Republicans Claim Fiscal Responsibility - That's NOT TRUE!

From Jackie Calmes in the Los Angeles Times: 

With a Democrat inhabiting the White House, perhaps the most predictable thing about House Republicans’ return to power is this: They’ve rediscovered their faux fiscal conservatism.

All week members of the Republican majority have been chest-beating about how, thanks to the new House rules they devised, they will restore rectitude to federal budgeting. Income will be balanced against spending and debt reduced, just as American families have to do at their kitchen tables.

Don’t take that promise to the bank. It’ll bounce. And not because Republicans are up against the supposedly profligate Democrats who control the White House and Senate. As we begin what’s sure to be a chaotic two years of Republican governance in the House, a little fiscal history is in order, no green eyeshades needed.

In short, Republicans forfeited the title “fiscal conservatives” so long ago, most Americans weren’t even born yet

A fiscal conservative advocates for small government and low taxes but is open to higher taxes if necessary to erase deficits. That kind of thinking defined the Republican Party for most of the 20th century.

Starting with the Reagan era, however, the party flipped its orthodoxy on its head: Republicans became so anti-tax that each time their party took power, they willfully drove up deficits in the higher cause of slashing taxes for businesses and the rich. And each time, Republicans’ claims that the tax cuts would pay for themselves (economic growth!) were disproved by the record — Reagan’s, George W. Bush’s and Donald Trump’s.

Yet to hear House Republicans lately, you’d think Democrats and a few RINOs were responsible for the entire $31-trillion gross federal debt. Heck, we’re still paying on debt from Bush’s administration, when, for six of his eight years, Republicans also controlled Congress. Republicans’ red ink, which quickly washed away a budget surplus Bush had inherited, flowed largely from tax cuts, an unnecessary war in Iraq and a big, unfunded domestic program, Medicare Part D, to cover seniors’ prescription drugs.

Democrats for years had wanted to add a drug benefit for older Americans, but were stymied by the cost; in 1990, they’d agreed with the first President Bush (a fiscal conservative, mostly) that new tax cuts or spending on entitlement programs like Medicare would be paid for with separate spending cuts or tax increases. The second Bush and his Republican allies simply got rid of the rule, so they could cut taxes and enact Part D, deficits be damned. (As Vice President Dick Cheney famously said, deficits didn’t matter anymore.)

Democrats, in true fiscally conservative fashion, revived the “pay as you go” rule when they regained power in Congress. President Obama’s Affordable Care Act was mostly paid for with spending cuts and new taxes on businesses that stood to benefit from additional paying patients. When Trump was elected and Republicans took charge again, those taxes were repealed, adding some Obamacare debt to the nation’s tab and once again rendering Republican claims to fiscal rectitude hollow.

That move was responsible for just a fraction of the debt we’re now shouldering from Trump’s tenure. Lest the former president’s defenders rush to argue that he was blindsided by a costly pandemic, know this: Before COVID-19 struck, Trump and a Republican-controlled Congress had piled up nearly $5 trillion in debt, projected over a decade, from both higher spending and tax cuts. That’s according to the (truly) fiscally conservative Committee for a Responsible Federal Budget.

Trump left behind almost $8 trillion in total debt after four years, more than either the second Bush or Obama did in each man’s eight years as president, as the conservative Manhattan Institute found.

Did the purported deficit-hawk Republicans now running the House complain? Of course not. On that, like any other outrage of the Trump years, they were silent. And complicit.

But they’ve found their voices now that Joe Biden is president, although their tough talk goes only so far: Tax cuts don’t have to be paid for under the new Republican rules, which require that only of some new spending.

Three times during Trump’s term, Republicans quietly went along in raising the federal debt limit, so that the government could keep borrowing to cover costs that they, along with past presidents and Congresses, had run up on the nation’s credit card. No drama, no conditions. Yet even before House Republicans won power in the midterm elections, they were promising to hold the debt limit hostage unless Biden and Democrats would agree to huge spending cuts.

“We’re not just going to keep lifting your credit card limit, right?” then-minority leader and now Speaker Kevin McCarthy said in October.

“Your” credit card, says the man who’s been a member of Congress for 16 years, and in the House Republican leadership for 14. Over time, he voted for countless unfunded tax cuts and more spending than he’d admit to.

Raising the debt limit doesn’t add a cent to deficits and debt; it merely ensures that the government can pay existing bills. But refusing to raise it could be catastrophic, for the nation and for a global economy that relies on the United States for a stable dollar. When House Republicans seriously flirted with blocking a debt ceiling increase in 2011, under Obama, the threat rocked markets.

To play this game again would be the most fiscally irresponsible and least fiscally conservative thing that Republicans could do. But as history warns us, don’t put it past them. They’re fiscal fakers.

Health Care Broken & Too Expensive Even For The Insured

 The health care system is broken in the United States -- and has been for a very long time. Obamacare helped, but fell far short of fixing the system. There are still millions with no insurance at all, and it did almost nothing to cure the exorbitant costs of health care. Today, even for those who thought they had a good health insurance plan, they can find they still owe thousands of dollars when faced with a serious illness.

Here's how Aaron E. Carroll describes the health care problems in The New York Times:

More than 100 million Americans have medical debt, according to a recent Kaiser Health News-NPR investigation. And about a quarter of American adults with this debt owe more than $5,000. This isn’t because they’re uninsured. More often, it’s because they’re underinsured.

The Affordable Care Act was supposed to improve access to health insurance, and it did. It reduced the number of Americans who were uninsured through the Medicaid expansion and the creation of the health insurance marketplaces. Unfortunately, it has not done enough to protect people from rising out-of-pocket expenses in the form of deductibles, co-pays and co-insurance.

Out-of-pocket expenses exist for a reason; people are less likely to spend their own money than an insurance company’s money, and these expenses are supposed to make patients stop and think before they get needless care. But this moral-hazard argument assumes that patients are rational consumers, and it assumes that cost-sharing in the form of deductibles and co-pays makes them better shoppers. Research shows this is not the case. Instead, extra costs result in patients not seeking any care, even if they need it.

Cost sharing isn’t set up in a thoughtful way such that it might steer people away from inefficient care toward efficient care. Deductibles are, frankly, ridiculous. The use of deductibles assumes that all medical spending is the same and that the system should disincentivize all of it, starting over each Jan. 1. There is no valid argument for why that should be. Flu season peaks in the winter. We were in an Omicron surge at the beginning of this year. Making that the time when people are most discouraged from getting care doesn’t make sense.

Co-pays and co-insurance aren’t much better. They treat all patients the same, and they assume that all patients should be treated the same way.

In a National Bureau of Economic Research working paper published last year, researchers looked at how increases in cost-sharing affected how older adults, who are more likely to need care, pay for and use drugs. Remember, people age 65 and older in the United States are insured with what most consider to be rather comprehensive coverage: Medicare. The researchers claimed, however, that a simple $10 increase in cost-sharing, which many would consider a small amount of money, led to about a 23 percent decrease in drug consumption. Worse, they said it led to an almost 33 percent increase in monthly mortality. In other words, making seniors pay $10 more per prescription led to people dying.

These seniors weren’t taking optional, esoteric, exceptionally expensive medications. This finding was for drugs that treat cholesterol and high blood pressure. In fact, they were considered “high value” drugs because they were proven to save lives. Further, those at higher risk of a heart attack or stroke were more likely to cancel their prescriptions than people at lower risk.

People are not smart shoppers or rational spenders when it comes to health care. When you make people pay more, they consume less care, even if it’s for lifesaving treatment.

Moreover, a $10 increase in drug cost-sharing is small potatoes compared with what most people have to pay out of pocket for care each year. The average deductible on a silver-level plan on the A.C.A. exchanges rose to $4,500 in 2021. If people tried to buy plans with a lower premium, at a bronze level, the average deductible rose to more than $6,000. Granted, some cost-sharing reductions are available for those who make less than 250 percent of the federal poverty line, but even after accounting for those, the average deductible was more than $3,100 for silver plans.

Those who receive insurance from their employer aren’t much better off than those who buy on the A.C.A. marketplaces. The average deductible for insurance offered by large companies in the United States was more than $1,200. At small companies, it was more than $2,000.

Those are only the deductibles. After they are paid, people must still cover co-pays and co-insurance until they hit the out-of-pocket maximums. The good news is that the A.C.A. limits these in plans sold in the exchanges. The bad news is that they’re astronomical: $8,700 for an individual and $17,400 for a family.

A large majority of Americans don’t have that kind of money sitting in accounts, certainly not after paying an average of about $5,000 in premiums each year for a benchmark individual silver plan. Half of U.S. adults don’t have even $500 to cover an unexpected bill. Anyone who requires significant health care will be out the entire deductible, meaning thousands of dollars, and if severely ill, is likely to hit the out-of-pocket maximum.

Of course Americans are in medical debt. The Kaiser Family Foundation estimates the country’s collective medical debt is almost $200 billion.

It’s worth noting that the cost of health care in the United States is so high that even expensive premiums are not enough to cover the full amount without significant out-of-pocket spending. That doesn’t mean no better options exist for cost-sharing. We could treat those with diagnosed chronic diseases differently, as many countries in Europe do. It makes sense to try to disincentivize healthy people from overtreatment, but lots of people, including me, need care that costs money every day. It makes no sense to try to persuade me to rethink that. U.S. leaders could also consider adapting a reference pricing system, where the health system determines what constitutes the lowest-cost, highest-quality care and makes that available without any out-of-pocket spending. Cost-sharing can then be applied to other options that might cost more or have less evidence behind them.

The purpose of insurance is to protect people from financial ruin if they face unexpected medical expenses. Reducing the amount that they need to pay from six figures to five is necessary, but not sufficient. It’s not enough to give people insurance. That insurance must also be comprehensive.

Will Biden Reduce Or Eliminate Student Loan Debt?

The exorbitant rise in the cost of a college education, combined with stagnant wage growth for most Americans, has created a crisis of debt for many students. There is currently about $1.7 trillion of loan debt for students. This is keeping them from buying the things their parents were able to buy at the same point in their lives, and that is a drag on the country's economy.

Many want President Biden to eliminate, or significantly reduce this loan debt. And currently he is considering doing that. Here, from Vox.com, are his three options:

Senator Warren Calls For Forgiving Student Loan Debt

The following is the letter from Senator Elizabeth Warren (D-Massachusetts) to her supporters regarding student loan debt. She favors forgiving up to $50,000 of that debt. Here is what she had to say

There's been a lot of talk about unity recently.

For me, unity is about doing the work that the American people want done.

It's not about ideology. It's not about helping just the richest Americans or some interest group — unity is about doing things that the American people want to see us do.

And you know one thing that unites Americans? Canceling student loan debt.

It's a hugely popular proposal that would immediately put hundreds and thousands of dollars back in the pockets of millions of Americans, start to close the racial wealth gap, and boost our economy.

And the president can get it done without waiting for Congress.

I'm partnering with Senate Majority Leader Chuck Schumer and Congresswoman Ayanna Pressley to set a bold plan for how Joe Biden can use his executive authority to deliver meaningful relief to struggling Americans and broadly cancel up to $50,000 in student loan debt.

We need to take action because families need relief. Over 40 million Americans are being crushed by over $1.5 trillion in federal student loan debt.

In the middle of an economy that's been badly hit by the pandemic, the student debt crisis acts like an anchor, preventing a swift recovery and restricting opportunity and prosperity for millions of American families.

Canceling student loan debt as soon as possible would mean substantial and immediate relief for tens of millions of Americans, many of whom have suddenly been laid off or are worried that their jobs are next.

And communities of color, which have been hit hardest by the health and economic consequences of the coronavirus pandemic, disproportionately bear the burden of student debt.

Black students are on average nearly 20 percentage points more likely to take out federal student loans. Half of Black borrowers and a third of Latino borrowers default on their loans within 20 years. Canceling student loan debt would increase wealth for Black and Latino families, help them avoid default, and start to close the racial wealth gap.

Economists agree that canceling student loan debt would also help boost our struggling economy through a consumer-driven economic stimulus, greater home-buying rates and housing stability, expanded access to more affordable financial products including car loans and mortgages, higher college completion rates, and greater small business formation. This is a no brainer for our economy.

Look: we all saw what happened in 2008. After the financial crisis, young people were shoved into a weak job market and plunged even deeper into student debt. And today, as workers face layoffs and frozen wages in the wake of the coronavirus pandemic, student loan borrowers who were barely staying afloat are now drowning. When Americans can't fully participate in our economy, we see a ripple effect across our entire economy and a slowdown in economic growth. This affects all of us, including those of us who don't have student loans or have already paid off their student debt.

We can do better than this. And Democrats will.

Elizabeth

Forgiving Student Debt Would Be Huge Boost To Economy

Student debt has ballooned in the last decade, and now surpasses both auto loan and credit card debt (see the chart above). This is because college costs have risen and many students cannot attend college now without going into debt. The problem is that this enormous debt is holding many graduates back from starting families or buying homes -- and that is hurting the U.S. economy.

Some Democratic presidential candidates (especially Elizabeth Warren and Bernie Sanders) have proposed forgiving part or all of this debt. It's not a bad idea. Doing so could be a big boost for the U.S. economy, and benefit all citizens.

Here is what Chris Arnold has to say about forgiving student debt at NPR.org:

Presidential hopefuls Elizabeth Warren and Bernie Sanders want to tear up your student loans and set you financially free. That's popular among voters – especially those struggling to pay off this debt.

Other Democratic candidates have more modest plans. But economists say the dramatic proposals from Sanders and Warren to free millions of Americans from the burden of student debt could boost the economy in significant ways and help combat income inequality.

Warren would forgive up to $50,000 for most people. Sanders would go further with total loan forgiveness. But with these plans having a price tag north of $1 trillion, such legislation would come with plenty of risks.

The reason debt forgiveness could have a big impact on the overall economy is that a generation of Americans is making major life decisions differently because of student loans.

"Children, it's not about if you want them," says Laura Greenwood in Montpelier, Vt. "It's about can you afford them?"

Greenwood works for the state education agency. She's 30 years old and makes $63,000 a year. "I make probably a better salary than a lot of my peers."

But after paying for college and grad school, Greenwood owes $96,000 in student loans. And she says that's got her and her partner feeling frozen. "Yeah. It's always, we're interested in having kids, but just cost of living and all our other bills and then the student loans, it's just like the final straw." She says it makes starting a family feel impossible.

So if people like Greenwood suddenly had this millstone of debt lifted from their necks, it stands to reason that would unleash pent-up desires and spending that would be good for the economy. A lot more people would have kids, or start businesses, or buy houses.

"In the short term, it would be very positive for the housing market," says Lawrence Yun, the National Association of Realtors chief economist. He says his group's surveys show that student debt has people delaying homeownership by five to seven years.

He's not endorsing any particular plan, but he estimates that broad loan forgiveness would push up the number of home sales quite a bit. "Home sales could be, say, 300,000 higher annually if people were not saddled with large student debt." Yun says that would be "a boost to the housing sector as well as the economy."

The effects would go beyond the housing market. William Foster is a vice president with Moody's, which just did a report on student debt forgiveness. "There've been some estimates that U.S. real GDP could be boosted on average by $86 billion to $108 billion per year," which is "quite a bit," he says. "That's if you had total loan forgiveness." Foster says it wouldn't have to be total forgiveness to see significant results. And he says it could also help address rising income inequality.

Some Charts On World Debt

These charts reflect the countries that have the most debt in the world. According to the IMF (International Monetary Fund), the world debt has reached $69.3 trillion. That's the highest it's ever been.

The nation that has the most debt is the United States. The chart above shows the U.S. debt at $21,465,000,000. That chart has 2018 numbers. The 2019 debt for the United States is now more than $23,000,000,000 (23 trillion).

As the top chart shows, the United States has about 31% of the entire world's debt. And the recent GOP tax cut has that debt growing by about a trillion dollars a year.

These charts are from visualcapitalist.com.

Why Should Refugees/Migrants Respect Our Borders, Since We Did Not Respect Theirs?

(This image of Syrian refugees is from qasioun-news.com.)

Donald Trump, and his Republican cohorts, don't think we have any responsibility to accept refugees or immigrants into this country. They are wrong! The truth is that both the United States and other Western countries created much of the conditions that forced those refugees and immigrants to leave their country to save their families.

Here is part of an excellent and thought-provoking article by Suketu Mehta in The New York Times:

There is a lot of debate these days about whether the United States owes its African-American citizens reparations for slavery. It does. But there is a far bigger bill that the United States and Europe have run up: what they owe to other countries for their colonial adventures, for the wars they imposed on them, for the inequality they have built into the world order, for the excess carbon they have dumped into the atmosphere.

The creditor countries aren’t seriously suggesting that the West send sacks of gold bullion every year to India or Nigeria. Their people are asking for fairness: for the borders of the rich countries to be opened to goods and people, to Indian textiles as well as Nigerian doctors. In seeking to move, they are asking for immigration as reparations.

Today, a quarter of a billion people are migrants. They are moving because the rich countries have stolen the future of the poor countries. Whether it is Iraqis and Syrians fleeing the effects of illegal American wars, or Africans seeking to work for their former European colonial masters, or Guatemalans and Hondurans trying to get into the country that peddles them guns and buys their drugs: They are coming here because we were there. 

Before you ask them to respect our borders, ask yourself: Has the West ever respected anyone’s borders?

A vast majority of migrants move from a poor to a less poor country, not a rich one. Immigration quotas should be based on how much the host country has ruined other countries. Britain should have quotas for Indians and Nigerians; France for Malians and Tunisians; Belgium for very large numbers of Congolese. 

And when they come, they should be allowed to bring their families and stay — unlike the “guest workers” who were enticed to build up the postwar labor force of the colonizers and then asked to leave when their masters were done exploiting them.

The Dominican Republic, where the United States propped up the dictator Rafael Trujillo for three decades, should be high on the American preference list. So should Iraq, upon which we imposed a war that resulted in 600,000 deaths. Justice now demands that we let in 600,000 Iraqis: for each death we caused there, someone should get a chance at a new life here.

Some 12 million Africans were enslaved and carried across the Atlanticby European powers. Should not 12 million people from Africa be allowed to live in the countries enriched by the toil of their ancestors? Both will be better off: the African still suffering from what slavery has done to his country, and the host country that will again benefit from African labor, but this time without enormous pain and for a fair wage.

Just as there is a carbon tax on polluting industries, there should be a “migration tax” on the nations who got rich while emitting greenhouse gases. The United States is responsible for one-third of the excess carbon in the atmosphere; Europe, another one-quarter. A hundred million refugees fleeing hurricanes and droughts will have to be resettled by the end of the century. The United States should take a third, and Europe another quarter.

A huge bill would come to the West, but it is one it should look forward to paying. Without immigration, America’s economic growth would have been 15 percent lower from 1990 to 2014; Britain’s would have been a full 20 percent lower. Immigrants are 14 percent of the American population, but they started a quarter of all new businesses and since 2000 earned over a third of the American Nobel Prizes in chemistry, physics and medicine.

Migrants are 3 percent of the world’s population but contribute 9 percent of its gross domestic product. Their taxes prop up the pension systems of the wealthy nations, which are not making enough babies of their own. 

If you want to help the poorest people in the world, the fastest way to do so is to ease barriers to migration. Migrants sent back $689 billion in remittances last year, which amounts to three times more than the direct gains from abolishing all trade barriers, four times more than all the foreign aid given by those governments and 100 times the amount of all debt relief. . . .

There are no serious arguments that demonstrate long-term economic damage to countries that accept immigrants, even in large numbers. During the age of mass migration, a quarter of Europe moved to the United States, which went on to replace Europe at the pinnacle of wealth and power.

A world with more open borders would have a brief spasm of mass movement, and then migration might actually decrease, because money and happiness would be more equitably spread around, and more people would stay home.

To avoid paying the “migration tax,” the rich countries would have to stop propping up dictators, stop starting savage and unnecessary wars, restrain their multinational corporations from ripping off mineral wealth of poor countries and make sure that global trade is more equitable. Or else the migration bill from the devastated country would be prohibitive. . . .

History is what has happened and can never un-happen; history is happening right now. Attention needs to be paid. So does the bill.

The Public Favors Free Tuition And Cancelling Student Debt

A college education is very expensive these days. Even public colleges and universities have priced themselves out of the reach of many poor and working class students, and those who borrow to attend those schools find themselves with a crushing debt upon graduation.

Republicans don't seem to care. They want to cut the amount of grants available to students, and raised the interest rate students must pay when they borrow to go to school. Once again, it shows the Republicans only care about the rich.

Democrats have proposed a couple of plans to help needy students better themselves by getting an education. One would provide free tuition at public colleges and universities. Another would cancel up to $50,000 of debt to students from families making less than $100,000 a year.

What does the public think of the Democratic plans? A significant majority of them approve of both plans. About 61% of adults and registered voters support free tuition at public colleges and universities. About 56% of adults and 58% of registered voters support cancelling up to $50,000 in debt for families making less than $100,000 a year.

These programs make a lot of sense. In fact, they would pay for themselves over time, since those college-educated individuals will pay a lot more in taxes over their working life. Other developed nations know this, and many of them already offer free college tuition. It's time for the U.S. to do the same.

The charts above are from the latest Economist / YouGov Poll -- done between May 26th and 28th of a national sample of 1,500 adults (including 1,120 registered voters). The margin of error for adults is 2.6 point, and for registered voters is 3 points.

Are GOP Policies Leading Us Toward A New Depression ?

In the past, Republican policies (favoring the rich and corporations) created a situation where the gap in wealth and income between the rich and the rest of the country was enormous. A stock market crash in 1929 triggered the Great Depression (which was inevitable because of that wealth/income gap).

Today's Republicans have recreated that wealth and income gap, and it is growing even larger than it was prior to the Great Depression. The policies, deregulation of financial institutions and huge tax cuts for corporations and the rich, have also had another effect. It has created an enormous debt -- both government and private debt.

Some economists believe it is this ballooning debt that will trigger a new depression -- and it could happen before Trump's presidential term ends. Consider this part of a thought-provoking article by John Aldan Byrne in The New York Post:

Ten years ago, it was too-easy credit that brought financial markets to their knees. Today, it could be a global debt of $247 trillion that causes the next crash.

After a decade of escalating US household debt brought on by low wages and the national debt more than doubling over the same time frame, to $21 trillion, debt could soon put the brakes on this economic recovery, analysts warn.

“We think the major economies are on the cusp of this turning into the worst recession we have seen in 10 years,” said Murray Gunn, head of global research at Elliott Wave International.

And in a note, he added: “Should the [US] economy start to shrink, and our analysis suggests that it will, the high nominal levels of debt will instantly become a very big issue.”

The economic stats:

• US household debt of $13.3 trillion now exceeds the 2008 peak. That’s due in part to mortgage lending, which is hovering near its decade-ago level of $9 trillion-plus.
• Student loans outstanding have skyrocketed from $611 billion in 2008 to around $1.5 trillion today.
• Auto loans, at nearly $1.25 trillion, have exceeded the 2008 total, while credit card balances are just as high now as before the Great Recession.
• Meanwhile, global debt — a result of central bankers flooding economies with cheap money to lift them out of a funk — is now $247 trillion, up from $177 trillion in 2008. That is close to 2½ times the size of the global economy.

“We won’t be able to call it a recession, it’s going to be worse than the Great Depression,” said economic commentator Peter Schiff, forecasting a major economic downturn as early as the tail end of the Trump presidency’s first term. “The US economy is in so much worse shape than it was a decade ago.”

Economic theorists say insurmountable debt is the big kahuna. The huge sums today certainly fed the boom times. But since it must eventually be repaid, the tipping point will come when a wave of defaults by overwhelmed borrowers — potentially squeezed by rising interest rates — leads to a widespread reduction in spending and incomes, economists explain.

New GOP Norm Is Trillion Dollar A Year Federal Deficits

The chart above (from MarketWatch) shows the federal debt projected by the CBO before the Republicans passed their massive tax cuts for the rich and corporations. Thanks to those cuts, the areas in red on the chart above will be much larger.

The Republicans have always claimed to be the party of fiscal responsibility. That wasn't actually true. They just wanted to do their spending on the military instead of programs to help most Americans. But their new tax cut, coupled with their profligate spending, means they have tossed fiscal responsibility out of the window.

They have ushered in a new era of yearly minimum deficits of at least a trillion dollars a year, which will balloon the federal debt far faster and bigger than ever before.

The following is just part of an article by Stan Collender at Forbes.com:

The new U.S. normal of $1 trillion or more annual federal budget deficits will officially begin this week when the Congressional Budget Office releases its economic and budget outlook report showing that the deficit will be at least that high every year Donald Trump is president.

Although there have been private sector projections for months (including my post from last October) that the government's red ink will hit and exceed a trillion dollars for years to come, this will be the first report by Congress's official budget watchdog since last year's big tax cut and this year's spending deal were enacted that will show the deficit rising precipitously and staying at that very high level through the next 10 years.

The official CBO projections are likely to be lower than the budget deficits that actually occur. CBO's report is based on current law and makes no political judgements about what Congress and the president will do in the future. That means the deficit projections will be based on the presumption that the tax cuts enacted last year that currently phase out will in fact end. That means the CBO forecast will assume that future revenues will be higher and the deficit lower compared to what is likely to occur.

The same is true for spending. For this report, the Congressional Budget Office doesn't presume that any of the reductions proposed in the Trump 2019 budget will be enacted. That will increase the deficit outlook compared to what the White House will say it will be.

For the record (and before the trolls come out to play), there were indeed four consecutive trillion dollar federal deficits during the Obama administration from fiscal 2009-2012. Those deficits were primarily caused by the Great Recession and were temporary. By contrast, the trillion dollar Trump deficits are permanent changes to the federal budget outlook caused by enacted reductions in revenues and increases in spending.

The Trump deficits assume a relatively high-level of economic growth. If the economic outlook doesn't turn out to be as rosy as the White House is promising, the very high Trump era federal budget deficits will be even higher.

President's Proposed Budget For 2016

President Obama has submitted his proposed budget for 2016 (which would actually start in September of this year). These two charts, from the National Priorities Project, reflect the spending proposed by the president. I show you both charts, because it is highly likely that the two parties in Congress will be talking about different charts.

The top chart shows all government spending -- both discretionary (which Congress must budget each year) and mandatory (which is already written into law). This is the chart the Republicans want to talk about, because it makes it look like the mandatory spending is what is eating up most of our tax dollars -- and they want to use that to cut Social Security, Medicare, and other healthcare (which together make up about 87% of mandatory spending).

But that is very misleading. Social Security (49% of mandatory spending) has not added a penny to the budget deficit or the national debt -- ever. It is fully funded by the FICA payroll taxes, which can continue providing full benefits for another 20 years (and then will provide 80% of full benefits for many more years -- and with an increase in the cap on income subject to the payroll tax (making the rich pay the same percentage as the working and middle classes), it will be fully funded far into the future.

And the same is largely true of Medicare (most of which comes from payroll taxes and Social Security deductions). The GOP wants people to think Social Security and Medicare must be cut to balance the budget deficit, but that is an outrageous lie -- since they do not contribute to that budget deficit.

So where does the deficit come from. It comes from the second chart -- discretionary spending. This is the spending that Congress must budget every year (and is funded by income and other taxes -- everything but payroll taxes). t is too much discretionary spending that has ballooned our deficit and our national debt. Note that 54% of the discretionary budget goes to the military -- not for the benefit of our soldiers, but for the military-industrial complex (corporations) and to keep over 800 to 900 military bases around the world. Massive cuts could be made in both these areas without hurting our military readiness or our national defense.

But the Republicans don't want to cut in that area. They want to cut in the other 46% of government discretionary spending (an area that has already been cut to the bone). This is where the argument will come between the two parties. The president and the Democrats want to preserve the spending in that 46% of the budget -- because that is the spending that helps hurting Americans, and puts money into the economy (which helps all Americans). The Republicans want to cut more from that 46% (which will shrink the economy and hurt all Americans), so they can give more to the rich and the corporations.

NOTE -- You may notice a small percentage of the discretionary budget going to Social Security. That is not to pay for benefits. It is to pay back the money our congressional politicians have borrowed from  Social Security.

People Don't Seem To Understand How The Economy Works

Americans like a lot of sensible economic ideas. They support a raising of the minimum wage to at least $10.10 an hour. They oppose benefit cuts to Social Security (and most would like to see those benefits enhanced). They oppose abolishing Medicare or repealing Obamacare. They support a small increase in taxes for the rich, and want corporations to be made to pay their share of income taxes. They support a realistic job creation program, and oppose the exporting of good American jobs. And they believe the government should enact policies that would reduce the wealth/income inequality in the United States.

Those are all good things. But every now and then something comes along that makes me think that most Americans don't really understand how our economy (or any capitalist economy) works. And one of those things is the new Rasmussen Poll -- taken on January 27th and 28th of a random national sample of 800 likely voters, with a margin of error of 3.5 points.

In that survey (whose results are in the chart above), about 54% of all adults think an across-the-board cut for all government programs would be a good thing. They seem to have accepted the Republican argument that cutting the budget would be a good thing for the economy -- that "austerity" is the way to get a sluggish economy moving again.

There is one thing wrong with that argument. That's not the way our economy works (or the way any regulated capitalist economy works). Cutting government programs actually shrinks the economy by taking money out of it. Cutting government spending would actually hurt everyone in this country. It would hurt businesses because a huge number of people would have less money to spend in those businesses. It would hurt workers because when sales go down for business, wages are stagnated and those businesses will lay off more workers. And it would hurt consumers, because businesses would have to raise prices to cover the drop in sales.

The truth is that in a recession, or an economy still trying to recover from a recession, shrinking the economy by cutting government programs is the worst thing you can do. The economy needs to be expanded, even if that means more government spending. This would give the masses more money to spend, and that increased spending would create more demand for the goods/services of businesses, which would create more jobs to service that increased demand (and keep prices from rising since business sales are profits are up).

Some of you may be saying at this point -- wouldn't that increase the budget deficit and national debt? Only in the short term. The increase in jobs and profits would actually increase government revenues and, over the long term, would pay down that deficit and debt -- and a small increase in taxes on the rich (and making corporations pay their taxes) would help pay down the deficit and debt even faster. We don't need to make government cuts to decrease the deficit and debt.

Don't accept the Republican lie that budget cuts are needed. They aren't really interested in paying the deficit and debt down. They are the ones that created the current deficit (remember, Bill Clinton left office with a budget surplus -- which the Republicans instantly turned into a huge deficit with tax cuts for the rich and two unnecessary wars). Republicans just want those cuts so they can give the rich even more tax cuts -- and they don't really care what it does to the economy or struggling Americans.