How the hell are we going to balance the budget?

It's a simple question folks. It's my understanding that even if the Bush tax cuts were completely repealed, we'd still be a few hundred billion short of a balanced budget, and that's assuming Congress holds the line on spending, which doesn't seem likely. And even if some miracle happens and we get a balanced budget, that still leaves us a few trillion short of what it's going to take to keep funding social security benefits at their current level for the baby boomer generation. It's amazing what a difference a few years, a few tax cuts, a few wars and a recession can make. I still remember when the parties were arguing over who could pay off the national debt the fastest.

obviously. The more economic growth you have, the more revenue coming into Treasury, even with higher marginal rates. If the economy does pick up in the next couple years, and we win in 2004, we could conceivably balance the budget by 2008. All of the tax cuts would have to be repealed for this scenario to happen. Of course, the economic growth would have to be more than 3% a year, and we would have to grow the government less than 21% a year overall. In other words, we would be cutting essential government services, because 2% would probably be less than the rate of inflation. If we did that, I think it is conceivable we could balance it in 2008. This is also assuming that we do not implement the new prescription drug benefits or any of the candidates health care plans.

At $600 billion in debt per year, the yearly increase in debt service will exceed any realistic expectations in increased federal revenue.

I'm not sure where we are going to get the other $599,999,999,499.95.

by being hardcore in their support of Bush.

The puzzling thing is: They couldn't be happier.

To leave a big surplus for the next asshole Republican administration to come in and steal?

I've been saying for years that the Republicans are trying to systematically defund the federal government in order to undermine enforcement of environmental, consumer and labor laws, and erode public confidence in Medicare and Social Security to the point where the Republicans are able to scrap them.

So are you saying the Democrats should play their game and spend as much as possible now, while the money is still available?

All I know is we shouldn't leave it for them to raid. We know the Democrats have the right economic policy. Now if we could only pass enough laws to tie the money up in social programs for the people, like health care, day care and education, then maybe they couldn't get their hands on it entirely.

I've been saying for years that the Republicans are trying to systematically defund the federal government in order to undermine enforcement of environmental, consumer and labor laws, and erode public confidence in Medicare and Social Security to the point where the Republicans are able to scrap them.

The trick is to fix the problem before the strategy becomes a self-fulfilling prophesy.

My solution would be to handle it in pieces....like eating a whale, just one bite at a time.

Social Security and Medicare: eliminate the cap on wages subject to SS and increase medicare taxation.

Deficit reduction: undo tax cuts, unfortunately in total.

Economic growth: give tax incentives to small businesses for hiring new people; put a penalty or surcharge on any corporation "outsourcing" jobs out of the country of original charter.

More deficit reduction: force disicipline on spending, phase in new programs only as funds become available on a priority basis;

Infrastructure improvement: set aside a discreet amount per year for improvements, prioritize projects and take them as monies become available.

Health insurance: take a look at the whole system, find out where the hell all the monies go (prolly an even mix between Docs, Lawyers and Insurance companies) blow up the whole f-ing system if necessary because whether you live or die shouldn't depend on the size of your wallet!

uuummmm...lots of flame bait there, feel free.

n/t

We are fucked. Do you think this might have been part of Osama's plan? I do. But it would only work if the Monkey in a Man's Suit was in office.

Imagine what would happen if some of those thousands of Stinger missiles that Reagan/Bush sold to Osama and his Mujahadeen buddies downed 4 commercial airliners one day. That would be all she wrote. The airlines would tank, the market would follow, and that $500 billion defecit would skyrocket.

Or what about that huge hurricane ominously tracking this way?

We are on the edge. It would not take much to push us over.

Those right-wing Republicans may be insanely evil, but they're also pretty smart. They know that Medicare, Social Security and our environmental protection laws are far too popular to ever take on directly. So instead, they keep pushing for tax cuts. Pretty soon the government runs out of money. So the EPA and DOJ no longer have the money to go after polluters. And pretty soon young people stop believing that Social Security and Medicare will still be around when they retire. Public confidence in these programs continue to drop. Environmental laws are increasingly seen as ineffective. Eventually, it's no longer considered heresy to talk about privatizing Social Security and Medicare -- after all, the programs are so badly underfunded, it's not as if there's much left fighting for.

Absolutely. It is death of social progress by a thousand cuts. They know this, and it is working.

If you can't oppose it politically, attack it at the funding level. When the funds are gone, they can say, "oh, well".

Who knows, Bush* and Osama Bin Ladin have never been seen at the same time
and with all that beard and stuff who can tell?

This was not Osama bin Forgotten's plan, this was the bush crime family's plan. Although I think they bankrupted the country faster than they thought they would. I think they thought they had 8 years to do this.

I don't know, maybe they did intend to fuck us this fast.:evilfrown: I'm pretty bummed out about this. It just seems like they keep on winning no matter how much we know and see it coming.

I think we're pretty fucked.

I think the plan all along was to starve Medicare, Social Security, Education, Welfare, Healthcare,other Social programs. I just think they did it a lot faster than planned.

Even if we win in 2004, we are fucked.:evilfrown:

You know they are going to raid Social Security and Medicare until they become essentially useless. Yeah, work all those old folks until they are 70 or 75 or better yet until they drop dead. That should take care of the baby boomer problem.

starting from the millionaires who now enjoy all kinds of loopholes and pay practically nothing. Done.

close the f*ckin corporate loopholes and make the tax system WAY more progressive.

an extra 1 % of economic growth for a few years can add hundreds of billions of dollars to the budget and can overwhelm any spending congress can do.

In the 90's, the stock market went up over 20 % five years in a row. Each time someone sold a stock and made $ 50,000, they had to send $ 10,000 to the government as a capital gains tax. The government was getting way more money than it expected getting, and voila, the budget was in good shape. Not a lot of people have been sending in capital gains taxes the last three years. Since Jan 2000, the stock market's been mostly down, and people have been deducting capital losses instead of sending in capital gains.

at this point 1% of growth in GDP would "only" raise treasury revenue by about 20 billion. With a 500B deficit we would need to grow GDP(not the stock market) between 20-25% OVER inflation.

That would be of course if rich people running Coporations don't wise up and change thier stocks from "growth stocks" to ones that give a dividend making it possible for government revenues to go down even with growth imn GDP because guess what dividends aren't taxesd anymore!

what about all the other good things that happen with a fast-growing economy?

The stock market doubles in three years adding how much wealth to the net worth's of the people? A good chunk of that will be taxed each year as capital gains, and that will be a huge windfall to the treasury.

With fast growth comes new jobs, and that means each new worker earns a new paycheck to take income tax from and payroll taxes too. Again, lots of unexpected income comes into the treasury.

Then there's the other side. With a fast growing economy, the government will pay out less in unemployment, food stamps, free lunches, retraining, AFDC, even police. Again a windfall to the treasury.

A good economy brings with it a tidal wave of good economic news. It's way more important than any tinkering that congress can do with a billiob spent or saved here or there.

So, how do we get the eceonomy to grow faster than the 1% or so of the last two years. That's completely unacceptable.

Government revenues peaked in %of GDP in the late 90's as higher income taxes were phased in, that was about 20.2% If I reccall correctly. There have been tax cuts since then so it is going to be less than 20% without changes. the current GDP is about 10Trillion with government revenues about 2 Trillion. We have about a 500 Billion deficit. For the deficit to go away we have to maintain current spending levels untill revenues are 2.5 Trillion. Or untill the GDP is at 12.5 trillion, or 25% above its current level.

Clearly these numbers are very rough estimates. I'm just trying to point out that growing out of a deficit is not as easy as you seem to claim. i.e. 1% growth above inflation will not give the government "hundreds of billions" more revenue.

and I realize that it wasn't quick during the 90's either. I think it was five years of S+P 500 growing over 20 % a year before we reached surplus.

But it's the only way to do it.

The government can't raise taxes or cut spending $ 500 billion.

But if 5 % of the stock market could be taxed because it went up 40 % one year, then how much extra tax is that? I don't know how much worth is in the stock market today, but it is trillions of dollars isn't it? The current value of all stocks?

Well, it's not taxed untill it's sold. So, vast amounts of increases in the stock market do not necessarily turn into tax revenue. Also, there is a huge incentive now for stocks' nominal price to stay level and the profits will get dividends instead of the stock price raising. CApital gains tax revenue of course will nnot go away because there will still be capital gains taxes on land and bonds, but capital gains taxes on stocks will slow dramaticaly because stock holders would prefer the tax free way of reciving the profits of the company.

In the 90's we didn't grow out of the deficit, income taxes were raised and that brought us out of deficit spending after a few years.

and a $ 280 billion defecit became a $ 200 billion surplus.

I think there was more going on there than a tax increase.

The economy and stock market had far more impact than the tax increase. That just seems like arithmetic.

Don't you remember how every quarter the defecit and then surplus numbers would get revised to be even better than before? It seemed like money was just appearing out of no where? That wasn't because congress was rushing new tax increases through at night every few months. It was because the economy and the stock market kept bringing in more tax money than they projected one quarter after the next.

Also, most of us own mutual funds instead of individual stocks, and stock mutual funds pay a capital gains at the end of each year, even if you don't sell the fund.

I'll explain why that happens if anyone is wondering.

While I don't deny what you say about the effects of stock growth on tax revenues, the fact remains that much of the growth of the 1990's was based on a speculative tech bubble on the NASDAQ -- one that eventually burst. It was also fueled on the NYSE by misstatement of earnings by corporate America -- and we see how all of that turned out in the end. :grr:

I would recommend an increase in the highest tax brackets and clamping down on corporate taxes (ending offshore tax dodging and making certain that corporations actually pay taxes) coupled with a drastic increase in public infrastructure spending. While this will lead to short-term deficits probably even bigger than now, it will also create a huge number of jobs, and therefore stimulate demand by pumping money back into the economy through the people who are most likely to spend it. It's classic Keynesian economics in that respect.

And hey, since we're going to run deficits anyway, we may as well approach it from this angle. The worst outcome is that we can at least modernize our transportation networks, electrical grids and school infrastructure past a 1965 level. :shrug:

There's 2.3 trillion (with a t) dollars missing from the Pentagon budget (googled a DU link)

<snip>

"Rumsfeld himself has said that "according to some estimates, we cannot track $2.3 trillion in transactions."

This amount of $2.3 trillion amounts to $8,000 for every man, woman and child in America."

—snip—

"Instead of blaming Pentagon accountants, however, the American people should understand that privately held firms, which have federal contracts for so-called accounting and computer systems (which coincidentally never seem to work) are the real culprits. The liability for government fraud begins and ends with these private contractors. These "Beltway Bandits" with insider government connections are the most blatant unindicted white-collar criminals to date.

Public money is most likely siphoned out through companies like DynCorp, AMS, and Lockheed Martin, which control the bookkeeping for federal agencies, where fraud is rampant, unchecked and very lucrative for corporate and government insiders."

<snip>

Damn but that would pay for some real progress. Down the hole.

that missing money is GONE. That money is never going to be recovered if ever found. And we can't just cut the Pentagon budget and leave our service men and women over there holding nothing but their dicks without the support they need.

I agree we've got to cut the fuckers like Halliburton, DynCorp, AMS, and Lockheed Martin off at the pass. Gotta get rid of CHENEY!!

that way we wont have to spend any more money on our precious assassins

IMHO, slashing the military budget is the most important but the toughest challenge we would ever face -- not only because of the massive lobbying, the ignorance, and the fear, but also because the Pentagon and the CIA are subject to only weak control by the President and congress. In one of Gore Vidal's books (I think it was "Perpetual War") he wrote of JFK's comment to him that if he wanted to do anything about cleaning up the Pentagon he would have to spend his entire term parked "over there" and that he would be a one-term president.

Within a week or two of 9-11 I found myself thinking 'well, maybe this will finally drive the U.S. public to become more knowledgeable about what our CIA has been up to around the world' -- not knowing then about the direct connections about having trained the "Afghan Arabs" or BinLaden but having the sense that it surely was related to our behind-the-scenes ugly foreign policy in some manner. Boy, was I wrong. It seems to be the last place they are willing to look.

As much as I want it to.

We have already seen that many contractors DO NOT complete tasks any more efficiently than the government and DON'T DO it for less money because the government doesn't have some fat cat trashing the company, laying off the staff and telling the consumer tough shit..that's what you get because we don't have any competition. (or at least that's how the RW framed it when gov't DID operate many now privatized services.)

And it happened. So it can happen again. This time we have to do that goofy lock-box thingy.

the money was taken from the government and put into safe keeping in bank cd's or insurance company fixed annuity contracts.

If you're going to put it in a lock-box, and then loan it out to the government as a federal bond, then it's a sham because there isn't any money there. If the money's in the bank it is there.

Sadly, I haven't heard anyone suggest taking the money from the government, and therefore it's a joke.

Who is Paupau?

He is an actuary and posts here. He states there were separate funds and that much of the manner in which the funds are described commonly are misleading but I don't have the knowledge to paraphrase him correctly.

and then lend it to the government and then put a bond instead in the box, then...

there's nothing in the box because the government doesn't have the money to repay the bond. It was spent on missiles and trips to Crawford and airport scanners.

So now it's 20 years later and we need the $ 100 billion dollars to pay retired baby boomers. Gee we have all these bonds - but the government doesn't have the money to pay them back. It was spent long ago. Too bad, so sad.

Like I said if the money was in a cd, they could redeem the cd when it's needed, but the government needs that lockbox money to spend right now. They can't afford to not spend it. It's a scam.

The Money being taken from the payroll tax to pay for current expenses is indeed gone. But the SS Trust fund is given as a substitute US gov Bonds that earned about 6% (it changes for each borrowing) until they are paid off by means of the Federal Government raising funds – most likely via a FIT tax increase – so as to redeem those bonds.

Indeed the SS system is solid until 2043 ONLY IF those SS Trust fund bonds have real value and we intend to raise FIT in 2018 and later as the stolen money is repaid to the Trust fund and the Trust fund uses the cash to pay benefits.

Indeed this is the crisis that Bush faces under Social Security – the need to pay back those trust funds – which means a need to raise FIT rates beginning in 2018. Indeed this is the ONLY crisis that faces Social Security.

Now the Lock Box was a term coined to explain NOT USING SS PAYROLL TAXES FOR GENERAL EXPENSE! Since the SS Trust fund does not hold cash, the fund in effect buys National Debt bonds from the private hands that now hold it. Since the National Debt consists of the bonds in the Trust fund plus the bonds in private hands, the cash in effect reduces the National Debt – a situation Clinton achieved for the period 1/1/2000 to 12/31/200. Keeping the excess payroll taxes from being used on general expenses also can be accomplished if the Trust funds uses the money to buy non-government bond assets. The effect is the same.

But buying non-gov assets may be safer than expecting the GOP to honor the bonds by raising FIT tax rates to raise the money to redeem those gov bonds owned by the Trust. Indeed the budget would not then have the subsidy of the SS excess payroll tax – and all the world could see how in the red we are. By buying gov bonds, SS allows the financial press to ignore the fact of a future FIT tax increase being needed.

The idea that non-government assets in the SS Trust fund that can be easily converted to cash is solid, while excess payroll taxes into the promise of a FIT tax increase in the future – as represented by a government bond – made be a pretend, is a real problem only if you assume the GOP are all a bunch of thieves and that the SS Trust fund bonds have no value as they have no claim on the taxing power of the government.

I do not expect the GOP to admit that, and if the press has any ethics – another if – the GOP will not be allowed to pretend there is a need to “fix” Social Security without also making the confession about their theft of the SS payroll tax – the working man’s retirement funds - so as to fund a tax cut for the rich.

more of a reminder of when the money is due to be needed, and at that time since the government won't have the money it has been stealing from the empty lockbox, it should raise taxes to gather the money needed?

Well it could raise taxes to get the money needed whether there's a lockbox or not. When the money is needed, we'll have to find some way to come up with it.

When that bill comes due, the government will have to find some way to pay it, if it's not so huge it's just impossible to pay.

I suppose the government could massively raise taxes, but that will depend on who's in charge of the government at the time and the economic conditions more than what any empty lockbox says.

I still say separate the money in bank CD's and it will actually be there when it's expected.

As to what kind of interest the money is getting while it's loaned out to the government, I'd say who cares, because whether the money owed, or half of it, or all of it plus interest, or all of it with reduced interest, will ever be returned to the trust fund will depend on all kinds of political decisions made by congress at the time. They will do what they want to do, not what the empty lockbox tells them to do.

You can loan a friend a million dollars and charge him any interest rate you want. You're still only going to get back what he can afford to pay you, and I'm more than suspicious that when the time comes, there will be all those billions of dollars just appear in the trust fund.

... of things to do (some of which probably already mentioned in one form or another):

Absolute top of the list: bring the minimum wage to living wage levels.
That will start moving money faster than one can imagine.

Next, make the idiots in Congress understand that they have two choices--real tax reform which encourages a middle class and discourages the accumulation of wealth from generation to generation, or they're looking at violent revolution twenty years down the road. That's not a prediction--it's just history.

Next, get those same idiots to start taxing corporations again. Wipe the tens of thousands of loopholes out of the tax code, or reinstitute a reasonable alternative minimum tax on corporations, say, 30%. This will reinvigorate the budgets of the states, as well.

Reduce military spending by 25%. Everyone thinks the more money we spend on defense, the safer we are. That's BS. The more money we throw at the Defense Dept., the more they waste, the more they lose track of. Force Defense to become a truly defensive force, rather than doing R&D for WWVI and working its manpower into multiple expeditionary forces for empire-building.

Stop putting education money into national test-taking and start putting money into programs that work--Head Start, for one. Start funding science programs again, start funding trade schools again for people who can't or won't go to college.

Start putting money into the development of new local businesses. Corporations have been playing the jobs game (demanding tax breaks and give-backs from states and local governments in exchange for a few ultimately temporary jobs) that we might as well call it for what it is--extortion.

Start with a sensible energy program that sets real, achievable goals for renewables, and then fund that new energy program with an emphasis on new and small businesses with potential for growth in that field.

Stop using the SBIR system as a means to fund corporate giants, and limit the size of the businesses which can participate in such programs.

Stop giving tax incentives for corporate giants to move jobs offshore.

If a business wants the tax advantage of moving their mailbox offshore, give them foreign corporation status, period. And then don't let them bid on government contracts.

I can think of more, but that's enough to digest right now.

Cheers.

is massive transferring of information jobs to the Philippines (my company) and India. The internet now allows information to be handled around the world as easily as in the next city. Therefore compnaies are transferring hundreds of thousands of jobs to those countries where the same job can be done for less than half the price.

I don't know if this is the time to raise the minimum wage when we already have a massive outflow of jobs leaving our country to countries with cheaper labor. Seems like making our labor more expensive just speeds up the flow of jobs out of the country.

I'd sure like to hear reasonable ways to stem this tide.

Mostly, the answer is to get rid of Bush, but I don't think that will stop companies sending American jobs to Manila.

I am a Keysianist.

more important to get the economy moving faster right now.

They are not one and the same. The 1990's stock bubble (yes, it was a bubble based on hysteria rather than reality, judging by the NASDAQ crash and corporate misstatements of earnings) did help fuel some economic growth, but much of that has fallen apart since. While it is undeniable that the gains of this bubble had begun to trickle down to a large majority of the population, it was also unsustainable (20% S&P growth per year for 5 years is definitely NOT). The Bush administration has accelerated the downfall, but it was beginning anyway.

When you talk about Keynesian economics, you are talking about government pumping massive amounts of capital into the economy and running up large short-term deficits, in order to stimulate economic growth. A great example of doing this would be a massive infrastructure improvement project -- modernizing the electrical grid, modernizing the highway system, modernizing public transit, etc. -- that would create jobs, therefore pumping money back into the economy and stimulating demand.

THAT is Keynesian economics. It has little to do with the stock market, but instead is about recognizing the fact that private industry reacts too slowly to stem off economic downturn, so government must vigorously step in and pump the economy with massive amounts of capital. It's the classic "prime the pump" strategy, as opposed to "trickle down" -- which is what you are actually advocating in calling for stock market gains to pull us out of recession.

a booming stock market brings with it many billions of immediate unexpected dollars to the federal treasury. It's one of the easiest ways for the government to raise money.

Have the stock market double and collect 20 % tax on capital gains distributions.

That booming stock market, even though it was a bubble, was a huge advantage to the Clinton administration as they were able to revise their budget projections upward every quarter as more money flowed in than expected. I don't know whether they knew it was a bubble or not, but there were plenty of warnings.

It's what did in the Spanish Empire of the 16th century.

It did in the Dutch trade empire of the 17th century.

It did in the British Empire.

And now it's doing us in. Don't believe me? Read Kevin Phillips' Wealth and Democracy.

The kind of stock market growth experienced in the 1990's is wholly unsustainable. To base your economy on that is just plain foolish, it's like playing with fire after you've poured gasoline over your head!

And the Clinton Administration knew what was going on, but they embraced the bubble anyway -- just as every other bubble has been embraced. Of course, it's not them and their friends who get hurt most when the bubble finally goes POP!

The question is how does one grow the economy in a overcapacity world that, unlike world of JFK's where the capacity was not being used and a properly structured tax cut gave much more stimulus than was lost by the effect of long term interest rates, we actually have overproduction that needs a demand stimulus.

Currently we destroy small countries via increased production incentives to our farming sector - if we limited those incentives to small farms we would still have the individuals who break up their family farm to max out the subsidy - but the Farm Corporations would not do this and indeed we help small countries as produce prices rise and with Corporate monopoly Farm middlemen losing pricing power their reduced profits offset - leaving retail prices where they are now. Of Course the Big Farm Corporations are hard at work at the GOP and at the world trade conf in Cancun telling the starving small countries the fact that grow food more cheaply than the US does not mean we want to cut back on US production or that we want to stop flooding the world markets with our tax dollar subsidized low priced goods - hell - these folks are red state folks that live on this welfare while voting GOP!!!

The Clinton econ discovery was to find out just how powerful a small change in long-term interest rates really is. Now long term interest rates are 95% determined by how well the economy is currently - mainly because the liquidity and ease of getting out of bonds is so great folks feel they have time to adjust to economic change. But rates ate built up by the expectation for next year, plus the expectation for the year after that, etc so that a 10-year bond is the sum of 10 annual rate expectations. And those rate expectation that are in the latter years look to the risks that rates will be much higher - and those risks are structural inflation developing or the supply/demand balance for bonds - which in the end determines the price and that means the rate - changing due to some demographic reason or some Government out of control reason. It is the latter that is the problem now and which was the problem under Reagan/Bush (despite a $1.7 trillion fiscal stimulus under Reagan via tax cuts he achieved only a 3.33% 8 year average growth rate, compared to Carter's 3.25%, and the much higher rate achieved by Clinton. Folks expect very high rates in the future if they see Gov deficits projected "forever" - meaning there will be a larger supply of gov bonds and rates must be raised to sell them (the old supply demand thing determining price). This is a bit curious in that gov borrowing is small compared to corporate borrowing, but it is a fact.

And it is this expectation that moves 10 year and longer rates to the "high" end of the range that the current economic situation is justifying (indeed Japan's near zero interest rates - and for a few nights negative interest rates!!! - are at the high end of the "range" that is given for an economy going nowhere for 10 years – as with Japan).

So getting a PLAN – tax increases – that imply control of the situation – moves the long term rates down (relatively) and since these are the rates that are “hurdle” one most get past before getting Board room approval for a corporate investment – meaning the investment must return more than the return obtained by a “safe” purchase of bonds – the lower hurdle means more corporate investment gets approved that would otherwise be approved – note that one invests based on sales expectations and risk, and this lowers a “risk” so with the same sales expectations more is invested.

And investment is what drives growth. So yes – a tax increase and change of administration will turn the situation around on a dime (albeit a 5 year “dime”).

As to the trillions for Social Security – SS is solid at current benefit levels as required by current law until 2043 – and then solid if the “retirement age” is raised from Reagan’s 67 (you thought it was 65???) to age 70 for those retiring after 2042 (this is in effect a 30% reduction from the current law level of benefits for 2043 for those that choose to get benefits before the “retirement age” – all us folks drawing beginning at 62!).

Now an alternative is to make the SS system more progressive meaning the rich pay a tax on all income, with their getting a higher benefit from the additional tax but at the 15% factor level – meaning the system gets much more than the annuity costs and all is well for the community of retires – and the rich pay more. Dean was in the increase the retirement age crowd in 1995 but is in the increase the wage base crowd today.

As the O’Neill “trillions” in debt, that refers to an approach where we break with the current workers paying for the retired workers concept of SS and actually try to develop a huge fund that is not invested in gov securities – indeed this was the 1935 concept – but the GOP fought and yelled about Socialism by the backdoor – meaning the Trust fund would own a large chunk of the US economy – and we went into the current Gov Funds “investment” - sized at a few months benefits - Trust Fund with a Pay as you go system – and trust between generations.

You are correct that a payroll tax increase does nothing to increase the security of SS benefits – as we have seen, because the money is not needed right away, the GOP steal it and then scream when the FIT needs to be raised so the Treasury can pay back the stolen money (now called Trust fund government bonds) via redemption of those bonds to get cash to give to SS to pay benefits. Indeed this is the Bush crisis – beginning around 2018 FIT must be raised so as to start paying back SS the moneys stolen today. If it is paid back – meaning a gov bond owned by the SS Trust does indeed have real value, then the SS system is solid to 2043.

Raise taxes, cut out the loopholes and corporate giveaways.

A bit of a deficit during a recession is not a problem. This is different. THe current policy is a policy of looting the treasury for decades to come.

Raise the minimum wage. Drop the payroll tax on the first $10,000 of income. Extend the payroll tax to higher incomes. Reinstate the inheritance tax, surtax accumulated wealth.

Take the money from the top and put it back in at the bottom. It all will work it's way back to the top sooner or later, but alot of economic activity has to happen to get it there.

"The trickle up theory" works because it uses the natural tendency of capitalism to concentrate wealth to advantage.

Raising the minimum wage was the most successful economic policy of the Clinton Administration. Give people at the bottom more money and they will certainly spend it

The whole notion of supply side stimulus ignores something important. People do not start businesses and "create jobs" because that have more wealth laying around, rather they do it because they see a demand for something and think they can make even more money by supplying it. More importantly, the rich very rarely start businesses with their own funds anyway, they incorporate and borrow funds to reduce personal risk if the idea doesn't pan out. When they go to a bank to borrow the cash, they are unconcerned about who's
savings they are borrowing.

The only time supply side stimulus could potentially have worked was the economic conditions at the beginning of Reagan's first term. Specifically, an economy with high inflation and shortages of goods and services.

Current conditions are exactly opposite, massive demand side stimulus is the only cure.

You leave economic growth out of your analysis. The only hope (short of gutting the federal budget) is to stimulate economic growth. The question then becomes do we structure our tax policy to favor trickle-down economics, or do we recognize the fact that in an economy where industrial capacity is underutilized it makes more sense to stimulate the consumer-side and create consumer demand?

The question then becomes do we structure our tax policy to favor trickle-down economics, or do we recognize the fact that in an economy where industrial capacity is underutilized it makes more sense to stimulate the supply side and create consumer demand?

Ummm... supply side is the same as trickle-down. Essentially, it means that you cut taxes on the uppermost brackets, assuming that they will invest this extra money in production, thus creating jobs by increasing supply.

I think what you're talking about is DEMAND SIDE -- "priming the pump" by putting money into the economy through the wallets of the working and middle class, thereby stimulating demand and increasing economic growth. Of course, this leads to large short-term deficits (because the money used to "prime the pump" comes from government coffers), but the theory is that it will more than be made up for from the tax revenues created by the ensuing economic growth.

See John Maynard Keynes's "General Theory" for a (much) more detailed description.

Yes. You are right. Not so much a typo as a brain fart. I've corrected it and my meaning should be clear now. Thanks for pointing it out and adding further clarification (and for taking the high road).

People will regain confidence and start contributing to society again. Money will again pour into the government as long as we know it will be spent on the USA instead of bullets and bombs and give-away to rich.

The middle and working classes in this country have been taking a hit for the past 30 years. While the speculative stock bubble of the 1990's helped at least stabilize wages, and Bush's ineptitude has accelerated losses; there is still a LOT of work that needs to be done to our economy to get it back on the right track.

I wish it were as simple as voting Bush out, but I doubt that the Democratic nominee will have either the political capital or the courage to go after the powers-that-be to REALLY get our economy back on the right track.