Iran Air Strikes Growing in Probability

Mr. Thomas. In my opinion, your posts are almost always intelligent and informative.

With regard to the National Debt( around 9 Trillion at this time) are you aware that the National Debt must be compared to the GDP for the year in order to assess its true meaning?

I am sure that you are aware, Mr. Thomas, that if our GDP, because of tax cuts and other spurs to business, grows at a 4% yearly rate and if our expenditures(After we cut several useless Cabinets) go up at 3% a year, by the year 2024, we will have a GDP in the USA of 26 Trillion and a Total Debt of 16 Trillion.

AGDP of 26 Trillion can handle a National Debt of 16 Trillion quite easily.

When we look at Xingu's chart,it shows a National Debt of about 2.8 Trillion for 1985. In 1985, the GDP was 3,585 Trillion.

When we look at Xingu's chart. it shows a National Debt of about 8 or at the most 9 Trillion for 2006. This year the GDP hit 13 Trillion.

What Xingu does not seem to realize is that our ability to handle the Gross Debt is directly tied to the GDP since that, in essence, is the wealth of our country and can be used to pay off the debt as we go.

The trick, of course, is to grow the GDP at a faster rate than the debt. This can be done if tax rates stay low so that Business can prosper and add jobs which, in turn, will fill the cofferes at the Treasury Dept.

A fair point -- let's see what a difference it makes. Here is a chart of the US national debt (and other macroeconomic benchmarks), plotted a percentage of GDP. (Update: The guy seems to have made a mistake about non-defense spending. But the debt graph, which your point was about, is consistent with the one I find in Samuelson/Nordhaus: "Economics", which is not available on the web.)


Source

As you see, it seems to (a) confirm Asherman's point about Hoover's and Roosevelt's expansion of the welfare state; (b) show that the most dramatic fiscal effect was that of winning World War II, which I assume Asherman agrees was worth making deficits for; (c) refute Asherman's point about the effect of the Johnson administration, (d) emphasizes Xingu's point about fiscal discipline under Clinton, and the lack thereof under Reagan and George Bush the Younger.

But of course, that's only my opinion.

Thank you, Mr. Thomas for a fine graph. Your comment about "fiscal discipline" must be viewed through the demands of the time.

You are certainly aware, Mr. Thomas, that because of the tax cuts Reagan pressed on the Congress, the tax revenues shot upwards.
As David Stockman indicated in his book--"The Triumph of Politics" those monies were negated by the spending of the Congress which was split between the Republicans and the Democrats until the last two crucial years of Reagan's tenure.

I am sure that you noted the Debt line in World War II and afterwards.

I know you noted the debt line's rise all through 1997 with a small dip after 1997 until 2001 when a rise came along. (Wars do that)


The crucial point as far as I am concerned, Mr. Thomas, is that the ratio of the National Debt to the GDP was over 100( actually 120% in 1950,) THEN IT PROCEEDED DOWNWARD UNTIL AROUND 1982 WHEN THE RATIO WAS ABOUT 38%.


It is vital to understand that the Debt did NOT stop growing every year. The reduction in the ratio between the National Debt and the GDP was due to the larger increase in the GDP as opposed to the Debt increase.

In other words, if the nation's GDP keeps growing at a 4 or 5% rate--a rate we can only achieve if tax cuts are in place to allow the fullest business expansion( It must be noted that our revenue intake has INCREASED since the tax cuts went into place) and if we can, by cutting Cabinet Posts which we do not need- A prime example is the Department of Education-- we can again achieve the decline of the GDP curve that is noted in the chart from 1950 to 1982.

Then even if our National Debt is 13 Trillion in 2024, if our GDP has grown to 26 Trillion, the ratio will be a comfortable 50%

No I am not. In fact, I see no reason to believe it's true. (Perpetual repetition is no reason.)

Asherman

In the 2005 budget entitlements comprised 53% of federal spending. Of that 53% Social Security, Medicare and Medicaid amounted to 41%. The reason for this is the growth of the aged population.
http://www.house.gov/budget/hearings/sawhillstmnt021506.pdf

So what do you think we should do? Give more tax cuts to the rich and cut entitlements for the lower income people who are dependent on them?

Or perhaps we should put all entitlements in the hands of profit seeking private corporations?

Thank you Thomas for the charts. On the basis of what's shown, I'm revising my opinion as to the direct cost effects of the Great Society. However, those programs did I still believe contribute to a non-discretionary budget that consumes close to half of all Federal spending.

I note that military spending is shown down by 1%, even during a time when the nation is engaged in several foreign campaigns. I would have thought spending might have increased just a bit. After all intelligent munitions are costly, and every one that is used has to be replaced to maintain our stocks. Oh well .....

I'm not comfortable with the size of the national debt, and would love to see it either reduced or at least the rate of grown slowed. It is difficult to see how the debt can be significantly effected by adjustments to the discretionary side of the budget. The Federal government has several important Constitutional responsibilities, and first among them is to provide a military force to carry out national policy objectives. The volunteer military has exceeded expectations, but it appears to me that it is too small for the tasks we demand of it. A larger military would cost more, not less. Other Federal discretionary spending might be cut somewhat, but without gutting important programs the relief would hardly effect the growth of the national debt.

That leaves the non-discretionary parts of the budget. Costs have been rising in those programs steadily since the middle of the 20th century. What were intended as "self-funding" programs threaten to collapse if additional Federal funding isn't found. The Baby Boomers are hitting retirement and beginning to experience declining health. If something isn't done, and soon, there won't be enough money to cover even the costs, even if zero money is spent on discretionary items ... like the military. Do I want to see Social Security and Medicare go away? Au contraire, mon frere! Medicare and even Social Security are important to my wife and I in our retirement. What I think is that we need to give serious consideration to our national priorities, and make some painful adjustments in spending patterns. I think individuals and organizations have become too addicted to the Federal teat, and that we need to rediscover thrift and personal responsibility. Ideally, I think, would be for some programs to be shifted from the Federal government to State governments. There are good arguments against that idea, but its worth some consideration.

Mr. Thomas- sir- I post what I thought was a fairly definitive explanation of why the total debt could be handled and you merely take one small part of my post and react to it.

May I respectfully suggest that you give me some feedback on the other parts of my post? Thank you.

I do believe that the information below does give evidence that the Reagan Tax Cuts brought in more money to the US Treasury just as the Kennedy Tax Cuts did and just as the Bush tax cuts are doing!

**************************************************************
Happy Birthday, Dear Tax Cut
Ronald Reagan gave us an 18-year boom--and counting.

BY PETE DU PONT
Wednesday, August 1, 2001 12:01 a.m. EDT

Twenty years ago this month President Reagan signed the Economic Recovery Tax Act into law. It was the most significant economic policy change in America since the New Deal.

It was also the culmination of a long fight. From July 1977, when Rep. Jack Kemp and Sen. William Roth introduced legislation for an across-the-board tax cut, through the 1980 presidential campaign and the first congressional session in the Reagan presidency, the debate on tax policy dominated political discussion. Now the tax cut was law, and for the right reason: to help the economy grow. As the Senate conference report said: "The Committee believes that a program of significant multi-year tax reductions is needed to ensure economic growth in the years ahead."

The Economic Recovery Tax Act reduced the top income-tax rate to 50% from 70% over three years, cut the capital-gains tax rate to 20% from 29%, indexed tax brackets to inflation, expanded the use of the charitable deduction and increased the amount workers could contribute to their individual retirement accounts. It was a big victory for a new president. And it ignited indignation and anger among liberals that is with us still.

Rep. Henry Reuss of Wisconsin called it "a radical redistribution of income"; pessimistic pamphleteers Donald Bartlett and James Steele moaned that "the growth of the middle class . . . has been reversed"; Sen. Tom Eagleton of Missouri called it "a greedy, bloated, avaricious tax bill." And yet many Democratic leaders voted for it--among them Scoop Jackson, David Boren, George Mitchell, Dan Rostenkowski and Leon Panetta.

So 20 years later, who was right, the pro-growth supply-siders and moderate Democrats, or the outraged liberals? Was it, as Sen. Lloyd Bentsen said in 1988, "the ultimate epoch of illusion, an eight-year coma," or was it the beginning of an era of economic growth that is with us still?




That's an easy call; the Reagan tax cut was a grand-slam home run. As the performance of the American economy between 1982 and 1988 demonstrated, the tax cut stimulated economic growth, created jobs, created wealth across the income spectrum, and increased tax revenues. Inflation and interest rates also went down, though thanks more to Fed Chairman Paul Volcker than to the tax cut.
Economic prosperity was the most important legacy of that tax cut. Real growth averaged 3% in the following eight years (which included the recession year of 1982) compared with a growth rate of 2.1% in the previous eight years. By 1985 economic output was two to three percentage points higher than it would have been. That growth led to 18 million net new jobs and the unemployment rate dropping to 5.5% from 11%. From 1982 to 1990 exports almost doubled, manufacturing output rose by almost half; the poverty rate declined, and the "misery index" (the sum of inflation and unemployment rates) dropped to 9.6 from 20.6. The tax cut was a smashing success.

Nor did the Reagan tax cut cause a loss in government revenue. Yes, income tax revenues fell in the year after the cut. But they increased in every subsequent year and were 65% higher in 1989 than in 1981. Revenues from the income tax alone increased 56%. In a paradox that still sparks angry disbelief among liberals, the government was able to collect more revenue each year in the 1980s because the economy grew, while taxpayers kept more of their income because tax rates were lower and indexed for inflation. In short, everybody won.

In their endless attack on the Economic Recovery Tax Act as benefiting the rich, liberals failed to understand that Americans who didn't think of themselves as rich nevertheless thought the tax system was treating them unfairly. "Bracket creep," the result of high inflation pushing families into higher tax brackets while their real income remains unchanged, was very real to middle-income families. As Lawrence Lindsey pointed out in his book "The Growth Experiment," the marginal tax rate for a median-income family of four rose to 28% in 1980 from 19% in 1971, a stealth tax increase that virtually everyone thought was unfair.

Cutting tax rates remedied that unfairness in a very understandable way. Mr. Lindsey calculated that a $20-an-hour blue-collar electrician or plumber saw the tax rate on his last hour of work fall to 34% from 44%, so the tax cut gave him an immediate $2-an-hour after-tax raise.

The economic impact of the tax cut across the income spectrum was just as it should have been. The tax burden on the wealthy rose, for the percentage of income taxes paid by people making more than $200,000 doubled to 14% of income tax revenues in 1986 from 7% in 1981. The tax burden on the middle class fell to 60% from 67%. A typical American family with two full-time wage earners saw its after-tax income rise 13% over the period. And as Mr. Lindsey noted, between 1981 and 1989 "the real income of the median income family rose $3,000 after falling the same amount between 1973 and 1981." Low-income individuals--those who made $5,000 to $10,000 a year--saw a 27% reduction in their income-tax rates. Again, everybody won.




So the Reagan tax cuts created an enormous national prosperity, launching America on the longest peacetime expansion since World War II, an expansion that is still with us. In each of the 18 years since Reagan's cut took effect, with the exception of the recession year of 1991, real gross domestic product has increased. Tax rates were lower for everyone; there were more jobs and the standard of living rose for almost every American.
Twenty years of experience has again proved that income-tax cuts can stimulate economic growth that will benefit everyone. John F. Kennedy predicted his tax cuts would be the "rising tide that lifts all boats." He was right, just as Ronald Reagan was right. If President Bush's lower-tax plan sticks, he will be proved right as well.

As his tax-cut legislation cleared Congress, Mr. Reagan wrote in his personal diary that it was "the greatest political win in half a century." It was, but political wins don't matter. What does count is a truth now proven beyond doubt: the Reagan tax cuts were good for everyone in America.

Asherman- I absolutely agree that nothing can be done or should be done to the Medical and Social Security aspects of the Budget.

However, I am sure that you are aware that we could save Billions if we could somehow cut out the unnecessary Bureaucratric Structures--the Empires--which have grown up in DC . YOu may know that in World War II, there were only 7 Cabinet agencies-Now there are 14.

We have added HHS, then HUD (An enormously wasteful operation that could be taken care of more efficiently on the local level), then the Dept. of Transportation, then the Department of Education(all of which could be taken care of on the local level more effectively since Education is, in the final analysis, controlled at the local level), Then the VA Cabinet.

How many Billions could be saved by totally eliminating some of these Agencies?

One thing I noticed about the pie charts xingu posted.

They both show that veterans benefits and services are 3% of federal spending.

That contradicts the lefts claim that spending on veterans benefits has been cut.

I haven't made that claim, haven't looked at the relevant numbers yet, and don't know if I'm part of "the left" by your standards. That said, America has been at war for some time now. It stands to reason that because of this war, there are now more veterans who need more benefits. So on the face of it, it seems entirely plausible that the budget as a whole has expanded while the benefits offered to the typical individual veteran have been cut.

For anyone doing active duty during the last 15 years, it is plain that veteran's benefits have steadily declined for each individual - we kinda keep an eye on those things...

Snood, there's something we agree on - and I think it's a crime.

I am respectfully asking Mr. Thomas and Mr. Xingu to reply to my post in which I believe I answered Mr. Thomas' comment on "tax cuts" and Mr. Xingu's pie chart hysteria.

I can replicate my post by saying--- THE DEBT OF A COUNTRY MUST BE VIEWED AS A PERCENTAGE OF ITS GNP. IF THE GNP IS HIGH ENOUGH, EVEN MASSIVE DEBT CAN BE HANDLED.

again-

--------------------------------------------------------------------------------
Thank you, Mr. Thomas for a fine graph. Your comment about "fiscal discipline" must be viewed through the demands of the time.

You are certainly aware, Mr. Thomas, that because of the tax cuts Reagan pressed on the Congress, the tax revenues shot upwards.
As David Stockman indicated in his book--"The Triumph of Politics" those monies were negated by the spending of the Congress which was split between the Republicans and the Democrats until the last two crucial years of Reagan's tenure.

I am sure that you noted the Debt line in World War II and afterwards.

I know you noted the debt line's rise all through 1997 with a small dip after 1997 until 2001 when a rise came along. (Wars do that)


The crucial point as far as I am concerned, Mr. Thomas, is that the ratio of the National Debt to the GDP was over 100( actually 120% in 1950,) THEN IT PROCEEDED DOWNWARD UNTIL AROUND 1982 WHEN THE RATIO WAS ABOUT 38%.


It is vital to understand that the Debt did NOT stop growing every year. The reduction in the ratio between the National Debt and the GDP was due to the larger increase in the GDP as opposed to the Debt increase.

In other words, if the nation's GDP keeps growing at a 4 or 5% rate--a rate we can only achieve if tax cuts are in place to allow the fullest business expansion( It must be noted that our revenue intake has INCREASED since the tax cuts went into place) and if we can, by cutting Cabinet Posts which we do not need- A prime example is the Department of Education-- we can again achieve the decline of the GDP curve that is noted in the chart from 1950 to 1982.

Then even if our National Debt is 13 Trillion in 2024, if our GDP has grown to 26 Trillion, the ratio will be a comfortable 50%

You can always ask. But contrary to your assertion, you did not offer any evidence that tax revenue rose because of Reagan's tax cuts. It is not controversial that Reagan cut tax rates and that that tax revenue rose. But you have supplied no evidence at al for the causal relation you are asserting. Thus, I have no evidence to comment on.

I will accept that, Mr. Thomas, but my major concern is that you comment, if you wish on my assertion that THE DEBT OF A COUNTRY MUST BE COMPARED TO ITS GNP AND IF THE GNP ACCRUES AT A FASTER RATE THAN THE TOTAL DEBT A COUNTRY HAS, THAT COUNTRY IS ABLE TO HANDLE ITS DEBT VERY WELL.

"There is a war about the war going on inside the building," a Pentagon consultant said.

Israel only has a few submarines, each with only a few cruise missiles, the cruise missiles may not have a suitably long range (the range is unknown to the public), and their ability to penetrate defenses may not be ideal.

An Israeli nuclear sub isn't nearly the threat that a UK or French nuclear sub is.


Israel tried to buy another sub from Germany, but that fell through, either because of finances or political opposition. We could help them solve either problem with the sale.

In addition, Israel's nuclear designs are relatively crude simply because they have never engaged in large-scale nuclear testing. If we withdrew from the Non Proliferation Treaty, we could provide them with much better warhead designs that would be more reliable, more powerful, lighter, and which would use less nuclear material (allowing them to expand their number of warheads without producing more weapons material).

And if we withdrew from the Missile Technology Control Regime, we could provide Israel with Tomahawk cruise missiles, which would probably be a significant upgrade over their existing cruise missiles.


Alternatively, we could surreptitiously give them the computer software for advanced nuclear simulations, and give them political cover to do their own underground nuclear tests.





I was thinking of a raid to briefly capture the whole country. Once we controlled the whole country, we could free the POWs and blow up the bunkers, then leave.

Actually ALL Israelian submarines are German subs (though the earliest - from the 70's - British made from German blueprints).

They've got three Dolphin class submarines so far (these subs are considere to be the best modern submarines), the next two are already in the wharf (one has done shipyard trial voyages already) and due to be delivered this year and the following.

Really? I heard that construction was halted after Dolphin sub #3, either because of finances, or because of opposition from the German Green Party.

The German subs are the best diesel attack subs, but as far as nuclear deterrents go, a sub full of ballistic missiles is a much greater threat.