Friday, July 8, 2011

It's NOT federal spending out of control.

I don't understand how this fallacy can continue to perpetuate itself.  It's NOT and never has been an issue of out of control spending since the 2008 Recession.  I am so disappointed with politicians and Americans who simply ignore or choose to lie about this issue.

Just as disconcerting is the fat lie that this problem lies with Democrats.  Anyone with an eye can see that federal income began to flatten out and decline in Q1-2007, nearly a full year before NBER's official start of the recession.

Republicans were in complete denial.

"I think the experts will tell you we’re not in a recession." - George Bush, 2/11/2008 
"By the way, I don’t believe we’re headed into a recession. I believe the fundamentals of this economy are strong, and I believe they will remain strong." - John McCain, 1/10/2008
"I think there is no reason to believe that we’re headed for a recession." - Fred Thompson, 10/09/2007
 What is the problem?  The damned tax cuts, that's what.  You can see it clearly under the 2001 and 2003 Republican tax cuts.  Did it increase growth?  No.  Did it add to the federal debt?  Absolutely.

Now look at what happened with the slight uptick in federal spending in Q2-2009, from the federal stimulus.  Did the federal income bleeding stop?  Absolutely.  And more to the point, it was June 2009 that the NBER says the recession ended.

Of course, the problem is, that the massive tax cuts have added huge sums to the federal debt. See that gap between the two lines?  Until those two lines cross, we'll be adding to the debt.  Anyone who actually believes that massive spending cuts will shrink that gap, is clueless as to how GDP works.  As soon as those massive spending cuts hit, so will income take a hit.  If you recall, Paul Ryan's plan called for cuts in spending AND cuts in taxes.

Obviously he was counting on fairy dust.

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