Will the federal government ever have a budget surplus again?

[JohnfrmClevelan]

I said nothing about why the economy boomed under Clinton...you just put words in my mouth.

The "why" is the important part. If you skip over the "why," what use is this conversation?

 

[DA60]

Are you looking at your own dates? March 2001 comes well before 9/11/2001. And the "continuation" that you blame on 9/11 was just three months (if you count November). You need to check your reasoning. Just throw 9/11 out altogether.



The economy grew on the back of growing consumer debt, despite the surplus and despite trade deficits - and that lasted how long before it crashed? Is that the awesome economy that you want to point to? You don't see any connection between Americans going further into debt and a later recession? Seriously?

So, for the record...JohnfrmClevelan admits that Clinton ran surpluses AND trade deficits and that the economy grew from 1998 to 2000.

Thank you.

 

[DA60]

The "why" is the important part. If you skip over the "why," what use is this conversation?

Lol...let me get this straight?

You put words in my mouth, don't apologize for it, don't state you will cease doing it and then expect me to wish to converse further with you?

Ahhh...no.


I am not offended at all...but I am not wasting my time with people who do that (unless I am REALLY bored or need them for something - neither of which applies here).

I made my point and you answered the question I wanted you to answer.

Good day.

 

[JohnfrmClevelan]

So, for the record...JohnfrmClevelan admits that Clinton ran surpluses AND trade deficits and that the economy grew from 1998 to 2000.

Thank you.

If you need a win so bad that you are willing to count that, then take it. I don't want to damage your delicate psyche.

...but it led right into a recession. Just like you don't declare bankruptcy WHILE you are running up credit card debt, you declare afterward.

 

[jaeger19]

Yes, I suppose "decimate" might be a little strong. But there's a train of thought that the surpluses create recessions, so maybe there's something to it.

12 surplus years of the last 75. The last one in 2001.

I like Billy Boy. Not everything about him, of course.

And that train of thought is derailed.

How many recession have we had? And how many surplus years?

We have had enough recession through the years that you could probably correlate recession with just about anything.

 

[jaeger19]

If you need a win so bad that you are willing to count that, then take it. I don't want to damage your delicate psyche.

...but it led right into a recession. Just like you don't declare bankruptcy WHILE you are running up credit card debt, you declare afterward.

It was also a democratic president.. and it led to a recession.

a financial crisis hit south east asia.. and it led to a recession

Terrorist bombed two US embassies killing 250 people and it led to a recession

Dow Jones dropped 500 points and it led to a recession

Free Willy the orca was released into the wild.. and it led to a recession..

US launched cruise missiles in Afghanistan and it "led to a recession"..

AND

US announces first surplus in 30 years.. and it "led to a recession"..

 

[fmw]

Interest for 2015 was $229 billion, or 6% of total spending.

We collected $3.28 trillion in federal revenues that year. That's 14 times more than the interest we had to pay.

It's not a problem.



Yes, actually, it can.

Aside from us being nowhere near a failure to pay our basic obligations, the reality is that a government debt is nothing like a personal debt. The federal government can indefinitely roll over its debt.

In fact, it'd be a major problem for the global economy if the federal government refused to issue new debt. T-Bills and similar instruments are a critical part of global finance; among other things, it's one of the most secure financial instruments, and millions of retirees often put their money into various government bonds for that very reason.

In addition, no one has demonstrated any real downsides to a high federal debt load. E.g. the Reinhart - Rogoff paper, which claimed that a debt-to-GDP ratio above 90% led to lower growth rates, has been discredited quite thoroughly, including improperly calculating its own data.

While I concur that we should not use this as an excuse to slash taxes and spend on whatever we want, the reality is that we can handle our current deficits and debts without too much trouble.

Or, to put it another way: After 30 years of crying wolf, how much more evidence do you need to know there's no real cause for concern?

I didn't say it was a problem. I said it will be a problem. It is not sustainable.

 

[fmw]

...and it led us into a depression.

Maybe. Maybe it was the cyclical nature of the economy.

 

[Visbek]

I didn't say it was a problem. I said it will be a problem. It is not sustainable.

When do you think it will be a problem?

What will be the nature of this problem?

After hearing "it's going to be a problem!" for 30 years, how much longer do we have to wait for it to become a problem?

Are you willing to increase taxes as part of a solution to this presumptive problem?

 

[mmi]

Congress … had to force Clinton into it.

The fiscal policy that led to the Clinton-era surpluses was the Omnibus Budget Reconciliation Act of 1993, which raised taxes significantly, not the Balanced Budget Act of 1997, which cut spending by only $127 billion over five years. The surpluses totalled $559 billion 1998-2001. The deficits had been dropping before that.

1992 — 290
1993 — 255
1994 — 203
1995 — 164
1996 — 107
1997 — 22

I'd say the Information Revolution was the main macroeconomic driver, pushing up GDP and therefore revenues, up 86% 1992-2000.

Every government department knows full well if they spend less this period they will be budgeted less next time.

I looked at two federal departments, chosen randomly, Education and Transportation. Their authorizations moved up and down year-to-year, especially when measured in real dollars.

I'm not denying that there is a tendency for gubmint agencies to behave along the lines you described, but it's not at all universal, and imo is very much exaggerated.

The recession started before 9/11

The 2001 recession was rather brief and mild. It almost didn't get classified as one. I'd say DA60 is correct that the Sept 11 attacks pushed it over the line. He also corrected an error he made. There may yet be hope. ☺

US announces first surplus in 30 years.. and it "led to a recession"..

I figure it played a role. If it had been properly forecast and taxes had been reduced to bring it into balance, wouldn't you agree that that stimulus might have kept things going along a little better in FY2001? The economy contracted in the first and third quarters of that fiscal year.

We were pretty close under Bush, so I say yes. Just have to wait for the right circumstances. A president who thinks its a priority, and a favorable economy.

2007 -160,701

I would hope that "the right circumstances" don't include a bubble that bursts the next year (like 2008) and leads to a long and severe recession. And fwiw, it ain't easy to close a $160 billion gap.

 

[austrianecon]

Why the hell should we want a government surplus?

It cuts down the trade deficit? A surplus makes the US a lender and not a borrower?

 

[joG]

Why the hell should we want a government surplus?

In Never Never Land that might true.

 

[JohnfrmClevelan]

It was also a democratic president.. and it led to a recession.

a financial crisis hit south east asia.. and it led to a recession

Terrorist bombed two US embassies killing 250 people and it led to a recession

Dow Jones dropped 500 points and it led to a recession

Free Willy the orca was released into the wild.. and it led to a recession..

US launched cruise missiles in Afghanistan and it "led to a recession"..

AND

US announces first surplus in 30 years.. and it "led to a recession"..

Similar line of reasoning to the above:

Theory: heart attacks cause death.

Jaeger's analysys: cancer causes death, disembowelment causes death, and loss of blood causes death - therefore, heart attacks must not cause death.

 

[JohnfrmClevelan]

It cuts down the trade deficit? A surplus makes the US a lender and not a borrower?

Why would it cut down on the trade deficit? And who would we be lending to?

 

[JohnfrmClevelan]

In Never Never Land that might true.

Just answer the question.

 

[joG]

Just answer the question.

You asked me a question?

 

[JohnfrmClevelan]

You asked me a question?

I asked a question, and you offered up a non-answer. So here it is again:

Why the hell should we want a government surplus?

 

[joG]

I asked a question, and you offered up a non-answer. So here it is again:

Why the hell should we want a government surplus?

My goodness! I thought you were joking. There are a library of books on many aspects of that.

 

[JohnfrmClevelan]

My goodness! I thought you were joking. There are a library of books on many aspects of that.

So you should have no trouble coming up with an answer, eventually. I'll wait.

 

[joG]

So you should have no trouble coming up with an answer, eventually. I'll wait.

I know you can hardly imagine this, but many books about a topic does not shorten a correct answer to a simplistic question. That is one of those things. So go on believing in Voodoo, if you like.

 

[DA60]

I asked a question, and you offered up a non-answer. So here it is again:

Why the hell should we want a government surplus?

I can't sleep...so I will answer this.

Where to begin.

First, running a surplus is only a good idea if you have a national debt (obviously).

The advantages are (off of the top of my head):

- lowering of national debt; which...
- raises credit rating
- which lowers debt service costs
- which frees up more tax dollars for the nation and not just debt servicing.
- which lowers taxes
- which benefits the economy
- which increases revenue
- which increases speed of debt repayment
- which accelerates above benefits OR less tax dollars are needed to make the same debt repayment every year.

PLUS

Fiscal stability promotes stability and increases public/foreign confidence...which increases expenditures and long term investment.


According to the CIA, there are 33 countries in that run deficits. They include:

Germany - the fourth largest economy in the world
Luxembourg
Norway
Switzerland
Hong Kong

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2222rank.html

All healthy, stable, well respected and growing countries.

Plus Canada (for example) ran fiscal surpluses for (I believe) 13 straight years and it's economy thrived (overall) during that time.


Btw, since your mind John is clearly COMPLETELY AND TOTALLY closed on this issue, I am not interested in your response to this...no offense intended.

Like I said, I couldn't sleep so...what the heck.


Good day.

 

[JohnfrmClevelan]

First, running a surplus is only a good idea if you have a national debt (obviously).

Our national debt is largely held by our trading partners, banks, corps, funds, etc. Our taxes, on the other hand, are mostly paid by normal, working Americans. So what you are suggesting is that the govt. taxes more money out of our pockets in order to "pay off" our debt to, for instance, China. So China, instead of holding bonds, now holds dollars. (Dollars are still a govt. liability, just like bonds, btw.) So there's your big change - increased taxes mean decreased demand, which is a blow to our economy. All so we can avoid paying a bit of interest, which costs the government nothing to create. Great idea.

The advantages are (off of the top of my head):

- lowering of national debt; which...
- raises credit rating
- which lowers debt service costs
- which frees up more tax dollars for the nation and not just debt servicing.
- which lowers taxes
- which benefits the economy
- which increases revenue
- which increases speed of debt repayment
- which accelerates above benefits OR less tax dollars are needed to make the same debt repayment every year.

Lowered credit ratings didn't cause our interest rates to go up, because bond traders aren't stupid. You should know by now that yields on govt. bonds are very low, which makes your argument look pretty weak - why do you keep making the same weak argument over and over?

Also, federal surpluses remove dollars from the private sector, yet in your scenario, the economy magically benefits from this. Have you not argued in the past for lower taxes? The benefit of lower taxes is supposed to be that we have more to spend or invest, but now you think that we would be better off giving that money to the government.

PLUS

Fiscal stability promotes stability and increases public/foreign confidence...which increases expenditures and long term investment.

And what financial instrument does Planet Earth trust the most? U.S. bonds, even with our large debt and yearly large federal and trade deficits. So much for that point.

According to the CIA, there are 33 countries in that run deficits. (I assume you meant to say "surpluses.") They include:

Germany - the fourth largest economy in the world
Luxembourg
Norway
Switzerland
Hong Kong

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2222rank.html

All healthy, stable, well respected and growing countries.

...with healthy trade surpluses.

Plus Canada (for example) ran fiscal surpluses for (I believe) 13 straight years and it's economy thrived (overall) during that time.

Let me guess - they ran trade surpluses as well.

Btw, since your mind John is clearly COMPLETELY AND TOTALLY closed on this issue, I am not interested in your response to this...no offense intended.

Come up with a winning argument on this (or any other topic), and I'll listen. Until then, keep trying.

 

[JohnfrmClevelan]

I know you can hardly imagine this, but many books about a topic does not shorten a correct answer to a simplistic question. That is one of those things. So go on believing in Voodoo, if you like.

If you can't come up with an answer, just admit it. Nobody is buying your excuse.

 

[jonny5]

I can't sleep...so I will answer this.

Where to begin.

First, running a surplus is only a good idea if you have a national debt (obviously).

The advantages are (off of the top of my head):

- lowering of national debt; which...
- raises credit rating
- which lowers debt service costs
- which frees up more tax dollars for the nation and not just debt servicing.
- which lowers taxes
- which benefits the economy
- which increases revenue
- which increases speed of debt repayment
- which accelerates above benefits OR less tax dollars are needed to make the same debt repayment every year.

PLUS

Fiscal stability promotes stability and increases public/foreign confidence...which increases expenditures and long term investment.


According to the CIA, there are 33 countries in that run deficits. They include:

Germany - the fourth largest economy in the world
Luxembourg
Norway
Switzerland
Hong Kong

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2222rank.html

All healthy, stable, well respected and growing countries.

Plus Canada (for example) ran fiscal surpluses for (I believe) 13 straight years and it's economy thrived (overall) during that time.


Btw, since your mind John is clearly COMPLETELY AND TOTALLY closed on this issue, I am not interested in your response to this...no offense intended.

Like I said, I couldn't sleep so...what the heck.


Good day.

Didnt I say not to bite? He'll just go off on another MMT super thread.

 

[fmw]

When do you think it will be a problem?

When we can no longer afford the interest payments

What will be the nature of this problem?

See above

After hearing "it's going to be a problem!" for 30 years, how much longer do we have to wait for it to become a problem?

I would imagine less than 20 years. But I will go with your guess.

Are you willing to increase taxes as part of a solution to this presumptive problem?

Of course not. I think most of the federal government should be shut down with the activities moving to the states, the private sector or the trash can.