Ok. Good point. However, those are "natural" effects on spending and revenue though. Revenue drops because economic activity decreases during a recession. It doesn't drop because we lowered tax rates, right?
If you lower tax rates, and all else remains equal, revenue drops.
But that's not what happened in this case, right? In this case, tax rates stayed the same, but "all else" did not remain equal. We had a recession and that caused revenues to drop. The idea that we should raise tax rates to fix the revenue problems doesn't make any sense. We didn't have to do this to recover from any other recent recessions, why would it be required in this case?
Similarly, spending increases because more people are in need of existing social services. We don't increase the scope of those services, right?
You know what I'm going to say: increase the scope of services, and public spending costs more.
Ok. But stay focused on the topic. We're talking about recessionary patterns here, right? In past recessions, spending increased not because we passed new spending laws increasing the scope of our social programs, but because the recession itself caused greater need for the existing ones. Just as revenue drops as a natural consequence of recession, so does spending increase. We don't have to change any laws for that to happen.
So you're correct that we've seen this happen in past recessions. However, in this recession, the Democrats choose to increase spending. Not just spending more on the same things because of increased need, but simply because they choose to add a whole lot of new things to spend money on. That's why spending went so far out of control. Normally, we should have seen deficits of maybe 500-600B in size. But because of their new spending, we've seen deficits around three times that big.
That's why this recession is different. That's why we're not recovering from it as quickly. And that is 100% the result of the Dems actions.
But this recession is different than the last 2 or 3 because the Dems did increase the scope of social services. They passed legislation to create new benefits, and new programs, and new objectives. Thus, we had more than the usual revenue/spending gap we'd expect in a recession of this type. That in turn created greater deficits than normal.
True to an extent. The PUBLIC gap during this recession was greater than it might have been.
It's much much greater than it would have been. Don't undersell this. We didn't have a debt crisis after the 2001 recession, or back during the S&L crisis. Those recessions had similar effects on revenue and employment (initially anyway). The Dems tipped the balance way over.
But that public expenditure on social services, while providing services that would have long term returns, ALSO had a secondary and very useful function as direct stimulus. The new public servants were directly hired in a recession, a time of rising unemployment. The difference in pay between their new wages and unemployment probably mostly went straight back into the private economy (easing the recession) except for the part of their pay that went to taxes (easing the deficit).
Except that this didn't work. It didn't stimulate the economy. And it didn't help unemployment. And we conservatives said that it wouldn't work. We were right. The liberals were wrong. I get that this is a fundamental ideological difference of opinion. Conservatives believe that government spending on the demand side doesn't create jobs or stimulate the economy. Liberals believe that it does. Well, we just tested it. Liberals were wrong. Shocking!
While it looked bad in the short term, This spending was probably a solid long-term bet, returning more over-all than it cost. But you have to wait for the benefits to ... Trickle Through! (I would expect some social services to be paying dividends in 20 years time)
Which is it though? Does the spending stimulate the economy into recovery? Or does it hurt us in the short term but provide long term benefits? From where I'm standing it has done the opposite of both. It hurt us in the short term by creating too much debt for our system to handle. And it'll hurt us in the long term because if we have to raise taxes to pay for the debt, it'll slow down the economy for decades to come.
Of course, that's from a conservative's perspective. But it's amazing how frequently we're exactly right about our economic predictions and how consistently the left is wrong. You'd think some people would stop assuming that conservative ideas are wrong. But ideology is stronger than even fact when it's put right in front of you, I guess?
Well, the debt increase due to increased social services was completely and utterly dwarfed by the bank bail-outs, mortgage buy-outs, Car company (bail-outs? buy-outs?) and direct economic stimulous to counter a looming Depression.
You lumped more things than I was talking about in there though. I'm putting car company bail outs, social services, mortgage buy-outs, and direct economic stimulus into the "we didn't need to spend this money" category. Against this, is the bank bail-outs, which is the only necessary spending. That cost us less than $400B, and we've gotten 100% of that money back (with interest!). It cost us zero dollars to bail out the banks
All the other costs were the things that Democrats pushed for and the GOP largely opposed. And that spending is what's killing us now, not the bank bail outs. Had we just done TARP (yes, I'm aware that contained car company bailouts, but that was an add-in by the Dems which the GOP opposed), we would have prevented economic collapse, not put us in debt, and would likely be in complete recovery right now.
Unfortunately, we had Democrats in charge. So here we are, sitting at the bottom of a recessionary hole wondering how to get out. Unfortunately, the left is so stubborn that they'll never admit the absolute disastrous failure of their economic policies, so the only way we can reverse course is if the GOP wins majorities in both houses and gains the white house next year. So we'll have to suffer this crappy economy for another year and a half before we'll see things turn around.
Again, it just makes me wonder why people still think that liberal economic idea work. All evidence should point in the other direction, right? Edited, Aug 16th 2011 2:30pm by gbaji