When the Levee Breaks

Living not-so-large on a sea of red ink

© Bryan Zepp Jamieson

9/12/05

http://www.zeppscommentaries.com/Politics/budgetcharts.htm

First, a quick note of explanation. For those who clicked on the link, puzzled that the essay wasn’t in the post, the reason is that at the bottom of this are three big tables with lots of big numbers in them. The tables were in Excel format, and while Front Page can import them quite happily, Word Perfect will whine and howl and refuse to pass them out to Front Page. And I refuse to use Word on the grounds that a word processing program should allow you to write, rather than try to show you how to write. So I go with Microsoft’s strengths, and use Corel’s strengths for the rest of it. The result is a web page with neatly formatted tables at the bottom.

I wound up looking at the numbers because a Putsch apologist (one of those 12% who think the feds did an excellent job of responding to Katrina) claimed that revenues were up under Putsch. Turns out that like most claims made on his behalf, this one was a lie.

What happened was that the image directly above this came from Bartcop’s site, and while some of the recent numbers are out of date, it dramatically shows just how much trouble Putsch’s reckless and opportunistic fiscal policies have put America.

Where reality – or at least the latest expectations regarding reality – diverges from Bartcop’s table is both better and worse. The projected numbers for 2003 and 2004 aren’t as bad as those in Bartcop’s table, simply because the economy stopped plunging and settled for a state of stasis, not unlike that of ventricular fibrillation. In simpler terms, it stopped its death plunge and settled for merely falling at the normal rate of gravity. Small consolation, that.

The bad news is that thanks to Katrina, the forecast for FY 2005 is now expected to break most records in the book for greatest deficit in American history. A single year deficit of $550 billion is in the offing. Call it $490 billion in 2000 constant dollars. This handily breaks FDR’s single year record (constant 2000 dollars again) of $486 billion. Granted, in FDR’s case, he was spending more than three dollars for every dollar taken in, amounting to a staggering 43% of the economy depending on hot checks from the government. (By way of comparison, about three and a half cents of each GDP dollar is a product of the deficit). In FDR’s defense, though, it should be noted that this was 1943. Not a good time to cut the military budget.

It’s already been noted that Iraq is already the fourth costliest war in US history, which, given that it amounts to a small army occupying a country of 16 million is pretty astonishing. (When WILL people start asking just where the hell all that money for the military is going?) But even then, it’s only about 5% of federal spending.

As you may have expected, revenues are down sharply under Putsch in the wake of his vast give-away to the rich. Revenues were 20.9% of the GDP in 1998, and sank steadily to 15.7% last year. But outlays increased during the same period from 18.4% of GDP to 20.2% So not only were revenues down, but spending shot through the roof.

Mind you, this came during a period when Republicans controlled the House, the Senate, and the White House.

Republicans tried using Reagan to validate Laffer, the fellow who said that cutting taxes would cause the economy to boom so much it would increase revenues more than enough to make up for those lost through the tax cuts, and it didn’t work then, either: revenues dropped from 19.2% in 1982, the year the tax cuts were pushed through Congress, to 17.5% by 1986.

Where Laffer screwed up, and where the Republicans adopted a Lysenko theory of Economics, was in the fact that tax rates and economic activity don’t have a straight correlation. Common sense, and even some economists, will tell you that it’s sound fiscal policy to raise taxes during the boom times, both to raise extra money for the lean times and to prevent the economy from overheating, and to cut taxes during recessions when it might act as a growth incentive. Republicans simply decided that cutting taxes was good, and the economy would boom when they did. Doing it once in the early 80s was foolish. Doing it again less than twenty years later is just plain criminal.

Revenues are down despite a huge bubble in the housing market. You know how right wingers like to claim that the Clinton boom was fueled by the high-tech bubble? The high-tech bubble was never more than 1% of the economy. The housing bubble is dozens of times bigger. And the bubble has already burst. Asking prices on houses are still sky high, but worried realtors are watching their inventories double, and redouble, as the market cools sharply. The implosion of this particular bubble will be in slow motion (would YOU cut the asking price on an investment property below what you paid for it if you could fool yourself into believing there has to be at least one rich sucker out there?), but its effects will be more pronounced than the collapse of NASDAQ was.

The overall national debt – government, corporate, and personal – is staggering, roughly equal to two years’ GDP. Imagine being in debt roughly double your annual income. In a manner of speaking, that’s exactly the situation in which you find yourself.

The dollar is propped up mostly on hope and Asian forbearance. One rumor making the rounds is that the reason Putsch is saber-rattling at Iran again is because the Iranians are threatening to switch from dollars to euros in doing business, a move that would undoubtedly shave 40% off the value of the American dollar virtually overnight.

And of course, there is the developing oil crisis. The present prices may stem mostly from opportunistic corporations deciding to gouge while the gouging is good, but the problems presented by “peak oil” are quite real, and will cause massive economic dislocation.

Did I mention that insurance companies are looking at bleak assessments that global warming might cost them $250 TRILLION dollars in America alone over the next 95 years?

The economic future for America is generally grim. And having Putsch and the GOP running the show has made it far, far worse than it needed to be. As Bartcop’s chart demonstrates.

Even if America regains its sanity and throws these liars and thieves out, it may be that the damage is done, and Putsch has inflicted an economic wound that “while not as wide as a church door, is sufficient.”

So what does Putsch plan to do about all this?  Bleeding profusely from his disaster in Iraq and his botched response to Katrina, he's already planning a way to appeal to his "conservative base".  He plans to . . . yes . . . cut taxes some more!

The numbers, courtesy of the GPO, are right here. Read ‘em and weep.

http://www.gpoaccess.gov/usbudget/