In Report on November Deficit, AP's Crutsinger Miscasts Post-9/11 Economy of 'A Decade Ago'
Uncle Sam's Monthly Treasury Statement for November came out yesterday. The results: Tax collections through two months of the fiscal year are up 4.4% over fiscal 2010; spending is down 5.5%, but only because about $31 billion in checks which would ordinarily have gone out on October 1 (a Saturday) were sent on September 30; and the deficit of $235 billion is $55 billion less than last year.
The headline in the report by Martin Crutsinger of the Associated Press, aka the Administration's Press ("Gov't on pace to run budget deficit below $1T"), celebrated the totally untenable claim, only two months into the year, that the deficit might come in below $1 trillion for the first time in four years. Crutsinger's coverage was otherwise adequate, except near the end, when he threw in the following obviously gratuitous and recklessly false and misleading statement: "A decade ago, the government was running surpluses and trillion-dollar deficits seemed unimaginable."
Well Marty, "a decade ago" was the third month of the first fiscal year after the 9/11 attacks. At that point, the government was "on pace" (to use your headline's words) to ultimately running up a $158 billion deficit for fiscal 2002. Everyone recognized in December 2001 that the economy had take a serious hit as a result of the attacks, that federal tax collections would suffer as a result, and that additional spending relating to homeland security and the war in Afghanistan would lead to a fiscal 2002 deficit.
As to the second half of Crutsinger's crummy sentence -- "trillion-dollar deficits seemed unimaginable" -- that was actually true until about 34 months ago in February 2009, when Barack Obama and the Democratic House and Senate created the failed "stimulus" plan without giving a thought or care as to how it would be paid for. Up until then, Obama (mis)led voters into believing, based on promises made during the 2008 presidential campaign, that such a calamity would not happen even once, let alone three and possibly four years in a row:
"When George Bush came into office, our debt -- national debt was around $5 trillion. It's now over $10 trillion. We've almost doubled it. ... But actually I'm cutting more than I'm spending so that it will be a net spending cut." -- Obama, during an Oct. 7, 2008, debate in Nashville Verdict: Promise Broken.
Since fiscal 2008, spending has increased from roughly $2.98 trillion to $3.60 trillion. But Marty Crutsinger and the AP will never, ever tell us that.
Cross-posted at BizzyBlog.com.
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Comments
Blank Sheet
Submitted by scottyusmc on Tue, 12/13/2011 - 10:05am.
This guy could publish a blank sheet of paper with his name on it for all the value I place in what he has to say... The economy is NOT improving and if everyone who has seen their pay and purchase power drop in the last 3.5 years votes for change, BOB will be out on his a$$. Big problem for BOB is that even those (uncounted) unemployed workers can still vote!!!
Tom - only in part. Larger immediate cause was the collapse . .
Submitted by Gary Hall on Tue, 12/13/2011 - 1:13pm.
. . of the dot.com economic bubble, relative to the projections.
Needless to say, Martin Crutsinger has been listening far too often to the economic prowess of Fareed Zakaria and/or DNC chair Debbie Wasserman Schultz. However, I'd offer that there was a lot more to the disappearance of the budget surpluses in 2001 - 2001 than 9/11. You noted:
Everyone recognized in December 2001 that the economy had take a serious hit as a result of the attacks, that federal tax collections would suffer as a result, and that additional spending relating to homeland security and the war in Afghanistan would lead to a fiscal 2002 deficit.
Many recognized earlier, in 1999-2000, that when the dot.com bubble economy collapsed, the surpluses would be a thing of the past as we would quickly return to sizable deficits. Personally, I felt this very strongly back in 2000, arguing at the time, that the result of the bubble collapse would be a recession, and a quick end to the surpluses -- regardless of it being Gore or Bush in 2001. Congress (both parties) was also itching to start spending again, as the spending restraints of the prior few years, was quickly wearing off - it had not been structural enough in design.
Certainly the hard costs of 9/11, as well as the additional economic fallout from it, added to this shift of fortunes; but, 9/11 was late in the year in 2001. Tax revenue was already falling off the cliff.
Federal Tax revenue rose 11% from 1999 to 2000. Had this [fantasy] trend continued thru 2002, Receipts would have measured almost $2.5 trillion (2002) compared to $1.85 Trillion. Even with spending increasing, because of 9/11, 2002 would have seen a surplus of $484 billion rather than a deficit of $158 billion.
Obviously, those represent unfairly weighted numbers, as there are so many other factors at play - but I'm drawn to the view of what lefty economist Dean Baker expressed to me, in August 2002 (while discussing yet another issue at play):
This [unexpected revenue shortfalls from capital gains taxes], along with the fallout from the recession, has been a far bigger cause of the return of deficits than the Bush tax cuts
And by recession - even Baker has long been clear (then and more recently) of the damage done by the dot.com bubble.
In 2000, Baker predicted:
"The main feature of the 'new economy' is a stock market bubble of unprecedented magnitude. When the bubble bursts, the new economy will just be a bad memory. The inflated stock market has created enormous distortions in the economy, the ramifications of which will only be apparent when stock prices return to more normal levels. If the market falls 50 percent and loses $10 trillion of wealth in a correction, it's going to be very hard to avoid a recession. A lot of these dot.coms are worth a corner lemonade stand and are putting real companies out of business. What are you going to tell people who lose much of their retirement savings in their 401K when there's a downturn?"
Well, I'll tell them what they were going to tell them - "It was Bush's fault." LOL
In March, 2001, Baker said:
"The decline in the stock market was an entirely predictable event for anyone familiar with basic arithmetic, even if the exact timing could not be known in advance. The nation's political leaders [Clinton era] chose to ignore the stock market bubble . . . As a result, millions of families have seen their dreams of a secure retirement or their children's college education vanish with the stock market bubble. The level of negligence of the nation's political leaders in ignoring the stock bubble exceeds anything since the days of Herbert Hoover."
9/11 added to the deficits. The economic stimulus of 2001-2002 (tax cuts, etc) was just that, needed stimulus (Obama and Martin should understand that). Note: Looking forward, through the end of 2003 (when the deficit stood at $378 billion) CBO scored the cost of the Iraq war at $54 billion. Not really a driver, yet.
I'd bet that Martin really likes Dean Baker, as do most in the national MSM. Of course, the MSM is very selective in what they decide to report to their audience.
Why quote Baker? Well, the national media loves to have him on, when he's bashing capitalism and conservatives, but when he speaks out on actual history - they have no interest.
(;`> gary
Totally agree, Gary
Submitted by Tom Blumer on Tue, 12/13/2011 - 4:34pm.
I was concentrating on post-9/11 because even the press, which is the last to know, had figured out by then that the surpluses were done, yet Crutsinger pretended otherwise.
The bubble's relevance is not forgotten.
Tom - yea, of course I know that you
Submitted by Gary Hall on Tue, 12/13/2011 - 6:26pm.
Tom - yea, of course I know that you agree.
Throwing it in, for other minds .. and or, just in case Martin stopped by.
Martin? Yo, Marty?
(;~> gary
Well ...
Submitted by Tom Blumer on Tue, 12/13/2011 - 6:43pm.
... from direct experience, Marty's probably too busy hanging on every word out of Tim Geithner's and other apparatchiks' mouths to worry about things like correctness and historical accuracy.
Surplus Myth
Submitted by HardRightTurn on Tue, 12/13/2011 - 1:33pm.
If there was in fact a surplus, why did the Treasury continue to issue bonds to finance the government? Budgeted versus actual. Follow the real money.
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