Saturday, July 17, 2010

That well is dry

Over at Reason, in a post titled "It's the spending, stupid" it's shown that - no matter what the government does - tax revenues as a share of the economy is stuck around 18% GDP. By 2020, the CBO estimates that federal spending will reach 25.2% of GDP, which is higher than any time in our history except for World War II.

With huge and endless deficits on the horizon, it's worth considering the current battle over extending unemployment benefits. The Democrats want to bypass their own PAYGO rules and spend $34 billion to help the unemployed; the Republicans want the benefits to be paid for out of unspent stimulus money instead of adding to the deficit.

Is it possible that Congress cannot find $34 billion dollars? That's a pimple on the behind of the stimulus legislation and an atom in the entire federal budget which already on pace to overspend by $1 trillion in just the first nine months of the fiscal year. If Congress can't carve out this small-change from the enormous bloat that already exists, there is literally no hope of ever addressing our long-term deficits once the entitlement tsunami hits.

4 comments:

Anonymous said...

Remember when Ireland's austerity policy had started to turn their economy around and that guy from the New York Times was a schmuck? Mmm yeah, last week... sweet memories.

http://www.irishtimes.com/newspaper/breaking/2010/0719/breaking7.html

Eric said...

That guy from the NYT is a schmuck, who always claims the bond holders are an imaginary threat.

Ireland has a debt to GDP ratio of over 1000% - they had no choice but to go on an austerity plan. And now they're stuck in the trap (that I've been warning about for, oh, seven years on this blog) where it's impossible to climb out of recession because nobody will extend more credit.

Krugman is a parody of himself. Government intervention ALWAYS helps and - if it doesn't - it's because the stimulus wasn't BIG enough. Also, you're stupid (see today's column.)

DMB said...

There's only one way out of this mess: tax cuts for the rich!

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