From: elwin@maidavale.media.mit.edu (Lee W Campbell)
Newsgroups: alt.politics.clinton
Subject: Re: The Clinton Revolution
Date: 8 Nov 92 01:24:03 GMT
Organization: MIT Media Laboratory

In article <1992Nov6.222305.5468@desire.wright.edu>, demon@desire.wright.edu (Stupendous Man) writes:
> In article <1992Nov6.132647.16309@news.media.mit.edu>, elwin@maidavale.media.mit.edu (Lee W Campbell) writes:
> > In article <1992Nov5.120813.5428@desire.wright.edu>, demon@desire.wright.edu (Stupendous Man) writes:
> > |> In article <1992Nov4.140305.28033@news.media.mit.edu>, elwin@maidavale.media.mit.edu (Lee W Campbell) writes:
> > |> >    I remember when the Reagan Revolution started. Reagan told us
> > |> > how easy it would be: he would cut taxes, the ecomomy would grow
> > |> > itself, the deficit would close, and all the while, "Happy Days"
> > |> > blared in the background. As we all know, the economy did grow,
> > |> > but the deficit grew faster and it has caught up with us. The
> > |> 
> > |> 	The deficit, as a % of GNP, declined during the 80s.
> > 
> >    Technically correct, but highly misleading. First of all, I'm talking
> > debt here: the accumulated total owed. You are talking deficit: the amount
> > added to the debt each year. If you graph debt/GNP vs year, you'll see
> > that the curve had a gentle negative slope during part of the second Reagan
> > term, but it had such a fierce positive slope during the first Reagan term
> > that we never had *less* debt as a percentage of GNP than Carter left us with.
> > Another interesting thing to graph: cost of carrying the debt as percentage
> > of the federal budget vs year.
> 
> 	I was pointing out that the rate of deficit spending was decreasing.

   Decreasing a little bit after quadrupling. Like I said: highly misleading.
Why not talk about the debt, and the cost of servicing the debt? Did either
of those ever decrease under Reagan?

> 	If Reagan had tackled the other half of the supply-side formula
> (cutting spending) he would have cut into the debt.

According to David Stockman, in the famous 1981 Atlantic Monthly interviews,
Reagan did not want to cut spending enough to come *close* to paying for his
tax cut. He believed the Supply-Side snake oil that said "just cut taxes, the
economy will grow enough so we won't have to worry about the deficit."
Stockman would offer him menus of budget cuts, and he would reject them.

   Cutting taxes is easy to do politically. It gives every Congressperson
some bacon to bring home to every constituent. Cutting spending is tough;
it makes people scream and yell. It takes leadership to cut spending, and
it is best done at the same time as tax cuts. Reagan made a huge mistake
by decoupling tax cuts and spending cuts. That's why he had to raise taxes
two years later.

> >    Finally, the greatest economic shame of the Reagan years is this: the
> > Treasury can (and did) borrow money from the Social Security Administration
> > i.e. Soc. Sec. invested in Treasury bonds. This does *not* show up in the
> > deficit! It's a little accounting sleight of hand that allowed the Reagan
> > administration to *hide* an extra $50 billion or so deficit some years.
> 
> 	Social Security is a scam on the American people.  The sooner we get
> rid of it, the better. That Reagan/Bush/Clinton did/will use it to make the
> debt look smaller is only of minor consequence.  The money is not lost, only
> redirected.

Actually, your original point is that the rate of deficit spending was
decreasing. Perhaps, without this accounting trick, the *real* rate of
deficit spending never did decrease. So it may not be of minor consequence
to your argument. Also, during Reagan's "7 fat years" he was borrowing up
all the "easy to borrow" money. That's the time that the US went from the
world's greatest creditor nation to the world's greatest debtor nation.
You can't grow the national debt forever at those rates; you drive up the
cost of money worldwide. The fact that the 2nd derivative of the debt turned
negative for a while doesn't necessarily mean that worldwide interest rates
will remain low enough so that it *stays* negative. We're working in a
non-linear domain here.

> 	As you said, it's an accounting trick.  But that's all.  No one is
> going to lose money.

And the money to pay back the Soc. Sec. Agency will have to come from general
revenues. Can you say "future tax hike, no matter what party is in power"?
All to cook the numbers, so Reagan's budgets don't look as bad as they are.

> > This may or may not be a good investment for Soc. Sec.; I'm not arguing
> > that, but it ought to be included in the deficit calculations, and, shame-
> > fully, wasn't. Brett, when you post your FAQ on Reaganomics, I hope you'll
> > include that borrowing in your deficit figures or else explain why Treasury
> > doesn't need to pay it.
> > 				- Lee Campbell  <elwin@media.mit.edu>
> 
> 	There will be a section on debt vs. deficit vs. creative financing.
> 
> Brett
> ===============================================================================
> 80s: 18 million new jobs, deficits down (%GNP), tax rates down, tax revenues up
> GNP up, inflation down, unemployment down, interest rates down, cold war won
> -------------------------------------------------------------------------------
Newsgroups: alt.politics.clinton