RE: Debt reduction also creates fiscal space

[sawicky@xxxxxxxxxx (Max Sawicky)]

[Clifford Poirot]
	Sorry. I should have been more specific. What I meant was that the
Deficits of the 1980's, and to a lesser extent of the '60's and '70's had
led to a large level of debt, and consequently, debt service. 13% of our
>>>>>>>>

Debt/GDP, and I presume interest/GDP, decreased continuously
from 1946 to 1979, so deficits of 60's and 70's created
absolutely no problem at all, let alone a 'large' level
of debt.

The '80's saw the increase in debt/GDP.

>>>>>>>>>>>
current total spending is on paying interest on the national debt, and that
13% includes the Social Security portion of the budget. So out of the
general revenue part of the budget, roughly 30% is going to pay *interest
alone* on the debt. Notably, this debt was accumulated due to the structural
deficits of the 1980's and early 1990's. By eliminating the structural
>>>>>>>>

The past ten years shows these deficits were not
structural, since economic growth (not legislative
changes in spending or taxes) were responsible
for eliminating most of them.  Episodic would
be a better word.  Structural to me connotes
something built in that cannot be escaped
without deliberate action.

>>>>>>>>>>
deficit and beginning to pay down the debt, we allow the possibility for
lower interest rates and prudent leaning against the wind policy when we
need  it.
	I am extremely skeptical about the current budget projections. One
>>>>>>>>>>

If you don't believe the projections, what is
the basis for your 'structural' deficit of the
future?  Such a deficit is purely the artifact
of projections.  Have you done projections?
How do yours differ from the official ones?

>>>>>>>
recent analysis I saw (the source was a Paul Krugman column) is that the
surplus projections only work if per person spending in real terms actually
decreases over the period. Assuming we want to at leas maintain current per
person spending levels in *real terms* we will have to increase nominal
expenditures by a considerable amount. This suggests that Bush's tax
proposals are nothing short of absolute recklessness, designed, to in
essence, wreck the welfare state and force large cuts in spending.
>>>>>>>>>>>>

PK has invented his own standard for gauging
spending growth.  The convention is current
law for entitlements, and constant real aggregate
for everything else (exc. interest).  I haven't
done the numbers (and I doubt PK has either),
but there is room for spending growth even
given the conventional projections.

If bush is out to wreck the welfare state, he's
going to have to get a lot more bold.  Fact is
the crusade for big tax cuts is over.  They are
not even flying in the Republican primaries.

mbs