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This is my distillation of what the average American should know about the "debate" transpiring in Washington about the deficit.

I.   Government spending over the past 20 years has increased at a lower rate than any of the other factors contributing to GDP.

II.   The deficit crisis was created by a combination of events, but mostly by:

  a.  A global financial crisis precipitated by a combination of factors, not the least of    which was a bubble in the real estate market which was used to feed the financial markets collateral to include in financial products which the banksters hawked to their customers, while they in turn placed bets that those products would fail.  This is called "financialization".  This process was facilitated by deregulation and lax enforcement of existing regulations governing financial markets from the mid/late 1990s onward.

III.  The financial crisis reduced government tax collections at all levels.

IV.  Individual income tax receipts account for 42% of US tax receipts.  Social Security and social insurance taxes account for 40%.  Corporate taxes account for 9% of US tax receipts.

V.  Once the tax revenue fell off due to the financial crisis, the deficit problem was exacerbated by other legislation of the past 12 years, including:

  a.     The Bush tax cuts, which favor the wealthy, reduced federal coffers after the surplus of the Clinton years.

  b.     The launching of a general war on terror/invasion of Iraq and Afghanistan that has helped depleted the national treasury.

  c.      A defense budget that exceeds the rest of the world combined,

  d.     But the overwhelming reason for the deficit problem in the US and abroad, is the reduced national revenues due to the financial collapse.

VI.  This gap between the US income and its expenditures should be reduced, but doing so should not be done in a way that erodes the economy even further.  That is all but impossible to do when private sector spending is decreased as it is now.  The Government must spend more at times like these to make up for those missing private expenditures.  Europe has been experimenting with deficit reduction techniques through cutting their budgets over the past two years, and those nation's economies have continued to deteriorate as if they had never approached the problem, or worse, they have served to accelerate their nations economic deterioration.

  a.     Reducing the gap between national income and expenditures can be approached in three ways.

    1.     By restoring tax rates on corporations and businesses to the higher  pre-Bush levels.

    2.     By cutting government spending.  This approach can backfire depending on which areas of the budget are cut, and in an economic downturn will likely worsen the deficit.

    3.     Improving the economy so that tax revenues increase due to increased commerce.  This of course is tied to #2 above.

VII.  Reducing the deficit will not increase the amount of money the treasury takes in.  Unless public money is invested in venues that increase household consumption, or otherwise stimulate economic growth, deficit reduction will likely decrease the amount of money the government takes in.    

VIII. Our political class believes that taxes cannot be raised on the upper tier of American income earners and corporations, who are now enjoying the lowest rates of taxation in over 50 years, and a wealth disparity between the upper 10% of American wealth holders and the lower 80% that rivals that seen during the Great Depression.

IX.  Our government has decided that we "all" must share the burden of the reconfiguration of this dynamic, and sacrifice services which average Americans now enjoy, in order to reduce the deficit.

X.  That means public services such as Social Security will be reduced.  This removes money from the economy in an all ready faltering market, and will contribute to even greater unemployment.

XI.  Reducing the deficit will not create more jobs or wealth for the lower 80% of Americans.  Reducing the deficit will benefit major financial players by stabilizing their current portfolios.

XII.  Reducing the deficit will only make the economy worse, lowering tax revenues and increasing the lines at the unemployment office.

XIII.   The federal budget deficit will not come down significantly until the economy improves.

XIV.  Nobody in elected public office is interested in addressing the problem of wealth/income for the man on the street, and truly reducing the deficit by improving the economy.  Unless you own a bank, you're s@#t-out-o-luck.

XV.  You should be very angry.

        I'm traveling and won't be around to comment for some time, and f@#k Microsoft Word, and it's auto-formatting too.

Originally posted to miguelitoh2o on Mon Jul 11, 2011 at 07:45 PM PDT.

Also republished by Community Spotlight.

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Comment Preferences

    •  Thank you for posting this (5+ / 0-)
      Recommended by:
      caul, phonegery, Oh Mary Oh, EMBA30, sow hat

      It's spot-on, and necessary.  

      Shirley Chisholm was right. Our Republic is in deep trouble.

      by Big River Bandido on Tue Jul 12, 2011 at 05:10:45 AM PDT

      [ Parent ]

    •  Diary's first point needs to be corrected (0+ / 0-)

      Diary says:

      I.   Government spending over the past 20 years has increased at a lower rate than any of the other factors contributing to GDP.

      Total Government Spending (Federal state and local)  as a share of GDP in 1990 was 36.01% while in 2010 it is 39.97%. see

      So Government Spending rose faster than GDP over the past 20 years.    

      If your statement was only in reference to Federal Spending, those numbers are 21.06% for 1990 and 23.82% for 2010.  Again, Federal spending was faster than GDP growth.

      To give some historical perspective, during the last year of the Clinton Administration, when the Clinton tax rates were in effect, Federal spending was 17.98% of GDP compared to 2010's 23.82% - a 32% larger share of GDP.  While total government spending was 32.56% compared to 2010s 39.97% a 22.7% increase in the share of GDP.

      The lower share of GDP for Federal spending was a fundamental component to why Clinton had a budget surplus.  The 2000 budget would have been in deficit if it spent an additional 5.84% of GDP.

      Do you have data from a government source (BLS, Treasury, etc.) that verifies what you originally wrote?

      I did not review the rest of the diary for accuracy after this first major error.

      The most important way to protect the environment is not to have more than one child.

      by nextstep on Tue Jul 12, 2011 at 08:30:22 AM PDT

      [ Parent ]

      •  Hey, fella, before you go all Dream Team cross- (1+ / 0-)
        Recommended by:
        Sean Robertson

        examination-impeachment on us, maybe you should note that the writer said

        Government spending over the past 20 years has increased at a lower rate than any of the other factors contributing to GDP.

        While your little nitpick addresses a quite different notion.

        I did not review the rest of nextstep's comment for accuracy after this first major error.

        "Is that all there is?" Peggy Lee.

        by jm214 on Tue Jul 12, 2011 at 08:56:49 AM PDT

        [ Parent ]

        •  A assumed some knowledge of math by readers, sorry (1+ / 0-)
          Recommended by:
          Sean Robertson

          I will leave it as a math problem for readers on why if an individual component grows faster than the total of the components, than that component cannot be the slowest growing component.  

          Hint:  GDP = Government + Consumption + Investment + Trade Balance

          The most important way to protect the environment is not to have more than one child.

          by nextstep on Tue Jul 12, 2011 at 09:04:54 AM PDT

          [ Parent ]

    •  Great list (0+ / 0-)

      Regarding MS Word, you're probably better off just composing directly in the diary form rather than composing in word and then copying and pasting.  If you must use some kind of word processor, consider Google docs.

  •  The Greedy Elite... (4+ / 0-)

    of this country (of the world) have forgotten their history.

    Someone's going to get their head cut off.  

    I don't know exactly when, but it's coming.  

    They're outnumbered.

  •  @ David Kronimg II Unintended consequences (3+ / 0-)
    Recommended by:
    caul, EMBA30, No one gets out alive

    Yeah, they never saw the fall of the Berlin Wall coming, or the collapse of the Soviet Union, or the financial crisis, or the Arab Spring.  Still reality tends to come back and bit one on the ass if one doesn't pay attention.

  •  While some of what you say is true (1+ / 0-)
    Recommended by:

    you only look at one side of the picture.

    Yes, reducing the deficit will not, in and of itself, create jobs or much improve the economy.

    What it DOES do, however, is reduce the amount of interest we'll be paying on that debt going forward.  In a few years, the interest alone will be half a trillion dollars per year.. even more if interest rates rise.

    That means the first $500 million collected in taxes will go to pay off what we spent years ago.. instead of going for services.

    •  What will we be paying the debt (1+ / 0-)
      Recommended by:

      with if our economy is in a shambles and people don't have jobs?  Does it matter what the interest rate is at that point?

      I don't think it does.

    •  It doesn't matter if (0+ / 0-)

      the cuts were made in a way that impacts overall demand in the marketplace.  That will result in lost jobs, which in turn reduces tax revenue even more.  

      •  You give too much credit to government spending (0+ / 0-)

        as something that drives the economy, IMHO.  I don't think it has anywhere near as much influence on the economy as a whole as many folks, apparently including you, do.

        Look at the anemic affect the stimulus had.  $800 Billion in new money and it barely created a ripple.

        Cutting $300-$400 Billion a year would not even be noticed.

        •  How do you know it barely created a ripple? (3+ / 0-)
          Recommended by:
          lcj98, Dragon5616, miguelitoh2o

          We don't know how much worse things would've been without the stimulus.

          I don't see how we make things better without additional revenue.  Putting more money into the hands of corporations isn't going to help-- they aren't hiring because folks aren't buying.  Corporate profits are up but apparently we can't ask profitable corporations to pay taxes and we can't ask wealthy people to pay the taxes they used to pay.

          We need money to go to people who will spend it before companies begin to hire again.  Meanwhile, the federal government needs to get revenue from somewhere.

          I feel like this country is at the mercy of idiots who think in circles.  I suspect we'd have a solid recovery by now if were not for those in our government who are afraid that their ideology has been proven wrong, and they are afraid that Americans will understand that very soon.

        •  You´re talking about the stimulus package (0+ / 0-)

          that included $400 B in tax cuts with a low multiplier effect?  Ha ha.  Do you know what the multiplier effect of various spending programs are?  Victor you need to do a ittle more reading on economics.

    •  Slight correction (1+ / 0-)
      Recommended by:

      "that means the first $500 million collected in taxes will go to pay off what we spent years ago..."

      Change that million to a billion.  As you noted earlier it's $500 billion or a half a trillion in interest payments that are coming due each and every year.

      We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

      by theotherside on Tue Jul 12, 2011 at 07:29:27 AM PDT

      [ Parent ]

  •  It was going great until X (0+ / 0-)

    when you fell off the wagon.

  •  Maybe I shouldn't have said (0+ / 0-)

    I was traveling and wouldn't be able to comment much.  Seems the trolls are disproportionately represented here.  That said, I am in fact traveling, so good luck all with the comments/dialogue here folks!

  •  Here's a better fact: (3+ / 0-)
    Recommended by:
    juca, amilamia, Dragon5616

    If we had balanced our budget in the past we would have an extra $400 billion per year that we could spend on government programs instead of just paying interest on the debt.

    On top of that you are appealing to the selfish nature of the today's current voter when you say that deficit reduction will lead to more unemployment.  Your point is 100 percent true.  By borrowing money from future Americans we are artificially inflating the current employment figures at the expense of future growth.  The way you phrase it you make it sound like that is actually a good thing and I would say it is immoral as the problems that future Americans are going to be far worse than what we face today.

    Deficit reduction is utterly necessary but since the economy sucks so bad we should focus more on long term structural deficits and not hurt our economy too much with cutting much of our current budget.

    We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

    by theotherside on Tue Jul 12, 2011 at 07:26:27 AM PDT

    •  So you´re saying (0+ / 0-)
      and not hurt our economy too much with cutting much of our current budget.
      Yet doing so necessitates raising the deficit limit.  The nature of our world economy is changing.  Japan has actually had good growth with a deficit that is 200% of their GDP.  
  •  I take it that from IX on, the writer was laying (0+ / 0-)

    out what appears to be the game plan for the Village People/Idiots. I don't gather that he is recommending that course of action.

    What I wonder is what has changed since the following was published just a couple of months ago:

    A trick question: If Congress takes no action in coming years, what will happen to the budget deficit?

    It will shrink — and shrink a lot. This simple fact may offer the best hope for deficit reduction.

    As federal law currently stands, some significant tax increases are set to take effect in coming years. The most important is the scheduled expiration of the Bush tax cuts at the end of 2012.

    Of course, both parties favor the permanent extension of most of those tax cuts — the ones applying to income below $250,000. Both parties also oppose big cuts to the military, Social Security and Medicare, at least in the short term. Unfortunately, the deficit is likely to remain frighteningly large over the next decade without either cuts to those programs or tax increases. Democratic and Republican leaders alike dance around this point.

    It's as if tax increases were a mere technicality in any deficit-reduction plan. In reality, finding a way to raise taxes may well be the central political problem facing the United States.

    The Red game plan is to complete the feudalization of our nation, and make permanent the most outrageous wealth disparity and theft of income and Real Wealth ever. Bigger than even the depredations of the Bourbons, the ones whose heads got so big they fell off.

    And we should all remember our "Casablanca;" the cretin claiming to be "Victor Laszlo," an imaginary Brave National Patriot, seems in fact a pretty sad incarnation or maybe impersonation of Captain Louis Renault.

    "Is that all there is?" Peggy Lee.

    by jm214 on Tue Jul 12, 2011 at 07:30:02 AM PDT

  •  Also, while it is clear that the (2+ / 0-)
    Recommended by:
    Oh Mary Oh, Dragon5616

    Great Recession has had a huge impact on the deficit it is also true that since 2002 we have been running rather huge deficits (usually in excess of $200B per year).

    So what we were doing back in those years was borrowing from today to help "them" have a better economy during the "Bush" years.  Does it make sense for an economy that has relatively low unemployment insurance to borrow money from this Great Recession economy to make those numbers look better?  Not so much, IMHO.

    Same goes for the current situation.  It is abhorent for us to borrow from future Americans who will be faced with the twin difficulties of Peak Oil and Climate Change.  The time to make difficult choices is now (well, it was decades ago really) but sadly few of us have the ability to recognize the new reality that we are dealing with.

    We cannot solve our problems with the same thinking we used when we created them. Albert Einstein

    by theotherside on Tue Jul 12, 2011 at 07:49:47 AM PDT

  •  one major flaw (0+ / 0-) item II...there is no debt crisis here in the U.S., except for the one that the Republicans are trying to create.

    All we need to do is raise the debt ceiling, as we've always done...

  •  nice listing (0+ / 0-)

    and I especially agree with your last comment, about the software.

    Yesterday's weirdness is tomorrow's reason why. -- Hunter S. Thompson

    by Mnemosyne on Tue Jul 12, 2011 at 08:25:34 AM PDT

  •  The Most Important Thing to Know (3+ / 0-)
    Recommended by:
    Agathena, psyched, miguelitoh2o


    1. The deficit is NOT at a record compared to GDP

    2. The nation's debt service to income (GDP) ratio is less than 3%

    3.  Interest rates on the debt are LOWER than they were
         during the budget surplus years of the Clinton Admin.

    4.  Inflation is still at historic lows despite all the fear     mongering by the Cons about it over the past 2 years.

    5.  We need to increase the deficit to create demand in the economy that will produce jobs.

    6.  The federal government has been running large deficits for most of the past 70 years with no problems rolling it over.

    7.  We cannot default on our debt because we can print all the money we want to pay it, unlike Greece, etc.

    •  James K. Galbraith agrees (3+ / 0-)
      Recommended by:
      psyched, citydem, miguelitoh2o

      Hawk Nation: A Guide to the Catastrophic Debt Ceiling Debate

      In Washington it appears that this assault on government has a large measure of elite and media support, if not on the crass details or vulgar personalities but because it could conceivably force the parties to do "what they should do anyway" - namely come to a long-term deficit and debt agreement. Such an agreement would cut spending, raise some taxes, put the projected debt-to-GDP ratio on a declining track, and solve the "government's fiscal crisis."

      What fiscal crisis? The great unasked question in this summer of sound-and-fury is "why?" The United States has many problems at the moment: a high-and-stubborn unemployment rate, a foreclosure catastrophe, a slowing economy that has not recovered and will not recover from the Great Crisis, and the ongoing challenges of infrastructure, energy and climate change. Fiscal crisis? The entire thing is a figment, made up of wise-men's warnings repeated endlessly and linked to the projections of technicians at the Congressional Budget Office and elsewhere.

      This above all: to thine own self be true...-WS

      by Agathena on Tue Jul 12, 2011 at 11:05:38 AM PDT

      [ Parent ]

      •  Deficit Reduction is the Phoniest Issue (1+ / 0-)
        Recommended by:

        since Saddam's WMD.  And yet here are the same Very Serious People pushing the same phony arguments.  Who will pay the price?  Not them of course.  

        Once again, the working classes will pay - this time with their livelihoods instead of their lives.

        •  Why are the working classes buying it? (0+ / 0-)

          The USA has many crises, the "deficit crisis" was made up by the Republicans to make sure the other important issues are overlooked.

          That Democrats are buying it demonstrates the success of the media which is working for the corporations and the oligarchy.

          This above all: to thine own self be true...-WS

          by Agathena on Tue Jul 12, 2011 at 01:28:25 PM PDT

          [ Parent ]

          •  Working classes bought the Iraq war too (1+ / 0-)
            Recommended by:

            Watching Fox Noise is a major problem for working people who actually seem to believe the claptrap they spew.

            But the MSM does not present any counterpoint either - when was the last time you heard ANYONE on the MSM say the deficit "crisis" is phony?

            When Congress passes a "clean" increase in the debt limit - and they will - nothing bad will happen.  The world will go on just the same and the "crisis" will soon be forgotten, just as the Iraq war has been.

  •  According To Victor Laslow "The Stimulus Barely (1+ / 0-)
    Recommended by:

    created a ripple" in the economy. Well Victor, you can thank the Republicans for that - the Democrats wanted a BIGGER stimulus, but the Republicans fought them every step of the way. Oh, and by the way Victor, just what effect has the extension of the Bush tax cuts for the wealthiest 2% had on the economy? You remember those tax cuts don't you Victor - the ones that Republicans held the country hostage for back in December? The tax cuts that Obama and the Democrats opposed because it added $400 billion to our national debt over 10 years? The tax cuts that Republicans screamed would "punish the job creators" in American society?
    Well  Victor, I'll tell you what effect they had - the unemployment rate increased from 9.1% to 9.2% since those tax cuts went into effect -  Victor I'm SHOCKED, SHOCKED (from Casablanca)!!!

  •  16) When Reagan took office (1+ / 0-)
    Recommended by:

    this country's debt stood at $900 billion. 28 years later, of which 20 of them had Republican Presidents, debt stood at nearly $11 trillion. In fact, Republican Presidents are responsible for nearly 90% of our debt since Reagan took office.

    17) Believe it or not, it was only 10 short years ago when Republicans concocted the fairy tale that our country was heading towards "dangerous" surpluses. These same Republicans now how shifted seemlessly into deficit warning mode without ever having been held to account for disasterous fairy tale about runaway surpluses and the "harm" they would cause.

  •  Thanks for the comments, and (0+ / 0-)

    I wish I ould have been here to comment in real time, and more detail.  I´m on a motorcycle trip, and broken down, in mexico otherwise I would not have been able to comment this morning at all.  With hope I´ll be back on the road this afternoon.  Cheers to all, even you victor, and your pal.

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