Professor Mark J. Perry's Blog for Economics and Finance
1. Dan Mitchell of the Cato Institute explains why Deficits are Bad, but the Real Problem is Spending.
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
22 Comments:
The real problem is spending?
Hooo boy.
Let's look at federal spending financed by income taxes (Social Security and Medicare are financed by payroll taxes).
The Department of Defense, the VA, the Department of Agriculture, Homeland Security and Civilian Defense, and debt payments eat up 60 percent of federal spending financed by income taxes.
All that is sacred cow stuff.
No one has called for an abolition of the Department of Agriculture, even though we know food is cheaper than ever and we are a nation of fatties. Talk about pork.
No one asks how is it possible that it costs $1 million a year in marginal costs (not total costs, probably in the millions) to put a US soldier on the ground.
Don't even ask--you will accused of appeasing terrorists, or ingratitude towards those risking their lives for you.
If spending is the problem, we are lost in the USA.
Invest in Thailand, China.
Benny The Man,
You are SO RIGHT!
Republicans talk about cutting spending but not once do they actually talk about what they would cut.
#1 spending program is DoD. That is as Benny the Man said "sacred cow" stuff to the Republicans. In fact, if you remember the Obama administration tried to cut a fighter jet in the spring that no one wanted. Not the Air Force. Not the President. Not the Joint Chiefs. They got it done. It was a token cut. More symbolic than anything. Yet, it was very hard to cut out that jet that noone wanted. Almost, Republicans voted against cutting funding and some Democrats did too.
In fact, the Obama administration increased the defense budget by 6% this year and was accused of Republicans of gutting our military because it didn't raise the military budget even more.
This is the reality we live with. The people who say they care the most about the deficit won't do anything to actually cut the deficit.
So, I ask again, what do you want to cut??
This is why I am now a registered Independent.
Republicans can spend money just as fast as Democrats. They just spend it on their own programs.
I find it amusing, absolutely amusing, that Republicans are standing up there this week talking about what a travesty it is that the Democrats want to cut $500 billion from Medicare.
Wait, which is the party of limited government spending? Neither one, unfortunately.
I find it amusing, absolutely amusing, that Republicans are standing up there this week talking about what a travesty it is that the Democrats want to cut $500 billion from Medicare.
Actually, they're complaining about transferring $500 billion from Medicare to a "public option". No one is talking about cutting anything.
Kind of amusing when you can't follow the argument.
Well as usual mach999 and pseudo benny can't seem to get a grip on reality: "#1 spending program is DoD. That is as Benny the Man said "sacred cow" stuff to the Republicans"...
Looking at page 37 of form 1040 EZ we can see that the vast majority federal income tax dollars are spent on Constitutionally questionable items...
I'm guessing neither one of them has ever read the Constitution...
In fact, if you remember the Obama administration tried to cut a fighter jet in the spring that no one wanted.
The fighter was the F-22 Raptor and the Air Force did, in fact, want it:
The Air Force’s top two leaders ... Schwartz and Donley acknowledged they had wanted an F-22 fleet of 243 but came to realize “buying more F-22s means doing less of something else.” The $13 billion for the 60 additional fighters (Obama and the Dems earmarked more than $6 billion for ACORN) could be better used to repair the service’s nuclear enterprise, ramp up its unmanned aircraft fleet and better fight irregular wars.
AirForceTimes
Pressed on why the Air Force was giving up on the 381 F-22s it had long stated it needed to make sure it could dominate the skies from Day One of any future major conflict, Schwartz spoke of going from a "low risk" to a "moderate risk" number.
Reuters
Putting American servicemen and the entire nation at risk is what leftists live for.
Obama canceled the project throwing thousands of Americans out of work in order to divert the monies to ACORN, the UAW and dubious "green" projects. Hey, he's got his priorities, I guess he feels his bowing, groveling and apologizing will keep us safe.
The US military is a federal agency, totally paid for by US taxpayers, as it has been for decades and decades and decades.
It has become a professional force, with many dependents.
That is a recipe for ossified lard and patronage, in any federal agency.
Remember, Congress controls military outlays, and Congress is a political body.
Result: We have a military like a 350-lb barefoot fat lady, in the ring against a fighting mouse.
If the fat lady could leverage her weight, she might win, but as it stands, the mouse gets away, and the fat lady is scared about being bit.
I just described a conventional, ossfied and lardy military in a fight against terrorists.
So 24 guys buy boxcutters, come here from Saudi Arabia, and take down a few planes. All the aircraft carriers in the world can do nothing.
Yes, we need radical reforms and demobilization of our military, in order to meet present-day needs.
Ain't going to happen.
BTW, many of the Founding Fathers were against a permanent military, especially George Mason--the same Mason honored by George Mason University, where Dr. Perry earned his stripes, so to speak.
If adversaries can field soldiers at, oh say $3000 per soldier per year, and it costs us, oh say, 600 times that, how can we ever expect to prevail in a long struggle, which seems to be the only kind of war we ever get into anymore?
I'm guessing neither one of them has ever read the Constitution...
juandos,
If you want to get strictly Constitutional on me, where in the Constitution does it say anything about maintaining a standing army during peace time??? Now, I am not a strict constitutionalist and I obviously see the pragmatic need for an army during peace time, BUT if you want to get all idealogue on me you have to stay consistent. There is only one mention of the word "Army" in the entire constitution and it is as follows:
The President shall be Commander in Chief of the Army and Navy of the United States, and of the Militia of the several States, WHEN CALLED INTO THE ACTUAL SERVICE of the United States
That's right. The Constitution says the President shall be the commander in chief of the army when it is called into service. Implying that in normal times, there is no standing army.
By the way, for someone like me, who believes in strong regulation and doesn't believe the market is ALWAYS right, wouldn't it be amazing if the constitution said something like:
The Congress shall have the Power to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes
Oh wait....IT DOES! Article 1, Section 8!
I am guessing all "conservatives" and "constitutionalists" just close their eyes when passing over that Section.
BTW reading what the Bible says about "usury" can be unsettling as well. Makes you want to convert to Buddhism.
The fighter was the F-22 Raptor and the Air Force did, in fact, want it
Anon,
That entire post that you just wrote exemplifies to me how "conservatives" are not really for limited government. They are just for government doing different things.
First, you call out two Air Force officials who wanted this jet. Who cares! Why don't you call them what you would call two Health & Human Service officials who want funding for some social program. Corrupt government bureaucrats.
I really can't emphasize or remind people enough. The Army IS THE GOVERNMENT. It operates with NO PROFIT INCENTIVE. It is funded and run by a government agency. The people in the armed forces can be considered nothing more than glorified bureaucrats and social workers with ranks and titles.
And yet that seems to pass right over the heads of people who claim they are for "small government".
Let's see what else is in your post:
Obama canceled the project throwing thousands of Americans out of work
This is your argument? Seriously?? What if I said, "Don't cut this social program, think how many people depend on it and work to carry it out?" You would call me an idiot and rightfully so. There are a lot of things the government does and funds that support a lot of jobs that do nothing to improve the well being of this nation. I know you agree with me. So saying that this jet supports a lot of jobs is no argument for the jet.
Oh and btw, I thought Kenesyanism doesn't work and creates no jobs. I thought government can't create jobs. But I guess it only works when it's on military spending. Cause when money is spent on military, the Kenesyanism works, but if it's spent on a bridge somewhere, nope, that doesn't create any jobs.
This entire post shows me the power of the military-industrial complex in America. It has the power to make people who claim they are for small government, to show their true colors.
The US government never spent over $3 trillion until 2009. Then the "new era of responsibility" came to office and spending was in the #3.9 trillion range. You can take every single dime of defense spending out of that and it would still exceed the 2008 spending.
Are we going to see a frugal 2010? Not really. The budget is about $3.6 trillion, increasing to over $4 trillion by 2014.
I think they've cut down spending slightly since the prior budget got to $4 trillion faster.
See the current and historical here:
http://www.whitehouse.gov/omb/budget/Summary_Tables/
Mason favored states militia composed of all eligible men, providing their own arms and subject to regular, compulsory drill. A kind of perpetual "minutemen". I'm sure that Benny, Mach999 and the rest of their lefty brethren would be more than happy with that arrangement. Personally, I would consider it "social justice" for the two of them to be called up at a moments notice, put under the command of an amateur, politically appointed officer and marched of to fight the terrorists without benefit of modern technology. Somehow, though, I think they would find a way to weasel out, allowing others to fight while they complained about how they were going about it.
The US government never spent over $3 trillion until 2009. Then the "new era of responsibility" came to office and spending was in the #3.9 trillion range.
So, I noticed a new tactic the Right has mastered. Its called lying without lying. The easiest way to do that is throw out big numbers and come to "obvious" conclusions based on those numbers.
But if you add a little bit of perspective the argument falls apart.
Why such a big rise in spending?
Well you had the TARP, a one time $700 billion outlay that in the end will be 70% repaid, and in reality it has repaid itself 100 fold because it essentially saved, not only the economy, but Western civilization as we know it. (If you think that's ridiculous, how rationally do you think the depositors of Bank of America, Citigroup and others would react to see their checking accounts frozen?)
Then you had the $796 billion stimulus. About $200-$300 billion of which was paid out this year. And it's another one time item.
These will all come off the book soon and have paid themselves back many times over in preventing economic collapse and bringing this recession to an end.
Now going forward, the rise in spending in years 2014 and beyond is mostly due to a rise in projected health care costs. Even if health care rises with inflation, it will still lead to huge strains on the Medicare budget because of the changing demographics (more old people, less young people to support them). But we see what's happening when someone tries to address rising health care costs. He takes huge hits politically and his program is diluted so much that it will really do nothing to curb health care costs.
Actually, think about the last 2 Presidents and 3 structural problems they have tried to address and the results they got: Social Security, immigration & health care.
FAIL, FAIL, FAIL.
Politicians are taking a lesson from all this. And the lesson is just waffle from crisis to crisis and don't try anything too hard.
Machiavelli999 said...
...So, I noticed a new tactic the Right has mastered. Its called lying without lying. The easiest way to do that is throw out big numbers and come to "obvious" conclusions based on those numbers.
So your point is the massive spending increase this year and in the future is not really due to the DOD? It's instead the bailouts and entitlement spending?
Well I completely agree. Note than even when the "temporary" spending stops, and defense is cut in dollar terms, the budget is still 20% higher than 2008.
2008 was itself double that of the mid 90's. The entire federal spending wasn't $800 billion until 1983.
Spending increases well outpace inflation, and spending is indeed the problem.
I am for universal conscription, and one year of service. Bona fide CO's could serve as medics or in other programs.
And when I say universal, I mean it. No college deferments.
Mason wanted state militias of volunteers. Maybe I would go for that too,
I know one thing: If we had an all-volunteer force, there would have been no wars in Iraq and Afghanistan. Not enough people would have volunteered.
What we have today is a mercenary, professional military, a poisonous carbuncle on our political-economic landscape, the vile excretum of federalism ran mad. It eats money and more money, yet can barely put soldiers on the ground without bankrupting the Treasury. If anyone thinks this is what our Founding Fathers envisioned, you are wrong.
The Founding Fathers could barely tolerate the notion of a permanent military of any sort--even though we had just been invaded by the Brits. Even so, many detested the thought of a military.
Both Mason and T. Jefferson rued the fact that the Constitution did not explicitly forbid a permanent military.
It saddens me that the present day right-wing is so wedded to militarism, and the ossified lard and patronage that is our modern-day military.
I am pro-business, and would like to vote for a pro-business party. Still looking.
The argument for the jet stands on it's own. This article spells out the reality of the world we live in and the challenges we face:
Obama, John McCain and a Leftist-controlled Congress all took glee in killing the urgently-needed F-22 Raptor fighter program. This means the US will have to defend any airspace using aging F-15’s F-16’s or F/A-18’s.
How very dangerous this is was omitted from the discussion.
Any tactician can get an idea of what will happen in real warfare by the results of military exercises. A set of exercises that pitted the aging F-15 to some of modern Russian jets, not even the top of the line models, mind you, but the slightly dumbed-down export models revealed serious weaknesses in the F-15, versus the new, highly maneuverable Russian Fighters.
The US went to India, which was equipped with a mixed bag of THREAT aircraft, to include the Sukoi Su-30MK. In mock air combat, our fighters were often destroyed by the Russian aircraft:
The Russian-built Sukhoi Su-30MK, the high-performance fighter being exported to India and China, consistently beat the F-15C in classified simulations, say U.S. Air Force and aerospace industry officials.
In certain circumstances, the Su-30 can use its maneuverability, enhanced by thrust-vectoring nozzles, and speed to fool the F-15’s radar ...
Aviation Week
This is not a welfare program, this is fulfillment of the promise to provide for our common defense.
Of the four wars in my lifetime, none came about because the US was too strong.
- Ronald Reagan
Benny,
Bush got reamed for proposing to cut 140 programs.
http://www.redorbit.com/news/business/381665/bushs_budget_heavy_on_military__plan_would_shrink_or/index.html
It saddens me that the present day right-wing is so wedded to militarism ...
I guess that you missed the last two world wars and the march of communist imperialism, resulting in the deaths of almost 200 million people. Maybe you should take a history course.
The right isn't "wedded to militarism", get your head out of Noam Chomsky's ass. The right believes in the adage, "If you want peace, prepare for war". Bowing, groveling and pleading does not impress tyrants. In fact, it only emboldens them, leading inevitably to conflict.
So you see, it's you and your leftist buddies who are the warmongers.
Anon-
I want a military that is effective. Not a 350-lb fat barefoot Fat Lady in the ring against a fighting mouse.
I am tired of feeding a Fat Lady who can't get the mouse.
Maybe we should have a catlike military, until we need a bigger one. That's called rational mobilization, not perma-mobilization.
You are bankrupting America, and we are going down, thanks to federal overspending.
I want a military that is effective. Not a 350-lb fat barefoot Fat Lady ... I am tired of feeding a Fat Lady who can't get the mouse.
Is there ever an end to this ignorant drivel? The US military has proven, time and time again, to be the most effective fighting force in human history. It's effectiveness is only impeded by the arbitrary "rules of engagement" imposed by leftists sympathetic to the enemy cause.
That "fat barefoot Fat Lady" has the worlds finest special forces contingent, which operates quite effectively against our current enemies when given the latitude to do so.
Of course, this has always been part of the lefts strategy, hamstring the military with ridiculous ROE, and then claim that the military can't win a guerilla war.
Anon-
Taxing and spending more money is not the solution. We need to spend less.
We need to put a soldier on the ground for a lot less than $1 million in marginal costs.
We need universal conscription, and an end to this poisonous, parasitical excretum, the perma-mobilized mercenary military.
Taking on more and more and more debt forever is not an option except in the fantasy world of the borrow-and-spend crowd.
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