Debunk The Argument: "Deficits As A Percentage of GDP...

[Yavin4]

is smaller now than it was during the cold war."

All conservatives are using this stat to justify a half of a trillion dollars in annual budget deficits, and I have to call "BULLSH1T" on this. So, here's my counterargument:

As a percentage of the GDP in today's terms, it may indeed be small, but the flaw is the mistake that this small percentage of the GDP will stay that way for years to come. It won't. Given the coming retirement of the baby boomers, that percentage will grow dramatically in years to come.

Additionally, in order to analyze "the percentage of GDP (PGDP)" argument properly, you have to measure PGDP in terms of its growth. IOW, in 2000, the deficit as a percentage of the GDP was 0%. Today, it's coming up to 4.5% of the GDP. That's a 400% increase in this percentage in just three years.

[GumboYaYa]

1. They point to prior deficits as a % of GDP.

I think that the definition of GDP has changed since the times they compare to. For example, we now allocate a value of production to stay at home parents since they are contributing services to the household. This was not counted as GDP in prior years.

The problem is that getting into these types of discussions causes most peoples' eyes to glaze over and they only remember the simple statistic cited.

The bottom line is there are lies, damned lies and then statistics. Or figures don't lie, but liars can figure. I have found that simple pithy responses like these often make the point better than a detailed discussion of GDP.

[zoidberg]

5. Do you have a link to back up the stay at home parents statement?

I know they impute rental value of owned homes in GDP. But I've never, ever heard of them trying to put a value on stay at home parents or other jobs done in the house. I'm skeptical until I see something from the BEA.

[denverbill]

2. How bout this?

During the Cold War, what percent of the budget went to paying interest on the national debt? It's something like 15% right now and getting worse fast thanks to Shrub.

However, since they liked the Cold War era so well, why don't we go back to the tax structure we had back then? When the top marginal rate was like 70%?

[Dookus]

4. that's what I always say

when repugs trumpet the claim "JFK cut taxes!"

OK... let's go back to the rates he picked.

[papau]

3. Where is the deficit spent - does the money flow to US workers for

consumptiom or investment

or to US Corporations for spending and investment overseas?

How hard it hurts the economy depend on effect on long term interest rates, and offset of fiscal stimulus - if any.

These tax cuts and this spending could not be more poorly designed to offset each other so as to stimulate the economy - This will depress the economy into a copy of Japan's zero interest rate but 10 year recession world - no job growth, and the rich get very rich - and the middle class disappears.

Clinton had the right path - and the GOP's right turn will take generations to recover from.

[0rganism]

6. Why are they looking at the GDP instead of gross tax receipts?

Budget defecits are financed with treasury notes and government bonds. If I were getting a loan, my creditor would generally be more interested in my ability to successfully make timely payments than net assets for purposes of foreclosure. They would also compare my total debt (analogous to the national debt) with my total assets, and consider payments on outstanding debt as part of my current outflow.

In other words, debt would be compared to assets (national debt to GDP), and income to outgo (budget defecit to gross receipts), for purposes of figuring economic health.

Currently, the $$500 Billion$$ defecit overspends the federal budget by about a third, IIRC. This is a comparable percentage to Reagan's obscene 1983 defecit of $$300 Billion$$. Because shrub has given away a boatload of tax money to the rich, look for this percentage to increase over the next decade.

When Reagan took office in 1981, the national debt was 33% of the GDP. In 1988, it was 52% of the GDP. During the reign of Bush Sr., the debt ballooned to 64% of the GDP, a figure Clinton's economic policy was only beginning to impact by 2000. I don't even want to look at what it is now.

[Yavin4]

7. They Focus on Deficit As A Percentage of GDP

because it's the only way to make a quantative argument that makes Bush's look somewhat okay. It's a huge joke.

You're 100% correct. They're comparing Apples to Oranges. Comparing annual shortfalls to overall asset value is also what Enron did to make their books look better.