Here are some interesting facts about deficits and economic growth in the last 100 years. As Democrats and Republicans point fingers to pin responsibility for the deficit it is important to understand both parties are culpable. Republican influence has sometimes resulted in budget surpluses, but also contributed to the biggest yearly deficits. Democrats don't blow up the deficit in the middle of healthy economies like Republicans sometimes do with tax cuts, but they have run big deficits in times of crisis, and in good times they historically have still, like water building a stalagmite, slowly and steadily added to the national debt.
Top 8 biggest annual deficits - (using deficits over 3% of GDP as the minimum qualifier):
#1 - 1942 to 1945 - WW II saw deficits that averaged about 20% of GDP. Democrats controlled Congress and the Presidency throughout the war (as they had since 1933). The nation went into war with a deficit from the Great Depression (see #6 below).
#2 - 1918 - 1919 - WW I saw deficits shoot up to 12% in 1918, and then 17% in 1919. This was a period with a Republican House and a Democratic Senate.
#3 - 2009 - 2010 - Deficits of about 9% of GDP - This was a result of a major loss in revenues as a result of the financial collapse, the various government credits and bail outs begun by President Bush and continued by President Obama to treat our ailing economy, and the ongoing wars in Iraq and Afghanistan
#4 - 1982 to 1988 - deficits ranged from 3.04 to 5.88 percent of GDP, averaged around 4.5%. This was during the Reagan years - Republicans controlled the Presidency and the Senate, Democrats controlled the House. There was no war at this time (other than the cold war), the economy was healthy and growing, the deficits were driven by tax cuts that reduced revenue coupled with increased spending, primarily in defense.
#5 - 1990 to 1993 - through and after the Gulf War we averaged deficits of about 4.25%. Democrats controlled Congress, Mr Bush Sr was in the White House, Mr Clinton took over in 1993. We experienced a recession during this period but the economy continued to grow.
#6 - 1933 to 1936 - After 12 years of Republican control of Congress and the Presidency Democrats took over Congress and the Presidency three years into the Great Depression. Trying to pull the country out of the Depression we averaged deficits of about 4% for this period. Before the Democrats took over the Republicans deficit in 1932 was 2.78%.
#7 - 1975-76 - at the end of the Vietnam war we averaged deficits of about 3.75% for these two years. Democrats controlled the House and Senate, President Ford was in the White House. The economy was growing but inflation was rampant.
#8 - 2003 and 2004 - Although the economy was growing we averaged deficits of about 3.4% during these years. Republicans controlled Congress and the Presidency, the deficits were a result of tax cuts coupled with wars in Iraq and Afghanistan
Other notable periods in our deficit history:
The longest period of continuous balanced budgets was from 1920 to 1930. Republicans took control of both houses of Congress and the presidency in 1921 and maintained that control until 1933. In 1920 Wilson was President but Republicans controlled both the House and the Senate. Economic growth during this period was spotty however, as a percent of GDP it did not reach 1920 levels until 1925 then collapsed from 1930 through1940. It did not reach 1929 levels again until 1941.
Debt exploded during the 1930's through WW II. After the war, from 1947 through 1960 we alternated between small surpluses and small deficits.
For the 26 years between 1955 and 1981 Democrats controlled Congress. 22 out of those 26 years we ran deficits. The 4 non-deficit years, 1955, 1956, 1960 and 1969 were years we had Republican Presidents These years spawned the immortal Republican phrase "tax and spend liberal". On the upside the economy grew every year during this period.
We continued to run budget deficits from 1981 through 1997. The amount of the deficit jumped up to around 5% of GDP from 1983 to 1986. 1981 to 1987 was the period when President Reagan's tax cuts were enacted. Republicans controlled the Senate, Democrats controlled the House. GDP continued to rise each year. After 1987 Democrats controlled Congress until 1995, each year after Democrats recaptured Congress the budget deficit shrank further from the highs of the mid-80's until they jumped back up in response to the Gulf War. The economy grew continuously during this period.
In 1995 Republicans took over Congress and maintained that control until 2007. The budget deficit shrunk further in 1995 and 1996 then we ran surpluses from 1997 to 2001. In 2001 President Bush took office and Republicans continued to control Congress. In 2002 we began running deficits again and we have since run deficits continuously. The economy was consistently strong during this entire period until the housing bubble burst in 2007 leading to the financial collapse in 2008. 2009 was the first year since 1949 GDP shrank in comparison to the prior year.
Thursday, July 28, 2011
Wednesday, July 27, 2011
Thoughts on Pension Plans
A couple generations ago Economists who didn't know what they didn't know sold both business and government on the idea they could give employees pension plans that would guarantee the employee's a certain return in retirement. It was called a defined benefit plan. Congress build in preferences for defined benefit plan into the tax code and it became the norm for Government and large businesses.
Recent history has demonstrated that defined benefit pension plans are prone to disaster. They require an element of predicting the future based on scores of assumptions, and unless rigorously controlled the assumptions often tend to err on the side of overestimating the future. They also require a level of discipline those who oversee plans often lack. In the private sector companies don't contribute when they stock market is bullish, on the assumption increasing stock values will cover the cost of the program, then when the market crashes the program is hugely underfunded, or when the business founders the employee's pension get wiped out in bankruptcy. Governments make promises to employee's that become impossible to keep when tax revenues fall.
In the private sector we now have a hundreds of thousands of older folks who are trying to figure out how to make due on far less than they expected in retirement after their companies ran through bankruptcy to reduce their pension obligations.
In the public sector we have the services provided by government disappearing under a crush of overly optomistic pension obligations.
Defined benefit plans are inherently unreliable over the long term. The tax code should require any defined benefit plan to be based on conservative projections and fully funded each year without regard to investment performance.
Recent history has demonstrated that defined benefit pension plans are prone to disaster. They require an element of predicting the future based on scores of assumptions, and unless rigorously controlled the assumptions often tend to err on the side of overestimating the future. They also require a level of discipline those who oversee plans often lack. In the private sector companies don't contribute when they stock market is bullish, on the assumption increasing stock values will cover the cost of the program, then when the market crashes the program is hugely underfunded, or when the business founders the employee's pension get wiped out in bankruptcy. Governments make promises to employee's that become impossible to keep when tax revenues fall.
In the private sector we now have a hundreds of thousands of older folks who are trying to figure out how to make due on far less than they expected in retirement after their companies ran through bankruptcy to reduce their pension obligations.
In the public sector we have the services provided by government disappearing under a crush of overly optomistic pension obligations.
Defined benefit plans are inherently unreliable over the long term. The tax code should require any defined benefit plan to be based on conservative projections and fully funded each year without regard to investment performance.
Monday, July 25, 2011
Thoughts on the learning curve of Conservatives
I was raised a Conservative Republican back when the people that are now Tea Party folks were in the John Birch society. I was crushed when Goldwater was defeated in 1964. I voted for Richard Nixon and for Ronald Reagan for President. I learned the ideology as a child and that was all I needed, I was not going to waste my time thinking about wrong-headed non-Conservative notions. I felt my opinions were right, and I trusted those emotions. I would look around for facts and logic to justify my emotion based beliefs, but when facts and emotions that contradicted my beliefs were presented I simply dismissed them.
Huge emotional upheavals in my life, coupled with moving into a profession where being right is about facts, not belief, were necessary to get me to open up my mind and start questioning the truth of my emotional beliefs.
I don't mean to imply conservative are the only folks who unconsciously rely on their emotional beliefs and block out facts and reality, we all do it to some extent. We are hardwired to make our emotions the chairman of the brain board. But I think what makes one a conservative is the willingness to trust ones emotions in the day to day interactions of life. It works well for individuals - the emotions are pretty good at figuring out what we need as individuals. Conservatives often do pretty well for themselves in life. Where it doesn't work so well is in dealing with a world of people with different backgrounds and outlooks. Basically conservatives are very judgmental and inclined to think any thinking or behavior they aren't emotionally comfortable with is bad and should be prohibited. The evolution of modern society has been a constant battle of conservatives fighting to stifle new ideas or ways of living.
The drug war was a Conservative war. Richard Nixon first called it the drug war in 1971, although in fact it had been going on since politicians first started using drug use by immigrants and minorities as a tool to fire up peoples emotions and get their vote back in the 1920's. In about 1986 while investigating some old California laws punishing drug use I ran across 1929 newspaper articles, and transcripts of legislative proceedings from 1928 and 1929 where the arguments of police chiefs and politicians were virtually identical in tone and content to the quotes I was hearing and reading in the media and political speeches in 1986. The drug war had been going on 50 years at that point.
Beginning in the 1970's, in response to the ideas of individual freedom that grew out of the 1960's, conservatives pounded on any moderate Republican or Democrat who questioned the wisdom of the drug war. The buzz phrase was people were "soft on drugs". Conservatives were so good at appealing to peoples fears and instincts that by the early 1990's few politicians of either party who wanted to get elected dared be anything but one more drug warrior.
Now, after trillions of dollars spent on enforcement and incarceration over nearly a century, some conservatives are coming to the conclusion maybe it isn't really working. Debra Saunders, SF Chronicle columnist, is representative of this turnabout by many Conservatives. In her column on June 12, 2011 she argued that the drug war encouraged criminality, deprived government of needed revenue, limited individual rights and was the essence of hypocrisy given that huge percentages of the leaders in the country used drugs as young people.
She argues "Prohibition didn't work for alcohol and it doesn't work for drugs". Prohibition ended in 1934 - why did it take conservatives 76 years to figure that one out?
She next implies Democrats are what is keeping the drug war going. She quotes some former Narcotics officer saying "(Obama)...needs to think about where he would be if he had been caught with drugs as a young black man". I find this breathtakingly condescending. Do they really believe Obama hasn't been painfully aware of that fact his whole life?
In the last decade immigration has been one of the clubs conservative politicians use to beat up political opponents. Now that conservatives have basically taken over many of the smaller states, they are passing harsh immigration laws. Georgia passed a really tough immigration law that takes effect on July 1 that is basically causing many of the farmworkers in the State to leave. As a result farmers in Georgia had only about 1/2 to 2/3 the labor available they normally need during the May/June harvest period. The farmers estimate they lost about $300 million because they did not have enough labor. The Governor of Georgia who signed the bill into law suggested that Parolee's would take those newly available jobs (Right - parolees are going to voluntarily do hard physical labor all day in the hot sun). Here is my prediction. There is little that is more important to conservatives than letting people make money, so Georgia's law will be amended to become relatively toothless and then Georgia's conservatives will be keeping mum about immigration, or find a way to say Democrats caused the states economic problems. I just have to wonder why they couldn't take a couple minutes before they passed the law to question the wisdom of their emotional beliefs, to think and do some research about the consequences of their actions. In the last decade every time the topic of immigration came up farmers or other people who actually know what immigrants do would point out migratory labor does the dirty work no one else is hungry enough to do. But conservatives don't seem capable of hearing voices that contradict their ideology.
In 1863 Republican President Abraham Lincoln freed the slaves. Yet in my lifetime Republicans are consistently the last to get on board with civil rights issues. The fought the 1963 Civil Rights Act tooth and nail. They railed against equal rights for women. The last decade they have been firing people up about saving marriage by not letting gays get married, but never stopping to think exactly how a gay couples marriage negatively impacts anyone else. For the longer term that battle is probably over - in the Prop 8 case in California the Conservatives had to actually put on evidence showing gay marriage harmed society in some way - and suddenly discovered they had none. Strongly held emotional belief doesn't cut it as evidence in Federal Court. The proponents of Prop 8 still think they may get the extremely conservative current Supreme Court to reverse the trial courts decision. But I don't think even this Supreme Court will be able to find a way to protect this particular Conservative ideology. They may be Conservative but they are lawyers who have devoted their entire life to the distinction between evidence and belief.
In another couple decades Conservatives will be standing up on the floor of Congress making self righteous speeches in support the right of gays to be treated like everyone else. Much as they now support racial equality, or womens rights. I just wish they could pause from time to time to really critically exam their ideology to see if it makes sense before they start manning the political barriers for decades long fights.
(Sources: SF Chronicle Insight Section for Debra Saunders quotes, June 12, 2011, Economist, June 18, 2011, page 37 for discussion about the Georgia immigration law)
Huge emotional upheavals in my life, coupled with moving into a profession where being right is about facts, not belief, were necessary to get me to open up my mind and start questioning the truth of my emotional beliefs.
I don't mean to imply conservative are the only folks who unconsciously rely on their emotional beliefs and block out facts and reality, we all do it to some extent. We are hardwired to make our emotions the chairman of the brain board. But I think what makes one a conservative is the willingness to trust ones emotions in the day to day interactions of life. It works well for individuals - the emotions are pretty good at figuring out what we need as individuals. Conservatives often do pretty well for themselves in life. Where it doesn't work so well is in dealing with a world of people with different backgrounds and outlooks. Basically conservatives are very judgmental and inclined to think any thinking or behavior they aren't emotionally comfortable with is bad and should be prohibited. The evolution of modern society has been a constant battle of conservatives fighting to stifle new ideas or ways of living.
The drug war was a Conservative war. Richard Nixon first called it the drug war in 1971, although in fact it had been going on since politicians first started using drug use by immigrants and minorities as a tool to fire up peoples emotions and get their vote back in the 1920's. In about 1986 while investigating some old California laws punishing drug use I ran across 1929 newspaper articles, and transcripts of legislative proceedings from 1928 and 1929 where the arguments of police chiefs and politicians were virtually identical in tone and content to the quotes I was hearing and reading in the media and political speeches in 1986. The drug war had been going on 50 years at that point.
Beginning in the 1970's, in response to the ideas of individual freedom that grew out of the 1960's, conservatives pounded on any moderate Republican or Democrat who questioned the wisdom of the drug war. The buzz phrase was people were "soft on drugs". Conservatives were so good at appealing to peoples fears and instincts that by the early 1990's few politicians of either party who wanted to get elected dared be anything but one more drug warrior.
Now, after trillions of dollars spent on enforcement and incarceration over nearly a century, some conservatives are coming to the conclusion maybe it isn't really working. Debra Saunders, SF Chronicle columnist, is representative of this turnabout by many Conservatives. In her column on June 12, 2011 she argued that the drug war encouraged criminality, deprived government of needed revenue, limited individual rights and was the essence of hypocrisy given that huge percentages of the leaders in the country used drugs as young people.
She argues "Prohibition didn't work for alcohol and it doesn't work for drugs". Prohibition ended in 1934 - why did it take conservatives 76 years to figure that one out?
She next implies Democrats are what is keeping the drug war going. She quotes some former Narcotics officer saying "(Obama)...needs to think about where he would be if he had been caught with drugs as a young black man". I find this breathtakingly condescending. Do they really believe Obama hasn't been painfully aware of that fact his whole life?
In the last decade immigration has been one of the clubs conservative politicians use to beat up political opponents. Now that conservatives have basically taken over many of the smaller states, they are passing harsh immigration laws. Georgia passed a really tough immigration law that takes effect on July 1 that is basically causing many of the farmworkers in the State to leave. As a result farmers in Georgia had only about 1/2 to 2/3 the labor available they normally need during the May/June harvest period. The farmers estimate they lost about $300 million because they did not have enough labor. The Governor of Georgia who signed the bill into law suggested that Parolee's would take those newly available jobs (Right - parolees are going to voluntarily do hard physical labor all day in the hot sun). Here is my prediction. There is little that is more important to conservatives than letting people make money, so Georgia's law will be amended to become relatively toothless and then Georgia's conservatives will be keeping mum about immigration, or find a way to say Democrats caused the states economic problems. I just have to wonder why they couldn't take a couple minutes before they passed the law to question the wisdom of their emotional beliefs, to think and do some research about the consequences of their actions. In the last decade every time the topic of immigration came up farmers or other people who actually know what immigrants do would point out migratory labor does the dirty work no one else is hungry enough to do. But conservatives don't seem capable of hearing voices that contradict their ideology.
In 1863 Republican President Abraham Lincoln freed the slaves. Yet in my lifetime Republicans are consistently the last to get on board with civil rights issues. The fought the 1963 Civil Rights Act tooth and nail. They railed against equal rights for women. The last decade they have been firing people up about saving marriage by not letting gays get married, but never stopping to think exactly how a gay couples marriage negatively impacts anyone else. For the longer term that battle is probably over - in the Prop 8 case in California the Conservatives had to actually put on evidence showing gay marriage harmed society in some way - and suddenly discovered they had none. Strongly held emotional belief doesn't cut it as evidence in Federal Court. The proponents of Prop 8 still think they may get the extremely conservative current Supreme Court to reverse the trial courts decision. But I don't think even this Supreme Court will be able to find a way to protect this particular Conservative ideology. They may be Conservative but they are lawyers who have devoted their entire life to the distinction between evidence and belief.
In another couple decades Conservatives will be standing up on the floor of Congress making self righteous speeches in support the right of gays to be treated like everyone else. Much as they now support racial equality, or womens rights. I just wish they could pause from time to time to really critically exam their ideology to see if it makes sense before they start manning the political barriers for decades long fights.
(Sources: SF Chronicle Insight Section for Debra Saunders quotes, June 12, 2011, Economist, June 18, 2011, page 37 for discussion about the Georgia immigration law)
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