Is raising taxes and raising spending the key to a good economy? (1 Viewer)

[jon_mx]

Wasn’t the deficit cut in the later years of Obama’s Presidency mainly due to the sequestration compromise? Which Trump abandoned? That’s my understanding. 

In any event:

1. If you reduce the annual deficit (not the overall debt) how does that affect the economy? 

2. If you reduce the debt, how would that affect the economy? 

Here is the data of deficits as a percentage of GDP:

Bush (-1.2, -1.4, 3.3, 3.4, 2.4, 1.8, 1.1, and 3.1)

Obama (9.8, 8.6, 8.3, 6.7, 4.0, 2.7, 2.4, and 3.1)

Certainly the first 3 or 4 years of Obama were heavily related to the economy of the stimulus spending.  Yes spending in Obama's last four years were significantly lower than his first four, but still at a higher level than where Bush was at.  To characterize that as cutting the deficit is a huge stretch.  If you wanted to make a case it was not all that much different, well ok.  But cut the deficit?  No way would a competent Mathematician would look at that and make that claim that candidate 2 cut deficits.  

 

[jon_mx]

Wasn’t the deficit cut in the later years of Obama’s Presidency mainly due to the sequestration compromise? Which Trump abandoned? That’s my understanding. 

In any event:

1. If you reduce the annual deficit (not the overall debt) how does that affect the economy? 

2. If you reduce the debt, how would that affect the economy? 

A lower deficit in many cases is the result of economic growth.  The impact debt has on the economy has to due in part with confidence in currency and inflationary effects.  If you are just printing money, money becomes worthless.

 

[timschochet]

A lower deficit in many cases is the result of economic growth. 

Why? 

 

[jon_mx]

Why? 

Because people/businesses make more money in a growing economy which increases tax revenues which lowers the deficit.  

 

[sho nuff]

Because people/businesses make more money in a growing economy which increases tax revenues which lowers the deficit.  

So then...currently rising deficits are bad, correct?

 

[jon_mx]

So then...currently rising deficits are bad, correct?

I have said nothing positive about Trump's fiscal policies.  I am not sure how it is related to that posts though except to be argumentative.  

 

[sho nuff]

I have said nothing positive about Trump's fiscal policies.  I am not sure how it is related to that posts though except to be argumentative.  

It was a question Jon...not everything is some gotcha.  I didn’t make any claim about you saying anything positive.  Just looking for common ground.

 

[Endowed]

 thank Clinton for giving it all away.

What means this?

 

[Endowed]

Youve never heard "what means this?" before?

 

[timschochet]

Because people/businesses make more money in a growing economy which increases tax revenues which lowers the deficit.  

That’s a backwards argument isn’t it? What you’re arguing now is that a growing economy leads to a lower deficit. That makes sense. But before you seemed to argue that lowering the deficit (for example through raising taxes or cutting spending) grows the economy. I’m not sure how that works. 

 

[jon_mx]

That’s a backwards argument isn’t it? What you’re arguing now is that a growing economy leads to a lower deficit. That makes sense. But before you seemed to argue that lowering the deficit (for example through raising taxes or cutting spending) grows the economy. I’m not sure how that works. 

You are looking for a simple linear relationships to a highly complex multi-variable problem.  There is a reason why the Fed evaluates dozens of indicators before changing monetary policy.  You just can't say lower interest rates improves the economy.  In some circumstances it can be disastrous.  

 

[tommyGunZ]

This issue is really very simple:

1.  When the president hails from my tribe and the economy performs well, it's because of his policies.

2.  When the president hails from my tribe and the economy doesn't perform well, it's because his predecessor was from the other, wicked tribe, and the economy would be even worse if it weren't for my tribe's president's policies.

3.  When the president hails from the bad tribe and the economy performs well, it's because he inherited a great economy from his predecessor (who hailed from my tribe) and the economy would do even better if it weren't for the bad tribe's president's policies.

4.  When the president hails from the bad tribe and the economy doesn't perform well, it's because of his policies.

5.  "The Economy" means the stock market when the stock market is up during a good-tribe presidency or down during a bad-tribe presidency.

6.  "The Economy" means other fundamentals when the stock market is down during a good-tribe presidency or up during a bad-tribe presidency.

Seriously, if you know which president is under discussion and the preferred tribe of who is posting, these rules will predict the content of the resulting post with something like 99% accuracy.

I agree that these conversations are often overly simplistic, but I think your both sides-ing the issue entirely is overly generous to Republicans over the last few decades.  When viewed in context, I think anyone objectively looking at the debt/deficit would say that Democrats have been far more fiscally responsible in our lifetime.  “Fiscal conservatism” is the biggest myth in politics. 

 

[tommyGunZ]

I have said nothing positive about Trump's fiscal policies.  I am not sure how it is related to that posts though except to be argumentative.  

It’s always interesting to me how folks who consider themselves “socially liberal, but fiscally conservative” manage to twist themselves into supporting Trumpism.  Even more so when they admit Trump’s economic failures.  

 

[stlrams]

https://www.washingtonpost.com/business/2019/12/28/trumps-stock-market-rally-is-very-good-still-lags-obama-clinton/

OK so let me offer a rather simplistic, transactional formula: 

1. Presidents Reagan and Bush cut taxes and cut spending. The economy suffers. 

2. President Trump cuts taxes and raises spending. The economy does very well. 

3. Presidents Clinton and Obama raise taxes and raise spending. The economy does better than very well, achieving its greatest increases in modern history. 

This would suggest that the best formula is to increase spending and increase taxes at the same time. Yes or no? 

Using that logic, Connecticut would have a great economy.  Unfortunately we still haven’t recover all the jobs from 2008 recession and ct ranks in the bottom 10% of every economic indicator.  

 

[jon_mx]

It’s always interesting to me how folks who consider themselves “socially liberal, but fiscally conservative” manage to twist themselves into supporting Trumpism.  Even more so when they admit Trump’s economic failures.  

Who is supporting Trumpism?

 

[timschochet]

Using that logic, Connecticut would have a great economy.  Unfortunately we still haven’t recover all the jobs from 2008 recession and ct ranks in the bottom 10% of every economic indicator.  

I don’t know whether federal economic rules transfer to state or not. I kind of suspect they don’t. 

 

[tommyGunZ]

Here is the data of deficits as a percentage of GDP:

Bush (-1.2, -1.4, 3.3, 3.4, 2.4, 1.8, 1.1, and 3.1)

Obama (9.8, 8.6, 8.3, 6.7, 4.0, 2.7, 2.4, and 3.1)

Certainly the first 3 or 4 years of Obama were heavily related to the economy of the stimulus spending.  Yes spending in Obama's last four years were significantly lower than his first four, but still at a higher level than where Bush was at.  To characterize that as cutting the deficit is a huge stretch.  If you wanted to make a case it was not all that much different, well ok.  But cut the deficit?  No way would a competent Mathematician would look at that and make that claim that candidate 2 cut deficits.  

It’s literally true. 

 

[tommyGunZ]

Who is supporting Trumpism?

You do.  Daily.  

 

[jon_mx]

You do.  Daily.  

Lol....that is ridiculous.  I criticize nearly everything he does.  I simply do not support comparing him to Hitler or the efforts to impeach him.  It is the hatred of him I am against.  

 

[IvanKaramazov]

I agree that these conversations are often overly simplistic, but I think your both sides-ing the issue entirely is overly generous to Republicans over the last few decades.  When viewed in context, I think anyone objectively looking at the debt/deficit would say that Democrats have been far more fiscally responsible in our lifetime.  “Fiscal conservatism” is the biggest myth in politics. 

I agree with you on this one.  Republicans since GHWB haven't even pretended to take deficit spending seriously.  Democrats have been better on this issue.  I think that's largely due to the fact that they're held accountable on this one in a way the Republicans aren't, but that's beside the point.

It’s always interesting to me how folks who consider themselves “socially liberal, but fiscally conservative” manage to twist themselves into supporting Trumpism.  Even more so when they admit Trump’s economic failures.  

Incidentally, this will never be me.  I know you were responding to a different poster on this one, but I want to note for the record that there are a bunch of us in this corner of the political universe who continue to despise Trump.

 

[sho nuff]

It’s always interesting to me how folks who consider themselves “socially liberal, but fiscally conservative” manage to twist themselves into supporting Trumpism.  Even more so when they admit Trump’s economic failures.  

You mean, since he is neither?

 

[The Commish]

Seems like it needs to be pointed out again that deficits <> debt.  Deficits are year to year.  They are the amount you spend over and above what you take in that year.  Comparing quantity spent between Presidents or sizes of budgets etc are completely different topics of discussion and have really nothing to do with yearly deficits.  They are self contained.  One can see a trend if a CEO or a President etc is cutting deficits year over year.  That generally means they are doing better each year in staying on budget.  If they are trending up, that shows they aren't staying on budget.  Outside of that, there isn't much to compare using "deficits".  

 

[John Blutarsky]

You do.  Daily.  

No he doesn’t.

 

[tonydead]

It’s literally true. 

Does "it's literally true" fall into the same camp as "it's simply not true"?  Asking for a friend.

 

[jon_mx]

Seems like it needs to be pointed out again that deficits <> debt.  Deficits are year to year.  They are the amount you spend over and above what you take in that year.  Comparing quantity spent between Presidents or sizes of budgets etc are completely different topics of discussion and have really nothing to do with yearly deficits.  They are self contained.  One can see a trend if a CEO or a President etc is cutting deficits year over year.  That generally means they are doing better each year in staying on budget.  If they are trending up, that shows they aren't staying on budget.  Outside of that, there isn't much to compare using "deficits".  

Nobody was confusing anything.  I used annual deficits as a percentage of GDP which is the absolute fairest way of evaluating the trend.  Obama's first four years produced by far the highest deficits as a percentage of GDP since the end of WWII.  Not one year by any other president was anywhere close.  Of course the economy and the housing bubble were huge mitigating factors.  But the fact that the next four years were lower than those monster years is nothing to brag about.  The average of those last 4 years were still much higher than historical averages.  If you insist on spinning that as Obama cut the deficits, it is simply an intellectually dishonest position that only a partisan would dig in their heels about.  

 

[jon_mx]

You mean, since he is neither?

Who is neither?  I am probably the most fiscally conservative poster here.  I support modestly higher taxes and opposed both Bush's and Trump's tax cuts.  I supported Clinton's tax hikes.  I support modest cuts in all types of spending including defense.  I voted for Perot since his main issue was the budget.  I supported most of Newt's Contract with America.  I oppose throwing federal dollars at every issue.  I support fiscally conservative positions regardless of party affiliation.  So I have zero idea where you get that stuff.   People like to make things personal just to avoid making good arguements. 

Somehow this forum has some crazy idea I am some partisan Ttump supporting hack, when I am probably as middle of the road there is in the PSF.  Admittedly right-leaning, but nothing I support is at the extremes. 

 

[The Commish]

Nobody was confusing anything.  I used annual deficits as a percentage of GDP which is the absolute fairest way of evaluating the trend.  Obama's first four years produced by far the highest deficits as a percentage of GDP since the end of WWII.  Not one year by any other president was anywhere close.  Of course the economy and the housing bubble were huge mitigating factors.  But the fact that the next four years were lower than those monster years is nothing to brag about.  The average of those last 4 years were still much higher than historical averages.  If you insist on spinning that as Obama cut the deficits, it is simply an intellectually dishonest position that only a partisan would dig in their heels about.  

My comment was that the deficits decreased as Obama's term went forward.  Nothing more....certainly NONE of what you're reading into my words.  And it's certainly NOTHING I am "dug in" on....you spin as you see fit and create whatever narrative you want.  It's what you do.  I was making a larger comment about economic confidence in our markets in an attempt to give context to Tim's question.  Shockingly enough, I wasn't even talking to you yet again.  I'd caution the lectures on being "intellectually dishonest" if I were you jon...oh lecturer on hypocrisy!

 

[jon_mx]

My comment was that the deficits decreased as Obama's term went forward.  Nothing more....certainly NONE of what you're reading into my words.  And it's certainly NOTHING I am "dug in" on....you spin as you see fit and create whatever narrative you want.  It's what you do.  I was making a larger comment about economic confidence in our markets in an attempt to give context to Tim's question.  Shockingly enough, I wasn't even talking to you yet again.  I'd caution the lectures on being "intellectually dishonest" if I were you jon...oh lecturer on hypocrisy!

What a condescending response.  Can't you just concede a point?  

"Seems like an important part is missing....deficits.  Those two Presidents also reduced deficits over the course of their terms. "

You did not simply point out that the deficits decreased, you credited Obama (and Clinton)  with reducing deficits.  I am being very balanced and honest with my narrative, crediting and criticizing both sides where appropriate.  It is only by selectively analysing facts one would credit Obama with decreasing deficits.  

 

[kface]

Contrary to what some americans believe the world's economies thrive across the globe while supporting business and their citizens and protecting the environment.  Europe isn't a third world continent.  

 

[sho nuff]

Who is neither?  I am probably the most fiscally conservative poster here.  I support modestly higher taxes and opposed both Bush's and Trump's tax cuts.  I supported Clinton's tax hikes.  I support modest cuts in all types of spending including defense.  I voted for Perot since his main issue was the budget.  I supported most of Newt's Contract with America.  I oppose throwing federal dollars at every issue.  I support fiscally conservative positions regardless of party affiliation.  So I have zero idea where you get that stuff.   People like to make things personal just to avoid making good arguements. 

Somehow this forum has some crazy idea I am some partisan Ttump supporting hack, when I am probably as middle of the road there is in the PSF.  Admittedly right-leaning, but nothing I support is at the extremes. 

Donald Trump is the he I was referring to. 

 

[Warrior]

You are looking for a simple linear relationships to a highly complex multi-variable problem.   

Bingo. Great way to summarize the entire pointless thread.

 

[tommyGunZ]

Nobody was confusing anything.  I used annual deficits as a percentage of GDP which is the absolute fairest way of evaluating the trend.  Obama's first four years produced by far the highest deficits as a percentage of GDP since the end of WWII.  Not one year by any other president was anywhere close.  Of course the economy and the housing bubble were huge mitigating factors.  But the fact that the next four years were lower than those monster years is nothing to brag about.  The average of those last 4 years were still much higher than historical averages.  If you insist on spinning that as Obama cut the deficits, it is simply an intellectually dishonest position that only a partisan would dig in their heels about.  

The Great Recession was a bit more than a “mitigating factor“ Jon.  You know what automatic stabilizers are, and you’re well read so I know you understand that when the economy retracts as strongly as it did in 2008, economic activity doesn’t simply go back to normal after a few quarters and therefore deficit/gdp ratios are of course going to be abnormally high.  
The amusing part of all of this is that in retrospect, I think the majority of macroeconomists would argue that Obama’s deficits were too small, and the relative austerity in federal govt expansion was a factor in the slowness in which the recovery took place.  

 

[jon_mx]

Donald Trump is the he I was referring to. 

The quote you responded to was,

---

folks who consider themselves “socially liberal, but fiscally conservative” manage to twist themselves into supporting Trumpism.  Even more so when they admit Trump’s economic failures. 

-----

Tommy did not refer to a he, but was talking about 'folks' which seemed to be talking about posters (me being about the only one who remotely he could be referring to).  In context it appeared the 'he' you referred to sounded like the poster(s) Tommy was talking about, but if you meant Trump that is fine.  It could be taken either way.  

 

[sho nuff]

The quote you responded to was,

---

folks who consider themselves “socially liberal, but fiscally conservative” manage to twist themselves into supporting Trumpism.  Even more so when they admit Trump’s economic failures. 

-----

Tommy did not refer to a he, but was talking about 'folks' which seemed to be talking about posters (me being about the only one who remotely he could be referring to).  In context it appeared the 'he' you referred to sounded like the poster(s) Tommy was talking about, but if you meant Trump that is fine.  It could be taken either way.  

He referred to supporting Trump...and then specifically to Trump’s economic failures.  That is where I was referring to Trump.  I could have been more clear...but I now have told you who I was referring to.  

 

[Juxtatarot]

Why can't we all just get along?

 

[jon_mx]

The Great Recession was a bit more than a “mitigating factor“ Jon.  You know what automatic stabilizers are, and you’re well read so I know you understand that when the economy retracts as strongly as it did in 2008, economic activity doesn’t simply go back to normal after a few quarters and therefore deficit/gdp ratios are of course going to be abnormally high.  
The amusing part of all of this is that in retrospect, I think the majority of macroeconomists would argue that Obama’s deficits were too small, and the relative austerity in federal govt expansion was a factor in the slowness in which the recovery took place.  

A lot of the simplistic analysis in the OP ignored (and mischaracterized) a lot of historical context of what was going on.  If you wish to argue semantics of the use of 'mitigating factor' as too weak that is fine.  It was a catastrophic event, no doubt.  I suppose there are economists who would argue that Obama spent too little, but I don't think history supports that arguement.  We are in a strong economy now and have recovered well. So it seems appropriate.  I just believe once our economy recovered we should be looking at getting our deficits to historical averages or preferably less.  I believe the slowness of the recovery had more to do with how poorly the stimulus was structured, focusing way too much on short term projects and getting money into the pockets of the low-income a d too little at promoting business growth. 

 

[The Commish]

What a condescending response.  Can't you just concede a point?  

"Seems like an important part is missing....deficits.  Those two Presidents also reduced deficits over the course of their terms. "

You did not simply point out that the deficits decreased, you credited Obama (and Clinton)  with reducing deficits.  I am being very balanced and honest with my narrative, crediting and criticizing both sides where appropriate.  It is only by selectively analysing facts one would credit Obama with decreasing deficits.  

Would it make it better if I revised the statement to say "Seems like an important part is missing....deficits.  During those two administrations the deficits went down" ?  I don't see a meaningful difference at all but maybe that will help you see what I am saying?  It certainly has no bearing on the reality that we are in a confidence based market now and the face value number of the deficit decreasing gives the consumer confidence.  I am absolutely as confident of that as I am the average person isn't going to go through all the contortions of analysis you seem to be attempting in this thread.  We're talking about everyday people here that are after soundbytes not deep economic analysis and I responded in kind...to Tim, not you.

 

[Bottomfeeder Sports]

During the Reagan administration... federal outlays grew from $678 billion to $1144 billion (an increase of 69%).

President Ronald Reagan added $1.412 trillion in deficits, almost doubling the debt. He fought the 1982 recession by cutting the top income tax rate from 70 percent to 28 percent and the corporate rate from 48 percent to 34 percent. Reagan also increased government spending by 2.5 percent a year.

Federal Spending Grew More Under Bush and Reagan than Under Obama

Reagan cut taxes in '81.   The largest tax hike to date then happen in '82.  And tax hikes continued for pretty much the rest of his term.  So in simplistic terms the tax cut in '81 pushed the fragile economy into a recession.   The tax cut in '82 helped get to the "Reagan Miracle" (though the guy that died on the 8th certainly contributed in a less simplistic view.)

So to @timschochetpremise that tax hikes and spending increases are good for the economy I think we need to put '82 and after Reagan as supporting evidence with the '81 Reagan supporting that tax cuts are bad for the economy.

 

[jon_mx]

Would it make it better if I revised the statement to say "Seems like an important part is missing....deficits.  During those two administrations the deficits went down" ?  I don't see a meaningful difference at all but maybe that will help you see what I am saying?  It certainly has no bearing on the reality that we are in a confidence based market now and the face value number of the deficit decreasing gives the consumer confidence.  I am absolutely as confident of that as I am the average person isn't going to go through all the contortions of analysis you seem to be attempting in this thread.  We're talking about everyday people here that are after soundbytes not deep economic analysis and I responded in kind...to Tim, not you.

Lol...I don't want to get a timeout for a proper response to this poop.  .  

 

[supermike80]

Bingo. Great way to summarize the entire pointless thread.

But a very complex one. A swamp with many levels of political overtones and resonances that cant be fathomed at the present time.  But need the distance of the future to give it a perspective so we can truly have a point of view and realize the viscosity of that quagmire.  But the only way to understand this is to realize its incomprehensible

 

[supermike80]

Lol...I don't want to get a timeout for a proper response to this poop.  .  

You will most likely get reported for using that word.  I used a similar word,  that started with a c and ended with a p and was specifically told by the site owner that I could no longer use it anymore in any context.

 

[Jackstraw]

PLUS also too. wouldn't a better question be what's good for people? 

Because people are doing pretty poorly in the greatest economy in the history of all the world. 

Student debt off the charts, MANY not covered by health insurnace. Half the country are working poor. Two parents working and not getting ahead.  

American dream as we used to know it has been snuffed out for a good portion of the country.  

Unemployment is low. Great. But jobs aren't providing the standard of living we once had. Stock Market is up. Great but a huge chunk of the country has no savings better yet stocks. 

I'm doing fantiastic. But I'd like to see that possibility for a larger portion of the country. How did the last round of tax cuts realistically improve lives of average americans? Very little. 

The bigger picture is that when the economy eventually slows or recedes the deficits will be staggering. Then conservatives will inevitably call for more pain and sacrifice from the working class. Sure as the sun rises in the east. We are on a collision course for more thouroughly abandoning a wide swath of the country. 

Pretty much fuedalism is the logical outcome.  

 

[FBG26]

Here is the data of deficits as a percentage of GDP:

Bush (-1.2, -1.4, 3.3, 3.4, 2.4, 1.8, 1.1, and 3.1)

Obama (9.8, 8.6, 8.3, 6.7, 4.0, 2.7, 2.4, and 3.1)

Certainly the first 3 or 4 years of Obama were heavily related to the economy of the stimulus spending.  Yes spending in Obama's last four years were significantly lower than his first four, but still at a higher level than where Bush was at.  To characterize that as cutting the deficit is a huge stretch.  If you wanted to make a case it was not all that much different, well ok.  But cut the deficit?  No way would a competent Mathematician would look at that and make that claim that candidate 2 cut deficits.  

Thanks, Jon. I’m mostly a lurker here, but appreciate the detail in your comments in this thread (as opposed to some of the flyby “nah-uhs” filling the board). Reading through some of the later comments, it seems that the conversation would benefit from clarifying what measure is used to determine whether Obama/Trump cut the deficit and relative to what. You’ve clarified that you’re looking at the deficit relative to GDP, while I think most people probably mean strictly in dollar terms.

What I think the biggest difference between posters is that you are talking about whether Obama reduced deficits relative to W, whereas most people will be talking about Obama reducing deficits over the course of his term. If you read it along the lines that I believe most people will, then it is not “a huge stretch” to say that Obama reduced deficits from over the course of his term. I’d say that, on pure dollar terms or relative to GDP, Obama clearly reduced deficits over the course of his term. So while I recognize that you are comparing Obama to W when you say that Obama did not reduce deficits, I don’t think that’s how most people will do the comparison. And you make some good points when comparing Obama to W, but when you don’t recognize that most people are comparing the first part of Obama’s term to the later part of his term, and then make that statement that “no way would a competent Mathematician would look at that….”, I think you take a solid perspective/argument and really do a dis-service to yourself.

I usually don’t say anything because I think a lot of posters aren’t worth engaging, but wanted to say something here because I thought you raised good points worth discussion.

If you’re still reading, I did have one comment on the substance. In a later post, you said that the deficit as %GDP in Obama’s last four years was still higher than historical averages (post WWII).  I’m not sure I’d agree. The deficit relative to GDP over Obama’s last four years don’t seem that much different than many of the years from 1975-1995.  Link I’d agree that the deficit as %GDP wasn’t much lower than historical numbers over the last 40 years, but I wouldn’t say the numbers under Obama were much higher either. I guess I’d say that the deficit under Obama went from some monster numbers in the first 4 years to more historically average numbers during his last four years, which I’d consider a success.