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The Deficit

7:26 am on Friday, January 13, 2006

The Skeptical Optimist: The Disappearing Deficit

The chart shows that the deficit has been shrinking for the last two years. If (…and it’s a big “if”…) the economy continues to grow at the same robust pace, the deficit will disappear within 3-5 years, depending on how big the Katrina spending effect turns out to be.

A balanced budjet in 2008, while not a certainty seems to be a real possibility.  That would put Democrats in a tough political position.  While ’starve the beast’ seems only marginally successful at best, I do expect that deficit size does have some effect, and as it shrinks desires for additional spending will increase, so I doubt we will see a balanced 2008 budget.

It is probably also fair to acknowledge that while I think overall economic performance will continue to do well, keeping up with the growth of the past couple of years may prove difficult.

Read the rest of Skeptical Optomist’s post though, he certainly has more expertise on such matters than I do.

6 Comments »

Comment by tsykoduk

January 13, 2006 @ 1:04 pm

The real challenge, if we can balance the books by 08 will be capping the Democrat’s own spending. Since they have a stake in the goverment, they are able to undermine efforts to work the Republican Way.

It will be a hard fight to curb spending enough to balance the budget wilst keeping the wolves at bay…

Comment by Dave Justus

January 13, 2006 @ 2:10 pm

Republicans have proven to be able spenders as well.

I am not really a big deficit hawk. I am worried about the effects of too much spending however we finance it, but I don’t think that financing spending through taxes is any different than financing it through a deficit, and in many cases a deficit may be superio to taxes.

Controlling inflation is important, and too much spending, especially deficit spending can make that difficult but as long as we have strong productivity gains that danger seems minimal.

Comment by honestpartisan

January 13, 2006 @ 3:03 pm

Tsykoduk – What are you talking about? Republicans control Congress. Do you foresee that changing as a result of the ‘06 elections? And what spending do you think should be cut? I’m not talking about bridges to nowhere, meritless as they may be, I mean the really fiscally significant stuff: defense, interest on the debt, Social Security, Medicare, and Medicaid.

Comment by tsykoduk

January 13, 2006 @ 4:07 pm

DJ:

I agree – but the historically, the diffrence is a few percentage points lower for the Republicans

Hoest:

Hmmm.. Lemme see.

1) IRS. The IRS needs to go. We could save a boatload of cash if we went to a simpler tax code and did not pay the salary for all of the IRS folks.

2) Welfare. Welfare should be provided for by local intrests, so that local concerns can be met.

3) Education, See Welfare.

4) Social Security. We need to pay out what we have promised, but new claims should not be allowed. Cut the taxes on it, and allow folks to invest their own money as they see fit. If they do not want to invest, then they work when they get old. It’s their choice.

5) Federally Funded medical programs. Either we offer free health care to everyone, and tax everyone equally for it, or we should not offer it at all. Again, local concerns should be addressed locally, not through a federal mandate. I think that if a town or state wants to tax it’s citizens and provide a service, that it their choice. It’s not the federal goverment’s job to govern down to the smallest minutae.

Basically, I really think that the only thing a federal goverment is good for is defense, assistance during major problems (Hurricanes, Floods, Plagues, Invasions from Mars) but other then that, they should let us govern ourselves locally. Local goverment means that each of us gets more of a say in what happens.

Comment by honestpartisan

January 16, 2006 @ 8:58 am

Well, as a partisan Democrat, I hope that Republicans run on your plan — especially #4 and #5.

By the way, you’re wrong about the IRS. Cutting the IRS enforcement has made the deficit worse. When they’re able to, they collect a lot of taxes that people don’t pay. And the reason that the tax code is not simple is because of legislators looking for ways to tax people more, but because of legislators looking to carve out exceptions for people.

Comment by Tsykoduk

January 16, 2006 @ 9:46 am

I did not say cut the enforcement. I said cut the IRS and simplifly the tax code. Say, 15 to 20% sales tax on everything. No more IRS, H&R Block, tax season, billions spend on maintaining a bloated bureaucracy. I wrote about this almost a year ago here and here. To sum it up, we would save billions and the government would make more then it does now.

As far as a social safety net imposed by the federal government, that money is better entrusted to the people, so that they might spend it on the local concerns that they agree with rather then some mandated programs from a government in the sky.

The Republicans will never run on this – they are not fiscally conservative.

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