Policy update

Today President Obama proposed about $634 billion in new spending and taxes.  But since we here at MR cover only the quantitatively significant policy initiatives, I have nothing to say about it.

Comments

Gotta be at LEAST $650 billion, agreed.

ABC news includes immediate hikes in business taxes and reports the amount as $1 trillion in new taxes. Of course, this is only the beginning of the new regime...

Student,

Please. The law is changing, Obama's on watch. It's a tax increase. He ran on it. What are you saying?

Welcome to Argentina. Have a safe landing. Be ready, soon you may need to add zeros to all your tickets.

Obama's moral repugnance was obvious to many prior to the election. Every action of Obama is designed to destroy his enemies in the private sector and strengthen government control and power.

I'm not surprised at all that Obama eagerly grinds the heel of his boot into the neck of America.

Jim...what're you smoking? Were you smoking the same thing during the last eight years when we got into this mess? Obama is simply trying like hell to undo the damage, which is, by all assessments, massive. I don't know if he has all the answers or not, but I'm much more confident in his abilities than I was of his predecessor's.

"I don't know if he has all the answers or not, but I'm much more confident in his abilities
than I was of his predecessor's."

Why?

why? Iraq! Bin Laden! Katrina! Massive deficits (from a balanced budget)! Recession! Worldwide loss of respect! Deteriorating infrastructure! Someone hasn't been paying attention. Fortunately you're in the minority.

John Thacker: the reason the Byrd rule was even relevant is that the GOP bypassed the normal budget process by using a reconciliation bill and also did not pay for the tax cuts with corresponding reductions in savings.

These policies played a central role in converting the largest surplus in U.S. history to a deficit of over $1 trillion dollars while driving the economy into a ditch. It takes a lot of chutzpah for the GOP to criticize Obama's policies now. But then again, they said Clinton's tax increase in 1993 would lead directly to recession as well.

I don't understand why politicians favor the cap and trade system when economists seem to prefer Pigouvian taxes.

"These policies played a central role in converting the largest surplus in U.S. history"

Come on 'student' don't be intellectually dishonest. Go back and use accrual based accounting for social insurance programs, then come back and tell me how "big" that surplus really was.

Jay:

According to the times, there will be no initial allocation of permits. If so, they are just calling it "cap and trade" because they don't want to say "tax".

They can either say "$20/ton tax" or sell enough permits so the auction price ends up to be $20.

http://www.nytimes.com/2009/02/27/washington/27web-energy.html?_r=1

Under the plan, 100 percent of pollution permits will be auctioned,

The tax laws that the GOP passed in Bush's first term REQUIRE tax rates to increase in 2011. They wrote it this way to make them seem less costly. Many people said from the beginning that this gimmick was dishonest budgeting

They wrote it that way because they needed 60 votes to not write it that way. If the Democrats seriously cared about that "gimmick" being dishonest, then they could have acknowledged that the GOP had 50 votes for it and voted to allow the tax cuts to be permanent so that the budget would be honest.

The GOP was also pushing for the budget to be honest. From their perspective, the Democrats made it dishonest budgeting. Both sides have some truth; that's the irony of requiring 60 votes.

It's hypocrisy for the people that made the tax cuts only last 10 yeas to complain about it, student.

Jay, I was just referring to the standard published budgets, but you make a good point about accrual accounting.

The Medicare Part D expansion added at least $8 trillion to our unfunded liabilities, twice as much as the entire Social Security unfunded liability. And then, of course, there are long term financial commitments overseas and at home, from the Iraq war. It's probably impossible to put a number on the damage our financial system has sustained-- the bills are still coming in.

So a more intellectually honest accounting would show that our finances deteriorated far more than the official budget numbers.

Congratulations middle class! (me included)

Not only will you get a tax break worth next to nil, you can use that tax break to (almost) pay for the dramatic rise in your heating and cooling bill!

I am waiting for someone to do the math on that one...

The get to take credit for giving you money, then they can blame the CEOs of evil companies for taking it back from you.

Sounds like a winner!

HOPENCHANGE...not exactly what you voted for!

Its like Bush gave us cancer and Obama is the evil doctor trying to cure us with leaches. That is how I feel in regards to the fiscal situation in this country. Can anyone define what the Bush and Obama presidencies are about other than spending ungodly sums of money on things that having nothing to do with creating value added for the economy in the long run.

BTW, absolute kudos to Tyler for being wonderfully pithy with this post.

Seen this joke in various places already, and made it myself couple of times, but for some reason, this one was just perfectly worded.

I'm not really sure what else some people here want Obama to do. The deficit numbers are staggering, but they probably aren't going to be structural for the most part, just merely cyclical. Still, what remains will need to be paid for, but the only way to make a dent in these numbers is to increase taxes just a little, even if spending didn't increase too much. We're not talking about tax rates that were like those in the 1950s, but instead like what we had in the 1990s.

I know a lot of people are going to suggest that spending be cut, but is that a realistic option, even if it is the preferred one?

If nothing else, I like the way Obama is approaching making a budget because he's not relying on the comically dishonest methods of the previous administration. Ideology aside, that's the right way to do things.

Don, you need a lobotomy as an intellect boost.

why? Iraq! Bin Laden! Katrina! Massive deficits (from a balanced budget)! Recession! Worldwide loss of respect! Deteriorating infrastructure! Someone hasn't been paying attention. Fortunately you're in the minority.

For now.

Of course, George Bush wasn't running, and Bin Laden's big day was a creation of Bill Clinton's indecision (we have the tape) Katrina was a NATURAL disaster. Never had respect-and Obama's already offended the Brits, and intelligent people don't derive intellectual satisfaction from being in the biggest crowd.

So everything is going to hell! Elect a leftist megalomaniac!

Looks like another do-nothing President in the mold of Herbert Hoover!

"Were you smoking the same thing during the last eight years when we got into this mess?"

Is there any real point to setting the time frame as the last eight years? Its not like the mess has lasted eight years, or that you could argue that the policies leading to it were all in the last eight years. So, pick a time frame that makes sense and not one that is a partisan hack slam.

why? Iraq! Bin Laden! Katrina! Massive deficits (from a balanced budget)! Recession! Worldwide loss of respect! Deteriorating infrastructure! Someone hasn't been paying attention. Fortunately you're in the minority.

Yes, electing and re-electing the previous administration was a mistake on the part of the electorate. But the only reason I have to think the current administration will be better is regression to the mean: after the outlier of the last eight years, any arbitrarily chosen president is probably better.

On the other hand, the current president seems to share the mixture of inexperience and a sense of mandate that helped his predecessor govern so badly. Their favored policies differ greatly, yes, but the ability to implement them well ... the data are still out.

Phillip Capper,

EXACTLY!! I come to these web sites for the same reason. I'm an American and a non-economist who comes here and other places to gain some understanding of economics. Most threads though tend to descend into partisan bickering, ad hominem attacks and otherwise weak A** logic. It's our way I guess. It just goes to show that there's no such thing as a politically disinterested "science" of economics, and hence no "science" at all. Anyone who surveys the mess before us and takes the untenable position that one party is to blame needs to revisit their assumptions.

"Did either of you look at President Obama's proposed budget? He plans to run a larger deficit than GWB averaged during his terms-- after the recovery ramps up. Start with the CBO.

And of course the same people who were arguing that the economy was so poor under Bush in 2003 and 2004 are now bashing him from having a 3.5-3.6% of GDP deficit during those years. The deficit in 2005, 2006, 2007, 2008-- 2.6%, 1.9%, 1.2%, and then 3.2% as the economy tanks."

John Thacker,

Bush didn't have to deal with any crises like the ones Obama will have to deal with. No, 9/11, economically speaking, doesn't count. The deficits are almost certainly going to be worse because of the aftermath of the problems we now face.

John Thacker

The deficits do worry me, but I'm willing to give the Obama administration more leeway because they are dealing with a much worse economic situation than Bush ever dealt with. The recession following 9/11 and the dotcom bubble was pretty shallow by modern standards, while this one is bound to be much worse and much longer. Simply put, I feel there was much less of a reason to let the Bush deficits exist.

I guess it's possible for cyclical deficits to turn into structural ones, but at the same time, I'm pretty confident the Obama administration will be considering how to raise more revenue and reduce spending once the economy is stabilized. I don't know if this would take the form of tinkering around the edges or something more drastic, however.

If nothing else, I hope they consider a stock transaction tax, which promises to raise a lot of revenue without causing nearly as much harm as other taxes. Dean Baker estimates that a small tax could raise $150 billion a year. That would reduce an approximate $500 billion deficit by about 30 percent. Not bad, right?

"Were you smoking the same thing during the last eight years when we got into this mess? Obama is simply trying like hell to undo the damage, which is, by all assessments, massive."

Can we find something remotely emperical about really caused this mess? Was it just eight years in the making? and was it Bush and his policies that got us into trouble? ...because if I hear that lie perpetuated once again, I think I may vomit.

http://alfred.stlouisfed.org/graph?s_1=1&s[1][id]=PSAVERT&s[1][vintage_date]=2009-02-02&s[1][line_color]=%23FF0000&s_2=1&s[2][id]=PSAVERT&s[2][vintage_date]=2008-12-24&s[2][line_color]=%230000FF&chart_type=line&s[1][range]=Max&s[2][range]=Max#

John, I don't support high deficits after the recovery starts, either. I'd prefer to raise taxes and slow growth once growth is positive.

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