From: rja@mahogany126.cray.com (Russ Anderson)
Subject: Re: Conservative Values (Re: New group proposal:  alt.conservative.forum)
Originator: rja@mahogany126
Organization: The 1991 World Champion Minnesota Twins!
Date: 8 Jan 93 16:46:27 CST


In article <C0J9yq.Lqy@unix.portal.com>, mykes@shell.portal.com (mike myke schwartz) writes:
> Russ Anderson (rja@mahogany126.cray.com) wrote:
> : In article <2155@celia.UUCP>, steve@celia.UUCP (Steve Tyree) writes:
> : > 
> : >  From 1983 to 1990 "The Seven Fat Years" we experienced the longest 
> : > peace time economic expansion and the longest general economic expan-
> : > sion since the Kennedy Tax Cuts in the 60's. What happened in 1990 to
> : > 1992 was due to the 1990 Budget compromise.
> : 
> : Let's see if I've got this straight.  The recession started in July 1990
> : because of a budget compromise that was not passed until the end of 
> : September 1990, right?
> 
> The recession started in July in large part due to the media.  In Jan. 1990,
> almost Jan 1 to the day, the press was saying how the 80's were the years
> the baby boom lived it up and that the 90's would be the years the baby
> boomers started feeling their age and started saving for retirement.

I don't think "the media" was a "large part".  The tangible factors (below)
were much more important.

> Additionally, elimination of mortgage and credit card debt caused a lot
> of people to spend their money on debt payments instead of new goods.

The change in credit card deductability is certainly a factor.  Consumer
debt in 1991 was less than 1990, the first time since WWII that consumer
debt was less than the year previous.  This is good in the long run, but 
is a drag on the economy in the short run.

> And the government also restricted the money supply by forcing banks to
> keep a higher percentage of reserves.

This is the major factor in the credit crunch.  Banks were forced to 
increase their capital holding, forcing many to cut back on lending and
some to even call loans.

>                                        Bush and Cheney also worked hard
> to cut the military by $30 Billion.

DoD cuts have hurt (esp in New England & CA), although this also is 
better for the economy in the long run.

>                                      Adding a tax hike to further limit
> the private sector's spending/borrowing power was significant fuel for the
> fire.

The tax increase is a good example of the problems of government fiscal
policy (another is the Cinton stimulous package).  It takes at least a 
couple years to get a tax/spending change through Congress, so what 
was sould policy when proposed will go into effect when the economy does
not need it.  Had the tax increase been passed in 1988, the economy 
would have been strong enough to handle it.  Actually, Clinton's stimulous
package should have been passed in 1990 and the 1990 budget deal passed
in 1993 (so it takes effect as the economic recovery is picking up steam).

>        The boom would have continued if the private sector were encouraged
> to spend money (by giving it money) on goods, creating demand, and so on.

Another factor in the recession was the oil price increase (due to the 
Iraq invasion of Kuwait).  One economist I heard estimated the effect as
the same as a $50-75 Billion/year tax increase (sent to foreign oil producers).
This did not cause the recession, and oil prices did come back down, but 
did slow the economy for about a year.

> But remember, 1990 was a year of Reverse Reaganomics (tm) and that in an
> all-out attempt by the Democratic Fascist Party (tm) in Congress to force bush
> into going against his no new taxes pledge.  I'm sure you are aware that bush
> refused to sign the tax bill 3 times, and 3 times the government went into
> Gramm/Rudman sequester.  And 3 times, congress extended the date the 
> sequesters would take effect.  I bet Bush would have allowed the sequesters
> to happen for good, but if congress can get around its own rules by taking
> a vote at will, no sequester would have happened anyway.  The government
> operating without a budget would have been terrible for the economy...

Would it?

> : >                                               This compromise had nothing
> : > to do with Reagan and involved Bush "caving" into the Democrates on the
> : > hill. We Conservatives and Classical Liberals believe that Bush caved in
> : > to easily (ie - he lied about taxes and lost the election).
> 
> Agreed.  And congress stood totally in Bush's way of implementing any kind
> of stimulus package at all.  
> 
> : >  The socialist naysayers cry that "The Seven Fat Years" were caused by 
> : > deficit spending. That of course requires the listener to actually believe
> : > that deficit spending has the ability to spurn economic growth. This also
> : > requires belief in Keynes.
> : >  What we all need to worry about is the latest theory held by many leftward
> : > leaning economist.
> : 
> : Could you name some of these economists?
> 
> Robert Reich, for one.

Reich certainly does know that deficits matter.

>                        I'm not holding my breath that Clinton will keep any
> of his promises wrt middle class tax cut and stimulus package.  In fact,
> I expect to see 95% of what Bush proposed end up as Clinton's package.
> Balanced Budget Amendment, line item veto, capital gains tax cut, first
> time home buyer tax credit.

Does that mean you like 95% of Clinton's package?

> : >                     This theory uses "The Seven Fat Years" as empirical proof
> : > that deficits dont matter. They think that the current government deficit 
> : > is meaningless and if they persuade President-Elect Clinton of this, we can
> : > all expect deficits to skyrocket through the roof.
> : 
> : Bush's own budget estimates show annual deficits >$300 Billion thru 1998.
> 
> What do Bush's revenue estimates show?  Negative growth?  Decent positive 
> growth?

I've been looking for those numbers, but have yet to find them.

>         I've already stated that Bush's budget for 1993 is similar in size
> to the 1992 bill, and that maintaining a fixed budget while revenues increase
> gives us money to pay the debt...  And allows us to stop defecit spending
> within a few years.  Like if we spend $1.5 trillion every year, tax 
> revenues will eventually surpass $1.5 trillion...
> 
> : >  Steve Tyree - These opinions are mine and mine alone.
> : >                "Just imagine what the deficit would be like if The Seven
> : >                 Fat Years never occurred. Remember when Social Security
> : >                 would not last till the next decade."
> : 
> : There was a massive increase in the Social Security tax to make it "solvent".
> 
> Yup.  And a damn unfair tax, too.
-- 
Russ Anderson    |  Disclaimer: Any statements are my own and do not reflect
------------------              upon my employer or anyone else.  (c) 1992
EX-Twins' Jack Morris, 10 innings pitched, 0 runs (World Series MVP!)
Newsgroups: alt.fan.rush-limbaugh,alt.fan.limbaugh