Scumbria,..I don't care if they are crooks. I care if they are stupid. $300 billion interest payments per year is pure stupidity. Not fixing the problem is stupidity.<<<<<<<<<<
What kind of statement is that? Everybody does stupid things (I got married twice) once in a while; you probably have too. To put up with crooks willingly is one of the stupidest things I have heard you say.
Here is another view of your deficit reduction act.
SOURCES OF DEFICIT REDUCTION : FY 1993-1996
Senate Budget Committee staff analysis
July 15, 1996
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I : Technical Reestimates
II : Revised Economic Forecasts
III: Legislative Changes
IV : Review of Clinton Fiscal Overtures
V : Conclusion
Graph
Table
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The deficit has declined markedly over the last 4 years, during a period of steady economic growth and the resolution of the thrift crisis. The FY 1996 deficit is expected to be $130 billion, versus FY 1993's $255 billion total. This raises the obvious question - what pushed the deficit lower? The Clinton administration will claim credit for the move, however, this is not really an accurate picture.
To examine the forces behind recent deficit reduction, we compared the multi-year budget forecasts that CBO made in January 1993, and traced their revisions through time. CBO's revisions are motivated by changes in technical, economic and legislative factors. We look at FY 1993, 1994, 1995 and 1996.1
When one compares the 4 year projected deficit levels with actuals, one sees that $407 billion in cumulative deficit reduction was achieved. CBO figures show that 48 percent of this fall was due to a revision in technical assumptions (notably the unwinding of the thrift crisis and slower spending in medical programs) and 13 percent was due to a rosier economic backdrop. Thus, a full 61 percent of deficit reduction is accounted for by factors other than legislative changes.
The remaining 39 percent came from legislative changes, primarily from tax hikes in OBRA-93. Of the $159 billion in legislative savings, 76 percent came from from higher tax revenues, while only a meager 17 percent came from spending restraint and 7 percent came from debt service. Furthermore, all of the net spending restraint came in 1996, under the Republican controlled Congress. In the FY 1996 appropriations process alone, Republicans were able to pare $19 billion from the deficit. Contrast this with a net spending increase of $12 billion during , FY 1993, 1994 and 1995 combined.
Thus, only 35 percent of the $407 billion in deficit reduction from FY1993-1996 can be directly linked to Clinton's legislative initiatives and debt service savings. This figure would have been even smaller if Republicans had not saved Clinton from himself. They blocked his early plan for a $16 billion stimulus plan, goaded him into offering a balanced budget and stymied his attempted government take-over of the health care system.
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I : Technical Reestimates
Technical reestimates account for $197 billion, or 48 percent, of the cumulative deficit reduction from FY 1993-1996. A technical reestimate is a change in the deficit estimate that is not caused by the passage of new legislation or a change in the economic forecast.
Resolution of the thrift crisis and lower Medicaid/Medicare outlays produced 75 percent of the deficit reduction accounted for by technical factors. Lower than expected costs for deposit insurance programs and the savings & loan clean-up generated $80 billion in savings, while lower Medicare and Medicaid payouts produced $67 billion in deficit reduction. The remaining $50 billion came from higher than expected revenues (which were not explained by the economic forecast or by legislation), adjustments to debt service and other small changes to spending estimates.
These technical factors are completely unrelated to any policy changes from Congress or the President.
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II : Revised Economic Forecasts
A stronger than projected economy led to a $51 billion decline in the cumulative deficit, accounting for 13 percent of overall deficit reduction. Higher than expected tax collections were main cause of this deficit reduction.
Although the Clinton administration may try to take credit for economic growth, the bulk of credit goes to prudent Federal Reserve policy, which has kept inflation low and growth steady since this recovery began under then President Bush in early 1991. While falling long-term interest rates were an economic positive during the first year of the Clinton presidency, these low interest rates were short-lived as it became apparent that this administration was not committed to true deficit reduction. In fact, by late 1994, the 30 year yield was well above the level it stood at when President Clinton assumed office, leading to the growth slowdown that we experienced last year. It took Republican deficit cutting efforts in the 104th Congress to drive interest rates back down at the end of 1995.
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III: Legislative Changes
Enacted legislation produced savings of a cumulative $159 billion or 39 percent of total deficit reduction. Of this legislative subtotal, roughly three quarters of this amount stems from higher taxes. Virtually all of the tax hikes were embodied in the Omnibus Budget Reconciliation Act of 1993 (OBRA93; PL 103-66), the President's coveted economic plan that no Congressional Republican supported.
The 1993 tax hikes raised a cumulative $121 billion in revenue and accounted for a shocking 76 percent of all legislative deficit reduction. They included an increase in the tax rate for high-income individuals; extension and increase of the motor fuels tax, repeal of the Hospital Insurance (HI) wage base cap; increase in the taxable portion of Social Security benefits; increase in the corporate tax rate; and a reduction in the business meal and entertainment deduction.
Only 6 percent or $26 billion of the cumulative deficit reduction from FY 1993-1996 came from spending cuts. Of note, $19 billion of that was due to cuts that Republicans made in the 1996 Appropriations process alone. Put another way, in this short period of time, Republicans were responsible for over 73 percent of all spending cuts made during President Clinton's entire 4 year tenure. The remaining spending cuts came from FCC spectrum auction fees and by small reductions in Medicare, Federal employee retirement and health benefits, Medicaid, Federal Family Education Loans, Veterans' benefits and farm programs. Discretionary caps were also extended from 1995 through to 1998. The caps were implemented by the Bush deficit reduction plan in 1990 and were scheduled to expire in 1995. Extending the caps produced $8 billion in savings. Offsetting these spending cuts, however, were increases in the Earned Income Credit & food stamps programs and disaster relief for farm assistance, the California earthquake and the need for additional defense preparation.
Debt service savings accounted for 7 percent or $12 billion of cumulative deficit reduction.
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IV : Review of Clinton Fiscal Overtures
Although we give President Clinton direct legislative credit for roughly 35 percent of recent deficit reduction, this is still somewhat charitable. This 35 percent reduction was achieved in spite of President Clinton, not because of him. Throughout his tenure (from the aborted stimulus package to the failed government take-over of health care to the spending caps enacted in the Budget Enforcement Act of 1990), Republican determination saved President Clinton from his spendthrift ways and kept us on the path of fiscal integrity.
When President Clinton assumed office in January 1993, his first goal was to boost government spending with a $16 billion 'stimulus' package. To make matters worse, CBO showed that this package would have caused the administration's FY 1994 outlays to exceed the discretionary caps set in the Budget Enforcement Act. Thus, right from the get go, the administration was prepared to toss away the multi-year spending controls which Republicans had fought so hard for in 1990, in an effort to satisfy the President's big spending compulsion. With fourth quarter 1992 GDP growth of over 4 percent, it was far from clear that a stimulus package was even necessary. The breakdown of the stimulus package reinforced such skepticism - it was dominated by social spending proposals, unrelated to infrastructure. Ultimately, Congressional Republicans scrapped this proposal, preserving $16 billion of the total FY1993-1996 deficit savings.
President Clinton was similarly averse to any real efforts to eliminate the budget deficit. He had three opportunities to offer a balanced budget & refused to do so in FY 1994, 1995 and 1996. In these three budgets, the deficit remained above $200 billion at the end of the respective 5 year projection period. It was only after Republicans drew the line in the sand and demanded a balanced budget by 2002 that the President finally offered a balanced budget proposal for FY 1997. Even here, however, the administration offered two sets of books, one for public consumption and the other for real budgeting. This latter, true budget left a deficit of $81 billion by 2002, with no specified spending cuts offered to eliminate this gap.
One of the most significant actions that Republicans undertook, was to block President Clinton's proposed government take-over of the health-care system. Although its staggered phase-in and up-front implementation of cigarette taxes insulated the deficit from 1994-1996, CBO estimated that this health care proposal would have boosted the deficit by $74 billion from 1995-2000. Here again, Republican opposition kept the President from his spendthrift leanings and kept the US on the path of deficit reduction.
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V : Conclusion
Most forecasters had expected the deficit to decline from FY 1993 to FY 1996, as growth improved and thrift expenditures wound down. However, the cumulative $407 billion in deficit reduction from FY 1993-1996 was larger than CBO projected. By tracing CBO's deficit revisions, we have determined that roughly 35 percent stems directly from President Clinton's legislative efforts, which are mostly tax hikes.
While the overall fall in the headline deficit is welcome news, it is important to recognize the large role that technical and economic factors have played in this fall. This highlights the fact that policy has not produced significant, lasting change and that as a result, the deficit is vulnerable to a renewed spike should the economy slow or unexpected negative technical factors emerge. Of note, CBO's current baseline projects the deficit to climb back to $244 billion by the year 2000 if no further policy action is taken. The picture gets even bleaker the farther out one goes. By the year 2030, CBO estimates that unchanged policy would produce a deficit of 26 percent of GDP, with a debt to GDP ratio of 230 percent of GDP (versus today's ratio of 51 percent). While most of us would have a hard time comprehending the implications of such enormous figures, it highlights the urgency of reducing the deficit in a meaningful and lasting way right now.<<<<<<<<<
http://www.senate.gov/comm/budget/releases/sources.htm
Please note several things.
The remaining 39 percent came from legislative changes, primarily from tax hikes in OBRA-93. Of the $159 billion in legislative savings, 76 percent came from from higher tax revenues, while only a meager 17 percent came from spending restraint and 7 percent came from debt service. Furthermore, all of the net spending restraint came in 1996, under the Republican controlled Congress. <<<<<<<<<
and
One of the most significant actions that Republicans undertook, was to block President Clinton's proposed government take-over of the health-care system. Although its staggered phase-in and up-front implementation of cigarette taxes insulated the deficit from 1994-1996, CBO estimated that this health care proposal would have boosted the deficit by $74 billion from 1995-2000. Here again, Republican opposition kept the President from his spendthrift leanings and kept the US on the path of deficit reduction.<<<<<< |
