RSSFuture Surpluses…or Deficits
We have seen how the national debt has risen to its current level as a result of deficit spending. We have looked at deficit spending in absolute dollars as well as a percentage of the gross domestic product. The relationship of the federal budget to the country’s GDP establishes a foundation for understanding the potential outcomes of proposals to continue or change current fiscal policies. This chart simply asks the question: Can we expect budget surpluses or budget deficits in the future?
7 Responses to “Future Surpluses…or Deficits”
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June 20th, 2008 at 12:57 pm
re:tl, I believe we have a current example of politicians response to increased revenue. The state of California in the late 90′s + had a windfall of revenue because of the increase in new business activity and the resulting capital gains taxes that resulted.
Instead of saving the extra money for a rainy day, they spent it all on NEW programs and increases of various sorts that brought re-election of a significant Democratic majority which has continued for almost 2 decades. NOW California is running huge deficients, borrowing itself into significant fiscal irresponsibility. This “windfall” tax revenue clearly was not sustainable and could not be counted on in the future. However, the politicians in Sacramento spent it as though it would continue and INCREASE forever!
It has been demonstrated over and over again at local, state and national levels, that in most cases politicians will spend some amount OVER what their current revenue is. Very little concern is shown for the future beyond the next election. Thus, about the only way to constrain the spending, is to constrain the revenue!
This is what was done on a national level during Clinton’s first term with the Republican’s gaining control of the House and stopping the proposed national health plan and costs proposed by Hillary. They voted for tax reductions and lowered the projected future revenue. For what every reason, Bill Clinton continued through the remainder of his Presidency without increasing spending significantly on a percentage basis. I would guess it had to do mostly with one party in control of the Presidency and one in control of Congress.
When one party gets in control of the Presidency and also the Congress, you have historically seen spending rise at a much greater rate then inflation.
Just raising taxes to balance revenue with spending has shown to be a failure in most cases as the spending continues to ALWAYS be raised to some number GREATER than what current revenue is.
I agree that spending must be reduced. Income and expenses need to be in balance. Politicians seem to be humanly incapable of do that which I have just stated. Look at the coming correction/disaster of municipal and state governments finances which in many cases simply mirrors the national problems of many promises of pensions, medical payments, and other commitments that have been voted without a reasonable way to pay for them in the future.
San Diego’s pension and governmental mess, Vallejo’s (California) bankruptcy, and California’s huge deficients are simply the start of a wave of similar problems soon to be felt nationwide.
I do not believe that we can simply tax ourselves out of this mess. Perot’s charts on this website clearly show that in a decade or two we would need to collect practically the entire revenue stream of the nation just to pay for the governmental promises of the national government, let alone all of the state and local governments which have very similar problems coming along. These are just not as well publicized.
Unless there is a totally different attitude of fiscal responsibility shown by politicians, there will be in the near future fiscal calamity followed by national ruin in this country.
June 22nd, 2008 at 1:39 pm
to builderofhouses; You are completely correct. I have made the same statement in other comments throughout the website, that no amount of tax revenue to the government, no matter where is comes from or how much it is, will ever be used properly unless Congress (and State govt) has to follow a law which controls spending, borrowing, and taxing. This must be done by replacing the 16th amendment with one which describes those kinds of controls. Texas had the same situation as California when the tech bubble broke. It was obvious that they all (state and local govts) believed that the money train was going to last forever, and had no backup plan to use current surpluses to cushion the inevitable fall.
Government officials will never be fiscally responsible unless they are made so by law. The only laws that Congress must follow, are those described in the Constitution, so amending the Constitution is essential to fixing the problem. Getting this to become a reality, though, is no small task. To incumbents, it would mean cutting their own throats because they use frivolous spending to reward their constituency.
I also agree with you that our best government is when we have one party in the executive office, and the other party in congress. It seem to create a better balance. I have been a 3rd party supporter since the mid 80′s. Prior to that I was republican, and still tend toward that side. However, when I realized that the republicans were just as financially irresponsible as the democrats, I felt it was time for a 3rd party influence. When Ross Perot fired up the Reform Party, I jumped on immediately. Unfortunately, when both the Democrats and Republicans used the ‘Don’t throw your vote away’ propaganda, it scared away many people who would have otherwise voted for him (my opinion).