And you have forgotten that we had higher taxes and a smaller deficits because of it... Originally Posted by WTFI have forgotten no such thing.
No, I didn't specifically mention that in my earlier post, but I didn't have time to cover every related factor. But the main reason we had smaller deficits was that spending levels were so much lower. Remember, we were only spending (at the federal level) about $1.8 trillion at the end of the 1990s. The aggregate amount of subsequent tax cuts is certainly not insubstantial, but it's still only a fraction of the total spending increases.
There are many many factors but the GOP has not been a help with this squack for lower taxes at every turn. Originally Posted by WTFIndeed, but so have the Democrats. During the last couple of years, they have called for -- and gotten -- payroll tax cuts which in the aggregate far exceed the revenue lost from cutting taxes on the top 1%. I'm all for people keeping more of their hard-earned money, but we passed the point beyond which we can afford to hand out tax cuts to everyone years ago. And people forget that about 80% of the Bush-era tax cuts went to those earning less than $250K. (I think the number is really quite a bit higher than that, since CBO estimates use static analysis.)
...the Feds are not letting the consumer off the hook by inflating their way out as Reagan did. The banks do not want to be paid back with those inflated dollars. They do not want for that to ever happen again. Originally Posted by WTFSay what??
When did the Reagan administration "inflate its way out" of anything? The opposite is the case. Reagan correctly let Paul Volcker (a Carter appointee in 1979) continue to do the tough work needed to crush the back of inflation in 1981-83. As you recall, the requisite monetary tightening necessitated a severe recession in 1981-82, but after that inflation remained quiescent.
I think it's very important to remember that Reagan and Clinton ran, generally speaking, strong-dollar treasuries -- while Nixon, Carter, G. W. Bush, and Obama have all done the opposite.
See the difference? Uber-accommodative, ultra-easy monetary policy and weak-dollar policies always must be unwound. You cannot have a strong, solid recovery accompanied by the extended application of such policies. At no time in history has that ever happened. Now we've had over three years of ZIRP and multiple rounds of QE. In fact, the Fed's balance sheet (around $700-800 billion pre-crisis) is now up to about $3 trillion. I don't think that's a very healthy situation. But it has apparently been decided that extraordinary monetary policy is necessary to accommodate bad fiscal policy (out-of-control government spending). Fed and Treasury officials are terrified of the panic that would ensue if they wake up one day and find that a Treasury auction for new issuance of 5s, 7s, or 10s went badly. As we are soon likely to see, the world does not have an infinite appetite for U.S. Treasury debt.
I'm with you on Simpson Bowles. Whoever gets elected will head in that direction. Originally Posted by WTFHe'd better, or we're likely to get into far more trouble that most of us could possibly imagine!
