From: nelson_p@apollo.hp.com (Peter Nelson)
Subject: Re: Congress and the balaced budget scam
Date: Tue, 28 Jul 1992 19:09:46 GMT
Organization: Hewlett-Packard Corporation, Chelmsford, MA

In article <1992Jul27.224902.8003@oakhill.sps.mot.com> pjm@anegada.sps.mot.com (Patrick J. McGuinness) writes:
>In article nelson_p@apollo.hp.com (Peter Nelson) writes:

>>  in practice the actual steps that would have to be taken to balance
>>  the budget such as huge spending cuts or massive tax increases along
>>  with some guarantee that these increases could only go to deficit
>>  reduction, were/are politically impossible.
>
>I would dispute the "huge and massive" assertion.
>Even with the $330 billion deficit (or $380 billion if the Congress had passed
>S&L bailout money), we have what is essentially a budget that is,
>long-term, about 20% or $200 billion out of balance.

  If you averaged that over the states, let's say by population 
  then that would work out to a $6 billion loss to Massachusetts,
  a $30 billion loss to California, etc.  Politically impossible.


>The deficit will fall in the coming years, even if we continue to
>increase spending at our current (high) rates.

  What is your basis for this?   Our economy is clearly stagnating.
  Business Week predicts the unemplyment rate to keep climbing to
  over 8% in the current downturn, and also says that most of 
  the jobs which have been lost in recent years will not be 
  returning or be easily replaced by new ones of equivalent
  earning power.  

  Moreover I expect strong and growing demands for more government
  services.  Healthcare, in particular, will prove an irresistable
  political demand as healthcare costs continue to grow, and fewer
  people are covered by insurance due to unemplyment, underemployment,
  and ever-stricter insurance company rules.   But I also expect 
  growing demands for government to spend on education (witness the 
  bill signed last week), economic stimulation, crime and drug
  problems and other areas. 

  And of course, the population is getting older: retired people 
  are net consumers of government spending, but don't contribute much
  tax revenue.


>With medium growth and some tax increases (about $100 billion),

  Again, political problems:  if we distribute that $100 billion
  over the top 100 million taxpayers (i.e., just about everybody
  who paid any taxes last year) that's $1000 a person, which is
  a lot of money for most people and so political suicide.  But if,
  as is more likely, we distribute it over a smaller number of
  more affluent taxpayers then the pain is even more noticable
  so they'll fight it even harder.

  This is the problem:  Housing or other costs are so high that
  what used to be affluent is now middle class.   Even with 
  the economic depression here in the northeast, for instance, 
  it takes two fairly professional incomes to buy a modest 
  home and raise a family and even THINK about sending kids to
  college.  The Democrats have the distorted idea that families
  earning, say, $75K-$100K a year are affluent.  But withn 
  modest 3-bedroom houses costing $175K, modest cars like Corollas
  costing $11K (+ $1k/yr to ensure), state colleges costing $14K
  a year (and private ones $22K+), and private health insurance,
  retirement savings, and of course taxes, costing many thousands
  a years, most people I know in that income range are struggling.
  Yet these are the people most likely to bear the brunt of any
  tax increase big enough to dent the deficit.   They won't stand
  for it so it won't fly.


>Unless 3% reduction in overall spending per year is considered
>"massive cuts",

  I guess that's my point: the government has gotten so big that
  3% (and I dispute that it's this low) IS massive in absolute
  terms. 


---peter





Xref: sparky talk.politics.misc:35385 alt.politics.clinton:348