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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Scumbria who wrote (142132)	5/3/2001 2:01:14 PM
From: Bill	Read Replies (1) \| Respond to of 769667

It was never called the deficit reduction act until the reps blocked all his spending initiatives and the deficit started going down. What a joke!

To: Scumbria who wrote (142132)	5/3/2001 2:10:01 PM
From: Neocon	Read Replies (1) \| Respond to of 769667

-------------------------------------------------------------------------------- September 13, 2000 Time for Gore to Get Better Economic Advisers? by William A. Niskanen (William A. Niskanen is chairman of the Cato Institute and was a member of the Council of Economic Advisers during the first term of the Reagan administration). President Clinton and now candidate Al Gore have made a case that fiscal responsibility, specifically the Budget Act of 1993, was their primary policy contribution to the long boom. This focus on the Budget Act of 1993, of course, serves a partisan purpose, because this act was the only major economic policy initiative by the Clinton administration that was not dependent on Republican support. Their conjecture that the large increase in the top marginal tax rate in the 1993 act would increase economic growth, however, is not consistent with any known macroeconomic theory and leads them to misrepresent the historical record. The new Gore-Lieberman economic plan, for example, contends that "During the 1980's and early 1990's with the debt quadrupling, mortgage rates skyrocketed and many families were priced out of owning a home." In fact, average mortgage rates on new homes declined from 15.14 percent in 1982 to 8.24 percent in 1992. Similarly, the new economic plan contends that "The 1993 commitment to deficit reduction changed market expectations and had an almost instant impact on interest rates. Daily stories in the Wall Street Journal, the New York Times and other papers attributed the sharp decline in long-term rates to the introduction and passage of the deficit reduction package." In fact, the average yield on 10 year Treasury securities increased from 5.68 percent in August 1993 (when the Budget Act was passed by the narrowest margin) to 7.96 percent in November 1994 (when Republicans were elected to a majority of Congress). More important, numerous careful econometric studies of the longer record have failed to find any significant positive relation between U.S. interest rates and the federal budget deficit. The reason for this is less clear but probably related to the fact that new U.S. federal borrowing has been a very small share of the total world stock of debt instruments. All of this would be only a tempest in some academic teapot except for the fact that the Gore-Lieberman case for reducing the explicit federal debt (running a continued budget surplus) is based largely on the alleged effects of such a fiscal policy on interest rates. Mr. Gore would make a sounder case by arguing that a budget surplus has better economic effects than most of the additional spending that the next president and Congress would otherwise be tempted to approve. But his unsupported arguments about the interest rate effects of this fiscal policy are not sufficient to dismiss the case for using the projected surplus as an opportunity to finance the privatization of Social Security or a thorough reform of the federal tax system. Do your homework, Mr. Gore, or get better economic advisers. cato.org

To: Scumbria who wrote (142132)	5/3/2001 2:38:08 PM
From: Neocon	Read Replies (1) \| Respond to of 769667

SOURCES OF DEFICIT REDUCTION : FY 1993-1996 Senate Budget Committee staff analysis July 15, 1996 -------------------------------------------------------------------------------- I : Technical Reestimates II : Revised Economic Forecasts III: Legislative Changes IV : Review of Clinton Fiscal Overtures V : Conclusion Graph Table -------------------------------------------------------------------------------- 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. senate.gov

To: Scumbria who wrote (142132)	5/3/2001 2:40:50 PM
From: Neocon	Respond to of 769667

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. senate.gov

To: Scumbria who wrote (142132)	5/3/2001 2:42:51 PM
From: Neocon	Read Replies (1) \| Respond to of 769667

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. -------------------------------------------------------------------------------- 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. senate.gov