BBC News, Wednesday, June 30, 1999: President Bill Clinton now predicts that it would take the government just 16 years to reduce the debt to zero
Tuesday, October 07, 2008
Somebody pointed this article out on another site. I always find articles from the end of the Clinton presidency and those from right at the beginning of the Iraq War ("That was easy! Statue down, Baghdad taken, all done!") to be the most surreal.
It is not so long ago, that economists and politicians on both sides of the Atlantic fretted about the US government's escalating budget deficit and the ballooning size of public debt.The article also gives the following situations however in which the situation could worsen in the future:
The days of gloom are over.
A booming economy has generated massive tax revenues, and President Bill Clinton now predicts that it would take the government just 16 years to reduce the public debt to zero.
Things that can go wrong
But let's return to the real world.
Mr Clinton's plans - and the official debt projections - work only if the economic situation does not change.
But what if ...
# today's fantastic growth rates collapse?
# the stockmarket falters?
# inflation rebounds and interest rates rise?
# unforeseen events force government to spend more?
# Congress or a new president opt for tax cuts instead of debt repayments?
2 comments:
There was never any chance that it was going to happen, and it showed the economic illiteracy of most of our "elite" that they ever saw it happening, or indeed saw it a thing to be wished for. Government debt = non government surplus (by definition). The process of "retiring" trillions of debt would have drained just that much in financial assets from the private economy. Even in 1999, below the surface there were all the signs of the strain. Private savings went sharply into negative territory (which was seen as something puzzling at the time by people who can't add).
Bush's tax cuts, which changed the the fiscal balance by something like $600B (restoring some of the private financial assets lost to the surplus) were the only thing that prevented the early 2000s recession from being much, much, deeper than it was. (The deficits were going to come, one way or another, but it's much better to do it through active policy changes rather than by a slow process of rising social spending and falling tax revenues in a recession until non-government savings desires are met) Of course, spending increases in infrastructure, R&D, etc. would have accomplished the same thing while adding more to the country's real wealth, but you take what you can get from republicans. (I always say that Dems and Repubs both have silly economic theories based on unsound foundations - the one saving grace of the Repubs is that they are much less responsible in implementing them...) Note that the only previous time prior to the late 90s that the federal govt. ran a surplus 3 years running were 1927, 1928, and 1929. (sound familiar?)
Our current troubles had many causes, but in addition to fixing the flawed architecture of the financial system (which I don't hold out too much hope of either party doing), what is need is some truly massive deficits to restore some financial balance to the beat up private sector and maintain aggregate demand. Instead, I see a repeat of the U.S. in the 30s or Japan in the 90s - anemic "pump priming" fiscal packages which are just enough to begin to revive demand, followed by recession when people decide that we have to "save our grandchildren" (as if our grandchildren were building cars, growing food, giving massages, etc. in the year 2050 and shipping them back to us in a time machine...) and attempting to balance the budget...
Sorry for the rant. I just found your blog in a random google search and saw the same old conventional wisdom staring me in the face...
There was never any chance that it was going to happen, and it showed the economic illiteracy of most of our "elite" that they ever saw it happening, or indeed saw it a thing to be wished for. Government debt = non government surplus (by definition). The process of "retiring" trillions of debt would have drained just that much in financial assets from the private economy. Even in 1999, below the surface there were all the signs of the strain. Private savings went sharply into negative territory (which was seen as something puzzling at the time by people who can't add).
Bush's tax cuts, which changed the the fiscal balance by something like $600B (restoring some of the private financial assets lost to the surplus) were the only thing that prevented the early 2000s recession from being much, much, deeper than it was. (The deficits were going to come, one way or another, but it's much better to do it through active policy changes rather than by a slow process of rising social spending and falling tax revenues in a recession until non-government savings desires are met) Of course, spending increases in infrastructure, R&D, etc. would have accomplished the same thing while adding more to the country's real wealth, but you take what you can get from republicans. (I always say that Dems and Repubs both have silly economic theories based on unsound foundations - the one saving grace of the Repubs is that they are much less responsible in implementing them...) Note that the only previous time prior to the late 90s that the federal govt. ran a surplus 3 years running were 1927, 1928, and 1929. (sound familiar?)
Our current troubles had many causes, but in addition to fixing the flawed architecture of the financial system (which I don't hold out too much hope of either party doing), what is need is some truly massive deficits to restore some financial balance to the beat up private sector and maintain aggregate demand. Instead, I see a repeat of the U.S. in the 30s or Japan in the 90s - anemic "pump priming" fiscal packages which are just enough to begin to revive demand, followed by recession when people decide that we have to "save our grandchildren" (as if our grandchildren were building cars, growing food, giving massages, etc. in the year 2050 and shipping them back to us in a time machine...) and attempting to balance the budget...
Sorry for the rant. I just found your blog in a random google search and saw the same old conventional wisdom staring me in the face...
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