About Stuart Levine


Federal Budget

October 4, 2008--Comparing Debt Update

This chart, from Pat Garofalo, shows the federal debt as a percentage of the GDP:


debt_gdp_comparison chart#1

September 22, 2008--Comparing Debt

When Bill Clinton became president, the total federal debt, including both public debt and intragovernmental holdings, was $4.188 Trillion. When he left office, the debt was $5.728 Trillion. In other words, the federal debt, in nominal terms, climbed 26.88547%.

Thus far (with about four months to go), the federal debt under W has grown from $5.728 Trillion to $9.727 Trillion or $3.999 Trillion. That's a 69.814944% increase, more than twice the percentage increase under Clinton.

Source: Treasury Direct.

September 13, 2008--Where Would We Be Without the Bush Tax Cuts?

According to the Center for Budget and Policy Priorities, with a significantly smaller deficit.

Fully 42% of the 2009 federal budget deficit is due to the Bush tax cuts. Another 40% is derived from defense and national security increases. Only 6% is derived from increases in discretionary domestic spending.


2008 CPBB deficit chart#1


Tax cuts contributed 46% to the aggregate 2002-2011 projected deficits.

2008 CPBB deficit chart#2


The money quote:

In sum, tax cuts, increased defense and security funding, and a dose of economic cold water are, in order, the three key reasons that the large surpluses projected in January 2001 turned into substantial deficits. Increases in domestic programs have been relatively modest in comparison.

A copy of the report in pdf is here.

July 19, 2008--Do Tax Cuts Increase Income?

No.

See this from the Center for Budget and Policy Priorities. Among the points the study makes:

  • There is no evidence that the 2001 and 2003 tax cuts caused any increase in economic growth, let alone growth sufficient to offset their cost.

  • In 1981, when Congress substantially lowered marginal income tax rates on the well-off, supporters claimed the cuts would boost economic growth. In 1990 and 1993, when Congress raised marginal income tax rates on the well-off, opponents claimed the increases would harm the economy. In fact, the economy grew at about the same rate in the 1990s, following tax increases, as in the 1980s, following a large tax cut. And revenues grew twice as fast in the in the 1990s (3.5 percent in real per-capita terms) as in the 1980s (1.5 percent).

  • Capital gains rate cuts, like other tax cuts, lower revenue in the long run.

  • Deficit-financed tax cuts carry significant costs that are likely to outweigh any short-term boost in economic growth.

  • Given the evidence, economists across the political spectrum reject the notion that tax cuts pay for themselves.

April 23, 2008--The Cost of War

CBO Budget Director Peter Orszag has an enlightening discussion of how the CBO has calculated the cost of the invasion of Iraq. He contrasts the CBO's methodology with that of Joseph Stiglitz and Linda Bilmes in their book, The Three Trillion Dollar War: The True Cost of the Iraq Conflict. Without going into detail, the CBO estimates that the combined cost of the wars in Iraq and Afghanistan will "only" cost between $1.2 and $1.7 trillion through 2017. Stiglitz and Bilmes come up with a much higher $3 trillion figure.

The principal (but by no means the only) difference is that the CBO limits its analysis to the federal budgetary cost of the wars. Stigliz and Bilmes take into account estimates of costs imposed outside the federal budget, for instance, the private costs imposed on a family by the death of an individual killed in action.

Orszag's explanation is here.

April 15, 2008--Yet Another Federal Budget Pie Chart

This one from The Center for Budget and Policy Priorities here:

2007 CPBB fed expenditures


April 15, 2008

The Center for Budget and Policy Priorities here shows rather conclusively that domestic discretionary spending is not the cause of the yawning budget deficit:

Table 1:
Domestic Discretionary Funding
 Is a Shrinking Share of Total Program Costs

Share of Total

2001

2008

Change

Defense & security

21.7%

29.2%

+7.5%

Social Security, Medicare/caid

45.9%

43.5%

-2.4%

Other mandatory programs

14.0%

12.5%

-1.4%

Domestic discretionary

18.4%

14.7%

-3.7%

Total program costs

100%

100%

0.0%

Notes: Figures may not add due to rounding.  The defense/security figures also include veterans, homeland security, and international affairs.  Medicare is net of premiums.  Figures for 2008 are CBO’s January estimate plus supplemental discretionary funding requested by President Bush.  Totals exclude net interest.


In fact, as the chart below shows, both domestic discretionary spending and federal revenues, expressed as a percent of gross domestic product, have been falling:

Table 3:
Domestic Discretionary Funding is a Shrinking
 Percentage of the Economy (% of GDP)

 

2001

2008

Change

Defense & security

3.6%

5.6%

+2.0%

Social Security, Medicare/caid

7.7%

8.4%

+0.7%

Other mandatory programs

2.3%

2.4%

+0.1%

Domestic discretionary

3.1%

2.8%

-0.2%

Total program costs

16.7%

19.3%

+2.6%

Addendum, revenues

19.8%

18.5%

-1.3%

See Notes, Table 1.

The full report is available here.

Welfare--Broadly Defined

I'm willing to bet that most people believe that a large portion of the federal budget is devoted to aid to poor people. Those people are wrong. Here are the facts with respect to the larger welfare programs in the Bush Administration's proposed FY 2008 budget (total=$3,100 Billion):

From Non-Defense Discretionary Spending:

Temporary Assistance for Needy Families (TANF)--$16.5 Billion (0.532258065%) Source: Child Welfare League of America.

Food Stamps--$36.5 Billion (1.17741935%) Source: California Food Policy Advocates. Note: Food Stamps are widely supported because they are viewed as a form of farm support.

From Mandatory Spending:

Medicaid/SCHIP--$203.9 Billion (6.57741935%) Source: Child Welfare League of America.

January 12, 2008--Just the Fat

Candidates for public office like to claim that they can effect significant change in either the federal budget deficit or the tax burden by making government more efficient, that is, by cutting the fat in the federal budget. The chart below, taken from Fiscal Year 2007 Mid-Session Review: Budget of the U.S. Government published by Bush's Office of Management and Budget.

2007 fed expenditures

Look at the chart. There's very little fat.

Interest, Social Security, Medicare, Medicaid, and "Other Mandatory" spending is, well, mandatory. That is, those expenditures cannot be reduced.

Even though defense spending is categorized as "discretionary," in fact, it's not. In fact, due to the degradation of military preparedness under the Bush Administration, defense spending as a percentage of total government spending is likely to either remain static or even grow. Thus, in order to cut, say 10% of overall federal spending, one would have to cut 52.6% of all non-defense discretionary spending.

Want safe air flights? Cut the Federal Aviation Administration's budget by 52.6%. Want safe and effective food and drugs? Cut the budgets of the Food and Drug Administration and the Department of Agriculture by 52.6%. Want an honest and effective administration? Cut the budget of the Office of the President and Office of the Vice President by 52.6%. (Ok, one out of three ain't bad.)

November 18, 2007--Medicare Costs

You hear a great deal of how the growth in the costs of Medicare will be the monster that devours our future. Typically, the growth is attributed to the aging of the population. There's only one problem with that theory: It ain't right.

The CBO recently prepared a study, The Long Term Outlook for Health Care Spending which has this graph on the cover:

health care growth


In other words, the cost attributable to an aging population is a minor part of the cost growth.

November 9, 2007--Growth in the Federal Debt

The Treasury has a neat page here where you can calculate the federal debt on a certain date or between two dates.

On January 20, 1993, the date that Bill Clinton took office, the federal debt was $4.19 billion. On the 19th of January, 2001, his last full day in office, the debt stood at $5.73 billion, an increase of 36.7%.

On January 20, 2001, the date W took office, the debt stood at $5.73 billion. As of November 8, 2007, it was $9.80 billion, a 58.46% increase. And, the man has more than 14 months to go.

In the past 14 months, the deficit has risen by 14.21%. If W manages to keep that pace, the deficit will have risen by almost 95% during the 96 months he was in office.

October 19, 2007 Update: Apparently, even economists from The National Review understand that the Bush tax cuts have caused a net loss in federal revenues. Thus, here, NR Senior Editor Ramesh Ponnuru states:

Bush's tax cuts appear to have caused revenue to be lower than it would otherwise have been, which suggests that we're already below the revenue-maximizing tax rate.

It is entirely possible that Bush is not a liar, but merely stupid and incompetent. Of course, those attributes are not mutually exclusive.

October 17, 2007--Source Material: The CBO's Budget and Economic Outlook

The CBO's Budget and Economic Outlook presents a useful and factual antidote to the rosey scenario painted by the Bush Administration.

October 11, 2007--Knave-In-Chief

President Bush lied today. He stated that:

You know, last February, it was projected that our deficit would be $244 billion, and today the Director [of OMB] informed us that the deficit -- actual deficit is $163 billion. In other words, as a result of the hard work of the American people, this economy is growing; the growing economy has yielded more tax revenues than anticipated. And because of fiscal restraint, those tax revenues went to reduce our deficit.

President George W. Bush meets with his economic advisors Thursday, Oct. 11, 2007, in the New Executive Office Building in Washington, D.C. "The deficit today is at 1.2 percent of GDP, which is lower than the average of the last 40 years. In other words, we have told the American people that by keeping taxes low we can grow the economy, and by working with Congress to set priorities we can be fiscally responsible and we can head toward balance," said President Bush in a statement to the press. "And that's exactly where we're headed." The deficit today is at 1.2 percent of GDP, which is lower than the average of the last 40 years. In other words, we have told the American people that by keeping taxes low we can grow the economy, and by working with Congress to set priorities we can be fiscally responsible and we can head toward balance. And that's exactly where we're headed.

First, I don't know where Bush gets the alleged $244 estimate, since CBO's baseline projection, released in March of 2007, indicated a deficit of about $177 billion. See here at page 3. So Bush simply inflated the "estimate" to make actual results look better than they were.

October 16, 2007 Update: The October, 2007 CBO Monthly Budget Review states that "CBO estimates that the federal deficit was about $161 billion in 2007, down from $248 billion in the previous year. The estimated deficit is about $3 billion higher than CBO projected this summer. (My emphasis.)"

Second, the argument that lower taxes lead to higher federal revenues is one that no responsible economist believes. It is rejected by the CBO (" The net result incorporating the estimated feedback effects would be a budgetary impact from [Bush's tax cuts], (including debt-service costs) of roughly $195 billion to $215 billion in 2007." as well as Bush's own economic advisors. In other words, the federal budget would be showing a surplus, not a deficit, were it not for the Bush tax cuts.

changed October 4, 2008