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Obama's Permanent Spending Binge
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John Taylor, a professor of economics at Stanford, points out that the numbers being thrown back and forth in the budget debate can be confusing. He suggests a better way to look at this. The U.S. budget was 20% of GDP in 2007, and has been at or below that level in recent years, before the higher spending to counteract the effects of the 2008 financial crisis. As the economy recovers and private investment increases it makes sense to bring the spending back to levels where it has been- spending levels that do not endanger the country's credit rating and are a prudent way to manage the nation's finances. Taylor asks the question- if the U.S. got by by spending 20% of GDP in 2007, then why is it not possible to do this in future years when the GDP will be higher. In 2000 spending was actually 18.2% of GDP. Taylor says that with higher incomes people will be moving into higher tax brackets which should increase revenues in future years. In three years since 2009 the spending levels are up to 24.4%. Under this scenario private investment would make up for lower government spending and debt, leading to higher employment and GDP as business confidence rises.
John Taylor and other experts on the U.S. budget, deficits, and private investment for jobs
01/27/2009
Taylor asks why the U.S. cannot get by on a budget that is 20% of GDP, when this is what the budget was in 2007 and GDP is much larger today. He says private investment can do a better job reducing unemployment and creating a growing U.S. economy. Taylor provides advice on the Romney Plan.
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Obama's Permanent Spending Binge
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What Krugman makes of the one trillion dollar U.S. deficit in 2012 and the alternate view of John Taylor on the U.S. deficit
08/22/2010
Krugman says $1.089 trillion to be exact for the fiscal year ending in Sept. 2012. He gives the 400-450-150 formula to understand what this means in simple terms. The debt would still be stable or declining as a ratio of GDP at $400 billion because of steady GDP growth. He cites the example of the period when debt to GDP declined from 49% to 33% because of steady growth during the Clinton years (1992-2000) even though Clinton started out in 2000 with a deficit. The $450 billion is from lower tax payments because of the 2008 economic crisis followed by recession which would be reversed with restored GDP growth. The $150 billion is from payments such as unemployment insurance, food stamps, to cushion the effects of that crisis and the recession, which would be reversed with restored economic growth.
Grouped Articles
New York Times 09/06/2011
New York Times 09/08/2013
Bush Tax Cuts: Now That's Rich
New York Times 08/22/2010
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Dollar’s Rise Poses Risk for Fed Plans
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Republicans, John Taylor, and a U.S. budget that is at about 20% of GDP
04/22/2011
John Taylor makes the arguments for a budget that is around 20% of GDP, which it was in 2007- before the financial crisis of 2008.
Linked Articles
GOP Hopefuls Betting Voters Want Deep Cuts
Wall Street Journal 07/18/2011
Obama's Permanent Spending Binge
Wall Street Journal 04/22/2011
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