt including social security went up all through the period and (b) he reaped inordinate gains from taxes directly related to the stock market bubble.

It is true that the gross federal debt did continue to increase every year under Clinton. In fact, it has done so in every year since 1969. However, there was a rapid decrease in the gross federal deficit, from $403.6 billion in 1992 to $23.2 billion in 2000. Since then, there has been an even more rapid increase, with the deficit reaching $594.7 billion in 2004.

Between 1996-01 peak April tax receipts were atypically 80% higher than the average of the previous 11 months, wheareas for 1990-95 and 2002-05 this seasonal AMT/capital gains peak was just under 50% of the 11-month average.

It is likewise true that Clinton benefited from the stock market bubble. However, some of the increased peak April tax receipts was due to the increase in income tax rates in 1993. The most accurate way to estimate what portion was due to the stock market bubble would likely be to look at those receipts that came from capital gains taxes. I have not run across this data and would be interested in any source that anyone can provide.

In summary, I agree that the reported surpluses did not signal an end to our financial problems as some have suggested. Even in Clinton's last budget, the government was projecting that the public debt would rise sharply in the second half of this century as Medicare, Social Security, and Interest costs continued to rise. This can be seen in the graphs and tables at http://home.att.net/~rdavis2/pro2001.html . However, I do think that Clinton did have a much better appreciation for the fiscal risks that we face and followed a much more fiscally responsible policy than the current administration.

Anyhow, feel free to post any of this as a response. Otherwise, I might do so when and if I get the time.

[TheBaldyMan]

5. the Mises site is a poorly disguised libertarian rag

I wouldn't lose any sleep over it, they're not there for debate rather it is a back-slapping site. Even neo-cons get short shrift if they are not in the libertarian lockstep that is unfettered capitalism ( unless, of course, it adversly effects rich people )

[Sammy Pepys]

6. I wouldn't even say it's poorly disguised! n/t

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