Re: Tax Cut And Budget Surplus

[Warren Mosler <mosler@xxxxxxxxxxxxxx>]

"Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx> wrote:
> The New York Time  (Jonathan Fuerbringer Sunday Dec.
> 24, 2000) reported
> that according to chief economist John Youngdahl of
> Goldman Sachs, even
> with a recession and a $1.3 trillion 10 year tax
> cut, plus zero growth for
> the next two years, the Federal surplus is still
> expected to be $245
> billion in 2001, $203 billion in 2002, $180 billion
> in 2003, $178 billion
> in 2004, $183 billion in 2005 and modest increases
> in the next five years
> to over $400 billion in 2011 ($800 billion sans tax
> cut).
>
> By the second quarter of 2001, the one year T bill
> will be retired.  The
> popular two year note will be reduced to $10 billion
> a quarter from the
> $10 billion a month now. 30-year bonds, already cut
> to $15 billion a year
> from $47.2 in 1991 may not be issued further, as
> well as now 4-year-old
> TIPS (Treasury Inflation Protected Securities).
>
> Thus the argument of whether tax cut or debt
> reduction is a phantom one.
> Also, the concentration of the reduction on short
> term Treasury bills, the
> yields on them may experience downward pressure.

>
Hello Henry!

Yes, not to mention the downward pressure as the
Fed lowers its fed funds target!

The surplus will vanish.  There is a nice way and
a not so nice way.  The nice way is a legislated
tax cut/spending increase.  The not so nice way
is falling tax revenues and rising transfer payments
if we don't get the first one done in time.

Wray has a new article on my website calling
for a $450 billion annual tax cut:

http://www.warrenmosler.com

We are in the midst of the most powerful dose
of good old fiscal drag this country has ever
experienced.  From the above quote it seems even
a 'recession' won't be enough to restore 'fiscal
health.'  Good luck to all of us!

> It seems that Bush can get his tax cut and still
> have some $200 billion a
> year with which to lean against the recession wind.

'still have'???  With a floating exchange rate
there is no 'revenue constraint' on spending!

Best,

w
(I can't post to pkt from this computer.  You are
welcome to if you wish.)



> The question is; will
> he?
>
> Henry C.K. Liu
>
>
>
>


=====
http://www.warrenmosler.com
      http://www.moslerauto.com

Time flies like an arrow,
Fruit flies like a banana.

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